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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR FISCAL YEAR ENDED: DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-12428
OASIS RESIDENTIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0297457
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4041 EAST SUNSET ROAD, HENDERSON, NEVADA 89014
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (702) 435-9800
---------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
$2.25 Series A Cumulative Convertible New York Stock Exchange
Preferred Stock, $.01 par value
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 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 10-K or any amendment to this Form 10-K. [ ]
As of March 15, 1998, the aggregate market value of Common Stock of
Oasis Residential, Inc. held by non-affiliates was $ based
upon the closing price of the stock on the NYSE. The number of shares of
common stock outstanding as of that date was 16,326,477.
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DOCUMENTS INCORPORATED BY REFERENCE
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
LITIGATION REFORM ACT OF 1995. Statements contained or incorporated by reference
in this document that are not based upon historical fact are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may", "will", "expect", "estimate",
"anticipate", "continue" or similar terms, variations of those terms or the
negative of those terms. The "Risk Factors" set forth below in this document
constitute cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements.
PART I
ITEM 1. BUSINESS
Oasis Residential, Inc. (the "Company") is a fully integrated Real
Estate Investment Trust (a "REIT"), with in-house acquisition, development,
property management, and finance expertise. The Company is the largest owner of
predominantly upscale apartment communities in the greater Las Vegas, Nevada
metropolitan area based on the number of apartment units developed and owned. As
of December 31, 1997, the Company owned and operated 51 apartment communities in
Las Vegas, Reno, Denver and Southern California, comprising a total of 14,796
apartment units (the "Properties") with an average age of less than eight years,
as well as a 30,000 square foot commerical center in Henderson, Nevada in which
the Company's headquarters is located (the "Commercial Center"). Forty-three of
the Properties are located in the greater Las Vegas area. The Company's weighted
average occupancy was 95%, 94% and 95% for the years ended December 31, 1997,
1996 and 1995, respectively. During these periods, average monthly rental income
per unit was $647, $606 and $570, respectively. As of December 31, 1997, the
weighted average occupancy rate of the Properties (excluding four communities in
lease-up and the 321 units owned through a limited liability company in which
the Company owns a 50% interest) was 93.4% and the Commercial Center was 100%
occupied. The Company currently has one community comprising 340 units under
construction in Denver.
RECENT DEVELOPMENTS
Acquisitions. On October 23, 1997, the Company completed the acquisition
of a managing member interest in Oasis Martinique, L.L.C., which owns the 714
unit Villa Martinique apartment community in Orange County, California (which
has been renamed "Oasis Martinique"). In connection with the acquisition, Oasis
Martinique, L.L.C. issued units of limited liability company interest ("LLC
Units") which are exchangeable on a one-for-one basis into 886,022 shares of the
Company's common stock. The Company also assumed existing tax exempt debt of
$51.4 million issued by Orange County, California. The "low floater" bonds
mature in 2009 and have an interest rate subject to weekly repricing based upon
a spread of 125 basis points over the seven-day tax exempt bond floating rate
index. The Company also contributed to Oasis Martinique, L.L.C., approximately
$1.5 million in cash drawn from its bank credit facility for transaction costs
and costs associated with the formation of Oasis Martinique, L.L.C.. At the time
of the closing of the acquisition, the holders of the LLC Units borrowed $8.2
million from the Company. The loans must be repaid by the holders of the LLC
Units prior to December 23, 1998 and are secured by a pledge of the LLC Units.
On June 5, 1997, the Company completed the acquisition of a 138 unit
apartment community in Costa Mesa, California named Sea Palms. The purchase
price of approximately $10.95 million was funded with cash drawn from the
Company's $200.0 million bank credit facility. Since the acquisition, the
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Company renamed the community Oasis Sea Palms and has invested approximately
$430,000 in a capital refurbishment program designed to upgrade the community to
Oasis brand standards.
On March 6, 1998, the Company completed the acquisition of a 421
apartment community in Fullerton, California named Parkside Apartments. The
purchase price was approximately $29.0 million. The Company assumed
approximately $21.0 million in mortgage debt, with the remainder of the purchase
price being funded with cash drawn from the Company's $200.0 million bank credit
facility. The Company renamed the community Oasis Parkside and intends to
invest approximately $7.0 million in a capital refurbishment program over the
next 18 months.
Dispositions. On December 8, 1997, the Company completed the sale of
three Las Vegas apartment properties: Oasis Orchid, 280 units; Oasis Terrace,
336 units; and Oasis Trails, 360 units. The combined sales price for the
properties was $53.7 million, resulting in a book gain of approximately $7.0
million. Additionally, on August 18, 1997, the Company sold the 84 unit Oasis
Villas apartment community for $6.3 million, with no material gain or loss
resulting from the transaction. The net proceeds from the sales were used to
reduce debt outstanding under the Company's $200.0 million bank credit facility.
On February 27, 1998, the Company sold the Oasis Star II Apartment Community for
$1.3 million. The Company is currently under contract to sell the Oasis Morning
apartment community for approximately $3.5 million with an anticipated closing
date of April 1998.
Developments. During 1997, the Company completed construction on five
apartment communities in the Las Vegas and Reno, Nevada and Denver, Colorado
metropolitan areas comprising an aggregate of 1,897 units with a total
investment of $153.0 as follows: Oasis Bluffs I (450 units in Reno), Oasis
Denver West (321 units in Denver, which was developed as part of a joint venture
agreement with Stevinson Partnership Ltd., an unaffiliated entity), Oasis
Gateway (360 units in Las Vegas), Oasis Lakeway (451 units in Denver), and Oasis
Pines (315 units in Las Vegas). The Company has initiated construction of a 340
unit apartment community called Oasis Interlocken on a 19.5 acre parcel located
in the master planned community of Interlocken, Colorado and plans to complete
the project in the second quarter of 1999.
Proposed Merger with Camden Property Trust. The Company has entered into
an Agreement and Plan of Merger dated as of December 16, 1997, as amended by
Amendment No. 1 to the Agreement and Plan of Merger dated as of February 4,
1998, with Camden Property Trust ("Camden") and Camden Subsidiary II, Inc., a
wholly-owned subsidiary of Camden, providing for the merger (the "Merger") of
the Company with and into Camden Subsidiary II, Inc. Upon consummation of the
Merger, each outstanding share of Common Stock of the Company (other than shares
held by the Company as treasury stock or owned by any subsidiary of the Company)
will be converted into 0.759 of a Common Share of Beneficial Interest of Camden,
and each outstanding share of Series A Cumulative Convertible Preferred Stock of
the Company (other than shares held by the Company as treasury stock or owned by
any subsidiary of the Company) will be converted into one Series A Cumulative
Convertible Preferred Share of Beneficial Interest of Camden. Consummation of
the Merger is subject to the satisfaction of various conditions, including the
approval of the Merger by stockholders of the Company and shareholders of
Camden. A special meeting of stockholders of the Company will be held on April
8, 1998 for the purpose of voting on the proposal to consummate the Merger. The
Board of Directors of the Company has unanimously approved the Merger and has
unanimously recommended to the stockholders of the Company that they vote in
favor of the Merger at the special meeting of stockholders scheduled for April
8, 1998.
STRATEGIES FOR GROWTH
The Company's primary business strategy has been to increase cash flow
and enhance portfolio
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value by focusing on the upscale apartment market. The Company has implemented
this strategy principally by (i) realizing internal growth in income from its
existing portfolio of apartment communities and (ii) pursuing external growth
through the selective development and acquisition of new apartment communities.
The Company believes its strong local market presence, brand name
identity and resident-oriented approach reduce turnover and encourages resident
referrals, resulting in higher occupancies, higher effective rents and reduced
expenses as compared to its competitors.
Brand Name Operating Strategy. In order to take advantage of the
Company's significant presence and market leadership position in Las Vegas, the
Company implemented a customer-focused brand name operating strategy in 1995.
The brand name program is designed to build customer recognition of the Company
and its apartment communities and to impart an image of distinction, quality and
consistency. All of the Company's Properties incorporate the Oasis brand name
and all Company on-site associates wear uniforms advertising the Oasis brand
name and logo. The Company believes the Oasis brand name enhances its ability to
attract new residents, retain existing residents, gain additional resident
referrals, and retain more residents transferring from one Oasis community to
another
Internal Growth Strategy. The Company is committed to increasing cash
flow and Funds from Operations "FFO" (as defined below under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Calculation of Funds from Operations and Funds Available for
Distribution") from its existing portfolio of Properties by utilizing the
experience and quality of the Company's senior management. The Company's
operating priorities are: (i) to provide the residents with the highest quality
lifestyle possible in an apartment community; (ii) to emphasize a clean,
pleasant living environment by maintaining all buildings, grounds and
landscaping in excellent condition; and (iii) to attract the caliber of
residents who desire to live in a high-quality, clean apartment community with
premium service at a reasonable cost.
External Growth Strategy. The Company has pursued external growth by
selectively developing new apartment communities in areas where it has
first-hand knowledge of growth patterns and local economic conditions and
believes that it has or can create a competitive advantage due to its brand name
identity, extensive experience and reputation as a developer and access to lower
cost of capital than that available to many of its local competitors.
In evaluating whether to develop a new property, the Company analyzes
salient geographic, demographic, economic and financial data, including the
following factors: (i) prevailing rental and occupancy rates in the area; (ii)
prospective resident income levels and the ability of those income levels to
service the property's requisite rents; (iii) the site's location and aesthetic
appeal; and (iv) the size and growth rate of the employment base in the area. In
order to provide its residents with a feeling of quality, community, security
and accessibility, the Company is extremely selective in seeking development
sites which are located in quality single-family neighborhoods having convenient
access to employment centers and plentiful amenities.
In certain circumstances, the Company also may expand its portfolio of
properties through the selective acquisition of existing apartment properties.
The Company seeks to acquire properties which are: (i) strategically located in
the Company's existing or target markets; (ii) capable of increased operating
cash flow after benefiting from the Company's renovation and management
expertise; (iii) priced below replacement cost, thereby enabling the Company to
operate the properties profitably at lower rents than those realized from new
properties; and (iv) able to generate returns comfortably in excess of the
Company's weighted average cost of capital.
The Company has also, from time to time, disposed of properties in order
to enhance stockholder value.
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It has also been the Company's strategy to expand through acquisition
and development beyond the greater Las Vegas metropolitan area to certain target
markets located in Nevada, Colorado and Southern California. Pursuant to this
strategy, the Company has expanded its operations to the greater Denver and Reno
metropolitan areas and Southern California. The Company believes these target
markets share many of the favorable investment characteristics found in the Las
Vegas area and are in sufficient proximity to allow the Company to continue to
benefit from its successful "hands-on" property management philosophy.
Financing Strategy. In conducting its operations and pursuing its
external growth strategy, the Company has maintained a conservative balance
sheet to provide the Company with the financial flexibility to choose the
optimal source of capital (whether debt or equity) with which to finance
external growth. It is the Company's policy to maintain a debt to total market
capitalization ratio (i.e., total consolidated debt of the Company as a
percentage of market value of its capital stock plus total consolidated debt) of
less than 50%. For purposes of this calculation, the Company's $2.25 Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") is
valued at the greater of its liquidation preference or its market value.
Investment Policies. The Company has developed and acquired apartment
communities for long term investment in a manner consistent with requirements of
the Internal Revenue Code for the Company to qualify as a REIT through the
development and ownership of apartment communities.
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies and entered into certain
agreements designed to reduce potential conflicts of interest. The Company's
employment agreements with Scott S. Ingraham, Allan O. Hunter Jr., and Walter B.
Eeds prohibit each of them, during his employment by the Company, from engaging,
without the Company's consent, in any business competitive with that of the
Company. Each agreement also provides that during the one year period following
termination of employment, so long as employment has not been terminated without
cause (as defined in the agreement), the individual will not engage in the
development, acquisition, construction or management of multifamily apartment
properties, other than through the Company, in the states of Nevada, California,
Arizona, Utah, New Mexico and Colorado.
Robert V. Jones has entered into a noncompetition agreement with the
Company which provides that he will not engage in the development, acquisition,
construction or management of multifamily apartment properties in the states of
Nevada, California, Arizona, Utah, New Mexico and Colorado for such time as Mr.
Jones is an executive officer, Director or greater than 5% stockholder of the
Company.
REGULATION
General. Multifamily apartment properties are subject to various laws,
ordinances and regulations, including regulations relating to recreational
facilities such as swimming pools, activity centers and other common areas. The
Company believes that its properties have the necessary permits and approvals to
operate its business.
Restrictions Imposed by Laws Benefiting Disabled Persons. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all places of public
accommodation are required to meet certain federal requirements related to
access and use by disabled persons. These requirements became effective in 1992.
Compliance with the ADA requires removal of structural barriers to handicapped
access in certain public areas of the Company's properties, where removal is
"readily achievable." The ADA does not, however, consider residential
properties, such as apartment communities, to be public accommodations or
commercial facilities, except to the extent portions of the facilities, such as
a leasing office, are open to the public. A number of additional federal, state
and local laws exist which also may require modifications to the Properties and
the Commercial Center or restrict certain further renovations, with respect to
access by
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disabled persons. For example, the Fair Housing Amendments Act of 1988 (the
"FHAA") requires apartment communities first occupied after March 1991 or for
which construction permits were obtained after June 1990, to be accessible to
the handicapped. Noncompliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants.
The Company has been contacted by certain regulatory agencies with
regard to alleged failures to comply with the FHAA as it pertains to properties
constructed for first occupancy after March 1991. Currently, the Company is
inspecting these properties to determine the extent of the alleged noncompliance
and the changes that may be necessitated. At this time, the Company is unable to
provide an estimate of costs and expenses associated with this matter as the
scope and extent of the required work, if any, has yet to be determined.
Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. Although costs of compliance
with the ADA and such additional legislation are not currently ascertainable,
such costs could be substantial. Limitations or restrictions on the completion
of certain renovations may limit application of the Company's investment
strategy in certain instances or reduce overall returns on the Company's
investments.
Rent Control Legislation. State and local rent control laws in certain
jurisdictions limit a property owners' ability to increase rents and to recover
increases in operating expenses and the costs of capital improvements. No rent
control laws are currently applicable to the Properties or the Commercial
Center, and management is not aware of any intention on the part of applicable
governing bodies to enact any rent control legislation. The Company does not
presently intend to develop or acquire multifamily apartment communities in
markets that are either subject to rent control or in which rent limiting
legislation exists. However, affordable housing restrictions on the Company's
tax-exempt financed properties as well as restrictions pertaining to high
density units at Oasis Sea Palms, may impair the Company's ability to achieve
increased rental rates on portions of these properties (see "Item 2.
Properties").
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by those parties in connection with the contamination. These laws
typically impose cleanup responsibility and liability without regard to whether
the owner knew of or caused the presence of the contaminants, and the liability
under those laws has been interpreted to be joint and several unless the harm is
divisible and there is a reasonable basis for allocation of responsibility. The
costs of investigation, remediation or removal of such substances may be
substantial, and the presence of such substances, or the failure to properly
remediate the property, may adversely affect the owner's ability to sell or rent
the property or to borrow using the property as collateral. In addition, some
environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the costs of removal or remediation of those
substances at the disposal or treatment facility, whether or not the facility is
owned or operated by that person. Finally, the owner of a contaminated site may
be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from the site.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when the materials are in poor condition or in the event of building
remodeling, renovation or demolition. The laws may impose liability for release
of ACMs and may enable third parties to seek recovery from owners or operators
of real properties for personal injury associated with ACMs. In connection with
its ownership and operation of properties, the Company could be potentially
liable for these costs.
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All of the Properties, the development properties and the Commercial
Center owned by the Company have been subject to Phase I or similar
environmental audits by independent environmental consultants. Environmental
assessments have disclosed the existence or possible existence of ACMs on the
Oasis Morning, Oasis Plaza, Oasis Ridge, Oasis Topaz, Oasis View and Oasis Winds
properties. The reports did not recommend any remedial action be taken. The
reports did recommend, however, that the Company conduct further testing in the
relevant areas for ACMs in the event it renovates or demolishes any of these
properties. The Company does not currently have any plans to engage in any
renovation or demolition of these properties that would necessitate further
testing. Phase I assessments are intended to discover information regarding, and
to evaluate the environmental condition of, the surveyed properties and
surrounding properties. Phase I assessments generally include an historical
review, a public records review, a preliminary investigation of the site and
surrounding properties, screening for the presence of asbestos and equipment
containing polychlorinated biphenyls ("PCBs"), and underground storage tanks and
the preparation and issuance of a written report, but do not include soil
sampling or subsurface investigations.
The Phase I assessments have not revealed any environmental liability
that the Company believes would have a material adverse effect on the Company's
business, assets or results of operations, nor is the Company aware of any
environmental liability. Nevertheless, it is possible that the Company's
assessments did not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware. The Company
believes that its properties are in compliance in all material respects with all
federal, state and local laws, ordinances and regulations regarding hazardous or
toxic substances or petroleum products. The Company has not been notified by any
governmental authority, and is not otherwise aware, of any material
noncompliance liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of its present Properties.
EMPLOYEES
As of February 20, 1998, the Company employed approximately 480 persons.
COMPETITION
All of the Properties are located in developed areas that include other
apartment properties. There are numerous other multifamily properties and real
estate companies within the market areas in which the Company's properties are
located that compete with the Company, some of which may have greater resources
than the Company. The number of competitive multifamily apartment properties and
real estate companies in a particular area could have a material effect on the
Company's ability to lease apartment units at the Properties or at any newly
developed or acquired properties and on the rents charged. In addition, other
forms of multifamily residential properties and single-family homes provide
housing alternatives to potential residents of apartment properties.
INSURANCE
Management believes that the Properties and the Commercial Center are
covered by adequate fire, flood and property insurance, and that its development
properties are also covered by adequate insurance for their stage of
development, in each case provided by reputable companies and with commercially
reasonable deductibles and limits. There are, however, certain types of losses
(generally of a catastrophic nature, such as wars or earthquakes) which may be
either uninsurable or not economically insurable. Should an uninsured loss
occur, the Company could lose both its invested capital in and anticipated
profits from the affected property and could continue to be obligated to repay
any mortgage indebtedness on the property.
TAXATION OF THE COMPANY
Management of the Company believes that the Company has operated in such
a manner as to
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qualify for taxation as a "REIT" under Sections 856 to 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year
ended December 31, 1993, and the Company intends to continue to operate in that
manner. No assurance can be given, however, that it has operated or will be able
to continue to operate in a manner that will enable it to qualify or to remain
so qualified.
If the Company qualifies for taxation as a "REIT", it will generally not
be subject to federal corporate income taxes on net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (e.g., at the corporate and stockholder levels) that generally results
from investment in stock of a corporation. The Company will continue to be
subject, however, to federal income tax under certain circumstances.
The Company and its stockholders may be subject to state or local
taxation in various state or local jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its stockholders may not conform to the federal income tax
treatment.
RISK FACTORS
In addition to the matters set forth in the foregoing discussion of the
Company's business, the operations and financial performance of the Company are
subject to the risks described below.
Lack of Geographic Diversification; Dependence on Greater Las Vegas Metropolitan
Area
A majority of the Properties are located in the greater Las Vegas
metropolitan area. The Company's performance may therefore be influenced by
economic conditions in this region and the market for apartment units therein. A
decline in the economy in this market may adversely affect the ability of the
Company to make distributions to stockholders.
Expansion Into New Markets. Pursuant to the Company's plans to expand
beyond the greater Las Vegas metropolitan area, the Company has commenced
operations and construction of multifamily apartment communities in the greater
Denver, Colorado and Reno, Nevada metropolitan areas and Southern California.
Furthermore, the Company has entered into an agreement to purchase a 19.8 acre
parcel in Mission Viejo, California, subject to the satisfaction of certain
entitlement conditions. If the conditions are satisfied and the purchase is
completed the Company intends to build a 380 unit apartment community slated to
begin construction in late 1998. The performance of the Company's properties in
these new markets may be linked to economic conditions in these regions and in
the market for apartments therein.
Development and Acquisition Risks; Increased Project Costs; Failure to Obtain
Financing; Inability to Meet Operating Expenses
General Development and Acquisition Risks. The Company intends to
continue selective development and acquisition of multifamily properties. New
project development is subject to a number of risks, including risks of
construction delays and cost overruns that may increase project costs, risks
that lease-up may not be completed on schedule or that the properties will not
achieve anticipated occupancy levels or sustain anticipated rent levels
sufficient to generate income to cover operating expenses, and new project
commencement risks such as the receipt of zoning, occupancy and other required
governmental permits and authorizations and the incurrence of development costs
in connection with projects that are not pursued to completion. Acquisitions
entail risks that investments will fail to perform in accordance with
expectations and that judgments with respect to the costs of improvements to
bring an acquired property up to standards established for the market position
intended for that property will prove inaccurate, as well as general investment
risks associated with any new real estate investment.
Risks Relating to Financing; Distributions. The Company anticipates that
its development and acquisition activities will be largely financed through
externally generated funds from borrowings under
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credit facilities and other secured and unsecured debt financing and from equity
financing. In addition, new development activities may be financed under lines
of credit or other forms of secured or unsecured construction financing that
would result in a risk that permanent financing for newly developed projects
might not be available or would be available only on disadvantageous terms.
Because the Company must distribute 95% of its taxable income to maintain its
qualification as a REIT, the Company's ability to rely upon income from
operations or cash flow from operations to finance new development or
acquisitions will be limited. Furthermore, it has been the Company's practice to
make distributions in excess of the 95% requirement, further limiting the cash
flow available to the Company for reinvestment. Accordingly, were the Company
unable to obtain funds from borrowings or the capital markets to refinance new
development or acquisitions undertaken without permanent financing, the
Company's ability to grow through additional development and acquisition
activities could be curtailed, Funds Available for Distribution "FAD" (as
defined below under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Calculation of Funds from Operations and
Funds Available for Distribution") could be adversely affected and the Company
could be required to reduce distributions.
The Company's income will consist primarily of income from its
Properties. Differences in timing between the actual receipt of income and the
actual payment of expenses and the inclusion of the income and deduction of the
expenses in arriving at taxable income of the Company, or the effect of required
debt amortization payments, could require the Company to borrow funds on a
short-term (or, possibly, long-term) basis to meet the distribution requirements
that are necessary to achieve the tax benefits associated with qualifying as a
REIT even if management believed that then prevailing interest rates, terms and
other market conditions were not generally favorable for such borrowings or that
the borrowings would not be advisable in the absence of these tax
considerations.
Debt Risks; Possible Increase in Leverage
No Limitations on Debt. The Board of Directors of the Company currently
has a policy of limiting its indebtedness to approximately 50% of its market
capitalization (i.e., total consolidated debt of the Company as a percentage of
market value of its capital stock plus total consolidated debt; for purposes of
this calculation, total consolidated debt will be calculated net of amounts
collateralized with cash, and the Series A Preferred Stock will be valued at the
greater of its liquidation preference or its market value, but the
organizational documents of the Company do not contain any limitation on the
amount or percentage of indebtedness, funded or otherwise, the Company might
incur. Accordingly, the Board of Directors could alter or eliminate its current
policy on borrowing. If this policy were changed, the Company could become more
highly leveraged, resulting in an increase in debt service that could adversely
affect the Company's FAD and subsequently its ability to make expected
distributions to its stockholders, resulting in an increased risk of default on
its obligations.
Use of Debt Financing. The Company is subject to the risks normally
associated with debt financing, including the risk that the Company will have
insufficient cash available to meet required payments of principal and interest.
As a result of the Company's use of indebtedness and leverage, including the use
of debt to finance development and acquisitions and the use of variable rate
financing, the cumulative effect of the risks associated with borrowing is
greater than that of each of these risks considered individually. In addition,
if a property or properties are mortgaged to secure payment indebtedness and the
Company is unable to meet mortgage payments or if certain other events of
default occur, the property could be foreclosed upon by or otherwise transferred
to the mortgagee with a consequent loss of income and asset value to the
Company. Any borrowings under the Company's unsecured credit facility (the
"Credit Facility") and the Company's outstanding notes due 2001, 2003, 2006 in
the aggregate principal amount of $150 million are general recourse obligations
of the Company. In addition, the Credit Facility is secured by
cross-collateralized liens on certain of the Properties and, accordingly,
default under the Credit Facility could result in foreclosure on multiple
properties.
Existing Debt Maturities. At December 31, 1997, the Company had
outstanding $448.8 million of
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indebtedness, $207.5 million of which was secured by certain of the Properties.
Most of that indebtedness will mature during the period 1998 through 2009. Since
the Company anticipates that only a small portion of the principal of the
indebtedness will be repaid prior to maturity and the Company will not have on
hand funds sufficient to repay the indebtedness in full at maturity, it will be
necessary for the Company to refinance the debt either through additional debt
offerings or additional equity offerings. If, at the time of refinancing,
prevailing interest rates or other factors result in higher interest rates on
refinancings, the Company's interest expenses would increase, which would
adversely affect the Company's Funds Available for Distribution and subsequently
its ability to make distributions to stockholders. In addition, in the event the
Company was unable to refinance the indebtedness on acceptable terms, the
Company might dispose of properties upon disadvantageous terms, which might
result in losses to the Company and might adversely affect FAD.
Risks of Rising Interest Rates. The Company has incurred and expects in
the future to incur variable rate indebtedness in connection with the
construction of multifamily apartment communities, as well as for other
purposes. In addition, financing under the Credit Facility is variable rate
indebtedness. An increase in interest rates would increase the interest on
variable rate indebtedness, and could have an adverse effect on net income and
FAD.
Real Estate Investment Risks; Adverse Impact on Ability to Make Distributions;
Effect on Value of the Properties
General. Real property investments are subject to varying degrees of
risk. The yields available from equity investments in real estate depend on the
amount of income generated and expenses incurred. If the Company's Properties do
not generate income sufficient to meet operating expenses, including debt
service and capital expenditures, the Company's income and ability to make
distributions to its stockholders will be adversely affected. Income from
properties may be adversely affected by the general economic climate, local
conditions such as oversupply of apartments or a reduction in demand for
apartments in the area, the attractiveness of the properties to tenants,
competition from other available apartments, the ability of the owner to provide
adequate maintenance and insurance, and increased operating costs (including
real estate taxes). The Company's income would also be adversely affected if a
significant number of tenants were unable to pay rent or apartments could not be
rented on favorable terms. Certain significant expenditures associated with each
property investment (such as mortgage payments, real estate taxes and
maintenance costs) generally are not reduced when circumstances cause a
reduction in income from the investment.
Illiquidity of Real Estate. Real estate investments may be illiquid and,
therefore, could tend to limit the ability of the Company to vary its portfolio
promptly in response to changes in economic or other conditions. In addition,
the Code places limits on the ability of the Company, as a REIT, to sell
properties held for fewer than four years, which may affect the Company's
ability to sell properties without adversely affecting returns to stockholders
Adverse Tax Consequences of Failure to Qualify as a REIT
The Company intends at all times to qualify as a REIT under the relevant
provisions of the Code. Although the Company believes that it has been and will
continue to be organized and operated in that manner, no assurance can be given
that the Company will qualify or continue to qualify as a REIT. Qualification as
a REIT involves the application of highly technical and complex provisions of
the Code for which there are only limited judicial or administrative
interpretations, and the determination of various factual matters and
circumstances not entirely within the Company's control. In addition, no
assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of qualification.
If in any taxable year the Company fails to qualify as a REIT, the
Company would not be allowed a deduction for distributions to stockholders in
computing its taxable income and would be subject to
<PAGE> 11
federal income tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. An exception to this four-year rule exists if, among
other things, the Company can satisfy the Internal Revenue Service that its
failure to qualify as a REIT was due to reasonable cause and not to willful
neglect of the qualification provisions of the Code. If this exception is not
applicable and the Company becomes disqualified from treatment as a REIT, the
FAD would be reduced for each of the years involved. In addition, the Company
would not be compelled to make distributions under the Code. To the extent that
distributions to stockholders would have been made in anticipation of the
Company's qualifying as a REIT, the Company might be required to borrow funds or
to liquidate certain of its investments to pay the applicable tax. Although the
Company currently intends to operate in a manner designed to qualify as a REIT,
it is possible that future economic, market, legal, tax or other considerations
may cause the Company to fail to qualify as a REIT or may cause the Company's
Board of Directors to revoke the REIT election.
Ownership Limit Necessary to Maintain REIT Qualification; Exception for Robert
V. Jones and Related Persons
In order for the Company to maintain its qualification as a REIT, not
more than 50% of the value of its outstanding stock may be owned, directly or
constructively, by five or fewer individuals or entities (as set forth in the
Code). For the purpose of preserving the Company's REIT qualification, the
Company's articles of incorporation prohibit direct or constructive ownership of
more than 8% by value of the outstanding shares of capital stock (the "Ownership
Limit") by any person (with exception for Robert V. Jones, members of his
family, affiliated entities and their transferees), subject to adjustments as
described below. The constructive ownership rules are complex and may cause
shares of capital stock owned directly or constructively by a group of related
individuals or entities to be constructively owned by one individual or entity.
There are certain exceptions for corporations or certain investment funds for
which shares of capital stock are treated as proportionately owned by the owners
of those entities.
The number of shares of Common Stock held by Robert V. Jones and certain
members of his family and affiliates exceeds the Ownership Limit and may
continue to exceed it. The Company's articles of incorporation provide that any
of Mr. Jones, members of his family, affiliated entities and their transferees
may acquire additional shares up to a limit (the "Existing Holder Limit") such
that the five largest beneficial owners of shares of capital stock, taking into
account the Ownership Limit, do not hold more than 49% of the outstanding shares
of capital stock. Presently, the Existing Holder Limit is 17.8% by value of the
outstanding shares of capital stock.
The Board of Directors may waive the Ownership Limit with respect to a
particular stockholder if it is satisfied, based upon the advice of tax counsel,
that ownership in excess of this limit will not jeopardize the Company's status
as a REIT. A transfer of shares to a person who, as a result of the transfer,
violates the Ownership Limit may be void under some circumstances or may be
exchanged for Excess Stock which has very limited rights and no rights to
distributions.
Limitation on Acquisition and Change in Control
Ownership Limit. The Ownership Limit may have the effect of precluding
acquisition of control of the Company by a third party without the consent of
the Board of Directors.
Staggered Board. The Board of Directors of the Company is comprised of
three classes of Directors, whose terms expire in 1998, 1999 and 2000,
respectively. The staggered terms for Directors may affect the stockholder's
ability to change control of the Company even if a change in control was in the
stockholder's interest.
Preferred Stock. The Company's articles of incorporation authorize the
Board of Directors to
<PAGE> 12
issue shares of preferred stock and to establish the preferences and rights of
any shares issued. The issuance of preferred stock could have the effect of
delaying or preventing a change of control of the Company even if a change in
control were in the stockholders' interest.
ITEM 2. PROPERTIES
General. As of December 31, 1997, the Company owned and operated 51
apartment communities containing 14,796 apartment units, as well as the
Commercial Center in which the Company's headquarters is located and had under
development an additional 340 units. The Properties typically consist of one-and
two-story buildings in a landscaped setting. Thirty-four of the Properties
(comprising approximately 61% of the total units) were completed less than 10
years ago. The Properties are predominantly upscale garden apartment complexes
consisting of one, two and three bedroom apartments. Forty-seven of the
Properties have in excess of 100 apartment units, with the largest having 720
apartment units. As of the end of December 31, 1997, the weighted average
occupancy rate of the Properties (excluding four communities in lease-up) was
93.4%.
The Properties generally provide residents with a variety of attractive
amenities, such as in-unit laundry facilities, oversized luxury bath tubs,
monitored security systems, swimming pools, spas and saunas, extensive
landscaping and, in certain cases, tennis courts, racquetball courts, and weight
and exercise facilities. The Properties generally are located in or adjacent to
attractive and desirable single-family residential neighborhoods and are easily
accessible to significant areas of employment.
The 30,000 square foot Commercial Center was constructed in 1989. The
Company occupies 15,100 square feet of the building as its headquarters, and the
remainder is leased to third parties, consisting predominantly of banking,
professional and service businesses. As of December 31, 1997, the Commercial
Center was 100% leased, with third party tenants paying an average annualized
rent per square foot of $24.58. Aside from the Company, one tenant, a bank,
occupies more than 10% of the Commercial Center. The bank's lease expires in May
2008 and has two five-year renewal options priced at fair market value
None of the Company's properties account for 10% or more of the book
value of the Company's assets.
<PAGE> 13
PROPERTY INFORMATION
The following table presents certain information concerning the Properties:
<TABLE>
<CAPTION>
DEC. 1997
APPROXIMATE AVERAGE AVERAGE MONTHLY
NUMBER RENTABLE YEAR UNIT 1997 RENTAL RATE(1)
OF AREA PLACED IN SIZE AVERAGE OCCUPANCY FOR PER PER SQ.
THE COMMUNITIES UNITS (SQ. FT.) SERVICE (SQ. FT.) OCCUPANCY DECEMBER 1997 UNIT FT.
- ------------------- --------- --------- ------- -------- --------- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nevada:
Oasis Bay 128 108,032 1993 844 95.7% 96.7% $ 706 $ 0.84
Oasis Bel Air I 232 202,600 1993 873 93.9% 96.7% 647 0.74
Oasis Bel Air II 296 296,512 1995 1,002 94.3% 94.2% 755 0.75
Oasis Bluffs I 450 501,687 1997 1,115 --(2) 82.3%(3) 975 0.87
Oasis Breeze 320 275,920 1993 862 95.1% 91.3% 669 0.78
Oasis Canyon 200 197,408 1995 987 92.4% 90.5% 753 0.76
Oasis Cliffs 376 351,920 1993 936 96.3% 96.8% 707 0.75
Oasis Club 320 286,560 1993 896 96.1% 94.3% 704 0.79
Oasis Cove 124 111,290 1993 898 94.7% 97.8% 668 0.74
Oasis Crossings 72 70,752 1996 983 87.4% 94.0% 736 0.75
Oasis Del Mar 560 552,040 1996 986 93.4% 90.6% 798 0.81
Oasis Emerald 132 115,180 1993 873 96.8% 93.9% 630 0.72
Oasis Gateway 360 418,680 1997 1,163 --(2) 91.5%(3) 840 0.72
Oasis Glen 113 89,488 1994 792 98.1% 96.6% 692 0.87
Oasis Greens 432 385,216 1993 892 96.3% 93.5% 688 0.77
Oasis Harbor I 336 338,696 1996 1,008 95.6% 95.0% 769 0.76
Oasis Heights 240 204,160 1994 851 96.1% 96.4% 637 0.75
Oasis Heritage 720 678,760 1994 943 92.9% 88.7% 594 0.63
Oasis Hills 184 106,472 1993 579 96.5% 91.1% 500 0.86
Oasis Island 118 106,260 1993 901 94.3% 94.1% 639 0.71
Oasis Landing 144 124,752 1993 866 95.8% 90.6% 674 0.78
Oasis Meadows 383 397,276 1996 1,037 93.7% 91.5% 763 0.74
Oasis Morning 106 53,772 1993 507 95.2% 96.9% 464 0.91
Oasis Palms 208 184,272 1993 886 94.3% 93.9% 647 0.73
Oasis Paradise 624 560,896 1994 899 93.4% 92.3% 722 0.80
Oasis Pearl 90 82,332 1993 915 94.9% 95.1% 666 0.73
Oasis Pines 315 313,950 1997 997 --(2) 90.2%(3) 818 0.82
Oasis Place 240 105,600 1994 440 96.7% 94.5% 461 1.05
Oasis Plaza 300 245,936 1993 820 95.9% 94.5% 590 0.72
Oasis Pointe 252 249,216 1996 989 93.9% 91.6% 747 0.76
Oasis Ridge 477 187,833 1993 394 95.1% 93.3% 414 1.05
Oasis Rose 212 213,888 1994 1,009 92.8% 90.7% 709 0.70
Oasis Sands 48 54,000 1994 1,125 86.6% 94.6% 740 0.66
Oasis Springs 304 246,912 1994 812 94.1% 89.7% 619 0.76
Oasis Star II 24 21,720 1993 905 96.2% 92.7% 661 0.73
Oasis Suites 409 163,200 1994 399 92.0% 85.9% 439 1.10
Oasis Summit 234 277,836 1994/95 1,187 97.6% 95.0% 1,040 0.88
Oasis Tiara 400 417,016 1996 1,043 97.0% 96.5% 817 0.78
Oasis Topaz 270 223,268 1993 827 96.2% 93.0% 607 0.73
Oasis View 180 169,200 1993 940 94.5% 95.9% 642 0.68
Oasis Vinings 234 269,574 1993/94 1,152 92.5% 92.5% 741 0.64
Oasis Vintage 368 366,048 1993/94 995 93.2% 92.2% 712 0.72
Oasis Vista 408 363,196 1994 890 94.5% 94.4% 522 0.59
Oasis Winds 350 282,500 1993 807 95.4% 93.7% 587 0.73
---------- ---------- ---------- ------- ------- ---------- -------
Subtotals/Wtd. Avg 12,293 10,971,826 893 94.6% 93.1% 683 0.77
Denver(4)
Oasis Centennial 276 205,380 1995 744 96.6% 99.2% 639 0.86
Oasis Deerwood 342 391,590 1996 1,145 90.0% 91.8% 1,057 0.92
Oasis Lakeway 451 425,770 1997 944 --(2) 77.8%(3) 930 0.99
Oasis Park(5) 224 167,600 1994 748 97.7% 97.6% 676 0.90
Oasis Wexford(5) 358 289,968 1994 810 97.0% 94.9% 707 0.87
---------- ---------- ---------- ------- ------- ---------- -------
Subtotals/Wtd. Avg 1,651 1,480,308 897 95.1% 94.9% 825 0.92
Orange County
Oasis Martinique(5) 714 642,176 1997 899 97.7%(6) 95.4% 895 1.00
Oasis Sea Palms(7) 138 123,300 1997 893 96.1%(6) 92.2% 957 1.07
---------- ---------- ---------- ------- ------- ---------- -------
Subtotals/Wtd. Avg 852 765,476 898 97.5% 94.9% 905 1.01
Total/Wtd. Avg 14,796 13,217,610 893 94.9% 93.4% $ 712 $ 0.80
========== ========== ========== ======= ======= ========== =======
</TABLE>
---------
(1) Reflects a weighted average of current contract rents for occupied units and
market rents for unoccupied units for each community.
(2) Under development and/or in lease-up during period. Accordingly, its
occupancy is not included in the subtotal or total.
(3) In lease-up during the month. Accordingly, its occupancy is not included in
the subtotal or total.
<PAGE> 14
(4) Excludes the 321 unit Oasis Denver West community which is owned by a
limited liability company in which the Company holds a 50% member interest.
As the Company's only joint venture, Denver West is not included in the
consolidated financial statements as it is accounted for using the equity
method.
(5) The Company is required to comply with affordable housing restrictions that
require a certain percentage of the units at these communities to be leased
to persons with incomes below a certain percentage of the local median
income. These restrictions may impair the Company's ability to achieve
increased rental rates on portions of these communities.
(6) Average occupancy only during the period of management by the Company.
(7) Due to high density units put in place at the time of construction, Oasis is
required to comply with affordable housing restrictions that require a
certain percentage of the units at this community to be leased to persons
with incomes below a certain percentage of the local median income. These
restrictions may impair the Company's ability to achieve increased rental
rates on portions of this community.
<PAGE> 15
Development Information. The following table presents certain
information concerning the Company's development activities:
<TABLE>
<CAPTION>
APPROXIMATE ESTIMATED
NUMBER RENTABLE APPROXIMATE AVERAGE ANTICIPATED TOTAL
OF AREA TOTAL UNIT SIZE CONSTRUCTION CONSTRUCTION INVESTMENT
COMMUNITIES UNITS (SQ. FT.) ACREAGE(1) (SQ. FT.) COMMENCEMENT COMPLETION (2)
----------- ----- --------- ---------- --------- ------------ ------------ -----------
(dollars in
millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Under Construction
Denver:
Oasis Interlocken 340 336,350 19.5 989 4th Qtr. 1997 2nd Qtr. 1999 $33.0
Future Construction
Las Vegas:
Oasis Bluffs II 414 461,552 50.6 1,115 (3) (3) (4)
Oasis Harbor II 248 250,026 13.6 1,008 (3) (3) (4)
Oasis Miramar (5) 352 350,112 19.6 995 (3) (3)
----- -------- ---- -----
Subtotals/Wtd. Avg. 1,014 1,061,690 83.8 1,047
----- --------- ---- -----
Total/weighted average 1,354 1,398,040 103.3 1,033
===== ========= ===== =====
</TABLE>
- ----------
(1) Reflects gross acreage for each community.
(2) Includes cost of land.
(3) In preliminary planning stage; no construction schedule has been
established. Commencement of construction is contingent upon a number of
factors, including suitable financing, and there can be no assurances as to
when or if suitable financing will be obtained. See "Risk Factors -
Development and Acquisition Risks
(4) The time required to complete the lease-up phase of development varies from
project to project. The Company typically develops its properties in phases,
opening a portion of the total units to occupancy at one time. The Company
begins leasing activities approximately 60 days before the first phase is
opened for occupancy, setting up a temporary leasing office at the property.
(5) The Company has entered into an agreement to purchase a 19.8-acre parcel in
Mission Viejo, California, subject to the satisfaction of certain
entitlement conditions. If the conditions are satisfied and the purchase is
completed the Company intends to build a 380 unit apartment community slated
to begin construction in the second half of 1998.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company, the Properties, the development properties, nor the
Commercial Center are subject to any material litigation nor, to the Company's
knowledge, is any material litigation threatened against the Company, the
Properties, the development properties or the Commercial Center, other than
routine litigation and administrative proceedings arising in the ordinary course
of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange (the
"NYSE"). As of ____, 1998, there were approximately ____ stockholders of record
and in excess of _____ beneficial stockholders of the Company's common stock.
The Company's common stock first traded on October 22, 1993. Set forth below are
the high and low sales prices as reported on the NYSE of the Company's common
stock for the periods indicated, as well as the dividends declared by the
Company per share of common stock for each period:
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
HIGH LOW PER SHARE
------- ------- ---------
<S> <C> <C> <C>
1996
First Quarter $24 1/2 $22 $ .4350
Second Quarter 23 1/2 21 .4350
Third Quarter 22 21 1/8 .4350
Fourth Quarter 23 1/2 20 1/2 .4350
1997
First Quarter 24 3/8 22 3/8 .4525
Second Quarter 23 3/4 22 .4525
Third Quarter 24 15/16 23 1/16 .4525
Fourth Quarter 25 21 11/16 .4525
1998
First Quarter
(through ________, 1998) _______ ______ .4525
</TABLE>
The closing price of the Company's common stock at December 31, 1997 and 1996
was $22.3125 and $22.75, respectively.
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial information for the
Company and for the multifamily apartment communities and Commercial Center
owned by the Company's predecessors prior to the Company's initial public
offering (the "Original Properties and Commercial Center"). The historical
information for the Company reflects the actual operations of the Company from
the date of the initial public offering and the operating data for the Original
Properties and Commercial Center prior to the date of the Company's initial
public offering.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenue:
Rental income $ 111,591 $ 92,843 $ 73,249 $ 49,316 $ 21,737
Other income 4,188 3,156 3,080 2,581 815
Joint venture investment income 64 -- -- -- --
Interest income (related party) 142 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total revenue $ 115,985 $ 95,999 $ 76,329 $ 51,897 $ 22,552
------------ ------------ ------------ ------------ ------------
Expenses:
Property operating and maintenance 32,482 27,226 21,485 14,978 6,782
Property management fees (related
party) -- -- -- -- 391
General and administrative 3,692 3,230 2,645 2,352 338
Real estate taxes 6,246 5,230 4,079 2,814 1,372
Interest 26,184 15,216 7,310 6,371 7,538
Interest (related party) -- -- -- -- 1,294
Interest (non-cash) 1,214 1,118 1,332 673 1,791
Depreciation and amortization 19,113 15,637 12,062 8,689 4,343
------------ ------------ ------------ ------------ ------------
Total expenses 88,931 67,657 48,913 35,877 23,849
------------ ------------ ------------ ------------ ------------
Income before minority interest, gain on
sale of real estate assets and
extraordinary item 27,054 28,342 27,416 16,020 (1,297)
Less minority interest 179 -- -- -- --
------------ ------------ ------------ ------------ ------------
Income before gain on sale of real
estate assets and extraordinary item 26,875 28,342 27,416 16,020 (1,297)
------------ ------------ ------------ ------------ ------------
Gain on sale of real estate assets 6,999 2,444 -- -- --
Extraordinary item -- (1,403) (1,952) -- --
------------ ------------ ------------ ------------ ------------
Net income 33,874 29,383 25,464 16,020 (1,297)
Less preferred dividend requirement 9,372 9,372 6,534 -- --
------------ ------------ ------------ ------------ ------------
Earnings available for common stockholders $ 24,502 $ 20,011 $ 18,930 $ 16,020 $ (1,297)
============ ============ ============ ============ -===========
Net income per common share $ 1.51 $ 1.23 $ 1.17 $ 1.24 --
Common dividends paid per share $ 1.81 $ 1.74 $ 1.64 $ 1.43 --
Weighted average common shares outstanding 16,250,118 16,237,646 16,230,429 12,957,175 --
BALANCE SHEET DATA
Real estate assets $ 875,577 $ 798,467 $ 661,922 $ 506,899 $ 208,157
Total assets 846,528 774,773 641,936 502,432 208,789
Debt 448,774 394,274 250,825 212,093 49,426
Total liabilities 456,652 402,561 261,482 215,834 50,870
Minority interest 20,600 -- -- -- --
Stockholders' equity 369,276 372,212 380,454 286,598 157,919
Common shares outstanding 16,326,477 16,237,646 16,237,646 16,216,134 10,468,134
Series A preferred shares outstanding 4,165,000 4,165,000 4,165,000 -- --
OTHER DATA
Cash flows provided (used in):
Operating activities $ 45,881 $ 39,256 $ 41,392 $ 22,286 $ 842
Investing activities (12,274) (147,169) (155,023) (219,448) (87,551)
Financing activities (34,474) 105,340 112,544 188,719 101,661
Funds from Operations (1) 45,867 43,766 39,329 24,350 --
PROPERTY DATA (2)
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C>
Total properties, end of year 51 49 43 38 24
Total apartment units, end of year 14,796 13,428 11,643 9,819 5,317
Total apartment units, weighted average 14,278 12,671 10,610 7,416 3,501
Weighted average monthly rental income
per apartment Unit (3) $ 647 $ 606 $ 570 $ 549 $ 507
Communities under development at end of year 1 5 13(4) 9(5) 7
</TABLE>
(1) Management considers FFO to be an appropriate measure of the performance of
an equity REIT. The National Association of Real Estate Investment Trust
("NAREIT") currently defines FFO as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and
joint ventures. In addition, extraordinary or unusual items along with
significant non-recurring events that materially distort the comparative
measure of FFO are typically disregarded in its calculation. The Company's
definition of FFO also assumes conversion of all convertible securities,
including minority interests that are convertible into common equity. The
Company believes that in order to facilitate a clear understanding of its
consolidated historical operating results, FFO should be examined in
conjunction with net income as presented in the consolidated financial
statements included in this Annual Report on Form 10-K. FFO should not be
considered as an alternative to net income as an indication of the Company's
operating performance or to net cash provided by operating activities as a
measure of the Company's liquidity. Furthermore, FFO as disclosed by other
REIT's may not be comparable to the Company's calculation.
(2) Excludes communities under development.
(3) Excludes rental income from commercial properties.
(4) Includes the 20-unit expansion at Oasis Cove.
(5) Includes the 156-unit phase II at Oasis Summit.
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL BACKGROUND
The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report. The Company became an operating entity on
October 22, 1993, when it completed an initial public offering of common stock.
In connection with the Initial Offering, the Company acquired 17 properties from
the Robert V. Jones, Corp. and other affiliates and acquired 2,023 apartment
units.
In July 1994, the Company completed a second public offering of 5,750,000
shares of common stock. The net proceeds of the offering (approximately
$132,000,000) were used to acquire five multifamily communities containing 2,441
units for approximately $98,811,000 including the assumption of $38,880,000 of
mortgage indebtedness, to effectively repay $16,067,000 of construction loan
indebtedness and to reduce the amounts drawn on the Company's credit facilities
by approximately $51,000,000. The balance of the net proceeds was used for
general corporate purposes, including other acquisitions and development
activities.
In April 1995, the Company completed a public offering of 4,165,000 shares of
$2.25 Series A Cumulative Convertible Preferred Stock at $25.00 per share. The
net proceeds of the offering were approximately $99,200,000 of which $63,000,000
was used to repay credit facility debt, $6,100,000 was used to repay short-term
debt and $23,214,000 was used to repay construction debt. The balance of the net
proceeds was used for working capital purposes.
In November 1996, the Company completed a public offering of $150,000,000 of
unsecured, fixed rate notes payable which priced in three tranches. The Company
borrowed $50,000,000 due November 15, 2001 at a coupon rate of 6.75%,
$50,000,000 due November 15, 2003 at a coupon rate of 7.00% and $50,000,000 due
November 15, 2006 at a coupon rate of 7.25%. The net proceeds of the offering
were used to retire approximately $53,087,000 in mortgage notes payable and to
reduce the outstanding balance on the credit facility.
RESULTS OF OPERATIONS
Increases in the operating results for the periods discussed below are
primarily the result of increases in the number of properties owned and
operated, as well as a result of increased rental rates. Where applicable,
comparisons have been made on a weighted average per unit basis in order to
adjust for such changes in the number of units owned. In computing the weighted
average per unit amounts, income and expenses of the Commercial Center have been
eliminated.
Comparison of year ended December 31, 1997 to year ended December 31, 1996
The weighted average number of apartment units increased by 1,607, or 13%, from
12,671 units in 1996 to 14,278 units in 1997. The increase is primarily the
result of the development of 1,576 and 1,234 units during 1997 and the second
half of 1996, respectively, as well as the acquisition of 852 units during 1997.
This increase was partially offset by the sale of one apartment community with
84 units in August 1997 and three apartment communities comprising 976 units in
December 1997. Total apartment units owned at the end of each period were 14,796
and 13,428, respectively.
For the year ended December 31, 1997, net income increased by $4,491,000 as
compared to the year ended December 31, 1996. For the year ended December 31,
1997, net income included a gain on sale of real estate assets of $6,999,000 and
a deduction for minority interest of $179,000. The gain on sale of real estate
assets related primarily to the sale of three apartment communities, Oasis
Orchid (280 units), Oasis Terrace (336 units) and Oasis Trails (360 units) in
the fourth quarter of 1997. The
<PAGE> 20
minority interest represents the separate private ownership of Oasis Martinique
(714 units). For the year ended December 31, 1996, net income included an
extraordinary charge of $1,403,000 and a gain on sale of real estate assets of
$2,444,000. The extraordinary charge for the year ended December 31, 1996
related to the unamortized loan fees and prepayment penalty fees associated with
the mortgage notes payable which were repaid with the proceeds from the issuance
of $150,000,000 in notes payable in the fourth quarter of 1996. The gain on sale
of real estate assets related to the sale of Oasis Star I (44 units) and Oasis
Reef (60 units) in the fourth quarter of 1996. When examining income on an
income before minority interest, gain on sale of real estate assets and
extraordinary charge basis, income for the year ended December 31, 1997
decreased by $1,288,000 as compared to the year ended December 31, 1996. This
decrease was due to increases in property operating and maintenance expenses of
$5,256,000, general and administrative expenses of $462,000, real estate taxes
of $1,016,000, interest expense of $10,968,000, interest (non-cash), which
represents amortization of loan fees and costs, of $96,000, and depreciation and
amortization of $3,476,000. Offsetting these factors were increases in rental
income of $18,748,000, other income of $1,032,000, joint venture investment
income of $64,000 and interest income - related party of $142,0000. The
increases in revenue and expenses were primarily the result of operating a
greater number of apartment units in 1997 as compared to 1996.
Multifamily Communities
The following table presents the operations of the Company's multifamily
apartment communities (excluding the commercial properties and corporate general
and administrative expenses) for the year ended December 31, 1997, with
comparative amounts for 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 % CHANGE
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Rental income $110,919 $92,196 20%
Other income 3,736 2,858 31%
---------- ---------- ----------
Total income 114,655 95,054 21%
---------- ---------- ----------
Property operating and
maintenance 32,314 27,085 19%
Real estate taxes 6,199 5,189 19%
---------- ---------- ----------
Total property
operating expenses 38,513 32,274 19%
---------- ---------- ----------
Property net operating income, before
interest expense and depreciation and
amortization $76,142 $62,780 21%
========== ========== ==========
</TABLE>
Rental income increased by $18,723,000, or 20%, from $92,196,000 in 1996 to
$110,919,000 in 1997. This increase was attributable to an increase in the
average monthly income per apartment unit, as well as additional rents received
as a result of the acquisition of 852 units and the completion of 1,897 units
during 1997. This increase was partially offset by the loss of rents relating to
the sale of 1,060 units during 1997. The weighted average monthly rental income
per apartment unit was approximately $647 in 1997 compared to $606 in 1996.
Other income (consisting primarily of nonrefundable security deposits,
application and cleaning fees, laundry and vending income) increased by $878,000
or 31%, from $2,858,000 in 1996 to $3,736,000
<PAGE> 21
in 1997, primarily due to the operation of additional apartment communities in
1997 as compared to 1996.
Property operating and maintenance expenses increased by $5,229,000, or 19%. On
a weighted average per unit, per month basis, these expenses increased by $11,
or 6%, from $178 in 1996 to $189 in 1997. These increases are primarily
attributable to general increases in utility rates during 1997.
Real estate taxes increased by $1,010,000, or 19%, primarily due to the
acquisition and development of additional apartment communities in 1997 and
during the second half of 1996. On a weighted average per unit, per month basis,
real estate taxes increased by $2, or 6%, from $34 in 1996 to $36 in 1997. This
increase is primarily due to the periodic re-assessment of the value of the
Company's communities. Nevada law requires the taxing authorities to re-assess
approximately twenty percent of all properties each year. Accordingly, each of
the Company's properties will be re-assessed for tax purposes approximately once
every five years.
"Same Store" Portfolio
The operating performance of the 36 communities and the first phase of one
community containing an aggregate of 9,983 apartment units which the Company
owned and operated (excluding communities under development) as of January 1,
1996, are summarized as follows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 % CHANGE
----------- ---------------------
(Dollars in thousands)
<S> <C> <C> <C>
Rental income $71,766 $70,130 2%
Other income 2,569 2,140 20%
----------- ---------------------
Total income 74,335 72,270 3%
----------- ---------------------
Property operating and maintenance 21,303 20,604 3%
Real estate taxes 4,267 4,081 5%
----------- --------- ----------
Total property operating expenses 25,570 24,685 4%
----------- --------- ----------
Property net operating income, before
interest expense and depreciation and
amortization $48,765 $47,585 2%
=========== ========= =========
</TABLE>
The increase in rental income of $1,636,000, or 2%, was primarily due to
an increase in the average rental rates.
Other income increased by $429,000, or 20%, primarily due to an increase in fees
unrelated to rent such as nonrefundable security deposits, application and
cleaning fees, and late fees. The increase is directly correlated to a greater
focus on the collection of termination fees and other related charges.
The increase in property operating and maintenance expenses of $699,000, or 3%,
was due to increased repairs and maintenance costs of $227,000, increased
marketing costs of $191,000, increased security costs of $165,000, increased
utility costs of $152,000 and increased payroll costs of $23,000, which were
partially offset by decreases in administrative expenses of $59,000.
<PAGE> 22
Real estate taxes increased by $186,000, or 5%, from $4,081,000 in 1996 to
$4,267,000 in 1997, primarily due to the re-assessment of certain communities by
the taxing authorities.
Comparison of year ended December 31, 1996 to year ended December 31, 1995
The weighted average number of apartment units increased by 2,061, or 19%, from
10,610 units in 1995 to 12,671 units in 1996. This increase is primarily the
result of the development of 1,889 units during 1996, as well as the acquisition
and development of 276 and 856 units, respectively, during the second half of
1995. This increase was partially offset by the sale of two apartment
communities comprising 104 apartment units during December 1996. Total apartment
units owned at the end of each period were 13,428 and 11,643, respectively.
For the year ended December 31, 1996, net income increased by $3,919,000 as
compared to the year ended December 31, 1995. For the year ended December 31,
1996, net income included an extraordinary charge of $1,403,000 and a gain on
sale of real estate assets of $2,444,000. The extraordinary charge for the year
ended December 31, 1996 related to the unamortized loan fees and prepayment
penalty fees associated with the mortgage notes payable which were repaid with
the proceeds from the issuance of $150,000,000 in notes payable in the fourth
quarter of 1996. The gain on sale of real estate assets related to the sale of
Oasis Star I (44 units) and Oasis Reef (60 units) in the fourth quarter of 1996.
For the year ended December 31, 1995, net income included an extraordinary
charge of $1,952,000 for unamortized loan fees and costs associated with the
credit facility debt that was retired during the third quarter of 1995. When
examining income on an income before gain on sale of real estate assets and
extraordinary charge basis, income for the year ended December 31, 1996
increased by $926,000 as compared to the year ended December 31, 1995. This
increase was due to increased rental and other income of $19,594,000 and
$76,000, respectively, as well as a decrease in interest expense (non-cash),
which represents amortization of loan fees and costs, of $214,000. Offsetting
these factors were increases in property operating and maintenance expenses of
$5,741,000, general and administrative expenses of $585,000, real estate taxes
of $1,151,000, interest expense of $7,906,000, and depreciation and amortization
of $3,575,000. The increases in revenue and expenses were primarily the result
of operating a greater number of apartment units in 1996 as compared to 1995.
<PAGE> 23
Multifamily Communities
The following table presents the operations of the Company's multifamily
apartment communities (excluding the commercial properties and corporate general
and administrative expenses) for the year ended December 31, 1996 with
comparative amounts for 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 % CHANGE
--------- ---------- ----------
(Dollars in
thousands)
<S> <C> <C> <C>
Rental income $ 92,196 $72,595 27%
Other income 2,858 2,388 20%
--------- ---------- ----------
Total income 95,054 74,983 27%
--------- ---------- ----------
Property operating and 27,085 21,356 27%
maintenance
Real estate taxes 5,189 4,038 29%
--------- ---------- ----------
Total property operating expenses 32,274 25,394 27%
--------- ---------- ----------
Property net operating income, before interest
expense and depreciation and amortization $62,780 $49,589 27%
========= ========== ==========
</TABLE>
Rental income increased by $19,601,000, or 27%, from $72,595,000 in 1995 to
$92,196,000 in 1996. Of the increase, $16,533,000 was attributable to
development communities, $1,412,000 was attributable to Oasis Centennial, which
was acquired in the third quarter of 1995, and the balance was attributable to
increased rents at communities owned during both periods. The weighted average
monthly rental income per apartment unit was approximately $606 in 1996 compared
to $570 in 1995.
Other income (consisting primarily of nonrefundable security deposits,
application and cleaning fees, laundry and vending income) increased by
$470,000, or 20%, from $2,388,000 in 1995 to $2,858,000 in 1996, primarily due
to the operation of additional apartment communities in 1996 as compared to
1995.
Property operating and maintenance expenses increased by $5,729,000, or 27%. On
a weighted average per unit, per month basis, these expenses increased by $10,
or 6%, from $168 in 1995 to $178 in 1996. These increases are primarily
attributable to general increases in utility rates during 1996, as well as to
additional costs associated with the Company's implementation of its brand name
operating strategy.
Real estate taxes increased by $1,151,000, or 29%, primarily due to the
acquisition and development of additional apartment communities in 1996 and
during the second half of 1995. On a weighted average per unit, per month basis,
real estate taxes increased by $2, or 6%, from $32 in 1995 to $34 in 1996. This
increase is primarily due to the periodic re-assessment of the value of the
Company's communities. Nevada law requires the taxing authorities to re-assess
approximately twenty percent of all properties each year. Accordingly, each of
the Company's properties will be re-assessed for tax purposes approximately once
every five years.
<PAGE> 24
"Same Store" Portfolio
The operating performance of the 40 communities and the first phase of one
community containing an aggregate of 9,819 apartment units which the Company
owned and operated (excluding communities under development) as of January 1,
1995, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 % CHANGE
----------- ---------------------
(Dollars in thousands)
<S> <C> <C> <C>
Rental income $67,850 $66,194 3%
Other income 2,163 2,315 (7%)
----------- ----------- -------
Total income 70,013 68,509 2%
----------- ----------- -------
Property operating and maintenance 20,424 19,630 4%
Real estate taxes 3,934 3,769 4%
----------- ----------- -------
Total property operating expenses 24,358 23,399 4%
----------- ----------- -------
Property net operating income, before
interest expense
and depreciation and amortization $45,655 $45,110 1%
=========== ========= ========
</TABLE>
The increase in rental income of $1,656,000, or 3%, was primarily due to an
increase in the average rental rates.
Other income decreased by $152,000, or 7%, primarily due to a decrease in fees
unrelated to rent such as nonrefundable security deposits, application and
cleaning fees, and late fees. This decrease is directly correlated to the
reduction in turnover experienced by the Company during 1996 resulting from the
implementation of its brand name operating strategy.
The increase in property operating and maintenance expenses of $794,000, or 4%,
was due to increased utility costs of $383,000, increased payroll costs of
$247,000, increased marketing costs of $92,000 and increased administrative
costs of $80,000, which were partially offset by decreases in other operating
expenses of $8,000.
Real estate taxes increased by $165,000, or 4%, from $3,769,000 in 1995 to
$3,934,000 in 1996, primarily due to the re-assessment of certain communities by
the taxing authorities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased by $6,625,000 from
$39,256,000 in 1996 to $45,881,000 in 1997. This increase is primarily due to an
increase in net operating income (income before depreciation and amortization
expense, minority interest, gain on sale of real estate assets and extraordinary
item), an increase in resident deposits and prepaid rent, as well as a reduction
in the decrease of accounts payable and accrued expenses and a reduction in the
increase of deferred assets
<PAGE> 25
and other costs.
Net cash used in investing activities decreased by $134,895,000, from
$147,169,000 in 1996 to $12,274,000 in 1997. During the year ended December 31,
1996, the Company had 15 communities in development (including a 321 unit
apartment community being developed as part of a joint venture agreement ("Oasis
Denver West")), comprising 4,448 apartment units, of which eight communities
comprising 1,889 apartment units were completed during the period. During the
year ended December 31, 1997, the Company had eight communities in development
(including Oasis Denver West), comprising 2,899 apartment units of which five
communities (including Oasis Denver West) comprising 1,897 units were completed
during the period. The estimated total investment upon completion of the 1,002
apartment units will be finalized prior to the commencement of construction.
In December 1996, the Company sold Oasis Star I, a 44 unit apartment community,
and Oasis Reef, a 60 unit apartment community, both located in Las Vegas, for an
aggregated consideration of $6,600,000, resulting in a combined gain of
$2,444,000. The cash proceeds to the Company were $5,302,000. Additionally, in
connection with the sale of Oasis Reef, the sale agreement provided for a
$1,100,000 note receivable which was issued in favor of the Company. The note
was paid in full during 1997. During 1997, the Company sold, in separate
transactions, Oasis Villas, an 84 unit apartment community, Oasis Orchid, a 280
unit apartment community, Oasis Terrace, a 336 unit apartment community and
Oasis Trails, a 360 unit apartment community, all located in Las Vegas, for an
aggregate consideration of approximately $60,000,000, resulting in a combined
gain of $6,999,000. The cash proceeds to the Company were $58,359,000.
The Company funds its development activities through a combination of working
capital, construction loans and its $200,000,000 credit facility. Advances under
the credit facility bear interest, at the Company's election, of either the
London Interbank Offered Rate ("LIBOR") plus 1.15% or the prime lending rate,
which reflects the interest rate reductions obtained by the Company during 1997.
In fourth quarter 1997, the LIBOR-based rate on the credit facility was reduced
to LIBOR plus 1.15% from LIBOR plus 1.25%. At December 31, 1997, the Company had
available borrowing capacity under the credit facility of $108,544,000.
Net cash provided by financing activities was $105,340,000 in 1996
compared to net cash used by financing activities of $34,474,000 in 1997,
representing a difference of $139,814,000. This difference is primarily a result
of the reduction in proceeds from debt.
At December 31, 1997, the Company had total indebtedness of approximately
$448,774,000, which includes $149,808,000 (net of a discount of $192,000) of
unsecured fixed rate debt, $133,492,000 of fixed rate mortgage debt, $91,456,000
of credit facility debt and $74,018,000 of fixed rate tax-exempt debt.
The Company anticipates meeting its short-term liquidity requirements
through a combination of cash flow from operations retained for investment
purposes, cash available from its credit facility and construction loans plus
additional long-term borrowings. The Company believes that net cash provided by
operations will be adequate to meet its operating requirements and to pay
dividends in accordance with real estate investment trust ("REIT") requirements.
The Company expects to meet its long-term liquidity requirements, such as
funds for acquisition and development activity and the repayment of debt,
through new long-term borrowings and the issuance of additional debt securities
or equity securities. In March 1997, the Company filed a shelf
<PAGE> 26
registration statement with the Securities and Exchange Commission which covers
up to an aggregate of $250,000,000 of debt securities, preferred stock,
depositary stock, common stock and warrants to purchase common stock and
preferred stock which the Company may issue from time to time.
<PAGE> 27
The following table presents certain information concerning the development and
expansion activities of the Company during 1997:
<TABLE>
<CAPTION>
COST PRIMARY SOURCE OF FUNDING
ESTIMATED EXPENDED -------------------------
NUMBER TOTAL THROUGH CONSTRUCTION WORKING CAPITAL/
COMMUNITIES OF UNITS INVESTMENT(1) 12/31/97(1) LOAN CREDIT FACILITY
----------- --------- ------------- ----------- ------------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Completed developments
Oasis Bluffs I 450 $ 37,670 $ 37,670 $ 37,670
Oasis Gateway 360 26,634 26,634 26,634
Oasis Lakeway 451 37,883 37,883 37,883
Oasis Pines 315 23,908 23,908 23,908
--------- --------- --------- ---------
1,576 126,095 126,095 126,095
Current developments:
Oasis Interlocken 340 33,000 10,021 33,000
Future Developments:
Oasis Bluffs II 414 (2) 9,569(3) 9,569
Oasis Harbor II 248 (2) 6,335(3) 6,335
--------- --------- --------- ---------
662 15,904 15,904
Subtotal 2,578 159,095 152,020 174,999
Land held for future
development:
Oasis Miramar 352 4,083(3) 4,083
--------- --------- ---------
Total 2,930 $ 159,095 $ 156,103 $ 179,082
========= ========= ========= =========
</TABLE>
- ---------
(1) Includes cost of land.
(2) Estimated total investment for these projects is in the process of being
finalized.
(3) Represents cost of land and infrastructure.
<PAGE> 28
The following table sets forth certain information with respect to debt at
December 31, 1997. As of that date, 9,330 of the Company's operating apartment
units and the commercial properties were unencumbered:
<TABLE>
<CAPTION>
ENCUMBERED NUMBER INTEREST BALANCE
LENDER PROPERTIES OF UNITS MATURITY RATE DECEMBER 31, 1996
------------------- ---------------- -------- -------- ---------------- -----------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C>
Credit facility:
Wells Fargo Bank Unsecured 09/98 LIBOR + 1.15%(1) $ 91,456
--------
Notes payable:
5 year notes payable Unsecured 11/01 6.75% 50,000
7 year notes payable Unsecured 11/03 7.00% 50,000
10 year notes payable Unsecured 11/06 7.25% 50,000
--------
150,000(2)
Mortgage notes payable:
Lutheran Brotherhood Oasis Club 320 10/98 6.90% 8,940
Teachers Insurance Oasis Del Mar 560 12/02 8.46% 21,449
FNMA-MBS Oasis Greens 432 08/01 8.63% 12,000
FNMA Oasis Hills 184 10/03 7.50% 2,599
FNMA Oasis Landing 144 10/03 7.50% 3,920
Allstate Oasis Paradise I 368 04/08 7.10% 15,573
FNMA-MBS Oasis Plaza 300 08/01 8.63% 6,000
FNMA Oasis Rainbow 232 10/03 7.50% 6,309
FNMA Oasis Topaz 270 12/01 9.50% 6,451
FNMA Oasis Vintage I 336 10/03 7.50% 10,819
Teachers Insurance Various(3) 1,024 12/05 8.13% 39,432
----- --------
4,170 133,492
----- --------
Tax-exempt bonds:
Bonds Oasis Park 224 01/26 7.29% 7,591(4)
Bonds Oasis Wexford 358 11/25 6.45% 15,827
Bonds Oasis Martinique 714 01/09 (5) 50,600
----- --------
1,296 74,018
----- --------
Subtotal 5,466 448,966
----- --------
Unamortized discount
on notes payable (192)
--------
Total 5,466 $448,774
===== ========
</TABLE>
- ----------
(1) During 1997, the LIBOR-based rate on the credit facility was reduced to
LIBOR + 1.15% from LIBOR + 1.25%.
(2) $149,808 net after discount.
(3) Communities collateralized are Oasis Bel Air, Oasis Canyon, Oasis Pointe,
and Oasis Centennial.
(4) $1,090 of the outstanding balance is taxable.
(5) The interest rate on the bonds is based upon the seven day tax exempt bond
floating rate index plus 125 basis points.
<PAGE> 29
CAPITAL EXPENDITURES
The Company capitalizes the direct and indirect costs of expenditures for the
acquisition or development of apartment communities and replacements and
improvements. Non-revenue generating capital expenditures are those
replacements which recur on a regular basis, but which have estimated useful
lives of more than one year, such as roofing, heating, ventilation and air
conditioning and exterior repainting. Revenue generating expenditures are
those improvements which enhance the community's net operating income
generating capability either through increased rental rates or reduced
operating expenses.
During 1995, the Company implemented its customer focused brand name
operating strategy. The process required many on-site improvements, including
the changing of property signage (which includes the Oasis name and logo) and
was completed in 1996. These costs are considered revenue generating capital
expenditures in that the Company believes that the Oasis brand name enhances
the Company's ability to attract new residents, retain existing residents,
gain additional resident referrals and retain more residents transferring
from one Oasis community to another.
At newly acquired communities, the Company often finds it necessary to
upgrade the physical appearance of the properties and to complete maintenance
and repair work which had been deferred by the prior owners. These activities
often result in heavier capital expenditures in the early years of Company
ownership. Some of these expenditures which would normally be considered
non-revenue generating capital expenditures or expense items are classified
as revenue generating expenditures when carpets and appliances are replaced
and the community is substantially upgraded to meet the image and quality
standards represented by the Oasis brand name. Upon completion of the
rehabilitation process, normal recurring capital expenditures such as carpet
and appliances are expensed as incurred.
Interest, real estate taxes and other carrying costs incurred during the
development period of communities under construction are capitalized and,
upon completion of the project, depreciated over the lives of the project.
INFLATION
The Company leases apartments to its residents under lease terms generally
ranging from six to 12 months. Management believes that the short-term lease
contracts lessen the impact of inflation by giving the Company the ability to
adjust rental rates to market levels as leases expire. The impact of recent
low rates of inflation has not been significant to the Company's operations,
except for the positive effect that low inflation has had on reducing the
Company's interest cost. Inflation and inflationary expectations and their
effect on interest rates may affect the Company in the future by changing the
underlying value of the Company's real estate assets or by affecting the
Company's costs of financing its operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and
No. 131 "Disclosures about Segments of an Enterprise and Related
Information". These statements shall be effective for financial statements
for fiscal years beginning after December 15, 1997. Management does not
believe that the adoption of Standards No. 130 and 131 will have a material
effect on its financial position or
<PAGE> 30
results of operations.
CALCULATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION
The Company considers FFO to be an appropriate measure of the performance of
an equity REIT. The National Association of Real Estate Investment Trust
("NAREIT") currently defines FFO as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. In addition, extraordinary or unusual items along with significant
non-recurring events that materially distort the comparative measure of FFO
are typically disregarded in its calculation. The Company's definition of FFO
also assumes conversion of all convertible securities, including minority
interests that are convertible into common equity. The Company believes that
in order to facilitate a clear understanding of its consolidated historical
operating results, FFO should be examined in conjunction with net income as
presented in the consolidated financial statements included in this Annual
Report on Form 10-K. FFO should not be considered as an alternative to net
income as an indication of the Company's operating performance or to net cash
provided by operating activities as a measure of the Company's liquidity.
Furthermore, FFO as disclosed by other REIT's may not be comparable to the
Company's calculation.
The following table presents a calculation of FFO and FAD:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
---------------------
(Dollars in thousands)
<S> <C>
Computation of Funds from Operations:
Income before gain on sale of real estate assets and $ 26,875
extraordinary item
Add:
Depreciation on real estate assets 18,813
Less:
Preferred dividend requirement (9,372)
--------
FUNDS FROM OPERATIONS - PRIMARY 36,316
Add:
Preferred dividend requirement 9,372
Minority interest 179
--------
FUNDS FROM OPERATIONS - FULLY DILUTED $ 45,867
Computation of Funds Available for Distribution:
Funds from Operations - Fully Diluted $ 45,867
Add:
Amortization of deferred financing costs 1,214
Depreciation of non-real estate 323
assets
Other amortization 12
Less: Non-revenue generating capital expenditures (3,250)
--------
FUNDS AVAILABLE FOR DISTRIBUTION $ 44,166
========
</TABLE>
<PAGE> 31
NOTES TO COMPUTATIONS OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR
DISTRIBUTION
1. The Company generally expenses most recurring non-revenue generating property
expenditures, including carpet and appliance replacements, except for certain
expenditures on acquisition communities where major improvements are required
to bring the community up to the operating standards of the Oasis portfolio.
2. Non-revenue generating expenditures at the communities consist of
replacements and equipment additions that do not enhance the revenue
generating capabilities of the communities.
3. Non-revenue generating expenditures at the corporate office consist primarily
of computer and office equipment acquisitions.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant and has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OASIS RESIDENTIAL, INC.
By: /s/ Scott S. Ingraham
-----------------------------------------
Scott S. Ingraham
Chief Executive Officer, President and
Director
Date: March 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT V. JONES Chairman of the Board March 23, 1998
- -------------------------------
Robert V. Jones
/s/ SCOTT S. INGRAHAM Chief Executive Officer, March 23, 1998
- ------------------------------- President and Director
Scott S. Ingraham (Principal Executive
Officer)
/s/ ALLAN O. HUNTER, JR. Executive Vice President, March 23, 1998
- ------------------------------- Chief Operating Officer
Allan O. Hunter, Jr. and Director
/s/ JOHN M. CLAYTON Senior Vice President and March 23, 1998
- ------------------------------- Chief Financial
John M. Clayton Officer (Principal
Financial Officer)
/s/ MARIANNE K. AGUIAR Vice President and March 23, 1998
- ------------------------------- Controller (Principal
Marianne K. Aguiar Accounting Officer)
/s/ JOHN M. GALVIN Director March 23, 1998
- -------------------------------
John M. Galvin
/s/ PETER L. RHEIN Director March 23, 1998
- -------------------------------
Peter L. Rhein
/s/ ROBERT H. SMITH Director March 23, 1998
- -------------------------------
Robert H. Smith
/s/ EDWARD R. MULLER Director March 23, 1998
- -------------------------------
Edward R. Muller
</TABLE>
<PAGE> 33
OASIS RESIDENTIAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OASIS RESIDENTIAL, INC.
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1996........................... F-3
Consolidated Statements of Operations for the Years ended December 31, 1997, 1996
and 1995......................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years ended
December 31, 1997, 1996 and 1995................................................. F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 1997, 1996
and 1995......................................................................... F-6
Notes to the Consolidated Financial Statements...................................... F-7
Schedule III: Real Estate and Accumulated Depreciation.............................. F-20
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted or the
information is presented in the consolidated financial statements or related
notes.
F-1
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Oasis Residential, Inc.
We have audited the accompanying consolidated financial statements and the
financial statement schedule of Oasis Residential, Inc. and its subsidiaries
(the "Company") as of December 31, 1997 and 1996 and for each of the three years
in the period ended December 31, 1997 as listed on page F-1 of this Form 10-K.
These consolidated financial statements and the financial statement schedule are
the responsibility of the management of the Company. Our responsibility is to
express an opinion on these consolidated financial statements and the financial
statement schedule based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 1997 and 1996 and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1997
in conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
San Francisco, California
January 23, 1998, except for Note 15
as to which the date is March 6, 1998.
F-2
<PAGE> 35
OASIS RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Real estate assets:
Land................................................................. $126,224 $ 93,484
Buildings and improvements........................................... 674,155 552,500
Furniture and fixtures............................................... 45,163 39,515
-------- --------
845,542 685,499
Less accumulated depreciation........................................ 64,899 53,049
-------- --------
780,643 632,450
Land held for development............................................ 4,083 3,766
Construction in progress............................................. 25,952 109,202
-------- --------
Net real estate assets............................................ 810,678 745,418
Cash and cash equivalents.............................................. 2,530 3,397
Restricted cash........................................................ 2,964 2,976
Investment in and advances to joint venture............................ 8,370 9,574
Notes receivable (Related Party)....................................... 8,216 --
Deposits on real estate assets......................................... 2,654 2,000
Deferred costs and other assets (net of accumulated amortization of
$3,028 and $1,802 at December 31, 1997 and 1996, respectively)....... 11,116 11,408
-------- --------
Total assets...................................................... $846,528 $774,773
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Debt................................................................. $448,774 $394,274
Resident deposits and prepaid rent................................... 3,148 2,066
Accounts payable and accrued expenses................................ 4,730 6,221
-------- --------
Total liabilities................................................. 456,652 402,561
-------- --------
Minority Interest...................................................... 20,600 --
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $2.25 Series A Cumulative Convertible,
$.01 par value, liquidation preference of $25 per share,
15,000,000 shares authorized, 4,165,000 shares issued and
outstanding at December 31, 1997 and 1996......................... 42 42
Common stock, $.01 par value, 100,000,000 shares authorized,
16,326,477 and 16,237,646 shares issued and outstanding at
December 31, 1997 and 1996, respectively.......................... 163 162
Paid-in capital...................................................... 388,876 386,910
Distributions in excess of accumulated earnings...................... (19,805) (14,902)
-------- --------
Total stockholders' equity........................................ 369,276 372,212
-------- --------
Total liabilities and stockholders' equity........................ $846,528 $774,773
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 36
OASIS RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rental income........................................ $ 111,591 $ 92,843 $ 73,249
Other income......................................... 4,188 3,156 3,080
Joint venture investment income...................... 64 -- --
Interest income -- related party..................... 142 -- --
----------- ----------- -----------
115,985 95,999 76,329
----------- ----------- -----------
Expenses:
Property operating and maintenance................... 32,482 27,226 21,485
General and administrative........................... 3,692 3,230 2,645
Real estate taxes.................................... 6,246 5,230 4,079
Interest............................................. 26,184 15,216 7,310
Interest (non-cash).................................. 1,214 1,118 1,332
Depreciation and amortization........................ 19,113 15,637 12,062
----------- ----------- -----------
88,931 67,657 48,913
----------- ----------- -----------
Income before minority interest, gain on sale of real
estate assets and extraordinary item................. 27,054 28,342 27,416
Minority interest...................................... 179 -- --
----------- ----------- -----------
Income before gain on sale of real estate assets and
extraordinary item................................... 26,875 28,342 27,416
Gain on sale of real estate assets..................... 6,999 2,444 --
----------- ----------- -----------
Income before extraordinary item....................... 33,874 30,786 27,416
Extraordinary item..................................... -- (1,403) (1,952)
----------- ----------- -----------
Net income............................................. 33,874 29,383 25,464
Less preferred dividend requirement.................... 9,372 9,372 6,534
----------- ----------- -----------
Earnings available for common stockholders............. $ 24,502 $ 20,011 $ 18,930
=========== =========== ===========
Basic and Diluted Earnings Per Share:
Earnings available for common stockholders before
extraordinary item................................ $ 1.51 $ 1.32 $ 1.29
Less extraordinary item.............................. -- 0.09 0.12
----------- ----------- -----------
Earnings available for common stockholders........... $ 1.51 $ 1.23 $ 1.17
=========== =========== ===========
Weighted average number of common shares outstanding... 16,250,118 16,237,646 16,230,429
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 37
OASIS RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DISTRIBUTIONS
----------------------------
PREFERRED STOCK COMMON STOCK IN EXCESS
$.01 PAR VALUE $.01 PAR VALUE OF TOTAL
------------------- -------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------ ----------- ------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994...................... -- -- 16,218,134 $162 $287,755 $ (1,319) $ 286,598
Shares issued for cash
(net of issuance
costs)................. 4,165,000 $42 -- -- 98,655 -- 98,697
Common stock issued to
executive officer...... -- -- 19,512 -- 500 -- 500
Net income................ -- -- -- -- -- 25,464 25,464
Dividends paid:
Preferred stock........ -- -- -- -- -- (4,191) (4,191)
Common stock........... -- -- -- -- -- (26,614) (26,614)
--------- --- ---------- ---- -------- --------- ---------
Balance, December 31,
1995...................... 4,165,000 42 16,237,646 162 386,910 (6,660) 380,454
Net income................ -- -- -- -- -- 29,383 29,383
Dividends paid:
Preferred stock........ -- -- -- -- -- (9,372) (9,372)
Common stock........... -- -- -- -- -- (28,253) (28,253)
--------- --- ---------- ---- -------- --------- ---------
Balance, December 31,
1996...................... 4,165,000 42 16,237,646 162 386,910 (14,902) 372,212
Net income................ -- -- -- -- -- 33,874 33,874
Dividends paid:
Preferred stock........ -- -- -- -- -- (9,372) (9,372)
Common stock........... -- -- -- -- -- (29,405) (29,405)
Common stock issued to
executive officer...... -- -- 32,877 -- 754 -- 754
Dividend Reinvestment Plan
issuance............... -- -- 55,954 1 1,212 -- 1,213
--------- --- ---------- ---- -------- --------- ---------
Balance, December 31,
1997...................... 4,165,000 $42 16,326,477 $163 $388,876 $ (19,805) $ 369,276
========= === ========== ==== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 38
OASIS RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 33,874 $ 29,383 $ 25,464
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 19,113 15,637 12,062
Amortization of discount on notes payable........... 22 2 --
Gain on sale of real estate assets.................. (6,999) (2,444) --
Extraordinary item (write-off of unamortized loan
fees)............................................. -- 714 1,952
Interest (non-cash)................................. 1,214 1,118 1,332
Increase in deferred costs and other assets......... (934) (2,784) (6,334)
Increase (decrease) in liabilities:
Resident deposits and prepaid rent................ 1,082 378 141
Accounts payable and accrued expenses............. (1,491) (2,748) 6,775
-------- --------- ---------
Net cash provided by operating activities......... 45,881 39,256 41,392
-------- --------- ---------
Cash flows from investing activities:
Purchase of real estate assets......................... (12,455) -- (12,686)
Improvements to real estate assets..................... (7,737) (15,241) (15,954)
Notes receivable (related party)....................... (8,216) -- --
Construction of real estate assets..................... (42,775) (125,656) (126,383)
Deposits on real estate assets......................... (654) (2,000) --
Net proceeds from the sale of real estate assets....... 58,359 5,302 --
Investment in and advances to joint venture............ 1,204 (9,574) --
-------- --------- ---------
Net cash used in investing activities............... (12,274) (147,169) (155,023)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from debt..................................... 66,500 329,284 232,235
Principal payments on debt............................. (63,422) (185,838) (193,503)
(Increase) decrease in restricted cash................. 12 (481) 5,420
Net proceeds from public offerings of stock............ -- -- 99,197
Proceeds from issuance of common stock in connection
with the dividend reinvestment program.............. 1,213 -- --
Cash dividends paid -- preferred stock................. (9,372) (9,372) (4,191)
Cash dividends paid -- common stock.................... (29,405) (28,253) (26,614)
-------- --------- ---------
Net cash provided by financing activities........... (34,474) 105,340 112,544
-------- --------- ---------
Net decrease in cash and cash equivalents........... (867) (2,573) (1,087)
Cash and cash equivalents, beginning of year............. 3,397 5,970 7,057
-------- --------- ---------
Cash and cash equivalents, end of year................... $ 2,530 $ 3,397 $ 5,970
======== ========= =========
Supplemental information:
Cash paid during the year for interest................. $ 30,440 $ 23,274 $ 15,553
======== ========= =========
Supplemental schedule of non-cash investing and
financing activities:
Issuance of common stock to executive officer....... $ 754 $ -- $ 500
======== ========= =========
Note receivable in connection with the sale of real
estate assets..................................... $ -- $ 1,100 $ --
======== ========= =========
Assumption of debt in connection with
acquisitions...................................... $ 51,400 $ -- $ --
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 39
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
Oasis Residential, Inc. (the "Company"), which was incorporated in the
State of Nevada on March 23, 1993, is a self-administered and self-managed real
estate investment trust ("REIT"), engaged in the development, acquisition and
operation of predominantly upscale apartment communities in the greater Las
Vegas area, Reno and Denver metropolitan areas and Orange County, California.
The Company commenced operations as a public company on October 22, 1993 with an
initial portfolio of 23 apartment communities comprising 5,215 units and a
30,000 square foot commercial center in Henderson, Nevada in which the Company's
headquarters is located. At December 31, 1997, the Company owned and operated 51
apartment communities containing 14,796 apartment units.
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, (the "Code") commencing with the taxable year ended
December 31, 1993. In order for the Company to qualify as a REIT, it must
distribute annually at least 95% of its REIT taxable income, as defined in the
Code, to its stockholders and comply with certain other requirements.
Accordingly, no provision has been made for federal income taxes in the
accompanying consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Financial Statement Presentation:
The accompanying consolidated financial statements include the accounts of
all subsidiaries and partnerships in which a controlling interest is held,
including at December 31, 1997, Oasis Martinique, L.L.C. The Company uses the
equity method of accounting where its ownership interest is between 20% and 50%.
All significant intercompany balances and transactions have been eliminated
in consolidation.
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 dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
Real Estate Assets and Depreciation:
Rental property is stated at the lower of cost or fair value. Expenditures
which increase the revenue potential of a property or which extend the useful
life of the asset are generally capitalized. Maintenance and repair expenditures
necessary to maintain a property in operating condition are charged to expense
when incurred. Depreciation is calculated on a straight-line basis over the
estimated useful lives of the depreciable real estate assets, which range from
18 to 40 years for buildings and improvements and 5 to 12 years for furniture
and fixtures.
Costs are capitalized during the development of constructed assets
(including interest, property taxes and other direct and indirect costs)
beginning when active development commences and ending when construction is
substantially complete and the property is ready for occupancy.
Losses in carrying values of investment assets are provided by management
when the losses become apparent and the investment asset is considered impaired.
Management evaluates its investment properties, at least quarterly, to assess
whether any impairment indications are present. If an asset is considered to be
impaired, a loss is provided to reduce the carrying value of the property to its
estimated fair value. No such losses have been required or provided in the
accompanying financial statements.
F-7
<PAGE> 40
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Cash and Cash Equivalents:
The Company considers highly liquid short-term investments with initial
maturities of three months or less to be cash equivalents.
Cash and cash equivalents are primarily held in a single financial
institution, and at times, such balances may be in excess of the Federal Deposit
Insurance Corporation insurance limit.
Restricted Cash:
Restricted cash balances at December 31, 1997 and 1996 are required under
certain debt agreements for property tax and insurance expenses and to secure
the payment of certain replacement and capital improvement costs.
Deferred Financing Costs:
Included in deferred costs and other assets are costs associated with
obtaining debt financing and credit enhancements. Such costs are being amortized
over the term of the associated debt or credit enhancement.
Accounting for Stock-Based Compensation:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and related interpretations in
accounting for its stock-based compensation plans.
Interest Rate Protection Agreements:
Premiums paid to purchase interest rate protection agreements are
capitalized and amortized over the terms of those agreements using the
straight-line method which approximates the effective interest method.
Unamortized premiums are included in deferred costs and other assets.
Impact of Recently Issued Accounting Standards:
In 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and No.
131 "Disclosures about Segments of an Enterprise and Related Information." These
statements shall be effective for financial statements for fiscal years
beginning after December 15, 1997. Management does not believe that the adoption
of Standards No. 130 and 131 will have a material effect on its financial
position or results of operations.
3. INTEREST CAPITALIZED
Interest costs associated with projects under development aggregating
$5,125, $9,350 and $8,499 for the years ended December 31, 1997, 1996 and 1995,
respectively, were capitalized.
4. INVESTMENT IN AND ADVANCES TO JOINT VENTURE
In April 1995, the Company and Stevinson Partnership, Ltd. ("Stevinson")
entered into an operating agreement to form Denver West Apartments, L.L.C., a
limited liability company (the "Joint Venture"). Under the terms of the
agreement, the Company and Stevinson each have a 50% interest in Oasis Denver
West, a 321 unit apartment community located in Denver, Colorado. In November
1996, the Joint Venture finalized the loan agreement with Northwestern Mutual
Life Company for the construction and permanent financing of the community in
the amount of $15,430 which the Company has guaranteed. The loan bears interest
at a rate of 8.30% and matures on August 1, 2007.
F-8
<PAGE> 41
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company has contributed capital of $4,171 and $3,955 as of December 31,
1997 and 1996, respectively. In addition, the Company has advanced cash to the
Joint Venture in the form of a loan. The outstanding balance on the loan was
$2,958 and $4,400 as of December 31, 1997 and 1996, respectively. The loan bears
interest at the prime lending rate plus 2% (prime rate at December 31, 1997 was
8.50%) and is being repaid from operations. Additionally, the Company has
incurred $1,219 of additional costs that are not accounted for at the
joint-venture level.
5. OASIS MARTINIQUE, L.L.C.
On October 23, 1997, the Company acquired a managing member interest in a
limited liability company ("LLC") that owns the 714 unit Oasis Martinique
apartment community in Costa Mesa, California. In connection with the
acquisition, the LLC issued operating LLC units, convertible on a 1 for 1 basis
into 886,022 shares of the Company's common stock. The Company assumed existing
tax exempt debt of $51,400 issued by the County of Orange, California. The
Company also contributed approximately $1,500 in cash for the transaction and
LLC formation costs, thus resulting in a total initial investment to the Company
of approximately $73,500. The Company plans to increase its investment in Oasis
Martinique by $2,500 to $3,000 in order to fund a capital refurbishment program
designed to increase net operating income.
The minority interest represents the separate private ownership of Oasis
Martinique, L.L.C.
In connection with the LLC transaction, the Company loaned the other two
members of the LLC $8,216 collateralized by each member's LLC units. The loans
are payable in quarterly installments of interest only and are due December 23,
1998. The interest rate on these loans is set at 9% if the loans are paid in
full on or before March 31, 1998. If the loans are not paid in full by March 31,
1998, the interest rate is increased to 15% and will be made effective back to
the original issuance date of the loans. Interest income recorded in connection
with these loans for the year ended December 31, 1997 was $142.
6. DEFERRED COSTS AND OTHER ASSETS
Deferred financing costs which included deferred loan fees and offering
costs and which are included in deferred costs and other assets aggregated to
$9,360 and $8,327 at December 31, 1997 and 1996, respectively. Accumulated
amortization which related to deferred financing costs aggregated to $2,977 and
$1,763 at December 31, 1997 and 1996, respectively.
7. DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Notes Payable.......................................................... $150,000 $150,000
In November 1996, the Company completed a public offering of
$150,000 of unsecured, fixed rate notes payable which priced in three
tranches (the "Notes Payable"). The Company borrowed $50,000 due
November 15, 2001 at a coupon rate of 6.75%, $50,000 due November 15,
2003 at a coupon rate of 7.00% and $50,000 due November 15, 2006 at a
coupon rate of 7.25%. The Notes Payable were sold at a discount, and at
December 31, 1997 and 1996, the unamortized discount was $192 and $214,
respectively.
The Notes Payable may be redeemed at any time at the option of the
Company, in whole or in part, upon payment of certain yield maintenance
penalties.
</TABLE>
F-9
<PAGE> 42
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
The Notes Payable contain certain covenants, the most restrictive
of which, requires that the Company may not at any time own Total
Unencumbered Assets, as defined, equal to less than 150% of the
aggregate outstanding principal amount of the unsecured indebtedness of
the Company on a consolidated basis.
The net proceeds from the offering were used to retire
approximately $53,087 in Mortgage Notes Payable and to reduce the
outstanding balance on the Credit Facility. For the year ended December
31, 1996, the Company recorded an extraordinary charge in the amount of
$1,403 for the remaining unamortized deferred financing costs and
prepayment penalties in connection with the retirement of these
Mortgage Notes Payable.
Mortgage Notes Payable................................................. $133,492 $135,062
Mortgage Notes Payable were comprised of seven loans at December
31, 1997 and 1996, each of which is collateralized by one or more
apartment communities. During 1997, the Company substituted Oasis
Pointe and Oasis Centennial with regards to the Mortgage Notes which
were previously collateralized by Oasis Rose and Oasis Trails. No fees
were incurred as a result of the substitution. The Mortgage Notes
Payable generally require monthly installments of interest and
principal over various terms extending through the year 2008. Interest
rates on the Mortgage Notes Payable are fixed, and ranged from 6.90% to
9.50% (weighted average interest rate was 8.00% at December 31, 1997).
In March 1996, the Company refinanced a $16,000 loan with Allstate
Insurance Company collateralized by the 368 unit Oasis Paradise I
apartment community. The new interest rate is 7.10%, a reduction from
the previous rate of 9.03%. The loan maturity was extended from April
1996 to April 2008.
In November 1996, five Mortgage Notes Payable totaling $53,087
were repaid with proceeds from the issuance of the Notes Payable.
Credit Facility........................................................ 91,456 85,736
In 1995, the Company entered into a $150,000 credit facility
agreement (the "Credit Facility") with various banks led by Wells Fargo
Bank and retired its two lines of credit that were previously
outstanding. In connection with the retirement of the two prior lines
of credit, the Company, for the year ended December 31, 1995, recorded
an extraordinary charge of $1,952 for the remaining unamortized
deferred financing costs and other costs associated with those loans.
Advances under the Credit Facility initially bore an interest rate, at
the Company's election, of either the London Interbank Offered Rate
("LIBOR") plus 1.75% or the prime lending rate. During 1996, the Credit
Facility was amended to increase the facility to $200,000 and reduce
the LIBOR-based interest rate to LIBOR plus 1.25%. The LIBOR-based
interest rate was again reduced to LIBOR plus 1.15% during 1997. At
December 31, 1997, LIBOR ranged from 5.72% to 5.97% for one, three, six
and twelve-month indices, and the prime rate was at 8.50%. At December
31, 1997, the weighted average interest rate on borrowings outstanding
on the Credit Facility was 7.15%. The credit facility agreement
terminates in September 1998.
</TABLE>
F-10
<PAGE> 43
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
The Credit Facility contains certain covenants, the most
restrictive of which limits the borrowing capacity of the Company to
50% of Gross Asset Value, as defined, and restricts distributions to
stockholders to 95% of Funds from Operations, as defined. The Company
does not anticipate that these covenants will affect its ability to pay
dividends in accordance with the Company's current dividend policy.
Tax-Exempt Bonds....................................................... $ 74,018 $ 23,690
In connection with the 1994 acquisition of Oasis Wexford, the
Company assumed tax exempt housing bonds in the principal amount of
$17,800. The bonds were reissued in November 1995, for $16,235. The
bonds are payable in monthly installments of principal and interest.
The interest rate on the tax-exempt bonds is 6.45% and is subject to
"reset" on December 1, 2005 based upon market conditions at that time.
The bonds are due on November 1, 2025.
The Company has $6,660 (Series 1995A) of tax-exempt housing bonds
and $1,090 (Series 1995B) of taxable housing bonds collateralized by
Oasis Park. The bonds are payable in monthly installments of principal
and interest. The interest rate on these bonds is 7.29%. The Series
1995A bonds are due on January 1, 2026 and the Series 1995B bonds are
due on July 1, 2006.
In connection with the 1997 acquisition of Oasis Martinique, the
Company assumed $51,400 of low floater, tax exempt bonds. The bonds are
payable in monthly installments of interest only, along with principal
payments made in December of each year. The interest rate on the bonds
is subject to weekly repricing based upon the seven day tax exempt bond
floating rate index plus 125 basis points. At December 31, 1997, the
seven day tax exempt bond floating rate index was 3.55%. The bonds are
due December 1, 2009.
-------- --------
448,966 394,488
Less unamortized discount on Notes Payable............................. 192 214
-------- --------
Total........................................................ $448,774 $394,274
======== ========
</TABLE>
Scheduled principal payments on debt, are as follows:
<TABLE>
<CAPTION>
NOTES MORTGAGE NOTES CREDIT TAX- EXEMPT
PAYABLE PAYABLE FACILITY BONDS TOTAL
-------- -------------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
1998............................. $ -- $ 10,551 $91,456 $ 1,095 $103,102
1999............................. -- 1,745 -- 1,220 2,965
2000............................. -- 1,889 -- 1,345 3,234
2001............................. 50,000 20,046 -- 1,455 71,501
2002............................. -- 27,602 -- 1,490 29,092
Thereafter....................... 100,000 71,659 -- 67,413 239,072
-------- -------- ------- -------- --------
$150,000 $133,492 $91,456 $ 74,018 $448,966
======== ======== ======= ======== ========
</TABLE>
F-11
<PAGE> 44
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
At December 31, 1997 and 1996, management estimates that the carrying
amount of debt approximates fair value; however, current estimates of fair value
could differ significantly from amounts realized in market exchanges.
8. STOCKHOLDERS' EQUITY
In October 1993, the Company completed a public offering of 8,970,000
shares of common stock at a price per share of $21.75. The net proceeds from
this offering were approximately $180,000 and were used for the acquisition of
communities, the repayment of first and second lien preexisting mortgage
indebtedness and for working capital purposes.
In July 1994, the Company completed a second public offering of 5,750,000
shares of common stock at a price per share of $24.50. The net proceeds from
this offering were approximately $132,000 and were used for the acquisition of
five multifamily communities containing 2,441 units for approximately $98,800,
including the assumption of $38,800 of mortgage indebtedness, the repayment of
certain adjustable rate debt, the reduction of the balance owing on the
Company's credit facility and for working capital purposes.
In April 1995, the Company issued 4,165,000 shares of Series A Cumulative
Convertible Preferred Stock ("Preferred Stock") at $25.00 per share. The net
proceeds from the offering were approximately $99,200 and were used for the
repayment of certain short-term and construction debt, the reduction of the
balance owing on the credit facility and for working capital purposes. The
shares pay a cumulative dividend quarterly in arrears in an amount per share
equal to the greater of $2.25 per annum or the cash dividends paid or payable on
a number of shares of common stock equal to the number of shares of common stock
into which a share of Preferred Stock is convertible. The shares generally have
no voting rights and have a liquidation preference of $25.00 per share plus
accrued and unpaid distributions. The Preferred Stock is convertible at the
option of the holder at any time into shares of common stock, at a conversion
price of $24.64 per share of common stock (equivalent to a conversion rate of
1.0146 shares of common stock per share of Preferred Stock), subject to
adjustment in certain circumstances. The Preferred Stock is not redeemable by
the Company prior to April 30, 2001.
In 1995, the Company adopted a Dividend Reinvestment and Share Purchase
Plan (the "Plan"). The Company has reserved 1,000,000 shares for issuance under
the Plan. The Plan allows stockholders to acquire additional shares of the
Company by automatically reinvesting dividends and making voluntary cash
payments. For the year ended December 31, 1997, 55,954 shares were issued at an
average price of $21.68 (net of a 2% discount). For the year ended December 31,
1996, the Company issued no new common shares to stockholders who elected to
participate in this Plan; all shares were purchased in the open market.
In 1994, the Company entered into an agreement with an executive officer
that provided for the Company's acquisition from the executive officer of
certain contractual rights to acquire two properties for development in
Colorado, Oasis Deerwood and Oasis Denver West. The agreement provided that when
each of the two Colorado properties was completed and stabilized, and subject to
the properties meeting certain performance criteria, the executive officer would
have the right to receive up to approximately $1,000 in the Company's common
stock, with approximately $750 applicable to Oasis Deerwood and approximately
$250 applicable to Oasis Denver West. During the fourth quarter of 1997, Oasis
Deerwood met the required performance criteria and the executive officer
received 32,877 shares at a price of $22.94 per share totaling $754. If and when
the required performance criteria are met with regards to Oasis Denver West, the
executive officer will have the right to receive up to $250 in the Company's
common stock. In the event that the executive officer's employment is terminated
for cause, the executive officer's rights under the agreement will be forfeited.
F-12
<PAGE> 45
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
As described in Note 1, the Company has elected to be treated, for federal
income tax purposes, as a REIT. As such, the Company is required to distribute
annually, in the form of dividends to its common stockholders, at least 95% of
its taxable income. In reporting periods where taxable income exceeds net
income, stockholders' equity will be reduced by the distributions in excess of
net income and will be increased by the excess of net income over distributions
in periods where net income exceeds taxable income. For tax reporting purposes,
a portion of the common dividends declared during the years ended December 31,
1997 and 1996 represents a return of capital.
For federal income tax purposes, the following tables, on a per share
basis, summarize the taxability of dividends paid in 1997 and 1996:
<TABLE>
<CAPTION>
COMMON SHARES PREFERRED SHARES
--------------------- ---------------------
YEAR ENDED DECEMBER 31, 1997 DIVIDEND PERCENTAGE DIVIDEND PERCENTAGE
- --------------------------------------------------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ordinary income.......................................... $ 1.14 63% $ 2.25 100%
Capital gain............................................. .20 11% -- --
Return of capital........................................ .47 26% -- --
------ --- ------ ---
$ 1.81 100% $ 2.25 100%
====== === ====== ===
</TABLE>
<TABLE>
<CAPTION>
COMMON SHARES PREFERRED SHARES
--------------------- ---------------------
YEAR ENDED DECEMBER 31, 1996 DIVIDEND PERCENTAGE DIVIDEND PERCENTAGE
- --------------------------------------------------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Ordinary income.......................................... $ 1.13 65% $ 2.25 100%
Return of capital........................................ 0.61 35% -- --
------ --- ------ ---
$ 1.74 100% $ 2.25 100%
====== === ====== ===
</TABLE>
9. EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (the "Statement"). In accordance with the provisions
of the Statement, basic earnings per share for the years ended December 31,
1997, 1996 and 1995, is computed by dividing income available to common
stockholders (income from continuing operations less the preferred stock
dividend requirement) by the weighted average number of shares outstanding
during the period.
F-13
<PAGE> 46
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Additionally, other dilutive potential common shares, are considered when
calculating earnings per share on a diluted basis.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
BASIC EPS CALCULATION 1997 1996 1995
- -------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Income before extraordinary item.............................. $33,874 $30,786 $27,416
Preferred stock dividend requirement.......................... (9,372) (9,372) (6,534)
------- ------- -------
Earnings available for common stockholders before
extraordinary item.......................................... 24,502 21,414 20,882
Extraordinary item.......................................... -- (1,403) (1,952)
------- ------- -------
Earnings available to common stockholders..................... $24,502 $20,011 $18,930
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
DATES OUTSTANDING SHARES OUTSTANDING FRACTION OF PERIOD AVERAGE SHARES
- --------------------------------------------- ------------------ ------------------ --------------
<S> <C> <C> <C>
January 1 - May 14, 1995..................... 16,218,134 134/365 5,954,055
Issuance of common stock on May 15, 1995..... 19,512
----------
May 15 - December 31, 1995................... 16,237,646 231/365 10,276,374
----------
Weighted average shares, year ended
December 31, 1995....................... 16,230,429
==========
January 1 - December 31, 1996................ 16,237,646 365/365 16,237,646
----------
Weighted average shares, year ended
December 31, 1996....................... 16,237,646
==========
January 1 - June 3, 1997..................... 16,237,646 154/365 6,850,952
Issuance of common stock on June 4, 1997..... 840
----------
June 4, 1997 - September 18, 1997............ 16,238,486 107/365 4,760,323
Issuance of common stock on September 19,
1997....................................... 721
----------
September 19, 1997 - November 3, 1997........ 16,239,207 46/365 2,046,585
Issuance of common stock on November 4,
1997....................................... 32,877
----------
November 4 - November 17, 1997............... 16,272,084 14/365 624,135
Issuance of common stock on November 18,
1997....................................... 54,393
----------
November 18 - December 31, 1997.............. 16,326,477 44/365 1,968,123
----------
Weighted average shares, year ended
December 31, 1997....................... 16,250,118
==========
</TABLE>
Basic EPS
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Earnings available for common stockholders before
extraordinary item................................ $1.51 $1.32 $1.29
Extraordinary item.................................. -- (.09) (.12)
----- ----- -----
Earnings available for common stockholders.......... $1.51 $1.23 $1.17
===== ===== =====
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, there were no
dilutive potential common shares outstanding during the period. Therefore,
diluted earnings per share is the same as basic earnings per share.
10. RELATED PARTY TRANSACTIONS
An affiliated company leased space in one of the commercial properties
through May 1995. Related party rental revenue was $30 for the year ended
December 31, 1995.
F-14
<PAGE> 47
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. OPERATING LEASES
The Company owns two commercial properties; a portion of one building
serves as its headquarters. The portion of the commercial properties not used by
the Company is leased to tenants under net operating leases with initial terms
extending to the year 2008. Future minimum rentals under noncancellable
operating leases at both commercial properties, excluding tenant reimbursements
of expenses, as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998...................................................... $ 361
1999...................................................... 322
2000...................................................... 186
2001...................................................... 136
2002...................................................... 136
Thereafter................................................ 503
------
Total..................................................... $1,644
======
</TABLE>
12. STOCK-BASED COMPENSATION PLANS
In May 1995, the Company adopted the 1995 Equity Participation Plan (the
"1995 Plan") to supplement the Company's 1993 Stock Option Plan (the "1993
Plan"). The Company also has a Stock Option Plan for Outside Directors (the
"Outside Directors Plan").
The 1995 Plan provides incentives for officers, key employees and
consultants through the grant or issuance of options, restricted stock
performance awards, dividend equivalents, deferred stock, stock payments and
stock appreciation rights ("SARs"). The aggregate number of shares that may be
issued under the 1995 Plan may not exceed 1,135,000, less the number of shares
covered by options outstanding under the 1993 Plan and the Outside Directors
Plan. The 1995 Plan limits the number of shares that any individual may receive
in any year under the plan to 150,000 and limits the dollar value of awards,
other than options and SARs that may be paid to any employee for any year to
$100.
The 1993 Plan provides for the issuance of incentive and non-qualified
stock options under the Code and grants of the Company's common stock contingent
upon the attainment of certain performance goals or subject to other
restrictions. A total of 700,000 shares of the Company's common stock have been
reserved for issuance under the 1993 Plan and the Outside Directors Plan.
Options awarded under both the 1993 and 1995 Plans provide for the options
to be granted at a price equal to the market value of the Company's common stock
at the date of grant, to vest ratably over a four year period and to expire ten
years from the date the options were granted.
Under the Outside Directors Plan, each of the Company's non-employee
directors is granted an option to purchase 3,000 shares of common stock at the
time of appointment/election to the Board of Directors. In addition, following
each annual meeting of stockholders, each of the Company's non-employee
directors, who have served as a member for one year or more, will receive an
option to purchase up to 3,000 shares of common stock at the market price of the
shares on the date of grant. All options granted under the Outside Directors
Plan will vest one year after the date of grant. The Outside Directors Plan is
administered by the Board of Directors.
F-15
<PAGE> 48
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table shows the activity and balances for each stock option
plan:
<TABLE>
<CAPTION>
1993 PLAN OUTSIDE
& OPTION PRICE DIRECTORS OPTION PRICE
1995 PLAN PER SHARE PLAN PER SHARE
--------- ------------------ --------- ------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994....... 620,000 15,000
Options granted................ 5,000 $22.50 15,000 $22.625 - $22.875
Options cancelled.............. (10,000) (3,000)
--------- -------
Balance, December 31, 1995....... 615,000 27,000
Options granted................ 351,000 $22.375 - $22.625 12,000 $22.50
Options cancelled.............. (20,000) --
--------- -------
Balance, December 31, 1996....... 946,000 39,000
Options granted................ 135,000 $23.25 - $23.375 15,000 $23.125
Options cancelled.............. -- --
--------- -------
Balance, December 31, 1997....... 1,081,000 54,000
========= =======
</TABLE>
There were no shares available for grant as of December 31, 1997. None of
the options granted are contingent upon the attainment of performance goals or
subject to other restrictions. As of December 31, 1997, outstanding options to
purchase 644,750 shares of common stock were exercisable.
Additionally, 46,500 non-qualified stock options were issued to an
executive officer during 1997. These options were not granted in connection with
either the 1993 or 1995 Plan. The options vest ratably over a four year period
and were granted at an option price of $23.375 per share. The option price was
equal to the market value of the stock on the date of grant. Therefore, the
Company did not recognize any compensation expense in connection with the grant
of these options.
The Company applies APB 25 and related interpretations in accounting for
its stock-based compensation plans. Accordingly, no compensation expense has
been recognized for its stock-based compensation plans. Had compensation cost
for the Company's stock option plans been determined based upon the fair value
at the grant date for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the Company's net income and earnings
per share would have been reduced by approximately $423 or $.03 per share for
the year ended December 31, 1997, approximately $634 or $0.04 per share for the
year ended December 31, 1996, and approximately $123 or $0.01 per share for the
year ended December 31, 1995. The estimated fair value of the options granted
during 1997 ranged from $1.40 to $2.22 per share on the date of grant using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 7.3%, volatility of 17.98%, risk free rates of 5.88% to 6.36% and an
expected life of four years. The estimated fair value of the options granted
during 1996 ranged from $1.43 to $1.45 per share on the date of grant using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 7.26%, volatility of 16.82%, risk free rates of 4.19% to 5.60% and an
expected life of four years. The estimated fair value of the options granted
during 1995 ranged from $1.63 to $1.78 per share on the date of grant using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 7.26%, volatility of 16.82%, risk free rates of 4.72% to 5.60% and an
expected life of four years.
13. EMPLOYEE BENEFITS
Effective February 1995, the Company adopted an employee investment plan
(the "Plan"), under Section 401(k) of the Internal Revenue Code. Employees who
are at least 21 years old and who have completed one year of eligibility service
may become participants in the Plan. Each participant may make
F-16
<PAGE> 49
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
contributions to the Plan through salary deferrals in amounts of at least 1% to
a maximum of 15% of the participant's compensation, subject to certain
limitations imposed by the Internal Revenue Code. The Company contributes an
amount equal to 50% of the first 6% of the participant's compensation
contributed. A participant's contribution to the Plan is 100% vested and
nonforfeitable. A participant will become vested in 20% of the Company's
contributions after one year of service while enrolled in the Plan and
increasing by 20% for each additional year of service while enrolled in the
Plan.
14. GAIN ON SALE OF REAL ESTATE ASSETS
During 1997, the Company sold, in separate transactions, Oasis Villas, an
84 unit apartment community, Oasis Orchid, a 280 unit apartment community, Oasis
Terrace, a 336 unit apartment community and Oasis Trails, a 360 unit apartment
community, all located in Las Vegas, for an aggregate consideration of
approximately $60,000 , resulting in a combined gain of $6,999.
15. SUBSEQUENT EVENTS
On January 20, 1998, the Company declared a quarterly dividend for its
Series A Cumulative Convertible Preferred Stock of $0.5625 per share payable on
February 16, 1998 to stockholders of record on February 2, 1998. In addition, on
January 26, 1998, the Company declared a quarterly dividend of $0.4525 per
common share to stockholders of record on February 3, 1998, payable on February
17, 1998.
On February 27, 1998, the Company sold Oasis StarII, a 24 unit apartment
community, for $1,300, with no material gain or loss resulting from the
transaction.
On March 6, 1998, the Company purchased a 421 apartment community in
Fullerton, California named Parkside Apartments. The purchase price of
approximately $29,000 was funded with cash drawn from the Company's Credit
Facility. The Company renamed the community Oasis Parkside.
16. COMMITMENTS AND CONTINGENCIES
On December 16, 1997, the Company announced the execution of a definitive
merger agreement ("the Agreement") between the Company and Camden Property Trust
("Camden"). Under the terms of the agreement, the Company would be merged with
and into a wholly-owned subsidiary of Camden, with each share of the Company's
common stock being exchanged for 0.759 shares of Camden. The merger is subject
to approval by the shareholders of the Company and Camden, which is expected to
occur in April 1998. At this time, there can be no assurance given that such
approval will be obtained.
The Company is presently in the development stage on three additional
communities (Oasis Bluffs II, Oasis Harbor II and Oasis Interlocken) totaling
1,002 units in its three markets, Las Vegas, Reno and Denver. The estimated
total investment for these units will be finalized prior to the commencement of
construction.
In November 1996, the Company entered into an agreement to purchase a 19.8
acre parcel in Mission Viejo, California, subject to the satisfaction of certain
entitlement conditions. If the conditions are satisfied and the purchase is
completed, the Company intends to build a 380 unit apartment community slated to
begin construction in 1998. In accordance with the terms of the agreement, the
Company made a deposit in the amount of $2,000 into an escrow account. The
payment is fully refundable until the seller completes certain obligations under
the agreement and thereafter, is considered nonrefundable but may be applied to
reduce the amounts due to the seller at the close of escrow.
In October 1997, the Company entered into a contract to purchase a 421 unit
apartment community in Fullerton, California for approximately $29,000, subject
to the satisfaction of certain conditions. In accordance with the terms of the
agreement, the Company made a deposit in the amount of $300 in an escrow
account. In January 1998, the Company made an additional deposit in the amount
of $200 for a total deposit of $500.
The Company has been contacted by certain regulatory agencies with regards
to alleged failures to comply with the "Fair Housing Act" (the "Act") as it
pertains to properties constructed for first occupancy after March 31, 1991 (the
"Properties"). Currently, the Company is inspecting the Properties to determine
the extent of noncompliance and the changes that will be necessitated. It is the
Company's intention to make any and all changes and modifications necessary in
order to meet the compliance standards of the Act. At this
F-17
<PAGE> 50
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
time, the Company is unable to provide an estimate of costs and expenses
associated with this matter as the scope and extent of required work has yet to
be determined.
The Company is also party to various legal actions which are incidental to
its business. Management believes that these actions will not have a material
adverse affect on the financial position or the results of operations of the
Company.
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................... $ 26,824 $ 28,071 $ 29,619 $ 31,471
Income before gain on sale of real
assets.............................. 7,125 7,099 6,163 6,488
Gain on sale of real estate assets.... -- -- -- 6,999
Net income............................ 7,125 7,099 6,163 13,487
Preferred dividend requirement........ 2,343 2,343 2,343 2,343
Earnings available for common
stockholders........................ 4,782 4,756 3,820 11,144
Per share data:
Income before gain on sale of real
estate assets and (net of
preferred dividend
requirement)..................... $ 0.29 $ 0.29 $ 0.24 $ 0.26
Gain on sale of real estate
assets......................... -- -- -- 0.43
Earnings available for common
stockholders................... 0.29 0.29 0.24 0.69
Weighted average number of common
shares outstanding.................. 16,237,646 16,237,904 16,238,556 16,286,017
</TABLE>
F-18
<PAGE> 51
OASIS RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................... $ 21,752 $ 23,207 $ 24,875 $ 26,165
Income before gain on sale of real
estate assets and extraordinary
item................................ 6,955 7,057 7,104 7,226
Gain on sale of real estate assets.... -- -- -- 2,444
Extraordinary item.................... -- -- -- (1,403)
Net income............................ 6,955 7,057 7,104 8,267
Preferred dividend requirement........ 2,343 2,343 2,343 2,343
Earnings available for common
stockholders........................ 4,612 4,714 4,761 5,924
Per share data:
Income before gain on real estate
assets and extraordinary item
(net of preferred dividend
requirement)..................... $ 0.28 $ 0.29 $ 0.29 $ 0.60
Gain on sale of real estate
assets........................... -- -- -- (0.15)
Extraordinary item.................. -- -- -- (0.09)
Earnings available for common
stockholders..................... 0.28 0.29 0.29 0.36
Weighted average number of common
shares outstanding.................. 16,237,646 16,237,646 16,237,646 16,237,646
</TABLE>
F-19
<PAGE> 52
SCHEDULE III
OASIS RESIDENTIAL, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
INITIAL COST COST(A)
----------------------------------- COST ------------
BUILDINGS FURNITURE SUBSEQUENT TO BUILDINGS
12/31/97 AND AND CONSTRUCTION/ AND
PROPERTY NAME ENCUMBRANCES LAND IMPROVEMENT FIXTURES ACQUISITION LAND IMPROVEMENTS
- ------------------------- ------------ -------- ------------ --------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oasis Bay................ $ 1,321 $ 3,342 $ 283 $ 283 $ 1,321 $ 3,423
Oasis Bel Air............ $ 11,435(C) 2,206 16,118 549 144 2,206 16,201
Oasis Bluffs............. 1,294 35,191 1,185 -- 1,294 35,191
Oasis Breeze............. 2,340 11,538 226 995 2,340 12,066
Oasis Canyon............. 7,886(C) 1,724 10,706 359 73 1,724 10,738
Oasis Centennial......... 10,647(C) 2,592 9,803 276 571 2,592 10,177
Oasis Centre............. 423 1,159 19 327 425 1,471
Oasis Cliffs............. 1,619 9,730 1,630 1,668 1,619 10,757
Oasis Club............... 8,940 3,177 10,462 751 1,156 3,177 11,262
Oasis Cove(B)............ 1,003 4,068 386 206 1,022 4,108
Oasis Crossings.......... 673 4,426 153 4 673 4,425
Oasis Deerwood........... 1,868 26,245 472 810 1,868 27,010
Oasis Del Mar............ 21,449 4,073 31,439 1,032 157 4,073 31,519
Oasis Emerald............ 579 3,335 533 509 580 3,674
Oasis Gateway............ 2,819 22,874 941 -- 2,819 22,874
Oasis Glen............... 1,120 4,939 112 166 1,120 5,019
Oasis Greens............. 12,000 709 17,077 295 1,858 709 18,012
Oasis Harbor I........... 2,446 19,137 724 71 2,446 19,202
Oasis Heights............ 1,485 8,761 245 995 1,486 9,236
Oasis Heritage........... 3,628 26,162 540 5,134 3,628 27,927
Oasis Hills.............. 2,599 550 4,469 300 272 550 4,615
Oasis Island............. 760 4,095 196 186 761 4,069
Oasis Lakeway............ 3,944 32,686 1,253 -- 3,944 32,686
Oasis Landing............ 3,920 505 5,937 104 392 505 6,108
Oasis Martinique......... 50,600 26,377 45,821 1,862 -- 26,377 45,821
Oasis Meadows............ 2,216 21,447 795 151 2,216 21,589
Oasis Mini Storage....... 304 976 2 157 304 1,089
Oasis Morning............ 42 1,468 135 459 49 1,627
Oasis Nellis
Commercial............. 288 576 -- -- 288 576
Oasis Palms.............. 1,021 6,586 799 695 1,022 6,840
<CAPTION>
FURNITURE DATE OF
AND ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY NAME FIXTURES TOTAL DEPRECIATION ACQUISITION LIFE
- ------------------------- --------- -------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Oasis Bay................ 485 5,229 $ 1,126 8/90 5-40 Years
Oasis Bel Air............ 610 19,017 882 12/95 5-40 Years
Oasis Bluffs............. 1,185 37,670 242 9/97 5-40 Years
Oasis Breeze............. 693 15,099 1,388 10/93 5-40 Years
Oasis Canyon............. 400 12,862 759 7/95 5-40 Years
Oasis Centennial......... 473 13,242 647 9/95 5-40 Years
Oasis Centre............. 32 1,928 512 10/89 5-40 Years
Oasis Cliffs............. 2,271 14,647 5,084 7/88 5-40 Years
Oasis Club............... 1,107 15,546 2,998 12/89 5-40 Years
Oasis Cove(B)............ 533 5,663 1,119 5/90 & 4/96 5-40 Years
Oasis Crossings.......... 158 5,256 140 9/96 5-40 Years
Oasis Deerwood........... 517 29,395 978 9/96 5-40 Years
Oasis Del Mar............ 1,109 36,701 1,855 10/95 5-40 Years
Oasis Emerald............ 702 4,956 1,643 11/88 5-40 Years
Oasis Gateway............ 941 26,634 210 6/97 5-40 Years
Oasis Glen............... 198 6,337 539 7/94 5-40 Years
Oasis Greens............. 1,218 19,939 2,143 10/93 5-40 Years
Oasis Harbor I........... 730 22,378 620 11/96 5-40 Years
Oasis Heights............ 764 11,486 1,055 2/94 5-40 Years
Oasis Heritage........... 3,909 35,464 3,098 7/94 5-40 Years
Oasis Hills.............. 426 5,591 1,368 6/91 5-40 Years
Oasis Island............. 407 5,237 1,061 6/90 5-40 Years
Oasis Lakeway............ 1,253 37,883 1 12/97 5-40 Years
Oasis Landing............ 325 6,938 715 10/93 5-40 Years
Oasis Martinique......... 1,862 74,060 329 10/97 5-40 Years
Oasis Meadows............ 804 24,609 876 4/96 5-40 Years
Oasis Mini Storage....... 46 1,439 97 7/94 5-40 Years
Oasis Morning............ 428 2,104 1,221 1978 5-40 Years
Oasis Nellis
Commercial............. -- 864 51 7/94 5-40 Years
Oasis Palms.............. 1,239 9,101 2,660 9/94 5-40 Years
</TABLE>
F-20
<PAGE> 53
<TABLE>
<CAPTION>
TOTAL
INITIAL COST COST(A)
----------------------------------- COST ------------
BUILDINGS FURNITURE SUBSEQUENT TO BUILDINGS
12/31/97 AND AND CONSTRUCTION/ AND
PROPERTY NAME ENCUMBRANCES LAND IMPROVEMENT FIXTURES ACQUISITION LAND IMPROVEMENTS
- ------------------------- ------------ -------- ------------ --------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Oasis Paradise........... 15,573 7,640 27,280 624 1,391 7,843 27,606
Oasis Park............... 7,591 1,217 8,087 224 753 1,217 8,611
Oasis Pearl.............. 585 1,581 224 242 587 1,696
Oasis Pines.............. 2,648 20,437 823 -- 2,648 20,437
Oasis Place.............. 2,189 5,950 196 217 2,195 6,024
Oasis Plaza.............. 6,000 2,541 6,677 151 2,290 2,541 8,190
Oasis Pointe............. 9,464(C) 2,056 14,273 554 35 2,056 14,305
Oasis Rainbow............ 6,309 714 6,245 962 769 714 6,610
Oasis Ridge.............. 1,899 9,869 219 828 1,899 10,074
Oasis Rose............... 1,943 9,926 453 195 1,964 10,054
Oasis Sands.............. 601 2,417 56 77 601 2,474
Oasis Sea Palms.......... 3,500 7,475 405 -- 3,500 7,475
Oasis Springs............ 1,638 11,547 231 919 1,638 11,953
Oasis Star(D)............ 211 312 39 100 212 361
Oasis Suite.............. 1,464 8,470 306 781 1,464 8,637
Oasis Summit............. 2,275 17,537 479 367 2,352 17,669
Oasis Tiara.............. 4,129 22,086 782 219 4,129 22,259
Oasis Topaz.............. 6,451 2,377 6,353 143 3,070 2,377 8,678
Oasis View............... 341 3,908 316 1,242 341 4,109
Oasis Vinings............ 1,857 11,624 365 415 1,857 11,940
Oasis Vintage............ 10,819 2,942 14,237 1,019 280 2,943 14,423
Oasis Vista.............. 2,856 12,930 50 1,048 2,856 13,509
Oasis Wexford............ 15,827 2,843 16,111 358 845 2,843 16,616
Oasis Winds.............. 2,309 9,425 152 2,805 2,309 11,133
-------- -------- -------- ------- ------- -------- --------
207,510 125,881 655,330 25,288 36,327 126,224 674,155
Land held for
development............ 4,083
-------- -------- -------- ------- ------- -------- --------
207,510 125,881 655,330 25,288 36,327 130,307 674,155
Construction in
progress...............
-------- -------- -------- ------- ------- -------- --------
$207,510 $125,881 $655,330 $25,288 $36,327 $130,307 $674,155
======== ======== ======== ======= ======= ======== ========
<CAPTION>
FURNITURE DATE OF
AND ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY NAME FIXTURES TOTAL DEPRECIATION ACQUISITION LIFE
- ------------------------- --------- -------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Oasis Paradise........... 1,486 36,935 2,966 3/94 5-40 Years
Oasis Park............... 453 10,281 771 9/94 5-40 Years
Oasis Pearl.............. 349 2,632 739 7/87 5-40 Years
Oasis Pines.............. 823 23,908 190 6/97 5-40 Years
Oasis Place.............. 333 8,552 612 7/94 5-40 Years
Oasis Plaza.............. 928 11,659 1,069 10/93 5-40 Years
Oasis Pointe............. 557 16,918 722 3/96 5-40 Years
Oasis Rainbow............ 1,366 8,690 3,094 11/88 5-40 Years
Oasis Ridge.............. 842 12,815 1,270 10/93 5-40 Years
Oasis Rose............... 499 12,517 987 10/94 5-40 Years
Oasis Sands.............. 76 3,151 225 9/94 5-40 Years
Oasis Sea Palms.......... 405 11,380 119 6/97 5-40 Years
Oasis Springs............ 744 14,335 1,181 7/94 5-40 Years
Oasis Star(D)............ 89 662 155 6/91 5-40 Years
Oasis Suite.............. 920 11,021 944 7/94 5-40 Years
Oasis Summit............. 637 20,658 1,484 7/94 & 7/95 5-40 Years
Oasis Tiara.............. 828 27,216 810 9/96 5-40 Years
Oasis Topaz.............. 888 11,943 1,092 5/93 5-40 Years
Oasis View............... 1,357 5,807 3,515 1983 5-40 Years
Oasis Vinings............ 464 14,261 1,209 12/93 5-40 Years
Oasis Vintage............ 1,112 18,478 2,270 1/93 5-40 Years
Oasis Vista.............. 519 16,884 1,270 7/94 5-40 Years
Oasis Wexford............ 698 20,157 1,384 12/94 5-40 Years
Oasis Winds.............. 1,249 14,691 1,274 10/93 5-40 Years
------- -------- -------
42,447 842,826 64,769
Land held for
development............ 4,083
------- -------- -------
42,447 846,909 64,769
Construction in
progress............... 25,952
------- -------- -------
$42,447 $872,861 $64,769
======= ======== =======
</TABLE>
- ---------------
(A) The aggregate cost for federal income tax purposes at December 31, 1997 is
$864,650.
(B) Initial cost includes the expansion of Oasis Cove totaling 20 units.
(C) Encumbrance represents a portion of the $39,432 Teachers Insurance and
Annuity Association loan allocated to the property based upon relative size.
(D) Initial cost was reduced to reflect the sale of 44 units at Oasis Star I.
F-21
<PAGE> 54
NOTE TO SCHEDULE III
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1. RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year............................. $687,174 $547,181 $433,450
Additions................................................ 218,664 144,312 113,731
Dispositions............................................. (58,929) (4,319) --
-------- -------- --------
Balance at end of year................................... $846,909 $687,174 $547,181
======== ======== ========
Accumulated depreciation:
Balance at beginning of year............................. $ 52,924 $ 38,499 $ 26,605
Additions................................................ 18,778 15,438 11,894
Dispositions............................................. (6,933) (1,013) --
-------- -------- --------
Balance at end of year................................... $ 64,769 $ 52,924 $ 38,499
======== ======== ========
</TABLE>
F-22
<PAGE> 55
3.1 Third Amended and Restated Articles of Incorporation of Oasis
Residential, Inc. (1)
3.2 Fourth Amended and Restated Bylaws of Oasis Residential, Inc. (1)
10.1 Amended and Restated Employment Contract between the Company and Robert
V. Jones (6)
10.2 First Amendment to Amended and Restated Employment Contract between the
Company and Robert V. Jones (6)
10.3 Amended and Restated Employment Contract between the Company and Scott
S. Ingraham (6)
10.4 First Amendment to Amended and Restated Employment Contract between the
Company and Scott S. Ingraham (6)
10.5 Amended and Restated Employment Contract between the Company and Allan
O. Hunter, Jr. (6)
10.6 First Amendment to Amended and Restated Employment Contract between the
Company and Allan O. Hunter (6)
10.7 Amended and Restated Employment Contract between the Company and Walter
B. Eeds (6)
10.8 First Amendment to Amended and Restated Employment Contract between the
Company and Walter B. Eeds (6)
10.9 Noncompetition Agreement between the Company and RVJ (1)
10.10 Stock Option Plan for Outside Directors (l)
10.11 Form of Nonqualified Stock Option Agreement for Outside Directors (l)
10.12 Form of Officers and Directors Indemnification Agreement (l)
10.13 Form of Promissory Note and related documentation between the Company
and Lutheran Brotherhood (l)
10.14 Form of Promissory Note and related documentation between the Company
and Washington Pacific Financial Group Ltd. (1)
10.15 Multifamily Note in favor of GMAC Mortgage Corporation of
Pennsylvania(l)
10.16 Amended and Restated Acquisition Agreement between the Company and
Walter B. Eeds (3)
10.17 Credit Agreement among the Company, certain lenders, and Wells Fargo
Bank, National Association. as Agent dated January 9, 1995 (3)
10.18 Loan Agreement for Oasis Parc between ORI-Colorado, Inc. and Bank One,
Arizona, NA dated September 29, 1994 (3)
10.19 Letter of Credit Reimbursement Agreement between ORI-Colorado, Inc. and
Bank One, Arizona, NA relating to City of Westminster, Colorado
Multifamily Housing Revenue Bonds (Wexford Station A Project) 1985
Series A dated December 1, 1994 (3)
<PAGE> 56
10.20 Loan Agreement between City of Westminster, Colorado and Wexford Venture
dated December 1, 1985 (3)
10.21 Amendment to Loan Agreement between City of Westminster, Colorado and
ORI-Colorado, Inc. dated December 1, 1994, relating to Oasis Wexford (3)
10.22 Transcript $6,690,000 Adams County, Colorado Multifamily Housing Revenue
Refunding Bonds Series 1986A; Sale of Project and Purchase in Lieu of
Redemption dated October 3, 1994 (3)
10.23 Promissory Note of ORI-Colorado, Inc. in favor of Eagle Chase, Ltd.
dated September 29, 1994 (3)
10.24 Loan Agreement between ORI-Colorado, Inc. and Bank One, Arizona, NA
dated September 29, 1994 (3)
10.25 Assignment and Assumption Agreement between Eagle Chase, Ltd. and
ORI-Colorado, Inc. (3)
10.26 Assignment and Assumption Agreement by and among U.S. Customs Service,
the Company and Robert V. Jones (3)
10.27 Promissory Note for Oasis Terrace between the Company and Bank One,
Arizona, NA dated May 11, 1994 (3)
10.28 Promissory Note for Oasis Del Mar between the Company and Bank One,
Arizona, NA (3)
10.29 Promissory Note for Oasis Canyon between the Company and Bank One,
Arizona, NA (3)
10.30 Multifamily Deed of Trust, Assignment of Rents and Security Agreement
and Multifamily Note by and between the Company and Washington Mortgage
Group Financial Group, Inc. (3)
10.31 Multifamily Deed of Trust, Assignment of Rents and Security Agreement
and Multifamily Note by and between Washington Mortgage Group Financial
Group, Inc. and the Company (3)
10.32 Amended and Restated Credit Agreement among the Company, The Lenders
Listed Therein, Wells Fargo Bank as Administrative Agent, and Morgan
Guaranty Trust Company of New York dated as of September 25, 1995 (4)
10.33 Promissory Note of the Company in favor of Wells Fargo Bank dated
September 25, 1995 (4)
10.34 Promissory Note of the Company in favor of Morgan Guaranty Trust Company
of New York dated September 25, 1995 (4)
10.35 Promissory Note of the Company in favor of Bank One Arizona, N.A. dated
September 25, 1995 (4)
10.36 Promissory Note of the Company in favor of Dresdner Bank AG, Los Angeles
Agency and Grand Cayman Branch dated September 25, 1995 (4)
10.37 Promissory Note of the Company in favor of Union Bank dated September
25, 1995 (4)
10.38 Multifamily Deed of Trust, Assignment of Rents and Security Agreement,
Multifamily Note, Financing Agreement, Indenture of Trust, and
Regulatory Agreement by and between BOCC Funding Corporation and the
Company dated as of November 1, 1995 (Oasis Wexford) (4)
10.39 Multifamily Deed of Trust, Assignment of Rents and Security Agreement,
Multifamily Note, Financing Agreement and Indenture of Trust by and
between BOCC Funding Corporation and the Company dated as of December 1,
1995 (Oasis Park) (4)
<PAGE> 57
10.40 Nevada Deed of Trust and Assignment of Rents and Security Agreement and
Fixture Filing Statement, Nevada Deed of Trust Note, and Note Agreement
by and between Teachers Insurance and Annuity Association of America and
Company dated December 29, 1995 (Oasis Bel Air, Oasis Canyon, Oasis
Trails, Oasis Rose) (4)
10.41 Nevada Deed of Trust and Assignment of Rents and Security Agreement and
Fixture Filing Statement, Nevada Deed of Trust Note, and Letter of
Credit Agreement by and between Teachers Insurance and Annuity
Association of America and Company dated December 29, 1995 (Oasis Del
Mar) (4)
10.42 First Modification Agreement to the Amended and Restated Credit
Agreement among the Company, The Lenders named therein, Wells Fargo Bank
as Administrative Agent, and Morgan Guaranty Trust Company of New York
and Bank One, Arizona, N.A., dated as of February 25, 1996 (5)
10.43 Second Modification Agreement to the Amended and Restated Credit
Agreement among the Company, The Lenders named therein, Wells Fargo Bank
as Administrative Agent, and Morgan Guaranty Trust Company of New York
and Bank One, Arizona, N.A., dated as of July 25, 1996 (5)
10.44 Third Modification Agreement to the Amended and Restated Credit
Agreement among the Company, The Lenders named therein, Wells Fargo Bank
as Administrative Agent, and Morgan Guaranty Trust Company of New York
and Bank One, Arizona, N.A., dated as of September 24, 1996 (5)
10.45 Promissory Note of the Company in favor of Wells Fargo Bank dated
September 24, 1996 (5)
10.46 Promissory Note of the Company in favor of Morgan Guaranty Trust Company
dated September 24, 1996 (5)
10.47 Promissory Note of the Company in favor of Bank One. Arizona, N.A. dated
September 24, 1996 (5)
10.48 Promissory Note of the Company in favor of Dresdner Bank AG, New York
Brand and Grand Cayman Branch dated September 24, 1996 (5)
10.49 Promissory Note of the Company in favor of Union Bank of California,
N.A. dated September 24, 1996 (5)
10.50 Amended and Restated Deed of Trust, Assignment of Leases, Rents and
Contracts, Security Agreement and Fixture Filing between Oasis
Residential, Inc., as Trustor, and Stweart Title of Nevada, as Trustee,
and Allstate Life Insurance Company, as Beneficiary, dated March 14,
1996 (Oasis Reef) (6)
10.51 Amended and Restated Mortgage Note with Oasis Residential, Inc. as Maker
payable to Allstate Life Insurance Company dated March 14, 1996 (Oasis
Reef) (6)
10.52 Purchase Agreement between Oasis Residential, Inc. as Seller and Siefert
Investments, a Nevada Limited Partnership as Buyer dated December 11,
1996, for sale of Oasis Reef Apartments (6)
10.54 Fourth Modification Agreement to the Amended and Restated Credit
Agreement among the Company, The Lenders named therein, Wells Fargo Bank
as Administrative Agent, and Morgan Guaranty Trust Company of New York
and Bank One, Arizona, N.A., dated as of December 18, 1996 (7)
10.55 Land Purchase Agreement for Oasis Interlaken by and between Interlocken,
Ltd. and ORI-Colorado, Inc. dated December 24, 1996 (7)
<PAGE> 58
10.56 Purchase and Sale Agreement for Oasis Sea Palms by and between Hutton
Development Company, Inc. and the Company dated May 19, 1997 (7)
10.57 Fifth Modification Agreement to the Amended and Restated Credit
Agreement among the Company, The Lenders named therein, Wells Fargo Bank
as Administrative Agent, and Morgan Guaranty Trust Company of New York
and Bank One, Arizona, N.A., dated as of September 25, 1997 (8)
10.58 Contribution Agreement dated as of October 23, 1997 by and between the
Company, Costa Mesa Partners, LLC, ISCO, IFT Properties, Ltd., Edward
Israel and Robert Cohen
10.59 Amended and Restated Limited Liability Company Agreement dated as of
October 23, 1997 by and among the Company, ISCO and IFT
10.60 Exchange Rights Agreement dated as of October 23, 1997 by and among the
Company, Oasis Martinique, LLC, ISCO and IFT Properties, Ltd.
10.61 Loan and Security Agreement dated as of October 23, 1997 by and among
the Company, ISCO, IFT Properties, Ltd., Edward Israel and Robert Cohen
10.62 Agreement and Plan of Merger dated December 16, 1997 by and among
Camden Property Trust, Camden Subsidiary II, Inc. and the Company (9)
10.63 Amendment No. 1 to Agreement and Plan of Merger dated as of February 4,
1998, by and among Camden Property Trust, Camden Subsidiary II, Inc. and
the Company
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule Year Ended December 31, 1997
27.2 Financial Data Schedule Quarterly and Year Ended December 31, 1996
27.3 Financial Data Schedule Quarterly 1997
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on
Form S-11, Registration No. 33-67564
(2) Incorporated by reference from the Company's Registration Statement on
Form S-11, Registration No. 33-79564
(3) Incorporated by reference from the Company's Form 10-K for the fiscal
year ended December 31, 1994
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995
(5) Incorporated by reference from the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1996
(6) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996
(7) Incorporated by reference from the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1997
(8) Incorporated by reference from the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1997
<PAGE> 59
- ------------------------------
Scott S. Ingraham
Chief Executive Officer, President and
Director
Date: March 23, 1998
Pursuant to the requirements of the Securities Act of 1934, this Report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Robert V. Jones Chairman of the Board March 23,1998
Scott S. Ingraham Chief Executive Officer, March 23, 1998
President, and Director
(Principal Executive Officer)
Allan O. Hunter, Jr. Executive Vice President, March 23, 1998
Chief Operating Officer
and Director
John M. Clayton Senior Vice President March 23, 1998
and Chief Financial Officer
(Chief Financial Officer)
Marianne K. Aguiar Vice President and March 23, 1998
Controller (Principal
Accounting Officer)
John M. Galvin Director March 23, 1998
Peter L. Rhein Director March 23, 1998
Robert H. Smith Director March 23, 1998
Edward R. Muller Director March 23, 1998
</TABLE>
<PAGE> 1
EXHIBIT 10.58
CONTRIBUTION AGREEMENT
BY AND AMONG
OASIS RESIDENTIAL, INC.,
A NEVADA CORPORATION
AND
COSTA MESA PARTNERS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
ISCO,
A CALIFORNIA GENERAL PARTNERSHIP,
IFT PROPERTIES, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP,
EDWARD ISRAEL
AND
ROBERT COHEN
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................................1
ARTICLE II. THE TRANSACTION; CLOSING.........................................................7
Section 2.1. Time and Place..........................................................7
Section 2.2. Actions of OAS At the Closing...........................................7
Section 2.3. Actions of the Company, ISCO and IFT at Closing.........................7
Section 2.4. Transaction Taxes and Closing Costs.....................................8
Section 2.5. Credit and Proration....................................................9
Section 2.6. Condition Precedent....................................................11
ARTICLE III. COVENANTS......................................................................11
Section 3.1. Employee Matters.......................................................11
Section 3.2. Further Assurances.....................................................11
Section 3.3. Retained Pre-Closing Assets............................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..................................................12
Section 4.1. Representations and Warranties of ISCO, IFT, Israel and Cohen..........12
Section 4.2. Representations and Warranties Regarding the Property..................17
Section 4.3. Knowledge Defined......................................................18
Section 4.4. Representations and Warranties of OAS..................................18
Section 4.5. Exclusive Representations and Warranties...............................20
ARTICLE V. INDEMNIFICATION..................................................................20
Section 5.1. Indemnification........................................................20
ARTICLE VI. BROKERAGE COMMISSIONS...........................................................22
ARTICLE VII. MISCELLANEOUS..................................................................23
Section 7.1. Public Disclosure......................................................23
Section 7.2. Assignment.............................................................23
Section 7.3. Notices................................................................23
Section 7.4. Modifications..........................................................24
Section 7.5. Entire Agreement.......................................................24
Section 7.6. Counterparts...........................................................24
Section 7.7. Facsimile Signatures...................................................24
Section 7.8. Severability...........................................................24
Section 7.9. Applicable Law.........................................................24
Section 7.10. Captions..............................................................24
Section 7.11. Construction..........................................................24
Section 7.12. Exhibits..............................................................24
Section 7.13. Date of Performance...................................................24
Section 7.14. Nature of Representation..............................................25
</TABLE>
i
<PAGE> 3
Exhibits
--------
"A" - Disclosure Schedule
"B" - Operating Agreements
"C" - Rent Roll
"D" - Description of Land
"E" - Press Release
"F" - Leases
"G" - Amended and Restated Limited Liability Company Agreement
"H" - Exchange Rights Agreement
"I" - Permitted Encumbrances
"J" - Continuing Guaranty
ii
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement") is entered into as
of October 23, 1997 (the "Effective Date"), by and among OASIS RESIDENTIAL,
INC., a Nevada corporation ("OAS"), COSTA MESA PARTNERS, LLC, a Delaware limited
liability company (the "Company"), ISCO, a California general partnership
("ISCO"), IFT Properties, Ltd., a California limited partnership ("IFT"), Edward
Israel ("Israel"), and Robert Cohen ("Cohen") (collectively, OAS, the Company,
ISCO, IFT, Israel, and Cohen are hereinafter sometimes referred to as the
"Parties," and each of them, a "Party").
WHEREAS, the Company was formed prior to the Effective Date and
succeeded to the ownership of the Property (as defined herein) by Costa Mesa
Partners, a California general partnership (the "Partnership") upon the
conversion of the Partnership into a limited liability company; and
WHEREAS, ISCO and IFT are the sole members of the Company; and
WHEREAS, Israel or members of Israel's family own beneficially,
either directly or indirectly, interests in IFT and Cohen or members of Cohen's
family own beneficially, either directly or indirectly, interests in ISCO; and
WHEREAS, the Parties desire that OAS make an investment in the
Company upon the terms and conditions and with the effect described in this
Agreement;
NOW, THEREFORE, in consideration of and subject to the mutual
promises, agreements, terms and conditions made herein, the Parties agree as
follows:
ARTICLE I.
DEFINITIONS
-----------
The following capitalized terms, when used in this Agreement,
shall have the meanings specified below. Any of those terms, unless the context
otherwise requires, may be used in the singular or plural, depending upon the
reference.
"ACTION" shall mean any action, claim, suit, litigation,
proceeding, labor dispute, arbitral action, governmental audit, inquiry,
criminal prosecution, investigation or unfair labor practice charge or
complaint.
"AFFILIATE" means with respect to any Person, any Person directly
or indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
<PAGE> 5
"AGREEMENT" has the meaning set forth in the preamble of this
Agreement.
"AMENDED LLC AGREEMENT" means that certain Amended and Restated
Limited Liability Company Agreement in the form attached hereto as Exhibit "G."
"ASSETS" means all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real, personal or mixed and constituting, or used or useful in
connection with, or related to, the business of the Company or in which the
Company has any interests, including, without limitation, all of the Company's
right, title and interest in and to the Property.
"BOND FEES" means all credit enhancement fees, issuer fees,
remarketing fees, compliance monitoring fees, trustee fees (including periodic
expenses of the trustee), rating agency fees, rebate arbitrage fees and other
fees or costs associated with the Bonds.
"BONDS" means the Orange County Housing Authority Apartment
Development Revenue Bonds, Issue BB of 1985, as amended or reissued.
"CLAIM" has the meaning set forth in Section 5.1(d) hereof.
"CLAIM NOTICE" has the meaning set forth in Section 5.1(d)
hereof.
"CLOSING" has the meaning set forth in Section 2.1 hereof.
"CLOSING DATE" has the meaning set forth in Section 2.1 hereof.
"CLOSING PLACE" has the meaning set forth in Section 2.1 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder.
"COHEN" has the meaning set forth in the preamble of this
Agreement.
"COMPANY" has the meaning set forth in the preamble of this
Agreement.
"CONTRACTS" has the meaning set forth in Section 4.1(h).
"DAMAGES" has the meaning set forth in Section 5.1(a) hereof.
"DEFAULT" means (a) a breach of or default under any Contract or
other agreement, document or instrument, (2) the occurrence of an event that
with or without the passage of time or the giving of notice or both would
constitute a breach of or default under any Contract or other agreement,
document or instrument, or (3) the occurrence of an event that with or without
the passage of time or the giving of notice or both would give rise to a right
of termination, renegotiation or acceleration under any Contract or other
agreement, document or instrument.
2
<PAGE> 6
"DEVELOPER NOTE" means that certain Amended Promissory Note dated
April 9, 1986 in the original principal amount of $55,000,000 payable by Costa
Mesa Partners, a California general partnership, to the order of the Orange
County Housing Authority, California, evidencing the obligation to repay a loan
made by the Orange County Housing Authority, California to Costa Mesa Partners
with the proceeds of the Bonds.
"DISCLOSURE SCHEDULE" means the schedule attached hereto as
Exhibit "A" which sets forth the exceptions to the representations and
warranties of the Company, Israel and Cohen contained in Article IV hereof and
certain other information called for by this Agreement. The Disclosure Schedule
shall be deemed to include all other matters expressly disclosed in this
Agreement, including the Exhibits to this Agreement, and in the Amended LLC
Agreement, including the Exhibits to the Amended LLC Agreement.
"EFFECTIVE DATE" has the meaning set forth in the preamble of
this Agreement.
"EMPLOYEE MATTERS" means any failure by the Company or the
Partnership to comply in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, or to avoid
engaging in any unfair labor practices as defined in the National Labor
Relations Act or other applicable law, ordinance or regulation.
"ENVIRONMENTAL LAW" means any and all federal, state, municipal
and local laws, statutes, ordinances, rules, regulations, guidances, policies,
orders, decrees, judgments, whether statutory or common law, as amended from
time to time, now or hereafter in effect, or promulgated, pertaining to the
environment, public health and safety and industrial hygiene, including the use,
generation, manufacture, production, storage, release, discharge, disposal,
handling, treatment, removal, decontamination, clean-up, transportation or
regulation of any Hazardous Substance, including the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Safe Drinking
Water Act and the Occupational Safety and Health Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"EXCHANGE AGREEMENT" means that certain Exchange Rights Agreement
by and among OAS, the Company, ISCO and IFT in the form attached hereto as
Exhibit "H."
"GOVERNMENT AUTHORITY" means as to a certain Person, the United
States, the state, county, city and political subdivision in which the Person
operates or in which any of the Person's assets are located or which exercise
jurisdiction over the Person or any of its assets, and any court administrator,
agency, department, commission, board, bureau or instrumentality of any of them
which exercises jurisdiction over the Person or its assets.
3
<PAGE> 7
"GOVERNMENT REQUIREMENT" means any law, ordinance, order, rule,
regulation, decree or similar edict of a Government Authority, including without
limitation Environmental Laws, occupational, health, safety, zoning and other
land use ordinances and regulations.
"HAZARDOUS SUBSTANCE" means collectively, any petroleum,
petroleum product or byproduct or any substance, material or waste regulated or
listed pursuant to any Environmental Law.
"IFT" has the meaning set forth in the preamble of this
Agreement.
"IMPROVEMENTS" means the buildings, structures, fixtures and
other improvements affixed to or located on the Land.
"INTANGIBLES" means the (i) Operating Agreements, and (ii) all
assignable existing warranties and guaranties (express or implied) issued to
Company in connection with the Improvements or the Personal Property, and (iii)
all assignable existing permits, licenses, approvals and authorizations issued
by any Government Authority in connection with the Property.
"ISCO" has the meaning set forth in the preamble of this
Agreement.
"ISRAEL" has the meaning set forth in the preamble of this
Agreement.
"LAND" means that certain parcel of land situated in the City of
Costa Mesa, Orange County, California more particularly described in Exhibit
"D", together with all rights and appurtenances pertaining to such property.
"LEASE" means as to a party, any and all of such party's right
title and interest in and to the leases, licenses, and occupancy agreements
covering all or a portion of the Real Property.
"LIABILITIES" means any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guarantee or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or otherwise.
"LLC UNIT" means a fractional share of the Membership Interests
of all Members (except the managing member of the Company) of the Company.
"MEMBERS" means the Persons owning Membership Interests in the
Company.
"MEMBERSHIP INTEREST" means an ownership interest in the Company
representing a Capital Contribution by a Member and includes any and all
benefits to which the holder of such a Membership Interest may be entitled as
provided in the Amended LLC Agreement.
"NOTICES" shall have the meaning set forth in Section 7.3 hereof.
"OAS" has the meaning set forth in the preamble of this
Agreement.
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"OAS'S BROKER" has the meaning set forth in Article VI hereof.
"OPERATING AGREEMENTS" means all assignable contracts and
agreements listed and described on Exhibit "B" attached hereto relating to the
upkeep, repair, maintenance or operation of the Land, Improvements, or Personal
Property.
"ORGANIZATIONAL DOCUMENTS" means collectively, as applicable, the
articles or certificate of incorporation, certificate of limited partnership or
certificate of limited liability company, by-laws, partnership agreement,
operating company agreement, limited liability company agreement, trust
agreement, statement of partnership, fictitious business name filings and all
other organizational documents relating to the creation, formation or existence
of a business entity, together with resolutions of the board of directors,
partner or member consents, trustee certificates, incumbency certificates and
all other documents or instruments approving or authorizing the transactions
contemplated in this Agreement.
"PARTIES" has the meaning set forth in the preamble of this
Agreement.
"PARTNERSHIP" has the meaning set forth in the preamble of this
Agreement.
"PARTY" has the meaning set forth in the preamble of this
Agreement.
"PERMITTED ENCUMBRANCES" means collectively, (i) liens for Taxes,
assessments and governmental charges not yet past due or delinquent, (ii) the
reservations, restrictions and other exceptions to title as set forth in the
Grant Deed to the Property, and (iii) such other title exceptions set forth on
Exhibit "I" hereto.
"PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.
"PERSONAL PROPERTY" means all tangible personal property owned by
the Company located upon the Land or within the Improvements, including, without
limitation, any and all appliances, furniture, carpeting, draperies and
curtains, tools and supplies, and other items of personal property owned by the
Company, located on and used exclusively in connection with the operation of the
Land and the Improvements.
"PROPERTY" means all property associated with the Villa
Martinique apartment community located at 2855 Pinecreek Drive, Costa Mesa,
California, and more particularly described herein as, collectively, the Land,
the Improvements, the Personal Property, the Leases, the Rents, the Security
Deposits and the Intangibles.
"PROPERTY VALUATION" means Seventy-Two Million Dollars
($72,000,000.00).
"REAL PROPERTY" means the Land and the Improvements.
"REGULATIONS" means the applicable income tax regulations under
the Code, whether such regulations are in proposed, temporary or final form, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
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"RELATED DOCUMENTS" means all other agreements or documents, the
execution or completion and delivery of which are reasonably contemplated by
this Agreement, whether by specific references or otherwise, including without
limitation the Amended LLC Agreement and the Exchange Agreement.
"RENT ROLL" means the rent roll attached hereto as Exhibit "C".
"RENTS" means all sums due under the Leases of the Property.
"REPRESENTATIVES" means, with respect to any Person, that
Person's directors, officers, employees, agents, partners, advisors, lenders,
accountants or independent contractors.
"RETAINED PRE-CLOSING ASSETS" means all of the Partnership's and
the Company's right, title and interest in and to (i) all receivables from third
parties existing as of the close of business on the day prior to the Closing
Date (excluding any receivables for which ISCO and IFT shall receive a credit in
the computation of the Credit and Proration Amount pursuant to Section 2.5
hereof), (ii) all claims against third parties (including Israel, Cohen, IFT and
ISCO and their respective attorneys and Representatives) which arise out of
conditions or events which both (aa) existed or occurred prior to the Closing
Date and (bb) are unrelated to the Property and the construction, maintenance,
operation, use and condition of the Property (excluding any claims for which
ISCO and IFT shall receive a credit in the computation of the Credit and
Proration Amount to Section 2.5 hereof) and (iii) all other claims against
Israel, Cohen, ISCO or IFT or their attorneys or Representatives other than
those claims, if any, arising out of the transactions provided for in this
Agreement or the Related Documents.
"SEC DOCUMENTS" has the meaning set forth in Section 5.3(f)
hereof.
"SECURITY DEPOSITS" means any and all security deposits held
pursuant to the Leases of the Real Property.
"SUBSIDIARY" means with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value-added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty (or penalties), or addition thereto, whether disputed or not. The term
"Tax" also includes any amounts payable pursuant to any tax sharing agreement to
which any relevant Person is liable as a successor or pursuant to contract.
"TBC" means Tokai Bank of California.
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"TERMINATED EMPLOYEES" has the meaning set forth in Section
3.1(b).
ARTICLE II.
THE TRANSACTION; CLOSING
------------------------
Section 2.1. Time and Place. The consummation of the transaction
contemplated hereby (the "Closing") shall be held at the offices of Latham &
Watkins, 650 Town Center Drive, Costa Mesa, California (the "Closing Place"), on
the date hereof (the "Closing Date").
Section 2.2. Actions of OAS At the Closing. At the Closing, OAS
shall:
(a) deliver duly executed counterparts of the Amended LLC
Agreement and the Exchange Agreement to the other parties thereto;
(b) transfer to the Company, by wire transfer or other
immediately available funds, the amount of one million dollars ($1,000,000) as a
capital contribution to the Company as contemplated by Section 4.1 of the
Amended LLC Agreement, to be placed in the Reserve for Capital Improvements (as
defined in the Amended LLC Agreement) and disbursed in accordance with the
Amended LLC Agreement;
(c) deliver to the Company, ISCO and IFT a copy of (i)
OAS's Articles of Incorporation and By-laws, certified by the secretary of OAS
to be true and correct copies, (ii) a Certificate of Good Standing of OAS from
the Secretary of State of Nevada, and (iii) resolutions of the Board of
Directors of OAS, certified by the secretary of OAS to be a true and correct
copy, authorizing the transactions contemplated by this Agreement, the Exchange
Agreement and the Amended LLC Agreement;
(d) deliver to ISCO and IFT a copy of the Continuing
Guaranty executed by OAS in the form attached hereto as Exhibit "J",
(e) cause the Letter of Credit provided for by the Amended
LLC Agreement to be issued, in all material respects, in the form attached
thereto;
(f) transfer to ISCO and IFT, by wire transfer or other
immediately available funds, the Credit and Proration Amount, if any, calculated
to be due to ISCO and IFT pursuant to Section 2.5; and
(g) execute and deliver such additional documents as shall
be reasonably required to consummate the transactions contemplated by this
Agreement.
Section 2.3. Actions of the Company, ISCO and IFT at Closing. At
the Closing, the Company, ISCO and IFT shall:
(a) deliver to OAS a copy of the Certificate of Conversion
of Costa Mesa Partners, certified by the Secretary of State of Delaware, into
the Company, and further
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certified by Israel and Cohen as being a true, correct and complete copy thereof
and to be the only agreement, document or instrument executed in connection with
the conversion of Costa Mesa Partners into the Company;
(b) deliver to OAS a copy of (i) the Certificate of
Formation of the Company, certified by the Secretary of State of Delaware, (ii)
a Certificate of Good Standing of the Company from the Secretary of State of
Delaware and the Secretary of State of California, and (iii) a copy of the
limited liability company agreement of the Company and all amendments and
supplements thereto, certified by Israel and Cohen as being true, correct and
complete copies thereof;
(c) deliver to OAS duly executed counterparts of the
Amended LLC Agreement and the Exchange Agreement to the extent it or he is a
party thereto;
(d) deliver to OAS a Chicago Title Insurance Company
policy of title insurance (or a commitment to issue such a policy) satisfactory
to OAS showing good and indefeasible title to the Property in fee simple vested
in the Company as of the Closing, subject only to the Permitted Encumbrances;
(e) transfer to OAS, by wire transfer or other immediately
available funds, the Credit and Proration Amount, if any, calculated to be due
to OAS pursuant to Section 2.5;
(f) have delivered to OAS, before the Closing Date
guaranties by IFT and ISCO, in accordance with Section 8.4.C of the Amended LLC
Agreement, of the obligations of OAS under the guaranty described in Section
2.2(d); and
(g) execute and deliver such additional documents as shall
be reasonably required to consummate the transactions contemplated by this
Agreement.
Section 2.4. Transaction Taxes and Closing Costs.
(a) ISCO, IFT, Israel and Cohen shall pay the fees of any
counsel or accountant representing them or representing, prior to the Closing,
the Partnership or the Company, whether individually or collectively.
(b) ISCO, IFT, Israel and Cohen shall also pay the
following costs and expenses:
(i) the cost of the Title Policy; and
(ii) the cost of all documentary transfer taxes or
other real property transfer impositions (if any) which are associated
with, related to, or a result of, the transaction contemplated by this
Agreement or Related Documents, whether such costs are assessed or
imposed prior to, at, or after the Closing Date.
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(c) OAS shall pay the fees of any counsel or accountant
representing it in connection with the transactions contemplated by this
Agreement. OAS shall also pay the fees for OAS's Broker identified in Article VI
hereof.
(d) All costs and expenses incident to the transactions
contemplated by this Agreement and the Closing and not specifically described
above, shall be paid by the Party incurring the same.
Section 2.5. Credit and Proration.
(a) All income and expenses of the Property shall be
apportioned as of 12:01 a.m. on the Closing Date based on whether such income or
expenses are attributable to period(s) before or after the Closing Date. Such
prorated items include without limitation the following:
(i) all Rents;
(ii) taxes and assessments (including personal
property taxes on the Personal Property) levied against the Property;
(iii) utility charges respecting the Property (if
any), such charges to be apportioned at the Closing on the basis of the
most recent meter reading occurring prior to the Closing (dated not more
than fifteen (15) days prior to the Closing) or, if unmetered, on the
basis of a current bill for each such utility;
(iv) all amounts payable under the Operating
Agreements;
(v) all other sums or charges payable by the
Tenants under the Leases which accrue prior to the Closing but are not
then due and payable, shall be prorated as of the Closing;
(vi) any other operating expenses or other items
pertaining to the Property, including (x) Property employee salaries,
expenses, reimbursements, bonuses or other benefits paid or payable, (y)
interest paid or payable on the Bonds, and (z) Bond Fees.
(b) Notwithstanding anything contained in Section 2.5(a)
hereof:
(i) At the Closing, (x) ISCO and IFT shall credit
to OAS the sum of the amount of (A) any Security Deposits actually held
by the Company, ISCO, IFT, Israel or Cohen, pursuant to the Leases (to
the extent such Security Deposits have not been applied against
delinquent Rents or otherwise as provided in the Leases, and OAS will
use reasonable efforts to collect delinquent Rents relating to periods
prior to the Closing Date and apply them in the manner provided in
Section 2.5(b)(ii) hereof) and (B) any Rents which have been prepaid for
any period after the month in which the Closing
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occurs, and (y) OAS shall credit to ISCO and IFT all deposits posted
with utility companies or any other provider of goods or services
serving the Property, if any;
(ii) Unpaid and delinquent Rent collected by OAS or
ISCO, IFT, Israel or Cohen after the Closing Date shall be delivered as
follows: (x) if ISCO, IFT, Israel or Cohen collects any unpaid or
delinquent Rent for the Property, ISCO, IFT, Israel and Cohen, jointly
and severally, shall, within fifteen (15) days after the receipt
thereof, deliver to OAS any such Rent to which OAS is entitled hereunder
relating to the Closing Date and any period thereafter; (y) if OAS
collects any unpaid or delinquent Rent from the Property, OAS shall,
within fifteen (15) days after the receipt thereof, deliver to ISCO or
IFT any such Rent which ISCO and IFT is entitled to hereunder relating
to the period prior to the Closing Date. The Parties agree that all Rent
received by the Parties after the Closing Date shall be applied first to
actual out-of-pocket costs of collection incurred by the collecting
Party; second, to Rents due from the tenant for the month in which such
payment is received; third, to Rents and other tenant charges
attributable to any period after the Closing which are past due on the
date of receipt; and finally, to Rents and other tenant charges
delinquent as of the Closing Date. OAS will not be obligated to
institute any legal proceedings, including an action for unlawful
detainer, or other collection procedures to collect delinquent Rents;
(iii) At the Closing, ISCO and IFT shall credit to
OAS any amounts which have been prepaid or credited to ISCO, IFT, Israel
or Cohen pursuant to any Operating Agreements (including without
limitation that certain Lease Agreement dated December 6, 1995 with Web
Service Co., Inc.) for any period after the Closing; and
(iv) There shall be no credits or debits with
respect to principal payments on the Developer Note or Bond principal or
sinking fund payments.
(c) Except as otherwise provided herein, any revenue or
expense amount which cannot be ascertained with certainty as of the Closing Date
shall be prorated on the basis of the Parties' reasonable estimates of such
amount, and shall be the subject of a final proration sixty (60) days after the
Closing, or as soon thereafter as the precise amounts can be ascertained. Each
Party shall promptly notify the other Parties when it or he becomes aware that
any such estimated amount has been ascertained. Once all revenue and expense
amounts have been ascertained, OAS shall prepare, and certify as correct, a
final proration statement which shall be subject to the approval of ISCO, IFT,
Israel and Cohen. Upon acceptance and approval of any final proration statement
submitted by OAS, such statement shall be conclusively deemed to be accurate and
final.
(d) The provisions of this Section 2.5 shall survive the
Closing.
The net amount, if any, which results from the credit and
proration calculations pursuant to subsections (a) and (b) of this Section 2.5
shall be referred to herein as the "Credit and Proration Amount."
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Section 2.6. Condition Precedent.
It shall be a condition precedent to the performance of the
obligations of the Parties at the Closing that Israel, Cohen, ISCO and IFT shall
have received, in a form acceptable to them, a release from Tokai Bank of all
obligations of Israel, Cohen, ISCO and IFT (if any) under the Developer Note and
under any guarantee of the Developer Note executed by them. Any such release
shall in no event be effective unless and until the Closing actually occurs.
ARTICLE III.
COVENANTS
---------
Section 3.1. Employee Matters.
(a) The Company shall not be obligated to continue the
employment of any employee of the Company following the Closing. Subject to the
provisions of Section 3.1(b), the Company shall be obligated to pay, without
reimbursement, the salary and other benefits payable to any employee who OAS
elects to cause the Company to continue to employ following the Closing. Nothing
in this Agreement shall confer upon any employee of the Company any right with
respect to continued employment by the Company nor shall anything in this
Agreement interfere with the right of the Company, at its sole cost and without
reimbursement (except as provided in Section 3.1(b)), to terminate the
employment of any employee of the Company at any time, with or without cause, or
restrict the Company in any way in modifying the terms and conditions of the
employment of any employee of the Company.
(b) Set forth in the Disclosure Schedule is a list of the
employees of the Company identified by OAS as the Employees whose employment by
the Company will be terminated by the Company prior to, or as soon as
practicable following, the Effective Date (the "Terminated Employees"). The
Company shall give notice of termination of employment to the Terminated
Employees prior to the Closing. ISCO, IFT, Israel and Cohen jointly and
severally agree to pay (or reimburse the Company, promptly upon request by the
Company), for all severance and termination payments and benefits paid to the
Terminated Employees (other than payments of normal salary for services rendered
through the date of termination of employment, which shall be paid by the
Company without reimbursement). ISCO, IFT, Israel and Cohen shall be entitled to
determine the monetary terms of any Termination of a Terminated Employee if the
amounts payable to the Terminated Employee in connection with the termination
are paid directly to the Employee by ISCO, IFT, Israel or Cohen.
Section 3.2. Further Assurances. ISCO, IFT, OAS and the Company
agree after the Closing (i) to use all commercially reasonable good faith
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, the Amended LLC Agreement and
the Exchange Agreement, (ii) to execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the
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transactions contemplated hereunder or thereunder, and (iii) to cooperate with
each other in connection with the foregoing.
Section 3.3. Retained Pre-Closing Assets. The Parties to this
Agreement intend and agree that all of the Retained Pre-Closing Assets shall be
solely the property of ISCO and IFT and, accordingly, the Company hereby
quitclaims and assigns to ISCO and IFT, without representation or warranty of
any kind or nature, all right, title and interest it may have, if any, in and to
the Retained Pre-Closing Assets.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1. Representations and Warranties of ISCO, IFT, Israel
and Cohen. ISCO and IFT hereby, jointly and severally, make the following
representations and warranties to OAS as of the Effective Date and Closing Date
and Israel and Cohen hereby, jointly and severally, make the representations and
warranties set forth below in Section 4.1(q), (r), (s) and (t) as of the
Effective Date and Closing Date:
(a) Organization and Authority. The Company has been duly
organized and is validly existing under the laws of the State of Delaware and is
duly qualified to transact business as a foreign company and is in good standing
in the State of California. The Company has the full right and authority to
enter into this Agreement, the Amended LLC Agreement and the Exchange Agreement
and to consummate or cause to be consummated the transactions contemplated by
this Agreement. The Partnership has been converted into the Company pursuant to
Section 18-214 of the Delaware Limited Liability Company Act;
(b) Members. ISCO and IFT are the only Members of the
Company and no other person or entity (other than Riveroaks Newport Associates,
a California limited partnership, to the extent provided in, and only to the
extent provided in, the Settlement Agreement, as that terms is defined in
Section 8.8 of the Amended LLC Agreement) has any Membership Interest in the
Company and no person or entity has any option or right to acquire any
membership interest in or right of first refusal or preemptive right with
respect to the transfer or issuance of any membership interest in the Company.
(c) Subsidiaries. The Company has no Subsidiaries and does
not own any stock, partnership interest, joint venture interest or any other
security or ownership interest issued by any other Person;
(d) Authorization. Each of the Company, ISCO and IFT has all
requisite power, authority and capacity to execute and deliver this Agreement,
the Amended LLC Agreement and the Exchange Agreement, to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. The execution, delivery and performance
of this Agreement, the Amended LLC Agreement and the Exchange Agreement by the
Company, ISCO and IFT and the consummation by the Company, ISCO and IFT of the
transactions contemplated hereunder and thereunder have been duly and
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validly authorized by all necessary action on the part of the Company, ISCO and
IFT and no other proceedings on the part of the Company, ISCO or IFT are
necessary to authorize the execution, delivery and performance of this
Agreement, the Amended LLC Agreement and the Exchange Agreement or the
consummation of transactions contemplated hereunder and thereunder. This
Agreement has been duly executed and delivered by the Company, ISCO and IFT and
constitutes, and the Amended LLC Agreement and Exchange Agreement, when executed
and delivered by the Company, ISCO and IFT, as contemplated hereby will
constitute, the legal, valid and binding obligations of the Company, ISCO and
IFT, enforceable against the Company, ISCO and IFT in accordance with their
respective terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
(e) No Conflict or Violation. The execution and delivery of
this Agreement, the Amended LLC Agreement and the Exchange Agreement by the
Company, ISCO and IFT does not and will not, and the performance by the Company,
ISCO and IFT of their respective obligations hereunder and thereunder and the
consummation by the Company, ISCO and IFT of the transactions pursuant hereto
and thereto will not (i) conflict with or violate its limited liability company
or partnership agreement or (ii) result in a violation or breach of or result in
a default under (or an event which with the giving of notice or the lapse of
time or both would constitute a default under) or require any consent, approval
or authorization under, or result in the creation of a lien or other encumbrance
on the Property pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company, ISCO or IFT is a party or by which the Company, ISCO or
IFT or the Property may be bound.
(f) Consents and Approvals. No consent, approval,
authorization or permit of, or declaration, filing or registration with any
governmental authority or any other Person, is required to be made or obtained
by the Company, ISCO or IFT in connection with the execution, delivery and
performance of this Agreement, or by ISCO or IFT in connection with the
execution, delivery and performance of the Amended LLC Agreement or the Exchange
Agreement, except as set forth on the Disclosure Schedule.
(g) No Undisclosed Liabilities. Except as set forth in the
Disclosure Schedule, the Company has no Liabilities.
(h) Contracts and Commitments. Except for the Contracts to
which the Company is a party (the "Contracts") set forth in the Disclosure
Schedule, the Company is not a party to any written or oral:
(i) contract, agreement, commitment or personal
property lease which requires the Company to make payments thereunder in
excess of $25,000;
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(ii) contracts, agreements or commitments which
have an unexpired term in excess of 12 months from the date hereof;
(iii) employment contracts, severance agreements or
other contracts involving salary, other compensation or benefits
(including, without limitation, provision of free living accommodations
or accommodations at less than the current market rate or provision of
automobiles, or relocation allowance, office allowances, cellular phones
and credit cards) or bonus payments, severance payments or the creation
of any liability to make payments to which any current or former
employee of the Partnership or the Company is a party; or
(iv) contracts, agreements or commitments for the
provision of services which, if terminated at anytime by the Company,
would subject the Company or require the Company to pay damages,
penalties, fees, compensation, termination payments or other amounts in
excess of $5,000 for a single contract, agreement or commitment or
$25,000 for all contracts, agreements and commitments; or
(v) contract, agreement, commitment or other
arrangements with ISCO, IFT, Israel, Cohen or Affiliate thereof or
Person related thereto.
(i) Litigation, Proceedings and Applicable Law. Except as
set forth in the Disclosure Schedule, there is no action, investigation, suit or
other proceeding pending or, to the best knowledge of Israel or Cohen,
threatened against or affecting the Partnership or the Company or any of the
Property or before any Government Authority or arbitrator which (i) if adversely
determined would have a material adverse effect on the Property, business,
condition (financial or otherwise), results of operations or prospects of the
Company taken as a whole, or (ii) could reasonably be expected to prevent or
substantially delay consummation of the transactions contemplated hereunder or
otherwise prevent the Company, ISCO, IFT, Israel or Cohen from performing its or
his obligations under this Agreement. Except as set forth in the Disclosure
Schedule, the Company is not in Default with respect to any judgment, order,
writ, injunction or decree of any Governmental Authority which could reasonably
be expected to have a material adverse effect on the Property, business,
condition (financial or otherwise), results of operations or prospects of the
Company taken as a whole. Except as set forth in the Disclosure Schedule, there
is no outstanding order, ruling, decree, judgment or stipulation by or with any
court, administrative agency, arbitration panel or other similar authority to
which the Partnership, the Company or the Property is subject, which adversely
affects or could adversely affect (i) the Property, business, condition
(financial or otherwise), results of operations or prospects of the Company or
(ii) the ability of the Parties to consummate the transactions contemplated by
this Agreement, the Amended LLC Agreement or the Exchange Agreement.
(j) Compliance with Law. Except as set forth in the
Disclosure Schedule, to the best knowledge of Israel and Cohen, (i) the Company
and the Partnership has complied and the Company is now in compliance with all
Government Requirements, except for failure to comply, if any, which
individually or in the aggregate do not, and, insofar as Israel and
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<PAGE> 18
Cohen can reasonably foresee, in the future will not, have a material adverse
effect on the Property, business, condition (financial or otherwise), results of
operations or prospects of the Company, taken as a whole, (ii) no claims or
complaints have been received by the Partnership or the Company from any
Government Authorities or other Persons that the Partnership or the Company was
or is in violation of any Government Requirement and to the best knowledge of
Israel and Cohen, no such claims or complaints are threatened, and (iii) neither
the Partnership, ISCO, IFT, Israel, Cohen or the Company has received any notice
from any Government Authorities of any pending proceedings to take all or any
part of the Property by condemnation or right of eminent domain and, to the best
knowledge of Israel and Cohen, no such proceedings are threatened.
(k) Books and Records. To the best knowledge of ISCO and
IFT, the Company and the Partnership have made and kept books, records and
accounts which accurately reflect the respective activities of the Company and
the Partnership and the transactions and dispositions of their assets. To the
best knowledge of ISCO and IFT, neither the Company nor the Partnership has
engaged in any transaction, maintained any bank account or used any corporate
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the Partnership and
the Company.
(l) Operating Agreements. The Operating Agreements listed on
Exhibit "B" are all of the agreements concerning the operation and maintenance
of the Property or affecting the Property under which the Company will be
obligated to pay or will be paid or receive in excess of Five Thousand Dollars
($5,000).
(m) Leases. To the best of their knowledge, the Rent Roll
attached hereto as Exhibit "C" is accurate in all material respects and lists
all of the Leases affecting the Property as of the date stated therein.
(n) Other Business. Neither the Partnership nor the Company
has conducted or conducts any business other than the construction, ownership,
development and operation of the Property located on the Land.
(o) Tax Matters.
(i) No Tax Payable by the Partnership or Company.
There are no material unpaid Taxes arising from the operation of the
Partnership's or the Company's business (or as a result of the
Partnership or the Company succeeding to the Liabilities of any other
Person by operation of law pursuant to a conversion, purchase of stock,
merger, consolidation or similar transaction) during any period prior to
the Closing Date for which the Company is or will become liable or which
are or will become a lien against any of the Assets following the
Closing Date other than Taxes which are not yet delinquent that are set
forth on the Disclosure Schedule.
(ii) Tax Returns. True, complete and accurate
copies of all of the federal and California Partnership income and
franchise tax returns of the Partnership filed for 1996 and all years
prior thereto have heretofore been delivered to OAS.
15
<PAGE> 19
(iii) Tax Audits. Except as set forth on the
Disclosure Schedule, neither the Partnership nor the Company has
received from the Internal Revenue Service or from the Tax authorities
of any state, county, local or other jurisdiction (i) any notice of
underpayment of Taxes or other deficiency which has not been paid; (ii)
any objection to any Tax return or report filed by the Partnership or
the Company; or (iii) any notice of audit with respect to any Tax, nor
is the Partnership or the Company currently the subject of any such
audit. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax return or report
filed by either the Partnership or the Company.
(iv) Foreign Persons. Neither ISCO nor IFT is a
"foreign person" within the meaning of Section 1445(f)(3) of the Code,
and each of ISCO and IFT will furnish to OAS and the Company, if
requested by OAS, an affidavit in form satisfactory to OAS confirming
the same.
(v) Leases. Attached as Exhibit "F" is the standard
form or forms of Lease to which the Company or the Partnership is a
party and neither the Company nor the Partnership is a party to any
Lease containing terms that differ in any material respect from the form
or forms of Leases attached as Exhibit "F."
(vi) Partnership Status. True and correct copies of
(i) the partnership agreement of the Partnership in effect immediately
prior to conversion of the Partnership into the Company (the
"Partnership Agreement") and (ii) each limited liability company
agreement of the Company in effect during the existence of the Company
(other than the Amended LLC Agreement) (collectively, the "Company
Agreements") have been delivered to OAS. Neither the Partnership
Agreement nor any of the Company Agreements has been amended or modified
in any respect.
(vii) Other. Except as set forth on the Disclosure
Schedule, neither the Partnership nor the Company has (i) applied for
any Tax ruling or (ii) entered into a closing agreement with any Taxing
authority.
(p) Employee Benefit Plans. Except as set forth in the
Disclosure Schedule, there are no employee benefit plans or arrangements
pursuant to which the Company has any liability or has had any liability within
the five years prior to the Closing Date, including without limitation, any
employee pension benefit plans, or plans and arrangements providing for welfare
benefits, retirement benefits, deferred compensation, severance compensation,
profit sharing bonuses or post retirement insurance pursuant to which the
Company has any liability or has had any liability with the five years prior to
the Closing Date. There is no entity that, together with the Company is, or
within the five years prior to the Closing Date was, required to be treated as a
single employer under Section 414 of the Code.
(q) Authority of Israel and Cohen. Each of Israel and Cohen
has all requisite power, authority and capacity to execute and deliver this
Agreement, to perform his respective obligations hereunder and to consummate the
transactions contemplated hereunder. This Agreement has been duly executed and
delivered by Israel and Cohen and constitutes the
16
<PAGE> 20
legal, valid and binding obligations of Israel and Cohen, enforceable against
the Israel and Cohen in accordance with its terms, except as such enforceability
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally, and except as the availability of equitable remedies may be limited
by the application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity).
(r) No Conflict or Violation With Respect to Israel and
Cohen. The execution and delivery of this Agreement by Israel and Cohen does
not, and the performance by Israel and Cohen of their respective obligations
hereunder and the consummation by Israel and Cohen of the transactions pursuant
hereto will not, result in a violation or breach of or result in a Default under
or require any consent, approval or authorization under, or result in the
creation of a lien or other encumbrance on the Property pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Israel or Cohen is a party
or by which Israel or Cohen may be bound.
(s) Consents and Approvals. No consent, approval,
authorization or permit of, or declaration, filing or registration with any
governmental authority or any other Person, is required to be made or obtained
by Israel or Cohen in connection with the execution, delivery and performance of
this Agreement, except as set forth on the Disclosure Schedule.
(t) No Release. Neither the Partnership nor the Company has
released ISCO, IFT, Israel or Cohen or their Representatives or attorneys from
any claims arising out of the transactions provided for in this Agreement or the
Related Documents.
Section 4.2. Representations and Warranties Regarding the
Property. Except for the representations and warranties of ISCO and IFT
contained in this Section 4.2, the Company, ISCO, IFT, Israel and Cohen have
made no representations or warranties, implied or express, regarding the
Property and OAS is accepting the Property in its "AS-IS-WHERE-IS" condition,
subject to any facts, circumstances, conditions and defects whether or not
capable of being observed or ascertained. Without limiting the generality of the
foregoing, except as expressly provided otherwise in this Section 4.2, the
Company, ISCO, IFT, Israel and Cohen expressly disclaim any representation or
warranty (implied or express) with respect to the condition of the Improvements
(and all of the mechanical, electrical, heating, plumbing and other aspects
thereof) and the manner of the construction of the Improvements, their fitness
for a particular use or whether any latent or patent defects exist. OAS, except
as expressly provided otherwise in this Section 4.2, expressly waives any claims
against the Company, ISCO, IFT, Israel and Cohen for construction defects,
whether latent or patent, in the Improvements and acknowledges that the Company,
ISCO, IFT, Israel and Cohen shall have no obligation of any kind to it to repair
or correct any such conditions or defects or to compensate OAS in any manner for
the same.
OAS further acknowledges that it has heretofore undertaken, or
caused to be undertaken on its behalf, all such physical inspections,
examinations and reviews of the Property as it deems necessary or appropriate
under the circumstances and is strictly relying solely upon
17
<PAGE> 21
such inspections, examinations and reviews as well as the advice of its retained
professional consultants and legal counsel. By virtue of the foregoing, the OAS,
subject only to the representations and warranties of ISCO and IFT contained in
this Section 4.2, hereby assumes the full risk of any loss or damage occasioned
by any fact, circumstances, conditions or defects pertaining to the Property or
any portion or part thereof whether or not the same is capable of being observed
or ascertained.
However, ISCO and IFT, jointly and severally, hereby expressly
represent and warrant to OAS that, to the best of their respective knowledge, as
of the Effective Date and Closing Date:
(a) Governmental Notice. Except as described in the
Disclosure Schedule, none of them has received written notice from any
governmental or quasi-governmental agency requiring the correction of any
condition with respect to the Property (or any part thereof) by reason of a
violation of any Governmental Requirement which has not been corrected.
(b) Construction Documents. Any survey, mechanical and
structural plans and specifications, soil reports, and leases delivered to OAS
are true and correct.
(c) Governmental Action. Except as described in the
Disclosure Schedule, they have received no written notice from the City of Costa
Mesa or the County of Orange or the State of California, or any of their
respective agencies, of any governmental action contemplated to be taken thereby
which will result in a material adverse change in the operation and use of the
Property.
Section 4.3. Knowledge Defined. For purposes of this Agreement,
references to the "knowledge" or "best knowledge" of ISCO, IFT, Israel and Cohen
shall refer only to the actual knowledge of Israel and Cohen after consultation
with the manager of the Property with respect to the matters covered by the
representation or warranty or other relevant provision concerned.
Section 4.4. Representations and Warranties of OAS. OAS hereby
makes the following representations and warranties to the Company, IFT, ISCO,
Israel and Cohen as of the Effective Date and Closing Date:
(a) Due Organization. OAS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has all requisite power and authority to own, lease and operate its properties
and conduct its business as it is presently being conducted. OAS is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is necessary under the applicable
law as a result of the conduct of its business or the ownership of its
properties except where the failure to be so qualified would not have a material
adverse effect on OAS.
(b) Authorization. OAS has all requisite corporate power and
authority to execute and deliver this Agreement, the Amended LLC Agreement and
the
18
<PAGE> 22
Exchange Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement, the Amended LLC Agreement and the Exchange
Agreement by OAS and the consummation by OAS of the transaction contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of OAS and no other corporate proceedings on the part of OAS are
necessary to authorize the execution, delivery and performance of this
Agreement, the Amended LLC Agreement or the Exchange Agreement or the
consummation of the transactions contemplated hereby or thereby. This Agreement
has been duly executed and delivered by OAS and constitutes, and the Amended LLC
Agreement and Exchange Agreement, when executed and delivered by OAS will
constitute, the legal, valid and binding obligation of OAS, enforceable against
it in accordance with their respective terms, except as such enforceability may
be limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally,
and except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principles are applied in a proceeding at law or in equity).
(c) Consents and Approvals. No consent, approval,
authorization or permit of, or declaration, filing or registration with, any
governmental authority or any other person is required to be made or obtained by
OAS in connection with the execution, delivery and performance of this
Agreement, the Amended LLC Agreement or the Exchange Agreement, except for any
filings required to be made under federal or state securities laws in connection
with the sale of shares of OAS Common Stock in exchange for LLC Units as
provided in the Exchange Agreement or the Amended LLC Agreement.
(d) No Conflict or Violation. The execution and delivery of
this Agreement by OAS do not, and the performance by OAS of its obligations
hereunder and the consummation by OAS of the transactions pursuant hereto will
not, (i) conflict with or violate the articles of incorporation or bylaws of OAS
or (ii) result in a violation or breach of or constitute a Default under or
require any consent, approval or authorization under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which OAS or any of its Subsidiaries is a party or
by which OAS or any of its Subsidiaries is bound, except in the case of clause
(ii) for any such conflicts, breach or Default or other occurrences which would
not, individually or in the aggregate, result in a material adverse effect on
OAS.
(e) OAS Common Stock. All of the shares of OAS Common Stock
issuable in exchange for LLC Units under the Exchange Agreement or the Amended
LLC Agreement have been duly authorized and reserved for such issuance and, when
issued in accordance with the terms thereof, will be validly issued, fully paid
and nonassessable shares of OAS Common Stock listed on the New York Stock
Exchange.
(f) SEC Documents. The OAS Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, the OAS Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 1997 and June 30, 1997 and all other
documents filed by OAS pursuant
19
<PAGE> 23
to Section 13 of the Exchange Act subsequent to December 31, 1996 (collectively
the "SEC Documents"), when read together at the date hereof, do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
circumstances under which they were made, not misleading, except that the SEC
Documents contain no disclosure of the transactions contemplated by this
Agreement, the Amended LLC Agreement or the Exchange Agreement.
Section 4.5. Exclusive Representations and Warranties. The
Parties agree that the only representations and warranties made by any Party to
any other Party in connection with the transactions provided for in this
Agreement, the Amended LLC Agreement and the Exchange Agreement are those
representations and warranties set forth expressly in this Agreement, the
Amended LLC Agreement and the Exchange Agreement, and each Party hereby waives
any right it may have now or at any time in the future to assert a claim that
any representation or warranty, other than a representation or warranty set
forth in this Agreement, the Amended LLC Agreement or the Exchange Agreement,
has been breached or is inaccurate in any respect.
ARTICLE V.
INDEMNIFICATION
---------------
Section 5.1. Indemnification.
(a) ISCO, IFT, Israel, and Cohen, jointly and severally,
shall indemnify, save and hold harmless OAS and each of its respective
Representatives, from and against any and all costs, losses, Liabilities,
obligations, damages, lawsuits, claims, demands, and expenses (whether or not
arising out of third-party claims), including, without limitation, interest,
penalties, reasonable attorneys' fees and all amounts paid in investigation,
defense or settlement of any of the foregoing (but excluding lost profits and
diminution in value and excluding amounts for which the indemnified party has
actually received reimbursement under an insurance policy or policies)
("Damages") in excess of $50,000 in the aggregate, incurred in connection with,
arising out of or resulting from (i) any breach or inaccuracy of any
representation or warranty made by the Company, ISCO, IFT, Israel or Cohen in
this Agreement (but not in any other agreement) or (ii) any breach of any
covenant or agreement made by the Company, ISCO, IFT, Israel or Cohen in this
Agreement (but not in any other agreement, except as provided in the following
clause (iii)), (iii) the breach of any covenant or agreement of IFT and ISCO set
forth in Section 8.8, 10.2.B, 10.2.C and 10.2.D in the Amended LLC Agreement or
(iv) the matter described in item 3 or item 4 of the Disclosure Schedule,
provided, however, that the foregoing $50,000 limitation shall not apply to
Damages incurred in connection with, arising out of or resulting from any matter
described in the foregoing clause (iv) (the "Full Indemnity Matter") and the
indemnified parties shall be indemnified under this Section 5.1(a) for all
Damages incurred in connection with, arising out of or resulting from the Full
Indemnity Matter, irrespective of the amount of the Damages. The term "Damages"
as used in this Agreement is not limited to matters asserted by third parties
but includes Damages incurred or sustained in the absence of third party claims.
20
<PAGE> 24
(b) OAS shall indemnify and save and hold harmless the
Company, ISCO, IFT, Israel and Cohen and each of their respective
Representatives from and against any and all Damages in excess of $50,000 in the
aggregate incurred in connection with, arising out of or resulting from (i) any
breach or inaccuracy of any representation or warranty made by OAS in this
Agreement, (ii) any Employee Matter (other than any Employee Matter relating to
a Terminated Employee) occurring on or following the Closing Date or (iii) any
breach of any covenant or agreement made by OAS in this Agreement.
(c) Each indemnified party shall cooperate in all reasonable
respects with each indemnifying party and its Representatives (including without
limitation its attorneys) in the investigation, trial and defense of any lawsuit
or action and any appeal arising therefrom; provided, however, that such
indemnified party may, at its own cost, participate in negotiations,
arbitrations and the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. The parties shall cooperate with each other in
any notifications to insurers.
(d) If a claim for Damages (a "Claim") is to be made by a
party entitled to indemnification hereunder against the indemnifying party, the
party claiming such indemnification shall give written notice (a "Claim Notice")
to the indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section 5.1.
Such Claim Notice shall specify the nature and amount of the Claim asserted, if
actually known to the party entitled to indemnification hereunder. If any
lawsuit or enforcement action is filed against any party entitled to the benefit
of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within 15
calendar days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects at its own cost, risk and expense, (i) to
take control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice to handle and defend the same
unless the named parties to such action or proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, in which event
the indemnified party shall be entitled, at the indemnifying party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such Claim, provided, however, that such compromise or settlement shall
be made only with the written consent of the indemnified party if the amount
payable in the compromise or settlement exceeds $5,000,000, such consent not to
be unreasonably withheld. If the indemnifying party fails to assume the defense
of such Claim within 15 calendar days after receipt of the Claim Notice, the
indemnified party against which such Claim has been asserted will (upon
delivering notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the defense, compromise
or settlement of such
21
<PAGE> 25
claim on behalf of and for the account and risk of the indemnifying party;
provided, however, that such Claim shall not be compromised or settled without
the written consent of the indemnifying party if the amount payable in the
compromise or settlement exceeds $5,000,000, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes the defense of
the Claim, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 5.1 and for any final judgment
for Claims subject to indemnification under this Section 5.1 (subject to any
right of appeal), and the indemnifying party agrees to indemnify and hold
harmless an indemnified party from and against any Damages by reason of such
settlement or judgment.
(e) Notwithstanding anything to the contrary contained in
this Agreement, (i) no indemnifying party shall be liable for Damages (other
than Damages incurred in connection with, arising out of or resulting from a
Full Indemnity Matter (as defined in Section 5.1(a)), as to which the two-year
limitation set forth in this clause (i) of Section 5.1(e) shall not apply)
unless a Claim Notice notifying the indemnifying party of the fact, condition or
event which may give rise to the Damages for which indemnification is sought is
given to the indemnifying party on or prior to the second anniversary of the
Effective Date or, with respect to any Damages arising out of a breach of any
representation or warranty set forth in Section 4.1(o), prior to the expiration
of the applicable statute of limitations for the liabilities to which such
representation or warranty relates, and (ii) the sole remedy available to the
Parties for Damages arising out of a breach of this Agreement are those remedies
set forth in this Article V.
ARTICLE VI.
BROKERAGE COMMISSIONS
---------------------
With respect to the transaction contemplated by this Agreement,
OAS represents that its sole broker is Churchill Mortgage ("OAS's Broker"), and
the Company, ISCO, IFT, Israel, and Cohen, jointly and severally, represent that
none of them is represented by a broker. Neither the Company, ISCO, IFT, Israel
nor Cohen shall be responsible for the payment of a real estate brokerage
commission to OAS's Broker, but rather OAS shall pay the full amount of any such
brokerage commission owing to OAS's Broker. Each Party hereto agrees that if any
Person, other than OAS's Broker, makes a claim for brokerage commissions or
finder's fees related to the transactions contemplated by this Agreement, and
such claim is made by, through or on account of any acts or alleged acts of said
Party or its Representatives, said Party will protect, indemnify, defend and
hold the other Parties free and harmless from and against any and all loss,
liability, cost, damage and expense (including reasonable attorneys' fees) in
connection therewith.
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<PAGE> 26
ARTICLE VII.
MISCELLANEOUS
-------------
Section 7.1. Public Disclosure. Upon the Closing, OAS will issue
a press release in the form attached as Exhibit "E" hereto.
Section 7.2. Assignment. No Party may assign its rights or
obligations under this Agreement without the written consent of the other
Parties. Any attempt to so assign its rights or obligations shall be null and
void. Subject to the foregoing, the terms and provisions of this Agreement will
apply to and bind the permitted successors and assigns of the Parties.
Section 7.3. Notices. Any notice pursuant to this Agreement shall
be given in writing by (a) personal delivery, (b) reputable overnight delivery
service with proof of delivery, (c) United States Mail, postage prepaid,
registered or certified mail, return receipt requested, or (d) legible facsimile
transmission, sent to the intended addressee at the address set forth below, or
to such other address or to the attention of such other person as the addressee
shall have designated by written notice sent in accordance herewith. Any notice
so given shall be deemed to have been given upon receipt or refusal to accept
delivery. In the event this Agreement requires that notice be given to the
Company, ISCO, IFT, Israel or Cohen, OAS shall be entitled to rely on notice
given to Israel as notice to Israel, IFT and the Company, and notice given to
Cohen as notice to Cohen, ISCO and the Company. Unless changed in accordance
with the provisions of this Section 7.3, the addresses for notices given
pursuant to this Agreement shall be as follows:
If to OAS: Oasis Residential, Inc.
4041 East Sunset Road
Henderson, Nevada 89014
Attention: President
Telephone No. (702) 436-9800
Facsimile No.: (702) 435-9445
If to the Company, IFT
or Israel: Edward Israel
10474 Santa Monica Blvd., #405
Los Angeles, California 90025
Telephone No.: (310) 475-4599
Facsimile No.: (310) 474-8533
If to the Company, ISCO
or Cohen: Robert Cohen
c/o Four Seasons Hotel
300 South Doheny
Los Angeles, California 90048
Telephone No.: (310) 278-8548
Facsimile No.: (310) 278-3637
23
<PAGE> 27
Section 7.4. Modifications. This Agreement cannot be changed
orally, and no agreement shall be effective to waive, change, modify or
discharge it in whole or in part unless such agreement is in writing and is
signed by the Parties against whom enforcement of the waiver, change,
modification or discharge is sought.
Section 7.5. Entire Agreement. This Agreement, including the
exhibits and schedules hereto, contains the entire agreement between the Parties
pertaining to the subject matter hereof and supersedes all prior written or oral
agreements and understandings between the Parties pertaining to that subject
matter.
Section 7.6. Counterparts. This Agreement may be executed in
counterparts, all such executed counterparts shall constitute the same
agreement, and the signature of any Party to any counterpart shall be deemed a
signature to, and may be appended to, any other counterpart.
Section 7.7. Facsimile Signatures. In order to expedite the
transaction contemplated herein, telecopied signatures may be used in place of
original signatures on this Agreement or any document delivered pursuant hereto.
The Company, ISCO, IFT, Israel, Cohen and OAS intend to be bound by the
signatures on the telecopied document, are aware that the other Parties will
rely on the telecopied signatures, and hereby waive any defenses to the
enforcement of the terms of this Agreement based on the form of signature.
Section 7.8. Severability. If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Agreement shall nonetheless remain in full force and
effect; provided that the invalidity or unenforceability of such provision does
not materially adversely affect the benefits accruing to any Party hereunder.
Section 7.9. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
Section 7.10. Captions. The section headings appearing in this
Agreement are for convenience of reference only and are not intended, to any
extent and for any purpose, to limit or define the text of any section or any
subsection hereof.
Section 7.11. Construction. The Parties acknowledge that the
Parties and their counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting Party shall not be employed in the interpretation
of this Agreement or any exhibits or amendments hereto.
Section 7.12. Exhibits. All exhibits and schedules attached to
this Agreement are incorporated herein by reference.
Section 7.13. Date of Performance. If the date on which any
performance required hereunder is other than a business day, then such
performance shall be required as of the next following business day.
24
<PAGE> 28
Section 7.14. Nature of Representation. The Parties acknowledge
and agree that the law firms of Kaye, Scholer, Fierman, Hays & Handler, LLP and
Akin, Gump, Strauss, Hauer & Feld LLP (collectively the "Law Firms") have
represented Israel, Cohen, IFT and ISCO (collectively, the "Clients") in
connection with the transactions provided for in or contemplated by this
Agreement, the Amended LLC Agreement and the Exchange Agreement and that the Law
Firms have not represented the Partnership or the Company in connection with any
of those transactions. Consequently, the Parties agree that (i) the
attorney-client privilege with respect to any communications between the Law
Firms and the Clients or their Representatives, consultants, attorneys and
Affiliates (collectively, with the Clients, the "Client Parties") and the work
product privilege with respect to the Clients shall belong solely to the
respective Clients and may be waived solely by the respective Clients and shall
not belong to and cannot be waived by the Partnership or the Company or any
other Person, including OAS, (ii) no privileged communication between the Law
Firms, or either of them, on the one hand, and the Client Parties, or any of
them, on the other, shall be deemed to have been disclosed to the Partnership or
the Company and no attorney-client privilege with respect to those
communications or work product privilege with respect to the Clients shall be
deemed to have been waived on account of any alleged disclosure of the
communication to the Partnership or the Company, and (iii) neither the Company,
nor any Person, including OAS, shall be entitled to disqualify the Law Firms, or
either of them, from representing the Clients, or any of them, on the basis (or
the asserted basis) that the Law Firms have represented the Partnership or the
Company in the past, it being understood that neither the Company nor any
Person, including OAS, shall be precluded from disqualifying the Law Firms, or
either of them, from representing the Clients, or any of them, on any other
basis.
[intentionally left blank]
[signatures appear on following page]
25
<PAGE> 29
IN WITNESS WHEREOF, the Parties have duly executed this
Contribution Agreement as of the Effective Date.
<TABLE>
<S> <C>
ISCO, a California general partnership OASIS RESIDENTIAL, INC., a Nevada
corporation
By: Costa Mesa Associates, a California
general partnership By:
---------------------------------
Its: President
By:
----------------------------------
General Partner
COSTA MESA PARTNERS, LLC, a Delaware limited IFT PROPERTIES, LTD,
liability company a California limited partnership
By:
----------------------------------
Edward Israel, Authorized By:
signatory ---------------------------------
Edward Israel, General Partner
- ----------------------------------------- ------------------------------------
ROBERT COHEN EDWARD ISRAEL
(only as to Sections 2.4(a), 2.4(b), 3.1, (only as to Sections 2.4(a), 2.4(b),
4.1(q)-(t), Article V, Article VI and 3.1, 4.1(q)-(t), Article V, Article
Article VII) VI and Article VII)
</TABLE>
<PAGE> 30
EXHIBIT "A"
DISCLOSURE SCHEDULE
-------------------
[SEE ATTACHED]
<PAGE> 31
EXHIBIT "B"
OPERATING AGREEMENTS
--------------------
[SEE ATTACHED]
<PAGE> 32
EXHIBIT "C"
RENT ROLL
---------
[SEE ATTACHED]
<PAGE> 33
EXHIBIT "D"
DESCRIPTION OF LAND
-------------------
[SEE ATTACHED]
<PAGE> 34
OR-9637274
TITLE OFFICER - REIMER
AMENDMENT NO. 3
DESCRIPTION
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, CITY OF COSTA MESA, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1 OF PARCEL MAP NO. 84-390, AS SHOWN ON A MAP FILED IN BOOK 200, PAGES 34
AND 35 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY,
CALIFORNIA.
ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER THAT
PORTION OF SAID LAND LYING WESTERLY OF THAT CERTAIN COURSE AND SOUTHERLY
PROLONGATION THEREOF, IN THE BOUNDARY OF SAID PARCEL 2, SHOWN ON SAID PARCEL MAP
AS HAVING A BEARING AND DISTANCE OF "N 0 DEGREES 00' 50" E, 25.90 FT.", SAID
COURSE BEING THE CENTERLINE OF COLLEGE STREET, BY VARIOUS DEEDS OF RECORD.
ALSO EXCEPTING THEREFROM, ALL URANIUM, THORIUM AND ALL OTHER MATERIALS
DETERMINED PURSUANT TO SECTION 5(B)(1) OF THE ATOMIC ENERGY ACT OF 1946 (60
STAT. 761) TO BE PECULIARLY ESSENTIAL TO THE PRODUCTION OF FISSIONABLE MATERIAL,
CONTAINED IN WHATEVER CONCENTRATION, IN DEPOSITS IN THE LANDS COVERED BY THIS
INSTRUMENT, TOGETHER WITH THE RIGHT OF THE UNITED STATES, THROUGH ITS AUTHORIZED
AGENTS OR REPRESENTATIVES, AT ANY TIME TO ENTER UPON THE LAND AND PROSPECT FOR,
MINE AND REMOVE THE SAME, MAKING JUST COMPENSATION FOR ANY DAMAGE OR INJURY
OCCASIONED THEREBY, AS EXCEPTED IN THE DEED FROM THE UNITED STATES OF AMERICA,
RECORDED JUNE 13, 1949 IN BOOK 1860, PAGE 60 OF OFFICIAL RECORDS, AND RECORDED
AUGUST 30, 1949 IN BOOK 1895, PAGE 373 OF OFFICIAL RECORDS.
EXCEPTING THEREFROM, ALL URANIUM, THORIUM AND ALL OTHER MATERIALS DETERMINED
PURSUANT TO SECTION 5(B)(1) OF THE ATOMIC ENERGY ACT OF 1946 (60 STAT. 761) TO
BE PECULIARLY ESSENTIAL TO THE PRODUCTION OF FISSIONABLE MATERIAL, CONTAINED IN
WHATEVER CONCENTRATION, IN DEPOSITS IN THE LANDS COVERED BY THIS INSTRUMENT,
TOGETHER WITH THE RIGHT OF THE UNITED STATES, THROUGH ITS AUTHORIZED AGENTS OR
REPRESENTATIVES, AT ANY TIME TO ENTER UPON THE LAND AND PROSPECT FOR, MINE AND
REMOVE THE SAME, MAKING JUST COMPENSATION FOR ANY DAMAGE OR INJURY OCCASIONED
THEREBY, AS EXCEPTED IN THE DEED FROM THE UNITED STATES OF AMERICA, RECORDED
AUGUST 18, 1949 IN BOOK 1891, PAGE 32 OF OFFICIAL RECORDS.
1
<PAGE> 35
EXHIBIT "E"
PRESS RELEASE
-------------
[SEE ATTACHED]
<PAGE> 36
FORM OF PRESS RELEASE
---------------------
Oasis Residential, Inc. (NYSE:OAS) - announced today it has acquired the
managing member interest in a limited liability company ("LLC") that owns the
714 unit Villa Martinique apartment community in Costa Mesa, California.
The LLC has issued 886,022 LLC units, exchangeable for shares of OAS common
stock on a one-for-one basis. OAS also assumed existing tax-exempt bond debt of
$51.4 million issued by Orange County, California. The "low floater" bonds
mature in 2009 and have an interest rate subject to weekly repricing based upon
a spread of 125 basis points over a 7 day tax-exempt bond floating rate index.
The Company also contributed approximately $1.5 million in cash for transaction
and LLC formation costs, thus resulting in a total investment of approximately
$73.5 million.
OAS intends to increase its investment in the community, which will be renamed
Oasis Martinique, by approximately $2.5 million in order to fund a capital
refurbishment program designed to increase net operating income at the
community. The ten-year old community was designed by the Newport Beach
architectural firm, McLarand Vasquez, & Associates and offers one and two
bedroom units in four-story, elevator-served buildings constructed over a
two-level subterranean parking garage. The community was 97% occupied at
closing. The addition of Oasis Martinique increases the Company's holdings in
Orange County to 852 units and approximately $87.5 million. The acquisition fits
with management's strategic diversification plan which calls for increased
investment in Southern California and Denver matched with selective dispositions
in Las Vegas.
<PAGE> 37
EXHIBIT "F"
LEASES
------
[SEE ATTACHED]
<PAGE> 38
EXHIBIT "G"
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
--------------------------------------------------------
[SEE ATTACHED]
<PAGE> 39
EXHIBIT "H"
EXCHANGE RIGHTS AGREEMENT
-------------------------
[SEE ATTACHED]
<PAGE> 40
EXHIBIT "I"
PERMITTED ENCUMBRANCES
----------------------
The following are Permitted Encumbrances as defined in and for
purposes of the Agreement. The item numbers listed below correspond to the item
numbers listed as exceptions in that certain preliminary title report dated
October 1, 1997, issued by Chicago Title Company, reference number 996241-56,
which report is attached hereto and incorporated herein by reference.
"Permitted Encumbrances":
Item numbers 6, 9, 11, 13, 14, 15, 16, 17, 18, 20, 21, 32, 33,
36, 37 and 40.
<PAGE> 41
EXHIBIT "J"
CONTINUING GUARANTY
-------------------
[SEE ATTACHED]
<PAGE> 1
EXHIBIT 10.59
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "Agreement") dated as of October 23, 1997, is entered into by and among
Oasis Residential, Inc., a Nevada corporation ("OAS"), and the Persons whose
names are set forth on Exhibit A as attached hereto (together with the Managing
Member, the "Members"), together with any other Persons who become Members in
the Company as provided herein.
WHEREAS, Costa Mesa Partners, a California general partnership
converted into Costa Mesa Partners, LLC, a Delaware limited liability company
(the "Company") on October 22, 1997, pursuant to Section 18-214 of the Act,
under the name of Costa Mesa Partners, LLC, and an original limited liability
company agreement was entered into as of that date between IFT Properties, Ltd.,
a California limited partnership ("IFT"), and ISCO, a California general
partnership ("ISCO"), as members (the "Original Members");
WHEREAS, concurrently herewith OAS, Edward Israel ("Israel"),
Robert Cohen ("Cohen"), the Original Members and the Company have entered into
that certain Contribution Agreement dated as of the date hereof, providing for a
capital contribution by OAS to, and the acquisition by OAS of certain interests
in, the Company;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Contribution Agreement that the parties hereto enter into
this Agreement pursuant to which, among other things, the name of the Company
will be changed to Oasis Martinique, LLC and OAS will become the Managing Member
of the Company and it is a condition of this Agreement taking effect that the
closing of all said transactions occur; and
WHEREAS, by virtue of their respective execution of this
Agreement, the Original Members each hereby consents to the amendment and
restatement of the original limited liability company agreement of the Company.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree to the above and as follows:
ARTICLE 1.
DEFINED TERMS
The terms used in this Agreement shall have meanings set forth in
Exhibit B hereto and Exhibit B is incorporated in this Agreement by this
reference.
<PAGE> 2
ARTICLE 2.
ORGANIZATIONAL MATTERS
SECTION 2.1. FORMATION
The Members have formed the Company under the Act for the
purposes and upon the terms and subject to the conditions set forth in this
Agreement. Except as provided herein, the rights and obligations of the Members
and the administration and termination of the Company shall be governed by the
Act.
SECTION 2.2. NAME
The name of the Company is Oasis Martinique, LLC. The Company's
business may be conducted under any other name or names deemed advisable by the
Managing Member. The Managing Member in its sole and absolute discretion may
change the name of the Company, other than to the name of the Managing Member or
its Affiliates, at any time and from time to time in accordance with applicable
law.
SECTION 2.3. REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE OF
BUSINESS; OTHER PLACES OF BUSINESS
The address of the registered office of the Company in the State
of Delaware is located at 32 Loockerman Square, Dover, Delaware 19901, and the
registered agent for service of process on the Company in the State of Delaware
at such registered office is The Corporation Service Company. The principal
office of the Company is located at 4041 East Sunset Road, Henderson, Nevada
89104, or such other place as the Managing Member may from time to time
designate by notice to the Members. The Company may maintain offices at such
other place or places within or outside the State of Delaware as the Managing
Member deems advisable.
SECTION 2.4. POWER OF ATTORNEY
A. Each Member (other than the Managing Member) and each Assignee
hereby irrevocably constitutes and appoints the Managing Member and authorized
officers and attorneys-in-fact of the Managing Member, and each of them acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to execute, acknowledge, deliver, file and record in the appropriate
public offices all instruments relating to the admission, withdrawal, removal or
substitution of any Member pursuant to, and in accordance with, Article 11,
Article 12 or Article 13 hereof. Nothing contained herein shall be construed as
authorizing the Managing Member to amend this Agreement except in accordance
with Section 12.3 through the use of the power of attorney granted in this
Section 2.4.A.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Members and Assignees will be relying upon the power of
the Managing Member to act as contemplated by this Agreement, and it shall
survive and not be affected by the subsequent Incapacity of any
2
<PAGE> 3
Member or Assignee and the Transfer of all or any portion of such Member's or
Assignee's LLC Units or Membership Interest and shall extend to such Member's or
Assignee's heirs, successors, assigns and personal representatives.
SECTION 2.5. CERTIFICATE OF FORMATION; FILINGS
A Certificate of Formation (the "Certificate") was filed on
October 22, 1997 in the Office of the Delaware Secretary of State as required by
the Act. The Managing Member may execute and file any duly authorized amendments
to the Certificate (so long as they are consistent with the other provisions of
this Agreement) from time to time in a form prescribed by the Act. The Managing
Member shall also cause to be made, on behalf of the Company, any such
additional filings and recordings as the Managing Member shall deem necessary or
advisable.
SECTION 2.6. FICTITIOUS BUSINESS NAME STATEMENTS
Following the execution of this Agreement, fictitious business
name statements shall be filed and published when and if the Managing Member
determines it is necessary. Any fictitious business name statement shall be
renewed as required by applicable law.
SECTION 2.7. TERM
Pursuant to the Act, the term of the Company commenced on
December 20, 1985, the date on which the predecessor partnership to the Company
was originally formed. The original Certificate was filed in the office of the
Secretary of State of Delaware on October 22, 1997 in accordance with the Act.
The term of the Company shall continue until October 22, 2012 unless earlier
dissolved and liquidated pursuant to the provisions of Section 13 hereof.
ARTICLE 3.
PURPOSE
SECTION 3.1. PURPOSE AND BUSINESS
The sole purposes of the Company are (i) to own, manage, operate,
maintain, improve, encumber, sell or otherwise dispose of, in accordance with
the terms of this Agreement, Villa Martinique and any other apartment
building(s) or community(ies) acquired by the Company in the manner provided in
this Agreement and invest and ultimately distribute funds, including, without
limitation, funds obtained from owning or otherwise operating its Properties and
the proceeds from the sale or other disposition of Villa Martinique and any such
other apartment building(s) or community(ies), all in the manner permitted by
this Agreement, and (ii) subject to and in accordance with the terms of this
Agreement, to do anything necessary or incidental to the foregoing. No Member,
including the Managing Member, shall have any authority to take any action on
behalf of the Company that is not consistent with the foregoing purposes.
3
<PAGE> 4
SECTION 3.2. POWERS
The Company shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes described in Section 3.1, subject
to the terms of this Agreement.
SECTION 3.3. SPECIFIED PURPOSES
The Company shall be a limited liability company and its sole
purposes shall be those specified in Section 3.1, and this Agreement shall not
be deemed to create a company, venture or partnership between or among the
Members with respect to any other activities whatsoever. Except as otherwise
provided in this Agreement (including, without limitation, Section 8.4.C
hereof), no Member shall have any authority to act for, bind, commit or assume
any obligation or responsibility on behalf of the Company, its properties or any
other Member. No Member, in its capacity as a Member under this Agreement, shall
be responsible or liable for any indebtedness or obligation of another Member or
for liabilities of the Company or for liabilities of Costa Mesa Partners (the
general partnership predecessor of the Company) nor shall the Company be
responsible or liable for any indebtedness or obligation of any Member, incurred
either before or after the execution and delivery of this Agreement by such
Member, except to the extent, if any, otherwise provided in this Agreement
(including, without limitation, Section 8.4.C hereof).
SECTION 3.4. REPRESENTATIONS AND WARRANTIES AND COVENANTS BY THE
MEMBERS
A. Each Member that is an individual (including, without
limitation, the Managing Member and each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the Company, the
Managing Member and each other Member that (i) the consummation of the
transactions contemplated by this Agreement to be performed by such Member will
not result in a breach or violation of, or a default under, (a) any agreement by
which such Member or any of such Member's property is bound, or (b) any statute,
regulation, order or other law to which such Member is subject, except, in the
case of both clauses (a) and (b) above, for those breaches, violations or
defaults that would not materially and adversely affect the ability of such
Member to perform his or her obligations under this Agreement, (ii) except as
set forth on Schedule 3.4 hereto, such Member is neither a "foreign person"
within the meaning of Code Section 1445(f) nor a "foreign partner" within the
meaning of Code Section 1446(e), (iii) so long as the Managing Member is a REIT,
such Member (other than the Managing Member) does not own, directly or
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)), nine and eight-tenths percent (9.8%) or more of the total combined
voting power of all classes of stock entitled to vote (calculated based on the
total number of outstanding shares of stock entitled to vote as set forth in the
Report) or nine and eight-tenths percent (9.8%) or more of the total number of
outstanding shares of all classes of stock, of the Managing Member (calculated
based on the total number of outstanding shares as set forth in the Report),
(iv) so long as the Managing Member is a REIT, such Member (other than the
Managing Member) does not own, directly or indirectly or by attribution under
4
<PAGE> 5
Code Section 544 (as modified by Code Section 856(h)) eight percent (8%) or more
of the value of the Equity Stock (calculated based on (i) the total number of
outstanding shares of Equity Stock as set forth in the Report), multiplied by
(ii) the value of a share of Equity Stock based upon (AA) the closing price of a
share of Equity Stock on the principal exchange on which such shares are then
trading on the trading day immediately prior to the date on which this
representation is made, or (BB) if the Equity Stock is not traded on an exchange
but is quoted on the NASDAQ Stock Market or a successor quotation system, the
last sales price (if such shares are then listed as a National Market Issue on
the NASDAQ Stock Market) or the mean between the closing representative bid and
asked prices (in all other cases) for a share of such Equity Stock on the
trading day immediately prior to the date this representation is made as
reported by the NASDAQ Stock Market or such successor quotation system, or (CC)
if such shares are not publicly traded on an exchange and not quoted on the
NASDAQ Stock Market or a successor quotation system, the mean between the
closing bid and asked prices for a share of such Equity Stock on the trading day
immediately prior to the date on which this representation is made, or (DD) if
such shares are not publicly traded, the fair market value set forth in the
Report as established by the Managing Member acting in good faith and in a
manner consistent with the method used by the Managing Member to make similar
calculations for its shareholders generally, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its terms, except
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether the equitable principles are applied in a proceeding at
law or in equity).
B. Each Member that is not an individual (including, without
limitation, the Managing Member and each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the Company, the
Managing Member and each other Member that (i) all transactions contemplated by
this Agreement to be performed by it have been duly authorized by all necessary
action, including, without limitation, that of its managing member(s) (or, if
there is no managing member, a majority in interest of all members),
committee(s), trustee(s), general partner(s), beneficiaries, directors and/or
shareholder(s), as the case may be, as required, (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under,
(a) its partnership or operating agreement, trust agreement, charter or bylaws,
as the case may be, (b) any agreement by which such Member or any of such
Member's properties or any of its partners, members, beneficiaries, trustees or
shareholders, as the case may be, is or are bound, or (c) any statute,
regulation, order or other law to which such Member or any of its partners,
members, trustees, beneficiaries or shareholders, as the case may be, is or are
subject, except, in the case of both clauses (b) and (c) above, for those
breaches, violations or defaults that would not materially and adversely affect
the ability of such Member to perform its obligations under this Agreement,
(iii) except as set forth on Schedule 3.4 hereto, such Member is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e), (iv) so long as the
Managing Member is a REIT, such Member (other than the Managing Member) does not
own, directly or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)), nine and eight-tenths percent (9.8%) or
more of the total combined voting power of all classes of
5
<PAGE> 6
stock entitled to vote (calculated based on the total number of outstanding
shares of stock entitled to vote as set forth in the Report) or nine and
eight-tenths percent (9.8%) or more of the total number of outstanding shares of
all classes of stock of the Managing Member (calculated based on the total
number of outstanding shares as set forth in the Report), (v) so long as the
Managing Member is a REIT, such Member (other than the Managing Member) does not
own, directly or indirectly or by attribution under Code Section 544 (as
modified by Code Section 856(h)) eight percent (8%) or more of the value of the
Equity Stock (calculated based on (i) the total number of outstanding shares of
Equity Stock as set forth in the Report), multiplied by (ii) the value of a
share of Equity Stock based upon (AA) the closing price of a share of Equity
Stock on the principal exchange on which such shares are then trading on the
trading day immediately prior to the date on which this representation is made,
or (BB) if the Equity Stock is not traded on an exchange but is quoted on the
NASDAQ Stock Market or a successor quotation system, the last sales price (if
such shares are then listed as a National Market Issue on the NASDAQ Stock
Market) or the mean between the closing representative bid and asked prices (in
all other cases) for a share of such Equity Stock on the trading day immediately
prior to the date this representation is made as reported by the NASDAQ Stock
Market or such successor quotation system, or (CC) if such shares are not
publicly traded on an exchange and not quoted on the NASDAQ Stock Market or a
successor quotation system, the mean between the closing bid and asked prices
for a share of such Equity Stock on the trading day immediately prior to the
date on which this representation is made, or (DD) if such shares are not
publicly traded, the fair market value set forth in the Report as established by
the Managing Member acting in good faith and consistent with the method used by
the Managing Member to make similar calculations for its shareholders generally,
and (vi) this Agreement is binding upon, and enforceable against, such Member in
accordance with its terms, except that such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies may be limited by the application of
general principles of equity (regardless of whether the equitable principles are
applied in a proceeding at law or in equity).
C. Each Member (including, without limitation, each Substituted
Member as a condition to becoming a Substituted Member) represents, warrants and
agrees that it has acquired its interest in the Company for its own account for
investment only and not for the purpose of, or with a view toward, the resale or
distribution of all or any part thereof, nor with a view toward selling or
otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances in any transaction requiring
registration under the Securities Act or in violation of federal or state
securities laws. Each Member (other than any Substituted Member who has not
acquired a Membership Interest (i) in a transaction constituting a "sale" within
the meaning of Section 2(3) of the Securities Act or (ii) by gift from a Person
as to whom the Member is a Family Member) further represents and warrants that
it is an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act and is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds that it has invested in the Company in what it
understands to be a highly speculative and illiquid investment.
6
<PAGE> 7
D. The representations and warranties contained in Section 3.4
shall be deemed made as of the date hereof only, except that the representations
and warranties set forth in Section 3.4.C with respect to Persons who become
Members after the date hereof shall also be deemed made as of the earlier of the
date such respective Persons acquire an interest in the Company or the date such
respective Persons become a Member or a Substituted Member, as the case may be.
Liability for the breach of the representations, warranties and agreements set
forth in Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and
delivery of this Agreement by each Member (and, in the case of a Substituted
Member, the admission of such Substituted Member as a Member in the Company) and
the dissolution, liquidation and termination of the Company. The Managing Member
may, in its sole and absolute discretion on behalf of the Company and its
Members, grant waivers and exceptions to the representations and warranties
contained in Sections 3.4.A, 3.4.B and 3.4.C hereof (other than those made by
the Managing Member), but any such waiver or exception must be in writing, must
refer to this Section 3.4.D and must describe with particularity the
representation or warranty as to which such waiver or exception shall apply.
E. NO PERSON HAS MADE ANY REPRESENTATION OR WARRANTY CONCERNING
(I) THE FEDERAL, STATE, LOCAL OR OTHER TAX (INCLUDING PROPERTY TAX) CONSEQUENCES
TO ANY PERSON OF THE TRANSACTIONS, ACTIONS OR EVENTS (INCLUDING THE ALLOCATION
OF TAX ITEMS) THAT MAY ARISE OUT OF OR BE CONTEMPLATED BY THE TRANSACTION
AGREEMENTS OR THE EXECUTION, DELIVERY OR PERFORMANCE OF THE TRANSACTION
AGREEMENTS EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.4 OF THIS AGREEMENT OR IN
SECTION 4.1 OF THE CONTRIBUTION AGREEMENT (COLLECTIVELY, "TAX REPRESENTATIONS")
OR (II) ANY PROJECTIONS, CASH FLOWS, POTENTIAL PROFIT OR YIELDS FROM,
PERFORMANCE OF OR ECONOMIC CONSEQUENCES OF AN INVESTMENT OR MEMBERSHIP IN THE
COMPANY OR THE MANAGING MEMBER (COLLECTIVELY, THE "ECONOMIC REPRESENTATIONS").
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY PROVIDED IN THIS
AGREEMENT AND ANY REPRESENTATIONS AND WARRANTIES EXPRESSLY PROVIDED IN ANY OTHER
TRANSACTION AGREEMENT OR IN ANY OTHER AGREEMENT OR DOCUMENT PROVIDED FOR IN, OR
CONTEMPLATED BY, THIS AGREEMENT OR ANY TRANSACTION AGREEMENT (COLLECTIVELY,
"EXPRESS REPRESENTATIONS"), NO PERSON IS MAKING ANY REPRESENTATION OR WARRANTY
AS TO ANY OTHER MATTER (ALL SUCH REPRESENTATIONS, OTHER THAN THE EXPRESS
REPRESENTATIONS, SHALL BE REFERRED TO HEREIN AS THE "OTHER REPRESENTATIONS").
EACH MEMBER (INCLUDING, WITHOUT LIMITATION, EACH SUBSTITUTED MEMBER AS A
CONDITION TO BECOMING A SUBSTITUTED MEMBER) ACKNOWLEDGES THAT NO PERSON HAS MADE
ANY TAX REPRESENTATIONS, ECONOMIC REPRESENTATIONS OR OTHER REPRESENTATIONS.
CONSISTENT WITH THE FOREGOING AND AS A MATERIAL INDUCEMENT TO THE OTHER MEMBERS
TO ENTER INTO THIS AGREEMENT, EACH MEMBER (INCLUDING, WITHOUT LIMITATION, EACH
SUBSTITUTED MEMBER AS A CONDITION TO BECOMING A SUBSTITUTED MEMBER) HEREBY
WAIVES (ON BEHALF OF ITSELF, HIMSELF OR HERSELF AND ON BEHALF OF ALL ASSIGNEES
7
<PAGE> 8
AND ALL HOLDERS) ANY AND ALL RIGHTS HE, SHE OR IT MAY HAVE AT ANY TIME, NOW OR
IN THE FUTURE, TO ASSERT A CLAIM THAT ANY TAX REPRESENTATIONS, ECONOMIC
REPRESENTATIONS OR OTHER REPRESENTATIONS HAVE BEEN MADE BY OR ON BEHALF OF ANY
MEMBER OR ANY OTHER PERSON OR TO SEEK DAMAGES, A RIGHT OF OFFSET OR OTHER RELIEF
BASED UPON AN ALLEGED BREACH OR INACCURACY OF ANY TAX REPRESENTATION, ECONOMIC
REPRESENTATION OR OTHER REPRESENTATIONS AND HEREBY AGREES NEVER TO ALLEGE OR
ASSERT ANY SUCH CLAIM OR SEEK ANY SUCH DAMAGES, RIGHT OF OFFSET OR OTHER RELIEF.
IN THE EVENT ANY MEMBER (OR THE TRANSFEREE OF ANY INTEREST, INCLUDING UNITS, OF
THE MEMBER IN THE COMPANY) TAKES ANY ACTION TO ASSERT ANY SUCH CLAIM OR SEEK ANY
SUCH DAMAGES, RIGHT OF OFFSET OR OTHER RELIEF WITH RESPECT TO ANY OTHER
REPRESENTATIONS, THE MEMBER TAKING THE ACTION (OR, IN THE EVENT OF ACTION TAKEN
BY A TRANSFEREE OF AN INTEREST OF A MEMBER, SUCH MEMBER) SHALL REIMBURSE THE
OTHER MEMBERS AND THE TRANSFEREES OF AN INTEREST OF A MEMBER, IMMEDIATELY UPON
DEMAND, FOR ANY AND ALL LOSSES, COSTS AND EXPENSES, INCLUDING, WITHOUT
LIMITATION, LEGAL FEES, ACCOUNTING FEES, CONSULTING FEES AND COSTS OF RESPONSE,
NEGOTIATION AND DEFENSE, INCURRED BY THOSE MEMBERS IN CONNECTION WITH OR AS A
RESULT OF SUCH ACTION (COLLECTIVELY, "COSTS"), AND ANY COSTS NOT SO PAID UPON
DEMAND SHALL BEAR INTEREST, FROM THE DATE OF DEMAND UNTIL PAID, AT THE HIGHEST
RATE PERMITTED BY APPLICABLE USURY LAW, UP TO THE MAXIMUM RATE OF 18% PER ANNUM.
F. EACH MEMBER (INCLUDING, WITHOUT LIMITATION, EACH SUBSTITUTED
MEMBER AS A CONDITION TO BECOMING A SUBSTITUTED MEMBER) REPRESENTS THAT IT OR HE
HAS BEEN REPRESENTED BY INDEPENDENT ADVISORS, INCLUDING LEGAL COUNSEL AND TAX
COUNSEL, IN CONNECTION WITH THE TRANSACTIONS PROVIDED FOR IN OR CONTEMPLATED BY
THE TRANSACTION AGREEMENTS (AND, IN THE CASE OF OAS, THE ORIGINAL MEMBERS AND
ISRAEL AND COHEN, IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS
AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS), AND THAT IT, SHE OR HE HAS
DISCUSSED, TO THE EXTENT IT, SHE OR HE HAS DEEMED APPROPRIATE, WITH ITS, HER OR
HIS INDEPENDENT ADVISORS, INCLUDING LEGAL COUNSEL AND TAX COUNSEL, THE
CONSEQUENCES, INCLUDING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES AND
TAX RETURN DISCLOSURE REQUIREMENTS, OF THE TRANSACTIONS, ACTIONS AND EVENTS
ARISING OUT OF OR CONTEMPLATED BY THE TRANSACTION AGREEMENTS AND THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE TRANSACTION AGREEMENTS. IN PLACING THEIR
INITIALS BELOW EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS
MADE ABOVE IN SECTION 3.4.E AND F AND IRREVOCABLY AND CONCLUSIVELY AGREES TO THE
MATTERS SET FORTH IN THE FOREGOING SECTIONS 3.4.E AND F, INCLUDING THE WAIVERS
OR RIGHTS SET FORTH THEREIN
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<PAGE> 9
AND THAT HOLDERS, ASSIGNEES OR SUBSTITUTED MEMBERS NEED NOT HAVE
INITIALED BELOW TO BE SUBJECT TO OR BE DEEMED TO HAVE AGREED TO THE PROVISIONS
OF SECTION 3.4.E AND F.
INITIAL ____ INITIAL ____ INITIAL ____
ARTICLE 4.
CAPITAL CONTRIBUTIONS
SECTION 4.1. CAPITAL CONTRIBUTIONS OF THE INITIAL MEMBERS
At the time of their respective execution of this Agreement, the
Members shall make or already have made their respective Capital Contributions
set forth in Exhibit A, which will include contributions to the Reserve for
Capital Improvements. The Properties owned by the Company at the time of the
execution of this Agreement shall be deemed to have an aggregate Gross Asset
Value of $72,000,000, which shall be allocated for Capital Account purposes
among the Original Members in the proportions designated in Exhibit A. Each
Member (but not the Managing Member) shall own LLC Units in the respective
amounts set forth in Exhibit A, as the same may be amended from time to time.
Except as provided by law or in the other provisions of this Agreement,
including Sections 4.4, 5.5, 7.1.B(9), 7.1.B(10) and 7.4, the Members shall have
no obligation to make any additional Capital Contributions or loans to the
Company. Further, no Member nor any Affiliate of a Member shall make any loan(s)
to the Company, nor borrow any amount from the Company (except that it is
acknowledged that an amount may be treated as a loan from the Company for
withholding taxes under Section 10.4).
SECTION 4.2. NO ADDITIONAL MEMBERS
No Persons shall be admitted as additional Members of the Company
except Substituted Members pursuant to Section 11.4 or a successor to the
Managing Member pursuant to Sections 11.2 and 12.1. No additional LLC Units
shall be issued.
SECTION 4.3. LOANS BY THIRD PARTIES
Subject to the provisions of Sections 4.1 and 7.3 hereof, the
Company may incur or assume Debt for any purpose (including, without limitation,
in connection with any further acquisition of Properties from any Person), upon
such terms as the Managing Member determines appropriate; provided, however,
that the Company shall not incur or assume any Debt (a) under which a breach,
violation or default would be deemed to occur by virtue of the Transfer or
Exchange of any Membership Interest or (b) if such incurrence or assumption
would (whether with notice or passage of time or both) result in a breach of or
default under the terms of the Developer Note, Bonds, Bond Credit Enhancement or
any refinancing thereof.
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SECTION 4.4. ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS
The Managing Member may, subject to the terms of this Agreement
and at any time and from time to time, determine that the Company requires
additional funds for such purposes as the Managing Member may determine. Any
additional funds required by the Company shall be contributed by the Managing
Member. Notwithstanding the foregoing two sentences, the Managing Member shall
make all Capital Contributions required by this Agreement to be made by the
Managing Member on or after the Measurement Date, including those required by
Sections 5.5, 7.1.B(9) and 7.1.B(10), whether or not it has made a determination
that additional funds are required. Any Holder shall have the right to enforce
the obligations of the Managing Member to make the Capital Contributions
required by this Agreement, including those required by Sections 5.5, 7.1.B(9)
and 7.1.B(10). No Holder shall have any liability or obligation with respect to
or on account of any Capital Contribution or other payment made or required to
be made by the Managing Member under this Agreement and the Managing Member
hereby unconditionally releases all Holders from any such liability or
obligation. Subject to the next sentence, any Holder shall have the right, at
any time at its option, to agree to restore all or any portion of any deficit in
its Capital Account by agreeing to make a Capital Contribution upon the
liquidation of the Company, as defined in Section 13.2.C (a "Deficit Restoration
Obligation"). Should the Managing Member notify a Holder that the Managing
Member reasonably believes the Holder will be allocated during a taxable year
income in excess of the income that otherwise would be allocated to it pursuant
to Section 6.2.A unless it agrees to such a Deficit Restoration Obligation (or
an increased amount of a Deficit Restoration Obligation), the Holder shall have
60 days from the receipt of such notice to notify the Managing Member whether,
and if so, how much of a Deficit Restoration Obligation (or an increased amount
of a Deficit Restoration Obligation) it desires for the taxable year. If such
Holder does not notify the Managing Member within such 60 day period, it shall
be precluded from agreeing to or increasing its Deficit Restoration Obligation
for such taxable year.
SECTION 4.5. NO INTEREST; NO RETURN
No Member shall be entitled to interest on its Capital
Contribution or on such Member's Capital Account. Further, except as otherwise
provided in this Agreement, additional Capital Contributions shall not affect
any Holder's or Member's right to profit, gain, loss or distributions under this
Agreement. Except as provided herein or by law, no Member shall have any right
to demand or receive the return of its Capital Contribution from the Company.
Notwithstanding anything to the contrary in this Agreement, all distributions
provided for or permitted under this Agreement shall constitute equity capital
or a return on equity capital and not interest or any other fee or charge in the
nature of interest. Further, (i) if, in strict accordance with the provisions of
this Agreement, at any time the Company does agree to pay a Member any amount
which is determined by a court of competent jurisdiction to be interest or any
other fee or charge in the nature of interest, then in no event shall such
amount exceed the highest rate permissible under any law to which such payment
is subject and (ii) if it should be determined by a court of competent
jurisdiction that any Member has contracted for any rate of interest in excess
of the highest lawful rate, then such rate shall be reduced to the highest
lawful rate so that in no event shall amounts be charged or received which are
in excess of the highest lawful rate,
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and, in the event it should be determined that any excess over such highest
lawful rate has been charged or received, such Member shall promptly refund such
excess to the Company; provided, however, that, if lawful, any such excess shall
be paid by the Company to such Member during any subsequent period to the extent
such payments will not cause the maximum lawful rate to be exceeded for such
subsequent period.
SECTION 4.6. LETTER OF CREDIT
A. (1) Concurrently with the execution of this Agreement, the
Managing Member will provide, at its sole cost and expense, the Original
Members with a letter of credit in the amount of $500,000 issued by
Wells Fargo Bank in the form consistent in all material respects with
the form attached hereto as Exhibit C (collectively with any additional
letter of credit referenced in the next sentence, the "Letter of
Credit"). Subsequent to the date of this Agreement, if required pursuant
to the provisions of Section 5.1.B(2), the Managing Member will provide
the Holders with an additional Letter of Credit as described in Section
5.1.B(2) in the amount of $500,000 so that the total of the Letter of
Credit outstanding is $1 million. Subject to Sections 4.6.B and
5.1.B(2), if any time hereafter the amount of funds available under the
Letter of Credit is less than $500,000 (or $1,000,000 if required by
Section 5.1.B(2)), the Managing Member shall, within five (5) Business
Days thereafter, make the payments or take the action necessary to
restore the amount of funds available under the Letter of Credit to
$500,000 (or $1,000,000 if required by Section 5.1.B(2)). All funds
drawn under the Letter of Credit pursuant to this Agreement shall be
deemed to be additional Capital Contributions to the Company by the
Managing Member except for funds drawn down on any Letter of Credit as a
result of an LC Termination, which funds are deposited in the LC
Account, which draw down shall be deemed to be a Capital Contribution
only when and if such amounts are actually distributed from the LC
Account to any Holders in accordance with this Agreement, and any unpaid
Priority Distributions shall be deemed to have been distributed by the
Company to the Priority Distribution Recipients, to the full extent of
the drawings under the Letter of Credit, on the date of the respective
drawings under the Letter of Credit except for any funds drawn down on
any Letter of Credit as a result of the LC Termination, which funds are
deposited in the LC Account, which draw down amounts shall only be
deemed to be distributed to the Priority Distribution Recipients in
distribution of the unpaid Priority Distributions, at the time and to
extent that such amounts are actually distributed to them from the LC
Account.
The Letter of Credit shall be used only as permitted in
accordance with the terms of that Letter of Credit and the provisions of
Section 5.1.B.
(2) Subject to Section 4.6.B, the Managing Member shall
maintain in effect throughout the term of this Agreement the Letter of
Credit. No later than five (5) days prior to the expiration of any
Letter of Credit, the Managing Member will replace the existing Letter
of Credit with a new Letter of Credit in the form and amount consistent
in all material respects with the form and the amount of the existing
Letter of Credit outstanding. If the Managing Member does not deliver
the replacement Letter of
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Credit (which event is referred to as a "LC Termination"), the
Non-Managing Member Representative shall have the right to draw down the
entire amount available under the existing Letter of Credit. All amounts
so drawn down by the Non-Managing Member Representative under this
Section 4.6.A(2) shall be deposited by the Non-Managing Member
Representative in a separate interest-bearing bank account (the "LC
Account") with the Non-Managing Member Representative as the sole
signatory and used only to pay amounts that would otherwise have been
paid under the Letter of Credit pursuant to Section 5.1.B(1).
B. If the Net Cash Flow of the Company for any period of twelve
consecutive months is equal to or greater than $3,000,000, the obligation of the
Managing Member to maintain the Letter of Credit shall terminate on the day (the
"LC Termination Date") after the later of (i) the next LLC Distribution Date or
(ii) the date on which all Priority Distributions for the Company's fiscal
quarter preceding the next LLC Distribution Date and for all prior periods have
been paid in full to the Priority Distribution Recipients. On the LC Termination
Date, the Non-Managing Member Representative will return the existing Letter of
Credit to Wells Fargo Bank, together with any other documentation requested by
Wells Fargo Bank necessary to permanently cancel the Letter of Credit.
Immediately after five (5) Business Days written notice of the LC Termination
Date, the Non-Managing Member Representative shall pay all amounts in the LC
Account (including all interest accrued thereon) to the Managing Member in
immediately available funds. The amounts in the LC Account on the LC Termination
Date shall be repaid to the Managing Member (without reduction or offset for any
claim of any party for any reason, notwithstanding any other provision of this
Agreement) and if not paid on the LC Termination Date (i) the unpaid amount (the
"Unpaid Amount") shall bear interest at the highest rate permitted by law until
paid in full, and (ii) the Company shall be entitled to offset on behalf of the
Managing Member the Unpaid Amount, together with interest accrued thereon,
against any payments or distributions payable to the Holders hereunder,
including, without limitation, payments or distributions made pursuant to
Section 5.1, 5.6 or 13.2 of this Agreement. Any payment or distribution against
which such an offset is made shall be deemed to have been paid or made to the
extent of the offset. The amount so offset shall be deemed applied first against
the payment of accrued and unpaid interest on the Unpaid Amount and then to
reduce the obligation of the Non-Managing Member Representative to pay the
Unpaid Amount. The amount of any such offset shall be paid by the Company
directly to the Managing Member without reduction or offset for any claim of any
party for any reason, notwithstanding any other provision of this Agreement.
SECTION 4.7. PAYMENTS UNDER CONTINUING GUARANTY
In the event OAS shall make any payments under or pursuant to the
Continuing Guaranty, and in lieu of any right Managing Member may have to obtain
reimbursement for such payments by way of subrogation or other principle of
surety law, all such payments shall be deemed to be additional Capital
Contributions to the Company by the Managing Member.
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ARTICLE 5.
DISTRIBUTIONS AND GUARANTEED PAYMENTS
SECTION 5.1. REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
AND GUARANTEED PAYMENTS
A. Subject to Section 13.2, the Managing Member shall cause the
Company to distribute quarterly during each Fiscal Year, on each LLC
Distribution Date during the term of this Agreement, all of the Available Cash
from Operations for such quarter (or other applicable period) to the Holders and
the Managing Member on the LLC Record Date with respect to such quarter (or
other period) as follows (and no offset or withholding of any amounts
distributable to the Holders under this or any other Section of this Agreement
shall occur except to the extent provided under Sections 4.6.B, 5.1.C, 8.8,
10.2.B, 10.2.C, 10.2.D, or 10.4, if applicable):
(1) First, subject to any offset pursuant to Section 4.6.B
or Section 5.1.C (the amount of which offset, together with any other
repayment of Excess Payments, shall be distributed or paid solely in
accordance with Section 4.6.B or Section 5.1.C, as the case may be,
notwithstanding any other provision of this Agreement to the contrary),
Section 8.8, Section 10.2.B, Section 10.2.C, 10.2.D, or Section 10.4, to
each Holder an amount equal to the sum of (a) the product of (i) the
Preferred Return Per Unit for such Holder (or its predecessor) for such
quarter (or other period) and (ii) the number of LLC Units held by such
Holder as of the LLC Record Date for such quarter (or other period) and
(b) any undistributed amounts previously distributable to such Holder
(or its predecessor) under this Section 5.1.A(1) that have not been
distributed for any reason, including because there was not sufficient
Available Cash from Operations to make the distribution), together with
an additional return on said undistributed amounts (and on any amounts
previously distributable to such Holder or its predecessor under Section
5.1.A(1)(a) above that were not distributed by the applicable LLC
Distribution Date), to the extent not previously distributed, computed
at the rate of 1.5% per month or portion of a month (prorated on a
30-day basis for portions of a month) from the applicable LLC
Distribution Date until distributed; provided, however, that the amount
distributable pursuant to clause (a) to any Holder with respect to the
period ending December 31, 1997 shall be prorated based on the number of
days from the day immediately prior to the Measurement Date until
December 31, 1997;
(2) Second, to the Managing Member to the extent, if any,
of the cumulative amount of Capital Contributions made by the Managing
Member or deemed made by the Managing Member (including, without
limitation, Capital Contributions made or deemed made under Section 7.4
or Section 7.7) (which has not previously been distributed to the
Managing Member under this Section 5.1.A(2)) other than its initial
Capital Contributions made as described in Section 4.1;
(3) Third, if in any Fiscal Year the Company has Net Cash
Flow in excess of $6.6 million, an amount equal to the excess (the
"Excess") of Net Cash Flow over $6.6 million, if any, shall be
distributed (a) subject to the withholding requirements,
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if any, imposed by Sections 5.1.C, 8.8, 10.2.B, 10.2.C, and/or 10.4 (if
applicable), to the Holders, in proportion to their outstanding LLC
Units as of the LLC Record Date, in an amount equal to the product of
(i) 5% and (ii) the Adjusted Holder Percentage, and (b) the remainder of
the Excess to the Managing Member, but in each case only with respect to
Net Cash Flow in excess of $6.6 million; in the event the sum of the
distributions made pursuant to this Section 5.1.A(3) in respect of any
Fiscal Year, plus the amount, if any, withheld therefrom pursuant to
Sections 4.6.B, 5.1.C, 8.8, 10.2.B, 10.2.C, 10.2.D or 10.4 is less than
the Excess for such Fiscal Year, the amount of the difference (which
amount, to the extent not distributed in future distribution periods as
hereinafter provided and to the extent no offset has been taken against
it in future distribution periods pursuant to Section 4.6.B or Section
5.1.C, is referred herein as the "Undistributed Difference") shall be
carried over to subsequent distribution periods and no future
distributions of Available Cash from Operations shall be made pursuant
to Section 5.1.A(4) hereof until Available Cash from Operations in the
amount of the Undistributed Difference for all prior periods has been
distributed pursuant to this Section 5.1.A(3) or has been the subject of
an offset pursuant to Sections 4.6.B, 5.1.C, 8.8, 10.2.B, 10.2.C, 10.2.D
or 10.4 hereof; and
(4) Fourth, the remaining balance, if any, (a) subject to
offset, if any, imposed by Sections 4.6.B, 5.1.C, 8.8, 10.2.B, 10.2.C,
10.2.D or 10.4 (if applicable), to the Holders in proportion to their
outstanding LLC Units as of the LLC Record Date, an amount equal to the
product of (i) 1% and (ii) the Adjusted Holder Percentage, and (b) the
remainder to the Managing Member.
B. If the Managing Member shall fail (whether resulting from
insufficient Available Cash from Operations or otherwise, including as a result
of restrictions on distributions in the Reaffirmation Agreement) to make a
distribution of all or any portion of the amounts set forth in Section 5.1.A(1)
(the "Priority Distributions") to the applicable Holders (the "Priority
Distribution Recipients") by an applicable LLC Distribution Date, then:
(1) if such failure shall continue, in whole or part, for
more than five (5) Business Days following the date (the "Notice Date")
on which the Non-Managing Member Representative shall have notified the
Managing Member in writing of such failure), and if the obligation to
maintain the Letter of Credit shall not have terminated pursuant to
Section 4.6, the Non-Managing Member Representative shall be entitled to
draw down funds under the Letter of Credit in an amount not in excess of
the amount required to pay any undistributed Priority Distributions to
the Priority Distribution Recipients and the Non-Managing Member
Representative shall immediately pay the amount of the drawings under
the Letter of Credit to the Priority Distribution Recipients in
accordance with the information the Managing Member will provide to the
Non-Managing Member Representative with respect to the relative
interests of such Priority Distribution Recipients to enable the
Non-Managing Member Representative to be able to make those payments.
All funds drawn under any Letter of Credit pursuant to this Section
5.1.B(1) shall be deemed to be additional Capital Contributions to the
Company
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by the Managing Member to the extent (and only to the extent) set forth
in Section 4.6(A)(1).
(2) if such failure shall continue, in whole or in part,
for more than 30 days following the Notice Date, and the Company is then
required by the terms of this Agreement to maintain the Letter of
Credit, the Managing Member shall at its sole cost and expense provide
the Holders, within five (5) Business Days, with an additional Letter of
Credit in the amount of $500,000 issued by Wells Fargo Bank in the form
consistent in all material respects with the form attached hereto as
Exhibit C;
(3) if such failure shall continue, in whole or part, for
more than 30 days following the Notice Date, the percentages relating to
distributions of Available Cash from Operations, Net Income and Net Loss
from Operations, and Net Income and Net Loss from Sale set forth in all
of Sections 5.1.A(3) and (4), Section 6.2.B(2), Section 6.3.A(1)(d) and
Section 6.3.A(2)(c) applicable to Holders shall be permanently increased
by four (4) points for each 30 day period (or portion of a 30 day
period) following the applicable LLC Distribution Date during which the
Priority Distributions remain wholly or partially unpaid and the
Managing Members' percentage in those Sections shall be correspondingly
reduced. For example, if the LLC Distribution Date is March 31, 1998 and
the Priority Distributions are not paid in full until May 1, 1998, the
"1%" in Section 5.1.A(4) shall become "9%", the "5%" in Section 5.1.A(3)
shall become "13%", the "1%" in Section 6.2.B(2) shall become "9%", and
the "10%" in Section 6.3.A(1)(d) and Section 6.3.A(2)(c) shall become
"18%," and the Managing Member's percentage in each of these Sections
shall be correspondingly reduced; and
(4) if the Non-Managing Member shall have exercised in
full the rights set forth in Section 5.1.B(1) and drawings under the
Letter of Credit (if outstanding) made pursuant to Section 5.1.B(1) were
insufficient to pay the undistributed Property Distributions in full and
the failure to pay the Undistributed Priority Distributions in full
shall continue, in whole or part, for more than 90 days following the
Notice Date, the Non-Managing Member Representative may give notice to
the Managing Member which shall (i) state that it is a notice under this
Section 5.1.B(4) and (ii) state that it is the intention of the
Non-Managing Member Representative to commence the exercise of the
rights set forth in this Section 5.1.B(4). If all outstanding, unpaid
undistributed Priority Distributions have not been distributed within
ten (10) Business Days after such notice is given, notwithstanding
anything to the contrary in this Agreement or elsewhere, the
Non-Managing Member Representative shall have and is hereby irrevocably
granted the full power, authority and right (but not the obligation) to
act for and on behalf of the Company (with his sole signature) to cause
the Company from time to time to sell, dispose or borrow against on a
secured basis or otherwise encumber any Property of the Company in order
to generate all or a portion of the cash necessary to distribute to the
Priority Distribution Recipients all unpaid Priority Distributions and
the Managing Member shall immediately take such action as the
Non-Managing Member Representative shall reasonably request to enable
the Non-Managing Member Representative to take the foregoing actions. If
a sale or disposition occurs
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under the preceding sentence (a "Forced Sale or Disposition"), then the
amount of the Priority Distributions shall be increased one time, and
only one time during the term of this Agreement, (and such increase
shall be immediately distributed from the first proceeds of such sale or
disposition) for all purposes (and shall be deemed an amount
distributable under Section 5.1(A)(1) herein) by an amount equal to the
product of $8,666,666 and the Adjusted Holder Percentage (the "Adjusted
Liquidated Damage Amount") (and such increase shall be allocated among
the Priority Distribution Recipients in the ratio of their LLC Units
outstanding). Further, the Managing Member hereby irrevocably
constitutes and appoints the Non-Managing Member Representative, with
full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to execute, acknowledge, deliver, file and record in the
appropriate public offices all conveyances and other instruments or
documents that the Non-Managing Member Representative deems appropriate
or necessary to reflect any sale, disposition, borrowing or encumbrance
referred to in the immediately-preceding sentence and to cause the
Priority Distributions to be distributed to the Priority Distribution
Recipients. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, and it shall
survive and not be affected by the subsequent Incapacity of the Managing
Member or the Transfer of all or any portion of such Managing Member's
Membership Interest and shall extend to the Managing Member's
successors, assigns and representatives. Concurrently with the parties'
execution of this Agreement, the Managing Member shall record in the
real estate records of the Counties where the Company's Properties are
located a memorandum or other instrument setting forth in full the
foregoing power of attorney in form reasonably acceptable to the
Non-Managing Member Representative (and thereafter whenever any other
real property(ies) is acquired by the Company, the Managing Member shall
also record such a memorandum or other instrument in the Counties where
the same is or are located.
THE ADJUSTED LIQUIDATED DAMAGE AMOUNT IS PAYABLE WHETHER OR NOT
THE EVENTS GIVING RISE TO THE PAYMENT OF THE ADJUSTED LIQUIDATED DAMAGE AMOUNT
CONSTITUTE A BREACH OF ANY PROVISION IN THIS AGREEMENT. HOWEVER, THE PARTIES TO
THIS AGREEMENT ACKNOWLEDGE THAT THE HOLDERS' ACTUAL DAMAGES OR ADVERSE
CONSEQUENCES IN THE EVENT OF A FORCED SALE OR DISPOSITION UNDER THIS SECTION
5.1.B(4) WOULD BE EXTREMELY DIFFICULT, COSTLY, INCONVENIENT AND IMPRACTICABLE TO
DETERMINE AND PROVE. THEREFORE, THE PARTIES FURTHER ACKNOWLEDGE THAT THE
ADJUSTED LIQUIDATED DAMAGE AMOUNT SHALL BE DEEMED FOR ALL PURPOSES TO HAVE BEEN
AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF DAMAGES
OR ADVERSE CONSEQUENCES TO THE HOLDERS IN THE EVENT OF A FORCED SALE OR
DISPOSITION UNDER THIS SECTION 5.1.B(4). THE PARTIES HEREBY ACKNOWLEDGE AND
AGREE THAT THE ADJUSTED LIQUIDATED DAMAGE AMOUNT IS A REASONABLE SUM CONSIDERING
ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING THE
RELATIONSHIP OF THE TOTAL ADJUSTED LIQUIDATED DAMAGE AMOUNT TO THE RANGE OF
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POSSIBLE HARM TO THE HOLDERS AND THEIR DIRECT AND INDIRECT OWNERS, INCLUDING THE
EFFECT OF POSSIBLE ADDITIONAL OR ACCELERATED STATE AND FEDERAL INCOME TAXES THAT
REASONABLY COULD BE ANTICIPATED. THE PARTIES HERETO FURTHER ACKNOWLEDGE AND
AGREE THAT THE HOLDERS SHALL BE ENTITLED TO RECEIVE, AND THE COMPANY SHALL BE
REQUIRED TO DISTRIBUTE, THE ADJUSTED LIQUIDATED DAMAGE AMOUNT ONLY ONCE, NO
MATTER HOW MANY FAILURES TO PAY DISTRIBUTIONS OR FORCED SALES OR DISPOSITIONS
UNDER THIS SECTION 5.1.B(4) MAY HAVE OCCURRED OR MAY OCCUR. UPON DISTRIBUTION OF
THE ADJUSTED LIQUIDATED DAMAGE AMOUNT BY THE COMPANY PURSUANT TO THIS SECTION
5.1.B(4), ALL RIGHTS OF THE HOLDERS TO RECEIVE ANY FURTHER PAYMENTS OF THE
ADJUSTED LIQUIDATED DAMAGE AMOUNT UNDER THIS SECTION 5.1.B(4) ON ACCOUNT OF
OTHER OR FUTURE FAILURES TO MAKE DISTRIBUTIONS OR ON ACCOUNT OF OTHER OF FUTURE
FORCED SALES OR DISPOSITIONS SHALL CEASE. NEITHER ANY FORCED SALE OR DISPOSITION
PURSUANT TO THIS SECTION 5.1.B(4) NOR ANY DISTRIBUTION OF THE ADJUSTED
LIQUIDATED DAMAGE AMOUNT BY THE COMPANY SHALL CONSTITUTE A LIQUIDATED DAMAGES
BREACH (AS DEFINED IN SECTION 7.3.G) OR ANY OTHER BREACH OF THE OBLIGATIONS OF
THE MANAGING MEMBER UNDER ANY PROVISION OF THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE PROVISIONS OF SECTION 7.3. THE PARTIES TO THIS AGREEMENT
ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THIS PROVISION COVERING
LIQUIDATED DAMAGES AND THAT THEY SHALL HAVE NO RECOURSE AGAINST ANY PERSON IN
THE EVENT OF A FORCED SALE OR DISPOSITION UNDER THIS SECTION 5.1.B(4) PROVIDED
THAT THE HOLDERS RECEIVE THE ADJUSTED LIQUIDATED DAMAGE AMOUNT AS LIQUIDATED
DAMAGES AT THE TIME AND IN THE MANNER PROVIDED IN THIS SECTION 5.1.B(4).
FURTHER, NOTWITHSTANDING THE FOREGOING, THE HOLDERS AND MEMBERS (OTHER THAN THE
MANAGING MEMBER), IN ADDITION TO ALL RIGHTS THEY MAY HAVE TO THE ADJUSTED
LIQUIDATED DAMAGE AMOUNT UNDER THIS SECTION 5.1.B(4), SHALL STILL HAVE ALL OF
THEIR OTHER RIGHTS UNDER THIS AGREEMENT TO RECEIVE GUARANTEED PAYMENTS, INCOME,
GAIN, LOSS, PROFITS, DISTRIBUTIONS AND INDEMNITY PAYMENTS (AND DAMAGES OR OTHER
RELIEF FOR ANY BREACH OF ANY OTHER PROVISIONS OF THIS AGREEMENT OTHER THAN ANY
BREACH THAT, IN THE ABSENCE OF THE FOREGOING LIMITATIONS, MIGHT BE DEEMED TO
HAVE ARISEN BY VIRTUE OF THE FORCED SALE OR DISPOSITION OR THE DISTRIBUTION OF
THE ADJUSTED LIQUIDATED DAMAGE AMOUNT). EACH PARTY TO THIS AGREEMENT
ACKNOWLEDGES THAT IN CONNECTION WITH THE TRANSACTIONS PROVIDED FOR IN THIS
AGREEMENT IT HAS BEEN REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF
THE PROVISIONS IN THIS SECTION 5.1.B(4) AT THE TIME THIS AGREEMENT WAS MADE. IN
PLACING THEIR INITIALS BELOW EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF
THE STATEMENTS MADE ABOVE AND IRREVOCABLY AND CONCLUSIVELY AGREES THAT THE
ADJUSTED LIQUIDATED DAMAGE AMOUNT (INCLUDING, WITHOUT LIMITATION, THE
METHODOLOGY BY WHICH IT WAS DETERMINED) MAY NOT BE
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CHALLENGED BY ANY PARTY OR OTHER PERSON AND THAT ANY HOLDERS, ASSIGNEES OR
SUBSTITUTED MEMBERS NEED NOT HAVE INITIALED BELOW TO OBTAIN THE BENEFITS OF THIS
SECTION 5.1.B(4) (AND THEY SHALL BE DEEMED THIRD PARTY BENEFICIARIES OF THE
SAME).
INITIAL ____ INITIAL ____ INITIAL ____
C. GUARANTEED PAYMENT
(1) Notwithstanding anything to the contrary herein, the
Company shall pay quarterly during each Fiscal Year, on each Guaranteed
Payment Date (whether or not there is Available Cash from Operations),
and the Managing Member shall make any Capital Contribution required to
enable the Company to so pay, to the Holders in proportion to their
outstanding LLC Units as of the Guaranteed Payment Record Date an amount
(which is intended to be a guaranteed payment pursuant to Section 707(c)
of the Code) equal to the sum of (i) the Property Tax Difference and
(ii) any amounts that should have been distributed previously to the
Holders under this Section 5.1.C but were not so distributed for any
reason, together with an additional return on said unpaid amounts (and
on any amounts previously distributable to Holders under the foregoing
clause (i) of this Section 5.1.C(1) that were not paid by the applicable
LLC Guaranteed Payment Date), to the extent not previously paid,
computed at the rate of 1.5% per month or any portion of a month
(prorated on a 30-day basis for portions of a month) from the applicable
Guaranteed Payment Date until paid; provided, however, that the amount
distributable pursuant to clause (i) of this Section 5.1.C(1) to any
Holder with respect to the period ending December 31, 1997 shall be
prorated based on the number of days from the date immediately prior to
the Measurement Date until December 31, 1997; provided, further, that
the amount distributable pursuant to this Section 5.1.C(1) to a Holder
with respect to any quarter during which that Holder Exchanges any LLC
Units shall be prorated, but only with respect to those LLC Units
actually Exchanged, based on the number of days from the beginning of
the applicable fiscal quarter until the closing of that Exchange.
(2) If a Termination Event (as defined in Section 5.1.C(3)
hereof) occurs and the Company actually reports and pays property taxes
consistent with the Termination Event, the provisions of clause (i) of
Section 5.1.C(1) (but not the provisions of clause (ii)) shall terminate
on the date of the Termination Event and be of no further force or
effect (except that if the Termination Event occurs on a Guaranteed
Payment Date, the provisions of clause (i) shall apply to the payment to
be made on the Guaranteed Payment Date on which the Termination Event
occurs, and if the Termination Event does not occur on an Guaranteed
Payment Date, the provisions of clause (i) shall apply to the payment to
be made on the LLC Distribution Date next following the date on which
the Termination Event occurs (the amount of which will be reduced by
appropriate prorations to account for the portion of the quarter for
which the Company is actually required to pay higher property taxes
under applicable property tax laws and regulations
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as a result of the Termination Event). If a Termination Event occurs
prior to the date of any payment made to the Holders pursuant to Section
5.1.C(1) (without the property tax consequences of the Termination Event
being accurately reflected in the calculation of the Property Tax
Difference at the time of such payment), the Managing Member, on behalf
of the Company, shall offset against the distributions which would
otherwise be required to be distributed to Holders pursuant to Sections
5.1.A, 5.6 or 13.2 or any other provision of this Agreement (and the
distribution shall be deemed to have been made to the extent of the
offset), an amount equal to the sum (which sum is referred to as the
"Excess Payments") of (i) the excess, if any, of (aa) the cumulative
amount of all payments previously made pursuant to Section 5.1.C(1),
over (bb) the cumulative amount of all payments which would have been
required to be made taking into account the property tax consequences of
the Termination Event, plus (ii) interest (but not any penalties) at the
rate assessed by the applicable property tax assessor (if any)
calculated on said excess in (i) above for the period from the date of
the Termination Event to the date such excess has been repaid to the
Company by offset or otherwise; provided, however, that if the amount of
the Excess Payments with respect to any Holder exceeds the amount of the
remaining distributions required to be made to that Holder pursuant to
Section 5.1.A(1) (assuming sufficient Available Cash from Operations to
make such distributions) at the time the Holder exercises its Exchange
rights, then prior to or concurrently with the Holder's receipt of the
full consideration for such Exchange, the Holder shall repay (with
reservation of rights if the Holder disputes his obligation to pay) to
the Company the full remaining amount of Excess Payments that has not
yet been offset or repaid as of that time. The amount so offset or
repaid shall be distributed pursuant to Sections 5.1.A(1), (2), (3) and
(4) above (or 13.2, if applicable), at the time and to the extent of the
foregoing offset or repayment and before any further distributions are
made (but without causing any delay in making the further distributions)
under Section 5.1.A(1), and the Managing Member shall make the
appropriate adjustments to the Members' Capital Accounts and the books
and records of the Company to reflect the foregoing transactions. The
term "Property Tax Difference" shall mean an amount equal to the product
of (a) 12.5% and (b) an amount (which shall not be less than zero) equal
to (i) $781,025, less (ii) the amount of the real property taxes payable
with respect to Villa Martinique for the Property Tax Year in which the
LLC Record Date in respect of which a distribution is to be made
pursuant to Section 5.1.C(1) (excluding special assessments payable in
respect of periods subsequent to the Measurement Date and excluding the
portion of those taxes attributable to (a) improvements on or to Villa
Martinique, the construction of which commenced subsequent to the
Measurement Date) or (b) an increase in tax attributable to an Early
Sale (as defined below); provided, further, that fifty percent (50%) of
the amount of any rebates or refunds of property taxes paid (to the
extent not explicitly or implicitly taken into account in the
calculation of the amount determined in clause (ii) of the immediately
preceding sentence) with respect to Villa Martinique shall be paid as
soon as practicable to the Holders following receipt of the rebate or
refund, in proportion to their outstanding LLC Units as of the date of
the payment (or if no LLC Units are then outstanding to the Persons who
were Holders on the last date on which LLC Units were outstanding, in
proportion to their outstanding LLC Units on that date).
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(3) For purposes of this Section 5.1.C, the term
"Termination Event" shall mean an event or series of events (other than
from a sale or other disposition of Villa Martinique by the Company in
violation of Section 7.3.C(1) or (2) or a Transfer under Section 11.2
hereof (any of which, an "Early Sale")) which results in the amount of
the real property taxes payable with respect to Villa Martinique for the
Property Tax Year in which the Guaranteed Payment Date in respect of
which a payment is to be made pursuant to Section 5.1.C(1) (excluding
special assessments payable in respect of periods subsequent to the
Measurement Date and excluding the portion of those taxes attributable
to improvements on or to Villa Martinique, the construction of which
commenced subsequent to the Measurement Date) being equal to or in
excess of $781,025. Nothing in Section 5.1.C shall preclude the Holders
(x) from challenging whether a Termination Event actually occurred, or
(y) if such challenge is successful, from obtaining retroactive and
prospective reactivation of Section 5.1.C(1)(i) as if no Termination
Event had occurred.
SECTION 5.2. DISTRIBUTIONS IN KIND
No right is given to any Holder or Member to demand or receive
property other than cash, except as provided in this Agreement or the Exchange
Rights Agreement.
SECTION 5.3. AMOUNTS WITHHELD OR OFFSET
All amounts withheld or offset pursuant to the Code or any
provisions of any state or local tax law or Sections 4.6.B, 5.1.C, 8.8, 10.2.B,
10.2.C, 10.2.D or 10.4 hereof with respect to any allocation, payment or
distribution to any Holder or to the Managing Member shall be treated as amounts
paid or distributed to such Holder or to the Managing Member pursuant to Section
5.1 hereof for all purposes under this Agreement and shall be applied to and
deemed to satisfy the obligations for which so withheld or offset on behalf of
(and to the credit of) the Holder or Managing Member against whom so withheld or
offset.
SECTION 5.4. DISTRIBUTIONS UPON LIQUIDATION
Notwithstanding the other provisions of this Article 5, Available
Cash From Sale and any other cash received after a Liquidating Event, shall be
distributed to the Holders and the Managing Member in accordance with Section
13.2 hereof.
SECTION 5.5. ADDITIONAL CAPITAL CONTRIBUTIONS TO PREVENT
RESTRICTED DISTRIBUTIONS AND PAYMENTS
In the event that the making of any Priority Distribution or the
making of any payment pursuant to Section 5.1.C would otherwise result in a
violation of Section 18-607 of the Act (or any provision of law having similar
effect with respect to distributions or payments by the Company including
Bankruptcy laws governing preferences (collectively with said Section 18-607,
"Recovery Laws")), then in addition to the Managing Member's obligations under
Section 7.1.B(9) and (10) the Managing Member shall make additional Capital
Contributions to the Company at such time(s) and in such amounts as are
necessary to prevent
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the occurrence of any violation of any Recovery Laws in connection with any
portion of such Priority Distribution or payment pursuant to Section 5.1.C.
Also, no other distributions (i.e., non-Priority Distributions) to the Members
shall be made at any time to any Member to the extent it would violate any
Recovery Laws. Notwithstanding anything to the contrary contained herein, if any
Holder is ever required by law (including without limitation by any Recovery
Laws) to return, and does return, money to the Company (by Capital Contribution
or otherwise), or to a creditor of the Company (other than, in each case, to the
extent, and only to the extent, it is a result of (a) the commission by Holder
of an act mentioned in clause (i) or (ii) of Section 7.7.A, (b) any guarantee by
the Holder with respect to the Bonds or Bond Credit Enhancement in accordance
with Section 8.4.C, (c) the provisions of Section 8.8 or (d) the discharge of an
express contractual obligation to make such payment under the terms of this
Agreement or the Contribution Agreement) then the Managing Member shall (within
ten (10) business days after delivery to the Managing Member of written notice
by the applicable Holder of such return of money) reimburse such Holder for the
amount so returned and such reimbursement by the Managing Member shall
constitute a Capital Contribution by the Managing Member. The return by the
Holder shall be treated as a Capital Contribution and the reimbursement by the
Managing Member shall be considered a distribution to the Holder.
SECTION 5.6. RETENTION OF AVAILABLE CASH FROM SALE.
The Managing Member shall cause the Company to retain and
reinvest in the business of the Company, subject to Section 7.3.C(6) hereof, all
Available Cash from Sale received prior to a Liquidating Event. Upon the
occurrence of a Liquidating Event, the Available Cash from Sale shall be
distributed to the Holders and the Managing Member in accordance with Section
13.2 hereof. If the VM Property Sale is considered a Liquidating Event, the
Available Cash from Sale shall be distributed in accordance with Section 13.2.
SECTION 5.7. DISTRIBUTION RESTRICTIONS.
The restrictions on distributions in the Reaffirmation Agreement
shall not relieve the Company of any obligation to make guaranteed payments, nor
relieve the Managing Member or the Company of any other obligations, nor limit
any rights or remedies of the Holders (including liquidated damages) with
respect to distributions or the failure to make distributions under this
Agreement.
ARTICLE 6.
ALLOCATIONS
SECTION 6.1. TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME FROM
OPERATIONS AND NET LOSS FROM OPERATIONS
Net Income from Operations and Net Loss from Operations of the
Company shall be determined and allocated with respect to each Fiscal Year of
the Company as of the end of each such year. Except as otherwise provided in
this Article 6, and subject to Section 11.6.C hereof, an allocation to the
Managing Member or a Holder of a share of Net Income from Operations or Net Loss
from Operations shall be treated as an allocation of the same share of
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each item of income, gain, loss or deduction that is taken into account in
computing Net Income from Operations or Net Loss from Operations.
SECTION 6.2. GENERAL ALLOCATIONS Except as otherwise provided in
this Article 6, and subject to Section 11.6.C hereof:
A. NET INCOME FROM OPERATIONS. Except as otherwise provided in
Section 6.3.A and any other applicable provisions of this Article 6, Net Income
from Operations for any Fiscal Year shall be allocated as follows:
(1) First, to the Holders and the Managing Member, in
proportion to, and until the amount of Net Income from Operations
allocated pursuant to this Section 6.2.A(1) is equal to, the excess of
(i) the amount of the cumulative Net Loss from Operations allocated
pursuant to Sections 6.2.B(1) and 6.2.B(2) of this Agreement to the
Managing Member or the Holders (or predecessors) (as applicable) for all
prior Fiscal Years, over (ii) the cumulative amount of Net Income from
Operations allocated to the Holders and the Managing Member pursuant to
this Section 6.2.A(1) for all prior Fiscal Years, in the reverse order
of priority that such Net Loss from Operations was allocated to the
Managing Member or such Holders (or predecessors) (as applicable);
(2) Second, to all Holders in proportion to their
outstanding LLC Units, and to the extent of, the excess, if any, of (a)
the cumulative amount of the distributions received by all Holders (or
predecessors) pursuant to Section 5.1.A(1) and Section 5.1.B of this
Agreement over an amount equal to the sum of the Excess Distribution
Amounts for the current Fiscal Year and all prior Fiscal Years over (b)
the amount of the cumulative Net Income from Operations allocated for
all prior Fiscal Years to all Holders (or predecessors) pursuant to this
Section 6.2.A(2), until all Holders have been allocated an amount under
this Section 6.2.A(2) equal to such excess on a per LLC Unit basis;
(3) Third, to each Holder in proportion to its outstanding
LLC Units, and to the extent of, the excess, if any, of (a) the
cumulative amount of the distributions received for the Fiscal Year and
all prior Fiscal Years by such Holder (or predecessor) pursuant to
Section 5.1.A(3) of this Agreement, over (b) the amount of the
cumulative Net Income from Operations allocated for all prior Fiscal
Years to such Holder (or predecessor) pursuant to this Section 6.2.A(3),
until each Holder has been allocated an amount under this Section
6.2.A(3) equal to such excess on a per LLC Unit basis;
(4) Fourth, to each Holder in proportion to its
outstanding LLC Units, and to the extent of the excess, if any, of (a)
the cumulative amount of the distributions received for the Fiscal Year
and all prior Fiscal Years by such Holder (or predecessor) pursuant to
Section 5.1.A(4) of this Agreement, over (b) the amount of the
cumulative Net Income from Operations allocated for all prior Fiscal
Years to such Holder (or predecessor) pursuant to this Section 6.2.A(4),
until each Holder have been allocated an amount under this Section
6.2.A(4) equal to such excess on a per LLC Unit basis; and
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(5) Thereafter, to the Managing Member.
B. NET LOSS FROM OPERATIONS. Net Loss from Operations for any
Fiscal Year shall be allocated as follows:
(1) First, to the Holders and the Managing Member in
proportion to, and until the amount of the Net Loss from Operations
allocated pursuant to this section 6.2.B(1) is equal to the amount of,
the excess of (i) the cumulative Net Income from Operations allocated
pursuant to Sections 6.2.A(1), (3), (4), and (5) for all prior Fiscal
Years over (ii) the cumulative amount of Net Loss from Operations
allocated to the Holders and the Managing Member pursuant to this
Section 6.2.B(1) for all prior Fiscal Years, in the reverse order of
priority that such Net Income from Operations was allocated to such
Holders (or predecessors) and the Managing Member (as applicable); and
(2) Second, the balance, if any, (i) one percent (1%)
multiplied by the Adjusted Holder Percentage to the Holders, in
proportion to their outstanding LLC Units, and (ii) one hundred percent
(100%) minus the percentage allocated to the Holders pursuant to clause
(i) of this sentence, to the Managing Member.
C. ALLOCATION. For purposes of Article 6, Depreciation shall be
allocated to the Managing Member.
D. ALLOCATION OF CERTAIN DEDUCTIONS. To the extent any payments
to Riveroaks pursuant to the Settlement Agreement or Section 8.8 are determined
to be deductible items of the Company, such amounts will be specially allocated
to the Original Members (or their successors, as the case may be) pro rata in
accordance with their outstanding LLC Units at the time of such payments (or
pursuant to such other ratio mentioned in Section 8.8 as between the Original
Members (or their successors, as the case may be)).
SECTION 6.3. ADDITIONAL ALLOCATION PROVISIONS
A. ALLOCATION OF NET INCOME AND NET LOSS FROM SALE
(1) Net Income from Sale and, to the extent specifically
indicated in this Section 6.3.A(1), Net Income from Operations (and, if
necessary, gross income from operations), shall be allocated as follows:
(a) First, Net Income from Operations and then Net Income
from Sale (and, if necessary, gross income from operations if there is
insufficient Net Income from Operations and Net Income from Sale to
provide for all allocations under this Section 6.3.A(1)(a) and Section
6.3.A(1)(b)) in a Fiscal Year in which there occurs a Terminating
Capital Transaction or a sale, deemed sale, or other disposition of
Villa Martinique (or other real property of the Company if Villa
Martinique is no longer owned by the Company) shall be allocated to the
Holders in proportion to their outstanding LLC Units and until the
amount allocated pursuant to this Section 6.3.A(1)(a) equals the sum of
(A)
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the excess of, (i) the sum of all amounts that would have been
distributed to each Holder (or predecessor) under Section 5.1.A(1) and
Section 5.1.B assuming unlimited Available Cash from Operations in all
prior Fiscal Years and the current Fiscal Year over (ii) the aggregate
amounts actually distributed (or deemed distributed) to each Holder (or
predecessor) pursuant to Sections 5.1.A(1) and 5.1.B in all prior Fiscal
Years and the current Fiscal Year plus (B) the Undistributed Difference
for all prior Fiscal Years and the current Fiscal Year;
(b) Second, in a Fiscal Year in which there occurs a
Terminating Capital Transaction or a sale, deemed sale, or other
disposition of Villa Martinique (or other real property of the Company
if Villa Martinique is no longer owned by the Company), to the extent
not allocated to the Managing Member pursuant to Section 6.3.C(1), to
the Managing Member, an amount equal to the excess, if any, of (i)
$51,400,000, over (ii) the Basis of the Property which is real property
of the Company, the disposition of which resulted in such Net Income
from Sale;
(c) Third, in a Fiscal Year in which there occurs a
Terminating Capital Transaction or a sale, deemed sale, or other
disposition of Villa Martinique (or other real property of the Company
if Villa Martinique is no longer owned by the Company), (i) to the
Holders, in proportion to their outstanding LLC Units, an amount equal
to the product (the "Holder Restoration Amount") of (x) the excess, if
any, of (AA) the sum of all amounts that were or would have been
distributed to each Holder (or predecessor) under Sections 5.1.A(1),
5.1.A(3), and 5.1.B assuming unlimited Available Cash from Operations in
all prior Fiscal Years and the current Fiscal Year, over (BB) the
aggregate amount of Net Income from Operations, gross income from
operations, and/or Net Income from Sale (as the case may be) allocated
to each Holder (or predecessor) pursuant to Sections 6.2.A(2), (3), and
(4), and 6.3.A(1)(a) (adjusted for allocations made pursuant to Section
6.2.B(1)) in all prior Fiscal Years and the current Fiscal Year and (y)
the Adjusted Holder Percentage, and (ii) to the Managing Member, an
amount equal to the excess (the "Managing Member Restoration Amount"),
if any, of (s) the product of (CC) the amount described in clause (x)
above and (DD) one hundred percent (100%) minus the Adjusted Holder
Percentage; provided, however, that, in the event the remaining Net
Income from Sale, if any, available to allocate to the Holders and the
Managing Member pursuant to this Section 6.3.A(1)(C) prior to any
allocations pursuant to this Section 6.3.A(1)(C) (the "Remaining Net
Income from Sale"), is less than the sum (the "Total Restoration
Amount") of the Holder Restoration Amount and the Managing Member
Restoration Amount, then (u) the maximum amount allocated to the Holders
in the aggregate pursuant to clause (i) of this Section 6.3.A(1)(C)
shall be equal to the product of (EE) the Remaining Net Income from Sale
and (FF) a fraction, the numerator of which is equal to the Holder
Restoration Amount and the denominator of which is equal to the Total
Restoration Amount, and (v) the maximum amount allocated to the Managing
Member pursuant to clause (ii) of this Section 6.3.A(1)(C) shall be
equal to the product of (GG) the Remaining Net Income from Sale and (HH)
a fraction, the numerator of which is equal to the Managing Member
Restoration Amount and the denominator of which is equal to the Total
Restoration Amount; and
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(d) Fourth, the balance, if any, (i) ten percent (10%)
multiplied by the Adjusted Holder Percentage, to the Holders, in
proportion to their outstanding LLC Units, and (ii) one hundred percent
(100%) minus the percentage allocated to the Holders pursuant to clause
(i) of this Section 6.3.A(1)(d), to the Managing Member.
(2) Net Loss from Sale shall be allocated as follows:
(a) First, to the Holders (in proportion to their
outstanding LLC Units) and the Managing Member in proportion to and
until the amount of the cumulative Net Loss from Sale allocated pursuant
to this Section 6.3.A(2)(a), is equal to the excess (if any) of, (i) the
cumulative amount of Net Income from Operations allocated to such
Holders (or predecessors) or the Managing Member (as the case may be)
pursuant to Sections 6.2.A(1), (3), (4), and (5) for all prior Fiscal
Years over (ii) the cumulative amount of Net Loss from Operations
allocated pursuant to Section 6.2.B(1) to such Holders (or predecessors)
or the Managing Member (as the case may be), in the reverse order of
priority that such Net Income from Operations was allocated to the
Holders (on a per LLC Unit basis) and the Managing Member (or
predecessors);
(b) Second, to the Holders with positive Capital Account
balances, pro rata in accordance with and up to the amount of such
positive Capital Account balances;
(c) Third, to the Managing Member up to the amount of its
positive Capital Account balance; and
(d) Fourth, the balance, if any, (i) ten percent (10%)
multiplied by the Adjusted Holder Percentage, to the Holders, in
proportion to their outstanding LLC Units, and (ii) one hundred percent
(100%) minus the percentage allocated to the Holders pursuant to clause
(i) of this Section 6.3.A(2)(d), to the Managing Member.
B. QUARTERLY AND PER UNIT ADJUSTMENTS. In the event LLC Units are
Exchanged or otherwise Transferred in a Fiscal Year, the calculations otherwise
set forth in the allocation provisions contained in this Article 6 shall be
performed, to the extent practicable, and in coordination with Section 11.6.C,
using a per outstanding LLC Unit, per quarter Fiscal Year convention. The
purpose of this provision is to allocate items of income, gain, loss and
deduction in such a manner so that (i) income not allocated to a Holder with
respect to a distribution made in a prior Fiscal Year that relates to LLC Units
that have been Exchanged or otherwise Transferred shall not be allocated to such
Holder after such Exchange or Transfer has occurred (such item being an item
properly allocable to the Managing Member or transferee Holder (as the case may
be)); and (ii) the Excess Distribution Amount shall be allocated on a calendar
quarter, per outstanding LLC Unit basis to the extent practicable to take into
consideration Exchanges or Transfers occurring within any one Fiscal Year.
C. REGULATORY ALLOCATIONS
Notwithstanding the foregoing provisions of this Article 6:
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(1) Except as otherwise provided in Regulations Section
1.704-2(f), if there is a net decrease in Company Minimum Gain during
any Fiscal Year, each Holder and the Managing Member (as applicable)
shall be specially allocated items of Company income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such
Holder's or the Managing Member's (as applicable) share of the net
decrease in Company Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be allocated
to each Holder and the Managing Member (as applicable) pursuant thereto.
The items to be allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.3.C(1) is intended to qualify as a "minimum gain chargeback" within
the meaning of Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(2) Except as otherwise provided in Regulations Section
1.704-2(i)(4) or in Section 6.3.C(1) hereof, if there is a net decrease
in Member Minimum Gain attributable to a Member Nonrecourse Debt during
any Fiscal Year, each Holder or the Managing Member (as applicable) who
has a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and
gain for such year (and, if necessary, subsequent years) in an amount
equal to such Holder's or the Managing Member's (as applicable) share of
the net decrease in Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to
each Member and other Holders pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.C(2) is intended to
qualify as a "chargeback of partner nonrecourse debt minimum gain"
within the meaning of Regulations Section 1.704-2(i) and shall be
interpreted consistently therewith.
(3) Any Member Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Holder(s) and the Managing Member
who bear(s) the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-2(i). Any
Nonrecourse Deductions for any Fiscal Year shall be specially allocated
(i) to each Holder in an amount equal to 10% multiplied by the Adjusted
Holder Percentage and further multiplied by a fraction the numerator of
which is the number of LLC Units held by such Holder and the denominator
of which is the total number of LLC Units outstanding as of the
applicable measurement date and (ii) to the Managing Member in an amount
equal to 100% minus the percentage allocated to the Holders pursuant to
clause (i) of this sentence.
(4) If any Holder or the Managing Member (as applicable)
unexpectedly receives an adjustment, allocation or distribution
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
items of Company income and gain shall be
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allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d),
to such Holder or the Managing Member (as applicable) in an amount and
manner sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of such Holder or the
Managing Member (as applicable) as quickly as possible, provided that an
allocation pursuant to this Section 6.3.C(4) shall be made if and only
to the extent that such Holder or the Managing Member (as applicable)
would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as if
this Section 6.3.C(4) were not in the Agreement. It is intended that
this Section 6.3.C(4) qualify and be construed as a "qualified income
offset" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(5) In the event that any Holder or the Managing Member
(as applicable) has a deficit Capital Account at the end of any Fiscal
Year that is in excess of the sum of (i) the amount (if any) that such
Holder or the Managing Member (as applicable) is obligated to restore to
the Company upon complete liquidation of such Holder's or the Managing
Member's (as applicable) Membership Interest and (ii) the amount that
such Holder or the Managing Member (as applicable) is deemed to be
obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Holder
or the Managing Member (as applicable) shall be specially allocated
items of Company income and gain (or, alternatively, items of deduction
or loss may be specially allocated to other Holders and/or Members (as
applicable) to create the effect of an allocation of gross income) in
the amount of such excess to eliminate such deficit as quickly as
possible, provided that an allocation pursuant to this Section 6.3.C(5)
shall be made if and only to the extent that such Holder or the Managing
Member (as applicable) would have a deficit Capital Account in excess of
such sum after all other allocations provided in this Article 6 have
been tentatively made as if this Section 6.3.C(5) and Section 6.3.C(4)
hereof were not in the Agreement.
(6) To the extent that any allocation of Net Loss from
Operations would cause or increase an Adjusted Capital Account Deficit
as to any Holder or the Managing Member (as applicable), such allocation
of Net Loss from Operations shall be reallocated among the other Holders
and the Managing Member (as applicable) in accordance with their
respective Membership Interests, subject to the limitations of this
Section 6.3.C(6).
(7) To the extent that an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4),
to be taken into account in determining Capital Accounts as the result
of a distribution to a Holder or the Managing Member (as applicable) in
complete liquidation of its interest in the Company, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Holders or the Managing Member (as
applicable) in accordance
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with their Membership Interests in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(8) The allocations set forth in Sections 6.3.C(1), (2),
(3), (4), (5), (6) and (7) hereof (the "Regulatory Allocations") are
intended to comply with certain regulatory requirements, including the
requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.1 hereof, the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Holders or the Managing
Member (as applicable) so that, to the extent possible without violating
the requirements giving rise to the Regulatory Allocations, the net
amount of such allocations of other items and the Regulatory Allocations
to each Holder or the Managing Member (as applicable) shall be equal to
the net amount that would have been allocated to each such Holder or the
Managing Member (as applicable) if the Regulatory Allocations had not
occurred.
D. ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For purposes of
determining a Holder's and the Managing Member's proportional share of the
"excess nonrecourse liabilities" of the Company within the meaning of
Regulations Section 1.752-3(a)(3), (i) each Holder's interest in Company profits
shall be equal to 10% multiplied by the Adjusted Holder Percentage and further
multiplied by a fraction the numerator of which is the number of LLC Units held
by such Holder and the denominator of which is the total number of LLC Units
outstanding as of the applicable measurement date, and (ii) the Managing
Member's interest in Company profits shall be equal to 100% minus the percentage
allocated to the Holders pursuant to clause (i) of this sentence.
SECTION 6.4. TAX ALLOCATIONS
A. IN GENERAL. Except as otherwise provided in this Section 6.4,
for income tax purposes under the Code and the Regulations each Company item of
income, gain, loss and deduction (collectively, "Tax Items") shall be allocated
among the Holders and the Managing Member in the same manner as its correlative
item of "book" income, gain, loss or deduction is allocated pursuant to Sections
6.2 and 6.3 hereof.
B. ALLOCATIONS RESPECTING SECTION 704(C) REVALUATIONS.
Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is
contributed to the Company (or deemed contributed to the Company pursuant to
Section 4.1) with a Gross Asset Value that varies from its basis in the hands of
the contributing Member immediately preceding the date of contribution (or
deemed contribution) shall be allocated among the Holders and the Managing
Member for income tax purposes pursuant to the "traditional method" as described
in Regulations Section 1.704-3(b). In the event that the Gross Asset Value of
any Company asset is adjusted pursuant to subsection (b) of the definition of
"Gross Asset Value" (provided in Article 1 hereof), subsequent allocations of
Tax Items with respect to such asset shall take account of the variation, if
any, between the adjusted basis of such asset and its Gross Asset Value in the
same manner as under Code Section 704(c) and the applicable Regulations and this
Section 6.4.B.
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SECTION 6.5. OTHER PROVISIONS
A. OTHER ALLOCATIONS. In the event that (i) any modifications are
made to the Code or any Regulations, (ii) any changes occur in any case law
applying or interpreting the Code or any Regulations, (iii) the IRS changes or
clarifies the manner in which it applies or interprets the Code or any
Regulations or any case law applying or interpreting the Code or any Regulations
or (iv) subject to the rights of the Holders or the Non-Managing Member
Representative under Sections 10.2 and 10.3, pursuant to a Tax Determination,
the IRS adjusts the reporting of any of the transactions contemplated by this
Agreement which, in each case, either (a) requires allocations of items of
income, gain, loss, deduction or credit or (b) requires reporting of any of the
transactions contemplated by this Agreement in a manner different from that set
forth in this Article 6, the Managing Member is hereby authorized to make new
allocations and/or report any such transactions (as the case may be) in reliance
on the foregoing, provided, however, that the Managing Member shall make such
allocations in such a manner that the Holders will receive the same amount of
cash distributions as a result of the new allocations or reporting as they would
have received if the allocations or reporting had been made in accordance with
this Agreement.
B. TAX REPORTING. The Managing Member shall cause the Company to
report its Net Income, Net Losses and other items of income, gain, loss,
deduction and credit for federal, state and local income tax purposes in
accordance with the allocations made under this Agreement, including the
allocations made in accordance with Section 6.5.A.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1. MANAGEMENT
A. Except as otherwise provided in this Agreement or the Act, the
Managing Member, in its capacity as a Member of the Company under the Act, shall
have sole and complete charge and management over the business and affairs of
the Company, in all respects and in all matters. The Managing Member shall be an
agent of the Company's business and the actions of the Managing Member taken in
such capacity and in accordance with and subject to this Agreement (including
the Consent rights of the Non-Managing Members or Holders, as applicable) shall
bind the Company. The Managing Member shall at all times be a Member of the
Company. Except as otherwise provided in this Agreement or required by
provisions of applicable law, the Non-Managing Members shall not participate in
the control of the Company, shall have no right, power or authority to act for
or on behalf of, or otherwise bind, the Company and shall have no right to vote
on or consent to any other matter, act, decision or document involving the
Company or its business. The Managing Member may not be removed by the Members
with or without cause, except with the consent of the Managing Member. In
addition to the powers now or hereafter granted a manager of a limited liability
company under applicable law (none of which shall be exercised by the Managing
Member in breach hereof) or that are granted to the Managing Member under any
other provision of this Agreement, the Managing Member, subject to the other
provisions hereof including the limitations on the authority of the
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Managing Member set forth in Article 7, shall have full power and authority to
do all things deemed necessary or desirable by it to conduct the business of the
Company, in good faith and consistent with its fiduciary duties, pursuant to the
powers set forth in Section 3.2 hereof solely in order to effectuate the
purposes set forth in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures necessary or desirable
for the conduct of the business of the Company, the lending or borrowing
of money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the Company's
assets) and the incurring of any obligations that it deems necessary for
the conduct of the activities of the Company;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Company;
(3) the acquisition, sale, transfer, exchange or other
disposition of any assets of the Company (including, but not limited to,
the exercise or grant of any conversion, option, privilege or
subscription right or any other right available in connection with any
assets at any time held by the Company) or the merger, consolidation,
reorganization or other combination of the Company with or into another
entity;
(4) the mortgage, pledge, encumbrance or hypothecation of
any assets of the Company, the use of the assets of the Company
(including, without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement which the Managing Member believes will
directly benefit the Company and on any terms that the Managing Member
sees fit;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition, replacement or improvement of any
Property, including, without limitation, Villa Martinique, or other
asset of the Company;
(6) the negotiation, execution and performance of any
contracts, leases, conveyances or other instruments that the Managing
Member considers useful or necessary to the conduct of the Company's
operations or the implementation of the Managing Member's powers under
this Agreement (including the Reaffirmation Agreement) including
contracting with property managers (including, without limitation, as to
Villa Martinique or other Property, contracting with the contributing or
any other Member or its Affiliates for property management services),
contractors, developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of their expenses
and compensation out of the Company's assets;
(7) the distribution of Company cash or other Company
assets in accordance with this Agreement, the holding, management,
investment and reinvestment
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of cash and other assets of the Company, and the collection and receipt
of revenues, rents and income of the Company;
(8) the selection and dismissal of employees of the
Company or of the Managing Member (including, without limitation,
employees having titles or offices such as "president," "vice
president," "secretary" and "treasurer"), and agents, outside attorneys,
accountants, consultants and contractors of the Company or the Managing
Member and the determination of their compensation and other terms of
employment or hiring;
(9) the maintenance of such insurance for the benefit of
the Company and the Members as it deems necessary or appropriate
including casualty, liability and other insurance on the Properties of
the Company;
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(10) the control of any matters affecting the rights and
obligations of the Company, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment, of any claim, cause of action, liability, debt or damages,
due or owing to or from the Company, the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, and the representation of the Company
in all suits or legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, the incurring of
legal expense, and the indemnification of any Person against liabilities
and contingencies to the extent permitted by law;
(11) the determination of the fair market value of any
Company property distributed in kind using such reasonable method of
valuation as it may adopt; provided that such methods are otherwise
consistent with the requirements of this Agreement;
(12) the enforcement of any rights against any Member
pursuant to representations, warranties, covenants and indemnities
relating to such Member's contribution of property or assets to the
Company;
(13) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Company;
(14) the maintenance of working capital and other reserves
in such amounts as the Managing Member, in its sole and absolute
discretion, deems appropriate and reasonable from time to time
(provided, however, no reserves shall reduce Available Cash from
Operations (except as set forth in the definition of Available Cash from
Operations or Available Cash from Sale); and
(15) the making, execution and delivery of any and all
deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreements in
writing necessary or appropriate in the judgment of the Managing Member
for the accomplishment of any of the powers of the Managing Member
enumerated in this Agreement.
B. Notwithstanding any other provision of this Agreement, the
Managing Member shall:
(1) cause the Company to maintain books and records
separate from any other Person;
(2) cause the Company to conduct the business of the
Company in the name of the Company; provided, however, that the Company
may operate Villa Martinique and any other apartment building or
community owned by this Company under the Oasis brand name;
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(3) cause the Company to maintain separate unconsolidated
financial statements;
(4) cause the Company to pay the salaries of Company
employees;
(5) cause the Company to allocate fairly and reasonably
any overhead expense;
(6) cause the Company to use Company stationery, invoices
and checks;
(7) cause the Company to hold itself out and operate as a
separate entity and to observe all of the formalities of a limited
liability company under the Act and other applicable law;
(8) cause the Company to pay its obligations out of the
funds of the Company;
(9) make additional Capital Contributions to the Company
to the extent necessary to enable the Company to pay all of the
Company's Debts and obligations (including, without limitation, the
Company's obligations under Sections 7.7 and 5.1.C) in full when due;
(10) in the event an order or decree for relief in a
(voluntary or involuntary) case is entered under any Bankruptcy Law with
respect to the Company, take all actions necessary to and shall cause
the Company to secure a dismissal of the order or decree within 120 days
after entry including, without limitation, to the extent necessary,
making an additional Capital Contribution or Capital Contributions to
the Company to enable it to do so; provided, however, that the Managing
Member shall not be required to pay, or cause the Company to pay, or
make any additional Capital Contribution or Capital Contributions to the
Company to the extent such payments, Capital Contribution or Capital
Contributions are necessary solely to pay any obligation or liability
which the Original Members or Israel or Cohen, or any of them, has
agreed in writing to pay (in the Transaction Agreements or in documents
executed on or about the date of the Transaction Agreements or executed
thereafter) or with respect to which the Company or the Managing Member
has been indemnified in writing by either of the Original Members or
Israel or Cohen, or any of them; and
(11) following expiration of the ten year period referred
to in Section 7.3.C(2) hereof, use commercially reasonable efforts to
avoid any actions or occurrences specified in Section 7.3.C(2) that will
constitute a Recognition Event (as defined in Section 7.3.C(2)), so long
as the commercially reasonable efforts are, in the good faith judgment
of the Managing Member, in the best interests of the shareholders of the
Managing Member.
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SECTION 7.2. CERTIFICATE OF FORMATION
To the extent that such action is determined by the Managing
Member to be reasonable and necessary or appropriate, the Managing Member shall
file amendments to and restatements of the Certificate and do all the things to
maintain the Company as a limited liability company under the laws of the State
of Delaware, in each case in a manner consistent with the provisions of this
Agreement. Subject to the terms of Section 8.4.A(4) hereof, the Managing Member
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Member. The Managing Member shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited liability company in the
State of Delaware and any other state, or the District of Columbia or other
jurisdiction in which the Company may elect to do business or own property.
SECTION 7.3. RESTRICTIONS ON MANAGING MEMBER'S AUTHORITY
A. The Managing Member shall not take any action in contravention
of the provisions of this Agreement.
B. Notwithstanding anything to the contrary provided in this
Agreement or in the Act or any other applicable law, the Managing Member shall
not, without the Consent of the Non-Managing Members holding (or whose Assignees
hold) at least 80% of the aggregate number of then outstanding LLC Units, do or
undertake or have the power or authority to do or undertake any of the following
actions or enter into any transaction that would have the effect of such actions
or otherwise cause, suffer or allow to occur, voluntarily or involuntarily, any
of the following actions:
(1) within the meaning of any Bankruptcy Law, (a) file a
petition for relief or otherwise commence a voluntary or involuntary
case with respect to the Company, (b) consent to the entry of an order
for relief in an involuntary case with respect to the Company, (c)
consent to the appointment of a Custodian of the Company or for all or
substantially all of its property or (d) make a general assignment for
the benefit of creditors of the Company;
(2) dissolve or liquidate the Company other than in
accordance with the provisions of Article 13 of this Agreement;
(3) cause the Company to merge or consolidate with or sell
or otherwise dispose of all or substantially all of its assets to any
other Person, except in a transaction or series of transactions
described in Section 1031 of the Code;
(4) commingle Company assets with those of any other
Person, including the Managing Member, or maintain any reserves other
than the Reserve for Capital Improvements;
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(5) cause the Company to guarantee or become obligated for
the Debts of any other Person or hold out the Company's credit as being
available to satisfy obligations of others;
(6) cause the Company to pledge or otherwise encumber its
assets for the benefit of any other Person;
(7) amend, modify or terminate this Agreement other than
to reflect the admission, substitution, termination or withdrawal of
Members pursuant to Article 11 or Article 12 hereof;
(8) subject to the rights of Transfer provided in Section
11.2 hereof, Transfer or approve or acquiesce in the Transfer of the
Membership Interest of the Managing Member, or admit into the Company
any successor Managing Member;
(9) entry of a decree of judicial dissolution of the
Company pursuant to the provisions of the Act or any other applicable
law; or
(10) have any Subsidiary of the Company.
C. For so long as the Adjusted Holder Percentage is greater than
or equal to 10%, notwithstanding anything to the contrary herein or in the Act
or any other applicable law, the Managing Member shall not, without the Consent
of Non-Managing Members holding (or whose Assignees hold) at least 80% of the
aggregate number of then outstanding LLC Units, do or undertake or have the
power or authority to do or undertake, any of the following actions or enter
into any transaction that would have the effect of such actions or otherwise
cause, suffer or allow to occur, voluntarily or involuntarily, any of the
following actions:
(1) for a period of ten years from the Measurement Date,
sell or otherwise dispose of all or any portion of Villa Martinique
(other than personal property located at Villa Martinique);
(2) for a period of ten years from the Measurement Date,
engage in or allow to occur any of the following if any of the
following, individually, would result in the recognition of gain or
income to Non-Managing Members or Holders for tax purposes (each of
which, if it results in such recognition, being referred to herein as a
"Recognition Event"): (a) the distribution of Property (other than
distributions of cash made or deemed to have been made to the extent
required or permitted by this Agreement) to a Member or Holder; (b) a
foreclosure, deed-in-lieu thereof or similar disposition of Villa
Martinique; (c) reduction of the amount of Debt secured by Villa
Martinique, or other real property of the Company if Villa Martinique is
no longer owned by the Company, below $30 million; (d) breach the
obligation pursuant to Section 8.4.C to permit the Holders to guaranty
or otherwise obligate themselves with respect to the Debt described in
subclause (c) above; or (e) the modification of the terms of any Debt
agreements, letters of credit or guarantees, any of which is secured by
Villa Martinique or other real property of the Company if Villa
Martinique is no longer owned by the Company;
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(3) distribute the cash proceeds from a VM Property Sale
prior to the occurrence of a Liquidating Event, except for cash required
to pay the distributions set forth in Sections 5.1.A(1), 5.1.B(4), 5.1.C
and 7.3.G;
(4) cause the Company to acquire any apartment building or
other real property (other than in a transaction or series of
transactions described in Section 1031 of the Code (subject to Section
7.3.C(1)) and other than capital improvements to Villa Martinique and
any other real property acquired by the Company in accordance with this
Agreement);
(5) cause or allow the Company to incur any Debt (i) which
bears interest measured by a percentage of the profits or revenues of
the Company or a percentage of the proceeds from the sale of Villa
Martinique, or (ii) the principal amount of which, when added to the
principal amount of existing Debt, exceeds an aggregate principal amount
of $51,400,000; provided, however, that for purposes of the foregoing,
Debt shall not be deemed to include (a) accrued and unpaid interest not
yet due on, or fees (including, without limitation, credit enhancement
fees, issuer fees, compliance monitoring fees, trustee fees, rating
agency fees, rebate arbitrage fees and remarketing fees), costs incurred
or expenditures made or required to be made in connection with or
pursuant to the terms of, the Bonds, the Developer Note or any Bond
Credit Enhancement other than the obligation of the Company to repay the
principal amount of any advances made pursuant to a Bond Credit
Enhancement, to the extent the advances have been applied to or added to
any sinking fund or collateral for the repayment of the principal amount
of the Developer Note, or (b) any indebtedness or other obligation under
the Settlement Agreement (as defined in Section 8.8 hereof) or
constituting Damages (as defined in Section 8.8 hereof); or
(6) invest the cash proceeds from a VM Property Sale or a
sale, refinancing or other disposition of any other apartment building
owned by the Company in anything other than a Permitted Investment,
provided, however, that notwithstanding the foregoing and subject to the
provisions of Section 7.3.C(2), the Managing Member shall be entitled to
apply the proceeds from any refinancing to the payment or prepayment of
the indebtedness refinanced.
The provisions of this Section 7.3.C shall terminate and be of no further
prospective force or effect on the date that the Adjusted Holder Percentage
becomes less than 10%.
D. The Managing Member shall have the power, without the Consent
of the Non-Managing Members, to amend this Agreement as may be required to
reflect the substitution or withdrawal of Members in accordance with this
Agreement or the termination of the Company in accordance with this Agreement,
and to amend Exhibit A in connection with such substitution or withdrawal. The
Managing Member will provide ten (10) business days prior notice to the
Non-Managing Members before any action under this Section 7.3.D is taken.
E. Notwithstanding the provisions of Sections 7.1, 7.3.C and
7.3.D hereof, this Agreement shall not be amended, and no action may be taken by
the Managing Member,
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without the Consent of each Holder adversely affected (which the Holder may give
or withhold in his sole and absolute discretion), if such amendment or action
would (i) alter rights of the Holder to receive distributions pursuant to
Article 5 or Article 13 hereof or allocations pursuant to Article 6 hereof, (ii)
alter or modify the rights to an Exchange as set forth in the Exchange Rights
Agreement or Sections 8.5 or 8.6 hereof, or (iii) amend this Section 7.3.
Further, no amendment may alter the restrictions on the Managing Member's
authority set forth elsewhere in this Section 7.3 without the Consent specified
therein. Any such amendment or action consented to by any Member shall be
effective as to that Member, notwithstanding the absence of such consent by any
other Member.
F. If either a Holder or the Managing Member breaches any
provision of this Agreement (other than a Liquidated Damages Breach or a breach
giving rise to the payment of the Adjusted Liquidated Damage Amount), any court
or other authority or agency having jurisdiction over the matter shall take into
consideration the positive and negative income tax consequences of the breach on
either the Holders or the Managing Member (as the case may be) in determining
damages for the breach.
G. IN THE EVENT OF A BREACH BY THE MANAGING MEMBER OF ITS
COVENANTS SET FORTH IN SECTION 7.1.B(10), SECTION 7.3.B(1), SECTION 7.3.C(1)
(BUT NOT IN THE CASE OF A BREACH OF SECTION 7.3.C(1) AS A RESULT OF AN EVENT OR
TRANSACTION DESCRIBED IN CODE SECTION 1033 UNLESS THE AMOUNT OF GAIN OR INCOME
RECOGNIZED AS A RESULT OF ANY SUCH EVENT OR TRANSACTION, INCLUDING, WITHOUT
LIMITATION, GAIN RECOGNIZED AS A RESULT OF A DEEMED DISTRIBUTION PURSUANT TO
CODE SECTION 752, EXCEEDS $1,000,000), SECTION 7.3.C(2) (BUT ONLY IF THE BREACH
OF SECTION 7.3.C(2) RESULTS IN THE RECOGNITION OF GAIN OR INCOME FOR FEDERAL
INCOME TAX PURPOSES IN EXCESS OF $1,000,000) OR SECTION 10.2.B HEREOF
(COLLECTIVELY, A "LIQUIDATED DAMAGES BREACH") WITHOUT LIMITING ANY OF THEIR
RIGHTS TO GAINS, PROFITS, LOSSES, DISTRIBUTIONS, GUARANTEED PAYMENTS, PAYMENTS
UNDER SECTION 5.5 OR OTHER PAYMENTS UNDER THIS AGREEMENT, THE MANAGING MEMBER
SHALL PAY TO THE HOLDERS, IN PROPORTION TO THEIR LLC UNITS OUTSTANDING AT THE
TIME OF THE LIQUIDATED DAMAGES BREACH, AN AMOUNT COMPUTED BY MULTIPLYING
$8,666,666 BY THE ADJUSTED HOLDER PERCENTAGE AT THE TIME OF THE LIQUIDATED
DAMAGES BREACH (THE "LIQUIDATED DAMAGE AMOUNT"). THE LIQUIDATED DAMAGE AMOUNT
SHALL BE PAID TO THE HOLDERS PROMPTLY UPON RECEIPT BY THE MANAGING MEMBER OF A
WRITTEN DEMAND FOR PAYMENT FROM THE NON-MANAGING MEMBER REPRESENTATIVE. THE
PARTIES TO THIS AGREEMENT ACKNOWLEDGE AND AGREE THAT THE OBLIGATION OF THE
MANAGING MEMBER UNDER THIS SECTION 7.3.G IS INTENDED TO BE A DIRECT OBLIGATION
OF THE MANAGING MEMBER AND NOT A DIRECT OR INDIRECT OBLIGATION OF THE COMPANY.
NO PAYMENT PURSUANT TO THIS SECTION 7.3.G SHALL BE CONSIDERED A COMPANY PAYMENT
TO A HOLDER OR SHALL HAVE ANY EFFECT ON A HOLDER'S CAPITAL ACCOUNT, OR BE
CONSIDERED A "GUARANTEED PAYMENT" UNDER CODE SECTION 707(C).
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NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE HOLDERS MAY NOT SEEK
EQUITABLE RELIEF WITH RESPECT TO ANY LIQUIDATED DAMAGES BREACH.
THE PARTIES TO THIS AGREEMENT ACKNOWLEDGE THAT THE HOLDERS'
ACTUAL DAMAGES IN THE EVENT OF A LIQUIDATED DAMAGES BREACH WOULD BE EXTREMELY
DIFFICULT, COSTLY, INCONVENIENT AND IMPRACTICABLE TO DETERMINE AND PROVE.
THEREFORE, THE PARTIES FURTHER ACKNOWLEDGE THAT THE FOREGOING PAYMENTS SHALL BE
DEEMED FOR ALL PURPOSES TO HAVE BEEN AGREED UPON, AFTER NEGOTIATION, AS THE
PARTIES' REASONABLE ESTIMATE OF DAMAGES IN THE EVENT OF A LIQUIDATED DAMAGES
BREACH. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT THE LIQUIDATED DAMAGE
AMOUNT IS A REASONABLE SUM CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE
DATE OF THIS AGREEMENT, INCLUDING THE RELATIONSHIP OF THE TOTAL LIQUIDATED
DAMAGE AMOUNT TO THE RANGE OF POSSIBLE HARM TO THE HOLDERS AND THEIR DIRECT AND
INDIRECT OWNERS, INCLUDING THE EFFECT OF POSSIBLE ADDITIONAL OR ACCELERATED
STATE AND FEDERAL INCOME TAXES THAT REASONABLY COULD BE ANTICIPATED. THE PARTIES
HERETO FURTHER ACKNOWLEDGE AND AGREE THAT PAYMENT OF THE LIQUIDATED DAMAGE
AMOUNT IS THE SOLE AND EXCLUSIVE REMEDY AGAINST THE MANAGING MEMBER ARISING FROM
A LIQUIDATED DAMAGES BREACH, PROVIDED, HOWEVER, THAT THE HOLDERS SHALL BE
ENTITLED TO RECOVER FROM THE MANAGING MEMBER REASONABLE ATTORNEYS' FEES INCURRED
IN CONNECTION WITH ANY BREACH BY THE MANAGING MEMBER OF ITS OBLIGATION TO PAY
THE LIQUIDATED DAMAGE AMOUNT HEREUNDER, AND THAT THE HOLDERS SHALL BE ENTITLED
TO RECEIVE, AND THE MANAGING MEMBER SHALL BE REQUIRED TO PAY, THE LIQUIDATED
DAMAGE AMOUNT ONLY ONCE, NO MATTER HOW MANY LIQUIDATED DAMAGE BREACHES MAY HAVE
OCCURRED OR MAY OCCUR. UPON PAYMENT OF THE LIQUIDATED DAMAGE AMOUNT BY THE
MANAGING MEMBER PURSUANT TO THIS SECTION 7.3.G, ALL RIGHTS OF THE HOLDERS TO
RECEIVE ANY FURTHER PAYMENTS UNDER THIS SECTION 7.3.G ON ACCOUNT OF OTHER OR
FUTURE LIQUIDATED DAMAGE BREACHES SHALL CEASE. PAYMENT OF THE LIQUIDATED DAMAGE
AMOUNT BY THE MANAGING MEMBER SHALL NOT CONSTITUTE A BREACH OF THE OBLIGATIONS
OF THE MANAGING MEMBER UNDER ANY PROVISIONS OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ANY OBLIGATION OF THE MANAGING MEMBER TO AVOID TAKING ANY
ACTION THAT WILL RESULT IN THE RECOGNITION OF INCOME TO THE NON-MANAGING
MEMBERS. THE PARTIES TO THIS AGREEMENT ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THIS PROVISION COVERING LIQUIDATED DAMAGES AND THAT THEY SHALL HAVE
NO RECOURSE IN THE EVENT OF A LIQUIDATED DAMAGES BREACH PROVIDED THAT THE
HOLDERS RECEIVE THE LIQUIDATED DAMAGE AMOUNT AS LIQUIDATED DAMAGES AT THE TIME
AND IN THE MANNER PROVIDED IN THIS SECTION 7.3.G. FURTHER, NOTWITHSTANDING THE
FOREGOING, THE HOLDERS
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AND MEMBERS (OTHER THAN THE MANAGING MEMBER), IN ADDITION TO ALL RIGHTS THEY MAY
HAVE TO LIQUIDATED DAMAGES UNDER THIS SECTION 7.3.G, SHALL STILL HAVE ALL OF
THEIR OTHER RIGHTS UNDER THIS AGREEMENT TO RECEIVE INCOME, GAIN, LOSS, PROFITS,
DISTRIBUTIONS, INDEMNITY PAYMENTS, GUARANTEED PAYMENTS AND OTHER PAYMENTS (AND
DAMAGES OR OTHER RELIEF FOR ANY BREACH OF ANY OTHER PROVISIONS OF THIS AGREEMENT
OTHER THAN ANY LIQUIDATED DAMAGES BREACH). EACH PARTY TO THIS AGREEMENT
ACKNOWLEDGES THAT IN CONNECTION WITH THE TRANSACTIONS PROVIDED FOR IN THIS
AGREEMENT IT HAS BEEN REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF
THE LIQUIDATED DAMAGES PROVISIONS IN THIS SECTION 7.3.G AT THE TIME THIS
AGREEMENT WAS MADE. IN PLACING THEIR INITIALS BELOW EACH PARTY SPECIFICALLY
CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND IRREVOCABLY AND
CONCLUSIVELY AGREES THAT THE LIQUIDATED DAMAGE AMOUNT (INCLUDING, WITHOUT
LIMITATION, THE METHODOLOGY BY WHICH IT WAS DETERMINED) MAY NOT BE CHALLENGED BY
ANY PARTY OR OTHER PERSON AND THAT ANY HOLDERS, ASSIGNEES OR SUBSTITUTED MEMBERS
NEED NOT HAVE INITIALED BELOW TO OBTAIN THE BENEFITS OF THIS SECTION 7.3.G (AND
THEY SHALL BE DEEMED THIRD PARTY BENEFICIARIES OF THE SAME).
INITIAL ____ INITIAL ____ INITIAL ____
SECTION 7.4. PAYMENTS MADE BY THE MANAGING MEMBER AND AFFILIATES
The Managing Member and its Affiliates shall not be compensated
for services as the manager of the Company. Distributions, payments and
allocations to which the Managing Member may be entitled hereunder in its
capacity as the Managing Member shall not constitute compensation for services
rendered by the Managing Member as provided in this Agreement (including the
provisions of Articles 5 and 6 hereof). To the extent practicable, Company
expenses shall be billed directly to and paid by the Company. However, to the
extent, if any, costs are actually paid by the Managing Member or any of its
Affiliates for operating and other expenses of the Company, including, without
limitation, the actual cost of goods, materials and administrative services
related to (i) Company operations, (ii) Company accounting, (iii) communications
with Members, (iv) legal services, (v) tax services including expenditures in
connection with the Managing Member's duties as tax matters partner, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses and
(ix) such other related operational and administrative expenses as are necessary
for the prudent organization and operation of the Company, they shall be
computed on a quarterly basis (and reported to the Non-Managing Members along
with other quarterly reports to them hereunder) and shall be treated and deemed
when made to be (i) cash Capital Contributions by the Managing Member to the
Company and (ii) expenditures paid directly by the Company. (Notwithstanding the
preceding sentence, to the extent, if any, that the Managing Member pays (or
contributes to the Company) any amounts (including liquidated or other damages)
attributable to any breach of this Agreement on its part or attributable to any
fraud, willful misconduct, gross negligence or known violation of the law by it
or its Affiliates, the Managing Member shall not be deemed to have made (nor
otherwise be
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treated as having made) any Capital Contributions for such amounts.) "Actual
cost of goods and materials" means the actual cost to the Managing Member or any
of its Affiliates of goods and materials used for or by the Company obtained
from entities not affiliated with the Managing Member, and "actual cost of
administrative services" means the pro rata cost of personnel (as if such
persons were employees of the Company) providing administrative services to the
Company. The cost for such services treated as a cash Capital Contribution by
the Managing Member hereunder shall be the lesser of (i) the Managing Member's
or Affiliate's actual cost, or (ii) the amount the Company would be required to
pay to independent parties for comparable administrative services in the same
geographic location.
SECTION 7.5. OTHER BUSINESS OF MEMBERS
The Members may engage independently or with others in other
business ventures of every nature and description, including, without
limitation, the ownership of other properties and the making or management of
other investments. Nothing in this Agreement shall be deemed to prohibit the
Members or any of their Affiliates from dealing, or otherwise engaging in
business with, Persons transacting business with the Company or from providing
services related to the purchase, sale, financing, management, development or
operation of real or personal property and receiving compensation therefor not
involving any rebate or reciprocal arrangement that would have the effect of
circumventing any restriction set forth herein upon dealings with the Managing
Member or any Affiliate of the Managing Member. Neither the Company nor any
Member shall have any right by virtue of this Agreement or the relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.
SECTION 7.6. CONTRACTS WITH AFFILIATES
Except as permitted by this Agreement, neither the Managing
Member nor any of its Affiliates, directly or indirectly, shall sell, transfer
or convey any property to the Company or engage in any other transaction with
the Company, except and upon terms determined by the Managing Member in good
faith to be comparable to terms that could be obtained from an unaffiliated
party in an arm's length transaction. Notwithstanding the foregoing, the Company
shall not sell Villa Martinique to the Managing Member or any of the Affiliates
(even if such sale would otherwise comply with the provisions of the preceding
sentence) except in accordance with the provisions of this Agreement.
SECTION 7.7. INDEMNIFICATION
A. To the fullest extent permitted by applicable law, the Company
shall indemnify, defend and hold harmless each Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including, without limitation, attorney's fees and other legal fees and
expenses), judgments, fines, settlements and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations or property of
the Company (all of the foregoing losses, claims, etc. are referred to as
"Actions"), including Actions against Holders under
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Recovery Laws in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise; provided, however, that the Company shall not
indemnify an Indemnitee (i) for fraud, willful misconduct, gross negligence or a
knowing violation of the law (other than Recovery Laws with respect to
Indemnitees who are Holders) or (ii) for any transaction for which such
Indemnitee received an improper personal benefit in violation or breach of any
provision of this Agreement or applicable law (other than Recovery Laws with
respect to Indemnitees who are Holders). The foregoing indemnity shall extend to
any liability of any such Indemnitee, pursuant to a loan guarantee or otherwise,
for any Debt of the Company (including, without limitation, any Debt which the
Company has assumed or taken subject to), and the Managing Member is hereby
authorized and empowered, on behalf of the Company, to enter into one or more
indemnity agreements consistent with the provisions of this Section 7.7 in favor
of any Indemnitee having or potentially having liability for any such Debt. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.7.A. The termination of any proceeding by conviction
of an Indemnitee or upon a plea of nolo contendere or its equivalent by an
Indemnitee, or an entry of an order of probation against an Indemnitee prior to
judgment, does not create a presumption that such Indemnitee acted in a manner
contrary to that specified in this Section 7.7.A with respect to the subject
matter of such proceeding. Without limiting the Managing Member's obligations in
this Agreement, including under Sections 4.1, 4.4, 5.5, 7.1.B(9) and 7.1.B(10)
any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Company, as an expense of the Company; provided, however, that all
cash payments that would otherwise be made to the Managing Member or any of its
Affiliates that are corporations, partnerships or limited liability companies
hereunder shall be retained by the Company (for use for all Company purposes
including distributions) and constitute an additional cash Capital Contribution
to the Company made by the Managing Member. Without limiting the Managing
Member's obligations set forth in this Agreement, no Member shall be subject to
personal liability by reason of these indemnification provisions.
Notwithstanding the foregoing, the Original Members shall not be indemnified for
(a) amounts paid in connection with guaranties or other obligations of Holder,
entered into under Section 8.4.C, (b) their indemnity obligations under Section
8.8 or (c) their indemnity obligations under the Contribution Agreement.
B. To the fullest extent permitted by law, expenses incurred by
an Indemnitee who is a party to a proceeding or otherwise subject to or the
focus of or is involved in any Action shall be paid or reimbursed by the Company
as incurred by the Indemnitee in advance of the final disposition of the Action
upon receipt by the Company of (i) a written affirmation by the Indemnitee of
the Indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Company as authorized in Section 7.7.A has been met and
(ii) a written undertaking by or on behalf of the Indemnitee to repay the amount
if it shall ultimately be determined that the standard of conduct has not been
met.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Members, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the
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benefit of the heirs, successors, assigns and administrators of the Indemnitee
unless otherwise provided in a written agreement with such Indemnitee or in the
writing pursuant to which such Indemnitee is indemnified.
D. The Company may, but shall not be obligated to, purchase and
maintain insurance, on behalf of any of the Indemnitees and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Company's activities, regardless of whether the Company would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. Any liabilities which any Indemnitee incurs as a result of
acting on behalf of the Company or the Managing Member (whether as a fiduciary
or otherwise) in connection with the operation, administration or maintenance of
an employee benefit plan or any related trust or funding mechanism (whether such
liabilities are in the form of excise taxes assessed by the IRS, penalties
assessed by the Department of Labor, restitutions to such a plan or trust or
other funding mechanism or to a participant or beneficiary of such plan, trust
or other funding mechanism, or otherwise) shall be treated as liabilities or
judgments or fines under this Section 7.7, unless such liabilities arise as a
result of (i) such Indemnitee's fraud, willful misconduct, recklessness, gross
negligence or knowing violation of the law or (ii) any transaction in which such
Indemnitee received an improper personal benefit in violation or breach of any
provision of this Agreement or applicable law.
F. An Indemnitee shall not be denied indemnification in whole or
in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
G. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision of this
Section 7.8 shall be prospective only and shall not in any way affect the
limitations on the Company's liability to any Indemnitee under this Section 7.7
as in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
H. It is the intent of the Members that any amounts paid or
deemed paid by the Company to Indemnitees who are Members pursuant to this
Section 7.7, other than amounts deemed contributed and distributed under Section
5.5, shall be treated as "guaranteed payments" within the meaning of Code
Section 707(c).
SECTION 7.8. LIABILITY OF THE MANAGING MEMBER
A. Without limiting the obligations of the Managing Member
hereunder, including, without limitation, the obligations set forth in Sections
4.1, 4.4, 5.5 and 7.1.B(9) and
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(10) and 7.3, neither the Managing Member nor any of its directors, officers,
employees or representatives shall be liable or accountable in damages or
otherwise to the Company, any Member, any Assignees or any other party for
losses sustained, liabilities incurred or benefits not derived as a result of
errors in judgment or mistakes of fact or law or of any act or omission if the
Managing Member or such director, officer, employee or representative acted in
good faith in accordance with this Agreement.
B. The Non-Managing Members expressly acknowledge that the
Managing Member is acting for the benefit of the Company and the Members
collectively and that the Managing Member is under no obligation, except as
otherwise provided in this Agreement, to give priority to the separate interests
of the Members (including, without limitation, the tax consequences to Members,
or Assignees in deciding whether to cause the Company to take (or decline to
take) any actions in accordance with the terms of this Agreement.
C. Subject to its obligations and duties as Managing Member set
forth in Section 7.1.A hereof, the Managing Member may exercise any of the
powers granted to it by this Agreement (subject to any limitations on those
powers set forth in this Agreement) and perform any of the duties imposed upon
it hereunder either directly or by or through its employees or agents (subject
to the supervision and control of the Managing Member).
D. Any amendment, modification or repeal of this Section 7.8 or
any provision of this Section 7.8 shall be prospective only and shall not in any
way affect the limitations on the Managing Member's, and its officers' and
directors', liability to the Company and the Members under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
E. To the fullest extent permitted by law (without limiting the
Managing Member's obligations hereunder), no officer, director or shareholder of
the Managing Member shall be liable to the Company for money damages except for
(i) active and deliberate dishonesty established by a final judgment (not
subject to appeal) or (ii) actual receipt of an improper benefit or profit in
money, property or services. This Agreement is executed by the officers of the
Managing Member solely as officers of the same and not in their own individual
capacities.
F. To the extent that, at law or in equity, the Managing Member
has duties (including fiduciary duties) and liabilities relating thereto to the
Company or the Members, the Managing Member shall not be liable to the Company
or to any other Member for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they increase or
restrict the duties and liabilities of the Managing Member otherwise existing at
law or in equity, are agreed by the Members to replace such other duties and
liabilities of the Managing Member.
G. Nothing contained in this Section shall relieve the Managing
Member from any liability for any breach of any provision herein.
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SECTION 7.9. OTHER MATTERS CONCERNING THE MANAGING MEMBER
A. The Managing Member may rely in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture or other paper or document
reasonably believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties.
B. The Managing Member may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers selected
by it, and any act taken or omitted to be taken in good faith reliance upon the
opinion of such Persons as to matters that the Managing Member reasonably
believes to be within such Person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the Company shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
C. The Managing Member shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act and duty that
is permitted or required to be done by the Managing Member hereunder.
D. Nothing contained in this Section shall relieve the Managing
Member from any liability for any breach of any provision herein.
SECTION 7.10. TITLE TO COMPANY ASSETS
Title to Company assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Company as an
entity, and no Member, individually or collectively with other Members or
Persons, shall have any ownership interest in such Company assets or any portion
thereof. Title to any or all of the Company assets may be held in the name of
the Company, the Managing Member or one or more nominees, as the Managing Member
may determine, including Affiliates of the Managing Member; provided, however,
that notwithstanding the foregoing, title to Villa Martinique shall be held in
the name of the Company. The Managing Member hereby covenants that any Company
assets for which legal title is held in the name of the Managing Member or any
nominee or Affiliate of the Managing Member shall be held by the Managing Member
for the use and benefit of the Company in accordance with the provisions of this
Agreement; provided, however, that the Managing Member shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Company as soon as reasonably practicable. All Company assets shall be recorded
as the property of the Company in its books and records, irrespective of the
name in which legal title to such Company assets is held.
SECTION 7.11. RELIANCE BY THIRD PARTIES
Subject to the provisions of Sections 7.3.B and 7.3.C hereof, any
Person dealing with the Company shall be entitled to assume that the Managing
Member (or the Non-Managing
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Member Representative in the case of actions under Sections 5.1.B(1) or (4)) has
full power and authority, without the consent or approval of any other Member or
Person, to encumber, sell or otherwise use in any manner any and all assets of
the Company and to enter into any contracts on behalf of the Company, and take
any and all actions on behalf of the Company, and such Person shall be entitled
to deal with the Managing Member (or the Non-Managing Member Representative in
the case of actions under Sections 5.1.B(1) or (4)) as if it were the Company's
sole party in interest, both legally and beneficially.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
SECTION 8.1. LIMITATION OF LIABILITY
Except as otherwise provided by this Agreement or required by any
non-waivable provision of the Act or other applicable law or pursuant to any
express indemnities given to the Company by any Member pursuant to this
Agreement (including, without limitation, pursuant to Section 8.8 hereof) or the
Contribution Agreement or any other written instrument or pursuant to any
express guaranties given to a creditor of the Company, another Member or Holder
or other third party in accordance with this Agreement, (i) without in any way
limiting any Member's obligations (or rights) under this Agreement, no Member
(including the Managing Member, whether in its capacity as a Member or as
Managing Member) shall be personally liable in any manner whatsoever for any
debt, liability or other obligation of the Company, whether such debt, liability
or other obligation arises in contract, tort or otherwise (except for any Debt,
liability or other obligation of the Company for which it or he is liable under
the terms of this Agreement), and (ii) without in any way limiting any Member's
obligations (or rights) under this Agreement, no Member (including the Managing
Member, whether in its capacity as a Member or as Managing Member) shall in any
event have any liability whatsoever (except for any liability any Member may
have to other Members or Holders under the terms of this Agreement) in excess of
(a) the amount of its Capital Contributions, (b) its share of any assets and
undistributed profits of the Company, (c) the amount of any obligation of the
Managing Member to make additional Capital Contributions to the Company pursuant
to this Agreement, (d) a Deficit Restoration Obligation described in Section
4.4, and (e) the amount of any wrongful distribution to the Member in violation
of Section 18-607 of the Act); provided, however, that in the case of any Holder
receiving a wrongful distribution in violation of Section 18-607 of the Act,
such Holder's wrongful distribution shall be reimbursed by the Managing Member
pursuant to Section 5.5 and the amount of such reimbursement shall be deemed to
constitute an additional Capital Contribution made by the Managing Member.
SECTION 8.2. OUTSIDE ACTIVITIES OF MEMBERS
Subject to any agreements entered into pursuant to Section 7.6.
hereof and any other agreements (including the Exchange Rights Agreement)
entered into by a Member or its Affiliates with the Managing Member, the Company
(including, without limitation, any employment agreement), any Member and any
Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder
of any Member shall be entitled to and may have business
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interests and engage in business activities in addition to those relating to the
Company, including business interests and activities that are in direct or
indirect competition with the Company or that are enhanced by the activities of
the Company. Subject to such agreements, neither the Company nor any Member
shall have any rights by virtue of this Agreement in any business ventures of
any Member or Assignee. Subject to such agreements, none of the Members nor any
other Person shall have any rights by virtue of this Agreement or the
relationship established hereby in any business ventures of any other Person
(other than rights of the Holders to acquire interests in the Managing Member
pursuant to Section 8.5, 8.6 or the Exchange Rights Agreement), and such Person
shall have no obligation pursuant to this Agreement, subject to Section 7.6.
hereof and any other agreements entered into by a Member or its Affiliates with
the Managing Member or the Company, to offer any interest in any such business
ventures to the Company, any Member or any such other Person (other than the
rights of the Holders to acquire interests in the Managing Member pursuant to
Section 8.5, 8.6 or the Exchange Rights Agreement), even if such opportunity is
of a character that, if presented to the Company, any Member or such other
Person, could be taken by such Person or would directly or indirectly compete
with the Company or that are enhanced by the activities of the Company. Nothing
contained herein is intended to limit any Holder's rights under Section 8.5, 8.6
or the Exchange Rights Agreement.
SECTION 8.3. RETURN OF CAPITAL
Except for any Holder's rights under Sections 8.5, 8.6 or the
Exchange Rights Agreement, no Member shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Company as provided
herein. Except to the extent provided in Articles 5 and 6 hereof or otherwise
provided in this Agreement, no Member or Assignee shall have priority over any
other Member or Assignee either as to the return of Capital Contributions or as
to profits, losses or distributions.
SECTION 8.4. RIGHTS OF NON-MANAGING MEMBERS RELATING TO THE
COMPANY
A. In addition to other rights provided by this Agreement or by
the Act, each Non-Managing Member shall have the right, for a purpose reasonably
related to such Non-Managing Member's Membership Interest in the Company, upon
written demand with a statement of the purpose of such demand and at such
Non-Managing Member's own expense:
(1) to obtain a copy of (i) the most recent annual and
quarterly reports filed with the SEC by the Managing Member pursuant to
the Exchange Act and (ii) each report or other written communication
sent to the shareholders of the Managing Member;
(2) to obtain a copy of the Company's federal, state and
local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Member;
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(4) to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies of all powers
of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Member and that each Member has agreed to
contribute in the future, and the date on which each became a Member.
B. On written request from a Non-Managing Member, the Managing
Member shall notify the Non-Managing Member of the then current Adjustment
Factor or any change made to the Adjustment Factor or to the REIT Shares Amount.
On written request from the Non-Managing Member Representative, the Managing
Member shall notify the Non-Managing Member Representative of the names and
addresses of, and the respective number of LLC Units held of record by, the
Assignees and Substituted Members, as that information appears in the books and
records of the Company.
C. The Holders shall have the right, at their option, to
guarantee or otherwise obligate themselves with respect to the Developer Note or
the Bond Credit Enhancement or any other indebtedness of the Company secured by
Villa Martinique or other Company real property if Villa Martinique is no longer
owned by the Company (collectively the "Available Indebtedness") (and the
Company and the Managing Member shall make available at all times during the
term of this Agreement the ability for the Holders to provide such guaranties or
otherwise obligate themselves to the Company or the Managing Member (as the case
may be)) up to (i) for a period of ten years from the Measurement Date, $30
million and (ii) thereafter, the lesser of $30 million or the principal amount
of the Available Indebtedness (provided, however, that the liability of the
Holders in respect of the Available Indebtedness so guaranteed or in respect of
which they have become so obligated shall, at the option of such Holder or
Holders, be the last dollars of liability on such Available Indebtedness), in a
manner, and upon such terms as, such Holders, in their sole and absolute
discretion, shall determine. Should any Holder guarantee or otherwise obligate
himself, herself, or itself with respect to Available Indebtedness, as provided
above, then notwithstanding anything in this Agreement that could be construed
to the contrary, such Holder shall at all times be liable under such guarantee
or obligation, in accordance with the terms of the indemnity agreement to be
entered into in accordance with this Section unless such Holder elects to cancel
the guarantee of indebtedness or obligation in whole or part following an
Exchange of LLC Units. Should such a guaranty or obligation be so canceled in
whole or part, such Holder or any other Holder shall have the right to guaranty
or obligate itself for such amount or any portion thereof so canceled, in
accordance with the terms of the indemnity agreement described above.
SECTION 8.5. EXCHANGE RIGHTS
Notwithstanding anything to the contrary in this Agreement
(including Article 11) or the Act, the Holders shall have the right, but not the
obligation, from time to time and at any
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time (pursuant to the provisions of the Exchange Rights Agreement) to transfer
to the Managing Member, and to require the Managing Member to acquire, all or a
portion of their LLC Units in an Exchange pursuant to the Exchange Rights
Agreement for cash, REIT Shares or certain other consideration specified
therein. Notwithstanding any such Exchange, neither the Managing Member nor any
other Person shall obtain (or succeed to) any of the rights or benefits of a
Member or Holder or otherwise as a result of the Managing Member's purchase of
LLC Units in such Exchange except that the Capital Account of such Holder shall
be transferred to the Managing Member and such LLC Units shall be deemed
canceled for all purposes on the Tender Date (as such term is defined in the
Exchange Rights Agreement). The Exchange shall not adversely affect, however,
any claims which the transferor Holder may have with respect to the LLC Units
that are Exchanged for any prior breaches of this Agreement (including
compensatory and/or liquidated damages), any undistributed Priority
Distributions (including any increase in Priority Distribution pursuant to
Section 5.1(B)(4) as a result of the non-timely payment of Priority
Distributions), any payments under Section 5.1.C, or any unpaid indemnification
payments or other amounts owed to such Holder, by the Managing Member or the
Company prior to the Exchange (and, without limitation, after the Exchange such
transferor shall have and retain all the rights of an Exercising Unitholder
under Sections 8(a) and 8(b) of the Exchange Rights Agreement), and
notwithstanding such Exchange, the Holder shall still be treated the same as if
he were a Holder for purposes of receiving such distributions and payments with
respect to the LLC Units Exchanged. Any Holder's rights under this Section 8.5
and the Exchange Rights Agreement shall still be fully effective and enforceable
and shall not be adversely affected in any way by the Incapacity, bankruptcy or
other status of the Company or any Holder or Member. The Holders shall be
relieved of all their obligations under this Agreement (other than as may be
provided in the last sentence of Section 8.4.C) with respect to any LLC Units
Exchanged, except that the Holders shall not be relieved, as a result of the
Exchange, of any obligations accrued prior to the Exchange that they may have to
return Excess Payments (if any), provide indemnity under Section 8.8, Section
10.2.B, Section 10.2.C or 10.2.D, reimburse for withholding under Section 10.4
or for prior breaches of this Agreement.
SECTION 8.6. MANAGING MEMBER'S RIGHT TO CALL MEMBERSHIP
INTERESTS
On and after the date on which the Adjusted Holder Percentage is
less than 10%, the Managing Member shall have the right, but not the obligation,
at any time to acquire all (but not less than all) of the outstanding Membership
Interests held by the Holders by treating those Holders as "Exercising
Unitholders" (as such term is defined in the Exchange Rights Agreement) who have
delivered Exercise Notices for their Membership Interests pursuant to the
Exchange Rights Agreement and by delivering notice (the "Call Notice") to the
Holders that the Managing Member has elected to exercise its rights under this
Section 8.6. The Call Notice given by the Managing Member to such Holders shall
be treated as if it were an Exercise Notice delivered to the Managing Member by
each such Holder under the Exchange Rights Agreement and the date of the Call
Notice shall be used as the "Tender Date" (as such term is defined in the
Exchange Rights Agreement) and the acquisition of the LLC Units shall be treated
as an Exchange made upon the terms and with the effects specified in the
Exchange Rights Agreement. Notwithstanding any such Exchange, neither the
Managing Member nor any other Person shall obtain (or succeed to) any of the
rights or benefits of a Member or Holder or otherwise as a result
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of the Managing Member's purchase of LLC Units in such Exchange except that the
Capital Account of such Holder shall be transferred to the Managing Member and
such LLC Units shall be deemed canceled for all purposes on such Tender Date.
The Exchange shall not adversely affect, however, any claims which the
transferor Holder may have with respect to the LLC Units that are Exchanged for
any prior breaches of this Agreement (including compensatory and/or liquidated
damages), any undistributed Priority Distributions (including any increase in
Priority Distribution pursuant to Section 5.1.(B)(4) as a result of the
non-timely payment of Priority Distributions, any payments under Section 5.1.C,
any unpaid indemnification payments or other amounts owed to such Holder, by the
Managing Member or the Company prior to the Exchange (and, without limitation,
after the Exchange such transferor shall have and retain all the rights of an
Exercising Unitholder under Sections 8(a) and 8(b) of the Exchange Rights
Agreement) and notwithstanding such Exchange, the Holder shall still be treated
the same as if he were a Holder for purposes of receiving such distributions and
payments with respect to the LLC Units Exchanged. The Holders shall be relieved
of all their obligations under this Agreement (other than as may be otherwise
provided in the last sentence of Section 8.4.C) with respect to any LLC Units
Exchanged, except that the Holders shall not be relieved, as a result of the
Exchange, of any obligations accrued prior to the Exchange that they may have to
return Excess Payments (if any), provide indemnity under Section 8.8, Section
10.2.B, Section 10.2.C, Section 10.2.D, reimburse for withholding under Section
10.4, or for prior breaches of this Agreement.
SECTION 8.7. NO REDEMPTIONS
Unless provided to the contrary in this Agreement, there shall be
no redemptions of any Membership Interest by the Company.
SECTION 8.8. INDEMNIFICATION BY ORIGINAL MEMBERS
A. Pursuant to that certain Settlement Agreement dated November
30, 1992 (the "Settlement Agreement") between Nelson S. Zand, Edward M. Israel,
individually and d/b/a/ Wilshire Pacific Properties, David J. Bornstein, Robert
S. Schenkman, Riveroaks Newport Associates, a California Limited Partnership
("Riveroaks"), ISCO, a California general partnership, Costa Mesa Partners, a
California general partnership, Riveroaks Properties, Inc., a California
corporation, Zand & Co., a California corporation, and Robert S. Schenkman
Accountancy Corporation, a California corporation, and Ernest Cohen, Costa Mesa
Associates, a California general partnership, IFT Properties, Ltd., a California
limited partnership, American Realprop, a California general partnership, the
Zand Family Trust, Riveroaks Investments-I, a California limited partnership,
Riveroaks Investments-II, a California limited partnership, and Riveroaks
Associates, a California general partnership, the Company is obligated to pay
Riveroaks up to an aggregate amount of $400,000 upon the "sale" of Villa
Martinique, as such term is defined in the Settlement Agreement. In connection
therewith, Riveroaks has caused a Memorandum of Settlement Agreement to be
recorded against Villa Martinique. Nothing in this Section 8.8 shall be deemed
to create any rights or benefits in favor of Riveroaks.
B. The Original Members, at their sole cost and expense, shall,
on or before the first anniversary of the Measurement Date, either cause (i) a
release (the "Release") of the
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Memorandum of Settlement Agreement to be recorded in the real property records
or (ii) First American Title Insurance Company or another reputable title
company to issue either a title insurance policy without the Memorandum of
Settlement Agreement being shown as an exception to such title insurance or a
title policy endorsement reasonably acceptable to the Managing Member with the
same effect (the "Title Commitment"). If the Release is not recorded on or
before the first anniversary of the Measurement Date or in lieu thereof, the
Title Commitment is not issued, the Managing Member shall have the right,
notwithstanding any other provision of this Agreement, (i) to withhold from
amounts otherwise distributable to the Holders pursuant to Section 5.1 and
Section 13.2 (and the amounts so distributable shall be deemed to have been made
to the extent of the amount so withheld) an aggregate amount equal to $800,000
to be kept as a cash reserve in a segregated, interest-bearing Company bank
account (the "Settlement Reserve") and to be used only as permitted in
accordance with this Section 8.8. The Settlement Reserve may only be used (i) to
satisfy or pay any and all losses, claims, damages, liabilities, joint or
several, expenses (including, without limitation, attorney's fees and other
legal fees and expenses), judgments, fines, settlements and other amounts
relating to the obligations due to Riveroaks under the Settlement Agreement,
(ii) to pay for any fees, costs or expenses relating to the recording of the
Release and (iii) to pay for the indemnification set forth in Section 8.8.D
below. Upon (i) the satisfaction of the obligations due Riveroaks under the
Settlement Agreement, as determined by the Managing Member in its reasonable
discretion, and the recording of the Release or (ii) delivery of the Title
Commitment in lieu thereof, all amounts remaining in the Settlement Reserve,
including any interest thereon and all amounts set off against other
distributions under Section 8.8.E, will be distributed (but without again being
counted as a distribution to the Holders) to the applicable Holders or, in the
Managing Member's discretion (or if there are no remaining Holders), to the
Non-Managing Member Representative.
C. If (i) the Original Members and the Managing Member agree in
writing that a "sale" (as such term is defined in the Settlement Agreement) of
Villa Martinique has occurred prior to the first anniversary of the Measurement
Date, or (ii) in the event the issue of whether such a "sale" has occurred prior
to the first anniversary of the Measurement Date is the subject of litigation, a
court in a final, non-appealable judgment decides that a "sale" has occurred
prior to the first anniversary of the Measurement Date, the Original Members
hereby agree that they will (i) pay all amounts due Riveroaks pursuant to the
terms of the Settlement Agreement and (ii) cause a Release of the Memorandum of
Settlement Agreement to be recorded, or, alternatively, cause a Title Commitment
to be issued, upon satisfaction of the obligations to Riveroaks under the
Settlement Agreement.
D. (i) To the fullest extent permitted by applicable law, the
Original Members shall and hereby agree to indemnify the Company and each Member
other than the Original Members, including the Managing Member, from and against
any and all losses, claims, damages, liabilities, joint or several, expenses
(including, without limitation, attorney's fees and other legal fees and
expenses), judgments, fines, settlements and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, to the extent arising from the obligations due
to Riveroaks under the Settlement Agreement (collectively, "Damages").
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(ii) If a claim for Damages (a "Claim") is to be made by a
party entitled to indemnification under this Section 8.8 against the
indemnifying party, the party claiming such indemnification shall give written
notice (a "Claim Notice") to the indemnifying party as soon as practicable after
the party entitled to indemnification becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section 8.8. The Claim Notice shall specify the nature and amount of
the Claim asserted, if actually known to the party entitled to indemnification
hereunder. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within 15 calendar days after the service of the citation or summons). The
failure of any indemnified party to give timely notice under this Section 8.8
shall not affect rights to indemnification hereunder, except to the extent that
the indemnifying party demonstrates actual damage caused by such failure. After
such notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects at its own cost, risk and
expense, (I) to take control of the defense and investigation of such lawsuit or
action, (II) to employ and engage attorneys of its own choice to handle and
defend the same unless the named parties to such action or proceeding (including
any impleaded parties) include both the indemnifying party and the indemnified
party and the indemnified party has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying party,
in which event the indemnified party shall be entitled, at the indemnifying
party's cost, risk and expense, to separate counsel of its own choosing, and
(III) to compromise or settle in full such Claim, which compromise or settlement
shall be made only with the written consent of the indemnified party, which it
may give or withhold in its sole discretion. If the indemnifying party fails to
assume the defense of such Claim within 15 calendar days after receipt of the
Claim Notice, the indemnified party against which such Claim has been asserted
will (upon delivering notice to such effect to the indemnifying party) have the
right to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the indemnifying party. If the indemnified party assumes defense of the
Claim, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense and shall not be able to compromise
or settle the Claim without the written consent of the indemnifying party if the
amount payable in the compromise or settlement exceeds $5,000,000, which shall
be in its sole discretion. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 8.8 with its written consent, which shall be in its sole discretion, and
for any final judgment (subject to any right of appeal), and the indemnifying
party agrees to indemnify and hold harmless an indemnified party from and
against any Damages by reason of such settlement or judgment.
E. If the Settlement Reserve has been established pursuant to
Section 8.8.B, all amounts which the Original Members are obligated to pay or
indemnify against pursuant to the provisions of this Section 8.8 shall first be
paid out of the Settlement Reserve. If the Settlement Reserve has not been
established or if all amounts placed in the Settlement Reserve have been
previously expended, the Managing Member shall have the right to set off against
any amounts
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otherwise distributable to the Holders pursuant to Section 5.1 and Section 13.2
any amounts which the Original Members are obligated to pay or indemnify against
pursuant to the provisions of this Section 8.8. For purposes of this Agreement,
including, without limitation, Section 5.1.B, any amounts withheld or set off
pursuant to this Section 8.8 shall be deemed to have been actually distributed
to the Original Members in accordance with the distribution provisions of
Section 5.1 or Section 13.2, as applicable.
F. For purposes of this Section 8.8, the term "Original Members"
shall include all partners of each of the Original Members (and the successors
in interest to the partnership interests of those partners).
G. To the extent any payments to Riveroaks pursuant to the
Settlement Agreement or Section 8.8 are determined to be deductible items of the
Company, an amount equal to any such payments shall be deemed to have been made
as cash Capital Contributions by the Original Members (or their successors, as
the case may be), pro rata in accordance with their outstanding LLC Units at the
time of such payments (or pursuant to such ratio as they may otherwise agree
between them) (the "Deemed Credit"). However, to the extent any such deductions
are later disallowed, the amount of the Deemed Credit shall be reduced (with the
reduction allocated between the Original Members in the same ratio mentioned
above) to the extent their Capital Accounts are not otherwise reduced pursuant
to Code Section 704(b) or this Agreement.
H. With respect to and beginning with the federal and state tax
returns of the Company (and associated Schedules K-1) for the taxable year of
the Company ending December 31, 1997, unless the Managing Member receives from
the Non-Managing Member Representative before the filing of such returns
adequate documentation and analysis in accordance with Section 10.2.D, the
Managing Member intends to report Riveroaks as a retiring partner of the Company
for income tax purposes and as having a capital account balance of $0.00. Each
of the Original Members hereby agrees that neither (i) the Managing Member's
reporting of Riveroaks as having a capital account balance of $0.00 pursuant to
the preceding sentence nor (ii) the amendment by the Original Members (or the
Non-Managing Member Representative, as the case may be) of a tax return of the
Company (or any predecessor of the Company) for any taxable year of the Company
(or any such predecessor of the Company) ending prior to the Measurement Date
pursuant to Section 10.3.C(2), shall in any manner impair or otherwise adversely
affect the right(s) of the Managing Member to seek Damages or otherwise pursue a
Claim pursuant to this Section 8.8 (e.g., neither (i) nor (ii) of this sentence
shall form the basis for all or part of a defense to a Claim for Damages
pursuant to this Section 8.8).
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1. RECORDS AND ACCOUNTING
A. The Managing Member shall keep or cause to be kept at the
principal office of the Company separate books and records for the Company as
are required to be maintained by the Act and other books and records deemed by
the Managing Member to be
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appropriate with respect to the Company's business, including, without
limitation, all books and records necessary to provide to the Members any
information, lists and copies of documents required to be provided pursuant to
Section 8.4.A and Section 9.3 hereof. Any records maintained by or on behalf of
the Company in the regular course of its business may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time.
B. The books of the Company shall be maintained (on an
unconsolidated separate basis), for financial reporting purposes, on an accrual
basis in accordance with generally accepted accounting principles, or on such
other basis as the Managing Member determines to be necessary or appropriate.
SECTION 9.2. FISCAL YEAR
The Fiscal Year of the Company shall be the calendar year.
SECTION 9.3. REPORTS
A. As soon as practicable, but in no event later than 90 days
after the end of each Fiscal Year, the Managing Member shall cause to be mailed
to each Member, of record as of the end of the Fiscal Year, an annual report
containing financial statements of the Company.
B. As soon as practicable, but in no event later than 90 days
after the end of each calendar quarter (except the last calendar quarter of each
year), the Managing Member shall cause to be mailed to each Member, of record as
of the last day of the calendar quarter, a report containing (i) an income
statement of the Company, (ii) a quarterly computation of Available Cash from
Operations and Available Cash from Sale and (iii) the amount of Capital
Contributions made by the Managing Member during the quarter.
ARTICLE 10.
TAX MATTERS
SECTION 10.1. PREPARATION OF TAX RETURNS
A. The Managing Member shall arrange for the preparation and
timely filing of all returns with respect to Company income, gains, deductions,
losses and other items required of the Company for federal, state and local
income tax purposes and shall use all reasonable efforts to furnish, within 90
days of the close of each taxable year, the tax information reasonably required
by Members for federal, state and local income tax reporting purposes. The
Members shall promptly provide the Managing Member with such information
relating to Villa Martinique, including tax basis and other relevant
information, as may be reasonably requested by the Managing Member from time to
time.
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SECTION 10.2. TAX ELECTIONS
A. Except as otherwise provided herein, the Managing Member may,
in its sole and absolute discretion, determine whether to make any available
election pursuant to the Code, including, but not limited to, the election to
use the "recurring item" method of accounting provided under Code Section 461(h)
with respect to property taxes imposed on the Company's Properties; provided,
however, that, if the "recurring item" method of accounting is elected with
respect to such property taxes, the Company may pay the applicable property
taxes prior to the date provided in Code Section 461(h) for purposes of
determining economic performance; provided, further, that the Managing Member
shall make the election under Code Section 754 (i) upon a Permitted Transfer
under Section 11.3.A or upon the death of any Member, if requested to do so by
the transferee in the Permitted Transfer or the duly appointed representatives
of the estate of the Member. The Managing Member shall have the right to seek to
revoke any such election (including, without limitation, any election under Code
Sections 461(h) and 754) upon the Managing Member's determination in its sole
and absolute discretion that such revocation is in the best interests of the
Members; provided, however, that the Managing Member may seek to revoke the
election under Code Section 754 only with the Consent of a Majority in Interest
of the Non-Managing Members. It is expressly acknowledged by the Managing
Member, all other Members and all Holders that the triggering of a Change of
Ownership as a result of Exchanges or Transfers of LLC Units by the Holders
shall not provide any claim whatsoever to any of them as a result of the
increase in Company property taxes that may be so caused, except as set forth in
Section 5.1.C.
B. Notwithstanding anything to the contrary above, at all times
that the Company owns Villa Martinique, or other real property of the Company if
Villa Martinique is no longer owned by the Company, so long as it is consistent
with any Tax Determination, (i) the Company shall treat itself as a partnership
(but not as a publicly-traded partnership) for federal, state and local tax
purposes, which owns Villa Martinique which has an initial Gross Asset Value of
$72 million and an initial adjusted tax basis equal to its adjusted tax basis as
of the day before the date of execution of this Agreement, as adjusted for
depreciation and cost recovery, (ii) the Managing Member shall cause the
Company's tax filings and all communications with any Agencies (as defined in
Section 10.3) to be consistent therewith (including the Managing Member's tax
return), (iii) the Managing Member and the Company shall not make any disclosure
using IRS Form 8275, Form 8082, Form 8275-R (or any replacement to such forms or
similar state forms) and (iv) none of the Members or Holders shall at any time
take, agree to or assert any position inconsistent with the foregoing, provided,
however, that each of the Holders, including each of the Original Members,
jointly and severally agrees (x) to hold harmless (a) the Managing Member, (b)
the Company, (c) each tax advisor of the Company, and (d) each tax advisor of
the Managing Member from and against any and all costs or expenses suffered or
incurred in connection with or with respect to each of such Persons' compliance
with clause (iii) of this sentence, including, without limitation, the
imposition of any penalties, interest (on penalties), fines or costs, and (y)
that clause (x) of this sentence shall be enforced by a procedure consistent
with that referenced in Section 10.4 (i.e., as if such amounts were withheld
taxes paid on behalf of or with respect to such Holder); and provided further,
that, subject to Section 10.2.C, if the Non-Managing Member Representative
elects to contest a tax controversy beyond
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a Tax Determination pursuant to and in accordance with Section 10.3, the Company
shall, notwithstanding a Tax Determination, continue to act consistently with
the provisions of clauses (i) through (iv) of this sentence until the subject
matter(s) of such Tax Determination is (or are) subject to a final,
nonappealable order of a court of competent jurisdiction (in which case the
Company, the Managing Member, and any of the Company's tax advisors shall be
entitled to act and shall act consistently with such order as to such matter(s),
despite the fact that such order may require any of such Persons to act in a
manner which is inconsistent with any of the provisions of clauses (i) through
(iv) of this sentence, and any such action(s) consistent with such order shall
not result in a breach of this Section 10.2.B).
C. Each of the Holders, including each of the Original Members,
agrees (x) to hold harmless (a) the Managing Member, (b) the Company, (c) each
tax advisor of the Company, and (d) each tax advisor of the Managing Member from
and against any and all costs or expenses suffered or incurred in connection
with or with respect to each of such Persons' obligation to act consistently
during the contest of a tax controversy pursuant to the second proviso of
Section 10.2.B, including, without limitation, the imposition of any penalties,
interest (on penalties), fines or costs, and (ii) that clause (i) of this
sentence shall be enforced by a procedure consistent with that referenced in
Section 10.4 (i.e., as if such amounts were withheld taxes paid on behalf of or
with respect to such Holder).
D.
(1) Provided that the Managing Member receives from the
Non-Managing Member Representative adequate documentation or assurances
that Riveroaks is appropriately characterized as a retiring partner of
the Company in accordance with Code Section 736, receipt of which as of
the execution of this Agreement is hereby acknowledged, the Company and
the Managing Member agree to treat Riveroaks as a retiring partner of
the Company for income tax purposes in accordance with Code Section 736
until such time as either (i) the Managing Member is notified or
otherwise becomes aware of a change of status of Riveroaks as a retiring
partner of the Company for income tax purposes or (ii) the documentation
and/or assurances referred to in this sentence (and/or the facts on
which such documentation and/or assurances may be based, if any) is
determined to be or otherwise becomes inapplicable, incorrect, invalid,
or untrue in the reasonable discretion of the tax advisor(s) to the
Company.
(2) Provided that the Managing Member receives from the
Non-Managing Member Representative adequate documentation and analysis
that Riveroaks has guaranteed or otherwise obligated itself with respect
to a portion of Company Debt prior to the Managing Member obligating
itself with respect to the Continuing Guaranty (a "Pre-Obligation
Guaranty") and such documentation and analysis support a tax return
reporting position (meaning there is a realistic possibility of success)
with respect to the allocation of a portion of Company Debt to Riveroaks
equal to the Pre-Obligation Guaranty, the Company and the Managing
Member agree to provide Riveroaks with an allocation of basis equal to
the Pre-Obligation Guaranty until such time as (x) the Managing Member
is notified or otherwise becomes aware of a change of status of
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Riveroaks as a retiring partner of the Company for income tax purposes,
(y) the Managing Member is notified or otherwise becomes aware of a
change in the amount of Company Debt with respect to which Riveroaks
continues to provide a guarantee or otherwise obligates itself (in which
case appropriate basis adjustments shall be made), or (z) the
documentation and/or analysis referred to in this sentence (and/or the
facts on which such documentation and/or analysis may be based, if any)
is determined to be or otherwise becomes inapplicable, incorrect,
invalid, or untrue such that the Company, in the reasonable discretion
of the tax advisor(s) to the Company.
(3) Provided that the Managing Member receives from the
Non-Managing Member Representative documentation and analysis that
supports, in the sole and absolute discretion of the tax advisor(s) to
the Company, a tax return reporting position (meaning there is a
realistic possibility of success) with respect to the allocation of a
portion of Company Debt to Riveroaks not based on a Pre-Obligation
Guaranty, the Company and the Managing Member agree to provide Riveroaks
with an allocation of basis consistent with such reporting position
until such time as (x) the Managing Member is notified or otherwise
becomes aware of a change of status of Riveroaks as a retiring partner
of the Company for income tax purposes, (y) the Managing Member is
notified or otherwise becomes aware of a change in the documentation
and/or analysis referred to in this sentence (and/or the facts on which
such documentation and/or analysis may be based, if any) is determined
to be or otherwise becomes inapplicable, incorrect, invalid, or untrue
such that the Company, in the sole and absolute discretion of the tax
advisor(s) to the Company.
(4) The Non-Managing Member Representative and the Holders
acknowledge that it is an express condition of the obligations of the
Company and the Managing Member pursuant to clause (2) and (3) above
that (i) Riveroaks guarantee or otherwise obligate itself to the Holders
with respect to a portion of the $30 million (or such lesser amount, if
applicable) of Company Debt made available to the Holders pursuant to
and in accordance with Section 8.4.C and that (ii) the Holders shall
make available at all times during which the reporting position is being
taken the ability for Riveroaks to provide such guarantee or otherwise
obligate itself to the Holders with respect to such Company Debt made
available to the Holders in a manner sufficient to support an allocation
of such Company Debt in an amount no less than the amount of Riveroak's
negative capital account on a basis consistent with that certain Third
Amendment to Costa Mesa Partners Joint Venture Agreement dated as of
November 30, 1992. In addition, the Non-Managing Member Representative,
on behalf of the Holders, agrees to promptly notify the Managing Member
of any information of which it becomes aware and which reasonably would
alter any of the above-described tax return reporting positions.
(5) Each of the Holders, including each of the Original
Members, agrees (x) to hold harmless (a) the Managing Member, (b) the
Company, (c) each tax advisor of the Company, and (d) each tax advisor
of the Managing Member from and against any and all costs or expenses
suffered or incurred in connection with or with respect to each
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of such Persons' obligation to act consistently with the obligation of
the Managing Member and the Company pursuant to this Section 10.2.D,
including, without limitation, the imposition of any penalties, interest
on penalties, fines or costs, and the indemnity provided for in this
sentence shall be enforced by a procedure consistent with that
referenced in Section 10.4 (i.e., as if such amounts were withheld taxes
paid on behalf of or with respect to such Holder). The hold harmless
provision contained in the immediately preceding sentence (and not the
provisions of Section 8.8) shall apply with respect to any obligations
under this Section 10.2.D.
SECTION 10.3. TAX MATTERS PARTNER
A. The Managing Member shall be the "tax matters partner" of the
Company for all Agency (as defined below) purposes. The Managing Member shall
receive no compensation for its services in its capacity as tax matters partner.
All third-party costs and expenses incurred by the Managing Member in performing
its duties as such (including legal and accounting fees and expenses) shall be
deemed to be Capital Contributions made by the Managing Member to the Company.
Except as specifically provided in this Agreement, nothing contained in this
Agreement shall require the Company or the Managing Member to contest audit
positions or results of examinations or other matters with the IRS, the
California Franchise Tax Board, or other applicable taxing authority (each, an
"Agency," and collectively, the "Agencies") beyond a Tax Determination, and the
Company shall not be obligated to pay or reimburse others for costs incurred in
contesting audit positions or results of examinations or other matters with an
Agency beyond a Tax Determination. Nothing herein shall be construed to restrict
the Company from engaging an accounting firm or other tax advisor to assist the
Managing Member in discharging its duties hereunder. The Managing Member shall
provide to the Non-Managing Member Representative copies of all correspondence
received and/or sent by it or the Company relating to any tax matters and/or tax
controversies and give notice of all meetings scheduled with representatives of
any Agency within a commercially reasonable time after receipt, dispatch, or the
scheduling of the same (as the case may be). In addition, the Managing Member
shall provide to the Non-Managing Member Representative with the substance of
any other communication(s) to which the Managing Member was a party relating to
any tax controversies involving the Company within a commercially reasonable
time following such communication(s). The Managing Member shall also provide any
Agency with the information required under Code Section 6223 (or similar
provision under state law) and the regulations thereunder sufficient to require
the Agency to give the notice described in Code Section 6223(a) (or similar
state law) At the reasonable request of any Holder, the Managing Member shall
consult with such Holder with respect to the preparation and filing of any
returns and with respect to any subsequent Agency examination or litigation
relating to such returns; provided, however, that, except as otherwise set forth
in this Agreement, the decisions relating to such filing of such returns,
positions relative to items reflected in any such returns, any audit or
examination by any Agency with respect to any items contained therein, and any
administrative or judicial proceedings relating to any such returns as filed,
shall be in the sole and absolute discretion of the Managing Member.
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B. Subject to Section 10.3.C, the Managing Member is authorized,
but not required:
(1) to enter into any settlement with any Agency with
respect to any administrative or judicial proceedings for the adjustment
of Company items required to be taken into account by a Holder or the
Managing Member for income tax purposes (such administrative proceedings
being referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the settlement agreement the
Managing Member may expressly state that such agreement shall bind all
Holders, except that such settlement agreement shall not bind any Holder
(i) who (within the time prescribed pursuant to the Code and Regulations
(or, if applicable, the California Revenue and Taxation Code and
corresponding regulations)) files a statement with such Agency providing
that the Managing Member shall not have the authority to enter into a
settlement agreement on behalf of such Holder or (ii) who is a "notice
partner" (as defined in Code Section 6231) or a member of a "notice
group" (as defined in Code Section 6223(b)(2));
(2) in the event that a notice of a final administrative
adjustment at the Company level of any item required to be taken into
account by a Holder or the Managing Member for tax purposes (a "final
adjustment") is mailed to the Managing Member, to seek judicial review
of such final adjustment, including the filing of a petition for
readjustment with the United States Tax Court or the United States
Claims Court, or the filing of a complaint for refund with the District
Court of the United States (or, if applicable, with the California
Superior Court) for the district in which the Company's principal place
of business is located. If the Managing Member determines that the
United States District Court or the United States Claims Court (or, if
applicable, such Superior Court) is the most appropriate forum in which
to seek judicial review, the Managing Member shall notify each Person
who was a Holder at any time during the Company's taxable year to which
the final adjustment relates of the approximate amount by which such
Person's tax liability would be increased (based on such assumptions as
the Managing Member may in good faith make) if the treatment of limited
liability company items on such Person's return was made consistent with
the treatment of limited liability company items on the Company's
return, as adjusted by the final adjustment. With respect to Agency
examinations and/or tax controversies involving federal income taxes,
unless each such Person deposits with the Managing Member, for deposit
with the IRS, the approximate amount of such Person's increased tax
liability, together with a written agreement to make additional deposits
if required to satisfy the jurisdictional requirements of the federal
Court in question, within thirty (30) days after the Managing Member's
notice to such Person, the Managing Member shall not seek judicial
review in such federal Court. Instead, the Managing Member may, but
shall not be obligated to, file a petition in the United States Tax
Court;
(3) to intervene in any action brought by any Holder for
judicial review of a final adjustment;
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(4) to file a request for an administrative adjustment
with an Agency at any time and, if any part of such request is not
allowed by such Agency, to file an appropriate pleading (petition or
complaint) for judicial review with respect to such request;
(5) to enter into an agreement with an Agency to extend
the period for assessing any tax that is attributable to any item
required to be taken into account by a Holder or the Managing Member for
tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Holders in
connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the Managing Member
in connection with any such proceeding, except to the extent required by law or
any provision of this Agreement, is a matter in the sole and absolute discretion
of the Managing Member, and the provisions relating to indemnification of the
Managing Member set forth in Section 7.7 hereof shall be fully applicable to the
Managing Member in its capacity as such. Notwithstanding the provisions of this
Section 10.3.B, the Managing Member shall not enter into a settlement,
stipulation, or compromise of any part of a tax audit without first (i) having
notified the Non-Managing Member Representative in writing within thirty (30)
days prior to the prospective date of such settlement, stipulation, or
compromise and (ii) having provided the Non-Managing Member Representative with
the meaningful opportunity to review the final provisions of any such
settlement, stipulation, or compromise and assess whether the Managing Member is
authorized to enter into such settlement, stipulation, or compromise in
accordance with this Article 10 (including Section 10.3.C).
C.
(1) (a) In the event that (i) an Agency alleges or asserts
in a tax audit or judicial review, for any one taxable year of the
Company, an aggregate adjustment of income or deductions of the Company
totaling a net change of income with respect to the Holders of more than
$500,000 in additional income (or reduction of deduction) and has not
withdrawn, revoked, or dismissed such allegation or assertion or (ii)
with respect to a tax audit or judicial review that is the subject of a
Tax Determination, the Managing Member decides not to appeal the Tax
Determination, if any, applicable to such tax audit, and (b) with
respect to a tax audit or judicial review of any items for any taxable
year of the Company ending prior to the Measurement Date, then, subject
to the provisions of Section 10.3.D, the Managing Member shall promptly
notify the Non-Managing Member Representative and offer to delegate such
tax audit or judicial review to the Non-Managing Member Representative
and the Non-Managing Member Representative may, but shall not be
required to, take any and all actions otherwise reserved to the Managing
Member under Sections 10.3.A and 10.3.B, and, subject to the provisions
of Section 10.3.D, the Managing Member (as tax matters partner) shall,
if notified in writing by the Non-Managing Member Representative at any
time thereafter, delegate to the Non-
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Managing Member Representative such powers as may be necessary to
accomplish such actions, including all of the powers set forth in
Sections 10.3.A and 10.3.B and all powers of the tax matters partner
under the Code (or similar state law) (such audit, controversy, and/or
litigation being referred to herein as a "Delegated Controversy" and the
date of such delegation with respect to the Delegated Controversy being
referred to herein as the "Delegation Date"), and the Managing Member,
as tax matters partner, shall take all actions requested by the
Non-Managing Member Representative in accordance with Section 10.3 to
carry out the provisions of this Section 10.3.C.
(2) Notwithstanding any other provision of this Agreement,
(i) the Managing Member shall not be responsible for the amendment of
any tax returns of the Company (or any predecessor of the Company) for
taxable years of the Company (or any such predecessor of the Company)
ending prior to the Measurement Date ("Pre-Measurement Date Returns"),
(ii) the Managing Member shall not amend any Pre-Measurement Date
Returns without the consent of the Non-Managing Member Representative;
and (iii) the Managing Member shall not be held responsible for any
amendment(s) or lack thereof of Pre-Measurement Date Returns; instead,
the Original Members (or, at their election, the Non-Managing Member
Representative) shall retain the sole and exclusive authority and
responsibility to amend any Pre-Measurement Date Returns; provided,
however, that the authority of the Original Members (or the Non-Managing
Member Representative, as the case may be) pursuant to this Section
10.3.C(2) shall be subject to the provisions of Section 10.3.D (as if
(a) each prospective amendment of a Pre-Measurement Date Return were
considered a separate Delegated Controversy (as such term is defined
above) for purposes of Section 10.3.D and (b) the day before the first
day that the Original Members (or the Non-Managing Member
Representative, as the case may be) take any affirmative steps to amend
any such Pre-Measurement Date Return were considered the Delegation Date
with respect to such deemed Delegated Controversy for purposes of
Section 10.3.D).
D. (1) Following a Delegation Date with respect to a Delegated
Controversy: (i) none of the costs, professional fees, or any other
expenses associated with such Delegated Controversy (including, without
limitation, legal, accounting, and other fees) shall be borne by the
Managing Member and/or the Company; (ii) the Managing Member shall not
be required to make capital contributions to the Company to fund the
payment of, or reimburse the Non-Managing Member Representative or any
of the Holders for, any such costs and/or expenses; (iii) neither the
Non-Managing Member Representative nor any of the Holders shall be
entitled to reimbursement from the Company and/or the Managing Member
for any such costs and/or expenses; (iv) none of the Holders (including,
if applicable, the Non-Managing Member Representative) shall be entitled
or permitted to have its Capital Account credited for any of such costs
and/or expenses; and (v) consistent with subclauses (i) through (iv) of
this sentence, the Non-Managing Member Representative shall be
responsible for the compensation and/or reimbursement of Persons
retained and/or engaged by the Non-Managing Member Representative in
connection with the Delegated Controversy in question, including,
without limitation, Persons engaged by the Non-Managing Member
Representative who
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may also (x) have been employed, retained, and/or engaged by the Company
and/or the Managing Member prior to the Delegation Date or Persons or
(y) continue to be employed, retained, and/or engaged by the Company
and/or the Managing Member following the Delegation Date (regardless of
whether or not such Person(s) may have been employed, retained, and/or
engaged by the Company and/or Managing Member with respect to such
Delegated Controversy prior to the Delegation Date with respect to such
Delegated Controversy, but limited to the compensation and/or
reimbursement attributable to the services performed and/or expenses
incurred by such Person or Persons in connection with such Person's or
Persons' retention by the Non-Managing Member Representative following
the Delegation Date).
(2) Notwithstanding the provisions of Section 10.3.C, the
Managing Member shall not delegate to the Non-Managing Member
Representative, and the Non-Managing Member Representative shall not be
entitled to require the Managing Member to delegate to the Non-Managing
Member Representative pursuant to Section 10.3.C, any powers or
authority to deal in any way with any aspect of any audit, controversy,
and/or litigation involving, or potentially involving, in the reasonable
determination of the Managing Member followed by the Managing Member's
notification of the Non-Managing Member Representative of such
determination and the reasons therefor, alleged actions or omissions
that are related to the subject matter of the audit, controversy and/or
litigation that have a realistic possibility of resulting in liability
to the Managing Member under Section 7.3.G.
(3) Notwithstanding the provisions of Section 10.3.C, from
and following a Delegation Date, the Non-Managing Member Representative
shall not, with respect to the Delegated Controversy, take or fail to
take, nor shall the Non-Managing Member Representative have or retain
any authority to take or fail to take any action the result of which
action or failure to take such action (as the case may be) would:
(a) cause the Managing Member to fail to qualify as
a REIT for federal and/or state income tax purposes for any taxable
year;
(b) cause the Managing Member to recognize income
("Non-Qualifying 95% Income") in an amount greater than the excess, if
any, of (i) four and nine-tenths percent (4.9%) of the Managing Member's
total gross income (but excluding the amount of any such Non-Qualifying
95% Income) for any Fiscal Year involved in such Delegated Controversy
that is described in subsections (A) through (H) of Code Section
856(c)(2) over (ii) the amount of gross income (within the meaning of
Code Section 856(c)(2)) derived by the Managing Member from sources
other than those described in subsections (A) through (H) of Code
Section 856(c)(2) (but not including the amount of any such
Non-Qualifying 95% Income) for such Fiscal Year (with respect to clause
(ii) of this sentence, the Managing Member shall notify the Non-Managing
Member Representative of the amount of such gross income, or it shall be
deemed to be zero);
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(c) cause the Managing Member to recognize income
("Non-Qualifying 75% Income") in an amount greater than the excess, if
any, of (i) 24% of the Managing Member's total gross income (but
excluding the amount of any such Non-Qualifying 75% Income) for any
Fiscal Year involved in such Delegated Controversy that is described in
subsections (A) through (I) of Code Section 856(c)(3) over (ii) the
amount of gross income (within the meaning of Code Section 856(c)(3))
derived by the Managing Member from sources other than those described
in subsections (A) through (I) of Code Section 856(c)(3) (but not
including the amount of any such Non-Qualifying 75% Income) for such
Fiscal Year (with respect to clause (ii) of this sentence, the Managing
Member shall notify the Non-Managing Member Representative of the amount
of such gross income, or it shall be deemed to be zero); or
(d) legally bind the Managing Member to a
settlement, stipulation, or compromise of any part of a tax audit or
judicial review that would result in an aggregate adjustment of income
or deductions of the Company and/or Managing Member totaling a net
change of income with respect to the Managing Member of more than
$500,000 in additional income (as compared to the amount of income
allocated to the Managing Member in any one Fiscal Year in accordance
with the provisions of Article 6 as reported in the Company's tax return
for any such Fiscal Year).
(4) Notwithstanding the provisions of Section 10.3.C, from
and following a Delegation Date, the Non-Managing Member Representative
shall not, with respect to the Delegated Controversy, enter into a
settlement, stipulation, or compromise of any part of such Delegated
Controversy without first (i) having notified the Managing Member in
writing within thirty (30) days prior to the prospective date of such
settlement, stipulation, or compromise and (ii) having provided the
Managing Member with the meaningful opportunity to review the final
provisions of any such settlement, stipulation, or compromise and assess
whether the Non-Managing Member Representative is authorized to enter
into such settlement, stipulation, or compromise in accordance with this
Article 10 (including Section 10.3.D).
(5) The Non-Managing Member Representative shall provide
to the Managing Member copies of all correspondence received and/or sent
by it relating to the Delegated Controversy, within a commercially
reasonable time after receipt or dispatch of the same (as the case may
be). In addition, the Non-Managing Member Representative shall provide
to the Managing Member the substance of any other communication(s) with
the relevant tax authorities to which the Non-Managing Member
Representative is a party relating to the Delegated Controversy within a
commercially reasonable time following such communication(s).
(6) Notwithstanding anything to the contrary, at all times
from and after a Delegation Date with respect to a Delegated
Controversy, the Managing Member shall possess all of the rights of a
"notice partner" (as defined in Code Section 6231) with respect to such
Delegated Controversy.
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E. Within a reasonable period of time prior to the due date for
filing the Company's 1997 tax year return, the Managing Member shall make
available for the Non-Managing Member Representative's review and reasonable
approval a copy of the 1997 tax return of the Company proposed to be filed by
the Managing Member. The Non-Managing Member Representative shall use its best
efforts to provide the Managing Member with information relating to operating
results of the Company for the period in 1997 prior to the Measurement Date no
later than 30 days following the execution of this Agreement (e.g., income
statements, repairs and maintenance detail, balance sheet, and additions or
deletions with respect to fixed assets).
SECTION 10.4. WITHHOLDING
Each Member hereby authorizes the Company to withhold from or pay
on behalf of or with respect to such Member any amount of federal, state, local
or foreign taxes that the Managing Member determines in good faith that the
Company is required to withhold or pay with respect to any amount distributable
or allocable to such Member pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the Company pursuant to
Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446,
and all such amounts shall be paid over to the applicable tax authority with
respect to the Member in question and the Managing Member shall concurrently
provide notice of the computation and source of and proof of such payment to the
Member in question. Any such amount paid on behalf of or with respect to a
Member shall constitute a loan by the Company to such Member, which loan shall
be repaid by such Member within 15 days after notice from the Managing Member
that such payment must be made unless (i) the Company withholds such payment
from a payment or distribution that would otherwise be made to the Member (in
which case the payment or distribution shall be deemed to have been made to the
extent of the amount so withheld) or (ii) the Managing Member determines, in its
sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Company that would, but for such payment, be distributed
to the Member. Any such loan repayable by a Member hereunder shall bear interest
at the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four (4) percentage points (but not higher than the maximum lawful rate)
from the date such amount is due (i.e., 15 days after said notice) until such
amount is paid in full.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
SECTION 11.1. TRANSFER
A. No part of the interest of a Member shall be subject to the
claims of any creditor, to any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported
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Transfer of a Membership Interest not made in accordance with this Article 11
shall be null and void ab initio.
SECTION 11.2. TRANSFER OF MANAGING MEMBER'S MEMBERSHIP INTEREST
The Managing Member shall not Transfer any of its Membership
Interest or withdraw from the Company except as provided in this Section 11.2.
The Managing Member shall not withdraw from the Company and shall not Transfer
all or any portion of its Membership Interest in the Company without the Consent
of each of the Non-Managing Members, which Consent may be given or withheld in
the sole and absolute discretion of each of the Non-Managing Members; provided,
however, that the Managing Member may Transfer all but not part of its
Membership Interest without obtaining such Consent if the Membership Interest is
Transferred to a purchaser of or successor to all or substantially all of the
assets of the Managing Member or in connection with the merger of the Managing
Member into or the consolidation of the Managing Member with any other Person,
so long as such Transfer will not cause the Company to be treated as an
association taxable as a corporation or a publicly traded partnership for state
or federal income tax purposes or otherwise cause the Company to become a
reporting company under the Exchange Act ("Merger Transfer"). Notwithstanding
Section 5.1.C(2), if a Merger Transfer causes a Termination Event described in
Section 5.1.C(3) then Section 5.1.C(1)(i) shall not terminate as a result
thereof. Upon any Transfer of such a Membership Interest pursuant to the Consent
of each of the Non-Managing Members or otherwise in accordance with the
provisions of this Section 11.2, the transferee shall become the successor
Managing Member for all purposes herein, and shall be vested with all powers and
rights of the transferor Managing Member, and shall be liable for all
obligations and responsible for all duties of the Managing Member, once such
transferee has executed such instruments as may be necessary to effectuate such
admission and to confirm the agreement of such transferee to be bound by all the
terms and provisions of this Agreement with respect to the Membership Interest
so acquired. It is a condition to any Transfer otherwise permitted under this
Section 11.2 that the transferee assumes, by operation of law or express
agreement, all of the obligations of the transferor Managing Member under this
Agreement and such Transfer shall relieve the transferor Managing Member of its
obligations under this Agreement accruing subsequent to the date of such
Transfer. In the event that the Managing Member withdraws from the Company, in
violation of this Agreement or otherwise, or otherwise dissolves or terminates,
or upon the Incapacity of the Managing Member, a "Majority of Remaining Members"
may elect to continue the Company business by selecting a successor Managing
Member in accordance with the Act.
SECTION 11.3. HOLDER'S RIGHTS TO TRANSFER
A. GENERAL. No Holder shall Transfer an LLC Unit to any
transferee without the consent of the Managing Member, which consent may be
withheld in its reasonable discretion; provided, however, that, any Holder may
at any time, without the consent of the Managing Member, (i) after December 24,
1998, Transfer, subject to Section 11.3.C, an LLC Unit (A) to any Qualified
Transferee, (B) to a trust, whether or not revocable, of which such Holder or
such Holder's Family Members are beneficiaries or (C) to an Affiliate or to any
direct or indirect owner of an Original Member or (ii) pledge, encumber,
hypothecate, mortgage, grant
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a security interest in or assign and, if desired, enter into puts, calls,
derivatives, hedges or similar arrangements in connection therewith with terms
which maintain the Holder's ownership of the LLC Units past December 24, 1998
(collectively, "Pledge"), one or more LLC Units to a lender, as collateral or
security for a bona fide loan or other extension or continuance of credit (and
Managing Member shall have the option, but not the obligation, to cure any
default under the obligation secured by Pledge and the Holders shall cooperate
to provide adequate security and reimbursement arrangements to Managing Member
in the event of such a cure), and further Transfer, subject to Section 11.3.C,
such Pledged LLC Unit(s) to such lender in connection with (or in lieu of) the
exercise of remedies under such loan or extension or continuance of credit (any
Transfer or Pledge permitted by this proviso is referred to as a "Permitted
Transfer"). It is a condition to any Transfer otherwise permitted hereunder that
the transferee (other than by Pledge) assume by operation of law or express
agreement all of the obligations of the Holder under this Agreement or the
Exchange Rights Agreement with respect to such Transferred LLC Unit(s).
Notwithstanding the foregoing, any transferee other than by Pledge of any
Transferred LLC Unit(s) shall be subject to any and all ownership limitations
(including, without limitation, the Ownership Limit) contained in the Charter.
Any transferee (other than by Pledge) whether or not admitted as a Substituted
Member, shall take subject to the obligations of the transferor hereunder.
Unless admitted as a Substituted Member, no transferee, whether by a voluntary
Transfer, by operation of law or otherwise, shall have any rights hereunder,
other than the rights of an Assignee as provided in Section 11.5 hereof. The
Managing Member shall reasonably cooperate (to the extent it is able to do so)
with a Holder to satisfy any lender's requests for information, estoppels,
consents and other matters (excluding material information with respect to the
Managing Member that is not publicly available) in connection with a loan
secured by a Pledge of LLC Units.
B. INCAPACITY. If a Holder is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Holder's estate shall have all the rights of a Holder, but not more
rights than those enjoyed by other Holders, including for the purpose of
settling or managing the estate, and such power as the Incapacitated Holder
possessed to Transfer all or any part of its interest in the Company. The
Incapacity of a Holder, in and of itself, shall not dissolve or terminate the
Company.
C. TRANSFEREE REPRESENTATION. It is a condition to any Transfer
other than by Pledge of an LLC Unit that the Managing Member receive written
notice of the name and address of the transferee at least ten (10) Business Days
prior to the proposed Transfer and written evidence that each transferee (other
than by Pledge) represents, warrants and agrees that it is acquiring the LLC
Units for its own account for investment only and not for the purpose of, or
with a view toward, the resale or distribution of all or any part thereof in
violation of federal or state securities laws.
D. ADVERSE TAX CONSEQUENCES. No Transfer by a Holder of LLC Units
(excluding any Exchange and any Permitted Transfer) may be made to any Person if
(i) in the written opinion of legal counsel for the Company competent in federal
and California taxation (to be requested by the Managing Member from such legal
counsel within ten (10) Business Days of any notice to the Managing Member of
the proposed Transfer for prompt delivery thereafter), it
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would result in the Company being treated as an association taxable as a
corporation for state or federal income tax purposes, (ii) such Transfer is
effectuated through an "established securities market" or a "secondary market
(or the substantial equivalent thereof)" within the meaning of Code Section 7704
or (iii) such Transfer (other than a Transfer which constitutes an Exchange)
would result in the termination of the Company for federal income tax purposes.
SECTION 11.4. SUBSTITUTED MEMBERS
A. No Holder shall have the right to substitute a transferee
(including any transferees pursuant to Transfers permitted by Section 11.3
hereof) as a Member in its place. A transferee of the interest of a Holder may
be admitted as a Substituted Member only with the consent of the Managing
Member, which consent may be given or withheld by the Managing Member in its
sole and absolute discretion (or in the reasonable discretion of the Managing
Member if the Company receives a written opinion from counsel for the Company
competent in Federal and California taxation (which the Managing Member will
request for prompt delivery from counsel, if counsel can render such opinion,
whenever asked to do so by the proposed Transferor) that conditioning the
admittance of a transferee as a Substituted Member upon the sole and absolute
discretion of the Managing Member is no longer necessary under the Code or
applicable state tax laws or regulations). The failure or refusal by the
Managing Member to permit a transferee of any such interests to become a
Substituted Member shall not give rise to any cause of action against the
Company or the Managing Member, except where such failure or refusal breaches
the provisions hereinabove contained. Subject to the foregoing, an Assignee
shall not be admitted as a Substituted Member until and unless it furnishes to
the Managing Member (i) evidence of acceptance, in form and substance
satisfactory to the Managing Member, of all the terms, conditions and applicable
obligations of this Agreement, and (ii) such other documents and instruments as
may be required or advisable, in the sole and absolute discretion (or reasonable
discretion if the reasonable discretion standard above applies) of the Managing
Member, to effect such Assignee's admission as a Substituted Member.
B. A transferee who has been admitted as a Substituted Member in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Member under this Agreement
and the transferor shall be relieved of all of its obligations hereunder
accruing subsequent to such admission with respect to the LLC Units Transferred
unless otherwise provided for in Section 8.4.C.
C. Upon the admission of a Substituted Member, the Managing
Member shall amend Exhibit A to reflect the name and address of such Substituted
Member and to eliminate, if necessary, the name and address of the predecessor
of such Substituted Member.
SECTION 11.5. ASSIGNEES
If the Managing Member does not consent under Section 11.4 hereof
to the admission of any transferee in a Permitted Transfer or in a Transfer
consented to by the Managing Member under Section 11.3 hereof as a Substituted
Member, such transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee (other than by Pledge) shall be entitled to all the
rights of an assignee of a limited liability company interest under the
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Act, including, without limitation, the right to receive distributions,
guaranteed payments, indemnity payments and other payments from the Company and
the share of Net Income, Net Losses and other items of income, gain, loss,
deduction and credit of the Company attributable to the LLC Units assigned to
such transferee and the rights to Transfer the LLC Units provided in this
Article 11, but shall not be deemed to be a holder of LLC Units for any other
purpose under this Agreement (other than as provided in Section 8.5, Section 8.6
or in the Exchange Rights Agreement), and shall not be entitled to effect a
Consent or vote with respect to such LLC Units on any matter presented to the
Members for approval (such right to Consent or vote, to the extent provided in
this Agreement or under the Act, fully remaining with the transferor Member). In
the event that any such transferee desires to make a further assignment of any
such LLC Units, such transferee shall be subject to all the provisions of this
Article 11 to the same extent and in the same manner as any Members desiring to
make an assignment of LLC Units.
SECTION 11.6. GENERAL PROVISIONS
A. No Non-Managing Member may withdraw from the Company other
than as a result of a permitted Transfer of all of such Non-Managing Member's
LLC Units in accordance with this Article 11, with respect to which the
transferee becomes a Substituted Member, or pursuant to an Exchange of all of
its LLC Units under Section 8.5, Section 8.6 or the Exchange Rights Agreement.
B. Any Member who shall Transfer all of its remaining LLC Units
in a Transfer (i) permitted pursuant to this Article 11 where such transferee
was admitted as a Substituted Member, (ii) pursuant to the exercise of its
rights to effect an Exchange of all of its LLC Units under the Exchange Rights
Agreement or (iii) to the Managing Member, whether or not pursuant to the
Exchange Rights Agreement, shall cease to be a Member. Any LLC Units transferred
to the Managing Member, whether under the Exchange Rights Agreement or
otherwise, shall be deemed canceled and no longer outstanding.
C. If any LLC Unit is Transferred in compliance with the
provisions of this Article 11, or is acquired by the Managing Member pursuant to
Sections 8.5 or 8.6 hereof or the Exchange Rights Agreement, on any day other
than the first day of a Fiscal Year, then Net Income from Operations, Net Loss
from Operations, each item thereof and all other items of income, gain, loss,
deduction and credit attributable to such LLC Unit for such Fiscal Year shall be
allocated to the transferor Holder or Managing Member or the tendering party, as
the case may be, and to the transferee Holder or Managing Member (including,
without limitation, the Managing Member in the case of an Exchange pursuant to
the Exchange Rights Agreement or Section 8.5 or Section 8.6 hereof) by taking
into account their varying interests during the Fiscal Year in accordance with
Code Section 706(d), using the "daily proration" or "interim closing of the
books" method or another permissible method selected by the Managing Member.
Solely for purposes of making such allocations, the Managing Member, in its sole
and absolute discretion, may determine that each of such items for the calendar
month in which a Transfer occurs shall be allocated to the transferee Holder or
Managing Member and none of such items for the calendar month in which a
Transfer or an Exchange occurs shall be allocated to the transferor Holder or
Managing Member or the tendering party, as the case may be, if such Transfer
occurs on or
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before the 15th day of the month; otherwise such items for such calendar month
shall be allocated to the transferor. All distributions of Available Cash from
Operations or Available Cash from Sale attributable to such LLC Unit with
respect to which the LLC Record Date is before the date of such Transfer,
assignment or Exchange shall be made to the transferor Holder or the tendering
party, as the case may be, and, in the case of a Transfer other than an
Exchange, all distributions of Available Cash from Operations or Available Cash
from Sale thereafter attributable to such LLC Unit shall be made to the
transferee Holder.
D. In addition to any other restrictions on Transfer herein
contained, in no event may any Transfer of a Membership Interest by any Member
be made:
(a) to any person or entity who lacks the legal right,
power or capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the written opinion of
legal counsel to the Company competent in Federal and California
taxation, cause the Company either (i) to cease to be classified as a
partnership or (ii) to be classified as a publicly traded partnership
treated as a corporation, in either case for federal or state income tax
purposes (except as a result of any Exchange);
(d) if such Transfer would, in the written opinion of
legal counsel to the Company competent in employee benefit plans, cause
any portion of the assets of the Company to constitute assets of any
employee benefit plan pursuant to Department of Labor Regulations
Section 2510.3-101, which the Managing Member will request for prompt
delivery from such counsel upon request by the Non-Managing Member
Representative;
(e) if such Transfer requires the registration of such
Membership Interest pursuant to any applicable federal or state
securities laws;
(f) if such Transfer causes the Company (as opposed to the
Managing Member) to become a reporting company under the Exchange Act;
(g) if such Transfer subjects the Company to regulation
under the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA, each as amended; or
(h) if such Transfer would, in the written opinion of
legal counsel with nationally recognized standing in matters pertaining
to the exclusion of interest from gross income for federal income tax
purposes on bonds issued by states and political subdivisions, adversely
affect the tax-exempt status of interest payable on the Bonds.
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To the extent any attempted Transfer would be in violation of
this Section 11.6.D, it shall be null and void ab initio, and the transferee
shall not acquire any rights or economic interests in the LLC Units or other
interests that otherwise would have been Transferred.
ARTICLE 12.
ADMISSION OF MEMBERS
SECTION 12.1. ADMISSION OF SUCCESSOR MANAGING MEMBER
A successor to all of the Managing Member's Membership Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
Managing Member shall be admitted to the Company as the Managing Member,
effective immediately prior to such Transfer. Any such successor shall carry on
the business of the Company without dissolution. In each case, the admission
shall be subject to the successor Managing Member executing and delivering to
the Company an acceptance of all of the terms, conditions and applicable
obligations of this Agreement and such other documents or instruments as may be
required to effect the admission.
SECTION 12.2. ADMISSION OF ADDITIONAL MEMBERS
A. No additional Members shall be admitted to the Company (except
any Substituted Members pursuant to Section 11.4 or a successor Managing Member
pursuant to Sections 11.2 and 12.1).
SECTION 12.3. AMENDMENT OF AGREEMENT AND CERTIFICATE
For the admission to the Company of any Member in accordance with
this Agreement, the Managing Member shall take all steps necessary or
appropriate under the Act to amend the records of the Company and, if necessary,
to prepare as soon as practical an amendment of this Agreement (including an
amendment of Exhibit A) solely for purposes of reflecting the admission to the
Company of that Member and, if required by law, shall prepare and file an
amendment to the Certificate and may for these purposes exercise the power of
attorney granted pursuant to Section 2.4 hereof.
SECTION 12.4. LIMITATION ON ADMISSION OF MEMBERS
No Person shall be admitted to the Company as a Substituted
Member if, in the opinion of legal counsel for the Company competent in federal
and California taxation and securities laws, it would result in the Company
being treated as an association taxable as a corporation or publicly traded
partnership for state or federal income tax purposes or otherwise cause the
Company to become a reporting company under the Exchange Act.
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ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 13.1. DISSOLUTION
The Company shall not be dissolved by any Transfer of a
Membership Interest or by the admission of Substituted Members or by the
admission of a successor Managing Member in accordance with the terms of this
Agreement. Upon the withdrawal of the Managing Member, any successor Managing
Member shall continue the business of the Company without dissolution. However,
the Company shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following (each a "Liquidating Event"):
A. the Incapacity of the Managing Member, unless a Majority of
Remaining Members votes to continue the Company within ninety (90) days
following the occurrence of any such Incapacity;
B. an election to dissolve the Company made by the Managing
Member, with the Consent of each of the Non-Managing Members;
C. entry of a decree of judicial dissolution of the Company
pursuant to the provisions of the Act;
D. the Exchange of all LLC Units; or
E. the expiration of its term as provided in Section 2.7.
Section 13.1.A shall be of no further force or effect on the date
that the Company receives an opinion from counsel for the Company competent in
California and Federal income tax matters (which the Managing Member shall
request for prompt delivery from counsel, if counsel can render such opinion,
whenever reasonably asked to do so by a Non-Managing Member) that such provision
is no longer necessary for federal or state tax laws or regulations in order for
the Company to be taxed as a partnership.
SECTION 13.2. WINDING UP
A. Upon the occurrence of a Liquidating Event, the Managing
Member shall give notice thereof to the Holders (a "Liquidating Notice") and the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets and satisfying the claims of its
creditors, Members and Holders. Notwithstanding the foregoing sentence,
throughout the wind-up period, the Managing Member shall continue to (i) make
all distributions required pursuant to Section 5.1.A(1) on the applicable LLC
Distribution Date, (ii) make all payments required pursuant to Section 5.1.C on
the Guaranty Payment Date, and (iii) take all actions, if any, required to be
taken by the Managing Member pursuant to Section 5.1.B. Notwithstanding anything
to the contrary in this Article 13 or the other provisions hereof, during the
30-day period after the Liquidating Notice is given, no further action in
connection with liquidation or winding up of the Company shall occur, and, if at
any time prior to the end of that
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30-day waiting period, any Holder gives notice to the Managing Member that it is
exercising its right to make an Exchange pursuant to the Exchange Agreement,
then the provisions of this Article 13 will not be applied to such Holder to the
extent of the LLC Units involved in such Exchange, but instead such Holder shall
receive all of the consideration for and in such Exchange at the time and manner
provided in the Exchange Rights Agreement prior to the Company making of any
distributions to the Holders or Members under this Article 13 (or any
redemptions or purchases of LLC Units under Section 13.2.B(2)). Subject to the
preceding sentence, after the occurrence of a Liquidating Event, no Member shall
take any action that is inconsistent with, or not necessary to or appropriate
for, the winding up of the Company's business and affairs. If, after the 30-day
period above has run, if any of the Holders has not elected to Exchange LLC
Units, then the Managing Member (or, in the event that there is no remaining
Managing Member or the Managing Member has dissolved, become bankrupt within the
meaning of the Act or ceased to operate, any Person elected by a Majority in
Interest of those remaining Non-Managing Members who have not elected to
exercise their Exchange rights (the Managing Member or such other Person being
referred to herein as the "Liquidator")) shall be responsible for overseeing the
winding up and dissolution of the Company and shall take full account of the
Company's liabilities and property, and subject to the foregoing 30-day waiting
period and the rights of those Holders who have elected to Exchange LLC Units,
the Company property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom as well as all Cash
Available from Operations and Cash Available from Sale shall be applied and
distributed in the following order:
(1) First, to the satisfaction of all obligations of the
Company and to the expenses of liquidation (whether by payment or the
making of reasonable provision for payment thereof), and to the setting
up of any reserve for contingencies which the Managing Member may
consider necessary; and
(2) Second, to the extent any proceeds remain, to the
Managing Member and Holders up to and in proportion to their positive
Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
B. Notwithstanding the provisions of Section 13.2.A hereof that
require liquidation of the assets of the Company, if the occurrence of a
Liquidating Event is not preceded by or concurrent with a taxable VM Property
Sale (other than a refinancing) or a Terminating Capital Transaction, the
following shall occur (subject, however, to the foregoing 30-day waiting period
and the rights of those Holders who have elected to Exchange LLC Units):
(1) Unless the Managing Member makes the election in
Section 13.2.B(3) (which shall control, if made, instead of this Section
13.2.B(1) and Section 13.2.B(2)) the Managing Member shall compute the
Capital Account balances of the Holders (with respect to each such
Holder, the "Hypothetical Capital Account Balance") that would have
resulted had a single Terminating Capital Transaction been consummated
(had gain (or loss, as the case may be) from such transaction been
allocated to the Holders and the Managing Member pursuant to Sections
6.2 and 6.3 hereof) immediately prior to the liquidation of the Company
for consideration equal to the fair
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market value of the property of the Company at such time, determined by
agreement among the Managing Member and the Holders, or, if no such
agreement exists within ten (10) Business Days following the end of the
foregoing 30-day waiting period, determined by Appraisal (and all time
periods in this Section 13.2 shall be extended if necessary to complete
the Appraisal process) with respect to any property of the Company for
which no such agreement has been reached by such time;
(2) At the election of the Managing Member, the Managing
Member may (subject to the Holders' rights to Exchange pursuant to
Section 13.2.A), within thirty (30) Business Days following the end of
the foregoing 30-day waiting period, either (i) purchase from each
Holder the LLC Units then held by it, for an amount of cash equal to the
Hypothetical Capital Account Balance for such Holder, and each such
Holder shall be obligated to sell (and by execution of this Agreement or
by agreement to be bound by the terms of this Agreement, hereby agrees
to sell) to the Managing Member the LLC Units then held by it for such
consideration or (ii) cause the Company to distribute to each Holder an
amount of cash equal to the consideration referenced in clause (i) of
this subsection (2) in complete redemption of such Holder's LLC Units
then held by it; and
(3) After the 30-day period mentioned in Section 13.2.A,
if the Managing Member does not elect to engage, or cause the Company to
engage, in either of the transactions described in subsection (2) above,
the Managing Member shall sell or cause the Company to sell all of the
assets of the Company as soon as practicable after the expiration of the
thirty (30) day period referenced in subsection (2) above and to
distribute the proceeds from such sale, if any, in accordance with the
terms of this Agreement.
C. In the event that the Company is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the Members and Holders that have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
to the extent of, and in proportion to, their positive Capital Account balances.
Except as provided in Section 4.4 with respect to a Holder's Deficit Restoration
Obligation, if any Member or Holder has a deficit balance in its Capital Account
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Member or Holder shall have no obligation to make any contribution to the
capital of the Company with respect to such deficit, and such deficit shall not
be considered a debt owed to the Company or to any other Person for any purpose
whatsoever. In the sole and absolute discretion of the Managing Member or the
Liquidator, a pro rata portion of the distributions that would otherwise be made
to the Members and Holders pursuant to this Article 13 may be withheld or
escrowed to provide a reasonable reserve for Company liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Company, provided that such withheld or escrowed amounts shall be
distributed to the Members and Holders in the manner and order of priority set
forth in Section 13.2.A hereof as soon as practicable.
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SECTION 13.3. DEEMED DISTRIBUTION AND RECONSTITUTION
Notwithstanding any other provision of this Article 13, in the
event the Company is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Company's
property shall not be liquidated, the Company's liabilities shall not be paid or
discharged, and the Company's affairs shall not be wound up. In such event, the
Company, Managing Member and Holders shall treat such liquidation in a manner
that is consistent with the Code.
SECTION 13.4. RIGHTS OF MEMBERS
Except as otherwise provided in this Agreement, (a) each Member
shall look solely to the assets of the Company for the return of its Capital
Contribution, (b) no Member shall have the right or power to demand or receive
property other than cash from the Company and (c) no Member shall have priority
over any other Member as to the return of its Capital Contributions,
distributions or allocations.
SECTION 13.5. NOTICE OF DISSOLUTION
In the event that a Liquidating Event occurs or an event occurs
that would, but for an election or objection by one or more Members pursuant to
Section 13.1 hereof, result in a dissolution of the Company, the Managing Member
shall, within 30 days thereafter, provide written notice thereof to each of the
Members and Assignees and, in the Managing Member's sole and absolute discretion
or as required by the Act or other applicable law, to all other parties with
whom the Company regularly conducts business (as determined in the sole and
absolute discretion of the Managing Member), and the Managing Member may, or, if
required by the Act, shall, publish notice thereof in a newspaper of general
circulation in each place in which the Company regularly conduct business (as
determined in the sole and absolute discretion of the Managing Member).
SECTION 13.6. REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly winding-up of
the business and affairs of the Company and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Members during the period of liquidation.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
SECTION 14.1. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS
The actions requiring consent or approval of Non-Managing Members
(or Holders, if applicable) pursuant to this Agreement, including Section 7.3
hereof, or otherwise
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pursuant to applicable law, and all amendments to this Agreement, are subject to
the procedures set forth in this Article 14.
SECTION 14.2. AMENDMENTS
Amendments to this Agreement must be in writing and signed by all
Members and may be proposed by the Managing Member or by a Majority in Interest
of the Non-Managing Members. Following such proposal, the Managing Member shall
submit any proposed amendment to the Members. The Managing Member shall seek the
written Consent of the Members on the proposed amendment. The affirmative
Consent, as applicable, of the Managing Member and of one hundred percent (100%)
of the Non-Managing Members is required for the approval of a proposed
amendment, which vote or Consent may be given or withheld in their respective
sole and absolute discretion.
SECTION 14.3. WRITTEN CONSENT
Subject to the provisions of Section 14.2 and except as otherwise
provided in this Agreement, all actions requiring consent or approval of the
Non-Managing Members shall be by Consent of the Non-Managing Members. Any
actions requiring consent or approval of a Holder or Assignee shall be by
Consent of same which, except as otherwise provided in this Agreement, may be
given or withheld in its, his or her sole and absolute discretion.
ARTICLE 15.
GENERAL PROVISIONS
SECTION 15.1. ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be
given or made to a Member or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent and
received by first class United States mail or by other means of written
communication (including by telecopy, facsimile, or commercial courier service)
(i) in the case of a Member, to and at the Member's name(s) and address set
forth in Exhibit A or such other address of which the Member shall notify the
Managing Member in writing and (ii) in the case of an Assignee, to and at the
Assignee's name and address of which such Assignee shall notify the Managing
Member in writing.
SECTION 15.2. TITLES AND CAPTIONS
All article or section titles or captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
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SECTION 15.3. PRONOUNS AND PLURALS
Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
SECTION 15.4. FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement, subject to the other
terms hereof.
SECTION 15.5. BINDING EFFECT; INTENDED THIRD PARTY BENEFICIARIES;
DIRECT ENFORCEMENT RIGHTS
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns. Each creditor of the Company at the time
of the entry of the order or decree (or thereafter during the pendency thereof)
described in Section 7.1.C(10) is an intended third party beneficiary of the
agreement of the Managing Member set forth in Section 7.1.C(10) and shall be
entitled to enforce the agreement of the Managing Member set forth in Section
7.1.C(10) as if the creditor were a party to this Agreement. The Persons
specified as third party beneficiaries in Section 7.3.G shall receive similar
treatment. Neither Riveroaks, Zand, RIVCO, ZANDCO, the Zand Family Trust,
Riveroaks Investments - I, Riveroaks Investments - III, nor Riveroaks Associates
(as described in the Settlement Agreement referred to in Section 8.8), nor any
direct or indirect owners of any of them, are third party beneficiaries of this
Agreement, and none of such parties shall have any rights under nor be entitled
to enforce any provisions of this Agreement.
SECTION 15.6. WAIVER
No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
SECTION 15.7. COUNTERPARTS
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Faxed signatures are acceptable.
SECTION 15.8. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law. In the
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event of a conflict between any provision of this Agreement and any
non-mandatory provision of the Act, the provisions of this Agreement shall
control and take precedence.
SECTION 15.9. ENTIRE AGREEMENT
This Agreement and the Contribution Agreement and the Exchange
Rights Agreement collectively contain all of the understandings and agreements
between and among the Members with respect to the subject matter of therein and
supersede all other letters of intent or other agreements regarding the same and
the rights, interests and obligations of the Members with respect to the
Company. In the event of a conflict between these agreements, the Exchange
Rights Agreement shall control.
SECTION 15.10. INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
SECTION 15.11. LIMITATION TO PRESERVE REIT STATUS
Notwithstanding anything else in this Agreement, to the extent
that the amount paid, credited, distributed or reimbursed by the Company or any
of the Holders to, for or with respect to any REIT Member or its officers,
directors, employees or agents, whether as a reimbursement, fee, expense or
indemnity (a "REIT Payment"), would constitute gross income to the REIT Member
for purposes of Code Section 856(c)(2) or Code Section 856(c)(3), then,
notwithstanding any other provision of this Agreement, the amount of such REIT
Payments, as selected by the Managing Member in its discretion from among items
of potential distribution, reimbursement, fees, expenses and indemnities, shall
be reduced for any Fiscal Year so that the REIT Payments, as so reduced, to, for
or with respect to such REIT Member shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i) four and
nine-tenths percent (4.9%) of the REIT Member's total gross income (but
excluding the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code Section
856(c)(2)) derived by the REIT Member from sources other than those
described in subsections (A) through (H) of Code Section 856(c)(2) (but
not including the amount of any REIT Payments); or
(b) an amount equal to the excess, if any, of (i) 24% of
the REIT Member's total gross income (but excluding the amount of any
REIT Payments) for the Fiscal Year that is described in subsections (A)
through (I) of Code Section 856(c)(3) over (ii) the amount of gross
income (within the meaning of Code Section 856(c)(3)) derived by the
REIT Member from sources other than those described in subsections (A)
through (I) of Code Section 856(c)(3) (but not including the amount of
any REIT Payments);
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provided, however, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the Managing Member, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Member's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.11, such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. Nothing in this Section 15.11 shall permit the Managing Member to
allocate income of the Company to any Holder in excess of the income that would
otherwise be allocated to it under Article 6 without regard to this Section
15.11. The purpose of the limitations contained in this Section 15.11 is to
prevent any REIT Member from failing to qualify as a REIT under the Code by
reason of such REIT Member's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Company or the Holders, and this Section 15.11 shall be interpreted and
applied to effectuate such purpose.
SECTION 15.12. NO PARTITION
No Member nor any successor-in-interest to a Member shall have
the right while this Agreement remains in effect to have any property of the
Company partitioned, or to file a complaint or to institute any proceeding at
law or in equity to have such property of the Company partitioned, and each
Member, on behalf of itself and its successors and assigns hereby waives any
such right. It is the intention of the Members that the rights of the parties
hereto and their successors-in-interest to Company property, as among
themselves, shall be governed by the terms of this Agreement, and that the
rights of the Members and their successors-in-interest shall be subject to the
limitations and restrictions as set forth in this Agreement.
SECTION 15.13. NON-MANAGING MEMBER REPRESENTATIVE
A. All actions taken by the Non-Managing Member Representative
pursuant to those provisions of this Agreement which authorize the Non-Managing
Member Representative to so act shall be binding upon all Non-Managing Members
as if they had individually taken such action and each Non-Managing Member, by
entering into or agreeing to be bound by the provisions of this Agreement,
authorize the Non-Managing Member Representative to take such actions on his,
her or its behalf and agree that the actions so taken shall be binding upon him,
her or it to the same extent as if he, she or it had taken the action directly.
B. The initial Non-Managing Member Representative shall be
Israel. The Holders of a majority of the outstanding LLC Units held by the
Holders shall be entitled to replace the Non-Managing Member Representative by
delivering to the Managing Member a written notice signed by the Holders of a
majority of the outstanding LLC Units (which notice may be executed in
counterparts) stating (i) that the notice is being provided to the Managing
Member pursuant to this Section 15.13.B, (ii) that the Holders signing the
notice own of record on the books of the Company a majority of the outstanding
LLC Units, (iii) that the Holders signing the notice desire to replace the
person then serving as the Non-Managing Member Representative with the person
named in the notice, and (iv) specifying the date on which the
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appointment of the named individual to replace the then serving Non-Managing
Member Representative shall be effective (which shall be a date not earlier than
the fourteenth day after the date on which the notice shall have been delivered
to the Managing Member). The appointment of the new Non-Managing Member
Representative specified in the notice shall be effective on the date specified
in the notice and upon effectiveness, the individual previously serving as the
Non-Managing Member Representative shall cease to be entitled to act in that
capacity under this Agreement.
SECTION 15.14. ATTORNEY FEES
If any Member or Holder or Assignee or the Company commences an
action against any other Member, Holder or Assignee or the Company to enforce
any of the terms of this Agreement or because of the breach by any Member or
Holder or Assignee or the Company of, or a dispute concerning, the terms of this
Agreement, the non-prevailing party or parties shall pay to the prevailing party
or parties reasonable attorneys' fees, costs and expenses (including, without
limitation, accounting fees, consulting fees, investigation costs, and any other
costs of response, negotiation and/or defense) incurred in connection with the
enforcement hereof, the investigation of such breach or dispute and the
prosecution or defense, as the case may be, of such action.
[intentionally left blankl]
[signatures appear on the next page]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
MANAGING MEMBER:
OASIS RESIDENTIAL, INC.,
a Nevada corporation
By:
--------------------------------------
President
NON-MANAGING MEMBERS:
ISCO, a California general partnership
By: AMERICAN REALPROP, a California
general partnership, its
General Partner
By:
----------------------------------
Robert Cohen, General Partner
IFT PROPERTIES, LTD., a California
limited partnership
By:
--------------------------------------
Edward Israel, General Partner
<PAGE> 80
EXHIBIT A
MEMBER INFORMATION
MANAGING MEMBER:
- ----------------
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
Oasis 4041 East Sunset Road
Residential, Inc. Henderson, Nevada 89014
Attention: President
With copies to:
Latham & Watkins
650 Town Center Drive 20th Floor
Costa Mesa, CA 92626
Attention: Mr. Jeffrey Pero
Capital contribution: One Million Dollars ($1,000,000.00)
- --------------------
</TABLE>
A-1
<PAGE> 81
ORIGINAL MEMBERS:
- -----------------
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
IFT 10474 Santa Monica Blvd., #405
Los Angeles, California 90025
Attention: Edward Israel
With copies to:
Akin, Gump, Strauss, Hauer & Feld, LLP
2029 Century Park East, Suite 4150
Los Angeles, California 90067
Attention: Hushmand Sohaili, Esq.
</TABLE>
Capital contribution: Villa Martinique
- --------------------
Gross asset values of Villa Martinique: $72,000,000.00
- --------------------------------------
Gross asset value of Villa Martinique allocated to IFT: $720,000.00
- ------------------------------------------------------
Net asset value of Villa Martinique
- -----------------------------------
(gross asset value less assumed indebtedness): $20,600,000.00
- ---------------------------------------------
Net asset value of Villa Martinique allocated to IFT: $206,000.00
- ----------------------------------------------------
Number of LLC Units issued to IFT: 8,860
- ---------------------------------
A-2
<PAGE> 82
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
ISCO c/o Four Seasons Hotel
300 South Doheny
Los Angeles, California 90048
Attention: Robert Cohen
With copies to:
Akin, Gump, Strauss, Hauer & Feld, LLP
2029 Century Park East, Suite 4150
Los Angeles, California 90067
Attention: Hushmand Sohaili, Esq.
</TABLE>
Capital contribution: Villa Martinique
- --------------------
Gross asset values of Villa Martinique: $72,000,000.00
- --------------------------------------
Gross asset value of Villa Martinique allocated to ISCO: $71,280,000.00
- -------------------------------------------------------
Net asset value of Villa Martinique
- -----------------------------------
(gross asset value less assumed indebtedness): $20,600,000.00
- ---------------------------------------------
Net asset value of Villa Martinique allocated to ISCO: $20,394,000.00
- -----------------------------------------------------
Number of LLC Units issued to ISCO: 877,162
- ----------------------------------
A-3
<PAGE> 83
EXHIBIT B
DEFINITIONS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"ACT" means the Delaware Limited Liability Company Act, as it may
be amended from time to time, and any successor to such statute.
"ACTIONS" has the meaning set forth in Section 7.7 hereof.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(a) decrease such deficit by any amounts that such Member
is obligated to restore pursuant to this Agreement or by operation of
law upon liquidation of such Member's Membership Interest or is deemed
to be obligated to restore pursuant to Regulation Section
1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"ADJUSTED HOLDER PERCENTAGE" means, on any given date, that
percentage derived by dividing (i) the number of outstanding LLC Units held by
the Holders (other than the Managing Member) on that date, by (ii) 886,022.
"ADJUSTED LIQUIDATED DAMAGE AMOUNT" has the meaning set forth in
Section 5.1.B(4).
"ADJUSTMENT FACTOR" has the meaning provided in the Exchange
Rights Agreement.
"AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling or controlled by or under common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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<PAGE> 84
"AGREEMENT" means this Amended and Restated Limited Liability
Company Agreement, as it may be amended, supplemented or restated from time to
time in accordance with the terms hereof.
"APPRAISAL" means, with respect to real property, including Villa
Martinique or any interest therein, the value determined by an appraiser
appointed by agreement among the Managing Member and the Holders or, in the
absence of such an agreement, the value determined in accordance with the
following procedures:
(a) the Managing Member shall designate in a notice to the
Holders the name, address and contact information of a Person selected
to act as its appraiser and such information as the Holders shall
reasonably need to appraise the property (including all information
provided by the Managing Member to the Managing Member's appraiser), to
the extent the same has not previously been supplied to the Holders;
(b) within ten (10) Business Days after such notice, the
Holders shall appoint a second Person to act as their appraiser;
(c) the appraisers thus appointed shall, within 45 days
following the date of the appointment in (b) above, determine the fair
market value of the property; provided, however, that if the Holders
shall have failed to appoint their appraiser within the ten-day period
set forth above, or if either party's appraiser shall not have
determined the Appraised Value within the 45-day period set forth above,
then, in the first instance, the determination by the Managing Member's
appraiser shall be final and, in the second instance, the determination
of the appraiser who has made a determination within such time period
shall be final;
(d) if the two appraisers have made their determinations
within such forty-five day period, (i) if the difference between the
amounts so determined shall not exceed ten percent (10%) of the lesser
of such amounts, the Fair Market Value of the property shall be fifty
percent (50%) of the sum of the amounts so determined; and (ii) if the
difference between the amounts so determined shall equal or exceed ten
percent (10%) of the lesser of such amounts, (I) the two appraisers
shall, within 20 days, appoint a third appraiser with the same
information (and if no such appraiser shall have been appointed within
such 20-day period, the Managing Member or the Holders may request the
American Arbitration Association (or any successor organization thereto)
to appoint an appraiser and such third appraiser shall determine the
fair market value of the property within 30 days after appointment; and
(II) the determination of the appraiser which differs the most in terms
of dollar amount from the determinations of the other two appraisers
shall be excluded, and 50% of the sum of the remaining two
determinations shall be the fair market value of the property;
(e) the Managing Member, on the one hand, and the Holders,
on the other hand, shall pay the fees and expenses of the appraiser
appointed by it and them, respectively, and one-half of the fees and
expenses of the third appraiser and one-half of all other cost and
expenses incurred in connection with each appraisal; and
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(f) all appraisers must be a member of the American
Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five (5) years of experience in valuing
commercial real estate in the general location of the property being
appraised.
With respect to any other asset or any asset following the death or Incapacity
of all of the Non-Managing Members, Appraisal shall mean the written opinion of
an independent third party experienced in the valuation of similar assets,
selected by the Managing Member in good faith (and, except following the death
or Incapacity of all of the Non-Managing Members, with the consent of a Majority
in Interest of the Non-Managing Members, which consent shall not be unreasonably
withheld). Such opinion may be in the form of an opinion by such independent
third party that the fair market value for such asset as set by the Managing
Member is fair, from a financial point of view, to the Members and/or the
Company.
"APPRAISED VALUE" means, with respect to any property, including
Villa Martinique, the value of such property as determined by Appraisal.
"ASSIGNEE" means a Person (other than the Managing Member) to
whom one or more LLC Units have been Transferred as permitted under this
Agreement, but who has not become a Substituted Member, and who has the rights
set forth in Section 11.5 hereof.
"AVAILABLE CASH FROM OPERATIONS" means, with respect to any
period for which such calculation is being made,
(a) the sum, without duplication, of:
(1) all cash received from any source whatsoever during
such period including cash earned on Permitted Investments (other than
Available Cash from Sale and cash held in or contributed to the Reserve
for Capital Improvements), including, without limitation, all cash
Capital Contributions and net cash refinancing proceeds; and
(2) the net proceeds from the sale, refinance, disposition
or encumbrance of any Company Properties by the Non-Managing Member
Representative, pursuant to the powers of the Non-Managing Member
Representative under Section 5.1.B, but only in the amount necessary to
make distributions pursuant to Section 5.1.A(1), including the amount
necessary to distribute the increase in Priority Distributions provided
by Section 5.1(B)(4) as a result of such sale, refinance, encumbrance or
disposition pursuant to Section 5.1(B)(4).
(b) less the sum, without duplication (here or under
Available Cash from Sale), of:
(1) all payments of principal and interest (but not any
prepayment, including any prepayment resulting from the acceleration of
the due date of a payment, unless the Consent to the prepayment is
obtained from Holders of at least 80% of the aggregate number of then
outstanding LLC Units) on the Company Debts made during such period by
the Company, plus all Bond Fees;
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(2) all payments for capital expenditures, except for
payments made from the Reserve for Capital Improvements; and
(3) all other expenditures and payments attributable to
the operation of the business of the Company in accordance with this
Agreement which are made during such period, whether or not deducted in
determining Net Income from Operations or Net Loss from Operations for
such period.
"AVAILABLE CASH FROM SALE" means, with respect to any period for
which such calculation is being made, the following amount (without duplication
in the calculation of Available Cash from Sale or Available Cash from
Operations):
(a) all cash received from the sale, disposition,
condemnation (to the extent not reinvested in similar Property),
recovery of insurance proceeds (to the extent not reinvested in Villa
Martinique) or encumbrance of any Company Property after first deducting
the amounts described in clause (a)(2) of the definition of "Available
Cash from Operations";
(b) less the sum of:
(1) all payments of principal and interest made during
such period (but not any prepayment, including any prepayment resulting
from the acceleration of the due date of a payment, made during the
ten-year period following the Measurement Date, unless the same Consent,
if any, required for the consummation of the transaction described in
Section 7.3.C(1) during the ten-year period following the Measurement
Date, is obtained with respect to the prepayment on the Company Debts
secured by the Company property described in (a) above; and
(2) all other expenditures and payments made during such
period incident to the sale, disposition, condemnation (if the cash
proceeds therefrom are included in (a) above), recovery of insurance
proceeds (if the cash proceeds therefrom are included in (a) above) or
encumbrance of the Company Property described in (a) above, whether or
not deducted in determining Net Income from Operations or Net Loss from
Operations for such period.
Available Cash from Sale shall not include cash earned on
Permitted Investments.
"AVAILABLE INDEBTEDNESS" has the meaning set forth in Section
8.4.C.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any bankruptcy,
insolvency, receivership or similar federal or state law for the relief or
protection of debtors or protection of creditors.
"BASIS" means, with respect to a particular Property, the
positive difference between (i) the Gross Asset Value of such Property as of the
date hereof (or the date such Property was acquired by the Company, if such
Property is acquired after the date hereof) and (ii) the cumulative Depreciation
with respect to such Property for the current and all prior Fiscal Years.
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"BONDS" means the Orange County Housing Authority Apartment
Development Revenue Bonds, Issue BB of 1985, as amended, refunded or reissued.
"BOND CREDIT ENHANCEMENT" means any letter of credit, guarantee
agreement, security agreement, pledge agreement, mortgage backed security,
surety bond, insurance policy or any combination of the foregoing which provides
for or insures (a) the payment of principal and interest on the Bonds (whether
at maturity, by acceleration or call for redemption) and or (b) the purchase
price payable for Bonds required or permitted to be tendered pursuant to
mandatory tender provisions, optional tender provisions or conversion to a
different interest rate on the Bonds.
"BOND FEES" means all credit enhancement fees, issuer fees,
remarketing fees, compliance monitoring fees, trustee fees (including periodic
expenses of the trustee), rating agency fees, rebate arbitrage fees and other
fees or costs associated with the Bonds.
"BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in Los Angeles, California, Las Vegas, Nevada or
New York, New York are authorized or required by law to close.
"CAPITAL ACCOUNT" means, with respect to any Member, the Capital
Account maintained by the Managing Member for such Member on the Company's books
and records in accordance with the following provisions:
(a) To each Member's Capital Account, there shall be added
such Member's Capital Contributions, such Member's distributive share of
Net Income from Operations, Net Income from Sale and any items allocated
pursuant to Section 6.3 hereof, and the principal amount of any Company
liabilities assumed by such Member or that are secured by any property
distributed to such Member.
(b) From each Member's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Member pursuant to any provision of this Agreement,
such Member's distributive share of Net Loss from Operations, Net Loss
from Sale, any specially allocated items, such as Depreciation, and any
items allocated pursuant to Section 6.3 hereof, and the principal amount
of any liabilities of such Member assumed by the Company or that are
secured by any property contributed or deemed contributed by such Member
to the Company.
(c) In the event any interest in the Company is
Transferred in accordance with the terms of this Agreement or Exchanged
in accordance with Sections 8.5 or 8.6 hereof or with the terms of the
Exchange Rights Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent that it relates to the
Transferred or Exchanged interest.
(d) In determining the principal amount of any liability
for purposes of subsections (a) and (b) hereof, there shall be taken
into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations.
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(e) The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in
a manner consistent with such Regulations. If the Managing Member shall
determine that it is prudent to modify the manner in which the Capital
Accounts are maintained in order to comply with such Regulations, the
Managing Member may make such modification provided that such
modification will not have a material effect on the amounts
distributable to any Holder without such Holder's Consent. The Managing
Member also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the
Members and the amount of Company capital reflected on the Company's
balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b)
or Section 1.704-2.
"CAPITAL CONTRIBUTION" means, with respect to any Member or
Holder, the amount of money and the initial Gross Asset Value of Villa
Martinique and any other amount that such Member or Holder contributes to the
Company or is deemed to have contributed to the Company pursuant to the terms of
this Agreement (including, without limitation, amounts deemed to have been
contributed pursuant to or as provided in Section 7.4 or Section 7.7 hereof).
"CERTIFICATE" means the Certificate of Formation of the Company
filed in the office of the Secretary of State of the State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"CHARTER" means the Articles of Incorporation of the Managing
Member, as amended, supplemented or restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"COMPANY" means the limited liability company formed under the
Act and pursuant to this Agreement, and any successor thereto.
"COMPANY MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(d) for the phrase "partnership minimum gain," and the amount of
Company Minimum Gain, as well as any net increase or decrease in Company Minimum
Gain, for a Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"CONSENT" means the signed written consent of a Non-Managing
Member (or Holder, if applicable) given in accordance with Article 14 hereof.
"CONSENT OF THE NON-MANAGING MEMBERS" means the signed written
Consent of a Majority in Interest (except as otherwise specifically provided in
this Agreement) of the Non-Managing Members, which Consent shall be obtained
prior to the taking of any action for which it is required by this Agreement
and, except as otherwise specifically provided in this Agreement,
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may be given or withheld by a Majority in Interest of the Non-Managing Members,
in their sole and absolute discretion.
"CONTINUING GUARANTY" means that certain Continuing Guaranty
dated October 23, 1997 executed by OAS in favor of The Tokai Bank, Ltd., Los
Angeles Agency.
"CONTRIBUTION AGREEMENT" means that certain Contribution
Agreement to which this Agreement is an Exhibit, by and among OAS, the Original
Members and the Company (the name of which, at the time of execution of the
Contribution Agreement, was Costa Mesa Partners, LLC).
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
other similar official under any Bankruptcy Law.
"DEBT" means, as to any Person, as of any date of determination,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services; (ii) all amounts owed by such Person to
banks or other Persons in respect of reimbursement obligations under letters of
credit, surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"DEPRECIATION" means, for each Fiscal Year or other applicable
period, an amount equal to the federal income tax depreciation, amortization or
other cost recovery deduction allowable with respect to an asset for such year
or other period, except that, if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such year
or period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
"DEVELOPER NOTE" means that certain Amended Promissory Note dated
April 9, 1986 in the original principal amount of $55,000,000 payable by Costa
Mesa Partners, a California general partnership, to the order of the Orange
County Housing Authority, California, evidencing the obligation to repay a loan
made by the Orange County Housing Authority, California to Costa Mesa Partners
with the proceeds of the Bonds.
"DISTRIBUTE" AND "PAY" shall mean the payment of the amount
specified in this Agreement and a distribution or payment shall be deemed to
have been made (i) on the date on which (a) a check is mailed by first class
mail to the Person entitled to receive the payment to the address of that Person
set forth in Exhibit A or such other address of which the Person has notified
the Managing Member in writing, (b) a wire transfer or other bank transfer in
the amount
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of the payment is initiated and directed to the Person entitled to receive the
payment or (c) any other method of payment that can reasonably be expected to
result in delivery of the payment as promptly as a payment mailed by first class
mail, is initiated and directed to the Person entitled to receive the payment to
the address of that Person set forth in Exhibit A or such other address of which
the Person has notified the Managing Member in writing, if, in each case, the
payment is received by or on behalf of the Person entitled to receive the
payment, (ii) the date on which a drawing is made under the Letter of Credit for
the purpose of funding the distribution or payment, or (iii) the date on which
the Company retains an amount for its own account by offset against amounts in
accordance with this Agreement if it is authorized to do so pursuant to the
terms of this Agreement; provided, however, notwithstanding anything to the
contrary contained herein, any amount described in clauses (i), (ii) or (iii)
above shall not be treated as a payment (or be deemed paid) or treated as a
distribution (or be deemed a distribution) to any Holder if (I) such Holder is
required by law (including without limitation by Section 18-607 of the Act) to
return, and does return, the amount to the Company (by Capital Contributions or
otherwise), or to a creditor of the Company (other than, in each case, to the
extent, and only to the extent, it is a result of (a) the commission of an act
mentioned in clause (i) or (ii) of Section 7.7.A, (b) any guarantee by the
Holder with respect to the Bonds or Bond Credit Enhancement in accordance with
Section 8.4.C, (c) the provisions of Section 8.8 or (d) the discharge of an
express contractual obligation to make such payment under the terms of this
Agreement, or, the Contribution Agreement), and (II) neither the Company nor the
Managing Member reimburses the Holder for the amount that is so required to be
returned and is returned by the Holder.
"EQUITY STOCK" shall mean stock that is either common stock or
preferred stock of OAS or a successor thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCEPT AS OTHERWISE EXPRESSLY PROVIDED", "EXCEPT AS OTHERWISE
PROVIDED", "EXCEPT AS OTHERWISE SPECIFIED" and "EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED" and all variations thereof have the same meaning unless otherwise
specifically provided.
"EXCESS DISTRIBUTION AMOUNT" means, with respect to a particular
Fiscal Year (or a quarter of a particular Fiscal Year, as applicable), the
excess, if any, of (i) the amount of the distributions made by the Company
pursuant to Sections 5.1.A(1) and 5.1.B for the Fiscal Year (or such quarter of
such Fiscal Year, as applicable) over (ii) the product of (a) the Adjusted
Holder Percentage as of the end of the Fiscal Year (or such quarter of such
Fiscal Year, as applicable) and (b) with respect to such Fiscal Year,
$1,600,000, or, with respect to such quarter of such Fiscal Year, $400,000.
"EXCESS PAYMENTS" has the meaning set forth in Section 5.1.C.
"EXCHANGE" means an acquisition of LLC Units by the Managing
Member pursuant to (i) Section 8.6 or (ii) the exercise of the rights set forth
in Section 8.5 or the Exchange Rights Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
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"EXCHANGE RIGHTS AGREEMENT" means that certain Exchange Rights
Agreement by and among OAS and the Original Members.
"FAMILY MEMBERS" means, as to a Person that is an individual, (a)
such Person's spouse, (b) such Person's ancestors and/or their spouses and
descendants (by blood or adoption), (c) such Person's descendants (whether by
blood or by adoption) and/or their spouses and descendants (by blood or
adoption), (d) such Person's brothers and sisters and/or their spouses and
descendants (by blood or adoption), (e) inter vivos or testamentary trusts of
which only such Person and/or his spouse, ancestors, descendants (whether by
blood or by adoption), brothers and/or sisters and/or their spouses and
descendants (by blood or adoption) are beneficiaries and (f) any partnership or
limited liability company all of whose shareholders, partners or members consist
of such Person and/or his spouse, ancestors, descendants (whether by blood or by
adoption), brothers and/or sisters and/or inter vivos or testamentary trusts of
which only such Person and/or his spouse, ancestors, descendants (whether by
blood or by adoption), brothers and/or sisters are beneficiaries.
"FISCAL YEAR" means the fiscal year of the Company, which shall
be the calendar year.
"FORCED SALE OR DISPOSITION" has the meaning set forth in Section
5.1.B(4).
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed
by a Member to the Company (including Villa Martinique, which is
retained by the Company) shall be set forth on Exhibit A with respect to
that Member.
(b) The Gross Asset Values of all Company assets
immediately prior to the occurrence of any event described in clause
(1), clause (2), clause (3), clause (4) or clause (5) hereof shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing Member using such reasonable method of
valuation as it may adopt, as of the following times:
(1) the acquisition of an additional interest in the
Company (other than in connection with the execution of this Agreement
but including, without limitation, acquisitions pursuant to Section 4.4
hereof or contributions or deemed contributions by the Managing Member
pursuant to Section 4.4 hereof) by a new or existing Member in exchange
for more than a de minimis Capital Contribution, if the Managing Member
reasonably determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Members in the
Company;
(2) the distribution by the Company to a Member of more
than a de minimis amount of Company property as consideration for an
interest in the Company, if the Managing Member reasonably determines
that such adjustment is necessary or appropriate to reflect the relative
economic interests of the Members in the Company;
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(3) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(4) upon the admission of a successor Managing Member
pursuant to Section 12.1 hereof; and
(5) at such other times as the Managing Member shall
reasonably determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Company asset distributed
to a Member shall be the gross fair market value of such asset on the
date of distribution as determined by the distributee and the Managing
Member, provided that, if the distributee is the Managing Member or if
the distributee and the Managing Member cannot agree on such a
determination, such gross fair market value shall be determined by
Appraisal.
(d) At the election of the Managing Member, the Gross
Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted bases of such assets pursuant to
Code Section 734(b).
(e) If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such
asset.
"GUARANTEED PAYMENT DATE" means the LLC Distribution Date, or if
there is no LLC Distribution Date with respect to a fiscal quarter, the 60th day
following the last day of the fiscal quarter.
"GUARANTEED PAYMENT RECORD DATE" means the LLC Record Date, or if
there is no LLC Record Date with respect to a fiscal quarter, the 30th day
following the last day of the fiscal quarter.
"HEREIN," HEREUNDER and "HEREOF" and all variations thereof, in
each case when used without qualification or limitation, mean in or of this
entire Agreement, not just a part of it.
"HOLDER" means either (a) a Member or (b) an Assignee, owning a
LLC Unit, that would properly be treated as having the economic interests of a
partner in the Company for federal income tax purposes, assuming for this
purpose that the Company would properly be treated as a partnership (and not as
an association taxable as a corporation) for such tax purposes, (and if an
Assignee would not so qualify as having the economic interests of a partner for
such tax purposes, then the Person who Transferred the LLC Unit(s) to that
Assignee shall continue to be treated as the "Holder" of such LLC Unit(s)).
However, "Holder" shall not include the Managing Member.
"IFT" means IFT Properties, Ltd., a California limited
partnership.
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"INCAPACITY" or "INCAPACITATED" means, (i) as to any Member who
is an individual, death, total physical disability or entry by a court of
competent jurisdiction adjudicating such Member incompetent to manage his or her
person or his or her estate; (ii) as to any Member that is a corporation or
limited liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member's creditors, (d) the Member files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of the
nature described in clause (b) above, (e) the Member seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Member or for all or any substantial part of the Member's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Member's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) above is not vacated within 90
days after the expiration of any such stay.
"INCLUDING" means including without limitation.
"INDEMNITEE" means (i) any Person subject to a claim or demand
made or threatened to be made a party to, or involved or threatened to be
involved in, an action, suit or proceeding by reason of his, her or its status
as (A) a Holder, Assignee or Member or (B) a partner, director, officer,
employee or agent of the Company or a Holder, Assignee or Member, and (ii) such
other Persons (including Affiliates of the Managing Member or the Company) as
the Managing Member may designate from time to time (whether before or after the
event giving rise to potential liability), in its sole and absolute discretion.
"INTEREST" means interest, original issue discount and other
similar payments or amounts paid by the Company for the use or forbearance of
money.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"ISCO" means ISCO, a California general partnership.
"LETTER OF CREDIT" shall have the meaning set forth in Section
4.6.A.
"LIQUIDATED DAMAGES BREACH" has the meaning set forth in Section
7.3.G hereof.
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"LIQUIDATING EVENT" has the meaning set forth in Section 13.1
hereof.
"LIQUIDATING NOTICE" has the meaning set forth in Section 13.2
hereof.
"LIQUIDATOR" has the meaning set forth in Section 13.2.A hereof.
"LLC DISTRIBUTION DATE" means the date established by the
Managing Member for the payment of certain distributions pursuant to Section
5.1, which date shall be the same as the date established by the Managing Member
for the payment of dividends to holders of REIT Shares.
"LLC RECORD DATE" means the record date established by the
Managing Member for the determination of which Holders or Members are entitled
to receive distributions on the LLC Distribution Date, which record date shall
be the same as the record date established by the Managing Member for a dividend
to holders of REIT Shares.
"LLC UNIT" means a fractional share of the Membership Interests
of all Members (except the Managing Member) issued pursuant to Section 4.1
hereof. The ownership of LLC Units may (but need not, in the sole and absolute
discretion of the Managing Member) be evidenced in the form of a certificate for
LLC Units.
"MAJORITY IN INTEREST OF THE NON-MANAGING MEMBERS" means those
Non-Managing Members holding in the aggregate more than 50% of the aggregate
outstanding LLC Units of all the Non-Managing Members.
"MAJORITY OF REMAINING MEMBERS" means Non-Managing Members owning
(a) a majority of the profit and loss interests in the Company held by all
Non-Managing Members, determined and allocated based on any reasonable estimate
of profits and losses from the relevant date to the projected termination of the
Company and taking into account present and future allocations of profits and
losses under the Agreement as it is in effect on the relevant date, and (b) a
majority of the capital interests in the Company, determined as of the relevant
date under the Agreement, owned by all Non-Managing Members.
"MANAGING MEMBER" means OAS, in its capacity as a Member, or any
successor Managing Member designated pursuant to the terms of this Agreement
(including as a result of a merger of OAS or a transfer of substantially all of
OAS's assets).
"MEASUREMENT DATE" shall mean October 24, 1997.
"MEMBER MINIMUM GAIN" means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Regulations Section 1.704-2(i) with respect to "partner
nonrecourse debt minimum gain."
"MEMBER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."
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"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for the phrase "partner nonrecourse
deductions," and the amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with
the rules of Regulations Section 1.704-2(i)(2).
"MEMBERS" means the Persons owning Membership Interests,
including the Managing Member and any Substituted Members, named as Members in
Exhibit A attached hereto, which Exhibit A may be amended from time to time.
"MEMBERSHIP INTEREST" means an ownership interest in the Company
representing a Capital Contribution by a Member or Holder (or predecessor) and
includes any and all benefits to which the Member or Holder of such a Membership
Interest may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement. A Membership Interest of a Holder may be expressed as a number of LLC
Units.
"NET CASH FLOW" means, for any period, an amount equal to net
operating income less debt service payments (principal, interest and Bond Fees).
"NET INCOME FROM OPERATIONS" or "NET LOSS FROM OPERATIONS" means,
for each Fiscal Year of the Company, an amount equal to the Company's taxable
income or loss for such year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1), except Depreciation, shall
be included in taxable income or loss), but not including Depreciation, and with
the following additional adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Income
from Operations (or Net Loss from Operations) pursuant to this
definition of "Net Income from Operations" or "Net Loss from Operations"
shall be added to (or subtracted from, as the case may be) such taxable
income (or loss);
(b) Any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B)
expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Net Income from Operations
(or Net Loss from Operations) pursuant to this definition of "Net Income
from Operations" or "Net Loss from Operations," shall be subtracted from
(or added to, as the case may be) such taxable income (or loss); and
(c) Notwithstanding any other provision of this definition
of "Net Income from Operations" or "Net Loss from Operations," any item
allocated pursuant to Sections 6.2.C, 6.2.D and/or 6.3.C hereof shall
not be taken into account in computing Net Income from Operations or Net
Loss from Operations. The amounts of the items of Company income, gain,
loss or deduction available to be allocated pursuant to Sections 6.2.C,
6.2.D and/or 6.3.C hereof shall be determined by applying rules
analogous to those set forth in this definition of "Net Income from
Operations" or "Net Loss from Operations."
B-13
<PAGE> 96
"NET INCOME FROM SALE" or "NET LOSS FROM SALE" means,
respectively, gain or loss resulting from any disposition of Company Property
with respect to which gain or loss is recognized for federal income tax
purposes, computed by reference to the Gross Asset Value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its Gross Asset Value. In the event that the Gross Asset Value of
any Company asset is adjusted pursuant to subsection (b) or (c) of the
definition of "Gross Asset Value," the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Income from Sale or Net Loss from Sale. To the extent that an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a Member's
interest in the Company, the amount of such adjustment shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income from
Sale or Net Loss from Sale.
"NON-MANAGING MEMBER" means any Member other than the Managing
Member.
"NON-MANAGING MEMBER REPRESENTATIVE" means Edward Israel until a
successor Non-Managing Member Representative shall have been appointed pursuant
to Section 15.13 hereof and, thereafter, shall mean the person appointed and
then acting as the Non-Managing Member Representative hereunder.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"ORIGINAL MEMBERS" means IFT Properties, Ltd., a California
limited partnership and ISCO, a California general partnership.
"OWNERSHIP LIMIT" means the applicable restriction on ownership
of shares of the Managing Member imposed under the Charter.
"PAY" shall have the meaning set forth above under "distribute"
and "pay."
"PERMITTED INVESTMENTS" shall mean bonds, notes, treasury bills
or other securities constituting direct obligations of, or fully guaranteed by,
the United States of America (provided that such direct obligations or
guarantees, as the case may be, are entitled to the full faith and credit of the
United States government), or certificates of deposit issued by any U.S. bank
having assets not less than $500,000,000 and net worth not less than
$100,000,000 (provided, however, that not more than $1,000,000 shall be invested
in certificates of deposit in any one bank without the prior written consent of
the Non-Managing Member Representative. All of the securities and investments
described in the immediately preceding sentence shall have a maturity of three
(3) months or less.
B-14
<PAGE> 97
"PERMITTED TRANSFER" has the meaning set forth in Section 11.3.A
hereof.
"PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association, limited liability company or
other entity.
"PLEDGE" has the meaning set forth in Section 11.3.A.
"PREFERRED RETURN PER UNIT" means with respect to an LLC Unit
outstanding on a LLC Record Date an amount equal to the product of (i) the cash
dividend per REIT Share declared by the Managing Member for holders of REIT
Shares on that LLC Record Date, multiplied by (ii) the Adjustment Factor in
effect on that LLC Record Date. However, if cash is deliverable pursuant to the
last sentence of Section 3(b) of the Exchange Rights Agreement (the amount of
such cash is referred to herein as the "Deliverable Sum"), the Preferred Return
Per Unit shall be (a) an amount equal to the aggregate dividends and
distributions which a shareholder of the Selected Index would have received
since the previous LLC Record Date if the Deliverable Sum were invested in the
Selected Index, divided by (b) the number of LLC Units outstanding on the LLC
Record Date (and the LLC Record Date(s) and LLC Distribution Date(s) shall be
deemed, for this purpose, to be the same applicable record date(s) and
applicable distribution date(s) used by such Selected Index). The Preferred
Return Per Unit shall not constitute a "guaranteed payment" under Code Section
707(c).
"PREVIOUSLY DISTRIBUTABLE" shall mean those amounts which would
have been distributed to Holders pursuant to the terms of this Agreement if
sufficient Available Cash from Operations were available at the time the
distributions were to be made to make all of the distributions described in the
applicable Section.
"PRIORITY DISTRIBUTION(S)" AND "PRIORITY DISTRIBUTION RECIPIENTS"
have the meanings set forth in Section 5.1.B.
"PROPERTY(IES)" means any assets and property of the Company such
as, but not limited to, interests in real property and personal property,
including, without limitation, fee interests, interests in ground leases,
interests in limited liability companies, joint ventures or partnerships,
interests in mortgages, and Debt instruments as the Company may hold from time
to time.
"PROPERTY TAX DIFFERENCE" shall have the meaning set forth in
Section 5.1.C.
"QUALIFIED TRANSFEREE" means (i) an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act or (ii) a Person who is
not acquiring its Membership Interest in a transaction that does not constitute
a "sale" within the meaning of Section 2(3) of the Securities Act or who is a
Family Member of the transferor and is acquiring LLC Units by gift.
"REAFFIRMATION AGREEMENT" means the Reaffirmation and
Modification Agreement among the Company and The Tokai Bank, Ltd. in
substantially the form attached hereto as Exhibit D.
B-15
<PAGE> 98
"REGULATIONS" means the applicable income tax regulations under
the Code, whether such regulations are in proposed, temporary or final form, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in Section
6.3.B(8).
"REIT" means a real estate investment trust qualifying under Code
Section 856.
"REIT MEMBER" means a Member or Assignee that is, or has made an
election to qualify as, a REIT.
"REIT PAYMENT" has the meaning set forth in Section 15.11.
"REIT SHARE" shall have the same meaning as "REIT Shares" in the
Exchange Rights Agreement.
"REIT SHARES AMOUNT" or "REIT Share Amount" shall have the same
meaning as "REIT Shares Number" in the Exchange Rights Agreement.
"REPORT" means, with respect to a calculation to be made pursuant
to Section 3.4.A or Section 3.4.B, the quarterly or annual report on Form 10-Q
or 10-K (or the successor to those respective forms, if any) most recently filed
by the Managing Member with the SEC pursuant to the Exchange Act prior to the
date the calculation is to be made, unless the Managing Member shall have
delivered to the Member concerned, subsequent to the date of filing of the most
recently filed quarterly or annual report, a written statement updating the
information set forth in the most recently filed quarterly or annual report, as
the case may be, to be used in making the relevant calculation, in which event
"Report" shall mean the written statement so delivered by the Managing Member.
"RESERVE FOR CAPITAL IMPROVEMENTS" shall mean the one time
$1,000,000 reserve established by the Company consisting of funds from the
initial Capital Contribution made by the Managing Member to be used to finance
capital improvements to the Company's Properties.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation
or other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"SUBSTITUTED MEMBER" means an Assignee who is admitted as a
Member to the Company pursuant to Section 11.4 hereof. The term "Substituted
Member" shall not include any Additional Member.
"TAX CONSEQUENCE" shall mean any transaction or event in which
the Managing Member shall engage or participate or which the Managing Member
shall allow to occur as a consequence of a Tax Determination.
B-16
<PAGE> 99
"TAX DETERMINATION" shall mean the issuance by the IRS (or, if
applicable, a tax authority of a state or county) of a final administrative
adjustment, notice of proposed assessment, notice of deficiency or other similar
notice of determination (or, if applicable, a similar notice by such other tax
authority), after any challenge thereto through the appellate level within the
IRS (or within such other tax authority), that results in the recharacterization
of the tax treatment of any acts or transactions provided for in or permitted by
this Agreement.
"TAX ITEMS" has the meaning set forth in Section 6.4.A hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Company.
"TERMINATION EVENT" has the meaning set forth in Section 5.1.C(3)
hereof.
"TRANSACTION AGREEMENTS" means this Agreement, the Contribution
Agreement and the Exchange Rights Agreement.
"TRANSFER," when used with respect to an LLC Unit or all or any
portion of a Membership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, grant of security interest, exchange, transfer or other
disposition or act of alienation, whether voluntary or involuntary or by
operation of law; provided, however, that, when the term is used in Article 11
hereof, Transfer does not include any Exchange. The terms "Transferred" and
"Transferring" have correlative meanings.
"VILLA MARTINIQUE" means the apartment buildings and real
property located at 2855 Pinecreek Drive, Costa Mesa, California.
"VM PROPERTY SALE" means the refinancing, sale, condemnation or
other disposition of Villa Martinique (or any property deriving its tax basis,
in whole or part, from Villa Martinique (such as pursuant to a Section 1031
exchange)).
B-17
<PAGE> 100
EXHIBIT C
FORM OF LETTER OF CREDIT
<TABLE>
<S> <C>
Date of Issue: October ___, 1997 Our Irrevocable Standby Credit:
NZS279741
Date of Expiry: October __, 1999
Place of Expiry: At our above counters
Applicant: Beneficiary:
Oasis Residential, Inc., {Named Individual}
A Nevada Corporation _____________________________________
4041 E. Sunset Road
Henderson, NV 89014 _____________________________________
Amount: USD 500,000.00
Five Hundred Thousand and 00/100's
US Dollars
</TABLE>
We hereby establish in your favour this credit available with Wells Fargo Bank,
N.A., San Francisco, CA by payment of your draft(s) at sight drawn on Wells
Fargo Bank, N.A. accompanied by:
1 - Your signed and dated statement worded as follows with instructions in
brackets therein complied with:
"The undersigned, as Beneficiary, hereby certifies:
(A) That the Beneficiary is entitled to make a drawing under this Letter
of Credit in the draft amount pursuant to the provisions of Section
5.1.B(1) of the Amended and Restated Limited Liability Company Agreement
of {insert name of agreement} dated as of {insert date} (the
"Agreement"), that all conditions to the right of the Beneficiary under
the Agreement to make such a drawing in the draft amount have been
satisfied, and that the draft amount does not exceed the amount the
Beneficiary is entitled to draw under this Letter of Credit under
Section 5.1.B(1) of the Agreement;
(B) That immediately upon receipt of the proceeds of the drawing
hereunder in the draft amount, the Beneficiary will pay the proceeds, in
full, to the priority distribution
C-1
<PAGE> 101
recipients specified in Section 5.1.B(1) of the Agreement in the manner
specified in Section 5.1.B(1) of the Agreement; and
(C) That the sight draft presented hereunder has been duly executed by
the Beneficiary."
Partial and multiple drawings are permitted under this Letter of Credit.
This Letter of Credit is transferable but only to a single transferee, which the
transferor has certified to be the current non-managing member representative
under the Agreement in the form of Annex A, and only in the full amount
available to be drawn under this Letter of Credit at the time of such transfer.
Any such transfer may be effected only through ourselves and only upon payment
of our usual transfer fee and upon presentation to us at our above-specified
office of a duly executed instrument of transfer in the form of Annex A with
your signature guaranteed by a banking institution together with the original of
this Letter of Credit. Any transfer of this Letter of Credit as previously
mentioned may not change the place of expiration of this Letter of Credit from
our above-specified office. Each transfer shall be evidenced by our endorsement
on the reverse of the original of this Letter of Credit, and we shall deliver
the original of this Letter of Credit so endorsed to the transferee.
We hereby agree with you that each draft presented hereunder in full compliance
with the terms hereof will be duly honored by our payment to you of the amount
of such draft, in immediately available funds of Wells Fargo Bank, N.A.:
I. Not later than 11:00 a.m. San Francisco time, on the business day
following the business day on which such demand is presented to us as
aforesaid, if such presentation is made to us before noon San Francisco
time.
or
II. Not later than 11:00 a.m. San Francisco time, on the second business
day following the business day on which such demand is presented to us
as aforesaid, if such presentation is made to us after noon San
Francisco time.
As used herein the term "business day" shall mean a day of the year on which
Wells Fargo Bank, N.A., San Francisco, CA is open for business.
If any instructions accompanying a drawing under this Letter of Credit request
that payment is to be made by transfer to an account with us or at another bank,
we and/or such other bank may rely on an account number specified in such
instructions even if the number identifies a person or entity different from the
intended payee.
Documents must be presented to us no later than 5:00 p.m.
Draft(s) must indicate the number and date of this credit.
C-2
<PAGE> 102
Each draft presented hereunder must be accompanied by this original credit for
our endorsement thereon of the amount of such draft.
Documents must be forwarded to us via courier in one parcel and may be mailed to
Wells Fargo Bank, N.A., Operations Group, Northern California, 525 Market
Street, 25th Floor, San Francisco, CA 94105-2733.
This credit is subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication Number
500, and engages us in accordance with the terms thereof.
----------------------------------------
Authorized Signature
Please contact Dawn Y. Shinsato by telephone at (415) 396-5458 or by fax at
(415) 541-0299 regarding any inquiries.
C-3
<PAGE> 103
Annex A to Wells Fargo Bank, N.A.
Irrevocable Letter of Credit
No. NZS__________________
Wells Fargo Bank, N.A.
Operations Group Northern California
525 Market Street, 25th Floor
San Francisco, California 94105
Re: Your Letter of Credit No. _______________
Ladies and Gentlemen:
For value received, I hereby irrevocably assign and transfer all of my rights
under the above-captioned Letter of Credit, as heretofore and hereafter amended,
extended or increased, to:
------------------------------------
(Name of Transferee)
------------------------------------
(Address of Transferee)
------------------------------------
------------------------------------
I hereby certify that I have ceased to become the non-managing member
representative under that certain Amended and Restated Limited Liability Company
Agreement of {Name of LLC} dated as of October ___, 1997 (the "Agreement") and
that the transferee is current non-managing member representative under the
Agreement.
By this transfer, all of our rights in the Letter of Credit are transferred to
the transferee, and the transferee shall have sole rights as Beneficiary under
the Letter of Credit, including sole rights relating to any amendments, whether
increases or extensions or other amendments, and whether now existing or
hereafter made. Your are hereby irrevocably instructed to advise future
amendment(s) of the Letter of Credit to the transferee without my consent or
notice.
Enclosed are the original of the Letter of Credit and the original of all
amendments to this date. Also enclosed is $__________ in payment of your
transfer commission (1/8% of the amount transferred, minimum $250.00). The
transferor agrees to pay to you on demand any expenses which may be incurred by
you in connection with this transfer. Please notify the transferee of this
C-4
<PAGE> 104
transfer and of the terms and conditions of the Letter of Credit as transferred.
This transfer will not become effective until the transferee is so notified.
Very truly yours,
{Insert Date} (Insert Name of Transferor)
- -------------------
By:
------------------------------------
(Insert Name and Title)
Signature of Transferor Guaranteed
(Insert Name of Bank)
{Insert Date}
- -------------------
By:
------------------------------------
(Insert Name and Title)
C-5
<PAGE> 105
SCHEDULE 3.4
------------
None.
S-1
<PAGE> 106
================================================================================
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
---------------------------
Dated as of October 23, 1997
================================================================================
<PAGE> 107
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINED TERMS.................................................................1
ARTICLE 2. ORGANIZATIONAL MATTERS........................................................2
Section 2.1. Formation..............................................................2
Section 2.2. Name...................................................................2
Section 2.3. Registered Office and Agent; Principal Place of Business; Other
Places of Business.....................................................2
Section 2.4. Power of Attorney......................................................2
Section 2.5. Certificate of Formation; Filings......................................3
Section 2.6. Fictitious Business Name Statements....................................3
Section 2.7. Term...................................................................3
ARTICLE 3. PURPOSE.......................................................................3
Section 3.1. Purpose and Business...................................................3
Section 3.2. Powers.................................................................3
Section 3.3. Specified Purposes.....................................................4
Section 3.4. Representations and Warranties and Covenants by the Members............4
ARTICLE 4. CAPITAL CONTRIBUTIONS.........................................................9
Section 4.1. Capital Contributions of the Initial Members...........................9
Section 4.2. No Additional Members..................................................9
Section 4.3. Loans by Third Parties.................................................9
Section 4.4. Additional Funding and Capital Contributions...........................9
Section 4.5. No Interest; No Return................................................10
Section 4.6. Letter of Credit......................................................11
Section 4.7. Payments under Continuing Guaranty....................................12
ARTICLE 5. DISTRIBUTIONS AND GUARANTEED PAYMENTS........................................12
Section 5.1. Requirement and Characterization of Distributions and
Guaranteed Payments...................................................12
Section 5.2. Distributions in Kind.................................................19
Section 5.3. Amounts Withheld or Offset............................................20
Section 5.4. Distributions Upon Liquidation........................................20
Section 5.5. Additional Capital Contributions to Prevent Restricted
Distributions and Payments............................................20
Section 5.6. Retention of Available Cash From Sale.................................21
Section 5.7. Distribution Restrictions.............................................21
ARTICLE 6. ALLOCATIONS..................................................................21
Section 6.1. Timing and Amount of Allocations of Net Income from Operations
and Net Loss from Operations..........................................21
</TABLE>
i
<PAGE> 108
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.2. General Allocations...................................................21
Section 6.3. Additional Allocation Provisions......................................23
Section 6.4. Tax Allocations.......................................................28
Section 6.5. Other Provisions......................................................28
ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS........................................29
Section 7.1. Management............................................................29
Section 7.2. Certificate of Formation..............................................33
Section 7.3. Restrictions on Managing Member's Authority...........................33
Section 7.4. Payments Made by the Managing Member and Affiliates...................38
Section 7.5. Other Business of Members.............................................39
Section 7.6. Contracts with Affiliates.............................................39
Section 7.7. Indemnification.......................................................39
Section 7.8. Liability of the Managing Member......................................41
Section 7.9. Other Matters Concerning the Managing Member..........................42
Section 7.10. Title to Company Assets...............................................43
Section 7.11. Reliance by Third Parties.............................................43
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MEMBERS............................................44
Section 8.1. Limitation of Liability...............................................44
Section 8.2. Outside Activities of Members.........................................44
Section 8.3. Return of Capital.....................................................45
Section 8.4. Rights of Non-Managing Members Relating to the Company................45
Section 8.5. Exchange Rights.......................................................46
Section 8.6. Managing Member's Right to Call Membership Interests..................47
Section 8.7. No Redemptions........................................................48
Section 8.8. Indemnification by Original Members...................................48
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.......................................51
Section 9.1. Records and Accounting................................................51
Section 9.2. Fiscal Year...........................................................51
Section 9.3. Reports...............................................................52
ARTICLE 10. TAX MATTERS..................................................................52
Section 10.1. Preparation of Tax Returns............................................52
Section 10.2. Tax Elections.........................................................52
Section 10.3. Tax Matters Partner...................................................55
Section 10.4. Withholding...........................................................61
ARTICLE 11. TRANSFERS AND WITHDRAWALS....................................................62
Section 11.1. Transfer..............................................................62
Section 11.2. Transfer of Managing Member's Membership Interest.....................62
Section 11.3. Holder's Rights to Transfer...........................................63
Section 11.4. Substituted Members...................................................64
Section 11.5. Assignees.............................................................65
</TABLE>
ii
<PAGE> 109
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 11.6. General Provisions....................................................65
ARTICLE 12. ADMISSION OF MEMBERS.........................................................67
Section 12.1. Admission of Successor Managing Member................................67
Section 12.2. Admission of Additional Members.......................................67
Section 12.3. Amendment of Agreement and Certificate................................67
Section 12.4. Limitation on Admission of Members....................................68
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.....................................68
Section 13.1. Dissolution...........................................................68
Section 13.2. Winding Up............................................................68
Section 13.3. Deemed Distribution and Reconstitution................................71
Section 13.4. Rights of Members.....................................................71
Section 13.5. Notice of Dissolution.................................................71
Section 13.6. Reasonable Time for Winding-Up........................................71
ARTICLE 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS.........72
Section 14.1. Procedures for Actions and Consents of Members........................72
Section 14.2. Amendments............................................................72
Section 14.3. Written Consent.......................................................72
ARTICLE 15. GENERAL PROVISIONS...........................................................72
Section 15.1. Addresses and Notice..................................................72
Section 15.2. Titles and Captions...................................................73
Section 15.3. Pronouns and Plurals..................................................73
Section 15.4. Further Action........................................................73
Section 15.5. Binding Effect; Intended Third Party Beneficiaries; Direct
Enforcement Rights....................................................73
Section 15.6. Waiver................................................................73
Section 15.7. Counterparts..........................................................73
Section 15.8. Applicable Law........................................................74
Section 15.9. Entire Agreement......................................................74
Section 15.10. Invalidity of Provisions.............................................74
Section 15.11. Limitation to Preserve REIT Status...................................74
Section 15.12. No Partition.........................................................75
Section 15.13. Non-Managing Member Representative...................................75
Section 15.14. Attorney Fees........................................................76
Exhibit A Member Information..........................................................A-1
Exhibit B Definitions.................................................................B-1
Exhibit C Letter of Credit............................................................C-1
Exhibit D Reaffirmation and Modification Agreement....................................D-1
Schedule 3.4 ............................................................................S-1
</TABLE>
iii
<PAGE> 1
EXHIBIT 10.60
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (this "Agreement") is made as of October
23, 1997 among Oasis Residential, Inc., a Nevada corporation (the "Managing
Member"), Oasis Martinique, LLC, a Delaware limited liability company (the
"Company"), and each Unitholder (as hereinafter defined) listed on the signature
page attached hereto.
WHEREAS, pursuant to the Contribution Agreement (as hereinafter
defined), simultaneous with the execution and delivery of this Agreement, the
Managing Member is making a certain capital contribution to the Company and the
Original Members (as hereinafter defined) and the Managing Member are entering
into the LLC Agreement (as hereinafter defined); and
WHEREAS, as a material inducement to, and in consideration of, the
Original Members' entry into the transactions contemplated by the immediately
preceding paragraph, the Managing Member has agreed to grant to each Unitholder
certain rights to exchange their LLC Units (as hereinafter defined) in
accordance with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
The following terms shall have the following meanings:
"Act" means the Delaware Limited Liability Company Act, as set forth in
Title 6 of the Delaware Code, as the same shall be in effect at the relevant
time.
"Adjustment Factor" means 1.00; provided, however, the Adjustment
Factor shall be subject to adjustment, from time to time, as described in
Section 3 below.
"Appraisal" means the following procedure:
(a) within ten (10) days following any event triggering an Appraisal,
the Managing Member shall notify (the date of the notification being
referred to herein as the "Notification Date") the Unitholder(s) of the
determination by the Managing Member of the value of the Appraisal subject
and such information as the Unitholder(s) shall reasonably need to
determine the value of the Appraisal subject, to the extent the same has
not previously been supplied to the Unitholder(s);
(b) the Unitholder(s) shall have the right to contest such
determination, and if no agreement on the value of the Appraisal subject
reached within twenty (20) days following the Notification Date, then
within ten (10) days following the end of such twenty-day period (the
"Notification Period"), the Managing Member shall designate in a notice to
the Unitholder(s) the name of a Person selected to act as its appraiser;
<PAGE> 2
(c) within ten (10) days after the Notification Period, the
Unitholder(s) (acting by majority, if applicable) shall appoint a second
Person to act as his, her or its (their) appraiser;
(d) the appraisers thus appointed shall (i) within five (5) days
following the appointment of the appraiser for the Unitholder(s), select a
third appraiser (and if no such appraiser shall have been selected within
such five (5) day period, the Managing Member or the Unitholder(s) may
request the American Arbitration Association (or any successor organization
thereto) to select an appraiser) and (ii) within twenty (20) days following
the appointment of the appraiser for the Unitholder(s), determine the fair
market value of the Appraisal subject; provided, however, that if either
party shall have failed to appoint his, her or its appraiser within the
periods set forth in (b) and (c) above, or if either party's appraiser
shall not have determined the value of the Appraisal subject within the
twenty (20) day period set forth above, then, in the first instance the
determination by the timely appointed appraiser shall be final and, in the
second instance, the determination of the appraiser who has made a timely
determination shall be final;
(e) if the two (2) appraisers have made their determinations within
such twenty (20) day period, then
(i) if the difference between the amounts so determined does not
exceed ten percent (10%) of the lesser of such amounts, the appraisal
value shall be fifty percent (50%) of the sum of the amounts so
determined; and
(ii) if the difference between the amounts so determined equals or
exceeds ten percent (10%) of the lesser of such amounts, the two (2)
appraisers shall make a good faith effort to reduce the difference
between the amounts so determined to less than ten percent (10%) of the
lesser of such amounts; and
(I) if such reduction is achieved within seven (7) days
following the end of the twenty (20) day appraisal period, the fair
market value of the Appraisal subject shall be fifty percent (50%)
of the sum of the amounts so determined, and
(II) if such reduction is not achieved within seven (7) days
following the end of the twenty (20) day appraisal period, (A) the
two (2) appraisers shall, within the following five (5) days,
appoint the third appraiser selected pursuant to paragraph (c)
above and (B) the third appraiser shall, within twenty (20) days of
his appointment, designate one (1) of the two (2) amounts
determined by the two (2) appraisers, respectively, as the fair
market value of the Appraisal subject;
(f) the Managing Member, on the one hand, and the Unitholder(s) on
the other hand, shall pay the fees and expenses of the appraiser appointed
by it and them, respectively, and one-half (1/2) of the fees and expenses
of the third appraiser and one-half (1/2) of all other costs and expenses
incurred in connection with each Appraisal;
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(g) all appraisers must have at least five (5) years of experience
with respect to appraisals of the kind required under this Agreement.
For purposes of this definition of "Appraisal," if the Appraisal is
triggered by the exercise of a Unitholder's put rights as herein provided, the
term "Unitholder(s)" shall refer to the Exercising Unitholder(s); in all other
cases, the term "Unitholder(s)" shall refer to all Unitholder(s).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California, Las Vegas, Nevada or New
York, New York are authorized or required by law to close.
"Cash Consideration" means, with respect to an Exercising Unitholder,
the excess, if any, of (i) the product of (a) the number of Tendered Units and
(b) the Unit Cash Amount as of the Tender Date over (ii) the product of (c) the
number of REIT Shares, if any, delivered to such Exercising Unitholder pursuant
to Section 4 and (d) the current market price per REIT Share as determined
pursuant to paragraph (e) of Section 3, as of the Tender Date.
"Charter" means the Articles of Incorporation of the Managing Member,
as amended, supplemented or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference to a specific section or
sections of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Company" means Oasis Martinique, LLC, a Delaware limited liability
company.
"Contribution Agreement" means that certain Contribution Agreement,
dated as of the date hereof, by and between the parties hereto and to which a
form of this Agreement is attached as an exhibit.
"Delivery Date" means that date which is twelve (12) Business Days
after the applicable Tender Date; provided; however, that notwithstanding the
foregoing, in the event that on such Tender Date an Appraisal is required in
connection with the exercise of the put rights, the Delivery Date shall in no
event be earlier than five (5) Business Days after the conclusion of that
Appraisal.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, all as the same shall be in effect at the relevant time.
"Exercise Notice" means a notice of a Unitholder of exercise of his,
her or its put rights as herein provided in the form of Exhibit B attached
hereto.
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"Exercising Unitholder(s)" means any Unitholder(s) exercising his, her
or its (their) put rights pursuant to this Agreement.
"LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement of the Company, attached as Exhibit "G" to the Contribution
Agreement, as the same may be amended from time to time.
"LLC Unit" shall have the meaning ascribed to such term in the LLC
Agreement.
"Member" means any member of the Company.
"No Put Period" means the period expiring at 11:59 p.m., Los Angeles
Time, on December 24, 1998.
"Original Members" means ISCO, a California general partnership, and
IFT Properties, Ltd., a California limited partnership.
"Managing Member" means Oasis Residential, Inc., a Nevada corporation.
"Person" means any individual, partnership, corporation, trust,
unincorporated organization, or any other entity or a government or agency or
political subdivision thereof.
"REIT Share" means, subject to the provisions of Section 3(b), a share
of the Managing Member's common stock, par value $.01 per share.
"REIT Shares Number" means that number of REIT Shares equal to the
product of (a) the Tendered Units and (b) the then applicable Adjustment Factor.
"Selected Index" means the Vanguard Index 500 Fund, or one of the
following indices selected by the holders of a majority of the LLC Units making
such selection: the Schwab 1000 Fund (SNXFX) or the Fidelity Spartan U.S. Equity
Index Fund (FUSEX).
"Tender Date" means the date an Exercise Notice is received by the
Managing Member.
"Tendered Units" shall mean the LLC Units tendered pursuant to the
Exercise Notice.
"Transferee" means any Person to whom one or more LLC Units which were
initially owned by an Original Member have been Transferred. The term
"Transferee" shall include each transferee, assignee and distributee (whether or
not in liquidation of the distributing Person), transferee of a transferee
through one or more predecessor transfers and, by way of illustration and not
limitation, each Person who becomes a transferee as a result of a secured
creditor exercising its rights under a security agreement and/or applicable law,
in each case, whether the transfer to the transferee was effected with or
without consideration, by gift or bequest, by operation of law or otherwise.
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"Transfer" when used with respect to an LLC Unit for purposes of this
Agreement, means any sale, assignment, bequest, conveyance, devise, gift
(outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange
(other than upon exercise of a Unitholder's put rights hereunder), transfer or
other disposition or act of alienation, whether voluntary or involuntary or by
operation of law, provided, however, that any grant of a security interest shall
constitute a Transfer only upon exercise by the secured creditor of its rights
under a security agreement and/or applicable law. The terms "Transferred" and
"Transferring" have correlative meanings.
"Unit Cash Amount" means, with respect to any exercise by a Unitholder
of his, her or its put rights hereunder, that amount of cash equal to the
product of (a) the current market price per REIT Share as determined pursuant to
paragraph (e) of Section 3, as of the Tender Date and (b) the then applicable
Adjustment Factor, as of the Tender Date.
"Unitholders" means those persons who are "Holders" (as that term is
defined in the LLC Agreement.
2. Put Rights. After the No Put Period, Unitholders may exercise their
put rights hereunder, in whole or in part, at any time and from time to time, by
delivery to the Managing Member of an Exercise Notice. With each Exercise
Notice, an Exercising Unitholder shall tender no less than one thousand (1,000)
LLC Units or, if such Unitholder holds less than one thousand (1,000) LLC Units,
no less than all of his, her or its LLC Units. Each Unitholder shall have put
rights hereunder as long as such Unitholder holds any LLC Units. Each LLC Unit
tendered shall be exchanged, at the election of the Managing Member exercised,
in its sole and absolute discretion, pursuant to Section 6, for REIT Shares,
Cash Consideration, or a combination thereof, in accordance with Sections 4 or
5, as the case may be. Such exchange shall be deemed to have been effected
immediately prior to the close of business on the Tender Date, and at such time
the rights of the Exercising Unitholder as the holder of the LLC Units tendered
shall cease in accordance with, and to the extent of, the provisions of Section
8(b) and in the event that (a) the Managing Member elects to deliver REIT
Shares, the Person or Persons in whose name or names any certificate or
certificates for REIT Shares shall be issuable upon such exchange shall be
deemed to have become the holder or holders of record of the shares represented
thereby, or (b) the Managing Member elects to deliver cash, the Person or
Persons entitled to such cash shall have the irrevocable right to receive the
applicable Cash Consideration on the applicable Delivery Date. The Managing
Member shall also have the right to call LLC Units in exchange for REIT Shares,
Cash Consideration, or a combination thereof hereunder pursuant to the
provisions of Section 8.6 of the LLC Agreement.
3. Adjustment of Adjustment Factor. The Adjustment Factor shall be
subject to adjustment (rounded to the nearest one-hundredth (1/100)), and the
Unitholder's right to receive REIT Shares shall be subject to modification, from
time to time on or prior to the relevant Tender Date as follows:
(a) In case the Managing Member shall at any time (i) split or
subdivide its outstanding REIT Shares, or (ii) effect a reverse stock
split or otherwise
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<PAGE> 6
combine its outstanding REIT Shares, or (iii) pay a dividend in REIT
Shares to holders of REIT Shares, the Adjustment Factor in effect
immediately prior to such action shall be adjusted so that the holder
of any LLC Unit thereafter tendered for exchange shall be entitled to
receive that number of REIT Shares which he would have received
immediately following such action had such LLC Unit been tendered for
exchange immediately prior thereto. Any such adjustment shall become
effective immediately after the record date in the case of a dividend
and shall become effective immediately after the effective date in the
case of a split, subdivision or combination.
(b) In case of any reclassification or change in the REIT Shares
(other than a change from no par value to par value, or from par value
to no par value, or a change in par value, or as a result of a split,
subdivision or combination of shares), or in case of any consolidation
or merger of the Managing Member into another corporation or other
entity, or in the case of any merger of another corporation or other
entity into the Managing Member (other than a merger with a corporation
or other entity in which merger the Managing Member is the continuing
corporation and which does not result in any reclassification,
conversion, exchange or cancellation of outstanding REIT Shares), or in
case of any sale or conveyance to another corporation or other entity
of all or substantially all of the property of the Managing Member, the
holder of each LLC Unit then outstanding shall have the right
thereafter, subject to the terms and conditions of this Agreement, to
exchange such LLC Unit only into the kind and amount of shares of stock
and other securities, property and cash receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of REIT Shares into which such LLC Unit might
have been exchanged immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance; and, if necessary, effective
provision shall be made in the Articles of Incorporation or other
governing document(s) of the resulting or surviving corporation or
other entity or otherwise so that the provisions set forth in this
Agreement shall thereafter be applicable, as nearly as practicable, to
any such other shares of stock and other securities, property and cash
(subject, in the case of cash, to further adjustment as described in
the final sentence of this paragraph (b)) deliverable upon exchange of
the LLC Units remaining outstanding; and any such resulting or
surviving corporation or other entity shall expressly assume the
obligation to deliver, upon the exercise of the put rights as herein
provided, such shares, securities, property or cash as the holders of
the LLC Units remaining outstanding may be entitled to and to make
provisions for the protection of the put rights as herein provided. In
case securities or property other than REIT Shares shall be issuable or
deliverable upon exchange as aforesaid, then all references to REIT
Shares in this paragraph (b) shall be deemed to apply, so far as
appropriate and as nearly as practicable, to such other securities or
property. In case cash shall be deliverable pursuant to this paragraph
(b) upon exchange, the amount of cash payable to an Exercising
Unitholder shall be that amount of cash that would be payable to such
Exercising Unitholder if he, she or it had exercised the put rights
hereunder immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance, which amount shall be
increased or decreased by the percentage increase or decrease (rounded
to the nearest one-thousandth (1/1000) of one percent (1%)), as the
case may be, of the applicable price per share (with adjustment, if
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<PAGE> 7
appropriate, to reflect any splits, combinations or similar changes) of
the Selected Index from the date of such reclassification, change,
consolidation, merger, sale or conveyance to the Tender Date.
(c) In case the Managing Member shall issue to all holders of its
REIT Shares rights or warrants entitling them to subscribe for or
purchase, or issue to such holders securities convertible into, REIT
Shares at a price per share less than the then current market price per
REIT Share (as determined in accordance with the provisions of
paragraph (e) below) at the record date mentioned below (each such
right or warrant, a "Distributed Right"), the Adjustment Factor shall
be adjusted so that the same shall equal the factor determined by
multiplying the Adjustment Factor in effect immediately prior thereto
by a fraction, of which the numerator shall be the number of REIT
Shares outstanding on the record date mentioned below plus the number
of additional REIT Shares offered for subscription or purchase under
the Distributed Rights, and of which the denominator shall be the
number of REIT Shares outstanding on such record date plus the number
of REIT Shares which the aggregate offering price of the total number
of REIT Shares so offered under the Distributed Rights would purchase
at such current market price per REIT Share. Such adjustment shall be
made whenever any Distributed Rights are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such Distributed Rights, provided,
however, that as any Distributed Rights issued to holders of the
Managing Member's REIT Shares expire or become no longer exercisable,
the Adjustment Factor shall be adjusted as of the date of such
expiration or the date such Distributed Rights become no longer
exercisable, as the case may be, to reflect a reduced number of shares
offered for subscription to purchase under the Distributed Rights.
(d) In case the Managing Member shall distribute to all holders of
REIT Shares, (i) shares of its capital stock other than REIT Shares,
(ii) evidence of its indebtedness or assets (excluding cash dividends
or distributions) or (iii) rights or warrants (each a "Right") to
subscribe or purchase shares of its capital stock other than REIT
Shares, securities convertible into shares of its capital stock other
than REIT Shares, evidences of indebtedness or assets (excluding those
referred to in paragraph (c) above), then in each such case the
Adjustment Factor in effect thereafter shall be determined by
multiplying the Adjustment Factor in effect immediately prior thereto
by a fraction, of which the numerator shall be the total number of
outstanding REIT Shares multiplied by the then current market price per
REIT Share (as determined in accordance with the provisions of
paragraph (e) below) on the record date mentioned below, and of which
the denominator shall be the total number of outstanding REIT Shares
multiplied by such current market price per REIT Share, less the fair
market value (as determined by Appraisal), of the capital stock, assets
or evidences of indebtedness so distributed or of such Rights. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution,
provided, however, that as any Rights distributed to holders of the
Managing Member's REIT Shares expire or become no longer exercisable,
the Adjustment Factor shall be adjusted as of the date of such
expiration or
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<PAGE> 8
the date such Rights become no longer exercisable, as the case may be,
to reflect a reduced number of Rights.
(e) For the purpose of any computation under this Agreement, the
current market price per REIT Share at any date shall be deemed to be
the average of the daily closing prices for the ten (10) consecutive
business days commencing fifteen (15) business days before the day in
question. The closing price for each day shall be the closing price of
REIT Shares on the principal national securities exchange on which the
REIT Shares are then trading or if such REIT Shares are not then so
trading, the closing price of the REIT Shares as shown by the National
Association of Securities Dealers, Inc. National Market or, if no such
closing price is available, at the average of the closing bid and asked
prices of such REIT Shares in the over-the-counter market, as shown by
the National Association of Securities Dealers, Inc., Automated
Quotation System, (or comparable system) or in the absence of any of
the foregoing, the fair market value as determined by Appraisal.
4. Delivery of REIT Shares. In the event that the Managing Member
elects, pursuant to Section 6, to deliver to the Exercising Unitholder REIT
Shares, the Managing Member shall deliver to the Exercising Unitholder, on the
Delivery Date, the number of REIT Shares equal to such Exercising Unitholder's
REIT Shares Number (or, on the Delivery Date, such lesser number of REIT Shares
as the Managing Member shall elect in the Response Notice), together with the
Cash Consideration. The REIT Shares so delivered shall be duly authorized,
validly issued, fully paid and nonassessable, freely transferable, and free of
any claim, pledge, lien, encumbrance or restriction (including, without
limitation, any restriction under federal or state securities laws), other than
those contained in the Charter, any claim, pledge, lien, encumbrance or
restriction contained in an agreement to which such exercising Unitholder is
party or otherwise imposed as a result of actions taken by the Unitholder. The
Managing Member shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of REIT Shares upon exchange; provided, however, that the
Exercising Unitholder shall pay any such tax which is due because such shares
are to be issued in a name other than that of such Exercising Unitholder. No
fractional REIT Share shall be issued on any exercise of a put right, but in
lieu thereof, the Managing Member shall pay therefor in cash an amount equal to
the current market price of such fractional interest on the Tender Date as
determined in accordance with the provisions of paragraph (e) of Section 3.
5. Delivery of Cash Consideration. In the event that (a) the Managing
Member elects, pursuant to Section 6, to deliver to the Exercising Unitholder(s)
cash in whole or in part, or (b) the Managing Member elects to deliver REIT
Shares (or is deemed to have elected to deliver REIT Shares as provided in
Section 6) and, for any reason whatsoever, does not deliver the REIT Shares
Number (or such lesser number of REIT Shares elected by the Managing Member
pursuant to Section 4) that meets the requirements of Section 4 on or before the
Delivery Date, the Managing Member shall deliver to the Exercising
Unitholder(s), on the Delivery Date, the Cash Consideration (which shall be
computed by deeming the product described in part (ii) of the definition of Cash
Consideration to be zero) in immediately available United States funds.
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6. Managing Member's Response Notice. Promptly upon receipt of an
Exercise Notice from an Exercising Unitholder (and in no event later than ten
(10) Business Days after such receipt), the Managing Member shall deliver to the
Exercising Unitholder a completed and duly executed Response Notice in the form
of Exhibit A attached hereto. The Managing Member shall simultaneously deliver
to the Company a copy of such duly executed Response Notice. In the event the
Managing Member fails to deliver to the Exercising Unitholder a duly executed
Response Notice within such ten (10) Business Day period, the Managing Member
shall be deemed to have irrevocably elected to deliver to the Exercising
Unitholder, on the Delivery Date, the REIT Shares Number in accordance with
Section 4.
7. Delivery; Distributions.
(a) On the Delivery Date, the Managing Member shall deliver to the
Exercising Unitholder (or any other Person designated in the Exercise
Notice), pursuant to the instructions in the Exercise Notice and in
accordance with the Response Notice, the REIT Shares Number (or such
lesser number of REIT Shares determined and delivered in accordance
with Section 4) and Cash Consideration required to be delivered
pursuant to this Agreement. If any REIT Shares are so delivered, the
Managing Member shall deliver a stock certificate or certificates
evidencing the REIT Shares to be issued and registered in the name of
the Exercising Unitholder or his, her or its designee.
(b) The Managing Member's obligation to deliver REIT Shares and the
Cash Consideration, as the case may be, pursuant to this Agreement is
not subject to any conditions or rights of offset or rebate whatsoever,
except that the Managing Member shall be entitled to offset against
such REIT Shares and the Cash Consideration , and the Cash
Consideration (plus and thereafter, to the extent then necessary, such
REIT Shares) shall be reduced by, the aggregate amount payable, if any,
by the Exercising Unitholder to the Company pursuant to Sections
5.1.C(2), 4.6.B, 8.8, 10.2.B, 10.2.C, 10.2.D, and 10.4 of the LLC
Agreement at the time of delivery of the REIT Shares and the Cash
Consideration, to the extent such amount has not been paid, offset, or
funded by the Exercising Unitholder by the Delivery Date (collectively,
the "LLC Offset"). For purposes of the LLC Offset, a REIT Share shall
be deemed to have a value equal to the Unit Cash Amount of a REIT Share
as of the applicable Tender Date.
8. Rights as a Member.
(a) Prior to the Tender Date, each Exercising Unitholder shall
continue to own such Unitholder's tendered LLC Units, and will continue
to be treated as the holder of such tendered LLC Units for all purposes
of the LLC Agreement, including, without limitation, for purposes of
voting, consent, allocations and distributions. Prior to the Tender
Date, the Exercising Unitholder shall have no rights as a shareholder
of the Managing Member with respect to the REIT Shares issuable in
connection with the exercise of the put rights. If the Tender Date is a
record date for the payment of a dividend by the Managing Member, the
Exercising Unitholder shall be treated as a holder of any REIT Shares
issuable pursuant hereto on the Tender Date and not as a Unitholder of
the
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tendered LLC Units (and (i) the Exercising Unitholder shall be
entitled to receive the dividend payable on such REIT Shares with
respect to such record date and (ii) the Managing Member shall also pay
to the Exercising Unitholder the excess, if any, of (A) the dividend
which would be payable on the REIT Shares Number with respect to such
record date over (B) the amount of the dividend to which the Exercising
Unitholder is entitled under (i) above). The intention of the preceding
parenthetical is that, if the Tender Date is such a record date, the
Exercising Unitholder be entitled to receive an amount equal to the
full dividend which would be payable with respect to such record date
on the REIT Shares Number (no more and no less), whether the Exercising
Unitholder receives all cash, all REIT Shares, or a combination thereof
for the Tendered Units.]
(b) As of the Tender Date, (i) the Unitholder shall have no further
claim or interest in and with respect to the LLC Units tendered by such
Exercising Unitholder, except for all rights, title, interests, claims,
causes of action, and the like of such Exercising Unitholder which are
specified in Section 8.5 of the LLC Agreement, (ii) the Unitholder
shall be released from all liabilities arising at any time out of such
Unitholder's LLC Units tendered and/or such Unitholder's status and
interest as a Unitholder as a result thereof, except as otherwise
specified in the LLC Agreement, and (iii) the Units tendered by such
Exercising Unitholder shall be canceled.
9. Consistent Treatment as Sale. Each of the Managing Member, any
Exercising Unitholder and the Company shall treat the exercise of an Exercising
Unitholder's put rights hereunder for federal income tax purposes as a sale of
the Exercising Unitholder's Tendered Units to the Managing Member.
10. Representations and Warranties of Unitholders. On each date that an
Exercising Unitholder delivers to the Managing Member an Exercise Notice, such
Exercising Unitholder represents and warrants to the Managing Member as follows:
(a) The Unitholder has the authority to exercise all rights and
powers under this Agreement, including the right and power to deliver
the Exercise Notice, tender LLC Units and receive all consideration
provided hereunder, and has obtained all consents, approvals, permits
and other clearances required pursuant to any agreement to which such
Unitholder is a party to complete the transactions contemplated
hereunder. This Agreement and the performance of all of the
transactions by the Unitholder contemplated hereunder have been duly
authorized, and this Agreement has been duly executed and delivered by
the Unitholder.
(b) Upon receipt by the Unitholder of the REIT Shares Number (or
such lesser number of REIT Shares determined and delivered in
accordance with Section 4) and the Cash Consideration, the Unitholder
will convey good and marketable title to each and every LLC Unit
tendered hereunder, free and clear of any liens, claims, encumbrances,
restrictions, interests or rights of any other Person, except for the
restrictions on transfer of LLC Units described in the LLC Agreement or
under federal or state securities laws or otherwise imposed as a result
of actions taken by the Managing Member.
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(c) The Unitholder (other than a Unitholder who has not acquired any
LLC Unit in a transaction constituting a "sale" within the meaning of
Section 2(3) of the Securities Act or who is a Family Member (as such
term is defined in the LLC Agreement) of the transferor and has
acquired the LLC Units by gift) is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The
Unitholder acknowledges that he, she or it has the financial ability to
bear the economic risk of his, her or its investment in the Managing
Member, has adequate means for providing for his, her or its current
needs and personal contingencies and has no need for liquidity with
respect to the investment in the Managing Member.
11. Representations and Warranties of the Managing Member. On the date
hereof, and on each date that a Unitholder receives REIT Shares or other
securities or cash under this Agreement, the Managing Member represents and
warrants to the Exercising Unitholder (or any other Person designated in the
Exercise Notice as a Person to receive REIT Shares) as follows:
(a) The Managing Member is duly incorporated and validly existing,
in good standing, under the laws of the state of Nevada, with full
power and authority to exercise all rights and powers under this
Agreement, including the right and power to deliver the Response
Notice, issue REIT Shares, deliver any and all consideration to be
delivered hereunder and to acquire the LLC Units tendered pursuant to
this Agreement, and has obtained all consents, approvals, permits and
other clearances required to complete the transactions contemplated
hereunder. This Agreement and the performance of all of the
transactions contemplated hereunder have been duly authorized, and this
Agreement has been duly executed and delivered, by the Managing Member.
(b) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of or constitute a default
under any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Managing Member
is a party or by which it is bound, the Managing Member's Charter or
By-laws, or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Managing Member or any of
its subsidiaries or any of their properties, except for any such
breach, violation or default that would not adversely affect the
ability of the Managing Member to perform its obligations under this
Agreement.
(c) The REIT Shares issuable upon exchange of the LLC Units have
been duly authorized and reserved for issuance and, when issued upon
any such exchange, will be validly issued, fully paid and
nonassessable, freely transferable, and free of any claim, pledge,
lien, encumbrance or restriction (including, without limitation, any
restriction under federal or state securities laws), other than those
contained in the Charter, any claim, pledge, lien, encumbrance or
restriction contained in an agreement to which such Exercising
Unitholder is a party or otherwise imposed as a result of actions taken
by
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the Unitholder. The shareholders of the Managing Member have no
preemptive rights with respect to any shares of capital stock of the
Managing Member, including, without limitation, the REIT Shares
issuable hereunder.
12. Covenants of the Managing Member. The Managing Member covenants and
agrees as follows:
(a) As long as any LLC Units are outstanding, the Managing Member
agrees (i) to have, at all times, authorized and reserved for issuance
that number of REIT Shares equal to the product of (I) the number of
outstanding LLC Units and (II) the Adjustment Factor then in effect and
(ii) to take all actions necessary (x) so that any REIT Shares issued
upon the exercise of any put rights hereunder shall be duly authorized,
validly issued, fully paid and nonassessable, freely transferable, and
free of any claim, pledge, lien, encumbrance or restriction (including,
without limitation, any restriction under federal or state securities
laws), other than any pledge, lien, encumbrance or restriction
contained in an agreement to which such Exercising Unitholder is a
party or otherwise imposed as a result of actions taken by the
Unitholder, and (y) to maintain, at all times, its status as a "real
estate investment trust" as defined in Section 856 of the Internal
Revenue Code of 1986, as amended (except if there is (A) a
consolidation or merger of the Managing Member into another corporation
or other entity which is not such a real estate investment trust or (B)
a sale or conveyance to another corporation or other entity of all or
substantially all of the property of the Managing Member).
(b) During the existence of the put rights, the Unitholders shall
receive in a timely manner all reports filed by the Managing Member
with the Securities and Exchange Commission and all communications
transmitted from time to time by the Managing Member to its
stockholders generally.
13. Indemnification. The Managing Member agrees to indemnify each
Unitholder and his, her or its affiliates, officers, directors, partners,
employees, agents and representatives against all losses, claims, damages,
liabilities and expenses whatsoever and reasonable fees and expenses of counsel
incurred in investigating, preparing or defending against, and aggregate amounts
paid in settlement of any litigation, action, investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether or
not a party, or any claim whatsoever based upon, arising from or in connection
with the breach of any representation or warranty made by the Managing Member
under this Agreement. Each Exercising Unitholder agrees to indemnify the
Managing Member and his, her or its affiliates, officers, directors, partners,
employees, agents and representatives against all losses, claims, damages,
liabilities and expenses whatsoever and reasonable fees and expenses of counsel
incurred in investigating, preparing or defending against, and aggregate amounts
paid in settlement of any litigation, action, investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether or
not a party, or any claim whatsoever based upon, arising from or in connection
with the breach of any representation or warranty made by the Exercising
Unitholder under this Agreement. The procedures for indemnification set forth in
Section 8.8 D(ii) of the LLC Agreement shall govern any claim for under this
Section 13.
12
<PAGE> 13
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed, construed and
enforced in all respects by the laws of the State of California,
without regard to choice of law rules.
(b) Entire Agreement. This Agreement and the provisions of the
forms of Exercise Notice and Response Notice attached hereto, together
with the LLC Agreement, the Contribution Agreement, and all other
agreements and documents specifically referred to herein, or therein,
constitute the full and entire understanding and agreement with regard
to the subjects hereof and thereof, and supersede any previous
agreements regarding the matters covered herein and therein. In the
event of any inconsistency between this Agreement and any other
agreement, this Agreement shall govern.
(c) Notices. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a "notice") required
or desired to be given or made under this Agreement shall be in writing
(except as otherwise provided in this Agreement) and shall be effective
and deemed to have been received (a) when delivered in person or (b)
when sent by facsimile transmission with receipt acknowledged (i) if to
a Unitholder, to the Unitholder at such Unitholder's address set forth
in Exhibit A hereto or, if not set forth in Exhibit A, in the records
of the Company, or at such other address or to such telefax number as
such Unitholder shall have furnished to the Managing Member and the
Company in writing, or (ii) if to the Managing Member or the Company,
to the Managing Member or the Company at the address of the Managing
Member's principal executive offices and addressed to the attention of
the President, or at such other address or to such telefax number as
the Managing Member or the Company shall have furnished to the
Exercising Unitholder in writing.
(d) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full
force and effect without said provision; provided, however, that no
such severability shall be effective if it materially changes the
economic benefit of this Agreement to any Person.
(e) Construction. Words such as "herein," "hereinafter," "hereof"
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.
(f) Effectiveness and Binding Effect. This Agreement shall become
effective upon the execution and delivery of counterparts by the
Managing Member, the Company and the Original Members, and shall
thereafter be binding upon and inure to the
13
<PAGE> 14
benefit of the Managing Member, the Company and the Unitholders and
their respective successors, assigns, heirs, executors, administrators
and legal representatives.
(g) Additional Holders of LLC Units. If the Company issues LLC
Units in accordance with and subject to the consents required by the
LLC Agreement to Persons who are not parties to this Agreement, the
Managing Member may elect to cause such Persons to become parties to
this Agreement, in which case (a) this Agreement shall be amended
without the consent of any other party to make such Persons parties to
this Agreement and (b) such Persons shall execute and deliver a
counterpart of this Agreement.
(h) Headings. Headings are for descriptive purposes only and shall
not control or alter the meaning of this Agreement as set forth in the
text.
(i) Attorneys' Fees. In the event of any litigation among the
parties hereto to enforce or interpret any provision hereof, the
unsuccessful party to such litigation covenants and agrees to pay the
successful party all costs and expenses reasonably incurred, including,
without limitation, reasonable attorneys' fees, including any such fees
and expenses relating to the enforcement of any judgment.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
the date first written above.
OASIS RESIDENTIAL, INC.,
a Nevada corporation
By:
-----------------------------------
President
OASIS MARTINIQUE, LLC,
a Delaware limited liability company
By: Oasis Residential, Inc., a Nevada
corporation, its Managing Member
By:
-------------------------------
President
UNITHOLDERS
ISCO, a California general partnership
By: AMERICAN REALPROP, a California
general partnership
By:
---------------------------
Robert Cohen,
Authorized Signature
IFT PROPERTIES, LTD., a California
limited partnership
By:
-------------------------------
Edward Israel, General Partner
15
<PAGE> 16
EXHIBIT A
RESPONSE NOTICE
--------------------, ------
[Date]
TO: [Exercising Unitholder] and [Company]
On and subject to the terms, provisions and conditions of that certain
Exchange Rights Agreement dated as of September ___, 1997 among Oasis
Residential, Inc., a Nevada corporation (the "Managing Member"), Oasis
Martinique, LLC, a Delaware limited liability company (the "Company"), and each
of the Unitholders who are parties thereto, the Managing Member hereby elects to
acquire ___________ LLC Units from _________________________ (the "Unitholder")
pursuant to that certain Exercise Notice delivered to the Managing Member by the
Unitholder, by delivery to the Unitholder (or any Person designated in the
Exercise Notice) of the following number of REIT Shares, with the balance, if
any, due upon acquisition of the LLC Units payable as Cash Consideration :
________________ REIT Shares
Oasis Residential, Inc.,
a Nevada corporation
By: ________________________________
Its: _______________________________
Print Name: ________________________
<PAGE> 17
EXHIBIT B
EXERCISE NOTICE
--------------------, ------
[Date]
To: Oasis Residential, Inc.
On and subject to the terms, provisions and conditions of that certain
Exchange Rights Agreement ("Agreement") dated as of September ___, 1997 among
Oasis Residential, Inc., a Nevada corporation (the "Managing Member"), Oasis
Martinique, LLC, a Delaware limited liability (the "Company"), and each of the
Unitholders who are parties thereto, the undersigned Unitholder hereby exercises
such Unitholder's put rights pursuant to the Agreement by tendering ______ LLC
Units described below.
DESCRIPTION OF LLC UNITS
Name(s) and LLC Unit Certificate(s) Enclosed
Address(es) of (Attach additional list if necessary)
Unitholder(s)
<TABLE>
<CAPTION>
LLC Units
LLC Unit Represented
Certificate by LLC Unit LLC Units
Number(s) Certificate(s) Being Tendered
----------- -------------- --------------
<S> <C> <C> <C>
</TABLE>
Unless otherwise indicated, all LLC Units, evidenced by any LLC Unit
Certificate(s) delivered to the Managing Member are being tendered.
The undersigned Unitholder represents, warrants and agrees that:
(a) as of the date hereof, the undersigned Unitholder, to the best of
its knowledge after reasonable inquiry, owns, directly, indirectly, and by
attribution under Code Section 318 (as modified by Code Section 856(d)(5)), not
more than the following number(s) of shares of each class and/or type of
securities (e.g., common stock, preferred stock, convertible securities,
options, warrants, and/or other rights to acquire securities) of the Managing
Member:
CLASS AND/OR TYPE OF SECURITY NUMBER
----------------------------- ------
- ---------------------------------------- ------------------------------
- ---------------------------------------- ------------------------------
- ---------------------------------------- ------------------------------
<PAGE> 18
(b) as of the date hereof, the undersigned Unitholder, to the best of
its knowledge after reasonable inquiry, owns, directly, indirectly, and by
attribution under Code Section 544 (as modified by Code Section 856(h)), not
more than the following number(s) of shares of each class and/or type of
securities (e.g., common stock, preferred stock, convertible securities,
options, warrants, and/or other rights to acquire securities) of the Managing
Member:
CLASS AND/OR TYPE OF SECURITY NUMBER
----------------------------- ------
- ---------------------------------------- ------------------------------
- ---------------------------------------- ------------------------------
- ---------------------------------------- ------------------------------
Dated: Name of Unitholder:
----------------------------
------------------------------------
------------------------------------
(Signature of Unitholder)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip)
------------------------------------
(Social Security Number or
identifying number)
Signature Guaranteed by:
------------------------------------
Issue REIT Shares in the name of
------------------------------------
2
<PAGE> 1
LOAN AND SECURITY AGREEMENT
This AGREEMENT, dated as of October 23, 1997, is made by and among
OASIS RESIDENTIAL, INC., a Nevada corporation (the "Lender"), ISCO, a California
general partnership (the "Borrower"), and IFT PROPERTIES, LTD., a California
limited partnership ("IFT"), Edward M. Israel, an individual whose address is
10474 Santa Monica Boulevard, #405, Los Angeles, California 90025 ("Israel"),
and Robert Cohen, an individual whose address is c/o Four Seasons Hotel, 300
South Doheny, Los Angeles, California 90048 ("Cohen" and, collectively with IFT
and Israel, the "Guarantors").
Recitals
A. The Borrower has requested the Lender to lend to the Borrower the
sum of $8,216,000 to be evidenced by and repayable on the terms set forth in (i)
a promissory note in substantially the form of Exhibit A hereto ("Note A")
payable by the Borrower to the order of the Lender in the principal sum of
$4,300,000, together with interest thereon, and secured and guaranteed as herein
set forth and (ii) a promissory note in substantially the form of Exhibit B
attached hereto ("Note B") payable by the Borrower to the order of the Lender in
the principal sum of $3,916,000, together with interest thereon, and secured and
guaranteed as herein set forth.
B. The Lender is willing to make the loans evidenced by the Notes
subject to and upon the terms and conditions set forth in the Notes and in this
Agreement, including the guaranties, collateral security, representations,
warranties, covenants and agreements set forth herein.
NOW THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE LOANS
SECTION 1.1 THE LOANS.
(a) MAKING THE LOANS. Subject to the terms and conditions set forth
herein, the Lender hereby agrees to lend to the Borrower on the Closing Date (i)
the sum of $4,300,000 to be evidenced by and repayable on the terms set forth in
Note A and this Agreement, and (ii) the sum of $3,916,000 to be evidenced by
and repayable on the terms set forth in Note B and this Agreement.
<PAGE> 2
(b) USE OF PROCEEDS. The Borrower has offered to and hereby agrees
to, and the Borrower and the Guarantors hereby irrevocably authorize and direct
Chicago Title Company, as escrow agent for the closing of the transactions
contemplated by the Transaction Documents, or the Lender to, disburse the
proceeds of the loans evidenced by the Notes for the account of the Borrower as
follows:
(1) From the proceeds of Note A:
(A) $1,910,532 shall be applied to pay indebtedness
secured by Junior Trust Deeds,
(B) $665,144 shall be applied to the payment of
obligations of the Borrower and the Guarantors under the
Contribution Agreement,
(C) $22,860 shall be applied to the payment of the amount
payable under Section 4.1(g), and
(D) the remainder of such proceeds shall be remitted to
Cohen as the proceeds of a loan in such amount evidenced by, and
repayable to the Borrower on the terms set forth in, that certain
promissory note dated October 23, 1997 (the "Cohen Note") made by
Cohen payable to the order of the Borrower, a true copy of which is
attached as Exhibit C-1 hereto, and
(2) From the proceeds of Note B:
(A) $2,865,797 shall be applied to pay indebtedness
secured by Junior Trust Deeds, and
(B) $997,718 shall be applied to the payment of
obligations of the Borrower and the Guarantors under the
Contribution Agreement,
(C) $34,290 shall be applied to the payment of the amount
payable under Section 4.1(g), and
(D) the remainder of such proceeds shall be remitted to
Israel as the proceeds of a loan in such amount evidenced by, and
repayable to the Borrower on the terms set forth in, that certain
2
<PAGE> 3
promissory note dated October 23, 1997 (the "Israel Note") made by
Israel payable to the order of the Borrower, a true copy of which is
attached as Exhibit C-2 hereto.
(c) SINGLE FUNDING; NO REBORROWING. The loans committed hereunder
shall be available only in a single funding on the Closing Date, if the
conditions set forth in Section 4.1 are then met, and shall not be available
thereafter. Amounts repaid hereunder may not be reborrowed.
SECTION 1.2 REPAYMENT OF THE LOANS.
(a) REPAYMENT OF PRINCIPAL. The Borrower promises to repay to the
Lender the principal of each Note in full and in cash in lawful money of the
United States, at the offices of the Lender in Henderson, Nevada, on the day
(the "Maturity Date") that is the first to occur of (i) December 23, 1998, and
(ii) the date on which the indebtedness evidenced by such Note becomes
immediately due and payable as set forth in Section 7.1.
(b) PREPAYMENT.
(1) The Borrower shall prepay Note A if and whenever there is a
Prepayment Event as to Note A, in an amount equal to the proceeds of such
Prepayment Event.
(2) The Borrower shall prepay Note B if and whenever there is a
Prepayment Event as to Note B, in an amount equal to the proceeds of such
Prepayment Event.
(3) The Borrower may at any time prepay the Notes in full or in
part, without premium or penalty but, whenever any Note is prepaid in
full, with all unpaid interest accrued to the date of prepayment.
(c) INTEREST. The Borrower further promises to pay to the Lender, in
cash in lawful money of the United States, interest on the principal amount
outstanding on each Note from the Closing Date until such principal amount is
paid in full in cash in lawful money of the United States, at the rate of
fifteen percent (15%) per annum, subject to Sections 1.2(e) and 1.2(f).
(d) PAYMENT OF INTEREST. Interest on each Note shall be payable
quarterly in arrears, in cash in Dollars, with all unpaid interest accrued on
each Note
3
<PAGE> 4
through the 15th day of each November, February, May and August payable on the
25th day of such month, commencing November 25, 1997, and, in any event, upon
prepayment of such Note in full and on the Maturity Date; provided, however,
that:
(1) If a distribution in cash is made pursuant to Section
5.1(A)(1) of the LLC Agreement on an "LLC Distribution Date" (as defined
therein) occurring in any November, February, May or August prior to the
25th day of such month, the date on which interest is payable and shall be
paid in such month shall be the LLC Distribution Date occurring in such
month rather than the 25th day of such month; and
(2) If as to any such November, February, May or August (i)
the amount of cash distributed on account of LLC Units constituting
Collateral pursuant to Section 5.1(A)(1) of the LLC Agreement or as a
dividend on Common Stock constituting Collateral is less than forty-five
and one-quarter cents ($0.4525) per LLC Unit or per share of Common Stock
(a "Per Share Distribution Shortfall"), (ii) the Lender has received
direct payment of all cash distributions on account of LLC Units and
Common Stock constituting Collateral in accordance with Section 3.9 and
has been permitted to apply such distributions to the payment of any and
all unpaid interest accrued on Note A, in the case of cash distributions
on the Cohen Interests, and any and all unpaid interest accrued on Note B,
in the case of cash distributions on the Israel Interests, and (iii) no
Default or Event of Default has occurred and is continuing on such
quarterly interest payment date, and:
(A) if and only if the aggregate amount of all such cash
distributions received by the Lender on the Cohen Interests during
such month is not sufficient to pay in full all interest that is due
and payable on Note A on the quarterly interest payment date
occurring in such month (a "Cohen Interest Coverage Shortfall"),
then payment of a portion of the interest payable on Note A on such
quarterly interest payment date equal to the lesser of (1) such
Cohen Interest Coverage Shortfall or (2) the product of (x) the Per
Share Distribution Shortfall determined for such month times (y) the
number of LLC Units and shares of Common Stock then comprising the
Cohen Interests shall be deferred (without compounding of interest
on the amount deferred) and such deferred interest shall be payable
(i) from any amount by which any future distributions on the Cohen
Interests exceed the interest then due on Note A, as and when such
distributions are made, and (ii) in any event, on the Maturity Date;
and
4
<PAGE> 5
(B) if and only if the aggregate amount of all such cash
distributions received by the Lender on the Israel Interests during
such month is not sufficient to pay in full all interest that is due
and payable on Note B on the quarterly interest payment date
occurring in such month (an "Israel Interest Coverage Shortfall"),
then payment of a portion of the interest payable on Note B on such
quarterly interest payment date equal to the lesser of (1) such
Israel Interest Coverage Shortfall or (2) the product of (x) the Per
Share Distribution Shortfall determined for such month times (y) the
number of LLC Units and shares of Common Stock then comprising the
Israel Interests shall be deferred (without compounding of interest
on the amount deferred) and such deferred interest shall be payable
(i) from any amount by which any future distributions on the Israel
Interests exceed the interest then due on Note A, as and when such
distributions are made, and (ii) in any event, on the Maturity Date.
(e) EARLY PAYMENT INCENTIVE CREDIT. Notwithstanding the provisions
of Section 1.2(c), if on any day prior to March 31, 1998 (time and strict and
full compliance with the following conditions being of the essence):
(1) the Borrower has paid to the Lender all interest accrued
on Note A or Note B (as the case may be) at the rate of 15 % per annum as
set forth in Section 1.2(c), to the extent payable prior to such day, and
has repaid to the Lender, in full and in cash, the entire outstanding
principal balance of Note A (if interest on Note A was so paid) or on Note
B (if interest on Note B was so paid), except the amount of the early
payment incentive credit to which the Borrower is entitled in respect of
such repayment as set forth in this Section 1.2(e), and
(2) the Borrower has delivered to the Lender an instrument in
form and substance reasonably satisfactory to the Lender, duly executed
and delivered (x) if Note A was repaid, by the Borrower, Cohen and
American Realprop, a California general partnership and each and all of
the partners therein and successors thereto, and (y) if Note B was repaid,
by the Borrower, Israel and Victor Israel and by IFT and Costa Mesa
Associates, a California general partnership and each and all of the
partners and successors to IFT and Costa Mesa Associates, forever
releasing and discharging the Lender and each of its Affiliates and each
and all of their respective shareholders, members, equity owners,
directors, officers, employees, attorneys and agents from and against any
and all claims, causes of action, liabilities, damages, costs
5
<PAGE> 6
and expenses, whether due or not due, absolute or contingent, liquidated
or unliquidated, accrued or not accrued, known or unknown, that are or
might be based on or arising from or relating to this Agreement or the
making, administration, or repayment of the loans evidenced by the Notes
or the exercise or enforcement of any right, remedy, claim or interest of
the Lender under the Loan Documents (but without releasing any rights or
claims arising under the Transaction Documents),
then the Borrower shall be entitled to an early payment incentive credit against
the interest otherwise payable pursuant to Section 1.2(c) such that the
aggregate amount required to repay all principal of and interest on the
indebtedness outstanding on the Note that was paid in full (Note A or Note B, as
the case may be) shall be equal to the sum of (i) the full stated principal
amount thereof and (ii) interest computed on the unpaid balance of such
principal amount from the Closing Date until such principal was paid in full at
the rate of nine per cent (9%) per annum. The Borrower shall not have the right
to reduce or credit or setoff any Obligation payable by it on any Note by reason
of' any dispute as to whether any refund is due under this Section 1.2(e).
(f) USURY LAWS. It is the intent of the Borrower, the Lender and the
Guarantors that the laws of the State of Nevada, including Nevada law relating
to the permissible or lawful rate of interest on the loans to be evidenced by
the Notes, shall apply to such loans and the Notes and the transaction
contemplated hereby and that the fifteen per cent (15%) per annum rate of
interest specified in Section 1.2(c) and all other payment obligations of the
Borrower and Guarantors hereunder shall be lawful and collectible and
enforceable against the Borrower and the Guarantors and the Collateral. If,
notwithstanding such intention of the parties, it is determined by a court of
competent jurisdiction that the parties could not lawfully agree that such laws
of the State of Nevada shall apply and that the parties are, notwithstanding
their intention to the contrary, required as a matter of law to be bound by and
subject to any usury law of any jurisdiction pursuant to which a lesser rate of
interest is the highest lawful rate of interest that the Lender may charge,
enforce or collect on such loans, then to the extent of such determination (i)
the interest on such loans shall be reduced as required to limit the aggregate
interest collected by the Lender to such highest lawful rate of interest and
(ii) any payment of interest in excess of such highest lawful rate of interest
that has actually been paid to and retained by the Lender shall be deemed
reapplied so as to constitute a payment of principal on account of such loans.
(g) PAYMENT FREE FROM CONDITIONS, CLAIMS AND RESERVATIONS OF RIGHTS.
No payment of principal or interest on any Note, or on any other obligation
6
<PAGE> 7
of the Borrower hereunder, shall be deemed properly made or tendered if such
payment is subject to any condition, claim or reservation of rights. The Lender
shall not be bound by any such condition, claim or reservation and shall have
the right to accept and retain any such payment free from any such condition,
claim or reservation, without notifying the Borrower or any other Person of its
intent or election to do so and without prejudice to its right to enforce the
Borrower's obligation to make such payment properly, without any such condition,
claim or reservation.
SECTION 1.3 PAYMENT OBLIGATIONS ABSOLUTE. The obligation of the Borrower
to make the payments described in Section 1.2 shall be absolute, unconditional
and irrevocable and shall be performed strictly in accordance with the terms of
this Agreement without regard to any other circumstances, including (i) any lack
of validity or enforceability of any of the Loan Documents, (ii) any amendment
or waiver of or any consent to departure from all or any terms of any of the
Loan Documents, (iii) the existence of any claim, setoff, defense or other right
which the Borrower or any Guarantor may have at any time against the Lender or
any holder of a Note or any of their respective Affiliates or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any other transaction, whether or not related or concurrent thereto, (iv) any
breach of contract or dispute among or between the Borrower, any Guarantor, or
the Lender or any holder of a Note or any of their respective Affiliates or any
other Person, (v) any use of the proceeds of the Loans evidenced by the Notes,
including the uses set forth in Section 1.1(b), or the unenforceability or
uncollectibility of the Cohen Note or the Israel Note, (vi) any release or
discharge of any Guarantor or any Lien upon any collateral security, (vii) any
extension of time for or delay, renewal or compromise of or other indulgence or
modification granted or agreed to by the Lender, with or without notice to or
approval by the Borrower or any Guarantor, (viii) any failure to preserve or
protect any Collateral, any failure to perfect or preserve the perfection of any
Lien thereon, or the release of any Collateral, or (ix) any other circumstance
or event whatsoever relating to the Borrower or any Guarantor or any Note or
Loan Document or any payment thereunder or any act or omission (whether or not
wrongful) in any manner relating thereto or any other event, condition or
circumstance of any type or nature whatsoever.
SECTION 1.4 PAYMENTS AND COMPUTATIONS.
(a) PAYMENTS. The Borrower shall make each payment due to the Lender
under this Agreement or under the Notes by delivering immediately available
Dollars to the Lender at its offices in Henderson, Nevada or for account of the
Lender
7
<PAGE> 8
to a bank designated by the Lender located in Las Vegas or Henderson, Nevada,
not later than 1:00 p.m. (Nevada time) on the day payment is due. Unless
otherwise directed by the Lender, such payment shall be remitted to the Lender
by wire transfer as follows:
Bank: Wells Fargo Bank
Bank ABA: 121 000 248
Account No.: 4159-574797
Account Name: Oasis Residential, Inc.
For Credit to: Oasis Residential, Inc.
(b) COMPUTATIONS. All computations of interest, additional interest
and fees accruing at a per annum rate shall be made on the basis of the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, additional interest or fees are payable and
a year of 365 days or, in a leap year, 366 days.
(c) PAYMENT ON BUSINESS DAY. Whenever any payment to the Lender
under this Agreement or the Notes is due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees.
SECTION 1.5 TAXES.
(a) NET PAYMENTS. Any and all payments by the Borrower under this
Agreement or the Notes shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on the Lender's net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively, are "Taxes"). If the
Borrower is required by law to deduct any Taxes from or in respect of any sum
payable under this Agreement or any Note, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.5) the
Lender or any other holder of a Note entitled to such payment (as the case may
be) receives an amount equal to the sum it would have received if no such
deductions had been made, (ii) the Borrower shall make such deductions, and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. If the Borrower
makes any such deductions, the Lender will cooperate with the Borrower in any
manner reasonably requested by the
8
<PAGE> 9
Borrower to enforce any claim for a refund, but at the Borrower's sole cost and
expense.
(b) PAYMENT OF OTHER TAXES. In addition, the Borrower agrees to pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made under this
Agreement or the Notes or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Notes or any other Loan Document
("Other Taxes").
(c) INDEMNIFICATION. The Borrower will indemnify the Lender and each
other holder of any Note, or any interest therein, for the full amount of Taxes
and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 1.5) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnity shall be due 30 days after written demand therefor.
(d) EVIDENCE OF PAYMENTS. Within 30 days after the date of any
payment of Taxes, the Borrower will furnish to the Lender the original or a
certified copy of a receipt evidencing payment thereof.
SECTION 1.6 COSTS, EXPENSES AND TAXES. The Borrower further agrees to pay
on demand all reasonable costs and expenses incurred by the Lender in connection
with the preparation, negotiation, execution, delivery, modification and
amendment of the Loan Documents and the other documents to be delivered under
the Loan Documents, including reasonable fees and out-of-pocket expenses of
counsel to the Lender with respect thereto and with respect to advising the
Lender as to its rights and responsibilities under the Loan Documents. Without
limiting the Borrower's liability for costs and expenses incurred by the Lender
after the Closing Date, the amount payable by the Borrower under this Section
1.6 in respect of such costs and expenses incurred through the Closing Date
shall not exceed $57,150. The Borrower further agrees to pay on demand all
out-of-pocket costs and expenses, including any and all fees and expenses of
attorneys (including allocable costs of in-house counsel), accountants,
appraisers, advisors and other experts, incurred by the Lender or any holder of
any Note, or any interest therein, in respect of any Event of Default or while
any Event of Default is continuing or in connection with the protection,
resolution or enforcement (whether through negotiations, by legal proceedings,
in bankruptcy or otherwise) of the obligations of the Borrower or any Guarantor
9
<PAGE> 10
hereunder or the Collateral or any right, remedy, power, interest or claim of
the Lender or such holder under any Loan Document.
SECTION 1.7 INDEMNITY. The Borrower hereby agrees to pay and assume all
liability for, and to defend, indemnify, and hold harmless the Lender and each
of its transferees and each of their respective shareholders, directors,
officers, attorneys, employees and agents (each, an "Indemnified Person") from
and against, any and all claims, liabilities, obligations, losses, damages,
penalties, actions, proceedings, judgments, suits, costs, charges, expenses or
disbursements (including reasonable fees and expenses of counsel) of any kind or
nature whatsoever with respect to the execution, delivery, enforcement and
performance of this Agreement or any other Loan Document or the transactions
contemplated herein, or with respect to any investigation, litigation or
proceeding related to this Agreement or the funding or repayment of the loans
hereunder or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"), except only, in the case of any Indemnified Person, Indemnified
Liabilities arising from the gross negligence or willful misconduct of such
Indemnified Person.
ARTICLE II
GUARANTY, INDEMNIFICATION AND SUBORDINATION
BY THE GUARANTORS
SECTION 2.1 GUARANTY OF NOTE A AND RELATED OBLIGATIONS. Each Guarantor
hereby absolutely and unconditionally guarantees, jointly and severally with
each other Guarantor, the payment of the principal of and interest on Note A in
full and in cash on the Maturity Date.
SECTION 2.2 GUARANTY OF NOTE B AND RELATED OBLIGATIONS. Each Guarantor
hereby absolutely and unconditionally guarantees, and severally with each other
Guarantor, the payment of the principal of and interest on Note B in full and in
cash on the Maturity Date.
SECTION 2.3 GUARANTY OF OTHER BORROWER OBLIGATIONS. Each Guarantor hereby
absolutely and unconditionally guarantees, jointly and severally with each other
Guarantor, the payment when due (at maturity, by acceleration or otherwise) of
any
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and all other obligations and liabilities of the Borrower, other than the Notes,
at any time arising under this Agreement.
SECTION 2.4 JOINT AND SEVERAL INDEMNITY. Each Guarantor hereby agrees,
jointly and severally with each other Guarantor, to pay and assume all risk of,
and to defend, indemnify and hold harmless the Lender and each other holder of
any Obligations and each and all of their respective equity owners, members,
directors, officers, attorneys, agents and employees from and against, any and
all claims, damages, liabilities, losses, costs and expenses (including all fees
and disbursements of legal counsel, whether or not suit is brought) arising
from, based on or relating in any manner relating to (i) any inaccuracy in or
breach of any of the representations and warranties set forth in Sections 3.6 or
5.1 or (ii) any failure by any Person to perform or observe, or any breach of,
any of the covenants and agreements set forth in Sections 3.3, 3.4, 3.7, 3.8,
3.9, 6.1 or 6.2, in each case whether or not such inaccuracy, failure or breach
was caused by the Borrower or a Guarantor or any other Person or resulted from
an Act of God or otherwise and whether or not such inaccuracy, failure or breach
is otherwise within the control of the Borrower or such Guarantor or any other
Person.
SECTION 2.5 ACCELERATION OF PAYMENT. If any Guarantor (i) fails to make any
payment due and demanded of such Guarantor hereunder, (ii) fails upon demand to
perform and observe any obligation of such Guarantor set forth herein, (iii)
falls to pay when due, or permit any default or event of default to occur in
respect of, any debt or liability binding upon or enforceable against such
Guarantor or any of its property for an amount of $250,000 or more, (iv) becomes
a debtor in any bankruptcy case or the subject of any insolvency, liquidation,
receivership or dissolution proceeding commenced voluntarily by such Guarantor
or (if it remains pending for more than 60 days or if such Guarantor consents to
entry of an order for relief therein) commenced involuntarily against such
Guarantor, or (v) payment of the Notes becomes due or is demanded from the
Borrower after the occurrence of any Prepayment Event or Event of Default, then
(in each such event) all liability of each Guarantor under this Agreement that
is not then due and payable shall thereupon become and be immediately due and
payable, without notice or demand.
SECTION 2.6 GUARANTY ABSOLUTE AND UNCONDITIONAL. Each Guarantor guarantees
that the Obligations will be paid in accordance with the terms of this Agreement
and the other Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights and claims of any holder of Obligations against the Borrower or any other
Guarantor with respect thereto and even if any such rights or claims are
modified, reduced or
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discharged in any bankruptcy case or insolvency or liquidation proceeding or
otherwise. The liability of each Guarantor under this Agreement is independent
of all other Obligations, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Agreement, whether or not any
action is brought against the Borrower or any other Guarantor and whether or not
the Borrower or any other Guarantor is joined in any such action or actions. The
liability of each Guarantor under this Agreement shall be absolute and
unconditional irrespective of, and shall not be affected or impaired in any
manner by, (i) the failure of any Person to become or remain a Guarantor
hereunder or the failure of any holder of Obligations to preserve, protect or
enforce any right to require any Person to become or remain a Guarantor
hereunder, (ii) any lack of validity or enforceability of any Loan Document or
any other agreement, instrument or document relating thereto, (iii) any change
in the time, manner or place of payment of, or in any other term of, any of the
Obligations, or any other amendment or waiver of or any consent to departure
from the terms of any Loan Document, including any extension or renewal of the
Obligations (whether or not for longer than the original period) and any
increase in the Obligations resulting from the extension of additional credit to
the Borrower or otherwise, (iv) any taking, exchange, release or non-perfection
of any Lien securing, or any taking, release or amendment or waiver of or
consent to departure from any other guaranty of, any of the Obligations, (v) any
manner or order of sale or other enforcement of any Lien securing any or all of
the Obligations or any manner or order of application of the proceeds of any
such Lien to the payment of the Obligations or any failure to enforce any Lien
or to apply any proceeds thereof, (vi) any change, restructuring or termination
of the corporate structure or existence of the Borrower or any of its
Subsidiaries or Affiliates, any Guarantor, or any other Person, or (vii) any
other circumstance which might otherwise constitute a defense (except the
defense of payment) available to, or a discharge of, a surety or guarantor.
SECTION 2.7 GUARANTOR LIABILITY IRREVOCABLE AND CONTINUING. The liability
of each Guarantor under this Agreement shall constitute an irrevocable and
continuing offer and agreement guaranteeing payment of any and all Obligations
and granting indemnification as herein set forth and shall extend to all
Obligations and indemnified matters whether now outstanding or created or
incurred at any future time, whether or not created or incurred pursuant to any
agreement presently in effect or hereafter made, until all obligations of the
Lender under this Agreement shall have expired or been terminated and shall have
been indefeasibly discharged and all Obligations shall have been fully, finally
and indefeasibly paid in cash. To the extent any contingent Obligation survives
the expiration or termination of the Loan Documents and the repayment of the
Obligations that are then due, each Guarantor's liability under this Agreement
shall likewise survive. The liability of each Guarantor
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under this Agreement and each right, remedy, interest or power granted herein or
arising hereunder may be released only in writing.
SECTION 2.8 SUBORDINATION. Any and all present and future debts,
liabilities and obligations of every type and description (whether for money
borrowed, on intercompany accounts, for provision of goods or services, under
cash management, tax sharing or contribution agreements or on account of any
other transaction, agreement, occurrence or event and whether absolute or
contingent, direct or indirect, matured or unmatured, liquidated or
unliquidated, created directly or acquired from another, or sole, Joint, several
or Joint and several) now outstanding or hereafter incurred, arising or owed to
any Guarantor by the Borrower or any Subsidiary of the Borrower or by any other
Guarantor (collectively, the "Subordinated Liabilities") shall be, and hereby
are, subordinated to payment of the Obligations, in full and in cash.
(a) PROHIBITED PAYMENTS. Until the Maturity Date and at all times
thereafter until all outstanding Obligations (except indemnification obligations
that arc then contingent and unliquidated) have been paid in full and
discharged, no Guarantor will demand, sue for, accept or receive, or cause or
permit any other Person to make, any payment on or transfer of property on
account of any Subordinated Liabilities, except (but only if and so long as no
Default or Event of Default has occurred and is continuing or would result
therefrom) a Permitted Payment.
(b) NO LIENS. Each Guarantor agrees that such Guarantor will not
demand, accept or hold any Lien upon any real or personal property of the
Borrower or any of its Subsidiaries as security for any of the Subordinated
Liabilities and that any such Lien shall be void.
(c) BANKRUPTCY AND INSOLVENCY PROCEEDINGS. In any case under the
Bankruptcy Code in which the Borrower or any of its Subsidiaries or any
Guarantor is the debtor, and in each other insolvency, receivership, dissolution
or liquidation proceeding by, against or affecting the Borrower or any of its
Subsidiaries or any Guarantor, the holders of Obligations shall be entitled to
receive payment in full of all amounts due or to become due on or in respect of
the Obligations (including all Post-Petition Interest and Expense Claims), in
full and in cash, before any Guarantor is entitled to receive any payment or
distribution of any kind or character, whether in cash, property or securities
or otherwise, on account of any of the Subordinated Liabilities; and to that end
the holders of Obligations (including Post-Petition Interest and Expense Claims)
shall be entitled to receive, for application to the payment thereof, all
payments and distributions of any kind or character, whether in cash,
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property or securities or otherwise (including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other debt
or liability of the Borrower or any Subsidiary of the Borrower or any Guarantor
being subordinated to the payment of the Subordinated Liabilities), which may be
payable or deliverable in respect of the Subordinated Liabilities in any such
case, insolvency, receivership, dissolution or liquidation proceeding. Each
Guarantor expressly acknowledges and agrees that, pursuant to the provisions of
this Section 2.8(c), any such payment or distribution payable or deliverable in
respect of Subordinated Liabilities will be turned over to, and will become the
property of, the holders of Obligations until they have received payment in Full
and in cash of all Obligations, including Post-Petition Interest and Expense
Claims that are not enforceable, allowable or allowed in such case or proceeding
and as to which, as a consequence, such Guarantor will not have any subrogation
claim in such case or proceeding.
(d) HELD IN TRUST. If any payment, transfer or distribution is made
to any Guarantor upon any Subordinated Liabilities that is not permitted to be
made under this Section 2.8 or that the holders of Obligations are entitled to
receive under this Section 2.8, such Guarantor shall receive and hold the same
in trust, as trustee for the benefit of the holders of Obligations, and shall
forthwith transfer and deliver the same to the Lender, in precisely the form
received (except for any required endorsement), for application to the payment
of Obligations.
(e) CLAIMS IN BANKRUPTCY. Each Guarantor will file all claims
against the Borrower or any Subsidiary of the Borrower or any Guarantor in any
case under the Bankruptcy Code and in each other insolvency, receivership,
dissolution or liquidation proceeding in which the filing of claims is required
or permitted by law upon any of the Subordinated Liabilities and will assign to
the Lender, for the benefit of the holders of Obligations, all rights of such
Guarantor thereunder. If any Guarantor does not file any such claim at least 30
days prior to any applicable claims bar date, the Lender is hereby authorized
(but shall not be obligated), as attorney-in-fact for such Guarantor with full
power of substitution, either to file such claim or proof thereof in the name of
such Guarantor or, at the option of the Lender, to assign such claim to the
Lender or its nominee and cause such claim or proof thereof to be filed by the
Lender's agent or nominee. The Lender and its agents and nominees shall have the
sole right, but no obligation, to accept or reject any plan proposed in any such
case or proceeding and to cast any votes and to take any other action with
respect to all claims upon any of the Subordinated Liabilities.
(f) SUBORDINATION EFFECTIVE AND NOT IMPAIRED. This Section 2.8 shall
remain effective until the Maturity Date and thereafter for so long as any
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Obligation is outstanding. Each Guarantor's liability under this Section 2.8
shall be absolute and unconditional as set forth in Section 2.6, irrevocable and
continuing as set forth in Section 2.7 and otherwise as equally enduring and
free from defenses as such Guarantor's liability for the payment of the
Obligations.
SECTION 2.9 GENERAL PROVISIONS.
(a) REINSTATEMENT. If at any time any payment on any Obligation is
set aside, avoided or rescinded or must otherwise be restored or returned, this
Agreement and the liability of each Guarantor under this Agreement and the
subordination effectuated hereby and all other liabilities of each Guarantor
hereunder shall remain in full force and effect and, if previously released or
terminated, shall be automatically and fully reinstated, without any necessity
for any act, consent or agreement of any Guarantor, as fully as if such payment
had never been made and as fully as if any such release or termination had never
become effective.
(b) WAIVER. Each Guarantor hereby waives and agrees not to assert or
take advantage of:
(1) Any right to require any holder of Obligations to proceed
against or exhaust its recourse against the Borrower, any other Guarantor
or any other Person liable for any of the Obligations or against any Lien
securing any of the Obligations or against any other Person or property,
before demanding and enforcing payment of the Obligations from any
Guarantor under this Agreement,
(2) Any defense that may arise by reason of (i) the
incapacity, lack of authority, death or disability of the Borrower, any
other Guarantor or any other Person, (ii) the revocation or repudiation of
any of the Loan Documents by the Borrower, any other Guarantor or any
other Person, (iii) the unenforceability in whole or in part of the Loan
Documents or any other instrument, document or agreement, (iv) the failure
of any holder of Obligations to file or enforce a claim against any Person
liable for any of the Obligations or in any bankruptcy case or insolvency,
receivership, dissolution or liquidation proceeding, (v) any election made
by any holder of Obligations as to any right or remedy granted or
available to it under the Bankruptcy Code, or (vi) any other borrowing or
grant of a security interest under Section 364 of the Bankruptcy Code,
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(3) Presentment, demand for payment, protest, notice of
discharge, notice of acceptance of this Agreement, notice of the
incurrence of, or any default in respect of, any Obligation, and all other
indulgences and notices of every type or nature, including, to the maximum
extent permitted by law, notice of the disposition of any Collateral,
(4) Any defense based upon an election of remedies (including
if available, an election to proceed by non-judicial foreclosure) or any
other act or omission of any holder of Obligations or any other Person
which destroys or otherwise impairs any right that any Guarantor might
otherwise have for subrogation, recourse, reimbursement, indemnity,
exoneration, contribution or otherwise against the Borrower, any other
Guarantor or any other Person,
(5) Any defense based upon any grant of, any failure to
demand, take, perfect, protect or enforce, or any modification or release
of any Lien securing, or guaranty of, any or all of the Obligations, or
any failure to create or perfect or ensure the priority or enforceability
of any security interest in any collateral for any of the Obligations or
any act or omission related thereto,
(6) Any right to recoup from or offset against any of the
Obligations any claim that may be held or asserted by or available to (i)
the Borrower or any other Guarantor or any other Person liable for any of
the Obligations against any holder of Obligations or (ii) any Guarantor
against the Borrower, any other Guarantor, any other holder of Obligations
or any other Person, or
(7) Any other claim, right or defense (including, by way of
illustration and without limitation, such matters as failure or
insufficiency of consideration, statute of limitations, breach of
contract, tortious conduct, accord and satisfaction, and discharge by
agreement or conduct or in any bankruptcy case or other insolvency or
liquidation proceeding), except the defense of payment, that may be held
or asserted by or available to (i) the Borrower or any other Guarantor or
any other Person liable for any of the Obligations against any holder of
Obligations or (ii) any Guarantor against the Borrower, any other
Guarantor, any other holder of Obligations or any other Person.
(c) SUBROGATION. Each Guarantor hereby represents, warrants and
agrees, in respect of any and all present and future rights of subrogation,
recourse, reimbursement, indemnity, exoneration, contribution and other claims
that such
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Guarantor at any time may have against the Borrower, any other Guarantor or any
other Person liable for the payment of any of the Obligations (including,
without limitation, the owner of any interest in collateral subject to a Lien
securing any of the Obligations) as a result of or in connection with this
Agreement or any payment hereunder, that:
(1) Such Guarantor has not entered into, and agrees that it
will not enter into, any agreement providing, directly or indirectly, for
any such right or claim against the Borrower or any Subsidiary of the
Borrower or, except as set forth in Section 2.9(e), against any other
Guarantor; and each such agreement now existing or hereafter entered into
(except Section 2.9(e)) is and shall be void,
(2) Such Guarantor (i) forever waives and releases any such
right or claim against the Borrower or any Subsidiary of the Borrower and
(ii) agrees not to assert, exercise or enforce any such right or claim
against any other Guarantor until the Obligations have been paid in full
and in cash,
(3) Neither the execution and delivery of this Agreement by
such Guarantor nor any payment by such Guarantor under this Agreement
shall give rise to any claim (as that term is defined in the Bankruptcy
Code) in favor of such Guarantor against the Borrower or any Subsidiary of
the Borrower or, until the Obligations have been paid in full and in cash,
against any other Guarantor, and
(4) Such Guarantor reserves, as against each other Guarantor,
its right of contribution under Section 2.9(e) but agrees that all such
contribution rights shall be included among the Subordinated Liabilities.
(d) FRAUDULENT TRANSFER LIMITATION. Each Guarantor represents and
warrants that it is Solvent on the date it becomes a Guarantor hereunder and on
the Closing Date. If, notwithstanding the foregoing, enforcement of the
liability of any Guarantor under this Agreement for the full amount of the
Obligations would be an unlawful or voidable transfer under any applicable
fraudulent conveyance or fraudulent transfer law or any comparable law, then the
liability of such Guarantor hereunder shall be reduced to the highest amount for
which such liability may then be enforced without giving rise to an unlawful or
voidable transfer under any such law.
(e) CONTRIBUTION AMONG GUARANTORS. The Guarantors desire to allocate
among themselves, in a fair and equitable manner, their rights of contribution
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from each other when any payment is made by one of the Guarantors under this
Agreement. Accordingly, if any payment is made by a Guarantor (a "Funding
Guarantor") under this Agreement that exceeds the Funding Guarantor's Fair
Share, the Funding Guarantor shall be entitled to a contribution from each other
Guarantor in the amount of such other Guarantor's Fair Share Shortfall, so that
all such contributions shall cause each Guarantor's Aggregate Payments to equal
its Fair Share. For these purposes:
(1) "Fair Share" means:
(a) with respect to Cohen, an amount equal to the
aggregate amounts payable under Note A, including but not limited to
any costs of collection or other amounts payable under the Loan
Documents in connection with Note A, plus 4300/7816ths of any
amounts payable under the Loan Documents which cannot be reasonably
allocated solely to Note A or to Note B;
(b) with respect to IFT and Israel jointly, an amount
equal to the aggregate amounts payable under Note B, including but
not limited to any costs of collection or other amounts payable
under the Loan Documents in connection with Note B, plus
3516/7816ths of any amounts payable under the Loan Documents which
cannot be reasonably allocated solely to Note A or to Note B.
(2) "Fair Share Shortfall" means, with respect to a Guarantor
as of any date of determination, the excess, if any, of the Fair Share of
such Guarantor over the Aggregate Payments of such Guarantor.
(3) "Aggregate Payments" means, with respect to a Guarantor as
of any date of determination, the aggregate net amount of all payments
made on or before such date by such Guarantor under this Agreement
(including, without limitation, under the Cohen Note, under the Israel
Note, and under this Section 2.9(e)). For purposes of this paragraph, the
fair value of any portion of the Cohen Interests sold or accepted by
Lender and applied against the unpaid balance of Note A or Note B, or
against any costs of collection or other amounts payable in connection
with Note A or Note B, shall be deemed payment by Cohen at the time of
such sale or acceptance- the fair value of any portion of the Israel
Interests sold or accepted by Lender and applied against the unpaid
balance of Note A or Note B, or against any costs of collection or other
amounts payable in connection with Note A or Note B, shall be deemed a
payment by IFT and Israel at the time of such sale or acceptance.
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The amounts payable as contributions hereunder shall be determined by the
Funding Guarantor as of the date on which the related payment or distribution is
made by the Funding Guarantor, and such determination shall be binding on the
other Guarantors absent manifest error. The allocation and right of contribution
among the Guarantors set forth in this Section 2.9(e) shall not be construed to
limit in any way the liability of any Guarantor under this Agreement to the
holders of the Obligations.
SECTION 2.10 NO LIMITATION OF LIABILITY. Subject only to Section 2.9(d),
the liability of each Guarantor under this Agreement shall be unlimited in
amount.
SECTION 2.11 JOINT AND SEVERAL OBLIGATION. This Agreement and all
liabilities of each Guarantor hereunder shall be the joint and several
obligation of each Guarantor and may be freely enforced against each Guarantor,
for the full amount of the Obligations and all other liabilities of such
Guarantor hereunder, without regard to whether enforcement is sought or
available against any other Guarantor.
SECTION 2.12 CONDITION OF THE BORROWER. Each Guarantor is fully aware of
the financial condition of the Borrower and is executing and delivering this
Agreement based solely upon such Guarantor's own independent investigation of
all matters pertinent hereto and is not relying in any manner upon any
representation or statement by any holder of Obligations. Each Guarantor
represents and warrants that it is in a position to obtain, and each Guarantor
hereby assumes full responsibility for obtaining, any additional information
concerning the financial condition of the Borrower and any other matter
pertinent hereto as such Guarantor may desire, and such Guarantor is not relying
upon or expecting any holder of Obligations to furnish to such Guarantor any
information now or hereafter in the possession of any holder of Obligations
concerning the same or any other matter. By executing this Agreement, each
Guarantor knowingly accepts the full range of risks encompassed within a
contract of this type, which risks each Guarantor acknowledges. No Guarantor
shall have the right to require any holder of Obligations to obtain or disclose
any information with respect to the Obligations, the financial condition or
prospects of the Borrower or any Subsidiary of the Borrower, the ability of the
Borrower to pay or perform the Obligations, the existence, perfection, priority
or enforceability of any collateral security for any or all of the Obligations,
the existence or enforceability of any other guaranties of all or any part of
the Obligations, any action or non-action on the part of any holder of
Obligations, the Borrower, any Subsidiary of the Borrower, any other Guarantor
or any other Person, or any other event, occurrence, condition or circumstance
whatsoever.
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SECTION 2.13 CERTAIN WAIVERS. If, in the exercise of any rights and
remedies, any holder of Obligations shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against the Borrower or any
other Guarantor or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Guarantor hereby consents
to such action by such holder and, to the maximum extent permitted by applicable
law, waives any claim or defense (including any defense based upon the election
of remedies under the provisions of Section 580d of the California Code of Civil
Procedure or any comparable provision of Nevada law) based upon such election of
remedies, even if such action by such holder shall result in a full or partial
loss of any rights of subrogation, contribution or indemnification, and/or any
right of any Guarantor to proceed against any Person for reimbursement, which
such Guarantor might otherwise have had but for such action by such holder or
the terms herein. Furthermore, each Guarantor waives all rights and defenses
arising out of an election of remedies by any holder of Obligations, even though
that election of remedies, such as a nonjudicial foreclosure with respect to
security for any Obligation, has destroyed such Guarantor's rights of
subrogation and reimbursement against the Borrower or any other Guarantor or any
other Person by the operation of Section 580d of the California Code of Civil
Procedure or any comparable provision of Nevada law or otherwise. Any election
of remedies which results in the denial or impairment of the right of any holder
of Obligations to seek a deficiency judgment against the Borrower or any
Guarantor shall not, to the maximum extent permitted by applicable law, impair
any other Guarantor's obligation to pay the full amount of the Obligations. In
the event any holder of Obligations shall bid at any foreclosure or trustee's
sale or at any private sale permitted by law or the Loan Documents, such holder
may bid all or less than the amount of the Obligations and the amount of such
bid need not be paid by such holder but shall be credited against the
Obligations. To the extent permitted by applicable law, the amount of the
successful bid at any such sale, whether any holder of Obligations or any other
Person is the successful bidder, shall be conclusively deemed to be the fair
market value of the property being sold and the difference between such bid
amount and the remaining balance of the Obligations shall be conclusively deemed
to be the amount of the Obligations guaranteed under this Agreement,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which any
holder of Obligations might otherwise be entitled if no holder had bid at any
such sale. Each Guarantor hereby expressly waives any and all benefits which
might otherwise be available to it under California Civil Code Sections 2809,
2810, 2819, 2820, 2821, 2822, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 and
California Code of Civil Procedure Sections 580a, 580b, 580d and 726 and all
comparable provisions of Nevada law. The foregoing waivers are included solely
out of an abundance of caution and shall not be
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construed to mean that any of the referenced provisions of California law are in
any way applicable to this Agreement or to any of the Obligations.
SECTION 2.14 ACCEPTANCE AND NOTICE. Each Guarantor acknowledges acceptance
hereof and reliance hereon by the Lender and each other holder of Obligations
and waives, irrevocably and forever, all notice thereof.
ARTICLE III
SECURITY INTEREST
SECTION 3.1 GRANT OF SECURITY. As security for the payment of each and all
of the Secured Obligations, the Borrower and the Guarantors hereby assign and
transfer to the Lender and grant the Lender a continuing general Lien upon and
security interest in all interests now owned or at any time hereafter acquired
by the Borrower or any Guarantor in the following types and items of property,
wherever located and whether now existing or hereafter arising (the
"Collateral"):
(a) all LLC Units,
(b) the Cohen Note and the Israel Note, together with the
indebtedness evidenced thereby,
(c) the Transaction Documents and all rights, claims, interests,
payments and distributions at any time arising thereunder,
(d) all shares of Common Stock issued in exchange for LLC Units
under the Exchange Rights Agreement,
(e) all payments, distributions, products, rents, issues, profits,
replacements, additions, parts, appurtenances, accessions, substitutions and
replacements of or for any of the foregoing types and items of property,
including all rights, claims and interests into which any of such property may
at any time be converted by agreement, by operation of law or otherwise,
(f) all equity, partnership, membership or ownership interests in,
all options, warrants and rights to acquire any equity, partnership, membership
or ownership interest in, and all debts, liabilities and obligations of, and all
claims against, any Guarantor,
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(g) all other equity, partnership, membership or ownership interests
in, all options, warrants and rights to acquire any equity, partnership,
membership or ownership interest in, and all debts, liabilities and obligations
of, and all claims against, the issuer of or obligor on any type or item of
property described above, and
(h) all proceeds of the foregoing.
SECTION 3.2 SECURED OBLIGATIONS. The Collateral secures (i) payment of each
and all of the Notes and each and all other Obligations in full in cash when
due, and (ii) all costs and expenses incurred by the Lender, or any other holder
of any Obligations, in asserting, enforcing or protecting a claim in respect of
any of the Obligations or the Collateral in any bankruptcy case or insolvency,
receivership, dissolution or liquidation proceeding in which the Borrower or any
Guarantor may be the debtor or to which the Borrower or any Guarantor may be
subject, whether voluntarily or involuntarily, and all collection costs and
enforcement expenses incurred by the Lender or any other holder of Obligations,
in collecting or otherwise enforcing payment of any of the Obligations or in
retaking, holding, preparing for sale, selling or otherwise disposing of or
realizing on any Collateral or otherwise exercising or enforcing any of its
rights or remedies under this Agreement or any other Loan , Document, together
(in each case) with all attorneys' fees and disbursements and court costs
related thereto incurred by the Lender and by each such holder (collectively,
the "Secured Obligations"); PROVIDED, HOWEVER, that (A) Note A shall not be
secured by the Israel Interests or the Israel Note, and (B) Note B shall not be
secured by the Cohen Interests or the Cohen Note.
SECTION 3.3 DELIVERY OF INSTRUMENTS. All certificates representing LLC
Units, the Cohen Note, the Israel Note and all other notes, bonds, debentures
and other instruments and certificated investment securities constituting
Collateral shall be delivered to the Lender on the Closing Date or, if hereafter
acquired, immediately upon acquisition thereof and without any notice or demand,
in form suitable for transfer by delivery accompanied by duly executed
instruments of transfer or assignments in blank or with appropriate
endorsements, in form and substance satisfactory to the Lender. Notwithstanding
anything to the contrary in the Exchange Rights Agreement, all Common Stock at
any time delivered in exchange for LLC Units pursuant to the Exchange Rights
Agreement shall be delivered directly to the Lender, to be held by the Lender as
part of the Collateral, and all such Common Stock delivered to the Lender shall
be deemed to have been delivered to the Loan Party entitled thereto in
accordance with the terms of the Exchange Rights Agreement in satisfaction of
the obligation to make such delivery as therein set forth, and neither such
delivery to the Lender nor any exercise or enforcement of any of the rights of
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the Lender under this Section 3.3 shall in any manner constitute a breach of or
a default under any provision of the Exchange Rights Agreement.
SECTION 3.4 FURTHER ASSURANCES. The Borrower and each Guarantor will
promptly (and in any event within three Business Days after request by the
Lender or any other holder of Obligations) execute and deliver, and use its
reasonable and diligent best efforts to obtain from other Persons, all
instruments and documents (including assignments, transfer documents and
transfer notices, financing statements and other lien notices), in form and
substance satisfactory to the Lender, and take all other actions which are
necessary or, in the good faith judgment of the Lender, desirable or appropriate
in order to create, maintain, perfect, ensure the priority of, protect, or
enforce the security interests in the Collateral granted in Section 3.1, to
enable the Lender or any other holder of Obligations to exercise and enforce its
rights and remedies hereunder with respect to any Collateral, to protect the
Collateral against the rights, claims or interests of third persons, or to
effect or to assure further the purposes and provisions of this Agreement), and
the Borrower and each Guarantor jointly and severally agree to pay all costs
related thereto and all reasonable expenses incurred by the Lender or any holder
of Obligations in connection therewith.
SECTION 3.5 SURVIVAL OF SECURITY INTEREST. Except as otherwise required by
law, the security interest granted hereby shall, unless released in writing by
the Lender, (i) remain enforceable as security for all Obligations now
outstanding or created or incurred at any future time (whether or not created or
incurred pursuant to any agreement presently in effect or hereafter made and
notwithstanding any subsequent repayment of any of the Obligations or any other
act, occurrence or event), until all obligations of the Lender under this
Agreement shall have been indefeasibly discharged and all Obligations shall have
been indefeasibly paid in full and in cash, (ii) survive the expiration or
termination of the Loan Documents and the repayment of the Notes to the same
extent that any contingent Obligation (including any indemnification Obligation)
survives, and (iii) survive any sale, exchange or other disposition of any
Collateral and remain enforceable against each transferee and subsequent owner
of such interest, even if such sale, exchange or other disposition is permitted
at the time under the Loan Documents or any agreement enforceable against the
Lender, except (A) a Permitted Sale and (B) any item of Collateral that is
expressly and specifically released from the security interest created hereby
pursuant to a written release signed by the Lender.
SECTION 3.6 REPRESENTATIONS AND WARRANTIES AS TO THE COLLATERAL. Each of
the Borrower and Guarantors represents and warrants to the Lender that:
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(a) LLC UNITS. Schedule 3.6 attached hereto completely and
accurately sets forth all interests in Oasis Martinique, LLC in which the
Borrower or any of its Subsidiaries or Affiliates, including the Guarantors,
owns any interest. All such interests are owned solely and exclusively by the
Borrower, except that IFT Properties, Ltd. owns 8,860 LLC Units, and no
Guarantor and no other Affiliate of the Borrower has any interest therein. Such
interests have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in breach or derogation of preemptive rights
of any Person.
(b) LOCATION. The Borrower's chief executive office is located at
the address shown as its chief executive office on Schedule 3.6. IFT's chief
executive office is located at the address shown as its chief executive office
on Schedule 3.6. Cohen and Israel reside at locations within the County of Los
Angeles, State of California. All other places at which the Borrower or any
Guarantor keeps any Collateral or any books or records relating thereto are
listed on Schedule 3.6.
(c) NAMES. Neither the Borrower nor IFT conducts business, or for
the previous five year's has conducted business, under any fictitious business
name or trade name, except any name listed on Schedule 3.6.
(d) OWNERSHIP OF COLLATERAL. The Borrower is and will at all times
remain the sole legal and beneficial owner of all Collateral and retain
exclusive possession and control thereof free and clear of any Lien, encumbrance
or transfer except only the security interest granted in Section 3.1, and no
Guarantor has any right thereto or interest therein. No financing statement,
notice of lien, mortgage, deed of trust or instrument similar in effect covering
the Collateral or any portion thereof or any proceeds thereof exists or is on
file in any public office, except as may have been filed in favor of the Lender.
(e) DELIVERY. All certificates representing the LLC Units, the Cohen
Note and the Israel Note have been delivered to the Lender, with all necessary
or appropriate endorsements. As of the Closing Date, there are no other
certificates, notes, bonds, debentures, stock and other instruments or
certificated investment securities that constitute Collateral.
(f) NO CONFLICT. Except as set forth in Schedule 3.6, neither the
Borrower nor any Guarantor nor any of the Collateral purported to be granted
hereunder is subject to any requirement of law or any contractual obligation
which prohibits, restricts, or limits the execution, delivery or performance of
this Agreement or the creation of enforcement of the security interest purported
to be created hereby.
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(g) MARGIN REGULATIONS. The transaction contemplated by this
Agreement does not violate any of the requirements of Regulation G or Regulation
U of the Board of Governors of the Federal Reserve System.
(h) TAXPAYER ID NUMBER. The proper taxpayer identification number
for the Borrower and each Guarantor is accurately set forth on Schedule 3.6.
SECTION 3.7 COVENANTS AS TO THE COLLATERAL. Each of the Borrower and
Guarantors covenants and agrees that, so long as the security interest granted
in Section 3.1 remains outstanding:
(a) NO CHANGES. The Borrower will not (i) cause, permit or suffer
any voluntary or involuntary change in its name, identity or corporate
structure, or in the location of its chief executive office, or (ii) keep any
records relating to its accounts receivable or any tangible Collateral at any
location other than a location set forth in Schedule 3.6, unless (in each case)
(A) Schedule 3.6 has first been appropriately supplemented with respect thereto,
and (B) an appropriate financing statement has been filed in the proper office
and in the proper form, and all other requisite actions have been taken, to
perfect or continue the perfection (without loss of priority) of the security
interest granted under Section 3. 1.
(b) DEFENSE OF COLLATERAL. The Borrower and each Guarantor will
defend the Collateral against all claims and demands of all persons at any time
claiming the same or any interest therein.
(c) TRANSFER OF COLLATERAL. Neither the Borrower nor any Guarantor
will encumber, sell, exchange or otherwise dispose of any item of Collateral or
any interest therein, or permit or suffer any such item to be encumbered, sold,
exchanged or otherwise disposed of, except a Permitted Sale.
(d) FINANCING STATEMENTS. The Lender and each other holder of
Obligations, acting alone, is hereby authorized to file one or more financing
statements, and continuations thereof and amendments thereto, relative to all or
any part of the Collateral, without the signature of the debtor where permitted
by law.
(e) SUBSTITUTED PERFORMANCE. The Lender and each other holder of
Obligations, acting alone, may at any time (but shall not be obligated to) (i)
perform any of the obligations of the Borrower or any Guarantor under this
Agreement if the Borrower or such Guarantor fails to perform such obligation
within three Business Days after written demand by the Lender or such holder and
(ii) make any payments
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and do any other acts which the Lender or such holder may deem necessary or
desirable to protect its security interest in the Collateral, including the
right to pay, purchase, contest or compromise any Lien that attaches or is
asserted against any Collateral and to appear in and defend any action or
proceeding relating to any Collateral, and the Borrower and each Guarantor will
promptly reimburse the Lender or such holder for all payments made by the Lender
or such holder in doing so, together with interest thereon at the rate then
applicable under Section 1.2, all reasonable attorneys' fees and disbursements
incurred by the Lender or such holder in connection therewith, whether or not
suit is brought, and all other costs and expenses related thereto.
SECTION 3.8 VOTING RIGHTS. So long as no Event of Default or Default has
occurred and is continuing or would result from any exercise thereof, the
Borrower shall have and may exercise all voting rights with respect to any and
all LLC Units and Common Stock constituting Collateral, and the Lender will
deliver to the Borrower such proxies as may be necessary to permit the Borrower
to exercise such voting rights as to any and all LLC Units and Common Stock that
have been transferred to and registered in the Lender's name, as pledgee, except
that:
(a) NO BREACH. The Borrower may not and shall not act or vote in
favor of any action that would constitute or cause a breach of any obligations
of the Borrower or any Guarantor under any Loan Document,
(b) LENDER CONSENT REQUIRED. Without the Lender's prior written
consent, the Borrower may not and shall not vote in favor of (i) any
distribution on account of any membership or ownership interests, (ii) the
authorization or issuance of any options, warrants, voting rights, or preference
or priority interests or additional membership or ownership interests, LLC Units
or Common Stock, (iii) any amendment of or change in the LLC Agreement or the
Exchange Rights Agreement or any waiver of any rights thereunder, or (iv) any
reclassification, readjustment, reorganization, merger, consolidation,
liquidation, sale or disposition of assets, or dissolution, and
(c) NO MATERIAL ADVERSE EFFECT. The Borrower may not and shall not
vote in favor of any action that does or is reasonably likely to constitute a
Material Adverse Change or to have a material adverse effect on the value of any
of the Collateral.
Upon the occurrence of any Event of Default, the Lender may terminate any or all
of any of the Borrower's voting rights with respect to any or all LLC Units or
Common
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Stock constituting Collateral, either by giving written notice of such
termination to the Borrower or by transferring such LLC Units or Common Stock
into the Lender's name. Except to the extent the Borrower is specifically
granted voting rights as to any item of Collateral pursuant to this Section 3.8,
the Lender shall have the sole right and power to exercise any and all voting
rights as to any and all Collateral.
SECTION 3.9 DIVIDENDS, DISTRIBUTIONS AND PAYMENTS. The Loan Parties will
cause all dividends and distributions on all LLC Units, Common Stock and equity,
partnership, membership and ownership interests constituting Collateral (whether
paid or made in cash, in kind or in property) and all payments on any notes,
bonds, debentures and other instruments constituting Collateral and all other
cash proceeds of Collateral to be delivered to the Lender to be held and applied
as part of the Collateral on the following terms:
(a) DIRECT PAYMENT RIGHTS. Cash distributions on LLC Units or Common
Stock constituting Collateral shall be paid directly to the Lender. In order to
accomplish the foregoing:
(1) The Lender may at any time and from time to time, whether or
not any Default or Event of Default is continuing and without any notice
to any Loan Party or any other Person, cause Oasis Martinique, LLC to pay
directly to the Lender any and all distributions on the LLC Units and any
and all other amounts payable to or for the account of any Loan Party
under Section 5.1, 5.6 or 13.2 or any other provision of the LLC
Agreement, notwithstanding anything to the contrary set forth in the LLC
Agreement.
(2) The Lender likewise may cause all amounts payable to or for
the account of any Loan Party under the Exchange Rights Agreement to be
paid directly to the Lender, notwithstanding anything to the contrary set
forth in the Exchange Rights Agreement.
(3) All payments under the LLC Agreement or Exchange Rights
Agreement that are paid to the Lender under this Section 3.6 shall be
deemed to have been paid to the Loan Party in accordance with the terms of
the LLC Agreement or the Exchange Rights Agreement, as the case may be, in
satisfaction of the obligation to make such payment as therein set forth,
and neither such payment to the Lender nor any exercise or enforcement of
any of the rights of the Lender under this Section 3.6 shall in any manner
constitute a breach of or a default under any provision of the LLC
Agreement or the Exchange Rights Agreement, including the provisions of
Sections 5.1.B, 7.1,
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7.3 or 15.9 of the LLC Agreement or Sections 4, 5, 7 or 14(b) of the
Exchange Rights Agreement.
(4) The Lender shall have the right to exercise its power and
authority under the LLC Agreement and the Exchange Rights Agreement,
including its power and authority as the Managing Member of Oasis
Martinique, LLC, as it may in good faith deem necessary or appropriate to
cause any and all such payments to be made directly to the Lender or
otherwise to protect or enforce any of the rights or remedies of the
Lender under the Loan Documents.
(5) The Lender likewise may cause all dividends and
distributions on Common Stock to be paid and delivered directly to the
Lender.
(b) APPLICATION OF DISTRIBUTIONS; RELEASE OF SURPLUS ORDINARY
DISTRIBUTIONS. Cash distributions on LLC Units or Common Stock constituting
Collateral received by the Lender shall on the Business Day of receipt by the
Lender, be applied to pay any and all interest accrued and unpaid on the Notes,
whether or not due, and to pay any other outstanding Obligations that are then
due and payable. Until the Maturity Date, if no Default or Event of Default has
occurred and is continuing or would result, any surplus of any Ordinary Cash
Distribution remaining after all accrued interest on the Notes (including any
and all interest previously deferred pursuant to clause (2) in the proviso to
Section 1.2(d)) and all amounts due and payable on other Obligations have been
paid shall be released to the Borrower within one Business Day thereafter.
(c) APPLICATION OF OTHER CASH PROCEEDS. Except as set forth in the
case of Ordinary Cash Distributions in Section 3.9(b), all cash proceeds of
Collateral delivered to the Lender may be applied by the Lender (after accrued
interest has been paid in full) to prepay the principal of the Notes and to pay
or prepay any and all other Secured Obligations, whether or not then due.
SECTION 3.10 DUTY OF CARE. Neither the Lender nor any other holder of
Obligations nor any of their respective shareholders, directors, officers,
employees, attorneys or agents shall be obligated to care for the Collateral or
to collect, enforce, vote, or protect the Collateral or any rights or interests
of any Person related thereto or to preserve or enforce any rights which any
Person may have against any third party, except only that the Lender shall
exercise reasonable care in physically safekeeping any item of Collateral that
was delivered into the Lender's possession. The Lender shall be deemed to have
exercised such reasonable care if the Collateral is
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accorded treatment substantially equal to that which the Lender accords to its
own property or if it selects, with reasonable care, a custodian or agent to
hold such collateral for the Lender's account.
SECTION 3.11 REGISTRATION OF PLEDGE. The Lender may at any time, whether or
not any Default or Event of Default is continuing and without any notice to any
Loan Party or any other Person, transfer to and register in the Lender's name,
as pledgee, any and all LLC Units and Common Stock constituting Collateral. Such
transfer and registration shall not foreclose or otherwise affect any rights or
interests of any Loan Party and shall not restrict or reduce any of the Lender's
rights and remedies.
SECTION 3.12 PARTIAL RELEASE OF COLLATERAL.
(a) UPON REPAYMENT OF NOTE A. If the principal of and all interest
accrued on Note A are at any time paid in full in cash, the Lender will release
the security interest granted to it in Section 3.1 insofar (and only insofar) as
such security interest attaches to the Cohen Interests and the Cohen Note.
(b) UPON REPAYMENT OF NOTE B. If the principal of and all interest
accrued on Note B are at any time paid in full in cash, the Lender will release
the security interest granted to it in Section 3.1 insofar (and only insofar) as
such security interest attaches to the Israel Interests and the Israel Note.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1. CONDITIONS PRECEDENT ON THE CLOSING DATE. The obligation of
the Lender to make the loans evidenced by the Notes is subject in all respects
to the satisfaction of each and all of the following conditions precedent no
later than October 31, 1997:
(a) LOAN DOCUMENTS. The Lender must have received:
(1) this Agreement duly executed by the Borrower, the Lender
and each of the Guarantors,
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(2) the Notes, in substantially the form of Exhibits A and B,
duly executed by the Borrower, and
(3) evidence satisfactory to the Lender that all other actions
necessary or, in the opinion of the Lender, desirable to create, perfect,
ensure first priority of or protect the security interests granted in
Section 3. 1 have been taken, including (i) delivery to the Lender of
certificates representing 886,022 LLC Units, the Cohen Note, the Israel
Note and all other instruments and certificated securities constituting
Collateral, duly endorsed for transfer in blank, (ii) delivery of UCC-1
financing statements duly executed by each Loan Party and in form
sufficient for filing in the office of the Secretary of State for
California and the Secretary of State for Nevada, and (111) financing
statement, judgment and tax lien searches as to the Borrower, each partner
in the Borrower, the Guarantors and any Affiliate through which any
Guarantor owns any interest in the Borrower and the partners in such
Affiliate.
(b) ORGANIZATIONAL DOCUMENTS. The Lender must have received:
(1) copies of the partnership agreement governing the Borrower
and the limited partnership agreement governing IFT, as in effect on the
Closing Date, certified as of the Closing Date by an appropriate officer
or agent of such Person,
(2) copies of resolutions duly adopted by the partners in the
Borrower (other than Victor Israel) and by the general partner in IFT (and
its board of directors or other governing authority, if any) authorizing
the execution, delivery and performance of the Loan Documents, certified
as of the Closing Date by an appropriate officer or agent of such Person,
(3) a certificate setting forth as to each Loan Party the names
and true signatures of such Person or the officer or agent of such Person
authorized to sign each Loan Document to which it is a party and, in the
case of the Borrower, to request an extension of credit hereunder, and
(4) a good standing certificate for IFT, issued as of a recent
date by the Secretary of State of California.
(c) GOVERNMENTAL CONSENTS. The Borrower and each Guarantor must have
obtained all consents, approvals and authorizations required from any
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Governmental Authority in connection with the execution, delivery and
performance of its obligations under the Loan Documents.
(d) NO INJUNCTION. No law or regulation shall prohibit, and no
order, judgment or decree of any Govern-mental Authority shall enjoin, prohibit
or restrain, and no litigation shall be pending or threatened which in the good
faith judgment of the Lender would enjoin, prohibit or restrain the making of
the loans evidenced by the Notes or the consummation of the transactions
contemplated by the Loan Documents.
(e) FINANCIAL STATEMENTS AND CERTIFICATES. The Lender must have
received:
(1) a copy of the Borrower's financial statements for the year
ended December 31, 1996,
(2) a certificate dated as of the Closing Date and signed by
the Borrower and each Guarantor certifying that, as of the Closing Date,
(A) the representations and warranties contained in Article V of this
Agreement are true and correct, as though made on and as of such date, (B)
no Event of Default or Default has occurred and is continuing, (C) since
December 31, 1996, there has been no Material Adverse Change, (D) each of
the other conditions precedent set forth in this Article IV has been
satisfied, and (E) the Borrower or such Guarantor is Solvent and will be
Solvent after giving effect to all transactions occurring or being
consummated on the Closing Date,
(3) all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this Agreement or any
other Loan Document, and
(4) such other certificates, agreements, documents or
instruments as the Lender may reasonably request in writing.
(f) LEGAL OPINION. The Lender must have received an opinion of
Richards, Watson & Gershon and Kirshman, Harris & Cooper, counsel for the
Borrower and the Guarantors, substantially in the form of Exhibits D-1 and D-2
hereto, respectively, and as to such other matters as the Lender may reasonably
request.
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(g) PAYMENT OF FEES AND EXPENSES. The Borrower must have paid, or
made provision satisfactory to the Lender for the payment of, $57,150 in
attorney fees and expense reimbursements due to the Lender under Section 1.6.
(h) CLOSING UNDER CONTRIBUTION AGREEMENT. All transactions provided
for in the Contribution Agreement to be consummated at or prior to the Closing
(as that term is defined in the Contribution Agreement) must have been
consummated or must be concurrently consummated.
(i) NO DEFAULT, PREPAYMENT EVENT OR MATERIAL ADVERSE CHANGE. No
event must have occurred and be continuing, or would result from the funding of
such loans or from the application of the proceeds thereof, that constitutes an
Event of Default or a Default or a Prepayment Event or a Material Adverse
Change.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES. Each of the Borrower and
Guarantors represents and warrants as follows:
(a) ORGANIZATION. Each of the Borrower and IFT is a Person duly
organized, validly existing and in good standing under the laws of the State of
California and is duly qualified to do business in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary.
(b) POWER AND AUTHORITY. Each Loan Party has the power and authority
(i) to carry on the business and affairs of such Loan Party as now being
conducted and as proposed to be conducted, (ii) to execute, deliver and perform
each Loan Document to which such Loan Party is a party, and (iii) to take all
action necessary to consummate the transactions contemplated under each Loan
Document to which such Loan Party is a party.
(c) DUE AUTHORIZATION. The execution, delivery and performance by
the Borrower of each Loan Document to which it is or will be a party have been
duly and unanimously authorized by the partners in the Borrower (other than
Victor Israel, who (i) has duly authorized such execution, delivery and
performance, and (ii) is liable as a general partner in the Borrower in respect
of all of the Obligations in the same manner each other general partner in the
Borrower is bound thereby). The
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execution, delivery and performance by IFT of each Loan Document to which it is
or will be a party have been duly and unanimously authorized by its general
partner thereunto duly authorized by all necessary action of its board of
directors or other governing authority. Such execution, delivery and performance
do not require the approval of any shareholders, partners or members except the
approvals described in Schedule 5.1(c), each of which has been duly and
irrevocably obtained, and do not contravene any organizational document
governing the Borrower or IFT. The execution, delivery and performance by each
Loan Party of each Loan Document to which it is or will be a party do not
contravene any law, rule or regulation or any indenture, lease or written
agreement binding on or affecting such Loan Party and do not result in or
require the creation of any Lien (other than pursuant to Section 3.1) upon any
property of such Loan Party.
(d) OWNERSHIP. Schedule 5.1(d) accurately and exhaustively sets
forth (i) each Person that both is an Affiliate of any Loan Party and directly
or indirectly owns any interest in or claim against the Borrower or IFT. The LLC
Units are duly authorized, validly issued, fully paid and nonassessable and are
not "margin stock," as that term is defined in Regulations G and U of the Board
of Governors of the Federal Reserve System.
(e) ASSETS, LIABILITIES, LITIGATION AND CONTRACTUAL OBLIGATIONS OF
THE BORROWER. Schedule 5.1(e) accurately and exhaustively sets forth all
litigation, claims and proceedings pending or threatened against the Borrower or
IFT or required to be disclosed to auditors for financial reporting purposes and
all material agreements binding upon or enforceable against the Borrower or IFT
any of their respective properties. The Borrower has no material assets, except
the Collateral, and has no liabilities of any type or description, whether due
or not due, matured or unmatured, absolute or contingent, direct or indirect,
liquidated or unliquidated, except those disclosed in the December 31, 1996
financial statements previously delivered to the Lender or otherwise disclosed
in writing to the Lender and other liabilities not in the aggregate exceeding
$250,000.
(f) GOVERNMENTAL APPROVAL. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by any Loan Party of
any Loan Document to which it is or will be a party, except for those listed on
Schedule 5.1(f), each of which has been duly obtained or made and is in full
force and effect.
(g) BINDING AND ENFORCEABLE. This Agreement is, and each other Loan
Documents which any Loan Party will be a party is or when delivered will be,
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legal, valid and binding obligations of the Loan Parties enforceable against the
Loan Parties in accordance with their respective terms, subject to laws
generally affecting the enforcement of creditors' rights.
(h) FINANCIAL INFORMATION. The financial statements delivered to the
Lender pursuant to Section 4.1 fairly present the consolidated financial
condition of the Person named therein as at the date thereof and the results of
such Person's operations for the period then ended.
(i) MATERIAL ADVERSE CHANGE. Since December 31, 1996, there has been
no Material Adverse Change.
(j) COMPLIANCE. Each Loan Party is in compliance in all material
respects with all laws, rules, regulations and orders applicable to such Loan
Party or its business, operations or affairs.
(k) LITIGATION. Schedule 5.1(k) sets forth accurately and
exhaustively all pending or overtly threatened actions or proceedings affecting
any Loan Party before any court, governmental agency or arbitrator, and all loss
contingencies within the meaning of GAAP, other than any action or proceeding
that would not subject the Loan Parties to liability in excess of $100,000 in
the aggregate. Except as identified on Schedule 5.1(k), there is no pending or
overtly threatened action or proceeding affecting any Loan Party before any
court, governmental agency or arbitrator, which would, if adversely determined,
result in a liability exceeding $100,000 or any Material Adverse Change or which
relates to or could reasonably be expected to affect the legality, validity or
enforceability of any Loan Document.
(j) NO CONFLICT. The execution, delivery and performance by each
Loan Party of each of the Loan Documents to which it is a party do not and will
not conflict with, result in a breach of, or constitute (with or without notice
or the lapse of time or both) a default under, any law, rule or regulation or
any instrument, lease, indenture, agreement or other contractual obligation
issued by any Loan Party or enforceable against it or any of its property.
(k) NO DEFAULT OR PREPAYMENT EVENT. No event has occurred and is
continuing which constitutes an Event of Default or a Default or a Prepayment
Event.
(l) PAYMENT OF TAXES. Each Loan Party has filed all federal and
state income tax returns and all other tax returns required to be filed by it
and has state income tax returns and all other tax returns required to be filed
by it and has
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paid all taxes and assessments payable by it which have become due except to the
extent being contested in accordance with the provisions of Section 6.1(g).
(m) MARGIN REGULATIONS. No proceeds of any loan contemplated hereby
will be used for any purpose that requires the Lender to deliver or obtain any
certification under, or to comply with any margin requirement or other provision
of, Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System.
(n) TITLE TO ASSETS. Each Loan Party has title, as of the date of
each of its financial statements delivered hereunder, to all of its material
assets reflected therein, free and clear of all Liens except Liens permitted
under Section 6.2(a).
(o) COLLATERAL. The provisions of Section 3.1 are effective to
create in favor of the Lender a legal, valid and perfected security interests in
all right, title and interest in the Collateral described therein, enforceable
against each Loan Party that owns an interest in such Collateral, subject to
laws generally affecting the enforcement of creditors' rights.
(p) SOLVENCY. The Borrower and each Guarantor is, and after giving
effect to all transactions occurring or being consummated on or prior to the
Closing Date will be, Solvent.
(q) OTHER MATTERS. Each and all of the representations and
warranties made by any Loan Party in any of the Transaction Documents are true
and correct and complete as of the Closing Date.
ARTICLE VI
COVENANTS
SECTION 6.1 AFFIRMATIVE COVENANTS. Each of the Borrower and Guarantors
covenants and agrees that, so long as any Obligation remains unpaid, unless the
Lender otherwise consents in writing, the Borrower will, and will cause its
Subsidiaries to:
(a) COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable laws, rules, regulations and orders.
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(b) INSPECTION OF PROPERTY AND BOOKS AND RECORDS. Maintain proper
books of record and account, in which full, true and correct entries shall be
made of all financial transactions and matters involving its assets and
business, and permit representatives of the Lender to visit and inspect any of
its properties, to examine its corporate, financial and operating records and
make copies thereof or abstracts therefrom, and to discuss its affairs, finances
and accounts with its officers, employees and independent public accountants,
all at the expense of the Borrower and at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice to the Borrower, except that when an Event of Default exists the
Lender may take any such action at any time during business hours and on
same-day notice.
(c) REPORTING REQUIREMENTS. Furnish to the Lender:
(1) as soon as possible and in any event within two Business
Days after becoming aware of any Prepayment Event or any Event of Default
or Default, a statement of an Authorized Officer setting forth details
thereof and the action which the Borrower has taken and proposes to take
with respect thereto,
(2) notice upon, but in no event later than ten days after,
the occurrence of pending or threatened litigation or loss contingent
required to be reported to auditors under GAAP or any Material
Environmental Claim, together with a copy of any notice given or received
by any Loan Party with respect thereto, and
(3) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any Guarantor as
the Lender from time to time may in good faith request.
(d) PRESERVATION OF EXISTENCE, ETC. Preserve and maintain in full
force and effect its partnership existence and good standing under the laws of
its State of California and all rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal conduct of its
business or the ownership of its assets.
(e) MAINTENANCE OF PROPERTY. Maintain and preserve all its property
which is necessary for use in its business in good working order and condition,
except ordinary depreciation.
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(f) INSURANCE. Maintain insurance with financially sound and
reputable insurers with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons, including workers'
compensation insurance, public liability, property and casualty and business
interruption insurance.
(g) PAYMENT OF LIABILITIES. Pay and discharge all its obligations
and liabilities, including:
(1) as they become due and payable, all claims for tax
liabilities, assessments and governmental charges or levies against it or
upon its properties or assets;
(2) as they become due and payable, all lawful claims which,
if unpaid, would, with the passage of time or notice or both, by law
become a Lien upon its property;
(3) before expiration of any period of grace expressly
provided, all claims for payments due under any lease, and
(4) before expiration of any period of grace expressly
provided, all other liabilities as and when due and payable,
except that it may contest in good faith any claims and may permit the claims so
contested to remain unpaid during any period, including appeals, when it is in
good faith contesting the same, so long as (A) adequate reserves have been
established to the extent required by GAAP or other adequate provision for the
payment thereof has been made, (B) enforcement of the contested claim is
effectively stayed for the entire duration of such contest, and (C) any claim
determined to be due, together with any interest or penalties thereon, is paid
promptly, and in any event within three Business Days, after resolution of such
contest.
(h) FURTHER INFORMATION AND ASSURANCES.
(1) Promptly and in no event later than five Business
Days after becoming aware thereof, notify the Lender if any written
information, exhibits and reports furnished to the Lenders contained any
untrue statement of a material fact or omitted to state any material fact
or any fact necessary to make the statements contained therein not
misleading in the light of the
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circumstances in which made, and correct any defect or error that may be
discovered therein or in the execution, acknowledgement or recordation of
any Loan Document.
(2) Promptly upon request by the Lender, execute, deliver,
acknowledge, file, re-file, register and re-register any and all such
further acts, security agreements, assignments, estoppel certificates,
financing statements and continuations thereof, termination statements,
notices of assignment, transfers, certificates, assurances and other
instruments as the Lender may in good faith require from time to time in
order (A) to carry out more effectively the purposes of this Agreement or
any other Loan Document, (B) to subject to the Liens created by Section
3.1 any of the properties, rights or interests described therein intended
to be covered thereby, (C) to comply with any covenant herein, (D) to
establish and maintain the validity, effectiveness, perfection and
priority of any Lien in favor of the Lender, or (E) to better assure,
convey, grant, assign, transfer, preserve, protect and confirm to the
Lender the rights granted or now or hereafter intended to be granted to
the Lender under any Loan Document or under any other instrument executed
in connection therewith.
SECTION 6.2 NEGATIVE COVENANTS. Each of the Borrower and Guarantors
covenants and agrees that, so long as any Obligation remains unpaid, unless the
Lender otherwise consents in writing, the Borrower will not, and will cause its
Subsidiaries not to:
(a) LIENS. Directly or indirectly make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or become or remain bound by
any agreement to do so, except the provisions of Section 3.1, or become or
remain bound by any agreement restricting its ability to grant, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property or assets, whether now owned or hereafter acquired, except restrictions
set forth in the Loan Documents.
(b) SALE OR DISPOSITION OF ASSETS. Directly or indirectly sell,
assign, lease, convey, transfer or otherwise dispose of all or any portion of
its assets, business or property, or agree to do any of the foregoing, except
(but only if and so long as no Default or Event of Default has occurred and is
continuing or would result therefrom) (i) a Permitted Exchange, (ii) a Permitted
ARP Distribution, (iii) a Permitted Sale, and (iv) a Permitted Payment.
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(c) INVESTMENTS. Directly or indirectly make, acquire, carry or
maintain any Investment, or become or remain bound by any agreement to make,
acquire, carry or maintain any Investment, except Investments in Permitted Cash
Investments and the acquisition of IFT's LLC Units or the consolidation of IFT
into the Borrower.
(d) INDEBTEDNESS OR LIABILITIES. Directly or indirectly create, incur,
assume, guarantee or permit or suffer to exist, or otherwise become or remain
directly or indirectly liable with respect to, any Debt or any other liability
or obligation for the payment of money, except the Obligations.
(e) TRANSACTIONS WITH AFFILIATES. Enter or agree to enter into any
transaction with any Affiliate of the Borrower except any transaction that is
(i) approved by the Lender, (ii) otherwise expressly permitted under this
Agreement, and (iii) upon fair and reasonable terms no less favorable to the
Borrower than the Borrower would obtain in a comparable arm's-length transaction
with a Person not an Affiliate of the Borrower.
(f) SUBSIDIARIES. Acquire or hold any interest in any Subsidiary.
(g) LEASES AND AGREEMENTS. Enter into or permit or suffer it or any of
its property to become or remain bound by or subject to any lease, contract or
agreement, except (i) the Loan Documents, and (ii) the contracts specified in
Schedule 5.1(e).
(h) CONDUCT OF BUSINESS. Enter into or conduct any business or acquire
any assets or engage in any activity, except solely to hold and maintain
ownership of the property owned by it on the Closing Date.
(i) RESTRICTED PAYMENTS. Directly or indirectly (A) declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any partnership, equity, ownership or
profit interests, (B) purchase, redeem or otherwise acquire for value any such
partnership, equity or ownership or profit interest or any warrants, rights or
options to acquire any such interest, now or hereafter outstanding, (C) pay,
purchase, redeem or otherwise acquire or retire any Debt or liability owed by
it, (D) make any loan or advance to any Person, (E) pay any salary,
compensation, fee or other remuneration to any Person, or (F) enter into any
agreement relating to any of the foregoing, except (but only if and so long as
no Default or Event of Default has occurred and is continuing
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or would result therefrom) (i) a Permitted Payment and (ii) a Permitted ARP
Distribution.
(j) MERGERS, ETC. Merge or consolidate with or into or enter into any
agreement to merge or consolidate with or into any Person.
(k) UNPLEDGED ASSETS. Own or hold any assets or property upon which
the Lender does not hold a valid, perfected and sole Lien as security for the
Secured Obligations.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) NON-PAYMENT OF PRINCIPAL. The Borrower fails to pay when due any
principal payment due on any Note; or
(b) NON-PAYMENT OF INTEREST OR FEES. The Borrower fails to pay when
due any interest payment due on any Note under Section 1.2(c) and such failure
continues for five days after either (i) such failure is acknowledged in writing
by the Borrower or (ii) written notice thereof is given to the Borrower by the
Lender; or
(c) NON-PAYMENT OF OTHER AMOUNTS. The Borrower or any Guarantor shall
fail to pay when due any other payment required to be made by it under any Loan
Document and such failure continues for ten days after either (i) such failure
is acknowledged in writing by the Borrower or (ii) written notice thereof is
given to the Borrower by the Lender; or
(d) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made by any Loan Party under or in connection with any Loan Document proves to
have been incorrect in any material respect when made and either (i) such
representation or warranty cannot be remedied or (ii) such representation or
warranty continues to be incorrect in any material respect for ten days after
either (A) such incorrectness is acknowledged in writing by the Borrower or (B)
written notice thereof is given to the Borrower by the Lender; or
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(e) CERTAIN COVENANTS. The Borrower fails to perform or observe any
of the covenants set forth in Section 6.2 and such failure continues for 10 days
after either (A) it is acknowledged in writing by the Borrower or (B) written
notice thereof is given to the Borrower by the Lender; or
(f) OTHER COVENANTS. The Borrower or any Loan Party fails to perform
or observe any other term, covenant or agreement contained in this Agreement or
any other Loan Document (other than those specifically referred to in Section
7.1(d)) and such failure continues for 21 days after either (A) it is
acknowledged in writing by the Borrower or (B) written notice thereof is given
to the Borrower by the Lender; or
(g) BANKRUPTCY, INSOLVENCY, RECEIVERSHIP, DISSOLUTION OR LIQUIDATION
PROCEEDING. Any Loan Party is generally not paying its debts as they become due
or admits in writing its inability to pay its debts generally or makes a general
assignment for the benefit of creditors; or any proceeding is instituted by or
against any Loan Party or any Subsidiary of a Loan Party seeking an order for
relief under the United States Bankruptcy Code or seeking liquidation,
dissolution, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts or the appointment of a receiver,
trustee, custodian or other similar official for such Loan Party or for any
substantial part of the property of such Loan Party under any law relating to
bankruptcy, insolvency, dissolution, liquidation or reorganization or relief of
debtors and either (i) any such relief in any such proceeding is sought or
consented to by such Loan Party or an order for any such relief is entered
against it, or (ii) any such proceeding instituted against such Loan Party
remains undismissed and unstayed for a period of 60 days; or any Loan Party
takes any action to authorize any of the actions set forth above in this Section
7.1(f); or
(h) LITIGATION. Any litigation is commenced against any Loan Party
seeking recovery of, or any judgment or order for the payment of money is
rendered against any Loan Party or any of Subsidiary of a Loan Party for payment
of, an amount that, in the aggregate for all such litigation, judgments and
orders, exceeds $250,000; or
(i) LOAN DOCUMENTS. Any provision of any Loan Document for any reason
is not or ceases to be valid and binding on, and enforceable against, any Loan
Party that is party thereto, or any Loan Party shall repudiate or purport to
revoke any of its obligations under any Loan Document; or the provisions of
Section 3.1 for any reason do not or cease to create a valid and perfected and
sole security interest and
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Lien upon (i) the Collateral described in Section 3.1 or (ii) any property of
the Borrower; or
(j) MATERIAL ADVERSE CHANGE. Any Material Adverse Change occurs; or
(k) GOOD FAITH INSECURITY. The Lender in good faith determines that
the prospect of payment of the Notes in full when due has been impaired or
otherwise in good faith deems itself insecure;
then, and in each and every such event, the Lender may, by notice to the
Borrower, declare the obligation of the Lender to make loans hereunder to be
terminated (whereupon the same shall forthwith terminate) and declare the
principal of and interest on the Notes and all indebtedness evidenced thereby
and all other Obligations and all other amounts payable under this Agreement to
be immediately due and payable, (and thereupon the same shall become and be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower),
except that if an order for relief under the United States Bankruptcy Code is
entered at the request or upon the consent of any Loan Party or involuntarily
against any Loan Party (A) the obligation of the Lender to make such loans shall
automatically be terminated and (B) the Notes and all indebtedness evidenced
thereby and all other Obligations and all such other amounts shall automatically
become and be immediately due and payable, without presentment, demand, protest
or any notice of any kind, all of which are hereby expressly waived by the
Borrower.
SECTION 7.2 RIGHT OF SET-OFF. Whenever any Event of Default is continuing,
the Lender and each other holder of Obligations may at any time or from time to
time, without any notice to any Loan Party or any other Person, set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other debt or amount at any time owing or payable by
it to or for the credit or the account of any Loan Party (including any amount
payable under the Exchange Rights Agreement or the LLC Agreement,
notwithstanding any provision to the contrary contained in the Exchange Rights
Agreement, the LLC Agreement or any other agreement), whether or not then due,
against any and all obligations then owing to it by such Loan Party, whether or
not then due. Such right of setoff is cumulative with and additional to all
other rights and remedies (including other rights of set-off). All payments
under the LLC Agreement or Exchange Rights Agreement that are set off and
applied by the Lender under this Section 7.2 shall be deemed to have been
paid to the Loan Party in accordance with the terms of the LLC Agreement or the
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Exchange Rights Agreement, as the case may be, in satisfaction of the obligation
to make such payment as therein set forth, and neither such setoff or
application nor any other exercise or enforcement of any of the rights of the
Lender under this Section 7.2 shall in any manner constitute a breach of or a
default under any provision of the LLC Agreement or the Exchange Rights
Agreement, including the provisions of Sections 5.1.B, 7.1, 7.3 or 15.9 of the
LLC Agreement or Sections 4, 5, 7 or 14(b) of the Exchange Rights Agreement.
SECTION 7.3 REMEDIES AS TO COLLATERAL. Upon and at any time after the
occurrence of any Event of Default, the Lender may exercise and enforce, in any
order, (i) each and all of the rights and remedies available to a secured party
upon default under the Uniform Commercial Code or other applicable law, (ii)
each and all of the rights and remedies available to it under any Loan Document
and (iii) each and all of the following rights and remedies:
(a) COLLECTION RIGHTS. The Lender may notify any or all account
debtors and obligors on any Collateral of the Lender's security interest therein
and direct, demand and enforce payment thereof directly to the Lender.
(b) POSSESSION. The Lender may take possession of all items of
Collateral that are not then in its possession and require the Borrower or any
Guarantor or the Person in possession thereof to deliver such Collateral to the
Lender at one or more locations designated by the Lender and reasonably
convenient to it and the Borrower.
(c) SALE OR DISPOSITION. The Lender may sell, lease, license or
otherwise dispose of any or all of the Collateral or any part thereof in one or
more parcels at public sale or in private sale or transaction, on any exchange
or market or at the Lender's offices or on the Borrower's or a Guarantor's
premises or at any other location, for cash, on credit or for future delivery,
and may enter into all contracts necessary or appropriate in connection
therewith, without any notice whatsoever unless required by law. The Borrower
and each Guarantor agrees that at least ten calendar days' written notice to the
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall be commercially reasonable and that any such
notice given to the Borrower shall be deemed effectively given not only to the
Borrower but also to each Guarantor. The giving of notice of any such sale or
other disposition shall not obligate the Lender to proceed with the sale or
disposition, and any such sale or disposition may be postponed or adjourned from
time to time, without further notice.
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In addition, the Lender and each other holder of any Obligation may exercise and
enforce such rights and remedies for the collection of the Obligations as may be
available to it by law or agreement.
SECTION 7.4 REMEDIES CUMULATIVE. The Lender may exercise and enforce each
right and remedy available to it upon the occurrence of an Event of Default
either before or concurrently with or after, and independently of, any exercise
or enforcement of any other right or remedy of the Lender or any other holder of
any Obligation against any Person or property. All such rights and remedies
shall be cumulative, and no one of them shall exclude or preclude any other.
SECTION 7.5 SURPLUS; DEFICIENCY. Any surplus proceeds of any sale or other
disposition by the Lender of any Collateral remaining after all the Secured
Obligations are paid in full and in cash shall be paid over to the Borrower or
to whomever may be lawfully entitled to receive such surplus or as a court of
competent jurisdiction may direct, but if any commitment to make any loan then
remains outstanding or if any contingent, unliquidated or unmatured Secured
Obligation then remains outstanding, such surplus proceeds may be retained by
the Lender and held as Collateral until such time as all such commitments have
been terminated and all outstanding Secured Obligations have been determined,
liquidated, paid in full in cash and discharged. The Borrower and each Guarantor
shall be and remain liable for any deficiency.
SECTION 7.6 INFORMATION RELATED TO COLLATERAL. If the Lender determines to
sell or otherwise dispose of any Collateral, the Borrower and each Guarantor
shall, and shall cause any Person controlled by any of them to, furnish to the
Lender all information the Lender may request that pertains or could pertain to
the value or condition of such Guarantor Collateral or that would or might
facilitate its sale.
SECTION 7.7 SALE EXEMPT FROM REGISTRATION. The Lender shall be entitled at
any such sale, if it deems it advisable to do so, to restrict the prospective
bidders or purchasers to Persons who will provide assurances satisfactory to the
Lender that Collateral may be offered and sold to them without registration
under the Securities Act of 1933, as amended, and without registration or
qualification under any other applicable state or federal law. Upon the
consummation of any such sale, the Lender shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Collateral so
sold. The Lender may solicit offers to buy the Collateral, or any part of it,
from a limited number of investors deemed by the Lender, in its reasonable
judgment, to meet the requirements to purchase securities under Regulation
D promulgated under the Securities Act of 1933 as then in effect (or any other
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regulation of similar import). If the Lender solicits such offers from such
investors, then the acceptance by the Lender of the highest offer obtained from
any of them shall be deemed to be a commercially reasonable method of
disposition of the Collateral.
SECTION 7.8 REGISTRATION RIGHTS. If the Lender determines that registration
of any securities constituting Collateral under the Securities Act of 1933, or
registration or qualification of such securities under any other applicable
state or federal law, is required or desirable in connection with any sale, then
as and when requested by the Lender, the Borrower and each Guarantor will use
its best efforts to cause such registration to be effectively made, at no
expense to the Lender, and to continue any such registration effective for such
time as may be reasonably necessary in the opinion of the Lender.
SECTION 7.9 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers or privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement.
ARTICLE VIII
DEFINITIONS AND ACCOUNTING TERMS
SECTION 8.1 CERTAIN DEFINITIONS. When used in this Agreement:
"AFFILIATE" of a specified Person means any other Person that directly
or indirectly through one or more intermediaries controls, is controlled by or
is under common control with the Person specified and specifically includes, in
the case of any Loan Party, each other Loan Party and each Affiliate of any
other Loan Party. For this purpose, "control," "controlled by" and "under common
control with" with respect to any Person mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" means this Loan and Security Agreement.
"BORROWER" has the meaning provided in the preamble hereto.
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"BUSINESS DAY" means any day except a Saturday or Sunday or a day
when commercial banks are authorized or required by law to be closed in New
York, New York, Las Vegas, Nevada or Los Angeles, California.
"CAPITAL LEASE" means, with respect to any Person, any lease of any
property by that Person as lessee which, in accordance with GAAP, is required to
be accounted for as a capital lease on the balance sheet of that Person.
"CLOSING DATE" means the date on which all of the conditions
precedent set forth in Section 4.1 are satisfied or waived in writing by the
Lender.
"COHEN" has the meaning provided in the preamble hereto.
"COHEN INTERESTS" means (i) the 302,000 LLC Units represented by
Oasis Martinique, LLC's LLC Units certificate number 2 issued on October 23,
1997 or any certificate upon transfer of any such LLC Units or in exchange or
substitution or replacement for such certificate and (ii) any and all Common
Stock issued in exchange for any or all of such LLC Units pursuant to Exchange
Rights Agreement.
"COHEN NOTE" has the meaning provided in Section 1.1(b)(1).
"COLLATERAL" means all property which at any time is subject or is to
become subject to any Lien or security interest granted or created under any of
the Loan Documents.
"COMMON STOCK" means the Common Stock of the Lender, par value
$.01 per share.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
October 23, 1997 by and among the Lender, Costa Mesa Partners, LLC, the Borrower
and the Guarantors.
"DEBT" means, as applied to any Person, (i) all indebtedness of such
Person for borrowed money (whether by loan or the issuance of debt securities or
otherwise), (ii) all obligations issued, undertaken or assumed by such Person as
the deferred purchase price of property or services or interest thereon, except
accounts and accrued expenses payable on ordinary trade terms and incurred in
the ordinary course of business, (iii) all reimbursement obligations of such
Person with respect to surety bonds, letters of credit, bankers' acceptances and
similar instruments, whether
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or not contingent, (iv) all monetary obligations of such Person under any
Capital Lease, (v) all obligations (contingent or otherwise) to purchase, retire
or redeem any capital stock or any other equity interest of such Person or any
of its Subsidiaries, (vi) all monetary obligations measured by, or determined on
the basis of, the value of any capital stock of such Person or any of its
Subsidiaries, (vii) all Debt of any other Person that such Person has guaranteed
or otherwise given assurances relating to the repayment thereof, and (viii) all
liabilities of such Person or any other Person that are secured by (or for which
the holder thereof has an existing right, contingent or otherwise, to become
secured by) any Lien upon any property of such Person or any Subsidiary of such
Person.
"DEFAULT" means any event or condition described in Section 7.1
which, with any notice or passage of time (or both) expressly described in
Section 7.1, would constitute an Event of Default.
"DOLLARS" and "$" mean United States dollars or such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts in the United States of America.
"EVENTS OF DEFAULT" has the meaning provided in Section 7.1.
"EXCHANGE RIGHTS AGREEMENT" means that certain Exchange Rights
Agreement dated as of October 23, 1997 by and among the Lender, Oasis
Martinique, LLC, the Borrower and IFT.
"EXEMPTED COHEN AFFILIATE" means a trust, whether or not revocable,
of which Cohen's "Family Members" (as that term is defined in the LLC Agreement)
are the sole beneficiaries.
"EXEMPTED ISRAEL AFFILIATE" means a trust, whether or not revocable,
of which Israel's "Family Members" (as that term is defined in the LLC
Agreement) are the sole beneficiaries.
"EXEMPTED TRANSFER" means a transfer of any or all Cohen Interests to
an Exempted Cohen Affiliate or a transfer of any or all Israel Interests to an
Exempted Israel Affiliate if (in the case of each such transfer) (i) such
transfer is permitted under the Transaction Documents, and (ii) the transferee
delivers to the Lender (A) an instrument in form and substance reasonably
satisfactory to the Lender duly executed by the Borrower and the transferee by
which the transferee assumes and agrees to pay all Obligations and to be bound
by all of the covenants and agreements
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set forth in the Loan Documents in the same manner as the Borrower is bound
thereby and the Borrower agrees that the Borrower shall remain liable to pay the
Obligations and bound by such covenants and agreements, and (B) an opinion of
counsel reasonably satisfactory to the Lender confirming as to such instrument
and the parties thereto each and all of the matters confirmed in the opinion of
counsel delivered to the Lender pursuant to Section 4.1(f).
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the U.S. accounting profession, which are applicable
to the facts and circumstances on the date of determination.
"GOVERNMENTAL AUTHORITY" means any nation, state, sovereign or
government, any political subdivision thereof and any entity exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government.
"GUARANTORS" has the meaning provided in the preamble hereto.
"HOLDER" means, in respect of any Obligation, the Person entitled to
enforce payment thereof and, in each instance, specifically includes the Lender.
"IFT" has the meaning provided in the preamble hereto.
"INDEMNIFIED PERSON" has the meaning provided in Section 1.7.
"ISRAEL" has the meaning provided in the preamble hereto.
"ISRAEL INTERESTS" means (i) the 8,860 LLC Units represented by Oasis
Martinique, LLC's LLC Units certificate number 3 issued on October 23, 1997, and
the 575,162 LLC Units represented by Oasis Martinique, LLC's LLC Units
certificate number 1 issued on October 23, 1997, or any certificate issued upon
transfer of any such LLC Units or in exchange or substitution or replacement for
such certificate, and (ii) any and all Common Stock issued in exchange for any
or all of such LLC Units pursuant to Exchange Rights Agreement.
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"ISRAEL NOTE" has the meaning provided in Section 1.1(b)(2).
"JUNIOR TRUST DEEDS" means any deed of trust recorded against any
real property in which Oasis Martinique, LLC, has, or immediately upon giving
effect to the transactions contemplated by the Transaction Documents will have,
any interest, except the deed of trust dated April 1, 1986 made by Costa Mesa
Partners as trustor and recorded April 9, 1986 as instrument number 86-142579 in
the Official Records of Orange County, California.
"LENDER" has the meaning provided in the preamble hereto.
"LIEN" means any mortgage, deed of trust, lien, pledge, charge,
security interest, hypothecation, assignment, deposit arrangement or encumbrance
of any kind in respect of any asset, whether or not filed, recorded or otherwise
perfected or effective under applicable law, as well as the interest of a vendor
or lessor under any conditional sale agreement, capital or finance lease or
other title retention agreement relating to such asset.
"LLC AGREEMENT" means that certain Amended and Restated Limited
Liability Company Agreement of Oasis Martinique, LLC dated as of October 23,
1997, entered into by and among the Lender and the Persons whose names are set
forth on Exhibit A thereto.
"LLC UNIT" means any equity, ownership or membership interest in
Oasis Martinique, LLC and, when used in reference to a specific number of such
interests, has the meaning set forth in the LLC Agreement.
"LOAN DOCUMENTS" means this Agreement, the Notes, and all other
guaranties, agreements, instruments and written undertakings entered into by any
Loan Party for the benefit of the Lender in connection with, or in other to
evidence, assure, guarantee, secure, or provide for repayment of any of the
Obligations or otherwise pursuant to or in connection with the transactions and
agreements contemplated hereby.
"LOAN PARTY" means the Borrower and each Guarantor.
"MATERIAL ADVERSE CHANGE" means any materially adverse change in the
financial condition, assets, nature of the assets, liabilities, operations or
prospects of the Borrower or in the ability of the Borrower to pay any of the
Obligations or in the
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ability of any Guarantor to pay any liability of such Guarantor hereunder or in
the validity, enforceability or collectibility of any Loan Document.
"MATURITY DATE" has the meaning provided in Section 1.2(a).
"MOODY'S" means Moody's Investor Service, Inc.
"NOTES" means the promissory notes of the Borrower delivered pursuant
to Section 4.1(a) and all promissory notes and other evidence of indebtedness
at any time delivered by the Borrower in exchange or substitution therefor or in
replacement thereof or as additional evidence of the Borrower's indebtedness for
the loans made hereunder.
"OASIS MARTINIQUE, LLC" means Oasis Martinique, LLC, a Delaware
limited liability company.
"OBLIGATIONS" means all present and future indebtedness, obligations
and liabilities of every type and description of the Borrower or any other Loan
Party at any time arising under or in connection with this Agreement, the Notes
or any other Loan Document due or to become due to the Lender or any Person
required to be indemnified under any Loan Document or any other Person and shall
include (i) all liability for principal of and interest on the loans evidenced
by the Notes, (ii) all liability under the Loan Documents for any additional
interest, fees, taxes, compensation, costs, losses, expense reimbursements and
indemnification and (iii) all Post-Petition Interest and Expense Claims.
"ORDINARY CASH DISTRIBUTION" means (i) a cash distribution on LLC
Units that is made in accordance with Section 5.1 of the LLC Agreement, as in
effect on the Closing Date, or (ii) a cash dividend on Common Stock issued in
exchange for LLC Units pursuant to the Exchange Rights Agreement, up to an
amount, in the aggregate for all such dividends in any period, not exceeding the
amount of the cash distribution on such LLC Units that would have been required
for such period under such Section 5.1, if such LLC Units had not been exchanged
for Common Stock.
"OTHER TAXES" has the meaning provided in Section 1.5(b).
"PERMITTED ARP DISTRIBUTION" means a transfer of the Cohen Interests
to American Realprop, a California general partnership in which Cohen, as
Trustee of the Cohen Family Trust, is one of the partners, but only if (i) such
transfer is an Exempted Transfer, (ii) such transfer is a transfer of all (and
not less than all) interest
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<PAGE> 51
in the Cohen Interests, and (iii) American Realprop and the partners therein are
Solvent at the time of such transfer and both before and after giving effect to
all transactions consummated concurrently therewith.
"PERMITTED CASH INVESTMENTS" means any bank deposit account or
financial intermediary account under the exclusive dominion and control of the
Lender and in which the Lender has a duly created and perfected and sole
security interest invested exclusively in (i) debt securities issued or fully
guaranteed or insured by the United States Government or any agency thereof and
backed by the full faith and credit of the United States maturing not more than
one year from the date of acquisition, (ii) certificates of deposit, time
deposits, Eurodollar time deposits, bankers' acceptances or deposit accounts
having in each case a remaining term to maturity of not more than one year,
which are either (i) fully insured by the Federal Deposit Insurance Corporation
or (ii) issued by any commercial bank under the laws of any State or any
national banking association that has combined capital and surplus of not less
than $800,000,000 and whose short-term securities are rated at least A-1 by S&P
or P-1 by Moody's, (iii) commercial paper that is rated at least A-1 by S&P or
P-1 by Moody's, issued by a company that is incorporated under the laws of the
United States or of any State and directly issues its own commercial paper, and
has a remaining term to maturity of not more than one year, (iv) a repurchase
agreement with (A) any commercial bank that is organized under the laws of any
State or any national banking association and that has total assets of at least
$1,000,000,000, or (B) any investment bank that is organized under the laws of
any State and that has total assets of at least $1,000,000,000, if such
agreement is secured by any one or more of the securities and obligations
described in clauses (i), (ii) or (iii) of this definition having a market value
(exclusive of accrued interest and valued at least monthly) at least equal to
the principal amount of such investment, (v) any money market or other
investment fund the investments of which are limited to investments described in
clauses (i), (ii), (iii) and (iv) of this definition and which is managed by (A)
a commercial bank that is organized under the laws of any State or any national
banking association and that has total assets of at least $1,000,000,000, or (B)
an investment bank that is organized under the laws of any State and that has
total assets of at least $1,000,000,000.
"PERMITTED EXCHANGE" means an exchange of LLC Units for Common Stock
pursuant to the Exchange Rights Agreement if (i) such shares of Common Stock are
concurrently delivered to the Lender to be held as Collateral in accordance with
Section 3.3, (ii) such exchange does not occur prior to the first anniversary of
the Closing Date, and (iii) no Event of Default or Default has occurred and is
continuing at the time of such exchange.
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<PAGE> 52
"PERMITTED PAYMENT" means a payment or distribution to the partners
in the Borrower or on account of Subordinated Liabilities that is made from (i)
any interest refund paid to the Borrower by the Lender pursuant to Section
1.2(e) or (ii) surplus proceeds of an Ordinary Cash Distribution released by the
Lender to the Borrower pursuant to Section 3.9 as the surplus proceeds remaining
after such Ordinary Cash Distribution was paid to the Lender and was first
applied by the Lender to pay interest on the Notes and any and all other
past-due Obligations, as set forth in Section 3.9.
"PERMITTED SALE" means a Prepayment Event, but only if (i) such
Prepayment Event consists of a sale of LLC Units or Common Stock in a good faith
arms-length sale that is permitted under the Transaction Documents and made to a
Person not an Affiliate of the Borrower or any Guarantor, and (ii) on the day of
occurrence of such Prepayment Event the Borrower makes the prepayment required
under Section 1.2(b)(1) or (2) by reason of such Prepayment Event.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"POST-PETITION INTEREST AND EXPENSE CLAIMS" means any and all claims
of any holder of Obligations (i) for interest thereon accrued at any time after
the commencement of any case under the Bankruptcy Code or any other insolvency,
receivership, dissolution or liquidation proceeding at the contract rate
(including any applicable post-default increase therein) set forth in this
Agreement or any other Loan Document or (ii) for cost and expense reimbursements
or indemnification on the terms set forth in this Agreement or any other Loan
Document relating to costs and expenses incurred and indemnification rights
accrued at any time after the commencement of any such case or proceeding,
whether or not such claim is enforceable, allowable or allowed in such case or
proceeding and even if such claim is disallowed therein.
"PREPAYMENT EVENT" means (i) as to Note A, the sale or other
disposition of any or all of the Cohen Interests, or any interest therein, to
any Person, except an Exempted Transfer, and (ii) as to Note B, the sale or
other disposition of any of the Israel Interests, or any interest therein, to
any Person, except an Exempted Transfer.
"S&P" means Standard & Poors Corporation.
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"SECURED OBLIGATIONS" has the meaning provided in Section 3.2.
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including probable liability on contingent
liabilities, of such Person, (ii) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probably liability of such Person on its debts and liabilities as they become
due, (iii) such Person does not intend to, and does not believe that it will,
incur debts and liabilities beyond its ability to pay as they become due, and
(iv) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's property would
constitute an unreasonably small amount of capital.
"SUBORDINATED LIABILITIES" has the meaning provided in Section
2.8(a).
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture or other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled
directly or indirectly by such Person or one or more Subsidiaries of such Person
or a combination thereof.
"TAXES" has the meaning provided in Section 1.5(a).
"TRANSACTION DOCUMENTS" means the Contribution Agreement, the
Exchange Rights Agreement and the LLC Agreement.
"UNITED STATES" and "U.S." mean the United States of America.
SECTION 8.2 ACCOUNTING TERMS. All accounting terms not expressly defined
herein shall be construed, except where the context otherwise requires, and all
financial computations required under this Agreement shall be made in accordance
with GAAP applied on a consistent basis. If GAAP changes during the term of this
Agreement so as to affect the calculation of any term defined herein or any
measure of financial performance or financial condition employed or referred to
herein, the Borrower and the Lenders agree to negotiate in good faith toward an
amendment of this Agreement which shall approximate, to the extent possible, the
economic effect of the original provisions hereof after taking into account such
change in GAAP, but until the parties are able to agree upon such amendment (i)
the Borrower shall be deemed in compliance with the provisions hereof only if
and to the extent it would have been in compliance if such change in GAAP had
not occurred and (ii) the
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Borrower shall deliver to the Agent, with each financial report delivered by the
Borrower hereunder, information sufficient to confirm such compliance as if such
change in GAAP had not occurred.
SECTION 8.3 OTHER DEFINITIONAL PROVISIONS.
(a) USE OF DEFINED TERMS IN OTHER DOCUMENTS. Unless otherwise
specified herein or therein, all terms defined in this Agreement shall have the
defined meanings when used in any other Loan Document or in any certificate or
other document made or delivered pursuant hereto.
(b) CERTAIN MATTERS. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "including" is not
limiting and means "including without limitation."
(c) TIME. In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding"; and the word "through" means "to
and including. "
(d) AMENDMENTS. References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document.
(e) LAWS. References to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(f) CAPTIONS AND HEADINGS. The captions and headings of this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS. No amendment or waiver of any provision of this
Agreement or the Notes, and no consent to any departure by the Borrower
therefrom, shall be effective unless it is in writing and signed by the Lender
(and any such waiver or consent shall in any case be effective only in the
specific instance and for the specific purpose for which given).
SECTION 9.2 NOTICES. All notices and other communications provided for
hereunder shall be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered:
if to the Lender, at: Oasis Residential, Inc.
4041 East Sunset Road
Henderson, Nevada 89014
Attention: President
Telecopy: (702) 435-9445
if to the Borrower,
IFT or Israel, at: Edward M. Israel
10474 Santa Monica Boulevard #405
Los Angeles, California 90025
Telecopy: (310) 474-8533
with a copy to: Richards, Watson & Gershon
A Professional Corporation
333 South Hope Street, 38th Floor
Los Angeles, California 90071
Att'n: Timothy L. Neufeld
Telecopy: (213) 626-0078
and if to the Borrower
or Cohen, at: Robert Cohen
c/o Four Seasons Hotel
300 South Doheny
Los Angeles, California 90048
Telecopy: (310) 278-3637
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with a copy to: Richards, Watson & Gershon
A Professional Corporation
333 South Hope Street, 38th Floor
Los Angeles, California 90071
Att'n: Timothy L. Neufeld
Telecopy: (213) 626-0078
Each Guarantor hereby irrevocably appoints the Person immediately above named as
agent for delivery and receipt of any and all notices that may at any time be
given to such Guarantor and irrevocably agrees that any notice delivered to such
Person shall be deemed sufficiently given to such Guarantor for all purposes.
All such notices and communications shall be effective (i) when sent by
telecopy, with proof of transmission, to the number set forth above, or (ii)
when delivered to or personally served upon the Person identified above, or (ii)
on the Business Day on which delivery is committed by any reputable private
courier service.
SECTION 9.3 NO WAIVER; REMEDIES. No failure on the part of the Lender to
exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 9.4 ASSIGNMENTS AND PARTICIPATIONS.
(a) PERMITTED ASSIGNMENTS. The Lender may assign to any Person all or
a portion of its rights and obligations under this Agreement. Upon the execution
and delivery of a written instrument of assignment, then from and after the
effective date of such assignment as specified therein, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such instrument,
shall have the rights and obligations of the Lender hereunder and (ii) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such instrument, relinquish its
rights and be released from its obligations under this Agreement.
(b) EFFECT OF ASSIGNMENT. By executing and delivering an instrument of
assignment, the Lender assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto that (i) other than as
provided in such instrument of assignment, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or
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representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto or as to
the Collateral or the validity, enforceability, perfection or priority of any
Lien upon the Collateral; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
instrument of assignment; (iv) such assignee will, independently and without
reliance upon the Lender or such assigning Person any other Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; and (v) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(c) REISSUANCE OF NOTES. Upon its receipt of any such instrument of
assignment, or upon receipt of any certificate by the holder of any Note stating
that such Note has been damaged, lost, misplaced or destroyed (and in such event
without any additional bond, indemnity or undertaking) the Borrower, at its own
expense, shall execute and deliver to the assignor Lender, or to the Lender so
certifying, a new Note or Notes to the order of such assignee or to the order of
the Lender so certifying in an aggregate amount equal to the interest in the
surrendered Note or Notes assigned to it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained an interest in the
surrendered Note or Notes a new Note or Notes to the order of the assigning
Lender in an aggregate amount equal to the interest so retained.
(d) PARTICIPATIONS. Each holder of any Obligation may sell
participations to one or more Persons in all or a portion of its rights and
obligations under this Agreement, but (i) such holder's obligations under this
Agreement (including its commitment to the Borrower hereunder) shall remain
unchanged, (ii) such holder shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such holder shall remain
the holder of any such Note or Notes for all purposes of this Agreement, and
shall continue to deal solely and directly with the Loan Parties in connection
with such holder's rights and obligations under this Agreement.
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(e) ADDITIONAL INFORMATION. Any holder of any Obligation may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.4, disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrower or any other Loan Party furnished to such Lender by or on behalf of the
Borrower or any other Loan Party.
SECTION 9.5 BINDING EFFECT. This Agreement shall become effective when it
has been executed and delivered by all of the parties hereto and shall be
binding upon and inure to the benefit of the Borrower, the Guarantors and the
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lender.
SECTION 9.6 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL;
RELEASE OF LIABILITY FOR CERTAIN DAMAGES.
(a) PLACE OF CONTRACT AND PERFORMANCE. THIS AGREEMENT IS ENTERED INTO
IN THE STATE OF NEVADA, AND ALL LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST AND
OTHER LIABILITIES HEREUNDER SHALL BE MADE IN THE STATE OF NEVADA.
(b) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA.
(c) SUBMISSION TO JURISDICTION. EACH OF THE BORROWER, EACH GUARANTOR,
THE LENDER AND EACH OTHER HOLDER OF OBLIGATIONS HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST THE BORROWER, ANY GUARANTOR, THE LENDER OR ANY OTHER HOLDER OF
OBLIGATIONS WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS AGREEMENT OR ANY
RELATED AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION OF THE
STATE OF NEVADA OR OF THE UNITED STATES OF AMERICA IN AND FOR THE DISTRICT OF
NEVADA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER,
THE GUARANTORS AND THE LENDER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND
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UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL, NON-APPEALABLE JUDGMENT RENDERED
THEREBY. THE BORROWER AND EACH GUARANTOR WAIVES ANY OBJECTION TO JURISDICTION
AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE
BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW OR SHALL LIMIT THE RIGHT OF THE LENDER OR ANY OTHER HOLDER OF OBLIGATIONS
TO BRING PROCEEDINGS AGAINST THE BORROWER OR ANY GUARANTOR IN THE COURTS OF ANY
OTHER JURISDICTION IN ORDER TO ENFORCE ANY JUDGMENT RENDERED BY ANY STATE OR
FEDERAL COURT SITUATED IN THE STATE OF NEVADA OR IF SUCH PROCEEDINGS ARE IN ANY
RESPECT NECESSARY OR APPROPRIATE FOR THE FULL PROTECTION AND ENFORCEMENT OF ANY
OR ALL OF THE CLAIMS, LIENS, AND RIGHTS OF THE LENDER OR SUCH OTHER HOLDER.
(d) WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH
OF THE BORROWER, THE GUARANTORS, THE LENDER AND OTHER HOLDERS OF OBLIGATIONS
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS AGREEMENT.
(e) LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY THE BORROWER OR
ANY GUARANTOR AGAINST THE LENDER OR ANY OTHER HOLDER OF OBLIGATIONS OR ANY OF
THEIR RESPECTIVE AFFILIATES, SHAREHOLDERS, OWNERS, MEMBERS, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM (WHETHER BASED UPON ANY BREACH OF
CONTRACT, TORT, BREACH OF STATUTORY DUTY OR ANY OTHER THEORY OF LIABILITY)
ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT (WHETHER OR NOT WRONGFUL)
OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER AND EACH GUARANTOR HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES,
WHETHER OR NOT NOW ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS
FAVOR
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SECTION 9.7 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Borrower,
the Guarantors and the Lender with respect to the loan transaction governed
hereby and supersedes all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof. Notwithstanding the foregoing, none of the provisions of the
Transaction Documents shall be superseded, changed, affected or impaired hereby.
No representation, understanding, promise or condition concerning the subject
matter hereof and thereof shall be binding upon any holder of Obligations unless
expressed herein, and no course of prior dealing or usage of trade, and no parol
or extrinsic evidence of any nature, shall be admissible to supplement, modify
or vary any of the terms hereof or thereof. Acceptance of or acquiescence in a
course of performance rendered under this Agreement or any other dealings
between any Loan Party and any holder of Obligations shall not be relevant to
determine the meaning of this Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
SECTION 9.8 SURVIVAL. The Borrower's liability for any and all additional
interest, fees, taxes, compensation, costs, losses, expense reimbursements,
indemnification and other similar Obligations arising under any Loan Document
shall survive the expiration or termination of the commitments of the Lenders to
extend credit hereunder and the repayment and retirement of all Notes at any
time outstanding hereunder.
SECTION 9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 9.10 LIABILITIES JOINT AND SEVERAL. All liabilities of the Borrower
and the Guarantors hereunder shall be in all respects joint and several and may
be enforce against any one or more of them without regard to whether enforcement
is sought, permitted or available against any others of them. This Agreement may
be enforced severally and successively in one or more actions, whether
independent, concurrent, joint, successive or otherwise. The claims, rights and
remedies of any holder of Obligations (i) may not be modified or waived by any
other holder of Obligations and (ii) shall not be reduced, discharged, affected
or impaired by any deed, act or omission, whether or not wrongful, of any other
holder of Obligations.
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SECTION 9.11 SEVERABILITY. If any provision hereof or the application
thereof in any particular circumstance is held to be unlawful or unenforceable
in any respect, all other provisions hereof and such provision in all other
applications shall nevertheless remain effective and enforceable to the maximum
extent lawful.
[intentionally left blank]
[signatures appear on following pages]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan and
Security Agreement to be duly executed as of the date first above written.
OASIS RESIDENTIAL, INC., a Nevada
corporation
By: /s/ MARIANNE K. AGUIAR
------------------------------------------
Marianne K. Aguiar
Vice President
ISCO, a California general partnership
BY: IFT Properties, Ltd., a California
limited partnership and a partner in
ISCO,
By: /s/ EDWARD M. ISRAEL
-------------------------------------
Edward M. Israel, its general
partner
BY: Costa Mesa Associates, a California
general partnership and a partner in
ISCO,
By: /s/ EDWARD M. ISRAEL
-------------------------------------
Edward M. Israel, partner
BY: American Realprop, a California
general partnership and a partner in
ISCO,
By: /s/ ROBERT COHEN
-------------------------------------
Robert Cohen, Trustee, General
Partner
S-1
<PAGE> 63
IFT PROPERTIES, LTD., a California
limited partnership
By: /s/ EDWARD M. ISRAEL
------------------------------------------
Edward M. Israel, its general partner
/s/ EDWARD M. ISRAEL
-----------------------------------------------
Edward M. Israel
/s/ ROBERT COHEN
-----------------------------------------------
Robert Cohen
S-2
<PAGE> 64
List of Exhibits and Schedules
EXHIBITS
A - Note A
B - Note B
C-1 - Cohen Note
C-2 - Israel Note
D-1 - Opinion of Richards, Watson & Gershon
D-2 - Opinion of Kirshman, Harris & Cooper
SCHEDULES
3.6 - Collateral matters
5.1(c) - Approvals
5.1(d) - Affiliates
5.1(e) - Litigation; material agreements
5.1(f) - Governmental approvals
5.1(k) - Certain other litigation
<PAGE> 1
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 (this "Amendment"), dated as of February 4, 1998, is
made and entered into by and among Camden Property Trust, a Texas real estate
investment trust ("Camden"), Camden Subsidiary II, Inc., a Delaware corporation
and a direct wholly owned subsidiary of Camden ("Camden Sub"), and Oasis
Residential, Inc., a Nevada corporation (the "Company"), and shall amend the
Agreement and Plan of Merger, dated December 16, 1997, by and among Camden,
Camden Sub and Oasis (the "Merger Agreement").
WHEREAS, the parties to the Merger Agreement desire to amend the Merger
Agreement to clarify their mutual intent relating thereto.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
hereby agree as follows:
1. Section 2.1(d) of the Merger Agreement is amended in its entirety to read as
follows:
"(d) Conversion of Series A Preferred Stock. At the Effective Time, each
share of Series A Preferred Stock outstanding immediately prior to the Effective
Time shall, except as otherwise provided in clause (b) above, automatically and
without any action on the part of the holder thereof, cease to be outstanding
and be converted into one share of Series A Cumulative Convertible Preferred
Stock, par value $.01 per share (the "CAMDEN PREFERRED STOCK" and, together with
the Camden Common Stock, the "CAMDEN SHARES"), of Camden (the "PREFERRED STOCK
EXCHANGE RATIO" and, together with the Common Stock Exchange Ratio, the
"EXCHANGE RATIO"), and shall have a liquidation preference of $25.00 per share.
The terms of the Camden Preferred Stock shall be the same as the terms of the
Series A Preferred Stock; provided, however, that the Camden Preferred Stock
shall have such voting rights as the parties shall reasonably agree are
necessary in order to insure that the Merger constitutes a reorganization within
the meaning of Section 368(a) of the Code; provided, further, that the
cumulative cash dividends payable in amount per share shall equal the greater of
(i) $2.25 per annum or (ii) the cash dividends paid or payable on a number of
shares of Camden Common Stock equal to the number of shares of Camden Common
Stock into which a share of Camden Preferred Stock is convertible, and shares of
Camden Preferred Stock shall be convertible into shares of Camden Stock at a
conversion price of $32.4638 per share of Camden Common Stock, subject to
certain adjustments.
2 . Section 3.1(f) of the Merger Agreement is amended in its entirety to read as
follows:
"(f) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents or in SCHEDULE 3.1(f) to the Company Disclosure Letter,
since the date of the most recent financial statements included in the Company
SEC Documents (the "FINANCIAL STATEMENT DATE") and to the date of this
Agreement, the Company and the Company Subsidiaries have conducted their
business only in the ordinary course and there has not been (i) any change that
would have a Material Adverse Effect (a "MATERIAL ADVERSE CHANGE"), nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in a Material
1
<PAGE> 2
Adverse Change, (ii) except for regular quarterly dividends paid on Company
Shares as set forth on SCHEDULE 3.1(f) to the Company Disclosure Schedule, in
each case with customary record and payment dates, any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of the Company's capital stock, other than any
dividend required to be paid pursuant to Section 2.2, (ill) any split,
combination or reclassification of any of the Company's capital stock or, except
for the issuance of the Oasis Martinique LLC Units, any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of its capital stock or any issuance of an ownership interest in, any
Company Subsidiary except as permitted by Section 4.1,(iv) any damage,
destruction or loss, not covered by insurance, that has or would have a Material
Adverse Effect or (v) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary, except insofar as may have been
disclosed in the Company SEC Documents or required by a change in GAAP."
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
effective as of the date first above written.
CAMDEN PROPERTY TRUST
By: /s/ RICHARD J. CAMPO
----------------------------------
Richard J. Campo
Chairman of the Board
CAMDEN SUBSIDIARY II, INC.
By: /s/ RICHARD J. CAMPO
----------------------------------
Richard J. Campo
Chairman of the Board
OASIS RESIDENTIAL, INC.
By:
----------------------------------
Scott S. Ingraham
President and Chief Executive
Officer
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
effective as of the date first above written.
CAMDEN PROPERTY TRUST
By:
----------------------------------
Richard J. Campo
Chairman of the Board
CAMDEN SUBSIDIARY II, INC.
By:
----------------------------------
Richard J. Campo
Chairman of the Board
OASIS RESIDENTIAL, INC.
By: /s/ SCOTT S. INGRAHAM
----------------------------------
Scott S. Ingraham
President and Chief Executive
Officer
3
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
effective as of the date first above written.
CAMDEN PROPERTY TRUST
By:
----------------------------------
Richard J. Campo
Chairman of the Board
CAMDEN SUBSIDIARY II, INC.
By:
----------------------------------
Richard J. Campo
Chairman of the Board
OASIS RESIDENTIAL, INC.
By: /s/ SCOTT S. INGRAHAM
----------------------------------
Scott S. Ingraham
President and Chief Executive
Officer
3
<PAGE> 1
Exhibit 21.1
List of Subsidiaries
Oasis California, Inc.
100% Owned
O.R.I., Inc.
100% Owned
O.R.I. - Colorado, Inc.
100% Owned
O.R.I. Park, Inc.
100% Owned
O.R.I. Wexford, Inc.
100% Owned
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Oasis Residential, Inc. on Form S-3 (File No. 333-22901), Joint Proxy Statement
on Form S-4 (File No. 333-45817), and Form S-8 (File No. 333-07317) of our
report dated January 23, 1998, except for Note 15 as to which the date is March
6, 1998, on our audits of the consolidated financial statements and financial
statement schedule of Oasis Residential, Inc. as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997, which
report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
March 24, 1998
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