-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gC+IS6cTlGoKAbBK42kVisfaukjv/CCKJ4o3SaNxhESSrskjzNtzWHlgv03AzdEJ rQAUUcEmO7+YiMJQBD387Q== 0000765506-95-000004.txt : 19950512 0000765506-95-000004.hdr.sgml : 19950512 ACCESSION NUMBER: 0000765506-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA SEVEN ASSOCIATES LTD PARTNERSHIP CENTRAL INDEX KEY: 0000765506 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 942970056 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14581 FILM NUMBER: 95536431 BUSINESS ADDRESS: STREET 1: 900 COTTAGE GROVE RD STREET 2: SOUTH BLDG CITY: BLOOMFIELD STATE: CT ZIP: 06002 BUSINESS PHONE: 2037266000 MAIL ADDRESS: STREET 1: 900 COTTAGE GROVE RD STREET 2: SOUTH BUILDING CITY: BLOOMFIEELD STATE: CT ZIP: 06002 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14581 California Seven Associates Limited Partnership, a California Limited Partnership (Exact name of registrant as specified in its charter) California 94-2970056 (State of Organization) (I.R.S. Employer Identification No.) 900 Cottage Grove Road, South Building Bloomfield, Connecticut 06002 (Address of principal executive offices) Telephone Number: (203) 726-6000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No Part I - Financial Information California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Balance Sheets
March 31, December 31, 1995 1994 Assets (Unaudited) (Audited) Property and improvements, at cost: Land and land improvements $20,563,613 $20,562,073 Buildings 109,983,485 109,890,874 Furniture and fixtures 13,049,229 13,030,382 Machinery and equipment 775,859 765,087 144,372,186 144,248,416 Less accumulated depreciation 49,180,343 48,128,827 Net property and improvements 95,191,843 96,119,589 Cash and cash equivalents 2,510,034 1,191,015 Earthquake insurance - partial settlement receivable 9,250,000 -- Accounts receivable 297,332 488,885 Prepaid expenses and other assets 471,150 599,166 Total $107,720,359 $98,398,655 Liabilities and Partners' Deficit Liabilities: Liabilities not subject to compromise: Accounts payable and accrued expenses $614,322 $357,719 Tenant security deposits 465,252 472,898 Unearned income 73,403 79,046 Earthquake insurance - partial settlement unapplied 9,250,000 -- 10,402,977 909,663 Postpetition liabilities subject to compromise: Fees and reimbursements payable to the General Partner and its affiliates 191,088 102,832 Prepetition liabilities subject to compromise: Note and mortgages payable 111,983,903 111,983,903 Accrued interest payable 2,560,559 2,560,559 Accounts payable and accrued expenses 935,240 923,957 Fees and reimbursements payable to the general partner and its affiliates 4,078,563 4,078,563 119,558,265 119,546,982 Total liabilities 130,152,330 120,559,477 Partners' deficit: General Partner (767,557) (764,846) Limited partners (362 Class A Units and 3 Class B Units): (21,664,414) (21,395,976) Total partners' deficit (22,431,971) (22,160,822) Total $107,720,359 $98,398,655 The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Statements of Operations For the Three Months Ended March 31, 1995 and 1994 (Unaudited)
1995 1994 Property operating revenues: Rental income $3,597,044 $3,694,079 Other 117,596 136,527 3,714,640 3,830,606 Property operating expenses: Maintenance and repairs, furniture rental, insurance, and other property operations 744,107 731,565 Real estate taxes 281,515 350,730 Management fees 128,802 143,185 Property administrative 743,398 711,877 1,897,822 1,937,357 Net property revenue 1,816,818 1,893,249 Other operating costs and expenses: Depreciation 1,051,516 1,059,220 Management and administrative fees to affiliates 74,548 75,634 Partnership administrative 19,752 43,443 Net cost (recovery) on business interruption insurance 41,719 -- 1,187,535 1,178,297 Net partnership operating income 629,283 714,952 Interest income 9,168 4,817 Interest expense (contractual interest of $2,615,450 in 1995) (885,721) (2,615,450) Net loss before reorganization items (247,270) (1,895,681) Reorganization items: Interest income 6,899 -- United States Trustee fees (5,000) -- Professional fees (25,778) -- Net loss $(271,149) $(1,895,681) Net loss: General Partner $(2,711) $(18,957) Limited partners (268,438) (1,876,724) $(271,149) $(1,895,681) Net loss per Class A Unit: $(742) $ (5,184) The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Statements of Cash Flows For the Three Months Ended March 31, 1995 and 1994 (Unaudited)
1995 1994 Cash flows from operating activities: Net loss $(271,149) $(1,895,681) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 1,051,516 1,059,220 Accounts receivable 191,553 35,183 Accounts payable and accrued expenses 256,603 241,425 Other, net 114,727 92,746 Liabilities subject to compromise 99,539 -- Net cash provided by (used in) operating activities 1,442,789 (467,107) Cash flows from investing activities: Purchase of property and improvements (123,770) (28,685) Net increase (decrease) in cash and cash equivalents 1,319,019 (495,792) Cash and cash equivalents, beginning of year 1,191,015 1,440,476 Cash and cash equivalents, end of period $2,510,034 $944,684 Supplemental disclosure of cash information: Interest paid during period $885,721 $2,150,000 Fees paid in connection with reorganization $21,408 $-- The Notes to Financial Statements are an integral part of these statements.
California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements (Unaudited) Readers of this quarterly report should refer to the audited financial statements for California Seven Associates Limited Partnership, a California Limited Partnership ("the Partnership"), for the year ended December 31, 1994 which are included in the Partnership's 1994 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. 1. Organization and Basis of Accounting a) Organization: On September 16, 1994, the Partnership filed a voluntary petition for bankruptcy protection under Chapter 11 of Title 11, United States Code. The Partnership's Chapter 11 bankruptcy reorganization case is currently pending in the United States Bankruptcy Court for the Central District of California. The Partnership's goal is to maximize recovery by creditors and partners by preserving the Partnership as a viable entity with a going concern value. The financial statements do not include any adjustments relating to the recoverability of reported asset amounts or the amounts of liabilities that might result from the outcome of this uncertainty. b) Basis of Presentation: The accompanying financial statements were prepared in accordance with generally accepted accounting principles. It is the opinion of management that the financial statements presented reflect all the adjustments necessary for a fair presentation of the financial condition and results of operations. Certain amounts in the 1994 financial statements have been reclassified to conform to the 1995 presentation. c) Cash and Cash Equivalents: Short-term investments with a maturity of three months or less at the time of purchase are reported as cash equivalents. At March 31, 1995 the Partnership had cash and cash equivalents classified as cash collateral used for operations of the properties totalling $613,691. In addition, at March 31, 1995, cash and cash equivalents include amounts the Partnership is required to maintain in segregated cash collateral accounts for security deposits, taxes and insurance and the Sherman Oaks deductible. The balances of these accounts at March 31, 1995 were $475,989, $750,115 and $501,302, respectively. The Partnership had unencumbered cash and cash equivalents at March 31, 1995 of $168,937 2. Petition for Relief Under Chapter 11 On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petitions for relief under the Federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor in Possession. These claims are reflected in the accompanying balance sheets as "prepetition liabilities subject to compromise." California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements - Continued (Unaudited) Additional claims may arise subsequent to the filing date resulting from the rejection of executory contracts and from the determination by the Court of allowed claims for contingencies and other disputed amounts. Claims secured against the Partnership's assets are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured by liens on the Partnership's property and improvements. On September 22, 1994, the Partnership entered into a Letter Agreement with the first mortgage lender which defines and authorizes the use of cash collateral. The Partnership was granted use of collateral pursuant to the Letter Agreement until June 30, 1995. All excess cash flow from property operations after payment of property operating expenses, allowed capital expenditures, and funding of agreed upon segregated cash collateral accounts, is remitted to the first mortgage lender monthly. As part of the Partnership's Motion for Use of Cash Collateral, the Partnership requested all use of property that may be cash collateral in the form of rental revenues and insurance proceeds to repair the Sherman Oaks property. On February 1, 1995, the Court held a hearing on the use of cash collateral to repair Sherman Oaks and denied the Partnership's Motion without prejudice after determining that the issue should be decided in the context of the confirmation of the Partnership's plan of reorganization. On or about December 6, 1994, the first mortgage lender commenced a declaratory action against the Partnership, claiming that the second lien holder is an insider as defined under 11 U.S.C. Sec. 101. The Partnership filed an answer to the Complaint denying that the second lien holder is an insider as that term is defined in the Bankruptcy Code. A status hearing was held on February 21, 1995, and after arguments by counsel, the Court set the discovery deadline and scheduled the continued status conference both for May 22, 1995. On or about January 30, 1995, the first mortgage lender filed a Motion for Relief from the Automatic Stay. The Partnership filed an Opposition to the Motion. A hearing was held on February 21, 1995. After hearing arguments by counsel, the court set a date for a final evidentiary hearing on the Motion for Relief from Stay for April 18, 1995. On April 18, 1995, the Court held a final evidentiary hearing on the Motion for Relief from the Automatic Stay. After hearing arguments and representations of counsel, the Court continued the hearing until July 12, 1995. On March 17, 1995, the Partnership filed its proposed Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated March 16, 1995, together with a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code. On March 17, 1995, the Court set the hearing on the California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements - Continued (Unaudited) Partnership's Disclosure Statement for April 18, 1995. The Partnership's period for soliciting acceptances to the plan expires on June 7, 1995, unless otherwise extended by the Court. On April 17, 1995, the Partnership filed with the Bankruptcy Court certain Non-material Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy Court held a hearing and acted upon the approval of the Partnership's Disclosure Statement together with the Non-material Amendments. After considering the Disclosure Statement and the Non- material Amendments thereto, the Court ruled that certain additional information should be included in the Partnership's Disclosure Statement. The Court required the Partnership to file an Amended Disclosure Statement which the Court, after considering objections, would act upon without further hearing. The Partnership subsequently filed its Amended Disclosure Statement and Amended Plan of Reorganization on May 4, 1995. Also, in accordance with the Court's ruling at the hearing on April 18, 1995, the Court set a confirmation hearing on the Partnership's Amended Plan for July 12, 1995. 3. Property and Improvements and Note and Mortgages Payable At March 31, 1995, the Partnership owned five operating apartment properties located in California totaling 1,763 units with leases generally for a term of one year or less. The Partnership owns a sixth property with 372 apartment units which was not operating and was unoccupied at March 31, 1995. All properties are pledged as security for the long-term debt. Although the first and second mortgages payable represent secured claims under the bankruptcy proceedings, there is uncertainty as to whether the claims are undersecured or will be impaired under a plan of reorganization. The mortgages payable, therefore, are classified as liabilities subject to compromise in the accompanying balance sheet. Interest expense will be recorded postpetition to the extent paid during the proceeding. The Partnership has entered into a cash collateral agreement with the first mortgage lender which calls for the payment of cash flow from operations, rents less operating expenses and capital, on a monthly basis. The Sherman Oaks property was severely damaged by the January 17, 1994 Southern California earthquake. The property is not operating and is currently unoccupied. The Partnership's properties are covered by insurance, including earthquake and business interruption; although the policy carries a 5% deductible. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements - Continued (Unaudited) On April 28, 1994, the Partnership received a $750,000 advance on the business interruption policy for the earthquake damaged property. The Partnership recorded the advance as income, "Net recovery on business interruption insurance", for the year ended December 31, 1994. "Net cost (recovery) on business interruption insurance" for the three months ended March 31, 1995 were costs specifically associated with the earthquake. All other income statement lines relating to the Sherman Oaks property include only the activity related to the period from January 1, 1994 to January 16, 1994, or fixed operating expenses unrelated to the earthquake, if applicable. On March 9, 1995, the Partnership submitted a report, prepared as of January 11, 1995, representing the Partnership's business interruption claim, in the amount of $4,913,748 (prior to netting out the $750,000 advance the Partnership has already received for business interruption). The income statement does not include any amounts relating to the pending claim with the insurance company. Of February 3, 1995, the insurance company carrying the first $10,000,000 layer of earthquake insurance coverage offered to settle a portion of the loss resulting from the earthquake. The appropriate documents were executed in the second quarter of 1995 and on April 26, 1995, the Partnership received a partial insurance settlement of $9,250,000. The application of the insurance proceeds to the outstanding first mortgage payable or repair of the Sherman Oaks property will be decided by the Court as part of the Plan confirmation process. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Notes to Financial Statements - Continued (Unaudited) 4. Transactions with Affiliates Fees and other expenses incurred by the Partnership related to the General Partner or its affiliates are as follows: Three Months Ended Unpaid at March 31, March 31, 1995 1994 1995 Interest on assignment note(a) $-- $ 22,000 $502,334 Asset management fee 37,048 38,134 2,502,125 Administration and management fee -- -- 260,050 General partner's salary 37,500 37,500 937,500 Real Estate Advisory fee -- -- 518,750 Reimbursement (at cost) for out of pocket expenses 9,338 6,545 46,856 Reorganization item: Professional fees 4,370 -- 4,370 $ 88,256 $104,179 $4,771,985 (a) Postpetition interest is recorded to the extent it is paid. Contractual interest on assignment note was $22,000 for the three months ended March 31, 1995. 5. Litigation [Theodore D. Cohen, et al v. California Seven Associates, et al., No. 657925 (Orange County, CA, May 16, 1991)] Plaintiffs in suit brought against the Partnership and its General Partner are members of the class participating in a federal court action in Chicago [In re VMS Securities Litigation, No. 90 c 2412, N.D. Ill.] which has concluded in a settlement, of which plaintiffs have been notified. Defendant has filed a Motion for Summary Judgment. The likelihood of an unfavorable outcome or the extent of any possible liability cannot be assessed at this time. 6. Going Concern The Partnership plans to pursue confirmation of the Plan of Reorganization, which contemplates repairing the Sherman Oaks property. The outcome of this effort is unknown at this time. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Although every effort is being made to preserve the Partnership as a going concern, the possibility remains that the Partnership will cease its operations causing the complete loss of the ownership interest held by the partners. If the Partnership's effort to reorganize is unsuccessful, the Partnership will likely lose the properties and improvements through foreclosure with no cash available to partners. As a result of a foreclosure, the Partnership would record extraordinary income on relief of indebtedness. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources On September 16, 1994, the Partnership filed a voluntary petition for reorganization under Chapter 11 of the Federal bankruptcy laws in the United States Bankruptcy Court for the District of California. Pursuant to Section 1108 of the Bankruptcy Code, the Partnership is managing and operating its business as a debtor in possession and will continue to do so pursuant to Sections 1107 and 1108 of the Bankruptcy Code unless otherwise ordered by the Court. Of February 3, 1995, the insurance company carrying the first $10,000,000 layer of earthquake insurance coverage, offered to settle a portion of the loss resulting from the earthquake. The appropriate documents were executed in the second quarter of 1995 and on April 26, 1995, the Partnership received a partial insurance settlement of $9,250,000. The application of the insurance proceeds to the outstanding first mortgage payable or repair of the Sherman Oaks property will be decided by the Court as part of the Plan confirmation process. On March 9, 1995, the Partnership submitted a report, prepared as of January 11, 1995, representing the Partnership's business interruption claim, in the amount of $4,913,748 (prior to netting out the $750,000 advance the Partnership has already received for business interruption). On or about January 30, 1995, the first mortgage lender filed a Motion for Relief from the Automatic Stay. The Partnership filed an Opposition to the Motion. A hearing was held on February 21, 1995. After hearing arguments by counsel, the court set a date for a final evidentiary hearing on the Motion for Relief from Stay for April 18, 1995. On April 18, 1995, the Court held a final evidentiary hearing on the Motion for Relief from the Automatic Stay. After hearing arguments and representations of counsel, the Court continued the hearing until July 12, 1995. On March 17, 1995, the Partnership filed its proposed Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated March 16, 1995, together with a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code. On March 17, 1995, the Court set the hearing on the Partnership's Disclosure Statement for April 18, 1995. The Partnership's period for soliciting acceptances to the plan expires on June 7, 1995, unless otherwise extended by the Court. On April 17, 1995, the Partnership filed with the Bankruptcy Court certain Non-material Amendments to the Disclosure Statement. On April 18, 1995, the Bankruptcy Court held a hearing and acted upon the approval of the Partnership's Disclosure Statement together with the Non-material Amendments. After considering the Disclosure Statement and the Non- California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) material Amendments thereto, the Court ruled that certain additional information should be included in the Partnership's Disclosure Statement. The Court required the Partnership to file an Amended Disclosure Statement which the Court, after considering objections, would act upon without further hearing. The Partnership subsequently filed its Amended Disclosure Statement and Amended Plan of Reorganization on May 4, 1995. Also, in accordance with the Court's ruling at the hearing on April 18, 1995, the Court set a confirmation hearing on the Partnership's Amended Plan for July 12, 1995. The Partnership plans to pursue confirmation of the Plan of Reorganization. The outcome of this effort is unknown at this time. Although every effort is being made to preserve the Partnership as a going concern, the possibility remains that the Partnership will cease its operations causing the complete loss of the ownership interests held by the partners. If the Partnership's effort to reorganize is unsuccessful, the Partnership will likely lose the Project through foreclosure with no cash available to Partners. A foreclosure would result in an income allocation to the Partners; although, if a limited partner's ownership interest in the Partnership is the partner's only passive activity and the limited partner has been suspending passive loss allocations as required by the Tax Reform Act of 1986, the suspended losses available are estimated to be more than the potential foreclosure income allocation, resulting in an available net loss. In a year in which the Project is disposed of and the Partnership dissolved, any cumulative suspended loss will be available for use by a limited partner to offset ordinary income. Results of Operations During 1994, the apartment submarkets in which the Partnership's properties operate remained stable in terms of occupancy percentages and new construction. Absorption of existing units continued and rental rates began to increase slightly. Contributing to the Partnership's improved net property revenue results (property level revenues less property level operating expenses) for 1994, as compared with 1993, was a decrease in OAKWOOD related costs due to the conversion of Mission Bay East from OAKWOOD operations to conventional apartments effective January 1, 1994. Net property revenues for the three months ended March 31, 1995, decreased approximately 3% as compared with the fourth quarter of 1994, adjusted for Sherman Oaks activity and other incomparable activity. Property revenues remained flat in 1995 while property level expenses increased slightly in total. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Sherman Oaks property was severely damaged by the Southern California earthquake on January 17, 1994. The property was evacuated and city inspectors classified the property as unsafe for use. The property is not operating and is unoccupied. As a result, the property generated no revenue in 1995, and only a nominal amount in 1994, and has incurred only necessary operating expenses and expenses related to the earthquake since. Sherman Oaks' results for the three months ended March 31, 1995, as compared with the same period in 1994, were affected as follows: Rental income decreased approximately $99,000, other income decreased approximately $7,000, property operating expenses decreased approximately $72,000, real estate taxes decreased approximately $37,000, management fees decreased approximately $12,000 and property administrative expenses decreased approximately $82,000. The following analytical comments have been limited to the Partnership's five operating properties. At Mission Bay East, average occupancy increased approximately 4% for the three months ended March 31, 1995, as compared with the same period in 1994. Less corporate business in the first quarter of 1995, however, decreased rental income slightly as corporate rates are higher than conventional rates. Rental income at Arbor Park decreased nominally as a slight increase in rates in 1994 partially offset the decrease in average occupancy for 1995. These decreases were offset by increased rental income at Amberway resulting from increased average occupancy. Other income decreased for the three months ended March 31, 1995, as compared with the same period in 1994, due primarily to decreased laundry revenue and cleaning fees earned at Arbor Park. Overall, property operating expenses increased for the three months ended March 31, 1995, as compared to the same period of the previous year. Insurance expense increased approximately $83,000 for the five properties in total. In addition, Amberway and Arbor Park had increased non-routine maintenance for carpet and vinyl replacements. Partially offsetting these increases were decreased non-routine maintenance for carpet and vinyl replacements at Mission Bay East and decreased furniture rental expense at West Los Angeles. Property taxes decreased for the three months ended March 31, 1995, as compared with the same period in 1994, due to decreased assessed values for fiscal year 1995 (July 1, 1994 to June 30, 1995) at all properties. The increase in property administrative expense for the three months ended March 31, 1995, as compared with the same period in 1994, was the result of increased direct and indirect payroll related costs at West Los Angeles, Mission Bay East and Arbor Park. In addition, advertising costs increased for the three months at West Los Angeles and Arbor Park. The decrease in partnership administrative expense for the three months ended March 31, 1995, as compared with the same period in 1994, was due primarily to a decrease in legal fees incurred. The increase in interest income for the three months ended March 31, 1995, as compared with the same period in 1994, was due to the increase in interest rates. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Occupancy The following is a listing of approximate physical occupancy levels by quarter for the Partnership's investment properties: 1994 1995 At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 The Anaheim Property 83% 81% 89% 95% 92% The Huntington Beach Property 95% 98% 99% 94% 94% The West Los Angeles Property 87% 92% 87% 83% 91% The San Diego Property 84% 93% 95% 92% 95% The Sherman Oaks Property (a) N/A N/A N/A N/A N/A The Upland Property 91% 90% 91% 95% 85% (a) The property was severely damaged by the January 17, 1994 Southern California earthquake. The property was evacuated and considered unsafe for use. Therefore, occupancy is not applicable for 1994 and 1995. Part II - Other Information Item 1. Legal Proceedings The information included in the "Notes to Financial Statements, Note 5. Litigation" on page 6 of the Partnership's March 31, 1995 Financial Statements, is incorporated by reference. The information included in the "Notes to Financial Statements, Note 2. Petition for Relief Under Chapter 11" on page 7 of the Partnership's March 31, 1995 Financial Statements, is incorporated by reference. Item 2. Changes in the Rights of the Partnership Security Holders (b) On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal bankruptcy laws. The voluntary reorganization action may provide for a reorganization of the debt and equity structure of the Partnership business which may change the rights and form of the equity interests of the Partnership. Item 3. Defaults by the Partnership on its Senior Securities On September 16, 1994, the Partnership filed a petition for relief under Chapter 11 of the Federal bankruptcy laws. On the filing date, the Partnership was in default on its second mortgage loan obligation. Although the second mortgage holder had acknowledged the default, the Partnership did not receive a notice of acceleration. Due to the Chapter 11 proceedings, claims secured against the Partnership assets are stayed. The balance of the second mortgage note at March 31, 1995 was $14,000,000 plus $1,699,892 of accrued and unpaid interest. California Seven Associates Limited Partnership, a California Limited Partnership (Debtor in Possession) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 2.2 Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code for California Seven Associates Limited Partnership, Debtor and Debtor in Possession, Proposed by the Debtor, Dated April 25, 1995. 27 Financial Data Schedule (b) No Form 8-Ks were filed during the three months ended March 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. California Seven Associates Limited Partnership, a California Limited Partnership By: CIGNA Realty Resources, Inc. - Seventh, General Partner Date: May 11, 1995 By: /s/ John D. Carey John D. Carey, President and Controller (Principal Executive Officer) (Principal Accounting Officer) EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QUARTER 1995
5 DEC-31-1995 MAR-31-1995 3-MOS 2510034 0 9547332 0 0 0 144372186 49180343 107720359 0 0 0 0 0 0 107720359 0 3714640 0 1897822 1187535 0 885721 0 0 (271149) 0 0 0 (271149) 0 0
EX-2 3 AMENDED PLAN OF REORGANIZATION EXHIBIT 2.2 Clifton R. Jessup, Jr. Bruce H. White DIXON & DIXON LTD., L.L.P. 2500 Fountain Place 1445 Ross Avenue Dallas, Texas 75202 Telephone: (214) 754-0155 FAX: (214) 754-0704 And J. Scott Bovitz (#93548) Of Counsel DIXON & DIXON LTD., L.L.P. 333 S. Grand Avenue, Suite 2000 Los Angeles, California 90071-1524 Telephone: (213) 346-8310 FAX: (213) 620-1811 Attorneys for Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION In re ) Case No. SA 94-19491-JR ) CALIFORNIA SEVEN ASSOCIATES ) Chapter 11 LIMITED PARTNERSHIP, a ) California Limited Partnership, ) AMENDED PLAN OF ) REORGANIZATION UNDER ) CHAPTER 11 OF THE Debtor. ) BANKRUPTCY CODE FOR ) CALIFORNIA SEVEN ASSOCIATES ) LIMITED PARTNERSHIP, DEBTOR ) AND DEBTOR IN POSSESSION, ) PROPOSED BY THE DEBTOR, ) DATED APRIL 25, 1995 Employer Tax I.D. # 94-2970056 ) ) Date: July 12, 1995 ) Time: 9:30 a.m. ) Place: Courtroom 606 ) 34 Civic Center Plaza ) Santa Ana, CA 92701 California Seven Associates Limited Partnership, a California Limited Partnership, the Debtor and Debtor in Possession in the above-captioned Chapter\11 case, proposes the following Amended Plan of Reorganization (the "Plan") pursuant to 11\U.S.C. s\1121(a). Reference is made to the Amended Disclosure Statement (the "Disclosure Statement") filed by the Proponent dated April 25, 1995, which discusses CAL\7, and its history, business, management, Properties, financial information and results of operations. The Disclosure Statement also contains a summary and analysis of this Plan. Creditors are urged to consult the Disclosure Statement before voting to accept or reject this Plan. NO SOLICITATION MATERIALS OTHER THAN THE DISCLOSURE STATEMENT AND RELATED MATERIALS TRANSMITTED HEREWITH AND APPROVED BY THE BANKRUPTCY COURT HAVE BEEN AUTHORIZED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING ACCEPTANCES OR REJECTIONS OF THIS PLAN. ARTICLE I DEFINITIONS AND INTERPRETATION A. TERMS DEFINED IN THIS PLAN In addition to such other terms as are defined in other sections of the Plan, the following capitalized terms shall have the following meanings: 1.01. "Acceptance" shall have the same meaning contained in Section 1126 of the Bankruptcy Code (11 U.S.C. 1 6159C/10566.9 s\1126) and requires that holders of a Class of Claims against the Debtor accept this Plan by at least two thirds in dollar amount and more than one half in number of such Class of Claims. 1.02. "Administrative Claim" shall mean a Claim for any cost or expense of administration in connection with this Case of a kind specified in Section 364(c)(1) of the Bankruptcy Code (11 U.S.C. \364(c)(1)) or in Section 503(b) of the Bankruptcy Code (11 U.S.C. s\503(b)) and referred to in Section 507(a)(1) of the Bankruptcy Code (11 U.S.C. s\507(a)(1)), including without limitation, the actual, necessary costs and expenses of preserving the Estate and of operating the business of the Debtor, including wages, salaries, commissions or any other compensation for services rendered after the commencement of the bankruptcy Case, compensation for legal or other services and reimbursement of costs and expenses under Sections 330(a) or 331 of the Bankruptcy Code (11 U.S.C. ss\330(a) or 331) or otherwise allowed by the Court, and all fees and charges assessed against the Estate under Chapter 123, Title\28, United States Code (28 U.S.C. ss\1911 et seq.). 1.03. "Administrative Convenience Claim" shall mean the Unsecured Claim in the amount of $1000 or less, or an Unsecured Claim voluntarily reduced to $1000 by the election of the holder of the Unsecured Claim. 1.04. "Administrative Convenience Class" shall mean all Unsecured Creditors of the Debtor with Claims of $1000 or less or Claims voluntarily reduced to $1000. 2 6159C/10566.9 1.05. "Affiliate" shall have the same meaning as such term is defined in Section 101(2) of the Bankruptcy Code (11 U.S.C. s\101(2)). 1.06. "Allowed Administrative Claim" shall mean all or that portion of any Administrative Claim which has been allowed by a Final Order of the Bankruptcy Court or is otherwise allowed under relevant provisions of the Bankruptcy Code or is expressly designated an Allowed Administrative Expense Claim under this Plan. 1.07. "Allowed Amount" shall mean the dollar amount of an Allowed Claim or Allowed Interest. 1.08. "Allowed Claim" shall mean a Claim, whether or not complete evidence of such Claim is set forth in an applicable Proof of Claim or in this Plan, other than an Administrative Claim, that: (a) either (1) is scheduled by the Debtor pursuant to the Bankruptcy Code, other than a Claim scheduled as disputed, contingent or unliquidated, or (2) proof of which has been timely filed with the Court pursuant to the Bankruptcy Code or any order of the Court, or later filed with leave of the Court after notice and a hearing; and (b) either (1) no objection to the allowance of which or a motion to expunge has been interposed before any 3 6159C/10566.9 final date for the filing of such objections or motions set forth in the Confirmation Order, or (2) any objection to the allowance of which or a motion to expunge has been overruled by a Final Order, or (3) which has otherwise been allowed by a Final Order or designated as an Allowed Claim under this Plan. 1.09. "Allowed Interest" shall mean an Interest in the partnership of the Debtor, held either by the General Partner or by Limited Partners, and either that is not a Disputed Interest or that has been allowed by a Final Order. 1.10. "Bankruptcy Code" or "Code" shall mean the Bankruptcy Reform Act of 1978, as subsequently amended, principally codified at 11 U.S.C. \101, et seq. 1.11. "Bankruptcy Court" or "Court" shall mean the United States Bankruptcy Court for the Central District of California (Santa Ana Division), or, if such court ceases to have jurisdiction over the Case, such court or adjunct thereof that exercises jurisdiction over the Case in lieu of the Bankruptcy Court for the Central District of California, having jurisdiction over the Case. 1.12. "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure promulgated by the United States Supreme Court pursuant to Section 2075 of Title 28, United States Code, and, where appropriate, the Local Bankruptcy Rules 4 6159C/10566.9 for the United States Bankruptcy Court for the Central District of California to the extent applicable in this Case. 1.13. "Bar Date" shall mean January 30, 1995, the date set by the Court for filing a proof of Claim or Interest in this Case. 1.14. "Business Day" shall mean any day except Saturday, Sunday or any other day on which the law authorizes commercial banks in the City of Santa Ana, California, to be closed. 1.15. "CAL 7" shall mean California Seven Associates Limited Partnership, a California Limited Partnership, the Debtor and Debtor in possession in the above-captioned case. 1.16. "Case" shall mean the Chapter 11 case commenced in the Court by the Debtor on the Petition Date. 1.17. "Cash" shall mean cash and cash equivalents which evidence immediately available funds. 1.18. "Chapter 5 Causes of Action" shall mean all claims of the Debtor and Reorganized Debtor against any and all third parties, including without limitation, claims for the recovery of (a)\transfers of cash, offsets, debt forgiveness and other types or kinds of property, or the value thereof, recoverable exclusively pursuant to Sections 544, 545, 547, 548, 549, 550 and 553 of the Code; (b)\damages, general or exemplary or both relating to or based upon (1)\fraud, negligence, gross negligence, willful misconduct, or any tort 5 6159C/10566.9 actions, (2)\violations of Federal or State securities laws, (3)\violations of applicable corporate laws, (4)\breaches of fiduciary or agency duties, (5)\breaches of causes of action based upon alter ego or other liability theories; (c)\damages based upon any other claim of the Debtor, to the extent not specifically compromised or released pursuant to the Plan or an agreement referred to, or incorporated into, the Plan or Final Order entered after notice and opportunity for hearing; (d)\any claims of the Debtor for equitable subordination under Section 510(c) of the Code or under other applicable laws; and (e)\all unresolved objections to any Disputed Claims. 1.19. "Chapter 5 Recoveries" shall mean the rights of the Debtor or any assignee to any proceeds from (a)\any award, judgment or other determination rendered or made in favor of the Debtor or assignee as to any Chapter 5 Cause of Action or (b)\any compromise or settlement entered into by or on behalf of the Debtor or on behalf of the Estate. 1.20. "Chapter 11" shall mean Chapter 11 of the Bankruptcy Code. 1.21. "Claim" shall mean a claim against the Debtor, whether or not asserted, as defined in Section 101(5) of the Bankruptcy Code (11 U.S.C. \101(5)) by whatever right the Claimant may have against the Debtor. 1.22. "Claimant" shall mean the holder of a Claim. 1.23. "Class" shall mean a category of holders of Claims or Interests as provided in Article II of this Plan. 6 6159C/10566.9 1.24. "Collateral" shall mean any property of the Debtor subject to a valid and enforceable lien to secure the payment of a Claim. 1.25. "Confirmation" shall mean the entry of an order by the Court confirming this Plan. 1.26. "Confirmation Date" shall mean the date of the entry of the Confirmation Order by the Bankruptcy Court Clerk's Office. 1.27. "Confirmation Order" shall mean the order signed by the Court confirming this Plan. 1.28. "Congen" shall mean Congen Properties, Inc., a Delaware corporation, a creditor holding the second lien on the Properties. 1.29. "Congen Claim" shall mean the Claim held by Congen evidenced by that certain promissory note dated October 25, 1990 in the original principal amount of $14,000,000 with related deeds of trust and other security documents executed by CAL 7 and delivered to Congen, as supplemented and amended and all related documents which shall be treated as an Allowed Claim as to principal and accrued interest. 1.30. "Creditor" shall mean the holder of an Allowed Claim against the Debtor. 1.31. "Creditors' Committee" shall mean the Official Committee of Unsecured Creditors appointed in this Case pursuant to Section 1102 of the Code. 1.32. "Debtor" shall mean CAL 7, Debtor and Debtor 7 6159C/10566.9 in Possession in the above-captioned Case. 1.33. "Debtor's Financial Projections" shall mean the financial projections attached to this Plan as Exhibit "A". 1.34. "Designee" of any person shall mean any Entity appointed in any writing executed and delivered by such person for the purpose or purposes specified in such writing. Such person shall be permitted to appoint different Designees for different purposes. 1.35. "Disallowed Claim" shall mean any Claim or portion thereof which has been disallowed by a Final Order. 1.36. "Disclosure Statement" shall mean the Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code with respect to the Plan of Reorganization Under Chapter 11 of the Bankruptcy Code Proposed by the Debtor Dated April 25, 1995, together with any amendments or modifications thereto. 1.37. "Disputed Claim" shall mean: (a)\a Claim as to which, if no proof of Claim has been Filed by the Claims Bar Date or has otherwise been deemed timely Filed under applicable law and such Claim has been scheduled by the Debtor in its Schedule of Liabilities as other than disputed, contingent or unliquidated: (1)\the Debtor has objected to the Claim and (2)\(I) any agreement to settle the dispute has not been executed or (II)\if such agreement was executed prior to the Confirmation Date, such agreement has not been approved by the Court; or (b)\a Claim as to which, if a proof of Claim has been Filed by the Claims Bar Date or has otherwise been deemed 8 6159C/10566.9 timely Filed under applicable law, an objection has been Filed by the Debtor or any other party in interest and which objection, if timely Filed, has not been withdrawn on or before any date fixed by the Plan or order of the Court for Filing such objections and such objection has not been denied by a Final Order. Prior to the time that an objection has been or may be timely Filed, for the purpose of the Plan, a Claim asserted in a proof of Claim shall be considered a Disputed Claim if: (a)\the amount of the Claim specified in the proof of Claim exceeds the amount of any corresponding Claim scheduled by the Debtor in its Schedule of Liabilities; (b)\any corresponding Claim in the Debtor's Schedule of Liabilities has been scheduled as disputed, contingent or unliquidated, irrespective of the amount scheduled; or (c)\no corresponding Claim has been scheduled by the Debtor in its Schedule of Liabilities. As to any Disputed Claim, only the portion thereof which either (a) exceeds the amount of any corresponding Claim scheduled by the Debtor in its Schedule of Liabilities or (b) is asserted by Debtor in objections filed in connection therewith as disputed, contingent or unliquidated shall be deemed the "disputed portion" of such Disputed Claims. 1.38. "Disputed Interest" shall mean any Interest in the Debtor and as to which an objection has been Filed by the Debtor or any other party in interest and which objection, if timely Filed, has not been withdrawn on or before any date fixed by the Plan or by order of the Court for Filing such 9 6159C/10566.9 objections and such objection has not been denied by a Final Order. 1.39. "District Court" shall mean the United States District Court for the Central District of California. 1.40. "Effective Date" shall mean, and shall occur on the later of (a) the 11th day after the entry of the Confirmation Order; (b) August 1, 1995; or (c) such later date as may be mutually agreed by the Debtor and the Creditors' Committee, with notice and an opportunity to object, to all parties requesting special notice, unless the effectiveness of the Confirmation Order has been stayed or vacated, in which case the Effective Date shall be the later of the 11th day after the entry of the Confirmation Order or such date thereafter when any stay of the effectiveness of the Confirmation Order has expired or otherwise terminated. 1.41. "Entity" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, unincorporated organization, estate, trust, governmental unit or other entity including the Debtor and the U.S. Trustee, whether singular or plural, but does not include the Federal Deposit Insurance Corporation and/or the Resolution Trust Corporation, their successors or assigns. 1.42. "Estate" shall mean the estate created in this Bankruptcy Case pursuant to Section 541 of the Bankruptcy Code (11 U.S.C. \541). 1.43. "Executory Contracts" shall mean all leases 10 6159C/10566.9 and executory contracts within the meaning of Section 365 of the Bankruptcy Code (11 U.S.C. \365) including but not limited to and all leases or executory contracts that are modified by this Plan. 1.44. "Face Amount" shall mean with respect to any Claim the full stated liquidated amount claimed by the holder of such Claim in any proof of Claim timely filed by such holder plus the amount determined by (i) agreement of such holder and Reorganized Debtor, or (ii) by the Court as to the unliquidated portion, if any, of such Claim. 1.45. "Fee Application" shall mean the application of a professional person under Sections 330 or 503 of the Bankruptcy Code (11 U.S.C. \330 or 503) for allowance of compensation and reimbursement of expenses in the Chapter 11 Case. 1.46. "File" or "Filed" shall mean file or filed with the Court in this Case. 1.47. "Filing Date" shall mean September 16, 1994, the day this Case was filed with the Court. 1.48. "Final Order" shall mean an order as to which any appeal that has been or may be taken has been resolved or as to which the time for appeal has expired. 1.49. "Fiscal Year" shall mean the annual accounting period used by the Debtor which is a calendar year. 1.50. "General Partner" shall mean CIGNA Realty 11 6159C/10566.9 Resources, Inc. - Seventh, the sole General Partner of the Debtor. 1.51. "Insurance Policy" shall mean the collective insurance policies that provided coverage to the Debtor's Properties by the Insurers pursuant to the insurance contracts identified as follows: (1) Aetna Policy No. 007-MO-15631-SCA (the "Aetna Policy"); (2) Home Policy No. MLP 9109969 (the "Home Policy"); (3) Phoenix Policy No. E-CIP-P22456 (the "Phoenix Policy"); and (4) Lexington Policy No. 8690158 (the "Lexington Policy"). 1.52. "Insured Claim" shall mean the Claim arising from the damage to Sherman Oaks from the Northridge earthquake and any other claims covered by the Debtor's Insurance Policy. 1.53. "Insurers" shall collectively mean the Aetna Life Insurance Company ("Aetna"), Home Insurance Company ("Home"), Phoenix Assurance Company of New York ("Phoenix") and Lexington Insurance Company ("Lexington"). 1.54. "Interest" shall mean the rights of a partner (general or limited) arising from his, her or its status as an Equity Interest holder. 1.55. "LIBOR" shall mean the London Inter-Bank Offering Rate which is published daily in the Wall Street Journal. 12 6159C/10566.9 1.56. "Maxim" shall mean Maxim Property Management, formerly known as Prometheus Management Group, an independent contractor managing the Amberway Apartments for CAL 7 pursuant to the Maxim Management Agreement. 1.57. "Maxim Management Agreement" shall mean the Management Agreement dated May 1, 1992, by and between California Seven Associates Limited Partnership ("Owner"), and Promethius Management Group, as supplemented and amended from time to time. 1.58. "Objection Deadline" shall mean the date by which Objections to Claims shall be filed with the Bankruptcy Court and served upon the respective holders of each of the Claims as provided in Section 11.01 of the Plan. 1.59. "Operating Properties" shall mean the following five (5) apartment complexes and related site improvements owned and operated by CAL 7 that are currently leased and have tenants as of the Confirmation Date: (1) Amberway Apartments 489 S. Chatham Circle Anaheim, California (2) Pacifica Club 6700 Warner Avenue Huntington Beach, California (3) Oakwood Apartments (West Los Angeles) 3636 Sepulveda Blvd. Los Angeles, California (4) Mission Bay East 3883 Ingraham Street San Diego, California (5) Arbor Park Apartments 859 N. Mountain Avenue Upland, California 13 6159C/10566.9 1.60. "Other Priority Claims" shall mean a Claim which is entitled to priority under Section 507 of the Bankruptcy Code (11 U.S.C. \507) other than a Claim entitled to priority under Sections 507(a)(1), 364(c)(1) or 507(a)(7) of the Bankruptcy Code (11 U.S.C. \507(a)(1) or 507(a)(7)). 1.61. "Partnership Units" shall mean the limited partnership voting securities issued by CAL 7 and currently held by the limited partners and by the General Partner. 1.62. "Plan" shall mean this Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code for California Seven Associates Limited Partnership, Debtor and Debtor in Possession, Proposed by the Debtor, Dated April 25, 1995, including any amendment or modification thereto, which Plan shall also constitute a Plan of Reorganization within the meaning of Section 368(a)(1) of the Internal Revenue Code (26 U.S.C. \368(a)(1)). 1.63. "Plan Proponent" shall mean the Debtor and such other entities which, by appropriate pleadings filed in the Case prior to the Confirmation Date, join as Plan Proponents. 1.64. "Professional Persons" shall mean an Entity retained or to be compensated pursuant to Sections 327, 328, 330, 503(b) or 1103 of the Bankruptcy Code. 1.65. "Properties" shall mean the Operating Properties plus Sherman Oaks property. 1.66. "Pro Rata" shall mean, proportionately, based 14 6159C/10566.9 on the percentage amount of the distribution made on account of a particular Allowed Claim or Allowed Interest and the distributions made on account of all Allowed Claims or Allowed Interests of the Class in which the particular Allowed Claim or Allowed Interest is included. 1.67. "R&B" shall mean R&B Apartment Management Company, Inc., an independent contractor managing the Arbor Park Apartments, Pacifica Club Apartments and Oakwood Management Company, a division of R&B Realty Group, independent contractor managing Oakwood Apartments (West Los Angeles), Sherman Oaks Apartments, and Mission Bay East Apartments pursuant to the R&B Management Agreements. 1.68. "R&B Management Agreements" shall mean the following Management Agreements which have been supplemented or amended from time to time: 1. Management Agreement, Arbor Park Apartments, Upland, California, dated May 1, 1991; 2. Management Agreement, Pacifica Club Apartments, dated May 1, 1992; 3. Second Amendment to Management and Leasing Agreement dated August 1992; 4. First Amendment to Management and Leasing Agreement dated January 1, 1991; and 5. Management and Leasing Agreement dated January 30, 1985. 1.69. "Reorganized Debtor" shall mean the Debtor's 15 6159C/10566.9 partnership entity resulting from the Plan on and after the Effective Date. 1.70. "Schedules" shall mean the Schedules of Assets and Liabilities and the Statement of Financial Affairs filed by the Debtor in this Case, together with any amendments thereto. 1.71. "Secured Claim" shall mean a Claim secured by a lien on property of the Debtor, which lien is valid, perfected and enforceable under applicable law and which is not subject to avoidance under the Bankruptcy Code or other applicable non-bankruptcy law and which is duly established in the Case, but only to the extent of the value of the Collateral that secures payment of the Claim. 1.72. "Sherman Oaks" shall mean the Oakwood Apartment complex located at 4500 Woodman Avenue, Sherman Oaks, California, that was damaged in the Northridge earthquake on January 17, 1994. 1.73. "Stablization of Occupancy" shall mean an average physical occupancy for at least 90 days of 90% or more. 1.74. "Tax Claim" shall mean Claims of the kind specified in Section 507(a)(7) of the Bankruptcy Code (11\U.S.C. \507(a)(7)). 1.75. "Term of the Plan" shall mean the period of time commencing on the Effective Date and ending on the date of the final payment due under the plan. 1.76. "Trade Claimants" shall mean the holders of 16 6159C/10566.9 Claims for goods and services rendered to or for any of the Properties, including but not limited to the Claims of all vendors, suppliers, contractors, R&B and Maxim. 1.77. "Travelers" shall mean The Travelers Life Insurance Company, a secured Creditor of the Debtor. 1.78. "Travelers Secured Claim" shall mean the Secured Claim held by Travelers evidenced by the original note secured by deeds of trust dated December 20, 1984 in the principal amount of $100,000,000, which debt was originally incurred on or about December 20, 1984 and was assumed by the Debtor on or about January 31, 1985 with related security documents, as supplemented and amended, together with all related documents which are referenced in the Proof of Claim filed by Travelers on or about January 23, 1995. 1.79. "Unclaimed Property" shall mean any Cash or Reorganization Securities which are unclaimed one year following the Effective Date. Unclaimed Property shall include: (a) checks (and the funds represented thereby), which have been returned as undeliverable after having been properly posted to the forwarding address most recently provided to the Debtor or Reorganized Debtor; (b) funds for checks which have not been paid; (c) checks (and the funds represented thereby), which are not mailed or delivered because of the absence of a proper address in which to mail or deliver such property; and 17 6159C/10566.9 (d) interest on Cash constituting Unclaimed Property. 1.80. "Unsecured Claim" shall mean any Claim that is not an Administrative Claim, an Administrative Convenience Claim, an Other Priority Claim, a Tax Claim or a Secured Claim. B. INTERPRETATION, RULES OF CONSTRUCTION AND OTHER TERMS. Any term used in this Plan that is not defined herein, whether in this Article I or elsewhere, but that is used in the Code or the Bankruptcy Rules has the meaning assigned to that term in the Code or the Bankruptcy Rules and shall be construed in accordance with the Rules of Construction thereunder. Any capitalized term used in this Plan that is not defined herein, but that is defined and used in the Disclosure Statement has the meaning ascribed to that term in the Disclosure Statement. The words "herein," "hereof," "hereto," "hereunder" and others of similar importance refer to the Plan as a whole and not to any particular section, subsection or clause contained in the Plan. Unless specified otherwise in a particular reference, a reference in this Plan to an article or a section is a reference to that article or section of this Plan. Any reference in this Plan to a document or instrument being in a particular form means that the document or instrument shall be in substantially such form. Any reference in this Plan to an existing document or 18 6159C/10566.9 instrument means such document or instrument as it may have been amended, modified or supplemented from time to time. As contextually appropriate, each term stated in either the singular or plural shall include both the singular and the plural. In addition to the foregoing, the rules of construction set forth in Section 102 of the Code (11 U.S.C. \102) shall apply to this Plan. In computing any period of time prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) shall apply. All exhibits to this Plan are incorporated into this Plan, and shall be deemed to be included in this Plan, regardless of when filed with the Court. ARTICLE II CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 2.01. Division of Claims. For purposes of organization, voting and all confirmation matters, except as otherwise provided herein, all Claims (except for Administrative Claims and priority Tax Claims) and all Equity Interests shall be classified as set forth in this Article II of the Plan. 2.02. Administrative Claims and Priority Tax Claims. As provided in Section 1123(a)(1) of the Bankruptcy Code (11 U.S.C. \1123(a)(1)), Administrative Claims and priority Tax Claims against the Debtor shall not be classified 19 6159C/10566.9 for purposes of voting or receiving distributions under the Plan. Rather, all such Claims shall be treated separately as unclassified Claims pursuant to the terms set forth in Article IV of the Plan. 2.03. Allowed Claims and Interests. A Claim or Interest is in a particular Class only to the extent the Claim or Interest is an Allowed Claim or Allowed Interest as defined herein. 2.04. Classification of Claims and Interests. Claims against the Estate and Interests in the Debtor are classified as follows: (a) Class 1 - Class 1 consists of the Travelers Secured Claim; (b) Class 2 - Class 2 consists of the Congen Claim; (c) Class 3 - Class 3 consists of the claims of any other secured or undersecured claimants; (d) Class 4 - Class 4 consists of the Other Priority Claims; (e) Class 5 - Class 5 consists of Administrative Convenience Claims against the Debtor; (f) Class 6 - Class 6 consists of all Unsecured Claims of Trade Claimants (except Administrative Convenience Claims in Class 5, undersecured or Secured Claimants in Class 3, Tenants' Claims in Class 7 and 20 6159C/10566.9 claims of the General Partner and other claimants in Class 8); (g) Class 7 - Class 7 consists of the Allowed Unsecured Claims of the tenants of the Debtor residing in the Operating Properties; (h) Class 8 - Class 8 consists of the Allowed Unsecured Claims of the General Partner and of CIGNA Financial Partners, Inc. and CIGNA Investments, Inc.; and (i) Class 9 - Class 9 consists of the Allowed Interests of the General Partner and the limited partners of the Debtor. ARTICLE III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS 3.01. Unimpaired Classes of Claims and Interests. The class consisting of Other Priority Claims (Class 4) is not impaired under the Plan. This class is deemed to have accepted the Plan under the provisions of Section 1126(f) of the Bankruptcy Code (11 U.S.C. \1126(f)). The Class consisting of the Allowed Unsecured Claims of the tenants of the Debtor (Class 7) is not impaired because their leases will be assumed and their security deposits paid according to the terms of their leases. This Class is deemed to have accepted the Plan under the provisions of Section 1126(f) of the Bankruptcy Code (11\U.S.C. \1126(f)). The Plan Proponent shall not solicit acceptances of the Plan from Classes 4 and 7. 21 6159C/10566.9 3.02. Impaired Classes of Claims and Equity Interests. Classes 1, 2, 3, 5, 6, 8 and 9 are impaired under the Plan. The Plan Proponent shall seek acceptances of the Plan from these Classes. ARTICLE IV TREATMENT OF CERTAIN UNCLASSIFIED ADMINISTRATIVE, STATUTORY FEES AND TAX CLAIMS 4.01. Administrative Claims. (a) Allowed Administrative Claims Against the Debtor. Subject to the Bar Date provisions of Paragraph (b) of this Article IV, the holders of Allowed Administrative Claims against the Debtor, unless otherwise agreed, are entitled to priority under Section 507(a)(1) of the Bankruptcy Code. An Entity entitled to payment pursuant to Sections 546(c) or 553 of the Bankruptcy Code, and an Entity entitled to payment of administrative expenses pursuant to Sections 503 and 507(a) of the Bankruptcy Code, shall receive on account of such Allowed Administrative Claims or administrative expenses unless otherwise agreed, Cash in the amount of such Allowed Administrative Claims or administrative expenses on the Effective Date. Notwithstanding the foregoing, outstanding operating payables incurred in the ordinary course of business of the Debtor shall be paid according to their terms. Professional fee expenses for services rendered after the Effective Date shall be paid by Reorganized Debtor in the ordinary course of business. 22 6159C/10566.9 (b) Bar Date for Filing Applications for Allowance and Payment of Administrative Expense Claims. Applications for allowance and payment of Administrative Claims must be filed on or within 90 days after the Effective Date. The Court shall not consider any applications for allowance of Administrative Claims filed after such date. Reorganized Debtor and all other interested parties shall have until 30 days after the filing of such Administrative Claims to object to such Administrative Claims. All Administrative Claims that become Allowed Administrative Claims after the Confirmation Date will be treated like other Allowed Administrative Claims and will be paid on the later of the Effective Date or within 30 days after becoming an Allowed Administrative Claim unless otherwise ordered by the Court. Any of such Claims which are Allowed but which are not determined to be Administrative Claims will be treated as Class 6 Claims. 4.02. Payment of Statutory Fees. On or before the Effective Date, all fees payable pursuant to Section 1930 of Title 28, United States Code, 28 U.S.C. \1930, as determined by the Court at the Confirmation Hearing, shall be paid in Cash equal to the amount of such Administrative Claim. 4.03. Tax Claims. All Tax Claims shall be paid by the Debtor in full, in Cash, on the Effective Date or pursuant to their terms; provided, however, that Reorganized Debtor may 23 6159C/10566.9 elect to pay a Tax Claim in deferred Cash payments of a value as of the Effective Date equal to the Allowed Amount of such Tax Claim payable over a period (a) not exceeding six years from the date of assessment if an assessment has been made prior to the Effective Date, and (b) not exceeding six (6) years from the Effective Date if no assessment has been made prior to such date (with interest at the rate of 5.25% from the Effective Date of the Plan) or as the holder of such Tax Claim and Reorganized Debtor may otherwise agree. 4.04. Disallowance of Certain Interest and Penalties on Tax Claims. Holders of Tax Claims shall not receive any payment on account of postpetition interest on, or penalties with respect to, or arising in connection with, such Tax Claims, except as allowed by a Final Order. The Plan, the Confirmation Order and Section 1141(d) of the Bankruptcy Code provide for the discharge of any such Claims for postpetition interest or penalties. Holders of Tax Claims shall not assess or attempt to collect such interest or penalties from the Debtor, the Estate, Reorganized Debtor or from any of its respective properties. 4.05. Disallowance of Special Taxes. The issuance, transfer, or exchange of a security as defined under the Bankruptcy Code or applicable law, or the making or delivery of any instrument of transfer under this Plan, shall not be taxed under any state or local law imposing a stamp tax or similar tax as provided in Bankruptcy Code Section 1146. 24 6159C/10566.9 ARTICLE V TREATMENT OF UNIMPAIRED CLASSES 5.01. Class 4 Claims. Class 4 Claims (the Other Priority Claims) if any, shall be paid in Cash in full on the Effective Date or as otherwise agreed between the Debtor and such claimant. 5.02. Class 7 Claims. Class 7 Claims, all Unsecured Claims of the Tenants of the Operating Properties, shall have their leases assumed on the Effective Date and shall be entitled to receive their security deposits pursuant to the terms of their leases. ARTICLE VI TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN 6.01. Class 1 Claims. The holder of the Class 1 Claim (the Travelers Secured Claim in the approximate amount of $97,880,497.00) shall receive payment in full of its Allowed Secured Claim, evidenced by the Third Note Modification Agreement (the "Modified Note"), a form of which is attached to the Plan as Exhibit "D". The Modified Note generally contains the same terms as the original Travelers' Note except as modified by the terms of this Plan. Any accrued and unpaid postpetition interest to which the Claimant in Class 1 is entitled shall be added to the principal amount of the Modified Note. The addition of accrued interest to principal shall not include default interest, late charges or attorneys' fees unless allowed under Section 506(b) of the Bankruptcy Code or 25 6159C/10566.9 unless otherwise ordered by the Bankruptcy Court. The repayment of the debt evidenced by the Modified Note shall be secured by first liens on the Properties evidenced by the six existing first deeds of trust as modified. Travelers shall receive a Third Deed of Trust Modification Agreement (the "Modified Deeds of Trust") for each of the Properties. A form of the Modified Deeds of Trust is attached to the Plan as Exhibit "D". The Modified Deeds of Trust shall contain the following release prices for each of the Properties (subject to proportional increases for any accrued and unpaid post-petition interest for which Travelers is entitled and adjustments for payments made): Amberway Apartments $12,550,000 Arbor Park Apartments $8,410,000 Mission Bay East Apartments $25,500,000 Oakwood Apartments - West Los Angeles $18,600,000 Pacifica Club Apartments $16,000,000 Sherman Oaks Apartments $16,820,497 From the Effective Date until the completion of the repairs and Stabilization of Occupancy of Sherman Oaks (approximately 18 months from the Effective Date) the debt attributable to Sherman Oaks shall be secured by the Sherman Oaks Apartments with a value of $14,900,000 and by the cash balance maintained in the Reorganized Debtor's bank account. For the approximate 18 month period, monthly payments in 26 6159C/10566.9 arrears of interest only commencing at the rate of 8.125% and adjusted monthly as described hereafter on the principal amount of $14,900,000 shall be paid commencing on the tenth day of the second month after the Effective Date. The interest rate shall be adjusted monthly on the first day of the month for the month in which interest is accruing based upon the 30-day LIBOR rate on that date plus 2%. Upon Stablization of Occupancy of Sherman Oaks, the $14,900,000 plus interest commencing at the rate of 10.3% and adjusted monthly as described hereafter with a 30-year amortization schedule shall be paid in monthly payments. The rate of interest shall be adjusted monthly on the first day of the month for the month in which interest is accruing based upon the 30-day LIBOR rate on that date plus 4.175%. The balance of the Allowed Secured Claim in the total approximate amount of $82,980,497.00 evidenced by the Modified Note secured by first deeds of trust on the five Operating Properties shall earn interest commencing at the rate of 10.3% and adjusted monthly as described hereafter for the first 18 months commencing on the first day of the first month after the Effective Date. The payments of interest only shall be due and payable monthly in arrears by the tenth day of the month. Thereafter, interest commencing at the rate of 10.3% and adjusted monthly as described hereafter with a 30-year amortization schedule on the principal balance of the Modified Note shall be paid until December 31, 2004, when the total 27 6159C/10566.9 outstanding balance of the Modified Note shall be due and payable in full. Throughout the term, the interest rate shall be adjusted monthly on the first day of the month for the month in which interest is accruing based upon the 30-day LIBOR rate on that date plus 4.175%. All payments made to Travelers postpetition shall be credited against the amount of the Modified Note pro rata. The Debtor shall maintain the Properties in good and tenantable condition using funds for capital expenditures with regard to the five Operating Properties and after Stabilization of Occupancy at Sherman Oaks, as estimated in the Debtor's Projections attached to the Plan. These amounts shall be expended in the ordinary course of business to maintain the five Operating Properties and Sherman Oaks in a good and tenantable condition. The Reorganized Debtor may prepay the Modified Note to Travelers at any time in whole or in part without penalty. The holder of the Allowed Class 1 Claim shall retain its liens on the Properties to secure the Modified Note on the same terms and conditions as set forth in the original Travelers security documents except as modified in the Plan. The forms of the Modified Note, the Modified Deeds of Trust (Reorganized Debtor shall execute six Modified Deeds of Trust in the same form); and the Second Amendment to Security Agreement are attached to the Plan as Exhibit "D". The Reorganized Debtor may obtain new financing to 28 6159C/10566.9 replace the current Travelers' loan on Sherman Oaks through the City of Los Angeles and from FNMA or their designee in the approximate amount of $17,820.497. The City of Los Angeles may issue tax-exempt bonds to provide a financing program for the replacement financing of Sherman Oaks in the approximate amount of $1,000,000 as well as the release price on Sherman Oaks in the approximate amount of $16,820,497. The Debtor anticipates that the replacement financing through the City and FNMA may occur in eighteen months, from the Effective Date, after the repair and Stablization of Occupancy of Sherman Oaks. Upon payment of the release price for Sherman Oaks, Travelers shall release its first mortgage lien on Sherman Oaks. 6.02. Class 2 Claims. The holder of Class 2 Claim (the Congen Claim in the approximate amount of $15,600,000) shall receive in full and complete satisfaction of its claim cash paid on the Effective Date in the amount of $50,000.00 and shall receive sixty-six and two-thirds (66-2/3) Partnership Units. 6.03. Class 3 Claims. The holder(s) of the Class 3 Claims (all other secured claimants and undersecured claimants) shall receive in full and complete satisfaction of their claims, modified notes in the Allowed Amounts of their claims. The modified notes shall provide for interest at the rate of 10.3% per annum based on a 30-year amortization of the principal balance of the modified notes until December 31, 29 6159C/10566.9 2004, when the total outstanding balance of the modified notes shall be due and payable in full. The interest rate shall be adjusted monthly on first day of each month for the month in which interest is accruing following the Effective Date based upon LIBOR plus 4.175%. The Secured Claimants, if any, in Class 3 shall retain their liens, in accordance with their priority. The undersecured Claimants, if any, shall release their liens on the undersecured portion of their Claim. 6.04. Class 5 Claims. Class 5, all Unsecured Allowed Claims of the Debtor of $1000 or less or such Claims that are voluntarily reduced to $1000 (the Administrative Convenience Class in the approximate amount of $41,000.00), shall receive Cash for their Allowed Claims equal to the amount of such Claim not to exceed $1000 as follows: Fifty percent (50%) of such claim shall be paid on the Effective Date and Fifty percent (50%) shall be paid seven months after the Effective Date. 6.05. Class 6 Claims. The holders of Class 6 Claims (the Unsecured Creditors of the Debtor with Allowed Claims in the approximate aggregate amount of $460,500.00) shall receive payment in full for their Allowed Claims in Cash to be paid in annual payments over of term of three (3) years plus interest at the rate of 5.25% per annum. The first payment shall be made on the Effective Date. 6.06. Class 8 Claims. The holders of Class 8 Claims (the Allowed Claims of the affiliates of the General 30 6159C/10566.9 Partner) shall have their prepetition Unsecured Claims discharged on the Effective Date. 6.07. Class 9 Interests. The holders of Allowed Class 9 Interests shall retain their partnership interests in the Debtor, subject to the treatment of Class 2 as hereinbefore described. ARTICLE VII MEANS FOR EXECUTION OF PLAN AND CONDITIONS TO PLAN BECOMING EFFECTIVE 7.01. Partnership Structure. The Debtor, upon the Effective Date, shall become the Reorganized Debtor, and shall take all appropriate actions set forth in the Plan. On and after the Effective Date, the control of the Reorganized Debtor shall be determined according to the Limited Partnership Agreement which is attached hereto as Exhibit "C" and applicable non-bankruptcy law as modified by this Plan. 7.02. Conditions to Plan Becoming Effective and Events to Occur on the Effective Date. The Plan shall not be consummated and the Effective Date shall not occur until each of the following conditions have been satisfied or such conditions occur on the Effective Date: (a) The Confirmation Order shall have been entered by the Bankruptcy Court in a form satisfactory to the Debtor; (b) The Allowed Priority Claims (Class 4) shall receive payment in full; and 31 6159C/10566.9 (c) All Administrative Convenience Claims (Class 5) and Allowed Unsecured Claims in Class 6 shall receive their first pro rata payment. 7.03. Repair of Sherman Oaks. The Reorganized Debtor, in its sole discretion, shall rebuild, repair and/or reconstruct (hereinafter collectively referred to as "Repair") Sherman Oaks. The Reorganized Debtor, in its sole discretion, may enter into contracts, including but not limited to construction contracts, for the Repair of Sherman Oaks. The Insurers are directed to immediately pay any and all insurance proceeds from the Insurance Policy directly to the Debtor as sole payee. The Reorganized Debtor shall have the right, in its sole discretion, to use the proceeds from the Insurance Policy, including but not limited to the business interruption/rent loss proceeds, to Repair Sherman Oaks. The Debtor shall further have the right to use any and all insurance proceeds from the Insurance Policy to pay, including, but not limited to the deductible required under the Insurance Policy, and any and all upgrades of the Sherman Oaks property not otherwise covered by the Insurance Policy. Travelers shall not interfere in any way with the Repair of Sherman Oaks. 7.04. Vesting of Assets in Reorganized Debtor. During the period following the entry of the Confirmation Order, the Debtor shall continue as Debtor in Possession, until the Effective Date and then shall operate and conduct its business as the Reorganized Debtor. Except as otherwise 32 6159C/10566.9 provided in the Plan, on the Effective Date, all property of the Estate, and any property acquired by the Debtor or any property treated under any provision of the Plan, shall vest in Reorganized Debtor, free and clear of all Claims, liens, charges, other encumbrances and Interests except for the Claims, liens and security interests specifically retained in the Plan. Reorganized Debtor may operate its business and may use, acquire and dispose of cash and property and compromise or settle any Claims or Interest without supervision or approval by the Court and free of any restrictions of the Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and the Confirmation Order. Without limiting the foregoing, Reorganized Debtor may pay after the Effective Date the charges that the Debtor incurs after the Confirmation Date for Professionals' fees, disbursements, expenses or related support services without application to the Court. 7.05. The Reorganized Debtor's Obligations Under the Plan. Reorganized Debtor shall perform all of the duties and obligations under the Plan, including obligations to pay or otherwise satisfy the Allowed Claims. All Cash necessary for Reorganized Debtor to make payments pursuant to the Plan shall be obtained from the Debtor's existing Cash balances, cash in accounts, payments from the Insurers, interest accrued or to accrue, funds to be received or from the operations of the Debtor or Reorganized Debtor and any funds received from or 33 6159C/10566.9 through the City of Los Angeles. Reorganized Debtor may enter into leases of the Property and may seek to refinance any individual Property as it deems necessary or appropriate. 7.06. Unclaimed Property. Unclaimed Property shall be held and maintained by Reorganized Debtor or its Agent, if any. If the Entity entitled to any such Cash or Non-Cash Unclaimed Property is located within one (1) year after the Effective Date, such Unclaimed Property, together with any Cash or non-Cash dividends excluding interest earned thereon, shall be paid and distributed to such Entity. If, however, such Entity cannot be located within one (1) year following the Effective Date, any such Cash Unclaimed Property and Unclaimed Property and related interest thereon, shall become the property of Reorganized Debtor. 7.07. Implementation of Plan Under State Partnership Law. The General Partner of the Debtor is authorized and directed to take all necessary or appropriate action under state partnership statutes applicable to the Debtor to implement the Plan, including amending the limited partnership agreement of the Debtor which, upon the Effective Date, is necessary to implement the plan. The General Partner of the Debtor shall take all such actions without meetings or other action by the limited partners of the Debtor. The General Partner of the Debtor and/or the Reorganized Debtor, may designate one or more officers of the General Partner to execute documents and certificates and to take all other 34 6159C/10566.9 actions authorized pursuant to this Plan. Without limiting the generality of the foregoing, the actions authorized under this Section of the Plan may include: (a) amending the partnership agreement of the Debtor, which, upon the Effective Date, shall become the Reorganized Debtor; and (b) filing documents and certificates and taking other actions with respect to the Secretary of State or other appropriate officials of each applicable state. From and after the Effective Date, the actions of the General Partner of the Reorganized Debtor (except actions ratifying any of the actions specified above in this Section 7.07 to authorize and implement the express provisions of this Plan) shall be subject to all applicable state partnership laws. 7.08. New Financing. Subsequent to the preliminary hearing on the Motion for Relief from the Automatic Stay filed by Travelers, the Debtor met with David Perel, Housing Finance Officer for the Los Angeles Housing Department, City of Los Angeles, concerning the City's financial assistance in repairing Sherman Oaks. On or about March 16, 1995, counsel for the Debtor received correspondence from Mr. Perel indicating the City's willingness to assist the Debtor in repairing Sherman Oaks. Specifically, the City Housing Department is tentatively prepared to provide at least $300,000 in direct construction funding to cover a portion of the insurance deductible on Sherman Oaks. Additionally, in conjunction with a guaranty to which the Federal National 35 6159C/10566.9 Mortgage Association ("FNMA") has tentatively agreed, the City is tentatively prepared to issue tax-exempt bonds to pay off both the deductible portion of the reconstruction financing (in the approximate amount of $1,000,000) as well as the first mortgage loan on Sherman Oaks held by Travelers (in the approximate amount of $16,820,497). The Debtor is in the process of finalizing the tentative agreement with the City concerning possible financing in the total approximate amount of $17,820,497. A portion of the financing (approximately $1,000,000) will be used to pay the insurance deductible necessary to repair Sherman Oaks. The remaining amount will be used to pay off the first mortgage note held by Travelers on Sherman Oaks (in the approximate amount of $16,820,497). In consideration for the $17,820,497, the City of Los Angeles and/or FNMA shall receive a note in the approximate amount of $17,820,497. The note will be secured by a first deed of trust on Sherman Oaks. Terms of the repayment will be more favorable than the current loan on Sherman Oaks with Travelers with interest estimated to be at the rate of 7.5% per annum. ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS 8.01. Distributions by Reorganized Debtor. All distributions to be made under the Plan shall be made by Reorganized Debtor. Reorganized Debtor may employ or contract 36 6159C/10566.9 with other Entities to assist in or make the distributions required by the Plan. Reorganized Debtor shall serve without bond. 8.02. Date of Distributions for Claims Allowed as of the Effective Date. Except as otherwise provided in this Plan, or as may be ordered by the Court, distributions of Cash to Claims Allowed as of the Effective Date and the nondisputed amount of Disputed Claims and Disputed Interests shall be made no later than ten (10) days following the Effective Date. Authorized distributions to Classes 4, 5 and 6 shall be divided pro rata among the claimants in such Classes and shall be deemed made as of the Effective Date if made on the Effective Date or as promptly thereafter as practicable, but in any event no later than ten (10) days after the Effective Date. Distributions on account of the disputed portion of Disputed Claims and Disputed Interests allowed after the Effective Date shall be made pursuant to Article\XI. The Reorganized Debtor shall establish a disputed claims reserve for the disputed claims of Classes 4, 5 and 6 as set forth in Article XI of the Plan. 8.03. Delivery of Distributions. (a) General. Subject to Bankruptcy Rule 9010, distributions and deliveries to each holder of an Allowed Claim shall be made at the address of such holder as set forth on the proof of Claim filed by such holder (or at the last known address of such holder if no proof of 37 6159C/10566.9 Claim is Filed or if the Debtor has been notified of a change of address), as of the last business day prior to the Effective Date. If any holder's distribution is returned as undeliverable, no further distribution to such holder shall be made unless and until Reorganized Debtor is notified of such holder's then current address, at which time all missed distributions shall be made to such holder without interest. Reorganized Debtor shall be under no obligation to attempt to locate the holder of any Allowed Claim or to recognize any purported transfer or encumbrance on the rights of holders of Allowed Claims after the Confirmation Date. Amounts of undeliverable distributions attempted by Reorganized Debtor shall be retained by Reorganized Debtor until such distributions are claimed or until such distributions become Unclaimed Property. All Claims for undeliverable distributions shall be made on or before the second anniversary of the Effective Date. After such date, all Unclaimed Property shall be treated as specified in Section 7.05 of this Plan and the Claim of any holder with respect to such property shall be discharged and forever barred. (b) Means of Cash Payments. Cash payments made pursuant to the Plan shall be in United States dollars by checks drawn on the domestic bank selected by the Debtor or Reorganized Debtor, or by wire transfer from a domestic bank, at the option of either Debtor or 38 6159C/10566.9 Reorganized Debtor; provided, however, that cash payments made to foreign trade creditors holding Allowed Claims may be paid, at the option of the Debtor or Reorganized Debtor, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. (c) De Minimis Cash Distributions. No cash payment of less than five dollars ($5.00) shall be made to any holder of a Claim unless a request therefor is made in writing to Reorganized Debtor. 8.04. Setoff. Reorganized Debtor shall, pursuant to Section 558 of the Code, or common law rights of setoff and/or recoupment, in the ordinary course of business, setoff or assert recoupment against any Allowed Claim, and the distributions to be made pursuant to the Plan on account of such Claim, the claims, rights and causes of action of any nature that the Debtor or Reorganized Debtor may hold against the holder of such Claim; provided, however, that, unless otherwise provided herein, neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtor or Reorganized Debtor of any such claims, rights and causes of action that the Debtor or Reorganized Debtor may possess against such holder. ARTICLE IX EXECUTORY CONTRACTS 9.01. Assumption, Rejection and Assignment of Executory Contracts. 39 6159C/10566.9 (a) Executory Contracts. All Executory Contracts to which the Debtor is a party on the Confirmation Date shall be assumed on the Effective Date and assigned to Reorganized Debtor except the executory contracts listed in Exhibit "B". (b) Assumption of Residential Tenant Real Estate Leases. All residential tenant leases in which the Debtor is lessor shall be assumed on the Effective Date and assigned to Reorganized Debtor. (c) Management Agreements. Notwithstanding anything else in this Plan, the Debtor shall reject the R&B Management Agreement and the Maxim Management Agreement effective as of the Effective Date. The Reorganized Debtor shall enter into new management agreements with R&B and Maxim on or after the Effective Date with terms consistent with this Plan. (d) Payment of Cure Amounts. Any monetary amounts by which each Executory Contract, the unexpired leases or unexpired lease, as modified, to be assumed under Sections 9.01(a) and (b) of the Plan is in default shall be satisfied, pursuant to Section 365(b)(1) of the Code, at Reorganized Debtor's option or the assignee of the Debtor: (1)\by payment of the default amount in Cash on the Effective Date, (2)\by payment of the default amount in quarterly Cash installments commencing on the Effective Date and continuing for one (1) year or (3)\on 40 6159C/10566.9 such other terms as are agreed to by the parties to such Executory Contract or unexpired lease. In the event of a dispute regarding the amount of any cure payments, the ability of Reorganized Debtor or any assignee to provide "adequate assurance of future performance" (within the meaning of Section 365 of the Code) under the contract or lease to be assumed, or any other matter pertaining to assumption, the cure payments required by Section 365(b)(1) of the Code shall be made following the entry of a Final Order resolving the dispute and approving the assumption. (e) Remaining Executory Contracts and Leases. All the Executory Contracts that are in effect on the Confirmation Date, not identified in Sections 9.01(a), (b) and (c) above and which have not been previously rejected, or for which there is not pending a motion to reject, on or prior to the Confirmation Date, shall be deemed rejected by the entry of the Confirmation Order. (f) Rejected Executory Contracts and Proofs of Claim. The Court shall determine the dollar amount, if any, of the Claim of any Entity claiming damages by the rejection of such Executory Contracts under Section 9.01(c) of this Article IX, provided such Entity files a proof of Claim in the Bankruptcy Court on or before the Effective Date. Objections to any such proof of Claim shall be filed by Reorganized Debtor not later than 41 6159C/10566.9 thirty (30) days after the Effective Date, and the Court shall determine any such objection. To the extent such damages are determined by a Final Order of the Court, such Entity shall become a Class 6 Claimant for such amount except as allowed by Final Order as an Allowed Administrative Claim. Any Entity who has a Claim for rejection of an Executory Contract or Lease who does not file a proof of Claim therefor on or before the Effective Date shall not receive any distribution under this Plan and shall forever be barred from asserting any Claims against the Debtor, Reorganized Debtor, any successor to the Debtor or any property of the Estate. ARTICLE X COMPOSITION OF GENERAL PARTNER AND POSTCONFIRMATION MANAGEMENT 10.01. General Partner. The General Partner of the Debtor shall continue to be CIGNA Realty Resources, Inc. - Seventh. The General Partner was incorporated in Delaware and is qualified to do business in the States of California and Connecticut. The General Partner's office is located at 900 Cottage Grove Road, South Building, Bloomfield, Connecticut 06002. The officers and directors of the General Partner are as follows: NAMES OF OFFICERS POSITION WITH THE AND DIRECTORS OF THE GENERAL PARTNER GENERAL PARTNER R. Bruce Albro Director Philip J. Ward Director John Wilkinson Director 42 6159C/10566.9 John D. Carey President, Controller Verne E. Blodgett Vice President, Counsel Joseph W. Springman Vice President and Assistant Secretary David C. Kopp Secretary Michael N. Sinisgalli Treasurer The officers and directors of the General Partner receive no current or proposed direct compensation from the Debtor or Reorganized Debtor in such capacities. However, certain officers and directors of the General Partner receive compensation from the General Partner and, or its Affiliates (but not from the Debtor or Reorganized Debtor) for services performed to the Debtor or Reorganized Debtor. The General Partner will however receive compensation from the Reorganized Debtor pursuant to the terms and conditions set forth in the Limited Partnership Agreement attached hereto as Exhibit "C". 10.02. Management. The management of the Property operations of the Reorganized Debtor shall be performed by Maxim and R&B as follows: (a) Maxim Management Agreement. Maxim shall continue to manage the Amberway Apartments for the Debtor and, then, the Reorganized Debtor. The Reorganized Debtor shall enter into a new management agreement with Maxim. The new management agreement shall provide for a management fee to Maxim in the amount of 3% of gross receipts plus the opportunity for an additional 1.5% incentive fee based upon certain revenues and expense goals. 43 6159C/10566.9 (b) R&B Management Agreement. R&B shall continue to manage the Mission Bay East, Arbor Park, West Los Angeles, Sherman Oaks and Pacifica Club properties. The Reorganized Debtor shall enter into a new management agreement with R&B. The new management agreement shall provide for a management fee to R&B for all five properties in the amount of 3% of gross receipts plus an opportunity for an additional 1.5% of incentive fee based upon certain revenue and expense goals. The New Maxim Management Agreement and the New R&B Management Agreements as set forth in detail the terms and conditions of the operational management of the Properties, including but not limited to the payment of management fees. ARTICLE XI PROVISIONS FOR THE RETENTION, ENFORCEMENT, SETTLEMENT OR ADJUSTMENT OF CLAIMS BELONGING TO THE DEBTOR OR TO THE ESTATE 11.01. Preservation and Handling of Claims. Unless otherwise provided herein, Reorganized Debtor shall retain and may enforce all Chapter 5 Causes of Action including but not limited to all rights pursuant to Sections 502, 510, 544, 545 and 546 of the Bankruptcy Code, all preference claims pursuant to Section 547 of the Bankruptcy Code not settled prior to or as a part of this Plan, all fraudulent transfer claims pursuant to Section 548 of the Bankruptcy Code or state law, all claims relating to postpetition transactions under Section 549 of the Bankruptcy Code, all claims recoverable under Section 550 of 44 6159C/10566.9 the Bankruptcy Code, and all claims against any third party on account of an indebtedness or any other claim owed to or in favor of the Debtor. Unless otherwise provided herein, such claims of the Debtor against third parties may be used by Reorganized Debtor, at its option, to offset any payment due to such Entity under this Plan. 11.02. Prosecution of Objections to Claims. Unless another date is established by the Court or this Plan, all objections to Claims except for all those Claims otherwise Allowed in the Plan shall be Filed and served on the holders of such Claims within thirty (30) days after the Effective Date. If an objection has not been Filed to the proof of Claim or a scheduled Claim that relates to a Disputed Claim by the objection bar dates established herein, the Claim to which the proof of Claim or scheduled Claim relates shall be treated as an Allowed Claim if such Claim has not been allowed earlier or Allowed by the Plan. For cause shown, the deadline to File objections to Claims may be extended by the Court after notice and opportunity to object has been given to all parties requesting requesting special notice. 11.03. Authority to Prosecute Objections. Except as otherwise set forth in the Plan, Reorganized Debtor shall have the authority to File objections, settle, compromise, withdraw or litigate to judgment objections to Disputed Claims. Except as otherwise set forth under the Plan, objections to Claims pending prior to the Confirmation Date may be prosecuted by the 45 6159C/10566.9 party which Filed same, if authorized to do so under applicable law. 11.04. Treatment of Disputed Claims. (a) Payments on Account of Disputed Claims. Notwithstanding any other provisions of the Plan, no payments or distributions shall be made on account of the disputed portion of any Disputed Claim or Interest until such disputed portion of the Disputed Claim or Disputed Interest becomes an Allowed Claim or an Allowed Interest, respectively, unless otherwise ordered by the Court. (b) Disputed Claims Reserves Distributions on Account of Disputed Claims, Once Allowed. A Disputed Claims Reserves shall be established for Classes 4 and 5 Claims. Cash held in the Disputed Claims Reserves shall be deposited in a segregated bank account in the name of Reorganized Debtor, for the benefit of potential claimants of such funds, and shall be accounted for separately by class. Reorganized Debtor may invest the cash held in any reserve in investment vehicles and accounts permitted under the Plan as selected in Reorganized Debtor's sole discretion regardless of approval or disapproval by beneficiaries of the Disputed Claims Reserve. Reorganized Debtor shall also place in the Disputed Claims Reserve any net return yielded from the investments held in such reserve pending distribution. Within thirty (30) days after the end of 46 6159C/10566.9 each quarter of a Fiscal Year following the Effective Date, Reorganized Debtor shall make all distributions on account of the disputed portion of any Disputed Claim that has become an Allowed Claim during the preceding quarter of a Fiscal Year in accordance with the treatment provided for in the Plan for that respective Claimant. Such distributions shall be made pursuant to the provisions of the Plan governing the applicable Class of Claims. ARTICLE XII MISCELLANEOUS 12.01. Discharge. Except as otherwise expressly provided in this Plan or the Confirmation Order, Confirmation of this Plan constitutes a discharge of the Debtor effective as of the Effective Date of any Claim and any "debt" (as that term is defined in Section 101(12) of the Bankruptcy Code), and the Debtor's liability in respect thereof is extinguished completely. Except as otherwise expressly provided in the Plan, all Claims and debts of the Debtor (whether reduced to judgment or not, liquidated or unliquidated, contingent or noncontingent, asserted or unasserted, fixed or not, matured or unmatured, disputed or undisputed, legal or equitable, known or unknown) that arose from any agreement of the Debtor entered into, or obligation of the Debtor incurred, before the Confirmation Date, or from any conduct of the Debtor prior to the Confirmation Date, or that otherwise arose before the 47 6159C/10566.9 Confirmation Date, including, without limitation, all interest, if any, on any such debts, whether such interest accrued before or after the Filing Date (including, without limitation, any liability of a kind specified in Sections 502(g), 502(h) and 502(i) of the Bankruptcy Code, whether or not a proof of Claim is filed or deemed filed under Section 501 of the Bankruptcy Code, such Claim is allowed under Section 502 of the Bankruptcy Code, or the holder of such Claim has accepted this Plan) are released and discharged as of the Effective Date of this Plan. 12.02. Revesting. Except as otherwise expressly provided in this Plan or the Confirmation Order, on the Effective Date, Reorganized Debtor shall be vested with all of the property of the Estate free and clear of all Claims, liens, encumbrances, charges and other interests of Creditors and equity security holders, and may operate its properties free of any restrictions imposed by the Bankruptcy Code or by the Court; provided, however, that Reorganized Debtor shall continue as a debtor in possession under the Bankruptcy Code until the Effective Date, and, thereafter, Reorganized Debtor may operate its business free of any restrictions imposed by the Bankruptcy Code or the Court. Nothing herein shall affect the right of any claimant to enforce their remedies in the event of a post-Effective Date default. 12.03. Termination. As of the Effective Date, except as provided in this Plan or the Confirmation Order, all entities shall be precluded from asserting against Reorganized 48 6159C/10566.9 Debtor, its respective successors or its respective property, any other or further Claims, debts, rights, causes of action, liabilities or equity interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date. In accordance with the foregoing, except as provided in this Plan or the Confirmation Order, as of the Effective Date, the Confirmation Order shall be a judicial determination of discharge of all such Claims and other debts and liabilities against the Debtor and termination of all such Interests and other rights of equity security holders in the Debtor, pursuant to Sections 524 and 1141 of the Code, and such discharge shall void any judgment obtained against the Debtor at any time, to the extent that such judgment relates to a Claim discharged. Nothing herein shall affect the right of any claimant to enforce their remedies in the event of a post-Effective Date default. 12.04. Injunction. Except as otherwise expressly provided in this Plan, the Confirmation Order shall provide, among other things, that all Entities who have held, hold or may hold Claims and all Entities who have held, hold or may hold Interests against Reorganized Debtor and any of its Affiliates, are permanently enjoined on and after the Effective Date from: (a) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim against the Debtor, Reorganized Debtor or any of its Affiliates; (b) the enforcement, attachment, collection or 49 6159C/10566.9 recovery by any manner or means of any judgment, award, decree or order against the Debtor, Reorganized Debtor or any of their respective Affiliates, or the property of the Debtor, Reorganized Debtor or any of their Affiliates thereof, with respect to any such Claim; (c) creating, perfecting or enforcing any encumbrance of any kind against the Debtor, Reorganized Debtor or any of their respective Affiliates, or against the property of the Debtor, Reorganized Debtor or any of their respective Affiliates, with respect to any such Claim; and (d) from asserting any setoff, right of subrogation or recoupment of any kind against any obligation due the Debtor, Reorganized Debtor or any of its Affiliates, or against the property of the Debtor, Reorganized Debtor or any of its Affiliates, with respect to any such Claim. Nothing herein shall affect the right of any claimant to enforce their remedies in the event of a post-Effective Date default. 12.05. Term of Injunctions or Stays. Unless otherwise provided, all injunctions or stays provided for in the case pursuant to Sections 105 or 362 of the Bankruptcy Code or otherwise shall remain in full force and effect until the Effective Date rather than the Confirmation Date. 12.06. Jurisdiction Retained. Until the end of the Term of the Plan, the Court shall have jurisdiction of all matters arising under, arising out of or relating to this case including, but not limited to, the following: 50 6159C/10566.9 (a) To insure that the purpose and intent of this Plan are carried out; (b) To consider any modification of this Plan under Section 1127 of the Bankruptcy Code; (c) To hear and determine all Claims, controversies, default suits and disputes against the Debtor; (d) To hear, determine and enforce all Claims and causes of action which may exist on behalf of the Debtor or the Estate, including, but not limited to, any right of the Debtor or the Estate to recover such claims, causes or rights as enumerated in Article XI above; (e) To hear and determine all controversies, suits, defaults and disputes that may arise in connection with the interpretation, execution or enforcement of this Plan; (f) To hear and determine all requests for compensation and/or reimbursement of expenses for services rendered or expenses incurred prior to the Effective Date which may be made after the Effective Date of the Plan; (g) To hear and determine all objections to Claims, controversies, suits and disputes that may be pending at or initiated after the Effective Date, except as provided in the Confirmation Order; (h) To consider and act on the compromise and settlement of any Claim against or cause of action on 51 6159C/10566.9 behalf of the Debtor or the Estate; (i) To enforce and interpret by injunction or otherwise the terms and conditions of the Plan; (j) To enter an order concluding and terminating this case; (k) To correct any defect, cure any omission or reconcile any inconsistency in the Plan or Confirmation Order which may be necessary or helpful to carry out the purposes and intent of the Plan; (l) To determine all questions and disputes regarding titles to the assets of the Debtor or the Estate; (m) To classify the Claims of any creditor and to re-examine Claims which have been allowed for purposes of voting, and to determine objections which may be filed to creditors' Claims (the failure by the Debtor to object to, or examine any Claim for the purposes of voting shall not be deemed a waiver of the Debtor's right to object to, or re-examine the Claim in whole or part); (n) To consider and act on such other matters consistent with this Plan as may be provided in the Confirmation Order; and (o) To consider the rejection of Executory Contracts that are not discovered prior to Confirmation and allow Claims for damages with respect to the 52 6159C/10566.9 rejection of any such Executory Contracts within such future time as the Court may direct. 12.07. Exculpation. The Debtor, Reorganized Debtor, the Creditors' Committee, and their respective directors, shareholders, agents, officers, employees, representatives and attorneys, including Professionals, (acting in such capacity) shall neither have nor incur liability to any Entity for any action taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, implementation, Confirmation or consummation of the Plan, the Disclosure Statement, earlier versions of same or any contract, instrument, release or other agreement or document created or entered into, or any other action taken or omitted to be taken in connection with the Plan or the Case; provided, however, that the foregoing provisions of this section shall have no effect on the liability of any Entity that would otherwise result from any such action or omission to the extent that such action or omission is determined in a Final Order to have constituted gross negligence or willful misconduct. 12.08. Nonwaiver. Neither the filing of this Plan and the accompanying Disclosure Statement, nor any statement or provision contained herein, nor the taking by the Debtor or a party in interest of any action with respect to this Plan shall: (a) be or be deemed to be an admission against interest and (b) until the Distribution Date, be or be deemed to be a waiver of any rights of any creditor or party in interest of 53 6159C/10566.9 Debtor, and until the Distribution Date all such rights are specifically reserved. In the event that the Effective Date does not occur, neither this Plan nor any statement contained herein, may be used or relied upon in any manner in any suit, action, proceeding or controversy within or outside of the bankruptcy case involving the Debtor. The Debtor may withdraw this Plan at any time prior to Confirmation. 12.09. Successors and Assigns. The rights, benefits and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such Entity. 12.10. Modification of the Plan. The Debtor reserves the right, in accordance with the Bankruptcy Code, to amend or modify this Plan prior to the Confirmation Date. After the Confirmation Date, the Debtor may, upon order of the Court, amend or modify this Plan in accordance with Section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in this Plan in such manner as may be necessary to carry out the purposes and intent of this Plan. 12.11. Payment Dates. Whenever any payment or distribution to be made under the Plan shall be due on a day other than a Business Day, such payment or distribution shall instead be made, without interest, on the next Business Day, 54 6159C/10566.9 except as may be provided in negotiable instruments requiring such payments. 12.12. Notices. All notices, requests, elections or demands in connection with the Plan shall be in writing and shall be deemed to have been given when received or, if mailed, five (5) days after the date of mailing provided such writing shall have been sent by registered or certified mail, postage prepaid, return receipt requested, and sent to the following: Clifton R. Jessup, Jr. DIXON & DIXON LTD., L.L.P. 2500 Fountain Place 1445 Ross Avenue Dallas, Texas 75202 All notices and requests to Claimants and holders of Interests shall be sent to them at their last known addresses. The Debtor, and any Claimant or holder of Interests of any Class, may designate in writing any other address for purposes of this Section 12.12, which designation shall be effective upon receipt. 12.13. Governing Law. EXCEPT TO THE EXTENT THAT THE BANKRUPTCY CODE IS APPLICABLE, THE RIGHTS AND OBLIGATIONS ARISING UNDER THIS PLAN SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. 12.14. Severability. Should any provision in this Plan be determined to be unenforceable, such determination shall in no way limit or affect the enforceability and operative effect of any and all other provisions of this Plan. 55 6159C/10566.9 ARTICLE XIII CONFIRMABILITY OF THE PLAN AND CRAMDOWN 13.01. Cramdown. The Debtor hereby requests Confirmation under Section 1129(b) of the Bankruptcy Code of any impaired Class that does not accept the Plan pursuant to Section 1126 of the Bankruptcy Code. /// 56 6159C/10566.9 RESPECTFULLY SUBMITTED THIS DAY OF MAY, 1995. CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP, a California Limited Partnership By: CIGNA REALTY RESOURCES, INC.- SEVENTH, a Delaware corporation By: John D. Carey, President AND By: CLIFTON R. JESSUP, JR. DIXON & DIXON LTD., L.L.P. ITS ATTORNEYS 57 6159C/10566.9 EXHIBIT "A" DEBTOR'S FINANCIAL PROJECTIONS CAL-7 PROJECTED CASH FLOW CONSOLIDATED SOURCES AND USES
1995 1996 1997 1998 1999 Total Sources 9,801,815 8,833,239 11,325,671 11,532,905 12,097,377 Total Uses (4,209,814) (12,855,054) (11,907,751) (11,777,005) (11,821,934) Net Cash Flow 5,592,001 (4,021,815) (582,080) (244,100) 275,444 Cash Balance 5,592,001 1,570,186 988,106 744,006 1,019,449
2000 2001 2002 2003 2004 Total Sources 12,657,256 13,261,881 13,963,365 14,712,054 166,186,192 Total Uses (11,809,002) (11,848,333) (11,889,232) (11,931,548) (174,322,081) Net Cash Flow 848,254 1,413,548 2,074,133 2,780,505 (8,135,889) Cash Balance 1,867,703 3,281,251 5,355,384 8,135,889 0
CAL-7 PROJECTED CASH FLOW SOURCES DETAIL
1995 1996 1997 1998 1999 2000 Property Operations (1): Amberway 528,782 1,366,079 1,390,231 1,419,861 1,464,268 1,489,221 Arbor Park 326,563 946,444 970,259 994,545 1,019,304 1,044,536 Mission Bay East 1,131,285 2,800,316 2,979,491 3,071,566 3,266,269 3,426,316 Pacifica Club 629,471 1,729,153 1,777,343 1,826,750 1,877,399 1,929,312 West LA 719,329 1,929,743 2,046,215 2,169,309 2,299,369 2,442,054 Sherman Oaks (2) (284,010) (240,656) 2,070,470 1,980,736 2,099,814 2,225,587 Net Cash Flow from Oper. 3,051,420 8,531,079 11,234,009 11,462,767 12,026,423 12,557,026 Interest Income: Security Deposits (3) 10,700 25,680 25,680 25,680 25,680 25,680 Cash Balance (4) 124,538 183,506 65,982 44,458 45,274 74,550 Insurance Proceeds (5) 303,686 92,974 Rent Loss Insurance 3,965,525 Available Cash on Hand (7) 1,079,946 Sherman Oaks Cash 504,000 Collateral Account Taxes & Insurance Cash 762,000 Collateral Account Total Sources 9,801,815 8,833,239 11,325,671 11,532,905 12,097,377 12,657,256
2001 2002 2003 2004 2005 Amberway 1,524,736 1,560,789 1,597,362 1,634,439 1,671,999 Arbor Park 1,070,244 1,096,428 1,123,086 1,150,218 1,177,823 Mission Bay East 3,594,206 3,770,322 3,955,068 4,148,866 4,352,160 Pacifica Club 1,962,517 2,037,037 2,092,897 2,150,122 2,209,250 West LA 2,592,603 2,752,077 2,920,336 3,096,069 3,281,833 Sherman Oaks 2,358,418 2,496,690 2,646,805 2,803,187 2,968,575 Net Cash Flow from Oper. 13,102,724 13,713,343 14,335,554 14,982,901 15,661,640 Interest Income: Security Deposits (3) 25,680 25,680 25,680 25,680 Cash Balance (4) 133,477 224,342 350,820 518,395 Insurance Proceeds (5) Sales Proceeds (6) 150,659,216 Rent Loss Insurance Available Cash on Hand (7) Sherman Oaks Cash Collateral Account Taxes & Insurance Cash Collateral Account Total Sources 13,261,881 13,963,365 14,712,054 166,186,192
(1) Assumes August 1 to December 31 cash flows from operations (includes full year of insurance expenses to be paid in December). The individual property cash flows were estimated based on 1994 actual results and conservative growth projections. Assumes post confirmation commencement of operations on August 1, 1995. (2) Sherman Oaks cash flow assumes lease-up begins during 1996. (3) Assumes interest earned of 5.35% (our current short-term investment rate) on an average security deposit balance of $480,000. (4) Represents 5.35% interest earned on the average cash balance. Calculation assumes all sources and uses are spread equally over the period (i.e. divide total activity by 2) (5) Represents the interest earned on the $9,250,000 insurance proceeds finally received from Aetna on April 24, 1995. Calculation assumes 5.6% interest on the total amount ($9,250,000) from April 27 until July 30 and then equal draws against the balance over the 12 months of drawings, permits and construction for Sherman Oaks. (6) Calculated using MT's assumptions (most pessimistic) of a weighted terminal capitalization rate of 10.1875% applied to the 2005 cash flow and a 2% deduction for sales costs. (7) Does not include $300,000 commitment from the City of Los Angeles Housing Department. CAL - 7 PROJECTED CASH FLOW USES DETAIL
1995 1996 1997 1998 1999 Additional Costs for Sherman Oaks (1) 1,728,000 Debt Service to Travelers (2): Sherman Oaks Loan 403,542 1,210,625 100,885 Balance of Loan 2,848,997 8,546,991 712,249 Total Loan 9,688,235 10,568,984 10,568,984 Principal Balance Payment to Congen 50,000 Unsecured Non-Insider Trade Creditors: Contracts Assumed (3) 115,251 Administrative Conv. Claims (4) 20,407 20,406 Property Tax Claims (5) 48,353 58,701 56,114 53,527 50,940 Other Claims (5) 153,490 169,913 161,702 Capital Expenditures: Amberway 21,333 97,100 111,000 105,000 109,200 Arbor Park 51,583 225,533 234,554 243,936 253,694 Mission Bay East 90,150 287,600 293,352 299,219 305,203 Pacifica Club 71,595 206,796 215,068 223,671 232,617 West LA 120,379 130,056 135,258 140,669 146,295 Sherman Oaks 0 0 26,000 42,000 55,000 Admin. Claims (prof. fees) 200,983 73,333 73,333 Statutory Fees 3,750 CII Management Fees (6) General Partner's Salary (6) Partnership Expenses 10,000 100,000 100,000 100,000 100,000 Distribution to Equity Holders Total Uses 4,209,814 12,855,054 11,907,751 11,777,005 11,821,934
2000 2001 2002 2003 2004 Additional Costs for Sherman Oaks (1) Debt Service to Travelers (2): Sherman Oaks Loan Balance of Loan Total Loan 10,568,984 10,568,984 10,568,984 10,568,984 10,568,984 Principal Balance 91,956,029 Payment to Congen Unsecured Non-Insider Trade Creditors: Contacts Assumed (3) Administrative Conv. Claims (4) Property Tax Claims (5) Other Claims (5) Capital Expenditures: Amberway 113,600 118,100 122,900 127,800 132,900 Arbor Park 263,842 274,395 285,371 296,786 308,657 Mission Bay East 311,307 317,534 323,884 330,362 336,969 Pacifica Club 241,922 251,599 261,663 272,129 283,015 West LA 152,147 158,233 164,562 171,145 177,991 Sherman Oaks 57,200 59,488 61,868 64,342 66,916 Admin. Claims (prof. fees) Statutory Fees CII Management Fees (6) 2,067,701 General Partner's Salary (6) 1,412,500 Partnership Expenses 100,000 100,000 100,000 100,000 100,000 Distribution to Equity Holders 66,910,419 Total Uses 11,809,002 11,848,333 11,889,232 11,931,548 174,322,081
(1) Represents the $1,000,000 insurance deductible and $728,000 cost to upgrade the units based on Paul Foster's report. (2) Debt service to Travelers assume 10.3% on $82,980,497 and 8.125% on $14,900,000 interest only for the first year and a half (Sherman Oaks construction and lease-up period), then 10.3% interest with 30 year amortization on $97,880,497 over the remainder of the loan. (3) Represents the total ($115,251.39) amount of default for the Executory Contracts that the Reorganized Debtor assumes. Assumes payment in full on the Effective Date. (4) Represents the total ($40,812.99) unsecured allowed claims of $1,000 or less. Assumes payment of 50% on the Effective Date and 50% seven months after the Effective Date. (5) Assumes property tax claims of $241,765.58 is paid over a five year period and the other non-insider trade creditors claims (greater than $1,000) of $460,470.61 is paid over a three year period. Both claims assume annual payments on August 1 and each payment includes 5.35% interest on the outstanding balance. (6) CIGNA Investments, Inc. (CII) management fees represents 1% of total property revenues. General Partner's salary is a flat $150,000 per year. Both amounts are deferred without interest until disposition. EXHIBIT "B" REJECTED EXECUTORY CONTRACTS EXHIBIT "B" REJECTED EXECUTORY CONTRACTS 1. R&B Management Agreements a. Management Agreement, Arbor Park Apartments, Upland, California, dated May 1, 1991; b. Management Agreement, Pacifica Club Apartments, dated May 1, 1992; c. Second Amendment to Management and Leasing Agreement dated August 1992; d. First Amendment to Management and Leasing Agreement dated January 1, 1991; and e. Management and Leasing Agreement dated January 30, 1985. 2. Maxim Management Agreement Management Agreement dated May 1, 1992, by and between California Seven Associates Limited Partnership and Promethius Management Group, as supplemented and amended from time to time. EXHIBIT "C" LIMITED PARTNERSHIP AGREEMENT The Limited Partnership Agreement is incorporated by reference. EXHIBIT "D" THIRD NOTE MODIFICATION AGREEMENT; THIRD DEED OF TRUST MODIFICATION AGREEMENT; AND SECOND AMENDMENT TO SECURITY AGREEMENT THIRD NOTE MODIFICATION AGREEMENT (CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP) Loan No. 502108-5 THIS THIRD NOTE MODIFICATION AGREEMENT is made as of \\\\\\\[Date] (the "Effective Date") by and between California Seven Associates Limited Partnership, a California limited partnership (hereinafter referred to as "Borrower"), and The Travelers Insurance Company, a Connecticut corporation (hereinafter referred to as "Lender"). RECITALS: A. Borrower and IFD Properties, Inc.-First, a Delaware corporation ("IFD"), are the makers of that certain Note Secured by Deeds of Trust in the original principal amount of One Hundred Million Dollars ($100,000,000), dated December 20, 1984, as amended by Modification Agreement dated August 1, 1987, and Second Note Modification Agreement, dated May 1, 1990 (hereinafter collectively referred to as the "Note"). B. The Note is secured by Deeds of Trust, recorded on December 20, 1984, and by Second Deed of Trust Modification Agreements, recorded on the dates hereinafter provided (individually hereinafter referred to as a "Deed of Trust" and collectively as the "Deeds of Trust"), against the Properties therein more fully described (individually hereinafter referred to as a "Property" and collectively as the "Properties"), as follows: 1. Arbor Park Apartments (San Bernardino County). Official Records of San Bernardino County, California, as Document No. 84-303705; as amended by Document No. , filed ; 2. Mission Bay East Apartments (San Diego County). Official Records of San Diego County, California, as Document No. 84-474369; as amended by Document No. , filed ; 3. Pacifica Club Apartments (Orange County). Official Records of Orange County, California, as Document No. 84-525617; as amended by Document No. , filed ; 4. Amberway Apartments (Orange County). Official Records of Orange County, California, as Document No. 84-525621; as amended by Document No. , filed ; THIRD NOTE MODIFICATION AGREEMENT - Page 1 - 5404U/10566.9 5. Sherman Oaks Apartments (Los Angeles County). Official Records of Los Angeles County, California, as Document No. 84-1489393; as amended by Document No. , filed ; 6. Oakwood Apartments-West Los Angeles (Los Angeles County). Official Records of Los Angeles County, California, as Document No. 84-1489397; as amended by Document No. , filed ; C. The Note is further secured by that certain bank account (Account No. ) styled , at [Bank] , , California (the "Account"), with a balance as of the Effective Date of $ . The Account shall be in substitution for the Account described in that certain security agreement created in that certain Modification Agreement, dated August 1, 1987, entered into between Borrower and Lender, as amended by that certain First Amendment to Security Agreement, dated as of May 1, 1990, by and between Borrower and Lender (hereinafter collectively referred to as the "Security Agreement"). D. The Note, Deeds of Trust, Security Agreement and all other security agreements executed in connection therewith, as modified, are referred to as the "Loan Documents". E. Pursuant to that certain order confirming Borrower's Amended Plan of Reorganization (the "Order"), entered by the United States Bankruptcy Court for the Central District of California, Santa Ana Division (the "Bankruptcy Court"), in the Chapter 11 Case No. SA 94-19491-JR, In re: California Seven Associates Limited Partnership, a California limited partnership, Debtor (the "Bankruptcy Case"), on , the Bankruptcy Court approved the Borrower's Amended Plan of Reorganization (the "Plan") which required that the Note, Deeds of Trust, and Security Agreement be modified as hereinafter provided and as provided in the six (6) Third Deed of Trust Modification Agreements and in the Second Amendment to Security Agreement entered into by Borrower and Lender contemporaneously herewith. NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree to amend the Note as follows: 1. Principal Balance and Maturity Date. As of the Effective Date, the principal balance of the Note is fixed at [Amount to be determined by the Court] (the "Principal Balance") and shall be due and payable together with any and all other amounts which are due and unpaid under the Note as hereby modified (including without limitation any late charges, default charges and advances but only to the extent the same are incurred after the THIRD NOTE MODIFICATION AGREEMENT - Page 2 - 5404U/10566.9 Effective Date unless allowed by the Bankruptcy Court) on December 31, 2004 (the "Maturity Date"), unless sooner paid as hereinafter set forth. 2. Sherman Oaks Principal. (a) Commencing on [Effective Date], but subject to adjustment as hereinafter provided, interest shall accrue on $14,900,000 of the Principal Amount of the Note (the "Sherman Oaks Principal") commencing at the rate of 8.125% and adjusted monthly as described hereafter until Stabilization of Occupancy (Stabilization of Occupancy as referenced herein shall mean that the physical occupancy at Sherman Oaks shall average 90% for at least 90 days), at which time the Sherman Oaks Principal shall bear interest commencing at the rate of 10.3% and adjusted monthly as described hereafter throughout the remainder of the term of Note. Notwithstanding the foregoing, commencing on [First of the Month Following Effective Date], and on the first (1st) day of each month (the "Interest Rate Adjustment Date") thereafter during the term of the Note, the Sherman Oaks Principal shall bear interest at the Sherman Oaks Adjusted Rate (as hereinafter defined). The term "Sherman Oaks Adjusted Rate" shall mean the 30-day London Inter-Bank Offering Rate ("LIBOR") that is published daily in the Wall Street Journal which is in effect on the applicable Interest Rate Adjustment Date (or the 30-day LIBOR in effect on the next business day if the Interest Rate Adjustment Date falls on a day for which the 30-day LIBOR is not published in the Wall Street Journal) plus 2%. The interest rate on the Sherman Oaks Principal shall be adjusted on each Interest Rate Adjustment Date during the term of the loan evidenced by this Note. (b) Interest only on the Sherman Oaks Principal shall be due and payable monthly, in arrears, at the interest rates hereinabove provided, on the tenth (10th) day of each following calendar month, beginning [10th Day of Month Following Effective Date], and continuing regularly and monthly thereafter until and including Stabilization of Occupancy, after which date principal and interest shall be due and payable in monthly installments of principal and interest (based upon a 30-year amortization of the then unpaid Sherman Oaks Principal at the interest rate then in effect hereinafter defined) payable on the tenth (10th) day of each and every following calendar month, beginning Stabilization of Occupancy, and continuing regularly and monthly thereafter until the Maturity Date, at which time the unpaid portion of the Sherman Oaks Principal, together with all accrued interest thereon, shall be due and payable in full. THIRD NOTE MODIFICATION AGREEMENT - Page 3 - 5404U/10566.9 3. Remaining Property Principal. (a) Commencing on [Effective Date], but subject to adjustment as hereinafter provided, interest shall accrue on [Principal balance - Sherman Oaks Principal] ($ ) of the Principal Amount of the Note (the "Remaining Property Principal") commencing at the rate of 10.3% and adjusted monthly as described hereafter throughout the term of the loan evidenced by this Note. Notwithstanding the foregoing, commencing on [First of Month Following Effective Date], and on each Interest Rate Adjustment Date thereafter during the term of the Note, the Remaining Property Principal shall bear interest at the Remaining Property Adjusted Rate (as hereinafter defined). The interest rate on the Remaining Property Principal shall be adjusted on each successive Interest Rate Adjustment Date during the term of the loan evidenced by this Note. The term "Remaining Property Adjusted Rate" shall mean the LIBOR (as hereinabove defined) plus 4.175%. (b) Interest only on the Remaining Property Principal shall be due and payable, monthly, in arrears, at the interest rates hereinabove provided, on the tenth (10th) day of each following calendar month, beginning [10th day of the month following the Effective Date] and continuing regularly and monthly thereafter until and including [date approximately 18 months following Effective Date] after which date principal and interest shall be due and payable in monthly installments of principal and interest (based upon a 30-year amortization of the then unpaid Remaining Property Principal at the interest rate then in effect), payable on the tenth (10th) day of each and every following calendar month, beginning [10th day of the month following the Effective Date], and continuing regularly and monthly thereafter until the Maturity Date, at which time the unpaid portion of the Remaining Property Principal, together with all accrued interest thereon, shall be due and payable in full. (c) Interest shall be calculated on the actual number of days on the basis of a year of 365 days. 4. Application of Monthly Installments. Each monthly installment of principal and interest shall be applied first to the payment of the interest then accrued and due on the unpaid principal balance of the Sherman Oaks Principal or the Remaining Property Principal, as the case may be, and the remainder shall be applied to the reduction of the unpaid principal thereof. 5. Release of Lien. The provisions of the Note and the Deeds of Trust, as amended by the Modification Agreement, dated August 1, 1987, and the Second Note Modification Agreement and the Second Deed of Trust Modification Agreement, both dated as of May 1, 1990, which delete the language from Paragraph 32 of the Deeds of THIRD NOTE MODIFICATION AGREEMENT - Page 4 - 5404U/10566.9 Trust regarding transfer of the Property and which substitute language therefor providing for the release of the liens created by the Deeds of Trust are hereby deleted in their entirety and replaced by the following provision: Lender shall release the lien of the Deed of Trust encumbering a Property upon payment of the amount (the "Release Price") hereinbelow set forth with respect to said Property (subject to proportional increases for any accrued and unpaid postpetition interest, if any, to which the Lender is allowed by the Bankruptcy Court, and adjustments for payments made): Amberway Apartments $12,550,000 Arbor Park Apartments $ 8,410,000 Mission Bay East Apartments $25,500,000 Oakwood Apartments-West Los Angeles $18,600,000 Pacifica Club Apartments $16,000,000 Sherman Oaks Apartments $16,820,497 The Lender shall apply the Release Price tendered with respect to the Sherman Oaks Apartments to reduce, first, the Sherman Oaks Principal, and, to the extent of any excess funds after such application, to reduce the Remaining Property Principal. The Lender shall apply the Release Price tendered with respect to each of the other apartments hereinabove set forth to reduce, first, the Remaining Property Principal and, to the extent of any excess funds after such application to reduce the Sherman Oaks Principal. All such prepayments shall be allowed without penalty or prepayment fee. Interest shall immediately cease upon amounts of principal prepaid. 6. Prepayments. The Note may be prepaid, in whole or in part, at any time and from time to time, without penalty or prepayment fee. Except as hereinafter provided to the contrary in Paragraph 5 hereinabove, all prepayments shall be applied, pro rata, toward the payment of installments of the Sherman Oaks Principal and Remaining Properties Principal next maturing thereon, and interest shall immediately cease upon amounts of principal prepaid thereon. 7. Governing Law. This Agreement shall be construed in accordance with the laws of the State of California, without regard to its conflict of law principles. 8. No Other Agreements. Borrower and Lender each acknowledge that there are no other agreements or representations, either oral or written, express or implied, not embodied in the Note, as modified herein, the Deeds of Trust, as modified herein, the Security Agreement, as modified herein, and all other security instruments executed in connection therewith, which, together, represent a complete integration of all prior and contemporaneous THIRD NOTE MODIFICATION AGREEMENT - Page 5 - 5404U/10566.9 agreements and understandings of Borrower and Lender and, except to the extent modified herein or as otherwise provided to the contrary in the Plan, the provisions of the Note, Deeds of Trust, Security Agreement and other loan documents executed in connection therewith, are hereby ratified and confirmed. 9. Ratification. Except as expressly modified herein, or in the Third Deed of Trust Modification Agreements of even date herewith, or the Second Amendment to Security Agreement of even date herewith or as otherwise provided to the contrary in the Plan, the Note, Deeds of Trust, Security Agreement and other Loan Documents shall remain in full force and effect, and all of the terms and provisions of the Note, Deeds of Trust, Security Agreement and other Loan Documents, as so modified, are hereby ratified and reaffirmed. 10. Lien Priority. All of the Property shall remain in all respects subject to the lien, charge, and encumbrance of the Deeds of Trust, as herein modified, and nothing herein contained, and nothing done pursuant hereto, shall affect the lien, charge or encumbrance of the Deeds of Trust, as herein modified, or the priority thereof over other liens, charges, encumbrances or conveyances, or to release or affect the liability of any party or parties whosoever who may now or hereafter be liable under or on account of the Note and/or Deeds of Trust and/or other Loan Documents nor any shall anything herein contained or done in pursuance hereof affect or be construed to affect any other security or instrument, if any, held by Lender as security for or evidence of the aforesaid indebtedness. 11. Counterparts. This Third Note Modification Agreement may be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 12. Binding Effect. This Third Note Modification Agreement shall be binding upon and shall inure to the benefit of Borrower (and the partners thereof), and Lender and their respective successors, assigns, grantees, heirs, executors, personal representatives and administrators. 13. Memorandum. The parties hereto shall execute and record a Memorandum of this Agreement in the Official Records in each of the counties in which the Properties are located. 14. Headings. The headings used in connection with the paragraphs of this Agreement are for convenience only and shall not be deemed to construe or limit the meaning of the language of this Agreement. THIRD NOTE MODIFICATION AGREEMENT - Page 6 - 5404U/10566.9 IN WITNESS WHEREOF, the parties hereto have executed this Third Note Modification Agreement to be effective as of the Effective Date. Attest: THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation By: By: Its: Name: Title: LENDER Attest: CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP, a California limited partnership By: CIGNA Realty Resources, Inc.-Seventh, a Delaware corporation, General Partner By: By: Its: Name: Title: BORROWER THIRD NOTE MODIFICATION AGREEMENT - Page 7 - 5404U/10566.9 THE STATE OF THE COUNTY OF On , before me, the undersigned, a Notary Public in and for said State, personally appeared and , personally known to me or proved to me on the basis of satisfactory evidence to be the persons who executed the within instrument respectively as the and the on behalf of the corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public in and for the State of Printed/Typed Name of Notary Public My Commission Expires: THE STATE OF THE COUNTY OF On , before me, the undersigned, a Notary Public in and for said State, personally appeared and , personally known to me or proved to me on the basis of satisfactory evidence to be the persons who executed the within instrument respectively as the and the on behalf of the corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public in and for the State of Printed/Typed Name of Notary Public My Commission Expires: THIRD NOTE MODIFICATION AGREEMENT - Page 8 - 5404U/10566.9 THIRD DEED OF TRUST MODIFICATION AGREEMENT CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP) THIS THIRD DEED OF TRUST MODIFICATION AGREEMENT is made as of [Date] (the "Effective Date") by and between California Seven Associates Limited Partnership, a California limited partnership (hereinafter referred to as "Trustor"), Ticor Title Insurance Company of California, a California corporation ("Trustee"), and The Travelers Insurance Company, a Connecticut corporation (hereinafter referred to as "Beneficiary"). RECITALS: A. Trustor is the maker of that certain Note secured by Deeds of Trusts in the original principal amount of One Hundred Million Dollars ($100,000,000), dated December 20, 1984, as amended by Modification Agreement, dated August 1, 1987, Second Note Modification Agreement, dated as of May 1, 1990, and Third Note Modification Agreement of even date herewith (hereinafter collectively referred to as the "Note"). B. The Note is secured, inter alia, by that certain Deed of Trust recorded on December 20, 1984, in the Official Records of County, California, as Document No. , as amended by that certain Second Deed of Trust Modification Agreement, recorded on , in the Official Records of County, California, as Document No. (the "Deed of Trust") covering the property therein described (the "Property"). C. The Note is further secured by that certain bank account (Account No. ) styled , at [Bank] , , California (the "Account"), with a balance as of the Effective Date of $ . The Account shall be in substitution for the Account described in that certain security agreement created in that certain Modification Agreement, dated August 1, 1987, entered into between Trustor and Beneficiary, as amended by that certain First Amendment to Security Agreement, dated as of May 1, 1990, by and between Trustor and Beneficiary (hereinafter collectively referred to as the "Security Agreement"). D. The Note, Deeds of Trust, Security Agreement and all other security agreements executed in connection therewith, as modified, are referred to as the "Loan Documents". E. Pursuant to that certain order confirming Trustor's Amended Plan of Reorganization (the "Order"), entered by the United States Bankruptcy Court for the Central District of California, Santa Ana Division (the "Bankruptcy Court"), in the Chapter 11 Case No. SA 94-19491-JR, In re: California Seven Associates Limited THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 1 - 5406U/10566.9 Partnership, a California limited partnership, Debtor (the "Bankruptcy Case"), on , the Bankruptcy Court approved the Trustor's Amended Plan of Reorganization (the "Plan") which required that the Note, Deeds of Trust, and Security Agreement be modified as hereinafter provided and as provided in the six (6) Third Deed of Trust Modification Agreements and in the Second Amendment to Security Agreement entered into by Trustor and Beneficiary contemporaneously herewith. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree to amend the Deed of Trust as follows: 1. Release of Lien. The provisions of the Note and the Deed of Trust, as amended, which delete the language from Paragraph 32 of the Deed of Trust regarding transfer of the Property and which substitute language therefor providing for the release of the liens created by the Deed of Trust are hereby deleted in their entirety and replaced by the following provision: Beneficiary shall release the lien of the Deed of Trust encumbering a Property upon payment of the amount (the "Release Price") hereinbelow set forth with respect to said Property (subject to proportional increases for any accrued and unpaid postpetition interest, if any, to which the Beneficiary is allowed by the Bankruptcy Court, and adjustments for payments made): Amberway Apartments $12,550,000 Arbor Park Apartments $ 8,410,000 Mission Bay East Apartments $25,500,000 Oakwood Apartments-West Los Angeles $18,600,000 Pacifica Club Apartments $16,000,000 Sherman Oaks Apartments $16,820,497 The Beneficiary shall apply the Release Price tendered with respect to the Sherman Oaks Apartments to reduce, first, the Sherman Oaks Principal (as defined in the Note) and, to the extent of any excess funds after such application, to reduce the Remaining Property Principal (as defined in the Note). The Beneficiary shall apply the Release Price tendered with respect to each of the other apartments hereinabove set forth to reduce, first, the Remaining Propety Principal, to the extent of any excess funds after such application, to reduce the Sherman Oaks Principal. All such prepayments shall be allowed without penalty or prepayment fee. Interest shall immediately cease upon amounts of principal prepaid. 2. Ratification. Except as expressly modified herein, or in the Third Note Modification Agreement of even date herewith, or the Second Amendment to Security Agreement of even date herewith, or as otherwise provided to the contrary in the Plan, the Note, Deed of THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 2 - 5406U/10566.9 Trust, Security Agreement and other Loan Documents shall remain in full force and effect, and all of the terms and provisions of the Note, Deed of Trust, Security Agreement and other Loan Documents as so modified, are hereby ratified and reaffirmed. 3. Lien Priority. The Property shall remain in all respects subject to the lien, charge and encumbrance of the Deed of Trust, as herein modified, and nothing herein contained, and nothing done pursuant hereto, shall affect the lien, charge or encumbrance of the Deed of Trust, as herein modified, or the priority thereof over other liens, charges, encumbrances or conveyances, or to release or affect the liability of any party or parties whomsoever who may now or hereafter be liable under or on account of the Note and/or Deed of Trust, nor shall anything herein contained or done in pursuance hereof affect or be construed to affect any other security or instrument, if any, held by Beneficiary as security for or evidence of the aforesaid indebtedness. 4. Governing Law. This Agreement shall be construed in accordance with the laws of the State of California, without regard to its conflict of law principles. 5. No Other Agreements. Trustor and Beneficiary each acknowledge that there are no other agreements or representations, either oral or written, express or implied, not embodied in the Deed of Trust, as modified herein, the Note, the Security Agreement, and all other security instruments executed in connection therewith, which, together, represent a complete integration of all prior and contemporaneous agreements and understandings of Trustor and Beneficiary, and, except to the extent modified herein or otherwise provided to the contrary in the Plan, the provisions of the Note, Deeds of Trust, Security Agreement and other Loan Documents executed in connection therewith, are hereby ratified and confirmed. 6. Counterparts. This Third Deed of Trust Modification Agreement may be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 7. Binding Effect. This Third Deed of Trust Modification Agreement shall be binding upon and shall inure to the benefit of Trustor (and the partners thereof), and Beneficiary and their respective successors, assigns, grantees, heirs, executors, personal representatives and administrators. 8. Headings. The headings used in connection with the paragraphs of this Agreement are for convenience only and shall not be deemed to construe or limit the meaning of the language of this Agreement. THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 3 - 5406U/10566.9 IN WITNESS WHEREOF, the parties hereto have executed this Third Deed of Trust Modification Agreement to be effective as of the Effective Date. Attest: THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation By: By: Its: Name: Title: BENEFICIARY Attest: TICOR TITLE INSURANCE COMPANY OF CALIFORNIA, a California corporation By: By: Its: Name: Title: TRUSTEE Attest: CALIFORNIA SEVEN ASSOCIATES LIMITED PARTNERSHIP, a California limited partnership By: CIGNA Realty Resources, Inc.-Seventh, a Delaware corporation, General Partner By: By: Its: Name: Title: TRUSTOR THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 4 - 5406U/10566.9 THE STATE OF THE COUNTY OF On , before me, the undersigned, a Notary Public in and for said State, personally appeared and , personally known to me or proved to me on the basis of satisfactory evidence to be the persons who executed the within instrument respectively as the and the on behalf of the corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public in and for the State of Printed/Typed Name of Notary Public My Commission Expires: THE STATE OF THE COUNTY OF On , before me, the undersigned, a Notary Public in and for said State, personally appeared and , personally known to me or proved to me on the basis of satisfactory evidence to be the persons who executed the within instrument respectively as the and the on behalf of the corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public in and for the State of Printed/Typed Name of Notary Public My Commission Expires: THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 5 - 5406U/10566.9 THE STATE OF THE COUNTY OF On , before me, the undersigned, a Notary Public in and for said State, personally appeared and , personally known to me or proved to me on the basis of satisfactory evidence to be the persons who executed the within instrument respectively as the and the on behalf of the corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public in and for the State of Printed/Typed Name of Notary Public My Commission Expires: THIRD DEED OF TRUST MODIFICATION AGREEMENT - Page 6 - 5406U/10566.9 -----END PRIVACY-ENHANCED MESSAGE-----