<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, 1995
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 (I.R.S. Employer
of incorporation or organization) Identification 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,
1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $159,205,960 $159,186,119
Temporary investments 3,542,008 2,175,490
Cash 367,967 872,662
Cash held in escrow -- 520,677
Interest receivable, net 878,496 797,401
Promissory notes receivable, net 92,618 175,405
Deferred bond selection fees, net 2,035,846 2,174,386
Other assets 24,995 15,803
------------ ------------
Total assets $166,147,890 $165,917,943
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Deferred income $ 479,612 $ 568,953
Due to affiliates 379,701 30,481
Accrued expenses 90,960 67,017
Reserve for disputed claim -- 422,287
------------ ------------
Total liabilities 950,273 1,088,738
------------ ------------
Contingencies
Partners' capital
BUC$holders (9,151,620 BUC$ issued and outstanding) 165,286,690 164,925,646
General partners (89,073) (96,441)
------------ ------------
Total partners' capital 165,197,617 164,829,205
------------ ------------
Total liabilities and partners' capital $166,147,890 $165,917,943
------------ ------------
------------ ------------
- --------------------------------------------------------------------------------------------------
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,
------------------------- -------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first
mortgage bonds, net $8,878,728 $8,750,744 $3,015,288 $3,041,529
Interest income from temporary investments 92,421 43,085 31,152 16,949
Interest income from promissory notes 19,742 30,461 5,782 10,104
---------- ---------- ---------- ----------
8,990,891 8,824,290 3,052,222 3,068,582
---------- ---------- ---------- ----------
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 288,876 238,751 101,268 79,799
Amortization of deferred bond selection
fees 138,540 138,540 46,180 46,180
Provision for disputed claim -- 116,896 -- 116,896
---------- ---------- ---------- ----------
1,338,536 1,405,307 452,266 547,693
---------- ---------- ---------- ----------
Net income $7,652,355 $7,418,983 $2,599,956 $2,520,889
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ALLOCATION OF NET INCOME
BUC$holders $7,499,308 $7,270,603 $2,547,957 $2,470,471
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General partners $ 153,047 $ 148,380 $ 51,999 $ 50,418
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per BUC $ .82 $ .79 $ .28 $ .27
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
GENERAL
BUC$HOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1994 $164,925,646 $(96,441) $164,829,205
Net income 7,499,308 153,047 7,652,355
Distributions (7,138,264) (145,679) (7,283,943)
------------ -------- ------------
Partners' capital (deficit)--September 30, 1995 $165,286,690 $(89,073) $165,197,617
------------ -------- ------------
------------ -------- ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<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>
1995 1994
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received, net $ 8,860,137 $ 8,688,493
Fees and expenses paid (836,025) (994,536)
Cash held in escrow 98,390 (8,873)
----------- -----------
Net cash provided by operating activities 8,122,502 7,685,084
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of temporary investments (1,366,518) (1,076,208)
Principal payments received from loans made to properties 23,264 21,481
Income deferred upon assumption of FMB by new debtor -- 487,025
----------- -----------
Net cash used in investing activities (1,343,254) (567,702)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid (7,283,943) (7,283,943)
----------- -----------
Net decrease in cash (504,695) (166,561)
Cash at beginning of period 872,662 302,826
----------- -----------
Cash at end of period $ 367,967 $ 136,265
----------- -----------
----------- -----------
- ---------------------------------------------------------------------------------------------------
SCHEDULE RECONCILING NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 7,652,355 $ 7,418,983
----------- -----------
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 (29,818) (3,312)
Changes in:
Cash held in escrow 520,677 (8,873)
Interest receivable, net (81,095) (112,643)
Promissory notes receivable, net 59,523 52,872
Other assets (9,192) (13,859)
Accrued expenses 23,943 (59,133)
Deferred income (59,523) (52,872)
Due to affiliates 349,220 228,326
Reserve for disputed claim (422,287) --
----------- -----------
Total adjustments 470,147 266,101
----------- -----------
Net cash provided by operating activities $ 8,122,502 $ 7,685,084
----------- -----------
----------- -----------
- ---------------------------------------------------------------------------------------------------
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, 1995
(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,
1995, the results of its operations for the nine and three months ended
September 30, 1995 and 1994 and its cash flows for the nine months ended
September 30, 1995 and 1994. 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, 1994.
B. Participating First Mortgage Bonds
Effective January 1, 1995, the Partnership adopted Statement of Financial
Accounting Standards (``SFAS'') No. 114, Accounting by Creditors for Impairment
of a Loan. The initial adoption of SFAS No. 114 had no effect on the net income
of the Partnership for the nine months ended September 30, 1995.
SFAS No. 114 requires creditors to evaluate the collectibility of both
interest and principal of a participating first mortgage bond (``FMB'') when
determining whether it is impaired. An FMB is considered to be impaired when,
based on current information and events, it is probable the creditor will be
unable to collect all amounts due according to the contractual terms. When an
FMB is considered to be impaired, the amount of the loss accrual is determined
by discounting the expected future cash flows of the FMB at its effective
interest rate or, when practical, utilizing the estimated fair value of the
collateral. To the extent that the owners of properties underlying the FMBs may
require modifications to their forbearance agreements or the FMBs may otherwise
become impaired in subsequent periods, the Partnership may be required to record
additional valuation allowances which could have a material effect on the
Partnership's financial statements.
Prior to January 1, 1995, the original owner of the underlying property and
obligor of the Pelican Cove FMB had been replaced by an affiliate of Related Tax
Exempt Associates II, Inc. (the ``Related General Partner'') who had not made an
equity investment in the underlying property. This FMB, which had been
classified as an Asset Held for Sale in prior years, has been reclassified to an
FMB in 1995 for all periods presented.
5
<PAGE>
Descriptions of the various FMBs owned by the Partnership at September 30,
1995 are as follows:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid Minimum
for the Annual
nine months Pay Rate
ended as of Stated
September September Interest Call Maturity Face Carrying
Property Location 30, 1995* 1995 Rate* Date Date Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------- --------------- ----------- ----------- ------- ------------ ------------ ------------ ------------
Bay Club Mt. Pleasant,
SC 8.04% 7.25% 8.25% Sep. 2000 Sep. 2006 $ 6,400,000 $ 6,280,960
Loveridge Contra Costa,
CA 6.53(E) (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 8,550,000
The Lakes Kansas City, MO 5.12(D)(E) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 12,750,000
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,075,000
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 5,650,000
Highland Ridge St. Paul, MN 7.06(E)(F) 8.00 8.00 Feb. 1999 Feb. 2007 15,000,000 15,000,000
Newport Village Tacoma, WA 7.89(C) 7.00 8.00 Jan. 1999 Jan. 2007 13,000,000 13,000,000
Sunset Downs Lancaster, CA 5.59(E) (B) 8.00 May 1999 May 2007 15,000,000 15,000,000
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006 6,100,000 6,100,000
Cedar Pointe Nashville, TN 8.00 8.00 8.00 Apr. 1999 Apr. 2007 9,500,000 9,500,000
Shannon Lake Atlanta, GA 6.00 6.00 8.00 Jun. 1999 Jun. 2007 12,000,000 12,000,000
Bristol Village Bloomington, MN 8.55(C) 7.50 8.00 Jun. 1999 Jun. 2005 17,000,000 17,000,000
Suntree Ft. Myers, FL 7.50 7.50 8.00 Jul. 1999 Jul. 2007 7,500,000 7,500,000
River Run Miami, FL 8.00 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 7,200,000
Pelican Cove St. Louis, MO 7.50 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 18,000,000
Players Club(A) Ft. Myers, FL 7.00 7.00 8.00 Aug. 1999 Aug. 2007 2,500,000 2,500,000
------------ ------------
$162,125,000 161,105,960
------------
------------
Less: Allowance for loss on impairment of assets (1,900,000)
------------
Carrying Amount $159,205,960
------------
------------
</TABLE>
* The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB.
(A) 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 FMB.
(B) Pay rate is based on the net cash flow generated by the property.
(C) Includes receipt of deferred base interest relating to prior periods.
(D) Includes contingent interest received during the nine months ended September
30, 1995.
(E) See discussion below.
(F) Represents eight monthly payments.
Due to increases in its real estate taxes, the obligor under the Highland
Ridge FMB has opened discussions with the Partnership with regard to entering
into a forbearance agreement. Based on current discussions and in addition to
other terms and conditions, it is anticipated that such agreement, when
finalized, will encompass a partial deferral of monthly interest payments for a
period of four years to be repaid from future available cash flow or sale or
refinancing proceeds. The FMB is currently paying interest two months in arrears
at the stated rate and the property is delinquent in the payment of its 1995
installments of its real estate taxes. At this time, no agreement has been
finalized and there is no assurance that an agreement will be signed.
Effective with the May 1, 1995 payment date, the Loveridge and Sunset Downs
FMBs have made payments based on the monthly net cash flow generated by the
operations of the underlying properties in accordance with the terms of the
agreement outlined below. Effective as of August 1, 1995, the obligor of the
Sunset Downs FMB entered into a forbearance agreement. In accordance with the
terms of this agreement, the obligor of the FMB is paying debt service on the
FMB to the extent of cash flow generated by the underlying property. The
difference between the pay rate and the stated rate of this FMB is deferred and
payable out of available future cash flow. In addition, pursuant to the
agreement, the obligor has replaced the present property manager and leasing
agent with a new property manager who is an affiliate of the Related General
Partner. Other terms of the agreement call for the deed to be transferred to the
Partnership or its designee no later than January 30, 1997 should the obligor be
unable to bring the FMB fully current on all interest due and payable (including
deferred base interest) on or before that date. These and other obligations are
secured by a guarantee from an affiliate of the obligor. No additional allowance
for loss on impairment was required as a result of this transaction.
Effective as of August 1, 1995, the original owner and obligor of the
Loveridge FMB transferred the deed to the underlying property to an affiliate of
the Related General Partner for limited consideration. Pursuant to the
agreement, the Related General Partner's affiliate, who has not made an equity
investment in the
6
<PAGE>
<PAGE>
underlying property, assumed the day-to-day responsibilities and obligations of
operating the property. The Partnership receives the monthly net cash generated
by the property as payment toward debt service. No additional allowance for loss
on impairment was required as a result of this transaction.
With respect to the FMBs which are subject to forbearance agreements with the
respective obligors, the difference between the stated interest rates and the
rates paid (whether deferred and payable out of available future cash flow or,
ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement 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. Unrecorded contractual interest income was
approximately $496,000 and $510,000 for the nine months ended September 30, 1995
and 1994, 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 mechanics lien judgment rendered against The Lakes. In July,
1994, the appeal was rejected and the judgment affirmed. However, at that time
LPI petitioned the court for a rehearing. On January 23, 1995, in settlement of
this case, LPI and the plaintiff agreed that approximately $422,000 of the
current escrow balance be paid to the plaintiff. The balance of funds
(approximately $99,000) remaining in escrow was returned to LPI and thence to
the Partnership. Previously, the Partnership had reserved fully for the appeal.
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. As a result of the cash equity investment, The Lakes was reinstated as an
FMB in 1994, as it was previously classified as an Asset Held for Sale. 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 income from participating first mortgage bonds over the remaining life
of The Lakes FMB. The balance of the deferred income relating to The Lakes FMB
was approximately $444,000 at September 30, 1995 and $474,000 at December 31,
1994.
C. Related Parties
Prudential-Bache Properties, Inc. (``PBP'') and the Related General Partner
(collectively, 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 Agreement of Limited Partnership (the ``Partnership
Agreement''). The costs and expenses were:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
---------------------- --------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
PBP and affiliates:
Management fee $ 303,984 $303,984 $101,328 $101,328
General and administrative 97,648 74,404 29,416 24,801
---------- -------- -------- --------
401,632 378,388 130,744 126,129
---------- -------- -------- --------
Related General Partner and affiliates:
Management fee 303,984 303,984 101,328 101,328
Loan servicing fees 303,152 303,152 102,162 102,162
General and administrative 20,308 10,787 10,227 2,780
---------- -------- -------- --------
627,444 617,923 213,717 206,270
---------- -------- -------- --------
$1,029,076 $996,311 $344,461 $332,399
---------- -------- -------- --------
---------- -------- -------- --------
</TABLE>
An affiliate of the Related General Partner receives loan servicing fees (see
above) in the amount of .25% per annum of the principal amount outstanding on
FMBs serviced by the affiliate.
7
<PAGE>
<PAGE>
The General Partners are paid, in the aggregate, an annual management fee
equal to .5% of the original amount invested in FMBs.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, is responsible for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
PSI owns 61,265 BUC$ at September 30, 1995.
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 obligors of the Suntree, Players Club and River Run FMBs are affiliates
of the Related General Partner.
D. Contingencies
On 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, PSI and a number of
other defendants. On 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, PSI and a number of other defendants. On 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, PSI 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 PSI and
dismissed the first amended complaint without prejudice. On June 30, 1994,
plaintiffs filed a second amended complaint. The Panel subsequently reaffirmed
the April 14, 1994 transfer. 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 June 8, 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 for pretrial proceedings
under the caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 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, PSI, 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 and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts and breach of implied covenants 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.
On November 28, 1994, the transferee court deemed each of the complaints in
the constituent actions (including Kinnes) amended to conform to the allegations
of the consolidated complaint. PSI and PBP, along with various other defendants,
filed a motion to dismiss the consolidated complaint on December 20, 1994. By
order dated August 29, 1995, the transferee court granted plaintiffs' motion for
temporary class certifica-
8
<PAGE>
<PAGE>
tion, preliminarily approved a settlement entered into between plaintiffs and
PBP and PSI, scheduled a fairness hearing for November 17, 1995, approved the
form and content of the notice to class members and directed that it be provided
to class members. The full amount due under the settlement agreement has been
paid by PSI. The case as against the Related General Partner is still pending.
E. Subsequent Event
In November 1995, a distribution of approximately $2,379,000 and $49,000 was
paid to the BUC$holders and General Partners, respectively, for the quarter
ended September 30, 1995.
9
<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
(Unaudited)
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 multi-family residential apartment
properties.
At the beginning of the year, the Partnership had cash and temporary
investments of $3,048,000. After payment of distributions and receipt of the net
cash flow from operations, the Partnership ended the quarter with $3,910,000 in
cash and temporary investments. The third quarter distribution of $2,379,000
($.26 per BUC) was paid to BUC$holders in November 1995 from cash flow from
operations. As further discussed in Note B to the financial statements, two FMBs
were restructured effective as of August 1, 1995. These restructurings may
negatively impact liquidity in future quarters. 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 $233,000 and $79,000 for the nine months and three
months ended September 30, 1995, respectively, as compared to 1994 for the
reasons discussed below.
Interest income from FMBs increased by $128,000 for the nine months and
decreased by $26,000 for the three months ended September 30, 1995,
respectively, as compared to 1994. The increase for the nine months is primarily
due to additional interest received from the Newport Village, Shannon Lakes,
Bristol Village, Players Club and Suntree FMBs as required by the terms of their
respective forbearance agreements together with, increased cash flow generated
by the Pelican Cove property resulting in an increase in its interest payments
to the Partnership and contingent interest received from The Lakes. The increase
for the nine months is partially offset by reduced debt service payments
received from the Loveridge and Sunset Downs FMBs during the six month period
ended September 30, 1995 (see Note B to the financial statements for further
discussion) and nonrecurring contingent interest received in 1994 from Crowne
Pointe and Willow Creek. The decrease for the three months ended September 30,
1995 is due to the reduced debt service payments received from the Loveridge and
Sunset Downs FMBs.
Interest income from promissory notes decreased by $11,000 and $4,000 for the
nine and three months ended September 30, 1995, respectively, as compared to
1994 due to the repayment of the Pelican Cove and The Lakes property tax loans
in May 1994.
Interest income from temporary investments increased by approximately $49,000
and $14,000 for the nine and three months ended September 30, 1995,
respectively, as compared to 1994 due to higher interest rates and invested
balances in 1995.
General and administrative expenses increased by approximately $50,000 and
$21,000 for the nine and three months ended September 30, 1995, respectively, as
compared to 1994. This increase is primarily due to an increase in
administrative expense as well as legal costs relating to the Kinnes litigation
described in Note D to the financial statements.
10
<PAGE>
<PAGE>
Property Information
The following table lists the FMBs the Partnership owns together with
occupancy rates of the underlying properties as of October 15, 1995:
<TABLE>
<CAPTION>
Minimum
Annualized Interest Annual
Rate Paid Pay Rate
Stated for the nine as of
Face Interest months ended September
Property Location Amount of FMB Occupancy Rate* September 30, 1995* 1995
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Bay Club Mt. Pleasant, SC $ 6,400,000 96.9% 8.25% 8.04% 7.25%
Loveridge Contra Costa, CA 8,550,000 89.1 8.00 6.53(E) (B)
The Lakes Kansas City, MO 13,650,000 91.1 4.87 5.12(D)(E) 4.87
Crowne Pointe Olympia, WA 5,075,000 99.4 8.00 8.00 8.00
Orchard Hills Tacoma, WA 5,650,000 94.3 8.00 8.00 8.00
Highland Ridge St. Paul, MN 15,000,000 97.8 8.00 7.06(E)(F) 8.00
Newport Village Tacoma, WA 13,000,000 93.1 8.00 7.89(C) 7.00
Sunset Downs Lancaster, CA 15,000,000 79.3 8.00 5.59(E) (B)
Willow Creek Ames, IA 6,100,000 100.0 8.00 8.00 8.00
Cedar Pointe Nashville, TN 9,500,000 95.7 8.00 8.00 8.00
Shannon Lake Atlanta, GA 12,000,000 95.2 8.00 6.00 6.00
Bristol Village Bloomington, MN 17,000,000 100.0 8.00 8.55(C) 7.50
Suntree Ft. Myers, FL 7,500,000 85.2 8.00 7.50 7.50
River Run Miami, FL 7,200,000 96.9 8.00 8.00 8.00
Pelican Cove St. Louis, MO 18,000,000 98.7 8.00 7.50 (B)
Players Club(A) Ft. Myers, FL 2,500,000 90.2 8.00 7.00 7.00
-------------
$162,125,000
-------------
-------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The rate paid represents the interest recorded by the Partnership while
the stated rate represents the coupon rate of the FMB.
(A) 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 FMB.
(B) Pay rate is based on the net cash flow generated by the property.
(C) Includes receipt of deferred base interest relating to prior periods.
(D) Includes contingent interest received during the nine months ended
September 30, 1995.
(E) See Note B to the financial statements.
(F) Represents eight monthly payments.
General
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements on the FMBs or, alternatively, to pursue
its remedies under the loan documents, including foreclosures, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
Certain property owners have, at times, supplemented the cash flow generated
by the properties to meet the required FMB interest payments. There can be no
assurance that in the future any property owner will elect to supplement
property cash flow to satisfy FMB interest requirements, if necessary. The owner
of the Highland Ridge property supplemented cash flow generated by the
respective properties to meet its interest payments during the nine months ended
September 30, 1995. The owner of the Sunset Downs and Loveridge properties
supplemented the cash flow generated by the respective properties to meet their
interest payments during the first two months of 1995. (See Note B to the
financial statements for further discussion.)
11
<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--None
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
(10ah)--Settlement Agreement for the Loveridge First
Mortgage Bond dated July 31, 1995 (filed
herewith)
(10ai)--Settlement and Forbearance Agreement for
the Sunset Downs First Mortgage Bond
dated July 31, 1995 (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.
12
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT L.P. II
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: November 14, 1995
----------------------------------------
Eugene D. Burak
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 14, 1995
----------------------------------------
Alan P. Hirmes
Vice President
13
<PAGE>
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made as of the 31st day of
July, 1995, by and among DESERT VALLEY--204, LTD., an Oregon
limited partnership having an office c/o Randall Realty Corp.,
9500 SW Barbur Boulevard, Suite 300, Portland, Oregon 97219
("Desert Valley"), DESERT SANDS APTS.--148, LTD., an Oregon
limited partnership having an office c/o Randall Realty Corp.,
9500 SW Barbur Boulevard, Suite 300, Portland, Oregon 97219
("Desert Sands"), LOVERIDGE-148, LTD., an Oregon limited
partnership having an office c/o Randall Realty Corp., 9500 SW
Barbur Boulevard, Suite 300, Portland, Oregon 97219
("Loveridge"), SUMMIT TAX EXEMPT L.P. II, a Delaware limited
partnership having an office c/o Related Capital Company, 625
Madison Avenue, New York, New York 10022-1801 ("Summit II"),
SUMMIT TAX EXEMPT L.P. III, a Delaware limited partnership having
an office c/o Related Capital Company, 625 Madison Avenue, New
York, New York 10022-1801 ("Summit III"), RANDALL REALTY CORP.,
an Oregon corporation having an office at 9500 SW Barbur
Boulevard, Suite 300, Portland, Oregon 97219 (the "Corporation"),
ROBERT D. RANDALL, an individual having an office c/o Randall
Realty Corp., 9500 SW Barbur Boulevard, Suite 300, Portland,
Oregon 97219 ("Randall") and CTL MANAGEMENT, INC., an Oregon
corporation having an office at 9498 SW Barbur Boulevard, Suite
200, Portland, Oregon 97219 ("CTL Management"). Desert Valley,
Desert Sands and Loveridge may hereinafter be referred to,
individually, as a "Borrower" and, collectively, as the
"Borrowers". Summit II and Summit III may hereinafter be
referred to, individually, as a "Summit Entity" and,
collectively, as the "Summit Entities".
RECITALS:
A. Desert Valley is the owner and holder of fee title
in certain premises located in the City of Lancaster, County of
Los Angeles, State of California, which premises are commonly
known as Sunset Village Apartments and are more particularly
described in Exhibit A attached hereto (such premises, together
with the improvements located thereon, are hereinafter referred
to as the "Desert Valley Property").
B. Pursuant to a certain Indenture of Trust (the
"Desert Valley Indenture") dated as of March 1, 1988 from
<PAGE>
Lancaster Redevelopment Agency ("Issuer") to The Bank of
California, N.A., predecessor in interest to First Trust
California, as trustee ("Trustee"), Issuer issued certain
Multifamily Housing Revenue Refunding Bonds (Sunset Village
Project) 1988 Series A (the "Desert Valley Bonds") in the
aggregate principal amount of $11,375,000, the proceeds of which
were used to fund a certain mortgage loan (the "Desert Valley
Loan"), in the original principal amount of $11,375,000, made by
Issuer as of March 1, 1988 to Desert Valley.
C. The Desert Valley Loan was made pursuant to a
certain Loan Agreement dated as of March 1, 1988 among Desert
Valley, Issuer and Trustee (the "Desert Valley Loan Agreement"),
is evidenced by a promissory note (the "Desert Valley Note")
executed by Desert Valley, and is secured by a Construction Trust
Deed, Security Agreement, Assignment of Rents and Fixture Filing
dated as of March 1, 1988 (the "Desert Valley Deed of Trust"),
covering the Desert Valley Property, and various other loan
documents described in the Desert Valley Loan Agreement
(collectively, the "Desert Valley Loan Documents"). Reference is
also made to a certain letter agreement dated July 10, 1992
between Desert Valley and Summit III, which letter agreement
hereby constitutes one of the Desert Valley Loan Documents.
D. Pursuant to the Desert Valley Indenture, and with
the consent of Desert Valley, the Desert Valley Loan Agreement,
the Desert Valley Note, the Desert Valley Deed of Trust, certain
other documents and property and all payments to be made by
Desert Valley under the Desert Valley Loan Agreement (except
certain specified payments) were assigned by Issuer to the
Trustee as security for the Desert Valley Bonds.
E. All of the Desert Valley Bonds issued pursuant to
the Desert Valley Indenture are owned and held by Summit III.
F. In accordance with Section 7.02(a) of the Desert
Valley Indenture, as the single owner of the Desert Valley Bonds,
Summit III is the "Acting Party", and has the sole authority to
take actions in respect of any "Event of Default" under the
Desert Valley Indenture and has the right to exercise certain
remedies under the Desert Valley Loan Agreement.
-2-
<PAGE>
G. By letter dated as of May 18, 1995, Desert Valley
acknowledged and agreed that an "Event of Default" (as defined in
the Desert Valley Loan Documents has occurred under the Desert
Valley Loan Documents by reason of the failure of Desert Valley
to pay the full amount of Base Interest (as defined in the Desert
Valley Loan Documents) when due.
H. As a result of the default under the Desert Valley
Loan Documents, Summit III is entitled to declare the obligations
of Desert Valley under the Desert Valley Loan Documents to be
immediately due and payable.
I. Desert Valley has acknowledged that it will not be
able to make the payments due under the Desert Valley Note and
therefore will not be able to cure the existing defaults under
the Desert Valley Loan Documents.
J. Desert Valley has requested that Summit III
release Desert Valley from the obligation to repay the Desert
Valley Loan and from all other obligations arising under the
Desert Valley Loan Documents following the transfer of the Desert
Valley Property to Sunset Creek/Village Investors, Inc., a
Delaware corporation ("Sunset Creek"), a nominee, assignee or
designee of Summit III.
K. Summit III is willing to release Desert Valley
from the obligation to repay the Desert Valley Loan and from all
other obligations arising under the Desert Valley Loan Documents
following the transfer of the Desert Valley Property to Sunset
Creek, a nominee, assignee or designee of Summit III.
L. Desert Sands is the owner and holder of fee title
in certain premises located in the City of Lancaster, County of
Los Angeles, State of California, which premises are commonly
known as Sunset Creek Apartments and are more particularly
described in Exhibit B attached hereto (such premises, together
with the improvements located thereon, are hereinafter referred
to as the "Desert Creek Property").
M. Pursuant to a certain Indenture of Trust (the
"Desert Sands Indenture") dated as of March 1, 1988 from Issuer
to Trustee, pursuant to which Issuer issued certain Multifamily
Housing Revenue Refunding Bonds (Sunset Creek Project) 1988
-3-
<PAGE>
Series B (the "Desert Sands Bonds") in the aggregate principal
amount of $8,275,000, the proceeds of which were used to fund a
certain mortgage loan (the "Desert Sands Loan"), in the original
principal amount of $8,275,000, made by Issuer as of March 1,
1988 to Desert Sands.
N. The Desert Sands Loan was made pursuant to a
certain Loan Agreement dated as of March 1, 1988 among Desert
Sands, Issuer and Trustee (the "Desert Sands Loan Agreement"), is
evidenced by a promissory note (the "Desert Sands Note") executed
by Desert Sands, and is secured by a Construction Trust Deed,
Security Agreement, Assignment of Rents and Fixture Filing dated
as of March 1, 1988 (the "Desert Sands Deed of Trust"), covering
the Desert Sands Property, and various other loan documents
described in the Desert Sands Loan Agreement (collectively, the
"Desert Sands Loan Documents"). Reference is also made to a
certain letter agreement dated July 10, 1992 between Desert Sands
and Summit III, which letter agreement hereby constitutes one of
the Desert Sands Loan Documents.
O. Pursuant to the Desert Sands Indenture, and with
the consent of Desert Sands, the Desert Sands Loan Agreement, the
Desert Sands Note, the Desert Sands Deed of Trust, certain other
documents and property and all payments to be made by Desert
Sands under the Desert Sands Loan Agreement (except certain
specified payments) were assigned by Issuer to the Trustee as
security for the Desert Sands Bonds.
P. All of the Desert Sands Bonds issued pursuant to
the Desert Sands Indenture are owned and held by Summit III.
Q. In accordance with Section 7.02(a) of the Desert
Sands Indenture, as the single owner of the Desert Sands Bonds,
Summit III is the "Acting Party", and has the sole authority to
take actions in respect of any "Event of Default" under the
Desert Sands Indenture and has the right to exercise certain
remedies under the Desert Sands Loan Agreement.
R. By letter dated as of May 18, 1995, Desert Sands
acknowledged and agreed that an "Event of Default" (as defined in
the Desert Sands Loan Documents has occurred under the Desert
Sands Loan Documents by reason of the failure of Desert Sands to
-4-
<PAGE>
pay the full amount of Base Interest (as defined in the Desert
Sands Loan Documents) when due.
S. As a result of the default under the Desert Sands
Loan Documents, Summit III is entitled to declare the obligations
of Desert Sands under the Desert Sands Loan Documents to be
immediately due and payable.
T. Desert Sands has acknowledged that it will not be
able to make the payments due under the Desert Sands Note and
therefore will not be able to cure the existing defaults under
the Desert Sands Loan Documents.
U. Desert Sands has requested that Summit III release
Desert Sands from the obligation to repay the Desert Sands Loan
and from all other obligations arising under the Desert Sands
Loan Documents following the transfer of the Desert Sands
Property to Sunset Creek, a nominee, assignee or designee of
Summit III.
V. Summit III is willing to release Desert Sands from
the obligation to repay the Desert Sands Loan and from all other
obligations arising under the Desert Sands Loan Documents
following the transfer of the Desert Sands Property to Sunset
Creek, a nominee, assignee or designee of Summit III.
W. Loveridge is the owner and holder of fee title in
certain premises located in the City of Pittsburg, County of
Contra Costa, State of California, which premises are commonly
known as Loveridge Terrace Apartments and are more particularly
described in Exhibit C attached hereto (such premises, together
with the improvements located thereon, are hereinafter referred
to as the "Loveridge Property", and together with the Desert
Valley Property and the Desert Sands Property, the "Properties").
X. Pursuant to a certain Indenture of Trust (the
"Loveridge Indenture") dated as of November 1, 1986 from the
Redevelopment Agency of the City of Pittsburg ("Loveridge
Issuer") to Trustee, pursuant to which Loveridge Issuer issued
certain Multifamily Housing Revenue Bonds (Loveridge Apartments
Project) 1986 (the "Loveridge Bonds") in the aggregate principal
amount of $8,550,000, the proceeds of which were used to fund a
certain mortgage loan (the "Loveridge Loan", and together with
-5-
<PAGE>
the Desert Valley Loan and the Desert Sands Loan, the "Loans"),
in the original principal amount of $8,550,000, made by Loveridge
Issuer as of November 1, 1986 to Loveridge.
Y. The Loveridge Loan was made pursuant to a certain
Loan Agreement dated as of November 1, 1986 among Loveridge,
Loveridge Issuer and Trustee (the "Loveridge Loan Agreement"), is
evidenced by a promissory note (the "Loveridge Note") executed by
Loveridge, and is secured by a Construction Trust Deed, Security
Agreement, Assignment of Rents and Fixture Filing dated as of
November 1, 1986 (the "Loveridge Deed of Trust"), covering the
Loveridge Property, and various other loan documents described in
the Loveridge Loan Agreement (collectively, the "Loveridge Loan
Documents", and together with the Desert Valley Loan Documents
and the Desert Sands Loan Documents, the "Loan Documents").
Z. Pursuant to the Loveridge Indenture, and with the
consent of Loveridge, the Loveridge Loan Agreement, the Loveridge
Note, the Loveridge Deed of Trust, certain other documents and
property and all payments to be made by Loveridge under the
Loveridge Loan Agreement (except certain specified payments) were
assigned by Loveridge Issuer to the Trustee as security for the
Loveridge Bonds.
AA. All of the Loveridge Bonds issued pursuant to the
Loveridge Indenture are owned and held by Summit II.
AB. In accordance with Section 7.02(a) of the
Loveridge Indenture, as the single owner of the Loveridge Bonds,
Summit II is the "Acting Party", and has the sole authority to
take actions in respect of any "Event of Default" under the
Loveridge Indenture and has the right to exercise certain
remedies under the Loveridge Loan Agreement.
AC. By letter dated as of May 18, 1995, Loveridge
acknowledged and agreed that an "Event of Default" (as defined in
the Loveridge Loan Documents has occurred under the Loveridge
Loan Documents by reason of the failure of Loveridge to pay the
full amount of Base Interest (as defined in the Loveridge Loan
Documents) when due.
AD. As a result of the default under the Loveridge
Loan Documents, Summit II is entitled to declare the obligations
-6-
<PAGE>
of Loveridge under the Loveridge Loan Documents to be immediately
due and payable.
AE. Loveridge has acknowledged that it will not be
able to make the payments due under the Loveridge Note and
therefore will not be able to cure the existing defaults under
the Loveridge Loan Documents.
AF. Loveridge has requested that Summit II release
Loveridge from the obligation to repay the Loveridge Loan and
from all other obligations arising under the Loveridge Loan
Documents following the transfer of the Loveridge Property to
Loveridge Project Investors, Inc., a Delaware Corporation
("Loveridge Investors"), a nominee, assignee or designee of
Summit II.
AG. Summit II is willing to release Loveridge from the
obligation to repay the Loveridge Loan and from all other
obligations arising under the Loveridge Loan Documents following
the transfer of the Loveridge Property to Loveridge Investors, a
nominee, assignee or designee of Summit II.
NOW, THEREFORE, in light of the foregoing facts and in
consideration of the respective undertakings of the parties
hereto, it is hereby agreed as follows:
1. Acknowledgments of Borrowers, Corporation and
Randall. (a) Each of Desert Valley, the Corporation and Randall
acknowledges that:
(i) the Desert Valley Loan Documents are in full force
and effect and are valid and enforceable in accordance with
their terms against Desert Valley;
(ii) pursuant to the Desert Valley Loan Documents,
Summit III has a valid and perfected first lien and security
interest in and to the Desert Valley Property and the other
property secured under the Desert Valley Deed of Trust, the
Desert Valley Indenture and the other Desert Valley Loan
Documents;
(iii) pursuant to the Desert Valley Loan Documents,
Summit III has a first priority, fully perfected security
-7-
<PAGE>
interest in all rents, issues, profits, rent equivalent
income, hotel receipts, security deposits and any other
revenues, income or proceeds of any nature whatsoever
generated by, arising from or otherwise related to the
Desert Valley Property and any other payments covered by any
assignment of rents that has been executed and delivered by
Desert Valley to Summit III as security for its obligations
under the Desert Valley Loan Documents (collectively,
"Desert Valley Rents");
(iv) an event of default has occurred under the terms
of the Desert Valley Loan Documents, and Desert Valley is
unable to cure such event of default;
(v) each of Summit III and Issuer has fully complied
with its obligations under the Desert Valley Loan Documents,
and Desert Valley does not have any defenses, offsets or
claims of any kind or nature with respect to Desert Valley's
obligations under the Desert Valley Loan Documents which
would in any manner limit, diminish or eliminate any of the
rights or remedies of Summit III or Issuer under the Desert
Valley Loan Documents and that to the extent that any such
defenses, claims or offsets exist as of the date these
acknowledgments are made, they are hereby waived and
released.
Desert Valley, based on the above acknowledgments, hereby waives
(x) any and all rights to receive any notice of default under the
Desert Valley Note, the Desert Valley Deed of Trust or the other
Desert Valley Loan Documents relating to the Desert Valley Loan
with respect to any events of default currently existing or
hereinafter arising under the Desert Valley Loan Documents, and
(y) any and all rights to cure such events of default.
(b) Each of Desert Sands, the Corporation and Randall
acknowledges that:
(i) the Desert Sands Loan Documents are in full force
and effect and are valid and enforceable in accordance with
their terms against Desert Sands;
(ii) pursuant to the Desert Sands Loan Documents,
Summit III has a valid and perfected first lien and security
-8-
<PAGE>
interest in and to the Desert Sands Property and the other
property secured under the Desert Sands Deed of Trust, the
Desert Sands Indenture and the other Desert Sands Loan
Documents;
(iii) pursuant to the Desert Sands Loan Documents,
Summit III has a first priority, fully perfected security
interest in all rents, issues, profits, rent equivalent
income, hotel receipts, security deposits and any other
revenues, income or proceeds of any nature whatsoever
generated by, arising from or otherwise related to the
Desert Sands Property and any other payments covered by any
assignment of rents that has been executed and delivered by
Desert Sands to Summit III as security for its obligations
under the Desert Sands Loan Documents (collectively, "Desert
Sands Rents");
(iv) an event of default has occurred under the terms
of the Desert Sands Loan Documents, and Desert Sands is
unable to cure such event of default;
(v) each of Summit III and Issuer has fully complied
with its obligations under the Desert Sands Loan Documents,
and Desert Sands does not have any defenses, offsets or
claims of any kind or nature with respect to Desert Sands'
obligations under the Desert Sands Loan Documents which
would in any manner limit, diminish or eliminate any of the
rights or remedies of Summit III or Issuer under the Desert
Sands Loan Documents and that to the extent that any such
defenses, claims or offsets exist as of the date these
acknowledgments are made, they are hereby waived and
released.
Desert Sands, based on the above acknowledgments, hereby waives
(x) any and all rights to receive any notice of default under the
Desert Sands Note, the Desert Sands Deed of Trust or the other
Desert Sands Loan Documents relating to the Desert Sands Loan
with respect to any events of default currently existing or
hereinafter arising under the Desert Sands Loan Documents, and
(y) any and all rights to cure such events of default.
(c) Each of Loveridge, the Corporation and Randall
acknowledges that:
-9-
<PAGE>
(i) the Loveridge Loan Documents are in full force and
effect and are valid and enforceable in accordance with
their terms against Loveridge;
(ii) pursuant to the Loveridge Loan Documents, Summit
II has a valid and perfected first lien and security
interest in and to the Loveridge Property and the other
property secured under the Loveridge Deed of Trust, the
Loveridge Indenture and the other Loveridge Loan Documents;
(iii) pursuant to the Loveridge Loan Documents, Summit
II has a first priority, fully perfected security interest
in all rents, issues, profits, rent equivalent income, hotel
receipts, security deposits and any other revenues, income
or proceeds of any nature whatsoever generated by, arising
from or otherwise related to the Loveridge Property and any
other payments covered by any assignment of rents that has
been executed and delivered by Loveridge to Summit II as
security for its obligations under the Loveridge Loan
Documents (collectively, "Loveridge Rents");
(iv) an event of default has occurred under the terms
of the Loveridge Loan Documents, and Loveridge is unable to
cure such event of default;
(v) each of Summit II and Loveridge Issuer has fully
complied with its obligations under the Loveridge Loan
Documents, and Loveridge does not have any defenses, offsets
or claims of any kind or nature with respect to Loveridge's
obligations under the Loveridge Loan Documents which would
in any manner limit, diminish or eliminate any of the rights
or remedies of Summit II or Loveridge Issuer under the
Loveridge Loan Documents and that to the extent that any
such defenses, claims or offsets exist as of the date these
acknowledgments are made, they are hereby waived and
released.
Loveridge, based on the above acknowledgments, hereby waives (x)
any and all rights to receive any notice of default under the
Loveridge Note, the Loveridge Deed of Trust or the other
Loveridge Loan Documents relating to the Loveridge Loan with
respect to any events of default currently existing or
-10-
<PAGE>
hereinafter arising under the Loveridge Loan Documents, and (y)
any and all rights to cure such events of default.
2. Transfer of the Desert Valley Property, the Desert
Sands Property and the Loveridge Property (collectively, the
"1995 Properties").
(a) Transfer of Desert Valley Property. Desert Valley
acknowledges and agrees that Summit III has the absolute and
unconditional right to declare the Desert Valley Loan immediately
due and payable as a result of the occurrence of a default under
the Desert Valley Loan Documents, and that no such right or
remedy, and no such default, has been waived in any respect by
Summit III. Desert Valley acknowledges and agrees that Summit
III is required to seek to enforce the rights and remedies of
Summit III and Issuer under the Desert Valley Loan Documents in
order to protect its interests in the Desert Valley Property. In
order to induce Summit III not to accelerate the Desert Valley
Loan and pursue the remedies available to it and Issuer against
Desert Valley under the Desert Valley Loan Documents, or under
any other applicable law, rule or regulation (or in equity),
Desert Valley has simultaneously with the execution and delivery
of this Agreement transferred to Sunset Creek, a nominee,
assignee or designee of Summit III, all right, title and interest
of Desert Valley in the Desert Valley Property, subject to the
Desert Valley Note, the Desert Valley Deed of Trust and the other
Desert Valley Loan Documents, by executing and delivering to
Sunset Creek a grant deed (the "Desert Valley Deed") and certain
other transfer documents (the "Desert Valley Transfer
Documents"); it hereby being understood and agreed that the
provisions of this Agreement shall have no force or effect unless
and until the Desert Valley Deed has been properly recorded in
the appropriate recording office.
(b) Transfer of Desert Sands Property. Desert Sands
acknowledges and agrees that Summit III has the absolute and
unconditional right to declare the Desert Sands Loan immediately
due and payable as a result of the occurrence of a default under
the Desert Sands Loan Documents, and that no such right or
remedy, and no such default, has been waived in any respect by
Summit III. Desert Sands acknowledges and agrees that Summit III
is required to seek to enforce the rights and remedies of Summit
III and Issuer under the Desert Sands Loan Documents in order to
-11-
<PAGE>
protect its interests in the Desert Sands Property. In order to
induce Summit III not to accelerate the Desert Sands Loan and
pursue the remedies available to it and Issuer against Desert
Sands under the Desert Sands Loan Documents, or under any other
applicable law, rule or regulation (or in equity), Desert Sands
has simultaneously with the execution and delivery of this
Agreement transferred to Sunset Creek, a nominee, assignee or
designee of Summit III, all right, title and interest of Desert
Sands in the Desert Sands Property, subject to the Desert Sands
Note, the Desert Sands Deed of Trust and the other Desert Sands
Loan Documents, by executing and delivering to Sunset Creek a
grant deed (the "Desert Sands Deed" and certain other transfer
documents (the "Desert Sands Transfer Documents"); it hereby
being understood and agreed that the provisions of this Agreement
shall have no force or effect unless and until the Desert Sands
Deed has been properly recorded in the appropriate recording
office.
(c) Transfer of Loveridge Property. Loveridge
acknowledges and agrees that Summit II has the absolute and
unconditional right to declare the Loveridge Loan immediately due
and payable as a result of the occurrence of a default under the
Loveridge Loan Documents, and that no such right or remedy, and
no such default, has been waived in any respect by Summit II.
Loveridge acknowledges and agrees that Summit II is required to
seek to enforce the rights and remedies of Summit II and
Loveridge Issuer under the Loveridge Loan Documents in order to
protect its interests in the Loveridge Property. In order to
induce Summit II not to accelerate the Loveridge Loan and pursue
the remedies available to it and Loveridge Issuer against
Loveridge under the Loveridge Loan Documents, or under any other
applicable law, rule or regulation (or in equity), Loveridge has
simultaneously with the execution and delivery of this Agreement
transferred to Loveridge Investors, a nominee, assignee or
designee of Summit II, all right, title and interest of Loveridge
in the Loveridge Property, subject to the Loveridge Note, the
Loveridge Deed of Trust and the other Loveridge Loan Documents,
by executing and delivering to Loveridge Investors the grant deed
(the "Loveridge Deed") and certain other transfer documents (the
"Loveridge Transfer Documents"); it hereby being understood and
agreed that the provisions of this Agreement shall have no force
or effect unless and until the Loveridge Deed has been properly
recorded in the appropriate recording office.
-12-
<PAGE>
(d) The parties hereto agree that, notwithstanding the
Summit Entities' or their respective designee's acquisition of
the Properties, the indebtedness evidenced by the Loan Documents
shall not be cancelled and all of the Loan Documents shall remain
in full force and effect after the transaction contemplated by
this Agreement has been consummated but the Borrowers shall have
no further liability therefor. The parties hereto further agree
that the interest of the Summit Entities or their respective
designee in the Properties after the Summit Entities or their
respective assignee's, designee's or nominee's acquisition of the
Properties, shall not merge with the interest of the Summit
Entities in the Properties under the Loan Documents. It is the
express intention of each of the parties hereto (and all of the
conveyances provided for in this Agreement shall so recite) that
such interest of the Summit Entities in the Properties shall not
merge, but be and remain at all times separate and distinct,
notwithstanding any union of said interest in the Summit Entities
at any time by purchase, termination or otherwise and that the
respective liens of the Loan Documents on the Properties shall be
and remains at all times a valid and continuous liens on the
Properties.
(e) Transfer Taxes/Borrowers' Expenses.
Notwithstanding anything contained herein, each of Desert Valley,
Desert Sands and Loveridge shall be solely responsible for the
payment of any and all real estate transfer taxes or transfer
gains taxes that may be imposed, assessed or collected in
connection with the transfer of the Desert Valley Property, the
Desert Sands Property or the Loveridge Property, respectively,
and the transfer and recordation of the Desert Valley Deed, the
Desert Sands Deed or the Loveridge Deed, respectively, it hereby
being understood and agreed that such fees, costs and expenses
shall be paid from a source other than the cash flow of the
Desert Valley Property, the Desert Sands Property or the
Loveridge Property.
(f) Payment of Prior Expenses. As of the effective
date of this Agreement, each Summit Entity agrees to be
responsible for and pay, as, if and when due all reasonable
amounts due under any service contract which service contracts
are hereby being assumed by such Summit Entity with respect to
the applicable 1995 Property (a list of such service contracts
are annexed hereto as Schedule 1) but only to the extent such
-13-
<PAGE>
amounts (i) were incurred strictly in the ordinary course of
business by the applicable Borrower, (ii) were incurred, and were
first due and payable, on or after July 1, 1995, and (iii) would
otherwise be the obligation of, and be payable by, the Borrower
which previously owned such Property.
(g) Management of Properties. As of the effective
date of this Agreement: (i) all management and control of the
Properties shall be transferred to Related Management Company
("New Manager"), as the agent of Summit II (in the case of the
Loveridge Property) and Summit III (in the case of the Desert
Valley Property and the Desert Sands Property) and (ii) CTL
Management shall resign, or be terminated, as the managing and
leasing agent for the Desert Valley Property, the Desert Sands
Property and the Loveridge Property, it hereby being understood
and agreed that CTL Management shall have no claim or recourse of
any nature against the Desert Valley Property, the Desert Sands
Property, the Loveridge Property, Summit II, Summit III or any
nominees, assignees or designees of Summit II or Summit III.
Simultaneously herewith, each of Desert Valley, Desert Sands,
Loveridge, and CTL Management shall transfer to New Manager all
cash and other funds arising from or relating to the Desert
Valley Property, the Desert Sands Property and the Loveridge
Property, respectively, attributable to prior or current periods,
including, without limitation, all funds held by any of the
Borrowers or CTL (with respect to the Properties) in any
operating accounts, tax escrow accounts, insurance escrow
accounts, reserve accounts, or any other accounts of any type or
nature, and security deposits under leases in the aggregate
amount of $35,884.45.
(h) Further Assurances. Each of Desert Valley, Desert
Sands and Loveridge hereby agrees to execute and deliver such
other and further documents or instruments, including, without
limitation, assignments and partnership authorizations, as may
reasonably be requested by Summit II and Summit III, as
applicable, to effectuate the transfer of title to the Desert
Valley Property, the Desert Sands Property and the Loveridge
Property in accordance with and as contemplated by this paragraph
2 of this Agreement.
3. Conditions to Effectiveness of Agreement. The
provisions of this Agreement shall not become effective unless
-14-
<PAGE>
and until each general partner and each limited partner in each
of the Borrowers shall have given and delivered, irrevocably, its
written consent to this Agreement and the transactions
contemplated hereunder and in connection herewith.
4. Releases.
(a) Simultaneously with the execution and delivery of
this Agreement, and as a condition to the effectiveness of this
Agreement: (i) each of Desert Valley and Desert Sands shall have
executed and delivered to Summit III a release (the "Summit III
Releases"); and (ii) Loveridge shall have executed and delivered
to Summit II a release (the "Summit II Release").
(b) Simultaneously with the execution and delivery of
this Agreement, and as a condition to the effectiveness of this
Agreement: (i) Summit II shall have executed and delivered to
Loveridge a release (the "Loveridge Release"); and (ii) Summit
III shall have executed and delivered to each of Desert Valley
and Desert Sands a release (the "Desert Valley Release" and the
"Desert Sand Release").
5. Borrowers' Professional Fees. Borrower and
Randall personally shall each be jointly and severally
responsible for and liable for the payment of all "Professional
Fees" incurred by or otherwise accrued against any of the
Borrowers in connection with this Agreement and the transactions
contemplated herein or relating thereto; provided, however, that
each of the Borrowers shall have $5,000 of its Professional Fees
reimbursed out of cash flow from its respective transferred
property; provided, that Randall shall not be personally
responsible for the payment of the professional fees, costs and
expenses of any of the Summit Entities. For purposes of this
paragraph 5, "Professional Fees" shall mean all fees, costs and
expenses incurred in connection with this Settlement Agreement
and the documents and instruments entered into in connection
herewith by any attorney, accountant, financial consultant or
other consultant or professional person. The parties acknowledge
and consent to the fact that each Borrower has been reimbursed in
the amount of $5,000 for its Professional Fees from the cash flow
of its respective Property.
-15-
<PAGE>
6. Not a Novation. This Agreement, together with the
other documents executed in connection with the transactions
contemplated hereby is not intended to and shall not terminate or
extinguish any of the indebtedness or obligations under the
Desert Valley Loan Documents, the Desert Sands Loan Documents and
the Loveridge Loan Documents and all other documents executed in
connection with the transactions contemplated thereby in such a
manner as would constitute a novation of the original indebted-
ness or obligations under the Loan Documents, nor shall this
Agreement affect or impair the priority of any liens created
thereby, it being the intention of the parties hereto to carry
forward all liens and security interests securing payment of the
Desert Sands Note, the Desert Valley Note and the Loveridge Note.
7. Further Assurances. Each of the Borrowers shall
execute and deliver or cause to be executed and delivered such
assignments, agreements and partnership authorizations as may be
necessary or desirable to carry out the purposes of this
Agreement.
8. WAIVER OF TRIAL BY JURY. EACH BORROWER
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THE LOAN
DOCUMENTS, THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT NOW
OR HEREAFTER EXECUTED AND DELIVERED IN CONNECTION THEREWITH.
9. Agreement Binding. This Agreement and all the
covenants and agreements herein contained, shall be and are
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal
representatives, successors and assigns except as expressly set
forth herein.
10. Construction of Agreement. The titles and
headings of the paragraphs of this Agreement have been inserted
for convenience of reference only and are not intended to
summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the
construction of this Agreement.
11. Waivers. Any Summit Entity may at any time and
from time to time waive any one or more of the conditions
-16-
<PAGE>
contained herein, but any such waiver shall be deemed to be made
in pursuance hereof and not in modification thereof, and any such
waiver in any instance or under any particular circumstance shall
not be considered a waiver of such condition in any other
instance or any other circumstance.
12. Severability. If any term, covenant or provision
of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be construed
without such term, covenant or provision.
13. No Beneficiary. No person, party or entity shall
under any circumstances have the right to assert that it is a
third party beneficiary of this Agreement.
14. Counterparts. It is understood and agreed that
this Agreement may be executed in telecopied or original
counterparts, each of which shall, for all purposes, be deemed an
original and all of such counterparts, taken together, shall
constitute one and the same Agreement, event though all of the
parties hereto may not have executed the same counterpart of this
Agreement.
15. Modifications. This Agreement may only be
modified, amended, changed, discharged or terminated by an
agreement in writing signed by all of the parties to this
Agreement.
16. Full Authority. Each of the parties to this
Agreement (and the undersigned representatives of such parties,
if any) has full power and authority and legal right to execute
this Agreement and to keep and observe all of the terms,
covenants and provisions of this Agreement on the respective
parts of such parties to be performed or observed.
17. No Third Party Liability. Each of the Borrowers
acknowledges and agrees that the mechanism established in this
Agreement for the transfer of the Properties, and the
participation of the Summit Entities in the process, is a
legitimate and reasonable exercise of the applicable Summit
Entity's rights and remedies as the principal secured creditor of
the applicable Borrower. The Summit Entities' participation in
this process (and pursuant to this Agreement) is as a secured
-17-
<PAGE>
creditor, and not as a co-owner, partner, joint venturer,
operator, insider, control entity, employer in fact or law, or
any other equity participant with any of the Borrowers. As such,
no of the Summit Entities shall have no liability to any third
party as co-owner, partner, joint venturer, operator, insider,
control entity, employer in fact or law, or any other equity
participant for exercising its rights under this Agreement as
regards any of the Properties.
18. Choice of Law. This Agreement shall be governed
and construed in accordance with the internal laws of the State
of California.
19. Advice of Counsel. Each of the Borrowers,
Randall, the Corporation, CTL Management and each of the Summit
Entities acknowledges that it (i) has had the opportunity to
obtain advice of counsel of its own choosing in the negotiations
for and preparation of this Agreement; (ii) has read the
Agreement and has had the Agreement fully explained by such
counsel, and is fully aware of its contents and legal effects;
(iii) has entered into this Agreement of its own free will and
accord and without threats, coercion, fraud or duress of any kind
and (iv) is not relying on any representation, statement or
warranty of any party regarding this Agreement or the
transactions contemplated hereby, except as set forth in this
Agreement.
20. Conveyance. The Borrowers agree that the
conveyance of the Properties to the Summit Entities or their
respective assignees, designees or nominees according to the
terms of this Agreement is an absolute conveyance of all of their
respective right, title and interest in and to the Property in
fact as well as form and was not and is not now intended as a
mortgage, trust conveyance, deed of trust or security instrument
of any kind, and that the consideration for such conveyance is as
exactly as recited herein and that the Borrowers have no further
interest (including right of redemption) or claims in and to the
Properties or to the proceeds and profits which may be derived
thereof, of any kind whatsoever.
21. Summit Reliance. The Summit Entities acknowledge
that they are relying solely on their own inspections, tests,
audits, studies and investigations conducted in connection with,
-18-
<PAGE>
and on their own judgment with respect to, the acquisition of the
Properties. The Summit Entities further acknowledge that (A) the
Borrowers have made and are making no representations or
warranties as to the accuracy or completeness of any third party
reports or studies regarding the Properties or any of the tenants
(except as specifically provided for herein), and (B) the
Borrower Entities disclaim any representations or warranties
regarding any matter with respect to the Properties, and (C) the
Summit Entities shall accept the Properties in the condition in
which they exist on the date the Properties are transferred to
the Summit Entities or their nominee "AS IS" and "WHERE IS," with
all faults (e.g., faults (latent or patent) discovered by the
Summit Entities or their nominee at any time (whether or not such
faults (latent or patent) are disclosed to the Summit Entities by
Borrowers) without any further representation or warranty,
express or implied, in fact or by law.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
THE SIGNATURE PAGES FOLLOW<PAGE>
-19-
<PAGE>
IN WITNESS WHEREOF, each of the Borrowers, Randall, the
Corporation, CTL Management and each of the Summit Entities have
duly executed this Agreement as of the day and year first above
written.
DESERT VALLEY--204, LTD.,
an Oregon limited partnership,
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
DESERT SANDS APTS.--148, LTD.,
an Oregon limited partnership,
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
LOVERIDGE-148, LTD.,
an Oregon limited partnership,
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
/s/ Robert D. Randall
--------------------------------
Robert D. Randall
Randall Realty Corp.
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: President
-20-
<PAGE>
CTL MANAGEMENT
By: /s/ Darrell K. Johnson
---------------------------
Name: Darrel K. Johnson
Title: President
SUMMIT TAX EXEMPT L.P. II, a
Delaware limited partnership
By: Related Tax Exempt Associates
II, Inc., a general partner
By: /s/ Stuart Boesky
---------------------------
Name: Stuart Boesky
Title: Vice-President
By: Prudential-Bache Properties,
Inc., a general partner
By: /s/ Thomas F. Lynch, III
---------------------------
Name: Thomas F. Lynch, III
Title: President
-21-
<PAGE>
SUMMIT TAX EXEMPT L.P. III, a
Delaware limited partnership
By: Related Tax Exempt Associates
III, Inc., a general partner
By: /s/ Stuart Boesky
---------------------------
Name: Stuart Boesky
Title: Vice-President
By: Prudential-Bache Properties,
Inc., a general partner
By: /s/ Thomas F. Lynch, III
---------------------------
Name: Thomas F. Lynch, III
Title: President
-22-
<PAGE>
The undersigned, being all of the limited partners of Desert
Valley - 204, Ltd., an Oregon limited partnership (the
"Partnership") hereby consent to the execution by the Partnership
of this Agreement and the completion of the transactions
contemplated hereby.
PACIFIC FRONTIER WOOD MARKETS,
INC.
By: /s/ Robert D. Randall
------------------------
Name: Robert D. Randall
Title: President
CSL PROPERTIES, INC.
By: /s/ Robert D. Randall
------------------------
Name: Robert D. Randall
Title: President
<PAGE>
<PAGE>
The undersigned, being all of the limited partners of Desert
Sands Apts. -- 148, Ltd., an Oregon limited partnership (the
"Partnership") hereby consent to the execution by the Partnership
of this Agreement and the completion of the transactions
contemplated hereby.
PACIFIC FRONTIER WOOD MARKETS,
INC.
By: /s/ Robert D. Randall
------------------------
Name: Robert D. Randall
Title: President
CSL PROPERTIES, INC.
By: /s/ Robert D. Randall
------------------------
Name: Robert D. Randall
Title: President
<PAGE>
The undersigned, being the sole limited partner of Loveridge
- - 148, Ltd., an Oregon limited partnership (the "Partnership")
hereby consents to the execution by the Partnership of this
Agreement and the completion of the transactions contemplated
hereby.
PACIFIC FRONTIER WOOD MARKETS,
INC.
By: /s/ Robert D. Randall
------------------------
Name: Robert D. Randall
Title: President
<PAGE>
<PAGE>
EXHIBIT A
(Description of Desert Valley Property)
(To Be Attached)<PAGE>
<PAGE>
EXHIBIT B
(Description of Desert Sands Property)
(To Be Attached)<PAGE>
<PAGE>
EXHIBIT C
(Description of Loveridge Property)
(To Be Attached)
<PAGE>
SCHEDULE 1
(Service Contracts)
<PAGE>
<PAGE>
----------------------------------------------------
SETTLEMENT AGREEMENT
among
DESERT VALLEY -- 204, LTD.
DESERT SANDS APTS. -- 148, LTD.,
LOVERIDGE - 148, LTD.,
RANDALL REALTY CORP.,
ROBERT D. RANDALL,
CTL MANAGEMENT
and
SUMMIT TAX EXEMPT L.P. II
and SUMMIT TAX EXEMPT L.P. III
Dated as of July 31, 1995
Premises:
LOVERIDGE TERRACE APARTMENTS
CONTRA COSTA COUNTY, CALIFORNIA
SUNSET CREEK APARTMENTS
LOS ANGELES COUNTY, CALIFORNIA
SUNSET VILLAGE APARTMENTS
LOS ANGELES COUNTY, CALIFORNIA
----------------------------------------------------
<PAGE>
[Desert Hills]
SETTLEMENT AND FORBEARANCE AGREEMENT
THIS SETTLEMENT AND FORBEARANCE AGREEMENT (this
"Agreement") is made as of the 31st day of July, 1995, by and
among DESERT HILLS--264, LTD., an Oregon limited partnership
having an office c/o Randall Realty Corp., 9500 SW Barbur
Boulevard, Suite 300, Portland, Oregon 97219 ("Borrower"), SUMMIT
TAX EXEMPT L.P. II, a Delaware limited partnership having an
office c/o Related Capital Company, 625 Madison Avenue, New York,
New York 10022-1801 ("Summit"), RANDALL REALTY CORP., an Oregon
corporation having an office at 9500 SW Barbur Boulevard, Suite
300, Portland, Oregon 97219 (the "Corporation"), ROBERT D.
RANDALL, an individual having an office c/o Randall Realty Corp.,
9500 SW Barbur Boulevard, Suite 300, Portland, Oregon 97219
("Randall") and CTL MANAGEMENT, INC., an Oregon corporation
having an office at 9498 SW Barbur Boulevard, Suite 200,
Portland, Oregon 97219 ("CTL Management"). Borrower and Desert
Hills (defined below) may hereinafter be referred to, individual-
ly, as a "Borrower" and, collectively, as the "Borrowers".
RECITALS:
A. Borrower is the owner and holder of fee title in
certain premises located in the City of Lancaster, County of Los
Angeles, State of California, which premises are commonly known
as Sunset Downs Apartments and are more particularly described in
Exhibit A attached hereto (such premises, together with the
improvements located thereon, are hereinafter referred to as the
"Property").
B. Pursuant to a certain Indenture of Trust (the
"Indenture") dated as of February 1, 1987 from the Lancaster
Redevelopment Agency ("Issuer") to The Bank of California, N.A.,
predecessor in interest to First Trust California, as trustee
("Trustee"), Issuer issued certain Multifamily Housing Revenue
Refunding Bonds (Sunset Downs Project) 1987 Series A (the
"Bonds") in the aggregate principal amount of $15,000,000, the
proceeds of which were used to fund a certain mortgage loan (the
"Loan"), in the original principal amount of $15,000,000, made by
Issuer as of February 12, 1987 to Borrower.
C. The Loan was made pursuant to a certain Loan
Agreement dated as of February 1, 1987 among Borrower, Issuer and
Trustee (the "Loan Agreement"), is evidenced by a promissory note
(the "Note") executed by Borrower, and is secured by a
Construction Trust Deed, Security Agreement, Assignment of Rents
and Fixture Filing dated as of February 1, 1987 (the "Deed of
Trust") covering the Property, and various other loan documents
described in the Loan Agreement (collectively, the "Loan
Documents"). Reference is also made to a certain letter
<PAGE>
agreement dated July 10, 1992 between Borrower and Summit, which
letter agreement hereby constitutes one of the Loan Documents.
D. Pursuant to the Indenture, and with the consent of
Borrower, the Loan Agreement, the Note, the Deed of Trust,
certain other documents and property and all payments to be made
by Borrower under the Loan Agreement (except certain specified
payments) were assigned by Issuer to the Trustee as security for
the Bonds.
E. All of the Bonds issued pursuant to the Indenture
are owned and held by Summit.
F. In accordance with Section 7.02(a) of the
Indenture, as the single owner of the Bonds, Summit is the
"Acting Party", and has the sole authority to take actions in
respect of any "Event of Default" under the Indenture and has the
right to exercise certain remedies under the Loan Agreement.
G. By letter dated as of May 18, 1995, Borrower
acknowledged and agreed that an "Event of Default" (as defined in
the Loan Documents) has occurred under the Loan Documents by
reason of the failure of Borrower to pay the full amount of Base
Interest (as defined in the Loan Documents) when due.
H. As a result of the default under the Loan
Documents, Summit is entitled to declare the obligations of
Borrower under the Loan Documents to be immediately due and
payable.
I. Borrower has requested that Summit forbear from
exercising its right (i) to declare the obligations of Borrower
under the Loan Documents immediately due and payable and (ii) to
commence an action to foreclose the Deed of Trust.
J. Summit is willing to forbear from exercising its
rights (i) to declare the obligations of Borrower under the Loan
Documents immediately due and payable and (ii) to commence an
action to foreclose the Deed of Trust only if Borrower and the
Corporation enter into a settlement with Summit with respect to
the Property on the terms and conditions hereinafter set forth,
including, without limitation, the delivery by the Corporation of
a certain guaranty of payment, a copy of which is annexed hereto
as Exhibit B (the "Vanishing Guaranty").
K. Desert Terrace--184, Ltd., an Oregon limited
partnership ("Desert Terrace"), is the owner and holder of fee
title in certain premises located in the City of Lancaster,
County of Los Angeles, State of California, which premises are
commonly known as Sunset Terrace Apartments and are more
particularly described in Exhibit A-1 attached hereto (such
-2-
<PAGE>
premises, together with the improvements located thereon, are
hereinafter referred to as the "Desert Terrace Property").
NOW, THEREFORE, in light of the foregoing facts and in
consideration of the respective undertakings of the parties
hereto, it is hereby agreed as follows:
1. Acknowledgments of Borrower, Corporation and
Randall. Each of Borrower, the Corporation and Randall
acknowledges that:
(i) the Loan Documents are in full force and effect
and are valid and enforceable in accordance with their terms
against Borrower;
(ii) pursuant to the Loan Documents, Summit has a
valid and perfected first lien and security interest in and
to the Property and the other property secured under the
Deed of Trust, the Indenture and the other Loan Documents;
(iii) pursuant to the Loan Documents, Summit has a first
priority, fully perfected security interest in all rents,
issues, profits, rent equivalent income, receipts, insurance
proceeds, tax refunds, security deposits and any other
revenues, income or proceeds of any nature whatsoever
generated by, arising from or otherwise related to the
Property and any other payments covered by any assignment of
rents that has been or will be executed and delivered by
Borrower to Summit and/or Issuer as security for its
obligations under the Loan Documents (collectively,
"Rents");
(iv) an event of default has occurred under the terms
of the Loan Documents;
(v) each of Summit and Issuer has fully complied with
its obligations under the Loan Documents, and Borrower does
not have any defenses, offsets or claims of any kind or
nature with respect to Borrower's obligations under the Loan
Documents which would in any manner limit, diminish or
eliminate any of the rights or remedies of Summit or Issuer
under the Loan Documents and that to the extent that any
such defenses, claims or offsets exist as of the date these
acknowledgments are made, they are hereby waived and
released; and
(vi) the existing accrued and unpaid base interest
under the Loan as of July 31, 1995 is $655,770.43 (and
continues to accrue in accordance with the terms of the Note
and the other Loan Documents) and the existing principal
balance of the Loan as of the date hereof is $15,000,000
(exclusive of any deferred or other interest of any nature
-3-
<PAGE>
thereon and all fees, costs and expenses of Summit and
Issuer with respect to the Loan).
2. Agreement by Summit to Forbear. Notwithstanding
the existing events of default under the Loan Documents, Summit
shall, until the occurrence of a Forbearance Termination Event,
forbear from declaring the obligations of Borrower under the Loan
Documents immediately due and payable and from demanding payment
thereof, and from foreclosing or commencing a foreclosure action
as a result of such existing defaults. For purposes of this
Agreement, a "Forbearance Termination Event" shall mean the
occurrence of any one or more of the following events which is
not cured within applicable notice and cure periods, if any:
(a) if Borrower, Randall, the Corporation or any of
their respective affiliates shall commit a material default or
otherwise materially breach any of their material
representations, warranties or covenants under the terms of this
Agreement, the Management Agreement (defined below), the
Vanishing Guarantee or any of the other material documents and
material agreements executed in connection with the Loan or the
transactions contemplated hereby (collectively, the "Forbearance
Documents");
(b) if on or before 3:00 p.m. New York, New York time
on January 30, 1997, time being of the essence, Summit shall not
have received all principal, all accrued and unpaid base
interest, accrued interest, deferred interest, contingent
interest and other interest of any nature whatsoever, and sums
other than principal and interest (including, without limitation,
all fees, costs, and expenses of Summit) due under the Loan
Documents, and any other amounts of any nature whatsoever due
under the Loan Documents (it being expressly agreed that there
shall be no grace, notice or cure period with respect to the
obligations under this sub-paragraph (b);
(c) if at any time during the term of this Agreement:
(i) Randall or his heirs, executors or personal representatives
shall cease to be the sole general partner of Borrower; (ii)
without the prior written consent of Summit, which shall not be
unreasonably withheld, one hundred (100%) percent of the
ownership interest in Borrower and in the profits and losses of
Borrower shall cease to be owned and controlled on an
unencumbered basis (A) one (1%) percent by Randall, (B) twenty-
four (24%) percent by Pacific Frontier Wood Markets, Inc., (C)
fifteen (15%) percent by Kenneth A. Randall and (D) sixty (60%)
percent by CSL Properties, Inc.; or (iii) Randall shall sell,
transfer of otherwise dispose of all or any portion of his
interest in Borrower;
(d) if a voluntary case, or an involuntary case which
is not dismissed within 90 days, is commenced under title 11 of
-4-
<PAGE>
the United States Code (the "Bankruptcy Code") or under any other
federal or state bankruptcy or insolvency statute by or against
any one or more of Borrower, Randall or the Corporation;
(e) if the Certificate and Agreement of Limited
Partnership Agreement, dated as of October 10, 1984, with respect
to Borrower, or any other or similar agreement or instrument
governing Borrower (it being acknowledged and agreed that Summit
shall be deemed to be and hereby is a third party beneficiary of
such documents, agreements and instruments, collectively,
"Organizational Documents") shall not be modified or amended (x)
in any material respect without the prior written approval of
Summit or (y) in a non-material respect without notice to Summit;
(f) if any of Borrower's Organizational Documents
shall be violated or breached in any way that material adversely
affects the interests of Summit;
(g) if any one or more of Borrower, Randall, the
Corporation, or any person, party or entity acting by, for or
under the control (either directly or indirectly) of Borrower,
Randall or the Corporation shall take any step or action which
has the effect of materially interfering with or preventing the
implementation of any one or more of the material terms,
provisions or conditions of this Agreement, or which has the
effect of materially interfering with or preventing in any manner
whatsoever the collection or application of the Rents (as set
forth herein;
(h) (i) the termination or dissolution of any one or
more of Borrower or the Corporation, or (ii) the failure of any
one or more of Borrower or the Corporation to maintain its
corporate/partnership existence; provided, however, any of such
acts by the Corporation shall not be a Forbearance Termination
Event if the Corporation shall have been replaced as a guarantor
under the Vanishing Guaranty in accordance with the terms
thereof;
(i) the occurrence of a Forbearance Termination Event
under that certain settlement and forbearance agreement dated as
of the date hereof among Randall, CTL, the Corporation, Summit
Tax Exempt Bond Fund, L.P. ("Summit Fund") and Desert Terrace
(the "Other Forbearance Agreement");
(j) the failure by any of Borrower's Affiliates,
including, without limitation, CTL, Randall and the Corporation
to fulfill any of its material covenants or other material
obligations under that certain Settlement Agreement dated as of
July 31, 1995 among Desert Valley--204, Desert Sands Apts.--148
Ltd., Loveridge--148, Ltd., the Corporation, Randall, CTL
Management, Summit II and Summit Tax Exempt L.P. III (the
"Settlement Agreement"); and
-5-
<PAGE>
(k) if that certain property and cash management
agreement dated as of the date hereof among Summit, Related
Management Company ("New Manager") and Borrower (the "Management
Agreement") is modified, amended or terminated by an act of
Borrower without Summit's prior written consent;
provided, however, the occurrence of any one or more of
the events set forth in clauses (a), (c), (e), (f), (g), (h), (j)
and (k) above shall not constitute a "Forbearance Termination
Event" if any such event is fully cured (including indefeasible
payment to Summit of any loss, cost or expense resulting from
such breaches, default or act) as of the tenth (10th) day after
receipt of written notice by Summit to Borrower of such event or
default; provided, further, that such ten (10) day cure period
shall be extended to forty-five (45) days if and to the extent
that Borrower has commenced curing such default and is diligently
prosecuting the completion of same.
3. Post-Forbearance Transfer of the Property.
(a) Upon the occurrence of a Forbearance Termination
Event, and without the necessity of any other or further notice
to Borrower, Randall, the Corporation, any limited partner in
Borrower or any other person, party or entity (i) all obligations
of Borrower under the Loan Documents shall automatically, and
without the necessity of any other or further act or instrument,
become immediately due and payable in full, (ii) the Property
shall be transferred pursuant to a Post-Forbearance Transfer of
the Property, as hereinafter described, and (iii) only if the
Transfer Documents shall not be unconditionally delivered
pursuant to a Post-Forbearance Transfer of the Property within
five (5) days after written demand by Summit, Summit shall have
the absolute and unconditional right to pursue all rights and
remedies available to Summit under the Loan Documents including,
without limitation, commencing a foreclosure action with respect
to the Property; provided that Seller shall not be required to
grant Borrower such five (5) day period prior to pursuing any
right or remedy including, without limitation, commencing a
foreclosure action, and shall be entitled to immediately exercise
its remedies under the Loan Documents, if the Forbearance
Termination Event occurred under Section 2(b) hereof. However,
notwithstanding the foregoing, in the event that the Borrower
unconditionally delivers the Transfer Documents prior to a
Forbearance Termination Event, and the Desert Hills Property is
not subject to any liens, encumbrances or tenancies other than
those permitted by the Loan Documents, then Summit shall have no
right to commence a Foreclosure (defined below) against Borrower,
Corporation or Randall in respect of the Loan Documents prior to
or after recording the Desert Hills Deed (defined below).
(b) For purposes of this Agreement, a "Post-
Forbearance Transfer of the Property" shall mean a transfer of
-6-
<PAGE>
the Property that occurs at the election of Summit, which
election shall be made by Summit in the exercise of its sole and
absolute discretion (i) by unconditional execution, acknowledg-
ment and delivery by Borrower of the Transfer Documents (defined
below), in which event the Property will be transferred subject
to the Deed of Trust and the other Loan Documents, without any
offsets or counterclaims of any kind or nature (a "Title
Transfer") or (ii) if the Transfer Documents shall not be
unconditionally delivered within five (5) days after demand and
after the occurrence of a Forbearance Termination Event by Summit
(as to which date time shall be of the essence) pursuant to a
consensual non-judicial foreclosure (or judicial foreclosure, if
Summit elects) of the Deed of Trust under applicable California
law (a "Foreclosure"). In connection with such foreclosure
action, Summit shall have all rights against its collateral
available to a mortgagee or a trust deed beneficiary under the
applicable California law. Borrower hereby agrees not to
contest, impede or in any way interfere with such foreclosure by
Summit of the Deed of Trust, including, without limitation,
filing any documents or papers (such as answers, motions, claims
or counterclaims).
(c) The term "Transfer Documents" means, collectively,
a certain grant deed (the "Desert Hills Deed"), substantially in
the form of Exhibit C annexed hereto, the transfer documents
listed on Exhibit C-1 and such further documents or instruments
that Summit may reasonably request for the purpose of
transferring title to the Property to Summit or its nominee,
assignee or designee (such person or entity acquiring title to
the Property is defined as the "Transferee"), including, without
limitation, such other customary and reasonable affidavits,
documents or instruments as the Transferee's Title Company may
require in order to issue its fee title policy, which may include
affidavits of title and other affidavits regarding the payment of
franchise or other similar taxes with respect to matters not
subject to accurate disclosure by public records at de minimis
cost.
In connection with a Post-Forbearance Transfer of the Property,
whether by means of a Title Transfer or a Foreclosure, Borrower
hereby agrees to cooperate fully with Summit and the Transferee
and hereby agrees to take any and all steps or actions reasonably
requested by Summit and the Transferee to effectuate any such
transfer, including, without limitation, supplying information
regarding the Property, providing all appropriate consents
required under applicable California law and otherwise assisting
Summit in any reasonable manner to effectuate such transfer of
the Property. Notwithstanding the foregoing, Borrower shall not
be required to incur any material costs or expenses in connection
with a transfer of the Property; provided, however, it is the
intent and agreement of the parties that (A) Borrower shall be
obligated to effectuate transfer of the Property as and when
-7-
<PAGE>
required under the terms of this Agreement even if such transfer
results in cost, expense or liability to such Borrowers and any
provision herein with respect to actions being taken "at no
material cost or expense" is limited to an alternative action (an
"Alternative Action") requested by Summit which could be
accomplished in a less costly manner by Borrower while still
accomplishing the intent and requirements of this Agreement and
(B) Borrower shall be required to perform such Alternative Action
if and to the extent the costs and expenses thereof are
reimbursed by cash flow from the Property and not by Randall, the
Corporation or any of their respective affiliates.
(d) The parties hereto agree that, notwithstanding
Transferee's acquisition of the Property, the indebtedness
evidenced by the Loan Documents shall not be cancelled and all of
the Loan Documents shall remain in full force and effect after
the transaction contemplated by this Agreement has been consum-
mated but Borrower shall have no further liability therefor. The
parties hereto further agree that the Transferee's interest in
the Property after its acquisition thereof shall not merge with
the interest of Summit in the Property under the Loan Documents.
It is the express intention of each of the parties hereto (and
all of the conveyances provided for in this Agreement shall so
recite) that such interest of Summit in the Property shall not
merge, but be and remain at all times separate and distinct,
notwithstanding any union of said interest in Summit at any time
by purchase, termination or otherwise and that the respective
liens of the Loan Documents on the Property shall be and remains
at all times a valid and continuous liens on the Property.
(e) The agreements by Summit to forbear from declaring
the obligations of Borrower under the Loan Documents to be
immediately due and payable and from demanding payment thereof in
the manner set forth herein shall in no event or under any
circumstance be construed as a waiver by Summit, in whole or in
part, of the existing events of default under the Loan Documents.
(f) Notwithstanding anything contained herein to the
contrary, Borrower shall have and shall retain, through and
including the date of any transfer of the Property by means of a
Foreclosure or a Title Transfer, the right to bring current the
Property by paying to Summit the full amount of all principal,
interest (including, without limitation, Base Interest (as
defined in the Loan Documents), accrued interest, deferred
interest, contingent interest and any other type or kind of
interest payable under the Loan Documents), fees, costs and
expenses of Summit and any other amounts payable under the Loan
Documents, which principal, interest, fees, costs and expenses of
Summit and other amounts shall be deemed to be due and payable in
full, without any offsets or counterclaims of any kind, at such
time.
-8-
<PAGE>
4. Management of the Property.
(a) Simultaneously with the execution of this
Agreement, (i) CTL Management shall be terminated as the property
manager and leasing agent for the Property, and (ii) New Manager
shall replace CTL Management as the sole managing and leasing
agent for the Property pursuant to the Management Agreement; it
hereby being understood and agreed that CTL Management has and
shall have no claim or recourse of any nature against Summit (or
any nominees, assignees or designees of Summit) or Property
arising from or resulting from the termination of CTL Management
as managing and leasing agent for Property or for any other
reason, and CTL Management is a signatory to this Agreement for
the purpose of effectuating this understanding. Borrower agrees
not to terminate, replace or attempt to replace New Manager as
the sole managing and leasing agent of the Property without the
prior written consent of Summit.
(b) Borrower and New Manager shall each procure and
maintain the casualty and liability insurance required to be
procured and maintained under the Loan Documents and the
Management Agreement, as the case may be, and each party shall
cause the other party to be a named additional insured on such
insurance policy, it being the intent of the parties that all
parties be fully protected from liability with respect to the
Property to the extent of such insurance coverage. The costs of
such insurance to be procured and maintained by Borrower and New
Manager hereunder shall be paid from funds in the Cash Collateral
Disbursement Account (as such term is defined in the Management
Agreement).
5. Intentionally Deleted.
6. Forbearance. During the period (the "Forbearance
Period") commencing with the date of execution of this Agreement
through and including the earlier of January 30, 1997 and the
date a Forbearance Termination Event occurs, Base Interest (as
defined in the Indenture) and all other interest accrued and
payable shall continue to accrue on the outstanding principal
balance of the Loan in accordance with the Loan Documents. In
lieu of making the payments required under the Loan Documents,
all Excess Cash Collateral (as such term is defined in the
Management Agreement) shall be applied on a monthly basis first
to the payment of Base Interest for that month, and the balance,
if any, shall thereafter be applied in accordance with the
provisions of the Indenture, the Note, the Loan Agreement and the
other Loan Documents. Any amounts of unpaid interest outstanding
on the principal balance of the Loan at any time and from time to
time shall themselves bear interest and be payable at the rates
and in the manner set forth in Section 3.06 of the Indenture and
Section 3.2 of the Loan Agreement.
-9-
<PAGE>
7. Conditions to Effectiveness of Agreement. The
provisions of this Agreement shall not become effective unless
and until each and every one of the conditions set forth below
shall have been satisfied:
(a) The Corporation shall have executed,
acknowledged and delivered the Vanishing Guaranty to
Summit;
(b) The general partner and each limited partner
in Borrower shall have given and delivered,
irrevocably, its written consent to this Agreement and
the transactions contemplated hereunder and in
connection herewith;
(c) Borrower shall have delivered to Summit (i) all
cash in its various accounts and (ii) the agreed upon amount
representing a portion of all security deposits;
(d) The Corporation's counsel shall have delivered an
opinion of counsel with respect to power and authority, due
authorization, due execution, and due authority, with
respect to the Guaranty and the grantor thereunder in form
and substance acceptable to Summit;
(e) The Management Agreement and the Initial Release
(defined below) shall have been executed, acknowledged and
delivered by all parties thereto; and
(f) All material conditions precedent to the
effectiveness of the Other Forbearance Agreement and the
Settlement Agreement shall have been satisfied or waived in
writing.
8. Releases.
Concurrently with the execution and delivery of this
Agreement, Borrower shall deliver to Summit the initial release
in a form satisfactory to Summit (the "Initial Release").
Immediately following the closing of a transfer of the Property
pursuant to this Agreement, (i) Borrower shall execute and
deliver to Summit the Summit Final Release in the form of Exhibit
E-1; and (ii) provided a Forbearance Termination Event resulting
in actual damage to Summit or its affiliates shall not have
occurred and not cured, Summit shall execute and deliver to
Borrower the Desert Hills Release in the form of Exhibit E-2
annexed hereto.
9. Borrowers' Professional Fees. Borrower and
Randall personally shall each be jointly and severally
responsible for and liable for the payment of all professional
fees, costs, and expenses (including, without limitation,
-10-
<PAGE>
attorneys' fees) incurred by or otherwise accrued against
Borrower in connection with this Agreement and the transactions
contemplated herein or relating thereto; provided, however, that
Randall shall not be personally responsible for the payment of
the professional fees, costs and expenses of Summit.
Notwithstanding the foregoing, (i) Summit shall be entitled to
reimburse itself out of the Desert Hills Lockbox Account for all
costs, including attorneys fees and expenses, and other
professional fees, costs and expenses incurred by Summit in
connection with the transactions contemplated by this Agreement
out of any amounts disbursed to Summit in accordance with the
provisions of the Cash Management Agreement and (ii) a portion of
Borrower's legal fees and other costs and expenses in connection
with the transactions contemplated hereby in the amount of $5,000
have been paid from the cash flow of the Property; and any fees
and expenses in excess of such amount shall be paid by Randall
from a source other than the cash flow of the Property.
10. Assignment. Upon prior (or simultaneous) written
notice to Borrower, Summit may sell or assign, in whole or in
part, its interest in the Loan, subject to the terms and
provisions of this Agreement.
11. Notices. Any notice, request or demand given or
made under this Agreement shall be in writing and shall be hand
delivered or sent by Federal Express or other reputable courier
service, and shall be deemed given when received at the following
addresses whether hand delivered or sent by Federal Express or
other reputable national overnight courier service:
If to Summit:
Summit Tax Exempt L.P. II
c/o Related Capital Company
625 Madison Avenue
New York, New York 10022-1801
Attention: Mr. Bruce Brown
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Eric R. Landau, Esq.
-11-
<PAGE>
If to Borrower:
Desert Hills--264, Ltd.
c/o Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
Attention: Mr. Ron Koos
With a copy to:
O'Melveny & Myers
275 Battery Street
San Francisco, California 94111-3305
Attention: Stephen A. Cowan, Esq.
If to Randall:
Mr. Robert D. Randall
c/o Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
If to the Corporation:
Randall Realty Corp.
9500 SW Barbur Boulevard
Suite 300
Portland, Oregon 97219
If to CTL Management
CTL Management, Inc.
9498 SW Barbur Boulevard
Suite 200
Portland, Oregon 97219
Each party to this Agreement may designate a change of address by
notice given to the other party fifteen (15) days prior to the
date such change of address is to become effective.
12. Loan Documents Remain Binding. Borrower
acknowledges that all of the obligations to be performed by
Borrower under the Loan Documents are valid and shall continue in
full force and effect notwithstanding the execution of this
Agreement, except to the extent expressly stated herein to the
contrary. Borrower acknowledges that the Loan Documents are and
shall at all times continue to be absolute and unconditional in
all respects, and shall at all times be valid and enforceable
-12-
<PAGE>
irrespective of any other agreements or circumstances of any
nature whatsoever which might otherwise constitute a defense to
the Loan Documents, the obligations of Borrower under the Loan
Documents, the obligations of any other person or party relating
to the Loan Documents, or the obligations of Borrower hereunder
or otherwise with respect to the Loan Documents. The agreement
by Summit to forbear from exercising any of its rights and
remedies under the Loan Documents in accordance with the
provisions of this Agreement shall in no event or under any
circumstance be construed as a waiver by Summit in whole or in
part of any existing default with respect to the Loan Documents,
or of the absolute and unconditional right of Summit, from and
after the occurrence of a Forbearance Termination Event (and
expiration of all applicable grace, cure and notice periods)
hereunder or under the Other Forbearance Agreement, to seek to
enforce its rights and remedies with respect to the Loan in
accordance with the Loan Documents; provided, however, Summit
agrees that it shall not commence a foreclosure action against
Borrower, Corporation or Randall with respect to the Desert Hills
Property prior to or after recording the Desert Hills Deed if the
Transfer Documents are unconditionally delivered to Summit, or
its nominee, designee or affiliate, within fifteen (15) days of
demand after the occurrence of a Forbearance Termination Event
therefrom by Summit. Borrower absolutely, unconditionally and
irrevocably waives any and all right to assert any setoff,
counterclaim (except for a compulsory counterclaim in a court of
federal jurisdiction) or crossclaim of any nature whatsoever
(i) with respect to the Loan Documents and the documents
contemplated hereby and executed and delivered in connection
herewith, or (ii) with respect to the obligations of Borrower
under the Loan Documents and the documents contemplated hereby
and executed and delivered in connection herewith, or (iii) with
respect to the obligations of any other person or party relating
to the Loan Documents and the documents contemplated hereby and
executed and delivered in connection herewith, or (iv) otherwise
with respect to the Loan or (v) in any action or proceeding
brought by Summit to collect the sums due under the Loan
Documents and the documents contemplated hereby and executed and
delivered in connection herewith, or any portion thereof, or to
enforce, foreclose and realize upon the liens and security
interests created by the Deed of Trust, the other Loan Documents
and the documents contemplated hereby and executed and delivered
in connection herewith. Borrower acknowledges that no oral or
other agreements, understandings, representations or warranties
exist with respect to the Loan Documents or with respect to the
obligations of Borrower under the Loan Documents, except those
specifically set forth in the documents contemplated hereby and
executed and delivered in connection herewith; provided, however,
that where the terms and conditions of the Loan Documents
conflict with the terms and conditions of this Agreement and the
Forbearance Documents, then the terms and conditions of the
Forbearance Documents shall control.
-13-
<PAGE>
13. Not a Novation. This Agreement, together with the
other Forbearance Documents is not intended to and shall not
terminate or extinguish any of the indebtedness or obligations
under the Loan Documents in such a manner as would constitute a
novation of the original indebtedness or obligations under the
Loan Documents, nor shall this Agreement affect or impair the
priority of any liens created thereby, it being the intention of
the parties hereto to carry forward all liens and security
interests securing payment of the Note.
14. Further Assurances. Borrower shall execute and
deliver or cause to be executed and delivered such assignments,
agreements, partnership authorization and other documentation as
Summit shall require to create, evidence and assure the
agreements herein contained and the rights conferred upon the
parties hereby, at no additional cost to any of them and without
the incurrence of any additional obligations or liabilities by
any of them.
15. Time of the Essence. Time shall be of the essence
with respect to the payment and performance of the obligations of
each of the Borrowers to be paid and performed hereunder and with
respect to all dates and deadlines set forth herein (whether or
not specifically so indicated) including, without limitation, the
dates specified in the defined term "Forbearance Termination
Event".
16. WAIVER OF TRIAL BY JURY. EACH BORROWER
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THE LOAN
DOCUMENTS, THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT NOW
OR HEREAFTER EXECUTED AND DELIVERED IN CONNECTION THEREWITH.
17. Agreement Binding. This Agreement and all the
covenants and agreements herein contained, shall be and are
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal
representatives, successors and assigns except as expressly set
forth herein.
18. Construction of Agreement. The titles and
headings of the paragraphs of this Agreement have been inserted
for convenience of reference only and are not intended to
summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the
construction of this Agreement.
19. Waivers. Summit may at any time and from time to
time waive any one or more of the conditions contained herein,
but any such waiver shall be deemed to be made in pursuance
hereof and not in modification thereof, and any such waiver in
-14-
<PAGE>
any instance or under any particular circumstance shall not be
considered a waiver of such condition in any other instance or
any other circumstance.
20. Severability. If any term, covenant or provision
of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be construed
without such term, covenant or provision.
21. No Beneficiary. No person, party or entity other
than Summit Fund shall under any circumstances have the right to
assert that it is a third party beneficiary of this Agreement.
22. Counterparts. It is understood and agreed that
this Agreement may be executed in telecopied or original
counterparts, each of which shall, for all purposes, be deemed an
original and all of such counterparts, taken together, shall
constitute one and the same Agreement, event though all of the
parties hereto may not have executed the same counterpart of this
Agreement.
23. Entire Agreement. The Loan Documents and the
documents contemplated hereby and executed and delivered in
connection herewith set forth the entire agreement and
understanding of Borrower, Randall, the Corporation, CTL
Management and Summit with respect to the matters set forth
herein.
24. Modifications. This Agreement may only be
modified, amended, changed, discharged or terminated by an
agreement in writing signed by all of the parties to this
Agreement.
25. Full Authority. Each of the parties to this
Agreement (and the undersigned representatives of such parties,
if any) has the full power and authority and legal right to
execute this Agreement and to keep and observe all of the terms,
covenants and provisions of this Agreement on the respective
parts of such parties to be performed or observed.
26. No Third Party Liability. Borrower acknowledges
and agrees that the mechanism established in this Agreement for
the transfer of the Property, and the participation of Summit in
the process, is a legitimate and reasonable exercise of Summit's
rights and remedies as the principal secured creditor of
Borrower. Summit's participation in this process (and pursuant
to this Agreement) is as a secured creditor, and not as a co-
owner, partner, joint venturer, operator, insider, control
entity, employer in fact or law, or any other equity participant
with Borrower. As such, Summit shall have no liability to any
third party as co-owner, partner, joint venturer, operator,
insider, control entity, employer in fact or law, or any other
-15-
<PAGE>
equity participant for exercising its rights under this Agreement
as regards any of the Properties.
27. Choice of Law. This Agreement shall be governed
and construed in accordance with the internal laws of the State
of California.
28. Advice of Counsel. Each of Borrower, Randall, the
Corporation, CTL Management and Summit acknowledges that it (i)
has had the opportunity to obtain advice of counsel of its own
choosing in the negotiations for and preparation of this
Agreement; (ii) has read the Agreement and has had the Agreement
fully explained by such counsel, and is fully aware of its
contents and legal effects; (iii) has entered into this Agreement
of its own free will and accord and without threats, coercion,
fraud or duress of any kind and (iv) is not relying on any
representation, statement or warranty of any party regarding this
Agreement or the transactions contemplated hereby, except as set
forth in this Agreement.
29. Conveyance. Borrower agrees that the conveyance
of the Property to Summit or its assignee, designee or nominee
according to the terms of this Agreement is and shall be an
absolute conveyance of all of its right, title and interest in
and to the Property in fact as well as form and was not and is
not now and shall not be intended as a mortgage, trust convey-
ance, deed of trust or security instrument of any kind, and that
the consideration for such conveyance is as exactly as recited
herein and that, following delivery of the Transfer Documents,
Borrower shall have no further interest (including right of
redemption) or claims in and to the Property or to the proceeds
and profits which may be derived thereof, of any kind whatsoever.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
THE SIGNATURE PAGE FOLLOWS<PAGE>
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.
DESERT HILLS--264, LTD.,
an Oregon limited partnership,
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
/s/ Robert D. Randall
---------------------------------
Robert D. Randall
Randall Realty Corp.
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
CTL MANAGEMENT
By: /s/ Darrell K. Johnson
---------------------------
Name: Darrel K. Johnson
Title: President
SUMMIT TAX EXEMPT L.P. II, a
Delaware limited partnership
By: Related Tax Exempt Bond
Associates, Inc., a general
partner
By: /s/ Stuart Boesky
---------------------------
Name: Stuart Boesky
Title: Vice-President
By: Prudential-Bache Properties,
Inc., a general partner
By: /s/ Thomas F. Lynch, III
---------------------------
Name: Thomas F. Lynch, III
Title: President
-17-
<PAGE>
The undersigned, being all of the limited partners of
Desert Hills --264, Ltd., an Oregon limited partnership (the
"Partnership") hereby consent to the execution by the Partnership
of this Agreement and the completion of the transactions contem-
plated hereby.
PACIFIC FRONTIER WOOD MARKETS, INC.
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
/s/ Kenneth A. Randall
----------------------------
Kenneth A. Randall
CSL PROPERTIES, INC.
By: /s/ Robert D. Randall
---------------------------
Name: Robert D. Randall
Title: General Partner
-18-
<PAGE>
Acknowledgments
(To Be Attached)<PAGE>
-1-
<PAGE>
EXHIBIT A
(Description of Property)
(To Be Attached)<PAGE>
-2-
<PAGE>
EXHIBIT A-1
(Description of Desert Terrace Property)
<PAGE>
-3-
<PAGE>
EXHIBIT B
(Vanishing Guaranty)
(To Be Attached)<PAGE>
-4-
<PAGE>
EXHIBIT C
(Form of Desert Hills Deed)
(grant deed)
-5-
<PAGE>
<PAGE>
EXHIBIT D
(Management Agreement)<PAGE>
-6-
<PAGE>
EXHIBIT E
(Form of Summit Final Release)
<PAGE>
<PAGE>
EXHIBIT E-1
(Form of Desert Hills Release)<PAGE>
<PAGE>
--------------------------------------------------------
SETTLEMENT AND FORBEARANCE AGREEMENT
among
DESERT HILLS - 264, LTD.,
RANDALL REALTY CORP.,
ROBERT D. RANDALL,
CTL MANAGEMENT
and
SUMMIT TAX EXEMPT L.P. II
Dated as of July 31, 1995
Premises:
SUNSET DOWNS APARTMENTS
LOS ANGELES COUNTY, CALIFORNIA
--------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt LP II
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000792924
<NAME> Summit Tax Exempt LP II
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-Mos
<CASH> 367,967
<SECURITIES> 3,542,008
<RECEIVABLES> 162,237,915
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 166,147,890
<CURRENT-LIABILITIES> 950,273
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 165,197,617
<TOTAL-LIABILITY-AND-EQUITY> 166,147,890
<SALES> 8,990,891
<TOTAL-REVENUES> 8,990,891
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,338,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,652,355
<INCOME-TAX> 7,652,355
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,652,355
<EPS-PRIMARY> .82
<EPS-DILUTED> 0
</TABLE>
