UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-24129
Historic Preservation Properties 1989 Limited
Partnership (Exact name of registrant as specified in
its charter)
Delaware 04-3021042
(State or other jurisdiction (I.R.S. Employer of incorporation
or Identification No.)
organization)
Batterymarch Park II, Quincy, Massachusetts 02169
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 4721000
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
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
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (229.405 of
this chapter) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10K or
any amendment to this Form 10-K. [X]
Voting stock held by non-affiliates of the registrant:
Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the Form 10-K Document
into which Incorporated Incorporated by Reference
I Prospectus of the registrant
dated December 19, 1988
(the "Prospectus").
III The Prospectus.
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED
PARTNERSHIP
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Sequential
Page No.
Page No.
PART I
Item 1 Business K-3 4
Item 2 Properties K-5 6
Item 3 Legal Proceedings K-5 6
Item 4 Submission of Matters to a
Vote of Unit Holders K-5 6
PART II
Item 5 Market for the Registrant's
Units and Related Unit
Holder Matters K-6 7
Item 6 Selected Financial Data K-7 8
Item 7 Management's Discussion and
Analysis of Financial Condition and Results
of Operations K-8 9
Item 8 Financial Statements and
Supplementary Data K-12 13
Item 9 Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure K-12 13
PART III
Item 10 Director and Executive
Officer of the Registrant K-13 14
Item 11 Executive Compensation K-14 15
Item 12 Unit Ownership of Certain
Beneficial Owners and
Management K-15 16
Item 13 Certain Relationships and
Related Transactions K-15 16
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K K-16 17
SIGNATURES K-17 18
SUPPLEMENTAL INFORMATION K-18 19
PART I
Item 1. Business
Historic Preservation Properties 1989 Limited
Partnership (HPP'89, also referred to as the
Partnership), a Delaware limited partnership, was
organized under the Delaware Revised Uniform Limited
Partnership Act on September 1, 1988, for the purpose of
investing in a diversified portfolio of real
properties which qualified for rehabilitation tax
credits (Rehabilitation Tax Credits) afforded by Section 47 of
the Internal Revenue Code of 1986, as amended (the
Code), and rehabilitating such properties (or acquiring
such properties in the process of rehabilitation and completing such
rehabilitation) in a manner intended to render the cost of
such rehabilitation eligible for classification as
"Qualified Rehabilitation Expenditures", as such term is
defined inthe Code, and thus eligible for Rehabilitation Tax Credits.
The Partnership was initially capitalized with contributions of $100 from
its general partner and $100 from each of three initial limited
partners. On September 2, 1988, the Partnership filed a Registration
Statement on Form S-11, File Number 33-24129 (the Registration
Statement), with the Securities and Exchange Commission (the Commission)
with respect to the public offering of units of limited partnership
interest (Units) in the Partnership. The Registration Statement, covering the
offering of up to 100,000 Units at a purchase price of
$1,000 per Unit (an aggregate of $100,000,000), was
declared effective on December 19, 1988. The offering of
Units terminated on December 29, 1989, at which time the
Partnership had received gross offering proceeds of
$26,588,000 from 2,505 investors.
The general partner of the Partnership is Boston
Historic Partners Limited Partnership (the General
Partner), a Massachusetts limited partnership. The
general partners of the General Partner are (i) Portfolio Advisory
Services, Inc. (PAS), a Massachusetts corporation organized
for the purpose of acting as a general partner of the
General Partner, and (ii) Terrence P. Sullivan (Sullivan).
Limited partnership interests in the General Partner are
held by investors unaffiliated with the General Partner
(except for an approximately one-third limited partnership
interest which is owned by Sullivan).
The Partnership does not have any employees. For the
period January 1, 1995 through September 30, 1995,
accounting, asset management and investor services for
the Partnership were performed by PAS who received no
fee but was reimbursed for operating costs of providing
such services. The original contract with PAS was for one
year, commencing July 1, 1993, and was extended through September
30, 1995.
On October 1, 1995, HPP'89 engaged Claremont
Management Corporation (CMC), an unaffiliated Massachusetts Corporation,
to provide asset management, accounting and investor
services for an annual fee of $76,800 and reimbursement of
all operating expenses of providing such services. The
contract with CMC expires June 30, 1997 and is
automatically renewed on a yearly basis unless otherwise
terminated as provided for in the agreement.
The Partnership's only business is investing in real
properties which have qualified for Rehabilitation Tax
Credits. A presentation of information about industry
segments is not applicable and would not be helpful
in understanding the Partnership's business taken as a
whole. The Partnership's investment objectives and policies
are described on pages 28-36 of its Prospectus dated
December 19, 1988 (the Prospectus) under the caption
"Investment Objectives and Policies", which description is
incorporated herein by this reference. The
Prospectus was filed with the Commission pursuant to Rule
424 (b) on January 5, 1989.
The Partnership originally invested an aggregate of
$11,158,064 in three limited partnerships (collectively,
the "Investee Partnerships") through the acquisition of
general partnership interests in the Investee Partnerships,
each of which owned or acquired real properties, the
rehabilitation of which qualified for Rehabilitation Tax Credits.
The Partnership also originally invested $5,000,000 in a real
property that the Partnership purchased directly. In conjunction
with this direct purchase, the Partnership had placed a total of
$2,000,000 in an escrow account with the mortgage lender (the
mortgage lender) for such property for the purpose of funding
operating deficits until such time as there is sufficient cash flow
from operations to do so.
These properties, located in Jenkintown, Pennsylvania (Jenkins Court);
Portland, Oregon (Portland Lofts); New Orleans, Louisiana
(402 Julia); and St. Paul, Minnesota (the Cosmopolitan)
were placed in service in December 1989. As of December 31,
1996, 100% of the Limited Partners' capital contributions (net
of selling commissions, organizational and sales costs, acquisition
fees and reserves) had been invested in real property investments.
As further discussed in Item 7, Jenkins Court filed for
protection under Chapter 11 federal bankruptcy laws on November 23,
1994. On August 31, 1995, after maximum vesting of the
remaining Rehabilitation Tax Credits had been achieved for 1995 and
considering the unlikelihood of a successful plan of
reorganization, Jenkins Court negotiated with the mortgage
holder to transfer the deed and title of the property to the
mortgage holder in lieu of foreclosure.
On September 16, 1993, the Partnership sold one-third of its
general partnership interest in 402 Julia to the developer
general partner for $185,000. The Partnership's percentage of
interest in 402 Julia was thereby reduced from 98% to 65%. The
terms of the sale required an initial payment of $100,000 which was
paid in September 1993, and requires annual payments of $3,500
through 2016 and a final payment of $4,500 in 2017.
As further discussed in Item 7, in March 1996 the Partnership
contributed the Cosmopolitan and certain other assets and
liabilities to The Cosmopolitan at Mears Park, LLC (TCAMP), a
Delaware limited liability company, for a 50% ownership interest in
TCAMP. Concurrently, an unrelated party contributed $650,000 in
cash to TCAMP for a 50% ownership interest in TCAMP.
Simultaneously, TCAMP issued a mortgage note, the proceeds of
which, along with the $650,000 cash contribution were used to
settle in full the Partnership's mortgage note related to the
Cosmopolitan.
The Investee Partnerships and the Investee Limited Liability
Company are herein collectively referred to as "the Investee
Entities". Each of the Investee Entities' agreements is different, but in
general,provides for a sharing of management duties and decisions among
HPP'89 and therespective local general partners or other managing members
and certain priorities to HPP'89 with respect to return on and
return of invested capital. Significant Investee Entity decisions
require the approval of both HPP'89 and the local general
partners or other managing member. In addition, each Investee
Entity has entered into various agreements with its local
general partners or member, or their affiliates, to provide development,
management and other services, for which the local
general partners, other member (or their affiliates), are paid
fees by the respective Investee Entity. All the Investee
Entities are subject to first mortgage loans (except for Jenkins
Court, as discussed in Item 7). See Management's
discussion and Analysis of Financial Condition and
Results of Operations included as part of this Annual report
on Form 10-K for further detail.
The Investee Entities are, and will continue to be, subject
to competition from existing and future projects in the same
areas. The success of the Partnership will depend on
factors, many of which are beyond the control of the
Partnership and which cannot be predicted at this time.
Such factors include general economic and real estate
market conditions, both on a national basis and in those
areas where the projects are located, the availability and
cost of borrowed funds, real estate tax rates, operating
expenses, energy costs and government regulations. In
addition, other risks inherent in real estate investment
may influence the ultimate success of the Partnership,
including (i) possible reduction of rental income due to
an inability to maintain high occupancy levels or
adequate rental levels, or (ii) possible adverse changes in
general economic conditions and adverse local conditions,
such as competitive overbuilding, or a decrease in
employment or adverse changes in real estate laws,
including building codes. In particular, changes in federal
and state income tax laws affecting real estate ownership or
limited partnerships could have a material and adverse
effect on the business of the Partnership.
Item 2. Properties
See Item 1 above.
Item 3. Legal Proceedings
The Partnership and its Investee Entities are not party
to, to the best knowledge of the General Partner, any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders.
No matters were submitted to a vote of Unit holders.
PART II
Item 5. Market for Registrant's Units and Related Unit
Holder Matters.
(a) There is no active market for the Units and no such
market is expected to develop. Trading in the Units
is sporadic and occurs solely through private
transactions.
(b) As of March 15, 1997, there were 2,519 holders of
Units.
The Amended and Restated Agreement of Limited Partnership
(the Partnership Agreement) requires that any Cash Flow
(as defined therein) be distributed quarterly to the
investor limited partners (Limited Partners) in
specified proportions and priorities and that Sale or
Refinancing Proceeds (as defined therein) be
distributed as and when available. There are no
restrictions on the Partnership's present or future
ability to make distributions of Cash Flow or Sale or
Refinancing Proceeds. For the years ended December 31,
1996, 1995 and 1994, no distributions of Cash Flow or
Sale or Refinancing Proceeds were paid or accrued to the
Limited Partners.
Item 6. Selected Financial Data.
Periods Ended December 31,
(Unaudited)
1996 1995 1994 1993 1992
Revenues $552,395 $2,164,691 $ 2,188,421 $2,074,655 $1,853,948
Net Income (Loss) $473,848 $(1,928,010)$(1,391,927) $(1,476,662)$(1,234,413)
Net Income (Loss) per weighted
average Unit outstanding :
Loss before
extraordinary gain$(324.25) $ (71.79) $ (51.83)$ (54.98)$ (45.96)
Extraordinary gain $ 341.89 $ - $ - $ - $ -
Net Income (Loss) $ 17.64 $ (71.79) $ (51.83)$ (54.98)$ (45.96)
Total Assets as of
December 31, $892,540 $17,160,719 $ 19,092,470$19,495,840 $20,211,720
Long Term Debt, excluding discount
as of December 31, $ 0 $17,579,606 $18,496,144 $17,884,892 $17,500,000
Cash Distributions per weighted
average Unit
outstanding $ 0 $ 0 $ 0 $ 0 $ 0
Rehabilitation Tax
Credit per Unit $ 0 $ 0 $ 0 $ 0 $ 0
See Item 7 for a discussion of the factors that may materially
affect the foregoing information in future years.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources. The Partnership terminated
its offering of Units on December 29, 1989, at which time
Limited Partners had purchased 26,588 Units, representing
gross capital contributions of $26,588,000. The
Partnership originally invested an aggregate of
$11,158,064 in three Investee Partnerships which owned
or acquired real properties, the rehabilitation of
which qualified for Rehabilitation Tax
Credits. The Partnership also originally invested
$5,000,000 in real property that the Partnership had
purchased directly and was required to place a total of
$2,000,000 in an escrow account with the mortgage lender
for this property for the purpose of funding operating
deficits.
Such amounts originally contributed represent approximately
100% of the Limited Partners' capital contributions after
deduction of selling commissions, organizational and sales costs,
acquisition fees and reserves. The Partnership does not
expect to make any additional investments in new real
estate.
Effective March 15, 1996, HPP'89 contributed the
Cosmopolitan Building, and certain other assets and
liabilities, to TCAMP (a Limited Liability Company)
for a 50% ownership interest.Concurrently, another member contributed
$650,000 cash to TCAMP for a 50% ownership interest. Simultaneously, TCAMP
issued a mortgage note in the amount of $7,000,000 the
proceeds of which along with the $650,000 contributed cash,
were used to settle in full HPP'89's mortgage note payable related to the
Cosmopolitan Building. The fair value of the Cosmopolitan Building and
other assets contributed by HPP'89 approximated the fair value of liabilities
transferred to TCAMP by HPP'89 and the amount paid by TCAMP to
settle in full HPP'89's mortgage note payable related to the
Cosmopolitan Building. This transaction resulted in a provision for
impairment of real estate of $8,437,963 to recognize a reduction to
fair value at the date of contribution to TCAMP and an extraordinary
gain on debt extinguishment of $9,182,017 to recognize the
difference between the amount outstanding under the mortgage payable
and the amount accepted by the lender from TCAMP in full settlement.
HPP'89 will no longer have any operations directly due to real estate
activity. As of March 15, 1996, the Partnership accounts
for its investment in TCAMP under the equity method of accounting.
As further discussed later under Results of Operations, Jenkins Court
filed for protection under Chapter 11 Federal
Bankruptcy laws on November 23, 1994. On August 31, 1995, after
maximum vesting of the remaining Rehabilitation Tax Credits had
been achieved for 1995, and considering the unliklihood of a
successful plan of reorganization, Jenkins Court negotiated with the
mortgage holder to transfer the deed and the title of the property
to the mortgage holder, in lieu of foreclosure.
Also, as further discussed in the Results of Operations section, in
May 1996, Portland Lofts reached a settlement agreement with the
holder of its mortgage note and an unsecured note. According
to the Settlement Agreement, Portland Lofts was allowed until,
July 31, 1996, to pay $5,400,000 to the holder in full satisfaction of
both the mortgage note and an unsecured note. On June 20, 1996,
Portland Lofts obtained alternative financing to fully satisfy the mortgage
note and unsecured note, as well as a separate note payable. In
1990, the Partnership fully reserved against its investment
in Portland Lofts, due to the substantial doubt it would
continue as a going concern. Generally, under the equity
method of accounting, an investment may not be carried below
zero. Accordingly, since the Portland Lofts investment was
fully reserved for, the Partnership had cumulative
unrecorded losses of $1,325,926 as of December 31, 1995.
Portland Lofts generated a net income of $1,547,514 in
1996, principally as a result of an extraordinary gain
on extinguishment of debt, of which HPP'89 has been
allocated $1,532,039. This allocated net income allowed
HPP'89 to recover all of its cumulative unrecorded losses
from Portland Lofts. HPP'89's income in equity recognized
in 1996, totaled $206,113 before distributions and after
the recovery of cumulative unrecorded losses.
The short term liquidity of the Investee Entities, with
the exception of Jenkins Court, depends on their ability to
generate sufficient rental income to fund operating
expenses and debt service requirements. Both TCAMP and
Portland Lofts have stabilized operations and, after
considering the effects of their recent respective
refinancings, are expected to generate cash
flow. During 1996, the Partnership received distributions
from Portland Lofts and TCAMP totaling $26,000 and $98,200,
respectively.
HPP'89's cash is used primarily to fund general and
administrative expenses of running the public fund. After the
contribution of the Cosmopolitan to TCAMP, the
Partnership's only source of short term liquidity is from
distributions received from Investee Entities. The Partnership expects
to fund its expenses with cash flow distributions from Portland Lofts
and, if required, from TCAMP. As of December 31, 1996, the Partnership
had $163,316 of total cash, of which $63,316 was not insured by the
Federal Deposit Insurance Corporation.
To the extent that The Partnership accumulates from whatever sources
operating reserve amounts greater than $140,000 at the end of any
fiscal year, The Partnership is required to contribute such excess
within thirty days of the end of such fiscal year to TCAMP as additional
capital contributions to be distributed by TCAMP to its other member as a
return of the outstanding portion of her original capital
contribution. Since the Partnership anticipates funding
its expenses principally from distributions received from
Portland Lofts, the Partnership does not expect that this
requirement will affect its ability to fund its expenses.
Cash flow generated from the Partnership's investment
properties and the Partnership's share of the proceeds from
the sale of such properties is expected to be the source of
future long-term liquidity.
Results of Operations. The Partnership generated net
income, under generally accepted accounting principles, of
$473,848 in 1996, including its allocable share of
income from Investee Entities of $297,734, a loss on
impairment of real estate of $8,437,963 and an
extraordinary gain on extinguishment of debt of $9,182,017.
The Partnership's allocable share of operating income
and/or losses in the Investee Entities range from 50% to 99%.
Income allocated from the Investee Entities to the
Partnership represents a loss from 402 Julia of
approximately $3,000, amortization of approximately $3,000
and income from Portland Lofts and TCAMP of approximately
$206,000 and $98,000, respectively.
On January 5, 1995, the Partnership resolved a dispute with
the holder of the Cosmopolitan's mortgage over certain
amounts in an escrow account. As a result, the Partnership
was provided with certain funds from the escrow account
and the opportunity to purchase the mortgage note at the
fair market value of the property, in exchange for the
release of the principal funds from the escrow account
as a payment toward the mortgage principal and a reduction of
the mortgage term by three years.
Effective March 15, 1996, HPP'89 contributed the
Cosmopolitan Building, and certain other assets and
liabilities, to TCAMP (a Limited Liability Company) for a 50% ownership
interest. Concurrently, another member contributed $650,000
cash to TCAMP for a 50% ownership interest.
Simultaneously, TCAMP issued a mortgage note in the amount
of $7,000,000 the proceeds of which along with the $650,000
contributed cash, were used to settle in full HPP'89's
mortgage note payable related to the Cosmopolitan Building.
The fair value of the Cosmopolitan Building and other assets
contributed by HPP'89 approximated the fair value of
liabilities transferred to TCAMP by HPP'89 and the amount
paid by TCAMP to settle in full HPP'89's mortgage note
payable related to the Cosmopolitan Building. This
transaction resulted in a provision for impairment of
real estate of $8,437,963 to recognize a
reduction to fair value at the date of contribution to TCAMP
and an extraordinary gain on Debt extinguishment of
$9,182,017 to recognize the difference between the
amount outstanding under the mortgage payable and the amount
accepted by the lender from TCAMP in full settlement. This
transaction did not generate any recapture of
Rehabilitation Tax Credits to the Partnership because the
tax credits were already fully vested.
As a result of the contribution of the Cosmopolitan to TCAMP
for a 50% ownership interest in TCAMP, HPP'89 will no
longer have operations directly due to real estate activity.
As of the date of contribution, the Partnership accounts
for its investment in TCAMP under the equity method of
accounting.
Both 402 Julia and TCAMP are residential properties
with traditional, annual operating leases to individuals that
expire within one year of signing. Portland Lofts is a
mixed-use building with 91 residential units and 23,470
square feet of commercial space. The residential
leases are traditional, annual operating leases to
individuals that expire within one year of signing. There
are 16 commercial units, with operating leases which range
in length from one to eight years. The largest commercial tenant occupies
only 5.8% of the total square feet of the property.
402 Julia has had better than 90% occupancy levels since
July 1990 and was 100% leased at December 31, 1996. This
24 unit residential building has benefited from a relatively
strong New Orleans market.
TCAMP had leased approximately 99% of its units at December
31, 1996, and has met occupancy projections. This 255 unit
property operates in a very competitive lowertown St. Paul
market and has steadily leased up since 1992.
Jenkins Court transferred title and deed to its property to
the holder of the mortgage in August 1995 through
foreclosure proceedings.
Although Jenkins Court no longer owns its investment
property and will no longer have property operations, the
Jenkins Court partnership will remain in existence until
the resolution of certain partnership assets and
liabilities. These liabilities include a $250,000 default
loan and accrued interest thereon, which has been provided
by HPP'89 and secured by the developer's interest in an
unaffiliated limited partnership. As a result of the
Chapter 11 proceedings, The Partnership is not expected to
be liable as a general partner of Jenkins Court for
any remaining obligations of Jenkins Court.
Since the fourth quarter of 1990, HPP'89 had reserved
against its investment in Jenkins Court, reducing such
investment to zero due to the substantial doubt that
Jenkins Court would continue as a going concern. Since
Jenkins Court no longer owns its investment property, it is
not expected to continue as a going concern.
Consequently, due to Jenkins Court's foreclosure in 1995,
HPP'89's investment in Jenkins Court and its
corresponding reserve, both totaling $5,471,055, were
eliminated from the balance sheet as of December 31, 1995.
As of December 31, 1996, Portland Lofts had approximately 85%
occupancy of residential units and 81% occupancy of net
rentable commercial space for a combined occupancy of
approximately 87%.
On May 21, 1996, Portland Lofts and the holder of its
mortgage note and an unsecured note entered into a Settlement
Agreement (the Agreement) to resolve the claims concerning
these notes. According to the Agreement, Portland Lofts was
allowed, until July 31, 1996, to pay $5,400,000 to the new
note holder in full satisfaction of the mortgage note and the
unsecured note.
On June 20, 1996, Portland Lofts issued a promissory mortgage
note in the amount of $5,625,000 and a promissory
note to a general partner in the amount of $340,000 to
provide sufficient funds to pay in full the $5,400,000
settlement amount with the new holder, the unsecured note
payable and all related closing costs.
The transaction resulted in an extraordinary gain on
extinguishment of debt of $1,656,579. The current
$5,625,000 mortgage note on the property: bears interest
at 9.0%; amortizes over a 25-year schedule;
requires monthly payments of principal and interest of $47,205;
and matures on July 1, 2006, at which time all unpaid principal
and interest is due.
In 1990, the Partnership fully reserved against its investment
in Portland Lofts, due to the substantial doubt it would
continue as a going concern. Generally, under the equity method
of accounting, an investment may not be carried below zero.
Accordingly, since the Portland Lofts investment was fully
reserved for, the Partnership had cumulative unrecorded losses
of $1,325,926 associated with the investment as of December 31, 1995.
Principally as a result of a extraordinary gain on
extinguishment of debt, Portland Lofts generated net income of
$1,547,514 in 1996, of which HPP'89 has been
allocated $1,532,039. This allocated net income allowed HPP'89
to recover all of its cumulative unrecorded losses from
Portland Lofts. HPP'89's net income in equity recognized in 1996,
after recovery all of cumulative unrecorded losses, from the
Portland Lofts Investment, totaled $206,113.
Inflation and Other Economic Factors
Recent economic trends have kept inflation relatively low,
although the Partnership cannot make any predictions
as to whether recent trends will continue. The assets of
the Partnership, principally investments in Investee Entities,
are highly leveraged in view of the fact that each Investee
property is subject to a long-term first mortgage loan.
Operating expenses and rental revenue of each Investee
property are subject to inflationary factors. Low rates of
inflation could result in slower rental rate increases, and to the
extent that these factors are outpaced by increases in
property operating expenses (which could arise as a
result of general economic circumstances such as an
increase in the cost of energy or fuel, or from local
economic circumstances), the operations of the Partnership
and its Investees could be adversely affected. Actual
deflation in prices generally would, in effect, increase the
economic burden of the mortgage debt service with a
corresponding adverse effect.
High rates of inflation, on the other hand, raise the
operating expenses for projects, and to the extent they
cannot be passed on to tenants through higher rents, such
increases could also adversely affect Partnership and
Investee operations. Although, to the extent rent
increases are commensurable, the burden imposed by the
mortgage leverage is reduced with a favorable effect. Low
levels of new construction of similar projects and high
levels of interest rates may foster demand for existing
properties through increasing rental income and appreciation
in value.
Item 8. Financial Statements and Supplementary Data.
See the Financial Statements of the Partnership included as
part of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
Previously disclosed in the Partnership's Report on Form 8-
K which was filed on December 17, 1991.
PART III
Item 10. Director and Executive Officer of the Registrant.
(a) and (b) Identification
of Director and Executive Officer.
The following table sets forth the name and age of the
director and executive officer of PAS and the offices
held by such person.
Name Office Age
Terrence P. Sullivan President and Director 50
Mr. Sullivan has served as a director and executive
officer of PAS, which is a general partner of the General Partner since
November 1986. Since that time, he has also been a general
partner of the General Partner. He will continue to serve in the
capacity indicated above until his successor is elected and qualified.
Mr. Sullivan is also an executive officer of Boston Capital Planning
Group, Inc. (Boston Capital Planning), a Massachusetts
corporation.
(c) Certain Significant Employees.
None.
(d) Family Relationships.
None.
(e) Business Experience.
The background and experience of the executive officer and
director of PAS and Boston Capital Planning identified above in Items
10(a) and 10(b) is as follows:
Terrence P. Sullivan, 50, is the founder and sole shareholder of
Boston Capital Planning, a financial consulting and real estate
syndication firm, and its wholly-owned subsidiary, Boston Bay
Capital, Inc. (Boston Bay Capital). Founded in 1979, Boston Bay
Capital was an NASD-Registered broker/dealer specializing in
placement of interests in real estate limited partnerships which own
historic and restoration properties. From 1979 through December
31, 1986, Boston Bay Capital participated in the placement of
limited partnership interests in 98 real estate programs,
approximately 60 of which were historic rehabilitation or restoration
partnerships, placing a total of approximately $140,000,000 in
equity. In addition, Boston Bay Capital served as dealer manager
in connection with the sale of Units of limited partnership
interest in Historic Preservation Properties Limited Partnership,
Historic Preservation Properties 1988 Limited Partnership, the
Partnership, and Historic Preservation Properties 1990 L.P. Tax
Credit Fund, four public programs sponsored by the General Partner
and an affiliate of the General Partner. Such public programs
sold an aggregate of approximately $82 million of Units of limited
partnership interest.
From 1972 to 1978, Mr. Sullivan was Tax Shelter coordinator for the
Boston office of White, Weld & Co., Inc., an investment banking
firm. Mr. Sullivan graduated from Worcester Polytechnic Institute in
1968 with a Bachelor of Science degree in mechanical engineering.
He received a Masters in Business Administration from the
University of Massachusetts (Amherst) in 1971. Mr.
Sullivan serves as a general partner of BBC Restoration Properties
II Limited Partnership. In addition, an entity controlled by
Mr. Sullivan serves as the general partner of Institutional
Credit Partners Limited Partnership (ICP), a partnership organized to
invest in a diversified portfolio of properties which qualify
for low-income housing tax credits, Rehabilitation Tax
Credits, or both. In 1989, ICP completed a private
placement of $5,790,000 of limited partnership interest
to corporations and other institutional investors.
(f) Involvement in Certain Legal Proceedings.
None.
Item 11. Executive Compensation.
The director and executive officer of PAS and Boston Capital
Planning receives no remuneration from the Partnership.
Under the Partnership Agreement, the General Partner and its
affiliates are entitled to receive various fees, expense
reimbursements, commissions, cash distributions, allocations of
taxable income or loss and tax credits from the Partnership. The
amounts of these items and the times at which they are payable
to the General Partners and their affiliates are described on
pages 13-15 and 36-39 of the Prospectus under the captions
"Management Compensation" and "Cash Distributions and Net Profits
and Net Losses", respectively, which descriptions are incorporated
herein by this reference.
The following table sets forth the amount of expense
reimbursements which the Partnership paid to or accrued for the
account of the General Partner and its affiliates for the
years ended December 31, 1995 and 1994. There were no
expense reimbursements paid to or accrued, for the years ended
December 31, 1996.
Receiving Type of Amount of Compensation
Entity Compensation 1995 1994
(Unaudited) (Unaudited)
General Reimbursement of
Partner Administrative
and/or Expenses $ 67,955 $ 92,126
Affiliates
Total $ 67,955 $ 92,126
For the year end December 31, 1996, the Partnership
allocated to the General Partner unaudited taxable income of
$104,578 and for the years ended December 31, 1995 and
1994, the Partnership allocated unaudited losses of $20,545
and $13,919, respectively. See Note 6 of Notes to
Financial Statements for additional information about
transactions between the Partnership and the General
Partner and its affiliates.
Item 12. Unit Ownership of Certain Beneficial Owners
and Management.
(a) Unit Ownership of Certain
Beneficial Owners.
No person or group is known by the Partnership to
be the beneficial owner of more than 5% of the
outstanding Units at March 15, 1997. Pursuant to the
Partnership Agreement, the voting rights of the Limited
Partners are limited and, in some circumstances, are
subject to the prior receipt of certain opinions of
counsel or judicial decisions.
Under the Partnership Agreement, the right to manage
the business of the Partnership is vested solely in the
General Partner, although the consent of a majority in
interest of the Limited Partners is required for the sale
at one time of all or substantially all of the
Partnership's assets and with respect to certain other
matters. See Item 1 above for a description of the General
Partner and its general partners.
(b) Unit Ownership of Management.
No director or executive officer of PAS, Boston Capital
Planning or their affiliates had any beneficial ownership
of Units as of March 15, 1997. However, a former Vice
President of Boston Capital Planning purchased 20 Units
($20,000) in the Partnership during 1989. No officer or
director of PAS or Boston Capital Planning, nor any
general partner of the General Partner, nor any of their
respective affiliates, possesses the right to acquire
Units.
(c) Change in Control.
There exists no arrangement known to the Partnership which
may at a subsequent date result in a change in control
of the Partnership.
Item 13. Certain Relationships and Related Transactions.
See Note 6 of Notes to Financial Statements for
information about transactions between the Partnership
and the General Partner and its affiliates. See Item 11
above for information concerning the reimbursements which
the Partnership paid to or accrued for the account of
the General Partner and its affiliates for the years ended
December 31, 1995 and 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) The following documents are filed as part of this
report:
1. Financial Statements - The Financial
Statements listed on the accompanying Index
to Financial Statements and Schedules are
filed as part of this Annual Report.
2. Financial Statement Schedules - The
Financial Statement Schedules listed on the
accompanying Index to Financial Statements is
filed as part of this Annual Report.
3. Exhibits - The Exhibits listed on the
accompanying Index to Exhibits are filed as
part of this Annual Report and incorporated in
this Annual Report as set forth in said Index.
(b)Reports on Form 8-K - The Partnership did not
file any Current Reports on Form 8-K during
the fourth quarter of 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP
By: Boston Historic Partners Limited
Partnership, General Partner
By: Portfolio Advisory Services,
Inc., General Partner
Date: March 15, 1997 By:
Terrence P. Sullivan,
President
and
Date: March 15, 1997 By:
Terrence P. Sullivan,
General Partner
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Signature Title
Individual General Partner of
Boston Historic Partners Limited
Partnership and President,
Principal
Terrence P. Sullivan Executive Officer and Director of
Portfolio Advisory Services,Inc.,
Date: March 15, 1997 General Partner of Boston Historic
Partners Limited Partnership.
Principal Financial and Principal
Accounting Officer of Portfolio
Advisory Services, Inc., General
Terrence P. Sullivan Partner of Boston Historic Partners
Limited Partnership
Date: March 15, 1997
Supplemental Information to be Furnished with Reports
Filed Pursuant to Section 15(d) of the Act by Registrants
Which Have Not Registered Securities Pursuant to Section 12
of the Act.
An annual report will be furnished to Unit holders
subsequent to filing of this Form 10-K.
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Historic Preservation Properties 1989 Limited Partnership
ITEM 14 (a) 3
EXHIBITS
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
Index to Exhibits
Exhibit No. Title of Documents
3(a)
Certificate of Limited
Partnership of Historic
Preservation Properties 1989
Limited Partnership dated as of
August 30, 1988 (filed as an exhibit
to the Partnership's
Registration Statement of Form
S-11, File No. 33-24129, and
incorporated herein by this
reference).
3(b) Agreement of Limited
Partnership of Historic Preservation
Properties 1989 Limited Partnership
dated as of August 30, 1988 (filed as an
exhibit to the Partnership's Registration
Statement on Form S-11, File No. 33-
24129, and incorporated herein by this
reference).
3(c) Amended and Restated Agreement of Limited
Partnership of Historic Preservation
Properties 1989 Limited Partnership dated
as of December 19, 1988, as
currently in effect, other than amendments
thereto which provide solely for the admission
or withdrawal of investors as
limited partners of the Partnership (filed
as an exhibit to the Partnership's Registration
Statement of Form S11, File No. 33-2419, and
incorporated herein by this reference).
4(a) See Exhibits 3(a), 3(b)
and 3(c).
10(a) Sales Agency Agreement between
Historic Preservation Properties
1989 Limited Partnership and Boston
Bay Capital, Inc., dated December 19,
1989 (filed as Exhibit No. 10(a)
to the Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
10(b) Escrow Deposit Agreement
between Historic Preservation
Properties 1989 Limited Partnership
and Wainwright Bank and Trust
Company dated December 19, 1989
(filed as Exhibit No. 10(b) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
10(c) Documents relating to the acquisition of
a general partnership interest in Jenkins
Court Associates Limited Partnership (filed as
part of Post-Effective Amendment No. 1
to the Partnership's Registration Statement
of Form S-11, File No. 33-24129, and
incorporated herein by this reference).
10(d) Documents relating to the acquisition of
a general partnership interest in Portland Lofts
Associates Limited Partnership (filed as part
of Post-Effective Amendment No. 2 to
the Partnership's Registration Statement on Form
S-11, File No. 33-24129, and incorporated herein
by this reference).
10(e) Documents relating to the acquisition of
a general partnership interest in 402 Julia
Street Associates Limited Partnership (filed as a
part of Post-Effective Amendment No. 2
to the Partnership's Registration Statement on
Form S-11, File No. 33024129, and
incorporated by this reference).
10(f) Documents relating to the acquisition of
the Cosmopolitan Building, St. Paul, Minnesota.
I. Purchase and Sale Agreement between Historic
Landmarks Realty Growth Fund: The
Cosmopolitan (the "Seller"), as Seller,
and Historic Preservation
Properties 1989 Limited
Partnership (the "Partnership"),
as Buyer, dated as of July 14,
1989 (filed as part of Post Effective
Amendment No. 2 to the
Partnership's Registration Statement
on Form S-11, File No. 33-24129,
and incorporated herein by this
reference).
II. Amendment to Purchase and Sale
Agreement dated September, 1989,
between the Seller and the
Partnership (filed as Exhibit No.
10(f) to the Partnership's Form 10-K
as of December 31, 1989 and
incorporated herein by this
reference).
III. Loan Agreement dated December 18, 1989
between the Partnership and Meritor
Savings Bank (filed as Exhibit No. 10(f) to the
Partnership's Form 10-K as of December 31, 1989
and incorporated herein by this
reference).
IV. Allonge to First Loan Note and Second
Loan Note dated December 18, 1989, between
the Partnership and Meritor Savings Bank
(filed as Exhibit No. 10(f) to the
Partnership's Form 10-K as of December 31, 1989
and incorporated herein by this reference).
V. Mortgage, Security Agreement, Modification,
Consolidation and Amendment Agreement dated
December 18, 1989, between the Partnership and
Meritor Savings Bank (filed as Exhibit No. 10(f)
to the Partnership's Form 10-K as of December 31, 1989
and incorporated herein by this reference).
VI. Security Agreement dated December 18, 1989
between the Partnership and Meritor Savings Bank
(filed as Exhibit No. 10(f) to the Partnership's Form 10- K
as of December 31, 1989 and incorporated herein
by this reference).
VII. Assignment of Leases, Consolidation and Modification
Agreement dated December 18, 1989 between the
Partnership and Meritor Savings Bank (filed as
Exhibit No. 10(f) to the Partnership's Form 10-K as
of December 31, 1989 and incorporated herein by this reference).
VIII. Assignment of Depository accounts dated December 18,1989
between the Partnership and Meritor Savings Bank
(filed as Exhibit No. 10(f) to the Partnership's
Form 10-K as of December 31, 1989 and incorporated herein
by this reference).
IX. Assignment and Subordination of Management and Leasing
Consolidation and Modification Agreement dated
December 18, 1989 between the Partnership and Meritor
Savings Bank (filed as Exhibit No. 10(f) to the
Partnership's Form 10-K as of December 31, 1989
and incorporated herein by this reference).
X. Management and Leasing Agreement dated
as of October 17, 1989 between the Partnership
and McKenna Management Associates (filed as
Exhibit 10(f) to the Partnership's Form 10-K as
of December 31, 1989 and incorporated
herein by this reference).
10(g)Documents relating to $400,000 loan to Portland Lofts
Associated Limited Partnership
I. Promissory Note, dated December 29, 1989, delivered by Portland
Lofts Associates Limited Partnership to Capital Consultants, Inc.
(filed as Exhibit 10(g) to the
Partnership's Form 10-K as of December 31, 1989 and
incorporated herein by this reference).
II. Deed of Trust and Security Agreement dated December 29, 1989,
between Portland Lofts Associates Limited Partnership and
Capital Consultants, Inc. (filed as Exhibit No. 10(g)
to the Partnership's Form 10-K as of December 31, 1989 and
incorporated herein by this reference).
III. Assignment of Surplus dated December 29, 1989, delivered
by Joseph W. Angel II and Lynne I. Angel to Capital
Consultants, Inc. (filed as Exhibit No. 10(g) to the
Partnership's Form 10-K as of December 31, 1989 and
incorporated herein by this reference).
IV. Guaranty of Note and Deed of Trust dated December 29, 1989, delivered
by Joseph W. Angel II and Dennis M. Gilman to Capital
Consultants, Inc. (filed as Exhibit No. 10(g) to the
Partnership's Form 10-K as of December 31, 1989 and
incorporated herein by this reference).
10(h)Management Agreement dated August 20, 1989 between Portland
Lofts Associates Limited Partnership and Great Northwest Management
(filed as Exhibit No. 10(h)to the Partnership's Form 10K as of
December 31, 1989 and incorporated herein by this reference).
10(i)Documents relating to Settlement of Fleet National Bank Loan
to Jenkins Court Associates Limited Partnership (all dated as of
February 7, 1991).
I. Settlement Agreement between
Fleet National Bank ("Fleet") and Jenkins Court Associates
Limited Partnership ("Jenkins Court") (filed as Exhibit
No. 10(i) to the Partnership's Form 10-K as of December
31, 1991 and incorporated herein by this reference).
II. Agreement between Fleet and
Jenkins Court (filed as Exhibit No. 10(i) to
the Partnership's Form 10-K as of December 31, 1991 and
incorporated herein by this reference).
III. $250,000 Promissory Note of
Jenkins Court (filed as Exhibit No. 10(i) to
the Partnership's Form 10-K as of December 31, 1991 and
incorporated herein by this reference).
IV. $20,820,000 Amended and Restated
Promissory Note of Jenkins Court (filed as Exhibit No.
10(i) to the Partnership's Form 10-K as of December 31, 1991 and
incorporated herein by this reference).
V. Open End Mortgage Modification Agreement between Fleet and Jenkins
Court (filed as Exhibit No. 10(i) to the Partnership's
Form 10-K as of December 31, 1991 and incorporated herein
by this reference).
VI. Assignment Modification Agreement between Fleet and Jenkins Court
(filed as Exhibit No. 10(i) to the Partnership's Form 10-K as of
December 31, 1991 and incorporated herein by this
reference).
10(j)Documents relating to Amended Settlement of Fleet Loan to
Jenkins Court (all dated as of January 29, 1992).
I. First Amended and restated Settlement Agreement between Fleet and
Jenkins Court (filed as Exhibit No. 10(j) to the Partnership's
Form 10-K as of December 31, 1991 and incorporated herein by
this reference).
II. First Allonge to Amended and Restated Promissory Note of Jenkins
Court (filed as Exhibit No. 10(j) to the
Partnership's Form 10-K as of December 31, 1991 and
incorporated herein by this reference).
III. Open End Mortgage Modification Agreement between Fleet
and Jenkins Court (filed as Exhibit No. 10(j) to the
Partnership's Form 10-K as of December 31, 1991 and
incorporated herein by this reference).
IV. Assignment Modification Agreement between Fleet and Jenkins
Court (filed as Exhibit No. 10(j) to the Partnership's Form 10-K as
of December 31, 1991 and incorporated herein by this reference).
V. Closing Letter between Fleet and Jenkins Court (filed as
Exhibit No. 10(j) to the Partnership's Form
10-K as of December 31, 1991 and incorporated herein by this
reference).
10(k)Agreement for Extension of Debt and
Related Matters between Security Pacific
Bank Oregon, Portland Lofts Associates Limited Partnership
and Joseph W. Angel, II dated May 7, 1991
(filed as Exhibit No. 10(k) to the
Partnership's Form 10-K as of December 31, 1991
and incorporated herein by this reference).
10(l)Documents related to the Second Amended
Settlement of Fleet Loan to Jenkins Court dated
as of July 2, 1992.
I. Second Amended and Restated
Settlement Agreement between Fleet
and Jenkins
Court (filed as Exhibit No. 10(l) to
the Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
10(m Documents relating to the Amended $6,800,000
Construction Loan to Portland Lofts
Associates Limited Partnership (all dated as
of March 31, 1992).
I. Promissory Note of Portland Lofts
to Security Pacific Bank Oregon
(Security Pacific) (now Bank of
America) (filed as Exhibit No. 10(m)
to the Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
II. Deed of Trust and Security Agreement
between Portland Lofts and Security
Pacific
(filed as Exhibit No. 10(m) to
the Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
III. Assignment of Leases and Conditional
Assignment of Rentals by Portland
Lofts to Security Pacific (filed as
Exhibit No. 10(m) to the Partnership's
Form 10-K as of
December 31, 1992 and
incorporated herein by this
reference).
IV. Guarantees of Note and Deed of Trust
delivered by East Bank Development,
Inc., Joseph W. Angel, II, Dennis M.
Gilman and Martin J. Soloway to
Security Pacific (filed as Exhibit
No. 10(m) to the Partnership's Form
10-K as of December 31, 1992 and
incorporated herein by this
reference).
V. Arbitration Agreement between Portland
Lofts and Security Pacific (filed
as Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
10(n)Management Agreement dated April 1,
1992 between Portland Lofts
Associates Limited Partnership and C & R
Realty (filed as Exhibit No. 10(n) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated herein by
this reference).
10(o)Documents relating to the sale of a
portion of the general partnership interest in
402 Julia Street Associates Limited
Partnership (all dated September 16, 1993)
I Second Amendment to the Amended and
Restated Agreement of Limited
Partnership of 402 Julia Street
Associates Limited Partnership
(filed as Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
II. Assignment and Assumption Agreement
between the Partnership, and Henry M.
Lambert and R. Carey Bond. (filed as
Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and
incorporated herein by this
reference).
III. Security Agreement between the
Partnership, and Lambert and Bond
(filed as Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
10(p)Agreement for Extension of Loan from
Fleet Bank to Jenkins Court Associates
Limited Partnership (dated as of June 15, 1993)
(filed as Exhibit No. 10(p) to the
Partnership's Form 10-K as of December 31, 1993
and incorporated herein by this reference).
10(q)Agreement for Extension of Loan from
Capital Consultants, Inc. to Portland Lofts
Associates Limited Partnership (dated January 3,
1994) (filed as Exhibit No. 10(q) to the
Partnership's Form 10K as of December 31, 1993
and incorporated herein by this reference).
10(r)Documents relating to the $15,000 loan
to Portland Lofts Associates Limited Partnership
(all dated March 2, 1992)
I. Rehabilitation Loan Agreement
between Portland Lofts and the City
of Portland (acting by and through
the Portland Development Commission)
(filed as Exhibit No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
II. Promissory Note between Portland Lofts
and the City of Portland (acting by and
through the Portland Development
Commission) (filed as Exhibit
No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
III. Trust Deed between Portland Lofts and the
City of Portland (acting by
and through the
Portland Development Commission)
(filed as Exhibit No.
10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
10(s) Documents relating to the settlement of
amounts payable between Portland Lofts and Richard E. Ragland, AIA
I. Letter of agreement signed by Portland Lofts
and Ragland (dated March 17, 1994)
(filed as Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
II. Promissory Note between Portland Lofts and
Ragland (dated February 22,
1994) (filed as
Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
III. Release of Claims between Portland Lofts
and Ragland (dated February 22, 1994)
(filed as Exhibit No.
10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
IV. Release of All Claims between Ragland and
Portland Lofts (dated March 1, 1994)
(filed as Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
10(t)Documents relating to the amendment of
loan documents by and between Historic
Preservation Properties 1989 Limited
Partnership and Mellon Bank, N.A. (all
dated December 28, 1994, but executed January
4, 1995), (filed as Exhibit 10(t) to the
Partnership's Form 10-K as of December 31, 1994
and incorporated herein by the reference).
I. First Amendment to Note
Mortgage and
Assignment of Leases.
II. Second Amendment to Loan Agreement
III. Letter Agreement on Payment of Legal Fees
10(u)Letter Agreement on Management Functions by
and between Historic Preservation Properties 1989
Limited Partnership and Jenkins Court Investors
Limited Partnership (dated September 8, 1994),
(filed as Exhibit 10(u) to the Partnership's Form
10-K as of December 31, 1994 and
incorporated herein by this reference).
10(v)Stipulation of Settlement, and Transfer Deed,
dated August 31, 1995, by and among Jenkins
Court Associates Limited Partnership, Miles S.
Katzen, Jenkins Court Investors Limited
Partnership, MSK Associates, Inc., Jane Katzen,
Frank Seidman, the Jane II Corporation and
Jenkins Court Pennsylvania L.P, (filed as
Exhibit 10(v) to the Partnership's Form 10-K as
of December 31, 1995 and incorporated herein by
this reference).
10(w)Asset Management Agreement, dated October 1,1995,
by and among Historic Preservation
Properties Limited Partnership, Historic
Preservation Properties 1988 Limited
Partnership, Historic Preservation Properties
1989 Limited Partnership, Historic Preservation
Properties 1990 L.P. Tax Credit Fund and
Claremont Management Corporation, (filed as
Exhibit 10(w) to the Partnership's Form 10-K
as of December 31, 1995 and incorporated
herein by this reference).
10(x)Property Management Agreement, dated November 1,
1995, by and between Historic Preservation
Properties 1989 L.P. and Claremont Management
Corporation, (filed as Exhibit 10(x) to the
Partnership's Form 10-K as of December 31, 1995
and incorporated herein by this reference).
10(y)First Amendment to Loan Documents,
dated June 1, 1995, by and between
Portland Lofts Associates Limited
Partnership and Capital Consultants, Inc.,
(filed as Exhibit 10(y) to the Partnership's
Form 10-K as of December 31, 1995 and
incorporated herein by this reference).
10(z)Documents relating to the organization
and management of The Cosmopolitan at Mears
Park, LLC.
I. Operating Agreement of the Cosmopolitan at
Mears Park, LLC, dated March 15, 1996.
II. Management Agreement between The
Cosmopolitan at Mears Park, LLC and
Claremont Management Corporation, dated
March 20, 1996.
10 (aa) Documents relating to the refinancing
of The Cosmopolitan at Mears Park, LLC Mortgage
Debt.
I. Promissory Note between the Cosmopolitan at
Mears Park, LLC and Heller Financial,
Inc., dated March 20, 1996.
II. Mortgage, Assignment of Rents and
Security Agreement between the Cosmopolitan
at Mears Park, LLC and Heller Financial,
Inc., dated March 20, 1996.
III. Letter Agreement between Patrick Carney
and Heller Financial regarding Personal
Liability for carve-outs to non-recouse
language dated March 20, 1996.
10 (bb) Settlement Agreement of the
Amended Construction Loan to Portland Lofts
Associates,
L.P., (Amended Construction Loan Agreement filed
as Exhibit No. 10(m) to the Partnership's Form 10K
as of December 31, 1992).
10 (cc) Documents relating to the
refinancing of the Portland Lofts Associates, L.P.
Mortgage Debt, (all dated as of June 20, 1996).
I. Promissory Note between Portland Lofts
Associates, L.P. and Bank of America Oregon.
II. The Standing Loan Agreement between Portland
Lofts Associates, L.P. and Bank of America
Oregon.
III. The Deed of Trust, with Assignment of Rents,
Security Agreement and Fixture Filing between
Portland Lofts Associates, L.P. and Bank of
America Oregon.
IV. The Payment Guaranty between Joseph W. Angel,
II and Bank of America Oregon.
V. The Payment Guaranty between Lynne I. Angel
and Bank of America Oregon.
10 (dd) Promissory Note between Portland
Loft Associates, L.P. and Joseph Angel and Lynne
Angel, dated December 18, 1996.
22 List of Investee Partnerships (filed as
Exhibit No. 22 to the Partnership's Form 10-K as
of December 31, 1989 and incorporated herein by
this reference).
28(ii)(a) Pages 13-25, 28-36 and 36-39 of the
Partnership's Prospectus dated December 19, 1988
(filed with the Commission pursuant to Rule 424(b)
on January 5, 1989 and incorporated herein by this
reference).
28(ii)(b) Supplement No. 1 to the Partnership's
Prospectus dated January 20, 1989 (filed as a part
of Post-Effective Amendment No. 1 to the
Partnership's Registration Statement on Form S-11,
File No. 33-24129, and incorporated herein by this
reference).
28(ii)(c) Supplement No. 2 to the Partnership's
Prospectus dated June 30, 1989 (filed as part of
Post-Effective Amendment No. 2 to the
Partnership's Registration Statement on Form S-
11, File No. 33-24129 and incorporated herein
by this reference).
28(ii)(d) Supplement No. 3 to the
Partnership's Prospectus dated July 25, 1989
(filed as a part of Post-Effective Amendment
No. 2 to the Partnership's Registration
Statement on Form S-11, File No. 33-24129, and
incorporated herein by this reference).
28(ii)(e) Supplement No. 4 to the
Partnership's Prospectus dated September 13,
1989 (filed as a part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129, and incorporated herein by
this reference).
28(ii)(f) Supplement No. 5 to the
Partnership's Prospectus dated September 19,
1989 (filed as a part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11, File No. 33-
24129, and incorporated herein by this
reference).
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
ANNUAL REPORT ON FORM 10-K
Items 14 (a) (1) and (2) and 14 (d)
INDEX TO FINANCIAL STATEMENTS
Page Financial Statements of Historic Preservation
Properties 1989 Limited Partnership
Independent Auditors' Report F-3
Balance Sheets as of December 31, 1996 and 1995 F-4
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-5
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1996, 1995 and 1994 F-7
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-8
Notes to Financial Statements F-10
Independent Auditors' Report on Accompanying Information F-25
Financial Statement Schedule
Real Estate and Accumulated Depreciation Held
Directly and by Investee Entities F-26
Financial Statements of The Cosmopolitan at Mears Park, LLC
(the St. Paul, Minnesota
Investee Entity)
Independent Auditors' Report F-29
Balance Sheet as of December 31, 1996 F-30
Statement of Operations for the Period
March 15, 1996 (Inception) through December 31, 1996 F-31
Statement of Members' Equity (Deficit) for the
Period March 15, 1996 (Inception) through December 31, 1996 F-32
Statement of Cash Flows for the Period
March 15, 1996 (Inception) through December 31, 1996 F-33
Notes to Financial Statements F-35
INDEX TO FINANCIAL STATEMENTS (Continued)
Page Financial Statements of Portland Lofts Associates
Limited Partnership (the Portland, Oregon
Investee Partnership)
Independent Auditors' Report F-40
Balance Sheets as of December 31, 1996 and 1995 F-41
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-42
Statements of Changes in Partners' Equity for the
Years Ended December 31, 1996, 1995 and 1994 F-43
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-44
Notes to Financial Statements F-46
Financial Statements of 402 Julia Street Associates
Limited Partnership (the New Orleans, Louisiana
Investee Partnership)
Independent Auditors' Report F-54
Balance Sheet as of December 31, 1996 and 1995 F-55
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-56
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1996, 1995 and 1994 F-57
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-58
Notes to Financial Statements F-59
INDEPENDENT AUDITORS' REPORT
The Partners
Historic Preservation Properties 1989 Limited Partnership
Quincy, Massachusetts
We have audited the accompanying balance sheet of Historic
Preservation Properties 1989 Limited Partnership (the Partnership) as of
December 31, 1996. This financial statement is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
balance sheet. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe
that our audit provides a reasonable basis for our opinion.
Because we were not engaged to audit the balance sheet as of December
31, 1995, or the statements of operations, changes in partners'
equity (defiency) and cash flows for each of the years in the three-
year period ended December 31, 1996, we did not extend our auditing
procedures to enable us to express an opinion on the financial
position of Historic Preservation Properties 1989 Limited Partnership
as of December 31, 1995 or the results of its operations and cash flows
for each of the years in the three-year period ended December 31,
1996. Accordingly, we express no opinion on them.
In our opinion, the balance sheet referred to in the first
paragraph presents fairly, in all material respects, the financial
position of Historic Preservation Properties 1989 Limited Partnership
as of December 31, 1996, in conformity with generally accepted
accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February, 21, 1997
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED
PARTNERSHIP BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
(Unaudited)
INVESTMENT IN REAL ESTATE
Building and improvements $ - $15,922,298
Land and land improvements - 1,171,079
Furniture and equipment - 526,875
$17,620,252
Accumulated depreciation - (2,853,348)
- 14,766,904
INVESTMENTS IN INVESTEE ENTITIES 4,097,336 3,923,802
Less reserve for realization of investments
in Investee Entities (3,469,267) (3,469,267)
628,069 454,535
CASH, AND CASH EQUIVALENTS including $542,088 of
restricted cash in 1995 163,316 788,602
DEFERRED EVALUATION AND ACQUISITION COSTS, net of
accumulated amortization (1995, $186,640) - 1,057,739
OTHER ASSETS 101,155 92,939
$892,540 $17,160,719
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage payable $ - $17,579,606
Less discount on mortgage payable - (1,059,719)
- $16,519,887
Accounts payable 3,734 5,366
Accrued expenses and other liabilities 42,110 262,618
Total liabilities 45,844 $16,787,871
COMMITMENTS AND CONTINGENCIES (Notes 4, 5 and 6)
PARTNERS' EQUITY:
Limited Partners' equity - Units of Investor Limited
Partnership interest, $1,000 stated value per
Unit - Issued and outstanding 26,588 units 1,069,565 600,455
General Partner's deficit (222,869) (227,607)
Total partners' equity 846,696 372,848
$ 892,540 $17,160,719
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
REVENUE:
Rental income $ 533,027 $2,043,734 $1,975,795
Interest and other income 19,368 120,957 212,626
552,395 2,164,691 2,188,421
EXPENSES:
Operating and administrative 141,861 120,242 101,985
Professional fees 35,536 11,549 70,556
Depreciation and amortization 124,804 524,903 513,745
Property operating expenses:
Other property operating 57,709 313,375 286,976
Management fees 21,940 86,771 83,630
Repairs and maintenance 52,728 192,568 208,582
Utilities 84,691 302,788 309,112
Real estate taxes 85,698 330,492 322,640
Insurance 7,295 30,150 29,629
612,262 1,912,838 1,926,855
PROVISION FOR IMPAIRMENT OF REAL
ESTATE (8,437,963) - -
INCOME (LOSS) FROM OPERATIONS (8,497,830) 251,853 261,566
INTEREST EXPENSE (508,073) (2,163,677) (1,638,696)
EQUITY IN INCOME (LOSS)
OF INVESTEE ENTITIES 297,734 (16,186) (14,797)
NET LOSS BEFORE EXTRAORDINARY GAIN (8,708,169) (1,928,010) (1,391,927)
EXTRAORDINARY GAIN ON
EXTINGUISHMENT OF DEBT 9,182,017 - -
NET INCOME (LOSS) $ 473,848 $(1,928,010)$(1,391,927)
NET INCOME (LOSS) ALLOCATED
TO GENERAL PARTNER $ 4,738 $ (19,280) $(13,919)
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ 469,110 $(1,908,730)$(1,378,008)
NET INCOME (LOSS) PER UNIT OF
INVESTOR LIMITED PARTNERSHIP
INTEREST, BASED ON 26,588 UNITS
ISSUED OUTSTANDING
LOSS BEFORE EXTRAORDINARY GAIN (324.25) (71.79) (51.83)
EXTRAORDINARY GAIN 341.89 - -
NET INCOME (LOSS) 17.64 $ (71.79) $(51.83)
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND
1994 (UNAUDITED)
Units of
Investor Investor General
Limited Limited Partner's
Partnership Partners' Equity
Interest Equity (Deficiency) Total
BALANCE,
December 31, 1993 26,588 $3,887,193 $ (194,408) $3,692,785
Net loss - (1,378,008) (13,919) (1,391,927)
BALANCE,
December 31, 1994 26,588 2,509,185 (208,327) 2,300,858
Net loss - (1,908,730) (19,280) (1,928,010)
BALANCE,
December 31, 1995 26,588 600,455 (227,607) 372,848
Net Income - 469,110 4,738 473,848
BALANCE,
December 31, 1996 26,588 $1,069,565 $ (222,869) $ 846,696
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 473,848 $(1,928,010)$(1,391,927)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 124,804 524,903 513,745
Amortization of discount on note
payable 233,893 930,442 296,356
Provision for impairment of real estate
at transfer of ownership interest in
real estate to investee entity 8,437,963 - -
Extraordinary gain on extinguishment
of debt (9,182,017) - -
Deferred interest expense added to
principal of mortgage payable 78,237 394,087 611,252
Equity in (Income) loss of
investee entities (297,734) 6,186 14,797
Increase (decrease) in accrued
expenses and other liabilities 88,719 (9,595) 60,331
Increase (decrease) in accounts payable (1,632) (18,110) 20,618
(Increase) decrease in other assets (23,306) 10,701 4,807
Net cash provided by (used in)
operating activities (67,225) (79,396) 129,979
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements - (16,369) -
Purchase of furniture and equipment (2,694) (2,349) -
Decrease in due from investee
partnerships - 3,000 1,522
Cash payment at transfer of ownership
interest in investment in real estate
to investee entity (679,567) - -
Cash distributions from investee
entities 124,200 - -
Net cash provided by (used in)
investing activities (558,061) (15,718) 1,522
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on mortgage
note payable - (1,310,625) -
Payment of deferred financing fees - (19,593) -
Cash used in financing activities - (1,330,218) -
NET INCREASE (DECREASE) IN CASH (625,286) (1,425,332) 131,501
CASH, BEGINNING OF YEAR 788,602 2,213,934 2,082,433
CASH AND CASH EQUIVALENTS, END OF YEAR $ 163,316 $ 788,602 $2,213,934
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 301,349 $ 832,170 $731,291
NON-CASH INVESTING ACTIVITY
On March 15, 1996, Historic Preservation Properties 1989
Limited Partnership contributed the following assets and
liabilities to The Cosmopolitan at Mears Park, LLC:
Land $1,009,000
Building and improvements 6,074,104
Furniture and equipment 200,994
Cash and cash equivalents 144,633
Cash, security deposits 94,093
Real estate tax escrow 168,416
Rent receivable 6,533
Deferred financing fees 233,397
Mortgage note payable (7,650,000)
Accounts payable and accrued expenses (184,799)
Security deposits (96,371)
(1) Organization
Historic Preservation Properties 1989 Limited Partnership (HPP'89)
was formed on September 1, 1988 under the Delaware Revised Uniform
Limited Partnership Act. The purpose of HPP'89 is to invest in a
diversified portfolio of real properties, for which certain costs of
rehabilitation have qualified for rehabilitation tax credits
(Rehabilitation Tax Credits).
Boston Historic Partners Limited Partnership (BHP), a
Massachusetts limited partnership, is the general partner of HPP'89,
and officers of Boston Capital Planning Group, Inc. (BCPG), an
affiliate of BHP, were the initial limited partners of HPP'89. The
initial limited partners withdrew as limited partners upon
the first admission of Investor Limited Partners
(Limited Partners). Prior to admission of the Limited Partners, all
costs incurred by HPP'89 were paid by BHP. On May 3, 1989, the first
Limited Partners were admitted to HPP'89 and operations commenced.
The Amended and Restated Agreement of Limited Partnership
(Partnership Agreement) of HPP'89 generally provides that all net
profits, net losses, tax credits and cash
distributions of HPP'89 from normal operations
subsequent to admission of Limited Partners shall be allocated 99% to
the Limited Partners and 1% to BHP. Proceeds from sales or
refinancings generally will be distributed 100% to the Limited Partners
until they have received an amount equal to their Adjusted Capital
Contributions (as defined in the Partnership Agreement) plus, priority
returns and additional incentive priority returns for certain Limited
Partners admitted to HPP'89 on or prior to certain specified dates.
(2) General Partner - BHP
BHP was formed in November 1986 for the purpose of organizing,
syndicating and managing publicly offered real estate limited
partnerships (Public Rehabilitation Partnerships). As of December 31,
1996, BHP had established three such partnerships, including HPP'89.
(3) Summary of Significant Accounting Policies
Investments in Investee Entities
HPP'89 accounts for its investments in its four investee
entities (Investee Entities) under the equity method. In general, under
the equity method of accounting for investments, the investment is
recorded at cost and the current allocable portion of earnings
(losses) of an Investee Partnership is recorded as income (loss)
with a corresponding increase (decrease) to the investment account.
(3) Summary of Significant Accounting Policies (Continued)
Investments in Investee Entities (Continued)
Distributions received are recorded as reductions to the
investment account. Expenditures attributable to HPP'89's
investments (primarily evaluation and acquisition fees and interest
expense incurred during construction periods) are treated as
additional investment basis and are amortized on a straight-line basis
over the estimated life of the investee assets (40 years).
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Investment in Real Estate and Depreciation
Investment in real estate was held for lease and stated at
cost through the date of contribution to TCAMP (see Note 4).
Depreciation was computed on a straight-line basis over 40 years for
real property and over seven years for personal property.
Cash, Cash Equivalents and Concentration of Credit Risk
HPP'89 considers all highly liquid investments with a maturity
of three months or less when purchased as cash equivalents December 31,
1996, cash equivalents totaled $140,000.
At December 31, 1996 and 1995, HPP'89 had approximately $63,000
and $526,000 (unaudited), respectively, of cash and cash equivalents in a
bank in excess of amounts insured by the Federal Deposit Insurance
Corporation.
Deferred Evaluation and Acquisition Costs
Expenditures related to the direct purchase of real estate had
been capitalized and were being amortized on a straight-line basis
over the estimated life of real property (40 years) through the
date of the contributions of real estate to TCAMP (see Note 4).
(3) Summary of Significant Accounting Policies (Continued)
Income Taxes
No provision (benefit) for income taxes is reflected in
the accompanying financial statements of HPP'89. Partners of
HPP'89 are required to report on their tax returns their allocable
share of income, gains, losses, deductions and credits determined on a
tax basis.
Rental Income
Until March 15, 1996, HPP'89 had a direct ownership interest in
a property located in St. Paul, Minnesota (see Note 4). Revenues
under annual operating leases from that property were recorded when due.
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies
During 1989, HPP'89 acquired general partnership interests in
three Investee Entities, as well as a direct interest in a property
located in St. Paul, Minnesota. Each such Investee Entity placed a
property in service in December 1989 and commenced initial leasing
activity.
As discussed below, in March 1996, HPP'89 contributed land,
building and improvements and furniture and equipment related to
its property located in St. Paul, Minnesota (the Cosmopolitan
Building), and certain other
assets and liabilities, to a limited liability company for a 50%
ownership interest in the Investee Entity.
HPP'89's current allocable percentage of operating income
and/or losses in the Investee Entities ranges from 50% to 99%. Each of the
Investee Entities' agreements is different but, in general, provides for
a sharing of management duties and decisions among HPP'89 and the
respective local general partners or other managing members, and certain
priorities to HPP'89 with respect to return on and return of invested capital.
Significant Investee Entity decisions require the approval of both
HPP'89 and the local general partners or other maintaining members. In
addition, each Investee Entity has entered into various agreements with
its local general partners or members, or their affiliates, to provide
development, management and other services, for which the local
general partners or other members (or their affiliates), are paid fees by the
respective Investee Entity.
Following is summary of information regarding the Investee
Entities and HPP'89's investments therein:
Jenkins Court Associates Limited Partnership (Jenkins Court) is
a Delaware limited partnership formed on December 20, 1988 to
acquire, construct, rehabilitate, operate and manage a 144,000 net
rentable square foot five-story building and 30,000 net rentable square feet
of new retail
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies (Continued)
space, including storage areas and parking facilities, located at Old
York Road and Rydal Road, Jenkintown Borough, Pennsylvania.
HPP'89 contributed $6,563,064 through the date of Jenkins
Court's Chapter 11 filing (see below) to the capital of Jenkins Court
and had a general partnership interest therein. HPP'89's investment in
Jenkins Court represented approximately 36% of the aggregate amount
which HPP'89 originally contributed to the capital of its three
Investee Entities acquired during 1989 and to purchase its direct
interest in the Cosmopolitan Building.
Due to slow leasing activity, Jenkins Court had difficulty making
debt service payments on its construction loan since the origin of its
loan. In July 1992, Jenkins Court and the lender entered into an
agreement by which the construction loan was bifurcated into two notes
and a substantial amount of accrued interest, late fees and extension
fees was forgiven. In June 1993, the lender extended the maturity date
of the notes to June 15, 1994.
Management of Jenkins Court was negotiating with the lender to
extend the notes to June 15, 1995. On September 30, 1994, the lender
sold the notes to a real estate investment entity, who became the new
holder of the notes. Management of Jenkins Court entered negotiations
with the new holder to extend or restructure the notes. On November 23,
1994, the new holder presented a demand for payment in full of the
balance of the notes and accrued interest thereon. On November 23,
1994, Jenkins Court filed a petition for relief under Chapter 11 of
the federal bankruptcy laws in United States Bankruptcy Court for the
jurisdiction of the Eastern District of Pennsylvania. Under Chapter 11,
certain claims against the Jenkins Court in existence prior to the
filing of the petition for relief under federal bankruptcy laws were
stayed while Jenkins Court continued business
operations as Debtor-in-Possession. Although the acceptance of a plan
of reorganization through the bankruptcy proceeding was highly
unlikely, Jenkins Court had achieved a short-term goal of maximizing the
vesting of the majority of its remaining tax credits on June 30, 1995.
On August 31, 1995, Jenkins Court and the mortgage holder entered
into a settlement agreement to resolve the bankruptcy litigation. As part
of the settlement agreement, Jenkins Court transferred the deed and title
to the property to the mortgage holder in lieu of foreclosure
proceedings. The mortgage holder agreed to release Jenkins Court and its
guarantors for the entire indebtedness and Jenkins Court received
$25,000 to pay certain professional fees incurred during the
bankruptcy proceedings. The transfer of deed and title of the
property to the mortgage holder resulted in a recapture of
Rehabilitation Tax Credits in 1995 of $44,451 (unaudited) to HPP'89, of
which $44,007 was allocated to the Limited Partners of HPP'89. Tax
credits allocated to the Limited Partners of HPP'89 totaling $2,758,113
(unaudited)
(4) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
were vested on or before June 15, 1995. Therefore, 98.4% (unaudited)
of the Limited Partners' tax credits were vested prior to the loss of
the property.
Although Jenkins Court no longer owns its investment property and
no longer has property operations after August 31, 1995, the Jenkins
Court partnership will remain in existence until the resolution of
certain partnership assets and liabilities. Partnership assets include
approximately $312,000 of unsecured receivables from the developer and
its affiliates which have been fully reserved for as of December 31,
1996;partnership liabilities include approximately $94,000 of trade payables
which have been fully reserved for as of December 31, 1996 since HPP'89
does not believe such amount will be recourse to HPP'89, as well as
a $250,000 default loan and accrued interest thereon which had been
provided by HPP'89 and secured by the developer's interest in an
unaffiliated limited partnership.
Since the fourth quarter of 1990, HPP'89 had reserved against
its investment in Jenkins Court, reducing such investment to zero due
to the substantial doubt that Jenkins Court would continue as a going
concern. Due to Jenkins Court's foreclosure in 1995, HPP'89's investment
In Jenkins Court and its corresponding reserve, both totaling $5,471,055, were
eliminated from the balance sheet as of December 31, 1995.
HPP'89 might be liable as a general partner of Jenkins Court
for certain trade creditor claims outstanding prior to the Chapter 11
petition that are not paid by Jenkins Court or the developer general
partner.
402 Julia Street Associates Limited Partnership(402 Julia) is
a Delaware limited partnership formed on July 25, 1989 to acquire,
construct, rehabilitate, operate and manage a 19,000 square foot site and
the building situated thereon and to rehabilitate the building into 24
residential units and approximately 3,500 net rentable square feet
of commercial space located thereon at 402 Julia Street, New Orleans,
Louisiana. At December 31, 1996, 402 Julia had leased 100% of its
residential units and commercial space.
HPP'89 originally contributed $775,000 to the capital of 402 Julia
and owns a general partnership interest therein. HPP'89's original
investment in 402 Julia represented approximately 4% of the aggregate
amount which HPP'89 has contributed to the capital of its three
Investee Entities acquired in 1989 and to purchase its direct interest
in the Cosmopolitan Building.
On September 16, 1993, HPP'89 sold one-third of its
general partnership interest in 402 Julia to the developer general
partner for $185,000. HPP'89's percentage of interest in 402 Julia was
thereby reduced from 98% to 65%. The terms of the sale required an
initial payment of $100,000, which was received in September 1993,
and requires annual payments of $3,500 through 2016 and a final
payment of $4,500 in 2017. A total of $74,500 remains uncollected as of
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies (Continued)
December 31, 1996 and is secured by the interest sold to the
developer general partner. The sale transaction did not generate any
Investment Tax Credit recapture.
HPP'89 recorded a net loss of $3,327 as well as amortization
of $3,252 in 1996, from the 402 Julia Investment.
Portland Lofts Associates Limited Partnership (Portland Lofts) is
a Delaware limited partnership formed on August 8, 1989 to
acquire, construct, rehabilitate, operate and manage three buildings containing
107 residential units including ground floor space useable as either
commercial space or as home/studio space for artists, located at 555
Northwest Park Avenue in Portland,Oregon. At December 31, 1996, Portland
Lofts had leased approximately 87% of its residential units and approximately
81% of its net rentable commercial space.
HPP'89 contributed $3,820,000 through December 31, 1996 to the
capital of Portland Lofts and owns a general partnership interest
therein. HPP'89's investment in Portland Lofts represents approximately 21% of
the aggregate amount which HPP'89 originally contributed to the capital
of its three Investee Entities acquired in 1989 and to purchase
its direct interest in the Cosmopolitan Building.
Portland Lofts' $6,800,000 construction loan matured on March 1, 1992.
On June 30, 1992, Portland Lofts refinanced the construction loan through
a variable rate mortgage note maturing on April 1, 1997. In July 1993,
the mortgage loan and a $550,000 unsecured note were purchased by a real
estate investment entity (the new holder). The new holder claimed
that the unsecured note matured on March 1, 1992 and that a default for
non-payment of the unsecured note constituted a default of the
mortgage note. On October 7, 1994, the new holder demanded full
payment of the unsecured note by November 10, 1994. On November 11,
1994, the new holder filed judicial foreclosure proceedings against
Portland Lofts for non-payment of the unsecured note. Portland Lofts
successfully contested through the court the right of the current holder
to foreclose on the property.
(4) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
On June 30, 1995, Portland Lofts extended the maturity date of
a $400,000 note payable which matured on February 28, 1994, and which
is secured by the developer general partner's interest in an
unrelated property. The note payable was originally extended until
December 31, 1995, with options to further extend for five additional
successive one year periods, and has been further extended through
December 31, 1996.
On May 21, 1996, Portland Lofts and the new holder entered into
a Settlement Agreement (the Agreement) to resolve the claims concerning
the mortgage note and the $550,000 unsecured note (the Notes).
According to the Agreement, Portland Lofts was allowed, until July 31,
1996, to pay $5,400,000 to the new holder in full satisfaction of the
Notes.
On June 20, 1996, Portland Lofts issued a promissory mortgage note
to a bank in the amount of $5,625,000 and a promissory note to one
of its general partners in the amount of $340,000 to provide sufficient funds
to pay in full the $5,400,000 settlement amount with the new holder,
the $400,000 note payable and all related closing costs. The
transaction resulted in an extraordinary gain on extinguishment of debt
of $1,656,579.
In 1990, HPP'89 had reserved against its investment in Portland
Lofts reducing such investment to zero due to the substantial doubt that
Portland Lofts may not be able to continue as a going concern. Due to
the debt settlement and refinancing completed in June 1996,
Portland Lofts is expected to continue as a going concern. Generally,
under the equity method of accounting, an investment may not be carried
below zero. Accordingly, since the Portland Lofts Investment was
fully reserved for, HPP'89 had cumulative unrecorded losses of
$1,325,926 at December 31,1995. Principally a result of the extraordinary
gain on extinguishment of debt, Portland Lofts generated net income of
$1,547,514 for the year ended December 31,1996 of which HPP'89 has been
allocated $1,532,039. Consequently, HPP'89 was able to recover all of its
cumulative unrecorded losses from Portland Lofts and recognize income in
equity from its investment in Portland Lofts of $206,113 before
distributions and after the recovery of cumulative unrecorded losses.
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies (Continued)
The Cosmopolitan at Mears Park, LLC (TCAMP) On December 18,
1989, HPP'89 acquired the Cosmopolitan Building containing 255
residential units and approximately 1,700 square feet of commercial
space. The building was renovated, and certain renovation costs qualified
for Rehabilitation Tax Credits. HPP'89 purchased the Cosmopolitan Building
for one dollar and assumed mortgage indebtedness with a face value of
$22,500,000.In accordance with the terms of the Purchase and Sale Agreement,
HPP'89 paid $5,000,000 at the closing which was used to repay a portion
of the outstanding mortgage loan principal.
The Cosmopolitan Building was originally recorded at the net
purchase price of the net indebtedness assumed by HPP'89 plus the amount
paid at the closing. Subsequent improvements were recorded at
cost. HPP'89's investment in The Cosmopolitan Building represented
approximately 39% of the aggregate amount which HPP'89 originally
contributed to the capital of its three Investee Entities acquired in
1989 and to purchase its direct interest in the Cosmopolitan Building.
Effective March 15, 1996, HPP'89 contributed the
Cosmopolitan Building, and certain other assets and liabilities, to
TCAMP (a Limited Liability Company) for a 50% ownership interest.
Concurrently, another member contributed $650,000 cash to TCAMP for a
50% ownership interest. Simultaneously, TCAMP issued a mortgage note in
the amount of $7,000,000, the proceeds of which along with the $650,000
contributed cash were used to settle in full HPP'89's mortgage note
payable related to the Cosmopolitan Building. The fair value
of the Cosmopolitan Building and other assets contributed by HPP'89
approximated the fair value of liabilities transferred to TCAMP by HPP'89
and the amount paid by TCAMP to settle in full HPP'89's mortgage note
payable related to the Cosmopolitan Building. This transaction resulted in
a provision for impairment of real estate of $8,437,963 to recognize a
reduction to fair value at the date of contribution to TCAMP and an
extraordinary gain on debt extinguishment of $9,182,017 to recognize the
difference between the amount outstanding under the mortgage payable and
the amount accepted by the lender from TCAMP in full settlement.
Distributions from TCAMP to HPP'89 and the other members are subject to
the order of distributions as specified in the Operating Agreement of
TCAMP. To the extent that HPP'89 accumulates operating reserve amounts
greater than $140,000 at the end of any fiscal year, HPP'89 is required to
contribute to TCAMP, such excess amounts as additional capital
contributions.
HPP'89 recorded net income of $32,334 and cash distributions
of $98,200 for the year ended December 31, 1996, from the TCAMP
Investment. Distributions in excess of net income and HPP'89's
original equity investment totaling $65,866 were recorded as equity
income from Investee Entities for the year ended December 31, 1996.
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies (Continued)
HPP'89's investments in the Investee Entities at December 31, 1996
and 1995 are summarized as follows:
Cumulative: 1996 1995
(Unaudited)
Investments and advances made in cash $4,845,000 $4,845,000
Evaluation and acquisition costs 835,709 835,709
Interest capitalization and other costs 39,615 39,615
Equity in losses of Investee Partnerships (1,213,944) (1,514,930)
Reserves for realization of investments (3,469,267) (3,469,267)
Amortization of certain costs (43,224) 39,972)
Distributions received from Investee (124,200) -
Sale of one third interest of Investee
Partnership (241,620) (241,620)
$ 628,069 $454,535
The above summary of HPP'89's investments in Investee Entities does
not include the investment in Jenkins Court and accumulated
activity thereon as of December 31, 1995.
The equity in income(losses) of Investee Entities reflected in
the accompanying statements of operations includes allocated income of
$300,986 for the year ended 1996 and losses of $12,934 (unaudited)
and $11,545 (unaudited) for the years ended December 31, 1995 and 1994,
respectively, and annual amortization of certain costs of $3,252,
for the years ended December 31, 1996, 1995 and 1994.
(4) Investments in Investee Entities and Real Estate; Commitments
and Contingencies (Continued)
Summary combined balance sheets of the four Investee Entities as
of December 31, 1996 and 1995, and summary combined statements of
operations for the years ended December 31, 1996, 1995 and 1994 are as
follows:
COMBINED BALANCE SHEETS
ASSETS
1996 1995
(Unaudited)
Buildings and improvements, net of accumulated
depreciation of $2,350,515 and $1,882,175 in
1996 and 1995, respectively $16,382,387 $10,504,702
Land 2,041,326 1,032,326
Other assets, net of accumulated amortization
of $ 47,543 and $55,591 in 1996 and 1995,
respectively 722,333 358,154
Cash 296,895 101,744
Total assets $19,442,941 $11,996,926
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage and notes payable $13,564,967 $ 7,568,023
Other liabilities 741,195 1,817,191
Total liabilities 14,319,162 9,385,214
Partners' equity:
HPP'89 3,629,067 1,748,575
Other partners 1,494,712 863,137
Total partners' equity 5,123,779 2,611,712
Total liabilities and partners' equity $19,442,941 $11,996,926
Members Equity in TCAMP has been classified as partners' equity in
the combined balance sheets.
4) Investments in Investee Entities, and Real Estate Commitments
and Contingencies (Continued)
COMBINED STATEMENTS OF OPERATIONS
1996 1995 1994
(Unaudited) (Unaudited)
(Unaudited) Revenue:
Rental revenue $2,959,725 $2,635,084 $3,726,567
Interest and other income 651,311 92,415 98,260
3,611,036 2,727,499 3,824,827
Expenses:
Interest expense 1,248,150 821,471 2,118,563
Depreciation and amortization 548,737 1,017,302 1,488,679
Operating expenses 1,404,210 1,075,333 1,527,662
Loss on transfer of property - 1,142,247 -
3,201,097 2,914,106 5,134,904
Net income (loss) before
extraordinary gain 409,939 (186,607) (1,310,077)
Extraordinary gain on
extinguishment of debt 1,656,579 - 57,130
Net income (loss) $2,066,518 $(1,328,854) $(1,252,947)
Net income (loss) allocated to
HPP'89 $1,997,503 $(1,266,194) $(1,190,951)
Net income (loss) allocated to
other partners $ 69,015 $ (62,660) $ (61,996)
The net loss before extraordinary gain for the year ending December
31, 1995 includes operating income from Jenkins Court of $74,608
through August 31, 1995, the date of transfer of the property.
(5) Mortgage Payable and Restricted Cash
The mortgage HPP'89 assumed relating to its purchase of
the Cosmopolitan Building had an original maturity date of December 18,1
999.
For the first 36 months, interest due was at the lesser of
the contract interest rate (principal outstanding at 7% interest) or net
cash flow, as defined under the note. During the 37th month through the
maturity of the note, interest was due at the contract interest rate. To
the extent that contract interest exceeded net cash flow during the
37th month (January 1993) through the maturity of the note, such
amounts accrued and were added to the principal balance (Additional
Principal). The entire unpaid principal balance, including Additional
Principal, contract interest and Contingent Interest, as defined, was
due and payable at maturity. Contract interest due from January 1,
1996 through March 15, 1996, and for the year ended
December 31, 1995 totaled $273,618, and $1,233,236
(unaudited) respectively, of which $78,237 and $394,087,
respectively, exceeded net cash flow and was added to the principal
balance. Net cash flow due for the year ended December 31, 1995
(unaudited) totaled $864,995 and for the period January 1, 1996 to March
15, 1996 totaled $169,535 and was paid in full as of March 15, 1996.
As of December 31, 1995 interest payable totaled $105,957.
In December 1992, the Cosmopolitan's original mortgage lender
was purchased by Mellon Bank, N.A., referred to as the holder. The
holder, as of December 31, 1995, continued to service the mortgage loan
and hold the escrowed funds.
In accordance with the terms of the original mortgage
agreement related to the Cosmopolitan, HPP'89 was required to establish an
interest bearing operating account (Operating Account) with the mortgage
lender for the Cosmopolitan in the initial amount of $1,000,000.
An additional $1,000,000 was added to this account on January 15, 1990.
Principal funds could have been withdrawn from the operating account
if the expenditures were in accordance with the approved budget between
the holder and HPP' 89, with the approval of the holder, or after HPP'
89 makes six consecutive debt service payments. Any principal funds
remaining in this account may have been returned to HPP' 89 under
the terms of the loan agreement.
(5) Mortgage Payable and Restricted Cash (Continued)
On January 5, 1995, HPP'89 consummated the Second Amendment to
the Loan Agreement (Second Amendment) with the holder to resolve a
dispute over funds in the restricted escrow account (which had
a balance of approximately $1,732,000). HPP'89 maintained that the interest
earned from the escrow account of approximately $300,000 and a previous
overfunding of approximately $120,000 should be paid to HPP'89. The
holder maintained that interest earned was additional security on the
mortgage note. The terms of the Second Amendment allowed HPP'89 to be
paid the interest earned on the escrow account and overfunded amount.
Also, HPP'89 received an option to buy the mortgage note for the
fair market value of the property. In exchange, HPP'89 released
the principal funds of the escrow account (approximately
$1,311,000) for payment to the outstanding mortgage and agreed to
reduce the maturity date of the note from December 18, 1999 to December
18, 1996. In summary, at the closing of the Second Amendment, HPP'89
received approximately $286,000 (consisting of the overfunding,
interest earned thereon, and one-half of interest earned on principal
funds of the original Operating Account) and released for payment
approximately $1,311,000 for mortgage principal and approximately
$15,000 for finance fees. As of December 31, 1995, $122,593
(unaudited) remained in the escrow account. As discussed below, HPP'89
was paid the approximately $123,000 remaining in the escrow account (one-
half of interest on principal funds of the original Operating Account and
interest thereon) on March 15, 1996, the date of purchase of the mortgage
note.
For financial reporting purposes, the original discount on
the mortgage note payable was recorded to reflect an effective interest
rate of 10% over the life of the loan. Due to the advancement of the
maturity date, as discussed below, the effective interest rate was
amended on January 1, 1995 to 14.04% to amortize the remaining discount
over the remaining life of the mortgage note. Amortization of the
discount amounted to $930,442 and $296,329 for 1995 and 1994 respectively
(unaudited), as interest expense.
In accordance with the Second Amendment, HPP'89 established a
tenant security deposit account with the current holder of the mortgage
note. As of December 31, 1995, the security deposit account
totaled $94,194 (unaudited).
Also in accordance with the Cosmopolitan's original
mortgage agreement, HPP'89 established a working capital reserve
(Working Capital Account) for apartment rollover expenses and working
capital items. As of December 31, 1995 the balance of the Working
Capital Account totaled $123,129 (unaudited). Furthermore, due to
HPP'89's cash flow debt service mortgage agreement, the cash accounts
maintained for the daily operations of the Cosmopolitan are effectively
reserved for the Cosmopolitan only. As of December 31, 1995, the
balance of Cosmopolitan's operating accounts equaled $202,172
(unaudited).
(5) Mortgage Payable and Restricted Cash (Continued)
Effective March 15, 1996, HPP'89 contributed the
Cosmopolitan Building, and certain other assets and liabilities, to
TCAMP (a Limited Liability Company) for a 50% ownership interest.
Concurrently, another member contributed $650,000 cash to TCAMP for a
50% ownership interest. Simultaneously, TCAMP issued a mortgage note in
the amount of $7,000,000,the proceeds of which along with the $650,000
contributed cash were used to settle in full HPP'89's mortgage note payable
related to the Cosmopolitan Building. The fair value of the Cosmopolitan
Building and other assets contributed by HPP'89 approximated the
fair value of liabilities transferred to TCAMP by HPP'89 and the amount
paid by TCAMP to settle in full HPP'89's mortgage note payable related to
the Cosmopolitan Building. This transaction resulted in a provision for
impairment of real estate of $8,437,963 to recognize a reduction to
fair value at the date of contribution to TCAMP and an
extraordinary gain on debt extinguishment of $9,182,017 to recognize the
difference between the amount outstanding under the mortgage payable and
the amount accepted by the lender from TCAMP in full settlement.
(6) Transactions With Related Parties and Commitments
In July 1993, HPP'89 engaged Portfolio Advisory Services, Inc.
(PAS), corporate general partner of BHP, to provide asset management,
accounting, and investor services to HPP'89. PAS performed such
services for no fee, but was reimbursed for all operating costs of
providing such services. This agreement was extended until September
30, 1995. For the period January 1, 1995 to September 30, 1995 and the
year ended December 31, 1994 PAS was reimbursed approximately $68,000
(unaudited) and $92,100 (unaudited), respectively, for asset management,
accounting and investor services to HPP'89.
On October 1, 1995, HPP 89 engaged Claremont Management
Corporation (CMC), an unaffiliated Massachusetts corporation, to provide
asset management, accounting and investor services. CMC provides such
services for an annual management fee of $67,200 plus reimbursement of
all its costs providing these services. The initial term of the
contract with CMC extends until June 30, 1997, and is automatically
extended on a yearly basis unless otherwise terminated as provided
for in the agreement. For the year ending December 31, 1996 and for the
period October 1,1995 through December 31, 1995, CMC was reimbursed
$61,635 and $15,397 (unaudited), respectively for operating costs.
On November 1, 1995, HPP'89 entered into a management agreement
with CMC, expiring June 30, 1997, to manage the Cosmopolitan Building.
CMC's management agreement requires the payment of management fees equal
to the greater of $5,200 monthly or 4% of gross receipts as
defined in the agreements. For the period November 1, 1995 through
December 31, 1995 and for the period January 1, 1996 through March 15,
1996, CMC was paid $14,400
(6) Transactions With Related Parties and Commitments (Continued)
(unaudited) and $21,940, respectively, in property management fees.The
CMC management agreement also required the Cosmopolitan to maintain
with CMC at all times an Operating Account in the amount of $100,000
and a Contingency Reserve Account in the amount of $50,000 for the
benefit of the Cosmopolitan. The property management contract between
HPP'89 and CMC terminated on March 15, 1996 when HPP contributed
the property was transferred to TCAMP.
(7) Fair Value of Financial Instruments
The Fair Values of cash and cash equivalents, accounts payable,
and accrued expenses and other liabilities at December 31, 1996 and
1995 (unaudited) approximate their carrying and rents due to their
short maturities. The fair value of the mortgage payable at December 31,
1995 is approximately $7,650,000 (unaudited) based upon the amount
accepted by the lender in full satisfaction of amounts outstanding under
the mortgage note. All financial instruments are held for non-trading
purposes.
Independent Auditors' Report on Accompanying Information
The Partners
Historic Preservation Properties 1989
Limited Partnership
Quincy, Massachusetts
We have audited in accordance with generally accepted
auditing standards, the balance sheet of Historic Preservation
Properties 1989 Limited Partnership (the Partnership) as of December
31, 1996 and have issued our report thereon dated February 21, 1997.
Our audit was made for the purpose of forming an opinion on the 1996
balance sheet taken as a whole. The supplemental schedule is
the responsibility of the Partnership's management and is
presented for the purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. The information included in this schedule has been
subjected to the auditing procedures applied in the audit of the
balance sheet, and in our opinion fairly states in all material
respects the financial data required to be set forth therein in
relation to the balance sheet as a whole.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 21, 1997
<TABLE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED
PARTNERSHIP REAL ESTATE & ACCUMULATED DEPRECIATION
HELD DIRECTLY BY INVESTEE ENTITIES
DECEMBER 31, 1996
(IN THOUSANDS)
Costs Capitalized Gross Amounts at
InitialCosts Subseq to acq Dec 31, 1996
<CAPTION>
Building Building Accum Date of Date of Deprec
Description Encum- Improve- Improve- Carrying Improve- Total Deprec Constr/ Interest Life
Ownership % brances Land ments ments Costs Land ments (Note3)(Note2)Rehabil Acquired (years)
Residential Building/Commercial Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65% 1,016 133 282 1,154 145 133 1,581 1,714 277 8/1/89 7/25/89 40
Residential Building/Commercial Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 5,600 900 886 9,189 610 900 10,685 11,585 1,820 8/31/89 8/89 40
Residential Building
The Cosmopolitan at Mears Park, LLC
St. Paul, Minnesota
50% 6,950 1,009 6,074 105 - 1,009 6,179 7,188 135 12/18/89 3/20/96 34
Total $13,566 $2,042 $7,242 10,448 $755 $2,042 $18,445 $20,487 $2,232
* In March 1996, the Partnership contributed property,title,deed
and the accompanying mortgage note payable and other liabilities of the
Cosmopolitan property to The Cosmopolitan at Mears Park, LLC for a 50%
annuity interest.
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED
PARTNERSHIP REAL ESTATE & ACCUMULATED DEPRECIATION
HELD DIRECTLY BY INVESTEE ENTITIES (CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Note 1: The aggregate cost of each property on Note 3: The changes in total costs of land
a tax basis net of the reduction due to the building and improvements for the years ended
rehabilitation tax credit at December 31, December 31, 1996, 1995 and 1994 are as
1996, 1995 and 1994 are as follows: follows:
1996 1995 1994 1996 1995 1994
Jenkintown, Pennsylvania $ - $ - $23,578 Balance at beginning of period $28,820 $55,345 $55,291
New Orleans, Louisiana 1,458 1,458 1,458 Additional Building and
Improvements 105 76 54
Portland, Oregon 9,733 9,733 9,733 Disposal of Building
and improvements(Jenkins Court)
St Paul Minnesota 21,013 20,997 20,997 Provisions for write down of
32,204 32,188 55,766 of building and improvement - 2,601 -
(The Cosmopolitan) (8,438) - -
Balance at end period $20,487 $28,820 $55,345
Note 2:The changes in accumulated depreciation for the
years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
Balance at beginning of period $4,676 $7,833 $6,031
Depreciation during the year 517 822 1,802
Write-off due to disposal of
property - (3,979) -
Transfer of property (2,961) - -
$2,232 $4,676 $7,833
</TABLE>
THE COSMOPOLITAN AT MEARS PARK, LLC
FINANCIAL STATEMENTS
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
Table of Contents
Page
Independent Auditors' Report F-29
Balance Sheet F-30
Statement of Operations F-31
Statement of Members' Equity (Deficit) F-32
Statement of Cash Flows F-33
Notes to Financial Statements F-35
Independent Auditors' Report
The Members
The Cosmopolitan at Mears Park, LLC
Quincy, Massachusetts
We have audited the accompanying balance sheet of
THE COSMOPOLITAN AT MEARS PARK, LLC (the "Company") as of
December 31, 1996, and the related tatements of operations, members' equity
(deficit) and cash flows for the period March 15, 1996
(inception) through December 31, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of THE COSMOPOLITAN AT MEARS PARK, LLC as of December
31, 1996, and the results of its operations and cash flows for
the period March 15, 1996 (inception) through December 31,
1996, in conformity with generally accepted accounting
principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 21, 1997
THE COSMOPOLITAN AT MEARS PARK, LLC BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Investment in real estate:
Land $1,009,000
Building and improvements 6,179,155
Furniture and equipment 206,421
7,394,576
Less accumulated depreciation 172,569
7,222,007
Cash and cash equivalents 68,711
Cash, security deposits 111,603
Real estate tax escrow 67,448
Replacement reserve 34,411
Rent receivable 698
Prepaid expenses 15,211
Deferred financing fees,
less accumulated amortization of $25,007 208,390
$7,728,479
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgage note payable $6,949,879
Accounts payable and accrued expenses 64,047
Accrued interest-mortgage note payable 52,935
Security deposits 106,900
Total liabilities 7,173,761
Commitments (Notes 3, 4 and 5)
Members' equity 554,718
$7,728,479
The accompanying notes are an integral part of these
financial statements.
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31,
1996
REVENUE:
Rental income $1,659,166
Interest and other income 15,637
$1,674,803
EXPENSES:
Operating and administrative $ $171,672
Management fee 66,819
Repairs and maintenance 164,186
Utilities 237,425
Insurance 22,839
Real estate taxes 251,926
Depreciation and amortization
197,576
1,112,443
INCOME FROM OPERATIONS 562,360
INTEREST EXPENSE (497,692)
NET INCOME $ 64,668
The accompanying notes are an integral part of these financial
statements.
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENT OF MEMBERS' EQUITY (DEFICIT)
DECEMBER 31, 1996
Historic
Preservation
Properties 1989 Total
Lillian Limited Members'
Carney Partnership Equity
Capital contributions $650,000 $ - $650,000
Distributions (61,750) (98,200) (159,950)
Net income 32,334 32,334 64,668
$620,584 $ (65,866) $554,718
The accompanying notes are an integral part of these financial
statements.
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 64,668
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 197,576
Decrease in rent receivable 5,835
Increase in prepaid expenses (15,211)
Decrease in accounts payable and accr exp (129,496)
Increase in cash security deposits, net (6,981)
Increase in accrued interest 52,935
Net cash provided by operating activities 169,326
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds disbursed for acquisition of real estate
and property assets and liabilities (650,000)
Purchase of improvements, furniture and equipment (101,734)
Decrease in real estate tax escrow and
replacement reserve 66,557
Net cash used in investing activities (685,177)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from member contribution 650,000
Principal payment on mortgage note payable (50,121)
Distributions to members (159,950)
Net cash provided by financing activities 439,929
NET DECREASE IN CASH AND CASH EQUIVALENTS (75,922)
CASH AND CASH EQUIVALENTS, AT INCEPTION 144,633
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 68,711
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 444,757
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
NON-CASH INVESTING ACTIVITY
On March 15, 1996, Historic Preservation Properties 1989 Limited
Partnership contributed the following assets and liabilities to The
Cosmopolitan at Mears Park, LLC:
Land $1,009,000
Building and improvements 6,074,104
Furniture and equipment 200,994
Cash and cash equivalents 144,633
Cash, security deposits 94,093
Real estate tax escrow 168,416
Rent receivable 6,533
Deferred financing fees 233,397
Mortgage note payable paid by TCAMP
on behalf of HPP'89 (7,650,000)
Accounts payable and accrued expenses (184,799)
Security deposits (96,371)
Also, on March 15, 1996, The Cosmopolitan at Mears Park, LLC paid
the above noted $7,650,000 mortgage note in full with the proceeds
of a $7,000,000 mortgage note issued to a lender and $650,000 of
cash contributions received from a Member.
The accompanying notes are an integral part of these
financial statements.
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(1) Organization
The Cosmopolitan at Mears Park, LLC (TCAMP), a Limited
Liability Company, was formed on March 15, 1996, under the
Delaware Limited Liability Company Act. The purpose of TCAMP
is to engage in investment in, and operation and development
of, real estate and interests therein. The members of TCAMP
are Historic Preservation Properties 1989 Limited Partnership and
Lillian Carney (the Members).
Effective March 15, 1996, Historic Preservation Properties
1989 Limited Partnership (HPP'89) contributed land,
building and improvements and furniture and equipment
(Contributed Real Estate), and certain other assets and
liabilities to TCAMP for a 50% ownership interest. Concurrently,
Lillian Carney contributed $650,000 cash to TCAMP for a 50%
ownership interest. Simultaneously, TCAMP issued a mortgage
note, the proceeds of which, along with the $650,000
contributed cash, were used to settle in full HPP'89's mortgage
note payable related to the Contributed Real Estate. The fair
value of the Contributed Real Estate and other assets contributed
by HPP'89 approximated the fair value of liabilities transferred
to TCAMP by HPP'89 and the amount paid by TCAMP to settle in
full HPP'89's mortgage note payable related to the Contributed
Real Estate.
TCAMP owns a residential apartment complex containing 255
units located at 250 6th Street, St. Paul, Minnesota. At
December 31, 1996, TCAMP had leased approximately 99% of its
residential units.
(2) Basis of Presentation and Summary of Significant Accounting
Policies
Basis of Accounting
TCAMP's financial statements are prepared on the accrual
basis of accounting in accordance with generally accepted
accounting principles.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(2) Basis of Presentation and Summary of Significant
Accounting Policies (Continued)
Investment in Real Estate and Depreciation
Investment in real estate is held for lease. Contributed
Real Estate was recorded at fair value and subsequent additions are
stated at cost. Depreciation is computed on a straight-line basis
over the estimated economic lives of the assets.
Cash, Cash Equivalents and Concentrations of Credit Risk
TCAMP considers all highly liquid investments with a maturity
of three months or less when purchased as cash
equivalents. Cash equivalents at December 31, 1996 totaled $162,262.
At December 31, 1996, TCAMP had $82,528 of cash and
cash equivalents in banks which is in excess of amounts insured
by the Federal Deposit Insurance Corporation.
Deferred Financing Fees
Deferred financing fees have been capitalized and are
being amortized on a straight-line basis over the term of the
mortgage note payable.
Revenue Recognition
Revenue, principally under annual operating leases, is
recorded when due.
Income Taxes
No provision (benefit) for income taxes is reflected in
the accompanying financial statements since the Members of TCAMP
are required to report their allocable share of net income
(loss) on their respective income tax returns.
(3) Mortgage Note Payable and Escrow Accounts
As discussed in Note 1, TCAMP issued a $7,000,000 mortgage
note.
The mortgage note bears interest at 9.14% per annum and amortizes
over a 25 year schedule. The mortgage note requires monthly payments of
principal and interest, real estate tax escrow deposits and
replacement reserve deposits of $59,416, $29,069 and $4,250,
respectively. The mortgage note matures in March 2003, at which
time all unpaid principal and accrued interest is due.
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(3) Mortgage Note Payable and Escrow Accounts (Continued)
The annual maturities of the mortgage note for each of the
next five years are as follows:
For the year ending December 31, Amount
1997 $81,119
1998 88,851
1999 97,321
2000 106,599
2001 116,761
The mortgage note is secured by TCAMP's property, rents
and assignments of leases.
(4) Related Party Transaction and Commitment
TCAMP entered into a management agreement with
Claremont Management Corporation (CMC) to manage the property.
The sole shareholder of CMC is related to Lillian Carney. The
initial term of the agreement expires June 30, 1997 and is
automatically renewed thereafter on an annual basis, unless
terminated per the agreement. The management agreement requires
the payment of a management fee equal to the greater of $5,200
monthly or 4% of gross receipts as defined in the agreement,
plus the reimbursement of all CMC's costs of providing these
services. Management fees under the management agreement totaled
$66,819 for the period March 15, 1996 through December 31,
1996. Expense reimbursements to CMC for the period March 15,
1996 through December 31, 1996 totaled $135,329.
During the period March 15, 1996 through December 31,
1996, TCAMP paid $8,744 in construction management fees to First
Claremont Corporation, an affiliate of CMC.
(5) Liability of Members and Distributions of Cash
The liability of the Members for losses, debts and
obligations of TCAMP is limited to their capital contributions,
except under applicable law Members may, under certain
circumstances, be liable to TCAMP to the extent of previous
distributions received by the Members in the event TCAMP does not
have sufficient assets to discharge its liabilities.
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE PERIOD MARCH 15, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
Distributions by TCAMP to the Members at the end of each fiscal
year, or at such time as determined by the Board of Managers, are as
follows:
(i) First, to Lillian Carney in payment of any current or
accrued portion of the 12% preferred return on her unreturned original
capital contribution;
(ii) Second, to HPP'89 in an amount equal to the preferred
return distributed to Lillian Carney in (i) above;
(iii) Third, to Lillian Carney in payment of any unpaid
principal portion of Lillian Carney's original capital contribution;
(iv) Fourth, to the payment of any principal or interest due
with respect to any loans from Members, with any such payments to be
applied first to accrued but unpaid interest and then to principal;
and
(v) Fifth, the balance, if any, to the Members in accordance
with their respective percentage interests (50% HPP'89 and 50%
Lillian Carney).
To the extent that HPP'89 accumulates from whatever sources
operating reserve amounts greater than $140,000 at the end of any fiscal
year, HPP'89 is required to contribute such excess within thirty days of
the end of such fiscal year to TCAMP as additional capital contributions
to be distributed by TCAMP to Lillian Carney as a return of the
outstanding portion of her original capital contribution.
(6) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, cash
security deposits, real estate tax escrow, replacement reserve, rent
receivable, accounts payable and accrued expenses, accrued interest
and security deposits approximate their fair values due to their short
maturities. The fair value of the mortgage note payable approximates
its carrying amount based on interest rates available to TCAMP for similar
financing arrangements. All financial instruments are held for non-trading
purposes.
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONTENTS
Page
Independent Auditors' Report F-40
Balance Sheets as of December 31, 1996 and 1995 F-41
Statements of Operations for the Years ended December 31,
1996, 1995 and 1994 F-42
Statements of Changes in Partners' Equity for the
Years ended December 31, 1996, 1995 and 1994 F-43
Statements of Cash Flows for the Years ended December 31,
1996, 1995 and 1994 F-44
Notes to Financial Statements F-46
INDEPENDENT AUDITORS' REPORT
The Partners
Portland Lofts Associates Limited Partnership
Quincy, Massachusetts
We have audited the accompanying balance sheet of Portland
Lofts Associates Limited Partnership (the Partnership) as of
December 31, 1996. This financial statement is the
responsibility of the Partnership's management. Our
responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in
the balance sheet. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe
that our audit provides a reasonable basis for our opinion.
Because we were not engaged to audit the balance sheet as
of December 31, 1995, or the statements of operations,
changes in partners' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, we
did not extend our auditing procedures to enable us to
express an opinion on the financial position of
Portland Lofts Associates Limited
Partnership as of December 31, 1995 or the results of
its operations and cash flows for each of the years in the
three-year period ended December 31, 1996. Accordingly, we
express no opinion on them.
In our opinion, the balance sheet referred to in the
first paragraph presents fairly, in all material respects,the
financial position of Portland Lofts Associates Limited
Partnership as of December 31, 1996, in conformity with generally
accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 21, 1997
PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
(Unaudited)
Investment in real estate:
Land $ 899,526 $ 899,526
Buildings and improvements 10,684,704 10,684,703
Furniture and equipment 81,051 77,397
11,665,281 11,661,626
Less accumulated depreciation 1,901,434 1,608,170
9,763,847 10,053,456
Cash 19,626 22,816
Escrow deposits 161,720 -
Rents and other receivables 2,841 11,732
Other assets 24,473 8,065
Deferred costs, net of accumulated amortization
(1996, $21,912; 1995, $14,251) 96,270 1,127
$10,068,777 $10,097,196
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes payable:
Mortgage $ 5,599,534 $6,547,037
General partner 340,000 -
Other 4,918 973,772
Accounts payable and accrued liabilities 83,584 61,057
Interest payable 60,732 56,116
Tenant security deposits 8,405 9,125
Total liabilities 6,097,173 7,647,107
Commitments
Partners' equity 3,971,604 2,450,089
$10,068,777 $10,097,196
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
Revenue:
Rental income $ 1,059,286 $1,072,709 $1,003,123
Interest and other income 96,107 42,548 56,760
Total revenues 1,155,393 1,115,257 1,059,883
Expenses:
Administrative and operating 119,295 156,283 114,920
Management fees 39,086 33,146 31,135
Repair and maintenance 111,164 83,021 79,281
Utilities 49,901 47,694 48,871
Real estate taxes 36,702 40,568 112,792
Insurance 19,809 21,410 17,966
Depreciation and amortization 300,925 298,914 297,337
Total expenses 676,882 681,036 702,302
Income from operations 478,511 434,221 357,581
Interest expense 587,575 675,638 562,058
Net loss before
extraordinary item (109,064) (241,417) (204,477)
Extraordinary item - gain on
extinguishment of debt 1,656,579 - 57,130
Net income (loss) $ 1,547,515 $ (241,417) $ (147,347)
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
Historic
Preservation East Bank
Properties Angel Total
1989 Limited Joint Partners'
Partnership Venture Equity
Balance, December 31, 1993 $1,803,336 $1,035,517 $2,838,853
Net loss (145,874) (1,473) (147,347)
Balance, December 31, 1994 1,657,462 1,034,044 2,691,506
Net loss (239,003) (2,414) (241,417)
Balance, December 31, 1995 1,418,459 1,031,630 2,450,089
Distributions (26,000) - (26,000)
Net income 1,532,040 15,475 1,547,515
Balance, December 31, 1996 $2,924,499 $1,047,105 $3,971,604
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,547,515 $(241,417) $(147,347)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 300,925 298,914 297,337
Extraordinary gain on extinguishment
of debt (1,656,579) - (57,130)
Decrease (Increase) in tenant
improvement escrow - 60,265 (60,265)
Increase in escrow deposits (161,720) - -
Decrease in rents and other
receivables 8,891 3,636 6,255
Dec (Inc) in other assets (24,473) 21,600 (14,409)
(Decrease) Increase in accounts
payable and accrued liab 22,527 18,466 (1,685)
Increase in interest payable 4,616 102 15,160
(Decrease) Increase in tenant
deposits (720) 200 (1,291)
Net cash provided by
operating activities 40,982 161,766 36,625
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to buildings and
improvements (3,655) - -
Purchase of tenant improvements - (60,000) (3,500)
Cash used in investing activ (3,655) (60,000) (3,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing 5,625,000 - -
Proceeds from general partner note
payable 340,000 - -
Payment on mortgage, notes payable
and construction loan (5,815,000) - -
Principal payments on mortgage, notes
payable and construction loan (69,778) (78,416) (73,719)
Payment of deferred finan fees (94,739) (11,162) -
Distributions (26,000) - -
Net cash used in finan act (40,517) (89,578) (73,719)
NET INCREASE (DECREASE) IN CASH (3,190) 12,188 (40,594)
CASH, BEGINNING OF YEAR 22,816 10,628 51,222
CASH, END OF YEAR $19,626 $22,816 $10,628
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION
1996 1995 1994
Cash paid for interest $582,959 $676,536 $546,898
Non-Cash financing activity:
In February 1994, Portland Lofts settled $72,130 of outstanding trade
payables; $15,000 was converted to a note payable and $57,130 was
forgiven and recognized as an extraordinary gain.
In June 1996, Portland Lofts settled $7,471,579 of mortgage and other
notes payable through issuing a promissory mortgage note of
$5,815,000 and recognizing an extraordinary gain of $1,656,579.
1. Summary of Partnership Organization and Significant Accounting
Policies:
Organization:
Portland Lofts Associates Limited Partnership (the Partnership),
a Delaware limited partnership, was formed on August 8, 1989 to
acquire, rehabilitate and operate three buildings and the related
land (the Property) containing 107 residential units and 23,470
net rentable square feet of commercial space, located at 555
Northwest Park Avenue in Portland, Oregon.
The general partners of the Partnership are East Bank Angel
Joint Venture (EBAJV), an Oregon general partnership (also known
as the developer), and Historic Preservation Properties
1989 Limited Partnership (HPP'89), a Delaware limited partnership,
whose sole general partner is Boston Historic Partners Limited Partnership.
EBAJV, whose venturers are Pacific Star Corporation and Joseph Angel
(Angel), is also the only limited partner (see Note 4).
Basis of accounting:
The Partnership's financial statements are prepared on the accrual
basis of accounting.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Investment in real estate
Investment in real estate is held for lease and stated at
cost. Depreciation is computed on a straight-line basis over 40
years for buildings and improvements, and over 7 years for personal
property.
Deferred costs
Costs to lease residential units are generally expensed;
however, leasing costs associated with commercial space are
capitalized and amortized on a straight-line basis over the
related lease terms. Leasing costs capitalized in 1995 totaled
$8,000. Amortization for the years ended December 31, 1996, 1995
and 1994 totaled $1,798, $2,488 (unaudited) and $6,574 (unaudited),
respectively.
1. Summary of Partnership Organization and Significant Accounting
Policies (continued):
Direct costs attributable to obtaining financing are capitalized
and amortized on a straight-line basis over the terms of the related
debt. Financing costs capitalized in 1996 and 1995 totaled $94,739 and
$3,162, respectively. Amortization of financing costs for the
years ended December 31, 1996, 1995 and 1994 totaled $5,863, $4,064
(unaudited) and $901 (unaudited), respectively.
Revenue recognition
Rental revenue from commercial leases is recorded by recognizing
the aggregate minimum rentals to be received over the terms of each
lease in equal monthly installments over the related lease terms.
Rental income recorded prior to actual cash collections under the
terms of the leases is reflected as rents receivable ($2,746 and
$8,825 (unaudited) as of December 31, 1996 and 1995,
respectively). Rental revenue under residential short-term
operating leases is recorded when due.
Income taxes
No provision (benefit) has been made for income taxes, since the
income or loss of the Partnership will be included in the tax returns
of the respective partners.
2. Mortgage and Notes Payable:
The Partnership refinanced its $6,800,000 construction loan to
a permanent mortgage on March 31, 1992. The mortgage note was to
mature on April 1, 1997. Principal and interest payments, which
commenced May 1, 1992 were based upon an amortization period of 30
years. A balloon payment of all unpaid principal and accrued interest
was due on April 1, 1997. The interest rate was variable based on the
LIBOR rate plus 2.5%. The interest rate was adjusted every 30 days.
Effective December 29, 1989, the Partnership assumed an unsecured
note dated November 3, 1989 from EBAJV in the amount of $800,000 of
which a balance of $550,000 had been outstanding at December 31,
1995.
The note had an extended maturity date of March 1, 1992. It is
the Partnership's position that the maturity date of the unsecured
note had been effectively further extended to correspond with the
maturity date of the mortgage note. The unsecured note was
guaranteed by Angel. Interest is payable monthly at an annual rate
of 1.00% over the Prime Rate.
In July 1993, the mortgage note and the $550,000 unsecured note
were purchased by a real estate investment entity (the new
holder). The new holder claimed that the unsecured note matured on
March 1, 1992, and that default for non-payment of the unsecured note
constitutes a default of the mortgage note.
2. Mortgage and Notes Payable (Continued):
On October 7, 1994, the new holder demanded full payment of
the unsecured note by November 10, 1994. On November 11, 1994,
the new holder filed judicial foreclosure proceedings against the
Partnership for non-payment of the unsecured note. The Partnership
successfully contested through the court the right of the new holder
to foreclose on the property.
On May 21, 1996, the Partnership and the new holder entered into
a Settlement Agreement (Settlement Agreement) to resolve the
claims concerning the mortgage note and the unsecured note. According
to the Settlement Agreement, the Partnership was allowed, until July
31, 1996, to pay $5,400,000 to the new holder in full satisfaction of
the mortgage note and the unsecured note.
On December 29, 1989, the Partnership entered into a promissory
note with Capital Consultants, Inc. totaling $400,000 which was used
to pay certain construction related expenses not otherwise
chargeable to the construction loan. Interest at the original rate
of 14.00% was payable in monthly installments of $4,667. The
interest rate was decreased to 13.11%, with monthly interest only
installments payable of $4,370.
The Portland Development Commission (PDC) loaned $15,000 to
the Partnership on March 2, 1992. The note was non-interest bearing
and was due and payable upon any sale or transfer of the property
securing the note in the amount of the original loan balance less
1/84th of the original loan balance for each month after completion
of renovations in which the Partnership remained owner of the
property. If the Partnership remained owner of the property
for seven full years from the date of completion of renovations,
then the note shall be deemed paid in full.
On June 20, 1996, the Partnership issued a promissory mortgage note to
a bank in the amount of $5,625,000 and a promissory note to Angel in
the amount of $340,000 to provide sufficient funds to pay in
full the $5,400,000 settlement amount with the new holder,
the $400,000 promissory note and all related closing costs. The
transaction resulted in extraordinary gain on extinguishment of
debt of $1,656,579. The mortgage note bears interest at 9%; amortizes
over a 25-year schedule; requires monthly payments of principal interest
of $47,205; and matures on July 1, 2006, at which time all unpaid
principal and interest is due. The mortgage note is secured by the
Property, rents and assignments of leases.
The Angel Note bears interest at 11%; amortizes over a 10-year
schedule; requires monthly principal and interest payments in the
amount of $4,684; and matures January 1, 2007.
2. Mortgage and Notes Payable (Continued):
The aggregate annual maturities under the mortgage note payable and note
payable to general partner are as follows:
Note Payable
Mortgage to General
Year Ending December 31, Note Payable Partner Total
1997 $ 65,632 $ 19,780 $ 85,411
1998 71,788 22,068 93,857
1999 78,523 24,622 103,145
2000 85,889 27,471 113,360
2001 93,946 30,650 124,596
In February 1994, the Partnership settled a $72,130 outstanding
liability which had been included as part of accounts payable. As
part of the settlement, $15,000 of the obligation was converted to
a note payable amortizing over four years at a 9.0% interest rate,and
the remaining $57,130 of the obligation was forgiven and recognized as
an extraordinary gain for the year ended December 31, 1994
(unaudited). Monthly principal and interest payments of $350 are due
on this note.
3. Partners' Equity:
Profits, losses and tax credits from operations during the first
five years following completion of the rehabilitation of the Property
are to be distributed as follows:
HPP'89 99.0%
EBAJV .9
Limited partner .1
100.0%
Thereafter, profits, losses and tax credits shall be distributed
in accordance with the above formula except that if cash flows
are distributed to the partners in accordance with (b) and (c) below,
then profits, losses and tax credits shall be distributed in
accordance with such formula.
Cash flows from operations shall be distributed to the partners,
as defined in the Partnership Agreement, as follows:
a. 100 percent to the payment of accrued interest on, and
then the unpaid principal balance of, any outstanding loans made
to the Partnership by HPP'89.
3. Partners' Equity (continued):
b. Thereafter, 100 percent to HPP'89 until HPP'89 has
received distributions of cash flow in such year in an amount
equal to an 8 percent cumulative, noncompounded return on its
weighted average HPP'89 invested capital for such year.
c. The remaining balance, if any, is to be distributed
as follows:
Prior to
call/put date Thereafter
HPP'89 50.0% 75.0%
EBAJV 49.9 24.9
Limited partner .1 .1
100.0% 100.0%
The Partnership Agreement allows certain call options and put rights
to the partners under terms as defined in the agreement, including:
(a)During the first six months following the fifth calendar
year after rehabilitation of the Property has been
completed, the Developer has the option (the call option) to
acquire HPP'89's interest in the Partnership for the greater of,
(1) the excess of $5,750,000 over the total amount distributed
to HPP'89 under the terms of the Partnership Agreement, or (2)
the amount which would be distributed to HPP'89 upon a
hypothetical sale of the Property for the appraised value.
(b) After the call option expires, HPP'89 has a put right to require
the Developer to purchase HPP'89's interest in the Partnership
for the amount indicated in 3(a). The Developer, provided it has
met certain conditions defined in the agreement, shall have the
right to locate a third party to purchase HPP '89's interest on
behalf of the Developer at the terms noted in 3(a) and defined in
the agreement. Cash from the sale or refinancing of the Property
shall be distributed to repay any outstanding loans and related
interest and then to the partners, as defined in the Partnership
Agreement.
4. Transactions with Related Parties and Commitment:
Interest expense totaling $18,735 related to the Angel Note for the
year ended December 31, 1996 has been included in interest
payable at December 31, 1996.
In November 1996, the Partnership entered into an agreement to pay
EBAJV a monthly fee of $2,400 for partnership management services
provided to the Partnership. Management fees for the year ended
December 31, 1996 and accounts payable and accrued liabilities
at December 31, 1996 include $4,800 in partnership management fees.
5. Minimum Future Rentals under Operating Leases:
The Partnership rents space to residential tenants principally under
one year operating leases and to commercial tenants under operating
leases of varying terms expiring through 2004. As of December 31,
1996, the Partnership had entered into fourteen commercial
leases covering approximately 81% (unaudited) of the building's net
rentable commercial space. The Partnership's largest commercial
tenant occupancies 23% of the commercial space at December 31, 1996,
representing only 5.8% of the total square feet of the property.
On January 1, 1997, the Partnership enter into a three year commercial
lease to lease an additional 1,090 square feet of commercial space. As
of February 28, 1997, the Partnership had approximately 84% (unaudited)
of the building's net rentable commercial space leased.
Certain commercial leases provide for reimbursement of real estate taxes
and certain operating expenses. The approximate minimum future rentals
to be received under the commercial leases for each of the next five
years are as follows:
Year Ending, December 31,
1997 $ 197,536
1998 165,128
1999 140,088
2000 66,215
2001 54,690
The above amounts do not include additional rentals that will become
due as a result of escalation provisions in the commercial leases.
6. Fair Value of Financial Instruments
The carrying amounts of cash, escrow deposits, rents and
other receivables, accounts payable and accrued liabilities, tenant
security deposits, and interest and other payables at December 31,
1996 and 1995 (unaudited) approximate their fair values due to
their short maturities. The fair value of the Partnership's
mortgage note payable and other notes payable at December 31, 1996
approximate their carrying amounts based on interest rate currently
available to the Partnership for similar financing
arrangements. The fair value of The
Partnership's mortgage note payable and other notes payable at
December 31, 1995 totaled $6,040,000 (unaudited) based upon amounts
accepted by lenders in full settlement of the amounts outstanding
under the note payable. All financial investments are held for
nontrading purposes.
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 , 1995 AND 1994
Table of Contents
Page
Independent Auditors' Report F-54
Balance Sheets as of December 31, 1996 and 1995 F-55
Statements of Operations for the Years ended December 31,
1996, 1995 and 1994 F-56
Statements of Changes in Partners' Equity (Deficit)
for the Years ended December 31, 1996, 1995 and 1994 F-57
Statements of Cash Flows for the Years ended December 31,
1996, 1995 and 1994 F-58
Notes to Financial Statements F-59
INDEPENDENT AUDITORS' REPORT
The Partners
402 Julia Street Associates Limited Partnership
Quincy, Massachusetts
We have audited the accompanying balance sheet of 402 Julia Street
Associates Limited Partnership (the Partnership) as of December 31, 1996.
This financial statement is the responsibility of the Partnership's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a
reasonable basis for our opinion.
Because we were not engaged to audit the balance sheet as of December 31,
1995, or the statements of operations, changes in partners' equity
(deficit) and cash flows for each of the years in the three-year period
ended December 31, 1996, we did not extend our auditing procedures to
enable us to express an opinion on the financial position of 402 Julia
Street Associates Limited Partnership as of December 31, 1995 or the
results of its operations and cash flows for each of the years in the three-
year period ended December 31, 1996. Accordingly, we express no opinion on
them.
In our opinion, the balance sheet referred to in the first paragraph
presents fairly, in all material respects, the financial position of 402
Julia Street Associates Limited Partnership as of December 31, 1996, in
conformity with generally accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 21, 1997
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
(Unaudited)
INVESTMENT IN REAL ESTATE:
Building and improvements $ 1,581,571 $ 1,581,571
Land 132,800 132,800
Furniture and fixtures - 43,206
1,714,371 1,757,577
Less accumulated depreciation 276,512 274,005
1,437,859 1,483,572
CASH 44,925 30,885
CASH, TENANT SECURITY DEPOSITS 18,843 18,477
ACCOUNTS RECEIVABLE - 377
REAL ESTATE TAX AND INSURANCE ESCROW 13,087 13,067
REPLACEMENT RESERVE 20,100 16,500
DEFERRED FINANCING FEES, net of accumulated
amortization (1996, $25,631; 1995, $21,108) 19,600 24,123
$ 1,554,414 $1,587,001
LIABILITIES AND PARTNERS' EQUITY
MORTGAGE NOTE PAYABLE $ 1,015,553 $ 1,020,986
ACCOUNTS PAYABLE 4,625 9,250
ACCRUED INTEREST 8,463 8,508
SECURITY DEPOSITS 19,586 18,477
Total liabilities 1,048,227 1,057,221
COMMITMENTS (Notes 3 and 4)
PARTNERS' EQUITY 506,187 529,780
$ 1,554,414 $ 1,587,001
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
REVENUE:
Rental income $ 241,273 $ 223,105 $ 226,664
Interest and other income 7,815 7,540 9,624
249,088 230,645 236,288
EXPENSES:
Operating and administrative 24,362 22,706 23,082
Management fees 22,400 19,575 21,845
Repairs and maintenance 26,830 28,938 26,025
Utilities 9,708 10,336 13,214
Real estate taxes 6,474 6,408 6,508
Insurance 12,362 9,917 8,514
Depreciation and amortization 50,236 50,234 51,973
152,372 148,114 151,161
INCOME FROM OPERATIONS 96,716 82,531 85,127
INTEREST EXPENSE 101,809 102,328 102,798
NET LOSS $ (5,093) $(19,797) $(17,671)
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
<TABLE>
Historic
Preservation
Properties
1989 Limited Limited
Partnership Developers Partners Total
<CAPTION>
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 396,553 $ 213,098 $ (31) $ 609,620
DISTRIBUTIONS - (23,872) - (23,872)
NET LOSS, 1994 (11,545) (6,126) - (17,671)
BALANCE, December 31, 1994 $ 385,008 $ 183,100 $ (31) $ 568,077
DISTRIBUTIONS - (18,500) - (18,500)
NET LOSS, 1995 (12,934) (6,863) - (19,797)
BALANCE, December 31, 1995 $ 372,074 157,737 $ (31) $ 529,780
DISTRIBUTIONS - (18,500) - (18,500)
NET LOSS, 1996 (3,327) (1,766) - (5,093)
BALANCE, December 31, 1996 $ 368,747 $ 137,471 $ (31) $ 506,187
</TABLE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNAUDITED)
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,093) $ (19,797) $ (17,671)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 50,236 50,234 51,973
(Inc) Dec in accounts receivable 377 (370) 1,583
Inc (Dec) in accounts payable (4,625) 4,625 -
Inc in tenant sec dep, net 743 - 866
Decrease in accrued interest (45) (41) (37)
Increase in tax and insurance escrow and
replacement reserve (3,620) (4,712) (3,272)
Net cash provided by oper activ 37,973 29,939 33,442
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal pymts on mortg note pay (5,433) (4,918) (4,452)
Distributions (18,500) (18,500) (23,872)
Cash used in financing activities (23,933) (23,418) (28,324)
NET INCREASE IN CASH 14,040 6,521 9,743
CASH BALANCE AT BEGINNING OF YEAR 30,885 24,364 14,621
CASH BALANCE AT END OF YEAR $44,925 $ 30,885 $24,364
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $101,854 $102,369 $102,835
(1) ORGANIZATION
402 Julia Street Associates Limited Partnership (the
Partnership), a Delaware limited partnership, was formed on July 25, 1989
to acquire a 19,000 square foot site and the building situated thereon in
New Orleans, Louisiana, and rehabilitate the building into 24 residential
units and approximately 3,500 net rentable square feet of commercial space
known as the Loft (the Property). The Partnership is owned by Historic
Preservation Properties 1989 Limited Partnership (HPP 1989) as a general
partner (65.33%), by Henry M. Lambert and R. Carey Bond (the Developers) as
a general partner (34.66%), and by John D. Lambert III (the Limited
Partner) as a limited partner (.01%). The rehabilitation construction was
substantially completed in December 1989 and the property was placed in
service on December 29, 1989.
(2) SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership's financial statements are prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Investment in Real Estate
Investment in real estate is held for lease and stated at cost.
During the construction period, all carrying costs, principally real estate
taxes and interest, were capitalized. Depreciation is provided over the
estimated economic useful lives of the assets using the straight-line
method.
Deferred Financing Fees
Deferred financing fees relating to the financing of the
Partnership's mortgage note payable are being amortized on a straight-line
basis over the term of the note.
(2) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenue from residential and commercial units, principally under
short-term operating leases, is recorded when due.
Income Taxes
No provision (benefit) for income taxes is reflected in the
accompanying financial statements of the Partnership. All of the Partnership's
partners are required to report on their tax returns their allocable share of
income, gains, losses, deductions and credits determined on a tax basis.
(3) MORTGAGE NOTE PAYABLE
In April 1991,the Partnership issued a $1,040,000 mortgage note to a
lender to pay off a construction loan. The note bears interest at 10.0% and
amortizes over a 35-year schedule. The note requires monthly payments of
principal and interest, real estate tax and insurance escrow deposits, and
replacement reserve deposits of $8,941, $1,791 and $300,respectively. The note
matures in May 2001, at which time all unpaid principal and accrued interest is
due.
The annual maturities of the mortgage note for each of the next five
years are as follows:
Year Ending December 31, Amount
1997 $ 6,002
1998 6,630
1999 7,325
2000 8,091
2001 987,505
The mortgage note is secured by the Partnership's property, rents and
assignment of leases.
(4) TRANSACTIONS WITH RELATED PARTY AND COMMITMENTS
The Partnership entered into a property management and lease broker
agreement with a company owned by the Developers. The initial term of the
agreement expired July 31, 1993, and, as defined in the agreement, continues
until terminated by either party.This affiliate manages the Property for a fee
equal to 6% of gross rental receipts and serves as the lease broker for a fee
equal to one half of one month's rent for each lease signed. For the
years ended December 31, 1996, 1995 and 1994, fees paid to the affiliate under
this agreement totaled $22,400, $19,575 (unaudited) and $21,845 (unaudited),
respectively.
The Partnership reimbursed to an affiliate certain payroll expenses
which totaled $4,891,$5,237 (unaudited) and $8,366 (unaudited) for the years
ended December 31, 1996, 1995 and 1994, respectively.
(5) MINIMUM FUTURE RENTALS UNDER COMMERCIAL OPERATING LEASES
Future minimum rentals to be received in cash under the terms of
commercial operating leases, excluding reimbursement for real estate taxes and
certain operating expenses, are as follows for the years ending December 31:
1998 $26,460
1999 9,480
$ 35,940
At December 31, 1996, the Partnership has leased 100% of its
residential units and commercial space.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, real estate tax and
insurance escrow, replacement reserve, accounts payable,security deposits and
accrued interest approximate their fair values at December 31, 1996 and 1995
(unaudited) due to their short maturities. The fair value of the mortgage note
payable at December 31, 1996 and 1995 (unaudited) approximates its carrying
amount based on the interest rates currently available to the Partnership for
similar financing arrangements. All financial instruments are held for non-
trading purposes.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 163,316
<SECURITIES> 0
<RECEIVABLES> 101,155
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 892,540
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 892,540
<SALES> 0
<TOTAL-REVENUES> 552,395
<CGS> 0
<TOTAL-COSTS> 9,050,225
<OTHER-EXPENSES> (297,734)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 508,073
<INCOME-PRETAX> (8,497,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 9,182,017
<CHANGES> 0
<NET-INCOME> 473,848
<EPS-PRIMARY> 17.64
<EPS-DILUTED> 0
</TABLE>
MANAGEMENT AGREEMENT
This Agreement is made this 20th day of March 1996, by and between
The Cosmopolitan at Mears Park, LLC (the "Owner") and Claremont
Management Corporation (the "Agent").
Section 1 - APPOINTMENT OF MANAGING AGENT
1.1 APPOINTMENT OF MANAGING ACCEPTANCE
Owner hereby appoints Agent as sole and exclusive agent of
Owner to lease and manage the property described in paragraph
1.2 upon the terms and conditions provided herein. Agent
accepts the appointment and agrees to furnish the services of
its organization for the leasing and management of the
Premises; and Owner agrees to pay all expenses in connection
with those services.
1.2 DESCRIPTION OF PREMISE
The property to be managed by Agent under this Agreement (the
"Premises") is known as The Cosmopolitan at Mears Park, LLC
located at 250 E. Sixth Street, St. Paul, MN, consisting of
the land, building, and other improvements described as a 255
unit residential community in the state of Minnesota.
1.3 TERM
The terms of the Agreement shall be for an initial period of
15 months (the "initial term") from the 20th day of March
1996, to including the 30th day of June 1997; and thereafter
shall be automatically renewed from year to year unless
terminated as provided in sections 21 or 27 herein. Each of
said one-year renewal periods is referred to as a "term year".
1.4 MANAGEMENT OFFICE
Owner shall provide adequate space on the Premises for a
management office. Owner shall pay all expenses related to
such office, including, but not limited to, furnishings,
equipment, postage and office supplies, electricity and other
utilities, and telephone.
1.5 APARTMENT FOR ON-SITE STAFF
Owner shall provide a suitable apartment(s) on the Premises,
if deemed appropriate by mutual consent of both parties, for
the use of an on-site manager and/or a resident janitor and
their families, rent free, except that such resident staff
shall pay for heat and utilities in the same manner as other
tenants. The specific apartment(s) shall be the Owner's
choice.
Section 2 - BANK ACCOUNTS
The various bank accounts established under this Agreement
shall at all times be established in Owner's name but under
Agent's control. Agent's and Owner's designees shall be the
only parties authorized to draw upon such accounts. No
amounts deposited in any accounts established under this
Agreement shall in any event be commingled with any other
funds of Agent.
2.1 OPERATING (AND/OR) RESERVE ACCOUNT(S)
Agent shall establish a separate account(s) known as The
Cosmopolitan at Mears Park, LLC Operating (and/or) Reserve
Account(s), separate and apart from Agent's corporate
accounts, for the deposit of receipts collected as described
herein, in a bank or other institution whose deposits are
insured by the federal government. Such depository shall be
selected by the Agent upon consent of the Owner. However,
Agent shall not be held liable in the event of bankruptcy or
failure of a depository. Funds in the Operating (and/or)
Reserve Account(s) remain the property of Owner subject to
disbursement of expenses by Agent as described in the
Agreement.
2.1.1 INITIAL DEPOSIT AND CONTINGENCY RESERVE
Upon refinancing/purchase of mortgage note of the Premises
currently held by Mellon Bank, N.A., and in accordance with
new mortgage note, Owner shall remit to Agent an amount to be
determined by the manager to be deposited in the Operating
(and/or) Reserve Account(s) as an initial deposit representing
the estimated disbursements to be made in the first month
following the commencement of this Agreement, plus an
additional sum, also to be determined by the manager, as a
contingency reserve. Owner agrees to maintain the contingency
reserve stated above at all times in the Operating (and/or)
Reserve Account(s) to enable Agent to pay the obligations of
Owner under this Agreement as they become due. Owner and
Agent shall review the amount of the contingency reserve from
time to time and shall agree in writing on a new contingency
reserve amount when such is required.
2.2 SECURITY DEPOSIT ACCOUNT
Agent shall, if required by law, maintain a separate interest
bearing account for tenant security deposits and advance
rentals. Such account shall be maintained in accordance with
applicable state or local laws, if any.
2.3 FIDELITY BOND
The Agent will furnish, at its own expense, a fidelity bond in
the principal sum of $1,000,000, which is at least equal to
the gross potential income for two months and is conditioned
to protect the Owner and the Mortgagee against
misappropriation of funds of the Premises by the Agent and its
employees. The Agent will obtain a bond of like kind to cover
the on-site personnel expressed in Section 9.1 and it shall be
paid for from Premises income. The other terms and conditions
of the bond, and the surety thereon, will be subject to
approval of the Owner and the Mortgagee.
Section 3 - COLLECTION OF RENTS AND OTHER RECEIPTS
3.1 AGENT'S AUTHORITY
Agent shall collect (and give receipts for, if necessary) all
rents, charges and other amounts receivable on Owner's account
in connection with the management and operation of the
Premises. Such receipts (except tenants' security deposits
and advance rentals, which shall be handled as specified in
paragraphs 2.2 and 3.3 hereof; and special charges, which
shall be handled as specified in paragraph 3.2 hereof) shall
be deposited in the Operating (and/or) Reserve Account(s)
maintained by Agent for the Premises.
3.2 SPECIAL CHARGES
If permitted by applicable law, Agent may collect from tenants
any or all of the following: and administrative charge for
late payment of rent, a charge for returned or non-negotiable
checks, a credit report fee, an administrative charge and/or
commission for subleasing.
3.3 SECURITY DEPOSITS
Agent shall collect, deposit, and disburse tenants' security
deposits in accordance with the terms of each tenant's lease.
Agent shall pay from operations tenants interest upon such
security deposits only if required by law to do so. Agent
shall comply with all applicable state or local laws
concerning the responsibility for security deposits and
interest, if any.
Section 4 - DISBURSEMENT FROM OPERATING (AND/OR) RESERVE ACCOUNT(S)
4.1 OPERATING EXPENSES
From the Operating (and/or) Reserve Account(s), Agent is
hereby authorized to pay or reimburse itself for all expenses
and costs of operating the Premises in accordance with
approved annual budget under Section 6.2 and for all other
sums due Agent under this Agreement, including Agent's
compensation under section 17.
4.2 DEBT SERVICE
Owner shall give Agent advance written notice of at least 10
days if Owner desires Agent to make any additional monthly or
recurring payments (such as mortgage indebtedness, general
taxes, or special assessments, or fire, steam boiler, or other
insurance premiums) out of the proceeds from the Premises. If
Owner notifies Agent to make such payments after the beginning
of the term of this Agreement, Agent shall have the authority
to name a new contingency, and Owner shall maintain this new
contingency reserve amount at all times in the Operating
(and/or) Reserve Account(s).
4.3 NET PROCEEDS
To the extent that funds are available, and after maintaining
the cash contingency reserve amount as specified in paragraph
2.1.1, Agent shall transmit cash balances to Owner
periodically, as follows. Such periodic cash balances shall
be remitted to the following person(s), in the percentage(s)
specified, address(es) shown: as directed from time to time
by Owner.
Section 5 - AGENT NOT REQUIRED TO ADVANCE FUNDS
In the event the balance in the Operating (and/or) Reserve
Account(s) is at any time insufficient to pay disbursements
due and payable under paragraphs 4.1 and 4.2, and paragraph
6.2. Owner shall immediately upon notice, remit to Agent
sufficient funds to cover the deficiency and replenish the
contingency reserve. In no event shall Agent be required to
use its own funds to pay such disbursements. Nor shall Agent
be required to advance any monies to Owner, to the Security
Deposit Account, or to the Operating (and/or) Reserve
Account(s).
If Agent elects to advance any money in connection with the
Premises to pay any expenses for Owner, such advances shall be
considered a loan subject to repayment with interest, and
Owner hereby agrees to reimburse Agent, including interest as
provided in paragraph 17.7 and hereby authorizes Agent to
deduct such amounts from any monies due Owner.
Section 6 - FINANCIAL AND OTHER REPORTS
6.1 REPORTING REQUIREMENTS
By the 20th day of each month, Agent will provide to the Owner
the following schedules, which include, but are not limited
to: balance sheet, income statement with comparisons to
budget, general ledger, rent roll, bank statements and cash
reconciliations, aged listing of accounts receivables, listing
of prepaids, additions to fixed assets over $500, intercompany
reconciliation, listing of accruals and other prepaids, tenant
security deposit listing, and cash flow statement. In
addition, Agent shall, on a mutually acceptable schedule,
prepare and submit to Owner such other reports as are agreed
on by both parties.
6.2 BUDGETS
Annual operating budgets for the Premises will be approved by
the Owner. Except as permitted under Section 10.1 below,
annual disbursements for each type of operating expenses
itemized in the budget shall not materially exceed the amount
authorized by the approved budget without prior consent of the
Owner. The Agent will prepare a recommended operating budget
for each fiscal year beginning during the term of this
Agreement, and will submit the same to the Owner at least
forty-five (45) days before the beginning of the fiscal year.
The Owner will promptly inform the Agent of any changes
incorporated in the approved budget, and the Agent will keep
the Owner informed of any anticipated deviation from the
receipts or disbursements stated in the approved budget.
6.3 OWNER'S RIGHT TO AUDIT
Owner shall have the right to request periodic audits of all
applicable accounts managed by Agent, and the cost of such
audit(s) shall be paid by Owner.
6.4 TAX ASSESSMENTS
Agent will inform Owner of changes in the amount of real or
personal property tax assessments and assist Owner in
compiling all necessary information in connection with any
contest or appeal of any assessments.
Section 7 - ADVERTISING
Agent is authorized to advertise the Premises or portions
thereof for rent using periodicals, signs, plans, brochures,
or displays, or such other means as Agent may deem proper and
advisable and in accordance with Section 6.2. Agent is
authorized to place signs on the Premises advertising the
Premises for rent, provided such signs comply with applicable
laws. The cost of such advertising shall be paid out of the
Operating (and/or) Reserve Account(s). All advertising shall
make clear that Agent is the manager and NOT the Owner of the
Premises. Newspaper ads that share space with other
properties managed by the Agent shall be prorated on a
reasonable basis.
Section 8 - LEASING AND RENTING
8.1 AGENT'S AUTHORITY TO LEASE PREMISES
Agent shall use all reasonable efforts to keep the Premises
rented by procuring tenants for the Premises. Agent is
authorized to negotiate, prepare, and execute all leases,
including all renewals and extensions of leases (and
expansions of space in the Premises, if applicable) and to
cancel and modify existing leases. Agent shall execute all
leases as Agent for the Owner. All costs of leasing shall be
paid out of the Operating (and/or) Reserve Account(s). No
lease shall be in excess of two year(s) without written
approval of Owner. The form of the lease shall be agreed upon
by Owner and Agent.
8.2 NO OTHER RENTAL AGENT
During the time of this Agreement. Owner shall not authorize
any other person, firm, or corporation to negotiate or act as
leasing or rental agent with respect to any leases for space
in the Premises. Owner agrees to promptly forward all
inquiries about leases to Agent.
8.3 RENTAL RATES
Agent, with the consent of the Owner, is authorized to
establish and change or revise all rents, fees, or deposits,
and any other charges chargeable with respect to the Premises.
8.4 ENFORCEMENT OF LEASES
Agent is authorized to institute, in Owner's name, all legal
actions or proceedings for the enforcement of any lease term,
for the collection of rent or other income from the Premises
or for the evicting or dispossessing of tenants or other
persons from the Premises. Agent is authorized to sign and
serve such notices as Agent deems necessary for lease
enforcement, including the collection of rent or other income.
Agent is authorized, when expedient, to settle, compromise,
and release such legal actions or suits or reinstate such
tenancies. Any monies for such settlements paid out by Agent
shall not exceed $5,000 without prior approval by Owner.
Attorney's fees, filing fees, court costs, and other necessary
expenses incurred in connection with such actions and not
recovered from tenants shall be paid out of the Operating
(and/or) Reserve Account(s) or reimbursed directly to Agent by
Owner. Agent may select the attorney of its choice to handle
such litigation upon the advise and consent of Owner.
Section 9 - EMPLOYEES
9.1 AGENT'S AUTHORITY TO HIRE
Agent is authorized to hire, supervise, discharge, and pay all
servants, employees, contractors or other personnel necessary
to be employed in the management, maintenance, and operation
of the Premises in accordance with approved budget mentioned
in Section 6.2. All employees shall be deemed employees of
the Agent.
9.2 OWNER PAYS EMPLOYEE EXPENSES
All wages and fringe benefits payable to such employees hired
per paragraph 9.1 above, and all local, state, and federal
taxes and assessment (including but not limited to Social
Security taxes, unemployment insurance and workers'
compensation insurance) incident to the employment of such
personnel, shall be reimbursed to the Agent out of the
Operating (and/or) Reserve Account(s) in accordance with the
approved budget, and shall be treated as operating expenses.
9.3 AGENT'S AUTHORITY TO FILE RETURNS
Agent shall do and perform all acts required of an employer
with respect to the Premises and shall execute and file all
tax and other returns required under the applicable federal,
state and local laws, regulations, and/or ordinances governing
employment, and all other statements and reports pertaining to
labor employed in connection with the Premises and under any
similar federal or state law now or hereafter in force. In
connection with such filing, Owner shall be responsible for
all amounts required to be paid under the foregoing laws, and
Agent shall pay the same from the Operating (and/or) Reserve
Account(s). Any penalties assessed to Owner and incurred due
to the negligence of Agent shall be paid for by Agent.
9.4 WORKER'S COMPENSATION INSURANCE
Agent shall, at Owner's expense, maintain worker's
compensation insurance covering all liability of the employer
under established worker's compensation laws.
9.5 HOLD HARMLESS, LABOR LAWS
Agent shall be responsible for compliance with all applicable
state or federal labor laws. Owner shall indemnify, defend,
and save Agent harmless from all claims, investigations, and
suites, or from Owner's action or failures to act, with
respect to any alleged or actual violation of state or federal
labor laws. Conversely, Agent shall indemnify, defend and
save Owner harmless from all claims, investigations, and
suits, or from Agent's actions or failure to act with respect
to any alleged or actual violations of state or federal labor
laws. Agent's or Owner's obligation with respect to such
violation(s) shall include payment of all settlements,
judgments, damages, liquidated damages, penalties,
forfeitures, back pay awards, court costs, litigation
expenses, and attorney's fees.
Section 10 - MAINTENANCE AND REPAIR
Agent is authorized to make or cause to be made, through
contracted services or otherwise, all ordinary repairs and
replacements reasonably necessary to preserve the Premises in
its present condition and for the operating efficiency of the
Premises, and all alterations required to comply with lease
requirements, governmental regulations, or insurance
requirements. Agent is also authorized to decorate the
Premises and to purchase or rent, on Owner's behalf, all
equipment, tools, appliances, materials, maintenance, or
operation of the Premises. Such maintenance and decorating
expenses shall be made in accordance to approved budget and
shall be paid out of the Operating (and/or) Reserve
Account(s). This section applies except where decorating
and/or maintenance are at tenants' expense as stipulated in a
lease.
10.1 APPROVAL FOR EXCEPTIONAL MAINTENANCE EXPENSE
The expense to be incurred for any one item of maintenance
alteration, refurbishing, or repair shall not exceed the sum
of $5,000 unless such expense is specifically authorized by
Owner or is incurred under such circumstances as Agent shall
reasonable deem to be an emergency. In an emergency where
repairs are immediately necessary for the preservation and
safety of the Premises, or to avoid the suspension of any
essential service to the Premises, or to avoid danger to life
or property, or to comply with federal, state, or local law,
such emergency repairs shall be made by Agent at Owner's
expense prior approval.
Section 11 - CONTRACTS, UTILITIES AND SERVICES
Agent is authorized to negotiate contracts for non-recurring
items of expense, not to exceed $5,000, unless approved by
Owner, and to enter into agreements in Owner's name for all
necessary repairs, maintenance, minor alterations, and utility
services. Agent shall, in Owner's name and at Owner's
expense, make contracts on Owner's behalf for electricity,
gas, telephone, fuel, or water, and such other services as
Agent shall deem necessary or prudent for the operation of the
Premises. All utility deposits shall be the Owner's
responsibility, except that Agent may pay same from the
Operating (and/or) Reserve Account(s) at Owner's request.
Section 12 - RELATIONSHIP OF AGENT TO OWNER
The relationship of the parties to this Agreement shall be
that of Principal and Agent, and all duties to be performed by
Agent under this Agreement shall be for and on behalf of
Owner, in Owner's name and for Owner's account. In taking any
under the Agreement, Agent shall be acting only as Agent for
Owner, and nothing in this Agreement shall be construed as
creating a partnership, joint venture, or any other
relationship between the parties to this Agreement except that
of Principal and Agent, or as requiring Agent to bear any
portion of losses arising out of or connected with the
ownership or operation of the Premises. Nor shall Agent at
any time during the period of this Agreement to be considered
a direct employee of Owner. Neither party shall have the
owner to bind or obligate the other except as expressly set
forth in this Agreement except that Agent is authorized to act
with such additional authority and power as may be necessary
to carry out the spirit and intent of this Agreement.
Section 13 - SAVE HARMLESS
The Owner will indemnify the Agent harmless against and hold
the Agent harmless from and against any liabilities, damages,
costs and expenses (including reasonable attorney's fees)
sustained or incurred for injury to any person or property
in, about, and in conjunction with the buildings, unless such
injury shall be caused by the Agent's own negligence or
willful misconduct; and any liability, damages, penalties,
costs and expenses (including reasonable attorney's fees)
statutory or otherwise, for all acts performed by the Agent in
accordance with the terms of this Agreement or pursuant to the
instructions of the Owner, provided, in each of the foregoing
instances, that the Agent promptly advises the Owner of its
receipt of information concerning any such injury and the
amount of any such liability, damages, penalties, costs and
expenses.
The Agent will indemnify the Owner harmless against and hold
the Owner harmless from and against; any liabilities, damages,
costs and expenses (including reasonable attorney's fees)
sustained or incurred for injury to any person or property in,
about, and in conjunction with the buildings caused by the
Agent's own negligence or willful misconduct; and any
liability, damages, penalties, costs and expenses (including
reasonable attorney's fees) statutory or otherwise, for all
acts performed by the Agent not in accordance with the terms
of this Agreement or not pursuant to the instructions of the
Owners.
Section 14 - LIABILITY INSURANCE
Owner and Agent shall obtain and keep in force adequate
insurance against physical damage (e.g. fire with extended
coverage endorsement, boiler and machinery, etc.) and against
liability for loss, damage, or injury to property or persons
which might arise out of the occupancy, management, operation,
or maintenance of the Premises. The amounts and types of
insurance shall be acceptable to both Owner and Agent, and any
deductible required under each insurance policies shall be
Owner's expense. Agent shall be covered as additional insured
on all liability insurance maintained with respect to the
Premises. Liability insurance shall be adequate to protect
the interest of both Owner and Agent and in form, substance,
and amounts reasonable satisfactory to Agent. Owner agrees to
furnish Agent with certificates evidencing such insurance or
with duplicate copies of such policies within 10 days of the
execution of this Agreement. If Owner fails to do so, Agent
may but shall not be obligated to place said insurance and
charge the cost thereof to the Operating (and/or) Reserve
Account(s). Said policies shall provide that notice of
default or cancellation shall be sent to Agent as well as
Owner and shall require a minimum of 30 days written notice to
Agent before any cancellation of or changes to said policies.
Section 15 - AGENT ASSUMES NO LIABILITY
Agent assumes no liability whatsoever for any acts or
omissions of Owner or any previous owners of the Premises, or
any previous management or other agent of either. Agent
assumes no liability for any failure of or default by any
tenant in the payment of any rent or other charges due Owner
or in the performance of any obligations owned by any tenant
to Owner pursuant to any lease or otherwise. Nor does Agent
assume any liability for previously unknown violations or
environmental or other regulations which may become unknown
during the period of this Agreement is in effect. Any such
regulatory violations or hazards discovered by Agent shall be
brought to the attention of the Owner in writing and Owner
shall promptly cure them.
Section 16 - OWNER RESPONSIBLE FOR ALL EXPENSES OF LITIGATION
Owner shall reimburse all reasonable expenses incurred by
Agent, including but not limited to, reasonable attorneys' fee
and Agent's costs and time, any liability, fines, penalties or
the like, in connection with any claim, proceeding, or suit
involving an alleged violation by Agent or Owner, or both, of
any law pertaining to fair employment, fair credit reporting,
environmental protection, rent control, taxes, or fair
housing, including, but not limited to, any law prohibiting or
making illegal discrimination on the basis or race, sex,
creed, color, religion, national origin, or mental or physical
handicap, provided, however, that Owner shall not be
responsible to Agent for any such expenses in the event Agent
is finally adjudged to have personally, and not in a
representative capacity, violated any such law. Nothing
contained in this Agreement shall obligate Agent to employ
legal counsel to represent Owner in any such proceeding or
suit.
16.1 FEES FOR LEGAL ADVICE
Owner shall pay reasonable expenses incurred by Agent in
obtaining legal advice regarding compliance with any law
affecting the Premises or activities related to them. If such
expenditure also benefits others for whom Agent in this
Agreement acts in a similar capacity, Owner agrees to pay an
apportioned amount of such expense.
Section 17 - AGENT'S COMPENSATION AND EXPENSES
As compensation for the services provided by Agent under this
Agreement (and exclusive of reimbursement of expenses to which
Agent is entitled hereunder). Owner shall pay Agent as
follows:
17.1 FOR MANAGEMENT SERVICES
The greater of (i) $5,200 per month or (ii) 4% of the total
monthly gross receipts from the premises, payable by the 1st
day of the current month for the duration of this Agreement.
Payments due Agent for Periods of less than a calendar month
shall be prorated over the number of days for which
compensation is due. The percentage amount set forth in (ii)
above shall be based upon the total gross receipts form the
premises during the preceding month.
The term "gross receipts" shall be deemed to include all
collected rents and other income and charges from the normal
operation of the Premises, including, but not limited to,
rents, parking fees, laundry income, forfeited security
deposits, pet deposits, other fees and deposits, special
charges listed in paragraph 3.2, or excess interest on
security deposits (from paragraph 3.3), and other
miscellaneous income. Gross receipts shall NOT be deemed to
include the value of units provided to on-site staff, nor the
income arising out of the sale of real property or settlement
of fire or other casualty losses and items of a similar
nature.
17.2 FOR APARTMENT LEASING
N/A.
17.3 FOR COMMERCIAL LEASING
N/A.
17.4 FOR MODERNIZATION (REHABILITATION/CONSTRUCTION)
N/A.
17.5 FOR FIRE RESTORATION
10% of total restoration if Claremont Management Corporation
acts as general contractor.
17.6 FOR OTHER ITEMS OF MUTUAL AGREEMENT
To be determined if situation arises.
17.7 INTEREST ON UNPAID SUMS
Any sums due Agent under any provisions of this Agreement, and
not paid within 30 days after such sums have become due, shall
bear interest at the rate of Fleet prime rate.
Section 18 - REPRESENTATIONS
Owner represents and warrants: That Owner has full power and
authority to enter this Agreement; that there are no written
or oral agreements affecting the Premises other than tenant
leases, copies of which have been furnished to Agent; that
there are no recorded easements, restrictions, reservations,
or rights of way which adversely affect the use of the
Premises for the purposes intended under this Agreement; that
to the best of Owner's knowledge, the property is zoned for
the intended use; that all leasing and other permits for the
operation of the Premises have been secured and are current;
that the building and its been secured and are current; that
the building and its construction and operation do not violate
any applicable statutes, laws, ordinances, rules regulations,
orders, or the like (including, but not limited to, those
pertaining to hazardous or toxic substances); that the
building does not contain any asbestos, urea, formaldehyde,
radon, or other toxic or hazardous substance; and that no
unsafe conditions exists.
Section 19 - STRUCTURAL CHANGES
Owner expressly withholds from Agent any power or authority to
make any structural changes in any building, or to make any
other major alterations or additions in or to any such
building or to any equipment to any such building, or to incur
any expense chargeable to Owner other than expenses related to
exercising the express powers vested in Agent through this
Agreement, without the consent of the managers.
However, such emergency repairs as may be required because of
danger to life or property, or which are immediately necessary
for the preservation and safety of the Premises or the safety
of the tenants and occupants thereof, or required to avoid the
suspension of any necessary service to the Premises, or to
comply with any applicable federal, state, or local laws,
regulations, or ordinances, shall be authorized pursuant to
paragraph 10.1 of this Agreement, and Agent shall notify Owner
appropriately.
Section 20 - BUILDING COMPLIANCE
Agent does not assume and is given no responsibility for
compliance of the Premises or any building thereon or any
equipment therein with the requirements of any building codes
or with any statue, ordinance, law, or regulation or any
governmental body or of any public authority or official
thereof having jurisdiction, except to notify Owner promptly
or forward to Owner promptly any complaints, warnings,
notices, or summons received by Agent relating to such
matters. Owner represents that to the best of Owner's
knowledge the Premises and all such equipment comply with all
such requirements, and Owner authorizes Agent to disclose the
ownership of the Premises to any such officials and agrees to
indemnify and hold Agent, its representatives, servants, and
employees, harmless of and from all loss, cost, expense, and
liability whatsoever which may be imposed by reason of any
present or future violation or alleged violation of such laws,
ordinances, statues, or regulations.
Section 21 - TERMINATION
21.1 TERMINATION BY EITHER PARTY
This Agreement may be terminated by either Owner or Agent,
with or without cause, at the end of the initial term or of
any following term year upon the giving of 30 days' written
notice prior to the end of said initial term or following
terming year.
21.2 TERMINATION FOR CAUSE
Notwithstanding the foregoing, the Agreement shall terminate
in any event, and all obligations of the parties hereunder
shall cease (except as to liabilities or obligations which
have accrued or arisen prior to such termination, or which
accrue pursuant to paragraph 21.3 as a result of such
termination, and obligations to insure and indemnify), upon
the occurrence of any of the following events:
a. BREACH OF AGREEMENT - Thirty (30) days after the receipt
of notice by either party to the other specifying in detail a
material breach of this Agreement, if such breach has not been
cured within said thirty (30) day period; or if such breach is
of a nature that it cannot be cured within said (30) day
period but can not be cured with a reasonable time thereafter,
if efforts to cure such breach have not commenced or/and such
efforts are not proceeding and being continued diligently both
during and after such thirty (30) day period prior to the
breach being cured. HOWEVER, the breach of any obligation of
either party hereunder to pay any monies to the other party
under the terms of this Agreement shall be deemed to be
curable within thirty (30) days.
21.2 TERMINATION FOR CAUSE (Cont.)
b. FAILURE TO ACT, ETC. - In the event that any insurance
required of Owner is not
maintained without any lapse, or it is alleged or charged that
the Premises, or any portion thereof, or any act or failure to
act by Owner, its agent and employees with respect to the
Premises, fails to comply with any law or regulations, or any
order or ruling of any public authority, and Agent, in its
sole discretion, considers that the action or position of
Owner or its representatives with respect thereto may result
in damage or liability to Agent, or disciplinary proceeding
with respect to Agent's license. Agent shall have the right to
terminate this Agreement at any time by written notice to
Owner of its election to do so, which termination shall be
effective upon the service of such notice. Such termination
shall not release the indemnities of Owner set forth herein.
c. EXCESSIVE DAMAGE - Upon the destruction of or substantial
damage to the Premises by any cause, or the taking of all or a
substantial portion of the Premise of the Premises by eminent
domain, in either case making it impossible or impracticable
to continue operation of the Premises.
d. INADEQUATE INSURANCE - If Agent deems that the liability
insurance obtained by Owner per section 14 is not reasonable
satisfactory to protect its interest under this Agreement, and
if Owner and Agent cannot agree as to adequate insurance.
Agent shall have the right to cancel this Agreement upon the
service of notice to Owner.
21.3 TERMINATION COMPENSATION
If (i) Owner terminates this Agreement before the end of the
initial term or any subsequent term year as provided in
paragraph 21.1 above for any reason other than for a breach by
Agent under paragraph 21.2 (a) above, or if (ii) Agent
terminates this Agreement for a breach by Owner under
paragraph 21.2 (a) above or pursuant to the provisions of
paragraph 21.2 (b) or 21.2 (d) above, then in any such event,
Owner shall be obligated to pay Agent as liquidated damages an
amount equal to the management fee earned by Agent, as
determined under paragraph 17.1 above, for the calendar month
immediately preceding the month in which the notice of
termination is given to Agent or to Owner, multiplied by the
number of months and/or portions thereof remaining from the
termination date until the end of the initial term or term
year in which the termination occurred. Such damages, plus
any amounts accruing to Agent prior to such termination, shall
be due and payable upon termination of this Agreement. To the
extent that funds are available, such sums shall be payable
from the Operating (and/or) Reserve Account(s). Any amount
due in excess of the funds available from the Operating
(and/or) Reserve Account(s) shall be paid by Owner to Agent
upon demand.
21.4 OWNER RESPONSIBLE FOR PAYMENTS
Upon Termination or withdrawal from this Agreement, Owner
shall assume the obligations of any contract or outstanding
bill executed by Agent under this Agreement for and on behalf
of Owner and responsibility for payment of all unpaid bills.
In addition, Owner shall furnish Agent security, in an amount
satisfactory to Agent, against any obligations or liabilities
with Agent may have properly incurred on Owner's behalf under
this Agreement.
Agent may withhold funds for ninety (90) days after the end of
the month in which this Agreement is terminated, in order to
pay bills previously incurred by not yet invoiced and to close
accounts. Agent shall deliver to Owner, within ninety (90)
days after the end of the month in which this Agreement is
terminated, any balance of monies due Owner or of tenant
security deposits, or both which were held by Agent with
respect to the Premises, as well as a final accounting
reflecting the balance of income and expenses with respect to
the Premises as of the date of termination or withdrawal, and
all records, contracts, leases, receipts for deposits, and
other papers or documents which pertain to the Premises.
21.5 SALE OF PREMISES
In the event that the Premises are sold by Owner during the
period of this Agreement, Agent may, upon agreement with Owner
and in accordance with Owner's partnership agreement, obtain
rights of representation in the sale as stated in a specific
sales agreement to be negotiated separately. Upon transfer of
ownership, this Agreement shall terminate by mutual consent of
Owner and Agent under the term and conditions set forth below:
The agreement shall automatically terminate upon sale of
Premises to a bona fide Third Party without penalty. A
minimum of sixty days notice is required.
Section 22 - INDEMNIFICATION SURVIVES TERMINATION
All representatives and warranties of the parties contained
herein shall survive the termination of this Agreement. All
provisions of this Agreement that require Owner to have
insured or to defend, reimburse, or indemnify Agent
(including, but not limited to, paragraphs, 2.1, 2.3, 5, 8.4,
9.2, 13, 14, 15, 16, 17.7, 20, 21.3 and 21.4) shall survive
any termination; and if Agent is or becomes involved in any
proceedings or litigation by reason of having been Owner's
Agent, such provisions shall apply as if this Agreement were
still in effect.
Section 23 - HEADINGS
All headings and subheadings employed within this Agreement
and in the accompanying List of Provisions are inserted only
for convenience and ease of reference and are not to be
considered in the construction or interpretation of any
provision of this Agreement.
Section 24 - FORCE MAJEUR
Any delays in the performance of any obligation of Agent under
this Agreement shall be excused to the extent that such delays
are caused by wars, national emergencies, natural disasters,
strikes, labor disputes, utility failures, governmental
regulations, riots, adverse weather, and other similar causes
not within the control of Agent, and any time periods required
for performance shall be extended accordingly.
Section 25 - COMPLETE AGREEMENT
This Agreement, including any specified attachments,
constitutes the entire agreement between Owner and Agent with
respect to the management and operation of the Premises and
supersedes and replaces any and all previous management
agreements entered into or/and negotiated between Owner and
Agent relating to the Premises covered by this Agreement. No
change to this Agreement shall be valid unless made by
supplemental written agreement executed and approved by Owner
and Agent. Except as otherwise provided herein, any and all
amendments, additions, or deletions to this Agreement shall be
null and void unless approved by Owner and Agent in writing.
Each party to this Agreement hereby acknowledges and agrees
that the other party has made no warranties, representations,
covenants, or agreements, express or implied, to such party,
other than those expressly set forth herein, and that each
party, in entering into and executing this Agreement, has
relied upon no warranties, representations, covenants, or
agreement, express or implied, to such party, other than those
expressly set forth herein.
Section 26 - RIGHTS CUMULATIVE; NO WAIVER
No right or remedy herein conferred upon or reserved to either
of the parties to this Agreement is extended to be exclusive
of any other right or remedy, and each and every right and
remedy shall be cumulative and in addition to any other right
or remedy given under this Agreement or now or thereafter
legally existing upon the occurrence of an event or default
under this Agreement. The failure of either party to this
Agreement to insist at any time upon the strict observance or
performance of any of the provisions of this Agreement, or to
exercise any right or remedy as provided in this Agreement,
shall not impair any such right or remedy with respect to
subsequent defaults. Every right and remedy given by this
Agreement to the parties to it may be exercised from time to
time and as often as may be deemed expedient by those parties.
Section 27 - APPLICABLE LAW AND PARTIAL INVALIDITY
The Execution, interpretation, and performance of this
Agreement shall in all respects be controlled and governed by
the laws of the State of Massachusetts. If any part of this
Agreement shall be declared invalid or unenforceable, Agent
shall have the option to terminate this Agreement by notice to
Owner.
Any notices, demands, consents, and report necessary or
provided for under this Agreement shall be in writing and
shall be addressed as follows, or at such other address as
Owner and Agent individually may specify hereafter in writing:
Agent: Claremont Management Corporation
Batterymarch Park II
Quincy, MA 02169
ATTN: Charles M. Moran, Jr.
Owner: The Cosmopolitan at Mears Park, LLC
Batterymarch Park II
Quincy, MA 02169
ATTN: Terrence P. Sullivan
Such notice or other communication may be mailed by United
States registered or certified mail, return receipt requested,
postage prepaid, and may be deposited in a United States Post
Office or a depository for the receipt of mail regularly
maintained by the post office. Such notices, demands,
consents, and reports may also be delivered by hand or by any
other receipted method or means permitted by law. For
purposes of this Agreement, notices shall be deemed to have
been "given" or "delivered" upon personal delivery thereof
forty-eight (48) hours after having been deposited in the
United States mails as provided herein.
Section 28 - AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement shall be binding the parties hereto and their
respective personal representatives, heirs, administrators,
executors, successors and assigns.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have affixed or caused
to be affixed their respective signatures this _________ day of
_______________ 1996.
Witnesses: The Cosmopolitan at Mears Park,LLC
a Delaware Limited Liability Company
__________________________ By:______________________________
Terrence P. Sullivan,Manager
Agent:
Firm: Claremont Management Corporation
__________________________ By:_______________________________
Charles M. Moran, Jr.,President
FIXED RATE PROGRAM
PROMISSORY NOTE SECURED BY MORTGAGE
LOAN NO. 96-062
March 20, 1996
Chicago, Illinois
MAKER: THE COSMOPOLITAN AT MEARS
PARK, LLC., a Delaware limited liability
company
MAKER'S ADDRESS: Batterymarch Park II
Quincy, MA 02169
PRINCIPAL AMOUNT: Seven Million and no/100 Dollars
($7,000,000.00), together with all other
amounts added thereto pursuant to this
Note or otherwise payable in accordance
with the Loan Documents.
PAYEE AND HOLDER: Heller Financial, Inc., a Delaware
corporation, and its successors and
assigns.
PAYMENT ADDRESS: 500 West Monroe Street, 15th Floor
Chicago, Illinois
60661
or such other address
as Holder may hereafter designate in
writing to Maker.
PRINCIPAL: Patrick Carney
INITIAL PAYMENT DATE: May 1, 1996.
MATURITY DATE: March 31, 2003, or any earlier
date on which the entire unpaid Principal
Amount shall be paid or required to be
paid in full, whether by prepayment,
acceleration or otherwise.
AMORTIZATION PERIOD: 25 Years.
AMORTIZATION SCHEDULE: The amortization schedule attached hereto
as Exhibit A.
CONTRACT RATE: A rate of interest equal to nine
and 14/100ths percent (9.14%) per annum.
DEFAULT RATE: The Contract Rate plus 500 basis
points per annum.
LATE CHARGE: Five percent (5%) of each
delinquent payment.
PROPERTY: Cosmopolitan at Mears Park
Apartments
250 East Sixth Street
St. Paul, Ramsey County, Minnesota
MORTGAGE: The mortgage or deed of trust,
assignment of rents and security agreement
of even date herewith (and any
modification, renewal or extension
thereof) securing repayment of the Loan
and encumbering, among other things, the
Property.
LOAN: The loan from Holder to
Maker evidenced by this Note and secured
by the other Loan Documents.
LOAN DOCUMENTS: This Note, the Mortgage and any other
documents evidencing or securing the Loan
or executed in connection therewith, and
any modification, renewal and extension
thereof.
NOTE: This Promissory Note
Secured by Mortgage and any modifications,
renewals or extensions hereof and any
substitutions therefor.
1. Promise to Pay.
FOR VALUE RECEIVED, Maker promises to pay to the order of
Holder at the Payment Address the Principal Amount (or so much
thereof as may from time to time be outstanding) on or before the
Maturity Date, together with interest thereon as hereinafter set
forth, payable in lawful money of the United States of America.
2. Principal and Interest.
So long as no Event of Default exists, interest shall accrue
on the Principal Amount from time to time outstanding at the
Contract Rate based on a 360 day year consisting of 12 months of 30
days each. Principal and interest shall be paid to the Holder
hereof as follows: (a) On the Initial Payment Date and on the
first day of each month thereafter, Maker shall pay to Holder
monthly payments of principal and interest due for such period
based upon the Amortization Schedule; and (b) the outstanding
Principal Amount of this Note, together with all accrued and unpaid
interest, shall be due and payable in full on the Maturity Date.
Whenever any payment is stated to be due or a computation is to be
made on a day which is not a business day, such payment or
computation will be made on the next succeeding business day, and
such extension of time will be included in the computation of
interest.
3. Prepayment.
This Note may be prepaid in full but not in part at any time,
provided that any such prepayment shall be: (i) accompanied by all
accrued and unpaid interest and all fees and costs due from Maker
to Holder; (ii) made only upon Holder's receipt of at least thirty
(30) days' prior written notice of Maker's election to prepay; and
(iii) accompanied by (x) the "Yield Maintenance Amount", if the
prepayment occurs during the first five (5) "Loan Years", or (y)
the "Prepayment Premium", if prepayment occurs during the sixth
(6th) or seventh (7th) "Loan Year's". The Loan may be prepaid
without payment of a Yield Maintenance Amount or Prepayment Premium
during the last one hundred eighty (180) days of the loan term.
Notwithstanding the foregoing, the application of any insurance
proceeds or condemnation awards to the Indebtedness in accordance
with Paragraph 5 of the Mortgage shall not result in the payment of
any prepayment penalty or Yield Maintenance Amount.
"Yield Maintenance Amount" means an amount, never less than
zero, equal to the following:
(A) The Contract Rate,
MINUS
(B) The yield ("U.S. Securities Rate"), as of the date of
such prepayment, as published by the Federal Reserve System in its
"Statistical Release H.15(519), Selected Interest Rates" under the
caption "U.S. Government Securities/Treasury Constant Maturities",
for a U.S. Government Security with a term equal to that remaining
on this Note on the date of such prepayment (which term may be
obtained by interpolating between the yields published for specific
whole years),
DIVIDED BY TWELVE (12) AND THE
QUOTIENT THEREOF THEN MULTIPLIED BY
(C) The amount prepaid on the date of such prepayment,
AND THE PRODUCT THEREOF THEN MULTIPLIED BY
(D) The number of whole months remaining from the date of
prepayment through the Maturity Date,
AND THE PRODUCT THEREOF THEN DISCOUNTED
TO OBTAIN THE PRESENT VALUE BY
(E) Discounting, assuming monthly compounding, such amount at
the U.S. Securities Rate.
"Prepayment Premium" means an amount equal to the following:
Loan Year During Which Prepayment Occurs Prepayment Premium
Loan Year 6 Two percent (2%) of the
current outstanding
balance
Loan Year 7 One percent (1%) of the
current outstanding
balance
All percentages shall be rounded to the nearest one hundred
thousandth percent and dollar amounts to the nearest whole dollar.
Maker acknowledges and agrees that any prepayment of this Note by
virtue of the occurrence of an Event of Default hereunder shall be
deemed a voluntary prepayment for purposes of determining the
applicability of the Yield Maintenance Amount.
4. Default.
4.1 Events of Default.
The following shall constitute an "Event of Default"
under this Note: (i) failure to pay any amounts owed pursuant
to this Note within ten (10) calendar days after such payment
is due; and (ii) the occurrence of any Event of Default under
any of the other Loan Documents.
4.2 Remedies.
So long as an Event of Default remains outstanding:
(a) interest shall accrue at the Default Rate and, to the
extent not paid when due, shall be added to the Principal
Amount; (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the unpaid Principal
Amount immediately due and payable. Holder's rights, remedies
and powers, as provided in this Note and the other Loan
Documents, are cumulative and concurrent, and may be pursued
singly, successively or together against Maker, the security
described in the other Loan Documents, any guarantor(s) hereof
and any other security given at any time to secure the payment
hereof, all at the sole discretion of Holder. Additionally,
Holder may resort to every other right or remedy available at
law or in equity without first exhausting the rights and
remedies contained herein, all in Holder's sole discretion.
Failure of Holder, for any period of time or on more than one
occasion, to exercise its option to accelerate the Maturity
Date shall not constitute a waiver of the right to exercise
the same at any time during the continued existence of any
Event of Default or any subsequent Event of Default.
5. Late Charge.
If payments of principal and/or interest, or any other amounts
under the other Loan Documents are not timely made and remain
overdue for a period of ten days, Maker, without notice or demand
by Holder, promptly shall pay the Late Charge computed on such past
due amounts. Until paid, the Late Charge shall be added to the
Principal Amount. Nothing in this Note shall be construed as an
obligation on the part of Holder to accept, at any time, less than
the full amount then due hereunder, or as a waiver or limitation of
Holder's right to compel prompt performance.
6. Jury Trial Waiver.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
NOTE AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS
WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY MAKER
AND HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER THE HOLDER NOR ANY
PERSON ACTING ON BEHALF OF THE HOLDER HAS MADE ANY REPRESENTATIONS
OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY
ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. MAKER AND
HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER HAVE
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY
HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL.
7. Waiver.
Except as specifically required by the Loan Documents, Maker,
for itself and all endorsers, guarantors and sureties of this Note,
and each of them, and their heirs, legal representatives,
successors and assigns, respectively hereby waives presentment for
payment, demand, notice of nonpayment, notice of dishonor, protest
of any dishonor, notice of protest and protest of this Note, and
all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note,
and agrees that its liability shall be unconditional and without
regard to the liability of any other party and shall not be in any
manner affected by any indulgence, extension of time, renewal,
waiver or modification granted or consented to by the Holder.
Maker, for itself and all endorsers, guarantors and sureties of
this Note, and each of them, and their heirs, legal
representatives, successors and assigns, respectively hereby
consents to every extension of time, renewal, waiver or
modification that may be granted by Holder with respect to the
payment or other provisions of this Note, and to the release of any
makers, endorsers, guarantors or sureties, or of any collateral
given to secure the payment hereof, or any part hereof, with or
without substitution, and agrees that additional makers or
guarantors or endorsers may become parties hereto without notice to
Maker and without affecting the liability of Maker hereunder.
8. Security, Application of Payments.
This Note is secured by the liens, encumbrances, and
obligations created hereby and by the other Loan Documents and the
terms and provisions of the other Loan Documents are hereby
incorporated herein. Each payment on the Loan is to be applied
when received first to the payment of any fees, expenses or other
costs Maker is obligated to pay hereunder or under the terms of the
other Loan Documents, second to the payment of any accrued and
unpaid Late Charge, third to the payment of interest on the
Principal Amount from time to time remaining unpaid, and the
remainder of such payment shall be used to reduce the Principal
Amount.
9. Miscellaneous.
9.1 Amendments.
This Note may not be terminated or amended orally, but
only by a termination or amendment in writing signed by
Holder.
9.2 Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid
or agreed to be paid to Holder pursuant to this Note exceed
the highest lawful rate of interest permissible under
applicable law. If, from any circumstances whatsoever,
fulfillment of any provision of this Note and the other Loan
Documents shall involve exceeding the lawful rate of interest
which a court of competent jurisdiction may deem applicable
hereto, then ipso facto, the obligation to be fulfilled shall
be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Holder shall
receive, as interest, an amount which would be deemed unlawful
under such applicable law, such interest shall be applied to
the Principal Amount (whether or not due and payable), and not
to the payment of interest, or refunded to Maker if such
Principal Amount has been paid in full.
9.3 Captions; Definitions.
The captions of the Paragraphs of this Note are for
convenience only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof. Each of the
terms defined before Paragraph 1 hereof shall have the meaning
set forth following such term when used throughout this Note.
9.4 Severable Provisions.
Every provision of this Note is intended to be
severable. If any term or provision hereof is declared by a
court of competent jurisdiction to be illegal, invalid or
unenforceable for any reason whatsoever, such illegality,
invalidity or unenforceability shall not affect the balance of
the terms and provisions hereof, which terms and provisions
shall remain binding and enforceable.
9.5 Notices.
Notices shall be given under this Note in conformity
with the terms and conditions of the Mortgage.
9.6 Joint and Several.
The obligations of Maker in this Note shall be joint and
several obligations of Maker and of each Maker, if more than
one, and of each Maker's heirs, personal representatives,
successors and assigns.
9.7 Time of Essence.
Time is of the essence of this Note and the performance
of each of the covenants and agreements contained herein.
9.8 Governing Law.
This Note shall be governed by the laws of the State of
Illinois.
10. Exculpation.
Subject to the provisions set forth below, neither Maker nor
Principal shall be personally liable to pay the Principal Amount
and Holder agrees to look solely to the Property and any other
collateral heretofore, now, or hereafter pledged by any party to
secure the Principal Amount. Notwithstanding the foregoing, Maker
and Principal, jointly and severally, shall be personally liable to
pay (A) the Principal Amount in the event of, and all damages,
including but not limited to attorneys' fees and expenses, arising
from the breach of the provisions contained in Paragraphs 8
(inspection), 10 (financial statements), 15 (transfers of the
property or beneficial interest in Maker; assumption), 16 (no
additional liens), and 17 (single asset entity) of the Mortgage;
and (B) all damages, including but not limited to attorneys' fees
and expenses, arising from:
(i) the collection and receipt of proceeds and income
from the Property and the other assets and obligations
securing the Loan by or for the benefit of Maker or
Principal following an Event of Default which are not
paid to Holder or applied to the Property in the ordinary
course of business;
(ii) fraud;
(iii) material misrepresentation;
(iv) misapplication or misappropriation of funds which
come into the possession of Maker or Principal; or
(v) intentional or material waste to the Property.
The foregoing shall in no way limit or impair the enforcement
against the Property or any other security granted by the Loan
Documents of any of the Holder's rights and remedies pursuant to
the Loan Documents.
IN WITNESS WHEREOF, Maker does execute this Note as of the
date set forth above.
MAKER:
THE COSMOPOLITAN AT MEARS PARK,
LLC., a Delaware limited
liability company
By:____________________________
Terrence P. Sullivan
Its Manager
This instrument was prepared by
and after recording return to:
Janet A. Lindeman, Esq.
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
SPACE ABOVE THIS LINE FOR
RECORDER'S USE.
Loan No. 96-062
MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
THIS MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
("Mortgage") is made as of the 20th day of March, 1996, between
THE COSMOPOLITAN AT MEARS PARK, LLC , a limited liability company
organized and existing under the laws of Delaware, whose address
is Batterymarch Park II, Quincy, Massachusetts, 01269
("Borrower"), and HELLER FINANCIAL, INC., a corporation organized
and existing under the laws of Delaware, whose address is 500
West Monroe Street, 15th Floor, Chicago, Illinois 60661 (HELLER
FINANCIAL, INC. and its successors and assigns are hereinafter
referred to as "Lender").
RECITALS
A. Borrower has executed and delivered to Lender a
Promissory Note Secured by Mortgage dated of even date herewith
in the principal amount of Seven Million and no/100 Dollars
($7,000,000.00) (which note, together with all notes issued in
substitution or exchange therefor and/or as any of the foregoing
may be amended, modified or supplemented from time to time, is
hereinafter referred to as the "Note"), providing for monthly
installments of principal and interest, with the balance thereof,
if not sooner due or paid as set forth in the Note, due and
payable on March __, 2003 (said date, or any earlier date on
which the entire unpaid principal amount shall be paid or
required to be paid in full, whether by prepayment, acceleration
or otherwise, is herein called the "Maturity Date");
B. Lender wishes to secure (i) the prompt payment of the
Note, together with all interest thereon in accordance with the
terms of the Note, as well as the prompt payment of any
additional indebtedness accruing to Lender on account of any
future payments, advances or expenditures made by Lender pursuant
to the Note or this Mortgage or any other agreement, document, or
instrument securing the payment of the indebtedness evidenced by
the Note (the Note, this Mortgage, and any other documents
evidencing or securing the indebtedness evidenced by the Note or
executed in connection therewith, and any modification, renewal,
extension thereof, are hereinafter collectively referred to as
the "Loan Documents"), and (ii) the prompt performance of each
and every covenant, condition, and agreement now or hereafter
arising contained in the Loan Documents of Borrower or any
"Principal" (as defined in the Note). All payment obligations of
Borrower or any Principal are hereinafter sometimes collectively
referred to as the "Indebtedness" and all other obligations of
Borrower or any Principal are hereinafter sometimes collectively
referred to as the "Obligations".
NOW, THEREFORE, TO SECURE TO LENDER the repayment of the
Indebtedness and the performance of the Obligations, Borrower has
executed this Mortgage and does hereby mortgage, convey, assign,
warrant, transfer, pledge and grant a security interest in and to
Lender the following described property and all proceeds thereof
(which property is hereinafter sometimes collectively referred to
as the "Property"):
A. The real estate described on Exhibit A hereto (the
"Land");
B. All improvements of every nature whatsoever now or
hereafter situated on the Land and owned by Borrower (the
"Improvements"), and all machinery, equipment, mechanical
systems and other personal property now or hereafter owned
by Borrower and used in connection with the operation of the
Improvements;
C. All easements and appurtenances now or hereafter
in any way relating to the Land or Improvements or any part
thereof;
D. All agreements affecting the use, enjoyment or
occupancy of the Land and/or Improvements now or hereafter
entered into (the "Leases") and the immediate and continuing
right to collect all rents, income, receipts, royalties,
profits, issues, service reimbursements, reasonable fees,
accounts receivables, revenues and prepayments of any of the
same from or related to the Land and/or Improvements from
time to time accruing under the Leases and/or the operation
of the Land and/or Improvements (the "Rents"), reserving to
Borrower, however, so long as no "Event of Default"
(hereinafter defined) has occurred hereunder, a revocable
license to receive and apply the Rents in accordance with
the terms and conditions of Paragraph 13 of this Mortgage;
E. All claims, demands, judgments, insurance
proceeds, awards of damages and settlements hereafter made
resulting from the taking of the Land and/or the
Improvements or any part thereof under the power of eminent
domain, or for any damage (whether caused by such taking, by
casualty or otherwise) to the Land or the Improvements or
any part thereof;
F. To the extent assignable, all now or hereafter
existing management contracts and all permits, certificates,
licenses, approvals, entitlements and authorizations,
however characterized, issued or in any way furnished for
the acquisition, construction, operation and use of the
Land, Improvements and/or Leases, including building
permits, environmental certificates, licenses, certificates
of operation, warranties and guaranties;
G. All of Borrower's rights in and to all trademarks,
tradenames, assumed names, and other rights and interests in
and to the names and marks used by Borrower in connection
with the Land or Improvements, including all rights in the
name Cosmopolitan at Mears Park; and
H. Any monies on deposit with or for the benefit of
Lender, including deposits for the payment of real estate
taxes.
TO HAVE AND TO HOLD the Property and all parts thereof,
together with the rents, issues, profits and proceeds thereof,
unto Lender to its own proper use, benefit, and advantage
forever, subject, however, to the terms, covenants, and
conditions herein.
At no time shall the principal amount of the Indebtedness,
not including sums advanced in accordance herewith to protect the
security of this Mortgage, exceed two hundred percent (200%) of
the original amount of the Note.
Borrower covenants and agrees with Lender as follows:
1. Payment of Indebtedness; Performance of Obligations.
Borrower shall promptly pay when due the Indebtedness and
shall promptly perform all Obligations.
2. Taxes and Other Obligations.
Borrower shall pay, when due, and before any interest,
collection reasonable fees or penalties shall accrue, all taxes,
assessments, fines, impositions and other charges and
obligations, including charges and obligations for any present or
future repairs or improvements made on the Property, or for any
other goods or services or utilities furnished to the Property,
which may become a lien on or charge against the Property prior
to this Mortgage, subject, however, to Borrower's right to
contest such lien or charge upon the posting of security
reasonably satisfactory to Lender so long as such contest stays
the enforcement or collection of such lien or charge. Should
Borrower fail to make such payments, Lender may, at its option
and at the expense of Borrower, pay the amounts due for the
account of Borrower. Upon the request of Lender, Borrower shall
immediately furnish to Lender all notices of amounts due and
receipts evidencing payment. Borrower shall promptly notify
Lender of any lien on all or any part of the Property and shall
promptly discharge any unpermitted lien or encumbrance.
3. Reserves for Taxes.
Borrower shall pay to Lender, at the time of and in addition
to the monthly installments of principal and/or interest due
under the Note, a sum equal to one-twelfth (1/12) of the amount
estimated by Lender to be sufficient to enable Lender to pay at
least thirty (30) days before they become due and payable, all
taxes, assessments and other similar charges levied against the
Property. So long as no Event of Default exists hereunder,
Lender shall apply the sums to pay such tax items. These sums
may be commingled with the general funds of Lender, and these
sums shall not be deemed to be held in trust for the benefit of
Borrower. These sums shall be deposited in an interest bearing
account for the benefit of Borrower. If such amount on deposit
with Lender is insufficient to fully pay such tax items, Borrower
shall, within ten (10) days following notice at any time from
Lender, deposit such additional sum as may be required for the
full payment of such tax items. Upon the Maturity Date, the
moneys then remaining on deposit with Lender or its agent shall,
at Lender's option, be applied against the Indebtedness. The
obligation of Borrower to pay such tax items is not affected or
modified by the provisions of this paragraph.
4. Use of Property.
Unless required by applicable law, Borrower shall not permit
changes in the use of any part of the Property from the use
existing at the time this Mortgage was executed, which use
Borrower represents and warrants is limited to rental apartments
and related uses. Borrower shall not initiate or acquiesce in a
change in the zoning classification of the Property without
Lender's prior written consent.
5. Insurance and Condemnation.
Borrower shall keep the Improvements insured, and shall
maintain general liability coverage and such other coverages
requested by Lender, by carrier(s), in amounts and in form at all
times satisfactory to Lender, which carrier(s), amounts and form
shall not be changed without the prior written consent of Lender.
All such policies of insurance shall be issued by insurers
qualified under the laws of the state in which the Land is
located, duly authorized and licensed to transact business in
such state and reflecting a General Policy Rating of A-:V or
better in Best's Key Rating Guide.
In case of loss or damage by fire or other casualty,
Borrower shall give immediate written notice thereof to the
insurance carrier(s) and to Lender. Lender is authorized and
empowered to make or file proofs of loss or damage (in each case
only so long as such loss or damages is equal to or greater than
$50,000) and to settle and adjust any claim under insurance
policies which insure against such risks, or to direct Borrower,
in writing, to agree with the insurance carrier(s) on the amount
to be paid in regard to such loss.
Borrower shall immediately notify Lender of any action or
proceeding relating to any condemnation or other taking, whether
direct or indirect, of the Property, or part thereof, and
Borrower shall appear in and prosecute any such action or
proceeding unless otherwise directed by Lender in writing.
Borrower authorizes Lender, at Lender's option, as attorney-in-
fact for Borrower, to commence, appear in and prosecute, in
Lender's or Borrower's name, any action or proceeding relating to
any condemnation or other taking of the Property, whether direct
or indirect, and to settle or compromise any claim in connection
with such condemnation or other taking, provided such claim is
for an amount equal to or greater than $50,000. The proceeds of
any award, payment or claim for damages, direct or consequential,
in connection with any condemnation or other taking, whether
direct or indirect, of the Property, or part thereof, or for
conveyances in lieu of condemnation, are hereby assigned to and
shall be paid to Lender as further security for the payment of
the Indebtedness and performance of the Obligations.
Provided no Event of Default then exists hereunder, the net
insurance proceeds and net proceeds of any condemnation award (in
each case after deduction only of Lender's reasonable costs and
expenses, if any, in collecting the same) shall be made available
for the restoration or repair of the Property if (a) restoration
or repair and the continued operation of the Property is
economically feasible, (b) the value of Lender's security is not
reduced, (c) the loss or condemnation, as applicable, does not
occur in the six (6) month period preceding the stated Maturity
Date (in which event Borrower shall be under no obligation to
restore or repair the Property), and (d) Borrower deposits with
Lender an amount, in cash, which Lender, in its sole discretion,
determines is necessary, in addition to the net insurance
proceeds or net proceeds of any condemnation award, as
applicable, to pay in full the cost of the restoration or repair
(Borrower's deposit shall be disbursed prior to any disbursement
of insurance proceeds held by Lender). Any excess proceeds
remaining after completion of such repair shall be distributed
first to Borrower to the extent Borrower has deposited funds with
Lender for such repair with the balance applied against the
Indebtedness. Notwithstanding the foregoing, it shall be a
condition precedent to any disbursement of insurance proceeds
held by Lender hereunder that Lender shall have approved (x) all
plans and specifications for any proposed repair or restoration,
(y) the construction schedule and (z) the architect's and general
contractor's contract for all restoration that exceeds Fifty
Thousand and no/100 Dollars ($50,000.00) in the aggregate.
Lender may establish other conditions it deems reasonably
necessary to assure the work is fully completed in a good and
workmanlike manner free of all liens or claims by reason thereof.
Borrower's deposits made pursuant to this paragraph shall be used
before the net insurance proceeds or net proceeds of any
condemnation award, as applicable, for such restoration or
repair. If the net insurance proceeds or net proceeds of any
condemnation award, as applicable, are made available for
restoration or repair, such work shall be completed by Borrower
in an expeditious and diligent fashion, and in compliance with
all applicable laws, rules and regulations. At Lender's option,
the net insurance proceeds or net proceeds of any condemnation
award, as applicable, shall be disbursed pursuant to a
construction escrow acceptable to Lender. If following the final
payments for the completion of such restoration or repair there
are any net insurance proceeds or net proceeds of any
condemnation award, as applicable, remaining, such proceeds shall
be paid (i) to Borrower to the extent Borrower was required to
make a deposit pursuant to this paragraph, (ii) then to Lender to
be applied to the Indebtedness, whether or not due and payable
until paid in full, and (iii) then to Borrower. If an Event of
Default then exists, or any of the conditions set forth in
subparagraphs (a) through (d) of this Paragraph 5 have not been
met or satisfied, the net insurance proceeds or net proceeds of
any condemnation award, as applicable, shall be applied to the
Indebtedness, whether or not due and payable, with any excess
paid to Borrower.
6. Preservation and Maintenance of Property.
Borrower (a) shall not commit waste or permit impairment or
deterioration of the Property; (b) shall not abandon the
Property; (c) shall keep the Property in good repair and restore
or repair promptly, in a good and workmanlike manner, all or any
part of the Property to the equivalent of its original condition,
ordinary wear and tear excepted, or such other condition as
Lender may approve in writing, upon any damage or loss thereto,
if net insurance proceeds are made available to cover in whole or
in part the costs of such restoration or repair; (d) shall comply
with all laws, ordinances, regulations and requirements of any
governmental body applicable to the Property; (e) shall provide
for management of the Property by Borrower or by a property
manager satisfactory to Lender pursuant to a contract in form and
substance satisfactory to Lender; (f) shall give notice in
writing to Lender of any action or proceeding purporting to
affect the Property, the security granted by the Loan Documents
or the rights or powers of Lender to the extent such action or
proceeding could potentially expose Borrower, Principal or the
Property to liability in excess of $35,000; and (g) unless
otherwise directed in writing by Lender, appear and defend any
action or proceeding purporting to affect the Property, the
security granted by the Loan Documents or the rights or powers of
Lender. Neither Borrower nor any tenant or other person shall
remove, demolish or alter any Improvement or any fixture,
equipment, machinery or appliance in or on the Land and owned or
leased by Borrower except when incident to the replacement of
fixtures, equipment, machinery and appliances with items of like
kind.
7. Protection of Lender's Security; Leases.
If Borrower fails to pay the Indebtedness or perform the
Obligations, or if any action or proceeding is commenced which
affects the Property or Lender's interest therein in excess of
$35,000, then Lender, at Lender's option, may make such
appearances, disburse such sums and take such action as Lender
deems necessary, in its sole discretion, to protect the Property
or Lender's interest therein, including entry upon the Property
to make repairs and perform environmental tests and studies.
Any amounts disbursed by Lender pursuant to this Paragraph 7
(including attorneys' costs and expenses), with interest thereon
at the "Default Rate" (defined in the Note) from the date of
disbursement, shall become additional Indebtedness of Borrower
secured by the Loan Documents and shall be due and payable on
demand. Nothing contained in this Paragraph 7 shall require
Lender to incur any expense or take any action hereunder.
Except in the ordinary course of its business, Borrower
shall not, without Lender's prior written consent, execute,
modify, amend, surrender or terminate any Lease. All Leases of
space in the Property shall be on the form of lease previously
approved by Lender with tenants and for a use acceptable to
Lender. All Leases of space in the Property executed or renewed
after the date hereof must be approved by Lender prior to the
execution thereof by Borrower. Borrower shall not be authorized
to enter into any ground lease of the Property without Lender's
prior written approval. If Lender consents to any new Lease of
space in the Property or the renewal of any existing Lease of
space in the Property, at Lender's request, Borrower shall cause
the tenant thereunder to execute a subordination and attornment
agreement in form and substance satisfactory to Lender
contemporaneously with the execution of such Lease.
8. Inspection.
Lender and its authorized agents may make or cause to be
made reasonable entries upon and inspections of the Property,
including for performing any environmental inspections and
testing of the Property, and inspections of Borrower's books,
records, and contracts at all reasonable times upon reasonable
advance notice, which notice may be given in writing or orally.
9. Books and Records.
Borrower shall keep and maintain at all times at Borrower's
address stated above, or such other place as Lender may approve
in writing, complete and accurate books of accounts and records
adequate to reflect correctly the results of the operation of the
Property and copies of all written contracts, Leases and other
instruments affecting the Property.
10. Financial Statements.
Borrower shall furnish to Lender, within forty-five (45)
days after the end of each fiscal quarter of the operation of the
business of Borrower and at any other time upon Lender's request,
a balance sheet, a statement of income and expenses of the
Property and a statement of changes in financial position, each
in reasonable detail and certified as true and complete by
Borrower or its general partner or chief financial officer.
Borrower shall also furnish to Lender, and shall cause each
Principal to furnish to Lender, within sixty (60) days after the
end of each fiscal year of Borrower in preliminary form and
within ninety (90) days after the end of each fiscal year of
Borrower in final form, a balance sheet, a statement of income
and expenses and a statement of cash flows, each in reasonable
detail and certified as true and complete by Borrower or its
general partner or chief financial officer and each Principal, as
the case may be. Borrower shall furnish, together with the
foregoing quarterly financial statements and at any other time
upon Lender's request if Lender determines that the value of its
collateral has diminished, a rent schedule for the Property,
certified as true and complete by Borrower, showing the name of
each tenant, and for each tenant, the space occupied, the lease
expiration date, the rent payable, the rent paid to date, and the
security deposit being held for such tenant. If Borrower fails
to timely furnish Lender with any of the financial information
and reports set forth in this paragraph within the required time
periods, Lender shall have the right, acting in its sole
discretion, to hire a certified public accounting firm acceptable
to Lender, to prepare such financial information and reports, on
an audited basis. The costs and expenses of such accounting firm
shall be paid by Borrower on demand and, to the extent advanced
by Lender become, with interest thereon from the date advanced by
Lender at the Default Rate, additional Indebtedness of Borrower
secured by the Loan Documents. Additionally, if Borrower fails
to timely furnish Lender with any of the financial information
and reports set forth in this paragraph within the required time
periods, Lender shall be entitled to receive a late charge equal
to $500 for each financial information and/or report not so
furnished to Lender (the "Financial Late Charge"). The Financial
Late Charge shall be due and payable by Borrower immediately upon
receipt by Borrower of an invoice for same from Lender. Until
paid, the Financial Late Charge shall bear interest at the
Default Rate, and shall be deemed additional Indebtedness of
Borrower secured by the Loan Documents.
11. Hazardous Materials.
Borrower covenants and agrees that it (a) shall not use,
generate, store, or allow to be generated, stored or used, any
"Hazardous Materials" (hereinafter defined) on the Property,
except in the ordinary course of Borrower's business and in
accordance with all "Environmental Laws" (hereinafter defined),
(b) shall at all times maintain the Property in full compliance
with all applicable Environmental Laws, including timely
remediating the Property if and when required, and (c) shall
cause compliance by all tenants and sub-tenants on the Property
with Borrower's covenants and agreements contained in this
Paragraph 11.
Borrower shall promptly notify Lender in writing of (i) any
investigation, claim or other proceeding by any party caused or
threatened in connection with any Hazardous Materials on the
Property, or the failure or alleged failure of the Property to
comply with any applicable Environmental Laws, or (ii) Borrower's
discovery of any condition on or in the vicinity of the Property
that could cause the Property to fail to comply with applicable
Environmental Laws.
The term "Environmental Laws" shall include any federal,
state or local laws or regulations relating to health, safety or
protection of the environment. The term "Hazardous Materials"
shall include Hazardous Substances, as defined by the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601 et seq., any petroleum or petroleum products
(excluding a small quantity of gasoline and oil used in
maintenance equipment on the Property), asbestos or asbestos
containing material, or any other hazardous substances, hazardous
wastes or hazardous materials as defined by other Environmental
Laws.
12. Representations and Covenants.
(a) If Borrower is a corporation, it represents that
it is a corporation duly organized, existing and in good
standing under the laws of its state of incorporation, that
it is duly qualified and in good standing under the laws of
the state where the Land is located, and that the execution
and delivery of the Loan Documents and the performance of
the obligations thereunder are within Borrower's corporate
powers, have been duly authorized by all necessary action of
its board of directors, and do not contravene the terms of
its articles of incorporation or by-laws.
(b) If Borrower is a general or limited partnership or
a limited liability company, it represents that it is duly
formed, organized and existing in the state of its
formation, that it is qualified to do business under the
laws of the state where the Land is located, and that the
execution and delivery of the Loan Documents and the
performance of the obligations thereunder do not conflict
with any provision of Borrower's partnership agreement or
operating agreement, as applicable, and all other
certificates and agreements governing Borrower, and have
been duly authorized by all necessary action of its partners
or members.
(c) Borrower represents that (i) the execution and
delivery of the Loan Documents, the payment of the
Indebtedness, and the performance of the Obligations do not
violate any law or conflict with any agreement by which
Borrower is bound, or any court order by which Borrower is
bound, (ii) no consent or approval of any governmental
authority or any third party is required for the execution
or delivery of the Loan Documents, the payment of the
Indebtedness, and the performance of the Obligations, and
(iii) the Loan Documents are valid and binding agreements,
enforceable in accordance with their terms.
(d) Borrower represents it is lawfully seized with fee
simple title in the estate hereby conveyed, has the right to
mortgage, grant, convey, assign and grant a first security
interest in the Property; the Property is unencumbered, and
Borrower will warrant and defend title to the Property
against all claims and demands, subject to easements and
restrictions listed in a schedule of exceptions to coverage
in the title insurance policy accepted by Lender insuring
Lender's interest in the Property.
(e) Borrower represents and covenants that (i) all
material permits, approvals, and certificates, including
certificates of completion and occupancy permits, required
by law or regulation have been obtained and are and shall
remain in full force and effect; and (ii) the use and
occupancy of the Land and all improvements thereon are and
shall remain in compliance with all laws.
(f) Borrower represents that all of the improvements
on the Land lie wholly within the boundaries of and building
line restrictions relating to the Land and no improvements
located on adjoining lands encroach upon the Land so as to
effect the value or marketability of the Property, except
those which are insured against by the title insurance
policy accepted by Lender insuring Lender's interest in the
Property.
(g) None of Borrower, any Principal, or any other
holder of a direct or indirect legal or beneficial interest
in Borrower is or will be, held, directly or indirectly, by
a "foreign corporation," "foreign partnership," "foreign
trust," "foreign estate," "foreign person," "affiliate" of a
"foreign person" or a "United States intermediary" of a
"foreign person" within the meaning of IRC Sections 897 and
1445, the Foreign Investments in Real Property Tax Act of
1980, the International Foreign Investment Survey Act of
1976, the Agricultural Foreign Investment Disclosure Act of
1978, the regulations promulgated pursuant to such acts or
any amendments to such acts.
(h) None of Borrower or any Principal is insolvent,
and there has been no (i) assignment made for the benefit of
the creditors of any of them, (ii) appointment of a receiver
for any of them or for the properties of any of them, or
(iii) any bankruptcy, reorganization, or liquidation
proceeding instituted by or against any of them.
(i) There has been no material adverse change in the
representations made or information heretofore supplied by
or on behalf of Borrower or any Principal in connection with
the Loan as to Borrower, any Principal, or the Property.
(j) Except as listed on Exhibit B hereto, there is no
litigation, arbitration, or other proceeding or governmental
investigation pending or, to Borrower's knowledge,
threatened against or relating to Borrower, any Principal,
or the Property.
(k) The proceeds evidenced by the Note will be used by
Borrower solely and exclusively for proper business purposes
and will not be used for the purchase or carrying of
registered equity securities within the purview and
operation of any regulation issued by the Board of Governors
of the Federal Reserve System or for the purpose of
releasing or retiring any indebtedness which was originally
incurred for any such purpose.
(l) Borrower represents and covenants that all Leases
of space in the Property existing as of the date hereof are
in writing.
13. Leases of the Property/Absolute Assignment, License to
Receive and Apply Rents.
The parties intend that this Mortgage grants a present,
absolute, and unconditional assignment of the Rents and shall,
immediately upon execution, give Lender the right to collect the
Rents and to apply them in payment of the principal, interest and
all other sums payable under the Loan Documents. Such assignment
and grant shall continue in effect until the Indebtedness is paid
in full and all Obligations are fully satisfied. Subject to the
provisions set forth herein and provided there is no Event of
Default, Lender grants to Borrower a revocable license to enforce
the Leases and collect the Rents as they become due and Borrower
shall hold the same, in trust, to be applied first to the payment
of all impositions, levies, taxes, assessments and other charges
upon the Property, second to maintenance of insurance policies
upon the Property required hereby, third to the expenses of
Property operations, including maintenance and repairs required
hereby, fourth to the payment of that portion of the Indebtedness
then due and payable, and fifth, the balance, if any, to or as
directed by Borrower. Borrower shall deliver such Rents to
Lender as are necessary for the payment of principal, interest
and other sums payable under the Loan Documents as such sums
become due.
Borrower shall comply with and observe Borrower's
obligations as landlord under all Leases. Borrower will not
lease any portion of the Property for non-residential use except
with the prior written approval of Lender. Borrower, at Lender's
request, shall furnish Lender with executed copies of all Leases,
and all Leases and amendments thereto hereafter entered into will
be on a form of Lease previously approved by Lender. All
renewals of Leases and all proposed Leases for space in the
Property shall provide for rental rates comparable to existing
local market rates and shall be arms-length transactions. All
Leases other than for space in the Property shall be terminable
on not less than sixty (60) days' notice, unless approved in
writing by Lender prior to Borrower's execution thereof.
This Mortgage shall not be deemed to impose upon Lender any
of the obligations or duties of the landlord or Borrower provided
in any Lease. Borrower hereby acknowledges and agrees:
(i) Borrower is and will remain liable under the Leases to the
same extent as though this Mortgage had not been made; and
(ii) Lender has not by this Mortgage assumed any of the
obligations of Borrower under the Leases, except as to such
obligations which arise after such time as Lender shall have
assumed full ownership or control of the Property. This Mortgage
shall not make Lender responsible for the control, care,
management, or repair of the Property or any personal property or
for the carrying out of any of the terms of the Leases. Lender
shall not be liable in any way for any injury or damage to person
or property sustained by any person or persons, firm, or
corporation in or about the Property.
14. Estoppel Certificate.
Borrower shall, within ten (10) days after Lender's request,
furnish Lender with a written statement, duly acknowledged,
setting forth the sums secured by the Loan Documents and any
right of set-off, counterclaim or other defense which exists
against such sums and the Obligations.
15. Transfers of the Property or Beneficial Interest in
Borrower; Assumption.
Sale or transfer of any of the following are prohibited (i)
all or any part of the Property, or any interest therein, or (ii)
more than forty-nine percent (49%) of the beneficial interests of
each member in Borrower. Upon any such prohibited sale or
transfer or if Patrick Carney fails to continue to control the
Borrower's business or ceases to be engaged by Borrower and in
charge of the day to day operations of Borrower, then Lender may,
at Lender's option, declare all of the Indebtedness to be
immediately due and payable, and Lender may invoke any remedies
permitted by the Loan Documents. Notwithstanding the preceding
sentences, once during the term of the Note a sale or transfer of
the Property or of an interest restricted by the preceding
sentences shall be permitted when the transferee's
creditworthiness and management ability are satisfactory to
Lender in its sole and absolute discretion and the transferee has
executed, prior to the sale or transfer, a written assumption
agreement containing such terms as Lender may require, including
the payment of an assumption fee of 1% of the outstanding
principal balance of the Note at the time of such transfer.
Additionally, if the transfer of beneficial interest in or change
in control of Borrower prohibited by the foregoing results from
the death of a Principal who is an individual and if the
transferee or subsequently controlling party, as applicable, has
the creditworthiness and management ability which are
satisfactory to Lender in its sole and absolute discretion, such
transfer or change in control shall be permitted upon the
execution of a written assumption agreement containing such terms
as Lender may require.
16. No Additional Liens.
Borrower covenants not to execute any mortgage, security
agreement, assignment of leases and rents or other agreement
granting a lien (except the liens granted to Lender by the Loan
Documents) or, except as set forth in Paragraph 2 above, take or
fail to take any other action which would result in a lien
against the interest of Borrower in the Property without the
prior written consent of Lender.
17. Single Asset Entity.
Borrower shall not hold or acquire, directly or indirectly,
any ownership interest (legal or equitable) in any real or
personal property other than the Property, or become a
shareholder of or member or partner in any entity which acquires
or holds any property other than the Property, until such time as
the Indebtedness has been fully repaid and all Obligations are
satisfied.
18. Borrower and Lien Not Released.
Without affecting the liability of Borrower or any other
person liable for the payment of the Indebtedness, and without
affecting the lien or charge of this Mortgage as security for the
payment of the Indebtedness, Lender may, from time to time and
without notice to any junior lien holder or holder of any right
or other interest in and to the Property: (a) release any person
so liable, (b) waive or modify any provision of this Mortgage or
the other Loan Documents or grant other indulgences, (c) release
all or any part of the Property, (d) take additional security for
any obligation herein mentioned, (e) subordinate the lien or
charge of this Mortgage, (f) consent to the granting of any
easement, or (g) consent to any map or plan of the Property.
19. Uniform Commercial Code Security Agreement.
This Mortgage shall constitute a security agreement pursuant
to the Uniform Commercial Code for any of the items specified
herein as part of the Property which, under applicable law, may
be subject to a security interest pursuant to the Uniform
Commercial Code, and Borrower hereby grants Lender a security
interest in said items. Any reproduction of this Mortgage or of
any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Borrower
agrees to execute and deliver to Lender any financing statements,
as well as extensions, renewals and amendments thereof, and
reproductions of this Mortgage in such form as Lender may require
to perfect a security interest with respect to said items.
Borrower shall pay all costs of filing such financing statements
and any extensions, renewals, amendments and releases thereof,
and shall pay all reasonable costs and expenses of any record
searches for financing statements Lender may reasonably require.
Lender shall have the remedies of a secured party under the
Uniform Commercial Code.
20. Events of Default; Acceleration of Indebtedness; Remedies.
The occurrence of any one or more of the following events
shall constitute an "Event of Default" under this Mortgage:
(a) failure of Borrower to pay, within ten (10) days
of the due date, any of the Indebtedness, including any
payment due under the Note; or
(b) failure of Borrower to strictly comply with
Paragraphs 11, 15, 16 and 17 of this Mortgage; or
(c) a petition under any Chapter of Title 11 of the
United States Code or any similar law or regulation is filed
by or against Borrower or any Principal (and in the case of
an involuntary petition in bankruptcy, such petition is not
discharged within sixty (60) days of its filing), or a
custodian, receiver or trustee for any of the Property is
appointed, or Borrower or any Principal makes an assignment
for the benefit of creditors, or any of them are adjudged
insolvent by any state or federal court of competent
jurisdiction, or an attachment or execution is levied
against any of the Property; or
(d) the occurrence of an "Event of Default" under and
as defined in any other Loan Document; or
(e) Borrower is in default in the payment of any
indebtedness (other than the Indebtedness) secured by the
Property and such default is declared and is not cured
within the time, if any, specified therefor in any agreement
governing the same; or
(f) any statement, report or certificate made or
delivered to Lender by Borrower or any Principal is not
materially true and complete; or
(g) failure of Borrower, within thirty (30) days after
notice and demand, to satisfy each and every Obligation,
other than those set forth in the subsections above;
provided, however, if such Obligation cannot by its nature
be cured within thirty (30) days, and if Borrower commences
to cure such failure promptly after written notice thereof
and thereafter diligently pursues the curing thereof (and
then in all events cures such failure within sixty (60) days
after the original notice thereof), Borrower shall not be in
default hereunder during such period of diligent curing.
Upon the occurrence of an Event of Default, the
Indebtedness, at the option of the Lender, shall become
immediately due and payable without notice to Borrower, and
Lender shall be entitled to all of the rights and remedies
provided in the Loan Documents or at law or in equity. Each
remedy provided in the Loan Documents is distinct and cumulative
to all other rights or remedies under the Loan Documents or
afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
21. Entry; Foreclosure; Remedies.
Upon the occurrence of an Event of Default, (a) Borrower,
upon demand of Lender, shall forthwith surrender to Lender the
actual possession, or to the extent permitted by law, Lender
itself, or by such officers or agents as it may appoint, may
enter and take possession of all or any part of the Property, and
may exclude Borrower and its agents and employees wholly
therefrom, and may have joint access with Borrower to the books,
papers and accounts of Borrower; and (b) if Borrower shall for
any reason fail to surrender or deliver the Property or any part
thereof after such demand by Lender, Lender may obtain a judgment
or decree conferring on Lender the right to immediate possession
or requiring the delivery to Lender of the Property, and Borrower
specifically consents to the entry of such judgment or decree.
Upon every such entering upon or taking of possession, Lender may
hold, store, use, operate, manage and control the Property and
conduct the business thereof. Lender shall have no liability for
any loss, damage, injury, cost or expense resulting from any
action or omission by it or its representatives which was taken
or omitted in good faith.
When the Indebtedness or any part thereof shall become due,
whether by acceleration or otherwise, Lender may, either with or
without entry or taking possession as herein provided or
otherwise, proceed by suit or suits at law or in equity or by any
other appropriate proceeding or remedy to (a) enforce payment of
the Note or the performance of any term, covenant, condition or
agreement of Borrower under any of the Loan Documents, (b)
foreclose the lien hereof for the Indebtedness or part thereof
and sell the Property as an entirety or otherwise, as Lender may
determine, and/or (c) pursue any other right or remedy available
to it under or by the law and decisions of the State in which the
Land is located. The failure to join any tenant or tenants of
the Property as party defendant or defendants in any foreclosure
action or the failure of any such order or judgment to foreclose
their rights shall not be asserted by the Borrower as a defense
in any civil action instituted to collect the Indebtedness, or
any part thereof, any statute or rule of law at any time existing
to the contrary notwithstanding.
Upon any foreclosure sale, Lender may bid for and purchase
the Property and shall be entitled to apply all or any part of
the Indebtedness as a credit to the purchase price.
Upon the occurrence of an Event of Default, then, without
notice to or the consent of Borrower, Lender shall be entitled
to exercise all of the rights and remedies contained in this
Mortgage or in any other Loan Document or otherwise available at
law or in equity including the right to do any one or more of the
following:
(a) To enter upon, take possession of and manage the
Property for the purpose of collecting the Rents;
(b) To require Borrower to hold all Rents collected in
trust for the benefit of Lender;
(c) Dispossess by the usual summary proceedings any
Tenant defaulting in the payment of Rent to Borrower;
(d) Lease the Property or any part thereof;
(e) Repair, restore, and improve the Property;
(f) Apply the Rent after payment of Property expenses
as determined by Lender to Borrower's indebtedness under the
Loan Documents; and
(g) Apply to any court of competent jurisdiction for
specific performance of this Mortgage, an injunction against
the violation hereof and/or the appointment of a receiver.
22. Expenditures and Expenses.
In any civil action to foreclose the lien hereof or
otherwise enforce Lender's rights, there shall be allowed and
included as additional Indebtedness in the order or judgment for
foreclosure and sale or other order all expenditures and expenses
which may be paid or incurred by or on behalf of Lender including
reasonable attorneys' fees, costs and expenses, receiver's fees,
costs and expenses, reasonable appraiser's fees, reasonable
engineers' fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may
be estimates as to items to be expended after entry of said order
or judgment) of procuring all such abstracts of title, title
searches and examination, title insurance policies, Torrens'
Certificates and similar data and assurances with respect to the
title as Lender may deem reasonably necessary either to prosecute
such civil action or to evidence to bidders at any sale which may
be had pursuant to such order or judgment the true condition of
the title to, or the value of, the Property (said expenditures
and expenses are hereinafter collectively referred to as the
"Reimbursable Expenses"). All Reimbursable Expenses, and such
costs, expenses and reasonable fees as may be incurred by Lender
at any time or times hereafter in the protection of the Property,
in enforcing the Obligations, and/or the maintenance of the lien
established by any of the Loan Documents, including reasonable
accountants' and attorneys' fees, costs and expenses in any
advice, litigation, or proceeding affecting the Loan Documents or
the Property, whether instituted by Lender, Borrower or any other
party, or in preparation for the commencement or defense of any
action or proceeding or threatened action or proceeding, shall be
immediately due and payable to Lender by Borrower, and, to the
extent such services relate to the Hazardous Substance Indemnity
Agreement of even date herewith from Borrower and Principals in
favor of Lender, by Borrower and Principals, with interest
thereon at the Default Rate set forth in the Note, and shall be
secured by the Loan Documents.
23. Application of Proceeds of Foreclosure Sale.
The proceeds of any foreclosure sale of the Property shall
be distributed and applied in the order of priority set forth in
the Note with the excess, if any, being applied to any parties
entitled thereto as their rights may appear.
24. Appointment of Receiver or Mortgagee in Possession.
If an Event of Default is continuing or if Lender shall have
accelerated the Indebtedness, Lender, upon application to a court
of competent jurisdiction, shall be entitled as a matter of
strict right, without notice, and without regard to the occupancy
or value of any security for the Indebtedness or the insolvency
of any party bound for its payment, to the appointment of a
receiver or the appointment of Lender to take possession of and
to operate the Property, and to collect and apply the rents,
issues, profits and revenues thereof.
25. Forbearance by Lender Not a Waiver.
Any forbearance by Lender in exercising any right or remedy
under any of the Loan Documents, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise
of any right or remedy. Lender's acceptance of payment of any
sum secured by any of the Loan Documents after the due date of
such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens
or charges by Lender shall not be a waiver of Lender's right to
accelerate the maturity of the Indebtedness, nor shall Lender's
receipt of any awards, proceeds or damages under Paragraph 5
hereof operate to cure or waive Borrower's default in payment or
sums secured by any of the Loan Documents. With respect to all
Loan Documents, only waivers made in writing by Lender shall be
effective against Lender.
26. Waiver of Statute of Limitations.
Borrower hereby waives the right to assert any statute of
limitations as a bar to the enforcement of the lien created by
any of the Loan Documents or to any action brought to enforce the
Note or any other obligation secured by any of the Loan
Documents.
27. Waiver of Homestead and Redemption.
Borrower hereby waives all right of homestead exemption in
the Property. Borrower hereby waives all right of redemption on
behalf of Borrower and on behalf of all other persons acquiring
any interest or title in the Property subsequent to the date of
this Mortgage, except decree or judgment creditors of Borrower.
28. Jury Trial Waiver.
BORROWER, AND LENDER BY ITS ACCEPTANCE OF THIS MORTGAGE,
HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THE LOAN DOCUMENTS AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY MADE BY BORROWER AND BY LENDER, AND BORROWER
ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF
OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. BORROWER AND LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT BORROWER AND LENDER HAVE ALREADY
RELIED ON THIS WAIVER IN ENTERING INTO THE LOAN DOCUMENTS AND
THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE
THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO
BE REPRESENTED) IN THE SIGNING OF THE LOAN DOCUMENTS AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
29. Notice.
Except for any notice required under applicable law to be
given in another manner, (a) any notice to Borrower provided for
in the Loan Documents shall be given by mailing such notice by
Federal Express or any other overnight carrier addressed to
Borrower at Borrower's address stated above or at such other
address as Borrower may designate by notice to Lender as provided
herein, and (b) any notice to Lender shall be given by Federal
Express or any other overnight carrier to Lender's address stated
above or to such other address as Lender may designate by notice
to Borrower as provided herein or by facsimile to the transmittal
number provided herein or to such other number as Lender may
designate by notice to Borrower provided, however, such notice
shall not be effective unless actually received by Lender. Any
notice provided for in the Loan Documents shall be deemed to have
been given to Borrower or Lender on the first (1st) business day
following such mailing in the manner designated herein.
30. Successors and Assigns Bound; Joint and Several Liability;
Agents; Captions.
The covenants and agreements contained in the Loan Documents
shall bind, and the rights thereunder shall inure to, the
respective successors and assigns of Lender and Borrower, subject
to the provisions of Paragraph 15 hereof. All covenants and
agreements of Borrower shall be joint and several. In exercising
any rights under the Loan Documents or taking any actions
provided for therein, Lender may act through its employees,
agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Mortgage are for
convenience only and are not to be used to interpret or define
the provisions hereof.
31. Governing Law; Severability.
This Mortgage shall be governed by the law of the State of
Illinois, provided, however, that to the extent the mandatory
provisions of the laws of another jurisdiction relating to (i)
the perfection or the effect of perfection or non-perfection of
the security interests in any of the Property, (ii) the lien,
encumbrance or other interest in the Property granted or conveyed
by this Mortgage, or (iii) the availability of and procedures
relating to any remedy hereunder or related to this Mortgage are
required to be governed by such other jurisdiction's laws, such
other laws shall be deemed to govern and control. If any
provision of the Loan Documents conflicts with applicable law,
such conflict shall not affect other provisions of which can be
given effect without the conflicting provisions, and to this end
the provisions of the Loan Documents are declared to be
severable.
32. Release.
Upon payment of all sums secured by this Mortgage, Lender
shall release this Mortgage. Borrower shall pay Lender's
reasonable costs incurred in releasing this Mortgage and any
financing statements related hereto.
33. Terms.
As used in the Loan Documents, (i) "business day" means a
day when banks are not required or authorized to be closed in
Chicago, Illinois; and (ii) the phrase "including" shall mean
"including but not limited to" unless specifically set forth to
the contrary.
34. Loss of Note.
Upon notice from Lender of the loss, theft, or destruction
of the Note and upon receipt of indemnity reasonably satisfactory
to Borrower from Lender, or in the case of mutilation of the
Note, upon surrender of the mutilated Note, Borrower shall make
and deliver a new note of like tenor in lieu of the then to be
superseded Note.
35. Exculpation.
This Mortgage and other Loan Documents and all of Borrower's
obligations hereunder and thereunder are subject to the
provisions of Paragraph 10 of the Note entitled Exculpation and
which are incorporated herein by this reference.
36. Disclosure of Information.
Lender shall have the right (but shall be under no
obligation) to make available to any party for the purpose of
granting participations in or selling, transferring, assigning or
conveying all or any part of the Loan (including any governmental
agency or authority and any prospective bidder at any foreclosure
sale of the Project) any and all information which Lender may
have with respect to the Project and Borrower, whether provided
by Borrower, any Principal or any third party or obtained as a
result of any environmental assessments. Borrower and each
Principal agree that Lender shall have no liability whatsoever as
a result of delivering any such information to any third party,
and Borrower and each Principal, on behalf of themselves and
their successors and assigns, hereby release and discharge Lender
from any and all liability, claims, damages, or causes of action,
arising out of, connected with or incidental to the delivery of
any such information to any third party.
37. Sale of Loan.
Lender, at any time and without the consent of Borrower or
any Principal, may grant participations in or sell, transfer,
assign and convey all or any portion of its right, title and
interest in and to the Loan, this Mortgage and the other Loan
Documents, any guaranties given in connection with the Loan and
any collateral given to secure the Loan.
38. Exhibits.
The following Exhibits (which may contain additional
representations, warranties, and covenants) are attached to this
Mortgage and hereby made a part of this Mortgage: Exhibit A
(legal description for Land), Exhibit B (pending and threatened
litigation) and Exhibit C (Rider Number 1).
IN WITNESS WHEREOF, Borrower has executed this Mortgage or
has caused the same to be executed by its representatives
thereunto duly authorized.
BORROWER
THE COSMOPOLITAN AT MEARS
PARK, LLC,
a Delaware limited liability
company
By:
____________________________________
Name:
____________________________________
Its: Manager
STATE OF ___________ )
) SS
COUNTY OF __________ )
I, ____________________________, a Notary Public in and for
said County, in the State aforesaid, DO HEREBY CERTIFY, that
___________________, the Manager of The Cosmopolitan at Mears
Park, LLC, a Delaware limited liability company, who is
personally known to me to be the same person whose name is
subscribed to the foregoing instrument as such Manager, appeared
before me this day in person and acknowledged that (he/she)
signed and delivered the said instrument as (his/her) own free
and voluntary act and as the free and voluntary act of said
limited liability company, for the uses and purposes therein set
forth.
GIVEN under my hand and Notarial Seal this ____ day of
_______________, 1996.
_________________________
Notary Public
My Commission Expires:
______________________
EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
PENDING AND THREATENED LITIGATION
[See Section 12(j)] None
EXHIBIT C
RIDER NUMBER 1
(REPLACEMENT RESERVE PROVISIONS)
This Rider Number 1 is attached to and made a part of that
certain Mortgage, Assignment of Rents and Security Agreement
("Mortgage") dated as of the 20th day of March, 1996, between The
Cosmopolitan at Mears Park, LLC ("Borrower") and Heller
Financial, Inc., a corporation organized and existing under the
laws of Delaware (Heller Financial, Inc. and its successors and
assigns are hereinafter referred to as "Lender"). To the extent
of any conflicts between the terms and provisions of this Rider
Number 1 and the terms and provisions of the Mortgage, the terms
and provisions of this Rider Number 1 will govern and control the
rights and obligations of the parties hereto.
1. All terms not defined in this Rider Number 1 shall have
the meaning ascribed to such terms as set forth in the Mortgage.
2. The following is hereby added as new Section 3A of the
Mortgage to the end of Section 3 and before Section 4:
"3A. Reserves for Replacement. At
the time of and in addition to the monthly
installments of principal and/or interest due
under the Note, Borrower shall deposit into a
segregated account maintained by Lender (the
"Replacement Reserve") $16.67 per apartment
unit. The replacement reserve shall bear
interest for the benefit of Borrower. The
funds contained in the Replacement Reserve
shall be utilized by Borrower solely for
capital improvements approved in advance by
Lender. Lender shall reimburse Borrower
from the Replacement Reserve for the actual
cost of such approved capital improvements
upon Borrower's providing Lender with paid
receipts, lien waivers and other
documentation deemed necessary by Lender with
minimum draws of $10,000. If and to the
extent the amount of unexpended funds in the
Replacement Reserve as of December 31 of each
calendar year during the term of the Loan
(including funds that should have been but
have not yet been deposited into such
Replacement Reserve by Borrower but excluding
any funds scheduled to be expended for
identified future capital improvements
approved in advance by Lender) exceed twenty-
five percent (25%) of the amount of the
Replacement Reserve for such calendar year,
Borrower shall promptly pay such excess
amount to Lender as a partial prepayment of
the outstanding principal balance of the Loan
to be applied to installments due in the
inverse order of their maturity. Lender may
audit Borrower's calculation of amounts
deposited into the Replacement Reserve to
determine the accuracy of Borrower's
calculation and, if such audit discloses a
shortfall in the amounts theretofore
deposited into the Replacement Reserve by
Borrower, Borrower shall promptly deposit the
amount of such shortfall into the Replacement
Reserve. Borrower shall execute any
documents and take any other actions
necessary to provide Lender with a perfected
security interest in the Replacement
Reserve."
EXHIBIT A
LEGAL DESCRIPTION
Parcel 1:
The Easterly 50 feet of the Westerly 60 feet of Lots 1 and 2 except that part
of said lots described as follows:
The Easterly 10 feet of the Westerly 60 feet of Lots 1 and 2, the
Easterly 40 feet of the Westerly 50 feet of the Southerly 20 feet of
Lot 2; and that part of the asterly 20 feet of Westerly 50 feet of the
Northerly 20 feet of the Southerly 40 feet of said Lot 2 lying
Southeasterly of a line commencing on the Westerly line of the Easterly
10 feet of the Westerly 60 feet of Lot 2, 10 feet Southerly from the
Northerly line of said lot; thence to the right on a curve having
a radius of 20 feet to an intersection with the Northerly line of
the Southerly 20 feet of Lot 2, all in Block 11, Whitney and Smith's
Addition to St. Paul.
Parcel 2:
Lots 3,7,8,9,10 and 11, Block 11, Whitney and Smith's Addition to
St Paul, together with the benefits inuring to but subject to the
burdens iposed on said premises by the following four insruments:
a. A Party Wall Agreement between Laura E. Merriam and William R.
Merriam, her husband, as first parties, and Frank P. Shepard and
Annie M. Shepard, his wife, as second parties, recorded in the
office of said Register if Deeds in Book 59 of iscellaneous
Records, page 566. (covers Parcels 1 and 2)
b. The Agreement between David C. Shepard and Stronge & Warner
Company, corporation, as first parties, and Frank P. Shepard,
as second party, recorded in said office in Book 59 of
Miscellaneous Records, page 570.
c. Agreement between Frank P. Shepard and Finch, Van Slyck &
McConville, a corporation, as first parties, and David C. Shepard,
as second party, recorded n said office in Book 57 of
Miscellaneous Records, page 547.
d. The Party Wall Agreement between North Minnesota Land Company, a
corporation, as first party, and Frank P. shepard and Annie M.
Shepard, his wife, and Finch, Van Sylyck & McConville, a
corporation, as second parties, recorded in said office Book 57
of Miscellaneous Records, page 545.
Parcel 3:
Lot 12, Block 11, Whitney and Smith's Addition to St. Paul,except the
Westerly 95 feet thereof.
Parcel 4:
The Westerly 95 feet of Lot 12, Block 11, Whitney & Smith's Addition
to St. Paul.
Parcel 5:
The Easterly 10 feet of the Westerly 60 feet of Lots 1 and 2; the
Easterly 40 feet of the Westerly 50 feet of the Southerly 20 feet of Lot 2;
and that part of the Easterly 20 ffet of the Westerly 50 feet of the
Northerly 20 feet of the Southerly 40 feet of said Lot 2 lying
Southeasterly of a line commencing on the Westerly ine of the
Easterly 10 feet of the Westerly 60 feet of Lot 2, 10 ffet Southerly
from the Northerly ine of said lot; thenceto the right on a curve
having a radius of 20 feet to an intersection with the Northerly line
of the Southerly 20 feet of Lot 2, all in Block 11, Whitney nd Smith's
Addition to St.Paul, according to the recorded plot thereof in file
and of record in the office of the Register of Deeds in and for
Ramsey County, Minnesota.
Together with Easement for Light and Air dated March 13, 1986,
recorded and filed April 15, 1986, as Document Nos. 2309736(A)
and 800081 (T).
Parcel 6:
The Southwesterly 10 feet of Lots 1 and 2, Block 11, Whitney and
Smith's Addition to St. Paul.
Ramsey County, Minnesota
Absract Property (Parcels 3,4 and 6)
Torrens Property (Parcels, 1,2 and 5)
Torrens Certificate No. 345603
March 20, 1996
Heller Financial, Inc.
500 West Monroe Street
15th Floor
Chicago, Illinois 60661
Re: $7,000,000 Loan ("Loan") from Heller
Financial, Inc. ("Lender") to THE
COSMOPOLITAN AT MEARS PARK, LLC, a Delaware
limited liability company ("Borrower")
Ladies & Gentlemen:
Reference is hereby made to the above-referenced Loan
evidenced by that certain Promissory Note Secured by Mortgage of
even date herewith ("Note") and secured by, among other things,
that certain Mortgage, Assignment of Rents and Security Agreement
of even date herewith ("Mortgage"). All capitalized terms used
herein and not otherwise defined shall have the same meanings
ascribed to them in the Note and/or the Mortgage.
Patrick Carney herein referred to as a "Principal" is
a manager of Borrower and shall directly or indirectly benefit
from the making of the Loan. It is in the direct financial
interest and to the benefit of Principal to execute and deliver
this letter agreement ("Agreement") to Lender so as to induce
Lender to make the Loan to and for the benefit of Borrower.
Accordingly, Principal agrees that Principal shall, together with
Borrower, be jointly and severally personally liable to pay the
following (collectively the "Retained Liabilities"): (A) the
Principal Amount in the event of, and all damages, including but
not limited to attorneys' fees and expenses, arising from, the
breach of the provisions contained in Paragraphs 8 (inspection),
10 (financial statements), 15 (transfers of the property or
beneficial interest in Borrower; assumption), 16 (no additional
liens) and 17 (single asset entity) of the Mortgage; and (B) all
damages, including but not limited to attorneys' fees and
expenses, arising from:
(i) the collection and receipt of proceeds and income
from the Property and the other assets and obligations
securing the Loan by or for the benefit of Borrower or
Principal following an Event of Default which are not
paid to Lender or applied to the Property in the
ordinary course of business;
(ii) fraud;
(iii) material misrepresentation;
(iv) misapplication or misappropriation of funds which
come into the possession of Borrower or Principal;
(v) intentional or material waste to the Property; or
(vi) the obligations set forth in the Hazardous
Substance Indemnity Agreement from Borrower and
Principal to Lender of even date herewith, as hereafter
amended, if at all.
Principal agrees that the liability of Principal shall
be direct and immediate as a primary and not a secondary
obligation or liability, and is not conditional or contingent
upon the pursuit of any remedies against Borrower or any other
person, or against any collateral or liens held by Lender.
Principal waives any rights which it may have to require that (a)
Lender first proceed against Borrower or any other person or
entity with respect to the Retained Liabilities or (b) Lender
first proceed against any collateral held by Lender or (c) any
party to be joined in any proceeding to enforce the Retained
Liabilities.
Principal waives any rights to enforce any remedy which
Lender may have against Borrower, any rights to participate in
any security for the Loan and any rights of indemnity,
reimbursement, contribution or subrogation which Principal may
have against Borrower with respect to the Retained Liabilities.
Principal consents and agrees that Lender may at any
time, and from time to time, without notice to or further consent
from Principal and either with or without consideration do any
one or more of the following, all without affecting the
agreements contained herein or the liability of Principal for the
Retained Liabilities: (a) release Principal hereunder; (b)
surrender without substitution any property or other collateral
of any kind or nature whatsoever held by Lender, or by any
person, firm or corporation on Lender's behalf or for Lender's
account, securing the Loan or the Retained Liabilities; (c)
modify the terms of any document evidencing, securing or setting
forth the terms of the Loan; (d) grant releases, compromises and
indulgences with respect to the Loan or the Retained Liabilities
or any persons or entities now or hereafter liable thereon; or
(e) take or fail to take any action of any type whatsoever with
respect to the Loan or the Retained Liabilities.
Principal hereby waives and agrees not to assert or
take advantage of any defense based upon:
(a) The incapacity, lack of authority, death or
disability of Borrower or any other person or entity;
(b) The failure of Lender to commence an action
against Borrower or to proceed against or exhaust any
security held by Lender at any time or to pursue any other
remedy whatsoever at any time;
(c) Any duty on the part of Lender to disclose to
Principal any facts Lender may now or hereafter know
regarding Borrower regardless of whether Lender has reason
to believe that any such facts materially increase the risk
beyond that which Principal intends to assume or has reason
to believe that such facts are unknown to Principal,
Principal acknowledging that it is fully responsible for
being and keeping informed of the financial condition and
affairs of Borrower;
(d) Lack of notice of default, demand of performance
or notice of acceleration to Borrower or any other party
with respect to the Loan or the Retained Liabilities;
(e) The consideration for this Agreement;
(f) Any acts or omissions of Lender which vary,
increase or decrease the risk on Principal;
(g) Any statute of limitations affecting the liability
of Principal hereunder, the liability of Borrower or any
guarantor, if any, under the Loan Documents, or the
enforcement hereof, to the extent permitted by law;
(h) The application by Borrower of the proceeds of the
Loan for purposes other than the purposes represented by
Borrower to Lender or intended or understood by Lender or
Principal;
(i) An election of remedies by Lender, including
any election to proceed against any collateral by judicial
or nonjudicial foreclosure, whether real property or
personal property, or by deed in lieu thereof, and whether
or not every aspect of any foreclosure sale is commercially
reasonable, and whether or not any such election of remedies
destroys or otherwise impairs the subrogation rights of
Principal or the rights of Principal to proceed against
Borrower or any guarantor for reimbursement, or both;
(j) Any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor
in any other aspects more burdensome than that of a
principal;
(k) Lender's election, in any proceeding instituted
under the Federal Bankruptcy Code, of the application of
Section 1111(b) (2) of the Federal Bankruptcy Code or any
successor statute; and
(l) Any borrowing or any grant of a security interest
under Section 364 of the Federal Bankruptcy Code.
PRINCIPAL, AND LENDER BY ITS ACCEPTANCE OF THIS
AGREEMENT, HEREBY WAIVES ITS (HIS) RESPECTIVE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE
SUBJECT MATTER OF THIS AGREEMENT AND THE BUSINESS RELATIONSHIP
THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY PRINCIPAL AND BY LENDER,
AND PRINCIPAL ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON
ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS
WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. PRINCIPAL AND
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT PRINCIPAL AND LENDER
HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. PRINCIPAL AND LENDER
FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD
THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL.
Principal further agrees that the provisions of this
Agreement shall bind Principal's heirs, personal representatives,
successors and assigns, as the case may be.
Principal acknowledges that such Principal's execution
and delivery of this Agreement to Lender is a material inducement
to Lender's making of the Loan to Borrower.
PRINCIPAL:
__________________________________________________
Name: Patrick Carney
SETTLEMENT AGREEMENT
DATED: May 21, 1996
AMONG: PORTLAND LOFTS ASSOCIATES, L.P. ("PLA")
AND: EAST BANK ANGEL JOINT VERDURE ("East Bank")
AND: EAST BANK DEVELOPMENT, INC. ("EBDI")
AND: JOSEPH W. ANGEL, II ("Angel")
AND: KEARNY STREET REAL ESTATE
COMPANY, L.P. ("Kearny Street")
AND: KEARNY STREET II REAL ESTATE
COMPANY, L.P. ("Kearny II")
AND: BANK OF AMERICA OREGON ("Bank")
AND: BANKAMERICA CORPORATION
("BAC")
AND: HANFORD HEALY ASSET
MANAGEMENT COMPANY ("Hanford Healy"
Recitals:
A. Kearny Street has filed an action against PLA, East
Bank, EBDI and Angel (collectively, "Defendants"), captioned as
Kearnv Street Real Estate Company. L.P.. V. Portland Lofts
Associates Limited Partnership. et al., Multnomah County Circuit
Court Case No. 9411-07780 (the "Lawsuit), and Defendants have
brought counterclaims in the Lawsuit.
B. In the Lawsuit, Kearny Street sought to collect on (a)
a note by East Bank dated November 3, 1989, originally stated in
the amount of $800,000, and guaranteed by EBDI, Angel and East
Bank and (b) a note by PLA dated March 31, 1992, originally
stated in the amount of $6,800,000, and guaranteed by EBDI, Angel
and East Bank (collectively, the "Notes").
C. Kearny Street received the Notes, guaranties, and
collateral described in paragraph l.A. (ii) and (iii) in an
assignment from the Bank, and Kearny Street has assigned the
Notes, guaranties, and the collateral described in Paragraph lA.
(ii) and (iii) below to Kearny II.
D. The parties to this Settlement Agreement (the
"Agreement", which includes the attached Exhibits 1 - 8 and 11 -
12, which are incorporated by reference as if fully set forth
herein,) wish to settle the claims and counterclaims in the
Lawsuit, and certain other claims or potential claims to the
extent specifically provided in this Agreement.
Agreements:
In order to fully and finally compromise and settle the
claims and counterclaims in the Lawsuit, and certain other claims
and disputes or potential claims or disputes, to the extent
specifically described below, and in consideration of the
foregoing recitals and the mutual covenants, agreements and
representations set forth herein, the Parties agree as follows:
1. Payment. In full satisfaction of the Notes, PLA
shall cause the delivery to the escrow agent selected by the
parties of $5.4 million by 5:00 p.m. on July 31, 1996, except as
provided in Paragraph 2 below. After this payment by PLA, Kearny
II shall deliver to the escrow agent:
A. The original Notes, marked CANCELED";
B. Any and all documents evidencing an interest,
or necessary to release such an interest, that Kearny or Kearny
II or their assignees or transferees may have in all collateral
securing the Notes, including but not limited to the Deed of
Trust dated March 31, 1992 to Security Pacific Bank for the
property at issue; the property pledged pursuant to the Pledge
Agreement between Angel and Security Pacific Bank dated April 25,
1991; a Security Agreement dated March 31, 1992; an Assignment of
Leases recorded on April 6, 1992 in the records of Multnomah
County at Book 2526, Page 227; a Conditional Assignment of Rents
recorded on April 6, 1992 in the records of Multnomah County at
Book 2526, Page 221; a UCC Fixture Filing dated March 30, 1992
recorded in the records of Multnomah County at Book 2526, Page
2233; and a UCC-l Financing Statement filed with the Oregon
Secretary of State's Office on April 9, 1992 as File No. R01179;
and
C. All guaranties given for the Notes, including
the Guaranties executed by EBDI, East Bank, and/or Angel on May
23, 1989 and March 31, 1992.
Upon receipt of both the payment and the documents
described above, the escrow agent (1) shall release the $5.4
million to Fleet Real Estate Capital, Inc, as agent for Kearny
II, (2) shall release the Notes, collateral, the releases of
security described in paragraph 1.B above, and guaranties
described in paragraph l.C above to PLA, and (3) shall provide
the releases described in Paragraphs 4 and S below to the
respective counsel for each party being released.
2. Loan by Bank of America. The Bank has committed
to fund a loan to PLA sufficient for the payment in Paragraph 1
above (the "Loan"), pursuant to a commitment letter to PAL dated
April 18, 1996 (the "Commitment"). When the Bank funds the Loan
to PAL, PAL shall cause the escrow agent to pay $5.4 million of
the Loan proceeds to Fleet Real Estate Capital, Inc., as agent
for Kearny II. If the Bank fails to fund the Loan on or before
May 31, 1996, due to no fault or unreasonable conduct by
Defendants, (a) Defendants shall have such additional time as is
reasonably necessary to obtain financing from another source, but
in no event later than October 1, 1996, and (b) the date for
payment in Paragraph 1 shall be accordingly extended.
3. Failure to Pay. When they execute this Agreement,
defendants shall tender into escrow an executed confession of
judgment on the Note dated November 3, 1989, in the form of
Exhibit 12 hereto. If Defendants fail to make the $5.4 million
payment by the time required by Paragraph 1 or by any additional
time permitted by Paragraph 2, the confession of judgment shall
be released to Kearny II, and the Note dated March 31, 1992 shall
remain due and payable. If the payment required by Paragraph 1
is made by the time required by Paragraph 1 or any additional
time permitted by Paragraph 2, the confession of judgment shall
be void and shall be destroyed.
4. Releases. Concurrent with the execution of this
Settlement Agreement, the parties shall sign and deliver into
escrow the releases attached hereto as Exhibits 1 - 8. Any
releases by and of the Bank and BAC found among Exhibits 1-10,
including Exhibits 2, 3, 4, and 6, shall become effective only if
the Bank funds the Loan. The releases by and of parties other
than the Bank and BAC in Exhibits 1, 5, 7, and 8 shall become
effective upon execution of this Agreement and those releases.
5. Additional Releases. If Morgan Stanley Real
Estate Fund, L.P. (`Morgan Stanley") provides the release of
Defendants as provided in Exhibit 9 hereto, Defendants shall
provide the release of Morgan Stanley as provided in Exhibit 10,
or in such other format as defendants and Morgan Stanley may
agree. The settlement is not contingent upon obtaining the
releases in Exhibits 9 and 10.
6. Monthly Payments. Pending the payment required by
Paragraph 1, Defendants shall continue to make the monthly
payments to Kearny II required by the March 31, 1992 Note, and
shall continue to make monthly payments of the monthly interest
due on the November 3, 1989 note. In the month that the payment
under Paragraph 1 is made, these payments on the Notes shall
still be due, and any excess payment shall be refunded to PAL on
a prorated basis.
7. Dismissal of Claims. Immediately after (1) this
Agreement has been executed, (2) the payments under Paragraphs 1
and 6 have been timely made, and (3) signed releases as provided
in Paragraph 4 have been received in escrow, Kearny Street and
Defendants will move to dismiss the claims and counterclaims in
the Lawsuit with prejudice, and without costs or fees to any
party, using the form of Judgment of Dismissal attached as
Exhibit 11.
8. Confidential Settlement. The terms of this
Settlement shall be confidential and shall not disclosed, except
as required by law or to partners of the Parties to this
Agreement and the Commitment, their attorneys, their accountants,
their investors or potential investors, their lenders or
potential lenders, officers, directors, employees, rating
agencies, bank regulators, and other applicable governmental
agencies.
9. ED. Defendants represent and warrant that ED was
administratively dissolved on or about April 17, 1992, that ED
did not file a proceeding under the bankruptcy laws, that ED has
no claims against any of the parties to this Agreement, that ED
has not assigned or otherwise transferred any such claim as more
fully indicated in Paragraph 19 below, and that to the extent
that ED has ever had any such claims, any such claims shall be
released pursuant to the terms of this Agreement and the releases
attached as Exhibits 1 - 8. Defendants agree to defend indemnify
and hold harmless Kearny Street, Kearny II, Bank of America
Oregon and BankAmerica Corporation from any reasonable costs,
expenses, losses, damages, suits, actions, claims or causes of
action, including but not limited to any outside or in-house
attorneys fees, resulting from any breach of the representations
and/or warranties in this Paragraph 9.
10. Mutual Representations. Covenants and Warranties.
Each of the Parties represents, warrants and agrees as follows:
A. Each party has, to the extent such party has
deemed necessary, received independent legal advice from his,
her, or its attorney(s) with respect to the advisability of
making this settlement, the form of this Agreement, and the form
of the Exhibits hereto.
B. No party (nor any officer, director, partner,
agent, employee, representative, or attorney of or for any party)
has made any statement or representation to any other party
regarding any fact relied upon in entering into this Agreement1
and no party (nor any officer, director, partner, agent,
employee, representative, or attorney of or for any party) is
relying upon any statement, representation or promise of any
other party (nor any officer, director, partner, agent, employee,
representative, or attorney of or for any party) in executing
this Agreement or in making the settlement provided for herein,
except as expressly stated in this Agreement, or as stated in the
Bank's Commitment, to PAL dated April 18, 1996, or in any loan
application, loan documents, deeds of trust, or guaranties
entered into in connection with the Bank's Loan to PAL referenced
in Paragraph 2 above.
C. Each party to this Agreement has made such
investigation of the facts pertaining to this settlement, this
Agreement, and the Exhibits hereto, and of all matters pertaining
thereto as it, he or she deems necessary.
D. Each party has read this Agreement and
understands the contents hereof.
11. Binding Effect. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Parties and
their respective successors, predecessors, attorneys-in-fact,
attorneys-at-law, officers, directors, shareholders, partners,
limited partners, joint venturers, employees, agents, parent
corporations, subsidiary and affiliated corporations, affiliates,
insurers, heirs, personal representatives, executors and
administrators of the estate of the parties to this Agreement.
12. Amendment. This Agreement may not be modified or
amended except by the written agreement of the Parties. No
modification or amendment of any provision of this Agreement or
the Exhibits hereto shall be binding unless in writing and signed
by the party to be bound. This Agreement may not be modified or
amended orally. No waiver of any of the provisions of this
Agreement shall be binding unless executed in writing by the
party making the waiver. No waiver of any of the provisions of
this Agreement shall be deemed to constitute a waiver of any
other provisions, regardless of whether such provisions are
similar to the provision being waived, nor shall any waiver
constitute a continuing waiver unless so indicated in writing by
the party making the waiver.
13. Entire Agreement. This Agreement and the attached
exhibits 1 - 8, 11 and 12, which are incorporated herein by
reference, contain the entire agreement and understanding of the
Parties with respect to the matters described herein, and
supersede all prior and contemporaneous agreements between them
with respect to such matters. Notwithstanding anything contained
herein to the contrary, this Agreement does not supersede or
modify the terms of the Bank's Commitment, nor does this
Agreement supersede or modify the terms of any loan application,
loan documents, deeds of trust or guaranties to be executed in
connection with the Bank's Loan to PAL referenced in Paragraph 2
above.
14. Governing Law. This Agreement shall be governed
by and construed under the laws of the State of Oregon to whose
jurisdiction the parties submit, provided, however, that in the
event that any law or laws of the State of Oregon shall require
or otherwise dictate that the laws of another state or
jurisdiction shall be applied in any proceeding, such Oregon law
or laws shall be superseded by this paragraph and the remaining
laws of the State of Oregon shall nonetheless be applied in such
proceeding. In the event that any action is instituted in
connection with this Agreement, it shall be commenced and
maintained in Multnomah County Circuit Court, Multnomah County,
Oregon.
15. Arbitration of Claims. Any controversy or claim
arising out of or relating to this Agreement shall, at the
request of any party to this Agreement, be determined by
arbitration in accordance with Oregon arbitration procedure and
under the auspices and rules of the American Arbitration
Association. Judgment upon the award of the arbitrator may be
entered in any court having jurisdiction. The institution and
maintenance of a civil action shall not constitute a waiver of
this provision.
16. Attorneys' Fees and Costs. Any party breaching
this Agreement shall be liable for reasonable in-house and
outside counsel's attorneys' fees and costs actually incurred by
the injured party in enforcing this Agreement, remedying the
breach, seeking its interpretation, or in recovering damages for
any such breach, in arbitration, trial, and on appeal.
17. Captions. The captions appearing at the
commencement of the paragraphs hereof are descriptive only and
for convenience of reference. Should there be any conflict
between such caption and the paragraph at the head of which it
appears, the paragraph and not such caption shall control and
govern in the construction of this Agreement.
18. Joint Preparation. Counsel for each of the
Parties has cooperated and participated in the negotiation of the
terms of this Agreement. Accordingly, the Parties hereby
acknowledge and agree that this Agreement shall not be construed
or interpreted in favor of or against any party(ies) by virtue of
the identity of its preparer.
19. Non-Assignment of Claims. Each of the Parties
represents and warrants that, except as described in Recital C
above and paragraph 20 below, there has been no assignment, sale
or transfer, by operation of law, subrogation or otherwise, of
any claim, right, cause of action, demand, obligation, liability
or interest released by any of them as provided herein or in the
Releases.
20. Kearny II As Owner. Kearny and Kearny II
represent and warrant that Kearny II owns the Notes, all
guaranties, and all collateral described in paragraph 1 above,
but that Kearny II has pledged the Notes, guaranties and
collateral to a third party. Kearny and Kearny II represent and
warrant that they have the power and authority to enter into this
Agreement and the attached Releases, and that Kearny II has the
power and authority to make the modifications to the Notes
contemplated by this Agreement. Kearny and Kearny II represent
and warrant that Kearny II has the right and ability to obtain
the return of the Notes, guaranties and collateral, free of any
such pledge or encumbrance, and Kearny II represents, warrants
and agrees that it will do so. Kearny and Kearny II agree to
defend indemnify and hold harmless all parties that are or will
be released by Kearny and Kearny II in Exhibits 1-8 from any
reasonable costs, expenses, losses, damages, suits, actions,
claims or causes of action, including but not limited to any
outside or in-house attorneys' fees, resulting from any breach of
the representations or warranties in paragraphs 19 and 20, so
long as the title or interest of the party bringing such a claim
derived from or was transferred or assigned to that party by
Kearny or Kearny II or an affiliated partnership or corporation.
21. No Admission of Liability. This Agreement is a
settlement of disputed actual and potential claims,
counterclaims, crossclaims and third party claims. Neither the
terms of this Agreement nor the fact that a settlement is being
effected by this Agreement is to be construed as an admission of
liability or wrongdoing by any party to this Agreement.
22. Execution in Counterparts. This Agreement may be
executed in counterparts. When each party has signed and
delivered to the escrow agent at least one such executed
counterpart of this Agreement and the pertinent Releases in
Exhibits 1 - 8, then each such counterpart shall be deemed an
original, and, when taken together with all other signed
counterparts, shall constitute one agreement which shall be
binding upon and effective as to all Parties, to the extent
provided in this Agreement. A faxed counterpart shall be treated
as an original.
23. Severability. If any term or provision of this
Agreement, including the attached exhibits, or its application to
any circumstance shall to any extent be invalid or unenforceable
the remainder of this Agreement or exhibit and the application of
such term or provision to persons other than those as to which it
is held invalid or unenforceable shall not be affected thereby
and each term or provision of this Agreement or exhibit shall be
valid and enforceable to the fullest extent permitted by law.
24. Additional Documents. The parties agree to act in
good faith and cooperate in the execution of additional documents
necessary to effect the intent of this Agreement, but this
Agreement constitutes a binding contract between the parties.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
KEARNY STREET REAL ESTATE COMPANY, L.P
By: JEFFREY A.ORTLEY,
PRESIDENT
Date: 5/28/96
HANFORMD/HEALY ASSET MANAGEMENT COMPANY
A California general partnership
by: Hanford/Healy Resources One, Inc.
a Calofornia corporation, General
Partner:
by: Patrcicia R. Healy
President
date: 5/29/96
BANK OF AMERCIA OREGON
BY:
ITS:
DATE:
BANKAMERICA CORPORATION
BY:
ITS:
DATE:
PORTLAND LOFTS ASSOCIATES, L.P.
BY: Joseph W. Angel II
ITS: General Partner
DATE: 5/21/96
EAST BANK ANGEL JOINT VENTURE
BY: Jospeh R. Angel II
ITS: General Partner
DATE: 5/21/96
EAST BANK DEVELOPMENT, INC.
JOSEPH W. ANGEL II
EXHIBIT 1
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Kearny Street ri Real Estate Company, L.P. and Kearny Street
Real Estate Company, L.P. for themselves, individually, their
respective successors, and assigns, hereby fully releases,
discharges, and forever acquits Portland Lofts Associates
Limited Partnership; East Bank Angel Joint Venture; East Bank
Development1 mc.; and Joseph W. Angel, II, and their partners,
joint venturers, officers, directors, employees, agents,
attorneys, heirs, affiliates, parent corporations, affiliated
corporations, predecessors, successors, and assigns, from any
and all claims, demands, and causes of action, known or
unknown, of any kind, to the extent said claims relate in any
way to the Notes and conduct that were the subject of Kearnv
Street Real Estate Cornoany L.P., V. Portland Lofts Associates
Limited Partnership, etal, MuLtnomah County Circuit Court Case No.
9411-07780.
KEARNY STREET REAL ESTATE
COMPANY, L.P.
By: KS CORPORATION, a Delaware Corporation
Its: General Partner
By: Jeffrey A. Dritley
President
Date: 5/28/96
KEARNY STREET II ESTATE CCMPANY,
L.P., a Delaware limited
partnerahip
By: Kearny Street II Corporation, a
Delaware corporation, its General
Partner
Its: JEFFREY A. DRITLEY
President
Date: 5/28/96
By: Janet A. Wimik
Its: V.P., General Council, Secty
Date: 5/28/96
EXHIBIT 2
REVISED RELEASE
In consideration of the Settlement Agreement dated May 21,
1996, Bank of America Oregon, for itself individually, and for
its successors, affiliates, heirs, and assigns hereby fully
releases, discharges, and forever acquits Portland Lofts
Associates Limited Partnership; East Bank Angel Joint Venture;
East Bank Development, Inc.; and Joseph w. Angel, II, and their
respective partners, joint venturers, officers directors,
employees, agents, attorneys, heirs, affiliates, parent
corporations, subsidiary corporations, affiliated corporations,
predecessors, successors, and assigns, from any and all claims,
demands, and causes of action, known or unknown, of any kind, to
the extent said claims relate in any way to or arise out of the
Notes and conduct that were the subject of Kearnv Street Real
Estate Companv L.P. V. Portland Lofts Associates Limited
Partnership. et al., Multnomah County Circuit Court Case No.
9411-07780 ("the Lawsuit"). Not included in this Release are any
(1) loan and guarantee obligations incurred pursuant to the Loan
and guaranties referred to in Paragraph 2 of the Settlement
Agreement to which this Release is an exhibit, (2) loan
obligations incurred pursuant to the line of credit agreement
between Oregon Bank, Joseph Angel, and Dennis H. Gilman,
currently reflected in Bank of America Line of Credit Account No.
50243106956847001, dated February 17, 1994, and (3) other
lending, credit, guarantee, or account relationships between Bank
of America Oregon (or any of its affiliates, parent corporations,
affiliated corporations, subsidiary corporations,
predecessors, successors, or assigns) and any of the
parties being released by this instrument, which
relationships were not the subject of the Lawsuit. This
release supersedes the previous version of Exhibit 2, and
shall be binding on the parties signing below.
BANK OF AMERICA OREGON
By: KERMIT K. HOUSER
Its: Senior Credit Officer
Date: 5/24/96
EXHIBIT 3
REVISED RELEASE
In consideration of the Settlement Agreement dated May 21,
1996, BankAmerica Corporation, for itself, individually, its
respective successors, heirs, and assigns, hereby fully releases,
discharges, and forever acquits Portland Lofts Associates Limited
Partnership; East Bank Angel Joint Venture; East Bank
Development, Inc.; and Joseph W. Angel, II, and their respective
partners, joint venturers, officers, directors, employees,
agents, attorneys, heirs, affiliates, parent corporations,
subsidiary corporations, affiliated corporations, predecessors,
successors, and assigns, from any and all claims1 demands, and
causes of action, known or unknown, of any kind, to the extent
said claims relate in any way to or arise out of the Notes and
conduct that were the subject of Kearnv Street Real Estate
Comoany. L.P.. V. Portland Lofts Associates Limited Partnership
et al., Multnomah County Circuit Court Case No. 9411-07780 (the
Lawsuit"). Not included in this Release are (1) any loan and
guarantee obligations incurred pursuant to the Loan or guaranties
referred to in Paragraph 2 of the Settlement Agreement to which
this Release is an exhibit or (2) any other lending, credit,
guarantee, or account relationships between BankAmerica
Corporation (or any of its subsidiaries, affiliates, affiliated
corporations, subsidiary corporations, successors or assigns) and
any of the parties being released by this instrument, which
relationships were not the subject of the Lawsuit. This release
supersedes the previous version of Exhibit 3, and shall be
binding on the parties signing below.
BANKAMERICA CORPORATION
By: Merrill O Burns
Its: SVP
Date: 5/24/96
EXHIBIT 4
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Portiand Lofts Associates Limited Partnership; East Bank Angel
Joint Venture; East Bank Development, Inc.; and Joseph W. Angel,
II, for themselves, individually, their respective successors,
heirs, and assigns, hereby fully release, discharge, and forever
acquit Bank of America Oregon and BankAmerica Corporation and
their respective officers, directors, employees, agents,
attorneys, heirs, affiliates, affiliated corporations, parent
corporations, subsidiary corporations, predecessors, successors
and assigns, from any and all claims, demands, and causes of
action1 known or unknown, of any kind, to the extent said claims
relate in any way to or arise out of the notes and conduct that
were the subject of Kearny Street Real Estate Companv. L.P.. V.
Portland Lofts Associates Limited Partnership. etal, Multnomah
County Circuit Court Case No. 9411-07780 ("the Lawsuit"). Not
included in this Release are (1) any loan obligations incurred
pursuant to the Loan or guaranties referred to in Paragraph 2 of
the Settlement Agreement to which this Release is an exhibit,
(2) loan obligations incurred pursuant to the line of credit
agreement between Oregon Bank, Joseph Angel, and Dennis H.
Gilman, currently reflected in Bank of America Line of Credit
Account No. 50243106956847001, dated February 17, 1994, and
3) any other lending, credit, or account relationships between
Bank of America Oregon or BankAmerica Corporation (or any of
their affiliates, affiliated corporations, parent corporations,
subsidiary corporations, predecessors, successors, or assigns)
and any of the parties being released by this instrutnent, which
relationships were not the subject of the Lawsuit.
PORTLAND LOFTS ASSOCZATES LZMZTED
PARTNERSHIP
By: East Bank Angel Joint
Venture,its, General Partner
JOSEPH W. ANGEL
General Partner
Date: 5/21/96
EAST BANK ANGEL JOINT VENTURE
by: JOSEPH W. ANGEL
Its: General Partner
Date: 5/21/96
EAST BANK DEVELOPMENT, INC.
By: JOSEPH W. ANGEL
Date: 5/21/96
EXHIBIT 4
REVISED RELEASE
In consideration of the Settlement Agreement dated May 1996,
Portland Lofts Associates Limited Partnership; East Bank Angel
Joint Venture; East Bank Development, Inc.; and Joseph w. Angel,
II, for themselves, individually, their respective successors,
heirs, and assigns, hereby fully release, discharge, and forever
acquit Bank of America Oregon and BankAmerica Corporation and
their respective officers, directors, employees, agents,
attorneys, heirs, affiliates, affiliated corporations, parent
corporations, subsidiary corporations, predecessors, successors,
and assigns, from any and all claims, demands, and causes of
action, known or unknown, of any kind, to the extent said claims
relate in any way to or arise out of the notes and conduct that
were the subject of Kearny Street Real Estate company. L.P. v.
Portland Lofts Associates Limited Partnership. etal., Multnomah
County Circuit Court Case No. 9411-07780 ("the Lawsuit"). Not
included in this Release are (1) any loan and guarantee
obligations incurred pursuant to the Loan or guaranties referred
to in Paragraph 2 of the Settlement Agreement to which this
Release is an exhibit, (2) loan obligations incurred pursuant to
the line of credit agreement between Oregon Bank, Joseph Angel,
and Dennis H. Gilman, currently reflected in Bank of America Line
of Credit Account No. 50243106956847001, dated February 17, 1994,
and (3) any other lending, credit, or account relationships
between Bank of America Oregon or BankAmerica
Corporation (or any of their affiliates, affiliated corporations,
parent corporations, subsidiary corporations, predecessors,
successors, or assigns) and any of the parties signing this
release (or any of their affiliates, affiliated corporations,
parent corporations, subsidiary corporations, predecessors,
successors, or assigns), which relationships were not the subject
of the Lawsuit. This release supersedes the previous version of
Exhibit 4, and shall be binding on the parties signing below
Corporation (or any of their affiliates, affiliated corporations,
parent corporations, subsidiary corporations, predecessors,
successors, or assigns) and any of the parties signing this
release (or any of their affiliates, affiliated corporations,
parent corporations, subsidiary corporations, predecessors,
successors, or assigns), which relationships were not the subject
of the Lawsuit. This release supersedes the previous version of
Exhibit 4, and shall be binding on the parties signing below.
PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP
By: East Bank Angel Joint
Venture,
its General Partner
By: JOSEPH W. ANGEL
Its:General Partner
Date: 5/23/96
EAST BANK ANGEL JOINT VENTURE
By: JOSEPH W. ANGEL
Its: General Partner
Date: 5/23/96
EAST BANK DEVELOPMENT, INC.
BY: DENNIS GILMAN
ITS: PRESIDENT
DATE: 5/21/96
EXHIBIT 5
RELEASE
Pursuant to the Settlement Agreement dated May 21,1996,
Portland Lofts Associates Limited Partnership; East Bank Angel
Joint Venture; East Bank Development, Inc.; and Joseph W. Angel,
II, for theMselves, individually, their respective successors,
affiliates, heirs and assigns, hereby fully release, discharge,
and forever acquit Kearny Street II Real Estate company, L.P.,
Kearny Street Real Estate company, L.P, and their partner,
officers, directors, employees, agents, attorneys, heirs,
successors, affiliates, predecessors, parent corporations,
subsidiary corporations, affiliated corporations, and assigns,
from any and all claims, demands, and causes of action, known or
unknown, to the extent said claims relate in any way to the Notes
and conduct that were the subject of Kearny Street Real Estate
Companv L.P. V. Portland Lofts Associates Limited Partnership.
etal., Multnomah County Circuit Court Case No. 9411-07780.
PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP
By: East Bank Angel Joint
Venture, its General Partner
By: JOSEPH W. ANGEL
Its: General Partner
Date: 5/21/96
EXHIBIT 6
RELEASE
Pursuant to the Settlement Agreement dated May 21, l996,
Kearny Street Real Estate Company, L.P., Kearny Street II Real
Estate Company, L.P., and Hanford Healy Asset Management Company,
on the one hand (collectively, "Kearny"), and Bankmerica
Corporation and Bank of America Oregon, on the other hand
(collectively, "Bank"), individually, and for their respective
partners, joint venturers, officers, directors, employees,
agents attorneys, heirs, affiliates, parent corporations,
subsidiary corporations, affiliated corporations, predecessors,
successors, and assigns, hereby fully release, discharge, and
forever acquit each other and their respective partners, joint
venturers, officers, directors, employees, agents, attorneys,
heirs, affiliates, parent corporations, subsidiary corporations,
affiliated corporations, predecessors, successors, and assigns,
from any and all claims, demands, and causes of action, known or
unknown, of any kind, to the extent said claims relate in any way
to or arise out of the Notes and conduct that were the subject of
Kearny Street Real Estate Company, L.P.. vs. Portland Lofts
Associates Limited Partnership, et al., Multnomah County Circuit
Court Case No. 9411-07780.
KEARNY STREET REAL ESTATE L.P.
By: KS Corporation, a Delaware Corporation
General Partner
Its: JEFFREY A. DRITLEY
PRESIDENT
Date: 5/28/96
KEARNY STREET II REAL ESTATE
COMPANY, L.P., a Delaware limited
partnership
By: Kearny Street II Corporation, a
Delaware corporation, its General
Partner
By: JEFFREY A DRITLEY
Its: PRESIDENT
Date: 5/28/96
By: JANET A. WINNICK
Its: VP, GENERAL COUNCIL, SECTY
Date: 5/28/96
HANFORD HEALY ASSET MANAGEMENT COMPANY, a
California general partnership
By: Hanford/Healy Resources One, Inc., a
California corporation, General Partner
By: Patricia R. Healy
Its: President
Date: 5/29/96
BANK OF AMERICA OREGON
BY: Kermit K. Houser,EVP
Its: Senior Credit Officer
Date: 5/24/96
EXHIBIT 7
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Hanford Healy Asset Management company, for itse1f,
individually, its respective successors,affi1iates,
and assigns, hereby fully releases, discharges, and
forever acquits, Portland Lofts Associates Limited
Partnership; East Bank Angel Joint Venture; East Bank
Development, Inc.; and Joseph W. Angel, II, and their
partners, joint venturers, officers, directors,
employees, agents, attorneys, heirs, predecessors,
successors, affiliates, Parent corporations, subsidiary
ccrporations, affiliated corporatioms, and assigns from
any and all claims, demands and causes of action, known
or unknown, of any kind, to the extent said c1aims relate
in any way to the Notes and conduct that were the subject
of Kearny Street Rea1 Estate Companv L.P.. v.
Portland Lofts Associates LImited Partnership et al.,
Mu1tnomah County Circuit Court Case No. 9411-07780.
HANFORD HEALY ASSET MANAGEMENT COMPANY, a
California qeneral partnership
By: Hanford Healy Resources One, Inc.
a California corporation,
General Partner
By: Patriia R.Healy
Its: President
Date: 5/29/96
EXHIBIT 8
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Portland Lofts Associates Limited Partnership; East Bank Angel
Joint Venture; East Bank Development, Inc.; and Joseph W. Angel,
II. for themselves, individually, their respective successors,
affiliates, heirs, and assigns, hereby fully release, discharge,
and forever acquit Hanford Healy Asset Management Company and its
affiliates, officers, directors, employees, agents, attorneys,
heirs, predecessors, successors, affiliates, parent corporations,
subsidiary corporations, affiliated corporations, and assigns,
from any and all claims, demands, and causes of action, known or
unknown, of any kind, to the extent said claims relate in any way
to the Notes and conduct that were the subject of Kearny Street
Real Estate Company. L.P.. v. Portland Lofts Associates Limited
Partnership. et al., Multnomah County Circuit Court Case No.
9411-07780.
PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP
By: East Bank Angel Joint
Venture,its general partner
By: Joseph W. Angel
Its: General Partner
Date: 5/23/96
EAST BANK ANGEL JOINT VENTURE
By: Joseph W. Angel
Its: General Partner
Date: 5/23/96
EAST BANK DEVELOPMENT, INC.
by: JOSEPH W. ANGEL
date: 5/23/96
EAST BANK DEVELOPMENT, INC
by: Dennis Gilman
date: 5/21/96
BALL JANIK LLP
ATTORNEYS
ONE MAIN PLACE
101 SOUTHWEST AIN STREET, SUITE 1100
PORTLAND, OREGON 97204-3219
JOHN J. DUNBAR TEL 503-228-2525 [email protected]
Also admitted in Washington Fax 503-205-1058 direct fax 503-226-3910
August 29, 1996
Mr. Joseph W.Angel, II
1410 SW Jefferson
Portland, OR 97201
Mr. Charles Intravaia
Claremont Companies
Batterymarch Park II
Quincy, MA 02196
RE: Portland Lofts/Kearny
Gentlemen:
Enclosed is a copy of the release we received from Morgan Stanley.
If you have any questions, please give me a call.
Sincerely,
John J.Dunbar
JJD:rr
Enclosure
EXHIBIT 9
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Morgan Stanley Real Estate Fund, L.P., for itself, individually,
its respective successors, affilites, and assigns, hereby fully
releases, didscharges, and forever acquits Portland Lofts
Associates Limited Partnership; East Bank Angel Joint Venture;
East Bank Development, Inc.; and Joseph W Ange, II, and their
partners, joint ventureres, officers, directors, employees,
agents, attorneys, heirs, affiliates, parent corporations,
subsidiary corporations, affiliated corporations, predecessors
successors, and assigns, from any and all claims, demands, and
causes of action, known or unknown, of any kind, to the extent
said claims relate in any way to the notes and conduct that were
the subject of Kearny Street Real Estate Company, L.P., v.
Portland Lofts Associates Limited Partnership, et al., Multnomah
County Circuit Court Case No. 9411-07780
MORGAN STANLEY REAL ESTATE FUND, LP
by: Christian B. Malone
its: Vice President
date: 7/31/96
BALL JANIK LLP
ATTORNEYS
ONE MAIN PLACE
101 SOUTWEST MAIN STREET, SUITE 1100
PORTLAND, OREGON 97204-3219
John J. Dunbar Tel 503-228-2525 [email protected]
Also admitted in Washignton Fax 503-295-1058 direct fax 503-226-9301
August 29, 1996
Mr. Frederick W Bogdan
Morgan Stanley
1585 Broadway, 9th Floor
New York, New York 10036
RE Portland Lofts Associates/Kerny
Dear Rick:
In exchange for the release Morgan Stanley provided, enclosed
is the release of your clients.
Sincerely,
JOHN J. DUNBAR
JJD;RR
Enclosure
cc: Joseph W. Angel
Charles Intravaia
Steven K Blackhurst
David B. Horworth
(w/enclosure)
EXHIBIT 10
RELEASE
Pursuant to the Settlement Agreement dated May 21, 1996,
Portland Lofts Associates Limited Partnership; East Bank Angel
Joint Venture; East Bank Development, Inc. and Joseph W. Angel,
II, for themselves, individually, their respective successors,
affiliates, heirs, and asigns, hereby fully release, discharge,
and forever acquit Morgan Staley Real Estate Fund, L.P. and its
partners, officers, directors, employees, agents, attorneys,
heirs, affiliates, parent corporations, subsidiary corporations,
affiliated corportaions, predecessors, successors, and assigns,
unknown, of any kind, to the extent said claims relate in any way
to the Notes and conduct that were the subject of Kearny Street
Real Estate Company, L.P. v. Portland Lofts Associates Limited
Partnership, et at., Multnomah County Circuit Court Case No.
9411-07780.
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
By: East Bank Angel Joint Venture, its
general partner
By: Joseph W. Angel
its: General Partner
date: 5/23/96
EAST BANK ANGEL JOINT VENTURE
by: Joseph W. Angel
its: General Partner
Date: 5/23/96
EAST BANK DEVELOPMENT, INC.
by: Joseph W. Angel
date: 5/23/96
by: Dennis Gilman
its: President
date: 5/21/96
EXHIBIT 11
IN THE CIRCUIT COURT OF THE STAET OF OREGON
FOR THE COUNTY OF MULTNOMAH
KEARNY STREET REAL ESTATE COMPANY, )
L.P., )
Plaintiff, ) Case No. 9411-07780
v. ) STIPULATED JUDGEMENT OF
PORTLAND LOFTS ASSOCIATES LIMITED ) DISMISSAL; ORDER SEALING
PARTNERSHIP; EAST BANK ANGEL JOINT ) FILE
VENTURE; EAST BANK DEVELOPMENT, )
INC., JOSEPH W. ANGEL II; AND CITY )
OF PORTLAND ACTING BY AND THROUGH )
THE PORTLAND DEVELOPMENT )
COMMISSION, )
)
)
Defendants. )
The parties, by their attorneys, stipulate as follows:
1. The claims and counterclaims are dismissed with
prejudice.
2. Each party shall bear its own costs and attorneys fees.
3. The Clerk shall place the file in this matter under seal.
SO STIPULATED:
JOHN J. DUNBAR
Attorney for Defendants Portland
Lofts Associates Limited
Partnership; East Bank Angel Joint
Venture; East Bank Development, Inc.;
Joseph W. Angel, II;
DAVID B. HOWORTH
Attorney for Plaintiff Kearny
Street Real Estate Company, L.P.
EXHIBIT 12
IN THE CIRCUIT COURT OF THE STATE OF OREGON
FOR THE COUNTY OF MULTNOMAH
In the Matter of the )
Confession of Judgement by )
)
)
Portland Lofts Associ- )
ates, L.P., East Bank )
Angel Joint Venture, )
and Joseph W. Angel, ) Case no.
Angel, )
Defendants, ) CONFESSION OF JUDGMENT
)
In Favor of )
Kearny Street Real )
Estate Company, L.P. )
)
Plaintiff. )
Pursuant to ORCP 73, defendants Portland Lofts
Associates, L.P., a Delaware limited partnership with its
principal place of business in Portland,Oregon, East Bank Angel
Joint Venture, an Oregon joint venture, and Joseph w. Angel
hereby confess judgment jointly and severally in favor of
plaintiff on the Note dated November 3, 1989 (Exhibit A hereto,
the "Note") and the guaranty by Joseph Angel Dated May 23, 1989
(exhibit B-1 hereto) in the sum of Five Hunderd and Fifty One
Thousand, Two Hundred Seventy One Dollars and Eighty Eight Cents
($551,271.88),and authorize the entry of judement against them
in this amount, together wit interest on this amount at the prime
rate of the Bank of Amercia N.T. & S. A., plus one percent
(1), to change on the same day as any change in said prime rate,
from the date of the Note, compounded annually, and reasonable
attorney fees and costs to collect such amount.
Defendants acknowledge that this confession of judgment
is for a debt justly and presently due and arises out of
defendants' breach of the Note. Defendants understand that this
confession of judgement authorizes entry of judgment without
further proceedings which would authorize execution to enforce
payment of the judgment, and that this confession has been
executed after the date when the sums described in the statement were
due.
VERIFICATION
I, Joseph W. Angel, am one of the defendants in the
above-entitled cause and a guarantor of the Note. I and each of
the defendants reside in Multnomah County, including Portland
Lofts Associates, L.P.,a Delaware Limited Partnership with its
principal place of business in Portland, Oregon. I am a joint
venturer in East Bank Angel Joint Venture, and am authorized to
sign documents on behalf of East Bank Angel Joint Venture, and
Portland Lofts Associates, L.P. I have read the foregoing
statement and know the contents thereof. The Same is true of my
own knowledge, except as to those matters which are therein
alleged on information and belief, and as to those matter, I
believe it to be true.
I declare under penalty of perjury that the foregoing
is true and correct and that this declaration was executed on,
, 1996, at Portland, Oregon.
JOSEPH W. ANGEL, INDIVIDUALLY
PORTLAND LOFTS ASSOCIATES, L.P.
BY: East Bank Angel Joint Venture, its
general partner
by: JOSEPH W. ANGEL
its: General Partner
EAST BANK ANGEL JOINT VENTURE
by: JOSEPH W. ANGEL
its: General Partner
STATE OF OREGON )
) ss.
County of Multnomah )
The foregoing instrument was acknowledged before me on
this 23 day of MAY , 1996 by Joseph W. Angel.
SUE SHADE
Notary Public for Oregon
My commission expires: 11/26/98
OREGON BANK
A SECURITY PACIFIC COMPANY
Portland, Oregon, November 3, 1989, $800,000.00
on demand, if no demand September 1, 1990, after date
for value received the undersigned promises to pay to
STRAIGHT the order of The Oregon Bank at its Real Estate Industr
NOTE Group office, in the City of Portland, Oregon, EIGTH
HUNDRED THOUSAND AND NO/100THS-----Dollars. In lawful
money of the United States of America with interest
thereon from dates payable monthly, at the rate
below and identified by an "x" in the box next to the
______ description.
BJH XX The Oregon Bank's prime rate (defined as that index
rate used to price loans which is publicly announced
from time to time as the Oregon Bak's prime rate
1.0 % to change on the same day's any change in said
prime rate.
until paid, and if interest is not so paid, the whole
of both principal and interest to become immediately due
at the option of the holder of this note.
XX All interest shall be clculated on the basis of actual
days elapsed over a year of 350 days.
In the event that the undersigned shall (1) fail to
make any payments due hereunder withing 30 days after
such payment is due, whether or not prior to acceleration
or demand, or (2) breach and covenant or
representation made in connection with the debt evidenced
by this note or agreement and such is not cured within
30 days after notice from the Bank, then in either
event, and without waiving any default or remedies as a
result or such default, the interest rate on the debt
evidenced by this note or agreement shall increase by
2% above he interest rate provided for above, effective
after the expiration of such 30 day period.
In the event of default, each of the undersigned agrees
to pay all costs of collection, including attorneys' fees
even though no suit or action is filed hereon, and if such
or action is filed attorneys' fees and court costs and
attorneys' fees and court costs incurred on appea, if any.
The Oregon Bank is authorized to share any information
concerning the credit of the undersigned with Security
Pacific Corporation and its subsidiaries. The Bank is
also authorized to respond to credit inquires from other
parties and to furnish credit reports in accordance with
customary banking practices.
SEE ATTACHED SIGNATURE PAGE
EXHIBIT A
SIGNATURE PAGE FOR STRAIGHT NOTE
EAST BANK ANGEL JOINT VENTURE,
an Oregon Joint Venture
BY: JOSEPH W. ANGEL, II, VENTURER
BY: EAST BANK DEVELOPMENT, NC., an
Oregon Corporation, Venturer
By: Dennis H.Gilman,President
By: Martin Soloway, Vice President
BANK OF AMERICA
PROMISSORY NOTE
(Standing Loan)
$5,625,000.00 Loan No.310266-2
June 20, 1996 Portland, Oregon
1 BORROWER'S PROMISE TO PAY.
For value received, PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP a Delaware limited partnership (the "Borrower")
promises to pay Five Million Six Hundred Twenty-Five Thousand and
No/00 Dollars ($5,625,000.00), plus interest, to the order of
BANK OF AMERCE OREGON, an Oregon state chartered commercial bank
(the "Bank") at P.O. Box 3066, Portland, Oregon, or at such other
place as the holder of this Note may from time to time require.
This Note evidences a loan (the "Loan") from Bank to
Borrower made pursuant to a Standing Loan Agreement (the "Loan
Agreement") between Bank and Borrower of even date herewith. This
Note is secured by a deed of trust (the "Deed of Trust") covering
certain real property and other collateral.
2. INTEREST RATE AND MONTHLY PAYMENTS.
A. Interest Rate. Interest shall accrue at the rate of
nine percent (9.00%) per year (the "Note Rate").
B. Monthly Payments. If the Deed of Trust records on any
day but the first day of a month, Borrower will pay interest in
advance from the date of recording to the first day of the next
month. Thereafter, principal and interest shall be payable in
equal monthly installments of Forty-Seven Thousand Two Hundred
Four and 80/100 ($47,204.80), beginning on the first day of
August, 1996, and continuing on the first day of each month
thereafter, with a final payment of all remaining unpaid
principal, interest and other sums due under this Note due and
payable on July 1,2006 (the "Maturity Date").
C. Interest Appointment and Allocation. The amount of each
year's interest on the Note will, as it accrues, be apportioned
among calendar months on the basis of a year consisting of 12
thirty-day months. The early or late date of making a monthly
payment will be disregarded for purposes of allocating the
payment between principal and interest. For this purpose, the
payment will be treated as though made on the date due.
3. PRINCIPAL PREPAYMENTS.
A. Borrower may prepay principal on the Note in whole or
in part in minimum amounts equal to or greater than ten percent
(10%) of the face amount of this Note but in no event more than
once per year. Borrower shall give Bank written notice of
Borrower's intention to make the prepayrnent, specifying the date
and amount of the prepayment. The notice must be received by Bank
at least five (5) Banking Days in advance of the prepayment. All
prepayments of principal on the Note shall be applied to the most
remote principal installment or installments then unpaid. Each
such prepayment shall be accompanied by the Prepayment Fee
described in this Section 3. In the event Borrower elects not to
make the prepayment, a prepayment service fee in the amount of
$250 will be assessed.
B. Except for any required principal repayment under
Section 2.13 of the Standing Loan Agreement, each prepayment of
the Loan, whether voluntary, by reason of acceleration or
otherwise, shall be accompanied by payment of all accrued
interest on the amount of the prepayment, a prepayment service
fee of $250.00 and the Prepayment Fee described below.
C. The Prepayment Fee shall be the sum of fees calculated
separately for each Prepaid Installment, as follows:
(1) Determine the amount of interest which would have
accrued each month for the Prepaid Installment had it
remained outstanding until the applicable Original Payment
Date, using the Note Rate;
(2) Subtract from each monthly interest amount
determined in (1), above, the amount of interest which would
accrue for that Prepaid Installment if it were reinvested
from the date of prepayment through the Original Payment
Date, at the Treasury Rate:
(3) If(1) minus (2) for the Prepaid Installment is
greater than zero, discount the monthly difference to the
date of prepayment by the rate used in (2) above. The sum of
the discounted monthly differences is the prepayment fee for
that Prepaid Installment.
D. For purposes of this Section 3,
(1) "Treasury Rate" means the interest rate yield for
U.S. Government Treasury Securities which Bank determines could
be obtained by reinvesting a specified Prepaid Installment in
such securities from the date of prepayment through the Original
Payment Date.
(2) "Original Payment Dates" mean the dates on which
principal of the Loan would have been paid if there had been no
prepayment.
(3) "Prepaid Installment" means the portion of the
prepaid principal of the Loan which would have been paid on a
single Original Payment Date.
(4) 'Banking Day" means a day, other than a Saturday
or a Sunday, on which Bank is open for business for all banking
functions in Oregon.
E. Bank may adjust the Treasury Rate and Money Market Rate
to reflect the compounding, accrual basis, or other costs of the
Loan. Each of the rates is Bank's estimate only, and Bank is
under no obligation to actually reinvest any prepayment. The
rates shall be based on information from either the Telerate or
Reuters information services, The Wall Street Journal or other
information sources the Bank deems appropriate.
4. BORROWER'S WAIVER OF PREPAYMENT RIGHT.
By its signature below, Borrower expressly waives any right
to prepay the Loan except on the express terms set forth above.
Borrower agrees to pay the Prepayment Fee even if the prepayment
is made following Bank's acceleration of the Note due to a
default by Borrower, or by reason of any transfer giving Bank the
right to accelerate the maturity of this Note pursuant to the
terms of the Deed of Trust. Borrower acknowledges that prepayment
of the Loan may result in Bank incurring additional costs
(including lost opportunity costs), expenses or liabilities.
Borrower therefore agrees that the Prepayment Fee represents a
reasonable estimate of the prepayment costs, expenses or
liabilities Bank may suffer on a prepayment. Borrower agrees that
Bank's willingness to offer a fixed interest rate to Borrower is
sufficient and independent consideration for this waiver.
Borrower understands that Bank would not offer a fixed interest
rate to Borrower absent this waiver.
BORROWER: PORTLAND LOFTS ASSOCIATES
LIMITED PARTNERSHIP, a
Delaware limited partnership
BY: East Bank Angel
Joint Venture, an
Oregon joint
venture,
General Partner
By: Joseph Angel
By: Pacific Star Corporation,
an Oregon corporation
By:: Joseph W.Angel
President
BY: Historic Preservation
Properties 1989 Limited
Partnership, a Delaware limited
partnership, General Partner
By: Boston Historic Partners Limited
Partnership, a Massachusetts
limited partnership,
General Partner
By: Portfolio Advisory Services,
Inc., a Massachusetts
corporation, General Partner
By: Terrence P. Sullivan
President
By: Terrence P. Sullivan
General Partner
'
5. LATE PAYMENTS.
A. Late Charge for Overdue Payments. If Bank has not
received the full amount of any monthly payment by the end of 15
calendar days after the date it is due, Borrower will pay a late
charge to Bank in the amount of five percent (5%) of the overdue
payment. Borrower will pay this late charge only once on any late
payment.
B. Default Rate. From and after the Maturity Date, or such
earlier date as all sums owing on this Note become due and
payable by acceleration or otherwise, all sums owing on this
Note, at the option of Bank, shall bear interest until paid in
full at three (3) percentage points above the rate at which
interest would otherwise accrue under this Note.
6. MISCELLANEOUS.
A. Payments. All amounts payable under this Note are
payable in lawful money of the United States. Checks constitute
payment only when collected.
B. Joint and Several. If more than one person or entity
are signing this Note as Borrower, their obligations under this
Note will be joint and several. If Borrower consists of or is
comprised of more than one person or entity, any reference to
Borrower shall refer to each person or entity comprising
Borrower.
C. Loan Agreement. This Note is subject to the terms and
conditions of the Loan Agreement, which, among other things,
contains provisions for acceleration of the maturity of this
Note.
D. Limitation on Recourse.
This Note is executed in connection with a term loan made by
the Bank to the Borrower. Notwithstanding any other provision of
the Note to the contrary, neither Historic Preservation
Properties 1989 Limited Partnership, a Delaware limited
partnership ("HPP"), which is one of the Borrower's two general
partners, nor HPP's general partners shall have any personal
liability for the payment of the loan secured by the Deed of
Trust or any liability for the performance of the Borrower's
obligations and the Bank's sole remedy in the case of HPP shall
be to proceed against HPP's interest in the property and
improvements or any proceeds thereof. The preceding sentence
shall not preclude the Bank from enforcing the Bank's rights
against the property and improvements and against other parties
liable for the payment of the loan secured by a Deed of
Trust, nor shall it preclude the Bank from joining HPP or its
general partners in any proceeding to foreclose the Bank's Deed
of Trust, security interest and other liens securing the
Borrower's obligations pursuant to such loan.
IN WITNESS WHEREOF, Borrower has duly executed and delivered
this Note to Bank as of the date first above written.
BORROWER: PORTLAND LOFTS ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited
partnership
BY: East Bank Angel Joint
Venture, an Oregon joint
venture, General Partner
BY: Joseph W. Angel
BY: Pacific Star Corporation,
an Oregon corporation
By: Joseph W.Angel
President
BY: Historic Preservation
Properties 1989 Limited
Partnership, a Delaware
limited partnership, General
Partner
By: Boston Historic Partners
Limited Partnership, a
Massachusetts limited
partnership, General
Partner
By: Portfolio Advisory Services,
Inc., a Massachusetts
corportion, General Partner
By Terrence P. Sullivan
President
By: Terrence P.Sullivan
General Partner
STANDING LOAN AGREEMENT
This Standing Loan Agreement (hereinafter referred to as
"Loan Agreement"), dated as of June 20, 1996, is between PORTLAND
LOFTS ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
partnership (Borrower") and BANK OF AMERICA OREGON, an Oregon
state chartered commercial bank ("Bank").
Agreement
I. Loan Terms.
1.1 Amount and Purpose.
Bank shall make a loan to Borrower in the principal
amount of Five Million Six Hundred Twenty-Five Thousand and
No/100 Dollars ($5,625,000.00) (the "Loan") to be used for
Refinance as described below.
The Loan will be evidenced by a promissory note (the "Note")
payable to Bank in the original principal amount of the Loan and
will be secured by a Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing ("Deed of Trust") covering
certain real property commonly known as Honeyman Hardware Lofts,
502-514 N.W. 9th Avenue, Portland, Oregon 97209 (together with
all improvements now or hereafter located thereon, the
"Property") and certain personal property and other collateral.
Joseph W. Angel, II and Lynne I. Angel (collectively,
"Guarantors") will guaranty Borrower's obligations under this
Loan Agreement pursuant to a Payment Guaranty of even date
herewith (collectively, the "Guaranties").
1.2 Documentation.
At the closing of this transaction, Borrower will
deliver the following documents and other items, executed and
acknowledged as appropriate, all in form and substance
satisfactory to Bank: (a) this Loan Agreement; (b) the Note; (c)
the Deed of Trust; (d) a UCC- 1 Financing Statement perfecting a
first-position lien on all personal property collateral; (e) the
Guaranties, (f) a 1970 form ALTA extended coverage title
insurance policy insuring Bank that the Deed of Trust constitutes
a valid and enforceable lien on the Property subject and
subordinate only to such liens or other matters as Bank has
approved in writing; (g) if the Deed of Trust is to be junior to
any other lien or deed of trust on the Property, a Beneficiary's
Statement from the holder of such prior lien or deed of trust;
(h) evidence of the casualty and other insurance coverage required under this
Loan Agreement; (i) if Borrower is anything other than a natural
person, evidence of Borrower's due formation and good standing or
existence, as well as due authorization and execution of the Loan
Documents; (]) if applicable, Subordination Agreements and
Estoppels from tenants leasing space in the Property; (k) if the
Property is to be leased to third parties, Borrower's pro forma
lease form; (1) a loan fee in the amount of $70,312.50; (m) an
Environmental Questionnaire and Disclosure Statement prepared and
certified by Borrower, and, if Bank requires, an environmental
survey of the Property prepared by an environmental consultant
satisfactory to Bank; and (n) such other documents, Property
information and other assurances as Bank may require.
1.3 INTENTIONALLY DELETED
1.4 Disbursement Procedures.
Bank shall disburse the Loan proceeds as follows:
(a) Pay Bank of America Oregon a loan fee in the
amount of $70,312.50;
(b) Pay Bank of America Oregon $55.00 to reimburse the
fee advanced for pre-closing and post-closing UCC searches;
(c) Pay Bank of America Oregon Commercial Appraisal
Group for preparation and review of the appraisal;
(d) Pay Bank of America Oregon to reimburse the
amounts advanced or incurred for legal fees in connection with
the closing and administration of the loan;
(e) Pay Chicago Title Insurance Company for recording
and escrow fees, title charges and related fees.
(f) Pay any unpaid taxes and assessments on the
Property, plus interest;
(g) Payoff the indebtedness evidenced by a lien in
favor of City of Portland recorded on March 11, 1992, in the
original amount of $15,000.00
(h) Pay $5,400,000.00 to be held in escrow under the
terms of the Settlement Agreement dated May 21. 1996 among
Borrower, Bank, Kearney Street Real Estate Company, L.P. and
others.
(i) Any remaining loan proceeds shall be paid per the
Borrower's instructions.
II. Covenants of the Borrower.
Borrower promises to keep each of the following covenants:
2.1 Compliance with Law.
Borrower shall comply with all existing and future
laws, regulations, orders, building restrictions and requirements
of, and all agreements with and commitments to, all governmental,
judicial or legal authorities having jurisdiction over the
Property and Borrower's business.
2.2 Conditional Sales Contracts.
Without Bank's prior written consent, which consent
shall not be unreasonably withheld, Borrower shall not purchase
any materials, equipment, furnishings or fixtures to be installed
on the Property under any agreement where the seller reserves
title or the right of removal or repossession after such items
are installed on the Property.
2.3 Site Visits.
Borrower shall allow Bank access to the Property at any
reasonable time between the hours of 9:00 a.m. and 5:00 p.m.
after reasonable advance notice for the purposes of performing an
appraisal, inspecting the Property, taking soil or groundwater
samples, and conducting tests, among other things, to investigate
for the presence of Hazardous Substances, as defined in Article
IV. Borrower shall also allow Bank to examine, copy and audit its
books and records. Bank is under no duty to visit or observe the
Property, or to examine any books or records. Any site visit,
observation or examination by Bank shall be solely for the
purpose of protecting Bank's security and preserving Bank's
rights under the Loan Documents. Bank owes no duty of care to
protect Borrower or any other party against, or to inform
Borrower or any other party of, any adverse condition affecting
the Property, including any defects in the design or construction
of any improvements on the Property or the presence of any
Hazardous Substances on the Property.
2.4 Insurance.
Borrower shall maintain the following insurance:
(a) All risk property damage insurance in nonreporting
form on the Property, with a policy limit in an amount not
less than the full insurable value of the Property on a
replacement cost basis, including tenant improvements, if
any. The policy shall include a business interruption (or
rent loss, if more appropriate) endorsement in the amount of
six months' projected rents or income, a lender's loss
payable endorsement (438 BFU) in favor of Bank, and any
other endorsements required by Bank.
(b) Comprehensive General Liability coverage with such
limits as Bank may require. Should other than Borrower
provide the insurance, such policy shall name Borrower as an
additional insured with respect to the Property. Coverage
shall be written on an occurrence basis, not claims made.
(c) Such other insurance as Bank may require, which
may include earthquake and flood.
All policies of insurance required by Bank must be issued by
companies approved by Bank and otherwise be acceptable to Bank as
to amounts, forms, risk coverages and deductibles. In addition,
each policy (except workers' compensation) must provide Bank at
least thirty (30) days' prior notice of cancellation, non-renewal
or modification. If Borrower fails to keep any such coverage in
effect while the Loan is outstanding, Bank may procure the
coverage at Borrower's expense. Borrower shall reimburse Bank,
on demand, for all premiums advanced by Bank, which advances
shall be considered to be additional loans to Borrower secured by
the Deed of Trust and bearing interest at the default rate
provided in the Note.
2.5 Payment of Expenses.
Borrower shall pay all reasonable costs and expenses
incurred by Bank in connection with the making, disbursement and
administration of the Loan, as well as any revisions, extensions,
renewals or "workouts" of the Loan, and in the exercise of any of
Bank's rights or remedies under this Loan Agreement. Such costs
and expenses include title insurance, recording and escrow
charges, fees for appraisal (but not more than one appraisal in
any twelve (12) month period), environmental services, legal fees
and expenses of Bank's counsel and any other reasonable fees and
costs for services, regardless of whether such services are
furnished by Bank's employees or by independent contractors.
Borrower acknowledges that the Loan tee does not include amounts
payable by Borrower under this section. All such sums incurred by
Bank and not immediately reimbursed by Borrower shall be
considered an additional loan to Borrower secured by the Deed of
Trust and bearing interest at the default rate provided in the
Note.
2.6 Financial and Other Information.
If Borrower or any Guarantor is other than a natural
person or a trust, Borrower shall provide Bank, within one
hundred - twenty (120) days of the close of Borrower's and each
such Guarantor's fiscal year-end, its and each such Guarantor's
annual financial statements, including a year-end balance sheet
and annual profit and loss statement and shall provide Bank its
and each such Guarantor's tax returns, together with supporting
schedules, including without limitation K-i forms, extension
requests and statements of contributions to subchapter S
corporations, within thirty (30) days of filing same. If
Borrower or any Guarantor is a natural person or a trust,
Borrower shall provide Bank its and each such Guarantor's year
end financial statement within one hundred - twenty (120) days of
the fiscal year end and shall provide copies of its and each such
Guarantor's tax returns, together with all supporting schedules,
including without limitation K-i forms, extension requests and
statements of contributions to subchapter S corporations within
thirty (30) days of filing same. Borrower shall also provide an
annual operating statement and rent roll on the Property in form
and substance satisfactory to Bank within ninety (90) days of
Borrower's fiscal year-end. Within thirty (30) days after request
by the Bank, Borrower shall promptly provide Bank with any other
financial or other information concerning its and each
Guarantor's affairs and properties as Bank may request.
2.7 Notices.
Borrower shall promptly notify Bank in writing of:
(a) any litigation filed against Borrower, Guarantor
or the Property, and litigation filed against the General Partner
of Borrower that directly relates to the Property, where the
amount claimed is One Hundred Thousand Dollars ($100,000.00) or
more;
(b) any notice that the Property or Borrower's or
Guarantor's business fails in any respect to comply with any
applicable law, regulation or court order; and
(c) any material adverse change in the physical
condition of the Property or Borrower's or any Guarantor's
financial condition or operations or other circumstance that
adversely affects Borrower's intended use of the Property or
Borrower's or Guarantor's ability to repay the Loan.
2.8 Indemnity.
Borrower agrees to indemnify, defend with counsel
acceptable to Bank, and hold Bank harmless from and against all
liabilities, claims, actions, damages, costs and expenses
(including all legal fees and expenses of Bank's counsel) arising
out of or resulting from the ownership, operation, or use of the
Property, whether such claims are based on theories of derivative
liability, comparative negligence or otherwise. Notwithstanding
anything to the contrary in any other Loan Document, the
provisions of this Section 2.8 shall not be secured by the Deed
of Trust, and shall survive the termination of this Loan
Agreement, repayment of the Loan and foreclosure of the Deed of
Trust or similar proceedings.
2.9 Preservation of Rights: Maintenance of Properties.
Borrower shall obtain and preserve all rights,
privileges and franchises necessary or desirable for the
operation of the Property and the conduct of Borrower's business.
Borrower shall maintain all its properties in good condition.
2.10 Performance of Acts.
Upon request by Bank, Borrower shall perform all acts
which may be necessary or advisable to perfect any lien or
security interest provided for in the Loan Documents or to carry
out the intent of the Loan Documents.
2.11 Keeping Guarantor Informed.
Borrower shall keep each Guarantor, informed of
Borrower's financial condition and business operations and all
other circumstances which may affect Borrower's ability to pay
and perform its obligations under the Loan Documents. In
addition, Borrower shall deliver to each such person all of the
financial information required to be furnished to Bank hereunder.
2.12 Maximum Loan-to-Value Ratio.
Borrower agrees that the ratio of the total committed amount of
the Loan to the current "as is" value of the Property ("Current
As Is Value") shall at no time exceed eighty percent (80%) (the
"Maximum Loan-to-Value Ratio"). If the debt service coverage
("DSC") for the Property falls below 1. lOX DSC annually, based
on the Property's actual annual net operating income ("NOI") as
reported annually by Borrower, divided by the debt service
on the Loan utilizing the remaining amortization schedule and the
current note rate as defined in the Promissory Note, an appraisal
may be required at Bank's option, but not more than annually, at
Borrower's expense. For purposes of this section, Bank shall
determine the Current As Is Value of the Property by an appraisal
using a methodology which (i) conforms to then-current regulatory
requirements, (ii) is considered by Bank to be reasonable and
appropriate under the circumstances, and (iii) takes into account
then-current market conditions, including vacancy factor,
discount rates, and rental rates and concessions, all as
determined by Bank. If Bank at any time should determine that
such ratio has been exceeded, Bank may make written demand on
Borrower to repay principal of the Loan in an amount sufficient
in Bank's reasonable judgment to cause the Maximum Loan-to-Value
Ratio to be met. Borrower shall make any such payment of
principal within thirty (30) days after Bank's demand. No
Prepayment Fee will be assessed on such payment.
2.13 Further Encumbrances.
Borrower acknowledges that Bank has relied upon the
Property not being subject to additional liens or encumbrances
for reasons which include, but are not limited to, the
possibility of competing claims or the promotion of plans
disadvantageous to Bank in bankruptcy; the risks to Bank in a
junior lienholder's bankruptcy; questions which involve the
priority of future advances, the priority of future leases of the
Property, the marshaling of Borrower's assets, and Bank's rights
to determine the application of condemnation awards and insurance
proceeds; the impairment of Bank's option to accept a deed in
lieu of foreclosure; and Bank's requirements concerning
Borrower's preservation of its equity in the Property and the
absence of debt which could increase the likelihood of Borrower's
inability to perform its obligations when due. Therefore, as a
principal inducement to Bank to make the Loan and with the
knowledge that Bank will materially rely upon this section in so
doing. Borrower covenants not to voluntarily or involuntarily
encumber the Property or any part thereof. Without limiting the
generality of the foregoing and irrespective of the priority
thereof, no mortgages, deeds of trust or other forms of security
interests shall encumber any real or personal property which is
the subject of any lien or security interest granted to Bank as
security for the Note. Encumbrances and hypothecations of stock
or partnership interests in Borrower or any successor of
Borrower, sale lease-backs, transfers by leases with purchase
options, and conveyances by real estate contract shall each be
deemed an encumbrance for the purposes of this Section. Any
transfers (i) of partnership interests in Historic Preservation
Properties 1989 Limited Partnership ("HPP") or its partners or
(ii) of partnership interests by Joseph W. Angel II for estate
planning purposes, will neither violate the provisions of this
Section nor require the Beneficiary's consent but will require
written notice to the Beneficiary. In the event of a transfer of
the interest of HPP to East Bank Angel Joint Venture ('~EBAJV")
or of the interest of EBAJV to HPP in accordance with the Amended
and Restated Agreement of Limited Partnership of Portland Lofts
Associates Limited Partnership, as in effect on the date of this deed of
Trust, the Beneficiary shall not increase the interest rate on
the Loan.
2.14 UCC Searches.
At any time requested by Bank, Borrower will reimburse
Bank for all expenses incurred by Bank to obtain current uniform
commercial code searches made in the office of the Secretary of
State of the State of Oregon, and such other places as Bank may
require, covering Borrower and such other persons and entities as
Bank may require. Bank may require, at its sole discretion,
Borrower to take action to remove filings related to or which
could relate to the Property, or any other collateral for the
Loan, other than filings made pursuant to the Loan Documents or
otherwise approved by Bank.
III. Use or Leasing of the Property.
3.1 Use of the Property.
Borrower shall develop and hold the Property as income
property for lease to unaffiliated third parties in accordance
with the provisions of this Article III provided however, Bank
understands Borrower may desire to pursue condominium conversion
of the Property at a future date. Bank, in its sole discretion,
reserves the right to reach an underwriting determination on
whether the Bank will consent to such conversion based on
information required by the Bank at that time.
3.2 Leasing.
Except as otherwise approved by Bank in writing, all
leases of space in the Property shall be documented on a pro
forma lease approved by Bank, shall be entered into with bona
fide third party tenants financially capable of performing their
obligations under their leases, and shall reflect arms-length
transactions at the then current market rate for comparable
space. The pro forma lease may be modified so long as the
modifications do not impair, or purport to impair, the Bank's, or
any Lender's rights under the pro forma lease. Borrower shall
perform all obligations required to be performed by it as
landlord under any lease affecting any part of the Property.
Borrower shall not accept payment of more than one month's rent
in advance from any tenant.
3.3 Delivery of Leasing Information and Documents.
Borrower shall promptly deliver to Bank such rent
rolls, leasing schedules and reports, operating statements or
other leasing information as Bank from time to time may
request, and shall promptly notify Bank of any material tenant
dispute or material adverse change in leasing activity on the
Property. Borrower shall use all reasonable efforts to promptly
obtain and deliver to Bank such estoppel certificates and
subordination and attornment agreements from tenants as Bank from
time to time may require. In no event shall any approval by Bank
of a lease be a representation of any kind with regard to the
lease or its enforceability, or the financial capacity of any
tenant or lease guarantor.
3.4 Income from Property.
Borrower shall first apply all income derived from the
Property, including all income from leases, to pay costs and
expenses associated with the ownership, maintenance, operation
and leasing of the Property, including all amounts then required
to be paid under the Loan Documents, before using or applying
such income for any other purpose. No such income shall be
distributed or paid to any partner, shareholder or, if Borrower
is a trust, to any beneficiary or trustee, unless all such costs
and expenses which are then due have been paid in full.
IV. Hazardous Substances.
Notwithstanding any provision in the Deed of Trust or any
other Loan Document, the provisions of this Article IV shall not
be secured by the Deed of Trust and shall survive termination of
this Loan Agreement, repayment of the Loan, and foreclosure of
the Deed of Trust or similar proceedings.
4.1 Definition of Hazardous Substance.
For purposes of this Loan Agreement, a "Hazardous
Substance" is defined to mean any substance, material or waste,
including asbestos and petroleum (including crude oil or any
fraction thereof), which is or becomes designated, classified or
regulated as "toxic," "hazardous," a "pollutant" or similar
designation under any federal, state or local law, regulation or
ordinance.
4.2 Indemnity Regarding Hazardous Substances.
Borrower agrees to indemnify, defend with counsel
acceptable to Bank, and hold Bank, its parent and affiliated
companies, and their respective officers, directors, employees
and agents, harmless from and against all actual or threatened
liabilities, claims, actions, damages (including foreseeable and
enforceable consequential damages), penalties, costs, expenses
(including attorney's fees) and losses directly or indirectly
arising out of or resulting from the presence of any Hazardous
Substance in or around any part of the
Property or in the soil or groundwater under the Property,
including (1) any expenses incurred in connection with any
investigation of site conditions or any clean-up, remedial,
removal or restoration work, and (2) any resulting damages or
injuries to the person or property of any third parties or to any
natural resources. In addition, Borrower shall similarly
indemnify, defend and hold harmless any persons purchasing the
Property through a foreclosure sale or following a foreclosure
sale, and any persons purchasing the Loan or any portion of or
interest in it.
4.3 Representation and Warranty.
Before signing this Loan Agreement, Borrower researched
and inquired into the previous, current and contemplated uses and
ownership of the Property. Based on that due diligence, Borrower
represents and warrants that, to the best of its knowledge, no
Hazardous Substance has been or will be disposed of, released
onto or otherwise exists in, on, or under the Property, except as
Borrower has disclosed to Bank in writing.
4.4 Compliance with Law: Notices.
Borrower has complied, and shall comply and cause all
occupants of the Property to comply, with all laws, regulations
and ordinances governing or applicable to Hazardous Substances as
well as the recommendations of any qualified environmental
engineer or other expert. Borrower shall promptly notify Bank if
it knows or suspects there may be any Hazardous Substance in or
around the Property, or in the soil or groundwater under the
Property, or if any action or investigation by any governmental
agency or third party pertaining to Hazardous Substances is
pending or threatened.
V. Representations and Warranties.
Borrower promises that each representation and warranty set
forth below is true, accurate and correct.
5.1 Formation: Authority.
If Borrower is anything other than a natural person, it
has complied with all laws and regulations concerning its
organization, existence and the transaction of its business, and
is in good standing or existence in each state in which it
conducts its business. Borrower is authorized to execute, deliver
and perform its obligations under each of the Loan Documents.
5.2 No Violation.
Neither Borrower nor the Property is in violation of, nor do
the terms of this Loan Agreement conflict with, any regulation or
ordinance, any order of any court or governmental entity, or any
covenant or agreement affecting Borrower or the Property.
There are no claims, actions, proceedings or investigations
pending or threatened against Borrower or affecting the Property
except for those previously disclosed by Borrower to Bank in writing.
5.3 Financial Information.
All financial information which has been and will be
delivered to Bank, including all information relating to the
financial condition of Borrower, any of its members, partners,
shareholders, or other principals, any Guarantor, and the
Property, does and will fairly and accurately represent the
financial condition being reported on. All such information was
and will be prepared in accordance with generally accepted
accounting principles consistently applied, unless otherwise
noted. As of the date hereof, there has been no material adverse
change in any financial condition reported at any time to Bank.
5.4 Borrower Not a "Foreign Person".
Borrower is not a "foreign person" within the meaning of Section
1445(t)(3) of the Internal Revenue Code of 1986, as amended from
time to time.
5.5 Disclosure to Guarantor.
Before each Guarantor, became obligated in connection with
the Loan, Borrower made full disclosure to that person regarding
Borrower's financial condition and business operations and all
other circumstances bearing upon Borrower's ability to pay and
perform its obligations under the Loan Documents.
VI. Default and Remedies.
6.1 Events of Default.
Borrower will be in default under this Loan Agreement upon the
occurrence of any one or more of the following events ("Event of
Default"):
(a) Borrower fails to make any payment due under the
Note, or fails to make any payment demanded by Bank under any
Loan Document, within fifteen (15) days after the date due or
demand; or
(b) Borrower fails to comply with any covenant contained
in this Loan Agreement other than those referred to in clause
(a), and does not either cure that failure within thirty (30)
days after written notice from Bank, or, if the default cannot be
reasonably cured in thirty days, within a reasonable time; or
(c) Borrower or any Guarantor, or Borrower's managing
general partner if it is a partnership or its majority
shareholder if it is a corporation, becomes insolvent or the
subject of any bankruptcy or other voluntary or involuntary
proceeding (except that, in the case of an involuntary
proceeding, the same shall not constitute an Event of Default if
the proceeding is dismissed within ninety (90) days of filing),
in or out of court, for the adjustment of debtor-creditor
relationships; or
(d) Borrower or any Guarantor dissolves or liquidates,
or any of these events happens to Borrower's managing general
partner if it is a partnership or to its chief executive or
majority shareholder if it is a corporation, or, if Borrower or
any Guarantor is a trust, the trust is revoked or materially
modified or there is a change or substitution of the trustee; or
(e) Borrower or any Guarantor dies or becomes
permanently disabled, or any of these events happens to
Borrower's or any Guarantor's managing general partner, if it is
a partnership, its chief executive officer, if it is a
corporation, or its trustee, if it is a trust unless within
ninety (90) days of the death or disability, Borrower or
Guarantor provides a substitute borrower or guarantor or
additional collateral, satisfactory to Bank, in Bank's sole
discretion; or
(f) Any representation or warranty made or given in
any of the Loan Documents proves to be false or misleading in any
material respect; or
(g) Any Guarantor revokes its Guaranty or any Guaranty
becomes ineffective for any reason; or
(h) An Event of Default occurs under any of the Loan
Documents; or
(i) Bank fails to have an enforceable first lien on or
security interest in any property given as security to; 0r the
Loan (except as approved by Bank in writing); or
(j) A judgement or judgements are entered against
Borrower or any Guarantor in excess of $100,000.00 which are not
covered by insurance or are not satisfied or bonded within the
time required by law, if the same materially adversely affects
Borrower's or such Guarantor's ability to repay the Loan, or any
governmental authority takes action that materially adversely
affects Borrower's intended use of the Property or Borrower's or
any Guarantor's ability to repay the Loan; or
(k) Borrower, any Guarantor or any person affiliated
with Borrower or any Guarantor fails to meet the conditions of,
or fails to perform any obligation under, any other agreement
Borrower has with Bank or any affiliate of Bank after any
applicable notice and cure period provided therein. For the
purposes of this section, "affiliated with" means in control of,
controlled by or under common control with; or
(I) Borrower defaults in connection with any credit
such person has with any lender, if the default consists of the
failure to make a payment when due or gives the other lender the
right to accelerate the obligation; or
(m) There is a material adverse change in Borrower's
or any Guarantor's financial condition that materially impairs
Borrower's intended use of the Property or Borrower's or any
Guarantor's ability to repay the Loan.
6.2 Remedies.
If an Event of Default occurs under this Loan Agreement,
(a) Bank may exercise any right or remedy which it has
under any of the Loan Documents, or which is otherwise available
at law or in equity or by statute, and all of Bank's rights and
remedies shall be cumulative. All of Borrower's obligations under
the Loan Documents shall become immediately due and payable
without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or
demands of any kind or character, all at Bank's option,
exercisable in its sole discretion.
(b) Bank shall have the right in its sole discretion
to enter the Property and take possession of it, whether in
person, by agent or by court-appointed receiver, collect rents
and otherwise protect its collateral. If Bank exercises any of
the rights or remedies provided in this clause (b), that exercise
shall not make Bank a partner or joint venture of Borrower. All
sums which are expended by Bank in preserving its collateral
shall be considered an additional loan to Borrower secured by the
Deed of Trust and bearing interest at the default rate provided
in the Note.
VII. Arbitration.
7.1 Mandatory Arbitration.
After the Deed of Trust has been released, fully reconveyed,
or extinguished, any controversy or claim between or among the
parties, including those arising out of or relating to this Loan
Agreement or the Loan Documents and any claim based on or arising
from an alleged tort, shall at the request of any party be
determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S.
Code), notwithstanding any choice of law provision in this Loan
Agreement, and under the Commercial Rules of the AAA. The
arbitrator(s) shall give effect to statutes of limitation in
determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action
for judicial relief or pursuit of a provisional or ancillary
remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial
relief.
7.2 Real Property Collateral.
Notwithstanding the provisions of Section 7.1, no controversy or claim
shall be submitted to arbitration without the consent of all
parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to
Bank which is secured by real property collateral. If all parties
do not consent to submission of such a controversy or claim to
arbitration, the controversy or claim shall be determined by a
court of competent jurisdiction.
7.3 Provisional Remedies Self-Help and
Foreclosure.
No provision of this Article VII shall limit the right of any party to
this Loan Agreement to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or personal
property collateral or security, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before,
after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration or reference. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed
of trust or mortgage or by judicial foreclosure.
VIII. Miscellaneous Provisions.
8.1 No Waiver Consents.
No alleged waiver by Bank shall be effective unless in writing, and no
waiver shall be construed as a continuing waiver. No waiver shall
be implied from any delay or failure by Bank to take action on
account of any default of Borrower. Consent by Bank to any act or
omission by Borrower shall not be construed as a consent to any
other or subsequent act or omission.
8.2 No Third Parties Benefited.
This Loan Agreement is made and entered into for the sole protection
and benefit of Bank and Borrower and their successors and
assigns. No trust fund is created by this Loan Agreement and no
other persons or entities shall have any right of action under
this Loan Agreement or any right to the Loan funds.
8.3 Notices.
All notices given under this Loan Agreement shall be in writing and
shall be effectively served upon delivery, or if mailed, upon
receipt of certified United States mail, postage prepaid, sent to
the party at its address appearing below its signature. Those
addresses may be changed by either party by notice to the other
party.
8.4 Attorneys' Fees.
If any lawsuit, reference or arbitration is commenced which arises out
of, or which relates to this Loan Agreement, the Loan Documents
or the Loan, including any alleged tort action, regardless of
which party commences the action, the prevailing party shall be
entitled to recover from each other party such sums as the court,
referee or arbitrator may adjudge to be reasonable attorneys'
fees in the action or proceeding or appeal or review therefrom,
in addition to costs and expenses otherwise allowed by law. In
all other situations, including any bankruptcy or other voluntary
or involuntary proceeding, in or out of court, for the adjustment
of debtor-creditor relationships, Borrower agrees to pay all of
Bank's costs and expenses, including attorneys' fees, which may
be incurred in any effort to collect or enforce the Loan or any
part of it or any term of any Loan Document. From the time(s)
incurred until paid in full to Bank, all sums shall bear interest
at the default rate provided in the Note.
8.5 Heirs. Successors and Assigns.
The terms of this Loan Agreement shall bind and benefit the heirs,
legal representatives, successors and assigns of the parties;
provided, however, that Borrower may not assign this Loan
Agreement without the prior written consent of Bank. Bank shall
have the right to transfer the Loan to any other persons or
entities without the consent of or notice to Borrower. Provided,
however, in the case of an unaffiliated entity, Bank will
undertake its best efforts to provide notification to Borrower.
Without the consent of or notice to Borrower, Bank may disclose
to any prospective purchaser of any securities issued by Bank,
and to any prospective or actual purchaser of any interest in the
Loan or any other loans made by Bank to Borrower, any financial
or other information relating to Borrower, the Loan or the
Property.
8.6 Interpretation.
The language of this Loan Agreement shall be construed as a whole
according to its fair meaning, and not strictly for or against
any party. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not
limited to." Whenever Borrower is obligated to pay or reimburse
Bank for any attorneys' fees, those fees shall include the
allocated costs for services of in-house counsel. This Loan
Agreement is the result of substantial negotiations between
Borrower and Bank and shall be construed in accordance with the
fair intent and meaning of the language contained in this Loan
Agreement in its entirety and not for or against either party,
regardless of which party (or its legal counsel) was responsible
for its preparation. Borrower and Bank each represent to the
other that each has consulted with its own legal counsel in
connection with Loan Agreement.
8.7 Miscellaneous.
This Loan Agreement may not be modified or amended except by
a written agreement signed by the parties. The invalidity or
unenforceability of any one or more provisions of this Loan
Agreement shall in no way affect any other provision. If Borrower
consists of more than one person or entity, each shall be jointly
and severally liable to Bank for the faithful performance of this
Loan Agreement and the other Loan Documents. If Borrower consists
of or is comprised of more than one person or entity, any
reference to Borrower shall refer to each person or entity
comprising Borrower. Time is of the essence in the performance of
this Loan Agreement and the other Loan Documents. This Loan
Agreement shall be governed by Oregon law.
8.8 Inte ration and Relation to Loan Commitment.
The Loan Documents fully state all of the terms and
conditions of the parties' agreement regarding the matters
mentioned in or incidental to this Loan Agreement. The Loan
Documents supersede all oral negotiations and prior writings
concerning the subject matter of the Loan Documents, including
any loan commitment issued to Borrower.
8.9 Relationships with Other Bank Customers.
From time to time, Bank may have business relationships with
Borrower's customers, suppliers, contractors, tenants, partners,
shareholders, officers or directors, with businesses offering
products or services similar to those of Borrower, or with
persons seeking to invest in, borrow from or lend to Borrower.
Borrower agrees that in no event shall Bank be obligated to
disclose to Borrower any information concerning any other Bank
customer. Borrower further agrees that Bank may extend credit to
those parties and may take any action it may deem necessary to
collect any such credit, regardless of any effect the extension
or collection of such credit may have on Borrower's financial
condition or operations.
8.10 Limitation on Recourse. This Loan Agreement is executed
in connection with a term loan made by the Bank to the Borrower.
Notwithstanding any other provisions of the Loan Agreement to the
contrary, neither Historic Preservation Properties 1989 Limited
Partnership, a Delaware limited partnership ("HPP"), which is one
of the Borrower's two general partners, nor HPP's general
partners shall have any personal liability for the payment of the
loan secured by the Deed of Trust or any liability for the
performance of the Borrower's obligations and the Bank's sole
remedy in the case of HPP shall be to proceed against HPP's
interest in the property and improvements or any proceeds
thereof. The preceding sentence shall not preclude the Bank from
enforcing the Bank's rights against the property and improvements
and against other parties liable for the payment of the loan
secured by a Deed of Trust, nor shall it preclude the Bank from
joining HPP or its general partners in any proceeding to
foreclose the Bank's Deed of Trust, security interest and other
liens securing the Borrower's obligations pursuant to such loan.
8.11 Special Provision.
Without limiting the foregoing or any other provision
of this Loan Agreement or the Loan Documents, in order to
avoid any misunderstanding between the parties, the parties
agree to the following special provision:
Borrower and each of its constituent partners, and
their permitted successors and assigns (if any), agree that
no agreement, representation, warranty, promise, commitment,
or statement of any kind (collectively, '("Statements") by
any person related directly or indirectly to this Loan or
the Property shall be binding on Bank, its parent,
subsidiaries, affiliates, participants, assigns, or the
officers, directors, employees, and agents of any of them
(collectively, the "Bank Related Parties'), unless the
Statements are in writing and executed by a duly authorized
officer of Bank, Borrower and each of its constituent
partners, and their permitted successors and assigns (if
any), agree not to rely upon such Statements in any way and
further agree not to claim waiver of the foregoing provision
(requiring all Statements to be in writing) for any reason.
This provision requiring any Statement to be in writing to
be enforceable against the Bank Related Parties cannot be
waived orally or by conduct.
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP,
a Delaware Limited partnership
BY: East Angel Joint Venture, an Oregon joint
venture, General Partne
By: Joseph W. Angel
BY: Pacific Star Corporation, an Oregon corporation
BY: Joseph W.Angel
President
BY: Historic Preservation Properties 1989 Limited
Partnership, a Delaware Limited partnership, General
Partner
By: Boston Historic Partners Limited Partnership,
a Massachusetts limited partnership, General
Partner
By: Portfolio Advisory Services, Inc., a
Massachusetts corporation, General Partner
By: Terrence P. Sulllivan
President
By: Terrence P. Sullivan
General Partner
8.12 Statutory Notice.
"UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY US AFTER OCTOBER 3,1989 CONCERNING LOANS
OR OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY US TO BE ENFORCEABLE".
WARNING
Unless you provide us with evidence of the insurance
coverage as required by our contract or loan agreement, we
may purchase insurance at your expense to protect our
interest. This insurance may, hut need not, also protect
your interest. If the collateral becomes damaged, the
coverage we purchase may not pay any claim you make or any
claim made against you. You may later cancel this coverage
by providing evidence that you have obtained property
coverage elsewhere.
You are responsible for the cost of any insurance
purchased by us. The cost of this insurance may be added to
your contract or loan balance. If the cost is added to you
contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount.
The effective date or coverage may be the date your prior
coverage lapsed or the date you failed to provide proof of
coverage.
The coverage we purchase may be considerably more
expensive than insurance you can obtain on your own and may
not satisfy any need for property damage coverage or any
mandatory liability insurance requirements imposed by
applicable law.
BORROWER: PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
BY: East Bank Angel Joint Venture, an Oregon
joint venture, General Partner
By: Joseph W. Angel
By: Pacific Star Corporation, an Oregon
corporation
By: Joseph W. Angel
President
BY: Historic Preservation Properties 1989
Limited Partnership, a Delaware limited
partnership, General Partner
By: Boston Historic Partners Limited Partnership,
a Massachusetts limited partnership,
General Partner
By: Portfolio Advisory Services, Inc.,
a Massachusetts corporation,
General Partner
By: Terrence P. Sullivan
Title: President
By: Terrence P. Sulllivan
General Partner
Adress: Portland Lofts Associates L. P.
c/o Restaurant Management Northwest, Inc.
1410 S.W. Jefferson Street
Portland, Oregon, 97201
Copy to: Mr. Chris Walters
Ball, Janick & Novack
101 S.W. Main Street, Suite 1100
Portland, Oregon 97204
BANK OF AMERICA OREGON,
an Oregon state chartered commercial bank
By: Ann Young, Vice President
ADDRESS: BANK OF AMERICA OREGON
Loan Administration No.2098
P.O. Box 3066
Portland, Oregon 97208
Certified to be a
true and correct copy
Chicago Title Ins Co
Submitted for Recordation
By and Return to:
BANK OF AMERICA OREGON
Real Estate Industries Division
P.O Box 3066
Portland, Oregon 97208
Attn: Unit 2098/Nancy Phelan
Loan No.310266-2
SPACE ABOVE THIS LINE FOR RECORDER'S USE
Tax Account No.18020-6680
DEED OF TRUST
WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Maximum Principal Amount To Be Advanced:
$5,625,000.00; Term of Credit Agreement, if any,
exclusive of options to extend, if any:
July 1,2006
This Deed of Trust with Assignment of Rents, Security Agreement and Fixture
Filing("Deed of Trust"),made this 20th day of June,1996, BETWEEN PORTLAND LOFTS
ASSOCIATES LIMITED PARTNERSHIP,a Delaware limited partnership,whose mailing
address is do Restaurant Management Northwest, Inc., 1410 S.W. Jefferson Street,
Portland, Oregon,97201,as GRANTOR("Grantor" to be interpreted as"Grantors" where
context requires), CHICAGO TITLE INSURANCE COMPANY, whose mailing address is
888 S.W. 5th Avenue, Suite 930,Portland,Oregon 97204, as TRUSTEE, and BANK OF
AMERICA OREGON, an Oregon state chartered commercial bank whose mailing
address is P.O. Box 3066, Portland, Oregon 97208, as BENEFICIARY, as agent
for itself and for any other subsidiary or affiliate of BankAmerica
Corporation which has extended or may hereafter extend credit to the
Grantor (the "Lending Banks").
WITNESSETH: That Grantor IRREVOCABLY CONVEYS, GRANTS, TRANSFERS and
ASSIGNS to TRUSTEE, IN TRUST, WITH POWER OF SALE, the real property legally
described in the attached Exhibit A, including all buildings and
improvements thereon, all appurtenances and easements used in connection
therewith, all water and water rights (whether riparian, appropriative, or
otherwise, and whether or not appurtenant) used in connection therewith,
all shares of stock evidencing the same, pumping stations, engines,
machinery, pipes and ditches, including also all gas, electric, cooking,
heating, cooling, air conditioning, refrigeration and plumbing fixtures and
equipment which have been or may hereafter be attached in any manner to any
building now or hereafter on the said property, or to the said property,
and also any leasehold interest in all or any part thereof, and also the
rents, issues and profits thereof, collectively (the "Real Property"),
SUBJECT, HOWEVER, to the right, power and authority hereinafter given to
and conferred upon the Beneficiary to collect and apply such rents, issues
and profits. This Deed of Trust constitutes a financing statement filed as
a fixture filing covering any property which now is or later may become
fixtures attached to the Real Property covered by this Deed of Trust.
TOGETHER WITH:
(i) All equipment, furnishings, fixtures, construction materials,
tools, books and records and all other property, tangible and intangible,
of every kind and character now or hereafter owned by the Grantor and now
or hereafter (a) located or erected on the Real Property or (b) used or
useful in connection with the Real Property, any construction undertaken
thereon, any trade, business or other activity for which the Real Property
is used, or the maintenance of the Property (hereinafter defined), for the
convenience of any tenants, guests, licensees or invitees -of Grantor;
(ii) Any and all architectural and engineering plans,
specifications and drawings, including without limitation as-built
drawings, relating to the construction of any improvements on the Real
Property and any and all surveys of the Real Property;
(iii) any and all rights to payment from sale of any part of the
Property (including without limitation all earnest money sales deposits)
and all deposits made by Grantor with third parties in connection with the
Property (including without limitation all utility deposits);
(iv) My and all contract rights, general intangibles, development
and use rights, governmental permits and licenses, applications, chattel
paper, instruments, documents, notes, drafts and letters of credit (other
than letters of credit in favor of Beneficiary), which arise from or relate
to the Property or to any business now or later to be conducted on the Real
Property; and any and all payment or performance bonds issued to Grantor as
obligee in connection with the construction of any improvements on the Real
Property;
(v) All proceeds (including insurance and tort claims) and products
of any of the foregoing.
Subsections (I) through (v), together with the Real Property, are
hereinafter referred to collectively as the 'property".
FOR TIE PURPOSE OF SECURING: (1) Payment of the sum of $5,625,000.00
with interest thereon according to the terms of a promissory note or notes
dated June 20, 1996, made by Grantor, payable to the order of the
Beneficiary, and extensions, modifications or renewals thereof All
principal and interest under the note or notes will be due to be repaid as
stated in the note or notes, but no later than July 1,2006. (2) Performance
of Grantor's obligations under that certain Standing Loan Agreement of even
date herewith (the "Loan Agreement"), Provided however, this Deed of Trust
does not secure any obligations which are stated in such Loan Agreement to
be unsecured. (3) Payment of any and all obligations and liabilities,
whatsoever, whether primary, secondary, direct, indirect, fixed or
contingent, which are now due or may hereafter become due from Grantor (or
any of them or any successor in interest to Grantor or any of them) to
Beneficiary or to any Lending Bank, whether created directly or acquired by
assignment if the document evidencing any such other obligation or
liability or any other writing signed by Grantor (or any of them or any
successor in interest to Grantor or any of them) specifically provides that
said obligation is secured by this Deed of Trust. (4) Performance of each
agreement of Grantor herein contained. (5) Payment of all sums to be made
by Grantor pursuant to the terms hereof The interest rate, payment terms
and balance due with respect to the indebtedness and other obligations
secured hereby may be indexed, adjusted, renewed, or renegotiated in
accordance with the terms of the note or other agreement evidencing such
indebtedness or other obligation, or any extensions, modifications or
renewals of such note or other agreement.
TO Protect THE PROPERTY AND SECURITY GRANTED BY THIS DEED OF
TRUST, GRANTOR AGREES:
(a) Properly to care for and keep the Property and buildings
and improvements situate thereon in good condition and repair; to underpin
and support, when necessary, any building or other improvement situate
thereon, and otherwise to protect and preserve same; not to remove or
demolish any building or improvement situate thereon (except tenant
improvement work under any lease or leases); to complete or restore promptly,
and in good and workmanlike manner, any - building or improvement which
may be constructor, damaged or destroyed thereon, and pay in full all costs
incurred therefor; not to commit or permit waste of the Property; to comply
with all jaws, covenants, conditions or restrictions affecting the Property;
in the case of a leasehold estate, to observe and perform all obligations of
Grantor under any lease or leases and to take any action required and to
refrain from taking any action prohibited, as necessary, to preserve and
protect the leasehold estate and the value thereof,. to provide and maintain
fire (and if required by Beneficiary, earthquake, as reasonably and
commercially available, mortgage guaranty and other) insurance satisfactory
to and with loss payable solely to Beneficiary, and to deliver all policies
to Beneficiary, which delivery shall constitute assignment to
Beneficiary of all return premiums; to appear in and defend, without cost to
Beneficiary or Trustee, any action or proceeding purporting to affect the
security hereunder, or the rights or powers of Beneficiary or Trustee, and,
when required by Trustee or Beneficiary, to commence and maintain any
action or proceeding necessary to protect such security and such rights or
powers; and should Trustee or Beneficiary elect to appear in, defend, or
commence and maintain any such action or proceeding, (including
any proceedings under law relating to insolvency or bankruptcy) to
pay all their costs and expenses, including attorney fees; to pay before
delinquency, all taxes, assessments and charges affecting the Property,
including assessments on appurtenant water stock; to pay when due all
encumbrances, charges and liens affecting or purporting to affect
title to the Property; to pay all costs, fees and expenses of this trust; if
the Property be agricultural, to farm said land in an approved and
husbandlike manner, and to keep all trees, vines and crops on said land properly
cultivated, irrigated, fertilized, sprayed and fumigated; to replace
all dead or unproductive vines or trees with new ones; and to keep all
buildings, fences, ditches, canals, wells and other farming improvements
on said premises in first class condition, order and repair. At the request
of Beneficiary, Grantor will monthly pay to Beneficiary an amount equal
to one-twelfth (1/12th) of the annual cost of taxes and assessments on the
Property together with an amount equal to the estimated next fire or fire
and earthquake and other required insurance premiums divided by the
number of months between the date of computation and the date of payment of
the said insurance premium; said accumulated funds will be released to
Grantor for payment of taxes, assessments and insurance premiums, or may be
so directly applied by Beneficiary, if Beneficiary so elects.
(b) Should Grantor fail to make any payment or do any act as
herein provided, then Beneficiary or Trustee (but without obligation
so to do, and without notice to or demand upon Grantor, and without
releasing Grantor from any obligation hereunder) may make or do the
same, and may pay, purchase, contest or compromise any encumbrance,
charge or lien, which in the judgment of either appears to affect
he Property; and in exercising any such powers, incur any liability
and expend whatever amounts in its absolute discretion it may deem
necessary therefor. All sums so incurred or expended by Beneficiary
or Trustee shall be secured hereby and, without demand, shall be
immediately due and payable by Grantor and shall bear interest at
the same rate as the indebtedness secured hereby; provided, however,
that at the option of Beneficiary or Trustee such sums may be added
to the principal balance of any indebtedness secured hereby and
shall bear interest at the same rate as the indebtedness secured
hereby and be payable ratably over the remaining term thereof.
IT IS MUTUALLY AGREED THAT:
I. Should the Property or any part thereof be taken or damaged by reason
of any public improvement or condemnation proceeding, or damaged by fire or
earthquake, or in any other manner, Beneficiary shall be entitled, at its
option, to commence, appear in and prosecute in its own name, any action or
proceeding, or to make any compromise or settlement, in connection with
such taking or damage, and to obtain all compensation, awards or other
relief therefor. All such compensation, awards, damages, rights of action
and proceeds, including the proceeds of any policies of insurance affecting
said property, are hereby assigned to Beneficiary. In each instance,
Beneficiary shall apply such proceeds first toward reimbursement of all of
Beneficiary's costs and expenses of recovering the proceeds, including
attorneys' fees. In the event the damage is covered by insurance or
condemnation proceeds, Beneficiary shall permit Grantor to use the balance
of such proceeds Net Claims Proceeds") to pay costs of repairing or
reconstructing the Property, if, in any instance, in Beneficiary's
reasonable judgment, Beneficiary's security interest will not be materially
impaired thereby. In the event that anyone shall establish and exercise any
right to develop, bore for or mine for any water, gas, oil or mineral on or
under the surface of the Property, any sums that may thereafter become due
and payable to the Grantor as bonus or royalty shall be considered rent
hereunder, and such sums, together with damages and other compensation
payable to the Grantor by reason of the exercise of such rights are hereby
made subject to this Deed of Trust and shall be applied in accordance with
the provisions hereof Grantor agrees to execute such further assignments of
any compensation, award, damages and rights of action and proceeds, as
Beneficiary or Trustee may require. The Trustee or Beneficiary may enter
upon the Property at any time during the existence of this trust for the
purpose of inspection, or for the accomplishment of any of the purposes
hereof.
II. By accepting payment of any sum hereby secured after its due
date, or after the filing of notice of default and of election to sell,
Beneficiary shall not waive its right to require prompt payment when due of
all other sums so secured, or to declare default for failure so to pay, or
to proceed with the sale under any such notice of default and of election
to sell, for any unpaid balance of said indebtedness. If Beneficiary or any
Lending Bank holds any additional security for any obligation secured
hereby, it may enforce the sale thereof at its option, either before,
contemporaneously with, or after the sale is made hereunder, and on any
Event of Default of Grantor, Beneficiary and any Lending Bank may, at its
option, offset against any indebtedness owing by it to Grantor, the whole
or any part of the indebtedness secured hereby.
III. Without affecting the liability of any person, including
Grantor, for the payment of any indebtedness secured hereby, or the lien of
this Deed of Trust on the remainder of the Property for the full amount of
any indebtedness unpaid, Beneficiary, Lending Banks and Trustee are
respectively empowered as follows: Beneficiary and Lending Banks may from
time to time and without notice (a) release any person liable for the
payment of any of the indebtedness, (b) extend the time or otherwise alter
the terms of payment of any of the indebtedness, (c) accept additional
security therefor of any kind, including deeds of trust or mortgages, (d)
alter, substitute or release any property securing the indebtedness;
Trustee may, at any time and from time to time, upon the \written request
of Beneficiary (a) consent to the making of any map or plat of the Real
Property, (b) join in granting any easement or creating any restriction
thereon, (c) join in any subordination or other agreement affecting this
Deed of Trust or the lien or charge thereof, (d) reconvey, without any
warranty, alt or any part of the Property.
IV. Upon payment in full of all sums secured hereby, and performance
of all obligations of the Grantor hereunder, the Trustee shall reconvey,
without warranty, the estate vested in it hereby. The grantee in any
reconveyance made pursuant to this Deed of Trust may be described as "the
person or persons legally entitled thereto," and, upon proper recordation,
the recitals therein of any matters or facts shall be conclusive proof of
the truthfulness thereof
V. If an Event of Default is made in payment when due of any
part or installment of principal or interest of the note or notes
specifically referred to above or in the payment of any other
indebtedness secured hereby, or any other Event of Default occurs
with respect to the obligations secured hereby, or in the event
Grantor or any successor in interest to Grantor in the Property
sells, conveys, alienates, assigns or transfers the Property, or any
part thereof, or any interest therein, or drills or extracts or
enters into any lease for the drilling or extraction of oil, gas, or
other hydrocarbon substances or any mineral of any kind or character
therefrom or from any part thereof, or becomes divested of his title
or any interest therein in any manner or way,
- - - whether voluntary or involuntary, or upon Event of default by
Grantor in the performance of any agreement hereunder, or in the
event and at any time after anyone establishes and exercises any
right to develop, bore for or mine for any water, gas, oil or
mineral on or under the surface of the Real Property, Beneficiary
and Lending Banks shall have the right, at their option, to declare
said note or notes and any other indebtedness or obligation secured
hereby, irrespective of the maturity date specified in any note or
written agreement evidencing the same, immediately due and payable
without notice or demand, and no waiver of this right shall be
effective unless in writing and signed by Beneficiary or the
affected Lending Bank. For purposes of this Paragraph 5, if Grantor
is anything other than a natural person, any transfer, whether
voluntary or involuntary, of more than fifty percent (50%) of the
direct or indirect beneficial ownership or voting power of Grantor,
or the removal of or other change in its managing general partner,
if Grantor is a partnership, its chief executive officer, if Grantor
is a corporation, or its trustee, if Grantor is a trust, shall be
deemed to be a transfer of the Property encumbered by this Deed of
Trust, entitling Beneficiary to accelerate the obligations secured
hereby as set forth above. Any transfers (i) of partnership
interests in Historic Preservation Properties 1989 Limited
Partnership ("HPP") or its partners or (ii) of partnership interests
by Joseph W. Angel II for estate planning purposes) will neither
violate the provisions of this Section nor require the Beneficiary's
consent but will require written notice to the Beneficiary. In the
event of a transfer of the interest of HPP to East Bank Angel Joint
Venture ("EBAJV") or of the interest of EBAJV to HPP in accordance
with the Amended and Restated Agreement of Limited Partnership of
Portland Lofts Associates Limited Partnership, as in effect on the
date of this Deed of Trust, the Beneficiary shall not increase the
interest rate on the Loan. The Beneficiary shall not unreasonably
withhold its consent to such transfers that would otherwise violate
the provisions of this Section V; however, as a condition of its
consent to such transfers, the Beneficiary, among other things, may
require from the transferee such information as would normally be
required for a new loan applicant, impose a fee, increase the
interest rate on the Loan and otherwise require that the terms and
conditions of the Loan be modified and supplemented to conform to
the Beneficiary's then applicable underwriting requirements as the
Beneficiary or any successor or participant may require.
VI. Waiver of a right granted to Beneficiary hereunder as to
one transaction or occurrence shall not be deemed to be a waiver of
the right as to any subsequent transaction or occurrence.
Beneficiary may rescind any notice before Trustee's sale by
executing a notice of rescission and recording the same. The
recordation of such notice shall constitute also a cancellation of
any prior declaration of default and demand for sale, and of any
acceleration of maturity of indebtedness affected by any prior
declaration or notice of default. The exercise by Beneficiary of the
right of rescission shall not constitute a waiver of any default
then existing or subsequently occurring, nor impair the right of the
Beneficiary to execute other declarations of default and demand for
sale, or notices of default and of election to cause the Property to
be sold, nor otherwise affect the note or notes secured hereby or
Deed of Trust, or any of the rights, obligations or remedies of the
Beneficiary or Trustee hereunder.
VII. Beneficiary may elect to cause the Property described in
this Deed of Trust or any part thereof to be sold as follows: In its
discretion, Beneficiary may choose to dispose of some or all of the
Property, in any combination consisting of both real and personal
property, together ~n one sale to be held in accordance with the law
and procedures applicable to real property as set forth in Paragraph
8 below, as permitted by the Oregon Uniform Commercial Code. Grantor
agrees that such a sale of personal property together with real property
constitutes a commercially reasonable sale of the personal property.
Alternatively, Beneficiary may elect to treat any of the Property which
consists of a right in action or which is property that can be severed from
the Property without causing structural damage as if the same were personal
property, and dispose of the same in accordance with Paragraph 9 below,
separate and apart from the sale of real property, the remainder of the
Property being treated as real property.
VIII. Trustee, having first given notice of sale as then required
by law, and without demand on Grantor, shall sell the Property at the time
and place of sale fixed by it in the notice of sale, either as a whole or
in separate parcels, and in such order as the Trustee may determine, at
public auction to the highest bidder for cash, in lawful money of the
United States of America, payable at the time of sale. Grantor waives all
rights to direct the order in which any of the Property will be sold, and
also waives any right to have any of the Property marshaled upon any sale.
Trustee may postpone sale of all or any portion of the Property by public
announcement at the time of sale, and from time to time thereafter may
postpone the sale by public announcement at the time fixed by the previous
postponement (for periods totaling not more than 180 days from the original
sale date), and without further notice it may make such sale at the time to
which the same shall be so postponed. Trustee shall deliver to the
purchaser its deed conveying the Property so sold, but without any covenant
or warranty, express or implied. The recital in any such deed of any
matters or facts, stated either specifically or in general terms, or as
conclusions of law or fact, shall, upon proper recordation on, be
conclusive proof of the truthfulness thereof. Any person, including
Grantor, Trustee, Beneficiary or any Lending Bank, may purchase at the
sale. After deducting all costs, fees and expenses of Trustee and of this
trust, including costs of evidence of title in connection with the sale,
the Trustee shall apply the proceeds of the sale to the payment of all sums
then secured hereby, in such order and manner as may be required by Oregon
Revised Statutes 86.765, or any successor statute thereto; the remainder,
if any, to be paid to the person or persons legally entitled thereto. If
Beneficiary or any Lending Bank shall elect to bring suit to foreclose this
Deed of Trust in the manner and subject to the provisions, rights and
remedies relating to the foreclosure of a mortgage, Beneficiary and Lending
Banks shall be entitled to a reasonable sum to be fixed by the court as
attorney's fees expended in the prosecution of said action.
IX. Should Beneficiary elect to cause any of the Property to be
disposed of as personal property as permitted by Paragraph 7 above, it may
dispose of any part thereof in any manner now or hereafter permitted by
Chapter 9 of the Oregon Uniform Commercial Code or in accordance with any
other remedy provided by law. Both Grantor and Beneficiary shall be
eligible to purchase any part or all of such property at any such
disposition. Any such disposition may be either public or private as
Beneficiary may elect, subject to the provisions of the Oregon Uniform
Commercial Code. Beneficiary shall give Grantor at least ten days' prior
written notice of the time and place of any public sale or other
disposition of such property, or of the time at or after which any private
sale or any other intended disposition is to be made, and if such notice is
sent to Grantor at the address last given to Beneficiary by Grantor for the
purpose of notice, it shall constitute reasonable notice to Grantor.
X. Grantor hereby absolutely, irrevocably, presently and
unconditionally assigns to Beneficiary all Grantor's interest in all
existing and future: (a) leases on the Property (including extensions,
renewals and subleases) and agreements for use and occupancy of the
Property (all such leases and agreements whether written or oral, are
hereinafter referred to as "Leases"); (b) all guaranties of the lessees'
performance under the Leases; and (c) rents, royalties, issues, profits,
revenue, income and proceeds of the Property, whether now due, past due or
to become due, including all prepaid rents, security deposits and all
monies which may have been or may hereafter be deposited with Grantor by
any lessee of the Property to secure the payment of any rent (collectively,
the "Rents"), and confers upon Beneficiary the right to collect such Rents
with or \without taking possession of the Property and agrees to deliver
the Rents to Beneficiary upon
Event of Default in the performance of any of the provisions hereof. In the
event that anyone establishes and exercises any right to develop, bore for
or mine for any water, gas, oil or mineral on or under the surface of the
Property, any sums that may become due and payable to Grantor as bonus or
royalty payments, and any damages or other compensation payable to Grantor
in connection with the exercise of any such rights, shall also be
considered Rents assigned under this Paragraph. This is an absolute
assignment, not an assignment for security only. Grantor warrants it has
made no prior assignment of the Rents or the Leases and will make no
subsequent assignment (other than to Beneficiary) without the prior written
consent of Beneficiary. At --Beneficiary's request, Grantor shall execute
and deliver to Beneficiary a separate assignment of Rents and Leases
containing such terms and conditions as Beneficiary may reasonably require.
Beneficiary hereby confers upon Grantor a license ("License") to
collect and retain the Rents as they become due and payable, so long as no
Event of Default shall exist and be continuing. Grantor shall use the Rents
to pay, among other things, normal operating expenses for the Property and
sums due and payments required under the Loan Agreement or any other
document executed in connection therewith. If a Event of Default has
occurred and is continuing, Beneficiary shall have the right, which it may
choose to exercise in its sole discretion, to terminate this License
without notice to or demand upon Grantor, and without regard to the
adequacy of Beneficiary's security under this Deed of Trust.
Subject to the License granted to Grantor under the preceding
paragraph, Beneficiary has the right, power and authority after three (3)
business days notice to Grantor to collect any and all Rents. Grantor
hereby appoints Beneficiary its attorney-in-fact to perform after three (3)
business days notice to Grantor any and all of the following acts, if and
at the times when Beneficiary in its sole discretion may so choose:
(a) Demand, receive and enforce payment of any and all Rents
including those past due and unpaid; or
(b) Give receipts, releases and satisfactions for any and all
Rents; or
(c) Sue either in the name of Grantor or in the name of
Beneficiary for any and all Rents; or
(d) Lease the property or any part thereof for such rental,
term, and upon such conditions as its judgment may dictate.
Beneficiary's right to the Rents does not depend on whether or not
Beneficiary takes possession of the Property as may be permitted under
Oregon law. In Beneficiary's sole discretion, Beneficiary may choose to
collect Rents either with or without taking possession of the Property.
Beneficiary shall apply all Rents collected by it in the manner provided
under Section 8 If a default occurs while Beneficiary is in possession of
all or part of the Property and is collecting and applying Rents as
permitted under this Deed of Trust, Beneficiary, Trustee and any receiver
shall nevertheless be entitled to exercise and invoke every right and
remedy afforded any of them under this Deed of Trust and at law or in
equity, including the right to exercise the power of sale Granted under
this Deed of Trust and Section 8.
Under no circumstances shall Beneficiary have any duty to
produce Rents from the Property. Regardless of whether or not Beneficiary,
in person or by agent, takes actual possession of the Property, Beneficiary
is not and shall not be deemed to be:
(a) A 'mortgagee in possession" for any purpose; or
(b) Responsible for performing any of the obligations of the
lessor under any lease; or
(c) Responsible for any waste committed by lessees or any other
parties, any dangerous or defective condition of the Property, or any
negligence in the management, upkeep, repair or control of the Property; or
(d) Liable in any manner for the Property or the use, occupancy,
enjoyment or -operation of all or any part of it.
Grantor shall not accept any deposit or prepayment of Rents for
any rental period exceeding one (~) month without Beneficiary's prior
written consent. Grantor shall not lease the Property or any part of it
except strictly in accordance with the Loan Agreement. Grantor shall apply
all Rents in the manner required by the Loan Agreement.
XI. Any Grantor who is a married person hereby expressly agrees that
recourse may be had against his or her separate property for any deficiency
after the sale of the Property thereunder, to the extent permitted by law.
XII. The pleading of any statute of limitations as a defense to
any and all obligations secured by this Deed of Trust is hereby waived to
the full extent permissible by law.
XIII. Grantor further agrees that Beneficiary and any Lending Bank
may from time to time and for periods not exceeding one year, in behalf of
the Grantor, renew or extend any promissory note or other obligation
secured hereby.
XIV. Beneficiary may, from time to time, substitute another
Trustee in the place of the Trustee herein named, to execute this trust.
Upon such appointment and proper recordation of such substitution, and
without conveyance to the successor trustee, the latter shall be vested
with all the title, powers and duties conferred upon the Trustee herein
named. Each such appointment and substitution shall be made by written
instrument executed by the Beneficiary, containing reference to this Deed
of Trust sufficient to identify it, which, when recorded in the office of
the County Recorder of the county or counties in which the Property is
situated, shall be conclusive proof of the proper appointment of the
successor trustee.
XV. This Deed of Trust shall inure to and bind the heirs, devisees,
legal representatives, successors and assigns of the parties hereto. All
obligations of each Grantor hereunder are joint and several. If Grantor
consists of or is comprised of more than one person or entity, any
reference to Grantor shall refer to each person or entity comprising
Grantor. The rights or remedies granted thereunder, or by law, shall not be
exclusive, but shall be concurrent and cumulative.
XVI. For any statement regarding the obligations secured hereby,
Beneficiary may charge the maximum amount permitted by law at the time of
the request therefor.
XV II. If this Deed of Trust is foreclosed as a mortgage and the Property
is sold at a foreclosure sale, the purchaser may, during any redemption
period allowed, make such repairs or alterations on the Property as may be
reasonably necessary for the proper operation, care, presentation,
protection, and insuring thereof Any sums so paid, together with interest
thereon from the time of such expenditure at the rate of 18 percent per
annum or the highest rate permitted by applicable law, if less, shall be
added to and become a part of the amount required to be paid for redemption
from such sale.
XVIII. This Deed of Trust shall be governed by the laws of the
State of Oregon.
XIX. Time is of the essence of this Deed of Trust.
If a mailing address is set forth opposite any Grantor's signature
hereto, and not otherwise, the undersigned Grantor shall be deemed to
have requested that a copy of any notice
of default, and of any notice of sale thereunder, be mailed to said
Grantor at said address.
XX. Beneficiary shall have the right, at its option, to
foreclose this Deed of Trust subject to the rights of any lessees of
the Property. Beneficiary's failure to foreclose against any -lessee
shall not be asserted as a claim against Beneficiary or as a defense
against any claim by Beneficiary in any action or proceeding.
Beneficiary at any time may subordinate this Deed of Trust to any or
all of the Leases except that Beneficiary shall retain its priority
claim to any condemnation or insurance proceeds.
XXI. After any Event of a Default Beneficiary may obtain a
current regulatory conforming appraisal of the Collateral. In
addition, appraisals may be commissioned by Beneficiary when
required by laws and regulations which govern Beneficiary's lending
practices. The cost of all such appraisals (and related internal
review fees and costs) will be paid by Grantor within fifteen (15)
days after request by Beneficiary; provided however, Grantor shall
only pay such costs for one appraisal in any 12 month period prior
to any event of default.
XXII. If Grantor is in default, whether Beneficiary has
accelerated the maturity of the indebtedness or not, any tender of
payment sufficient to satisfy all sums due under the Loan Documents
made at any time prior to foreclosure sale shall constitute an
evasion of the prepayment terms of the Note, if any, and shall be
deemed a voluntary prepayment. Any such payment, to the extent
permitted by law, shall include the additional payment required
under the Prepayment Fee provision in the Note.
XXIII. Statutory Disclaimer: THIS INSTRUMENT WILL NOT ALLOW
THE USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT TO BE IN
VIOLATION
OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR
ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE
PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY
PLANNING DEPARTMENT TO VERIFY APPROVED USES AND TO DETERMINE ANY
LIMITS ON LAWSUITS AGAINST FARMING OR FOREST AGAINST AS DEFINED
IN ORS 30.930.
XXIV. Limitation on Recourse. This Deed of Trust is
executed in connection with a term loan made by the Beneficiary to
the Grantor. Notwithstanding any other provision of the Deed of
Trust to the contrary, neither Historic Preservation Properties 1989
Limited Partnership, a Delaware limited partnership ('HPP"), which
is one of the Grantor's two general partners, nor HPP's general
partners shall have any personal liability for the payment of the
loan secured by this Deed of Trust or any liability for the
performance of the Grantor's obligations and the Beneficiary's sole
remedy in the case of HPP shall be to proceed against HPP's interest
in the property and improvements or any proceeds thereof The
preceding sentence shall not preclude the Beneficiary from enforcing
the Beneficiary's rights against the property and improvements and
against other parties liable for the payment of the loan secured by
this Deed of Trust, nor shall it preclude the Beneficiary from
joining HPP or its general partners in any proceeding to foreclose
the Beneficiary's Deed of Trust, security interest and other liens
securing the Grantor's obligations pursuant to such loan.
MAILING ADDRESS FOR NOTICES:
TO GRANTOR; Portland Lofts Associates L. P.
C/O Restaurant Management Northwest, Inc.
1410 SW. Jefferson Street
Portland, Oregon, 97201
MAILING ADDRESS FOR NOTICES (continued):
COPY TO: Mr. Chris Walters
Ball, Janick & Novak
101 Main Street, Suite 1100
Portland, Oregon 97204
TO TRUSTEE: Chicago Title Insurance
Company 888 S.W. 5th Avenue, Suite 930 Portland,
Oregon 97204
TO BENEFICIARY: BANK OF AMERICA OREGON
Real Estate Industries Division, Unit 2098 P.O.
Box 3066
Portland, Oregon 97208
Signature of Grantor:
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP,
a Delaware limited partnership
BY East Bank Angel Joint Venture, an Oregon joint venture,
General Partner
<By Joseph W. Angel
BY: Pacific Star Corporation,
an Oregon corporation
Joseph W. Angel,
President
BY; Historic Preservation Properties 1989 Limited
Partnership, a Delaware limited partnership, General
Partner
By. Boston Historic Partners Limited Partnership, a
Massachusetts limited partnership, General Partner
By Portfolio Advisory Services, Inc., a
Massachusetts corporation, General Partner
By: Terrence P. Sullivan
Title: President
By: Terrence P. Sullivan
Title: General Partner
ACKNOWLEDGMENTS
STATE OF OREGON )
) ss.
County of Multnomah )
The foregoing instrument was acknowledged before me this 27th day of
June, 1996, by Joseph W. Angel as a joint venture of East Bank Angel Joint
Venture, an Oregon joint venture as General Partner of Portland Lofts
Associates Limited Partnership, a Delaware limited partnership, on behalf
of the partnership.
OFFICIAL SEAL Notary Public
CASEY I DEPIETRO I
NOTARY PUBLIC-OREGON My commission expires:8-4-97
commission NO. A 025321 MY COMMISSION EXPIRES AUG.4 1907
STATE OF OREGON )
) ss.
County of Multnomah )
The foregoing instrument was acknowledged before me this 27th day of
June, 1996, by Joseph W. Angel as president of Pacific Star
Corporation, an Oregon corporation as a joint venture of East Bank
Angel Joint Venture, an Oregon joint venture as General Partner of
Portland Lofts Associates Limited Partnership, a Delaware limited
partnership, on behalf of the partnership.
Notary Public
CASEY DIPIETRO My commission expires:8-4-97
STATE OF Massachusetts)
ss
County of Norfolk
STATE OF Massachusetts )
) ss.
County of Norfolk )
The foregoing instrument was acknowledged before me this" day
June, 1996, by Terrenc P. Sullivan of Portfolio Advisory Services, Inc.,
a Massachusetts corporation as General Partner of Boston Historic
Partners Limited Partnership, a Massachusetts limited partnership
as General Partner of Historic Preservation properties 1989 Limited
Partnership, a Delaware limited partnership as General Partner of
Portland Lofts Associates Limited Partnership, a Delaware limited
partnership, on behalf of
the partnership.
Notary Public ~ Suzanne Gavin
My commission expires 1/24/2003
EXHIBIT A
Legal Description
PARCEL 1: Lots 1, 2, 3 and 4, Block 73, COUCH'S ADDITION TO THE CITY OF
PORTLAND, in the City of Portland, County of Mutlnomah and State of Oregon.
PARCEL 2: Lots 5, 6, 7 and 8, Block 73, COUCH'S ADDITION TO THE CITY OF
PORTLAND, in the City of Portland, County of Multnomah and State of Oregon.
ADDRESS
5O2-514 N.W. 9th Avenue, Portland, Oregon 97209
PAYMENT GUARANTY
(Commercial Real Estate)
This Payment Guaranty ("Guaranty") is made as of June
20, 1996, by JOSEPH W. ANGEL, II ("Guarantor") in favor of BANK
OF AMERICA OREGON ("Bank").
Factual Background
A. Guarantor is
executing this Guaranty to induce Bank to make a standing loan
(defined in Section 2 as the "Loan") to PORTLAND LOFTS ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Borrower")
in the principal amount of Five Million Six Hundred Twenty-Five
Thousand and No/1OO Dollars ($5,625,000.00) The Loan is being
made under a standing loan agreement (the "Loan Agreement")
entered into as of June 20, 1996, between Bank and Borrower.
B. The Loan is evidenced by a promissory note (the
"Note") made payable to Bank in the principal amount of the Loan.
The Note is secured by a deed of trust ("Deed of Trust") covering
certain real and personal property, as therein described (all
collectively, the "Property"). The Note may also be secured by
other collateral, as more fully explained in the Loan Agreement.
In connection with the Loan, Borrower is signing an Unsecured
Indemnity Agreement (the "Borrower's Indemnity").
C. This Guaranty is one of several Loan Documents, as
defined and designated in the Loan Agreement. The Loan Documents
also include the Loan Agreement, the Note, the Deed of Trust and
certain other specified instruments and agreements.
Guaranty
I. Guaranty of Loan. Guarantor unconditionally
guaranties to Bank the full payment of and performance of
Borrower's obligations in connection with the Loan, and
unconditionally agrees to pay Bank the full amount of the Loan.
This is a guaranty of payment, not of collection. If Borrower
causes an Event of Default to occur in the payment when due of
the Loan or any part of it, Guarantor shall in lawful money of
the United States pay to Bank or order, on demand, all sums due
and owing on the Loan, including all interest, charges, fees and
other sums, costs and expenses.
2. Loan. In this Guaranty, the term "Loan" is broadly
defined to mean and include all primary, secondary, direct,
indirect, fixed and contingent obligations of Borrower to pay
principal, interest, prepayment charges, late charges, loan fees
and any other fees, charges, sums, costs and expenses which may
be owing at any time under the Note or the other Loan Documents,
as any or all of them may from time to time be modified, amended,
extended or renewed. For purposes of this Guaranty, the Loan
includes any and all such obligations which may arise in
connection with (a) the Borrower's Indemnity, (1,)any set aside
letters, and (c) any advances made before recording of the Deed
of Trust. If the amount outstanding under the Loan is determined
by a court of competent jurisdiction, that determination shall be
conclusive and binding on Guarantor, regardless of whether
Guarantor was a party to the proceeding in which the
determination was made or not.
3. Rights of Bank. Guarantor authorizes Bank to
perform any or all of the following acts at any t[me in its sole
discretion, all without notice to Guarantor and without affecting
Guarantor's obligations under this Guaranty:
(a) Bank may alter any terms of the Loan or any
part of it, including renewing, compromising, extending or
accelerating, or otherwise changing the time for payment of, or
increasing or decreasing the rate of interest on, the Loan or any
part of it.
b) Bank may take and hold security for the Loan
or this Guaranty, accept additional or substituted security for
either, and subordinate, exchange, enforce, waive, release,
compromise, fail to perfect and sell or otherwise dispose of any
such security.
(c) Bank may direct the order and manner of any
sale of all or any part of any security now or later to be held
for the Loan or this Guaranty, and Bank may also bid at any such
sale.
(d) Bank may apply any payments or recoveries
from Borrower, Guarantor or any other source, and any proceeds of
any security, to Borrower's obligations under the Loan Documents
in such manner, order and priority as Bank may elect, whether or
not those obligations are guarantied by this Guaranty or secured
at the time of the application.
(e) Bank may release Borrower of its liability
for the Loan or any part of it.
(f) Bank may substitute, add or release any one
or more guarantors or endorsers.
(g) In addition to the Loan, Bank may extend
other credit to Borrower, and may take and hold security for the
credit so extended, all without affecting Guarantor's liability
under this Guaranty.
4. Guaranty to be Absolute. Guarantor expressly
agrees that until the Loan is paid and performed in full and each
and every term, covenant and condition of this Guaranty is fully
performed, Guarantor shall not be released by or because of:
(a) Any act or event which might otherwise
discharge, reduce, limit or modify Guarantor's obligations under
this Guaranty;
(1,) Any waiver, extension, modification,
forbearance, delay or other act or omission of Bank, or its
failure to proceed promptly or otherwise as against Borrower,
Guarantor or any security;
(c) Any action, omission or circumstance which
might increase the likelihood that Guarantor may be called upon
to perform under this Guaranty or which might affect the rights
or remedies of Guarantor as against Borrower; or
(d) Any dealings occurring at any t[me between
Borrower and Bank, whether relating to the Loan or otherwise.
Guarantor hereby expressly waives and surrenders any
defense to its liability under this Guaranty based upon any of
the foregoing acts, omissions, agreements, waivers or matters. It
is the purpose and intent of this Guaranty that the obligations
of Guarantor under it shall be absolute and unconditional under
any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to
any action or proceeding brought against Guarantor by Bank, to
the fullest extent permitted by law;
(1)) Any right it may have to require Bank to
proceed against Borrower, proceed against or exhaust any security
held from Borrower, or pursue any other remedy in Bank's power to
pursue;
(c) Any defense based on any claim that
Guarantor's obligations exceed or are more burdensome than those
of Borrower;
(d) Any defense based on: (i) any legal
disability of Borrower, (ii) any release, discharge,
modification, impairment or limitation of the liability of
Borrower to Bank from any cause, whether consented to by Bank or
arising by operation of law or from any bankruptcy or other
voluntary or involuntary proceeding, in or out of court, for the
adjustment of debtor-creditor relationships ("Insolvency
Proceeding") and (jii) any rejection or disaffirmance of the
Loan, or any part of it, or any security held for it, in any such
Insolvency Proceeding;
(e) Any defense based on any action taken or
omitted by Bank in any Insolvency Proceeding involving Borrower,
including any election to have Bank's claim allowed as being
secured, partially secured or unsecured, any extension of credit
by Bank to Borrower m any Insolvency Proceeding, and the taking
and holding by Bank of any security for any such extension of
credit;
(f) All presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices
of dishonor, notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind except for
any demand or notice by Bank to Guarantor expressly provided for
in Section 1;
(g) Any defense based on or arising out of any
defense that Borrower may have to the payment or performance of
the Loan or any part of it; and
(h) Any defense, claim and damage arising from
errors or omissions in Bank's administration of the Loan.
6. Waivers of Subrogation and Other Rights.
(a) Upon a default by Borrower, Bank in its sole
discretion, without prior notice to or consent of Guarantor, may
elect to: (i) foreclose either judicially or nonjudicially
against any real or personal property security it may hold for
the Loan, (ji) accept a transfer of any such security in lieu of foreclosure,
(ill) compromise or adjust the Loan or any part of it or make any
other accornmodation with Borrower or Guarantor, or
(iv) exercise any other remedy against Borrower or any security.
No such action by Bank shall release or limit the liability of
Guarantor, who shall remain liable under this Guaranty
after the action, even if the effect of the action is to deprive
Guarantor of any subrogation rights, rights of indemnity, or
other rights to collect reimbursement from Borrower for any sums
paid to Bank, whether contractual or arising by operation of law
or otherwise. Guarantor expressly agrees that under no
circumstances shall it be deemed to have any right, tide,
interest or claim in or to any real or personal property to be
held by Bank or any third party after any foreclosure or transfer
in lieu of foreclosure of any security for the Loan.
(1,) Regardless of whether Guarantor may have
made any payments to Bank, Guarantor forever waives: (i) all
rights to enforce any remedy that Bank may have against Borrower,
and (ii) all rights to participate in any security now or later
to be held by Bank for the Loan. Provided such waiver shall not
affect or impair any other right of contribution, subrogation,
collection, indemnity or rights Guarantor may have against
Borrower contractually or arising by operation of law or
otherwise.
7. Revival and Reinstatement. If Bank is required to
pay, return or restore to Borrower or any other person any
amounts previously paid on the Loan because of any Insolvency
Proceeding of Borrower, any stop notice or any other reason, the
obligations of Guarantor shall be reinstated and revived and the
rights of Bank shall continue with regard to such amounts, all as
though they had never been paid.
8. Information Regarding Borrower and the Property.
Before signing this Guaranty, Guarantor investigated the
financial condition and business operations of Borrower, the
present and former condition, uses and ownership of the Property,
and such other matters as Guarantor deemed appropriate to assure
itself of Borrower's ability to discharge its obligations under
the Loan Documents. Guarantor assumes full responsibility for
that due diligence, as well as for keeping informed of all
matters which may affect Borrower's ability to pay and perform
its obligations to Bank. Bank has no duty to disclose to
Guarantor any information which Bank may have or receive about
Borrower's financial condition or business operations, the
condition or uses of the Property, or any other circumstances
bearing on Borrower's ability to perform.
9. Subordination. Any rights of Guarantor, whether
now existing or later arising, to receive payment on account of
any indebtedness (including interest) owed to it by Borrower or
any subsequent owner of the Property, or to withdraw capital
invested by it in Borrower, or to receive distributions from Borrower,
shall at all times be subordinate as to lien and time of payment and in all
other respects to the full and prior repayment to Bank of the
Loan. Guarantor shall not be entitled to enforce or receive
payment of any sums hereby subordinated until the Loan has been
paid and performed in full and any such sums received in
violation of this Guaranty shall be received by Guarantor in
trust for Bank. The foregoing notwithstanding, Guarantor is not
prohibited from receiving (a) such reasonable management fees or
reasonable salary from Borrower as Bank may find acceptable from
time to time, ~) distributions from Borrower in an amount equal
to any income taxes imposed on Guarantor which are attributable
to Borrower's income from the Property, and (c) so long as the
loan is current and Borrower maintains adequate reserves for
taxes, insurance and maintenance, then Borrower is permitted to
distribute excess proceeds for repayment of loans incurred by
Borrower from Guarantor in connection with the property.
10. Financial Information. Guarantor shall keep true
and correct financial books and records, using generally accepted
accounting principles consistency applied, or such other
accounting principles as Bank in its reasonable judgment may find
acceptable from time to time. Within thirty (30) days after
written request by the Bank, but in no event earlier than one
hundred-twenty (120) days after the end of each year, Guarantor
shall deliver to Bank its financial statement, together with a
statement showing all changes in its financial condition which
occurred during the preceding year and shall provide copies of
each such Guarantor's tax returns, together with all supporting
schedules, including without limitation K-i forms, extension
requests and statements of contributions to subchapter S
corporations within thirty (30) days of filing same. Guarantor
shall also promptly deliver to Bank all quarterly balance sheets
and income statements if they become available or if Bank
requests them. Within thirty (30) days after written request by
the Bank, Guarantor shall promptly provide Bank with any other
financial or other information concerning each Guarantor's
affairs and properties as Bank may request.
ii. Guarantor's Representations and Warranties:
Guarantor represents and warrants that:
(a) all financial statements and other financial
information furnished or to be furnished to Bank are or will be
true and correct and do or will fairly represent the financial
condition of Guarantor (including all contingent liabilities);
(1,) all financial statements were or will be
prepared in accordance with generally accepted accounting
principles, or such other accounting principles as may be
acceptable to Bank at the time of their preparation, consistency
applied; and
(c) there has been no material adverse change in
Guarantor's financial condition since the dates of the statements
most recently furnished to Bank.
12. Events of Default. Bank may declare Guarantor to
be in default under this Guaranty upon the occurrence of any of
the following events ("Events of Default"):
(a) Guarantor falls to perform any of its
obligations under this Guaranty; or
(0) Guarantor revokes this Guaranty or this
Guaranty becomes ineffective for any reason; or
(c) Any representation or warranty made or given
by Guarantor to Bank proves to be false or misleading in any
material respect; or
(d) Guarantor becomes insolvent or the subject of
any Insolvency Proceeding (except that, in the case of an
involuntary proceeding, the same shall not constitute an Event of
Default if the proceeding is dismissed within ninety (90) days of
filing); or
(e) Guarantor dies, dissolves or liquidates, or
any of these events happens to any of Guarantor's members,
general partners or to its chief executive or majority
shareholder, or Guarantor's managing general partner or its chief
executive ceases for any reason to act in that capacity unless
within ninety (90) days of the death or disability, Guarantor
provides a substitute guarantor or additional collateral,
satisfactory to Bank, in Bank's sole discretion.
13. Arbitration.
(a) Mandatory Arbitration. After the Deed of
Trust has been released, fully reconveyed or extinguished, any
controversy or claim between or among the parties, including
those arising out of or relating to this Guaranty or the Loan
Documents and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Guaranty, and under the
Commercial Rules of the AAA. The arbitrator(s) shall give effect
to statutes of limitation in determining any claim. Any
controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration
award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or
pursuit of a provisional or ancillary remedy shall not constitute
a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(0) Real Property Collateral. Notwithstanding the
provisions of subsection 13(a), no controversy or claim shall be
submitted to arbitration without the consent of all parties if,
at the time of the proposed submission, such controversy or claim
arises from or relates to an obligation by Guarantor or Borrower
to Bank which is secured by real property collateral. If all
parties do not consent to submission of such a controversy or
claim to arbitration, the controversy or claim shall be
determined by a court of competent jurisdiction.
(c) Provisional Remedies. Self-Help and
Foreclosure. No provision of this Section 13 shall limit the
right of any party to exercise self-help remedies such as setoff,
foreclosure against or sale of any real or personal property
collateral or security, or to obtain provisional or ancillary
remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The
exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trust or mortgage or
by judicial foreclosure.
14. Authorization: No Violation. Guarantor is
authorized to execute, deliver and perform under this Guaranty,
which is a valid and binding obligation of Guarantor. No
provision or obligation of Guarantor contained in this Guaranty
violates any applicable law, regulation or ordinance, or any
order or ruling of any court or governmental agency. No such
provision or obligation conflicts with, or constitutes a breach
or default under, any agreement to which Guarantor is a party.
15. Additional and Independent Obligations.
Guarantor's obligations under this Guaranty are in addition to
its obligations under any other existing or future guaranties,
each of which shall remain in full force and effect until it is
expressly modified or released in a writing signed by Bank.
Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Loan. Bank may bring a separate action,
or commence a separate reference or arbitration proceeding against Guarantor
without first proceeding against Borrower, any other person or
any security that Bank may hold, and without pursuing any other
remedy. Bank's rights under this Guaranty shall not be exhausted
by any action by Bank until the Loan has been paid and performed
in full.
16. No Waiver: Consents: Cumulative Remedies. Each
waiver by Bank must be in writing, and no waiver shall be
construed as a continuing waiver. No waiver shall be implied from
Bank's delay in exercising or failure to exercise any right or
remedy against Borrower, Guarantor or any security. Consent by
Bank to any act or omission by Borrower or Guarantor shall not be
construed as a consent to any other or subsequent act or
omission, or as a waiver of the requirement for Bank's consent to
be obtained in any future or other instance. All remedies of Bank
against Borrower and Guarantor are cumulative.
17. No Release. Guarantor shall not be released from
its obligations under this Guaranty except by a writing signed by
Bank or performance in full of the obligations under this
Guaranty. The failure of any Guarantor to sign this Guaranty
shall not in any way affect, release or discharge the liability
of any Guarantor who signs this Guaranty. In the event that there
are multiple Guarantors, Bank's release of one or more such
Guarantors shall not in any way affect, release or discharge the
liability of the remaining Guarantors hereunder.
18. Heirs. Successors and Assigns: Participations.
The terms of this Guaranty shall bind and benefit the heirs,
legal representatives, successors and assigns of Bank and
Guarantor; provided, however, that Guarantor may not assign this
Guaranty, or assign or delegate any of its rights or obligations
under this Guaranty, without the prior written consent of Bank in
each instance. Bank in its sole discretion may sell or assign
participations or other interests in the Loan and this Guaranty,
in whole or in part, all without notice to or the consent of
Guarantor and without affecting Guarantor's obligations under
this Guaranty. Also without notice to or the consent of
Guarantor, Bank may disclose any and all information in its
possession concerning Guarantor, this Guaranty and any security
for this Guaranty to any actual or prospective purchaser of any
securities issued or to be issued by Bank, and to any actual or
prospective purchaser or assignee of any participation or other
interest in the Loan and this Guaranty.
19. Notices. All notices given under this Guaranty
must be in writing and shall be effectively served upon delivery,
or if mailed, upon the first to occur of receipt or the
expiration of forty-eight hours after deposit in certified United
States mail, postage prepaid, sent to the party at its address
given at the end of this Guaranty. Those addresses
may be changed by Bank or Guarantor by written notice to the
other party. Service of any notice on any one Guarantor signing
this Guaranty shall be effective service on Guarantor for all
purposes.
20. Rules of Construction. In this Guaranty, the word
"Borrower" includes both the named Borrower and any other person
who at any time assumes or otherwise becomes primarily liable for
all or any part of the obligations of the named Borrower on the
Loan. The word "person" includes any individual, company, trust
or other legal entity of any kind. If this Guaranty is executed
by more than one person, the word "Guarantor" includes all such
persons. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not
limited to." When the context and construction so require, all
words used in the singular shall be deemed to have been used in
the plural and vice versa. No listing of specific instances,
items or matters in any way limits the scope or generality of any
language of this Guaranty. All headings appearing in this
Guaranty are for convenience only and shall be disregarded in
construing this Guaranty.
21. Governing Law. This Guaranty shall be governed by,
and construed in accordance with, the laws of the State of
Oregon.
22. Costs and Expenses. If any lawsuit, reference or
arbitration is commenced which arises out of, or which relates to
this Guaranty, the Loan Documents or the Loan, the prevailing
patty shall be entitled to recover from each other party such
sums as the court, referee or arbitrator may adjudge to be
reasonable attorneys' fees (including allocated costs for
services of in-house counsel) in the action or proceeding, in
addition to costs and expenses otherwise allowed by law. In all
other situations, including any Insolvency Proceeding, Guarantor
agrees to pay all of Bank's costs and expenses, including
attorneys' fees (including allocated costs for services of Bank's
in-house counsel) which may be incurred in any effort to collect
or enforce the Loan or any part of it or any term of this
Guaranty. From the time(s) incurred until paid in full to Bank,
all sums shall bear interest at the Default Rate provided in the
Note.
23. Consideration. Guarantor acknowledges that it
expects to benefit from Bank's extension of the Loan to Borrower
because of its relationship to Borrower, and that it is executing
this Guaranty in consideration of that anticipated benefit.
24. Integration: Modifications. This Guaranty (a)
integrates all the terms and conditions mentioned in or
incidental to this Guaranty, (1)) supersedes all oral
negotiations and prior writings with respect to its subject
matter, and (c) is intended by
Guarantor and Bank as the final expression of the agreement with
respect to the terms and conditions set forth in this Guaranty
and as the complete and exclusive statement of the terms agreed
to by Guarantor and Bank. No representation, understanding,
promise or condition shall be enforceable against any party
unless it is contained in this Guaranty. This Guaranty may not be
modified except in a writing signed by both Bank and Guarantor.
25. Miscellaneous. The death or legal incapacity of
any Guarantor shall not terminate the obligations of such
Guarantor or any other Guarantor under this Guaranty, including
its obligations with regard to future advances under the Loan
Documents. The liability of all persons who are in any manner
obligated under this Guaranty shall be joint and several. The
illegality or unenforceability of one or more provisions of this
Guaranty shall not affect any other provision. Any Guarantor who
is married agrees that Bank may look to all of his or her
community property and separate property to satisfy his or her
obligations under this Guaranty. Time is of the essence in the
performance of this Guaranty by Guarantor.
26. Special Provision. Without limiting the foregoing or any other
provision of this Loan Agreement or the Loan Documents, in order
to avoid any misunderstanding between the parties, the parties
agree to the following special provision:
Guarantor and each of its constituent partners, and their
permitted successors and assigns (if any), agree that no
agreement, representation, warranty, promise, commitment,
or statement of any kind (collectively, "Statements") by
any person related directly or indirectly to this Loan or
the Property shall be binding on Bank, its parent,
subsidiaries, affiliates, participants, assigns, or the
officers, directors, employees, and agents of any of them
(collectively, the "Bank Related Parties"), unless the
Statements are in writing and executed by a duly authorized
officer of Bank, Guarantor and each of its constituent
partners, and their permitted successors and assigns (if
any), agree not to rely upon such Statements in any way and
further agree not to claim waiver of the foregoing
provision (requiring all Statements to be in writing) for
any reason. This provision requiring any Statement to be in
writing to be enforceable against the Bank Related Parties
cannot be waived orally or by conduct.
GUARANTOR: Address Where Notices to
Guarantor are to be Sent
JOSPEH W. ANGEL, II Portland Lofts Associates L. P.
c/o Restaurant Management Northwest,
Inc
1410 S.W.
Jefferson Street
Portland, Oregon 97201
Copy to:
Mr. Chris Walters
Ball, Janick & Novack
101 S.W. Main Street,
Suite 1100
Portland, Oregon 97204
Address Where Notices to Bank are
to be sent:
BANK OF AMERICA - OREGON
Loan Administration No.2098
P.O. Box 3066
Portland, OR 97208
PAYMENT GUARANTY
(Commercial Real Estate)
This Payment Guaranty ("Guaranty") is made as of June
20 1996, by LYNNE I.
ANGEL ("Guarantor") in favor of BANK OF AMERICA OREGON ("Bank").
Factual Background
A. Guarantor is executing this Guaranty to induce Bank to make
a standing loan (defined in Section 2 as the "Loan") to PORTLAND
LOFTS ASSOCIATES LIMITED PARTNERSHIP, a
Delaware limited partnership ("Borrower") in the principal amount
of Five Million Six Hundred Twenty-Five Thousand and No/i 00
Dollars ($5,625,000.00) The Loan is being made under a standing
loan agreement (the "Loan Agreement") entered into as of June ~
1996, between Bank and Borrower.
B. The Loan is evidenced by a promissory note (the
"Note") made payable to Bank in the principal amount of the Loan.
The Note is secured by a deed of trust ("Deed of Trust") covering
certain real and personal property, as therein described (all
collectively, the "Property"). The Note may also be secured by other
collateral, as more fully explained in the Loan Agreement. In connection
with the Loan, Borrower is signing an Unsecured Indemnity Agreement (the
"Borrower's Indemnity").
C. This Guaranty is one of several Loan Documents, as
defined and designated in the Loan Agreement. The Loan Documents
also include the Loan Agreement, the Note, the Deed of Trust and
certain other specified instruments and agreements.
Guaranty
1. Guaranty of Loan. Guarantor unconditionally
guaranties to Bank the full payment of and performance of
Borrower's obligations in connection with the Loan, and
unconditionally agrees to pay Bank the full amount of the Loan.
This is a guaranty of payment,
not of collection. If Borrower causes an Event of Default to
occur in the payment when due of the Loan or any part of it,
Guarantor shall in lawful money of the United States pay to Bank
or order, on demand, all sums due and owing on the Loan,
including all interest, charges, fees and other sums, costs and
expenses.
2. Loan. In this Guaranty, the term "Loan" is broadly
defined to mean and include all primary, secondary, direct,
indirect, fixed and contingent obligations of Borrower to pay
principal, interest, prepayment charges, late charges, loan fees
and any other fees, charges, sums, costs and expenses which may
be owing at any time under the Note or the other Loan Documents,
as any or all of them may from time to time be modified, amended,
extended or renewed. For purposes of this Guaranty, the Loan
includes any and all such obligations which may arise in
connection with (a) the Borrower's Indemnity (b) any set aside
letters, and (c) any advances made before recording of the Deed
of Trust. If the amount outstanding under the Loan is determined
by a court of competent jurisdiction, that determination shall be
conclusive and binding on Guarantor, regardless of whether
Guarantor was a party to the proceeding in which the
determination was made or not.
3. Rights of Bank. Guarantor authorizes Bank to
perform any or all of the following acts at any time in its sole
discretion, all without notice to Guarantor and without affecting
Guarantor's obligations under this Guaranty:
(a) Bank may alter any terms of the Loan or any
part of it, including renewing, compromising, extending or
accelerating, or otherwise changing the time for payment of, or
increasing or decreasing the rate of interest on, the Loan or any
part of it.
(b) Bank may take and hold security for the Loan
or this Guaranty, accept additional or substituted security for
either, and subordinate, exchange, enforce, waive, release,
compromise, fail to perfect and sell or otherwise dispose of any
such security.
(c) Bank may direct the order and manner of any
sale of all or any part of any security now or later to be held
for the Loan or this Guaranty, and Bank may also bid at any such
sale.
(d) Bank may apply any payments or recoveries
from Borrower, Guarantor or any other source, and any proceeds of
any security, to Borrower's obligations under the Loan Documents
in such manner, order and priority as Bank may elect, whether or
not those obligations are guarantied by this Guaranty or secured
at the time of the application.
(e) Bank may release Borrower of its liability
for the Loan or any part of it.
(f) Bank may substitute, add or release any one
or more guarantors or endorsers.
(g) In addition to the Loan, Bank may extend
other credit to Borrower, and may take and hold security for the
credit so extended, all without affecting Guarantor's liability
under this Guaranty.
4. Guaranty to be Absolute. Guarantor expressly
agrees that until the Loan is paid and performed in full and each
and every term, covenant and condition of this Guaranty is fully
performed, Guarantor shall not be released by or because of:
(a) Any act or event which might otherwise
discharge, reduce, limit or modify Guarantor's obligations under
this Guaranty;
(b) Any waiver, extension, modification,
forbearance, delay or other act or omission of Bank, or its
failure to proceed promptly or otherwise as against Borrower,
Guarantor or any security;
(c) Any action, omission or circumstance which
might increase the likelihood that Guarantor may be called upon
to perform under this Guaranty or which might affect the rights
or remedies of Guarantor as against Borrower; or
(d) Any dealings occurring at any time between
Borrower and Bank, whether relating to the Loan or otherwise.
Guarantor hereby expressly waives and surrenders any
defense to its liability under this Guaranty based upon any of
the foregoing acts, omissions, agreements, waivers or matters. It
is the purpose and intent of this Guaranty that the obligations
of Guarantor under it shall be absolute and unconditional under
any and all circumstances.
5. Guarantor's Waivers. Guarantor waives:
(a) All statutes of limitations as a defense to
any action or proceeding brought against Guarantor by Bank, to
the fullest extent permitted by law;
(b) Any right it may have to require Bank to
proceed against Borrower, proceed against or exhaust any security
held from Borrower, or pursue any other remedy in Bank's power to
pursue;
(c) Any defense based on any claim that
Guarantor's obligations exceed or are more burdensome than those
of Borrower;
(d) Any defense based on: (i) any legal
disability of Borrower, (ii) any release, discharge,
modification, impairment or limitation of the liability of
Borrower to Bank from any cause, whether consented to by Bank or
arising by operation of law or from any bankruptcy or other
voluntary or involuntary proceeding, in or out of court, for the
adjustment of debtor-creditor relationships ("Insolvency
Proceeding") and (iii) any rejection or disaffirmance of the
Loan, or any part of it, or any security held for it, in any such
Insolvency Proceeding;
(e) Any defense based on any action taken or
omitted by Bank in any Insolvency Proceeding involving Borrower,
including any election to have Bank's claim allowed as being
secured, partially secured or unsecured, any extension of credit
by Bank to Borrower in any Insolvency Proceeding, and the taking
and holding by Bank of any security for any such extension of
credit;
(f) All presentments, demands for performance,
notices of non performance, protests, notices of protest, notices
of dishonor, notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind except for
any demand or notice by Bank to Guarantor expressly provided for
in Section 1;
(g) Any defense based on or arising out of any
defense that Borrower may have to the payment or performance of
the Loan or any part of it; and
(h) Any defense, claim and damage arising from
errors or omissions in
Bank's administration of the Loan.
6. Waivers of Subrogation and Other Rights.
(a) Upon a default by Borrower, Bank in its sole
discretion, without prior notice to or consent of Guarantor, may
elect to: (i) foreclose either judicially or nonjudicially
against any real or personal property security it may hold for
the Loan, (ii) accept a transfer of any such security in lieu of
foreclosure, (iii) compromise or adjust
the Loan or any part of it or make any other accommodation with
Borrower or Guarantor or (iv) exercise any other remedy against
Borrower or any security. No such action by Bank shall release or
limit the liability of Guarantor, who shall remain liable under
this Guaranty after the action, even if the effect of the action
is to deprive Guarantor of any subrogation rights, rights of
indemnity, or other rights to collect reimbursement from Borrower
for any sums paid to Bank, whether contractual or arising by
operation of law or otherwise. Guarantor expressly agrees that
under no circumstances shall it be deemed to have any right,
title, interest or claim in or to any real or personal property
to be held by Bank or any third party after any foreclosure or
transfer in lieu of foreclosure of any security for the Loan.
(b) Regardless of whether Guarantor may have made
any payments to Bank, Guarantor forever waives: (i) all rights to
enforce any remedy that Bank may have against Borrower, and (ii)
all rights to participate in any security now or later to be held
by Bank for the Loan. Provided such waiver shall not affect or
impair any other right of contribution, subrogation, collection,
indemnity or rights Guarantor may have against Borrower
contractually or arising by operation of law or otherwise.
7. Revival and Reinstatement. If Bank is required to
pay, return or restore to Borrower or any other person any amounts
previously paid on the Loan because of any
Insolvency Proceeding of Borrower, any stop notice or any other
reason, the obligations of Guarantor shall be reinstated and revived
and the rights of Bank shall continue with regard to
such amounts, all as though they had never been paid.
8. Information Regarding Borrower and the Property.
Before signing this Guaranty, Guarantor investigated the
financial condition and business operations of Borrower, the
present and former condition, uses and ownership of the Property,
and such other matters as Guarantor deemed appropriate to assure
itself of Borrowers ability to discharge its obligations under
the Loan Documents. Guarantor assumes full responsibility for
that due diligence, as well as for keeping informed of all
matters which may affect Borrower's ability to pay and perform
its obligations to Bank. Bank has no duty to disclose to
Guarantor any information which Bank may have or receive about
Borrower's financial condition or business operations, the
condition or uses of the Property, or any other circumstances
bearing on Borrower's ability to perform.
9. Subordination. Any rights of Guarantor, whether
now existing or later arising, to receive payment on account of
any indebtedness (including interest) owed to it by Borrower or
any subsequent owner of the Property, or to withdraw capital
invested by it in Borrower, or to receive distributions from Borrower,
shall at all times be subordinate as to lien and time of payment and
in all other respects to the full and prior repayment to Bank of the
Loan. Guarantor shall not be entitled to enforce or receive
payment of any sums hereby subordinated until the Loan has been
paid and performed in full and any such sums received in
violation of this Guaranty shall be received by Guarantor in
trust for Bank. The foregoing notwithstanding, Guarantor is not
prohibited from receiving (a) such reasonable management fees or
reasonable salary from Borrower as Bank may find acceptable from
time to time, and (b) distributions from Borrower in an amount
equal to any income taxes imposed on Guarantor which are
attributable to Borrower's income from the Property, and (c) so
long as the loan is current and Borrower maintains adequate
reserves for taxes, insurance and maintenance, then Borrower is
permitted to distribute excess proceeds for repayment of loans
incurred by Borrower from Guarantor in connection with the
property.
10. Financial Information. Guarantor shall keep true
and correct financial books and records, using generally accepted
accounting principles consistently applied, or such other
accounting principles as Bank in its reasonable judgment may find
acceptable from time to time. Within thirty (30) days after
written request by the Bank, but in no event no earlier than one
hundred-twenty (120) days after the end of each year, Guarantor
shall deliver to Bank its financial statement, together with a
statement showing all changes in its financial condition which
occurred during the preceding year and shall provide copies of
each such Guarantor's tax returns, together with all supporting
schedules, including without limitation K-i forms, extension
requests and statements of contributions to subchapter S
corporations within thirty (30) days of filing same. Guarantor
shall also promptly deliver to Bank all quarterly balance sheets
and income statements if they become available or if Bank
requests them. Within thirty (30) days after written request by
the Bank, Guarantor shall promptly provide Bank with any other
financial or other information concerning each Guarantor's
affairs and properties as Bank may request.
11. Guarantor's Representations and Warranties:
Guarantor represents and warrants that:
(a) all financial statements and other financial
information furnished or to be furnished to Bank are or will be
true and correct and do or will fairly represent the financial
condition of Guarantor (including all contingent liabilities);
(b) all financial statements were or will be
prepared in accordance with generally accepted accounting
principles, or such other accounting principles as may be
acceptable to Bank at the time of their preparation, consistently
applied; and
(c) there has been no material adverse change in
Guarantor's financial condition since the dates of the statements
most recently furnished to Bank.
12 Events of Default. Bank may declare Guarantor to
be in default under this Guaranty upon the occurrence of any of
the following events ("Events of Default"):
(a) Guarantor fails to perform any of its
obligations under this Guaranty; or
(b) Guarantor revokes this Guaranty or this
Guaranty becomes ineffective for any reason; or
(c) Any representation or warranty made or given
by Guarantor to Bank proves to be false or misleading in any
material respect; or
(d) Guarantor becomes insolvent or the subject of
any Insolvency Proceeding (except that, in the case of an
involuntary proceeding, the same shall not constitute an Event of
Default if the proceeding is dismissed within ninety (90) days of
filing); or
(e) Guarantor dies, dissolves or liquidates, or
any of these events happens to any of Guarantor's members,
general partners or to its chief executive or majority
shareholder, or Guarantor's managing general partner or its chief
executive ceases for any reason to act in that capacity unless
within ninety (90) days of the death or disability, Guarantor
provides a substitute guarantor or additional collateral,
satisfactory to Bank, in Bank's sole discretion.
13 Arbitration.
(a) Mandatory Arbitration. After the Deed of
Trust has been released, fully reconveyed or extinguished, any
controversy or claim between or among the parties, including
those arising out of or relating to this Guaranty or the Loan
Documents and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Guaranty, and under
the Commercial Rules of the AAA. The arbitrator(s) shall give
effect to statutes of limitation in determining any claim Any
controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration
award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or
pursuit of a provisional or ancillary remedy shall not constitute
a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party
contests such action for judicial relief
(b) Real Property Collateral. Notwithstanding
the provisions of subsection 13(a), no controversy or claim shall
be submitted to arbitration without the consent of all parties
if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation by Guarantor or
Borrower to Bank which is secured by real property collateral. If
all parties do not consent to submission of such a controversy or
claim to arbitration, the controversy or claim shall be
determined by a court of competent jurisdiction.
(c) Provisional Remedies Self-Help and
Foreclosure. No provision of this Section 13 shall limit the
right of any party to exercise self-help remedies such as setoff
foreclosure against or sale of any real or personal property
collateral or security, or to obtain provisional or ancillary
remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The
exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trust or mortgage or
by judicial foreclosure.
14. Authorization No Violation. Guarantor is
authorized to execute, deliver and perform under this Guaranty,
which is a valid and binding obligation of Guarantor. No
provision or obligation of Guarantor contained in this Guaranty
violates any applicable law, regulation or ordinance, or any
order or ruling of any court or governmental agency. No such
provision or obligation conflicts with, or constitutes a breach
or default under, any agreement to which Guarantor is a party.
15. Additional and Independent Obligations.
Guarantor's obligations under this Guaranty are in addition to
its obligations under any other existing or future guaranties,
each of which shall remain in full force and effect until it is
expressly modified or released in a writing signed by Bank.
Guarantor's obligations under this Guaranty are independent of
those of Borrower on the Loan. Bank may bring a separate action,
or commence a separate reference or arbitration proceeding
against Guarantor without first proceeding against Borrower, any
other person or any security that Bank may hold, and without pursuing
any other remedy. Bank's rights under this Guaranty shall not be
exhausted by any action by Bank until the Loan has been paid and
performed in full.
16. No Waiver Consents Cumulative Remedies. Each
waiver by Bank must be in writing, and no waiver shall be
construed as a continuing waiver. No waiver shall be implied from
Bank's delay in exercising or failure to exercise any right or
remedy against Borrower, Guarantor or any security. Consent by
Bank to any act or omission by Borrower or Guarantor shall not be
construed as a consent to any other or subsequent act or
omission, or as a waiver of the requirement for Bank's consent to
be obtained in any future or other instance. All remedies of Bank
against Borrower and Guarantor are cumulative.
17. No Release. Guarantor shall not be released from
its obligations under this Guaranty except by a writing signed by
Bank or performance in full of the obligations under this
Guaranty. The failure of any Guarantor to sign this Guaranty
shall not in any way affect, release or discharge the liability
of any Guarantor who signs this Guaranty. In the event that there
are multiple Guarantors, Bank's release of one or more such
Guarantors shall not in any way affect, release or discharge the
liability of the remaining Guarantors hereunder.
18. Heirs Successors and Assigns; Participations. The
terms of this Guaranty shall bind and benefit the heirs, legal
representatives, successors and assigns of Bank and Guarantor;
provided, however, that Guarantor may not assign this Guaranty,
or assign or delegate any of its rights or obligations under this
Guaranty, without the prior written consent of Bank in each
instance. Bank in its sole discretion may sell or assign
participations or other interests in the Loan and this Guaranty,
in whole or in part, all without notice to or the consent of
Guarantor and without affecting Guarantor's obligations under
this Guaranty. Also without notice to or the consent of
Guarantor, Bank may disclose any and all information in its
possession concerning Guarantor, this Guaranty and any security
for this Guaranty to any actual or prospective purchaser of any
securities issued or to be issued by Bank, and to any actual or
prospective purchaser or assignee of any participation or other
interest in the Loan and this Guaranty.
19. Notices. All notices given under this Guaranty
must be in writing and shall be effectively served upon delivery,
or if mailed, upon the first to occur of receipt or the
expiration of forty-eight hours after deposit in certified United
States mail, postage prepaid, sent to the party at its address
given at the end of this Guaranty. Those addresses may be changed
by Bank or Guarantor by written notice to the other party.
Service of any notice on any one Guarantor signing this Guaranty
shall be effective service on Guarantor for all purposes.
20. Rules of Construction. In this Guaranty, the word
"Borrower" includes both the named Borrower and any other person
who at any time assumes or otherwise becomes primarily liable for
all or any part of the obligations of the named Borrower on the
Loan. The word "person" includes any individual, company, trust
or other legal entity of any kind. If this Guaranty is executed
by more than one person, the word "Guarantor" includes all such
persons. The word "include(s)" means "include(s), without
limitation," and the word "including" means "including, but not
limited to." When the context and construction so require, all
words used in the singular shall be deemed to have been used in
the plural and vice versa. No listing of specific instances,
items or matters in any way limits the scope or generality of any
language of this Guaranty. All headings appearing in this
Guaranty are for convenience only and shall be disregarded in
construing this Guaranty.
21. Governing Law. This Guaranty shall be governed by,
and construed in accordance with, the laws of the State of
Oregon.
22. Costs and Expenses. If any lawsuit, reference or
arbitration is commenced which arises out of, or which relates to
this Guaranty, the Loan Documents or the Loan, the prevailing
party shall be entitled to recover from each other party such
sums as the court, referee or arbitrator may adjudge to be
reasonable attorneys' fees (including allocated costs for
services of in-house counsel) in the action or proceeding, in
addition to costs and expenses otherwise allowed by law. In all
other situations, including any Insolvency Proceeding, Guarantor
agrees to pay all of Bank's costs and expenses, including
attorneys' fees (including allocated costs for services of Bank's
in-house counsel) which may be incurred in any effort to collect
or enforce the Loan or any part of it or any term of this
Guaranty. From the time(s) incurred until paid in full to Bank,
all sums shall bear interest at the Default Rate provided in the
Note.
23. Consideration. Guarantor acknowledges that it
expects to benefit from Bank's extension of the Loan to Borrower
because of its relationship to Borrower, and that it is executing
this Guaranty in consideration of that anticipated benefit.
24. Integration; Modifications. This Guaranty (a)
integrates all the terms and conditions mentioned in or
incidental to this Guaranty, (b) supersedes all oral negotiations
and prior writings with respect to its subject matter, and (c) is
intended by Guarantor and Bank as the final expression of the
agreement with respect to the terms and conditions set forth in
this Guaranty and as the complete and exclusive statement of the
terms agreed to by Guarantor and Bank. No representation,
understanding, promise or condition shall be enforceable against
any party unless it is contained in this Guaranty. This
Guaranty may not be modified except in a writing signed
by both Bank and Guarantor.
25. Miscellaneous. The death or legal
incapacity of any Guarantor shall not terminate the
obligations of such Guarantor or any other Guarantor
under this Guaranty, including its obligations with
regard to future advances under the Loan Documents. The
liability of all persons who are in any manner obligated
under this Guaranty shall be joint and several. The
illegality or unenforceability of one or more provisions
of this Guaranty shall not affect any other provision.
Any Guarantor who is married agrees that Bank may look to
all of his or her community property and separate
property to satisfy his or her obligations under this
Guaranty. Time is of the essence in the performance of
this Guaranty by Guarantor.
26. Special Provision. Without limiting the
foregoing or any other provision of this Loan Agreement
or the Loan Documents, in order to avoid any
misunderstanding between the parties, the parties agree
to the following special provision:
Guarantor and each of its constituent partners, and
their permitted successors and assigns (if any),
agree that no agreement, representation, warranty,
promise, commitment, or statement of any kind
(collectively, "Statements") by any person related
directly or indirectly to this Loan or the Property
shall be binding on Bank, its parent, subsidiaries,
affiliates, participants, assigns, or the officers,
directors, employees, and agents of any of them
(collectively, the "Bank Related Parties"), unless
the Statements are in writing and executed by a
duly authorized officer of Bank, Guarantor and each
of its constituent partners, and their permitted
successors and assigns (if any), agree not to rely
upon such Statements in any way and further agree
not to claim waiver of the foregoing provision
(requiring all Statements to be in writing) for any
reason. This provision requiring any Statement to
be in writing to be enforceable against the Bank
Related Parties cannot be waived orally or by
conduct.
GUARANTOR: Address Where Notices to
Guarantor are to be Sent:
Lynne I. Angel 1816 S.W Hawthorne Terrace
Portland, Oregon 97201
Copy to:
Mr. Chris Walters
Ball, Janick & Novack
101 S~W. Main Street, Suite 1100
Portland, Oregon 97204
Address Where Notices to Bank
are to be
Sent:
BANK OF AMERICA - OREGON
Loan Administration No.2098
P.O. Box 3066
Portland, OR 97208
PROMISSORY NOTE
$340,000.00
December 18, 1996
Portland, Oregon
FOR VALUE RECEIVED, the undersigned, PORTLAND LOFTS
ASSOCIATES LIMITED PARTNERSHIP, a Delaware
limited partnership ("Obligor"), hereby promises to
pay to the order of JOSEPH W. ANGEL (J. Angel') and LYNNE
I. ANGEL (L. Angel) and, together with J. Angel, "Obligees) at their
respective addresses hereinafter set forth,
the principal amount of THREE HUNDRED FORTY THOUSAND
AND NO/100 DOLLARS ($340,000.00), plus interest and other amounts
as provided herein, all in lawful money of the United States of America.
The unpaid principal balance of this Promissory Note
(this 'note) shall bear interest from December 1, 1996 at the rate
of eleven percent (11.0%) per annum; provided that after the
occurrence and during the continuance of an Event of Default
(hereinafter defined), the unpaid principal balance of, and all overdue
interest on, this Note shall bear interest at the rate of
fifteen percent (15.0%) per annum. Commencing on January 1, 1997, and
continuing on the first day of each calendar month thereafter to
and including December 1, 2006, Obligor shall make monthly payments
of principal and interest hereunder,each in the amount of $4,683.50.
Unless previously accelerated in the manner provided below, the
entire unpaid principal balance of and all unpaid accrued interest on
this Note shall be due and payable in full on January 1, 2007 (the
maturity date).
Obligor shall (i) pay one-half of any amount payable to
Obligees hereunder to J. Angel at 937 S.W. 14th Ave., Suite 201,
Portland, OR 97205, or such other address as he may
specify from time to time by written notice to Obligor-, and
(ii) pay one-half of any amount payable to Obligees thereunder to
L. Angel at 18 16 SW Hawthorn Terrace, Portland, OR 97201, or such other
address as she may specify from time to time by written notice to
Obligor.
This Note may be prepaid in whole or in part at any time
without penalty; provided that any such prepayment shall be paid one-half
to J. Angel and one-half to L. Angel. All payments made pursuant to
this Note shall be applied first to the payment of attorneys' fees,
costs, and other charges to the extent provided herein, then to accrued
interest hereon; and then to principal.
Time is of the essence of the performance of Obligor's
obligations under this Note. In the event Obligor fails to pay the
amount owing under this Note within ten (I0) business days after written
notice from either Obligee stating that such payment is past due, such
failure shall constitute an "Event of Default." Upon the occurrence of an
Event of Default, the entire unpaid principal balance of this Note and all
unpaid accrued interest hereon shall, at Obligees' option, be added to the
Developer's Priority Amount (as that term is defined in the Amended and
Restated Agreement of Limited Partnership of Obligor). Obligee shall
be entitled to exercise such remedy at any time while such Event of
Default is continuing. Obligee's failure to exercise such remedy shall
not be deemed a waiver of any existing or subsequent default or a
waiver of any such remedy.
If following the occurrence of any default thereunder,
Obligees consult with an attorney regarding the enforcement of any of
their rights under this Note, or if this Note is placed in the hands
of an attorney for collection, or if a suit ,action or other proceeding
of any nature whatsoever is instituted to enforce this Note or in
connection with any controversy thereunder, Obligor agrees to pay all
costs thereof, including reasonable attorneys' fees, if Obligees prevail in
such suit, action, or other proceeding. Such costs and attorneys' fees
shall include, without limitation, those incurred on any appeal or review.
Obligor hereby waives presentment demand for payment,
notice of dishonor, protest, and notice of protest.
Any modification to this Note must be set forth in a
writing which, to the extent enforcement thereof may be sought against
Obligees, must be executed by both Obligees.
All notices under this Note shall be in writing. Notices
may be (i) delivered personally, (ii) transmitted by facsimile, (iii)
delivered by a recognized national overnight delivery service, or (iv)
mailed by certified United States mail, postage prepaid and return
receipt requested. Notices to Obligor shall be directed to their
respectiive addresses set forth beneath its signature below,
or to such other or additional address as it may specify from time to
time by written notice to Obligees. Notices to Obligees shall be directed
to their respective addresses set forth above in this Note or to such
other or additional address as either of them may specify from time
to time by written notice to Obligor. Any notice delivered in accordance
with this paragraph shall be deemed given when actually received or, if
earlier, (a) in the case of any notice transmitted by facsimile, on the
date on which the transmitting party receives confirmation of
receipt by facsimile transmission, telephone, or otherwise, (b) in the
case of any notice delivered by a recognized national overnight delivery
service, on the next business day after delivery to the service or, if
different, on the day designated for delivery, or (c) in the case of any
notice mailed by certified U.S. mail, three business days after deposit
therein.
This Note shall be governed by and construed in accordance
with the laws of the State of Oregon (without regard to the principles
thereof relating to conflicts of laws.
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP,
a Delaware Limited partnership
By: Historic Preservation Properties 1989
Limited Partnership, its general partner
By: Boston Historic Properties Limited
Partnership, its general partner
By Terrence P. Sullivan
Title General Partner
By. East Bank Angel Joint Venture,
an Oregon general partnership,
its general partner
BY: Joseph W. Angel II, partner
Address for Notices to Obligor:
c/o Claremont Management Corporation
Batterymarch Park II
Quincy, MA 02169
Fax No.: (617-472-3670
OPERATING AGREEMENT OF
THE Cosmopolitan AT MEARS PARK, LLC
DATED AS OF MARCH 15,1996
TABLE OF CONTENTS
ARTICLE I
Name, Office, Agent, Organization, Powers and Members.......1
1.01 Defined Terms.................................1
1.02 Name of the Limited Liability Company........1
1.03 Office of the Limited Liability Company; Agent
for Service of Process.......................1
1.04 Organization .... .....................1
1.05 Purposes and Powers..........................2
1.06 Members......................................2
ARTICLE II
Capital Contributions and Liability of Members..............4
2.01 Capital Accounts..............................4
2.02 Capital Contributions.........................4
2.03 No Withdrawal of or Interest in Capital.......4
2.04 Managers as Members ..........................4
2.05 Liability of Members..........................4
ARTICLE III
Loans; Additional Equity ...................................4
2.01 Voluntary Loans.................................4
2.02 Additional Equity................................4
ARTICLE IV
Cash Distributions..........................................5
4.01 Distribution of Distributable Cash...........5
4.02 Distributions Upon Transfer or Admission.....5
4.03 Certain Payments to the Internal Revenue
Service Treated as Distributions.............6
4.04 Distribution of Assets in Kind...............6
ARTICLE V
Allocation of Net Profits and Net Losses................6
5.01 Basic Allocations.............................6
5.02 Allocations of Nonrecourse Deductions and
Minimum Gain..................................7
5.03 Overriding Allocations of Net Profits and Net
Losses........................................8
5.04 Allocations Upon Transfer or Admission........9
ARTICLE VI
Management.................................................10
6.01 Management of the LLC........................10
6.02 Managers.....................................12
6.03 Members......................................14
6.04 Interpretation of Rights and Duties of
Managers and Members.........................15
6.05 Certain Permitted Transactions...............15
6.06 Budget and Major Decisions...................16
6.07 Binding the LLC..............................17
6.08 Contracts with Members.......................17
6.09 Indemnification and Exculpation..............17
6.10 Other Activities.............................18
ARTICLE VII
Fiscal Matters.............................................18
7.01 Books and Records...........................18
7.02 Reports.....................................19
7.03 Bank Accounts...............................19
7.04 Fiscal Year.................................19
7.05 Tax Matters Partner.........................19
ARTICLE VIII
Transfers of Interests.....................................20
8.01 General Restrictions on Transfer ...........20
8.02 Restrictions as to Certain Matters..........21
8.03 Transfers of Interests by Members Who Serve
as Managers.................................22
8.04 Permitted Transfers.........................22
8.05 Right of First Refusal.....................23
ARTICLE IX
Dissolution and Termination................................24
9.01 Events Causing Dissolution..................24
9.02 Continuation of the LLC.....................25
9.03 Procedures on Dissolution...................25
9.04 Management Rights During Winding Up.........25
9.05 Distributions Upon Liquidation..............25
9.06 Distributions Upon Liquidation..............25
9.07 Disposition of Documents and Records........26
ARTICLE X
Default and Dissolution....................................26
10.01 Events of Default............................26
10-02 Election of Non-Defaulting Member............27
10.03 Closing......................................27
ARTICLE XI
Appraisal..................................................28
11.01 General......................................28
11.02 Appraisal Procedures.........................28
ARTICLE XII
Arbitration................................................29
12.01 Initiation...................................29
12.02 Costs........................................29
ARTICLE XIII
General Provisions.........................................29
13.01 Notices......................................29
13.02 Word Meanings................................30
13.03 Binding Provisions...........................30
13-04 Applicable Law.............................. 30
13.05 Counterparts.................................30
13.06 Separability of Provisions...................30
13.07 Section Titles...............................30
13.08 Amendments...................................30
13.09 Third Party Beneficiaries....................30
13.10 Entire Agreement.............................30
13.11 Waiver of Partition..........................31
13.12 Survival of Certain Provisions...............31
ARTICLE XIV
Definitions................................................31
SCHEDULE A.................................................40
SCHEDULE B.................................................41
THIS OPERATING-RATING AGREEMENT, dated as of the
fifteenth day of March, 1996, is by and among each of
the persons named on Schedule A hereto as a Manager
(collectively, the "Managers" and individually, a
"Manager'), and each of the persons named on Schedule
B hereto as a Member (collectively, the "Members" and
individually, a "Member').
WHEREAS, The Cosmopolitan at Mears Park, LLC (the
"LLC") has been formed as a limited liability company
under the Delaware Limited Liability Company Act (the
'Act') by the filing on the date hereof of a Certificate of
Formation (the "Certificate") in the office of the
Secretary of State of the State of Delaware; and
WHEREAS, the Managers and the Members wish to set
out fully their respective rights, obligations and duties
with respect to the LLC and its business, management and
operations.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of
which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Name, Office, Agent, Organization, Powers and Members
1.01 Defined Terms. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in Article XIV of this
Agreement.
1.02 Name of the Limited Liability company. The name of the limited
lliability company formed hereby is The Cosmopolitan at Mears Park,
LLC. The name of the LLC may be changed at any time or from time to
time with the approval of the Board of Managers and the Consent of the
Members.
1.03 Office of the Limited Liability company, Agent for Service
of Process. The address of the registered office of the LLC for purposes
of the Act is c/o 'Prentice-Hall Corporation System, Inc., 1013
Centre Road, Wilmington, Delaware, 19805. The name and address of the
resident agent for service of process for the LLC is Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware, 19805.
The Board of Managers may establish places of business of the LLC within
and without the State of Delaware, as and when required by its business
and in furtherance of its purposes set forth in Section 1.05 hereof, and
may appoint agents for service of process in all jurisdictions in which
the LLC shall conduct business. The Board of Managers may cause the LLC
to change from time to time its resident agent for service of process, or
the location of its registered office, provided, however, that the Members
shall promptly be notified in writing of any such change.
1.04 Organization. The Board of Managers shall cause to be filed
such certificates and documents as may be necessary or appropriate to comply
with the Act and any other applicable requirements for the operation of
a limited liability company in accordance with the laws of the State of
Delaware and any other jurisdictions in which the LLC shall conduct
business, and shall continue to do so for so long as the LLC conducts business
therein.
1.05 Purposes and Powers. The general character of the business of
the LLC, as set forth in the Certificate, is to engage in investment in, and
ownership and development of, real estate and interests therein, including
buying, acquiring, owning, operating, selling, financing, refinancing,
disposing of and otherwise dealing with interests in real estate, directly or
indirectly through joint ventures, partnerships or other entities; and to
engage in any activities directly or indirectly related or incidental
thereto, Subject to all other provisions of this Agreement, in furtherance
of the conduct of its business, the LLC is hereby expressly authorized:
(a) to acquire, develop, own, operate and dispose of the
Property;
(b) to enter into, execute, modify, amend, supplement,
acknowledge, deliver, perform and carry out contracts of any kind,
including operating agreements of limited liability companies (whether as
a member or manager), joint venture, limited and general partnership
agreements, contracts with Affiliates, and including guarantees and
contracts establishing business arrangements or,necessary to, in connection
with, or incidental to the accomplishment of the purposes of the LLC, and
to secure the same by mortgages, pledges or other liens;
(e) to borrow money, including, without limitation, the
Heller Loan, and issue evidences of indebtedness in furtherance of any or
all of the purposes of the LLC, and to secure the same by mortgages, pledges
or other liens;
(d) to the extent that funds of the LLC are available
therefore, to pay all expenses, debts and obligations of the LLC;
(e) to enter into or engage in any kind of activity
necessary to, in connection with, or incidental to the accomplishment of the
purposes of the LLC, so long as said activities may be lawfully carried
on or performed by a limited liability company under the laws of
the State of Delaware;
(f) to execute and deliver any and all documents and
instruments required by Heller Financial, Inc. in connection with the
borrowing and evidencing of the Heller Loan; and
(g) to take any other action not prohibited under the
Act or other applicabl law.
1.06 Members.
(a) The Members of the LLC are identified on Schedule
B hereto. Additional Members may be admitted to the LLC (i) pursuant to
and in accordance with the provisions of Article VIII hereof, or (ii)
with the approval of Members holding not less than two-thirds of the
Percentage Interests held by all Members, which approval shall
specify the capital contribution, Percentage Interest, economic interest and
any other rights and obligations of such additional Member. In connection
with any such admission, this Agreement (including Schedule B) shall be
amended to reflect the additional Member, its capital contribution, if any, its
Percentage Interest, and any other rights and obligations of the additional
Member.
(b) Each Member, by execution of this Agreement or
an amendment hereto reflecting such Member's admission to the LLC, hereby
represents and warrants to the LLC as follows:
(i) It is acquiring an interest in the LLC for its
own account for investment only, and not with a view to, or for sale
in connection with, any distribution thereof in violation of the Securities
Act, or any rule or regulation thereunder.
(ii) It understands (i) that the interest in the LLC
it is acquiring has not been registered under the Securities Act or
applicable-able state securities laws and cannot be resold unless
subsequently registered under the Securities Act and such laws or unless an
exemption from such registration is available, (ii) that such registration
under the Securities Act and such laws is unlikely at any time in the future
and that neither the LLC nor the Members nor the Managers are
obligated to file a registration statement under the Securities Act or such
laws, and (iii) that the assignment, sale, transfer, exchange, or other
disposition of the interests in the LLC is restricted in accordance
with the terms of this Agreement.
(iii) It has had such opportunity as it
has deemed adequate to ask questions of and receive answers
from the Managers concerning the terms and conditions, and to obtain from
representatives of the LLC such information which the LLC possesses or ran
acquire without unreasonable effort or expense, as is necessary to evaluate
the merits and risks of an investment in the LLC.
(iv) It has, either alone or with its professional
advisers, sufficient experience in business, financial and investment matters
to be able to evaluate the merits and risks involved in investing in the LLC
and to be an informed investment decision with respect to such investment.
(v) It can afford a complete loss of the value of
its investment in the LLC and is able to bear the economic risk of holding
such investment for an indefinite period.
(vi) If it is an entity, it is duly organized,
validly existing and in good standing under the laws of its state of
organization and that it has full organizational power to execute and
deliver this Agreement and to perform its obligations hereunder.
ARTICLE - II
Capital Contributions and Liability of Members
2.01 Capital Accounts. For each Member (and each permitted assignee),
the LLC shall establish and maintain a separate Capital Account.
2.02 Capital Contributions. Each Member has contributed to the
capital of the LLC the amount set forth opposite its name on Schedule B
attached hereto.
2.03 No Withdrawal of or Interest in Capital. Except as otherwise
provided in this Article 11, no Member shall be obligated or permitted to
contribute any additional capital to the LLC. No interest shall accrue on
any contributions to the capital of the LLC, and no Member shall have the
right to withdraw or to be repaid any capital contributed by it or to receive
any other payment in respect of its interest in the LLC, including without
limitation as a result of the withdrawal or resignation of such Member
from the LLC, except as specifically provided in this Agreement.
2.04 Managers as Members. Any Manager may hold an interest in
the LLC as a Member, and such person's rights and interest as a Manager
shall be distinct and separate from such person's rights and interest as
a Member. 2.05 Liability of Members. The liability of the Members for
the losses, debts and obligations of the LLC shall be limited to their
capital contributions; provided, however, that under applicable law, the
Members may under certain circumstances be liable to the LLC to the
extent of previous distributions made to them in the event that the LLC does
not have sufficient assets to discharge its liabilities. Without limiting
the foregoing, (i) no Member, in his, her or its capacity as a Member (or,
if applicable, as a manager), shall have any liability to restore any negative
balance in his, her or its Capital Account, and (ii) the failure of the LLC
to observe any formalities or requirements relating to exercise of its powers or
management of its business or affairs under this Agreement or the Act shall
not be grounds for imposing personal liability on the members or Managers
for liabilities of the LLC.
ARTICLE III
Loans; Additional Equity
2.01 Voluntary Loans. In the event that the LLC requires
additional funds to carry out its purposes, to conduct its business, or
to meet its obligations, or to make any expenditure authorized by this
Agreement, the LLC may borrow funds from such third party tender(s) or
Member(s), and on such terms and conditions as may be acceptable to the
Board of Managers.
2.02 Additional Equity. To the extent that HPP accumulates
from whatever sources operating reserve amounts greater than $140,000 at
the end of any fiscal year, such excess amounts shall be contributed
within thirty (30) days of the end of such fiscal year to the LLC as
additional capital contributions. Notwithstanding any provisions of
Articles IV and V, any such additional capital contributions shall be
distributed by the LLC and applied as a return of the outstanding portion
of the Carney Equity.
ARTICLE IV
Cash Distributions
4.01 Distribution of Distributable Cash.
(a) Subject to the provisions of Section 4.01(b) below,
Distributable Cash of the LLC shall be distributed to the Members following
the end of each fiscal year of the LLC (or at such other times as the
Board of Managers may determine),
(i) First, to Lillian B. Carney in payment of any
current or accrued portion of the preferred return on the Carney
Equity;
(ii) Second, to the distribution to HPP of an
amount equal to the Preferred Return;
(iii) Third, to Lillian B. Carney in payment of
any unpaid principal portion of the Carney Equity;
(iv) Fourth, to the payment of any principal or
interest due with respect to any loans from Members pursuant to
the terms of Article III hereof, with any such payments to be
applied first to accrued but unpaid interest and then to principal; and
(v) Fifth, the balance, if any, to the Members in
accordance with their respective Percentage Interests.
(b) Notwithstanding the foregoing, in the event of a
liquidation of the LLC following or in conjunction with a Capital Transaction,
any Distributable Cash arising therefrom and remaining after the payments
and distributions described in clauses First through Fourth of Section
4.01(a) above be distributed to the Members in accordance with the
provisions of Section 9.06(b),
4.02 Distributions Upon Transfer or Admission. In the event that
a Member acquires an interest in the LLC either by transfer from another
Member or by acquisition from the LLC, an equal portion of the
Distributable Cash (other than Distributable Cash from a Capital
Transaction) of the LLC for the year in which such acquisition occurs shall
be allocated to each day of such year, and such Distributable Cash so
allocated to the portion of the year prior to the date of the acquisition of
the interest in the LLC by the Member shall be distributed among the Members
without giving effect to such acquisition, and such Distributable Cash so
allocated to the portion of the year from and after the date of the
acquisition of such interest shall be distributed among the Members by
giving effect to such acquisition Distributable Cash from a Capital
Transaction or upon the liquidation of the LLC shall be distributed to the
Members based upon the actual ownership of interests in the LLC on the date
of the event giving rise to such Distributable Cash.
4.03 Certain Payments to the Internal Revenue Service Treated as
Distributions.
(a) For purposes of this Section 4.03, the LLC may
assume that any Member who fails to provide to the Board of Managers
satisfactory evidence of its tax status for United States federal
income tax purposes is a foreign person taxable as a corporation.
(b) Notwithstanding anything to the contrary herein, to
the extent that the LLC is required, or elects, pursuant to applicable
law, either (i) to pay tax (including estimated tax) on a Member's allocable
share of LLC items of income or gain, whether or not distributed, or
(ii) to withhold and pay over to the tax authorities any portion of a
distribution otherwise distributable to a Member, the Board of Managers
may pay over such tax or such withheld amount to the tax authorities,
and such amount shall be treated as a distribution to such Member at
the time it is paid to the tax authorities.
4.04 Distribution of Assets in Kind. No Member shall have the
right to require any distribution of any assets of the LLC in kind. If
any assets of the LLC are distributed in kind, such assets shall be
distributed on the basis of their fair market value as determined by the
Board of Managers. Any Member entitled to any interest in such
assets shall, unless otherwise determined by the Board of Managers, receive
separate assets of the LLC and not an interest as a tenant in-common with
other Members so entitled in any asset being distributed.
ARTICLE V
Allocation of Net Profits and Net Losses
5.01 Basic Allocations.
(a) Except as provided in Sections 5.02 and 5.03
below (which shall be applied first), the Net Profits and Net Losses of
the LLC from operations for any year (or other fiscal period) shall be
allocated to and among the Members in accordance with their respective
Percentage Interests.
(b) Except as provided in Sections 5.02 and 5.03
below (which shall be applied first), any Net Profit, arising from a Capital
Transaction or upon liquidation of the LLC shall be allocated as follows:
(i) First, to any Members having negative
Adjusted Capital Account balances, in proportion to and to the extent of such
negative balances; and
(ii) The balance, if any, to the Members in
such proportions and in such amounts as would result in the respective
Adjusted Capital Account balance of each Member equaling, as nearly as
possible, such Member's share of the then LLC Capital determined by
calculating the amount the Member would receive if an amount equal
to the LLC Capital were distributed to the Members in accordance with
the provisions of Section 4.01(a) hereof.
(c) Except as provided in Sections 5.02 and 5.03
below (which shall be applied first), any Net Losses arising from a Capital
Transaction or upon liquidation of the LLC shall be allocated among the
Members as follows:
(i) First, to each Member with a positive
Adjusted Capital Account balance, in the amount of such positive balance;
provided, however, that if the amount of Net Losses to be allocated
is less than the sum of the Adjusted Capital Account balances of all
Members having positive Adjusted Capital Account balances, then the Net
Losses shall be allocated to the Members in such proportions and in
such amounts as would result in the respective Adjusted Capital Account
balance of each Member equaling, as nearly as possible, such Member's
share of the then LLC Capital determined as set forth in Section 5.01(b)(ii)
above; and
(ii) The balance, if any, to the Members in accordance
with their Percentage Interests.
(d)If the amount of Net Profits allocable to the Members pursuant to
Section 5.01(b)(ii) or the amount of Net Losses allocable to them pursuant to
Section 5.01(r-)(i) is insufficient to allow the Adjusted Capital
Account balance of each Member to equal such Member's share of the LLC-
Capital, such Net Profits or Net Losses shall be allocated among the
Members in such a manner as to decrease the differences between the
Members' respective Adjusted Capital Account balances and their respective
shares of the LLC Capital in proportion to such differences.
(e) Allocations of Net Profits and Net Losses provided for
in this Section 5.01 generally shall be made as of the end of the fiscal
year of the LLC; provided, however, that allocations of Net Profits and
Net Losses pursuant to Sections 5.01(b) and (c) shall be made no later
than immediately prior to the time that the proceeds from the event giving
rise to such Net Profits or Net Losses are distributed to the Members.
(f) Net Profits and Net Losses allocated hereunder to the
Members (or to any particular group of Members) as a group shall be allocated
to and among them based on their respective Percentage Interests.
5.02 Allocations of Nonrecourse Deductions and Minimum Gain.
Notwithstanding the provisions of Section 5.01 above,
the following allocations of Gross
Income and Nonrecourse Deductions shall be made in the
following order of priority:
(a) If in any year there is a net decrease
in- the amount of Minimum Gain attributable to either (i) Nonrecourse
Debt that is not Partner Nonrecourse Debt or (ii) Partner Nonrecourse Debt,
then each Member shall first be allocated items of Gross Income for
such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in such Minimum Gain (determined in
accordance with Treasury Regulation Sections 1.704-2(g)(2)and 1.704-2(i)
(5)) to the minimum extent required by, and in the manner specified in,
Treasury Regulation Sections 1.704 2(f) and 1.704-2(i)(4).
(b) All Nonrecourse Deductions of the LLC for any
year other than Nonrecourse Deductions attributable to Partner
Nonrecourse Debt shall be allocated to and among the Members in accordance
with their respective Percentage Interests.
(c) All Nonrecourse Deductions of the LLC for any
year attributable to Partner Nonrecourse Debt shall be allocated to the
Members who bear the Economic Risk of Loss with respect to the debt.
5.03 Overriding Allocations of Net Profits and Net Losses.
Notwithstanding the provisions of Section 5.01 above, but subject
to the provisions of Section 5.02 above, the following allocations of Net
Profits and Net Losses and items thereof shall be made.
(a) If, during any year a member receives any
adjustment, allocation or distribution described in Treasury Regulation
Section 1.704 1(b)(2)(ii)(d)(4), (5) or (6), and, as a result of such
adjustment, allocation or distribution, such Member's Capital Account
has an Excess Negative Balance, then items of Gross Income for
such year (and, if necessary, subsequent year) shall first be allocated
to such Member in an amount equal to such Member's Excess Negative
Balance.
(b) In no event shall Net Losses of the LLC be allocated
to a Member if such allocation would cause or increase an Excess
Negative Balance in such Member's Capital Account.
(c) In the event that Net Profits, Net Losses or items
thereof are allocated to one or more Members pursuant to subsections (a)
or (b) above, subsequent Net Profits and Losses from operations will fast
be allocated (subject to the provisions of subsections (a) and (b)) to
the Members in a manner designed to result in each Member having a
Capital Account balance equal to what it would have been had the original
allocation of Net Profits, Net Losses or items thereof pursuant to
subsections (a) or (b) not occurred.
(d) Except as otherwise provided herein or as required
by Code Section 704, for tax purposes, all items of income, gain, loss,
deduction or credit shall be allocated to the Members in the same manner
as are Not Profits and Net Losses; provided, however, that if the
Carrying Value of any property of the LLC differs, from its adjusted basis for
tax purposes, then items of income, gain, loss, deduction or credit related
to such property for tax purposes shall be allocated among the Members
so as to take account of the variation between the adjusted basis of
the property for tax purposes and its Carrying Value in the manner provided
for under Code Section 704(c).
(e) To the extent that any portion of any Net Profits
realized upon a sale or other disposition of any asset of the LLC is
treated as ordinary income pursuant to Code Sections 1245 or 1250
("Recapture Income'), such Recapture Income shall be allocated (prior
to any allocation of Net Profits from such event pursuant to Sections 5.01
above) as follows:
(i) In the case of Recapture Income arising under
Code Section 1245, to each Member in an amount equal to the amount
of depreciation deductions allocated to such Member with respect to such
asset; and
(ii) In the case of Recapture Income arising
under Code Section 1250, to each Member in an amount equal to the
excess of the amount of "depreciation adjustments" (as defined in Code
Section 1250(b)(1) and (4)) allocated or attributable to such Member with
respect to such asset over the amount of depreciation adjustments that
would have been allocated or attributable to such Member had the"straight-line
method of adjustment" (as described in Code Section 1250(b)(5)) been used
with respect to such asset; provided, however,that in the event the amount of
Recapture Income arising from from the sale or disposition is less than the
aggregate amount set forth in clause (i) or(ii) (whichever is applicable), the
Recapture Income shall be allocated to Members based on the order in
time in which they were allocated depreciation deductions or adjustments with
respect to such asset.
(f) Subject to the other provisions of this Section 5.03,
if at any time any portion of any of the LLC's assets is treated as "tax-
exempt use property' within the meaning of Code Section 168(h) (or
successor provision), those Members who are not "tax-exempt entities'
within the meaning of Code Section 168(h) will be allocated as nearly as
possible the same amount of Net Profits and Net Losses, as they would have
been allocated had none of such assets been treated as "tax-exempt use
property.
5.04 Allocations Upon Transfer or Admission. In the event that
a Member acquires an interest in the LLC either by transfer from another
Member or by acquisition from the LLC, an equal portion of the Gross
Income, Net Profits, Net Losses and Nonrecourse Deductions from operations
of the LLC for the year in which such acquisition occurs shall be allocated
to each day of such year, and the Gross Income, Net Profits, Net
Losses and Nonrecourse Deductions so allocated to the portion of the year
prior to the date of the acquisition of the interest in the LLC by the
Member shall be allocated among the Members without giving effect to
such acquisition, and the Gross Income, Net Profits, Net Losses and
Nonrecourse Deductions so allocated to the portion of the year from and
after the date of the acquisition of such interest shall be allocated
among the Members by giving effect to such acquisition. Gross Income,
Net Profits, Net Losses and Nonrecourse Deductions from a Capital
Transaction shall be allocated among the Members based upon the actual
ownership of interests in the LLC on the date of the Capital Transaction
giving rise to such Gross Income, Net Profits, Net Losses and
Nonrecourse Deductions.
ARTICLE VI
Management
6.01 Management of the LLC-C. The business and
affairs of the LLC shall be managed by or under the
direction of a Board of Managers, who may exercise all
of the powers of the LLC except as otherwise provided
by law or this Agreement (including without
limitation, Section 6.07 below). In the event of a
vacancy in the Board of Managers, the remaining
managers, except as otherwise provided by law, may exercise
the powers of the fall Board until the vacancy is failed
All management and other responsibilities not
specifically reserved to the Members in this Agreement
shall be vested in the Board of Managers, and the
Members shall have no voting rights except as specifically
provided in this Agreement. Each Manager shall devote
such time to the affairs of the LLC as may be
reasonably necessary for performance by the Manager of
his, her or its duties hereunder, provided such Persons shall
not be required to devote full time to such affairs.
Specifically, but not by way of limitation, but
subject to the provisions of Section 6.07,
the Board of Managers shall be authorized in the name and
on behalf of the LLC, to cause the LLC to do all things
necessary or appropriate to carry on the business and
purposes of the LLC, including without limitation the
following:
(a). to acquire by purchase, lease,
exchangeor otherwise and to sell, finance,
refinance, encumber and otherwise deal with, any real or
personal property;
(b) to borrow money and issue evidences
of indebtedness or to guarantee loans
and to secure the same by mortgage, deed of trust, pledge or
other lien on any assets or property of the LLC and
to pay, prepay, extend, amend or otherwise modify the
terms of any such borrowings;
(c) to employ executive,administrative
and support personnel in connection with the business of the LLC,
to pay salaries, expense reimbursement, employee benefits, fringe
benefits, bonuses and any other form of compensation or employee
benefit to such persons and entities, at such times and in such
amounts as may be determined by the Board of Managers
in its sole discretion, in order to provide executive,
administrative and support services in connection with
the business of the LLC;
(d) to hire or employ such
agents, employees, managers, accountants,
attorneys, consultants and other persons necessary or
appropriate to carry out the business and operations of
the LLC, and to pay fees, expenses, salaries, wages
and other compensation to such persons;
(e) to pay, extend, renew, modify,
adjust, submit to arbitration, prosecute,
defend or compromise, upon such terms as it may
determine and upon such evidence as it may deem
sufficient, any obligation, suit, liability, cause of action
or claim, including taxes, either in favor of or against
the LLC;
(f) to determine the appropriate accounting
method or methods to be used by
the LLC;
(g) to cause the LLC to make or revoke any
of the elections referred to in Sections 108, 704, 709, 754 or 1017 of
the Code or any similar provisions enacted in lieu
thereof, or in any other Section of the Code;
(h) to establish and maintain reserves for
such purposes and in such amounts as it deems appropriate from time to
time;
(i) to pay all organizational expenses and
general and administrative expenses
of the LLC;
0) to deal with, or otherwise engage in
business with, or provide services to and receive compensation therefor
from, any person who has provided or may in the future
provide any services to, lend money to, sell property to, or
purchase property from the LLC, including without limitation, any Member
or Manager.
(k) to engage in any kind of activity and to
perform and carry out contracts
of any kind necessary to, or in connection with, or
incidental to the accomplishment of the
purposes of the LLC;
(l) to pay any and all fees and to make any
and all expenditures which it, in
its sole discretion, deems necessary or appropriate in
connection with the organization of the
LLC, the management of the affairs of the LLC, and the
carrying out of its obligations and responsibilities under
this Agreement, including, without limitation, fees,
reimbursements and expenditures payable to a Member or
Manager;
(m) to exercise all powers and authority
granted by the Act to managers, except
as otherwise provided in this Agreement;
(n) to cause the LLC and its properties
and assets to be maintained and
operated in such manner as the Board of Managers may
determine, subject, however, to
obligations imposed by applicable laws or by any mortgage or
security interest encumbering the LLC and such properties
and assets from time to time, and by any lease, rental
agreement or other agreement pertaining thereto;
(o) to cause to be obtained and continued in
force all policies of insurance
required by any mortgage, lease or other agreement relating to
the LLC's business or any part
thereof, or determined by the Board of Managers to be in the
best interests of the LLC;
(p) to cause to be paid any and all taxes,
charges and assessments that may be levied, assessed or imposed upon any
of the assets of the LLC, unless the same are contested by the LLC; and
(q) to negotiate for and enter into leases for
space in the Property on terms approved by the Members; and
(r) to perform any other act which
the Board of Managers may deem necessary, convenient or desirable
for the LLC or its business.
6.02 Managers.
(a) Number, Election and Qualification.
The number of Managers which shall constitute the whole Board of
Managers shall be determined by resolution of the Members, but in no
event shall such number be less than three nor more
than seven unless the Members specifically vote pursuant to Section
6.03(c) to cause the LLC to be Member managed, in
which case there shall be no Board of Managers. The
Managers shall be elected at an annual meeting of Members by such
Members as have the right to vote at such election.
Managers need not be Members of the LLC.
Each person elected to serve as a Manager of the
LLC shall sign this Agreement, or a counterpart hereof
or amendment hereto, or other writing pursuant to which
such person (I) acknowledges receipt of a copy of this
Agreement, as amended and in effect as of the date of
such writing, (ii) agrees that he or she is a party to and
bound by this Agreement, (iii) agrees to perform the
duties of a Manager hereunder, and (iv) agrees to
execute and deliver such additional agreements, instruments,
certificates and documents, including without limitation an
amendment to the Certificate, which may be necessary,
appropriate or convenient to reflect the foregoing
matters and the election of such person as a Manager of the
LLC.
Upon the death, resignation, removal or
expiration of the term of any Manager (a
"Terminated Manager"), (i) such Terminated Manager
shall have no further authority under this Agreement, (ii)
such Terminated Manager shall have no further obligations
or rights under this Agreement (except for liabilities and
rights accruing prior to the date of death, resignation,
removal or expiration of his term, such as, for example,
rights to indemnification under Section 6.9 which related
to actions or omissions occurring during such person's
service as a Manager), and (iii) no writing or instrument
shall be required to be executed by the LLC or the
Terminated Manager to reflect such cessation of service, except that the
Terminated Manager (or its Legal Representative or
attorneyin-fact, as provided in the following paragraph)
shall execute and deliver any agreement, instrument,
certificate or document, including an amendment to the
Certificate, which may be reasonably required to reflect that the
Terminated Manager is no longer a Manager of the LLC.
Each person now or hereafter serving as a
Manager of the LLC, by execution of this Agreement, an
amendment hereto, or an instrument acknowledging that it is
bound hereby, hereby constitutes and appoints each other
person who may from time to time be serving as a
Manager, and each of them acting singly, such Manager's
agent and attorneyin-fact for the purpose of executing
and delivering any and all agreements, instruments and
other documents (including without limitation, an amendment to
the Certificate) as are necessary or appropriate to
reflect that he, she or it is no longer a Manager of the LLC following the
death, resignation, removal or expiration of the term of such
Manager, which power of attorney, is hereby agreed and
acknowledged to be coupled with an interest and
irrevocable, and shall survive the death, dissolution,
bankruptcy or incapacity of any Manager until such time as
the withdrawal of such Manager from the LLC has been
reflected by all necessary or appropriate agreements,
instruments and other documents.
(b) Enlargement of the Board Subject to
the provisions of Section 6,02(a)
above, the number of Managers be increased at any time and from
time to time by the Members.
(c) Tenure. Each Manager shall hold office
until the next annual meeting and
until his successor is duly elected and qualified, or until
his earlier death, resignation or
removal.
(d) Vacancies. Unless and until filled by
the Members, any vacancy in the
Board of Managers, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled
by vote of a majority of the Managers then in office, although
less than a quorum, or by a sole remaining Manager. A Manager
elected to fill a vacancy shall be electedfor the unexpired
term of his predecessor in office, and a Manager chosen to
fill a position resulting from an increase in the number of
Managers shall hold office until the next annual meeting
of Members and until his successor is duly elected and
qualified, or until his earlier death, resignation or
removal.
(e) Resignation. Any Manager may
resign by delivering his written resignation to the LLC at its principal
office. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or
upon the happening of some other
event.
(f) Regular Meetings. Regular meetings of the Board
of Managers may be held without notice at such time and place, either within or
without the State of Delaware, as shall be determined from time to
time by the Board of Managers; provided that any Manager who is
absent when such a determination is made shall be given notice of the
determination. A regular meeting of the Board of Mangers may
be held without notice immediately after and at the same
place as the annual meeting of Members.
(g) Special Meetings. Special meetings of the Board of
Managers may be held at any time and place, within or without the State of
Delaware, designated in a call by two or more Managers, or by one Manager
in the event that there is only a single Manager in office.
(h) Notice of Special Meetings. Notice of
any special meeting of Managers shall be given to each Manager by the
Secretary or by the officer or one of the Managers calling the meeting.
Notice shall be duly given to each Manager (i) by giving notice to such
manager in person or by telephone at least 24 hours in advance of the
meeting, (ii) by sending a telegram
or telex, or delivering written notice by hand, to his last
known business or home address at
least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known
business or home address at least 72 hours in advance of the
meeting. A notice or waiver of
notice of a meeting of the Board of Managers need not specify
the purposes of the meeting.
(i) Meetings by Telephone Conference
Calls. Managers or any members of
any committee designated by the Managers may participate
in a meeting of the Board of
Managers or such committee by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other, and participation by such means shall constitute
presence in person at such meeting.
(j) Quorum. A majority of the total
number of the whole Board of Managers shall constitute a
quorum at all meetings of the Board of Managers. In the
event one or more of the Managers shall be disqualified to
vote at any meeting, then the required quorum shall be
reduced by one for each such Manager so disqualified;
provided, however, that in no case shall less than one-
half (1/2) of the number so fixed constitute a quorum. In the
absence of a quorum at any such meeting, a majority of the
Managers present may adjourn the meeting from time to
time without further notice other than announcement at the
meeting, until a quorum shall be present.
(k) Action at Meeting. At any meeting
of the Board of Managers at which
a quorum is present, the vote of a majority of those present
shall be sufficient to take any action,
unless a different vote is specified by law, the Certificate or
this Agreement.
(1) Action by Consent. Any action required
or permitted to be taken at any
meeting of the Board of Managers or of any committee of
the Board of Managers may be taken without a meeting, if
all members of the Board or committee, as the case may
be, consent to the action in writing, and the written consents
are filed with the minutes of proceedings of the Board or
committee.
(m) Removal. Except as otherwise provided
by the Act, any one or more or
all of the Managers may be removed, with or without
cause, by Members holding a majority of the Percentage
Interests then held by all Members.
6.03 Members.
(a) Place of Meetings. All meetings of
Members shall be held at such place
within or without the State of Delaware as may be
designated from time to time by the Board of Managers
or, if not so designated, at the registered office of the LLC.
(b) Annual Meeting. There shall be
held an annual meeting of Members for
the election of Managers and for the transaction of
such other business as may properly be brought before the
meeting. Such meeting shall be held on a date to be fixed by the
Board of Managers (which date shall not be a legal holiday
in the place where the meeting is
to be held) at the time and place to be fixed by the Board of
Managers and stated in the notice
of the meeting. If no annual meeting is held in
accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and
any action taken at that special
meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case
all references in this Agreement to the annual meeting of the
Members shall be deemed to refer to such special meeting.
(c) Right to Elect to be Member-
Managed. At any annual meeting (or any
special meeting, as described in Section 6.03(d) below), the
Members may elect (by vote of all Members) to cause
the LLC to be managed by the Members. In connection
with any such election, this Agreement shall be amended
by the Members to reflect appropriate provisions regarding
the management and operation of the LLC by the Members.
(d) Special Meetings. Special meetings of
Members may be called at any time
by the Board of Managers. Business transacted at any
special meeting of Members shall be
limited to matters relating to the purpose or purposes stated
in the notice of meeting.
(e) Notice of Meetings. Except as otherwise
provided by law, written notice
of each meeting of Members, whether annual or special, shall
be given not less than 10 nor
more than sixty (60) days before the date of the meeting to
each Member entitled to vote at such
meeting. The notices of all meetings shall state the place,
date and hour of the meeting. The
notice of a special meeting shall state, in addition, the
purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited
in the United States mail, postage
prepaid, directed to the Member at his address as it appears on
the records of the LLC.
(f) Action at Meeting. When a quorum is
present at any meeting, the
Members representing a majority of the total Percentage
Interests of all Members entitled to vote (or if there are
two or more classes of Members entitled to vote as separate
classes, then in the case of each such class, the holders of a
majority of the total Percentage Interests of that class
entitled to vote on such matter) shall decide any matter to be
voted upon by the Members at such meeting, except when a
different vote is required by express provision of law, the
Certificate or this Agreement.
(g) Action. Any action required or
permitted to be taken at any annual or special meeting of Members of the LLC
may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so
taken, is signed by the Members having not less than the
minimum aggregate Percentage Interests that would be
necessary to authorize or take such action at a meeting at
which all Members to vote on such action were present and
voted. Prompt notice of the taking of an action without
a meeting by less than unanimous written consent shall be
given to those Members who have not consented in writing.
6.04 Interpretation of Rights and Duties of
Managers and Members. To the fullest
extent permitted by the Act and other applicable law, and to
the extent not inconsistent with the specific provisions of this Agreement
or the Certificate, it is the intention of the parties that:
(a) the Board of Managers shall have the
power to do any and all acts,
statutory and otherwise, with respect to the LLC which the
board of directors of a Delaware
corporation would have with respect to such Delaware
corporation; and
(b) the Members shall have no power or
authority whatsoever with respect to
the management of the business and affairs of the LLC,
6.05 Certain Permitted Transactions. Without
limitation of any of its powers set forth
in Section 6.01 above, the Board of Managers is expressly
authorized, in the name and on behalf
of the LLC, to cause the LLC to enter into a Property
Management Agreement with Claremont Management Company,
pursuant to which Claremont Management Company will
provide certain property management services to the LLC.
6.06 Budget and Major Decisions.
(a) Not less often than Once
each fiscal Year, the Board of Managers shall
prepare and submit to the Members for their
consideration a budget (the "Budget") setting forth the estimated
receipts and expenditures (capital, Operating and
other) of the LLC for the period covered by the
Budget. The Members shall review and adjust the
Budget on a quarterly basis. When the Consent of
the Members to any Budget has been obtained,
the Board of Managers shall implement the Budget and shall be
authorized, subject to the provisions of Section 6.06(b),
without the need for any further Consent of the Members
to make the expenditures and incur the obligations
provided for in the Budget.
(b) Notwithstanding the provisions
of Section 6.01 or any other provision of this
Agreement to the contrary, without the prior written
Consent of the Members, no act shall be taken,
sum expended, decision made or obligation incurred
by the LLC, the Board of Managers, the
Property Manager, or any Member with respect to
a matter within the scope of any of the major
decisions enumerated below (the 'Major Decisions'),
unless and until the same has been expressly
delegated by the Members in writing. The Major
Decisions shall include:
(i) the acquisition of real estate other than the
Property;
(ii) changing the use of the Property from
its contemplated use a residential rental apartment complex;
(iii) under or making commitments to undertake major
improvements to the Property, meaning thereby improvements of
such a major scope as may reasonably be construed to be
such, having due regard for the cost thereof, the nature and
extent of the work, labor and materials, the
duration of performing and installing the same, and
the impact thereof on the Property;
(iv) selling the Property or any material part
thereof, directly or indirectly;
(v) offering or selling interests in the LLC;
(vi) exercising the powers under Section
6.01(b) as to secured borrowing or mortgaging for obligations,
except that, the Managers, without the consent of the
Members, shall have the right to refinance the Heller Loan
as long as the terms of the new loan(s) are no less
favorable to the LLC than the existing loans.
(vii) selecting or varying
depreciation and accounting methods and making
other decisions with respect to treatment of
various transactions for state or federal income
tax purposes or other financial purposes not
otherwise specifically provided for herein, provided
that such methods and decisions shall be
consistent with the other provisions of this Agreement;
(viii) the approval of all construction and
architectural contracts and all architectural plans, specifications
and drawings prior to the construction, addition to and/or
alteration of the Property or any portion thereof, and any
Modifications of such contracts, plans, specifications
and drawings, except for such matters as may be
expressly delegated in writing to the Property Manager by the
Members;
(ix) determining whether or not distributions should
be made to the Members;
(x) approving the Budget pursuant to the provisions
of Section 6.06 hereof-,
(xi) making any expenditure or incurring any
obligation which when added to any other expenditure for the fiscal
year of the LLC exceeds the Budget or any line item specified in the
Budget;
(xii) the selection, termination or removal of the
Property Manager other than pursuant to the terms of the Property Management
Agreement;
(xiii) the election of the members of the Board of Managers; or
(xiv) any other decision or action which by any
provision of this Agreement is subject to the Consent of the
Members or which materially affects the LLC or the
assets or operations thereof.
6.07 Binding the LLC. Except as the Board of Managers may
generally or in any particular case or cases otherwise authorize,
and subject to the other provisions of this Agreement and the
Certificate, all deeds, leases, contracts, bonds, notes, checks, drafts
or other obligations made, accepted or endorsed by the
LLC shall be signed by the Managers or any one of
them acting singly.
6.08 Contracts with Members. Subject to the
provisions of Section 6.06, with the approval of a
majority in number of disinterested Managers in each
case, the LLC may engage in business with, or enter
into one or more agreements, leases, contracts or other
arrangements for the furnishing to or by the LLC of
goods, services or space with any Member or Affiliate
of a Member, and may pay compensation in connection
with such business, goods, services or space,
provided in each case the amounts payable thereunder are reasonably
comparable to those which would be payable to
unaffiliated Persons under similar agreements, and
if the determination of such amounts is made in good
faith it shall be conclusive absent manifest error.
6.09 Indemnification and Exculpation.
(a) No Manager, or its Affiliates, shall
have any liability to the LLC or to any
Member for any loss suffered by the LLC which arises
out of any action or inaction of any Manager or its
Affiliates if such Manager or its Affiliates, as the
case may be, in good faith, determined that such course
of conduct was in the best interests of the LLC and
such course of conduct did not constitute gross
negligence or willful misconduct of such Manager or
its Affiliates. Each Manager and its Affiliates shall be indemnified by
the LLC against any losses, judgments, liabilities.
expenses and amounts paid in settlement of any claims
sustained by it with respect to actions taken by such Manager
or its Affiliates on behalf of the LLC, provided that no
indemnification shall be provided for any person with respect
to any matter as to which he shall have been adjudicated
in any proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interest of
the LLC. Without limiting the foregoing, such
indemnification may include payment by the LLC of expenses
incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such
action or proceeding, upon receipt of an undertaking by the
person indemnified to repay such payment if he shall be
adjudicated not to be entitled to indemnification under this
Section 6.9, which undertaking may be accepted without
reference to the financial ability of such person to
make repayment, Any indemnification to be provided hereunder
may be provided although the person to be indemnified is
no longer a Manager or an Affiliate of a Manager.
(b) Notwithstanding the provisions of
Section 6.9(a) above, foregoing, no
Manager, nor its respective Affiliates, nor any person
acting as a broker-dealer, shall be
indemnified for any losses, liabilities or expenses arising
from or out of a violation of federal
or state securities laws or any other intentional or
criminal wrongdoing. Any indemnity under this Section 6.9
shall be paid from, and only to the extent of, LLC assets,
and no Member shall have any personal liability on amount
thereof. The LLC shall not incur the cost of that
portion of any insurance, other than public liability
insurance, which insures any party against any liability
as to which such party is herein prohibited from being
indemnified.
6.10 Other Activities. Except as provided
in Section 6. 10(b) below, the Members, Managers and any
Affiliates of any of them, may engage in and possess
interests in other business, ventures and investment
opportunities of every kind and description,
independently or with others, including serving as
directors, officers, stockholders, managers, members and
general or limited partners of corporations, partnerships or other limited
liability companies with purposes similar to those of the
LLC. Neither the LLC nor any other Member or Manager
shall have any rights in or to such ventures or opportunities
or the income or profits therefrom.
ARTICLE VII
Fiscal Matters
7.01 Books and Records. The Board of Managers
shall keep or cause one Manager or a designated third
party to keep, complete and accurate books and records of
the LLC on the income tax method of reporting and
otherwise in accordance with generally accepted accounting
principles consistently applied, which shall be maintained and
be available, in addition to any documents and information
required to be furnished to the Members under the Act, at
the office of the LLC for examination and copying by any
Member or Manager, or his, her or its duly authorized
representative, at its reasonable request and at its expense
during ordinary business hours. A current list of the
full name and last known address of each Member and
Manager, a copy of this Agreement, any amendments thereto, the
Certificate, including all certificates of amendment
thereto, executed copies of all powers of attorney, if
any, pursuant to which this Agreement, any amendment, the
Certificate or any certificate of amendment has been
executed, copies of the LLC's financial statements and
federal, state and local income tax returns and
reports, if any, for the three most recent fiscal years,
shall be maintained at the registered office of the LLC
required by the Act.
The LLC shall have no obligation to deliver or mail
a copy of the Certificate or any
amendment thereto to the Members .
7.02 Reports. Within one hundred twenty (120) days
after the end of each fiscal year,
the Board of Managers shall cause to be prepared and sent to
all Members a financial report of
the LLC, including a balance sheet and a profit and loss
statement, and, if such profit and loss
statement is not prepared on a cash basis, a statement of
changes in financial position, all of
which shall be certified by an independent certified public
accountant if required by Consent of
the Members. Within ninety (90) days after the end of each
fiscal year, the Board of Managers shall furnish (or cause
to be furnished) to all Members such information as may
be needed to enable the Members to file their federal income
tax return and any required state income tax return.
The cost of all such reporting shall be paid by the LLC
as an LLC expense. Any Member may, at any time, at its own
expense, cause an audit of the LLC books to be made by
a certified public accountant of its own selection, All
expenses incurred by such accountant shall be home by such
Member.
7.03 Bank Accounts. The Board of Managers shall
be responsible for causing one or
more accounts to be maintained in a bank (or banks) which is
a member of the F.D.I.C., which accounts shall be used for
the payment of the expenditures incurred in connection
with the business of the LLC, and in which shall be deposited
any and all cash receipts. All deposits and funds not needed
for the operations of the LLC may be invested in short-
term investments, including securities issued or fully
guaranteed by United States government agencies,
certificates of deposit of banks, bank repurchase agreements
covering the securities of the United States government,
commercial paper rated A or better by Moody's Investors
Services, Inc., money market funds, interest-bearing time
deposits in banks and thrift institutions and such other
similar investments as the Board of Managers may approve. All
such amounts shall be and remain the property of the LLC,
and shall be received, held and disbursed by the Board
of Managers for the purposes specified in this Agreement.
There shall not be deposited in any of said accounts any
funds other than funds belonging to the LLC, and no other
funds shall in any way be commingled with such funds.
Withdrawals from any LLC bank or similar account shall
be made and other activity conducted on such signature or
signatures as shall be approved by the Board of Managers.
7.04 Fiscal Year. The fiscal year of the LLC
shall end on December 31 of each year.
7.05 Tax Matters Partner. The Board of Managers
shall designate a Member to serve
as the "tax matters partner" of the LLC. If at any time such
person is not eligible under the
Code to serve, or refuses to serve, as the "tax matters
partner," another Member shall be
designated by the Board of Managers to serve as the "tax
matters partner." The "tax matters
partner" is hereby authorized to and shall perform all duties
of a "tax matters partner" under the
Code and shall serve as "tax matters partner" until his, her
or its resignation or until the
designation of his, her or its successor, whichever occurs
sooner.
ARTICLE VII
Transfer ofInterests
8.01 General Restrictions on Transfer.
(a) No Member may Transfer his, her or
its interest in the LLC unless the Board of Managers (acting
exclusive of any Manager which is, or is affiliated with, the
Transferring Member) and the other Member shall have
previously approved such Transfer in
writing, the granting or denying of which approval shall
be in the Board's and such other
Member's absolute discretion.
No assignment of the interest of a Member shall be
made if, in the opinion of counsel
to the LLC, such assignment (i) may not be effected
without registration under the Securities
Act, (ii) would result in the violation of any applicable state
securities laws, (iii) unless approved
by the Board of Managers (acting exclusive of any Manager
which is, or is affiliated with, the
Transferring Member), would result in a termination of the
LLC under Section 708 of the Code
or (iv) unless approved by the Board of Managers (acting
exclusive of any Manager which is,
or is affiliated with, the Transferring Member), would result
in the treatment of the LLC as an
association taxable as a corporation or as a "publicly
traded limited partnership" for tax
purposes. The LLC shall not be required to recognize any
such assignment until the instrument
conveying such interest has been delivered to the Board
of Managers for recordation on the
books of the LLC. Unless an assignee becomes a
substituted Member in accordance with the
provisions of Section 8.01(b), it shall not be entitled to any
of the rights granted to a Member
hereunder, other than the right to receive all or part of the
share of the net profits, net losses,
cash distributions or return of capital to which his assignor
would otherwise be entitled.
(b) An assignee of the interest of a
Member, or any portion thereof, shall
become a substituted Member entitled to all the rights of a
Member if, and only if:
(i) the assignor gives the assignee such right;
(ii) the remaining Member shall have consented to
such substitution in writing, the granting or denying of which
consent shall be in her or its absolute discretion:
(iii) the assignee pays to the LLC all
costs and expenses incurred in connection with such substitution,
including specifically, without limitation, costs incurred in the review
and processing of the assignment and in amending the LLC's then
current Certificate and/ or Operating Agreement, if required; and
(iv) the assignee executes and delivers an
Amendment to this Agreement (and to the Certificate, if required),
which Amendment shall be executed by a Manager and by such assignee,
and such other instruments, in form and substance satisfactory to
the Board of Managers (acting exclusive of any manager which is, or is
affiliated with, the assigning Member), as may be necessary,
appropriate or desirable to effect such in Section 8.02(b), shall be
deemed(L by acceptance of the acquisition thereof, to have agreed to
be subject to and bound by all of the obligations of this
Agreement with respect to such interest
and shall be subject to the provisions of this Agreement with
respect to any subsequent Transfer of such interest.
(e) Any Transfer in contravention of any of
the provisions of this Agreement
shall be null and void and ineffective to transfer any interest
in the LLC, and shall not bind, or
be recognized by, or on the books of, the LLC, and
any transferee or assignee in such
transaction shall not be or be treated as or deemed to be a
Member for any purpose, except to
the extent provided in Section 8.01(d) above. In the
event any Member shall at any time
Transfer an interest in the LLC in contravention of any of the
provisions of this Agreement, then
each other Member shall, in addition to all rights and remedies
at law and equity, be entitled to
a decree or order restraining and enjoining such
transaction, and the offending Member shall not
plead in defense thereto that there would be an adequate
remedy at law; it being expressly
hereby acknowledged and agreed that damages at law
would be an inadequate remedy for a
breach or threatened breach of the provisions of this
Agreement concerning such transactions.
8.03 Transfers of Interests by Members Who Serve as Managers.
(a) A Transfer or assignment of an
interest by a Member who serves as a
Manager shall transfer only the economic interest, rights,
duties and obligations of the transferor
in its capacity as a Member, and no transferee shall obtain,
as a result of such Transfer or
assignment, any rights as a Manager.
(b) A Member serving as a Manager who assigns
or Transfers all (but not less than all) of its interest as a Member
shall be deemed to have tendered his or her resignation as
a Manager to the Board of Managers effective as of the date
of such transfer or assignment. A
majority of the Board of Managers, exclusive of the
resigning member, may accept or reject
such resignation. If accepted, the acceptance date shall be
the effective date of the resignation.
Failure to reject such resignation within thirty (30) days
after the tender thereof shall be deemed
to constitute acceptance of such resignation.
8.04 Permitted Transfers. The following Transfers
shall be permitted without the
approval of the Board of Managers otherwise required
under Section 8.01(a) above, but such
permitted Transfers shall in any event be subject to Sections
8.01(b) and 8.02 hereof:
(a) An interest as a Member of the LLC may
be Transferred from time to time
as a part of any proceeding under the present or any
future federal bankruptcy act or any other
present or future applicable federal, state, or other
statute or law relating to bankruptcy,
insolvency, or other relief for debtors, and subject to the
requirements and provisions thereof.
(b) An interest as a Member of the LLC may
be Transferred from time to time
to any Legal Representative(s) and/or Affiliate(s) and/or
member(s) of the Immediate Family of
the transferring Member.
8.05 Right of First Refusal.
(a) A Member may Transfer the whole or any
portion of his, her or its interest
as a Member of the LLC without the approval of the
Board of Managers otherwise required
under this Agreement if such Member (the "Offering Member")
first obtains a Bona Fide Offer
for the purchase of the entire interest to be Transferred and
makes the interest which is the
subject of the Bona Fide Offer available to the other Members
on a first refusal basis upon the
same terms and provisions as are set forth in such Bona Fide
Offer, in the manner hereinafter
set forth.
(b) The Offering Member shall furnish a
true and complete copy of the Bona
Fide Offer to each other Member, together with full
and fair disclosure of any material
information available as to the proposed transaction and the
parties thereto, and the other
Members shall have a period of sixty (60) days thereafter
within which to elect, by written
notice to the Offering Member (the "Exercise Notice"), to
purchase the entire interest to be
Transferred at the price (the "Purchase Price") and upon the
terms set forth in the Bona Fide
offer. Each Exercise Notice shall contain a statement
of the maximum percentage of the
Offering Member's interest which the Member giving such
notice wishes to purchase, and if
such amounts do not total at least 100% of the Offering
Member's interest which is the subject
of the Bona Fide Offer, then no Member shall have the right
to purchase any interest of the
Offering Member.
(c) If there shall be a dispute as to the
amount of the Offering Member's interest which any Member(s) may
purchase pursuant to Section8.05(b), each Member
participating in any such purchase (a 'Purchasing Member')
shall be entitled to purchase a pro
rata amount of the Offering Member's interest based
upon the Percentage Interest of such
Purchasing Member in relation to the aggregate
Percentage Interests held by all Members
participating in such purchase, unless the Purchasing
Members agree to purchase such interest
based upon an allocation other than such pro rata allocation.
(d) If the interest of the Offering Member is
being purchased by one or more Purchasing Members, the closing shall
take place at the principal office of the LLC, on the date
specified in the Exercise Notice of the Purchasing Member
who is purchasing the largest portion
of such interest (which date shall not be earlier than ten (10)
nor more than thirty (30) days after
the sixtieth (60th) day following delivery of such Exercise
Notice to the Offering Member). At
the closing, the Purchase Price shall be paid by the
Purchasing Member(s) upon the terms set
forth in ft Bona Fide Offer and the Offering Member shall
execute and deliver such instruments
as may be required to vest in the Purchasing Member(s) (or his,
her, its, or their designees) the
interest to be sold free and clear of all liens, claims and
encumbrances. All information, trade
secrets or confidential financial or other data of the LLC
shall be the property of the LLC, and
the Offering Member shall not disclose or use to the
detriment of the other Member(s) any
confidential information, trade secrets or confidential
financial or other data of the LLC;
provided, however, that the offering Member may make
such disclosures as he, she, or it
reasonably believes may be required by law, regulation, or
rule of any government authority
or any court order or other legal process.
(e) If the interest of the offering Member shall not
be purchased by Purchasing
Member(s) as aforesaid, the Offering Member may sell such
interest to the maker of the Bona
Fide offer, but only upon the terms and provisions originally
set forth in the Bona Fide Offer,
provided such sale satisfies the following requirements:
(i) Such sale is concluded within
one hundred twenty (120) days after
the delivery to the offeree of the Bona Fide offer; and
(ii) The maker of the Bona Fide
offer shall enter into a valid and
binding agreement the effect of which will be that
any interest in the LLC which is so
Transferred shall continue to remain subject to the
provisions of this Agreement with the
same force and effect as if such Person had originally
been a party hereto.
ARTICLE IX
Dissolution and Termination
9.01 Events Causing Dissolution. The LLC shall
be dissolved and its affairs wound
up upon:
(a) the sale or other disposition of all or
substantially all of the assets of the
LLC, unless the disposition is a transfer of assets of
the LLC in return for consideration other
than cash and the Board of Managers determines not to
distribute any such non-cash items to the
Members;
(b) subject to the provisions of Section
9.02, upon the death, insanity, retirement, resignation, expulsion,
Bankruptcy, dissolution or occurrence of any other event
which terminates the membership of a Member, except
for a Transfer effected in accordance
with the provisions of Article VIII;
(c) the election to dissolve the LLC made in
writing by the Board of Managers with the Consent of the Members,
(d) any consolidation or merger of the LLC
with or into any entity following
which the LLC is not the resulting or surviving entity;
(e) the occurrence of an Event of Default
following which the non-Defaulter
elects to dissolve the LLC pursuant to the provisions of
Section 10-02(d); or
(f) the occurrence of an event specified
under the laws of the State of
Delaware as one effecting dissolution, except that where,
under the terms of this Agreement or
the Act, the LLC is not to terminate, then the LLC
shall immediately be reconstituted and
reformed on all the applicable terms, conditions, and
provisions of this Agreement,
(g) December 31, 2010.
9.02 Continuation of the LLC.
Notwithstanding the occurrence of an event specified in Section
9.01(b), the LLC shall not be dissolved and its business and
affairs shall not be
discontinued, and the LLC shall remain in existence as a
limited liability company under the
laws of the State of Delaware, if the remaining Members, acting
by Consent, elect within ninety
(90) days after such occurrence to continue the LLC and the
LLC's business. If such election
to continue the LLC and its business is made by one Member,
an additional Member shall be
admitted to the LLC in connection with such election.
9.03 Procedures on Dissolution. Dissolution of
the LLC shall be effective on the day
on which occurs the event giving rise to the dissolution, but
the LLC shall not terminate until
the Certificate shall have been cancelled and the assets of the
LLC shall have been distributed
as provided herein. Notwithstanding the dissolution of the LLC,
prior to the termination of the
LLC, as aforesaid, the business of the LLC and the affairs
of the Members, as such, shall
continue to be governed by this Agreement. The Board of
Managers or, if there be none, a
liquidator appointed with the Consent of the Members, shall
liquidate the assets of the LLC,
apply and distribute the proceeds thereof as contemplated by
this Agreement and cause the
cancellation of the Certificate.
9.04 Management Rights During Winding Up. During the
period of the winding up
of the affairs of the LLC, the rights and obligations of the
Members set forth herein with respect
to the management of the LLC shall continue, For purposes
of winding up, the Board of
Managers shall continue to act as such and shall make all
decisions relating to the conduct of
any business or operations during the winding up period and to
the sale or other disposition of
LLC assets; provided that if the termination of the LLC results
from an Event of Default, the
defaulting Member shall have no further right to participate in
the management or affairs of the
Venture or to attend Board of Manager meetings or vote on
decisions by the Board of Managers,
but shall nonetheless be bound by all decisions made by
the non-Defaulter. Each Member
hereby waives any claims it may have against the non
Defaulter that may arise out of the
management by the non-Defaulter of the LLC, so long as such non
Defaulter acts in good faith.
9.05 Distributions Upon Liquidation. If the LLC is
dissolved for any reason while
there is work in progress on the development or construction of
the Property and Improvements,
winding up of the affairs and termination of the business of
the LLC may include completion
of the work in progress to the extent of constructing and
leasing or selling improvements then
being developed on such Property or Improvements as the
Board of Managers may determine
to be necessary to bring the matters under construction to a
state of completion convenient to
permit a sale of the LLC's interest in such work, giving due
regard to the interests of the
Members.
9.06 Distributions Upon Liquidation.
(a) After payment of liabilities owing to
creditors, the Board of Managers or
liquidator shall set up such reserves as it deems reasonably
necessary for any contingent or
unforeseen liabilities or obligations of the LLC. Said reserves
may be paid over by the Board
of Managers or such liquidator to a bank, to be held in escrow
for the purpose of paying any
such contingent or unforeseen liabilities or obligations and, at
the expiration of such period as
the Board or liquidator may deem advisable, such reserves shall
be distributed to the Members
or their assigns in the manner set forth in paragraph (b) below.
(b) After paying such liabilities and
providing for such reserves, the Board of
Managers or liquidator shall cause the remaining net assets of
the LLC to be distributed to and
among the Members in accordance with their respective
positive Adjusted Capital Account
balances (after such balances have been adjusted to reflect the
allocation of Net Profits or Net
Losses arising from such event pursuant to Sections 5.01, 5.02
and 5.03) . In the event that any
part of such net assets consists of notes or accounts receivable
or other non-cash assets, the
Board of Managers or liquidator may take whatever steps it
deems appropriate to convert such
assets into cash or into any other form which would facilitate
the distribution thereof. If any
assets of the LLC are to be distributed in kind, such assets
shall be distributed on the basis of
their fair market value (net of any liabilities). Any dispute
concerning such fair market value
shall be settled by arbitration in accordance with the
provisions of Article XII.
9.07 Disposition of Documents and Records. All
documents and records of the LLC
including, without limitation, all financial records,
vouchers, canceled checks and bank
statements, shall be delivered to HPP upon termination of the LLC.
ARTICLE X
Default and Dissolution
10.01 Events of Default.
(a) The occurrence of any of the following
events shall constitute an event of
default (an "Event of Default") hereunder on the part of the
Member with respect to whom such
event occurs (a "Defaulting Member") if within thirty (30) days
following notice of such default
from the other Member (ten (10) days if the default is due
solely to the nonpayment of monies),
the Defaulting Member fails to pay such monies, or in the
case of non-monetary defaults, fails
to commence substantial efforts to cure such default or
thereafter fails within a reasonable time
to prosecute to completion with diligence and continuity the
curing of such default; provided,
however, that the Bankruptcy of a Member shall
constitute an Event of Default immediately upon such
occurrence without any requirement of notice or passage
of time (except as specifically set forth in ft definition
of "Bankruptcy" set forth in Article XIV).
(i) the violation by a Member of any
of the restrictions set forth in
Article VIII of this Agreement upon the right of a Member
to transfer her or its interest
in the LLC;
(ii) the Bankruptcy of a Member; and
(iii) a default in the performance of or
a failure to comply with any other material agreements, obligations or
undertakings of a Member herein contained.
10.02 Election of Non-Defaulting Member.
(a) Upon the occurrence of an Event of
Default by a Defaulting Member, the
Non-Defaulting Member shall have the right to acquire the
interest of the Defaulting Member
for cash, except as provided in Section 10,02 (b) hereof, at a
price determined pursuant to the
appraisal procedures set forth in Article XI, subject to
adjustment as set forth in Section 10.03
(b). In furtherance of such right, the Non-Defaulting
Member may notify the Defaulting
Member at any time following an Event of Default of the Non
Defaulting Member's election to institute the appraisal
procedures set forth in Article )U. Upon the determination of
the value of the Defaulting Member's interest, the Non
Defaulting Member may notify the Defaulting Member of the
election by the Non-Defaulting Member to purchase the interest
of the Defaulting Member.
(b) In the event that an Event of Default
consists of the Bankruptcy of the
Defaulting Member, the Non-Defaulting Member shall have the
right to purchase the Defaulting Member's interest by
payment of twenty percent (20%) of the purchase price (as
determined by the appraisal procedure pursuant to Article XI)
for such interest at closing, the balance of the purchase
price to be payable in equal monthly installments over a period
of five (5) years, the unpaid balance to bear interest at
the Designated Prime Rate as of the date of closing, with the
right of prepayment of any amount at any time without premium.
(c) The closing of the purchase shall take
place as provided in Section 10.03;
provided, that upon the closing of such purchase the Non
Defaulting Member may elect to offset against the purchase
price the amount of any loss, damage or injury, the amount
of which has been established by a final non-appealable
judgment, caused to it by the default of the Defaulting
Member.
(d) If the Non-Defaulting Member does not elect
to acquire the entire interest of the Defaulting Member as set forth in
Section 10.02 (a), the Non-Defaulting Member may elect to dissolve and
terminate the LLC pursuant to Section 9.01 of this Agreement
by written notice to the Defaulting Member. The right of
the Non-Defaulting Member to institute the procedures for
purchase of the Defaulting Member's interest as set forth in
this Section 10.02 shall continue unless and until such
NonDefaulting Member elects to exercise its right to
terminate the LLC as provided in this Section-10.02 (d).
10.03 Closing.
(a) The closing of any sale of an interest in
the LLC pursuant to this Article
X (the "Closing") shall be held at the principal office of the
LLC, unless otherwise mutually
agreed, on a mutually acceptable date not more than sixty (60)
days after receipt of written
notice from the Non-Defaulting Member to purchase the
interest of the Defaulting Member pursuant to the provisions
of Section 10.02 and the determination of the value of the
Defaulting Member's interest pursuant to the appraisal
procedures set forth in Article XI.
(b) At the Closing, any closing
adjustments which are then usual and
customary, shall be made between the purchasing party or parties
and each selling party as of
the date of Closing- The price to be paid for a selling Member's
interest also shall be adjusted
as follows, There shall be determined, as of the date of the
Closing, (i) the aggregate amount
of all additional capital contributions made by the selling
Member pursuant to the provisions of
this Agreement between the date as of which the price for such
interest was established and the
date of the Closing, and (ii) the aggregate amount of all
distributions, whether of capital or
otherwise, made to the selling Member during such period
pursuant to the provisions of Article IV. If the amount
determined under clause (i) exceeds the amount determined
under clause (ii), the price shall be increased by an amount
equal to such excess-, if the amount determined under clause
(ii) exceeds the amount determined under clause (i), the price
shall be decreased by an amount equal to such excess. Any
Member transferring its or his interest shall transfer
such interest free and clear of any liens, encumbrances or any
interests of any third party and shall execute or cause to be
executed any and all documents required to fully transfer
such Interest to the acquiring Members, including, but not
limited to, any documents necessary to evidence such
transfer, and all documents required to release any interest
of a Member's spouse or any other party who may claim an
interest in such interest. Any monetary default by the
selling Member must be cured out of the proceeds from such
sale at the Closing. Following the date of Closing, the
selling Member shall have no further rights to any distributions
of Distributable Cash, other LLC income or any distributions
attributable to any period or event following the date of
Closing and all such rights shall vest in the selling Member's
transferee.
ARTICLE XI
Appraisal
11.01 General. Whenever this Agreement provides
for the valuation of an interest in
the LLC to be purchased or sold, the value of such interest in
the LLC shall be determined as
follows. The parties shall first attempt to agree upon the
"net fair market value' of the LLC
and of the Interests in the LLC to be purchased or sold. The
'net fair market value' of the LLC
shall mean the cash price which a sophisticated purchaser would
pay on the effective date of the appraisal for all
tangible assets of the LLC in excess of the mortgages or
other liens then encumbering the LLC's assets, such valuation to be made on
the assumption that such assets are subject to the terms and
conditions of this Agreement and to any other agreements,
including leases, management and service agreements then in
effect. A sophisticated purchaser shall be one who would
take into account the nature, extent, maturity date,
and other terms of the liabilities of the LLC, whether fixed
or contingent, including the favorable or unfavorable nature
of any mortgages or other liens then encumbering the
Property or other LLC assets, and the prospects that the
income from the LLC assets would be sufficient to satisfy such
liabilities when due, excluding any liability under any
financing already taken into account, The "net fair
market value" of an interest shall mean the value of the
interest to be sold or purchased, based on the net fair
market value of the LLC, and subject to the terms and
provisions of this Agreement.
11.02 Appraisal Procedures. In the event that the
Members are unable to mutually agree upon the net fair
market value of the LLC and of the interests to be sold or
purchased within thirty (30) days following the date on which
the appraisal procedures set forth in this Article XI are
instituted as provided in this Agreement, the Members
shall attempt to agree upon the appointment of three (3)
disinterested appraisers who shall be members of the American
Institute of Appraisers. If the Members are unable to agree
upon the selection of three (3) appraisers within seventy
five (75) days of the date the appraisal procedures are
instituted as Provided in this Agreement, then a petition
may be made by either Member to the presiding judge
of the Superior Court for the Commonwealth of
Massachusetts, County of Suffolk, for such selection.
Each Member shall have the right to submit the names of
three (3) appraisers so qualified and the judge shall
select the three (3) appraisers from the names so
submitted. Each appraiser so selected shall furnish the
Members and the certified public accountants for the LLC
with a written appraisal within ninety (90) days following his
selection, setting forth his determination of the net fair
market value of all real estate and other tangible assets
owned by the LLC as of the date of the application to the
Superior Court. Such appraisal shall assume that the use
of the Property shall be the highest and best use thereof, and
the appraisal shall not include any value for any
intangible assets of the LLC, such as goodwill. The
average of the two closest valuations of such appraisers
shall be treated as the net fair market value of the LLC
and of the interests to be sold or purchased hereunder and
such determination shall be final and binding on the
Members. The cost of the appraisal shall be an expense of the
LLC.
ARTICLE XII
Arbitration
12.01 Initiation. In such cases where this
Agreement provides for the determination of
any matter by arbitration, the game shall be settled and
finally determined by arbitration in the
City of Boston, Massachusetts in accordance with the
Rules of Commercial Arbitration of the American
Arbitration Association, or its successor, or in any
case where the American Arbitration Association, or its successor, is
not in existence or fails or refuses to act within a
reasonably prompt period of time (but in no event
exceeding sixty (60) days from the date a request for
arbitration is filed), the arbitration shall proceed in
accordance with the laws relating to arbitration then in
effect in the Commonwealth of Massachusetts. Any
arbitration pursuant to this Agreement shall be conducted
by three (3) arbitrators, The judgment upon the award
rendered in any such arbitration shall be final and binding
upon the parties and may be entered in any court having
jurisdiction thereof.
12.02 Costs. All fees and expenses of the arbitrators
and all other expenses of the
arbitration, except for attorneys' fees, shall be shared by
the Members in accordance with their respective Percentage
Interests. Each Member shall bear its own attorneys' fees.
ARTICLE XIII
General Provisions
13-01 Notices. Except for notices of meetings of
Managers and Members, notice of which shall be given in
the manner provided in Sections 6,02(h) and 6.0a(e),
respectively, any and all notices under this Agreement shall
be effective (a) on the fourth business day after being
sent by registered or certified mail, return receipt requested,
postage prepaid, (b) on the first business day after
being sent by express mail, receipt confirmed telecopy,
or commercial overnight delivery service providing a receipt
for delivery, (c) on the date of hand delivery or (d) on
the date actually received, if sent by any other method. In
order to be effective, all such notices shall be addressed,
if to the LLC at its registered office under the Act, if
to a Member at the last address of record on the LLC books,
and copies of such notices shall also be sent to the last
address for the recipient which is known to the sender, if
different from the address so specified.
13.02 Word Meanings. The words such as "herein,"
"hereinafter," and "hereunder" refer to this Agreement as a
whole and not merely to a subdivision in which such
words appear unless the context otherwise requires. The
singular shall include the plural and the masculine gender
shall include the feminine and neuter, and vice versa,
unless the context otherwise requires.
13.03 Binding Provisions. Subject to the restrictions
on transfers set forth herein, the
covenants and agreements contained herein shall be binding
upon, and inure to the benefit of,
the parties hereto, their heirs, Legal Representatives,
successors and assigns.
13.04 Applicable Law. This Agreement shall be
construed and enforced in accordance
with the laws of the State of Delaware, including the Act, as
interpreted by the courts of the
State of Delaware, notwithstanding any rules regarding choice
of law to the contrary.
13.05 Counterparts. This Agreement may be executed
in several counterparts and as
so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all
of the parties have not signed the original or the same
counterpart.
13 .06 Separability of Provisions. Each provision of
this Agreement shall be considered
separable.
13.07 Section Titles. Section titles are for
descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in
the text.
13.08 Amendments. Except as otherwise specifically
provided in this Agreement, this
Agreement may be amended or modified only with the Consent of
the Members.
13-09 Third Party Beneficiaries. The provisions of
this Agreement, including Article
III (except Section 3.02), are not intended to be for the
benefit of any creditor (other than a
Member who is a creditor) or other Person (other than a Member
or Manager in his, her or its capacity as such) to whom
any debts, liabilities or obligations are owed by (or who
otherwise have any claim against) the- LLC or any of the
Members or Managers. Moreover, notwithstanding
anything contained in this Agreement, including without
limitation Article III (except Section 3,02), no such
creditor or other Person shall obtain any rights under
this Agreement or shall, by reason of this Agreement, make
any claim in respect of any debt, liability or obligation
(or otherwise) against the LLC or any Member or Manager.
13. 10 Entire Agreement. This Agreement
embodies the entire agreement and
understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
To the extent that any provision of this Agreement is
prohibited or ineffective under the
Act, this Agreement shall be considered amended to the,
smallest degree possible in order to
make the Agreement effective under the Act (and, if
the Act is subsequently amended or interpreted in such
manner as to make effective any provision of this
Agreement that was formerly rendered invalid, such
provision shall automatically be considered to be valid
from the effective date of such amendment or
interpretation). The Members and Managers hereby agree
that each Member and each Manager shall be entitled to
rely on the provisions of this Agreement, and no
Member or Manager shall be liable to the LLC or any
other Member or Manager for any action or refusal to
act taken in good faith reliance on the terms of this
Agreement.
The Members and the Managers hereby agree that
the duties and obligations imposed on the Members and
Managers as such shall be those set forth in this
Agreement, which is intended to govern the relationship
among the LLC, the Members and the Managers,
notwithstanding any provision of the Act or common law to the
contrary.
13 .11 Waiver of Partition. Each Member agrees that
irreparable damage would be done to the LLC if any Member
brought an action in court to dissolve the LLC.
Accordingly, unless otherwise expressly authorized in this
Agreement, each Member agrees that he, she or it shall
not, either directly or indirectly, take any action to require
partition or appraisal of the LLC or of any of the
assets or properties of the LLC, and notwithstanding
any provisions of this Agreement to the contrary, each Member
(and his, her or its successors and assigns) accepts
the provisions of the Agreement as his, her or its sole
entitlement on termination, dissolution and/or liquidation
of the LLC and hereby irrevocably waives any and all
right to maintain any action for partition or to compel any
sale or other liquidation with respect to his, her or its
interest, in or with respect to, any assets or properties
of the LLC; and each Member agrees that he, she or it
will not petition a court for the dissolution, termination or
liquidation of the LLC.
13.12 Survival of Certain Provisions. The Members
acknowledge and agree that this Agreement contains
certain terms and conditions which are intended to
survive the dissolution and termination of the LLC,
including without limitation, the provisions of Sections
2.05 and 6.9. The Members agree that such provisions of this
Agreement which by their terms require, given their
context, that they survive the dissolution and
termination of the LLC so as to effectuate the intended
purposes and agreements of the Members, shall survive
notwithstanding that such provisions had not been
specifically identified as surviving and notwithstanding
the dissolution and termination of the LLC or the
execution of any document terminating this Agreement,
unless such termination document specifically provides for
nonsurvival by reference to this Section 10.12 and to specific
nonsurviving provisions.
ARTICLE XIV
Definitions
The following capitalized terms used in this
Agreement shall have the respective
meanings ascribed to them below:
"Act" means the Delaware Limited Liability Company
Act, in effect at the time of the
initial filing of the, Certificate with the Office of the
Secretary of State of the State of Delaware,
and as thereafter amended from time to time.
"Adjusted Capital Account" means an offer which
complies with the following conditions:
(i) The offer shall be in writing and shall
constitute an agreement legally binding on the offeror
without any material conditions precedent or right on
the part of the offeror to withdraw the offer within sixty
(60) days-,
(ii) The offeror shall be a financially responsible Person,
(iii) The offer shall be for a purchase solely
for cash payable all at the time of sale; and
(iv) The offeror shall be a Person who is not
an Affiliate of the Offering Member(s) For this purpose
the term 'Affiliate' shall include, in addition to the
Persons specified in the definition thereof, all
beneficial owners of the specified Person and members
of the Immediate Family of such beneficial owners.
"Budget" shall have the meaning set forth in Section 6.06(a).
"Capital Account" means a separate account
maintained for each Member and adjusted in accordance
with Treasury Regulations under Section 704 of the
Code. To the extent consistent with such Treasury
Regulations, the adjustments to such accounts shall
include the following:
(i) There shall be credited to each Member's
Capital Account the amount of any cash (which shall
not include imputed or actual interest on any
deferred contributions) actually contributed by such
Member to the capital of the LLC, the fair market value
(without regard to Code Section 7701(g)) of any
property contributed by such Member to the capital of the
LLC (net of any liabilities secured by such property
that the LLC is considered to assume or take
subject to under Code Section 752) and such Member's share
of the Net Profits and Gross Income of the LLC and
of any items in ft nature of income or gain separately
allocated to the Members; and there shall be charged against each
Member's Capital Account the amount of all cash
distributions to such Member, the fair market value
(without regard to Code Section 7701(g)) of any
property distributed to such Member by the LLC (net
of any liability secured by such property that
the Member is considered to assume or take subject to under
Code Section 752) and such Member's share of the Net
Losses of the LLC and of any items in the nature of
losses or deductions separately allocated to the Members.
(ii) If the LLC at any time distributes any of
its assets in-kind to any Member, the Capital Account
of each Member shall be adjusted to account for that
Member's allocable share of the Net Profits, Net Losses
or Gross Income that would have been realized by
the LLC had it sold the assets that were distributed at
their respective fair market values (taking Code Section
7701(g) into account) immediately prior to their distribution.
(iii) In the event any interest in the LLC
is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to
the transferred interest.
"Capital Transaction" means a sale or other
disposition of all or a portion of the LLC's property
in a single transaction or in a series of related
transactions.
"Carney Equity" means the capital contribution made to
the LLC by Lillian B. Carney in the
amount of $650,000, upon which amount Lillian B.
Carney shall receive a preferred return at the annual
rate of twelve percent (12%) as set forth in Section 401.
"Carring Value" means, with respect to any
asset, the asset's adjusted basis for federal income
tax purposes, except as follows:
(i) The initial Carrying Value of any
asset contributed to the LLC shall be
such asset's gross fair market value at the time of such contribution;
(ii) The Carrying Values of all LLC
assets shall be adjusted to equal their respective
gross fair market values upon an election by the LLC
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(f) to
adjust the Members' Capital Accounts;
(iii) If the adjusted basis of any asset
acquired by the LLC is determined by reference to
the madjusted basis of any other asset of the LLC, the
Carrying Value of the acquired asset shall be
determined by reference to the Carrying Value of the other asset
rather than its adjusted basis; and
(iv) If the Carrying Value of an asset
has been determined pursuant to clause (i), (ii) or
(iii) of this definition, such Carrying Value shall
thereafter be adjusted in the same manner as would
the asset's adjusted basis for federal income tax purposes
except that depreciation deductions shall be computed
in accordance with clause (i) of the definition of
"Net Profits" and "Net Losses".
"Certificate" means the Certificate of
Formation creating the LLC, as it may, from time to
time, be amended in accordance with the Act.
"Closing" shall have the meaning set forth in
Section 10.03(a).
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Consent" means the written consent or
approval of more than 50% in interest, based on the
Percentage, Interests of the Members as specified on
Schedule B of those Members entitled to
participate in giving such Consent, and if more than one class
of members is so entitled then more than 50% shall be so
required with respect to each such class.
"Defaulting, Member" shall have the meaning set
forth in Section 10.01(a).
"Distributable Cash" means, with respect to any fiscal
period, the excess of all cash
receipts of the LLC from any source whatsoever, including
normal operations, sales of assets, proceeds of
borrowings, capital contributions of the Members,
proceeds from a Capital Transaction, and any and all other
sources over the sum of the following amounts:
(i) cash disbursements for advertising and
promotion expenses, salaries, employee
benefits (including profit-sharing, bonus and similar
plans), fringe benefits, accounting and
bookkeeping services and equipment, costs of sales of
assets, utilities, rental payments with
respect to equipment or real property, management fees
and expenses, insurance, real estate taxes, legal
expenses, costs of repairs and maintenance, and any and all
other items which are customarily considered to be
"operating expenses";
(ii) payments of interest, principal and
premium and points and other costs of
borrowing under any indebtedness of the LLC, including
without limitation (A) any mortgages or deeds of trust
encumbering the real property or other assets owned or leased
by the LLC, and (B) the Heller Loan, but specifically
excluding payments of any kind in respect of any loan made
by a Member pursuant to Article III;
(iii) payments made to purchase capital
assets, and for capital construction,
rehabilitation, acquisitions, alterations and improvements; and
(iv) amounts set aside as reserves for
working capital, contingent liabilities,
replacements or for any of the expenditures described in
clauses (i), (ii) and (iii) above which
are deemed by the Board of Managers to be necessary to meet
the current and anticipated future needs of the LLC.
"Economic Risk of Loss" means the risk as
determined under Treasury Regulation Section 1.752-2
(taking all applicable 'grandfathering' rules into
account) that a member or person related to a member will suffer an
economic loss as a result of the failure of the limited
liability company to repay a liability.
"Excess Negative Balance" for a Member means the
excess, if any, of (i) the negative balance in a
Member's Capital Account after reducing such balance by
the net adjustments, allocations and distributions
described in Treasury Regulation Section 1.704-I(b)(2)(ii)(d)(4), (5)
and (6) which, as of the end of the LLC's taxable year are
reasonably expected to be made to such Member, over
(ii) the sum of (A) the amount, if any, which the
Member is required to restore to the LLC upon liquidation
of such Member's interest in the LLC (or which is so
treated pursuant to Treasury Regulations Section l@704-
1(b)(2)(ii)(c)), (13) the Member's Share of Minimum Gain
and (C) that portion of any indebtedness of the LLC
(other than Partner Nonrecourse Debt) with respect to which
the Member bears the Economic Risk of Loss that such
indebtedness would not be repaid out of the LLC's assets if all of the
LLC's assets were sold at their respective Carrying
Values as of the end of the fiscal year or other period and
the proceeds from the sales together with any amounts
described in clause (A), above, were used to pay the
LLC's liabilities.
"Gross Income" means, for each fiscal year or
other period, an amount equal to the
LLC's gross income as determined for federal income tax
purposes for such fiscal year or period but computed
with the adjustments specified in clauses (i), (ii) and (iii)
of the definition of
'Net Profits' and 'Net Losses".
"Heller Loan" means the loan in the original principal
amount of $7,000,000 made to the LLC by Heller
Financial, Inc. and secured by a first mortgage lien on the
Property.
"HPP" means Historic Preservation Properties
1989 Limited Partnership, a Delaware limited
partnership, and its successors and assigns.
"Immediate Family" (i) with respect to any
individual, means his ancestors, spouse,
issue, spouses of issue, any trustee or trustees,
including successor and additional trustees,
principally for the benefit of any one or more of such
individuals, and any entity or entities all
of the beneficial owners of which are such trusts and/or such
individuals, but (ii) with respect
to a legal Representative, means the Immediate Family of
the individual for whom such Legal Representative was
appointed and (iii) with respect to a trustee, means the
Immediate Family of the individual with respect to whom the
principal beneficiaries are members of the Immediate
Family.
"Invested Capital" means, at any point in time,
for any Member, the excess of (i) the
aggregate amount of the capital contributed to the LLC by
such Member over (ii) the aggregate amount distributed
(or deemed distributed) to such Member pursuant to Section 4.01(c).
"Legal Presentative" means, with respect to any
individual, a duly appointed executor,
administrator, guardian, conservator, personal
representative or other legal representative
appointed as a result of the death or incompetency of such
individual.
'LLC" means the limited liability company
formed pursuant to the Certificate and this Agreement,
as it may from time to time be constituted and amended.
"LLC Capital" means an amount equal to the
sum of all of the Members' Adjusted Capital Account
balances determined immediately prior to the
allocation to the Members pursuant to Sections
5.01(b)(ii) or 5.01(c)(i) of any Net Profits or Net Losses from a sale
or other disposition of the assets of the LLC other than in
the ordinary course of the LLC's trade or business,
increased by the aggregate amount of Net Profits to be
allocated to the Members pursuant to Section 5.01(b)(ii)
as a result of such sale or other disposition or decreased
by the aggregate amount of Net Losses to be allocated to
the Members pursuant to Section 5.01(c)(i) as a result of
such sale or other disposition.
"Major Decision" shall have the meaning set forth in
Section 6.%(b).
"Manager" shall refer to any Person named as
manager in this Agreement and any Person who becomes a
manager as permitted by this Agreement, in each such
Person's capacity as (during the period during which such
Person serves as) a member of the Board of Managers of
the LLC. "Managers" or the "Board of Managers" shall refer
collectively to all of such Persons named as Managers
in this Agreement and any Person who becomes a Manager as
permitted by this Agreement. in their capacity as (during
the period during which such Persons serves as) Managers of the LLC.
"Member" shall refer to any Person named as
Member in this Agreement and any Person who becomes an
additional, substitute or replacement Member as permitted
by this Agreement, in such Person's capacity as a Member of
the LLC. 'Members' shall refer collectively to all such
Persons in such capacity,
"Minimum Gain" means the amount determined by
computing with respect to each Nonrecourse Debt of the
LLC, the amount of Gross Income, if any, that would be
realized by the LLC if it disposed of the property securing
such debt in full satisfaction thereof, and by then
aggregating the amounts so computed. For purposes of
determining the amount of such Gross Income with respect
to a liability, the Carrying Value of the asset securing the
liability shall be allocated among all the liabilities that
the asset secures in the manner set forth in Treasury
Regulation Section 1.7042(d)(2).
"Net Profits" and "Net Losses," mean the taxable
income or loss, as the case may be, for
a period as determined in accordance with Code Section
703(a) computed with the following adjustments:
(i) Items of gain, loss, and deduction shall be
computed based upon the Carrying Values of the LLC's assets rather
than upon the assets, adjusted bases for federal income tax
purposes, and, in particular, except to the extent required
by Treasury Regulation Section 1. 704- 3, the amount of any
deductions for depreciation or amortization with respect to
an asset for a period shall equal such asset's Carrying
Value multiplied by a fraction the numerator of which
shall be the amount of depreciation or amortization with
respect to such asset allowable for federal income tax,
purposes for such period and the denominator of which shall
be such asset's adjusted basis;
(ii) Any tax-exempt income received by the LLC shall
be included as an item of gross income;
(iii) The amount of any adjustments to the Carrying
Values of any assets of the LLC pursuant to Code Section 743 shall not
be taken into account;
(iv) Any expenditure of the LLC described in
Code Section 705(a)(2)(B) (including
any expenditures treated as being described in Section
705(a)(2)(B) pursuant to Treasury Regulations under Code
Section 704(b)) shall be treated as a deductible expense; and
(v) The amount of Gross Income and
Nonrecourse Deductions specially allocated to any Members
pursuant to Section 5,01, 5,02 and 5.03 shall not be
included in the computation,
"Nonrecourse Debt' means any liability of a limited
liability company to the extent that
the liability is nonrecourse for purposes of Treasury
Regulation Section 1. 100 1 -2 .
"Nonrecourse Deductions" for a taxable year
means deductions funded by Nonrecourse Debt (as determined
under Treasury Regulation Sections 1.704-2(c) and 1-704-
2(i)(2)) for such year and are generally equal to the excess,
if any, of (i) the net increase in Minimum Gain
during such year over (ii) the sum of (A) the aggregate
distributions of proceeds from Nonrecourse Debts
attributable to increases in Minimum Gain during such year
and (B) increases in Minimum Gain during such year
attributable to conversions of liabilities into
Nonrecourse Debts.
"Partner Nonrecourse Debt" means any Nonrecourse
Debt to the extent that a member bears the Economic
Risk of Loss associated with the debt.
"Percentage Interest" shall be the percentage
interest of a Member set forth in Schedule
as amended from time to time.
"Person" means any natural person, corporation,
partnership (whether general or limited), limited
liability company, trust, estate, association, or other
unincorporated entity.
"Preferred Return" means. with respect to a
specified fiscal year of the Company, an
amount which, when added to all other cash available to
HPP from its operations or any other source in such
fiscal year, equals $140,000.
"Property" means the real estate, together with
the improvements thereon, located in St.
Paul, Minnesota and more particularly described in Exhibit A attached hereto,
"Property Management Agreement" means the
property management agreement in effect from time to time
between the LLC and the Property Manager.
"Property Manager" means Claremont
Management Company, a Massachusetts corporation,
and its successors, or any other manager appointed from time
to time with the consent of the Members.
"Securities Act" means the Securities Act of1933, as amended.
"Share of Minimum Gain" means, for each
Member, the sum of such Member's share of Minimum
Gain attributable to Nonrecourse Debt other than Partner
Nonrecourse Debt (computed in accordance with Treasury
Regulation Section 1.704-2(g)) and such Member's share
of Minimum Gain attributable to Partner Nonrecourse
Debt (computed in accordance with Treasury Regulation
Section 1.7042(i)(5)).
"Transfer" and any grammatical variation thereof
shall refer to any sale, exchange, issuance, redemption, assignment,
distribution,encumbrance, hypothecation, gift, pledge, retirement,
resignation, transfer or other withdrawal, disposition or
alienation in any way (whether voluntarily, involuntarily
or by operation of law) as to any interest as a
Member. Transfer shall specifically, without limitation of the
above, include assignments and distributions resulting from
death, incompetency, Bankruptcy, liquidation and dissolution.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement under seal as; of the day and year first above written.
MANAGERS:
Patrick Carney
Terrence P. Sullivan
Charles M. Moran, Jr.
MEMBERS:
HISTORIC PRESERVATION
PROPERTIES 1989
LIMITED PARTNERSHIP, a
Delaware limited
partnership, by its general
partner, Boston Historic
Partners Limited
Partnership, by its general
partners
By: Portfolio Advisory Services,
Inc.
Terrence P. Sullivan, President
Lillian B. Carney
SCHEDULE A
TO
OPERATING AGREEMENT
OF LLC
MANAGERS
Patrick Carney
c/o Claremont Companies
Batterymarch Park II
Quincy, MA 02169
Terrence P. Sullivan
c/o Claremont Companies
Batterymarch Park 11
Quincy, MA 02169
Charles M. Moran, Jr.
c/o Claremont Companies
Batterymarch Park 11
Quincy, MA 02169
SCHEDULE B
TO
OPERATING AGREEMENT
OF LLC
MEMBERS
Percentage Interest
as to Profits and Percentage
Capital losses from Interset in all
Member Contribution Operations other respects
Historic Preservation $100 50% 50%
Properties 1989 Limited
Partnership c/o
Claremont Companies
Batterymarch Park II
Quincy, MA 02169
Lillian B- Carney $650,000 50% 50%
c/o Claremont Companies
Batterymarch Park II
Quincy, MA 02021
