SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the fiscal year
ended December 31, 1996 Commission File No. 0-15962
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(Exact name of registrant as specified in its charter)
Illinois 36-3256340
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
Documents incorporated by reference: None
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 9
PART II
Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . 9
Item 6. Selected Financial Data. . . . . . . . . . . 10
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. . . . . . . . . . 14
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 27
Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 63
PART III
Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . 63
Item 11. Executive Compensation . . . . . . . . . . . 66
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 68
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 69
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . 69
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . 75
i
PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report. Capitalized
terms used herein, but not defined, have the same meanings as used in the
Notes.
The registrant, Carlyle Real Estate Limited Partnership-XIV (the
"Partnership"), is a limited partnership formed in late 1983 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois to invest in improved income-producing commercial and residential
real property. On June 4, 1984, the Partnership commenced an offering to
the public of $250,000,000 (subject to increase by up to $250,000,000) in
Limited Partnership Interests (and assignee interests therein)
("Interests") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (No. 2-88687). A total of 401,048.66 Interests were
sold to the public at $1,000 per Interest. The offering closed July 15,
1985. No Holder of Interests has made any additional capital contribution
after such date. The Holder of Interest share in their portion of the
benefits of ownership of the Partnership's real property investments
according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are held by fee title, leasehold estates and/or through
joint venture partnership interests. The Partnership's real estate
investments are located throughout the nation and it has no real estate
investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate no later
than December 31, 2034. The Partnership is self-liquidating in nature. At
sale of a particular property, the net proceeds, if any, are generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. As discussed further in Item 7, the
Partnership currently expects to conduct an orderly liquidation of most of
its remaining investment portfolio as quickly as practicable. As a result,
the Partnership currently expects that it will sell or dispose of its
remaining investment properties, with the possible exception of its
indirect interests in the 237 Park Avenue and 1290 Avenue of the Americas
properties, not later than December 31, 1999, barring any unforeseen
economic developments.
The Partnership has made the real property investments set forth in
the following table:
<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (g) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. Old Orchard Shopping
Center
Skokie (Chicago),
Illinois . . . . . 783,000 4/1/84 8/30/93 fee ownership of
sq.ft. land and improvements
g.l.a. (through joint venture
partnerships) (c)(d)
2. Brittany Downs
Apartments
Phase I and Phase II,
Thornton (Denver),
Colorado . . . . . 464 units 8/15/84 1/10/95 fee ownership of land and
improvements (f)
3. Scottsdale Financial
Center I
Scottsdale,
Arizona. . . . . . 106,800 9/28/84 12/17/93 fee ownership of land and
sq.ft. improvements
n.r.a.
4. Scottsdale Financial
Center II
Scottsdale,
Arizona. . . . . . 151,625 9/28/84 10/1/93 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land
5. 237 Park Avenue
Building
New York,
New York . . . . . 1,140,000 8/14/84 10/10/96 fee ownership of land and
sq.ft. (i) improvements (through joint
n.r.a. venture partnerships) (c)
6. 1290 Avenue of the
Americas Building
New York,
New York . . . . . 2,000,000 7/27/84 10/10/96 fee ownership of land and
sq.ft. (i) improvements (through joint
n.r.a. venture partnerships)
(c)
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (g) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
7. 2 Broadway Building
New York,
New York . . . . . 1,600,000 8/14/84 9/18/95 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
(c)(f)
8. 1090 Vermont Avenue
Building
Washington, D.C. . 140,000 9/26/84 2% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)
9. Mariners Pointe
Apartments
Stockton,
California . . . . 220 units 10/2/84 10/11/96 fee ownership of land and
improvements (through joint
venture partnership) (c)(f)
10. Louisiana Tower
Shreveport,
Louisiana. . . . . 349,000 11/14/84 8/30/95 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (e)
11. Marketplace at
South Street
Seaport
New York,
New York . . . . . 263,000 12/14/84 3/8/88 fee ownership of improve-
sq.ft. ment and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
12. Gateway Tower
White Plains,
New York . . . . . 552,000 12/31/84 12/30/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
13. Piper Jaffray Tower
Minneapolis,
Minnesota. . . . . 723,755 12/27/84 5% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1996,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION (g) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
14. 900 Third Avenue
Building
New York,
New York . . . . . 517,000 12/28/84 5% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships) (c)
15. Wells Fargo Center
-IBM Tower
Los Angeles,
California . . . . 1,100,000 6/28/85 10% fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(c)
16. Louis Joliet Mall
Joliet, Illinois . 305,000 7/31/85 5% fee ownership of land and
sq.ft. improvements (h)
g.l.a.
17. Turtle Creek Centre
Dallas, Texas. . . 296,378 8/30/85 3/7/89 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership) (c)(e)
18. Yerba Buena West
Office Building
San Francisco,
California . . . . 267,687 8/30/85 6/24/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnerships)
19. Wilshire Bundy
Plaza
Los Angeles,
California . . . . 284,724 11/7/85 3/27/96 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (e)
<FN>
- -----------------------
(a)The computation of this percentage for properties held at
December 31, 1996 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.
(b)Reference is made to the Notes filed with this annual report for the
current outstanding principal balances and a description of the long-term
mortgage indebtedness secured by the Partnership's real property
investments.
(c)Reference is made to the Notes for a description of the joint venture
partnership or partnerships through which the Partnership made this real
property investment.
(d)Reference is made to the Notes for a description of the sale of the
Partnership's interest in this investment property.
(e)Reference is made to the Notes for a description of the disposition
of this investment property.
(f)Reference is made to the Notes for a description of the sale of this
investment property.
(g)Reference is made to Item 8 - Schedule III to the Consolidated
Financial Statements filed with this annual report for further information
concerning real estate taxes and depreciation.
(h)Reference is made to Item 6 - Selected Financial Data for additional
operating and lease expiration data concerning this investment property.
(i)The original invested capital percentage for the 237 Park Avenue
Building and the 1290 Avenue of the Americas Building was 7% and 15%,
respectively. Reference is made to the Notes for a description of the
reorganization and restructuring of the Partnership's interests in these
investment properties.
</TABLE>
The Partnership's real property investments are subject to competition
from similar types of properties (including in certain areas properties
owned by affiliates of the General Partners or properties owned by certain
of the joint venture partners) in the respective vicinities in which they
are located. Such competition is generally for the retention of existing
tenants. Additionally, the Partnership is in competition for new tenants
in markets where significant vacancies are present. Reference is made to
Item 7 below for a discussion of competitive conditions and future
renovation and capital improvement plans of the Partnership and certain of
its significant investment properties. Approximate occupancy levels for
the properties are set forth in the table in Item 2 below to which
reference is hereby made. The Partnership maintains the suitability and
competitiveness of its properties in its markets primarily on the basis of
effective rents, tenant allowances and service provided to tenants. In the
opinion of the Corporate General Partner of the Partnership, all of the
investment properties held at December 31, 1996 are adequately insured.
Although there is earthquake insurance coverage for a portion of the value
of the Partnership's investment properties, the Corporate General Partner
does not believe that such coverage for the entire replacement cost of the
investment properties is available on economic terms.
Reference is made to Item 6 and to the Notes filed with this annual
report for a schedule of minimum lease payments to be received in each of
the next five years, and in the aggregate thereafter, under leases in
effect at certain of the Partnership's investment property as of December
31, 1996.
The Partnership has no employees other than personnel performing on-
site duties at certain of the Partnership's properties, none of whom are
officers or directors of the Corporate General Partner of the Partnership.
The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to
under Item 1 above to which reference is hereby made for a description of
said properties.
The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1996 and 1995 for the Partnership's investment properties owned
during 1996:
<TABLE>
<CAPTION>
1995 1996
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Wilshire Bundy
Plaza
Los Angeles,
California . . . . . . . Financial Ser-
vices/Advertising 83% 87% 86% 86% N/A N/A N/A N/A
2. Mariners Pointe
Apartments
Stockton, California . . Apartments 85% 91% 96% 94% 91% 90% 90% N/A
3. 237 Park Avenue
Building
New York, New York . . . Advertising/
Insurance/Paper/
Real Estate
Investment 98% 98% 98% 98% 98% 98% 98% *
4. 1290 Avenue of the
Americas Building
New York, New York . . . Financial Services 94% 94% 94% 93% 78% 71% 81% *
5. 1090 Vermont Avenue
Building
Washington, D.C. . . . . Trade Associations 95% 95% 93% 95% 91% 88% 88% 84%
6. Piper Jaffray Tower
Minneapolis,
Minnesota. . . . . . . . Legal Services/
Advertising/
Financial Services 97% 97% 98% 98% 98% 98% 98% 98%
7. 900 Third Avenue
Building
New York, New York . . . Legal Services/
Detective Agency/
Financial Services 94% 96% 96% 97% 97% 98% 98% 98%
1995 1996
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
8. Wells Fargo Center
-IBM Tower
Los Angeles,
California . . . . . . . Business Infor-
mation Systems 96% 96% 96% 95% 95% 97% 92% 92%
9. Louis Joliet Mall
Joliet, Illinois . . . . Retail 79% 80% 87% 88% 77% 80% 79% 82%
<FN>
- --------------------
Reference is made to Item 6, Item 7, and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.
An "N/A" indicates that the property was sold or disposed of and not owned by the Partnership at the end of
the quarter.
An "*" indicates that the joint venture which owns the property was restructured, and therefore, such
information is not meaningful for the Partnership. Reference is made to the Notes for further information
regarding the reorganized and restructured ventures.
</TABLE>
ITEM 3. LEGAL PROCEEDING
The Partnership is not subject to any material legal proceedings.
Reference is made to the Notes for a discussion of certain litigation
involving the Partnership related to the 900 Third Avenue investment
property.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
fiscal years 1996 and 1995.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1996, there were 41,604 record Holders of the
400,909.17850 Interests outstanding of the Partnership. There is no public
market for Interests and it is not anticipated that a public market for
Interests will develop. Upon request, the Corporate General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any economic aspects of the transaction, will be
subject to negotiation by the investor. There are certain conditions and
restrictions on the transfer of Interests, including, among other things,
the requirement that the substitution of a transferee of Interests as a
Limited Partner of the Partnership be subject to the written consent of the
Corporate General Partner, which, may be granted or withheld in its sole
and absolute discretion. The rights of a transferee of Interests who does
not become a substituted Limited Partner will be limited to the rights to
receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Corporate General Partner
has been received by the Corporate General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses from operations of the
Partnership for a calendar year in which a transfer occurs will be
allocated between the transferor and the transferee based upon the number
of quarterly periods in which each was recognized as the Holder of the
Interests, without regard to the results of the Partnership's operations
during particular quarterly periods and without regard to whether cash
distributions were made to the transferor or transferee. Profits or losses
arising from the sale or other disposition of Partnership properties will
be allocated to the recognized Holder of the Interests as of the last day
of the quarter in which the Partnership recognized such profits or losses.
Cash distributions to a Holder of Interests arising from the sale or other
disposition of Partnership properties will be distributed to the recognized
Holder of the Interests as of the last day of the quarterly period with
respect to which such distribution is made.
Reference is made to the Notes for a discussion of the provisions of
the Partnership Agreement relating to cash distributions. Reference is
made to Item 6 below for a discussion of cash distributions made to the
Holders of Interests. The mortgage loans secured by the 900 Third Avenue,
Wells Fargo South Tower and Piper Jaffray Tower investment properties
restrict the use by the property owning joint ventures of the cash flows
from those properties as discussed more fully in the Notes. In addition,
the purchase money notes issued by JMB/NYC in connection with its
acquisition of interests in the 237 Park Avenue and 1290 Avenue of the
Americas investment properties require that any distributions payable to
JMB/NYC with respect to such investment properties be applied to reduce the
outstanding principal and interests on the purchase notes.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income. . . . . . . $ 11,830,330 19,054,756 23,597,310 25,596,437 26,852,635
============ =========== =========== =========== ===========
Operating earnings
(loss) . . . . . . . . . $ (8,777,967) (8,072,831) (8,019,023) (12,471,986) (22,560,142)
Partnership's share of
operations of uncon-
solidated ventures
(including income
from restructuring
of $163,662,750 in
1996). . . . . . . . . . 161,701,376 (19,392,303) (16,851,858) (60,283,861) (22,495,785)
Venture partners'
share of ventures'
operations . . . . . . . -- -- -- 22,472 70,706
------------ ----------- ----------- ----------- -----------
Net operating earnings
(loss) . . . . . . . . . 152,923,409 (27,465,134) (24,870,881) (72,733,375) (44,985,221)
Gain (loss) on sale of
investment properties
by unconsolidated
ventures or on sale
or disposition of
investment properties . 2,928,068 (14,886,886) 1,702,082 26,281,496 8,783,892
Extraordinary items . . . 23,622,011 35,711,359 (3,000,000) -- --
Cumulative effect of an
accounting change. . . . (16,000,000) -- -- -- --
------------ ----------- ----------- ----------- -----------
Net earnings (loss) . . . $163,473,488 (6,640,661) (26,168,799) (46,451,879) (36,201,329)
============ =========== =========== =========== ===========
1996 1995 1994 1993 1992
------------- ------------- ----------- ------------ ------------
Net earnings (loss) per
Interest (b):
Net operating earnings
(loss). . . . . . . . $ 366.18 (65.74) (59.53) (177.06) (107.68)
Gain (loss) on sale of
investment properties
by unconsolidated
ventures or on sale
or disposition
of investment
properties. . . . . . 7.23 (36.75) 4.20 64.88 21.68
Extraordinary items. . 58.33 87.94 (7.18) -- --
Cumulative effect of
an accounting
change. . . . . . . . (38.31) -- -- -- --
------------ ----------- ----------- ----------- -----------
Net earnings (loss) . . . $ 393.43 (14.55) (62.51) (112.18) (86.00)
============ =========== =========== =========== ===========
Total assets. . . . . . . $ 60,002,966 106,113,792 147,075,454 149,516,685 191,806,563
Long-term debt. . . . . . $ 47,736,328 26,000,000 25,794,970 98,747,743 116,309,718
Cash distributions
per Interest (c). . . . $ -- 20.00 -- -- --
============ =========== =========== =========== ===========
<FN>
- -------------
(a) The above selected financial data should be read in conjunction with the consolidated financial statements
and the related notes appearing elsewhere in this annual report.
(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of the
period.
(c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for financial
reporting or Federal income tax purposes. Each Partner's taxable income (or loss) from the Partnership in each year
is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the cash generated
or distributed by the Partnership. Accordingly, cash distributions to the Holders of Interests since the inception
of the Partnership have represented a return of capital for financial reporting purposes.
</TABLE>
<TABLE>
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1996
<CAPTION>
Property
- --------
Louis Joliet
Mall
a) The gross leasable area ("GLA") occupancy rate and average base rent per
square foot as of December 31, for each of the last five years were
as follows:
GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>
1992 . . . . . 91% $12.41
1993 . . . . . 82% 13.56
1994 . . . . . 79% 13.53
1995 . . . . . 88% 13.29
1996 . . . . . 82% 14.65
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s)
------------------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
None - No single tenant represents more than 10%
of the gross leasable area of the property.
</TABLE>
<TABLE>
<CAPTION>
c) The following table sets forth certain information with respect to the expiration of
leases for the next ten years at the Louis Joliet Mall:
Annualized Percent of
Number of Approx. Total Base Rent Total 1996
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases (1) Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997 10 18,029 $ 343,620 10%
1998 5 9,481 110,868 3%
1999 11 13,060 317,052 9%
2000 8 17,320 248,964 7%
2001 8 12,884 198,060 6%
2002 7 8,598 294,036 8%
2003 9 29,457 360,192 10%
2004 10 29,497 587,580 16%
2005 15 46,156 810,939 23%
2006 7 25,744 433,548 12%
<FN>
(1) Excludes leases that expire in 1997 for which renewal leases or leases with replacement
tenants have been executed as of March 5, 1997.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Unless otherwise indicated, all references to "Notes" are to Notes to
Consolidated Financial Statements contained in this report. Capitalized
terms used herein, but not defined, have the same meanings as used in the
Notes.
As a result of the public offering as described in Item 1, the
Partnership had approximately $351,747,000 after deducting selling expenses
and other offering costs with which to make investments in income-producing
commercial and residential real property, to pay legal fees and other costs
(including acquisition fees) related to such investments and for working
capital. A portion of such proceeds was utilized to acquire the properties
described in Item 1 above.
In March 1997 some of the Holders of Interests received from a third
party unaffiliated with the Partnership an unsolicited offer to purchase up
to 18,000 Interests at $10 per Interest. Such offer is scheduled to expire
on April 10, 1997. The board of directors of JMB Realty Corporation
("JMB"), the Corporate General Partner, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests, including any and
all responses to such tender offers. The Special Committee has retained
independent counsel to advise it in connection with any tender offers for
Interests and has retained Lehman Brothers Inc. as financial advisor to
assist the Special Committee in evaluating and responding to such tender
offers. With respect to the offer for Interests at $10 per Interest, the
Special Committee, on behalf of the Partnership, has recommended against
acceptance of this offer on the basis that, among other things, the offer
price is inadequate. The Partnership has received a request from another
unaffiliated third party for the list of Holders of Interests. It is
possible that other offers for Interests may be made by unaffiliated third
parties in the future, although there is no assurance that any third party
will commence an offer for Interests, the terms of any such offer or
whether any such offer, if made, will be consummated, amended or withdrawn.
At December 31, 1996, the Partnership had cash and cash equivalents of
approximately $18,070,000. Such funds are available for distributions to
partners and working capital requirements. The Partnership has currently
budgeted in 1997 approximately $1,614,000 for tenant improvements and other
capital expenditures. The Partnership's share of such items and its share
of such similar items for its unconsolidated ventures in 1997 is currently
budgeted to be approximately $2,808,000. Actual amounts expended in 1997
may vary depending on a number of factors including actual leasing
activity, results of property operations, liquidity considerations and
other market conditions over the course of the year. The source of capital
for such items and for both short-term and long-term future liquidity and
distributions to partners is dependent upon existing working capital, net
cash generated by the Partnership's investment properties and the sale or
refinancing of such investments. However, due to the property specific
concerns discussed below, the Partnership currently considers only Louis
Joliet Mall, 1090 Vermont Avenue and 900 Third Avenue to be potential
significant sources of future cash generated from operations, sales or
refinancings. In such regard, reference is made to the Partnership's
property specific discussions below and also to the Partnership's
disclosure of certain property lease expirations in Item 6. Due to the
above situations and the property specific concerns discussed below, the
Partnership had suspended operating distributions beginning with the fourth
quarter 1991 distribution payable in February 1992.
The Partnership is maintaining funds for working capital purposes.
The Partnership may decide to commit a portion of these funds for various
purposes (discussed below and in the Notes) at its 900 Third Avenue and
Louis Joliet Mall investment properties. The Partnership may also use a
portion of these funds to aid in refinancing at a discount the loan secured
by the Piper Jaffray Tower. The Partnership will not commit additional
working capital funds for these purposes unless, among other things, the
Partnership believes that upon sale of the particular property, the
Partnership will receive a return of the incremental funds and a reasonable
rate of return thereon.
Piper Jaffray Tower
The Minneapolis office market has rebounded over the last couple
years. Vacancy rates for Class A buildings (competitive market for the
property) have dropped to the low single digit level. Consequently, net
effective rental rates have risen, although not to a level achieved prior
to the real estate depression experienced in the late 1980's through the
early 1990's.
A major law firm tenant, Popham Haik (103,782 square feet with a lease
expiration date of January 31, 2003) informed the joint venture that as a
result of recent attorney and staff downsizing, they no longer need all of
their space and they would like the joint venture to consider taking back a
significant portion of their space. The joint venture has analyzed the
tenants request and determined that based upon its inability to pay the
full amount of rent, a modification of the lease is necessary. In this
regard, the joint venture has reached an agreement in principle with the
tenant to amend the terms of its lease. Under the terms of the agreement,
the joint venture will take back approximately 56,000 square feet of
Popham's leased space leaving it with approximately 47,000 square feet.
Popham's rent on the remaining square footage will increase to a market
rate effective on the date of the give-back. There will be no adjustment
to the lease expiration date on the remaining space. The underlying lender
has approved the terms of this agreement. However, there are no assurances
that this agreement will be finalized on these or any terms. In the
meantime, the manager is in final lease negotiations with a tenant to
occupy approximately 12,000 square feet of Popham's give-back space at
rental rates in excess of Popham's original rental rate. There are no
assurances that this lease will be finalized on these or any terms.
In addition, Piper Jaffray (310,111 square feet with a lease
expiration date of March 31, 2000) has requested that the joint venture
submit a proposal for early renewal of its lease. Piper Jaffray has
requested that in return for such early renewal, it would like an immediate
reduction in the existing rental rate which exceeds current market rental
rates. The joint venture has made a proposal to extend the terms of
Piper's lease for a period of nine years. Under the proposal, Piper's
current rent would be reduced for the last lease year with an extension
period rent equal to the joint venture's estimate of market rental rates at
the time which would be less than Piper's current rental rate. Any
modification or early renewal of this lease would require the approval of
the underlying lender. The joint venture has not received an official
response from the tenant. During the fourth quarter, Piper Jaffray
exercised an option to lease approximately 24,000 square feet of space
under lease expiring December 31, 1997. The rental rate will be at market
which is currently being negotiated. The lease expiration date will be
coterminous with its existing lease termination date of March 31, 2000.
Under the terms of a modification agreement with the lender, the
lender is essentially entitled to all operating cash flow. In addition to
fixed interest on the mortgage notes secured by the Piper Jaffray Tower,
contingent interest is payable in annual installments on April 1 computed
at 50% of gross receipts, as defined, for each fiscal year in excess of
$15,200,000. No such contingent interest was due for 1994, 1995 or 1996.
In addition, to the extent the investment property generates cash flow
after payment of the fixed interest on the mortgage, contingent interest,
if any, leasing and capital costs, and 25% of the ground rent, such amount
will be paid to the lender as a reduction of the principal balance of the
mortgage loan. The excess cash flow payments remitted to the lender for
1994 and 1995 totalled $353,251 and $464,178, respectively. During 1996,
excess cash flow generated under this agreement was $741,627 which is
expected to be remitted to the lender during the second quarter of 1997.
On a monthly basis, the venture deposits the property management fee into
an escrow account to be used (including interest earned thereon) for future
leasing costs to the extent cash flow is not sufficient to cover such
items. To date, no escrow funds have been required to be used for leasing
costs. At December 31, 1996, the balance of such escrow account totalled
approximately $3,934,000. The manager of the property (which was an
affiliate of the Corporate General Partner through November 1994) has
agreed to defer receipt of its management fee until a later date. As of
December 31, 1996, the manager has deferred approximately $3,216,000
($1,839,000 of which represents deferred fees due to affiliates through
November 1994, of which $919,500 is the Partnership's share) of management
fees.
In addition, upon sale or refinancing, the lender is entitled to
prepayment fees as well as a significant level of proceeds in excess of the
then unpaid principal balance prior to the joint venture's receipt of
proceeds. While the modification provides the joint venture with an
opportunity to retain an ownership position in the property, under the
current terms of the modified debt, there must be a significant additional
improvement in current market and property operating conditions resulting
in a significant increase in the value of the property before the joint
venture can share in sale or refinancing proceeds. The joint venture
anticipates exploring refinancing alternatives during 1997. Such
refinancing would only be possible if the underlying lender would accept a
discount and would also likely require additional capital contributions
from the Partnership and its affiliated partner. There are no assurances
that a refinancing can be achieved. The Partnership will not commit
additional capital to this property unless, among other things, it believes
that upon sale of the property, the Partnership will receive a return of
such funds and a reasonable rate of return thereon.
Wells Fargo Center
The Wells Fargo Center ("South Tower") operates in the downtown Los
Angeles office market, which has become extremely competitive over the last
several years with the addition of several new buildings that has resulted
in a vacancy rate of approximately 25% in the marketplace. The Partnership
expects that the competitive market conditions and the continued recession
in Southern California will have an adverse affect on the building through
lower effective rental rates achieved on releasing of existing space which
expires or is given back over the next several years. In addition, new
leases are expected to require expenditures for lease commissions and
tenant improvements prior to occupancy. This anticipated decline in rental
rates, the anticipated increase in re-leasing time and the costs upon
releasing will result in a decrease in cash flow from operations over the
near term.
During 1996, the Partnership, the joint venture partner, and the
lenders reached an agreement to modify the mortgage note and the promissory
note and to restructure the joint venture. Since the terms of the
agreement make it unlikely that the Partnership would recover any
incremental investment,the Partnership has decided not to commit any
significant additional amounts to the property. Reference is made to the
Notes for a further description of these events.
Brittany Downs Apartments - Phase I and II
Brittany Downs Apartments Phase II did not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership had been paying a reduced amount of debt service since November
1990. The Partnership had been placed in default for failure to pay the
required debt service.
On January 10, 1995, the Partnership sold the Brittany Downs
Apartments Phase I and II to an unaffiliated third party. Reference is
made to the Notes for a further description of such sale.
JMB/NYC
In October 1994, the Partnership and its affiliated partners (together
with the Partnership, the "Affiliated Partners"), through JMB/NYC, entered
into an agreement (the "Agreement") with the affiliates (the "Olympia &
York affiliates") of Olympia & York Developments, Ltd. ("O&Y") who were the
venture partners in the Joint Ventures which owned 237 Park Avenue, 1290
Avenue of the Americas and 2 Broadway, to resolve certain disputes among
the Affiliated Partners and the Olympia & York affiliates. In general, the
parties agreed to: (i) restructure the first mortgage loan; (ii) sell the
2 Broadway Building; (iii) reduce or eliminate approval rights of JMB/NYC
with respect to virtually all property management, leasing, sale or
refinancing; (iv) amend the Joint Ventures' agreements to eliminate any
funding obligations by JMB/NYC and (v) establish a new preferential cash
distribution level for the Olympia & York affiliates. In accordance with
the Agreement and in anticipation of the sale of the 2 Broadway Building,
the unpaid first mortgage indebtedness previously allocated to 2 Broadway
was allocated in 1994 to 237 Park Avenue and 1290 Avenue of the Americas.
As part of the Agreement, JMB/NYC and the Olympia & York affiliates
agreed to file a pre-arranged bankruptcy plan for reorganization under
Chapter 11 of the Bankruptcy Code in order to facilitate the restructuring
of the Joint Ventures between JMB/NYC and the Olympia & York affiliates and
the debt encumbering the two properties remaining after the sale of 2
Broadway. In June 1995, the 2 Broadway Joint Ventures filed their pre-
arranged bankruptcy plans for reorganization, and in August 1995, the
bankruptcy court entered an order confirming their plans of reorganization.
In September 1995, the sale of the 2 Broadway Building was completed. Such
sale did not result in any distributable proceeds to JMB/NYC or the Olympia
and York affiliates.
Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue
and 1290 Avenue of the Americas properties were made in April 1996, and in
August 1996, an Amended Plan of Reorganization and Disclosure Statement
(the "Plan") was filed with the Bankruptcy Court for these Joint Ventures.
The Plan was accepted by the various classes of debt and equity holders and
confirmed by the Court on September 20, 1996 and became effective October
10, 1996 ("Effective Date"). The Plan provides that JMB/NYC has an
indirect limited partnership interest which, before taking into account
significant preferences to other partners, equals approximately 4.9% of the
reorganized and restructured ventures owning 237 Park and 1290 Avenue of
the Americas (the "Properties"). Neither O&Y nor any of its affiliates has
any direct or indirect continuing interest in the Properties. The new
ownership structure gives control of the Properties to a newly-organized
real estate investment trust which is owned primarily by holders of the
first mortgage debt which encumbered the Properties prior to the
bankruptcy. JMB/NYC has, under certain limited circumstances, through
January 1, 2001 rights of consent regarding sale of the Properties or the
consummation of certain other transactions that significantly reduce
indebtedness of the Properties.
The restructuring and reorganization discussed above eliminates any
potential additional obligation of the Partnership in the future to provide
additional funds under its previous joint venture agreements. The
Affiliated Partners entered into a joint and several obligation to
indemnify, through a date no later than January 2, 2001, the newly formed
real estate investment trust to the extent of $25 million to ensure their
compliance with the terms and conditions relating to JMB/NYC's indirect
limited partnership interest in the restructured and reorganized joint
ventures that own the Properties. The Affiliated Partners contributed
approximately $7.8 million (of which the Partnership's share was
approximately $3.9 million) to JMB/NYC which was deposited into an escrow
account as collateral for such indemnification. These funds have been
invested in stripped U.S. Government obligations with a maturity date of
February 15, 2001. Compliance with the provisions of the indemnification
agreement generally deal with impacting the operations of the newly
organized real estate investment trust. Compliance, therefore, is within
the control of the Affiliated Partners and non-compliance with such
provisions by either the Partnership or the Affiliated Partners is highly
unlikely. Therefore, it is highly likely that the Partnership's share of
the collateral will be returned to it at the termination of the
indemnification agreement. The Partnership may either retain for working
capital purposes or distribute all or portions of such funds upon return.
1090 Vermont Avenue Building
At the end of 1996, occupancy at this office building was 84%, down
from 95% at the end of 1995. As a result of lower rent from existing
tenants, anticipated increased vacancy and potential releasing costs
associated with such vacancy, the joint venture, and therefore, the
Partnership anticipates a lower level of operating cash flow from this
property in the near term. The property is generating operating cash flow,
however, the joint venture is retaining such cash for working capital
purposes. The Partnership has classified the property as held for sale or
disposition at December 31, 1996 and therefore is no longer subject to
continuing depreciation.
Orchard Associates
The Partnership's interest in Old Orchard shopping center (through
Orchard Associates and Old Orchard Urban Venture ("OOUV") was sold in
September 1993.
Old Orchard Urban Venture could have received reimbursement, under
certain conditions, up to an additional $3,400,000 (of which Orchard
Associates had a 79.1667 interest) of previously incurred development costs
based upon certain future earnings of the property (as defined). In
December 1996, the joint venture received a final settlement $2,450,000 (of
which the Partnership share was $969,796) of such development costs related
to the sale of Old Orchard Shopping Center.
In 1996, OOUV distributed to Orchard Associates $1,389,210 in proceeds
from the settlement of operating prorations. As a result Orchard
Associates distributed $694,605 to the Partnership representing its share
of such operating prorations.
Wilshire Bundy Plaza
On March 27, 1996, title to the property transferred to the lender.
Reference is made to the Notes for a further description of such
disposition.
900 Third Avenue Building
In 1994, JMB/900 Third Avenue Associates, on behalf of the property
joint venture, successfully completed an extension to December 1, 2001 of
its mortgage loan, which was scheduled to mature on December 1, 1994. In
addition, net cash flow after debt service and capital (as defined) will be
paid into an escrow account controlled by the lender to be used by the
property joint venture for the payment of property taxes and for releasing
costs associated with leases which expire in 1999 and 2000 (approximately
240,000 square feet of space). To date, no escrow funds have been required
to be used for leasing costs. The remaining amount in this escrow
(including interest earned thereon), if any, will be released to the
property joint venture once 90% of such leased space has been renewed or
released. The agreement provides, however, that the joint venture can
repay itself, out of the first available net cash flow, certain costs
incurred and deposits made by the joint venture in connection with the loan
extension (approximately $3,229,000). As of the date of this report, all
of the amounts advanced by the joint venture have been repaid to the joint
venture (of which the Partnership's share is approximately $1,000,000).
The escrow balance at December 31, 1996 is approximately $193,000.
Occupancy of this building increased to 98% at the end of 1996. The
midtown Manhattan market remains competitive. The manager has signed
leases or is in final lease negotiations with tenants to occupy virtually
all the remaining vacant space in the building. During 1997, leases
covering approximately 21,000 square feet of space or approximately 2% of
the building's leasable square footage, expire. Tenants occupying
approximately one-half of such space are expected to renew.
JMB/900 is currently involved in litigation. Current discussions
involve a settlement whereby JMB/900 would purchase all the unaffiliated
venture partner interests in the property. There are no assurances that a
settlement will be finalized on this or any terms. The Partnership will
not commit additional capital to this property unless, among other things,
it believes that upon sale of the property, the Partnership will receive a
return of such funds and a reasonable rate of return thereon.
Louis Joliet Mall
Occupancy at this mall increased to 82% at December 31, 1996
(excluding the effect of the move-out of General Cinema, Inc., as discussed
below). During the fourth quarter of 1994, General Cinema, Inc. (14,587
square feet or approximately 5% of the mall space) ceased its operations
within the mall. General Cinema, Inc. continues to pay rent in accordance
with its lease (which expires December 31, 1998) and as of the date of this
report, all amounts due from the tenant under the lease have been received.
The Partnership is currently in negotiations with a potential replacement
operator for the General Cinema space. The Partnership may be required to
contribute capital to secure such replacement operator. A significant
portion of the mall's vacant space is contained in three large spaces
(including the Mark Shale space discussed below) which have been very
difficult to lease due to their size and location within the mall. The
manager is exploring the opportunity to lease some of this space to larger
"big box" space users which in the past have not occupied mall space.
Given their size, these types of tenants generally pay lower rents than
typical regional and national mall tenants. In addition, the Partnership
would likely need to commit substantial capital toward the build-out of
this space for these users. The Partnership will not commit additional
capital to this property for this purpose unless, among other things, it
believes that upon sale of the property, the Partnership will receive a
return of such funds and a reasonable rate of return thereon.
During the third quarter of 1993, Al Baskin Co. (19,960 square feet or
approximately 7% of the mall space) informed the Partnership that even
though its lease did not contain provisions allowing it to terminate its
lease, it believed it had the right and intended to terminate its lease
effective December 31, 1993 (as opposed to the original lease expiration of
December 31, 2003). In response, during the third quarter of 1993, the
Partnership filed an anticipatory breach lawsuit against the tenant in
order to prevent the tenant from vacating its space and cease paying rent
to the Partnership. Subsequently, the Partnership and tenant entered into
a temporary agreement under which the tenant continued to operate its store
and pay rent. All amounts due from the tenant under the lease had been
received through December 31, 1995. The Partnership believes the tenant's
position is without merit and had intended to enforce the original terms of
the lease. On November 9, 1995, Al Baskin filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. On December 29, 1995 Al Baskin
vacated its premises and ceased paying rent. The Partnership subsequently
filed a bankruptcy claim for the maximum amount allowable (approximately
fourteen months of future rent or approximately $415,000). There are no
assurances that any amounts will be recovered from the tenant in connection
with this action.
The litigation regarding the lease expiration date continues.
However, if the tenant accepts the Partnership's bankruptcy claim as
discussed above, the Partnership will terminate this action.
As the Partnership has committed to a plan to sell the property, the
property was classified as held for sale or disposition as of December 31,
1996, and therefore, will not be subject to continuing depreciation.
Louisiana Tower
In 1995, title to the property transferred to the lender. Reference
is made to the Notes for a further description of such disposition.
Mariners Pointe Apartments
In October 1996, the Partnership, through the joint, venture sold the
Mariners Pointe Apartments. Reference is made to the Notes for a
description of such sale.
On October 11, 1996, the Partnership sold the apartment complex to a
third party for $7,600,000 less brokerage commissions, title costs and
legal fees. As a result of this sale, the Partnership recognized a gain
for financial reporting and Federal income tax purposes of approximately
$2,100,000 and $4,700,000, respectively in 1996. The lower than
anticipated proceeds from the sale of the property can be attributed
primarily to the poor past performance of the local economy and prospects
for growth in the future. As a result of the stagnant local economy over
the last decade, the joint venture has been unable to raise rental rates at
the property. In the meantime, however, the cost of operating the property
had risen resulting in lower net operating income than originally achieved
upon initial lease-up. The prospects for significant growth in the local
economy which fueled increased demand for apartments and therefore upward
rental rate pressure, were poor. Consequently, prospective purchasers were
demanding a higher initial return than can be achieved in healthier
markets. This required return was also higher than the initial return used
in the acquisition of the property when the prospectus for the economy and
property appeared to be brighter. The combination of lower net operating
income and higher purchaser required return had resulted in a lower sale
price which returned only a portion of the Partnership's initial
investment.
Yerba Buena Office Building
In June 1992, title to the Yerba Buena Office Building in San
Francisco, California was transferred to the lender by the joint venture (a
partnership comprised of the Partnership, two other limited partnerships
sponsored by the Partnership's Corporate General Partner and four
unaffiliated limited partners). In return for a smooth transition of title
and management of the property, the joint venture was able to negotiate the
right to share in future sale or refinancing proceeds, if any, above
certain specified levels. In addition, the joint venture has a right of
first opportunity to purchase the property during the time frame of June
1995 through May 1998 should the lender wish to market the property for
sale. The joint venture has recently learned that the lender has sold the
property without having given the joint venture its right of first
opportunity to purchase it. The joint venture is analyzing its legal
remedies for the lender's breach of its obligation. There are no
assurances that the joint venture would recover any amounts in the event it
should pursue its legal remedies.
General
To the extent that additional payments related to certain properties
are required or if properties do not produce adequate amounts of cash to
meet their needs, the Partnership may utilize the working capital which it
maintains and/or pursue outside financing sources. However, based upon
current market conditions, the Partnership may decide not to, or may not be
able to, commit additional funds to certain of its investment properties.
This would result in the Partnership no longer having an ownership interest
in such property, and generally would result in taxable income to the
Partnership with no corresponding distributable proceeds. The
Partnership's and its ventures' mortgage obligations generally are separate
non-recourse loans secured individually by the investment properties and
are not obligations of the entire investment portfolio, and the Partnership
and its ventures are not personally liable for the payment of the mortgage
indebtedness.
There are certain risks and uncertainties associated with the
Partnership's investments made through joint ventures including the
possibility that the Partnership's joint venture partner in an investment
might become unable or unwilling to fulfill its financial or other
obligations, or that such joint venture partner may have economic or
business interests or goals that are inconsistent with those of the
Partnership.
As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. The Partnership has also sought or may seek additional loan
modifications or extensions of loan modifications where appropriate. By
conserving working capital, the Partnership will be in a better position to
meet the future needs of its properties since the availability of
satisfactory outside sources of capital may be limited given the
portfolio's current debt levels, among other factors.
The Partnership has held certain of its investment properties longer
than originally anticipated in an effort to maximize the return of their
investment to the Holders of Interests. After reviewing the remaining
properties and the competitive marketplaces in which they operate, the
General Partners of the Partnership expect to be able to conduct an orderly
liquidation of most of its remaining investment portfolio as quickly as
practicable. In such regard, certain of the properties have been
classified by the Partnership or its ventures as held for sale or
disposition, and therefore, will no longer be subject to continued
depreciation. As a result, the Partnership currently expects that it will
sell or dispose of its remaining investment properties, with the possible
exception of its indirect interests in the 237 Park Avenue and the 1290
Avenue of the Americas properties, no later than the end of 1999 barring
unforeseen economic developments. Although the Partnership currently
expects to distribute sale proceeds from the disposition of the 900 Third
Avenue, 1090 Vermont Avenue Building and Louis Joliet Mall investment
properties, aggregate distributions of sale and refinancing proceeds
received by Holders of Interest over the entire term of the Partnership
will be substantially less than one-fourth of their original investment.
However, in connection with sales or other dispositions (including
transfers to lenders) of properties (or interests therein) owned by the
Partnership or its joint ventures, Holders of Interests may be allocated
substantial gain for Federal income tax purposes, regardless of whether any
proceeds are distributable from such sales or other dispositions. In
particular, the Piper Jaffray Tower, 237 Park Avenue, 1290 Avenue of the
Americas and Wells Fargo Center (South Tower) investment properties
continue to suffer from the effects of the high levels of debt secured by
each property and the real estate recession, and provide no cash flow to
the Partnership. While loan and joint venture modifications have been
obtained which enable the Partnership to retain an ownership interest in
these properties, it is currently unlikely under existing arrangements that
the Partnership will receive significant proceeds from any source from
these properties. However, upon disposition, the Partnership, and
therefore the Holders of Interest will recognize a significant amount of
taxable income with no distributable proceeds. For certain Holders of
Interests, such taxable gain may be offset by passive activity losses.
Each Holder's tax consequences will depend on such Holder's own tax
situation.
RESULTS OF OPERATIONS
At December 31, 1996, 1995 and 1994, the Partnership owned seven, nine
and twelve investment properties, respectively, all of which were
operating.
The increase in the balance of cash and cash equivalents at December
31, 1996 as compared to December 31, 1995 is primarily due to retained
proceeds received from the sale of Mariners Pointe apartments and improved
property operations for 1996 and the debt restructuring during 1995 at
Louis Joliet Mall shopping center.
The decrease in restricted funds at December 31, 1996 as compared to
December 31, 1995 is due primarily to the disposition of Wilshire Bundy
during March 1996 and all related property cash reflected as restricted
funds at December 31, 1995 being remitted to the lender.
The decrease in interest, rents and other receivables, prepaid
expenses, land and leasehold interests, buildings and improvements,
accumulated depreciation, deferred expenses, accrued rents receivable,
accounts payable and tenant security deposits at December 31, 1996 as
compared to December 31, 1995 is due primarily to the disposition of
Wilshire Bundy Plaza in March 1996 and the sale of Mariners Pointe
Apartments in October 1996. The Wilshire Bundy and Mariners Pointe
Apartments properties were classified by the Partnership as held for sale
or disposition at January 1, 1996, and therefore, were not subject to
continued depreciation. Furthermore, a $16,000,000 provision for value
impairment (reflected as the cumulative effect of an accounting change in
the accompanying consolidated financial statements) was recorded at
Wilshire Bundy on January 1, 1996. Due to such provision, and the
suspension of depreciation provisions pursuant to SFAS 121, no gain or loss
on the disposition of the property was recognized for financial reporting
purposes except for a gain on forgiveness of indebtedness reflected as an
extraordinary item. For Federal income tax purposes such disposition
resulted in a gain of approximately $9,200,000.
The decrease in current portion of long-term debt and accrued interest
at December 31, 1996 as compared to December 31, 1995 is primarily due to
the disposition of Wilshire Bundy Plaza in March 1996 and restructuring of
the Partnership's loan payable secured by the Partnership's interest in
Wells Fargo Center.
The decrease in due to affiliates as of December 31, 1996 as compared
to December 31, 1995 represents a reduction of the Partnership's paid-in
capital obligation to Carlyle Investors, Inc. and Carlyle Managers, Inc.
from $2,400,000 to $800,000. The decrease is partially offset by the
accrued interest on these obligations.
The increase in unearned rents as of December 31, 1996 as compared to
December 31, 1995 is primarily due to the timing of the collection of
rental income at Louis Joliet Mall.
The decrease in the deficit balance of the investment in
unconsolidated venture is due to capital contributions of approximately
$4,368,397, related primarily to the restructuring of the Partnerships
indirect interest in JMB/NYC during the year and income from operations of
unconsolidated venture including income from restructuring of $157,949,848
related to JMB/NYC and $5,712,902 related to Wells Fargo recognized during
1996. The deficit balance of the investment in unconsolidated venture has
been adjusted so as to reflect the prorata exposure to the Partnership
under its indemnification related to the 237 and 1290 Properties as more
fully described in the Notes.
The decrease in rental income for the twelve months ended December 31,
1996 as compared to the twelve months ended December 31, 1995 is primarily
due to the dispositions of Wilshire Bundy Plaza in March 1996 and Louisiana
Tower in August 1995. The decrease in rental income for the twelve months
ended December 31, 1995 as compared to the twelve months ended December 31,
1994 is primarily due to the sale of Brittany Downs Apartments I and II in
January 1995 and the disposition of Louisiana Tower in August 1995.
Interest income decreased for the twelve months ended December 31,
1996 as compared to the twelve months ended December 31, 1995 primarily due
to lower average investments during 1996 and the disposition of Wilshire
Bundy during March 1996 in which all related property was remitted to the
lender. Interest income increased for the twelve months ended December 31,
1995 as compared to the twelve months ended December 31, 1994 primarily due
to the increase in 1995 in the average interest rate earned on the
Partnership's investment in U.S. Government obligations partially offset by
lower average cash balances in 1995.
The decrease in mortgage and other interest expense for the twelve
months ended December 31, 1996 as compared to the twelve months ended
December 31, 1995 is primarily due to the disposition of Louisiana Tower in
August 1995, the disposition of Wilshire Bundy Plaza in March 1996, and the
1995 refinancing of the first and second mortgage notes secured by the
Louis Joliet Mall. The decrease in mortgage and other interest expense for
the twelve months ended December 31, 1995 as compared to the twelve months
ended December 31, 1994 is due primarily to the sale of Brittany Downs
Apartments Phase I and II in January 1995 and the disposition of Louisiana
Tower in August 1995.
The decrease in depreciation expense for the twelve months ended
December 31, 1996 as compared to the twelve months ended December 31, 1995
is primarily due to the disposition of Louisiana Tower in August 1995 and
suspension of depreciation at Wilshire Bundy Plaza effective January 1,
1996 due to the classification of this property as held for sale or
disposition as of January 1, 1996 as discussed above. The decrease in
depreciation expense for the twelve months ended December 31, 1995 as
compared to December 31, 1994 is due primarily to the sale of Brittany
Downs Apartments Phase I and II in January 1995 and the disposition of
Louisiana Tower in August 1995.
The decrease in property operating expenses for the twelve months
ended December 31, 1996 as compared to the twelve months ended December 31,
1995 is due to the disposition of Louisiana Tower in August 1995 and the
disposition of Wilshire Bundy Plaza in March 1996. The decrease in
property operating expenses for the twelve months ended December 31, 1995
as compared to the twelve months ended December 31, 1994 is due primarily
to the sale of Brittany Downs Apartments Phase I and II in January 1995 and
the disposition of Louisiana Tower in August 1995.
The decrease in amortization of deferred expenses for the twelve
months ended December 31, 1996 as compared to December 31, 1995 is due to
the disposition of Louisiana Tower in August 1995 and the disposition of
Wilshire Bundy Plaza in March 1996. Amortization of deferred expenses
increased for the twelve months ended December 31, 1995 as compared to the
twelve months ended December 31, 1994 primarily due to the amortization of
costs associated with the refinancing of Louis Joliet Mall in September
1995 and the loan extension obtained at Mariners Pointe Apartments during
the third quarter of 1994.
The restructuring fee for the year ended December 31, 1996 is due to
the loan modification of the Partnership's note payable to Wells Fargo and
restructuring of the South Tower venture during the fourth quarter of 1996.
The increase in general and administrative expenses for the twelve
months ended December 31, 1995 as compared to the year ended December 31,
1994 are attributable primarily to an increase in reimbursable costs to
affiliates of the General Partners in 1995 and the recognition of certain
additional prior year reimbursable costs to such affiliates.
The Partnership's share of income from operations of unconsolidated
ventures for the year ended December 31, 1996 is primarily due to the
restructuring of the Partnership's interests in JMB/NYC and South Tower.
During 1996, the Partnership recognized income from restructuring of
$163,662,750 which is included with losses from operations of
unconsolidated ventures. Furthermore, due to the effects of the bankruptcy
and related plan of reorganization of the ventures owned by JMB/NYC, the
Partnership recognized loss from operations of unconsolidated venture of
$496,653 for the year ending December 31, 1996 compared to losses of
$13,588,448 for the year ended December 31, 1995. The increase in the
Partnership's share of loss from operations of unconsolidated ventures for
the twelve months ended December 31, 1995 as compared to the twelve months
ended December 31, 1994 is primarily due to reduced rental income at Piper
Jaffray Tower due to the expansion of Piper Jaffray, Inc. and reduced
rental income at Wells Fargo-IBM Tower due to the early move-out of two
major law firm tenants during 1995 as discussed above.
The gain on sale of property by unconsolidated ventures for the twelve
months ended December 31, 1996 is due to final resolution regarding OOUV's
share of reimbursable developmental costs related to the sale of Old
Orchard shopping center which was sold in September 1993. The loss on sale
of property by unconsolidated ventures and the Partnership's share of gain
from the extinguishment of indebtedness of unconsolidated ventures for the
twelve months ended December 31, 1995 as compared to the twelve months
ended December 31, 1994 is primarily due to the disposition of the 2
Broadway Building and the related gain on the extinguishment of
indebtedness.
The gain on sale of investment properties for the twelve months ended
December 31, 1996 is due to the sale of the Mariners Pointe Apartments in
October 1996. The increase in the gain on sale of investment properties,
gain on forgiveness of indebtedness and the prepayment penalty for the
twelve months ended December 31, 1995 as compared to the twelve months
ended December 31, 1994 is due to the sale of the Brittany Downs Apartments
Phase I and Phase II in January 1995 and the related gain recognized on
forgiveness of debt, and the disposition of Louisiana Tower in August 1995,
in addition to the refinancing of Louis Joliet Mall in September 1995 and
related prepayment penalty.
The extraordinary gain on forgiveness on indebtedness for the twelve
months ended December 31, 1996 is due to the disposition of the Wilshire
Bundy Plaza in March 1996 as discussed above.
INFLATION
Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.
Inflation is not expected to significantly impact future operations
due to the expected sale or disposition of most of the investment
properties of the Partnership by the end of 1999. However, to the extent
that inflation in future periods may have an adverse impact on property
operating expenses, the effect would generally be offset by amounts
recovered from tenants as many of the long-term leases at the Partnership's
commercial properties have escalation clauses covering increases in the
cost of operating the properties as well as real estate taxes. Therefore,
the effect on operating earnings generally will depend upon the extent to
which the properties are occupied. In addition, substantially all of the
leases at the Partnership's shopping center investment contain provisions
which entitle the property owner to participate in gross receipts of
tenants above fixed minimum amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
SCHEDULE
--------
Consolidated Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV:
We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XIV, a limited partnership, (the Partnership),
and its consolidated ventures as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and the
financial statement schedule are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Partnership and its consolidated venture at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated venture changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 21, 1997
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
------
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 18,069,904 16,210,170
Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . -- 2,523,419
Interest, rents and other receivables (net of allowance
for doubtful accounts of $22,675 for 1996 and $383,341
for 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,300 310,325
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 25,860 101,000
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 250,603 349,318
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . 18,508,667 19,494,232
------------ ------------
Investment properties - Schedule III:
Land and leasehold interest . . . . . . . . . . . . . . . . . . . -- 6,982,049
Buildings and improvements. . . . . . . . . . . . . . . . . . . . -- 105,859,744
------------ ------------
-- 112,841,793
Less accumulated depreciation . . . . . . . . . . . . . . . . . . -- 36,814,248
------------ ------------
Total properties held for investment,
net of accumulated depreciation . . . . . . . . . . . . . -- 76,027,545
Properties held for sale or disposition . . . . . . . . . . . . . 33,602,388 --
------------ ------------
Total investment properties . . . . . . . . . . . . . . . . 33,602,388 76,027,545
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 6,279,874 7,534,345
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158,543 1,920,835
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 453,494 1,136,835
------------ ------------
$ 60,002,966 106,113,792
============ ============
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1996 1995
------------ ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 251,510 60,042,105
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 1,018,641 1,187,171
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 1,273,858 2,743,979
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 796,972 7,291,442
Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 600,100 600,015
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . 435,718 304,724
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . 4,376,799 72,169,436
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 15,168 417,084
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 21,687,689 184,813,778
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 47,736,328 26,000,000
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 73,815,984 283,400,298
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . (15,345,058) (21,087,495)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (1,316,336) (1,316,336)
------------ ------------
(16,660,394) (22,402,831)
------------ ------------
Limited partners (400,909.17850 Interests):
Capital contributions, net of offering costs. . . . . . . . . . . 351,746,836 351,746,836
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . (304,723,432) (462,454,483)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (44,176,028) (44,176,028)
------------ ------------
2,847,376 (154,883,675)
------------ ------------
Total partners' capital accounts (deficits) . . . . . . . . (13,813,018) (177,286,506)
------------ ------------
$ 60,002,966 106,113,792
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . $ 10,544,285 17,403,886 22,212,040
Interest income . . . . . . . . . . . . . . . . . 854,307 1,138,093 985,270
Other income. . . . . . . . . . . . . . . . . . . 431,738 512,777 400,000
------------ ------------ ------------
11,830,330 19,054,756 23,597,310
------------ ------------ ------------
Expenses:
Mortgage and other interest . . . . . . . . . . . 5,971,389 11,041,298 13,670,591
Depreciation. . . . . . . . . . . . . . . . . . . 1,462,969 4,155,575 4,795,412
Property operating expenses . . . . . . . . . . . 5,289,810 9,861,497 11,299,218
Professional services . . . . . . . . . . . . . . 739,065 731,793 779,846
Amortization of deferred expenses . . . . . . . . 367,084 650,512 472,735
General and administrative. . . . . . . . . . . . 659,725 686,912 598,531
Restructuring fee . . . . . . . . . . . . . . . . 6,118,255 -- --
------------ ------------ ------------
20,608,297 27,127,587 31,616,333
------------ ------------ ------------
Operating earnings (loss) . . . . . . . . . . . (8,777,967) (8,072,831) (8,019,023)
Partnership's share of operations of unconsolidated
ventures (including income from restructuring of
$163,662,750 in 1996) . . . . . . . . . . . . . . 161,701,376 (19,392,303) (16,851,858)
------------ ------------ ------------
Net operating earnings (loss) . . . . . . . . . 152,923,409 (27,465,134) (24,870,881)
Partnership's share of gain (loss) on sale of
investment properties by unconsolidated
ventures. . . . . . . . . . . . . . . . . . . . . 870,837 (29,579,058) 1,702,082
Gain on sales or disposition of
investment properties . . . . . . . . . . . . . . 2,057,231 14,692,172 --
------------ ------------ ------------
Net earnings (loss) before
extraordinary item. . . . . . . . . . . . . . 155,851,477 (42,352,020) (23,168,799)
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1996 1995 1994
------------ ------------ ------------
Extraordinary items:
Gain on forgiveness of indebtedness . . . . . . . 23,622,011 1,650,638 --
Partnership's share of gain on
extinguishment of indebtedness of
unconsolidated venture. . . . . . . . . . . . . -- 31,264,814 --
Prepayment penalty on refinanced long-term
debt. . . . . . . . . . . . . . . . . . . . . . -- (204,093) --
Provision for earthquake repairs. . . . . . . . . -- 3,000,000 (3,000,000)
Cumulative effect of an accounting change . . . . . (16,000,000) -- --
------------ ------------ ------------
Net earnings (loss) . . . . . . . . . . . . . . $163,473,488 (6,640,661) (26,168,799)
============ ============ ============
Net earnings (loss) per limited
partnership interest:
Net operating earnings (loss) . . . . . . . $ 366.18 (65.74) (59.53)
Partnership's share of gain (loss)
on sale of investment properties
by unconsolidated ventures. . . . . . . . 2.15 (73.02) 4.20
Gain on sale or disposition of
investment properties . . . . . . . . . . 5.08 36.27 --
Extraordinary items . . . . . . . . . . . . 58.33 87.94 (7.18)
Cumulative effect of an accounting change . (38.31) -- --
------------ ------------ ------------
Net earnings (loss) . . . . . . . . . . . . $ 393.43 (14.55) (62.51)
============ ============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficits)
Decem-
ber 31,
1993 . . . .$1,000 (19,183,198) (1,235,319) (20,417,517) 351,746,836 (431,549,320) (36,155,381)(115,957,865)
Net earnings
(loss) . . . -- (1,097,814) -- (1,097,814) -- (25,070,985) -- (25,070,985)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1994 . . . . 1,000 (20,281,012) (1,235,319) (21,515,331) 351,746,836 (456,620,305) (36,155,381)(141,028,850)
Cash dis-
tributions . -- -- (81,017) (81,017) -- -- (8,020,647) (8,020,647)
Net earnings
(loss) . . . -- (806,483) -- (806,483) -- (5,834,178) -- (5,834,178)
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED
GENERAL PARTNERS LIMITED PARTNERS
-------------------------------------------------- ---------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- ------------
Balance
(deficits)
Decem-
ber 31,
1995 . . . . 1,000 (21,087,495) (1,316,336) (22,402,831) 351,746,836 (462,454,483) (44,176,028)(154,883,675)
Net earnings
(loss) . . . -- 5,742,437 -- 5,742,437 -- 157,731,051 -- 157,731,051
------ ----------- ---------- ----------- ----------- ------------ ----------- ------------
Balance
(deficits)
Decem-
ber 31,
1996 . . . .$1,000 (15,345,058) (1,316,336) (16,660,394) 351,746,836 (304,723,432) (44,176,028) 2,847,376
====== =========== ========== =========== =========== ============ =========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $163,473,488 (6,640,661) (26,168,799)
Items not requiring (providing) cash or
cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . 1,462,969 4,155,575 4,795,412
Amortization of deferred expenses . . . . . . 367,084 650,512 472,735
Amortization of discount on long-term debt. . -- 257,588 540,492
Restructuring fee . . . . . . . . . . . . . . 6,118,255 -- --
Partnership's share of operations of
unconsolidated ventures (including income
from restructuring of $163,662,750 in 1996) (161,701,376) 19,392,303 16,851,858
Partnership's share of gain (loss) on
sale of investment properties by
unconsolidated ventures . . . . . . . . . . (870,837) 29,579,058 (1,702,082)
Gain on sale or disposition of investment
properties. . . . . . . . . . . . . . . . . (2,057,231) (14,692,172) --
Extraordinary items . . . . . . . . . . . . . (23,622,011) (35,711,359) 3,000,000
Cumulative effect of an accounting change . . 16,000,000 -- --
Changes in:
Restricted funds. . . . . . . . . . . . . . . . (861,169) (2,340,567) 1,699,657
Interest, rents and other receivables . . . . . (113,362) 239,454 25,989
Prepaid expenses. . . . . . . . . . . . . . . . 31,273 9,665 17,052
Escrow deposits . . . . . . . . . . . . . . . . 98,715 (315,817) 164,416
Accrued rents receivable. . . . . . . . . . . . (42,471) 89,377 277,659
Accounts payable. . . . . . . . . . . . . . . . 138,524 460,368 212,459
Due to affiliates . . . . . . . . . . . . . . . 129,878 168,594 127,831
Accrued interest. . . . . . . . . . . . . . . . 3,474,759 6,213,384 (728,768)
Deferred interest . . . . . . . . . . . . . . . -- 1,200,233 2,648,987
Accrued real estate taxes . . . . . . . . . . . 158,390 (42,682) 6,237
Unearned rents. . . . . . . . . . . . . . . . . 160,900 (302,569) (175,116)
Tenant security deposits. . . . . . . . . . . . (7,188) 41,497 131,734
Other liabilities . . . . . . . . . . . . . . . -- (488,549) 30,316
------------ ----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . 2,338,590 1,923,232 2,228,069
------------ ----------- -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases)
of short-term investments. . . . . . . . . . . . -- 2,129,166 14,061,209
Additions to investment properties. . . . . . . . (608,071) (1,487,605) (3,402,832)
Partnership's distributions from
unconsolidated ventures . . . . . . . . . . . . 3,568,234 1,576,046 5,925,748
Cash proceeds from sale of investment
properties. . . . . . . . . . . . . . . . . . . 777,478 2,795,768 --
Partnership's contributions to
unconsolidated ventures . . . . . . . . . . . . (4,368,397) (515,350) (1,760,411)
Payment of deferred expenses. . . . . . . . . . . (198,100) (330,216) (734,434)
------------ ----------- -----------
Net cash provided by (used in)
investing activities. . . . . . . . . . (828,856) 4,167,809 14,089,280
------------ ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . -- (376,203) (728,949)
Proceeds received on restructuring and
refinancing of long-term debt . . . . . . . . . 350,000 381,704 --
Prepayment penalty on long-term debt. . . . . . . -- (204,093) --
Distributions to general partners . . . . . . . . -- (81,017) --
Distributions to limited partners . . . . . . . . -- (8,020,647) --
------------ ----------- -----------
Net cash provided by (used in)
financing activities. . . . . . . . . . 350,000 (8,300,256) (728,949)
------------ ----------- -----------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . 1,859,734 (2,209,215) 15,588,400
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 16,210,170 18,419,385 2,830,985
------------ ----------- -----------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $ 18,069,904 16,210,170 18,419,385
============ =========== ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1996 1995 1994
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . $ 2,496,630 3,574,186 11,209,880
============ =========== ===========
Non-cash investing and financing activities:
Sale of investment properties:
Total sale proceeds, net of selling expenses. $ 7,277,478 17,925,768 --
Principal balances due on mortgages payable . (6,500,000) (15,130,000) --
------------ ----------- -----------
Cash proceeds from sale of investment
property, net of selling expenses . . . . . $ 777,478 2,795,768 --
============ =========== ===========
Extraordinary item due to forgiveness
of indebtedness secured by
Brittany Downs Apartments - Phase II. . . . $ -- 1,650,638 --
============ =========== ===========
Extraordinary item due to forgiveness
of indebtedness secured by
Wilshire Bundy Plaza. . . . . . . . . . . . $ 23,622,011 -- --
============ =========== ===========
Gross proceeds from restructuring and
refinancing of long-term debt . . . . . . . $ 9,737,838 26,000,000 --
Principal and interest paid at closing. . . . -- (24,985,162) --
Prepayment penalty. . . . . . . . . . . . . . -- (204,093) --
Payment of deferred mortgage expense. . . . . -- (429,041) --
Restructuring fee . . . . . . . . . . . . . . (6,118,255) -- --
Accrued interest. . . . . . . . . . . . . . . (3,269,583) -- --
------------ ----------- -----------
Proceeds received on restructuring
and refinancing of long-term debt . . $ 350,000 381,704 --
============ =========== ===========
Gain recognized on disposition of investment
properties. . . . . . . . . . . . . . . . . $ 2,928,068 14,692,172 --
============ =========== ===========
Reduction in investment in unconsolidated
venture . . . . . . . . . . . . . . . . . . $ 1,600,000 -- --
============ =========== ===========
Reduction in amounts due to affiliates. . . . $ (1,600,000) -- --
============ =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (either directly or through joint ventures) an
equity investment portfolio of United States real estate. Business
activities consist of rentals to a wide variety of commercial and retail
companies, and the ultimate sale or disposition of such real estate. The
Partnership currently expects to conduct an orderly liquidation of most of
its remaining investment portfolio and wind up its affairs as quickly as
practicable. As a result, the Partnership currently expects that it will
sell or dispose of its remaining investment properties, with the possible
exception of its indirect interests in the 237 Park Avenue and 1290 Avenue
of the Americas properties (the "Properties"), not later than December 31,
1999 barring any unforseen economic developments.
The accompanying consolidated financial statements include the accounts
of the Partnership and its majority-owned venture, Mariners Pointe
Associates ("Mariners Pointe") (prior to its sale in October 1996). The
effect of all significant transactions between the Partnership and the
consolidated venture has been eliminated. The equity method of accounting
has been applied in the accompanying consolidated financial statements with
respect to the Partnership's interests in Orchard Associates; JMB/Piper
Jaffray Tower Associates ("JMB/Piper") and JMB Piper Jaffray Tower
Associates II ("JMB/Piper II"); 900 3rd Avenue Associates ("JMB/900"); 1090
Vermont Avenue, N.W. Associates Limited Partnership ("1090 Vermont");
Maguire/Thomas Partners - South Tower LLC (formerly Maguire/Thomas Partners
- - South Tower) ("South Tower").
The Partnership holds an approximate 50% interest in JMB/NYC Office
Building Associates, L.P. ("JMB/NYC") which in turn owns an indirect
approximate 4.9% interest in commercial real estate in the city of New
York, New York consisting of the 237 Park Avenue and 1290 Avenue of the
Americas properties (the "Properties").
The equity method of accounting has been applied in the accompanying
financial statements with respect to the Partnership's 50% indirect
interest in JMB/NYC through Carlyle XIV Associates, L.P. Accordingly, the
financial statements do not include the accounts of JMB/NYC or Carlyle XIV
Associates, L.P. Effective with the confirmation and acceptance of the
Amended Plan of Reorganization and Disclosure Statement on October 10, 1996
("Effective Date"), JMB/NYC accounts for its indirect interest in the
Properties on the cost basis of accounting as a result of JMB/NYC
converting its ownership interest in the joint ventures which owned the
Properties to a limited partner. As a limited partner, JMB/NYC has no
future funding obligations (other than that related to a certain
indemnification provided in connection with the restructuring) and has no
influence or control over the day-to-day affairs of the Properties which
owns the Properties subsequent to the Effective Date. Accordingly, JMB/NYC
(and the Partnership) have suspended loss recognition relative to their
respective real estate investments and have reversed those previously
recognized losses that the Partnership and JMB/NYC are no longer obligated
to fund. The Partnership maintains a deficit balance in its investment in
unconsolidated venture to reflect its maximum exposure under the
indemnification agreement. The share of income from unconsolidated
ventures in the accompanying Partnership financial statements includes the
respective partnerships' proportionate share of the operations of the
Properties through the Effective Date, as well as income from restructuring
consisting primarily of the reversal of previously recognized losses as
noted above and the adjustments necessary to record the restructuring.
JMB/NYC utilized the equity method to account for such investments prior to
the Effective Date.
Due to the restructuring of the Partnership's interest in Maguire
Thomas Partners - South Tower, LLC, as discussed below, the Partnership has
suspended loss recognition relative to its respective real estate
investment and has reversed those previously recognized losses that the
Partnership is no longer obligated to fund, which is reflected as income
from restructuring.
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $ 60,002,966 96,200,128 106,113,792 97,367,891
Partners' capital accounts
(deficits):
General partners. . . . . . . . (16,660,394) (17,092,692) (22,402,831) (22,727,866)
Limited partners. . . . . . . . 2,847,376 (160,531,826) (154,883,675) (176,962,173)
Net earnings (loss):
General partners. . . . . . . . 5,742,437 5,635,174 (806,483) (610,819)
Limited partners. . . . . . . . 157,731,051 16,430,347 (5,834,178) (25,164,650)
Net earnings (loss)
per limited
partnership interest. . . . . . . 393.43 40.97 (14.55) (62.75)
=========== =========== =========== =============
</TABLE>
The net earnings (loss) per limited partnership interest is based upon
the limited partnership interests outstanding at the end of each year
(400,909.17850). Deficit capital accounts will result, through the
duration of the Partnership, in the recognition of net gain to the Holders
of Interests for financial reporting and Federal income tax purposes.
Reference is made to the Notes for a discussion of the allocations of
profits and losses.
The Preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from its unconsolidated ventures are considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net earnings. In addition, the Partnership records
amounts held in U.S. Government obligations at cost which approximates
market. For the purposes of these statements, the Partnership's policy is
to consider all such amounts held with original maturities of three months
or less (approximately $16,772,271 and $16,040,895 at December 31, 1996 and
1995, respectively) as cash equivalents, which includes investments in an
institutional mutual fund which holds U.S. Government obligations, with any
remaining amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of mortgage fees which are
amortized on a straight-line basis over the terms of the related mortgage
notes and deferred leasing commissions and concessions which are amortized
over the lives of the related leases.
Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due and/or increases in
minimum lease payments over the term of the lease, the Partnership accrues
rental income for the full period of occupancy on a straight-line basis.
Such amounts are reflected in accrued rents receivable in the accompanying
balance sheets.
Certain amounts in the 1995 financial statements have been
reclassified to conform with the 1996 presentation.
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to tax authorities amounts
representing withholding from distributions paid to partners.
The Partnership has acquired, either directly or through joint
ventures, two apartment complexes, fourteen office buildings and three
shopping centers. Twelve properties have been sold or disposed of by the
Partnership as of December 31, 1996. All of the properties owned at
December 31, 1996 were operating. The cost of the investment properties
represents the total cost to the Partnership or its ventures plus
miscellaneous acquisition costs and net of value impairment adjustments.
Depreciation on the consolidated investment properties has been
provided over the estimated useful lives of 5 to 30 years using the
straight-line method.
The investment properties or the Partnership's interest in
unconsolidated ventures are pledged as security for the long-term debt, for
which there is generally no recourse to the Partnership. The long-term
debt represents senior mortgage loans.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.
Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" was issued in March 1995. The Partnership
adopted SFAS 121 as required in the first quarter of 1996. SFAS 121
requires that the Partnership record an impairment loss on its properties
to be held for investment whenever their carrying value cannot be fully
recovered through estimated undiscounted future cash flows from their
operations and sale. The amount of the impairment loss to be recognized
would be the difference between the property's carrying value and the
property's estimated fair value. The Partnership's policy is to consider a
property to be held for sale or disposition when the Partnership has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the near
term or the Partnership has concluded that it may dispose of the property
by no longer funding operating deficits or debt service requirements of the
property thus allowing the lender to realize upon its security. The
$16,000,000 impairment loss on the Wilshire Bundy investment property,
which was categorized as held for sale or disposition at January 1, 1996
upon adoption of SFAS 121, has been reflected in the accompanying
consolidated financial statements as the cumulative effect of an accounting
change as provided by SFAS 121. In accordance with SFAS 121, any
properties identified as "held for sale or disposition" are no longer
depreciated. Adjustments for impairment loss for such properties
(subsequent to the date of adoption of SFAS 121) are made in each period as
necessary to report these properties at the lower of carrying value or fair
value less costs to sell. In certain situations, such estimated fair value
could be less than the existing non-recourse debt which is secured by the
property. There can be no assurance that any estimated fair value of these
properties would ultimately be realized by the Partnership in any future
sale or disposition transaction.
Under the prior accounting policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's carrying value. The amount of any such impairment loss
recognized by the Partnership was limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 is determined
without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a
net gain for financial reporting purposes (comprised of gain on
extinguishment of debt and gain or loss on the sale or disposition of
property) for financial reporting purposes to the extent of any excess of
the then outstanding balance of the property's non-recourse indebtedness
over the then carrying value of the property, including the effect of any
reduction for impairment loss under SFAS 121.
In addition, upon the disposition of any impaired property, the
Partnership will generally recognize more gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's prior
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
implementation of this accounting statement could significantly impact the
Partnership's reported earnings, there would be no impact on cash flows.
Further, any such impairment loss is not recognized for Federal income tax
purposes.
The results of operations for consolidated properties classified as
held for sale or disposition as of December 31, 1996 or sold or disposed of
during the past three years were net losses of $106,017, $6,842,205 and
$6,357,263, respectively, for the years ended December 31, 1996, 1995 and
1994.
In addition, the accompanying financial statements include income
(losses) ($679,665), $599,394 and ($8,766,947), respectively, of the
Partnership's share of total property operations of ($1,317,601),
$3,507,789 and ($35,326,343) of unconsolidated properties held for sale or
disposition as of December 31, 1996 or sold or disposed of in the past
three years.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1996 is a party to six operating joint
venture agreements. Pursuant to such agreements, the Partnership made
initial capital contributions of approximately $192,617,000 (before legal
and other acquisition costs and its share of operating deficits as
discussed below). Under certain circumstances, either pursuant to the
venture agreements or due to the Partnership's obligations as a general
partner, the Partnership may be required to make additional cash
contributions to certain of the ventures. Five of the joint venture
agreements (JMB/NYC (through an interest in Carlyle-XIV Associates, L.P.),
JMB/Piper, JMB/Piper II, JMB/900 and South Tower) are, directly or
indirectly, with partnerships (JMB/Manhattan Associates, Ltd.
("JMB/Manhattan"), Carlyle Real Estate Limited Partnership-XIII ("C-XIII")
and Carlyle Real Estate Limited Partnership-XV ("C-XV")) sponsored by the
Corporate General Partner or its affiliates. These five joint ventures
have entered into a total of six property joint venture agreements.
The Partnership has acquired, through the above ventures, interests in
seven office buildings. The venture properties have been financed under
various long-term debt arrangements as described below.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.
INVESTMENT PROPERTIES
ORCHARD ASSOCIATES
The Partnership's interest in Old Orchard Shopping Center (through
Orchard Associates and Old Orchard Urban Venture ("OOUV")) was sold in
September 1993.
OOUV was entitled to receive up to an additional $4,300,000 based upon
certain events (as defined), all of which was earned and was subsequently
received in 1994. Upon receipt, OOUV distributed the $4,300,000 to the
respective partners based upon their percentage interests. OOUV could have
received reimbursement, under certain conditions, of up to an additional
$3,400,000 (of which Orchard Associates had a 79.1667 interest) of
previously incurred development costs based upon certain future earnings of
the property (as defined). In December 1996, OOUV received a final
allocation of $2,450,000 (of which the Partnership's share was $969,796) of
such development costs related to the sale of Old Orchard Shopping Center.
At the time of redemption, OOUV retained a portion of the Orchard
Associates redemption proceeds in order to fund certain contingent amounts
which may have been due in the future. In July 1995, OOUV distributed to
Orchard Associates a significant portion of its redemption holdback of
$2,083,644. As a result, the Partnership received its share of the
holdback of $1,041,820. In October 1995, OOUV distributed to Orchard
Associates its share of the pre-sale settlement with Federated Department
Stores of $288,452. As a result, Orchard distributed to the Partnership
its share of the settlement of $144,226. In 1996, OOUV distributed to
Orchard Associates $1,389,210 in proceeds from the settlement of operating
prorations. As a result, Orchard Associates distributed $694,405 to the
Partnership representing its share of such operating prorations. The
Partnership intends to retain these funds for working capital purposes.
OOUV and Orchard Associates had also entered into a contribution
agreement whereby they have agreed to share future gains and losses which
may arise with respect to potential revenues and liabilities from events
which predated the contribution of the property to the new venture
(including, without limitation the distribution to OOUV of $4,300,000 and
the potential future distribution of $3,400,000 as described above) in
accordance with their pre-contribution percentage interests. In September
1994, Orchard received its share of the contingent $4,300,000, as discussed
above and distributed to each of the respective partners their share
($1,702,082) to the Partnership of such amount. The Partnership recognized
a gain of $1,702,082 for financial reporting purposes and Federal income
tax purposes in 1994. In December 1996, Orchard received its share of the
earnout provision $2,450,000, as discussed above, and distributed to each
of the respective partners their share ($969,796 to the Partnership) of
such amount. The Partnership recognized a gain of $870,837 for financial
reporting and for federal income tax purposes in 1996.
JMB/NYC
JMB/NYC is a limited partnership among Carlyle-XIV Associates, L.P.,
Property Partners, L.P. and Carlyle-XIII Associates, L.P. as limited
partners and Carlyle Managers, Inc. as the sole general partner. The
Partnership is a 40% shareholder of Carlyle Managers, Inc. and related to
this investment, has an obligation to fund, on demand, $400,000 (reduced
from $1,200,000 during 1996) of additional paid-in capital to Carlyle
Managers, Inc. (reflected in amounts due to affiliates in the accompanying
consolidated financial statements). The Partnership currently holds,
indirectly as a limited partner of Carlyle-XIV Associates, L.P., an
approximate 50% limited partnership interest in JMB/NYC. The sole general
partner of Carlyle-XIV Associates, L.P. is Carlyle Investors, Inc., of
which the Partnership is a 40% shareholder. Related to this investment,
the Partnership has an obligation to fund, on demand, $400,000 (reduced
from $1,200,000 during 1996) of additional paid-in capital (reflected in
amounts due to affiliates in the accompanying consolidated financial
statements). The general partner in each of JMB/NYC and Carlyle-XIV
Associates, L.P. is an affiliate of the Partnership. For financial
reporting purposes, the allocation of profits and losses of JMB/NYC to the
Partnership is 50%.
In October 1994, the Partnership and its affiliated partners (together
with the Partnership, the "Affiliated Partners"), through JMB/NYC, entered
into an agreement (the "Agreement") with the affiliates (the "Olympia &
York affiliates") of Olympia & York Developments, Ltd. ("O&Y") who were the
venture partners in the Joint Ventures which owned 237 Park Avenue, 1290
Avenue of the Americas and 2 Broadway, to resolve certain disputes among
the Affiliated Partners and the Olympia & York affiliates. In general, the
parties agreed to: (i) restructure the first mortgage loan; (ii) sell the
2 Broadway Building; (iii) reduce or eliminate approval rights of JMB/NYC
with respect to virtually all property management, leasing, sale or
refinancing; (iv) amend the Joint Ventures' agreements to eliminate any
funding obligations by JMB/NYC and (v) establish a new preferential cash
distribution level for the Olympia & York affiliates. In accordance with
the Agreement and in anticipation of the sale of the 2 Broadway Building,
the unpaid first mortgage indebtedness previously allocated to 2 Broadway
was allocated in 1994 to 237 Park Avenue and 1290 Avenue of the Americas.
As part of the Agreement, JMB/NYC and the Olympia & York affiliates
agreed to file a pre-arranged bankruptcy plan for reorganization under
Chapter 11 of the Bankruptcy Code in order to facilitate the restructuring
of the Joint Ventures between JMB/NYC and the Olympia & York affiliates and
the debt encumbering the two properties remaining after the sale of 2
Broadway. In June 1995, the 2 Broadway Joint Ventures filed their pre-
arranged bankruptcy plans for reorganization, and in August 1995, the
bankruptcy court entered an order confirming their plans of reorganization.
In September 1995, the sale of the 2 Broadway Building was completed. Such
sale did not result in any distributable proceeds to JMB/NYC or the Olympia
and York affiliates.
Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue
and 1290 Avenue of the Americas properties were made in April 1996, and in
August 1996, an Amended Plan of Reorganization and Disclosure Statement
(the "Plan") was filed with the Bankruptcy Court for these Joint Ventures.
The Plan was accepted by the various classes of debt and equity holders and
confirmed by the Court on September 20, 1996 and became effective October
10, 1996 ("Effective Date"). The Plan provides that JMB/NYC has an
indirect limited partnership interest which, before taking into account
significant preferences to other partners, equals approximately 4.9% of the
reorganized and restructured ventures owning 237 Park and 1290 Avenue of
the Americas. Neither O&Y nor any of its affiliates has any direct or
indirect continuing interest in the Properties. The new ownership
structure gives control of the Properties to a newly-organized real estate
investment trust which is owned primarily by holders of the first mortgage
debt which encumbered the Properties prior to the bankruptcy. JMB/NYC has,
under certain limited circumstances, through January 1, 2001 rights of
consent regarding sale of the Properties or the consummation of certain
other transactions that significantly reduce indebtedness of the
Properties.
The restructuring and reorganization discussed above eliminates any
potential additional obligation of the Partnership in the future to provide
additional funds under its previous joint venture agreements. The
Affiliated Partners entered into a joint and several obligation to
indemnify, through a date no later than January 2, 2001, the newly formed
real estate investment trust to the extent of $25 million to ensure their
compliance with the terms and conditions relating to JMB/NYC's indirect
limited partnership interest in the restructured and reorganized joint
ventures that own the Properties. The Affiliated Partners contributed
approximately $7.8 million (of which the Partnership's share was
approximately $3.9 million) to JMB/NYC which was deposited into an escrow
account as collateral for such indemnification. These funds have been
invested in stripped U.S. Government obligations with a maturity date of
February 15, 2001. Compliance with the provisions of the indemnification
agreement generally deal with impacting the operations of the newly
organized real estate investment trust. Compliance, therefore, is within
the control of the Affiliated Partners and non-compliance with such
provisions by either the Partnership or the Affiliated Partners is highly
unlikely. Therefore, it is highly likely that the Partnership's share of
the collateral will be returned to it at the termination of the
indemnification agreement. The Partnership may either retain for working
capital purposes or distribute all or portions of such funds upon return.
PIPER JAFFRAY TOWER
In 1984, the Partnership acquired, through JMB/Piper, with C-XV, an
interest in a 42-story office building known as the Piper Jaffray Tower in
Minneapolis, Minnesota with the developer and certain limited partners. In
April 1986, JMB/Piper II, a joint venture partnership between the
Partnership and C-XV, acquired the developer's interest in the OB Joint
Venture. JMB/Piper holds its interest in the property through three
existing joint ventures (OB Joint Venture, OB Joint Venture II and 222
South Ninth Street Limited Partnership, together "Piper"). The terms of
the JMB/Piper and JMB/Piper II venture agreements generally provide that
JMB/Piper's and JMB Piper II's respective shares of Piper's annual cash
flow, sale or refinancing proceeds and profits and losses will be
distributed or allocated to the Partnership in proportion to its 50% share
of capital contributions.
JMB/Piper invested approximately $19,915,000 for its 71% interest in
Piper. JMB/Piper is obligated to loan amounts to Piper to fund operating
deficits (as defined). The loans bear interest at a rate of not more than
14.36% per annum, provide for payments of interest only from net cash flow,
if any, and are repayable from net sale or refinancing proceeds. Such
loans and accrued interest were approximately $95,764,000 and $84,489,000
at December 31, 1996 and 1995, respectively.
The property is subject to a mortgage loan in the principal amount of
$100,000,000 of which approximately $96,868,300 is outstanding as of
December 31, 1996. Under the terms of a modification agreement with the
lender, in addition to fixed interest on the mortgage notes secured by the
Piper Jaffray Tower, contingent interest is payable in annual installments
on April 1 computed at 50% of gross receipts, as defined, for each fiscal
year in excess of $15,200,000. No such contingent interest was due for
1994, 1995 or 1996. In addition, to the extent the investment property
generates cash flow after payment of the fixed interest on the mortgage,
contingent interest, if any, leasing and capital costs, and 25% of the
ground rent, such amount will be paid to the lender as a reduction of the
principal balance of the mortgage loan. The excess cash flow payments
remitted to the lender for 1994 and 1995 totalled $353,251 and $464,178,
respectively. During 1996, excess cash flow generated under this agreement
was $741,627 which is expected to be remitted to the lender during the
second quarter of 1997. On a monthly basis, the venture deposits the
property management fee into an escrow account to be used (including
interest earned thereon) for future leasing costs to the extent cash flow
is not sufficient to cover such items. To date, no escrow funds have been
required to be used for leasing costs. The escrow balance as of December
31, 1996 is approximately $3,993,000. The manager of the property (which
was an affiliate of the Corporate General Partner through November 1994)
has agreed to defer receipt of its management fee until a later date. As
of December 31, 1996, the manager has deferred approximately $3,216,000
($1,839,000 of which represents deferred fees due to affiliates through
November 1994) of management fees. If upon sale or refinancing as
discussed below, there are funds remaining in this escrow after payment of
amounts owed to the lender, such funds will be paid to the manager to the
extent of its deferred and unpaid management fees. Any remaining unpaid
management fees would be payable out of the venture's share of sale or
refinancing proceeds. Additionally, pursuant to the terms of the loan
modification, effective January 1992, OB Joint Venture, as majority owner
of the underlying land, began deferring receipt of its share of land rent.
These deferrals will be payable from net sale or refinancing proceeds, if
any.
Furthermore, repayment of the loan is subject to a prepayment fee
ranging from 6% to 1% through the maturity date as well as an amount that
will provide the lender with an internal rate of return from 12.75% to
13.59% out of proceeds from the sale or refinancing of the property. After
the prepayment fees, the lender participates in any remaining sale or
refinancing proceeds. For financial reporting purposes, through December
31, 1995, additional interest expense had been accrued at a rate of 13.59%
per annum. Under the current terms of the modified debt, there must be a
significant improvement in the current market and property operating
conditions resulting in a significant increase in value of the property in
order for JMB/Piper to share in any future net sale or refinancing
proceeds. Therefore, during 1996, interest expense of $10,250,000 was
recognized at the loans stated payment rate. Total indebtedness including
interest under the mortgage loan is approximately $119,111,070 and
$120,429,415 at December 31, 1996 and 1995, respectively. JMB/Piper
anticipates exploring refinancing alternatives during 1997. Such
refinancing would only be possible if the underlying lender would accept a
discount and would also likely require additional capital contributions
from JMB/Piper. There are no assurances that a refinancing can be
achieved. The Partnership will not commit additional capital to this
property unless, among other things, it believes that upon sale of the
property, the Partnership will receive a return of such funds and a
reasonable rate of return thereon.
The Piper venture agreements provide that any net cash flow, as
defined, will be used to pay principal and interest on the operating
deficit loans (as described above) with any excess generally distributable
71% to JMB/Piper and 29% to the venture partners, subject to certain
adjustments (as defined). In general, operating profits or losses are
allocated in relation to the economic interests of the joint venture
partners. Accordingly, operating profits (excluding depreciation and
amortization) were allocated 71% to the JMB/Piper and 29% to the venture
partners during 1996, 1995 and 1994.
The Piper venture agreements further provide that, in general, upon
any sale or refinancing of the property, the principal and any accrued
interest outstanding on any operating deficit loans will be repaid. Any
remaining proceeds will be distributable 71% to JMB/Piper and 29% to the
joint venture partners, subject to certain adjustments, as defined.
During the fourth quarter 1991, Larkin, Hoffman, Daly & Lindgren, Ltd.
(23,344 square feet) approached the joint venture indicating it was
experiencing financial difficulties and desired to give back a portion or
all of its leased space. Larkin's lease was scheduled to expire in January
2005 and provided for annual rental payments which were significantly
higher than current market rental rates. Larkin was also a limited partner
with partial interests in the building and the land under the building. On
January 15, 1992, the joint venture agreed to terminate Larkin's lease in
return for its partial interest in the land under the building and a
$1,011,798 note receivable. The note receivable provides for monthly
payments of principal and interest at 8% per annum with full repayment over
ten years. Larkin may prepay all or a portion of the note at any time. As
of the date of this report, all amounts due under the note have been
received. The balance of the note receivable as of December 31, 1996 is
$621,744.
JMB/900
In 1984, the Partnership acquired, through JMB/900, with C-XV, an
interest in an existing joint venture ("Progress Partners") which owns a
36-story office building known as the 900 Third Avenue Building in New
York, New York. The partners of Progress Partners were the developer of
the property ("PPI") and an original affiliate of PPI ("JRA") and JMB/900.
In 1986, PPI transferred a portion of its interest to another partnership
("PC-900") in which it and a major tenant of the building (Central National
Bank) were partners. In 1987 the bank failed and the Federal Deposit
Insurance Corporation ("FDIC") assumed its position as a limited partner in
PC-900. The current partners of Progress Partners are JMB/900 and PPI, JRA
and PC-900 (together "Venture Partners").
The terms of the JMB/900 venture agreement generally provide that
JMB/900's share of Progress Partners' cash flow, sale or refinancing
proceeds and profits and losses will be distributed or allocated to the
Partnership in proportion to its 33-1/3% share of capital contributions.
JMB/900 has made capital contributions to Progress Partners and
certain payments to an affiliate of the developer, in the aggregate amount
of $18,270,000, subject to the obligation to make additional capital
contributions as described below.
JMB/900 has also made a loan to PPI in the amount of $20,000,000 which
is secured by the Venture Partners' interest in Progress Partners. The
loan bears interest at the rate of 16.4% per annum and is payable in
monthly installments of interest only until maturity on the earlier of the
sale or refinancing of the property or August 2004. For financial
reporting purposes, the loan is classified as an additional investment in
Progress Partners and any related interest received would be accounted for
as distributions (none in 1994, 1995 and 1996). To the extent that JMB/900
has not received annual distributions equal to the interest payable on such
loan, the deficiency becomes a cumulative preferred return payable out of
future net cash flow or net sale or refinancing proceeds.
The Progress Partners venture agreement provides that the venture is
required to pay the Venture Partners a stated return of $3,285,000 per
annum payable quarterly. Generally, JMB/900 is required to contribute
funds to the venture, to the extent net cash flow is not sufficient, to
enable the venture to make this payment. As a result of the lawsuit
discussed below, such amounts have not been contributed by JMB/900 to pay
the Venture Partners and consequently interest has not been received by
JMB/900 on the $20,000,000 loan discussed above. Under the terms of the
Progress Partners' venture agreement, the Venture Partners are generally
entitled to receive a non-cumulative preferred return of net cash flow (net
after the $3,285,000 per annum stated return payable to the Venture
Partners discussed above) of approximately $3,414,000 per annum, with any
remaining net cash flow distributable 49% to JMB/900 and 51% to the Venture
Partners.
The Progress Partners venture agreement further provides that net sale
or refinancing proceeds are distributable to JMB/900 and the Venture
Partners, on a pro rata basis, in an amount equal to the sum of any
deficiencies in the receipt of their respective cumulative preferred
returns of net cash flow plus certain contributions to the venture made by
JMB/900 to pay for the Venture Partners stated return. Next, proceeds will
be distributable to the Venture Partners in an amount equal to $20,000,000.
JMB/900 is entitled to receive the next $21,000,000 and the Venture
Partners will receive the next $42,700,000. Any remaining net proceeds are
to be distributed 49% to JMB/900 and 51% to the Venture Partners. As
discussed above, the $20,000,000 loan to the Venture Partners matures upon
sale or refinancing (under certain conditions) of the property.
Consequently, the $20,000,000 distribution level to the Venture Partners
would be used to pay off the $20,000,000 loan from JMB/900. Furthermore,
to the extent that JMB/900 has not received annual distributions equal to
the interest payable on the $20,000,000 loan discussed above, JMB/900's
preferred return deficiency is increased by the amounts not received.
Operating profits, in general, are allocated 49% to JMB/900 and 51% to
the Venture Partners. Operating losses, in general, are allocated 90% to
JMB/900 and 10% to the venture partners.
As a result of certain defaults by PPI, an affiliate of the General
Partners assumed management responsibility for the 900 Third Avenue
building as of August 1987 for a fee computed as a percentage of certain
revenues. In December 1994, the affiliated property manager entered into a
sub-management contract with an unaffiliated third party. Pursuant to the
sub-management agreement, the unaffiliated property manager is managing the
property.
Through December 31, 1991, it was necessary for JMB/900 to contribute
approximately $4,364,000 ($1,457,000 of which was contributed by the
Partnership) to pay past due property real estate taxes and to pay certain
costs, including litigation settlement costs, which were the responsibility
of one of the Venture Partners under the terms of the joint venture
agreement to the extent such funds were not available from the investment
property. In July 1989, JMB/900 filed a lawsuit in Federal court against
the former manager and the Venture Partners to recover the amounts
contributed and to recover for certain other joint venture obligations on
which the Venture Partners had defaulted. This lawsuit was dismissed on
jurisdictional grounds. Subsequently, however, the FDIC filed a complaint,
since amended, in a lawsuit against PPI, JRA, JMB/900, and other
unaffiliated defendants, which has enabled JMB/900 to refile its previously
asserted claims against the Venture Partners as part of that lawsuit in
Federal court. There is no assurance that JMB/900 will recover the amounts
of its claims as a result of the litigation. Due to the uncertainty, no
amounts in addition to the amounts advanced to date, noted above, have been
recorded in the financial statements.
During the fourth quarter of 1996, The State of Maryland Deposit
Insurance Fund Corporation (the "MDIFC") commenced an action against PPI
and JRA to collect on a certain note receivable by foreclosing its security
interest in PPI and JRA's interest in Progress Partners. The trial court
in that action has entered summary judgment in favor of MDIFC for in excess
of $6 million. The MDIFC has made known its intent to schedule an
immediate sale of PPI and JRA's interest at which the MDIFC expects to be
the successful purchaser. In anticipation of succeeding PPI and JRA, the
MDIFC has been discussing with JMB/900 a purchase by JMB/900 of all of the
interests that would be acquired by MDIFC if it were the successful
purchaser. There are no assurances that a purchase agreement with the
MDIFC will be reached or that the MDIFC will be the successful purchaser at
the sale.
Concurrent with the lawsuit filed by the MDIFC, the FDIC has filed two
additional lawsuits against JMB/900, PPI, JRA, and other non-affiliated
defendants, in an attempt, among other things, to obtain a legal resolution
of competing claims made as to the interests in PC-900 and to challenge the
consent given by JMB/900 in 1990 to allow the MDIFC, in the event it
acquired PPI and JRA's interest through foreclosure, to become a partner of
Progress Partners. JMB/900 has been discussing a settlement with the FDIC
in which JMB/900 would purchase the interest of the FDIC and/or PC-900 in
Progress Partners. If a settlement is not achieved and the FDIC pursues
these actions, JMB/900 intends to vigorously defend itself.
The Partnership will not commit additional capital to this property
unless, among other things, it believes that upon sale of the property, the
Partnership will receive a return of such funds and a reasonable rate of
return thereon.
In 1994, JMB/900, on behalf of Progress Partners, successfully
completed an extension to December 1, 2001 of its mortgage loan, which
matured on December 1, 1994. Pursuant to the loan extension, net cash flow
(as defined) after debt service and capital and after repayment of
approximately $3,229,000 to JMB/900 representing costs associated with and
deposits made by the joint venture in connection with the loan extension
will be paid into an escrow account controlled by the lender to be used,
including interest earned thereon, by the joint venture for releasing costs
associated with leases which expire in 1999 and 2000 (approximately 240,000
square feet of space). The remaining proceeds in this escrow plus interest
earned thereon, if any, will be released to the joint venture once 90% of
such leased space has been renewed or released. To date, no escrow funds
have been deposited into the account for leasing costs. As of July 1996,
all of the amounts advanced by the joint venture have been repaid to the
joint venture (of which the Partnership's share is approximately
$1,000,000). The escrow balance at December 31, 1996 is approximately
$193,000.
SOUTH TOWER
In June 1985, the Partnership acquired an interest in a joint venture
partnership ("South Tower") which owns a 44-story office building in Los
Angeles, California. The joint venture partners of the Partnership include
Carlyle Real Estate Limited Partnership-XV ("Affiliated Partner"), one of
the sellers of the interests in South Tower, and another unaffiliated
venture partner.
The Partnership and the Affiliated Partner purchased their interests
for $61,592,000. In addition, the Partnership and the Affiliated Partner
made capital contributions to South Tower totaling $48,400,000 for general
working capital requirements and certain other obligations of South Tower.
The Partnership's share of the purchase price, capital contributions (net
of additional financing) and interest thereon totaled $26,589,500.
The terms of the original South Tower agreement generally provided
that the Partnership and Affiliated Partner's aggregate share of the South
Tower's annual cash flow, net sale or refinancing proceeds, and profits and
losses be distributed or allocated to the Partnership and the Affiliated
Partner in proportion to their aggregate capital contributions.
Annual cash flow was to be distributed 80% to the Partnership and
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner have received, in the aggregate, a cumulative preferred
return of $8,050,000 per annum. The remaining cash flow was to be
distributable 49.99% to the Partnership and the Affiliated Partner, and the
balance to the other joint venture partners. Additional contributions to
South Tower were contributed 49.99% by the Partnership and the Affiliated
Partner until all partners had contributed $10,000,000 in aggregate.
Operating profits and losses, in general, were to be allocated 49.99%
to the Partnership and the Affiliated Partner and the balance to the other
joint venture partners. Substantially all depreciation and certain
expenses paid from the Partnership's and Affiliated Partner's capital
contributions were to be allocated to the Partnership and Affiliated
Partner. In addition, operating profits, up to the amount of any annual
cash flow distribution, were allocated to all partners in proportion to
such distributions of annual cash flow.
In general, upon sale or refinancing of the property, net sale or
refinancing proceeds would be distributed 80% to the Partnership and the
Affiliated Partner and 20% to another partner until the Partnership and the
Affiliated Partner have received the amount of any deficiency in their
preferred return described above plus an amount equal to their "Disposition
Preference" (which, in general, begins at $120,000,000 and increases
annually by $8,000,000 to a maximum of $200,000,000). Any remaining net
sale or refinancing proceeds would be distributed 49.99% to the Partnership
and the Affiliated Partner and the remainder to the other partners.
The office building is being managed by an affiliate of one of the
venture partners under a long-term agreement pursuant to which the
affiliate is entitled to receive a monthly management fee of 2-1/2% of
gross project income, a tenant improvement fee of 10% of the cost of tenant
improvements, and commissions on new leases.
The mortgage note secured by the property (with a balance of
approximately $187,483,000 and accrued interest of approximately $1,562,000
as of December 31, 1996), matured December 1, 1994. The Partnership and
the joint venture had been in discussions with the lender regarding an
extension of the mortgage note. The venture continued to make interest
payments to the lender under the original terms of the mortgage note and
was required to escrow all available cash flow. In the fourth quarter of
1996, the joint venture and the lender reached an agreement to modify the
mortgage note. The agreement provides that the mortgage note secured by
the property be extended to September, 2003 at an interest rate of 10% with
all excess cash flow being escrowed for future tenant improvements and
principal payments. In addition, upon sale or refinancing of the property
subsequent to September 1, 1999, the mortgage loan requires payment of
participation interest (as defined) of any excess proceeds. The mortgage
lender received a $2,000,000 extension fee paid by the venture partners in
their ownership percentages (of which the Partnership's share was
$350,000).
The promissory note secured by the Partnership's interest in the joint
venture matured in December 1, 1994. The Partnership had been in
discussion with the lender regarding an extension of the promissory note.
The Partnership has ceased making debt service payments on the promissory
note, and therefore, the promissory note had been classified as a current
liability in the accompanying consolidated financial statements at December
31, 1995. In the fourth quarter of 1996, the Partnership reached an
agreement with the lender to modify the promissory note (with a principal
balance of $12,250,000 and accrued interest of approximately $3,269,583
prior to modification). The Partnership's amended and restated promissory
note has an adjusted balance of approximately $21,988,000 consisting of the
original principal loan balance, unpaid accrued interest, the Partnership's
share of the extension fee and a restructuring fee of approximately
$6,118,000. The promissory note is due September 2003 and accrues interest
at 17% per annum. The loan requires payments of cash flow distributed by
the venture from either property operations or sales proceeds as well as a
portion of the property management fee paid to the venture partner. The
loan is secured solely by the Partnership's interest in the property.
In conjunction with the note modifications, the joint venture was
converted to a limited liability company with members' interests in the
same ratio as the prior venture ownership interests. The conversion of the
Partnership's interest to a member's interest in a limited liability
company eliminates any potential additional obligation of the Partnership
in the future to provide additional funds under its previous joint venture
agreement. As a result, previously recognized losses of $5,712,902 have
been reversed.
At maturity of the loan, it is not anticipated that further
modifications or extensions can be obtained. This would likely result in
the Partnership no longer having an ownership interest in the property, and
in such event would result in a gain for Federal income tax purposes with
no corresponding distributable proceeds. Since the terms of the agreement
make it unlikely that the Partnership would recover any incremental
investment, the Partnership has decided not to commit any significant
additional amounts to the property.
TURTLE CREEK
Under the terms of the Turtle Creek venture agreement, through
December 1990, the joint venture partner was obligated to make capital
contributions to the venture to fund operating deficits of the property and
to pay the Partnership a preferential return. The joint venture partner
defaulted on such obligations and in this regard, the joint venture partner
had not made the required debt service payments since December 1988 nor had
it paid the Partnership's preferential return since the third quarter of
1988. Due to the non-payment of debt service, the lender, on March 7,
1989, concluded proceedings to realize on its security and took title to
the property.
The joint venture partner's obligations to the Partnership were
guaranteed by certain of the joint venture partner's principals. The
Partnership filed a lawsuit against the joint venture partner and certain
of the joint venture partner's principals seeking to recover amounts lost
resulting from their defaults. On April 3, 1992, the Partnership signed a
settlement agreement with the joint venture partner and its principals.
Under the terms of the settlement, the Partnership is scheduled to receive
total payments of $4,075,000. The Partnership received $650,000 of this
amount upon execution of the agreement. The remainder of the settlement
amount is represented by a promissory note issued to the Partnership in the
amount of $3,425,000. The note provides for monthly interest payments over
a six-year period at interest rates which vary from 4.8613% to 5.3684% per
annum. In addition, the note provides for annual principal payments of
$400,000 due every April for five years with a final payment in the amount
of $1,425,000 due on April 3, 1998. Due to the uncertainty of collection
of the remaining settlement amounts, settlement payments are reflected in
other income only as collected. As of December 31, 1996, all scheduled
payments have been received.
WILSHIRE BUNDY PLAZA
The Partnership had commenced discussions with the existing lender for
a possible debt modification on its mortgage loan which matured April 1996
in order to reduce its debt service and cover its releasing costs over the
next several years. In this regard, the Partnership suspended debt service
payments commencing with the December 1, 1994 payment. During July 1995,
the Partnership received a formal notice of default on its mortgage loan
from the lender. Accordingly, the principal balance of the mortgage loan
($41,292,105) and related accrued interest were classified as a current
liability in the accompanying consolidated financial statements at December
31, 1995. The lender began foreclosure proceedings in October 1995. A
receiver was appointed for the property and the previously affiliated third
party property manager continued to manage the property on behalf of the
receiver. Title to the property transferred to the lender on March 27,
1996. As a result of the transfer of title, the Partnership was relieved
of all obligations related to the property, including an estimated $100,000
in earthquake repairs related to the January 17, 1994 earthquake in
Southern California as discussed below. The property was classified as
held for sale or disposition as of January 1, 1996 and therefore was not
subject to continued depreciation. The accompanying consolidated financial
statements include $16,000,000 as the cumulative effect of an accounting
change to record value impairment and $23,622,011 of extraordinary gain on
extinguishment of debt upon the lender's taking title to the property for
the twelve months ended December 31, 1996. The Partnership recognized a
gain of approximately $9,200,000 for Federal income tax purposes in 1996
with no corresponding distributable proceeds.
The Wilshire Bundy Plaza incurred minimal damage as a result of the
earthquake in Southern California on January 17, 1994. On February 22,
1995, the City Council of the City of Los Angeles passed an ordinance
relating to the repair of welded steel moment frame buildings in an area of
the city that includes Wilshire Bundy Plaza. A complete determination of
the requirements to comply with the ordinance was not possible to be made
at the time of the issuance of the Partnership's 1994 consolidated
financial statements. It was estimated at that time that the cost of
compliance with the ordinance could be approximately $3 million (none of
which had been budgeted). Accordingly, the 1994 consolidated financial
statements reflected an extraordinary item of $3 million.
During June 1995, the Partnership received notice from the City which
required submission of a report indicating the number of welded connections
damaged and proposed repair procedures. Based upon the findings and cost
estimates of independent structural engineers, was estimated that the cost
of making the necessary repairs would be approximately $100,000.
Accordingly, the extraordinary item recorded in 1994 of $3 million was
reversed in the Partnership's 1995 consolidated financial statements.
BRITTANY DOWNS APARTMENTS - PHASE I AND II
Brittany Downs Apartments Phase II did not produce sufficient cash
flow to cover its required debt service payments and, consequently, the
Partnership had been paying a reduced amount of debt service since November
1990. Although the Partnership was negotiating to obtain a loan
modification to reduce the property's required debt service payments, the
Partnership was placed in default during the fourth quarter of 1992.
On January 10, 1995, the Partnership sold the Brittany Downs
Apartments Phase I and II to an unaffiliated third party. The sale price
was $18,380,000 (before selling costs and prorations), of which $2,795,768
was received in cash at closing and $14,340,000 represented the purchaser's
assumption of the underlying debt (net of a payoff discount granted by the
underlying lender for Brittany Downs Apartments Phase II). The sale
resulted in a gain of $6,574,760 for financial reporting purposes and
$8,984,569 for Federal income tax reporting purposes in 1995. In addition,
as a result of the payoff discount granted by the underlying lender for
Brittany Downs Apartments Phase II, the Partnership recognized an
additional gain on forgiveness of indebtedness of $1,650,638 for financial
reporting purposes in 1995.
LOUISIANA TOWER
During 1988, Louisiana Tower restructured its existing mortgage note
with the lender. In 1990, the Partnership further restructured the loan in
order to reduce current and anticipated deficits resulting from the
termination of a major tenant's lease and costs associated with leasing.
The terms of the agreement required debt service payments in an amount
equal to the monthly cash flow generated by the property (before payment of
property management fees) plus $100,000 per annum for a five-year period
commencing with the January 1990 payment. The cash flow of the property
was escrowed monthly and remitted to the lender annually on March 31. The
difference between the above pay rate and the contract pay rate of 9% per
annum on the principal balance accrued at 9% per annum compounded monthly
until maturity when the principal and accrued interest was to be due and
payable. The existing modification period expired and the loan matured in
January 1995. The Partnership decided that it would not commit any
significant amounts of capital to this property due to the fact that the
recovery of such amounts would be unlikely. Consequently, commencing in
June 1994, the Partnership ceased making the required debt service payments
to the lender and sought further modifications to the loan. The lender was
unwilling to provide further modifications to the loan and began
foreclosure proceedings in October 1994. A receiver was appointed for the
property and a third party manager was appointed to manage the property on
the receiver's behalf. Title to the property was transferred to the lender
on August 30, 1995. The Partnership recognized a gain of $8,117,412 for
financial reporting purposes and $2,530,731 for Federal income tax purposes
in connection with this transfer with no distributable proceeds in 1995.
LOUIS JOLIET MALL
The second mortgage loan matured on September 1, 1995. During
September 1995, the Partnership finalized a refinancing of the property's
first (with a principal balance of approximately $12,400,000) and second
(with a principal balance of $10,000,000 and accrued and deferred interest
of approximately $2,500,000) mortgage loans with a new seven year first
mortgage loan in the amount of $26,000,000. Such refinancing resulted in
approximately $382,000 in net proceeds after payment of the existing loans,
closing costs and prepayment penalty, which the Partnership has decided to
retain for working capital purposes. The new loan matures on October 1,
2002 and may be prepaid after the second loan year with a yield maintenance
prepayment penalty. As a result of the early refinancing of the first
mortgage loan (scheduled maturity April, 1998), the Partnership paid a
prepayment penalty of approximately $204,000.
As the Partnership has committed to a plan to sell the property, the
property was classified as held for sale or disposition as of December 31,
1996 in the accompanying financial statements, and therefore, will not be
subject to continuing depreciation.
1090 VERMONT
Through 1993, the Partnership and joint venture partners had
contributed a total of $4,076,000 ($2,038,000 by the Partnership) to the
joint venture to cover releasing and capital costs. The Partnership and
joint venture partner had agreed that such contributions would be repaid
along with a return thereon out of first available proceeds from property
operations, sale or refinancing. In 1993, the joint venture finalized a
refinancing of the existing mortgage loan. During December, 1993
$1,785,560 (of which the Partnership's share was $889,064) was distributed
from net refinancing proceeds as a partial return of the additional capital
contributed. In addition to providing refinancing proceeds to the joint
venture, the debt service payments due under the new loan are significantly
lower than the payments due under the prior loan.
Distributions of operating cash flow totalling approximately $1.5
million (the Partnership's share was approximately $750,000) since the
effective date of the refinancing have also represented a partial return to
the partners of the additional capital contributed. As of December 31,
1996, the total remaining unpaid additional capital contributed, including
the unpaid return thereon, is $2,009,030, of which the Partnership's share
is $1,004,515.
MARINERS POINTE
During the third quarter of 1994, the Partnership obtained a two-year
extension of the existing $6,500,000 mortgage loan. The new maturity date
was October 1, 1996. Accordingly, the principal balance of the property's
underlying mortgage loan ($6,500,000) had been classified as a current
liability in the accompanying consolidated financial statements at December
31, 1995. Under terms of the loan extension, the loan bore interest at
2.75% above the floating weekly tax exempt rate. The weekly tax exempt
interest rate at December 31, 1995 was 4.19% per annum for an interest rate
of 6.94% per annum as of that date. Prior to the extension, the loan bore
interest of 10.875% per annum.
In 1995, the joint venture commenced marketing the property for sale.
In October 1996, the joint venture sold the Mariners Pointe Apartments to
an unaffiliated third party. The sales price was $7,600,000 (before
selling costs and prorations), of which approximately $788,000 was received
in cash at closing and $6,500,000 represented the purchaser's assumption of
the underlying debt. The joint venture was also returned all amounts held
by the underlying lender in a collateral account. Upon receipt of the net
sale proceeds and proceeds from the collateral account, the joint venture
distributed such proceeds to the Partnership. The joint venture partner
received no distributions in connection with this transaction. As a result
of the sale during 1996, the joint venture allocated gains to the
Partnership of approximately $2,100,000 for financial reporting purposes
and approximately $4,700,000 for Federal income tax purposes. The property
was classified as held for sale or disposition as of January 1, 1996, and
therefore, was not subject to continued depreciation after such date.
Under the terms of the joint venture agreement, the joint venture
partner was obligated to contribute 22.3% of annual cash operating
deficits. The Partnership had made a request for capital from the joint
venture partner for its share of the 1992 deficit. The joint venture
partner's obligation to make the capital contribution was secured by its
interest in the joint venture as well as personal guarantees by certain of
its principals. The joint venture partner did not make the required
contribution. The Partnership decided not to pursue this matter further
since the cost to pursue would likely exceed the recovery (if any) of
amounts owed. In addition, the sale did not result in any distribution to
the joint venture partner due to the Partnership's preferential sharing
levels upon sale of the property. Consequently, the Partnership did not
pursue the joint venture partner's interest in the property.
YERBA BUENA OFFICE BUILDING
In June 1992, title to the Yerba Buena Office Building in San
Francisco, California was transferred to the lender by the joint venture (a
partnership comprised of the Partnership, two other limited partnerships
sponsored by the Partnership's Corporate General Partner and four
unaffiliated limited partners). In return for a smooth transition of title
and management of the property, the joint venture was able to negotiate the
right to share in future sale or refinancing proceeds, if any, above
certain specified levels. In addition, the joint venture has a right of
first opportunity to purchase the property during the time frame of June
1995 through May 1998 should the lender wish to market the property for
sale. The joint venture has recently learned that the lender has sold the
property without having given the joint venture its right of first
opportunity to purchase it. The joint venture is analyzing its legal
remedies for the lender's breach of its obligation. There are no
assurances that the joint venture would recover any amounts in the event it
should pursue its legal remedies.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996 and
1995:
1996 1995
----------- -----------
17% promissory note; secured by the
Partnership's interest in the Wells
Fargo Center South Tower office building
in Los Angeles, California; principal
and accrued interest due September 2003. $21,987,838 --
8.03% first mortgage note; secured
by the Louis Joliet Mall in
Joliet, Illinois; monthly interest
only payments of $173,983 until
April 1997; beginning April 1, 1997,
monthly principal and interest
payments of $201,189 until October 1,
2002 when the remaining balance
of $23,751,765 is due. . . . . . . . . . 26,000,000 26,000,000
11.5% mortgage note (in default);
secured by the Wilshire Bundy Plaza
in Los Angeles, California; principal
and interest payments of $416,000 were
due monthly through March 1996; unpaid
balance of $40,920,000 was due April
1996, satisfied in 1996 by virtue
of the lender realizing upon its
collateral security. . . . . . . . . . . -- 41,292,105
12% promissory note; secured by the
Partnership's interest in the
Wells Fargo Center South Tower
office building in Los Angeles,
California; monthly interest only
payments of $122,500 through November
1994; principal balance of $12,250,000
was due in December 1994, replaced
in 1996 by the loan described above. . . -- 12,250,000
Variable rate mortgage note secured
by the Mariner's Pointe Apartments,
satisfied in 1996 by virtue of the
lender realizing upon its collateral
security . . . . . . . . . . . . . . . . -- 6,500,000
------------ ------------
Total debt. . . . . . . . . . . 47,987,838 86,042,105
Less current portion
of long-term debt . . . . . . 251,510 60,042,105
------------ ------------
Total long-term debt. . . . . . $ 47,736,328 26,000,000
============ ============
Five year maturities of long-term debt are as follows:
1997. . . . . . . . . . $ 251,510
1998. . . . . . . . . . 359,714
1999. . . . . . . . . . 389,687
2000. . . . . . . . . . 422,156
2001. . . . . . . . . . 457,331
----------
$1,880,398
==========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Holders
of Interests and 4% to the General Partners. Profits from the sale of
investment properties are to be allocated to the General Partners to the
greatest of (i) 1% of such profits, (ii) the amount of cash distributions
to the General Partners, or (iii) an amount which will reduce the General
Partners' capital account deficits (if any) to a level consistent with the
gain anticipated to be realized from the sale of properties. Losses from
the sale of investment properties are to be allocated 1% to the General
Partners. The remaining profits and losses will be allocated to the
Holders of Interests.
The General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership. Distributions of "net cash receipts" of the
Partnership are allocated 90% to the Holders of Interests and 10% to the
General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).
The Partnership Agreement provides that, subject to certain
conditions, the General Partners shall receive as a distribution of the
proceeds (net after expenses and liabilities and retained working capital)
from the sale or refinancing of a real property up to 3% of the selling
price for any property sold, and that the remaining net proceeds be
distributed 85% to the Holders of Interests and 15% to the General
Partners. However, prior to such distributions being made, the Holders of
Interests are entitled to receive 99% of net sale or refinancing proceeds
and the General Partners shall receive 1% until the Holders of Interests
have received (i) cash distributions of net sale or refinancing proceeds in
an amount equal to the Holders' aggregate initial capital investment in the
Partnership and (ii) cumulative cash distributions from the Partnership's
operations which, when combined with the net sale or refinancing proceeds
previously distributed, equal a 6% annual non-compounded return on the
Holders' average capital investment for each year (their initial capital
investment reduced by net sale or refinancing proceeds previously
distributed) commencing with the third fiscal quarter of 1985. If upon the
completion of the liquidation of the Partnership and the distribution of
all Partnership funds, the Holders of Interests have not received the
amounts in (i) and (ii) above, the General Partners will be required to
return all or a portion of the 1% distribution of net sale or refinancing
proceeds described above up to an amount equal to such deficiency in
payments to the Holders of Interests pursuant to (i) and (ii) above.
Accordingly, $1,742,000 of proceeds have been deferred for the General
Partners at December 31, 1996. The General Partners have received $121,527
of sale proceeds as of December 31, 1996 representing its 1% share of total
sale distributions made which will be required to be returned to the
Partnership before liquidation of the Partnership.
LEASES - AS PROPERTY LESSOR
At December 31, 1996, the Partnership's principal assets are one
shopping mall. The Partnership has determined that all leases relating to
this property are properly classified as operating leases; therefore,
rental income is reported when earned and the cost of each property,
excluding cost of land, is depreciated over the estimated useful lives.
Leases with commercial tenants range in term from one to 34 years and
provide for fixed minimum rent and partial to full reimbursement of
operating costs. In addition, such leases provide for additional rent
based upon percentages of tenant sales volumes. A substantial portion of
the ability of retail tenants to honor their leases is dependent upon the
retail economic sector.
Minimum lease payments including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
operating commercial lease agreements, are as follows:
1997. . . . . . . . . . $ 3,579,418
1998. . . . . . . . . . 3,264,829
1999. . . . . . . . . . 3,040,079
2000. . . . . . . . . . 2,803,629
2001. . . . . . . . . . 2,645,233
Thereafter. . . . . . . 7,602,231
-----------
$22,935,419
===========
Additional rent based upon percentages of tenants' sales volumes
included in rental income aggregated $638,884, $472,344 and $488,747 for
the years ended December 31, 1996, 1995 and 1994, respectively.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of December 31, 1996, 1995 and 1994 are as follows:
UNPAID AT
DECEMBER 31,
1996 1995 1994 1996
-------- -------- -------- ------------
Property management
and leasing fees . . $273,795 433,723 2,088,404 --
Insurance commissions 28,745 64,121 64,214 --
Reimbursement (at
cost) for accounting
services . . . . . . 23,190 178,371 211,104 1,404
Reimbursement (at
cost) for portfolio
management services. 53,223 73,169 42,795 16,876
Reimbursement (at
cost) for legal
services . . . . . . 11,557 10,599 24,654 4,612
Reimbursement (at
cost) for administra-
tive charges and
other out-of-pocket
expenses . . . . . . 4,684 203,318 271,902 --
-------- -------- --------- -------
$395,194 963,301 2,703,073 22,892
======== ======== ========= =======
In February 1995, the Partnership distributed $81,017 to the General
Partners out of proceeds from the sale or refinancing of certain investment
properties.
Reference is made to the JMB/NYC discussion above regarding the
Partnership's obligation to fund, on demand, $1,200,000 and $1,200,000 to
Carlyle Managers, Inc. and Carlyle Investors, Inc., respectively, for
additional paid-in capital (reflected in amounts due to affiliates in the
accompanying consolidated financial statements). These obligations were
reduced to $400,000 and $400,000, respectively. As of December 31, 1996,
these obligations bore interest at 5.93% per annum and interest accrued on
these obligations was $473,858.
The manager of Piper Jaffray Tower (which was an affiliate of the
Corporate General Partner through November 1994) had agreed to defer
receipt of its property management fees as more fully discussed above.
Such fees deferred by the affiliate were approximately $1,839,000 at
December 31, 1996.
Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, provided certain property management services to Wilshire
Bundy Plaza. Such acquisition had no effect on the fees payable by the
Partnership under any existing agreements with such company. The fees
earned by such company from the Partnership for the twelve months ended
December 31, 1995 and through March 27, 1996, date of disposition were
approximately $11,600 and $2,900, respectively, all of which have been
paid.
All amounts currently payable to the General Partners and their
affiliates do not bear interest and are expected to be paid in future
periods.
INVESTMENT IN UNCONSOLIDATED VENTURES
Summary combined financial information for Orchard Associates,
JMB/NYC, JMB/Piper, JMB/Piper II, JMB/900, 1090 Vermont, South Tower and
their unconsolidated ventures as of and for the years ended December 31,
1996 and 1995 is presented below.
1996 1995
-------------- --------------
Current assets. . . . . . . . . . $ 19,289,340 41,169,690
Current liabilities (includes
$902,603,491 of current
portion of long-term debt
at December 31, 1995). . . . . . (16,512,908) (1,152,046,100)
-------------- --------------
Working capital (deficit) . . 2,776,432 (1,110,876,410)
-------------- --------------
Investment properties, net. . . . 313,943,509 975,646,720
Other assets. . . . . . . . . . . 46,191,011 110,638,545
Other liabilities . . . . . . . . (31,270,436) (86,791,207)
Long-term debt. . . . . . . . . . (502,136,107) (225,621,000)
-------------- --------------
Partners' capital (deficit) . $ (170,495,591) (337,003,352)
============== ==============
Represented by:
Invested capital. . . . . . . . $(1,045,884,993) 1,035,645,376
Cumulative distributions. . . . 267,619,087 (259,482,618)
Cumulative income (losses). . . 948,761,497 (1,113,166,110)
-------------- --------------
$ 170,495,591 (337,003,352)
============== ==============
Total income. . . . . . . . . . . $ 323,104,336 253,409,999
============== ==============
Expenses applicable to
operating loss. . . . . . . . . $ 107,022,633 285,772,212
============== ==============
Net income (loss) (including
income from restructuring of
$220,431,722) . . . . . . . . . $ 216,081,703 (32,362,213)
============== ==============
During 1996, as a result of the adoption of the Plan, JMB/NYC adopted
the cost method of accounting for its investments in unconsolidated
ventures. Accordingly, JMB/NYC adjusted its deficit basis in the
unconsolidated ventures to the extent of its share of the maximum
obligation escrow of $25,000,000. The net income for the year ended
December 31, 1996 includes $7,618,056 of income from operations through the
Effective Date of which the Partnership's share is $3,809,028. The
Partnership's capital (deficit) in JMB/NYC differs from its investment in
unconsolidated venture as reflected in the accompanying financial
statements due to the Partnership's 1996 reversal of previously recognized
losses in JMB/NYC as a result of the restructuring of partnership
interests.
In addition, total income and net income for 1996 also includes gain
on sale of property of $1,741,674 due to final resolution regarding
reimbursable developmental costs related to the sale of Old Orchard
shopping center in prior years.
Total income and net loss for 1995 includes a loss on sale of
investment property of $38,214,703, offset by an extraordinary gain on
forgiveness of indebtedness of $62,529,627 related to the sale of the 2
Broadway building.
Total income and net loss for 1994 includes gain of $3,404,164 related
to the sale of the Old Orchard Shopping Center.
Total income, expenses related to operating loss and net loss for the
above mentioned ventures for the year ended December 31, 1994 were
$242,197,996, $287,980,902 and $(45,782,906).
<TABLE>
SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
COSTS
INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B)
----------------------------- -------------- --------------------------------------------
LAND AND BUILDINGS LAND AND LAND AND BUILDINGS
LEASEHOLD AND BUILDINGS AND LEASEHOLD AND
ENCUMBRANCE(C) INTEREST IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTS TOTAL (D)
-------------- ----------- ------------ --------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHOPPING MALL:
Joliet,
Illinois. . $26,000,000 4,100,414 35,752,871 8,787,167 4,100,414 44,540,038 48,640,452
----------- --------- ---------- --------- --------- ---------- ----------
Total . . $26,000,000 4,100,414 35,752,871 8,787,167 4,100,414 44,540,038 48,640,452
=========== ========= ========== ========= ========= ========== ==========
</TABLE>
<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1996
ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE
DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING MALL:
Joliet, Illinois . . . . . $15,038,064 1978 7/31/85 5-30 years 534,752
----------- -------
Total. . . . . . . . . $15,038,064 534,752
=========== =======
<FN>
Notes:
(A) The initial cost represents the original purchase price of the property, including amounts incurred subsequent
to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1996 for Federal income tax purposes was $47,940,381.
(C) Amounts disclosed exclude current accrued interest.
</TABLE>
<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(D) Reconciliation of real estate owned:
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . $112,841,793 161,748,228 158,345,396
Additions during period. . . . . . . . . . . . . 608,071 1,487,605 3,402,832
Disposals during period. . . . . . . . . . . . . (48,809,412) (50,394,040) --
Provision for value impairment . . . . . . . . . (16,000,000) -- --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $ 48,640,452 112,841,793 161,748,228
============ ============ ============
(E) Reconciliation of accumulated depreciation:
Balance at beginning of period . . . . . . . . . $ 36,814,248 49,431,004 44,635,592
Depreciation expense . . . . . . . . . . . . . . 1,462,969 4,155,575 4,795,412
Disposals. . . . . . . . . . . . . . . . . . . . (23,239,153) (16,772,331) --
------------ ------------ ------------
Balance at end of period . . . . . . . . . . . . $ 15,038,064 36,814,248 49,431,004
============ ============ ============
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes of in or disagreements with accountants during
1995 or 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding shares of JMB are owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates.
JMB has responsibility for all aspects of the Partnership's operations,
subject to the requirement that purchases and sales of real property must
be approved by the Associate General Partner of the Partnership, ABPP
Associates, L.P., which is an Illinois limited partnership ABPP
Associates, L.P., shall be directed by a majority in interest of its
limited partners (who are generally officers, directors and affiliates of
JMB or its affiliates) as to whether to provide its approval of any
purchase or sale of real property (or any interest therein) of the
Partnership.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants for properties and/or for the
sale of properties. Because the timing and amount of cash distributions
and profits and losses of the Partnership may be affected by various
determinations by the General Partners under the Partnership Agreement,
including whether and when to sell or refinance a property, the
establishment and maintenance of reasonable reserves, the timing of
expenditures and the allocation of certain tax items under the Partnership
Agreement, the General Partners may have a conflict of interest with
respect to such determinations.
The names, positions held and length of service therein of the
directors and the executive and certain other officers of the Corporate
General Partner of the Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
- ---- ------ ------------
Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Chief Executive Officer 8/01/93
Executive Vice President 1/02/87
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91
There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 7, 1997. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 7,
1997. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"),
Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real
Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate
Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited
Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-
XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-
III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle
Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II
("Carlyle Income Plus-II") and the managing general partner of JMB Income
Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB
Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income
Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X
("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"),JMB
Income Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties,
Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the
associate general partner of most of the foregoing partnerships. Most of
the foregoing directors and officers are partners in the Associate General
Partner and also officers and/or directors of various affiliated companies
of JMB including Income Growth Managers, Inc. (the corporate general
partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG"), Arvida/JMB
Managers, Inc. (the general partner of Arvida/JMB Partners, L.P.) and
Arvida/JMB Managers-II, Inc. (the general partner of Arvida/JMB Partners,
L.P.-II ("Arvida-II")). Most of such directors and officers are also
partners, directly or indirectly, of certain partnerships which are
associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-VII, Carlyle-IX, Carlyle-XI,
Carlyle-XII, Carlyle-XIII, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB
Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB
Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income
Plus, Carlyle Income Plus-II and IDS/BIG. Certain of such officers are
also officers and the sole director of Carlyle Managers, Inc., the general
partner of JMB/NYC.
The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:
Judd D. Malkin (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc.
("USC, Inc."), an affiliate of JMB that is a real estate investment trust
in the business of owning, managing and developing shopping centers. He is
a Certified Public Accountant.
Neil G. Bluhm (age 59) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since
August, 1970. Mr. Bluhm is a director of USC, Inc. He is a member of the
Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 58) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.
Stuart C. Nathan (age 55) has been associated with JMB since July,
1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of
sporting goods. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency,
Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 50) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
a company which is engaged in the real estate investing business. He is
also a senior advisor and partner of Blackstone Real Estate Partners, an
affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also
served as a Trustee of Amli Residential Property Trust, a publicly-traded
real estate investment trust that invests in multi-family properties. Mr.
Schreiber is also a director of USC, Inc. He is also a director of a number
of investment companies advised or managed by T. Rowe Price Associates and
its affiliates. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business.
H. Rigel Barber (age 47) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.
Glenn E. Emig (age 49) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.
Gary Nickele (age 44) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 48) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 61) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Holders of Interests, and a
share of profits or losses. Reference is made to the Notes for a
description of such transactions, distributions and allocations. In 1995,
the General Partners received distributions of $81,017 (all of which were
distributable sale or refinancing proceeds) and the Corporate General
Partner received no management fees. In 1996 and 1994, the General
Partners received no distributions and Corporate General Partner received
no management fees. The General Partners received a share of Partnership
income for tax purposes aggregating $5,635,174 in 1996.
An affiliate of the Corporate General Partner provided property
management services during 1996 for Louis Joliet Mall. In 1996, such
affiliate earned property management and leasing fees amounting to $273,795
for such services, all of which were paid as of December 31, 1996. In
addition, an affiliate of the Corporate General Partner had managed the
Piper Jaffray Tower through November 1994. In conjunction with the August
1992 loan modification, the affiliated property manager had agreed to defer
receipt of its property management fees which aggregated $1,839,000 through
November 1994 at December 31, 1996. As set forth in the Prospectus of the
Partnership, the Corporate General Partner must negotiate such agreements
on terms no less favorable to the Partnership than those customarily
charged for similar services in the relevant geographical area (but in no
event at rates greater than 6% of the gross income from a property), and
such agreements must be terminable by either party thereto, without
penalty, upon 60 days' notice. In December 1994 the affiliated property
manager entered into an agreement with an unaffiliated third party for the
sub-management of the 900 Third Avenue building. Property management fees
for this property were $422,825 in 1996, all of which were paid to the sub-
manager.
JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1996
aggregating $28,745 in connection with the provision of insurance coverage
for certain of the real property investments of the Partnership. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The General Partners of the Partnership or their affiliates may be
reimbursed or paid for their direct expenses or out-of-pocket expenses and
salary and salary-related expenses relating to the administration of the
Partnership and the operation of the Partnership's real property
investments. In 1996, the Corporate General Partner of the Partnership was
due reimbursement for such expenses in the amount of $57,907, of which
$16,876 was unpaid at December 31, 1996. Additionally, the General
Partners are also entitled to reimbursements for legal and accounting
services. Such costs for 1996 were $34,747, of which $6,016 was unpaid as
of December 31, 1996.
The Partnership had obligations to fund, on demand, $1,200,000 and
$1,200,000 to Carlyle Managers, Inc. and Carlyle Investors, Inc.,
respectively, of additional paid-in capital (reflected in amounts due to
affiliates in the accompanying consolidated financial statements). During
1996, these obligations were reduced to $400,000 and $400,000,
respectively. As of December 31, 1996, these obligations bore interest at
5.93% per annum and interest accrued on these obligations was $473,858.
Effective January 1, 1994, certain officers and directors of the
Corporate General Partner acquired interests in a company which, among
other things, has provided certain property management services to Wilshire
Bundy Plaza. Such acquisition had no effect on the fees payable by the
Partnership under any existing agreements with such company. The fees
earned by such company from the Partnership for the twelve months ended
December 31, 1995 and through March 27, 1996, date of disposition, were
approximately $11,600 and $2,900 respectively, all of which have been paid.
The Partnership is permitted to engage in various transactions
involving the General Partners and their affiliates, as described in Item
10.
<TABLE>
<CAPTION>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding
Interests of the Partnership.
(b) The Corporate General Partner, its officers and directors and the Associate General Partner own the
following Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests and Assignee
Interests therein JMB Realty Corporation 5 Interests (1) Less than 1%
indirectly
Limited Partnership
Interests and Assignee
Interests therein Corporate General Partner, 16.9 Interests (1) (2) Less than 1%
its officers and
directors and the
Associate General
Partner as a group
<FN>
(1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB, as its
indirect majority shareholder, is deemed to have sole voting and investment power.
(2) Includes 11.9 Interests owned by officers or their relatives for which an officer has investment and
voting power as to such Interests so owned.
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire
beneficial ownership of Interests of the Partnership.
Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.
(c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent data
result in a change in control of the Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements (See Index to Financial Statements
filed with this annual report).
(2) Exhibits.
3-A.* Amended and Restated Agreement of Limited
Partnership.
3-B.* Assignment Agreement by and among the
Partnership, the General Partners and the Initial Limited Partner.
3-C. Acknowledgement of rights and duties of the
General Partners of the Partnership between ABPP Associates, L.P. (a
successor Associated General Partner of the Partnership) and JMB Realty
Corporation as of December 31, 1995 is filed herewith.
3-D. Acknowledgement of rights and duties of the
General Partners of the Partnership between ABPP Associates, L.P. (a
successor Associated General Partner of the Partnership) and JMB Realty
Corporation as of December 31, 1995 is filed herewith.
4-A. Long-term debt documents relating to the
refinancing of the first mortgage loan secured by the 1090 Vermont office
building in Washington, D.C. are hereby incorporated by reference to the
Partnership's Report on Form 10-K (File No. 0-15962) dated March 27, 1995.
4-B. Long-term debt documents relating to the
September 1995 refinancing of the first and second mortgage loans secured
by the Louis Joliet Mall are hereby incorporated by reference to the
Partnership's Report on Form 10-Q (File No. 0-15962) dated November 9,
1995.
4-C. Documents relating to the modification and
extension of the mortgage loan secured by Wells Fargo-South Tower are filed
herewith.
4-D. Amended and restated promissory note between
Wells Fargo Bank and the Partnership is filed herewith.
4-E. Loan modification agreement of Wells Fargo
Bank is filed herewith.
10-A. Acquisition documents relating to the purchase
by the Partnership of an interest in the 1290 Avenue of the Americas
Building in New York, New York are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #1 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-B. Acquisition documents relating to the purchase
by the Partnership of an interest in the 237 Park Avenue Building in New
York, New York are hereby incorporated by reference to the Partnership's
Post-Effective Amendment #1 to the Partnership's Registration Statement on
Form S-11 (File No. 0-15962) dated June 4, 1984.
10-C. Acquisition documents relating to the purchase
by the Partnership of an interest in the Wells Fargo Center - IBM Tower in
Los Angeles, California are hereby incorporated by reference to the
Partnership's Post-Effective Amendment #5 to the Partnership's Registration
Statement on Form S-11 (File No. 0-15962) dated June 4, 1984.
10-D. Agreement of Limited Partnership of Carlyle-
XIV Associates, L.P. is hereby incorporated by
reference to the Partnership's Report on Form 10-Q (File No. 0-15962) dated
May 14, 1993.
10-E. Second Amended and Restated Articles of
Partnership of JMB/NYC Office Building Associates, L.P. is hereby
incorporated by reference to the Partnership's report for December 31, 1993
on Form 10-K (File No. 0-15962) dated March 28, 1994.
10-F. Documents relating to the sale by the
Partnership of its interest in the Old Orchard Urban Venture are hereby
incorporated by reference to the Partnership's report on Form 8-K (File No.
0-15962) for August 30, 1993, dated November 12, 1993.
10-G. Amended and Restated Certificate of
Incorporation of Carlyle-XIV Managers, Inc., (known as Carlyle Managers,
Inc.) is hereby incorporated by reference to the Partnership's report for
December 31, 1993 on Form 10-K (File No 0-15962) dated March 28, 1994.
10-H. Amended and Restated Certificate of
Incorporation of Carlyle-XIII Managers, Inc., (known as Carlyle Investors,
Inc.), is hereby incorporated by reference to the Partnership's report for
December 31, 1993 on Form 10-K (File No. 0-15962) dated March 28, 1994.
10-I. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Managers, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-J. $1,200,000 demand note between Carlyle-XIV
Associates, L.P. and Carlyle Investors, Inc., is hereby incorporated by
reference to the Partnership's report for December 31, 1993 on Form 10-K
(File No. 0-15962) dated March 28, 1994.
10-K. Assumption Agreements dated October 14, 1994
made by 237 Park Avenue Associates and by 1290 Associates in favor and for
the benefit of O&Y Equity Company, L.P., O&Y NY Building Corp. and JMB/NYC
Office Building Associates, L.P., are hereby incorporated by reference to
the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
15962) dated March 27, 1995.
10-L. Assumption Agreements dated October 14, 1994
made by O&Y Equity Company, L.P., and by O&Y NY Building Corp. and by
JMB/NYC Office Building Associates, L.P. in favor and for the benefit of 2
Broadway Associates and 2 Broadway Land Company, are hereby incorporated by
reference to the Partnership's Report for December 31, 1994 on Form 10-K
(File No. 0-15962) dated March 27, 1995.
10-M. Lockbox and forbearance agreements related to
the mortgage note secured by the Wells Fargo Building, are hereby
incorporated by reference to the Partnership's Report for December 31, 1994
on Form 10-K (File No. 0-15962) dated March 27, 1995.
10-N. Amendment No. 1 to the Agreement of Limited
Partnership of Carlyle-XIV Associates, L.P. dated January 1, 1994 by and
between Carlyle Investors, Inc. a Delaware corporation, as general partner,
and Carlyle Real Estate Limited Partnership-XIV, an Illinois limited
partnership, as limited partner, is hereby incorporated by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-15962)
dated May 11, 1995.
10-O. Amendment No. 1 to the Second Amended and
Restated Articles of Partnership of JMB/NYC Office Building Associates,
L.P. dated January 1, 1994 by and between Carlyle Managers, Inc. a Delaware
corporation, as general partner, and Carlyle-XIII Associates, L.P. a
Delaware limited partnership, Carlyle-XIV Associates, L.P. a Delaware
limited partnership and Property Partners, L.P. a Delaware limited
partnership, as the limited partners, is hereby incorporated by reference
to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-
15962) dated May 11, 1995.
10-P. Agreement of Sale between 2 Broadway
Associates, L.P. and 2 Broadway Acquisition
Corp. dated August 10, 1995, is hereby incorporated by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-15962)
dated March 25, 1996.
10-Q. Agreement of Conversion of 1290 Associates
into 1290 Associates, L.L.C. dated October 10, 1995 among JMB/NYC Office
Building Associates, L.P., an Illinois limited partnership, O&Y Equity
Company, L.P., a Delaware limited partnership and O&Y NY Building Corp., a
Delaware corporation, is hereby incorporated by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-15962)
dated March 25, 1996.
10-R. Agreement of Conversion of 237 Park Avenue
Associates into 237 Park Avenue Associates, L.L.C., dated October 10, 1995
among JMB/NYC Office Building Associates, L.P., an Illinois limited
partnership, O&Y Equity Company, L.P., a Delaware limited partnership and
O&Y NY Building Corp., a Delaware corporation, is hereby incorporated by
reference to the Partnership's Report for December 31, 1995 on Form 10-K
(File No. 0-15962) dated March 25, 1996.
10-S. Trustee's Deed of Sale dated March 27, 1996
relating to the conveyance of title and interest in Wilshire Bundy Plaza to
Teachers Insurance and Annuity Association of America (Grantee) by Chicago
Title Company (Trustee) for Carlyle Real Estate Limited Partnership - XIV
(Trustor) is incorporated herein by reference to the Partnership's Report
for March 31, 1996 on Form 10-Q (File No. 0-15962) dated May 10, 1996.
10-T. Disclosure Statement for the Second Amended
Joint Plan of Reorganization of 237 Park Avenue Associates, L.L.C. and 1290
Associates, L.L.C. dated August 9, 1996, is hereby incorporated by
reference to the Partnership's Report for September 30, 1996 on Form 10-Q
(File No. 0-15962) dated November 8, 1996.
10-U. Purchase Agreement as amended including
exhibits thereto, dated August 29, 1996 between Mariners Pointe Associates,
Ltd. and Mariners Pointe L.L.C. is filed herewith.
10-V. Documents relating to the operating agreement
of Maguire Thomas Partners-South Tower, L.L.C. are filed herewith.
10-W. Consent of Director of Carlyle-XIV Managers,
Inc. (known as Carlyle Managers, Inc.) dated October 31, 1996 is filed
herewith.
10-X. Consent of Director of Carlyle-XIII, Managers,
Inc. (known as Carlyle Investors, Inc.) dated October 31, 1996 is filed
herewith.
10-Y. Allonge to demand note between Carlyle Real
Estate Limited Partnership-XIV and Carlyle Managers, Inc. dated October 31,
1996 is filed herewith.
10-Z. Allonge to demand note between Carlyle Real
Estate Limited Partnership-XIV and Carlyle Investors, Inc., dated October
31, 1996 is filed herewith.
10-AA. Indemnification agreement between Property
Partners, L.P., Carlyle-XIII Associates, L.P. and Carlyle-XIV Associates,
L.P. dated as of October 10, 1996 is filed herewith.
10-BB. Agreement of Limited Partnership of 237/1290
Lower Tier Associates, L.P. dated as of October 10, 1996 is filed herewith.
10-CC. Amended and Restated Limited Partnership
Agreement of 237/1290 Upper Tier Associates, L.P. dated as of October 10,
1996 is filed herewith.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
- --------------
* Previously filed as Exhibits 3-B, 3-C and 10-H to the Partnership's
Report for December 31, 1992 on Form 10-K of the Securities Exchange Act
(File No. 0-15962) filed on March 30, 1993 and hereby incorporated herein
by reference.
Although certain additional long-term debt instruments of the
Registrant have been excluded from Exhibit 4 above, pursuant to Rule
601(b)(4)(iii), the Registrant commits to provide copies of such agreements
to the Securities and Exchange Commission upon request.
(b) No reports on Form 8-K were filed since the beginning of the
last quarter of the period covered by this report.
No annual report for the year 1996 or proxy material has been sent
to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
By: JMB Realty Corporation
Corporate General Partner
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation
Corporate General Partner
JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 21, 1997
NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 21, 1997
H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 21, 1997
GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 21, 1997
GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 21, 1997
A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 21, 1997
STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 21, 1997
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 21, 1997
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3-A. Amended and Restated Agreement of
Limited Partnership Yes
3-B. Assignment Agreement by and among
the Partnership, the General Partners
and the Initial Limited Partners Yes
3-C. Acknowledgement of rights and duties
of the General Partners of the
Partnership between ABPP Associates,
L.P. (a successor Associated General
Partner of the Partnership) and
JMB Realty Corporation as of
December 31, 1995 Yes
4-A. Long-term debt documents relating
to the refinancing of the first
mortgage loan secured by the
1090 Vermont Office Building
in Washington, D.C. Yes
4-C. Documents relating to the modification
and extension of the mortgage loan
secured by Wells Fargo-South Tower No
4-D. Amended and restated promissory note
of Wells Fargo Bank No
4-E. Loan modification agreement of
Wells Fargo Bank No
10-A -
10-C. Acquisition Documents are hereby
incorporated herein by reference Yes
10-D. Agreement of Limited Partnership
of Carlyle-XIV Associates, L.P. Yes
10-E. Second Amended and Restated Articles
of Partnership of JMB/NYC Office
Building Associates, L.P. Yes
10-F. Documents relating to the sale by
the Partnership of its interest
in the Old Orchard Venture Yes
10-G. Amended and Restated Certificate
of Incorporation of Carlyle-XIV
Managers, Inc. (known as Carlyle
Managers, Inc.) Yes
10-H. Amended and Restated Certificate
of Incorporation of Carlyle-XIII
Managers, Inc. (known as Carlyle
Investors, Inc.) Yes
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX - CONTINUED
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
10-I. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Managers, Inc. Yes
10-J. $1,200,000 demand note between
Carlyle-XIV Associates, L.P. and
Carlyle Investors, Inc. Yes
10-K. Assumption Agreements dated October
14, 1994 made by 237 Park Avenue
Associates and by 1290 Associates in
favor and for the benefit of O&Y
Equity Company, L.P., O&Y NY Building
Corp. and JMB/NYC Office Building
Associates, L.P. Yes
10-L. Assumption Agreements dated October 14,
1994 made by O&Y Equity Company, L.P.,
and by O&Y NY Building Corp. and by
JMB/NYC Office Building Associates, L.P.
in favor and for the benefit of 2 Broadway
Associates and 2 Broadway Land Company. Yes
10-M. Lockbox and forbearance agreements
related to the mortgage note secured
by the Wells Fargo Building. Yes
10-N. Amendment No. 1 to the Agreement of
Limited Partnership of Carlyle-XIV
Associates, L.P. dated January 1, 1994
by and between Carlyle Investors, Inc.,
a Delaware corporation, as general partner,
and Carlyle Real Estate Limited
Partnership-XIV, an Illinois limited
partnership, as limited partner. Yes
10-O. Amendment No. 1 to the Second Amended
and Restated Articles of Partnership of
JMB/NYC Office Building Associates, L.P.
dated January 1, 1994; by and between
Carlyle Managers, Inc., a Delaware
corporation, as general partner, and
Carlyle-XIII Associates, L.P., a Delaware
limited partnership, Carlyle-XIV Associates,
L.P., a Delaware limited partnership and
Property Partners, L.P., a Delaware limited
partnership, as the limited partners. Yes
10-P. Agreement of Sale between 2 Broadway
Associates, L.P. and 2 Broadway
Acquisition Corp. dated August 10, 1995. Yes
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX - CONTINUED
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
10-Q. Agreement of Conversion of 1290
Associates, L.L.C. dated October 10,
1995 Yes
10-R. Agreement of Conversion of 237 Park
Avenue Associates into 237 Park
Avenue Associates, L.L.C. dated
October 10, 1995 Yes
10-S. Trustee's Deed of Sale dated
March 27, 1996 relating to the
conveyance of title and interest
in Wilshire Bundy Plaza to
Teachers Insurance and Annuity
Association of America (Grantee)
by Chicago Title Company
(Trustee) for Carlyle Real Estate
Limited Partnership - XIV (Trustor) Yes
10-T. Disclosure Statement for the
Second Amended Joint Plan of
Reorganization of 237 Park Avenue
Associates, L.L.C. and 1290 Associates,
L.L.C. dated August 9, 1996 Yes
10-U. Purchase Agreement as amended including
exhibits thereto, dated August 29,
1996 between Mariners Pointe Associates,
Ltd. and Mariners Pointe, L.L.C. No
10-V. Documents relating to the operating
agreement of Maguire Thomas Partners-
South Tower, L.L.C.
10-W. Consent of Director of Carlyle-XIV
Managers, Inc. (known as Carlyle
Managers, Inc.) dated October 31,
1996 No
10-X. Consent of Director of Carlyle-XIII,
Managers, Inc. (known as Carlyle
Investors, Inc.) dated October 31,
1996 No
10-Y. Allonge to demand note between
Carlyle Real Estate Limited
Partnership-XIV and Carlyle Managers,
Inc. dated October 31, 1996 No
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIV
EXHIBIT INDEX - CONTINUED
DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
10-Z. Allonge to demand note between
Carlyle Real Estate Limited
Partnership-XIV and Carlyle
Investors, Inc., dated
October 31, 1996 No
10-AA. Indemnification agreement between
Property Partners, L.P., Carlyle-XIII
Associates, L.P. and Carlyle-XIV
Associates, L.P. dated as of
October 10, 1996 No
10-BB.* Agreement of Limited Partnership of
237/1290 Lower Tier Associates, L.P.
dated as of October 10, 1996 No
10-CC.* Amended and Restated Limited Partnership
Agreement of 237/1290 Upper Tier
Associates, L.P. dated as of
October 10, 1996 No
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
- --------------------
* FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T,
THESE AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP
EXEMPTION.
MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT is made as of September 19, 1996, between AETNA
LIFE INSURANCE COMPANY, a Connecticut corporation ("AETNA"), and
MAGUIRE/THOMAS PARTNERS-SOUTH TOWER, a California limited partnership
("MTP-SOUTH TOWER LP").
1. Aetna is the holder of that indebtedness of MTP-South
Tower LP (the "LOAN") evidenced and secured by, among other instruments and
agreements:
a. that $200,000,000 Promissory Note dated
November 26, 1984 (as at any time heretofore amended, extended, restated or
replaced, the "NOTE"), by MTP-South Tower LP (then known as Maguire
Partners - Crocker Properties - South Tower) payable to the order of The
Aetna Casualty and Surety Company, a Connecticut corporation ("AETNA
CASUALTY AND SURETY");
b. that Deed of Trust, Assignment of Rents and Security
Agreement dated as of November 26, 1984 (as at any time heretofore amended,
extended, restated or replaced, the "DEED OF TRUST"), by MTP-South Tower LP
(then known as Maguire Partners - Crocker Properties - South Tower), as
Trustor, to Ticor Title Insurance Company of California, as Trustee, for
the benefit of Aetna Casualty and Surety, as Beneficiary, and recorded
November 28, 1984 as Instrument Number 84-1399775 in the Official Records
of Los Angeles County, California; and
c. that California Assignment of Rents and Leases dated as
of November 26, 1984 (as at any time heretofore amended, extended, restated
or replaced, the "ASSIGNMENT OF RENTS"), by MTP-South Tower LP (then known
as Maguire Partners - Crocker Properties - South Tower), as assignor, to
Aetna Casualty and Surety, as assignee, and recorded November 28, 1984 as
Instrument Number 84-1399776 in the Official Records of Los Angeles County,
California.
2. The Deed of Trust encumbers, with first lien priority, that
improved real property in Los Angeles, California more particularly
described in Exhibit A to the Deed of Trust (the "PROJECT"), which
improvements include, without limitation, the 45-story office building
project now known as the "IBM Tower" located at 355 South Grand Avenue,
together with associated subterranean parking and a garage penthouse
structure, and the "X-2 Garage" located at 235 South Hill Street.
3. Aetna Casualty and Surety assigned and transferred its
interest under the Note, the Deed of Trust and the Assignment of Rents to
Aetna pursuant to that Assignment dated October 29, 1986 and recorded on
December 4, 1986 as Instrument Number 86-1676563 in the Official Records of
Los Angeles County, California.
4. As of December 1, 1994, MTP-South Tower LP, Aetna and CB
Commercial Real Estate Group, Inc., as Agent for Aetna, entered into that
Lockbox Agreement (as heretofore supplemented and amended, the "LOCKBOX
AGREEMENT") providing for the deposit of all Gross Receipts (as defined
therein) into Aetna's "DEPOSIT ACCOUNT" (as defined and provided for
therein) and certain other matters.
5. The Loan matured on December 1, 1994 and has not been repaid.
6. Prior to the execution and delivery of this Agreement,
International Business Machines Corporation ("IBM"), the only limited
partner in MTP-South Tower LP, transferred its limited partnership interest
in MTP-South Tower LP to Maguire Partners-Bunker Hill, Ltd., one of the
general partners of MTP-South Tower LP.
7. MTP-South Tower LP and Aetna now wish to provide for, subject
to the payment to Aetna of $2,000,000 from equity contributions (as
provided for herein) and the satisfaction of certain other conditions
precedent to the "Effective Date" provided for herein, an extension of the
scheduled maturity date of the Loan, until September 1, 2003, and for
certain other modifications to the terms and conditions of the instruments
and agreements evidencing and securing the Loan (collectively, the "Loan
Documents," including but not limited to the Note, the Deed of Trust, the
Assignment of Rents and the Lockbox Agreement).
8. In connection with such conditional modification of the Loan
Documents, simultaneously herewith, Aetna and MTP-South Tower LP have
caused certain recording instructions dated as of even date herewith (the
"RECORDING INSTRUCTIONS") to be issued to Chicago Title Company ("CHICAGO
TITLE") providing for the transmittal of this Agreement and the other
instruments and agreements described below to Chicago Title and the
subsequent closing of the transactions provided for herein upon receipt of
the $2,000,000 payment described above and the satisfaction of certain
other conditions precedent, prior to the expiration or sooner termination
of the Recording Instructions.
9. Accordingly, as of even date herewith, the parties are
executing the following instruments and agreements and are transmitting
same to Chicago Title pursuant to the Recording Instructions:
a. this Agreement between Aetna and MTP-South Tower LP,
with the appended Acknowledgment and Agreement executed by the direct and
indirect general partners of MTP-South Tower LP;
b. that Allonge to Promissory Note dated as of even date
herewith (the "ALLONGE"), between MTP-South Tower LP and Aetna, amending
the Note;
c. that Amendment to Deed of Trust, Assignment of Rents
and Security Agreement and to California Assignment of Rents and Leases and
Fixture Filing dated as of even date herewith (the "AMENDMENT TO SECURITY
DOCUMENTS"), between MTP-South Tower LP and Aetna, amending the Deed of
Trust and the Assignment of Rents;
d. that Environmental Indemnity dated as of even date
herewith (the "ENVIRONMENTAL INDEMNITY AGREEMENT"), by MTP-South Tower LP
to and for the benefit of Aetna, providing for certain additional covenants
of MTP-South Tower LP in connection with the Project;
e. that Acknowledgment Agreement (Wells Fargo Center
Project Agreements) dated as of even date herewith (the "CENTER
ACKNOWLEDGMENT AGREEMENT"), by MTP-South Tower LP and Maguire Partners -
Crocker Properties Phase I, a California limited partnership (the "PHASE I
OWNER"), in favor of Aetna;
f. that Agreement of Property Manager dated as of even
date herewith (the "PROPERTY MANAGER'S AGREEMENT"), by Maguire/Thomas
Partners-Development, Ltd., a California limited partnership
("MTP-DEVELOPMENT"), and MTP-South Tower LP in favor of Aetna; and
g. that Consent to Lease Amendment (Munger Tolles & Olson)
dated as of even date herewith (the "MUNGER TOLLES CONSENT"), between Aetna
and MTP-South Tower LP, providing for the approval by Aetna of (i) that
Third Amendment to Lease dated as of March 1, 1996 between MTP-South
Tower LP, as Landlord, and Munger, Tolles & Olsen, as Tenant, and (ii) that
Termination Agreement dated as of March 1, 1996 among MTP-South Tower LP,
the general partners of MTP-South Tower LP and Munger, Tolles & Olson.
The instruments and agreements described in this Recital H executed by each
party are being (promptly upon full execution thereof) transmitted to
Chicago Title pursuant to the terms and conditions of the Recording
Instructions, and this Agreement and such other instruments and agreements
shall become effective only if and when same are delivered to the parties
in accordance with the terms and conditions of this Agreement prior to the
expiration or sooner termination of the Recording Instructions. The Loan
Documents, if and when amended as of the Effective Date by this Agreement,
the Allonge, the Amendment to Security Documents and the Environmental
Indemnity, are sometimes collectively referred to herein as the "AMENDED
LOAN DOCUMENTS."
IN CONSIDERATION of the recitals and agreements set forth herein,
and for other valuable consideration, the receipt and adequacy of which is
hereby acknowledged, MTP-South Tower LP and Aetna agree that the Loan
Documents shall be supplemented and modified as follows:
1. TRANSACTIONS ON EFFECTIVE DATE AND LLC CONVERSION.
1.1 CONDITIONS PRECEDENT TO EFFECTIVE DATE. Among the
conditions precedent to the Effective Date provided for herein, prior to
the expiration or sooner termination of the Recording Instructions:
1.1.1one or more of the Equity Owners (as defined in
Section 1.5 below) of MTP-South Tower (as defined below) must have made
capital contributions totalling $2,000,000 in accordance with Section 1.7
below, which sum must have been deposited with Chicago Title pursuant to
the Recording Instructions, for disbursement to Aetna on the Effective Date
provided for herein in accordance with this Agreement and the Recording
Instructions; and
1.1.2the Investment Committee of Aetna must have approved
the execution and delivery of this Agreement and the transactions provided
for herein, and Aetna must have provided Chicago Title with written
confirmation of such Investment Committee approval.
IF FOR ANY REASON SUCH TRANSACTIONS AND THE OTHER CONDITIONS PRECEDENT
PROVIDED FOR IN SECTION 10.2 BELOW HAVE NOT BEEN SATISFIED PRIOR TO THE
EXPIRATION OR SOONER TERMINATION OF THE RECORDING INSTRUCTIONS, THEN THIS
AGREEMENT AND THE OTHER INSTRUMENTS AND AGREEMENTS EXECUTED AS OF EVEN DATE
HEREWITH BY AETNA AND MTP-SOUTH TOWER LP SHALL BE NULL AND VOID, AND
NEITHER PARTY SHALL HAVE ANY LIABILITY OR OBLIGATION HEREUNDER OR
THEREUNDER. The Recording Instructions provide, among other things, that
any of the general partners of MTP-South Tower LP or Aetna may, each acting
unilaterally and with or without cause, terminate the Recording
Instructions at any time after September 26, 1996, time being of the
essence. Without limiting the generality of the foregoing, the parties
acknowledge that if the Recording Instructions are terminated prior to the
Effective Date provided for herein, the Loan Documents shall remain in full
force and effect, unmodified by the matters provided for in this Agreement,
and Aetna reserves the right, without limitation, to claim and enforce the
imposition of interest at the default rate provided for in the Note for the
period from December 1, 1994 until the Note and all other obligations of
MTP-South Tower LP to Aetna under the Loan Documents are paid in full. The
foregoing acknowledgments of MTP-South Tower LP and Aetna shall survive the
expiration or sooner termination of the Recording Instructions.
1.2 EFFECTIVE DATE. This Agreement shall become effective only
on the date of the Closing of certain transactions provided for in this
Agreement, which Closing is described in Section 10.1 below and is subject
to satisfaction of the conditions precedent provided for in Section 1.1
above and in Section 10.2 below. The date of such Closing (as publicly
evidenced by the recording by Chicago Title, in accordance with the
Recording Instructions, of the Amendment to Security Documents in the
Official Records of Los Angeles County) is herein referred to as the
"EFFECTIVE DATE," as provided for in Section 10.1.
1.3 CONSENT TO EQUITY TRANSACTION. Aetna hereby consents to
the transfer by IBM of its interest in MTP-South Tower described in
Recital F above.
1.4 CONVERSION TO LIMITED LIABILITY COMPANY. The general
partners of MTP-South Tower LP plan to cause a limited liability company to
be formed under California law, to be named Maguire Thomas Partners-South
Tower, LLC ("MTP-SOUTH TOWER LLC"), and to cause MTP-South Tower LLC to
succeed by operation of law to all of the assets and liabilities of
MTP-South Tower LP. If MTP-South Tower LLC is formed and succeeds to the
assets and liabilities of MTP-South Tower LP, whether before or after the
Effective Date, Aetna consents to such formation and succession, provided
that:
1.4.1all of the general partners of MTP-South Tower LP
must be the managing members of MTP-South Tower LLC;
1.4.2within five days following such formation and
succession, MTP-South Tower LLC:
1.4.2.1 must duly execute, acknowledge and
deliver to Aetna an Amendment to Deed of Trust and Acknowledgement
Agreement in the form of Exhibit D attached hereto (the "MTP-SOUTH
TOWER LLC ACKNOWLEDGMENT");
1.4.2.2 must duly execute and deliver to Aetna a
Uniform Commercial Code Fixture Filing in the form of Exhibit E attached
hereto (the "MTP-SOUTH TOWER LLC FIXTURE FILING");
1.4.2.3 must duly execute and deliver to Aetna
two Uniform Commercial Code Financing Statements in the forms set forth on
Exhibit F attached hereto (the "MTP-SOUTH TOWER LLC FINANCING STATEMENTS");
and
1.4.2.4 must cause Chicago Title to record the
MTP-South Tower LLC Acknowledgment and the MTP-South Tower LLC Fixture
Filing, and to issue a further endorsement to Aetna's title insurance
policy referred to in Section 9.3, confirming that record title to the
Project has vested in MTP-South Tower LLC and that the Aetna continues to
hold a first lien thereon, with no loss of priority -- all premiums, fees
and charges in connection therewith shall be paid by MTP-South Tower LLC,
as Approved Operating Costs hereunder; and
1.4.2.5 must execute such additional instruments
as Aetna may reasonably require to evidence the assumption by MTP-South
Tower LLC, subject to the provisions of Section 11.8 below, of all of the
obligations and liabilities of MTP-South Tower LP hereunder and to confirm
the liens and interests of Aetna on the assets of MTP-South Tower LLC in
accordance with the terms of the Amended Loan Documents.
If MTP-South Tower LLC is so organized and succeeds to the interest of MTP-
South Tower LP, the failure to comply with the provisions of Section 1.4.1
and Section 1.4.2 above shall constitute a breach of this Agreement with
respect to MTP-South Tower LP.
1.5 MTP-SOUTH TOWER; EQUITY OWNERS. As used herein, "MTP-SOUTH
TOWER" shall mean and refer to MTP-South Tower LP or MTP-South Tower LLC as
the successor in interest to MTP-South Tower LP, as applicable, and the
partners of MTP-South Tower LP or the members of MTP-South Tower LLC, as
the case may be, are herein collectively referred to as the "EQUITY OWNERS"
of MTP-South Tower and each is herein individually referred to as a "EQUITY
OWNER" of MTP-South Tower. Without limiting the generality of the
foregoing, after the date MTP-South Tower LLC succeeds to the interest of
MTP-South Tower LP, the provisions of Section 11.8 shall apply to the
liability of MTP-South Tower LLC, as "MTP-South Tower" thereunder, and to
the members of MTP-South Tower LLC, as "Equity Owners" thereunder.
1.6 APPLICATION OF PRE-CLOSING PAYMENTS. Subject to the
disclaimers set forth in the last paragraph of Section 1.1 above (in the
event the Effective Date does not occur for any reason):
1.6.1 Aetna and MTP-South Tower agree that all payments
received by Aetna on each "Disbursement Date" under the Lockbox Agreement
during the period from December 1, 1994 (the scheduled maturity date of the
Loan under the existing Loan Documents) through September 20, 1996 (the
most recent Disbursement Date for a disbursement by Agent under the Lockbox
Agreement) shall be credited and accounted for as of each such Disbursement
Date during such period as follows: (i) first, to the reimbursement of then
unpaid legal and other expenses of Aetna reimbursable by MTP-South Tower
pursuant to the terms of the Loan Documents (during such period, the total
amount of such reimbursements was $443,892.30); (ii) second, to then
accrued unpaid interest on the Loan at the rate of thirteen percent (13%)
per annum, the applicable interest rate during such period under the
existing Loan Documents, through such date; and (iii) third, any excess to
principal reduction on such date. As a result of the foregoing, Aetna and
MTP-South Tower acknowledge, affirm and agree that as of September 20,
1996: (i) interest on the Loan has been paid through that date, (ii) the
principal balance of the Loan is One Hundred Eighty-Nine Million Sixty
Thousand Three Hundred Seven and 69/100 Dollars ($189,060,307.69) on that
date, and (iii) the balance in the Deposit Account on that date is
approximately $3,000 (the minimum balance maintained therein) plus any
deposits posted thereto since September 18, 1996.
1.6.2 During the period following September 20, 1996
through the Effective Date, any payments received by Aetna in accordance
with the Lockbox Agreement on each Disbursement Date thereunder shall be
credited and accounted for in the same manner, as follows: (i) first, to
reimbursement of any then unpaid reimbursable expenses of Aetna under the
terms of the Lockbox Agreement and the other Loan Documents, (ii) second,
to then accrued unpaid interest on the Loan at the rate of thirteen
percent (13%) per annum through such date, and (iii) third, any remaining
balance to reduction of the principal balance of the Loan on such date.
1.7 ADDITIONAL PAYMENT AT CLOSING. On the Effective Date,
MTP-South Tower must also pay to Aetna the sum of Two Million
Dollars ($2,000,000), which sum shall be applied on the Effective Date in
accordance with Section 1.8 to certain obligations of MTP-South Tower. In
connection therewith, MTP-South Tower covenants, agrees, represents and
warrants to Aetna:
1.7.1 that said sum shall be contributed to the equity of
MTP-South Tower by one or more of its Equity Owners;
1.7.2 that no portion of said sum shall have been obtained
from Project rents or other Gross Receipts (as defined in the Lockbox
Agreement), from other pre-Closing assets of MTP-South Tower, or from
indebtedness of MTP-South Tower, whether owed to such Equity Owner or
Owners or to any other person; and
1.7.3 that no Equity Owner making such contribution to the
capital of MTP-South Tower shall have any right to receive any return on or
return of such sum at any time prior to the repayment in full of the Loan
and all other obligations of MTP-South Tower to Aetna.
As provided for in Section 10.1, the payment provided for in this
Section 1.7 shall be made through Chicago Title pursuant to the Recording
Instructions, which provide for the simultaneous (i) release of fully
executed counterparts of this Agreement and the other instruments and
agreements provided for herein to the parties, and (ii) the application of
such sum in accordance with the provisions of Section 1.8 below.
1.8 APPLICATION OF FUNDS AT CLOSING. On the Effective Date,
the $2,000,000 payment by MTP-South Tower pursuant to Section 1.7, shall be
released by Chicago Title pursuant to the Recording Instructions and
applied or disbursed by Aetna for obligations of MTP-South Tower as
follows:
1.8.1 $88,800 shall be applied by Chicago Title for the
title insurance premium for the policy or endorsement and recording fees
provided for in Section 9.3 below;
1.8.2 $388,934 shall be disbursed to MTP-Development as
payment in full of all previously held-back leasing commissions owed by
MTP-South Tower, which sum shall be paid by MTP-South Tower to
MTP-Development in satisfaction of all such obligations (and MTP-South
Tower hereby represents and warrants that such sum (of which $258,514 was
50% of the commission earned in connection with the February 6, 1995 lease
to The Los Angeles Unified School District, $51,176 was 50% of the
commission earned plus certain other fees earned in connection with the
March 8, 1995 lease to Finova Capital Corporation, and $79,244 was 100% of
the commission earned in connection with the July 10, 1995 lease to The
Boston Consulting Group) represents the full amount of all accrued leasing
commissions and other fees owed by MTP-South Tower to MTP-Development as of
the date of this Agreement); and
1.8.3 following the disbursements described above, the
balance of such $2,000,000 shall be disbursed to Aetna, and shall be
applied by Aetna:
1.8.3.1 first, for reimbursable costs of Aetna,
to the extent not disbursed to Aetna from the Deposit Account pursuant to
the terms of the Lockbox Agreement prior to the Effective Date, including,
without limitation, such sums as required to reimburse Aetna's legal fees
and expenses in connection with the Loan for the period following
March 31, 1996 (the last date for which such fees and expenses were
reimbursed by Aetna as provided in Section 1.6 above) through the Effective
Date (without limitation with respect to fees and expenses for subsequent
periods, such fees and expenses for the period from April 1, 1996 through
August 31, 1996 were approximately $51,200); and
1.8.3.2 the remaining amount shall credited by
Aetna on the Effective Date to reduction of the principal balance of the
Loan.
1.9 ESTABLISHMENT OF PROJECT RESERVE ACCOUNT.
1.9.1 In addition to the existing Deposit Account and the
existing "TAX AND INSURANCE ESCROW" (as defined and provided for in the
Lockbox Agreement), in connection with the transactions provided for
herein, Aetna has established a new deposit account, Account No.
12336-21673 (the "PROJECT RESERVE") with Bank of America N.T. & S.A., in
the name of Agent, as agent for Aetna. As used in this Agreement and in
the Lockbox Agreement, "AGENT" means CB Commercial Real Estate Group, Inc.
or such other entity as may be designated by Aetna from time-to-time, in
accordance with Section 13 of the Lockbox Agreement (and Aetna hereby
agrees to not so designate as its Agent an entity which, directly or
through affiliates, owns, manages or is developing a competing office
building project in downtown Los Angeles), to act as Aetna's agent with
respect to the Deposit Account, the Tax and Insurance Escrow and the
Project Reserve pursuant to this Agreement and the Lockbox Agreement, as
supplemented and modified by the provisions of this Agreement (unless the
context requires otherwise, references herein to the "LOCKBOX AGREEMENT"
shall mean and refer to the existing Lockbox Agreement as so supplemented
and modified). Until the Loan and all other obligations of MTP-South Tower
under this Agreement and the other Amended Loan Documents have been paid in
full, MTP-South Tower shall remain obligated to reimburse the reasonable
fees and costs of Aetna's Agent, which fees shall not be limited to the
current fees of Agent specified in the Lockbox Agreement (such fees and
costs shall be paid out of Operating Receipts as defined in Section 6.2.1)
in accordance with Section 7.2.1.3 below). The Project Reserve shall be
the property of Aetna and shall be exclusively controlled by Agent for
Aetna for the purposes provided for in this Agreement.
1.9.2 Absent Default (as defined in Section 8.14.1) under
the Amended Loan Documents, in which event Aetna shall have the rights and
remedies provided for in Section 6.4.2, the Project Reserve shall be used:
(i) to fund Approved Capital Costs (as defined in Section 5.2.2.1 below)
for the Project (including tenant improvement costs and leasing
commissions), in accordance with Section 7.3 below; and (ii) to provide
working capital for the Project (in addition to the provision for $250,000
of working capital in section 6(b) of the Lockbox Agreement) -- as provided
for in the first paragraph of Section 7.2.1 below, if the balance on
deposit in the Deposit Account is insufficient therefor, funds in the
Project Reserve may be transferred to the Deposit Account for disbursement
to pay or permit payment of Approved Operating Costs (as defined in
Section 7.2.1.4), Fixed Rate Interest (as defined in Section 2.2.1 below)
and certain other obligations which have been approved in advance by Aetna.
1.9.3 The amount of the maximum balance to be maintained
in the Project Reserve at any time in accordance with this Agreement (the
"PROJECT RESERVE MAXIMUM BALANCE") shall equal $3,000,000 or such lesser
sum as Aetna and MTP-South Tower may mutually agree upon in writing;
provided, however, that at any time following the designation of any such
lesser sum, MTP-South Tower shall have the right, by notice to Aetna and
Agent, to specify that the Project Reserve Maximum Balance again be the sum
of $3,000,000 (whereupon the Project Reserve shall be funded to such
increased Project Reserve Maximum Balance amount only to the extent of
subsequent disbursement of Operating Receipts pursuant to Section :\JMB-10K\,
i.e., no party shall be responsible for funding such increased amount).
2. EXTENSION AND INTEREST.
2.1 EXTENSION; EXTENSION FEE. The scheduled "Maturity Date"
provided for in Paragraph 1(h) of the Note, in paragraph a. on page 2 of
the Deed of Trust, and in any other provision of the Loan Documents, i.e.,
December 1, 1994, is hereby extended until September 1, 2003, at which time
the entire unpaid principal balance of the Loan, all accrued but unpaid
interest on the Loan (including both Fixed Rate Interest and Participation
Interest, as provided for below), and any other unpaid amounts owed to
Aetna in accordance with the terms of the Amended Loan Documents, shall be
immediately due and payable. In consideration of such extension, MTP-South
Tower shall pay to Aetna a fee (the "EXTENSION FEE") of Five Hundred
Thousand Dollars ($500,000), which sum shall be paid to Aetna out of
disbursements of Operating Receipts pursuant to Section 7.2.1.9 below.
2.2 INTEREST. In consideration of Aetna's agreement to extend
the scheduled maturity date of the Loan, as provided for in Section 2.1
above, and to reduce the fixed rate of interest payable on the Loan, as
provided for in Section 2.2.1 below, MTP-South Tower has agreed that Aetna
shall also be entitled to Participation Interest, as provided for in
Section 2.2.2.1 below.
2.2.1FIXED RATE INTEREST. Effective from and after the
Effective Date, until the Loan has been repaid in full, the rate of fixed
interest which shall accrue on the outstanding unpaid balance of the Loan
shall be decreased to ten percent (10%) per annum ("FIXED RATE INTEREST"),
payable monthly in arrears in accordance with the Note, as amended by the
Allonge (the "AMENDED NOTE"); provided, however, during the time that any
installment of principal or interest payable under the Amended Note is
delinquent, interest at the rate of twelve percent (12%) per annum shall
accrue and be due and payable on the total of all unpaid principal plus all
arrearages of interest past due under the Amended Note; provided further,
however, that if there is a maximum legal rate of interest applicable to
the Amended Note, the total interest payable on account of the Amended Note
shall not exceed interest at such maximum rate permitted by law. Such
changes in the fixed interest rate shall only be effective from and after
the Effective Date; any unpaid accrued interest on the Loan for the period
prior to the Effective Date, at the rate of thirteen percent (13%) per
annum, shall be payable at such rate on the next date interest is due
following the Effective Date in accordance with the terms of the Amended
Note.
2.2.2PARTICIPATION INTEREST.
2.2.2.1 As more particularly provided for in the
Allonge, at the maturity of the Loan (including acceleration and
prepayment) other than upon Early Repayment in accordance with Section 3.1
below, MTP-South Tower shall also be obligated to pay Aetna additional
interest (as more particularly defined in the Allonge, "PARTICIPATION
INTEREST") equal to fifty percent (50%) of the amount, if any, by which the
sum of:
2.2.2.1.1 the "Fair Market Value" of the
Project (as defined and provided for in the Allonge, and determined by
appraisal in accordance with the Allonge, except in connection with an
"Arms-Length Sale" of the Project in accordance with Section 4.4 below),
less an amount equal to one percent (1%) of such sum as an allowance for
assumed commissions and other closing costs (except in connection with an
Arms-Length Sale of the Project, in which case the amount of closing costs
shall be based on the actual closing costs, as provided for in Section 4.4
below), plus
2.2.2.1.2 all other assets of MTP-South Tower
(other than the Excluded Assets provided for in Section 8.12 below) plus
all amounts on deposit in the Deposit Account, in the Project Reserve and
in the Tax and Insurance Escrow, to the extent not required to pay or
provide for then-accrued obligations of MTP-South Tower for (i) Fixed Rate
Interest and all other sums then due Aetna under the Amended Loan Documents
(other than principal, Yield Maintenance Payment (as defined in Section 3.3
below) and Participation Interest), (ii) property taxes on the Project,
(iii) Approved Operating Costs, and (iv) Approved Capital Costs,
exceeds the sum of the then-outstanding principal balance of the
Loan plus the amount of any Yield Maintenance Payment then due and payable;
provided, however, that the amount of Participation Interest due and
payable to Aetna pursuant to this Agreement and the Amended Note shall not
exceed the "MAXIMUM PARTICIPATION INTEREST AMOUNT" as defined and provided
for in the Allonge.
2.2.2.2 The Participation Interest provided for
herein and in the Allonge equals a share (50%) of the entire unencumbered
value of the Project and such other amounts, and is not limited to a share
of any appreciation in such value; by way of example:
2.2.2.2.1 if Participation Interest was to
become due prior to any principal reduction of the Loan, and if the
aggregate value (determined as provided for in Section 2.2.2.1.1 above) of
the Project plus such other assets (not including the Excluded Assets) and
the amounts on deposit in the Deposit Account, in the Project Reserve and
in the Tax and Insurance Escrow (to the extent not required to pay or
provide for then-accrued obligations of MTP-South Tower, as provided for in
Section 2.2.2.1.2 above) then exceeded the principal balance of the Loan by
$1,000,000, and no Yield Maintenance Payment was then due, then the amount
of Participation Interest then due would equal $500,000; and
2.2.2.2.2 if instead Participation Interest
was to become due later, during which period (i) the principal balance of
the Loan had been reduced by $5,000,000 and (ii) the aggregate value of the
Project plus such other assets (not including the Excluded Assets) and the
amounts on deposit in the Deposit Account, in the Project Reserve and in
the Tax and Insurance Escrow (to the extent not required to pay or provide
for then-accrued obligations of MTP-South Tower, as provided for in
Section 2.2.2.1.2 above) had increased (from the amount described in the
preceding example) by $6,000,000, and no Yield Maintenance Payment was due,
then such aggregate value would exceed the then-current Loan balance by
$12,000,000 and the amount of Participation Interest then due would equal
$6,000,000.
3. PAYMENT OF THE LOAN.
3.1 EARLY REPAYMENT. At any time during the period (the
"PERMITTED PREPAYMENT PERIOD") from the Effective Date through and
including September 1, 1999, if not then in Default under the Amended Loan
Documents, MTP-South Tower shall have the right, without the consent of
Aetna, to prepay the Loan in full or in part, and in connection with such
voluntary cash repayment of the Loan on or before said date ("EARLY
REPAYMENT"), Aetna hereby agrees that no Participation Interest shall be
due or payable in connection with any Early Repayment.
3.2 AMOUNTS DUE AT MATURITY. At the scheduled maturity date of
the Loan or the earlier date of acceleration of the obligations evidenced
and secured by the Amended Loan Documents, or upon the repayment of the
Loan in full, upon such event ("MATURITY"), in addition to accrued Fixed
Rate Interest and any other unsatisfied obligations of MTP-South Tower to
Aetna under the Amended Loan Documents, the following amounts shall be due
and payable to Aetna by MTP-South Tower:
3.2.1 any Yield Maintenance Payment (to the extent
provided for in the Allonge or in Section 3.3 below); and
3.2.2 Participation Interest (except on Early Repayment,
and subject to the provisions set forth in Section 4.2 with respect to a
Deferred Obligation in connection with a refinancing of the Loan).
3.3 YIELD MAINTENANCE PAYMENT. MTP-South Tower shall also be
obligated to pay Aetna the "YIELD MAINTENANCE PAYMENT" (as defined in the
Allonge) in the amount provided for in the Allonge, (a) upon any
acceleration of the maturity of the Loan following March 1, 2000 by reason
of an Event of Default under the Amended Loan Documents, and (b) upon any
full or partial prepayment of the Loan after March 1, 2000, except with
respect to (i) principal payments made from monthly disbursements of
Operating Receipts, as provided for in Section 7.2.1.10 below,
(ii) Additional Loan Advance Repayments in accordance with Section 3.4.1,
or (iii) principal payments made from the proceeds of condemnation awards
or insurance recoveries, as provided for in Section 4.1.2.2, made after
said date. No Yield Maintenance Payment shall be due or payable upon any
full or partial prepayment of the Loan at any time on or before March
1, 2000, regardless of whether or not an Event of Default then exists under
the Amended Loan Documents.
3.4 REPAYMENT OF ADDITIONAL LOAN ADVANCES.
3.4.1ADDITIONAL LOAN ADVANCE REPAYMENTS. The provisions
of this Section 3.4 shall apply only if Aetna has made any Additional Loan
Advance pursuant to Section 7.4 below. In such event, on the September 1st
immediately following the date of the first Additional Loan Advance, and on
each subsequent September 1st until the Loan has been repaid in full (each
an "ADJUSTMENT DATE"), MTP-South Tower shall be required to make a partial
principal payment on the Loan (an "ADDITIONAL LOAN ADVANCE REPAYMENT"),
from the proceeds of equity contributions by one or more of the Equity
Owners of MTP-South Tower in accordance with Section 3.4.2 below, equal to
the lesser of:
3.4.1.1 the amount, if any, by which (i) the
outstanding principal balance of the Loan on such Adjustment Date exceeds
(ii) the amount of the applicable Maximum Principal Balance (defined below)
provided for in Exhibit A for such Adjustment Date (i.e., no Additional
Loan Advance Repayment shall be due on an Adjustment Date if the
outstanding principal balance of the Loan is then less than or equal to the
amount of the Maximum Principal Balance provided for on such date in
Exhibit A); or
3.4.1.2 the sum of (i) the aggregate amount of all
Additional Loan Advances made by Aetna pursuant to Section 7.4 below during
the twelve month period (herein referred to as a "LOAN YEAR") prior to such
Adjustment Date (e.g., on September 1, 1998, the aggregate amount of such
Additional Loan Advances made during the Loan Year between
September 1, 1997 through August 31, 1998), plus (ii) the aggregate amount
of all disbursements to MTP-South Tower in accordance with Section 7.2.1.8
during the (same) Loan Year prior to such Adjustment Date.
As more specifically provided for in Exhibit A attached hereto and
incorporated herein by reference, the "Maximum Principal Balance" for each
Loan Year specified therein shall be reduced by the amount of any principal
payments by MTP-South Tower following the Effective Date, other than:
(i) principal payments made from monthly disbursements of Operating
Receipts, as provided for in Section 7.2.1.10, (ii) Additional Loan Advance
Repayments in accordance with Section 3.4.1, or (iii) principal payments
made from the proceeds of condemnation awards or insurance recoveries, as
provided for in Section 4.1.2.2. Such reduction of the Maximum Principal
Balance for the current and each subsequent Loan Year shall become
effective immediately upon receipt of any such principal payment. All
references in this Agreement to any "MAXIMUM PRINCIPAL BALANCE" shall mean
the applicable amount shown on Exhibit A as same may be so reduced
following any such principal payment. Any such Additional Loan Advance
Repayment pursuant to this Section 3.4.1 shall be due and payable on the
first business day immediately following the applicable Adjustment Date.
Any such Additional Loan Advance Repayment received by Aetna from MTP-South
Tower shall be applied to reduction of the principal balance of the Loan.
No Yield Maintenance Payment shall be due or payable in connection with any
such Additional Loan Advance Repayment.
3.4.2EQUITY CONTRIBUTIONS. MTP-South Tower covenants and
agrees as follows with respect to each such Additional Loan Advance
Repayment:
3.4.2.1 that the amount of any such Additional Loan
Advance Repayment shall be contributed to the equity of MTP-South Tower on
or immediately before the applicable Adjustment Date by one or more of its
Equity Owners and said sum shall be used to make such Additional Loan
Advance Repayment to Aetna;
3.4.2.2 that no portion of the amount of such
Additional Loan Advance Repayment shall be obtained from Project rents or
other Gross Receipts (as defined in the Lockbox Agreement), from other
assets of MTP-South Tower (other than any Excluded Assets), or from
indebtedness of MTP-South Tower, whether owed to such Equity Owner or
Owners or to any other person; and
3.4.2.3 that no Equity Owner making such
contribution to the capital of MTP-South Tower shall have any right to
receive any return on or return of such sum at any time prior to the
repayment in full of the Loan and all other obligations of MTP-South Tower
to Aetna (except a right to participate in any disbursement made to
MTP-South Tower in accordance with Section 3.4.3 and Section 7.2.1.8).
3.4.3PERMITTED EQUITY DISTRIBUTIONS. If (a) MTP-South
Tower makes any Additional Loan Advance Repayments following the Effective
Date, (b) on any subsequent Disbursement Date (as defined in Section 7.2.1)
during the same or any subsequent Loan Year, the balance of the Loan
becomes less than the Maximum Principal Balance as provided for in
Section 3.4.1 and the schedule attached as Exhibit A for the September 1st
next following such Disbursement Date, and (c) no Default then exists, then
MTP-South Tower shall be entitled to disbursements, up to the amount of any
such Additional Loan Advance Repayments (without interest), of excess
Operating Receipts (as defined in Section 6.2.1) disbursed on such
Disbursement Date in accordance with the terms and conditions of (and at
the priority provided for in) Section 7.2.1.8 below, and any amount so
disbursed to MTP-South Tower may, notwithstanding any other provision of
this Agreement, be distributed or paid by MTP-South Tower to its Equity
Owners; provided, however, that the right to receive such disbursements
pursuant to Section 7.2.1.8 shall terminate on the earliest of (i) the
Maturity of the Loan, (ii) September 1, 2003, or (iii) the date any
Deferred Obligation is created pursuant to Section 4.2. An example of the
operation of Section 3.4.1 and the operation of Section 7.2.1.8 is attached
hereto as Exhibit C.
4. CAPITAL EVENTS.
4.1 PAYMENTS UPON RECEIPT OF CAPITAL PROCEEDS. In the event of
a refinancing of the Loan or the receipt of other Capital Receipts (as
defined in Section 6.2.2 below) by MTP-South Tower (except in connection
with a sale of the Project, which shall be governed by Section 4.4 below,
but including, without limitation, receipt of any insurance proceeds or
condemnation proceeds, to the extent not required to repair or restore the
Project), then:
4.1.1 MTP-South Tower shall be obligated to pay Aetna an
amount (not to exceed the aggregate amount owed to Aetna, including but not
limited to accrued unpaid Fixed Rate Interest, the unpaid balance of the
Loan, any Yield Maintenance Payment and any Participation Interest) equal
to 100% of the amount of net proceeds therefrom ("NET CAPITAL PROCEEDS"),
after payment of or provision for the customary and reasonable costs
associated with such refinancing or other capital event, as reasonably
approved by Aetna ("CAPITAL TRANSACTION COSTS"), including, without
limitation, (i) reasonable legal fees, appraisal costs, points and other
closing costs reasonably associated therewith, or (ii) any costs payable
out of any insurance proceeds or condemnation proceeds as reasonably
required to repair or restore the Project.
4.1.2 As provided for in Section 6.2 below, all such
proceeds received by MTP-South Tower (before deduction or provision for
Capital Transaction Costs) shall constitute "Capital Receipts" and must be
immediately deposited in Aetna's Deposit Account upon receipt by MTP-South
Tower. Agent shall disburse such Capital Receipts from the Deposit Account
as follows:
4.1.2.1 Following Aetna's reasonable approval of
such Capital Transaction Costs and in accordance with a disbursement
schedule proposed by MTP-South Tower and reasonably approved by Aetna at
the time of such capital event, from such Capital Receipts funds shall be
disbursed to MTP-South Tower, in installments, to the extent required to
permit MTP-South Tower to pay Capital Transaction Costs. In the event of
condemnation or casualty, absent the existence of an Event of Default,
Aetna shall permit insurance proceeds or condemnation payments to be
applied to the reasonable costs of any necessary repair and restoration of
the Project, and Aetna's approval of such repair or restoration costs shall
not be unreasonably withheld, delayed or conditioned. Any or all Capital
Transaction Costs may be paid or disbursed by an escrow holder or other
third party (other than MTP-South Tower or its affiliates) in connection
with a sale, refinancing or other event giving rise to Capital Receipts, in
which event (i) disbursements for such Capital Transaction Costs shall be
made by such escrow holder or other third party, and not by Agent, and
(ii) the approval by Aetna of a settlement statement or similar instrument
describing such costs shall constitute Aetna's approval of such Capital
Transaction Costs for purposes of this Agreement.
4.1.2.2 The entire amount of Net Capital Proceeds
(i.e., all Capital Receipts after payment of or provision for Capital
Transaction Costs to be disbursed to MTP-South Tower pursuant to
Section 4.1.2.1), shall be disbursed to Aetna, to be applied by Aetna to
reduction of the principal amount of the Loan plus any Yield Maintenance
Payment with respect to such principal payment (as provided for in
Section 3.3, no Yield Maintenance Payment shall be due in connection with
such principal payments made from the proceeds of condemnation awards or
insurance recoveries).
4.1.2.3 If the amount of Net Capital Proceeds
paid to Aetna in accordance with Section 4.1.2.2 is sufficient to repay the
entire principal balance of the Loan and any Yield Maintenance Payment
associated therewith, then the Loan shall mature and all other amounts due
at Maturity, as provided for in Section 3.2 above, shall be due and
payable, and:
4.1.2.3.1 Aetna shall apply such excess amount
of Net Capital Proceeds, after repayment pursuant to Section 4.1.2.2 of the
entire principal balance of the Loan and any Yield Maintenance Payment
associated therewith:
(1) first, to Fixed Rate Interest and
any other accrued unpaid obligations of MTP-South Tower under the Amended
Loan Documents other than Participation Interest, and
(2) second, (except in connection with
Early Repayment) to Participation Interest.
4.1.2.3.2 To the extent such excess amount of
Net Capital Proceeds is insufficient to pay all of such obligations owed to
Aetna under the Amended Loan Documents, including (except in connection
with Early Repayment) all Participation Interest, then MTP-South Tower
shall be obligated to immediately pay Aetna all such amounts, subject,
however, to the provisions of Section 4.2 regarding deferral of the
obligation to pay unpaid Participation Interest upon certain refinancings.
4.2 SUBORDINATION OF PARTICIPATION INTEREST ON REFINANCING. In
the event that MTP-South Tower refinances the Loan, to the extent that the
net proceeds of such refinancing (after payment of or provision for the
Capital Transaction Costs and funding any Qualified Reserves and/or
Qualified Set-Asides (as defined in Section 4.2.8.5 and Section 4.2.8.6
below, respectively) required by the first lien lender) plus all amounts in
the Project Reserve are sufficient (and are applied) to repay the entire
outstanding principal balance of the Loan, plus any Yield Maintenance
Payment associated therewith, and to pay all accrued unpaid Fixed Rate
Interest and all other obligations to Aetna under the Amended Loan
Documents, but are not sufficient to repay in full all Participation
Interest then due Aetna (i.e., in the event of Early Repayment, for which
no Participation Interest is due, the provisions of this Section 4.2 shall
not apply), then Aetna shall permit MTP-South Tower to repay the unpaid
balance of such Participation Interest (which balance shall be determined
and fixed as of the date (the "REFINANCING DATE") of such refinancing and
repayment of the principal balance of the Loan), plus Fixed Rate Interest
on such unpaid balance from the Refinancing Date until repaid (the
"DEFERRED OBLIGATION"), over a three year period subject to the terms and
conditions of this Section 4.2.
4.2.1 The Deferred Obligation shall remain a secured debt
obligation of MTP-South Tower, as part of the Loan and evidenced and
secured by the Amended Loan Documents (and subject, without limitation, to
the limitation on the liability of MTP-South Tower and its Equity Owners in
accordance with Section 11.8), as the Amended Loan Documents are further
amended as provided for in this Section 4.2.
4.2.2 The lien of the Amended Loan Documents securing the
Deferred Obligation shall be subordinated by Aetna to the lien of the
instruments and agreements evidencing and securing the new financing
obtained by MTP-South Tower to refinance the Loan, pursuant to a
subordination agreement reasonably acceptable to Aetna.
4.2.3 The Deferred Obligation, including all accrued
unpaid interest thereon, shall be due and payable on the earlier of
(i) September 1, 2006 or (ii) the third anniversary of the Refinancing
Date, regardless of the availability of funds for such repayment.
4.2.4 During the three year period following the
Refinancing Date, however, the Deferred Obligation shall be repaid out of,
and only to the extent of (i) 100% of Operating Receipts (as defined in
Section 6.2.1) remaining after payment or provision for (a) operating
costs, including taxes and insurance and a working capital reserve not to
exceed $250,000, (b) capital expenditures, including funding a Qualified
Reserve therefor not to exceed $3 million, and (c) debt service on the
first lien loan, and (ii) 100% of any Net Capital Proceeds (as defined in
Section 4.1.1) remaining after any required repayment of such first lien
loan.
4.2.5 The Deposit Account and lockbox requirements of the
Lockbox Agreement, as supplemented and modified by this Agreement, shall
continue to apply to provide for such application of funds to operating
expenses, including taxes and insurance and a working capital reserve not
to exceed $250,000, and capital expenditures, including funding a reserve
therefor not to exceed $3 million, and other approved obligations of
MTP-South Tower, including debt service on the first lien loan, and payment
of the Deferred Obligation; provided, however, that if the first lien
lender requires that MTP-South Tower provide such lender with a similar
lockbox or deposit account arrangement, then Aetna agrees to consent to
same provided that such documents, in form and substance reasonably
acceptable to Aetna, provide for direct payments to Aetna for the Deferred
Obligation from all excess funds as provided for herein.
4.2.6 Following the date that the balance of the Loan
(other than the Deferred Obligation) is repaid, Aetna shall have no
obligation to make any Additional Loan Advances and there shall be no
further disbursements to MTP-South Tower in connection therewith pursuant
to Section 7.2.1.8.
4.2.7 Aetna also agrees to reasonably cooperate to
accommodate the reasonable requests of the first lien lender in connection
with amendments to the Amended Loan Documents and agreements subordinating
the liens thereof to the liens of the instruments and agreements evidencing
and securing the first lien loan.
4.2.8 The economic terms of the new first lien loan to
which any Deferred Obligation is to be subordinated (the "NEW LOAN") shall
be subject to the prior approval of Aetna, in its reasonable discretion (as
such standard is provided for in Section 5.4), unless the following
conditions are satisfied, in which event Aetna will be deemed to have
approved such economic terms (and any amendment of such economic terms
shall similarly remain subject to the prior approval of Aetna, in its
reasonable discretion):
4.2.8.1 the maturity date of the New Loan must be
not less than five years;
4.2.8.2 the interest rate of the New Loan must be a
market rate of interest, taking into account points and fees;
4.2.8.3 the New Loan must be non-amortizing or have
an amortization schedule of not less than 25 years (level payment), with no
additional principal payments required before maturity;
4.2.8.4 no kicker, participating or other contingent
interest must be due or payable under the New Loan prior to the repayment
in full of the Deferred Obligation;
4.2.8.5 if the lender with respect to the New Loan
requires reserves for capital expenditures to be funded or maintained out
of disbursements from Operating Receipts, then (i) the maximum amount of
such capital reserve must not exceed $3,000,000 (in addition to a working
capital reserve of not more than $250,000 and any reserve for Project
property taxes and/or insurance premiums), and after the Refinancing Date
the Project Reserve Maximum Balance shall be reduced by the amount of the
required balance in such capital reserve (so that the aggregate amount of
both (in addition to a working capital reserve not to exceed $250,000 and a
reserve for Project property taxes and insurance) does not exceed the sum
of $3,000,000), and (ii) Aetna must have a lien on such reserve subordinate
only to any lien thereon securing the New Loan (such reserve meeting the
foregoing conditions is herein referred to as a "QUALIFIED RESERVE");
4.2.8.6 if in addition to any Qualified Reserve, the
lender with respect to the New Loan requires any amounts be set-aside from
the proceeds of the New Loan, then (i) such set-asides must be used to fund
a Qualified Reserve or be held to fund Project costs (including capital
costs, operating expenses and debt service) over a period not to exceed
three years (and Aetna will not unreasonably withhold its approval of a
longer period), (ii) any amounts released from such set-asides not used for
such purposes must be included in Operating Receipts for disbursement in
accordance with this Agreement, and (iii) Aetna must have a lien on any
such set-aside funds subordinate only to any liens thereon securing the New
Loan (such set-asides meeting the foregoing conditions are herein referred
to as "QUALIFIED SET-ASIDES"); and
4.2.8.7 if the proceeds of the New Loan are to be
disbursed in installments, then the net proceeds of any such future
advances, to the extent not applied to Project operating or capital costs
or held in a Qualified Set-Aside for such Project costs, must be applied to
the Deferred Obligation when received by MTP-South Tower.
4.2.9 The obligation of Aetna to commit to such
subordination and deferral of unpaid Participation Interest shall be
subject to the following conditions:
4.2.9.1 the Loan and all other obligations of
MTP-South Tower to Aetna (other than Participation Interest) must have been
repaid in full;
4.2.9.2 to the extent that the net proceeds of the
New Loan (after payment of reasonable and customary closing costs
(including, without limitation, reasonable attorneys fees, points, swap
costs, and title insurance premiums) and funding any Qualified Reserves and
Qualified Set-Asides required by the first lien lender) plus all amounts in
the Project Reserve (but excluding amounts in the Tax and Insurance Escrow,
the Deposit Account or the Operating Account) exceed the amount required to
satisfy such other Loan obligations to Aetna, the excess amount must have
been applied to pay Participation Interest;
4.2.9.3 amendments to the Amended Loan Documents,
and agreements subordinating the liens thereof to the instruments and
agreements securing the New Loan, must be acceptable to Aetna, in its
reasonable discretion;
4.2.9.4 the economic terms of the New Loan must have
been approved, or deemed approved, by Aetna as provided for in
Section 4.2.8;
4.2.9.5 the first lien lender must have consented to
all documents and the transactions provided for therein;
4.2.9.6 the closing of such transactions must occur
on or before September 1, 2003, the scheduled maturity date of the Loan
(subject to any extension of that date by written express amendment of the
Amended Loan Documents);
4.2.9.7 all instruments and agreements must be duly
executed and delivered by all parties;
4.2.9.8 Aetna must receive opinions of counsel to
MTP-South Tower as Aetna may reasonably request;
4.2.9.9 Aetna must have received an endorsement to
its title insurance policy, confirming the second lien priority of the
instruments and agreements evidencing and securing the Deferred Obligation;
and
4.2.9.10 MTP-South Tower must reimburse all of
Aetna's reasonable costs and expenses in connection with negotiating,
documenting and closing the transactions provided for in this Section 4.2
(including, without limitation, reasonable attorneys' fees and costs).
4.3 RIGHT OF FIRST OFFER. In connection with any sale or other
disposition of the Project by MTP-South Tower, MTP-South Tower must comply
with the terms of this Section 4.3. If MTP-South Tower desires to sell or
otherwise dispose of the Project, then MTP-South Tower must offer to sell
the Project to Aetna, which offer shall be in writing (the "OFFER") and
shall specify the purchase price and any other material economic terms upon
which MTP-South Tower would be willing to sell the Project; without
limiting the foregoing: (i) unless otherwise specified in the Offer, the
Project shall include the Excluded Assets provided for herein, and (ii) the
Offer must specify the terms of any post-closing property management
contract with MTP-Development or any other affiliate of MTP-South Tower (as
used herein, an "AFFILIATE" of MTP-South Tower means any person or entity
which is controlled by, controls or is under common control with MTP-South
Tower or any of the Equity Owners of MTP-South Tower) -- absent such
specification, there shall be no such affiliate contract.
4.3.1 If Aetna accepts such Offer in writing within
thirty (30) days following its receipt, or accepts any Revised Offer (as
defined below) within seven (7) business days following its receipt,
MTP-South Tower and Aetna shall proceed in good faith to document and close
such sale as soon as possible, in accordance with such Offer or Revised
Offer, as applicable, and at such closing, the Project shall be sold to
Aetna or its nominee subject to the matured Loan, i.e., all accrued unpaid
Fixed Rate Interest, the entire principal balance, any Yield Maintenance
Payment associated therewith, Participation Interest (except on Early
Repayment), and all other amounts payable under the Amended Loan Documents
shall be deducted in the determination of the portion of the purchase
payable to MTP-South Tower at the closing of such sale of the Project to
Aetna or its nominee. The amount of Participation Interest, if any, shall
be calculated in the same manner as provided for in Section 4.6 below
(i.e., based on (i) the purchase price, plus (ii) amounts in the Deposit
Account, in the Project Reserve and in the Tax and Insurance Escrow, plus
(iii) all cash and other assets of MTP-South Tower other than the Excluded
Assets), except that no closing costs shall be payable at such closing or
deductible in such calculation of Participation Interest then due. At such
closing, property taxes, operating expenses and current rents shall be
prorated. Aetna and MTP-South Tower shall be obligated to close such sale
within thirty (30) days following the date Aetna accepts the applicable
Offer or Revised Offer, and in such event, solely for the purpose of
determining whether or not any Yield Maintenance Payment or Participation
Interest is then due, provided MTP-South Tower diligently proceeds to close
such sale to Aetna, such sale shall be deemed to have occurred on the date
Aetna accepts the Offer or Revised Offer, as applicable.
4.3.2 If Aetna declines or fails to accept an Offer within
such thirty (30) day period, or if Aetna declines or fails to accept a
Revised Offer within the seven business day period provided for below, then
MTP-South Tower shall have the right at any time during the following nine
months to close the sale of the Project in an Arms-Length Sale (as provided
for in Section 4.4 below) provided that the purchase price and other
material economic terms of such sale are no more favorable to the buyer
than the purchase price and other material economic terms declined or so
deemed declined by Aetna, and in such event Aetna shall have no approval
rights with respect to such Arms-Length Sale (provided that the other
"arms-length" requirements of Section 4.4 are satisfied); provided,
however:
4.3.2.1 that at any time during such nine month
period following Aetna's rejection or deemed rejection of an Offer,
MTP-South Tower shall have the right to submit a revised offer to Aetna (a
"REVISED OFFER"), which Aetna must accept, if at all, within seven (7)
business days following its receipt;
4.3.2.2 that Aetna's failure to accept any such
Offer or Revised Offer from MTP-South Tower shall not affect the right of
Aetna to approve or reject any sale or other disposition of the Project
which is not an Arms-Length Sale in accordance with Section 4.5 (including,
without limitation, Aetna's rights in connection with certain transactions
in accordance with Paragraph 17 of the Note); and
4.3.2.3 that the references herein to MTP-South
Tower's rights within the nine month period described shall not be
construed to extend the date of Maturity of the Loan.
4.4 ARMS-LENGTH SALE OF PROJECT. In the event of an
Arms-Length Sale (as defined below) the Loan shall be due and payable and,
except in the case of Early Repayment (when no Participation Interest is
due hereunder), the amount of Participation Interest related to the value
of the Project shall be determined with reference to the amount of the net
proceeds of such sale, as provided for in Section 4.5 (in all other cases,
the amount of Participation Interest attributable to the value of the
Project shall be determined by appraisal, as more particularly provided for
in Section 2.2.2.1 and in the Allonge). As used herein, a sale of the
Project shall constitute an "ARMS-LENGTH SALE" only if:
4.4.1 the purchase price and the other material economic
terms of such sale are no more favorable to the buyer than those contained
in an Offer or any Revised Offer made by MTP-South Tower to Aetna in
accordance with Section 4.3, which Offer and any Revised Offer have been
declined by Aetna (or been deemed to have been declined by Aetna in
accordance with Section 4.3.2) within nine months preceding the date of
closing of such sale;
4.4.2 following such sale, if MTP-Development or any other
affiliate of MTP-South Tower is to continue to manage the Project, the
management fee payable to such affiliated entity is not more than the
management fee now payable by MTP-South Tower to MTP-Development, i.e.,
2-1/2% of Project revenues;
4.4.3 if following such sale MTP-Development or any other
affiliate of MTP-South Tower is to continue to provide leasing agent
services at the Project, the leasing commissions payable to such entity are
not more than the leasing commissions payable to MTP-Development under its
contract with MTP-South Tower as of the date of this Agreement; and
4.4.4 all other aspects of such sale are with unaffiliated
entities, including but not limited to any sales commissions payable in
connection with such sale, and none of MTP-South Tower or any of the Equity
Owners of MTP-South Tower or any affiliate of any of them retains or
receives any direct or indirect interest in the buyer or in the Project
following such sale.
Notwithstanding any other provision of this Agreement, MTP-South Tower
shall not be required to obtain the consent of Aetna to an Arms-Length Sale
of the Project.
4.5 PROCEEDS OF SALE OF PROJECT. In the event of any sale or
other disposition of the Project, whether or not same qualifies as an
Arms-Length Sale hereunder (this Section, however, shall not be deemed to
be a consent to any transfer other than in accordance with Section 5.1
hereof), upon such sale or other disposition ("SALE"):
4.5.1 The Loan and all other obligations of MTP-South
Tower to Aetna under the Amended Loan Documents shall be immediately due
and payable, and all of such obligations must be paid to Aetna regardless
of the amount of the net proceeds of such sale (except in the case of
Participation Interest payable in connection with an Arms-Length Sale, as
provided for in Section 4.6 below).
4.5.2 As provided for in Section 6.2 below, all such
proceeds received by MTP-South Tower from any sale shall constitute
"Capital Receipts" and must be immediately deposited in Aetna's Deposit
Account upon receipt by MTP-South Tower. In addition, upon a sale of the
Project, Agent shall consolidate into the Deposit Account all remaining
Funds (as defined in Section 6.3.1 below) in the Project Reserve and (to
the extent not required to pay or provide for then-accrued property taxes
on the Project) in the Tax and Insurance Escrow. From such Funds:
4.5.2.1 Agent shall make the payments required under
this Agreement to Aetna for all accrued unpaid Fixed Rate Interest, the
entire outstanding principal balance of the Loan plus any Yield Maintenance
Payment payable in connection with such prepayment, and any other amounts
due Aetna under the Amended Loan Documents (other than Participation
Interest, which shall be disbursed in accordance with Section 4.5.2.3
below);
4.5.2.2 following Aetna's reasonable approval of
such costs and in accordance with a disbursement schedule proposed by
MTP-South Tower and reasonably approved by Aetna in connection with such
sale, Agent shall disburse such Funds from the Deposit Account to MTP-South
Tower in installments as required, after taking into account the amounts
available in MTP-South Tower's Operating Account (as defined in the Lockbox
Agreement) and all other assets (not including the Excluded Assets) of
MTP-South Tower, to permit MTP-South Tower (i) to create reasonable
reserves for any post-closing obligations of MTP-South Tower in connection
with such sale, and (ii) to pay approved commissions, fees and other
Capital Transaction Costs in connection with such sale, any outstanding
Approved Operating Costs, and other approved costs as necessary in
connection with the liquidation of MTP-South Tower (to the extent that
closing costs are paid by an escrow agent or other third party from funds
not delivered to MTP-South Tower, the provisions of this Section 4.5.2.2
applicable to disbursement to MTP-South Tower of amounts to pay such costs
do not apply, and Aetna shall permit such payments or disbursements by an
escrow agent or other third party, as provided for in Section 4.1.2.1); and
4.5.2.3 from the remaining Funds, after payment or
provision for the disbursements and payments described above,
simultaneously:
4.5.2.3.1 if such sale closes after the
Permitted Prepayment Period (as defined in Section 3.1 above), i.e., such
sale does not result in Early Repayment, Agent shall cause Aetna to be paid
Participation Interest either (i) in accordance with Section 4.6 below, if
such sale constitutes an Arms-Length Sale, or (ii) if not, in accordance
with the provisions of Section 2.2.2.1 and the Allonge; and
4.5.2.3.2 any remaining Funds shall be
released by Agent to MTP-South Tower.
4.6 PARTICIPATION INTEREST ON ARMS-LENGTH SALE. The amount of
Participation Interest due and payable upon an Arms-Length Sale shall be
determined as follows (unless such Arms-Length Sale closes on or before the
expiration of the Permitted Prepayment Period and results in Early
Repayment, as provided for in Section 3.1 above, in which event the
provisions of this Section 4.6 shall not apply):
4.6.1 To the extent, if any, that (a) the aggregate amount
of (i) net proceeds from such Arms-Length Sale, after payment of the
reasonable and customary costs associated with such sale (if the
Arms-Length Sale requires MTP-South Tower to fund post-closing obligations,
e.g., an income guaranty or a reserve for capital costs, then the
deductible costs associated with such sale shall include the cost to fund
appropriate reserves for such post-closing obligations of MTP-South Tower
to the buyer in connection with such sale), as reasonably approved by
Aetna, plus (ii) all amounts in the Deposit Account, in the Project Reserve
and (to the extent not required to pay or provide for then-accrued property
taxes on the Project) in the Tax and Insurance Escrow, plus (iii) all cash
and other assets of MTP-South Tower (other than the Excluded Assets),
exceeds (b) the sum of (i) the amount required to pay or provide for all
approved costs to satisfy obligations of MTP-South Tower to persons other
than Aetna (as such costs are provided for in Section 4.5.2.2 above), plus
(ii) the outstanding Loan obligations (other than Participation Interest
but including, without limitation, accrued Fixed Rate Interest, the unpaid
principal balance of the Loan and any Yield Maintenance Payment in
connection therewith) then due and payable to Aetna in accordance with
Section 4.5.1, then an amount equal to fifty percent (50%) of any excess
shall be due and owing to Aetna as Participation Interest on the Loan (and
an equal amount shall be retained by or disbursed, pari passu, to MTP-South
Tower); provided, however that the amount payable to Aetna as Participation
Interest shall not exceed the Maximum Participation Interest Amount, as
provided for in Section 2.2.2.1 above and in the Allonge (and after the
payment of such Maximum Participation Interest Amount to Aetna, any excess
shall be retained by or disbursed to MTP-South Tower).
4.6.2If reserves are created for post-closing obligations
of MTP-South Tower to the buyer in connection with such sale, as provided
for above, then following such closing Aetna shall be entitled to receive
50% of any amounts released from such reserves to the extent not used for
the purpose for which such funds were reserved, and at the closing of such
sale Aetna and MTP-South Tower shall enter into an agreement providing for
the obligation of MTP-South Tower to so share any such excess reserves upon
the release thereof pursuant to the applicable contract with the new owner
of the Project. If a third party holds and disburses such reserves, that
entity must be a party to such agreement between Aetna and MTP-South Tower;
if not, then such reserves shall be disbursed out of Aetna's Deposit
Account subject to reasonable approval rights of Aetna and MTP-South Tower
to be set forth in their agreement. Aetna shall have the right to require
such agreement in connection with the release of its liens upon the closing
of such Arms-Length Sale.
4.6.3 To the extent that MTP-South Tower then has non-cash
assets (other than the Excluded Assets) not sold as part of the Project
(e.g., without limitation, a right of MTP-South Tower to receive a property
tax refund, or a contingent right of MTP-South Tower to receive any
remaining unused balance of reserves created in connection with a sale,
including any interest earned thereon), there shall be an equitable
disbursement or allocation of such non-cash assets in accordance with the
foregoing, in a manner reasonably approved by Aetna. For example, assuming
Aetna is entitled to Participation Interest upon such sale (in accordance
with Section 4.6.1 above), then either, at the election of Aetna:
4.6.3.1 such non-cash assets may be retained by
MTP-South Tower and the amount of Participation Interest paid in cash to
Aetna shall be increased to reflect the fair market present value of such
retained non-cash assets, or
4.6.3.2 an undivided 50% interest in any such
non-cash assets may be assigned to Aetna, as Aetna's Participation Interest
with respect to such non-cash assets.
5. APPROVAL RIGHTS OF AETNA.
5.1 APPROVAL OF TRANSFERS AND ADDITIONAL DEBT. In addition to
the approval rights of Aetna in connection with leases and other agreements
pursuant to Section 5.3 and the other approval rights of Aetna provided for
herein, MTP-South Tower hereby agrees that Aetna's prior written approval
shall be required for:
5.1.1 any financing or refinancing of the Project, except
(i) upon repayment in full of the Loan, including but not limited to any
and all Participation Interest then accrued and any Yield Maintenance
Payment (in which event Aetna shall have no approval rights with respect to
such financing or refinancing), or (ii) upon repayment in full of the Loan
except for the creation of a Deferred Obligation in lieu of cash payment of
Participation Interest, as provided for in Section 4.2 in connection with
repayment of the Loan upon a refinancing (for which Aetna's approval rights
will be limited as provided for therein);
5.1.2 any other indebtedness of MTP-South Tower (excluding
trade payables and other obligations entered into in the ordinary course of
business);
5.1.3 any sale, conveyance, transfer or other disposition
of the Project or any part thereof or any interest therein, except in
connection with a sale, conveyance, transfer or other disposition of the
entire Project if both (i) MTP-South Tower has complied with the provisions
of Section 4.3 (right of first offer) in connection therewith, and (ii) the
entire Loan, including principal, accrued Fixed Rate Interest, any Yield
Maintenance Payment and any Participation Interest is paid in full in
accordance with this Agreement upon the closing of such sale, conveyance,
transfer or other disposition of the Project, in which event the approval
of Aetna shall not be required; and
5.1.4 certain transfers or changes with respect to equity
interests in MTP-South Tower described in Paragraph 17 of the Note.
Any approval required to be obtained from Aetna hereunder may be withheld
in the reasonable discretion of Aetna (as such standard is provided for in
Section 5.4) and shall not be unreasonably delayed, except: (i) if such
matters are entered into upon Early Repayment, in which event Aetna shall
have no approval rights, and (ii) in the event MTP-South Tower is in
Default under the Amended Loan Documents, in which event such approval may
be withheld or denied in the sole discretion of Aetna.
5.2 APPROVAL OF OPERATING AND CAPITAL BUDGETS.
5.2.1APPROVED OPERATING COSTS. As provided for in
Section 6 of the Lockbox Agreement, as supplemented by Section 7.2.1.4
below, any operating costs and expenses of the Project are subject to the
prior reasonable approval of Aetna (unless an Event of Default exists, in
which event such approval shall be subject to Aetna's sole discretion), and
that upon such approval, such costs and expenses shall constitute "Approved
Operating Costs" for purposes of the Lockbox Agreement and this Agreement.
Section 6 of the Lockbox Agreement provides for submission of monthly
schedules of operating costs and expenses to Aetna for such approval.
Following the Effective Date, in addition to the procedures provided for in
Section 6 of the Lockbox Agreement, MTP-South Tower shall have the right to
submit to Aetna for approval a reasonably detailed written proposed
operating budget (in form and detail reasonably acceptable to Aetna) of
anticipated operating monthly costs and expenses for each calendar year or
portion thereof following the Effective Date. Upon written approval of any
such annual operating budget by Aetna, which approval shall not be
unreasonably withheld or delayed (unless an Event of Default exists, in
which event such approval shall be subject to Aetna's sole discretion),
such operating budget shall constitute an "APPROVED OPERATING BUDGET" and
the costs and expenses shown thereon shall constitute "Approved Operating
Costs" for the applicable period for all purposes of this Agreement and the
Lockbox Agreement. Aetna shall respond to any such proposed operating
budget within thirty (30) days. If Aetna disapproves such a proposed
operating budget, Aetna shall specify the items that it disapproves so that
MTP-South Tower can submit a revised proposed operating budget that meets
the requirements of Aetna. Aetna and MTP-South Tower shall use best
efforts to reach agreement on a revised operating budget within thirty
days. Provided that MTP-South Tower has submitted a proposed operating
budget to Aetna at least thirty (30) days prior to the beginning of any
calendar year, if same has not been approved by Aetna, the prior Approved
Operating Budget shall remain in effect during the first month of the
following calendar year. MTP-South Tower shall have the right to obtain
disbursements for Approved Operating Costs in accordance with an Approved
Operating Budget without further approval of Aetna (in accordance with
disbursement requests to Agent as provided for in the Lockbox Agreement).
MTP-South Tower, shall, however, provide Aetna, on request or otherwise at
least annually, with a comparison of actual expenditures to date to the
Approved Operating Budget for such expenditures. MTP-South Tower shall
obtain Aetna's prior written approval of any expenditure for Operating
Costs which exceeds by more than 5% the budgeted amount therefor (on a line
item basis) in an Approved Operating Budget.
5.2.2APPROVED CAPITAL COSTS.
5.2.2.1 APPROVAL. The amounts of all
expenditures by MTP-South Tower (i) for leasing commissions, tenant
improvement costs and allowances and other closing costs in connection with
the execution and delivery of any lease at the Project or the build-out of
space in connection with any such lease, and (ii) for all other capital
improvements at the Project (except repairs and restoration funded from
insurance proceeds or other Capital Receipts in accordance with this
Agreement and the other Amended Loan Documents), shall be subject to the
prior written approval of Aetna, which approval shall not be unreasonably
withheld or delayed; provided, however, that Aetna, in its sole discretion,
shall have the right (in addition to all its other rights in accordance
with this Agreement and the other Amended Loan Documents) to withhold or
deny such approval, or to rescind any approval previously granted (to the
extent (i) amounts to pay such costs have not been disbursed in accordance
with Section 7.3.1.4 below, (ii) such costs have not been incurred by
MTP-South Tower, or (iii) such expenditures have not been committed by
MTP-South Tower in binding written agreements):
5.2.2.1.1 in Aetna's sole discretion at any
time a Default (as defined in Section 8.14.1) exists under the Amended Loan
Documents (whether or not an Event of Default has occurred); and
5.2.2.1.2 in Aetna's reasonable discretion at
any time after September 1, 2002, regardless of whether or not MTP-South
Tower is then in default.
Any such approval by Aetna may be in the form of approval of a budget or
schedule for such capital costs (including the leasing guidelines provided
for in Section 5.3), approval of a lease which provides for such
expenditures (including but not limited to execution of a subordination,
non-disturbance and attornment agreement with respect to a lease, which
shall constitute approval of such lease and the capital expenditures
provided for therein). Upon such approval by Aetna, until and unless such
approval is rescinded in accordance with the foregoing, such amounts shall
constitute "APPROVED CAPITAL COSTS" for purposes of this Agreement.
5.2.2.2 DISBURSEMENT. Approved Capital Costs
shall be subject to such disbursement conditions and requirements as Aetna
may reasonably establish, including, without limitation, requirements for
documentation of expenditures, rights of inspection, requirements for
tenant estoppel certificates, and requirements for lien waivers.
5.3 APPROVAL OF LEASES AND OTHER AGREEMENTS.
5.3.1 In addition to the approval rights of Aetna in
connection with transfers and additional debt pursuant to Section 5.1 and
the other approval rights of Aetna provided for herein, from and after the
Effective Date, the terms and conditions of the following, to the extent
entered into after the Effective Date, shall be subject to the prior
written approval of Aetna:
5.3.1.1 all leases at the Project, and any work
letters, subordination, non-disturbance and attornment agreements, and
other contracts or agreements associated therewith, involving (initially or
with expansion options) either (i) more than the area of a full floor, or
(ii) occupancy of any space then leased to IBM, other than IBM subleases
(collectively, "MAJOR LEASES");
5.3.1.2 the principal economic terms of all leases
and concession agreements at the Project other than Major Leases, pursuant
to a term sheet, in form reasonably acceptable to Aetna, to be delivered to
Aetna in connection with any such proposed lease or concession agreement;
5.3.1.3 any contract or agreement of MTP-South Tower
with an affiliate of MTP-South Tower or of any Equity Owner of MTP-South
Tower;
5.3.1.4 any material contract or agreement of
MTP-South Tower, involving either (i) a term of more than one year, unless
cancelable at any time without penalty on not more than 30 days' notice, or
(ii), unless such expenditure has previously been approved by Aetna (in a
budget or otherwise), the expenditure by MTP-South Tower of more than
$100,000 for a single item or contract;
5.3.1.5 any material amendment, modification, or
supplement of any of the foregoing, or any replacement of any of the
foregoing; and
5.3.1.6 any termination, or acceptance of a
cancellation or termination, of any of the foregoing or of any such lease,
contract or agreement entered into prior to the Effective Date, other than
an acceptance of a cancellation or termination by the other party thereto
in accordance with the terms of such instrument.
5.3.2 In addition to and without limiting the requirement
for an acknowledgment agreement in connection with any Major Lease in the
Project in accordance with Section 8.2 below, Aetna's approval with respect
to the matters described in Section 5.3.1 above shall not be unreasonably
withheld (and, at the request of MTP-South Tower, Aetna shall not
unreasonably withhold advance approval of annual schedules of minimum
acceptable economic terms for leases at the Project); provided, however,
that Aetna shall have the right to withhold or deny such approval (whether
or not any schedule of minimum acceptable terms has previously been
approved by Aetna):
5.3.2.1 in Aetna's sole discretion, at any time a
Default exists under the Amended Loan Documents (whether or not an Event of
Default has occurred); and
5.3.2.2 in Aetna's reasonable discretion, at any
time after September 1, 2002, regardless of whether or not MTP-South Tower
is then in default.
In connection with the foregoing, approval of a lease by Aetna (including
execution of a subordination, nondisturbance and attornment agreement by
Aetna for a lease) shall constitute Aetna's approval of the capital
expenditures provided for therein.
5.4 AETNA'S DISCRETION. Except as otherwise provided herein
(e.g., for matters subject to Aetna's "reasonable discretion"), each and
every decision, election, determination, estimate, request, consent,
approval or similar matter to be made or given by Aetna from time-to-time
pursuant to or in connection with this Agreement shall, unless and until a
Default (as defined in Section 8.14.1) exists, be made or given by Aetna
acting reasonably, and shall not be unreasonably withheld, conditioned,
denied or delayed, but upon and during the existence of a Default, such
decision, election, determination, estimate, request, requirement, consent,
approval or similar matter shall be made using Aetna's sole and absolute
discretion. For purposes of this Agreement, any approval or consent
subject to Aetna's "REASONABLE DISCRETION" may be denied or withheld by
Aetna, acting reasonably, based in whole or in part on the effect (or
Aetna's reasonable belief as to the effect) of such matter on the repayment
of the Loan or the value of Aetna's collateral; provided, however, that
upon and during the existence of a Default, any such approval or consent
shall be made using Aetna's sole and absolute discretion. Any consent or
approval granted by Aetna under this Agreement or the other Amended Loan
Documents shall not constitute a waiver of the requirement for consent or
approval for subsequent matters requiring Aetna's consent or approval. In
addition, no waiver by Aetna of any condition to any obligation of Aetna
hereunder shall constitute a waiver of the requirement that such condition
be satisfied in connection with subsequent performance by Aetna. Aetna
further agrees that for purposes of exercising Aetna's reasonable approval
pursuant to Section 5.2 and Section 5.3, the standard of operation,
maintenance and repair of the Project shall remain consistent with such
standards in effect as of the date of this Agreement.
6. LOCKBOX AGREEMENT.
6.1 LOCKBOX AGREEMENT TO REMAIN IN EFFECT. The Lockbox
Agreement and all obligations of MTP-South Tower thereunder, as same are
supplemented and modified by the terms of this Agreement (including but not
limited to the provisions of Section 11.8 of this Agreement), shall remain
in full force and effect following the Effective Date until the Loan and
all other obligations of MTP-South Tower to Aetna under the Amended Loan
Documents (including but not limited to the Deferred Obligation provided
for in Section 4.2) are paid in full.
6.2 GROSS RECEIPTS IN DEPOSIT ACCOUNT. Without limiting the
generality of Section 6.1, MTP-South Tower acknowledges and agrees that all
"GROSS RECEIPTS" (as defined in the Lockbox Agreement) must continue to be
immediately deposited into Aetna's Deposit Account established pursuant to
the Lockbox Agreement, and that the direct and indirect Equity Owners of
MTP-South Tower shall be and remain personally obligated to Aetna in
connection with such matters to the extent provided for in Section 2(g) of
the Lockbox Agreement, subject to the provisions of Section 11.8. For
purposes of this Agreement, Gross Receipts shall consist of either:
6.2.1"OPERATING RECEIPTS," including (i) all cash revenues
and receipts from the operation or leasing of the Project, including rent
receipts and all other revenues from operation of the Project, interest
income, amounts released from reserves (including the Project Reserve and
the Tax and Insurance Escrow) not used for the purpose of such reserves,
property tax refunds, forfeited tenant security deposits, and lease
termination payments, and (ii) any Excluded Asset Proceeds, as provided for
in Section 8.12.3; or
6.2.2"CAPITAL RECEIPTS," including all Gross Receipts
other than Operating Receipts, including but not limited to the proceeds of
capital events with respect to MTP-South Tower or the Project, such as
financing proceeds, sale proceeds, and insurance proceeds.
6.3 APPLICATION OF LOCKBOX AGREEMENT TO PROJECT RESERVE.
6.3.1FUNDS. For purposes of this Agreement, and for
purposes of the Lockbox Agreement from and after the Effective Date,
"FUNDS" shall mean all funds from time-to-time held in the Deposit Account,
the Tax and Insurance Escrow Account and the Project Reserve.
6.3.2AUTHORITY OF AGENT. Agent shall have the same power
and authority with respect to the Project Reserve as is granted or reserved
under the Lockbox Agreement as the power and authority of Agent with
respect to the Deposit Account and the Tax and Insurance Escrow.
6.3.3LIMITATION OF RIGHTS OF MTP-SOUTH TOWER.
6.3.3.1 The provisions of Section 2(c) of the
Lockbox Agreement, which prior to the Effective Date have applied to the
Deposit Account, the Tax and Insurance Escrow and Funds on deposit in
either, are hereby supplemented and amended to also include the Project
Reserve and Funds on deposit therein, and as so supplemented and amended is
restated as follows:
(c) Until the Loan and all other sums due and owing
to Aetna have been paid in full, MTP-South Tower also agrees that MTP-South
Tower shall not, and shall have no right to, amend, terminate or modify in
any way the agreement(s) with Bank of America pertaining to the Project
Reserve, to the Tax and Insurance Escrow Account, or to the Deposit Account
or the Lockbox arrangements applicable thereto. Only persons designated by
Aetna, in its discretion, shall have the authority to make withdrawals or
disbursements from the Project Reserve, the Deposit Account and the Tax and
Insurance Escrow Account, and MTP-South Tower shall have no right to
withdraw or otherwise transfer Funds from the Project Reserve, the Deposit
Account or the Tax and Insurance Escrow Account, to close the Project
Reserve, the Deposit Account or the Tax and Insurance Escrow Account, or to
otherwise modify or exercise any authority over the Project Reserve, the
Deposit Account, the Tax and Insurance Escrow Account or any Funds on
deposit in any of them.
The foregoing shall not limit the obligation of Aetna to cause Agent to
make the disbursements provided for in Section 7.1, Section 7.2 and
Section 7.3 in accordance with the terms and conditions of this Agreement.
6.3.3.2 The provisions of Section 2(g) of the
Lockbox Agreement shall continue to apply to Section 2 of the Lockbox
Agreement, including but not limited to said Section 2(c) as amended by
Section 6.3.3.1.
6.3.4PROJECT RESERVE SECURITY AGREEMENT AND REMEDIES. In
addition to the provisions of Section 10 of the Lockbox Agreement, which
shall continue to apply with respect to the Deposit Account and the Tax and
Insurance Escrow, MTP-South Tower and Aetna agree as provided for in this
Section 6.3.4 with respect to the Project Reserve.
6.3.4.1 To the extent MTP-South Tower has any
interest in the Project Reserve or Funds on deposit therein, MTP-South
Tower hereby pledges to Aetna, and grants to Aetna a security interest in,
the Project Reserve and such Funds, as additional security for the Loan and
for the obligations of MTP-South Tower under this Agreement and the other
Amended Loan Documents. In addition to Aetna's other rights and remedies
under this Agreement, the other Amended Loan Documents and applicable law,
MTP-South Tower hereby grants Aetna all rights and remedies relating to the
Project Reserve and the Funds on deposit therein of a secured party under
the Uniform Commercial Code of the California. The foregoing grant of a
security interest is not intended to derogate from the parties' intent that
the Project Reserve and all Funds on deposit therein are and shall be the
sole property of Aetna but, rather, is intended to protect Aetna's interest
in the Project Reserve and such Funds in the event that a court, contrary
to the parties' intent, determines that MTP-South Tower has a legal or
equitable interest therein.
6.3.4.2 Concurrently with the execution and delivery
of this Agreement MTP-South Tower and Aetna shall jointly notify Bank of
America confirming Aetna's security interest in the Project Reserve and all
Funds on deposit therein, as provided for herein.
6.4 AFFIRMATION OF AETNA'S RIGHTS IN FUNDS.
6.4.1Aetna hereby confirms the designation and appointment
of Agent as Aetna's bailee for purposes of taking possession of the Funds,
and as Aetna's agent for purposes of controlling the disbursement of the
Funds, as security for the Loan and for the obligations of MTP-South Tower
under the Amended Loan Documents and for purposes of effectuating Aetna's
rights and remedies relating to the Funds. MTP-South Tower hereby confirms
MTP-South Tower's irrevocable consent and agreement to such appointment and
to Agent's actions that may be taken in that capacity in accordance with
the terms of this Agreement and the Lockbox Agreement.
6.4.2 Without limiting the rights of Aetna pursuant to the
other provisions of this Agreement, the Lockbox Agreement or the other
Amended Loan Documents, Aetna may, at, or at any time after, the occurrence
of an Event of Default, in addition to exercising any or all of its other
rights and remedies under the Amended Loan Documents, direct Agent, in
writing, to pay over to Aetna all or any part of the Funds specified by
Aetna in such written direction, without demand or notice to MTP-South
Tower. Promptly after receiving such written direction, Agent shall pay
over to Aetna all of the Funds or the part thereof specified in such
written direction, as the case may be. Aetna may, at its option, without
demand or notice, (i) setoff or recoup or otherwise apply all or any part
of the Funds so received by Aetna against all or any part of the Loan
(whether matured or unmatured), in such order and priority as Aetna may
determine, or (ii) apply all or any part of the Funds so received by Aetna
to satisfy any of the other obligations of MTP-South Tower under the
Amended Loan Documents.
6.4.3 No application of all or any part of the Funds
pursuant to this Agreement, the Lockbox Agreement or the other Amended Loan
Documents shall in any way release, satisfy or discharge any of the unpaid
Loan or other obligations of MTP-South Tower to Aetna, except to the extent
applied to the Loan or such other obligations by Aetna pursuant to this
Agreement or the other Amended Loan Documents. No delay or omission of
Aetna to exercise any of its rights or remedies shall waive, exhaust or
impair any of Aetna's rights or remedies under the Amended Loan Documents.
Notwithstanding any such delay or omission, Aetna thereafter shall have the
right, from time-to-time and as often as Aetna deems advisable, to exercise
any of its rights or remedies.
7. PROJECT COSTS.
7.1 GENERALLY. Subject to the provisions of Section 6.4.2,
following the Effective Date, disbursements for costs associated with the
Project shall be made in accordance with the following referenced
provisions:
7.1.1CONTINUING OPERATING COSTS. Each month, from
Operating Receipts (as defined in Section 6.2.1) on deposit in the Deposit
Account, Agent shall make disbursements for Approved Operating Costs, for
funding the Tax and Insurance Escrow, for Fixed Rate Interest, for funding
the Project Reserve, for disbursements to MTP-South Tower in connection
with Additional Loan Advance Repayments and Excluded Asset Proceeds, and
for principal payments on the Loan, all in accordance with Section 7.2.1
below.
7.1.2CAPITAL COSTS. As required, from amounts on deposit
in the Project Reserve, Agent shall make disbursements for Approved Capital
Costs in accordance with Section 7.3.
7.1.3PROJECT TAXES AND INSURANCE. As required, from
amounts on deposit in the Tax and Insurance Escrow, Agent shall make
disbursements for property taxes and insurance premiums for the Project in
accordance with the Lockbox Agreement.
7.1.4CAPITAL TRANSACTION COSTS. Upon the receipt of any
Capital Receipts, from such sum (which is required to be deposited in the
Deposit Account in accordance with this Agreement), Agent shall make
disbursements for Capital Transaction Costs (as defined in Section 4.1.1
above and including, without limitation, commissions, fees and other
transaction costs) associated with such Capital Receipts which MTP-South
Tower is required to bear (i.e., excluding costs paid or to be paid by
escrow agents or other third parties from amounts not delivered to
MTP-South Tower as Capital Receipts) and shall disburse the balance of such
sum for application to the outstanding principal balance of the Loan, and
any Yield Maintenance Payment associated therewith, and (on a pari passu
basis with disbursements to MTP-South Tower) any Participation Interest,
all as provided for in Section 4.5.2 above, with respect to Capital
Receipts arising out of a sale of the Project, or Section 4.1.2 above, with
respect to any other Capital Receipts.
7.2 DISBURSEMENTS FROM DEPOSIT ACCOUNT. The provisions of
Section 5(a) of the Lockbox Agreement are hereby replaced by the following
provisions of this Section 7.2.
7.2.1MONTHLY DISBURSEMENT OF OPERATING RECEIPTS. Until
the Loan and all other sums due and owing to Aetna have been paid in full,
and subject to the provisions of Section 6.4.2 above, on the first business
day of each calendar month (the "DISBURSEMENT DATE") Agent (i) shall
withdraw all good, collected funds held in the Deposit Account other than
Capital Receipts (i.e., all Operating Receipts and the proceeds of any
Additional Loan Advance funded into the Deposit Account, as provided for in
Section 7.4.5), and (ii) shall withdraw any balance in the Project Reserve
in excess of the Project Reserve Maximum Balance (as provided for in
Section 1.9.3), whereupon Agent shall remit, pay and disburse such amount
in the order of priority set forth below in this Section 7.2.1; provided,
however, that in the event that such amount on any Disbursement Date is
less than the amount required to make all of the disbursements provided for
in Section 7.2.1.1 through Section 7.2.1.6 below on such Disbursement Date,
then prior to making such disbursements, Agent shall withdraw the amount of
such deficiency from the Project Reserve to the Deposit Account and shall
include such sum in the following disbursements:
7.2.1.1 first, on the Disbursement Date of each
calendar month or at such other time as Aetna may request, to Aetna to pay
any amounts due and payable by MTP-South Tower to Aetna under the Amended
Loan Documents other than principal and interest on the Loan;
7.2.1.2 next, on the Disbursement Date of any month
if there are Excluded Asset Proceeds in the Deposit Account and MTP-South
Tower has requested such disbursement by not less than ten business days
prior written notice to Aetna indicating the nature and amount of such
Excluded Asset Proceeds, the amount of such Excluded Asset Proceeds, to
MTP-South Tower;
7.2.1.3 next, on the Disbursement Date of each
calendar month, to Agent to pay all fees and expenses of Agent (which
expenses may include, without limitation, the charges of the depository
bank or banks in which the Deposit Account, the Project Reserve and the Tax
and Insurance Reserve are maintained);
7.2.1.4 next, on the Disbursement Date of each
calendar month, to MTP-South Tower, for deposit into MTP-South Tower's
Operating Account (as defined in the Lockbox Agreement), an amount equal to
the amount of any "APPROVED OPERATING COSTS" (as defined in the Lockbox
Agreement, except that following the Effective Date, Approved Operating
Costs shall also exclude Approved Capital Costs, as defined in Section 7.3
below) for such calendar month in accordance with the notice of approval
thereof received by Agent from Aetna under Section 6 of the Lockbox
Agreement or in accordance with a budget previously approved by Aetna in
accordance with Section 5.2.1 of this Agreement (if such an approved budget
exists) -- all such amounts disbursed to MTP-South Tower under this
Section 7.2.1.4 shall be used by MTP-South Tower solely to pay Approved
Operating Costs incurred or to be incurred in the operation of the Project,
only in accordance with the approved budget therefor pursuant to Section 6
of the Lockbox Agreement or Section 5.2.1 of this Agreement, and in
accordance with MTP-South Tower's usual custom and practice for such
operating costs, and any excess of such disbursement over the amount of
such Approved Operating Costs actually paid by MTP-South Tower shall be
credited against (and reduce) the amount of the disbursement to MTP-South
Tower under this Section 7.2.1.4 for the next calendar month;
7.2.1.5 next, on the Disbursement Date of each
calendar month, to Agent, for deposit into the Tax and Insurance Escrow
Account, the sum of $267,865.54 per month (an amount equal to $158,988.21
per month with respect to property taxes and $108,877.33 per month for
insurance), or such other amount as determined in accordance with
Section 1(d) of the Lockbox Agreement;
7.2.1.6 next, to Aetna, on the Disbursement Date of
each calendar month, an amount equal to accrued unpaid Fixed Rate Interest
on the Loan;
7.2.1.7 next, on the Disbursement Date of each
calendar month, to Agent, if the balance in the Project Reserve is then
less than the Project Reserve Maximum Balance (as defined and provided for
in Section 1.9.3), for deposit into the Project Reserve to the extent
required to cause the balance in the Project Reserve to equal the Project
Reserve Maximum Balance;
7.2.1.8 next, for Disbursement Dates after
January 1, 1997, there shall be a disbursement to MTP-South Tower pursuant
to this Section 7.2.1.8 if and only if each of the following conditions has
been satisfied on such Disbursement Date:
(1) MTP-South Tower must have made one or more
Additional Loan Advance Repayments following the Effective Date, and the
aggregate amount of all such Additional Loan Advance Repayments must exceed
the aggregate amount of all prior disbursements to MTP-South Tower since
the Effective Date pursuant to this Section 7.2.1.8 (the amount of such
excess on any Disbursement Date is referred to below as the "NET REPAYMENT
AMOUNT");
(2) the outstanding principal balance of the
Loan immediately preceding any such disbursement pursuant to this
Section 7.2.1.8 must equal or be less than the applicable required Maximum
Principal Balance for the immediately following Loan Year as provided for
in Section 3.4.1 and the schedule attached as Exhibit A (e.g., on
July 1, 1998, to satisfy this condition the outstanding principal balance
must be not more than the Maximum Principal Balance required on
September 1, 1998 and applicable to the Loan Year ending August 31, 1999);
(3) the balance in the Project Reserve,
following the disbursement provided for in Section 7.2.1.7 above on such
Disbursement Date, must equal the Project Reserve Maximum Balance; and
(4) no Default must then exist by MTP-South
Tower under the Amended Loan Documents;
if each of such conditions is satisfied, then on such
Disbursement Date, from any excess amount of Operating Receipts, an amount
shall be disbursed to MTP-South Tower up to the Net Repayment Amount on
such Disbursement Date; provided, however, that the right to receive any
disbursement pursuant to this Section 7.2.1.8 shall terminate on the
earliest of (i) the Maturity of the Loan, (ii) September 1, 2003, or
(iii) the date any Deferred Obligation is created pursuant to Section 4.2
(an example of the operation of Section 3.4.1 and this Section 7.2.1.8 is
attached hereto as Exhibit C);
7.2.1.9 next, to Aetna, on the Disbursement Date of
each calendar month, the entire remaining amount, if any, of such Operating
Receipts after the disbursements provided for above in this Section 7.2.1,
to be applied to payment of the unpaid balance of the Extension Fee
provided for in Section 2.1 above, until such Extension Fee has been paid
in full; and
7.2.1.10 last, to Aetna, on the Disbursement Date of
each calendar month, the entire remaining amount, if any, of such Operating
Receipts after the disbursements provided for above in this Section 7.2.1,
to be applied to reduction of the outstanding principal balance of the
Loan.
Such priority of disbursements from Aetna's Deposit Account shall not,
however, be construed as limiting the obligation of MTP-South Tower to pay
when due any Fixed Rate Interest or other obligation, whether or not there
are sufficient funds for such purpose disbursed in accordance with the
foregoing, except for the disbursements provided for in Section 7.2.1.7
through Section 7.2.1.10, which shall each be made only to the extent of
any remaining Funds on each Disbursement Date after making the
disbursements provided for in the respective preceding provisions of this
Section 7.2.1.
7.2.2DISBURSEMENT OF CAPITAL RECEIPTS. Subject to the
provisions of Section 6.4.2, Capital Receipts shall be paid and disbursed
from the Deposit Account in accordance with Section 4.1.2 or Section 4.5.2
of this Agreement, as applicable.
7.3 DISBURSEMENT OF PROJECT RESERVE FOR APPROVED CAPITAL COSTS.
7.3.1DISBURSEMENT PROCEDURES. Subject to the provisions
of Section 6.4.2, amounts required to pay Approved Capital Costs (as
defined and provided for in Section 5.2.2.1) shall be disbursed from the
Project Reserve in accordance with the terms of this Section 7.3.1.
7.3.1.1 Such disbursements shall be made only for
capital costs which have been approved by Aetna as Approved Capital Costs
in accordance with Section 5.2.2.1.
7.3.1.2 MTP-South Tower shall have the right to
request disbursements from the Project Reserve for payment of then-due
Approved Capital Costs not more than once each month (on a date which may
be different from the Disbursement Date for Approved Operating Costs), on
not less than ten days notice to Agent and Aetna, pursuant to a
disbursement request (in form reasonably acceptable to Aetna) showing the
total amount requested and an itemized list of the Approved Capital Costs
incurred which are to be paid by MTP-South Tower from such disbursement,
accompanied by copies of invoices and other documentation (including,
without limitation, appropriate lien waivers) reasonably acceptable to
Aetna. Subject to compliance with the other requirements of this
Agreement, Aetna shall cause Agent to make each disbursement for Approved
Capital Costs in accordance with each such disbursement request within ten
days.
7.3.1.3 Each request for such disbursement shall
constitute the certification by MTP-South Tower that such costs have been
incurred and are Approved Capital Costs in accordance with this Agreement,
which certification shall be subject to the provisions of Section 11.8
below limiting the liability of MTP-South Tower and the Equity Owners of
MTP-South Tower.
7.3.1.4 Each such disbursement by Agent from the
Project Reserve for one or more items which constitute currently-due
Approved Capital Costs shall be made as a single disbursement to MTP-South
Tower, for MTP-South Tower to use to pay such Approved Capital Costs.
7.3.1.5 Except as provided for above, such
disbursements by Agent from the Project Reserve shall be in accordance with
the terms, conditions and procedures set forth in this Agreement.
7.3.2PAYMENT OF APPROVED CAPITAL COSTS. MTP-South Tower
shall cause all amounts of such disbursements from the Project Reserve to
be applied promptly to the payment of Approved Capital Costs, in full
conformity with the applicable requirements of any contractual obligations
of MTP-South Tower. Any portion of any such disbursement not so applied to
an Approved Capital Cost within thirty (30) days shall be immediately
returned by MTP-South Tower to Agent, for re-deposit in the Project
Reserve. If MTP-South Tower fails to return any such amount, then in
addition to the other rights and remedies of Aetna under the Amended Loan
Documents, such sum may be offset against any other amounts to be disbursed
to MTP-South Tower pursuant to this Agreement.
7.3.3RESPONSIBILITY. MTP-South Tower shall be solely
responsible for incurring and paying all Approved Capital Costs in
accordance with the terms of this Agreement. Neither this Agreement nor
any approval of an Approved Capital Cost or a disbursement by Aetna or
Agent shall be construed to impose on Aetna or Agent any responsibility or
liability in connection with any Approved Capital Costs or any other cost
or expense in connection with the Project, and MTP-South Tower shall
indemnify, defend and hold Aetna and Agent harmless from and against any
liability, claim, obligation, cost or expense (including, without
limitation, reasonable attorneys' fees) in connection therewith, which
indemnification covenant shall be subject to the provisions of Section 11.8
below limiting the liability of MTP-South Tower and the Equity Owners of
MTP-South Tower.
7.4 ADDITIONAL LOAN ADVANCES.
7.4.1COMMITMENT. During the period between the Effective
Date and August 31, 2003, to the extent that at any time and from time to
time the balance of Operating Receipts in the Deposit Account plus the
balance available in the Project Reserve is insufficient to allow MTP-South
Tower pay currently due Approved Operating Costs (including the maintenance
of $250,000 of working capital in MTP-South Tower's Operating Account as
provided for in the Lockbox Agreement), accrued Fixed Rate Interest on the
Loan and Approved Capital Costs, then subject to satisfaction of the
conditions set forth in Section 7.4.3 below, Aetna shall advance the amount
of such deficiency to MTP-South Tower under the Loan (an "ADDITIONAL LOAN
ADVANCE") in accordance with the terms of this Agreement.
7.4.2DRAW REQUEST. MTP-South Tower shall have the right
to request Additional Loan Advances not more than once each month (on a
date which may be different from the Disbursement Date for Approved
Operating Costs), on not less than twenty-one (21) days' prior notice to
Aetna and Agent, pursuant to a draw request (in form reasonably acceptable
to Aetna) showing the amount of Funds available in the Deposit Account and
the Project Reserve and the total amount of Approved Operating Costs, Fixed
Rate Interest and Approved Capital Costs to be paid from such Funds and the
Additional Loan Advance.
7.4.3CONDITIONS. The obligation of Aetna to make any
Additional Loan Advance shall be subject to satisfaction of each of the
following conditions:
7.4.3.1 INADEQUATE FUNDS FOR CURRENT APPROVED
OBLIGATIONS. At the time of the funding of any such Additional Loan
Advance, the aggregate balance of Funds in the Project Reserve, in the
Deposit Account and in MTP-South Tower's Operating Account must be less
than the amount required to satisfy current obligations (due not more than
thirty (30) days following the date of such Additional Loan Advance) of
MTP-South Tower for Approved Operating Costs, accrued Fixed Rate Interest
on the Loan and Approved Capital Costs. The amount of such Additional Loan
Advance shall not exceed the amount of such deficiency. Any such Approved
Operating Costs and Approved Capital Costs must have been approved (or
deemed approved) by Aetna in accordance with the terms of this Agreement
and the Lockbox Agreement.
7.4.3.2 ABSENCE OF DEFAULT. No Default shall
have occurred and be continuing under the Amended Loan Documents.
7.4.3.3 TITLE INSURANCE. The title insurance
received by Aetna on the Effective Date contains an endorsement insuring
the first lien priority of up to $100 million of any Additional Loan
Advances made by Aetna pursuant to this Agreement. To the extent said
limit is ever exceeded, then as a condition to any further Additional Loan
Advances, Aetna shall have received, on the date of such Additional Loan
Advance, an endorsement to its title insurance policy insuring that the
Amended Loan Documents secure the entire amount of such Additional Loan
Advance, with no loss of priority. MTP-South Tower shall pay all premiums
and costs in connection therewith, as Approved Operating Costs hereunder.
If required by the title insurance company in connection with such
endorsement, MTP-South Tower shall execute, acknowledge and deliver an
amendment to the Deed of Trust (in form prepared by Aetna and reasonably
approved by MTP-South Tower) confirming such priority, and MTP-South Tower
shall bear all costs of preparation and recording of any such instrument.
7.4.3.4 LIMITATION ON AMOUNT. Aetna shall only
be required to make any such Additional Loan Advance to MTP-South Tower if
and to the extent that the outstanding principal balance of the Loan on the
date of such Additional Loan Advance is and would remain (after such
principal balance increases by the amount of the Additional Loan Advance)
less than the applicable Maximum Principal Balance for such Loan Year as
provided for in Section 3.4.1 and the schedule attached hereto as
Exhibit A.
7.4.4LIMITATION. Notwithstanding any other provision of
this Agreement, Aetna shall have no obligation to fund any Additional Loan
Advance:
7.4.4.1 at any time after August 31, 2003, whether
or not a default exists under the Amended Loan Documents;
7.4.4.2 at any time a Default has occurred and is
continuing under the Amended Loan Documents, whether or not same
constitutes an Event of Default;
7.4.4.3 at any time following the repayment in full
of the Loan; or
7.4.4.4 at any time following the date any Deferred
Obligation is created pursuant to Section 4.2.
7.4.5ADVANCE BY AETNA. Aetna shall fund any Additional
Loan Advance into the Deposit Account or the Project Reserve, and upon such
funding the entire amount of the Additional Loan Advance shall be added to
the outstanding principal balance of the Loan, shall bear Fixed Rate
Interest due and payable each month following such disbursement, and shall
be, without further act, evidenced and secured by the Amended Loan
Documents. Such amounts shall thereafter be disbursed by Agent from the
Deposit Account or the Project Reserve, as applicable, in accordance with
the terms and conditions of Section 7.2.1 or Section 7.3.1, respectively.
8. ADDITIONAL COVENANTS.
8.1 NO EQUITY DISTRIBUTIONS.
8.1.1RESTRICTION. The provisions for a disbursement to
MTP-South Tower of the sum of $100,000 per month for distribution to the
Equity Owners of MTP-South Tower provided for in the Lockbox Agreement
shall terminate from and after the Effective Date. MTP-South Tower
represents and warrants to Aetna that (i) since December 1, 1994, there
have been no Equity Distributions (as defined below) except as permitted
and provided for in the Lockbox Agreement, and (ii) that there has been no
Equity Distribution by MTP-South Tower since May 18, 1995. MTP-South Tower
covenants and agrees that until the Loan and all other obligations of
MTP-South Tower to Aetna under the Amended Loan Documents have been paid in
full, MTP-South Tower shall not make any Equity Distributions. As used
herein, "EQUITY DISTRIBUTION" means any distribution of MTP-South Tower
assets to any Equity Owner of MTP-South Tower, whether or not such a
distribution is permitted under the terms of MTP-South Tower's partnership
agreement or limited liability company operating agreement, as applicable,
including but not limited to (i) repayment of any loans made by Equity
Owners to MTP-South Tower, (ii) return of or return on capital
contributions, (iii) distributions upon termination, liquidation or
dissolution of MTP-South Tower, or (iv) any development, property
management, accounting or other fees payable to an Equity Owner (unless any
such fee is in accordance with the existing "Property Management Contract"
described in the Property Manager's Agreement or is otherwise expressly
included as an Approved Operating Cost approved by Aetna in accordance with
the Lockbox Agreement); provided, however, that Equity Distributions shall
exclude distributions by MTP-South Tower to its Equity Owners of any amount
disbursed to MTP-South Tower after the Effective Date pursuant to the
provisions of (a) Section 7.2.1.2 (distribution of any Excluded Asset
Proceeds), or (b) Section 3.4.3 and Section 7.2.1.8 (disbursements in
connection with Additional Loan Advance Repayments). In the event that
MTP-South Tower or its successors or assigns is or becomes a limited
liability company, a partnership, a corporation or any other form of
entity, the foregoing provisions applicable to Equity Owners shall apply
equally to the members, partners, shareholders or other beneficial owners
of any such new entity and to the agreements providing for the organization
thereof; provided, however, that any such change in structure shall require
the prior written consent of Aetna.
8.1.2LIABILITY OF EQUITY OWNERS. In the event of any
breach by MTP-South Tower of its covenants, agreements, representations or
warranties set forth in Section 8.1.1, the amount of any Equity
Distribution made in violation of the provisions of Section 8.1.1 shall be
immediately returned and deposited into Aetna's Deposit Account, and
notwithstanding any provision of the Amended Loan Documents to the
contrary, the direct and indirect Equity Owners of MTP-South Tower (but not
(i) JMB Realty Corporation, or (ii) any shareholder of the indirect Equity
Owners of MTP-South Tower) shall be personally liable to Aetna for the
obligation to so deposit such amount, but such obligation of the Equity
Owners shall be subject to the provisions of Section 11.8 and the
provisions of the Acknowledgment and Agreement appended to this Agreement.
8.2 MAJOR LEASE ACKNOWLEDGMENT AGREEMENTS. Without limiting
Aetna's approval rights under Section 5.3, simultaneously with the
execution of any Major Lease at the Project, MTP-South Tower shall execute
and deliver to Aetna an acknowledgment agreement for the benefit of Aetna,
in form reasonably acceptable to Aetna (and similar to the existing
acknowledgment agreements executed by MTP-South Tower and IBM in connection
with the Los Angeles Unified School District and Finova Capital Corporation
leases), providing for the following:
8.2.1 confirmation of MTP-South Tower's assignment to
Aetna of all leases at the Project including the subject lease;
8.2.2 confirmation that MTP-South Tower has directed the
tenant to pay all rents and other amounts payable under the subject lease
to Aetna's Deposit Account established pursuant to the Lockbox Agreement
and this Agreement;
8.2.3 estoppel certifications by MTP-South Tower with
respect to the subject lease;
8.2.4 the agreement of MTP-South Tower to promptly give
Aetna copies of all notices which MTP-South Tower is required to give or
may give the tenant under the subject lease;
8.2.5 the agreement of MTP-South Tower to not, without the
prior written consent of Aetna, amend, modify, supplement, replace or
terminate the subject lease, or, except in accordance with the terms of
such lease, accept a cancellation or termination of the subject lease;
8.2.6 confirmation by MTP-South Tower of all closing costs
in connection with the execution and delivery of the subject lease and the
build-out of space for such tenant (including, without limitation, all
allowances, commissions, and legal fees and expenses) -- the amount of such
closing costs shall be subject to the approval of Aetna as Approved Capital
Costs in accordance with Section 5.2.2.1 and subject to disbursement and
payment in accordance with Section 7.3;
8.2.7 confirmation by MTP-South Tower of all amounts
payable to affiliates of MTP-South Tower or its Equity Owners as
commissions or other closing costs in connection with such lease;
8.2.8 confirming the agreement of MTP-South Tower to
reimburse all of Aetna's reasonable costs and expenses in connection with
such lease (and MTP-South Tower hereby agrees that MTP-South Tower shall
promptly reimburse all of Aetna's reasonable costs and expenses (including
but not limited to legal fees and expenses) in connection with any lease or
proposed lease, whether or not a proposed lease is executed and whether or
not a proposed lease is approved by Aetna) -- all such reimbursable costs
and expenses shall constitute Approved Operating Costs hereunder;
8.2.9 if such space is being terminated from the IBM lease
at the Project, IBM shall join in the execution and delivery of such
acknowledgment agreement for the benefit of Aetna, to confirm the status of
the IBM lease, to confirm the amount of closing costs being paid by IBM, to
confirm the amount and terms of any subsidy or other payments by IBM to
MTP-South Tower, to confirm any arrangement for IBM to finance any portion
of closing costs being borne by MTP-South Tower and such other matters as
Aetna may request from IBM; and
8.2.10 such additional matters as Aetna may reasonably
request.
The requirement that MTP-South Tower deliver acknowledgment agreements only
in connection with Major Leases shall not be construed to relieve MTP-South
Tower of its obligations under this Agreement and the other Amended Loan
Documents in connection with such leases which are not Major Leases.
8.3 AFFILIATE COMMISSIONS.
8.3.1 The provisions of that letter agreement Re: Leasing
Commissions dated March 21, 1995, among Aetna, MTP-South Tower LP, IBM and
MTP-Development, providing for certain restrictions on leasing commissions
payable to MTP-Development or other affiliates of MTP-South Tower or its
Equity Owners, shall terminate on the Effective Date.
8.3.2 With the consent of Aetna, prior to the Effective
Date not more than 50% of certain commissions otherwise due have been paid
to MTP-Development in connection with The Los Angeles Unified School
District lease, the Finova Capital Corporation lease, and The Boston
Consulting Group lease, as provided for in the acknowledgment agreements
executed in connection with each such lease, pursuant to which the balance
of such commissions were to be neither due nor payable until and unless the
Loan and all other obligations of MTP-South Tower have been paid in full.
As provided for in Section 1.8.2 above, Aetna has waived such restrictions
and permitted such payment on the Effective Date, and Aetna hereby agrees
that such restrictions shall not apply in connection with such commissions
payable to MTP-Development or other affiliates of MTP-South Tower in
connection with leases executed after the Effective Date in accordance with
the terms and conditions of this Agreement.
8.3.3 None of Aetna, any entity which acquires title to
the Project upon foreclosure, deed in lieu or other realization under the
Aetna Loan Documents, or their respective successors and assigns shall have
any liability or obligation to pay any portion of any commissions to
MTP-Development, or to any other entity affiliated with MTP-South Tower or
any of its Equity Owners, in connection with the Project or any lease of
premises therein.
8.4 WELLS FARGO CENTER AGREEMENTS. MTP-South Tower shall
promptly and fully perform all of its obligations under the Center
Acknowledgment Agreement described in Recital I.(5) above, and under the
"Project Agreements" provided for therein.
8.5 PROJECT MANAGEMENT AND LEASING CONTRACTS.
8.5.1PROJECT MANAGER'S AGREEMENT. As of even date
herewith MTP-Development and MTP-South Tower have entered into the Property
Manager's Agreement for the benefit of Aetna. MTP-South Tower agrees to
promptly and fully perform its obligations under the Property Manager's
Agreement, and to cause MTP-Development to promptly and fully perform its
obligations thereunder. Without limiting the generality of the foregoing,
MTP-South Tower shall be obligated to enforce the provisions of Sections 4
and 5 of the Property Manager's Agreement for the benefit of Aetna upon the
occurrence of the events provided for therein.
8.5.2TERMINATION OF MTP-DEVELOPMENT PROPERTY MANAGEMENT
CONTRACT. MTP-South Tower hereby agrees that MTP-Development's property
management contract for the Project shall terminate in the event that
MTP-Development or any successor firm is no longer controlled by, and at
least 50% beneficially owned by, one or more of the existing officers and
employees of such firm or its general partner, or their successors in such
organization, i.e., in the event of a sale or other transfer of the
business or equity interests therein, unless one or more of the officers
and employees prior to such sale or other transfer continue to control such
organization and beneficially own at least one-half of the equity interests
therein following such sale or other transfer.
8.5.3ENFORCEMENT. MTP-South Tower shall cause
MTP-Development or any other property management firm for the Project to
promptly and fully perform its obligations under the applicable property
management contract with MTP-South Tower in accordance with its terms
(including, without limitation, the existing property management contract
with MTP-Development described in the Property Manager's Agreement).
MTP-South Tower also shall cause MTP-Development or any other leasing agent
for the Project to promptly and fully perform its obligations under the
applicable leasing services agreement with MTP-South Tower in accordance
with its terms (including, without limitation, the existing agreement with
MTP-Development described in the Property Manager's Agreement).
\1996REPLACEMENT. In the event that any property
management contract or leasing services agreement for the Project expires
or is terminated (including, but not limited to the existing property
management agreement between MTP-South Tower LP and MTP-Development), then:
8.5.4.1 MTP-South Tower shall promptly hire an
unaffiliated experienced and reputable property management firm to manage
the Project or leasing agent to lease the Project, as the case may be; and
8.5.4.2 such new Project property manager or leasing
agent and property management contract or leasing services agreement shall
be subject to the prior written approval of Aetna, which approval shall not
be unreasonably withheld, conditioned or delayed.
8.6 FINANCIAL REPORTS.
8.6.1 Within one hundred twenty (120) days following the
end of each calendar year, MTP-South Tower shall provide Aetna with annual
audited financial statements of MTP-South Tower, including a balance sheet,
an income statement, a reconciliation of limited liability company capital
accounts and, if applicable, income accounts, and such other statements as
may be reasonably required by Aetna, prepared in accordance with GAAP
(defined below) consistently applied and certified as true and complete
without qualification by the independent public accountants for MTP-South
Tower. As used herein, "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be approved
by a significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
8.6.2 Within forty-five (45) days following the end of
each calendar quarter, MTP-South Tower shall deliver to Aetna the
following, certified as true and complete by an Equity Owner of MTP-South
Tower (which certification shall be subject to the provisions of
Section 11.8): (a) a rent roll for the Project, and (b) a quarterly
financial report on the Project, showing monthly and quarterly cash flow
during such quarter and including a Project balance sheet, income statement
and such other information as Aetna may reasonably require, all in form and
substance reasonably satisfactory to Aetna.
8.6.3 In addition to the financial statements and reports
which MTP-South Tower is required to provide pursuant to the preceding
provisions of this Section 8.6, MTP-South Tower shall promptly furnish to
Aetna from time-to-time such other information regarding the financial
condition of MTP-South Tower or the Project as Aetna may reasonably
request.
8.7 RIGHT TO INSPECT. Aetna and its accountants and
consultants shall have the right at any time and from time-to-time, to
inspect, review, audit and copy any and all books and records of MTP-South
Tower, including books and records related to the Project in the possession
of any manager or agent. Such records may include, without limitation, all
leases and other contracts and agreements.
8.8 ACCESS TO PROJECT AND DISSEMINATION OF INFORMATION.
MTP-South Tower hereby authorizes Aetna, any participant in the Loan, any
prospective participant, assignee or bidder at any foreclosure sale and
their respective officers, directors, employees, agents and independent
contractors to enter upon all or any portion of the Project at any time and
from time-to-time (including following the occurrence of a default) for the
purpose of conducting such tests, inspections, inquiries, examinations,
studies, analyses, samples, surveys and other information-gathering
activities (collectively, "TESTS AND STUDIES") with respect to the Project
as any of them may from time-to-time deem necessary or appropriate,
including Tests and Studies with respect to the structural integrity of
improvements, the presence of hazardous substances in or around the
Project, and the occurrence of any hazardous substances activity; provided,
however, that unless a Default then exists or Aetna has reason to believe
that a problem exists in connection with any of the foregoing matters, such
Tests and Studies shall not include drilling, boring or similar physical
invasion of the improvements at the Project. Aetna agrees that any such
entry shall be on reasonable notice to MTP-South Tower and shall be made
without unreasonable interference with the rights of tenants or the
operation of the Project. MTP-South Tower hereby covenants and agrees to
cooperate fully with such persons in their efforts to conduct Tests and
Studies, and further covenants and agrees to make available to such persons
such portions of the Project and the other collateral as any of them may
designate. The results of all Test and Studies shall be and at all times
remain the property of such persons, and under no circumstances shall any
such person have any obligation whatsoever to disclose or otherwise make
available to MTP-South Tower or any other person such results or any other
information obtained by them in connection with such Tests and Studies.
Notwithstanding the foregoing provisions of this Section 8.8, Aetna hereby
reserves the right, and MTP-South Tower hereby expressly authorizes Aetna,
to make available to any person (including any governmental agency or
authority and any prospective participant, assignee or bidder at any
foreclosure sale of the Project) any and all information which Aetna may
have with respect to the Project, whether provided by MTP-South Tower or
any other person or obtained as a result of Tests and Studies (including
environmental reports, surveys and engineering reports); provided, however,
that any such disclosure to any governmental agency or authority shall only
be to the extent required by applicable law. MTP-South Tower consents to
Aetna notifying any person (either as a part of a Notice of Sale or
otherwise) of the availability of any or all of the Tests and Studies, any
environmental reports and the information contained therein. MTP-South
Tower acknowledges that Aetna cannot control or otherwise assure the
truthfulness or accuracy of the Tests and Studies or any environmental
reports, and that the release of the Tests and Studies or any environmental
reports, or any information contained therein, to prospective bidders at
any foreclosure sale of the Project may have a material and adverse effect
upon the amount which a person may bid at such sale. MTP-South Tower
agrees that Aetna shall have no liability whatsoever as a result of
delivering any or all of the Tests and Studies and any environmental
reports or any information contained therein to any person permitted
hereby, and MTP-South Tower hereby releases, remises and forever discharges
Aetna from any and all claims, damages or causes of action arising out of,
connected with or incidental to the Tests and Studies, any environmental
reports or the delivery thereof as permitted herein; provided, however,
that Aetna shall be and remain responsible for claims, damages or causes of
action arising out of any physical damage to property or injury to persons
which occurs at the Project in the course of any such tests, inspections or
other activities conducted by Aetna or at Aetna's request pursuant to this
Section 8.8.
:\J FURTHER ASSURANCES. MTP-South Tower shall cooperate with
Aetna and shall execute and deliver, or cause to be executed and delivered,
all financing statements, payment notices and other documents and
instruments, and shall take all such other action as Aetna may reasonably
request from time-to-time in order to accomplish and satisfy the provisions
and purposes of this Agreement and the other Amended Loan Documents,
provided same do not adversely modify the rights or obligations of
MTP-South Tower under the Amended Loan Documents.
8.10 NOTICE OF LITIGATION, ETC. Promptly upon receiving notice
thereof, MTP-South Tower shall give, or cause to be given, prompt written
notice to Aetna of:
8.10.1 any action or proceeding instituted by or against
MTP-South Tower in an amount in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) in any Federal or state court or before any
commission or other regulatory body, Federal, state or local, foreign or
domestic; or
8.10.2 any such proceedings that are threatened against
MTP-South Tower which, if adversely determined, could have a material and
adverse effect upon the business, operations, property, assets, management,
nature of ownership or condition (financial or otherwise) or which would
constitute a breach or default under any of the Amended Loan Documents or
any other contract, instrument or agreement to which MTP-South Tower is a
party or by or to which MTP-South Tower or any of its assets may be bound
or subject; or
8.10.3 any other actions, proceedings or notices
materially and adversely affecting the Project (or any portion thereof) or
Aetna's interest therein.
8.11 LIENS. MTP-South Tower hereby confirms and agrees that
pursuant to the Loan Documents and the Amended Loan Documents Aetna has and
shall continue to hold first priority perfected liens on the Project and
all other property of MTP-South Tower, real and personal, tangible and
intangible, other than the Excluded Assets provided for in Section 8.12.1
and the proceeds from the Excluded Assets. On the Effective Date and at
any time and from time-to-time thereafter, MTP-South Tower shall promptly
execute, acknowledge and deliver any instrument Aetna may reasonably
request in order to evidence, confirm or perfect any such lien. Until the
Loan and all other obligations of MTP-South Tower under the Amended Loan
Documents have been fully satisfied, MTP-South Tower shall not create,
permit or suffer to exist any other lien or encumbrance on the Project or
on any other asset or property of MTP-South Tower.
8.12 EXCLUDED ASSETS.
8.12.1 WORKS OF ART. The works of art described on
the schedule attached hereto as Exhibit B and incorporated herein by
reference are owned by MTP-South Tower, but are not encumbered by Aetna's
liens. If any of the works of art described on Exhibit B are removed from
the Project, then:
8.12.1.1 MTP-South Tower shall promptly and fully
restore the portions of the Project where such work of art has been
removed; and
8.12.1.2 in the event that the Community
Redevelopment Agency of The City of Los Angeles or other applicable
governmental agency requires that such works of art be replaced, then
MTP-South Tower shall be obligated to obtain such replacements acceptable
to such agency.
The costs of any such restoration and replacements shall be borne and paid
by MTP-South Tower solely either (i) from any proceeds of the disposition
of such scheduled works of art, or (ii) from equity contributions by one or
more Equity Owners of MTP-South Tower; the Equity Owners of MTP-South Tower
other than Carlyle Real Estate Limited Partnership XIV and Carlyle Real
Estate Limited Partnership XV shall be personally liable for any failure of
MTP-South Tower to comply with the foregoing, and such liability shall be
subject to the provisions of Section 11.8 and the provisions of the
Acknowledgment and Agreement appended to this Agreement. All such
scheduled works of art and such replacements thereof shall constitute
"EXCLUDED ASSETS" for purposes of this Agreement; provided, however, that
any works of art acquired after the Effective Date using funds from Gross
Receipts shall not constitute Excluded Assets and shall be encumbered by
the liens of the Amended Loan Documents.
8.12.2 EXCESS PARKING RIGHTS. Prior to foreclosure or
other realization on the collateral encumbered by the Amended Loan
Documents, or acceptance of a deed or assignment in lieu thereof, MTP-South
Tower shall continue to have a right to transfer, by recorded covenants
burdening the Project, free of any security interest under the Amended Loan
Documents, the right to include parking capacity contained in the Project
in excess of applicable Los Angeles Municipal Code requirements for the
Project in the capacity considered in determining whether other property
has adequate parking capacity. Subject to the right of Aetna to reasonably
verify that such excess required parking capacity exists, Aetna shall join
in the execution and acknowledgment of any such covenant to evidence the
subordination of the Amended Loan Documents thereto.
8.12.3 EXCLUDED ASSET PROCEEDS. Any proceeds realized
by MTP-South Tower from (i) the disposition of works of art which
constitute Excluded Assets in accordance with Section 8.12.1, or (ii) the
sale of excess parking rights in accordance with Section 8.12.2
(collectively, "EXCLUDED ASSET PROCEEDS") shall, however, continue to be
included in Gross Receipts and must be deposited in the Deposit Account,
but such amounts shall be disbursed to MTP-South Tower in accordance with
Section 7.2.1.2.
8.13 SECURITY. The obligations of MTP-South Tower to Aetna
under this Agreement, under the Lockbox Agreement as supplemented and
modified hereby, under the Amended Note, and under the Environmental
Indemnity Agreement shall be secured by the Amended Loan Documents, and any
failure of MTP-South Tower to perform its obligations hereunder or under
the Amended Note or the Environmental Indemnity Agreement shall permit
Aetna to exercise any of its rights and remedies provided for in the
Amended Loan Documents.
8.14 DEFAULT; EVENT OF DEFAULT.
8.14.1 DEFAULT. As used herein in connection with
certain rights of Aetna under this Agreement, "DEFAULT" means either:
8.14.1.1 the occurrence and continuance of a
monetary breach or default by MTP-South Tower under this Agreement or any
of the Amended Loan Documents, following notice thereof to MTP-South Tower
but regardless of the expiration of any applicable cure period with respect
to such breach or default; or
8.14.1.2 the occurrence and continuance of any other
breach or default by MTP-South Tower under this Agreement or any of the
Amended Loan Documents, following notice thereof to MTP-South Tower and, if
there exists any cure period applicable to such default, the expiration of
such cure period.
The foregoing shall not limit any right that MTP-South Tower has under the
Amended Loan Documents or at law to cure any breach or default, within
applicable cure periods or otherwise, subject, however, to Aetna's right to
exercise its rights or remedies under this Agreement or the applicable
Amended Loan Documents or as otherwise permitted by law.
8.14.2 EVENT OF DEFAULT. The occurrence of any one or
more of the following events shall constitute an "EVENT OF DEFAULT" under
this Agreement and under each of the Amended Loan Documents:
8.14.2.1 if MTP-South Tower fails to comply with any
of the terms and conditions of this Agreement and such failure has not been
cured within five (5) business days following written notice from Aetna;
provided, however, that in the case of the failure to perform any
non-monetary obligation which cannot reasonably be cured within said five
(5) business day period, the failure to perform any such nonmonetary
obligation shall not constitute an Event of Default unless MTP-South Tower
fails to commence such cure within said five (5) business day period or
thereafter fails to proceed with diligence to cure such nonmonetary breach
within a reasonable period; or
8.14.2.2 if MTP-South Tower fails to comply with any
of the terms and conditions of any other instrument or agreement delivered
to Aetna in connection with the Project (including, without limitation, the
Acknowledgement Agreements previously executed by MTP-South Tower in
connection with The Los Angeles Unified School District Lease, the Finova
Capital Corporation Lease and The Boston Consulting Group Lease, and the
Center Acknowledgement Agreement), and such failure has not been cured
within the applicable cure period, if any, under such other instrument or
agreement; or
8.14.2.3 if an Event of Default, as defined in any
of the other Amended Loan Documents, occurs and is continuing.
Upon the occurrence of an Event of Default, Aetna shall be entitled to
exercise any and all rights and remedies available to Aetna under this
Agreement or the other Amended Loan Documents, at law, or in equity,
including but not limited to the right to accelerate the maturity of the
Loan upon an Event of Default (and upon such acceleration, all amounts due
at Maturity in accordance with Section 3.2 above, including but not limited
to any Yield Maintenance Payment and Participation Interest, shall be
immediately due and payable in full).
8.14.3 Subject to the disclaimers set forth in the
last paragraph of Section 1.1 above in the event the Effective Date does
not occur for any reason, Aetna acknowledges and confirms, as of the date
of this Agreement, that Aetna has no actual knowledge of the existence of
any defaults, any state of fact that with notice or the passage of time
would constitute a default, or any breach of any representation, by MTP-
South Tower under the Amended Loan Documents. As used in this
Section 8.14.3, the term "actual knowledge" shall mean the actual conscious
knowledge of employees of Aetna, without independent investigation or
review of Aetna's files.
9. CLOSING MATTERS.
9.1 REPRESENTATIONS AND WARRANTIES. As a material inducement
to Aetna to enter into this Agreement, MTP-South Tower hereby represents
and warrants to Aetna as follows:
9.1Default under the Amended Loan Documents, or any condition or event which
with notice or the lapse of time or both, would constitute an Event of
Default thereunder; MTP-South Tower has no rights of offset, defenses,
counterclaims, claims, or objections against Aetna with respect to the
Loan, the Amended Note, the Project, or any of the Amended Loan Documents,
or alternatively, if any and all such rights of offset, defenses,
counterclaims, claims, or objections of any nature whatsoever which
MTP-South Tower may have or claim, whether known or unknown, exist, such
claims are hereby expressly and irrevocably waived and released;
9.1.2 that the certified statement delivered by MTP-South
Tower in accordance with Section 9.2 below is true, complete and correct;
9.1.3 that the liens of Aetna under the Amended Loan
Documents on the property of MTP-South Tower described therein are valid,
perfected, binding and enforceable first liens on such property and that
there exist no other liens on any such property, other than liens for
property taxes not yet due and payable or other inchoate liens, and any
other liens shown on the title insurance policy or endorsement delivered to
Aetna at Closing in accordance with this Agreement;
9.1.4 that MTP-South Tower and its Equity Owners have
obtained all consents and permissions related to the transactions herein
contemplated and required to be obtained by MTP-South Tower or such Equity
Owners under any covenant, agreement, encumbrance, law or regulation;
9.1.5 that MTP-South Tower has the capacity and authority
to enter into this Agreement and nothing prohibits or restricts the right
or ability of MTP-South Tower to enter into this Agreement; and
9.1.6 that, without limiting the generality of the
foregoing, any necessary consent by any of the Equity Owners of MTP-South
Tower to the transactions provided for herein has been duly obtained.
The liability of MTP-South Tower and its Equity Owners in connection with
such representations and warranties shall be subject to the provisions of
Section 11.8.
9.2 CERTIFIED STATEMENT. As of the date of this Agreement,
MTP-South Tower shall execute a certified statement for the benefit of
Aetna, reflecting:
9.2.1 the rent roll for the Project, which shall include
the names of all tenants, a description of all leases and amendments, rent,
notice addresses, any outstanding landlord obligations, a statement of
whether any such defaults or disputes exist thereunder; and
9.2.2 a statement reflecting the extent of trade payables
of MTP-South Tower, real estate taxes on the Project (and the status of the
appeal thereof), leasing commissions due, if any and any other material
obligations of MTP-South Tower.
Such certified statement shall constitute representations and warranties of
MTP-South Tower, but the provisions of Section 11.8 shall apply to the
liability of MTP-South Tower and the Equity Owners of MTP-South Tower in
connection with any breach thereof or misrepresentation therein. Such
certified statement shall be transmitted to Chicago Title pursuant to the
Recording Instructions, for delivery to Aetna on the Effective Date.
9.3 TITLE INSURANCE. On the Effective Date, the Amendment to
Security Documents shall be recorded in the Official Records of Los Angeles
County, California and in connection therewith, Aetna shall receive either
a new policy of title insurance, or an endorsement of Aetna's policy of
title insurance issued in connection with the Loan, Policy No. 8148622
dated November 28, 1984 issued by Ticor Title Insurance Company, in either
case insuring that the lien of the Deed of Trust, as modified by the
Amendment to Security Documents, continues in full force and effect, with
no loss of priority, and also insuring the right of Aetna to realize on
such lien in connection with the Participation Interest provided for
herein. The title insurance company issuing such policy or endorsement,
the form of such policy or endorsement and any exceptions therein, the
terms of any reinsurance agreements and direct access agreements Aetna may
require, and the parties to any such reinsurance agreements and direct
access agreements shall all be subject to the prior written approval of
Aetna. All recording fees, title insurance premiums and other charges in
connection therewith shall be borne by MTP-South Tower, as an Approved
Operating Cost hereunder.
9.4 LEGAL OPINION. As of the date of this Agreement, MTP-South
Tower shall cause legal counsel to MTP-South Tower to execute an opinion
addressed to Aetna, in form reasonably satisfactory to Aetna and its legal
counsel, to the effect that MTP-South Tower LP has been duly organized and
is in good standing under the laws of California, that MTP-South Tower LP
has duly authorized, executed and delivered this Agreement, the Allonge,
the Environmental Indemnity Agreement, the Amendment to Security Documents
and the other instruments and agreements provided for herein to be signed
by MTP-South Tower LP, that this Agreement, the Allonge, the Environmental
Indemnity Agreement, the Amendment to Security Documents and each of the
Loan Documents modified thereby constitutes the valid and binding
obligation of MTP-South Tower LP, enforceable in accordance with its terms
(subject to customary exceptions and exclusions), and such additional
matters as Aetna may require. Such legal opinion shall be transmitted to
Chicago Title pursuant to the Recording Instructions, for delivery to Aetna
on the Effective Date.
9.5 LEGAL FEES AND COSTS. On or before the Effective Date,
MTP-South Tower shall pay all reasonable fees and expenses of Aetna's
outside counsel, and all other reasonable costs and expenses incurred by
Aetna relating to the transactions provided for herein, which amounts shall
constitute Approved Operating Costs hereunder.
10. CLOSING.
10.1 CLOSING DATE. The Closing of the transactions contemplated
herein (the "CLOSING") shall be accomplished in accordance with the
Recording Instructions to Chicago Title in Los Angeles, California,
pursuant to which, following Chicago Title's receipt of (i) fully executed
counterparts of this Agreement and the other closing documents described in
Section 10.2.1 from all parties thereto, (ii) the $2,000,000 payment
described in Section 1.7, and (iii) the confirmation from Aetna of
Investment Committee approval contemplated by Section 1.1.2 above, Chicago
Title shall, provided that Recording Instructions have not then expired or
been terminated (as provided for in the Recording Instructions),
simultaneously: (i) from said $2,000,000 payment, retain not more than
$88,880 for title insurance premiums and recording costs and disburse the
balance to Aetna, (ii) record the Amendment to Security Documents and cause
the title insurance policy or endorsement provided for in Section 9.3 to be
issued, and (iii) deliver counterparts of this Agreement and the other
closing documents to Aetna and MTP-South Tower. The date of such Closing
(i.e., such disbursement, recording and delivery) shall constitute the
"EFFECTIVE DATE" for all purposes of this Agreement. As provided for in
the Recording Instructions, if the foregoing transactions have not closed
on or before September 26, 1996, time being of the essence, any general
partner of MTP-South Tower LP or Aetna may, each acting unilaterally and
with or without cause, terminate the Recording Instructions, in which event
this Agreement and the other instruments and agreements executed as of even
date herewith shall be null and void, and no party shall have any liability
or obligations hereunder or thereunder.
10.2 CONDITIONS TO CLOSING. Prior to the expiration or sooner
termination of the Recording Instructions, as conditions precedent to the
Effective Date and to the obligations and agreements of Aetna hereunder,
the following transactions must have occurred:
10.2.1 Aetna and MTP-South Tower LP must have
delivered to Chicago Title the following instruments and agreements, duly
executed by the parties thereto:
10.2.1.1 the Recording Instructions executed by
Aetna and MTP-South Tower LP;
10.2.1.2 this Agreement executed by Aetna and
MTP-South Tower LP;
10.2.1.3 the Allonge executed by Aetna and MTP-South
Tower LP;
10.2.1.4 the Environmental Indemnity executed by
MTP-South Tower LP;
10.2.1.5 the Amendment to Security Documents
executed by MTP-South Tower LP and Aetna;
-VII.5in Section 6.3.4.2 above, executed by MTP-South Tower LP;
10.2.1.7 the Center Acknowledgement Agreement
executed by MTP-South Tower LP and the Phase I Owner (and MTP-South
Tower LP shall cause the Phase I Owner to execute and deliver the Center
Acknowledgement Agreement);
10.2.1.8 the Property Manager's Agreement executed
by MTP-South Tower LP and MTP-Development (and MTP-South Tower LP shall
cause MTP-Development to execute and deliver the Property Manager's
Agreement);
10.2.1.9 the Munger Tolles Consent described in
Recital I.(7) above executed by MTP-South Tower LP and Aetna;
10.2.1.10 the certified statement provided for in
Section 9.2 above executed by MTP-South Tower LP; and
10.2.1.11 the legal opinion provided for in
Section 9.4 above executed by legal counsel to MTP-South Tower LP (and
MTP-South Tower LP shall cause such counsel to execute such opinion).
10.2.2 Prior to the expiration or sooner termination of
the Recording Instructions, Chicago Title must have received from or on
behalf of Aetna, confirmation of the Aetna Investment Committee approval
provided for in Section 1.1.2.
10.2.3 At or prior to the Closing, MTP-South Tower must
have reimbursed Aetna for reasonable legal fees and costs in accordance
with Section 9.5 above and Section 11.10 below, as Approved Operating Costs
hereunder.
10.2.4 Unless the Recording Instructions have sooner
terminated, following receipt of all of the items described in
Section 10.2.1 and Section 10.2.2, on the Closing Date, Chicago Title, in
accordance with the Recording Instructions: (i) must have caused the
Amendment to Security Documents to be recorded in the Official Records of
Los Angeles County, California, and (ii) must have caused the title
insurance policy or endorsement provided for in Section 9.3 above to be
delivered to Aetna; MTP-South Tower shall pay all title insurance premiums,
recording fees and other charges in connection therewith, as Approved
Operating Costs hereunder.
11. MISCELLANEOUS.
11.1 NOTICES. Any notice, report, demand, request or other
instrument or communication which any party hereto may be required or may
desire to give hereunder to any other party hereto shall be in writing and
shall be deemed to have been properly given or delivered, if addressed to
the party intended to receive the same at the address of such party set
forth below, (a) when delivered at such address by hand or by overnight
courier or delivery service, or (b) three (3) business days after the same
shall have been deposited in the United States Mail as first class
registered or certified mail, return receipt requested, postage prepaid,
whether or not the same actually shall have been received by such party:
If to MTP-South Tower :
Maguire Thomas Partners-South Tower
355 South Grand Avenue, Suite 4500
Los Angeles, California 90071
Attention: Robert F. Maguire III
Fax: (213) 687-4758
and
Maguire Thomas Partners-South Tower
c/o Carlyle Real Estate Limited Partnership XIV
and Carlyle Real Estate Limited Partnership XV
c/o JMB Realty Corporation
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention: General Counsel
Fax: (312) 915-2310
with copies to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, California 90401
Attention: Paul S. Rutter, Esq.
Fax: (310) 394-4700
and
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Attention: Paul R. Walker, Esq.
Fax: (213) 627-0705
If to Aetna:
Aetna Life Insurance Company
c/o Aetna Investment Group
151 Farmington Avenue
Hartford, Connecticut 06156
Attn: Thomas A. Brome
Fax: (860) 275-2974
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street, Suite 1500
Los Angeles, California 90071
Attn: William N. Cooney, Esq.
Fax: (213) 669-6407
Any party may change the address to which any such notice, report, demand,
request or other instrument or communication intended to be received by
such party is to be delivered or mailed, by giving written notice of such
change to the other parties hereto, but no such notice of change shall be
effective against any party unless and until such notice of change shall
have been received by such party.
11.2 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision hereof may be changed, waived, released, discharged, withdrawn,
revoked or terminated orally, or by any action or inaction. In order to be
effective and enforceable, any such change, waiver, release, discharge,
withdrawal, revocation or termination must be evidenced by a written
document or instrument signed by the party against which enforcement of
such change, waiver, release, discharge, withdrawal, revocation or
termination is sought, and then shall be effective and enforceable only to
the extent specifically provided in such document or instrument.
11.3 GOVERNING LAW; SEVERABILITY. This Agreement shall be
construed, interpreted, enforced and governed by and in accordance with the
internal laws of the State of California, without regard to principles of
conflicts of laws. All rights and remedies provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate
any applicable law and are intended to be limited to the extent necessary
to avoid rendering this Agreement invalid, illegal or unenforceable. In
the event that any of the provisions of this Agreement shall be deemed
invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Agreement shall in
no way be affected, prejudiced or disturbed thereby,.
11.4 MEANING OF CERTAIN TERMS. Each reference in this Agreement
to any gender shall be deemed also to include any other gender, and the use
in this Agreement of the singular shall be deemed also to include the
plural and vice versa, unless the context requires otherwise. As used in
this Agreement, the term "PERSON" shall mean and refer to any and all
individuals, sole proprietorships, partnerships, joint ventures,
associations, trusts, estates, business trusts, limited liability
companies, corporations (non-profit or otherwise), financial institutions,
governments (and agencies, instrumentalities and political subdivisions
thereof), and other entities and organizations.
11.5 HEADINGS. The headings and captions of the Sections,
paragraphs and other subdivisions of this Agreement are for convenience of
reference only, are not to be considered part of this Agreement and shall
not limit, expand or otherwise affect any of the provisions of this
Agreement.
11.6 BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
Each reference in this Agreement to MTP-South Tower or Aetna shall be
deemed also to include the successors and assigns of such party. Nothing
set forth in this Section shall be deemed or construed to create, recognize
or allow any assignment or transfer rights not otherwise provided for in
this Agreement.
-10K EXCLUSIVE BENEFIT. This Agreement and the obligations of
Aetna and MTP-South Tower hereunder are and at all times shall be deemed to
be for the exclusive benefit of such parties and their respective
successors and permitted assigns. Nothing set forth herein shall be deemed
to be for the benefit of any other person.
11.8 NON-RECOURSE.
11.8.1 The provisions of this Section 11.8 shall
replace the provisions of Section 5.27 of the Deed of Trust, the
penultimate paragraph on the signature page of the Assignment of Rents,
Section 25 of the existing Lockbox Agreement, and any similar provisions of
the Loan Documents, the Amended Loan Documents or any other instrument or
agreement providing for or limiting the personal liability of MTP-South
Tower and its Equity Owners. Notwithstanding any other provision of the
Amended Loan Documents, with respect to any liability of MTP-South Tower
arising under this Agreement or the other Amended Loan Documents, except as
provided for below, the recourse of Aetna shall be limited to the Project
and the other assets of MTP-South Tower (other than the Excluded Assets or
the proceeds therefrom) encumbered at any time by the Amended Loan
Documents (including any collateral hereafter encumbered to secure the Loan
or the other obligations of MTP-South Tower to Aetna under the Amended Loan
Documents or any supplements thereto or amendments thereof hereafter
executed by MTP-South Tower), but neither MTP-South Tower nor the Equity
Owners of MTP-South Tower shall be personally liable for such obligations
of MTP-South Tower under this Agreement or the other Amended Loan
Documents, and no action or proceeding shall be brought by Aetna against
such Equity Owners, or such Equity Owners' other assets, for any deficiency
between the total amount of any such liability of MTP-South Tower and the
amount, if any, realized from the assets of MTP-South Tower; provided,
however, that MTP-South Tower and the direct and indirect Equity Owners of
MTP-South Tower (but not (i) JMB Realty Corporation, or (ii) any
shareholder of the indirect Equity Owners of MTP-South Tower) shall,
subject to Section 11.8.2 below, be personally jointly and severally liable
and obligated to Aetna:
11.8.1.1 for the matters provided for in
Section 2(g) of the Lockbox Agreement (as provided for in Section 6.2 and
Section 6.3.3 of this Agreement), in Section 8.1.2 and, with respect to any
Equity Owner other than Carlyle Real Estate Limited Partnership XIV and
Carlyle Real Estate Limited Partnership XV, in Section 8.12.1 above; and
11.8.1.2 for any damages suffered as a result of
fraud or misappropriation of cash or any asset (other than the Excluded
Assets) of MTP-South Tower (including, without limitation, any funds
disbursed to MTP-South Tower for payment of Approved Operating Costs or
Approved Capital Costs).
Nothing contained in this Section 11.8 shall be deemed to be a release or
impairment of the Loan or the security therefor provided by the Amended
Loan Documents, nor shall anything provided in this Section 11.8 preclude
Aetna from foreclosing (judicially or nonjudicially) or otherwise realizing
on the collateral security provided under the Amended Loan Documents, or
from obtaining a receiver as and when permitted by applicable law or
pursuant to the provisions of the Amended Loan Documents, or from bringing
any action to obtain or protect any income, revenues or other equitable
rights of Aetna arising from the Project or the other assets of MTP-South
Tower (other than the Excluded Assets), or to restrain or enjoin any action
by MTP-South Tower or its successors which would impair Aetna's security
for the Loan or would otherwise be in violation of the terms of the Amended
Loan Documents, or from enforcing any of its other rights under the Amended
Loan Documents except as provided herein.
11.8.2 Notwithstanding any other provision of the
Amended Loan Documents:
11.8.2.1 in the case of affirmative conduct of
MTP-South Tower which constitutes a breach of an applicable provision of
this Agreement or the Lockbox Agreement, or which constitutes fraud or
misappropriation as provided for above, for which the Equity Owners are
personally liable in accordance with the foregoing, the liability of any
Equity Owner shall be subject to the right of such Equity Owner to
establish (with such Equity Owner bearing burden of proof of such
assertion) that such Equity Owner neither caused such breach by MTP-South
Tower or participated in such fraud or misappropriation nor directly
received any benefit therefrom, in which event only the other Equity
Owner(s) of MTP-South Tower shall remain jointly and severally liable and
obligated to Aetna;
11.8.2.2 the Equity Owners of MTP-South Tower
shall not be liable to Aetna for punitive damages or consequential damages
under the provisions of this Section 11.8, and their liability shall be
limited to Aetna's actual damages;
11.8.2.3 in connection with any liability of
MTP-South Tower to Aetna, Aetna shall have no recourse to (and the Equity
Owners of MTP-South Tower shall have no liability to Aetna under) any
(i) deficit capital account or deficit make up obligation of any such
Equity Owner, (ii) claims against such Equity Owners by MTP-South Tower,
(iii) claims or obligations among such Equity Owners, or (iv) the Excluded
Assets; and
11.8.2.4 in the event Wells Fargo Bank or its
nominee succeeds to the interest of Carlyle Real Estate Limited
Partnership XIV or Carlyle Real Estate Limited Partnership XV in MTP-South
Tower, the liability of such successor under this Section 11.8, except for
any liability under Section 11.8.1.2 caused by such successor, shall be
limited to its interest in MTP-South Tower.
11.8.3 The general partners of MTP-South Tower LP,
together with certain indirect general partners of Maguire Partners-Bunker
Hill, Ltd., one of the general partners of MTP-South Tower LP, have
executed the Acknowledgment and Agreement appended to this Agreement in
order to evidence certain acknowledgements and agreements concerning their
liabilities and obligations set forth or provided for in this Section 11.8,
subject to the limitations provided for in Section 11.8.2 above, and the
rights of Aetna in connection therewith. Such liabilities and obligations
shall survive the Effective Date and shall survive the formation of
MTP-South Tower LLC, as such direct and indirect general partners of
MTP-South Tower LP will be direct and indirect members of MTP-South
Tower LLC. The provisions of said Acknowledgment and Agreement are
incorporated by reference into this Section 11.8.
11.9 NO MORTGAGEE IN POSSESSION; NO JOINT VENTURE. MTP-South
Tower agrees that neither Aetna nor Agent is a mortgagee in possession with
respect to the Project and that this Agreement does not create any
obligation on the part of Aetna or Agent to manage or operate the Project
or give Aetna or Agent any control over the Project; it being agreed that
the obligation to manage and operate and the right to control the Project
remains with MTP-South Tower. The relationship between Aetna and MTP-South
Tower is that of creditor and debtor and not that of partners or joint
venturers. MTP-South Tower agrees that neither Aetna nor Agent shall have
any fiduciary obligations or trust obligations with respect to managing or
operating the Project.
11.10 LEGAL FEES AND EXPENSES. MTP-South Tower shall be
obligated to reimburse all of the reasonable legal fees and expenses of
O'Melveny & Myers LLP, counsel to Aetna, in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
transactions provided for herein, the review of any proposed lease or other
matter submitted for approval by Aetna (whether or not such lease is
approved) and the preparation and negotiation of instruments in connection
therewith, and any breach or default by MTP-South Tower under the Amended
Loan Documents (including advice to Aetna with respect to its rights and
remedies thereunder). Such reimbursement obligations may be satisfied out
of Gross Receipts as Approved Operating Costs.
11.11 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties concerning the matters provided for herein,
and all prior or contemporaneous understandings, oral representations or
agreements had among the parties with respect to such matters are merged in
this Agreement. All prior written agreements executed by MTP-South Tower
and Aetna, as same may be supplemented and modified by this Agreement,
shall remain in effect; provided, however, that this Agreement replaces
that term sheet captioned "Binding Letter Agreement" executed by Aetna and
MTP-South Tower on December 29, 1995.
11.12 AUTHORITY. Each party executing this Agreement represents
that such party has the full authority and legal power to do so and
acknowledges that it was represented by counsel in the negotiation and
execution of this Agreement.
11.13 CONSTRUCTION. Except for specific provisions of this
Agreement that expressly amend specific provisions of the existing Loan
Documents, or for provisions of this Agreement which are contradictory to
provisions of the existing Loan Documents, it is the intention of the
parties that the provisions of this Agreement are in addition to, and
supplement, the provisions of the existing Loan Documents, which shall
continue to apply. To the extent of any conflict, however, the terms of
this Agreement shall govern and control over the terms of the existing Loan
Documents.
11.14 RATIFICATION. The Loan Documents, as supplemented,
modified and amended by this Agreement, the Allonge, the Amendment to
Security Documents and the Environmental Indemnity Agreement, shall remain
in full force and effect and are hereby ratified and affirmed in all
respects by Aetna and MTP-South Tower.
11.15 COUNTERPARTS. This Agreement, including the Acknowledgment
and Agreement appended hereto, may be executed in one or more counterparts,
each of which shall be deemed to be an original and all of which shall be
deemed to be one and the same Agreement.
WITNESS the execution of this Modification and Extension
Agreement by Aetna and MTP-South Tower as of the date first written above.
Aetna:
AETNA LIFE INSURANCE COMPANY, a Connecticut
corporation
By: ____________________________
Assistant Vice President
MTP-South Tower:
MAGUIRE/THOMAS PARTNERS-SOUTH TOWER, a
California limited partnership
By: MAGUIRE PARTNERS-BUNKER HILL, LTD., a
California limited partnership, General
Partner
By: MAGUIRE PARTNERS BGHS, LLC, a
California limited liability company,
Managing General Partner
By: MAGUIRE PARTNERS SCS, INC., a
California corporation, Manager
By: ________________________
Robert F. Maguire III
Chairman
By: MAGUIRE/THOMAS PARTNERS, INC., a
California corporation, General Partner
By: ________________________
Robert F. Maguire III
Chairman
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited
partnership, General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation
Its general partner
By: _________________________
Title:
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XV, an Illinois limited
partnership, General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
Its general partner
By: _________________________
Title:
ACKNOWLEDGEMENT AND AGREEMENT
THIS ACKNOWLEDGEMENT AND AGREEMENT is executed by MAGUIRE
PARTNERS-BUNKER HILL, LTD., a California limited partnership ("MPBH"),
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV, an Illinois limited
partnership ("Carlyle 14"), CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XV, an
Illinois limited partnership ("CARLYLE 15"), MAGUIRE PARTNERS BGHS, LLC, a
California limited liability company ("MPB"), MAGUIRE PARTNERS SCS, INC., a
California corporation ("MPS"), and MAGUIRE/THOMAS PARTNERS, INC., a
California corporation ("MTP"), each as an "ACKNOWLEDGING PARTY" herein, in
favor of AETNA LIFE INSURANCE COMPANY, a Connecticut corporation ("AETNA").
A. MPBH, Carlyle 14 and Carlyle 15 are the only general
partners in Maguire/Thomas Partners-South Tower, a California limited
partnership ("MTP-SOUTH TOWER LP"), MPB and MTP are the only general
partners of MPBH, and MPS is the Manager of MPB.
B. As provided for in the foregoing Modification and Extension
Agreement (the "MODIFICATION AGREEMENT") between Aetna and MTP-South
Tower LP to which this Acknowledgment and Agreement is appended, and in the
Lockbox Agreement referred to therein, each of the Acknowledging Parties,
as direct and indirect general partners in MTP-South Tower LP, has certain
liability to Aetna as described and provided for in Section 11.8.1.1 and
Section 11.8.1.2 of the Modification Agreement, subject, however, to the
provisions of Section 11.8.2 of the Modification Agreement.
C. As provided for in the Modification Agreement, the
Acknowledging Parties plan to cause a limited liability company to be
formed under California law, to be named Maguire Thomas Partners-South
Tower, LLC ("MTP-SOUTH TOWER LLC"), and to cause MTP-South Tower LLC to
succeed by operation of law to all of the assets of and liabilities of
MTP-South Tower LP (including, without limitation, the Project, as defined
in the Modification Agreement) and to all of the liabilities of MTP-South
Tower LP and will assume, subject to the provisions of Section 11.8 of the
Modification Agreement, the obligations of MTP-South Tower LP under the
Modification Agreement and the other Amended Loan Documents (as defined in
the Modification Agreement).
D. Because under California law the direct and indirect members
of a limited liablity company do not have the same personal liability for
the obligations of the limited liability company as the direct and indirect
general partners have for the obligations of a limited partnership, the
Acknowledging Parties are executing this Acknowledgment and Agreement to
evidence and affirm their continuing liability to Aetna for the matters
provided for in Section 11.8 of the Modification Agreement notwithstanding
their formation of a limited liability company in which they will be the
direct and indirect members, and notwithstanding the transactions by that
limited liability company described in Recital C above.
IN CONSIDERATION of the foregoing recitals and the covenants and
agreements set forth in the Modification Agreement, and to induce Aetna to
execute and deliver the Modification Agreement and to consent to the
formation of MTP-South Tower LLC to own the Project (as defined in the
Modification Agreement), each Acknowledging Party agrees as follows for the
benefit of Aetna:
1. Initially capitalized terms used in this Acknowledgement and Agreement
without definition are defined in the Modification Agreement.
2. (a) For purposes of this Acknowledgement and Agreement, the term
"ACKNOWLEDGED OBLIGATIONS" means the matters for which each Acknowledging
Party and all of them are personally jointly and severally liable to Aetna
as described and provided for in Section 11.8.1.1 and Section 11.8.1.2 of
the Modification Agreement, subject, however, to the provisions of
Section 11.8.2 of the Modification Agreement, and the provisions of
Section 11.8 of the Modification Agreement are incorporated by reference
herein.
(b) Each Acknowledging Party hereby acknowledges and agrees that it
is and shall remain, notwithstanding the formation of MTP-South Tower LLC,
until the Loan and all other obligations of MTP-South Tower LP and
MTP-South Tower LLC (collectively, or either of them, "MTP-SOUTH TOWER")
under the Modification Agreement and the other Amended Loan Documents have
been paid in full, jointly and severally liable to Aetna for the
Acknowledged Obligations.
3. Each Acknowledging Party waives any and all other rights and defenses
available to such Acknowledging Party against Aetna by reason of Sections
2787 to 2855, inclusive, of the California Civil Code. Notwithstanding the
foregoing, the Acknowledging Parties do not waive any rights and defenses
available to such Acknowledging Parties by reason of Sections 2787 to 2855
against the other Acknowledging Parties, provided, however, that each such
Acknowledging Party does hereby subordinate each and all of such rights and
defenses to the rights of Aetna against each of the Acknowledging Parties
until such time as all obligations of MTP-South Tower to Aetna under the
Modification Agreement and the other Amended Loan Documents have been fully
satisfied. No other provision of this Acknowledgement and Agreement shall
be construed as limiting the generality of any of the covenants and waivers
set forth in this Section 3.
4. Each Acknowledging Party represents and warrants to Aetna that it is a
direct or indirect general partner in MTP-South Tower LP. In that regard,
each Acknowledging Party agrees that it will substantially benefit from the
transactions with Aetna being entered into concurrently herewith pursuant
to the Modification Agreement, and from the organization of MTP-South
Tower LLC to own the Project as provided for herein, and each Acknowledging
Party further agrees as follows:
(a) Each Acknowledging Party shall continue to be liable under this
Acknowledgement and Agreement and the provisions hereof shall remain in
full force and effect notwithstanding (i) the formation of MTP-South
Tower LLC and the transactions described in Recital C above, and any
modification, agreement or stipulation between MTP-South Tower and Aetna,
or their respective successors and assigns, with respect to the
Modification Agreement or the other Amended Loan Documents or the
obligations encompassed thereby, including, without limitation, the
Acknowledged Obligations, (ii) Aetna's waiver of or failure to enforce any
of the terms, covenants or conditions contained in the Modification
Agreement or the other Amended Loan Documents or in any modification
thereof, (iii) any discharge or release of MTP-South Tower or any other
Acknowledging Party from any liability with respect to the Acknowledged
Obligations, (iv) any discharge, release, exchange or subordination of any
real or personal property then held by Aetna as security for the
performance of the obligations of MTP-South Tower under the Modification
Agreement or the other Amended Loan Documents (including, but not limited
to, the Acknowledged Obligations), (v) any additional security taken for
the obligations of MTP-South Tower under the Modification Agreement or the
other Amended Loan Documents (including, but not limited to, the
Acknowledged Obligations), whether real or personal property, (vi) any
additional loans or financial accommodations to MTP-South Tower, and
(vii) the manner or order by which payments are applied to principal,
interest or other obligations under the Modification Agreement or the other
Amended Loan Documents. Without limiting the generality of the foregoing,
each Acknowledging Party hereby waives the rights and benefits under
California Civil Code ("CC") Section 2819, and agrees that by doing so such
Acknowledging Party's liability shall continue even if Aetna alters any
obligations under the Modification Agreement or the other Amended Loan
Documents in any respect or Aetna's remedies or rights against MTP-South
Tower or any other Acknowledging Party are in any way impaired or suspended
without such Acknowledging Party's consent.
(b) No provision of this Acknowledgment and Agreement shall be deemed
to preclude Aetna, in any action between Aetna and MTP-South Tower
(including, but not limited to, an action for judicial foreclosure), from
joining any Acknowledging Party in such action to enforce obligations for
the Acknowledged Obligations provided for herein.
(c) Each Acknowledging Party's liability under this Acknowledgement
and Agreement shall continue until all sums due under the Amended Note have
been paid in full and until all obligations of MTP-South Tower to Aetna
under the Modification Agreement and the other Amended Loan Documents
(including, but not limited to, the Acknowledged Obligations) have been
fully satisfied.
(d) Each Acknowledging Party represents and warrants to Aetna that it
now has and will continue to have full and complete access to any and all
information concerning the transactions contemplated by the Modification
Agreement and the other Amended Loan Documents or referred to therein.
Each Acknowledging Party further represents and warrants that it has
reviewed and approved copies of the Modification Agreement and the other
Amended Loan Documents and is fully informed of the remedies Aetna may
pursue, with or without notice to MTP-South Tower, in the event of default
under the Amended Note, the Modification Agreement or the other Amended
Loan Documents.
(e) The liability of each Acknowledging Party under this
Acknowledgement and Agreement is personal liability for the Acknowledged
Obligations and is not a guaranty of repayment or collectibility and is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Modification Agreement or the other Amended Loan
Documents, or other instruments relating to the creation or performance of
the obligations of MTP-South Tower under the Modification Agreement or the
other the Amended Loan Documents (including, but not limited to, the
Acknowledged Obligations), or the pursuit by Aetna of any remedies which it
now has or may hereafter have with respect thereto under the Modification
Agreement or the other Amended Loan Documents, at law, in equity or
otherwise. Each Acknowledging Party hereby waives any and all benefits and
defenses under CC Section 2810 and agrees that by doing so Acknowledging
Party shall be liable even if MTP-South Tower had no liability at the time
of execution of the Modification Agreement or any of the other Amended Loan
Documents or thereafter ceases to be liable. Each Acknowledging Party
hereby waives any and all benefits and defenses under CC Section 2809 and
agrees that by doing so such Acknowledging Party's liability may be larger
in amount and more burdensome than that of MTP-South Tower. Each
Acknowledging Party's liability hereunder shall not be limited or affected
in any way by any impairment or any diminution or loss of value of any
security or collateral for the Loan, whether caused by hazardous substances
or otherwise, Aetna's failure to perfect a security interest in such
security or collateral, or any disability or other defense of MTP-South
Tower.
5. Each Acknowledging Party hereby waives to the extent permitted by law:
(i) all notices to Acknowledging Party, to MTP-South Tower, or to any other
Person, including, but not limited to, notices of the acceptance of this
Acknowledgement and Agreement or the creation, renewal, extension,
modification, accrual of any of the obligations of MTP-South Tower under
the Modification Agreement or the other Amended Loan Documents (including,
but not limited to, the Acknowledged Obligations) owed to Aetna and, except
to the extent set forth in Section 7 hereof, enforcement of any right or
remedy with respect thereto, and notice of any other matters relating
thereto; (ii) diligence and demand of payment, presentment, protest,
dishonor and notice of dishonor; (iii) any statute of limitations affecting
such Acknowledging Party's liability hereunder or the enforcement thereof;
and (iv) all principles or provisions of law which conflict with the terms
of this Acknowledgement and Agreement.
6. Notwithstanding anything to the contrary, Aetna hereby acknowledges
that nothing contained herein shall be deemed or construed as a waiver by
any of the Acknowledging Parties of any rights or defenses arising under
California "one-action" laws or anti-deficiency legislation, including,
without limitation any and all benefits and defenses under (i) California
Code of Civil Procedure ("CCP") Section 580a, (ii) CCP Sections 580b and
580d, and (iii) CCP Section 726.
7. Any notice, report, demand, request or other instrument or
communication which any party hereto may be required or may desire to give
hereunder to any other party hereto shall be in writing and shall be deemed
to have been properly given or delivered, if addressed to the party
intended to receive the same at the address of such party set forth below,
(a) when delivered at such address by hand or by overnight courier or
delivery service, or (b) three (3) business days after the same shall have
been deposited in the United States Mail as first class registered or
certified mail, return receipt requested, postage prepaid, whether or not
the same actually shall have been received by such party:
(a) If to Carlyle 14 or Carlyle 15:
c/o JMB Realty Corporation
900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention: General Counsel
Fax: (312) 915-2310
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Attention: Paul R. Walker, Esq.
Fax: (213) 627-0705
(b) If to MPBH, MPB, MTP or MPS:
c/o Maguire Thomas Partners
355 South Grand Avenue, Suite 4500
Los Angeles, California 90071
Attention: Robert F. Maguire III
Fax: (213) 687-4758
with a copy to:
Gilchrist & Rutter Professional Corporation
1299 Ocean Avenue, Suite 900
Santa Monica, California 90401
Attention: Paul S. Rutter, Esq.
Fax: (310) 394-4700
(c) If to Aetna, to the addresses for Aetna set forth in the
Modification Agreement.
Any Acknowledging Party may change any address to which any such
notice, report, demand, request or other instrument or communication
intended to be received by such party is to be delivered or mailed, by
giving written notice of such change to Aetna, but no such notice of change
shall be effective against Aetna unless and until such notice of change
shall have been received by Aetna. Aetna may change any address to which
any such notice, report, demand, request or other instrument or
communication intended to be received by Aetna is to be delivered or
mailed, by giving written notice of such change to MTP-South Tower in
accordance with the Modification Agreement, but no such notice of change
shall be effective against any Acknowledging Party unless and until such
notice of change shall have been received by MTP-South Tower.
8. Aetna may assign the Modification Agreement or the other Amended Loan
Documents, without in any way affecting Acknowledging Party's liability
hereunder. This Acknowledgement and Agreement shall be binding upon each
Acknowledging Party, and the respective heirs, representatives,
administrators, executors, successors and assigns of each of them, and
shall inure to the benefit of and shall be enforceable by Aetna, its
successors, endorsees and assigns. As used herein, the singular shall
include the plural, and the masculine shall include the feminine and neuter
and vice versa, if the context so requires.
9. In the event of any dispute or litigation regarding the enforcement or
validity of this Acknowledgement and Agreement, each Acknowledging Party
shall be obligated to pay all charges, costs and expenses (including,
without limitation, reasonable attorneys' fees) incurred by Aetna, whether
or not any action or proceeding is commenced regarding such dispute and
whether or not such litigation is prosecuted to judgment.
10. THIS ACKNOWLEDGEMENT AND AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
11. No provision of this Acknowledgement and Agreement may be changed,
waived, revoked or amended without Aetna's prior written consent. Every
provision of this Acknowledgement and Agreement is intended to be
severable. In the event any term or provision hereof is declared to be
illegal or invalid for any reason whatsoever by a court of competent
jurisdiction, such illegality or invalidity shall not affect the balance of
the terms and provisions hereof, which terms and provisions shall remain
binding and enforceable, subject to the limitations set forth in
Section 11.8 of the Modification Agreement.
12. This Acknowledgement and Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of
which shall be deemed to be one and the same agreement.
13. This Acknowledgement and Agreement embodies the entire agreement among
the parties hereto with respect to the matters set forth herein, and
supersedes all prior agreements among the parties with respect to the
matters set forth herein. No course of prior dealing among the parties, no
usage of trade, and no parol or extrinsic evidence of any nature shall be
used to supplement, modify or vary any of the terms hereof. There are no
conditions to the full effectiveness of this Acknowledgement and Agreement.
No failure or delay on the part of Aetna to exercise any power, right or
privilege under this Acknowledgement and Agreement, or under the
Modification Agreement or the other Amended Loan Documents, shall impair
any such power, right or privilege, or be construed to be a waiver of any
default or an acquiescence therein, nor shall any single or partial
exercise of such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
14. EACH ACKNOWLEDGING PARTY ACKNOWLEDGES THAT SUCH ACKNOWLEDGING PARTY
HAS BEEN AFFORDED THE OPPORTUNITY TO READ THIS DOCUMENT CAREFULLY AND TO
REVIEW IT WITH AN ATTORNEY OF ACKNOWLEDGING PARTY'S CHOICE BEFORE SIGNING
IT. EACH ACKNOWLEDGING PARTY ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE
MEANING AND EFFECT OF THIS DOCUMENT BEFORE SIGNING IT.
IN WITNESS WHEREOF, each Acknowledging Party has executed this
Acknowledgement and Agreement as of the date of the Modification Agreement
first above written.
MAGUIRE PARTNERS-BUNKER HILL, LTD., a
California limited partnership
By: MAGUIRE PARTNERS BGHS, LLC, a California
limited liability company, Managing General
Partner
By: MAGUIRE PARTNERS SCS, INC., a
California corporation, Manager
By: ________________________
Robert F. Maguire III
Chairman
By: MAGUIRE/THOMAS PARTNERS, INC., a
California corporation, General Partner
By: ________________________
Robert F. Maguire III
Chairman
MAGUIRE PARTNERS BGHS, LLC, a California
limited liability company
By: MAGUIRE PARTNERS SCS, INC., a California
corporation, Manager
By: ________________________
Robert F. Maguire III
Chairman
MAGUIRE PARTNERS SCS, INC., a California
corporation
By: ________________________
Robert F. Maguire III
Chairman
MAGUIRE/THOMAS PARTNERS, INC., a California
corporation
By: ________________________
Robert F. Maguire III
Chairman
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV,
an Illinois limited partnership
By: JMB REALTY CORPORATION, a Delaware
corporation, general partner
By: _________________________
Title:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XV,
an Illinois limited partnership
By: JMB REALTY CORPORATION, a Delaware
corporation, general partner
By: _________________________
Title:
EXHIBIT A
---------
Schedule of Maximum Permitted Amortized Loan Balance
Principal Balance on the date of this Agreement: $189,060,308
Adjustment Date: *Maximum Principal Balance: During Loan Year:
n/a $189,060,308* Effective Date to
8/31/97
September 1, 1997 $187,966,923* 9/1/97 to 8/31/98
September 1, 1998 $186,873,538* 9/1/98 to 8/31/99
September 1, 1999 $185,780,154* 9/1/99 to 8/31/00
September 1, 2000 $184,686,769* 9/1/00 to 8/31/01
September 1, 2001 $183,595,385* 9/1/01 to 8/31/02
September 1, 2002 $182,500,000* 9/1/02 to 8/31/03
* The amount of the Maximum Principal Balance for every Loan Year
shall be reduced by the amount of any principal payments by MTP-South Tower
following the Effective Date, other than: (i) principal payments made from
monthly disbursements of Operating Receipts, as provided for in
Section 7.2.1.10, (ii) Additional Loan Advance Repayments in accordance
with Section 3.4.1, or (iii) principal payments made from the proceeds of
condemnation awards or insurance recoveries, as provided for in
Section 4.1.2.2. Such reduction of the Maximum Principal Balance for the
current and each subsequent Loan Year shall become effective immediately
upon receipt of any such principal payment.
Exhibit B
---------
SCHEDULE OF WORKS OF ART EXCLUDED FROM AETNA'S LIENS
Night Sail (1985)
Louise Nevelson (1900-1989) aluminum and steel sculpture located
in plaza area near entrance to building;
together with the following sculptures to the extent, if any, that
such works of art are located at the Project (some or all of these may be
located on the adjacent property of the Phase I Owner):
Work: Artist:
La Caresse d'un Oiseau Miro
Le Dandy Dubuffet
Four Female Figures Graham
Sequi Graves
Light Touches Fall Color Wile
Lock Down Aonoldi
Sawtooth Obulick
Exhibit C
---------
EXAMPLE
Additional Loan Advance Repayments and Disbursements to MTP-South Tower
1. Assume an Additional Loan Advance of $2,000,000 by Aetna during
the Loan Year ending August 31, 1999. If on September 1, 1999, the unpaid
principal balance of the Loan was $1,025,000 less than the Maximum
Principal Balance provided for in Exhibit A, and no partial payments of
principal have been made to reduce the Maximum Principal Balance in
accordance with Exhibit A, then an Additional Loan Repayment of $1,025,000
would be due pursuant to Section 3.4.1 (the lesser of (i) the $2,000,000
Additional Loan Advance during the Loan Year ending August 31, 1999 plus
zero in disbursements to MTP-South Tower pursuant to Section 7.2.1.8 during
that Loan Year, or (ii) the $1,025,000 by which the principal balance of
the Loan exceeded the Maximum Principal Balance for that date shown on
Exhibit A). As a result of such payment, the principal balance of the Loan
would be reduced to an amount equal to the applicable Maximum Principal
Balance on September 1, 1999 pursuant to Exhibit A.
2. Assume that thereafter during the subsequent Loan Year ending
August 31, 2000, Operating Receipts disbursed pursuant to Section 7.2.1
were sufficient to restore the Project Reserve Maximum Balance by
February 1, 2001 (by disbursements pursuant to Section 7.2.1.7).
Thereafter, no amounts would be disbursed to MTP-South Tower pursuant to
Section 7.2.1.8 until disbursements to Aetna pursuant Section 7.2.1.10
reduced the principal balance of the Loan to the Maximum Principal Balance
shown on Exhibit A for the next following Adjustment Date,
September 1, 2001.
3. Assume that such disbursements to Aetna pursuant
Section 7.2.1.10 reduced the principal balance of the Loan to less than
said sum on June 1, 1999.
4. If on July 1, 2001, following the disbursements provided for in
Sections 7.2.1.1 through 7.2.1.7 on said date, the sum of $500,000 remained
available for disbursement, then absent the failure of the applicable
conditions precedent, such entire sum would be disbursed to MTP-South Tower
pursuant to Section 7.2.1.8 (as such sum is less than the aggregate amount
of Additional Loan Advance Repayments, $1,025,000, minus the aggregate
amount of previous disbursements to MTP-South Tower pursuant to
Section 7.2.1.8, zero).
5. If on August 1, 2001, following the disbursements provided for
in Sections 7.2.1.1 through 7.2.1.7 on said date, the sum of $600,000
remained available for disbursement, then absent the failure of the
applicable conditions precedent, $525,000 would be disbursed to MTP-South
Tower pursuant to Section 7.2.1.8 (an amount equal to the aggregate amount
of Additional Loan Advance Repayments, $1,025,000, minus the aggregate
amount of previous disbursements to MTP-South Tower pursuant to
Section 7.2.1.8, $500,000), and the excess ($75,000) would be disbursed to
Aetna pursuant to Section 7.2.1.10.
6. Assume that on August 15, 2001, Aetna makes an Additional Loan
Advance equal to $3,000,000, causing the principal balance of the Loan to
increase on said date. On September 1, 2001, an Additional Loan Repayment
would be due pursuant to Section 3.4.1 (the lesser of (i) the $3,000,000
Additional Loan Advance during the preceding Loan Year ending
August 31, 2001 plus $1,025,000 in disbursements to MTP-South Tower
pursuant Section 7.2.1.8 to during that Loan Year, or (ii) the amount by
which the actual principal balance of the Loan exceeded the Maximum
Principal Balance for September 1, 2001 shown on Exhibit A).
EXHIBIT D
---------
FORM OF MTP-SOUTH TOWER LLC ACKNOWLEDGMENT
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
Attn: William N. Cooney
File No. 8,750-102
Space Above Line for Recorder's Use
AMENDMENT TO DEED OF TRUST
AND
ACKNOWLEDGEMENT AGREEMENT
THIS AGREEMENT is made as of ___________, 1996, by MAGUIRE
THOMAS PARTNERS-SOUTH TOWER, LLC, a California limited liability company
("MTP-South Tower LLC") which is the successor by operation of law to
Maguire/Thomas Partners-South Tower, a California limited partnership
("MTP-South
Tower LP"), whose place of business is 355 South Grand Avenue, Suite 4500,
Los
Angeles, California 90071, Attn: Mr. Robert F. Maguire III, Chairman,
Maguire Thomas
Partners, in favor of AETNA LIFE INSURANCE COMPANY, a Connecticut
corporation
("Aetna") whose place of business is 242 Trumbull Street, 4th Floor,
Hartford,
Connecticut 06103, Attn.: Mr. Thomas A. Brome, Investment Officer, Aetna
Investment
Group.
A. Aetna is the holder of that indebtedness of MTP-South
Tower LP
(the "LOAN") evidenced and secured by, among other instruments and
agreements:
(1) that $200,000,000 Promissory Note dated
November 26, 1984
(as at any time heretofore amended, extended, restated or replaced, the
"NOTE"), by
MTP-South Tower LP (then known as Maguire Partners - Crocker Properties -
South
Tower) payable to the order of The Aetna Casualty and Surety Company, a
Connecticut
corporation ("AETNA CASUALTY AND SURETY");
(2) that Deed of Trust, Assignment of Rents and Security
Agreement dated as of November 26, 1984, (as at any time heretofore
amended, extended,
restated or replaced, the "DEED OF TRUST"), by MTP-South Tower LP (then
known as
Maguire Partners - Crocker Properties - South Tower), as Trustor, to Ticor
Title Insurance
Company of California, as Trustee, for the benefit of Aetna Casualty and
Surety, as
Beneficiary, and recorded November 28, 1984 as Instrument Number 84-1399775
in the
Official Records of Los Angeles County, California;
(3) that California Assignment of Rents and Leases dated
as of
November 26, 1984 (as at any time heretofore amended, extended, restated or
replaced,
the "ASSIGNMENT OF RENTS"), by MTP-South Tower LP (then known as Maguire
Partners - Crocker Properties - South Tower), as assignor, to Aetna
Casualty and Surety,
as assignee, and recorded November 28, 1984 as Instrument Number 84-1399776
in the
Official Records of Los Angeles County, California (Aetna Casualty and
Surety assigned
and transferred its interest under the Deed of Trust and the Assignment of
Rents to Aetna
pursuant to that Assignment dated October 29, 1986 and recorded on
December 4, 1986 as
Instrument Number 86-1676563 in the Official Records of Los Angeles County,
California.); and
(4) that Lockbox Agreement dated as of December 1, 1994
(as
heretofore supplemented and amended, the "LOCKBOX AGREEMENT"), among
MTP-South Tower LP, Aetna and CB Commercial Real Estate Group, Inc., as
Agent for
Aetna.
B. The Deed of Trust encumbers, with first lien priority, that
improved real
property in Los Angeles, California more particularly described in
Exhibit A to the Deed
of Trust (the "PROPERTY"), which improvements include, without limitation,
the
45-story office building project now known as the "IBM Tower" located at
355 South
Grand Avenue, together with associated subterranean parking and a garage
penthouse
structure, and the "X-2 Garage" located at 235 South Hill Street.
C. As of September 19, 1996, Aetna and MTP-South Tower LP
executed
certain instruments and agreements providing for an extension of the
scheduled maturity
date of the Loan and certain other matters, but conditioned upon, among
other things, the
due execution and delivery of this Agreement by MTP-South Tower LLC. Such
instruments and agreements, including those described below, are only
effective as of the
date of the recording of both the Amendment of Security Documents (as
defined below)
and this Agreement in the Official Records of Los Angeles County,
California. Such
instruments and agreements include, without limitation:
(1) that Modification and Extension Agreement dated as
of
September 19, 1996 (the "MODIFICATION AND EXTENSION AGREEMENT"),
between MTP-South Tower LP and Aetna;
(2) that Amendment to Deed of Trust, Assignment of Rents
and
Security Agreement and to California Assignment of Rents and Leases and
Fixture Filing
dated as of September 19, 1996 (the "AMENDMENT OF SECURITY DOCUMENTS"),
between MTP-South Tower LP and Aetna, and recorded as of even date with the
recording of this Agreement in the Official Records of Los Angeles County,
California;
(3) that Allonge to Promissory Note dated as of
September 19, 1996 (the "ALLONGE"), between MTP-South Tower LP and Aetna:
and
(4) that Environmental Indemnity dated as of as of
September 19, 1996 (the "ENVIRONMENTAL INDEMNITY AGREEMENT"), by
MTP-South Tower LP to and for the benefit of Aetna.
D. Immediately prior to the execution and delivery of this
Agreement, and
as permitted in the Modification and Extension Agreement, the partners of
MTP-South
Tower LP have caused MTP-South Tower LLC to be organized and have caused
MTP-South Tower LLC to succeed by operation of law to all of the assets and
liabilities
of MTP-South Tower LP, including but not limited to the Property.
E. MTP-South Tower LLC now wishes to acknowledge and ratify
its
obligations under the instruments and agreements evidencing and securing
the Loan.
IN CONSIDERATION of the recitals and agreements set forth
herein and
in the Modification and Extension Agreement, and to induce Aetna to execute
the
Modification and Extension Agreement and the other instruments and
agreements provided
for therein (the effectiveness of which are conditioned, among other
things, upon the due
execution and delivery of this Agreement), MTP-South Tower LLC agrees as
follows for
the benefit of Aetna:
1. ASSUMPTION OF LOAN DOCUMENTS. Subject to the provisions of
Section 3 below, MTP-South Tower LLC hereby assumes all of the obligations
of
MTP-South Tower LP under the Note, as amended by the Allonge, under the
Deed of
Trust and Assignment of Rents, as amended by the Amendment to Security
Documents,
under the Lockbox Agreement, under the Modification and Extension
Agreement, under
the Environmental Indemnity, and under all other instruments and agreements
evidencing
or securing the Loan (collectively, the "LOAN DOCUMENTS").
2. AFFIRMATION OF LIEN ON PROPERTY. MTP-South Tower LLC
hereby acknowledges and agrees that the Deed of Trust and the Assignment of
Rents, as
amended by the Amendment of Security Documents, encumbers the Property,
with first
lien priority, to secure the Loan and Loan Documents.
3. NON-RECOURSE. The liability of MTP-South Tower LLC and its
members in connection with the Loan and the Loan Documents shall be
governed and
controlled by the provisions of Section 11.8 of the Modification and
Extension Agreement
and the provisions of the Acknowledgment and Agreement appended thereto,
which
provisions are hereby incorporated by reference herein.
4. COUNTERPARTS. This Agreement may be executed and acknowledged
in
counterparts, all of which executed and acknowledged counterparts shall
together constitute a single agreement. Signature and acknowledgment pages
may be detached from the
counterparts and attached to a single copy of this document to physically
form one document, which may be recorded.
WITNESS the execution and acknowledgment of this Agreement by
MTP-South
Tower LLC as of the date first written above.
MAGUIRE THOMAS PARTNERS-SOUTH
TOWER, LLC, a California limited liability
company
By: MAGUIRE PARTNERS-BUNKER HILL,
LTD., a California limited partnership,
Manager
By: MAGUIRE PARTNERS BGHS, LLC, a
California limited liability company,
Managing
General Partner
By: MAGUIRE PARTNERS SCS, INC.,
a California corporation, Manager
By: ________________________
Robert F. Maguire III
Chairman
By: MAGUIRE/THOMAS PARTNERS, INC.,
a California corporation, General Partner
By: ________________________
Robert F. Maguire III
Chairman
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited
partnership,
Manager
By: JMB REALTY CORPORATION,
a Delaware corporation
Its general partner
By: _________________________
Title:
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XV, an Illinois limited
partnership,
Manager
By: JMB REALTY CORPORATION,
a Delaware corporation,
Its general partner
By: _________________________
Title:
STATE OF _______________ )
) ss
COUNTY OF ____________ )
On _______________, 1996 before me, ________________, a Notary
Public
in and for said State, personally appeared _______________________ proved
to me on
the basis of satisfactory evidence to be the person whose name is
subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which
the person acted executed the instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
[SEAL]
STATE OF _______________ )
) ss
COUNTY OF ____________ )
On ____________________, 1996 before me, ________________, a
Notary
Public in and for said State, personally appeared _______________________
proved to
me on the basis of satisfactory evidence to be the person whose name is
subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized
capacity, and that by his signature on the instrument the person, or the
entity upon behalf
of which the person acted executed the instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
[SEAL]
STATE OF _______________ )
) ss
COUNTY OF ____________ )
On _____________________, 1996 before me, ________________, a
Notary
Public in and for said State, personally appeared _______________________
proved to
me on the basis of satisfactory evidence to be the person whose name is
subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized
capacity, and that by his signature on the instrument the person, or the
entity upon behalf
of which the person acted executed the instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
[SEAL]
Exhibit E
---------
FORM OF MTP-SOUTH TOWER LLC FIXTURE FILING
EXHIBIT F
---------
FORM OF MTP-SOUTH TOWER LLC FINANCING STATEMENTS
MODIFICATION AND EXTENSION AGREEMENT
AETNA LIFE INSURANCE COMPANY
MAGUIRE/THOMAS PARTNERS-SOUTH TOWER
September 19, 1996
TABLE OF CONTENTS
1. Transactions on Effective Date and LLC Conversion . . . . . . . 3
1.1 Conditions Precedent to Effective Date. . . . . . . . . . 3
1.2 Effective Date. . . . . . . . . . . . . . . . . . . . . . 4
1.3 Consent to Equity Transaction . . . . . . . . . . . . . . 4
1.4 Conversion to Limited Liability Company . . . . . . . . . 4
1.5 MTP-South Tower; Equity Owners. . . . . . . . . . . . . . 5
1.6 Application of Pre-Closing Payments . . . . . . . . . . . 6
1.7 Additional Payment at Closing . . . . . . . . . . . . . . 6
1.8 Application of Funds at Closing . . . . . . . . . . . . . 7
1.9 Establishment of Project Reserve Account. . . . . . . . . 8
2. Extension and Interest. . . . . . . . . . . . . . . . . . . . . 9
2.1 Extension; Extension Fee. . . . . . . . . . . . . . . . . 9
2.2 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Payment of the Loan . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Early Repayment . . . . . . . . . . . . . . . . . . . . . 11
3.2 Amounts Due at Maturity . . . . . . . . . . . . . . . . . 11
3.3 Yield Maintenance Payment . . . . . . . . . . . . . . . . 12
3.4 Repayment of Additional Loan Advances . . . . . . . . . . 12
4. Capital Events. . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Payments Upon Receipt of Capital Proceeds . . . . . . . . 14
4.2 Subordination of Participation Interest on Refinancing. . 16
4.3 Right of First Offer. . . . . . . . . . . . . . . . . . . 19
4.4 Arms-Length Sale of Project . . . . . . . . . . . . . . . 21
4.5 Proceeds of Sale of Project . . . . . . . . . . . . . . . 21
4.6 Participation Interest on Arms-Length Sale. . . . . . . . 23
5. Approval Rights of Aetna. . . . . . . . . . . . . . . . . . . . 24
5.1 Approval of Transfers and Additional Debt . . . . . . . . 24
5.2 Approval of Operating and Capital Budgets . . . . . . . . 25
5.3 Approval of Leases and Other Agreements . . . . . . . . . 27
5.4 Aetna's Discretion. . . . . . . . . . . . . . . . . . . . 28
6. Lockbox Agreement . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Lockbox Agreement to Remain in Effect . . . . . . . . . . 28
6.2 Gross Receipts in Deposit Account . . . . . . . . . . . . 29
6.3 Application of Lockbox Agreement to Project Reserve . . . 29
6.4 Affirmation of Aetna's Rights in Funds. . . . . . . . . . 31
7. Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Disbursements from Deposit Account. . . . . . . . . . . . 32
7.3 Disbursement of Project Reserve for Approved Capital Costs 35
7.4 Additional Loan Advances. . . . . . . . . . . . . . . . . 37
8. Additional Covenants. . . . . . . . . . . . . . . . . . . . . . 38
8.1 No Equity Distributions . . . . . . . . . . . . . . . . . 39
8.2 Major Lease Acknowledgment Agreements . . . . . . . . . . 40
8.3 Affiliate Commissions . . . . . . . . . . . . . . . . . . 41
8.4 Wells Fargo Center Agreements . . . . . . . . . . . . . . 41
8.5 Project Management and Leasing Contracts. . . . . . . . . 42
8.6 Financial Reports . . . . . . . . . . . . . . . . . . . . 43
8.7 Right to Inspect. . . . . . . . . . . . . . . . . . . . . 43
8.8 Access to Project and Dissemination of Information. . . . 43
8.9 Further Assurances. . . . . . . . . . . . . . . . . . . . 44
8.10 Notice of Litigation, Etc . . . . . . . . . . . . . . . . 45
8.11 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.12 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 45
8.13 Security. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.14 Default; Event of Default. . . . . . . . . . . . . . . . 46
9. Closing Matters . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Representations and Warranties. . . . . . . . . . . . . . 48
9.2 Certified Statement . . . . . . . . . . . . . . . . . . . 49
9.3 Title Insurance . . . . . . . . . . . . . . . . . . . . . 49
9.4 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 50
9.5 Legal Fees and Costs. . . . . . . . . . . . . . . . . . . 50
10. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.1 Closing Date. . . . . . . . . . . . . . . . . . . . . . . 50
10.2 Conditions to Closing . . . . . . . . . . . . . . . . . . 50
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.2 Changes, Waivers, Etc . . . . . . . . . . . . . . . . . . 54
11.3 Governing Law; Severability . . . . . . . . . . . . . . . 54
11.4 Meaning of Certain Terms. . . . . . . . . . . . . . . . . 54
11.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 54
11.6 Binding Effect. . . . . . . . . . . . . . . . . . . . . . 54
11.7 Exclusive Benefit . . . . . . . . . . . . . . . . . . . . 55
11.8 Non-Recourse. . . . . . . . . . . . . . . . . . . . . . . 55
11.9 No Mortgagee In Possession; No Joint Venture. . . . . . . 57
11.10 Legal Fees and Expenses . . . . . . . . . . . . . . . . . 57
11.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 57
11.12 Authority . . . . . . . . . . . . . . . . . . . . . . . . 57
11.13 Construction. . . . . . . . . . . . . . . . . . . . . . . 58
11.14 Ratification. . . . . . . . . . . . . . . . . . . . . . . 58
11.15 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 58
EXHIBIT 4-D
- -----------
(C-XIV)
AMENDED AND RESTATED PROMISSORY NOTE
$21,987,838.60 October __, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby
promises to pay to the order of WELLS FARGO BANK, N.A., a national banking
association ("Bank"), at its office at 2120 E. Park Place, Suite 100, El
Segundo, California 90245 (Attn: J. Morgan)(or such other place as Bank may
direct from time to time), in lawful money of the United States and in
immediately available funds, (i) the principal amount of TWENTY-ONE MILLION
NINE HUNDRED EIGHTY-SEVEN THOUSAND EIGHT HUNDRED THIRTY-EIGHT AND 60/100
DOLLARS ($21,987,838.60) on September 1, 2003, (and such earlier times as
provided herein) and (ii) interest from the date hereof (computed on the
basis of a year of 360 days for the actual number of days elapsed), in like
money and funds and at such office, on principal amounts outstanding
hereunder until paid in full, at a rate per annum of:
(a) seventeen percent (17%), to and including the date of
maturity (whether at the stated due date, upon acceleration or otherwise),
said interest to be payable at the times and in the amounts set forth in
Section 4 of the Loan Modification Agreement (defined below); and
(b) after maturity (whether at scheduled maturity, upon
acceleration or otherwise), the greater of (i) seventeen percent (17%), or
(ii) Bank's "Prime Rate" from time to time PLUS five percent (5%), which
post-maturity interest shall change effective on and as of the date of each
change in Bank's Prime Rate and shall be payable upon demand. (Bank's
"Prime Rate" is the rate of interest which Bank announces publicly from
time to time at its San Francisco or Los Angeles executive office as its
"prime rate" for unsecured commercial borrowings.)
This Note is the "New Note" referred to in the Loan
Modification Agreement by and between Borrower and Bank dated as of the
date hereof (the "Loan Modification Agreement"), and amends and restates
that certain Promissory Note dated December 30, 1985, made by Borrower to
Bank (as successor in interest to Crocker National Bank) in the original
principal amount of $12,250,000. This Note is secured by certain
Collateral more specifically described in the Security Agreements and as
provided in the Loan Modification Agreement.
Whenever any Collateral proceeds or cash Collateral (including,
without limitation, any Subject Disbursements or Management Disbursements)
are received by Bank (or are collected by or paid to Bank) under any of the
Loan Documents (as defined in the Loan Modification Agreement), such amount
shall be immediately due and payable under this Note. Such amount shall be
applied first to expenses and other amounts due other than principal and
interest, then to interest and then to principal owing under this Note.
However, notwithstanding the foregoing, so long as Maguire/Thomas Partners
Development Ltd. ("Property Manager") is obligated to make monthly
installment payments of the "Manager's Payment" to Borrower or Bank under
the Manager's Letter Agreement (as defined in the Loan Modification
Agreement), or Maguire Thomas Partners-South Tower, LLC is obligated to
withhold any installment of the Manager's Payment, if requested by Borrower
or Bank, Borrower's thirty-five percent (35%) share of the $25,000 shall be
due and payable under this Note no later than thirty (30) days after the
date Bank gives written notice to Property Manager or Maguire Partners-
Bunker Hill, Ltd. ("Maguire")(with a copy to Borrower), or notice directly
to Borrower, of the failure of Property Manager or Maguire to pay such
installment payment within the five (5) business day cure period following
the date such installment payment is due. Since such installment payment
is due on the first day of each calendar month under the Manager's Letter
Agreement, the corresponding payment under this Note shall be due and owing
to the Bank on that same date, subject to such cure period.
Upon any failure by Borrower to (i) make any payment of
principal hereunder when and as the same shall become due and payable, or
(ii) make any payment of interest hereunder within (5) days after such
interest becomes due and payable, or upon any other default under this
Note, or upon the occurrence of an Event of Default as defined in the Loan
Agreement (as defined in the Loan Modification Agreement) or the Security
Agreements, the holder of this Note may, at its option and without notice,
declare immediately due and payable the entire unpaid principal balance of
this Note, together with all accrued but unpaid interest.
Borrower, for itself and its successors and assigns, hereby
waives diligence, presentment, protest and demand and notice of protest,
demand, dishonor and nonpayment of this Note. Borrower expressly agrees
that this Note or any payment hereunder may be extended from time to time,
and that Bank may accept security or release any security herefor, all
without in any way affecting the liability of Borrower or any endorsers or
guarantors hereof.
No extension of time for the payment of this Note or any
renewal or modification hereof made by agreement by Bank with any person or
entity now or hereafter liable for the payment of this Note shall affect
the liability of Borrower under this Note, even if Borrower is not a party
to such agreement.
Borrower agrees to pay all collection expenses, court costs and
reasonable attorneys' fees which may be incurred in connection with the
collection, defense, or enforcement of this Note or any part hereof,
including by exercising any rights available to a creditor with respect to
this Note or any Collateral in any case commenced by or against the
Borrower under any provision of the United States Bankruptcy Code. If any
suit or action is instituted to enforce this Note, Borrower promises to
pay, in addition to the costs and disbursements otherwise allowed by law,
reasonable attorneys' fees in such suit or action. In the event that suit
is brought under this Note, any judgment obtained in or as a result of such
suits shall be enforceable solely against the Collateral, and Borrower and
its partners shall have no personal liability therefor.
All amounts payable under this note are payable in lawful money
of the United States. Checks will constitute payment only when collected.
Notwithstanding anything to the contrary in this Note, Bank is
entitled to all of the benefits provided to it in the Loan Agreement, the
Loan Modification Agreement, the Security Agreements and all other Loan
Documents, and reference is hereby made to the foregoing for full
particulars of the matters described therein.
Terms used in this Note and not otherwise defined herein shall
have the meanings given to such terms in the Loan Modification Agreement.
This Note shall be governed by and construed in accordance with
the laws of the State of California.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV,
an Illinois limited partnership
By: JMB Realty Corporation
By:
Its:
EXHIBIT - 4-E
- -------------
(C-XIV)
LOAN MODIFICATION AGREEMENT
(Carlyle-XIV)
This Loan Modification Agreement ("Agreement") is executed as of this
_____ day of October, 1996, by and between CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois limited partnership (the "Borrower"), and
WELLS FARGO BANK, N.A., as successor by merger to Crocker National Bank
(the "Bank"). This Agreement is executed based on the following facts and
understandings.
RECITALS
A. On or about December 26, 1985, Borrower and the Bank entered
into that certain "Loan Agreement" pursuant to which the Bank made a loan
(the "Loan") to Borrower in the original principal amount of $12,250,000.
The Loan was evidenced by a promissory note dated as of December 30, 1985
(the "Note"). All obligations of Borrower to the Bank arising out of or
relating to the Loan Agreement, the Note, or any other documents executed
pursuant to any of them, as they may be amended from time to time, are
secured by certain collateral described in a "Security Agreement" dated
December 26, 1985 and executed by Borrower in favor of the Bank (the
"Original Security Agreement"). The Loan Agreement, the Note, the Original
Security Agreement, and the other documents executed concurrently therewith
or at any time before the Closing Date pursuant thereto are hereafter
referred to as the "Original Loan Documents."
B. Borrower is a general partner of Maguire Thomas Partners-South
Tower (the "Partnership"). The other general partners of the Partnership
are Maguire Partners-Bunker Hill, Ltd. ("Maguire") and Carlyle Real Estate
Limited Partnership-XV ("Carlyle 15"). The sole limited partner of the
Partnership was International Business Machines Corporation, a New York
Corporation ("IBM"), although its interest was recently acquired by
Maguire. Borrower has requested the Bank's consent to the merger of the
Partnership into a limited liability company formed under California law to
be named Maguire Thomas Partners-South Tower, LLC (the "LLC"), and to the
Operating Agreement of Maguire Thomas Partners-South Tower, LLC dated as of
September 24, 1996 (the "LLC Operating Agreement"), which replaces the
"Partnership Agreement" of the former Partnership (as defined in the LLC
Operating Agreement).
C. Carlyle 15 is also indebted to the Bank. On or about December
26, 1985, Carlyle 15 and the Bank entered into a "Loan Agreement" (the
"Carlyle 15 Loan Agreement") pursuant to which the Bank made a loan (the
"Carlyle 15 Loan") to Carlyle 15 in the original principal amount of
$22,750,000. The Carlyle 15 Loan was evidenced by a "Promissory Note"
dated December 30, 1985 (the "Carlyle 15 Note"). All obligations of
Carlyle 15 to the Bank arising out of or relating to the Carlyle 15 Loan
Agreement, the Carlyle 15 Note, or any other documents executed at any time
pursuant to any of them as they might be amended in writing from time to
time were secured by certain collateral described in a "Security Agreement"
(the "Carlyle 15 Security Agreement") dated December 26, 1985 and executed
by Carlyle 15 in favor of the Bank. The Carlyle 15 Loan Agreement, the
Carlyle 15 Note, and the Carlyle 15 Security Agreement, and the other
documents executed concurrently therewith or at any time pursuant thereto
by Carlyle 15 and/or the Bank are hereafter referred to as the "Original
Carlyle 15 Loan Documents." The Original Carlyle 15 Loan Documents,
together with the amendments and supplements thereto (such as counterparts
corresponding to the New Documents as described in Section 3.1 from
Borrower) as are required by the Carlyle 15 Loan Modification Agreement
dated as of the date hereof (herein, together with that Carlyle 15 Loan
Modification Agreement, collectively called the "New Carlyle 15 Documents")
are herein collectively called the "Carlyle 15 Loan Documents."
D. Borrower's present and future obligations to the Bank are
secured by the "Collateral" described in ANNEX A hereto (the "Collateral").
E. The primary asset of the Partnership is an office building more
specifically described in EXHIBIT A attached hereto (herein, together with
the Partnership's right, title and interests in all equipment, fixtures,
inventory and other real and personal property located thereon or
associated therewith and all rights and interests appurtenant or related
thereto consisting of rents, issues, profits, leases, accounts, chattel
paper, instruments, general intangibles, contract rights and other rights
to payment, collectively called the "Property"). The Property is
encumbered by a lien in favor of Aetna Life Insurance Company, as successor
to the Aetna Casualty & Surety Company ("Aetna") in the original principal
amount of $200,000,000 (the "Aetna Loan"). The Partnership has negotiated
or is in the process of negotiating and documenting a modification of the
Aetna Loan with a maturity of September 1, 2003 (the "Aetna Restructuring")
pursuant to a Modification and Extension Agreement dated as of
September 19, 1996, and certain "Amended Loan Documents" described therein
(herein collectively called the "Aetna Restructuring Documents"). The
"Aetna Loan Documents" include all "Loan Documents" defined in the Aetna
Restructuring Documents, together with the Aetna letter agreement dated
October 24, 1996 "Re Payment of Management Fee" (the "Aetna Manager Fee
Transfer Approval") and the "Letter Agreement" dated September 30, 1996
referenced therein (the "Manager's Letter Agreement") among Carlyle, the
LLC and Maguire/Thomas Partners Development Ltd. (herein, together with its
successors and assigns called, "Property Manager"), the Company
Acknowledgment and Consent dated as of the date hereof among Maguire,
Property Manager, LLC, Carlyle and Bank of America NT&SA (the "Manager's
Warranty"), and the Acknowledgment and Agreement dated September 25, 1996,
executed by Aetna in favor of the Bank (the "Aetna/WFB Acknowledgment").
F. The obligations evidenced by the Note matured on December 1,
1994. As of that date, the principal outstanding under the Note totalled
$12,250,000. Interest continued to accrue thereafter at the rate
applicable after maturity. Borrower has asked the Bank to modify and
extend the maturity date of the Loan approximately to coincide with the
maturity date of the Aetna Loan after completion of the Aetna
Restructuring. Borrower has also asked the Bank to consent to the Aetna
Restructuring Documents.
G. Subject to the terms and conditions set forth in this
Agreement, the Bank is willing to modify and extend the maturity date of
the Loan, to make certain other modifications to the Original Loan
Documents as expressly set forth below, and otherwise to do what is
expressly required for the Bank to do in this Agreement.
AGREEMENT
WHEREFORE, for fair and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. ACKNOWLEDGEMENTS, DEFINITIONS.
1.1 RELATION TO PAST. Borrower acknowledges, agrees,
represents and warrants that the Recitals set forth above are true and
correct. Borrower further acknowledges and agrees that, except as
expressly revised as set forth herein, the Original Loan Documents remain
fully valid, binding and enforceable in accordance with their respective
express, written terms, subject to no claims, defenses, or offsets of any
kind.
1.2 DEFINITION OF "LOAN DOCUMENTS". The term "Loan
Documents" used in this Agreement and in Article III of the Loan Agreement
(and elsewhere in the Loan Agreement) shall be deemed to refer not only to
the Original Loan Documents, but also to this Agreement, the New Documents,
all documents and agreements executed pursuant thereto, and all other duly
executed written amendments or supplements thereto or modifications
thereof. The New Documents are Loan Documents under all of the Original
Loan Documents. References to the "Partnership" in Article III of the Loan
Agreement shall be deemed to also refer to the LLC, such that, for example,
Section 3.5 of the Loan Agreement which contains a representation and
warranty that there is also no action, suit or proceeding pending against
the Partnership shall be deemed to also constitute a representation and
warranty that, to the extent applicable, as of the date hereof, there is
also no action, suit or proceeding pending against the LLC. As used in the
Original Loan Agreement, the following definitions are also modified as
follows for the purposes of the Loan Documents: (a) the "Partnership
Agreement" also includes the LLC Operating Agreement; (b) "Bank" means
Wells Fargo Bank, N.A. and its successors and assignees; and (c) "Security
Agreement" means collectively the Original Security Agreement and the
Supplemental Security Agreement. Except as otherwise expressly provided in
this Agreement, the terms used herein and defined in the California Uniform
Commercial Code as amended or recodified from time to time ("UCC") shall be
used in this Agreement with that defined meaning.
2. AGREEMENTS BY THE BANK. Subject to the satisfaction of the
conditions precedent set forth in Section 3 below, the Bank agrees as
follows:
2.1 NEW NOTE. To modify the Note in accordance with the
terms set forth in a "New Note" in the form of EXHIBIT B attached hereto,
such that (among other things):
(a) The principal amount shall be equal to the amount
stated in the New Note (calculated as to the sum of all outstanding
principal plus all accrued and unpaid interest (at the rate applicable
under the Note after maturity) from and after December 1, 1985 through the
"Closing Date" (defined below) plus a capitalized restructuring fee. The
restructuring fee is approximately equal to the difference between (i) the
total amount of interest payments made under the Note from and after
December 1, 1985 through the Closing Date, plus accrued and unpaid interest
owing on the Note, and (ii) the amount which would have been paid under the
Note if the interest rate applicable thereunder for the period from
December 1, 1985 through the Closing Date equalled seventeen percent (17%)
per annum computed on the basis of a 360 day year for actual days elapsed;
(b) The maturity date shall be extended until the first
to occur of (i) September 1, 2003, or (ii) acceleration due to the
occurrence of an "Event of Default";
(c) Interest shall accrue on the outstanding principal
amount of the New Note at a rate per annum prior to maturity of seventeen
percent (17%) per annum, and after maturity at a rate per annum equal to
the greater of (i) seventeen percent (17%)per annum , or (ii) the "Prime
Rate" (being charged by the Bank from time to time, changing with each
change in such Prime Rate) plus five percent (5%), in either case, based on
a 360-day year for actual days elapsed.
(d) The Loan (and all costs and expenses and other
payment obligations of Borrower) may be prepaid at any time without
penalty; and
(e) The New Note interest and principal shall be due
when and to the extent that any Subject Disbursements, Management
Disbursements, or other Collateral or proceeds are available in cash, and
such amounts shall be allocated first to expenses and other amounts due
other than principal and interest, then to interest and then to principal.
However, notwithstanding the foregoing, so long as the Property Manager is
obligated to make monthly installment payments (each called a "Manager's
Payment") of the Management Disbursements to Borrower or the Bank under the
Manager's Letter Agreement (or the LLC is obligated to withhold any portion
of any installment of the $300,000 payment from Property Manager, if
requested by Carlyle or the Bank), Borrower's thirty-five percent (35%)
share of $25,000 shall be due under the New Note no later than thirty (30)
days after the date the Bank gives written notice to Property Manager or
Maguire (with a copy to Borrower), or notice directly to Borrower, of the
failure of Property Manager or Maguire to pay such installment payment
within the five (5) day cure period following the date such installment
payment is due. Since such installment is due on the first day of each
calendar month under the Manager's Letter Agreement, the corresponding
payment on the New Note shall be due and owing to the Bank on the same
date, subject to such cure period.
2.2 ADDITIONAL ADVANCE. Subject to and upon the terms and
conditions stated in this Agreement, the Bank shall advance for the account
of Borrower Three Hundred Fifty Thousand and No/100 Dollars ($350,000.00)
as additional indebtedness evidenced by the New Note. Such advance shall
be disbursed by the Bank directly to the escrow for the Aetna Restructuring
in order to satisfy Borrower's share of the funds required by Aetna as a
condition to the closing of that transaction, and Borrower hereby
unconditionally consents to that direct disbursement of such additional
advance.
2.3 OTHER MODIFICATIONS. The Original Loan Documents shall
be deemed to have been modified and supplemented as expressly set forth in
this Agreement, including by the New Documents described below. However,
except as otherwise expressly so amended or supplemented by New Documents,
the Original Loan Documents remain in full force and effect.
3. CONDITIONS PRECEDENT. It shall be a condition precedent to
each and every obligation of the Bank to Borrower under this Agreement that
each of the following shall be satisfied (the date the satisfaction of
which shall be referred to as the "Closing Date"), which Closing Date shall
be no later than October 31, 1996 (as to which time is of the essence):
3.1 DOCUMENTS. The Bank shall have received originals of the
following documents from Borrower, each in form and substance satisfactory
to the Bank, and each of which shall have been duly executed by all parties
thereto (herein collectively called the "New Documents"):
(a) this Agreement (or a counterpart thereof);
(b) the "New Note" substantially in the form of EXHIBIT
B attached hereto;
(c) a "Release" in substantially the form of EXHIBIT C
attached hereto;
(d) a "Wells Fargo Bank Addendum" to the LLC Operating
Agreement executed by Maguire and in form and substance satisfactory to the
Bank;
(e) a "Notice of Assignment and Acknowledgement of
Receipt" in the form of EXHIBIT D attached hereto executed by the LLC and
each of the members thereof;
(f) a "Notice of Assignment and Acknowledgement of
Receipt" in the form of EXHIBIT D attached hereto executed by the Property
Manager (defined below);
(g) a "Security Agreement" in the form of EXHIBIT E
attached hereto (the "Supplemental Security Agreement");
(h) a "UCC-1 Financing Statement," and an amendment to
the existing UCC financing statement, each in the form of EXHIBIT F
attached hereto; and
(i) the Aetna Manager's Fee Transfer Approval, the
Manager's Letter Agreement, the Manager's Warranty, and the Aetna/WFB
Acknowledgment in form and substance satisfactory to the Bank.
3.2 COLLATERAL. The Bank shall have received a duly
perfected security interest of no less than first priority in all
Collateral described in ANNEX A hereto.
3.3 EXTENSION FEES. Borrower shall have paid to the Bank an
"Extension Fee" in cash or immediately available funds equal to $17,500.
Furthermore, the Bank shall have received in cash or in immediately
available funds from Carlyle 15 a separate extension fee of $32,500.
3.4 COSTS AND ATTORNEYS' FEES. Borrower shall have
reimbursed the Bank for all costs, expenses, and reasonable attorneys' fees
incurred between January 1, 1996, and the Closing Date in connection with
the defense, protection, exercise of the Bank's rights under, or
enforcement of, the Original Loan Documents, in responding to claims and
disputes raised by any of Borrower's partners in the Partnership or Aetna,
in negotiating and documenting the terms of this Agreement and the other
New Documents (and the superseded negotiations of other related matters),
in reviewing and commenting upon the Aetna loan transaction and other
matters potentially threatening or affecting the Collateral, in reviewing
and commenting upon the restructuring of the Partnership into an LLC and
negotiating and documenting the LLC Operating Agreement, and any and all
potential amendments to the Partnership Agreement and the LLC Operating
Agreement, and any other costs, expenses or charges of the type described
in Section 6.4 below (which sum is set forth in ANNEX B attached hereto and
is payable 65% from Carlyle 15 and 35% from Borrower).
3.5 AETNA RESTRUCTURING. The Bank shall have received
evidence satisfactory to the Bank indicating that the Partnership (and/or
the LLC) and Aetna have modified the Aetna Loan and Aetna Restructuring
Documents on terms and conditions satisfactory to the Bank, including that
the maturity date of the Aetna Loan has been extended to September 1, 2003,
and delivery to the Bank of the Aetna Acknowledgement and Agreement in
favor of the Bank in connection with the Aetna Restructuring.
3.6 FORMATION OF LLC. The LLC shall have been duly formed in
accordance with documentation in form and substance satisfactory to the
Bank, including by an LLC Operating Agreement and the related "Wells Fargo
Bank Addendum," in the form of EXHIBIT G attached hereto, and the
Partnership shall have been duly merged into the LLC.
3.7 UCC STATEMENTS. The Bank shall have received from
Borrower duly executed UCC-2 statements amending the original financing
statements and perfecting the Bank's security interests (or perfecting the
Bank's security interests) granted under the Original Security Agreement,
so as to reflect the amendments to the Loan pursuant to this Agreement, and
the Bank shall have received from Borrower duly executed UCC-1 Statements
(for Illinois and California) relating to the New Security Agreement as a
supplement to the provisions of the Original Security Agreement.
3.8 NECESSARY CONSENTS. The Bank shall have received duly
executed consents, releases, and acknowledgements executed by the
Partnership and/or the LLC and the other partners in the Partnership and/or
the members in the LLC relating to the Collateral for the obligations owing
to the Bank and the other issues raised by the transactions described
herein, in the form of the New Documents described in Sections 3.1(d), (e)
and (f).
3.9 LEASES. The Bank shall have received copies of all
pending leases relating to the Property for which approval is under
consideration by the LLC, together with such related documents and
information as the Bank may reasonably request (to the extent Borrower is
entitled thereto under the LLC Operating Agreement).
3.10 CARLYLE 15 TRANSACTION. The Bank shall have received a
duly executed original (or counterpart) of the Carlyle 15 Loan Modification
Agreement and all conditions precedent to the Bank's obligations thereunder
shall have been satisfied or waived in writing by the Bank, including the
execution of the other New Carlyle 15 Documents.
3.11 FINANCIAL DOCUMENTS. The Bank shall have received the
most current profit and loss statement, balance sheet, Property rent rolls,
Property operating statements, and cash flow statement relating to the
Partnership, the LLC, and/or the Property, and the Bank shall also have
received all of the most current financial reports and documentation
provided to Aetna by the Partnership (and/or the LLC) or its various
partners (and/or the members of the LLC)(other than Maguire); and
3.12 OPINION OF COUNSEL. Borrower shall have delivered to the
Bank a favorable opinion of counsel for Borrower, addressed to the Bank and
dated as of the Closing Date covering the matters incident to the closing
of this Agreement, to the Collateral, to the valid, binding and enforceable
nature of the Loan Documents, to the formation of the LLC and the valid
nature and enforceability of the LLC Operating Agreement, and to the merger
of the Partnership into the LLC, all as the Bank may reasonably request.
4. MODIFICATION OF LOAN. Subject to the satisfaction of the
conditions precedent set forth in Section 3 above, the Original Loan
Documents shall be further modified, amended and supplemented as follows:
4.1 PAYMENT TERMS. As stated in the New Note, payments of
principal and interest are due and payable prior to the maturity date
thereof as and when cash is available from or on account of the Collateral
to make payments, including as follows:
(a) All LLC or Partnership disbursements (collectively
"Subject Disbursements") from or on account of the interests of Borrower
and Carlyle 15 in the Partnership and/or the LLC shall be delivered
directly to the Bank by the payor thereof (and may be collected directly by
the Bank at any time pursuant to UCC 9318 and 9502 or otherwise) in
accordance with this Agreement, the Security Agreements, and any other
applicable documentation executed pursuant hereto, whether before or after
the occurrence of any Event of Default or default. Additionally, Borrower
agrees to deliver to the Bank in kind and in cash (to the extent received
in cash) any Subject Disbursements which Borrower receives within five (5)
business days of having received such Subject Disbursements.
(b) The $300,000 in aggregate annual payments which are
payable in monthly installments to Borrower and Carlyle 15 by
Maguire/Thomas Partners-Development, Inc. as "Property Manager" on account
of management fees (the "Management Disbursements") shall be delivered
directly to the Bank by the payor thereof (and may be collected directly by
the Bank at any time pursuant to UCC 9318 and 9502 or otherwise) in
accordance with this Agreement and any other applicable documentation
executed pursuant hereto, whether before or after the occurrence of any
Event of Default or default. Additionally, Borrower agrees to immediately
deliver to the Bank in kind and in cash (to the extent received in cash)
any Management Disbursements which Borrower receives within five (5)
business days of having received such Management Disbursement.
(c) Any other amounts of cash Collateral or cash
proceeds of Collateral received by Borrower shall be paid to the Bank
within five (5) business days of when the same are first received or
available (and at all times subject to direct collection by the Bank
immediately pursuant to UCC 9318 and 9501 or otherwise) whether or not
any Event of Default exists.
(d) Regardless of what the amount may be of Subject
Disbursements and Management Disbursements (plus other payments or
disbursements that are made by or on account of the interests of Borrower
in the Partnership or the LLC) all principal, accrued interest, fees,
costs or other payments for which Borrower is liable shall be due and
payable on the first to occur of (a) September 1, 2003, and (b)
acceleration due to the occurrence of an "Event of Default."
4.2 MODIFICATIONS REGARDING PREPAYMENTS. Section 1.4 of the
Loan Agreement is hereby deleted. Should Borrower desire to prepay the
Loan or any portion thereof, the payment shall be first applied to any
outstanding indemnity and reimbursement liabilities, expenses and costs for
which Borrower is liable, then to any accrued or unpaid interest and late
charges, and then to the principal owing under the New Note. Furthermore,
Section 1.5 of the Original Loan Agreement is amended, such that the last
sentence reading, "Any such prepayment shall be accompanied by payment of a
premium computed in accordance with the provisions of Section 1.4, and by
all accrued and unpaid interest on the principal amount prepaid", shall be
deleted. The only limitation on prepayments (as indicated above) is that,
if Borrower desires to make a prepayment on its New Note, the payments must
be first applied to all Loan Document liabilities in the order specified
above.
4.3 EVENTS OF DEFAULT. The provisions regarding the
definition of an "Event of Default" in the Original Loan Documents shall be
supplemented by the following provisions such that it shall constitute an
Event of Default under the Loan Documents (as modified by this Agreement
and the other New Documents) when, if, or to the extent that:
(a) (I) The LLC or any of its members shall modify,
amend, supplement or otherwise alter the Aetna Loan or any of the "Aetna
Loan Documents" or Aetna Restructuring Documents or the LLC Operating
Agreement in any respect whatsoever (or shall agree to or permit any
capital call or other monetary obligation to arise as a Major Decision [as
defined in the LLC Operating Agreement], without first obtaining the prior
written consent of the Bank), in any such case without first obtaining the
prior written consent of the Bank to such modification, amendment or
supplement, or (II) any "Event of Default" or default shall occur under any
of the Aetna Loan Documents which is not cured before Aetna serves or files
any notice of default, accelerates any payment due under the Aetna Loan, or
exercises any other remedy thereunder, or (III) the termination for any
reason of Property Manager as the Property Manager for the purposes of
Paragraph 2(ii) of the Manager's Letter Agreement, or the filing of any
petition by or against Property Manager under any provisions of the
Bankruptcy Code or any other law providing any moratorium on debt payments
or other exercise of creditor rights, in either case before the
satisfaction of the obligations with respect to the Supplemental Preferred
Return and the $5,000,000 Preference under the LLC Operating Agreement in
accordance with Paragraph 2(i) of the Manager's Letter Agreement, provided
that, if such Event of Default is determined by the Bank in its discretion
to be reasonably capable and reasonably probable of timely cure by
Borrower, then, so long as Borrower is continuously engaged in its diligent
efforts to cure such Event of Default (and so long as Aetna has not filed a
notice of default, accelerated any payment due under the Aetna Loan, or
exercised any other remedy under the Aetna Restructuring Documents), for up
to five (5) business days the Bank shall forbear from noticing any
foreclosure sale of any Collateral or accelerating the indebtedness owing
under the Note. However, the Bank shall have no obligation or duty to
consent to any Major Decision which exposes Borrower to any significant
risk of a capital call or other monetary obligation under the LLC Operating
Agreement for which Borrower has no reasonably certain committed source of
funding a timely payment of such obligation. For example, if the LLC
proposes a lease requiring tenant improvement allowances which could only
be funded with capital calls, approval of that lease is treated the same as
causing a capital call without the Bank's prior written consent;
(b) The LLC for any reason whatsoever is dissolved or,
absent the timely cure of any event of default by or involving Borrower or
Carlyle 15, will be dissolved; provided that, if such event of default is
determined by the Bank in its discretion to be reasonably capable and
reasonably probable of timely cure by Borrower under the applicable and
foreseeable circumstances, then so long as Borrower is continuously engaged
in using its diligent efforts to cure before dissolution occurs, Borrower
shall have the grace period (if any) prescribed in the LLC Operating
Agreement to cure such event of default;
(c) Borrower fails to make any capital contribution as
and when required by any provision of the LLC Operating Agreement or
otherwise fails to pay or perform any other monetary obligation as or when
provided therein;
(d) Any "Event of Default" occurs under the LLC
Operating Agreement; provided that, if such Event of Default is determined
by the Bank in its discretion to be reasonably capable and reasonably
probable of being timely cured by Borrower under applicable and foreseeable
circumstances, then so long as Borrower is continuously engaged in using
its diligent efforts to cure such Event of Default, Borrower shall have the
grace period (if any) prescribed in the LLC Operating Agreement to cure
such Event of Default; or
(e) Any or all of Borrower's interest in the
Partnership or the LLC for any reason or cause is subject to loss (other
than as a result of general market conditions), impairment, dilution,
purchase by another partner or member, or the occurrence of a Major
Decision which is made without opposition by Borrower and either to which
the Bank has not in its sole discretion given its prior written consent (if
the Bank deems the same to threaten or impair any of its Collateral or
related interests) or on which the Bank has not declined in writing in its
sole discretion to either consent or disapprove; provided that, if the Bank
determines in its discretion that such event or effect is reasonably
capable and reasonably probable of timely cure to prevent the same under
applicable and foreseeable circumstances, then so long as Borrower is
continuously engaged in using its diligent efforts to cure or avoid such
event or effect, Borrower shall have the grace period (if any) prescribed
in the LLC Operating Agreement to cure or avoid such event of effect;
(f) Borrower shall breach any provision of Article 5 of
this Agreement, each of which breach shall constitute an immediate Event of
Default, or Borrower shall breach or fail to comply with any other
provision of any New Document besides those otherwise enumerated as Events
of Default in the Loan Agreement and such Event of Default is not cured
within five (5) business days after receipt of notice of such breach or
failure from Bank; provided that, if such Event of Default is determined by
the Bank in its discretion to be reasonably capable and reasonably probable
of being timely cured by Borrower under applicable and foreseeable
circumstances, then so long as Borrower is continuously engaged in using
its diligent efforts to cure such Event of Default (and so long as Aetna
has not filed a notice of default, accelerated the payment of the Aetna
loan, or exercised any other remedy under the Aetna Restructuring
Documents), Borrower shall have an additional twenty (20) business days to
cure such Event of Default; provided further, however, that if any Event of
Default occurs as a result of Borrower's failure to provide to the Bank any
reports or documents which are to be prepared by Maguire and which have not
yet been delivered to Borrower, then so long as Borrower is continuously
engaged in using its diligent efforts to cure such Event of Default, then
Borrower shall have a reasonable period of time (not to exceed fifteen (15)
business days) to cure such Event of Default; or
(g) Borrower shall (i) fail to timely pay to the Bank
its thirty-five percent (35%) share of any installment of the $300,000 in
aggregate annual payments payable in monthly installments to the Bank under
the Manager's Letter Agreement (or the Aetna Manager Fee Transfer Approval
or the LLC Operating Agreement), or (ii) fail to cure any breach of any
covenant or agreement of Property Manager or Maguire under the Manager's
Letter Agreement or Section 3.01(b)(iv) of the LLC Operating Agreement, no
later than thirty (30) days after the date the Bank gives written notice to
Property Manager or Maguire (with a copy to Borrower), or notice directly
to Borrower, of the failure of Property Manager or Maguire to pay such
installment payment, or to perform such covenant or agreement, within the
five (5) business day cure period following the date such installment
payment, or performance of such covenant or agreement, is due.
Notwithstanding any provision to the contrary contained herein
or in the Loan Agreement, the terms and provisions of Sections 4.3(a) and
(f) hereof shall replace and supersede the terms and provisions of Section
5.1.I of the Loan Agreement with respect to the occurrence of any default
under the Aetna Loan.
4.4 REMEDIES UPON DEFAULT. The Original Security Agreement
and the other Original Loan Documents are hereby amended such that any
provisions limiting the Bank's methods of selling or disposing of that
portion of the Collateral described in Section 2(b) of the Original
Security Agreement to those set forth in Section 3.03 of the Partnership
Agreement ARE DELETED. Specifically, and without limitation, the following
language is HEREBY DELETED from paragraph 9 of the Original Security
Agreement:
Notwithstanding anything to the contrary contained herein,
Secured Party shall sell or dispose of that portion of the Collateral
described in Section 2(b) of this Agreement only in accordance with Section
3.03 of the Partnership Agreement.
Instead, there shall be no limitations on the exercise of the Bank's rights
or remedies except those expressly imposed on the Bank by the Wells Fargo
Bank Addendum attached hereto as EXHIBIT G with respect to the LLC
Operating Agreement.
4.5 REPORTING REQUIREMENTS. The following reporting
requirements shall supplement the reporting requirements set forth in
Section 4.1 of the Original Loan Agreement (and any reference to reports to
be provided by (or obligations to be performed by) the Partnership or its
partners shall be deemed to refer to the LLC and its members after the
merger of the Partnership into the LLC):
(a) Before the Partnership and/or the LLC enters into
any new leases or other contracts for or with respect to any of the
Property to which Borrower (or its representative on the Management
Committee) has any right to consent or object, where the same involves any
Major Decision or any lease for more than 50,000 square feet of the
Property, Borrower shall provide to the Bank copies of such proposed leases
and contracts and any material current correspondence or other
documentation reasonably requested by the Bank (to the extent provided to
Borrower under the LLC Operating Agreement) regarding the terms thereof
with the prospective tenants (and the Bank must consent in writing thereto
before Borrower agrees to support, suffer or permit entering into a
prospective lease or contract); provided, however, that if the Bank fails
to approve or disapprove any such lease or Property contract within fifteen
(15) business days (or such longer period as may be granted to Borrower
under the LLC Operating Agreement or other agreement if and when Borrower
is limited to a specific period for approving or disapproving such lease)
after the time when the Bank has been provided all of the documents and
information which are required to be delivered to Borrower under the LLC
Operating Agreement with respect to such lease or Property contract, then
the failure by the Bank to comment within such fifteen (15) business days
(or such longer period as may be granted to Borrower under the LLC
Operating Agreement or other agreement if and when Borrower is limited to a
specific period for approving or disapproving such lease) shall be deemed
consent to Borrower's recommended position on the issue;
(b) By the 50th calendar day after the end of each
calendar quarter, Borrower shall deliver to the Bank a profit and loss
statement, and a balance sheet each of which shall contain year-to-date
figures, as well as the monthly or quarterly data for each of (i) the
Partnership and/or the LLC, and (ii) Borrower;
(c) By the 20th calendar day of each calendar month for
the previous month ending Borrower shall deliver to the Bank an operating
statement, rent roll, and profit and loss statement for the Property, each
of which shall contain year-to-date figures;
(d) Within 90 days after the end of each calendar year,
Borrower shall deliver to the Bank a financial statement with respect to
the Partnership and/or the LLC, Borrower, and the Property;
(e) Within 60 days after the filing thereof, Borrower
shall deliver to the Bank the applicable Federal Tax Return or other filing
form and all attachments thereto for the Partnership and/or the LLC, and
Borrower; and
(f) Within 30 days after the receipt or preparation by
Borrower thereof, Borrower shall deliver to the Bank any report, document
containing financial data, operating statement, or other documentation
prepared by or on behalf of the Partnership and/or the LLC, the general
partners of the Partnership and/or the members of the LLC, or any of the
Property or Management Contract which relate in any way to the operation or
profitability of the Partnership and/or the LLC or the Property.
In addition, at any reasonable time and from time to time the
Bank, as attorney-in-fact for Borrower, shall have access to all books and
records of the LLC which are available to Borrower under the LLC Operating
Agreement or otherwise, as well as reasonable access to all books and
records (including, without limitation, any and all leases) of Borrower
pertaining to the Property.
4.6 MANAGEMENT DISBURSEMENTS; ENFORCEMENT BY THE BANK. As
noted in Section 4.1(b) above, the $300,000 in aggregate annual Manager's
Letter Agreement payments which are payable in monthly installments to
Borrower and Carlyle 15 by the Property Manager on account of the
Management Disbursements shall be delivered directly to the Bank by the
payor thereof (and may be collected directly by the Bank at any time
pursuant to UCC 9318 and 9502 or otherwise whether before or after any
default or Event of Default) in accordance with this Agreement and any
other applicable documentation executed pursuant hereto, whether before or
after the occurrence of any Event of Default or default, including as
provided in the Manager's Letter Agreement, the Aetna Manager Fee Transfer
Approval and the LLC Operating Agreement. Bank shall have the right as
either or both a secured party or attorney-in-fact for Borrower to take any
and all action necessary under the LLC Operating Agreement, the Loan
Documents or applicable law to enforce collection of all or any portion of
such payments of the Manager's Payment under the Manager's Letter Agreement
including without limitation, by the Bank's execution and delivery of any
and all documents, consents, notices, acknowledgements, instruments and
other agreements, and the exercise of any and all remedies available to
Borrower under the LLC Operating Agreement, the Manager's Warranty, the
Manager's Letter Agreement, the Aetna Manager Fee Transfer Approval or any
Loan Documents. Without limiting the generality of the foregoing, the Bank
may (either as a secured party or as an attorney in fact for Borrower)
require the LLC to withhold any Manager's Payment from Property Manager and
instead to pay such amount to the Bank in accordance with the Manager's
Letter Agreement and to exercise any right available to Borrower under the
LLC Operating Agreement as a consequence of the nonpayment of the Manager's
Payment installment to the Bank, including the rights of Borrower pursuant
to Section 3.01(b)(iv) and 3.06 of the LLC Operating Agreement. To the
extent that all or any portion of the Manager's Payment is not timely paid
to the Bank, and the Bank directly collects (as secured party or attorney-
in-fact for Borrower) all or any portion of such unpaid amounts of the
defaulted installment payment from later Manager's Payments, then the Bank
shall remit to Borrower any amounts which Borrower has previously paid to
the Bank (from Borrower's sources other than the Collateral) on account of
such unpaid amounts (less any reasonable and customary expenses, including
reasonable attorneys' fees, and other amounts incurred by the Bank in
making such collection or enforcing or defending the Bank's rights and
interests under the Manager's Letter Agreement or the LLC Operating
Agreement), if an only if (i) no Event of Default exists (besides such
payment cured by Borrower); (ii) Borrower makes such payment voluntarily
within 30 days from the date when first due (which time is of the essence)
from Borrower's sources other than the Collateral; and (iii) Borrower
notifies the Bank in writing at the time of such payment of the Borrower's
source of such payment and Borrower's intention to recoup such amount from
future payments. For example, if there are insufficient LLC funds
available to make any monthly installment payment and Borrower pays the
Bank such amount from non-Collateral funds of Borrower, then the Borrower
may recoup that payment when LLC funds are later available for such late
payment. However, Borrower's right of recoupment hereunder is subordinate
to the Bank's rights to current payments (under the Manager's Letter
Agreement), so that if there are insufficient LLC funds to pay the Bank and
Borrower in a subsequent month, Borrower may only recoup its payment from
any excess remaining after the current installment is paid to the Bank.
5. REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Borrower set forth in Article III of the Loan Agreement is
hereby reaffirmed as though made as of the date of this Agreement, except
that such representations and warranties are modified and supplemented as
follows:
5.1 DUE ORGANIZATION OF LLC. The LLC upon formation shall be
(and, if already formed, currently is) duly organized and validly existing
under applicable law, qualified to do business and in good standing in each
jurisdiction where required, and has complied with all laws necessary to
conduct its business as presently conducted. The LLC Operating Agreement
is a valid and binding obligation of the parties thereto which is legally
enforceable in accordance with its express terms. No "Event of Default"
exists under the Partnership Agreement or LLC Operating Agreement, and no
event, condition or matter exists which would constitute any such "Event of
Default" after the giving of notice or the passage of time or both.
5.2 EFFECT OF SECURITY AGREEMENT. Borrower acknowledges,
agrees, represents, and warrants that the liens and security interests
granted by Borrower to the Bank pursuant to the Original Loan Documents
shall remain in full force and effect and that, when the Partnership is
merged into the LLC and the Bank obtains a security interest in Borrower's
economic and other membership interest in the LLC (which constitutes
proceeds of the interest in the Partnership), the Bank shall have an
uninterrupted, continuing security interest of first priority in said
interest in the LLC (and in all other collateral described in the Original
Security Agreement) as well as in the collateral described in the New
Security Agreement executed pursuant hereto. Said liens and security
interests in favor of the Bank securing the obligations described herein,
in the New Note and the other New Documents executed pursuant hereto is of
first priority, subject to no liens, claims, encumbrances, offsets or
defenses of any kind.
5.3 FINANCIAL REPORTS. Except as to documents prepared by
Maguire or other third parties and which are forwarded by Borrower without
warranty hereunder (except that Borrower represents that it does not
affirmatively disagree with any of such documents, except as disclosed in
writing to the Bank), the various financial reports delivered to the Bank
pursuant to Section 3 above are accurate and fairly present the financial
condition and results of operations of Borrower, the Partnership, the LLC,
and the Property as may be applicable for the periods covered thereby, all
in accordance with accounting principles and practices accepted in the real
estate industry, consistently applied. To the best of Borrower's knowledge
(with respect only to those documents prepared by Maguire or other third
parties), since the date of the various reports, statements, and
documentation indicated above, there has been no material adverse change in
such condition or operations.
5.4 LIENS ON PROPERTY. Borrower specifically reaffirms
Section 3.11 of the Loan Agreement, except that the representation and
warranty relating to the fact that the Property is subject to no liens
securing monetary obligations other than the "Aetna Loan" shall include the
Aetna Loan as modified in accordance with the Aetna Restructuring.
References to the Aetna Loan in Article III of the Loan Agreement shall be
deemed to refer to the Aetna Loan as so modified.
5.5 VALID, ETC., LOAN DOCUMENTS. Each of the Loan Documents
is and remains a valid and binding obligation of Borrower which is
enforceable in accordance with its respective express terms.
5.6 AETNA RESTRUCTURING. The Aetna Loan and Aetna
Restructuring Documents dated as of September 19, 1996, shall become
effective at the Closing Date in the form and substance of the documents
submitted to escrow on or about September 25, 1996, as attached to the
October 7, 1996, letter from Mark L. Bronson to G. Larry Engel.
6. MISCELLANEOUS.
6.1 AMENDMENTS AND WAIVERS. If the Bank and Borrower at any
time wish to enter into any supplement, modification or amendment to any
provision of this Agreement, any other New Document executed pursuant
hereto or in connection herewith, and/or any other Loan Document, any such
amendment, supplement or modification shall be in a writing duly executed
by the parties' authorized representatives, and no oral, implied or other
amendment, supplement or modification shall be of any force or effect
whatsoever. Similarly, if the Bank wishes at any time to waive any default
or Event of Default, to consent to any matter or variance, or otherwise to
confer any benefit or approval or accept any detriment, such waiver,
consent or other conduct shall only be binding or effective against the
Bank if and when the Bank shall duly execute and deliver to Borrower a
written instrument waiving any provision of this Agreement or any other
Loan Document, or consenting to any departure by Borrower therefrom or
conferring or accepting any such benefit, approval or detriment (subject to
Section 4.5(a) above). Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given and only after execution and delivery or such writing by the
Bank (subject to Section 4.5(a) above).
6.2 NOTICES. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (includ-
ing by overnight courier or telecopier) and mailed, sent or delivered to
the respective parties hereto at or to their respective addresses or telex
or telecopier numbers set forth below their names on the signature pages
hereof, or at or to such other address or telecopier number as shall be
designated by any party in a written notice to the other parties hereto.
All such notices and communications shall be effective (a) if delivered by
hand or overnight courier, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or five business days after deposit in the
mail, first class, postage prepaid; and (c) if sent by telecopy, upon
receipt.
6.3 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part
of the Bank to exercise, and no delay in exercising, any right, remedy,
power or privilege hereunder or under any other Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
The rights and remedies under this Agreement and the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to the Bank.
6.4 COSTS AND EXPENSES; INDEMNIFICATION; OTHER CHARGES.
6.4.1COSTS AND EXPENSES. Borrower agrees to pay on
demand (to the extent incurred after the Closing Date):
(a) all reasonable and customary out-of-pocket
costs and expenses of the Bank, and all reasonable fees of counsel (and all
disbursements by such counsel) to the Bank (including allocated reasonable
costs of internal counsel), in connection with the negotiation,
preparation, execution, and delivery of the Loan Documents, the LLC
Operating Agreement, the Aetna Loan Documents, and any amendments, modifi-
cations or waivers of the terms thereof or disputes among the parties
thereto, or in connection with the exercise of any of the Bank's rights
thereunder;
(b) all reasonable and customary title,
appraisal, survey, audit, consulting, search, recording, filing and similar
fees and expenses incurred by the Bank in connection with the Loan
Documents or the Collateral; and
(c) all reasonable and customary costs and ex-
penses of the Bank and reasonable fees and disbursements of counsel
(including allocated reasonable costs of internal counsel), whether before,
during or after the filing of any petition under any provision of the
Bankruptcy Code by or against Borrower or the LLC or Partnership in connec-
tion with (i) any default or Event of Default, (ii) the exercise,
enforcement or defense (or attempted exercise, enforcement or defense), and
preservation of any rights or interests under any or all of the Loan
Documents, (iii) any out-of-court workout or other refinancing or
restructuring or any bankruptcy case, (iv) any relief from stay proceedings
or other actions or defenses of any kind taken in any bankruptcy or
insolvency proceeding, and (v) the enforcement, defense or preservation of,
and realization upon, any of the Collateral, including any losses, costs
and expenses sustained by the Bank as a result of any failure by Borrower
to perform or observe its obligations contained in any of the Loan
Documents.
Notwithstanding any provision to the contrary contained
herein, Borrower shall have no obligation to pay to the Bank any
administrative fees, servicing fees or other similar discretionary fees
payable to the Bank or its affiliates or to any third parties to whom the
Bank has delegated any servicing or administrative functions (provided that
this sentence does not affect the Bank's right to reimbursement for
attorneys' fees or other third party fees permitted under the Loan
Documents).
6.4.2INDEMNITY. Subject to Section 6.13, Borrower shall
indemnify the Bank from and against any loss, cost, damage, expense
(including reasonable attorneys' fees of inside and outside counsel) which
the Bank may suffer or incur as a consequence of Borrowers' noncompliance
with or breach of any provision of any Loan Document, the Partnership
Agreement, the LLC Operating Agreement or any of the Aetna Loan Documents,
including any monetary amount which the Bank would have to assume or pay in
order to succeed to Borrower's interest in the LLC or to cure Aetna Loan
Document Events of Default so as to preserve the value of the Collateral or
other rights or interests of the Bank under the Loan Documents, or to
perform any indemnity or other obligation to Aetna under the Aetna Manager
Fee Transfer Approval.
6.4.3PROTECTIVE ADVANCES. The Bank may (but shall not
be obligated to) make any advance (or take, consistent with Section 6.4.1
above, any other action at the expense of Borrower) that the Bank may deem
necessary or appropriate in order to protect, defend, enforce or preserve
any of its rights or interests with respect to any Collateral or Loan
Documents, including by curing any monetary obligation of Borrower directly
or indirectly (through the Partnership or LLC) owing under the LLC
Operating Agreement or any of the Aetna Loan Documents. Any such amount
advanced by the Bank hereunder shall be added to the principal balance
owing under the New Note, shall bear interest at the rate specified therein
and shall be secured and supported by the same security and Loan Documents
as if included in the New Note indebtedness.
6.5 BENEFITS OF AGREEMENT. This Agreement and the other Loan
Documents are entered into for the sole protection and benefit of the par-
ties hereto and their respective permitted successors and assigns, and no
other person or entity shall be a direct or indirect beneficiary of, nor
shall have any direct or indirect cause of action or claim in connection
with, this Agreement or any other Loan Document.
6.6 ACKNOWLEDGMENTS. The Bank's activities in connection
with this Agreement, all other Loan Documents and Borrower are not "outside
the scope of the activities of a lender of money" within the meaning of
Section 3434 of the California Civil Code. The Bank shall not be liable or
responsible for any acts, omissions or decisions of Borrower. The Bank is
not, and shall not be construed as, a partner of, joint venturer with or
controlling person of Borrower.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
6.8 BINDING EFFECT; ASSIGNMENT.
6.8.1BINDING EFFECT. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by Borrower, the Bank and
their respective permitted successors and assigns.
6.8.2ASSIGNMENT. Borrower shall not have the right to
assign its rights and obligations hereunder or under the other Loan
Documents or any interest herein or therein or any Collateral without the
prior written consent of the Bank. The Bank may sell, assign, transfer or
grant a participation interest in all or any portion of the Bank's rights
and obligations hereunder and under the other Loan Documents and in
connection therewith may disclose any information and documents as are
available to the Bank at any time.
6.8.3REAFFIRMATION. Borrower hereby reaffirms the
validity and continued enforceability of each and every term of the
Original Loan Documents as set forth therein, except as expressly modified
in this Agreement and other New Documents.
6.9 WAIVER OF JURY TRIAL. BORROWER AND THE BANK HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF
THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. BORROWER AND THE BANK HEREBY
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT IN ANY WAY LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS. A COPY OF THIS SECTION 6.9 MAY BE FILED WITH ANY
COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND
CONSENT TO TRIAL BY COURT.
6.10 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents reflect the entire agreement between Borrower and the Bank with
respect to the matters set forth herein and therein and supersede any prior
agreements, term sheets, letters of intent, commitments, discussions and
understandings, oral or written.
6.11 SEVERABILITY. If one or more provisions contained in
this Agreement or the other Loan Documents shall be determined by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect in any jurisdiction or with respect to any
party, such invalidity, illegality or unenforceability in such jurisdiction
or with respect to such party shall, to the fullest extent permitted by
applicable law, not invalidate or render illegal or unenforceable any such
provision in any other jurisdiction or with respect to any other party, or
any other provisions of this Agreement or the other Loan Documents.
6.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counter-
parts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute but one and the same
agreement.
6.13 LIMITED LIABILITY. In the event that suit is brought
under this Agreement or any of the Loan Documents, any judgment obtained in
or as a result of such suit shall be enforceable solely against the
Collateral, and Borrower and its partners shall have no personal liability
therefor.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed this Agreement as of the date first above written.
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV, an Illinois
limited partnership
By: JMB Realty Corporation
By: _____________________________
Title: __________________________
Address:_________________________
_________________________________
Fax No.:_________________________
WELLS FARGO BANK, N.A.
By: _____________________________
Title: __________________________
Address:_________________________
_________________________________
Fax No.:_________________________
GLOSSARY OF TERMS
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Loan Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Original Security Agreement . . . . . . . . . . . . . . . . . . . . . 1
Original Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 1
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Maguire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Carlyle 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LLC Operating Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
Carlyle 15 Loan Agreement . . . . . . . . . . . . . . . . . . . . . . 1
Carlyle 15 Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Carlyle 15 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Carlyle 15 Security Agreement . . . . . . . . . . . . . . . . . . . . 2
Original Carlyle 15 Loan Documents. . . . . . . . . . . . . . . . . . 2
New Carlyle 15 Documents. . . . . . . . . . . . . . . . . . . . . . . 2
Carlyle 15 Loan Documents . . . . . . . . . . . . . . . . . . . . . . 2
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Aetna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Aetna Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Aetna Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . 3
Amended Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . 3
Aetna Restructuring Documents . . . . . . . . . . . . . . . . . . . . 3
Pro Rata Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . 4
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 4
New Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Insider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
New Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
New Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Wells Fargo Bank Addendum . . . . . . . . . . . . . . . . . . . . . . 6
Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Supplemental Security Agreement . . . . . . . . . . . . . . . . . . . 7
Security Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 7
UCC-1 Financing Statement . . . . . . . . . . . . . . . . . . . . . . 7
Extension Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Carlyle 15 Modification Agreement . . . . . . . . . . . . . . . . . . 9
Subject Disbursements . . . . . . . . . . . . . . . . . . . . . . . . 9
Property Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management Disbursements. . . . . . . . . . . . . . . . . . . . . . . 10
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Aetna Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
outside the scope of the activities of a lender of money. . . . . . . 18
TABLE OF EXHIBITS
Exhibit<PAGE>
Description
A<PAGE>
Property Description
B<PAGE>
New Note
C<PAGE>
Release
D<PAGE>
Notice of Assignment and Acknowledgement of Receipt
E<PAGE>
Security Agreement
F<PAGE>
UCC-1 Financing Statement
G<PAGE>
Wells Fargo Bank Addendum
ANNEX A
TO LOAN MODIFICATION AGREEMENT
(CARLYLE XIV)
DEFINITION OF COLLATERAL
------------------------
All of Borrower's obligations now or hereafter owing to the Bank
under the Loan Documents shall be secured by the following "Collateral":
A. (a) any and all partnership interests of Borrower in
Maguire Thomas Partners-South Tower, a California limited partnership (the
"Partnership") and membership interests of Borrower in Maguire Thomas
Partners-South Tower, LLC, a California limited liability company (the
"LLC"), now existing or hereafter acquired (collectively, the
"Partnership/Membership Interests"), and all distributions, capital and
profits, cash, warrants, rights, certificates, instruments, chattel paper,
accounts, contract rights, general intangibles, and other rights, property
or proceeds and products from time to time evidencing, arising from,
relating to, received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Partnership/Membership Interests; (b) all
additional rights to purchase interests in the Partnership or the LLC from
time to time acquired by Borrower in any manner (which interests shall be
deemed to be part of the Partnership/Membership Interests), the
certificates or other instruments representing such additional interests,
if any, and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such additional interests or other rights; (c) any and all accounts,
contract rights, instruments, chattel paper, general intangibles and other
rights to payment arising from or under or as provided in the LLC Operating
Agreement or Partnership Agreement, in each case, as the same may be
amended, supplemented or modified from time to time; and (d) to the extent
not covered by clauses (a), (b) and (c) above, all Proceeds of any or all
of the foregoing. The term "Proceeds" shall have the meaning assigned that
term under the Uniform Commercial Code (the "Code") as in effect in the
State of California and the State of Illinois, as applicable, whether
consisting of general intangibles, accounts, contract rights, instruments,
chattel paper, or other rights to payment or kinds of property, and in any
event shall include, but not be limited to, any and all (A) proceeds of any
indemnity or guaranty payable to Borrower or Bank from time to time with
respect to any of the Collateral, and (B) any other amounts from time to
time paid or payable under or in connection with any of the Collateral.
B. all of Borrower's right, title and interest: (a) as a
partner in and to the Partnership and as a member in and to the LLC,
whether now owned or hereafter acquired, including, but not limited to, any
management and voting rights with respect to the Partnership/Membership
Interests, (b) all other property which, absent this Agreement would, now
or hereafter, be distributable or distributed, transferable or transferred,
payable or paid, or deliverable or delivered to Borrower as a partner in
the Partnership or a member in the LLC, as applicable, whether at any time
prior to, or in connection with, or after the dissolution of the
Partnership or the LLC, if any, including, without limitation,
distributions of cash and of property in kind by the Partnership or the LLC
(collectively, "Distributions"), and (c) all other rights, interests,
claims and other property of Borrower in any manner arising out of or
relating to the Partnership/Membership Interests, whether such rights,
interests, claims or other property are now owned or hereafter acquired by
Borrower, whatever their respective kind or character, whether they are
tangible or intangible property, and wheresoever they may exist or be
located, including, without limitation, all Proceeds, goods, documents,
instruments, claims, general tangibles, chattel paper, accounts and deposit
accounts (as such terms are defined in the Code), if any, now owned or
hereafter acquired by Borrower and in any manner arising out of or relating
to the Partnership/Membership Interests, and further including, without
limitation, all of the rights of Borrower as a holder of the
Partnership/Membership Interests to: (1) operate the business of the
Partnership or the LLC and deal with and receive the benefit from the
Partnership's or the LLC's assets; (2) receive proceeds of any indemnity,
warranty or guaranty under any agreement between Borrower and any other
party or entity associated with the Partnership or the LLC or otherwise
arising by operation of law for the account of Borrower, including any
rights of equitable or implied indemnity arising in connection with any
acts or omissions of Borrower in connection with the LLC or Partnership or
their assets; (3) receive fees, income, rents, proceeds of sale, issues,
earnings, deposits, receipts, royalties, revenues, recoveries,
compensation, permits, trade or business names, franchises, claims and
causes of action arising out of or relating to the Partnership or the LLC,
and all other rights, powers, property and remedies of Borrower with
respect to any of the foregoing; and (4) access the Partnership's or the
LLC's books and records and to the other information concerning or
affecting the Partnership or the LLC.
In the event that suit is brought under any of the Loan Documents,
any judgment obtained in or as a result of such suit shall be enforceable
solely against the Collateral, and Borrower and its partners shall have no
personal liability therefor.
ANNEX B
TO LOAN MODIFICATION AGREEMENT
(CARLYLE XIV)
Legal Fees and Expenses
(from January 1, 1996
through the Closing Date) $29,754.28 (35% of
$85,012.23)
EXHIBIT 10-U
- ------------
(C-XIV)
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
--------------------------------------------------
(Mariners Pointe Apartments; Stockton, California)
THIS AGREEMENT is made and entered into as of the ________ day of
August, 1996, by and between MARINERS POINTE ASSOCIATES, LTD., an Illinois
limited partnership (hereinafter called "SELLER"), and MARINERS POINTE
L.L.C., a Delaware limited liability company (hereinafter called "BUYER").
R E C I T A L S
---------------
A. Seller is the owner of that certain real property located at
8275 Mariner Drive, in the City of Stockton, County of San Joaquin, State
of California, consisting primarily of an apartment complex (the
"PREMISES") sometimes known as "Mariners Pointe Apartments."
B. Buyer desires to purchase such Premises on the terms and
conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. PURCHASE AND SALE. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the land (the "LAND") described in Exhibit "A",
attached hereto and made a part hereof, together with all right, title and
interest of Seller in and to all improvements, structures and fixtures
located upon the Land, all right, title and interest of Seller in and to
those items of personal property described in Exhibit "B" hereto and made a
part hereof, all right, title and interest of Seller in and to the name
"Mariners Pointe Apartments" and, to the extent assignable, all right,
title and interest of Seller in and to all leases, contract rights,
agreements, tenant lists, advertising material and telephone exchange
numbers (hereinafter, collectively, the "PROPERTY"), all upon the terms,
covenants and conditions hereinafter set forth.
2. PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for
the Property shall be the sum of $7,600,000.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid to
Seller by Buyer as follows:
A. ESCROW DEPOSIT. Concurrently herewith, Buyer shall
deliver $150,000 (which deposit, together with all interest earned thereon,
is herein called the "ESCROW DEPOSIT") to Stewart Title Guaranty Company,
through its agent, Central Valley Title Company in Stockton, California,
Attention: Richard Freed (which company, in its capacity as escrow holder
hereunder, is called "ESCROW HOLDER"). The Escrow Deposit shall be
delivered to Escrow Holder by wire transfer of immediately available
federal 7 funds or by bank or cashier's check drawn on a national bank
reasonably satisfactory to Seller. The amounts deposited hereunder shall
be held by Escrow Holder as a deposit against the Purchase Price in
accordance with the terms and provisions of this Agreement. At all times
that the Escrow Deposit is being held by the Escrow Holder, the Escrow
Deposit shall be invested by Escrow Holder in the following investments
("APPROVED INVESTMENTS"): (i) United States Treasury obligations, (ii)
United States Treasury-backed repurchase agreements issued by a major money
center banking institution reasonably acceptable to Seller, or (iii) such
other manner as may be reasonably agreed to by Seller and Buyer. The
Escrow Deposit shall be disposed of by Escrow Holder only as provided in
this Agreement.
B. ASSUMPTION OF BOND FINANCING. A portion of the Purchase
Price shall be payable by Buyer assuming the obligations of Seller under
the "Bond Documents" (as defined in Exhibit "C" attached hereto and made
apart hereof), such portion of the Purchase Price so payable being an
amount equal to the outstanding principal balance of the Bond Documents as
of the "Closing Date", as hereinafter defined (such amount being herein
called the "OUTSTANDING BOND AMOUNT"). The Outstanding Bond Amount as of
the Closing Date (assuming a closing in August, 1996) will be approximately
$6,500,000.
C. CLOSING PAYMENT. The balance of the Purchase Price
(i.e., $7,600,000 minus the Outstanding Bond Amount), as adjusted by the
application of the Escrow Deposit and by the prorations and credits
specified herein, shall be paid in cash on the "Closing Date", as
hereinafter defined (the amount to be paid under this subparagraph C being
herein called the "CLOSING PAYMENT"). Assuming the Closing Date occurs in
August, 1996, the Closing Payment is estimated to be $1,100,000 (prior to
application of the Escrow Deposit and adjustment for the prorations and
credits provided for in this Agreement).
4. CONDITIONS PRECEDENT
A. TITLE MATTERS.
(1) TITLE REPORT. Seller has delivered to Buyer a copy
of a preliminary title report ("PRELIMINARY TITLE REPORT") order number
01014685 dated August 9, 1996 covering the Property from Central Valley
Title Company, as agent for Stewart Title Guaranty Company (which company,
in its capacity as title insurer hereunder, is herein called the "TITLE
COMPANY"). In addition, Seller has delivered to Buyer a copy of a survey
of the Property dated March 26, 1996, prepared by Siegfried Engineering,
which survey shall be certified to Buyer ("SURVEY"). Buyer has approved
the exceptions to title shown on the Preliminary Title Report and the
matters disclosed on the Survey. Approval by Buyer of any additional
exceptions to title or survey matters disclosed after the date hereof shall
be a condition precedent to Buyer's obligation to purchase the Property
(Buyer hereby agreeing that its approval of such matters shall not be
unreasonably withheld). Unless Buyer gives written notice that it
disapproves any such additional exceptions to title or survey matters,
stating the exceptions so disapproved, on or before the sooner to occur of
10 days after receipt of written notice thereof or the Closing Date, Buyer
shall be deemed to have approved said exceptions or survey matters. If,
for any reason, on or before the Closing Date Seller does not cause such
exceptions to title or survey matters which Buyer disapproves (to the
extent Buyer is permitted hereunder to so disapprove) to be removed at no
cost or expense to Buyer (Seller having the right but not the obligation to
do so), the obligation of Seller to sell, and Buyer to buy, the Property as
herein provided shall terminate in accordance with paragraph 9 hereof.
Notwithstanding anything to the contrary contained in this Agreement,
Seller shall be obligated to remove (or cause the Title Company to
affirmatively insure over) at Seller's expense: (i) any deeds of trust
securing any financing obtained by Seller (other than Bond Documents),
(ii) any mechanic's or materialmen's liens for work done by or on behalf of
Seller, and (iii) any tax or judgment liens against Seller. Buyer shall
have the option to waive the condition precedent set forth in this
paragraph 4A(1) by notice to Seller. In the event of such waiver, such
condition shall be deemed satisfied.
(2) EXCEPTIONS TO TITLE. Buyer shall be obligated to
accept title to the Property, subject to the following exceptions to title:
(a) Real estate taxes and assessments not yet due
and payable;
(b) The Bond Documents;
(c) The printed exceptions which appear in the
standard form ALTA owner's policy of title insurance issued by Title
Company; and
(d) Such exceptions to title as may be approved
by Buyer pursuant to the provisions of subparagraph A(1) above. The
availability of title insurance as set forth above is a condition precedent
to Buyer's obligation to purchase the Property. Conclusive evidence of the
availability of such title insurance shall be the commitment of Title
Company to issue to Buyer on the Closing Date a standard form ALTA owner's
title insurance policy ("OWNER'S POLICY"), in the face amount of the
Purchase Price, which policy shall show (i) title to the Property to be
vested of record in Buyer, and (ii) the above exceptions to be the only
exceptions to title.
B. COMPLETED DUE DILIGENCE REVIEWS.
(1) PRICE REFLECTIVE OF REVIEWS. Buyer has performed
and completed all of Buyer's due diligence examinations, reviews and
inspections of all matters pertaining to the purchase of the Property,
including all leases, documents relating to the bond financing (including
Bond Documents), service contracts, survey and title matters, and all
physical, environmental and compliance matters and conditions respecting
the Property. Seller and Buyer have discussed the results of Buyer's due
diligence examinations, reviews and inspections and the Purchase Price has
been determined to appropriately take such due diligence matters into
account to Buyer's satisfaction.
(2) CONDUCT OF REVIEWS. Buyer will indemnify, defend,
and hold Seller and the Property harmless from and against any such damage,
loss, cost or expense for personal injury or property damage caused by
Buyer or its agents in connection with its due diligence reviews,
inspections or examinations. Buyer hereby represents and warrants to
Seller that Buyer did not make any intrusive physical testing
(environmental, structural or otherwise) at the Property (such as soil
borings or the like) and has or promptly hereafter will return the Property
to its prior condition and repair. Upon request by Seller, Buyer shall
promptly deliver to Seller true, accurate and complete copies of any
written reports relating to the Property prepared for or on behalf of Buyer
by any third party. In the event of termination hereunder, Buyer shall
return all documents and other materials furnished by or on behalf of
Seller hereunder. Buyer hereby represents and warrants that Buyer has, and
at all times hereinafter, shall, keep all information or data received or
discovered in connection with any of the inspections, reviews or
examinations strictly confidential, except to the extent that disclosure is
required by law. The provisions of this paragraph 4B shall survive the
closing of the transactions hereunder (or the earlier termination of this
Agreement).
C. BOND FINANCING MATTERS. Receipt of the written consent
to the transactions contemplated herein from all parties whose consent to
the assumption by Buyer of such Bond Documents is required thereunder,
together with a release of Seller from any liability under the Bond
Documents, and an "estoppel certificate" executed by the City of Stockton
and the Indenture Trustee certifying that the Bond Documents are in full
force and effect and that no default exists thereunder, shall be conditions
precedent to Seller's obligation to sell, and Buyer's obligation to
purchase, the Property. Buyer shall pay any transfer, assumption or other
fees and costs (including reasonable attorneys' fees, but not attorneys'
fees of Seller's counsel) imposed by any of such parties with respect to
such consent and assumption. Buyer shall reasonably cooperate with Seller
in connection with such consent and assumption (and shall promptly deliver
such information, including financial information, respecting Buyer or its
principals as any of such parties may request). Seller's sole obligations
in connection with the consent matters herein contemplated (unless Buyer
agrees otherwise) shall be to utilize reasonable efforts to obtain such
consents, and to reasonably cooperate with Buyer to the extent necessary,
including, but not limited to, with respect to its efforts in connection
with substitution of the letter of credit. If such consents are not
obtained on or before the Closing Date, the obligation of Seller to sell,
and Buyer to purchase, the Property shall terminate. Further, Seller
agrees to reasonably cooperate with Buyer after the Closing Date in
connection with any effort by Buyer to refund the Bonds and to replace them
with other bonds to be issued by the City of Stockton. The foregoing
agreement shall survive the Closing Date. Whenever the phrases "reasonable
efforts" or "reasonable cooperation" or "reasonably cooperate" or similar
words or phrases are used herein, Seller's obligation shall not include any
obligation to institute legal proceedings or to expend any monies with
respect thereto.
D. PERFORMANCE BY SELLER. The performance and observance,
in all material respects, by Seller of all covenants and agreements of this
Agreement to be performed or observed by Seller prior to or on the Closing
Date shall be a condition precedent to Buyer's obligation to purchase the
Property. In addition, in the event that (i) the "Seller Closing
Certificate" (as hereinafter defined) shall disclose any material adverse
changes in the representations and warranties of Seller contained in
paragraph 7A below which are not otherwise permitted or contemplated by the
terms of this Agreement, or (ii) the Property is not in substantially the
same condition on the Closing Date as it is on the date hereof, reasonable
wear and tear and, subject to paragraph 6 hereof, casualty and condemnation
excepted, then Buyer shall have the right to terminate this Agreement and,
upon the exercise of such right, a return of the Escrow Deposit. Buyer
shall have the option to waive the condition precedent set forth in this
paragraph 4D by written notice to Seller. In the event of such waiver,
such condition shall be deemed satisfied.
E. PERFORMANCE BY BUYER. The performance and observance, in
all material respects, by Buyer of all covenants and agreements of this
Agreement to be performed or observed by Buyer prior to or on the Closing
Date shall be a condition precedent to Seller's obligation to sell the
Property. In addition, in the event that the "Buyer Closing Certificate"
(as hereinafter defined) shall disclose any material adverse changes in the
representations and warranties of Buyer contained in paragraph 7B below
which are not otherwise permitted or contemplated by the terms of this
Agreement, then Seller shall have the right to terminate this Agreement
and, upon the exercise of such right, a return of the Escrow Deposit.
Seller shall have the option to waive the condition precedent set forth in
this paragraph 4D by written notice to Buyer. In the event of such waiver,
such condition shall be deemed satisfied.
5. CLOSING PROCEDURE TRANSACTIONS. The sale and purchase herein
provided shall be consummated at a closing conference ("CLOSING
CONFERENCE"), which shall be held on the Closing Date at the offices of
Seller's counsel, Pircher, Nichols & Meeks at 1999 Avenue of the Stars,
Suite 2600, Los Angeles, California 90067. As used herein, "CLOSING DATE"
means September 16, 1996, or such earlier date as may be agreed upon by
Buyer and Seller; provided, however, if any of the conditions to closing
set forth in this Agreement are not satisfied on or before the Closing Date
or if Buyer shall claim that Seller is in default or has otherwise breached
its obligations under this Agreement, Seller shall have the right, at its
sole option, to extend the Closing Date for up to fifteen (15) days in
order to attempt to satisfy such conditions or cure such defaults or
breaches, provided such extension does not interfere with compliance with
any application period required under the Bond Documents. Notwithstanding
anything herein to the contrary, the Closing Date shall be delayed as
reasonably necessary for the purpose of complying with any application
period required under the Bond Documents relative to the substitution of
the letter of credit; provided, however, that in no event shall the Closing
Date be later than October 1, 1996. Seller shall be required to pay any
extension fees required with respect to extending the date for substitution
of the letter of credit beyond the date presently provided in the Bond
Documents (i.e., 45 days prior to October 2, 1996).
A. ESCROW. Prior to the Closing Date, the parties shall
deliver to Title Company, at its office in Stockton, California, the
following: (1) by Seller, a duly executed and acknowledged original grant
deed ("DEED") in favor of Buyer, in the form of Exhibit "D" attached hereto
and made a part hereof, and (2) by Buyer, the Closing Payment in
immediately available federal funds. Such deliveries shall be made
pursuant to escrow instructions ("ESCROW INSTRUCTIONS") to be executed
among Buyer, Seller and Title Company in form reasonably acceptable to such
parties in order to effectuate the intent hereof. The conditions to the
closing of such escrow shall include the Title Company's receipt of the
Deed, the Closing Payment and an authorization notice from each of Buyer
and Seller (and each of Buyer and Seller shall be obligated to deliver such
authorization notice at the Closing Conference as soon as it is reasonably
satisfied that the other party is in a position to deliver the items to be
delivered by such other party under subparagraph B below).
B. DELIVERY TO PARTIES. Upon the satisfaction of the
conditions set forth in the Escrow Instructions, then (1) the Deed shall be
delivered to Buyer by Title Company's depositing the same for recordation,
(2) the Closing Payment (and the Deposit) shall be delivered to Seller and
(3) at the Closing Conference, the following items shall be delivered:
(1) SELLER DELIVERIES. Seller shall deliver to Buyer
the following:
(a) A duly executed and acknowledged bill of
sale, assignment and assumption agreement ("ASSIGNMENT AND ASSUMPTION
AGREEMENT") in the form of Exhibit "E" attached hereto and made a part
hereof;
(b) Duly executed and acknowledged certificates
regarding the "non-foreign" status of Seller satisfying both federal and
state law requirements;
(c) Appropriate documentation to evidence the
assignment and assumption of the Bond Documents as may be reasonably
required in order to effectuate the release, assignment and assumption
transactions respecting the Bond Documents as contemplated in this
Agreement;
(d) A certificate of Seller ("SELLER CLOSING
CERTIFICATE") updating the representations and warranties contained in
paragraph 7A hereto to the Closing Date and noting any changes thereto;
(e) Evidence reasonably satisfactory to Buyer and
Escrow Holder respecting the due organization of Seller and the due
authorization and execution of this Agreement and the documents required to
be delivered hereunder;
(f) To the extent in Seller's possession and
control, all of the original tenant leases respecting the Property and
written Service Agreements, books and records directly relating to, and
necessary for the operation of the Property, licenses and permits affecting
the Property, and all keys for the Property, with identification of the
lock to which each such key relates (provided, however, that the items
specified in this subsection (d) shall remain at and be turned over to
Buyer on the Closing Date at the Property); and
(g) Such additional documents as may be
reasonably required by Buyer and Title Company in order to consummate the
transactions hereunder (provided the same do not materially increase the
costs to, or liability or obligations of, Seller in a manner not otherwise
provided for herein).
(2) BUYER DELIVERIES. Buyer shall deliver to Seller
the following:
(a) A duly executed and acknowledged Assignment
and Assumption Agreement;
(b) Appropriate documentation to evidence the
assignment and assumption of the Bond Documents as may be reasonably
required in order to effectuate the release, assignment and assumption
transactions respecting the Bond Documents as contemplated in this
Agreement;
(c) A certificate of Buyer ("BUYER CLOSING
CERTIFICATE") updating the representations and warranties contained in
paragraph 7B hereto to the Closing Date and noting any changes thereto;
(d) Evidence reasonably satisfactory to Seller
and Escrow Holder respecting the due organization of Buyer and the due
authorization and execution of this Agreement and the documents required to
be delivered hereunder; and
(e) Such additional documents as may be
reasonably required by Seller and Title Company in or to consummate the
transactions hereunder (provided the same do not materially increase the
costs to, or liability or obligations of, Buyer in a manner not otherwise
provided for herein).
C. CLOSING COSTS. Seller shall pay (i) one-half of the
escrow fees of Escrow Holder, (ii) the title insurance premium (at a rate
not in excess of standard issue rates) attributable to standard CLTA
coverage respecting the Owner's Policy, (iii) all documentary or transfer
taxes attributable to the Deed; and (iv) the costs of certifying the Survey
to Buyer as set forth in this Agreement. Buyer shall pay (i) one-half of
the escrow fees of Escrow Holder, (ii) the title insurance premium
attributable to the Owner's Policy in excess of standard CLTA coverage, as
well as any costs attributable to ALTA or for so-called "extended coverage"
or any endorsements to the Owner's Policy, to the extent any of the
foregoing is requested by Buyer, (iii) all costs and expenses related to
Buyer's due diligence examinations, reviews and inspections, and (iv) all
recording charges attributable to the recordation of any documents
contemplated in this Agreement. Seller and Buyer shall each pay its
respective shares of prorations as hereinafter provided.
D. PRORATIONS.
(1) ITEMS TO BE PRORATED. The following shall be
prorated between Seller and Buyer as of the Closing Date:
(a) All real estate taxes and assessments on the
Property for the current year. If tax refunds become available for periods
prior to the Closing Date, such amounts shall be promptly paid to Seller.
Except as set forth below, if any supplemental taxes are imposed against
the Property after the Closing Date which relate to any period in which
Seller was the owner of the Property, Seller shall, promptly upon receipt
of written demand from Buyer thereof, pay the same (or Seller's prorated
portion thereof if any part of such supplemental taxes relate to the period
after the Closing Date). Notwithstanding anything to the contrary in this
Agreement, in no event shall Seller be charged with or be responsible for
any increase in the taxes on the Property resulting from the sale of the
Property or from any improvements made or leases entered into on or after
the Closing Date. In the event that any assessments on the Property are
payable in installments, then the installment for the current period shall
be prorated (with Buyer assuming the obligation to pay any installments due
after the Closing Date).
(b) All fixed and additional rentals under the
leases, other regular monthly revenue generated by the Property, refundable
security deposits and other tenant charges. Seller shall deliver or
provide a credit in an amount equal to all prepaid rentals for periods
after the Closing Date and all refundable security deposits set forth in
the attached Rent Roll to Buyer on the Closing Date. No security deposits
shall be applied to rents or forfeited to Seller after the date of the
Agreement; provided, however, that notwithstanding the foregoing, Seller
shall be permitted to apply security deposits to forfeited rents from
tenants who have vacated their premises. Rents which are delinquent as of
the Closing Date shall not be prorated on the Closing Date. Seller shall
provide a list of all such delinquencies to Buyer as of the Closing Date.
Buyer shall include such delinquencies in its normal billing and shall
diligently pursue the collection thereof in good faith after the Closing
Date (but Buyer shall not be required to litigate or declare a default in
any Lease). To the extent Buyer receives rents on or after the Closing
Date, such payments shall be applied first toward then current rent owed to
Buyer in connection with the applicable lease for which such payments are
received, and any excess monies received shall be applied toward the
payment of any delinquent rents, with Seller's share thereof being promptly
delivered to Seller. Buyer may not waive any delinquent rents nor modify a
Lease so as to reduce or otherwise affect amounts owed thereunder for any
period in which Seller is entitled to receive a share of charges or amounts
without first obtaining Seller's written consent. Seller hereby reserves
the right to pursue any remedy (other than an unlawful detainer proceeding
after the Closing Date) against any tenant owing delinquent rents and any
other amounts to Seller. Buyer shall reasonably cooperate with Seller in
any collection efforts hereunder (but shall not be require to litigate or
declare a default in any Lease and Buyer shall not be required to incur any
out-of-pocket costs in connection therewith). With respect to delinquent
rents and any other amounts or other rights of any kind respecting tenants
who are no longer tenants of the Property as of the Closing Date, Seller
shall retain all rights relating thereto.
(c) Interest and any other payments, fees and
charges owed under the Bond Documents, including, but not limited to, any
amounts owed to the City of Stockton, the Indenture Trustee, the
remarketing agent, loan administrator or any other party thereunder.
(d) All operating expenses (including expenses
under the "Service Agreements", as hereinafter defined).
(2) CALCULATION. The prorations and payments shall be
made on the basis of a written statement prepared by Seller prior to the
Close of Escrow and approved by Buyer and Seller. In the event any
prorations or apportionments made under this subparagraph D shall prove to
be incorrect for any reason, then any party shall be entitled to an
adjustment to correct the same. Any item which cannot be finally prorated
because of the unavailability of information shall be tentatively prorated
on the basis of the best data then available and reprorated when the
information is available.
6. CONDEMNATION OR DESTRUCTION OF PROPERTY. In the event that,
after the date hereof but prior to the Closing Date, either any portion of
the Property is taken pursuant to eminent domain proceedings or any of the
improvements on the Property are damaged or destroyed by any casualty,
Seller shall have no obligation to repair or replace any such damage or
destruction. Seller shall, upon consummation of the transaction herein
provided, assign to Buyer all claims of Seller respecting any condemnation
or casualty insurance coverage, as applicable, and all condemnation
proceeds or proceeds from any such casualty insurance received by Seller on
account of any casualty (the damage from which shall not have been repaired
by Seller prior to the Closing Date), as applicable. In the event the
condemnation award or the cost of repair of damage to the Property on
account of a casualty, as applicable, shall exceed $250,000, Buyer may, at
its option, terminate this Agreement by notice to Seller, given on or
before the Closing Date. In the event the condemnation award or the cost
of repair of damage to the Property on account of a casualty, as
applicable, is less than $250,000, and the available insurance (less any
deductible or coinsurance payment, which Seller shall pay or credit against
the Purchase Price if Buyer does not elect to terminate this Agreement;
provided, however, that Seller's obligation to pay or credit the deductible
or co-insurance payment as aforesaid shall in no event exceed $100,000) or
condemnation proceeds, are less than that amount, and Seller does not elect
to credit Buyer with an amount equal to the differential, Seller having the
right, but not the obligation to do so, Buyer may, at its option, terminate
this Agreement by notice to Seller, given on or before the Closing Date and
receive a refund of the Escrow Deposit.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
A. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
(1) GENERAL DISCLAIMER. Except as specifically set
forth in paragraph 7A(2) below, the sale of the Property hereunder is and
will be made on an "as is" basis, without representations and warranties of
any kind or nature, express, implied or otherwise, including, but not
limited to, any representation or warranty concerning title to the
Property, the physical condition of the Property (including, but not
limited to, the condition of the soil or the Improvements), the
environmental condition of the Property (including, but not limited to, the
presence or absence of hazardous substances on or respecting the Property),
the compliance of the Property with applicable laws and regulations
(including, but not limited to, zoning and building codes or the status of
development or use rights respecting the Property), the financial condition
of the Property or any other representation or warranty respecting an
income, expenses, charges, liens or encumbrances, rights or claims on,
affecting or pertaining to the Property or any part thereof. Buyer
acknowledges that Buyer has examined, reviewed and inspected all matters
which in Buyer's judgment bear upon the Property and its value and
suitability for Buyer's purposes. Except as to matters specifically set
forth in paragraph 7A(2) below, Buyer will acquire the Property solely on
the basis of its own physical and financial examinations, reviews and
inspections and the title insurance protection afforded by the Owner's
Policy.
(2) REPRESENTATIONS AND WARRANTIES OF SELLER. Subject
to the provisions of paragraph 7A(1) above, Seller hereby represents and
warrants that, on the date hereof, except as set forth in Exhibit "F"
attached hereto and made a part hereof, Seller has no present actual
knowledge that any of the following statements is untrue (and, for this
purpose, Seller's knowledge shall mean the knowledge of Douglas Welker,
after having made a reasonable due inquiry of the on-site property manager
for Heitman Properties, Ltd. ("HEITMAN"), Seller's third party management
company, with respect to the representations and warranties contained
herein).
(a) RENT ROLL. Attached as Exhibit "G" and made
a part hereof is a true, complete and accurate list, as of the date
thereof, of all tenant leases respecting the Property, including the rent
and other sums payable thereunder, the security deposit held with respect
thereto, and the term thereof (including any options to renew). Seller has
not received any written notice of a material default under any of such
tenant leases that remains uncured. There are no other leases, subleases
or other agreements, written or oral, concerning the occupancy of the
Property now in effect.
(b) LITIGATION. There is no pending, and Seller
has received no written notice of any threatened, action, litigation,
arbitration, administrative action or proceeding, condemnation or other
proceeding against the Property or against Seller with respect to the
Property.
(c) COMPLIANCE. Seller has received no written
notice from any governmental authority having jurisdiction over the
Property to the effect that the Property is not in compliance with
applicable laws, ordinances and rules and regulations.
(d) SERVICE AGREEMENTS. Seller has not entered
into any service agreements or contracts ("SERVICE AGREEMENTS") or other
agreements (other than as set forth in this Agreement) relating to the
Property which will be in force on the Closing Date, except as described in
Exhibit "H" attached hereto, and Seller has not received any written notice
of any material default thereunder that remains uncured.
(e) DUE AUTHORITY. This Agreement and all
agreements, instruments and documents herein provided to be executed or to
be caused to be executed by Seller are and on the Closing Date will be duly
authorized, executed and delivered by and are binding upon Seller. Seller
is a limited partnership, duly organized and validly existing under the
laws of the State of Illinois, and is duly authorized and qualified to do
all things required of it under this Agreement. Seller has the capacity
and authority to enter into this Agreement and consummate the transactions
herein provided.
(f) NO OTHER AGREEMENTS. Seller has not entered
into any contracts for sale, exchange or other disposition of the Property
or any portion thereof, nor do there exist any rights of first refusal,
options or other rights of any other party to purchase all or any portion
of the Property (except as reflected in the Tenant Leases and in the
documents reflected as exceptions in the Preliminary Title Report).
(g) TRUE AND COMPLETE COPIES. The Tenant Leases
and Service Agreements delivered to or otherwise made available to Buyer
are true and correct copies of the same and include all modifications and
amendments thereto. All operating statements delivered to or otherwise
made available to Buyer for the years of 1994 and 1995, and for the year to
date through June, 1996, were prepared in the usual course of Seller's
business.
(h) BOND DOCUMENTS. Seller is not in monetary
default or material non-monetary default under the Bond Documents.
(i) NO ASSESSMENTS OR LIENS. Seller has received
no written notice of any pending or proposed assessments, liens or charges
against the Property relating in any way to the levee situated thereon
(except for ordinary real property taxes).
B. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller that: this Agreement and all agreements,
instruments and documents herein provided to be executed or to be caused to
be executed by Buyer are and on the Closing Date will be duly authorized,
executed and delivered by and are binding upon Buyer; Buyer is a limited
liability company, duly organized and validly existing [and in good
standing] under the laws of the State of Delaware, and is duly authorized
and qualified to do all things required of it under this Agreement; and
Buyer has the capacity and authority to enter into this Agreement and
consummate the transactions herein provided.
C. SURVIVAL. Any cause of action of a party for a breach of
the foregoing representations and warranties shall survive until the date
which is one (1) year after the date of the Closing Date, at which time
such representations and warranties (and any cause of action resulting from
a breach thereof not then in litigation) shall terminate. Notwithstanding
the foregoing, if Buyer shall have actual knowledge as of the Closing Date
that any of the representations or warranties of Seller contained herein
are false or inaccurate or that Seller is in breach or default of any of
its obligations under this Agreement and Buyer shall not have given notice
to Seller of the foregoing, and Buyer nonetheless closes the transactions
hereunder and acquires the Property, then Seller shall have no liability or
obligation respecting such false or inaccurate representations or
warranties or other breach or default (and any cause of action resulting
therefrom shall terminate upon such closing hereunder).
D. INTERIM COVENANTS OF SELLER. Until the Closing Date or
the sooner termination of this Agreement:
(1) Seller shall maintain and operate the Property in
the same manner as prior hereto pursuant to its normal course of business
(such maintenance obligations not including extraordinary capital
expenditures or expenditures not incurred in such normal course of
business), subject to reasonable wear and tear and further subject to
destruction by casualty or other events beyond the control of Seller.
(2) Seller shall not enter into any additional Service
Agreements or other similar agreements without the prior consent of Buyer,
except those deemed reasonably necessary by Seller which are cancelable on
30 days' notice.
(3) Seller shall have the right to continue to offer
the Property for lease in the same manner as prior hereto pursuant to its
normal course of business and shall keep Buyer reasonably informed as to
the status of leasing prior to the Closing Date. Except for those leases
or modifications providing for terms of one year or less and rent at
Seller's current proforma rent level, Seller shall not enter into any new
leases or material modifications of existing leases without the consent of
Buyer (which consent will not be unreasonably withheld or materially
delayed).
(4) Seller will not modify or amend any of the Bond
Documents without the prior written consent of Buyer.
(5) Except as set forth in paragraph 7D(3) above or as
required by law, Seller will not, without the prior written consent of
Buyer, convey all or any portion of the Property, nor subject the Property
to any additional liens, encumbrances, covenants, conditions, easements,
rights of way or similar matters.
(6) Except as required by law, Seller will not make any
material alterations to the Property, or remove any of the personal
property therefrom (unless the personal property so removed is
simultaneously replaced with personal property of similar quality and
utility).
8. INDEMNIFICATION.
A. BY BUYER. Buyer shall hold harmless, indemnify and
defend Seller from and against: (1) any and all third party claims for
personal injury or property damage caused by Buyer's torts related to the
Property and occurring on or after the Closing Date, (2) any and all loss,
damage or third party claims in any way arising from Buyer's inspections or
examinations of the Property prior to the Closing Date; and (3) all costs
and expenses, including reasonable attorney's fees, incurred by Seller as a
result of the foregoing.
B. BY SELLER. Seller shall hold harmless, indemnify and
defend Buyer from and against: (1) any and all third party claims for
personal injury or property damage caused by Seller's torts related to the
Property and occurring prior to the Closing Date; and (2) all costs and
expenses, including reasonable attorney's fees, incurred by the Buyer as a
result of such claims. The foregoing indemnity shall not cover any matters
relating to title or marketability of the Property (Buyer relying on the
coverage provided by the Owner's Policy as to such matters).
C. GENERALLY. Each indemnification under this Agreement
shall be subject to the following provisions: The indemnitee shall notify
indemnitor of any such claim against indemnitee within 30 days after it has
notice of such claim, but failure to notify indemnitor shall in no case
prejudice the rights of indemnitee under this Agreement unless indemnitor
shall be prejudiced by such failure and then only to the extent of such
prejudice. Should indemnitor fail to discharge or undertake to defend
indemnitee against such liability within 10 days after the indemnitee gives
the indemnitor written notice of the same, then indemnitee may settle such
liability, and indemnitor's liability to indemnitee shall be conclusively
established by such settlement, the amount of such liability to include
both the settlement consideration and the reasonable costs and expenses,
including attorneys' fees, incurred by indemnitee in effecting such
settlement.
9. TERMINATION; DISPOSITION OF DEPOSIT. IF THE TRANSACTION HEREIN
PROVIDED SHALL NOT BE CLOSED BY REASON OF THE FAILURE OF SATISFACTION OF
ANY OF THE CONDITIONS DESCRIBED IN PARAGRAPH 4 HEREOF OR THE TERMINATION OF
THIS AGREEMENT IN ACCORDANCE WITH PARAGRAPH 6 HEREOF, THEN THE ESCROW
DEPOSIT SHALL BE RETURNED TO BUYER, AND NEITHER PARTY SHALL HAVE ANY
FURTHER OBLIGATION OR LIABILITY TO THE OTHER; PROVIDED, HOWEVER, THAT IN
ADDITION:
(X) IF THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE SOLELY BECAUSE
SELLER IS IN MATERIAL DEFAULT UNDER THIS AGREEMENT, (WHICH DEFAULT IS NOT
CURED WITHIN TEN (10) BUSINESS DAYS OF SELLER'S RECEIPT OF WRITTEN NOTICE
THEREOF FROM BUYER), AND BUYER SHALL HAVE FULLY PERFORMED ITS OBLIGATIONS
HEREUNDER AND SHALL BE READY, WILLING AND ABLE TO CLOSE THE TRANSACTIONS
CONTEMPLATED HEREIN, BUYER MAY TERMINATE THIS AGREEMENT AND UPON SUCH
TERMINATION, SELLER SHALL PAY TO BUYER AN AMOUNT NOT TO EXCEED $50,000 IN
THE AGGREGATE TO REIMBURSE BUYER FOR THE ACTUAL OUT-OF-POCKET EXPENSES PAID
BY BUYER TO UNAFFILIATED THIRD PARTIES SOLELY IN CONNECTION WITH THE
TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT; OR
(Y) IF THE TRANSACTIONS HEREUNDER SHALL FAIL TO CLOSE SOLELY
BECAUSE SELLER SHALL WILFULLY DEFAULT ANY OF ITS MATERIAL OBLIGATIONS WITH
THE INTENT TO DEPRIVE BUYER OF ITS RIGHT TO PURCHASE THE PROPERTY IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT (WHICH DEFAULT IS NOT CURED
WITHIN TEN (10) BUSINESS DAYS OF SELLER'S RECEIPT OF WRITTEN NOTICE THEREOF
FROM BUYER), AND BUYER SHALL BE READY, WILLING AND ABLE TO PERFORM ITS
OBLIGATIONS HEREUNDER, THEN BUYER SHALL BE PERMITTED TO INITIATE AN ACTION
AGAINST SELLER TO RECOVER ITS ACTUAL DAMAGES NOT TO EXCEED $150,000; OR
(Z) BUYER SHALL ALSO BE ENTITLED TO SPECIFICALLY ENFORCE THIS
AGREEMENT.
THE AMOUNTS SPECIFIED IN CLAUSES (X) AND (Y) ABOVE SHALL ONLY BE
PAYABLE AS A RESULT OF THE SPECIFIC DEFAULTS PROVIDED FOR IN SUCH CLAUSES
AND NOT BY REASON OF ANY OTHER DEFAULT OR BREACH HEREUNDER BY SELLER.
IN ADDITION, NO OTHER ACTION, FOR DAMAGES OR OTHERWISE (EXCEPT AS MAY
BE NECESSARY TO OBTAIN A RETURN OF THE ESCROW DEPOSIT OR TO OBTAIN THE
REIMBURSEMENT AMOUNTS AS SET FORTH IN CLAUSE (X) ABOVE, SELLER'S ACTUAL
DAMAGES FOR SELLER'S FAILURE TO DELIVER THE DEED TO TITLE COMPANY AS SET
FORTH IN CLAUSE (Y) ABOVE, OR TO SPECIFICALLY ENFORCE THIS AGREEMENT AS SET
FORTH IN CLAUSE (Z) ABOVE) SHALL BE PERMITTED IN CONNECTION WITH THIS
AGREEMENT. IN THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE AS
A RESULT OF THE DEFAULT OF BUYER, AND SELLER SHALL HAVE FULLY PERFORMED ITS
OBLIGATIONS HEREUNDER AND SHALL BE READY, WILLING AND ABLE TO CLOSE THE
TRANSACTIONS CONTEMPLATED HEREIN, THEN THE ESCROW DEPOSIT SHALL BE
DELIVERED TO SELLER AS FULL COMPENSATION AND LIQUIDATED DAMAGES UNDER AND
IN CONNECTION WITH THIS AGREEMENT. IN THE EVENT THE TRANSACTION HEREIN
PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL BE APPLIED AS A PARTIAL
PAYMENT OF THE PURCHASE PRICE. IN CONNECTION WITH THE FOREGOING LIQUIDATED
DAMAGES PROVISION, THE PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSE IN
CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE
PROPERTY WILL BE REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY
DIFFICULT AND IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER
CAUSED BY THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE
CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE
AMOUNT OF COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER'S BREACH
OR DEFAULT. IN THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED
ON ACCOUNT OF BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT
SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON
OF SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 10I HEREOF.
-------------------- --------------------
SELLER'S INITIALS BUYER'S INITIALS
10. MISCELLANEOUS.
A. BROKERS.
(1) Except as provided in subparagraph (2) below,
Seller represents and warrants to Buyer, and Buyer represents and warrants
to Seller, that no broker or finder has been engaged by it, respectively,
in connection with any of the transactions contemplated by this Agreement
or to its knowledge is in any way connected with any of such transactions.
In the event of a claim for broker's or finder's fee or commissions in
connection herewith, then Seller shall indemnify and defend Buyer from the
same if it shall be based upon any statement or agreement alleged to have
been made by Seller, and Buyer shall indemnify and defend Seller from the
same if it shall be based upon any statement or agreement alleged to have
been made by Buyer. The indemnification obligations under this paragraph
10 A(1) shall survive the closing of the transactions hereunder or the
earlier termination of this Agreement.
(2) If and only if the sale contemplated herein closes,
Seller agrees to pay a brokerage commission to Richard Ellis, LLC
("BROKER") pursuant to a separate written agreement.
B. LIMITATION OF LIABILITY.
(1) Notwithstanding anything to the contrary contained
herein, the aggregate liability of Seller arising pursuant to or in
connection with the representations, warranties, indemnifications,
covenants or other obligations (whether express or implied) of Seller under
this Agreement (or any document executed or delivered in connection
herewith) shall not exceed $375,000.
(2) In no event shall Seller have any liability arising
pursuant to or in connection with the representations, warranties,
indemnifications, covenants or other obligations (whether express or
implied) under this Agreement (or any document executed or delivered in
connection herewith) unless and until such liabilities exceed $25,000 in
the aggregate; provided, however, that once such liabilities exceed $25,000
in the aggregate, Seller's liability hereunder shall be from the first
dollar; and provided further, however, nothing contained in the foregoing
shall limit Seller's liability for any proration amounts due under this
Agreement.
(3) No constituent partner in or agent of Seller, nor
any advisor, trustee, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constituent partner in Seller (including, but
not limited to, Carlyle Real Estate Limited Partnership-XIV, JMB Realty
Corporation, and the individuals specified in paragraph 7A(2) above) shall
have any personal liability, directly or indirectly, under or in connection
with this Agreement or any agreement made or entered into under or pursuant
to the provisions of this Agreement, or any amendment or amendments to any
of the foregoing made at any time or times, heretofore or hereafter, and
Buyer and its successors and assigns and, without limitation, all other
persons and entities, shall look solely to Seller's assets for the payment
of any claim or for any performance, and Buyer, on behalf of itself and its
successors and assigns, hereby waives any and all such personal liability.
Notwithstanding anything to the contrary contained in this Agreement,
neither the negative capital account of any constituent partner in Seller
(or in any other constituent partner of Seller), nor any obligation of any
constituent partner in Seller (or in any other constituent partner of
Seller) to restore a negative capital account or to contribute capital to
Seller (or to any other constituent partner of Seller), shall at any time
be deemed to be the property or an asset of Seller or any such other
constituent partner (and neither Buyer nor any of its successors or assigns
shall have any right to collect, enforce or proceed against or with respect
to any such negative capital account of partner's obligation to restore or
contribute).
(4) Notwithstanding the provisions set forth in
paragraph 10B hereof, if Seller shall fail to maintain at least $375,000 in
cash or liquid assets in its partnership account for purposes of satisfying
its obligations under this Agreement until the later of (i) the first (1st)
anniversary of the Closing Date, and (ii) the date of final resolution of
any claim made by Buyer prior to such one (1) year anniversary (and as to
which litigation with respect thereto is commenced prior to such one (1)
year anniversary), then, subject to the other limitations set forth in this
Agreement, Carlyle Real Estate Limited Partnership-XIV shall be responsible
for any liability of Seller hereunder up to an amount equal to the amount
by which $375,000 exceeds the amounts so retained by Seller as reserves as
aforesaid.
C. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. This Agreement may not be modified or amended except by written
agreement signed by both parties.
D. TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
E. INTERPRETATION. Paragraph headings shall not be used in
construing this Agreement. Each party acknowledges that such party and its
counsel, after negotiation and consultation, have reviewed and revised this
Agreement. As such, the terms of this Agreement shall be fairly construed
and the usual rule of construction, to the effect that any ambiguities
herein should be resolved against the drafting party, shall not be employed
in the interpretation of this Agreement or any amendments, modifications or
exhibits hereto or thereto.
F. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of California.
G. SUCCESSORS AND ASSIGNS. Buyer may not assign or transfer
its rights or obligations under this Agreement without the prior written
consent of Seller (in which event such transferee shall assume in writing
all of the transferor's obligations hereunder, but such transferor shall
not be released from its obligations hereunder until the closing of the
transactions under this Purchase Agreement); provided, however, Buyer may
assign its interest in this Agreement to a limited partnership or a limited
liability company in which Buyer or the principal of Buyer is the managing
general partner or the manager, as the case may be. No consent given by
Seller to any transfer or assignment of Buyer's rights or obligations
hereunder shall be construed as a consent to any other transfer or
assignment of Buyer's rights or obligations hereunder. No transfer or
assignment in violation of the provisions hereof shall be valid or
enforceable. Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
H. NOTICES. Any notice which a party is required or may
desire to give the other shall be in writing and shall be sent by personal
delivery or by mail (either [i] by United States registered or certified
mail, return receipt requested, postage prepaid, or [ii] by Federal Express
or similar generally recognized overnight carrier regularly providing proof
of delivery), addressed as follows (subject to the right of a party to
designate a different address for itself by notice similarly given):
To Buyer:
c/o Elkor Realty
414 North Orleans, Ste. 608
Chicago, Illinois 60601
Attention: Jeffrey Elowe
WITH COPY TO:
Richman, Lawrence, Mann, Greene & Chizever
9601 Wilshire Boulevard, Penthouse
Beverly Hills, California 90210-5270
Attention: Bruce Greene, Esq.
TO SELLER:
c/o JMB Realty Corporation
900 North Michigan Avenue
19th Floor
Chicago, Illinois 60611
Attention: Mr. Douglas Welker
WITH COPIES TO:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (GML)
AND TO:
Richard Ellis, LLC
Three First National Plaza
Suite 1750
Chicago, Illinois 60602
Attention: Mr. Jeffrey Bramson
Any notice so given by mail shall be deemed to have been given as of the
date of delivery (whether accepted or refused) established by U.S. Post
Office return receipt or the overnight carrier's proof of delivery, as the
case may be. Any such notice not so given shall be deemed given upon
receipt of the same by the party to whom the same is to be given.
I. LEGAL COSTS. The parties hereto agree that they shall
pay directly any and all legal costs which they have incurred on their own
behalf in the preparation of this Agreement, all deeds and other agreements
pertaining to this transaction and that such legal costs shall not be part
of the closing costs. In addition, if either Buyer or Seller brings any
suit or other proceeding with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as determined by the
court, agency or other authority before which such suit or proceeding is
commenced), in addition to such other relief as may be awarded, shall be
entitled to recover reasonable attorneys' fees, expenses and costs of
investigation actually incurred. The foregoing includes, but is not
limited to, attorneys' fees, expenses and costs of investigation
(including, without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or in any
action or participation in, or in connection with, any case or proceeding
under Chapter 7, 11 or 13 of the Bankruptcy Code (11 United States Code
Sections 101 et seq.), or any successor statutes.
J. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
MARINERS POINTE ASSOCIATES, LTD.,
an Illinois limited partnership
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ________________________
Name: _________________
Title: ________________
"Seller"
MARINERS POINTE L.L.C.,
a Delaware limited liability company
By: ______________________________
Name: _______________________
Title: ______________________
"Buyer"
ESCROW HOLDER'S ACKNOWLEDGEMENT
The undersigned hereby executes this Agreement to evidence its
agreement to act as Escrow Holder in accordance with the terms of this
Agreement.
Date: ________________ STEWART TITLE GUARANTY COMPANY,
a ______________________________________
By: ___________________________________
Name: _____________________________
Title: ____________________________
"Escrow Holder"
EXHIBIT LIST
"A" - Property Description
"B" - Personal Property List
"C" - Description of Bond Documents
"D" - Deed
"E" - Assignment and Assumption Agreement
"F" - Exceptions to Seller's Representations and
Warranties
"G" - Rent Roll
"H" - Service Agreements
EXHIBIT "F"
EXCEPTIONS TO SELLER'S REPRESENTATIONS AND WARRANTIES
None.
FIRST AMENDMENT TO PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS is made and entered into as of the 30th day of September,
1996, by and between MARINERS POINTE ASSOCIATES, LTD., an Illinois limited
partnership ("SELLER"), and MARINERS POINTE L.L.C., a Delaware limited
liability company ("BUYER").
RECITALS
--------
96 Seller and Buyer entered into that certain Purchase Agreement
and Joint Escrow Instructions dated effective as of August 29, 1996, as
amended by that certain letter from Buyer to Seller dated August 29, 1996
(as amended, the "PURCHASE AGREEMENT") respecting certain premises commonly
known as "Mariners Pointe Apartments" in Stockton, California.
B. Seller and Buyer desire to amend the Purchase Agreement on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. DEFINITIONS. Except as otherwise specifically set forth
herein, any capitalized terms used in a defined manner herein shall have
the meaning set forth for such term in the Purchase Agreement.
2. EXTENSION OF CLOSING DATE. Notwithstanding anything contained
in the Purchase Agreement to the contrary, the Closing Date is hereby
extended to October 15, 1996.
3. NO OTHER MODIFICATION. Seller and Buyer acknowledge that,
except as specifically set forth herein, the Purchase Agreement is
unmodified and remains in full force and effect.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
MARINERS POINTE ASSOCIATES, LTD.,
an Illinois limited partnership
By: CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ________________________
Name: _________________
Title: ________________
"Seller"
MARINERS POINTE L.L.C.,
a Delaware limited liability company
By: ______________________________
Name: _______________________
Title: ______________________
"Buyer"
BILL OF SALE, ASSIGNMENT AND ASSUMPTION
(Mariners Pointe Apartments; Stockton, California)
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
the undersigned, MARINERS POINTE ASSOCIATES, LTD., an Illinois limited
partnership ("SELLER"), hereby sells, transfers, assigns and conveys to
MARINERS POINTE L.L.C., a Delaware limited liability company ("BUYER"), the
following:
1. PERSONAL PROPERTY. All right, title and interest of Seller in
and to those items of tangible personal property described in Exhibit "A"
attached hereto and made a part hereof ("PERSONAL PROPERTY"), located upon,
and used in the operation of, that certain apartment complex commonly known
as "Mariners Pointe Apartments", located in the City of Stockton, County of
San Joaquin, State of California (the "PROPERTY").
2. LEASES. All right, title and interest of Seller in and to all
leases ("LEASES") relating to the Property and described in Exhibit "B"
attached.
3. SERVICE AGREEMENTS. All right, title and interest of Seller in
and to all service agreements ("SERVICE AGREEMENTS") relating to the
Property, or any part of the same and described in Exhibit "C" attached
hereto.
4. INTANGIBLE PROPERTY. All right, title and interest of Seller,
to the extent assignable, in and to the name "Mariners Pointe Apartments",
and all contract rights, agreements, tenant lists, governmental permits,
licenses and approvals, advertising material and telephone exchange numbers
(collectively, the "INTANGIBLE PROPERTY") directly relating to the
Property.
This Bill of Sale, Assignment and Assumption is given pursuant to
that certain agreement dated as of August 29, 1996, between Seller and
Buyer, providing for, among other things, the assignment of the Personal
Property, Tenant Leases, Service Agreements and Intangible Property (which
agreement, together with any and all amendments thereto, is herein called
the "AGREEMENT"). The covenants, agreements, and limitations (including,
but not limited to, the limitations of liability provided in paragraph 10B
of the Agreement) provided in the Agreement with respect to the property
conveyed hereunder are hereby incorporated herein by this reference as if
herein set out in full and shall inure to the benefit of and shall be
binding upon Seller and Buyer, and their respective successors and assigns.
Said property is conveyed "as is" without warranty or representation,
except as expressly provided in (and subject to the limitations of) the
Agreement.
DATED: As of October ___, 1996.
SELLER:
MARINERS POINTE ASSOCIATES, LTD.,
an Illinois limited partnership
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ____________________
Name: ___________________
Title: __________________
ASSUMPTION BY BUYER
As of this ____ day of October, 1996, Buyer hereby accepts the
foregoing assignment of Leases, Service Agreements and other contracts,
agreements assigned hereby and agrees to assume and discharge, in
accordance with the terms thereof, all of the burdens and obligations of
Seller thereunder, to the extent the same arise from and after the date
hereof.
BUYER:
MARINERS POINTE L.L.C.,
a Delaware limited liability company
By: ___________________________
Name: _________________________
Title: ________________________
EXHIBIT "A"
LIST OF PERSONAL PROPERTY
EXHIBIT "B"
LIST OF LEASES
EXHIBIT "C"
LIST OF SERVICE AGREEMENTS
SIGNATURE PAGE TO FORM 590RE
DATED: October __, 1996
MARINERS POINTE ASSOCIATES, LTD.,
an Illinois limited partnership
By: CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XIV,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ____________________
Name: ___________________
Title: __________________
SECOND AMENDMENT TO PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS SECOND AMENDMENT TO PURCHASE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS is made and entered into as of the 9th day of October, 1996,
by and between MARINERS POINTE ASSOCIATES, LTD., an Illinois limited
partnership ("SELLER"), and MARINERS POINTE L.L.C., a Delaware limited
liability company ("BUYER").
RECITALS
--------
C. Seller and Buyer entered into that certain Purchase Agreement
and Joint Escrow Instructions dated effective as of August 29, 1996, as
amended by that certain letter from Buyer to Seller dated August 29, 1996,
and as amended by that certain First Amendment to Purchase Agreement and
Joint Escrow Instructions dated as of September 30, 1996 (as amended, the
"PURCHASE AGREEMENT") respecting certain premises commonly known as
"Mariners Pointe Apartments" in Stockton, California.
D. Seller and Buyer desire to amend the Purchase Agreement on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is hereby agreed as follows:
1. DEFINITIONS. Except as otherwise specifically set forth
herein, any capitalized terms used in a defined manner herein shall have
the meaning set forth for such term in the Purchase Agreement.
2. SUBSTITUTION OF ESCROW HOLDER. Notwithstanding anything
contained in the Purchase Agreement to the contrary, as used in the
Purchase Agreement, any use of the term "Escrow Holder" shall mean
Northwestern Title Company in Oakland, California, Attention: Wendy
Gallagher.
3. NO OTHER MODIFICATION. Seller and Buyer acknowledge that,
except as specifically set forth herein, the Purchase Agreement is
unmodified and remains in full force and effect.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
MARINERS POINTE ASSOCIATES, LTD.,
an Illinois limited partnership
By: CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV,
an Illinois limited partnership,
General Partner
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By: ________________________
Name: _________________
Title: ________________
"Seller"
MARINERS POINTE L.L.C.,
a Delaware limited liability company
By: ______________________________
Name: _______________________
Title: ______________________
"Buyer"
EXHIBIT 10-V
- ------------
(C-XIV)
OPERATING AGREEMENT
OF
MAGUIRE THOMAS PARTNERS - SOUTH TOWER, LLC
a California limited liability company
DATED
AS OF
SEPTEMBER 30, 1996
OPERATING AGREEMENT OF
MAGUIRE THOMAS PARTNERS - SOUTH TOWER, LLC
a California limited liability company
This Operating Agreement of MAGUIRE THOMAS PARTNERS - SOUTH TOWER,
LLC, a California limited liability company (the "AGREEMENT") is made and
entered into as of September 30, 1996 by and among MAGUIRE PARTNERS-BUNKER
HILL, LTD., a California limited partnership ("MAGUIRE PARTNERS"), CARLYLE
REAL ESTATE LIMITED PARTNERSHIP-XIV, an Illinois limited partnership
("CARLYLE 14"), and CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XV, an Illinois
limited partnership ("CARLYLE 15").
RECITALS
--------
A. Maguire Partners, Carlyle 14 and Carlyle 15 are partners in
Maguire/Thomas Partners-South Tower, a California limited partnership, (the
"PARTNERSHIP") pursuant to that certain Amended and Restated Agreement of
Limited Partnership, dated as of June 28, 1985, as amended by that certain
Amendment to Amended and Restated Agreement of Limited Partnership dated as
of August 1, 1985, as further amended by that certain Second Amendment to
Amended and Restated Agreement of Limited Partnership dated as of August 1,
1986 (the "PARTNERSHIP AGREEMENT").
B. International Business Machines Corporation ("IBM") was
previously a limited partner in the Partnership. Pursuant to that certain
Assignment and Assumption of Partnership Interest dated as of June 28,
1996, IBM assigned all of its interest in the Partnership to Maguire
Partners and Maguire Partners assumed all of IBM's interest and obligations
under the Partnership Agreement as of the date thereof. Carlyle 14 and
Carlyle 15 acknowledge and agree to such assignment by IBM to Maguire
Partners under the Partnership Agreement.
C. As a result of the foregoing, the Partnership is comprised of
Maguire Partners, with a 50.01% general and limited partnership interest
(including the 20% limited partnership interest formerly owned by IBM),
Carlyle 14 with a 17.4965% general partnership interest and Carlyle 15 with
a 32.4935% general partnership interest, each such interest being referred
to herein as such party's "PARTNERSHIP INTEREST".
D. Maguire Partners, Carlyle 14 and Carlyle 15 desire to (a)
form a limited liability company to be known as MAGUIRE THOMAS PARTNERS -
SOUTH TOWER, LLC (the "COMPANY") under the laws of the State of California
(b) merge the Partnership into the Company by a statutory merger under
California Corporations Code Section 17000 et seq. and pursuant to Code
Section 708(b)(2)(A) so that the Company will be considered the continuing
entity, and (c) set forth, in their entirety, the rights and obligations of
the parties with respect to the Company and its assets and liabilities.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises made herein, effective as of the date set forth above,
Carlyle 14, Carlyle 15 and Maguire Partners hereby form the Company as a
limited liability company under the Beverly-Killea Limited Liability
Company Act as set forth in Title 2.5 (commencing with Section 17500) of
the Corporations Code of the State of California (the "ACT") and this
Agreement shall be the Operating Agreement of the Company under the Act.
Carlyle 14, Carlyle 15 and Maguire Partners shall be the Initial Members
(as hereinafter defined) of the Company, with the rights, duties and
obligations set forth in this Agreement.
1. DEFINITIONS.
For purposes of this Agreement, the following terms which are used
herein shall have the meaning indicated, whether appearing in the plural or
singular number:
ACT - means the (California) Beverly-Killea Limited Liability Company
Act as set forth in Title 2.5 (commencing with Section 17000) of the
Corporations Code of the State of California (or any corresponding
provision or provisions of any succeeding law).
ADJUSTED CAPITAL ACCOUNT - means, with respect to any Member, such
Member's Capital Account as of the end of the relevant fiscal year, after
giving effect to the following adjustments:
(i) increase such Capital Account by any amounts which such
Member is obligated to contribute to the Company (pursuant to the terms of
this Agreement or otherwise) or is deemed to be obligated to contribute to
the Company pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-
2(i)(5); and
(ii) reduce such Capital Account by the amount of the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
AETNA LOAN - means the first deed of trust loan made by Aetna Life
Insurance Company (as successor-in-interest to Aetna Casualty and Surety
Company) ("AETNA") to the Partnership, secured by the Property, on November
26, 1984 as amended by the Modification and Extension Agreement and related
documents between the Partnership and Aetna dated September 19, 1996
("MODIFICATION DOCUMENTS") whereby the Aetna Loan was modified and
extended.
APPROVED BY THE MANAGEMENT COMMITTEE, OR APPROVAL OF THE MANAGEMENT
COMMITTEE - means, except as otherwise provided below, the approval in
writing by Members of the Company holding at least seventy-five percent
(75%) of the aggregate Percentage Interests in the Company, acting through
their respective representatives on the Management Committee designated
pursuant to SECTION 3.01(a) hereof.
ARTICLES OF ORGANIZATION - means the articles of organization filed
with the California Secretary of State for the purpose of forming the
Company.
BUILDING - means the 44-story office tower constructed on the
Property as part of the Project at 355 South Grand Avenue, Los Angeles,
California.
CAPITAL ACCOUNT - means the capital account established for each
Member pursuant to SECTION 2.04 hereof.
CAPITAL SHORTFALL - means any event which necessitates additional
capital contributions (other than the capital contributions required under
SECTION 2.03 hereof) by the Members in order to complete, finance and
operate the Project, including but not by way of limitation, (i) failure of
performance by a contractor or subcontractor, (ii) damage to or destruction
of Improvements on the Property, (iii) shortfall in financing for the
Project, and (iv) operating losses incurred in connection with the Project.
CARLYLE - means, collectively, Carlyle 14 and Carlyle 15.
CARLYLE 14 - means Carlyle Real Estate Limited Partnership-XIV, an
Illinois limited partnership.
CARLYLE 14 PERCENTAGE INTEREST - means 17.4965%, subject to any
adjustments pursuant to this Agreement, provided, however, that the Carlyle
14 Percentage Interest shall be adjusted to 23.33% immediately upon
satisfaction of the First Level and Second Level distribution preferences
under SECTIONS 2.06(b)(i) and (ii) and/or SECTIONS 2.06(c)(i) and (ii), as
applicable.
CARLYLE 15 - means Carlyle Real Estate Limited Partnership-XV, an
Illinois limited partnership.
CARLYLE 15 PERCENTAGE INTEREST - means 32.4935%, subject to any
adjustments pursuant to this Agreement, provided, however, that the Carlyle
15 Percentage Interest shall be adjusted to 43.34% immediately upon
satisfaction of the First Level and Second Level distribution preferences
under SECTIONS 2.06(b)(i) and (ii) and/or SECTIONS 2.06(c)(i) and (ii), as
applicable.
CODE - means the Internal Revenue Code of 1986, as amended from time
to time. Reference to a particular Code provision shall refer as well to
any similar successor statute.
COMPANY - means Maguire Thomas Partners-South Tower, LLC, a
California limited liability company.
COMPANY INTEREST - means an ownership interest in the Company, which
includes the Percentage Interest, the right to vote or participate in the
management of the Company, and the right to information concerning the
business and affairs of the Company, as provided in this Agreement and
under the Act.
COMPANY MINIMUM GAIN - means the amount determined by computing with
respect to each nonrecourse liability of the Company, the amount of gain
(of whatever character), if any, that would be realized by the Company if
it disposed (in a taxable transaction) of the property subject to such
liability in full satisfaction thereof, and by then aggregating the amounts
so computed as set forth in Regulations Section 1.704-2(d).
CRA - means The Community Redevelopment Agency of The City of Los
Angeles, California.
DDA - means the Disposition and Development Agreement dated June 21,
1979 between CRA and Robert F. Maguire III.
DISPOSITION EVENT - means any sale, transfer, disposition or taking
(including, but not limited to, any taking under any eminent domain
proceeding) of the Property or the Improvements or any portion thereof or
interest therein, (2) any event, circumstance or condition relating to the
Company's interest in the Property or the Improvements and resulting in any
payment to the Company under any casualty insurance policy or title
insurance policy, and (3) any financing or refinancing of the Company's
interest in the Property or the Improvements or any portion thereof.
DISPOSITION PROCEEDS - means the aggregate Net Cash Flow
distributable hereunder to the Members as a result of a Disposition Event.
In the computation of such Disposition Proceeds there shall be deducted (i)
the payment of all costs and other expenses related thereto, (ii) the
payment for any capital expenditures or other expenses for which such
proceeds are used, (iii) the satisfaction of any indebtedness being
discharged and any other debts or liabilities of the Company including,
without limitation, the payment of any Participation Interest, Fixed Rate
Interest and/or Yield Maintenance Payment due to Aetna under the
Modification Documents (as such terms are defined in the Modification
Documents) and (iv) the setting aside of such reserves therefrom as are
Approved by the Management Committee.
DISPOSITION PROFIT AND DISPOSITION LOSS - means, respectively, the
net gain realized or net loss suffered by the Company (and each related
item of gain or loss) attributable to a Disposition Event.
IBM - means International Business Machines Corporation, a New York
corporation.
IBM LEASE - means that certain lease, dated October 1, 1982, as
amended heretofore or hereafter, between the Company and IBM relating to
space in the Building.
IMPROVEMENTS - means any physical construction on the Property,
including, without limitation, the Building, the attendant subterranean
parking garage and the Off-Site Parking Facility.
MAGUIRE PARTNERS - means Maguire Partners-Bunker Hill, Ltd., a
California limited partnership.
MAGUIRE PARTNERS PERCENTAGE INTEREST - means 50.01%, subject to any
adjustments pursuant to this Agreement, provided, however, that the Maguire
Partners Percentage Interest shall be adjusted to 33.33% immediately upon
satisfaction of the First Level and Second Level distribution preferences
under SECTIONS 2.06(b)(i) and (ii) and/or SECTIONS 2.06(c)(i) and (ii), as
applicable.
MAJOR DECISION - has the meaning set forth in SECTION 3.01(c).
MANAGEMENT COMMITTEE - means the Management Committee of the Company
contemplated by SECTION 3.01(a) hereof.
MEMBER - means a Person who:
(a) Has been admitted to the Company as a member in
accordance with the Articles of Organization or this Agreement, or an
assignee of a Company Interest, other than a right to share in Net Cash
Flow or Operating Profits or Operating Loss, who has become a Member
pursuant to Section 3.03.
(b) Has not resigned, withdrawn or been expelled as a
Member or, if other than an individual, been dissolved.
Reference to a "MEMBER" shall be to any one of the Members. Reference to
an "INITIAL MEMBER" shall be to any one of the Members listed in
SECTION 2.02.
MEMBER NONRECOURSE DEBT - has the meaning attributable to "partner
nonrecourse debt" as set forth in Regulations Section 1.704-2(b)(4).
MEMBER NONRECOURSE DEBT MINIMUM GAIN - means an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a nonrecourse
liability of the Company, determined in accordance with Regulations
Sections 1.704-2(i)(2) and (3).
MEMBER NONRECOURSE DEDUCTIONS - has the meaning attributable to
"partner nonrecourse deductions" as set forth in Regulations Section
1.704-2(i)(2). The amount of Member Nonrecourse Deductions with respect to
a Member Nonrecourse Debt for a fiscal year of the Company equals the
excess (if any) of the net increase (if any) in the amount of Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt
during that fiscal year over the aggregate amount of any distributions
during that fiscal year to the Member that bears (or is deemed to bear) the
economic loss for such Member Nonrecourse Debt to the extent such
distributions are from the proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(2).
NET CASH FLOW - means that amount determined by deducting from the
gross cash receipts of any kind or description (including, without
limitation, the proceeds of any refinancing Approved by the Management
Committee, but excluding the proceeds of any capital contributions (except
to the extent utilized to provide reserves for contingencies)) of the
Company during a calendar month, the following:
(i) All costs of acquiring, improving, developing,
managing, leasing, operating, maintaining, replacing and preserving the
Project (including the Property and the Improvements) to the extent paid in
cash during such calendar month;
(ii) All operating or other expenses of the Company paid in
cash during such calendar month, or any amounts expended as a result of any
casualty losses to the extent that such losses are not reimbursed during
such month by any third party responsible therefor or through insurance
maintained by the Company, but not including any expenses paid in cash to
the extent that such expenses were reserved against and funded from such
reserves;
(iii) All cash payments made with respect to the discharge of
Company indebtedness during a calendar month, but not including any such
payments to the extent that the amounts thereof were reserved against and
funded from such reserves; and
(iv) All reasonable amounts of reserve cash as shall be
determined and Approved by the Management Committee to be necessary and
advisable for:
(a) repayment of Company indebtedness, coming due in
one or more calendar months next succeeding the month for which Net Cash
Flow is computed;
(b) the acquisition, improvement, development,
management, operation (including, but not limited to insurance and property
taxes and assessments), maintenance, replacement or preservation of the
Project (including the Property and Improvements); and
(c) increases in working capital and other
contingencies.
In computing Net Cash Flow, no deductions shall be made for depreciation or
amortization.
NET RECEIPTS - means all Net Cash Flow distributable hereunder to the
Members, from whatever source derived other than Disposition Proceeds.
OFF-SITE PARKING FACILITY - means the seven level parking garage
constructed on the Property as part of the Project at Second and Hill
Streets, Los Angeles, California.
OPERATING BUDGET - means the annual budget prepared by the Property
Manager as contemplated by SECTION 3.01(b)(iii) hereof.
OPERATING LOSS - means the net loss realized by the Company during a
fiscal year (after excluding any Disposition Profit and Disposition Loss),
including each and every item of income, gain, loss and deduction
comprising such net loss, whether includable in, or deductible from, the
Company's taxable income in accordance with Code Section 703(a).
OPERATING PROFIT - means the net profit realized by the Company
during the fiscal year (after excluding any Disposition Profit and
Disposition Loss), including each and every item of income, gain, loss and
deduction comprising such net profit, whether includable in, or deductible
from, the Company's taxable income in accordance with Section 703(a) of the
Code.
PERCENTAGE INTEREST - means the following: the Maguire Partners
Percentage Interest, the Carlyle 14 Percentage Interest and the Carlyle 15
Percentage Interest.
PERSON - means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government, or any agency or
political subdivision thereof.
PHASE I BUILDING - means the 54-story office building located at 333
South Grand Avenue, Los Angeles, California.
PHASE I PARTNERSHIP - means Maguire Partners-Crocker Properties Phase
I, a California limited partnership which owns and operates the Phase I
Project.
PHASE I PROJECT - means the Phase I Building and related improvements
constructed on Parcel N of the Bunker Hill Urban Renewal Project.
PROJECT - means the development and construction of the Improvements
on the Property and the operation of the Improvements following completion
as contemplated herein.
PROPERTY - means Parcels 0 and X-2(b) in the Bunker Hill Urban
Renewal project in Los Angeles, California, as more particularly described
in EXHIBIT A attached hereto, together with all Improvements from time to
time existing thereon, and all appurtenances thereof.
PROPERTY MANAGER - means the Property Manager appointed as
contemplated in SECTION 3.01(b) hereof.
REGULATIONS - means the federal income tax regulations promulgated by
the Treasury Department under the Code, as such regulations may be amended
from time to time. All references herein to a specific section of the
Regulations shall be deemed also to refer to any corresponding provisions
of succeeding Regulations.
SECRETARY OF STATE - shall mean the Secretary of State of the State
of California.
2. FORMATION OF COMPANY; CAPITAL, DISTRIBUTIONS AND ALLOCATIONS.
2.01 INTRODUCTORY MATTERS.
(a) The parties have formed the Company pursuant to the
provisions of the Act by filing the Articles of Organization with the
Secretary of State.
(b) The purpose of the Company shall be to own and operate
the Property and Improvements as investments and for income-producing
purposes, as the successor-in-interest by merger to the Partnership. The
Company shall have no other intended purpose nor engage in any other
business, except as set forth above, and shall be operated independently of
the Phase I Partnership, except to the extent that coordination between the
Phase I Project and the Project is determined by the mutual determination
of the respective Management Committees of the Company and the Phase I
Partnership to be mutually beneficial in connection with their operation.
(c) The term of the Company commenced upon the filing of the
Articles of Organization for the Company and shall end on December 31, 2035
unless the Company is terminated or dissolved sooner, in accordance with
the provisions of this Agreement.
(d) The Company shall maintain its principal place of
business at 355 South Grand Avenue, Suite 4500, Los Angeles, California
90071, or any other location mutually agreed upon by the Members.
(e) The name and address of the Company's agent for service
of process is Maguire Partners, 355 South Grand Avenue, Suite 4500, Los
Angeles, CA 90071.
2.02 MEMBERS AND THEIR INTERESTS.
(a) The Initial Members in the Company consist of Maguire
Partners, Carlyle 14 and Carlyle 15, each with the Percentage Interest in
income and capital distributions of the Company as is defined in ARTICLE I
hereof subject to the preferences set forth in SECTIONS 2.06 and 2.09.
(b) The parties hereby agree to merge the Partnership into
the Company. The Members shall cause the necessary filings and documents to
be prepared and filed to effect the merger of the Partnership into the
Company as quickly as possible including the execution of an Agreement of
Merger between the Partnership and the Company and a Certificate of Merger
(Form LLC-9) to be filed with the Secretary of State and, if necessary,
recorded in Los Angeles County Records. The Members intend that such
merger shall be accomplished pursuant to Section 708(b)(2)(A) so that the
Company is the continuing entity and shall comply with the Regulations and
rulings under Code Section 708. The Members acknowledge that they shall
hold all of their respective rights and obligations with respect to the
Project solely through the Company, from and after the effective date of
the merger of the Partnership into the Company, and that no Member has any
separate rights or claims against any other Member or any other partner in
the Partnership, or with respect to the Project, by or through the
Partnership.
(c) Maguire Partners holds an undivided twenty percent (20%)
interest in certain artworks described on EXHIBIT "B" attached hereto
("ARTWORK"), separate and apart from Maguire Partner's interest in said
Artwork through the Company. Carlyle holds no interest in such Artwork
directly or through the Company.
2.03 CAPITAL CONTRIBUTIONS.
(a) Each Member has the Capital Account set forth on EXHIBIT
"C" attached hereto, which Capital Accounts reflect the adjustment to such
Capital Accounts provided for in SECTION 2.04(a) through the date of the
Supplemental Contributions required by SECTION 2.03(b). Such Capital
Accounts have been revalued in accordance with Regulation Section 1.704-
1(b)(2)(4)(f).
(b) On the date hereof, each of Maguire Partners and Carlyle
shall contribute $1,000,000 in cash to the capital of the Company
("SUPPLEMENTAL CONTRIBUTIONS") for a total of $2,000,000 of capital. The
Supplemental Contributions shall be paid by the Company to Aetna pursuant
to the Modification Documents.
2.04 CAPITAL ACCOUNTS.
(a) A separate non-interest bearing Capital Account shall be
maintained for each Member, (A) to which there shall be credited (1) all
cash contributions of such Member to the Company, (2) the fair market
value, at the date of contribution, of property contributed by such Member
to the Company (net of liabilities assumed by the Company and liabilities
to which such contributed property is subject), which amount credited may
be less than $0, (3) such Member's share of Operating Profit, (4) such
Member's share of Disposition Profit (including, but not limited to,
Disposition Profit described in SECTION 3.06(g) hereof), (5) if an election
under Section 754 of the Code shall apply to a distribution of property by
the Company to a Member, (a) the amount of gain, if any, recognized by such
Member upon such distribution in accordance with Section 731(a)(1) of the
Code, and (b) in the case of a distribution of Company property other than
money under Section 732(a)(2) of the Code, the excess, if any, of the
Company's adjusted basis of such distributed property over the basis of
such distributed property to the distributee Member, and (6) 50% of any
recaptured investment tax credit suffered by the Member if no election
under Section 48(q)(4) of the Code was made with respect to the investment
tax credit subject to recapture; and (B) to which there shall be debited
(1) all cash distributions to such Member, (2) the fair market value of
property distributed to such Member (net of liabilities assumed by such
Member and liabilities to which such distributed property is subject),
which amount debited may be less than $0, (3) such Member's share of
Operating Loss, (4) such Member's share of Disposition Loss (including, but
not limited to, Disposition Loss described in SECTION 3.06(g) hereof), and
(5) 50% of any investment tax credit allocated to such Member unless an
election under Section 48(q)(4) of the Code was made with respect to such
investment tax credit. Upon the sale or exchange of a Company Interest,
(i) if such sale or exchange causes a termination of the Company within the
meaning of Section 708(b)(1)(B) of the Code, the income tax consequences of
the deemed distribution of Company property and the deemed immediate
contribution of Company property to a new partnership or limited liability
company (which for all other purposes continues to be the Company) shall be
governed by the relevant provision of Subchapter K of Chapter I of the Code
and the regulations promulgated thereunder (including Section 704(c) of the
Code) and the Capital Accounts of the Members shall be redetermined in
accordance with this SECTION 2.04(a); (ii) if such sale or exchange does
not cause a termination of the Company within the meaning of Section
708(b)(1)(B) of the Code and if an election by the Company under Section
754 of the Code shall apply to such sale or exchange, the Capital Account
of the selling or exchanging Member (or such portion which is attributable
to the interest sold or exchanged) will be carried over to the transferee
Member and there shall be made to the Capital Account of the Member who
receives the special basis adjustment under Section 743 of the Code a
corresponding adjustment to take into account such Code Section 743 basis
adjustment; or (iii) in the case of a sale or exchange not described in
clause (i) or (ii) of this sentence, the Capital Account of the selling or
exchanging Member (or such portion which is attributable to the interest
sold or exchanged) will be carried over to the transferee Member.
(b) Funds of the Company which are held in reserve and not
available for distribution shall to the extent practicable be invested in
bank certificates of deposit at market rates. Interest earned on funds of
the Company so invested shall inure solely to the benefit of the Company,
and no interest shall be paid to any Member upon any contributions or
advances to the capital of the Company (except as expressly provided
herein), nor upon any undistributed or reinvested income or profits of the
Company.
2.05 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) Additional capital contributions shall be made by the
Members as described below in order to satisfy any Capital Shortfall
declared by the Management Committee as a Major Decision under SECTION
3.01(c). Such capital contributions will not be made until other existing
funds of the Company have been utilized, and the Members shall use their
best efforts to cause the Company to borrow from third parties any funds
required for satisfaction of such Capital Shortfall before any demand is
made on the Members for capital contributions for the same. No Member
shall have any obligation to make a capital contribution to the Company
except as expressly required by the provisions of this Agreement.
(b) If any additional capital contributions are required to
satisfy any Capital Shortfall declared by the Management Committee as a
Major Decision under SECTION 3.01(c) (it being contemplated that the
Project Reserve permitted by the Aetna Modification Documents and the
Additional Loan Advances which Aetna has agreed to fund to the Partnership
under the Modification Documents will be used first to fund Company
requirements as described in SECTION 2.07(a) hereof before the Members
shall be obligated to make a contribution with respect to the same), then
the same shall be contributed by the Members in proportion to their
respective Percentage Interests at the time of such Capital Shortfall.
(c) In the event any Member shall fail to make any required
capital contribution required by SECTION 2.05(b) above within ten days (10)
after written demand for such payment by any other Member, (i) unless the
Members other than the non-contributing Member elect, either pursuant to
clause (ii) below or pursuant to SECTION 2.05(d) below, to make the entire
contribution required to be made by the non-contributing Member, each
Member that has made the additional capital contribution required to be
made by it pursuant to SECTION 2.05(b) above may withdraw such capital
contribution from the Company and may retain such amount until the non-
contributing Member shall have made the additional capital contribution
required to be made by it pursuant to SECTION 2.05(b) above, or (ii) the
capital contribution required to be made by the non-contributing Member may
be made by the other Members, in proportion to their respective Percentage
Interests or as they may otherwise agree, in which event such unpaid
capital contribution shall constitute a debt owed by the non-contributing
Member to the contributing Members, which shall bear interest at the prime
rate from time to time announced by Wells Fargo Bank, N.A., plus 5% per
annum (but not to exceed the maximum rate permitted by law), until paid and
shall be payable (with interest as aforesaid) 120 days after demand by the
contributing Members. In addition, and not in limitation of, the other
rights and remedies of the contributing Members, any distributions
otherwise to be made by the Company to a non-contributing Member shall
instead be made to the contributing Members, to be applied against such
debt, and until such amounts, including accrued interest, are paid in full,
no further distributions shall be made to any non-contributing Member by
the Company and such non-contributing Member shall cease to have any vote
on the Management Committee. Such debt, with interest as aforesaid, shall
be with recourse as to the non-contributing Member, and shall be secured by
a security agreement being executed contemporaneously herewith by such
Member encumbering such Member's Company Interest. Any capital
contribution so contributed by one Member on behalf of another Member
shall, for purposes of SECTION 2.05(a) above, be deemed made by the Member
on behalf of which such contribution was made.
(d) In the event any Member shall fail to make any capital
contribution required by SECTION 2.05(b) above and the other Members do not
elect to make such capital contribution in its entirety pursuant to SECTION
2.05(c) above within 45 days after written demand for payment of the
capital contribution given to the defaulting Member by any other Member
(which may be the same written demand as that given under SECTION 2.05(c)
above), then (unless the interest of the non-contributing Member in the
Company is acquired pursuant to SECTION 3.06(c) hereof as a result thereof)
the remaining Members may make such additional capital contributions in
cash in proportion to their respective Percentage Interests, or as they may
otherwise agree, in which event the respective Percentage Interests of the
Members shall be:
(i) in the case of a Member making such additional
capital contributions pursuant hereto, the Percentage Interest of such
contributing Member shall be increased by a percentage (herein called the
"PERCENTAGE ADJUSTMENT") determined by (x) dividing the amount of the
required capital contribution made by such contributing Member by the
"Estimated Value" of the defaulting Member's Interest, and (y) multiplying
the result by such defaulting Member's Percentage Interest before such
adjustment. For this purpose, "Estimated Value" shall be equal to 80% of
the total proceeds such defaulting Member would receive upon a liquidation
of the Company at its "Net Fair Market Value" and a distribution to the
Members in accordance with SECTIONS 3.06(d) and 2.06(c) hereof. Except as
otherwise provided in this Agreement, such "Net Fair Market Value" of the
Company shall be determined in accordance with SECTION 3.03(e) hereof;
(ii) in the case of a defaulting Member, its Percentage
Interest shall be decreased by the total Percentage Adjustment increases
pursuant to (i) above.
(e) The Percentage Adjustments shall be adjusted to the
nearest one hundredth of 1%. Adjustment shall be made in the respective
Percentage Interests on each occasion when an additional aggregate capital
contribution of at least $500,000 is made pursuant to SECTION 2.05(b),
taking into consideration for this purpose on a cumulative basis any such
capital contributions not previously included in making any such
adjustment. Nothing herein shall obligate a Member to make any additional
capital contribution required by SECTION 2.05(b) in the event one or more
of the Members fails to make such contributions hereunder.
(f) To illustrate the operation of this SECTION 2.05, assume,
for purposes of this example only, that the Percentage Interests of Carlyle
14, Carlyle 15 and Maguire Partners are 17.495%, 32.495% and 50.01%,
respectively, at the time an additional capital contribution of $10,000,000
is required pursuant to SECTION 2.05(b).
(i) If all of the Members contribute the required
capital pro rata ($1,749,500 by Carlyle 14, $3,249,500 by Carlyle 15 and
$5,001,000 by Maguire Partners) there would be no adjustment in the
respective Percentage Interests.
(ii) If Carlyle 14 and Carlyle 15 did not make their
required capital contributions and Maguire Partners made such contributions
(assuming that no loans were made to Carlyle 14 and Carlyle 15 pursuant to
SECTION 2.05(c) above) then, assuming that the Net Fair Market Value of the
Company has been appraised at an amount that would result in a total
distribution of $120 million to Carlyle 14 and Carlyle 15 upon liquidation
of the Company, the Percentage Interest of Maguire Partners would be
increased by 2.61%.
MAGUIRE PARTNERS
1,749,500 x 17.495% = 0.91%
-----------------
80% x $41,996,399
3,249,500 x 32.495% = 1.69%
-----------------
80% x $78,003,601
The Percentage Interest of Carlyle 14 would be decreased by 0.91% to
16.585%, and the Percentage Interest of Carlyle 15 would be decreased by
1.69% to 30.805%.
2.06 DISTRIBUTIONS.
(a) Not later than fifteen (15) days after the end of each
calendar month, the Property Manager shall make a distribution to the
Members of the entire Net Cash Flow of the Company during such preceding
month.
(b) Net Receipts shall be distributed to the Members as
follows:
(i) FIRST LEVEL. The first available Net Receipts
shall be distributed equally (50/50) to Maguire Partners and to Carlyle
until each of them has received a cumulative amount of Net Receipts under
this SECTION 2.06(b)(i) and Disposition Proceeds under SECTION 2.06(c)(i)
to provide each Member with a 25% internal rate of return, calculated on an
annual basis, on the Supplemental Contribution made by such Member from the
date of the making of the Supplemental Contribution through the date such
return is calculated with the first distributions being treated as return
on capital. The foregoing amount is referred to herein as the
"SUPPLEMENTAL CONTRIBUTION PREFERRED RETURN". For purposes hereof, the
internal rate of return on the Supplemental Contributions shall be
calculated by the Company's accountants, which calculations shall be final
and conclusive, if made in good faith and without manifest arithmetic
error.
(ii) SECOND LEVEL. After satisfaction of the
Supplemental Contribution Preferred Return to Maguire Partners and Carlyle
under SECTION 2.06(b)(i), the next available Net Receipts, up to a
cumulative amount of $5,000,000 of Net Receipts under this SECTION
2.06(b)(ii) and Disposition Proceeds under SECTION 2.06(c)(ii), shall be
distributed pari passu 80% to Carlyle and 20% to Maguire Partners. The
allocation of Net Receipts under this SECTION 2.06(b)(ii) is referred to
herein as the "$5,000,000 PREFERENCE".
(iii) THIRD LEVEL. The balance of the Net Receipts
remaining, after the distributions under the First and Second Levels above,
shall be distributed to the Members in proportion to their Percentage
Interests.
All Net Receipts distributable to Carlyle 14 and
Carlyle 15 pursuant to this SECTION 2.06(b) shall be distributed in the
ratio of their Percentage Interests.
(c) The Disposition Proceeds shall be distributed to the
Members as follows:
(i) FIRST LEVEL. In the event distribution of Net
Receipts previously made to the Members pursuant to SECTION 2.06(b)(i)
hereof, plus the amount of the prior distributions of Disposition Proceeds
pursuant to this First Level, shall be less than the Supplemental
Contribution Preferred Return as of the date the current distribution of
such Disposition Proceeds shall be made, then there shall first be
distributed to Maguire Partners, on the one hand, and Carlyle, on the other
hand, on an equal (50/50) basis, out of such Disposition Proceeds an amount
equal to such deficiency.
(ii) SECOND LEVEL. After distribution of Disposition
Proceeds as required by SECTION 2.06(c)(i), in the event the amount of
distributions previously made to the Members pursuant to SECTION
2.06(b)(ii) hereof, plus the amount of distributions of Disposition
Proceeds previously made pursuant to this Second Level, is, in the
aggregate, less than the $5,000,000 Preference as of the date of the
current distribution of such Disposition Proceeds being made, then there
shall next be distributed an amount equal to such deficiency, on a pari
passu basis, 80% to Carlyle and 20% to Maguire Partners out of such
Disposition Proceeds.
(iii) THIRD LEVEL. The balance of the Disposition
Proceeds remaining after the distributions under the First and Second
Levels above shall be distributed to the Members in accordance with their
respective Percentage Interests.
The cash portion of the Members' share of Disposition Proceeds,
together with all installments and payments of cash of or against any
deferred portion of such Disposition Proceeds, shall be distributed in
accordance with the levels provided above, with each person or entity
entitled to payment under a level receiving the entire amount of such cash
until the sum payable under such level shall have been discharged in cash.
All Disposition Proceeds distributable to Carlyle 14 and Carlyle 15
pursuant to this SECTION 2.06(c) shall be distributed in the ratio of their
Percentage Interests.
2.07 RESERVES.
(a) During the term of the Aetna Loan, and until the Aetna
Loan is refinanced with a replacement loan that permits a greater reserve
amount, the Company shall maintain a $3,000,000 Project Reserve for capital
improvements and operating costs and a $250,000 working capital reserve in
accordance with, and to the extent permitted by, the Modification
Documents.
(i) At such time as the Company is no longer subject to
the Modification Documents, the Company shall establish capital
improvements and operating reserves as are determined from time to time
with the Approval of the Management Committee.
(b) The capital improvements and operating reserves
established from time to time by the Company shall be used (A) to fund
tenant improvements and leasing commissions with respect to space in the
Building, (B) to pay operating deficits (including, but not limited to, any
of the same resulting from the obligation to pay debt service) for any
period after the date of this Agreement, (C) to fund any required capital
improvements, and (D) to fund any obligations of the Company under leases
of space assumed by the Company from persons who have become or may
hereafter become tenants in the Building.
2.08 RESERVED.
2.09 ALLOCATIONS AMONG MEMBERS.
(a) All Operating Profit, Operating Loss, Disposition
Profits, Disposition Loss and tax credits shall be allocated to the Members
as provided below in this SECTION 2.09.
(b) The Operating Profit and Disposition Profit of the
Company shall be allocated among the Members in the following order of
priority:
(i) First, to the Members in proportion to, and in a
cumulative amount equal to, the cumulative amount of Operating Loss and
Disposition Loss previously allocated to the Members pursuant to SECTIONS
2.09(c)(ii), (iii) and (iv);
(ii) Second, to the Members in proportion to, and in a
cumulative amount up to, the cumulative amount of Net Receipts and
Disposition Proceeds distributed to the Members or to be distributed to the
Members under SECTIONS 2.06(b)(i) and (ii) and 2.06(c)(i) and (ii),
excluding any distribution of Net Receipts and Disposition Proceeds which
represents a return of the capital contributions of such Members
(including, for example, the return of the Supplemental Contributions as
part of the Supplemental Contribution Preferred Return); and
(iii) Third, the balance of the Operating Profit and
Disposition Profit in any fiscal year shall be allocated among the Members
in proportion to their Percentage Interests.
(c) The Operating Loss and Disposition Loss of the Company
shall be allocated among the Members in the following order of priority:
(i) First, to the Members in proportion to, and in a
cumulative amount equal to, the cumulative amount of Operating Profit and
Disposition Profit previously allocated to the Members pursuant to SECTION
2.09(b)(iii) until the Adjusted Capital Account of each of the Members is
reduced to the sum of (A) its share of the undistributed Supplemental
Contribution Preferred Return and (B) its share of the undistributed
$5,000,000 Preference;
(ii) Second, to the Members in proportion to the amounts
required to be allocated pursuant to this SECTION 2.09(c)(ii), until the
Adjusted Capital Account of each of the Members is reduced to its share of
the undistributed Supplemental Contribution Preferred Return;
(iii) Third, to the Members in proportion to the amounts
required to be allocated pursuant to this SECTION 2.09(c)(iii), until the
Adjusted Capital Account of each of the Members is reduced to zero; and
(iv) Fourth, the balance of the Operating Loss and
Disposition Loss in any fiscal year shall be allocated among the Members in
proportion to their Percentage Interests.
(v) Notwithstanding anything to the contrary in this
SECTION 2.09(c),
(A) Interest income recognized on any deferred
purchase price obligation received in connection with a Disposition Event
shall not be considered a part of Disposition Profit or Disposition Loss,
as the case may be, and shall be allocated to the Member receiving the
interest payment to which such income is attributable.
(B) To the extent permitted by the applicable
Code provisions and Regulations, all Disposition Profit treated as ordinary
income because it is attributable to the recapture of depreciation or cost
recovery deductions shall be allocated among the Members in the same ratio
as prior allocations to such Members of the depreciation or cost recovery
deductions subject to recapture. The preceding sentence is intended merely
to characterize the gain allocable to the Members, and shall not operate to
increase or decrease the amount of Disposition Profit otherwise allocable
to the Members under SECTION 2.09(c)(ii).
(vi) For purposes of making the allocations provided for
in this SECTION 2.09, the Capital Account of each Member shall be
determined as of the end of the fiscal year in which the Disposition Event
occurred, after (x) crediting to such account all capital contributions
made by the Members within 15 days after the close of the fiscal year, (y)
debiting all distributions (whether of Net Receipts, Disposition Proceeds
or liquidation proceeds) made or to be made to such Member, and (z) after
crediting or debiting, as the case may be, such Member's share of the
Operating Profit or Operating Loss for such fiscal year.
(d) TAX CREDITS
The Company's basis in any property qualifying for the
investment tax credit shall be allocated among the Members in accordance
with the manner in which they share Operating Profit at the time the
property is first placed in service.
(e) SPECIAL ALLOCATIONS
Notwithstanding anything to the contrary in SUBSECTIONS
(b) through (d) of this SECTION 2.09:
(i) QUALIFIED INCOME OFFSET. If any Member
unexpectedly receives any adjustments, allocation or distributions
described in clauses (4), (5) or (6) of Regulations Section
1.704-1(b)(2)(ii)(d), items of Company income shall be specially allocated
to such Member in an amount and manner sufficient to eliminate the deficit
in such Member's Adjusted Capital Account created by such adjustments,
allocations or distributions as quickly as possible. This SECTION
2.09(e)(i) is intended to constitute a "qualified income offset" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(d)(3);
(ii) MINIMUM GAIN CHARGEBACK. If there is a net
decrease in Company Minimum Gain during a fiscal year, each Member will be
allocated, before any other allocation under this SECTION 2.09, items of
income and gain for such fiscal year (and if necessary, subsequent years)
in proportion to and to the extent of an amount equal to such Member's
share of the net decrease in Company Minimum Gain determined in accordance
with Regulations Section 1.704-2(g)(2). This SECTION 2.09(e)(ii) is
intended to comply with, and shall be interpreted consistently with, the
"minimum gain chargeback" provisions of Regulations Section 1.704-2(f);
(iii) MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK.
Notwithstanding any other provision of this SECTION 2.09, but except
SECTION 2.09(e)(ii), if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal
year of the Company, each Member who has a share of the Member Nonrecourse
Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal such Member's share of the
net decrease in Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulations Section 1.704-2(i)(4). This
SECTION 2.09(e)(iii) is intended to comply with the minimum gain chargeback
requirement of that Section of the Regulations and shall be interpreted
consistently therewith;
(iv) MEMBER NONRECOURSE DEDUCTIONS. Any Member
Nonrecourse Deductions for any fiscal year or other period shall be
specially allocated to the Member who bears (or is deemed to bear) the
economic risk of loss with respect to the Member Nonrecourse Debt to which
such Member Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
(v) NON-RECOURSE DEDUCTIONS. Any "Non-Recourse
Deductions" as defined in Regulations Section 1.704-2(c) for any fiscal
year or other period shall be specially allocated as items of loss in the
manner provided in Regulations Section 1.704-2(j)(1)(ii).
(vi) SPECIAL ALLOCATIONS. Any special allocations of
Operating Profits and Disposition Profits pursuant to SECTIONS 2.09(e)(ii),
(iii) and (iv) shall be taken into account in computing subsequent
allocations of Operating Profits and Disposition Profits pursuant to
SECTION 2.09(b) and (c), so that the net amount of any items so allocated
and the gain, loss and any other item allocated to each Member pursuant to
this SECTION 2.09 shall, to the extent possible, be equal to the net amount
that would have been allocated to each such Member pursuant to the
provisions of this SECTION 2.09 if such special allocations had not
occurred;
(vii) FEES TO MEMBERS OR AFFILIATES. In the event that
any fees, interest, or other amounts paid to any Member or any affiliate
thereof pursuant to this Agreement or any other agreement between the
Company and any Member or affiliate thereof providing for the payment of
such amount, and deducted by the Company in reliance on Section 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the Company on
its federal income tax return and are treated as Company distributions,
then:
(a) the Operating Profits or Operating Loss, as
the case may be, for the fiscal year in which such fees, interest, or other
amounts were paid shall be increased or decreased, as the case may be, by
the amount of such fees, interest, or other amounts that are treated as
Company distributions; and
(b) there shall be allocated to the Member to
which (or to whose Affiliate) such fees, interest, or other amounts were
paid, prior to the allocations pursuant to SECTION 2.09(b), an amount of
gross income for the fiscal year equal to the amount of such fees,
interest, or other amounts that are treated as Company distributions.
(viii) 704(C) ALLOCATION. Any item of income, gain,
loss, and deduction with respect to any property (other than cash) that has
been contributed by a Member to the capital of the Company and which is
required or permitted to be allocated to such Member for income tax
purposes under Section 704(c) of the Code so as to take into account the
variation between the tax basis of such property and its fair market value
at the time of its contribution shall be allocated to such Member solely
for income tax purposes in the manner so required or permitted. The
accounting for SECTION 704(c) for each Member shall continue in the same
manner as for the partners in the Partnership.
(f) ALLOCATION UPON CHANGE IN INTERESTS.
The Company shall treat all transfers and acquisitions of any
interest in the profits or losses of the Company that occur during the
first 15 days of a month as occurring on the first day of the month, and
shall treat all such transfers and acquisitions that occur after the 15th
day of the month as occurring on the 16th day of the month, except that a
daily allocation shall be made in the case of the acquisition or
disposition of a Member's entire interest in the Company. For purposes of
this subsection (f), the Company shall utilize the interim closing of the
books method.
(g) ALLOCATIONS BETWEEN CARLYLE 14 AND CARLYLE 15.
The Operating Profit and Operating Loss of the Company (and
items of income and deduction entering into the calculation of Operating
Profit or Operating Loss) which is allocated to Carlyle 14 and Carlyle 15
as aforesaid shall be allocated between Carlyle 14 and Carlyle 15, on a
monthly basis, in such a manner that the cumulative allocations to Carlyle
14 and Carlyle 15 will be allocated 65% to Carlyle 15 and 35% to Carlyle
14.
(h) NON-RECOURSE LIABILITIES.
The non-recourse liabilities of the Partnership, as defined in
Regulations Section 1.752-1(a)(2) shall be allocated among the Members in
accordance with Regulations Section 1.752-3(1)(1), (2) and (3).
2.10 RESERVED.
2.11 SPECIAL ASSETS.
(a) Neither Carlyle 14 nor Carlyle 15 will have any interest
in any of the Artwork described on EXHIBIT "B" hereto, any benefits
therefrom to accrue to Maguire Partners; provided that if any such artwork
shall hereafter be removed from its present location, Maguire Partners
shall promptly replace any Artwork it causes or permits to be removed with
other artwork comparable in size and appearance to that so removed, in
compliance with any governmental requirements presently in effect and with
all requirements in the Permitted Exceptions, Tenant Leases, Loan Documents
and Continuing Contracts (as such terms are defined in that certain
Agreement Re: Purchase and Sale of Partnership Interests among Maguire
Partners, Carlyle and Crocker Properties, Inc. dated June 28, 1985)
relating to artworks in or around the Building, and shall promptly restore
and finish the Property to first-class condition after any such removal.
(b) Maguire Partners shall have the right, on behalf of the
Company, to covenant to the City of Los Angeles any and all "Excess Parking
Capacity" (as hereinafter defined) in the Off-Site Parking Facility,
pursuant to Section 12.26E5 of the Los Angeles Municipal Code, or any
successor provision, for the benefit of any third party for the maintenance
of off-street parking spaces for the construction, operation or other
benefit of any other development projects or structures in the City of Los
Angeles and to receive and own any consideration paid by third parties for
such Excess Parking Capacity (all gain and income recognized by the Company
for income tax purposes due to such consideration being allocated to
Maguire Partners); provided, however, that no person shall be entitled to
actually occupy parking spaces within the Off-Site Parking Facility without
both obtaining the consent of the Company and paying to the Company the
prevailing market rate for comparable parking rights in downtown Los
Angeles, to which Carlyle 14 and Carlyle 15 will be entitled in accordance
with their Company interests. As used herein, "Excess Parking Capacity"
means that number of code compliance automobile parking spaces in the Off-
Site Parking Facility equal to the excess, if any, of (a) the total number
of code compliance automobile parking spaces in the Off-Site Parking
Facility, over (b) the aggregate number of automobile parking spaces
covenanted to the City of Los Angeles or otherwise restricted (including
restrictions which are to become effective at some future date) so as to be
unavailable for covenanting to the City of Los Angeles for the benefit of
third parties.
2.12 AETNA LOCKBOX. Notwithstanding anything to the contrary in
this Agreement, all receipts and funds of the Company shall be subject to
the terms, conditions and procedures of that certain Lockbox Agreement
dated as of December 1, 1994, by and among the Partnership, Aetna and CB
Commercial Real Estate Group, Inc. and of the Modification Documents so
long as such agreements remain in force and effect.
3. MANAGEMENT AND OPERATION.
3.01 MANAGEMENT OF THE COMPANY.
(a) MANAGEMENT COMMITTEE.
(i) The overall management and control of the business
and affairs of the Company shall be vested in a Management Committee,
appointed as hereinafter provided in this SECTION 3.01, which shall be
required to approve all decisions with respect to the management or control
of the Company, except as otherwise expressly provided herein. Except
where herein expressly provided to the contrary, all decisions with respect
to the management and control of the Company that are "Approved by the
Management Committee" shall be binding on the Company and all of its
Members. The size of the Management Committee shall be determined by
written approval of Members holding Percentage Interests in the Company
equal to at least seventy-five percent (75%), and the members of the
Management Committee shall be appointed by similar written approval and
shall include at least one representative each for Maguire Partners, for
Carlyle 14 and for Carlyle 15; provided, however, that the same person or
persons may be designated as the representative or representatives of both
Carlyle 14 and of Carlyle 15. The Company shall be a limited liability
company managed by its Members for purposes of the Act. The number of
representatives which each Member may have on the Management Committee
shall in any event be subject to the written approval of each of the other
Members other than a Member whose Percentage Interest in the Company shall
at any time be equal to or less than twenty percent (20%). Each Member so
entitled shall designate in writing from time to time its respective
representatives on the Management Committee and an alternate.
Any action of the Management Committee shall require the
written approval of the representatives on the Management Committee of all
Members. Each such representative shall be fully authorized to provide any
consent or approval which may be required hereunder of the Management
Committee. No meeting of the Management Committee shall be held unless at
least one representative of Maguire Partners and one representative of
either Carlyle 14 or Carlyle 15 are present.
(ii) In the event that the Management Committee fails to
take action on a Major Decision due to the inability of the representatives
of Maguire Partners and Carlyle to agree on the action to be taken, then
either Maguire Partners or Carlyle may give written notice (the
"ARBITRATION NOTICE") to the other that such inability to agree poses
significant risk to the successful operation of the Company (provided that
no Member shall give an Arbitration Notice with respect to a proposed
refinancing of the indebtedness on the Property that is not permitted by
SECTION 3.01(c)(ii) below) and thereupon the following actions shall be
taken:
(aa) Within thirty (30) days after transmittal of
such notice Maguire Partners and Carlyle shall each appoint an arbitrator,
and the two arbitrators so appointed shall appoint a third arbitrator. If
only two arbitrators are appointed within the first ten (10) days of the
initial thirty day period, then either Maguire Partners or Carlyle shall be
entitled to apply to the presiding judge of the Superior Court of the
County of Los Angeles for the selection of a third arbitrator who shall
then participate in such arbitration proceedings, and who shall be selected
from a list of four arbitrators possessing the qualifications set forth
below two of which shall be submitted by Maguire Partners and two of which
shall be submitted by Carlyle. Any arbitrator appointed pursuant to this
SECTION 3.01(a)(ii) shall be a qualified expert with generally recognized
current competence in real estate development. In conducting their
proceedings, the arbitrators shall be guided by the intention of the
Members that the Project be constructed and operated as a high quality
investment and building complex suitable for a corporate headquarters.
Except as otherwise provided herein, such arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
(bb) Within fifteen (15) days of the date of
selection of the last of the arbitrators to be selected by the foregoing
procedure set forth in clause (aa), the arbitrators shall furnish Maguire
Partners and Carlyle with written determination of a reasonable action to
be taken on the Major Decision in question. Such written determination
shall be signed by at least a majority of the arbitrators.
Either Maguire Partners or Carlyle shall have the
right to disapprove the determination by the arbitrators by written notice
to the other within ten (10) days after the delivery of the written
determination. Failure to so disapprove the written determination shall
constitute approval of the action on the Major Decision as set forth in the
written determination.
(cc) In the event either Maguire Partners or
Carlyle disapproves said written determination, then either Maguire
Partners or Carlyle (hereinafter called the "INITIATING PARTNER") shall, by
giving written notice to the other (hereinafter called the "RESPONDING
PARTNER"), of its disapproval of said determination within said ten (10)
day period be deemed to have initiated proceedings for the purchase or sale
of its respective Percentage Interest in the Company as herein
contemplated. If a majority of the arbitrators fail to deliver a written
determination within the time period provided above, then either Maguire
Partners or Carlyle as the Initiating Member may similarly give written
notice to the other as the Responding Member of its election to initiate
such proceedings. Within ten (10) days after the delivery of such notice
to initiate such procedures, Maguire Partners and Carlyle shall take steps
to have the Net Fair Market Value of the Company determined by appraisal as
provided in SECTION 3.03(e) hereof or by agreement or by any other means or
methods upon which they may from time to time agree. Within ten (10) days
after receipt of the results of such appraisal, or other agreement upon or
determination of such Net Fair Market Value, the Responding Member shall
give written notice to the Initiating Member as to whether the Responding
Member elects to sell its Percentage Interest in the Company to the
Initiating Member at the Net Fair Market Value thereof as so determined or
whether it elects to purchase the Percentage Interest in the Company of the
Initiating Member at such Net Fair Market Value. All such notices to
purchase when so delivered shall effect a binding agreement between Maguire
Partners and Carlyle to purchase or sell its respective Percentage Interest
in the Company to the other for cash as herein contemplated and such
purchase or sale shall be consummated within the time period and in the
manner contemplated in SECTION 3.03(d) hereof. Upon the delivery of such
election to purchase or sell, the Member whose interest is to be purchased
as herein contemplated shall cease to have a vote on the Management
Committee unless and until the Member which is to purchase such interest
shall default in its obligation to do so. If the Responding Member fails
to exercise its election to purchase or sell within the time period
provided, or if the Member which elects to purchase the Percentage Interest
of the other Member as herein contemplated thereafter fails to consummate
such purchase as herein contemplated, then the Initiating Member (in case
of the Responding Member's failure) or the nondefaulting Member (in case of
such failure of the Purchasing Member) as the case may be, shall have the
right by giving written notice of its election to do so to purchase the
Percentage Interest of such Responding Member or defaulting Member for cash
within the time period and in the manner contemplated in SECTION 3.03(d)
hereof. The price to be paid for the Percentage Interest to be so
purchased shall equal that portion of the Net Fair Market Value of the
assets of the Company which such selling Member would receive in the event
of dissolution of the Company pursuant to SECTION 3.06(d).
(dd) Neither Carlyle 14 nor Carlyle 15 shall take
any action pursuant to this SECTION 3.01(a)(ii) without the concurrence of
the other.
(b) PROPERTY MANAGER.
(i) The Company shall have a manager (the "PROPERTY
MANAGER") who shall be Maguire/Thomas Partners Development, Ltd., a
California limited partnership. The Property Manager shall be responsible
for the implementation of the decisions of the Management Committee and for
conducting the ordinary and usual business and affairs of the Company as
more fully set forth herein and in the Management Agreement referred to
below. The Management Committee of the Company shall require that the
Property Manager shall at all times conform to the policies and programs
established by the Management Committee and that the scope of the Property
Manager's authority shall be limited to said policies and programs. The
acts of the Property Manager shall bind the Members and the Company only
when within the scope of such Property Manager's authority. The Property
Manager shall at all times be subject to the direction of the Management
Committee, and the Management Committee shall require that the Property
Manager shall keep such Management Committee informed as to all matters of
concern to the Company.
The duties, obligations and compensation of the
Property Manager are set forth in the existing Property Management and
Leasing Agreement between the Company and the Property Manager. The
Property Manager may be another affiliate of Maguire Partners if
Maguire/Thomas Partners-Development, Ltd. resigns for any reason. The
Property Manager may, but is not obligated to, hire a professional building
management firm to assist in carrying out the duties of the Property
Manager, in which event such affiliate of Maguire Partners shall receive
such compensation, if any, for performing the duties of the Property
Manager as may be Approved by the Management Committee. The Property
Manager may, with the Approval of the Management Committee, be terminated
as the Property Manager with or without cause as provided in the Management
Agreement; provided that if an affiliate of Maguire Partners is acting as
the Property Manager, Carlyle 14 and Carlyle 15 may, with cause, terminate
its employment as the Property Manager and may, with or without cause,
terminate the employment of any professional building management firm
employed by Maguire Partners to assist it as aforesaid. In the event that
the Management Committee cannot agree upon the appointment of any successor
Property Manager within thirty (30) days after the termination or removal
of such Property Manager, then within thirty (30) days after the expiration
of said thirty (30) day period, Maguire Partners may deliver to the other
Members a written statement setting forth the names of three responsible
parties experienced in the management of real estate who would be
acceptable to Maguire Partners as the Property Manager and the terms and
conditions under which such parties would act as the Property Manager.
Within thirty (30) days after receipt of such statement, the other Members
shall give Maguire Partners a joint written notice setting forth the name
of the party out of such three parties which they select to act as the
Property Manager. In the event that Maguire Partners fails to provide the
other Members with the written statement of three responsible parties
referred to above within the required thirty (30) day period, the other
Members may proceed jointly to select a Property Manager and give Maguire
Partners notice of such selection. In the event that Maguire Partners
gives the aforesaid written statement as provided above and the other
Members do not give to Maguire Partners the joint written notice setting
forth the name of the party selected as Property Manager within the
aforesaid thirty (30) days, Maguire Partners may select the Property
Manager from the list and give the other Member notice of its selection.
Upon receipt of notice from the other Members, or from Maguire Partners, as
the case may be, all parties hereto shall execute such documents and do
such other acts as may be required to appoint such party as the Property
Manager and enable such party to act as the Property Manager. Subject to
the Approval of the Management Committee, the Property Manager being
removed or terminated shall continue to serve as such until the successor
Property Manager as provided herein has been selected. During any period
of time in which there shall not be a Property Manager actively serving in
such a capacity, the Management Committee shall carry out all
responsibilities of the Property Manager hereunder and under the Management
Agreement.
(iii) Not less often than once each fiscal year, the
Property Manager shall prepare and submit to the Management Committee for
its consideration an Operating Budget setting forth the estimated receipts
and expenditures (capital, operating and other) of the Company for the
forthcoming year, which Operating Budget shall be submitted to the
Management Committee at least sixty (60) days prior to the commencement of
each fiscal year of the Company. The Management Committee shall review and
adjust the Operating Budget on a quarterly basis. The Operating Budget as
so reviewed shall provide sufficient funds for the operation of the
Project, so as to permit operation of the Project in a manner consistent
with that for the operation of a first-class office building. When
Approved by the Management Committee, the Property Manager shall implement
the Operating Budget and shall be authorized, without the need for further
Approval by the Management Committee, to make the expenditures and incur
the obligations provided for in such Operating Budget.
(iv)Maguire/Thomas Partners Development, Ltd. ("MTP-D")
has entered into a letter agreement with Carlyle dated of even date
herewith re: Maguire Thomas Partners-South Tower, LLC- Manager's Payment
(the "LETTER AGREEMENT"). Pursuant to the Letter Agreement, MTP-D is
obligated to pay the Manager's Payment, as defined therein, to Carlyle in
monthly installments on the terms and conditions specified in the Letter
Agreement. Maguire Partners agrees that if MTP-D fails to pay any
installment of the Manager's Payment when due and payable to Carlyle under
the Letter Agreement, and if Carlyle notifies MTP-D of such default and
such default remains uncured for at least 10 days after such notice (a copy
of which shall also be given to Maguire Partners), then Maguire Partners
shall cause the delinquent installment of Manager's Payment to be paid by
Maguire/Thomas Partners Development, Ltd. to Carlyle in accordance with the
Letter Agreement within 15 days after such notice of default from Carlyle.
If Maguire Partners fails to cause such payment to be made as required by
the preceding sentence, then Carlyle may take whatever action Carlyle deems
appropriate to enforce its rights under the Letter Agreement or hereunder,
in its own name or in the name of the Company, to the Manager's Payment and
may invoke the procedures of SECTION 3.06 hereof with respect to such
default of Maguire Partners.
(1) Notwithstanding anything in this Agreement to the
contrary, Maguire Partners shall not be entitled to receive, or have an
interest in, any Net Receipts or other distributions under this Agreement,
in the event Maguire Partners is in default under this SECTION 3.03(b)(iv)
except to the extent the Net Receipts or other distributions hereunder
otherwise distributable to Maguire Partners exceed any amount for which
Maguire Partners is obligated to Carlyle pursuant to this SECTION
3.03(b)(iv) ("MAGUIRE PARTNERS' OBLIGATION"). Any Net Receipts or other
distributions hereunder which, but for the preceding sentence, would be
distributed to Maguire Partners, shall be held by the Company and applied
by it to pay the Maguire Partners' Obligation by payment to Carlyle. Any
amount held by the Company on account of such Maguire Partners' Obligation
shall be deemed to be a distribution to Maguire Partners (followed by a
payment by Maguire Partners on account of the Maguire Partners'
Obligation), shall reduce the amount otherwise distributable to Maguire
Partners pursuant to this Agreement, shall reduce the Capital Account of
Maguire Partners and shall reduce the amount of the Maguire Partners'
Obligation.
(2) Maguire Partners waives: (a) any defense based upon
any legal disability to enter into the Letter Agreement or other defense of
MTP-D; (b) any defense based on any lack of authority of the officers,
directors, partners or agents acting or purporting to act on behalf of MTP-
D or any principal of MTP-D, or any defect in the formation of MTP-D or any
principal of MTP-D; (c) any and all rights and defenses arising out of an
election of remedies by Carlyle, even though that election of remedies has
destroyed Maguire Partners' rights of subrogation and reimbursement against
the principal; (d) any defense based upon Carlyle's failure to disclose to
Maguire Partners any information concerning MTP-D's financial condition or
any other circumstances bearing on MTP-D's ability to perform its
obligations the Letter Agreement; (e) any defense based upon any statute or
rule of law which provides that the obligation of a surety must be neither
larger in amount nor in any respects more burdensome than that of a
principal; (f) any defense based upon Carlyle's election, in any proceeding
instituted under the Federal Bankruptcy Code, of the application of Section
1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (g) any
defense based upon any borrowing or any grant of a security interest under
Section 364 of the Federal Bankruptcy Code; (h) any right of subrogation,
any right to enforce any remedy which Carlyle may have against MTP-D and
any right to participate in, or benefit from, any security for the Letter
Agreement now or hereafter held by Carlyle; and (i) presentment, demand,
protect and notice of any kind. Maguire Partners agrees that payment or
performance of any act which tolls any statute of limitations applicable to
the Letter Agreement shall similarly operate to toll the statute of
limitations applicable to Maguire Partners' liability hereunder. Without
limiting the generality of the foregoing or any other provision hereof,
Maguire Partners expressly waives, to the extent permitted by law, any and
all rights and defenses which might otherwise be available to Maguire
Partners under California Civil Code Sections 2787 to 2855, inclusive, 2899
and 3433, or any of such sections.
(c) APPROVAL OF MAJOR DECISIONS.
Except for matters that the Property Manager may be
specifically authorized to do pursuant to SECTION 3.01(b) above, no act
shall be taken, sum expended, decision made or obligation incurred by the
Company, the Management Committee, the Property Manager, or any Member with
respect to any matter relating to the management or control of the Company
and each of the major decisions enumerated below (the "MAJOR DECISIONS"),
unless and until each such decision has been Approved by the Management
Committee. The Major Decisions shall include:
(i) Acquisition of any land or other real
property or interest therein.
(ii) Financing or refinancing of the Company
assets, including without limitation, the financing of the acquisition of
any property of the Company, interim and long-term financing or refinancing
of the Project, and financing operations of the Company; provided, however,
the Members hereby agree that when the present Aetna Loan (as extended by
the Modification Documents) shall mature, they shall accept in replacement
thereof a new mortgage loan in the maximum amount reasonably practicable
having a due date not earlier than 10 years and bearing interest without
any participation or accruals and otherwise at a market rate of interest
and points (which shall not be in excess of the rate of interest and fees
that would be charged on a loan with similar terms but in an amount equal
to the then outstanding balance of the Aetna Loan) and on market terms and
conditions. The Members hereby approve the Permanent Financing Guidelines
attached hereto as EXHIBIT "D".
(iii)Mortgaging or the placing or suffering of any
encumbrance on any of the Property owned or operated by the Company,
including the Improvements thereon; provided, however, that the Property
may be mortgaged to secure a replacement loan described in clause (ii)
above or a second mortgage not in excess of $500,000 (if permitted by the
holder of the first mortgage).
(iv) Approval of the form or forms of leases and
adoption of the terms, conditions and standards (the "LEASE GUIDELINES")
for the leasing of space within any of the Improvements owned or operated
by the Company. The Property Manager shall be authorized to negotiate and
execute, on behalf of the Company, leases of such space within the lease
guidelines.
(v) Execution of any lease or other arrangement
involving the rental, use or occupancy of space in any of the Improvements
owned or operated by the Company, if such lease or other arrangement
provides for terms, conditions or standards more favorable to the lessee
than those contained in the lease guidelines or otherwise materially varies
from the approved lease guidelines or from the lease forms previously
Approved by the Management Committee. Leases of space in the Building
shall be effected by the Property Manager pursuant to a standard form of
building lease which shall be Approved in advance by the Management
Committee. The financial responsibility of each prospective tenant in the
Building and such tenant's compatibility with the general use of the
Building as contemplated herein, and any deviation in terms of the lease to
any prospective tenant including, without limitation, terms as to base
rental, tenants' standard improvements or otherwise, shall be Approved by
the Management Committee.
(vi) Termination or modification of any lease or
other arrangement involving the rental, use or occupancy of space in any of
the Improvements owned or operated by the Company, if such lease or other
arrangement was required to be Approved by the Management Committee
pursuant hereto or if such modification would result in a modified lease or
other arrangement which would, if it were a new lease, be required to be
Approved by the Management Committee pursuant hereto.
(vii)Construction of any Improvements or the making of
any capital improvements, repairs, alterations or changes in, to or of that
portion of the Project owned or operated by the Company in an amount which
exceeds the limitations in clause (xiii) below, except for such matters as
may be expressly delegated in writing to the Property Manager by the
Management Committee. As used in this clause (vii), the term "capital
improvement" does not include any tenant improvements for any one tenant
which do not exceed $45 per square foot (exclusive of improvements paid for
by the tenant or amortized by payments made over the term of the lease).
(viii) Selecting or varying depreciation and
accounting methods and making other decisions with respect to treatment of
various transactions for state or federal income tax purposes or other
financial purposes.
(ix) Approval of all construction and
architectural contracts and all architectural plans, specifications, and
drawings prior to the construction and/or alteration of improvements on the
Property, and any modifications of such contracts, plans, specifications
and drawings, except for such matters as may be expressly delegated in
writing to the Property Manager by the Management Committee.
(x) Varying or changing any portion of the
insurance program set forth in the insurance schedule attached hereto as
EXHIBIT "E".
(xi) Determining whether distributions should be
made to the Members, except as otherwise set forth in SECTIONS 2.06, 2.07
and 2.08 hereof.
(xii)Approving the Operating Budget pursuant to SECTION
3.01(b)(iii) hereof.
(xiii) Making any expenditure or incurring any
obligation by or on behalf of the Company involving a sum in excess of
$10,000 or involving a sum of less than $5,000 where the same relates to a
component part of work, the combined cost of which in any one fiscal year
exceeds $100,000, except for expenditures made and obligations incurred
pursuant to and specifically set forth in an Operating Budget theretofore
Approved by the Management Committee or expressly provided for in this
Agreement.
(xiv)Making any expenditure or incurring an obligation
which when added to any other expenditure for the fiscal year of the
Company exceeds the Operating Budget or any line item specified in the
Operating Budget.
(xv) Preparation and release of all promotional
and advertising material relating to the Project or concerning the Company,
including without limitation, press releases.
(xvi)Selection or termination or removal of the Property
Manager (as contemplated in SECTION 3.01(d) hereof).
(xvii) Retention of counsel for the Company or
institution of any legal action, except for such action as the Management
Committee may in writing expressly authorize the Property Manager to
institute;
(xviii) Declaring the existence of a Capital
Shortfall for purposes of SECTION 2.05; or
(xix)Any other decision or action which by any provision
of this Agreement is required to be Approved by the Management Committee or
which is not contemplated by the foregoing clauses (i) through (xviii) and
which materially affects the Company or the assets or operations thereof.
Notwithstanding the foregoing, any sale or other disposition of
all or substantially all of the assets of the Company shall require the
written consent of Members holding at least 75% of the Percentage Interests
in the Company.
(d) LIMITATIONS ON AUTHORITY.
Any provisions hereof to the contrary notwithstanding, except
for expenditures made and obligations incurred that were previously
Approved by the Management Committee or incurred pursuant to a Operating
Budget Approved by the Management Committee, or otherwise not required to
be approved by the Management Committee, the Property Manager shall not
have any authority to make any expenditure or incur any obligation on
behalf of the Company. The Property Manager shall not expend more than
what the Property Manager in good faith believes to be the fair and
reasonable market value at the time and place of delivery or performance
for any goods purchased or services engaged on behalf of the Company. The
rights and obligations of the Property Manager under this Agreement and the
Management Agreement shall not be assignable voluntarily or by operation of
law by the Property Manager without the prior written Approval of the
Management Committee. None of the Members shall, without the consent of
the other Members, take any action on behalf of or in the name of the
Company, or enter into any commitment or obligation binding upon the
Company, except for (i) actions expressly provided for in this Agreement,
(ii) actions by the Property Manager within the scope of its authority
granted hereunder, and (iii) actions authorized by the Members in the
manner set forth herein. Each Member shall indemnify and hold harmless the
other Members and their affiliates, directors and officers from and against
any and all claims, demands, losses, damages, liabilities, lawsuits and
other proceedings, judgments and awards, and costs and expenses (including
but not limited to reasonable attorneys' fees) arising directly or
indirectly in whole or in part out of any breach of the foregoing
provisions by such Member or its affiliates, officers, agents or employees.
TIME DEVOTED TO THE COMPANY.
The Members shall each devote such time to the Company as is
reasonably necessary to carry out the provisions of this Agreement. Except
as may otherwise be expressly provided for herein or hereafter may be
Approved by the Management Committee, no payment shall be made by the
Company to any Member for the services of such Member or any member,
shareholder, director or employee of any such Member. Any such payments
shall not exceed the fair market value of such services.
(f) TRANSACTIONS WITH RELATED PERSONS.
The Property Manager shall not knowingly enter into any
agreement or other arrangement for the furnishing to or by the Company of
goods or services with any Person related to or affiliated with the
Property Manager or any Member unless such agreement or arrangement has
been Approved by the Management Committee. Such agreement or other
arrangement shall provide for payments to any such Persons not exceeding
the fair market value of the goods or services supplied. By way of
illustration and not as a limitation on the scope of the phrase "related to
or affiliated with," for the purposes of this Subsection (g), the following
Persons shall be deemed to be "related to or affiliated with" the Property
Manager or a Member:
(i) Any Owning Person, which shall mean a Person
owning directly or indirectly more than five percent (5%) of the issued and
outstanding stock of, or more than a five percent (5%) beneficial interest
in, the Property Manager or any Member;
(ii) Any Owned Person, which shall mean a Person
more than five percent (5%) of the issued and outstanding stock of which,
or more than a five percent (5%) beneficial interest in which, is owned
directly or indirectly by the Property Manager or any Member;
(iii)Any Affiliated Person, which shall mean (x) a
Person more than five percent (5%) of the issued and outstanding stock of
which, or more than a five percent (5%) beneficial interest in which, is
owned by an Owning Person or an Owned Person, and (y) a Person which owns
more than five percent (5%) of the issued and outstanding stock of, or more
than a five percent (5%) beneficial interest in, any Owning Person or any
Owned Person; and
(iv) Any agent, officer, director, employee or
partner (or any member of the family of an agent, officer, director,
employee, or partner) of the Property Manager, any Member, any Owning
Person, any Owned Person, or any Affiliated Person.
(g) OTHER INTERESTS OF MEMBERS.
Each of the Members understands that the other Members or their
affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Company. Each Member also
understands that the conduct of the business of the Company may involve
business dealings with such other businesses or undertakings. The Members
hereby agree that the creation of the Company and the assumption by each of
the Members of their duties hereunder shall be without prejudice to their
rights (or the rights of their affiliates) to have such other interests and
activities and to receive and enjoy profits or compensation therefrom, and
each Member waives any rights he or it might otherwise have to share or
participate in such other interests or activities of the other Members or
their affiliates. The Members or any of them, may engage in or possess any
interest in any other business venture of any nature or description
independently or with others, including, but not limited to, the ownership,
financing, leasing, operation, management, syndication, brokerage, or
development of real property and neither the Company nor any other Member
shall have any right by virtue of this Agreement in and to such venture or
the income or profits derived therefrom. Each Member shall give notice to
the other Members of its interest, or the interest of any of its
affiliates, in any other business or undertaking which proposes to enter
into any business transactions with the Company.
3.02 ACCOUNTING, TAX ELECTIONS AND RELATED MATTERS.
(a) At all times during the existence of the Company, the
Company shall cause the Property Manager, at the Company's expense, to
maintain accurate books and records of account in which shall be entered
all matters relating to the Company, including all income, expenditures,
assets and liabilities thereof. Such books and records of account shall be
maintained on the accrual basis in accordance with the tax accounting
method used in filings of Federal income tax returns. The Company will
elect and use the accrual method of accounting for the Federal and state
returns of income of the Company unless otherwise changed pursuant to
SECTION 3.01(c). The Company will make available adequate information to
provide any Member with all financial information as may be needed for any
Member or an affiliate of any Member for purposes of satisfying the
financial and tax reporting obligations of any Member or its respective
affiliate or affiliates. Each Member shall be entitled to any additional
information with respect to the Company as the Member's individual needs
may dictate, provided that the cost of providing such information shall be
borne solely by the Member so requesting such additional information.
(b) The Company's books and records of account shall be kept
and maintained at all times at the place or places Approved by the
Management Committee. Each Member, and its authorized representatives,
including, without limitation, such Member's lenders upon the request of
such Member, and any supervisory or regulatory authority which has
oversight over any Member or its lenders (through its representatives)
shall have the right to inspect, examine and copy the books, records,
files, securities, and other documents of the Company at all reasonable
times including, without limitation, the leases of the Property and all
correspondence concerning such leases. Said supervisory and regulatory
authorities shall also have the right in connection with an examination of
the Company activities, to examine any other Person (including, but without
limitation, the Property Manager) and the employees of such other Person
having custody or control of the Company documents with respect to such
documents.
(c) The fiscal year of the Company shall end on December 31st
of each year, unless otherwise changed pursuant to SECTION 3.01(c).
(d) (i) The Property Manager shall cause the accountants
employed by the Company to prepare a balance sheet of the Company as of the
last day of each month of each fiscal year, and an income and Net Cash Flow
statement for each month for each fiscal year. Such statements shall be
certified by an officer of the Property Manager, and copies shall be
furnished to each of the Members within ten (10) days after the end of each
month to the extent feasible. An annual statement of financial condition
of the Company and Income and Net Cash Flow statements (unaudited) shall to
the extent feasible be furnished to each of the Members within sixty (60)
days after the close of the fiscal year.
(ii) The records and accounts of the Company shall be
audited annually by Arthur Andersen & Co. or other nationally recognized
firm of independent certified public accountants Approved by the Management
Committee, who shall render their opinion on the statement of financial
condition of the Company as of the end of each fiscal year and the results
of its operations, changes in its financial condition and its income and
Net Cash Flow for each fiscal year. Such firm shall also render its
opinion on the Net Cash Flow computations made by the accountants for the
Company and certify that the distributions thereof are made in accordance
with SECTION 2.06 of this Agreement.
(e) Funds of the Company shall be deposited in an account or
accounts of a type in form and name and in a bank or banks Approved by the
Management Committee. Withdrawals from bank accounts shall be made by
parties Approved by the Management Committee.
(f) All accounting decisions for the Company (other than
those specifically provided for elsewhere in this SECTION 3.02) shall be
Approved by the Management Committee and shall be in accordance with
generally accepted accounting principles.
(g) Federal, state and local income tax returns of the
Company shall be prepared by the independent auditors. Copies of all tax
returns of the Company shall be furnished for review and Approved by the
Management Committee at least thirty (30) days prior to the statutory date
for filing, including extensions thereof, if any.
(h) Each item of income, gain, loss, deduction, or credit
earned, realized or available by or to the Company shall be allocated to
the Members for federal and state income tax purposes in accordance with
SECTION 2.09 hereof; provided, however, that, subject to the provisions of
SECTION 2.09(f) hereof, under no circumstances shall any item of expense or
deduction attributable to the period prior to the date of admission of a
Member be allocated to such Member, even if actually paid in a subsequent
period. The Company shall make the election under Section 754 of the
Internal Revenue Code (and under the corresponding section of state or
local law) at the request of any Member, or if otherwise Approved by the
Management Committee, with respect to any Company Interest in the Company
to which Section 754 applies. The Company shall make such other tax
decisions and elections as are set forth on EXHIBIT "F" hereto. Tax
decisions and elections for the Company not provided for expressly herein
or on said EXHIBIT "F" must be Approved by the Management Committee. All
information relating to depreciation, including method, useful lives and
asset amount, shall be furnished to each Member in sufficient detail and
with such promptness as to permit compliance with requirements of any
applicable supervising or regulatory authority.
(i) The Members shall jointly represent the interests
of the Company before the Internal Revenue Service and, for purposes of
notice to the Company, Carlyle 15 shall be designated the Tax Matters
Partner or Member (as defined in Section 6231(a)(7) of the Code). Carlyle
15 shall not make any commitment or agreement binding on the Company, as
such Tax Matters Member, without the approval of all Members and shall
fulfill all of the duties and obligations of the Tax Matters Member as set
forth in the Code and any Regulations promulgated in connection therewith,
including, without limitation, transmitting to Members copies of all
notices and information the Tax Matters Member from the Secretary (as
defined in Section 7701(a)(11) of the Code ("SECRETARY")) immediately after
receipt thereof, providing the Secretary sufficient information to enable
the Secretary to provide proper notice to each Member of any administrative
proceeding with respect to the Company or the Members (as specified in
Sections 6223(a) and (c) of the Code) and notice to the other Members of
the terms and conditions of any settlement entered into between it and the
Secretary within thirty (30) days of the date of such settlement. In
addition, the Tax Matters Member shall:
(1) Ensure that each other Member is
a Notice Partner or Member (as defined in Section 6231(a)(8) of the Code)
at all times with respect to the Company;
(2) In the event registration of the
Company is required under the provisions of Section 6111 of the Code,
following the providing to the Tax Matters Member by the other Members of
all information required to be submitted with or in connection with such
registration, promptly register the Company with the Secretary and submit
complete and accurate information in connection therewith; timely furnish
to each Member the identification number assigned by the Secretary to the
Company in connection with any such registration; and
(3) Indemnify and hold each other
Member and the Company harmless from and against any penalty or other
liability that may be imposed upon each other Member or the Company under
the provisions of Section 6707 or any other provision of the Code by reason
of any failure of the Tax Matters Member to comply promptly and fully with
the obligations imposed upon it under this SECTION 3.02(i).
(j) All Fixed Rate Interest accruing on the Aetna Loan
(excluding any Participation Interest, as defined in the Modification
Documents) after the date hereof shall be paid by the Company on a current
basis and shall not be deferred.
3.03 SALE, TRANSFER OR MORTGAGE OF INTERESTS IN THE COMPANY.
(a) Except as expressly permitted herein, no Member shall,
voluntarily or by operation of law, sell, assign, transfer, mortgage,
charge or otherwise encumber, or permit any third party to sell, assign,
transfer, mortgage, charge or otherwise encumber (herein sometimes
collectively called a "TRANSFER"), either directly or indirectly, any part
or all of its Company interest without the written consent of all Members
and any attempt to do so shall be void unless such transfer is made in
accordance with the provisions of SECTION 3.03(b) provided that the
foregoing shall not preclude a Member from granting to a Financial
Institution as security for or in connection with a loan the right to
receive part of all of the distributions to which such Member is or may
become entitled under this Agreement. In order to effectuate the purpose
of this SECTION 3.03, each Member agrees to transfer its interest in the
Company only through a direct transfer of such interest in the manner
contemplated in this SECTION 3.03, and that no transfer of any stock or
partnership or other beneficial interest in Carlyle, Maguire Partners or
other corporation, partnership or other Person which holds an interest in
the Company will be effective; provided, however, that the foregoing is not
intended to prohibit sales or transfers of stock of publicly traded
companies or the sale or transfer of limited partnership interests in
Carlyle. Nothing contained in this SECTION 3.03 (other than the provisions
of SECTION 3.03(g) hereof) or in any other provision of this Agreement
shall preclude Carlyle or Maguire Partners from granting a security
interest in or encumbering its Company interest to another Member or to a
bank, savings and loan association, insurance company or other financial
institution having a net worth of at least $100 million (a "FINANCIAL
INSTITUTION"), provided that such Financial Institution agrees to give the
other Members written notice of any default under such security interest or
encumbrance and grant to such Members for a period of 30 days after such
notice the right to cure such default or pay the entire balance due on such
loan and obtain the rights of such lender under such security interest or
encumbrance and provided further that such security interest or encumbrance
shall not secure any loan or obligation of a Member which is in excess of
40% of the value of the Members' interest in the Company.
No change in a Percentage Interest pursuant to SECTION
2.05 will be deemed a transfer pursuant to this SECTION 3.03.
(b) Except for any transfer of a Company Interest which is
not prohibited by SUBSECTION 3.03(a) above, if any Member proposes to
transfer all or any portion of its Company Interest (such Member being
hereinafter called the "OFFEROR"), such Member shall give notice ("THE
OFFERING NOTICE") to the other Members (each such Member or group of
Members receiving the Offering Notice being hereinafter referred to as the
"OFFEREES") of the terms upon which the Offeror proposes to transfer the
Company Interest and a list of potential transferees, whereupon the
following provisions shall apply:
(i) In the Offering Notice, the Offeror shall offer
(the "SALE OFFER") to the Offerees the right to purchase all and not less
than all of the Company Interest of the Offeror referred to in said
Offering Notice (which may be less than the Offeror's entire Percentage
Interest in the Company), at the same price and subject to the same terms
and conditions as set forth in said Offering Notice. The Offerees shall
jointly have the first right to purchase proportionate shares of the
Offeror's entire Company Interest so proposed to be sold or transferred;
provided, however, that if any Offeree does not elect to purchase its full
proportionate share of the Offeror's Company Interest, the other Offerees
may elect to purchase proportionately the balance of said Offeror's Company
Interest so proposed to be sold or transferred. The Offerees shall notify
the Offeror of their election within thirty (30) days of the date of
receipt of the Offering Notice. The proportionate shares of each electing
Offerees shall be based on the ratio which its respective Percentage
Interest in the Company bears to the aggregate Percentage Interests of all
electing Offerees.
(ii) If the Sale Offer is accepted by one or more of the
Offerees, and notice in writing is given within the period specified in
subsection (i) above, the Offeror shall thereupon be bound to sell to the
Offeree or Offerees and the Offerees shall be bound to purchase the Company
Interest referred to in the Sale Offer in accordance with the terms of such
Sale Offer. The purchase shall be closed in accordance with SECTION
3.03(d) below.
(iii) If no Offerees have accepted the Sale Offer as
provided in subsection (i) above within the time limits referred to
therein, the Sale Offer shall be deemed to have been declined by the
Offerees and the Offeror shall be free to sell that portion of its Company
Interest described in the Offering Notice at a price and upon terms and
conditions not less favorable to the Offeror than those set forth in the
Offering Notice and which complies with subsection (iv) below (but no such
sale shall be made at a price less than the price or on terms and
conditions less favorable to the Offeror than those set forth in the
Offering Notice without first sending the Offerees the new Offering Notice
at the changed price and on any such changed terms and conditions, in which
event the Offerees shall have a further period in which to elect to
purchase at the new price or on the changed terms and conditions as
aforesaid, said further period to be ten (10) business days in the case of
a proposed sale at a changed price which is not less than 95% of the price
and is otherwise on terms and conditions not less favorable to the Offeror
than as set forth in the Offering Notice (and thirty (30) days in all other
instances) and all rights of the Offerees under this Section with respect
to such sale only shall be deemed void and of no further force or effect,
but the Offerees shall continue to enjoy the rights granted in this
subsection with respect to any and all subsequent sales of the same or any
other Company Interest. If in any instance the Offerees elect not to
exercise their rights hereunder or to waive such rights, such election
shall not constitute a waiver of the Offerees' right to an Offering Notice
in the case of any subsequent sale. If such Company Interest is not so
sold and the transfer not consummated within one hundred twenty (120) days
from the expiration of the time limits referred to in subsection (i), the
relevant Company Interest shall again become subject to all the provisions
of this SECTION 3.03.
(iv) The Offeror shall not be entitled to consummate a
sale pursuant to Clause (iii) above unless the following additional
conditions have been satisfied:
(aa) The purchaser of the interest in the Company
proposed to be sold is one of the proposed transferees identified in the
Offering Notice;
(bb) The proposed purchase price is payable solely
in lawful money of the United States or in any equivalent foreign currency,
and if not payable in its entirety in cash, under no circumstances may
payment of the non-cash portion of the proposed purchase price be secured
by any charge, encumbrance or hypothecation of the interest in the Company
except to the selling Member with a provision that the selling Member may
not discount or otherwise transfer the obligation and the security interest
in the Company interest to any other Person. The holder of such charge,
encumbrance or hypothecation shall be subject to the provisions of this
SECTION 3.03 in connection with any disposition of such Company Interest.
(cc) The offer contains provisions whereby the
purchaser is obligated to comply with the provisions of SECTION 3.03(d)
hereof;
(dd) The purchaser is not an agent acting on
behalf of an undisclosed principal; and
(ee) The Offeror shall not have caused or
permitted an Event of Default under Section 3.06 hereof; provided, however,
that if following the occurrence of an Event of Default under SECTION 3.06
hereof on the part of the Offeror the Non-Defaulting Members (as defined in
SECTION 3.06) do not exercise any rights under SECTION 3.06 hereof to
acquire the Offeror's Company Interest within the time period therein set
forth, the Offeror may proceed to exercise its rights under this subsection
(a) with the same force and effect as if the Offeror had not caused or
permitted any Event of Default under SECTION 3.06 hereof.
(c) In the event of any attempted transfer of any part of a
Company Interest as a result of the involuntary dissolution of a Member or
any attempted transfer otherwise by operation of law, the other Members of
the Company shall have the right to purchase the entire interest of such
dissolved or bankrupt Member in the Company for a total price equal to that
portion of the Net Fair Market Value of the assets of the Company which
such dissolved or bankrupt Member would receive in the event of dissolution
of the Company pursuant to SECTION 3.06(d). In such event the other
Members shall jointly have the first right to purchase proportionate shares
of such dissolved or bankrupt Member's entire interest; provided, however,
that if any such other Member does not elect to purchase his full
proportionate share thereof, then the remaining Members may elect to
purchase proportionately the balance thereof. The other Members shall
notify the duly appointed representative of the dissolved or bankrupt
Member of their election within sixty (60) days of receipt of the appraisal
made pursuant to SECTION 3.03(e) hereof, and failure to give such notice of
election within said period shall be deemed to be an election not to
purchase the interest of such dissolved or bankrupt Member's interest. The
proportionate shares of the other Members shall be based on the ratio which
their respective Percentage Interests in the Company bear to the aggregate
Percentage Interests of all other Members exercising rights in the same
manner. If none of the other Members elects to so purchase, or if
following an election by one or more other Members to so purchase, no other
Member is ready and willing to consummate the purchase of the entire
interest of the dissolved or bankrupt Member, the personal representative
of such Member may forthwith commence proceedings for dissolution of the
Company. Anything hereinabove contained in this SECTION 3.03(c) to the
contrary notwithstanding, in the event that any transfer by operation of
law of all or any portion of the Percentage Interest of Maguire Partners
occurs as a result of the death of Maguire or the dissolution of Maguire's
marriage, the other Members shall have no right under this SECTION 3.03(c)
or any other section of this Agreement, to purchase any portion of the
Percentage Interest of Maguire Partners which is retained by Maguire
Partners. Furthermore, in said event, Maguire Partners shall for a period
of 180 days after the occurrence of such death or dissolution, be entitled
to seek a purchaser for the portion of its Percentage Interest so
transferred, including the entire Percentage Interest if so transferred,
pursuant to the provisions of SECTION 3.03(b) hereof. If no sale offer is
made pursuant to SECTION 3.03(b) within said 180 days, then the provisions
of this SECTION 3.03(c) shall become effective as to any portion of the
Percentage Interest so transferred.
(d) The closing of any sale of an interest in the Company
pursuant to this SECTION 3.03 (the "CLOSING") shall be held at a mutually
acceptable place on a mutually acceptable date not more than 120 days after
(i) receipt by the Offeror of the written notices of election by the
Offerees or after the expiration of the time within which the Offerees must
so elect as provided in SECTION 3.03(b) above or (ii) receipt by the
representative of a dissolved or bankrupt Member of written notice or
notices of election as provided in SECTION 3.03(c) above. Any Member
transferring its interest shall transfer such interest free and clear of
any liens, encumbrances or any interests of any third party and shall
execute or cause to be executed any and all documents required to fully
transfer such interest to the acquiring Members including, but not limited
to, any documents necessary to evidence such transfer, and all documents
required to release any interest of a Member's spouse or any other party
who may claim an interest in such Member's Company Interest. As of the
effective date of any transfer not prohibited hereunder by a Member of its
entire interest in the Company, such Member's rights and obligations
hereunder shall terminate except as to items accrued and any liability for
damages as of such date and except as to any indemnity obligations of such
Member expressly provided for in this Agreement attributable to acts or
events occurring prior to such date and, as to Maguire or Maguire Partners,
as the case may be, any obligations assumed under the DDA. Thereupon,
except as limited by the preceding sentence, this Agreement shall terminate
as to the transferring Member but shall remain in effect as to the other
Members. In the event that pursuant to the provisions of this SECTION
3.03, any Member (the "TRANSFEROR") shall transfer its Company Interest to
any person or entity other than the other Members ("TRANSFEREE"), no such
transfer shall be made or shall be effective to make such Transferee a
Member (limited or general) or entitle such Transferee to any benefits or
rights hereunder until the proposed Transferee enters into a written
agreement with the other Members whereby the Transferee agrees to assume
and be bound by all the obligations of the Transferor and be subject to all
the restrictions to which the Transferor is subject under the terms of this
Agreement and any further agreement with respect to the Project to which
the Transferor is then subject or is then required to be a party.
(e) Whenever provision is made herein for the purchase of an
interest in the Company or for other valuation by appraisal, the value of
such interest in the Company shall be determined as follows: Except as
otherwise agreed by the Member whose interest is to be transferred (the
"TRANSFEROR") and the Members who are to acquire such interest (the
"TRANSFEREE"), the Transferor and the Transferee shall within twenty (20)
days after the date on which the appraisal procedure is invoked as provided
in this Agreement, each appoint a recognized real estate expert who shall
have generally recognized current competence in the valuation of properties
similar to the Company assets which are located in Los Angeles, California.
The two appraisers so appointed shall appoint a third recognized real
estate expert possessing the aforesaid qualifications. If the three
appraisers to be so appointed are not appointed within thirty (30) days of
the date the appraisal procedure is invoked as provided in this Agreement,
then the appraiser or appraisers, if any, who have been selected shall
proceed to carry out the appraisal. The appraiser or appraisers so
selected shall furnish the Members with a written appraisal within forty-
five (45) days of the date of selection of the last of the appraisers to be
so selected, setting forth the Net Fair Market Value of the Company as of
the date as of which the appraisal is to be made as provided in this
Agreement or if not otherwise so provided, then as of a date within thirty
(30) days of the date of their report. Any appraisal report so submitted
shall be signed by a majority of the appraisers if more than two have been
selected. If only two appraisers have been selected and they are unable to
agree, then either the Transferor or the Transferee shall be entitled to
apply to the presiding judge of the Superior Court of the County of Los
Angeles for the selection of a third appraiser who shall then participate
in such appraisal proceeding, and who shall be selected from a list of
names of appraisers possessing the aforesaid qualifications submitted by
the Transferor and Transferee. As used in this section, the term "NET FAIR
MARKET VALUE" shall mean the cash price which a purchaser would pay on the
effective day of the appraisal for all assets of the Company taking into
account the nature, extent and maturity date of the liabilities of the
Company, whether fixed or contingent, such valuation to be made on the
assumption that such assets are subject to this Agreement and to any other
agreement, including leases, management and service agreements then in
effect. Such appraisals shall assume that the Project is the highest and
best use of the Property subject thereto and shall be made in the usual and
normal manner for real estate appraisals. The cost of the appraisal shall
be an expense of the Company. The value of an interest in the Company
shall be deemed to be the amount that the owner of such interest would have
received under the provisions of this Agreement if the Property had been
sold for cash at the value determined by such appraisal and the Company had
been wound up and dissolved following such sale in accordance with the
terms of this Agreement.
(f) As a matter separate and apart from the other provisions
of this SECTION 3.03, the Members agree amongst themselves that none of
them will, without the prior written consent of the other Member(s),
propose to transfer, transfer, dispose of, grant a security interest in or
encumber any portion of its interest in the Company prior to the fifth
anniversary hereof, except for:
(i) a pledge by a Member of a part or all of its
interest in the Company to a bank, savings and loan association, insurance
company or other financial institution having a net worth of not less than
$100 million;
(ii) the issuance, sale or assignment of limited
partnership interests in Carlyle 14 or Carlyle 15;
(iii) with the consent of the other Members (which
consent each Member agrees not to unreasonably withhold), a sale by a
Member of part or all of its interest in the Company for reasons that are
unrelated to the Company or the Property and are presently unforeseen; or
(iv) any transfer of an interest in the Company which
under the provisions of SECTION 3.03(a) above is permitted to be made
without the prior approval or consent of any other Member.
Nothing in this SECTION 3.03(f) shall in any way affect the operation
of the other provisions of this SECTION 3.03.
(g) Notwithstanding anything to the contrary herein, no
transfer of any Company Interest shall be made if either (i) such transfer
would result in termination of the Company within the meaning of Section
708(b)(1)(B) of the Code, unless the transferring Member delivers (A) an
opinion of a nationally recognized law firm, in form and substance
satisfactory to the other Members, that no material adverse tax
consequences would result to the Company nor any of the other Members; and
(B) an indemnity reasonably satisfactory to the other Members against any
liabilities, obligations, damages, losses, costs and expenses (including,
without limitation, reasonable attorneys' fees) on account of such
termination under Section 708(b)(1)(B); or (ii) the transferee of a Company
Interest does not have net worth at least equal to the net worth of the
transferring Member, at such time, as established to the reasonable
satisfaction of the other Members. A Member who breaches the covenant set
forth in the preceding sentence shall be liable to the other Members and
the Company for all liabilities, obligations, damages, losses, costs and
expenses (including, without limitation, reasonable attorneys' fees)
resulting to the Company and/or the other Members, or any of them, on
account of such breach.
3.04 RESERVED.
3.05 ADMISSION OF ADDITIONAL MEMBERS; SUBSTITUTION.
(a) Except as otherwise expressly provided herein, additional
Members shall be admitted to the Company only with the Approval of the
Management Committee. Except as the Members with respect to the Company
shall agree, admission of new Members shall be accomplished only by
proportional reduction of the interests of the existing Members in the
Company.
(b) Notwithstanding any other provisions hereof, the assignee
of a Member's interest shall not become a substituted partner unless (i)
the assigning partner so provides in the instrument of assignment and (ii)
the assignee agrees in writing to be bound by the provisions of this
Agreement.
(c) In the event of any assignment or transfer of a Company
Interest by any Member permitted hereunder, the Company shall not be
dissolved or wound up but instead shall continue as before with, however,
the addition or substitution (pursuant to the terms of this Agreement) of
such new Member.
3.06 DEFAULT AND DISSOLUTION.
(a) The occurrence of any of the following events shall
constitute an event of default (an "EVENT OF DEFAULT") hereunder on the
part of the Member with respect to whom such event occurs:
(i) The failure of the Member to make any additional
capital contribution to the Company as required pursuant to the provisions
of SECTION 2.05 hereof unless such contribution is made by another Member
or Members as contemplated in SECTION 2.05(c) hereof;
(ii) The unauthorized transfer by a Member of any of its
Company interest in violation of the restrictions set forth in SECTION 3.03
(other than 3.03(c), which shall be governed by the provisions thereof) of
this Agreement;
(iii) Institution by a Member of proceedings of any
nature under any laws of the United States or of any state, whether now
existing or subsequently enacted or amended, for the relief of debtors
wherein such Member is seeking relief as debtor; or a general assignment by
a Member for the benefit of creditors; or the institution by a Member of a
proceeding under any section or chapter of the Federal Bankruptcy Code as
now existing or hereafter amended or becoming effective; or the institution
against a Member of a proceeding under any section or chapter of the
Federal Bankruptcy Code as now existing or hereafter amended or becoming
effective, which proceeding is not dismissed, stayed or discharged within a
period of sixty (60) days after the filing thereof or is stayed, which stay
is thereafter lifted without a contemporaneous discharge or dismissal of
such proceedings; or the calling of a general meeting of its creditors by a
Member for the appointment of a receiver, trustee or a like officer to take
possession of assets having a value in excess of $100,000 of a Member if
the pendency of said receivership would reasonably tend to have a
materially adverse effect upon the performance by said Member of its
obligations under this Agreement, which receivership remains undischarged
for a period of thirty (30) days from the date of its imposition; or
admission by a Member in writing of his or its ability to pay his or its
debts as they mature;
(iv) Attachment, execution or other judicial seizure of
all or any substantial part of a Member's assets or of a Member's Company
Interest, or any part thereof, such attachment, execution or seizure being
with respect to an amount not less than $100,000 and remaining undismissed
or undischarged for a period of fifteen (15) days after the levy thereof,
if the occurrence of such attachment, execution or other judicial seizure
would reasonably tend to have a materially adverse effect upon the
performance by said Member of its obligations under this Agreement;
provided, however, that said attachment, execution or seizure shall not
constitute an Event of Default hereunder if said Member posts bond
sufficient to fully satisfy the amount of such claim or judgment within
fifteen (15) days after the levy thereof and the Member's assets are
thereby released from the lien of such attachment; and
(v) Any material default in the representation or
warranties of a Member material to the success of the Project contained in
SECTIONS 4.01, 4.02 or 4.03 hereof or in the performance of any other
agreements or obligations of a Member herein contained or in any other
agreements among all of the Members relating to this Agreement which are
material to the success of the Project.
The Company shall be dissolved in the event that:
(i) An Event of Default has occurred as provided in
SECTION 3.06(a) above and the Management Committee elects to dissolve the
Company as provided in SECTION 3.06(c);
(ii) Members holding at least 75% of the Percentage
Interests in the Company agree to terminate the Company;
(iii) The Company ceases to maintain any interest (which
term shall include but not be limited to a security interest) in the
Project;
(iv) Carlyle and Maguire Partners mutually agree to
dissolve or terminate the Company pursuant to any provisions of this
Agreement permitting such election to be made; or
(v) The Company by its terms, as set forth in this
Agreement, is terminated; or
(vi) The death, withdrawal, resignation, expulsion,
bankruptcy or dissolution of a Member or the occurrence of any other event
which terminates the Member's continued membership in the Company, unless
the business of the Company is continued by the unanimous vote of all
remaining Members within ninety (90) days of the happening of that event.
(c) Upon the occurrence of an Event of Default by a Member
("DEFAULTER"), any of the other Members (individually, a "NON-DEFAULTER" or
"NON-DEFAULTING MEMBER" and, collectively, the "NON-DEFAULTERS" or "NON-
DEFAULTING MEMBERS") shall have the right to give the Defaulter a notice of
default ("NOTICE OF DEFAULT") setting forth the nature of the default. If
within thirty (30) days following receipt of the Notice of Default the
Defaulter pays such monies, or in the case of non-monetary defaults
commences in good faith to perform such obligation in default and cure such
default and thereafter prosecutes to completion with diligence and
continues the curing thereof and cures such default within a reasonable
time, or if a waiver of such Event of Default (other than an Event of
Default arising by Maguire Partners' breach of SECTION 3.01(b)(iv)) shall
be Approved by the Management Committee (which approval shall include the
vote of Maguire Partners, unless its Company Interest shall be reduced to
or below 20%, and the vote of Carlyle 14 and Carlyle 15, unless their
aggregate Percentage Interests shall be reduced to or below 20%, whether or
not such Event of Default involves Maguire Partners or Carlyle 14 or
Carlyle 15), it shall be deemed that the Notice of Default was not given
and the initial Defaulter shall lose no rights hereunder. If, within such
time periods, the Defaulter (or another Member on behalf of the Defaulter
pursuant to SECTION 2.05(d) hereof) does not either pay or commence in good
faith the curing of such default or does not thereafter prosecute to
completion with diligence and continues the curing thereof, then (without
prejudice to any right to assert a claim for damages as the result of any
such default) the non-Defaulters shall have the right to acquire the
Company interest of the Defaulter for cash at a price determined pursuant
to appraisal procedures set forth in SECTION 3.03(e) above. For this
purpose, the price to be so paid shall equal that portion of the Net Fair
Market Value of the assets of the Company which such Defaulter would
receive in the event of dissolution of the Company pursuant to SECTION
3.06(d). In furtherance of such right, any one or more non-Defaulters may
notify the other Members within thirty (30) days of the expiration of the
aforesaid time periods of its election to invoke the appraisal procedure
set forth in SECTION 3.03(e). Upon receipt of the appraisal, any one or
more non-Defaulters may notify the other Members of its election to
purchase the interest of the Defaulter, and the non-Defaulters who elect to
acquire the interest of the Defaulter shall acquire the interest in the
following manner: the remaining non-Defaulters shall have the first right
to purchase proportionate shares of the Defaulter's entire interest;
provided, however, if any non-Defaulter does not elect to purchase his or
its full proportionate share of the Defaulter's interest, the other non-
Defaulters may purchase proportionately the Defaulter's entire interest.
The non-Defaulters shall notify the Defaulter of their election within
thirty (30) days of receipt of the appraisal. For purposes of this SECTION
3.06(c), a Member's proportionate share of the interest of another Member
shall be determined on the basis of the ratio which such Member's
Percentage Interest in the Company bears to the aggregate Percentage
Interests of all Members therein who are exercising their rights in the
same manner as such Member. The closing of any purchase pursuant to this
SECTION 3.06(c) shall take place as provided in SECTION 3.03(d) hereof. If
the non-Defaulters do not elect to acquire the interest of the Defaulter as
set forth above, then any non-Defaulter may elect to terminate the Company
pursuant to SECTION 3.06(d) below by written notice given to the other
Members not later than 15 days after (i) the expiration of the 30 day
period within which the said appraisal procedure may be invoked as
aforesaid, where the same is not invoked, or (ii) the expiration of the 30
day period after the receipt of the appraisal within which the non-
defaulters may elect to purchase such Company interest, where the appraisal
procedure is invoked but the election to purchase such Company interest is
not made; provided however that no Member shall have the election to so
terminate the Company prior to expiration of any time period during which
any non-Defaulter may elect to acquire a Defaulter's interest under this
SECTION 3.06(c).
(d) Upon dissolution of the Company pursuant to SECTION
3.06(b) hereof, the Company shall immediately commence to wind up its
affairs and the Members shall proceed with reasonable promptness to
liquidate the business of the Company. During the period of the winding up
of the affairs of the Company, the rights and obligations of the Members
set forth herein with respect to the management of the Company shall
continue. For purposes of winding up, the Management Committee shall
continue to act as such and shall make all decisions relating to the
conduct of any business or operations during the winding-up period and the
sale or other disposition of assets of the Company; provided that if the
termination of the Company results from any Event of Default, the
defaulting Member(s) shall have no further right to participate in the
management or affairs of the Company or to attend Management Committee
meetings or vote on decisions by the Management Committee of the Company,
and shall be bound by all decisions made by such Management Committee,
which shall determine all such matters as provided in this SECTION 3.06(d)
by the affirmative vote of not less than seventy-five percent (75%) of the
aggregate Percentage Interests of all non-Defaulting Members in the
Company.
If the Company is dissolved for any reason while there is
work in progress on the construction of improvements in or on any portion
of the Property and Improvements owned or operated by the Company, winding
up the affairs and termination of the business of the Company may include
completion of the work in progress to the extent of constructing and
leasing improvements then being developed on such Property and Improvements
as the Management Committee of the Company may determine to be necessary to
bring the matters under construction to a state of completion convenient
for the cessation of work, giving due regard to the interest of all
Members.
Net Cash Flow of the Company during the period of winding
up resulting from normal operations shall be distributed in accordance with
SECTION 2.06 hereof, after making provision for any necessary reserves as
therein contemplated, and Net Cash Flow of the Company from the sale of all
or substantially all of the assets of the Company, whether or not in
connection with the winding up of the Company shall be distributed as
provided in the next succeeding paragraph.
The assets of the Company shall be applied and
distributed in liquidation in the following order of priority:
(i) First, in payment of debts and obligations
of the Company owed to third parties, including the setting aside of such
reserves as are Approved by the Management Committee to satisfy contingent
or unforeseen liabilities of the Company;
(ii) Second, to pay the accrued, unpaid interest
and then principal on each of the debts and obligations of the Company to
any Member (based on the inverse chronological order in which the
indebtedness was incurred); and
(iii) Third, the balance, if any, to the Members
in accordance with SECTION 2.06. It is intended that the distributions set
forth in this subsection (iii) comply with the requirement of Regulations
Section 1.704-1(b)(2)(ii)(b)(2) that liquidating distributions be made in
accordance with positive Capital Account balances. However, if the
balances in the Capital Accounts do not result in such requirement being
satisfied, no change in the amounts of distributions pursuant to this
Section shall be made, but, instead, items of income, gain, loss, deduction
and credit will be reallocated among the Members so as to cause the
balances in the Capital Accounts to be in the amounts necessary so that, to
the extent possible, such result is achieved.
Following the final allocations and the final
distributions (other than the distribution, if any, required by this
sentence) of Company Property in connection with a dissolution and
termination of the Company, each Member that has obligated itself to make
up any deficits in its Capital Account pursuant to SECTION 3.06(f) shall
contribute to the Company an amount equal to (and shall in no event be
obligated to contribute more than) the lesser of (i) the amount that such
Member has so obligated itself to contribute and (ii) the deficit balance
in the Capital Account of such Member after such distributions and
allocations, and such contribution shall be distributed to the Members that
have positive balances in their Capital Accounts (unless such contribution
is used to satisfy obligations of the Company).
If the liquidation proceeds are insufficient to satisfy
all of the claims within any of the categories described in SECTIONS
3.06(d)(i) through (iii) above, the proceeds shall be applied prorata to
all claims within such category in order of priority for which any proceeds
are available for payment or distribution.
Every effort shall be made to dispose of the assets of
the Company so that the distribution may be made to the Members in cash.
If, at the time of the completion of the winding up of the Company, the
Company owns any assets in the form of work in progress, notes or deeds of
trust or otherwise which it has been unable to dispose of, such assets, if
any, shall be distributed in kind to the Members, in lieu of cash,
proportionately to their right to receive the assets of the Company if all
of the same were sold for cash.
(e) Each Member shall look solely to the assets of the
Company for all distributions with respect to the Company and its capital
contributions thereto and its share of the profits or losses thereof, and
shall have no recourse therefor (in the event of any deficit in a Member's
capital account or otherwise) against the other Members; provided that,
subject to SECTION 6.09, nothing contained herein shall relieve any Member
of such Member's obligation to make the capital contributions herein
provided or to pay any liability or indebtedness owing to the Company by
such Member, and the Company and the other Members shall be entitled at all
times to enforce such obligations of such Member. No holder of a Company
interest shall have any right to demand or receive property other than cash
upon dissolution and termination of the Company.
(f) Each Member may, prior to, or at the time prescribed by
law for the filing of the Company federal income tax return for each
taxable year (not including extensions), elect to be unconditionally
obligated to restore all or a portion of any deficit in such Member's
Capital Account upon liquidation of its interest in the Company. Any such
election shall be evidenced by written notice to the other Members,
delivered prior to such time, specifying the amount of any deficit for
which the Member elects a deficit restoration obligation. Any amount owing
pursuant to a deficit restoration obligation shall be payable upon the
later of (i) the end of the fiscal year in which a Member's interest is
liquidated or (ii) 90 days after the end of such liquidation. The amount
of any such election shall automatically be reduced to the extent the
deficit in such Member's Capital Account is subsequently reduced. If any
allocation or distribution thereafter increased the deficit in such
Member's Capital Account, unless a Member elects otherwise under this
SECTION 3.06(f), such Member will be obligated to restore the deficit only
to the extent of the lesser of (A) the deficit amount such Member has
previously elected to restore, or (B) the smallest deficit balance in such
Member's Capital Account at any time after such election. For purposes of
determining the amount referred to above in Clause (B), the income, gain,
losses and deductions of the Company shall be prorated on a daily basis,
except for income, gain, losses and deductions from the sale or disposition
of capital items, which will be allocated under an interim closing of the
books method.
(g) Any Company property which is not sold, but which is
distributed or deemed distributed to any Members (including any deemed
distribution in connection with a constructive termination of the Company
under Section 708 of the Code), shall be valued at its then fair market
value, as reasonably determined by the Management Committee, to determine
the gain or loss which would have resulted if such Company property had
actually been sold (subject to any debt secured by such property) at such
value, which fair market value (less the amount of any debt secured by such
property)) shall be treated as Disposition Proceeds for purposes of SECTION
2.06(c) hereof. The Members' share of the hypothetical gain or loss
realized by the Company from such deemed sale based on the property's fair
market value shall be considered a part of the Disposition Profit or
Disposition Loss, as the case may be, and shall be allocated among the
Members in accordance with SECTION 2.09 hereof. The Capital Accounts of
the Members shall be appropriately adjusted under SECTION 2.04 hereof to
take into account such allocations.
(h) All documents and records of the Company including,
without limitation, all financial records, vouchers, cancelled checks and
bank statements, shall be delivered to Carlyle upon termination of the
Company. In the event any Member ("WITHDRAWING MEMBER") for any reason
ceases as provided herein to be a Member at any time prior to termination
of the Company, and the Company is continued without the Withdrawing
Member, the other Members ("SURVIVING MEMBERS") agree that said documents
and records of the Company up to the date of the termination of the
Withdrawing Member's interest shall be maintained by the Surviving Members,
their successors and assigns, for a period of not less than seven (7) years
thereafter, and shall be available for inspection, examination and copying
by the Withdrawing Member upon reasonable notice, and by supervisory and
regulatory authorities (through their representatives) of any such
Withdrawing Member in the same manner as provided in SECTION 3.02(b) hereof
during said seven (7) year period.
4. BINDING EFFECT OF AGREEMENT; REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PARTIES.
4.01 REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAGUIRE PARTNERS.
Maguire Partners represents, warrants and covenants to Carlyle
that (i) Maguire Partners is not bound by any contractual or other
arrangement which would require the approval of any other party to the
effectuation of the transactions contemplated by this Agreement, which
approval has not been obtained, and (ii) there are no agreements between
Maguire Partners and any of the other parties hereto with respect to the
Company or the Project except as set forth or described herein and the
Wells Fargo Bank Addendum attached to this Agreement.
4.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF CARLYLE 14 AND
CARLYLE 15.
Carlyle 14 and Carlyle 15 each represents, warrants and covenants to
Maguire Partners that (i) it is not bound by any contractual or other
arrangement which would require the approval of any other party to the
effectuation of the transactions contemplated by this Agreement, which
approval has not been obtained, and (ii) there are no agreements between
Carlyle 14 and/or Carlyle 15 and any of the other parties hereto with
respect to the Company or the Project except as set forth or described
herein and the Wells Fargo Bank Addendum attached to this Agreement.
4.03 RESERVED.
4.04 INDEMNIFICATION.
Maguire Partners and Carlyle each agree to indemnify and hold
harmless the other and their affiliates, directors and officers against any
and all claims, demands, losses, damages, liabilities, lawsuits, and other
proceedings, judgments and awards and costs and expenses (including but not
limited to reasonable attorneys' fees) arising directly or indirectly in
whole or in part out of any breach of any of the foregoing representations
and warranties and covenants made by Maguire Partners or Carlyle, as the
case may be, under SECTION 4.01 or 4.02 above.
4.05 SURVIVAL OF REPRESENTATIONS.
The foregoing representations and warranties of Maguire Partners or
Carlyle set forth in SECTIONS 4.01 and 4.02 hereof shall survive the
consummation of this Agreement.
5. RESERVED.
6. MISCELLANEOUS PROVISIONS.
6.01 COMPLETE AGREEMENT; AMENDMENT.
This Agreement and the Wells Fargo Bank Addendum attached hereto,
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all agreements, representations,
warranties, statements, promises and understandings, whether oral or
written, with respect to the subject matter hereof, and no party hereto
shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth in this Agreement, the exhibits hereto and the Wells
Fargo Bank Addendum. This Agreement may not be amended, altered or modified
except by a writing signed by all parties hereto.
6.02 NOTICES.
(a) All notices under this Agreement shall be in writing and
shall be delivered by personal service, or by certified or registered mail,
postage prepaid, return receipt requested to the parties at the addresses
herein set forth and to the Company at its principal place of business.
The addresses for notices are as follows:
If to Maguire Partners or the Company:
355 South Grand Ave., Suite 4500
Los Angeles, CA 90071
Attn: Mr. Robert F. Maguire III
with a copy to:
Gilchrist & Rutter Professional Corporation
1229 Ocean Avenue
Suite 900
Santa Monica, California 90401
Attn: Paul S. Rutter, Esq.
If to Carlyle 14 or to Carlyle 15:
c/o JMB Realty Corporation
875 North Michigan Avenue, Suite 3900
Chicago, Illinois 60611
Attn: Mr. Patrick Meara
with a copy to:
Paul, Hastings, Janofsky & Walker
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
Attn: Paul Walker, Esq.
with a copy to:
Wells Fargo Bank, N.A.
2030 Main Street
Suite 800
Irvine, California 92714
Attn: Mr. Patrick Mooney, Vice President
with a copy to:
Brobeck, Phleger & Harrison, LLP
One Market Plaza, Spear Street Tower
23rd Floor
San Francisco, California 94105
Attn: G. Larry Engel
(b) All notices, demands and requests shall be effective upon being
deposited in the United States mail. However, the time period in which a
response to any such notice, demand or request must be given shall commence
to run from the date of receipt on the return receipt of the notice, demand
or request by the addresses thereof. Rejection or other refusal to accept
or the inability to deliver because of changed address of which no notice
was given as provided in subsection (c) below shall be deemed to be receipt
of the notice, demand or request sent.
(c) By giving to the other party at least thirty (30) days' written
notice thereof, the parties hereto and their respective permitted
successors and assigns shall have the right from time to time and at any
time during the term of this Agreement to change their respective addresses
for notices and each shall have the right to specify as its address for
notice any other address within the United States of America.
6.03 ATTORNEYS' FEES.
Should any litigation be commenced between the parties hereto or
their representatives or should any party institute any proceedings in a
bankruptcy or similar court which has jurisdiction over any other party
hereto or any or all of his or its property or assets concerning any
provision of this Agreement or the rights or duties of any person or entity
in relation thereto, the party or parties prevailing in such litigation
shall be entitled, in addition to such other relief as may be granted to a
reasonable sum as and for his or its or their attorneys' fees and court
costs in such litigation which shall be determined by the court in such
litigation or in a separate action brought for that purpose.
6.04 SEPARABILITY.
In the event that any provision of this Agreement shall be held to be
invalid, the same shall not affect in any respect whatsoever the validity
of the remainder of this Agreement.
6.05 SURVIVAL OF RIGHTS AND ASSIGNABILITY.
Except as provided herein to the contrary, this Agreement shall be
binding upon and inure to the benefit of the parties signatory hereto,
their respective heirs, representatives and permitted successors and
assigns; provided, however, that except as expressly permitted by the
provisions of this Agreement, no Member shall be permitted to assign any
rights hereunder to any third party.
6.06 GOVERNING LAW.
This Agreement has been entered into in the State of California and
all questions with respect to this Agreement and the rights and liabilities
of the parties hereto shall be governed by the laws of that State.
6.07 WAIVER.
No consent or waiver, express or implied, by any Member to or of any
breach or default by them in the performance by them of their obligations
hereunder shall be deemed to be a consent or waiver to or of any other
breach or default in performance by them of the same or any other
obligation of them hereunder. Except as otherwise provided herein, failure
to act of any Member or to declare any Member in default shall not
constitute a waiver by any Member of its rights hereunder. The giving of
consent by any Member in any one instance shall not limit or waive the
necessity to obtain such Member's consent in any future instance.
6.08 ALTERNATIVE REMEDIES; EQUITABLE REMEDIES.
The rights and remedies of any of the Members hereunder shall not be
mutually exclusive, i.e., the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof.
Each of the Members confirms that damages at law will be an inadequate
remedy for a breach or threatened breach of this Agreement and agrees that
in the event of a breach or threatened breach of any provision hereof, the
respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy, but nothing
herein contained is intended to nor shall it limit or affect any rights at
law or by statute or otherwise of any party aggrieved as against the other
for a breach or threatened breach of any provision hereof.
6.09 LIMITATION ON LIABILITY.
No Person who is a present or future Member in the Company, or a
direct or indirect partner or member in any Member in the Company shall
have any personal liability of any kind or nature for or by reason of any
matter or thing whatsoever under or in connection with this Agreement or
any other agreement entered into under or in connection herewith, and the
Company and each other Member hereby waives all such personal liability.
6.10 WELLS FARGO BANK ADDENDUM.
The Members hereby incorporate the provisions of the Wells Fargo
Bank Addendum attached to this Agreement as part of this Agreement.
6.11 ACTIONS BETWEEN MEMBERS.
Any Member shall be entitled to maintain, on its own behalf or on
behalf of the Company, any action or proceeding against the other Members
or the Company (including, without limitation, any action for damages,
specific performance or declaratory relief) for or by reason of any breach
by such Member of this Agreement or any other agreement with or related to
the Company, notwithstanding the fact that any or all of the parties to
such proceeding may then be Members in the Company, and without dissolving
the Company as a limited liability company.
6.12 NO THIRD PARTY BENEFICIARIES.
Nothing contained herein, except as otherwise herein expressly set
forth, shall be deemed to create any right or interest in any third party
or any right in any third party to enforce any provision of this Agreement
("third party" for purposes of the foregoing meaning any Person other than
a Member or an assignee, transferee or agent of a Member).
6.13 TERMINOLOGY.
All personal pronouns used in this Agreement whether used in the
masculine, feminine or neuter gender shall include all genders; and the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and neither limit nor amplify the
provisions of this Agreement itself. The use herein of the word
"including" when following any general statement, term or matter shall not
be construed to limit such statement, term or matter to the specific items
or matters set forth immediately following such word or to similar items or
matters whether or not non-limiting language (such as "without limitation"
or "but not limited to" or words of similar import) is used with reference
thereto but rather shall be deemed to refer to all other items or matters
that could reasonably fall within the broadest possible scope of such
general statement, term or matter.
6.14 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute
one and the same Agreement.
6.15 FURTHER ASSURANCES.
Each party hereto agrees to do all acts and things and to make,
execute and deliver such written instruments as shall be reasonably
required to carry out the terms and provisions of this Agreement, and to
enable each party to obtain the benefits of this Agreement provided for it
herein.
6.16 NON-DISCRIMINATION.
There shall be no discrimination against or segregation of, any
person, or group of persons on account of race, color, creed, national
origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy,
tenure, or enjoyment of the Property or the Improvements thereon, nor shall
the Company or any Person claiming under or through it, establish or permit
any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees, or vendees of the land.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above set forth.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV
an Illinois limited partnership
By: JMB REALTY CORPORATION
an Illinois corporation,
General Partner
By: ________________________________
Vice President
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XV
an Illinois limited partnership
By: JMB REALTY CORPORATION
an Illinois corporation,
General Partner
By: ______________________________________
Vice President
MAGUIRE PARTNERS-BUNKER HILL, LTD.
a California Limited Partnership
By: Maguire Partners BGHS, LLC
a California limited liability company
General Partner
By: Maguire Partners SCS, Inc.
a California corporation
Its Manager
By:_________________________
Robert F. Maguire III
President
WELLS FARGO BANK ADDENDUM
The undersigned parties are entering into this Addendum which is
attached to and made a part of the Operating Agreement ("OPERATING
AGREEMENT") of Maguire Thomas Partners-South Tower, LLC ("SOUTH TOWER").
In the event of a conflict between the provisions of the Operating
Agreement and this Addendum, the provisions of this Addendum shall control
only as among the parties to this Addendum; otherwise, the Operating
Agreement shall control.
A. CONSENT TO BANK SECURITY INTEREST. Maguire Partners-Bunker
Hill, Ltd. (herein, together with its permitted successors and assignees,
called "MP") consents to and acknowledges the Wells Fargo Bank (herein,
together with its successors and permitted assignees, called the "BANK" or
"WELLS FARGO BANK") security interest in the Carlyle membership interest in
South Tower ("CARLYLE INTERESTS") for the purposes of (i) Section 3.03 of
the Operating Agreement, and (ii) Sections 9318 and 9502 of the UCC. The
Bank may assign its rights and liens to any affiliate of the Bank in which
the Bank owns at least a majority ownership interest and has the right to
control the management of the affiliate ("AFFILIATE"), all without the need
for consent by MP or compliance with Section B below. The Bank shall give
prior written notice of any such assignment to MP. The 40% loan to value
and other limitations on permissible liens on membership interests shall
not apply to the Bank's security interest on the Carlyle Interests (or to
the successors or assignees of the Bank who hold such Interests and who are
affiliates of the Bank). All references herein to "membership interests"
(or similar terms) shall include all economic interests and rights to
distributions or payments of money or property.
B. RIGHT OF FIRST NEGOTIATION. The Bank may foreclose on its
security interest or otherwise acquire any or all of the Carlyle Interests,
either directly or through one of the Bank's affiliates, all without
complying with the offer and sale procedure in Section 3.03(b) of the
Operating Agreement, so long as the Bank or its affiliate is the transferee
of the Interests. An Event of Default by Carlyle under the Operating
Agreement shall not prevent the Bank from exercising its remedies under its
loan documents with Carlyle, subject to the Bank's obligations regarding
the cure of Carlyle defaults under SECTION C below; provided that the
foregoing shall not limit the remedies of MP for an Event of Default by
Carlyle under the Operating Agreement, subject to the right of the Bank to
cure such default under SECTION C.
Notwithstanding the two foregoing sentences, the following procedure
(herein called the "right of first negotiation procedure") shall apply (i)
if the Bank intends to transfer the Carlyle Interests, or any portion
thereof, to any entity or person other than the Bank (or its affiliate) or
Carlyle, or (ii) if the Bank transfers ownership of its affiliate, whether
as a result of a foreclosure on such Interests or as a result of a transfer
by the Bank subsequent to its foreclosure and acquisition of the Interests.
In such case, the Bank shall give notice to MP at least 30 days prior to
the date of such transfer. If the Bank does not receive written notice
from MP of MP's desire to negotiate to attempt to acquire such Interests
within 10 days from the date such notice of intent to transfer was sent to
MP, then the Bank may transfer the Carlyle Interests without further
restriction. However, if MP (i) wishes to negotiate to attempt to acquire
such Carlyle Interests, and (ii) gives its corresponding notice of that
desire to the Bank within such 10 days from the date the initial notice of
intent to transfer was sent to MP, then an exclusive negotiation period
shall exist for the balance of the 30 day period commencing on the date the
initial notice of intent to transfer was sent to MP. During that 30 day
exclusive negotiation period, Bank and MP shall negotiate in good faith
with each other regarding the terms of such purchase and sale of the
Carlyle Interests (or of the Bank's loan and security interest in the
Carlyle Interests, if the parties so agree in their respective discretion,
but without in any way implying any right or interest by MP or anyone else
in Bank's loan or security and without adversely affecting Bank's
unrestricted right to manage, administer, amend, renew, extend,
restructure, enforce or otherwise deal with its loan and security in any
way the Bank wishes). During said 30 day period in which the Bank or MP
are so negotiating with respect to the transfer of the Carlyle Interests,
the Bank shall not complete its foreclosure on, sell or agree to sell its
loan or the Carlyle Interests to any other party; provided that, the Bank
may notice the foreclosure sale for any time after the end of the 30 day
period and otherwise place itself in a position to complete a foreclosure
immediately after such 30 day period, if the negotiations with MP are
unsuccessful.
The Bank may always sell participations in its loans and security
without triggering this Section B exclusive negotiation procedure, as long
as such participants are subject to the same procedure as must be followed
by the Bank hereunder; provided that Bank will not sell such portion of the
loans and security such that Bank no longer has effective control over the
exercise of rights and remedies (subject to customary rights of approval by
loan participants in similar loans) as the holder of the loans unless (i)
Bank first gives South Tower written notice thereof at least thirty (30)
days prior to the consummation of such sale and (ii) the purchaser or
purchasers of such controlling interest in the loans is a Financial
Institution having at least $100,000,000 in net worth, as defined in
Section 3.03(a) of the Operating Agreement.
The Bank agrees that, if MP gives the Bank a written offer to
purchase the Carlyle Interests on an all cash basis ("MP OFFER") during the
30 day negotiation period, and if the Bank fails to accept such MP Offer
within the time period set forth in the MP Offer (which period for
acceptance must be at least twenty-five (25) days after the delivery of the
MP Offer), then from the date of receipt of the MP Offer until the date
that is one hundred eighty (180) days thereafter (the "TRANSFER PERIOD"),
the Bank shall have the right to transfer the Carlyle Interests to a
reputable third party, whether by foreclosure or otherwise, for a price
greater than the price in the MP Offer, although the Bank's transfer at a
higher price may be on terms other than cash, including a credit bid by the
Bank at the foreclosure sale. If, during the Transfer Period, the Bank
receives an offer from a third party for the purchase of the Carlyle
Interests which is equal to or lower than the MP Offer, and which the Bank
intends to accept, then the Bank shall not consummate a foreclosure sale or
other transfer of the Carlyle Interests to such offeror without first
complying with the offer and sale procedures of Section 3.03 of the
Operating Agreement. If the Bank receives an offer from a third party at a
price superior to the MP Offer during the Transfer Period, the Bank may
consummate such sale at a price greater than the MP Offer. After the
Transfer Period, if no sale is pending as of the last day of the Transfer
Period (or if such a sale is then pending but the closing date for such
sale is scheduled to occur more than thirty (30) days after the expiration
of the Transfer Period), including a foreclosure sale for a price above the
MP Offer, and if the Bank has not timely accepted the MP Offer, and the
Bank desires to sell the Carlyle Interests, the sales process shall re-
commence in accordance with the procedures described herein for a new 180-
day Transfer Period.
The comparison of the price to a third party compared to the MP Offer
is as to the aggregate compensation benefit to the Bank, considering all
factors relevant to a reasonable commercial bank under such circumstances.
Nothing herein prevents the Bank from making a credit bid at a foreclosure
sale in an amount in excess of the MP Offer. At all times, subject to the
right of first negotiation procedure herein (in the case of a sale of the
Carlyle Interests, or any portion thereof, to any third party other than
the Bank or its affiliate), the Bank may comply with the applicable laws to
make any foreclosure sale commercially reasonable and in compliance with
UCC 9504.
Subject to the Bank complying with the right of first negotiation
procedures governing the sale of the Carlyle Interests in accordance with
this SECTION B, a purchaser of the Carlyle Interests through a Bank
foreclosure sale shall become a substitute member in South Tower, subject
only to (i) the provisions of the Agreement requiring the substitute member
to assume all of the obligations of Carlyle under the Agreement, and (ii)
the delivery to MP of a certification from such substitute member, from
Carlyle (if then a member), and from the Bank, certifying that the
substitute member is either an affiliate of the Bank or has acquired the
Carlyle Interests after compliance by the Bank with the procedures set
forth in this Section B.
Nothing herein deprives the Bank of its rights under Section 3.03 of
the Operating Agreement. MP agrees that MP shall comply with the offer and
sale procedures of Section 3.03 of the Operating Agreement in connection
with the transfer of the MP interests.
C. RIGHT TO CURE DEFAULTS. The Bank shall receive directly copies
of all notices given to Carlyle by MP under the Operating Agreement,
including notices of default under Section 3.06, or offers to buy or sell
under Section 3.03, and of arbitration. The Bank (or its affiliate) shall
have the right, but not the obligation prior to the transfer of the Carlyle
Interests to the Bank or such affiliate, to cure any Carlyle default under
the Operating Agreement within a reasonable period after notice to the Bank
of Carlyle's default, which cure period shall not exceed the longer of (i)
ten (10) days from written notice thereof for monetary defaults, (ii)
thirty (30) days from written notice thereof for non-monetary defaults, or
(iii) the cure periods granted to Carlyle under the Agreement for the
relevant default; provided, however, that the Bank (or its successor or
permitted assignee which acquires the Carlyle Interests) shall have the
obligation to cure any Carlyle monetary default and any Carlyle non-
monetary default that is reasonably curable by a successor owner of the
Carlyle Interests within the foregoing cure periods once the Bank or its
successor or permitted assignee has acquired ownership of the Carlyle
Interests, calculating such Bank cure periods for such purpose from the
date when the Bank or its successor or permitted assignee so acquires such
Carlyle Interests. However, if the Bank or its successor or permitted
assignee becomes the substitute member in place of Carlyle, any non-
monetary defaults by Carlyle that are not reasonably capable of cure (with
a commercially reasonable effort) by the Bank or its successor or permitted
assignee need not be cured by the Bank or such other substitute member. As
long as the Bank can still cure Carlyle defaults and is diligently
undertaking reasonable efforts to cure such defaults, the Bank or its
successor or permitted assignee shall have the right to vote the Carlyle
Interests once the Bank or such successor or assignee acquires the Carlyle
Interests.
D. DISTRIBUTIONS. All distributions or payments for the account
of Carlyle in connection with South Tower shall be made directly to the
Bank pursuant to UCC Sections 9318 and 9502, and Carlyle irrevocably
consents to MP complying with such direction as to payments to the Bank.
Carlyle shall indemnify and hold MP harmless from any liability as a result
of its compliance with the foregoing direction.
E. NO ASSUMPTION. Unless and until the Bank replaces Carlyle as a
member, the Bank assumes none of the Carlyle obligations under the
Operating Agreement. However, the Bank recognizes any superior right which
South Tower may have to offset liabilities of Carlyle to South Tower
against the obligations of South Tower to Carlyle, as provided in UCC
9318(1)(a).
F. ARBITRATION. The Bank may intervene as a party and/or
participate (all at its option) in any arbitration proceeding pursuant to
the Operating Agreement in order to protect its interests. To the extent
that the Carlyle Interests in which the Bank has a security interest are
affected by any arbitration in which the Bank is permitted to participate
as a party, the results of such arbitration that are binding on Carlyle
likewise bind the Carlyle Interests which are subject to the Bank's
security interest, whether or not the Bank elects to participate in the
arbitration.
G. BANK APPROVAL OF CARLYLE ACTIONS. MP acknowledges that the
Bank holds its security interest and has certain rights to approve the
actions of Carlyle with respect to the Carlyle Interests in South Tower,
and that MP does not have any claim against the Bank as a result of its
having such approval rights through its loan documentation with Carlyle.
MP shall continue to deal exclusively with Carlyle in the management of
South Tower under the terms of the Operating Agreement, without regard to
the position of the Bank unless and until the Bank (or its affiliate)
becomes the substituted member pursuant to its security interest in the
Carlyle Interests. MP shall not bring a claim against the Bank by reason
of the Bank prohibiting Carlyle, under the Bank's loan documents with
Carlyle, from taking (or omitting to take) certain actions or approving (or
disapproving) certain decisions as a member of South Tower (without waiving
any rights or claims as to Carlyle as a member in the Company).
H. NO TERMINATION OF PARTNERSHIP. The Bank agrees that in no event
shall the exercise of the Bank's remedies as a secured creditor with a
security interest in the Carlyle Interests, nor any subsequent transfer of
the Carlyle Interests by the Bank or its successor or permitted assignee,
result in the termination of the South Tower limited liability company
under Section 708 of the Internal Revenue Code; provided, however, in
determining whether a transfer of the Carlyle Interests would cause a
Section 708 termination, the Bank shall be permitted to disregard any
transfer of the MP interest, or any portion thereof, during the preceding
12 month period. However, should the Bank succeed to the Carlyle
Interests, the Bank shall thereafter have no less rights than Carlyle would
have under the Operating Agreement, none of which shall be impaired by the
provisions of this Addendum, addressing the issues regarding the Bank's
position as a secured creditor of Carlyle. Nothing contained herein
relating to the transfer of the Carlyle Interests pursuant to the Bank's
rights as a secured creditor shall abridge or limit any other or greater
rights the Bank or any affiliate may have under the Operating Agreement
should the Bank or any affiliate acquire the Carlyle Interests or any other
interest of another member in South Tower.
I. NOTICES. The parties agree that notices hereunder shall be
given in accordance with Section 6.02 of the Operating Agreement and to the
addresses specified therein, in the case of Carlyle and MP. Notices to the
Bank shall be addressed as follows:
Wells Fargo Bank, N.A.
2030 Main Street
Suite 800
Irvine, California 92714
Attn: Patrick Mooney, Vice President
with a copy to:
Brobeck, Phelger & Harrison, LLP
One Market Plaza, Spear Street Tower
23rd Floor
San Francisco, California 94105
Attn: G. Larry Engel
(415) 442-1400
IN WITNESS WHEREOF, the parties below have entered into this Addendum
as of the 30th day of September, 1996.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV
an Illinois limited partnership
By: JMB REALTY CORPORATION
an Illinois corporation,
General Partner
By: ________________________________
Vice President
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XV
an Illinois limited partnership
By: JMB REALTY CORPORATION
an Illinois corporation,
General Partner
By: ______________________________________
Vice President
MAGUIRE PARTNERS-BUNKER HILL, LTD.
a California Limited Partnership
By: Maguire Partners BGHS, LLC
a California limited liability company
General Partner
By: Maguire Partners SCS, Inc.
a California corporation
Its Manager
By:_________________________
Robert F. Maguire III
President
WELLS FARGO BANK, N.A.
a national banking association
By:
Its:
EXHIBIT "A"
LEGAL DESCRIPTION
(attached)
EXHIBIT "B"
LIST OF WELLS FARGO CENTER ARTWORK
Work: Artist: Type:
La Caresse d'un Oiseau Miro Sculpture
La Dandy Dubuffet Sculpture
Four Female Figures Graham Sculpture
Sequi Graves Sculpture
Light Touches Fall Color Wile Sculpture
Lock Down Aonoldi Sculpture
Sawtooth Obulich Sculpture
Night Sail (1985) Nevelson Sculpture
EXHIBIT "C"
INITIAL CAPITAL ACCOUNTS
Maguire Partners
(Initially booked to -0-)
$1,000,000 (after Supplemental Contribution)
Carlyle 14
(Initially booked to -0-)
$350,000 (after Supplemental Contribution)
Carlyle 15
(Initially booked to -0-)
$650,000 (after Supplemental Contribution)
EXHIBIT "D"
PERMANENT FINANCING GUIDELINES
1) The maximum Fixed Interest Rate, prior to any participation for Debt
Financing, is 14% per annum. This rate is to be subject to the IRR
parameters in item 10.
2) Should the Fixed Interest Rate, prior to any participation for
Convertible Financing, exceed 12%, the maximum Equity Participant
Percentage must drop from the maximum of 50% to a percentage that will
yield no more than an 18% pre-tax IRR including Originating Fees. An
example of the Lender Financial Analysis not exceeding 12% is attached to
illustrate the calculation of the IRR. The IRR and IROR are synonymous in
this illustration.
3) No maximum term of loan.
4) Minimum term of loan is 10 years.
5) NO PRINCIPAL REDUCTION REQUIRED.
6) Minimum Principal = Total Project Construction Costs; NO MAXIMUM
PRINCIPAL.
7) Minimum Debt Service Coverage Ratio = 1.1:1
8) The pre-tax IRR or Effective Yield on permanent financing must not
exceed 18%. (See attached sheet.)
9) No more than a 1.5 Points Originating Fee is to be paid to the
lending institution. If required, this fee will be paid from the proceeds
of the mortgage obtained for Permanent financing.
10) No Compensating Balances are to be maintained with the lending
institution.
*Definition IRR (Internal Rate of Return).
The rate of return on that amount provided by the Permanent Lender to
finance the project through its minimum term of 10 years.
The internal rate of return is calculated by finding the discount rate that
equates the present value of future cash flows plus the residual value
(which is the cash flow capitalized in the year of conversion by the
Permanent Lender by a capitalization rate that will return to the lender no
more than 18% pretax) to the cost of the investment. The effective yield
is synonymous with Pretax IRR for the purposes of this document.
EXHIBIT "E"
MAGUIRE/THOMAS PARTNERS - SOUTH TOWER, LLC
INSURANCE PROGRAM
Property: South Tower
Limits- No less than $175,000,000 all risk with a stop loss
limit of $75,000,000 for earthquake and flood (as long as obtainable at
cost effective rates). The stop loss limit is calculated on an annual
aggregate basis.
- No less than $30,000,000 rental income
sublimit, no time limitation, deductions shall not exceed 15 days.
Deductibles - No more than - $ 25,000 per loss for all
perils except:
- $100,000 per loss from
flood
- 2% of value at time of
loss from earthquake
Property: X-2(b) Parking Garage
Limits- No less than $15,000,000 all risk including earthquake
and flood, no stop loss, no coinsurance.
Deductibles - No more than - $ 25,000 per loss for all
perils except:
- $100,000 per loss from
flood
- 2% of value at time of
loss from earthquake
Liability: South Tower and X-2(b) Parking Garage
Limits- $20,000,000 per accident for direct damage and
business interruption
- $25,000 per accident for expediting expense
- $25,000 per accident for water damage
Deductibles - $25,000 per accident
GENERAL OVERALL REQUIREMENTS:
1. The insurance program will provide for a waiver of subrogation
against IBM as tenant of the Project, as long as obtainable.
2. Certified copies of all such policies will be provided to the
Members.
3. The all risk insurance coverage will, at a minimum,
cover loss by fire, lightning and perils of broad form extended
coverage as now and hereafter constituted for the lesser of the full
replacement cost without deduction for physical depreciation or the actual
cash value of the Project.
4. The liability insurance coverage will provide protection for all the
Members with respect to their ownership of the Project.
EXHIBIT "F"
I. ELECTIONS
The Company has made or will make the following tax elections:
a. The election under section 168(b)(3) or otherwise to claim
straight-line depreciation or cost recovery deductions with respect to all
"section 1250 property" (as defined in section 1250(c)), and accelerated
depreciation or cost recovery deductions with respect to all "section 1245
property" (as defined in section 1245(c)), over as short a period as is
permissible;
b. If and to the extent there are start-up expenses, an election
under section 195(b) to amortize such start-up expenses over a period of 60
months;
c. If and to the extent there are organizational expenses, an
election under section 709(b) to amortize such organizational expenses over
a period of 60 months.
d. The election under section 46(d) for qualified progress
expenditures with respect to any conveying systems.
II. CAPITAL ACCOUNTS
The Capital Account of each Member as of the effective date of this
Agreement is calculated as set forth in Attachment 1 hereto in accordance
with SECTION 2.04 of the Agreement. The following is a list of principles
that were applied in determining the Capital Accounts. The Members
recognize that certain of the numbers contained in the assumptions set
forth in said Attachment are tentative in that they reflect certain
assumptions as to the amounts, bases and values of assets and liabilities
of the Company on the date of the Agreement and other similar items, which
assumptions may prove to be other than as set forth herein. The Members
agree to revise this Exhibit if necessary, to reflect actual capital
accounts using such revised items in place of the items now contained
herein, but otherwise using the same method for calculations set forth
herein.
TABLE OF CONTENTS
ARTICLE 1. Definitions. . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. Formation of Company; Capital, Distributions and
Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.01 Introductory Matters. . . . . . . . . 8
Section 2.02 Members and Their Interests . . . . . 9
Section 2.03 Capital Contributions . . . . . . . . 10
Section 2.04 Capital Accounts. . . . . . . . . . . 10
Section 2.05 Additional Capital Contributions. . . 11
Section 2.06 Distributions . . . . . . . . . . . . 14
Section 2.07 Reserves. . . . . . . . . . . . . . . 16
Section 2.08 Reserved. . . . . . . . . . . . . . . 16
Section 2.09 Allocations Among Members . . . . . . 16
Section 2.10 Reserved. . . . . . . . . . . . . . . 21
Section 2.11 Special Assets. . . . . . . . . . . . 21
Section 2.12 Aetna Lockbox . . . . . . . . . . . . 21
ARTICLE 3. Management and Operation . . . . . . . . . . . . . . 22
Section 3.01 Management of the Company . . . . . . 22
Section 3.02 Accounting, Tax Elections and Related
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.03 Sale, Transfer or Mortgage of Interests in
the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.04 Reserved. . . . . . . . . . . . . . . 44
Section 3.05 Admission of Additional Members;
Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.06 Default and Dissolution . . . . . . . 44
ARTICLE 4. Binding Effect of Agreement; Representations,
Warranties and Covenants of the Parties. . . . . . . 51
Section 4.01 Representations, Warranties
and Covenants of Maguire Partners. . . . . . . . . . . . . . . . . 51
Section 4.02 Representations, Warranties
and Covenants of Carlyle 14 and Carlyle 15 . . . . . . . . . . . . 51
Section 4.03 Reserved. . . . . . . . . . . . . . . 51
Section 4.04 Indemnification . . . . . . . . . . . 51
Section 4.05 Survival of Representations . . . . . 52
ARTICLE 5. Reserved . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 6. Miscellaneous Provisions . . . . . . . . . . . . . . 52
Section 6.01 Complete Agreement; Amendment . . . . 52
Section 6.02 Notices . . . . . . . . . . . . . . . 52
Section 6.03 Attorneys' Fees . . . . . . . . . . . 54
Section 6.04 Separability. . . . . . . . . . . . . 54
Section 6.05 Survival of Rights and Assignability. 54
Section 6.06 Governing Law . . . . . . . . . . . . 54
Section 6.07 Waiver. . . . . . . . . . . . . . . . 54
Section 6.08 Alternative Remedies; Equitable
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.09 Limitation on Individual Liability. . 55
Section 6.10 Wells Fargo Bank Addendum . . . . . . 55
Section 6.11 Actions Between Members . . . . . . . 55
Section 6.12 No Third Party Beneficiaries. . . . . 55
Section 6.13 Terminology . . . . . . . . . . . . . 56
Section 6.14 Counterparts. . . . . . . . . . . . . 56
Section 6.15 Further Assurances. . . . . . . . . . 56
Section 6.16 Non-Discrimination. . . . . . . . . . 56
WELLS FARGO BANK ADDENDUM
EXHIBITS
Exhibit A - Legal Description
Exhibit B - Artwork
Exhibit C - Initial Capital Accounts
Exhibit D - Permanent Financing
Guidelines
Exhibit E - Insurance Program
Exhibit F - Tax Elections
EXHIBIT 10-W
- ------------
(Carlyle-XIV)
CONSENT OF DIRECTOR
OF
CARLYLE MANAGERS, INC.
The undersigned, being all the directors of Carlyle Manager, Inc., a
Delaware corporation (the "Corporation"), acting by written consent
pursuant to Section 141(f) of the Delaware General Corporation Law, hereby
consent to the adoption of, and do hereby adopt, the following resolutions:
WHEREAS, this Corporation is the holder of certain demand notes made
by its shareholders in the aggregate original principal amount of
$3,000,000 (the "Notes"), as set forth in EXHIBIT A attached hereto; and,
WHEREAS, this Corporation desires to make a distribution to its
shareholders aggregating $2,000,000, as a return of capital (the
"Distribution"); and,
WHEREAS, in order to effect the Distribution, the outstanding
principal amount of the Notes will be reduced as set forth in such Exhibit
A.
NOW, THEREFORE, BE IT RESOLVED, that this Corporation make the
Distribution, as a return of capital, effective as of the date hereof, to
be paid by the reduction of the outstanding principal amount as set forth
EXHIBIT A attached hereto; and,
FURTHER RESOLVED, that any officer of this Corporation is hereby
authorized and directed to effect the Distribution as of the date hereof,
to enter into, execute and deliver, or to ratify, any and all documents
incidental or related thereto, including without limitation, those
documents deemed necessary or appropriate to evidence the reduction in the
outstanding principal balances of each of the Notes as set forth herein,
and any said officer is hereby authorized and directed to take whatever
actions said officer deems reasonably necessary in order to consummate the
transaction described or contemplated.
Dated: October 31, 1996
STUART C. NATHAN
- --------------------
Stuart C. Nathan
Being the sole director or Carlyle Managers, Inc., a Delaware corporation.
EXHIBIT A
---------
Original
Principal Principal
Payor Date of Note Amount Reduction
- ----- -------------- ---------- ---------
JMB Realty Corporation March 25, 1993 $ 600,000 $400,000
JMB/Manhattan
Associates, Ltd. March 25, 1993 $ 600,000 $400,000
Carlyle Real Estate
Limited Partnership-XIII March 25, 1993 $ 600,000 $400,000
Carlyle Real Estate
Limited Partnership-XIV March 25, 1993 $1,200,000 $800,000
EXHIBIT 10-X
- ------------
(C-XIV)
CONSENT OF DIRECTOR
OF
CARLYLE INVESTORS, INC.
The undersigned, being all the directors of Carlyle Investors, Inc.,
a Delaware corporation (the "Corporation"), acting by written consent
pursuant to Section 141(f) of the Delaware General Corporation Law, hereby
consent to the adoption of, and do hereby adopt, the following resolutions:
WHEREAS, this Corporation is the holder of certain demand notes made
by its shareholders in the aggregate original principal amount of
$3,000,000 (the "Notes"), as set forth in EXHIBIT A attached hereto; and,
WHEREAS, this Corporation desires to make a distribution to its
shareholders aggregating $2,000,000, as a return of capital (the
"Distribution"); and,
WHEREAS, in order to effect the Distribution, the outstanding
principal amount of the Notes will be reduced as set forth in such Exhibit
A.
NOW, THEREFORE, BE IT RESOLVED, that this Corporation make the
Distribution, as a return of capital, effective as of the date hereof, to
be paid by the reduction of the outstanding principal amount as set forth
EXHIBIT A attached hereto; and,
FURTHER RESOLVED, that any officer of this Corporation is hereby
authorized and directed to effect the Distribution as of the date hereof,
to enter into, execute and deliver, or to ratify, any and all documents
incidental or related thereto, including without limitation, those
documents deemed necessary or appropriate to evidence the reduction in the
outstanding principal balances of each of the Notes as set forth herein,
and any said officer is hereby authorized and directed to take whatever
actions said officer deems reasonably necessary in order to consummate the
transaction described or contemplated.
Dated: October 31, 1996
STUART C. NATHAN
- --------------------
Stuart C. Nathan
Being the sole director or Carlyle Investors, Inc., a Delaware corporation.
EXHIBIT A
---------
Original
Principal Principal
Payor Date of Note Amount Reduction
- ----- -------------- ---------- ---------
JMB Realty Corporation March 25, 1993 $ 450,000 $300,000
JMB/Manhattan
Associates, Ltd. March 25, 1993 $ 600,000 $400,000
Carlyle Real Estate
Limited Partnership-XIII March 25, 1993 $ 600,000 $400,000
Carlyle Real Estate
Limited Partnership-XIV March 25, 1993 $1,200,000 $800,000
JMB Service Bureau
company (a division of
Northbrook Corporation),
as successor-in-interest
to JMB Holdings Corporation March 25, 1993 $ 150,000 $100,000
EXHIBIT 10-Y
- ------------
(C-XIV)
ALLONGE TO DEMAND NOTE
Reference is made to that certain Demand Note, dated as of March 25,
1993 (the "Note"), made by Carlyle Real Estate Limited Partnership-XIV, an
Illinois limited partnership ("Carlyle XIV"), in favor of Carlyle Managers,
Inc., a Delaware corporation ("Investors"), in the original principal
amount of $1,200,000.
In consideration for the return of capital made by Investors to
Carlyle XIV as of the date hereof in the amount of $800,000, the
undersigned hereby reduces the outstanding principal balance of the Note to
$400,000. Such reduction shall not serve to reduce or cancel any accrued
and unpaid interest which may be outstanding on the Note.
This Allonge shall be attached to and become a part of the Note.
Dated as of October 31, 1996. CARLYLE MANAGERS, INC.
a Delaware corporation
By:___________________
Its:__________________
Acknowledged and Agreed:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation
Corporate General Partner
By:__________________
Its:_________________
EXHIBIT 10-Z
- ------------
(C-XIV)
ALLONGE TO DEMAND NOTE
Reference is made to that certain Demand Note, dated as of March 25,
1993 (the "Note"), made by Carlyle Real Estate Limited Partnership-XIV, an
Illinois limited partnership ("Carlyle XIV"), in favor of Carlyle
Investors, Inc., a Delaware corportion ("Investors"), in the original
principal amount of $1,200,000.
In consideration for the return of capital made by Investors to
Carlyle XIV as of the date hereof in the amount of $800,000, the
undersigned hereby reduces the outstanding principal balance of the Note to
$400,000. Such reduction shall not serve to reduce or cancel any accrued
and unpaid interest which may be outstanding on the Note.
This Allonge shall be attached to and become a part of the Note.
Dated as of October 31, 1996. CARLYLE INVESTORS, INC.,
A Delaware corporation
By:____________________
Its:___________________
Acknowledged and Agreed:
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIV,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
Corporate General Partner
By:______________________
Its:_____________________
EXHIBIT 10-AA
- -------------
(C-XIV)
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT dated as of the 10 day of October
1996, given by PROPERTY PARTNERS, L.P., CARLYLE - XIII ASSOCIATES, L.P.,
and CARLYLE - XIV ASSOCIATES, L.P., each a Delaware limited partnership
having an office at 900 North Michigan Avenue - 19th floor, Chicago,
Illinois 60611 (hereinafter individually referred to as an "Indemnitor" and
collectively as the "Indemnitors") to METROPOLIS REALTY TRUST, INC., a
Maryland corporation having an office c/o Victor Capital Group, L.P., 885
Third Avenue - 12th Floor, New York, New York 10022, Attn: John Klopp
(hereinafter referred to as "Indemnitee").
WITNESSETH:
WHEREAS, each Indemnitor is a partner in JMB/NYC Office Building
Associates, L.P. ("JMB LP"), an Illinois limited partnership and a member
of 237 Park Avenue Associates, LLC and 1290 Associates, LLC (collectively,
the "Debtors"), each a New York limited liability company and the obligors
under certain notes in the aggregate original principal amount of
$970,000,000 issued pursuant to that certain Mortgage Spreader and
Consolidation Agreement and Trust Indenture dated as of March 20, 1984
among O&Y Equity Corp., Olympia & Holdings Corporation, FAME Associates,
Olympia & York 2 Broadway Land Company, Olympia & York 2 Broadway Company
and Manufacturers Hanover Trust Company as Trustee, as supplemented and
(the "Indenture"), which encumbers the fee estates of the Debtors in
properties known as 237 Park Avenue and 1290 Avenue of the Americas;
WHEREAS, the Debtors defaulted under the Indenture beyond the
expiration of all applicable notice and cure periods;
WHEREAS, the Debtors, JMB LP and Indemnitors requested that the
Trustee and the holders of the Existing Notes forbear from exercising their
rights to pursue an action to foreclose the Indenture in order to provide
the Debtors with an opportunity to file a pre - negotiated plan of
reorganization (hereinafter referred to as the "Plan") under the Bankruptcy
Code, which Plan provides for, among other things, (i) a transfer of the
Properties to the Property Owning Partnerships, (ii) the Lower Tier
Partnership to own a 99% interest as a limited partner in each of the
Property Owning Partnerships, (iii) the Upper Tier Partnership to own a 5%
interest as a limited partner in the Lower Tier Partnership, and (iv) JMB
LP to own a 99% interest as a limited partner in the Upper Tier
Partnership;
WHEREAS, the Trustee and the holders of the Existing Notes were
willing to forbear from exercising their rights to pursue an action to
foreclose the Indenture and to proceed with the transactions contemplated
by the Plan only if the Indemnitors execute and deliver this
Indemnification Agreement to the Indemnitee and the Plan and the Agreements
of Limited Partnership of the Upper Tier Partnership and the Lower Tier
Partnership require that JMB LP cause the Indemnitors to execute and
deliver this Indemnity Agreement to the Indemnitee;
WHEREAS, the Plan was filed with the Bankruptcy Court on April 23,
1996 and became effective pursuant to an order of the Bankruptcy Court
entered on September 20, 1996 and, pursuant to the terms thereof;
WHEREAS, the Indemnitors will materially benefit from the
consummation of the transactions provided for in the Plan and described
above;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, and in
order to induce the Trustee and the holders of the Existing Notes to
forbear from exercising their rights as hereinbefore stated and such
parties and the Indemnitee to proceed with the transactions contemplated by
the Plan, the Indemnitors hereby covenant and agree with the Indemnitee as
follows:
1. Capitalized terms used but not defined herein shall have the
meanings provided in the Plan.
2. The Indemnitors absolutely and unconditionally agree to indemnify
and to hold Indemnitee harmless from and against any and all losses,
claims, liabilities, damages, costs or expenses (including, without
limitation, reasonable counsel fees) of any nature whatsoever, contingent
or otherwise, foreseen or unforeseen, which Indemnitee may or shall incur
as a result of any of JMB LP, its officers, directors, partners (including
without limitation any Indemnitor), stockholders, agents or affiliates
(collectively, the "Controlled Entities") intentionally interfering with,
impeding or preventing (including, without limitation, the filing by JMB LP
of a voluntary petition under the Bankruptcy Code or any other federal or
state bankruptcy or insolvency statute or any Controlled Entity joining in
an involuntary petition against JMB LP under the Bankruptcy Code or such
other statute) (x) the exercise by the Indemnitee of the Purchase Right (as
defined in Section 12.2A of the Lower Tier Partnership Agreement) or (y)
any disposition, mortgage, pledge, encumbrance, hypothecation or exchange
of the Properties by the Property Owning Partnerships or the Property
Owning Partnership Interests (as defined in Lower Tier Partnership
Agreement) by the Lower Tier Partnership or the merger or other combination
of the Property Owning Partnerships or the Lower Tier Partnership with or
into another entity, in accordance with the terms of the Lower Tier
Partnership Agreement, provided that such disposition, mortgage, pledge,
encumbrance, hypothecation, exchange, merger or other combination does not
constitute an Adverse Transaction as defined in the agreement of limited
partnership of the Lower Tier Partnership ("Prohibited Actions"), and
provided that any such Prohibited Action is not revoked or rescinded within
the time period provided in paragraph 3 below.
3. In the event that any Indemnitor or Controlled Entity takes any
Prohibited Action (including, without limitation, the filing by or against
JMB LP of a petition under the Bankruptcy Code or any other federal or
state bankruptcy or insolvency statute), the Indemnitors (x) acknowledge
(and Indemnitee, by its acceptance of this Indemnification Agreement,
acknowledges) that the damage to be suffered by Indemnitee shall be
difficult or impossible to ascertain and (y) if the Prohibited Action is
not revoked or rescinded within sixty (60) days after notice by Indemnitee
to Indemnitors so as to permit the consummation of the transaction
described in clause (x) or (y) of paragraph 2 above unimpeded by any
actions by JMB LP or any of the Controlled Entities, absolutely and
unconditionally agree to pay to Indemnitee upon demand the Maximum
Indemnitors' Liability Amount (as hereinafter defined) as full liquidated
damages for, and in satisfaction of, the undersigned's obligations under
this Indemnification Agreement, including but not limited to the
Indemnitors' obligations under paragraph 2 hereof. The Indemnitor
acknowledges and agrees that (and Indemnitee, by its acceptance of this
Indemnification Agreement, acknowledges and agrees that) the payment of the
Maximum Indemnitors' Liability Amount is a fair and reasonable remedy for
Indemnitee if any of the events set forth in paragraph 2 of this
Indemnification Agreement shall occur, as any such event will result in
Indemnitee incurring damages which cannot now be determined with any degree
of certainty. The foregoing shall not limit the remedies Indemnitee may
have against any other party, including without limitation, JMB LP and the
right of the Indemnitors to seek injunctive relief with respect to the
Prohibited Action or specific performance of the underlying obligation.
4. The term "Maximum Indemnitors' Liability Amount" as used in this
Indemnification Agreement shall mean an amount equal to $25,000,000,
provided that the Maximum Indemnitors' Liability Amount shall be reduced on
a dollar for dollar basis for each dollar actually received by Indemnitee
in respect of the JMB Collateral (as defined in the Lower Tier Partnership
Agreement).
5. The Indemnitors hereby consent that from time to time, before or
after the taking of any Prohibited Action by any Indemnitor or Controlled
Party, with or without further notice to or assent from the Indemnitors,
any security at any time held by or available to Indemnitee with respect to
any obligation of JMB LP, or any security at any time held by or available
to Indemnitee for any obligation of any other person or party secondarily
or otherwise responsible for the compliance by JMB LP of its obligations
under the Upper Tier and Lower Tier Partnership Agreements (hereinafter
referred to as the "Obligations"), may be exchanged, surrendered or
released and any obligation JMB LP, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered,
compromised, waived or released in whole or in part, or any default with
respect thereto waived, and Indemnitee may release, in whole or in part,
the JMB Collateral or any balance of any deposit account or credit on its
books in favor of JMB LP, or of any such other person or party, and may
generally deal with JMB LP or any such security or other person or party as
Indemnitee may see fit; and the Indemnitors shall remain bound under this
Indemnification Agreement notwithstanding any such exchange, surrender,
release, change, alteration, renewal, extension, continuance, compromise,
waiver, inaction or other dealing.
6. This is an agreement to pay liquidated damages and not an
agreement of collection and Indemnitor further waives any right to require
that any action be brought against JMB LP or any other person or party or
to require that resort be had to any security or to any balance of any
deposit account or credit on the books of Indemnitee in favor of JMB LP or
any other person or party.
7. Each reference herein to Indemnitee shall be deemed to include
its successors and assigns in whose favor the provisions of this
Indemnification Agreement shall also inure. This Indemnification Agreement
shall be binding upon, and shall inure to the benefit of, Indemnitee and
each Indemnitor and the respective heirs, executors, administrators, legal
representatives, successors and assigns of Indemnitee and each Indemnitor;
provided, however, that the Indemnitors shall in no event or under any
circumstance have the right without obtaining the prior written consent of
Indemnitee to assign or transfer the Indemnitors' obligations and
liabilities under this Indemnification Agreement, in whole or in part, to
any other person, party or entity.
8. The term "Indemnitor" as used herein shall, if this
Indemnification Agreement is signed by more than one party, mean the
"Indemnitors and each of them" and each undertaking herein contained shall
be their joint and several undertaking, provided, however, that in the next
succeeding paragraph hereof the term "Indemnitor" shall mean the
"Indemnitors or any of them".
9. No delay on the part of Indemnitee in exercising any right or
remedy under this Indemnification Agreement or failure to exercise the same
shall operate as a waiver in whole or in part of any such right or remedy.
No notice to or demand on the Indemnitor shall be deemed to be a waiver of
the obligation of the Indemnitor or of the right of Indemnitee to take
further action without notice or demand as provided in this Indemnification
Agreement.
10. This Indemnification Agreement may only be modified, amended,
changed or terminated by an agreement in writing signed by Indemnitee and
the Indemnitors. No waiver of any term, covenant or provision of this
Indemnification Agreement shall be effective unless given in writing by
Indemnitee and if so given by Indemnitee shall only be effective in the
specific instance in which given.
11. The indemnitors acknowledge that this Indemnification Agreement
and the Indemnitors' obligations under this Indemnification Agreement are
and shall at all times continue to be absolute and unconditional in all
respects. This Indemnification Agreement sets forth the entire agreement
and understanding of Indemnitee and the Indemnitors, and, except as
otherwise herein set forth, the Indemnitors absolutely, unconditionally and
irrevocably waive any and all right to assert any offset, counterclaim or
crossclaim of any nature whatsoever with respect to this Indemnification
Agreement or the obligations of the Indemnitors under this Indemnification
Agreement or the obligations of any other person or party (including,
without limitation, JMB LP) relating to this Indemnification Agreement or
the obligations of the Indemnitors hereunder in any action or proceeding
brought by Indemnitee to enforce the obligations of the Indemnitors under
this Indemnification Agreement. Nothing contained in this paragraph 11
shall limit the right of the Indemnitors to assert a defense or maintain a
separate action against Indemnitee with respect to any matter irrespective
of whether it relates to this Indemnification Agreement or the obligations
of the Indemnitors under this Indemnification Agreement. The Indemnitors
acknowledge and Indemnitee, by its acceptance hereof, acknowledges that no
oral or other agreements, understandings, representations or warranties
exist with respect to this Indemnification Agreement or with respect to the
obligations of the Indemnitors under this Indemnification Agreement except
as specifically set forth in this Indemnification Agreement or otherwise in
writing by Indemnitee and the Indemnitors.
12. THE INDEMNITORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE,
AND INDEMNITEE BY ITS ACCEPTANCE OF THIS INDEMNIFICATION AGREEMENT
IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR
OTHERWISE RELATING TO THIS INDEMNIFICATION AGREEMENT.
13. If at any time (i) any payment, or portion thereof, made by, or
for the account of, the Indemnitors on account of the obligations under
this Indemnification Agreement, or (ii) any transaction described in clause
(x) or (y) of paragraph 2 hereof, or (iii) the consummation of the transfer
of the interest of JMB LP in the Upper Tier Partnership pursuant to the JMB
Put Right under Section 7.7 of the partnership agreement of the Upper Tier
Partnership or of the interest of the Upper Tier Partnership in the Lower
Tier Partnership pursuant to the Put Right under Section 12.2C of the
partnership agreement of the Lower Tier Partnership, is set aside by any
court or trustee having jurisdiction as a voidable preference, fraudulent
transfer or otherwise as being subject to avoidance or recovery under the
provisions of the Bankruptcy Code or under any other applicable Federal or
state bankruptcy law or similar law, the Indemnitor hereby agrees that this
Indemnification Agreement (x) shall continue and remain in full force and
effect, or (y) if previously terminated as a result of the Indemnitors
having fulfilled its obligations hereunder in full or as a result of
Indemnitee having released the Indemnitors from their obligations and
liabilities hereunder, shall without further act or instrument be
reinstated and shall thereafter remain in full force and effect, in either
case with the same force and effect as though such payment or transaction
had not been made, and if applicable, as if such previous termination had
not occurred.
14. The Indemnitor hereby waives all defenses it may have based upon
any election of remedies by Indemnitee which destroys or impairs the
Indemnitors' subrogation rights or the Indemnitors' right to proceed
against JMB LP or any other person for reimbursement. The foregoing
waivers include any requirement of law that Indemnitee exhaust any security
for the Obligations before proceeding under this Indemnification Agreement.
In addition to the foregoing, the Indemnitors hereby waive and relinquish
the following rights and remedies accorded by applicable law to
Indenmnitors and agree not to assert or take advantage of any such rights
or remedies: (a) any defense that may arise by reason of the incapacity,
lack of authority, death or disability of any other person or persons; (b)
demand, protest and, except as set forth therein, notice of any kind; (c)
any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal; and (d) any duty on
the part of Indemnitee to disclose to the Indemnitors any facts Indemnitee
may now or hereafter know about JMB LP, regardless of whether Indemnitee
has reason to believe that any such facts materially increase the risk
beyond that which the Indemnitor intends to assume or has reason to believe
that such facts are unknown to Indemnitors or has a reasonable opportunity
to communicate such facts to Indemnitors.
15. Any notice, request or demand given or made under this
Indemnification Agreement shall be in writing and shall be hand delivered
or sent by Federal Express or other reputable overnight national courier
service, and shall be deemed given when received at the following address
whether hand delivered or sent by Federal Express or other reputable
overnight national courier service:
If to Indemnitee:
c/o Victor Capital Group, L.P.
885 Third Avenue - 12th Floor
New York, New York 10022
Attention: John Klopp
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Kenneth Friedman
If to the Indemnitors:
900 North Michigan Avenue - 19th Floor
Chicago, IL 60611
Attention: Stuart C. Nathan
Gary Nickele
With a copy to:
Pircher, Nichols & Meeks
1999 Avenue of the Americas
Los Angeles, California 90067
Attention: Leo Pircher
Each party to this Indemnification Agreement may designate a change of
address
by notice given to the other party fifteen (15) days prior to the date such
change of address is to become effective.
16. This Indemnification Agreement is, and shall be deemed to be,
a contract entered into under and pursuant to the laws of the State of New
York and shall be in all respects governed, construed, applied and enforced
in
accordance with the laws of the State of New York. No defense given or
allowed by laws of any other state or country shall be interposed in any
action or proceeding hereon unless such defense is also given or allowed by
the laws of the State of New York.
17. The Indemnitor agrees to submit to personal jurisdiction in the
State of New York in any action or proceeding arising out of this
Indemnification Agreement and, furtherance of such agreement, the
Indemnitor hereby agrees and consents that without limiting other methods
of obtaining jurisdiction, personal jurisdiction over the Indemnitor in any
such action or proceeding may be obtained within or without the
jurisdiction of any federal court located in New York (and any such court
shall have jurisdiction over the subject matter hereof) and tat any process
or notice of motion or other application to any such court in connection
with any such action or proceeding may be served upon the Indemnitor, by
registered or certified mail to or by personal service at the last known
address of the Indemnitor, whether such address be within or without the
jurisdiction of any such court. In addition to and in furtherance of the
foregoing, the foregoing, the Indemnitor hereby consents to venue being
held in either of the Southern District of New York.
18. This Indemnification Agreement may be executed in one or more
counterparts by some or all of the parties hereto, each of which
counterparts shall be an original and all of which together shall
constitute a single indemnification agreement. The failure of any party
listed below to execute this Indemnification Agreement, or any counterpart
hereof, shall not relieve the other signatories from their obligations
hereunder.
19. Except as set forth in paragraph 13 of this Indemnification
Agreement, the obligations and liabilities of the Indemnitors under this
Indemnification Agreement shall terminate on the earlier to occur of (i)
the date upon which the transactions described in clause (x) of paragraph 2
hereof have been consummated, (ii) the date upon which the Properties have
been sold or transferred by the Property Owning Partnerships or the
Property Owning Partnership Interests have been sold or transferred by the
Lower Tier Partnership in accordance with the provisions of the Lower Tier
Partnership Agreement, or (iii) the date upon which the interest of JMB LP
in the Upper Tier Partnership or of the Upper Tier Partnership in the Lower
Tier Partnership has been transferred pursuant to the JMB Put Right under
Section 7.7 of the partnership agreement of the Upper Tier Partnership or
the Put Right under Section 12.2C of the partnership agreement of the Lower
Tier Partnership.
20. If any term, covenant, condition or provision of this
Indemnification Agreement or the application thereof to any circumstance or
to the Indemnitors shall be invalid or unenforceable to any extent, the
remaining terms, covenants, conditions and provisions of this
Indemnification Agreement shall not be effected thereby and shall remain
valid and enforceable to the fullest extent permitted by law.
21. Notwithstanding any provision in this Indemnification Agreement,
no present or future partner, officer, director or shareholder of the
Indemnitors shall have any personal liability under this Indemnification
Agreement, provided, however, that the foregoing shall not limit or impair
any rights of Indemnitee (i) to enforce this Indemnification Agreement
against the Indemnitors and any assets of the Indemnitors, (ii) to seek and
enforce other equitable relief against the Indemnitors or against any such
partner, officer, director or shareholder, or (iii) to initiate proceedings
at law or in equity for the purpose of determining any rights of the
Indemnitee hereunder, so long as, in each such case, the same cannot result
in in personal liability of any present or future partner, officer,
director or shareholder of Indemnitors.
IN WITNESS WHEREOF, the Indemnitors have duly executed this
Indemnification Agreement the day and year first above set forth.
PROPERTY PARTNERS, L.P.
By: CARLYLE INVESTORS, INC.
as its general partner
By: ____________________
Name: Stuart C. Nathan
Title: President
CARLYLE - XIII ASSOCIATES, L.P.
By: CARLYLE INVESTORS, INC.
as its general partner
By: ______________________________
Name: Stuart C. Nathan
Title: President
CARLYLE - XIV ASSOCIATES, L.P.
By: CARLYLE INVESTORS, INC.
as its general partner
By: ______________________________
Name: Stuart C. Nathan
Title: President
EXHIBIT 10-BB
- -------------
(C-XIV)
FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THESE
AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP
EXEMPTION.
EXHIBIT 10-CC
- -------------
(C-XIV)
FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THESE
AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP
EXEMPTION.
EXHIBIT 21
LIST OF SUBSIDIARIES
The Partnership is a partner of the following joint ventures: 1090
Vermont Ave., N.W. Associates Limited Partnership, a limited partnership,
which holds title to the 1090 Vermont Avenue Building in Washington, D.C.;
Mariners Pointe Associates, a limited partnership, which holds title to the
Mariners Pointe Apartments in Stockton, California until its sale in
October 1996; Carlyle-XIV Associates, L.P., an Illinois limited partnership
which is a partner of JMB/NYC Office Building Associates, L.P., an Illinois
limited partnership, which has an indirect limited partnership interest
which equals approximately 4.9% of the reorganized and restructured
ventures owning 237 Park Avenue and 1290 Avenue of the Americas (the
"Properties"). The new ownership structure gives control of the Properties
to a newly-organized real estate investment trust which is owned primarily
by holders of the first mortgage debt which encumbered the Properties prior
to the bankruptcy. Prior to the restructuring, JMB/NYC was a member or
partner in (i) 237 Park Avenue Associates, L.L.C., a New York limited
liability company, (formerly 237 Park Avenue Associates, a New York general
partnership) which holds title to the 237 Park Avenue Building, (ii) 1290
Associates, L.L.C., a New York limited liability company, (formerly 1290
Associates, a New York general partnership) which holds title to the 1290
Avenue of the Americas Building, (all of these office buildings are in New
York, New York). JMB/Piper Jaffray Tower Associates, a general
partnership, which is a partner in (i) OB Joint Venture II, a general
partnership, which is a partner of 222 South Ninth Street Limited
Partnership, a limited partnership, which holds title to the Piper Jaffray
Tower office building in Minneapolis, Minnesota, and (ii) OB Joint Venture,
a general partnership, which holds title to the land underlying the Piper
Jaffray Tower office building; JMB/Piper Jaffray Tower Associates II, a
general partnership, which also is a partner in OB Joint Venture, a general
partnership, which holds title to the land underlying the Piper Jaffray
Tower office building; 900 3rd Avenue Associates, a general partnership,
which is a partner of Progress Partners, a general partnership, which holds
title to 900 Third Avenue Building located in New York, New York; Maguire
Thomas Partners-South Tower, a limited liability company, which holds title
to Wells Fargo Center-IBM Tower located in Los Angeles, California; Old
Orchard Associates a general partnership which recently held an interest in
the Old Orchard Shopping Center in Skokie (Chicago), Illinois. Generally,
the developer of the property is a partner in the joint ventures, however,
the partners in the JMB/NYC Office Building Associates, L.P. JMB/Piper
Jaffray Tower Associates, JMB/Piper Jaffray Tower Associates II, 900 3rd
Avenue Associates and Orchard Associates are affiliates of the General
Partners of the Partnership. Reference is made to the Notes for a
description of the terms of such joint venture partnerships. The
Partnership is a 40% shareholder in Carlyle Managers, Inc. and a 40%
shareholder in Carlyle Investors, Inc., both of which are Illinois
corporations.
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XIV, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1996, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer
GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XIV, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1996, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 22nd day of January, 1997.
NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm
JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin
A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks
STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner
The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1996,
and any and all amendments thereto, the 22nd day of January, 1997.
GARY NICKELE
-----------------------
Gary Nickele
GAILEN J. HULL
-----------------------
Gailen J. Hull
DENNIS M. QUINN
-----------------------
Dennis M. Quinn
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,069,904
<SECURITIES> 0
<RECEIVABLES> 438,763
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,508,667
<PP&E> 33,602,388
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,002,966
<CURRENT-LIABILITIES> 4,376,799
<BONDS> 47,736,328
<COMMON> 0
0
0
<OTHER-SE> (13,813,018)
<TOTAL-LIABILITY-AND-EQUITY> 60,002,966
<SALES> 10,544,285
<TOTAL-REVENUES> 11,830,330
<CGS> 0
<TOTAL-COSTS> 7,119,863
<OTHER-EXPENSES> 7,517,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,971,389
<INCOME-PRETAX> (8,777,967)
<INCOME-TAX> 0
<INCOME-CONTINUING> 152,923,409
<DISCONTINUED> 2,928,068
<EXTRAORDINARY> 23,622,011
<CHANGES> (16,000,000)
<NET-INCOME> 163,473,488
<EPS-PRIMARY> 393.43
<EPS-DILUTED> 393.43
</TABLE>
