-----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, NA88FeXg9fuWZsNSDOdHZA+do1W5noNIfT8LspbTWkHVFYTi+OKgcijPTMfMl4Yn 3qUQxnTMUOfmrR+WVYR+SA== 0000726995-97-000001.txt : 19970401 0000726995-97-000001.hdr.sgml : 19970401 ACCESSION NUMBER: 0000726995-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY & BOYLE CLUSTER HOUSING PROPERTIES CENTRAL INDEX KEY: 0000726995 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 042817478 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13556 FILM NUMBER: 97569144 BUSINESS ADDRESS: STREET 1: 57 RIVER ST CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172370544 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 10-K 1 10K FOR THE YEAR ENDED DECEMBER 31, 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________________ to ________________ Commission File No. 0-13556 Cluster Housing Properties (A California Limited Partnership) (Exact name of registrant as specified in its charter) California 04-2817478 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5110 Langdale Way, Colorado Springs CO 80906 (Address of principal executive offices) (Zip Code) (719) 527-0544 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of voting securities held by non-affiliates: Not applicable, since securities are not actively traded on any exchange. Documents incorporated by reference: None The Exhibit Index is located on page ______ PART I ITEM 1. BUSINESS This form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. Cluster Housing Properties (the "Partnership"), formerly Berry and Boyle Cluster Housing Properties, is a California limited partnership formed on August 8, 1983. The General Partners are Stephen B. Boyle and GP L'Auberge Communities, L.P., a California limited partnership, formerly Berry and Boyle Management. The primary business of the Partnership is to operate and ultimately dispose of a diversified portfolio of income-producing residential real properties through its joint venture interest in such properties. Descriptions of such properties are included below in "Item 2. Properties" as well as in note 5 of the Notes to the Consolidated Financial Statements included in this report and incorporated herein by reference thereto. On October 25, 1985, the Partnership acquired a majority joint venture interest in the Sin Vacas Joint Venture, which owns and operates a 72-unit multifamily rental property located in Tucson, Arizona. The Partnership contributed $2,520,954 to the Sin Vacas Joint Venture which was used to repay a portion of the construction loan on the property. The balance of the construction loan was repaid through the proceeds of a $2,575,000 permanent loan from a third party lender. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $250,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating the acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $168,686. On June 11, 1987, the Partnership acquired a majority joint venture interest in the Villa Antigua Joint Venture which owns and operates an 88-unit multifamily rental property located in Scottsdale, Arizona. The Partnership contributed $2,494,677 to the Villa Antigua Joint Venture which was used to repay a portion of the construction loan on the property. The balance of the construction loan was repaid through the proceeds of a $3,200,000 permanent loan from a third party lender. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $350,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating the acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $31,729. On May 14, 1996, the Partnership and certain affiliates consummated an agreement with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI"), a Phoenix based residential development, construction and management firm and the developer of the Villas at Sin Vacas and Villa Antigua properties, which separated the interests of EWI and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the properties. In consideration of a payment by the Partnership to EWI of $73,775 and delivery of certain mutual releases, EWI (i) relinquished its contract to manage Sin Vacas and Villa Antigua and its option to exercise its rights of first refusal with regard to the sale of those properties and (ii) assigned all of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the Sin Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. On July 16, 1986, the Partnership assigned its right to acquire a property known as L'Auberge Pinecliff ("Pinecliff"), formerly Autumn Ridge, a 96-unit multifamily rental property located in Colorado Springs, Colorado to a Colorado joint venture (the Autumn Ridge Joint Venture) which acquired the property for a purchase price of $7,320,760. The Partnership simultaneously contributed to the Autumn Ridge Joint Venture an amount equal to the total purchase price less the proceeds of a $3,300,000 permanent loan. In accordance with the terms of the Partnership Agreement, the Partnership paid an acquisition fee of $400,000 to GP L'Auberge Communities, L.P. for its services in structuring and negotiating this acquisition. The Partnership also incurred acquisition expenses relating to the acquisition which totaled $97,475. On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland"), a Colorado based residential development, construction and management firm and developer of the property known as L'Auberge Pinecliff, which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership to Highland totaling $7,718, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture. Highland may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. The Partnership expects to sell the properties at some future time, taking into consideration such factors as the price to be realized, the possible risks of continued ownership and the anticipated advantages to be gained for the partners. Proceeds from the sale, financing or refinancing of the properties will not be reinvested by the Partnership or its joint ventures, but will be distributed to the partners, so that the Partnership will, in effect, be self-liquidating. Under the terms of the various termination agreements, the Partnership has control over the decision to sell any property. The success of the Partnership will depend upon factors which are difficult to predict and many of which are beyond the control of the Partnership. Such factors include, among others, general economic and real estate market conditions, both on a national basis and in those areas where the Partnership's investments are located, competitive factors, the availability and cost of borrowed funds, real estate tax rates, federal and state income tax laws, operating expenses (including maintenance and insurance), energy costs, government regulations, and potential liability under and changes in environmental and other laws, as well as the successful management of the properties. On-site management of all of the Partnership's properties, Villas at Sin Vacas, Villa Antigua, and Pinecliff, is currently conducted by an affiliate of the General Partners. The terms of such property management services between the Partnership and property managers are embodied in a written management agreement with respect to each property. The property manager in each case receives management fees which are competitive with those obtainable in arm's-length negotiations with independent parties providing comparable services in the localities in which the properties are located. These fees do not exceed 4% of the gross revenues from each property plus reimbursement for allocable expenses. It is the responsibility of the General Partners to select or approve property managers and to supervise their performance. Property managers are responsible for on-site operations and maintenance, generation and collection of rental income and payment of operating expenses. The difference between rental income and expenses related to operations, including items such as local taxes and assessments, utilities, insurance premiums, maintenance, repairs and improvements (and reserves therefor), bookkeeping and payroll expenses, legal and accounting fees, property management fees and other expenses incurred, constitute the properties' operating cash flow. The Partnership's administrative expenses are paid out of the Partnership's share of such cash flow from the various properties and from interest income which the Partnership earns on its short-term investments. The Partnership's investments in real estate are also subject to certain additional risks including, but not limited to, (i) competition from existing and future projects held by other owners in the areas of the Partnership's properties, (ii) possible reduction in rental income due to an inability to maintain high occupancy levels, (iii) adverse changes in mortgage interest rates, (iv) possible adverse changes in general economic conditions and adverse local conditions, such as competitive overbuilding, or a decrease in employment or adverse changes in real estate zoning laws, (v) the possible future adoption of rent control legislation which would not permit the full amount of increased costs to be passed on to tenants in the form of rent increases, and (vi) other circumstances over which the Partnership may have little or no control. The Partnership's investments are subject to competition in the rental, lease and sale of similar types of properties in the localities in which the Partnership's real property investments are located. Furthermore, the General Partners of the Partnership are affiliated with other partnerships owning similar properties in the vicinity in which the Partnership's properties are located. In addition, other limited partnerships may be formed by affiliates of the General Partners which will compete with the Partnership. The Partnership considers itself to be engaged in only one industry segment, real estate investment. ITEM 2. PROPERTIES The Partnership owns and operates three properties: (1) Villas at Sin Vacas, a 72-unit multifamily rental property in Tucson, Arizona, subject to first mortgage financing in the original principal amount of $2,575,000; (2) L'Auberge Pinecliff, a 96-unit multifamily rental property in Colorado Springs, Colorado, subject to first mortgage financing in the original principal amount of $3,300,000; and, (3) Villa Antigua, an 88-unit multifamily rental property in Scottsdale, Arizona, subject to first mortgage financing in the original principal amount of $3,200,000. The ownership was formerly structured as Joint Ventures of which the Partnership owned a majority interest. With regard to the termination of the Joint Ventures, see Note 5 of Notes to Consolidated Financial Statements. Villas at Sin Vacas As of February 28, 1997, the property was 91% occupied, compared to 86% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Market Rents December 31, Unit 1996 1995 --------- ---- ---- One bedroom one bath $835 $835 Two bedroom two bath 1,050 1,050 Three bedroom two bath 1,200 1,200 Pinecliff As of February 28, 1997, the property was 86% occupied, compared to 95% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Market Rents December 31, Unit Type 1996 1995 - --------- ---- ---- One bedroom one bath $921 $898 Two bedroom two bath 1,125 1,102 Villa Antigua As of February 28, 1997, the property was 94% occupied, compared to 99% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Market Rents December 31, Unit Type 1996 1995 --------- ---- ---- One bedroom one bath $843 $760 Two bedroom two bath 1,080 1,028 Three bedroom two bath 1,130 1,090 ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Partnership or of which any of the properties is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1996. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The transfer of Units is subject to certain limitations contained in the Partnership Agreement. There is no public market for the Units and it is not anticipated that any such public market will develop. The number of holders of Units as of December 31, 1996 was 1,967. Distributions are made to the Partners on a quarterly basis based upon Net Cash from Operations, as calculated under Section 10 of the Partnership Agreement. Total cash distributions to the Limited Partners for 1996 and 1995 were paid as follows: Date of Quarter Ended Payment Amount - ------------- ------ ------ March 31, 1995 May 15, 1995 $ 121,579 June 30, 1995 August 15, 1995 $ 121,579 September 30, 1995 November 15, 1995 $ 121,579 December 31, 1995 February 15, 1996 $ 97,263 March 31, 1996 May 15, 1996 $ 97,263 June 30, 1996 August 15, 1996 $ 97,263 September 30, 1996 December 11, 1996 $ 97,263 December 31, 1996 February 28, 1997 $ 97,263 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Partnership and consolidated subsidiaries has been derived from consolidated financial statement audited by Coopers & Lybrand, L.L.P., whose reports for the periods ended December 31, 1996, 1995 and 1994 are included elsewhere in the Form 10K and should be read in conjunction with the full consolidated financial statements of the Partnership including the Notes thereto. Year Ended 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 Rental income $2,615,350 $2,725,119 $2,572,947 $2,391,911 $2,204,133 Net income (loss) ($167,778) $309,115 $260,976 $141,982 ($142,622) Net income (loss) allocated to Partners: Limited Partners - Per Unit Aggregate 32,421 Units ($5.12) $9.06 $7.65 $4.16 ($4.36) General Partners ($1,678) $15,456 $13,049 $7,099 ($1,426) Cash distributions to Partners: Limited Partners: Weighted average per Unit $12.00 $15.50 $17.75 $9.50 $3.00 General Partners $20,476 $26,449 $30,288 $16,211 $5,119 Total assets $15,644,667 $16,274,801 $16,587,271 $17,032,336 $17,327,814 Long term obligations $8,559,930 $8,695,278 $8,818,891 $8,931,713 $9,034,755
Long term obligations become due in 1997. The Partnership intends to refinance these notes prior to the due date, although there can be no assurance that the Partnership will be able to do so. See Note 6 of Notes to Consolidated Financial Statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management's expectations regarding future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity; Capital Resources In connection with its capitalization, the Partnership admitted investors who purchased a total of 32,421 Units aggregating $16,210,500. These offering proceeds, net of organizational and offering costs of $2,431,575, provided $13,778,925 of net proceeds to be used for the purchase of income-producing residential properties, including related fees and expenses, and working capital reserves. The Partnership expended $10,410,263 to (i) acquire its joint venture interests in the Sin Vacas Joint Venture, the Villa Antigua Joint Venture, and the Autumn Ridge Joint Venture, (ii) to pay acquisition expenses, including acquisition fees to one of the General Partners, and (iii) to pay certain costs associated with the refinancing of the Pinecliff permanent loan. The Partnership distributed $1,731,681 to the Limited Partners as a return of capital resulting from construction cost savings with respect to the Sin Vacas, Pinecliff and Villa Antigua projects and other excess offering proceeds. The remaining net proceeds of $1,636,981 were used to establish initial working capital reserves. These reserves have been used periodically to enable the Partnership to meet its various financial obligations including contributions to the various Joint Ventures that may be required. Cumulatively through December 31, 1996, $368,990 was contributed to the Joint Ventures for this purpose. In addition to the proceeds generated from the public offering, the Partnership utilized external sources of financing at the joint venture level to purchase properties. The Partnership Agreement limits the aggregate mortgage indebtedness which may be incurred in connection with the acquisition of Partnership properties to 80% of the purchase price of such properties. The Partnership's future ability to generate cash adequate to meet its needs is dependent primarily on the successful operations of its real estate investments. Such ability is also dependent upon the future availability of bank borrowings, and upon the future refinancing or sale of the Partnership's real estate investments and the collection of any mortgage receivable which may result from such sales. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, debt service and professional and management fees and expenses. Net Cash From Operations and Net Proceeds, if any, as defined in the Partnership Agreement, will then be available for distribution to the Partners in accordance with Section 10 of the Partnership Agreement. The General Partners believe that the current working capital reserves together with projected cash flows for 1997 are adequate to meet the Partnership's operating cash needs in the coming year. With regard to certain balloon payments on existing first mortgage debt on the Partnership's properties, the General partners do not anticipate sufficient cash flow from operations to retire these mortgage notes. As these mortgage notes payable are due in fiscal 1997, the Partnership will seek to renegotiate these mortgage notes with its existing lenders or seek new sources of financing for these properties on a long term basis, although there can be no assurance that the Partnership will be able to do so. The General Partners believe that existing cash flows from the properties will be sufficient to support a level of borrowing that is at least equal to amounts outstanding as of December 31, 1996. If the general economic climate for real estate in these respective locations were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete these refinancings. The working capital reserves of the Partnership consist of cash and cash equivalents and short-term investments. Together these amounts provide the Partnership with the necessary liquidity to carry on its day-to-day operations and to make necessary contributions to the various Joint Ventures. In 1996, the aggregate net decrease in working capital reserves was $481,980. This decrease resulted primarily from cash provided by operations of $349,757 offset by $281,346 of fixed asset additions, distributions to partners of $389,052 and $135,348 of principal payments on mortgage notes payable. In 1995, the aggregate net decrease in working capital reserves was $41,502. This decrease resulted primarily from cash provided by operations of $758,756 offset by $148,127 of fixed asset additions, distributions to partners of $528,974 and $123,613 of principal payments on mortgage notes payable. Results of Operations For the year ended December 31, 1996, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, L'Auberge Pinecliff (formerly Autumn Ridge) and Villa Antigua properties, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below: Sin L'Auberge Villa Investment Consolidated Vacas Pinecliff Antigua Total Total Total revenue $694,550 $1,022,283 $901,463 $53,445 $2,671,741 Expenses: General and administrative 1,686 - 259 381,328 383,273 Operations 410,622 437,646 363,192 26,368 1,237,828 Depreciation and 126,677 181,804 122,636 - 431,117 amortization Interest 223,411 286,313 277,577 - 787,301 ------------- -------------- -------------- ------------- ------------- 762,396 905,763 763,664 407,696 2,839,519 ------------- -------------- -------------- ============= ============= Net income (loss) ($67,846) $116,520 $137,799 ($354,251) ($167,778) ============= ============== ============== ============= =============
For the year ended December 31, 1995, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, Autumn Ridge and Villa Antigua Joint Ventures, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below: Sin L'Auberge Villa Investment Consolidated Vacas Pinecliff Antigua Total Total Total revenue $755,680 $1,041,402 $930,236 $81,023 $2,808,341 Expenses: General and administrative 7,200 7,244 7,200 183,245 204,889 Operations 353,533 420,726 310,611 - 1,084,870 Depreciation and 118,909 173,174 118,217 - 410,300 amortization Interest 226,761 290,606 281,800 - 799,167 ------------- -------------- -------------- ------------- ------------- 706,403 891,750 717,828 183,245 2,499,226 ------------- -------------- -------------- ============= ============= Net income (loss) $49,277 $149,652 $212,408 ($102,222) $309,115 ============= ============== ============== ============= =============
For the year ended December 31, 1994, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, Autumn Ridge and Villa Antigua Joint Ventures, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below: Sin Autumn Villa Investment Consolidated Vacas Ridge Antigua Total Total Total revenue $757,490 $979,216 $838,362 $56,007 $2,631,075 Expenses: General and administrative 7,494 7,793 7,862 143,532 166,681 Operations 339,483 353,665 298,421 - 991,569 Depreciation and 115,612 169,787 116,476 - 401,875 amortization Interest 229,820 294,553 285,601 - 809,974 -------------- ------------- -------------- --------------------------- 692,409 825,798 708,360 143,532 2,370,099 -------------- ------------- -------------- --------------------------- Net income $65,081 $153,418 $130,002 ($87,525) $260,976 (Loss) ============== ============= ============== ===========================
Comparison of 1996 and 1995 Operating Results: In accordance with its dispositions strategy, (see "Projected 1997 Operating Results" below). the Partnership incurred one time costs associated with the Evans Withycombe termination ($73,775), the Highland termination (($7,718) and their related legal costs. (Refer to Note 5 of the Consolidated Financial Statements.) In additions, the Partnership incurred one-time costs associated with its property interior and exterior refurbishment program, the change in on-site management following the Evans Withycombe termination, the outsourcing of much of the Partnership's administration work to an administrative agent and the relocation of the remaining administration, financial and investor services functions to a more cost efficient location in Colorado Springs, Colorado. Consequently, competitive pressures and disposition-related activities led to rental operating expenses (including advertising, promotion, apartment locator and concession costs) to increase by $152,958 or 14% over the prior year and total general and administrative expenses of the Partnership increased $178,384 (87%) over the prior year. Fixed asset purchases increased $281,346 from $141,735 in the prior year and consisted of such items as carpet, appliances, equipment for fitness and business centers facilities, and remodeling features. As a result of the factors described above, distributions to partners decreased $119,446, or 23%, from $528,974 in 1995 to $409,528 in 1996. Comparison of 1995 and 1994 Operating Results: Total revenue increased $177,266, or 7% over the prior year, due to increased rental income of $152,172 or 6%, primarily as a result of rental rate increases at the Partnership's properties. Interest income increased $25,094 or 43% in 1995, as a result of higher interest rates earned on money market accounts and short-term investments. Rental operating expenses increased $93,301 or 9% over the prior year primarily as a result of increases in maintenance and advertising costs. General and administrative expenses increased $38,208 or 23%, due primarily to increased salary expense allocations and legal costs and printing and mailing costs associated with the voluntary withdrawal of a general partner of the Partnership. Fixed asset purchases increased $141,735 from $6,392 in the prior year to $148,127 and included such items as carpet, floor tile and other replacements and exterior painting of Sin Vacas. As a result of the factors described above, distributions to partners decreased $76,788, or 13%, from $605,762 in 1994 to $528,974 in 1995 Projected 1997 Operating Results: While there can be no assurance that the Partnership will dispose of any or all of its properties in 1997, on March 25, 1997, the Partnership entered into letters of intent to sell Villas Sin Vacas in Tucson, Arizona, and Villa Antigua, Phase I, in Scottsdale, Arizona, to an unaffiliated purchaser. The purchase price for Villas Sin Vacas would be $5,040,000 and the purchase price for Villa Antigua, Phase I, would be $9,230,000. Each letter of intent is subject to completion of customary due diligence to the satisfaction of the purchaser, the purchaser obtaining a financing commitment for the purchase of the property on commercially reasonable terms and conditions, the negotiation and execution of a definitive purchase agreement, and certain other conditions. Accordingly, there can be no assurance that the sale of such properties will be consummated in accordance with the terms of the letters of intent or at all. As a result of the foregoing, operating results of the Partnership may vary significantly during 1997. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix A to this Report. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership has no directors or executive officers. Information as to the individual general partners of the Partnership and directors and executive officers of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.), the general partner of GP L'Auberge Communities, L.P., is set forth below. Individual General Partners Stephen B. Boyle, age 56, is President, Executive Officer and Director of L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge Communities, a California Limited Partnership (formerly Berry and Boyle), a limited partnership formed in 1983 to provide funds to various affiliated general partners of real estate limited partnerships, one of which is GP L'Auberge Communities, L.P. In September 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. GP L'Auberge Communities, L.P. Information as to the directors and executive officers of L'Auberge Communities, Inc., a general partner of GP L'Auberge Communities, L.P., which is a general partner of the Partnership, and its affiliates, is set forth below. There are no familial relationships between or among any officer and any other officer or director. Name Position Stephen B. Boyle See above Earl C. Robertson Executive Vice President and Chief Financial Officer Donna Popke Vice President and Secretary Earl C. Robertson, age 48, has been a senior development officer, partner and consultant in several prominent real estate development companies for over twenty years, including Potomac Investment Associates, developers of planned golf course communities nationwide. Mr. Robertson was also a key member of the management team that developed the nationally acclaimed Inn at the Market in Seattle. He joined L'Auberge Communities, Inc. in June 1995. Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds the title of Vice President and Secretary. Prior to joining L'Auberge Communities, Inc., Ms. Popke was employed by Olive & Associates in Denver, Colorado in the field of public accounting for six years and later from 1989 to 1995 with David R. Sellon & Company, a Colorado Springs land development company. ITEM 11. EXECUTIVE COMPENSATION None of the General Partners or any of their officers or directors received any compensation from the Partnership. See Item 13 below with respect to a description of certain transactions of the General Partners and their affiliates with the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As March 21, 1997, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 1996, the Partnership paid or accrued remuneration to the General Partners or their affiliates as set forth below. In addition to the information provided herein, certain transactions are described in notes 7 and 8 in the Notes to Financial Statements appearing in Appendix A, which are included in this report and are incorporated herein by reference thereto. Net Cash From Operations distributed in 1996 to the General Partners $20,476 Allocation of Income and (Loss) to the General Partners ($1,678) Property management fees paid to an affiliate of the General Partners $64,954 Reimbursements to General Partners $82,881 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1,2 See Page F-2 3 See Exhibit Index contained herein (b) Reports on Form 8-K The Partnership has not filed and was not required to file any reports on Form 8-K during the last quarter of 1996. (c) See Exhibit Index contained herein (d) See Page F-2. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CLUSTER HOUSING PROPERTIES By: GP L'Auberge Communities, L.P., a California Limited Partnership, General Partner By: L'Auberge Communities, Inc., its General Partner By: __/s/ Earl C. Robertson_________________________________ Earl C. Robertson, Executive Vice President and Chief Financial Officer Date: March 26, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date __/s/ Stephen B. Boyle Director, President and March 26, 1997 -------------------- STEPHEN B. BOYLE Principal Executive Officer of L'Auberge Communities, Inc. __/s/ Earl C. Roberston Executive Vice President and March 26, 1997 --------------------- EARL C. ROBERTSON Principal Financial Officer of L'Auberge Communities, Inc. APPENDIX A CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES --------- CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Year Ended December 31, 1996 CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES --------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants F-3 Consolidated Balance Sheets at December 31, 1996 and 1995 F-4 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 F-5 Consolidated Statements of Partners' Equity (Deficit) for the years ended December 31, 1996, 1995 and 1994 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 F-7 -- F-8 Notes to Consolidated Financial Statements F-9 -- F-16 All Schedules are omitted as they are not applicable, not required, or the information is provided in the financial statements or the notes thereto. Report of Independent Accountants To the Partners of Cluster Housing Properties (a California Limited Partnership): We have audited the accompanying consolidated balance sheets of Cluster Housing Properties (a California Limited Partnership) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cluster Housing Properties (a California Limited Partnership) and subsidiaries as of December 31, 1996 and 1995 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Denver , Colorado February 28, 1997 CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ---------- F-18 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1996 and 1995 --------------- ASSETS 1996 1995 ---- ---- Property, at cost: Land $3,677,028 $3,677,028 Buildings and improvements 14,067,757 14,067,756 Equipment, furnishings and 1,576,836 1,295,545 fixtures --------------- -------------- 19,321,621 19,040,329 Less accumulated depreciation (4,810,314) (4,418,093) --------------- -------------- 14,511,307 14,622,236 Cash and cash equivalents 1,065,855 480,389 Short-term investments 1,067,446 - Real estate tax escrows 41,632 44,055 Deposits 3,818 1,693 Accounts receivable 2,605 631 Deferred expenses, net ofaccumulated amortization of $175,041 and 19,450 58,351 $136,140 --------------- -------------- Total assets $15,644,667 $16,274,801 =============== ============== LIABILITIES AND PARTNERS' EQUITY Mortgage notes payable $8,559,930 $8,695,278 Accounts payable 115,410 42,245 Accrued expenses 195,794 164,298 Due to affiliates 8,975 23,173 (Note 8) Rents received in advance 4,538 10,495 Tenant security 55,320 57,306 deposits --------------- -------------- 8,939,967 8,992,795 liabilities Minority interest (8,895) - Partners' equity 6,704,700 7,290,901 --------------- -------------- Total liabilities and partners' equity $15,644,667 $16,274,801 ============= ==============
CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended December 31, 1996, 1995 and 1994 ------------- 1996 1995 1994 ---- ---- ---- Revenue: Rental income $2,615,350 $2,725,119 $2,572,947 Interest Income 56,391 83,222 58,128 ---------------------------------------------- Total Revenue 2,671,741 2,808,341 2,631,075 Expenses: Operations 1,237,828 1,084,870 991,569 Interest expense 787,301 799,167 809,974 Depreciation and amortization 431,117 410,300 401,875 General and administrative 383,273 204,889 166,681 ---------------------------------------------- Total Expenses 2,839,519 2,499,226 2,370,099 ---------------------------------------------- Net income (loss) ($167,778) $309,115 $260,976 ============================================== Net income (loss) allocated to: General Partners ($1,678) $15,456 $13,049 Per unit Net income (loss) allocated to Investor Limited Partner interest: 32,421 units ($5.12) $9.06 $7.65 issued
CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) for the years ended December 31, 1996, 1995 and 1994 ------------- Investor Total General Limited Partners' Partners Partners Equity Balance at December 31, 1993 ($141,908) $7,997,454 $7,855,546 Cash distributions (30,288) (575,474) (605,762) Net income 13,049 247,927 260,976 -------------- --------------- -------------- Balance at December 31, 1994 (159,147) 7,669,907 7,510,760 Cash distributions (26,449) (502,525) (528,974) Net income 15,456 293,659 309,115 -------------- --------------- -------------- Balance at December 31, 1995 (170,140) 7,461,041 7,290,901 Minority interest absorbed - (8,895) (8,895) Cash distributions (20,476) (389,052) (409,528) Net income (1,678) (166,100) (167,778) -------------- --------------- -------------- Balance at December 31, 1996 ($192,294) $6,896,994 $6,704,700 ============== =============== ==============
CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1996, 1995, 1994 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Interest received $80,257 $82,408 $55,610 Cash received from rental income 2,607,383 2,716,163 2,569,838 General and administrative (370,245) (201,143) (159,895) expenses Operations expense (1,179,822) (1,039,036) (968,373) Interest paid (787,816) (799,636) (810,404) -------------- -------------- --------------- Net cash provided by operating activities 349,757 758,756 686,776 Cash flows from investing activities: Purchase of fixed assets (281,346) (148,127) (6,392) Cash received from short-term investments 1,043,580 327,298 32,545 -------------- --------------- -------------- Net cash provided by investing activities 762,234 179,171 26,153 Cash flows from financing activities: Distributions to partners (389,052) (528,974) (605,762) Deposits (2,125) (358) (95) Principal payments on mortgage notes payable (135,348) (123,613) (112,822) -------------- --------------- -------------- Net cash used by financing (526,525) (652,945) (718,679) activities -------------- --------------- -------------- Net increase (decrease) in cash and cash 585,466 284,982 (5,750) equivalents Cash and cash equivalents at beginning of the period 480,389 195,407 201,157 -------------- --------------- -------------- Cash and cash equivalents at end of the period $1,065,855 $480,389 $195,407 ============== =============== ============== Non cash financing activities: Accrual of distributions to $20,476 partners
CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1996, 1995, 1994 ------------- Reconciliation of net income (loss) to net cash provided by operating activities: 1996 1995 1994 ---- ---- ---- Net income (loss) ($167,778) $309,115 $260,976 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 431,117 410,300 401,875 Change in assets and liabilities net of effects of investing and financing activities: Decrease in real estate tax 2,423 7,750 14,568 escrows (Increase) decrease in accounts and interest receivable 21,951 (1,445) (1,153) (Increase) decrease in deposits and prepaid expenses - 2,033 (2,033) Increase in accounts payable and accrued expenses 84,185 35,871 8,679 Increase (decrease) in due to affiliates (14,198) 4,088 6,973 Increase (decrease) in rent received in (5,957) (3,526) 4,446 advance Decrease in tenant security (1,986) (5,430) (7,555) deposits -------------- --------------- -------------- Net cash provided by operating activities $349,757 $758,756 $686,776 ============== =============== ==============
1. Organization of Partnership: Cluster Housing Properties (a California Limited Partnership) (the "Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed on August 8, 1983. The Partnership issued all of the General Partnership Interests to three General Partners in exchange for capital contributions aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a California Limited Partnership), formerly Berry and Boyle Management, are the General Partners. In September, 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. A total of 2,000 individual Limited Partners owning 32,421 units have contributed $16,210,500 of capital to the Partnership. At December 31, 1996, the total number of Limited Partners was 1,967. Except under certain limited circumstances, as defined in the Partnership Agreement, the General Partners are not required to make any additional capital contributions. The General Partners or their affiliates will receive various fees for services and reimbursement for various organizational and selling costs incurred on behalf of the Partnership. The Partnership will continue until December 31, 2010, unless terminated earlier by the sale of all, or substantially all, of the assets of the Partnership, or otherwise in accordance with the provisions of Section 16 of the Partnership Agreement. 2. Significant Accounting Policies: A. Basis of Presentation The consolidated financial statements include the accounts of the Partnership and its subsidiaries: Sin Vacas Joint Venture (Sin Vacas), Autumn Ridge Joint Venture (Autumn Ridge) and Villa Antigua Joint Venture (Villa Antigua). All intercompany accounts and transactions have been eliminated in consolidation. The Partnership follows the accrual basis of accounting. Refer to Note 5 regarding the termination of the Joint Ventures. B. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value. It is the Partnership's policy to invest cash in income-producing temporary cash investments. The Partnership mitigates any potential risk from such concentration of credit by placing investments with high quality financial institutions. C. Short-term Investments At December 31, 1995, short term investments consisted solely of various forms of U. S. Government backed securities, with an aggregate par value of $1,075,000, which matured in February, 1996. As of December 31, 1996, there were no short term investments. Investments are recorded at amortized cost, which approximates market value. D. Significant Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. E. Depreciation Depreciation is provided for by the use of the straight-line method over estimated useful lives as follows: Buildings and improvements 39-40 years Equipment, furnishings and fixtures 5-15 years F. Deferred Expenses Costs of obtaining mortgages on the properties are being amortized over the mortgage term using the straight-line method, which approximates the effective interest method. Fees paid to certain of the property developers were amortized over the term of the services provided using the straight-line method. Any unamortized costs remaining at the date of a refinancing are expensed in the year of refinancing. G. Income Taxes The Partnership is not liable for Federal or state income taxes because Partnership income or loss is allocated to the Partners for income tax purposes. If the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and such an examination results in a change in Partnership taxable income (loss), such change will be reported to the Partners. H. Rental Income Leases require the payment of rent in advance, however, rental income is recorded as earned. I. Long-Lived Assets The Partnership's long-lived assets include property and equipment. On a quarterly basis, the partnership evaluates the recoverability of the rental properties using undiscounted cash flows from operations. J. Reclassification Certain items in the financial statements for the years ended December 31, 1995 and 1994 have been reclassified to conform to the 1996 presentation. 3. Property, at Cost Property, at cost, consisted of the following at December 31, 1996: Initial Cost Costs Capitalized Gross Amount At Which Carried to Subsequent to at Close of Period Partnership Acquisition ----------------------------------------- ------------------------------------ ------------------------------ Buildings Equipment Buildings Equipment Buildings Equipment Property and Furniture and Furniture and Furniture Description Land Improvements & Fixtures Land Improvements & Fixtures Land Improvements & Fixtures Total - ------------------------------------------------------------ ------------------------------------ ---------------------------------- Villas at Sin Vacas, a 72-unit residential rental complex located in Tucson, Arizona $799,913 $3,948,060 $344,615 $22,146 $75,678 $190,059 $822,059 $4,023,738 $534,674 $5,380,471 Pinecliff, a 96-unit residential rental located in Colorado Springs, Colorado 1,242,061 5,981,166 380,288 - 81,889 169,811 1,242,061 6,063,055 550,099 7,855,215 Villa Antigua, an 88-unit residential rental complex located in Scottsdale, Arizona 1,610,646 3,942,388 376,709 2,262 38,576 115,354 1,612,908 3,980,964 492,063 6,085,935 -------------------------------------- ------------------------------ ------------------------------------ $3,652,620 $13,871,614 $1,101,612 $24,408 $196,143 $475,224 $3,677,028 $14,067,757 $1,576,836 $19,321,621 ===================================== ======================================================================== Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and accumulated depreciation at December 31, 1996 and 1995 consisted of the following: Accumulated Depreciation Depreciation December 31, Expense 1996 1995 1994 1996 1995 ----------- ------- ---- ---------- ---- ---- Buildings and improvements $351,694 $351,694 $351,695 $3,639,807 $3,288,113 Equipment, furnishings and 40,527 19,709 11,283 1,170,507 1,129,980 fixtures ------------------------------------------- --------------------------- $392,221 $371,403 $362,978 $4,810,314 $4,418,093 =========================================== ===========================
Each of the properties is encumbered by a nonrecourse mortgage note payable (see Note 6). 4. Cash and Cash Equivalents: Cash and cash equivalents at December 31, 1996 and 1995 consisted of the following: 1996 1995 ---- ---- Cash on hand $ 854,769 $ 30,848 Certificate of depo 211,086 100,000 Money market accoun ________ 349,541 $1,065,855 $480,389 5. Joint Venture and Property Acquisitions: The Partnership has invested in three properties located in Scottsdale and Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership will depend upon factors which are difficult to predict including general economic and real estate market conditions, both on a national basis and in the areas where the Partnership's investments are located. Sin Vacas On October 25, 1985, the Partnership acquired a majority interest in the Sin Vacas Joint Venture, which owns and operates the Villas at Sin Vacas, a 72-unit residential property located in Tucson, Arizona. Since the Partnership owns a majority interest in the Sin Vacas Joint Venture, the accounts and operations of the Sin Vacas Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villa Sin Vacas property. The Partnership made initial cash payments in the form of capital contributions totaling $2,458,507 and funded $398,949 of property acquisition costs which were treated as a capital contribution to the joint venture. Since completion of construction, the Partnership has made additional contributions totaling $275,167. At December 31, 1996, the total capital contributions and acquisition costs incurred were $2,713,937 and $418,686, respectively. For the years ended December 31, 1996, 1995 and 1994 the Sin Vacas Joint Venture had net loss of $67,846 and net income of $49,277, and $65,081, respectively JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8.75% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Sin Vacas Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. All profits from operations, to the extent of cash distributions, shall first be allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 70% to the Partnership and 30% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. Villa Antigua On June 11, 1987, the Partnership acquired a majority interest in the Villa Antigua Joint Venture, which owns and operates Villa Antigua, an 88-unit residential property located in Scottsdale, Arizona. Since the Partnership owns a majority interest in the Villa Antigua Joint Venture, the accounts and operations of the Villa Antigua Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villa Antigua property. The Partnership made initial cash payments in the form of capital contributions totaling $2,494,677 and funded $381,729 of property acquisition costs which were treated as a capital contribution to the Villa Antigua Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $85,440. At December 31, 1996, the total capital contributions and acquisition costs were $2,580,117 and $381,729, respectively. The Villa Antigua Joint Venture had net income of $137,799, $212,408, and $130,002 for the years ended December 31,1996, 1995 and 1994. JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 10% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's adjusted capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Villa Antigua Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. All profits from operations, to the extent of cash distributions, shall first be allocated to the Partnership and co-venturer in the same proportion as the cash distributions; however, if for any taxable year there are no cash distributions, profits are allocated 99% to the Partnership and 1% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. Sin Vacas and Villa Antigua MAY 14, 1996 THROUGH DECEMBER 31, 1996 On May 14, 1996, the Partnership and certain affiliates consummated an agreement with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI") which separated the interests of EWI and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the properties. In consideration of a payment by the Partnership to EWI of $73,775 and delivery of certain mutual releases, EWI (i) relinquished its contract to manage Sin Vacas and Villa Antigua and its option to exercise its rights of first refusal with regard to the sale of those properties and (ii) assigned all of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the Sin Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. Pinecliff On July 16, 1986, the Partnership acquired Pinecliff (formerly Autumn Ridge), a 96-unit residential property located in Colorado Springs, Colorado and simultaneously contributed the property to the Autumn Ridge Joint Venture comprised of the Partnership and an affiliate of the property developer. Since the Partnership owns a majority interest in the Autumn Ridge Joint Venture, the accounts and operations of the Autumn Ridge Joint Venture have been consolidated into the Partnership. The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado based residential development, construction and management firm. Highland developed the property known as L'Auberge Pinecliff The Partnership made initial cash payments in the form of capital contributions totaling $3,819,397 and funded $546,576 of property acquisition costs which were treated as a capital contribution to the Autumn Ridge Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $318,811. At December 31, 1996 the total capital contributions and acquisition costs incurred were $4,187,309 and $497,475, respectively. For the years ended December 31, 1996, 1995 and 1994 the Autumn Ridge Joint Venture had net income of $116,520, $149,652, and $153,418, respectively. JANUARY 1, 1996 THROUGH JULY 2, 1996: Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 82% to the Partnership and 18% to the co-venturer. All losses from operations and depreciation for the Autumn Ridge Joint Venture were allocated 100% to the Partnership. All profits from operations, to the extent of cash distributions, shall first be allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 82% to the Partnership and 18% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. JULY 3, 1996 THROUGH DECEMBER 31, 1996 On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland") which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership, to Highland totaling $7,718, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture. Highland may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. The Sin Vacas Joint Venture, the Autumn Ridge Joint Venture and the Villa Antigua Joint Venture are sometimes collectively referred to as the "Joint Ventures". These joint ventures were effectively terminated on December 31, 1996. The Partnership has eliminated various minority interests related to these joint ventures, as such, the Partnership owns 100% of the underlying assets at December 31, 1996. 6. Mortgage Notes Payable: All of the property owned by the Partnership is pledged as collateral for the nonrecourse mortgage notes payable outstanding at December 31, 1996 and 1995 which consisted of the following: 1996 1995 ---- ---- Villas at Sin Vacas $2,428,851 $2,467,255 Pinecliff 3,112,702 3,161,919 Villa Antigua 3,018,377 3,066,104 --------- --------- $8,559,930 $8,695,278 ========= ========= Sin Vacas Under the terms of the note, monthly principal and interest payments of $21,830, based on a fixed interest rate of 9.125%, are required over the term of the loan. The balance of the note will be due on July 15, 1997. Pinecliff Under the terms of the note, monthly principal and interest payments of $27,976 are required over the term of the loan, based on a fixed interest rate of 9.125%. The balance of the note will be due on July 15, 1997. Villa Antigua Under the terms of the note, monthly principal and interest payments of $27,128, based on a fixed interest rate of 9.125%, are required over the term of the loan. The balance of the note will be due on July 15, 1997. As these mortgage notes payable are due in fiscal 1997, the Partnership will seek to renegotiate these mortgage notes with its existing lenders or seek new sources of financing for these properties on a long term basis. The General Partners believe that existing cash flows from the properties will be sufficient to support a level of borrowing that is at least equal to amounts outstanding as of December 31, 1996. If the general economic climate for real estate in these respective locations were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete these refinancings. Interest included in Accrued expenses in the Consolidated Balance Sheets at December 31, 1996 and 1995 consisted of the following: 1996 1995 ---- ---- Villas at Sin Vacas $9,235 $ 9,381 Pinecliff 11,835 12,022 Villa Antigua 11,476 11,658 ------ --------- $ 32,546 $ 33,061 ======== ======== The principal balance of the mortgage notes payable appearing on the consolidated balance sheets at December 31, 1996 and 1995 approximates the fair value of such notes. 7. Partners' Equity: Under the terms of the Partnership Agreement profits are allocated 95% to the Limited Partners and 5% to the General Partners; losses are allocated 99% to the Limited Partners and 1% to the General Partners. Cash distributions to the partners are governed by the Partnership Agreement and are made, to the extent available, 95% to the Limited Partners and 5% to the General Partners. The allocation of the related profits, losses, and distributions, if any, would be different than described above in the case of certain events as defined in the Partnership Agreement, such as the sale of an investment property or an interest in a joint venture partnership. 8. Related-Party Transactions: Due to affiliates at December 31, 1996 and 1995 consisted of reimbursable costs payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in the amounts of $8,975, and $14,278, respectively. In 1995 distributions payable to the Villa Antigua co-venturer totaled $8,895. There was no distribution payable to the co-venturer in 1996. For the years ended December 31, 1996, 1995 and 1994, general and administrative expenses included $82,881, $84,643, and $68,625, respectively, of salary reimbursements paid to the General Partners for certain administrative and accounting personnel who perform services for the Partnership. The officers and principal shareholders of Evans Withycombe, Inc., the developer of the Villas at Sin Vacas and Villa Antigua properties and an affiliate of the co-venturers of those joint ventures, together hold a two and one half percent cumulative profit or partnership voting interest in LP L'Auberge Communities, a California Limited Partnership, formerly Berry and Boyle, which is the principal limited partner of GP L'Auberge Communities, L.P. During the years ended December 31, 1996, 1995 and 1994, Evans Withycombe received property management fees of $32,475, $84,187, and $79,692, respectively. These fees were 5% of rental revenue in each time period. In addition, for the years ended December 31, 1996, 1995 and 1994, $64,954, $51,715, and $49,083, respectively, of property management fees were paid or accrued to Residential Services - L'Auberge, an affiliate of the General Partners. These fees were 4% of rental revenue in 1996, and 5% of rental revenue in 1995 and 1994. Villa Antigua reimbursed $35,885, $34,707 and $34,878, respectively for its proportionate share of the 1996, 1995 and 1994 real estate taxes to Villa Antigua Phase II, which is an affiliate of the General Partners. EX-4 2 EXHIBITS EXHIBIT INDEX Exhibit No. (4)(1) Amended and Restated Certificate and Agreement of Limited Partnership (included in Partnership's Registration Statement No. 2-86262, declared effective on March 22, 1984 (the "Registration Statement") and incorporated herein by reference). (4)(a)(2) Seventeenth Amendment to Amended and Restated Certificate and Agreement of Limited Partnership dated May 31, 1990 (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference). (4)(b) Subscription Agreement (included as an Exhibit in the Registration Statement and incorporated herein by reference). EX-10 3 EXHIBITS (10)(a) Property management agreement between Autumn Ridge Joint Venture and Berry and Boyle Residential Services.(included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference). (10)(b) Property management agreement regarding Sin Vacas between Cluster Housing Properties and L'Auberge Communities Inc. dated May 15, 1996. (10)(c) Property management agreement regarding Villa Antigua between Cluster Housing Properties and L'Auberge Communities Inc. dated November 1, 1996. (10)(d) Documents pertaining to the permanent loan refinancing for the Sin Vacas Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(e) Documents pertaining to the permanent loan refinancing for the Autumn Ridge Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(f) Documents pertaining to the permanent loan refinancing for the Villa Antigua Joint Venture (included as an exhibit to the Partnership's Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein by reference). (10)(g) First Amendment to Joint Venture Agreement of L'Auberge Pinecliff Joint Venture and Related Assignment of Joint Venture Interest. (10)(h) Agreement Re Villa Sin Vacas Joint Venture (10)(i) Agreement Re Villa Antigua Joint Venture (27) Financial Data Schedule EX-27 4 FDS --
5 year Dec-31-1996 Dec-31-1996 1,065,855 0 2,605 0 0 0 19,321,621 (4,810,314) 15,644,667 380,037 0 0 0 0 6,704,700 15,644,667 0 2,671,741 0 0 2,052,218 0 787,301 0 0 0 0 0 0 (167,778) 0 0
EX-10.G 5 EXHIBITS ASSIGNMENT OF JOINT VENTURE INTEREST (L'Auberge Pinecliff) This Assignment of Joint Venture Interest (this "Assignment") is made as of June __, 1996, by and between Gentry Investments II, a Colorado general partnership (the "Assigning Venturer"), and Cluster Housing Properties, A California Limited Partnership, formerly known as Berry and Boyle Cluster Housing Properties (the "L'Auberge Venturer"), with reference to the following: A. The Assigning Venturer and the L'Auberge Venturer are joint venture partners in that certain Colorado joint venture partnership known as Autumn Ridge Joint Venture (the "Joint Venture") formed pursuant to that certain Joint Venture Agreement of Autumn Ridge Joint Venture dated July 15, 1986 (as amended, the "Joint Venture Agreement"). B. The Assigning Venturer desires to assign its entire right, title and interest in the Joint Venture to the L'Auberge Venturer, and the L'Auberge Venturer desires to accept such assignment, on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing and other valuable consideration (the receipt of which is hereby acknowledged), the parties hereto agree as follows: 1. Assignment of Joint Venture Interest. The Assigning Venturer hereby sells, transfers and assigns to the L'Auberge Venturer, and the L'Auberge Venturer hereby accepts from the Assigning Venturer, all of the Assigning Venturer's right, title and interest in and to its interest in the Joint Venture and in, to and under the Joint Venture Agreement, together with any and all rights (including without limitation all rights to distributions and allocations arising from and after the date hereof) incidental thereto (collectively, the "Interest"). By their execution hereof, the Assigning Venturer and the L'Auberge Venturer waive their respective rights to receive notice of the transfer of the Interest, to invoke restrictions on transfer of such Interest and to withhold approval of such transfer. 2. Acceptance of Assignment. Subject to the provisions of Paragraph 3 below, the L'Auberge Venturer hereby accepts such assignment and assumes and agrees to perform and discharge all joint venture partnership obligations of the Assigning Venturer with respect to the Interest as set forth in the Joint Venture Agreement arising from and after the date hereof. 3. Indemnification. (a) The Assigning Venturer hereby agrees to protect, defend, indemnify and hold the L'Auberge Venturer and the Joint Venture harmless from and against any and all losses, claims, expenses (including reasonable attorneys' fees), damages, liabilities or obligations relating to any act or omission of the Assigning Venturer with respect to the Joint Venture, its business or property, including the multi-family residential project which has been constructed thereon, which arose on or before the effective date of this Assignment. (b) The L'Auberge Venturer hereby agrees to protect, defend, indemnify and hold the Assigning Venturer harmless from and against any and all losses, claims, expenses (including reasonable attorneys' fees), damages, liabilities or obligations relating to any act or omission of the L'Auberge Venturer with respect to the Joint Venture, its business or property, including the multi-family residential project which has been constructed thereon, which arises after the effective date of this Assignment. 4. Representations and Warranties of the Assigning Venturer. The Assigning Venturer hereby represents and warrants as follows: (a) The Assigning Venturer has the legal right and power to enter into this Assignment and, as of the date hereof, has valid title to the Interest, free and clear of any liens, claims or encumbrances. (b) The Assigning Venturer has the legal right and power to sell, assign and transfer the Interest to the L'Auberge Venturer without obtaining the consent of any other person, entity or governmental authority. 5. Representations and Warranties of the L'Auberge Venturer. The L'Auberge Venturer hereby represents and warrants as follows: (a) The L'Auberge Venturer has the legal right and power to enter into this Assignment. (b) The L'Auberge Venturer has the legal right and power to accept the assignment of the Interest and to assume the obligations pertaining thereto without obtaining the consent of any other person, entity or governmental authority. 6. General Terms. (a) The Assigning Venturer hereby agrees to execute and deliver, upon the request of the L'Auberge Venturer, any additional documents or instruments which may be necessary or appropriate to effectuate the transfer of the Interest to the L'Auberge Venturer. (b) All representations, warranties, covenants and agreements of the parties contained in this Assignment or any other document referred to herein shall survive the execution and delivery of this Assignment. (c) This Assignment shall be governed by and construed in accordance with the laws of the State of Colorado, without giving effect to the conflict of laws or choice of law rules or laws of such jurisdiction. IN WITNESS WHEREOF, the parties hereto have executed this Assignment effective as of the date and year first set forth above. "L'Auberge Venturer" "Assigning Venturer" CLUSTER HOUSING PROPERTIES, GENTRY INVESTMENTS II, A California Limited Partnership, a Colorado general partnership formerly known as Berry and Boyle Cluster Housing Properties By: _____________________ a general partner By: GP L'Auberge Communities, L.P., By: ______________________ a California partnership a general partner formerly known as Berry and Boyle Management, By: ______________________ a General Partner a general partner By: L'Auberge Communities Inc. By: ______________________ a California corporation a general partner formerly known as Berry and Boyle Inc., a General Partner of GP L'Auberge Communities, L.P. By: _____________________ Its: __________________ EX-10.H 6 EXHIBITS AGREEMENT (Villas Sin Vacas) This Agreement is made and entered into as of March 29, 1996, by and among Sin Vacas Joint Venture, an Arizona joint venture partnership (the "Joint Venture"), Cluster Housing Properties, A California Limited Partnership (the "L'Auberge Venturer"), Villa Sin Vacas Limited Partnership, an Arizona limited partnership (the "EW Venturer"), and Evans Withycombe Management, Inc., an Arizona corporation ("Manager"), with reference to the following: A. The L'Auberge Venturer and the EW Venturer formed the Joint Venture by entering into that certain Joint Venture Agreement of Sin Vacas Joint Venture dated October 25, 1985 (as amended, the "Joint Venture Agreement"). The Joint Venture owns that certain multi-family residential project (the "Project") located at 7601 Calle Sin Envidia, Tucson, Arizona and commonly known as Villas Sin Vacas. Each of the L'Auberge Venturer and the EW Venturer now desires to effectuate the amicable and mutual dissolution and termination of the Joint Venture through an assignment by the EW Venturer of all of its right, title and interest in the Joint Venture to the L'Auberge Venturer on the terms and conditions hereinafter set forth. B. The Joint Venture and Manager entered into that certain Property Management Agreement (as it may have been amended, the "Property Management Agreement") dated October 25, 1985, with respect to the Project whereby the Joint Venture engaged Manager to manage the Project on the terms and conditions more particularly set forth therein. Each of the Joint Venture and Manager now desires to effectuate the termination of the Property Management Agreement on the terms and conditions hereinafter set forth. C. The Project is encumbered by a Deed of Trust and Security Agreement dated June 25, 1992 (the "Deed of Trust") securing certain indebtedness of the Joint Venture in favor of The Lincoln National Life Insurance Company ("Lender"). Under the provisions of the Deed of Trust, the Joint Venture is required to obtain Lender's consent to the termination of Manager, and the appointment of a successor, as manager of the Project. D. The L'Auberge Venturer has inspected the Project in order to determine the physical, operational and financial condition thereof and acknowledges that it has approved the result of such inspection except as otherwise provided in Paragraph 4(b) below. E. Concurrently herewith, various other entities affiliated with the L'Auberge Venturer and the EW Venturer are entering into other agreements (collectively, the "Other Agreements") pertaining to other joint ventures and containing substantially the same provisions as this Agreement. The Other Agreements and this Agreement are collectively referred to herein as the "Agreements." The parties contemplate that the closings with respect to each of the Agreements shall be conditions concurrent and shall occur simultaneously. NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows: 1. Termination of Property Management Agreement. (a) At the Closing (hereinafter defined), Manager, on the one hand, and the Joint Venture and the L'Auberge Venturer, on the other hand, shall enter into a Termination Agreement in the form attached hereto as Exhibit A and incorporated herein by this reference, and the Joint Venture shall pay to Manager accrued compensation in accordance with the provisions of the Termination Agreement. (b) Prior to the Closing, Manager shall continue to manage the Project in the same manner and with the same quality as the Project has been managed prior to the execution hereof (and in any event in compliance with the terms and conditions of the Property Management Agreement) and shall be entitled to receive a Property Management Fee in accordance therewith. 2. [Intentionally deleted.] 3. Assignment of Joint Venture Interest; Dissolution and Termination of Joint Venture. (a) At the Closing, the EW Venturer shall assign all of its right, title and interest in and to its interest in and to the Joint Venture and in, to and under the Joint Venture Agreement to the L'Auberge Venturer by executing and delivering that certain Assignment of Joint Venture Interest (the "Assignment") in the form attached hereto as Exhibit C and incorporated herein by this reference, except as provided in Paragraph 4(a) below. Following such assignment, the EW Venturer shall have no right to participate in any manner in the management or control of the Joint Venture or the Project and shall be released from any liability with respect to the ownership or operation of the Project accruing and arising from and after the Closing, notwithstanding the provisions of Paragraph 3(b) below. (b) Concurrently with such assignment, the L'Auberge Venturer and the Joint Venture, on the one hand, and the EW Venturer, on the other hand, shall execute and deliver that certain Partnership Interest Payment Agreement in the form attached hereto as Exhibit D and incorporated herein by this reference. (c) Immediately following such assignment, the L'Auberge Venturer shall hold one hundred percent (100%) of the interest in the Joint Venture and shall cause the dissolution and termination thereof by filing or recording such documents (including without limitation a Termination of Certificate of Fictitious Name and Notice of Dissolution of Sin Vacas Joint Venture (the "Termination") in the form attached hereto as Exhibit E and incorporated herein by this reference) and/or taking such other steps as may be necessary or appropriate in that regard. 4. Conditions to Closing. (a)No later than the execution of this Agreement, the Joint Venture shall solicit the consent of Lender to the transactions contemplated hereby to the extent that such consent is required under the Deed of Trust. The Joint Venture and the L'Auberge Venturer shall use reasonable efforts (but shall not be required thereby to incur any material cost or expense) to obtain such consent, to furnish Lender with all required financial or other information requested by Lender in connection with such consent and to obtain a written acknowledgment from Lender that the loan with respect to which such consent is being sought will not continue to apply against Lender's lending limit applicable to Evans Withycombe Management, Inc., an Arizona corporation ("EWM"), or its affiliates following the assignment of the EW Venturer's interest in the Joint Venture to the L'Auberge Venturer and the dissolution of the Joint Venture. The Closing shall be subject to receipt of Lender's written consent pursuant to such solicitation for consent and the written consent of Lender and John Hancock Mutual Life Insurance Company ("John Hancock") pursuant to all similar solicitations being made concurrently herewith by various affiliates of the Joint Venture under the Other Agreements. If such consents shall not have been received by the Joint Venture on or before October 1, 1996 (the "Outside Closing Date"), this Agreement shall terminate without liability of any party to the other hereunder on account of such termination; provided, however, that in the event John Hancock shall have failed or refused to give its consent to any of the other transactions under one or more of the Other Agreements on or before the Outside Closing Date but all other conditions to the Closing hereunder shall have been satisfied, the transactions contemplated hereby shall be consummated as set forth elsewhere in this Agreement. (b) Prior to the execution hereof, the Joint Venture has commenced an evaluation of the environmental condition of the Project. The approval by the Joint Venture of the environmental condition of the Project as disclosed in such evaluation shall be a condition to the Closing unless the Joint Venture waives such condition in writing on or before March 31, 1996. Failure by the Joint Venture to approve the evaluation or waive the condition on or before March 31, 1996, in either case in writing, shall be deemed a disapproval and shall result in a termination of this Agreement without liability of any party to the other hereunder on account of such termination. No partial or condition waivers or approvals shall be made or given. In the event such condition is neither satisfied nor waived on or before March 31, 1996, the Joint Venture shall immediately notify Lender thereof and withdraw its request for consent described in Paragraph 4(a) above. 5. Payment of Settlement Amount. At the Closing, the Joint Venture and the L'Auberge Joint Venturer shall pay, or cause to be paid, to the EW Venturer and to Manager an amount (the "Settlement Amount") which shall be equal to the excess of $500,000 over the aggregate of the Settlement Amounts payable to the EW Venturer and Manager so denominated in the Other Agreements; provided, however, that the total amount payable to EWM under all of the Agreements shall be $500,000. The payment of the Settlement Amount shall be made by confirmed wired funds or cashier's check to EWM, as collection agent for the EW Venturer and Manager. The EW Venturer and Manager, by their execution of this Agreement, hereby appoint EWM to act as their agent for purposes of collecting and distributing the Settlement Amount, and EWM, by its execution of this Agreement, hereby accepts such appointment. 6. Mutual Release. At the Closing, the Joint Venture and the L'Auberge Venturer, on the one hand, and the EW Venturer and Manager, on the other hand, shall execute and deliver that certain Mutual Release in the form attached hereto as Exhibit F and incorporated herein by this reference. 7. Closing. (a) The Closing shall take place at the offices of Ryley, Carlock & Applewhite, at 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003, on the third (3rd) business day following the satisfaction of the conditions to the Closing enumerated in Paragraph 4 above (or waiver of the condition in Paragraph 4(b) above if such condition shall have been waived on or before March 31, 1996) or on such earlier date as may be mutually agreeable to the parties hereto. If such conditions are not satisfied or waived on or before the Outside Closing Date, this Agreement and all obligations of the parties hereto shall automatically terminate and be of no further force and effect. (b) At the Closing, the parties shall cause the following to occur: (i) The Joint Venture, the L'Auberge Joint Venturer and Manager shall each execute and deliver the Termination Agreement. (ii) The L'Auberge Venturer and the EW Venturer shall each execute and deliver the Amendment. (iii) The EW Venture and the L'Auberge Venturer shall each execute and deliver the Assignment. (iv) The L'Auberge Venturer shall execute and deliver the Termination for recordation. (v) The EW Venturer and the L'Auberge Venturer shall each execute and deliver the Partnership Interest Payment Agreement. (vi) The Joint Venture and the L'Auberge Venturer shall deliver or cause to be delivered the Settlement Amount to EWM for the benefit of the EW Venturer and Manager. (vii) The Joint Venture, the L'Auberge Venturer, the EW Venturer and Manager shall each execute and deliver the Mutual Release. 8. Representations and Warranties. (a) The L'Auberge Venturer, for itself and the Joint Venture, represents and warrants to the EW Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The L'Auberge Venturer is the Managing Venturer of the Joint Venture and has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) The Joint Venture and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of the Joint Venture and the L'Auberge Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the L'Auberge Venturer which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the L'Auberge Venturer. (vi) The L'Auberge Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (b) The EW Venturer and Manager each represent and warrant to the Joint Venture and the L'Auberge Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The EW Venturer has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) Manager and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of Manager and the EW Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the EW Venturer or Manager which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the EW Venturer or Manager. (vi) The EW Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (vii) Neither the EW Venturer nor Manager has any actual knowledge of any fact, condition or circumstance related to the physical, environmental, operational and/or financial condition of the Project that has not been disclosed in previous physical, environmental, operational and/or financial reports prepared for or on behalf of, and delivered to, the Joint Venture. Notwithstanding the foregoing sentence, the representations and warranties of Manager and the EW Venturer contained in this subparagraph (vii) shall not be deemed to modify the provisions of the Property Management Agreement between Manager and the Joint Venture or modify the provisions of any development agreement, development obligations agreement or construction agreement relating to the Project between the EW Venturer, on the one hand, and the Joint Venture or the L'Auberge Joint Venturer, on the other hand, including any express or implied warranties or statutes of limitation relating thereto. (c) The representations and warranties set forth herein have been made as of the date hereof and shall be deemed to have been made as of the Closing and shall survive the Closing. 9. General Provisions. (a) Severability. The provisions of this Agreement shall be deemed severable. If any provision hereof shall be found invalid, illegal, void or unenforceable, in whole or in part, the remaining provisions or portions thereof shall remain in full force and effect to the maximum extent permitted by applicable law. To the maximum extent permitted by applicable law, each party hereby waives any provision of law which renders any provision of this Agreement invalid, illegal, void or unenforceable. (b) Governing Law. This Agreement and all relations of the parties in connection herewith shall be governed by and construed in accordance with the laws of the State of Arizona, without giving effect to the conflict of laws or choice of law rules or laws of such jurisdiction. (c) Attorneys' Fees and Costs. In the event any party fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees. The prevailing party shall include, without limitation, (i) a party who dismisses an action in exchange for sums allegedly due, (ii) the party who received performance from the other party where such performance is substantially equivalent to the relief sought in an action, or (iii) the party determined to be the prevailing party by a court of law, and the "party not prevailing" shall be the other party. (d) Successors and Assigns. This Agreement set forth herein shall be binding upon, and inure to the benefit of, any successors and assigns of the parties. (e) Entire Agreement; Modification. This Agreement set forth herein, together with the schedules and exhibits attached hereto, shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations and agreements with respect to the subject matter hereof. This Agreement may be modified only by an instrument in writing duly executed by the party sought to be bound by such modification. (f) Waivers. No breach of any covenant, condition, agreement, warranty or representation made in this Agreement shall be deemed waived unless expressly waived in writing by the party who might assert such breach. Any such waiver may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any such waiver may be conditional. No such waiver shall be deemed to be a waiver of any other matter, whenever occurring and whether identical, similar or dissimilar to the matter waived. (g) Notices. All notices required or permitted by this Agreement shall be in writing and may be delivered in person (by hand or by messenger or courier service) or may be sent by regular certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 9(g). The address of the L'Auberge Venturer and the Joint Venture for notice purposes shall be as follows: Mr. Stephen B. Boyle Canyon View Apartments 6655 Canyon Crest Drive Tucson, Arizona 85750 Attention: Rental Office Facsimile No.: (520) 577-6703 With a copy to: Hughes Hubbard & Reed 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Facsimile No.: (213) 613-2950 The address for the EW Venturer and Manager for notice purposes is as follows: Evans Withycombe Management, Inc. 6991 East Camelback Road, Suite 200A Scottsdale, Arizona 85251 Attention: Stephen Evans Facsimile No.: (602) 423-8843 With a copy to: Ryley, Carlock & Applewhite 101 First Avenue, Suite 2600 Phoenix, Arizona 85003-1973 Attention: Lynn T. Ziolko, Esq. Facsimile No.: (602) 257-9582 Either party may by written notice to the other specify a different address for notice purposes. A copy of all notices required or permitted to be given to either party hereunder shall be concurrently transmitted to such party or parties at such addresses as either party may from time to time hereafter designate by written notice to the other. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by U.S. Postal Service Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the United States Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone confirmation of receipt of the transmission thereof, provided that a copy is also delivered by delivery or mail. If any notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. (h) Further Agreements and Assurances. Each party agrees promptly to execute and deliver such other documents and to do such other acts as may be requested by any other party and are in the reasonable judgment of the requesting party necessary or appropriate to effectuate the purposes of this Agreement. (i) Headings; Gender; Number. The headings of the sections and subsections herein are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. As used herein and as the context requires, a reference to the male, female or neutral gender includes a reference to each other gender, and a reference to the singular or plural number includes a reference to the other number. (j) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed to constitute an original. (k) Default; Specific Performance. In the event that a party shall default in the performance of any of its obligations or agreements hereunder, the other party shall be entitled to specific performance of such obligations and agreements by the defaulting party, in addition to any and all other equitable and legal rights and remedies which such non-defaulting party may have. (l) No Admission. The parties hereto have entered into this Agreement and entered into the negotiations that led to this Agreement, solely for the purpose of compromising and settling various matters in dispute among the parties. This Agreement, and the settlement negotiations that led to this Agreement, however, shall not constitute an admission of any liability or responsibility by any party as to any matter relating to the Joint Venture or the Project. (m) Nondisclosure of Terms. Each of the parties hereto hereby agrees not to disclose the terms of this Agreement or the transactions contemplated hereby to any person or entity (other than its respective partners, affiliates, underwriters, agents, advisors, officers or employees who need to know such information for the purpose of entering into and performing the obligations under this Agreement or any other person or entity to whom such disclosure is required by law), except (i) with the prior written consent of each of the other parties hereto, (ii) in connection with any required financial accounting or other required reporting or legal proceedings brought by any of the parties hereto or their respective affiliates to enforce this Agreement or (iii) in compliance with applicable legal requirements. (n) Simultaneous Closing. Notwithstanding anything contained in this Agreement or any of the Other Agreements to the contrary, the Closing shall not occur unless there occurs the simultaneous closing of the transactions described in the Other Agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. SIN VACAS JOINT VENTURE, an Arizona joint venture partnership By: Cluster Housing Properties, A California Limited Partnership, Managing Venturer By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: _________________________ Stephen B. Boyle President CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: _________________________ Stephen B. Boyle President [signatures continued.] VILLA SIN VACAS LIMITED PARTNERSHIP, an Arizona limited partnership By: EW Development Corp. IX, Inc., an Arizona corporation its general partner By: ____________________________ Name: ______________________ Title:______________________ EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation formerly known as Evans Withycombe, Inc. By: ____________________________ Name: ______________________ Title:______________________ The undersigned accepts its appointment as collection agent pursuant to Paragraph 5 above: EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation By: Name: Title: EX-10.I 7 EXHIBITS AGREEMENT (Villa Antigua I) This Agreement is made and entered into as of March 29, 1996, by and among Villa Antigua I Joint Venture, an Arizona joint venture partnership (the "Joint Venture"), Cluster Housing Properties, A California Limited Partnership (the "L'Auberge Venturer"), Villa Antigua Limited Partnership, an Arizona limited partnership (the "EW Venturer") and Evans Withycombe Management, Inc., an Arizona corporation ("Manager"), with reference to the following: A. The L'Auberge Venturer and the EW Venturer formed the Joint Venture by entering into that certain Joint Venture Agreement of Villa Antigua Joint Venture dated December 31, 1985 (as amended, the "Joint Venture Agreement"). The Joint Venture owns that certain multi-family residential project (the "Project") located at 5950 North 78th Street, Scottsdale, Arizona, and commonly known as Villa Antigua I Apartments. Each of the L'Auberge Venturer and the EW Venturer now desires to effectuate the amicable and mutual dissolution and termination of the Joint Venture through an assignment by the EW Venturer of all of its right, title and interest in the Joint Venture to the L'Auberge Venturer on the terms and conditions hereinafter set forth. B. The Joint Venture and Manager entered into that certain Property Management Agreement (as it may have been amended, the "Property Management Agreement") dated December 31, 1985, with respect to the Project whereby the Joint Venture engaged Manager to manage the Project on the terms and conditions more particularly set forth therein. Each of the Joint Venture and Manager now desires to effectuate the termination of the Property Management Agreement on the terms and conditions hereinafter set forth. C. The Project is encumbered by a Deed of Trust and Assignment of Rents dated June 25, 1992 (the "Deed of Trust") securing certain indebtedness of the Joint Venture in favor of The Lincoln National Life Insurance Company ("Lender"). Under the provisions of the Deed of Trust, the Joint Venture is required to obtain Lender's consent to the termination of Manager, and the appointment of a successor, as manager of the Project. D. The L'Auberge Venturer has inspected the Project in order to determine the physical, operational and financial condition thereof and acknowledges that it has approved the result of such inspection except as otherwise provided in Paragraph 4(b) below. E. Concurrently herewith, various other entities affiliated with the L'Auberge Venturer and the EW Venturer are entering into other agreements (collectively, the "Other Agreements") pertaining to other joint ventures and containing substantially the same provisions as this Agreement. The Other Agreements and this Agreement are collectively referred to herein as the "Agreements." The parties contemplate that the closings with respect to each of the Agreements shall be conditions concurrent and shall occur simultaneously. NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows: 1. Termination of Property Management Agreement. (a) At the Closing (hereinafter defined), Manager, on the one hand, and the Joint Venture and the L'Auberge Venturer, on the other hand, shall enter into a Termination Agreement in the form attached hereto as Exhibit A and incorporated herein by this reference, and the Joint Venture shall pay to Manager accrued compensation in accordance with the provisions of the Termination Agreement. (b) Prior to the Closing, Manager shall continue to manage the Project in the same manner and with the same quality as the Project has been managed prior to the execution hereof (and in any event in compliance with the terms and conditions of the Property Management Agreement) and shall be entitled to receive a Property Management Fee in accordance therewith. 2. Termination of Right of First Refusal. At the Closing, the EW Venturer shall terminate its right of first refusal with respect to the Project by executing and delivering that certain First Amendment to Joint Venture Agreement of Villa Antigua Joint Venture (the "Amendment"), in the form attached hereto as Exhibit B and incorporated herein by this reference. 3. Assignment of Joint Venture Interest; Dissolution and Termination of Joint Venture. (a) At the Closing, the EW Venturer shall assign all of its right, title and interest in and to its interest in and to the Joint Venture and in, to and under the Joint Venture Agreement to the L'Auberge Venturer by executing and delivering that certain Assignment of Joint Venture Interest (the "Assignment") in the form attached hereto as Exhibit C and incorporated herein by this reference, except as provided in Paragraph 4(a) below. Following such assignment, the EW Venturer shall have no right to participate in any manner in the management or control of the Joint Venture or the Project and shall be released from any liability with respect to the ownership or operation of the Project accruing and arising from and after the Closing, notwithstanding the provisions of Paragraph 3(b) below. (b) Concurrently with such assignment, the L'Auberge Venturer and the Joint Venture, on the one hand, and the EW Venturer, on the other hand, shall execute and deliver that certain Partnership Interest Payment Agreement in the form attached hereto as Exhibit D and incorporated herein by this reference. (c) Immediately following such assignment, the L'Auberge Venturer shall hold one hundred percent (100%) of the interest in the Joint Venture and shall cause the dissolution and termination thereof by filing or recording such documents (including without limitation a Termination of Certificate of Fictitious Name and Notice of Dissolution of Villa Antigua Joint Venture (the "Termination") in the form attached hereto as Exhibit E and incorporated herein by this reference) and/or taking such other steps as may be necessary or appropriate in that regard. 4. Conditions to Closing. (a)No later than the execution of this Agreement, the Joint Venture shall solicit the consent of Lender to the transactions contemplated hereby to the extent that such consent is required under the Deed of Trust. The Joint Venture and the L'Auberge Venturer shall use reasonable efforts (but shall not be required thereby to incur any material cost or expense) to obtain such consent, to furnish Lender with all required financial or other information requested by Lender in connection with such consent and to obtain a written acknowledgment from Lender that the loan with respect to which such consent is being sought will not continue to apply against Lender's lending limit applicable to Evans Withycombe Management, Inc., an Arizona corporation ("EWM"), or its affiliates following the assignment of the EW Venturer's interest in the Joint Venture to the L'Auberge Venturer and the dissolution of the Joint Venture. The Closing shall be subject to receipt of Lender's written consent pursuant to such solicitation for consent and the written consent of Lender and John Hancock Mutual Life Insurance Company ("John Hancock") pursuant to all similar solicitations being made concurrently herewith by various affiliates of the Joint Venture under the Other Agreements. If such consents shall not have been received by the Joint Venture on or before October 1, 1996 (the "Outside Closing Date"), this Agreement shall terminate without liability of any party to the other hereunder on account of such termination; provided, however, that in the event John Hancock shall have failed or refused to give its consent to any of the other transactions under one or more of the Other Agreements on or before the Outside Closing Date but all other conditions to the Closing hereunder shall have been satisfied, the transactions contemplated hereby shall be consummated as set forth elsewhere in this Agreement. (b) Prior to the execution hereof, the Joint Venture has commenced an evaluation of the environmental condition of the Project. The approval by the Joint Venture of the environmental condition of the Project as disclosed in such evaluation shall be a condition to the Closing unless the Joint Venture waives such condition in writing on or before March 31, 1996. Failure by the Joint Venture to approve the evaluation or waive the condition on or before March 31, 1996, in either case in writing, shall be deemed a disapproval and shall result in a termination of this Agreement without liability of any party to the other hereunder on account of such termination. No partial or condition waivers or approvals shall be made or given. In the event such condition is neither satisfied nor waived on or before March 31, 1996, the Joint Venture shall immediately notify Lender thereof and withdraw its request for consent described in Paragraph 4(a) above. 5. Payment of Settlement Amount. At the Closing, the Joint Venture and the L'Auberge Joint Venturer shall pay, or cause to be paid, to the EW Venturer and to Manager an amount (the "Settlement Amount") which shall be equal to the excess of $500,000 over the aggregate of the Settlement Amounts payable to the EW Venturer and Manager so denominated in the Other Agreements; provided, however, that the total amount payable to EWM under all of the Agreements shall be $500,000. The payment of the Settlement Amount shall be made by confirmed wired funds or cashier's check to EWM, as collection agent for the EW Venturer and Manager. The EW Venturer and Manager, by their execution of this Agreement, hereby appoint EWM to act as their agent for purposes of collecting and distributing the Settlement Amount, and EWM, by its execution of this Agreement, hereby accepts such appointment. 6. Mutual Release. At the Closing, the Joint Venture and the L'Auberge Venturer, on the one hand, and the EW Venturer and Manager, on the other hand, shall execute and deliver that certain Mutual Release in the form attached hereto as Exhibit F and incorporated herein by this reference. 7. Closing. (a) The Closing shall take place at the offices of Ryley, Carlock & Applewhite, at 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003, on the third (3rd) business day following the satisfaction of the conditions to the Closing enumerated in Paragraph 4 above (or waiver of the condition in Paragraph 4(b) above if such condition shall have been waived on or before March 31, 1996) or on such earlier date as may be mutually agreeable to the parties hereto. If such conditions are not satisfied or waived on or before the Outside Closing Date, this Agreement and all obligations of the parties hereto shall automatically terminate and be of no further force and effect. (b) At the Closing, the parties shall cause the following to occur: (i) The Joint Venture, the L'Auberge Joint Venturer and Manager shall each execute and deliver the Termination Agreement. (ii) The L'Auberge Venturer and the EW Venturer shall each execute and deliver the Amendment. (iii) The EW Venture and the L'Auberge Venturer shall each execute and deliver the Assignment. (iv) The L'Auberge Venturer shall execute and deliver the Termination for recordation. (v) The EW Venturer and the L'Auberge Venturer shall each execute and deliver the Partnership Interest Payment Agreement. (vi) The Joint Venture and the L'Auberge Venturer shall deliver or cause to be delivered the Settlement Amount to EWM for the benefit of the EW Venturer and Manager. (vii) The Joint Venture, the L'Auberge Venturer, the EW Venturer and Manager shall each execute and deliver the Mutual Release. 8. Representations and Warranties. (a) The L'Auberge Venturer, for itself and the Joint Venture, represents and warrants to the EW Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The L'Auberge Venturer is the Managing Venturer of the Joint Venture and has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) The Joint Venture and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of the Joint Venture and the L'Auberge Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the L'Auberge Venturer which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the L'Auberge Venturer. (vi) The L'Auberge Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (b) The EW Venturer and Manager each represent and warrant to the Joint Venture and the L'Auberge Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The EW Venturer has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) Manager and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of Manager and the EW Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the EW Venturer or Manager which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the EW Venturer or Manager. (vi) The EW Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (vii) Neither the EW Venturer nor Manager has any actual knowledge of any fact, condition or circumstance related to the physical, environmental, operational and/or financial condition of the Project that has not been disclosed in previous physical, environmental, operational and/or financial reports prepared for or on behalf of, and delivered to, the Joint Venture. Notwithstanding the foregoing sentence, the representations and warranties of Manager and the EW Venturer contained in this subparagraph (vii) shall not be deemed to modify the provisions of the Property Management Agreement between Manager and the Joint Venture or modify the provisions of any development agreement, development obligations agreement or construction agreement relating to the Project between the EW Venturer, on the one hand, and the Joint Venture or the L'Auberge Joint Venturer, on the other hand, including any express or implied warranties or statutes of limitation relating thereto. (c) The representations and warranties set forth herein have been made as of the date hereof and shall be deemed to have been made as of the Closing and shall survive the Closing. 9. General Provisions. (a) Severability. The provisions of this Agreement shall be deemed severable. If any provision hereof shall be found invalid, illegal, void or unenforceable, in whole or in part, the remaining provisions or portions thereof shall remain in full force and effect to the maximum extent permitted by applicable law. To the maximum extent permitted by applicable law, each party hereby waives any provision of law which renders any provision of this Agreement invalid, illegal, void or unenforceable. (b) Governing Law. This Agreement and all relations of the parties in connection herewith shall be governed by and construed in accordance with the laws of the State of Arizona, without giving effect to the conflict of laws or choice of law rules or laws of such jurisdiction. (c) Attorneys' Fees and Costs. In the event any party fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees. The prevailing party shall include, without limitation, (i) a party who dismisses an action in exchange for sums allegedly due, (ii) the party who received performance from the other party where such performance is substantially equivalent to the relief sought in an action, or (iii) the party determined to be the prevailing party by a court of law, and the "party not prevailing" shall be the other party. (d) Successors and Assigns. This Agreement set forth herein shall be binding upon, and inure to the benefit of, any successors and assigns of the parties. (e) Entire Agreement; Modification. This Agreement set forth herein, together with the schedules and exhibits attached hereto, shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations and agreements with respect to the subject matter hereof. This Agreement may be modified only by an instrument in writing duly executed by the party sought to be bound by such modification. (f) Waivers. No breach of any covenant, condition, agreement, warranty or representation made in this Agreement shall be deemed waived unless expressly waived in writing by the party who might assert such breach. Any such waiver may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any such waiver may be conditional. No such waiver shall be deemed to be a waiver of any other matter, whenever occurring and whether identical, similar or dissimilar to the matter waived. (g) Notices. All notices required or permitted by this Agreement shall be in writing and may be delivered in person (by hand or by messenger or courier service) or may be sent by regular certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 9(g). The address of the L'Auberge Venturer and the Joint Venture for notice purposes shall be as follows: Mr. Stephen B. Boyle Canyon View Apartments 6655 Canyon Crest Drive Tucson, Arizona 85750 Attention: Rental Office Facsimile No.: (520) 577-6703 With a copy to: Hughes Hubbard & Reed 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Facsimile No.: (213) 613-2950 The address for the EW Venturer and Manager for notice purposes is as follows: Evans Withycombe Management, Inc. 6991 East Camelback Road, Suite 200A Scottsdale, Arizona 85251 Attention: Stephen Evans Facsimile No.: (602) 423-8843 With a copy to: Ryley, Carlock & Applewhite 101 First Avenue, Suite 2600 Phoenix, Arizona 85003-1973 Attention: Lynn T. Ziolko, Esq. Facsimile No.: (602) 257-9582 Either party may by written notice to the other specify a different address for notice purposes. A copy of all notices required or permitted to be given to either party hereunder shall be concurrently transmitted to such party or parties at such addresses as either party may from time to time hereafter designate by written notice to the other. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by U.S. Postal Service Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the United States Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone confirmation of receipt of the transmission thereof, provided that a copy is also delivered by delivery or mail. If any notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. (h) Further Agreements and Assurances. Each party agrees promptly to execute and deliver such other documents and to do such other acts as may be requested by any other party and are in the reasonable judgment of the requesting party necessary or appropriate to effectuate the purposes of this Agreement. (i) Headings; Gender; Number. The headings of the sections and subsections herein are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. As used herein and as the context requires, a reference to the male, female or neutral gender includes a reference to each other gender, and a reference to the singular or plural number includes a reference to the other number. (j) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed to constitute an original. (k) Default; Specific Performance. In the event that a party shall default in the performance of any of its obligations or agreements hereunder, the other party shall be entitled to specific performance of such obligations and agreements by the defaulting party, in addition to any and all other equitable and legal rights and remedies which such non-defaulting party may have. (l) No Admission. The parties hereto have entered into this Agreement and entered into the negotiations that led to this Agreement, solely for the purpose of compromising and settling various matters in dispute among the parties. This Agreement, and the settlement negotiations that led to this Agreement, however, shall not constitute an admission of any liability or responsibility by any party as to any matter relating to the Joint Venture or the Project. (m) Nondisclosure of Terms. Each of the parties hereto hereby agrees not to disclose the terms of this Agreement or the transactions contemplated hereby to any person or entity (other than its respective partners, affiliates, underwriters, agents, advisors, officers or employees who need to know such information for the purpose of entering into and performing the obligations under this Agreement or any other person or entity to whom such disclosure is required by law), except (i) with the prior written consent of each of the other parties hereto, (ii) in connection with any required financial accounting or other required reporting or legal proceedings brought by any of the parties hereto or their respective affiliates to enforce this Agreement or (iii) in compliance with applicable legal requirements. (n) Simultaneous Closing. Notwithstanding anything contained in this Agreement or any of the Other Agreements to the contrary, the Closing shall not occur unless there occurs the simultaneous closing of the transactions described in the Other Agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. VILLA ANTIGUA JOINT VENTURE, an Arizona joint venture partnership By: Cluster Housing Properties, A California Limited Partnership, Managing Venturer By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: _________________________ Stephen B. Boyle President [signatures continued.] CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: _________________________ Stephen B. Boyle President VILLA ANTIGUA LIMITED PARTNERSHIP, an Arizona limited partnership By: EW Development Corp. IX, Inc., an Arizona corporation its general partner By: ____________________________ Name: ______________________ Title:_______________________ EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation formerly known as Evans Withycombe, Inc. By: ____________________________ Name: ______________________ Title:_______________________ The undersigned accepts its appointment as collection agent pursuant to Paragraph 5 above: EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation By: Name: Title: EX-10.B 8 EXHIBITS PROPERTY MANAGEMENT AGREEMENT (Sin Vacas) THIS AGREEMENT is made as of this 15th day of May, 1996, by and between L'AUBERGE COMMUNITIES INC., a California corporation ("Agent"), and CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP ("Owner"), with reference to the following: A. Owner owns certain real property located in Tucson, Arizona, as more particularly described on Exhibit "A" attached hereto (the "Site"), upon which 72 apartment units (the "Units") have been constructed. (The Site, Units and all improvements relating to or connected with the Units, together with all appurtenances, fixtures and equipment and all rights and privileges now or hereafter contained in, belonging to or in any way pertaining or beneficial to any of the foregoing, whether or not attached to the Site or the Units, are sometimes hereinafter collectively referred to as the "Property.") B. Agent possesses the organization and skills necessary to discharge its obligations hereunder. C. Owner desires to employ Agent, and Agent desires to be employed by Owner, for the orderly management and operation of the Property on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Appointment of Manager. Owner hereby appoints Agent as Owner's exclusive representative, manager and agent for the purposes of managing, maintaining, and operating the Property for the account of Owner during the term of this Agreement and upon the terms and conditions set forth below. 2. Term. The term of this Agreement shall commence on the date first set forth above (the "Commencement Date") and Agent's obligations ("Agent's Management Obligations") pursuant to this Agreement shall expire in accordance with the provisions of Paragraph 9 below. 3. Agent's Duties. a. Agent agrees to perform the following duties on behalf of Owner: (i) To accept and does hereby accept the management of the Property for the period and upon the terms herein provided, and agrees to furnish the services of its organization for the renting, operating and managing of the Property, and to do and perform any and all things in and about the management, maintenance and operation of the Property customarily performed by agents of similar properties, in a professional, reasonable, effective and efficient manner, subject however to the provisions of Section 3(d) below; (ii) [Intentionally deleted]; (iii) To aid, assist and cooperate in the matter of real property taxes and insurance claim adjustments; (iv) Subject to the provisions of Paragraph 8 below, to care for, place and supervise all insurance coverage; (v) Subject to the provisions of Paragraph 8 below, to render on or before the tenth (10th) day of each calendar month during the term hereof, statements of receipts, expenses and charges for the previous calendar month; (vi) [Intentionally deleted]; (vii) To hire, discharge and supervise all labor and employees ("Project Personnel") required for the operation and maintenance of the Property (exclusive of employees retained to undertake the activities described in Section 3(d) below), it being agreed that all employees shall be deemed to be employees of Agent and not of Owner, and that Agent may perform its duties through its attorneys, agents and employees holding such licenses as may be necessary or appropriate for the performance of such duties, but shall not be responsible for their acts, defaults and negligence if reasonable care has been exercised in their appointment, supervision and retention; (viii) To pay all expenses, including without limitation mortgage payments, real estate and personal property taxes, insurance premiums, licenses, fees and payroll taxes and other obligations of Owner, incurred in connection with the Property during the term of this Agreement, prior to their due dates; (ix) To account for all deposits received from tenants, and the excess of operating revenues over the sum of operating expenses plus reserves established by Owner (or as otherwise approved from time to time by Owner, provided that in any event such amount shall not be less than the amount reasonably sufficient to pay all accounts payable of the Property), to Owner; and (x) To enter into any laundry, laundry machine and/or vending machine leases and other personal property leases. b. Agent shall establish operating procedures and policies necessary to perform Agent's Management Obligations under this Agreement. c. Agent shall be authorized to make contracts for electricity, gas, fuel, water, telephone, sweeping, cleaning and other similar services or such of them as Agent, in its discretion, shall deem advisable. d. Notwithstanding anything contained in this Section 3 or elsewhere in this Agreement to the contrary, Agent shall not be responsible for, nor shall Agent perform, any of the activities described in Arizona Revised Statute ss. 32-2101.32, or any successor statute, which activities require an Arizona real estate broker's or salesperson's license. These activities presently include without limitation renting, offering to rent, or negotiating the rental of real estate and collecting rents for the use of real estate. Owner acknowledges that Agent does not have a real estate license in Arizona. Owner and Agent further acknowledge that any natural person hired to undertake such activities for the Property pursuant to A.R.S. ss. 32-2121.A.7 shall be employed directly by Owner and shall be compensated directly by Owner. 4. Compensation. During the term hereof, Owner agrees to pay to Agent on the first day of each month a management fee (the "Property Management Fee") equal to 4% of rents collected in the preceding month (including forfeited security deposits and nonrefundable deposits and fees) as long as Agent's Management Obligations have not been terminated, as compensation for Agent's management services hereunder. 5. Operating Budget; Accounting. a. Agent shall prepare an operating budget for the Property for each calendar year during the term of this Agreement. Such operating budget shall be prepared in consultation with Owner. b. All monthly accounting functions for the Property, including without limitation rent collection and the processing and payment of accounts payable of the Property but excluding rent collection, shall be the responsibility of Agent at Agent's sole cost and expense. 6. Bank Account. Agent shall establish and maintain a separate trust account in the name of Owner for the deposit of all monies collected from or in connection with the operation of the Property. Agent shall have the authority to draw on this account for any payments which Agent may make solely for the discharge of any liabilities or obligations incurred pursuant to this Agreement, and for the payment of the Property Management Fee, all of which payments shall be subject to the limitations of this Agreement. 7. Records; Reports; Meetings; Remittance. a. Agent shall maintain books of account on all receipts and disbursements incurred in the management and operation of the Property, which records shall, at all reasonable times, be open to inspection by Owner without prior notice. b. During the term of this Agreement, Agent shall furnish to Owner, the following written reports: (i) On a monthly basis, not later than ten (10) days following the end of each calendar month, a detailed cash operating report, showing all receipts and disbursements for the previous month; and (ii) On a monthly basis, not later than ten (10) days following the end of each calendar month, a recapitulation of delinquent rents and a rent roll. c. All net cash flow from operations of the Property, after establishment of Property operating reserves, shall be remitted to Owner by the tenth (10th) day of the following calendar month. 8. Property Personnel; Insurance. a. Subject to the provisions of Paragraph 3(a)(vii) above, Agent shall hire or discharge on behalf of Owner all Property Personnel required for the operation and maintenance of the Property exclusive of employees retained to undertake the activities described in Section 3(d) above. b. Owner shall maintain public liability insurance and have Agent named as an additional insured in all such policies. The maintenance of other insurance in connection with the Property shall be the responsibility of Owner, but, upon the request of Owner, shall be supervised and implemented by Agent, as hereinabove provided. 9. Termination. Agent's Management Obligations may be terminated or modified at any time as provided below: a. If Owner shall sell or otherwise transfer title to the Property (except in connection with a reorganization of Owner): (i) Agent's Management Obligations shall automatically terminate as of the date of closing of such sale or transfer; and (ii) Owner shall pay to Agent any accrued but unpaid Property Management Fees owing to Agent pursuant to this Agreement up to the date of closing of such sale or transfer. b. Either party shall have the right, by giving written notice to the other party, to terminate Agent's Management Obligations without cause effective upon thirty (30) days prior written notice and with cause effective immediately upon delivery. c. In the event Agent's Management Obligations are terminated pursuant to Paragraph 9.b. above, Agent's right to receive the Property Management Fee shall terminate as of the effective date of such termination. For purposes hereof, "cause" shall mean, in addition to any material default or breach by Agent under this Agreement, any act or omission which constitutes negligence, willful malfeasance or fraud. 10. Settlement. Upon the expiration or sooner termination of Agent's Management Obligations, or in the event that, by mutual agreement of the parties, on-site management of the Property is delegated to a third party: a. Agent shall deliver and transfer to Owner or Owner's designee all books, records, agreements, documents and instruments of whatsoever nature pertaining to the Property maintained by Agent on behalf of Owner other than those maintained by Agent in the course of its own day-to-day business, and shall pay over to Owner or its designee all sums arising out of the operation of the Property from the commencement of business operations thereat, including, without limitation, all advance rent, security deposits, unused cleaning fees and the like, less permitted expenses actually paid by such transferring party; b. Owner shall pay to Agent any sums for which Agent is then entitled to reimbursement hereunder, including those which Agent may have theretofore advanced on behalf of Owner and for which Agent shall not have theretofore received reimbursement. 11. Reimbursement. Owner agrees to promptly reimburse Agent for any monies that Agent may advance on behalf of or for the benefit of the Property or Owner if such reimbursement may not reasonably be made from funds from the Property. Notwithstanding the foregoing, Agent shall not be obligated to make any such advances for the benefit of the Property or Owner. 12. Indemnity. Owner hereby indemnifies and agrees to hold Agent harmless from and against any and all suits, claims or costs incurred by Agent in any actions brought by third parties in connection with the management of the Property or this Agreement, and from any liability or injury suffered by third parties in or on the Property, except for any such suits, claims or costs which arise from or relate to any act or omission of Agent or its employees which constitutes negligence, willful malfeasance or fraud, as to which Agent shall indemnify and hold Owner harmless. 13. Notices. All notices required to be given by either party to the other shall be in writing and shall be deemed to have been properly given and delivered when deposited in the United States mail, sent certified or registered, return receipt requested, postage prepaid, or by commercial air courier, addressed to the parties as follows: If to Owner: c/o L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. If to Agent: L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Such notices shall be effective upon delivery if delivered in person and either upon actual receipt or three (3) days after mailing, whichever is earlier, if delivered by mail. 14. Entire Agreement. Except as otherwise specifically set forth herein, this Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect thereto. There have been no representations or warranties by either party to the other except as expressly contained herein. No claim of waiver, modification, consent or acquiescence with respect to any provision of this Agreement shall be made against either party except on the basis of a written instrument executed by or on behalf of such party. 15. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Agent may not assign any of its rights, or delegate any of its duties, under this Agreement without the prior written consent of Owner. 16. Exhibits. All Exhibits referred to in this Agreement are expressly incorporated herein by reference as though set forth in full. 17. Paragraph Headings. The headings of the several paragraphs of this Agreement are inserted solely for convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision thereof. 18. Time. Time is of the essence in the performance of this Agreement. 19. Authority. All parties to this Agreement warrant and represent that they have the power and authority to enter into this Agreement in the names, titles and capacities herein stated and on behalf of any entities, persons, estates or firms represented or purported to be represented by such persons, and shall deliver to the other party such corporate resolutions, powers of attorney and such other documents or instruments as shall be reasonably necessary to evidence such authority. 20. Governing Law. This Agreement is to be governed by and construed in accordance with the laws of the State of Arizona. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective the day and year first above written. AGENT: OWNER: L'AUBERGE COMMUNITIES INC., CLUSTER HOUSING PROPERTIES, a California corporation A CALIFORNIA LIMITED PARTNERSHIP By: By: GP L'Auberge Communities, L.P., Stephen B. Boyle a California limited partnership, President General Partner By: L'Auberge Communities Inc., General Partner By: _________________ Stephen B. Boyle President EX-10.C 9 EXHIBITS PROPERTY MANAGEMENT AGREEMENT (Villa Antigua I) THIS AGREEMENT is made as of this 1st day of November, 1996, by and between L'AUBERGE COMMUNITIES INC., a California corporation ("Agent"), and CLUSTER HOUSING PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP ("Owner"), with reference to the following: A. Owner owns certain real property located in Scottsdale, Arizona, as more particularly described on Exhibit "A" attached hereto (the "Site"), upon which 88 apartment units (the "Units") have been constructed. (The Site, Units and all improvements relating to or connected with the Units, together with all appurtenances, fixtures and equipment and all rights and privileges now or hereafter contained in, belonging to or in any way pertaining or beneficial to any of the foregoing, whether or not attached to the Site or the Units, are sometimes hereinafter collectively referred to as the "Property.") B. Agent possesses the organization and skills necessary to discharge its obligations hereunder. C. Owner desires to employ Agent, and Agent desires to be employed by Owner, for the orderly management and operation of the Property on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Appointment of Manager. Owner hereby appoints Agent as Owner's exclusive representative, manager and agent for the purposes of managing, maintaining, and operating the Property for the account of Owner during the term of this Agreement and upon the terms and conditions set forth below. 2. Term. The term of this Agreement shall commence on the date first set forth above (the "Commencement Date") and Agent's obligations ("Agent's Management Obligations") pursuant to this Agreement shall expire in accordance with the provisions of Paragraph 9 below. 3. Agent's Duties. a. Agent agrees to perform the following duties on behalf of Owner: (i) To accept and does hereby accept the management of the Property for the period and upon the terms herein provided, and agrees to furnish the services of its organization for the renting, operating and managing of the Property, and to do and perform any and all things in and about the management, maintenance and operation of the Property customarily performed by agents of similar properties, in a professional, reasonable, effective and efficient manner, subject however to the provisions of Section 3(d) below; (ii) [Intentionally deleted]; (iii) To aid, assist and cooperate in the matter of real property taxes and insurance claim adjustments; (iv) Subject to the provisions of Paragraph 8 below, to care for, place and supervise all insurance coverage; (v) Subject to the provisions of Paragraph 8 below, to render on or before the tenth (10th) day of each calendar month during the term hereof, statements of receipts, expenses and charges for the previous calendar month; (vi) [Intentionally deleted]; (vii) To hire, discharge and supervise all labor and employees ("Project Personnel") required for the operation and maintenance of the Property (exclusive of employees retained to undertake the activities described in Section 3(d) below), it being agreed that all employees shall be deemed to be employees of Agent and not of Owner, and that Agent may perform its duties through its attorneys, agents and employees holding such licenses as may be necessary or appropriate for the performance of such duties, but shall not be responsible for their acts, defaults and negligence if reasonable care has been exercised in their appointment, supervision and retention; (viii) To pay all expenses, including without limitation mortgage payments, real estate and personal property taxes, insurance premiums, licenses, fees and payroll taxes and other obligations of Owner, incurred in connection with the Property during the term of this Agreement, prior to their due dates; (ix) To account for all deposits received from tenants, and the excess of operating revenues over the sum of operating expenses plus reserves established by Owner (or as otherwise approved from time to time by Owner, provided that in any event such amount shall not be less than the amount reasonably sufficient to pay all accounts payable of the Property), to Owner; and (x) To enter into any laundry, laundry machine and/or vending machine leases and other personal property leases. b. Agent shall establish operating procedures and policies necessary to perform Agent's Management Obligations under this Agreement. c. Agent shall be authorized to make contracts for electricity, gas, fuel, water, telephone, sweeping, cleaning and other similar services or such of them as Agent, in its discretion, shall deem advisable. d. Notwithstanding anything contained in this Section 3 or elsewhere in this Agreement to the contrary, Agent shall not be responsible for, nor shall Agent perform, any of the activities described in Arizona Revised Statute ss. 32-2101.32, or any successor statute, which activities require an Arizona real estate broker's or salesperson's license. These activities presently include without limitation renting, offering to rent, or negotiating the rental of real estate and collecting rents for the use of real estate. Owner acknowledges that Agent does not have a real estate license in Arizona. Owner and Agent further acknowledge that any natural person hired to undertake such activities for the Property pursuant to A.R.S. ss. 32-2121.A.7 shall be employed directly by Owner and shall be compensated directly by Owner. 4. Compensation. During the term hereof, Owner agrees to pay to Agent on the first day of each month a management fee (the "Property Management Fee") equal to 4% of rents collected in the preceding month (including forfeited security deposits and nonrefundable deposits and fees) as long as Agent's Management Obligations have not been terminated, as compensation for Agent's management services hereunder. 5. Operating Budget; Accounting. a. Agent shall prepare an operating budget for the Property for each calendar year during the term of this Agreement. Such operating budget shall be prepared in consultation with Owner. b. All monthly accounting functions for the Property, including without limitation rent collection and the processing and payment of accounts payable of the Property but excluding rent collection, shall be the responsibility of Agent at Agent's sole cost and expense. 6. Bank Account. Agent shall establish and maintain a separate trust account in the name of Owner for the deposit of all monies collected from or in connection with the operation of the Property. Agent shall have the authority to draw on this account for any payments which Agent may make solely for the discharge of any liabilities or obligations incurred pursuant to this Agreement, and for the payment of the Property Management Fee, all of which payments shall be subject to the limitations of this Agreement. 7. Records; Reports; Meetings; Remittance. a. Agent shall maintain books of account on all receipts and disbursements incurred in the management and operation of the Property, which records shall, at all reasonable times, be open to inspection by Owner without prior notice. b. During the term of this Agreement, Agent shall furnish to Owner, the following written reports: (i) On a monthly basis, not later than ten (10) days following the end of each calendar month, a detailed cash operating report, showing all receipts and disbursements for the previous month; and (ii) On a monthly basis, not later than ten (10) days following the end of each calendar month, a recapitulation of delinquent rents and a rent roll. c. All net cash flow from operations of the Property, after establishment of Property operating reserves, shall be remitted to Owner by the tenth (10th) day of the following calendar month. 8. Property Personnel; Insurance. a. Subject to the provisions of Paragraph 3(a)(vii) above, Agent shall hire or discharge on behalf of Owner all Property Personnel required for the operation and maintenance of the Property exclusive of employees retained to undertake the activities described in Section 3(d) above. b. Owner shall maintain public liability insurance and have Agent named as an additional insured in all such policies. The maintenance of other insurance in connection with the Property shall be the responsibility of Owner, but, upon the request of Owner, shall be supervised and implemented by Agent, as hereinabove provided. 9. Termination. Agent's Management Obligations may be terminated or modified at any time as provided below: a. If Owner shall sell or otherwise transfer title to the Property (except in connection with a reorganization of Owner): (i) Agent's Management Obligations shall automatically terminate as of the date of closing of such sale or transfer; and (ii) Owner shall pay to Agent any accrued but unpaid Property Management Fees owing to Agent pursuant to this Agreement up to the date of closing of such sale or transfer. b. Either party shall have the right, by giving written notice to the other party, to terminate Agent's Management Obligations without cause effective upon thirty (30) days prior written notice and with cause effective immediately upon delivery. c. In the event Agent's Management Obligations are terminated pursuant to Paragraph 9.b. above, Agent's right to receive the Property Management Fee shall terminate as of the effective date of such termination. For purposes hereof, "cause" shall mean, in addition to any material default or breach by Agent under this Agreement, any act or omission which constitutes negligence, willful malfeasance or fraud. 10. Settlement. Upon the expiration or sooner termination of Agent's Management Obligations, or in the event that, by mutual agreement of the parties, on-site management of the Property is delegated to a third party: a. Agent shall deliver and transfer to Owner or Owner's designee all books, records, agreements, documents and instruments of whatsoever nature pertaining to the Property maintained by Agent on behalf of Owner other than those maintained by Agent in the course of its own day-to-day business, and shall pay over to Owner or its designee all sums arising out of the operation of the Property from the commencement of business operations thereat, including, without limitation, all advance rent, security deposits, unused cleaning fees and the like, less permitted expenses actually paid by such transferring party; b. Owner shall pay to Agent any sums for which Agent is then entitled to reimbursement hereunder, including those which Agent may have theretofore advanced on behalf of Owner and for which Agent shall not have theretofore received reimbursement. 11. Reimbursement. Owner agrees to promptly reimburse Agent for any monies that Agent may advance on behalf of or for the benefit of the Property or Owner if such reimbursement may not reasonably be made from funds from the Property. Notwithstanding the foregoing, Agent shall not be obligated to make any such advances for the benefit of the Property or Owner. 12. Indemnity. Owner hereby indemnifies and agrees to hold Agent harmless from and against any and all suits, claims or costs incurred by Agent in any actions brought by third parties in connection with the management of the Property or this Agreement, and from any liability or injury suffered by third parties in or on the Property, except for any such suits, claims or costs which arise from or relate to any act or omission of Agent or its employees which constitutes negligence, willful malfeasance or fraud, as to which Agent shall indemnify and hold Owner harmless. 13. Notices. All notices required to be given by either party to the other shall be in writing and shall be deemed to have been properly given and delivered when deposited in the United States mail, sent certified or registered, return receipt requested, postage prepaid, or by commercial air courier, addressed to the parties as follows: If to Owner: c/o L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. If to Agent: L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Such notices shall be effective upon delivery if delivered in person and either upon actual receipt or three (3) days after mailing, whichever is earlier, if delivered by mail. 14. Entire Agreement. Except as otherwise specifically set forth herein, this Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect thereto. There have been no representations or warranties by either party to the other except as expressly contained herein. No claim of waiver, modification, consent or acquiescence with respect to any provision of this Agreement shall be made against either party except on the basis of a written instrument executed by or on behalf of such party. 15. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Agent may not assign any of its rights, or delegate any of its duties, under this Agreement without the prior written consent of Owner. 16. Exhibits. All Exhibits referred to in this Agreement are expressly incorporated herein by reference as though set forth in full. 17. Paragraph Headings. The headings of the several paragraphs of this Agreement are inserted solely for convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision thereof. 18. Time. Time is of the essence in the performance of this Agreement. 19. Authority. All parties to this Agreement warrant and represent that they have the power and authority to enter into this Agreement in the names, titles and capacities herein stated and on behalf of any entities, persons, estates or firms represented or purported to be represented by such persons, and shall deliver to the other party such corporate resolutions, powers of attorney and such other documents or instruments as shall be reasonably necessary to evidence such authority. 20. Governing Law. This Agreement is to be governed by and construed in accordance with the laws of the State of Arizona. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective the day and year first above written. AGENT: OWNER: L'AUBERGE COMMUNITIES INC., CLUSTER HOUSING PROPERTIES, a California corporation A CALIFORNIA LIMITED PARTNERSHIP By: By: GP L'Auberge Communities L.P., Stephen B. Boyle a California limited partnership, President General Partner By: L'Auberge Communities Inc., General Partner By: ___________________ Stephen B. Boyle President -----END PRIVACY-ENHANCED MESSAGE-----