<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 1-9373
SUMMIT TAX EXEMPT BOND FUND, L.P.
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3323104
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(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
625 Madison Ave., New York, N.Y. 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
N/A
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK 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 _CK_ No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
- - ---------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $ 101,927,530 $ 84,262,524
Assets held for sale, net 27,643,550 45,243,550
Temporary investments 1,901,005 1,500,760
Cash 146,082 200,227
Promissory notes receivable, net 7,167,727 7,243,567
Deferred bond selection fees, net 1,933,300 2,008,329
Interest receivable 982,199 890,798
Deferred financing fees, net 452,730 516,644
Due from affiliate 114,232 --
Other assets 45,888 15,306
------------- ------------
Total assets $ 142,314,243 $141,881,705
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 1,631,686 1,666,349
Due to affiliates 361,216 70,950
Accrued expenses 166,032 300,669
Accrued interest -- 84,821
------------- ------------
Total liabilities 15,839,800 15,803,655
------------- ------------
Contingencies
Partners' capital
Limited partners (7,906,234 BUC$ issued and outstanding) 126,804,384 126,415,919
General partners (329,941) (337,869)
------------- ------------
Total partners' capital 126,474,443 126,078,050
------------- ------------
Total liabilities and partners' capital $ 142,314,243 $141,881,705
------------- ------------
------------- ------------
- - ---------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
2
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
------------------------- -------------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first
mortgage bonds $3,453,623 $3,532,500 $1,853,459 $1,773,913
Income from assets held for sale, net 1,359,170 993,713 545,672 540,952
Interest income from promissory notes 314,414 286,254 154,529 153,879
Interest income from temporary investments 17,013 12,816 9,632 6,873
---------- ---------- ---------- ----------
5,144,220 4,825,283 2,563,292 2,475,617
---------- ---------- ---------- ----------
EXPENSES
Interest expense 530,099 463,073 277,779 253,151
Management fees 335,938 335,938 167,969 167,969
General and administrative 157,873 221,923 78,949 94,072
Loan servicing fees 166,588 166,588 83,754 83,754
Amortization of deferred bond selection
fees 75,029 75,029 37,515 37,515
Amortization of deferred financing fees 63,914 53,704 31,958 29,293
Legal expense 30,000 190,000 15,000 95,000
---------- ---------- ---------- ----------
1,359,441 1,506,255 692,924 760,754
---------- ---------- ---------- ----------
Net income $3,784,779 $3,319,028 $1,870,368 $1,714,863
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ALLOCATION OF NET INCOME
Limited partners $3,709,083 $3,252,647 $1,832,961 $1,680,566
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General partners $ 75,696 $ 66,381 $ 37,407 $ 34,297
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per BUC $ .47 $ .41 $ .23 $ .21
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- - -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1993 $126,415,919 $(337,869) $126,078,050
Net income 3,709,083 75,696 3,784,779
Distributions (3,320,618) (67,768) (3,388,386)
------------ --------- ------------
Partners' capital (deficit)--June 30, 1994 $126,804,384 $(329,941) $126,474,443
------------ --------- ------------
------------ --------- ------------
- - -----------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
3
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1994 1993
<S> <C> <C>
- - ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 3,555,588 $ 3,729,424
Cash received from assets held for sale, net 1,359,170 948,713
Interest paid (614,920) (463,073)
Fees and expenses paid (565,352) (421,507)
------------ ------------
Net cash provided by operating activities 3,734,486 3,793,557
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of temporary investments (400,245) (185,216)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Funds borrowed -- 13,680,866
Repayment of loan payable -- (45,620)
Financing fees paid -- (585,866)
Repayment of loan from affiliate -- (3,000,000)
Distributions paid (3,388,386) (3,388,386)
Loans made to affiliates -- (10,126,000)
------------ ------------
Net cash used in financing activities (3,388,386) (3,465,006)
------------ ------------
Net increase (decrease) in cash (54,145) 143,335
Cash at beginning of period 200,227 151,621
------------ ------------
Cash at end of period $ 146,082 $ 294,956
------------ ------------
------------ ------------
- - ---------------------------------------------------------------------------------------------------
SCHEDULE RECONCILING NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 3,784,779 $ 3,319,028
------------ ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred bond selection fees 75,029 75,029
Amortization of deferred financing fees 63,914 53,704
Accretion of deferred income (64,300) (62,661)
Accretion of valuation allowance (65,006) (65,006)
Changes in:
Promissory notes receivable 75,840 80,406
Interest receivable (91,401) (19,472)
Due from affiliates (8,755) --
Other assets (30,582) 117,254
Deferred income (75,840) (80,406)
Due to affiliates 290,266 287,333
Accrued expenses (134,637) 88,348
Accrued interest (84,821) --
------------ ------------
Total adjustments (50,293) 474,529
------------ ------------
Net cash provided by operating activities $ 3,734,486 $ 3,793,557
------------ ------------
------------ ------------
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES
As a result of the sale of The Mansion apartments (see Note B), the Partnership recorded deferred
income of approximately $105,000 representing the net cash proceeds from the sale. The cash was
received by the Partnership in August 1994.
- - ---------------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
4
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of the Partnership as of June 30, 1994, the results of its operations
for the six and three months ended June 30, 1994 and 1993 and its cash flows for
the six months ended June 30, 1994 and 1993. However, the operating results for
the interim periods may not be indicative of the results expected for the full
year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1993.
Certain balances for the prior period have been reclassified to conform with
the current financial statement presentation.
B. Related Parties
For several properties collateralizing the participating first mortgage bonds
(``FMBs'') which are classified as assets held for sale in the financial
statements (High Pointe Club, securing an $8,900,000 bond; Greenway Manor,
securing a $12,850,000 bond and Cedar Creek, securing an $8,100,000 bond), the
original owners of the underlying properties and obligors of the FMBs have been
replaced with entities affiliated with the Related Tax Exempt Bond Associates,
Inc. (the ``Related General Partner'') which have not made equity investments.
These entities have assumed the day-to-day responsibilities and obligations of
the underlying properties. Buyers are being sought who would make equity
investments in the underlying properties and assume the nonrecourse obligations
for the FMBs. Although these properties are not producing sufficient cash flow
to fully service the debt (see Note C), the Partnership has no present intention
to declare a default on such FMBs.
On April 1, 1994, Mansion Apartment Project Investors, Inc., an affiliate of
the Related General Partner who had replaced the developer of The Mansion
property, sold its ownership interest in the property to Independence Apartments
Associates, L.P., an unrelated third party (``Independence'') for $20,550,000.
Independence paid $700,000 in cash and assumed the obligations under the
Partnership's $19,450,000 FMB as well as a $400,000 second mortgage note to a
lender affiliated with the Related General Partner taken by assignment from the
seller. Notwithstanding the assumption by Independence of the FMB, the General
Partners have agreed to forbear on the Partnership's rights and remedies in
declaring an interest payment default under the FMB loan documents provided
Independence makes minimum monthly interest payments to the Partnership equal to
approximately $81,000 per month (5% per annum) together with payments to the
replacement reserve escrow account of approximately $4,500 per month and
continues to comply with all other covenants and obligations of the borrower
under the FMB documents. The forbearance period expires September 30, 1994 at
which time it is expected that the forbearance agreement will be extended or
otherwise modified to conform with the market conditions and the performance of
the property.
As a result of the cash equity investment by Independence, The Mansion FMB
(which had previously been classified in the financial statements as an asset
held for sale) was reinstated as an FMB. The $105,477 of net cash proceeds from
the sale (net of an escrow for certain repairs in the amount of $400,000, a
$50,000 second mortgage note principal payment, and closing costs), which was
paid by Independence to the Partnership to reduce accrued and unpaid interest,
was recorded by the Partnership as deferred income and is being accreted as
interest income from first mortgage bonds over the remaining life of The Mansion
FMB. The balance of the deferred income relating to The Mansion FMB was
approximately $104,000 at June 30, 1994. All other accrued and unpaid interest
on The Mansion FMB was forgiven.
5
<PAGE>
<PAGE>
In 1992, the Partnership loaned approximately $540,000 to The Mansion, Cedar
Creek and Cypress Run properties to enable them to pay property taxes. The loans
to The Mansion and Cedar Creek were self-amortizing over two years with interest
at 8.5% per annum beginning in June 1992. These loans (approximately $220,000)
were recorded as a reduction in income from assets held for sale because the
FMBs are classified as assets held for sale paying interest on a cash flow
basis. Subsequent principal payments relating to these loans were recorded as
income from assets held for sale. These two loans were fully amortized during
the second quarter of 1994. The Cypress Run loan requires interest only payments
commencing July 1, 1992 and principal payable in full at the end of the two-year
period. Due to the delinquent 1993 and 1992 property taxes on the Cypress Run
property, an allowance for possible loss was established on this loan during
1993. As of August 1994, the loan remains outstanding and the Partnership has
notified the borrower of the default.
The General Partners and their affiliates perform services for the
Partnership which include but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
--------------------- ---------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
Prudential-Bache Properties, Inc. (``PBP'') and
affiliates:
General and administrative $ 44,969 $ 56,375 $ 20,953 $ 24,796
Management fee 167,969 167,969 83,985 83,985
-------- -------- -------- --------
212,938 224,344 104,938 108,781
-------- -------- -------- --------
Related General Partner and affiliates:
Loan servicing fees 166,588 166,588 83,754 83,755
General and administrative 13,403 25,470 7,354 12,735
Management fee 167,969 167,969 83,984 83,984
-------- -------- -------- --------
347,960 360,027 175,092 180,474
-------- -------- -------- --------
$560,898 $584,371 $280,030 $289,255
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The General Partners are paid, in aggregate, an annual management fee equal
to .5% of the total invested assets (which equals the original face amount of
the total FMBs).
An affiliate of the Related General Partner receives loan servicing fees in
the amount of .25% per annum of the principal amount outstanding on mortgage
loans serviced by the affiliate.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, receives a fee for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
Several executive officers and directors of the Related General Partner own
less than 1% of the outstanding BUC$.
C. Assets Held for Sale
Assets held for sale and the related income thereon are as follows:
<TABLE>
<CAPTION>
Net cash received Net cash received
for the six for the three
months ended months ended
Carrying Face June 30, June 30,
Call Maturity Value Amount ---------------------- --------------------
Date Date of FMB of FMB 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------
Cedar Creek, Dec. 1998 Dec. 2006 $ 7,798,550 $ 8,100,000 $ 296,590 $240,086 $161,918 $127,551
McKinney, Tx
High Pointe Club, June 1998 June 2006 7,545,000 8,900,000 270,000 117,175 135,000 95,000
Harrisburg, Pa
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Net cash received Net cash received
for the six for the three
months ended months ended
Carrying Face June 30, June 30,
Call Maturity Value Amount ---------------------- --------------------
Date Date of FMB of FMB 1994 1993 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Mansion, May 1998 May 2010 -- $19,450,000 $ 327,580 $636,452 $ 8,754 $318,401
Independence,
Mo*
Greenway Manor Oct. 1998 Sept. 2006 $12,300,000 12,850,000 465,000 -- 240,000 --
St. Louis, Mo**
------------ ----------- ---------- -------- -------- --------
$27,643,550 $49,300,000 $1,359,170 $993,713 $545,672 $540,952
------------ ----------- ---------- -------- -------- --------
------------ ----------- ---------- -------- -------- --------
</TABLE>
* As discussed in Note B, this investment was reinstated as an FMB as of April
1, 1994. As such, the cash received for the six months ended June 30, 1994
reflects cash flow only through March 31, 1994. Subsequent cash flow was
recorded as interest income from first mortgage bonds.
** On June 30, 1993, the original owner of the property transferred his
ownership interest to an affiliate of the Related General Partner who did not
make an equity investment and the FMB was reclassified as an asset held for
sale. Prior to this classification, cash received was recorded as interest
income from participating first mortgage bonds.
D. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al., (93 Civ. 654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership against the Partnership, PBP, Prudential
Securities Incorporated and a number of other defendants. On or about November
16, 1993, a putative class action captioned Connelly, et al. v. Prudential-Bache
Securities Inc. et al. (93 Civ. 713), was filed in the United States District
Court for the District of Arizona, purportedly on behalf of investors in the
Partnership against the Partnership, PBP, Prudential Securities Incorporated and
a number of other defendants. On or about January 3, 1992, a putative class
action, captioned Levine v. Prudential-Bache Properties Inc. et al. (92 Civ.
52), was filed in the United States District Court for the Northern District of
Illinois purportedly on behalf of investors in the Partnership against the
General Partners, Prudential Securities Incorporated and a number of other
defendants. Subsequently the Related General Partner exited the litigation by
way of settlement. On April 14, 1994, the Judicial Panel on Multidistrict
Litigation (the ``Panel'') deferred transfer of the case to the Southern
District of New York (discussed more fully below) until after the Illinois court
decided a pending motion to dismiss the complaint. On June 3, 1994, that court
granted the motion of PBP and Prudential Securities Incorporated and dismissed
the first amended complaint without prejudice. On June 30, 1994, plaintiffs
filed a second amended complaint. By order dated July 13, 1994, the Panel
unconditionally transferred the Levine case for inclusion in the consolidated
proceedings in the Southern District of New York.
By its April 14, 1994 order, the Panel transferred (in addition to Levine as
discussed above) the Kinnes case, and by order dated May 4, 1994, the Connelly
case, together with a number of other actions, on each occasion not involving
the Partnership, to a single judge of the United States District Court for the
Southern District of New York and consolidated them under the caption In re
Prudential Securities Incorporated Limited Partnership Litigation (MDL Docket
No. 1005). On June 8, 1994, plaintiffs in the transferred cases filed a
complaint that consolidated the previously filed complaints and named as
defendants, among others, Prudential Securities Incorporated, certain of its
present and former employees and the General Partners. The Partnership is not
named a defendant in the consolidated complaint, but the name of the Partnership
is listed as being among the limited partnerships at issue in the case. The
consolidated complaint alleges violations of the federal Racketeer Influenced
and Corrupt Organizations Act (``RICO''), fraud, negligent misrepresentation,
breach of fiduciary duties, breach of third-party beneficiary contracts, breach
of implied covenants and violations of New Jersey statutes in connection with
the marketing and sales of limited partnership interests. Plaintiffs request
relief in the nature of: rescission of the purchase of securities, and recovery
of all consideration and expenses in connection therewith, as well as
compensation for lost use of money invested, less cash distributions;
compensatory damages; consequential damages; treble damages for defendants' RICO
violations (both federal and New Jersey); general damages for all injuries
resulting from negligence, fraud, breaches of contract, and breaches of duty in
an amount to be determined at trial; disgorgement and restitution of all
earnings, profits, benefits and compensation received by defendants as a
7
<PAGE>
<PAGE>
result of their unlawful acts; costs and disbursements of the action; reasonable
attorneys' fees; and such other and further relief as the court deems just and
proper.
A derivative action entitled Litman et al. v. Prudential-Bache Properties,
Inc. et al. No. 12137 was filed in Delaware Chancery Court, against the General
Partners and the parent company of PBP. Plaintiffs are individual investors who
purchased Partnership interests. Defendants include the General Partners of the
Partnership and also Bache Group, Inc. Plaintiffs' initial complaint, which was
filed as a putative class action alleging breach of fiduciary duty, was
dismissed as legally insufficient. On April 30, 1992, plaintiffs filed an
amended complaint.
The amended complaint, which was solely a derivative action brought on behalf
of the Partnership, alleges that the defendants breached their fiduciary duties
in managing the affairs of the Partnership. Plaintiffs seek an indeterminate
amount of damages as well as attorneys' fees and costs. On June 5, 1992,
defendants filed a motion to dismiss the amended complaint in its entirety on
several grounds, including statute of limitations and failure to state a claim.
On January 4, 1993, defendants' motion was granted, and the amended complaint
was dismissed without leave to replead.
On February 2, 1993, plaintiffs filed a notice of appeal. On February 16,
1993, defendants filed a cross-appeal which appealed the court's failure to
dismiss plaintiffs' claims on statute of limitations grounds. After hearing oral
argument, the Delaware Supreme Court on November 18, 1993 remanded the action to
the Chancery Court for the limited purpose of determining whether plaintiffs'
claims were time-barred. On January 14, 1994, the Chancery Court concluded that
they were. After hearing all arguments, the Delaware Supreme Court on April 21,
1994 affirmed the decision of the Chancery Court dismissing the action for the
reasons set forth in the Chancery Court memorandum opinion of January 14, 1994.
On March 6, 1991, a derivative action entitled Virginia First Savings Bank
F.S.B., et al. v. Tax Exempt Bond Associates, Inc., et al., No. L91-726 was
filed in Virginia Circuit Court against the General Partners and others.
Plaintiffs are one named and other unknown individual investors who are
purportedly suing on behalf of the Partnership. Defendants include, among
others, the Partnership and its General Partners. The complaint alleges breach
of fiduciary duty. Plaintiffs seek an indeterminate amount of damages.
Defendants have moved to dismiss the complaint on the grounds that (i)
plaintiffs are precluded from bringing the action by a previous decision; (ii)
plaintiffs failed to adequately plead a valid derivative claim and that (iii)
the court lacks jurisdiction over certain defendants.
The General Partners and Prudential Securities Incorporated believe they have
meritorious defenses to the complaint and intend to vigorously defend these
actions. Pursuant to the terms of the Partnership Agreement, the General
Partners may be entitled to indemnification for any loss suffered as a result of
these actions including their attorneys' fees; however, no such claims have been
made.
PBP is also named as a defendant, together with other parties, in pending
legal proceedings involving other limited partnerships. Although a number of
cases have been resolved, others are still pending. PBP intends to defend itself
vigorously against such actions.
E. Subsequent Events
In August 1994, a distribution of approximately $1,660,000 and $34,000 was
paid to the limited partners and General Partners, respectively, for the quarter
ended June 30, 1994.
As a result of the continuing delinquency in the payment of 1992 and 1993
real estate taxes, in July 1994, the Partnership initiated steps to enforce its
rights and remedies on the Cypress Run property in Tampa, Florida which secures
the Partnership's $15,750,000 FMB. These remedies included acceleration of the
loan and a draw on an irrevocable letter of credit in the sum of $350,000 which
was issued on behalf of the owner of Cypress Run as security for the owner's
obligations under his Rental Performance Agreement. In response, on July 15,
1994, the owner of the property filed a Voluntary Petition for Relief under
Chapter 11 of the United States Bankruptcy Code. At this time, the owner
continues to conduct its business and affairs as a Debtor-in-possession. The
filing of the Voluntary Petition operates as a stay against the enforcement of
the Partnership remedies including a foreclosure action. At the initial hearing,
the court consented to, among other things, allow the Partnership to receive the
proceeds of the letter of credit as well as the monthly net cash flow generated
by the property as its debt service payments for at least the initial 120 days
of the proceedings.
8
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership has invested in eleven tax-exempt participating first
mortgage bonds (``FMBs'') issued by various state or local governments or their
agencies or authorities. The FMBs are secured by participating first mortgage
loans on multi-family residential apartment projects.
Interest payments from FMBs are anticipated to provide sufficient liquidity
to meet the operating expenditures of the Partnership in future years and to
fund distributions.
The loan payable has a variable interest rate; therefore, future levels of
interest expense will fluctuate in correlation to movements in the 30 day
commercial paper interest rate.
The second quarter distribution of approximately $1,660,000 ($.21 per BUC)
was paid to limited partners in August 1994 from cash flow from operations. The
Partnership anticipates funding future cash distributions from cash flow from
operations.
In July 1994, the owners of the Cypress Run property filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code (see Note E to the
financial statements). Ongoing monthly interest income to the Partnership from
the Cypress Run FMB will be reduced during these proceedings. However, it is
anticipated that the net cash flow from the Cypress Run property, together with
the proceeds of the letter of credit, is sufficient such that, barring any other
reduction of Partnership income or increase in Partnership expenses, the
Partnership's net cash flow from operations should not be negatively impacted in
the third quarter of 1994.
Results of Operations
Net income increased by approximately $466,000 and $156,000 for the six and
three months ended June 30, 1994 as compared to the corresponding periods in
1993 for the reasons discussed below.
Interest income from first mortgage bonds decreased by approximately $79,000
and increased by approximately $80,000 for the six and three months ended June
30, 1994 as compared to the corresponding periods in 1993. These fluctuations
are primarily due to interest received from the Greenway Manor property being
classified with income from assets held for sale for the six months ended June
30, 1994, interest received from The Mansion property being classified as
interest income from FMBs subsequent to the sale of the property (see Note B to
the financial statements) effective April 1, 1994, an increase in interest
received from the Thomas Lake and Sunset Terrace FMBs, a decrease in interest
received from the Clarendon Hills FMB equivalent to 50% of the property tax
increase resulting solely from the sale of the property and a decrease in
interest received from the North Glen FMB due to a modification to the
forbearance agreement with the property's owner.
Income received from FMBs that are currently classified as assets held for
sale (see Note C to the financial statements) increased by approximately
$365,000 and $5,000 for the six and three months ended June 30, 1994 as compared
to the corresponding periods in 1993. These increases are primarily due to the
classification of interest received from the Greenway Manor property as income
from assets held for sale in 1994 and increased cash flow received from the High
Pointe Club and Cedar Creek properties partially offset by the classification of
interest received from The Mansion property as interest income from first
mortgage bonds subsequent to the sale of the property (see Note B to the
financial statements) effective April 1, 1994.
Interest expense increased by approximately $67,000 and $25,000 for the six
and three months ended June 30, 1994 as compared to the corresponding periods in
1993 due primarily to an increase in the 30 day commercial paper interest rate.
General and administrative expenses decreased by approximately $64,000 and
$15,000 for the six and the three months ended June 30, 1994 as compared to the
corresponding periods in 1993 primarily due to the timing of certain expenses in
the respective years and a general decrease in the costs associated with the
administration of the Partnership.
9
<PAGE>
<PAGE>
Legal expense decreased by approximately $160,000 and $80,000 for the six and
three months ended June 30, 1994 as compared to the corresponding periods in
1993 due primarily to costs associated with the Greenway foreclosure in 1993 and
lower legal costs related to the Levine litigation described in Note D to the
financial statements.
Property Information
The following table lists the FMBs that the Partnership owns with occupancy
rates of the underlying properties as of July 22, 1994:
<TABLE>
<CAPTION>
Face
Amount of Stated
Property Location FMB Occupancy Interest Rate
<S> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------
The Mansion Independence, Mo $ 19,450,000 95.9% 8.50%(E)
Martin's Creek Summerville, SC 7,300,000 98.0 7.00%(B)
East Ridge Mt. Pleasant, SC 8,700,000 99.5 7.00%(B)
High Pointe Club Harrisburg, Pa 8,900,000 99.2 8.50%(A)
Cypress Run Tampa, Fl 15,750,000 93.1 8.50%(D)
Thomas Lake Eagan, Mn 12,975,000 100.0 8.50%(C)
North Glen Atlanta, Ga 12,400,000 91.8 8.50%(C)
Greenway Manor St. Louis, Mo 12,850,000 99.4 8.50%(A)
Clarendon Hills Hayward, Ca 17,600,000 97.5 5.52%(C)
Cedar Creek McKinney, Tx 8,100,000 97.5 8.50%(A)
Sunset Terrace Lancaster, Ca 10,350,000 92.9 8.00%(C)
------------
$134,375,000
------------
------------
- - ---------------------------------------------------------------------------------------------
(A) The rate paid is the current cash flow from the property. See Note C to the financial
statements.
(B) As discussed on the following page, the stated rate on the restructured FMBs will
increase from 6.0% to 8.25% over the remaining term of the FMB.
(C) See below and on the following pages for discussion of rates paid.
(D) See discussion of property bankruptcy on page 12.
(E) See Note B to the financial statements for discussion of property sale.
</TABLE>
Clarendon Hills, Hayward, California
On May 31, 1992, the sale of the Clarendon Hills property to an unrelated
third party was closed. Net proceeds made available to the Partnership were
approximately $1,441,000 and were recorded as deferred income. The Partnership
used a portion of the net proceeds to retire a loan due to the Related General
Partner and to fund loans to the owners of certain properties encumbered by FMBs
held by the Partnership to enable them to pay property taxes. The $6,600,000
promissory note to Clarendon Hills Investors Inc. issued at the time of the sale
of the property has been assigned to the Partnership. This promissory note
requires monthly interest payments of 8.0% per annum with the principal due on
December 31, 2003. Beginning June 1, 1992, debt service payments relating to the
FMB commenced at a rate of 5.52% pursuant to the terms of the sale and
modification of the FMB. Pursuant to the terms of the sale, beginning with the
November 1993 payment and through the August 1994 payment, the debt service
payments are reduced by 50% of the property tax increase resulting solely from
the sale of the property. The aggregate reduction for this period was $21,820.
Payments on the FMB and the note are current.
High Pointe Club, Harrisburg, Pennsylvania
In 1988, the original owner of the underlying property and obligor of the FMB
was replaced by an affiliate of the Related General Partner who did not make an
equity investment. Additional financing for construction cost overruns was
obtained in the amount of $3,250,000 from a major money center bank in the form
of a first mortgage bond and a pro rata share ($3,180,000) of the $10,000,000
loan obtained in 1990. The Partnership received debt service payments on the FMB
at a pay rate of 6.15% and 2.60% per annum for the six months ended June 30,
1994 and 1993, respectively. Although this property is still not producing
sufficient cash flow to fully service the debt, the Partnership has no present
intention to declare default on this FMB.
10
<PAGE>
<PAGE>
In November 1989, a settlement agreement was reached between the previous
developer of High Pointe Club Apartments (the ``Property'') and USF&G, the
construction performance bonding company for the Property. The terms of the
settlement required USF&G to pay $600,000 to the previous developer. Prior to
such agreement, the previous developer agreed to place the settlement proceeds
in escrow to later be shared with the subsequent developer (``Greenhill Project
Investors, Inc.'') or its successors and assigns pursuant to an arbitration
proceeding.
On April 23, 1993, the previous developer agreed to release the escrowed
funds to RHA Inv., Inc. (``RHA''), the successor to Greenhill Project Investors,
Inc. RHA continues to have certain obligations to, among others, the Partnership
including the payment of accrued and unpaid interest as well as the repayment of
certain loans guaranteed by the Partnership. As a result, the General Partners
of the Partnership and RHA are determining which of RHA's obligations will be
satisfied by proceeds received from escrow. The Partnership's claim on the
escrowed funds is not recorded in the accompanying financial statements.
The Mansion, Independence, Missouri
In 1989, the original owner of the underlying property and obligor of the FMB
was replaced by Mansion Apartment Project Investors, Inc., (``MARI''), an
affiliate of the Related General Partner who did not make an equity investment.
The Partnership made a loan to the owner of the property underlying the FMB for
approximately $134,000 for payment of 1992 property taxes. This loan, made in
June 1992, was self-amortizing over two years with interest at 8.5% per annum
payable monthly. Subsequent principal payments relating to this loan were
included in income from assets held for sale. The loan was fully amortized
during the second quarter of 1994. All previously past due and unpaid property
taxes have been paid.
On April 1, 1994, MARI sold its ownership interest in The Mansion to
Independence Apartments Associates, L.P., an unrelated third party, for
$20,550,000. See Note B to the financial statements for further information.
Cedar Creek, McKinney, Texas
In 1988, the original owner of the underlying property and obligor of the FMB
was replaced by an affiliate of the Related General Partner who did not make an
equity investment. For the six months ended June 30, 1994 and 1993, the property
made debt service payments at an annualized pay rate of approximately 7.32% and
6.00%, respectively. Although this property is not producing sufficient cash
flow to fully service the debt, the Partnership has no present intention to
declare default on this FMB. All previously past due and unpaid property taxes
have been paid. To bring taxes current, the Partnership made a loan in June 1992
to the owner of the property underlying the FMB for approximately $86,000 for
payment towards 1991 and 1992 property taxes. This loan was self-amortizing over
two years with interest at 8.5% per annum payable monthly. Subsequent principal
payments relating to this loan were included in income from assets held for
sale. The loan was fully amortized during the second quarter of 1994.
East Ridge and Martin's Creek, South Carolina
During the year ended December 31, 1990, the terms of the East Ridge and
Martin's Creek FMBs with a $16,000,000 face value (carrying value $14,700,000,
including valuation allowance of $1,300,000) were modified when the equity
interests in those properties and the related obligations of the FMBs were sold
from an affiliate of the Related General Partner to a third party borrower. As
part of this transaction, the minimum pay rates on the FMBs increase in annual
increments from 6.0% in 1990 to 8.25% in 1997. The difference between the rate
paid and the original stated rate is payable out of available future cash flow
or, ultimately, from sales or refinancing proceeds. During the six months ended
June 30, 1994, the Partnership received 6.96% and 7.25% from the East Ridge and
Martin's Creek properties, respectively. The minimum scheduled pay rate was
6.75% through February 28, 1994 and increased to 7.0% on March 1, 1994. In
addition, in 1990, the Partnership received $950,000 in 13% second mortgage
promissory notes calling for monthly interest and principal payments through
December 1996. Payments on these notes, which are partially secured by letters
of credit, are current through June 30, 1994.
Cypress Run, Tampa, Florida
As a result of the continuing delinquency in the payment of 1992 and 1993
real estate taxes, in July 1994, the Partnership initiated steps to enforce its
rights and remedies on the Cypress Run property in Tampa, Florida which secures
the Partnership's $15,750,000 FMB. These remedies included acceleration of the
loan and a draw on an irrevocable letter of credit in the sum of $350,000 which
was issued on behalf of the owner
11
<PAGE>
<PAGE>
of Cypress Run as security for the owner's obligations under his Rental
Performance Agreement. In response, on July 15, 1994, the owner of the property
filed a Voluntary Petition for Relief under Chapter 11 of the United States
Bankruptcy Code. At this time, the owner continues to conduct its business and
affairs as a Debtor-in-possession. The filing of the Voluntary Petition operates
as a stay against the enforcement of the Partnership remedies including a
foreclosure action. At the initial hearing, the court consented to, among other
things, allow the Partnership to receive the proceeds of the letter of credit as
well as the monthly net cash flow generated by the property as its debt service
payments for at least the initial 120 days of the proceedings.
In June 1992, the Partnership made a second mortgage loan to the owner of the
property underlying the FMB for approximately $320,000 for the payment of past
due 1991 property taxes. This loan requires monthly interest only payments at a
rate of 8.5% per annum with the entire principal due on July 1, 1994. Due to
past due 1993 and 1992 property taxes, an allowance for possible loss was
established on this loan during 1993. Interest payments on the loan as well as
the FMB are current through June 1994. As of August 1994, the loan remains
outstanding and the Partnership has notified the borrower of the default.
Thomas Lake, Eagan, Minnesota
Pursuant to the terms of a forbearance agreement entered into in 1991, debt
service payments were made at a rate of 7.75% per annum for the six months ended
June 30, 1994. The minimum pay rate is scheduled to increase in annual
increments to the original stated rate of 8.5% as of December 1996. The
difference between the rate paid and the original stated rate is payable out of
available future cash flow or, ultimately, from sales or refinancing proceeds.
The property also paid deferred base interest for the six months ended June 30,
1994 in the amount of approximately $21,000. In May 1992, Summit Tax Exempt
Funding Corp., an affiliate of the Partnership, made a second mortgage loan in
the amount of $220,000 secured by a second mortgage on the property toward the
payment of prior year's property taxes. In January 1993, as part of the
transaction in which the Partnership obtained a new credit facility, this loan
was assigned to the Partnership. The loan requires interest only payments at the
Citibank, N.A. prime rate (6.25% at March 31, 1994) plus 2.0% per annum, payable
monthly. Principal is due in full on April 15, 1995. Interest on this loan is
current.
North Glen, Atlanta, Georgia
Pursuant to a forbearance agreement entered into in 1991, interest payments
to the Partnership were scheduled to return to the stated rate of 8.5% per annum
for 1993. Due to continuing soft market conditions, the General Partners entered
into an extension of the forbearance agreement in April 1993 which allows the
owner to make debt service payments at a minimum pay rate equal to 6.0% per
annum through December 1995 at which time the rate is scheduled to increase to
the original stated rate of 8.5%. The difference between the rate paid and the
stated rate is payable out of available future cash flow or, ultimately, from
sales or refinancing proceeds.
In April 1993, the Partnership made a loan in the amount of $126,000 to the
owner of the property underlying the FMB for payment of past due property taxes.
This loan requires interest only payments at 8.5% per annum, payable monthly,
commencing on April 30, 1993 with the entire principal balance due on April 30,
1996. Due to the forbearance agreement, an allowance for possible loss was
established for this loan during 1993; however, interest payments on this loan
are current.
Greenway Manor, St. Louis, Missouri
Due to the failure to pay 1990 real estate taxes, the general partner of
Greenway Manor was removed in May 1991 and a third party management company was
installed and subsequently appointed as receiver to protect the Partnership's
interest while negotiations proceeded with the new general partner of Greenway
Manor for the payment of 1990 and 1991 property taxes. Due to a breakdown of
negotiations with Greenway Manor with regard to its payment of the delinquent
property taxes and interest payments (not paid from March to August 1992), the
Partnership instituted foreclosure proceedings against Greenway Manor. On July
20, 1992, the Greenway Manor partnership filed for bankruptcy under Chapter 11
of the United States Bankruptcy code. Pursuant to a 1992 court order, the
receiver paid the Partnership the cash flow remaining after paying the past due
real estate taxes, property operating costs and escrowing for the then current
year's real estate taxes. On June 30, 1993, the court dismissed the bankruptcy
proceeding at which time the owner of the property and obligor of the FMB agreed
to transfer the deed-in-lieu of foreclosure to an affiliate of the Related
General Partner who has not made an equity investment. Interest payments to the
Partner-
12
<PAGE>
<PAGE>
ship for the six months ended June 30, 1994 and 1993 equated to an annualized
rate of 7.24% and 6.50%, respectively. Although this property is not producing
sufficient cash flow to fully service the debt, the Partnership has no present
intention to declare default on this FMB.
Sunset Terrace, Lancaster, California
Due to soft market conditions, the General Partners entered into a
forbearance agreement with the Sunset Terrace property effective June 1992. The
property began paying debt service at 7.0% in May 1992 which increased to 7.25%
in May 1993 and 7.5% in May 1994. The rate paid is scheduled to further increase
in annual increments to the original stated rate of 8.0% as of May 1996. The
difference between the rate paid and the stated rate is payable from available
future cash flow or ultimately from sales or refinancing proceeds.
General
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements on the FMBs or, alternatively, to pursue
its remedies under the loan documents, including foreclosure, is based upon
several factors including, but not limited to, property performance, owner
co-operation and projected legal costs.
The difference between the stated interest rates and the rates paid by the
FMBs is not accrued as interest income for financial reporting purposes. The
accrual of interest at the stated interest rate will resume once a property's
ability to pay the stated interest rate has been adequately demonstrated.
Interest income of approximately $379,000 and $426,000 was not recognized for
the six months ended June 30, 1994 and 1993, respectively.
From time to time, certain property owners have elected to supplement the
cash flow generated by the properties to meet the required bond interest
payments. There can be no assurance that in the future any property owner will
elect to supplement property cash flow to satisfy bond interest requirements if
necessary.
13
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--Incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--On October 21, 1993, an affiliate of Prudential-Bache
Properties, Inc., Prudential Securities Incorporated (``PSI''), settled,
without admitting or denying the allegations contained therein, civil
and administrative proceedings with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc., and
various state regulators. These proceedings concerned, among other
things, the sale by PSI of limited partnership interests, including
interests of the Registrant, during the period 1980 through 1990. The
settlement has no impact on the Registrant itself.
The Office of the United States Attorney for the Southern District of
New York is conducting an investigation relating to the sale by PSI of
limited partnership interests during the period 1980 through 1990. In
connection with this investigation, PSI has received grand jury
subpoenas and other requests for information. PSI has been complying
with and intends to continue to comply with these requests and the
investigation is ongoing. Furthermore, in the ordinary course of PSI's
business, it receives inquiries and document requests from various
states and regulatory authorities concerning the sales activities of
certain of its employees, some of which may have in the past or may in
the future relate to the Registrant.
Item 6. Exhibits and Reports on Form 8-K--
(a) Exhibits:
4(a)--Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus of Registrant, dated February 19, 1986, filed
pursuant to Rule 424(b) under the Securities Act of 1933, File No.
33-2421.
4(b)--Amended and Restated Certificate of Limited Partnership,
incorporated by reference to Exhibit 4 to Registration Statement on
Form S-11, File No. 33-2421.
10(ab)--Sale-Purchase Agreement between Mansion Apartment Project
Investors, Inc., Seller and Independence Apartments Associates,
L.P., Purchaser dated November 30, 1993 (filed herewith).
10(ac)--Addendum to Sale-Purchase Agreement between Mansion
Apartment Project Investors, Inc., Seller and Independence
Apartments Associates, L.P., Purchaser dated March 31, 1994 (filed
herewith).
(b) Reports on Form 8-K--No reports on Form 8-K were filed during
the quarter.
14
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Summit Tax Exempt Bond Fund, L.P.
<TABLE>
<S> <C>
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Robert J. Alexander Date: August 12, 1994
----------------------------------------
Robert J. Alexander
Vice President
Chief Accounting Officer for the
Registrant
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: /s/ Alan P. Hirmes Date: August 12, 1994
----------------------------------------
Alan P. Hirmes
Vice President
</TABLE>
15
<PAGE>
<PAGE>
SALE-PURCHASE AGREEMENT
BETWEEN
MANSION APARTMENT PROJECT INVESTORS, INC., SELLER
AND
INDEPENDENCE APARTMENTS ASSOCIATES, L.P., PURCHASER
Premises:
Mansion Apartments
2905 Lee's Summit Road
Independence, Missouri
As of November 30, 1993
<PAGE>
CONTENTS
1. SALE-PURCHASE ............................................ 1
2. PURCHASE PRICE ........................................... 4
3. STATUS OF THE TITLE ...................................... 7
4A. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS .......... 8
4B. CONDITIONS PRECEDENT TO SELLERS OBLIGATIONS .............. 14
4C. ACTIONS UPON TERMINATION OF AGREEMENT .................... 14
5. APPORTIONMENTS ........................................... 15
6. PROPERTY NOT INCLUDED IN SALE ............................ 19
7. LEASE SECURITY DEPOSITS .................................. 20
8. FUTURE OPERATIONS ........................................ 20
9. ASSIGNMENTS BY SELLER AND ASSUMPTIONS BY PURCHASER ....... 22
10. RIGHTS OF INSPECTION ..................................... 23
11. DISCLAIMER; WAIVER OF CLAIMS ............................. 24
12. DOCUMENTS PRIOR TO CLOSING ............................... 28
13. DAMAGE AND DESTRUCTION; CONDEMNATION ..................... 29
14. RECORDING CHARGES, TRANSFER TAXES AND FURTHER ASSURANCES.. 31
15. DOCUMENTS TO BE DELIVERED ON THE CLOSING DATE ............ 32
(a) Seller's Documents .................................. 32
(b) Purchaser's Documents ............................... 34
16. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES .. 36
(i)
<PAGE>
CONTENTS
(CONTINUED)
17. ESCROW ................................................... 48
18. BROKERS .................................................. 49
19. NOTICES .................................................. 50
20. DEFAULT BY PURCHASER OR SELLER ........................... 51
21. INTEGRATION CLAUSE ....................................... 53
22. AMENDMENTS ............................................... 53
23. EFFECT OF WAIVER OF PROVISION ON REMEDY .................. 53
24. PARTIAL INVALIDITY ....................................... 53
25. CAPTIONS, JOINT AND SEVERAL LIABILITY, CONTROLLING LAW ... 54
26. GOVERNING LAW ............................................ 54
27. JOINT PREPARATION ........................................ 54
28. SUCCESSORS, ASSIGNS ...................................... 55
29. ASSIGNMENT AND RECORDING ................................. 55
30. FULL PERFORMANCE ......................................... 55
31. OFFER ONLY ............................................... 55
32. MUTUAL INDEMNITY ......................................... 55
33. ATTORNEYS' FEES .......................................... 56
34. COUNTERPARTS ............................................. 57
35. NO REPRESENTATION REGARDING LEGAL EFFECT OF DOCUMENT ..... 57
(ii)
<PAGE>
LIST OF EXHIBITS
Schedule "A" Legal Description
Schedule "B" Leases
Schedule "C" Equipment Leases
Schedule "D" Service Contracts
Schedule "E" Trademarks
Schedule "F" Transaction Summary--Omitted
Schedule "G" Residential Lease Form
Schedule "H" Rent Schedule
Schedule "I" Assignment and Assumption of Leases
Schedule "J" Assignment and Assumption of Equipment Leases and
Service Contracts
Schedule "K" Repair Escrow Agreement
Schedule "L" Operating Budget
Schedule "M" 1993 Year-to-Date Financial Statements
(iii)
<PAGE>
SALE-PURCHASE AGREEMENT made as of the 30th day of November, among MANSION
APARTMENTS PROJECT INVESTORS, INC., a Delaware
corporation, having an address at 625 Madison Avenue, New York, New York 10022
("Seller"), INDEPENDENCE APARTMENTS ASSOCIATES, L.P., a Missouri Limited
Partnership having an address in care of Carl Lang, Esq. 7733 Forsythe
Boulevard, 4th Floor, Clayton, Missouri 63105 ("Purchaser").
W I T N E S S E T H:
1. SALE-PURCHASE.
(a) Seller agrees to sell, assign and convey to Purchaser, and Purchaser
agrees to purchase from Seller, all of that certain plot, piece and parcel of
land (the "Land") consisting of approximately 31.7 acres
and generally known as Mansions Apartments, 2905 Lee's Summit Road,
Independence, Missouri, 64055 and more particularly described in
Schedule "A" annexed hereto, and depicted in the survey
previously delivered to Purchaser, together with the building and improvements
known as Mansions Apartments (collectively, the
"Building"), containing five hundred fifty (550) legal and
conforming units, located on the Land (which Building and Land are hereinafter
sometimes collectively referred to as the "Premises"), and
all of Seller's right, title and interest in, to and under (a) all easements,
rights of way, privileges, appurtenances, strips, gores and other rights
pertaining to the Premises, if any, (b) any land lying in the bed of any
street, road, avenue, open or proposed, public or private, in front of or
adjoining the Premises or any portion thereof, to the center line thereof, any
any award to be made in lieu thereof and in and to any unpaid award for damage
to the Premises by reason of change of grade of any street occurring after the
date of execution and delivery of this Agreement, (c) the leases, concessions
and licenses indentified in Schedule "B" annexed hereto,
copies of which have been made available for examination by Purchaser, and
those leases, concessions and licenses hereafter made pursuant to subsections
8(a) (i) and 8(a) (iv) hereof (the "Leases"), (d) all the
fixtures, furniture, furnishings, equipment and other personal property (the
"Personalty") owned or leased by Seller and used in
connection with the Premises (other than personal property owned by tenants,
subtenants, lessees, subleases and other occupants (collectively,
"Tenants")), including, without limitation, all
attachments, appliances, fittings, gas and oil burners, automatic stocker,
lighting fixtures, doors cabinets, partitions, mantels, elevators, electric
motors, pumps, screens, flagpoles, all sprinkler, plumbing, heating, air
conditioning, electrical, ventilating, lighting, incinerating, vacuum
cleaning, refrigerating and cooling systems, each with its respective
furnaces, boilers, engines, motors, dynamos, radiators, pipes, wiring and
other apparatus, vaults, safes, fire prevention and extinguishing equipment,
carpets, floor coverings, kitchen appliances, and antennae, together with all
parts and supplies pertaining thereto, (e) the equipment leases identified in
Schedule "C" annexed hereto, and those equipment leases
hereafter made pursuant to subsections 8(a) (iii) and 8(a) (iv) hereof (the
"Equipment Leases"), copies of which
will be delivered to Purchaser, (f) the Security Deposits (hereinafter
defined), if any, described in Section 7 hereof, held by Seller under the
Leases, (g) all services, maintenance and other agreements identified in
Schedule "D" annexed hereto, and those
hereafter made pursuant to Sections 8(a)(ii) and 8(a) (iv) hereof in
connection with the operation and maintenance of the Premises (the
"Service Contracts"), copies of which will be delivered
to Purchaser, (h) all copyrights, trademarks, service marks and other marks
and trade or business names relating to the ownership, use, operation and
management of the Premises, including, without limitation, the right to use
the names and the logo (the "Trademarks") described in
Schedule "E" annexed hereto, copies of which have already
been delivered to Purchaser and (i) the books, records and files
(collectively, the "Records") of Seller in connection with
the operation and maintenance of the Premises, or Seller's predecessor in
interest, constructed the Building, and any other assignable permits with
respect to the operation of the Building as a residential rental project (ex
inclusive of (1) books, the originals of which Seller desires to retain as
Seller's property, provided, however, that Seller shall permit Purchaser, at
Purchaser's sole cost and expense to examine and/or make copies thereof
and (2) Seller's income tax and accounting records) (the Land, the Building,
the Leases, the Personalty, the Equipment Leases, the Security Deposits, the
Service Contracts, the Trademarks and the Records being hereinafter
collectively called the "Property"), copies of which have
already been delivered to Purchaser.
2. PURCHASE PRICE.
The purchase price ("Purchase Price") for the Property is $20,550,000,
payable as follows:
(a) Cash Portion of Purchaser Price.
$700,000 ("Cash Portion of Purchase Price") shall be payable to Seller by
certified or bank check, or by wire transfer subject to receipt of funds, upon
the close of escrow. A portion of the Cash Portion of Purchase Price in the
amount of $400,000 shall be placed by Seller in an escrow account (the "Repair
Escrow") to be disbursed in accordance with the terms and conditions of that
certain agreement attached hereto and made a part hereof as Schedule "K" (the
"Repair Escrow Agreement"). As and for a good faith deposit, Purchaser will
deposit in escrow the amount of $50,000 (the "Deposit") by personal check, on
execution of this Agreement. The Deposit shall be refundable to Purchaser
solely in the event of Seller's failure to satisfy the conditions set forth in
Sections 4.A(a)(i) or 4.A(h), or as provided in Section 4.B, or in the event
of Seller's default. Interest on the Deposit will be payable to whichever
party is entitled to receive the Deposit hereunder. The Deposit referred to
herein shall be applied to the Cash Portion of the Purchase Price upon close
of escrow. The balance of the Cash Portion of Purchase Price shall be
deposited in escrow prior to closing.
1
<PAGE>
(b) Assumption of First Deed of Trust
Purchaser shall assume Seller's obligations under Seller's Nineteen Million
Four Hundred Fifty Thousand ($19,450,000) Dollar Promissory Note (the "First
Promissory Note") payable to the Industrial Development Authority of the City
of Independence, Missouri, which is secured by a first deed of trust (the
"First Deed of Trust") which is a lien against Seller's entire interest in the
Property.
The First Promissory Note and First Deed of Trust are more fully described as
follows:
A. (a) First Promissory Note:
Maker: Mansions Apartments Limited,
an Oklahoma Limited Partnership
Payee: Industrial Development Authority
of the City of Independence, Missouri
Date: May 1, 1986
Original amount: $19,450,000
Unpaid principal balance: $19,450,000
(b) First Deed of Trust:
Beneficiary: Merchants Bank and Trust
Original amount: $19,450,000
Recordation date: May 13, 1986
Document No. I-689489
Place of recordation: Reorder of Deeds - Jackson
County, Missouri
(c) Purchaser shall assume Seller's obligations under Seller's Four Hundred
Thousand ($400,000) Dollar modified Promissory Note (the "Second Promissory
Note") payable to MFR Partners, which is secured by a second deed of trust
(the "Second Deed of Trust") which is a second lien against Seller's entire
interest in the Property.
The Second Promissory Note and Second Deed of Trust are more fully described
as follows:
(a) Second Promissory Note:
Holder: MFR Partners
Original amount: $700,459.45
(b) Second Deed of Trust:
Beneficiary: MFR Partners
Original amount: $700,459.45
Recordation date: February 8, 1993
Document No. I-1165940, in Book I-2353 at Page 982
Place of Recordation: Jackson County, Missouri
Purchaser shall make monthly payments under the First Promissory Note and the
Second Promissory Note by sending checks or by wiring such sums to the
respective Payees, or their respective designees, as applicable or requested
by the respective Payees, or to such entities' designated agents.
3. STATUS OF THE TITLE.
(a) The Property shall be sold, assigned and conveyed by Seller to Purchaser,
and Purchaser shall accept same, subject to the Permitted Encumbrances as
defined in Section 4.A(a) of this Agreement. Such Permitted Encumbrances shall
include:
(i) real property taxes affecting the Premises which are a lien but not yet
due and payable (provided any supplemental real property tax attributable to
the period prior to closing, whether or not a lien has been assessed or a bill
therefor issued at closing, shall remain the responsibility of Seller, which
obligation shall survive the close of escrow);
(ii) any assessments affecting the Premises approved by Purchaser under
section 4.A(a) which are a lien but not yet due and payable;
(iii) any other matter or thing affecting the Property which Purchaser agrees
to take subject to or waives pursuant to the provisions of this Agreement; and
(iv) the Leases.
(b) Seller shall procure an ALTA standard policy of title insurance in the
amount of $20,250,000 or such other sum approved by Seller, to be paid by
Purchaser and to be issued by First American Title Insurance Company ("Title
Company") showing title vested in Purchaser.
4A. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.
(a) Title Insurance, Liens.
(i) Seller has delivered to Purchaser an updated preliminary report of title
dated, from First American Title Insurance Company
(such report, and any updates or revisions thereto, collectively, the
"Report"). On or before, Purchaser or its counsel shall furnish to Seller's
counsel, Michael H. Orbison, Esq., 625 Madison Avenue, 9th Floor, New
York, New York 10022, a written statement setting forth the
exceptions to title if any, which Purchaser approves (hereinafter,
the "Permitted Encumbrances") and the exceptions to title,
if any, which Purchaser disapproves, in Purchaser's reasonable
discretion. Seller shall cure any defaults in the payment of real
property taxes and assessments affecting the Property at or before close of
escrow. If Seller is unable to eliminate any other exceptions disapproved by
Purchaser (or any other exceptions that are subsequently reported in the
preliminary report of title which exceptions Purchaser disapproves in
Purchaser's reasonable discretion) by the Closing Date, then unless the same
are waived by Purchaser without abatement in the Purchase Price, Seller may
adjourn the closing, for a reasonable period or periods not to exceed sixty
(60) days in the aggregate, in order to attempt to eliminate such disapproved
exceptions. If Seller is unable to eliminate any of such disapproved
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exceptions or to otherwise transfer, assign and convey the Property in
accordance with the terms of this Agreement on the Closing Date, Purchaser may
(i) elect to accept the Property subject to such other
disapproved exceptions without any abatement of the Purchase Price,
in which event such other disapproved exceptions shall no longer be objections
to title and shall be deemed to be for all purposes Permitted Encumbrances,
and Purchaser shall close hereunder notwithstanding the existence of same and
Seller shall have no obligations whatsoever after the closing with respect to
Seller's failure to eliminate such disapproved exceptions, or (ii) terminate
this Agreement by notice given to Seller, in which event Purchaser shall be
entitled to a return of the Deposit, together with any interest earned
thereon.
(ii) Notwithstanding the foregoing, Seller may, in lieu of satisfying any of
the foregoing liens or encumbrances affecting the Property which are not
Permitted Encumbrances, direct Purchaser to apply a portion of the Cash
Portion of the Purchase Price to the satisfaction of such liens and
encumbrances, provided that Seller shall deliver to Purchaser, at the closing,
instruments, in recordable form, which, in the opinion of the Title Company,
will be sufficient to satisfy such liens or encumbrances of record, together
with the cost of recording or filing any such instruments.
(iii) If the Report discloses judgments, bankruptcies or other proceedings or
encumbrances against other persons having names the same as or similar to that
of Seller, Seller, on request, shall deliver to the Title Company affidavits
satisfactory to the Title Company showing that such judgments, bankruptcies or
other proceedings or encumbrances are not against Seller.
(iv) During the existence of this Agreement and prior to closing, neither
Purchaser nor Seller (including Purchaser's and Seller's owners, shareholders,
directors, officers, employees and agents) shall encumber the Premises, or
cause or allow the Premises to be encumbered by their actions or inactions, in
any form or manner whatsoever, including, but not limited to, liens and
privileges as provided under applicable law. Violation of this provision and
failure to cure such violation within ten (10) days following receipt of
written notice of such violation shall constitute a material default
hereunder.
(b) Intentionally omitted.
(c) Inspection of the Property.
Throughout the remainder of the escrow period, Purchaser and Purchaser's
agents and appraisers may inspect the physical condition of the Premises and
the other documentation in respect to the Property and the Premises at
Purchaser's sole cost and expense, including inspection of all documentation,
agreements, and other information in possession of Seller reasonably pertaining
to the Leases, the Equipment Leases, the Personalty, the Service Contracts and
the Records.
(d) Intentionally omitted.
(e) Restoration; Indemnity. All activity on the Premises
by Purchaser and its agents and representatives in connection with the
foregoing inspection shall be conducted during normal business hours with
reasonable advance notice to Seller, and shall be conducted in such a manner
as to minimize interference with the operation of the Premises and the
occupancy of the tenants therein. Upon completion of any such inspection,
investigation, testing or study, Purchaser shall at its sole cost, repair and
restore the Premises to its prior condition, including, without limitation,
filling, compacting and resodding of all excavations, unless Purchaser is
prohibited from restoring the Premises to its prior condition by law.
Purchaser shall indemnify, defend and save harmless Seller from and against
any and all cost and expense (including reasonable attorneys' fees), as
incurred, which shall derive from any and all claims for bodily injury or
property damage which may be asserted against Seller by reason of such entry
and activity on the Premises by Purchaser and its agents and representatives,
but excluding any lien, cost and expense, including attorneys' fees and costs,
arising out of Purchaser's mere discovery of hazardous materials or toxic
substances on, in or under the Property, for which Purchaser shall have no
responsibility or liability so long as Purchaser pays the costs of any test
commissioned by Purchaser. Seller shall indemnify, defend and save Purchaser
harmless from and against all cost and expense (including reasonable
attorneys' fees), as incurred, which shall derive from any and all claims for
bodily injury or property damage which may be asserted against Purchaser by
reason of the acts or omissions of Seller, its agents and representatives,
occurring on the Premises while Purchaser is exercising its right of entry
thereon.
(f) Intentionally omitted.
(g) Intentionally omitted.
(h) At or prior to close of escrow, Seller shall have obtained and notified
Purchaser in writing that it has obtained (i) the written consent of The
Industrial Development Authority of The City of Independence, Missouri
("Issuer") and The Merchants Bank, Kansas City, Missouri (the "Bond Trustee")
to the sale of the Property from Seller to Purchaser as required under Section
8 of the Regulatory Agreement defined in Section 16(a) (xviii) below, and (ii)
the written consent of Summit Tax Exempt Bond Fund, L.P. ("Summit"), the sole
holder of the Bonds, to the sale of the Property from Seller to Purchaser as
required under the First Deed of Trust. In the event that Seller shall fail to
obtain such consents or to so notify Purchaser, this condition shall be deemed
unsatisfied, in which event this Agreement shall terminate, Title Company
shall return the Deposit to Purchaser, together with all interest earned
thereon, the Documentation shall be returned to Seller and the parties shall
have no further obligations or recourse against each other except for any
previously existing liabilities which have arisen under Section 4.A(e) hereof.
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(i) At the prior to close of escrow, Seller shall have obtained and notified
Purchaser in writing that it has obtained written releases ("Releases") from
the Issuer, the Bond Trustee, or any other party benefiting from the Payment
Guaranty, Operating Deficit Guaranty or Construction Guaranty referenced in
the First Deed of Trust, pursuant to which such parties acknowledge the
termination of such guaranties prior to or at close of escrow.Such
Releases shall be in form and content satisfactory to Purchaser, in its sole
discretion. In the event that such releases can not be obtained prior to close
of escrow then Seller shall have the option, in its sole discretion, either to
cancel this sale with no further liability to any party or to provide to
Purchaser with an indemnity and hold harmless agreement reasonably
satisfactory to Purchaser from Summit limited to the above described
liability.
(j) At the close of escrow, Seller shall have performed all Seller's
obligations required to be performed hereunder, and all Seller's
representations and warranties set forth in Section 16(a) hereof shall be true
and correct as of close of escrow and all indemnities and guaranties required
of Summit shall have been executed and delivered.
(k) During the escrow period and at close of escrow, neither Seller nor Summit
shall have made an assignment for the benefit of creditors or admitted in
writing to pay its debts as they mature or have been adjudicated a bankrupt or
have filed a petition involuntary bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors under the federal bankruptcy
law or any other similar law or statute of the United States or any state,
and no such petition shall have been filed against it.
(l) At the close of escrow, Title Company shall be prepared to issue to
Purchaser a policy of title insurance as described in Section 3(e), subject to
only those exceptions and conditions approved by Purchaser as provided for in
this Agreement.
4B. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
At or prior to close of escrow Seller shall have received (i) the approval of
the Issuer and Summit to the transfer of the Property and the assumption of
the debt evidenced by the First Promissory Note and First Deed of Trust, and
(ii) the Releases specified in paragraph 4A(i) to the extent not waived
pursuant to paragraph 4A(i) hereof, and (iii) for the benefit of Purchaser, an
estoppel letter from Summit which is reasonably satisfactory to Purchaser. In
the event any of the above conditions are not met, this Agreement shall
terminate, Title Company shall return the Deposit to Purchaser, together with
all interest earned thereon, the Documentation shall be returned to Seller,
and the parties shall have no further obligations or recourse against each
other, except for previously existing liabilities which have arisen under
Section 4.A(e) hereof.
4C. ACTIONS UPON TERMINATION OF AGREEMENT.
In the event that this Agreement is so terminated in accordance with its
terms, but not by Purchaser's breach of the terms hereof, then Seller shall
direct Title Company to return the the Deposit and any interest earned thereon
to Purchaser and, following such return and the return of the Documentation to
Seller, neither party shall have any obligation to the other hereunder except
for previously existing liabilities which have arisen under Section 4A.(e)
hereof. If at the date specified for close of escrow, the conditions precedent
to Purchaser's obligation to purchase set forth in Section 4.A are not
satisfied or waived by Purchaser, then Purchaser may elect to terminate this
Agreement by written notice to Seller. If this Agreement is so terminated,
then Seller shall direct Title Company to return the Deposit, and all interest
earned thereon while held in escrow, to Purchaser and, following such return
and the return of the Documentation to Seller, neither party shall have any
obligation to the other hereunder except for previously existing liabilities
which have arisen under Section 4A.(e) hereof, and any liabilities arising as
a result of any default of either party hereunder prior to such
termination.
5. APPORTIONMENTS.
(a) The following shall be apportioned between Seller and Purchaser as of
Eleven Fifty-Nine o'clock in the evening (11:59 p.m.) on the date (the
"Apportionment Date") immediately preceding the Closing
Date:
(i) rents and other charges and concession and license fees (collectively
"Rents") payable under the Leases, to be apportioned in
accordance with Section 5(b) hereof;
(ii) real estate taxes, sewer rents and taxes, and charges, or any other
governmental tax or charge levied or assessed against the Property including,
without limitation, the current year's installment (both principal and
interest) of any special assessments which are Permitted Encumbrances
hereunder (collectively, the "Taxes"), on the basis of the
respective periods for which each is assessed or imposed, to be apportioned in
accordance with Section 5(c); provided, however, that any supplemental
assessment of real property taxes attributable to the period of Seller's
ownership, whether or not a lien has been assessed or a bill issued therefor
on the Apportionment Date, shall remain Seller's responsibility and liability;
(iii) water rates and charges to be apportioned in accordance with Section
5(d) hereof;
(iv) charges for electricity, telephone, steam, gas, cable television and any
other utilities (collectively "Utilities") made by the
utility companies servicing the Premises to be apportioned in accordance with
Section 5(e) hereof, and transferable utility deposits, if any, but all
amounts refundable under unassigned or unassignable utility arrangements shall
remain the property of Seller;
(v) prepaid fees of other charges for transferable licenses, permits,
telephone equipment, telephone rental, cable television equipment rental and
other items, if any, but all amounts refundable under unassigned or
unassignable permits and licenses shall remain the property of Seller;
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(vi) amounts paid or payable under the Service Contracts which Purchaser is
assuming under this Agreement;
(vii) amounts or payable under any Equipment Leases which Purchaser is
assuming under this Agreement; and
(viii) premiums on those existing transferable policies of insurance or
renewals of such policies which expire prior to the Closing Date (the
"Policies"), to the extent Seller elects to assign the
same to Purchaser on the Closing Date, and Purchaser elects to accept such
assignment and assume the obligations of the insured under the Policies. If
Seller elects not to assign certain policies of insurance, it shall notify
Purchaser prior to close of escrow. Such policies of insurance shall thereupon
be canceled as of the close of escrow, and Purchaser shall be responsible for
obtaining necessary insurance coverage as of the Closing Date.
(b) Rents shall be apportioned if, as and when collected, as follows:
(i) Seller will retain the right to collect any unpaid Rent payable to Seller
from any tenant of the Property and Purchaser agrees to cooperate at no
expense to Purchaser with Seller's efforts to collect such Rent. All sums paid
by such tenant or tenants to Purchaser after the closing shall be applied
first by Purchaser against sums due from tenant under the lease for periods
following the Closing Date, and the remainder, if any, shall be paid over to
Seller until such unpaid Rent is paid.
(ii) With respect to any past due Rents for periods prior to the Closing Date,
Seller hereby (A) expressly retains the right to recover same, and (B)
designates Purchaser as Seller's agent for collection purposes on the terms
and conditions of Section 5(b)(i) above; provided that Purchaser shall not be
obligated to actively seek to collect any past due Rents, other than in the
ordinary course of business. Until such designation shall be revoked by
Seller, which designation may be revoked in part in the event that Seller
shall desire to institute legal proceedings against a tenant for past due
rent, Purchaser shall receive and hold any moneys received on account of
such past due Rents in trust for Seller and to pay same promptly to Seller as
aforesaid, subject to Section 5(b) (i) above. All Rent prepaid as of the
Apportionment Date which is held by Seller shall be credited to Purchaser.
(c) Real property taxes shall be prorated as of the Closing Date on the basis
of a 30-day month.
(d) In the event that water meters are installed on the Property, Seller shall
furnish readings made on or immediately prior to the Apportionment Date to the
extent that current readings are obtainable and the unfixed water rates and
charges and sewer rents and taxes, if any, based thereon for the intervening
time, shall be apportioned on the basis of such last readings. In the event
that such readings are not obtainable, then water charges shall be prorated as
of the Apportionment Date based upon the per
diem rate obtained by using the last period that bills for
such charges are available. Unpaid water meter bills which are the obligations
of Tenants in accordance with the terms of the Leases shall not be adjusted
nor shall same be deemed an objection to title and Purchaser shall take title
subject thereto.
(e) The Utilities shall be apportioned (i) on the basis of actual current
readings, or (ii) if such readings have not been taken, on the basis of the
most recent bills that are available.
(f) In the event that the computation of apportionments shows that a net
amount is owed by Seller to Purchaser, such amount shall be credited against
the Cash Portion of the Purchase Price payable by Purchaser in accordance with
Section 2(a) hereof. If such computation shows that a net amount is owed by
Purchaser to Seller, such amount shall be paid to Seller by Purchaser on the
Closing Date by certified or bank check.
(g) The provisions of this Section 5 shall survive the Closing Date.
6. PROPERTY NOT INCLUDED IN SALE.
It is expressly agreed by the parties hereto that the following shall not be
included in the Property to be sold hereunder:
(a) utility deposits and other service contract deposits, except for those
identified herein as transferable utility or other deposits or other expenses
which are to be apportioned as herein provided; and
(b) all property owned by Tenants under the Leases.
It is expressly agreed that all prorated Rents, all prepaid Rents and all
Security Deposits are included in the Property to be sold hereunder and shall
be paid over to Purchaser in accordance with Section 7 hereunder.
7. LEASE SECURITY DEPOSITS.
Prior to the Closing Date, Seller shall provide Purchaser with a schedule of
the aggregate amount of all security deposits held by Seller under the Leases
(the "Security Deposits"), together with interest earned thereon, if any, to
the extent that said Security Deposits have not been theretofore applied by
Seller against moneys due and owing by the respective Tenants under the
Leases. Said Security Deposits shall be delivered to Purchaser upon the
closing of escrow.
8. FUTURE OPERATIONS.
(a) Subject only to conditions beyond its control, Seller, for itself and for
the management agent of the Property ("Management Agent"),
agrees that for the period following the date hereof up to and including the
Closing Date, Seller shall continue to operate and maintain the Property in
its usual and customary manner, and shall, among other things, be entitled to:
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(i) amend, or renew the terms of the Leases, provided, however, that (1) any
such Lease shall be in the form of the residential lease annexed hereto as
Schedule "G" and is for a monthly rent not less than that
provided on the Rent Schedule annexed hereto as Schedule "H" and (2)
any amendment or renewal for a term in excess of two (2)
years (unless same shall be terminable by the then owner of the Property on
six (6) months' or shorter notice) or which results in a reduction of Rent or
materially increases the landlord's obligations thereunder (unless said
renewal or amendment is required under any of said Leases or by any applicable
laws) shall not be made without Purchaser's prior written approval, provided
that Purchaser shall not then be in default hereunder, which approval shall
not be unreasonably withheld or delayed;
(ii) amend or renew the term of the Service Contracts, provided, however, that
any renewal thereof for a term in excess of one hundred eighty (180) days
(unless same shall be terminable by the then owner of the Property upon sixty
(60) days' notice or less, shall not be made without Purchaser's prior written
approval, provided that Purchaser shall not then be in default hereunder,
which approval shall not be unreasonably withheld or delayed;
(iii) amend or renew the term of any Equipment Leases, provided, however, that
any renewal thereof for a term in excess of one hundred eighty (180) days
(unless same shall be terminable by the then owner of the Property on sixty
(60) days' notice or less) shall not be made without Purchaser's prior written
approval provided that Purchaser shall not then be in default hereunder, which
approval shall not be unreasonably withheld or delayed;
(iv) cancel any of the Leases, Service Contracts, or Equipment Leases and
enter into new leases, service contracts or new equipment leases which in the
reasonable judgment of Seller and in the ordinary course of Seller's business,
would be in the best interest of Seller as owner of the Property, or any
successor in interest thereto, provided that any new leases which are not on
Seller's standard form or new contracts or new equipment leases which are not
terminable by the then owner of the Property on sixty (60) days' notice or
less, shall not be made without Purchaser's prior written approval, provided
that as Purchaser shall not then be in default hereunder, which approval shall
not be unreasonably withheld or delayed.
(b) Whenever in Section 8(a) hereof Seller is required to obtain Purchaser's
approval, Purchaser shall, within five (5)
days after delivery of notice by Seller containing Seller's written request
for such approval, notify Seller, in writing, of its approval or disapproval
of same. If Purchaser shall fail to notify Seller of its disapproval within
said five (5) day period, Purchaser shall be deemed to have approved same,
provided that such new leases, service contracts or equipment leases, or such
amendments to or renewals thereof, are on commercially reasonably terms and
conditions.
9. ASSIGNMENTS BY SELLER AND ASSUMPTIONS BY PURCHASER.
(a) On the Closing Date, and subject to the provisions of Section 8 hereof,
Seller shall assign to Purchaser all of Seller's right, title and interest to,
and Purchaser shall assume Seller's obligations accruing on and after the
Closing Date under the following:
(i) the Leases;
(ii) the Equipment Leases;
(iii) the Service Contracts;
(iv) assignable permits to operate the Premises as a rental housing project
(hereafter, "Assignable Permits");
(v) the Policies which Seller elects to assign to Purchaser and Purchaser
elects to accept and assume; and
(vi) the Bond Documents.
(b) After the Closing Date, Seller will cooperate with Purchaser, at
Purchaser's expense, to facilitate the transfer to Purchaser of all
nonassignable permits, if any, issued to Seller.
10. RIGHTS OF INSPECTION.
(a) Seller shall make all books and records relating to the operation and
physical condition of the Property from and after the date hereof available to
Purchaser and its accountants.
(b) Purchaser may, at reasonable times up and until the close of escrow,
during the hours 9:00 a.m. to 5:00 p.m., and upon reasonable notice to Seller,
at Purchaser's sole expense, cause the Premises and all utility and service
systems to be inspected by such engineers, architects and others acting on
behalf of Purchaser, as Purchaser may designate.
(c) Purchaser has had and shall continue to have access to the Property for
purposes of inspections and investigations of the Property, provided that
Purchaser's inspections and investigations are done during regular business
hours, that Purchaser and its agents do not disrupt the operation of the
Property or the occupancy of the Tenants, and that a representative of Seller
or the Management Agent be present at all times. Purchaser hereby indemnifies
and holds Seller harmless from and against any loss, cost or liability which
may rise or result from any activities of Purchaser or its agents on the
Property, as described in and subject to the limitations of Section 4.A(e).
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11. DISCLAIMER: WAIVER OF CLAIMS. (a) Seller and Purchaser
acknowledge and agree that Purchaser has had an opportunity to examine
financial and other documents, records, files and information and patent
physical items and conditions relating to the property. Accordingly, Seller
hereby specifically disclaims any warranty, guaranty or representation, oral
or written, past, present or future of, as to, or concerning (i) except as
otherwise specifically stated in Article 16 or Article 18, the nature and
condition of the property, including without limitation (A) the water, soil
and geology and the suitability thereof, and of the Property for any and all
activities and uses which Purchaser may elect to conduct thereon, (B) the
existence of any environmental hazards or conditions thereon (including but
not limited to the presence of asbestos or the release or threatened release
of hazardous substances) and (C) compliance with all applicable laws, rules or
regulations; (ii) except for any warranties contained in Article 16 or Article
18, the nature and extent of any right-of-way, lease, possession, lien,
encumbrance, license, reservation, condition or otherwise; and (iii) except
for any warranties contained in Article 16 or Article 18, the compliance of
the Property or its operation with any laws, ordinances or regulations of any
government or other body. Purchaser acknowledges that it has inspected the
property and, except for any warranties contained in Article 16 or Article 18
upon which Purchaser is relying, Purchaser will rely solely on its own
investigation of the property. Purchaser further acknowledges that the
information provided by Seller with respect to the property was obtained from
a variety of sources and that Seller (i) has not made any independent
investigation or verification of such information; and (ii) does not make any
representations as to the accuracy or completeness of such information other
than that Seller has provided true and accurate copies of any such material in
its possession. The sale of the property as provided for herein is made on an
"as is" basis, and Purchaser expressly acknowledges that, in consideration of
the agreements of Seller herein, except as otherwise specified herein, Seller
makes no warranty or representation, express or implied, or arising by
operation of law, including, but not limited to, any warranty of condition,
habitability, merchantability or fitness for a particular purpose, in respect
of the Property.
(b) Purchaser agrees that Seller shall not be responsible or liable to
Purchaser for any construction defect, errors or omissions in the design or
construction of the Property or any
other conditions, including environmental conditions affecting the Property,
such as the presence of asbestos, petroleum products or other hazardous
substances or contamination of the Property by a release of hazardous
substances, pollutants, contaminants or petroleum products, unless such
construction defect, errors or omissions in the design or construction of the
Property, or other conditions including environmental conditions affecting the
Property, constitute a breach of any of Seller's representations or warranties
set forth in this Agreement. Except for the representations and warranties of
Seller set forth in this Agreement, upon which Purchaser is relying, Purchaser
is purchasing the Property AS-IS, WHERE-IS and WITH ALL FAULTS. Purchaser
and its affiliates hereby fully release Seller, its employees, officers,
directors, representatives and agents from any and all claims that it may now
have or hereafter acquire against Seller, its employees, officers, directors,
representatives and agents for any cost, loss, liability, damage, expense,
demand, action or cause of action arising from or related to any construction
defects, errors or omissions in the design or construction of the Property or
any other conditions, including environmental conditions, affecting the
Property, unless such construction defect, errors or omissions in the design
or construction of the Property, or other conditions including environmental
conditions affecting the Property, constitute a breach of any of Seller's
representations or warranties set forth in this Agreement. This conditional
release includes any claim arising under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 as amended (42 U.S.C. 9601
et. seq.) or under similar federal or state statutes or under any further
amendment to said statutes or future statutes, unless such claim constitutes a
breach of any of Seller's representations or warranties set forth in this
Agreement. Purchaser agrees that in the event of any such construction
defects, errors, omissions or any other conditions affecting the Property
unless such construction defect, error, omission or other condition, including
environmental conditions, constitutes a breach of any of Seller's
representations and warranties set forth in this Agreement, Purchaser shall
look solely to Seller's predecessors or to such contractors and consultants as
may have contracted for work in connection with the Property for any redress
or relief. Purchaser further acknowledges and agrees that this release shall
be given full force and effect according to each of its express terms and
provisions, including, but not limited to, those relating to unknown and
suspected claims, damages and causes of action, unless such unknown or
suspected claims, damages and causes of action constitute a breach of any of
Seller's representations and warranties set forth in this Agreement. Seller
hereby assigns to Purchaser, effective upon Closing, any and all claims that
Seller may have for any such errors, omissions or conditions of the Property.
Purchaser further understands that some of Seller's predecessors in interest
may have filed petitions under the bankruptcy code and Purchaser may have no
remedy against such predecessors, contractors or consultants. This conditional
waiver and release of claims shall survive the Closing.
12. DOCUMENTS PRIOR TO CLOSING.
(a) Seller covenants to deliver the following Documents (the
"Documents") to the Purchaser within 0 days following the date hereof:
(i) To the extent presently available, all plans, drawings and specifications
of the Building and other structures located on the Land (including
structural, mechanical, electrical and all other plans, drawings and
specifications), all surveys and AS-BUILT surveys, all reports or studies
prepared or caused to be prepared by Seller with respect to the soils
conditions, structural conditions or hazardous materials conditions in respect
of the Building and Land.
(ii) Copies of all the executed Leases are to be made available for review at
the office of the Management Agent together with an updated rent roll.
(iii) Copies of all other contracts, agreements, warranties and
guarantees related to or affecting the Property, as described in
Schedule C and Schedule D .
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(iv) Copies of all certificates of occupancy (or their equivalent), building
permits, final building inspections, or other permits issued to Seller in
connection with the operation of the Property, if available.
(v) Copy of a policy of insurance for each of the Policies.
13. DAMAGE AND DESTRUCTION; CONDEMNATION.
(a) If, prior to the Closing Date, all or any part of the Property is damaged
by fire or other casualty, then Seller shall notify Purchaser of such fact,
and Seller and Purchaser shall each have the option to terminate this
Agreement upon notice given to the other party not later than thirty (30) days
after the date of Seller's notice. If this Agreement is terminated as
aforesaid, the Deposit, or any portion thereof then held in escrow, and all
interest earned thereon, shall be returned to Purchaser. Upon such return this
Agreement shall terminate and neither party hereto shall have any further
rights or obligations hereunder except for previously existing liabilities
which have arisen under Section 4.A(e) hereof. In the event that neither party
elects to terminate this Agreement as aforesaid, then the parties shall
nonetheless consummate this transaction in accordance with this Agreement,
without any abatement of the Purchase Price or any liability or obligation on
the part of Seller by reason of said destruction or damage, except that Seller
shall turn over to Purchaser on the Closing Date an amount equal to the entire
amount of any casualty insurance collected by Seller on account of said
physical damage or destruction without reduction for any funds expended by
Seller or its agents as required by law or otherwise in order to preserve the
Property or as deemed reasonably necessary to safeguard the tenants and their
property, and to the extent not so collected, to assign to Purchaser the right
to receive a credit against the Cash Portion of the Purchase Price for the
amount of any deductible under such casualty insurance policy. In the event
that Seller expends its own funds to correct any deficiencies caused by fire
or casualty otherwise covered by insurance, then such funds shall be retained
by Seller from the insurance proceeds otherwise to be turned over to
Purchaser.
(b) If, prior to the Closing Date, all or any portion of the Property is taken
by eminent domain, Seller shall promptly give Purchaser written notice thereof
and either Seller or Purchaser may, within thirty (30) days after the date of
Seller's notice, by written notice to the other party, elect to terminate this
Agreement. In the event that either party elects to terminate, both parties
shall be relieved and released of and from any further liability hereunder
except for previously existing liabilities which have arisen under Section
4.A(e) hereof, and Seller shall cause the Deposit, or any portion thereof then
held in escrow, and all interest earned thereon, to be returned to Purchaser.
Upon such return this Agreement shall terminate and neither party hereto shall
have any further rights or obligations hereunder except for previously
existing liabilities which have arisen under Section 4.A(e) hereof. If neither
party elects to terminate this Agreement, then the parties shall nonetheless
consummate this transaction in accordance with this Agreement,
without any abatement of the Purchase Price or any liability or obligation on
the part of Seller by reason of such taking, provided, however, that Seller
shall, at the closing, (i) assign and turn over, and Purchaser shall be
entitled to receive and keep, the gross proceeds of any award or other
proceeds of such taking which may have been collected by Seller as a result of
such taking without reduction for any funds expended by Seller or its agents
as required by law or otherwise in order to safeguard the Property or as
deemed reasonably necessary by Seller to safeguard the tenants and their
property, or (ii) if no award or other proceeds shall have been collected,
deliver to Purchaser an assignment of Seller's right to receive any such award
or other proceeds which may be payable to Seller as a result of such taking,
and the right to settle same.
14. RECORDING CHARGES, TRANSFER TAXES AND FURTHER ASSURANCES.
(a) Purchaser shall pay all recording charges and fees paid or payable in
connection with the transactions herein contemplated, including the premium
for the title insurance policy.
(b) Seller shall pay all costs and expenses of clearing title, preparing and
executing, acknowledging and delivering the grant deed, including without
limitation, any local transfer or conveyance tax, and all sales, intangible
and mortgage taxes paid or payable in connection with the transactions herein
contemplated.
(c) At or prior to closing, Seller and Purchaser shall each execute such other
documents reasonably required in connection with the transactions contemplated
by this Agreement.
15. DOCUMENTS TO BE DELIVERED ON THE CLOSING DATE.
(a) Seller's Documents : Seller, pursuant to the provisions
of this Agreement, shall deliver or cause to be delivered to Purchaser on the
Closing Date the following documents:
(i) Grant Deed (the "Deed"), in recordable form, conveying
to Purchaser Seller's interest in the Premises.
(ii) A duly executed and sworn Secretary's Certificate certifying that the
Board of Directors of Seller has duly adopted resolutions authorizing the
within transaction and an executed and acknowledged Incumbency Certificate
certifying to the authority of the officers of Seller to execute the documents
to be delivered by Seller on the Closing Date.
(iii) Certificate of Good Standing for Seller from the Secretary of State or
other appropriate official of the state in which Seller is incorporated.
(iv) A duly executed and acknowledged bill of sale (the "Bill of
Sale") conveying, selling and transferring to Purchaser all of
Seller's right, title and interest in and to the Personalty.
(v) A duly executed and acknowledged assignment (the "Assignment
and Assumption Agreement") of:
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(A) The Leases, conveying all of Seller's right, title and interest as
Landlord thereunder, together with Seller's executed counterparts, or copies
of the Leases and any amendments and other documents relating thereto. The
Assignment and Assumption Agreement shall contain Purchaser's assumption of
Seller's obligations under the Leases from and after the Closing Date, and
shall be in the form attached hereto as Schedule "I".
(B) The Equipment Leases and the Service Contracts, conveying all of Seller's
right, title and interest as lessee thereunder, together with Seller's
executed counterparts, or copies of the Equipment Leases and the Service
Contracts. The Assignment and Assumption Agreement shall contain
Purchaser's assumption of Seller's obligations under the Equipment Leases and
the Service Contracts from and after the Closing Date, and shall be in the
form attached hereto as Schedule "J".
(vi) Any assignment or endorsement of any Policies transferred, together with
such Policies.
(vii) Form letter to Tenants under the Leases to be duplicated, and
distributed by Purchaser, advising them of the change of ownership and
directing them to pay Rent payable for periods after the Closing Date to
Purchaser.
(viii) A revised Schedule "B", hereof, showing as of the
Closing Date, all of the Leases.
(ix) A revised Schedule "C" and Schedule
"D" hereof, showing, as of the Closing Date, all of the Equipment
Leases and the Service Contracts.
(x) Plans and specifications, technical manuals, all materials provided to
Purchaser under Section 12(a)(i) hereof, and similar materials, for the
Building or Land, if any, in Seller's possession.
(xi) If assignable, any Permits, or copies thereof, in Seller's possession
pertaining to the operation and maintenance of the Building, together with a
duly executed assignment thereof to Purchaser.
(xii) If assignable, any unexpired warranties and guarantees, or copies
thereof, in Seller's possession which Seller has received in connection with
any work or services performed with respect to, or equipment installed in, the
Premises, together with duly executed assignments thereof to Purchaser.
(xiii) The Releases as specified in Paragraph 4A(i), or Summit's
indemnification regarding same, as the case may be.
(xiv) A duly executed counterpart of the Repair Escrow Agreement in the form
of Schedule K.
(xv) Such other instruments and documents as may be reasonably required to
consummate the within transaction.
(b) Purchaser's Documents : Purchaser, pursuant to the
provisions of this Agreement, shall deliver or cause to be delivered to Seller
on the Closing Date the following documents:
(i) A duly executed and sworn Secretary's Certificate certifying that the
Board of Directors of Purchaser has duly adopted resolutions authorizing the
within transaction and an executed and acknowledged Incumbency Certificate to
the authority of the officers of Purchaser to execute the documents to be
delivered by Purchaser on the Closing Date.
(ii) Certified Copy of Purchaser's Certificate of Incorporation.
(iii) Certificate of Good Standing for Purchaser from the Secretary of State
or other appropriate official of the state in which Purchaser is incorporated.
(iv) The Purchase Price.
(v) A letter of direction to Escrow Agent directing the Deposit to be
delivered to Seller.
(vi) Assignment and Assumption Agreements in the form of Schedules
I and J .
(vii) A duly executed counterpart of the Repair Escrow Agreement in the form
of Schedule K.
(viii) Such other instruments and documents as may be
reasonably required to consummate the within transaction.
16. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES.
(a) Seller makes the following representations and warranties to Purchaser,
which representations and warranties shall be true on the date hereof and on
the Closing Date, and shall survive the close of escrow for a period of one
(1) year:
(i) Schedule "B" annexed hereto is a complete and correct
list of all Leases in effect on the date of this Agreement setting forth, with
respect to each of the Leases, (A) the premises affected, (B) the name of the
tenant, (C) the commencement and expiration dates of the term, (D) the
monthly rent payable and (E) the amount of the security deposit thereof.
(ii) There are no leases other than as set forth in Schedule
"B". Each of the Leases is in full force and effect, and has not been
amended, modified or supplemented other than as indicated in
Schedule "B". No written notice of default or breach on
the part of the landlord under any of the Leases has been received by Seller
from the tenant thereunder, and to the best of Seller's actual knowledge, the
tenants are not in default thereunder, except as otherwise disclosed in
writing by Seller to Purchaser.
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(iii) The rents and other income and charges set forth in Schedule
"B" are the actual rents, income and charges presently being
collected by Seller under the Leases.
(iv) Except locaters fees or employee incentive payments paid in the normal
course of business, no brokerage or leasing commission or other compensation
is or will be due or payable to any person, firm, corporation or other entity
with respect to or on account of any of the Leases or any extensions or
renewals thereof.
(v) No written notice has been given by any insurance company which has issued
any policy or by any board of fire underwriters (or other body exercising
similar functions) claiming any defects or deficiencies or requesting the
performance of any repairs, alterations or other work, and to the best of
Sellers' actual knowledge, no defects or deficiencies exist which would
justify a request for the performance of repairs, alterations or other work by
any such company or board.
(vi) Seller has not received any written notice of any pending condemnation or
similar proceeding affecting the Property, and to the best of Seller's actual
knowledge, no such challenge is threatened or contemplated.
(vii) Seller has not received any written notice from any governmental
authority challenging Seller's right to operate the Building as a rental
apartment complex, and to the best of Seller's actual knowledge, no such
challenge is threatened or contemplated.
(viii) The execution and delivery of this Agreement to Purchaser and the
consummation by Seller of the transactions contemplated hereby have been and
will be duly authorized pursuant to the terms of Seller's Articles of
Incorporation and the By-Laws promulgated thereunder. Seller has full power
and authority to enter into this Agreement and to perform all of Seller's
obligations hereunder and no further action or approval is required in order
to constitute this Agreement as a binding and enforceable obligation of
Seller.
(ix) The execution and delivery of this Agreement and the performance by
Seller of its obligations hereunder do not and will not conflict with or
violate any law, rule, judgment, regulation, order, writ, injunction or decree
of any court of governmental or quasi-governmental entity with jurisdiction
over Seller, including without limitation, the United States of America, the
State of Seller's Incorporation or any political subdivision of either of the
foregoing, or any decision or ruling of any arbitrator to which Seller is a
party or by which Seller is bound or affected, or any contract by which Seller
is bound.
(x) To the best of Seller's actual knowledge, other than for mechanics liens
recorded and disclosed by the report of title, if any, no action, suit, claim,
investigation or proceeding, whether legal or administrative or in mediation
or arbitration, is pending or threatened, at law or in equity or admiralty,
against Seller before or by any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
which would prevent Seller from performing its obligations pursuant to this
Agreement or affecting the Property, and there are no judgments, decrees or
orders entered on a suit or proceeding against Seller, an adverse decision in
which might, or which judgment, decree or order does,
materially adversely affect Seller's ability to perform its obligations
pursuant to, or Purchaser's rights under, this Agreement, or which seeks to
restrain, prohibit, invalidate, set aside, rescind, prevent or make unlawful
this Agreement or the carrying out of this Agreement or the transactions
contemplated hereby.
To the extent that there are any liens affecting title that exist as of the
date of close of escrow, which liens are not otherwise covered by insurance or
an indemnity from Seller as described in Section 4.A.(a), Seller agrees to
clear title of such liens as of the close of escrow. Further, to the best of
Seller's actual knowledge, there are no easements, liens, rights of adverse
possession, encroachments from the Property onto adjacent property or from
adjacent property onto the Property, or any boundary line disputes, other than
as shown on the Report.
(xi) Seller has not previously granted any person, firm or entity any right to
acquire the Property, and, to the best of Seller's actual knowledge, no
person, firm or entity has any rights to acquire the Property or any part
thereof.
(xii) Except as otherwise disclosed to Purchaser in writing, Seller has not
received actual written notice from any applicable governmental authority or
professional inspecting engineer or architect of construction defects in the
design or construction of the Building, and to the best of Seller's actual
knowledge, no such construction defects in the design or construction of the
Building exist;
(xiii) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect of any
hazardous environmental condition affecting the Premises including the presence
of asbestos, petroleum products or other toxic or hazardous substances, and to
the best of Seller's actual knowledge, no such hazardous environmental
condition affecting the Premises exists;
(xiv) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect that
the Premises are in violation of any federal, state, or local law, ordinance
or regulation relating to hazardous substances or to hazardous conditions on,
under, or about the Premises including but not limited to soil and ground
water condition, and to the best of Seller's actual knowledge, the Premises
are not in violation of any such federal, state or local law, ordinance or
regulation;
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(xv) during the time the Seller has owned the Premises, neither Seller nor, to
Seller's actual knowledge, any third party, has, other than in quantities
normal to residential apartments used, generated, stored, manufactured or
disposed of on, under or about the Premises or the property adjacent thereto,
any flammable materials, explosives, radioactive materials, hazardous wastes
or toxic substances;
(xvi) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect
concerning any litigation or administrative enforcement action or proceedings
brought or threatened to be brought nor have any settlements been reached by
or with any party, public or private, alleging the presence, disposal, re
lease, or threatened release of any hazardous waste or hazardous substance on,
from or under any part of the Premises, nor to the best of Seller's actual
knowledge, is any such litigation or administrative proceeding threatened or
contemplated; and
(xvii) Seller warrants that it is a corporation organized and existing under
the laws of the State of Delaware; that this transaction is a transfer of
substantially all of Seller's assets; that this transaction has been approved
by a majority of the outstanding shares as required by the Delaware
Corporation Law; and that this transaction has been approved by resolution of
its board of directors and a certified copy of that resolution, which remains
in effect, will be delivered to escrow holder before the close of escrow.
(xviii) Seller is not in default of any of its obligations under the
Regulatory Agreement dated as of May 1, 1986, between The Mansions Apartments
Limited and the Issuer, recorded May 13, 1986, of the Official Records of
Jackson County, or under the Promissory Note dated May 1, 1986, or the Deed of
Trust dated as of May 1, 1986, in the amount of $19,450,000.00, from The
Mansions Apartments Limited, Trustor, to The Merchants Bank, as Trustee, to
The Industrial Development Authority of the City of Independence, Missouri, as
Beneficiary, recorded May 13, 1986, Official Records of Jackson County, the
beneficial interest under which was assigned to ________________________
by document recorded _____________________, Series No. ___________________
in the Official Records of Jackson County, the obligations of The
Mansion Apartments Limited under both of which have been
assigned to Seller by Assignment and Assumption Agreement dated
_____________________, recorded _____________________, in the Official
Records of Jackson County, or any other contractual obligation by which Seller
is bound or affecting the Property.
(xix) Seller is not a "foreign person" or a "non-resident" for purposes of
federal or state income tax withholding, and Seller shall deliver to Purchaser
at closing a fully executed non-foreign seller's certificate meeting all the
requirements of Section 1445(b)(2) of the Internal Revenue Code. If Seller
cannot make this representation and warranty at closing, Seller shall
cooperate fully with Purchaser to permit Purchaser to cause Title Company to
withhold from the net proceeds of sale any sum required under Internal Revenue
Code Section 1445.
(xx) Seller has not received actual written notice from any applicable
governmental authority or the Trustee that the interest paid to the holders
under the Bonds is no longer tax-exempt or that its tax-exempt character has
been adversely affected or is in jeopardy or threatened, and to the best of
Seller's actual knowledge, no acts, omissions or other circumstances of any
party under the Regulatory Agreement, the First Deed of Trust, the Loan
Agreement defined in the First Deed of Trust, or the Bond Indenture defined in
the First Deed of Trust, or any of the other loan documents has threatened,
jeopardized, adversely affected or invalidated the tax-exempt character of the
interest paid on the Bonds.
(xxi) Seller has not received actual written notice of any claim made by any
holder of the Bonds, and to the best of Seller's actual knowledge, no claims
by any holder of the Bonds are threatened or contemplated.
(xxii) For purposes of this Section 16(a), the term "Seller's actual
knowledge" as used herein shall mean to the best of the actual knowledge of
Seller, no duty of independent investigation or inquiry having been required
or made by Seller.
(xxiii) Unless Seller shall otherwise notify Purchaser in writing at or prior
to the close of escrow, the foregoing representations and warranties shall be
true and correct, to the best of Seller's actual knowledge, as they relate to
the Property on the date of close of escrow, as though made at that time
without the necessity of a separate written certificate regarding the same. If
Seller notifies Purchaser in writing at or prior to the close of escrow that
due to the Seller's discovery of new information, any of the representations
and warranties set forth in Section 16(a) will not be true and correct as it
relates to the Property as of the date of close of escrow, or if any new
information comes into Purchaser's possession after the Approval Date which
would render any of Seller's representations and warranties untrue or
incorrect, Purchaser shall have ten (10) working days after receipt of such
notice of such information to determine whether such new information
has a materially adverse impact on Purchaser's proposed plans
for use of the Property and whether Purchaser would have disapproved
the Property and terminated this escrow for failure of any conditions
set forth in Sections 4.A, if such information had been disclosed
to Purchaser prior to satisfaction or waiver of those conditions and to notify
Seller in writing of such determination, Seller shall have thirty (30) days
from receipt of such notice from Purchaser to attempt to put Purchaser in the
position Purchaser would have been in but for the discovery of such new
information.
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If Seller is unable to put Purchaser in the position Purchaser would have been
in but for the discovery of such new information within such thirty (30) day
period, then, on written notice from Purchaser, this escrow shall be
terminated with respect to the Property. Immediately upon such termination,
the Deposit and all interest earned thereon shall be returned to Purchaser,
and Purchaser shall return to Seller all Documentation. If Purchaser
terminates this escrow on account of Seller's or Purchaser's discovery of such
new information as provided herein, Purchaser agrees that Purchaser shall be
entitled to the return of the Deposit and all interest earned thereon, and
shall have no other rights or remedies as a result of the discovery of such
new information, unless the new information discovered by Purchaser was
actually known to Seller as defined in Section 16(a)(xxii) at the time of
execution of this Agreement and thus constitutes a breach of any of Seller's
representations and warranties set forth herein. If Purchaser determines as
provided herein that Purchaser would not have disapproved the Property on
account of the disclosure of such information, such information shall be
deemed to have been disclosed to Purchaser in writing under this Agreement,
Seller's representation and warranty with respect to the subject matter to
which such new information pertains shall be deemed modified by such new
information, and Purchaser shall be deemed to have waived any claim Purchaser
might have with respect to such new information as of close of escrow.
(xxiv) Except as otherwise provided in section 16(a)(xxiii) above, Seller
shall indemnify, defend and hold Purchaser harmless from any loss, claim,
lien, damage, liability or other expense, including without limitation,
reasonable attorneys' fees and court costs, which Purchaser may incur arising
from or in relation to any breach by Seller of any of the foregoing
representations and warranties in this Section 16(a). Seller's
indemnification hereunder shall survive the close of escrow.
(b) Purchaser represents and warrants to Seller as of the date hereof that:
(i) To the best of Purchaser's actual knowledge, with no duty of independent
investigation or inquiry, no action, suit, claim, investigation or proceeding,
whether legal or administrative or in mediation or arbitration, is pending or
threatened, at law or in equity or admiralty, against Purchaser before or by
any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which would prevent
Purchaser from performing its obligations pursuant to this Agreement, and to
the best of Purchaser's actual knowledge, with no duty of independent
investigation or inquiry, there are no judgments, decrees or orders entered on
a suit or proceeding against Purchaser, an adverse decision in which might, or
which judgment, decree or order does, adversely affect Purchaser's ability to
perform its obligations pursuant to, or Seller's rights under, this Agreement,
or which seeks to restrain, prohibit, invalidate, set aside, rescind, prevent
or make unlawful this Agreement or the carrying out of this Agreement or the
trans actions contemplated hereby.
(ii) The execution and delivery of this Agreement and the performance by
Purchaser of its obligations hereunder do not and will not conflict with or
violate any law, rule, judgment, regulation, order, writ, injunction or decree
of any court of governmental or quasi-governmental entity with jurisdiction
over Purchaser, including, without limitation, the United States of America,
the State of Purchaser's incorporation or any political subdivision of either
of the foregoing, or any decision or ruling of any arbitrator to which
Purchaser is a party or by which Purchaser is bound or affected, or any
contractual obligation by which Purchaser is bound.
(iii) The execution and delivery of this Agreement to Seller and the
consummation by Purchaser of the transactions contemplated hereby have been
and will be duly authorized pursuant to the terms of Purchaser's Articles of
Incorporation and the By-Laws promulgated thereunder. Purchaser has full power
and authority to enter into this Agreement and to perform all of Purchaser's
obligations hereunder and no further action or approval is required in order
to constitute this Agreement as a binding and enforceable obligation as
Purchaser.
(iv) Purchaser warrants that it is a corporation organized and existing under
the laws of Missouri, that Steven J. Stogel and/or John Gold are authorized to
execute this Agreement on its behalf; and that this transaction has been
approved by resolution of its board of directors and a certified copy of that
resolution, which remains in effect, will be delivered to escrow holder before
the close of escrow.
17. ESCROW.
The Closing Date for the escrow will be three (3) days following receipt of
the consents to the subject transaction required pursuant to paragraph 4.A(h)
hereof. Escrow shall be considered closed when the grant deed to the property
is recorded.
Within 45 days after execution of this Agreement, each party shall execute and
deliver to the escrow holder its written instructions consistent with the
terms of this Agreement and shall provide the escrow holder with such other
information, documents, and instruments as the escrow holder may reasonably
require to enable it to close the transaction on the Closing Date.
If the designated escrow holder should be unable to unwilling to act, Seller
shall designate another escrow holder subject to the Purchaser's approval,
which approval shall not be unreasonably withheld.
18. BROKERS.
Seller represents that Seller has dealt with no real estate broker,
salesperson, finder or any other party with respect to this transaction other
than David Levine (the "Broker"), to whom Seller shall pay a commission
pursuant to a separate agreement at closing, but only if escrow closes.
Purchaser represents that Purchaser has dealt with no real estate broker,
salesperson, finder or any other party with respect to this transaction other
than the Broker. Seller and Purchaser shall each indemnify, defend and hold
the other harmless with respect to any loss, claim, damage, liability or other
expense, including without limitation, attorneys' fees, arising as a result of
any claim for a real estate broker's commission or finder's fee in connection
with this transaction based upon the acts or agreements or alleged acts or
agreements of the indemnifying party. Seller's and Purchaser's covenants
hereunder shall survive the close of escrow.
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19. NOTICES.
Generally . All notices under this Agreement shall be in
writing and shall be either (i) delivered personally with receipt
acknowledged, (ii) sent by prepaid registered or certified mail,
return receipt requested or (iii) sent by telecopy or other facsimile
transmission (followed by hard copies sent by method (i) or (ii) above),
addressed as set forth below, or as Seller or Purchaser shall otherwise have
given notice as herein provided.
All notices shall be deemed given when actually received or when proper
delivery is refused by the party to whom the same are directed. Any notice
required to be sent under the terms of this Agreement shall be sent as
follows:
(a) If to Seller:
Bruce Brown
c/o The Related Companies
625 Madison Avenue
New York, New York 10022
Facsimile Number: (212) 593-5794
with a copy to:
Michael H. Orbison, Esq.
625 Madison Avenue
9th Floor
New York, New York 10022
Facsimile Number: (212) 593-5794
and
(b) If to Purchaser:
Carl Lang, Esq.
7733 Forsythe Boulevard
4th Floor
Clayton, Missouri 63105
Attorneys for Seller and Purchaser may give notice with the same effect as if
such notice was given to or by the party represented by such attorney, but
such attorneys may not receive notice on behalf of any
party. The respective attorneys of the parties are also hereby authorized to
agree to adjournments of the Closing.
20. DEFAULT BY PURCHASER OR SELLER.
(a) Liquidated Damages. In the event that Purchaser shall
default in the performance of its obligations contained in this Agreement, and
such material default results in termination of this Agreement prior to close
of escrow, the parties agree that Seller shall be entitled to the Deposit, or
so much thereof as is held in escrow at the time of such default, as
liquidated damages to be delivered to Seller by Title Company, which sum the
parties agree is a reasonable sum, considering all the circumstances existing
on the date of this Agreement, including the relationship of the sum to the
range of harm to Seller that reasonably could be anticipated and the
anticipation that proof of actual damages would be costly or inconvenient.
Seller hereby expressly waives the remedy of specific performance and agrees
that Seller's sole remedy for Purchaser's default hereunder which results in
termination of this Agreement shall be liquidated damages set forth herein. In
placing their initials at the places provided, each party specifically
confirms the accuracy of the statements made above and the fact that each
party was represented by counsel who explained the consequences of this
liquidated damages provision at the time this Agreement was made.
Seller Buyer
Initial here:________ Initial here:________
(b) Seller's Liability. In the event that Seller shall
default in its obligation to convey the Property as required hereunder or if
Seller defaults in the performance of any of its other obligations under this
Agreement or any document contemplated hereby at or prior to close of escrow,
then Seller's liability shall be limited to the same damages for which
Purchaser would be liable under Section 20(a). If any of Seller's
representations and warranties under Sections 16(a) or 18 is not true and such
default is discovered by Purchaser after closing, then Purchaser shall have
all remedies available at law or equity, including without limitation, an
action against Seller for specific performance, and/or an action against
Seller for rescission or reformation.
21. INTEGRATION CLAUSE.
This Agreement constitutes the entire agreement between the parties and
supersedes all prior discussion, negotiations, and agreements, whether oral or
written. Any amendment to this Agreement, including an oral modification
supported by new consideration, must be reduced to writing and signed by both
parties before it will be effective.
22. AMENDMENTS.
This Agreement may not be changed, modified or terminated, except by an
instrument executed by the parties hereto.
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23. EFFECT OF WAIVER OF PROVISION ON REMEDY .
No waiver by a party of any provision of this Agreement shall be considered a
waiver of any other provision or any subsequent breach of the same or any
other provision, including the time for performance of any such provision. The
exercise by a party of any remedy provided in this Agreement or at law shall
not prevent the exercise by that party of any other remedy provided in this
Agreement or at law, unless such remedy has been expressly waived.
24. PARTIAL INVALIDITY.
If any term of provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforced to the fullest extent permitted
by law, unless such remedy has been expressly waived.
25. CAPTIONS, JOINT AND SEVERAL LIABILITY, CONTROLLING LAW.
The captions heading the various paragraphs of this Agreement are for
convenience and shall not be considered to limit, expand, or define the
contents of the respective paragraphs. Masculine, feminine, or neuter gender
and the singular and the plural number, shall each be considered to include
the other whenever the context so requires. If either party consists of more
than one person, each such person shall be jointly and severally liable.
26. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri.
27. JOINT PREPARATION.
This Agreement is deemed to have been jointly prepared by the parties hereto,
and any uncertainty or ambiguity existing herein, if any, shall not be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's-length agreements.
28. SUCCESSORS, ASSIGNS.
This Agreement shall apply and be binding upon the heirs, executors,
administrators, successors and assigns of the respective parties.
29. ASSIGNMENT AND RECORDING.
This Agreement may not be assigned by Purchaser to any unrelated third party
or recorded without first obtaining Seller's consent thereto, which Seller
may grant or deny in Seller's sole discretion. The assignment or recording of
this Agreement without Seller's consent shall be a default under this
Agreement.
30. FULL PERFORMANCE.
The acceptance of the Deed by Purchaser shall be deemed to be
full performance and discharge of every agreement and obligation on
the part of Seller to be performed pursuant to the provisions of
this Agreement except those, if any, which are herein specifically
stated to survive this Agreement.
31. OFFER ONLY.
This Agreement, until fully executed, is only an offer of the party first
executing the same and shall not be considered effective until and unless this
Agreement is signed by both parties and the Initial Deposit has been placed in
escrow.
32. MUTUAL INDEMNITY.
Except as provided in Section 4.A(e) above, Seller shall be responsible for all
costs, charges, liabilities and claims arising against Seller or the Property
from intentional or negligent acts or omissions by Seller or its agents in
connection with the Property prior to the closing and shall defend and
indemnify Purchaser against the same. Purchaser shall be responsible for all
costs, charges, liabilities and claims resulting from intentional or negligent
acts or omission of Purchaser or its agents in connection with the Property on
or after the closing Date, and shall defend and indemnify Seller against the
same. The indemnities contained in this Section 32 shall survive the closing
of escrow. Nothing contained in this Section 32 shall be construed as limiting
Purchaser's indemnity to Seller or Seller's indemnity to Purchaser as provided
in Section 4.A(e). Seller's indemnity and Purchaser's indemnity as herein
provided shall be effective only if closing occurs.
33. ATTORNEYS' FEES.
If either party files any action or brings any proceeding against the other
arising from this Agreement, or is made a party to any action or proceeding
brought by the escrow holder, then as between Purchaser and Seller, the
prevailing party shall be entitled to recover as an element of its costs of
suit, and not as damages, reasonable attorneys' fees to be fixed by the court.
The "prevailing party" shall be the party who is entitled to recover its costs
of suit, whether or not suit proceeds to final judgment. A party not entitled
to recover its costs shall not recover attorneys' fees. No sum for attorneys'
fees shall be counted in calculating the amount of the judgment for purposes
of determining whether a party is entitled to its costs or attorneys'
fees.
34. COUNTERPARTS.
This agreement and all amendments and supplements to it may be executed in
counterparts, and all counterparts together shall be construed as one
document.
35. NO REPRESENTATIONS REGARDING LEGAL EFFECT OF DOCUMENT.
No representation, warranty, or recommendation is made by Seller
or its brokers, respective agents, employees, or attorneys
regarding the legal sufficiency, legal effect, or tax consequences of this
Agreement or the transaction, and each signatory is
advised to submit this Agreement to his respective attorney before signing it.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Novation
Agreement as of the date and year first above written.
SELLER
MANSION APARTMENT PROJECT
INVESTORS, INC., a Delaware Corporation
By: _________________________________
PURCHASER
INDEPENDENCE APARTMENTS ASSOCIATES, L.P.
By: Independence Apartments
Management Company, Inc.,
general partner
By: _____________________________
Steven J. Stogel
President
15
<PAGE>
EXHIBIT "A"
The Mansion Apartments
2905 Lee's Summit Road
Independence, Missouri
All that part of the Northeast Quarter of Section 13, Township 49, Range 32
and all that part of the Northwest Quarter of Section 18, Township 49,
Range 31, all in Independence, Jackson County, Missouri, described as follows:
Commencing at the Northwest corner of the East 1/2 of the Northeast Quarter
of Section 13, Township 49, Range 32; thence South along the West line of
said 1/2 of Quarter Section 1017.24 feet; thence South 85 degrees 21 minutes
East 50.17 feet to the Southwest corner of Lot 981, GLENDALE GARDENS, a
subdivision in Independence, Missouri, which is a point on the East right
of way line of Lee's Summit Road, and which point is the true point of
beginning of this tract; thence along the Southerly or rear lines of
lots in said subdivision South 85 degrees 21 minutes East 709.69 feet
(plat equals 709.76) thence North 75 degrees 04 minutes 52 seconds East
308.76 feet (plat equals North 74 degrees 42 minutes East 309.44); thence
North 89 degrees 42 minutes 23 seconds East 300.55 feet (plat equals East)
to a point on the South line of Lot 963, which point is the Northwest corner
of Lot 680 in said Subdivision; thence along the West or rear lines of lots
in said subdivision South 1094.56 feet; thence North 89 degrees 58 minutes
56 seconds West 394.92 feet to the Northeast corner of Lot 322 in said
subdivision; thence along the North or rear lot lines of lots in said
subdivision North 89 degrees 58 minutes 56 seconds West 941.35 feet; (plat
West 942 feet) to a point on present East right of way line of Lee's
Summit Road which is 20 feet East of the West line of said 1/2 of Quarter
Section and which point is also 6.34 feet West of the Northwest corner of
Lot 313 in said subdivision; thence along said present East right of way line
parallel to and 20 feet East of the West line of said 1/2 of Quarter Section
North 459.04 feet to a point which is 36 feet East of measured at right angles
the center line of the right of way of present new Lee's Summit Road and
which point is opposite center line station 157+05.93, thence continuing along
said East right of way line parallel to and 36 feet East of said center
line in a Northerly direction along a curve to the right (having a radius of
5693.58 feet) 127.78 feet to the point of tangent opposite center line station
158+34.51; thence parallel to and 36 feet East of said center line North
4 degrees 50 minutes East 1.91 feet to the point of curve opposite center line
station 158+36.42; thence continuing along said East right of way line
parallel to and 36 feet East of said center line in a Northerly direction
along a curve to the left (having a radius of 5765.58 feet) 482.85 feet
to the true point of beginning
<PAGE>
Schedule "B"
Leases
Available For Inspection On Premises
<PAGE>
Schedule "C"
Equipment Leases
Available For Inspection On Premises
<PAGE>
Schedule "D"
Service Contracts
Available For Inspection On Premises
<PAGE>
Schedule "E"
Trademarks - None
<PAGE>
Schedule "G"
Residential Lease Form
Previously Approved By Purchaser
<PAGE>
Schedule "H"
Rent Schedule
Available For Inspection On Premises
<PAGE>
Schedule "I"
Assignment and Assumption of Leases
See Attached
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASES
THIS ASSIGNMENT AND ASSUMPTION OF LEASES is made as of the ____ day of
______________, 1993, by and between MANSION APARTMENT PROJECT INVESTORS,
INC., a Delaware corporation ("Seller"), and INDEPENDENCE APARTMENTS
ASSOCIATES, L.P., a Missouri limited partnership ("Buyer").
Recitals of Fact
A. Seller is the present owner of certain property known as the Mansion
Apartments, located at 2905 Lee's Summit Road, Independence, Jackson County,
Missouri, and legally described on Exhibit "A" attached hereto and
incorporated herein by this reference (the "Real Property").
B. Seller is also the present landlord under the leases set forth on
the rent roll attached hereto as Exhibit "B" and incorporated herein
by this reference (collectively the "Leases"), which Leases affect space
in the improvements upon the Real Property.
C. Seller desires to assign to Buyer and Buyer desires to accept an
assignment from Seller of (i) all of Seller's right, title and interest
in and to the Leases, and (ii) all prepaid rents and deposits, security
or otherwise, held by Seller which have been paid by tenants under the
Leases to the extent disclosed and scheduled on the Exhibit "B" rent roll
(collectively the "Security Deposits").
D. Seller and Buyer have agreed to execute this Assignment and Assumption
of Leases to evidence the assignment of the Leases and Security Deposits
by Seller, and the acceptance of the Leases and Security Deposits by Buyer.
Agreement
IN CONSIDERATION of the promises and covenants set forth in the
Sale-Purchase Agreement between Seller and Buyer affecting the Real
Property, and for other good and valuable consideration, the receipt
and sufficiency of which is acknowledged by both parties, the parties
hereby agree as follows:
1. Assignment. Seller hereby assigns, transfers, sets over and conveys
to Buyer, its successors and assigns, all of Seller's right, title and
interest in and to the Leases and the Security Deposits.
2. Assumption. Buyer hereby fully and completely assumes each and every
obligation of Seller which is to be performed under the Leases accruing
from and after the date hereof. Buyer agrees that Buyer shall fully pay,
perform and observe all of such obligations accruing from and after the
date hereof.
<PAGE>
3. Inspection. Buyer acknowledges that Buyer has had ample opportunity
to inspect the Leases and the records of Seller relating to the Security
Deposits, and has had ample opportunity to contract the tenants about the
Leases and Security Deposits. All of the same are acceptable to Buyer, and
Buyer accepts the same and accepts the tenants in the Leases and the Real
Property subject to the Leases, with full knowledge and agreement as to the
terms and conditions of the Leases, the current status of the tenants'
performances of the terms of the Leases, and the current status of the
Security Deposits.
4. Hold Harmless. Buyer agrees to defend, indemnify and hold Seller and
all affiliates, subsidiaries, related corporations, officers, directors,
employees and agents of Seller, fully and completely harmless from and
against any and all costs, expenses, liabilities, claims, assertions and
demands whatsoever, of any kind or nature, asserted by or raised by any
party whatsoever, which relates in any manner to any matter or thing in
connection with or related to the Leases or the Security Deposits arising
or accruing or occurring from and after the date hereof.
Seller agrees to defend, indemnify and hold Buyer and all affiliates,
subsidiaries, related corporation, officers, directors, employees and
agents of Seller, fully and completely harmless from and against any
and all costs, expenses, liabilities, claims, assertions and demands
whatsoever, of any kind or nature, asserted by or raised by any party
whatsoever, which relates in any manner to any matter or thing in
connection with or related to the Leases or the Security Deposits
arising or accruing or occurring prior to the date hereof; provided,
however, that Seller shall have no obligation hereunder to pay to
tenants under the Leases any portion of the Security Deposits.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Assumption of Leases to be executed as of the day and year first
above written.
SELLER: MANSION APARTMENTS PROJECT INVESTORS, INC.,
a Delaware corporation
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
BUYER: INDEPENDENCE APARTMENTS ASSOCIATES, L.P.,
a Missouri limited partnership
By: Independence Apartments
Management Company, Inc.,
a Missouri corporation
Its General Partner
By: ______________________________________
Steven J. Stogel
President
3
<PAGE>
Schedule "J"
Assignment and Assumption of Equipment Leases
and Service Contracts
See Attached
<PAGE>
ASSIGNMENT AND ASSUMPTION OF EQUIPMENT LEASES AND SERVICE CONTRACTS
THIS ASSIGNMENT AND ASSUMPTION OF EQUIPMENT LEASES AND SERVICE CONTRACTS is
made as of the ____ day of _________, 1993, by and between MANSION APARTMENTS
PROJECT INVESTORS, INC., a Delaware corporation ("Seller") and INDEPENDENCE
APARTMENTS ASSOCIATES, L.P., a Missouri limited partnership ("Buyer").
Recitals of Fact
A. Seller is the present owner of certain property known as the Mansion
apartments, located at 2905 Lee's Summit road, Independence, Jackson County,
Missouri, and legally described on Exhibit "A" attached hereto and incorporated
herein by this reference (the "Real Property").
B. Seller desires to assign to Buyer and Buyer desires to accept an assignment
from Seller of all of Seller's assignable right, title and interest in and to
all equipment leases, service and maintenance contracts, management agreements,
utility contracts, employment contracts, labor agreements, and all other
contracts in respect of the operation, maintenance and use of the Real
Property, including but not limited to the contracts listed on Exhibit "B"
attached hereto and incorporated herein by this reference (collectively the
"Contracts").
C. Seller and Buyer have agreed to execute this Assignment and Assumption of
Equipment Leases and Service Contracts to evidence the assignment of the
Contracts by Seller, and the acceptance of the Contracts by Buyer.
Agreement
IN CONSIDERATION of the promises and covenants set forth in the Sale-Purchase
Agreement between Seller and Buyer affecting the Real Property, and for other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged by both parties, the parties hereby agree as follows:
1. Assignment. Seller hereby assigns, transfers, sets over and conveys to
Buyer, its successors and assigns, all of Seller's right, title and interest in
and to the Contracts, to the extent that Seller's interest in the Contracts is
assignable under the terms of the Contacts and applicable law.
2. Assumption. Buyer hereby fully and completely assumes each and every
obligation of Seller which is to be performed under the Contracts accruing from
and after the date hereof. Buyer agrees that Buyer shall fully pay, perform
and observe all of such obligations accruing from and after the date hereof. To
the extent that this Agreement does not accomplish an assignment of Seller's
interest, for the reason that Seller's interest is not assignable or
otherwise, Buyer agrees that it accepts ownership of the Real Property subject
to whatever rights, if any, are held by the other contracting parties under the
Contracts.
<PAGE>
3. Inspection. Buyer acknowledges that Buyer has had ample opportunity to
inspect the Contracts, including without limitation the assignment provisions
thereof, and has had ample opportunity to contract the other parties to the
Contracts. All of the same are acceptable to Buyer, and Buyer accepts the same
and accepts the other parties to the Contracts and the Real Property subject to
the Contracts, with full knowledge and agreement as to the terms and conditions
of the Contracts and the current status of the other parties' performance of
the terms and conditions of the Contracts.
4. Hold Harmless. Buyer agrees to defend, indemnify and hold Seller and all
affiliates, subsidiaries, related corporations, officers, directors, employees
and agents of Seller, fully and completely harmless from and against any and
all costs, expenses, liabilities, claims, assertions and demands whatsoever,
of any kind or nature, asserted by or raised by any party whatsoever, which
relates in any manner to any matter or thing in connection with or related to
the Contracts arising or accruing from and after the date hereof.
Seller agrees to defend, indemnify and hold Buyer and all affiliates,
subsidiaries, related corporations, officers, directors, employees and agents
of Buyer, fully and completely harmless from and against any and all costs,
expenses, liabilities, claims, assertions and demands whatsoever, of any kind
or nature, asserted by or raised by any party whatsoever, which relates in any
manner to any matter or thing in connection with or related to the Contracts
arising or accruing or occurring prior to the date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
assumption of Equipment Leases and Service Contracts to be executed as of
the day and year first above written.
SELLER: MANSION APARTMENTS PROJECT INVESTORS, INC.,
a Delaware corporation
By:_________________________________
Name:_______________________________
Title:______________________________
BUYER: INDEPENDENCE APARTMENTS ASSOCIATES, L.P.,
a Missouri limited partnership
By: Independence Apartments
Management Company, Inc.,
a Missouri corporation
Its General Partner
By:____________________________
Steven J. Stogel
President
<PAGE>
Schedule "K"
Repair Escrow Agreement
See Attached
<PAGE>
REPAIR ESCROW AGREEMENT
THIS REPAIR ESCROW AGREEMENT made December ____, 1993 by and
among Mansion Apartment Project Investors, Inc., a Delaware corporation having
an office at 625 Madison Avenue, New York, New York 10022 ("Seller");
Independence Apartments Associates, L.P., a Missouri limited partnership
having an office c/o Carl Lang, 7733 Forsythe Boulevard, Clayton, Missouri
63105 ("Purchaser") and Commonwealth Land Title Insurance Company, 910 North
11th Street, Suite 250, St. Louis, Missouri 63101 Attention: Mr. Nat Walsh
("Escrow Agent").
W I T N E S S E T H:
WHEREAS, Seller and Purchaser have entered into a certain agreement for
purchase and sale dated as of December 1, 1993 (the "Agreement") wherein
Seller agreed to sell and Purchaser agreed to purchase the premises commonly
known as Mansions Apartments, 2905 Lee's Summit Road, Independence, Missouri
64055 (the "Property"); and
WHEREAS, Purchaser is unwilling to acquire the Property unless a portion of
the Purchase Price (as defined in the Agreement) is placed in escrow to ensure
that the cost of certain repairs to the Property shall be paid; and
WHEREAS, Seller and Purchaser have agreed to place the sum of Four Hundred
Thousand and No/100 ($400,000.00) Dollars in escrow (the "Escrow Funds")
with Escrow Agent to be delivered in accordance with the conditions set forth
in Section 1 hereof.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Purchaser has deposited with Escrow Agent, and Escrow Agent hereby
acknowledged receipt, by check subject to collection, of Four Hundred
Thousand ($400,000.00) Dollars, to be held in escrow by Escrow Agent. The
Escrow Funds shall be subject to and in accordance with the terms hereof and
disposed as hereinafter provided. Upon making delivery of the Escrow Funds in
the manner herein provided, Escrow Agent shall have no further liability
hereunder.
(a) Escrow Agent will promptly deliver the Escrow Funds to the Payees (as
hereinafter defined) upon the following terms and conditions:
(i) Purchaser hereby designates Eveker Consulting Services, Inc. ("Eveker") as
Purchaser's agent hereunder and authorizes Eveker to make all decisions
hereunder regarding repairs to the Property (and the payment therefor) on
behalf of Purchaser.
(ii) Seller hereby designates the RCC Services Corp. ("RCC") as Seller's agent
hereunder and authorizes the RCC to make all decisions hereunder regarding
repairs to the Property (and the payment therefor) on behalf of Seller.
(iii) Eveker and RCC shall mutually agree upon a contractor or contractors
(each, a "Contractor") to perform the required repair work on the Property.
(iv) Upon submission of a draw request by or on behalf of a Contractor for
repair work performed on the Property, the Escrow Agent shall, upon the joint
direction of Eveker and RCC, release a portion of the Escrow Funds in an
amount, and to a payee, to be agreed upon by Eveker and RCC in each instance
(each, a "Payee").
2
<PAGE>
(b) In the event Escrow Agent shall have received a notice of objection to the
delivery of the Escrow Funds as provided above in this Section l, Escrow Agent
shall continue to hold the Escrow Funds until:
(i) Escrow Agent receives written notice from the parties hereto and all
other persons having an interest in such dispute directing the delivery of the
Escrow Funds, in which case Escrow Agent shall then deliver the Escrow Funds
in accordance with said direction; or
(ii) In the event of litigation between Purchaser and Seller or between any of
the parties hereto, Escrow Agent shall deposit the Escrow Funds with the
appropriate official of the court in which said litigation is pending until
the final determination of the rights of the parties in such proceeding
directing a disposition of the Escrow Funds; or
(iii) Escrow Agent brings an action for interpleader (or such other
appropriate action as may be necessary) against Purchaser and Seller and
deposits the Escrow Funds in a court of competent jurisdiction in which such
action is pending. The costs of such action, including, but not limited to,
reasonable legal fees of Escrow Agent, shall be borne by whichever of
Purchaser or Seller is the losing party.
3
<PAGE>
2. Escrow Agent acting in good faith shall be entitled to rely and act upon
any notices, certificates, instruments or other writings as may be furnished
to it without inquiring into their sufficiency or correctness an without
inquiring as to the application of any funds paid, disbursed or deposited, and
shall not be liable to connection with the performance of any duties imposed
upon Escrow Agent by the provisions of this Agreement, except for Escrow
Agent's own willful default, bad faith or gross negligence. Escrow Agent shall
have no duties or responsibilities except those set forth herein. Escrow Agent
shall not be bound by any modification of this Agreement unless the same is in
writing and signed by all of the parties hereto. In the event that Escrow
Agent shall be uncertain as to Escrow Agent's rights or obligations hereunder,
including, but not limited to, any uncertainty as to whether Escrow Agent is
obligated to deliver the Escrow Funds or as to whom the Escrow Funds are to be
delivered or shall receive any instructions from the parties hereto which, in
Escrow Agent's opinion, are in conflict with any of the provisions hereof,
Escrow Agent shall be entitled to hold and apply the Escrow Funds pursuant to
Section (b) hereof and my decline to take any other action.
3. Escrow Agent is acting as a stakeholder only with respect to the Escrow
Funds; without limiting the provisions of Section 2 hereof, if there is any
dispute as to whether Escrow Agent is obligated to deliver the Escrow Funds or
as to whom said Escrow Funds are to be delivered, Escrow Agent shall not make
any delivery, but in such event Escrow Agent shall hold same until its receipt
of an authorization, in writing, signed by all the persons having interest in
such dispute, directing the disposition of the Escrow Funds. In the absence of
4
<PAGE>
such authorization, Escrow Agent shall hold the Escrow Funds until the final
determination of the rights of the parties in an appropriate proceeding, or if
such written authorization is not given, or proceedings for such determination
are not begun and diligently continued, Escrow Agent may, but is not required
to, retain counsel and bring an appropriate action or proceeding for leave to
deposit the Escrow Funds in court pending such determination. Escrow Agent
shall be reimbursed for all costs and expenses incurred by it in connection
with any action or proceeding relating to the Escrow Funds, including, but not
limited to, attorneys' fees and disbursements, by the party determined not to
be entitled to the Escrow Funds. Upon making delivery of the Escrow Funds
in the manner herein provided, the Escrow Agent shall have no further
liability hereunder. The duties of Escrow Agent are only as herein
specifically provided and are purely ministerial in nature, and Escrow Agent
has signed this Agreement only in order to confirm that Escrow Agent is
holding and will hold the Escrow Funds in escrow, pursuant to the provisions
hereof. However, Escrow Agent shall not be responsible for the clearing or
collection of the Escrow Funds.
5. Escrow Agent is discharged and released from any and all responsibility or
liability with respect to the Escrow Funds deposited with it and the parties
hereto shall jointly and severally indemnify, defend and save harmless Escrow
Agent against such responsibility or liability and from any claims made
against it with respect to the Escrow Funds, except for Escrow Agent's own
willful default, bad faith or gross negligence.
5
<PAGE>
6. Any notice or communication required or permitted hereunder shall be given
in writing and shall be considered to have been given on the date such notice
or communication has been mailed or delivered by hand, registered or certified
mail, return receipt requested, Express Mail or Federal Express, postage
prepaid, directed to such party at the following address (or at such other
address as such party shall hereafter designated by written notice to the
other):
(a) If to Seller, addressed to:
Mansion Apartments Project Investors, Inc.
c/o Related Capital Company
625 Madison Avenue
New York, New York 10022
With a copy to:
Michael H. Orbison, Esq.
625 Madison Avenue - 9th Floor
New York, New York 10022
(b) If to Purchaser, addressed to:
Independence Apartments Associates, L.P.
c/o Carl Lang, Esq.
7733 Forsythe Boulevard
Clayton, Missouri 63105
(c) If to Escrow Agent, addressed to:
Commonwealth Land Title Insurance Company
910 North 11th Street, Suite 250
St. Louis, Missouri 63101
Attention: Mr. Nat Walsh
6
<PAGE>
8. If any provision of this Agreement shall be determined to be unenforceable
or invalid by any court of competent jurisdiction, the same shall not affect
the remaining provisions of this Agreement, all of which other provisions
shall remain in full force and effect, and to this end the provisions of this
Agreement are intended to be and shall be severable; and it is the intention
of the parties hereto that if any provision of this Agreement is capable of
two constructions, one of which would render the provision unenforceable or
invalid and the other of which would render the provision enforceable and
valid, then the provision shall have the meaning which renders it enforceable
and valid.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of
the date first above written.
MANSION APARTMENTS PROJECT
INVESTORS, INC.
By:____________________________________
INDEPENDENCE APARTMENTS ASSOCIATES, L.P.
By: Independence Apartments
Management Company, Inc.
By: ___________________________________
Steven J. Stogel
President
COMMONWEALTH LAND TITLE INSURANCE
COMPANY
By: ___________________________________
7
<PAGE>
ADDENDUM TO
SALE-PURCHASE AGREEMENT
This is an ADDENDUM (the "Addendum") to that certain SALE-PURCHASE AGREEMENT
(the "Agreement") dated as of March 31, 1994, by and between MANSION
APARTMENT PROJECT INVESTORS, INC., as "Seller", and INDEPENDENCE
APARTMENTS ASSOCIATES, L.P., as "Purchaser".
Seller and Purchaser agree (notwithstanding anything to the contrary contained
in the Agreement), as follows:
1. Definitions. All capitalized terms not herein defined shall have
the meanings ascribed to such terms in the Agreement.
2. Terms of Addendum Control. In the event of any conflict between
the terms of this Addendum and the terms of the Agreement, or
between the terms of this Addendum and the terms of any of the
conveyance documents (the "Conveyance Documents") executed and delivered at or
in connection with the Closing of the sale and conveyance of the Premises by
Seller to Purchaser, then in all such events the terms and intent of this
Addendum shall govern, control and prevail, and the terms of the Agreement and
of the Conveyance Documents shall be construed to effect the terms and intent
of this Addendum. The terms of this Addendum shall survive the Closing.
3. Escrow of Portion of Purchase Price. At and upon the
closing of the sale and purchase of the Premises, a portion of
the Cash Portion of the Purchase Price in the amount of
$650,000.00 (the "Escrowed Amount") shall be placed by Seller in
escrow with American Land Title Company of Kansas City, Inc. (the "Escrow
Agent") pursuant to an escrow agreement in form and substance acceptable to
Purchaser and to Seller. The parties agree that the Repair Escrow Agreement
described the in Agreement may serve as said escrow agreement, if said Repair
Escrow Agreement incorporates the requirements of this Addendum.
4. Purchaser's Right to Rescind Acquisition. For and during the
thirty (30) calendar day period (the "First Rescission Period")
commencing on the date of the Closing of the sale and purchase
of the Premises pursuant to the Agreement, Purchaser shall
have the right, by written notice to Seller, to rescind the sale and
purchase pursuant to the Agreement, if Purchaser determines (in its sole
discretion) that the scope of the construction work to be performed with
respect to the Premises, as contemplated by the Agreement, is not adequate to
restore the Premises to a first-class condition satisfactory to Purchaser in
its judgment. If, during the First Rescission Period, Purchaser by written
<PAGE>
notice to Seller exercises its right to rescind under this Paragraph as
aforesaid, then: (i) title to the Premises shall be conveyed by Purchaser to
Seller; (ii) Purchaser shall be released, relieved and discharged from and of
all obligations assumed by Purchaser pursuant to the Conveyance Documents;
(iii) the Escrowed Amount (together with all interest thereon) shall be
released from escrow, and refunded and paid over to Purchaser free from the
escrow; (iv) Purchaser shall pay to Seller the amount, if any, of cash flow
from the Premises previously retained by Purchaser; and (v) Seller shall
forthwith, upon Purchaser's demand therefor, pay and remit to Purchaser an
amount equal to the sum of all costs, expenses and reasonable attorney's fees
incurred by Purchaser in connection with its acquisition of the Premises
pursuant to the Agreement or in connection with the Purchaser's exercise and
enforcement of its rescission right under this Paragraph (including costs,
expenses and reasonable attorney's fees incurred by Purchaser in collecting
monies due to Purchaser under this Paragraph). The Purchaser's determination
to invoke and exercise the rescission right pursuant to this Paragraph of this
Addendum shall be at the sole discretion of Purchaser, but shall require a
written statement from a duly authorized representative of McCormack Baron &
Associates, Inc. ("MBA"), setting forth MBA's statement that the scope of the
construction work to be performed with respect to the Premises, as
contemplated by the Agreement, is not adequate to restore the Premises to a
first-class condition in MBA's judgment.
5. Partial Release of Escrowed Monies. In the event that Purchaser
has not exercised its right to rescind pursuant to Paragraph 4
of this Addendum, then in such event: (i) upon the expiration
of the First Rescission Period, the sum of $250,000.00
of the Escrowed Amount shall, thence and thereupon be released from the
escrow, and paid over to Seller free from escrow, with the $400,000.00 balance
then constituting and being the Escrowed Amount; and (ii) Purchaser shall have
the additional rescission right set forth in Paragraph 6 of this Addendum.
6. Purchaser's Additional Right to Rescind Acquisition.
In the event that Purchaser has not, during the First Rescission Period,
exercised its right to rescind pursuant to Paragraph 4 of this Addendum, then
in such event, for and during the six (6) calendar month period (the "Second
Rescission Period") commencing on the date of the expiration of the First
Rescission Period, Purchaser shall have the right, by written notice to
Seller, to rescind the sale and purchase of the Premises pursuant to the
Agreement, if Purchaser determines (in its sole discretion) that the necessary
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construction work performed and to be performed with respect to the Agreement,
if Purchaser determines (in its sole discretion) that the necessary
construction work performed and to be performed with respect to the Premises,
as contemplated by the Agreement, cannot be completed with the $400,000.00
escrowed funds available for same and $400,000 of additional funds. If, during
the Second Rescission Period, Purchaser by written notice to Seller exercises
its right to rescind under this Paragraph as aforesaid, then: (i) title to the
Premises shall be conveyed by Purchaser to Sellers (ii) Purchaser shall be
released, relieved and discharged from and of any and all obligations assumed
by Purchaser pursuant to the Conveyance Documents; (iii) the balance of the
Escrowed Amount shall be released from escrow, and refunded and paid over to
Purchaser free from escrow; (iv) Seller shall forthwith pay and remit to
Purchaser that amount which is equal to $650,000.00, minus
(x) the amount paid to the Purchaser under item (iii) of this Paragraph, and
minus (y) the amount, if any, of cash flow from the
Premises previously retained by Purchaser; (v) Seller shall forthwith, upon
Purchaser's demand therefor, pay and remit to Purchaser an amount equal to the
sum of all costs, expenses and reasonable attorney's fees incurred by
Purchaser in collecting monies due to Purchaser under this Paragraph); and
(vi) Seller shall forthwith pay and remit to Purchaser an amount equal to
interest on all sums due Purchaser under this Paragraph, calculated from the
date advanced by Purchaser to the date repaid, such interest to be at a per
annum interest rate which is equal to the "Prime Rate" plus one percent (1%).
The Purchaser's determination to invoke and exercise its recision right
pursuant to this Paragraph of this Addendum shall be at the sole discretion of
Purchaser, but shall require a written statement from a duly authorized
representative of MBA, setting forth MBA's statement that the necessary
construction work performed and to be performed with respect to the Premises
cannot be completed with the $400,000.00 Escrowed Amount and $400,000 of
additional funds in MBA's judgement.
7. Miscellaneous. As amended herein
and hereby, the Agreement is confirmed and ratified, and is in full force and
effect, as of the date herein. This Addendum shall be binding upon the parties
hereto and their respective successors, heirs and assigns. This Addendum shall
be governed by the laws of the State of Missouri.
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IN WITNESS WHEREOF, the undersigned have executed this Addendum as
of this 31 day of _________________________, 1994.
SELLER: PURCHASER:
MANSION APARTMENT PROJECT INDEPENDENCE APARTMENTS
INVESTORS, INC. ASSOCIATES, L.P.,
a Delaware corporation a Missouri limited partnership
By: INDEPENDENCE APARTMENTS
MANAGEMENT COMPANY, INC.
a Missouri corporation,
Its General Partner
By:_________________________ By: ___________________________
Print Name:_________________ Steven J. Stogel,
Title: _____________________ President
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