-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TfLZl3xDykm/SF1M42kI/oZ9XlHnvp7/EQVIGEEprHmBa6BIp4HPjK0tPmvSsHxg OTU21F9fqctU9keUJngBxw== 0000944209-96-000515.txt : 19961115 0000944209-96-000515.hdr.sgml : 19961115 ACCESSION NUMBER: 0000944209-96-000515 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DE ANZA PROPERTIES X CENTRAL INDEX KEY: 0000215628 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 953005938 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08942 FILM NUMBER: 96661150 BUSINESS ADDRESS: STREET 1: 9171 WILSHIRE BLVD STE 627 CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: 3105501111 10-Q 1 QUARTERLY REPORT--X SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q --------- [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1996 [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------ ------------ Commission File Number 0-8942 DE ANZA PROPERTIES - X (Exact name of registrant as specified in its charter) CALIFORNIA 95-3005938 (State or other jurisdiction of (IRS Employer Iden- incorporation or organization) tification Number) 9171 WILSHIRE BOULEVARD, SUITE 627 BEVERLY HILLS, CALIFORNIA 90210 (Address of principal executive offices, including zip code) (310) 550-1111 (The registrant's telephone number, including area code) NO CHANGE (Former name, former address and former fiscal year, if changed since last report) 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 --- --- Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule 240.0-3(b) (17 CFR 240.0-3(b)), the pages of this document have been numbered sequentially. The total number of pages contained herein is 40. 1 TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION - ------ --------------------- ITEM 1. FINANCIAL STATEMENTS Balance Sheets 3 Statements of Income 5 Statements of Changes in Partners' Capital (Deficit) 7 Statements of Cash Flows 8 Notes to Financial Statements 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 PART II. OTHER INFORMATION 15 - ------- -----------------
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DE ANZA PROPERTIES - X (A Limited Partnership) Balance Sheets (Unaudited)
September 30, December 31, 1996 1995 ------------- ------------ ASSETS CASH AND CASH EQUIVALENTS - including restricted deposits of $700,557 and $843,923 at September 30, 1996 and December 31, 1995, respectively - Note 1 $ 1,429,485 $ 1,388,279 ACCOUNTS RECEIVABLE 8,268 10,812 PREPAID EXPENSES 91,581 70,222 ----------- ----------- 1,529,334 1,469,313 ----------- ----------- PROPERTY AND EQUIPMENT - Notes 1, 2, 5, 6 and 7 Land 2,989,265 2,989,265 Land improvements 4,782,559 4,704,170 Buildings and improvements 11,448,171 11,448,171 Furniture and equipment 623,498 623,498 ----------- ----------- 19,843,493 19,765,104 Less accumulated depreciation 10,203,950 9,921,679 ----------- ----------- 9,639,543 9,843,425 ----------- ----------- OTHER ASSETS Loan costs - less accumulated amortization of $55,794 and $53,484 at September 30, 1996 and December 31, 1995, respectively - Note 2 52,021 54,331 Other - Note 7 46,115 20,656 ----------- ----------- 98,136 74,987 ----------- ----------- $11,267,013 $11,387,725 =========== ===========
See accompanying notes to financial statements. 3 DE ANZA PROPERTIES - X (A Limited Partnership) Balance Sheets (Continued) (Unaudited)
September 30, December 31, 1996 1995 ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ACCOUNTS PAYABLE AND ACCRUED EXPENSES - including $23,334 and $11,305 due to related parties at September 30, 1996 and December 31, 1995, respectively $ 210,521 $ 127,389 DEPOSITS AND ADVANCE RENTALS 125,698 122,937 DEFERRED GAIN ON SALE - Note 5 700,557 843,923 SECURED NOTE PAYABLE - Note 2 4,682,730 4,752,430 ----------- ----------- 5,719,506 5,846,679 ----------- ----------- PARTNERS' CAPITAL (DEFICIT) General partners (3,474,473) (3,476,003) Cash general partners, 218.5 and 228.5 units issued and outstanding at September 30, 1996 and December 31, 1995, respectively 77,733 77,686 Limited partners, 22,650.5 and 22,640.5 units issued and outstanding at September 30, 1996 and December 31, 1995, respectively 8,944,247 8,939,363 ----------- ----------- 5,547,507 5,541,046 ----------- ----------- $11,267,013 $11,387,725 =========== ===========
See accompanying notes to financial statements. 4 DE ANZA PROPERTIES - X (A Limited Partnership) Statements of Income (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1996 1995 ------------- ------------- INCOME Rent - Note 6 $2,757,941 $3,027,018 Other 100,505 89,449 Interest and dividends 49,556 53,177 Utilities - 143,232 Gain on sale of property and equipment - Notes 5 and 6 143,366 2,258,041 ---------- ---------- 3,051,368 5,570,917 ---------- ---------- EXPENSES Interest 354,939 362,376 Depreciation and amortization - Notes 1 and 7 284,581 489,242 Maintenance, repairs and supplies 262,663 298,683 Other 236,350 219,981 Salaries - including $15,046 and $16,694 paid to related parties in 1996 and 1995, respectively - Note 3 210,264 235,352 Professional fees and services - including $75,075 and $92,614 paid to related parties in 1996 and 1995, respectively - Note 3 183,530 182,350 Real estate taxes 156,614 185,307 Utilities 153,754 239,902 Management fees - including $142,623 and $140,127 paid to related parties in 1996 and 1995, respectively - Note 3 142,623 164,361 Insurance 78,852 75,960 Payroll taxes and employee benefits 42,801 48,322 ---------- ---------- 2,106,971 2,501,836 ---------- ---------- NET INCOME $ 944,397 $3,069,081 ========== ========== NET INCOME GENERAL PARTNERS $ 223,648 $ 417,787 ========== ========== CASH GENERAL AND LIMITED PARTNERS $ 720,749 $2,651,294 ========== ========== INCOME PER 1% GENERAL PARTNER INTEREST - Note 4 $ 2,236.48 $ 4,177.87 ========== ========== INCOME PER CASH GENERAL AND LIMITED PARTNERSHIP UNIT - Note 4 $ 31.52 $ 115.93 ========== ==========
See accompanying notes to financial statements. 5 DE ANZA PROPERTIES - X (A Limited Partnership) Statements of Income (Unaudited)
Three Months Three Months Ended Ended September 30, September 30, 1996 1995 ------------- ------------- INCOME Rent - Note 6 $ 932,470 $ 921,027 Other 37,657 24,797 Interest and dividends 16,837 29,048 Utilities - 31,504 Gain on sale of property and equipment - Notes 5 and 6 143,366 2,077,041 ---------- ---------- 1,130,330 3,083,417 ---------- ---------- EXPENSES Interest 118,264 121,352 Depreciation and amortization - Notes 1 and 7 770 149,764 Maintenance, repairs and supplies 81,642 94,592 Other 78,188 85,550 Salaries - including $4,974 and $5,624 paid to related parties in 1996 and 1995, respectively - Note 3 70,873 68,984 Professional fees and services - including $23,385 and $28,010 paid to related parties in 1996 and 1995, respectively - Note 3 30,085 45,686 Real estate taxes 51,594 56,246 Utilities 50,872 56,178 Management fees - including $48,553 and $46,417 paid to related parties in 1996 and 1995, respectively - Note 3 48,553 52,649 Insurance 25,977 25,726 Payroll taxes and employee benefits 13,393 13,451 ---------- ---------- 570,211 770,178 ---------- ---------- NET INCOME $ 560,119 $2,313,239 ========== ========== NET INCOME GENERAL PARTNERS $ 132,645 $ 314,896 ========== ========== CASH GENERAL AND LIMITED PARTNERS $ 427,474 $1,998,343 ========== ========== INCOME PER 1% GENERAL PARTNER INTEREST - Note 4 $ 1,326.45 $ 3,148.96 ========== ========== INCOME PER CASH GENERAL AND LIMITED PARTNERSHIP UNIT - Note 4 $ 18.69 $ 87.38 ========== ==========
See accompanying notes to financial statements. 6 DE ANZA PROPERTIES - X (A Limited Partnership) Statements of Changes in Partners' Capital (Deficit) (Unaudited) For the Nine Months Ended September 30, 1996 and For the Year Ended December 31, 1995
Cash General General Limited Total Partners Partners Partners ------------ ----------- ----------- ------------ BALANCE - January 1, 1995 $ 7,805,545 $(3,210,498) $ 97,659 $10,918,384 DISTRIBUTIONS TO PARTNERS (5,524,941) (647,779) (48,731) (4,828,431) NET INCOME - for the year ended December 31, 1995 3,260,442 382,274 28,758 2,849,410 ----------- ----------- -------- ----------- BALANCE - December 31, 1995 5,541,046 (3,476,003) 77,686 8,939,363 DISTRIBUTIONS TO PARTNERS (937,936) (222,118) (6,839) (708,979) NET INCOME - for the nine months ended September 30, 1996 944,397 223,648 6,886 713,863 ----------- ----------- -------- ----------- BALANCE - September 30, 1996 $ 5,547,507 $(3,474,473) $ 77,733 $ 8,944,247 =========== =========== ======== ===========
See accompanying notes to financial statements. 7 DE ANZA PROPERTIES - X (A Limited Partnership) Statements of Cash Flows (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1996 1995 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Gross rents received from real estate operations $ 2,761,672 $ 3,193,880 Cash paid to suppliers and employees - including $254,893 and $255,445 paid to related parties in 1996 and 1995, respectively (1,405,611) (1,607,317) Interest paid (354,939) (362,376) Interest and other income received 152,224 135,685 ----------- ----------- Net cash provided by operating activities 1,153,346 1,359,872 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (78,389) (262,401) Sale of property and equipment - 4,325,000 Sales and closing costs (26,115) (71,498) ----------- ----------- Net cash used in investing activities (104,504) (3,991,101) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on secured notes payable (69,700) (63,094) Partner distributions (937,936) (5,253,542) ----------- ----------- Net cash used in financing activities (1,007,636) (5,316,636) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 41,206 34,337 CASH AND CASH EQUIVALENTS: BALANCE AT BEGINNING OF PERIOD 1,388,279 1,431,793 ----------- ----------- BALANCE AT END OF PERIOD $ 1,429,485 $ 1,466,130 =========== ===========
See accompanying notes to financial statements. 8 DE ANZA PROPERTIES - X (A Limited Partnership) Statements of Cash Flows (Continued) (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1996 1995 -------------- -------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 944,397 $ 3,069,081 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 284,581 489,242 Gain on sale of property and equipment (143,366) (2,258,041) Changes in operating assets and liabilities Decrease in accounts receivable 2,544 59,469 Increase in prepaid expenses (21,359) (29,455) Decrease in other assets 656 1,337 Increase in accounts payable and accrued expenses 83,132 24,659 Increase in deposits and advance rentals 2,761 3,580 ---------- ----------- Net cash provided by operating activities $1,153,346 $ 1,359,872 ========== ===========
SUPPLEMENTAL DISCLOSURE - ----------------------- During the nine months ended September 30, 1995, the MHC cash reserve of $181,000 was released from restricted cash and the Partnership recognized a gain on that portion of the 1994 sale proceeds. During the nine months ended September 30, 1996, $143,366 of the Independent Committee cash reserve was released from restricted cash and the Partnership recognized a gain on that portion of the 1994 sale proceeds. See accompanying notes to financial statements. 9 DE ANZA PROPERTIES - X (A Limited Partnership) Notes to Financial Statements (Unaudited) September 30, 1996 and December 31, 1995 and For the Nine and Three Months Ended September 30, 1996 and 1995 NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been included. Operating results during the nine and three months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1995. Cash and Cash Equivalents ------------------------- The Partnership invests its cash not needed for working capital in highly liquid short-term investments consisting primarily of money market funds and certificates of deposit, with original maturities ranging generally from one to three months. The Partnership considers all such items to be cash equivalents. Depreciation ------------ Pursuant to generally accepted accounting principles the Partnership ceased to depreciate Woodbridge from the time it determined to sell the property (see Note 7). NOTE 2 - SECURED NOTE PAYABLE
Secured note payable at September 30, 1996 and December 31, 1995 consisted of: September 30, December 31, 1996 1995 ------------- ------------ Note collateralized by first trust deed, payable in monthly installments of $47,093, including interest at 10%, maturing in 2014. $4,682,730 $4,752,430 ========== ==========
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES Pursuant to a former management agreement dated October 1, 1985, De Anza Assets, Inc., a former affiliate of the operating general partner (OGP), was paid a management fee in the amount of 5% of the annual gross receipts from the operations of the Partnership's properties. The payment of this fee is subordinated to the priority distributions to the cash general and 10 DE ANZA PROPERTIES - X (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1996 and December 31, 1995 and For the Nine and Three Months Ended September 30, 1996 and 1995 NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (Continued) limited partners of 6% of their adjusted capital contributions each year and is noncumulative, except in the case of a sale, refinancing or other disposition of the Partnership's properties. In that case, the difference between the management fee actually paid and the management fee that would have been paid if it were not subordinated, is payable out of proceeds from the sale, refinancing or other disposition after payment of the limited partners' priority return and capital contribution and the general partners' incentive interest. On August 18, 1994, subsequent to the sale of Colonies of Margate and the property management business of De Anza Group, Inc. (DAG), as discussed in Note 5, the property management of Woodbridge was assumed by Terra Vista Management, Inc. (Terra Vista). Terra Vista is wholly owned by Michael D. Gelfand, president of the OGP and the son of Herbert M. Gelfand. Herbert M. Gelfand, together with Beverly Gelfand, is the sole shareholder of the OGP and an individual general partner. Terra Vista was paid $142,623 and $140,127 for management fees during the nine months ended September 30, 1996 and 1995, respectively. Of the $142,623, $48,553 is attributable to the three months ended September 30, 1996 (compared to $46,417 paid for the three months ended September 30, 1995). The property management of Aptos Pines was transferred to an affiliate of the buyer when the property management business of DAG was transferred as part of the overall transaction concurrent with the sale of Colonies of Margate (see Note 5). In addition, Terra Vista or an affiliate of the OGP was paid $112,270 and $115,318 during the nine months ended September 30, 1996 and 1995, respectively, for performing bookkeeping, regional management, computer and investor relations services necessary for the operation of the Partnership and its properties. Of the $112,270, $46,191 is attributable to the three months ended September 30, 1996 (compared to $37,053 paid for the three months ended September 30, 1995). NOTE 4 - INCOME PER 1% GENERAL PARTNER INTEREST AND CASH GENERAL AND LIMITED PARTNERSHIP UNIT Income per cash general and limited partnership unit was computed based on the cash general and limited partners' share of net income as reflected on the Statements of Income and Changes in Partners' Capital (Deficit) and the number of units outstanding (22,869 units). The general partners' share of net income has not been included in this computation. Income per 1% general partner interest was computed based on the general partners' share of net income as reflected on the Statements of Income and Changes in Partners' Capital (Deficit). NOTE 5 - SALE OF COLONIES OF MARGATE On August 18, 1994, the Partnership sold Colonies of Margate to an affiliate of Manufactured Home Communities, Inc. (MHC), a real estate investment trust, as part of an overall transaction for the sale of the related property management business of DAG and other mobile home communities affiliated with DAG. 11 DE ANZA PROPERTIES - X (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1996 and December 31, 1995 and For the Nine and Three Months Ended September 30, 1996 and 1995 NOTE 5 - SALE OF COLONIES OF MARGATE (Continued) The sales price for the Property was $23,147,228. Additional proceeds of $557,192, which were included in the sales price for calculating the gain on sale of property and equipment, were received from MHC to fund a General Reserve. In connection with the sale, the Partnership established various reserves totaling $1,024,923. The $1,024,923 was used to establish the following reserves: MHC Reserve $181,000 General Reserve 557,192 Independent Committee Reserve 286,731
The MHC Reserve was required by MHC and released in May 1995. Accordingly, the gain on sale has been recognized and included in net income for the nine months ended September 30, 1995. The General Reserve and Independent Committee Reserve were established to fund contingent liabilities that may arise out of the MHC transaction. In September 1996, $143,366 of the Independent Committee Reserve was released. The gain on sale has been recognized and included in net income for the nine months ended September 30, 1996. Pursuant to the guidelines of Financial Accounting Standards No. 66 "Accounting for Sales of Real Estate", the Partnership deferred in 1994 the recognition of gain on that portion of the sales proceeds represented by the MHC Reserve, Independent Committee Reserve and General Reserve, totaling $1,024,923. As these reserves are released or expended, gain on sale will be recognized. At September 30, 1996 and December 31, 1995, $700,557 and $843,923, respectively, of sale proceeds have been deferred and are included in deferred gain on sale, as reflected in the balance sheets. NOTE 6 - SALE OF APTOS PINES On July 11, 1995, Aptos Pines (Aptos) was sold to a non-profit mutual benefit corporation formed by the Aptos Pines Homeowners' Association. The sales price for Aptos was $4,325,000, all cash, and an additional $35,000 was received as reimbursement of capital outlays related to the newly constructed sewer system. The Partnership incurred sales and closing costs of approximately $56,200, has distributed $4,265,000 of the proceeds to the limited and general partners and has reserved the remaining $3,800. NOTE 7 - SUBSEQUENT EVENT On October 7, 1996, the Partnership entered into a contract to sell Woodbridge Meadows Apartments to J.F. Shea Co., Inc. for $29,600,000, all cash. Escrow is scheduled to close in January 1997. If the sale occurs and no claims against the Partnership are pending, the Partnership expects to wind up and dissolve in 1997. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity - --------- The Partnership's quick ratio increased to 1.7:1 from 1.6:1, including unrestricted cash balances of $728,928 and $544,356 at September 30, 1996 and December 31, 1995, respectively. The increase is due to the release of a portion of the restricted cash reserves, offset in part by an increase in accounts payable and accrued expenses. The Partnership's cash balance is its immediate source of liquidity. On a long-term basis, the Partnership's liquidity is sustained primarily from cash flows from operations, which during the nine months ended September 30, 1996 were approximately $1,153,000. Should it become necessary to improve liquidity the Partnership can reduce partner distributions from operations, which totaled approximately $938,000 during the nine months ended September 30, 1996, arrange a short-term line of credit or refinance Woodbridge Meadows Apartments. In 1995 the Partnership sold Aptos Pines as discussed in Note 6 to the financial statements. The sale has reduced partnership income and therefore, liquidity. The Partnership has entered into a contract to sell its remaining property, Woodbridge Meadows Apartments, and anticipates that it will be sold in January 1997. The sale would result in the Partnership's dissolution and liquidation. Other than as described elsewhere, there are no known trends, demands, commitments, events or uncertainties known to the Partnership which are reasonably likely to materially affect the Partnership's liquidity. Capital Resources - ----------------- The Partnership anticipates spending approximately $102,000 in 1996 for physical improvements at its property, approximately $24,000 of which will be spent during the remainder of 1996. The Partnership is continuously reviewing the necessity for such expenditures in light of the expected sale of Woodbridge Meadows Apartments. Funds for these improvements will be provided by cash generated from operations and from the remaining reserves from the 1990 Margate refinancing available for improvement projects at Woodbridge. Due to the sale of Colonies of Margate and Aptos Pines discussed in Notes 5 and 6, and the distributions pursuant to the sale of Margate and Aptos Pines, the Partnership's capital resources have been reduced. The expected sale of Woodbridge Meadows Apartments in January 1997 would prompt the Partnership's dissolution. Other than as described above, there are no known material trends, favorable or unfavorable, in the Partnership's capital resources. The Partnership does not contemplate any other material changes in the mix of its capital resources, other than as described above. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations - --------------------- Since Aptos Pines was sold in July 1995, a comparison of results of operations for the nine and three months ended September 30, 1996 and 1995 would not be meaningful. However, a comparison can be done excluding the operations of Aptos Pines. Rental income, excluding Aptos Pines, increased 1.6% and 3.2% during the nine and three months ended September 30, 1996, over the same periods in 1995. The increase is due to both increased occupancy at Woodbridge and increased rental rates. Competition in the immediate area is vigorous, but the major improvements done to the property begun in 1992 and completed in 1995 are expected to allow Woodbridge to maintain a stable income stream. Competition mostly arises from Irvine Apartment Communities whose numerous properties dominate the local luxury apartment market. Other income increased during the nine months ended September 30, 1996 over the same period in 1995 due to increased fees for transfers of limited partnership units plus increased laundry income at Woodbridge. Woodbridge's increased laundry income is mostly responsible for the increase for the three months ended September 30, 1996 over the same period in 1995. Interest and dividend income decreased during the nine and three months ended September 30, 1996 over the same periods in 1995 because there were higher cash reserves during the three months ended September 30, 1995, including sale proceeds held for a short period until their distribution. Expenses, excluding Aptos Pines, decreased 3.1% and 23.0% during the nine and three months ended September 30, 1996 over the same periods in 1995. According to generally accepted accounting principles, from the time the Partnership determined to sell Woodbridge it ceased to depreciate the carrying value of the assets. This decrease in depreciation expense is mostly responsible for the decrease in overall expenses. Additionally, maintenance, repairs and supplies were lower due to lower apartment turnover, higher occupancy and lower turnkey costs. Partially offsetting these decreases were higher costs for professional fees and services due to the legal fees paid in connection with the November 1995 - January 1996 tender offer by Moraga Capital, LLC. while other expenses increased due to related investor mailings. Insurance premiums at Woodbridge increased as a result of the January 1994 Northridge earthquake centered approximately 70 miles from Woodbridge. Additionally, salaries and payroll taxes and benefits increased due to the higher leasing salaries to increase occupancy and utilities costs were higher due to increased occupancy. Other than as described above, there are no known trends or uncertainties which have had or can be reasonably expected to have a material effect on continuing operations. 14 PART II. OTHER INFORMATION ITEM NUMBER - ----------- 1. LEGAL PROCEEDINGS No new material legal proceedings were commenced during the three months ended September 30, 1996 and there are none pending. 2. CHANGES IN SECURITIES None. 3. DEFAULTS UPON SENIOR SECURITIES None. 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 5. OTHER INFORMATION A report on Form 8-K was filed on October 18, 1996 copying the letter sent to limited partners informing them of the Woodbridge sale contract. 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit 10.1-Contract to sell Woodbridge dated October 7, 1996....Page 17 15 PART II. OTHER INFORMATION (Continued) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DE ANZA PROPERTIES - X (Registrant) By DE ANZA CORPORATION A California Corporation Operating General Partner Date: November 13, 1996 By /s/ Michael D. Gelfand ---------------------- Michael D. Gelfand President and Chief Financial Officer 16 EX-10.1 2 CONTRACT TO SELL WOODBRIDGE DATED OCTOBER 7, 1996 EXHIBIT 10.1 WOODBRIDGE MEADOWS APARTMENTS ----------------------------- PURCHASE AND SALES AGREEMENT AND JOINT ESCROW INSTRUCTIONS THIS PURCHASE AND SALES AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this "Agreement") is made and entered into as of the 24th day of September, 1996, by and between DE ANZA PROPERTIES - X, a California limited partnership, having its principal offices at 9171 Wilshire Boulevard, Suite 627, Beverly Hills, California 90210 ("Seller") and J.F. SHEA CO., INC., a Nevada Corporation, and/or its permitted assignee, having its principal offices at 655 Brea Canyon Road, Suite 30, P.O. Box 1536, Walnut, California 91768-1536 ("Buyer"), and to serve as joint escrow instructions to the Escrow Holder defined herein, as follows: RECITALS -------- WHEREAS, Seller is the owner of that certain real property which is improved with 51 buildings comprising a 375 unit apartment project (40 studio units; 111 one-bedroom units; 40 one-bedroom/loft units; 56 two-bedroom, 1 1/4- bath units; 104 two-bedroom, two-bath units; and 24 three-bedroom units) known as WOODBRIDGE MEADOWS APARTMENTS, having an address of 50 Eastshore, City of Irvine, Orange County, California 92714, and which real property is described on Exhibit A attached hereto and made a part hereof (the "Real Property") as well - as all improvements affixed thereto ("Improvements") and certain personal property located thereon as described below, as of the date of this Agreement. WHEREAS, Seller desires to sell and Buyer desires to buy all of Seller's right, title and interest in and to the following, which shall hereinafter be referred to as the "Property" on the terms and conditions set forth in this Agreement: A. The Real Property; B. The Improvements; C. All personal property owned or leased by Seller at the Property, including but not limited to that described in Exhibit B attached hereto and - incorporated herein (the "Personal Property"); D. All of Seller's right, title and interest in the leases and tenancies of the Real Property, which as of August 1996 are reflected in the Rent Roll attached as Exhibit C and incorporated herein (the "Rent Roll"). - E. All of Seller's right, title and interest in and to all minerals contained in the Real Property, all non-public water rights pertaining to the Real Property, all tenements, hereditaments, easements, rights-of-way, appurtenances, riparian rights and drainage rights belonging to the Real Property and in and to any streets, alleys or other public ways, public areas, easements, and common or open or greenbelt areas (all before or after vacation thereof) in, or upon or adjacent to the Real Property; F. All of Seller's right, title and interest in the Woodbridge Village Association (the "Association"); and G. All intangible property ("Intangible Property") owned by Seller and in Seller's possession in connection with the Real Property, including but not limited to Seller's right, title and interest in the Property name "Woodbridge Meadows" and all transferable licenses, permits, surveys, plans and drawings (to the extent reasonably available to Seller to deliver upon Closing) relating to the Property. NOW, THEREFORE, for and in consideration of the mutual covenants and promises, and other good and valuable consideration as hereinafter provided, the receipt and sufficiency of which are hereby acknowledged, Seller agrees to convey to Buyer and Buyer agrees to acquire from Seller the Property for the consideration set forth hereinafter, all on the terms and conditions as hereinafter set forth. 1. Recitals and Definitions. The foregoing recitals are restated and ------------------------ incorporated herein as part of this Agreement. 2. Consideration. Buyer agrees to pay Seller in cash Twenty-nine Million ------------- Six Hundred Thousand Dollars ($29,600,000) (the "Purchase Price") for the Property. 2.1. Deposit. ------- 2.1.1. Initial Deposit. Upon execution of this Agreement by Buyer --------------- and Seller, Buyer shall deposit with Escrow Holder, One Hundred Thousand Dollars ($100,000) ("Initial Deposit") by cashier's or bank check or wire transfer, to be held by Escrow Holder pursuant to this Agreement as a good faith deposit. The Initial Deposit shall be deposited by Escrow Holder in a federally insured interest bearing account in accordance with the terms described below. If Buyer disapproves any matter which is subject to Buyer's approval pursuant to Section 3.1.1 prior to the end of the Inspection Period (defined in Section 3.1.1), at Buyer's election, the Initial Deposit, together with all interest earned thereon, shall be delivered to Buyer, and all obligations of Buyer and Seller to close this transaction shall terminate, and the Escrow shall be terminated. 2.1.2. Additional Deposit. If Buyer's obligation to acquire the ------------------ Property has not been terminated under this Agreement, then prior to the end of the Inspection Period, Buyer shall deposit with Escrow Holder an additional Two Hundred Thousand Dollars ($200,000) ("Additional Deposit") by cashier's or bank check or wire transfer. -2- The Additional Deposit, together with the Initial Deposit (collectively, the "Deposit"), shall be held by Escrow Holder pursuant to this Agreement and invested by Escrow Holder in a federally insured interest bearing account, short term U. S. Treasury Bills or similar equivalent securities, reasonably acceptable to Buyer and Seller and reportable for federal tax purposes to Buyer's federal tax identification number. Upon the Closing (defined below), provided that Buyer is not in default hereunder, the Deposit, together with all interest earned thereon, shall be credited towards the Purchase Price. In the event of a breach of this Agreement, the Deposit shall be disbursed as provided in Section 16.1 or 16.2, as appropriate. In the event Buyer fails to close this ---- ---- transaction because of a failure of a condition to Buyer's obligation to close and Buyer is not in default hereunder, the Deposit and all interest earned thereon shall be returned to Buyer. 2.2. Existing Debt. The Property is subject to an existing loan ------------- ("Existing Debt") in the approximate principal balance of $4,700,000, which will be paid in full at Closing by Seller out of the proceeds from Buyer. 2.3. Allocation of Purchase Price. Buyer and Seller agree on the ---------------------------- allocation of the Purchase Price among the components of the Property as follows: Real Property and Improvements $29,325,000.00 Personal Property $ 275,000.00 Intangible Property $ 0 -------------- TOTAL $29,600,000.00
3. Conditions to the Close of Escrow. --------------------------------- 3.1. Conditions Precedent to Buyer's Obligations. The close of Escrow ------------------------------------------- and Buyer's obligations with respect to the purchase of the Property as contemplated by this Agreement are subject to the satisfaction of each of the following conditions within the time periods specified. If Buyer proceeds to Closing with knowledge of the failure of a condition, such condition shall be deemed waived by Buyer and all other conditions precedent shall be deemed satisfied. If a condition is not satisfied and Buyer has not waived or been deemed to have waived such condition, Buyer shall immediately receive the Deposit and interest earned thereon from Escrow Holder and the obligations of Buyer and Seller to close this transaction shall cease. 3.1.1. Buyer's Inspection Period. From and after the date this ------------------------- Agreement is executed by Seller and Buyer, and continuing until thirty (30) days after the date of execution of this Agreement by such parties (the "Inspection Period"), Buyer shall have approved the following. The failure of Buyer to notify Seller and Escrow Holder in writing of Buyer's approval of all items on or before the end of the Inspection Period shall constitute disapproval of all matters and Buyer shall not be obligated to deposit the Additional Deposit with the Escrow Holder and except as otherwise provided in Section 3.1.1C for an ------ extension of time for Buyer to -3- deposit the Additional Deposit, the obligations of Buyer and Seller to close this transaction shall cease. Buyer shall not be entitled to any adjustment in the Purchase Price based upon the results of Buyer's inspections and investigations; Buyer's sole remedy shall be to timely terminate Buyer's obligations to close this transaction. A. Documents and Materials. No later than two (2) business ----------------------- days after Seller's execution of this Agreement, provided Buyer has also executed this Agreement, Seller shall deliver or make available to Buyer for Buyer's review and approval or disapproval, all of the materials described in Exhibit D attached hereto and incorporated herein. Buyer agrees to maintain all - material provided by Seller as confidential and not to disclose it to any person, except potential lenders, partners and authorized employees and representatives of buyer, who shall be apprised of and agree to the foregoing obligation of confidentiality. If Buyer elects not to acquire the property, all such materials shall be returned to seller within ten days. B. Buyer's Inspections and Studies. Buyer shall approve or ------------------------------- disapprove the results of any and all inspections, investigations, tests and studies (including, without limitation, investigations with regard to zoning, building codes, earthquake fault zones and seismic safety, ADA, lead-based paint, fire and life safety and other governmental regulations, architectural inspections, pest, dry rot and fungus inspections, engineering tests, environmental inspections, financial statements and soils, seismic, environmental and geologic reports) with respect to the Property (including all structural and mechanical systems) and the Association and its financial affairs as Buyer may elect to make or obtain. Buyer agrees to obtain a Phase-I environmental report for the Real Property and to provide a copy to Seller of that report and any other environmental reports relating to the Property or property adjacent to or in the vicinity of the Property, which are in Buyer's possession. The cost of all inspections, studies, tests and reports shall be borne by Buyer. Seller shall cooperate in providing Buyer and its representatives access to the Property at all reasonable times prior to Closing and to the books and records of the Property during the Inspection Period. Buyer and its representatives shall have the right to enter the Property only in accordance with the following terms and conditions: (i) Buyer's right to acquire the Property has not been terminated; (ii) Buyer may enter upon the Property only during business hours and for the purposes of performing inspections, reviews, studies and surveys. If Buyer obtains any reports, studies or assessments regarding the Property, Buyer shall not provide Seller with a copy of them, unless required by this Agreement or specifically requested by Seller; (iii) Buyer shall not enter upon the Property without the express prior permission of Seller, in each instance, which shall not be unreasonably withheld or delayed, and without an opportunity for an agent or employee of Seller to be present (provided that Seller cannot unreasonably delay Buyer's inspections); and (iv) Buyer shall indemnify, defend and hold Seller harmless from and against any -4- expenses, claims, liens, causes of action, damages, liabilities or obligations which arise directly out of Buyer's activities at the Property before Closing, including without limitation any costs, expenses and reasonable attorneys' fees incurred by Seller in connection with defending against, or clearing Seller's title to the Property of, such claims, liens, causes of action or obligations. The foregoing indemnity shall survive the expiration or termination of this Agreement and the Closing for the period of time equal to the statute of limitations for any such underlying claim against Seller or the Property. (v) Buyer shall have delivered to Seller an insurance certificate evidencing worker's compensation insurance with statutory limits of coverage and commercial general liability insurance with limits of not less than $1,000,000 for personal injury, including bodily injury and death and property damage. C. Title. Prior to the end of the Inspection Period, Buyer ----- shall have approved the legal description of the Real Property and any matters of title including those disclosed by the following documents and instruments (collectively, "Title Documents") and Buyer shall have specified all endorsements to the title policy reasonably required by Buyer: (i) Current preliminary title report for an A.L.T.A. Extended Coverage Owner's policy of title insurance ("Title Report") provided by Seller within two (2) business days after full execution of this Agreement, issued by Chicago Title Insurance Company (the "Title Company") with respect to the Real Property; (ii) an A.L.T.A. survey ("Survey") of the Real Property if obtained by Buyer at Buyer's cost, together with a certificate from a licensed surveyor reasonably acceptable to Buyer, showing all matters necessary for issuance of an A.L.T.A. Extended Coverage Owner's title insurance policy and any other matters reasonably requested by Buyer; (iii) a supplemental report prepared by the Title Company after its review of the Survey (the "Supplement"); (iv) copies of all documents, whether recorded or unrecorded, referred to in the Title Report, Supplement or Survey, or otherwise affecting title to the Property, which are to be provided by the Title Company. If Buyer does not approve the legal description or the Title Documents prior to the end of the Inspection Period, they shall be deemed disapproved and Buyer shall give Seller and Escrow Holder written notice ("Buyer's Title Notice") of the title matters disapproved by Buyer prior to the end of the Inspection Period. In such event, Seller shall, within ten (10) days after receipt of Buyer's Title Notice, give Buyer written notice ("Seller's Title Notice") of those disapproved title matters, if any, which Seller agrees to cause to be eliminated from or modified (as requested by Buyer) in the Title Policy (defined below). If Seller does not agree in Seller's Title Notice to -5- cause all matters disapproved in Buyer's Title Notice to be eliminated or modified, as the case may be, Buyer shall have five (5) days (which may extend beyond the Inspection Period) in which to notify Seller and Escrow Holder if Buyer elects to approve the title matters and proceed to acquire the Property ("Buyer's Title Approval Notice"), and if Buyer gives Buyer's Title Approval Notice, Buyer shall within two (2) business days after giving Buyer's Title Approval Notice, deposit the Additional Deposit and the legal description and Title Documents shall be deemed approved and Seller shall be obligated to cause the elimination or modification, as the case may be, by the Closing of those items which Seller agrees to cause to be eliminated or modified, as set forth in Seller's Title Notice. The Title Company shall issue a Pro Forma Title Policy ("Pro Forma Title Policy") in accordance with the foregoing, which shall have no requirements of Seller other than those agreed to by Seller herein or in Seller's Title Notice. If Buyer does not timely give Buyer's Title Approval Notice, the obligations of Buyer and Seller to consummate the transaction hereunder shall cease and the Deposit and interest earned thereon shall be immediately returned to Buyer by Escrow Holder. D. Employees. Prior to two weeks after the end of the --------- Inspection Period, Buyer shall notify Seller of the employees Buyer will hire upon Closing. E. Buyer's Board Approval. Prior to the end of the ---------------------- Inspection Period, Buyer shall have obtained approval of Buyer's Board of Directors to the transaction contemplated herein. 3.1.2. Representations, Warranties and Covenants of Seller. Seller --------------------------------------------------- shall have duly performed each and every covenant and agreement to be performed by Seller hereunder, including but not limited to delivery of all items required by Section 7.1 and Seller's representations and warranties set forth in Exhibit --- E attached to this Agreement and incorporated herein shall be true and correct - - as of the Closing Date. Notwithstanding anything herein or elsewhere to the contrary, if a matter is disclosed in writing to Buyer by or on behalf of Seller or by one of Buyer's consultants, to Buyer during the Inspection Period which would make a representation or warranty of Seller hereunder untrue or incorrect, or would be a breach of a covenant or agreement of Seller hereunder, and Buyer proceeds with the Closing, Buyer shall be deemed to have waived said breach and the condition forever, and Buyer shall have no right to recover any damages or remuneration for such breach or failure, nor to indemnity for such breach of a representation or warranty. 3.1.3. Title and Title Insurance. At the Closing upon satisfaction ------------------------- of all conditions to Seller's obligations hereunder, Seller shall deliver good and marketable fee simple title to the Real Property by Grant Deed ("Deed"), subject only to: (a) a lien for real property taxes, not then due or payable, (b) matters of title respecting the Property in accordance with the Pro Forma Title Policy, and (c) matters affecting the condition of title to the Real Property created by or with the prior written consent of Buyer. At the Closing, Seller shall cause the Title Company to issue to Buyer an A.L.T.A. Extended Coverage Owner's Policy of Title Insurance in accordance with the Pro Forma Title Policy (the "Title Policy"). The Title Policy shall be issued -6- with liability in an amount equal to the Purchase Price. The premium shall be shared as provided in Section 5.2. If necessary, the Closing Date (defined --- below) may be extended for up to an additional seven (7) days to permit Seller to cause the Title Policy to be issued. Title to the Real Property delivered to Buyer at Closing shall include all buildings and improvements now erected or placed thereon owned by Seller, all of Seller's right, title and interest in and to all tenements, hereditaments, easements, rights-of-way, appurtenances, passages, water rights, water courses, riparian rights, drainage rights and mineral and other rights, liberties and privileges thereon or in any way now or hereafter appertaining, including all of the right, title and interest of Seller in and to all public and private streets, roads, avenues, alleys, passageways (before and after vacation thereof) in front of or abutting the Real Property or any portion thereof. 3.2. Conditions Precedent to Seller's Obligations. The close of -------------------------------------------- Escrow and Seller's obligations with respect to the sale of the Property as contemplated by this Agreement are subject to the satisfaction of each of the following conditions within the time periods specified. If Seller proceeds to Closing with knowledge of the failure of a condition, such condition shall be deemed waived by Seller. 3.2.1. Representations, Warranties and Covenants of Buyer. Buyer -------------------------------------------------- shall have duly performed each and every covenant and agreement to be performed by Buyer hereunder, including but not limited to delivery of all items required by Section 7.2 and Buyer's representations and warranties set forth in Exhibit F --- - attached to this Agreement and incorporated herein shall be true and correct as of the Closing Date for Buyer and/or Buyer's approved designee. 4. Closing. The Escrow for the acquisition of the Property shall close ------- on January 15, 1997 or sooner, upon 30 days notice from Seller to Buyer and Escrow Holder following expiration of the Inspection Period or as mutually agreed upon by Buyer and Seller in writing ("Closing Date"). The "Closing" shall occur when all matters required to be delivered to Escrow Holder have been delivered and when all conditions to Closing have been satisfied or waived. Seller's and Buyer's counsel shall exchange Closing Documents three (3) business days prior to the Closing Date. 5. Costs, Expenses and Prorations. ------------------------------ 5.1. Cancellation Fees and Expenses. The Title Company and Escrow ------------------------------ Holder have agreed to waive any Title Report or Escrow charges in the event of cancellation of the Escrow; accordingly neither Seller nor Buyer shall have any liability for such charges. 5.2. Closing Expenses. ---------------- 5.2.1. Seller's. Seller shall be responsible for (a) the amount of -------- the -7- premium for the Title Policy equivalent to the C.L.T.A. standard premium, excluding the premium for Buyer's endorsements, (b) the documentary and transfer taxes, (c) one-half of all Escrow fees and costs, (d) Seller's share of Closing prorations, and (e) the recording charges for the Deed. 5.2.2. Buyer's. Buyer shall be responsible for (a) the balance of ------- the premium for the Title Policy and for Buyer's endorsements to the Title Policy, (b) the cost of the A.L.T.A. survey, (c) one-half of all Escrow fees and costs, (d) Buyer's share of Closing prorations and (e) any other document recording charges. 5.2.3. Other Expenses. Buyer and Seller shall each pay their -------------- respective legal, professional and consultants' fees. All other costs and expenses shall be allocated between Buyer and Seller in accordance with the customary practice in Orange County, California. 5.3. Closing Prorations and Credits. A statement of estimated ------------------------------ prorations and adjustments shall be prepared by Seller in accordance with this Agreement and submitted to Buyer for review and approval not less than three (3) business days prior to the Closing Date. For purposes of prorations, Buyer shall be deemed the owner of the Property as of 12:01 AM on the Closing Date. The following items are to be prorated or adjusted (as the case requires) as of the Closing Date and credits given to Buyer or Seller as appropriate against the Purchase Price. 5.3.1. Taxes. Delinquent real estate and personal property taxes, ----- if any, shall be paid at Closing. Real estate and personal property taxes and assessments shall be prorated as of Closing based on the actual current tax bill. Seller shall be responsible for any interest or penalties which accrued prior to the Closing due to Seller being delinquent in the payment of any taxes due hereunder. If after Closing, any supplemental real estate taxes are assessed against the Property pursuant to Chapter 3.5 of Part 0.5 of Division 1 of the California Revenue and Taxation Code (Section 75 through 75.80, inclusive) by reason of any event occurring prior to the Closing (other than an event caused by Buyer), such supplemental real estate taxes shall be prorated following the Closing within 30 days of receipt of such supplemental tax bill. In the event Seller or Buyer appeals any assessment or tax relating to the Property, Seller shall be entitled to the portion of the award, if any, relating to the period prior to Closing and Buyer shall be entitled to the portion relating to the period from and after the Closing, each net of costs incurred to obtain the award; and each party agrees to cooperate with the other in the pursuit of such appeal. Buyer agrees that Seller may appeal any supplemental tax or assessment relating to the Property following the Closing. 5.3.2. Rents and Charges. Collected rents (including advance ----------------- rents) and other charges from the Property relating to the period prior to the Closing, and the amount of any rents and other charges paid to Seller which are applicable to the period subsequent to the month of Closing, as set forth in the Closing Rent Roll shall be prorated as of Closing. In the event there are uncollected rents or other charges as of the Closing, Buyer shall use its reasonable efforts to collect such rents and other charges and shall pay them over to Seller, net of out-of- -8- pocket costs incurred by Buyer; provided, however, any rents collected shall first be applied to rent due Buyer. 5.3.3. Security Deposits. The full amount of security deposits ----------------- paid, less any lawful deductions, shall be transferred to Buyer by a credit. 5.3.4. Utilities. Water, electric, telephone and all other utility --------- and fuel income and expense shall be prorated as of the Closing. Seller shall endeavor to have all meters read for all utilities serving the Property on the day prior to the Closing Date. If any meters have not been read by the Closing Date, the utilities shall be estimated based upon the most recent bills and reprorated following Closing. Buyer shall be responsible for providing any required utility deposits; and existing deposits shall be returned to Seller. If Buyer has not made arrangements for transfer of utility service to Buyer as of the Closing, such utility service will be terminated by Seller on the Closing Date and Buyer shall be responsible for arranging for new service to the Property. 5.3.5. Service Contracts. Amounts due and prepayments under the ----------------- service Contracts to be assigned and assumed as listed on Schedule D-8 shall be --- prorated as of the Closing. All other service contracts will be terminated. 5.3.6. Licenses and Fees. Assignable license and permit fees, and ----------------- fees and dues paid to governmental entities and industry associations in which Buyer has or will participate shall be prorated as of the Closing. 5.3.7. Association Dues. Dues and assessments of the Association ---------------- shall be prorated as of the Closing. 5.3.8. Employees' Compensation. Seller shall be responsible for ----------------------- and, at or prior to Closing, shall pay all amounts due up to Closing for employees' salaries, vacation pay, withholding and payroll taxes, and other benefits, and any management fee affecting the Property. Seller shall terminate as of Closing employees who work at the Property. Seller shall indemnify and hold Buyer harmless from any and all obligations of Seller arising prior to Closing and relating to any claims made by employees. Buyer shall indemnify and hold Seller harmless from any and all obligations of Buyer arising from and after the Closing and relating to any employees Buyer indicates Buyer will hire as provided for in Section 3.1.1.D. ------- 5.3.9. Vacated Units. Buyer shall receive a credit of $300 for ------------- each vacated unit which is not in "rent ready condition" (as defined in Section 12.1) at the Closing Date; and an additional $700 for any such vacated unit which requires new carpeting, in the reasonable judgment of Buyer and Seller. 5.3.10. Closing Costs. The Closing costs shall be allocated to the ------------- respective party obligated for such Closing costs, and Seller's share shall be paid out of the -9- proceeds. 5.3.11. Other Expenses and Income. Other expenses and income of ------------------------- operation and similar items shall be prorated as of the Closing. Except for real estate taxes, any proration which must be estimated at Closing shall be reprorated and finally adjusted within thirty (30) days after the Closing, or such longer period as is reasonably necessary, not to exceed an additional thirty (30) days, otherwise all prorations shall be final. 5.4. Broker's Commission. Out of the proceeds, Seller shall pay ------------------- $296,000 (1% of the Purchase Price) to CB Commercial upon receipt of an invoice from CB Commercial signed by Joseph Leon, Raymond Eldridge and Blake Mirkin. 6. Escrow. ------- 6.1. Opening of Escrow. The opening of "Escrow" shall be caused by ----------------- the delivery, by Buyer, of a fully executed copy of this Agreement and the Initial Deposit to Chicago Title Insurance Company ("Escrow Holder") at the address set forth in Section 17. The close of Escrow for the acquisition of the Property shall occur on the Closing Date set forth in Section 4. Buyer and - Seller hereby authorize their respective attorneys to execute and deliver to Escrow Holder any additional or supplementary instructions as may be necessary or convenient to implement the terms of this Agreement and close the transaction contemplated hereby. 6.2. Full Disclosure. Escrow Holder shall be instructed to provide --------------- each of the parties hereto and their attorneys with copies of all documents, memorandum, correspondence or instructions received by Escrow Holder immediately upon receipt thereof. Escrow Holder shall keep each of the parties hereto fully apprised of all facts relevant to this Escrow. After closing of Escrow, Escrow Holder agrees that any party hereto or its appointed agent, representative or attorney may inspect the Escrow Holder's file upon reasonable notice during reasonable business hours. 6.3. Indemnification of Escrow Holder. If this Agreement or any -------------------------------- matter relating hereto shall become the subject of any litigation or controversy, Buyer and Seller agree, jointly and severally, to hold Escrow Holder free and harmless from any loss or expense, including reasonable attorneys' fees that may be suffered by it by reason thereof, other than arising out of Escrow Holder's own negligence, willful misconduct or failure to observe its instructions and obligations hereunder. In the event conflicting demands are made or notices served upon Escrow Holder with respect to this Agreement, the Buyer and Seller expressly agree that Escrow Holder shall be entitled to file a suit in interpleader and obtain an order from the court requiring Buyer and Seller to interplead and litigate their several claims and rights among themselves. Upon the filing of the action in interpleader, Escrow Holder shall be fully released and discharged from any obligations imposed on it by this Agreement. -10- 6.4. Non-Liability of Escrow Holder. Escrow Holder shall not be ------------------------------ liable for the sufficiency or correctness as to form, manner, execution or validity of any instrument deposited with it, nor as to the identity, authority or rights of any person executing such instrument, nor for failure to comply with any of the provisions of any agreement, contract or other instrument filed with Escrow Holder or referred to herein, other than this Agreement, to the extent it serves as joint escrow instructions. Notwithstanding the foregoing, if Escrow Holder is also acting as the Title Company under the terms of this Agreement, nothing in this Agreement shall limit the liability of the Title Company under the Title Policy. 6.5. Disbursements and Other Actions by Escrow Holder. At the close ------------------------------------------------ of Escrow upon satisfaction of all conditions, Escrow Holder shall promptly undertake all of the following in the manner hereinbelow indicated. 6.5.1. Closing. Escrow Holder shall disburse the funds and ------- deliver the documents and take other actions as follows: A. Closing Costs. Deduct all items chargeable to the ------------- account of Seller pursuant to Section 5 from the Purchase Price and pay all of Buyer's Closing costs from funds deposited by Buyer. B. Funds. Disburse by wire transfer the remaining balance ----- of the Purchase Price to Seller or as Seller may direct. C. Recording. Cause the Deed (with documentary transfer tax --------- and stamp information to be affixed after or separate from recording, if possible), the Assignment of Leases and any other documents which the parties hereto may mutually direct to be recorded in the official records of Orange County and obtain conformed copies thereof for distribution to Buyer and Seller. D. Title Policy. Direct the Title Company to issue the ------------ Title Policy to Buyer as of the date of Closing. E. Documents. Deliver to Buyer the Bill of Sale, the --------- General Assignment, the FIRPTA Certificate, and change of address notices duly executed by Seller and any of the documents (or copies thereof) deposited into Escrow by Seller pursuant hereto and deliver to Seller all documents (or copies thereof) deposited in Escrow by Buyer pursuant hereto. F. Section 6045 Filings. As the "reporting person" within -------------------- the meaning of Treasury Regulation (S)1.6045-4(e)(5), timely file the forms required by Internal Revenue Code Section 6045(e) and the regulations promulgated thereunder. Pursuant to such regulations, the parties agree to retain this Agreement for at least four (4) full calendar years after the Closing. -11- 7. Deliveries to Escrow Holder. --------------------------- 7.1. By Seller for the Closing. Seller hereby covenants and agrees ------------------------- to deliver or cause to be delivered to Escrow Holder prior to the Closing Date, the following instruments and documents, the delivery of each of which shall be a condition to the performance by Buyer of its obligations under the terms of this Agreement: 7.1.1. Deed. The Deed duly executed and acknowledged in recordable ---- form by Seller, conveying the Property to Buyer, or its approved designee, subject only to the title conditions permitted by Section 3.1.3. ----- 7.1.2. Bill of Sale. A bill of sale ("Bill of Sale") duly executed ------------ and acknowledged by Seller in favor of Buyer, or its approved designee, assigning and conveying to Buyer, or its approved designee, all of Seller's right, title and interest in and to the Personal Property, free and clear of all liens, encumbrances and adverse claims of parties claiming through Seller. 7.1.3. Assignment and Assumption of Leases. An assignment of the ----------------------------------- leases relating to the Real Property to Buyer or its approved designee, which assignment shall provide for Buyer or its approved designee to assume and agree to perform the obligations from and after the Closing under the leases relating to the Real Property ("Assignment of Leases"). 7.1.4. Assignment and Assumption of Service Agreements. An ----------------------------------------------- assignment of the transferable service agreements to be assigned as listed in Schedule D-8, to Buyer or its approved designee, which assignment shall provide --- for Buyer or its approved designee to assume and agree to perform the obligations from and after the Closing under those service agreements ("Assignment of Service Agreements"). 7.1.5. Closing Rent Roll. A rent roll, including a schedule of ----------------- security deposits and an itemization of any lawful deductions therefrom, for the Property in the form of Exhibit C, updated to the Closing Date, certified by - Seller to be true and correct at the day prior to the Closing Date. 7.1.6. General Assignment. An assignment ("General Assignment"), ------------------ without warranty, duly executed by Seller, assigning to Buyer or its approved designee all of Seller's right, title and interest in and to any licenses, records, plans and Intangible Property related to the Property. 7.1.7. Non-Foreign Certification. A certification duly executed by ------------------------- Seller under penalty of perjury setting forth Seller's address and federal tax identification number and certifying that Seller is a "United States Person" and that Seller is not a "foreign person" in accordance with and/or for the purpose of the provisions of Sections 7701 and 1445 (as may be -12- amended) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. 7.1.8. Notices. ------- (i) Written notices to be sent postage prepaid to each tenant, advising them of the purchase of the Property by Buyer, directing them to pay rent to Buyer, and notifying them of the transfer of the security deposits to Buyer (the "Tenant Notice"). Buyer shall notify Seller of the exact name, address and telephone number of Buyer to be included in the Tenant Notice. The Tenant Notice shall set forth each tenant's then-current rental rate, the amount of the security deposit transferred to Buyer. Upon Closing, Escrow Holder shall promptly send the notice to all tenants by first class mail, at Seller's cost; and (ii) A form of written notice(s) to the other parties to the Contracts and any vendors relating to the Property, advising them of the change in ownership of the Property and any other information required pursuant to the Contracts, which notices shall be mailed by Escrow Holder to each addressee. 7.1.9. Proof of Authority. Such proof of Seller's authority and ------------------ authorization to enter into this Agreement and consummate the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing and/or delivering any instruments, documents or certificates on behalf of Seller to act for and bind Seller as may be reasonably required by Title Company and/or Buyer. 7.1.10. Affidavits. Any affidavits or mechanic's lien ---------- indemnifications as may be reasonably required by Title Company in order to issue the Title Policy. 7.1.11. Representations and Warranties. A certificate of Seller ------------------------------ certifying that the representations and warranties of Seller set forth in Exhibit E are true and correct as of the Closing. - 7.1.12. Other. Any and all other instruments reasonably necessary ----- in order to consummate the acquisition of the Property in accordance with this Agreement. 7.2. By Buyer for the Closing. Buyer hereby covenants and agrees to ------------------------ deliver or cause to be delivered to Escrow Holder by 12:00 PM Pacific Standard Time one (1) business day prior to the Closing Date the following consideration, instruments and documents, the delivery of each of which shall be a condition to the performance by Seller of its obligations under the terms of this Agreement. 7.2.1. Purchase Price. Cash in the amount of the Purchase Price -------------- plus Buyer's prorations and Closing costs less Seller's prorations and Closing costs, by Bank wire transfer, less the Deposit and interest earned thereon. -13- 7.2.2. Assignment and Assumption of Leases. The Assignment of ----------------------------------- Leases executed and acknowledged by Buyer or its approved designee, whereby Buyer or its approved designee assumes and agrees to perform the obligations from and after the Closing under the leases relating to the Real Property. 7.2.3. Assignment and Assumption of Service Agreements. The ----------------------------------------------- Assignment of Service Agreements executed by Buyer or its approved designee, whereby Buyer or its approved designee assumes and agrees to perform the obligations from and after the Closing under the service Contracts. 7.2.4. Representations and Warranties. A certificate of Buyer and ------------------------------ its approved designee certifying that the representations and warranties set forth in Exhibit F are true and correct as of the Closing. - 7.2.5. Proof of Authority. Such proof of Buyer's authority and ------------------ authorization to enter into this Agreement and consummate the transactions contemplated hereby, and such proof of the power and authority of the individual(s) executing an/or delivering any instruments, documents or certificates on behalf of Buyer or its approved designee to act for and bind Buyer or its approved designee, as may be reasonably required by Seller or Title Company. 7.2.6. Other. Any and all other instruments reasonably necessary ----- in order to consummate the transfer of the Property and the payment of the Purchase Price in accordance with this Agreement. 8. Deliveries to Buyer Upon Close of Escrow Outside of Escrow. Seller ---------------------------------------------------------- shall deliver possession of the Property to Buyer or its approved designee upon the Closing, including keys to the Improvements and keys to all Personal Property located on the Property. The original leases, which are the subject of the Assignment of Leases, all tenant files, and all plans and drawings of the Property in Seller's possession shall be delivered to Buyer or its approved designee upon the Closing. 9. Casualty Damage. Prior to the Closing, and notwithstanding the --------------- pendency of this Agreement, the entire risk of loss or damage by earthquake, flood, landslide, fire or other casualty shall be borne and assumed by Seller, except for loss or damage caused by Buyer and except as otherwise provided in this Section 9. From and after the Closing, such risk shall be Buyer's or its - approved designee's. If, prior to the Closing, any part of the Property is damaged or destroyed by earthquake, flood, landslide, fire or other casualty, Seller shall promptly so notify Buyer. 9.1. Damage Exceeds $500,000. If such damage or destruction results ----------------------- in a cost to repair or replace the Property or any part of the Property which is greater than $500,000, Buyer -14- shall have the option to terminate its obligation to acquire the Property pursuant to this Agreement by written notice to Seller and Escrow Holder not later than ten (10) business days after receipt of notice from Seller of the fact that the Property has been damaged or destroyed, which notice shall include written evidence from Seller's insurer of the amount of insurance coverage to be paid for the casualty. In the event Buyer exercises the foregoing option, the Deposit, including all interest earned thereon, shall be immediately delivered to Buyer by Escrow Holder, and the obligations of Buyer and Seller to consummate the transaction contemplated hereunder shall cease. If Buyer does not timely exercise the foregoing option, the transaction shall proceed to Closing and Seller shall assign and turn over at Closing, and Buyer shall be entitled to receive and keep at Closing, all insurance proceeds payable, and an amount equal to the deductible, with respect to such damage or destruction, and Buyer shall have the right to participate in any adjustment of the insurance claim, and the parties shall proceed to the Closing. 9.2. Damage Equals Or Is Less Than $500,000. If the cost to repair -------------------------------------- the Property is $500,000 or less, neither party shall have a right to terminate its obligations under this Agreement and Seller shall assign and turn over at Closing, and Buyer shall be entitled to receive and keep at Closing, all insurance proceeds payable, and an amount equal to the deductible plus any shortfall necessary to cover the cost to repair, with respect to such damage or destruction, and Buyer shall have the right to participate in any adjustment of the insurance claim, and the parties shall proceed to the Closing. 10. Condemnation. If at any time prior to the Closing, the Property or ------------ any portion thereof which would materially adversely affect the use of the Property is taken by condemnation or eminent domain, or any such proceedings are commenced, Buyer may, at its option, within ten (10) business days after receipt of written notice of such fact from Seller, terminate its obligation to acquire the Property pursuant to this Agreement, by written notice to Seller and Escrow Holder. Thereupon, the obligations of Buyer and Seller to consummate the sale of the Property hereunder shall cease and the Deposit, including interest thereon shall be immediately returned to Buyer by Escrow Holder. Seller shall notify Buyer of any such taking by eminent domain or any commencement of any such action and keep Buyer apprised of the status of such action. If Buyer does not elect to so terminate its obligations under this Agreement, the Agreement shall remain in full force and effect and Seller shall in such event turn over or credit to Buyer at the Closing all monies received by Seller by reason of such taking, and Seller shall assign to Buyer all of its rights, title and interest in and to any awards to Seller or the Property that may be made for such taking and Buyer shall have the right to participate in any negotiations of such award. 11. Representations and Warranties. ------------------------------ 11.1. Seller's. Seller represents and warrants to Buyer as of the -------- date of this Agreement those matters set forth in Exhibit E attached hereto and - made a part hereof, which representations and warranties shall be true and correct at the Closing and shall survive the Closing only for five months. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES IN EXHIBIT E, (i) SELLER MAKES NO - WARRANTY OR REPRESENTATION REGARDING THE PROPERTY OR ANY PART THEREOF, ITS -15- PHYSICAL OR FINANCIAL CONDITION, FITNESS FOR A PARTICULAR PURPOSE OR USE, OR MERCHANTABILITY, OR ANY OTHER MATTER AFFECTING THE PROPERTY; AND (ii) BUYER WILL ACQUIRE THE PROPERTY, IF AT ALL, "AS-IS, WHERE-IS, AND WITH ALL FAULTS," INCLUDING BUT NOT LIMITED TO ANY HAZARDOUS SUBSTANCES OR HAZARDOUS WASTES THAT MAY BE LOCATED ON, UNDER OR AROUND THE PROPERTY, WHETHER KNOWN OR UNKNOWN. 11.2. Buyer's. Buyer represents and warrants to Seller as of the ------- date of this Agreement those matters set forth in Exhibit F attached hereto and - made a part hereof, which representations and warranties shall be true and correct at the Closing, and shall survive the Closing only for one month. 12. Seller's Covenants. ------------------ 12.1. Operation of Property Prior to Closing. So long as Seller is -------------------------------------- obligated to convey the Property to Buyer under this Agreement, Seller shall not encumber or convey any portion of the Property or any rights therein, except that Seller shall continue operating the Property substantially as it has in the past, including but not limited to leasing to tenants for up to a one (1) year period at not less than 90% of current rents, acquiring and disposing of inventory, entering into service contracts, implementing rent adjustments and performing inspections, repairs, maintenance and capital improvements. Seller will not enter into any service contracts after the date of this Agreement which are not terminable upon 30 days notice, without Buyer's prior written consent, which will not be unreasonably withheld. Any proposed rent increase or material modification of a lease form will be provided to Buyer prior to implementation and, to the extent feasible, prior to notification of the tenants of the Property. Seller will not enter into any leases with residents which are not on the lease form provided to Buyer without Buyer's prior written consent, which will not be unreasonably withheld. Except as set forth above, Buyer shall have no right of approval or disapproval thereof, so long as Seller's actions are reasonable and there is no material change in the budgeted cash flow as a result of Seller's actions. Seller shall have no obligation to replace any damaged or lost items of personal property in the model units prior to Closing which have a value under One Hundred Dollars ($100). Seller shall use its best efforts so that any apartment units vacated more than five (5) business days prior to the Closing Date are in "rent ready condition" on the Closing Date. "Rent ready condition" shall mean cleaned and recently painted in accordance with Seller's custom, and carpeting and floor coverings in suitable condition for resident move-ins, according to Seller's custom and practice. Following expiration of the Inspection Period and if this Agreement has not been terminated, Seller shall provide Buyer with a copy of the Weekly Occupancy Activity Analysis report for the Property, in the form attached as Exhibit G. Seller will use reasonable - efforts to ensure the overall accuracy of the report; however, said report shall be without warranty as to accuracy. 12.2. Representations and Warranties. To the extent within Seller's ------------------------------ control, Seller will take, cause to be taken, or refrain from, all action necessary to cause the representations and warranties of Seller set forth in Exhibit E to remain true and correct in all respects from the date of this - Agreement to the Closing. -16- 13. Buyer's Covenants. Buyer shall (or shall not, as the case may be) do ----------------- the following, from the date of this Agreement until the Closing and Subsequent Closing hereunder: 13.1. Ongoing Business. Carry on its business in the ordinary and ---------------- regular course in substantially the same manner as heretofore conducted; 13.2. Preserve Existence. Preserve its existence and business ------------------ organization intact; 13.3. Raise Funds. Use all commercially reasonable efforts to raise ----------- sufficient financing (either as equity or debt) to enable the transaction contemplated by this Agreement to be consummated (although the raising of such funds shall not be a condition of Buyer's obligations hereunder); 13.4. Representations and Warranties. To the extent within Buyer's ------------------------------ control, Buyer will take, cause to be taken, or refrain from, all action necessary to cause the representations and warranties of Buyer set forth in Exhibit F to remain true and correct in all respects from the date of this - Agreement to the Closing. 14. Indemnification. --------------- 14.1. By Seller. Seller shall indemnify, defend and hold harmless --------- Buyer, its officers, directors, agents and employees from and against any and all claims, demands, causes of action and liabilities including but not limited to reasonable attorneys' fees, arising as a result of an injury occurring at the Property prior to the Closing (other than if actually caused by Buyer), or arising out of the breach of Seller's representations and warranties set forth in Exhibit E. - 14.2. By Buyer. Buyer agrees to indemnify, defend and hold harmless -------- Seller, its partners, agents, employees, and Independent Committee members and their agents, from and against any and all claims, demands, causes of action, and liabilities, including but not limited to reasonable attorneys' fees, arising on or after the Closing and relating to the Property or Buyer's ownership, operation (which shall include without limitation tenant matters) or maintenance of the Property or arising out of a breach of Buyer's representations and warranties set forth in Exhibit F. - 14.3. Terms of Indemnification. The foregoing indemnification ------------------------ obligations are subject to the following: 14.3.1. Claim Amount. The respective indemnifying party under ------------ Sections 14.1 and 14.2 shall be required to indemnify the respective indemnified ---- ---- party thereunder only if, and then only to the extent that, the damages, judgments, costs, expenses (excluding attorneys' fees and disbursements), penalties or other amounts incurred by the indemnified party arising out of a matter for which the indemnified party is indemnified thereunder, exceeds $25,000. -17- Notwithstanding anything herein, the maximum liability of either party as indemnitor hereunder, including but not limited to all costs, expenses, reasonable attorney's fees and disbursements, shall be an amount equal to the Purchase Price. 14.3.2. Notice. No party hereto shall be required to indemnify ------ another party pursuant hereto unless within two months following the Closing (i) the claim for which the party seeks indemnity arises and (ii) the party claiming the right to be indemnified notifies the other party of its claim of indemnity and of the facts which are the basis for indemnification pursuant to this Section 14. If the notice is timely given but the notified party desires to -- dispute the claim of indemnity, it shall, within thirty (30) days after the aforesaid notice is given, give a counternotice, setting forth the basis for disputing such claim of indemnity, to the party claiming the right to be indemnified. If no such counternotice is given within such thirty (30) day period, or if the indemnifying party acknowledges liability for indemnification, then such indemnification shall be promptly honored. 14.3.3. Arbitration. If, within thirty (30) days after the giving of ----------- the counternotice, the parties have not reached agreement as to the claim in question, then the claim for indemnification shall be submitted to and settled by arbitration as hereinafter provided (it being expressly understood and agreed that if such counternotice is duly given, it is the intention of the parties to this Agreement that any such claim shall be resolved by arbitration as provided in this Section 14). Arbitration shall be before a retired judge or justice in -- Orange County, California. If the parties are unable to agree on a retired judge or justice, each party shall name one retired judge or justice and the two named persons will select a neutral judge or justice to act as the sole arbitrator. The parties shall be entitled to take discovery in accordance with the provisions of the California Code of Civil Procedure, including but not limited to Section 1283.05, which shall be applicable to such arbitration, except that leave of the arbitrator shall not be required to take depositions for discovery, provided that either party may request that the arbitrator limit the amount or scope of such discovery, and in determining whether to do so, the arbitrator shall balance the need for discovery against the parties' mutual desire to resolve the dispute expeditiously and inexpensively. The decision of the arbitrator on the merits shall be final and binding as to any matters submitted to the arbitrator under this Agreement, except the arbitrator shall have no authority to grant punitive damages. To the extent the arbitrator's decision is that a loss has been suffered for which a party is to be indemnified under this Agreement, it shall be promptly satisfied; provided, however, that, if necessary, such decision and satisfaction procedure may be enforced by either party hereto in any court of record having jurisdiction over the subject matter or over any of the parties hereto. All costs and expenses incurred in connection with any such arbitration proceeding shall be borne by the party against whom the decision is rendered, or, if no decision is rendered or if the decision is a compromise, equally by Buyer and Seller. 14.3.4. Right to Counsel. Any party entitled to indemnification ---------------- hereunder shall be entitled to be defended by counsel of such party's choice, subject to the approval of the indemnifying party, which approval shall not be unreasonably withheld or delayed, provided, -18- however, if the indemnity claim arises out of an action by a third party, then the indemnifying party shall have the right to use the same counsel to defend the indemnified party as the indemnifying party is using in the underlying action, unless the indemnified party in good faith believes that a conflict exists such that the indemnified party will not be adequately represented by such counsel. 14.3.5. No Third Party Beneficiary. The indemnifications set forth -------------------------- in this Agreement shall not inure to the benefit of any unspecified third party, including but not limited to insurance carriers, which are specifically excluded. 15. Brokers. Buyer and Seller each represents and warrants to the other ------- that neither has dealt with a broker, finder or other third party in connection with this transaction who would be entitled to a commission or finder's fee, other than CB Commercial, who represented the Seller, and none is due any person or entity, other than CB Commercial, who represented the Seller, through said party in connection with this Agreement or the transaction set forth herein and agrees to hold the other harmless from any such claim. 16. Default and Remedies. -------------------- 16.1. BUYER'S DEFAULT - CLOSING. IN THE EVENT OF BUYER'S DEFAULT ------------------------- HEREUNDER PRIOR TO CLOSING WHICH IS NOT CURED WITHIN TEN (10) DAYS OF NOTICE THEREOF, PROVIDED ALL CONDITIONS SET FORTH IN SECTION 3.1 HAVE BEEN SATISFIED OR --- WAIVED BY BUYER, SELLER MAY ELECT BY WRITTEN NOTICE TO BUYER AND ESCROW HOLDER, EITHER (A) TO CLOSE THIS TRANSACTION, BUT ONLY IF BUYER IS WILLING TO PROCEED TO CLOSING (I.E., SELLER SHALL NOT HAVE THE RIGHT OF SPECIFIC PERFORMANCE), AND TO RESERVE SELLER'S REMEDY TO SEEK DAMAGES FOR SUCH BREACH AS SET FORTH IN SECTION 16.3 OR (B) TO TERMINATE BUYER'S OBLIGATION TO BUY, AND SELLER'S OBLIGATION TO - ---- SELL, THE PROPERTY PURSUANT TO THIS AGREEMENT. IF SELLER SHALL ELECT THE LATTER REMEDY (I.E., CLAUSE (B)) AND IF BUYER'S DEFAULT IS MATERIAL, SELLER, AT ITS ELECTION, AS ITS SOLE AND EXCLUSIVE REMEDY, SHALL BE ENTITLED TO THREE HUNDRED THOUSAND DOLLARS ($300,000) (THE DEPOSIT) PLUS INTEREST EARNED THEREON, AS LIQUIDATED DAMAGES. THE PARTIES AGREE THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A MATERIAL DEFAULT BY BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO DETERMINE, AND THE LIQUIDATED DAMAGES HAVE BEEN AGREED UPON AFTER NEGOTIATION BETWEEN THE PARTIES. THE PARTIES -19- AGREE THAT THIS PROVISION IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING AT THE TIME THIS AGREEMENT IS MADE. __________________ __________________ INITIALS ON BEHALF INITIALS ON BEHALF OF SELLER OF BUYER 16.2. SELLER'S DEFAULT - CLOSING. IN THE EVENT OF SELLER'S DEFAULT -------------------------- HEREUNDER PRIOR TO CLOSING WHICH IS NOT CURED WITHIN TEN (10) DAYS OF NOTICE THEREOF, PROVIDED ALL CONDITIONS SET FORTH IN SECTION 3.2 HAVE BEEN SATISFIED OR --- WAIVED BY SELLER, BUYER MAY ELECT, BY WRITTEN NOTICE TO SELLER AND ESCROW HOLDER, EITHER (A) TO CLOSE THIS TRANSACTION, WITH THE RIGHT OF SPECIFIC PERFORMANCE, AND TO RESERVE BUYER'S REMEDY TO SEEK DAMAGES FOR SUCH BREACH AS SET FORTH IN SECTION 16.3 OR (B) IF SELLER'S DEFAULT IS MATERIAL, TO TERMINATE ---- SELLER'S OBLIGATION TO SELL, AND BUYER'S OBLIGATION TO BUY, THE PROPERTY PURSUANT TO THIS AGREEMENT AND RECEIVE THE RETURN OF THE DEPOSIT PLUS INTEREST EARNED THEREON AND BUYER SHALL BE ENTITLED TO PAYMENT FROM SELLER OF BUYER'S ACTUAL PAID OUT-OF-POCKET COSTS, NOT TO EXCEED $60,000 AND SHALL DELIVER THE SURVEY TO SELLER. __________________ __________________ INITIALS ON BEHALF INITIALS ON BEHALF OF SELLER OF BUYER 16.3. Breach of This Agreement if the Closing Occurs. In the event ---------------------------------------------- the Closing occurs, any claim for a breach (the "Breach") of this Agreement, other than for failure to honor an obligation of indemnity under this Agreement, shall be subject to the following: 16.3.1. Claim Amount. A party shall be liable for the Breach only ------------ if, and then only to the extent that, the damages, judgments, costs, expenses (excluding attorneys' fees and disbursements), penalties, liabilities or other amounts incurred as a result of the Breach exceed $25,000. Notwithstanding anything herein to the contrary, the maximum liability of either Buyer or Seller for the Breach, including but not limited to all costs, expenses, attorneys' fees and disbursements, shall be an amount equal to the Purchase Price. Notwithstanding the foregoing, the provisions of this Section 16.3.1 shall not ------ apply to any failure to reprorate the prorations as required by Section 5. 16.3.2. Notice. No party hereto shall be liable for the Breach ------ unless, prior to the date two months following the Closing (i) the alleged Breach occurs and (ii) the party -20- asserting the Breach notifies the other party of the alleged Breach and the facts which are the basis for the alleged Breach. If the notice is timely given but the notified party desires to dispute such claim of Breach, it shall, within thirty (30) days after the aforesaid notice is given, give a counternotice, setting forth the basis for disputing such claim of Breach, to the party claiming the Breach. If no such counternotice is given within such thirty (30) day period, or if the alleged Breaching party acknowledges the Breach, then the Breach shall be promptly cured or satisfied. 16.3.3. Arbitration. If, within thirty (30) days after the giving ----------- of the counternotice, the parties have not reached agreement as to the claim in question, then the claim shall be submitted to and settled by arbitration as hereinafter provided (it being expressly understood and agreed that if such counternotice is duly given, it is the intention of the parties to this Agreement that any such claim shall be resolved by arbitration as provided in this Section 16). Arbitration shall be before a retired judge or justice in Los -- Angeles County, California. If the parties are unable to agree on a retired judge or justice, each party shall name one retired judge or justice and the two named persons will select a neutral judge or justice to act as the sole arbitrator. The parties shall be entitled to take discovery in accordance with the provisions of the California Code of Civil Procedure, including but not limited to Section 1283.05, which shall be applicable to such arbitration, except that leave of the arbitrator shall not be required to take depositions for discovery, provided that either party may request that the arbitrator limit the amount or scope of such discovery, and in determining whether to do so, the arbitrator shall balance the need for discovery against the parties' mutual desire to resolve the dispute expeditiously and inexpensively. The decision of the arbitrator on the merits shall be final and binding as to any matters submitted to the arbitrator under this Agreement, and to the extent the arbitrator's decision is that a Breach occurred, it shall be promptly satisfied by the Breaching party; provided, however, that, if necessary, such decision and satisfaction procedure may be enforced by any party hereto in any court of record having jurisdiction over the subject matter or over any of the parties hereto. All costs and expenses incurred in connection with any such arbitration proceeding shall be borne by the party against whom the decision is rendered, or, if no decision is rendered or if the decision is a compromise, equally by Buyer and Seller. 17. Notices. All notices, requests, approvals, disapprovals, submissions, ------- waivers, elections, exercises of options and consents required or provided for herein shall be in writing and shall be sufficient if (i) delivered personally (which shall include delivery by messenger, overnight courier and by facsimile --- transmission) or (ii) sent by registered or certified United States mail, return receipt requested, postage prepaid and by facsimile transmission, addressed as --- described below, or to such other address as the party concerned may substitute by written notice to the other as provided herein. All notices given by mail shall be deemed to be received when actually received or refused. To Seller: De Anza Properties - X 9171 Wilshire Boulevard Suite 627 Beverly Hills, CA 90210 Attn.: Herbert M. Gelfand FAX: (310) 285-0167 -21- with a copy to: Terra Vista Management, Inc. 9171 Wilshire Boulevard Suite 627 Beverly Hills, CA 90210 Attn.: Michael D. Gelfand and --- Bonnie Bonfanti FAX: (310) 285-0167 and a copy to: Wendy G. Glenn, Esq. 1900 Avenue of the Stars Suite 2700 Los Angeles, CA 90067-4508 FAX: (310) 556-0655 To Buyer: J.F. Shea Co. Inc. 655 Brea Canyon Road Walnut, CA 91789-9010 Attn.: William B. Montgomery FAX: (909) 869-0868 with a copy to: Allen, Matkins, Leck, Gamble & Mallory 18400 Von Karman, 4th Floor Irvine, CA 92612 Attn.: David W. Wensley, Esq. or Susan Graham, Esq. FAX: (714) 553-8354 To Escrow Holder: Chicago Title Insurance Company 700 South Flower Street, Suite 900 Los Angeles, CA 90017 Attn.: Jane Little FAX: (213) 488-4384 To Title Company: Chicago Title Insurance Company 16969 Von Karman Irvine, CA 92614 Attn.: Jeff Lamm FAX: (714) 263-1022 18. Tax Deferred Exchange. Either party may desire to consummate a --------------------- (S)1031 tax deferred exchange with this transaction and each party agrees to cooperate with the other in effecting a (S)1031 tax deferred exchange provided that (a) the non-exchanging party shall not incur any cost or liability as a result of said exchange or attempted exchange by the exchanging -22- party, (b) said exchange(s) does not affect the Closing Date, (c) the non- exchanging party is not required to take title to other properties involved in the exchange of the exchanging party, and (d) the exchanging party pays for all escrow fees and charges charged by the Escrow Holder in connection with the exchanging party's exchange. 19. Miscellaneous. ------------- 19.1. Entire Agreement. This Agreement and the Exhibits attached ---------------- hereto which are incorporated herein and made a part hereof embody the entire agreement of the parties regarding the subject matter hereof. All prior negotiations, agreements and representations, whether oral or written, are merged herein. This Agreement may not be altered or modified, except by an instrument in writing signed by all parties (which may be in counterparts); nor may any provision be waived by a party unless in writing signed by such party. 19.2. Benefit of Agreement. This Agreement shall be binding upon and -------------------- inure to the benefit of the parties hereto and their respective successors and assigns. 19.3. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the internal laws of the State of California. 19.4. Time of the Essence. Time shall be of the essence with respect ------------------- to the performance by the parties of their respective obligations hereunder. Unless otherwise specified in this Agreement, in computing any time period provided for in the Agreement or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is Saturday, Sunday or a federal legal holiday, in which case, shall run until the end of the next day which is not a Saturday, Sunday or federal legal holiday. 19.5. Captions. The captions of the sections and paragraphs of this -------- Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit or describe the scope of this Agreement, or the intent of any provision hereof. 19.6. Severability. In case any one or more of the provisions ------------ contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect by a court, arbitrator or administrative agency having jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. 19.7. Further Assurances. Each party agrees that at the request of ------------------ another party it will at any time hereafter make such further assurances and execute or cause to be executed such further instruments as may be reasonably requested by the other party in order that this Agreement may be fully performed in accordance with its intent and provisions. -23- 19.8. Provisions Negotiated and Independent. Each and every ------------------------------------- provision of this Agreement has been independently, separately and freely negotiated by the parties as if this Agreement were drafted by all parties hereto. The parties, therefore, waive any statutory or common law presumption which would serve to have this document construed in favor of, or against, any party. 19.9. No Merger. All provisions in this Agreement, which by their --------- terms extend beyond the Closing, shall survive the Closing and not merge as a result of the conveyance of the Property, including but not limited to the representations and warranties of Seller and Buyer which shall survive the Closing for one month. 19.10. Failure to Enforce. The failure to enforce any breach of this ------------------ Agreement should not be deemed a waiver of such breach and each party reserves its right to enforce the same at a later time and its right to waive a condition for its benefit without waiving any other provision or condition. 19.11. Counterparts. This Agreement may be executed in two or more ------------ identical counterparts, all of which shall be taken together as a single instrument. 19.12. Assignment of Agreement. This Agreement may not be assigned ----------------------- except as necessary to effectuate a tax deferred exchange, and except that Buyer may designate an affiliate controlled by Buyer, to take title to the Property at Closing, on the condition that the Buyer remain obligated under the Agreement and said designee assumes, as an additional obligor, all obligations of Buyer hereunder and Buyer notifies Seller of the assignee five (5) business days prior to the date Seller is obligated to provide Closing Documents to Buyer or Buyer's counsel. The designation of a designee shall have no effect upon any amounts held by the Escrow Holder hereunder at the time of assignment, and all provisions herein relating to the Escrow Holder shall continue to be in full force and effect. 19.13. No Third-Party Beneficiaries. This Agreement is for the sole ---------------------------- benefit of the parties hereto, their respective successors and assigns, and no other person or entity shall be entitled to rely upon or receive any benefit from this Agreement or any term hereof, except those parties entitled to indemnification pursuant to Section 14. -- 19.14. Remedies. The rights and remedies of the parties are set -------- forth in Sections 14 and 16 and those in Sections 16.1 and 16.2 are exclusive in -- -- ---- ---- the event the Closing does not occur. If the Closing does occur, the rights and remedies of all parties under this Agreement or otherwise (whether based in contract, tort or any other theory) are set forth in Sections 14 and 16.3 and -- ---- are exclusive. 19.15. Attorneys' Fees. Unless otherwise specified in this --------------- Agreement, in any action or proceeding (including but not limited to an arbitration) arising out of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in -24- preparation for and in prosecution or defense of said action or proceeding, including but not limited to all appeals, related proceedings including enforcement, satisfaction and extraordinary writ proceedings. 19.16. Acceptance of Offer. This Agreement constitutes an offer by ------------------- Buyer to acquire the Property on the terms and conditions set forth in this Agreement, which offer must be accepted by Seller on or before two (2) business days from the date this Agreement is signed by Buyer and delivered to Seller. If not so accepted and returned to Buyer within said two (2) day period, this offer shall be deemed revoked. If accepted by Seller, this Agreement shall be valid and binding as to all parties. (signatures on following page) -25- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SELLER: DE ANZA PROPERTIES - X a California limited partnership By De Anza Corporation, Operating General Partner By /s/Herbert M. Gelfand Dated: October 7, 1996 --------------------- Herbert M. Gelfand Chairman of the Board BUYER: J.F. SHEA CO., INC. a Nevada corporation By /s/W. William Gaboury Dated: October 4, 1996 --------------------- W. William Gaboury Vice-President ESCROW HOLDER: Escrow obligations agreed to: CHICAGO TITLE INSURANCE COMPANY By: /s/Jane Little Dated: October 8, 1996 -------------------------- Jane Little, Escrow Officer -26- LIST OF EXHIBITS ---------------- A. Legal Description B. Personal Property C. Rent Roll D. Items to be provided to Buyer Schedules: D-6 Workmen's Compensation Claims for 1994, 1995 and Through July 1996 D-8 Written Service Contracts D-9 Written Guarantees or Warranties D-13 Blanket Insurance Coverage E. Seller's Representations and Warranties for Closing Schedules: E-7 Litigation E-8 Violation of Laws E-9 Contracts E-11 Hazardous Substances F. Buyer's Representations and Warranties G. Form of Weekly Occupancy Activity Analysis Report -27- EX-27 3 FINANCIAL DATA SCHEDULE--ARTICLE V
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,429,485 0 8,268 0 0 1,529,334 19,843,493 10,203,950 11,267,013 437,633 4,682,730 0 0 0 5,547,507 11,267,013 2,757,941 3,051,368 0 1,467,451 284,581 0 354,939 944,397 0 944,397 0 0 0 944,397 31.52 31.52 EPS is per Limited Partner Unit
-----END PRIVACY-ENHANCED MESSAGE-----