SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
March 31, 1998 Commission file number 0-16516
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(Exact Name of registrant as specified in its charter)
Illinois 36-3437938
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 13
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 17
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 17,843,062 16,214,633
Interest, rents and other receivables, net of allowances for
doubtful accounts of approximately $139,472 and $710,147 at
March 31, 1998 and December 31, 1997, respectively . . . . . . . . 67,193 68,335
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 40,845 111,897
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . 17,951,100 16,394,865
------------ ------------
Investment property held for sale or disposition. . . . . . . . . . . 43,146,694 43,146,694
------------ ------------
Total investment properties . . . . . . . . . . . . . . . . . 43,146,694 43,146,694
------------ ------------
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 1,129,621 1,904,784
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 517,516 518,228
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . 104,445 108,362
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 2,700,280 2,755,038
------------ ------------
$ 65,549,656 64,827,971
============ ============
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
1998 1997
------------- ------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 470,995 457,144
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 1,714,188 987,066
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 218,929
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 409,705 410,797
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . 2,594,888 2,073,936
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 56,364 66,157
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,884 1,377,521
Investment in unconsolidated ventures, at equity. . . . . . . . . . . 113,976 12,771,462
Long-term debt, less current portion. . . . . . . . . . . . . . . . . 40,499,456 40,622,529
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . 44,659,568 56,911,605
Venture partners' subordinated equity in ventures . . . . . . . . . . 3,796,969 3,751,845
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (3,266,231) (3,413,841)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (1,443,873) (1,443,873)
------------ ------------
(4,690,104) (4,837,714)
------------ ------------
Limited partners:
Capital contributions, net of offering
costs and purchase discounts. . . . . . . . . . . . . . . . . . 120,541,353 120,541,353
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . (47,878,088) (60,675,076)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . (50,880,042) (50,864,042)
------------ ------------
21,783,223 9,002,235
------------ ------------
Total partners' capital accounts. . . . . . . . . . . . . . . 17,093,119 4,164,521
------------ ------------
$ 65,549,656 64,827,971
============ ============
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,408,056 2,657,889
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,511 171,913
Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,520 --
----------- ----------
2,762,087 2,829,802
----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . . . . . . . . . . . . . . 1,230,213 1,242,629
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 501,927
Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . 719,249 1,133,918
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . 67,668 68,989
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . . 38,604 33,710
General and administrative. . . . . . . . . . . . . . . . . . . . . . . . 70,108 111,507
----------- ----------
2,125,842 3,092,680
----------- ----------
636,245 (262,878)
Partnership's share of earnings (loss)
from operations of unconsolidated
ventures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,931 (332,908)
Venture partners' share of ventures'
operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (159,728) 85,936
----------- ----------
Earnings (loss) before gains on sale
or disposition of investment properties . . . . . . . . . . . . . 605,448 (509,850)
Gain on sale or disposition of Partnership's
investments in unconsolidated ventures. . . . . . . . . . . . . . . . . . 7,103,609 70,290
----------- ----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1998 1997
------------ -----------
Earnings (loss) before Partnership's
share of extraordinary item from
unconsolidated venture. . . . . . . . . . . . . . . . . . . . . . 7,709,057 (439,560)
Partnership's share of unconsolidated
venture's forgiveness of indebtedness . . . . . . . . . . . . . . . . . 5,235,541 --
----------- ----------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . $12,944,598 (439,560)
=========== ==========
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gains on sale or
disposition of investment properties . . . . . . . . . . . . . $ 4.14 (3.49)
Gain on sale or disposition of Partnership's
investments in unconsolidated ventures . . . . . . . . . . . . 50.11 .50
Partnership's share of extraordinary item
from unconsolidated venture. . . . . . . . . . . . . . . . . . 36.93 --
----------- ----------
$ 91.18 (2.99)
=========== ==========
Cash distributions per limited partnership
interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- --
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,944,598 (439,560)
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 501,927
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 38,604 33,710
Partnership's share of (earnings) loss from operations of
unconsolidated ventures, net of distributions . . . . . . . . . . . . (128,931) 332,908
Venture partners' share of ventures' operations . . . . . . . . . . . . 156,934 (85,936)
Gains on sale or disposition of Partnership's investments in
unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . (7,103,609) (70,290)
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . (5,235,541) --
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 1,142 114,581
Other prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . 71,052 76,950
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,917 50,312
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 54,758 (72,485)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 727,120 97,912
Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218,928) (168,611)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,092) (970)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . (9,793) (12,000)
Ground rent payable . . . . . . . . . . . . . . . . . . . . . . . . . . 17,363 36,242
----------- -----------
Net cash provided by (used in)
operating activities. . . . . . . . . . . . . . . . . . . . . . . 1,317,594 394,690
----------- -----------
Cash flows from investing activities:
Additions to investment properties. . . . . . . . . . . . . . . . . . . . -- (48,911)
Partnership's distributions from unconsolidated ventures and
proceeds from sale of investment property . . . . . . . . . . . . . . . 1,038,797 --
Partnership's contributions to unconsolidated ventures. . . . . . . . . . (453,039) --
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (37,892) (30,320)
----------- -----------
Net cash provided by (used in) investing activities . . . . . . . . 547,866 (79,231)
----------- -----------
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (109,221) (96,928)
Distributions to venture partners . . . . . . . . . . . . . . . . . . . . (111,810) --
Distributions to limited partners . . . . . . . . . . . . . . . . . . . . (16,000) --
----------- -----------
Net cash provided by (used in) financing activities . . . . . . . . (237,031) (96,928)
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . 1,628,429 218,531
Cash and cash equivalents, beginning of the year. . . . . . . . . . 16,214,633 14,791,381
----------- -----------
Cash and cash equivalents, end of the period. . . . . . . . . . . . $17,843,062 15,009,912
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 1,231,305 1,243,598
=========== ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
=========== ===========
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1997, which
are included in the Partnership's 1997 Annual Report on Form 10-K (File No.
0-16516) dated on March 21, 1998, as certain footnote disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report. Capitalized terms used but
not defined in this quarterly report have the same meaning as in the
Partnership's 1997 Annual Report on Form 10-K.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" as required in the first
quarter of 1996. The Partnership's policy is to consider a property to be
held for sale or disposition when the Partnership has committed to a plan
to sell or dispose of such property and active marketing activity has
commenced or is expected to commence in the near term or the Partnership
has concluded that it may dispose of the property by no longer funding
operating deficits or debt service requirements of the property thus
allowing the lender to realize upon its security. In accordance with SFAS
121, any properties identified as "held for sale or disposition" are no
longer depreciated. As of March 31, 1998, the Partnership and its
consolidated venture have or have previously committed to plans to sell or
dispose of their remaining investment property. Accordingly, the property
has been classified as held for sale or disposition in the accompanying
consolidated financial statements. The results of operations, net of
venture partners' share, for this property and for properties sold or
disposed of in the past two years were $286,956 and ($154,993),
respectively, for the three months ended March 31, 1998 and 1997.
In addition, the accompanying consolidated financial statements
include $128,930 and ($332,909), respectively, of the Partnership's share
of total property operations of $656,517 and ($1,232,675) for
unconsolidated properties for the three months ended March 31, 1998 and
1997, respectively, all of which are held for sale or disposition or have
been sold or disposed of during the past two years.
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been, and
will be, required under applicable law to remit directly to the taxing
authorities amounts representing withholding from distributions paid to
partners. Due to this, $16,000 representing such withholding was remitted
in 1998 to the state of Maryland on behalf of the Holders of Interest
during the first quarter of 1998.
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees and certain of its officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investments. Fees, commissions and
other expenses required to be paid by the Partnership (or its consolidated
venture) to the General Partners and their affiliates as of March 31, 1998
and for the three months ended March 31, 1998 and 1997 were as follows:
Unpaid at
March 31,
1998 1997 1998
------- ------- -------------
Insurance commissions . . . . $ 1,169 -- --
Reimbursement (at cost)
for out-of-pocket
salary and salary-related
expenses related to the
on-site personnel and for
other costs for the
Partnership and its
investment properties. . . . 14,669 10,619 6,294
------- ------- ------
$15,838 10,619 6,294
======= ======= ======
An affiliate of the General Partners was entitled to payment of
property management and leasing fees relating to 260 Franklin through
November 1994 and subsequently JMB guaranteed payment to the unaffiliated
third party property manager for the property management and leasing fees.
Pursuant to a loan modification for the property, property management and
leasing fees were required to be escrowed through December 1995. Beginning
in January 1996, the unaffiliated property manager was paid management and
leasing fees by the property. As of March 31, 1998, $1,510,132 of
management and leasing fees payable to the affiliate of the General
Partners (as a result of the escrowing of certain 1995 and prior years'
management and leasing fees payable to an affiliate of the General Partner
and its payment guarantee to the unaffiliated property manager) were
unpaid, of which the Partnership's share is $453,040. In connection with
the sale of the 260 Franklin Street building, the Partnership assumed the
liability for its prorata share, which amount was transferred to the
accounts of the Partnership upon the sale of 260 Franklin.
260 FRANKLIN
On January 2, 1998, 260 Franklin, through a trust, disposed of the
land, building and related improvements of the 260 Franklin Street
Building. 260 Franklin transferred title to the land, building and
improvements, and all other assets and liabilities related to the property
in consideration of a discharge of the mortgage loan and receipt of $200 in
cash. 260 Franklin recognized a gain on disposal of approximately
$23,200,000 in 1998, in part as a result of previous impairment losses
recognized by the joint venture in 1996 aggregating $11,145,446, and an
extraordinary gain on forgiveness of indebtedness of approximately
$17,500,000 for financial reporting purposes, of which the Partnership's
share is approximately $7,000,000 and $5,000,000, respectively. In
addition, 260 Franklin expects to recognize a gain of approximately
$25,200,000 for Federal income tax reporting purposes, of which the
Partnership's share is approximately $7,500,000, with no distributable
proceeds in 1998. 260 Franklin and the Partnership have no future
liability for any representations, warranties or covenants to the purchaser
as a result of the sale.
<PAGE>
PALM DESERT TOWN CENTER
Occupancy at the portion of the shopping center in which the
Partnership owns an interest decreased to 85% at March 31, 1998 down from
88% at December 31, 1997. Sales at the center have been negatively
impacted during the last several quarters by new competition in the
center's trade area. The increased competition has resulted in lower
effective rents upon re-leasing of space. The center will continue to be
subject to increased competition from new developments that are expected to
be opening in the vicinity in the near future. The property has been
operating at an approximately break-even level. The joint venture
continues to consider a possible expansion of the mall and restructuring of
the ground lease and mortgage loan.
The Partnership and Carlyle-XVII entered into an agreement with the
unaffiliated venture partner, effective January 1, 1998, pursuant to which
the Partnership and Carlyle-XVII granted the unaffiliated venture partner
an option to acquire their interests in the joint venture. Pursuant to
such option, the unaffiliated venture partner has the right (but not the
obligation) to purchase all (but not less than all) of the Partnership's
and Carlyle-XVII's interests in the joint venture by giving notice of its
exercise of the option during the term of the option, which may extend
through July 15, 1998. The aggregate purchase price for the interests is
$7,000,000. In consideration for the option, the unaffiliated venture
partner is required to pay $58,333 for each month of the option term. The
Partnership and Carlyle-XVII will share the consideration for the option
and, if applicable, the purchase price in proportion to their respective
capital contributions to the joint venture (i.e., approximately 85.8% for
the Partnership and approximately 14.2% for Carlyle-XVII). Concurrently
with the execution of the option agreement, the joint venture made a
distribution to the Partnership and Carlyle-XVII in the aggregate amount of
approximately $740,000 (of which the Partnership's share was approximately
$635,000), which represents undistributed net cash flow of the joint
venture through the end of 1997. All other funds and net cash flow of the
joint venture during the term of the option are to be held by the joint
venture for its use, and if the sale of the Partnership's and Carlyle-
XVII's interests closes pursuant to the option agreement, such funds and
net cash flow will inure to the benefit of the unaffiliated venture
partner. The unaffiliated venture partner agreed to pay deficits of the
joint venture incurred in the ordinary course of its business that arise or
accrue during the term of the option, to the extent that the joint
venture's funds and net cash flow are insufficient to cover such deficits.
The property is expected to operate near the break-even level during the
term of the option. In general, the Partnership, Carlyle-XVII and the
unaffiliated venture partner agreed not to sell or refinance the Palm
Desert Town Center or engage in other actions outside the ordinary course
of the joint venture's business, not to make any distribution of the joint
venture's funds to its partners except for the distribution to the
Partnership and Carlyle-XVII described above, and, unless consented to by
all of the partners in the joint venture, not to amend or modify existing
leases and other contracts, and not to enter into new leases or agreements,
affecting the property during the term of the option. The unaffiliated
venture partner may terminate the option by giving notice of termination to
the Partnership and Carlyle-XVII, and under certain extraordinary
circumstances involving a termination of the option, the Partnership and
Carlyle-XVII may be obligated to refund the option consideration. In the
event such a sale does occur, the Partnership and Carlyle-XVII would not
participate in, or be required to pay a share of the costs of, an expansion
of the mall and restructuring of the ground lease and mortgage loan for the
joint venture. The Partnership could thereafter distribute a majority of
the funds it currently holds as working capital reserves for the possible
payment of its share of such costs, as well as any distributable net
proceeds from such sale. There is no assurance that the option will be
exercised or that a sale of the Partnership's and Carlyle-XVII's interest
in the joint venture will occur. During the term of the option, the
unaffiliated venture partner is entitled to pursue a possible expansion of
the mall and restructuring of the ground lease and mortgage loan on its
own, provided that no contracts are made effective prior to the exercise of
the option and the close of escrow and no liability accrues to the
Partnership or Carlyle-XVII from the unaffiliated venture partner's
actions.
The land underlying the shopping center is owned by the lender under
the first mortgage loan. Palm Desert leases the land by assignment of an
existing ground lease which provides for minimum annual rental payments of
$900,000, as well as for additional rental payments for each calendar year
equal to 50% of the amount by which certain of the ground lessee's gross
receipts from the shopping center exceed $6,738,256. Total ground rent
expense for the three months ended March 31, 1998 and 1997 was $246,614 and
$323,257, respectively.
NEWPARK MALL
During the quarter, occupancy of the portion of the shopping center in
which the Partnership owns an interest decreased to 77%, down from 79% in
the previous quarter. As a result of the acquisition by Federated
Department Stores of the company which owns the Emporium Capwell store at
NewPark Mall, Federated, which also owns the Macy's store at NewPark,
approached the NewPark joint venture regarding a sale of the Emporium
Capwell building. Simultaneously with its negotiations to acquire the
Emporium Capwell building, the NewPark joint venture negotiated to sell the
building to a national retail store owner. These transactions closed in
1997 and the joint venture received net proceeds of approximately
$2,000,000. The property is producing cash flow for the joint venture.
Subsequent to the end of the quarter, the Partnership and its affiliated
venture partner (Carlyle-XV) commenced efforts to market their respective
interests in the NewPark joint venture for sale. There is no assurance
that such efforts will result in a sale of such joint venture interests.
UNCONSOLIDATED VENTURES - SUMMARY INFORMATION
Summary income statement information for 260 Franklin for the three
months ended March 31, 1998 and 1997 is as follows:
1998 1997
----------- ----------
Total income . . . . . . . . . $ 76,002 2,440,134
Expenses applicable to
operating income (loss). . . 7,981 3,734,073
----------- ----------
Operating income (loss). . . . 68,021 (1,293,939)
Gain on sale . . . . . . . . . 23,212,184 --
Extraordinary item . . . . . . 17,451,802 --
----------- ----------
Net earnings (loss). . . . . . $40,732,007 (1,293,939)
=========== ==========
Partnership's share
of income (loss) . . . . . . $12,244,045 (388,182)
=========== ==========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments and adjustments to
reflect the treatment given certain transactions in the Partnership's 1997
Annual Report) necessary for a fair presentation have been made to the
accompanying figures as of March 31, 1998 and for the three months ended
March 31, 1998 and 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investment properties.
The board of directors of JMB Realty Corporation ("JMB"), the
corporate general partner of the Partnership, has established a special
committee (the "Special Committee") consisting of certain directors of JMB
to deal with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and has retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests.
During 1997, some of the Holders of Interests in the Partnership
received from unaffiliated third parties unsolicited offers to purchase up
to 4.9% of the outstanding Interests in the Partnership at $105 per
Interest. Such offers expired in 1997. The Special Committee recommended
against acceptance of these offers on the basis that, among other things,
the offer price was inadequate.
In late March of 1998, some of the Holders of Interests in the
Partnership received from an unaffiliated third party an unsolicited offer
to purchase up to 4.9% of the outstanding Interests in the Partnership at
$50 per Interest. Such offer is currently scheduled to expire in early
June 1998. The Special Committee has recommended against acceptance of
this offer on the basis that, among other things, the offer price was
inadequate. As of the date of this report, the Partnership is aware that
2.89% of the Interests have been purchased by all unaffiliated third
parties who have made unsolicited offers for Interests, either pursuant to
all such tender offers or through negotiated purchases. The Partnership
has been notified that an unaffiliated third party intends to commence an
offer for up to 5,413 Interests (approximately 3.86% of the outstanding
Interests) for $105 per Interest, and it is possible that other offers for
Interests may be made in the future. However, there is no assurance that
any such offer will be made, the terms of any such offer or whether any
such offer will be consummated, amended or withdrawn.
At March 31, 1998, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $17,843,000. Such cash and cash
equivalents are available for capital improvements and other working
capital requirements, including the Partnership's share of the costs for a
possible expansion of the mall and restructuring of the ground lease and
loan at Palm Desert Town Center. The Partnership and its consolidated
venture have currently budgeted in 1998 approximately $177,000 (excluding
costs of the possible expansion and restructuring) for tenant improvements
and other capital expenditures. The Partnership's share of such items,
including its share of such items for its unconsolidated venture, is
currently budgeted to be approximately $275,000. Actual amounts expended
in 1998 may vary depending on a number of factors including actual leasing
activity, results of operations, liquidity considerations and other market
conditions over the course of the year and whether the Palm Desert joint
venture proceeds with the possible expansion of the mall and restructuring
of the ground lease and mortgage loan. In addition, the Partnership has
entered into an agreement with Carlyle-XVII and the unaffiliated venture
partner in the Palm Desert joint venture pursuant to which the unaffiliated
joint venture has the option through July 15, 1998 to elect to purchase the
Partnership's and Carlyle-XVII's interests in the Palm Desert joint venture
for an aggregate purchase price of $7,000,000 (of which the Partnership's
share would be approximately $6,000,000. Pursuant to the option agreement,
the Palm Desert joint venture made a distribution to the Partnership and
Carlyle-XVII in the aggregate amount of $740,000 (of which the
Partnership's share was approximately $635,000), which represents
undistributed net cash flow of the joint venture through the end of 1997.
All other funds and net cash flow of the joint venture during the term of
the option are to be held by the joint venture for its use, and if the sale
of the Partnership's and Carlyle-XVII's interests closes pursuant to the
option agreement, such funds and net cash flow will inure to the benefit of
the unaffiliated venture partner. Reference is made to the Notes for a
further discussion of the option agreement. In the event of a sale of its
interest pursuant to the exercise of such option, the Partnership would not
participate in, or be required to pay a share of the costs of, an expansion
of the mall and restructuring of the ground lease and mortgage loan for
Palm Desert. The Partnership may also use a portion of its reserves to pay
its share of the costs for a possible mall enhancement program at NewPark
Mall, although there are no specific plans currently for such a program.
The source of capital for tenant improvements and other capital
expenditures and for both short-term and long-term future liquidity and
distributions is expected to be through net cash generated by the
investment properties, the Partnership's working capital reserve and from
the sale of such properties (or the Partnership's interest therein). Any
working capital reserves of the Partnership not ultimately used for tenant
improvements, other capital expenditures or working capital requirements
(including those relating to Palm Desert) would be available for future
distributions.
In May 1998, the Partnership expects to make an annual distribution of
cash generated from operations of $2 per Interest.
After reviewing the remaining properties and the marketplaces in which
they operate, the General Partners of the Partnership expect to be able to
sell its remaining investment portfolio as quickly as practicable. As a
result, the affairs of the Partnership are expected to be wound up no later
than December 31, 1999 (sooner if the properties are sold in the near
term), barring unforeseen economic developments. The Partnership's goal of
capital appreciation will not be achieved. Moreover, although the
Partnership expects to distribute sale proceeds from the disposition of
Palm Desert Town Center and NewPark Mall investment properties, aggregate
distributions of sale or refinancing proceeds received by Holders of
Interests over the entire term of the Partnership are expected to be
significantly less than one-half of their original investment. The
Partnership expects to recognize a gain of approximately $7,000,000 for
Federal income tax purposes from the disposition in January 1998 of the 260
Franklin Street building with no distributable proceeds from such
disposition.
RESULTS OF OPERATIONS
The decrease in allowance for doubtful accounts at March 31, 1998 as
compared to December 31, 1997 and the decrease in rental income and
property operating expenses for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997 is primarily due to the
resolution of litigation with a former tenant which resulted in the
reversal, in the first quarter of 1998, of a tenant receivable balance
which had been recognized in prior years and fully reserved for. The
allowance for doubtful accounts was also reduced in the first quarter of
1998 in conjunction with the reversal of the aforementioned tenant
receivable balance. The decrease was also due to the collection, in the
first quarter of 1998, of certain tenant accounts receivable balances which
were reserved for in prior years.
The decrease in prepaid expenses at March 31, 1998 as compared to
December 31, 1997 is primarily due to the timing of payment of insurance
premiums at Palm Desert Town Center.
<PAGE>
The decrease in investment in consolidated ventures, at equity, at
March 31, 1998 as compared to December 31, 1997 is primarily due to the
distribution to the Partnership of $1,000,000 of previously undistributed
operating cash flow and proceeds from the sale of JMB/Ownings interest in
Owings Mills.
The increase in accounts payable at March 31, 1998 as compared to
December 31, 1997 is primarily due to the timing of payment of real estate
tax payments at Palm Desert Town Center and the Partnership's assumption of
its prorata share of the management and leasing fees payable to an
affiliate of the General Partners which amount was transferred to the
accounts of the Partnership upon the sale of 260 Franklin.
The unearned rents at December 31, 1997 is due to the prepayment of
rents at Palm Desert Town Center.
The decreased deficit in investment in unconsolidated ventures, at
equity, at March 31, 1998 as compared to December 31, 1997 is primarily due
to the disposition of the 260 Franklin Street property in the first quarter
of 1998.
The other income reported for the three months ended March 31, 1998
represents the Partnership's share of the consideration paid by the
unaffiliated venture partner of the Palm Desert Town Center during the
first quarter pursuant to the option agreement.
The decrease in depreciation expense for the three months ended
March 31, 1998 as compared to the three months ended March 31, 1997 is due
to the Palm Desert Town Center being classified as held for sale or
disposition as of July 1, 1997, and therefore, no longer being subject to
continued depreciation.
The increase in venture partners' share of ventures' operations for
the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997 is due to an increase in net operating earnings at the Palm
Desert Town Center primarily as a result of the property being classified
as held for sale or disposition as of July 1, 1997, and therefore, no
longer being subject to continued depreciation.
The increase in Partnership's share of operations of unconsolidated
ventures for the three months ended March 31, 1998 as compared to the three
months ended March 31, 1997 is primarily due to the disposition of the 260
Franklin Street building on January 2, 1998.
The gain on sale of Partnership's investments in unconsolidated
ventures of $7,103,609 for the three months ended March 31, 1998 represents
recognition of deferred gain on sale of JMB/Owing's interest in Owings
Mills and gain on the disposition of the 260 Franklin Street building.
The extraordinary item at March 31, 1998 represents the Partnership's
share of the gain on forgiveness of indebtedness resulting from the loan
modification agreement with the lender of the 260 Franklin Street building
in which the lender waived accrued unpaid interest for the period prior to
January 1, 1998.
<PAGE>
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's investment
properties owned during 1998:
<CAPTION>
1997 1998
-------------------------------------- -------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. 260 Franklin Street Building
Boston, Massachusetts. . . . 96% 97% 98% 98% N/A
2. NewPark Mall
Newark (Alameda County),
California . . . . . . . . . 75% 75% 76% 79% 77%
3. Palm Desert Town Center
Palm Desert (Palm Springs),
California . . . . . . . . . 88% 86% 87% 88% 85%
- --------------------
<FN>
An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter.
/TABLE
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3-A. The Amended and Restated Agreement of Limited Partnership and
the Assignment Agreement set forth as Exhibit B to the Prospectus, copies
of which are hereby incorporated herein by reference to Exhibit 3 and
Exhibit 4-A to the Partnership's Report for December 31, 1992 on Form 10-K
(File No. 0-16516) dated March 19, 1993.
3-B. Acknowledgement of rights and duties of the General Partners of
the Partnership between ABPP Associates, L.P. (a successor Associated
General Partner of the Partnership) and JMB Realty Corporation as of
December 31, 1995 dated November 18, 1996 are hereby incorporated herein by
reference to the Partnership's Report for September 30, 1996 on Form 10-Q
(File No. 0-16516) dated November 8, 1996.
4-A. Documents relating to the loan modification of the mortgage loan
secured by the 260 Franklin Street Building is hereby incorporated herein
by reference to Exhibit 4-B to the Partnership's Report for December 31,
1991 on Form 10-K (File No. 0-16516) dated March 27, 1992.
4-B. Documents dated December 19,1995 relating to the Promissory Note
secured by NewPark Mall are hereby incorporated herein by reference to the
Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-16516)
dated March 25, 1996.
4-C. Documents relating to the third mortgage modification and
extension agreement secured by the 260 Franklin Street Building dated
December 4, 1996 are hereby incorporated herein by reference to the
Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-16516)
dated March 21, 1997.
10-A. Acquisition documents relating to the purchase of an interest in
the 260 Franklin Street Building, Boston, Massachusetts, are hereby
incorporated herein by reference to Exhibit 10.4 to the Partnership's
Amendment No. 2 to Form S-11 (File No. 33-3567) dated July 25, 1986.
10-B. Additional acquisition documents relating to the purchase of an
interest in the 260 Franklin Street Building, Boston, Massachusetts, are
hereby incorporated herein by reference to Exhibit 10.4.1 to the
Partnership's Post-Effective Amendment No. 1 to Form S-11 (File No. 33-
3567) dated September 30, 1986.
10-C. Acquisition documents relating to the purchase by the
Partnership of an interest in NewPark Mall in Newark (Alameda County),
California, are hereby incorporated herein by reference to Exhibit 10.6 to
the Partnership's Post-Effective Amendment No. 2 to Form S-11 (File No. 33-
3567) dated December 30, 1986.
10-D. Acquisition documents relating to the acquisition by the
Partnership of an interest in the Palm Desert Town Center in Palm Desert,
California, dated December 23, 1988 are hereby incorporated herein by
reference to Exhibit 1 to the Partnership's Form 8-K (File No. 0-16516)
dated January 6, 1989.
10-E. Modification to Reserve Escrow Agreement relating to the 260
Franklin Street Building is hereby incorporated herein by reference to the
Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-16516)
dated May 11, 1995.
<PAGE>
10-F. Modification Reserve Escrow Agreement relating to the 260
Franklin Street Building dated December 4, 1996 are hereby incorporated
herein by reference to the Partnership's Report for December 31, 1996 on
Form 10-K (File No. 0-16516) dated March 21, 1997.
10-G. Modification to Reserve Escrow Agreement relating to the 260
Franklin Street Building dated May 22, 1997 is incorporated herein by
reference to the Partnership's Report for June 30, 1997 on Form 10-Q (File
No. 0-16516) dated August 8, 1997.
10-H. Agreement for purchase and sale by 260 Franklin Street
Associates Trust of its interest in the 260 Franklin Street property is
hereby incorporated by reference to the Partnership's Report for January 2,
1998 on Form 8-K (File No. 0-16516) dated January 27, 1998.
10-I. Palm Desert Option Agreement by the Partnership and Carlyle-XVII
relating to the unaffiliated venture partner's option to purchase the
Partnership and Carlyle-XVII's interest in the joint venture dated March
11, 1998 are filed herewith.
27. Financial Data Schedule
(b) The following report on Form 8-K was filed since the beginning of
the last quarter of the period covered by this report.
The Partnership's Report on Form 8-K (File No. 0-16516) for
January 2, 1998 (describing the disposal of the 260 Franklin Street
Building) was filed. This report was dated January 27, 1998 and includes a
discussion of the sale (Item 5).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XVI
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 13, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: May 13, 1998
EXHIBIT 10-I
- ------------
(Carlyle - XVI)
PALM DESERT OPTION AGREEMENT
----------------------------
between
CARLYLE/PALM DESERT, INC.,
and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI,
and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVII,
as SELLER
and
HAHN/PALM DESERT, INC.,
and
TRIZECHAHN CENTERS INC.,
as BUYER
relating to
JMB/HAHN PDTC ASSOCIATES, L.P.,
a California limited partnership
EFFECTIVE AS OF JANUARY 1, 1998
[FINAL VERSION DATED MARCH 11, 1998]
<PAGE>
TABLE OF CONTENTS
- -----------------
Section Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. PARTNERSHIP. . . . . . . . . . . . . . . . . . . 1
B. PROPERTY . . . . . . . . . . . . . . . . . . . . 1
C. REDEVELOPMENT OPPORTUNITIES. . . . . . . . . . . 1
D. PURPOSE. . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 2
1. CREATION OF OPTION. . . . . . . . . . . . . . . . . . 2
1.1 GRANT. . . . . . . . . . . . . . . . . . . . . . 2
1.2 TERM . . . . . . . . . . . . . . . . . . . . . . 2
1.3 OPTION CONSIDERATION . . . . . . . . . . . . . . 2
1.4 MEMORANDUM OF OPTION . . . . . . . . . . . . . . 2
2. CONDUCT DURING TERM OF OPTION . . . . . . . . . . . . 3
2.1 MANAGEMENT AND ENTRY . . . . . . . . . . . . . . 3
2.2 RIGHTS TO DOCUMENTS. . . . . . . . . . . . . . . 3
2.3 RIGHT TO MEET WITH OTHERS. . . . . . . . . . . . 4
2.4 RIGHT TO SEPARATELY CONTRACT WITH OTHERS . . . . 4
2.5 CONDUCT OF REVIEWS . . . . . . . . . . . . . . . 5
2.6 OPERATION OF PARTNERSHIP . . . . . . . . . . . . 5
2.7 OBLIGATIONS FOR NEGATIVE CASH FLOW . . . . . . . 6
2.8 TERMINATION OBLIGATIONS. . . . . . . . . . . . . 8
2.9 PUBLICITY AND CONFIDENTIALITY. . . . . . . . . . 8
3. EXERCISE, EXPIRATION OR TERMINATION . . . . . . . . . 8
3.1 EXERCISE OF OPTION . . . . . . . . . . . . . . . 8
3.2 CONDITION OF TITLE . . . . . . . . . . . . . . . 9
3.3 EXPIRATION OR TERMINATION. . . . . . . . . . . . 9
3.4 ASSET PURCHASE RIGHTS. . . . . . . . . . . . . . 9
4. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . 9
4.1 ASSIGNMENT . . . . . . . . . . . . . . . . . . . 9
4.2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . 9
4.3 NOTICE AND CURE RIGHTS . . . . . . . . . . . . . 9
4.4 REFRAINING FROM LEGAL PROCEEDINGS. . . . . . . . 10
4.5 AMENDMENT, MODIFICATION AND WAIVER . . . . . . . 10
4.6 PARTIAL INVALIDITY . . . . . . . . . . . . . . . 10
4.7 NO THIRD PARTY BENEFICIARY . . . . . . . . . . . 10
4.8 NOTICES. . . . . . . . . . . . . . . . . . . . . 11
4.9 TIME OF ESSENCE. . . . . . . . . . . . . . . . . 11
4.10 GOVERNING LAW . . . . . . . . . . . . . . . . . 11
4.11 REMEDIES. . . . . . . . . . . . . . . . . . . . 11
4.12 ATTORNEYS' FEES . . . . . . . . . . . . . . . . 11
4.13 EXPENSES OF PARTIES . . . . . . . . . . . . . . 11
4.14 FURTHER ASSURANCES. . . . . . . . . . . . . . . 11
4.15 HEADINGS. . . . . . . . . . . . . . . . . . . . 11
4.16 GENDER. . . . . . . . . . . . . . . . . . . . . 12
4.17 FAIR MEANING. . . . . . . . . . . . . . . . . . 12
4.18 BINDING EFFECT. . . . . . . . . . . . . . . . . 12
4.19 COUNTERPARTS AND FACSIMILES . . . . . . . . . . 12
4.20 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . 12
4.21 LIMITATION ON LIABILITY; SURVIVAL OF CLAIMS . . 12
TABLE OF EXHIBITS
- -----------------
A. Purchase Agreement
B. Memorandum of Option Agreement
C. Quitclaim Deed Terminating Option
<PAGE>
PALM DESERT OPTION AGREEMENT
- ----------------------------
THIS PALM DESERT OPTION AGREEMENT (the "Option Agreement") is made
and entered into on March 11, 1998 (the "Execution Date"), effective as of
January 1, 1998 (the "Effective Date"), by the following parties,
hereinafter referred to as the "JMB Group" or "Seller":
CARLYLE/PALM DESERT, INC., an Illinois corporation ("Managing
Partner");
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI, an Illinois
limited partnership ("Carlyle A"); and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVII, an Illinois
limited partnership ("Carlyle B");
and also by the following parties, hereinafter referred to as the
"TrizecHahn Group" or "Buyer":
HAHN/PALM DESERT, INC., a California corporation
("Co-Partner"); and
TRIZECHAHN CENTERS INC., a California corporation, formerly
known as ERNEST W. HAHN, INC., a California corporation ("TrizecHahnco").
Recitals
- --------
A. PARTNERSHIP. The JMB Group and TrizecHahn Group together
constitute all of the partners in JMB/Hahn PDTC Associates, L.P., a
California limited partnership (the "Partnership"). The Partnership was
formed by an Agreement of Limited Partnership made and entered into as of
December 23, 1988 (the "Partnership Agreement"). The Partnership Agreement
is in full force and effect and has not been amended. The defined terms in
the Partnership Agreement are incorporated herein by reference. Managing
Partner and Co-Partner are the General Partners of the Partnership.
Carlyle A, Carlyle B and TrizecHahnco (the latter referred to in the
Partnership Agreement as "Hahnco") are the Limited Partners of the
Partnership.
B. PROPERTY. The principal asset of the Partnership is the
Property, as defined in the Partnership Agreement. It consists of certain
real and personal property in Riverside, California, which, together with
certain parcels owned by department stores, is commonly known as "Palm
Desert Town Center."
C. REDEVELOPMENT OPPORTUNITIES. During the term of this Option
Agreement, Buyer intends to review opportunities to redevelop and refinance
the Property. In the course of that effort, Buyer expects to discuss
matters respecting the Property with governmental agencies, tenants,
lenders and other persons or entities with whom the Partnership or others
have contractual arrangements, or prospective contractual arrangements,
relating to the Property. The parties wish to set forth the parameters for
any such dealings.
D. PURPOSE. Buyer desires to acquire the exclusive right to
purchase all, and not less than all, of the JMB Group's interests in the
Partnership, consisting of all of Managing Partner's general partnership
interests in the Partnership, and all of Carlyle A's and Carlyle B's
limited partnership interests in the Partnership, including, without
limitation, all of the JMB Group's interests in capital, profits,
liquidation proceeds, distributions and all other rights and interests
under the Partnership Agreement or relating to the Partnership
(collectively, "Seller's Partnership Interests"), without becoming
obligated to purchase them, at an agreed price and under specified terms
and conditions. By entering into this Option Agreement, the parties
consent to such a purchase and sale pursuant to Section 6.1 of the
Partnership Agreement.
AGREEMENT
- ---------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CREATION OF OPTION.
1.1 GRANT. Seller hereby grants to Buyer the exclusive right
and option to purchase all of Seller's Partnership Interests (the
"Option"), at the price and on the other terms and conditions set forth in
the Palm Desert Agreement for Purchase and Sale of Partnership Interests
attached hereto as EXHIBIT A (the "Purchase Agreement"). Fully executed
originals of the Purchase Agreement, and of each of its exhibits, have been
deposited with the Escrow Holder (as defined in Section 1.12 of the
Purchase Agreement), their effectiveness, however, made contingent upon
Buyer's timely exercise of this Option.
1.2 TERM. The term of this Option shall begin upon the
Effective Date and end on July 15, 1998; provided, however, that (i) if
this Option is duly exercised by Buyer, then references in this Option
Agreement to the "term of this Option" shall be deemed to include the
period of time from exercise until the Close of Escrow (as defined in
Section 7 of the Purchase Agreement), and (ii) if this Option is terminated
by written notice from Buyer to Seller pursuant to Section 3.3 below, then
references in this Option Agreement to the "term of this Option" shall mean
the period of time from the Effective Date until the date on which such
notice of termination is given.
1.3 OPTION CONSIDERATION. This Option is granted in
consideration for (i) Buyer's hereby agreeing to pay option consideration
to Seller ("Option Consideration"), to be allocated among the parties
constituting Seller in proportion to their respective Seller's Partnership
Interests, and (ii) other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. The Option Consideration
shall be payable in the amount of $58,333 per month (prorated for any
partial month in which the Close of Escrow shall occur or in which this
Option Agreement shall otherwise expire or be terminated without exercise
as herein provided) on the first day of each month during the term of this
Option Agreement (with the payments for January, February and March of 1998
being made concurrently with the execution hereof).
1.4 MEMORANDUM OF OPTION. A memorandum of this Option
Agreement in the form of EXHIBIT B attached hereto has been executed and
acknowledged by the parties concurrently herewith, and may be recorded by
Buyer at its option and at its expense. Concurrently herewith, Buyer is
executing a quitclaim deed terminating this Option in the form of EXHIBIT C
attached hereto, which shall be held by Stewart Title of California, Inc.
("Escrow Holder"). If this Option Agreement expires or terminates without
exercise, Seller shall have the right to cause Escrow Holder to record such
quitclaim deed. Buyer hereby further agrees to execute, acknowledge and
deliver to Seller, within ten (10) days after request therefor, a
termination agreement or any other document reasonably requested by Seller
or a title insurance company in order to verify such expiration or
termination.
<PAGE>
2. CONDUCT DURING TERM OF OPTION.
2.1 MANAGEMENT AND ENTRY.
2.1.1 TrizecHahn Centers Management Inc., a California
corporation, formerly known as Hahn Property Management Corporation, a
California corporation ("Manager"), is an Affiliate (as defined in
Section 1.1 of the Purchase Agreement) of Buyer, and presently manages the
Property pursuant to the Management Agreement. Manager is hereby
authorized and directed to reasonably cooperate with Buyer, solely at
Buyer's cost and expense, by allowing Buyer to enter upon the Property
during the term of this Option, subject to the rights of tenants, to make
such surveys, inspections and tests as may reasonably be necessary in
connection with Buyer's examination and analysis of the Property, subject
to the terms of this Option Agreement.
2.1.2 During the term of this Option, the Management
Agreement shall remain in full force and effect notwithstanding any rights
of termination that otherwise may be provided for therein, except that the
Management Agreement may be terminated as provided therein during the term
of this Option in case of:
-- Bankruptcy of Manager;
-- Fraud by Manager;
-- The actual closing of a transaction which changes
the control of Manager to a non-Affiliate of TrizecHahnco;
provided, however, that if the Option is not exercised, or if it is
exercised but escrow fails to close for any reason, then any grounds for
termination of the Management Agreement which may have arisen during the
term of this Option shall not be deemed to have been waived by the owner,
but rather its right to terminate, and any other rights it may have under
the Management Agreement for termination or damages, shall be deemed merely
to have been stayed during the term of this Option, and after expiration or
termination of this Option, or failure to close for any reason, all rights
the owner may have for termination or damages under the Management
Agreement may be exercised, if and as permitted in accordance with its
terms.
2.2 RIGHTS TO DOCUMENTS. During the term of this Option, to
the extent that Manager or Buyer does not have possession or control of the
following documents and Seller does have actual possession or control
thereof, Seller shall make the following documents reasonably available to
Buyer. Buyer shall have the right to use such documents both in connection
with its examination and analysis of the Property, and in connection with
its review of redevelopment opportunities at the Property:
2.2.1 All third party studies, reports, governmental
applications, permits, maps, plans, specifications and other documents in
the Partnership's possession or that it has made or contracted to be made
respecting the Partnership Property, including without limitation all third
party engineering reports, surveys, soil tests, seismic studies,
environmental reports, grading, flood control and drainage plans, design
renderings, market analyses, feasibility studies, proposed tentative,
parcel and final maps, and all correspondence with and notices to or from
governmental agencies, tenants, lenders and their personnel concerning the
same.
2.2.2 The books and records of the Partnership,
including without limitation any books and records relating to the
financial condition of the Partnership, taxes paid or to be paid by the
Partnership, the capital accounts and capital contributions of the
Partners, distributions made or to be made to the Partners, and all notices
to or from the Partnership regarding its affairs, all to the extent that
Seller itself has the right to such access.
<PAGE>
2.3 RIGHT TO MEET WITH OTHERS. For purposes of this
Section 2.3, the term "Buyer" shall mean either one of the entities
constituting Buyer, or both of them, as Buyer may elect. During the term
of this Option:
2.3.1 Buyer and its agents shall have the right (i) to
meet with all governmental agencies, tenants, lenders and other persons or
entities with whom the Partnership or others have contractual arrangements,
or prospective contractual arrangements, relating to the Property, (ii) to
discuss with any such agencies, tenants, lenders, persons and entities the
terms of this Option Agreement and Buyer's proposed redevelopment of the
Property, and (iii) subject to the terms of Section 2.4 below, to enter
into contractual arrangements with any such agencies, tenants, lenders,
persons and entities in Buyer's own name. In engaging in the foregoing
activities, Buyer may act for the purpose of furthering its own economic
interest with respect to the Property, so long as it does so in a manner
consistent with the requirements of Section 2.4 below, without thereby
being considered to be in violation of any fiduciary duty owed to Seller or
the Partnership, and without thereby being considered to have diverted any
prospective economic advantage or opportunity of Seller or the Partnership.
Buyer shall inform any such persons or entities with whom it is dealing
that Buyer is acting solely in its separate capacity as optionee hereunder
and not as the Partnership. Without limitation thereon, Buyer shall inform
such persons or entities that Buyer has no power or authority to bind the
Partnership or the Property at any time before the Close of Escrow, or to
bind Seller in any manner whether before or after the Close of Escrow,
without the separate written consent of Seller.
2.3.2 Buyer anticipates that meetings and discussions of
the kind referred to in Section 2.3.1 may be a continual activity during
the term of this Option, at times in formal face-to-face settings at which
principals are present and material decisions are expected to be made, at
other times in more ordinary course face-to-face information-gathering
sessions, at other times by telephone or other means of telecommunication,
and at still other times by fax, e-mail or in other ways in which business
affairs are conducted. With respect only to (i) formal face-to-face
meetings at which principals are present and material decisions are
expected to be made, and (ii) formal meetings by telephone or other means
of telecommunication, serving for all intents and purposes as a substitute
for formal face-to-face meetings, at which principals are present and
material decisions are expected to be made, Buyer shall give Seller at
least two (2) business days prior written notice of the time and place (or
dial-in number) for such meetings. Seller shall have the right, but no
obligation, to have a representative in attendance at such meetings. Buyer
shall have the right, but no obligation, to proceed with such meetings,
whether or not Seller chooses to have a representative in attendance.
Buyer shall keep Seller reasonably informed with respect to those meetings
as to which Seller does not send a representative.
2.4 RIGHT TO SEPARATELY CONTRACT WITH OTHERS. For purposes
of this Section 2.4, the term "Buyer" shall mean either one of the entities
constituting Buyer, or both of them, as Buyer may elect. During the term
of this Option, as part of its effort to redevelop or refinance the
Property, Buyer may find it necessary or appropriate to submit, or to
commit others to the terms of, various applications, permits, maps,
easements, restrictions, leases, agreements to modify or terminate any of
the foregoing, and other contractual arrangements with governmental
agencies, tenants, lenders and other persons and entities (collectively,
"Contracts"), related to, and in some cases potentially affecting the
Property. During the term of this Option, acting alone, Buyer is
authorized to enter into such Contracts (i) only in its own name, or (ii)
in the Partnership's name but only if the terms of such Contract make it
entirely conditional upon the Close of Escrow pursuant to the Purchase
Agreement. By doing so, Buyer itself will bear direct legal responsibility
for all obligations set forth in such Contracts, rather than Seller and the
Partnership. Buyer shall indemnify, defend and hold the Partnership,
Seller and the Property harmless from and against any loss, cost, expense,
damage, liability or obligation in connection with any such Contracts.
Consistent with the foregoing provisions, from time to time during the term
of this Option, (a) Buyer may apply to the City of Palm Desert, or to a
subdivision, agency, commission or authority thereof, for land use
approvals or other discretionary governmental actions required or otherwise
sought by Buyer in connection with its pursuit of opportunities for
redevelopment of the Property, either in its own name or in the name of the
Partnership so long as the effectiveness of governmental approval of such
an application is expressly made contingent upon the occurrence of the
Close of Escrow, and (b) Buyer may enter into Contracts with other
governmental agencies, tenants, lenders and other persons, either in its
own name or in the name of the Partnership so long as the effectiveness
thereof is expressly made contingent upon the occurrence of the Close of
Escrow. Provided the foregoing conditions are satisfied, Seller hereby
agrees not to oppose or challenge any such applications or Contracts. All
applications and Contracts entered into in Buyer's name without being
joined by Seller or the Partnership, and all work product produced at
Buyer's expense from architects, engineers, construction managers,
contractors, legal counsel, marketing firms and similar consultants related
to redevelopment of the Property, shall remain the property of Buyer, and
shall be assigned to the Partnership only if mutually agreed by Buyer and
the Partnership, for separate consideration to be negotiated at that time.
2.5 CONDUCT OF REVIEWS.
2.5.1 Buyer shall at all times conduct all reviews,
inspections and examinations hereunder in a manner so as to not cause
damage, loss, cost or expense to Seller or the Property and so as to not
interfere with or disturb any tenant at the Property, and Buyer will
indemnify, defend, and hold Seller and the Property harmless from and
against any such damage, loss, cost or expense (the foregoing obligation
surviving any termination of this Option Agreement).
2.5.2 Notwithstanding the provisions of Section 2.5.1
above, Buyer shall not make any intrusive physical testing (environmental,
structural or otherwise) at the Property (such as water samplings or the
like) without Seller's prior written consent or deemed consent, as provided
in this Section 2.5.2, with the following single exception:
-- Buyer may make soil borings, for non-environmental
purposes only, without Seller's prior consent.
In the event that Buyer wishes to undertake any intrusive physical testing
requiring Seller's prior written consent, Buyer shall first give written
notice to Seller of the nature and extent of the proposed testing. Seller
shall have five (5) business days after its receipt of such notice to give
written notice to Buyer of Seller's approval or disapproval thereof.
Seller's approval of proposed testing shall not be unreasonably withheld.
If Seller disapproves of the proposed testing, Seller's notice of
disapproval must state the reason for its decision. If Seller fails to
approve or disapprove of the proposed testing within the said five (5)
business day period, then Seller shall be deemed to have approved of the
proposed testing. If the Option is not exercised, or if it is exercised
but escrow fails to close for any reason, Buyer shall promptly restore and
return the Property to its prior condition and repair, in all material
respects, after any intrusive testing hereunder.
2.5.3 Buyer shall not permit any lien to attach to the
Property in connection with any activities by or on behalf of Buyer
hereunder.
2.6 OPERATION OF PARTNERSHIP. During the term of this
Option:
2.6.1 Seller shall not, except with the prior written
consent of Buyer, (i) amend the Partnership Agreement, sell or refinance
the Property, or engage in any other act outside the ordinary course of
business of the Partnership, (ii) make or consent to the making of any
distributions by the Partnership to any of the Partners, except as
permitted by Section 2.6.3 below, (iii) amend, modify or waive any rights
of the Partnership under any existing leases, service contracts or other
agreements affecting the Property, or (iv) consent to the Partnership's
entering into any new leases, service contracts or other agreements
affecting the Property. In all other respects, during the term of this
Option, Seller shall continue to conduct its affairs in relation to the
Partnership and Partnership Property in a manner consistent with the
Partnership Agreement.
2.6.2 Seller hereby agrees that it shall not market its
interests in the Partnership or the Property during the term of this
Option. Seller's preparation of marketing materials with its financial and
legal advisors on a confidential basis, and Seller's response (short of
contracting to sell) to unsolicited offers or expressions of interest in
the Partnership or the Property, shall not constitute violations of this
Section 2.6.2, so long as Seller makes clear to such financial and legal
advisors, and to all persons making unsolicited offers or expressions of
interest, the superiority of Buyer's rights pursuant to this Option
Agreement. Seller agrees that it shall require any person making such an
unsolicited offer or expression of interest to maintain the confidentiality
of any responsive information provided to such person by Seller, and also
to maintain confidentiality as to the fact that discussions had occurred,
were occurring or might thereafter occur regarding the marketing, offering
or sale of interests in the Partnership or the Property.
2.6.3 Notwithstanding the limitations set forth in
Section 2.6.1 above, currently with the execution of this Agreement, the
Partnership shall distribute to the JMB Group, pursuant to the terms of the
Partnership Agreement, an aggregate amount equal to $739,881. Subject to
the terms and conditions hereinafter set forth, all other Cash, Net Cash
Flow, reserves and other assets of the Partnership shall be available for
use by Manager during the term of this Option, and at the Close of Escrow
(if such closing occurs) shall remain the property of the Partnership,
inuring to the benefit of the TrizecHahn Group.
2.6.4 Buyer shall not, except with the prior written
consent of Seller, amend the Partnership Agreement, or sell or refinance
the Property. In addition, subject to reasonable adjustments, as
appropriate, to take into account appropriate efforts by Buyer to pursue
opportunities to redevelop and refinance the Property in the manner
permitted by this Option Agreement:
(a) Buyer shall not engage in any act outside the
ordinary course of business of the Partnership, and shall continue at all
times to cause the Partnership and the Property to be operated and managed
in a first class manner as provided for in the Partnership Agreement, the
Management Agreement and this Option Agreement.
(b) Buyer shall operate and manage the Property in
accordance with the approved "Budget" under the Partnership Agreement.
(c) Except as authorized in the Partnership
Agreement, the Management Agreement, the other documents executed or
delivered in connection therewith, or in this Option Agreement, Buyer shall
not amend, modify or waive any rights of the Partnership under any existing
leases, service contracts or other agreements affecting the Property, or
consent to the Partnership's entering into any new leases, service
contracts or other agreements affecting the Property.
(d) In all other respects, during the term of this
Option, Buyer shall continue to conduct its affairs in relation to the
Partnership and Partnership Property in a manner consistent with Buyer's
conduct of such affairs in the ordinary course of the Partnership's
business as of the date of this Option Agreement.
2.7 OBLIGATIONS FOR NEGATIVE CASH FLOW. Notwithstanding
anything to the contrary contained in the Partnership Agreement, and in
consideration of Seller's waiver of any rights to distributions other than
as set forth in Section 2.6:
<PAGE>
2.7.1 To the extent that the Partnership's Cash, Net
Cash Flow, reserves and other current assets on hand are insufficient to
pay the costs and expenses of the Partnership which arise or otherwise
accrue during the term of this Option (whether attributable to events which
occur during the term of this Option, or to events which occurred prior
thereto but became recognized or payable during the term of this Option),
Buyer shall be solely responsible for and shall pay all such costs and
expenses of the Partnership, including any "Negative Cash Flow" (as defined
in the Partnership Agreement), BUT EXCLUDING from the foregoing
responsibility any obligation or liability for any losses, costs, expenses
or reasonable attorneys' fees of the Partnership arising or otherwise
accruing from casualty, condemnation or other events that are extraordinary
or outside the ordinary course of business (whether attributable to events
which occur during the term of this Option, or to events which occurred
prior thereto but became recognized or payable during the term of this
Option).
2.7.2 Losses, costs, expenses and reasonable attorneys'
fees of the Partnership arising or otherwise accruing during the term of
this Option from casualty, condemnation or other events that are
extraordinary or outside the ordinary course of business (whether
attributable to events which occur during the term of this Option, or to
events which occurred prior thereto but became recognized or payable during
the term of this Option) ("Extraordinary Losses"), shall be handled as
follows:
UNINSURED EXTRAORDINARY LOSSES:
(a) IF (i) the Extraordinary Losses are
uninsured, and (ii) the JMB Group's apportioned share thereof in accordance
with the terms of the Partnership Agreement would be $500,000 or less, THEN
such Extraordinary Losses shall be apportioned between Seller and Buyer in
accordance with the terms of the Partnership Agreement, and the parties'
respective shares shall be paid as follows:
-- If this Option is exercised and escrow closes
thereon, JMB's apportioned share shall be paid by Seller to Buyer at the
Close of Escrow (the parties hereby agreeing to act reasonably in approving
mutual written instructions to the Escrow Holder consistent with the terms
of the Partnership Agreement, in order for such apportionment to be made);
or
-- If this Option expires or is terminated, or
if escrow fails to close for any reason, such Extraordinary Losses shall be
borne by Seller and Buyer in accordance with the terms of the Partnership
Agreement.
(b) IF (i) the Extraordinary Losses are
uninsured, (ii) the JMB Group's apportioned share thereof in accordance
with the terms of the Partnership Agreement would exceed $500,000, and
(iii) Buyer expressly assumes liability for all such uninsured
Extraordinary Losses in excess of $500,000, either by so stating in Buyer's
written notice of exercise of this Option (if the Extraordinary Losses,
which make the JMB Group's apportioned share exceed $500,000, arise or
accrue BEFORE Buyer's exercise of this Option), or by so stating in a
separate written notice given to Seller within five (5) business days after
the date on which such Extraordinary Losses arise or accrue (if such
Extraordinary Losses arise or accrue AFTER Buyer's exercise of this Option
but before the Close of Escrow), THEN such Extraordinary Losses shall be
apportioned between Seller and Buyer, and the parties' respective shares
shall be paid as follows:
-- Upon the Close of Escrow, (x) Seller shall
pay $500,000 to Buyer (the parties hereby agree to act reasonably in
approving mutual written instructions to the Escrow Holder consistent with
the provisions in this Subsection (b)), and (y) Buyer shall bear the entire
balance of such Extraordinary Losses (notwithstanding any other provision
in the Partnership Agreement to the contrary).
<PAGE>
-- If escrow fails to close for any reason, such
Extraordinary Losses shall be borne by Seller and Buyer in accordance with
the terms of the Partnership Agreement.
(c) IF (i) the Extraordinary Losses are
uninsured, (ii) the JMB Group's apportioned share thereof in accordance
with the terms of the Partnership Agreement would exceed $500,000, and
(iii) Buyer does NOT expressly assume liability for all such uninsured
Extraordinary Losses in excess of $500,000 in the manner required by
Subsection (b) above, THEN, unless otherwise agreed in writing at that time
by Seller and Buyer, this Option Agreement and the escrow shall
automatically expire or terminate, and within five (5) business days after
the date of such expiration or termination, Seller shall refund to Buyer
all Option Consideration theretofore paid by Buyer to Seller, without
offset or deduction, and without interest, and the rights and obligations
of the parties with respect to income and expenses of the Partnership
during the term of this Option Agreement shall be as set forth in the
Partnership Agreement (and not as set forth in Section 2.7 hereof).
INSURED EXTRAORDINARY LOSSES:
(d) To the extent that the Extraordinary Losses
are insured, the parties' rights and obligations shall be as set forth in
Section 8 of the Purchase Agreement, entitled "Condemnation, Damage or
Destruction."
2.8 TERMINATION OBLIGATIONS. If this Option Agreement shall
terminate or expire without exercise, or if the Close of Escrow shall not
occur, then thereafter the rights and obligations of the parties under the
Partnership Agreement shall be reinstated (including all rights to
distribution thereunder); provided, however, that (i) except as otherwise
expressly provided in Section 2.7.2(c) above, income and expenses incurred
during the term of this Option shall be allocated in the manner set forth
in Section 2.7 (and appropriate prorations of such income and expenses
between periods prior to and after termination hereunder shall be made upon
such termination), and (ii) nothing contained in this Section 2.8 shall
limit any party's liability for breach or default by such party under this
Option Agreement.
2.9 PUBLICITY AND CONFIDENTIALITY. Until a Close of Escrow
pursuant to the Purchase Agreement, no party to this Option Agreement shall
issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Option
Agreement without the consent of all other parties, which consent shall not
be unreasonably withheld; provided, however, nothing contained in the
foregoing shall limit disclosures required by law or disclosures to a
party's partners, employees, lenders and third party consultants who
reasonably need to be informed and such other disclosures as may be
contemplated herein.
3. EXERCISE, EXPIRATION OR TERMINATION.
3.1 EXERCISE OF OPTION. This Option may be exercised by
Buyer's delivery of written notice to Escrow Holder and Seller, on or
before expiration of the term of this Option, stating that Buyer thereby
exercises the Option without condition or qualification. Upon receipt of
such a notice, Escrow Holder shall use the fully executed originals of the
Purchase Agreement, and of each of its exhibits, deposited with Escrow
Holder upon execution of this Option Agreement, as more particularly set
forth in the Purchase Agreement. Seller and Buyer shall additionally
execute, acknowledge and deliver any and all other documents necessary or
appropriate to carry out the terms and conditions of the Purchase Agreement
(provided the same do not materially increase any cost, liability or
obligation of a party from that otherwise contemplated herein).
<PAGE>
3.2 CONDITION OF TITLE. If this Option is exercised, title
to Seller's Partnership Interests shall be conveyed by Seller to Buyer in
accordance with the requirements of the Purchase Agreement. From the date
of this Option Agreement until expiration of the term of this Option,
neither Seller nor Buyer shall sell, assign, mortgage, hypothecate,
encumber or otherwise permit or suffer the transfer of all or any part of
their respective Partnership Interests without the other party's prior
written consent.
3.3 EXPIRATION OR TERMINATION. If Buyer fails to exercise
this Option prior to its expiration in accordance with its terms, then this
Option and the rights of Buyer under this Option Agreement shall
automatically and immediately terminate upon expiration of the term of this
Option without notice. This Option may also be terminated prior to its
expiration, by written notice from Buyer to Seller given at any time during
the term of this Option.
3.4 ASSET PURCHASE RIGHTS. Notwithstanding anything to the
contrary contained herein, Buyer shall have the right to restructure the
transaction hereunder from a sale of Seller's Partnership Interests to a
sale by the Partnership of its interests in the Partnership Property. Such
restructuring right may be exercised only by giving written notice thereof
concurrently with the exercise of the Option. In such event, Seller and
Buyer shall enter into modifications of this Option Agreement and of the
Purchase Agreement, together with such other agreements as shall reasonably
be required in order to effectuate the intent hereof, all costs and
expenses in connection with such matters shall be paid by Buyer, and no
material obligations or liabilities in excess of those provided for herein
shall be imposed on Seller as a result thereof.
4. MISCELLANEOUS PROVISIONS.
4.1 ASSIGNMENT. No party may assign its rights or
obligations under this Option Agreement without receipt of the other
parties' prior written consent; provided, however that Buyer may assign its
rights and obligations hereunder prior to the Closing Date to any Affiliate
of Buyer (as defined in Section 1.1 of the Purchase Agreement), without
Seller's consent. An assignment (whether with the other parties' prior
written consent, or by Buyer to an Affiliate without Seller's consent)
shall NOT relieve the assignor of its liability hereunder, unless otherwise
expressly agreed in writing at that time by all of the parties to this
Option Agreement.
4.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in Section 3 of the Purchase Agreement, and
the representations and warranties of Buyer set forth in Section 4 of the
Purchase Agreement, are incorporated herein by reference.
4.3 NOTICE AND CURE RIGHTS.
4.3.1 If any party (a "Defaulting Party") defaults under
any term, condition or provision of this Option Agreement, then any other
party (a "Non-Defaulting Party"), after delivery of ten (10) days' written
notice to the Defaulting Party specifically describing the default (the
"Default Notice"), and after the Defaulting Party's failure to cure such
default within the ten (10) day period, (i) may declare an event of default
("Event of Default"), and, (ii) subject to Sections 4.3.2, 4.4, 4.11 and
4.21 below, may pursue its remedies as set forth in this Option Agreement;
provided, however, in no event shall Seller be obligated to give Buyer any
notice regarding any failure to deliver the Option Notice nor shall any
notice and cure right extend the term of this Option Agreement.
<PAGE>
4.3.2 If (i) Buyer or any party within the TrizecHahn
Group is the party to whom such a Default Notice is given, and (ii) Buyer
has already exercised or thereafter exercises this Option, then Seller
shall NOT be entitled to terminate this Option Agreement or the escrow (and
any previous notice from Seller purporting to exercise that right shall be
deemed to be stayed), and Seller shall be obligated to close the escrow on
Buyer's purchase of Seller's Partnership Interests, notwithstanding such
Event of Default, unless both of the following conditions are met:
(a) The Event of Default declared by Seller is
material; and
(b) Buyer or the party within the TrizecHahn Group to
whom such a Default Notice is given (i) fails to commence to cure the
default described in the Default Notice within the ten (10) day period
specified in Section 4.3.1, and also (ii) fails to exercise the Option
within the ten (10) day period specified in Section 4.3.1. Regarding
Clause (i) above, to the extent the default is of a nature which cannot be
cured within the ten (10) day period specified in Section 4.3.1, if Buyer
commences to cure the default within the said ten (10) day period, but
thereafter fails to prosecute such cure diligently toward completion
throughout the period from such commencement to the Close of Escrow, then
the condition required under Clause (i) will be deemed to have failed.
Regarding Clause (ii) above, if Buyer exercises the Option within the said
ten (10) day period, but thereafter fails to close escrow on the exercised
Option by the Scheduled Closing Date (as defined in the Purchase
Agreement), then the condition required under Clause (ii) will be deemed to
have failed.
4.4 REFRAINING FROM LEGAL PROCEEDINGS. Each party agrees
that, during the term of this Option Agreement, it shall not (i) commence,
join in, prosecute or participate in any suit, arbitration or other
proceeding in a position which is adverse to any other parties arising
directly or indirectly from the transactions contemplated by this Option
Agreement or in any way relating to the Property, the Partnership Agreement
or its management, or (ii) terminate, or attempt to terminate, this Option
Agreement, without in each instance first giving to the other parties the
Default Notice and opportunity to cure described in Section 4.3 above.
4.5 AMENDMENT, MODIFICATION AND WAIVER. No amendment,
modification or waiver of this Option Agreement or any part hereof shall be
valid or effective unless in writing and signed by the party sought to be
charged therewith. No waiver of any breach or condition of this Option
Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature. No course of dealing
between the parties hereto will be deemed effective to amend, modify or
discharge any part of this Option Agreement or the rights or obligations of
any party hereunder.
4.6 PARTIAL INVALIDITY. If any provision of this Option
Agreement shall be held by competent authority to be invalid or
unenforceable, such provision shall be construed so as to be limited or
reduced to be enforceable to the maximum extent compatible with the law as
it shall then appear. The total invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Option Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
4.7 NO THIRD PARTY BENEFICIARY. Except as expressly provided
in Sections 9.3 and 9.4 (related to indemnification) and in Section 11
(entitled Mutual Releases) of the Purchase Agreement, no person or entity
shall be deemed to be a third party beneficiary hereof, and nothing in this
Option Agreement (either expressed or implied) is intended to confer upon
any other person or entity any rights, remedies, obligations or liabilities
under or by reason of this Option Agreement.
<PAGE>
4.8 NOTICES. Any notice or other communication required or
permitted under this Option Agreement shall be in writing and shall be
deemed to have been duly given (i) upon personal delivery, (ii) on the
third day after the date of mailing by United States registered or
certified mail, postage prepaid, return receipt requested, (iii) on the
first day following delivery to a nationally recognized United States
overnight courier service, fee prepaid, return receipt or other
confirmation of delivery requested, or (iv) upon confirmation of receipt by
fax. Any such notice or communication shall be addressed as set forth in
the Purchase Agreement, or to such other address as may be designated by a
party in a notice given to all other parties in accordance with the
provisions of this Section 4.8.
4.9 TIME OF ESSENCE. Time is of the essence to this Option
Agreement.
4.10 GOVERNING LAW. This Option Agreement shall be governed,
construed and enforced in accordance with the laws of the State of
California.
4.11 REMEDIES. Except as otherwise expressly provided herein,
no remedy conferred upon a party by this Option Agreement is intended to be
exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law, in equity or by
statute; provided, however, that if the transactions hereunder shall fail
to close and Seller shall be in default hereunder, then (i) Buyer shall be
entitled only to specifically enforce this Option Agreement, and to such
ancillary damages as may be awarded in connection with such an action for
specific enforcement, but if specific enforcement is determined in the
legal proceeding to be impossible to effect by reason of Seller's default,
then Buyer shall be entitled to such alternative remedies (in no event,
however, to include any consequential or punitive damages) as may be found
in the legal proceeding to be appropriate, which alternative remedies shall
include, without limitation, a refund to Buyer of its Option Consideration,
and (ii) no other actions for damages (including, without limitation,
actions for consequential or punitive damages) shall be permitted as a
result of such default by Seller.
4.12 ATTORNEYS' FEES. In the event of any controversy, claim
or dispute between the parties arising from or related to this Option
Agreement or the breach hereof, the prevailing party shall be entitled to
recover from the losing parties its reasonable costs, expenses and
attorneys' fees.
4.13 EXPENSES OF PARTIES. Except as specifically set forth in
other provisions of this Option Agreement, all expenses involved in the
preparation, authorization and consummation of this Option Agreement,
including, without limitation, all fees and expenses for agents,
representatives, counsel and accountants, shall be borne solely by the
party who incurs the same, and the other parties shall have no liability
with respect thereto.
4.14 FURTHER ASSURANCES. The parties agree to take such
further actions and to execute such additional documents and instruments as
may be reasonably required in order to more effectively carry out the terms
of this Option Agreement and the intentions of the parties (provided the
same do not materially increase any cost, liability or obligation of a
party from that otherwise contemplated herein).
4.15 HEADINGS. The headings contained in this Option
Agreement are inserted for convenience only and do not constitute a part of
this Option Agreement.
<PAGE>
4.16 GENDER. Whenever the context may require, any pronoun
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular of nouns, pronouns and verbs shall include the
plural and vice versa.
4.17 FAIR MEANING. This Option Agreement shall be construed
according to its fair meaning, the language used shall be deemed the
language chosen by the parties hereto to express their mutual intent, and
no presumption or rule of strict construction will be applied against any
party hereto.
4.18 BINDING EFFECT. This Option Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and permitted assigns.
4.19 COUNTERPARTS AND FACSIMILES. This Option Agreement may
be executed in multiple copies, each of which will be deemed an original,
but all of which will constitute one Option Agreement after each party has
signed such a counterpart. An executed counterpart may be delivered by
transmission of a facsimile copy, and in such a case, delivery shall be
deemed effective upon transmission of the facsimile copy.
4.20 ENTIRE AGREEMENT. This document contains the entire
agreement between the parties related to the Option herein granted and
supersedes any prior understandings, memoranda and other written or oral
agreements between or among any of them respecting the subject matter
hereof. There are no representations, agreements, arrangements or
understandings, oral or written, between or among any of the parties
relating to the subject matter of this Option Agreement which are not fully
expressed herein.
4.21 LIMITATION ON LIABILITY; SURVIVAL OF CLAIMS.
4.21.1 If, PRIOR TO the Close of Escrow, Buyer gives
written notice to Seller stating that Buyer has become aware of a breach or
default by Seller with respect to the representations and warranties made
by Seller in Section 3.2 of the Purchase Agreement only (regarding clear
title to Seller's Partnership Interests), and such notice is later
determined to have been substantially correct, then Buyer shall be entitled
to all remedies against Seller permitted by Section 4.11 above, which shall
survive the Close of Escrow, without being subject to the limitations set
forth in the remainder of Sections 4.21.1, 4.21.2 or 4.21.3. The intent of
the parties is that, as to that particular matter, if it becomes known to
and is asserted in writing by Buyer PRIOR TO the Close of Escrow, Buyer
should not be deprived of the full benefit of its bargain pursuant to this
Agreement.
4.21.2 In contrast, in connection with all claims
asserting a breach or default by Seller under this Agreement, the Purchase
Agreement or any other document executed or delivered in connection
herewith OTHER THAN claims covered by Section 4.21.1 above, whether Buyer
(i) first gives written notice asserting such other claims PRIOR TO the
Close of Escrow (as to a matter not covered by Section 4.21.1 above) or
(ii) first gives notice ON OR AFTER the Close of Escrow, including, without
limitation, all claims based upon representations, warranties, indemnities
and further assurances under this Agreement, the Purchase Agreement or any
other document executed or delivered in connection herewith which survive
the Close of Escrow and as to which Buyer's claim of breach or default is
first given ON OR AFTER the Close of Escrow (collectively, the "Capped
Claims"), the following limitations shall apply:
(a) The aggregate liability of Seller arising with
respect to such Capped Claims shall not exceed $300,000, notwithstanding
anything to the contrary contained herein (and without limitation on any of
the other limitations on liability or remedies contained in this Option
Agreement).
<PAGE>
(b) The Capped Claims shall survive the exercise
of the Option, the consummation of the transactions contemplated thereby
and the transfer and delivery of Seller's Partnership Interests for a
period (the "Survival Period") lasting only until December 1, 1998, at
which time they shall terminate, except as to claims asserted by Buyer to
Seller in writing on or before December 1, 1998 and on which arbitration or
litigation is commenced by December 31, 1998 (if not resolved by then).
The claims described in the exception clause in the preceding sentence
shall survive until finally resolved.
4.21.3 The provisions of this Section 4.21.3 shall be of
no concern to the Escrow Holder.
(a) Seller shall retain reserves of at least
$300,000 at the time of closing under the Purchase Agreement, and, until
the expiration of the Survival Period, Seller shall not distribute the same
to its partners, but shall only utilize such retained funds for the payment
of the Capped Claims or for the payment of attorneys' fees of Seller
(including any amounts incurred in connection with resolving or defending
any claim of liability for the Capped Claims). The fact that Seller may
expend such reserves in part for the payment of attorneys' fees of Seller
in no way diminishes Buyer's right under Section 4.21.2 above to recover up
to $300,000 from Seller for the Capped Claims.
(b) Notwithstanding the foregoing, (i) if Seller
or a liquidating trust or other similar successor-in-interest established
by Seller shall fail to retain such reserves of at least $300,000 at the
time of closing, or (ii) if during the Survival Period, Seller (or such
successor-in-interest as aforesaid) shall utilize such reserves for any
purpose other than the payment of the Capped Claims or attorneys' fees
(including amounts for resolving or defending claims as aforesaid), or
(iii) if for any other reason (including, without limitation, the payment
of attorneys' fees or amounts for resolving or defending claims as
aforesaid), all of Buyer's claims against Seller for the Capped Claims are
finally resolved and the aggregate amount to which Buyer is entitled
pursuant to such final resolution (not to exceed $300,000 in the aggregate)
(collectively, the "Final Award in Favor of Buyer") exceeds the aggregate
amount actually paid by Seller (or such successor-in-interest as aforesaid)
to Buyer from its (or their) reserves in satisfaction of the Final Award in
Favor of Buyer, then in any such case, Buyer may look to the assets of JMB
Realty Corporation, as the general partner of Seller, for the payment of
the Final Award in Favor of Buyer; provided, however, that the aggregate
liability of JMB Realty Corporation in connection therewith shall not
exceed the lesser of:
-- $300,000; or
-- The difference between (x) the Final Award in
Favor of Buyer, and (y) the aggregate amount actually paid by Seller (or
such successor-in-interest as aforesaid) to Buyer from its (or their)
reserves in satisfaction of the Final Award in Favor of Buyer.
For example, if Seller properly retains a reserve of $300,000 at the time
of closing, Seller properly expends $200,000 from that reserve for its own
attorneys' fees in resolving or defending a claim against its reserves, a
Final Award in Favor of Buyer in the amount of $300,000 is nevertheless
entered against Seller, and Seller actually pays to Buyer the entire
$100,000 then remaining in Seller's reserve, then Buyer may recover from
JMB Realty Corporation the remaining $200,000 that is unpaid and owed on
the Final Award in Favor of Buyer.
<PAGE>
4.21.4 No constituent partner in or agent of Seller, nor
any advisor, trustee, director, officer, employee, beneficiary,
shareholder, participant, representative or agent of any corporation or
trust that is or becomes a constituent partner in Seller (including, but
not limited to, JMB Realty Corporation, except for the limited extent to
which Buyer may look to the assets of JMB Realty Corporation pursuant to
Sections 4.21.1 or 4.21.3 above), shall have any personal liability,
directly or indirectly, under or in connection with this Option Agreement,
the Purchase Agreement or any agreement made or entered into pursuant
hereto or thereto, or any amendment or amendments to any of the foregoing
made at any time or times, heretofore or hereafter, and Buyer and its
successors and assigns and, without limitation, all other persons and
entities, shall look solely to the reserves referred to in Section 4.21.3
above, to offsets against any undelivered portion of the Purchase Price and
to Seller's other assets for the payment of any claim or for any
performance, and Buyer, on behalf of itself and its successors and assigns,
hereby waives any and all such personal liability. Notwithstanding
anything to the contrary contained in this Option Agreement, neither the
negative capital account of any constituent partner in Seller (or in any
other constituent partner of Seller), nor any obligation of any constituent
partner in Seller (or in any other constituent partner of Seller) to
restore a negative capital account or to contribute capital to Seller (or
to any other constituent partner of Seller), shall at any time be deemed to
be the property or an asset of Seller or any such other constituent partner
(and neither Buyer nor any of its successors or assigns shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
IN WITNESS WHEREOF, the parties have executed this Option Agreement
on the date first set forth above.
SELLER:
CARLYLE/PALM DESERT, INC.,
an Illinois corporation
By:
Name:
Title:
By:
Name:
Title:
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVI,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By:
Name:
Title:
By:
Name:
Title:
BUYER:
HAHN/PALM DESERT, INC.,
a California corporation
By:
Name:
Title:
By:
Name:
Title:
TRIZECHAHN CENTERS INC.,
a California corporation
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
PALM DESERT AGREEMENT FOR
PURCHASE AND SALE OF PARTNERSHIP INTERESTS
------------------------------------------
between
CARLYLE/PALM DESERT, INC.,
and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI,
and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVII,
as SELLER
and
HAHN/PALM DESERT, INC.,
and
TRIZECHAHN CENTERS INC.,
as BUYER
relating to
JMB/HAHN PDTC ASSOCIATES, L.P.,
a California limited partnership
EFFECTIVE AS OF JANUARY 1, 1998
[FINAL VERSION DATED MARCH 11, 1998]
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Partnership . . . . . . . . . . . . . . . . . . . . . 1
B. Property. . . . . . . . . . . . . . . . . . . . . . . 1
C. Redevelopment Opportunities . . . . . . . . . . . . . 2
D. Purpose . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 2
1. Definitions . . . . . . . . . . . . . . . . . . . . . 2
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Business. . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Buyer . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Carlyle A . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Carlyle B . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Cash. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Close of Escrow, Closing or Closing Date. . . . . . . 3
1.9 Co-Partner. . . . . . . . . . . . . . . . . . . . . . 3
1.10 Condemnation . . . . . . . . . . . . . . . . . . . . 3
1.11 Escrow . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Escrow Holder. . . . . . . . . . . . . . . . . . . . 3
1.13 Governmental Body. . . . . . . . . . . . . . . . . . 3
1.14 Indemnified Party. . . . . . . . . . . . . . . . . . 3
1.15 Indemnifying Party . . . . . . . . . . . . . . . . . 3
1.16 Major Damage or Destruction. . . . . . . . . . . . . 3
1.17 Management Agreement . . . . . . . . . . . . . . . . 3
1.18 Manager. . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Managing Partner . . . . . . . . . . . . . . . . . . 3
1.20 Option . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 Option Agreement . . . . . . . . . . . . . . . . . . 4
1.22 Partnership. . . . . . . . . . . . . . . . . . . . . 4
1.23 Partnership Agreement. . . . . . . . . . . . . . . . 4
1.24 Partnership Distribution Amount. . . . . . . . . . . 4
1.25 Partnership Property . . . . . . . . . . . . . . . . 4
1.26 Property . . . . . . . . . . . . . . . . . . . . . . 4
1.27 Purchase Price . . . . . . . . . . . . . . . . . . . 4
1.28 Scheduled Closing Date . . . . . . . . . . . . . . . 4
1.29 Seller . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 Seller's Partnership Interests . . . . . . . . . . . 4
2. Purchase and Sale . . . . . . . . . . . . . . . . . . 4
2.1 Purchase of Partnership Interests . . . . . . . . . . 4
2.2 Purchase Price and Payment. . . . . . . . . . . . . . 4
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Partnership Distributions . . . . . . . . . . . . . . 5
3. Representations and Warranties of Seller. . . . . . . 5
3.1 Partnership Interests . . . . . . . . . . . . . . . . 5
3.2 Partnership Interest Ownership. . . . . . . . . . . . 5
3.3 Entity Standing . . . . . . . . . . . . . . . . . . . 5
3.4 Authority . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Consents; Conflicts . . . . . . . . . . . . . . . . . 6
3.6 Brokers or Finders. . . . . . . . . . . . . . . . . . 6
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . 6
3.8 No Untrue Statements. . . . . . . . . . . . . . . . . 6
4. Representations and Warranties of Buyer . . . . . . . 6
4.1 Corporate Standing. . . . . . . . . . . . . . . . . . 6
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Consents; Conflicts . . . . . . . . . . . . . . . . . 7
4.4 Investment Representations. . . . . . . . . . . . . . 7
4.5 Brokers or Finders. . . . . . . . . . . . . . . . . . 7
5. Deliveries to Escrow and Conduct before Closing . . . 7
5.1 Deliveries by Seller. . . . . . . . . . . . . . . . . 7
5.2 Deliveries by Buyer . . . . . . . . . . . . . . . . . 8
5.3 Cooperation and Further Assurances. . . . . . . . . . 8
6. Conditions to Closing . . . . . . . . . . . . . . . . 8
6.1 For Buyer . . . . . . . . . . . . . . . . . . . . . . 8
6.2 For Seller. . . . . . . . . . . . . . . . . . . . . . 8
7. Closing . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 General Provisions. . . . . . . . . . . . . . . . . . 9
7.2 Closing Procedures. . . . . . . . . . . . . . . . . . 9
8. Condemnation, Damage or Destruction . . . . . . . . . 9
8.1 Condemnation. . . . . . . . . . . . . . . . . . . . . 9
8.2 Damage or Destruction . . . . . . . . . . . . . . . . 9
9. Parties' Obligations after Closing. . . . . . . . . . 9
9.1 Cooperation Regarding Tax Returns . . . . . . . . . . 9
9.2 Expenses of Parties . . . . . . . . . . . . . . . . . 10
9.3 Indemnification . . . . . . . . . . . . . . . . . . . 10
9.4 Procedure for Indemnification . . . . . . . . . . . . 10
10. ARBITRATION OF DISPUTES . . . . . . . . . . . . . . . 11
11. Mutual Releases . . . . . . . . . . . . . . . . . . . 13
11.1 TrizecHahn Release . . . . . . . . . . . . . . . . . 13
11.2 JMB Release. . . . . . . . . . . . . . . . . . . . . 13
11.3 Civil Code Section 1542. . . . . . . . . . . . . . . 14
12. Miscellaneous Provisions. . . . . . . . . . . . . . . 14
12.1 Notice and Cure Rights . . . . . . . . . . . . . . . 14
12.2 Refraining from Legal Proceedings. . . . . . . . . . 15
12.3 Assignment . . . . . . . . . . . . . . . . . . . . . 15
12.4 Amendment, Modification and Waiver . . . . . . . . . 15
12.5 Partial Invalidity . . . . . . . . . . . . . . . . . 15
12.6 No Third Party Beneficiary . . . . . . . . . . . . . 15
12.7 Notices. . . . . . . . . . . . . . . . . . . . . . . 15
12.8 Time of Essence. . . . . . . . . . . . . . . . . . . 17
12.9 Governing Law. . . . . . . . . . . . . . . . . . . . 17
12.10 Remedies. . . . . . . . . . . . . . . . . . . . . . 17
12.11 Attorneys' Fees . . . . . . . . . . . . . . . . . . 17
12.12 Expenses of Parties . . . . . . . . . . . . . . . . 17
12.13 Further Assurances. . . . . . . . . . . . . . . . . 17
12.14 Headings. . . . . . . . . . . . . . . . . . . . . . 18
12.15 Gender. . . . . . . . . . . . . . . . . . . . . . . 18
12.16 Fair Meaning. . . . . . . . . . . . . . . . . . . . 18
12.17 Binding Effect. . . . . . . . . . . . . . . . . . . 18
12.18 Counterparts and Facsimiles . . . . . . . . . . . . 18
12.19 Entire Agreement. . . . . . . . . . . . . . . . . . 18
12.20 Limitation on Liability; Survival of Claims . . . . 18
<PAGE>
TABLE OF EXHIBITS
-----------------
1. Assignment of Partnership Interests
2. Certificate of Amendment of Limited Partnership (LP-2)
3. Authorizing Resolution - Managing Partner
4. Authorizing Resolution - Carlyle A
5. Authorizing Resolution - Carlyle B
6. Certificate of Non-Foreign Status - Managing Partner
7. Certificate of Non-Foreign Status - Carlyle A
8. Certificate of Non-Foreign Status - Carlyle B
9. Escrow General Provisions
<PAGE>
PALM DESERT AGREEMENT FOR
PURCHASE AND SALE OF PARTNERSHIP INTERESTS
------------------------------------------
THIS PALM DESERT AGREEMENT FOR PURCHASE AND SALE OF PARTNERSHIP
INTERESTS (the "Purchase Agreement" or "Agreement") is made and entered
into on March 11, 1998 (the "Execution Date"), effective as of January 1,
1998 (the "Effective Date"), by the following parties, hereinafter referred
to as the "JMB Group" or "Seller":
CARLYLE/PALM DESERT, INC., an Illinois corporation ("Managing
Partner");
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVI, an Illinois
limited partnership ("Carlyle A"); and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XVII, an Illinois
limited partnership ("Carlyle B");
and also by the following parties, hereinafter referred to as the
"TrizecHahn Group" or "Buyer":
HAHN/PALM DESERT, INC., a California corporation
("Co-Partner"); and
TRIZECHAHN CENTERS INC., a California corporation, formerly
known as ERNEST W. HAHN, INC., a California corporation ("TrizecHahnco").
Recitals
--------
A. PARTNERSHIP. The JMB Group and TrizecHahn Group together
constitute all of the partners in JMB/Hahn PDTC Associates, L.P., a
California limited partnership (the "Partnership"). The Partnership was
formed by an Agreement of Limited Partnership made and entered into as of
December 23, 1988 (the "Partnership Agreement"). The Partnership Agreement
is in full force and effect and has not been amended. The defined terms in
the Partnership Agreement are incorporated herein by reference. Managing
Partner and Co-Partner are the General Partners of the Partnership.
Carlyle A, Carlyle B and TrizecHahnco (the latter referred to in the
Partnership Agreement as "Hahnco") are the Limited Partners of the
Partnership.
B. PROPERTY. The principal asset of the Partnership is the
Property, as defined in the Partnership Agreement. It consists of certain
real and personal property in Riverside, California, which, together with
certain parcels owned by department stores, is commonly known as "Palm
Desert Town Center." All of the real and personal property assets of the
Partnership, individually and collectively, including, but not limited to,
the Property, are referred to in the Partnership Agreement, and will be
referred to in this Agreement, as the "Partnership Property."
C. REDEVELOPMENT OPPORTUNITIES. During the term of this Purchase
Agreement, Buyer intends to review opportunities to redevelop and refinance
the Property. In the course of that effort, Buyer expects to discuss
matters respecting the Property with governmental agencies, tenants,
lenders and other persons or entities with whom the Partnership or others
have contractual arrangements, or prospective contractual arrangements,
relating to the Property. The parties wish to set forth the parameter of
such dealings.
D. PURPOSE. Seller desires to sell, and Buyer desires to
purchase, all of Seller's interests in the Partnership, consisting of all
of Managing Partner's general partnership interests in the Partnership, and
all of Carlyle A's and Carlyle B's limited partnership interests in the
Partnership, including, without limitation, all of their interests in
capital, profits, liquidation proceeds, distributions and all other rights
and interests under the Partnership Agreement or relating to the
Partnership (collectively, "Seller's Partnership Interests"), on the terms
and conditions set forth in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings ascribed to them in this Section 1:
1.1 AFFILIATE. Any person or entity who directly or
indirectly controls, is controlled by or is under common control with the
specified person. By way of example and without limiting the generality of
the foregoing, where a determination is being made as to whether two
corporations are Affiliates, the "direct control" test is met, and
accordingly they are Affiliates, if one of those corporations controls or
is controlled by the other, and the "indirect control" test is met, and
accordingly they are Affiliates, if both of those corporations are in a
chain of Affiliated corporations ultimately controlled by a common parent
one or more tiers above them.
1.2 AGREEMENT. This Purchase Agreement, including all
amendments hereto, and all exhibits referred to herein.
1.3 BUSINESS. The business operated and conducted by the
Partnership on the date of this Agreement, including, without limitation,
the ownership, operation, leasing and subleasing of the Property.
1.4 BUYER. Jointly and severally, the Co-Partner and
TrizecHahnco, also known as the TrizecHahn Group.
1.5 CARLYLE A. Carlyle Real Estate Limited Partnership-XVI,
an Illinois limited partnership.
1.6 CARLYLE B. Carlyle Real Estate Limited Partnership-XVII,
an Illinois limited partnership.
1.7 CASH. (i) Currency, (ii) checks currently dated and
honored upon presentation for payment, or (iii) amounts credited by wire-
transfer into the bank accounts of the payee.
1.8 CLOSE OF ESCROW, CLOSING OR CLOSING DATE. The date upon
which Buyer deposits the Purchase Price and distribution amount under
Section 2.4 into Escrow by wire transfer of immediately available federal
funds (Seller's Assignment of Partnership Interests transferring Seller's
Partnership Interests to Buyer having previously been delivered to Escrow
Holder pursuant to this Agreement), together with an amount sufficient to
pay Buyer's share (as provided in Section 9.2.below) of any Escrow closing
costs in an amount determined by Escrow Holder, in Cash or other
immediately available funds. (The Scheduled Closing Date is fifteen (15)
days after exercise of the Option by Buyer, or if that day falls on a
Saturday, Sunday or legal holiday, the first regular business day
thereafter.)
1.9 CO-PARTNER. Hahn/Palm Desert, Inc., a California
corporation.
1.10 CONDEMNATION. Any taking of the Property or any part
thereof by condemnation or by exercise of any right of eminent domain or
threat thereof, or by any similar proceeding or act of any Governmental
Body.
1.11 ESCROW. The escrow established with Escrow Holder
pursuant to the terms of this Agreement.
1.12 ESCROW HOLDER. Stewart Title of California, Inc.
1.13 GOVERNMENTAL BODY. Any domestic or foreign national,
state, municipal or other local government or multi-national body, any
subdivision, agency, commission or authority thereof, or any quasi-
governmental or private body exercising any regulatory or taxing authority
thereunder.
1.14 INDEMNIFIED PARTY. The indemnified party as defined in
Section 9.4.1 below.
1.15 INDEMNIFYING PARTY. The indemnifying party as defined at
Section 9.4.1 below.
1.16 MAJOR DAMAGE OR DESTRUCTION. Damage or destruction at
the Property for which repair costs are estimated to exceed $250,000.
1.17 MANAGEMENT AGREEMENT. The Management Agreement [for]
Palm Desert Town Center dated December 23, 1988, by and between the
Partnership and the Manager.
1.18 MANAGER. TrizecHahn Centers Management Inc., a
California corporation.
1.19 MANAGING PARTNER. Carlyle/Palm Desert, Inc., an Illinois
corporation.
1.20 OPTION. The option held by Buyer to acquire Seller's
Partnership Interests pursuant to the Option Agreement.
1.21 OPTION AGREEMENT. The Palm Desert Option Agreement dated
as of January 1, 1998, by and between Seller and Buyer.
1.22 PARTNERSHIP. JMB/Hahn PDTC Associates, L.P., a
California limited partnership.
1.23 PARTNERSHIP AGREEMENT. The Articles of Limited
Partnership of JMB/Hahn PDTC Associates, L.P., a California limited
partnership, dated December 23, 1988.
1.24 PARTNERSHIP DISTRIBUTION AMOUNT. The Partnership
distribution to be made to the JMB Group at the Close of Escrow, in the
amount of $739,881, as provided in Section 2.6.3 of the Option Agreement.
1.25 PARTNERSHIP PROPERTY. This term is defined in Recital B.
1.26 PROPERTY. This term is defined in Recital B.
1.27 PURCHASE PRICE. The purchase price as defined at
Section 2.2.1 below.
1.28 SCHEDULED CLOSING DATE. Fifteen (15) days after exercise
of the Option by Buyer, or if that day falls on a Saturday, Sunday or legal
holiday, the first regular business day thereafter.
1.29 SELLER. Jointly and severally, the Managing Partner,
Carlyle A and Carlyle B, also known as the JMB Group.
1.30 SELLER'S PARTNERSHIP INTERESTS. This term is defined in
Recital D.
2. PURCHASE AND SALE.
2.1 PURCHASE OF PARTNERSHIP INTERESTS. Subject to the terms
and conditions of this Purchase Agreement, and in reliance upon the
representations and warranties herein, on the Closing Date, Seller shall
sell Seller's Partnership Interests to Buyer, and Buyer shall purchase
Seller's Partnership Interests from Seller.
2.2 PURCHASE PRICE AND PAYMENT.
2.2.1 AMOUNT. The aggregate purchase price for Seller's
Partnership Interests shall be Seven Million Dollars ($7,000,000) (the
"Purchase Price"), to be allocated among the parties constituting Seller in
proportion to their respective Seller's Partnership Interests, and payable
to them in addition to Buyer's payment of the Option Consideration as set
forth in the Option Agreement. Seller acknowledges that the Purchase
Price, together with the Option Consideration and the Partnership
distributions provided for in Section 2.4 below, is the entire
consideration to be paid to Seller in connection with the sale of Seller's
Partnership Interests, without adjustment for any reason whatsoever, and
that Seller shall not be entitled to any other monetary or non-monetary
consideration, notwithstanding any Cash held by the Partnership and
otherwise available for distribution on the Closing Date, or any changes in
the business or prospects of the Partnership, the Business or the Property.
2.2.2 PAYMENT. Buyer shall pay the Purchase Price to
Seller by wire transfer or immediately available funds on the Closing Date.
2.3 CLOSING.
2.3.1 PLACE. The Closing shall take place on the
Closing Date through escrow ("Escrow") with the Escrow Holder.
2.3.2 CONDUCT PENDING CLOSING. Throughout the term of
this Agreement, the parties shall conduct their affairs and those of the
Partnership in accordance with the provisions of Section 2 of the Option
Agreement entitled "Conduct during Term of Option." Section 1.2 of the
Option Agreement itself so provides, with its statement that, if the Option
is duly exercised, then the "term of this Option" is to be deemed to
include the period of time from exercise until the Close of Escrow.
2.4 PARTNERSHIP DISTRIBUTIONS. Seller and Buyer agree that,
pursuant to the terms of the Option Agreement, the method of making
Partnership distributions during the period from January 1, 1998 until the
Close of Escrow is being adjusted.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer as follows:
3.1 PARTNERSHIP INTERESTS. Seller's Partnership Interests
constitute the entire interest in the Partnership, the Business, the
Property and the Partnership Property of Seller and of each of the entities
constituting Seller.
3.2 PARTNERSHIP INTEREST OWNERSHIP. Subject only to the terms
of the Partnership Agreement, Seller's Partnership Interest is free and
clear of all mortgages, pledges, liens, security interests, conditional
sales agreements, claims, rights of third parties, charges, encumbrances
and restrictions of every kind and nature.
3.3 ENTITY STANDING. The entities constituting Seller -- the
Managing Partner, Carlyle A and Carlyle B -- are all duly organized and
validly existing under the laws of the State of Illinois, and have all
requisite power and authority to carry on their businesses as currently
conducted.
3.4 AUTHORITY. The entities constituting Seller -- the
Managing Partner, Carlyle A and Carlyle B -- each has the requisite power
and authority to enter into this Agreement and to sell its respective
Seller's Partnership Interests. All of the entities constituting Seller
have taken all such action as may be necessary and proper to authorize this
Agreement, their execution and delivery hereof, their consummation of the
transactions contemplated hereby and their execution and delivery of each
of the documents required to be delivered hereunder. This Agreement has
been duly executed and delivered by them and is valid, binding and
enforceable against them in accordance with its terms.
3.5 CONSENTS; CONFLICTS. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
provided hereunder, (i) do not require any third party consent, or notice
to any third party, or any permit, authorization or filing with any
Governmental Body (other than those the failure of which to obtain would
not have a material adverse effect on Buyer), (ii) will not violate the
respective charter documents of the entitles constituting Seller (articles
of incorporation and bylaws in the case of the Managing Partner, and
limited partnership agreements in the case of Carlyle A and Carlyle B),
each as the same may have been amended from time to time, and (iii) will
not violate, conflict with, result in the breach of, or cause the
acceleration of or default under any provision of any material agreement,
law, order, arbitration award, judgment or decree to which Seller or any
entity constituting Seller is a party (collectively or individually) or by
which Seller or any such entity is subject or bound.
3.6 BROKERS OR FINDERS. Neither Seller, nor any of the
entities constituting Seller, nor any of their agents, has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other like payment in connection with this
Agreement, and Seller will indemnify and hold Buyer harmless from any such
payment alleged to be due by or through Seller as a result of the action of
Seller, any of the entities constituting Seller or their agents.
3.7 LITIGATION. There is not pending or, to the best of
Seller's knowledge, threatened, any litigation, proceeding or investigation
(i) relating to Seller's title to Seller's Partnership Interests which may
adversely affect the transaction contemplated by this Agreement, or
(ii) relating to Seller in its capacity as a partner in the Partnership
which may adversely affect the transaction contemplated by this Agreement,
or (iii) relating to Seller in any capacity OTHER THAN as a partner in the
Partnership which may materially adversely affect the transaction
contemplated by this Agreement.
3.8 NO UNTRUE STATEMENTS. No representation, warranty or
covenant by Seller in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
4.1 CORPORATE STANDING. The entities constituting Buyer --
the Co-Partner and TrizecHahnco -- are both duly organized and validly
existing under the laws of the State of California, and have all requisite
power and authority to carry on their businesses as currently conducted.
Partner and TrizecHahnco -- each has the requisite power and authority to
enter into
this Agreement and to purchase Seller's Partnership Interests. Both of the
entities constituting Buyer have taken all such action as may be necessary
and proper to authorize this Agreement, their execution and delivery
hereof, their consummation of the transactions contemplated hereby and
their execution and delivery of each of the documents required to be
delivered hereunder. This Agreement has been duly executed and delivered
by them and is valid, binding and enforceable against them in accordance
with its terms.
4.3 CONSENTS; CONFLICTS. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer of the transactions
provided hereunder, (i) do not require any third party consent, or notice
to any third party, or any permit, authorization or filing with any
Governmental Body (other than those the failure of which to obtain would
not have a material adverse effect on Seller), (ii) will not violate the
articles of incorporation or bylaws of the entitles constituting Buyer,
each as the same may have been amended from time to time, and (iii) will
not violate, conflict with, result in the breach of, or cause the
acceleration of or default under any provision of any material agreement,
law, order, arbitration award, judgment or decree to which Buyer or any
entity constituting Buyer is a party (collectively or individually) or by
which Buyer or any such entity is subject or bound.
4.4 INVESTMENT REPRESENTATIONS. Buyer represents and warrants
that Seller's Partnership Interests are being acquired for Buyer's own
account, for investment only, without a view to distribution, as that
phrase is interpreted under the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations of the SEC, of all or any part of
Seller's Partnership Interests.
4.5 BROKERS OR FINDERS. Neither Buyer, nor any of the
entities constituting Buyer, nor any of their agents, has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other like payment in connection with this
Agreement, and Buyer will indemnify and hold Seller harmless from any such
payment alleged to be due by or through Buyer as a result of the action of
Buyer, any of the entities constituting Buyer or their agents.
5. DELIVERIES TO ESCROW AND CONDUCT BEFORE CLOSING.
5.1 DELIVERIES BY SELLER. Prior to the Closing Date, Seller
shall deliver to Escrow Holder each of the following (some of which may
have previously been deposited with Escrow Holder pursuant to the Option
Agreement):
5.1.1 An Assignment and Assumption of Partnership
Interests duly executed by all of the entities constituting Seller in the
form attached hereto as EXHIBIT 1 (the "Assignment of Partnership
Interests"). Consistent with its assignment rights in Section 12.3 below,
Buyer has elected to have all of Seller's Partnership Interests assigned to
Co-Partner (Hahn/Palm Desert, Inc.), and the Assignment of Partnership
Interests has been prepared in that manner.
5.1.2 A Certificate of Amendment of Limited Partnership
(Form LP-2) duly executed by all of the entities constituting Seller in the
form attached hereto as EXHIBIT 2 (the "Certificate of Amendment").
5.1.3 An authorization, resolution or written consent
action by the board of directors of the Managing Partner in the form
attached hereto as EXHIBIT 3, and by those persons authorized by the
limited partnership agreements of Carlyle A and Carlyle B to effect a sale
of Seller's Partnership Interests in the form attached hereto as EXHIBITS 4
AND 5, respectively, authorizing this Agreement, the execution and delivery
hereof, the consummation of the transactions contemplated hereby and the
execution and delivery of each of the documents required to be delivered
hereunder (the "Authorizing Resolutions").
5.1.4 A Certificate of Non-Foreign Status, duly executed
by each of the entities constituting Seller in the forms attached hereto as
EXHIBITS 6, 7 AND 8 (the "Certificates of Non-Foreign Status").
5.1.5 Any leases, contracts, books, invoices, bills or
records of the Partnership regarding the ownership, operation or management
of the Property from past years in Seller's possession or control to the
extent the same are not in Buyer's possession or control.
5.1.6 Any other documents or instruments which Buyer or
Escrow Holder may reasonably request (provided the same do not materially
increase any cost, liability or obligation of a party from that otherwise
contemplated herein).
5.2 DELIVERIES BY BUYER. On the Closing Date, Buyer shall
deliver to Escrow Holder each of the following (the Assignment of
Partnership Interests executed by Buyer having previously been deposited
with Escrow Holder pursuant to the Option Agreement):
5.2.1 The Purchase Price set forth in Section 2.2.1
above.
5.2.2 An amount sufficient to pay any Escrow closing
costs as determined by Escrow Holder, in Cash or other immediately
available funds.
5.3 COOPERATION AND FURTHER ASSURANCES. Each party to this
Agreement agrees to perform any further acts and execute and deliver any
further documents that may be reasonably necessary to carry out the
provisions and intent of this Agreement (provided the same do not
materially increase any cost, liability or obligation of a party from that
otherwise contemplated herein).
6. CONDITIONS TO CLOSING.
6.1 FOR BUYER. The obligation of Buyer to consummate the
transaction contemplated by this Agreement shall be subject only to the
condition that Buyer or Escrow Holder shall have received from Seller all
of the documents to be delivered by Seller pursuant to Section 5.1 above.
6.2 FOR SELLER. The obligation of Seller to consummate the
transaction contemplated by this Agreement shall be subject only to the
condition that Escrow Holder shall have received from Buyer all of the
funds and documents to be delivered by Buyer pursuant to Section 5.2 above,
and that Buyer shall have been ready, willing and able to cooperate with
Seller in causing the Partnership to deliver the funds to be delivered by
the Partnership pursuant to Section 5.3 above.
7. CLOSING. The terms "Close of Escrow," "Closing" and "Closing
Date" are defined in Section 1.8 above. The following provisions shall
govern Escrow and the Closing:
7.1 GENERAL PROVISIONS. The parties hereby approve the
"General Provisions" applicable to Escrow Holder attached hereto as EXHIBIT
9.
7.2 CLOSING PROCEDURES. The closing of the purchase and sale
of Seller's Partnership Interests shall take place through Escrow as
described in Section 2.3 above. Immediately upon such Closing, Escrow
Holder shall disburse the Purchase Price to Seller, and shall deliver to
Buyer all of the documents, as originally executed by or on behalf of
Seller, deposited into Escrow by Seller pursuant to Section 5.1 above. Any
funds deposited by or on behalf of Buyer in excess of the sum of the
Purchase Price and Escrow closing costs shall be returned to Buyer.
8. CONDEMNATION, DAMAGE OR DESTRUCTION.
8.1 CONDEMNATION. In the event of a Condemnation of all or
any portion of the Property prior to the Closing, Buyer may, at its option,
elect not to acquire the Property, by written notice to Seller and Escrow
Holder within fifteen (15) days after the date on which such Condemnation
commences. If Buyer does so elect, then the Escrow and this Agreement
shall be terminated, and all funds and documents held by Escrow Holder
shall be returned to the party depositing the same. If Buyer does not so
elect, Buyer shall close the purchase, in which case Buyer shall be
entitled to all of the Partnership's interest in all proceeds relating to
such Condemnation.
8.2 DAMAGE OR DESTRUCTION. In the event of damage or
destruction of the Property prior to the Closing:
8.2.1 In any case involving Major Damage or Destruction,
Buyer may, at its option, elect not to acquire the Property, by written
notice to Seller and Escrow Holder within fifteen (15) days after the date
on which such Major Damage or Destruction occurs. If Buyer does so elect,
then the Escrow and this Agreement shall be terminated, and all funds and
documents held by Escrow Holder shall be returned to the party depositing
the same. If Buyer does not so elect, Buyer shall close the purchase, in
which case Buyer shall be entitled to all of the Partnership's interest in
all insurance proceeds relating to such Major Damage or Destruction.
8.2.2 In any case involving damage or destruction that
is not Major Damage or Destruction, Buyer shall close the purchase, and
shall be entitled to all of the Partnership's interest in all insurance
proceeds relating to such damage or destruction.
9. PARTIES' OBLIGATIONS AFTER CLOSING.
9.1 COOPERATION REGARDING TAX RETURNS. Seller and Buyer shall
cooperate, and Buyer shall cause the Partnership to cooperate, in the
closing of their books and the proper reporting of items on the tax returns
of the Partnership. Nothing contained in this Section 9.1 shall be
construed as limiting the responsibility of the Partnership for filing any
and all required tax returns. Seller agrees that the Partnership and each
of the entities constituting Seller will make an Internal Revenue Code
Section 754 election on both of the Partnership's tax returns for the
calendar year in which the Closing occurs.
9.2 EXPENSES OF PARTIES. Except as specifically set forth in
other provisions of this Agreement, all expenses involved in the
preparation, authorization and consummation of this Agreement, and all fees
and expenses for agents, representatives, counsel and accountants, shall be
borne solely by the party who incurs the same. The fees and reimbursable
expenses of Escrow Holder shall be born 50% by Seller and 50% by Buyer.
9.3 INDEMNIFICATION.
9.3.1 Subject to the terms of Section 12.20 below,
Seller covenants and agrees to indemnify, defend and hold Buyer, each of
the entities constituting Buyer, and their shareholders, officers,
directors, employees, agents, attorneys, representatives, Affiliates,
predecessors, successors and assigns (collectively, the "TrizecHahn
Indemnified Group") harmless from and against any and all actual
liabilities, obligations, damages, losses and expenses, including claims of
every kind and nature, whether accrued, absolute, contingent or otherwise,
and reasonable attorneys' fees and the costs of defense (in no event,
however, to include any consequential or punitive damages) (collectively,
"Losses"), incurred by any one or more members of the TrizecHahn
Indemnified Group in any action or proceeding arising as a result or by
reason of the breach, falsity or failure of the representation and warranty
made by Seller in Section 3.2 of the Purchase Agreement only (regarding
clear title to Seller's Partnership Interests).
9.3.2 Buyer covenants and agrees to indemnify, defend
and hold Seller, each of the entities constituting Seller, and their
shareholders, officers, directors, employees, agents, attorneys,
representatives, Affiliates, predecessors, successors and assigns
(collectively, the "JMB Indemnified Group") harmless from and against any
and all Losses (as defined in Section 9.3.1 above) incurred by any one or
more members of the JMB Indemnified Group in any action or proceeding
arising as a result or by reason of the breach, falsity or failure of any
of Buyer's representations or warranties contained in this Agreement.
9.4 PROCEDURE FOR INDEMNIFICATION.
9.4.1 If a party shall seek to claim indemnification
pursuant to Section 9.3 above (the "Indemnified Party"), the Indemnified
Party shall promptly notify the party obligated to provide such
indemnification (the "Indemnifying Party") in writing of such claim,
setting forth the nature and amount of the claim in detail. Failure of the
Indemnified Party to promptly notify the Indemnifying Party upon discovery
of an indemnifiable claim shall not bar the Indemnified Party's claim for
indemnification hereunder; provided, however, that the Indemnifying Party's
liability hereunder shall be limited to that which would have existed had
prompt notice been given, and the Indemnified Party shall be solely
responsible for, and shall indemnify the Indemnifying Party from such
increased liability that shall have been occasioned by its failure to
provide the Indemnifying Party with prompt notice.
9.4.2 The Indemnifying Party shall promptly notify the
Indemnified Party in writing whether or not it intends to defend such third
party claim or demand. After the assumption of the defense, the
Indemnifying Party shall diligently pursue such defense using counsel
reasonably acceptable to the Indemnified Party. The Indemnified Party
shall not be liable for any legal expenses subsequently incurred by the
Indemnifying Party in connection with such defense, but the Indemnified
Party may participate in such defense at its own expense. However, if the
Indemnifying Party declines or fails or ceases to defend the third party
claim or demand (or if its counsel declares itself barred or disqualified
from acting on behalf of the Indemnified Party in such matter), the
Indemnified Party may assume its own defense through counsel of its own
choice and the Indemnified Party's reasonable legal expenses, including,
without limitation, legal expenses and costs incurred in connection with
collecting any Losses from the Indemnifying Party, shall become part of its
Losses subject to indemnification hereunder.
9.4.3 The Indemnifying Party shall provide, or cause its
counsel to provide, to the Indemnified Party monthly reports as to the
status of any such defense. The Indemnifying Party shall respond promptly
and fully to any inquiries from the Indemnified Party as to any aspect of
the defense of any third party claim or demand.
9.4.4 If a settlement opportunity related to an
indemnified claim or demand of a third party is presented, and if the
Indemnified Party reasonably objects to the settlement offer, the
Indemnifying Party may, at its sole option, pay the amount of settlement
under the settlement offer to the Indemnified Party, in which event the
Indemnifying Party shall be relieved of all liability related to such
indemnified claim or demand and in which event the Indemnified Party shall
conduct and defend at its own cost and through counsel of its own choosing,
the claim or demand of the third party giving rise to such claim for
indemnification.
9.4.5 Each party shall fully cooperate with the other
party and its counsel in the defense or compromise of such claim or demand.
The Indemnifying Party shall not, except with the written consent of the
Indemnified Party, consent to the entry of a judgment or settlement which
does not include, as a term thereof, the unconditional release of the
Indemnified Party and any of its Affiliates named as parties therein from
all liability in respect of such third party claim or demand.
10. ARBITRATION OF DISPUTES. ANY CONTROVERSY OR CLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, OR CONCERNING THE BREACH OR
INTERPRETATION HEREOF, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH
THE FOLLOWING PROVISIONS. FOR PURPOSES OF THIS SECTION 10 ONLY, (A) ALL
AFFECTED PARTIES WITHIN THE JMB GROUP WILL BE REFERRED TO IN THE SINGULAR
AS A "PARTY" AND SHALL JOINTLY TAKE THE PROCEDURAL ACTIONS REQUIRED IN
CONNECTION WITH THE ARBITRATION PROCEEDING DESCRIBED BELOW AS THOUGH THEY
WERE A SINGLE "PARTY," AND (B) ALL AFFECTED PARTIES WITHIN THE TRIZECHAHN
GROUP WILL BE REFERRED TO IN THE SINGULAR AS A "PARTY" AND SHALL JOINTLY
TAKE THE PROCEDURAL ACTIONS REQUIRED IN CONNECTION WITH THE ARBITRATION
PROCEEDING DESCRIBED BELOW AS THOUGH THEY WERE A SINGLE "PARTY." FOR
EXAMPLE, IF ALL SIX PARTIES TO THIS AGREEMENT ARE AFFECTED BY A DEMAND FOR
ARBITRATION, THERE WOULD NOT BE SIX ARBITRATORS SELECTED PURSUANT TO
SECTION 10.1 BELOW, BUT ONLY TWO ARBITRATORS -- ONE NAMED BY THE JMB GROUP,
AND THE OTHER NAMED BY THE TRIZECHAHN GROUP:
10.1 THE PARTY SEEKING ARBITRATION SHALL DELIVER A WRITTEN
NOTICE OF DEMAND TO RESOLVE DISPUTE (THE "DEMAND") TO THE OTHER PARTY TO
THIS AGREEMENT. THE DEMAND SHALL INCLUDE A STATEMENT OF THE PARTY'S CLAIM,
THE AMOUNT THEREOF, AND THE NAME OF THE PROPOSED ARBITRATOR, SELECTED FROM
THE THEN CURRENT COMMERCIAL OR BUSINESS ARBITRATION LIST OF THE SUPERIOR
COURT FOR THE COUNTY OF RIVERSIDE, TO DECIDE THE DISPUTE ("ARBITRATOR").
WITHIN TWENTY (20) DAYS AFTER RECEIPT OF THE DEMAND, THE OTHER PARTY
AGAINST WHOM A DEMAND IS MADE SHALL DELIVER A WRITTEN RESPONSE ("RESPONSE")
TO THE DEMANDING PARTY. THE RESPONSE SHALL INCLUDE A SHORT AND PLAIN
STATEMENT OF THE PARTY'S DEFENSES TO THE CLAIM AND SHALL ALSO STATE WHETHER
THE PARTY AGREES TO THE ARBITRATOR CHOSEN BY THE DEMANDING PARTY.
10.2 IN THE EVENT THE PARTIES CANNOT AGREE ON A SINGLE
ARBITRATOR, EACH PARTY SHALL SELECT AN ARBITRATOR FROM THE THEN CURRENT
COMMERCIAL OR BUSINESS ARBITRATION LIST OF THE SUPERIOR COURT FOR THE
COUNTY OF RIVERSIDE, AND THOSE TWO ARBITRATORS SHALL SELECT A THIRD
ARBITRATOR FROM THE THEN CURRENT COMMERCIAL OR BUSINESS ARBITRATOR LIST OF
THE SUPERIOR COURT OF THE COUNTY OF RIVERSIDE. ANY ARBITRATION SHALL BE
HELD IN A MUTUALLY AGREEABLE LOCATION IN PALM SPRINGS, CALIFORNIA.
10.3 THE PARTIES SHALL BE ENTITLED TO FULL RIGHTS OF DISCOVERY
AS SET FORTH IN THE CODE OF CIVIL PROCEDURE FOR CIVIL ACTIONS TRIED IN THE
SUPERIOR COURTS OF THE STATE OF CALIFORNIA. ALL DISCOVERY SHALL BE
COMPLETED WITHIN SIXTY (60) DAYS FOLLOWING SELECTION OF THE ARBITRATORS.
10.4 THE ARBITRATORS' POWERS SHALL BE LIMITED AS FOLLOWS: THE
ARBITRATORS SHALL FOLLOW THE SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA,
INCLUDING RULES OF EVIDENCE. HIS/HER/THEIR DECISION SHALL BE SUPPORTED BY
SUBSTANTIAL EVIDENCE AND OTHER LIKE PROVISIONS. THE GROUNDS FOR
CORRECTION, VACATION OR CONFIRMATION SHALL BE LIMITED TO THOSE CONTAINED IN
CODE OF CIVIL PROCEDURE SECTIONS 1286.2 AND 1286.6.
10.5 TO THE EXTENT POSSIBLE, THE ARBITRATION HEARINGS SHALL BE
CONDUCTED ON CONSECUTIVE DAYS, EXCLUDING SATURDAYS, SUNDAYS AND HOLIDAYS,
UNTIL THE COMPLETION OF THE HEARINGS.
10.6 IN CONNECTION WITH ANY ARBITRATION PROCEEDINGS COMMENCED
HEREUNDER, ANY PARTY SHALL HAVE THE RIGHT TO JOIN ANY THIRD PARTIES IN SUCH
PROCEEDINGS IN ORDER TO RESOLVE ANY OTHER DISPUTES, THE FACTS OF WHICH ARE
RELATED TO THE MATTERS SUBMITTED FOR ARBITRATION HEREUNDER.
10.7 THE ARBITRATORS SHALL RENDER HER/HIS/THEIR DECISION
CONCERNING THE SUBSTANTIVE ISSUE(S) IN DISPUTE IN WRITING. IF THE PARTIES
FAIL TO AGREE ON A SINGLE ARBITRATOR AND THE THREE ARBITRATORS SELECTED
CANNOT AGREE AS TO THEIR DECISION, THEN THE JOINT DECISION OF ANY TWO OF
THE THREE ARBITRATORS SHALL BE CONTROLLING. THE WRITTEN DECISION SHALL BE
SENT TO THE PARTIES NO LATER THAN THIRTY (30) DAYS FOLLOWING THE LAST
HEARING DATE.
10.8 IF ANY OF THE PROVISIONS RELATING TO ARBITRATION ARE NOT
ADHERED TO OR COMPLIED WITH, EITHER PARTY MAY PETITION THE CALIFORNIA
SUPERIOR COURT, RIVERSIDE COUNTY, FOR APPROPRIATE RELIEF.
10.9 IN THE EVENT THE PARTIES PROCEED WITH ARBITRATION, EACH
PARTY AGREES TO USE ITS BEST EFFORTS TO HAVE THE JUDGMENT OR DETERMINATION
OF THE ARBITRATORS RENDERED WITHIN NINETY (90) DAYS OF THE DATE OF DELIVERY
OF THE REQUEST THAT SUCH ARBITRATION BE COMMENCED. THE PARTIES AGREE TO BE
BOUND BY THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
10.10 NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS
"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS
PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT
POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.
YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
10.11 WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO
SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
_____/_____/_____ _____/_____
SELLER'S BUYER'S
INITIALS INITIALS
11. MUTUAL RELEASES.
11.1 TRIZECHAHN RELEASE. Effective upon the Close of Escrow,
the TrizecHahn Group, for themselves and their shareholders, officers,
directors, employees, agents, attorneys, representatives, Affiliates,
predecessors, successors and assigns (collectively, the "TrizecHahn Release
Group"), fully and forever release and discharge the JMB Group, and each of
them, and their respective shareholders, officers, directors, employees,
agents, attorneys, representatives, Affiliates, predecessors, successors
and assigns (collectively, the "JMB Release Group"), of and from any and
all claims, debts, demands, actions, and causes of actions, suits, costs,
damages, expenses, accounts, covenants, contracts, controversies,
agreements, promises and liabilities whatsoever, both in law and in equity,
which they may now have or ever may have had or may have in the future
against the JMB Release Group, and each of them, for all matters relating
to, or arising from (i) the Partnership, the Partnership Agreement, the
Management Agreement, the Partnership Interests or the Partnership
Property, (ii) the ownership, management and operation of the Property and
Partnership Property at any time whatsoever, whether before, during or
after the Close of Escrow, (iii) the conduct of the JMB Release Group, and
each of them at any time whatsoever, whether before, during or after the
Close of Escrow, with respect to the Partnership, the Partnership
Agreement, the Management Agreement, the Partnership Interests or the
Partnership Property, and (iv) any breach or alleged breach of the Option
Agreement or this Agreement; BUT SPECIFICALLY EXCLUDING from the foregoing
release and discharge only (a) claims based upon the representations,
warranties, indemnities and further assurances specifically set forth in
Sections 3, 5.3 and 9.3 of this Agreement, which by the terms of Section
12.20 below are to survive the execution and delivery hereof, the
consummation of the transactions contemplated hereby and the transfer and
delivery of Seller's Partnership Interests, and (b) claims by Buyer
referred to in Section 12.20.1 and 12.20.2 below.
11.2 JMB RELEASE. Effective upon the Close of Escrow, the JMB
Group, for themselves and for the JMB Release Group, and each of them,
fully and forever release and discharge the TrizecHahn Release Group, and
each of them, of and from any and all claims, debts, demands, actions, and
causes of actions, suits, costs, damages, expenses, accounts, covenants,
contracts, controversies, agreements, promises and liabilities whatsoever,
both in law and in equity, which they may now have or ever may have had or
may have in the future against the TrizecHahn Release Group, and each of
them, for all matters relating to, or arising from (i) the Partnership, the
Partnership Agreement, the Management Agreement, the Partnership Interests
or the Partnership Property, (ii) the ownership, management and operation
of the Property and Partnership property at any time whatsoever, whether
before, during or after the Close of Escrow, (iii) the conduct of the
TrizecHahn Release Group, and each of them at any time whatsoever, whether
before, during or after the Close of Escrow, with respect to the
Partnership, the Partnership Agreement, the Management Agreement, the
Partnership Interests or the Partnership Property, and (iv) any breach or
alleged breach of the Option Agreement or this Agreement; BUT SPECIFICALLY
EXCLUDING from the foregoing release and discharge only those certain
claims that are based upon the representations, warranties, indemnities and
further assurances specifically set forth in Sections 4, 5.3 and 9.3 of
this Agreement, which by the terms of Section 12.20 below are to survive
the execution and delivery hereof, the consummation of the transactions
contemplated hereby and the transfer and delivery of Seller's Partnership
Interests.
11.3 CIVIL CODE SECTION 1542. All rights under Section 1542
of the Civil Code of the State of California, and under any and all similar
laws of any State, are hereby expressly waived. Each party is aware that
Section 1542 of the Civil Code provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
12. MISCELLANEOUS PROVISIONS.
12.1 NOTICE AND CURE RIGHTS.
12.1.1 If any party (a "Defaulting Party") defaults
under any term, condition or provision of this Agreement, then any other
party (a "Non-Defaulting Party"), after delivery of ten (10) days' written
notice to the Defaulting Party specifically describing the default (the
"Default Notice"), and after the Defaulting Party's failure to cure such
default within the ten (10) day period, (i) may declare an event of default
("Event of Default"), and, (ii) subject to this Sections 12.1.2, 12.2,
12.10 and 12.20 below, may pursue its remedies as set forth in this
Agreement; provided, however, in no event shall Seller be obligated to
extend the Closing Date to accommodate any cure hereunder or under Section
12.1.2 below.
12.1.2 If Buyer or any party within the TrizecHahn Group
is the party to whom such a Default Notice is given, then Seller shall NOT
be entitled to terminate this Agreement or the escrow (and any previous
notice from Seller purporting to exercise that right shall be deemed to be
stayed), and Seller shall be obligated to close the escrow on Buyer's
purchase of Seller's Partnership Interests, notwithstanding such Event of
Default, unless both of the following conditions are met:
(a) The Event of Default declared by Seller is
material; and
(b) Buyer or the party within the TrizecHahn Group to
whom such a Default Notice is given (i) fails to commence to cure the
default described in the Default Notice within the ten (10) day period
specified in Section 4.3.1, and also (ii) fails to close escrow on the
exercised Option by the Scheduled Closing Date. Regarding Clause (i)
above, to the extent the default is of a nature which cannot be cured
within the ten (10) day period specified in Section 4.3.1, if Buyer
commences to cure the default within the said ten (10) day period, but
thereafter fails to prosecute such cure diligently toward completion
throughout the period from such commencement to the Close of Escrow, then
the condition required under Clause (i) will be deemed to have failed.
12.2 REFRAINING FROM LEGAL PROCEEDINGS. Each party agrees
that, during the term of this Agreement, it shall not (i) commence, join
in, prosecute or participate in any suit, arbitration or other proceeding
in a position which is adverse to any other parties arising directly or
indirectly from the transactions contemplated by this Agreement or in any
way relating to the Property, the Partnership Agreement or its management,
or (ii) terminate, or attempt to terminate, this Agreement, without in each
instance first giving to the other parties the Default Notice and
opportunity to cure described in Section 12.1 above.
12.3 ASSIGNMENT. No party may assign its rights or
obligations under this Purchase Agreement without receipt of the other
parties' prior written consent; provided, however that Buyer may assign its
rights and obligations hereunder concurrently with Close of Escrow
hereunder to any Affiliate of Buyer, without the consent of Seller.
12.4 AMENDMENT, MODIFICATION AND WAIVER. No amendment,
modification or waiver of this Purchase Agreement or any part hereof shall
be valid or effective unless in writing and signed by the party sought to
be charged therewith. No waiver of any breach or condition of this
Purchase Agreement shall be deemed to be a waiver of any other or
subsequent breach or condition, whether of like or different nature. No
course of dealing between the parties hereto will be deemed effective to
amend, modify or discharge any part of this Purchase Agreement or the
rights or obligations of any party hereunder.
12.5 PARTIAL INVALIDITY. If any provision of this Purchase
Agreement shall be held by competent authority to be invalid or
unenforceable, such provision shall be construed so as to be limited or
reduced to be enforceable to the maximum extent compatible with the law as
it shall then appear. The total invalidity or unenforceability of any
particular provision of this Purchase Agreement shall not affect the other
provisions hereof, and this Purchase Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
12.6 NO THIRD PARTY BENEFICIARY. Except as expressly provided
in Sections 9.3 and 9.4 above (related to indemnification) and in Section
11 above (entitled Mutual Releases), no person or entity shall be deemed to
be a third party beneficiary hereof, and nothing in this Purchase Agreement
(either expressed or implied) is intended to confer upon any other person
or entity any rights, remedies, obligations or liabilities under or by
reason of this Purchase Agreement.
12.7 NOTICES. Any notice or other communication required or
permitted under this Purchase Agreement shall be in writing and shall be
deemed to have been duly given (i) upon personal delivery, (ii) on the
third day after the date of mailing by United States registered or
certified mail, postage prepaid, return receipt requested, (iii) on the
first day following delivery to a nationally recognized United States
overnight courier service, fee prepaid, return receipt or other
confirmation of delivery requested, or (iv) upon confirmation of receipt by
fax. Any such notice or communication shall be addressed as set forth
below, or to such other address as may be designated by a party in a notice
given to all other parties in accordance with the provisions of this
Section 12.
ADDRESS FOR NOTICES TO SELLER (MANAGING PARTNER, CARLYLE A
AND/OR CARLYLE B):
JMB Realty Corporation
900 North Michigan Avenue
Chicago, Illinois 60611-1575
Attn: Mr. Glenn Emig
Telephone: (312) 915-2350
Facsimile: (312) 915-2310
WITH A COPY TO:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
26th Floor
Los Angeles, California 90067
Attention: Gary M. Laughlin
Telephone: (310) 201-8907
Facsimile: (310) 201-8922
ADDRESS FOR NOTICES TO BUYER (CO-PARTNER AND/OR
TRIZECHAHNCO):
TrizecHahn Centers Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attn: Mr. Andrew A. L. Blair
Telephone: (619) 546-3494
Facsimile: (619) 546-3497
WITH A COPY TO:
TrizecHahn Centers Inc.
4350 La Jolla Village Drive, Suite 400
San Diego, California 92122-1233
Attn: Ms. Susan G. Kanfer
Telephone: (619) 546-3375
Facsimile: (619) 546-3413
ADDRESS FOR NOTICES TO ESCROW HOLDER:
Stewart Title of California, Inc.
7676 Hazard Center Drive, 7th Floor
San Diego, California 92108
Attn: Ms. Juliet Martinez
Telephone: (619) 692-1600
Facsimile: (619) 298-4033
12.8 TIME OF ESSENCE. Time is of the essence to this Purchase
Agreement.
12.9 GOVERNING LAW. This Purchase Agreement shall be governed,
construed and enforced in accordance with the laws of the State of California.
12.10 REMEDIES. Except as otherwise expressly provided herein, no
remedy conferred upon a party by this Agreement is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law, in equity or by statute; provided, however,
that if the transactions hereunder shall fail to close and Seller shall be
in default hereunder, then (i) Buyer shall be entitled only to specifically
enforce this Agreement, and to such ancillary damages as may be awarded in
connection with such an action for specific enforcement, but if specific
enforcement is determined in the legal proceeding to be impossible to effect
by reason of Seller's default, then Buyer shall be entitled to such
alternative remedies (in no event, however, to include any consequential
or punitive damages) as may be found in the legal proceeding to be
appropriate, which alternative remedies shall include, without limitation,
a refund to Buyer of its Option Consideration, and (ii) no other actions
for damages (including, without limitation, actions for consequential or
punitive damages) shall be permitted as a result of such default by Seller.
12.11 ATTORNEYS' FEES. In the event of any controversy, claim or
dispute between the parties arising from or related to this Purchase Agreement
or the breach hereof, the prevailing party shall be entitled to recover from
the losing parties its reasonable costs, expenses and attorneys' fees.
12.12 EXPENSES OF PARTIES. Except as specifically set forth in
other provisions of this Purchase Agreement, all expenses involved in the
preparation, authorization and consummation of this Purchase Agreement,
including, without limitation, all fees and expenses for agents,
representatives, counsel and accountants, shall be borne solely by the party
who incurs the same, and the other parties shall have no liability with
respect thereto.
12.13 FURTHER ASSURANCES. The parties agree to take such further
actions and to execute such additional documents and instruments as may be
reasonably required in order to more effectively carry out the terms of this
Purchase Agreement and the intentions of the parties.
12.14 HEADINGS. The headings contained in this Purchase Agreement
are inserted for convenience only and do not constitute a part of this
Purchase Agreement.
12.15 GENDER. Whenever the context may require, any pronoun used
herein shall include the corresponding masculine, feminine or neuter forms,
and the singular of nouns, pronouns and verbs shall include the plural and
vice versa.
12.16 FAIR MEANING. This Purchase Agreement shall be construed
according to its fair meaning, the language used shall be deemed the language
chosen by the parties hereto to express their mutual intent, and no
presumption or rule of strict construction will be applied against any
party hereto.
12.17 BINDING EFFECT. This Purchase Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and permitted assigns.
12.18 COUNTERPARTS AND FACSIMILES. This Purchase Agreement
may be executed in multiple copies, each of which will be deemed an original,
but all of which will constitute one Purchase Agreement after each party has
signed such a counterpart. An executed counterpart may be delivered by
transmission of a facsimile copy, promptly followed by delivery of the
original in accordance with this Purchase Agreement, and in such a case,
delivery shall be deemed effective upon transmission of the facsimile copy.
12.19 ENTIRE AGREEMENT. This document contains the entire
agreement between the parties related to the purchase and sale of Seller's
Partnership Interests and supersedes any prior understandings, memoranda and
other written or oral agreements between or among any of them respecting the
subject matter hereof. There are no representations, agreements, arrangements
or understandings, oral or written, between or among any of the parties
relating to the subject matter of this Purchase Agreement which are not
fully expressed herein.
12.20 LIMITATION ON LIABILITY; SURVIVAL OF CLAIMS.
12.20.1 If, PRIOR TO the Close of Escrow, Buyer gives written
notice to Seller stating that Buyer has become aware of a breach or default
by Seller with respect to the representations and warranties made by Seller
in Section 3.2 of this Purchase Agreement only (regarding clear title to
Seller's Partnership Interests), and such notice is later determined to
have been substantially correct, then Buyer shall be entitled
to all remedies against Seller permitted by this Agreement, which
shall survive the Close of Escrow, without being subject to the
limitations set forth in the remainder of Sections 12.20.1, 12.20.2 or
12.20.3. The intent of the parties is that, as to that particular
matter, if it becomes known to and is asserted in writing by Buyer
PRIOR TO the Close of Escrow, Buyer should not be deprived of the
full benefit of its bargain pursuant to this Agreement.
12.20.2 In contrast, in connection with all claims asserting a
breach or default by Seller under this Agreement, the Option Agreement or
any other document executed or delivered in connection herewith OTHER THAN
claims covered by Section 12.20.1 above, whether Buyer (i) first gives
written notice asserting such other claims PRIOR TO the Close of Escrow
(as to a matter not covered by Section 12.20.1 above) or (ii) first gives
notice ON OR AFTER the Close of Escrow, including, without limitation,
all claims based upon representations, warranties, indemnities and
further assurances under this Agreement, the Option Agreement or any
other document executed or delivered in connection herewith which survive
the Close of Escrow and as to which Buyer's claim of breach or default is
first given ON OR AFTER the Close of Escrow (collectively, the "Capped
Claims"), the following limitations shall apply:
(a) The aggregate liability of Seller arising with respect to
such Capped Claims shall not exceed $300,000, notwithstanding anything to
the contrary contained herein (and without limitation on any of the other
limitations on liability or remedies contained in this Agreement).
(b) The Capped Claims shall survive the exercise of the
Option, the consummation of the transactions contemplated thereby and
the transfer and delivery of Seller's Partnership Interests pursuant to
this Agreement for a period (the "Survival Period") lasting only until
December 1, 1998, at which time they shall terminate, except as to claims
asserted by Buyer to Seller in writing on or before December 1, 1998 and
on which arbitration or litigation is commenced by December 31,
1998 (if not resolved by then). The claims described in the exception
clause in the preceding sentence shall survive until finally resolved.
12.20.3 The provisions of this Section 12.20.3 shall be of
no concern to the Escrow Holder.
(a) Seller shall retain reserves of at least $300,000 at
the time of closing under this Agreement, and, until the expiration of the
Survival Period, Seller shall not distribute the same to its partners, but
shall only utilize such retained funds for the payment of the Capped
Claims or for the payment of attorneys' fees of Seller (including any
amounts incurred in connection with resolving or defending any
claim of liability for the Capped Claims). The fact that Seller
may expend such reserves in part for the payment of attorneys' fees
of Seller in no way diminishes Buyer's right under Section 12.20.2
above to recover up to $300,000 from Seller for the Capped Claims.
(b) Notwithstanding the foregoing, (i) if Seller or a
liquidating trust or other similar successor-in-interest established
by Seller shall fail to retain such reserves of at least $300,000 at
the time of closing, or (ii) if during the Survival Period, Seller
(or such successor-in-interest as aforesaid) shall utilize such
reserves for any purpose other than the payment of the Capped
Claims or attorneys' fees (including amounts for resolving or
defending claims as aforesaid), or (iii) if for any other reason
(including, without limitation, the payment of attorneys' fees or
amounts for resolving or defending claims as aforesaid), all of Buyer's
claims against Seller for the Capped Claims are finally resolved and
the aggregate amount to which Buyer is entitled pursuant to such final
resolution (not to exceed $300,000 in the aggregate) (collectively,
the "Final Award in Favor of Buyer") exceeds the aggregate amount
actually paid by Seller (or such successor-in-interest as aforesaid)
to Buyer from its (or their) reserves in satisfaction of the Final
Award in Favor of Buyer, then in any such case, Buyer may look
to the assets of JMB Realty Corporation, as the general partner of
Seller, for the payment of the Final Award in Favor of Buyer; provided,
however, that the aggregate liability of JMB Realty Corporation in
connection therewith shall not exceed the lesser of:
-- $300,000; or
-- The difference between (x) the Final Award in Favor
of Buyer, and (y) the aggregate amount actually paid by Seller (or such
successor-in-interest as aforesaid) to Buyer from its (or their) reserves
in satisfaction of the Final Award in Favor of Buyer.
For example, if Seller properly retains a reserve of $300,000 at the time
of closing, Seller properly expends $200,000 from that reserve for its own
attorneys' fees in resolving or defending a claim against its reserves, a
Final Award in Favor of Buyer in the amount of $300,000 is nevertheless
entered against Seller, and Seller actually pays to Buyer the entire
$100,000 then remaining in Seller's reserve, then Buyer may recover
from JMB Realty Corporation the remaining $200,000 that is unpaid and
owed on the Final Award in Favor of Buyer.
12.20.4 No constituent partner in or agent of Seller, nor any
advisor, trustee, director, officer, employee, beneficiary, shareholder,
participant, representative or agent of any corporation or trust that is
or becomes a constituent partner in Seller (including, but not limited to,
JMB Realty Corporation, except for the limited extent to which Buyer may
look to the assets of JMB Realty Corporation pursuant to Sections 12.20.1
or 12.20.3 above), shall have any personal liability, directly or
indirectly, under or in connection with this Agreement, the Option
Agreement or any agreement made or entered into pursuant hereto or
thereto, or any amendment or amendments to any of the foregoing made
at any time or times, heretofore or hereafter, and Buyer and its
successors and assigns and, without limitation, all other persons and
entities, shall look solely to the reserves referred to in
Section 12.20.3 above, to offsets against any undelivered portion of
the Purchase Price and to Seller's other assets for the payment of
any claim or for any performance, and Buyer, on behalf of itself and its
successors and assigns, hereby waives any and all such personal liability.
Notwithstanding anything to the contrary contained in this Agreement,
neither the negative capital account of any constituent partner in Seller
(or in any other constituent partner of Seller), nor any obligation of any
constituent partner in Seller (or in any other constituent partner of
Seller) to restore a negative capital account or to contribute capital
to Seller (or to any other constituent partner of Seller), shall at any
time be deemed to be the property or an asset of Seller or any such other
constituent partner (and neither Buyer nor any of its successors or
assigns shall have any right to collect, enforce or proceed against or
with respect to any such negative capital account or partner's obligation
to restore or contribute).
IN WITNESS WHEREOF, the parties hereto have duly executed this Purchase
Agreement as of the date first set forth above.
SELLER:
CARLYLE/PALM DESERT, INC.,
an Illinois corporation
By:
Name:
Title:
By:
Name:
Title:
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVI,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By:
Name:
Title:
By:
Name:
Title:
CARLYLE REAL ESTATE LIMITED
PARTNERSHIP-XVII,
an Illinois limited partnership
By: JMB REALTY CORPORATION,
a Delaware corporation,
General Partner
By:
Name:
Title:
By:
Name:
Title:
BUYER:
HAHN/PALM DESERT, INC.,
a California corporation
By:
Name:
Title:
By:
Name:
Title:
TRIZECHAHN CENTERS INC.,
a California corporation
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CONSENT OF ESCROW HOLDER
- ------------------------
Stewart Title of California, Inc., the Escrow Holder under this
Agreement, hereby consents to the opening of Escrow pursuant to the terms
of this Agreement.
Date: _______________, 19___
Stewart Title of California, Inc.
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,843,062
<SECURITIES> 0
<RECEIVABLES> 108,038
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,951,100
<PP&E> 43,146,694
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,549,656
<CURRENT-LIABILITIES> 2,594,888
<BONDS> 40,499,456
<COMMON> 0
0
0
<OTHER-SE> 17,093,119
<TOTAL-LIABILITY-AND-EQUITY>65,549,656
<SALES> 2,408,056
<TOTAL-REVENUES> 2,762,087
<CGS> 0
<TOTAL-COSTS> 757,853
<OTHER-EXPENSES> 137,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,230,213
<INCOME-PRETAX> 636,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 605,448
<DISCONTINUED> 7,103,609
<EXTRAORDINARY> 5,235,541
<CHANGES> 0
<NET-INCOME> 12,944,598
<EPS-PRIMARY> 91.18
<EPS-DILUTED> 91.18
</TABLE>
