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
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-17653
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BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3523598
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Rd.,
Bannockburn, Illinois 60015
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited)
ASSETS
1996 1995
----------- -----------
Cash and cash equivalents $ 1,352,405 $ 3,062,342
Accounts and accrued interest receivable 56,214 54,970
----------- -----------
1,408,619 3,117,312
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Investment in acquisition loan receivable 7,781,448 7,817,596
Less:
Allowance for potential loan losses 1,168,367 545,000
----------- -----------
Net investment in acquisition loan receivable 6,613,081 7,272,596
Investment in joint ventures - affiliates 5,147,766 4,801,982
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11,760,847 12,074,578
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$ 13,169,466 $ 15,191,890
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 15,066 $ 82,545
Due to affiliates 17,970 13,952
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Total liabilities 33,036 96,497
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Limited Partners' capital (292,708 Interests
issued and outstanding) 13,178,333 15,137,296
General Partner's deficit (41,903) (41,903)
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Total partners' capital 13,136,430 15,095,393
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$ 13,169,466 $ 15,191,890
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Interest on loans $ 411,621 $ 411,621
Interest on short-term investments 50,895 129,609
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Total income 462,516 541,230
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Expenses:
Administrative 206,031 176,481
Provision for potential loss on loan 623,367
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Total expenses 829,398 176,481
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(Loss) income before participation in income
of joint ventures - affiliates and equity in
loss from investment in acquisition loan (366,882) 364,749
Participation in income of joint ventures -
affiliates 204,968 28,129
Equity in loss from investment in
acquisition loan (36,148) (32,291)
----------- -----------
Net (loss) income $ (198,062) $ 360,587
=========== ===========
Net income allocated to General Partner $ 10,507 $ 9,006
=========== ===========
Net (loss) income allocated to Limited
Partners $ (208,569) $ 351,581
=========== ===========
Net (loss) income per Limited Partnership
Interest (292,708 issued and outstanding) $ (0.71) $ 1.20
=========== ===========
Distributions to General Partner $ 10,507 $ 9,006
=========== ===========
Distributions to Limited Partners $ 1,750,394 $ 351,250
=========== ===========
Distributions per Limited Partnership
Interest $ 5.98 $ 1.20
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Income:
Interest on loans $ 205,811 $ 205,811
Interest on short-term investments 15,443 62,347
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Total income 221,254 268,158
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Expenses:
Administrative 160,756 105,410
Provision for potential loss on loan 623,367
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Total expenses 784,123 105,410
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(Loss) income before participation in income
(loss) of joint ventures - affiliates and equity in
loss from investment in acquisition loan (562,869) 162,748
Participation in income (loss) of joint
ventures - affiliates 120,412 (24,100)
Equity in loss from investment in
acquisition loan (18,074) (16,146)
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Net (loss) income $ (460,531) $ 122,502
=========== ===========
Net income allocated to General Partner $ 6,004 $ 4,503
=========== ===========
Net (loss) income allocated to Limited
Partners $ (466,535) $ 117,999
=========== ===========
Net (loss) income per Limited Partnership
Interest (292,708 issued and outstanding) $ (1.59) $ 0.40
=========== ===========
Distribution to General Partner $ 6,004 $ 4,503
=========== ===========
Distribution to Limited Partners $ 1,574,769 $ 175,625
=========== ===========
Distribution per Limited Partnership Interest$ 5.38 $ 0.60
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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Operating activities:
Net (loss) income $ (198,062) $ 360,587
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Equity in loss from investment in
acquisition loan 36,148 32,291
Participation in income of joint
ventures - affiliates (204,968) (28,129)
Provision for potential loss on loan 623,367
Net change in:
Accounts and accrued interest
receivable (1,244) (45,349)
Accounts payable (67,479) (19,151)
Due to affiliates 4,018 (38,359)
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Net cash provided by operating activities 191,780 261,890
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Investing activities:
Capital contributions to joint ventures -
affiliates (265,613) (58,156)
Distributions from joint ventures -
affiliates 124,797 58,776
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Net cash used in or provided by investing
activities (140,816) 620
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Financing activities:
Distributions to Limited Partners (1,750,394) (351,250)
Distributions to General Partner (10,507) (9,006)
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Cash used in financing activities (1,760,901) (360,256)
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Net change in cash and cash equivalents (1,709,937) (97,746)
Cash and cash equivalents at beginning of
period 3,062,342 4,256,384
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Cash and cash equivalents at end of period $ 1,352,405 $ 4,158,638
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the six months and quarter
ended June 30, 1996, and all such adjustments are of a normal and recurring
nature.
2. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1996 are:
Paid
-----------------------
Six Months Quarter Payable
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Mortgage servicing fees $10,554 $ 5,277 $ 1,759
Reimbursement of expenses to
the General Partner, at cost 23,903 16,798 16,211
During the six months ended June 30, 1996, the General Partner subordinated
receipt of one-half of its share of distributed Cash Flow, totaling $10,507.
This amount will be paid to the General Partner only after required
distribution levels to investors have been met and such amounts, if any, will
be allocated to the Repurchase Fund.
3. Investments in Joint Ventures - Affiliates:
The following information has been summarized from the financial statements of
the 45 West 45th Street Office Building and Sun Lake Apartments joint ventures:
June 30, 1996
---------------
Net investment in real
estate as of June 30 $30,786,840
Total liabilities as
of June 30 15,946,638
Total income 3,114,404
Net income 482,321
4. Contingency:
A proposed settlement has been reached with respect to the class action
complaint, Paul Williams and Beverly Kennedy, et al, v. Balcor Pension
Investors, et al. between counsel for the Class and counsel for the defendants.
A final hearing on the proposed settlement is expected to be held in November
1996. The General Partner does not believe that the proposed settlement will
have a material adverse impact on the Partnership.
<PAGE>
5. Subsequent Event:
In July 1996, the Partnership made a distribution of $234,166 ($.80 per
Interest) to the holders of Limited Partnership Interests representing the
regular quarterly distribution of available Cash Flow for the second quarter of
1996.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Preferred Pension - 12 A Real Estate Limited Partnership (the
"Partnership") was formed in 1987 to invest in first mortgage loans,
wrap-around mortgage loans and other junior mortgage loans. The Partnership
raised $29,270,800 through the sale of Limited Partnership Interests and
utilized these proceeds to invest in four loans. The Partnership subsequently
reclassified its investment in two of these loans in which it held minority
participations to investment in joint ventures with affiliates. In addition,
one of the loans was repaid. As of June 30, 1996, the Partnership had an
investment in one participating first mortgage loan and two joint venture
investments in real estate in its portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Summary of Operations
- ---------------------
The Partnership recognized a provision for potential loss on acquisition loan
receivable during the second quarter of 1996. This decrease was partially
offset by improved operations at the properties in which the Partnership holds
joint venture interests. As a result, the Partnership generated a net loss
during the six months and quarter ended June 30, 1996 as compared to net income
during the same periods in 1995. Further discussion of the Partnership's
operations is summarized below.
1996 Compared to 1995
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the six months and quarters ended June 30, 1996 and 1995.
As a result of lower average cash balances due to special distributions to the
Limited Partners in July 1995 and April 1996, interest income on short-term
investments decreased during 1996 as compared to 1995.
The Partnership incurred higher consulting, printing and postage costs in
connection with its response to two tender offers during the second quarter of
1996. As a result, administrative expense increased during 1996 as compared to
1995. This increase was partially offset by lower accounting and legal fees.
Provisions are charged to income when the General Partner believes an
impairment has occurred to the value of its joint venture properties or in the
borrower's ability to repay the loan or in the value of the collateral
property. Determinations of fair value are made periodically on the basis of
performance under the terms of the loan agreement and assessments of property
operations. Determinations of fair value represent estimations based on many
variables which affect the value of real estate, including economic and
<PAGE>
demographic conditions. The Partnership recognized a provision for potential
loan loss of $623,367 related to the Noland Fashion Square loan during 1996.
The Partnership did not recognize any provisions during 1995 on its loan.
Participation in joint ventures with affiliates represents the Partnership's
share of the income or loss for the Sun Lake Apartments and the 45 West 45th
Street Office Building. Primarily as a result of lower exterior painting costs
at Sun Lake Apartments, and higher rental income along with lower interior
maintenance and repairs at the 45 West 45th Street Office Building,
participation in income of joint ventures with affiliates increased during 1996
as compared to 1995.
Liquidity and Capital Resources
- --------------------------------
The cash position of the Partnership decreased by approximately $1,710,000 as
of June 30, 1996 as compared to December 31, 1995 primarily as a result of a
special distribution made in April 1996. Cash flow of approximately $192,000
was provided by the Partnership's operating activities, which included mortgage
payments on the loan receivable and interest income on short-term investments,
which were partially offset by the payment of administrative expenses. Net cash
used in investing activities included approximately $141,000 of net capital
contributions made to the joint ventures. These contributions reflect the
Partnership's share of costs related to the refinancing of the Sun Lake debt
during 1995. Financing activities of approximately $1,761,000 consisted of
distributions to the Partners.
The Partnership classifies the cash flow performance of the properties in which
it has a joint venture interest as either positive, a marginal deficit or a
significant deficit. A deficit is considered to be significant if it exceeds
$250,000 annually or 20% of the property's rental and service income. The
Partnership defines cash flow generated from the properties as an amount equal
to the property's revenue receipts less property related expenditures, which
include any debt service payments. The 45 West 45th Street Office Building,
which does not have any underlying debt, generated positive cash flow during
the six months ended June 30, 1996 as compared to a significant cash flow
deficit during the same period in 1995, due to higher rental income and lower
interior maintenance and repair expenses at the property. The occupancy rate of
this property was 86% at June 30, 1996. The Sun Lake Apartments, which has an
underlying first mortgage loan, generated positive cash flow during the six
months ended June 30, 1996 and 1995. The occupancy rate of the property was 97%
at June 30, 1996. Rental markets continue to remain extremely competitive;
therefore, the General Partner's goals are to maintain high occupancy levels,
while increasing rents where possible, and to monitor and control operating
expenses and capital improvement requirements at the properties.
The General Partner believes that the market for multi-family housing
properties is favorable to sellers of these properties. The General Partner is
currently marketing the Sun Lake Apartments, in which the Partnership has a
joint venture interest. Additionally, the General Partner has also entered into
a contract to sell the 45 West 45th Street Office Building, in which the
Partnership has a joint venture interest, for a sale price of $10,300,000. If
current market conditions remain favorable and the General Partner can obtain
appropriate sale prices, the Partnership's liquidation strategy will be
accelerated. The General Partner examines each property individually by
property type and market in determining the optimal time to sell each property.
<PAGE>
In August 1996, the Partnership contracted to sell the Noland Fashion Square
loan. See Item 5. Other Information for additional information.
The Noland Fashion Square loan has been recorded by the Partnership as an
investment in acquisition loan. The Partnership has recorded its share of the
collateral property's operations as equity in loss from investment in
acquisition loan. The Partnership's share of operations has no effect on the
cash flow of the Partnership. Amounts representing contractually required debt
service are recorded as interest income on loans.
In July 1996, the Partnership paid $234,166 ($.80 per Interest) to Limited
Partners, representing the regular quarterly distribution for the second
quarter of 1996 from Cash Flow. The level of the regular quarterly distribution
is consistent with the amount distributed for the first quarter of 1996. The
Partnership also paid $6,004 to the General Partner as its unsubordinated
distributive share of Cash Flow for the second quarter of 1996. To date,
including the July 1996 distribution, the Partnership has distributed $56.67
per $100 Limited Partnership Interest, of which $38.72 represents Cash Flow
from operations and $17.95 represents Original Capital.
The Partnership expects to continue making quarterly cash distributions from
available Cash Flow. In accordance with the Partnership Agreement, ninety-five
percent of such Cash Flow will be distributed to Limited Partners, and five
percent will be distributed to the General Partner as its share from
Partnership operations, subject to certain subordinations. Cash available for
distribution will be determined by the General Partner after it creates any
reserves or makes expenditures appropriate for the operation of the
Partnership. For the six months ended June 30, 1996, $10,507, which represents
one-half of the General Partner's share of distributed Cash Flow, was
subordinated in accordance with the terms of the Partnership Agreement.
Changing interest rates can impact real estate values in several ways.
Generally, declining interest rates may lower the cost of capital allowing
buyers to pay more for a property whereas rising interest rates may increase
the cost of capital and lower the price of real estate.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Williams class action
- ---------------------
With respect to the class action complaint, Paul Williams and Beverly Kennedy,
et al. vs. Balcor Pension Investors, et al. (U.S. District Court, Northern
District of Illinois, Case No.: 90 C 0726), the ongoing settlement discussions
among the parties have resulted in a proposed settlement between counsel for
the Class and counsel for defendants. A draft notice including a description of
the terms of the proposed settlement is attached as Exhibit 99. A final hearing
to determine the fairness, reasonableness and adequacy of the proposed
settlement will be held on November 20, 1996 at 11:00 a.m. Copies of the
proposed settlement agreement may be inspected at the office of the Clerk of
the Court of the United States District Court for the Northern District of
Illinois located at 219 South Dearborn, Chicago, Illinois 60604.
Item 5. Other Information
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45 West 45th Street
- -------------------
In 1988 and 1989, the Partnership and three affiliates (the "Participants")
funded a $23,000,000 loan collateralized by the 45 West 45th Street Office
Building, New York City, New York. The Partnership's participation in the loan
was $5,000,000, for a participating percentage of approximately 21.74%. In
1993, the Participants cashed a letter of credit in the amount of $483,000
previously received from the borrower as partial collateral for the loan which
was applied to the principal amount of the loan. The Partnership's share of the
proceeds was $105,000. In 1995, a limited partnership (the "Limited
Partnership") in which each of the Participants holds an interest equal to its
participating percentage in the loan obtained title to the property pursuant to
an uncontested foreclosure.
On July 29, 1996, the Limited Partnership contracted to sell the property for a
sale price of $10,300,000 to an unaffiliated party, Olmstead Properties, Inc.,
a New York corporation. The purchaser has deposited $100,000 into an escrow
account as earnest money. The remainder of the sale price will be payable in
cash no later than the closing, scheduled for October 25, 1996. From the
proceeds of the sale, the Limited Partnership will pay $257,500 to a third
party as a brokerage commission. The Limited Partnership will receive the
remaining proceeds of $10,042,500, less closing costs. Of such proceeds, an
amount not to exceed $500,000 will be retained by the Limited Partnership and
will not be available for use or distribution by the Limited Partnership until
150 days after the closing. The Partnership's share of total net proceeds is
expected to be approximately $2,183,240, less the Partnership's share of
closing costs. Neither the General Partner nor any affiliate will receive a
brokerage commission in connection with the sale of the property. The General
<PAGE>
Partner will be reimbursed by the Limited Partnership for actual expenses
incurred in connection with the sale.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.
Noland Fashion Square Loan
- ---------------------------
In 1989, the Partnership and two affiliates (together, the "Participants")
funded a $23,300,000 first mortgage loan (the "Loan") collateralized by the
Noland Fashion Square Shopping Center, Independence, Missouri. The Loan is
payable in monthly interest only payments through maturity in January 2000.
The Partnership contributed $8,800,000 towards the funding of the Loan, for a
participating percentage of 38%. In 1992, the Participants cashed a $1,300,000
letter of credit previously deposited by the borrower as additional collateral
for the Loan. Pursuant to the terms of the Loan, the Participants received
$943,893 of the letter of credit proceeds, which was credited against principal
so that the outstanding balance of the Loan was reduced to $22,356,107.
On August 8, 1996, the Participants contracted to sell their interest in the
Loan to CS First Boston Mortgage Capital Corp. for a sale price equal to 79.28%
of the principal balance of the Loan at closing, scheduled for August 22, 1996
("Closing Date"), which sale price is estimated to be $17,725,000. The
purchaser has deposited $885,000 into an escrow account as earnest money with
the remainder of the sale price payable in cash at closing. From the proceeds
of the sale, the Participants will pay closing costs and approximately $197,250
to an unaffiliated party as a commission. The Partnership will receive a share
of the net proceeds based on its participating percentage in the Loan. Neither
the General Partner nor any affiliate will receive a brokerage commission in
connection with the sale of the Loan. The General Partner will be reimbursed by
the Participants for actual expenses incurred in connection with the sale.
Affiliates of the General Partner have simultaneously contracted to sell their
interests in 3 other loans ("Other Loans") to the purchaser. In the event that
the closing of the sale of any of the Other Loans does not occur on the Closing
Date or the purchaser terminates the contract for any Other Loan, the sale
price of the Loan will be reduced by $25,000.
The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the Loan may not occur.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4.1 in Amendment
No. 1 to the Registrant's Registration Statement on Form S-11 dated December 9,
1987 (Registration No. 33-16145) and Form of Confirmation regarding Interests
in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form
10-Q for the quarter ended June 30, 1992 (Commission File No. 0-17653) are
incorporated herein by reference.
(10) Material Contracts:
(a) Agreement of Sale dated July 29, 1996 relating to the sale of 45 West 45th
Street Office Building in New York City, New York is attached hereto.
(b) Agreement of Sale dated August 8, 1996 relating to the sale of the loan
collateralized by the Noland Fashion Square Shopping Center in Independence,
Missouri is attached hereto.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1996 is attached hereto.
(99) Form of Notice of Proposed Class Action Settlement and Hearing relating to
Paul Williams and Beverly Kennedy, et al. v. Balcor Pension Investors, et al.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1996.
<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.
BALCOR PREFERRED PENSION-12
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-VIII, the General Partner
By: /s/Brian D. Parker
------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-VIII,
the General Partner
Date: August 14, 1996
---------------------------
<PAGE>
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), entered into as of the 29th day
of July, 1996, by and between OLMSTEAD PROPERTIES, INC., a New York corporation
("Purchaser"), and 45 W. 45TH STREET LIMITED PARTNERSHIP, an Illinois limited
partnership ("Seller").
WITNESSETH:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to
sell at the price of Ten Million Three Hundred Thousand And No/100 Dollars
($10,300,000.00) (the "Purchase Price"), that certain property commonly known
as 45 W. 45th Street, New York, New York legally described on Exhibit A
attached hereto (the "Property"). Included in the Purchase Price is all of the
personal property set forth in Exhibit B (the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as
follows:
(a) Upon the execution of this Agreement, the sum of One Hundred
Thousand And No/100 Dollars ($100,000.00) (the "Earnest Money") to be held
in escrow by and in accordance with the provisions of the Escrow Agreement
("Escrow Agreement") attached hereto as Exhibit C; and
(b) On or before the expiration of the "Due Diligence Period" (as
hereinafter defined), the sum of Four Hundred Fifteen Thousand and No/100
Dollars ($415,000.00) (the "Additional Earnest Money") to be held in
accordance with the provisions of the Escrow Agreement (all references in
the Agreement to the Earnest Money shall mean the Earnest Money as same
may have been increased by the deposit of the Additional Earnest Money).
(c) On the "Closing Date" (hereinafter defined), the balance of the
Purchase Price, adjusted in accordance with the prorations, by federally
wired "immediately available" funds, on or before 11:00 a.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
A. Attached hereto as Exhibit D is a copy of a title commitment for
an owner's standard title insurance policy issued by First American Title
Insurance Company of New York (hereinafter referred to as "Title Insurer"),
dated June 7, 1996 for the Property (the "Title Commitment"). For purposes of
this Agreement, "Permitted Exceptions" shall mean: (a) the general printed
exclusions contained in the standard title policy to be issued by Title Insurer
based on the Title Commitment; (b) general real estate taxes, water rates,
sewer rents and assessments, in each case, subject to the provisions of
Paragraph 12, not yet due and payable; (c) matters shown on the "Existing
Survey" (hereinafter defined); (d) matters caused by the actions of Purchaser;
and (e) the title exceptions set forth in Schedule B of the Title Commitment as
Numbers 1 (as modified by adding the phrase "as tenants only"), 3 (as modified
by a survey reading), 4, 5 and 12. All the other exceptions to title shall be
referred to as "Unpermitted Exceptions". The Title Commitment shall be
conclusive evidence of good title as therein shown as to all matters to be
insured by the title policy, subject only to the exceptions therein stated.
<PAGE>
On the Closing Date, Title Insurer shall deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject
only to Permitted Exceptions and Unpermitted Exceptions waived by Purchaser
(the "Title Policy"). Purchaser shall pay for the costs of the Title
Commitment and Title Policy and the costs of any endorsements to, or extended
coverage on, the Title Policy.
B. Purchaser has received (or will receive prior to the expiration
of the Due Diligence Period) a survey of the Property prepared by Earl B.
Lovell - S.P. Belcher, Inc. last revised July, 1996 (the "Existing Survey").
To the extent Purchaser requires an updated survey, Purchaser shall be
responsible for obtaining, and Purchaser shall pay for the costs of, the
updated survey (the "Updated Survey"). Unless otherwise agreed by Purchaser
and Seller, in the event Purchaser does not terminate this Agreement pursuant
to Paragraph 27, Purchaser shall be deemed to have accepted all matters
disclosed by the Existing Survey and such matters shall be Permitted
Exceptions.
4. PAYMENT OF CLOSING COSTS.
A. In addition to the costs set forth in Paragraphs 3A and B,
Purchaser shall pay for the costs of the documentary or transfer stamps to be
paid with reference to the "Deed" (hereinafter defined), including City of New
York and State of New York Real Property Transfer Tax, State of New York Real
Property Transfer Gains Tax (to the extent applicable) and all other stamps,
intangible, transfer, documentary, recording, sales tax and surtax imposed by
law with reference to any other sale documents delivered in connection with the
sale of the Property and Personal Property to Purchaser and all other charges
of the Title Insurer in connection with this transaction.
5. CONDITION OF TITLE.
A. If, prior to Closing, a date-down to the Title Commitment or the
Updated Survey disclose an Unpermitted Exception, Seller shall have thirty (30)
days from the date of the date-down to the Title Commitment or the Updated
Survey, as applicable, to (i) bond over, cure and/or have any Unpermitted
Exceptions which, in the aggregate, do not exceed $50,000.00, or, without
limitation, (a) those which have arisen by reason of the affirmative
intentional acts of Seller or (b) which are monetary judgments against the
Property (such encumbrances in (a) and (b) being referred to as "Intentional
Acts") removed from the Title Commitment or to have the Title Insurer commit to
insure against loss or damage that may be occasioned by such Unpermitted
Exceptions, provided that such Unpermitted Exceptions are removed from any
lender's title commitment, or (ii) have the right, but not the obligation, to
bond over, cure and/or have any Unpermitted Exceptions which, in the aggregate,
equals or exceeds $50,000.00 (and which are not Intentional Acts), removed from
the Title Commitment or to have the Title Insurer commit to insure against loss
or damage that may be occasioned by such Unpermitted Exceptions, provided that
such Unpermitted Exceptions are removed from any lender's title commitment.
The time of Closing shall be delayed, if necessary, to give effect to said
aforementioned time periods. If Seller fails to cure or have said Unpermitted
Exception removed or have the Title Insurer commit to insure as specified above
within said thirty (30) day period or if Seller elects not to exercise its
<PAGE>
rights under (ii) in the preceding sentence, Seller shall deliver written
notice to Purchaser on or before the expiration of said thirty (30) day period
("Seller's Title Notice") and Purchaser may elect to either accept title to the
Property subject to any Unpermitted Exception or terminate this Agreement upon
notice to Seller within ten (10) days after receipt of Seller's Title Notice.
Absent notice from Purchaser to Seller within ten (10) days after receipt of
Seller's Title Notice, Purchaser shall be deemed to have elected to take title
subject to said Unpermitted Exception. If Purchaser terminates this Agreement
in accordance with the terms of this Paragraph 5A, this Agreement shall become
null and void without further action of the parties and all Earnest Money
theretofore deposited into the escrow by Purchaser together with any interest
accrued thereon, shall be returned to Purchaser, and neither party shall have
any further liability to the other, except for Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in Paragraph
7 and Seller's obligation to pay for any expenses resulting from the issuance
of the Title Commitment and Purchaser's obligation to pay any expenses
resulting from the Updated Survey.
B. Seller agrees to convey fee simple title to the Property to
Purchaser by bargain and sale deed with covenants against grantor's acts
("Deed") in recordable form subject only to the Permitted Exceptions and any
Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
A. Except as provided in any indemnity provisions of this
Agreement, Seller shall bear all risk of loss with respect to the Property up
to the earlier of the dates upon which either possession or title is
transferred to Purchaser in accordance with this Agreement. Notwithstanding
the foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller in good faith) Purchaser shall not have
the right to terminate its obligations under this Agreement by reason thereof,
but Seller shall have the right to elect to either repair and restore the
Property (in which case the Closing Date shall be extended until completion of
such restoration) or to assign and transfer to Purchaser on the Closing Date
all of Seller's right, title and interest in and to all insurance proceeds paid
or payable to Seller on account of such fire or casualty (provided there is no
co-insurance factor), including remitting (or crediting) to Purchaser the
amount of any applicable insurance deductible, and Seller assigns Purchaser any
right Seller has to adjust any claims under any applicable insurance policies.
Seller shall promptly notify Purchaser in writing of any such fire or other
casualty and Seller's determination of the cost to repair the damage caused
thereby. In the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost in excess of $100,000.00
(as determined by Seller in good faith), then this Agreement may be terminated
at the option of Purchaser, which option shall be exercised, if at all, by
Purchaser's written notice thereof to Seller within fifteen (15) business days
after Purchaser receives written notice of such fire or other casualty and
Seller's determination of the amount of such damages, and upon the exercise of
such option by Purchaser this Agreement shall become null and void, the Earnest
Money deposited by Purchaser shall be returned to Purchaser together with
interest thereon, and neither party shall have any further liability or
<PAGE>
obligations hereunder except for Purchaser's obligations to indemnify Seller
and restore the Property, as set forth more fully in Paragraph 7 and Seller's
obligation to pay for any expenses resulting from the issuance of the Title
Commitment and Purchaser's obligation to pay for any expenses resulting from
the Updated Survey. In the event that Purchaser does not exercise the option
set forth in the preceding sentence, the Closing shall take place on the
Closing Date and Seller shall assign and transfer to Purchaser on the Closing
Date all of Seller's right, title and interest in and to (i) all insurance
proceeds paid or payable to Seller on account of the fire or casualty,
including remitting (or crediting) to Purchaser the amount of any applicable
insurance deductible, and (ii) rights to adjust any claims under any applicable
insurance policies.
B. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall:
(i) materially impair access to the Property; (ii) cause any material
non-compliance with any applicable law, ordinance, rule or regulation of any
federal, state or local authority or governmental agencies having jurisdiction
over the Property or any portion thereof; (iii) materially and adversely
impairs the use of the Property as it is currently being operated, or (iv)
result in damages in excess of $100,000.00 (hereinafter collectively referred
to as a "Material Event"), Purchaser may:
(a) terminate this Agreement by written notice to Seller, in
which event the Earnest Money deposited by Purchaser, together with interest
thereon, shall be returned to Purchaser and all rights and obligations of the
parties hereunder with respect to the closing of this transaction will cease,
except for Purchaser's obligations to indemnify Seller and restore the
Property, as set forth more fully in Paragraph 7 and Seller's obligation to pay
for any expenses resulting from the issuance of the Title Commitment and
Purchaser's obligation to pay for any expenses resulting from the Updated
Survey; or
(b) proceed with the Closing, in which event Seller shall
assign to Purchaser all of Seller's right, title and interest in and to (i)
Seller's right to pursue any claim against the condemning authorities (with
Seller's reasonable cooperation, at no additional cost or expense to Seller, in
pursuing such claim); and (ii) any award made in connection with such
condemnation or eminent domain proceedings.
Purchaser shall then notify Seller, within fifteen (15) business days
after Purchaser's receipt of Seller's notice, whether Purchaser elects to
exercise its rights under subparagraph (a) or subparagraph (b) of this
Paragraph 6B. Closing shall be delayed, if necessary, until Purchaser makes
such election. If Purchaser fails to make an election within such fifteen (15)
business day period, Purchaser shall be deemed to have elected to exercise its
rights under subparagraph (b).
<PAGE>
If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which do not
constitute a Material Event, Purchaser shall be required to proceed with the
Closing, in which event Seller shall assign to Purchaser all of Seller's right,
title and interest in and to any award made in connection with such
condemnation or eminent domain proceedings.
7. AS-IS CONDITION.
A. Although Purchaser has completed its review of the Property and has
no contingencies for inspection of the same except as expressly set forth in
Paragraph 27 hereof, Purchaser shall have the right to enter upon the Property
in the presence of Seller or its employees, agents or designees at reasonable
times upon reasonable prior notice to Seller. The current rent roll for the
Property is attached hereto as Exhibit E. The most recent tax and casualty
insurance bills and utility account numbers are attached hereto as Exhibit F.
A list of the service contracts is attached hereto as Exhibit G. A portion of
unaudited 1995 operating statements are attached hereto as Exhibit H.
Purchaser shall defend, indemnify and hold Seller and any affiliate, parent of
Seller, and all shareholders, employees, officers and directors of Seller or
Seller's affiliate or parent (hereinafter collectively referred to as
"Affiliate of Seller") harmless from any and all liability, cost and expense
(including without limitation, reasonable attorney's fees, court costs and
costs of appeal) suffered or incurred by Seller or Affiliates of Seller for
injury to persons or property caused by Purchaser, and the employees, agents,
contractors and surveyors employed by Purchaser, while on the Property.
Purchaser shall undertake its obligation to defend set forth in the preceding
sentence using attorneys selected by Purchaser and reasonably approved by
Seller.
B. Except for the representations and warranties made herein, Purchaser
acknowledges and agrees that it will be purchasing the Property and Personal
Property based solely upon its inspections and investigations of the Property
and Personal Property, and that Purchaser will be purchasing the Property and
Personal Property "AS IS" and "WITH ALL FAULTS", based upon the condition of
the Property and Personal Property as of the date of this Agreement, wear and
tear and loss by fire or other casualty or condemnation excepted. Without
limiting the foregoing, Purchaser acknowledges that, except as may otherwise be
specifically set forth elsewhere in this Agreement, neither Seller nor its
consultants, brokers or agents have made any other representations or
warranties of any kind upon which Purchaser is relying as to any matters
concerning the Property or the Personal Property, including, but not limited
to, the condition of the land or any improvements comprising the Property, the
existence or non-existence of "Hazardous Materials" (as hereinafter defined),
economic projections or market studies concerning the Property, any development
rights, taxes, bonds, covenants, conditions and restrictions affecting the
Property, water or water rights, topography, drainage, soil, subsoil of the
Property, the utilities serving the Property or any zoning or building laws,
rules or regulations or "Environmental Laws" (as hereinafter defined) affecting
the Property. Seller makes no representation or warranty that the Property
complies with Title III of the Americans with Disabilities Act or any fire code
or building code. Purchaser hereby releases Seller and the Affiliates of
<PAGE>
Seller from any and all liability in connection with any claims which Purchaser
may have against Seller or the Affiliates of Seller, and Purchaser hereby
agrees not to assert any claims for contribution, cost recovery or otherwise,
against Seller or the Affiliates of Seller, relating directly or indirectly to
the existence of asbestos or Hazardous Materials on, or environmental
conditions of, the Property, whether known or unknown other than for such
claims relating to the environmental condition of the Property which pertain to
Seller's period of ownership of the Property (the "Seller's Ownership
Environmental Claims") and Seller agrees that Purchaser may name Seller as a
third party defendant as a result of Seller's Ownership Environmental Claims.
As used herein, "Environmental Laws" means all federal, state and local
statutes, codes, regulations, rules, ordinances, orders, standards, permits,
licenses, policies and requirements (including consent decrees, judicial
decisions and administrative orders) relating to the protection, preservation,
remediation or conservation of the environment or worker health or safety, all
as amended or reauthorized, or as hereafter amended or reauthorized, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802; the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6901. et seq.; the Emergency Planning
and Community Right-to-know Act ("Right-to-know Act"), 42 U.S.C. Section 11001
et seq., the Atomic Energy Act ("AEA"), 42 U.S.C. Section 2011 et seq., the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 651 et seq., the Federal
Water Pollution Control Act ("Clear Water Act"), 33 U.S.C. Section 1251 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean
Air Act ("CAA"), 42 U.S.C. Section 7401 et seq. As used herein, the term
"Hazardous Materials" means (i) "hazardous substances" as defined by CERCLA;
(ii) "hazardous wastes," as defined by RCRA; (iii) any radioactive material
including, without limitation, any source, special nuclear or bi-product
material, as defined by AEA; (iv) asbestos in any form or condition; (v)
polychlorinated biphenyls; and (vi) any other material, substance or waste to
which liability or standards of conduct may be imposed under any Environmental
Laws. Notwithstanding anything contained herein to the contrary, the terms of
this Paragraph 7.B shall survive the Closing and the delivery of the Deed and
termination of this Agreement.
C. Seller has provided to Purchaser certain unaudited historical
financial information regarding the Property relating to certain periods of
time in which Seller owned the Property. Seller and Purchaser hereby
acknowledge that such information has been provided to Purchaser at Purchaser's
request solely as illustrative material. Seller makes no representation or
warranty that such material is complete or accurate or that Purchaser will
achieve similar financial or other results with respect to the operations of
the Property, it being acknowledged by Purchaser that Seller's operation of the
Property and allocations of revenues or expenses may be vastly different than
Purchaser may be able to attain. Purchaser acknowledges that it is a
sophisticated and experienced purchaser of real estate and further that
Purchaser has relied upon its own investigation and inquiry with respect to the
operation of the Property and releases Seller from any liability with respect
to such historical information. Notwithstanding anything contained herein to
the contrary, the terms of this Paragraph 7.C shall survive the closing and
delivery of the Deed and termination of this Agreement.
<PAGE>
D. Seller has provided to Purchaser the following existing report: Phase
I Environmental Site Assessment Report prepared by HGCL, dated November 14,
1991 ("Existing Report"). Seller makes no representation or warranty
concerning the accuracy or completeness of the Existing Report. Purchaser
hereby releases Seller and Affiliates of Seller from any liability whatsoever
with respect to the Existing Report, or, including, without limitation, the
matters set forth in the Existing Report, the accuracy and/or completeness of
the Existing Report. Furthermore, Purchaser acknowledges that it will be
purchasing the Property with all faults disclosed in the Existing Report.
Notwithstanding anything contained herein to the contrary, the terms of this
Paragraph 7.D shall survive the closing and delivery of the Deed and
termination of this Agreement.
8. CLOSING. The closing of this transaction (the "Closing") shall be on
October 25, 1996 (the "Closing Date"), at the office of the Title Insurer,
Purchaser's lender's office in New York City or such other place as Purchaser
and Seller may mutually agree, at which time Seller shall deliver possession of
the Property to Purchaser. Notwithstanding the foregoing, Purchaser shall have
the right to accelerate the Closing Date at anytime after the date hereof upon
ten (10) days prior written notice to Seller. The Closing shall be a "New York
style" closing, in accordance with the customs of the Real Estate Board of New
York, at which the Purchaser shall wire the Purchase Price to Title Insurer on
the Closing Date and prior to the release of the Purchase Price to Seller,
Purchaser shall receive the Title Policy or marked up commitment dated the date
of the Closing Date. Seller shall deliver to Title Insurer any customary
affidavit in connection with a New York style closing.
9. CLOSING DOCUMENTS.
A. On the Closing Date, Purchaser and Seller shall each execute and
deliver to the other a closing statement. On the Closing Date, Purchaser shall
deliver to Seller the balance of the Purchase Price, and such other documents
as may be reasonably required by the Title Insurer in order to consummate the
transaction as set forth in this Agreement.
B. On the Closing Date, Seller shall deliver to Purchaser the following:
(i) the Deed (in the form of Exhibit I attached hereto), subject to
Permitted Exceptions and those Unpermitted Exceptions waived by
Purchaser;
(ii) a quit claim bill of sale conveying the Personal Property (in
the form of Exhibit J attached hereto);
(iii) assignment and assumption of intangible property (in the form
attached hereto as Exhibit K);
(iv) an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit L), as well as all security
deposits and interest thereon, if any, referred to in the leases
to the Property which have not been applied to the tenant's
obligations thereunder. Security deposits shall not be applied
to the tenant's obligations under any of the leases unless such
tenant vacates the Property;
<PAGE>
(v) non-foreign affidavit (in the form of Exhibit M attached
hereto);
(vi) original and/or copies (to the extent originals are not
available) of leases affecting the Property for all tenants of
the Property (which shall be delivered at the Property);
(vii) all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
(viii) possession of the Property to Purchaser;
(ix) evidence of the termination of the management agreement;
(x) notice to the tenants of the Property of the transfer of title
and assumption by Purchaser of the landlord's obligation under
the leases and the obligation to refund the security deposits
(in the form of Exhibit N); and
(xi) an updated rent roll.
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE ESCROW
IS TO SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS OBLIGATIONS AND
UNDERTAKINGS UNDER THIS AGREEMENT. IN THE EVENT OF A DEFAULT OF THE PURCHASER
UNDER THIS AGREEMENT, SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND THE
INTEREST THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY, EXCEPT
FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7A HEREOF
AND PURCHASER'S OBLIGATIONS TO PAY FOR ANY EXPENSES RESULTING FROM THE ISSUANCE
OF THE TITLE COMMITMENT AND UPDATED SURVEY. THE PARTIES HAVE AGREED THAT
SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE
EXTREMELY DIFFICULT OR IMPRACTICAL TO DETERMINE. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED
UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES.
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF
SELLER'S DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL EARNEST
MONEY TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND THIS AGREEMENT SHALL THEN
BECOME NULL AND VOID AND OF NO EFFECT AND THE PARTIES SHALL HAVE NO FURTHER
LIABILITY TO EACH OTHER AT LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS
TO INDEMNIFY SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND SELLER'S OBLIGATIONS TO PAY FOR ANY EXPENSES RESULTING FROM THE
ISSUANCE OF THE TITLE COMMITMENT AND PURCHASER'S OBLIGATIONS TO PAY FOR ANY
EXPENSES RESULTING FROM THE UPDATED SURVEY. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS ITS REFUSAL OR FAILURE TO
DELIVER THE DEED AS REQUIRED UNDER THIS AGREEMENT, THEN PURCHASER WILL BE
ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
<PAGE>
12. PRORATIONS.
A. Rents (exclusive of delinquent rents, but including prepaid
rents); refundable security deposits (which will be assigned to and assumed by
Purchaser and credited to Purchaser at Closing); prepaid operating expenses
incurred in the operation of the Property in a commercially reasonable manner;
sewer rents; real property taxes; all costs arising under service contracts,
real estate tax contributions, water and utility charges, fuel and other
additional charges which are reimbursable by the tenants for the period prior
to the Proration Date less any amount previously paid by the Tenants shall be
paid to Seller as and when collected; and other similar items shall be adjusted
ratably as of 11:59 p.m. on the actual date of the closing of this transaction
("Proration Date"), and credited to the balance of the cash due at Closing.
Assessments payable in installments which are due subsequent to the Closing
Date shall be paid by Purchaser. Seller shall obtain a water meter reading
within thirty (30) days before the Closing and the parties agree to prorate the
costs of the remaining obligations for water based on the most recent meter
reading. Seller shall instruct the utility company providing the electricity
and steam to the Property to terminate billing Seller as of the Closing Date
and Seller shall be responsible for said charges incurred prior to the Closing
Date. If the amount of any of the items to be prorated is not then
ascertainable, the adjustments thereof shall be on the basis of the most recent
ascertainable data. All prorations shall be subject to correction due to any
error within thirty (30) days after the date of the Closing of the transaction.
B. All sums paid following the Closing Date by any tenant of the
Property who is indebted under a lease for any period prior to and including
the Closing Date in excess of all sums required for said tenant to be current
shall be deemed a "Post-Closing Receipt" until such time as all such
indebtedness is paid in full. Within ten (10) days following each receipt by
Purchaser of a Post-Closing Receipt, Purchaser shall pay such Post-Closing
Receipt to Seller. Purchaser shall use commercially reasonable efforts to
collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder; provided that nothing herein shall require Purchaser to
institute any judicial action to collect Post-Closing Receipts. Within 120
days after the Closing Date, Purchaser shall deliver to Seller a reconciliation
statement of Post-Closing Receipts through the first 90 days after the Closing
Date. Upon the delivery of the Post-Closing Receipts reconciliation, Purchaser
shall deliver to Seller any Post-Closing Receipts owing to Seller and not
previously delivered to Seller in accordance with the terms hereof. Seller
retains the right to conduct an audit, at reasonable times and upon reasonable
notice, of Purchaser's books and records to verify the accuracy of the
Post-Closing Receipts reconciliation statement and upon the verification of
additional funds owing to Seller, Purchaser shall pay to Seller said additional
Post-Closing Receipts and the cost of performing Seller's audit. Paragraph 12B
of this Agreement shall survive the Closing and the delivery and recording of
the deed.
13. RECORDING. Neither this Agreement nor a memorandum thereof shall
be recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph 10.
<PAGE>
14. ASSIGNMENT. The Purchaser shall not have the right to assign its
interest in this Agreement without the prior written consent of the Seller.
Any assignment or transfer of, or attempt to assign or transfer, Purchaser's
interest in this Agreement shall be an act of default hereunder by Purchaser
and subject to the provisions of Paragraph 10. Notwithstanding the foregoing,
Purchaser may assign its interest in this Agreement without the consent of, but
with prior notice to, Seller to any entity affiliated with Purchaser, or the
principals of Purchaser, provided that Purchaser remains liable for and the
assignee assumes the obligations of Purchaser hereunder. If any assignee of
Purchaser under this Agreement petitions or applies for relief in bankruptcy or
assignee is adjudicated as a bankrupt or insolvent, or assignee files any
petition, application for relief or answer-seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future federal,
state or other statute, law, code or regulation relating to bankruptcy,
insolvency, or other relief for debtors (collectively, a "Bankruptcy Filing")
on or before the Closing Date, said Bankruptcy Filing shall be a default under
this Agreement and Purchaser shall indemnify Seller for all costs, attorney's
fees and expenses of Seller resulting from Seller's efforts to obtain the
Earnest Money as liquidated damages and to clear title to the Property from any
encumbrance resulting from the Bankruptcy Filing.
15. BROKER. The parties hereto represent and warrant that they have
dealt with no broker in connection with this transaction other than Edward S.
Gordon Company, Inc. (to be paid by Seller). Seller's commission to Edward S.
Gordon Company, Inc. shall only be payable out of the proceeds of the sale of
the Property in the event the transaction set forth herein closes. Purchaser
shall indemnify, defend and hold Seller and Affiliates of Seller harmless from
any proven claim (including without limitation, reasonable attorney's fees,
court costs and costs of appeal) from anyone claiming by or through Purchaser
any fee, commission or compensation on account of this Agreement, its
negotiation or the sale hereby contemplated other than to Edward S. Gordon
Company, Inc. Purchaser shall undertake its obligations set forth in the
preceding sentence using attorneys selected by Purchaser and reasonably
approved by Seller. The provisions of this Paragraph 15 will survive the
Closing and delivery of the Deed.
16. SELLER'S REPRESENTATIONS AND WARRANTIES.
A. Any reference herein to Seller's knowledge, representation,
warranty or notice of any matter or thing shall only mean such knowledge or
notice that has actually been received by Seller or any employee of Seller.
Any knowledge or notice given, had or received by any of Seller's agents shall
not be imputed to Seller, the general partner or limited partners of Seller,
the subpartners of the general partner or limited partners of Seller.
B. Subject to the limitations set forth in Paragraph A of this
Paragraph 16, Seller hereby makes the following representations and warranties,
which representations and warranties are made to Seller's knowledge: (i)
Seller has no knowledge of any pending or threatened litigation, claim, cause
of action or administrative proceeding concerning the Property except as set
forth in the Title Commitment; (ii) Seller has the power to execute this
Agreement and consummate the transactions contemplated herein; (iii) the rent
roll attached hereto as Exhibit E, and updated as of the Closing Date, is
<PAGE>
accurate as of the date set forth therein; (iv) there are no other leases
affecting the Property other than as set forth in the rent roll attached hereto
as Exhibit E and updated as of the Closing Date and subject to Paragraph 17
herein; (v) no lease contains any option to purchase the Property or any right
of first offer or right of first refusal to purchase the Property; (vi) Seller
has not entered into any contract with any labor organization for the provision
of services at the Property provided certain of Seller's contractors and agents
may have union employees and may have entered into contracts with labor
organizations; (vii) the schedule of service contracts attached hereto as
Exhibit G and updated as of the Closing Date are accurate and there are no
other service contracts or union contracts entered into by Seller affecting the
Property; (viii) Seller shall retain and shall not distribute to the partners
in Seller $500,000.00 from the proceeds of the sale of the Property for a
period of one hundred fifty (150) days from the date of Closing; (ix) the
Property is not subject to a contract with Consolidated Edison for the
providing of steam to the Property at rates which exceed those customarily
charged to office buildings of this nature in New York, New York and (x) no
commissions are owed to any leasing brokers as a result of any existing leases
affecting the Property (excluding any commissions arising under Paragraph 17
herein).
C. The Balcor Company ("Balcor") represents and warrants that there
are no other leases affecting the Property other than those set forth in the
Rent Roll attached hereto and updated as of the Closing Date and subject to
Paragraph 17 herein. Balcor agrees to execute this Agreement for the purposes
of evidencing its obligation under this Paragraph 16C.
D. Notwithstanding anything contained herein to the contrary, (i)
any claim by Purchaser against Seller for a breach of a representation or
warranty hereunder or for a claim arising out of a "Tenant Certificate" (as
hereinafter defined) executed by Seller must be made, if at all, within one
hundred fifty (150) days after the Closing Date, and (ii) any claim by
Purchaser against Balcor for a breach of a representation or warranty by Balcor
hereunder must be made, if at all, within one (1) year after the Closing Date.
17. FUTURE LEASES.
A. Seller shall not enter into any other new lease of space at the
Property, modify, terminate or renew (other than pursuant to the exercise by
tenant of an option to extend contained in such tenant's lease) any existing
leases of the Property unless Purchaser shall have granted its approval of such
lease, modification, termination or renewal.
B. Purchaser shall be responsible for any and all lease commissions
and obligations for tenant improvements pursuant to any new leases and/or
renewals, extensions or options to expand entered into or effective between the
date hereof and the Closing Date which have been entered into pursuant to
subparagraph 17.A.
C. In the event Purchaser's consent is required pursuant to the
terms of this Paragraph 17, such consent shall not be unreasonably withheld or
delayed.
<PAGE>
18. ESTOPPEL CERTIFICATES. Seller agrees to deliver a certificate
addressed to Purchaser and, provided Purchaser provides to Seller the name of
Purchaser's lender prior to expiration of the Due Diligence Period, Purchaser's
lender in the form of Exhibit O attached hereto (the "Tenant Certificate") or
the form required by said tenant's lease, and containing the applicable
information set forth in the Rent Roll attached hereto as Exhibit E, to the
tenants set forth on the Rent Roll attached hereto as Exhibit E. Purchaser's
obligation to close the transaction contemplated herein shall be contingent
upon Seller delivering within three days prior to the Closing Date a Tenant
Certificate addressed to Purchaser and, subject to the foregoing, Purchaser's
lender, from tenants occupying in excess of 2,000 square feet. In the event
Tenant Certificates delivered to Purchaser reveal tenant offsets or delinquent
obligations (excluding physical defects of the Property) of Seller as landlord
under said leases aggregating an amount not to exceed $50,000.00, Seller shall
be deemed to have satisfied the contingency set forth in this Paragraph 18 and
Seller shall have no liability for said adverse conditions raised in the Tenant
Certificate provided Seller credits Purchaser with such delinquent obligations
at Closing. In the event Seller has not satisfied the contingency set forth in
this Paragraph 18 on or before three days prior to the Closing Date, Purchaser
shall have the right to terminate this Agreement by delivering written notice
to Seller at any time prior to the Closing Date. In the event Purchaser does
not so terminate this Agreement in accordance with the terms hereof,
Purchaser's contingency set forth in this Paragraph shall be deemed satisfied
provided Seller delivers to Purchaser at Closing a Tenant Certificate executed
by Seller for any undelivered Tenant Certificate. Any Tenant Certificate
executed by Seller shall be subject to limitations contained in Paragraphs 16A,
16D and 20 and Seller's liability under said Certificate shall be extinguished
upon the presentation of a Tenant Certificate by said Tenant showing no matters
other than as disclosed under the Tenant Certificate executed by Seller. In
the event Purchaser exercises its right to terminate in accordance with the
terms of this Agreement, this Agreement shall be null and void, and the Earnest
Money, together with interest thereon, shall be returned to Purchaser, and
neither party shall have any liability to the other hereunder except for
Purchaser's obligation to indemnify Seller and restore the Property, as more
fully set forth in Paragraph 7A, and Seller's obligations to pay expenses
resulting from the issuance of the Title Commitment and Purchaser's obligations
to pay expenses resulting from the Updated Survey.
19. INTENTIONALLY OMITTED.
20. LIMITATION OF LIABILITY. None of Seller's beneficiaries,
shareholders, partners, officers, directors, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any matter or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability. Seller shall likewise have no
personal liability hereunder except if the transaction contemplated by this
Agreement closes, Seller may be personally liable for any such claim arising
out of a breach of (i) a representation or warranty contained herein or (ii) a
Tenant Certificate(s) executed by Seller up to an aggregate amount not to
<PAGE>
exceed $500,000, and Balcor may be personally liable for any such claim arising
out of a breach of a representation or warranty contained in subparagraph 16.C.
up to an aggregate amount not to exceed $500,000. Notwithstanding anything
contained herein to the contrary, Balcor's and Seller's liability hereunder
when aggregated together shall not exceed $750,000.00.
21. TIME OF ESSENCE. Time is of the essence of this Agreement.
22. NOTICES. Any notice or demand which either party hereto is required
or may desire to give or deliver to or make upon the other party shall be in
writing and may be (i) personally delivered, (ii) given or made by overnight
courier such as Federal Express, (iii) given or made by United States
registered or certified mail addressed, or (iv) given or made by telecopy, as
follows:
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Alan Lieberman
(847) 317-4360
(847) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Olmstead Properties, Inc.
575 Eighth Avenue, Suite 2400
New York, New York 10018
Attention: Samuel Rosenblatt
(212) 564-6662
(212) 564-6667 (FAX)
with a copy to: Goldberg Weprin & Ustin
1501 Broadway
New York, New York 10036
Attention: Andrew W. Albstein, Esq.
(212) 221-5700
(212) 730-4518 (FAX)
<PAGE>
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent by overnight
courier, on the 4th business day after the same is deposited in the United
States Mail as registered or certified mail, addressed as above provided, with
postage thereon fully prepaid, or, if given by telecopy, on the date of
transmission if transmitted on a business day before 5:00 p.m. (Chicago time)
(and, if not so transmitted, on the first business day thereafter). Any such
notice, demand or document not given, delivered or made by registered or
certified mail or by overnight courier as aforesaid shall be deemed to be
given, delivered or made upon receipt of the same by the party to whom the same
is to be given, delivered or made. Copies of all notices shall be served upon
the Escrow Agent.
22. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute
three (3) copies of this Agreement and four (4) copies of the Escrow Agreement
and forward them to Seller for execution, accompanied with the Earnest Money
payable to the Escrow Agent set forth in the Escrow Agreement. Seller will
forward one (1) copy of the executed Agreement to Purchaser and will forward
the following to the Escrow Agent:
(1) Earnest Money;
(2) One (1) fully executed copy of this Agreement; and
(3) Three (3) copies of the Escrow Agreement signed by the parties
with a direction to execute two (2) copies of the Escrow Agreement and deliver
a fully executed copy to each of the Purchaser and the Seller.
23. GOVERNING LAW. The provisions of this Agreement shall be governed by
the laws of the State of New York.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
25. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
26. CAPTIONS. Paragraph titles or captions contained herein are inserted
as a matter of convenience and for reference, and in no way define, limit,
extend or describe the scope of this Agreement or any provision hereof.
27. DUE DILIGENCE. Purchaser shall have fourteen (14) days from the date
this Agreement has been executed by Seller and Purchaser and delivered to the
other to conduct due diligence investigations and activities in respect of the
Property as Purchaser deems necessary (said 14 day period shall be referred to
herein as the "Due Diligence Period"). In this connection, Purchaser and its
representatives shall have the right to enter upon the Property from time to
time for the purposes of examining, investigating and making physical
inspection(s) thereof. In addition, Purchaser and its representatives shall
<PAGE>
have access during the Due Diligence Period, to all documents and records
relating to the Property and the operation thereof, including, without
limitation, financial statements and related financial records. Seller agrees
to cooperate in good faith with Purchaser in respect of such due diligence
activities and investigations and shall make available to Purchaser and its
representatives at the Property or the offices of Edward S. Gordon Company
during the normal business hours, all such documents and records with respect
to the Property. Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall have the right to terminate this Agreement if, in
its sole and exclusive judgment, it is dissatisfied with the results of its due
diligence activities (including, without limitation, any matters disclosed by
the Existing Survey), by written notice given to Seller on or before the
expiration of the Due Diligence Period. In the event Purchaser elects to
terminate this Agreement in the manner provided herein, the Earnest Money, plus
any interest accrued thereon, shall be returned to Purchaser and this Agreement
shall be null and void and the parties hereto shall have no further rights or
liabilities, each to the other, under this Agreement. Purchaser shall defend,
indemnify and hold Seller and any affiliate, parent of Seller and all
shareholders, employees, officers and directors of Seller or Seller's affiliate
or parent (hereinafter collectively referred to as "Affiliate of Seller")
harmless from any and all liability, cost and expense (including, without
limitation, reasonable attorneys' fees, court costs and cost of appeal)
suffered or incurred by Seller or Affiliates of Seller for injury to person or
property or any mechanic's liens caused by Purchaser's investigations and
inspections of the Property. Prior to commencing any physical tests, physical
studies and physical investigations, Purchaser shall furnish to Seller a
certificate of insurance evidencing comprehensive general public liability
insurance insuring the person, firm or entity performing such tasks, studies
and investigations and listing Seller and Purchaser as additional insureds
thereunder. If Purchaser terminates this Agreement by written notice to Seller
prior to the expiration of the Due Diligence Period, Purchaser shall promptly
deliver or cause to be delivered to Seller, copies of all documents,
instruments, agreements and other materials provided by or on behalf of Seller
to Purchaser.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as of
the day of July, 1996.
PURCHASER:
OLMSTEAD PROPERTIES, INC., a New York corporation
By: /s/ Samuel Rosenblatt
--------------------------------
Name: Samuel Rosenblatt
--------------------------------
Its: President
--------------------------------
SELLER:
45 W. 45TH STREET LIMITED PARTNERSHIP,
an Illinois limited partnership
By: 45 W. 45TH Street Partners, Inc., an
Illinois corporation, its general partner
By: /s/ Alan G. Lieberman
--------------------------------
Name: Alan G. Lieberman
--------------------------------
Its: Senior Vice President
-------------------------------
BALCOR:
THE BALCOR COMPANY
By: /s/ Alan G. Lieberman
---------------------------------
Name: Alan G. Lieberman
---------------------------------
Its: Senior Vice President
---------------------------------
<PAGE>
of Edward S. Gordon Company, Inc. ("Seller's Broker")
executed this Agreement in its capacity as a real estate broker and
acknowledges that the fee or commission due it from Seller as a result of the
transaction described in this Agreement is as set forth in that certain Listing
Agreement, dated , 199 between Seller and Seller's Broker (the "Listing
Agreement"). Seller's Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Seller's Broker agrees to deliver a receipt to
the Seller at the Closing for the fee or commission due Seller's Broker and a
release stating that no other fees or commissions are due to it from Seller or
Purchaser.
Edward S. Gordon Company, Inc.
By:
-------------------------------------
<PAGE>
Exhibits
A - Legal
B - Personal Property
C - Escrow Agreement
D - Title Commitment
E - Rent Roll
F - Tax and Insurance Bills and Utility Account Numbers
G - Service Contracts
H - 1995 Operating Statements
I - Deed
J - Bill of Sale
K - Assignment and Assumption of Intangible Property
L - Assignment and Assumption of Leases and Security Deposits
M - Non-Foreign Affidavit
N - Notice to Tenants
O - Tenant Certificate
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of August 8, 1996
by and between BALCOR MORTGAGE ADVISORS, INC., as nominee for Corlab VI Limited
Partnership, Labcor V Limited Partnership and Labcor 12 Limited Partnership
("Seller") and CS FIRST BOSTON MORTGAGE CAPITAL CORP. ("Purchaser").
RECITALS
A. In accordance with the terms of a certain Loan Agreement (the "Loan
Agreement") between Seller and Noland Fashion Square Partners ("Borrower"),
Seller made a certain loan to the Borrower in the original principal amount of
$23,300,000 (the "Loan"). The Loan is more fully described on Exhibit A
hereto. The Loan is evidenced and secured by a mortgage (the "Mortgage") on
the real property more fully described on Exhibit B hereto (the "Property") and
by any other documents or instruments which may evidence or secure the Loan
(collectively, the "Related Documents"). The Loan Agreement, Mortgage and
Related Documents are hereinafter collectively called the "Loan Documents."
B. Seller wishes to sell, and Purchaser wishes to purchase, subject to the
terms and conditions hereof:
(i) all right, title and interest of Seller in and to the Loan,
together with all Accrued Interest, Contingent Interest, and Deferred Interest
(as those terms are defined herein), and any accrued and unpaid fees with
respect to the Loan as of the Closing Date; and
(ii) all right, title and interest of Seller in and to the Loan
Documents;
NOW, THEREFORE in consideration of the mutual representations, warranties,
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
Section 1. Definitions.
(a) As used herein, the following terms shall have the meanings herein
specified (to be equally applicable to both the singular and plural forms of
the terms defined), except to the extent otherwise specified to the contrary:
"Accrued Interest" shall mean interest which shall have accrued on the Loan
since the most recent payment of interest with respect to the Loan and remains
unpaid.
"Adjustment" shall have the meaning specified in Section 11.
"Agreement" shall mean this Loan Sale Agreement, as it may be amended,
supplemented and modified from time to time.
<PAGE>
"Alzina Loan" shall mean that certain loan made by Balcor Pension Investors II
to Illinois National Bank of Springfield, as Trustee under Trust Agreement
dated December 29, 1972 and known as Trust No. 13-03770-00 in the original
principal amount of $11,324,000, which is the subject of a Related Agreement.
"Bannockburn Loan" shall mean that certain loan made by Balcor Pension
Investors III to LaSalle National Bank, as Trustee under Trust Agreement dated
October 4, 1973 and known as Trust No. 46514 in the original principal amount
of $10,100,000, which is the subject of a Related Agreement.
"Borrower" shall have the meaning provided in Recital A.
"Business Day" shall mean any day other than (a) a Saturday or a Sunday or (b)
any other day in which commercial banks in Chicago, Illinois are required or
authorized by law to be closed for business.
"Closing" shall have the meaning provided in Section 6.
"Closing Date" shall have the meaning provided in Section 6.
"Contingent Interest" shall mean all interest in connection with the Loan which
shall become due and payable upon the occurrence of an event or circumstance
set forth in the Loan Documents which has not occurred on or prior to the
Closing Date.
"Deferred Interest" shall mean all interest which has accrued on the principal
amount of the Loan but which is not yet due and payable, excluding Contingent
Interest and Accrued Interest.
"Deposit" shall have the meaning provided in Section 3(a)(i).
"Escrow Agent" shall mean Chicago Title and Trust Company.
"Escrow Agreement" shall have the meaning specified in Section 3(b).
"Guarantor" shall have the meaning provided in Section 2(d)(vii).
"Immaterial part" shall have the meaning provided in Section 12(b).
"Indemnified Persons" means the Purchaser Indemnified Persons or the Seller
Indemnified Persons, as the case may be.
"Indemnifying Person" means the party who shall be obligated to indemnify the
Indemnified Persons under this Agreement.
"Insignificant portion" shall have the meaning provided in Section 12(a).
"Laws" shall mean any present or future federal, state, municipal or local
laws, ordinances, rules, regulations, requirements, judgments, writs, decrees,
determinations, awards or court orders, building codes and zoning ordinances
and similarly, applicable orders, rules and regulations of any regulatory,
licensing, accrediting, rating, insurance underwriting or rating organization
or other body exercising similar functions.
"Loan Documents" shall have the meaning provided in Recital A.
<PAGE>
"Losses" shall mean all damages, losses, liabilities, obligations, penalties,
claims, litigations, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or nature (including, without limitation,
reasonable attorneys' fees and disbursements) as sustained, suffered or
incurred by any Indemnified Person arising from any matter which is the subject
of indemnification under this Agreement; provided, however, that Losses of any
Indemnified Person under this Agreement shall be computed net of (A) the
amount, if any, of insurance proceeds that such Indemnified Person shall have
received (net of Taxes payable with respect thereto) in respect of the matter,
the existence or occurrence of which gave rise to such indemnification, and (B)
the amount, if any, of the Tax benefits actually realized by such Indemnified
Person as a result of such Losses in the year in which such Losses occur, as
reasonably determined by such Indemnified Person.
"Material part" shall have the meaning provided in Section 12(b).
"Mortgage" shall have the meaning provided in Recital A.
"Note" means the note or notes executed by the Borrower and evidencing the
Loan.
"Notice of Claim" shall have the meaning provided in Section 17(d).
"Other Loans" shall mean the Alzina Loan, the Bannockburn Loan and the Seafirst
Loan.
"Permitted Encumbrances" shall have the meaning provided in Section 5(a).
"Premium" shall mean a portion of the Purchase Price in the amount of $25,000.
"Pricing Date" shall have the meaning provided in Section 7(e).
"Principal Amount" shall mean the outstanding principal amount of the Loan as
of the Closing Date.
"Property" shall have the meaning provided in Recital A.
"Purchaser" shall have the meaning provided in the Preamble to this Agreement.
"Purchase Price" shall have the meaning provided in Section 3(a).
"Purchaser Indemnified Persons" means and includes the Purchaser and its
permitted assigns and their respective directors, officers, agents, employees,
advisors and successors.
"Purchaser's Closing Documents" shall have the meaning provided in Section
6(b).
"Related Agreement" shall mean that certain Purchase and Sale Agreement of
even date herewith between Purchaser and Labcor II Limited Partnership as
seller, with respect to the Alzina Loan and/or that certain Purchase and Sale
Agreement of even date herewith between Purchaser and Labcor III Limited
Partnership as seller with respect to the Bannockburn Loan, and/or that certain
Purchase and Sale Agreement of even date herewith between Purchaser and Labcor
III Limited Partnership as seller with respect to the Seafirst Loan.
<PAGE>
"Reports" shall have the meaning provided in Section 7(l).
"Seafirst Loan" shall mean that certain loan made by Balcor Pension Investors
III to Hines, Spokane, Ltd. in the original principal amount of $32,425,000,
which is the subject of a Related Agreement.
"Seller" shall have the meaning provided in the Preamble of this Agreement.
"Seller Indemnified Persons" means and includes Seller and its affiliates and
their respective directors, officers, agents, employees, advisors and
successors.
"Seller's Closing Documents" shall have the meaning provided in Section 6(a).
"Significant portion" shall have the meaning provided in Section 12(a).
"Tax" or "Taxes" means all income taxes (including any tax on or based upon net
income, gross income, income as specially defined, earnings, or profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits, alternative or add on minimum, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts in respect thereof,
imposed by any taxing authority.
"Third Party Claim" shall have the meaning provided in Section 17(d).
"Title Policies" shall have the meaning specified in Section 5(b).
(b) The phrase "to the best of Seller's knowledge" and any similar phrase
referring to the knowledge of Seller, shall mean the actual knowledge of any
person currently employed by Seller who Seller has determined is likely to have
firsthand knowledge with respect to the Loan, the Borrower, any Guarantor or
the Property. The knowledge of any other person shall not be imputed to
Seller, regardless of whether any such person shall have once been or shall
currently be employed by or an agent of Seller.
Section 2. Agreement to Sell and Purchase the Loan. (a) Subject to the
terms and conditions set forth herein, Seller hereby agrees to sell, transfer
and assign to Purchaser and Purchaser hereby agrees to purchase and accept from
Seller all of its right, title and interest in and to the Loan and the Loan
Documents. Except as expressly set forth herein, the sale, transfer and
assignment of the Loan and the Loan Documents is and shall be made "AS IS",
"WHERE IS", "WITH ALL FAULTS".
(b) Purchaser has made such examinations, reviews and investigations as
it deems necessary or appropriate in making its decision to purchase the Loan.
Purchaser has been and will continue to be solely responsible for making its
own independent investigation of the Loan and the Loan Documents. Purchaser
acknowledges that the sale of the Loan by Seller to Purchaser is irrevocable,
and that Purchaser shall have no recourse to Seller, except as otherwise
provided in this Agreement. Purchaser acknowledges that Seller has not made
any representations or warranties concerning the collectability of the Loan or
the value of the Property.
<PAGE>
(c) Purchaser acknowledges that Seller will not be delivering an estoppel
or confirmation of the outstanding amount of the Loan or any other information
regarding the Loan, the Loan Documents or anything relating to the Property
from the Borrower, any principal of the Borrower, any Guarantor, any other
party affiliated with the Borrower or any Guarantor, or any other party having
an interest in or claim to the Property.
(d) Except as expressly set forth herein, Seller does not and will not
make any oral or written representations, warranties, promises or guarantees
whatsoever, whether express or implied, concerning or with regard to, and
expressly disclaims any liability or obligation with respect to, concerning or
relating to, any of the following:
(i) the collectibility of the Loan;
(ii) the value or condition of the Property;
(iii) title or ownership to or of the Property or any portion or
part thereof or any materials, fixtures or furnishings located therein or
thereon;
(iv) compliance with any environmental protection, pollution or land
use Laws, including, but not limited to, those pertaining to the use, handling,
generating, treating, storing or disposing of any hazardous waste, hazardous
substance, petroleum product, storage tank, or other container therefor,
asbestos or any other substance controlled or otherwise governed by applicable
Laws;
(v) the zoning and any other restrictions applicable to the
Property;
(vi) ownership of or obligations in respect of any air rights, zoning
bonuses, floor area ratio bonuses or entitlements or other similar rights or
benefits attributable to, burdening or otherwise pertaining to the Property;
(vii) claims by Borrower or any guarantors of the Loan (the
"Guarantors") against Seller under the Loan Documents or otherwise or claims by
third parties against the Borrower or any of the Guarantors or Seller or the
creditworthiness or ability of Borrower or any of the Guarantors to fulfill
their respective obligations or pay their respective debts as they mature;
(viii) pending, existing or projected approvals, commitments or
guarantees concerning or relating to, or rights of or from or claims against or
relating to, any governmental or quasi-governmental entity regarding,
assurances of assistance, compliance with programs or benefits, real estate
taxes or increases therein or changes thereto, tax reductions or benefits,
ability to meet, comport with or comply with assistance programs or programs
creating tax benefits for owners or tax reductions or credits for, in favor of
or benefitting the owner of the Property; and
(ix) the compliance in the past by the Borrower or any other
applicable party with conditions to advances under the Loan Documents or the
implicit or explicit waiver of any such conditions, the establishment of any
course of dealing or course of conduct regarding advances, or any commitment on
the part of Seller to make any advances under the Loan Documents.
<PAGE>
Purchaser acknowledges that it is a sophisticated investor and, except as
otherwise provided in this Agreement, Purchaser is relying solely on its own
investigation of the Loan, the Borrower, the Guarantors and the Property.
Purchaser further acknowledges that the failure of Seller to disclose any
material, non-public information with respect to the Loan, the Borrower, the
Guarantors or the Property which was not known to Seller shall not entitle
Purchaser to rescind or invalidate this Agreement or to seek any damages from
Seller, except as may otherwise be provided in this Agreement.
Section 3. Purchase Price of the Loan. (a) The purchase price of the Loan
shall equal the sum of (x) seventy-nine and 28/100ths percent (79.28%) of the
outstanding Principal Amount of the Loan, plus (y) seventy-nine and 28/100ths
percent (79.28%) of the outstanding Deferred Interest, if any (which Deferred
Interest is scheduled on Exhibit A attached hereto) (collectively, the
"Purchase Price"). The Purchase Price shall be paid as follows:
(i) an initial deposit equal to five percent (5%) of the Purchase
Price (together with any interest earned thereon, if any, the "Deposit"),
previously paid by Purchaser to the Escrow Agent, to be held in escrow, by the
Escrow Agent for disbursement in accordance with the terms of the Escrow
Agreement; and
(ii) the balance of the Purchase Price on the Closing Date payable by
wire transfer of immediately available funds to the direct order of Seller.
Purchaser shall receive at Closing a credit against the balance of the Purchase
Price then due in an amount equal to the sum, without duplication, of (A) all
payments of principal and interest, including, without limitation, proceeds
from compromises and settlements made by the Borrower with respect to the Loan
and actually received by Seller during the period commencing on the Pricing
Date and ending on the Closing Date and (B) any amounts then received by Seller
pursuant to Section 12 hereof and not applied to the restoration or rebuilding
of a Property in accordance with the Loan Documents.
(b) The Escrow Agent will hold the Deposit in accordance with the Escrow
Agreement attached hereto as Exhibit C (the "Escrow Agreement"). The party
entitled to the Deposit shall receive all interest earned thereon, if any,
which interest shall not be credited against the balance of the Purchase Price
due pursuant to Section 3(a)(ii) above.
(c) In addition to the Purchase Price, Purchaser shall on the Closing
Date pay to Seller by wire transfer of immediately available funds to the
direct order of Seller, the total amount of Adjustments due Seller in
accordance with Section 11 hereof.
Section 4. Assumption of Seller's Obligations. (a) On the Closing Date,
Purchaser shall assume and upon the Closing Date shall be deemed to have
assumed all of Seller's obligations of any kind whatsoever with respect to the
Loan, the Property or the Loan Documents, and Purchaser shall indemnify Seller
as specified in Section 17 hereof. The provisions of this Section shall
survive the Closing.
<PAGE>
(b) No recital herein or in any Exhibit hereto of any obligations to be
assumed by Purchaser shall constitute an acknowledgment or admission by either
party that any additional sums or advances are due, or that any other
obligations exist, under the Loan Documents or otherwise, and each party shall
have the right to deny and contest any claim for any such sums or advances or
any such obligation in the same manner as if such recitals had not been
included in this Agreement.
Section 5. Priority of Mortgage. (a) As a condition to the obligation of
the Purchaser to pay the Purchase Price at the Closing, the Mortgage shall be
subject only to the liens, encumbrances and other title matters described on
Schedule 5(a) annexed hereto and other non-monetary encumbrances or defects
which do not materially, adversely affect the use or value of the Property and
which are of a type generally acceptable to institutional lenders in the
jurisdiction in which the Property is located ("Permitted Encumbrances" -- all
other title matters shall be referred to herein as "Unpermitted Encumbrances").
(b) The policy of title insurance (the "Title Policies") with respect to
the Loan, a copy of which is attached to Schedule 5(a) hereto, is and will be
at Closing in full force and effect, is not subject to defenses of the insurer
by reason of acts or knowledge of the insured, and the rights of Seller
thereunder will be assigned to Purchaser at Closing. Except as may be
specified on Schedule 5(a) hereto, no claims have been made by Seller under any
such Title Policies.
Section 6. Closing of Sale. The closing of the sale of the Loan (the
"Closing") shall occur on August 22, 1996, or on such earlier date as mutually
agreed by the parties hereto (the "Closing Date").
(a) At the Closing, except as provided in Exhibit A hereto, the following
(the "Seller's Closing Documents") shall be delivered by Seller to Purchaser:
(i) assignments, without recourse, representation or warranty,
express or implied (other than any covenant, representation or warranty
contained in this Agreement which expressly survives the Closing), in the form
annexed hereto as Exhibit D-1 of the Mortgages and any separate assignment of
leases and rents all in recordable form in the jurisdiction in which the
Property is located; and
(ii) an allonge to the Note, in the form attached hereto as Exhibit
D-2.
(iii) a general assignment of the Seller's rights in and to the
Loan and the Loan Documents, without recourse, representation or warranty,
express or implied (other than any covenant, representation or warranty
contained in this Agreement which expressly survives the Closing), in the form
annexed hereto as Exhibit E.
(iv) assignments of any and all uniform commercial code financing
statements heretofore filed with respect to the Property in which Seller is
named as secured party, all on Form UCC-3 or such other forms which may then be
accepted for filing in the offices where such financing statements have been
filed.
<PAGE>
(v) the original Loan Documents described on Exhibit A or, to the
extent that Seller is unable to deliver an original of any of the Loan
Documents, copies thereof, together with a certificate of the Seller with
regard to the accuracy of such copies, in the form of Exhibit F attached
hereto.
(vi) all escrow, impound or cash collateral accounts and all letters
of credit, if any, held by Seller as security for the Loan or the performance
of the Borrower's obligations under the Loan Documents.
(vii) copies of notices given by Seller to the Borrower, the
applicable insurance companies or any other person regarding the transfer of
the Loan.
(viii) a certificate regarding any changes in the information
specified on Exhibit A, as updated to the Closing Date.
(ix) an affidavit stating that Seller is not a "foreign person" under
the Foreign Investment in Real Property Tax Act, Internal Revenue Code Section
1445, as amended, and the regulations promulgated thereunder.
(x) evidence that Seller is in good standing in the jurisdiction of
its formation and is authorized to consummate the transactions contemplated by
this Agreement, including certified copies of the organizational documents of
Seller and its constituent entities to the extent necessary to establish due
authorization by Seller of this Agreement and the transactions contemplated
hereby.
(xi) certified evidence that the Participants (as hereinafter
defined) have consented to Seller's execution and delivery of this Agreement
and the transfer by Seller to Purchaser of the Loan as contemplated hereby,
free and clear of any interests of the Participants.
(xii) such other and further documents and instruments of
transfer and assignment, without recourse, representation or warranty, express
or implied (other than any covenant, representation or warranty contained in
this Agreement which expressly survives the Closing), as may be reasonably
required to effectuate or confirm the assignment and transfer of the Loan and
the Loan Documents to Purchaser.
(b) At the Closing, the following (the "Purchaser's Closing Documents")
shall be delivered by Purchaser to Seller:
(i) The balance of the Purchase Price.
(ii) If Purchaser is a corporation, Purchaser shall supply at the
Closing a certified copy of a resolution of its Board of Directors authorizing
Purchaser's execution, delivery and performance of this Agreement, together
with such other documents as Seller may reasonably require to evidence
Purchaser's good standing and the authority of those acting on its behalf, or,
if Purchaser is other than a corporation, such other evidence of Purchaser's
existence, good standing (if applicable) and authority as Seller may reasonably
require.
(c) At the Closing, the Escrow Agent shall (and is hereby authorized and
directed by Seller and Purchaser to) transfer to Seller the Deposit.
<PAGE>
(d) The obligation of Seller to transfer the Loan to Purchaser and to
otherwise consummate the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions precedent on and as of the Closing
Date:
(i) all representations and warranties of Purchaser contained in
this Agreement shall have been true in all material respects when made and
shall be true in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Purchaser shall have performed and complied with, in all material respects, all
material covenants, agreements and conditions required by this Agreement to be
performed or complied with by Purchaser prior to or at the Closing;
(ii) Seller shall have received Purchaser's Closing Documents;
(iii) Seller shall have received payment of the balance of the
Purchase Price in accordance with Section 3(a)(ii) and such other amounts as
are due Seller hereunder; and
(iv) No claim, litigation or other proceeding, arising out of or
relating to the Loan, the Borrower, any Guarantor or the Property, shall have
been threatened or commenced after the Pricing Date against Seller or any
person for whom Seller shall be liable or whom Seller shall be obligated to
indemnify, which in the opinion of Seller is material, unless the Purchaser
shall have provided security satisfactory to Seller in its sole discretion for
Purchaser's obligation to indemnify Seller against such claim, litigation or
other proceeding under Section 17.
(e) Purchaser's obligation to pay the Purchase Price, to purchase the
Loan and otherwise to consummate the transactions contemplated hereby shall be
subject to Sections 5 and 12 hereof and to the satisfaction of the following
conditions precedent on and as of the Closing Date:
(i) either (A) all representations and warranties of Seller
contained in this Agreement shall have been true in all material respects when
made and, to the extent then deemed remade, shall be true in all material
respects at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, or (B) if a representation
or warranty of Seller shall not be true and correct in all material respects
when made or deemed remade, and Seller shall be obligated to indemnify
Purchaser, or Seller shall have offered to indemnify Purchaser, against any
Losses resulting therefrom under Section 17 hereof;
(ii) Seller shall have performed and complied with, in all material
respects, all material covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller prior to or at the Closing
Date and
(iii) Purchaser shall have received Seller's Closing Documents.
In the event any of the conditions precedent set forth in this Section 6(e)
have not been satisfied at or prior to Closing, Purchaser may terminate this
Agreement by giving written notice of such termination to Seller, in which
event this Agreement shall be deemed terminated upon Seller's receipt of such
written notice and the provisions of Section 16(b) hereof shall apply.
<PAGE>
(f) Purchaser's obligation to pay the Premium is subject to the condition
that each of the Other Loans is transferred to Purchaser in accordance with the
terms of the Related Agreements. In the event that the closing of the transfer
of any Other Loan has not occurred on the Closing Date and the Related
Agreement for such Other Loan has not been terminated, the Premium otherwise
payable by Purchaser in connection with this Agreement shall be deposited into
an escrow with the Title Company on the Closing Date. Such escrow shall
provide that the Premium shall be disbursed to Seller simultaneously with the
closing of the transfer to Purchaser of the last to close of any Other Loan
that had not closed on the Closing Date. If any Related Agreement has been
terminated by Purchaser pursuant to a right of Purchaser provided therein prior
to the Closing Date, the Purchase Price payable by Purchaser at the Closing
shall be equal to the amount calculated in accordance with Section 3 hereof,
less the Premium. If any of the Other Agreements is terminated by Purchaser
subsequent to the Closing Date pursuant to a right of Purchaser provided
therein, the Premium deposited into escrow at Closing shall be returned to
Purchaser.
(g) The foregoing conditions are for the benefit only of the party for
whom they are specified to be conditions precedent and such party may, in its
sole discretion, waive any or all of such conditions and close under this
Agreement without any increase in, abatement of or credit against the Purchase
Price.
(h) From and after the Closing Date, Seller shall promptly, subsequent to
its receipt, forward to Purchaser (at the address specified herein for notices)
copies or originals of any and all bills, invoices, insurance binders and
policies, letters, documents and other correspondence it receives relating to
the Loan, the Loan Documents and the Property to the extent (i) that such
materials are not otherwise subject to a privilege, or subject to an obligation
of confidentiality or other contractual obligation restricting Seller's release
thereof or (ii) the delivery thereof would not subject Seller to criminal
liability or otherwise constitute the violation of any Law.
Section 7. Representations and Warranties by Seller. Notwithstanding the
provisions of Section 2(d) hereof, Seller represents and warrants to Purchaser
as of the date of this Agreement as follows:
(a) Seller is an Illinois corporation, duly formed, validly existing and
in good standing under the Laws of the jurisdiction in which it was formed, and
has the full power, authority and legal right to engage in the transactions
contemplated by, and perform and observe the terms and conditions of this
Agreement.
(b) This Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of Seller
and, upon the assumption that this Agreement constitutes a legal, valid and
binding obligation of Purchaser, this Agreement constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
<PAGE>
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Seller do not and will not (i) violate
or conflict with the Seller's organizational documents or (ii) violate or
conflict with any Laws or any governmental regulation or permit applicable to
Seller or (iii) result in a breach of, or constitute a default under, any
provision of any contract or other instrument to which Seller is a party or by
which it is bound, which breach or default would prevent or materially
interfere with Seller's performance hereunder or (iv) result in the creation or
imposition of any lien, charge or encumbrance pursuant to the terms of any such
contract or other instrument which lien, charge or encumbrance would prevent or
materially interfere with Seller's performance hereunder.
(d) Except as specified on Schedule 7(h) or as previously disclosed to
Purchaser in writing, to the best of Seller's knowledge, without investigation
or inquiry with respect thereto, Seller has not received written notice of any
actions, suits or proceedings, either pending or threatened, in connection with
the Loan, including, without limitation, any actions, suits or proceedings
which might question the validity of this Agreement or the consummation of the
transactions contemplated hereby.
(e) As of the date specified on Exhibit A (the "Pricing Date"), (i) the
unpaid principal balance of the Loan, (ii) the amount of interest accrued on
the Loan which remains unpaid, (iii) the rate or rates at which interest on the
unpaid principal amount of the Loan accrues or is payable, (iv) the amount of
Deferred Interest, if any; (v) the amount of Contingent Interest paid by the
Borrower during the immediately preceding year, if any; (vi) the balances of
all escrow, impound and cash collateral accounts held by Seller with respect to
the Loan, if any; and (vii) the maturity date with respect to the Loan are as
specified on Exhibit A hereto; provided, however, that as of the Closing Date,
Seller shall furnish to Purchaser a certificate updating the information on
Exhibit A, which shall be true, correct and complete as of the Closing Date.
(f) To the best of Seller's knowledge, without investigation or inquiry
with respect thereto, (i) the Loan Documents specified on Exhibit A hereto
constitute all material Loan Documents, (ii) there are no letters of credit
issued in favor of Seller which secure the Loan, (iii) such Loan Documents have
not been modified or amended, except as described on Exhibit A hereto, and (iv)
the copies of such Loan Documents which are attached to Exhibit A or which have
previously been delivered to Purchaser are true and correct in all material
respects.
(g) Except as specified on Schedule 7(g) or 7(h) or as previously
disclosed to Purchaser in writing, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, Seller has received no written
notice or claim that the Loan is subject to any right of rescission, set-off,
recoupment, abatement, diminution, counterclaim or valid defense by the
Borrower or any Guarantor which would affect the ability of the holder thereof
to realize the practical benefits of the security intended to be provided by
the Loan Documents for the Loan, as such realization may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such realization is considered in a
proceeding at law or in equity.
<PAGE>
(h) Except as set forth on Schedule 7(h) or as previously disclosed to
Purchaser in writing, to the best of Seller's knowledge, without investigation
or inquiry with respect thereto, (i) Seller has not commenced or threatened to
commence any actions, suits or proceedings in connection with the Loan
Documents, and (ii) there are no valid, effective and enforceable orders,
injunctions or decrees of any federal, state, municipal or local court or
arbitral body with respect to the Loan or the Loan Documents.
(i) Except as provided in this subclause (i), Seller (i) is the sole
owner of the Loan, has not participated the Loan, and has the absolute right to
sell the Loan; (ii) has not granted any other option to purchase or other
rights in and to the Loan, (iii) has not pledged, collaterally assigned or
otherwise hypothecated any, interest therein or agreed to do so and (iv) has
obtained (to the extent required and not waived or the requirement therefor
otherwise avoided or averted) all consents of Borrower, any Guarantor or other
third party pursuant to the Loan Documents or pursuant to any organizational
documents of Seller or any entity owning, directly or indirectly, any interest
in Seller, which is necessary for the execution and delivery of this Agreement
and the sale of the Loan provided for herein. Seller has heretofore sold
participation interests aggregating 100% of Seller's interest in the Loan
("Participation Interests"). Each of the Participation Interests are held by
affiliates of Seller ("Participants") and such Participants have consented to
Seller's execution and delivery of this Agreement and the transfer by Seller to
Purchaser of the Loan as contemplated hereby, free and clear of any interests
of the Participants.
(j) Except as specified on Schedule 7(j) hereto or as previously
disclosed to Purchaser in writing, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, neither Borrower nor any
Guarantor has filed or is the subject of any proceeding under any state or
federal bankruptcy or insolvency Law.
(k) Except as specified on Schedule 7(k) hereto or as previously
disclosed to Purchaser, to the best of Seller's knowledge, without
investigation or inquiry with respect thereto, Seller has not received any
written notice of any pending or threatened condemnation or similar proceeding
affecting the Property.
(l) Except as specified on Schedule 7(l) hereto or as previously
disclosed to Purchaser in writing, no environmental reports or studies with
respect to the Property (collectively, "Reports") have been performed by or on
behalf of Seller and, to the best of Seller's knowledge, without investigation
or inquiry, Seller has not received notice that any of such Reports are
inaccurate in any material respect.
(m) The execution and delivery of this Agreement by Seller do not, and
the performance of this Agreement by Seller will not require, the consent or
approval of any public authority.
(n) To the best of Seller's knowledge, without investigation or inquiry
with respect thereto, the Loan is not expressly cross-collateralized or
cross-defaulted with any other loan.
(o) Seller has no obligations to make any additional advances under the
Loan.
<PAGE>
All warranties and representations of Seller in this Section 7 are true
and correct in all material respects as of the date hereof, and, with respect
to clauses (a) through (c) above, shall continue to be true and correct in all
material respects as of the Closing Date. Subject to the provisions of Section
17 hereof, the representations and warranties of Seller contained in this
Section 7 shall survive the Closing for a period of ninety (90) days; provided,
however, that any claim hereunder based upon such representations and
warranties must be made within such ninety (90) day period.
Section 8. Representations and Warranties by Purchaser. Purchaser
represents and warrants as follows:
(a) Purchaser is a Delaware corporation, validly existing and in good
standing under the laws of the jurisdiction in which it was formed, and has the
full power, authority and legal right to engage in the transactions
contemplated by, and perform and observe the terms and conditions of this
Agreement.
(b) This Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Purchaser and, upon the assumption that this Agreement constitutes a valid and
binding obligation of Seller, this Agreement constitutes a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally, and by general principles of
equity.
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Purchaser do not and will not (i)
violate or conflict with the organizational documents of Purchaser, (ii)
violate or conflict with any Law or any governmental regulation or permit
applicable to Purchaser, (iii) result in a breach of, or constitute a default
under, any of the provisions of any contract or other instrument to which
Purchaser is a party or by which it is bound, which breach or default would
prevent or materially interfere with Purchaser's performance hereunder, (iv)
result in the creation or imposition of any lien, charge or encumbrance
pursuant to the terms of any such contract or other instrument which lien,
charge or encumbrance would prevent or materially interfere with Purchaser's
performance hereunder or (v) violate, conflict with or constitute a "prohibited
transaction" under Section 406 of the Employee Retirement Income Security Act
of 1974, Section 4975 of the Internal Revenue Code of 1986, as amended, or
under any comparable provision of the Internal Revenue Code of 1986, as
amended.
(d) The execution and delivery of this Agreement by Purchaser do not, and
the performance of this Agreement by Purchaser will not, require the consent or
approval of any public authority.
(e) There are no legal actions, suits, arbitrations, or other legal,
administrative or other governmental proceedings pending or, to the knowledge
of Purchaser, threatened against Purchaser that might question the validity of
this Agreement or the consummation of the transactions contemplated hereby.
(f) Purchaser is a principal with respect to the proposed transaction
relating to the Loan, and is not acting as an agent for an undisclosed
unaffiliated principal.
<PAGE>
(g) The obligations of Purchaser hereunder are not contingent upon
Purchaser's procuring financing to provide funds to pay the Purchase Price to
Seller, and Purchaser has (or will, as of the Closing Date, have) available
funds to enable it to consummate the purchase and sale described herein.
(h) Purchaser is not acting on behalf of the Borrower or any of the
Guarantors.
(i) Purchaser is a sophisticated buyer with respect to the Loan, has
adequate information concerning the business and financial condition of
Borrower to make an informed decision regarding the purchase of the Loan and,
except for the covenants, representations and warranties expressly set forth
herein, has independently and without reliance upon Seller, and based on such
information as Purchaser has deemed appropriate, made its own analysis and
decision to enter into this Agreement.
(j) Without implying that the Loan constitutes a "security" within the
meaning of any applicable securities laws, Purchaser is not purchasing the Loan
with a view to resale or distribution in a manner that would violate applicable
securities laws.
All warranties and representations of Purchaser in this Section 8 are true and
correct in all material respects as of the date hereof, and shall continue to
be true and correct in all material respects as of the Closing Date. Subject
to the provisions of Section 17 hereof, the representations and warranties of
Purchaser contained in Sections 8(f), 8(i) and 8(j) shall survive the Closing.
Subject to the provisions of Section 17 hereof, the remaining representations
and warranties of Purchaser contained in this Section 17 shall survive the
Closing for a period of ninety (90) days; provided, however, that any claim
hereunder based upon such representations and warranties must be made within
such ninety (90) day period.
Section 9. Covenants of Seller. (a) Seller shall not, between the date
hereof and the Closing Date, take any affirmative action, or expressly consent
to any action, which would adversely affect the priority of the lien of the
Mortgage.
(b) Seller shall not, between the date hereof and the Closing Date,
(i) materially modify, waive or amend the terms of any of the Loan
Documents;
(ii) foreclose or accept a deed-in-lieu of foreclosure with respect
to the Loan;
(iii) grant any consents contemplated in the Loan Documents
without Purchaser's consent, which shall not be unreasonably, withheld,
conditioned or delayed (if Purchaser shall fail to respond to Seller's request
for such a consent for a period of three (3) Business Days, such failure to
respond shall be deemed to constitute Purchaser's consent to such matter);
(iv) compromise or settle claims of any kind with respect to the
Loan;
(v) sell or enter into an agreement to sell all or any portion of
the Loan or interest therein;
<PAGE>
(vi) release any Borrower or Guarantor or any portion of the
Property; or
(vii) increase the principal amount outstanding under any Note or
increase the amount of the debt secured by any of the Mortgages; provided,
however, that Seller may make any advances which it may be required to make
under the Loan Documents and, at Seller's option, Seller may make advances to
pay costs and expenses incurred to protect and preserve the Property and its
rights and security under the Loan Documents, including, without limitation,
(A) taxes, charges or assessments that may be imposed by law upon the Property,
(B) premiums on insurance policies covering the Property, (C) expenses incurred
in upholding the lien or enforceability of a Mortgage or any other Loan
Document, (D) utilities, security and maintenance costs with respect to the
Property and (E) any other amount, cost or expense which Seller is permitted or
required to expend pursuant to the Loan Documents or as otherwise may be
required under the Loan Documents or pursuant to requirements of Law.
(c) Between the date hereof and the Closing Date, Seller shall continue
to service the Loan, the Borrower and any Guarantor in accordance with its
prior practices and as it would in the ordinary course of its business.
(d) From and after the Closing Date, if Seller shall receive any payment
from a Borrower, any Guarantor or other party on account of an obligation or
liability arising under the Loan Documents which prior to the Closing Date
would have inured to Seller's benefit, then Seller shall accept such payment on
behalf of Purchaser and, subject to the provisions of Section 17 hereof, shall
promptly remit same to Purchaser.
(e) From and after the Closing Date, Seller shall cooperate with
Purchaser in connection with the delivery of notices to Borrowers and
Guarantors and the substitution of Purchaser in any ongoing litigation to
collect the Loan or to enforce the Loan Documents, including, without
limitation, providing such documentation, witnesses and information which
Seller possesses and which may be reasonably requested by Purchaser; provided,
however, that Seller shall not be required to incur any cost or expense in
connection therewith for which Purchaser shall not agree to indemnify Seller.
Section 10. Covenants of Purchaser. From and after the date hereof until
the Closing Date, (i) Purchaser shall not contact the Borrower or any Guarantor
regarding the Loan or the Property, (ii) Purchaser shall not take any action
with respect to the Borrower or any Guarantor, the Loan or the Loan Documents
which would have the effect of impairing or diminishing the value thereof or
the priority of the Mortgage, and (iii) Purchaser shall deliver to Seller
copies of all notices given or received by Purchaser in connection with the
Loan.
Section 11. Adjustments. Except as provided on Exhibit A hereto, the
following (each an "Adjustment") shall be apportioned at the Closing as of the
close of business on the day immediately preceding the Closing Date:
(a) Accrued Interest as of the close of business on the day
immediately preceding the Closing Date shall be calculated and shall constitute
an Adjustment due Seller; and
(b) The following advances shall be calculated and shall constitute
an Adjustment due Seller:
<PAGE>
(i) Any advances which Seller may have made in accordance with
its obligations under the Loan Documents or pursuant to any requirement of any
applicable Laws; or
(ii) Any advances which Seller may have elected to make to pay
costs and expenses incurred to protect and preserve the Property and its rights
and security under the Loan Documents from and after the Pricing Date through
the close of business on the day immediately preceding the Closing Date,
including, without limitation, (A) taxes, charges or assessments that may be
imposed by law upon the Property, (B) premiums on insurance policies covering
the Property, (C) expenses incurred in upholding the lien or enforceability of
a Mortgage or any other Loan Document, (D) utilities, security and maintenance
costs with respect to the Property, and (E) any other amount, cost or expense
which Seller is permitted or required to expend pursuant to the Loan Documents.
(c) Contingent Interest based on the income or cash flow of the
Borrower for the year in which the Closing shall occur shall be prorated on a
per diem basis based on the Contingent Interest paid by the Borrower during the
immediately preceding year, and Seller's pro rata share of such Contingent
Interest shall constitute an Adjustment due Seller. Such proration shall be
final and shall not be recalculated when the actual Contingent Interest for
such year shall be ascertained.
Section 12. Condemnation and Destruction. (a) If, prior to the Closing
Date, all or any significant portion (as defined in this Section) of the
Property is taken by eminent domain (or, if prior to the Closing Date, any
eminent domain proceeding with respect to any significant portion of the
Property has been commenced or Seller has received written notice threatening
to commence any such eminent domain proceeding), Seller shall notify Purchaser
thereof promptly after obtaining knowledge thereof and Purchaser shall have the
right to terminate this Agreement, which termination shall be effected by
giving notice to Seller not later than ten (10) days after the giving of
Seller's notice. For the purposes hereof, a "significant portion" of the
Property shall mean (i) such a portion of the Property as shall have a value,
as reasonably determined by Seller, in excess of ten (10%) percent of the
Purchase Price or (ii) any portion of the Property the taking of which
materially interferes with the current use of the Property. If Purchaser
elects to terminate this Agreement as aforesaid, the provisions of Section
16(b) shall apply. If Purchaser does not elect to terminate this Agreement as
aforesaid, or if an "insignificant portion" (i.e., anything other than a
significant portion) of the Property is taken by eminent domain (or becomes the
subject of a pending taking), there shall be no abatement of the Purchase Price
and Seller shall assign to Purchaser (without recourse) at the Closing the
rights of Seller to the awards theretofore received, if any, for the taking,
and Purchaser shall be entitled to all rights of Seller under the Loan
Documents, if any, to receive and keep all awards for the taking of the
Property or such portion thereof.
(b) If, prior to the Closing Date, a material part (as defined in this
Section) of the Property is destroyed or damaged by fire or other casualty,
Seller shall promptly notify Purchaser thereof and Purchaser shall have the
right to terminate this Agreement, which termination shall be effected by
giving notice to Seller not later than ten (10) days after the giving of
Seller's notice. For the purposes hereof, a "material part" of the Property
shall mean a part of the Property as shall have a value, as reasonably
determined by Seller, in excess of ten (10%) percent of the Purchase Price. If
Purchaser elects to terminate this Agreement as aforesaid, the provisions of
<PAGE>
Section 16(b) shall apply. If Purchaser does not elect to terminate this
Agreement as aforesaid, or if there is damage to or destruction of an
"immaterial part" (i.e., anything other than a material part) of the Property
by fire or other casualty, there shall be no abatement of the Purchase Price
and Seller shall assign to Purchaser (without recourse) at the Closing the
rights of Seller to any insurance proceeds theretofore received, if any, with
respect to such damage or destruction, and Purchaser shall be entitled to all
rights of Seller under the Loan Documents, if any, to receive and keep any
insurance proceeds payable upon the occurrence of any such casualty.
Section 13. Time of the Essence. Purchaser and Seller acknowledge and agree
that each and every one of the dates, time periods and time limitations set
forth in this Agreement shall be of the essence of this Agreement as against
Purchaser and Seller.
Section 14. Title Examination, Diligence Fees. All premiums and fees for
title examination and title insurance or any other report, study, survey or
diligence research obtained by Purchaser, if any, and all related charges in
connection therewith shall be paid by Purchaser.
Section 15. Broker. (a) Seller represents and warrants to Purchaser that it
has not hired, retained or dealt with any broker or finder in connection with
the negotiation, execution or delivery of this Agreement or the transactions
contemplated hereby, except Meenan, McDevitt & Company and Creamer Realty
Consultants (the "Brokers"). Seller will indemnify Purchaser against all
charges payable to the Brokers in connection with this Agreement and all Losses
arising out of any claim that the aforesaid representation and warranty is
untrue.
(b) Purchaser represents and warrants to Seller that it has not hired,
retained or dealt with any broker or finder in connection with the negotiation,
execution or delivery of this Agreement or the transactions contemplated
hereby. Purchaser will indemnity Seller against all Losses arising out of any
claim that the aforesaid representation and warranty is untrue.
(c) The provisions of this Section shall survive the Closing and any
termination of this Agreement.
Section 16. Remedies. (a) If Purchaser shall default under this Agreement,
the parties hereto agree that the damages that Seller shall sustain as a result
thereof shall be substantial but shall be difficult to ascertain.
Notwithstanding anything contained herein to the contrary, the parties hereto
therefore agree that if, subject to the conditions contained herein, Purchaser
fails to perform all of the terms, covenants, conditions and agreements to be
performed by it hereunder whether at or prior to the Closing, Seller may retain
the Deposit as and for liquidated damages, and thereafter neither Seller nor
Purchaser shall have any further liability or obligation hereunder, except for
such liabilities or obligations which are specifically stated herein to survive
the termination of this Agreement. A default by Purchaser under any Related
Agreement shall constitute a default by Purchaser under this Agreement.
(b) If on the Closing Date Seller shall be unable to perform its
obligations or to satisfy any condition applicable to Seller hereunder in
accordance with the provisions of this Agreement or title to the Property shall
not be in accordance with this Agreement and this Agreement shall be terminated
in accordance with its terms as a result thereof, the sole liability of Seller
shall be to direct Escrow Agent to return the Deposit to Purchaser, and, upon
<PAGE>
such return, this Agreement shall be deemed terminated and neither Seller nor
Purchaser shall have any further liability or obligation hereunder, except for
such liabilities or obligations as are specifically stated to survive the
termination of this Agreement.
(c) Notwithstanding anything contained herein to the contrary, if Seller
shall intentionally default in the performance of its obligation to transfer
the Loan hereunder, Purchaser shall be entitled to sue for specific performance
of this Agreement. Purchaser shall not have any right to sue for or to collect
damages, including, without limitation, punitive damages, from Seller based
upon any such intentional default by Seller.
(d) If, pursuant to the terms, conditions and provisions hereof,
Purchaser or Seller is not obligated to purchase and close with respect to the
Loan, then upon Purchaser's or Seller's notice to the other with respect
thereto terminating this Agreement, Seller and Purchaser shall direct Escrow
Agent to disburse the Deposit to Purchaser and, upon such return, this
Agreement shall be deemed terminated and neither Seller nor Purchaser shall
have any further liability or obligation hereunder, except for such liabilities
or obligations as are specifically stated to survive the termination of this
Agreement.
Section 17. Indemnification.
(a) Subject to the limitations set forth in this Section 17, from and
after the Closing, Seller shall save, defend and indemnify the Purchaser
Indemnified Persons against and hold them harmless from any and all Losses (but
not exceeding aggregate Losses in excess of $250,000) imposed upon or incurred
by Purchaser Indemnified Persons, directly or indirectly, arising out of the
untruthfulness, inaccuracy or breach of any representation or warranty of
Seller contained in this Agreement or the breach of any agreement or covenant
of Seller contained in this Agreement, excluding any such Losses which shall
have been caused by the intentional misconduct of the Purchaser Indemnified
Persons. On the Closing Date, Seller shall deposit $250,000 into escrow with
the Title Company in accordance with an escrow agreement mutually acceptable to
the parties hereto, in order to secure Seller's indemnity obligations
hereunder. Such escrow shall provide that the escrowed funds shall be
disbursed to Seller automatically without notice or consent from either party
hereto unless Purchaser makes a claim against Seller in accordance with Section
7 hereof within 90 days after the Closing Date, and Purchaser so notifies the
escrowee within such time period.
(b) Subject to the limitations set forth in this Section 17, from and
after the Closing, Purchaser shall save, defend and indemnify the Seller
Indemnified Persons against and hold them harmless from any and all Losses
imposed upon or incurred by any Seller Indemnified Persons, directly or
indirectly, arising out of (i) the untruthfulness, inaccuracy or breach of any
representation or warranty of Purchaser contained in this Agreement; (ii) the
breach of any agreement or covenant of Purchaser contained in this Agreement;
(iii) Purchaser's failure to perform any of Sellers' obligations under the Loan
Documents accruing after the Closing Date, including, without limitation, any
covenants or agreements relating to insurance proceeds or condemnation awards;
or (iv) the ownership of the Loan or the Loan Documents by Purchaser after the
Closing Date, excluding any such Losses caused by the intentional misconduct of
the Seller Indemnified Persons. With the exception of (i) Losses which shall
have been caused by the intentional misconduct of the Seller Indemnified
Persons, or (ii) Losses for which Seller is required to indemnify any Purchaser
<PAGE>
Indemnified Person pursuant to this Section 17, Purchaser hereby releases and
forever discharges the Seller Indemnified Persons from all damages, losses,
liabilities, obligations, penalties, claims, litigations, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any kind or
nature sustained, suffered or incurred by any Purchaser Indemnified Person in
connection with or related to the Loan or the Loan Documents.
(c) Each party's right of indemnification hereunder shall be that party's
sole contractual remedy with respect to any claims arising out of or in any way
related to the matters covered by this Agreement from and after the Closing and
shall be in lieu of any other remedy it may otherwise have at law, in equity or
otherwise.
(d) The obligations and liabilities of an Indemnifying Person with
respect to Losses resulting from the assertion of liability by third parties
(each, a "Third Party Claim") shall be subject to the following terms and
conditions:
(i) The Indemnified Persons shall give prompt written notice (each,
a "Notice of Claim") to the Indemnifying Person of any Third Party Claim which
might give rise to any Loss by the Indemnified Persons, stating the nature and
basis of said Third Party Claim, and the amount thereof to the extent known.
Each Notice of Claim shall be accompanied by copies of all relevant
documentation with respect to such Third Party Claim, including, without
limitation, any summons, complaint or other pleading which may have been served
or written demand or other document or instrument.
(ii) If the Indemnifying Person shall acknowledge in writing its
obligation to indemnify the Indemnified Persons, subject to the terms and
conditions of this Agreement, against such Third Party Claim, then the
Indemnifying Person shall have the right to assume the defense of such Third
Party Claim at its own expense and by its own counsel (reasonably satisfactory
to the Indemnified Persons).
(iii) If the Indemnifying Person shall assume the defense of a
Third Party Claim in accordance with this Agreement, the Indemnifying Person
shall not be responsible for any legal or other defense costs subsequently
incurred by the Indemnified Persons in connection with the defense thereof. If
the Indemnifying Person does not exercise its right to assume the defense of
such a Third Party Claim, then the Indemnified Persons may assume such defense
and the costs, expenses and reasonable attorneys' fees incurred by them shall
continue to constitute Losses hereunder.
(iv) Anything contained herein to the contrary notwithstanding,
neither the Indemnifying Person nor the Indemnified Persons shall admit any
liability with respect to, or settle, compromise or discharge, any Third Party
Claim without the written consent of the other, which consent shall not be
unreasonably withheld. In addition, each of the Indemnifying Person and the
Indemnified Persons shall cooperate and act in a reasonable and good faith
manner to minimize Losses relating to any Third Party Claim.
(e) The provisions of this Section 17 shall survive the Closing.
<PAGE>
Section 18. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given and received (a) if
personally delivered with proof of delivery thereof (any notice or
communication so delivered being deemed to have been received at the time
delivered on a Business Day, or if not a Business Day, the next succeeding
Business Day), or (b) sent by United States first class registered or certified
mail, return receipt requested, postage prepaid (any notice or communication so
sent being deemed to have been received three (3) Business Days after the date
of deposit in the United States mail), or (c) by nationally recognized
overnight courier (any notice or communication so sent being deemed to have
been received on the first succeeding Business Day subsequent to the day so
sent), or (d) by telecopier (any notice or communication so sent being deemed
to have been received on the date of transmission, if a Business Day, or the
first succeeding Business Day subsequent thereto), addressed to the respective
parties as follows: If to Purchaser:
If to Purchaser:
CS First Boston Mortgage Capital Corp.
55 East 52nd Street
New York, New York 10055-0186
Attn: Brad Settleman, Vice President
Fax: (212) 318-0518
With a copy to:
Brown Raysman & Millstein LLP
120 West 45th Street
New York, New York 10036
Attn: Rand G. Boyers, Esq.
Fax: (212) 840-2429
If to Seller:
Balcor Mortgage Advisors, Inc.
Bannockburn Lake Office Plaza
2355 Waukegan Road, Suite A200
Bannockburn, Illinois 60015
Attn: Daniel L. Charleston
Fax: (847) 317-4462
With a copy to:
Hopkins & Sutter
Three First National Plaza
Suite 4100
Chicago, Illinois 60602
Attn: Wayne F. Osoba
Fax: (312) 558-3312
or to such other address or party as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address or addresses shall only be effective upon receipt.
<PAGE>
Section 19. Miscellaneous Provision. (a) The acceptance of the Closing
Documents referenced in Section 6 by Purchaser and Seller shall be deemed an
acknowledgment by Purchaser and Seller that the other has fully complied with
all of its obligations hereunder and that such party is discharged there from
and that such party shall have no further obligation or liability with respect
to any of the agreements made by it in this Agreement, except for those
provisions of this Agreement which expressly provide that any such obligation
of such party shall survive the Closing.
(b) Each of Seller and Purchaser agrees that it will continue to be bound
by the terms, covenants and conditions of that certain Confidentiality
Agreement, dated as of June 3, 1996 the terms of which shall continue in full
force and effect during the effectiveness of this Agreement and subsequent to
any Closing hereunder or the termination hereof. Seller agrees to treat the
terms and provisions of this Agreement, as they relate to the Purchase Price
paid by Purchaser and to any other economic terms of this Agreement, as
confidential, and will not disclose any of such terms to any third party,
including but not limited to the Borrower, but excluding Seller's officers,
employees, advisors, attorneys and consultants who have a need to know the same
in connection with the performance of Seller's obligations under this
Agreement, except to the extent that such disclosure is compelled pursuant to
any judicial order or is required to be disclosed pursuant to any law or
regulation applicable to Seller. The terms of this Section 19(b) shall continue
in full force and effect during the effectiveness of this Agreement and
subsequent to any Closing hereunder or the termination hereof.
(c) On or prior to the Closing Date, Purchaser shall not have the right
to assign its rights hereunder, in whole or in part, without the prior written
consent of Seller. Any assignment on or prior to the Closing Date without such
prior written consent shall be deemed null and void. Notwithstanding the
foregoing, Purchaser may assign this Agreement on or prior to the Closing Date
to an affiliate (as defined in the Securities Act of 1933) and to any lender
providing financing to Purchaser or such affiliate to consummate the
transactions contemplated herein; provided, however, that if any such
assignment shall occur or if Purchaser shall assign its rights hereunder after
the Closing Date, Purchaser shall remain liable for all obligations of
Purchaser under this Agreement. Subject to and without limiting the preceding
two sentences, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
(d) This Agreement does not constitute an offer to sell and shall not
bind the parties hereto unless and until each elects to be bound hereby by
executing and delivering to the other an executed original counterpart hereof.
(e) If any term or provision of this Agreement or the application thereof
to any persons or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
(f) This Agreement, together with the Escrow Agreement and the Schedules
and Exhibits hereto and thereto, constitute the entire agreement of the parties
regarding the subject matter of this Agreement and the Escrow Agreement, and
all prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are hereby merged herein.
<PAGE>
(g) The parties agree to mutually execute and deliver to each other, at,
and, from time to time after, the Closing, such other and further documents as
may be reasonably required by counsel for the parties to carry into effect the
purposes and intents of this Agreement, provided such documents do not impose
any material obligations upon any party hereunder except as set forth in this
Agreement.
(h) This Agreement may not be modified, amended, altered or supplemented
except by written agreement executed and delivered by Purchaser and Seller.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original, and all of which when so executed shall be deemed
to be an original, and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement. Any delivery of a counterpart signature by
telecopier shall, however, be promptly followed by delivery of a manually
executed counterpart.
(i) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois applicable to agreements made and to be
performed wholly within such State.
(j) All Schedules and Exhibits referred to in this Agreement are
incorporated herein and made a part hereof as fully as if set forth herein.
(k) The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed as a waiver of any of
such provisions, or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to be
a waiver of any other or subsequent breach.
(l) Each party to this Agreement shall bear the costs of its own
attorneys' fees and expenses in the preparation, negotiation and execution of
this Agreement. Purchaser shall pay any transfer, conveyance, real property
transfer or gains, mortgage or mortgage recording, sales, use, value added,
stock or note transfer and stamp taxes, any recording, registration or other
similar taxes, expenses or fees and any penalties, interest and fees thereon,
imposed by any taxing authority, recording officer or register, or other
governmental authority in connection with the transactions contemplated herein.
(m) The Article and Section headings used herein are for reference
purposes only and do not control or affect the meaning or interpretation of any
term or provision hereof. All references in this Agreement to Sections,
paragraphs, Exhibits and Schedules are to the Sections and paragraphs hereof
and the Exhibits and Schedules annexed hereto.
(n) The representations, warranties and agreements of the parties
contained herein are intended solely for the benefit of the parties to whom
such representation, warranties or agreements are made and their permitted
assigns, shall confer no rights hereunder, whether legal or equitable, in any
other party, and no other party shall be entitled to rely thereon.
<PAGE>
(o) Seller and Purchaser each hereby irrevocably submits to the
jurisdiction of any State or Federal court sitting in the County of Cook and
State of Illinois over any action or proceeding arising out of or relating to
this Agreement, and Seller and Purchaser each hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard or determined
in any such State or Federal court. Seller and Purchaser each hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.
Seller and Purchaser each irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to Seller or Purchaser, as the case may be, at its respective address
specified in Section 18 hereof. Seller and Purchaser each hereby agrees that
the final judgment in any such action or proceeding shall be conclusive and may
be enforced in any other jurisdiction by suit on the judgment or in any other
matter provided by law. Nothing in this paragraph shall affect the right of
Seller or Purchaser, as the case may be, to serve legal process in any other
manner permitted by law or affect the right of Seller or Purchaser, the case
may be, to bring any action or proceeding against the other in the courts of
any other jurisdiction.
(p) NEITHER SELLER NOR PURCHASER MAY RECORD THIS AGREEMENT, AND ALL
RECORDING OFFICERS ARE HEREBY DIRECTED NOT TO RECORD THIS AGREEMENT. To the
extent that any such filing is made in violation of the Agreement, the party
effecting such filing shall indemnify the other against any damages incurred by
the other in connection therewith. The provisions of this paragraph shall
survive the termination of this Agreement.
IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered this
Agreement as of the day and year first above written.
SELLER:
BALCOR MORTGAGE ADVISORS, INC., an Illinois corporation,
as nominee for Corlab VI Limited Partnership, Labcor V Limited
Partnership and Labcor 12 Limited Partnership
By: /s/Daniel L. Charleston
----------------------------------
Name: Daniel L. Charleston
---------------------------------
Title: Authorized Agent
--------------------------------
PURCHASER:
CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware corporation
By: /s/Bradley A. Settleman
----------------------------------
Name: Bradley A. Settleman
---------------------------------
Title: Vice President
--------------------------------
<PAGE>
EXHIBIT INDEX
Exhibit A List of Loan Documents and Loan Information
Exhibit B Legal Description
Exhibit C Form of Certificate of Accuracy
Exhibit D-1 Form of Assignment of Recorded Documents
Exhibit D-2 Form of Allonge
Exhibit E Form of General Assignment and Assumption
Exhibit F Form of Escrow Agreement
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAUL WILLIAMS, et al., )
)
Plaintiffs, )
) No. 90 C 0726
v. )
) Honorable James B. Zagel
BALCOR PENSION INVESTORS, )
et al., )
)
Defendants. )
)
)
BALCOR MORTGAGE ADVISORS, et al., )
)
Counter-plaintiffs, )
)
v. )
)
PAUL WILLIAMS, et al., )
)
Counter-defendants. )
NOTICE OF PROPOSED
CLASS ACTION SETTLEMENT AND HEARING
THIS IS NOT NOTICE OF A LAWSUIT AGAINST YOU. This Notice is to
advise you of a proposed settlement of the class action lawsuit captioned above
and of a court hearing on the proposed settlement.
1. Summary of Proposed Settlement. The proposed settlement resolves
all issues raised by this lawsuit. The parties in these suits are the First
Union National Bank of North Carolina, Trustee of the Ploof Truck Lines, Inc.
Profit Sharing and 401(k) Plan, Bruce McGlasson and Tom Chipain (collectively
the "Class Representatives") on behalf of themselves and the plaintiff class as
defined below (the "Class"), Paul Williams, Beverly Kennedy, William B.
Copeland, Allan Hirschfield, Gregory Baird, individually and as trustee of the
Iva Medical Center, P.A. Pension and Profit Sharing Plan, and Samuel Wegbreit
(collectively "the Individual Plaintiffs"), who brought this suit as a class
action and Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension Investors-V,
Balcor Pension Investors-VI, Balcor Pension Investors-VII, Balcor Preferred
Pension-12, Balcor Mortgage Advisors, Balcor Mortgage Advisors-II, Balcor
Mortgage Advisors-III, Balcor Mortgage Advisors-V, Balcor Mortgage Advisors-VI,
Balcor Mortgage Advisors-VII, Balcor Mortgage Advisors-VIII, Balcor Mortgage
Advisors, Inc., Balcor Mortgage Advisors-V, Inc., The Balcor Company, Balcor
Securities Co., Shearson Lehman Hutton Inc., and American Express Company
(collectively "Defendants"). Plaintiffs assert that Defendants violated the
<PAGE>
law by misrepresenting or concealing material information concerning Balcor
Pension Investors, Balcor Pension Investors-II, Balcor Pension Investors-III,
Balcor Pension Investors-IV, Balcor Pension Investors-V, Balcor Pension
Investors-VI, Balcor Pension Investors-VII, and Balcor Preferred Pension-12
(the "BPI Partnerships") in connection with purchases of interests in them by
members of the Class. Defendants vigorously deny any wrongdoing and assert
that their conduct was proper and conformed to the law. To avoid the further
expense and risks of continued litigation, the parties have determined to
compromise their differences and have agreed to a proposed settlement that
resolves all issues raised by these lawsuits.
The class of persons who will be affected by the proposed settlement
consists of all individuals, partnerships, corporations and other entities who
invested in Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension
Investors-V, Balcor Pension Investors-VI, Balcor Pension Investors-VII, and
Balcor Preferred Pension-12 (the "BPI Partnerships"), during the original
public offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
This Notice contains important information regarding the settlement,
the final hearing on the settlement, and your right to participate in the
settlement hearing, which will be held on November 20, 1996 at 11:00 a.m. If
the Court approves the settlement, you will be bound by the Final Judgment.
YOU SHOULD READ THE ENTIRE NOTICE CAREFULLY, SINCE YOUR RIGHTS WILL BE AFFECTED
BY THIS SETTLEMENT.
2. History of the Lawsuits. There is now pending in the United
States District Court for the Northern District of Illinois an action captioned
Paul Williams, et al. v. The Balcor Company, et al., No. 90 C 0726, which was
filed on February 7, 1990. The lawsuit alleges violations by Defendants of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.
ee 78j(b) and 78t(a), Rule 10b-5 promulgated under e 10(b) of the Securities
Exchange Act of 1934, 17 C.F.R. d 240.10b-5, the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
ee 1961, et seq., and the common law in connection with the original offering
of interests in the BPI Partnerships. Defendants have denied these allegations
and have filed a class action counterclaim for declaratory judgment, which,
inter alia, concerns the propriety of defendants obtaining indemnification for
the attorneys' fees and expenses incurred defending this litigation from the
assets of the BPI Partnerships.
After the lawsuit was filed, the Seventh Circuit Court of Appeals
held in Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990), that
actions brought to enforce those provisions of the Securities Exchange Act of
1934 alleged in the lawsuit to have been violated by Defendants must be brought
within one year after discovery of the alleged violation and within three years
after such violation. Shortly thereafter, the United States Supreme Court made
a similar ruling in Lampf, Pleva, Lipkind, Prupis & Petrigrow v. Gilbertson,
<PAGE>
111 S.Ct. 2773 (1991). On July 21, 1994, the court granted the motion for
class certification filed by the class representatives and certified a class
solely on plaintiffs' claims of violations of the Securities and Exchange Act
of 1934.
On July 12, 1996, the Honorable James B. Zagel of the United States
District Court for the Northern District of Illinois preliminarily determined
that the proposed settlement is fair and reasonable.
3. Purpose of this Notice. This Notice is given pursuant to Federal
Rule of Civil Procedure 23 and an Order of the United States District Court for
the Northern District of Illinois. This Notice is not an expression of any
opinion by that Court as to the merits of any of the claims or defenses
asserted by any party in this lawsuit. The purpose of this Notice is to inform
you of the pendency of this lawsuit, the terms of the proposed class
settlement, the date of the court hearing on the settlement, and your rights
with respect to the settlement and hearing.
4. Definition of the Class. The proposed Class on whose behalf this
settlement is made consists of all individuals, partnerships, corporations and
other entities who invested in Balcor Pension Investors, Balcor Pension
Investors-II, Balcor Pension Investors-III, Balcor Pension Investors-IV,
Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor Pension
Investors-VII, and Balcor Preferred Pension-12, during the original public
offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
5. The Proposed Settlement. The parties have agreed to the
following settlement terms:
Consideration to the Class. As a condition of settlement, Defendants
will make the following consideration to the Class:
a. Defendants will deposit $100,000 into one of the bank
accounts of Balcor Preferred Pension-12 which shall be distributed to
members of the Class who invested in Balcor Preferred Pension-12.
b. The general partner ("General Partner") of each of the BPI
Partnerships will forego and instead distribute among the members of the
Class its distributive partnership share of Cash Flow from operations for
one of the four quarters immediately following the effective date of the
Settlement Agreement, excluding that percentage of such distributive share
of Cash Flow that, pursuant to the Partnership Agreement for each of the
BPI Partnerships (except Balcor Pension Investors), is to be set aside for
and deposited into the Early Investment Incentive Fund for such BPI
Partnership. The quarter for which the General Partner of each of the BPI
Partnerships will forego such distributive share of Cash Flow will be
chosen by Defendants by determining which quarter, of the four quarters
immediately following the effective date of the Settlement Agreement,
represents an average distributive Partnership share of Cash Flow earned
by such General Partner.
<PAGE>
c. Defendant The Balcor Company will guarantee to members of
the Class who invested in the following partnerships and who continue to
hold their units until termination of the partnership that the total
distributions from all sources, including Cash Flow, Mortgage Reductions,
distributions from the Early Investment Incentive Fund, and pursuant to
Section 18.4 of the Partnership Agreement for each of the BPI
Partnerships, made throughout the existence of the partnership, and
including monies distributed pursuant to this Settlement Agreement
will equal the following percentages of their respective initial capital
contributions:
Balcor Pension Investors VI - 90%
Balcor Pension Investors VII - 80%
Balcor Preferred Pension-12 - 80%
This guarantee will be null and void:
(1) As to any of the above partnerships in which there is
an effective change in control, including but not limited to:
(a) the replacement of the General Partner by an entity or individual
not affiliated with the current General Partner; (b) the General
Partner having been joined by any entity or individual not affiliated
with it as co-general partner; or (c) material restrictions having
been placed on the powers of the General Partner;
(2) As to any Class member who sells any of his/her/its
units, including any transfer of interests into the Early Investment
Incentive Fund, in any of the BPI Partnerships, with respect to such
units sold;
(3) As to any Class member who receives a tender offer
after April 1, 1996 for any of his/her/its units and does not accept
such tender offer, but which, if the Class member had accepted the
offer, would have resulted in the Class member having received
(including total partnership distributions to the Class member plus
the offer price of the tender) an amount equal to or greater than the
amount he/she/it would receive pursuant to the guarantee, the
percentage of the Initial Guarantee (the "Tender Percentage") equal
to the number of units which were not tendered pursuant to the tender
offer divided by the total number of units of the partnership
remaining eligible for the guarantee at the date of the termination
of said tender offer. In the event that more than one tender offer
is initiated, a Tender Percentage shall be computed for each tender
offer and the Tender Percentage for which the Initial Guarantee shall
be null and void shall be the sum of the Tender Percentages of all
tender offers. The "Initial Guarantee" for each of Balcor Pension
Investors-VI, Balcor Pension Investors-VII and Balcor Preferred
Pension-12 shall be a dollar amount per partnership interest equal to
the percentage of initial capital contribution described above as the
guarantee level in this Section 5(c) minus the actual dollar amount
distributed per partnership interest as of the date of the Settlement
Agreement. As of March 31, 1996, total distributions per interest in
these partnerships and the amount of additional distributions
guaranteed were:
<PAGE>
Additional Distributions
Per Interest Pursuant to
Total Distributions Per Initial Guarantee as of
Partnership Interest Through 03/31/96 03/31/96
Balcor Pension
Investors-VI $206.18 per $250 Interest $18.82 per $250 Interest
Balcor Pension
Investors-VII $147.05 per $250 Interest $52.95 per $250 Interest
Balcor Preferred
Pension-12 $55.87 per $100 Interest $24.13 per $100 Interest
As a result of distributions to holders of interests in these partnerships
and/or tender offers to holders of interests in certain of these partnerships
after April 1, 1996, the additional distributions per interest pursuant to the
Initial Guarantee have decreased and may decrease further. As of ,
defendants' records reflected that the number of interests held by members of
the Class who were original investors in these partnerships was approximately:
Units Held by
Partnership Class Members
Balcor Pension Investors-VI 1,032,269
Balcor Pension Investors-VII 379,261
Balcor Preferred Pension-12 262,174
The distributions provided for in subparagraphs 5.a. and 5.b. above
shall be made only to investors who purchased units in the BPI Partnerships
during the original public offerings of such interests, excluding those
individuals who excluded themselves from the Class. Those investors who
purchased interests in the BPI Partnerships during the original public
offerings but have excluded themselves from the Class and those investors who
purchased interests following the termination of the original offering periods
for such interests will receive only quarterly distributions of Cash Flow from
operations as provided in the Partnership Agreements for the BPI Partnerships.
6. Class Counsels' Attorneys' Fees and Costs. Defendants will pay
the fees and costs of class counsel that may be awarded or approved by the
Court.
7. Release. If the settlement is approved by the Court, all Class
members who did not timely exclude themselves from the Class will release
Defendants from all claims that were or could have been raised by the Class or
the Class Representatives against Defendants in these lawsuits.
8. Class Membership. If you invested in Balcor Pension Investors,
Balcor Pension Investors-II, Balcor Pension Investors-III, Balcor Pension
Investors-IV, Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor
Pension Investors-VII or Balcor Pension Preferred Pension-12 during the
<PAGE>
original public offerings of such interests, you are a member of the Class,
unless you expressly requested to be excluded ("opted out") on or before
November 20, 1995. As a member of the Class, any claims you may have against
defendants with respect to your interests in the BPI Partnerships will be
forever resolved and cannot be pursued in another lawsuit, except that you
shall not be precluded from participating in and sharing in any fund deposited
by any Defendant with the Securities and Exchange Commission, any state
securities commission or any governmental or regulatory entity in connection
with the resolution of proceedings relating to sales, marketing and related
activities as a soliciting dealer for the offering of interests in the BPI
Partnerships. YOU NEED DO NOTHING TO REMAIN A MEMBER OF THE CLASS, and your
rights in this lawsuit will be represented by class counsel, one of whom is
Norman Rifkind, Beigel, Schy, Lasky, Rifkind, Fertik & Gelber, 250 South Wacker
Drive, Suite 1500, Chicago, Illinois 60606.
9. Objecting to the Terms of the Settlement Agreement. If you have
any objections to the proposed settlement, you must file a written objection,
together with all briefs and other papers in support of the objection, with the
Court on or before November 4, 1996, and you must also serve copies of that
written objection on class counsel, Norman Rifkind, Esq., at the address set
forth in paragraph 8, above, and on counsel for Defendants, David L. Carden,
Esq., Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601-1692,
postmarked no later than October 20, 1996.
10. Final Hearing on Fairness of Settlement. A final hearing to
determine the fairness, reasonableness and adequacy of the proposed settlement
will be held on November 20, 1996 in the United States District Court for the
Northern District of Illinois, located in the Federal Building, 219 South
Dearborn Street, Chicago, Illinois, in Room 1919 at 11:00 a.m.
11. Further Information. This Notice is not all-inclusive. For
further information concerning the litigation, you may refer to the pleadings
and other papers, including the proposed Settlement Agreement, that have been
filed with the Court, which may be inspected during regular business hours at
the Office of the Clerk of the Court identified in paragraph 10, above, 20th
floor, or you may obtain further information about this action, the terms of
the settlement, the settlement hearing and how the settlement may affect your
rights by calling the following toll-free number for a recorded message:
1-800-XXX-XXXX. PLEASE DO NOT CONTACT THE CLERK OF THE COURT.
Dated: ______________
Clerk of the Court, United States
District Court for the Northern
District of Illinois
<PAGE>
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