-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QpOCv7mHHyTZI87chitwg71h89bSPUEDknQeSmsFehUoOgOYv2qoVbBLvCutuPxj 1dOfIZQn2Mb/hctSjOnb1A== 0000950134-96-001188.txt : 19960403 0000950134-96-001188.hdr.sgml : 19960403 ACCESSION NUMBER: 0000950134-96-001188 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19960402 SROS: NONE GROUP MEMBERS: CAYUGA ASSOCIATES L.P. GROUP MEMBERS: DEVON ASSOCIATES/NY/ GROUP MEMBERS: FLEETWOOD CORP. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GROWTH HOTEL INVESTORS CENTRAL INDEX KEY: 0000769129 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942964750 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-45555 FILM NUMBER: 96543546 BUSINESS ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL PLAZA PO BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL PLAZA PO BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: MRI BUSINESS HOTEL INVESTORS 85 DATE OF NAME CHANGE: 19850819 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DEVON ASSOCIATES/NY/ CENTRAL INDEX KEY: 0001007974 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 100 JERICHO QUADRANGLE STREET 2: SUITE 214 CITY: JERICHO STATE: NY ZIP: 11753 BUSINESS PHONE: 5168220022 MAIL ADDRESS: STREET 1: 100 JERICHO QUADRANGLE STREET 2: STE 214 CITY: JERICHO STATE: NY ZIP: 11753 SC 14D1/A 1 AMENDMENT NO. 3 TO SCHEDULE 14D1 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 (AMENDMENT No. 3) Final Amendment and SCHEDULE 13D* under the Securities Exchange Act of 1934 ----------------- GROWTH HOTEL INVESTORS, a California Limited Partnership (Name of Subject Company) DEVON ASSOCIATES CAYUGA ASSOCIATES L.P. FLEETWOOD CORP. (Bidders) LIMITED PARTNERSHIP ASSIGNEE UNITS (Title of Class of Securities) NONE (CUSIP Number of Class of Securities) ----------------- Michael L. Ashner Devon Associates Edward Mattner Cayuga Associates L.P. Fleetwood Corp. 100 Jericho Quadrangle 114 West 47th Street Suite 214 19th Floor Jericho, New York 11735-2717 New York, New York 10036 (516) 822-0022 (212) 921-3340 Copies to: Mark I. Fisher G. David Brinton Rosenman & Colin LLP Rogers & Wells 575 Madison Avenue 200 Park Avenue New York, New York 10022-2585 New York, New York 10166 (212) 940-8877 (212) 878-8276 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of Bidders) - -------------------------- * This Statement also constitutes the Statement on Schedule 13D of Cayuga Associates L.P. and Fleetwood Corp. filed with respect to the Limited Partnership Assignee Units of Growth Hotel Investors, a California limited partnership. 2 CUSIP NO. NONE 14D-1 Page 2 of 8 Pages ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Devon Associates ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization New York ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 13,277 Units ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [ ] ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 35.95% ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) PN 2 3 CUSIP NO. NONE 14D-1 Page 3 of 8 Pages ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Cayuga Associates L.P. ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization Delaware ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 0 Units** ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [x]** ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 0 ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) PN __________________________________ ** Does not include 1,036 Units owned by QALA III Associates, a New York general partnership and affiliate of Cayuga Associates L.P. or the 13,277 Units owned by Devon Associates. 3 4 CUSIP NO. NONE 14D-1 Page 4 of 8 Pages ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Fleetwood Corp. ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization Delaware ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 0 Units*** ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [x]*** ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 0 ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) CO __________________________________ *** Does not include 55 Units owned by LTBD Inc., a Delaware corporation and affiliate of Fleetwood Corp. or the 13,277 Units owned by Devon Associates. 4 5 AMENDMENT NO. 3 TO SCHEDULE 14D-1 This Amendment No. 3 further amends and supplements the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed with the Commission on February 15, 1996 by Devon Associates, a New York general partnership (the "Purchaser"), Cayuga Associates L.P. and Fleetwood Corp. (together with the Purchaser the "Bidders"), as amended and supplemented by Amendment Nos. 1 and 2 to the Schedule 14D-1 filed with the Commission by the Bidders on March 8, 1996 and on March 18, 1996, respectively, relating to the offer of the Purchaser to purchase up to 15,000 of the outstanding limited partnership assignee units ("Units") of Growth Hotel Investors, a California limited partnership (the "Partnership"), at a purchase price of $705 per Unit, net to the seller in cash, upon the terms set forth in the Offer to Purchase dated February 15, 1996 and Supplemented on March 18, 1996 and the related Letter of Transmittal (which collectively constitute the "Offer"), to include the information set forth below. Terms not otherwise defined herein shall have the meaning ascribed to them in the Schedule 14D-1 and the Offer to Purchase. Item 4. Source and Amount of Funds or Other Consideration. Item 4(a)-(b) is hereby amended by adding after the only sentence thereof the following sentence: "The total amount of funds required by the Purchaser to purchase the 13,276 Units purchased pursuant to the Offer, excluding related fees and expenses, was $9,359,580." Item 6. Interest in Securities of the Subject Company. Item 6(a)-(b) is hereby amended by adding after the only sentence thereof the following: "The Offer by the Purchaser to purchase up to 15,000 outstanding Units expired at 12:00 Midnight, New York City time, on Monday, March 25, 1996. Pursuant to the Offer, the Purchaser purchased 13,276 Units, constituting approximately 35.95% of the outstanding Units." 5 6 Item 11. Material to be Filed as Exhibits. Item 11 is hereby amended by adding the following, which are attached as exhibits: (b)(2) Master Agreement, dated March 28, 1996. (b)(3) Loan Agreement, dated March 28, 1996. 6 7 Signatures After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 1, 1996 DEVON ASSOCIATES By: Cayuga Associates L.P. By: Cayuga Capital Corp., its General Partner By: /s/ Michael L. Ashner ---------------------------------- Name: Michael L. Ashner Title: President By: Fleetwood Corp. By: /s/ Edward E. Mattner ---------------------------------- Name: Edward E. Mattner Title: President CAYUGA ASSOCIATES L.P. By: Cayuga Capital Corp., its General Partner By: /s/ Michael L. Ashner ---------------------------------- Name: Michael L. Ashner Title: President FLEETWOOD CORP. By: /s/ Edward E. Mattner ---------------------------------- Name: Edward E. Mattner Title: President 7 8 Exhibit Index Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ------------ EX-99.(b)(2) Master Agreement, dated March 28, 1996. EX-99.(b)(3) Loan Agreement, dated March 28, 1996. 8 EX-99.(B)(2) 2 MASTER AGREEMENT 1 EXHIBIT 99.(b)(2) 2 ================================================================================ MASTER AGREEMENT Dated as of March 28, 1996 BETWEEN DEVON ASSOCIATES, as BORROWER AND PAINE WEBBER REAL ESTATE SECURITIES INC., as Lender ================================================================================ 3 TABLE OF CONTENTS
Page ---- I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.2 Principles of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 II. CONDITIONS TO CLOSING AND LOAN ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.1 Conditions Precedent to Closing Date; Conditions Precedent to Loan Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.1.1 Conditions Precedent to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.1.2 Conditions Precedent to Initial Loan Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.1.3 Conditions Precedent to All Loan Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 2.2 Use of Proceeds; Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 III. SPECIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 3.1 Cooperation; Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.1.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.1.2 Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 3.2 Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.2.1 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.2.2 Pledge and Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3.2.3 Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.2.4 Deposit and Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.2.5 Disbursement of Account Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3.2.6 Remedies Upon Default in Respect of Account Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 3.2.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 3.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 3.3.1 Funding Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 3.3.2 Residual Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 3.4 Interest Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4.1 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4.2 Pledge and Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4.3 Deposit and Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4.4 Remedies Upon Default in Respect of Interest Reserve Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3.4.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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Page ---- IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 4.1 Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 4.2 Survival of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 5.1 Affirmative Covenants Prior to the Loan Satisfaction Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 5.2 Affirmative Covenants Subsequent to the Loan Satisfaction Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 6.1 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 VII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 7.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 7.3 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 8.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 8.2 Lender's Discretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 8.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 8.4 Modification, Waiver in Writing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 8.5 Delay Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 8.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 8.7 Waiver of Trial By Jury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 8.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 8.10 Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 8.11 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 8.12 Remedies of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 8.13 Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 8.14 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 8.15 Exhibits Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 8.16 Offsets, Counterclaims and Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 8.17 No Joint Venture or Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 8.18 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 8.19 Waiver of Marshalling of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 8.20 Waiver of Counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 8.21 Conflict; Construction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 8.22 Brokers and Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 8.23 Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 8.24 Assignments and Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 8.25 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
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Page ---- Section 8.26 Overdue Payments . . . . . . . . . . . . . . . 88
EXHIBITS AND SCHEDULES Exhibit A Core Entities Names and Notice Addresses Exhibit B Tender Offer Partnerships and Properties Owned Exhibit C Affiliate Unit Pledge Exhibit D Borrower Partnership Interest Pledge Exhibit E Cayuga Partnership Interest Pledge Exhibit F Deficit Distribution Agreement Exhibit G Environmental Indemnity Exhibit H Fleetwood Stock Pledge Exhibit I Loan Agreement Exhibit J LP Unit Pledge Exhibit K Monthly Certificate Exhibit L Note Exhibit M NPI Realty Pledge Exhibit N NPI Realty Stock Pledge Exhibit O Subsequent Transaction Agreement Exhibit P-1 Opinion of Rosenman & Colin Exhibit P-2 Opinion of Post & Heymann Exhibit P-3 Opinion of Haight, Gardner, Poor & Havens Exhibit P-4 Opinion of Roger & Wells Exhibit P-5 Opinion of Battle Fowler Exhibit P-6 Opinion of Proskauer, Rose, Goetz & Mendelsohn Exhibit P-7 Opinion of Akerman, Seuterfitt & Edison Exhibit P-8 Opinion of Howard Rice Nemerowski Exhibit Q Payment Instruction Letter Exhibit R Additional Collateral Agreement Exhibit S Partnership Acknowledgement Schedule I Initial Price of LP Units Schedule II Conflicts with Agreements Schedule III List of Debt (secured and unsecured) Schedule IV List of Title Reports (with dates) Schedule V Agreements Relating to Control of Tender Offer Partnerships Schedule VI Litigation Schedule VII Environmental Matters Schedule VIII Leasing Matters Schedule IX Limited Partner Distributions Schedule X Formation Document Entities Schedule XI Individual Property Management Agreements (iii) 6 Schedule XII Memorandum of Understanding (iv) 7 MASTER AGREEMENT THIS MASTER AGREEMENT, dated as of March 28, 1996 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this "Agreement"), by and between PAINE WEBBER REAL ESTATE SECURITIES INC., having an address at 1285 Avenue of the Americas, New York, New York 10019, Attention: Legal Department (together with its successors and assigns, "Lender"), and DEVON ASSOCIATES, a New York general partnership having an address at 100 Jericho Quadrangle, Jericho, New York 11753 (the "Borrower"). All capitalized terms used herein shall have the respective meanings set forth in Section 1 hereof. W I T N E S S E T H : WHEREAS, the Borrower is a newly-formed, bankruptcy remote Single-Purpose New York general partnership, one-third of the partnership interests in which are owned by Fleetwood and two-thirds of the partnership interests in which are owned by Cayuga; WHEREAS, Fleetwood is a newly-formed, bankruptcy remote Single-Purpose Delaware corporation all of the stock in which is owned by Carl F. Icahn; WHEREAS, Cayuga is a newly-formed, bankruptcy remote, Single-Purpose Delaware limited partnership, the partnership interests in which are owned as follows: (i) the general partnership interest in Cayuga, which interest constitutes 1% of the partnership interests in Cayuga, is owned by Cayuga Corp., (ii) 11.724% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, is owned by RJN, (iii) 24.12% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the Fox Investors, (iv) 23.785% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, is owned by AP-Cayuga, and (v) 40.37% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the QALB Investors; 8 WHEREAS, Cayuga Corp. is a newly-formed, bankruptcy remote, Single-Purpose Delaware corporation the stock in which is owned as follows: (i) one-third of the stock in Cayuga Corp. is owned by Michael L. Ashner, (ii) one-third of the stock in Cayuga Corp. is owned by W. Edward Scheetz and (iii) one-third of the stock in Cayuga Corp. is owned by RJN; WHEREAS, the managing general partnership interests in each of the Tender Offer Partnerships are directly owned and controlled by the TOP-GP, a California general partnership, and the managing general partner of the TOP-GP is NPI Realty; WHEREAS, NPI Realty is a Florida corporation and a wholly-owned subsidiary of NPI Corp.; WHEREAS, the Borrower intends to acquire limited partnership units (the "LP Units") in each of the Tender Offer Partnerships by means of the Tender Offers; WHEREAS, the Borrower desires to borrow the Loans from Lender in order to finance a portion of the cost of the Tender Offers; and WHEREAS, Lender has required, as a condition precedent to its agreement to make the Loan available to the Borrower pursuant to the Loan Agreement, that the Borrower execute and deliver this Agreement and that the Borrower and the other Transaction Parties execute and deliver the other Loan Documents; NOW, THEREFORE, in consideration of the agreement of Lender to make the Loans and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby agree as follows: I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 Definitions. For all purposes of this Agreement and the other Loan Documents, except as otherwise expressly required or unless the context clearly indicates a contrary intent: "Account Collateral" shall have the meaning provided in Section 3.2.2. -2- 9 "Additional Collateral" shall mean cash, United States Treasuries or equivalents reasonably satisfactory to Lender in an aggregate amount equal to (x) $2,000,000 minus (y) the value as of the Closing Date of the Affiliate Units pledged as Collateral by the Icahn Investors. "Additional Collateral Account" shall mean the account established pursuant to the Additional Collateral Agreement. "Additional Collateral Agreement" shall mean the Additional Collateral Agreement, dated as of the date hereof, made by Fleetwood, substantially in the form of Exhibit R annexed hereto, pledging to Lender as security for the Loans the Additional Collateral, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Adjusted Net Cash Flow" shall mean for any period an amount equal to (i) the Net Cash Flow for such period minus (ii) amounts required to be paid on the Payment Date immediately succeeding the last day of such period in respect of the payment of interest on the Loan and the other obligations of the Borrower under the Loan Documents (other than the obligations to repay the principal amount of the Loan). "Advance Date" shall have the meaning provided in Section 2.1.3. "Affiliate" shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Affiliate Unit Pledge" shall mean the Pledge and Security Agreement, dated as of the date hereof, made by the Borrower, QAL Associates and LTBD, substantially in the form of Exhibit C annexed hereto, pledging to Lender as security for the Loans all LP Units in the Tender Offer Partnerships owned by such entities, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. -3- 10 "Affiliate Units" shall mean, collectively, all LP Units in the Tender Offer Partnerships which are owned, directly or indirectly, by the Borrower, QAL Associates and LTBD. "Aggregate Liquidation Amount" shall mean, for any Deemed Distribution Date, the aggregate of the Liquidation Amounts for all Individual Properties for such Deemed Distribution Date. "Aggregate Refinancing Amount" shall mean, for any Deemed Distribution Date, the aggregate of the Refinancing Amounts for all Individual Properties for such Deemed Distribution Date. "Agreement" shall have the meaning specified in the first paragraph hereof. "Annualized Loan Interest" shall mean, as of any determination date, an amount equal to (i) the aggregate amount of interest which would be payable in respect of the then outstanding principal balance of the Loan in a twelve-month period, assuming that (x) the then current interest rate would be applicable to the Loan during such twelve-month period and (y) no repayments would be made in respect of the Loan during such twelve-month period, multiplied by (ii) 125%. "Annualized LP Unit Distributions" shall mean, as of any determination date, an amount equal to the lesser of (i) the cash distributions (other than cash distributions which constitute Capital Event Proceeds) paid in respect of the LP Units on the most recent quarterly distribution payment date (assuming such LP Units were owned by the Borrower on such quarterly payment date), multiplied by four, and (ii) the cash distributions (other than cash distributions which constitute Capital Event Proceeds) paid in respect of the LP Units on the four most recent quarterly distribution payment dates (assuming such LP Units were owned by the Borrower on each of such quarterly payment dates). "AP-Cayuga" shall mean AP-Cayuga, LLC, a Delaware limited partnership, and its successors and assigns. "Apollo Advisors" shall mean Apollo Real Estate Advisors, L.P., a Delaware limited partnership, and its successors and assigns. -4- 11 "Apollo Investors" shall mean, collectively, Apollo Advisors and its partners, employees and Affiliates (including, without limitation, AP-Cayuga). "Appraised Value" shall mean, as of the Loan Satisfaction Date, with respect to any Individual Property, the price that would be paid if such Individual Property was sold as of the Loan Satisfaction Date on an orderly basis as determined by an MAI appraiser mutually satisfactory to Lender and the Borrower. The cost of such appraisal shall be shared on a 50%/50% basis by the Borrower and Lender. "Attributed Net Value" shall mean, for any Tender Offer Partnership, the aggregate purchase price actually paid by the Borrower for the LP Units of such Tender Offer Partnership pursuant to the related Tender Offer. "Available Partnership Cash Flows" shall mean all Partnership Cash Flows received after the Initial Return Obligation Satisfaction Date. "Availability Period" shall mean the period commencing on the Closing Date and terminating on the 360th day thereafter. "Availability Period Closing Date" shall mean the last day of the Availability Period. "Bank" shall mean Bankers Trust Company, the financial institution at which the Cash Collateral Account has been established, and any other financial institution subsequently selected by Lender for the transfer of the Cash Collateral Account, provided that any such subsequent financial institution shall be authorized to maintain Eligible Accounts. "Borrower" shall mean Devon Associates, a New York general partnership, and its successors and assigns. "Borrower LP Units" shall mean, collectively, the LP Units owned by the Borrower. "Borrower Partnership Interest Pledge" shall mean that certain Pledge and Security Agreement dated as of the date hereof, made by Cayuga and Fleetwood to Lender, substantially in the form of Exhibit D annexed hereto, pledging to Lender as security for the Loans all partnership interests in the Borrower, as the same may be amended, -5- 12 restated, replaced, supplemented or otherwise modified from time to time. "Borrower's Partnership Agreement" shall mean the Partnership Agreement of the Borrower as in effect on the Closing Date and without giving effect to any amendment, restatement, replacement, supplement or other modification thereto made without the prior written consent of Lender. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, the Loan, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the London interbank Eurodollar market. "Capital Contribution" shall mean each cash equity contribution (including a Required Capital Contribution and excluding any equity contribution made by a partner in the Borrower to the Borrower for the purpose of funding a shortfall in the Interest Reserve Account pursuant to Section 3.4.3) made by a partner in the Borrower to the Borrower in accordance with Section 2.2. "Capital Event Interest" when used with respect to any amount shall mean the portion of such amount which would have been distributed to the Borrower and the other Transaction Parties in respect of the LP Units and the Affiliate Units in the Tender Offer Partnership receiving such amount had 100% of such amount been distributed by the relevant Tender Offer Partnership. "Capital Event Payment Amount" shall mean, for any Payment Date, an amount equal to (i) the Capital Event Proceeds received or deemed received during the Payment Period last ended less (ii) the Capital Events Proceeds Tax Amount for such Payment Date. "Capital Event Proceeds" shall mean for any period, and without duplication, (i) distributions and any other amounts received by the Borrower or any of the other Transaction Parties (including, without limitation, any sales commissions, fees or other compensation paid to the Borrower, any other Transaction Party or any of their respective Affiliates in connection with the related capital event) -6- 13 during such period in respect of the Affiliate Units or the LP Units owned, directly or indirectly, by the Borrower during such period on account of a sale or other disposition of such LP Units or Affiliate Units during such period and (ii) the Aggregate Refinancing Amount and the Aggregate Liquidation Amount for each Deemed Distribution Date occurring during such period in respect of the properties owned, directly or indirectly, by the Tender Offer Partnerships. "Capital Event Proceeds Tax Amount" shall mean, for any Payment Date, an amount equal to the capital gains tax obligations which would be incurred by the relevant Transaction Parties in connection with the related capital event, assuming the applicable capital gains tax rate were equal to the maximum federal capital gains tax rate then in effect plus 6.0%, on the Capital Event Proceeds received or deemed received during the Payment Period last ended other than Capital Event Proceeds which are Aggregate Refinancing Amounts. "Capital Proceeds Sub-Account" shall have the meaning specified in Section 3.2.3. "Capital Return Amount" shall mean a dollar amount that initially shall be zero on the Closing Date and that: (i) shall be increased from time to time by an amount representing a cumulative return at a rate of 15% per annum, compounded annually on each anniversary of the Closing Date, on the average daily balance of the Unreturned Capital Contribution Amount for the period commencing on the Closing Date; and (ii) shall be decreased from time to time (but not below zero) by Partnership Cash Flows received after the Loan Satisfaction Date. "Cash Collateral Account" shall have the meaning provided in Section 3.2.1. "Cash Flow Tax Amount" shall mean, for any period, an amount equal to 35% of the Adjusted Net Cash Flow for such period. "Cayuga" shall mean Cayuga Associates L.P., a Delaware limited partnership, and its successors and assigns. -7- 14 "Cayuga Corp." shall mean Cayuga Capital Corporation, a Delaware corporation, and its successors and assigns. "Cayuga Partnership Interest Pledge" shall mean that certain Pledge and Security Agreement dated as of the date hereof, made by Cayuga Corp., RJN, AP-Cayuga, the Fox Investors and the QALB Investors to Lender as security for the Loans, substantially in the form of Exhibit E annexed hereto, pledging to Lender all of the general and limited partnership interests in Cayuga and all of the stock of Cayuga Corp., as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as heretofore or hereafter amended or supplemented from time to time, including, without limitation, the Superfund Amendments and Reauthorization Act of 1986. "Change of Control" shall mean that any of the following events shall have occurred: (i) the Credit Parties shall cease directly or indirectly to own, collectively, at least 80% of the partnership interests in the Borrower and Cayuga, (ii) the Credit Parties shall cease directly or indirectly to own, collectively, 100% of the capital stock of Cayuga Corp., Fleetwood and NPI Realty, (iii) NPI Realty shall cease to be the sole managing general partner in the TOP-GP, (iv) the TOP-GP shall cease to be the sole managing general partner in each of the Tender Offer Partnerships, or (v) Fleetwood and Cayuga shall cease to be the sole partners in the Borrower. "Closing Date" shall have the meaning provided in Section 2.1.1. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean, collectively, each item of collateral at any time securing all or any portion of the Obligations, including, without limitation, (i) all partnership interests in the Borrower; (ii) the LP Units held by the Borrower (including all rights to distributions in respect thereof); (iii) the Affiliate Units (including all rights to distributions in respect -8- 15 thereof); (iv) all stock of, and general and limited partnership interests in, Cayuga, Cayuga Corp., Fleetwood and NPI Realty; (v) all partnership interests held by NPI Realty in the TOP-GP; (vi) the Interest Reserve Account; (vii) the Additional Collateral; and (viii) the Cash Collateral Account, provided that the "Collateral" shall not include the Deficit Distributions. "Commitment Letter" shall mean that certain Commitment Letter dated February 13, 1996 between the Borrower and Lender, together with all exhibits, schedules and annexes thereto. "Core Entities" shall mean, collectively, the Borrower, Fleetwood, Cayuga, Cayuga Corp., NPI Corp., NPI Realty, TOP-GP and the Tender Offer Partnerships. "Credit Parties" shall mean, collectively, the Borrower, Fleetwood, Cayuga, Cayuga Corp., the TOP-GP, NPI Realty, QAL Associates, the Icahn Investors, the QALB Investors, the Apollo Investors, the Insignia Investors and the Fox Investors. "Debt" shall mean, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under leases which have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities (other than letters of credit in support of trade obligations or in connection with workers' compensation, unemployment insurance, old-age pensions and other social security benefits in the ordinary course of business), -9- 16 (vii) all Debt in the nature of that referred to in clauses (i) through (vi) above which is guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss in respect of such Debt, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Debt, and (viii) all Debt referred to in clauses (i) through (vi) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien, security interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Debt Service Sub-Account" shall have the meaning specified in Section 3.2.3. "Deemed Distribution Date" shall mean each June 15 and December 15, commencing with December 15, 1996. "Default" shall mean any event, act or condition which, with notice or lapse of time, or both, would constitute an Event of Default. "Default Rate" shall have the meaning provided in the Loan Agreement. "Deficit Contributions" shall mean capital contributions made to a Tender Offer Partnership by a general partner in such Tender Offer Partnership pursuant to section 5 of the partnership agreement of such Tender Offer Partnership in connection with a dissolution or termination of such Tender Offer Partnership, which capital contributions are required to be made in order to restore a deficit balance in such general partner's Capital Account (as defined in the partnership agreement of such Tender Offer Partnership). "Deficit Distributions" shall mean any distributions made to the holders of the LP Units or the Affiliate -10- 17 Units which are distributions of amounts constituting Deficit Contributions. "Deficit Distribution Agreement" shall mean that certain Deficit Distribution Agreement and Indemnity, dated as of the date hereof, by and between Lender and the Borrower, substantially in the form of Exhibit F annexed hereto, pursuant to which (i) Lender has agreed, subject to certain conditions, to pay to the Borrower any portion of any Deficit Distributions received by Lender, and (ii) the Borrower has agreed to indemnify and hold harmless Lender from and against the payment of all or any portion of any Deficit Contributions, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Demand Funding Notes" shall mean, collectively, the notes dated February 13, 1996 made by each of RJN, Michael L. Ashner and W. Edward Scheetz, each in the original principal amount of $70,000.00 and each payable to Cayuga Corp. "Distribution" shall mean, with respect to any Person, that such Person has declared or paid a dividend or returned any equity capital to its stockholders or partners or authorized or made any other distribution, payment or delivery of property (other than common stock or partnership interests of such person) or cash to its stockholders or partners as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock or any partnership interests (or any options or warrants issued by such Person with respect to its capital stock or partnership interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock or any partnership interests of such Person (or any options or warrants issued by such Person with respect to its capital stock or partnership interests). Without limiting the foregoing, "Distributions" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "Eligible Account" shall mean a trust account held by and at the Bank or an account that is either: (a) maintained with a depository institution or trust company the -11- 18 long-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the long-term unsecured debt obligations of such holding company) have been rated by a Rating Agency in one of its two highest rating categories or the short-term commercial paper of which is rated by a Rating Agency in its highest rating category at the time of any deposit therein; or (b) a trust account or accounts maintained with a federal or state chartered depository institution or trust company with trust powers acting in its fiduciary capacity. "Environmental Claim" shall mean any notice of violation, claim, demand, abatement order or other order or direction (conditional or otherwise) by any Person for any damage, including, without limitation, personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other adverse effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (i) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity or (ii) the violation, or alleged violation, of any Environmental Laws in connection with any property owned, directly or indirectly, by an Operating Partnership or any portion thereof. "Environmental Indemnity" shall mean the Environmental Indemnity Agreement dated as of the date hereof, by the Borrower in favor of the Indemnitees, substantially in the form of Exhibit G annexed hereto, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Environmental Laws" shall mean all laws, statutes, ordinances, orders, rules, codes, regulations and judgments and any judicial or administrative interpretations thereof relating to health, safety and protection of the environment, including, without limitation, those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, removal, cleanup or remedial action, losses or injuries resulting from Hazardous Substance Activity, in any manner applicable to any property owned, directly or indirectly, by an Operating Partnership or any part thereof, or the ownership, use, occupancy or operation thereof, including, without limitation, CERCLA, the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et -12- 19 seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as heretofore or hereafter amended or supplemented from time to time, and any analogous future or present applicable local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) which together with the Borrower would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Event of Default" shall have the meaning provided in Section 7.1. "Existing Lenders" shall mean, with respect to each Individual Property, the lenders under the Existing Loan Documents encumbering such Individual Property. "Existing Loan Documents" shall mean, with respect to each Individual Property, the documents evidencing, securing or otherwise relating to the Existing Loans encumbering such Individual Property. "Existing Loans" shall mean, with respect to each Individual Property, the loans which encumber such Individual Property on the Closing Date. "Fees" shall mean the fees payable to Lender pursuant to Section 3.3. "Financial Statements" shall mean, with respect to each Tender Offer Partnership, (x) the statements of financial condition of such Tender Offer Partnership as set forth in the reports filed with the SEC on forms (i) 10-K, as at December 31, 1994, and (ii) 10-Q, as at September 30, -13- 20 1995, and (y) the statement of operation for the 12 month period ending December 31, 1995. "Fiscal Year" shall mean each twelve month period commencing on January 1 and ending on December 31. "Fleetwood" shall mean Fleetwood Corp., a Delaware corporation, and its successors and assigns. "Fleetwood Stock Pledge" shall mean that certain Pledge and Security Agreement, dated as of the date hereof, made by Carl C. Icahn to Lender as security for the Loans, substantially in the form of Exhibit H annexed hereto, pledging to Lender all of the stock of Fleetwood, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Formation Documents" shall mean, collectively, the partnership agreements, limited partnership agreements, certificates of limited partnership, articles of incorporation, by-laws and other organizational documents of the entities listed on Schedule X annexed hereto, as heretofore and hereafter amended, restated, replaced, supplemented or otherwise modified from time to time. "Fox Investors" shall mean, collectively, Emmet J. Cashin, Jr., Trustee of the Survivor Trust under the Cashin 1990 Trust; Jarold A. Evans, Trustee of the Jarold A. Evans Revocable Trust, dated April 19, 1989; J.E. Capital Partners, a California limited partnership; and W. Patrick McDowell, Trustee of the McDowell Family Revocable Trust, dated April 28, 1978, as amended. "Funding Fee" shall have the meaning provided in Section 3.3.1. "GAAP" shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. "Governmental Authority" shall mean any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Hazardous Substance" shall mean (i) any chemical, material or substance defined as or included in the definition of "hazardous wastes," "hazardous materials," "hazard- -14- 21 ous substance," "extremely hazardous substance," "pollutants," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable Environmental Laws, (ii) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, or any other materials which cause any property owned, directly or indirectly, by an Operating Partnership to be in violation of any applicable Environmental Laws and (iii) asbestos in any form which is friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million. "Hazardous Substance Activity" shall mean any storage, holding, existence, release, spill, leaking, pumping, pouring, injection, escaping, deposit, disposal, dispersal, leaching, migration, use, treatment, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Substance from, under, into or on any property owned, directly or indirectly, by an Operating Partnership, including, without limitation, the discharge of any Hazardous Substance emanating from any property owned, directly or indirectly, by an Operating Partnership through the air, soil, surface water, groundwater or property and also including, without limitation, the abandonment or disposal of any barrels, containers and other closed receptacles containing any Hazardous Substance from or on such property, in each case whether sudden or non-sudden, accidental or non-accidental; provided, however, that limited quantities of Hazardous Substances used or stored at any such property in compliance with applicable Environmental Laws and required in connection with the normal operation and maintenance of such property shall not constitute a Hazardous Substance Activity. "Icahn Investors" shall mean, collectively, Carl C. Icahn and his Affiliates (including, without limitation, Fleetwood and LTBD). "Impositions" shall mean all real estate and personal property taxes, water, sewer and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a -15- 22 Governmental Authority upon any property owned, directly or indirectly, by an Operating Partnership or the income and revenues therefrom or the ownership, use, occupancy or enjoyment thereof, and any interest, costs or penalties with respect to any of the foregoing. "Income Tax Sub-Account" shall have the meaning specified in Section 3.2.3. "Indemnified Liabilities" shall have the meaning provided in Section 8.14(b). "Indemnitees" shall mean, collectively, Lender, PW and the Servicer and their respective officers, directors, employees, agents, parents and Affiliates. "Independent" shall mean, when used with respect to any Person, a Person who (i) is in fact independent, (ii) does not have any direct financial or indirect financial interest in any Credit Party or any Tender Offer Partnership, or in any Affiliate of any Credit Party or any Tender Offer Partnership or in any constituent partner of any Credit Party or any Tender Offer Partnership or any Affiliate of any thereof and (iii) is not connected with any Credit Party or any Tender Offer Partnership or any Affiliate of any Credit Party or any Tender Offer Partnership or any constituent partner of any Credit Party or any Tender Offer Partnership or any Affiliate of any thereof as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. Whenever it is herein provided that any Independent Person's opinion or certificate shall be provided, such opinion or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof. "Individual Property" shall mean, with respect to each Tender Offer Partnership, each property listed on Exhibit B hereto as being owned or leased (directly or indirectly) by such Tender Offer Partnership, together with all improvements, fixtures, equipment and personalty relating to such property and all rights pertaining to such property, improvements, fixtures, equipment and personalty. "Individual Property Management Agreements" shall mean, collectively, the property management agreements, franchise agreements, license agreements and asset management agreements relating to the Individual Properties as listed in Schedule XI annexed hereto. -16- 23 "Initial Loan Advance" shall mean the first Loan Advance made under the Loan Agreement. "Initial Loan Advance Date" shall mean the date on which the Initial Loan Advance is made. "Initial Price" shall mean the initial price offered pursuant to a Tender Offer for the purchase of the related LP Units, as specified in Schedule I annexed hereto and made a part hereof. "Initial Return Obligation Satisfaction Date" shall mean the first date after the Loan Satisfaction Date on which each of the following has occurred: (i) the Capital Return Amount shall have been reduced to zero; and (ii) the Unreturned Capital Contribution Amount shall have been reduced to zero. It is understood and agreed that for purposes of this definition, Partnership Cash Flows received after the Loan Satisfaction Date shall be deemed applied on the date received first to reduce the Capital Return Amount on such date to zero and second, to reduce the Unreturned Capital Contribution Amount on such date to zero. "Insignia Investors" shall mean, collectively, Insignia Financial Group, Inc. and its Affiliates (including, without limitation, RJN). "Insurance Requirements" shall mean, with respect to each Individual Property and each other property owned, directly or indirectly, by an Operating Partnership, all material terms of any insurance policy applicable to such property, all material requirements of the issuer of any such policy, and all material regulations and then current standards applicable to or affecting the related property or any part thereof or any use or condition thereof, which may, at any time, be recommended by the Board of Fire Underwriters, if any, having jurisdiction over such property, or such other body exercising similar functions. "Interest Reserve Account" shall have the meaning provided in Section 3.4.1. "Interest Reserve Amount" shall have the meaning provided in Section 3.4.2. -17- 24 "knowledge" in the case of the Borrower shall mean the actual knowledge of any of Michael L. Ashner, Peter Braverman, Andrew Farkas, W. Edward Scheetz and Carl C. Icahn. "Legal Requirements" shall mean, with respect to each Operating Partnership and its respective assets, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, Environmental Laws) affecting such Operating Partnership and/or its respective assets, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto. "Lender" shall have the meaning specified in the first Paragraph hereof. "Lien" shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and mechanic's, materialmen's and other similar liens and encumbrances. "Liquidation Amount" shall mean, for any Deemed Distribution Date and for any Individual Property owned, directly or indirectly, by a Tender Offer Partnership, the Capital Event Interest in the net proceeds of (i) any sale of such Individual Property or (ii) to the extent not applied to the repair, restoration or replacement of the affected Individual Property, condemnation or insurance proceeds with respect to such Individual Property, which unapplied condemnation or insurance proceeds exceed $100,000 for each event for which such unapplied condemnation or insurance proceeds are payable, to the extent that such sale, condemnation or insurance proceeds are received during the Measurement Period for such Deemed Distribution Date and are not distributed in full by the relevant Tender Offer Partnership on or before such Deemed Distribution Date. "Loan" shall mean the loan in the aggregate maximum principal amount of up to $40,000,000, evidenced by the Note, to be advanced to the Borrower by Lender pursuant to the Loan Agreement and to be secured by the Security Documents and the other Loan Documents. -18- 25 "Loan Advance" shall mean an advance of Loan proceeds under the Loan Agreement. "Loan Agreement" shall mean that certain Loan Agreement dated as of the date hereof between Lender and Borrower, pursuant to which Lender has agreed to make the Loan available to Borrower pursuant and subject to the terms thereof and the other Loan Documents, substantially in the form of Exhibit I annexed hereto, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Loan Documents" shall mean, collectively, this Agreement, the Loan Agreement, the Note, the Pledges, the Environmental Indemnity, the Deficit Distribution Agreement, the Subsequent Transaction Agreement, and every other document or instrument executed and/or delivered in connection with the Loans or otherwise pursuant to the Loan Documents, in each case, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Loan Satisfaction Date" shall mean the date upon which the Loans, together with all interest accrued thereon and all other amounts owing under the Loan Documents (other than the Residual Fee) have been paid in full. "Loans" shall mean, collectively, some or all of the outstanding Loan Advances, as the context requires. "LP Unit Pledge" shall mean the Pledge and Security Agreement dated as of the date hereof, made by the Borrower to Lender as security for the Loans, substantially in the form of Exhibit J annexed hereto, pledging to Lender all LP Units acquired by the Borrower in the Tender Offer Partnerships, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "LP Units" shall have the meaning specified in the Recitals to this Agreement. "LTBD" shall mean LTBD, Inc., a Delaware corporation, and its successors and assigns. "Maturity Date" shall have the meaning provided in the Loan Agreement. "Measurement Period" shall mean, for (x) the first Deemed Distribution Date, the period commencing on the -19- 26 Closing Date and ending on the 30th day immediately preceding the first Deemed Distribution Date (i.e. December 15, 1996) and (y) for each subsequent Deemed Distribution Date, the period commencing on the 30th day preceding the immediately preceding Deemed Distribution Date and ending on the 30th day preceding such first-mentioned Deemed Distribution Date. "Memorandum of Understanding" shall mean the Memorandum of Understanding, dated March 15, 1996, a copy of which is annexed hereto as Schedule XII. "Monthly Certificate" shall mean for any Payment Period, an Officers' Certificate of the Borrower substantially in the form of Exhibit K annexed hereto, setting forth the calculation of (i) Net Cash Flow, Adjusted Net Cash Flow, the Cash Flow Tax Amount, the Tax Carryforward Amount and the Principal Repayment Amount for such Payment Period, (ii) the Capital Event Proceeds received during such Payment Period and a computation of the Aggregate Refinancing Amount, the Aggregate Liquidation Amount, the Capital Event Proceeds Tax Amount and Capital Event Proceeds Payment Amount for such Payment Period, and (iii) the Capital Return Amount and the Unreturned Capital Contribution Amount as of the last day of such Payment Period. "Net Cash Flow" shall mean, for any period, and without duplication, (a) all distributions received by any of the Transaction Parties during such period in respect of the Affiliate Units which are not Capital Event Proceeds or Deficit Distributions, (b) all distributions received by the Borrower during such period in respect of the LP Units which are not Capital Event Proceeds or Deficit Distributions, (c) all distributions (other than distributions of Loan proceeds made to the partners in the Borrower to return Capital Contributions made by such partners pursuant to and in accordance with Section 2.2) and reimbursements received by any of the Transaction Parties in respect of their respective partnership interests in the Borrower and Cayuga, and (d) all dividends and reimbursements received by any of the Transaction Parties in respect of their shareholder interests in Cayuga Corp. and Fleetwood. "Net Cash Flow Sub-Account" shall have the meaning specified in Section 3.2.3. "Note" shall mean the Promissory Note dated the date hereof in the maximum original principal amount of up to $40,000,000, made by Borrower to Lender, substantially in the form of Exhibit L annexed hereto, evidencing the Loan, as the -20- 27 same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "NPI Corp." shall mean National Property Investors, Inc., a Delaware corporation, and its successors and assigns. "NPI Realty" shall mean NPI Realty Management Corp., a Florida corporation, and its successors and assigns. "NPI Realty Pledge" shall mean that certain Pledge and Security Agreement dated as of the date hereof, made by NPI Realty to Lender as security for the Loans, substantially in the form of Exhibit M annexed hereto, pledging to Lender all of the partnership interests in the TOP-GP owned by NPI Realty, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "NPI Realty Stock Pledge" shall mean the certain Pledge and Security Agreement dated as of the date hereof, made by NPI Corp. to Lender as security for the Loans, substantially in the form of Exhibit N annexed hereto, pledging to Lender all of the stock of NPI Realty, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Obligations" shall mean, collectively, (i) the indebtedness evidenced by the Note, (ii) all other obligations and liabilities of the Borrower and the other Transaction Parties due or to become due to Lender pursuant hereto and/or pursuant to the other Loan Documents, (iii) all amounts, sums and expenses paid by or payable to Lender hereunder or under any of the other Loan Documents, and (iv) all other covenants, obligations and liabilities of the Borrower and the other Transaction Parties hereunder and under the other Loan Documents, in each instance, together with all interest thereon due in connection therewith, provided that after the Loan Satisfaction Date, Obligations shall not mean any obligation or liability of the Borrower for the payment of the Residual Fee. "Officer's Certificate" shall mean a certificate delivered to Lender which is signed by an authorized officer of a corporation (in the case of a corporation) or by an authorized officer of the managing general partner (in the case of a partnership). "Operating Partnerships" shall mean, collectively, the limited partnerships in which a Tender Offer Partnership has a direct or indirect interest and which have been formed -21- 28 for the purpose of investing in real estate and the partnerships, subsidiaries and joint ventures in which such limited partnerships have an interest. "Participation Percentage" shall mean the lesser of (i) 15%, or (ii) the sum of (x) 10% plus (y) 5/24ths of 1.0% for each full or partial month in the term of the Loans after the Initial Maturity Date (as defined in the Loan Agreement). "Partnership Acknowledgement" shall have the meaning provided in Section 2.1.1(j). "Partnership Cash Flows" shall mean, without duplication, for any period, (x) distributions received by the Borrower in respect of the LP Units during such period, and (y) proceeds received by the Borrower during such period from the sale or other disposition of such LP Units, provided that Partnership Cash Flows shall not include Deficit Distributions. "Partnership Formation Documents" shall mean, collectively, the partnership agreements, joint venture agreements, limited partnership agreements, certificates of limited partnership and other organizational documents of the Tender Offer Partnerships and all Operating Partnerships, as any of the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Payment Date" shall mean the last Business Day of each calendar month commencing April, 1996. "Payment Instruction Letters" shall have the meaning provided in Section 2.1.1(e). "Payment Period" shall mean (x) in the case of the first such period, the period commencing on the Closing Date and ending on the third Business Day immediately preceding the Payment Date occurring in April, 1996 and (y) in the case of each subsequent period, the period commencing on (but not including) the last day of the immediately preceding Payment Period and ending on (and including) the third Business Day immediately preceding the second Payment Date immediately succeeding the first day of such period. "Payors" shall mean, collectively, all Persons who are required to make payments directly into the Cash Collateral Account. -22- 29 "Permitted Investments" shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by Lender, Servicer, or any of their respective Affiliates: (i) direct obligations of, or obligations fully guaranteed as to full and timely payment of principal and interest by, (a) the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America, or (b) FHLMC, FNMA or the Federal Farm Credit System provided such obligations at the time of purchase or contractual commitment for purchase are qualified by a Rating Agency as a Permitted Investment hereunder as evidenced in writing; (ii) fully FDIC-insured demand and time deposits in or certificates of deposit of, or bankers' acceptances issued by, any bank or trust company, savings and loan association or savings bank, provided that such investments need not be insured if the commercial paper and long-term unsecured debt obligations of such depository institution or trust company (or in the case of the principal depository institution in a holding company system, the commercial paper or long-term unsecured debt obligations of such holding company) have the highest rating or one of the two highest ratings, respectively, available for such securities by a Rating Agency, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to the certificates by a Rating Agency as evidenced in writing; (iii) repurchase obligations with respect to any security described in clause (i) above entered into with a depository institution or trust company (acting as principal) described in clause (ii) above; (iv) general obligations of or obligations guaranteed by any state of the United States or the District of Columbia receiving one of the two highest long-term unsecured debt ratings available for such securities by a Rating Agency, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to the certificates by a Rating Agency as evidenced in writing; (v) securities bearing interest or sold at a discount that are issued by any corporation incorporated -23- 30 under the laws of the United States of America or any State thereof or the District of Columbia and is rated by a Rating Agency in one of its two highest long-term unsecured rating categories at the time of such investment or contractual commitment providing for such investment; provided, however, that securities issued by any such corporation will not be Permitted Investments to the extent that investment therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Cash Collateral Account, the Interest Reserve Account or the Additional Collateral Account, as the case may be, to exceed 20% of the aggregate principal amount of all Permitted Investments held in the Cash Collateral Account, the Interest Reserve Account or the Additional Collateral Account, as the case may be; (vi) commercial or finance company paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) that is rated by a Rating Agency in its highest short-term unsecured debt rating available at the time of such investment or contractual commitment providing for such investment, and is issued by a corporation the outstanding senior long-term debt obligations of which are then rated by a Rating Agency in one of its two highest long-term unsecured debt ratings available, or such lower rating as will not result in the downgrading or withdrawal of the rating then assigned to the Certificates by a Rating Agency as evidenced in writing; (vii) guaranteed reinvestment agreements acceptable to a Rating Agency issued by any bank, insurance company or other corporation rated in one of the two highest long-term unsecured rating levels available to such issuers by a Rating Agency at the time of such investment, provided that any such agreement must by its terms provide that it is terminable by the purchaser without penalty in the event any such rating is at any time lower than such level; and (viii) units of taxable money market funds rated by a Rating Agency in its highest rating category or which funds have been designated in writing by a Rating Agency as Permitted Investments with respect to this definition; -24- 31 provided, however, that such instrument continues to qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) and that no instrument or security shall be a Permitted Investment if (y) such instrument or security evidences a right to receive only interest payments or (z) the right to receive principal and interest payments derived from the underlying investment provide a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. "Person" shall mean any individual, corporation, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Plan" shall mean any "employee benefit plan" as defined in Section 3(3) of ERISA or any "plan" as defined in Section 4975(e)(1) of the Code. "Pledges" shall mean, collectively, the Borrower Partnership Interest Pledge, the Cayuga Partnership Interest Pledge, the Fleetwood Stock Pledge, the NPI Realty Stock Pledge, the NPI Realty Pledge, the Affiliate Unit Pledge and the LP Unit Pledge. "Principal Repayment Amount" shall mean, for any Payment Date, an amount equal to 100% of the Remaining Net Cash Flow for such Payment Period last ended. "PW" shall mean PaineWebber Incorporated, a Delaware corporation, and its successors and assigns. "QAL Associates" shall mean QALA III Associates, a New York general partnership, and its successors and assigns. "QALB Investors" shall mean, collectively, Michael L. Ashner, Martin Lifton, Peter Braverman and Arthur N. Queler and certain of their spouses and issue. "Rating Agency" shall mean one or more nationally recognized statistical rating agencies satisfactory to Lender. "Refinancing Amount" shall mean, for any Deemed Distribution Date, for any Individual Property: (x) if Debt in respect of such Individual Property is outstanding on the Closing Date, 100% of the Capital Event Interest in the -25- 32 amount by which the principal amount of Debt incurred in respect of such Individual Property (including any refinancing of existing Debt) during the Measurement Period for such Deemed Distribution Date exceeds 107% of the principal amount of the Debt in respect of such Individual Property which is outstanding on the Closing Date or (y) if no such Debt in respect of such Individual Property is outstanding on the Closing Date, the amount equal to 100% of the Capital Event Interest in Debt incurred in respect of such Individual Property during the Measurement Period for such Deemed Distribution Date to the extent that such excess Debt is not distributed in full by the relevant Tender Offer Partnership. "Related Documents" shall mean, collectively, the Formation Documents, the Partnership Formation Documents and the Individual Property Management Agreements. "Remaining Net Cash Flow" shall mean, for any period, an amount equal to (i) the Net Cash Flow for such period, minus (ii) the sum of (x) the Cash Flow Tax Amount for such period and (y) amounts required to be paid on the Payment Date immediately succeeding the last day of such period in respect of the payment of interest on the Loans and the other obligations of the Borrower under the Loan Documents (other than the obligations to repay the principal amount of the Loans). "Required Capital Contribution Amount" shall mean, (i) with respect to the first $10,000,000 of Loan Advances made by Lender to the Borrower, Capital Contributions equal in the aggregate to $2,500,000, which shall be made to the Borrower by the partners in the Borrower, and (ii) with respect to each subsequent $10,000,000 of Loan Advances made by Lender to the Borrower, additional Capital Contributions equal in the aggregate to $2,500,000, which shall be made to the Borrower by the partners in the Borrower. "Required Interest Reserve Amount" shall mean, as of any determination date, an amount equal to (i) the Annualized Loan Interest minus (ii) the Annualized LP Unit Distributions. "Residual Fee" shall have the meaning provided in Section 3.3.2. "Residual Fee Buy-Out Amount" shall mean an amount equal to (i) the Residual Participation Amount multiplied by (ii) the Participation Percentage; provided, however, that -26- 33 there shall be credited to the Residual Fee Buy-Out Amount any amounts distributed to Lender in respect of the Residual Fee during the period commencing on the Loan Satisfaction Date and expiring on the date the Borrower pays the Residual Fee Buy-Out Amount to Lender which are attributable to (x) the sale or other disposition by the Borrower of LP Units and (y) the sale, refinancing or other disposition of an Individual Property. "Residual Participation Amount" shall mean the aggregate amount, determined as of the Loan Satisfaction Date, which would be distributable in respect of the LP Units owned by the Borrower after giving effect as of the Loan Satisfaction Date to the repayment in full of the Loan and assuming the payment of the Capital Return Amount and assuming further that (i) all Individual Properties were sold by the Tender Offer Partnerships on the Loan Satisfaction Date for a cash purchase price equal to the Appraised Value of such Individual Properties and (ii) each such Tender Offer Partnership was liquidated on the Loan Satisfaction Date and all assets distributed in accordance with the terms of the relevant partnership agreements, provided that (x) the amount of all disposition fees and other similar amounts payable to general partners and managers in connection with the sale of Individual Properties (to the extent that such fees are not commercially reasonable as determined by Lender) shall not decrease the amount otherwise distributable in respect of the LP Units for purposes of determining the Residual Participation Amount, and (y) the payment of Deficit Distributions shall not be taken into account in determining the Residual Participation Amount. "RJN" shall mean RJN Corporation, a Delaware corporation, and its successors and assigns. "SEC" shall have the meaning provided in Section 5.1(a)(ix). "Securitization Transaction" shall mean the transactions to be contemplated in a pooling and servicing agreement (or similar agreement), including, without limitation, (i) the assignment and transfer of the Loans and the Loan Documents by Lender to a depositor, (ii) the creation of a grantor trust, (iii) the issuance, sale and rating of certificates, and (iv) the assignment and transfer of the Loans and the Loan Documents to the trustee of the grantor trust for the benefit of the certificateholders, as more particularly described in Section 3.1 hereof. -27- 34 "Security Documents" shall mean, collectively, the Pledges, the Additional Collateral Agreement, this Agreement (with respect to the Cash Collateral Account and the Interest Reserve Account), and any other Loan Document creating, perfecting or otherwise relating to the security interests to be granted to Lender in any portion of the Collateral, in each case, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Servicer" shall mean Bankers Trust Company, or its successor in interest, or any successor servicer appointed by Lender. "Single-Purpose" shall mean, with respect to a Person, that such Person at all times since its formation: (i) has been a duly formed and existing partnership or corporation, as the case may be; (ii) has been duly qualified in each jurisdiction in which such qualification was or may be necessary for the conduct of its business; (iii) has complied with the provisions of its organizational documents and the laws of its jurisdiction of formation in all respects; (iv) has observed all customary formalities regarding its partnership or corporate existence, as the case may be; (v) has accurately maintained its financial statements, accounting records and other partnership or corporate documents separate from those of any other Person; (vi) has not commingled its assets with those of any other Person; (vii) has accurately maintained its own bank accounts, payroll and separate books of account; (viii) has paid its own liabilities from its own separate assets; (ix) has identified itself in all dealings with the public, under its own name and as a separate and distinct entity; (x) has not identified itself as being a division or a part of any other Person; (xi) has not identified any other Person as being a division or a part of such Person; (xii) has been adequately capitalized in light of the nature of its business; (xiii) has not assumed or guaranteed the liabilities of any other Person; (xiv) has not acquired obligations or securities of any other Person (except the LP Units, in the case of the Borrower, and the interests in the Borrower in the case of Cayuga and Fleetwood); (xv) has not made loans or advances to any other Person; and (xvi) has not entered into and was not a party to any transaction with any Affiliate of such Person, except in the ordinary course of business and on terms which are no less favorable to such Person than would be obtained in a comparable arm's-length transaction with an unrelated third party, provided that a party to the Loan Documents or the Related Documents shall be deemed not to be -28- 35 Single-Purpose solely by reason of entering into the relationships contemplated therein. "State" shall mean the State or Commonwealth in which the subject of such reference or any part thereof is located. "Sub-Accounts" shall have the meaning provided in Section 3.2.3. "Subsequent Transaction Agreement" shall mean the Subsequent Transaction Agreement, dated as of the date hereof, by the Transaction Parties signatory thereto, substantially in the form of Exhibit O annexed hereto, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Tax Carryforward Amount" shall mean, for any Payment Period, the amount by which the Cash Flow Tax Amount for all prior Payment Periods exceeds the amount transferred from the Debt Service Sub-Account to the Income Tax Sub-Account during such Payment Periods pursuant to Section 3.2.5(c)(iii). "Tender Offer Documents" shall mean, collectively, the Offers to Purchase the LP Units of the Tender Offer Partnerships dated February 15, 1996 and supplemented on March 18, 1996. "Tender Offer LP Units" shall mean all limited partnership interests in the Tender Offer Partnerships whether owned by the Borrower, any other Transaction Party or any third party. "Tender Offers" shall mean, collectively, the offers to purchase LP Units made by the Borrower pursuant to the Tender Offer Documents. "TOP-GP" shall mean Montgomery Realty Company-85, a California general partnership, and its successors and assigns. "Transaction Parties" shall mean, collectively, the Borrower and each other Person (other than Lender) which executes and delivers a Loan Document. "UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in a State. -29- 36 "Unreturned Capital Contribution Amount" shall mean a dollar amount that initially shall be the Capital Contribution made as of the Closing Date and that shall be increased by the amount of any additional Capital Contributions made thereafter and that shall be decreased (but not below zero) (i) by the amount thereof refunded with the proceeds of the Loans in accordance with Section 2.2 and (ii) (whenever the Capital Return Amount is equal to zero) by the amount of all Partnership Cash Flows received by the Borrower after the Loan Satisfaction Date which are not applied to reduce the Capital Return Amount to zero. Section 1.2 Principles of Construction. All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, as modified herein. II. CONDITIONS TO CLOSING AND LOAN ADVANCES Section 2.1 Conditions Precedent to Closing Date; Conditions Precedent to Loan Advances. 2.1.1 Conditions Precedent to Closing Date. This Agreement shall become effective, and Lender shall execute and deliver the Loan Agreement, on the date (the "Closing Date") on which each of the following conditions precedent shall be satisfied: (a) Tender Offer Documents. On the Closing Date, the Tender Offer Documents shall be in full force and effect, Lender shall have received full and complete copies thereof and of any amendments or supplements thereto certified as such by the Borrower and the Tender Offer Documents and any such amendments or supplements shall be satisfactory to Lender. (b) Litigation. On the Closing Date, with the exception of the litigation which is the subject of the -30- 37 Memorandum of Understanding no litigation by any entity (private or governmental) shall be pending or threatened (i) with respect to the Tender Offers, the Loan, the transactions contemplated in the Loan Documents or the transactions contemplated in the Tender Offer Documents or any documentation executed in connection therewith or (ii) which Lender shall determine could have a materially adverse effect on the business, assets, liabilities, condition (financial or otherwise) or prospects of (x) any Credit Party, (y) any Tender Offer Partnership or (z) the Operating Partnerships taken as a whole. (c) Fees, etc. On the Closing Date, all costs, fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated in the Loan Documents to be payable to Lender shall have been paid to the extent due. (d) Legal Opinions. On the Closing Date, Lender shall have received legal opinions from each of (i) Rosenman & Colin LLP, counsel to the Borrower, Cayuga, QAL Associates, the QALB Investors, (ii) Post & Heymann, LLP, special counsel to NPI Corp. and Cayuga Corp., (iii) Haight, Gardner, Poor & Havens, special California counsel to the Tender Offer Partnerships, (iv) Rogers & Wells, counsel to Carl C. Icahn, LTBD and Fleetwood, (v) Battle Fowler LLP, counsel to AP-Cayuga, (vi) Proskauer, Rose, Goetz & Mendelsohn LLP, counsel to RJN, (vii) Akerman, Senterfitt & Eidson, special counsel to NPI Realty and (viii) Howard Rice Nemerovski Canady Robertson Falk & Rabkin, special counsel to the Fox Investors, addressed to Lender and dated the Closing Date, covering the matters set forth in Exhibits P-1 through P-8, respectively, and such other matters incident to the transactions contemplated herein as Lender may request. (e) Payment Instruction Letters. On or prior to the Closing Date, all Payors of amounts required to be deposited in the Cash Collateral Account shall have been directed in writing to make such payments directly to the Cash Collateral Account, each such Payor shall have acknowledged such instructions and consented thereto either in a Pledge or pursuant to a direction, consent and acknowledgment which is substantially in the form of Exhibit Q and Lender shall have received fully executed counterparts thereof (such directions, consents and acknowledgements are herein referred to collectively as the "Payment Instruction Letters"). (f) [Intentionally Omitted] -31- 38 (g) Related Documents. On the Closing Date, Lender shall have received true and complete copies of the Related Documents certified by the Borrower to be true, complete and correct. (h) Representations and Warranties, No Default. On the Closing Date, the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and no Default or Event of Default shall then exist and the Borrower shall have delivered to Lender an Officers' Certificate of the Borrower certifying that the conditions set forth in this Section 2.1.1(h) have been satisfied. (i) Insurance; Title. (i) On or prior to the Closing Date, Lender shall have received evidence that all of the Individual Properties are covered by valid and existing policies of insurance which comport with the representations set forth in Section 4.1 hereof, together with evidence of the payment of all premiums therefor. (ii) On the Closing Date, each Tender Offer Partnership shall have good and marketable title (whether direct or indirect) to its Individual Properties, subject only to the exceptions set forth in the title reports described in Schedule IV annexed hereto delivered to Lender on or before the Closing Date. (j) Loan Documents. (i) On or prior to the Closing Date, the Borrower and the other Transaction Parties shall have duly authorized, executed and delivered this Agreement, the Note, the Loan Agreement, the Pledges, the Environmental Indemnity and each other Loan Document, and each Loan Document shall be in full force and effect. (ii) On the Closing Date, the Borrower shall have delivered to Lender evidence of the completion of all recordings and filings of, or with respect to, the Security Documents (including, without limitation, the filing of proper UCC-1 financing statements) and shall have taken, or caused to be taken, all such other actions as may be necessary or, in the opinion of Lender, desirable to perfect the Liens and security interests intended to be created by the Security Documents in the Collateral covered thereby. Such filings, recordings and other actions shall include, without limitation, (x) the filing of Uniform Commercial Code financing statements in the appropriate locations, (y) the -32- 39 delivery of the certificates representing the capital stock being pledged to Lender pursuant to the Security Documents to Lender together with signed, undated stock powers and (z) each partnership the partnership interests in which are being pledged to Lender pursuant to the Security Documents shall have executed and delivered to Lender an acknowledgement in substantially the form of Exhibit S (each a "Partnership Acknowledgement"). (k) Partnership/Corporate Documents; Proceedings, Etc. (i) On the Closing Date, Lender shall have received Officer's Certificates of the Borrower, Cayuga, each Tender Offer Partnership and the TOP-GP, annexing and certifying as to (x) the partnership agreement of such entity having been duly executed, delivered and filed and remaining in full force and effect and unmodified as of the date of the such certificate (and annexing a copy thereof), (y) due authorization, execution and delivery by such entity of the Loan Documents and the Related Documents to which it is a party, and (z) such entity being in good standing and authorized to do business in each jurisdiction where the ownership of its assets and operation of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on such entity. (ii) On the Closing Date, Lender shall have received Officer's Certificates of Fleetwood, Cayuga Corp., NPI Corp. and NPI Realty annexing and certifying as to (i) corporate resolutions of such entity authorizing and approving the transactions contemplated by the Loan Documents, the Related Documents and the Tender Offer Documents, and the execution and delivery thereof by such entity in respect of the documents to which it is a party and on behalf of the other Transaction Parties in which such entity is a general partner in respect of the documents to which such Transaction Parties are parties, (ii) signatures and incumbency of all officers of such entity executing documentation on behalf of such entity or on behalf of the Transaction Parties in which such entity is a general partner, as the case may be, in connection with the transactions contemplated by the Loan Documents, the Related Documents and the Tender Offer Documents, (iii) the articles of incorporation and by-laws of such entity having been duly executed, delivered and filed and remaining in full force and effect and unmodified as of the date of such certificate (and annexing copies thereof) and (iv) such entity being in good standing and authorized to do business in each jurisdiction where the conduct of its business and ownership of its assets -33- 40 requires such qualification, except where the failure to be so qualified would not have a material adverse effect on such entity. (l) Consents. On or prior to the Closing Date, the general partner of each Tender Offer Partnership shall have executed a written consent pursuant to which, if Lender or any assignee holder of the Lender's interest under the Loan Documents becomes the holder of LP Units, Lender or such assignee is granted the right to become a limited partner under the partnership agreement of such Tender Offer Partnership. (m) Additional Collateral. On or prior to the Closing Date, Fleetwood shall have delivered to Lender the Additional Collateral, and shall have granted to Lender a first priority, perfected lien upon and security interest in the Additional Collateral, pursuant to the Additional Collateral Agreement. (n) Cash Collateral Account and Interest Reserve Account. On or prior to the Closing Date, the Cash Collateral Account and the Interest Reserve Account shall have been established at the Bank in accordance with Sections 3.2 and 3.4, respectively. (o) Subsequent Transaction Agreement. The parties to the Subsequent Transaction Agreement shall have executed and delivered such agreement, and such agreement shall be in full force and effect in accordance under its terms. (p) Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement and the other Loan Documents and all documents incidental thereto shall reflect the terms and conditions set forth in the Commitment Letter and shall otherwise be satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request. (q) Material Adverse Change. No material adverse change shall have occurred since March 18, 1996 in the Tender Offers or since December 31, 1995 in the business, property, operations, nature of assets, assets, liabilities, condition (financial or otherwise) or prospects of (x) any Credit Party, (y) any Tender Offer Partnership, or (z) the Operating Partnerships taken as a whole. -34- 41 (r) Net Operating Income. Lender shall be satisfied in its sole discretion that the aggregate net operating income (after reserves) of the Individual Properties is at least equal to $19,000,000 for the 12-month period ending with the month immediately preceding the month in which the Closing Date occurs. 2.1.2 Conditions Precedent to Initial Loan Advance. The obligation of Lender to make the Initial Loan Advance pursuant to the Loan Agreements and the other Loan Documents is subject to the fulfillment of the following conditions precedent: (a) Continued Satisfaction. On the Initial Loan Advance Date, all conditions described in Section 2.1.1 shall remain satisfied as of the date of the Initial Loan Advance. (b) Approvals. All necessary governmental, regulatory and third-party approvals in connection with the Tender Offers, the transactions contemplated by the Loan Documents and otherwise referred to in the Loan Documents shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents, or imposes materially adverse conditions upon, the consummation of the Tender Offers. Additionally, there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon, or materially delaying, or making economically unfeasible, the purchase of any LP Units pursuant to any of the Tender Offers. 2.1.3 Conditions Precedent to All Loan Advances. The obligation of Lender to make each Loan Advance (including the Initial Loan Advance) is subject to the fulfillment of the following conditions precedent on the date of such Loan Advance (each an "Advance Date"): (a) Tender Offer Documents. On each Advance Date, all conditions precedent under the Tender Offer Documents to the consummation of the Tender Offer(s) with respect to the LP Units then being acquired shall have been satisfied and all necessary governmental, regulatory and other third-party approvals required for the consummation of the Tender Offer(s) with respect to the LP Units then being acquired shall have been obtained. (b) Acquisition of LP Units. On each Advance Date, the LP Units then being acquired shall have been -35- 42 accepted and acquired by the Borrower in accordance with the terms of the relevant Tender Offer Documents and the relevant Tender Offer Partnership shall have consented to the Borrower becoming a substitute limited partner with respect to such LP Units and Lender shall have received an Officer's Certificate of the Borrower satisfactory to it of such acceptance and acquisition and as evidence of the Borrower's compliance with the third to last sentence of Section 2.2. In addition, on each Advance Date the Borrower shall have delivered to Lender evidence of the completion of all recordings and filings of, or with respect to, the Security Documents (including, without limitation, the filing of proper UCC-1 financing statements) and shall have taken, or caused to be taken, all such other action as may be necessary or, in the opinion of Lender, desirable to effect the liens and security interests intended to be created by the Security Documents in the LP Units then being acquired. Such filings, recordings and other actions, shall include, without limitation, (x) the delivery of the certificates, if any, to Lender representing such LP Units endorsed in blank and (y) the execution and delivery by each Tender Offer Partnership of a Partnership Acknowledgement with respect to the LP Units then being acquired in such Tender Offer Partnership. (c) Loans in Compliance. On each Advance Date, all Loans and Loan Advances shall be in full compliance with all requirements of law including Regulations G, T, U and X of the Board of Governors of the Federal Reserve System. (d) Continued Satisfaction. On each Advance Date, all conditions described in Sections 2.1.1 and 2.1.2 shall remain satisfied as of the date of each Loan Advance (including the Initial Loan Advance). It is understood that the waiver of a condition precedent with respect to a Loan Advance shall not constitute a waiver of such condition precedent in respect of any subsequent requested Loan Advance. (e) Representations True and Correct; Compliance. On each Advance Date, (x) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of each Loan Advance with the same effect as if made on and as of such date, and (y) no Default or Event of Default shall then exist and the Borrower shall have delivered to Lender an Officer's Certificate to such effect. (f) Litigation. On each Advance Date, no litigation by any entity (private or governmental) shall be -36- 43 pending or threatened (i) with respect to the Tender Offers, the Loans, the transactions contemplated in the Loan Documents or the transactions contemplated in the Tender Offer Documents or any documentation executed in connection therewith or (ii) which Lender shall determine could have a materially adverse effect on the business, assets, liabilities, condition (financial or otherwise) or prospects of (x) any Credit Party, (y) any Tender Offer Partnership or (z) the Operating Partnerships taken as a whole. (g) Fees, Etc. On each Advance Date, all costs, fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated in the Loan Documents payable to Lender shall have been paid to the extent due. (h) Legal Opinions. On each Advance Date subsequent to the Initial Loan Advance Date, Lender shall have received legal opinions from each of (i) Rosenman & Colin LLP, counsel to the Borrower and Cayuga, (ii) Post & Heymann LLP, special counsel to Cayuga Corp., and (iii) Rogers & Wells, special counsel to Fleetwood, addressed to Lender and dated such Advance Date covering the matters set forth in Exhibits P-1 through P-3, respectively, and modified, as appropriate, to cover all Loan Documents required to be delivered on or before such Advance Date and the transactions being consummated on or before such Advance Date and such other matters incident to the transactions contemplated herein as Lender may request. (i) Material Adverse Change. On each Advance Date, no material adverse change shall have occurred since March 10, 1995 in the Tender Offers or since December 31, 1995 in the business, property, operations, nature of assets, assets, liabilities, condition (financial or otherwise) or prospects of (x) any Credit Party, (y) any Tender Offer Partnership, or (z) the Operating Partnerships taken as a whole. (j) Required Capital Contributions. On each Advance Date, (i) the Borrower shall have received cash proceeds in an amount at least equal to the Required Capital Contribution Amount from its constituent partners, (ii) the Borrower shall have utilized the full Required Capital Contribution Amount so made available to purchase the LP Units and to pay related fees and expenses as contemplated in Section 2.2 hereof, and (iii) Lender shall have received an Officer's Certificate from the Borrower certifying that the -37- 44 conditions set forth in this Section 2.1.2(b) have been satisfied. Section 2.2 Use of Proceeds; Capital Contributions. The proceeds of the Loans shall be used by the Borrower solely to fund the acquisition of the LP Units pursuant to the Tender Offers and to pay related reasonable fees and expenses (which have been approved by Lender and which shall not be payable to the Apollo Investors, the Insignia Investors, the Icahn Investors, the Fox Investors, the QALB Investors or any of their respective Affiliates), provided that (i) the purchase price paid for the LP Units of a Tender Offer Partnership may not exceed the Initial Price for such LP Units and the fees and expenses related to all of the Tender Offers may not exceed $3,300,000, unless the sum of aggregate excess purchase prices paid for all LP Units plus the related fees and expenses in excess of $3,300,000 does not exceed the amount by which the Capital Contributions actually received by the Borrower which are not repaid with proceeds of the Loans as contemplated by clause (ii) or clause (iii) below exceeds the Required Capital Contribution Amount; (ii) the proceeds of the Loans made on the Closing Date may be utilized to (x) repay advances made by the partners in the Borrower to the Borrower in connection with the Tender Offers or (y) return Capital Contributions made by such partners which exceed the Required Capital Contribution Amount; and (iii) the proceeds of the Loans made on the Initial Loan Advance Date and the Availability Period Closing Date may be utilized to return Capital Contributions made by the partners in the Borrower to the Borrower in an amount equal to the lesser of (x) the amount by which such Capital Contributions exceed the Required Capital Contribution Amount and (y) the amount by which the aggregate Initial Price for all LP Units (assuming that the full number of LP Units tendered for pursuant to the Tender Offers are purchased) exceeds the aggregate Initial Price for all LP Units actually acquired pursuant to the Tender Offers. The maximum number of LP Units of any Tender Offer Partnership which may be accepted by the Borrower shall in all events be less than the number of such LP Units which, (A) when added to the number of LP Units in such Tender Offer Partnership that were transferred during the preceding 12-month period, would cause a liquidation or termination of the relevant Tender Offer Partnership for tax purposes or (B) would result in any Tender Offer Partnership being deemed to be "going private". All Required Capital Contributions made to the Borrower by the partners in the Borrower shall be utilized by the -38- 45 Borrower to (i) acquire the LP Units pursuant to the Tender Offers and (ii) pay related reasonable fees and expenses incurred in connection with the Tender Offers in accordance with this Section 2.2. Additional Capital Contributions may be made to the Borrower by the partners therein from time to time during the Availability Period for purposes of paying the costs and expenses of the Tender Offers and funding any increases in the purchase prices of the LP Units pursuant to the Tender Offers over the Initial Prices for the LP Units. III. SPECIAL PROVISIONS. Section 3.1 Cooperation; Related Transactions. 3.1.1 Cooperation. (a) Lender intends to underwrite the Loans and the Collateral to rating agency standards, in order to facilitate a refinancing of the Loans and a related Securitization Transaction. The Borrower covenants and agrees that it will, and that it will cause the other Transaction Parties to, cooperate in good faith with Lender in connection with such underwriting and the performance of all due diligence deemed necessary or desirable by Lender in connection therewith, and to take all actions deemed necessary or desirable by Lender to effect any such refinancing of the Loans and related Securitization Transaction, provided that (i) neither the Borrower nor any other Transaction Party shall be obligated, in connection with any such Securitization Transaction, to agree to a material increase in its Obligations or a material decrease in its rights under the Loan Documents, (ii) any such Securitization Transaction shall be done on a private placement basis with each investor therein agreeing to reasonable and appropriate confidentiality provisions and (iii) the reasonable out-of-pocket costs and expenses of the Borrower and the other Transaction Parties incurred in connection with any such Securitization Transaction shall be reimbursed by Lender. (b) In the event that a Securitization Transaction is implemented as contemplated in paragraph (a) above, the Borrower covenants and agrees that it will, and that it will cause the other Transaction Parties to, cooperate in good faith with PW, Lender and the Servicer (and their respective Affiliates), and all other Persons involved in such Securitization Transaction, in connection with effecting such Securitization Transaction and to cooperate in good faith to implement all requirements imposed by any Rating Agency involved in the securitization of the Loans, including, without limitation, all structural or other changes to the Loans, the Loan Documents and/or the Related Documents occasioned by the Securitization Transaction and all different or additional conditions imposed by any such Rating Agency in connection with its rating of the certificates to be issued as part of the Securitization Transaction, including, -39- 46 without limitation, delivery of opinions of counsel acceptable to the Rating Agency and addressing such matters as the Rating Agency may require, all subject to the limitations described in paragraph (a) above. (c) Notwithstanding the foregoing provisions of paragraphs (a) and (b) above, Lender shall have no obligation to undertake a Securitization Transaction, and, unless Lender in its sole discretion agrees otherwise prior to the Maturity Date, the Borrower and the other Transaction Parties are required to satisfy all of the Obligations in full not later than the Maturity Date. Lender's agreement to reimburse the reasonable out-of-pocket costs and expenses of the Borrower and the other Transaction Parties incurred in connection with any Securitization Transaction shall not be construed to relieve or release the Borrower from its obligations to pay costs, expenses and indemnities pursuant to Section 8.14 hereof arising by reason of any event other than the implementation of a Securitization Transaction in accordance with this Section 3.1. 3.1.2 Related Transactions. The Borrower acknowledges that, in order to implement a Securitization Transaction, the Lender may transfer and assign to a "depositor" all right, title and interest of Lender in, to and under the Loans and the Loan Documents and that such depositor will enter into a pooling and servicing agreement (or other similar agreement) which provides for the issuance of certificates. Pursuant to the pooling and servicing agreement, the depositor will assign and grant to the trustee thereunder, among other things, all of the depositor's right, title and interest in, to and under each of the Loan Documents and the full, exclusive and irrevocable right, power and authority to exercise, or to determine to refrain from exercising, any and all rights, powers and privileges of "Lender" under the Loan Documents, including, without limitation, (x) the granting or withholding of any and all consents or approvals which may be requested or given pursuant to this Agreement or any of the other Loan Documents, and the exercising of any right to vote or abstain from voting on any matter on which a vote may be required hereunder or thereunder, including in each case any determination to amend, modify, waive or terminate any provision -40- 47 hereof or thereof; (y) the giving and receiving of any and all notices, demands or other communications which are required to be, or may be, given hereunder or thereunder; and (z) the exercising, or determining to refrain from exercising, any and all rights and remedies hereunder or thereunder. For all purposes of this Agreement and the other Loan Documents, the Borrower may assume, and shall recognize, that, upon such assignment to the trustee, the trustee shall be Lender and shall have all rights of Lender thereunder, including without limitation, the right to exercise or refrain from exercising all of such rights, powers and privileges. The Borrower hereby acknowledges and irrevocably consents to the matters set forth in this Section 3.1. Section 3.2 Cash Collateral Account. 3.2.1 Establishment. Lender has established with the Bank, in the name of Lender, a trust account (the "Cash Collateral Account"), for the purposes specified herein. Only the amounts permitted or required to be deposited therein pursuant to this Section 3.2 shall be deposited in the Cash Collateral Account, in accordance with the terms of this Agreement. The Cash Collateral Account shall be under the sole dominion and control of Lender, and Lender shall have the sole right to make withdrawals from the Cash Collateral Account and to exercise all rights with respect to the Account Collateral on deposit therein from time to time, provided that so long as no Event of Default shall exist under the Loan Documents, Lender shall make disbursements of the Account Collateral from time to time in accordance with this Section 3.2. All Account Collateral on deposit from time to time in the Cash Collateral Account (or its constituent Sub-Accounts) shall be held in the Cash Collateral Account in accordance with the provisions of this Section 3.2. The Cash Collateral Account shall at all times be maintained as an Eligible Account. 3.2.2 Pledge and Grant of Security Interest. As collateral security for the Obligations, including, without limitation, the payment of principal and interest on the Loans, the Borrower hereby pledges and assigns to Lender a continuing possessory Lien upon and security interest in (A) all of its right, title and interest in and to the Cash Collateral Account, and (B) all of its right, title and interest in and to all deposits made from time to time in the Cash Collateral Account in accordance with this Section 3.2, together with all cash and non-cash proceeds thereof, inclusive of interest thereon (collectively, the "Account Collateral"), from the date of the establishment of the Cash -41- 48 Collateral Account until the termination thereof pursuant to the terms hereof. 3.2.3 Sub-Accounts. The Cash Collateral Account shall be comprised of four sub-accounts (collectively, the "Sub-Accounts" and individually, a "Sub-Account"), as follows: (i) a sub-account for purposes of segregating amounts required to make all payments due in respect of the Loan other than payments of principal on the Loan (the "Debt Service Sub-Account"); (ii) a sub-account for purposes of holding all Capital Event Proceeds (the "Capital Proceeds Sub-Account"); (iii) a sub-account for purposes of holding all Net Cash Flow (the "Net Cash Flow Sub-Account"); and (iv) a sub-account for purposes of holding amounts allocated to the payment of income tax obligations pursuant to this Section 3.2 (the "Income Tax Sub-Account"). 3.2.4 Deposit and Application of Funds. (a) The Borrower shall cause, and shall direct the relevant Payors to pay, (i) all Capital Event Proceeds and all Deficit Distributions made in respect of the Affiliate Units and LP Units owned by the Borrower directly into the Capital Proceeds Sub-Account, and (ii) all Net Cash Flow directly into the Net Cash Flow Sub-Account. In the event that revenues are received by the Borrower or any other Transaction Party and are not paid directly into the relevant Sub-Account, the Borrower shall, and shall cause the relevant Transaction Party to, hold such amounts in trust for the benefit of Lender and the Borrower shall immediately (x) notify Lender of such receipt and (y) pay or cause to be paid such amount to the Bank with instructions to pay such amount into the relevant Sub- Account. (b) By no later than the fifth Business Day immediately preceding the Payment Date immediately succeeding a Deemed Distribution Date, there shall be deposited in the Capital Proceeds Sub-Account an amount equal to the sum of the Aggregate Refinancing Amount and the Aggregate Liquidation Amount for such Deemed Distribution Date. -42- 49 (c) Notwithstanding the foregoing or any other provision of this Section 3.2, the accuracy or inaccuracy of any statement of account in respect of the Sub-Accounts shall not affect the obligations of the Transaction Parties to pay all amounts due in respect of the Obligations on the due dates therefor. 3.2.5 Disbursement of Account Collateral. Disbursements shall be made from the Sub-Accounts in the following manner (provided that (x) nothing herein contained shall be construed to impose liability upon Lender for any shortfalls in the amounts on deposit in the Cash Collateral Account or to excuse the Borrower or any other Transaction Party from its obligations to make all payments required to be made by it under this Agreement and the other Loan Documents and (y) after the occurrence of an Event of Default disbursements shall be made from the Sub-Accounts as provided in Section 3.2.6): (a) Net Cash Flow Sub-Account. All amounts deposited in the Net Cash Flow Sub-Account shall be disbursed as follows: (i) first, an amount equal to the aggregate amount of interest on the Loan and the other obligations of the Borrower under the Loan Agreement and the other Loan Documents (other than the obligations to repay the principal amount of the Loan) which are due and payable on the ensuing Payment Date shall be transferred from the Net Cash Flow Sub-Account to the Debt Service Sub-Account; (ii) second, provided that no Default or Event of Default then exists, an amount equal to the lesser of (x) the sum of the Cash Flow Tax Amount for the Payment Period last ended and the Tax Carryforward Amount, if any, for such Payment Period as set forth in the Monthly Certificate for such Payment Period and (y) the amounts remaining in the Net Cash Flow Sub-Account after application pursuant to clause (i) above shall be transferred to the Income Tax Sub-Account; and (iii) third, with respect to amounts remaining in the Net Cash Flow Sub-Account after application pursuant to clauses (i) and (ii) above, 100% of such remaining amount shall be applied to the repayment of the principal of the Loan. -43- 50 (b) Debt Service Sub-Account. All amounts deposited in the Debt Service Sub-Account shall be applied on each Payment Date to the payment of interest on the Loan and the other obligations of the Borrower under the Loan Agreement and the other Loan Documents (other than the obligations to repay the principal amount of the Loan) which are then due and payable. (c) Capital Proceeds Sub-Account. Amounts deposited in the Capital Proceeds Sub-Account (including amounts required to be deposited therein pursuant to Section 3.2.4(b)) shall be applied as follows on each Payment Date: (i) first, provided that no Default or Event of Default then exists (including, without limitation, a Default in the Borrower's obligations under Section 3.2.4(b) to deposit funds in the Capital Proceeds Sub-Account), an amount equal to the Capital Event Proceeds Tax Amount for such Payment Date shall be transferred to the Income Tax Sub-Account; and (ii) second, with respect to amounts remaining on deposit in the Capital Proceeds Sub-Account after application pursuant to clause (i) above, 100% of such remaining amount shall be applied to the repayment of the principal of the Loan. Notwithstanding the foregoing, amounts deposited in the Capital Proceeds Sub-Account which constitute Deficit Distributions shall, upon receipt of an Officers' Certificate of the Borrower identifying such amounts as constituting Deficit Distributions, be withdrawn from the Capital Proceeds Sub-Account and paid to the Borrower whether or not a Default or an Event of Default then exists, in accordance with the provisions of the Deficit Distribution Agreement. (d) Income Tax Sub-Account. Provided that no Default or Event of Default then exists, an amount equal to (x) the amount remaining in the Income Tax Sub-Account less (y) the amounts deposited in the Income Tax Sub-Account since the last day of the immediately preceding calendar quarter shall be withdrawn from the Income Tax Sub-Account and paid to the Borrower on or after the first Business Day of the current calendar quarter upon receipt by Lender of an Officer's Certificate of the Borrower at least 10 Business Days prior to the date of withdrawal specifying that a withdrawal pursuant to this clause is being requested and setting forth a computation of the amount requested to be withdrawn in reasonable detail. If a Default or Event of -44- 51 Default exists, amounts deposited in the Income Tax Sub-Account shall be applied as set forth in Section 3.2.6. 3.2.6 Remedies Upon Default in Respect of Account Collateral. Notwithstanding the foregoing provisions of this Section 3.2, upon the occurrence and during the continuance of an Event of Default, Lender shall have no obligation to make any disbursement of funds from the Cash Collateral Account to or on behalf of any Transaction Party, and Lender shall have the immediate and continuing right to withdraw funds on deposit in the Cash Collateral Account, and to exercise all rights and remedies afforded to Lender under this Agreement and the other Loan Documents, or otherwise at law or in equity in respect of the security for the Loans, in respect of the Cash Collateral Account, and the Account Collateral on deposit therein, including, without limitation, the right to withdraw and apply all Account Collateral on deposit in each Sub-Account of the Cash Collateral Account to the Obligations, provided that no such application shall be deemed to have been made by Lender, by operation of law or otherwise, unless and until actually made by Lender. Lender may, without notice except as specified below, sell or liquidate any or all of the non-cash collateral in the Cash Collateral Account in one or more parcels at any public or private sale, at any exchange brokers' board, or at any of Lender's offices or elsewhere for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Lender may deem commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by law, at least ten days' written notice to it of the time and place of any public sale or the time after which any private sale or other disposition is to be made shall constitute reasonable notification. Lender may adjourn any public or private sale from time to time (by announcement, in the case of any public sale, at the time and placed affixed therefore), and such sale may, without further notice, be made at the time and place to which it was so adjourned. 3.2.7 Investments. (a) The Cash Collateral Account shall be maintained as an interest bearing account. All interest or other earnings accruing on the Account Collateral shall be held in the Cash Collateral Account as part of the Account Collateral. All risk of loss in respect of the Account Collateral on deposit in the Cash Collateral Account shall be borne by the Borrower and the other Payors. Lender shall direct the Bank to provide to Lender and the Borrower a monthly statement of account showing deposits into -45- 52 and disbursements (or transfers or reallocations, as the case may be) from each Sub-Account of the Cash Collateral Account. (b) Upon the request of the Borrower, Lender shall direct the Bank to invest and reinvest any balances in the Sub-Accounts from time to time in Permitted Investments as requested by the Borrower, provided that (i) if the Borrower fails to so instruct Lender, or upon the occurrence of a Default or Event of Default, Lender may direct the Bank to invest and reinvest such balances in Permitted Investments as Lender shall determine in its sole discretion, (ii) the maturities of the Permitted Investments on deposit in each Sub-Account shall be selected and coordinated to become due not later than on the day before any disbursements from such Sub-Accounts must be made, (iii) all such Permitted Investments shall be held in the name and be under the sole dominion and control of Lender, and (iv) no Permitted Investment shall be made unless Lender shall retain a perfected first priority Lien in such Permitted Investment securing the Obligations and all filings and other actions necessary to ensure the validity, perfection, and priority of such Lien shall have been taken. All funds in the Cash Collateral Account which are invested in a Permitted Investment shall be deemed to be held in the Cash Collateral Account for all purposes of this Agreement and the other Loan Documents. Lender shall have no liability for any loss in investments of funds in the Cash Collateral Account that are invested in Permitted Investments and no such loss shall affect the Transaction Parties' respective obligations to fund, or liabilities for funding, the Cash Collateral Account and the Sub-Accounts, as the case may be. The Borrower agrees that the applicable Payors shall include all earnings on the Cash Collateral Account relating to amounts on deposit from time to time therein as income of such Payors (or the partners or stockholders of such Payors, as appropriate), for federal and applicable state tax purposes. The Payors shall have no right whatsoever to direct the investment of the Account Collateral on deposit from time to time in the Cash Collateral Account. Section 3.3 Fees. In consideration of Lender's agreements to make the Loans, the Borrower agrees to pay Lender the following fees at the times and in the amounts specified (and the Borrower hereby irrevocably authorizes and directs Lender to apply the first proceeds of any Advance to the payment of the required Funding Fee): -46- 53 3.3.1 Funding Fees. Funding fees (collectively, the "Funding Fee") to Lender in the following amounts and at the following times: (a) a non-refundable facility fee of $100,000 shall be deemed earned in full and shall be paid to Lender on the Initial Loan Advance Date; and (b) Lender shall be paid a funding fee on the date of each Loan Advance (including on the Initial Loan Advance Date) in an amount equal to 0.75% of the principal amount of each such Loan Advance. 3.3.2 Residual Fee. A residual fee (the "Residual Fee") to Lender in the following amounts and at the following times: (a) The Residual Fee shall be payable from and after the Initial Return Obligation Satisfaction Date and shall be equal to the Participation Percentage of the Available Partnership Cash Flows received by the Borrower, such fee to be payable by no later than the Business Day immediately succeeding the date Available Partnership Cash Flows are received by the Borrower. The Borrower shall buy out Lender's right to receive the Residual Fee on any date occurring not earlier than the Loan Satisfaction Date nor later than the 180th day following the Loan Satisfaction Date for a purchase price equal to the Residual Fee Buy-Out Amount. The Borrower shall give Lender not less than five days' prior written notice of the date upon which the Borrower will buy out Lender's right to receive the Residual Fee, and such buy out shall be effective on the date upon which Lender receives the full amount of the Residual Fee Buy-Out Amount, and upon Lender's receipt of the Buy-Out Amount, the Borrower shall have no further obligation to pay the Residual Fee (it being understood that the Borrower shall continue to have such obligation during the period commencing on the date of their election notice and ending on the date Lender receives the full amount of the Residual Fee Buy-Out Amount). Interest shall accrue and shall be paid monthly by the Borrower on the daily outstanding balance of the Residual Fee Buy-Out Amount, from the Loan Satisfaction Date to the date upon which the Borrower pays the Residual Fee Buy-Out Amount to Lender, at a rate per annum equal to the LIBOR Rate (as defined in the Loan Agreement) plus 250 basis points. -47- 54 Section 3.4 Interest Reserve Account. 3.4.1 Establishment. Lender has established with the Bank, in the name of Lender, a trust account (the "Interest Reserve Account"), for the purposes specified herein. Only the amounts permitted or required to be deposited therein pursuant to this Section 3.4 shall be deposited in the Interest Reserve Account, in accordance with the terms of this Agreement. The Interest Reserve Account shall be under the sole dominion and control of Lender, and Lender shall have the sole right to make withdrawals from the Interest Reserve Account and to exercise all rights with respect to the Interest Reserve Amount on deposit therein from time to time. The Interest Reserve Amount on deposit from time to time in the Interest Reserve Account shall be held in the Interest Reserve Account in accordance with the provisions of this Section 3.4. The Interest Reserve Account shall at all times be maintained as an Eligible Account. 3.4.2 Pledge and Grant of Security Interest. As collateral security for the Obligations, including, without limitation, the payment of principal and interest on the Loans, the Borrower hereby pledges and assigns to Lender a continuing possessory Lien upon and security interest in (A) all of its right, title and interest in and to the Interest Reserve Account, and (B) all of its right, title and interest in and to all deposits made from time to time in the Interest Reserve Account in accordance with this Section 3.4, together with all cash and non-cash proceeds thereof, inclusive of interest thereon (collectively, the "Interest Reserve Amount"), from the date of the establishment of the Interest Reserve Account until the termination thereof pursuant to the terms hereof. 3.4.3 Deposit and Application of Funds. The Borrower shall maintain on deposit in the Interest Reserve Account at all times during the term of the Loans an amount determined by Lender to be equal to the Required Interest Reserve Amount. The Borrower shall deposit into the Interest Reserve Account, from time to time within seven days following its receipt of notice from Lender, the amount of any shortfall in the Required Interest Reserve Amount, it being understood that if the amount of any such shortfall is contributed to the Borrower by the constituent partners in the Borrower, the amounts so contributed shall not constitute Capital Contributions. If a shortfall exists in the Debt Service Sub-Account of the Cash Collateral Account on any Payment Date, Lender may, in its sole discretion, apply all or any portion of the Interest Reserve Amount then on deposit -48- 55 in the Interest Reserve Account to the satisfaction of such shortfall by transfer of funds from the Interest Reserve Account to the Debt Service Sub-Account of the Cash Collateral Account, and the Borrower shall be required to deposit into the Interest Reserve Account the amount of the resulting shortfall therein with seven days of such Payment Date. 3.4.4 Remedies Upon Default in Respect of Interest Reserve Amount. Upon the occurrence and during the continuance of an Event of Default, Lender shall have the immediate and continuing right to withdraw funds on deposit in the Interest Reserve Account, and to exercise all rights and remedies afforded to Lender under this Agreement and the other Loan Documents, or otherwise at law or in equity in respect of the security for the Loans, in respect of the Interest Reserve Account, and the Interest Reserve Amount on deposit therein, including, without limitation, the right to withdraw and apply all or any portion of the Interest Reserve Amount on deposit in the Interest Reserve Account to the Obligations, provided that no such application shall be deemed to have been made by Lender, by operation of law or otherwise, unless and until actually made by Lender. Lender may, without notice except as specified below, sell or liquidate any or all of the non-cash collateral in the Interest Reserve Account in one or more parcels at any public or private sale, at any exchange brokers' board, or at any of Lender's offices or elsewhere for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Lender may deem commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by law, at least ten days' written notice to it of the time and place of any public sale or the time after which any private sale or other disposition is to be made shall constitute reasonable notification. Lender may adjourn any public or private sale from time to time (by announcement, in the case of any public sale, at the time and placed affixed therefore), and such sale may, without further notice, be made at the time and place to which it was so adjourned. 3.4.5 Investments. (a) The Interest Reserve Account shall be maintained as an interest bearing account. All interest or other earnings accruing on the Interest Reserve Amount shall be held in the Interest Reserve Account as part of the Interest Reserve Amount. All risk of loss in respect of the Interest Reserve Amount on deposit in the Interest Reserve Account shall be borne by the Borrower. Lender shall direct the Bank to provide to Lender and the -49- 56 Borrower a monthly statement of account in respect of the Interest Reserve Account. (b) Upon the request of the Borrower, Lender shall direct the Bank to invest and reinvest any balances in the Interest Reserve Account from time to time in Permitted Investments as requested by the Borrower, provided that (i) if the Borrower fails to so instruct Lender, or upon the occurrence of a Default or Event of Default, Lender may direct the Bank to invest and reinvest such balances in Permitted Investments as Lender shall determine in its sole discretion, (ii) all such Permitted Investments shall be held in the name and be under the sole dominion and control of Lender, and (iii) no Permitted Investment shall be made unless Lender shall retain a perfected first priority Lien in such Permitted Investment securing the Obligations and all filings and other actions necessary to ensure the validity, perfection, and priority of such Lien shall have been taken. All funds in the Interest Reserve Account which are invested in a Permitted Investment shall be deemed to be held in the Interest Reserve Account for all purposes of this Agreement and the other Loan Documents. Lender shall have no liability for any loss in investments of funds in the Interest Reserve Account that are invested in Permitted Investments and no such loss shall affect the Borrower's obligations to fund, or liability for funding, the Interest Reserve Account. The Borrower agrees that it shall include all earnings on the Interest Reserve Account relating to amounts on deposit from time to time therein as income of the Borrower (or the partners of the Borrower, as appropriate), for federal and applicable state tax purposes. The Borrower shall have no right whatsoever to direct the investment of the Interest Reserve Amount on deposit from time to time in the Interest Reserve Account. IV. REPRESENTATIONS AND WARRANTIES Section 4.1 Representations. The Borrower hereby represents and warrants to Lender as follows: (a) Formation. Each Core Entity and each Operating Partnership has been duly formed and is validly existing and in good standing as a corporation or partnership, as the case may be, under the laws of the State of its formation. Each Core Entity and each Operating Partnership has the requisite corporate or partnership power and authority, as applicable, to own its assets and conduct its businesses as currently conducted and owned, and to enter -50- 57 into and perform its obligations under each Loan Document and/or Related Document to which it is a party. Each Core Entity and each Operating Partnership is in good standing and authorized to do business in each jurisdiction here the ownership of its assets and/or the conduct of its business requires such qualification except where the failure to be so qualified would not have a material adverse effect on such entity. (b) Proceedings; Enforceability. Each Core Entity has taken all requisite corporate or partnership action, as applicable, to authorize the execution, delivery and performance by it of the Loan Documents and/or the Related Documents to which it is a party. Each Loan Document to which a Core Entity is a party and which is required to be executed and delivered on or prior to the date on which this representation and warranty is being made has been duly authorized, executed and delivered and constitutes the legal, valid and binding obligation of such party, enforceable against it in accordance with its respective terms except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency and similar laws effecting rights of creditors generally and to general principles of equity (regardless of whether enforcement is sought in a preceding in equity or at law). (c) Conflicts. Neither the execution, delivery and performance of the Loan Documents and the Related Documents by any Core Entity party thereto, or compliance by any such Core Entity with the terms and provisions thereof (including, without limitation, the granting of Liens pursuant to the Security Documents), (i) will contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions of, or constitute a default under, or result in the creation or imposition (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of such Core Entity pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement or any other agreement, contract or instrument to which such Core Entity is a party or by which it or any of its properties or assets is bound or to which it may be subject or (iii) will violate any provision of any Formation Document or any Partnership Formation Document. -51- 58 (d) Consents. No approval or consent of, notice to, or filing or registration with, any Governmental Authority is required in connection with (i) the execution, delivery and performance of any Loan Document or Related Document, (ii) the legality, validity, binding effect or enforceability of any such Loan Document or Related Document and (iii) the consummation of the transactions contemplated by the Loan Documents and Related Documents, including, without limitation, the consummation of the Tender Offers. No notice to or consent of any third-party is required to be obtained or given in connection with the transactions contemplated in the Loan Documents and the Related Documents. (e) Litigation. There is not pending or, to the knowledge of the Borrower, threatened any litigation or other judicial or administrative proceeding (including, without limitation, those described in Schedule VI) which could have a material adverse effect on the Loans, the prospect for timely payment thereof or the security therefor, or the ability of any Core Entity or Operating Partnership to perform its obligations under the Loan Documents or the Related Documents to which it is a party, or which could have a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or prospects of (i) the Core Entities or (ii) the Operating Partnerships taken as a whole. (f) [Intentionally Omitted] (g) Information. All factual information furnished by or on behalf of the Borrower to Lender (including, without limitation, all information contained in the Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information hereafter furnished by or on behalf of the Borrower to Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided. Except with respect to information relating to general economic and industry conditions, to the knowledge of the Borrower there is no material fact which has not been disclosed to Lender which adversely affects or which could reasonably be expected to adversely affect (i) any Core Entity or Operating Partnership, (ii) the Loans, the prospect of timely payment thereof or the security therefor, (iii) the business, -52- 59 operations or condition (financial or otherwise) of any Core Entity, or (iv) the business, operations or condition (financial or otherwise) of the Operating Partnerships taken as a whole. (h) Title to Properties. Each Tender Offer Partnership has good, indefeasible and marketable title (either directly or indirectly) to its Individual Properties, free and clear of all Liens other than the Liens described in the title reports listed on Schedule IV. (i) Debt. Annexed hereto as Schedule III is a complete list of all Debt of the Core Entities (other than NPI Corp.) and the Operating Partnerships. With the exception of NPI Corp., no Core Entity or Operating Partnership is the obligor in respect of any Debt other than the Debt described in Schedule III and the advances made by the partners in the Borrower to the Borrower which are repaid with the proceeds of the Loans incurred on the Closing Date. With the exception of NPI Corp. and the Tender Offer Partnerships, each Core Entity is in substantial compliance with the terms of any Debt owed by it (whether secured or unsecured), no payment defaults exist thereunder and no notice of default with respect thereto has been received by any such Core Entity. Each Tender Offer Partnership and Operating Partnership is in substantial compliance with the terms of any Debt, including the Existing Loans, owed by it (whether secured or unsecured), no payment defaults exist thereunder and no notice of default has been received with respect thereto by any Tender Offer Partnership or Operating Partnership, except that certain change of control provisions in certain of the Existing Loan Documents and in the Individual Property Management Agreements relating to certain of the Individual Properties may be breached by the consummation of the Tender Offers and/or the execution and delivery of one or more of the Pledges (or the foreclosure of such Pledges). (j) Taxes. All Core Entities and Operating Partnerships have made all required tax filings and have paid all federal, state and local taxes and other Impositions applicable to them and/or their respective assets. Each Individual Property and each other property owned by an Operating Partnership is in material compliance with applicable Legal Requirements, and all taxes and other Impositions (including insurance premiums) relating to such properties have been duly paid or have been escrowed against or are being contested in good faith in accordance with -53- 60 applicable Legal Requirements and the applicable terms of any Debt owing by the related Operating Partnership. (k) Financial Information. The Financial Statements of each Tender Offer Partnership present fairly the financial conditions of the Tender Offer Partnerships at the dates of such statements of financial condition and the results of operations for the periods covered thereby. Since the dates of the relevant Financial Statements, no material adverse change has occurred in the business, property, operations, nature of assets, assets, liabilities, condition (financial or otherwise) or prospects of any Tender Offer Partnership. In addition, no material adverse change has occurred in the Tender Offers since March 18, 1996 or since December 31, 1995 in the business, property, operations, nature of assets, assets, liabilities, conditions (financial or otherwise) or prospects of any Credit Party, either Tender Offer Partnership, or the Operating Partnerships (taken as a whole). (l) Casualty and Condemnation. There is no pending or threatened condemnation in respect of any property owned by an Operating Partnership and there have been no casualties at any of such properties in respect of which restoration has not been completed. (m) Use of Proceeds. The proceeds of all Loans will be utilized by the Borrower in accordance with Section 2.2 and no incurrence of any Loan will violate or be inconsistent with any requirements of law, including Regulations G, T, U and X of the Board of Governors of the Federal Reserve System. (n) Property Compliance. No state of facts exists with respect to zoning, ingress and egress, permitting, separate tax lot status and/or access to utilities (i) which could materially impair the value or use of any Individual Property or (ii) which could materially impair the value or use of the properties owned by the Operating Partnerships taken as a whole. (o) Borrower Ownership. The Borrower is a newly formed, bankruptcy remote Single-Purpose New York partnership one third of the partnership interests in which are owned by Fleetwood and two thirds of the partnership interests in which are owned by Cayuga. Cayuga is a newly formed, bankruptcy remote Single-Purpose Delaware limited partnership, the partnership interests in which are owned as follows: (i) the general partnership interests in Cayuga, -54- 61 which interests constitute 1% of the partnership interests in Cayuga, are owned by Cayuga Corp., (ii) 11.724% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the Insignia Investors, (iii) 24.12% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the Fox Investors, (iv) 23.785% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the Apollo Investors, and (v) 40.37% of the remaining 99% partnership interests in Cayuga, which interests constitute limited partnership interests, are owned by the QALB Investors. Cayuga Corp. is a newly formed, bankruptcy remote Single-Purpose Delaware corporation the stock in which is as follows: (i) one third of the stock in Cayuga Corp. is owned by Michael L. Ashner, (ii) one third of the stock in Cayuga Corp. is owned by the W. Edward Scheetz and (iii) one third of the stock in Cayuga Corp. is owned by RJN. Fleetwood is a newly formed, bankruptcy remote Single-Purpose Delaware corporation the stock in which is owned 100% by the Icahn Investors. The managing general partnership interests in each of the Tender Offer Partnerships are directly owned and controlled by the TOP-GP. The TOP-GP is a Single-Purpose California general partnership the managing general partner in which is NPI Realty. NPI Realty is a Single-Purpose Florida corporation and a wholly-owned subsidiary of NPI Corp., which is, in turn, owned indirectly by the Insignia Investors. (p) Tender Offer Partnerships. Attached hereto as Exhibit B is a true and complete list of the Tender Offer Partnerships and the Individual Properties owned, directly or indirectly, by each such Tender Offer Partnership, and in the case of any Individual Property not owned directly by a Tender Offer Partnership, Exhibit B sets forth the entity which directly owns such Individual Property and the means by which the related Tender Offer Partnership owns an interest in such entity and its ownership interest therein. (q) Control of Tender Offer Partnerships. NPI Realty controls, directly or indirectly, and without the requirement for consent of any other Person as to any matter, (i) the managing general partner of each Tender Offer Partnership, (ii) the right to liquidate and dissolve (and the liquidation and dissolution of) each Tender Offer Partnership, and (iii) the sale, financing and management of each Individual Property owned, directly or indirectly, by each Tender Offer Partnership, except with respect to the matters set forth in Schedule V, which Schedule lists all -55- 62 agreements which provide for, or limit or in any manner affect, the rights and ability of NPI Realty to control the Tender Offer Partnerships. (r) Formation Documents. The Borrower has delivered to Lender true and complete copies of (i) all Formation Documents listed on Schedule X, (ii) the Partnership Formation Documents, (iii) all agreements relating to the Debt of the Core Entities (other than NPI Corp.) and the Operating Partnerships, (iv) all Individual Property Management Agreements, and (v) all agreements listed on Schedule V, and no amendments have been made to any of the foregoing. (s) Tender Offers. The Tender Offers which have been consummated on or prior to the date as of which this representation is made have been consummated in compliance with all applicable laws and other Legal Requirements, and the Tender Offer Documents do not make any untrue statement of a material fact or omit to state any material facts necessary in order to make the statements made, in light of the circumstances in which they are made, not misleading. (t) Partnerships for Tax Purposes. Borrower, Cayuga, the TOP-GP and each Tender Offer Partnership is a partnership for federal income tax purposes and does not constitute a publicly traded partnership within the meaning of Section 7704 of the Code. (u) Tender Offer Documents. The Tender Offer Documents are in full force and effect and have not been amended. No litigation by any entity (private or governmental) is pending or threatened with respect to the Tender Offers or the transactions contemplated in the Tender Offer Documents or any documentation executed in connection therewith. All necessary governmental, regulatory and third-party approvals in connection with the Tender Offers and the transactions contemplated therein have been obtained and remain in full force and effect, and all applicable waiting periods have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Tender Offers. There does not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon, or materially delaying, or making economically unfeasible, the purchase of any LP Units pursuant to any of the Tender Offers. -56- 63 (v) Formation Documents in Full Force and Effect. The Formation Documents and the Partnership Formation Documents are in full force and effect in accordance with their respective terms, and no defaults exist under any of such documents. (w) Principal Place of Business. The principal place of business of each Core Entity is at the address listed for such Core Entity on Exhibit A annexed hereto. (x) Bankruptcy Filings. No Core Entity or Operating Partnership is contemplating either a filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property, and the Borrower has no knowledge of any Person contemplating the filing of any such petition against any Core Entity or Operating Partnership. (y) Options. Except as specifically contemplated in this Agreement, no Person holds a right of first refusal or option to purchase with respect to any item of Collateral or any Individual Property. (z) Environmental Matters. Except as disclosed in Schedule VII annexed hereto and made a part hereof, no Core Entity or Operating Partnership has any liability, including, without limitation, any contingent liability, under any Environmental Law in connection with any Hazardous Substance Activity, on, at or relating to, any portion of any property owned, directly or indirectly, by a Tender Offer Partnership or an Operating Partnership. Except as disclosed in Schedule VII, (i) to the knowledge of the Borrower, there exists and has existed no Hazardous Substance Activity at, upon, under or within any portion of any property owned, directly or indirectly, by a Tender Offer Partnership or an Operating Partnership in violation of any Environmental Law and (ii) there exists no condition which may constitute a violation of any Environmental Law at, upon, under, within or flowing or emanating from any portion of any such property. Except as disclosed in Schedule VII, (A) no Core Entity or Operating Partnership, or, to the knowledge of the Borrower, any other Person has been or is involved in activities at or related to any portion of any property owned, directly or indirectly by a Tender Offer Partnership or an Operating Partnership which activities could reasonably be expected to lead to (1) the imposition of any liability on any Core Entity or Operating Partnership under any Environmental Law, or on any subsequent or former owner of any portion of any such property, or (2) the creation of a Lien with respect to any liability on any -57- 64 portion of any such property under any Environmental Law; and (B) to the knowledge of the Borrower, no activity by any tenant or occupant of any portion of any such property could reasonably be expected to result in a claim or liability under any Environmental Law on such tenant or occupant, on any Core Entity or Operating Partnership or on any other subsequent or former owner of any portion of such property. Except as disclosed in Schedule VII, no Core Entity or Operating Partnership is, and the Borrower has no reason to believe that any Core Entity or Operating Partnership may become, subject to a liability under any Environmental Law. (aa) Leases. Except as otherwise disclosed on Schedule VIII, all leases affecting the Individual Properties are in full force and effect in accordance with their respective terms and no material defaults exist thereunder by any party thereto. (bb) Investment Company. No Core Entity or Operating Partnership is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. (cc) Holding Company. No Core Entity or Operating Partnership is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. (dd) LP Distributions. Schedule IX attached hereto is a true and complete listing of the amounts returned to the limited partners in each Tender Offer Partnership as of the Closing Date. (ee) ERISA. The Borrower has not maintained or contributed to and has not had any obligation to contribute to any Plan. The Borrower does not have any ERISA Affiliates. Section 4.2 Survival of Representations. All of the representations and warranties set forth in Section 4.1 and elsewhere in this Agreement and in the other Loan Documents shall survive until the Loan Satisfaction Date. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or -58- 65 hereafter made by Lender or on its behalf. The representations set forth in Section 4.1 hereof shall be deemed remade on and as of the date of each Loan Advance (including the Initial Loan Advance) under the Loan Agreement. V. AFFIRMATIVE COVENANTS Section 5.1 Affirmative Covenants Prior to the Loan Satisfaction Date. The Borrower covenants and agrees that on and after the Closing Date and until the Loan Satisfaction Date; (a) Information Covenants. The Borrower shall cause to be furnished to Lender the following financial statements and information: (i) Quarterly Financial Statements. Within 45 days (or 90 days in the case of the fourth fiscal quarter) after the close of each quarterly accounting period in each Fiscal Year, the consolidated and consolidating statements of financial condition of each of the Borrower, Cayuga, Cayuga Corp. and Fleetwood, as at the end of such quarterly period and the related consolidated and consolidating statements of income and retained earnings and statements of changes in financial position for such quarterly period and for the elapsed portion of the Fiscal Year ended with the last day of such quarterly period, in each case setting forth comparative figures for the related periods in the prior Fiscal Year, all of which shall be certified by the chief financial officer of the Borrower, Cayuga, Cayuga Corp. and Fleetwood, as the case may be, subject to normal year-end audit adjustments; (ii) Annual Financial Statements. Within 90 days after the close of each Fiscal Year, the consolidated and consolidating statements of financial condition of each of the Borrower, Cayuga, Cayuga Corp. and Fleetwood, as at the end of such Fiscal Year and the related consolidated and consolidating statements of income and retained earnings and statements of changes in financial position for such Fiscal Year, in each case setting forth comparative figures for the preceding Fiscal Year and certified, in the case of the consolidated financial statements, by independent certified public accountants of recognized national standing reasonably acceptable to Lender, in each case together -59- 66 with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Borrower, Cayuga, Cayuga Corp. and Fleetwood, as the case may be, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof; (iii) Capital Contribution Amount and Attributed Net Value. On or prior to the 10th Business Day to occur after the Availability Period Closing Date, an Officers' Certificate of the Borrower setting forth a computation of the Capital Contribution Amount and the Attributed Net Value of each Tender Offer Partnership; (iv) Partnership Cash Flows, etc. By no later than the 30th day following each calendar quarter to occur after the Loan Satisfaction Date, an Officers' Certificate of the Borrower setting forth in reasonable detail all Partnership Cash Flows received by the Borrower during such calendar quarter and a computation in reasonable detail of the Capital Return Amount, Unreturned Capital Contribution Amount, and Residual Fee, if any, which was due and payable during such calendar quarter; (v) Monthly Certificate. By no later than the last day of each Payment Period a Monthly Certificate for such Payment Period; (vi) Tender Offer Partnership Reports and Filings. Promptly, copies of all financial information, proxy materials and other information and reports which the Tender Offer Partnerships make to or shall file with the Securities and Exchange Commission or any governmental agencies substituted therefor (the "SEC"); (vii) Cash Flow Statements. Within 30 days after the end of each calendar quarter, rolling twelve-month cash flow statements for each Individual Property for the 12 month period ending on the last day of such calendar quarter, all of which shall be certified by the managing general partner of the relevant Tender Offer Partnership; -60- 67 (viii) No Default. At the time of the delivery of the financial statements provided for in Section 5(a)(i) and (ii) and each Monthly Certificate pursuant to Section 5(a)(v), a certificate of the chief financial officer of the Borrower to the effect that to such officer's knowledge no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof; (ix) Notice of Default or Litigation. Promptly, and in any event within five Business Days after an officer of the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default, (ii) any litigation or governmental investigation or proceeding pending (w) with respect to the Tender Offers, (x) against any Core Entity which might, if adversely determined, have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of any Core Entity or against any Operating Partnership which might if adversely determined, have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Operating Partnerships taken as whole, (iii) any other event which could have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of (x) any Core Entity or (y) the Operating Partnerships taken as a whole, and (iv) notice of any default or event of default under any Debt of any Tender Offer Partnership or Operating Partnership; (x) Notice of Casualty, Condemnation, Sale, Liquidation. Promptly, and in any event within 10 Business Days after the Borrower obtains knowledge thereof, written notice of (w) any pending or threatened condemnation proceeding or the occurrence of any casualty in respect of any Individual Property or any other property owned, directly or indirectly, by either Tender Offer Partnership, (x) the sale or financing of any property owned, directly or indirectly, by either Tender Offer Partnership, (y) the liquidation, dissolution or other cessation of existence of any Core Entity or any Operating Partnership, and (z) the termination of, or the occurrence of a default under, any of the Individual Property Management Agreements; -61- 68 (xi) Payment of Amounts. Not later than the tenth (10th) Business Day of each calendar month, an Officer's Certificate of the Borrower certifying that, except as disclosed in such Officer's Certificate, to the extent of the knowledge of such officer, all insurance premiums in respect of insurance policies covering the properties owned (directly or indirectly) by any Tender Offer Partnership or Operating Partnership have been paid or are not past due more than 30 days, all debt service payments in respect of any Debt of any Tender Offer Partnership or Operating Partnership have been made and all real estate taxes and other Impositions relating to any Tender Offer Partnership or Operating Partnership or its related assets have been paid; (xii) Sale or Refinancing. The Borrower shall notify Lender, not less than 30 days prior to the estimated date of consummation thereof, of any sale or refinancing of an Individual Property, which notice shall specify the agreed economic terms of such sale or refinancing, including, without limitation, the amount of loan proceeds to be received in connection with a refinancing or the purchase price to be paid in connection with a sale, as applicable and upon Lender's request shall provide copies of the documentation for such sale or refinancing to Lender; and (xiii) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the Credit Parties or any Operating Partnership as Lender may reasonably request in writing. (b) Existence. The Borrower shall, and shall cause each other Core Entity to, do all things necessary to preserve, renew and keep in full force and effect (i) its partnership or corporate existence, as applicable, and (ii) its material rights, licenses, permits and franchises. The Borrower shall, and shall cause each other Core Entity (other than NPI Corp.) to, comply with all laws and other Legal Requirements applicable to it and its assets, business and operations. The Borrower shall, and shall cause each other Core Entity (other than NPI Corp.) to, at all times maintain, preserve and protect all material franchises and trade names and all the remainder of its property used or useful in the conduct of its business, and keep its assets in good working order and repair, ordinary wear and tear excepted, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto. -62- 69 (c) Taxes. The Borrower shall, and shall cause each other Core Entity to, pay and discharge or cause to be paid and discharged all taxes and other Impositions (including insurance premiums) applicable to it. Notwithstanding the foregoing, such taxes and other Impositions may be contested in good faith by appropriate proceedings instituted in accordance with applicable Legal Requirements and the requirements, if any, imposed by any documents or instruments applicable to the relevant Core Entity. (d) Inspection. The Borrower shall, and shall cause each other Core Entity to, permit Lender and its agents, representatives and employees (including Servicer) to inspect the Individual Properties and the Collateral at reasonable hours upon reasonable notice, subject to the rights of tenants and other occupants of the Individual Properties. (e) Loan Documents. The Borrower shall, and shall cause all other Transaction Parties to, observe, perform and satisfy all the terms, provisions, covenants and conditions of, and to pay when due all costs, fees and expenses to the extent required under, the Loan Documents to which it or such Transaction Party, as the case may be, is a party. (f) Further Assurances. At its sole cost and expense, the Borrower shall, and shall cause each other Transaction Party to, execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts, necessary or desirable in the reasonable judgment of Lender to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and do and execute all and such further lawful acts, conveyances and assurances as Lender may reasonably require for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents. (g) Books and Records. The Borrower shall, and shall cause each other Core Entity to, keep and maintain in accordance with GAAP (or such other accounting basis reasonably acceptable to Lender), proper and accurate books, records and accounts reflecting all of its financial affairs and all items of income and expense in connection with its business and operations and in connection with any services, equipment or furnishings provided in connection with the operation of its business, whether such income or expense is realized by it or by any other Person. Lender shall have the right from time to time during normal business hours and upon -63- 70 reasonable notice to examine such books, records and accounts at the office of the Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence and during the continuance of an Event of Default, the Borrower shall pay any costs and expenses incurred by Lender in connection with the examination of any such books, records and accounts. (h) Business and Operations. The Borrower shall, and shall cause each Core Entity (other than NPI Corp.) to, continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership of, and preservation of the value and utility of, the Collateral. The Borrower shall, and shall cause each Core Entity to, qualify to do business and to remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of its assets except where the failure to be so qualified could not have a material adverse effect on it. (i) Title. [Intentionally Omitted] (j) Estoppel. The Borrower shall, within 10 days after request from Lender, from time to time furnish to Lender a statement, duly acknowledged and certified, setting forth (i) the amount then owing by the Borrower in respect of the Loan, (ii) the date through which interest on the Loan has been paid, (iii) any offsets, counterclaims, credits or defenses to the payment by the Borrower of the Loan and (iv) whether any written notice of Default from Lender to the Borrower is then outstanding, and acknowledging that this Agreement and the other Loan Documents are in full force and effect and unmodified, or if modified, giving the particulars of such modification. (k) Use of Proceeds. The Borrower shall use the proceeds of the Loan only for the purposes set forth in Section 2.2 hereof. (l) Bankruptcy. (i) The Borrower's Partnership Agreement provides that no bankruptcy or insolvency filing or proceeding in respect of the Borrower shall be made or commenced without the consent of the partners of the Borrower, and the Borrower shall not acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or -64- 71 administrative functions of or pertaining to government, for the purpose of commencing or sustaining a case against the Borrower under a federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Borrower or all or any part of the Borrower's property or assets or ordering the winding-up or liquidation of the affairs of the Borrower, if such action has not been consented to by the partners of the Borrower. The articles of incorporation of each of Cayuga Corp. and Fleetwood provide that no bankruptcy or insolvency filing or proceeding in respect of the Borrower, Cayuga Corp. or Fleetwood, as applicable, shall be made or commenced without the unanimous affirmative vote of the directors of Cayuga Corp. or Fleetwood, as applicable, and neither the Borrower nor Cayuga Corp. or Fleetwood, as applicable, shall acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case against the Borrower or Cayuga Corp. or Fleetwood (as applicable) under a federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Borrower or Cayuga Corp. or Fleetwood (as applicable) or all or any part of its or their property or assets or ordering the winding-up or liquidation of the affairs of the Borrower or Cayuga Corp. or Fleetwood (as applicable), if such action has not been consented to by a unanimous vote of such directors. Each of Cayuga Corp. and Fleetwood shall at all [relevant] times have at least one Independent director and the articles of incorporation of each of Cayuga Corp. and Fleetwood shall at all times provide that such Independent director shall not be removed without the appointment of a successor Independent director, and no action requiring unanimous approval of such directors shall be taken in the absence of such Independent director except for the action of removal and replacement of such Independent director with another Independent director. The provisions of the Borrower's Partnership Agreement and the articles of incorporation and by-laws of each of Cayuga Corp. and Fleetwood which relate to the Independent director or the filing of any bankruptcy or insolvency proceeding by or in respect of the Borrower, Cayuga Corp. and Fleetwood shall not be modified or amended in any respect. -65- 72 (ii) Promptly following the request of Lender, the Borrower will cause the Partnership Agreement of the TOP-GP to provide that no bankruptcy or insolvency filing or proceeding in respect of the TOP-GP shall be made or commenced without the consent of the partners of the TOP-GP, and that the TOP-GP shall not acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, for the purpose of commencing or sustaining a case against the TOP-GP under a federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the TOP-GP or all or any part of the TOP-GP's property or assets or ordering the winding-up or liquidation of the affairs of the TOP-GP, if such action has not been consented to by the partners of the TOP-GP. Promptly following the request of Lender, the Borrower will cause the articles of incorporation of NPI Realty to provide that no bankruptcy or insolvency filing or proceeding in respect of the TOP-GP or NPI Realty, as applicable, shall be made or commenced without the unanimous affirmative vote of the directors of NPI Realty, and neither the TOP-GP or NPI Realty shall acquiesce, petition or otherwise invoke or cause any other Person to invoke the process of the United States of America, any state or other political subdivision thereof or any other jurisdiction, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case against the TOP-GP or NPI Realty under a federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the TOP-GP or NPI Realty or all or any part of its or their property or assets or ordering the winding-up or liquidation of the affairs of the TOP-GP or NPI Realty, if such action has not been consented to by a unanimous vote of such directors. Promptly following the request of Lender and in any event at all relevant times, NPI Realty shall have at least one Independent director, the articles of incorporation of NPI Realty shall provide that such Independent director shall not be removed without the appointment of a successor Independent director, and no action requiring unanimous approval of such directors shall be taken in the absence of such Independent director except for the action of removal and replacement of such Independent director with another Independent director. The provisions of the Partnership Agreement of the TOP-GP and the -66- 73 articles of incorporation and by-laws of NPI Realty which relate to the Independent director or the filing of any bankruptcy or insolvency proceeding by or in respect of the TOP-GP or NPI Realty shall not be modified or amended in any respect. (m) Principal Place of Business. [Intentionally Omitted] (n) Management of Properties. The Borrower shall cause the management of the properties owned (directly or indirectly) by the Operating Partnerships to be conducted in a manner consistent with past practice. (o) Securitization Transaction. In addition to and not in limitation of the covenants and agreements of the Borrower contained in Section 3.1, the Borrower shall, and shall cause the other Transaction Parties to, deliver, in connection with any Securitization Transaction, one or more Officer's Certificates certifying as to the accuracy of all representations made by it and the other Transaction Parties in the Loan Documents as of the date of the closing of such Securitization Transaction and certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of it and each of the other Transaction Parties as of the date of the Securitization Transaction. (p) ERISA. The Borrower covenants and agrees that it will not maintain or contribute to a Plan or have any ERISA Affiliates. (q) Memorandum of Understanding. The Borrower covenants and agrees (i) to cause the defendants in the Action (as defined in the Memorandum of Understanding) to comply with all of the terms of the Memorandum of Understanding, and (ii) to cause Lender and its subsidiaries, parents, affiliates, officers, directors, agents, successors or assigns, and the employees, agents, representatives, officers or directors of any of them to be released by the Plaintiffs and the Class (as defined in the Memorandum of Understanding) and the Tender Offer Partnerships of and from all claims arising out of or relating to the Tender Offers. -67- 74 Section 5.2 Affirmative Covenants Subsequent to the Loan Satisfaction Date. From and after the Loan Satisfaction Date until payment in full of the Residual Fee, the Borrower shall (x) be bound by the same fiduciary duty to Lender in respect of the Residual Fee as the general partners in the Tender Offer Partnerships owe to the holders of the LP Units, (y) not sell or transfer the LP Units to an Affiliate or any third-party for consideration other than cash and (z) deliver to Lender the reports described in Section 5.1(a)(iv), (viii) and (xv). VI. NEGATIVE COVENANTS Section 6.1 Negative Covenants. The Borrower covenants and agrees with Lender that on and after the Closing Date and until the Loan Satisfaction Date: (a) Liens. (i) Neither the Borrower nor any other Core Entity (other than the Tender Offer Partnerships) will create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or assets (real or personal, tangible or intangible), whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to the Borrower or any other Core Entity (other than the Tender Offer Partnerships)), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, or sell, transfer, convey, assign or otherwise dispose of, directly or indirectly, grant rights with respect to, or otherwise encumber or create a security interest in, such property or assets (including, without limitation, any item of Collateral) or any portion thereof or any other revenues therefrom or the proceeds payable upon the sale, transfer or other disposition of such property or asset or any portion thereof, or permit or suffer any such action to be taken, except the following: (x) Liens created by the Loan Documents; (y) Liens for taxes, assessments or other governmental charges not yet delinquent or which are being diligently contested in good faith and by appropriate -68- 75 proceedings, if (x) reasonable reserves in an amount not less than the tax, assessment or governmental charge being so contested shall have been deposited in cash (or cash equivalents) with Lender to be held during the pendency of such contest, or such contested amount shall have been duly bonded in accordance with applicable law, (y) no risk of sale, forfeiture or loss of any interest in the Collateral or any part thereof arises during the pendency of such contest and (z) such contest does not have a materially adverse effect on the Loans or the security therefor; and (z) Liens in respect of property or assets of the Borrower or any other Core Entity imposed by law, which were incurred in the ordinary course of business and do not secure Debt, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of any of its property or assets or materially impair the use thereof in the operation of its business or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien. (ii) Anything in Section 6.1(a)(i) to the contrary notwithstanding, neither the Borrower nor any other Transaction Party shall create, incur, assume or suffer to exist any Lien upon any of the Collateral. Insofar as this Section 6.1(a) applies to NPI Corp., it shall only apply with respect to NPI Corp.'s interest in NPI Realty. (b) Termination of Management Agreements. Neither the Borrower nor any other Core Entity shall permit the termination of the Individual Property Management Agreements, except in connection with a sale of an Individual Property or otherwise in the ordinary course of business. (c) Dissolution. Neither the Borrower nor any other Transaction Party shall dissolve, terminate, liquidate, merge with or consolidate into another Person. (d) Other Business. Neither the Borrower nor any other Core Entity (other than NPI Corp.) shall enter into any line of business other than its business as of the Closing Date, or make any material change in the scope or nature of -69- 76 its business, purposes or operations, or undertake or participate in activities other than the continuance of its present business. (e) Forgiveness of Debt. Neither the Borrower nor any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) shall cancel or otherwise forgive or release any claim or Debt owed to it by any Person, except for adequate consideration and in the ordinary course of its business. (f) Affiliate Transactions. Neither the Borrower nor any other Core Entity (other than NPI Corp.) shall enter into, or be a party to, any transaction with an Affiliate (other than another Core Entity), except transactions entered into in the ordinary course of business and on terms which are no less favorable to it or such Affiliate than would be obtained in a comparable arm's-length transaction with an unrelated third party. Transactions with Affiliates shall be disclosed to Lender quarterly in an Officer's Certificate of the relevant Core Entity. (g) Amendments. Neither the Borrower nor any other Core Entity shall enter into, acquiesce in, suffer or permit any amendment, restatement or other modification of any of the Related Documents or the Tender Offer Documents without the prior written consent of Lender. Notwithstanding the foregoing, the Borrower shall not be in breach of this paragraph (g) if (i) such amendment, restatement or modification is required by law or (ii) such amendment, restatement or modification is required in order for the general partner in the relevant partnership not to be in breach of its fiduciary duties to the limited partners in such partnership. Lender shall be afforded prior written notice of any such amendment, restatement or modification effected pursuant to the immediately preceding sentence. (h) Assets. The Borrower shall not purchase or own any assets other than the Affiliate Units and the LP Units acquired pursuant to the Tender Offers. (i) Debt. Except for the Loans and the Debt described in Schedule III hereto, neither the Borrower nor any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) shall create, incur or assume any Debt other than the advances made by the partners in the Borrower to the Borrower prior to the Availability Period Closing Date, provided that such advances are paid in full on the Closing Date or the Availability Period Closing Date, -70- 77 [and (ii) Debt secured by Liens permitted under Section 6.1(a)(iv)]. Neither the Borrower nor any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) shall make any voluntary prepayments of any Debt in respect of which it is the obligor, nor shall the Borrower or any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) enter into, acquiesce, suffer or permit any amendment, restatement or other modification of the documentation evidencing and/or securing any Debt under which they are obligors, provided that the advances described in clause (i) of the immediately preceding sentence may be repaid on the Availability Period Closing Date. (j) Single-Purpose Status. Neither the Borrower nor any of Cayuga, Cayuga Corp., Fleetwood, NPI Realty or the TOP-GP shall cease at any time to be a Single-Purpose Entity. (k) Advances, Investments and Loans. Neither the Borrower nor any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) will, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents, except that the following shall be permitted: (i) the Core Entities may acquire and hold accounts receivable owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms; and (ii) the Core Entities may acquire and hold cash and Permitted Investments. (l) [Intentionally Omitted] (m) Dividends and Distributions. Neither the Borrower nor any other Core Entity (other than NPI Corp. or either Tender Offer Partnership) will authorize, declare or pay any Distributions. (n) ERISA. Neither the Borrower nor any other Core Entity (other than NPI Corp.) shall establish or be obligated to contribute to any Plan. -71- 78 VII. DEFAULTS Section 7.1 Events of Default. The following events shall constitute "Events of Default" hereunder and under the other Loan Documents (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) Principal and Interest. The failure of the Borrower to make any principal payment in respect of the Loan when due, or the failure of the Borrower to make any payment of interest in respect of the Loan within five days of the due date therefor, provided, that the Borrower shall not be deemed to have failed to make a payment in respect of principal or interest in respect of the Loan if funds for the full amount of such required payment are available for application to such payment in the Cash Collateral Account and Lender is not prohibited or restricted in any way from applying such amounts to such payment obligation; (b) Other Payments. Except as specified in Section 7.1(a), the failure of any Transaction Party to pay any amount due from it under the Loan Documents within 30 days after receipt of notice from Lender, provided, that no Transaction Party shall be deemed to have failed to make a payment of any amount due under the Loan Documents if funds for the full amount of such required payment are available for application to such payment in the Cash Collateral Account and Lender is not prohibited or restricted in any way from applying such amounts to such payment obligation; (c) Cash Collateral Account and Interest Reserve Account. If any required deposit is not made into the Cash Collateral Account or the Interest Reserve Account on the date such deposit is to be made; (d) Representations. If any representation or warranty made by any Person (other than Lender) in the Loan Documents was untrue in any material respect as of the date made or deemed made; (e) Bankruptcy. If any case, proceeding or other action, whether voluntary or involuntary, shall be commenced against any Core Entity or Operating Partnership seeking to have an order for relief entered against such Operating -72- 79 Partnership as debtor, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of any of its debts under any federal or state law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for such Core Entity or Operating Partnership or for any substantial part of its property, and any such case, proceeding or other action (i) results in the entry of an order for relief against such Core Entity or Operating Partnership which is not fully stayed within 60 days after the entry thereof or (ii) remains undismissed for a period of 60 days; or if a receiver or trustee of all or substantially all of the property of any Core Entity or Operating Partnership, is appointed and is not discharged within 60 days, or if any Core Entity or Operating Partnership makes a general assignment for the benefit of its creditors, or admits in writing its inability to pay its debts, or is adjudged insolvent by any federal or state court of competent jurisdiction, or if an attachment or execution is levied against all or substantially all of the property of any such Core Entity or Operating Partnership and is not discharged within 60 days; (f) Negative Covenants. The breach of the covenants contained in Section 6.1 hereof; (g) Other Covenants. Except as otherwise set forth in this Section 7.1, if any Person (other than Lender) shall continue to be in Default under any of the terms, covenants or conditions of this Agreement or any other Loan Document beyond the expiration of any applicable notice and/or grace period set forth in this Agreement or such other Loan Document, or, if no such notice or grace period is so specified, (i) for a period of five days after notice to the Borrower from Lender in the case of any Default which can be cured by the payment of money, or (ii) for 30 days after notice from Lender to the Borrower in the case of any other Default; (h) Default on Certain Debt. If any Core Entity (other than a Tender Offer Partnership) shall (i) default in any payment of any Debt (other than the Note) beyond the period of grace, if any, provided in the instrument or agreement under which such Debt was created or (ii) default in the observance or performance of any agreement or condition relating to any Debt (other than the Note) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or -73- 80 condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, any such Debt to become due prior to its stated maturity, or any Debt (other than the Note) of any Core Entity (other than a Tender Offer Partnership) shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; (i) Debt of Tender Offer Partnerships and Operating Partnerships. If Tender Offer Partnerships and Operating Partnerships owning Individual Properties which produced 10% or more of the aggregate net operating income for all of the Individual Properties for the 12-month period ending December 31, 1995 shall (i) default in any payment of any Debt beyond the period of grace, if any, provided in the instrument or agreement under which such Debt was created or (ii) default in the observance or performance of any agreement or condition relating to any Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, any such Debt to become due prior to its stated maturity, or any Debt of such Tender Offer Partnerships and/or Operating Partnerships shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; (j) Loan Documents. If any Loan Document for any reason other than the satisfaction in full of all Obligations shall cease to be in full force and effect (other than in accordance with its terms), thereby preventing Lender from obtaining the practical realization of the benefits thereof, or if any Loan Document shall be declared null and void, or if the Liens and security interests purported to be created by any of the Loan Documents shall cease to be valid, perfected, first priority security interests; (k) Judgments. (i) One or more judgments or decrees shall be entered against any Core Entity (other than a Tender Offer Partnership) involving a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, -74- 81 and the aggregate amount of all such judgments exceeds $100,000; (l) Dissolution. If any Core Entity is dissolved, terminated or liquidated; (m) Event of Default. If the Borrower or any other Transaction Party shall default under any other Loan Document and such default shall not be cured after the giving of any notice and the passage of any grace period for the cure of such default as may be specified in such other Loan Document; (n) Change of Control. If a Change of Control shall occur; or (o) Other Payments. If Operating Partnerships or Tender Offer Partnerships owning Individual Properties which produced 10% or more of the aggregate net operating income for all of the Individual Properties for the 12-month period ending December 31, 1995 shall fail to pay (x) insurance premiums in respect of insurance policies covering the Individual Properties for more than 30 days, or (y) all debt service payments in respect of any Debt of such Operating Partnerships or Tender Offer Partnerships or (z) all real estate taxes and other Impositions relating to such Operating Partnerships or Tender Offer Partnerships or their related assets. Section 7.2 Remedies. (a) Upon the occurrence of any Event of Default, then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, (x) in the case of any Event of Default other than as specified in Sections 7.1(e) of this Agreement, Lender may by written notice to the Borrower, declare the outstanding principal of and any accrued interest in respect of the Loan and the Note and all other Obligations owing hereunder and/or under any of the other Loan Documents to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (y) in the case of any Event of Default specified in Sections 7.1 (e) of this Agreement, the outstanding principal of and any accrued interest in respect of the Loan and the Note and all other Obligations owing hereunder and/or under any of the other Loan Documents shall immediately and automatically become forthwith due and payable without presentment, demand, -75- 82 protest or other notice of any kind. Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against all or any of the Borrower and the other Transaction Parties under this Agreement or any of the other Loan Documents or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Lender shall have no obligation to make any Loan Advance upon the occurrence and during the continuance of an Event of Default. (b) Nothing contained herein or in any other Loan Document shall be construed as requiring the Lender to resort to any item of Collateral for the satisfaction of any of the Obligations in preference or priority to any other item or items of Collateral, and Lender may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion, in respect of the Obligations (or any of them). Section 7.3 Remedies Cumulative. The rights, powers and remedies of Lender under this Agreement and the other Loan Documents shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrower and the other Transaction Parties (or any of them) pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to one or more of the Borrower or any -76- 83 other Transaction Parties shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrower, such Transaction Parties or by any other Transaction Parties or to impair any remedy, right or power consequent thereon. VIII. MISCELLANEOUS Section 8.1 Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loans and the execution and delivery to Lender of the Note, and shall continue in full force and effect until the Loan Satisfaction Date; provided, however, that from and after the Loan Satisfaction Date, the provisions of Sections 3.3.2, 5.2, 8.14 and 8.22 hereof shall remain in full force and effect until payment in full of the Residual Fee. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party. All covenants, promises and agreements in this Agreement contained shall inure to the benefit of the respective legal representatives, successors and assigns of Lender. Section 8.2 Lender's Discretion. Whenever pursuant to this Agreement or any other Loan Document, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive. Section 8.3 Governing Law. (a) This Agreement and the other Loan Documents were negotiated in the State of New York, and made and accepted by Lender and the Transaction Parties in the State of New York, and the proceeds of the Notes were disbursed from the State of New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, -77- 84 matters of construction, validity and performance, this Agreement and the other Loan Documents and the obligations arising hereunder and thereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America. To the fullest extent permitted by law, the Borrower hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Agreement and the other Loan Documents, and this Agreement and the other Loan Documents shall be governed by and construed in accordance with the laws of the State of New York pursuant to Section 5-1401 of the New York General Obligations Law. (b) Any legal suit, action or proceeding against Lender or any Transaction Party arising out of or relating to this Agreement or the other Loan Documents shall be instituted in any federal or state court in New York, New York, pursuant to Section 5-1402 of the New York General Obligations Law, and the Borrower waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. The Borrower does hereby designate and appoint Rosenman & Colin LLP, having an address at 575 Madison Avenue, New York, New York, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service of the Borrower mailed or delivered to the Borrower in the manner provided herein shall be deemed in every respect effective service of process upon the Borrower, in any such suit, action or proceeding in the State of New York. The Borrower (i) shall give prompt notice to the Lender of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. -78- 85 Section 8.4 Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by any Transaction Party therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on any Transaction Party, shall entitle such Transaction Party to any other or future notice or demand in the same, similar or other circumstances. Section 8.5 Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security for the Obligations, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount. Section 8.6 Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed if to Lender at its address set forth on the first page hereof, and if to the Borrower, at its address set forth at the outset of this Agreement with copies to Rosenman & Colin LLP, 575 Madison Avenue, New York, New York, Attention: -79- 86 Joseph Getraer, Esq., Post & Heymann LLP, 100 Jericho Quadrangle, Suite 214, Jericho, New York 11753, Attention: William Post, Esq. and Rogers & Wells, 200 Park Avenue, New York, New York 10166, Attention: G. David Brinton, Esq., or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day. Section 8.7 Waiver of Trial By Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS CREDIT TRANSACTION AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALING. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS, OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. -80- 87 Section 8.8 Headings. The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 8.9 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 8.10 Preferences. Lender shall have no obligation to marshal any assets in favor of any Transaction Party or any other Person or against or in payment of any or all of the Obligations pursuant to this Agreement, the Note or any other Loan Document. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by any Transaction Party to any portion of the Obligations. To the extent Lender receives a payment in respect of the Obligations, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Obligations or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender. Section 8.11 Waiver of Notice. No Transaction Party shall be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to such applicable Transaction Party and except with respect to matters for which such applicable Transaction Party is not, pursuant to applicable law, permitted to waive the giving of notice. The Borrower hereby expressly waives the right to receive any notice from Lender -81- 88 with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to the Borrower. Section 8.12 Remedies of the Borrower. In the event that a claim or adjudication is made that Lender or its agents, including, without limitation, Servicer, have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, the Borrower agrees that neither Lender nor its agents, including, without limitation, Servicer, shall be liable for any monetary damages, and the Borrower's sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Section 8.13 Recourse. Lender shall have full recourse to the Collateral (and the proceeds thereof) and to the Borrower, Cayuga, Cayuga Corp. and Fleetwood for the payment and performance of the Obligations; provided, however, that nothing contained in this Section 8.13 shall impair (i) the validity of the Debt evidenced by this Agreement and the other Loan Documents, (ii) prevent the taking of any action permitted by law against any Transaction Party or the assets of any Transaction Party or the proceeds of such assets or (iii) in any manner affect or impair the right of Lender to take any action permitted by law to realize upon any of the Collateral or any other security which may secure any Transaction Party's obligations; provided, further, that Lender shall not have recourse to the Demand Funding Notes; and provided, finally, that nothing in this Section 8.13 shall be deemed to release any Transaction Party from liability under the Loan Documents for such Transaction Party's fraudulent actions, intentional material misrepresentations, gross negligence or wilful misconduct. Section 8.14 Expenses; Indemnity. (a) The Borrower covenants and agrees to reimburse Lender (or the holder of the Loans, as applicable) upon receipt of written notice from such holder, for all reasonable costs and expenses (including reasonable -82- 89 attorneys' fees and disbursements) incurred by any of the Indemnitees in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, and all reasonable costs of furnishing all opinions of counsel delivered in connection therewith (including, without limitation, any opinions requested by Lender as to any legal matters arising under this Agreement, the Loan Documents, the Related Documents, or with respect to the Collateral); (ii) the Transaction Parties' ongoing performance of and compliance with their respective agreements and covenants contained in this Agreement and the other Loan Documents from and after the Closing Date; (iii) Lender's ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents from and after the Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement, the other Loan Documents, and any other documents or matters requested by any Transaction Party; (v) all filing and recording fees and expenses and other similar expenses incurred in creating and perfecting the Liens and security interests in favor of Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing or preserving any rights, in response to third-party claims, or prosecuting or defending any action or proceeding or other litigation, in each case against, under or affecting any of the Transaction Parties, the Operating Partnerships, the Loan Documents (or the transactions contemplated therein), the Collateral or any other security given for the Loans; and (vii) enforcing any obligations of or collecting any payments due from any of the Transaction Parties under this Agreement or the other Loan Documents or with respect to any portion of the Collateral or in connection with any refinancing or restructuring of the credit arrangements provided under the Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy proceedings. In the event that any Lien or security interest held by Lender is foreclosed in whole or in part or that the collection of the Obligations or any part thereof is put into the hands of an attorney for collection, suit, action or foreclosure, or in the event of the commencement of any litigation or proceeding affecting any portion of the Collateral in which Lender is made a party, or in the event of the bankruptcy, insolvency, rehabilitation or any similar proceedings in respect of any Transaction Party or any Operating Partnership or an assignment by any Transaction Party or Operating Partnership for the benefit of its creditors, the Transaction Parties and their respective -83- 90 successors and assigns, shall be chargeable with and hereby jointly and severally agree to pay all costs of collection and defense, including reasonable attorneys' fees and court costs in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which amounts shall be due and payable together with all required service or use taxes. (b) In addition to but without duplication of the payment of expenses pursuant to paragraph (a) above, whether or not the transactions contemplated hereby are consummated, the Borrower agrees to indemnify, pay and hold harmless the Indemnitees, and each of them, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), that may be imposed on, incurred by, or asserted against such Indemnitee in any manner relating to or arising out of (i) any transaction contemplated by this Agreement (including, without limitation, the Tender Offers), (ii) any breach by the Transaction Parties of their respective obligations under, or any material misrepresentation by the Transaction Parties contained in the Loan Documents, (iii) the use or intended use of the proceeds of the Loans, or (iv) any information provided by or on behalf of any of the Transaction Parties or the Operating Partnerships and contained in the Tender Offer Documents (collectively, the "Indemnified Liabilities"); provided, however, the Borrower shall not have any obligation to an Indemnitee hereunder to the extent that such Indemnified Liabilities arise from gross negligence, illegal acts, fraud or willful misconduct of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this paragraph (b) may be unenforceable because it violates any law or public policy, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (c) The Borrower hereby acknowledges and agrees that each Indemnitee (other than Lender) is an intended third-party beneficiary of this Section 8.14. -84- 91 Section 8.15 Exhibits Incorporated. The Exhibits and Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 8.16 Offsets, Counterclaims and Defenses. Any assignee of the Lender's interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which the Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by the Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by the Borrower. Section 8.17 No Joint Venture or Partnership. The Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of Borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between the Borrower and Lender nor to grant Lender any interest in the Collateral other than that of secured party or lender. Section 8.18 Publicity. Upon the consummation of the transactions contemplated in the Loan Documents and the Tender Offer Documents, Lender and its Affiliates shall be entitled, but not required, to advertise the same from time to time in media selected by Lender or its Affiliates at their expense, provided that no such advertisement shall refer to the use of the proceeds of the Loans. The Borrower covenants and agrees that neither it nor any of the Credit Parties nor any of their respective Affiliates shall advertise the closing of the transactions contemplated in the Loan Documents or the Tender Offer Documents prior to consummation thereof. Upon consummation of such transactions, the Credit Parties and their Affiliates shall be entitled, but not required, to advertise the same from time to time in media selected by them at their expense, provided that their advertisements -85- 92 shall include a disclosure, in each case approved in writing by Lender, that Lender provided the Loans. Section 8.19 Waiver of Marshalling of Assets. To the fullest extent the Borrower may legally do so, the Borrower waives all rights to a marshalling of the assets of any Transaction Party, such Transaction Party's partners, if any, and others with interests in such Transaction Party, and of the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Collateral for the collection of the Obligations without any prior or different resort for collection, or the right of Lender to the payment of the Obligations out of the net proceeds of the Collateral in preference to every other claimant whatsoever. Section 8.20 Waiver of Counterclaim. The Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents, including, without limitation, Servicer. Section 8.21 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Section 8.22 Brokers and Financial Advisors. Each of Lender and the Borrower represents and warrants that neither it nor any Person acting on its behalf (in the case of the Borrower including, without limitation, any Credit Party), has employed or used a broker in connection with the transactions contemplated in the Loan Documents, and each of Lender and the Borrower hereby agrees to indemnify and hold harmless the Transaction Parties (in the case of Lender) and the Indemnitees (in the case of the -86- 93 Transaction Parties) from and against all loss, cost, damage or expense arising by reason of any claim made by any such broker. The provisions of this Section 8.22 shall survive any termination of this Agreement. Section 8.23 Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, including, without limitation, the Commitment Letter, are superseded by the terms of this Agreement and the other Loan Documents. Section 8.24 Assignments and Participations. The Borrower may not assign its rights and obligations under the Loan Documents without the prior written consent of Lender. Lender may assign, and may sell participations in, its rights and obligations under the Loan Documents to any Person. Upon such assignment, such assignee shall be the "Lender" under this Agreement for all purposes hereof and shall be entitled to the benefits of, and be bound by the terms of this Agreement and, to the extent of such assignment, the assignor shall be released from its duties and obligations hereunder and under the other Loan Documents. Section 8.25 Right of Set-Off. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived by the Borrower for itself and all other Transaction Parties, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by Lender to or for the credit or the account of any Transaction Party against and on account of the Obligations and liabilities of the Transaction Parties to Lender under this Agreement or under any of the other Loan Documents, and all other claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not Lender shall have made any demand hereunder and although said Obligations, -87- 94 liabilities or claims, or any of them, shall be contingent or unmatured. Section 8.26 Overdue Payments. Overdue payments in respect of the Obligations shall accrue interest at the Default Rate from the date due until paid, which interest shall be payable upon demand and shall constitute a part of the Obligations evidenced and secured by the Loan Documents. -88- 95 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. Lender PAINE WEBBER REAL ESTATE SECURITIES INC. By ------------------------------------- Name: Title: Borrower -------- DEVON ASSOCIATES, a New York general partnership By: Fleetwood Corp., a general partner By: ------------------------------- Name: Edward Mattner Title: President By: Cayuga Associates L.P., a general partner By: Cayuga Capital Corporation, its general partner By: /s/ PETER BRAVERMAN ------------------------------- Name: Peter Braverman Title: Vice President EX-99.(B)(3) 3 LOAN AGREEMENT 1 EXHIBIT 99.(b)(3) 2 ================================================================================ $40,000,000 LOAN AGREEMENT between DEVON ASSOCIATES, as Borrower and PAINE WEBBER REAL ESTATE SECURITIES INC., as Lender __________________________________ Dated as of March 28, 1996 __________________________________ ================================================================================ 3 LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of March 28, 1996, between DEVON ASSOCIATES, a New York general partnership, having an address at 100 Jericho Quadrangle, Jericho, New York 11753, Attention: Michael L. Ashner (the "Borrower"), and PAINE WEBBER REAL ESTATE SECURITIES INC., having an address at 1285 Avenue of the Americas, New York, New York 10036, Attention: Legal Department (together with its successors and assigns, the "Lender"). Capitalized terms used herein without definition shall have the respective meanings ascribed to them in the Master Agreement hereinbelow defined. W I T N E S S E T H : WHEREAS, Borrower is party to that certain Master Agreement dated as of March 28, 1996, among the parties named therein and Lender (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Master Agreement"); WHEREAS, Borrower intends to acquire the limited partnership units of the Tender Offer Partnerships by means of Tender Offers, and desires to incur the Loan in order to finance a portion of the cost of such acquisition; WHEREAS, Lender has required, as a condition to its agreement to make the Loan available to Borrower, that Borrower execute and deliver this Agreement; and WHEREAS, in consideration of the material benefits which will accrue to Borrower and the other Credit Parties as a result of the making of the Loan, Borrower has agreed to execute and deliver this Agreement. NOW, THEREFORE, in consideration of the foregoing and other material benefits, the receipt and sufficiency of which are hereby acknowledged, Borrower hereby covenants and agrees with Lender as follows: 4 SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION. 1.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Agreement" shall mean this Loan Agreement, as amended, restated, replaced, supplemented or otherwise modified from time to time. "Applicable Margin" shall mean a percentage per annum equal to (x) prior to the first anniversary of the Closing Date, 2.5%, (y) on and after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, 3.5% and (z) on and after the second anniversary of the Closing Date, 4.5%. "Borrower" shall have the meaning provided in the first paragraph hereof. "Borrowing" shall mean Borrower's borrowing of a Loan Advance on a given date. "Default Rate" shall have the meaning provided in Section 2.06. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Event of Default" shall mean the occurrence of an "Event of Default" under and as defined in the Master Agreement. "Initial Borrowing Date" shall mean the date on which the initial Loan Advance is made hereunder. "Interest Payment Date" shall have the meaning provided in Section 2.06(c). "Interest Period" shall have the meaning provided in Section 2.07. "Interest Rate Determination Date" shall mean the second Business Day prior to the commencement of any Interest Period for the Loan. -2- 5 "LIBOR Rate" shall mean, for any interest period, the rate per annum from time to time equal to the rate (rounded upward, if necessary, to the nearest 1/32 of one percent), shown on the Telerate page 3750 (or such display substituted therefor as is then customarily used to quote the London interbank offering rate as determined by Lender in its reasonable discretion) as the offered rate per annum for one month United States dollar deposits of amounts in same day funds comparable to the principal amount of the Loans as of approximately 11:00 a.m. (London time) on each Interest Rate Determination Date for each Interest Period for such Loan, provided that if on any Interest Rate Determination Date the quotation specified in the preceding clause above does not appear on Telerate Page 3750, the LIBOR Rate will be either (a) the arithmetic mean (rounded upwards as aforesaid) of the offered rates which leading New York City banks selected by Lender are quoting at approximately 11:00 a.m. (New York City time) on the relevant Interest Rate Determination Date for United States dollar deposits for the next month to the principal London office of each of the reference banks or those of them (being at least two in number) to which such offered quotations are, in the opinion of Lender, being so made, or (b) in the event that Lender can determine no such arithmetic mean, the arithmetic mean (rounded upwards as aforesaid) of the offered rates which leading New York City banks selected by Lender are quoting on such Interest Rate Determination Date to leading European banks for United States dollar deposits for the next month. "Loan" shall mean the loan from Lender to Borrower made pursuant hereto in the maximum original principal amount of up to $40,000,000. "Loan Advance" shall mean an advance to Borrower by Lender of Loan proceeds in accordance with the terms hereof. "Maturity Date" shall mean the first anniversary of the Closing Date, subject to extension as provided in Section 2.08. "Note" shall have the meaning provided in Section 2.05. "Notice of Borrowing" shall have the meaning provided in Section 2.03. "Notice Office" shall mean the office of Lender located at the address set forth in the first paragraph of this Agreement, or such other office as Lender may hereafter designate in writing as such to Borrower. -3- 6 "Payment Office" shall mean at the office of Lender at 1285 Avenue of the Americas, New York, New York 10036, or such other office as Lender may hereafter designate in writing as such to Borrower. "Prime Lending Rate" shall mean the rate which Bankers Trust Company announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers Trust Company and Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Taxes" shall have the meaning provided in Section 3.04. "United States" and "U.S." shall each mean the United States of America. 1.02 Principles of Construction. (a) All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. (b) All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States ("GAAP"), as modified herein or in the Master Agreement. SECTION 2. AMOUNT AND TERMS OF CREDIT. 2.01 The Loan. Subject to and upon the terms and conditions set forth herein and in the other Loan Documents, Lender agrees, from time to time after the Closing Date and prior to the Availability Period Closing Date, to make Loans to the Borrower, provided that (i) in no event shall the aggregate outstanding principal amount of the Loans exceed 85% of the aggregate Initial Prices allocated to the LP Units acquired by Borrower in the Tender Offers; (ii) Loan Advances hereunder may not be incurred on more than five different days; (iii) in no event shall the aggregate principal amount of the Loans exceed $40,000,000 and (iv) no portion of the Loan may be reborrowed once the same has been repaid to Lender. -4- 7 2.02 Minimum Amount of Initial Loan Advance. The aggregate principal amount of the Loan Advance made on the Initial Borrowing Date shall be no less than $5,000,000. 2.03 Notice of Borrowing. Whenever Borrower desires to make a Borrowing hereunder, it shall give Lender at its Notice Office at least five Business Days' prior notice of each Loan Advance to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 12:00 Noon (New York time) on such day. Each such notice (each a "Notice of Borrowing") shall be in the form of Annex A attached hereto, appropriately completed to specify the principal amount of the Loan Advance to be made pursuant to such Borrowing, and the date of such Borrowing (which shall be a Business Day). 2.04 Disbursement of Funds. No later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing, Lender will make available to Borrower by wire transfer in immediately available funds to such account as Borrower shall notify Lender the amount of the Loan Advance requested in the Notice of Borrowing. 2.05 Note. Borrower's obligation to pay the principal of, and interest on, the Loan and all Loan Advances in respect thereof shall be evidenced by a promissory note duly executed and delivered by Borrower, substantially in the form of Exhibit L annexed to the Master Agreement (and hereby incorporated herein by reference) with blanks appropriately completed in conformity herewith (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Note"). The Note issued to Lender shall (i) be payable to the order of Lender and be dated the Closing Date, (ii) be in a stated principal amount equal to the maximum principal amount of the Loan, (iii) mature on the Maturity Date, (iv) bear interest as provided in Section 2.06, (v) be subject to repayment and prepayment as provided in Section 4, and (vi) be entitled to the benefits of, and be secured by, this Agreement and the other Loan Documents. Lender will note on its internal records the amount of each Loan Advance made by it and each payment in respect of the Loan and will, prior to any transfer of the Note, endorse on the reverse side thereof the outstanding principal amount of the Loan evidenced thereby. Failure to make any such notation shall not affect Borrower's obligations in respect of the Loan. 2.06 Interest. (a) Borrower agrees to pay interest in respect of the outstanding unpaid principal amount of the Loan from the Initial Borrowing Date until the maturity of the Loan (whether by acceleration or otherwise) at a rate per annum which shall, during each Interest Period applicable thereto, be the LIBOR Rate for such Interest Period plus the Applicable Margin. -5- 8 (b) Subject to limitations imposed by applicable law, overdue principal and overdue interest in respect of the Loan and any other overdue amount payable by Borrower hereunder shall bear interest at a rate per annum (the "Default Rate") equal to the rate which is the greater of (x) 12% and (y) 3% in excess of the Prime Lending Rate. (c) Accrued (and theretofore unpaid) interest shall be payable on the following dates (each an "Interest Payment Date"): (i) on each Payment Date, (ii) on any prepayment of the Loan (on the amount prepaid), (iii) at maturity (whether by acceleration or otherwise), and (iv) after such maturity, on demand. 2.07 Interest Periods. Except as provided in paragraph (b) below, there shall not be more than one Interest Period outstanding at any time in respect of the Loan. The interest period applicable to the Loan (each an "Interest Period") shall be a one month period, provided that (i) the first Interest Period for any Loan shall commence on the date of such Loan and shall end on the first Payment Date to occur thereafter and each subsequent Interest Period shall commence on the date on which the immediately preceding Interest Period ends, (ii) if any Interest Period relating to the Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period for the Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day and (iv) no Interest Period shall extend beyond the Maturity Date. 2.08 Maturity Date, Extension. Subject to the second sentence of this Section 2.08, the Loan shall mature on the Maturity Date. Provided that no Default or Event of Default then exists, Borrower shall have the right, by written notice to Lender received not later than the tenth Business Day preceding the Maturity Date or the first anniversary of the Maturity Date, as the case may be, which notice shall be accompanied by a Certificate of the Borrower certifying that no Default or Event of Default then exists, to extend the term of the Loan (i) in the case of the first extension, to the first anniversary of the Maturity Date, and (ii) in the case of the second extension, to the first anniversary of the Maturity Date as extended pursuant to clause (i) of this sentence. Borrower shall have no further right to extend the Maturity Date of the Loan. -6- 9 2.09 Use of Proceeds. The proceeds of the Loans will be used by Borrower solely for the purposes specified in Section 2.2 of the Master Agreement, which provision is hereby incorporated herein as part of this Agreement with the same effect as if set forth in the body hereof. 2.10 Increased Costs, Illegality, etc. (a) In the event that Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any Interest Rate Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR Rate; or (ii) at any time, that Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to the Loan or any Loan Advance because of (x) any change since the date of this Agreement in any applicable law or governmental rule, regulation, order or request (whether or not having the force of law) (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order or request), such as, for example, but not limited to, a change in the basis of taxation of payments to Lender of the principal of or interest on the Note or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of Lender) and/or (y) other circumstances affecting Lender or the interbank Eurodollar market, or the position of Lender in such market; or (iii) at any time, that the making or continuance of the Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by Lender with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, Lender shall promptly give notice (by telephone confirmed in writing) to Borrower. Thereafter (x) in the case of clause (i) above, Loan Advances shall no longer be available until such time as Lender notifies Borrower that the circumstances giving rise to such notice by Lender no longer exist, and any Notice of Borrowing given by Borrower with respect to Loan Advances which have not yet been incurred shall be deemed rescinded by Borrower, (y) in the case of clause (ii) above, -7- 10 Borrower shall pay to Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as Lender in its sole discretion shall determine) as shall be required to compensate Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to Lender, showing the basis for the calculation thereof, submitted to Borrower by Lender shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, take one of the actions specified in Section 2.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that the Loan or any Loan Advance is affected by the circumstances described in Section 2.10(a)(ii) or (iii), Borrower may (and in the case of the occurrence of the circumstances described in Section 2.10(a)(iii) shall) either (i) if the affected Loan Advance is then being made initially, cancel said Borrowing by giving Lender notice by telephone (confirmed in writing) of the cancellation on the same date that Borrower was notified by Lender pursuant to Section 2.10(a)(ii) or (iii); or (ii) if the affected Loan Advance is then outstanding, upon at least three Business Days' written notice to Lender, require Lender to convert the Loan into a Loan subject to interest at the Prime Lending Rate. (c) If Lender determines at any time that any applicable law or governmental rule, regulation, order or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by Lender based on the existence of Lender's obligations hereunder, then Borrower shall pay to Lender, upon its written demand therefor, such additional amounts as shall be required to compensate Lender for the increased cost to Lender as a result of such increase of capital. In determining such additional amounts, Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that Lender's determination of compensation owing under this Section 2.10(c) shall, absent manifest error, be final and conclusive and binding. Lender, upon determining that any additional amounts will be payable pursuant to this Section 2.10(c) will give prompt written notice thereof to Borrower, which notice shall show the basis for calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of Borrower's obligations to pay additional amounts pursuant to this Section 2.10(c). 2.11 Compensation. Borrower shall compensate Lender, upon its written request (which request shall set forth the basis for requesting such compensation and shall, absent manifest error, be final and conclusive and binding on all the parties -8- 11 hereto), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by Lender to fund the Loan) which Lender may sustain; (i) if for any reason (other than a default by Lender) a Borrowing does not occur on a date specified therefor in a Notice of Borrowing (whether or not withdrawn by Borrower or deemed rescinded pursuant to Section 2.10(a)); (ii) if any repayment (including any prepayment made pursuant to Section 4) is not made on the date specified therefor or is made on a day which is not the last day of an Interest Period with respect thereto; or (iii) as a consequence of (x) any other default by Borrower to repay the Loan or any portion thereof when required by the terms of this Agreement, the Note or any of the other Loan Documents or (y) any action taken pursuant to Section 2.10(b). SECTION 3. PREPAYMENTS; PAYMENTS. 3.01 Voluntary Prepayments. Subject to the continuing obligations of Borrower with respect to payment of the Residual Fee, Borrower shall have the right to prepay the Loan on any Interest Payment Date, without premium or penalty, in whole or in part, from time to time on the following terms and conditions: (i) Borrower shall give Lender at least three Business Days' prior notice of its intent to prepay the Loan, and the amount of such prepayment; (ii) each prepayment shall be in an aggregate principal amount of at least $1,000,000, or an integral multiple thereof; and (iii) prepayments made pursuant to this Section 3.01 may only be made on the last day of the applicable Interest Period. 3.02 Mandatory Prepayments. Borrower shall make all prepayments of the Loan on the dates, in the amounts and for application as specified in Section 3.2 of the Master Agreement. In addition, the Loan shall be repaid in full on the Maturity Date. 3.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement or the Note shall be made to Lender not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of Lender. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. -9- 12 3.04 Net Payments. All payments made by Borrower hereunder or under the Note will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding, except as provided below, any tax imposed on or measured by the net income of Lender pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the principal office of Lender is located) and all interest, penalties or similar liabilities with respect thereto (collectively, "Taxes"). Borrower shall also reimburse Lender, upon the written request of Lender, for taxes imposed on or measured by the net income of Lender pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the principal office of Lender is located as Lender shall determine are payable by Lender in respect of amounts paid to or on behalf of Lender pursuant to the preceding sentence. If any Taxes are so levied or imposed, Borrower agrees to pay the full amount of such Taxes and such additional amounts as may be necessary so that every payment of all amounts due hereunder or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. Borrower will furnish to Lender within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by Borrower. Borrower will indemnify and hold harmless Lender, and reimburse Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by Lender. SECTION 4. CONDITIONS PRECEDENT. The obligation of Lender to make any Loan Advance is subject at the time of each Borrowing to the satisfaction of the following conditions, in addition to, and not by way of limitation of, each of the conditions precedent set forth in Section 2.1 of the Master Agreement, which conditions are incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof: 4.01 Notice of Borrowing. Prior to each Borrowing, Lender shall have received a Notice of Borrowing with respect thereto meeting the requirements of Section 2.03. 4.02 Funding Fee. On or before the date of each Borrowing, Lender shall have received the portion of the Funding Fee payable in connection therewith. -10- 13 The acceptance of each Loan Advance shall constitute a representation and warranty by Borrower to Lender that all the conditions specified (or otherwise incorporated by reference) in this Section 4 are satisfied as of the date of Borrowing. SECTION 5. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter into this Agreement and to make the Loan, Borrower hereby affirms and acknowledges that each of the representations and warranties set forth in Section 4 of the Master Agreement (which are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof), are true, complete and correct in all material respects. Such representations and warranties shall survive the execution and delivery of this Agreement and the Note and the making of each Loan Advance and shall continue in full force and effect until the Loan Satisfaction Date. Each such representation and warranty shall be deemed remade by Borrower on the date of its submission of each Notice of Borrowing and on the date each Loan Advance is made hereunder. SECTION 6. COVENANTS. Borrower hereby acknowledges, affirms and agrees that, until the Loan Satisfaction Date, Borrower shall duly perform and observe each of its covenants and agreements set forth in the Master Agreement (including, without limitation, those set forth in Sections 3, 5 and 6 thereof) and the other Loan Documents. SECTION 7. EVENTS OF DEFAULT. Upon the occurrence of any Event of Default, then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, (x) in the case of any Event of Default other than as specified in Section 7.1 (e) of the Master Agreement with respect to the Borrower, Lender may by written notice to Borrower, declare the outstanding principal of and any accrued interest in respect of the Loan and the Note and all other Obligations owing hereunder and/or under any of the other Loan Documents to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower, and (y) in the case of any Event of Default specified in Section 7.1 (e) of the Master Agreement with respect to the Borrower, the outstanding principal of and any accrued interest in respect of the Loan and the Note and all other Obligations owing hereunder and/or under any of the other Loan -11- 14 Documents shall immediately and automatically become forthwith due and payable without presentment, demand, protest or other notice of any kind. Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against all or any of the Credit Parties under the Master Agreement, this Agreement or any of the other Loan Documents or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein, in the Master Agreement or in the other Loan Documents. Nothing contained herein or in any other Loan Document shall be construed as requiring the Lender to resort to any item of Collateral for the satisfaction of any of the Obligations in preference or priority to any other item or items of Collateral, and Lender may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion, in respect of the Obligations (or any of them). SECTION 8. MISCELLANEOUS. Each of the following provisions shall apply, in addition to, and not by way of limitation of, each of the provisions set forth in Section 8 of the Master Agreement, which provisions are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof: 8.01 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by Lender to or for the credit or the account of Borrower against and on account of the Obligations and liabilities of Borrower to Lender under this Agreement or under any of the other Loan Documents, -12- 15 and all other claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 8.02 Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Lender. Lender may at any time (i) grant participations in or (ii) transfer or assign, any of its rights hereunder, under the Note and/or under any of the other Loan Documents, subject to the provisions of Section 8.24 of the Master Agreement. If Lender transfers or assigns all or a part of its rights under the Loan Documents to any other Person, any reference to Lender in this Agreement or any of the other Loan Documents shall thereafter refer to such Person to the extent of its respective interests. 8.03 Calculations; Computations. All computations of interest hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. 8.04 Obligation to Make Payments in Dollars. The obligation of Borrower to make payment in Dollars of the principal of and interest on the Note and any other amounts due hereunder or under any other Loan Document to the Payment Office of Lender as provided in Section 3.03 shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any currency other than Dollars, except to the extent such tender or recovery shall result in the actual receipt Lender at its Payment of the full amount of Dollars expressed to be payable in respect of the principal of and interest on the Note and all other amounts due hereunder or under any other Loan Document. The obligation of Borrower to make payments in Dollars as aforesaid shall be enforceable as an alternative or additional cause of action for the purpose of recovery in Dollars of the amount, if any, by which such actual receipt shall fall short of the full amount of Dollars expressed to be payable in respect of the principal of and interest on the Note and any other amounts due under any other Loan Document, and shall not be affected by judgment being obtained for any other sums due under this Agreement or under any other Loan Document. 8.05 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. -13- 16 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Loan Agreement as of the date first above written. DEVON ASSOCIATES, a New York general partnership By: Cayuga Associates L.P., a general partner By: Cayuga Capital Corporation, its general partner By /s/ PETER BRAVERMAN ----------------------------- Name: Peter Braverman Title: Vice President By: Fleetwood Corp., a general partner By /s/ EDWARD E. MATTNER ----------------------------- Name: Edward E. Mattner Title: President PAINE WEBBER REAL ESTATE SECURITIES INC. By -------------------------------- Name: Title: 17 Annex A to LOAN AGREEMENT NOTICE OF BORROWING [Date] Paine Webber Real Estate Securities Inc. 1285 Avenue of the Americas New York, New York, 10036 Attention: __________________________ Gentlemen: The undersigned, Devon Associates, refers to the Loan Agreement, dated as of _______________, 1996 (as amended from time to time, the "Loan Agreement," the terms defined therein being used herein as therein defined), between the undersigned, as Borrower, and you, as Lender, and hereby gives you notice, irrevocably, pursuant to Section 2.03 of the Loan Agreement, that the undersigned hereby requests a Borrowing under the Loan Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.03 of the Loan Agreement: (i) The Business Day of the Proposed Borrowing is ________, 19__. (ii) The aggregate principal amount of the Proposed Borrowing is $_____________. (iii) The initial Interest Period for the Proposed Borrowing is the period commencing on the date specified in clause (i) above and expiring on the expiration date of the Interest Period then applicable to the outstanding principal balance of the Loan. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in (or incorporated by reference in) Section 5 of the Loan Agreement are correct, before and after 18 giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on and as of such date; (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof; and (C) all conditions precedent to the Proposed Borrowing set forth in (or incorporated by reference in) Section 4 of the Loan Agreement are satisfied as of the date hereof and will remain satisfied on the date of the Proposed Borrowing specified in clause (i) above. Very truly yours, DEVON ASSOCIATES, a New York general partnership By: Cayuga Associates L.P., its general partner By: Cayuga Capital Corporation, a general partner By ------------------------------ Name: Peter Braverman Title: Vice President By: Fleetwood Corp., a general partner By ------------------------------ Name: Edward E. Mattner Title: President 19 DEVON ASSOCIATES Suite 214 100 Jericho Quadrangle Jericho, NY 11753-2717 Phone 516-822-0022 NOTICE OF BORROWING March 27, 1996 Paine Webber Real Estate Securities Inc. 1285 Avenue of the Americas, 19th Floor New York, NY 10009 Attention: Kevin Cox Gentlemen: The undersigned, Devon Associates, refers to the Loan Agreement, dated as of March 27, 1996 (as amended from time to time, the "Loan Agreement," the terms defined therein being used herein as therein defined), between the undersigned, as Borrower, and you, as Lender, and hereby gives you notice, irrevocably, pursuant to the Loan Agreement, that the undersigned hereby requests a Borrowing under the Loan Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by the Loan Agreement: (i) The Business Day of the Proposed Borrowing is March 28, 1995. (ii) The aggregate principal amount of the Proposed Borrowing is $18,904,780. Of this amount, $18,335,294 should be wire transferred on the date specified in clause (i) above to the following account: NationsBank of Georgia Atlanta, GA ABA #061000052 For Credit To: Devon Associates A/A/F Account #3251808004 The balance represents a Funding fee payable to Lender of $239,986, expenses to Lender of $4,500 and $325,000 in legal fees to be held by Lender on behalf of White & Case until released by Borrower. 20 (iii) The initial Interest Period for the Proposed Borrowing is the period commencing on the date specified in clause (i) above and expiring on the expiration date of the Interest Period then applicable to the outstanding principal balance of the Loan. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in (or incorporated by reference in) the Loan Agreement are correct, before and after giving effect to the Proposed Borrowing and the application of the proceeds thereof, as though made on and as of such date; (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof; and (C) all conditions precedent to the Proposed Borrowing set forth in (or incorporated by reference in) the Loan Agreement are satisfied as of the date hereof and will remain satisfied on the date of the Proposed borrowing specified in clause (i) above. Very truly yours, DEVON ASSOCIATES By: Cayuga Associates L.P. By: Cayuga Capital Corporation its managing General Partner By: /s/ PETER BRAVERMAN ------------------------- Name: Peter Braverman Title: Vice President 21 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 (AMENDMENT No. 3) Final Amendment and SCHEDULE 13D* under the Securities Exchange Act of 1934 (Amendment No. 1) --------------------- GROWTH HOTEL INVESTORS II, a California Limited Partnership (Name of Subject Company) DEVON ASSOCIATES CAYUGA ASSOCIATES L.P. FLEETWOOD CORP. (Bidders) LIMITED PARTNERSHIP ASSIGNEE UNITS (Title of Class of Securities) ----------------- NONE (CUSIP Number of Class of Securities) ----------------- Michael L. Ashner Devon Associates Edward Mattner Cayuga Associates L.P. Fleetwood Corp. 100 Jericho Quadrangle 114 West 47th Street Suite 214 19th Floor Jericho, New York 11735-2717 New York, New York 10036 (516) 822-0022 (212) 921-3340 Copies to: Mark I. Fisher G. David Brinton Rosenman & Colin LLP Rogers & Wells 575 Madison Avenue 200 Park Avenue New York, New York 10022-2585 New York, New York 10166 (212) 940-8877 (212) 878-8276 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) __________________________________ * This Statement also constitutes Amendment No. 1 to the Statement on Schedule 13D of Cayuga Associates L.P. and Fleetwood Corp. filed with respect to the Limited Partnership Assignee Units of Growth Hotel Investors II, a California limited partnership, on February 15, 1996. 22 ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Devon Associates ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization New York ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 17,119 Units ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [ ] ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 29.02% ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) PN 23 CUSIP NO. NONE 14D-1 Page 3 of 8 Pages ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Cayuga Associates L.P. ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization Delaware ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 0 Units** ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [x]** ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 0 ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) PN __________________________________ ** Does not include 2,981 Units owned by QALA III Associates, a New York general partnership and affiliate of Cayuga Associates L.P. or the 17,119 Units owned by Devon Associates. 3 24 CUSIP NO. NONE 14D-1 Page 4 of 8 Pages ________________________________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Fleetwood Corp. ________________________________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] ________________________________________________________________________________ 3. SEC Use Only ________________________________________________________________________________ 4. Sources of Funds (See Instructions) WC; OO ________________________________________________________________________________ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) of 2(f) [ ] ________________________________________________________________________________ 6. Citizenship or Place of Organization Delaware ________________________________________________________________________________ 7. Aggregate Amount Beneficially Owned by Each Reporting Person 0 Units*** ________________________________________________________________________________ 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares (See Instructions) [x]*** ________________________________________________________________________________ 9. Percent of Class Represented by Amount in Row (7) 0 ________________________________________________________________________________ 10. Type of Reporting Person (See Instructions) CO __________________________________ *** Does not include 15 Units owned by LTBD Inc., a Delaware corporation and affiliate of Fleetwood Corp. or the 17,119 Units owned by Devon Associates. 4 25 AMENDMENT NO. 3 TO SCHEDULE 14D-1 This Amendment No. 3 further amends and supplements the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") filed with the Commission on February 15, 1996 by Devon Associates, a New York general partnership (the "Purchaser"), Cayuga Associates L.P. and Fleetwood Corp. (together with the Purchaser the "Bidders"), as amended and supplemented by Amendment Nos. 1 and 2 to the Schedule 14D-1 filed with the Commission by the Bidders on March 8, 1996 and on March 18, 1996, respectively, relating to the offer of the Purchaser to purchase up to 21,000 of the outstanding limited partnership assignee units ("Units") of Growth Hotel Investors II, a California limited partnership (the "Partnership"), at a purchase price of $750 per Unit, net to the seller in cash, upon the terms set forth in the Offer to Purchase dated February 15, 1996 and Supplemented on March 18, 1996 and the related Letter of Transmittal (which collectively constitute the "Offer"), to include the information set forth below. Terms not otherwise defined herein shall have the meaning ascribed to them in the Schedule 14D-1 and the Offer to Purchase. Item 4. Source and Amount of Funds or Other Consideration. Item 4(a)-(b) is hereby amended by adding after the only sentence thereof the following sentence: "The total amount of funds required by the Purchaser to purchase the 17,118 Units purchased pursuant to the Offer, excluding related fees and expenses, was $12,838,500." Item 6. Interest in Securities of the Subject Company. Item 6(a)-(b) is hereby amended by adding after the only sentence thereof the following: "The Offer by the Purchaser to purchase up to 21,000 outstanding Units expired at 12:00 Midnight, New York City time, on Monday, March 25, 1996. Pursuant to the Offer, the Purchaser purchased 17,118 Units, constituting approximately 29.02% of the outstanding Units." 5 26 Item 11. Material to be Filed as Exhibits. Item 11 is hereby amended by adding the following, which are attached as exhibits: (b)(2) Master Agreement, dated March 28, 1996. (b)(3) Loan Agreement, dated March 28, 1996. 6 27 Signatures After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 1, 1996 DEVON ASSOCIATES By: Cayuga Associates L.P. By: Cayuga Capital Corp., its General Partner By: /s/ Michael L. Ashner --------------------------- Name: Michael L. Ashner Title: President By: Fleetwood Corp. By: /s/ Edward E. Mattner --------------------------- Name: Edward E. Mattner Title: President CAYUGA ASSOCIATES L.P. By: Cayuga Capital Corp., its General Partner By: /s/ Michael L. Ashner --------------------------- Name: Michael L. Ashner Title: President FLEETWOOD CORP. By: /s/ Edward E. Mattner --------------------------- Name: Edward E. Mattner Title: President 7 28 Exhibit Index Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ------------- (b)(2) Master Agreement, dated March 28, 1996 * (b)(3) Loan Agreement, dated March 28, 1996 * * Incorporated by reference to Purchaser's Amendment No. 3 to Schedule 14D-1 filed April 1, 1996 in respect of the Purchaser's offer to purchase Limited Partnership Assignee Units of Growth Hotel Investors, a California limited partnership. 8 -----END PRIVACY-ENHANCED MESSAGE-----