-----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, FR8wn/iXQIqkk/naEpKWiKW2cCeteILj/2lh6mrJlE0eO5lMu7400L5cKKNAu3Au EKX3+Qmz6hQl1NKa+bqsXA== 0000950150-95-000744.txt : 19951213 0000950150-95-000744.hdr.sgml : 19951213 ACCESSION NUMBER: 0000950150-95-000744 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951212 SROS: NONE SUBJECT COMPANY: 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: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-38912 FILM NUMBER: 95600977 BUSINESS ADDRESS: STREET 1: 9171 WILSHIRE BLVD STE 627 CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: 3105501111 FILED BY: 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: SC 14D9 BUSINESS ADDRESS: STREET 1: 9171 WILSHIRE BLVD STE 627 CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: 3105501111 SC 14D9 1 SCHEDULE 14D-9 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ___) De Anza Properties - X (Name of Subject Company) De Anza Properties - X De Anza Corporation (Name of Persons Filing Statement) Units of Limited Partnership Interest (Title of Class of Securities) NONE ((CUSIP) Number of Class of Securities) Herbert M. Gelfand De Anza Corporation 9171 Wilshire Blvd. Suite 627 Beverly Hills, California 90210 (310) 550-1111 (Name, address, and telephone number of person authorized to receive notice and communications on behalf of the person(s) filing statement) with copies to: Michael J. Connell Rena L. O'Malley Morrison & Foerster 555 West Fifth Street Los Angeles, CA 90013-1024 (213) 892-5200 2 ITEM 1. SECURITY AND SUBJECT COMPANY. The subject company is De Anza Properties-X, a California limited partnership (the "Partnership"). The title of the class of equity securities to which this Statement relates is units of limited partnership interest ("Units") of the Partnership. The address of the principal executive offices of the Partnership is 9171 Wilshire Boulevard, Suite 627, Beverly Hills, California 90210. ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to the offer (the "Offer") by Moraga Capital, LLC, a newly-formed Delaware limited liability company (the "Bidder"), to purchase for cash up to 5,665 Units at $450 per Unit as disclosed in the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated November 29, 1995 filed by the Bidder with the Securities and Exchange Commission. According to the Schedule 14D-1, the principal place of business of the Bidder is located at 1640 School Street, Suite 100, Moraga, California 94556. ITEM 3. IDENTITY AND BACKGROUND. (a) This Statement is being filed by the Partnership and De Anza Corporation, a California corporation (the "Operating General Partner"). The address of the principal executive offices of the Operating General Partner is 9171 Wilshire Boulevard, Suite 627, Beverly Hills, California 90210. The name and business address of the Partnership are set forth in Item 1 above. (b)(1) The Partnership is a limited partnership and has no executive officers or directors. Except as described below, to the best knowledge of the Partnership, there are no material contracts, agreements, arrangements or understandings or any actual or potential conflicts of interest between the Partnership on the one hand and its general partners including the Operating General Partner or the directors and executive officers of the Operating General Partner or affiliates thereof on the other hand, with respect to the Offer. Terra Vista Management, Inc., a California corporation (the "Manager"), manages and operates Woodridge Meadows Apartments, the Partnership's sole remaining property (the "Property"), pursuant to a Management Agreement dated August 18, 1994 entered into by the Partnership with the Manager (the "Management Agreement"). The President and sole stockholder of the Manager is Michael D. Gelfand, who is also President and a member of the Board of Directors of the Operating General Partner, and the son of Herbert M. Gelfand (who is Chairman of the Board and sole shareholder, through his family trust, of the Operating General Partner and a general partner of the Partnership). The Management Agreement continues from year-to-year. However, either party may, without penalty or obligation to the other party, by providing sixty (60) days' written notice to the other, terminate the Management Agreement with or without cause at any time. The Management Agreement may be immediately cancelled in the event of violation of any of 2 3 the provisions of the Management Agreement, or by the Partnership in the event a petition in bankruptcy is filed by or against the Manager which is not dismissed within ninety (90) days following the date of such filing. The Manager is entitled to receive compensation for its services of a sum equivalent to five percent (5%) of the aggregate gross receipts from the operation of the Property (excluding all receipts from utilities or from taxes of any kind or type). However, the Manager's compensation is subordinated to the receipt (on a noncumulative basis) by the limited partners of the Partnership of an annual cash distribution equal to six percent (6%) of the adjusted aggregate capital contributions of the limited partners. Total compensation paid to the Manager by the Partnership in 1994 since the Manager's appointment pursuant to the Management Agreement was $74,818, and from January 1, 1995 to September 30, 1995 was $140,127. The Management Agreement is filed herewith as an exhibit and is incorporated herein by reference. The Partnership has retained the Manager and an affiliate of the Operating General Partner to provide accounting, data processing and investor and other services to the Partnership. The Manager and the Operating General Partner's affiliate are reimbursed on an allocated basis for their costs and expenses for providing these services to the Partnership. The total of such reimbursements paid by the Partnership in 1994 since the Manager's appointment was $84,815, and from January 1, 1995 to September 30, 1995 was $115,318. (b)(2) To the best knowledge of the Partnership, there are no material contracts, agreements, arrangements or understandings or any actual or potential conflicts of interest between the Partnership or its general partners or executive officers or directors of the Operating General Partner or affiliates thereof, on the one hand, and the Bidder or its executive officers, directors or affiliates, on the other hand. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) The Operating General Partner has determined that the Offer is inadequate and not in the best interest of the limited partners and recommends that limited partners of the Partnership reject the Offer and not tender their Units pursuant to the Offer. (b) The reasons for the position taken by the Operating General Partner are as follows: 1. The Offer price is too low to be fair to limited partners. As reported to limited partners on October 3, 1995, in the Operating General Partner's view, the Property of the Partnership is a valuable asset despite the decline in California real estate generally. The Operating General Partner believes that if the Property were sold today (but not in a forced sale) each Unit would be worth about $762. The Operating General Partner believes an offer significantly below the $762 estimate is too low to be recommended by the Operating General Partner. In reaching this conclusion, the Operating General Partner did not take into account individual tax consequences, which may vary significantly among limited partners. 3 4 In addition, the Offer is also lower than the liquidation value of the underlying assets of the Partnership as of June 30, 1995 as estimated by the Bidder to be $628 per Unit. As set forth in the Bidder's materials mailed to each of the limited partners, the Bidder established the purchase price of $450 per Unit by seeking the lowest price which might be acceptable to limited partners consistent with the Bidder's objective to maximize its own profit from an additional investment in the Units. Under the terms of the Offer, the Bidder will receive any distribution made as of December 31, 1995 with respect to any Unit tendered to the Bidder. The Operating General Partner presently expects that a distribution with respect to all Units will be made by the Partnership as of December 31, 1995. The Partnership's Property was last valued by an appraiser in December 1990 at $31,000,000. However, the real estate market has declined in Southern California due to the recession. In view of the length of time that has elapsed since the last appraisal, the Partnership engaged in November, 1995 an independent third party valuation expert to assist the Operating General Partner in valuing the Property for Partnership internal purposes. The valuation expert was not engaged to provide a valuation of or in connection with the Offer, and the valuation is not expected to be completed prior to December 31, 1995. In determining the estimated liquidation value of $762 per Unit the Operating General Partner first calculated the estimated current net sales value of the Partnership's Property. The estimated net sales value has been determined by dividing the Property's estimated net operating income ("NOI") of $2,131,500 for the twelve month period commencing on January 1, 1995 and ending December 31, 1995 (which amount was estimated by the Operating General Partner by annualizing the Partnership's actual results of operations for the nine months ended September 30, 1995, adjusted to take account of (i) the portion of the NOI for such period estimated by the Operating General Partner to be attributable to the operation of a property (Aptos Pines) which was sold by the Partnership in July 1995, (ii) certain Partnership expenses which a buyer of the Property would not take into account, and (iii) certain year-end items). To determine the estimated net sales value of the Property, the Operating General Partner then divided the estimated NOI by an 8% capitalization rate (the "Cap Rate") and reduced such result by (i) $100,000 to take into account the estimated closing costs which would be incurred upon the sale by the Partnership of the Property, including title costs, surveys, legal fees and transfer taxes, (ii) a penalty for prepayment of the mortgage debt encumbering the Property of approximately $167,109, and (iii) the $4,774,530 of mortgage debt encumbering the Property as of September 30, 1995. The resulting estimated net sales value of the Property is approximately $21,608,361. The Operating General Partner believes that the Cap Rate utilized by it is within the range of capitalization rates currently employed in the marketplace and is the Cap Rate at which the Property would most likely sell today. The independent third party valuation expert retained by the Partnership to assist the Operating General Partner in valuing the Property for Partnership internal purposes has indicated it currently intends to use a 9% Cap Rate in preparing its valuation estimate. Nevertheless, the Operating General Partner believes that the 9% Cap Rate utilized by the Bidder is higher than would be used by a buyer for the Property and results in a lower estimated value for the Partnership's Property by the Bidder. To determine the estimated liquidation value of the Partnership's assets, the Operating General Partner added to the estimated net sales value of the Partnership's Property the Partnership's $1,236,731 of net 4 5 current assets as of September 30, 1995. The resulting estimated liquidation value of the Partnership's assets as of September 30, 1995 is approximately $22,845,092 or $762 per Unit (based upon the percentage of net sales proceeds the limited partners are entitled to receive under the Partnership's partnership agreement (the "Partnership Agreement")). 2. The Operating General Partner believes the Bidder intends to influence a sale of the Partnership's Property. If as a result of consummation of the Offer, the Bidder is in a position to significantly influence all Partnership decisions, the Bidder intends to vote the Units acquired in the Offer in accordance its own investment objectives. That vote may be different from or in conflict with the interests of other limited partners who do not tender their Units. In particular, the Operating General Partner believes that the Bidder favors a sale of the Partnership's Property within the next year or so. The Operating General Partner urges all limited partners to carefully consider all the information contained herein and consult with their own advisors, tax, financial or otherwise, in evaluating the terms of the Offer before deciding whether to tender Units. In particular, the Operating General Partner has not taken into account the tax consequences to individual limited partners as a result of accepting or rejecting the Offer and those tax consequences could vary significantly for each limited partner based on such limited partner's unique tax situation or other circumstances. No independent person has been retained to evaluate or render any opinion with respect to the fairness of the Offer price. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Neither the Partnership nor any person acting on its behalf intends to employ, retain or compensate any other person to make solicitations or recommendations to the limited partners of the Partnership in connection with the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) To the best knowledge of the Partnership, no transactions in the Units have been effected during the past 60 days by the Partnership, by general partners of the Partnership, including by the Operating General Partner or any executive officer or director of the Operating General Partner, or any affiliates or subsidiaries of such persons. (b) To the best knowledge of the Partnership, the Operating General Partner, the officers and directors of the Operating General Partner and any other affiliate of the Operating General Partner do not presently intend to tender to the Bidder any Units currently held of record or beneficially owned by such persons. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Except as described below, the Partnership is not engaged in any negotiation in response to the Offer which relates to or would result in: (1) An extraordinary transaction such as a merger or reorganization, 5 6 involving the Partnership or any subsidiary of the Partnership; (2) A purchase, sale or transfer of a material amount of assets by the Partnership or any subsidiary of the Partnership; (3) A tender offer for or other acquisition of securities by or of the Partnership; or (4) Any material change in the present capitalization or dividend policy of the Partnership. (b) Except as described below, there are no transactions, board or partnership resolutions, agreements in principle, or signed contracts in response to the Offer, which relate to or would result in one or more of the matters referred to in this Item 7. The Operating General Partner has considered and reviewed on a preliminary basis the feasibility and desirability of exploring and investigating a variety of possible alternative transactions to the Offer that might provide a greater return to limited partners, including without limitation the sale of the Partnership's Property to a third party or a tender by the Partnership to redeem Units at a price higher than that offered by the Bidder. After considerable evaluation, the Operating General Partner has determined that pursuing any such alternative transaction is not presently in the best interest of the Partnership. Because the Operating General Partner believes that the Offer is inadequate and not in the best interest of limited partners, the Operating General Partner recommends that limited partners reject the Offer. The Operating General Partner may resume consideration of alternative transactions depending upon the future actions of the Bidder. On December 4, 1995, Herbert M. Gelfand, the Chairman of the Board of the Operating General Partner, spoke with Messrs. Pat Patterson and Michael L. Ashner, representatives of the Bidder, to discuss the terms of the Offer and the intent of the Bidder in the event some limited partners choose to tender their Units in accordance with the terms of the Offer. In that conversation, the Bidder confirmed that its purpose for conducting the Offer was for investment purposes and with the intention of making a profit for itself from an investment in the additional Units. The Bidder stated to Mr. Gelfand that it favors a sale of the Property within the next year or so and that if as a result of consummation of the Offer the Bidder is in a position to significantly influence all Partnership decisions it intends to do so in accordance with its own investment objectives. The Operating General Partner and the Partnership has made no representation to or agreement with the Bidder with respect to the sale of the Property, or any other transaction, other than the views expressed by the Operating General Partner in communications to all limited partners. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. The general partners of the Partnership, including the Operating General Partner and certain officers and directors of the Operating General Partner and other affiliates of the Operating General Partner, beneficially own limited partnership Units and general partner interests in the Partnership. The total amount of Units owned by all general partners and 6 7 the directors and key executive officers of the Operating General Partner is 1% of the outstanding Units. Pursuant to the terms of the Partnership's Partnership Agreement, in the event a general partner (including the Operating General Partner) is removed as a general partner by vote of a majority in interest of the limited partners, such general partner shall automatically become a limited partner and if the vote of a majority in interest of the limited partners so requires, sell his interest to the limited partners who shall purchase such interest on behalf of the Partnership. If a removed general partner is required by the limited partners to sell his interest in the Partnership, the amount to be paid for such interest shall be computed as of the date of the consummation of the purchase and in accordance with Section 15 of the Partnership's Partnership Agreement. 7 8 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a) Letter to Limited Partners dated December 12, 1995. (b) None. (c) Management Agreement dated as of August 18, 1994 by and between Terra Vista Management, Inc., a California corporation, and De Anza Properties-X, a California limited partnership.* _________________ * Not included in copies mailed to limited partners. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete, and correct. December 12, 1995 ----------------- (Date) DE ANZA PROPERTIES-X By: DE ANZA CORPORATION its general partner By: /s/Herbert M. Gelfand ---------------------- Herbert M. Gelfand Chairman of the Board DE ANZA CORPORATION By: /s/Herbert M. Gelfand -------------------------- Herbert M. Gelfand Chairman of the Board 8 9 EXHIBIT INDEX 99.(1) Letter to Limited Partners dated December 12, 1995. 99.(2) Management Agreement dated as of August 18, 1994 by and between Terra Vista Management, Inc., a California corporation, and De Anza Properties-X, a California limited partnership. 9 EX-99.1 2 LETTER TO LIMITED PARTNERS, DATED DEC. 12, 1995 1 EXHIBIT 99.(1) [DE ANZA PROPERTIES-X LETTERHEAD] December 12, 1995 Dear Limited Partner: We recently advised you that De Anza Properties-X (the "Partnership") was studying the unsolicited tender offer made by Moraga Capital, LLC (the "Bidder") to purchase units of limited partnership interest of the Partnership ("Units") for $450 per Unit. The Operating General Partner has completed its evaluation and has determined that the offer is inadequate, and not in the best interests of the Partnership or its limited partners. Accordingly, the Operating General Partner recommends that the limited partners reject the offer and urges you not to tender any of your limited partnership Units. None of the Operating General Partner or any of its officers, directors or affiliates intend to tender any Units. In arriving at its determination, the Operating General Partner carefully reviewed the offer with its advisors and management, and considered many factors including the business, financial condition and prospects of the Partnership. The Operating General Partner's conclusions and recommendations concerning the offer are based, in part, on the following: 1.The Operating General Partner's opinion that the amount being offered by the Bidder is inadequate and not fair to the limited partners. The Operating General Partner believes that the price does not fairly reflect the value of the Partnership's underlying assets but instead is the lowest price which the Bidder believes any limited partner would be willing to accept in exchange for a Unit. According to the Bidder's own materials the Bidder believes a Unit has a liquidating value of $628. Our estimate is $762. In addition, limited partners who tender any Unit to the Bidder will not receive any distribution to be made by the Partnership with respect to that Unit as of December 31, 1995. 2.If Units are tendered to the Bidder, the Bidder intends to vote those Units in accordance with its own investment objectives. That vote may be different from or in conflict with the interests of other limited partners who do not tender their Units. In particular, the Operating General Partner believes that the Bidder favors a sale of the Partnership's property within the next year or so. The attached Schedule 14D-9, which has been filed with the Securities and Exchange Commission, describes in more detail the reasons for the Operating General Partner's determination concerning the Bidder's offer, and contains additional information relating to the Operating General Partner's recommendation and certain other actions taken by the Operating General Partner 2 on behalf of the Partnership. We urge you to read the Schedule 14D-9 carefully. It will help you to understand why the Operating General Partner decided to recommend against the offer on behalf of the Partnership and recommend that you not tender any of your Units to the Bidder under the terms of the offer. If you have any questions concerning these matters please call Investor Relations at (310) 777-2153. You can be assured that the Operating General Partner will continue to act in the manner in which the Operating General Partner believes to be in the best interest of the Partnership and its limited partners. Again, the Operating General Partner recommends that you reject the Bidder's inadequate offer and not tender your Units to it. Very truly yours, DE ANZA PROPERTIES-X By: DE ANZA CORPORATION, Operating General Partner By: /s/Herbert M. Gelfand -------------------------- Herbert M. Gelfand Chairman of the Board EX-99.2 3 MANAGEMENT AGREEMENT, DATED AS OF AUG. 18, 1994 1 EXHIBIT 99.(2) WOODBRIDGE/TERRA VISTA MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 18th day of August, 1994, by and between Terra Vista Management, Inc., a California corporation, (the "Manager"), and De Anza Properties - X, a California limited partnership, (the "Owner"), in Los Angeles, California, with reference to the following facts: A. Owner owns certain property located in the City of Irvine, California, known as Woodbridge Meadows Apartments (hereinafter referred to as the "Property"). B. De Anza Assets, Inc., a California corporation, is the existing manager of the Property pursuant to a Management Agreement dated October 1, 1985. De Anza Assets, Inc. is wholly owned by De Anza Group, Inc., which is being sold. Accordingly, De Anza Assets has withdrawn as manager, which withdrawal has been accepted by Owner, and De Anza Assets has been replaced by Terra Vista Management, Inc. The parties desire to enter into this Management Agreement to reflect their obligations with respect to the ownership and operation of the Property. C. Owner desires that Manager maintain and operate the Property on its behalf, and Manager desires to undertake said functions. NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein, the parties agree as follows: - 1 - 2 1. Engagement. Owner hereby engages Manager as general manager of the Property to the extent and subject to the conditions set forth herein, and Manager hereby accepts such engagement. 2. Term and Termination. This Agreement shall continue from year to year; provided, however, that Owner or Manager may, without penalty or obligation to the other party to this Agreement, by providing sixty (60) days' written notice to the other, terminate this Agreement with or without cause at any time. This Agreement may be immediately canceled in the event of the violation of any of the provisions hereof, or by Owner in the event a petition in bankruptcy is filed by or against Manager which is not dismissed within ninety (90) days following the date of such filing. 3. General Duties of Manager. Manager shall be directly responsible for the day-to-day management of the Property, subject to such general guidelines and instructions as the Owner may issue from time to time. Notwithstanding anything to the contrary contained herein, all final decisions respecting the management of the Property shall be made by Owner. Manager shall at all times do and perform all things reasonably necessary to effectuate the purposes and intentions embodied in this Agreement so that the Property is operated at all times in a manner consistent with prudent business practice and in accordance with any and all leases, subleases and contracts to which the Property is subject, and any and all other laws, - 2 - 3 statutes, ordinances and regulations of any governmental authority having jurisdiction over Owner, the Property or Manager. 4. Collection of Rent and Payment of Expenses. Manager shall collect on behalf of Owner all rents and all other charges of every kind or type whatsoever from all tenants or other occupants of the Property for services provided in connection with, or for the use of, the Property or any portion thereof, and shall deposit the same in depositories specifically approved by Owner. Out of the foregoing rents and other charges collected on behalf of Owner, Manager shall pay all expenses related to the operation and maintenance of the Property and each of its facilities as and when the same become due, all in accordance with specific instructions provided by Owner. Manager may, with Owner's prior approval, and, when so requested by Owner, shall, at Owner's expense, institute legal actions or proceedings to collect charges, rent or other income or compensation due to Owner with respect to the Property, or to oust persons unlawfully in possession of any portion of the same. All such actions or proceedings and any related counterclaim, crossclaims or other proceedings shall be at Owner's expense and may be brought in the name of Owner or Manager. 5. Employees. Manager shall have the exclusive right to discharge, supervise and fix the pay of such personnel as are necessary for the efficient maintenance and operation of the Property. However, such personnel shall be employed and paid by and shall be bonded to the satisfaction of Owner. - 3 - 4 6. Repair and Maintenance of Property. Manager, at Owner's expense, shall make or attend to the making of ordinary and emergency repairs, maintenance, decorations and alterations at the Property. 7. Taxes and Insurance. Owner shall pay all taxes, personal and real, and assessments that are attributable to the Property. Manager shall obtain and keep in force, at Owner's expense, such fire, comprehensive, liability and other insurance policies as are generally carried with respect to similar facilities in amounts sufficient to protect and maintain the Property and Owner's interest therein in a form, manner and amount, and with companies satisfactory to Owner. Owner and Manager shall be named as insured parties in all liability insurance policies relating to the Property. 8. Accounting. Manager shall keep a detailed and complete set of books and records of all the income and disbursements of the Property in accordance with good accounting practices and Manager shall, on a monthly basis, render to Owner each of the following: (a) A report on all vacancies; (b) A schedule showing all income received and disbursements made during the preceding month, together with the balance on hand, if any, at the end of said month; and (c) A schedule describing the monthly and annual budget for the Property, together with the amount expended in each category in the preceding month and for the year to date. - 4 - 5 9. Books and Records. Manager shall keep adequate books and records in connection with all matters arising under the terms of this Agreement. During regular business hours, Manager shall allow Owner or any of its duly authorized representatives access to Manager's records and correspondence pertaining to any transaction arising out of this Agreement. At the close of each fiscal year of Owner, Manager shall allow the books and records which are the subject of this paragraph to be examined and audited by a certified public accountant selected by Owner. In the event of the termination of this Agreement, Manager shall turn over to Owner all records and correspondence as may be reasonably necessary to assist Owner to carry to completion any lease or other transaction and all contracts, records and documents directly pertaining to the Property. 10. Compensation. Owner shall pay to Manager as compensation for its services under this Agreement a sum equivalent to 5% of the aggregate gross receipts from the operation of the Property (excluding all receipts from utilities or from taxes of any kind or type). The foregoing compensation shall be payable at the beginning of each monthly accounting period and shall be calculated on the basis of the budgeted gross receipts (as determined by Owner) from the operation of the Property during that period. The total amount of compensation earned by Manager hereunder shall, as soon as possible after the end of each calendar year during the term of this Agreement, be calculated on the basis of the actual gross receipts from the operation of the Property during that year, and any additional compensation that is - 5 - 6 due to Manager (because the actual gross receipts exceeded the budgeted gross receipts) shall be paid to it by Owner at that time. Conversely, if Manager collected more compensation than it was entitled to receive during any such year (because the actual gross receipts were less than the budgeted gross receipts), Manager shall return the excess compensation to Owner (without interest thereon); provided, however, that such compensation shall be subordinated to the receipt (on a noncumulative basis) by the limited partners of Owner of an annual cash distribution equal to 6% of the aggregate capital contributions of such limited partners. The foregoing compensation shall be payment for Manager's conduct and supervision of the ordinary and routine operation of the Property and is not intended to compensate Manager for any other activities it may undertake with respect to any operation of the Property which would not be considered ordinary and routine when compared to the services provided by professional real property management companies for other real properties that are comparable in size, location and nature to the Property. In the event the nature of the Property or the business conducted thereon changes, the compensation to be paid to Manager hereunder will be altered in a manner which is mutually agreeable to it and Owner, but in no event shall the amount of such compensation exceed the amount that would be charged by nonaffiliated entities rendering comparable services which could reasonably be made available to Owner. - 6 - 7 11. Indemnification. Owner shall indemnify, defend and hold Manager harmless from any damages, costs, expenses or obligations incurred by Manager as a result of any actions or omissions of Manager within the scope of its authority as provided in this Agreement, or as a result of any other actions or obligations as Owner may specifically authorize Manager to perform, provided performance of such acts by Manager does not constitute fraud, bad faith or willful misconduct. 12. Miscellaneous. To the extent possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. However, if any provision hereof shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, and shall in no way affect the validity of the remainder of such provision, or of any of the remaining provisions of this Agreement. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of California. This Agreement and the rights of Owner and Manager hereunder shall not be assignable by either of them. Manager may, however, subcontract the performance of all or part of its duties under this Agreement to one or more subsidiaries or affiliates of Manager or to one or more affiliated companies or unaffiliated companies suitable to owner, but it shall remain responsible for such performance. The right of Manager to receive compensation - 7 - 8 may be assigned, pledged or hypothecated at anytime without Owner's consent. This Agreement contains the entire agreement of Owner and Manager with respect to the subject matter hereof and may not be changed except by an instrument executed by both of them. IN WITNESS WHEREOF, the parties hereto have executed this Management Agreement as of the date first above written. OWNER: DE ANZA PROPERTIES - X a California limited partnership By De Anza Corporation, Partner By: Herbert M. Gelfand --------------------------- Herbert M. Gelfand Chairman of the Board MANAGER: TERRA VISTA MANAGEMENT, INC. a California corporation By: Michael D. Gelfand --------------------------- Michael D. Gelfand President - 8 - 9 CONSENT De Anza Assets, Inc., a California corporation, ("Assets") is the Manager of Woodbridge Meadows Apartments pursuant to that certain Management Agreement, dated as of October 1, 1985, by and between De Anza Properties - X, a California limited partnership, as owner, (the "Partnership") and Assets. Assets desires to withdraw as Manager and the Partnership desires to accept such withdrawal and to replace Assets with Terra Vista Management, Inc. The Partnership and Assets hereby consent to the withdrawal of Assets from the Management Agreement and the replacement of Assets with Terra Vista Management, Inc. Dated: August 18,1994 De Anza Properties-X, De Anza Assets, Inc., a California limited partnership a California corporation By: De Anza Corporation, a California corporation By: Barry McCabe ----------------------------- Its: ---------------------------- By: Michael D. Gelfand ---------------------------- Its: President --------------------------- -----END PRIVACY-ENHANCED MESSAGE-----