<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1994
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-15726
SUMMIT TAX EXEMPT L.P. II
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3370413
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
625 Madison Ave., New York, N.Y. 10022
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
N/A
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September
30, December 31,
1994 1993
<S> <C> <C>
- - --------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $142,079,505 $130,309,664
Assets held for sale, net 17,600,000 29,350,000
Temporary investments 2,931,988 1,855,780
Cash 136,265 302,826
Cash held in escrow 516,896 508,023
Interest receivable 918,448 805,805
Promissory notes receivable, net 195,320 269,673
Deferred bond selection fees, net 2,220,566 2,359,106
Other assets 31,606 17,747
------------ ------------
Total assets $166,630,594 $165,778,624
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Due to affiliate $ 386,488 $ 158,162
Reserve for disputed claim 516,896 400,000
Deferred income 591,355 160,514
Accrued expenses 82,736 141,869
------------ ------------
Total liabilities 1,577,475 860,545
------------ ------------
Contingencies
Partners' capital
Limited partners (9,151,620 BUC$ issued and outstanding) 165,145,082 165,012,743
General partners (91,963) (94,664)
------------ ------------
Total partners' capital 165,053,119 164,918,079
------------ ------------
Total liabilities and partners' capital $166,630,594 $165,778,624
------------ ------------
------------ ------------
- - --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------- -------------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first
mortgage bonds $7,449,172 $7,283,414 $2,597,983 $2,485,390
Income from assets held for sale, net 1,301,572 1,191,886 443,546 372,934
Interest income from promissory notes 30,461 46,778 10,104 15,907
Interest income from temporary investments 43,085 32,131 16,949 11,316
---------- ---------- ---------- ----------
8,824,290 8,554,209 3,068,582 2,885,547
---------- ---------- ---------- ----------
EXPENSES
Management fees 607,968 607,968 202,656 202,656
Loan servicing fees 303,152 303,152 102,162 102,162
General and administrative 238,751 315,173 79,799 100,311
Amortization of deferred bond selection
fees 138,540 138,540 46,180 46,180
Provision for disputed claim 116,896 400,000 116,896 --
---------- ---------- ---------- ----------
1,405,307 1,764,833 547,693 451,309
---------- ---------- ---------- ----------
Net income $7,418,983 $6,789,376 $2,520,889 $2,434,238
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ALLOCATION OF NET INCOME
Limited partners $7,270,603 $6,653,588 $2,470,471 $2,385,553
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General partners $ 148,380 $ 135,788 $ 50,418 $ 48,685
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per BUC $ .79 $ .73 $ .27 $ .26
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- - -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1993 $165,012,743 $(94,664) $164,918,079
Net income 7,270,603 148,380 7,418,983
Distributions (7,138,264) (145,679) (7,283,943)
------------ -------- ------------
Partners' capital (deficit)--September 30, 1994 $165,145,082 $(91,963) $165,053,119
------------ -------- ------------
------------ -------- ------------
- - ---------------------------------------------------------------------------------------------------
<CAPTION>
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
<S> <C> <C>
1994 1993
- - ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $7,386,921 $ 7,554,815
Cash received from assets held for sale, net 1,301,572 1,191,886
Fees and expenses paid (994,536) (899,465)
Cash held in escrow (8,873) (501,825)
---------- -----------
Net cash provided by operating activities 7,685,084 7,345,411
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net sale (purchase) of temporary investments (1,076,208) 89,013
Principal payments received from loans made to properties 21,481 8,965
Loans made to properties -- (263,000)
Income deferred upon assumption of FMB by new debtor 487,025 --
---------- -----------
Net cash used in investing activities (567,702) (165,022)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid (7,283,943) (7,283,943)
---------- -----------
Net decrease in cash (166,561) (103,554)
Cash at beginning of period 302,826 228,469
---------- -----------
Cash at end of period $ 136,265 $ 124,915
---------- -----------
---------- -----------
- - ---------------------------------------------------------------------------------------------------
SCHEDULE RECONCILING NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $7,418,983 $ 6,789,376
---------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for disputed claim 116,896 --
Amortization of deferred bond selection fees 138,540 138,540
Accretion of valuation allowance (19,841) (19,841)
Accretion of deferred income (3,312) --
Changes in:
Cash held in escrow (8,873) (501,825)
Interest receivable (112,643) 159,598
Due from affiliate -- 38,624
Promissory notes receivable, net 52,872 46,455
Other assets (13,859) (20,220)
Due to affiliate 228,326 294,581
Deferred income (52,872) 6,281
Accrued expenses (59,133) 413,842
---------- -----------
Total adjustments 266,101 556,035
---------- -----------
Net cash provided by operating activities $7,685,084 $ 7,345,411
---------- -----------
---------- -----------
- - ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF INVESTING ACTIVITIES
The Partnership transferred $11,750,000 from assets held for sale to participating first mortgage
bonds (``FMBs'') during the three month period ended September 30, 1994. See Note C for further
information.
- - ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Summit Tax Exempt L.P. II (the ``Partnership'') as of September 30,
1994, the results of its operations for the nine and three months ended
September 30, 1994 and 1993 and its cash flows for the nine months ended
September 30, 1994 and 1993. However, the operating results for the interim
periods may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1993.
Certain balances from the prior periods have been reclassified to conform
with the current year financial statement presentation.
B. Related Parties
The General Partners and their affiliates perform services for the
Partnership which include but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with the services, the amount of which is limited by provisions of
the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
---------------------- --------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
Prudential-Bache Properties, Inc. (``PBP'') and
affiliates:
General and administrative $ 74,404 $ 78,256 $ 24,801 $ 24,856
Management fee 303,984 303,984 101,328 101,328
-------- ---------- -------- --------
378,388 382,240 126,129 126,184
-------- ---------- -------- --------
Related Tax Exempt Associates II, Inc. (the
``Related General Partner'') and affiliates:
Loan servicing fees 303,152 303,152 102,162 102,162
General and administrative 10,787 43,318 2,780 13,344
Management fee 303,984 303,984 101,328 101,328
-------- ---------- -------- --------
617,923 650,454 206,270 216,834
-------- ---------- -------- --------
$996,311 $1,032,694 $332,399 $343,018
-------- ---------- -------- --------
-------- ---------- -------- --------
</TABLE>
The General Partners are paid, in aggregate, an annual management fee equal
to .5% of the total invested assets (which equals the original face amount of
total FMBs).
An affiliate of the Related General Partner receives loan servicing fees in
the amount of .25% per annum of the principal amount outstanding on mortgage
loans serviced by the affiliate.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, receives a fee for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
PSI owns 48,825 BUC$ at September 30, 1994.
5
<PAGE>
<PAGE>
The Players Club property (securing a $2,500,000 FMB in this Partnership)
also secures an FMB for $7,200,000 owned by Summit Tax Exempt L.P. III, of which
the general partners are either the same or affiliates of the General Partners
of this Partnership.
The original obligors of the Suntree, Players Club and River Run FMBs are
affiliates of the Related General Partner.
C. Assets Held for Sale
Assets held for sale and the related income thereon are as follows:
<TABLE>
<CAPTION>
Net cash received Net cash received
for the nine for the three
months ended months ended
September 30, September 30,
Call Maturity Carrying Value Face Amount ------------------------- -------------------
Date Date of FMB of FMB 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------------------
The Lakes,
Kansas City, MO* Dec. 2006 Dec. 2006 $ -- $13,650,000 $ 354,620 $ 426,466 $106,046 $142,564
Pelican Cove,
St. Louis, MO Feb. 1999 Feb. 2007 17,600,000 18,000,000 946,952 765,420 337,500 230,370
-------------- ----------- ----------- ----------- -------- --------
$ 17,600,000 $31,650,000 $1,301,572 $1,191,886 $443,546 $372,934
-------------- ----------- ----------- ----------- -------- --------
-------------- ----------- ----------- ----------- -------- --------
</TABLE>
* Reinstated as an FMB as of August 31, 1994. As such, the net cash received for
the nine and three months ended September 30, 1994 reflects cash flow through
August 31, 1994. Subsequent cash flow is recorded as interest income from
participating first mortgage bonds.
The original owner of the underlying property and obligor of the Pelican Cove
FMB was replaced an affiliate of Related Tax Exempt Associates II, Inc., a
general partner of the Partnership, who has
not made an equity investment. This entity has assumed the day-to-day
responsibilities and obligations of the underlying property. Buyers are being
sought who would make an equity investment in the underlying property and assume
the nonrecourse obligations for the FMB. Although this property is not producing
sufficient cash flow to fully service the debt, the Partnership has no present
intention to declare a default on such FMB.
In June and December 1992, the Partnership made additional loans aggregating
approximately $410,000 to The Lakes and Pelican Cove for payment of 1991 past
due property taxes. The loans were self-amortizing over the period ending May
1994 with interest at 8.5% per annum. The loans were recorded in operating
results as a reduction of income from assets held for sale in 1992 because the
properties were paying on a cash flow basis. Subsequent principal payments
relating to these loans were recorded as income from assets held for sale. The
loans were fully amortized during the second quarter of 1994. Interest income
recognized on these loans was approximately $2,300 and $17,200 for the nine
months ended September 30, 1994 and 1993, respectively.
On May 13, 1993, the Partnership on behalf of Lakes Project Investors, Inc.
(``LPI''), an affiliate of the Related General Partner who replaced the original
developer, deposited a cash escrow of $500,000 in connection with the filing of
an appeal of a mechanic's lien judgement rendered against The Lakes. In July
1994, the appeal was rejected and the judgement affirmed. LPI petitioned the
court to grant a rehearing or, in the alternative, a transfer of the case to the
Missouri Supreme Court. A rehearing was granted on August 31, 1994. The
Partnership has established a reserve of $516,896 relating to this judgement for
the amount of loss anticipated should the rehearing be unsuccessful.
On January 27, 1994, LPI sold an option to purchase the ownership interest in
The Lakes, subject to the assumption of the obligation under the Partnership's
$13,650,000 FMB, to an unrelated third party for $200,000. Pursuant to the terms
of the option and assumption of the FMB, the option was exercised on August 31,
1994. The payment terms of the FMB include a base interest rate of 4.87%
($665,000 per annum) with 100% of the excess cash flow paid to the Partnership
up to a rate of 5.24% ($715,000 per annum) and participation in the net cash
flow thereafter. In addition, the call date of the FMB was extended to 2006.
As a result of the cash equity investment, The Lakes (which had previously
been classified in the financial statements as an asset held for sale) was
reinstated as an FMB. The net cash proceeds of approximately $487,000 (net of an
escrow for certain repairs and closing costs), paid to the Partnership to reduce
previously accrued and unpaid interest, was recorded as deferred income and is
being accreted as interest
6
<PAGE>
<PAGE>
income over the remaining life of The Lakes FMB. The balance of the deferred
income relating to The Lakes FMB was approximately $484,000 at September 30,
1994. All other accrued and unpaid interest as well as a $310,700 property tax
loan, all of which previously had been reserved, was forgiven.
D. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership against the Partnership, PBP, Prudential
Securities Incorporated and a number of other defendants. On or about November
16, 1993, a putative class action captioned Connelly et al.v. Prudential-Bache
Securities Inc. et al. (93 Civ. 713), was filed in the United States District
Court for the District of Arizona, purportedly on behalf of investors in the
Partnership against the Partnership, PBP, Prudential Securities Incorporated and
a number of other defendants. On or about January 3, 1992, a putative class
action, captioned Levine v. Prudential-Bache Properties Inc. et al. (92 Civ.
52), was filed in the United States District Court for the Northern District of
Illinois purportedly on behalf of investors in the Partnership against the
General Partners, Prudential Securities Incorporated and a number of other
defendants. Subsequently the Related General Partner exited the litigation by
way of settlement. On April 14, 1994, the Judicial Panel on Multidistrict
Litigation (the ``Panel'') deferred transfer of the case to the Southern
District of New York (discussed more fully below) until after the Illinois court
decided a pending motion to dismiss the complaint. On June 3, 1994, that court
granted the motion of PBP and Prudential Securities Incorporated and dismissed
the first amended complaint without prejudice. On June 30, 1994, plaintiffs
filed a second amended complaint. By order dated July 13, 1994, the Panel
unconditionally transferred the Levine case for inclusion in the consolidated
proceedings in the Southern District of New York described below.
By its April 14, 1994 order, the Panel transferred (in addition to Levine as
discussed above) the Kinnes case, and by order dated May 4, 1994, the Connelly
case, together with a number of other actions, on each occasion not involving
the Partnership, to a single judge of the United States District Court for the
Southern District of New York and consolidated them under the caption In re
Prudential Securities Incorporated Limited Partnership Litigation (MDL Docket
No. 1005). On June 8, 1994, plaintiffs in the transferred cases filed a
complaint that consolidated the previously filed complaints and named as
defendants, among others, Prudential Securities Incorporated, certain of its
present and former employees and the General Partners. The Partnership is not
named a defendant in the consolidated complaint, but the name of the Partnership
is listed as being among the limited partnerships at issue in the case. The
consolidated complaint alleges violations of the federal Racketeer Influenced
and Corrupt Organizations Act (``RICO''), fraud, negligent misrepresentation,
breach of fiduciary duties, breach of third-party beneficiary contracts, breach
of implied covenants and violations of New Jersey statutes in connection with
the marketing and sales of limited partnership interests. Plaintiffs request
relief in the nature of: rescission of the purchase of securities, and recovery
of all consideration and expenses in connection therewith, as well as
compensation for lost use of money invested, less cash distributions;
compensatory damages; consequential damages; treble damages for defendants' RICO
violations (both federal and New Jersey); general damages for all injuries
resulting from negligence, fraud, breaches of contract, and breaches of duty in
an amount to be determined at trial; disgorgement and restitution of all
earnings, profits, benefits and compensation received by defendants as a result
of their unlawful acts; costs and disbursements of the action; reasonable
attorneys' fees; and such other and further relief as the court deems just and
proper.
In July 1991, a putative class action entitled Schaffer v. Summit Tax Exempt
L.P. II, et al., No. 12176 Del. Cn. Ct., was filed in Delaware Chancery Court.
Plaintiff is an individual investor who has brought suit allegedly on behalf of
himself and others similarly situated who purchased Partnership interests.
Defendants include, among others, the Partnership, its General Partners, and its
Assignor Limited Partner. The complaint alleges breach of contract to list the
Partnership on an exchange. Plaintiff seeks an injunction, rescission,
compensatory damages and attorneys' fees. Defendants have moved to dismiss the
complaint; plaintiff has not yet responded.
The General Partners and Prudential Securities Incorporated believe they have
meritorious defenses to the complaints and intend to vigorously defend against
these actions. Pursuant to the terms of the Partnership Agreement, the General
Partners may be entitled to indemnification for any loss suffered as a result of
these actions including their attorneys' fees.
7
<PAGE>
<PAGE>
PBP is also named as a defendant, together with other parties, in pending
legal proceedings involving other limited partnerships. Although a number of
cases have been resolved, others are still pending. PBP intends to defend itself
vigorously against such actions.
E. Subsequent Event
In November 1994, a distribution of approximately $2,379,000 and $49,000 was
paid to the limited partners and General Partners, respectively, for the quarter
ended September 30, 1994.
8
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Summit Tax Exempt L.P. II (``The Partnership'') has invested in sixteen
tax-exempt participating first mortgage bonds (``FMBs'') issued by various state
or local governments or their agencies or authorities. The FMBs are secured by
participating first mortgage loans on the properties.
At the beginning of the year, the Partnership had cash and temporary
investments of approximately $2,159,000. On August 31, 1994, the equity
interest in The Lakes and the related obligation of the FMB were sold by an
affiliate of Related Tax Exempt Associates II, Inc. ( the ``Related General
Partner'') to an unrelated third party resulting in a cash receipt of
approximately $487,000 to the Partnership during the third quarter of
1994 for previously accrued and unpaid interest. After payment of distributions
and receipt of the net cash flow from operations, the Partnership ended the
quarter with approximately $3,068,000 in cash and temporary investments. The
third quarter distribution of approximately $2,379,000 ($.26 per BUC) was paid
to limited partners in November 1994 from cash flow from operations.
Interest payments from FMBs are anticipated to provide sufficient liquidity
to meet the operating expenditures of the Partnership in future years and to
fund distributions.
Results of Operations
Net income increased by approximately $630,000 and $87,000 for the nine and
three months ended September 30, 1994 as compared to the corresponding periods
in 1993 for the reasons discussed below.
Interest income from participating FMBs increased by
approximately $166,000 and $113,000 for the nine and three months ended
September 30, 1994 as compared to the corresponding periods in 1993. These
increases are due primarily to increased interest paid on the Newport Village,
Sunset Downs, Bay Club and Bristol Village FMBs, interest received from The
Lakes property being classified as interest income from FMBs as of August 31,
1994 and contingent interest received from the Crowne Pointe FMB. These
increases are partially offset by reduced rates paid on the Shannon Lakes,
Suntree and Players Club FMBs as a result of the amendments to the forbearance
agreements entered into in 1993 and 1994.
Income received from FMBs that are classified as assets held for sale (see
Note C to the financial statements) increased by approximately $110,000 and
$71,000 for the nine and three months ended September 30, 1994 as compared to
the corresponding periods in 1993 due to higher cash flow generated by the
Pelican Cove property.
Interest income from temporary investments increased by approximately $11,000
and $6,000 for the nine and three months ended September 30, 1994 as compared to
the corresponding periods in 1993 due to higher interest rates and invested
balances.
Interest income from promissory notes decreased by approximately $16,000 and
$6,000 for the nine and three months ended September 30, 1994 as compared to the
corresponding periods in 1993 primarily due to the repayment of the Pelican Cove
and The Lakes property tax loans.
General and administrative expenses decreased by approximately $76,000 and
$21,000 for the nine and three months ended September 30, 1994 as compared to
the corresponding periods in 1993 due primarily to lower legal costs related to
the Levine litigation described in Note D to the financial statements and a
general reduction in the costs associated with the administration of the
Partnership.
A contingent liability was established, through provisions recorded in 1993
and 1994, for the amount of probable loss if The Lakes is unsuccessful in the of
rehearing of its appeal of the mechanics lien judgement previously rendered
against it. (see Note C to the financial statements).
9
<PAGE>
<PAGE>
The following table lists the Partnership's FMBs together with occupancy
rates of the underlying properties as of October 30, 1994:
<TABLE>
<CAPTION>
Face
Amount of Stated
Property Location FMB Occupancy Interest Rate (A)
<S> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------
Bay Club Mt. Pleasant, SC $ 6,400,000 99.4% 7.00%(C)
Loveridge Contra Costa, Ca 8,550,000 85.0 8.00%
The Lakes Kansas City, Mo 13,650,000 97.7 4.87%(F)
Crowne Pointe Olympia, Wa 5,075,000 99.4 8.00%(E)
Orchard Hills Tacoma, Wa 5,650,000 91.4 8.00%
Highland Ridge St. Paul, Mn 15,000,000 97.3 8.00%
Newport Village Tacoma, Wa 13,000,000 98.5 8.00%(A)
Sunset Downs Lancaster, Ca 15,000,000 94.3 8.00%(A)
Pelican Cove St. Louis, Mo 18,000,000 98.5 8.00%(B)
Willow Creek Ames, Ia 6,100,000 100.0 8.00%
Cedar Pointe Nashville, Tn 9,500,000 99.5 8.00%
Shannon Lake Atlanta, Ga 12,000,000 98.0 8.00%(A)
Bristol Village Bloomington, Mn 17,000,000 98.9 8.00%(A)
Suntree Ft. Myers, Fl 7,500,000 92.8 8.00%(A)
River Run Miami, Fl 7,200,000 98.9 8.00%
Players Club Ft. Myers, Fl 2,500,000 90.5 8.00%(D)
------------
$162,125,000
------------
------------
- - ----------------------------------------------------------------------------------------------------
(A) See pages 11 and 12 for discussion of the rates paid.
(B) The rate paid is the current cash flow of the property. See Note C to the financial statements.
(C) As discussed below, the stated rate on the restructured bond increases in annual increments from
7.0% to 8.25% over the remaining term of the FMB.
(D) Summit Tax Exempt L.P. III, of which the general partners are either the same or affiliates of
the General Partners of the Partnership, acquired the other $7,200,000 of the Players Club Bond
issue. See page 12 for discussion of the rate paid.
(E) Contingent interest received during 1994. See discussion on page 12.
(F) See Note C to the financial statements for discussion of interest rate modification.
</TABLE>
Bay Club, Mt. Pleasant, South Carolina
In 1990, the terms of the Bay Club FMB ($6,400,000 face value) were modified
when the equity interest in the property and the related obligation of the FMB
were sold by an affiliate of the Related General Partner to an unrelated third
party. As part of this transaction, the minimum annual pay rate increases in
annual increments from 6.0% in 1990 to 8.25% in 1997. The difference between the
minimum interest rate and the original stated rate is payable out of available
future cash flow. Actual monthly payments, made based on net monthly cash flow,
are adjusted at year-end to the greater of net cash flow up to 8.25% or the
minimum annual pay rate. During the nine months ended September 30, 1994, the
Partnership was paid interest at the annual rate of 6.87% (7.8% for the nine
months ended September 30, 1993). The scheduled minimum pay rate was 6.75%
through February 28, 1994 and increased to 7.0% on March 1, 1994. The difference
between the actual rate paid and the original stated rate (8.25%) is payable
from available future cash flow or ultimately sales or refinancing proceeds.
The Lakes, Kansas City, Missouri
On August 31, 1994, the equity interest in The Lakes and the related
obligation of the FMB were sold by an affiliate of the Related General Partner
to an unrelated third party. The FMB had been modified in January 1994. See Note
C to the financial statements for further information. Since March 1994, The FMB
has been making debt service payments at a rate of approximately 4.87% per
annum.
Contingent interest of approximately $26,000 was received from The Lakes
during the third quarter of 1994 pursuant to the terms of the modified FMB.
10
<PAGE>
<PAGE>
Newport Village, Tacoma, Washington
Due to soft market conditions, the General Partners entered into a
forbearance agreement with the owner of the Newport Village property in 1992.
Pursuant to the terms of the agreement, in October 1992 the property began
paying debt service at 6.0% which increased to 6.5% in September 1993 and is
scheduled to increase in annual increments to the original stated rate of 8.0%
as of September 1996. The difference between the rate paid and the original
stated rate is deferred and is payable from available future cash flow or
ultimately from sales or refinancing proceeds. In addition to paying interest at
the scheduled annual rate of 6.5%, the property generated income sufficient to
pay deferred base interest of approximately $55,000 and $15,000 during the nine
and three months ended September 30, 1994, respectively.
Sunset Downs, Lancaster, California
Due to soft market conditions, the General Partners entered into a
forbearance agreement with the owner of the Sunset Downs property in 1992. The
property began paying debt service at 7.0% per annum in June 1992 which
increased to 7.25% in June 1993 and 7.5% in June 1994. The minimum pay rate is
scheduled to further increase in annual increments to the original stated rate
of 8.0% as of June 1996. The difference between the rate paid and the original
stated rate is payable from available future cash flow or ultimately from sales
or refinancing proceeds.
Pelican Cove, St. Louis, Missouri
In 1989, the original owner of the underlying property and obligor of the FMB
was replaced by an affiliate of the Related General Partner who has not made an
equity investment. Debt service payments of approximately 7.5% per annum have
been made based on the net cash flow of the property for the nine months ended
September 30, 1994 (5.7% was paid for the nine months ended September 30, 1993).
Although this property is not producing sufficient cash flow to fully service
the debt, the Partnership has no present intention to declare default on this
FMB.
Shannon Lake, Atlanta, Georgia
Pursuant to a forbearance agreement entered into with the property's owner in
1991, debt service payments were reduced to 7.0% per annum in 1991 and were
scheduled to increase in annual increments to the stated rate of 8.0% over the
next two years. Due to continuing soft market conditions, the General Partners
modified the forbearance agreement in April 1993 to allow the property's owner
to pay interest at 6.0% through December 1995. The difference between the rate
paid and the original stated rate is deferred and is payable from available
future cash flow or ultimately from sales or refinancing proceeds.
The Partnership made a $138,000 loan in April 1993 to the owner of the
property underlying the FMB for the payment of past due property taxes. The loan
requires interest only payments at 8.5% per annum, payable monthly, commencing
on May 1, 1993, with the principal due on April 30, 1996. Due to the forbearance
agreement, an allowance for possible loss was established for this loan during
1993. Interest payments on both the FMB and the tax loan are current.
Bristol Village, Bloomington, Minnesota
Due to soft market conditions, the General Partners entered into a
forbearance agreement with the owner of the Bristol Village property in 1992.
Pursuant to the terms of the modification, in October 1992 the property began
paying debt service at 6.0% per annum which increased to 7.0% in April 1993 and
7.25% in April 1994. The rate is scheduled to further increase in annual
increments to the original stated rate of 8.0% in January 1997. The difference
between the rate paid and the original stated rate is payable from available
future cash flow or ultimately from sales or refinancing proceeds. In addition
to the minimum pay rate of 7.25%, the property generated income sufficient to
pay deferred base interest of approximately $45,000 and $26,000 during the nine
and three months ended September 30, 1994, respectively.
The Partnership made a $125,000 loan in April 1993 to the owner of the
property underlying the FMB for payment of past due property taxes. This loan is
self-amortizing over four years with interest at 8.0% per annum, payable
monthly. Payments on this loan are current.
11
<PAGE>
<PAGE>
Suntree and Players Club, Ft. Myers, Florida
In 1992, the General Partners entered into forbearance agreements with the
owners of the Suntree and Players Club properties which called for reduced debt
service payments due to a soft market. In January 1993, the properties began
paying debt service at 7.25% per annum, an increase from the 1992 rate of 7.0%
per annum. Due to continuing soft market conditions and certain deferred
maintenance items, effective January 1, 1994, these forbearance agreements were
modified to allow minimum debt service payments at 6.0% per annum through the
end of 1994, at which time the minimum required pay rates are scheduled to
increase to the original stated rate of 8.0%. The Suntree property has been
paying debt services at a rate of 7.0% per annum since July 1994. The difference
between the rate paid and the original stated rate is payable from available
future cash flow or ultimately from sales or refinancing proceeds.
River Run, Miami, Florida
The developer of the River Run property has expressed an interest to prepay
its FMB obligation. There is no assurance that the prepayment will take place.
The property is paying at its stated interest rate of 8%.
Crowne Pointe, Olympia, Washington
Contingent interest of approximately $13,000 was received from the Crowne
Pointe property during the first quarter of 1994.
General
The remaining properties are current on their debt service payments.
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements relating to the FMBs or, alternatively, to
pursue its remedies under the loan documents, including foreclosures, is based
upon several factors including, but not limited to, property performance, owner
cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by the
FMBs is not accrued as interest income for financial reporting purposes. The
accrual of interest at the stated interest rate will resume once a property's
ability to pay the stated rate has been adequately demonstrated. Interest income
of approximately $510,000 and $622,000 was not recognized for the nine months
ended September 30, 1994 and 1993, respectively.
From time to time, certain property owners have elected to supplement the
cash flow generated by the properties to meet the required bond interest
payments. There can be no assurance that in the future any property owner will
elect to supplement property cash flow to satisfy bond interest requirements if
necessary.
12
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--Incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--On October 21, 1993, an affiliate of Prudential-Bache
Properties, Inc., Prudential Securities Incorporated (``PSI''), settled,
without admitting or denying the allegations contained therein, civil
and administrative proceedings with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc., and
various state regulators. These proceedings concerned, among other
things, the sale by PSI of limited partnership interests, including
interests of the Registrant during the period 1980 through 1990. The
settlement has no impact on the Registrant itself.
On October 27, 1994, PSI entered into cooperation and deferred
prosecution agreements (the ``Agreements'') with the Office of the
United States Attorney for the Southern District of New York (the ``U.S.
Attorney''). The Agreements resolved a grand jury investigation that had
been conducted by the U.S. Attorney into PSI's sale during the 1980's of
the Prudential-Bache Energy Income Fund oil and gas limited partnerships
(the ``Income Funds''). In connection with the Agreements, the U.S.
Attorney filed a complaint charging PSI with a criminal violation of the
securities laws. In its request for a deferred prosecution, PSI
acknowledged to having made certain misstatements in connection with the
sale of the Income Funds. Pursuant to the Agreements, the U.S. Attorney
will defer any prosecution of the charge in the complaint for a period
of three years, provided that PSI complies with certain conditions
during the three year period. These include conditions that PSI not
violate any criminal laws; that PSI contribute an additional $330
million to a pre-existing settlement fund; that PSI cooperate with the
government in any future inquiries; and that PSI comply with various
compliance-related provisions. If, at the end of the three-year period,
PSI has complied with the terms of the Agreements, the U.S. Attorney
will be barred from prosecuting PSI on the charges set forth in the
complaint. If, on the other hand, during the course of the three-year
period, PSI violates the terms of the Agreements, the U.S. Attorney can
elect to pursue such charges.
Item 6. Exhibits and Reports on Form 8-K--
(a) Exhibits:
4(a)--Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus of Registrant, dated July 7, 1986, filed
pursuant to Rule 424(b) under the Securities Act of 1933, File
No. 33-5213
4(b)--Certificate of Limited Partnership, incorporated by
reference to Exhibit 4 to Amendment No.1 to Registration
Statement on Form S-11. File No. 33-5213
10(ab)--Option Agreement between The Lakes Project Investors, Inc.,
Seller, and ZIPCO, Inc., Purchaser, dated January 27, 1994
(filed herewith)
10(ac)--Assignment and Assumption Agreements between The Lakes
Apartments, Inc., Seller, and ZIPCO, Inc., Purchaser, dated
August 31, 1994 (filed herewith)
10(ad)--Sale-Purchase Agreement between The Lakes Project Investors,
Inc., Seller, and ZIPCO, Inc., Purchaser, dated August 31, 1994
(filed herewith)
27--Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT L.P. II
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Robert J. Alexander Date: November 11, 1994
----------------------------------------
Robert J. Alexander
Vice President and Chief Accounting
Officer
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: /s/ Alan P. Hirmes Date: November 11, 1994
----------------------------------------
Alan P. Hirmes
Vice President
14
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT, dated January 27, 1994, is between The Lakes Project
Investors, Inc., a Delaware corporation having an address at
625 Madison Avenue, New York, New York 10022 ("Seller") and The Lakes
Apartments, Inc., a Missouri corporation with an address in care of The
Peterson Companies, 10000 West 75th Street, Shawnee Mission, Kansas 66204
("Purchaser").
1.0 Sale and Purchase Agreement.
The parties have agreed upon the terms and conditions of the Sale and Purchase
Agreement in the event Purchaser shall elect to exercise the option granted
hereby, which terms and conditions are more particularly set forth on Exhibit
A attached hereto and made a part hereof for all purposes. The terms of the
Sale and Purchase Agreement are incorporated herein by reference. All terms
not otherwise defined herein shall have the meanings ascribed to them in the
Sale and Purchase Agreement.
2.0 Option.
For and in consideration of Two Hundred Thousand and No/100 Dollars
($200,000.00) (the "Option Payment"), the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Seller grants and conveys to Purchaser the
exclusive right and option to purchase (the "Option") the Property upon the
terms and conditions set forth below and set forth in the Sale and Purchase
Agreement. Except as set forth in Section 2(a)(i) of the Sale and Purchase
Agreement, the Option Payment shall not be refundable to Purchaser for any
reason whatsoever.
3.0 Purchase Price.
The total monetary consideration (the "Purchase Price") to be paid by
Purchaser to Seller for the Property is the sum of Fourteen Million Three
Hundred Seventy Thousand and No/100 ($14,370,000.00) Dollars. If Purchaser
acquires the Property, the Option Payment shall be credited toward the
Purchase Price. A portion of the Purchase Price shall be paid by Purchaser
assuming Seller's obligations under the debt on the Property as more
particularly set forth in the Sale and Purchase Agreement.
4.0 Term.
The Option shall be for a term of two hundred fifteen (215) days (the "Option
Term") commencing on the date hereof (the "Effective Date") and terminating
thereafter as of 5:00 p.m., Eastern time on the last day of the Option Term.
5.0 Time for Exercise.
Purchaser may terminate this Option Agreement at any time during the Option
Term by written notice to Seller (provided that Seller shall retain the Option
Payment) but Purchaser may not exercise the Option prior to July 25, 1994.
6.0 Manner of Exercise.
To exercise the Option, Purchaser shall timely deliver to Seller a copy of the
Sale and Purchase Agreement duly executed by Purchaser. The delivery by
Purchaser to Seller of the completed Sale and Purchase Agreement executed by
Purchaser shall bind Purchaser and Seller to the terms and conditions thereof,
and no further action shall be required of either in order for the parties
hereto to enforce the Sale and Purchase Agreement. Simultaneously with the
delivery of the Sale and Purchase Agreement to Seller, Purchaser shall deliver
a copy of the same to the Title Company identified therein.
7.0 Obligations of Seller.
Seller shall be obligated to enter into the Sale Purchase Agreement upon
timely receipt of a counterpart thereof duly executed by Purchaser.
8.0 Rights and Obligations of the Parties if the Option is Exercised.
In the event that the Purchaser exercises the Option within the time and in
the manner hereinbefore provided, then thereafter the rights and obligations
of the parties with respect to the Property shall be governed by the terms and
conditions contained in the Sale and Purchase Agreement.
9.0 Notices.
All notices or other communications required or permitted pursuant to the
terms of this Agreement shall be in writing and shall be hand delivered or
sent by registered or certified mail, return receipt requested, postage
prepaid, and shall be sent to the parties at the addressess set forth below:
To Seller:
Lakes Project Investors, Inc.
625 Madison Avenue
New York, New York 10022
Attention: Bruce Brown
With a copies by first class mail to:
Michael H. Orbison, Esq.
625 Madison Avenue
New York, New York 10022
and to:
Don F. Dagenais, Esq.
Gage & Tucker
2345 Grand Avenue
Kansas City, Missouri 64108
To Purchaser:
The Lakes Apartments, Inc.
c/o The Peterson Companies
10000 West 75th Street
Shawnee Mission, Kansas 66204
With a copy by first class mail to:
William Carr, Esq.
Lewis, Rice & Fingersh
One Petticoat Lane
1010 Walnut, Suite 500
Kansas City, Missouri 64106
or at such other address as shall be designated by the parties in writing. All
notices shall be deemed to have been received on the date hand delivered to
the party or on the third business day following the date when deposited in
the United States Mail.
10.0 Time of the Essence.
Time shall be of the essence in this Option Agreement.
11.0 Governing Law.
This Agreement shall be executed, construed and enforced in accordance with
Missouri Law.
12.0 Entire Agreement.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior discussions,
understandings, agreements and negotiations between the parties.
This Agreement may be modified only by a written instrument duly
executed by both parties.
13.0 Days.
If any action is required to be performed, or if any notice, consent or other
communication is given, on a day that is a Saturday or Sunday or a legal
holiday in the jurisdiction in which the action is required to be performed or
in which is located the intended recipient of such notice, consent or other
communication, such performance shall be deemed to be required, and such
notice, consent or other communication shall be deemed to be given on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
14.0 Severability.
If any term, covenant or condition of this Agreement, or the application
thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15.0 Assignment.
This Option may be assigned by Purchaser only with the prior written consent
of Seller, but on condition that (a) no assignment shall relieve Purchaser of
its obligations and liabilities hereunder, and (b) each assignee assumes and
agrees to perform all obligations and liabilities hereunder. Notwithstanding
the foregoing, no consent shall be required for the assignment of this Option
to an affiliate of Purchaser or in connection with any like-kind exchange.
This Option may not be assigned by Seller.
16.0 Remedies.
In addition to any other remedy at law or in equity, the parties hereto shall
be entitled to specifically enforce their rights under this Agreement.
17.0 Performance of Obligations Under Sale and Purchase
Agreement Prior to the Exercise of Option.
Notwithstanding anything in this Option or the Sale and Purchase Agreement to
the contrary, Seller and Purchaser shall perform their respective obligations,
and Purchaser may exercise any and all of its rights, under the following
provisions of the Sale and Purchase Agreement from the date of this Option
through the closing date of the Sale and Purchase Agreement: 4A(a)(iv), 4(e),
4(f), 4(k), 8 and 10.
18.0 Representations and Warranties.
In order to induce Purchaser to execute this Option Agreement and tender the
Option Payment, Seller shall be deemed to have made the representations and
warranties to Purchaser set forth in Sections 16 and 17 of the Sale and
Purchase Agreement as of the date of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date set forth above.
THE LAKES PROJECT INVESTORS, INC.
By: /s/ Thomas G. Granville
----------------------------
Vice President
THE LAKES APARTMENTS, INC.
By: /s/ Kenneth Riedemann
----------------------------
President
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Lakes Apartments)
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered as
of the 31st day of August, 1994, by and between THE LAKES APARTMENTS,
INC., a Missouri corporation ("Assignor") and ZIPCO, INC., a Kansas
corporation ("Assignee").
RECITALS
(A) Assignor and Assignee are parties to an "Exchange Agreement"
dated March 8, 1994 pursuant to which Assignee has agreed to acquire
like-kind replacement property for Assignor.
(B) Assignor has an option to purchase the following real estate (the
"Property"):
Lot 1, THE LAKES, EXECUTIVE HILLS NORTH, a subdivision in Kansas
City, Platte County, Missouri, according to the recorded plat
thereof, together with all buildings and improvements thereon
and appurtenances thereto
pursuant to an "Option Agreement" dated as of January 27, 1994 (the
"Agreement") by and between Assignor and The Lakes Project Investors, Inc.,
a Delaware corporation (the "Seller").
(C) Assignor desires to assign its rights in the Agreement to
Assignee and Assignee desires to exercise the option, to acquire the Property,
and to cause The Lakes Project Investors, Inc., a Delaware corporation (the
"Seller"), to convey the Property to Assignor as replacement property.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
stated herein and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Assignment.
Assignor does hereby irrevocably assign, transfer, sell, deliver and set
over to Assignee, free and clear of any charge, claim or encumbrance, all of
Assignor's right, title and interest in and to the Agreement and Assignee
does hereby accept such assignment.
2. Liabilities and Obligations.
Assignee hereby assumes the liabilities and obligations of Assignor to
fully perform the Agreement, to exercise the option, and to consummate the
purchase of the Property from the Seller.
<PAGE>
3. General.
This Assignment and Assumption Agreement (a) constitutes the entire
agreement between the parties with respect to the subject matter hereof,
(b) shall be construed in accordance with the laws of the State of Kansas,
(c) shall be binding upon the parties hereto and their respective successors,
heirs and/or assigns, and (d) may be executed in counterparts, all of which,
taken together, shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
THE LAKES APARTMENTS, INC.
a Missouri corporation
By: /s/ Kenneth L Riedemann
--------------------------------
Kenneth L. Riedemann,
President
"Assignor"
ZIPCO, INC., a Kansas corporation
By: /s/ Thomas Davies
--------------------------------
Thomas Davies, President
"Assignee"
f:\lrf\mde\lakes\assign-o
<PAGE>
AGREEMENT made as of the 31st day of August, 1994 between THE LAKES
PROJECT INVESTORS, INC., a Delaware corporation, having an address at 625
Madison Avenue, New York, New York 10022 ("Seller"), and ZIPCO, INC.,
a Kansas corporation having an address at 12390 Pflumm Road, Olathe,
Kansas 66062-9601 ("Purchaser").
W I T N E S S E T H:
1. SALE-PURCHASE.
(a) Seller agrees to sell, assign and convey to Purchaser, and Purchaser
agrees to purchase from Seller, all of that certain plot, piece and parcel of
land (the "Land") consisting of approximately 22 acres
and generally known as Lakes Apartments, 7301 N.W. Donovan Drive, Kansas City,
Missouri, and more particularly described in
Schedule "A" annexed hereto, and depicted in the survey
previously delivered to Purchaser, together with the building and improvements
known as Lakes Apartments (collectively, the
"Building"), containing four hundred (400) legal and
conforming units, located on the Land (which Building and Land are hereinafter
sometimes collectively referred to as the "Premises"), and all
of Seller's right, title and interest in, to and under (a) all easements,
rights of way, privileges, appurtenances, strips, gores and other rights
pertaining to the Premises, if any, (b) any land lying in the bed of any
street, road, avenue, open or proposed, public or private, in front of or
adjoining the Premises or any portion thereof, to the center line thereof, any
award to be made in lieu thereof and in and to any unpaid award for damage
to the Premises by reason of change of grade of any street occurring after the
date of execution and delivery of this Agreement, (c) the leases, concessions
and licenses affecting the Premises, a list of which licenses only is
attached as Schedule "B" annexed hereto and copies of which have been made
available for examination by Purchaser, and those leases, concessions and
licenses hereafter made pursuant to subsections 8(a) (i) and 8(a) (iv)
hereof (the "Leases"), (d) all the fixtures, furniture, furnishings,
equipment and other personal property, including, without limitation, those
certain furnishings described on Schedule "K" annexed hereto (the
"Personalty") owned or leased by Seller and used in connection with the
Premises (other than personal property owned by tenants,
subtenants, lessees, sublessees and other occupants (collectively,
"Tenants")), including, without limitation, all
attachments, appliances, fittings, gas and oil burners, automatic stocker,
lighting fixtures, doors cabinets, partitions, mantels, elevators, electric
motors, pumps, screens, flagpoles, all sprinkler, plumbing, heating, air
conditioning, electrical, ventilating, lighting, incinerating, vacuum
cleaning, refrigerating and cooling systems, each with its respective
furnaces, boilers, engines, motors, dynamos, radiators, pipes, wiring and
other apparatus, vaults, safes, fire prevention and extinguishing equipment,
carpets, floor coverings, kitchen appliances, and antennae, together with all
parts and supplies pertaining thereto, (e) the equipment leases identified in
Schedule "C" annexed hereto, and those equipment leases
hereafter made pursuant to subsections 8(a) (iii) and 8(a) (iv) hereof (the
"Equipment Leases"), copies of which
will be delivered to Purchaser, (f) the Security Deposits (hereinafter
defined), if any, described in Section 7 hereof, held by Seller under the
Leases, (g) all services, maintenance and other agreements identified in
Schedule "D" annexed hereto, and those
hereafter made pursuant to Sections 8(a)(ii) and 8(a) (iv) hereof in
connection with the operation and maintenance of the Premises (the
"Service Contracts"), copies of which will be delivered
to Purchaser, (h) all copyrights, trademarks, service marks and other marks
and trade or business names relating to the ownership, use, operation and
management of the Premises, including, without limitation, the right to use
the names and the logo (the "Trademarks") described in
Schedule "E" annexed hereto, copies of which have already been delivered
to Purchaser and (i) the books, records, plans, specifications and files
(collectively, the "Records") of Seller (and those of Seller's
predecessor in interest to the extent same are in Seller's possession)
in connection with the operation and maintenance of the Premises,
and the construction of the Building, any other assignable permits with
respect to the operation of the Building as a residential rental project
(exclusive of Seller's corporate documentation and income tax and
accounting records) and all rights and interests of Seller in all
amounts escrowed under the Bond Documents for taxes, insurance, repairs and
replacements ("Bond Amounts") (the Land, the Building,
the Leases, the Personalty, the Equipment Leases, the Security Deposits, the
Service Contracts, the Trademarks, the Records and the Bond
Amounts being hereinafter collectively called the "Property"),
copies of which have already been delivered to Purchaser.
1
<PAGE>
2. PURCHASE PRICE.
The purchase price ("Purchase Price") for the Property is $14,370,000,
payable as follows:
(a) Cash Portion of Purchaser Price.
(i) $720,000 ("Cash Portion of Purchase Price") shall be payable to Seller by
certified or bank check, or by wire transfer subject to receipt of funds, upon
the close of escrow. Pursuant to that certain Option Agreement dated January
27, 1994 between Seller and Purchaser, as successor-in-interest to The
Lakes Apartments, Inc. ("Lakes"), (the "Option Agreement") Lakes deposited
with Seller the amount of $200,000 (the "Option Payment") which Option
Payment shall be credited toward the Cash Portion of Purchase Price upon
the close of escrow. Purchaser shall be enttiled to a refund of the
Option Payment solely in the event that (i) the Bonds and/or Bond Documents
(as hereinafter defined in Section 4.A(f)) are modified without the consent of
Purchaser following the date of the Option Agreement and prior to the
Closing Date or (ii) Seller shall be unable to deliver title to the
Property in accordance with the provisions of Sections 3(a) and 4A (a)(i)
hereof or (iii) the Title Company shall not issue the policy of title
insurance to Purchaser in accordance with Sections 3(b) or (iv) a
provision of this Agreement provides for such refund or (v) Seller shall
willfully default in the performance of any material term, condition,
covenant, agreement, representation, warranty or other provision hereof or
(vi) Purchaser shall not have received the Bond Estoppel (as hereinafter
defined) in accordance with the terms of this Agreement (collectively,
the "Conditions of Refund"), and for no other reason. Interest on the
Option Payment will be payable to Seller. The balance of the Cash
Portion of Purchase Price shall be deposited in escrow prior to closing.
(ii) Notwithstanding any provision herein to the contrary, Purchaser
shall have the absolute right to terminate this Agreement upon
written notice delivered to Seller on or before the Closing Date in the
event that the Bonds and/or Bond Documents shall be modified following
the date of the Option Agreement without the consent of Purchaser.
Upon the giving of such notice the (the "Termination Notice"), this
Agreement shall terminate, the Option Payment shall be returned to
Purchaser and neither party hereto shall have any further rights or
obligations hereunder.
(b) Assumption of First Deed of Trust
Purchaser shall assume Seller's obligations initially accruing from and
after the Closing Date under Seller's Thirteen Million Six Hundred
Fifty Thousand ($13,650,000) Dollar Promissory Note (the "First
Promissory Note") payable to the Industrial Development Authority of the City
of Kansas City, Missouri, which is secured by a first deed of trust (the
"First Deed of Trust") which is a lien against Seller's entire interest in the
Property. The financial terms of the First Promissory Note and First Deed of
Trust are more specifically described in the Debt Summary annexed hereto as
Schedule F (the "Debt Summary").
The First Promissory Note and First Deed of Trust are more fully described as
follows:
A. (a) First Promissory Note:
Maker: Kansas City, Ltd. a Missouri
Limited Partnership
Payee: Industrial Development
Authority of the City of
Kansas City, Missouri
Date: December 1, 1986
Original amount: $13,650,000
Unpaid principal
balance: $13,650,000
(b) First Deed of Trust:
Beneficiary: Boatmen's First National
Bank of Kansas City
("Boatmen's")
Original amount: $13,650,000
Recordation date: December 30, 1986
Document No. 35545489
Place of recordation: Recorder of Deeds - Platte
County, Missouri
2
<PAGE>
Purchaser shall make monthly payments under the First Promissory
Note by certified check payable to the Payee or by wiring such sums
to the Payee, or its designee, as applicable, or to such
entity's designated agent,
provided that Purchaser shall have received prior written notice of
such designee or such entity's designated agent.
3. STATUS OF THE TITLE.
(a) The Property shall be sold, assigned and conveyed by Seller to Purchaser
by special warranty deed, and Purchaser shall accept same, subject only
to the Permitted Encumbrances as defined in Section 4.A(a) of this Agreement.
Such Permitted Encumbrances shall include:
(i) real property taxes for 1994 and subsequent years affecting the Premises
which are a lien but not yet due and payable; provided, however, that
all real property taxes for the tax fiscal period in which the Closing Date
shall occur (the "Proration Period") shall be apportioned between
Purchaser and Seller on and as of the Closing Date, with Purchaser bearing
only the exposure of that portion of the real property taxes and installments
of special assessments that the number of days in the Proration Period
following and including the Closing Date bears to the total number of days in
such Proration Period;
(ii) any assessments due in 1994 and subsequent years affecting the Premises
approved by Purchaser under section 4.A(a) which are a lien but not yet
due and payable provided, however, that all real property taxes and
installments of special assessments for the tax fiscal period in which
the Closing Date shall occur (the "Proration Period") shall be apportioned
between Purchaser and Seller on and as of the Closing Date, with Purchaser
bearing only the exposure of that portion of the real property taxes and
installments of special assessments that the number of days in the
Proration Period following and including the Closing Date bears to the
total number of days in such Proration Period;
(iii) any other matter or thing affecting the Property which Purchaser in
writing either agrees to take subject to or waives pursuant to the provisions
of this Agreement; and
(iv) the Leases.
(b) Seller shall, at Seller's sole cost and expense, procure an ALTA
standard Form B-1970 policy of title insurance (except that the
standard exceptions relating to survey matters, rights of parties
in possession [other than rights of tenants under the Leases],
mechanics liens, easements or claims of easements not of record, and
taxes and assessments not shown by the public records, shall be eliminated,
but which shall contain a creditor rights exception in a form reasonably
acceptable to Purchaser) in the amount of the Purchase Price, to be
paid by Seller and to be issued by Stewart Title Insurance Company ("Title
Company") showing good and marketable title to the Property vested in
Purchaser on the Closing Date, subject only to the Permitted Encumbrances
and containing affirmative insurance in form and substance substantially the
same as the endorsements for contiquity and access, the survey, the
option and zoning attached to that certain title insurance letter
dated December 13, 1993 from Lewis, Rice & Fingersh to Gage & Tucker (the
"Title Letter").
4A. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.
(a) Title Insurance, Liens.
(i) Seller has delivered to Purchaser an updated preliminary report of title
dated November 1, 1993, from Stewart Title Insurance Company
(such report, and any updates or revisions thereto, collectively, the
"Report") and that certain survey prepared by LTD2 Engineering, Inc.
("Surveyor") dated August 2, 1993 (the "Survey"). Purchaser has reviewed
the Report and Survey and has set forth Purchaser's comments thereto in
the Title Letter. Seller shall use its best efforts to comply, and cause
the Title Company and Surveyor to comply, with Purchaser's comments in the
Title Letter. The term "Permitted Encumbrances" shall mean those exceptions
to title approved by Purchaser in the Title Letter and any of the
exceptions to title in the Report or on the Survey objected to by
Purchaser in the Title Letter which Seller is unable to remove or cause
the Title Company to insure over and which are "not material." An
exception to title objected to by Purchaser is material if it satisfies any
one of the following situations: (i) it is a lien or encumbrance in an
ascertainable amount (e.g., the mechanics' lien judgment identified as
title exception 24 in Report), (ii) it is an easement that encroaches on
any buildings or improvements (other than surface parking), (iii) it will
interfere with Purchaser's occupancy, use or operation of the Property
in Purchaser's reasonable judgment or (iv) it is a restriction or covenant the
violation of which would result in a damage claim or injunctive relief.
Seller shall cure any defaults in the payment of real property taxes
and assessments and all liens in an ascertainable amount affecting the
Property at or before close of escrow. If Seller is unable to eliminate
any other exceptions disapproved by Purchaser (or any other exceptions
that are subsequently reported in the preliminary report of title which
exceptions Purchaser disapproves in Purchaser's reasonable discretion)
by the Closing Date, then unless the same are waived by Purchaser
3
<PAGE>
without abatement in the Purchase Price, Seller may adjourn the closing,
for a reasonable period or periods not to exceed sixty (60) days in the
aggregate, in order to attempt to eliminate such disapproved exceptions.
If Seller is unable to eliminate any of such disapproved
exceptions or to otherwise transfer, assign and convey the Property in
accordance with the terms of this Agreement on the Closing Date, Purchaser may
(i) elect to accept the Property subject to such other
disapproved exceptions without any abatement of the Purchase Price,
in which event such other disapproved exceptions shall no longer be objections
to title and shall be deemed to be for all purposes Permitted Encumbrances,
and Purchaser shall close hereunder notwithstanding the existence of same and
Seller shall have no obligations whatsoever after the closing with respect to
Seller's failure to eliminate such disapproved exceptions, or (ii) terminate
this Agreement by notice given to Seller, in which event Purchaser shall be
entitled to a return of the Option Payment, provided, however, the foregoing
shall not be deemed to waive a willful default by Seller.
(ii) Notwithstanding the foregoing, Seller may, in lieu of satisfying any of
the foregoing liens or encumbrances affecting the Property which are not
Permitted Encumbrances, direct Purchaser to apply a portion of the Cash
Portion of the Purchase Price to the satisfaction of such liens and
encumbrances, provided that Seller shall deliver to Purchaser, at the closing,
instruments, in recordable form, which, in the opinion of the Title Company,
will be sufficient to satisfy such liens or encumbrances of record, together
with the cost of recording or filing any such instruments.
(iii) If the Report discloses judgments, bankruptcies or other proceedings or
encumbrances against other persons having names the same as or similar to that
of Seller, Seller, on request, shall deliver to the Title Company affidavits
satisfactory to the Title Company showing that such judgments, bankruptcies or
other proceedings or encumbrances are not against Seller.
(iv) From the date of the Option Agreement and prior to the Closing Date,
neither Purchaser nor Seller (including Purchaser's and Seller's owners,
shareholders, directors, officers, employees and agents) shall
encumber the Premises, or cause or allow the Premises to be
encumbered by their actions or inactions, in any form or manner
whatsoever, including, but not limited to, liens and privileges as
provided under applicable law. Violation of this provision and
failure to cure such violation within ten (10) days following receipt of
written notice of such violation shall constitute a material default
hereunder.
(b) Intentionally omitted.
(c) Intentionally omitted.
(d) Intentionally omitted.
(e) Inspection of the Property.
From the date of the Option Agreement through the Closing Date, Purchaser
and Purchaser's agents, contractors, engineers and appraisers may
inspect the physical condition of the Premises and the other
documentation in respect to the Property and the Premises at
Purchaser's sole cost and expense, including inspection of all documentation,
agreements, and other information in possession of Seller reasonably
pertaining to the Leases, the Equipment Leases, the Personalty, the
Service Contracts and the Records. All activity on the Premises by
Purchaser and its agents and representatives in connection with the
foregoing inspection shall be conducted during normal business hours with
reasonble advance notice to Seller, and shall be conducted in such a manner
as to minimize interference with the operation of the Premises and the
occupancy of the tenants therein. Upon completion of any such
inspection, investigation, testing or study, Purchaser shall at its sole cost,
repair and restore the Premises to its prior condition, including, without
limitation, filling, compacting and resodding of all excavations, unless
Purchaser is prohibited from restoring the Premises to its prior condition
by law. Purchaser shall indemnify, defend and save harmless Seller from and
against any and all cost and expense (including reasonable attorneys' fees),
as incurred, which shall derive from any and all claims for bodiy injury
or property damage which may be asserted against Seller by reason of such entry
and activity on the Premises by Purchaser and its agents and representatives,
but excluding any lien, cost and expense, including attorneys' fees and
costs, arising out of Purchaser's mere discovery of hazardous materials
or toxic substances on, in or under the Property, for which Purchaser shall
have no responsibility or liability other than the costs of any test
commissioned by Purchaser. Seller shall indemnify, defend and save
Purchaser harmless from and against all cost and expense (including
reasonable attorneys' fees), as incurred, which shall derive from any and
all claims for bodily injury or property damage which may be asserted
against Purchaser by reason of the acts or omissions of Seller, its
agents and representatives, occurring on the Premises while Purchaser is
exercising its right of entry thereon.
4
<PAGE>
(f) Approval of Bond Modification Agreement. Purchaser hereby
acknowledges that Purchaser has reviewed and approved that certain
Bond Modification Agreement dated January 24, 1994 ("Bond Modification
Agreement") with the Seller as to The Industrial Development Authority
of Kansas City, Missouri $13,650,000 Multi-Family Housing Revenue Bonds,
Series of 1986 (The Lakes Project) (the "Bonds") attached hereto as
Schedule L-1 and the First Supplemental Indenture between The Industrial
Development Authority of Kansas City, Missouri (the "IDA") and Boatmen's
dated January 24, 1994 (the "First Indenture") attached hereto as
Schedule L-2, together with the Bond documents described on Schedule
"L-3" annexed hereto and made a part hereof (such bond documents, First
Indenture and Bond Modification Agreement being called, collectively,
the "Bond Documents"). Seller hereby covenants (i) that Seller has obtained
the written consent of Summit Tax Exempt L.P. II ("Summit"), the sole
holder of the Bonds, to the sale of Property from Seller to Purchaser and
(ii) that Seller will not cause the Bonds to be further modified prior to
the Closing Date without the consent of Purchaser. In the event that the
Bonds shall be further modified without the consent of Purchaser, at
Purchaser's option, this Agreement shall terminate, Seller shall return the
Option Payment to Purchaser, together with all interest earned thereon,
the Documentation shall be returned to Seller, and the parties shall have
no further obligations or recourse against each other except for previously
existing liabilities which have arisen under Section 4.A(e) hereof.
(g) On the Closing Date, Seller shall deliver to Purchaser from Summit and,
if different, the holder of the Bonds an estoppel certificate (the "Bond
Estoppel") addressed to Purchaser stating that as of the Closing Date (i)
the Bonds and Bond Documents are not in default, (ii) that the Bonds
and Bond Documents as herein described are all the Bonds and Bond Documents
and have not been further modified during the Option Term, (iii) that
Summit or such holder, as applicable, have taken no action during the
Option Term to jeopardize the tax-exempt status of the Bonds and no
determination of taxability has been made or threatened, (iv) the
terms and conditions of the regulatory agreement and arbitrage rebate agreement
contained in the Bond Documents have been fully complied with to date,
(v) that neither Summit nor the holder of the Bonds, as applicable, will
require as escrow for insurance, provided that Purchaser shall prepay its
insurance premiums and provide such holder with evidence thereof and (vi) that
Summit or such other holder consents to the transfer of the Property to
Purchaser or its successors or assigns permitted under this Agreement.
If such estoppel shall not be so delivered, Purchaser shall have the same
right to terminate as provided in subparagraph (f) above.
(h) Intentionally omitted.
(i) Intentionally omitted.
(j) At the close of escrow, Seller shall have performed all Seller's
obligations required to be performed hereunder, and all Seller's
representations and warranties set forth in Section 16(a) hereof shall be true
and correct as of close of escrow and all indemnities and guaranties required
of Summit, if any, shall have been executed and delivered.
(k) During the Option Term (as defined in the Option Agreement)
through the close of escrow, neither Seller nor Summit shall have
made an assignment for the benefit of creditors or admitted in
writing to pay its debts as they mature or have been adjudicated a bankrupt or
have filed a petition involuntary bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors under the federal bankruptcy
law or any other similar law or statute of the United States or any state,
and no such petition shall have been filed against it. If the Option
Agreement or this Agreement shall be terminated in any bankruptcy
proceeding pertaining to Seller or Summit, the Option Payment shall be
refunded to Purchaser.
(l) At the close of escrow, Title Company shall be prepared to issue to
Purchaser a policy of title insurance as described in Section 3(a), subject to
only those exceptions and conditions approved by Purchaser in writing
as provided for in this Agreement.
(m) Purchaser shall have received all permits and licenses necessary to
operate the Property.
4B. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
None.
4C. ACTIONS UPON TERMINATION OF AGREEMENT.
In the event that this Agreement is terminated in accordance with
Sections 4A(a)(i), 4A(f) or 4A(g) hereof, but not by Purchaser's
breach of the terms hereof, then Seller shall return the Option Payment
to Purchaser and, following such return and the return of the Documentation
to Seller, neither party shall have any obligation to the other hereunder
except for previously existing liabilities which have arisen under
Section 4A(e) hereof. If at the date specified for close of escrow, the
conditions precedent to Purchaser's obligation to purchase set forth
in Section 4.A (other than in Sections 4A(a)(i), 4A(f) or 4A(g) or as
a result of a willful default by Seller) are not satisfied or waived
by Purchaser, then Purchaser may elect to terminate this Agreement by
5
<PAGE>
written notice to Seller. If this Agreement is so terminated, then,
unless otherwise herein provided to the contrary, Seller shall retain
the Option Payment and, following the return of the Documentation to
Seller, neither party shall have any obligation to the other hereunder
except for previously existing liabilities which have arisen under
Section 4A(e) hereof, and any liabilities arising as a result of any default
of either party hereunder prior to such termination. Notwithstanding
anything to the contrary contained in this Agreement, in the event of
a default by Seller under this Agreement, Purchaser shall have the right
to seek any and all of its rights and remedies at law or in equity or
under this Agreement, including, without limitation, specific performance,
provided, however, Purchaser agrees to limit any claim for monetary damages
to an amount not in excess of $200,000 in the event such a default shall
occur prior to the Closing Date.
5. APPORTIONMENTS.
(a) The following shall be apportioned between Seller and Purchaser as of
Eleven Fifty-Nine o'clock in the evening (11:59 p.m.) on the date (the
"Apportionment Date") immediately preceding the Closing
Date:
(i) rents and other charges and concession and license fees (collectively
"Rents") payable under the Leases, to be apportioned in
accordance with Section 5(b) hereof;
(ii) real estate taxes, sewer rents and taxes, and charges, or any other
governmental tax or charge levied or assessed against the Property including,
without limitation, the current year's installment (both principal and
interest) of any special assessments which are Permitted Encumbrances
hereunder (collectively, the "Taxes"), on the basis of the
respective periods for which each is assessed or imposed, to be apportioned in
accordance with Sections 3(a)(i) and (ii) and 5(c); provided, however,
that any supplemental assessment of real property taxes attributable to
the period of Seller's ownership, whether or not a lien has been assessed
or a bill issued therefor on the Apportionment Date, shall remain Seller's
responsibility and liability;
(iii) water rates and charges to be apportioned in accordance with Section
5(d) hereof;
(iv) charges for electricity, telephone, steam, gas, cable television and any
other utilities other than those utilities for which the tenants pay
directly (collectively "Utilities") made by the utility companies
servicing the Premises to be apportioned in accordance with
Section 5(e) hereof, and transferable utility deposits, if any (which amounts,
if transferred shall be credited to Seller hereunder), but all amounts
refundable under unassigned or unassignable utility arrangements shall
remain the property of Seller;
(v) prepaid fees of other charges for transferable licenses, permits,
telephone equipment, telephone rental, cable television equipment rental and
other items, if any, but all amounts refundable under unassigned or
unassignable permits and licenses shall remain the property of Seller;
(vi) amounts paid or payable under the Service Contracts which Purchaser is
assuming under this Agreement;
(vii) amounts or payable under any Equipment Leases which Purchaser is
assuming under this Agreement; and
(viii) premiums on those existing transferable policies of insurance or
renewals of such policies which expire prior to the Closing Date (the
"Policies"), to the extent Seller elects to assign the
same to Purchaser on the Closing Date, and Purchaser elects to accept such
assignment and assume the obligations of the insured under the Policies. If
Seller elects not to assign certain policies of insurance, it shall notify
Purchaser prior to close of escrow. Such policies of insurance shall thereupon
be canceled as of the close of escrow, and Purchaser shall be responsible for
obtaining necessary insurance coverage as of the Closing Date. Purchaser
covenants that the Property shall be insured in accordance with Purchaser's
requirements during the Option Term and that Seller shall be named thereon
as beneficiary.
(b) Rents shall be apportioned if, as and when collected, as follows:
(i) Subject to the provisions of subparagraph (b)(ii) hereof, Seller
will retain the right, subject to Purchaser's consent not to be
unreasonably withheld or delayed, to collect any unpaid Rent payable
to Seller from any tenant of the Property and Purchaser agrees to
cooperate at no expense to Purchaser with Seller's efforts to collect
such Rent. All sums paid by such tenant or tenants to Purchaser after
the closing shall be applied first by Purchaser against sums due from
tenant under the lease for periods following the Closing Date,
and the remainder, if any, shall be paid over to Seller until such
unpaid Rent is paid.
6
<PAGE>
(ii) With respect to any past due Rents for periods prior to the Closing Date,
Seller hereby (A) expressly retains the right to recover same, and (B)
designates Purchaser as Seller's agent for collection purposes on the terms
and conditions of Section 5(b)(i) above; provided that Purchaser shall not be
obligated to actively seek to collect any past due Rents, other than in the
ordinary course of business. Until such designation shall be revoked by
Seller, which designation may be revoked in part in the event that Seller
shall desire to institute legal proceedings against a tenant for past due
rent, Purchaser shall receive and hold any moneys received on account of
such past due Rents in trust for Seller and to pay same promptly to Seller as
aforesaid, subject to Section 5(b) (i) above. All Rent prepaid as of the
Apportionment Date which is held by Seller shall be credited to Purchaser.
(c) Real property taxes shall be prorated as of the Closing Date on a per
diem, 365 day calendar year basis.
(d) In the event that water meters are installed on the Property, Seller shall
furnish readings made on or immediately prior to the Apportionment Date to the
extent that current readings are obtainable and the unfixed water rates and
charges and sewer rents and taxes, if any, based thereon for the intervening
time, shall be apportioned on the basis of such last readings. In the event
that such readings are not obtainable, then water charges shall be prorated as
of the Apportionment Date based upon the per diem rate obtained by using
the last period that bills for such charges are available. Unpaid
water meter bills which are the obligations of Tenants in accordance
with the terms of the Leases shall not be adjusted nor shall same
be deemed an objection to title and Purchaser shall take title
subject thereto.
(e) The Utilities shall be apportioned (i) on the basis of actual current
readings, or (ii) if such readings have not been taken, on the basis of the
most recent bills that are available. Purchaser shall undertake, with
Seller's cooperation, to have any Utility accounts maintained in Seller's
name transferred to Purchaser as of the Closing Date.
(f) In the event that the computation of apportionments shows that a net
amount is owed by Seller to Purchaser, such amount shall be credited against
the Cash Portion of the Purchase Price payable by Purchaser in accordance with
Section 2(a) hereof. If such computation shows that a net amount is owed by
Purchaser to Seller, such amount shall be paid to Seller by Purchaser on the
Closing Date by certified or bank check.
(g) The provisions of this Section 5 shall survive the Closing Date.
6. PROPERTY NOT INCLUDED IN SALE.
It is expressly agreed by the parties hereto that the following shall not be
included in the Property to be sold hereunder:
(a) utility deposits and other service contract deposits, except for those
identified herein as transferable utility or other deposits or other expenses
which are to be apportioned as herein provided; and
(b) all property owned by Tenants under the Leases.
It is expressly agreed that all prorated Rents, all prepaid Rents and all
Security Deposits are included in the Property to be sold hereunder and shall
be paid over to Purchaser in accordance with Section 7 hereunder.
7. LEASE SECURITY DEPOSITS.
Prior to the Closing Date, Seller shall provide Purchaser with a schedule,
certified to be true and correct by Seller, of the aggregate amount of all
security deposits held by Seller under the Leases (the "Security Deposits"),
together with interest earned thereon, if any, to the extent that
said Security Deposits have not been theretofore applied by Seller
against moneys due and owing by the respective Tenants under the
Leases. Said Security Deposits shall be delivered to Purchaser upon the
closing of escrow.
8. FUTURE OPERATIONS.
(a) Subject only to conditions beyond its control, Seller, for itself and for
the management agent of the Property ("Management Agent"), agrees
that during the Option Term through and including the Closing Date,
Seller shall continue to operate and maintain the Property in its usual
and customary manner, and shall, among other things, be entitled to (subject
to the following limitations):
(i) amend, or renew the terms of the Leases or enter into new
Leases, provided, however, that (1) any such Lease or any renewal
thereof shall be in the form of the residential lease annexed hereto as
Schedule "G" and is for a monthly rent not less than that
provided on the Rent Schedule annexed hereto as Schedule "H" and (2)
any amendment or renewal for a term in excess of one (1) year
(unless same shall be terminable by the then owner of the Property on
six (6) months' or shorter notice) or which results in a reduction of Rent or
materially increases the landlord's obligations (or decrease the
Landlord's rights) thereunder or increases such tenants rights or options
(unless said renewal or amendment is required under any of said Leases or by
any applicable laws) shall not be made without Purchaser's prior
written approval, provided that Purchaser shall not then be in default
hereunder beyond any applicable grace period;
7
<PAGE>
(ii) amend or renew the term of the Service Contracts or enter into
new Service Contracts, provided, however, that any renewal thereof
or new Service Contract must be an "arms length" transaction, and
for a term not in excess of one hundred eighty (180) days (unless
same shall be terminable by the then owner of the Property upon thirty
(30) days' notice or less), without Purchaser's prior written approval,
provided that Purchaser shall not then be in default hereunder beyond
any applicable grace period;
(iii) amend or renew the term of any Equipment Leases or enter into
new Equipment Leases, provided, however, that any renewal thereof
or new Equipment Lease for a term in excess of one hundred eighty (180) days
(unless same shall be terminable by the then owner of the Property on thirty
(30) days' notice or less) shall not be made without Purchaser's prior written
approval provided that Purchaser shall not then be in default hereunder
beyond any applicable grace period;
(iv) cancel any of the Leases, Service Contracts, or Equipment Leases
unless such cancellation is in the ordinary course of Seller's business and
would be in the best interests of Seller and Purchaser as owner of the Property,
or any successor in interest thereto.
(b) Whenever in Section 8(a) hereof Seller is required to obtain Purchaser's
approval, Seller shall give notice to Purchaser and certify that such new
leases, service contracts or equipment leases, or such amendments to or
renewals thereof, are on commercially reasonably terms and conditions and
otherwise conform to the requirements for such agreements set forth in
this Agreement, and Purchaser shall, within five (5) days after delivery
of notice by Seller containing Seller's written request for such approval
and such certification, notify Seller, in writing, of its approval or
disapproval of same. If Purchaser shall fail to notify Seller of its
disapproval within said five (5) day period, Purchaser shall be deemed not
to have approved same.
9. ASSIGNMENTS BY SELLER AND ASSUMPTIONS BY PURCHASER.
(a) On the Closing Date, and subject to the provisions of Section 8 hereof,
Seller shall assign to Purchaser all of Seller's right, title and interest to,
and Purchaser shall assume Seller's obligations accruing on and after the
Closing Date under the following:
(i) the Leases;
(ii) the Equipment Leases;
(iii) the Service Contracts;
(iv) assignable permits to operate the Premises as a rental housing project
(hereafter, "Assignable Permits");
(v) the Policies which Seller elects to assign to Purchaser and Purchaser
elects to accept and assume; and
(vi) the Bond Documents, as modified by the Bond Modification Agreement,
and all Bond Amounts.
(b) After the Closing Date, Seller will cooperate with Purchaser, at
Purchaser's expense, to facilitate the transfer to Purchaser of all
nonassignable permits issued to Seller.
10. RIGHTS OF INSPECTION.
(a) During the Option Term through and including the Closing Date, Seller
shall make all books and records relating to the operation and physical
condition of the Property from and after the date hereof available to
Purchaser and its accountants.
(b) During the Option Term through and including the Closing Date,
Purchaser may, at reasonable times up and until the close of escrow,
during the hours 9:00 a.m. to 5:00 p.m., and upon reasonable notice to Seller,
at Purchaser's sole expense, cause the Premises and all utility and service
systems to be inspected by such engineers, architects and others acting on
behalf of Purchaser, as Purchaser may designate.
(c) During the Option Term through and including the Closing Date,
Purchaser has had and shall continue to have access to the Property for
purposes of inspections and investigations of the Property, provided that
Purchaser's inspections and investigations are done during regular business
hours, that Purchaser and its agents do not disrupt the operation of the
Property or the occupancy of the Tenants, and that a representative of Seller
or the Management Agent be present at all times. Purchaser hereby indemnifies
and holds Seller harmless from and against any loss, cost or liability which
may rise or result from any activities of Purchaser or its agents on the
Property, as described in and subject to the limitations of Section 4.A(e).
8
<PAGE>
11. DISCLAIMER: WAIVER OF CLAIMS. (a) Seller and Purchaser
acknowledge and agree that Purchaser has had an opportunity to examine
financial and other documents, records, files and information and patent
physical items and conditions relating to the property. Accordingly, Seller
hereby specifically disclaims any warranty, guaranty or representation, oral
or written, past, present or future of, as to, or concerning (i) except as
otherwise specifically stated in Article 16 or Article 18, the nature and
condition of the property, including without limitation (A) the water, soil
and geology and the suitability thereof, and of the Property for any and all
activities and uses which Purchaser may elect to conduct thereon, (B) the
existence of any environmental hazards or conditions thereon (including but
not limited to the presence of asbestos or the release or threatened release
of hazardous substances) and (C) compliance with all applicable laws, rules or
regulations; (ii) except for any warranties contained in Article 16 or Article
18 and in the Seller's Special Warranty Deed, the nature and extent of any
right-of-way, lease, possession, lien, encumbrance, license, reservation,
condition or otherwise; and (iii) except for any warranties contained in
Article 16 or Article 18, the compliance of the Property or its operation
with any laws, ordinances or regulations of any government or other body.
Purchaser acknowledges that it has inspected the Property and, except
for any warranties contained in Article 16 or Article 18 upon which
Purchaser is relying, Purchaser will rely solely on its own investigation
of the Property. Purchaser further acknowledges that the information
provided by Seller with respect to the physical aspects of the Property
was obtained from a variety of sources and that Seller (i) has not
made any independent investigation or verification of such
information; and (ii) does not make any representations as to the
accuracy or completeness of such information other than that Seller
has provided true and accurate copies of any such material in its
possession. Except as otherwise provided in this Agreement, the sale of
the property as provided for herein is made on an "as is" basis,
and Purchaser expressly acknowledges that, in consideration of the
agreements of Seller herein, except as otherwise specified herein, Seller
makes no warranty or representation, express or implied, or arising by
operation of law, including, but not limited to, any warranty of condition,
habitability, merchantability or fitness for a particular purpose, in respect
of the Property.
(b) Except as otherwise provided in this Agreement, Purchaser agrees
that Seller shall not be responsible or liable to Purchaser for any
construction defect, errors or omissions in the design or construction
of the Property unless such construction defect, errors or omissions in
the design or construction of the Property, constitute a breach of any
of Seller's representations or warranties set forth in this Agreement.
Except for the representations and warranties of Seller set forth in
this Agreement, upon which Purchaser is relying, Purchaser is
purchasing the Property AS-IS, WHERE-IS and WITH ALL FAULTS. Purchaser
and its affiliates hereby fully release Seller, its employees, officers,
directors, representatives and agents from any and all claims that it may now
have or hereafter acquire against Seller, its employees, officers, directors,
representatives and agents for any cost, loss, liability, damage, expense,
demand, action or cause of action arising from or related to any construction
defects, errors or omissions in the design or construction of the Property
unless such construction defect, errors or omissions in the design
or construction of the Property, constitute a breach of any of Seller's
representations or warranties set forth in this Agreement. Provided, however,
nothing herein shall be deemed to release Seller from any claim arising under
the Comprehensive Environmental Response Compensation and Liability Act
of 1980 as amended (42 U.S.C. S9601 et. seq.) or under similar federal or
state statutes or under any further amendment to said statutes or future
statutes. Purchaser agrees that in the event of any such construction
defects, errors, or omissions unless such construction defect, error
or omission constitutes a breach of any of Seller's representations
and warranties set forth in this Agreement, Purchaser shall look
solely to Seller's predecessors or to such contractors and consultants as
may have contracted for work in connection with the Property for any redress
or relief and in connection therewith, Seller shall hereby be deemed as
of the Closing Date, to have assigned to Purchaser all of its right against
such predecessors, contractors and consultants. Purchaser further
acknowledges and agrees that this release shall be given full force
and effect according to each of its express terms and provisions, including,
but not limited to, those relating to unknown and suspected claims,
damages and causes of action, unless such unknown or suspected claims,
damages and causes of action constitute a breach of any of Seller's
representations and warranties set forth in this Agreement. Seller
hereby assigns to Purchaser, effective upon Closing, any and all claims that
Seller may have for any such errors, omissions or conditions of the Property.
Purchaser further understands that some of Seller's predecessors in interest
may have filed petitions under the bankruptcy code and Purchaser may have no
remedy against such predecessors, contractors or consultants. This conditional
waiver and release and assignment of claims shall survive the Closing.
12. DOCUMENTS PRIOR TO CLOSING.
(a) Seller covenants to deliver the following Documents (the "Documents")
to the Purchaser within 5 days following the date hereof:
9
<PAGE>
(i) To the extent presently available or obtainable, all plans, drawings
and specifications of the Building and other structures located on
the Land (including structural, mechanical, electrical and all other
plans, drawings and specifications), all surveys and AS-BUILT surveys,
all reports or studies prepared or caused to be prepared by Seller with
respect to the soils conditions, structural conditions or hazardous
materials conditions in respect of the Building and Land.
(ii) Copies of all the executed Leases are to be made available for review at
the office of the Management Agent together with an updated rent roll.
(iii) Copies of all other contracts, agreements, warranties and
guarantees related to or affecting the Property, as described in
Schedule C and Schedule D.
(iv) Copies of all certificates of occupancy (or their equivalent), building
permits, final building inspections, or other permits issued to Seller in
connection with the operation of the Property, if available.
(v) Copy of a policy of insurance for each of the Policies.
13. DAMAGE AND DESTRUCTION; CONDEMNATION.
(a) If, prior to the Closing Date, twenty five 25% percent or more of the
Property is damaged by fire or other casualty, then Seller shall notify
Purchaser of such fact, and Purchaser shall have the option to terminate this
Agreement upon notice given to Seller not later than thirty (30) days
after the date of Seller's notice. If this Agreement is terminated as
aforesaid, the Option Payment and all interest earned thereon, shall be
retained by Seller, and neither party hereto shall have any further
rights or obligations hereunder except for previously existing liabilities
which have arisen under Section 4.A(e) hereof. In the event that Purchaser
does not elect to terminate this Agreement as aforesaid, then the parties shall
nonetheless consummate this transaction in accordance with this Agreement,
without any abatement of the Purchase Price or any liability or obligation on
the part of Seller by reason of said destruction or damage, except that Seller
shall turn over to Purchaser on the Closing Date an amount equal to the entire
amount of any casualty or rental value (but only for periods following
the Closing Date) insurance collected by Seller on account of said
physical damage or destruction without reduction for any funds expended by
Seller or its agents as required by law or otherwise in order to preserve the
Property or as deemed reasonably necessary to safeguard the tenants and their
property, and to the extent not so collected, to assign to Purchaser the right
to receive the balance of such uncollected funds together with a credit against
the Cash Portion of the Purchase Price for the amount of any deductible under
such casualty insurance policy. In the event that Seller expends its own funds
to repair and replace any damage caused by fire or casualty otherwise covered
by insurance, provided that such repair or replacement shall have been made
in a good and workmanlike manner and in accordance with applicable law, then
such funds shall be retained by Seller from the insurance proceeds otherwise
to be turned over to Purchaser; provided, however, in no event shall Seller
have any obligation to rebuild or restore any portion of the Property.
(b) If, prior to the Closing Date, all or any portion of the Property is taken
by eminent domain, Seller shall promptly give Purchaser written notice thereof
and Purchaser may, within thirty (30) days after the date of
Seller's notice, by written notice to Seller, elect to terminate this
Agreement. In the event that Purchaser elects to terminate, Seller shall
retain the Option Payment and all interest earned thereon, and neither party
hereto shall have any further rights or obligations hereunder
except for previously existing liabilities which have arisen under Section
4.A(e) hereof. If Purchaser elects not to terminate this Agreement,
then the parties shall nonetheless consummate this transaction in accordance
with this Agreement, without any abatement of the Purchase Price or any
liability or obligation on the part of Seller by reason of such taking,
provided, however, that Seller shall, at the closing, (i) assign and
turn over, and Purchaser shall be entitled to receive and keep, the
proceeds of any award (net of expenses of collection) or other
proceeds of such taking which may have been collected by Seller as a result of
such taking without reduction for any funds expended by Seller or its agents
as required by law or otherwise in order to safeguard the Property or as
deemed reasonably necessary by Seller to safeguard the tenants and their
property, and/or (ii) if the entire award or other proceeds shall not
have been fully collected, deliver to Purchaser an assignment of all of
Seller's right, title and interest to receive any such award
or other proceeds which may be payable to Seller as a result of such taking,
and the right to settle same.
14. RECORDING CHARGES, TRANSFER TAXES AND FURTHER ASSURANCES.
(a) Except as provided in subparagraph 14(b) hereof, Purchaser shall pay
all recording charges and fees paid or payable in connection with the
transactions herein contemplated other than in connection with the Bond
Modification Agreement excluding the premium for the title insurance policy,
which premium shall be paid by Seller.
10
<PAGE>
(b) Seller shall pay all costs and expenses of clearing title, preparing and
executing, acknowledging and delivering the deed, including without
limitation, any local transfer or conveyance tax, and all sales, intangible
and mortgage taxes paid or payable in connection with the transactions herein
contemplated, and the premium for the title insurance policy.
(c) At or prior to closing, Seller and Purchaser shall each execute such other
documents reasonably required in connection with the transactions contemplated
by this Agreement.
(d) Each party hereto shall pay one-half of any escrow fee in connection with
this transaction.
15. CLOSING DATE; DOCUMENTS TO BE DELIVERED ON THE CLOSING DATE.
The closing of title hereunder shall take place at 10:00 A.M. on the date
designated by Purchaser upon not less than 10 days prior notice to Seller
(which notice may be given prior to Purchaser's exercise of its option to
purchase the Property pursuant to the Option Agreement), but in no event
shall such date by earlier than the later of (i) receipt by Seller and
Purchaser of evidence that the conditions set forth in Sections 4A have been
satisfied (or Purchaser's written waiver of any such conditions that have
not been satisfied) or (ii) Purchaser's exercise of its option to purchase
the Property pursuant to the Option Agreement (the "Closing Date").
(a) Seller's Documents: Seller, pursuant to the provisions
of this Agreement, shall deliver or cause to be delivered to Purchaser on the
Closing Date the following documents:
(i) Special Warranty Deed (the "Deed"), in recordable form, conveying
to Purchaser Seller's interest in the Premises, subject only to the
Permitted Exceptions.
(ii) A duly executed and sworn Secretary's Certificate certifying that the
Board of Directors of Seller has duly adopted resolutions authorizing the
within transaction and an executed and acknowledged Incumbency Certificate
certifying to the authority of the officers of Seller to execute the documents
to be delivered by Seller on the Closing Date.
(iii) Certificate of Good Standing for Seller from the Secretary of State or
other appropriate official of the state in which Seller is incorporated.
(iv) A duly executed and acknowledged bill of sale (the "Bill of
Sale") conveying, selling and transferring to Purchaser all of
Seller's right, title and interest in and to the Personalty in form and
substance acceptable to Purchaser, including, without limitation, a warranty
from Seller that Seller has good and marketable title to the Personalty free
of all liens and other encumbrances.
(v) A duly executed and acknowledged assignment (the "Assignment
and Assumption Agreement") of:
(A) The Leases, conveying all of Seller's right, title and interest as
Landlord thereunder, together with Seller's executed counterparts, or copies
of the Leases and any amendments and other documents relating thereto. The
Assignment and Assumption Agreement shall contain Purchaser's assumption of
Seller's obligations under the Leases accruing from and after the Closing
Date, and shall be in the form attached hereto as Schedule "I" and shall
contain Seller's representation and warranty that the list of Leases is all
of the Leases and that the copies of the Leases are true and correct
and complete.
(B) The Equipment Leases and the Service Contracts, conveying all of Seller's
right, title and interest as lessee thereunder, together with Seller's
executed counterparts, or copies of the Equipment Leases and the Service
Contracts. The Assignment and Assumption Agreement shall contain
Purchaser's assumption of Seller's obligations under the Equipment Leases and
the Service Contracts accruing from and after the Closing Date, and shall be
in the form attached hereto as Schedule "J" and shall contain Seller's
representation and warranty that the list of the Equipment Leases and the
Service Contracts is a complete list of same and that the same delivered
to Purchaser are true, correct and complete.
(vi) Any assignment or endorsement of any Policies transferred, together with
such Policies.
(vii) Form letter to Tenants under the Leases to be duplicated, and
distributed by Purchaser, advising them of the change of ownership and
directing them to pay Rent payable for periods after the Closing Date to
Purchaser.
(viii) A revised Schedule "B", hereof, showing as of the
Closing Date, all of the Leases.
(ix) A revised Schedule "C" and Schedule
"D" hereof, showing, as of the Closing Date, all of the Equipment
Leases and the Service Contracts.
11
<PAGE>
(x) Plans and specifications, technical manuals, all materials provided to
Purchaser under Section 12(a)(i) hereof, and similar materials, for the
Building or Land, if any, in Seller's possession.
(xi) If assignable, any Permits, or copies thereof, in Seller's possession
pertaining to the operation and maintenance of the Building, together with a
duly executed assignment thereof to Purchaser.
(xii) If assignable, any unexpired warranties and guarantees, or copies
thereof, in Seller's possession which Seller has received in connection with
any work or services performed with respect to, or equipment installed in, the
Premises, together with duly executed assignments thereof to Purchaser.
(xiii) The FIRPTA Certificate (as hereinafter defined).
(xiv) An assignment of the Bond Amounts.
(xv) Such other documents reasonably requested by Purchaser to effectively
convey the Property to Purchaser.
(b) Purchaser's Documents: Purchaser, pursuant to the
provisions of this Agreement, shall deliver or cause to be delivered to Seller
on the Closing Date the following documents:
(i) A duly executed and sworn Secretary's Certificate certifying that the
Board of Directors of Purchaser has duly adopted resolutions authorizing the
within transaction and an executed and acknowledged Incumbency Certificate to
the authority of the officers of Purchaser to execute the documents to be
delivered by Purchaser on the Closing Date.
(ii) Certified Copy of Purchaser's Certificate of Incorporation.
(iii) Certificate of Good Standing for Purchaser from the Secretary of State
or other appropriate official of the state in which Purchaser is incorporated.
(iv) The Purchase Price in the manner provided in Section 2.
(v) Assignment and Assumption Agreements in the form of Schedules
I and J.
(vii) Such other instruments and documents as may be
reasonably required to consummate the within transaction.
16. PURCHASER'S AND SELLER'S REPRESENTATIONS AND WARRANTIES.
(a) Seller makes the following representations and warranties to Purchaser,
which representations and warranties shall be true on the date hereof and on
the Closing Date, and shall survive the close of escrow for a period of one
(1) year, meaning that Seller shall have no further liability therefor unless
Purchaser asserts a claim for breach thereof within said one year period
(but the representations and warranties made by Seller in subparagraphs
16(a)(viii), (ix), (x), (xiii), (xiv), (xv), (xvi), (xvii), (xviii), (xix),
(xx) and (xxi) hereof ("Further Surviving Provisions") shall survive without
limitation;
(i) Schedule "B" annexed hereto is a complete and correct
list of all Leases in effect on the date of this Agreement setting forth, with
respect to each of the Leases, (A) the premises affected, (B) the name of the
tenant, (C) the commencement and expiration dates of the term, (D) the
monthly rent payable and (E) the amount of the security deposit thereof.
(ii) There are no leases other than as set forth in Schedule
"B". Each of the Leases is in full force and effect, and has not been
amended, modified or supplemented other than as indicated in
Schedule "B". No written notice of default or breach on
the part of the landlord under any of the Leases has been received by Seller
from the tenant thereunder, and to the best of Seller's actual knowledge, the
tenants are not in default thereunder, except as otherwise disclosed in
writing by Seller to Purchaser.
(iii) The rents and other income and charges set forth in Schedule
"B" are the actual rents, income and charges presently being
collected by Seller under the Leases.
(iv) No brokerage or leasing commission or other compensation
is or will be due or payable to any person, firm, corporation or other entity
with respect to or on account of any of the Leases or any extensions or
renewals thereof.
(v) No written notice has been given by any insurance company which has issued
any policy or by any board of fire underwriters (or other body exercising
similar functions) claiming any defects or deficiencies or requesting the
performance of any repairs, alterations or other work, and to the best of
Sellers' actual knowledge, no defects or deficiencies exist which would
justify a request for the performance of repairs, alterations or other work by
any such company or board.
(vi) Seller has not received any written notice of any pending condemnation or
similar proceeding affecting the Property, and to the best of Seller's actual
knowledge, no such challenge is threatened or contemplated.
12
<PAGE>
(vii) Seller has not received any written notice from any governmental
authority challenging Seller's right to operate the Building as a rental
apartment complex, and to the best of Seller's actual knowledge, no such
challenge is threatened or contemplated.
(viii) The execution and delivery of this Agreement to Purchaser and the
consummation by Seller of the transactions contemplated hereby have been and
will be duly authorized pursuant to the terms of Seller's Articles of
Incorporation and the By-Laws promulgated thereunder. Seller has full power
and authority to enter into this Agreement and to perform all of Seller's
obligations hereunder and no further action or approval is required in order
to constitute this Agreement as a binding and enforceable obligation of
Seller.
(ix) The execution and delivery of this Agreement and the performance by
Seller of its obligations hereunder do not and will not conflict with or
violate any law, rule, judgment, regulation, order, writ, injunction or decree
of any court of governmental or quasi-governmental entity with jurisdiction
over Seller, including without limitation, the United States of America, the
State of Seller's Incorporation or any political subdivision of either of the
foregoing, or any decision or ruling of any arbitrator to which Seller is a
party or by which Seller is bound or affected, or any contract by which Seller
is bound.
(x) To the best of Seller's actual knowledge, other than for mechanics liens
recorded and disclosed by the Report of title, if any, no action, suit, claim,
investigation or proceeding, whether legal or administrative or in mediation
or arbitration, is pending or threatened, at law or in equity or admiralty,
against Seller before or by any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
which would prevent Seller from performing its obligations pursuant to this
Agreement or affecting the Property, and there are no judgments, decrees or
orders entered on a suit or proceeding against Seller, an adverse decision in
which might, or which judgment, decree or order does,
materially adversely affect Seller's ability to perform its obligations
pursuant to, or Purchaser's rights under, this Agreement, or which seeks to
restrain, prohibit, invalidate, set aside, rescind, prevent or make unlawful
this Agreement or the carrying out of this Agreement or the transactions
contemplated hereby. To the extent that there are any mechanic's or
materialman's liens affecting title that exist as of the date of close
of escrow, which mechanic's or materialman's liens are not otherwise covered
by insurance or an indemnity from Seller as described in Section 4.A.(a),
Seller agrees to clear title of such liens as of the close of escrow. Further,
to the best of Seller's actual knowledge, there are no easements, liens,
rights of adverse possession, encroachments from the Property onto adjacent
property or from adjacent property onto the Property, or any boundary line
disputes, other than as shown on the Report or the Survey.
(xi) Seller has not previously granted any person, firm or entity any right to
acquire the Property, and, to the best of Seller's actual knowledge, no
person, firm or entity has any rights to acquire the Property or any part
thereof.
(xii) Except as otherwise disclosed to Purchaser in writing, Seller has not
received actual written notice from any applicable governmental authority or
professional inspecting engineer or architect of construction defects in the
design or construction of the Building, and to the best of Seller's actual
knowledge, no such construction defects in the design or construction of the
Building exist; and, to the best of Seller's actual knowledge, neither the
Property nor any portion thereof is materially defective or in material
disrepair except as set forth on Schedule "11" attached hereto.
(xiii) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect of any
hazardous environmental condition affecting the Premises including the presence
of asbestos, petroleum products or other toxic or hazardous substances; to
the best of Seller's actual knowledge, no such hazardous environmental
condition affecting the Premises exists; Seller has not placed, caused,
to be placed or suffered to be placed any toxic or hazardous substances on
the Property; Seller is not aware of any hazardous or toxic substances on the
Property, including whether there is asbestos in the Building;
(xiv) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect that
the Premises are in violation of any federal, state, or local law, ordinance
or regulation relating to hazardous substances or to hazardous conditions on,
under, or about the Premises including but not limited to soil and ground
water condition, and to the best of Seller's actual knowledge, the Premises
are not in violation of any such federal, state or local law, ordinance or
regulation;
(xv) during the time the Seller has owned the Premises, neither Seller nor, to
Seller's actual knowledge, any third party, has, other than in quantities
normal to lawful household appliances and HVAC systems in residential
apartments used, generated, stored, manufactured or disposed of on, under
or about the Premises or the property adjacent thereto, any flammable
materials, explosives, radioactive materials, hazardous wastes
or toxic substances;
13
<PAGE>
(xvi) Seller has not received actual written notice from any applicable
governmental authority or professional inspecting engineer or architect
concerning any litigation or administrative enforcement action or proceedings
brought or threatened to be brought nor have any settlements been reached by
or with any party, public or private, alleging the presence, disposal,
release, or threatened release of any hazardous waste or hazardous substance
on, from or under any part of the Premises, nor to the best of Seller's actual
knowledge, is any such litigation or administrative proceeding threatened or
contemplated; and
(xvii) Seller warrants that it is a corporation organized and existing under
the laws of the State of Delaware; that this transaction is a transfer of
substantially all of Seller's assets; that this transaction has been approved
by a majority of the outstanding shares as required by the Delaware
Corporation Law; and that this transaction has been approved by resolution of
its board of directors and a certified copy of that resolution, which remains
in effect, will be delivered to escrow holder before the close of escrow.
(xviii) Seller is not in default of any of its obligations under the
Regulatory Agreement dated as of December 1, 1986, between Kansas City Ltd.
and the Issuer, recorded December 30, 1986, of the Official Records of
Jackson County, or under the Promissory Note dated December 1, 1986, or the
Deed of Trust dated as of December 1, 1986, in the amount of $13,650,000.00,
from Kansas City Ltd., Trustor, to Boatmen's First National Bank of
Kansas City, as Trustee, to The Industrial Development Authority of the City
of Kansas City, Missouri, as Beneficiary, recorded December 30, 1986, Official
Records of Platte County, the obligations of Kansas City Ltd. under which have
been assigned to Seller by an unrecorded Assignment and Assumption Agreement
dated August 11, 1988, and modified by the terms and conditions of that
certain Bond Modification Agreement dated January 24, 1994, recorded
January 26, 1994, in the Official Records of Platte County, or any other
contractual obligation by which Seller is bound or affecting the Property.
(xix) Seller is not a "foreign person" or a "non-resident" for purposes of
federal or state income tax withholding, and Seller shall deliver to Purchaser
at closing a fully executed non-foreign seller's certificate meeting all the
requirements of Section 1445(b)(2) of the Internal Revenue Code (the "FIRPTA
Certificate"). If Seller cannot make this representation and warranty at
closing, Seller shall cooperate fully with Purchaser to permit Purchaser to
cause Title Company to withhold from the net proceeds of sale any sum required
under Internal Revenue Code Section 1445.
(xx) Seller has not received actual written notice from any applicable
governmental authority or the Trustee that the interest paid to the holders
under the Bonds is no longer tax-exempt or that its tax-exempt character has
been adversely affected or is in jeopardy or threatened, and to the best of
Seller's actual knowledge, no acts, omissions or other circumstances of any
party under the Regulatory Agreement, the First Deed of Trust, the Loan
Agreement defined in the First Deed of Trust, or the Bond Indenture defined in
the First Deed of Trust, or any of the other loan documents has threatened,
jeopardized, adversely affected or invalidated the tax-exempt character of the
interest paid on the Bonds.
(xxi) Seller has not received actual written notice of any claim made by any
holder of the Bonds, and to the best of Seller's actual knowledge, no claims
by any holder of the Bonds are threatened or contemplated.
(xxii) For purposes of this Section 16(a), the term "the best of Seller's
actual knowledge" as used herein shall mean to the best of the actual
knowledge of Seller, no duty of independent investigation or inquiry
having been required or made by Seller.
(xxiii) Unless Seller shall otherwise notify Purchaser in writing at or prior
to the close of escrow, the foregoing representations and warranties shall be
true and correct, as they relate to the Property on the date of close of
escrow, as though made at that time without the necessity of a separate
written certificate regarding the same. Seller represents that it has
disclosed and/or made available to Purchaser for inspection all material
information regarding the Property currently available to Seller. If
Seller notifies Purchaser in writing at or prior to the close of escrow that
due to the Seller's discovery of new information, any of the representations
and warranties set forth in Section 16(a) will not be true and correct as it
relates to the Property as of the date of close of escrow, or if any new
information comes in Purchaser's possession after the date of the Option
Agreement which would render any of Seller's representations and warranties
untrue or incorrect, Purchaser shall have fourteen (14) working days after
receipt of such notice of such information to determine whether such new
information has a materially adverse impact on Purchaser's proposed plans
for use of the Property or whether Purchaser would not have entered into the
Option Agreement or this Agreement had such information been disclosed
to Purchaser and to notify Seller in writing of such determination, Seller shall
have thirty (30) days from receipt of such notice from Purchaser to attempt
to put Purchaser in the position Purchaser would have been in but for the
discovery of such new information.
14
<PAGE>
If Seller is unable to put Purchaser in the position Purchaser would have been
in but for the discovery of such new information within such thirty (30) day
period, then, on written notice from Purchaser, this Agreement may be
terminated by Purchaser, at Purchaser's option. If Purchaser terminates
this Agreement on account of Seller's or Purchaser's discovery of such new
information as provided herein, Purchaser agrees that Purchaser shall
have no other rights or remedies as a result of the discovery of such
new information, unless the new information discovered by Purchaser
was actually known to Seller as defined in Section 16(a)(xxii) at
the time of execution of this Agreement and thus constitutes a
breach of any of Seller's representations and warranties
set forth herein (which breach shall be deemed to be "willful"). If Purchaser
determines as provided herein that, the disclosure of such information, does
not have a material, adverse impact on the Property and that Purchaser
would have entered into the Option Agreement or this Agreement even had such
information been disclosed, such information shall be deemed to have been
disclosed to Purchaser in writing under this Agreement, Seller's
representation and warranty with respect to the subject matter to which such
new information pertains shall be deemed modified by such new information,
and Purchaser shall be deemed to have waived any claim Purchaser might have
with respect to such new information as of close of escrow.
(xxiv) Except as otherwise provided in section 16(a)(xxiii) above, Seller
shall indemnify, defend and hold Purchaser harmless from any loss, claim,
lien, damage, liability or other expense, including without limitation,
reasonable attorneys' fees and court costs, which Purchaser may incur arising
from or in relation to any breach by Seller of any of the foregoing
representations and warranties in this Section 16(a). Except for the Further
Surviving Provisions as to which Seller's indemnification shall survive
without limitation, Seller's indemnification hereunder shall survive
the closing of the transaction contemplated hereby for a period of one (1)
year meaning that Seller shall have no further liability therefor unless
Purchaser shall assert a claim within said one year period.
(b) Purchaser represents and warrants to Seller as of the date hereof that:
(i) To the best of Purchaser's actual knowledge, with no duty of independent
investigation or inquiry, no action, suit, claim, investigation or proceeding,
whether legal or administrative or in mediation or arbitration, is pending or
threatened, at law or in equity or admiralty, against Purchaser before or by
any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which would prevent
Purchaser from performing its obligations pursuant to this Agreement, and to
the best of Purchaser's actual knowledge, with no duty of independent
investigation or inquiry, there are no judgments, decrees or orders entered on
a suit or proceeding against Purchaser, an adverse decision in which might, or
which judgment, decree or order does, adversely affect Purchaser's ability to
perform its obligations pursuant to, or Seller's rights under, this Agreement,
or which seeks to restrain, prohibit, invalidate, set aside, rescind, prevent
or make unlawful this Agreement or the carrying out of this Agreement or the
transactions contemplated hereby.
(ii) The execution and delivery of this Agreement and the performance by
Purchaser of its obligations hereunder do not and will not conflict with or
violate any law, rule, judgment, regulation, order, writ, injunction or decree
of any court of governmental or quasi-governmental entity with jurisdiction
over Purchaser, including, without limitation, the United States of America,
the State of Purchaser's incorporation or any political subdivision of either
of the foregoing, or any decision or ruling of any arbitrator to which
Purchaser is a party or by which Purchaser is bound or affected, or any
contractual obligation by which Purchaser is bound.
(iii) The execution and delivery of this Agreement to Seller and the
consummation by Purchaser of the transactions contemplated hereby have been
and will be duly authorized pursuant to the terms of Purchaser's Articles of
Incorporation and the By-Laws promulgated thereunder. Purchaser has full power
and authority to enter into this Agreement and to perform all of Purchaser's
obligations hereunder and no further action or approval is required in order
to constitute this Agreement as a binding and enforceable obligation as
Purchaser.
(iv) Purchaser warrants that it is a corporation organized and existing under
the laws of Missouri, that Thomas J. Davies is authorized to execute this
Agreement on its behalf; and that this transaction has been approved by
resolution of its board of directors and a certified copy of that resolution,
which remains in effect, will be delivered to escrow holder before
the close of escrow.
17. ESCROW.
All Closing Documents shall be placed in escrow as required pursuant to
Section 15 hereof. Escrow shall be considered closed when the Deed to the
property is recorded.
Within 20 days after execution of this Agreement, each party shall execute and
deliver to the escrow holder its written instructions consistent with the
terms of this Agreement and shall provide the escrow holder with such other
information, documents, and instruments as the escrow holder may reasonably
require to enable it to close the transaction on the Closing Date.
15
<PAGE>
If the designated escrow holder should be unable to unwilling to act, Seller
shall designate another escrow holder subject to the Purchaser's approval,
which approval shall not be unreasonably withheld.
18. BROKERS; FINANCIAL CONSULTANT.
Seller represents that Seller has dealt with no real estate broker,
salesperson, finder or any other party with respect to this transaction other
than David Levine, who has acted as Seller's financial consultant ("Levine"),
to whom Seller shall pay a commission pursuant to a separate agreement at
closing. Purchaser represents that Purchaser has dealt with no real estate
broker, salesperson, finder or any other party with respect to this
transaction other Levine. Seller and Purchaser shall each indemnify, defend and
hold the other harmless with respect to any loss, claim, damage, liability or
other expense, including without limitation, attorneys' fees, arising as a
result of any claim for a real estate broker's commission or finder's fee
in connection with this transaction based upon the acts or agreements
or alleged acts or agreements of the indemnifying party. Seller's and
Purchaser's covenants hereunder shall survive the close of escrow.
19. NOTICES.
Generally. All notices under this Agreement shall be in
writing and shall be either (i) delivered personally with receipt
acknowledged, (ii) sent by prepaid registered or certified mail,
return receipt requested or (iii) sent by telecopy or other facsimile
transmission (followed by hard copies sent by method (i) or (ii) above),
addressed as set forth below, or as Seller or Purchaser shall otherwise have
given notice as herein provided.
All notices shall be deemed given when actually received or when proper
delivery is refused by the party to whom the same are directed. Any notice
required to be sent under the terms of this Agreement shall be sent as
follows:
(a) If to Seller:
Bruce Brown
c/o The Related Companies
625 Madison Avenue
New York, New York 10022
Facsimile Number: (212) 593-5794
with a copy to:
Michael H. Orbison, Esq.
625 Madison Avenue
9th Floor
New York, New York 10022
Facsimile Number: (212) 593-5794
and
(b) If to Purchaser:
Thomas J. Davies
ZIPCO, Inc.
12390 Pflumm Road
Olathe, Kansas 66062
Facsimile Number: (913) 782-4980
with a copy to:
Lewis Rice & Fingersh
One Petticoat Lane
1010 Walnut, Suite 500
Kansas City, Missouri 64100
Facsimile Number: (816) 472-2500
Attention: William E. Carr, Esq.
Attorneys for Seller and Purchaser may give notice with the same effect as if
such notice was given to or by the party represented by such attorney, but
such attorneys may not receive notice on behalf of any
party. The respective attorneys of the parties are also hereby authorized to
agree to adjournments of the Closing.
20. DEFAULT BY PURCHASER OR SELLER.
(a) Liquidated Damages. In the event that Purchaser shall
default in the performance of its obligations contained in this Agreement, and
such material default results in termination of this Agreement prior to close
of escrow, the parties agree that Seller shall be entitled to the Option
Payment, as liquidated damages, which sum the parties agree is a reasonable
sum, considering all the circumstances existing on the date of this Agreement,
including the relationship of the sum to the range of harm to Seller that
reasonably could be anticipated and the anticipation that proof of actual
damages would be costly or inconvenient. Seller hereby expressly waives the
remedy of specific performance and agrees that Seller's sole remedy for
Purchaser's default hereunder which results in termination of this Agreement
16
<PAGE>
shall be liquidated damages set forth herein. In placing their initials at
the places provided, each party specifically confirms the accuracy of the
statements made above and the fact that each party was represented by counsel
who explained the consequences of this liquidated damages provision at the
time this Agreement was made. This Section 20 (a) shall apply notwithstanding
anything to the contrary contained in this Agreement.
Seller Buyer
Initial here:________ Initial here:________
(b) Seller's Liability. In the event that Seller shall
default in its obligation to convey the Property as required hereunder or if
Seller defaults in the performance of any of its other obligations under this
Agreement or any document contemplated hereby at or prior to close of escrow,
then Seller's liability shall be limited to the same damages for which
Purchaser would be liable under Section 20(a). If any of Seller's
representations and warranties under Sections 16(a) or 18 is not true and such
default is discovered by Purchaser after closing, then Purchaser shall have
all remedies available at law or equity, including without limitation, an
action against Seller for specific performance, and/or damages, rescission or
reformation.
21. INTEGRATION CLAUSE.
This Agreement constitutes the entire agreement between the parties and
supersedes all prior discussion, negotiations, and agreements, whether oral or
written. Any amendment to this Agreement, including an oral modification
supported by new consideration, must be reduced to writing and signed by both
parties before it will be effective.
22. AMENDMENTS.
This Agreement may not be changed, modified or terminated, except by an
instrument executed by the parties hereto.
23. EFFECT OF WAIVER OF PROVISION ON REMEDY.
No waiver by a party of any provision of this Agreement shall be considered a
waiver of any other provision or any subsequent breach of the same or any
other provision, including the time for performance of any such provision. The
exercise by a party of any remedy provided in this Agreement or at law shall
not prevent the exercise by that party of any other remedy provided in this
Agreement or at law, unless such remedy has been expressly waived.
24. PARTIAL INVALIDITY.
If any term of provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforced to the fullest extent permitted
by law, unless such remedy has been expressly waived.
25. CAPTIONS, JOINT AND SEVERAL LIABILITY, CONTROLLING LAW.
The captions heading the various paragraphs of this Agreement are for
convenience and shall not be considered to limit, expand, or define the
contents of the respective paragraphs. Masculine, feminine, or neuter gender
and the singular and the plural number, shall each be considered to include
the other whenever the context so requires. If either party consists of more
than one person, each such person shall be jointly and severally liable.
26. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri.
27. JOINT PREPARATION.
This Agreement is deemed to have been jointly prepared by the parties hereto,
and any uncertainty or ambiguity existing herein, if any, shall not be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's-length agreements.
28. SUCCESSORS, ASSIGNS.
This Agreement shall apply and be binding upon the heirs, executors,
administrators, successors and assigns of the respective parties.
29. ASSIGNMENT AND RECORDING.
This Agreement may not be assigned by Purchaser to any unrelated third party
or recorded without first obtaining Seller's consent thereto, which Seller
may grant or deny in Seller's reasonable discretion (other than in connection
with the consummation of a so-called "like-kind exchange" or to an affiliate of
Purchaser in which event Seller's consent shall not be required). The
assignment or recording of this Agreement without Seller's consent shall be
a default under this Agreement. No such assignment should be deemed to release
any party from liability hereunder. This Agreement may not be assigned
by Seller.
17
<PAGE>
30. FULL PERFORMANCE.
The acceptance of the Deed by Purchaser shall be deemed to be
full performance and discharge of every agreement and obligation on
the part of Seller to be performed pursuant to the provisions of
this Agreement except those, if any, which are herein specifically
stated to survive this Agreement; provided that the parties hereto agree
to cooperate following the Closing Date in the event the reexecution or
redelivery of any documents or the execution of any additional documents
shall become necessary to implement the transactions contemplated by
this Agreement.
31. INTENTIONALLY DELETED.
32. MUTUAL INDEMNITY.
Except as provided in Section 4.A(e) above, Seller shall be responsible for all
costs, charges, liabilities and claims arising against Seller or the Property
from intentional or negligent acts or omissions by Seller or its agents in
connection with the Property prior to the closing and shall defend and
indemnify Purchaser against the same. Purchaser shall be responsible for all
costs, charges, liabilities and claims resulting from intentional or negligent
acts or omission of Purchaser or its agents in connection with the Property on
or after the closing Date, and shall defend and indemnify Seller against the
same. The indemnities contained in this Section 32 shall survive the closing
of escrow. Nothing contained in this Section 32 shall be construed as limiting
Purchaser's indemnity to Seller or Seller's indemnity to Purchaser as provided
in Section 4.A(e). Seller's indemnity and Purchaser's indemnity as herein
provided shall be effective only if closing occurs.
33. ATTORNEYS' FEES.
If either party files any action or brings any proceeding against the other
arising from this Agreement, or is made a party to any action or proceeding
brought by the escrow holder, then as between Purchaser and Seller, the
prevailing party shall be entitled to recover as an element of its costs of
suit, and not as damages, reasonable attorneys' fees to be fixed by the court.
The "prevailing party" shall be the party who is entitled to recover its costs
of suit, whether or not suit proceeds to final judgment. A party not entitled
to recover its costs shall not recover attorneys' fees. No sum for attorneys'
fees shall be counted in calculating the amount of the judgment for purposes
of determining whether a party is entitled to its costs or attorneys'
fees.
34. COUNTERPARTS.
This agreement and all amendments and supplements to it may be executed in
counterparts, and all counterparts together shall be construed as one
document.
35. NO REPRESENTATIONS REGARDING LEGAL EFFECT OF DOCUMENT.
No representation, warranty, or recommendation is made by Purchaser, Seller
or its brokers, respective agents, employees, or attorneys
regarding the legal sufficiency, legal effect, or tax consequences of this
Agreement or the transaction, and each signatory is
advised to submit this Agreement to his respective attorney before signing it.
36. WAIVER OF TRAIL BY JURY.
The parties hereto hereby waive their respective rights to a trail by jury
for any action or causes of action in respect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
SELLER
THE LAKES PROJECT INVESTORS,
INC., a Delaware Corporation
By: /s/ Thomas G. Granville
---------------------------------
Name: Thomas G. Granville
-------------------------------
Title: Vice President
PURCHASER
ZIPCO, INC., a Kansas corporation
By: /s/ Thomas Davies
----------------------------------
Name: Thomas Davies
Title: President
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt L.P. II
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000792924
<NAME> Summit Tax Exempt L.P. II
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1994
<PERIOD-END> Sep-30-1994
<PERIOD-TYPE> 9-MOS
<CASH> 653,161
<SECURITIES> 162,210,872
<RECEIVABLES> 3,766,561
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 166,630,594
<CURRENT-LIABILITIES> 1,577,475
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 165,053,119
<TOTAL-LIABILITY-AND-EQUITY> 166,630,594
<SALES> 8,824,290
<TOTAL-REVENUES> 8,824,290
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,405,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,418,983
<EPS-PRIMARY> .79
<EPS-DILUTED> 0
</TABLE>
