<PAGE> 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
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
-----------------------
BALCOR EQUITY PROPERTIES LTD.--VIII
(Name of Subject Company)
METROPOLITAN ACQUISITION VII, L.L.C.
MAP VII ACQUISITION CORPORATION
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
-----------------------
JOHN K. LINES, ESQ.
GENERAL COUNSEL AND SECRETARY
INSIGNIA FINANCIAL GROUP, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(803) 239-1675
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
-----------------------
COPY TO:
JOHN A. HEALY, ESQ.
ROBERT E. KING, JR., ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
-----------------------
CALCULATION OF FILING FEE
================================================================================
Transaction Valuation*: $2,340,520 Amount of Filing Fee: $468.10
================================================================================
* For purposes of calculating the fee only. This amount assumes the
purchase of 9,002 limited partnership interests ("Interests") of the
subject partnership for $260.00 per Interest. The amount of the
filing fee, calculated in accordance with Rule 0-11(d) under the
Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate of the cash offered by the bidder.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
================================================================================
Index to Exhibits Located at Page 5
<PAGE> 2
SCHEDULE 14D-1/AMENDMENT NO. 1 TO SCHEDULE 13D
This Tender Offer Statement on Schedule 14D-1 (the "Statement") also
constitutes Amendment No. 1 to the Statement on Schedule 13D previously filed
by Insignia Financial Group, Inc. ("Insignia") in connection with its
beneficial ownership of Interests (as defined below). The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Offer to Purchase (as defined below).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Balcor Equity Properties
Ltd.--VIII, an Illinois limited partnership (the "Partnership"). The address
of the Partnership's principal executive offices is 2355 Waukegan Road,
Bannockburn, Illinois 60015.
(b) This Statement relates to an offer by Metropolitan
Acquisition VII, L.L.C., a Delaware limited liability company (the
"Purchaser"), to purchase up to 9,002 of the outstanding limited partnership
interests ("Interests") of the Partnership at a purchase price of $260.00 per
Interest, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated March 11, 1996 (the "Offer
to Purchase") and the related Assignment of Partnership Interest (which,
together with any supplements or amendments, collectively constitute the
"Offer"), copies of which are filed as Exhibits (a)(2) and (a)(3) hereto,
respectively. The information set forth in the Offer to Purchase under
"Introduction" is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section
13 ("Background of the Offer") is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, MAP
VII Acquisition Corporation ("MAP") and Insignia. The information set forth in
the Offer to Purchase under "Introduction," in Section 11 ("Certain Information
Regarding the Purchaser, MAP and Insignia") and in Schedule I to the Offer to
Purchase is incorporated herein by reference.
(e)-(f) During the last five years, none of the Purchaser, MAP,
Insignia, nor, to the best of their knowledge, any of the persons listed in
Schedule I to the Offer to Purchase (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of or prohibiting
activities subject to federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction," in Section 10 ("Conflicts of Interest and Transactions with
Affiliates") and in Section 13 ("Background of the Offer") is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase in Section
10 ("Conflicts of Interest and Transactions with Affiliates") and in Section 12
("Source of Funds") is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b), (e) The information set forth in the Offer to Purchase
under "Introduction" and in Section 8 ("Future Plans of the Purchaser") is
incorporated herein by reference.
2
<PAGE> 3
(c) The information set forth in the Offer to Purchase in Section
8 ("Future Plans of the Purchaser"), in Section 10 ("Conflicts of Interest and
Transactions with Affiliates") and in Section 13 ("Background of the Offer") is
incorporated herein by reference.
(d) Not applicable.
(f)-(g) The information set forth in the Offer to Purchase in Section
7 ("Effects of the Offer") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under
"Introduction" and in Section 11 ("Certain Information Regarding the Purchaser,
MAP and Insignia") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth (i) in the Offer to Purchase under
"Introduction," in Section 7 ("Effects of the Offer"), Section 10 ("Conflicts
of Interest and Transactions with Affiliates"), Section 11 ("Certain
Information Regarding the Purchaser, MAP and Insignia") and Section 13
("Background of the Offer") and (ii) the Operating Agreement of the Purchaser,
a copy of which is filed as Exhibit (c)(1) hereto, is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under
"Introduction" and in Section 16 ("Fees and Expenses") is incorporated herein
by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 11
("Certain Information Regarding the Purchaser, MAP and Insignia") is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase under
"Introduction" and in Section 15 ("Certain Legal Matters") is incorporated
herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Assignment of Partnership Interest, copies of which are filed as
Exhibits (a)(2) and (a)(3) hereto, respectively, is incorporated herein by
reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Summary Advertisement, dated March 11, 1996.
(a)(2) Offer to Purchase, dated March 11, 1996.
(a)(3) Assignment of Partnership Interest and related Instructions.
(a)(4) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(b) Not applicable.
(c)(1) Operating Agreement of the Purchaser, dated February 29,
1996.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
3
<PAGE> 4
SIGNATURE
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: March 11, 1996
METROPOLITAN ACQUISITION VII, L.L.C.
By: MAP VII Acquisition Corporation,
its managing member
By: /s/ JEFFREY L. GOLDBERG
--------------------------------
Jeffrey L. Goldberg
Vice President
MAP VII ACQUISITION CORPORATION
By: /s/ JEFFREY L. GOLDBERG
--------------------------------
Jeffrey L. Goldberg
Vice President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
--------------------------------
Frank M. Garrison
Executive Managing Director
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
(a)(1) Summary Advertisement, dated March 11, 1996.
(a)(2) Offer to Purchase, dated March 11, 1996.
(a)(3) Assignment of Partnership Interest and related
Instructions.
(a)(4) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(c)(1) Operating Agreement of the Purchaser, dated February 29,
1996.
</TABLE>
5
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Interests. The Offer is being made solely by the Offer to
Purchase dated March 11, 1996 and the related Assignment of Partnership
Interest and is being made to all holders of Interests. The Purchaser is not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Purchaser becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Interests pursuant thereto, the Purchaser will
make a good faith effort to comply with such state statute. If, after such
good faith effort, the Purchaser cannot comply with such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Interests in such state. In any jurisdiction where securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one
or more registered brokers or dealers that are licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
Up to 9,002 Limited Partnership Interests
in
BALCOR EQUITY PROPERTIES--VIII
at
$260.00 Net per Interest
Up to 11,234 Limited Partnership Interests
in
BALCOR EQUITY PROPERTIES--XII
at
$250.00 Net per Interest
Up to 22,240 Limited Partnership Interests
in
BALCOR REALTY INVESTORS LTD.--82
at
$125.00 Net per Interest
Up to 22,501 Limited Partnership Interests
in
BALCOR REALTY INVESTORS--83
at
$225.00 Net per Interest
<PAGE> 2
Up to 42,000 Limited Partnership Interests
in
BALCOR REALTY INVESTORS--84
at
$153.00 Net per Interest
Up to 24,809 Limited Partnership Interests
in
BALCOR REALTY INVESTORS 85--SERIES I,
A REAL ESTATE LIMITED PARTNERSHIP,
at
$265.00 Net per Interest
Up to 17,728 Limited Partnership Interests
in
BALCOR REALTY INVESTORS 85--SERIES III,
A REAL ESTATE LIMITED PARTNERSHIP,
at
$225.00 Net per Interest
Up to 17,937 Limited Partnership Interests
in
BALCOR REALTY INVESTORS 86--SERIES I,
A REAL ESTATE LIMITED PARTNERSHIP,
at
$155.00 Net per Interest
by
METROPOLITAN ACQUISITION VII, L.L.C.
NONE OF THE OFFERS IS CONDITIONED UPON FINANCING OR UPON ANY MINIMUM
NUMBER OF INTERESTS BEING TENDERED.
Metropolitan Acquisition VII, L.L.C., a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to: 9,002 of the
outstanding limited partnership interests in Balcor Equity
<PAGE> 3
Properties--VIII, an Illinois limited partnership, at a purchase price of
$260.00 per Interest; 11,234 of the outstanding limited partnership interests
in Balcor Equity Properties--XII, an Illinois limited partnership, at a
purchase price of $250.00 per Interest; 22,240 of the outstanding limited
partnership interests in Balcor Realty Investors Ltd.--82, an Illinois limited
partnership, at a purchase price of $125.00 per Interest; 22,501 of the
outstanding limited partnership interests in Balcor Realty Investors--83, an
Illinois limited partnership, at a purchase price of $225.00 per Interest;
42,000 of the outstanding limited partnership interests in Balcor Realty
Investors--84, an Illinois limited partnership, at a purchase price of $153.00
per Interest; 24,809 of the outstanding limited partnership interests in Balcor
Realty Investors 85 Series I, A Real Estate Limited Partnership, an Illinois
limited partnership, at a purchase price of $265.00 per Interest; 17,728 of the
outstanding limited partnership interests in Balcor Realty Investors 85 Series
III, A Real Estate Limited Partnership, an Illinois limited partnership, at a
purchase price of $225 per Interest; and 17,937 of the outstanding limited
partnership interests in Balcor Realty Investors 86 Series I, A Real Estate
Limited Partnership, an Illinois limited partnership, at a purchase price of
$155.00 per Interest (each of the foregoing partnerships, a "Partnership" and,
collectively, the "Partnerships"), in each case, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase with respect to each Partnership dated March 11, 1996 and the
related Assignment of Partnership Interest (which, together with any
supplements or amendments thereto, collectively constitute each "Offer").
Limited partnership interests in each of the Partnerships are hereinafter
referred to as "Interests," and holders of Interests are hereinafter referred
to as "Limited Partners." The purchase price for an Offer will automatically
be reduced by the aggregate amount of distributions per Interest, if any, made
by the Partnership to Limited Partners of the applicable Partnership from and
including March 11, 1996 through and including the Expiration Date.
EACH OFFER AND THE RELATED WITHDRAWAL RIGHTS AND PRORATION PERIOD
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 5, 1996,
UNLESS SUCH OFFER IS EXTENDED.
The Purchaser is making each Offer for investment purposes. The
Purchaser does not have any present plans or intentions with respect to a
liquidation, sale of assets or refinancing of any of the properties of any of
the Partnerships, nor does the Purchaser presently intend to change the current
management or the operations of any of the Partnerships or to seek to cause any
of the Partnerships to engage in any extraordinary transaction. However, the
Purchaser's plans in these regards could change at any time in the future with
respect to any or all of the Partnerships. The Purchaser has been organized
for the purpose of making the Offers.
Limited Partners who tender their Interests in response to an Offer
will not be obligated to pay any commissions or partnership transfer fees. A
Limited Partner may tender any or all of the Interests owned by that Limited
Partner; provided, however, that tenders of fractional Interests will not be
permitted, except by a Limited Partner who is tendering all of the Interests
owned by that Limited Partner.
If more than the number of Interests that the Purchaser seeks to
purchase pursuant to an Offer are validly tendered and not properly withdrawn
on or prior to the Expiration Date (as defined below), the Purchaser will take
into account the number of Interests so tendered and will, upon the terms and
subject to the conditions of such Offer, take up and pay for, in the aggregate,
the maximum number of Interests sought, pro rata according to the number of
Interests validly tendered by each Limited Partner and not properly withdrawn
on or prior to the Expiration Date, with appropriate adjustments to avoid
purchases of fractional Interests. If the number of Interests validly tendered
and not properly withdrawn on or prior to the Expiration
<PAGE> 4
Date is less than or equal to the maximum number of Interests sought in an
Offer, the Purchaser will purchase all Interests so tendered and not withdrawn,
upon the terms and subject to the conditions of such Offer.
For purposes of the Offers, the Purchaser will be deemed to have
accepted for payment pursuant to each Offer, and thereby purchased, validly
tendered Interests if, as and when the Purchaser gives verbal or written notice
to the Depositary (as defined in the applicable Offer to Purchase) of the
Purchaser's acceptance for payment of those Interests pursuant to such Offer.
A tendering beneficial owner of Interests whose Interests are owned of record
by an Individual Retirement Account (IRA) or other qualified plan will not
receive direct payment of the Purchase Price; rather, payment will be made to
the custodian of such account or plan. Upon the terms and subject to the
conditions of each Offer, payment for Interests accepted for payment pursuant
to an Offer will be made by deposit of the purchase price with the Depositary,
which will act as agent for tendering Limited Partners for the purpose of
receiving payments from the Purchaser and transmitting such payments to Limited
Partners whose Interests have been accepted for payment. In all cases payment
for the Interests purchased pursuant to an Offer will be made only after timely
receipt by the Depositary of a properly completed and duly executed Assignment
of Partnership Interest (or facsimile thereof) with any required signature
guarantees and any other documents required by the Assignment of Partnership
Interest. Under no circumstances will interest on the purchase price for
Interests be paid, regardless of any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time,
on Friday, April 5, 1996, unless and until the Purchaser, in its sole
discretion, shall have extended the period of time during which an Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which such Offer, as so extended by the Purchaser, shall expire. The
Purchaser expressly reserves the right, at any time and from time to time, to
extend the period of time during which an Offer is open for any reason,
including the occurrence of any of the events specified in Section 14 of the
applicable Offer to Purchase, by giving verbal or written notice of such
extension to the Depositary. In the case of an extension of an Offer, such
extension will be followed by a press release or public announcement which will
be issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
Tenders of Interests made pursuant to an Offer are irrevocable, except
that Interests tendered pursuant to an Offer may be withdrawn at any time on or
prior to the applicable Expiration Date and, unless theretofore accepted for
payment by the Purchaser pursuant to such Offer, may also be withdrawn at any
time after May 11, 1996. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of the applicable Offer
to Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Interests to be withdrawn and must be signed by the person(s)
who signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed. Any Interests properly
withdrawn will be deemed not validly tendered for purposes of such Offer.
Withdrawn Interests may be re-tendered, however, at any time prior to the
Expiration Date.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in each Offer to Purchase and is incorporated herein by
reference.
The general partner of each of the Partnerships has provided the
Purchaser with a current list of the Limited Partners of such Partnership. The
tender offer documents and, if required, other relevant materials with respect
to an Offer will be mailed by the Purchaser to the persons shown the applicable
list and, to the
<PAGE> 5
extent known by the Purchaser, to persons who have purchased Interests but have
not yet been reflected as Limited Partners on the books and records of the
applicable Partnership.
EACH OFFER TO PURCHASE AND THE RELATED ASSIGNMENT OF PARTNERSHIP
INTEREST CONTAINS IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY AND IN
ITS ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO AN OFFER.
Questions and requests for assistance may be directed to the
Information Agents at their respective addresses and telephone numbers set
forth below. Requests for copies of an Offer to Purchase and the related
Assignment of Partnership Interest may be directed to either of the Information
Agents, and copies will be furnished promptly at the Purchaser's expense. The
Purchaser will not pay any fees or commissions to any broker or dealer or any
other person (other than the Information Agents and the Depositary) in
connection with the solicitation of tenders of Interests pursuant to any Offer.
The Information Agents for the Offers are:
[HERMAN GROUP LOGO] [BEACON HILL LOGO]
2121 San Jacinto Street 90 Broad Street
26th Floor 20th Floor
Dallas, Texas 75201 New York, New York 10004
(800) 647-2543 (800) 755-5001
(Toll Free) (Toll Free)
March 11, 1996
<PAGE> 1
Offer to Purchase for Cash
Up to 9,002 Limited Partnership Interests
in
BALCOR EQUITY PROPERTIES LTD.--VIII
for
$260.00 Net Per Interest
by
METROPOLITAN ACQUISITION VII, L.L.C.
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON FRIDAY, APRIL 5, 1996,
UNLESS THE OFFER IS EXTENDED.
IMPORTANT
Metropolitan Acquisition VII, L.L.C., a Delaware limited liability
company (the "Purchaser"), is offering to purchase up to 9,002 of the
outstanding limited partnership interests ("Interests") in Balcor Equity
Properties Ltd.--VIII, an Illinois limited partnership (the "Partnership"), at
a purchase price of $260.00 per Interest (the "Purchase Price"), net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Assignment of
Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"). The Purchase Price is subject to
adjustment under certain circumstances, as described herein. Limited Partners
who tender their Interests in response to the Offer will not be obligated to
pay any commissions or partnership transfer fees. The Purchaser is an
affiliate of Insignia Financial Group, Inc.
Limited Partners are urged to consider the following factors:
o The net liquidation value per Interest estimated by the
Purchaser is $349 (the "Estimated Liquidation Value"), and
Alex. Brown & Sons Incorporated, on behalf of the general
partner of the Partnership, has recently estimated that the
net liquidation value per Interest is between $448 and $468
(the "Alex Brown Estimate"). The Purchaser does not believe,
however, that either the Estimated Liquidation Value or the
Alex Brown Estimate represents a fair estimate of the market
value of an Interest, primarily due to the fact that such
estimates do not take into account timing considerations and
legal and other expenses that would be incurred in connection
with a liquidation of the Partnership. See Section 13.
Accordingly, the Purchaser does not believe that those
estimates should be viewed as representative of an amount a
Limited Partner can realistically expect to obtain for an
Interest.
o The Purchaser is not an affiliate of BRI Partners--79, the
general partner of the Partnership (the "General Partner").
An affiliate of the Purchaser does, however, provide property
management services to the Partnership, and as a result the
Purchaser has access to certain non-public information
regarding the Partnership.
o If the Purchaser is successful in acquiring a significant
number of Interests pursuant to the Offer, the Purchaser will
have the right to vote those Interests and thereby
significantly influence all voting decisions with respect to
the Partnership, including decisions concerning liquidation,
amendments to the Partnership Agreement and removal and
replacement of the General Partner.
o The Purchaser is making the Offer with a view to making a
profit. Accordingly, there is a conflict between the desire
of the Purchaser to purchase Interests at a low price and the
desire of Limited Partners to sell their Interests at a high
price.
THE OFFER IS NOT CONDITIONED UPON FINANCING OR UPON ANY MINIMUM NUMBER
OF INTERESTS BEING TENDERED.
Any Limited Partner desiring to tender Interests should complete and
sign the Assignment of Partnership Interest or a facsimile thereof in
accordance with the Instructions to the Assignment of Partnership Interest and
mail or deliver the signed Assignment of Partnership Interest to the
Information Agent/Depositary. A Limited Partner may tender any or all of the
Interests owned by that Limited Partner; provided, however, that tenders of
fractional Interests will not be permitted, except by a Limited Partner who is
tendering all of the Interests owned by such Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent/Depositary at the address and telephone numbers set forth
below and on the back cover of this Offer to Purchase. No soliciting dealer
fees or other payments to brokers for tenders are being paid by the Purchaser.
______________________________
For More Information or for Further Assistance Please Call:
The Herman Group, Inc.
(800) 647-2543
March 11, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Some Factors to be Considered by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Purchaser and Certain of its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Purchaser's Reasons for the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Walton Street Offer and WIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certain Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Holding Periods of Partnership Properties; Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Sales of Partnership Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Outstanding Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Terms of the Offer; Expiration Date; Proration . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Acceptance for Payment and Payment for Interests . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Procedure for Tendering Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Valid Tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Signature Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Delivery of Assignment of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . 7
Assignment of Interest in Future Distributions . . . . . . . . . . . . . . . . . . . . . . . 7
Appointment as Proxy; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Validity; Rejection of Interests; Waiver of Defects; No Obligation to
Give Notice of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Backup Federal Income Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FIRPTA Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Extension of Tender Period; Termination; Amendment . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Certain Federal Income Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gain or Loss Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Unrealized Receivables and Certain Inventory . . . . . . . . . . . . . . . . . . . . . . . . 11
Passive Activity Loss Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Partnership Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Backup Withholding and FIRPTA Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. Effects of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Assignment of Interest in Future Distributions . . . . . . . . . . . . . . . . . . . . . . . 13
Appointment as Proxy; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Limitations on Resales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act . . . . . . . 14
Control of Limited Partner Voting Decisions by Purchaser . . . . . . . . . . . . . . . . . . 15
WIG Agreement; Insignia/Walton Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. Future Plans of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 9. Certain Information Concerning the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selected Financial and Property-Related Data . . . . . . . . . . . . . . . . . . . . . . . . 17
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Operating Budgets of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10. Conflicts of Interest and Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . 21
Conflicting Interests With Respect to the Partnership . . . . . . . . . . . . . . . . . . . . 21
Voting by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Financing Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11. Certain Information Regarding the Purchaser, MAP and Insignia. . . . . . . . . . . . . . . . . 22
The Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13. Background of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Relationship with the Partnership and Balcor . . . . . . . . . . . . . . . . . . . . . . . . 25
The Walton Street Offer and WIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Determination of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14. Conditions of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 15. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Margin Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 16. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SCHEDULE I -- Information Regarding the Directors and Executive Officers
of MAP and Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
EXHIBIT A -- Certain Information Concerning the Partnership's Properties
Provided by the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
ii
<PAGE> 4
TO: LIMITED PARTNERS OF
BALCOR EQUITY PROPERTIES LTD.--VIII
INTRODUCTION
The Purchaser hereby offers to purchase up to 9,002 Interests at a
purchase price of $260.00 per Interest (the "Purchase Price"), net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Assignment of
Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"). The Purchase Price shall automatically
be reduced by the aggregate amount of distributions per Interest, if any, made
by the Partnership to Limited Partners from and including March 11, 1996
through and including the Expiration Date (as defined in Section 1). Limited
Partners who tender their Interests in response to the Offer will not be
obligated to pay any commissions or partnership transfer fees. The Purchaser
will pay all charges and expenses of The Herman Group, Inc. (the "Information
Agent/Depositary") in connection with the Offer. The Offer is not conditioned
upon financing or upon any minimum number of Interests being tendered. A
Limited Partner may tender any or all of the Interests owned by that Limited
Partner; provided, however, that tenders of fractional Interests will not be
permitted, except by a Limited Partner who is tendering all of the Interests
owned by such Limited Partner.
Some Factors to be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potentially Adverse Aspects of the Offer for Limited Partners
o The net liquidation value per Interest estimated by the
Purchaser is $349 (the "Estimated Liquidation Value"), and Alex.
Brown & Sons Incorporated ("Alex Brown"), on behalf of the
general partner of the Partnership, has recently estimated that
the net liquidation value per Interest is between $448 and $468
(the "Alex Brown Estimate"). See Section 13 for a discussion of
why the Purchaser believes that the Estimated Liquidation Value
and the Alex Brown Estimate are not necessarily indicative of
the fair market value of an Interest. THE PURCHASER MAKES NO
REPRESENTATION AND EXPRESSES NO OPINION AS TO THE FAIRNESS OR
ADEQUACY OF THE PURCHASE PRICE.
o The Purchaser is not an affiliate of BRI Partners--79, the
general partner of the Partnership (the "General Partner"). An
affiliate of the Purchaser does, however, provide property
management services to the Partnership, and as a result the
Purchaser has access to certain non-public information regarding
the Partnership. See Sections 9 and 13 and Exhibit A.
o As with any rational investment decision, the Purchaser is
making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser to
purchase Interests at a low price and the desire of the Limited
Partners to sell their Interests at a high price.
o If the Purchaser is successful in acquiring a significant number
of Interests pursuant to the Offer, the Purchaser will have the
right (subject to certain restrictions described in Sections 7
and 8) to vote those Interests and thereby significantly
influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the
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<PAGE> 5
Partnership Agreement, and removal and replacement of the
General Partner. This means that (i) non-tendering Limited
Partners could be prevented from taking action they desire but
that the Purchaser opposes and (ii) the Purchaser may be able to
take action desired by the Purchaser but opposed by the
non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o The Offer may be attractive to Limited Partners who have an
immediate need for cash.
o The General Partner has stated in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1994 (the
"1994 Form 10-K") that it "does not anticipate that [Limited
Partners] will recover all of their original investment."
Moreover, the Purchaser believes, based upon publicly available
information and information furnished by the General Partner,
that to date Limited Partners who have held Interests since
their issue by the Partnership have received only $315.57 per
Interest in distributions from the Partnership. Accordingly,
THE OFFER PRESENTS AN OPPORTUNITY FOR LIMITED PARTNERS TO
LIQUIDATE THEIR INVESTMENT IN THE PARTNERSHIP AND REPLACE IT
WITH AN INVESTMENT AFFORDING AN OPPORTUNITY FOR A HIGHER RETURN.
o Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Interests, there is no
formal trading market for Interests. Accordingly, THE OFFER
AFFORDS LIMITED PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR
INTERESTS FOR CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO
THEM.
o THE OFFER WILL PERMIT LIMITED PARTNERS TO DISPOSE OF THEIR
INTERESTS WITHOUT INCURRING THE SALES COMMISSIONS, and in some
instances other costs, typically associated with transfers of
Interests arranged through brokers or other intermediaries.
Also, Limited Partners who tender their Interests will not be
required to pay the transfer fee typically imposed by the
Partnership to process transfers of Interests. THE PURCHASER
WILL PAY ANY PARTNERSHIP TRANSFER FEES IMPOSED BY THE
PARTNERSHIP IN CONNECTION WITH INTERESTS PURCHASED PURSUANT TO
THE OFFER.
o Real estate markets in the United States generally have
recovered and experienced an upward trend since the end of the
last recession. That recovery and upward trend might continue.
On the other hand, those markets also may be adversely affected
by a variety of factors, including possible fluctuations in
interest rates, economic slowdowns and overbuilding.
Accordingly, ownership of Interests continues to be a
speculative investment. THE OFFER MAY PROVIDE LIMITED PARTNERS
WITH THE OPPORTUNITY TO LIQUIDATE THEIR INTERESTS IN THE
PARTNERSHIP AND REPLACE THEM WITH INVESTMENTS THAT ARE LESS
SPECULATIVE.
o The Offer may be attractive to Limited Partners who wish to
avoid in the future the expenses, delays, and complications in
filing personal income tax returns which may be caused by
ownership of Interests. In addition, A LIMITED PARTNER WHO
SELLS 100% OF ITS INTERESTS PURSUANT TO THE OFFER WILL NO LONGER
BE SUBJECT TO THE PASSIVE ACTIVITY LOSS LIMITATION WITH RESPECT
TO "SUSPENDED" LOSSES ATTRIBUTABLE TO THOSE INTERESTS AND,
THEREFORE, WILL BE ABLE TO UTILIZE FULLY ANY SUCH LOSSES.
o The Offer may be attractive to those Limited Partners who have
become disenchanted with real estate investments generally, and
in particular with the perceived illiquidity of
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<PAGE> 6
investments made through limited partnerships, because it may
afford an immediate opportunity for those Limited Partners to
liquidate their investments in the Partnership. On the other
hand, Limited Partners who tender their Interests will be giving
up the opportunity to participate in any potential future
benefits represented by the ownership of those Interests,
including, for example, the right to participate in any future
distributions of cash or property, whether from operations, the
proceeds of a sale or refinancing of one or more of the
Partnerships' properties, or in connection with any future
liquidation of the Partnership. Instead, any such distributions
of cash or property with respect to Interests tendered in the
Offer and purchased by the Purchaser will be paid to the
Purchaser.
The Purchaser makes no recommendation to any Limited Partner as to
whether to tender or refrain from tendering Interests. Each Limited Partner
must make its own decision, based on the Limited Partner's particular
circumstances, as to whether to tender Interests and, if so, how many Interests
to tender. Limited Partners should consult with their respective advisors
about the financial, tax, legal and other implications of accepting the Offer.
LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED
MATERIALS CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER
THEIR INTERESTS.
The Purchaser and Certain of its Affiliates. The Purchaser is a
newly-formed Delaware limited liability company, the managing member of which
is MAP VII Acquisition Corporation ("MAP"). MAP is a wholly-owned subsidiary
of Insignia Financial Group, Inc. ("Insignia"). Insignia Management Group,
L.P. ("IMG"), which also is an affiliate of the Purchaser and Insignia,
provides property management services to the Partnership. See Section 10.
The Purchaser's Reasons for the Offer. The Purchaser's purpose in
making the Offer is to acquire a substantial equity interest in the
Partnership, primarily for investment purposes and with a view to making a
profit. Although the number of Interests being sought in the Offer will not
give the Purchaser absolute control over the Partnership, if the Purchaser is
successful in acquiring all or a substantial portion of the Interests it is
tendering for, it could be in a position to exercise significant influence over
the outcome of any vote by Limited Partners. See Sections 7, 8, 10 and 13.
The Walton Street Offer and WIG. In November 1995, Walton Street
Capital Acquisition Co., L.L.C. ("Walton Street") commenced a tender offer (the
"Walton Street Offer") for Interests at a purchase price of $165 per Interest.
Pursuant to an agreement between FMG Acquisition I, L.L.C. ("FMG"), which is an
affiliate of the Purchaser and a wholly-owned subsidiary of Insignia, Walton
Street agreed to assign its right to purchase the Interests tendered pursuant
to the Walton Street Offer to WIG VIII Partners ("WIG"), in which FMG owns a
25% general partner interest. WIG subsequently purchased 2,025 Interests
pursuant to the Walton Street Offer. In connection with the organization of
the Purchaser, FMG has agreed to assign its 25% general partner interest in WIG
to the Purchaser. See Sections 7, 10 and 13.
Source of Funds. The Purchaser intends to use its existing working
capital to pay for the Interests to be purchased by it pursuant to the Offer
and to pay related fees and expenses. See Sections 11 and 12.
Certain Tax Considerations. A sale by a Limited Partner pursuant to
the Offer will result in taxable gain (or loss) equal to the excess (deficit)
of the amount realized by the Limited Partner for the Interests sold over such
Limited Partner's adjusted tax basis in those Units. In the case of a Limited
Partner who is an individual and who has held Interests since their issue by
the Partnership, the sale is expected to result in a gain, a portion of which
will be taxable as ordinary income and the balance as a long-term capital gain.
Limited Partners who have suspended "passive losses" from the Partnership or
3
<PAGE> 7
other passive activity investments generally may deduct these losses up to the
amount of gain from the sale. A sale pursuant to the Offer of all of a Limited
Partner's Interests will terminate his or her investment in the Partnership
and, commencing with the year following the year of sale, the Limited Partner
will no longer receive Partnership tax information or have to report the
complicated tax information currently required of Limited Partners. See
Section 6.
Holding Periods of Partnership Properties; Alternatives. The
Partnership was formed in 1979. Notwithstanding the projected property holding
periods that may have been discussed in the Partnership's prospectus with
respect to the Partnership's initial offering of Interests, under its
Partnership Agreement, the Partnership is not required to liquidate and
dissolve until December 31, 2029. The General Partner has stated in the 1994
Form 10-K that it "examines the operations of each property and each local
market in conjunction with the [Partnership]'s long-term dissolution strategy
when determining the optimal time to sell each of the [Partnership]'s
properties." The General Partner also stated in its Quarterly Report on Form
10-Q ("Form 10-Q") for the quarterly period ended September 30, 1995 that "[i]t
is expected that the remaining properties will be sold in approximately the
next two years and the Partnership will be liquidated." Limited Partners
could, as an alternative to tendering their Interests, take a variety of
possible actions including voting to liquidate the Partnership, removing and
replacing the General Partner and causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
Sales of Partnership Properties. The Purchaser has been informed that
one of the properties owned by the Partnership, Greentree Village, is under due
diligence review by a prospective purchaser. Although the Purchaser has been
advised that the offering price for the property is $8,750,000, the Purchaser
does not have any information concerning the seriousness of the party reviewing
the property, the likelihood of a sale of the property to such party (or to any
other party), or other terms and conditions of any such potential sale. See
Section 13.
Conditions. The Offer is not conditioned upon financing or upon any
minimum number of Interests being tendered. Certain other conditions do apply,
however. See Section 14.
Distributions. The potential for future distributions, both from
operating cash flow and in connection with sales or refinancings of the
Partnership's properties, was considered by the Purchaser when establishing the
Purchase Price. Limited Partners who tender their Interests in response to the
Offer will be entitled to receive any subsequent distributions made by the
Partnership on or prior to the Expiration Date, although any such distribution
will result in a reduction of the Purchase Price, as described in Section 1.
Tendering Limited Partners will not be entitled to receive any distributions in
respect of tendered Interests purchased by the Purchaser pursuant to the Offer
made after the Expiration Date, regardless of the fact that the record date for
any such distribution may be a date prior to the Expiration Date. See Section
3.
Outstanding Interests. According to information provided by the
General Partner, there were 30,007 Interests issued and outstanding as of
February 29, 1996, which as of such date were held of record by approximately
3,041 Limited Partners. The Purchaser does not directly own any Interests;
however, as mentioned above, FMG has agreed to transfer to the Purchaser FMG's
25% general partner interest in WIG, which is the record owner of 2,025
Interests.
4
<PAGE> 8
THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer (including, if the Offer is
extended or amended, the terms of any such extension or amendment), the
Purchaser will accept (and thereby purchase) up to 9,002 Interests that are
validly tendered on or prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in Section 4. For purposes of the
Offer, the term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, April 5, 1996, unless the Purchaser in its sole discretion shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as extended by the Purchaser, shall expire. See Section 5 for a description of
the Purchaser's right to extend the period of time during which the Offer is
open and to amend or terminate the Offer.
THE PURCHASE PRICE SHALL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER INTEREST, IF ANY, MADE BY THE PARTNERSHIP TO
LIMITED PARTNERS FROM AND INCLUDING MARCH 11, 1996 THROUGH AND INCLUDING THE
EXPIRATION DATE.
If, prior to the Expiration Date, the Purchaser increases the Purchase
Price offered to Limited Partners pursuant to the Offer, the increased Purchase
Price will be paid for all Interests accepted for payment pursuant to the
Offer, whether or not the Interests were tendered prior to the increase in
consideration.
If more than 9,002 Interests are validly tendered in accordance with
the procedure specified in Section 3 and not properly withdrawn in accordance
with the procedures specified in Section 4 on or prior to the Expiration Date,
the Purchaser will, upon the terms and subject to the conditions of the Offer,
accept for payment and pay for an aggregate of 9,002 of the Interests so
tendered, pro rata according to the number of Interests validly tendered by
each Limited Partner and not properly withdrawn on or prior to the Expiration
Date, with appropriate adjustments to avoid purchases of fractional Interests.
If the number of Interests validly tendered and not properly withdrawn on or
prior to the Expiration Date is less than or equal to 9,002 Interests, the
Purchaser will purchase all Interests so tendered and not withdrawn, upon the
terms and subject to the conditions of the Offer.
If proration of tendered Interests is required, the Purchaser may not
be able to announce the final results of such proration until at least
approximately seven business days after the Expiration Date because of the
difficulty of determining the proration results. Subject to the Purchaser's
obligation under Rule 14e-1(c) under the Securities Exchange Act of 1934 (the
"Exchange Act") to pay Limited Partners the Purchase Price in respect of
Interests tendered or return those Interests promptly after the termination or
withdrawal of the Offer, the Purchaser does not intend to pay for any Interests
accepted for payment pursuant to the Offer until the final proration results
are known. NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO INTEREST WILL BE PAID
ON THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser reserves the right (but in no event shall be obligated), in its sole
discretion, to waive any or all of those conditions. If, on or prior to the
Expiration Date, any or all of the conditions have not been satisfied or
waived, the Purchaser reserves the right to (i) decline to purchase any of the
Interests tendered, terminate the Offer and return all tendered Interests to
tendering Limited Partners, (ii) waive all the unsatisfied conditions and,
subject to complying with applicable rules and regulations of the Commission,
purchase all Interests validly tendered, (iii) extend the Offer and, subject to
the right of Limited Partners to withdraw Interests until the Expiration Date,
retain the Interests
5
<PAGE> 9
that have been tendered during the period or periods for which the Offer is
extended, and (iv) amend the Offer.
The General Partner has provided the Purchaser with a current list of
the Partnership's Limited Partners. This Offer to Purchase and the related
Assignment of Partnership Interest will be mailed by the Purchaser to the
persons shown on that list.
SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR INTERESTS. Upon
the terms and subject to the conditions of the Offer, the Purchaser will
purchase by accepting for payment and will pay for all Interests validly
tendered and not withdrawn in accordance with the procedures specified in
Section 4, as promptly as practicable following the Expiration Date. A
tendering beneficial owner of Interests whose Interests are owned of record by
an Individual Retirement Account (IRA) or other qualified plan will not receive
direct payment of the Purchase Price; rather, payment will be made to the
custodian of such account or plan. In all cases, payment for Interests
purchased pursuant to the Offer will be made only after timely receipt by the
Information Agent/Depositary of a properly completed and duly executed
Assignment of Partnership Interest (or facsimile thereof) and any other
documents required by the Assignment of Partnership Interest. See Section 3.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment pursuant to this Offer, and thereby purchased, validly
tendered Interests if, as and when the Purchaser gives verbal or written notice
to the Information Agent/Depositary of the Purchaser's acceptance of those
Interests for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Interests accepted for payment pursuant to
the Offer will be made by deposit of the Purchase Price with the Information
Agent/Depositary, which will act as agent for tendering Limited Partners for
the purpose of receiving payments from the Purchaser and transmitting those
payments to Limited Partners whose Interests have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Interests are not purchased for any reason, the
Assignment of Partnership Interest with respect to such Interests will be
destroyed by the Purchaser. If for any reason acceptance for payment of, or
payment for, any Interests tendered pursuant to the Offer is delayed or the
Purchaser is unable to accept for payment, purchase or pay for Interests
tendered pursuant to the Offer, then, without prejudice to the Purchaser's
rights under Section 14, the Information Agent/Depositary may, nevertheless, on
behalf of the Purchaser retain tendered Interests, and those Interests may not
be withdrawn except to the extent that the tendering Limited Partners are
entitled to withdrawal rights as described in Section 4; subject, however, to
the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Limited Partners the Purchase Price in respect of Interests tendered or return
those Interests promptly after termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of the Purchaser's affiliates, the
right to purchase Interests tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer or prejudice the rights of tendering Limited Partners to receive
payment for Interests validly tendered and accepted for payment pursuant to the
Offer.
SECTION 3. PROCEDURE FOR TENDERING INTERESTS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Interests must be validly tendered and not withdrawn on or
prior to the Expiration Date. In order for Interests to be validly tendered
pursuant to the Offer, a properly completed and duly executed Assignment of
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<PAGE> 10
Partnership Interest (or facsimile thereof) and any other documents required by
the Assignment of Partnership Interest must be received by the Information
Agent/Depositary, at its address set forth on the back cover of this Offer to
Purchase, on or prior to the Expiration Date. A Limited Partner may tender any
or all of the Interests owned by that Limited Partner; provided, however, that
tenders of fractional Interests will not be permitted, except by a Limited
Partner who is tendering all of the Interests owned by that Limited Partner.
No alternative, conditional or contingent tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is
signed by the registered holder of the Interests and payment is to be made
directly to that holder, then no signature guarantee is required on the
Assignment of Partnership Interest. Similarly, if the Interests are tendered
for the account of a member firm of a registered national securities exchange,
a member of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States (each an
"Eligible Institution"), no signature guarantee is required on the Assignment
of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE
ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION.
Delivery of Assignment of Partnership Interest. THE METHOD OF
DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
Assignment of Interest in Future Distributions. By executing and
delivering an Assignment of Partnership Interest, a tendering Limited Partner
irrevocably assigns to the Purchaser and its assigns all of the right, title
and interest of such Limited Partner in and to any and all distributions made
by the Partnership after the Expiration Date in respect of the Interests
tendered by such Limited Partner and accepted for payment by the Purchaser,
regardless of the fact that the record date for any such distribution may be a
date prior to the Expiration Date. The Purchaser will seek to be admitted to
the Partnership as a substitute Limited Partner upon consummation of the Offer.
Appointment as Proxy; Power of Attorney. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser, MAP, the officers of MAP and their designees as the Limited
Partner's proxies, in the manner set forth in the Assignment of Partnership
Interest, each with full power of substitution, to the full extent of the
Limited Partner's rights with respect to the Interests tendered by the Limited
Partner and accepted for payment by the Purchaser. Each such proxy shall be
considered coupled with an interest in the tendered Interests. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts the tendered Interests for payment. Upon such acceptance for payment,
all prior proxies given by the Limited Partner with respect to the Interests
will, without further action, be revoked, and no subsequent proxies may be
given (and if given will not be effective). The Purchaser, MAP, the officers
of MAP and their designees will, as to those Interests, be empowered to
exercise all voting and other rights of the Limited Partner as they in their
sole discretion may deem proper at any meeting of Limited Partners, by written
consent or otherwise. The Purchaser reserves the right to require that, in
order for Interests to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Interests, the Purchaser must be able
to exercise full voting rights with respect to the Interests, including voting
at any meeting of Limited Partners then scheduled or acting by written consent
without a meeting.
By executing an Assignment of Partnership Interest a tendering Limited
Partner also irrevocably constitutes and appoints the Purchaser, MAP, the
officers of MAP and their designees as the Limited Partner's attorneys-in-fact,
each with full power of substitution, to the full extent of the Limited
Partner's
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rights with respect to the Interests tendered by the Limited Partner and
accepted for payment by the Purchaser. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts the tendered Interests
for payment. Upon such acceptance for payment, all prior powers of attorney
granted by the Limited Partner with respect to such Interests will, without
further action, be revoked, and no subsequent powers of attorney may be granted
(and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, the Purchaser, MAP, the officers of MAP and their designees
each will have the power, among other things, (i) to seek to transfer ownership
of such Interests on the Partnership books maintained by the General Partner
(and execute and deliver any accompanying evidences of transfer and
authenticity any of them may deem necessary or appropriate in connection
therewith), (ii) upon receipt by the Information Agent/Depositary (as the
tendering Limited Partner's agent) of the Purchase Price, to become a
substitute Limited Partner, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Interests in
accordance with the terms of the Offer, (iii) to execute and deliver to the
General Partner a change of address form instructing the General Partner to
send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Interests to the
address specified in such form, and (iv) to endorse any check payable to or
upon the order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case on
behalf of the tendering Limited Partner.
Determination of Validity; Rejection of Interests; Waiver of Defects;
No Obligation to Give Notice of Defects. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance for payment of any
tender of Interests pursuant to the Offer will be determined by the Purchaser,
in its sole discretion, which determination shall be final and binding. The
Purchaser reserves the absolute right to reject any or all tenders of any
particular Interests determined by it not to be in proper form or if the
acceptance of or payment for those Interests may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right to waive or amend any of the conditions of the Offer that it is legally
permitted to waive as to the tender of any particular Interests and to waive
any defect or irregularity in any tender with respect to any particular
Interests of any particular Limited Partner. The Purchaser's interpretation of
the terms and conditions of the Offer (including the Assignment of Partnership
Interest and the Instructions thereto) will be final and binding. No tender of
Interests will be deemed to have been validly made until all defects and
irregularities have been cured or waived. Neither the Purchaser, the
Information Agent/Depositary nor any other person will be under any duty to
give notification of any defects or irregularities in the tender of any
Interests or will incur any liability for failure to give any such
notification.
Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31% with respect to
payment of the Purchase Price, a tendering Limited Partner must provide the
Purchaser with the Limited Partner's correct taxpayer identification number by
completing the Substitute Form W-9 included in the Assignment of Partnership
Interest. See the Instructions to the Assignment of Partnership Interest and
Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax
in an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Interest purchased, a tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying such Limited Partner's taxpayer identification number and
address and that the Limited Partner is not a foreign person. See the
Instructions to the Assignment of Partnership Interest and Section 6.
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A tender of Interests pursuant to the procedure described above and
the acceptance for payment of such Interests will constitute a binding
agreement between the tendering Limited Partner and the Purchaser on the terms
set forth in the Offer.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Interests pursuant to the
Offer are irrevocable, except that Interests tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless already
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after May 11, 1996. For withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Information Agent/Depositary, at its address set forth on the back cover
of this Offer to Purchase. Any such notice of withdrawal must specify the name
of the person who tendered the Interests to be withdrawn and must be signed by
the person(s) who signed the Assignment of Partnership Interest in the same
manner as the Assignment of Partnership Interest was signed. Any Interests
properly withdrawn will be deemed not validly tendered for purposes of the
Offer. Withdrawn Interests may be re-tendered, however, by following the
procedures described in Section 3 at any time prior to the Expiration Date.
If purchase of, or payment for, Interests is delayed for any reason or
if the Purchaser is unable to purchase or pay for Interests for any reason,
then, without prejudice to the Purchaser's rights under the Offer, tendered
Interests may be retained by the Information Agent/Depositary, and may not be
withdrawn except to the extent that tendering Limited Partners are entitled to
withdrawal rights as set forth in this Section 4; subject, however, to the
Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay Limited Partners the Purchase Price in respect of Interests tendered or
return those Interests promptly after termination or withdrawal of the Offer.
Any Interests properly withdrawn will be deemed not to be validly
tendered for purposes of the Offer. Withdrawn Interests may be re-tendered,
however, by following the procedures described in Section 3 at any time prior
to the Expiration Date.
All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. Neither the
Purchaser, the Information Agent/Depositary nor any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Interests, (ii) to terminate the Offer and not accept for payment any Interests
not already accepted for payment or paid for, (iii) upon the occurrence of any
of the conditions specified in Section 14, to delay the acceptance for payment
of, or payment for, any Interests not already accepted for payment or paid for,
and (iv) to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Interests being sought, or both). Notice of any such extension, termination or
amendment will promptly be disseminated to Limited Partners in a manner
reasonably designed to inform Limited Partners of such change in compliance
with Rule 14d-4(c) under the Exchange Act. In the case of an extension of the
Offer, the extension will be followed by a press release or public announcement
which will be issued no later than 9:00 a.m., New York City time, on the next
business day after the scheduled Expiration Date, in accordance with Rule
14e-1(d) under the Exchange Act.
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If the Purchaser extends the Offer, or if the Purchaser (whether
before or after its acceptance for payment of Interests) is delayed in its
payment for Interests or is unable to pay for Interests pursuant to the Offer
for any reason, then, without prejudice to the Purchaser's rights under the
Offer, the Information Agent/Depositary may retain tendered Interests and those
Interests may not be withdrawn except to the extent tendering Limited Partners
are entitled to withdrawal rights as described in Section 4; subject, however,
to the Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange
Act, to pay Limited Partners the Purchase Price in respect of Interests
tendered or return those Interests promptly after termination or withdrawal of
the Offer.
If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will extend the Offer and disseminate additional tender
offer materials to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act. The minimum period during which an offer must remain open
following a material change in the terms of the offer or information concerning
the offer will depend upon the facts and circumstances, including the relative
materiality of the change in the terms or information. In the Commission's
view, an offer should remain open for a minimum of five business days from the
date the material change is first published, sent or given to securityholders,
and if material changes are made with respect to information that approaches
the significance of price or the percentage of securities sought, a minimum of
ten business days may be required to allow for adequate dissemination to
securityholders and investor response. As used in this Offer to Purchase,
"business day" means any day other than a Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX MATTERS.
General. The following summary is a general discussion of certain of
the federal income tax consequences of a sale of Interests pursuant to the
Offer. This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder, administrative
rulings, practice and procedures and judicial authority, all as of the date of
the Offer. All of the foregoing are subject to change, and any such change
could affect the continuing accuracy of this summary. In addition, the
Purchaser does not have access to tax information of the Partnership;
consequently, the statements made in this summary are subject to change based
on a complete review of the Partnership's records. This summary does not
discuss all aspects of federal income taxation that may be relevant to a
particular Limited Partner in light of such Limited Partner's specific
circumstances or to certain types of Limited Partners subject to special
treatment under the federal income tax laws (for example, foreign persons,
dealers in securities, banks, insurance companies and tax-exempt
organizations), nor (except as otherwise expressly indicated) does this summary
describe any aspect of state, local, foreign or other tax laws. Sales of
Interests pursuant to the Offer will be taxable transactions for federal income
tax purposes, and also may be taxable transactions under applicable state,
local, foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING INTERESTS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Interests pursuant to the Offer equal to the
difference between (i) the Limited Partner's "amount realized" on the sale and
(ii) the Limited Partner's adjusted tax basis in the Interests sold.
Generally, a Limited Partner's adjusted tax basis with respect to an Interest
equals its cost increased by the amount of income and the amount of Partnership
Liabilities (as determined under Code Section 752) allocated to the Interest
and decreased by (i) any distributions made with respect to the Interest, (ii)
the amount of deductions or losses allocated to the Interest and (iii) any
decrease in the amount of Partnership Liabilities (as
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determined under Code Section 752) allocated to the Interest. Thus, the amount
of a Limited Partner's adjusted tax basis in such Interests will vary depending
upon the Limited Partner's particular circumstances. The "amount realized"
with respect to an Interest will be a sum equal to the amount of cash received
by the Limited Partner for the Interest pursuant to the Offer (that is, the
Purchase Price) plus the amount of the Partnership's liabilities allocable to
the Interest (as determined under Code Section 752). Limited Partners who
purchased their interests from the Partnership in the original issue of the
Interests are expected to recognize taxable gain on the sale.
Most of the gain or loss recognized by a Limited Partner on a sale of
an Interest pursuant to the Offer generally will be treated as a capital gain
or loss, if (as is generally expected to be the case) the Interest was held by
the Limited Partner as a capital asset. That capital gain or loss will be
treated as long-term capital gain or loss if the tendering Limited Partner's
holding period for the Interest exceeds one year. Under current law, long-term
capital gains of individuals and other non-corporate taxpayers are taxed at a
maximum marginal federal income tax rate of 28%, whereas the maximum marginal
federal income tax rate for ordinary income of such persons is 39.6%. Capital
losses are deductible only to the extent of capital gains, except that, subject
to the passive activity loss limitations discussed below, non-corporate
taxpayers may deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carryforward period
is five years and a non-corporate taxpayer can carry forward such losses
indefinitely); in addition, a corporation is permitted to carry back excess
capital losses to the three preceding taxable years, provided the carryback
does not increase or produce a net operating loss for any of those years.
On December 6, 1995, President Clinton vetoed a tax bill that would
have lowered the maximum capital gains rate to 19.8% and would have further
limited the use of capital losses to offset ordinary income by requiring two
dollars of long-term capital loss of an individual to offset every one dollar
of ordinary income. Although Congress may redraft the tax bill, it is unclear
whether or when a capital gain rate reduction or a capital loss limitation, if
any, will become effective.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Interests sold in accordance with the provisions of the Partnership Agreement
concerning transfers of Interests. Such allocation and any cash distributed by
the Partnership to the Limited Partner for that year will affect the Limited
Partner's adjusted tax basis in Interests and, therefore, the amount of such
Limited Partner's taxable gain or loss upon a sale of Interests pursuant to the
Offer.
Unrealized Receivables and Certain Inventory. If any portion of the
amount realized by a Limited Partner is attributable to "unrealized
receivables" (which includes depreciation recapture) or "substantially
appreciated inventory" as defined in Code Section 751, then a portion of the
Limited Partner's gain or loss may be ordinary rather than capital. A portion
of the gain upon the sale of Interests is expected to be attributable to
unrealized receivables. A Limited Partner who tenders Interests must file an
information statement with such Limited Partner's federal income tax return for
the year of the sale which provides the information specified in Treasury
Regulation Section 1.751-1(a)(3). The selling Limited Partner also must notify
the Partnership of the date of the transfer and the names, addresses and tax
identification numbers of the transferor(s) and transferee within 30 days of
the date of the transfer (or, if earlier, by January 15 of the following
calendar year).
Passive Activity Loss Limitation. Under Code Section 469, a
non-corporate taxpayer or personal service corporation generally can deduct
"passive losses" in any year only to the extent of the person's passive income
for that year. Closely held corporations (other than personal service
corporations) may
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offset such losses against active income as well as passive activity income for
that year. Substantially all post-1986 losses of Limited Partners from the
Partnership are believed to be passive losses. Thus, Limited Partners may have
"suspended" passive losses from the Partnership (i.e., post-1986 net taxable
losses in excess of statutorily permitted "phase-in" amounts and which have not
been used to offset income from other passive activities). Substantially all
gain from a sale of Interests under the Offer will be passive income.
If a Limited Partner sells less than all of its Interests pursuant to
the Offer, suspended passive losses can be currently deducted (subject to other
applicable limitations) to the extent of the Limited Partner's passive income
from the Partnership for that year (including any gain recognized on the sale
of Interests) plus any other passive income for that year. If, on the other
hand, a Limited Partner sells 100% of its Interests pursuant to the Offer, any
"suspended" losses and any losses recognized upon the sale of the Interests
will be offset first against any other net passive gain to the Limited Partner
from the sale of the Interests and any other net passive activity income from
other passive activity investments, and the balance of any "suspended" net
losses from the Interests will no longer be subject to the passive activity
loss limitation and, therefore, will be deductible by such Limited Partner from
its other income (subject to any other applicable limitations). A tendering
Limited Partner must sell all of its Interests to receive these tax benefits.
If more than 30% of the outstanding Interests are tendered, some tendering
Limited Partners may not be able to sell 100% of their Interests pursuant to
the Offer because of proration of the number of Interests to be purchased by
the Purchaser. See Section 1.
Partnership Termination. Section 708(b) of the Code provides that a
partnership terminates for income tax purposes if there is a sale or exchange
of 50% or more of the total interest in partnership capital and profits within
a twelve-month period (although successive transfers of the same interest
within a twelve-month period will be treated as a single transfer for this
purpose). Accordingly, it is possible that transfers of Interests made
pursuant to the Offer, in combination with other transfers made within twelve
months of the Offer, will result in a termination of the Partnership. In the
event of a termination, the Partnership's tax year would close and the
Partnership would be treated for income tax purposes as if it had made a
liquidating distribution of its assets to the remaining partners and the new
partners, followed by a recontribution of the assets to a "new" partnership.
Because the "new" partnership would be treated as having acquired its assets on
the date of the deemed recontribution, a new depreciation recovery period would
begin on such date, and the Partnership's annual depreciation deductions over
the next few years would be substantially reduced, and the Partnership would
have greater taxable income (or less tax loss) than if no tax termination
occurred. In addition, depreciation may be required to be allocated to those
Limited Partners that have a higher tax basis, such as the Purchaser. A tax
termination could also have the adverse effect on non-tendering Limited
Partners who subsequently dispose of their Interests at a gain of requiring
them to treat a greater portion of such gain as ordinary income (due to the
application of Code Section 735) than would otherwise be required absent a tax
termination of the Partnership. A tax termination will not affect a Limited
Partner who sells all of his Interests but will affect the taxation of a
Limited Partner in respect of any Interests retained after the date of the tax
termination. A tax termination of the Partnership will also terminate any
partnership in which the Partnership holds a majority interest (50% or more).
Provided there is not a tax termination of the Partnership, the
Purchaser does not anticipate that a Limited Partner who does not tender
Interests will realize any material tax consequences as a result of the
election not to tender. The Purchaser has not, however, had access to complete
information concerning assignments of Interests and cannot, therefore, be
certain that the Partnership will not terminate for tax purposes as a result of
sales pursuant to the Offer. The Purchaser has reserved the right not to
purchase Interests to the extent such purchase would cause a termination of the
Partnership for
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<PAGE> 16
federal income tax purposes. The Purchaser does not represent that a tax
termination will not result from the Offer or future direct or indirect
transfers of Interests to or by the Purchaser.
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Interests may be subject to 31% backup withholding unless those Limited
Partners provide a taxpayer identification number ("TIN") and certify that the
TIN is correct or properly certify that they are awaiting a TIN. A Limited
Partner may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Assignment of Partnership Interest.
If a Limited Partner who is subject to backup withholding does not properly
complete and sign the Substitute Form W-9, the Purchaser will withhold 31% from
payments to such Limited Partner.
Gain realized by a foreign Limited Partner on the sale of an Interest
pursuant to the Offer will be subject to federal income tax. Under Code
Section 1445, the transferee of an interest held by a foreign person in a
partnership which owns United States real property generally is required to
deduct and withhold a tax equal to 10% of the amount realized on the
disposition. In order to comply with this requirement, the Purchaser will
withhold 10% of the amount realized by a tendering Limited Partner unless the
Limited Partner properly completes and signs the FIRPTA Affidavit included as
part of the Assignment of Partnership Interest certifying the Limited Partner's
TIN, that such Limited Partner is not a foreign person and the Limited
Partner's address. Amounts withheld would be creditable against a foreign
Limited Partner's federal income tax liability and, if in excess thereof, a
refund could be obtained from the Internal Revenue Service by filing a U.S.
income tax return.
SECTION 7. EFFECTS OF THE OFFER.
Assignment of Interest in Future Distributions. By executing and
delivering an Assignment of Partnership Interest, a tendering Limited Partner
irrevocably assigns to the Purchaser and its assigns all of the right, title
and interest of such Limited Partner in and to any and all distributions made
by the Partnership after the Expiration Date in respect of the Interests
tendered by such Limited Partner and accepted for payment by the Purchaser,
regardless of the fact that the record date for any such distribution may be a
date prior to the Expiration Date. The Purchaser will seek to be admitted to
the Partnership as a substitute Limited Partner upon consummation of the Offer.
Appointment as Proxy; Power of Attorney. By executing an Assignment
of Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser, MAP, the officers of MAP and their designees as the Limited
Partner's proxies, in the manner set forth in the Assignment of Partnership
Interest, each with full power of substitution, to the full extent of the
Limited Partner's rights with respect to the Interests tendered by the Limited
Partner and accepted for payment by the Purchaser. Each such proxy shall be
considered coupled with an interest in the tendered Interests. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts the tendered Interests for payment. Upon such acceptance for payment,
all prior proxies given by the Limited Partner with respect to the Interests
will, without further action, be revoked, and no subsequent proxies may be
given (and if given will not be effective). The Purchaser, MAP, the officers
of MAP and their designees will, as to those Interests, be empowered to
exercise all voting and other rights of the Limited Partner as they in their
sole discretion may deem proper at any meeting of Limited Partners, by written
consent or otherwise. The Purchaser reserves the right to require that, in
order for Interests to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Interests, the Purchaser must be able
to exercise full voting rights with respect to the Interests, including voting
at any meeting of Limited Partners then scheduled or acting by written consent
without a meeting.
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By executing an Assignment of Partnership Interest a tendering Limited
Partner also irrevocably constitutes and appoints the Purchaser, MAP, the
officers of MAP and their designees as the Limited Partner's attorneys-in-fact,
each with full power of substitution, to the full extent of the Limited
Partner's rights with respect to the Interests tendered by the Limited Partner
and accepted for payment by the Purchaser. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts the tendered Interests
for payment. Upon such acceptance for payment, all prior powers of attorney
granted by the Limited Partner with respect to such Interests will, without
further action, be revoked, and no subsequent powers of attorney may be granted
(and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, the Purchaser, MAP, the officers of MAP and their designees
each will have the power, among other things, (i) to seek to transfer ownership
of such Interests on the Partnership books maintained by the General Partner
(and execute and deliver any accompanying evidences of transfer and
authenticity any of them may deem necessary or appropriate in connection
therewith), (ii) upon receipt by the Information Agent/Depositary (as the
tendering Limited Partner's agent) of the Purchase Price, to become a
substitute Limited Partner, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Interests in
accordance with the terms of the Offer, (iii) to execute and deliver to the
General Partner a change of address form instructing the General Partner to
send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Interests to the
address specified in such form, and (iv) to endorse any check payable to or
upon the order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case on
behalf of the tendering Limited Partner.
Limitations on Resales. The Partnership Agreement prohibits transfers
of Interests if a transfer, when considered with all other transfers during the
same applicable twelve-month period, would cause a termination of the
Partnership for federal income tax purposes (which termination may occur when
50% or more of the Interests are transferred in a twelve-month period). This
provision may limit sales of Interests on the secondary market and in private
transactions for the twelve-month period following completion of the Offer.
The Purchaser took this restriction, as well as the number of Interests
purchased by WIG pursuant to the Walton Street Offer, into account in
determining the number of Interests for which the Offer is made (representing
approximately 30% of the outstanding Interests if 9,002 Interests are tendered)
in order to permit normal historical levels of transfers to occur following the
transfers of Interests pursuant to the Offer without violating this
prohibition.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Interests are purchased pursuant to
the Offer, the result will be a reduction in the number of Limited Partners.
In the case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Interests and,
therefore, the Purchaser does not believe a reduction in the number of Limited
Partners will materially further restrict the Limited Partners' ability to find
purchasers for their Interests through secondary market transactions. See
Section 13 for certain limited information regarding recent secondary sales of
the Interests.
The Interests are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser does not expect or intend that consummation of the Offer
will cause the Interests to cease to be registered under Section 12(g) of the
Exchange Act. If the Interests were to be held by fewer than 300 persons, the
Partnership could apply to de-register the Interests under the Exchange Act.
Because the Interests are widely held, however, the Purchaser expects that even
if
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it purchases the maximum number of Interests in the Offer, the Interests will
continue to be held of record by substantially more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser. The
Purchaser will seek to be admitted to the Partnership as a substitute Limited
Partner upon consummation of the Offer and, if admitted, will have the right
(subject to certain limitations described below) to vote each Interest
purchased pursuant to the Offer. Even if the Purchaser is not admitted to the
Partnership as a substitute Limited Partner, however, the Purchaser nonetheless
will have the right to vote each Interest purchased in the Offer pursuant to
the irrevocable appointment by tendering Limited Partners of the Purchaser,
MAP, the officers of MAP and their designees as proxies with respect to the
Interests tendered by such Limited Partners and accepted for payment by the
Purchaser. As a result, the Purchaser could be in a position to significantly
influence all voting decisions with respect to the Partnership. This could (i)
prevent non-tendering Limited Partners from taking action they desire but that
the Purchaser opposes and (ii) enable the Purchaser to take action desired by
the Purchaser but opposed by non-tendering Limited Partners. Under the
Partnership Agreement, Limited Partners holding a majority of the Interests are
entitled to take action with respect to a variety of matters, including:
removal of a general partner; dissolution of the Partnership; sale of all or
substantially all of the Partnership's assets; and most types of amendments to
the Partnership Agreement. When voting on those matters, the Purchaser will
vote the Interests owned by it in whatever manner it deems to be in the
Purchaser's best interests.
WIG Agreement; Insignia/Walton Agreement. Pursuant to the terms of
the Agreement of Partnership of WIG (the "WIG Agreement"), WIG generally must
vote the Interests owned by it as directed by the Purchaser and Walton Street
in proportion to their respective percentage ownership interests in WIG.
Accordingly, upon consummation of the transfer of FMG's 25% general partner
interest in WIG to the Purchaser, the Purchaser generally will have the right
to direct the vote of 25% of the 2,025 Interests owned by WIG. With respect to
any matter presented to Limited Partners relating to the removal or replacement
of a general partner of the Partnership, however, Interests owned by WIG may
not be voted in favor of any such removal or replacement without the prior
written consent of FMG (or, after the transfer of the WIG interest is effected,
the Purchaser), unless the replacement is one of the WIG partners or an
affiliate thereof. A copy of the WIG Agreement was filed with the Commission
as an exhibit to the Tender Offer Statement on Schedule 14D-1 relating to the
Walton Street Offer, and it may be examined and copies may be obtained at the
same places and in the same manner as set forth in Section 9 (except that it
will not be available at the regional offices of the Commission).
In connection with the WIG Agreement, Insignia and Walton Street
entered into an agreement (the "Insignia/Walton Street Agreement") which
provides, among other things, that Insignia and its affiliates generally may
not (i) participate in, directly or indirectly, any solicitation of proxies or
become a participant in any election contest with respect to any general
partner interest in the Partnership, or (ii) acquire, directly or indirectly,
any general partner interest in the Partnership, in each case without the
consent of Walton Street. A copy of the Insignia/Walton Street Agreement was
filed with the Commission as an exhibit to the Tender Offer Statement on
Schedule 14D-1 relating to the Walton Street Offer, and it may be examined and
copies may be obtained at the same places and in the same manner as set forth
in Section 9 (except that it will not be available at the regional offices of
the Commission).
SECTION 8. FUTURE PLANS OF THE PURCHASER. The Purchaser is seeking
to acquire Interests pursuant to the Offer in order to acquire a substantial
equity interest in the Partnership, primarily for investment purposes and with
a view to making a profit. The Purchaser intends to seek admission to the
Partnership immediately following the consummation of the Offer as a substitute
Limited Partner with respect to all of the Interests purchased pursuant to the
Offer. Following the completion of the Offer, the Purchaser and/or persons
related to or affiliated with it may acquire additional Interests. Any such
15
<PAGE> 19
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable, may be at a
price higher or lower than the Purchase Price, and may be for cash or other
consideration. In addition, the Purchaser or an affiliate of the Purchaser may
seek to acquire one or more of the Partnership's properties at some time in the
future. The Purchaser does not currently have any definitive plans in this
regard, however.
There is a substantial possibility that the Purchaser will sell or
otherwise transfer some or all of the Interests it acquires pursuant to the
Offer within the next year, either directly or in connection with a merger or
other extraordinary transaction involving the Purchaser and one or more of its
affiliates, depending among other things on liquidity, strategic, tax and other
considerations applicable to the Purchaser, Insignia and their affiliates. It
is also possible that the Purchaser could seek to sell additional membership
interests in the Purchaser to affiliates or to unaffiliated third parties,
although neither the Purchaser nor Insignia has any definitive plans in this
regard. The operating agreement of the Purchaser (the "Operating Agreement")
provides that if Insignia forms or sponsors a real estate investment trust (a
"REIT") under its direct or indirect control, then it will covenant to use its
commercially reasonable best efforts to cause any Interests directly or
indirectly owned by the Purchaser to be transferred (whether directly or
indirectly, by merger, consolidation, or otherwise) to any such REIT in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT. In addition, the Operating Agreement expressly
authorizes and permits MAP, without the consent of the other members of the
Purchaser, to transfer (whether directly or indirectly, by merger,
consolidation, or otherwise) any Interests owned by the Purchaser to any REIT,
which may include any REIT sponsored, formed or controlled by Insignia, in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT. MAP is also permitted to transfer all (but not less
than all) of its interests in the Purchaser to any such REIT in exchange for
cash or for equity, debt (including convertible debt) or other securities in
such REIT, without any consent of the other members of the Purchaser. Upon any
such transfer, all of the other members of the Purchaser are required to
transfer all of their interests in the Purchaser to such REIT in an exchange
that is pro rata with the terms of MAP's exchange. A copy of the Operating
Agreement has been filed as an exhibit to the Purchaser's Tender Offer
Statement on Schedule 14D-1 relating to the Offer filed with the Commission,
and it may be examined and copies may be obtained at the same places and in the
same manner as set forth in Section 9 (except that it will not be available at
the regional offices of the Commission).
As discussed in greater detail in Section 10, IMG has been retained by
the Partnership as the property manager for its properties. Although Limited
Partners do not have the direct right to remove or replace IMG as property
manager or otherwise affect the terms of IMG's engagement under the terms of
the Partnership Agreement, if the Purchaser is successful in acquiring the
number of Interests sought in the Offer the Purchaser may have significant
influence with respect to any future decisions by the Partnership concerning
IMG's engagement as property manager, including possibly IMG's compensation for
its services.
Walton Street has agreed in the Insignia/Walton Street Agreement that
it will not, and will cause certain of its affiliates not to, (a) directly or
indirectly terminate, seek to terminate, cause the termination of, reduce the
compensation then payable under, or otherwise interfere in any way with any
contract between the Partnership and Insignia or any of Insignia's affiliates,
unless Insignia or its affiliate has engaged in conduct with respect to such
contract that constitutes gross negligence, intentional misconduct or fraud, or
a material breach of such contract; or (b) instigate, encourage or assist any
Limited Partner or any other third party to do any of the foregoing. Walton
Street also has agreed that if at any time Walton Street or certain of its
affiliates becomes the general partner of, or otherwise controls, the
Partnership, then Walton Street, subject to its fiduciary duties, will, and
will cause certain of its affiliates to, use their reasonable efforts to cause
Insignia or one of its affiliates to continue to be engaged as the
16
<PAGE> 20
property manager for the Partnership's properties. Also, the Operating
Agreement of the Purchaser provides that the members of the Purchaser (other
than MAP) may not, directly or indirectly, take any actions to terminate or
otherwise interfere with any property management contract between the
Partnership and Insignia or any of its affiliates.
Insignia has previously had preliminary discussions with The Balcor
Company, which is an affiliate of the General Partner, concerning the
acquisition by Insignia of the general partner interest in the Partnership held
by the General Partner, but those discussions are not currently active.
Insignia may, however, seek to reinitiate such discussions in the future. If
successful in acquiring the general partner interest in the Partnership held by
the General Partner, Insignia would have outright control over virtually all
aspects of the Partnership's operations. However, the Insignia/Walton Street
Agreement provides that Insignia and its affiliates generally may not (i)
participate in, directly or indirectly, any solicitation of proxies or become a
participant in any election contest with respect to any general partner
interest in the Partnership, or (ii) acquire, directly or indirectly, any
general partner interest in the Partnership, in each case without the consent
of Walton Street.
Neither the Purchaser nor Insignia has any present plans or intentions
with respect to a liquidation, sale of assets or refinancing of any of the
Partnership's properties, nor do they presently intend to change the current
management or the operations of the Partnership or to seek to cause the
Partnership to engage in any extraordinary transaction. However, the
Purchaser's or Insignia's plans in these regards could change at any time in
the future.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Except as otherwise indicated, information contained in this Section 9
is based upon documents and reports publicly filed by the Partnership with the
Commission. Although the Purchaser has no information that any statements
contained in this Section 9 are untrue, the Purchaser cannot take
responsibility for the accuracy or completeness of any information contained in
this Section 9 which is derived from such public documents, or for any failure
by the Partnership to disclose events which may have occurred and may affect
the significance or accuracy of any such information but which are unknown to
the Purchaser.
General. The Partnership was organized in 1979 under the laws of the
State of Illinois. Its principal executive offices are located at 2355
Waukegan Road, Suite A200, Bannockburn, Illinois 60015. Its telephone number
is (708) 267-1600.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed for the purpose of investing
in, acquiring, holding, maintaining, operating, improving, developing, selling,
exchanging, leasing and otherwise using real property and interests therein for
profit, and engaging in any and all activities related or incidental thereto.
Under the Partnership Agreement, the term of the Partnership will continue
until December 31, 2029, unless sooner terminated as provided in the
Partnership Agreement or by law.
At December 31, 1994, the Partnership's investment portfolio consisted
of five residential apartment complexes: a 176-unit complex, a 216-unit
complex, a 192-unit complex and a 232-unit complex, all in San Antonio, Texas,
and a 216-unit complex in Colorado Springs, Colorado.
Selected Financial and Property-Related Data. Set forth below is a
summary of certain financial and statistical information with respect to the
Partnership and its properties, all of which has been excerpted or derived from
the Partnership's Annual Reports on Form 10-K for the years ended
17
<PAGE> 21
December 31, 1994, 1993 and 1992 and the Partnership's Form 10-Qs for the nine
months ended September 30, 1995 and 1994. More comprehensive financial and
other information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein. In addition, THE PURCHASER
EXPECTS THAT THE PARTNERSHIP WILL FILE WITH THE COMMISSION AND MAIL TO LIMITED
PARTNERS ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995
SOMETIME PRIOR TO THE EXPIRATION OF THE OFFER. Such report would contain
information, including audited financial statements of the Partnership, that is
more current than the information summarized below. Limited Partners are urged
to read that report in its entirety.
BALCOR EQUITY PROPERTIES LTD.--VIII
SELECTED FINANCIAL DATA
(in thousands, except per Interest data)
<TABLE>
<CAPTION>
Nine Months
Ended Fiscal Year Ended
September 30, December 31,
---------------------- -----------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental and Service Income . . . . . . . $ 4,482 $ 4,289 $ 5,724 $ 5,272 5,312
Total Income . . . . . . . . . . . . . $ 4,631 $ 4,310 $ 6,175 $ 5,291 $ 5,337
Total Expenses . . . . . . . . . . . . . $ 4,272 $ 4,258 $ 5,761 $ 5,618 $ 5,904
Net Income (Loss) . . . . . . . . . . . $ 359 $ 52 $ 701 $ (327) $ 32
Net Income (Loss) per Interest . . . . . $ 11.86 $ 1.72 $ 23.12 $ (10.81) $ 1.05
</TABLE>
<TABLE>
<CAPTION>
As of As of
September 30, December 31,
---------------------- -----------------------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets . . . . . . . . . . . . . . $ 15,484 $ 14,628 $ 15,387 $ 15,170 $ 14,278
Total Liabilities . . . . . . . . . . . $ 15,833 $ 15,985 $ 16,096 $ 16,580 $ 15,360
Limited Partners' (Deficit) . . . . . . $ (127) $ (1,125) $ (483) $ (1,177) $ (853)
Interests Outstanding . . . . . . . . . 30,005 30,005 30,005 30,005 30,005
Book Value per Interest . . . . . . . . $ (4.24) $ (37.50) $ (16.11) $ (39.22) $ (28.42)
</TABLE>
Description of Properties. Set forth below is a table showing
the name and location, the month of acquisition and the use of each of the
Partnership's properties.
<TABLE>
<CAPTION>
Date of
Name and Location Acquisition Use
----------------- ----------- ---
<S> <C> <C>
Cedar Creek Apts./Phase I 04/81 Apartment
San Antonio, TX 176 units
Cedar Creek Apts./Phase II 04/81 Apartment
San Antonio, TX 216 units
Greentree Village Apts. 11/80 Apartment
Colorado Springs, CO 216 units
Walnut Hills Apts./Phase I 11/86 Apartment
San Antonio, TX 192 units
Walnut Hills Apts./Phase II 11/86 Apartment
San Antonio, TX 232 units
</TABLE>
18
<PAGE> 22
Initial Cost, Cost Adjustments, Real Estate and Accumulated
Depreciation. Set forth below is a table showing the initial cost to the
Partnership, cost adjustments subsequent to acquisition, gross carrying amounts
as of December 31, 1994 and accumulated depreciation of each of the five
residential apartment complexes owned by the Partnership.
<TABLE>
<CAPTION>
Initial Cost Cost Adjustments
to Partnership Subsequent to Acquisition
------------------------------ --------------------------------------------
Buildings
and Carrying Reduction
Description Land Improvements Improvements Costs of Basis
- ----------- ---------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Cedar Creek Apts./Phase I $ 196,020 $ 4,591,190 $ 94,448 $ 6,801 $(1,299,826)
Cedar Creek Apts./Phase II 300,000 6,189,358 59,907 9,336 (1,680,893)
Greentree Village 395,800 5,564,212 250,877 10,680 None
Walnut Hills Apts./Phase I 247,228 3,314,879 82,255 15,728 (347,203)
Walnut Hills Apts./Phase II 372,576 3,764,901 92,722 15,748 (402,797)
---------- ----------- -------- ------- -----------
Total $1,511,624 $23,424,540 $580,179 $58,293 $(3,730,719)
========== =========== ======== ======= ===========
<CAPTION>
Gross Amounts at Which
Carried at Close of Period
---------------------------------------------
Buildings
and Accumulated
Description Land Improvements Total Depreciation
- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Cedar Creek Apts./Phase I $ 143,150 $ 3,445,483 $ 3,588,633 $ 2,036,304
Cedar Creek Apts./Phase II 222,714 4,654,994 4,877,708 2,696,447
Greentree Village 396,747 5,824,822 6,221,569 3,467,727
Walnut Hills Apts./Phase I 224,767 3,088,090 3,312,857 1,306,685
Walnut Hills Apts./Phase II 338,520 3,504,630 3,843,150 1,293,548
---------- ----------- ----------- -----------
Total $1,325,898 $20,518,019 $21,843,917 $10,800,711
========== =========== =========== ===========
</TABLE>
Mortgage Notes Payable. Set forth below is a table showing
certain information regarding the outstanding mortgages encumbering the
Partnership's residential apartment complexes as of December 31, 1994.
<TABLE>
<CAPTION>
Carrying
Amount of Current Current Estimated
Property Pledged Notes at Interest Final Monthly Balloon
As Collateral 12/31/94 Rate Maturity Date Payment Payment
--------------------- ------------------ --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Apartment Complexes:
Cedar Creek
Phase I(a) $ 2,350,562 9.38% 2003 $19,763 $2,138,000
Phase II(b) 2,795,931 9.38% 2003 23,507 2,543,000
Greentree Village 3,099,604 9.75% 2026 26,479 None
Walnut Hills
Phase I(c) 5,164,476 9.26% 2002 42,977 4,767,000
Phase II(d) 1,910,147 9.26% 2002 15,896 1,763,000
-----------
Total 15,320,720
</TABLE>
- --------------------
(a) In May 1993, this loan was refinanced. The interest rate increased
from 9.25% to 9.38%, the maturity date was extended from August 1993
to June 2003 and the monthly payments increased from $18,510 to
$19,763. A portion of the proceeds from the new $2,375,000 first
mortgage loan were used to repay the existing first mortgage loan of
$1,864,165.
(b) In May 1993, this loan was refinanced. The interest rate decreased
from 9.75% to 9.38%, the maturity date was extended from September
1995 to June 2003 and the monthly payments decreased from $27,235 to
$23,507. A portion of the proceeds from the new $2,825,000 first
mortgage loan were used to repay the existing first mortgage loan of
$2,729,330.
(c) In May 1993, this loan was refinanced. The interest rate increased
from 9.25% to 9.26%, the maturity date was extended from March 1994 to
June 2002 and the monthly payments increased from $21,845 to $42,977.
A portion of the proceeds from the new $5,219,500 first mortgage loan
were used to repay the existing first mortgage loan of $2,231,902.
(d) In May 1993, this loan was refinanced. The interest rate decreased
from 10.25% to 9.26%, the maturity date was extended from October 1996
to June 2002 and the monthly payments decreased from $32,260 to
$15,896. The proceeds from the new $1,930,500 first mortgage loan,
along with Partnership cash reserves, were used to repay the existing
first mortgage loan of $3,200,175.
19
<PAGE> 23
All of the Partnership's loans described above require current monthly payments
of principal and interest. Five year maturities of the above notes are
summarized as follows:
<TABLE>
<S> <C>
1995 $ 108,000
1996 $ 119,000
1997 $ 130,000
1998 $ 143,000
1999 $ 157,000
</TABLE>
During the years ended December 31, 1994, 1993 and 1992, the Partnership
incurred interest expense on mortgage notes payable of $1,463,776, $1,419,454
and $1,374,149, respectively. The Partnership paid interest expense of
$1,463,776, $1,419,454 and $1,355,940 in 1994, 1993 and 1992, respectively.
Additional Information. The Partnership is subject to the information
reporting requirements of the Exchange Act and accordingly is required to file
reports and other information with the Commission relating to its business,
financial results and other matters. Such reports and other documents may be
examined and copies may be obtained from the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, New York, New York
10048. Copies should be available by mail upon payment of the Commission's
customary charges by writing to the Commission's principal offices at 450 Fifth
Street, N.W., Washington, D.C. 20549.
Operating Budgets of the Partnership. In its capacity as property
manager, IMG prepares operating budgets for each of the Partnership's
properties for the General Partner's review and approval and has access to the
final budgets for those properties. With the consent of the General Partner,
IMG has provided the Partnership's 1995 and 1996 operating budgets to the
Purchaser and Insignia. A summary of the Partnership's fiscal 1995 and 1996
operating budgets and the unaudited results of its operations for fiscal 1995
is set forth in the table below. The budgeted amounts provided below are
figures that were not computed in accordance with generally accepted accounting
principles ("GAAP"). Historically, budgeted operating results of operations
for a particular fiscal year have differed significantly in certain respects
from the audited operating results for that year. In particular, items that
are categorized as capital expenditures for purposes of preparing the operating
budgets are often re-categorized as expenses when the financial statements are
audited and presented in accordance with GAAP. Therefore, the summary
operating budgets presented for fiscal 1995 and 1996 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1995
or 1996 will be. Furthermore, any estimate of the future performance of a
business, such as the Partnership's business, is forward-looking and based on
numerous assumptions, some of which inevitably will prove to be incorrect. For
this reason, it is probable that the Partnership's future operating results
will differ from those projected in the operating budget, and those differences
may be material. As a result, such information should not be relied upon by
Limited Partners.
20
<PAGE> 24
<TABLE>
<CAPTION>
1995 1995 1996
Actual Budget Budget
---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . $ 5,859,668 $ 5,945,876 $ 5,973,398
Total Expenses . . . . . . . . . $ 2,842,200 $ 2,737,602 $ 2,767,067
Net Operating Income . . . . . . $ 3,017,468 $ 3,208,274 $ 3,206,331
Capital Expenditures . . . . . . $ 538,594 $ 520,952 $ 594,990
</TABLE>
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The Purchaser and its affiliates have conflicts of interest with respect to the
Offer as set forth below.
Conflicting Interests With Respect to the Partnership. If the
Purchaser acquires a substantial number of interests, it will have conflicting
interests in deciding how to vote on future extraordinary transactions
affecting the Partnership (such as sales of the Partnership's assets or
liquidation of the Partnership) as a result of the fact that a liquidation or
sale of the Partnership's assets would result in a decrease or elimination of
the property management fees paid to IMG (which is an affiliate of the
Purchaser). In addition, the Purchaser is making the Offer with a view to
making a profit. Accordingly, there is a conflict between the desire of the
Purchaser to purchase Interests at a low price and the desire of the Limited
Partners to sell their Interests at a high price.
Voting by the Purchaser. The Purchaser will seek to be admitted to
the Partnership as a substitute Limited Partner upon consummation of the Offer
and, if admitted, will have the right to vote each Interest purchased pursuant
to the Offer. Even if the Purchaser is not admitted to the Partnership as a
substitute Limited Partner, however, the Purchaser nonetheless will have the
right to vote each Interest purchased in the Offer pursuant to the irrevocable
appointment by tendering Limited Partners of the Purchaser, MAP the officers of
MAP and their designees as proxies with respect to the Interests tendered by
such Limited Partners and accepted for payment by the Purchaser. As a result,
if the Purchaser is successful in acquiring a significant number of Interests
pursuant to the Offer, the Purchaser will have the right (subject to certain
limitations described in Sections 7 and 8) to vote those Interests and thereby
significantly influence all voting decisions with respect to the Partnership,
including decisions concerning liquidation, amendments to the Partnership
Agreement, and removal and replacement of the General Partners. This means
that (i) non-tendering Limited Partners could be prevented from taking action
they desire but that the Purchaser opposes and (ii) the Purchaser may be able
to take action desired by the Purchaser but opposed by the non-tendering
Limited Partners.
Pursuant to the terms of the WIG Agreement, WIG generally must vote
the Interests it owns as directed by the Purchaser and Walton Street in
proportion to their respective percentage ownership interests in the Purchaser.
Accordingly, upon consummation of the transfer of FMG's 25% general partner
interest in WIG to the Purchaser, the Purchaser generally will have the right
to direct the vote of 25% of the 2,025 Interests owned by WIG. With respect to
any matter presented to Limited Partners relating to the removal or replacement
of a general partner of the Partnership, however, Interests owned by WIG may
not be voted in favor of any such removal or replacement without the prior
written consent of FMG (or, after the transfer of the WIG interest is effected,
the Purchaser), unless the replacement is one of the WIG partners or an
affiliate thereof.
Financing Arrangements. The Purchaser intends to pay for the
Interests out of its existing working capital. See Sections 11 and 12. It is
possible, however, that in connection with its future financing activities the
Purchaser could pledge the Interests it purchases pursuant to the Offer as
collateral for loans, or otherwise agree to terms which provide the Purchaser
with incentives to generate substantial
21
<PAGE> 25
near-term cash flow from the Purchaser's investment in the Interests. This
could be the case, for example, if a loan has a "bullet" maturity after a
relatively short time or bears a high or increasing interest rate. In such a
situation, the Purchaser may experience a conflict of interest in seeking to
reconcile the best interests of the Partnership with the Purchaser's potential
need for cash flow from the Partnership's activities. The Operating Agreement
of the Purchaser does not prohibit or otherwise limit the Purchaser's ability
to borrow money (including from Insignia) or to pledge the purchased Interests
as collateral for any loan.
Transactions with Affiliates. Pursuant to an agreement between
Insignia and the Partnership, the Partnership has agreed, among other things,
to cause Insignia to be retained as a manager of all properties controlled by
the Partnership. On November 4, 1994, Insignia acquired substantially all of
the assets of Allegiance Realty Group, Inc. ("Allegiance"). Those assets
included the property management contracts for the Partnership's properties.
Insignia assigned the management contracts for the Partnership's properties to
IMG. The purchase agreement between Insignia and Allegiance contains
non-compete provisions prohibiting Allegiance, its affiliate The Balcor Company
("Balcor"), an affiliate of the General Partner, and other affiliates from
providing property management services with respect to any Balcor owned or
controlled property subject to the acquisition for a period of five years and
from providing property management services with respect to any non-Balcor
owned or controlled property for a period of three years. In addition, if
during the five years beginning with 1995, either (i) the management agreements
with respect to Balcor owned or controlled properties are terminated without
cause and Balcor or its affiliates subsequently receive financial consideration
for entering into property management agreements or selling or transferring
property management agreements with respect to such properties or (ii) Balcor
sells or disposes of control of the general partner interest in such property
owners (or if Balcor or any of its parents is sold) and, in either case, as a
result thereof, Insignia suffers a loss of more than 5% of aggregate annual
management fees from such properties, then Insignia is entitled to compensation
from Balcor in the form of a retroactive decrease in the purchase price.
Pursuant to this arrangement, since November 1994 the Partnership has paid IMG
property management fees for property management services and reimbursed IMG
for certain expenses incurred by it. Property management fees paid to IMG
amounted to $44,477 for the period from November 4 to December 31, 1994 and
$281,661 for the year ended December 31, 1995. Under the Partnership's 1996
budget, the Partnership is scheduled to pay IMG approximately $293,103 in
property management fees during 1996.
SECTION 11. CERTAIN INFORMATION REGARDING THE PURCHASER, MAP AND
INSIGNIA.
The Purchaser. The Purchaser is a newly-formed Delaware limited
liability company which was organized for the purpose of acquiring the
Interests, as well as limited partnership interests in other real estate
partnerships that are affiliated with the Partnership. The Purchaser has not
engaged in any business activity other than in connection with the Offer and
the acquisition of limited partnership interests in such other partnerships.
The Purchaser does not have any significant liabilities at the present time,
and the Purchaser does not presently anticipate that it will have any
significant liability after the consummation of the Offer. Set forth below is
certain unaudited financial information with respect to the Purchaser. The
Purchaser has not prepared audited financial statements in the ordinary course
of its business (and does not intend to do so in the future); accordingly,
audited financial statements of the Purchaser were not available or obtainable
without unreasonable expense.
22
<PAGE> 26
METROPOLITAN ACQUISITION VII, L.L.C.
BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
As of
March 11, 1996
-------------------
<S> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,596,000
Due from Affiliate(1) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,700,000
Due from Subscribing Member(2) . . . . . . . . . . . . . . . . . . . $ 10,000,000
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,296,000
=============
LIABILITIES AND MEMBERS' CAPITAL
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Members' Capital . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,296,000
-------------
Total Liabilities and Members' Capital . . . . . . . . . . . . . $ 33,296,000
=============
</TABLE>
-----------------
(1) Represents the 25% general partner interest in WIG to be transferred to
the Purchaser by FMG.
(2) Represents the cash contribution due to the Purchaser pursuant to an
irrevocable subscription agreement from an affiliate of Apollo Real Estate
Advisors, L.P., which contribution will be made in full upon the
consummation of the Offer.
The principal executive offices of the Purchaser are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601. The Purchaser does
not have any employees.
MAP. MAP is a newly-formed, wholly-owned subsidiary of Insignia.
MAP's only significant asset is its membership interest in the Purchaser, and
it does not presently have any liabilities. MAP is the managing member of the
Purchaser. The principal executive offices of MAP are located at One Insignia
Financial Plaza, Greenville, South Carolina 29601. For certain information
concerning the directors and executive officers of MAP, see Schedule I to this
Offer to Purchase.
Insignia. Insignia is a full service real estate service organization
which performs property management, asset management, investor services,
partnership administration, mortgage banking, real estate brokerage services,
and real estate investment banking services for various ownership entities,
including approximately 1,000 limited partnerships having approximately 400,000
limited partners. Insignia believes it is the largest manager of multifamily
residential properties in the United States, managing approximately 300,000
units of multifamily residential housing. Insignia also is a significant
manager of commercial property, managing approximately 64,000,000 square feet
of retail and commercial space. Insignia has offices located in approximately
500 cities in 48 states. Insignia is a public company whose stock is listed on
the New York Stock Exchange (the "NYSE").
The principal executive offices of Insignia are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601. For certain
information concerning the directors and executive officers of Insignia, see
Schedule I to this Offer to Purchase.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as
of particular dates, concerning Insignia's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
23
<PAGE> 27
remuneration and stock options granted to them), the principal holders of
Insignia's securities, any material interests of such persons in transactions
with Insignia and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to Insignia's shareholders and filed
with the Commission. Such reports, proxy statements and other information may
be inspected and copied at the Commission's public reference facilities and
should also be available for inspection in the same manner as set forth with
respect to the Partnership in Section 9. In addition, such material should
also be available for inspection at the library of the NYSE, located at 20
Broad Street, New York, New York 10005.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1994 and 1993 and its fiscal third quarters ended September
30, 1995 and 1994. More comprehensive financial and other information is
included in Insignia's Annual Report on Form 10-K for the year ended December
31, 1994 (including management's discussion and analysis of financial condition
and results of operations) and in other reports and documents filed by Insignia
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
1995 1994 1994 1993
---------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues . . . . . . . . . . . . . . $89,177 $50,443 $75,566 $52,577
Income Before Taxes and Extraordinary Item 8,840 8,808 12,101 8,074
Net Income . . . . . . . . . . . . . . . . 5,304 5,286 7,261 4,670
</TABLE>
<TABLE>
<CAPTION>
As of September 30, As of December 31,
1995 1994 1994 1993
---------- ----------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents . . . . . . . . $ 27,643 $33,153 $36,596 $34,005
Receivables . . . . . . . . . . . . . . . 27,738 11,833 13,572 8,428
Total Assets . . . . . . . . . . . . . 226,988 96,553 174,272 88,835
Accounts Payable . . . . . . . . . . . . . 1,832 2,682 3,478 1,948
Accrued and Sundry Liabilities . . . . . . 24,394 12,085 18,790 14,208
Long-term Debt . . . . . . . . . . . . . . 97,119 5,084 73,198 1,139
Total Liabilities . . . . . . . . . . . 123,345 19,851 95,466 17,295
Redeemable Convertible Preferred Stock . . 15,000 -- -- --
Minority Interest of Consolidated
Subsidiaries . . . . . . . . . . . . . . . . 2,688 -- -- --
Shareholders' Equity . . . . . . . . . 85,955 76,702 78,806 71,540
</TABLE>
Except as otherwise set forth in this Offer to Purchase, none of the
Purchaser, or, to the best of the Purchaser's knowledge, any of the persons
listed on Schedule I hereto, or any affiliate of the foregoing, (i)
beneficially owns or has a right to acquire any Interests, (ii) has effected
any transaction in the Interests, or (iii) has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or voting
thereof, joint ventures,
24
<PAGE> 28
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies.
SECTION 12. SOURCE OF FUNDS. Simultaneously with the Offer, the
Purchaser is making tender offers for limited partnership interests in seven
other partnerships affiliated with the Partnership. If the Purchaser is
successful in purchasing the maximum number of limited partnership interests
sought in each of the other tender offers and in this Offer, it expects that
approximately $32,000,000 will be required to purchase such interests and to
pay related fees and expenses. The Purchaser intends to use its existing
working capital to fund all such purchases. Accordingly, the Offer is not
conditioned upon the Purchaser obtaining financing.
SECTION 13. BACKGROUND OF THE OFFER.
Relationship with the Partnership and Balcor. IMG began providing
property management services to the Partnership in November 1994 following
Insignia's purchase of the assets of Allegiance. In connection with that
purchase, Insignia entered into certain non-compete and other agreements with
Balcor, an affiliate of the General Partner. See Section 10. Because of this
business relationship, Insignia and the Purchaser are familiar with the
Partnership and the properties it owns and operates. In addition, Insignia has
previously had preliminary discussions with The Balcor Company, which is an
affiliate of the General Partner, concerning the acquisition by Insignia of the
general partner interest in the Partnership held by the General Partner, but
those discussions are not currently active. Insignia may, however, seek to
reinitiate such discussions in the future. If successful in acquiring the
general partner interest in the Partnership held by the General Partner,
Insignia would have outright control over virtually all aspects of the
Partnership's operations (subject to the limitations described in Sections 7
and 8 relating to the WIG Agreement and the Insignia/Walton Street Agreement).
In connection with the Offer, the General Partner has provided the
Purchaser and Insignia with certain non-public information concerning the
Partnership's properties. A summary of such information (on a property by
property basis) is set forth on Exhibit A to this Offer to Purchase.
The Walton Street Offer and WIG. In November 1995, Walton Street
commenced the Walton Street Offer at a purchase price of $165 per Interest.
Pursuant to an agreement between FMG, which is an affiliate of the Purchaser
and a wholly-owned subsidiary of Insignia, Walton Street agreed to assign its
right to purchase the Interests tendered pursuant to the Walton Street Offer to
WIG. WIG was a newly-formed joint-venture partnership between FMG and Walton
Street, in which FMG owns a 25% general partner interest and Walton Street owns
a 75% general partner interest. A description of this arrangement was included
in the tender offer documents relating to the Walton Street Offer filed with
the Commission.
On December 27, 1995, the Walton Street Offer expired pursuant to its
terms, and WIG purchased 2,025 Interests pursuant thereto. In connection with
the organization of the Purchaser in March 1996, FMG has agreed to assign its
25% general partner interest in WIG to the Purchaser. Upon consummation of the
transfer of such interest, the Purchaser will be a general partner of WIG and,
accordingly, will beneficially own the 2,025 Interests purchased by WIG
pursuant to the Walton Street Offer. Under the terms of the WIG Agreement,
however, the Purchaser generally will have the right to direct the vote of only
25% of the Interests owned by WIG. See Sections 7 and 10.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser reviewed certain publicly available information and certain
non-public information made available to it by the General Partner, including
among other things: (i) the Partnership Agreement, as amended to date; (ii)
25
<PAGE> 29
the Partnership's 1994 Form 10-K and Form 10-Q for the nine months ended
September 30, 1995; (iii) unaudited results of operations of the Partnership's
properties for the period since the beginning of the Partnership's last fiscal
year; (iv) the operating budgets prepared by IMG with respect to the
Partnership's properties for the years ending December 31, 1995 and 1996; (v)
the information contained on Exhibit A to this Offer to Purchase; and (vi)
other information obtained by IMG, Insignia and other affiliates in their
capacities as providers of property management services to the Partnership,
including discussions between the Purchaser and various employees of IMG
concerning the operations and physical condition of the properties as well as
the competition in the market in which such properties are located. The
Purchaser also considered the potential for future distributions by the
Partnership and the experience of Insignia and its affiliates in owning,
operating, purchasing and selling properties of a similar nature when
establishing the Purchase Price. Based on its review of all of the information
available to it, the Purchaser considered several factors, including those
discussed below.
Trading History of Interests. Secondary market sales activity
for the Interests, including privately negotiated sales, have been limited and
sporadic. Set forth in the table below are the high and low sales prices of
Interests for the quarterly periods from January 1994 to December 1995, as
reported by Robert A. Stanger & Co., Inc. ("Stanger"), an independent,
third-party source. The gross sales prices reported by Stanger do not
necessarily reflect the net sales proceeds actually received by sellers of
Interests, which typically are reduced by commissions and other secondary
market transaction costs to amounts less than the reported prices. The
Purchaser does not know how many Interests have traded at either the high or
the low sales prices reported below, nor does the Purchaser know whether the
information compiled by Stanger is accurate or complete.
BALCOR EQUITY PROPERTIES LTD.--VIII
REPORTED SALES PRICES OF PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
As Reported by Stanger
----------------------------------
Low Sales High Sales
Price Price
Per Interest Per Interest
--------------- ---------------
<S> <C> <C>
Fiscal Year Ended December 31, 1995:
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.00 250.00
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.33 180.00
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.00 118.00
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.00 102.00
Fiscal Year Ended December 31, 1994:
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.00 102.00
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.00 25.00
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a n/a
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a n/a
</TABLE>
The Purchaser believes that although secondary market sales
information probably is not a reliable measure of value because of the limited
and inefficient nature of the market for Interests, this information may be
relevant to a Limited Partner's decision as to whether to tender its Interests
pursuant to the Offer. At present, privately negotiated sales and sales
through intermediaries (e.g., through the trading system operated by Chicago
Partnership Board, Inc., which publishes sell offers by holders of Interests)
are the only means available to a Limited Partner to liquidate an investment in
Interests (other than the Offer) because the Interests are not listed or traded
on any national securities exchange or quoted on any NASDAQ list or system.
Alex Brown Estimate. The General Partner reported in its
Statement on Schedule 14D-9 filed with the Commission (the "Schedule 14D-9") in
connection with the Walton Street Offer in November 1995 that its financial
advisor, Alex Brown, had provided to the General Partner a report on
26
<PAGE> 30
the theoretical value per Interest in a liquidation of the Partnership within
one year. Alex Brown's analysis is stated to be "based on (a) historical and
anticipated net operating income for 1995 data provided to us [Alex Brown] by
you [the General Partner]; (b) capitalization assumptions prepared by us based
in part upon relevant real-estate profiles provided to us by you; and, (c) on
site visits of properties and interviews with property managers at a sample of
properties we deemed appropriate." Based on that analysis, Alex Brown states
in its report that in its opinion the liquidation value per Interest is between
$448 and $468. Alex Brown's report states: "THE VALUATION STATED HEREIN DOES
NOT CONSTITUTE A RECOMMENDATION TO THE HOLDERS OF THE UNITS, NOR ARE WE [ALEX
BROWN] EXPRESSING ANY OPINION ON THE FAIRNESS OR ADEQUACY OF THE OFFER."
Furthermore, Alex Brown's report expressly assumes an "orderly liquidation over
twelve months" of the Partnership's assets. The Purchaser does not believe
that a liquidation of the Partnership in such a short time period is
realistically possible or likely to occur, however.
Set forth below is a summary of certain of Alex Brown's valuation
assumptions and the results of its liquidation analysis. A copy of Alex
Brown's report was provided to the Purchaser and Insignia by the General
Partner at their request.
BALCOR EQUITY PROPERTIES LTD.--VIII
ALEX. BROWN LIQUIDATION ANALYSIS SUMMARY
($ in thousands, except per Interest amounts)
<TABLE>
<CAPTION>
Cap Sales Cost of Debt Net Prepay Net
Property NOI Rate Value Sale(2%) Payoff Proceeds Penalties Proceeds
------------------------ ------- ------- --------- -------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cedar Creek / Phase I $ 399 10.50% $ 3,802 $ (76) $ (2,335) $ 1,391 $ (117) $ 1,274
Cedar Creek / Phase II 526 10.50% 5,006 (100) (2,777) 2,129 (139) 1,990
Walnut Hills / Phase I 487 10.00% 4,871 (97) (3,182) 1,592 (159) 1,433
Walnut Hills / Phase II 609 10.00% 6,086 (122) (3,844) 2,120 (192) 1,928
Greentree Village 913 10.25% 8,906 (178) (3,085) 5,643 0 5,643
------ -------- ------- ---------- --------- --------- ---------
TOTALS $2,934 $ 28,672 $ (573) $ (15,223) $ 12,875 $ (607) $ 12,268
Working Capital Balance $ 1,162 $ 1,162
--------- ---------
Total Liquidation Proceeds 14,037 13,431
No. of LP Interests 30,005 30,005
Per LP Interest $ 468 $ 448
========= =========
</TABLE>
Purchaser's Estimate of Gross Real Estate Value. In
estimating the gross real estate value of the Partnership's properties, the
Purchaser utilized the capitalization of income approach. The estimate of the
gross real estate value of the Partnership's properties prepared by the
Purchaser does not purport to be an estimate of the aggregate fair market value
of the Interests themselves, nor should it be viewed as such by Limited
Partners. Neither the Purchaser nor any of its affiliates prepared any
estimates of the values of the Partnership's properties based upon any other
valuation method.
The following is a description of the methodology employed by the
Purchaser in preparing such estimates (as used below, "net operating income" is
calculated before depreciation, amortization, debt service payments and certain
capital expenditure items):
27
<PAGE> 31
CEDAR CREEK APARTMENTS/PHASES I AND II. In estimating the value of
this property, the Purchaser reviewed the gross rental income generated by the
property in the month of December 1995 ($143,264) and annualized that amount,
and then added to the annualized gross rental income amount ($1,719,168) the
amount of other income budgeted to be generated by the property during 1996
($106,916), resulting in the Purchaser's estimate of the total annual revenues
of the property for underwriting purposes. To arrive at its estimate of the
annual net operating income of the property for underwriting purposes, the
Purchaser then reduced the estimated total revenues ($1,826,084) by the amount
of actual operating expenses (other than insurance and property taxes) incurred
during 1995 ($814,805) and by the amount of insurance and property tax expenses
budgeted to be incurred in 1996 ($323,930). Next, the Purchaser adjusted its
net operating income estimate of $687,349 to decrease it by $300 per apartment
unit (or an aggregate of $117,600), representing the Purchaser's estimate of
the adjustment that would be imputed by a third-party purchaser in underwriting
the operating expenses of the property for valuation purposes. Finally, the
Purchaser capitalized its estimated adjusted net operating income amount
($804,949) at a 10.0% rate, resulting in an estimated gross property value of
$8,049,490.
WALNUT HILLS APARTMENTS/PHASES I AND II. In estimating the value of
this property, the Purchaser reviewed the gross rental income generated by the
property in the month of December 1995 ($170,710) and annualized that amount,
and then added to the annualized gross rental income amount ($2,048,520) the
amount of other income budgeted to be generated by the property during 1996
($95,184), resulting in the Purchaser's estimate of the total annual revenues
of the property for underwriting purposes. To arrive at its estimate of the
annual net operating income of the property for underwriting purposes, the
Purchaser then reduced the estimated total revenues ($2,143,704) by the amount
of actual operating expenses (other than insurance and property taxes) incurred
during 1995 ($765,564) and by the amount of insurance and property tax expenses
budgeted to be incurred in 1996 ($440,827). Finally, the Purchaser capitalized
its adjusted net operating income amount ($937,313) at a 10% rate, resulting in
an estimated gross property value of $9,373,130.
GREENTREE VILLAGE APARTMENTS. In estimating the value of this
property, the Purchaser reviewed the gross rental income generated by the
property in the month of December 1995 ($118,638) and annualized that amount,
and then added to the annualized gross rental income amount ($1,423,656) the
amount of other income budgeted to be generated by the property during 1996
($160,450), resulting in the Purchaser's estimate of the total annual revenues
of the property for underwriting purposes. To arrive at its estimate of the
annual net operating income of the property for underwriting purposes, the
Purchaser then reduced the estimated total revenues ($1,584,106) by the amount
of actual operating expenses (other than insurance and property taxes) incurred
during 1995 ($456,116) and by the amount of insurance and property tax expenses
budgeted to be incurred in 1996 ($66,126). Next, the Purchaser adjusted its
net operating income estimate of $1,061,864 to reduce it by $500 per apartment
unit (or an aggregate of $108,000), representing the Purchaser's estimate of
recurring capital improvement requirements and the adjustment that would be
imputed by a third-party purchaser in underwriting the operating expenses of
the property for valuation purposes. Finally, the Purchaser capitalized its
estimated adjusted net operating income amount ($953,864) at a 11% rate,
resulting in an estimated gross property value of $8,671,491. The Purchaser
understands that this property is currently under due diligence review by a
prospective buyer. Although the Purchaser has been advised that the offering
price for the property is $8,750,000, the Purchaser does not have any
information concerning the seriousness of the party reviewing the property, the
likelihood of a sale of the property to such party (or to any other party), or
other terms and conditions of any such potential sale. The Purchaser chose not
to utilize the contract price as its estimated gross property value.
Based on the individual estimates of the gross values of the
Partnership's properties described above, the Purchaser estimated that the
current aggregate gross real estate value of the Partnership's
28
<PAGE> 32
properties is $26,094,111 (the "Gross Real Estate Value Estimate"). The
property-specific capitalization rates used by the Purchaser in the valuation
estimates described above were based upon the Purchaser's and Insignia's
knowledge of expenses relating to operating properties in the relative markets
in which the Partnership's properties are located and their experience in the
real estate market in general. The Purchaser's Gross Real Estate Value
Estimate of $26,094,111 is approximately 0.7% greater than FMG's estimate of
the gross value of the same properties of $25,901,137, which estimate was
prepared by FMG in December 1995 in connection with the Walton Street Offer and
was included in the tender offer documents relating to the Walton Street Offer.
The principal reason for this difference is the Purchaser's observation that
similar properties in the geographic areas in which the Partnership's
properties are located have been sold or contracted for sale in the recent past
at prices in excess of what the Purchaser would have expected, and in excess of
what FMG considered to be the "market" for such properties in December 1995.
Although there are several other methods of estimating the value of
real estate of this type, the Purchaser believes that this approach represents
a reasonable method of estimating the aggregate gross value of the
Partnership's properties (without taking into account the costs of disposing of
the properties), subject to the substantial uncertainties inherent in any
estimate of value. The use of other assumptions, however, particularly as to
the applicable capitalization rate, could produce substantially different
results. Neither the Purchaser nor Insignia solicited any offers or inquiries
from prospective buyers of the Partnership's properties in connection with
preparing the Purchaser's estimates of the fair market values of those
properties, and the actual amounts for which the Partnership's properties might
be sold could be significantly higher or significantly lower than the
Purchaser's estimates.
The Gross Real Estate Value Estimate does not take into account (i)
the debt encumbering the Partnership's properties or the other liabilities of
the Partnership, (ii) cash and other assets held by the Partnership, (iii) real
estate transaction costs that would be incurred on a sale of the Partnership's
properties, such as brokerage commissions and other selling and closing
expenses, (iv) timing considerations or (v) costs associated with winding up
the Partnership. For this reason, the Purchaser considers the Gross Real
Estate Value Estimate to be less meaningful in evaluating the Purchase Price
offered by the Purchaser than its pro forma estimate of the net liquidation
value per Interest described below.
Purchaser's Pro Forma Estimate of Net Liquidation Value per
Interest. The Purchaser is offering to purchase Interests, which are a
relatively illiquid investment, and is not offering to purchase the
Partnership's underlying assets or assume any of its liabilities.
Consequently, the Purchaser does not believe that the per-Interest amount which
might be distributed to Limited Partners following a future sale of all the
Partnership's properties necessarily reflects the present fair value of an
Interest. Conversely, the realizable value of the Partnership's assets clearly
is a relevant factor in determining the price a prudent purchaser would offer
for Interests. In considering this factor, the Purchaser made a pro forma
calculation of the amount each Limited Partner might receive in a theoretical
orderly liquidation of the Partnership (which may not be realistically
possible, particularly in the near term, due to real estate market conditions,
the general difficulty of disposing of real estate in a short period of time,
and other general economic factors), based on the Gross Real Estate Value
Estimate described above and the other considerations described below.
In estimating the pro forma net liquidation value per Interest, the
Purchaser adjusted its Gross Real Estate Value Estimate of $26,094,111 to
reflect the Partnership's other assets (excluding prepaid and deferred
expenses) and liabilities. Specifically, the Purchaser added the amounts of
cash, accounts receivable and escrow deposits shown on the Partnership's
unaudited balance sheet at September 30, 1995 ($4,355,341) and subtracted all
liabilities shown on that balance sheet ($15,792,389). The Purchaser then
29
<PAGE> 33
deducted from that amount $4,183,388, representing (i) the special distribution
of $93.07 per Interest made to Limited Partners in October 1995, (ii) the
Purchaser's estimate (based upon information provided by the General Partner)
of the prepayment penalties the Partnership would likely incur as a result of
currently retiring in full the debt encumbering the Partnership's properties in
connection with a liquidation, and (iii) a reserve equal to 3% of the Gross
Real Estate Value Estimate (which represents the Purchaser's estimate of the
probable costs of brokerage commissions, real estate transfer taxes and other
disposition expenses). The result, $10,473,675 represents the Purchaser's pro
forma estimate of the aggregate net liquidation proceeds (before provision for
the costs described in the following sentence) which could be realized on an
orderly liquidation of the Partnership, based on the assumptions implicit in
the calculations described above. The Purchaser did not, however, deduct any
amounts in respect of the legal and other costs which the Purchaser expects
would be incurred in a liquidation, including costs of negotiating purchase and
sale contracts, possibly conducting a consent solicitation in order to obtain
the Limited Partners' approvals for the sales as may be required by the
Partnership Agreement, and winding up the Partnership, because of the
difficulty of estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Interest, the Purchaser
divided the estimated aggregate net liquidation proceeds of $10,473,675 by the
30,005 Interests reported as outstanding by the Partnership in its Form 10-Q
for the nine month period ended September 30, 1995 filed with the Commission.
The resulting estimated pro forma liquidation value was $349 per Interest (the
"Estimated Liquidation Value"), before provision for the legal and other costs
of liquidating the Partnership described in the last sentence of the preceding
paragraph. If the Purchaser had not taken into account any mortgage prepayment
penalties in performing its liquidation analysis, the resulting estimated pro
forma liquidation value would have been $369 per Interest.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Interests
because (i) there is no assurance that any such liquidation in fact will occur
in the foreseeable future and (ii) any liquidation in which the estimated fair
market values described above might be realized would take an extended period
of time (at least a year, and quite possibly significantly longer), during
which time the Partnership and its partners would continue to be exposed to the
risk of fluctuations in asset values because of changing market conditions and
other factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners
of liquidation proceeds. Because of these factors, the Purchaser believes the
actual current value of an Interest is substantially less than its estimate of
the Estimated Liquidation Value. Conversely, there is a substantial
possibility that the per-Interest value realized in an orderly liquidation
could be greater than the Estimated Liquidation Value. A reduction in either
operating expenses or capital expenditures from the levels reflected in the
property operating statements for the year ended December 31, 1995 would result
in a higher liquidation value under the method described above. Similarly, a
higher liquidation value would result if a buyer applied lower capitalization
rates (reflecting a willingness to accept a lower rate of return on its
investment) to the net operating income generated by the Partnership's
properties than the capitalization rates applied by the Purchaser. A 5%
increase or decrease in the aggregate value of the Partnership's properties
would produce a corresponding increase or decrease in the liquidating
distribution to Limited Partners of approximately $42 per Interest.
Furthermore, the analysis described above is based on a series of assumptions,
some of which may not be correct. For example, the above analysis assumes the
incurrence of substantial mortgage prepayment penalties as a result of an
immediate sale of all of the Partnership properties, some of which might be
lower if the properties are not in fact sold until a later date. Accordingly,
this analysis should be viewed as merely indicative of one aspect of the
30
<PAGE> 34
Purchaser's approach to valuing Interests and not as in any way predictive of
the likely result of any future transactions.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term
of the Offer, the Purchaser will not be required to accept for payment or to
pay for any Interests tendered if (i) the Purchaser shall have been informed
that upon the purchase of Interests pursuant to the Offer, the Purchaser will
not be admitted to the Partnership as a Limited Partner as to all such
Interests or will not be permitted to exercise the proxies granted to the
Purchaser by tendering Limited Partners, or (ii) all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, necessary
for the consummation of the transactions contemplated by the Offer shall not
have been filed, occurred or been obtained. Furthermore, notwithstanding any
other term of the Offer and in addition to the Purchaser's right to withdraw
the Offer at any time before the Expiration Date, the Purchaser will not be
required to accept for payment or pay for any Interests not theretofore
accepted for payment or paid for and may terminate or amend the Offer as to
such Interests if, at any time on or after the date of the Offer and before the
acceptance of such Interests for payment or the payment therefor, any of the
following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency shall
have been issued and shall remain in effect which (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment, purchase of or payment for any Interests by the
Purchaser, (ii) imposes or confirms limitations on the ability of the Purchaser
effectively to exercise full rights of ownership of any Interests, including,
without limitation, the right to vote any Interests acquired by the Purchaser
pursuant to the Offer or otherwise on all matters properly presented to the
Partnership's Limited Partners, (iii) requires divestiture by the Purchaser of
any Interests, (iv) causes any material diminution of the benefits to be
derived by the Purchaser as a result of the transactions contemplated by the
Offer, or (v) might materially adversely affect the business, properties,
assets, liabilities, financial condition, operations, results of operations or
prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer by any federal or state court, government or
governmental authority or agency, which might, directly or indirectly, result
in any of the consequences referred to in clauses (i) through (v) of paragraph
(a) above;
(c) any change or development shall have occurred or been
threatened since the date of the Offer to Purchase, in the business,
properties, assets, liabilities, financial condition, operations, results of
operations or prospects of the Partnership, which is or may be materially
adverse to the Partnership, or the Purchaser shall have become aware of any
fact that does or may have a material adverse effect on the value of the
Interests; or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation by any governmental authority
on, or other event which might affect, the extension of credit by lending
institutions or result in any imposition of currency controls in the United
States, (iv) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States, (v)
a material change in United States or other currency exchange rates or a
suspension of a limitation on the markets thereof, or (vi) in the case of any
31
<PAGE> 35
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
such conditions or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion. Any determination by the
Purchaser concerning the events described above will be final and binding upon
all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser is not aware of any filings, approvals or
other actions by any domestic or foreign governmental or administrative agency
that would be required prior to the acquisition of Interests by the Purchaser
pursuant to the Offer, other than the filing of a Tender Offer Statement on
Schedule 14D-1 with the Commission (which has already been filed) and any
required amendments thereto. Should any such approval or other action be
required, it is the Purchaser's present intention that such additional approval
or action would be sought. Although there is no present intent to delay the
purchase of Interests tendered pursuant to the Offer pending receipt of any
such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Partnership's business, or that certain parts of the
Partnership's business might not have to be disposed of or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser to elect to terminate the Offer without
purchasing Interests thereunder.
Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the
acquisition of Interests contemplated by the Offer.
Margin Requirements. The Interests are not "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section
16, the Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Interests pursuant to the Offer. The
Purchaser has retained The Herman Group, Inc. to act as Information
Agent/Depositary in connection with the Offer. The Purchaser will pay the
Information Agent and the Depositary reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and has agreed to indemnify the Information Agent/Depositary against
certain liabilities and expenses in connection therewith, including liabilities
under the federal securities laws. The Purchaser will also pay all costs and
expenses of printing and mailing the Offer and its legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Offer is being made solely by this
Offer to Purchase and the related Assignment of Partnership Interest and is
being made to all holders of Interests. The Purchaser is not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to any valid state statute. If the Purchaser becomes aware of
any valid state statute prohibiting the making of the Offer or the acceptance
of Interests pursuant thereto, the Purchaser will make a good faith effort to
comply with any such state statute. If, after such good faith effort, the
Purchaser cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Interests in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made
32
<PAGE> 36
on behalf of the Purchaser by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
The Purchaser has filed with the Commission a Tender Offer Statement
on Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same places and in
the same manner as set forth in Section 9 (except that they will not be
available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN THE
ASSIGNMENT OF PARTNERSHIP INTEREST AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
METROPOLITAN ACQUISITION VII, L.L.C.
March 11, 1996
33
<PAGE> 37
SCHEDULE I
INFORMATION REGARDING THE DIRECTORS AND EXECUTIVE OFFICERS OF
MAP AND INSIGNIA
1. DIRECTORS AND EXECUTIVE OFFICERS OF INSIGNIA. Set forth in the table
below are the name and the present principal occupations or employment and the
name, principal business and address of any corporation or other organization
in which such occupation or employment is conducted, and the five-year
employment history of each of the directors and executive officers of Insignia.
Insignia owns its interest in the Purchaser through its wholly-owned subsidiary
Insignia Capital Corporation, a passive investment company with no significant
operations of its own. Unless otherwise indicated, each person identified
below is employed by Insignia. The principal business address of Insignia and,
unless otherwise indicated, the business address of each person identified
below, is One Insignia Financial Plaza, Greenville, South Carolina 29601.
Directors are identified by an asterisk. All persons identified below are
United States citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been a director of Insignia since its inception
in July 1990, has been Chairman and Chief Executive Officer of
Insignia since January 1991, and has been President since May 1995.
Prior to August 1993, Mr. Farkas was the sole director of Insignia.
Mr. Farkas has been the president and sole director and stockholder of
Metropolitan Asset Group, Ltd. ("MAG"), a real estate investment
banking firm, since January 1983.
Robin L. Farkas* Robin L. Farkas has been a director of Insignia since August 1993.
Mr. Farkas is the retired Chairman of the Board and Chief Executive
Officer of Alexander's Inc., a real estate company. He served in that
capacity from 1984 until 1993. Alexander's Inc. filed a petition
under Chapter 11 of the Federal Bankruptcy Code in May 1992. He is
also a director of Refac Technology Development Corporation and of
Greenman Bros. Inc.
Merril M. Halpern* Merril M. Halpern has been a director of Insignia since August 1993.
c/o Charterhouse Mr. Halpern has been Chairman of the Board of Directors and co-chief
535 Madison Avenue executive officer of Charterhouse Group International, Inc.
New York, NY 10022 ("Charterhouse"), a privately-owned investment firm which, among other
things, actively engages in making private equity investments in a
broad range of industrial and service companies located primarily in
the United States, for more than the past five years. Mr. Halpern is
also a director of Charter Power Systems, Inc., DMPF Corp. and
Dreyer's Grand Ice Cream, Inc.
</TABLE>
S-1
<PAGE> 38
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
John F. Jacques* John F. Jacques has been a director of Insignia since August 1993 and
102 Woodmont Blvd. with the Office of the Chairman of Insignia since January 1992. Since
Suite 400 July 1995 he has served as President of Compleat Resource Group, Inc.
Nashville, TN 37205 From January 1969 until December 1991, Mr. Jacques was the Chief
Executive Officer of Jacques-Miller, Inc., a real estate syndication
firm that sold substantially all of its assets to Metropolitan Asset
Enhancement, L.P., a limited partnership in which Insignia has a
limited partnership interest ("MAE"), in December 1991.
Robert G. Koen* Robert G. Koen has been a director of Insignia since August 1993.
399 Park Avenue Since January 1996, Mr. Koen has been a partner in the law firm Akin,
New York, NY 10022 Gump, Strauss, Hauer & Feld, which represents Insignia or certain of
its affiliates from time to time. From January 1991 to January 1996,
Mr. Koen was a partner in the law firm LeBoeuf, Lamb, Greene & MacRae.
Michael Lipstein* Michael Lipstein has been a director of Insignia since August 1993.
110 East 59th Street Mr. Lipstein is, and for more than the past five years has been, self-
New York, NY 10022 employed in the real estate business, including ownership, management,
and lending.
Buck Mickel* Buck Mickel has been a director of Insignia since August 1993. Mr.
Fluor Daniel Mickel has been Chairman of the Board and Chief Executive Officer of
301 N. Main Street RSI Holdings, a company offering distribution of outdoor equipment,
Greenville, SC 29601 for more than the past five years. Mr. Mickel is also a director of
Fluor Corporation, The Liberty Corporation, NationsBank Corporation,
Emergent Group, Inc., Delta Woodside Industries, Inc., Duke Power
Company and Textile Hall Corporation.
James A. Aston James A. Aston has been with the Office of the Chairman since July
1994. From January 1991 to July 1994, Mr. Aston was Managing Director
-- Investment Banking of Insignia.
Frank M. Garrison Frank M. Garrison has been an Executive Managing Director of Insignia
102 Woodmont Blvd. and President of Insignia Financial Services, a division of Insignia,
Suite 400 since July 1994, and was Managing Director -- Investment Banking of
Nashville, TN 37205 Insignia from January 1993 to July 1994. From January 1992 to
December 1992, Mr. Garrison was the Vice President -- Investment
Banking of Insignia. From January 1991 to December 1991, Mr. Garrison
was employed by Donelson Ventures Holdings, L.P., a limited
partnership engaged in real estate investing activities.
Neil J. Kreisel Neil J. Kreisel has been an Executive Managing Director of Insignia
Kreisel Company, Inc. and President of Insignia Management Services -- New York, Inc., a
331 Madison Avenue subsidiary of Insignia, since September 1995. For more than the past
New York, NY 10017 five years, Mr. Kreisel has been President and Chief Executive Officer
of Kreisel Company, Inc.
</TABLE>
S-2
<PAGE> 39
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
Thomas R. Shuler Thomas R. Shuler has been Managing Director -- Residential Property
Management of Insignia since March 1991 and Executive Managing
Director and President of Insignia Management Services, a division of
Insignia, since July 1994. From January 1983 until March 1991, Mr.
Shuler served in various capacities, including President of the
Management Division of Hall Financial Group, Inc., a property
management organization located in Dallas, Texas.
Ronald Uretta Ronald Uretta has been Insignia's Chief Financial Officer and
Treasurer since January 1992. He also served as Secretary of Insignia
from January 1992 to June 1994. Since September 1990, Mr. Uretta has
also served as the Chief Financial Officer and Controller of MAG.
John M. Beam, Jr. John M. Beam, Jr. has been President of Insignia's mortgage banking
affiliate, Insignia Mortgage & Investment Company, since January 1991.
Jeffrey L. Goldberg Jeffrey L. Goldberg has been Managing Director -- Investment Banking
of Insignia since July 1994 and served as Managing Director -- Asset
Management of Insignia from January 1991 until July 1994. Since April
1990, Mr. Goldberg has been an officer of MAG, and currently serves as
an Executive Vice President.
Albert H. Gossett Albert H. Gossett has been Vice President and Chief Information
Officer of Insignia since January 1991 and Senior Vice President and
Chief Information Officer of Insignia since July 1994.
Henry Horowitz Henry Horowitz has been Managing Director of Insignia Commercial
Group, Inc. since January 1993. From January 1987 to January 1993,
Mr. Horowitz was the Chief Executive Officer of First Resource Realty,
Inc., a commercial property management organization that Insignia
acquired in January 1993.
William H. Jarrard, Jr. William H. Jarrard, Jr. has been Managing Director -- Partnership
Administration of Insignia since January 1991.
John K. Lines John K. Lines has been General Counsel of Insignia since June 1994 and
General Counsel and Secretary since July 1994. From May 1993 until
June 1994, Mr. Lines was employed as Assistant General Counsel and
Vice President of Ocwen Financial Corporation, in West Palm Beach,
Florida. From October 1991 until April 1993, Mr. Lines was employed
as Senior Attorney of Banc One Corporation, in Columbus, Ohio. From
May 1984 until October 1991, Mr. Lines was employed as an associate
with Squire Sanders & Dempsey in Columbus, Ohio.
S. Richard Sargent S. Richard Sargent has been Senior Vice President -- Human Resources
of Insignia since June 1994. From May 1989 until June 1994, Mr.
Sargent was employed as Vice President, Human Resources of Guilford
Mills, Inc., in Greensboro, North Carolina.
</TABLE>
S-3
<PAGE> 40
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
Stephen C. Schoenbaechler Stephen C. Schoenbaechler has been Senior Vice President -- Asset
Management of Insignia since August 1994. From January 1992 to August
1994, Mr. Schoenbaechler was Vice President -- Asset Management. Mr.
Schoenbaechler was an Executive Vice President with Jacques-Miller,
Inc. from July 1988 to January 1992.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF MAP. Set forth in the table below
are the name and the present principal occupations or employment and the name,
principal business and address of any corporation or other organization in
which such occupation or employment is conducted, and the five-year employment
history of each of the directors and executive officers of MAP, which is the
managing member of the Purchaser. Each person identified below is employed by
Insignia. The principal business address of MAP and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29601. Directors are
identified by an asterisk. All persons identified below are United States
citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been the sole director and the Chairman and
Chief Executive Officer of MAP since its organization in February
1996. For further information concerning Mr. Farkas, see Item 1 of
this Schedule I above.
Frank M. Garrison Frank M. Garrison has been the President of MAP since its
organization in February 1996. For further information concerning
Mr. Garrison, see Item 1 of this Schedule I above.
Jeffrey L. Goldberg Jeffrey L. Goldberg has been a Vice President of MAP since its
organization in February 1996. For further information concerning
Mr. Goldberg, see Item 1 of this Schedule I above.
James A. Aston James A. Aston has been a Vice President of MAP since its
organization in February 1996. For further information concerning
Mr. Aston, see Item 1 of this Schedule I above.
John K. Lines John K. Lines has been a Vice President and the Secretary of MAP
since its organization in February 1996. For further information
concerning Mr. Lines, see Item 1 of this Schedule I above.
Ronald Uretta Ronald Uretta has been a Vice President and the Treasurer of MAP
since its organization in February 1996. For further information
concerning Mr. Lines, see Item 1 of this Schedule I above.
</TABLE>
S-4
<PAGE> 41
EXHIBIT A
CERTAIN INFORMATION CONCERNING
THE PARTNERSHIP'S PROPERTIES PROVIDED BY THE GENERAL PARTNER
Set forth below is a summary of certain non-public, property-level
information provided to the Purchaser and Insignia by the General Partner in
connection with the Offer. The operating information provided for properties
in which the Partnership owns a joint-venture interest reflects only the
Partnership's percentage interest in such items. Except as otherwise noted in
the Offer to Purchase, the Purchaser does not know whether the strategies
identified below continue to be the current strategies of the General Partner.
CEDAR CREEK APARTMENTS / PHASE I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
Item Actual Actual Budget
---------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . . $ 1,027,259 $ 957,383 $ 919,559
Total Expenses . . . . . . . . . . . . . . . . . . $ 602,591 $ 589,377 $ 458,995
Net Operating Income . . . . . . . . . . . . . . . $ 424,668 $ 368,006 $ 460,564
Capital Expenditures . . . . . . . . . . . . . . . $ 103,132 $ 78,369 $ 97,921
</TABLE>
GENERAL PARTNER'S STRATEGY:
o Sell in 1997
o Soft market with new construction
MORTGAGE PREPAYMENT PENALTY:
o Loan cannot be prepaid in first five years without HUD consent
- --------------------------------------------------------------------------------
A-1
<PAGE> 42
CEDAR CREEK APARTMENTS / PHASE II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
Item Actual Actual Budget
---------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . . $ 1,143,437 $ 1,088,414 $ 1,090,567
Total Expenses . . . . . . . . . . . . . . . . . . $ 522,713 $ 559,525 $ 542,242
Net Operating Income . . . . . . . . . . . . . . . $ 620,724 $ 528,889 $ 548,325
Capital Expenditures . . . . . . . . . . . . . . . $ 139,796 $ 90,367 $ 101,095
</TABLE>
GENERAL PARTNER'S STRATEGY:
o Sell in 1997
o Soft market with new construction
MORTGAGE PREPAYMENT PENALTY:
o Loan is not prepayable until July 1995, after which time it is
prepayable subject to a penalty of 5% in year one; 4% in year two; 2%
in year three; 1% in years four through seven; and at par
thereafter
- --------------------------------------------------------------------------------
WALNUT HILLS APARTMENT / PHASE I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
Item Actual Actual Budget
---------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . . $ 971,088 $ 1,019,124 $ 1,054,778
Total Expenses . . . . . . . . . . . . . . . . . . $ 519,988 $ 557,195 $ 528,553
Net Operating Income . . . . . . . . . . . . . . . $ 451,100 $ 461,929 $ 526,225
Capital Expenditures . . . . . . . . . . . . . . . $ 90,344 $ 81,250 $ 97,665
</TABLE>
GENERAL PARTNER'S STRATEGY:
o Sell in 1997
o Soft market with new construction
MORTGAGE PREPAYMENT PENALTY:
o Loan is not prepayable until July 1995, after which time it is
prepayable subject to a penalty of 5% in year one; 4% in year two; 2%
in year three; 1% in years four through six; and at par
thereafter
- --------------------------------------------------------------------------------
A-2
<PAGE> 43
WALNUT HILLS APARTMENT / PHASE II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
Item Actual Actual Budget
---------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . . $ 1,199,225 $ 1,257,034 $ 1,298,045
Total Expenses . . . . . . . . . . . . . . . . . . $ 580,927 $ 619,101 $ 693,300
Net Operating Income . . . . . . . . . . . . . . . $ 618,298 $ 637,933 $ 604,745
Capital Expenditures . . . . . . . . . . . . . . . $ 100,322 $ 96,441 $ 102,500
</TABLE>
GENERAL PARTNER'S STRATEGY:
o Sell in 1997
o Soft market with new construction
MORTGAGE PREPAYMENT PENALTY:
o Loan is not prepayable until July 1995, after which time it is
prepayable subject to a penalty of 5% in year one; 4% in year two; 2%
in year three; 1% in years four through six; and at par
thereafter
- --------------------------------------------------------------------------------
GREENTREE VILLAGE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996
Item Actual Actual Budget
---------------------------------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . . $ 1,384,592 $ 1,537,713 $ 1,610,449
Total Expenses . . . . . . . . . . . . . . . . . . $ 515,144 $ 517,002 $ 543,977
Net Operating Income . . . . . . . . . . . . . . . $ 869,448 $ 1,020,711 $ 1,066,472
Capital Expenditures . . . . . . . . . . . . . . . $ 153,843 $ 192,167 $ 195,809
</TABLE>
GENERAL PARTNER'S STRATEGY:
o Projected sale in 1996
o Property has asbestos ceiling tiles
MORTGAGE PREPAYMENT PENALTY:
o n/a
- --------------------------------------------------------------------------------
A-3
<PAGE> 44
Questions and requests for assistance or for additional copies
of this Offer to Purchase and the Assignment of Partnership Interest may be
directed to the Information Agent/Depositary at its telephone number and
address listed below. You may also contact your broker, dealer, bank, trust
company or other nominee for assistance concerning the Offer.
Manually signed facsimile copies of the Assignment of
Partnership Interest will be accepted. The Assignment of Partnership Interest
and any other required documents should be sent or delivered by each Limited
Partner or such Limited Partner's broker, dealer, bank, trust company or other
nominee to the Information Agent/Depositary as set forth below.
The Information Agent/Depositary for the Offer is:
THE HERMAN GROUP, INC.
<TABLE>
<S> <C> <C> <C>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
P.O. Box 357 (214) 999-9348 (800) 647-2543 2121 San Jacinto Street
Dallas, TX 75221-9602 or or 26th Floor
(214) 999-9323 (214) 999-9393 Dallas, TX 75201
</TABLE>
<PAGE> 1
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF LIMITED PARTNERSHIP INTEREST(S) IN
<TABLE>
<S> <C>
BALCOR REALTY INVESTORS LTD.-82 BALCOR REALTY INVESTORS 85-SERIES I, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR REALTY INVESTORS - 83 BALCOR REALTY INVESTORS 85-SERIES III, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR REALTY INVESTORS - 84 BALCOR REALTY INVESTORS 86-SERIES I, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR EQUITY PROPERTIES LTD.-VIII BALCOR EQUITY PROPERTIES - XII
</TABLE>
PURSUANT TO THE OFFER(S) TO PURCHASE DATED MARCH 11, 1996,
AS AMENDED FROM TIME TO TIME BY
METROPOLITAN ACQUISITION VII, L.L.C.
<TABLE>
<S> <C>
THE DEPOSITARY FOR THE OFFER(S) IS: THE HERMAN GROUP, INC.
IF BY MAIL: P. O. Box 357
Dallas, Texas 75221-9602
IF BY OVERNIGHT OR 2121 San Jacinto Street, 26th Floor
HAND DELIVERY: Dallas, Texas 75201
(Please indicate changes or corrections
to address printed above.) IF BY FACSIMILE: (214) 999-9348 or (214) 999-9323
</TABLE>
================================================================================
THE OFFER(S), PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 5, 1996 (THE "EXPIRATION DATE"),
UNLESS THE OFFER(S) ARE EXTENDED.
The undersigned hereby tender(s) to Metropolitan Acquisition VII,
L.L.C., a Delaware limited liability company (the "Purchaser"), the number of
the undersigned's Interests of the Partnership(s) as specified below for the
Purchase Price(s) indicated in the Offer(s) to Purchase dated March 11, 1996
(the "Offer(s) to Purchase"), net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer(s) to Purchase
and this Assignment of Partnership Interest (the "Assignment of Partnership
Interest", which together with any supplements or amendments, collectively
constitute the "Offer(s)"), with such Purchase Price(s) being reduced by the
amount of any distributions made by the Partnership(s) on or after March 11,
1996 and through and including the Expiration Date. Receipt of the Offer(s) to
Purchase is hereby acknowledged. Capitalized terms used but not defined herein
have the respective meanings assigned in the Offer(s) to Purchase.
Subject to and effective upon acceptance for payment of any of the
Interests tendered hereby in accordance with the terms of the Offer(s), the
undersigned hereby irrevocably sells, assigns, transfers, conveys and delivers
to, or upon the order of, the Purchaser all rights, title and interest in and
to such Interests tendered hereby that are accepted for payment pursuant to the
Offer(s), including, without limitation, all rights in, and claims to, any
Partnership profits and losses, cash distributions (including, without
limitation, any and all distributions made by any Partnership after the
Expiration Date in respect of Interests purchased pursuant to the Offer(s),
regardless of the fact that the record date for any such distribution may be a
date prior to the Expiration Date), voting rights, rights to be substituted as
a Limited Partner of the Partnership, and all other benefits of any nature
whatsoever distributable or allocable to such tendered Interests under the
Partnership Agreement, and agrees from and after the date of such acceptance
not to exercise any rights pertaining to the Interests without the prior
consent of the Purchaser. The undersigned hereby irrevocably constitutes and
appoints the Purchaser, its managing member, the officers of the managing
member, and the designees of any of them ("Agent"), as the true and lawful
agent, proxy and attorney-in-fact of the undersigned with respect to such
Interests, each with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest in the tendered
Interests) to the full extent of the undersigned's rights with respect to the
tendered Interests and with an irrevocable instruction to the Agent (i) to
execute all or any instruments of transfer and/or other documents in the
Agent's discretion in relation to the Interests tendered hereby, (ii) to
exercise full voting rights (at any meeting of Limited Partners, by written
consent or otherwise), (iii) to execute and deliver to the General Partner a
change of address form instructing the General Partner to send any and all
future distributions to which the Purchaser is entitled pursuant to the terms
of the Offer(s) in respect of such Interests to the address specified in such
form, (iv) to endorse any check payable to or upon the order of such Limited
Partner representing a distribution to which the Purchaser is entitled pursuant
to the terms of the Offer(s), in each case on behalf of the tendering Limited
Partner, and (v) to act in such manner as any such attorney-in-fact and proxy
or substitute shall, in its sole discretion, deem proper with respect to such
Interests, (A) to deliver such Interests and seek to transfer ownership of such
Interests on the Partnership books maintained by the General Partner, together
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser and upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price, (B) to seek to become a substituted
Limited Partner, to receive any and all distributions made by the Partnership
after the expiration of the Offer(s), (C) to make all elections and to do all
such other acts and things as may in the opinion of the Agent be necessary or
expedient for the purpose of, or in connection with, the undersigned's
acceptance of the Offer(s), and (D) to receive all benefits and otherwise
exercise all rights of beneficial ownership of such Interests, all in
accordance with the terms of the Offer(s). The Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, the right to purchase Interests tendered pursuant to the
Offer(s), but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer(s) or prejudice the rights of tendering Limited
Partners to receive payment for Interests validly tendered and accepted for
payment pursuant to the Offer(s). Subject to and effective upon acceptance for
payment of any Interests tendered hereby, the undersigned hereby requests the
Partnership(s) and its General Partner to take any and all acts as may be
required to effect the transfer of the undersigned's Interest to the Purchaser
and in order that the Purchaser be admitted to the Partnership(s) as a
"substituted Limited Partner" under the terms of the Partnership Agreement(s)
of the Partnership(s) as to all the tendered Interests, except that if
proration of tendered Interests is required as described in Section 1 of the
Offer(s) to Purchase, than the undersigned may continue to be a Limited Partner
with respect to the tendered Interests that are not purchased. Upon request,
the undersigned will execute and deliver additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the
assignment, transfer and purchase of Interests tendered hereby and will hold
any distributions received from the Partnership(s) after the Expiration Date in
trust for the benefit of the Purchaser. Upon the purchase of Interests
pursuant to the Offer(s), all prior proxies and consents given by the
undersigned with respect to such Interests will be revoked and no subsequent
proxies or consents may be given (and if given will not be effective).
The undersigned recognizes that, if proration is required pursuant to
the terms of the Offer(s), the Purchaser will accept for payment from among
those Interests validly tendered on or prior to the Expiration Date and not
properly withdrawn, and this Assignment of Partnership Interest shall only be
effective to transfer to the Purchaser, the maximum number of Interests
permitted pursuant to the Offer(s) on a pro rata basis, with adjustments to
avoid purchases of fractional Interests, based upon the number of Interests
validly tendered prior to the Expiration Date and not withdrawn.
The undersigned understands that a tender of Interests to the
Purchaser will constitute a binding agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer(s). The
undersigned recognizes that under certain circumstances set forth in the
Offer(s) to Purchase, the Purchaser may not be required to accept for payment
any of the Interests tendered hereby. In such event, the undersigned
understands that the Assignment of Partnership Interest with respect to any
Interests not purchased for any reason will be destroyed by the Purchaser.
Except as stated in the Offer(s) to Purchase, this tender is irrevocable,
provided Interests tendered pursuant to the Offer(s) may be withdrawn at any
time prior to the Expiration Date.
OUR RECORDS INDICATE THE FOLLOWING WITH RESPECT TO YOUR OWNERSHIP OF
INTERESTS IN THE PARTNERSHIPS. IF NO INDICATION IS MARKED BELOW, ALL INTERESTS
LISTED WILL BE DEEMED TO HAVE BEEN TENDERED PURSUANT TO THE OFFER(S).
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PURCHASE PRICE(S) TOTAL PURCHASE PRICE(S)
PARTNERSHIP(S) INTERESTS OWNED INTERESTS TENDERED PER INTEREST IF ALL INTERESTS TENDERED
<S> <C> <C> <C> <C>
</TABLE>
================================================================================
SIGNATURE BOX-1 INDIVIDUALS AND JOINT OWNERS
(SEE INSTRUCTION 2)
================================================================================
<TABLE>
<S> <C>
Please sign exactly as your name is printed above. For joint owners, X
each joint owner must sign. (See Instruction 2). The undersigned hereby -------------------------------------------------
represents and warrants to the Purchaser that the undersigned owns the (Signature of Owner) (Date)
Interests tendered hereby and has full power and authority to validly
tender, sell, assign and transfer the Interests tendered hereby and that X
when the same are accepted for payment by the Purchaser, the Purchaser -----------------------------
will acquire good, marketable and unencumbered title thereto, free and (Social Security Number)
clear of all liens, restrictions, charges, encumbrances, conditional
sales agreements or other obligations relating to the sale or transfer X
thereof, and such Interests will not be subject to any adverse claims. -------------------------------------------------
The undersigned will, upon request, execute and deliver any additional (Signature of Co-Owner) (Date)
documents deemed by the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Interests tendered Telephone (Day) ( )
hereby. Except as stated in the Offer(s) to Purchase, this tender is ---------------------------
irrevocable. The signatory hereto hereby certifies under penalties of
perjury the Taxpayer I.D. No. furnished in the blank provided above and Telephone (Eve) ( )
the statements in Box A, Box B and, if applicable, Box C. ---------------------------
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT,
OR OTHER FIDUCIARIES OR REPRESENTATIVE CAPACITY SHOULD COMPLETE SIGNATURE
BOX-2 ON THE REVERSE SIDE.
</TABLE>
================================================================================
DELIVERY OF THIS ASSIGNMENT OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY. WHEN TENDERING BY
FACSIMILE, BOTH THE FRONT AND BACK OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST
SHOULD BE TRANSMITTED.
<PAGE> 2
NOTE: WHEN TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND THE
BACK OF THE ASSIGNMENT OF PARTNERSHIP INTEREST. PLEASE CAREFULLY READ
THE ATTACHED INSTRUCTIONS.
================================================================================
SIGNATURE BOX-2 TRUSTEES, CORPORATIONS
AND FIDUCIARIES (SEE
INSTRUCTIONS 2 AND 3)
- --------------------------------------------------------------------------------
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS
OF A CORPORATION OR OTHER PERSON(S) ACTING IN A FIDUCIARY OR REPRESENTATIVE
CAPACITY, PLEASE COMPLETE THIS BOX AND SEE INSTRUCTION 2.
The signatory hereto hereby certifies under penalties of perjury the
statements in Box A, Box B, and, if applicable, Box C.
<TABLE>
<S> <C>
X X
-------------------------------------------------------- ---------------------------------------------------------
(Signature) (Date) (Signature) (Date)
Name and Capacity (Title)
----------------------------------------------------------------------- --------------------------
Address
---------------------------------------------------------------------------------------------------------
(City) (State) (Zip)
Area Code and Telephone Nos. ( ) (Day) ( ) (Evening)
------------------------------------------ -------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED. SEE INSTRUCTION 2.)
Name and Address of Eligible Institution
---------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Authorized Signature Title
------------------------------------------- ------------------------------------------------
Name Date , 1996
----------------------------------------------------------------- --------------------------------------
</TABLE>
================================================================================
TAX CERTIFICATIONS
(SEE INSTRUCTIONS 5 AND 6)
================================================================================
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 5 - U.S. PERSONS AND BOX A)
The person signing this Assignment of Partnership Interest hereby
certifies the following to the Purchaser under penalties of perjury:
(i) The Taxpayer Identification No. ("TIN") furnished in the space
provided for that purpose on the front of this Assignment of
Partnership Interest is the correct TIN of the Limited Partner,
unless the Interests are held in an Individual Retirement Account
(IRA); or if this box [ ] is checked, the Limited Partner has
applied for a TIN. If the Limited Partner has applied for a TIN, a
TIN has not been issued to the Limited Partner, and either: (a) the
Limited Partner has mailed or delivered an application to receive a
TIN to the appropriate IRS Center or Social Security Administration
Office, or (b) the Limited Partner intends to mail or deliver an
application in the near future (it being understood that if the
Limited Partner does not provide a TIN to the Purchaser, 31% of all
reportable payments made to the Limited Partner thereafter will be
withheld until a TIN is provided to the Purchaser); and
(ii) Unless this box [ ] is checked, the Limited Partner is not subject
to backup withholding either because the Limited Partner: (a) is
exempt from backup withholding, (b) has not been notified by the IRS
that the Limited Partner is subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) has
been notified by the IRS that such Limited Partner is no longer
subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to
certify that the Limited Partner is not subject to backup
withholding.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 5 - BOX B)
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership if
50% or more of the value of its gross assets consists of U.S. real property
interests and 90% or more of the value of its gross assets consists of U.S.
real property interests plus cash or cash equivalents, and the holder of the
partnership interest is a foreign person. To inform the Purchaser that no
withholding is required with respect to the Limited Partner's interest in the
Partnership(s), the person signing this Assignment of Partnership Interest
hereby certifies the following under penalties of perjury:
(i) Unless this box [ ] is checked, the Limited Partner, if an
individual, is a U.S. citizen or a resident alien for purposes of
U.S. income taxation, and if other than an individual, is not a
foreign corporation, foreign partnership, foreign trust or foreign
estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
(ii) the Limited Partner's U.S. social security number (for individuals)
or employer identification number (for non-individuals) is correct
as furnished in the blank provided for that purpose on the front of
this Assignment of Partnership Interest; and
(iii) the Limited Partner's home address (for individuals), or office
address (for non-individuals), is correctly printed (or corrected)
on the front of this Assignment of Partnership Interest. If a
corporation, the jurisdiction of incorporation is ______________.
The person signing this Assignment of Partnership Interest understands
that this certification may be disclosed to the IRS by the Purchaser and that
any false statements contained herein could be punished by fine,
imprisonment, or both.
================================================================================
================================================================================
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 6 - BOX C)
By checking this box [ ], the person signing this Assignment of Partnership
Interest hereby certifies under penalties of perjury that the Limited Partner
is an "exempt foreign person" for purposes of the backup withholding rules
under the U.S. federal income tax laws, because the Limited Partner:
(i) Is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(ii) If an individual, has not been and plans not to be present in the
U.S. for a total of 183 days or more during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade or business
that has effectively connected gains from transactions with a broker
or barter exchange.
================================================================================
<PAGE> 3
INSTRUCTIONS FOR TENDERING INTERESTS AND
COMPLETING ASSIGNMENT OF PARTNERSHIP INTEREST
FORMING A PART OF THE TERMS AND CONDITIONS OF THE OFFER
================================================================================
FOR INFORMATION OR ASSISTANCE IN COMPLETING THIS
ASSIGNMENT OF PARTNERSHIP INTEREST,
PLEASE CALL THE NUMBER IDENTIFIED BELOW YOUR BALCOR PARTNERSHIP(S).
82, 83, 84, 85-I OR VIII 85-III, 86-I OR XII
CALL OR CALL
(800) 647-2543 (800) 253-3814
================================================================================
1. DELIVERY REQUIREMENTS. For Interests to be validly tendered, a
properly completed and duly executed Assignment of Partnership
Interest (or facsimile thereof) and any other documents required by
this Assignment of Partnership Interest must be received by the
Depositary, at the address (or facsimile number) set forth on the
front of the Assignment of Partnership Interest and listed below,
before 12:00 Midnight, New York City Time, on April 5, 1996, unless
the Offer is extended (the Expiration Date of the Offer).
Assignment(s) of Partnership Interest mailed or delivered to any
address or facsimile other than that of the Depositary will be deemed
to have not been validly tendered. To ensure receipt of the Assignment
of Partnership Interest by the Purchaser, it is suggested that you use
overnight courier delivery or, if the Assignment of Partnership
Interest is to be delivered by United States mail, you should use
certified or registered mail, return receipt requested. (See also:
Instruction 2 - Signature Requirements and Instruction 3 -
Documentation Requirements herein).
THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
TENDERING LIMITED PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
All tendering Limited Partners by execution of the Assignment of
Partnership Interest waive any right to receive any notice of the
acceptance or rejection of their Interest for payment. A Limited
Partner may tender any or all of the Interests owned by that Limited
Partner; provided, however, that tenders of fractional Interests will
not be accepted, except by a Limited Partner who is tendering all of
the Interests owned by that Limited Partner. No alternative,
conditional or contingent tenders will be accepted.
IF TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND THE BACK
OF THE ASSIGNMENT OF PARTNERSHIP INTEREST.
BY MAIL: THE HERMAN GROUP, INC.
P. O. Box 357
Dallas, Texas 75221-9602
BY HAND DELIVERY: 2121 San Jacinto Street, 26th Floor
Dallas, Texas 75201
BY FACSIMILE: (214) 999-9348 or (214) 999-9323
2. SIGNATURE REQUIREMENTS. After carefully reading and completing this
Assignment of Partnership Interest, in order to tender Interests,
Limited Partner(s) must sign at the "X" in either SIGNATURE BOX-1
(Individuals, Joint Owners, Beneficial Owners of Retirement Accounts)
OR SIGNATURE BOX-2 (Trustees, Corporations and Fiduciaries).
The signature(s) must correspond exactly with the name(s) printed on
the front of this Assignment of Partnership Interest without any
change whatsoever. IF ANY TENDERED INTERESTS ARE REGISTERED IN THE
NAMES OF TWO OR MORE JOINT HOLDERS, ALL SUCH HOLDERS MUST SIGN THIS
ASSIGNMENT OF PARTNERSHIP INTEREST. If this Assignment of Partnership
Interest is signed by the registered holder(s) of the Interests, and
payment is to be made directly to that holder, no signature guarantee
is required. Similarly, if Interests are tendered for the account of
a member firm of a registered national security exchange, a member of
the National Association of Securities Dealers, Inc. or a commercial
bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States
(each an "Eligible Institution"), signature guarantee is required.
HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THIS ASSIGNMENT OF
PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
AND SIGNATURE BOX-2 MUST BE COMPLETED. (See also Instruction
3-Documentation Requirements herein.)
(Continued on Reverse Side)
<PAGE> 4
3. DOCUMENTATION REQUIREMENTS. In addition to information required to be
completed on the Assignment of Partnership Interest, additional
documentation may be required by the Purchaser under certain
circumstances including, but not limited to those listed
below. Questions on documentation should be directed to the
Depositary at (800) 647-2543, Documentation Verification Department.
Deceased Owner (Joint Tenant) - Copy of Death Certificate.
Deceased Owner (Others) - Copy of Death Certificate and
Affidavit of Domicile. (See also
Executor/Administrator/Guardian
below).
Executor/Administrator/Guardian - (i) Copy of court Appointment
Documents for Executor or
Administrator; and (ii) a copy of
applicable provisions of the Will
(Title Page, Executor(s)' powers,
asset distribution); OR (iii)
Estate distribution documents.
Attorney-in-Fact - Current Power of Attorney.
Corporations/Partnerships - Corporate Resolution(s) or other
evidence of authority to act.
Partnerships should furnish copy
of Partnership Agreement.
Trust/Pension Plans - Copy of cover page of the Trust
or Pension Plan, along with copy
of the section(s) setting forth
names and powers of Trustee(s)
and any amendments to such
sections or appointment of
Successor Trustee(s).
4. TRANSFER TAXES. The Purchaser will pay or cause to be paid all
transfer taxes, if any, in respect of the Interests accepted for
payment pursuant to the Offer.
5. U. S. PERSONS. A Limited Partner who or which is a United States
citizen or resident alien individual, a domestic corporation, a
domestic partnership, a domestic trust or domestic estate
(collectively, "United States Persons"), as those terms are defined in
the Internal Revenue Code and Income Tax Regulations, should certify,
or complete, the following, as applicable:
BOX A - SUBSTITUTE FORM W-9. In order to avoid 31% federal income tax
backup withholding, tendering Limited Partner(s) must provide the
Purchaser with a correct Taxpayer Identification Number ("TIN") and
certify, under penalties of perjury, that such Limited Partner(s) are
not subject to such backup withholding. The TIN that must be provided
on the Substitute W-9 is that of the registered Limited Partner as
furnished in the applicable Signature Box-1 or Signature Box 2 on this
Assignment of Partnership Interest. If a correct TIN is not provided,
penalties may be imposed by the Internal Revenue Service ("IRS"), in
addition to the Limited Partner(s)' being subject to backup
withholding. Certain Limited Partners (including among others, all
corporations) are not subject to backup withholding. Backup
withholding is not an additional tax. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS. NOTE:
THE CORRECT TIN FOR AN IRA ACCOUNT IS THAT OF THE CUSTODIAN (NOT THE
INDIVIDUAL SOCIAL SECURITY NUMBER OF THE BENEFICIAL OWNER). Please
also refer to the enclosed instructions for completing a Substitute
Form W-9, which are included with your Offering materials.
BOX B - FIRPTA AFFIDAVIT. To avoid potential withholding of tax
pursuant to Section 1445 of the Internal Revenue Code, in an amount
equal to 10% of the Purchase Price for Interests purchased pursuant to
the Offer, plus the amount of any liabilities of the Partnership
allocable to such Interests, each tendering Limited Partner who or
which is a United States Person (as defined in Instruction 5 above)
must certify, under penalties of perjury, the Limited Partner(s)' TIN
and address, and that the Limited Partner(s) is not a foreign person.
If a corporation, the jurisdiction of incorporation should be inserted
in the blank in section (iii) of Box B. Tax withheld under Section
1445 of the Internal Revenue Code is not an additional tax. If
withholding results in an overpayment of tax, a refund may be obtained
from the IRS.
6. BOX C - FOREIGN PERSONS. In order for a tendering Limited Partner,
who is a foreign person (i.e., not a United States Person as defined
in 5 above) to qualify as exempt from 31% backup withholding, such
foreign Limited Partner must certify, under penalties of perjury, the
statement in BOX C of this Assignment of Partnership Interest
attesting to that foreign person's status by checking the box
preceding such statement. However, such person will be subject to
withholding of the 10% tax under Section 1445 of the Code (See also
Box B - FIRPTA Affidavit above).
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- --Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Assoc., club, religious, The organization
charitable, or
2. Two or more individuals (joint The actual owner of educational organization
account) the account or, if account
combined funds, the
first individual on the
account(1)
3. Custodian account of a minor The minor(2) 9. Partnership account held The partnership
(Uniform Gift to Minors Act) in the name of the
business
4.a. The usual revocable savings The grantor-trustee(1) 10. Association, club, or other The organization
trust account (grantor is also tax-exempt organization
trustee)
b. So-called trust account that is The actual owner(1) 11. A broker or registered The broker or nominee
not a legal or valid trust under nominee
State law
5. Sole proprietorship account The owner(3) 12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
6. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(4)
7. Corporate account The corporation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an
individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
- An international organization or any agency, or
instrumentality thereof.
- A registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1).
- An entity registered at all times under the Investment
Advisors Act of 1940 who regularly acts as a broker.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under
section 1441.
- Payments to partnerships not engaged in a trade or business in
the U.S. and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is
not paid in money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- Payments described in section 6049(b)(5) to non-resident
aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.- If
you fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.- If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
OPERATING AGREEMENT OF
METROPOLITAN ACQUISITION VII, L.L.C.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Place of Business and Office; Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Qualification in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
Purpose and Powers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Powers of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
Capital Contributions and Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Capital Contributions by Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Capital Contributions by non-Managing Members . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Investment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Other Matters Relating to Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V
Distributions and Allocation of Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Distributions -- General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Amounts and Priority of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Allocations of Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Allocations and Elections In the Event of Transfers of Company Interests . . . . . . . . . . . . 19
5.7 Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Powers of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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6.3 Reimbursement of Expenses to An Affiliate of the Managing Member; Reimbursement of Expenses
to the Managing Member; Engagement of Affiliates of Members; Fees and Certain Other
Payments to Affiliates of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 No Management by Other Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Limitations on Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Indemnification of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Other Activities of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.10 The WIG Partnerships and the Buy/Sell Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
Rights and Obligations of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Outside Activities of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Reimbursement of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 No Interference with Balcor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Transfer of Managing Member's Interest in the Company . . . . . . . . . . . . . . . . . . . . . 30
8.2 Admission of a Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Transfer of Membership Interests by Members other than the Managing Member . . . . . . . . . . . 32
8.4 Substitution of Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Limitation on Sale or Exchange of Company Interests . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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TABLE OF CONTENTS (cont'd)
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ARTICLE XI
Consents, Voting and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XII
Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.3 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.3 JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Binding Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8 No Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.10 Reasonable Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.11 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XV
Interpretation and Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVI
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVII
IFG Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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This Operating Agreement (this "Agreement") of Metropolitan
Acquisition VII, L.L.C. (the "Company"), a limited liability company organized
pursuant to the Delaware Limited Liability Company Act (the "Act") is entered
into and shall be effective as of February 29, 1996 by and between MAP VII
Acquisition Corporation, a Delaware corporation having its principal office at
One Insignia Financial Plaza, Greenville, South Carolina 29602 (the "Managing
Member") and Insignia Financial Group, Inc., a Delaware Corporation having its
principal office at One Insignia Financial Plaza, Greenville, South Carolina,
29102 ("IFG"), as the initial members of the Company. The Managing Member, IFG
and the individuals or entities who are subsequently admitted to the Company
formed hereby as members thereof are collectively referred to as the "Members"
and each is separately referred to as a "Member".
W I T N E S S E T H:
WHEREAS, the parties hereto wish to enter into this Agreement
to provide for their respective rights and obligations in connection with a
limited liability company formed pursuant to the Delaware Limited Liability
Company Act, 6 Del. C. Section 18-101, et. seq., as amended from time to time
(the "Delaware Act"), by filing a Certificate of Formation of the Company (the
"Certificate") with the offices of the Secretary of State of Delaware and
entering into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein made and intending to be legally bound, the Members hereby
agree as follows:
ARTICLE I
Defined Terms
Defined terms used in this Agreement that are not defined
elsewhere herein shall, unless the context otherwise requires, have the
meanings specified in this Article I.
"Adjusted Capital Account" shall mean, with respect to any
Member, the balance in such Member's Capital Account as of the end of the
relevant Fiscal Year or period, adjusted as follows:
(i) Credit to such Capital Account the sum of (x)
any amount which such Member is obligated or has agreed to contribute
(but has not yet contributed) to the Company and (y) the amount which
such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treas.
<PAGE> 6
Reg. Section 1.704-2(g)(1) and the penultimate sentence of Treas.
Reg. Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in subclauses (4), (5) and (6) of Treas. Reg. Section
1.704-1(b)(2)(ii)(d).
"Advance Request" shall have the meaning set forth in Section
6.7.3.
"Affiliate" of, or a Person "Affiliated" with, a specified
Member, shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
"Agreement" shall mean this Operating Agreement, as originally
executed and as amended, modified, supplemented or restated from time to time,
as the context requires.
"Balcor Contract" shall have the meaning set forth in Section
7.5.
"Balcor Partnerships" shall have the meaning set forth in
Section 3.1.2.
"Balcor Partnership Interests" shall have the meaning set
forth in Section 3.1.2.
"Balcor Securities" shall have the meaning set forth in
Section 3.1.2.
"Bankruptcy" shall mean, with respect to a Person, (i) that
such Person has (A) made an assignment for the benefit of creditors; (B) filed
a voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or
had entered against such Person an order of relief in any bankruptcy or
insolvency proceeding; (D) filed a petition or an answer seeking for such
Person any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation or filed an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Person in any proceeding of such
nature; or (E) sought, consented to, or acquiesced in the appointment of a
trustee, receiver or liquidator of such Person or of all or any substantial
part of such Person's properties; (ii) 90 days have elapsed after the
commencement of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation and such proceeding has not been
dismissed; or (iii) 60 days have elapsed since the appointment without such
Person's consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any
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<PAGE> 7
substantial part of such Person's properties and such appointment has not been
vacated or stayed or the appointment is not vacated within 60 days after the
expiration of such stay.
"Capital Account" shall mean, with respect to any Member, the
account maintained by the Company for such Member in accordance with Section
4.7 hereof.
"Capital Commitment" shall have the meaning set forth in
Section 4.3.
"Capital Contributions" of a Member shall mean the total
amount of contributions such Member has made to the Company pursuant to Article
IV, as of the date in question.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor federal income tax code.
"Commencement Date" shall have the meaning set forth in
Section 3.4.
"Company Minimum Gain" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(d), substituting the term "Company" for the term
"partnership" as the context requires.
"Consent" shall mean the approval of a Person, given as
provided in Section 11.1, to do the act or thing for which the approval is
solicited, or the act of granting such approval, as the context may require.
"Death Interest" shall have the meaning set forth in Section
8.3.3.
"Depreciation Recapture" shall have the meaning set forth in
Section 5.7.
"Distributable Cash" shall have the meaning set forth in
Section 5.1(b).
"Fair Market Value" shall mean
(i) for securities which are listed on a national
securities exchange, the value at their last sales prices on the date of
determination;
(ii) for securities which are not so listed, the
value at their last sales prices on the date of determination on the basis of
quotations in the over-the-counter market;
(iii) for securities which are in the form of
unlisted put or call options, their value as determined by the Managing Member
or the Liquidating Trustee, as the case may be.
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<PAGE> 8
(iv) for all other assets, the value of such assets,
as determined from time to time by the Managing Member or Liquidating Trustee,
as the case may be.
"Fiscal Year" shall mean the calendar year or, in the case of
the first and the last fiscal years, the fraction thereof commencing on the
date on which the Company is formed under the Delaware Act or ending on the
date on which the winding up of the Company is completed, as the case may be.
"Incapacity" shall mean, as to any Person, (i) the
adjudication of incompetence or insanity of such Person, or the Bankruptcy of
such Person, or (ii) the death, dissolution (except in any case in which a
Member which is a partnership or limited liability company shall be
reconstituted by its remaining partners or members, as applicable, following
any liquidation or dissolution caused by the legal incapacity of one or more of
its partners or members, as applicable) or termination (other than by merger or
consolidation), as the case may be, of such Person.
"Indemnitee" shall have the meaning set forth in Section 6.7.
"Interest" shall mean all, or the part (as the context
requires), of the interest of a Member in the Company at any particular time,
including the right of such Member to any and all benefits to which a Member
may be entitled as provided in this Agreement, together with the obligations of
such Member to comply with all the terms and provisions of this Agreement.
"Investment" shall have the meaning set forth in Section 3.1.2
"Liquidating Trustee" shall mean a Person selected by the
Managing Member, or, if there is none, by the other Members, to act as a
liquidating trustee as provided in Section 9.2.
"Litigation Advance" shall have the meaning set forth in
Section 6.7.3.
"Majority-in-Interest of the Members" shall mean Members
holding more than 50% of the Percentage Interests in the Company.
"Managing Member" shall have the meaning set forth in Section
6.1.
"Net Profits" and "Net Losses" for any Fiscal Year or period
shall mean, respectively, an amount equal to the Company's income or loss for
such Fiscal Year or period, as computed for federal income tax purposes with
the following adjustments:
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<PAGE> 9
(i) Any income of the Company which is exempt
from federal income tax shall increase such taxable income or shall
reduce such loss;
(ii) Any expenditures of the Company which are
described in Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i), shall reduce such taxable income or shall
increase such loss;
(iii) Any item which is specially allocated
pursuant to Section 5.4 hereof shall not be taken into account in
computing such income or loss;
(iv) For purposes of computing gain or loss
(whether realized by reason of a sale or distribution) and
depreciation and amortization, the basis of any property shall be
equal to the amount shown on the Company's books; and
(v) Any deemed gain or deemed loss for book
purposes resulting from the distribution of appreciated or depreciated
property or the adjustment of the value of such property on the
Company's books shall be taken into account in computing such income
or loss.
"Nonrecourse Deductions" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(b).
"Noticed Partner" shall have the meaning set forth in Section
6.10.1.
"Member Nonrecourse Deduction" shall have the meaning set
forth in Treas. Reg. Section 1.704-2(i), substituting the term "Member" for
the term "partner" as the context requires.
"Member Nonrecourse Loan" shall mean a loan made to, or credit
arrangement for the benefit of, the Company by a Member, substituting the term
"Member" for the term "partner" as the context requires, or by a person related
to a Member (as defined in Treas. Reg. Section 1.752-4(b)) which by its terms
exculpates the Members from personal liability on the debt, but under which
such Member or related person bears the ultimate economic risk of loss within
the meaning of Treas. Reg. Section 1.752-2.
"Offering" shall have the meaning set forth in Section 3.3.
"Offering Memo" shall have the meaning set forth in Section
3.3.
"Percentage Interest" shall mean, with respect to each Member,
the percentage obtained by multiplying 100% by a
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<PAGE> 10
fraction, the numerator of which is the total number of Units owned by such
Member and the denominator of which is the total number of outstanding Units.
"Permitted Temporary Investments" shall have the meaning set
forth in Section 3.1.2.
"Person" shall mean any individual, membership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity.
"REIT" shall have the meaning set forth in Section 3.1.2.
"Subject Partnership Interests" shall have the meaning set
forth in Section 4.5.6.
"Subject Partnerships" shall have the meaning set forth in
Section 4.5.6.
"Subscription Agreement" shall have the meaning set forth in
Section 3.3.
"Substitute Member" shall have the meaning set forth in
Section 8.4.2.
"Successor Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
"Tax Advances" shall have the meaning set forth in Section
5.1(d).
"Treas. Reg." and "Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Triggering Partner" shall have the meaning set forth in
Section 6.10.1.
"Unit" shall have the meaning set forth in Section 4.1.
"Walton" shall have the meaning set forth in Section 6.10.1.
"WIG Partnerships" shall have the meaning set forth in Section
4.5.6.
"Withdrawing Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
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<PAGE> 11
ARTICLE II
Organization
2.1 Formation.
(a) The Members hereby agree to form the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the
Members shall be as provided in the Delaware Act, except as otherwise
provided herein.
(b) Upon the execution of this Agreement, MAP VII
Acquisition Corporation and IFG shall be members of the Company.
(c) The name and mailing address of each Member of the
Company shall be listed on Schedule A attached hereto. The Managing
Member shall be required to update Schedule A and Schedule B from
time-to-time as necessary to accurately reflect the information
therein. Any reference in this Agreement to Schedule A or Schedule B
shall be deemed to be a reference to Schedule A or Schedule B as
amended and in effect from time-to-time.
(d) The Members hereby authorize and approve the
execution, delivery and filing with the office of the Secretary of
State of Delaware, the Certificate and any and all amendments thereto
and restatements thereof by the Managing Member as an authorized
person within the meaning of the Delaware Act.
(e) Upon admission to the Company of any Member other
than the Managing Member and IFG, IFG shall automatically be deemed to
have withdrawn from the Company and shall no longer be bound by any
provision of this Agreement, except for Article XVII.
2.2 Name. The name of the limited liability company formed hereby
and by the filing of the Certificate is Metropolitan Acquisition VII, L.L.C.
The business of the Company may be conducted upon compliance with all
applicable laws under any other name designated by the Managing Member.
2.3 Place of Business and Office; Registered Agent. The principal
office of the Company shall be c/o Insignia Financial Group, Inc., One Insignia
Financial Plaza, Greenville, South Carolina 29602. The registered office of
the Company in the State of Delaware shall be at Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle, State of Delaware, and
its registered agent shall be The Corporation Trust Company. The Managing
Member may from time to time (i) designate other places as the Company's
principal or registered office,
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<PAGE> 12
(ii) designate other individuals or entities as the Company's registered agent,
and (iii) establish additional offices of the Company, in each case in
compliance with the laws of the State of Delaware and otherwise in its sole
discretion. The Managing Member shall notify each of the other Members in
writing of the taking by it of any such action.
2.4 Term. The term of the Company shall commence at the time of
filing of the Certificate in the Office of the Secretary of State of Delaware,
and shall continue in full force and effect until March 31, 2016 unless the
Company is sooner dissolved pursuant to the provisions hereof.
2.5 Qualification in Other Jurisdictions. The Managing Member
shall cause the Company to be qualified or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company owns property or transacts business to the extent, in the reasonable
judgment of the Managing Member, such qualification or registration is
necessary or advisable in order to protect the limited liability of the Members
or to permit the Company lawfully to own property or transact business. The
Managing Member, as an authorized person within the meaning of the Delaware
Act, shall execute, deliver and file any certificates (and any amendments
and/or restatements thereof) necessary for the Company to qualify to do
business in a jurisdiction in which the Company may wish to conduct business.
ARTICLE III
Purpose and Powers of the Company
3.1 Purpose. Purposes of the Company.
3.1.1 The purposes of the Company are to engage in any
business in which a limited liability company may engage pursuant to the laws
of the State of Delaware.
3.1.2 The Company may (i) make tender offers to purchase or
otherwise acquire limited partnership interests (the "Balcor Partnership
Interests"), notes, general partner interests and any other securities
(collectively, the "Balcor Securities"), either directly or via special purpose
subsidiaries of the Company, in certain limited partnerships of which The
Balcor Company or any Affiliate thereof serves as the general partner (the
"Balcor Partnerships") at such time, or from time to time, and for such
purchase prices, and on such terms as the Managing Member may determine in its
sole discretion (each such acquisition being referred to herein as an
"Investment"); (ii) in the Managing Member's sole discretion, possibly to vote
on matters with respect to which partners of the Balcor Partnerships may
participate, including, without limitation, calling meetings, amending the
limited partnership agreement, and removing or
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replacing the general partner of one or more of the Balcor Partnerships with
any person or entity, including the Managing Member or an Affiliate thereof;
(iii) dispose of any or all of the Balcor Securities in a securitization
transaction or transactions at any time or from time to time in the sole
discretion of the Managing Member, including in exchange for cash or equity,
debt (including convertible debt) or other securities (whether directly or
indirectly, by merger, consolidation or otherwise) in a real estate investment
trust (a "REIT") which may be a REIT sponsored, controlled or formed (directly
or indirectly) by IFG or any Affiliate of IFG; and (iv) otherwise owning,
holding, selling, or otherwise disposing of any or all of such Balcor
Securities, at any time and from time to time, as may be determined by the
Managing Member in its sole discretion, and (v) purchase or otherwise acquire
real property and/or other assets from any Balcor Partnership in which the
Company owns an interest, provided such acquisition is made in accordance with
Section 7.1.2 hereof. Additionally, the Company may purchase securities issued
by governmental agencies backed by the full faith and credit of the United
States government, certificates of deposit issued by a commercial bank located
in the United States with assets in excess of $10,000,000,000, commercial paper
rated A-1 or P-1, or interest bearing bank deposits in a commercial bank
located in the United States with assets in excess of $10,000,000,000
("Permitted Temporary Investments").
3.2 Powers of the Company.
(a) The Company shall have the power and authority to
take any and all actions necessary, appropriate, proper, advisable,
convenient or incidental to or for the furtherance of the purposes set
forth in Section 3.1, including, but not limited to the power:
(i) to conduct its business, carry on its
operations and have and exercise the powers granted to a
limited liability company by the Delaware Act in any state,
territory, district or possession of the United States, or in
any foreign country that may be necessary, convenient or
incidental to the accomplishment of the purpose of the
Company;
(ii) to acquire by purchase, lease,
contribution of property or otherwise, own, hold, operate,
maintain, finance, improve, lease, sell, convey, mortgage,
transfer, demolish or dispose of any real or personal property
that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(iii) to enter into, perform and carry out
contracts of any kind, including, without limitation,
contracts with any Member or any Affiliate thereof, or
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any agent of the Company necessary to, in connection with,
convenient to, or incidental to the accomplishment of the
purpose of the Company;
(iv) to purchase, take, receive, subscribe for
or otherwise acquire, own, hold, vote, use, employ, sell,
mortgage, lend, pledge, or otherwise dispose of, and otherwise
use and deal in and with, shares or other interests in or
obligations of domestic or foreign corporations, associations,
general or limited partnerships (including, without
limitation, the power to be admitted as a partner thereof and
to exercise the rights and perform the duties created
thereby), trusts, limited liability companies (including,
without limitation, the power to be admitted as a member or
appointed as a manager thereof and to exercise the rights and
perform the duties created thereby) or individuals or direct
or indirect obligations of the United States or of any
government, state, territory, governmental district or
municipality or of any instrumentality of any of them;
(v) to lend money for any proper purpose, to
invest and reinvest its funds, and to take and hold real and
personal property for the payment of funds so loaned or
invested;
(vi) to sue and be sued, complain and defend,
and participate in administrative or other proceedings, in its
name;
(vii) to appoint employees and agents of the
Company, and define their duties and fix their compensation;
(viii) to indemnify any Person in accordance with
the Delaware Act and to obtain any and all types of insurance;
(ix) to cease its activities and cancel its
Certificate;
(x) to negotiate, enter into, renegotiate,
extend, renew, terminate, modify, amend, waive, execute,
acknowledge or take any other action with respect to any
lease, contract or security agreement in respect of any assets
of the Company.
(xi) to borrow money and issue evidences of
indebtedness, and to secure the same by a mortgage, pledge or
other lien on the assets of the Company;
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(xii) to pay, collect, compromise, litigate,
arbitrate or otherwise adjust or settle any and all other
claims or demands of or against the Company or to hold such
proceeds against the payment of contingent liabilities; and
(xiii) to make, execute, acknowledge and file any
and all documents or instruments necessary, convenient or
incidental to the accomplishment of the purpose of the
Company.
(b) Subject to the other provisions of this Agreement,
the Company, and the Managing Member, on behalf of the Company, may
enter into and perform any and all documents, agreements and
instruments contemplated thereby, all without any further act, vote or
approval of any Member. The Managing Member may authorize any Person
(including, without limitation, any other Member) to enter into and
perform any document on behalf of the Company.
(c) The Company may merge with, or consolidate into, a
REIT, another Delaware limited liability company or any other business
entity (as defined in Section 18-209(a) of the Delaware Act) without
any approval of the Members.
3.3 Admission.
(a) Subject to Section 3.4(c) and 3.4(d) below, the
Managing Member is hereby authorized to admit one or more Persons who
purchase the Units offered in the offering (the "Offering") pursuant
to the Private Placement Memorandum dated March 4, 1996 (the "Offering
Memo") as Members of the Company at any time (each, a "Commencement
Date") after the date hereof to and until April 30, 1996 (with each
Commencement Date being chosen by the Managing Member in its sole
discretion); provided, however, that (i) each additional Member must
purchase at least one Unit, and cannot purchase more than 5 Units, and
(ii) no more than 40 Units may be purchased pursuant to the Offering
Memo (in the sole discretion of the Managing Member subscriptions for
fractional Units may be accepted from subscribers who purchase at
least one Unit). Notwithstanding the immediately preceding sentence,
the Managing Member may, in its sole discretion, (i) waive the five
Unit maximum purchase limit with respect to any investor and (ii)
increase the number of Units that may be purchased pursuant to the
Offering Memo from 40 Units to 50 Units.
(b) After the Offering, the Managing Member may, for any
permitted purpose including funding the Company's acquisition of
additional Balcor Securities, in its sole discretion (i) cause the
Company to issue and sell a number of additional Units (including
fractions of Units) equal to
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up to one-third of the Units purchased pursuant to the Offering Memo
without the consent of the other Members and (ii) cause the Company to
issue and sell a number of additional Units exceeding one-third of the
Units purchased pursuant to the Offering Memo with the consent of a
Majority-In-Interest of the Members. The terms of the issuance and
sale of additional Units shall be determined by the Managing Member in
its sole discretion; provided, however that the price per additional
Unit shall equal the net asset value of the Company, as determined by
the Managing Member in its sole discretion (taking into account a
variety of factors including, but not limited to, the estimated
liquidation value of the assets underlying the Balcor Securities owned
by the Company, the anticipated holding period of the assets
underlying the Balcor Securities, whether the Company controls the
Balcor Partnerships and the Company's ownership percentage of the
Balcor Partnerships), divided by the number of Units (after giving
effect to the sale of the Additional Units (as defined below)). Prior
to consummating any sale of Additional Units, the Managing Member
shall give the Members notice of the impending sale. Each Member will
have a period of three days after delivery of such notice to subscribe
irrevocably to purchase up to its pro rata share, based upon the
number of Units then held by such Member, of the additional Units
covered by such notice (the "Additional Units"); provided, however,
that a Member may subscribe for Additional Units in excess of its pro
rata share to the extent that other Members decline to subscribe for
all of their pro rata share of the Additional Units. If necessary,
such excess Additional Units shall be allocated among the
oversubscribing Members pro rata based upon the respective numbers of
Additional Units for which they oversubscribed. If the Members do not
subscribe for all of the Additional Units, the Managing Member shall
have a period of 90 days in which to obtain subscriptions for the
remaining Additional Units to any person or persons (including
existing Members). Any Additional Units not purchased within such
90-day period shall again be subject to the pre-emption rights of the
Members. The Managing Member may, in its sole discretion, elect to
make more than one offering of Additional Units.
(c) Prior to the admission of any additional Member to
the Company pursuant to Section 3.4(a) above, the Managing Member must
receive from such additional Member (i) an executed copy of a
subscription agreement relating, among other things, to the
subscription by such additional Member to its Interest in the Company,
which subscription agreement shall be satisfactory in form and
substance to the Managing Member in its sole discretion (each, a
"Subscription Agreement"), (ii) such other documents, instruments, and
agreements as may be required by this Agreement or by the
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Managing Member in its sole discretion and (iii) full payment of such
additional Member's Capital Commitment.
(d) Notwithstanding anything to the contrary in this
Section 3.3, the Managing Member will not admit any additional Members
to the Company unless and until a minimum of at least 10 Units have
been subscribed for (including the subscriptions of the Managing
Member) by March 31, 1996.
ARTICLE IV
Capital Contributions and Capital Accounts
4.1 Capital Contributions. "Capital Contributions" shall mean,
for each Member, the aggregate amount of such Member's cash contributions to
the Company pursuant to Sections 4.2 and 4.3 of this Agreement through the date
of determination, and in the case of the Managing Member, shall also include
the Managing Member's non-cash contribution to the Company pursuant to Section
4.5.6 hereof. The total capital of the Company shall consist of the Capital
Contributions made to the Company by the Managing Member pursuant to or as
described in Section 4.2, plus the Capital Contributions made to the Company by
the other Members pursuant to or as described in Section 4.3. The capital of
the Company shall be divided into units of Membership Interests (each, a
"Unit"), and each Member shall hold that number of Units equal to his aggregate
Capital Contributions divided by $1 million.
4.2 Capital Contributions by Managing Member. The Managing Member
has contributed $1.01 to the capital of the Company, and shall make additional
Capital Contributions in the amount and form set forth and described in the
Offering Memo payable on the same terms and conditions as for the Capital
Contributions of the non-managing Members.
4.3 Capital Contributions by non-Managing Members. IFG has
contributed $100 to the capital of the Company. Each additional Member shall
agree in its Subscription Agreement to make Capital Contributions in the amount
set forth in such Subscription Agreement (aggregating not less than $1 million,
or one Unit), as accepted by the Managing Member, acting on behalf of the
Company (the "Capital Commitment"). A Member's Capital Contribution is to be
made at the time the Managing Member accepts such Member's Subscription
Agreement. A complete list of Members and the amount of their Capital
Contributions shall be set forth on Exhibit B hereto, as amended from time to
time.
4.4 Investment of Capital Contributions. Pending use by the
Company for Investments, Capital Contributions may be invested in Permitted
Temporary Investments.
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4.5 Other Matters Relating to Capital Contributions.
4.5.1 Subject to Section 7.1.2(a), any funds provided to
the Company by any Member (other than the Capital Contributions contemplated by
Sections 4.2 and 4.3) shall be treated as a loan made to the Company by such
Member at the time of such provision and not as a Capital Contribution to the
Company. Subject to Section 7.1.2(a), a Member's loans to the Company shall
bear interest at such rate per annum, and shall have such other terms and
conditions, as the Managing Member may determine in its sole discretion;
provided, however, that any loan made to the Company by the Managing Member or
IFG shall bear interest at a rate per annum equal to the Managing Member's cost
of funds or IFG's cost of funds, respectively.
4.5.2 The Managing Member may cause the Company to repay
any loan made to the Company pursuant to this Section 4.5 in accordance with
the terms of such loan as a preference to distributions of the Company to the
Members.
4.5.3 Except as otherwise provided in this Agreement, the
Company shall not pay any interest on any Capital Contributions made by any
Member to the Company.
4.5.4 Except as otherwise provided in this Agreement, a
Member shall not be entitled to withdraw, or to a return of, any part of the
Capital Contributions that it has made to the Company or to receive property or
assets other than cash in return thereof, and the Managing Member shall not be
liable to any Member for a return of the Capital Contributions that such Member
has made to the Company.
4.5.5 Except as otherwise provided in this Agreement, a
Member shall not be entitled to priority over any other Member with respect to
(i) a return to such Member of the Capital Contributions that it has made to
the Company, (ii) allocations of Company items of income, gain, loss,
deduction, or credit, or (iii) Company distributions.
4.5.6 All Capital Contributions to the Company shall be
made in cash provided, however, that the Managing Member shall satisfy
approximately $1,700,000 of the subscription price for its purchase of Units in
the Company by causing FMG Acquisition I, L.L.C. to contribute its 25%
interests in nine partnerships (the "WIG Partnerships") that have previously
acquired interests (the "Subject Partnership Interests") in nine of the Balcor
Partnerships (the "Subject Partnerships"). The effects of such contribution to
the Company are more fully discussed in Section 6.10 hereof.
4.6 Member's Interest. A Member's Interest shall for all purposes
be personal property. A Member has no interest in specific Company property.
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4.7 Capital Accounts.
(a) There shall be established for each Member on
the books of the Company a Capital Account initially reflecting an
amount equal to such Member's Capital Contribution. The Capital
Accounts shall be adjusted from time to time to reflect the Members'
additional Capital Contributions, if any, allocable shares of Net
Profits or Net Losses, special allocations pursuant to Section 5.4,
distributions pursuant to Sections 5.1, and 8.2(c), and as otherwise
required by the Code and Regulations, including but not limited to,
the rules of Treas. Reg. Section 1.704-1(b)(2)(iv).
(b) A Member's Capital Account shall not be
decreased by the payment of any fee to, or the reimbursement of any
expense incurred by such Member, nor shall a Member's Capital Account
be increased by the failure to pay any fee to, or the failure to
reimburse any expense incurred by, such Member.
(c) The Company shall establish and maintain an
Adjusted Capital Account for each Member in its workpapers (and not on
its books).
ARTICLE V
Distributions and Allocation of Profits and Losses
5.1 Distributions -- General Principles.
(a) Distributions made by the Company shall be
made in accordance with this Article V.
(b) The Managing Member shall have discretion as
to the making and timing of distributions out of Distributable Cash.
For purposes of this Section 5.1, "Distributable Cash" shall mean the
gross cash proceeds of the Company regardless of source (excluding
Capital Contributions by the Members and loans obtained by the
Company) less the portion thereof that the Managing Member reasonably
determines necessary to cover the Company's anticipated expenses and
losses or to facilitate the Company's potential acquisition of
additional Balcor Securities or reserves to satisfy any required
withholding pursuant to Section 5.1(d). Notwithstanding the first
sentence of this Section 5.1(b), the Managing Member will distribute
50% of the Distributable Cash no less frequently than annually in
order to assist Members in the payment of taxes on their allocable
portions of the Company's taxable income.
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(c) The Managing Member may elect to distribute
securities, assets or other property in kind. Each distribution in
kind of securities, assets or other property shall be made in
accordance with Section 5.2 based upon the Fair Market Value of such
property.
(d) To the extent the Company is required by law
to withhold or to make tax payments on behalf of or with respect to
any Member (e.g., backup withholding) ("Tax Advances"), the Managing
Member may withhold such amounts and make such tax payments as so
required. All Tax Advances (other than Tax Advances withheld from
distributions) made on behalf of a Member, together with interest
thereon at the "applicable federal rate," shall, at the option of the
Managing Member, (i) be promptly paid to the Company by the Member on
whose behalf such Tax Advances were made or (ii) be repaid by reducing
the amount of the current or next succeeding distribution or
distributions which would otherwise have been made to such Member or,
if such distributions are not sufficient for that purpose, by so
reducing the liquidation proceeds otherwise payable to such Member.
Whenever the Managing Member selects option (ii) pursuant to the
preceding sentence for repayment of a Tax Advance by a Member, for all
other purposes of this Agreement, such Member shall be treated as
having received all distributions (whether before or upon liquidation)
unreduced by the amount of such Tax Advance. Each Member hereby
agrees to indemnify and hold harmless the Company from and against any
liability with respect to Tax Advances required on behalf of or with
respect to such Member.
(e) Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not make a distribution
to any Member with respect to such Member's Interest if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
5.2 Amounts and Priority of Distributions. Distributions shall be
made to the Members in proportion to their Percentage Interests.
5.3 Allocations of Net Profits and Net Losses.
(a) Net Losses shall be allocated to the Members as
follows:
(i) First, to the Members in accordance with
their Percentage Interests; provided, however, that Net Losses
shall not be allocated to a Member to the extent such
allocation would cause the balance of such Member's Adjusted
Capital Account to become negative. Such Net Losses shall be
allocated to the Members who have positive balances in their
Adjusted Capital
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Accounts until the Adjusted Capital Accounts of each of the
Members has a balance of zero.
(ii) Thereafter, to the Managing Member.
(b) Net Profits shall be allocated as follows:
(i) First, to those Members, if any, having
negative balances in their respective Adjusted Capital
Accounts, an amount equal, and in proportion to such negative
balances;
(ii) Second, to the Members in such manner as may
be necessary so that each Member's respective Adjusted Capital
Account balance as a percentage of the total Adjusted Capital
Account balances corresponds with such Member's Percentage
Interest; and
(iii) Thereafter, to the Members in accordance with
their Percentage Interests.
5.4 Special Allocations.
(a) Notwithstanding any other provision of this
Agreement, the following allocations shall be made prior to any other
allocations under this Agreement and in the following order of
priority:
(i) If there is a net decrease in Company
Minimum Gain during any Fiscal Year or period so that
an allocation is required by Treas. Reg. Section
1.704-2(f), items of income and gain shall be
allocated to the Members in the manner and to the
extent required by such Regulation. This provision
is intended to be a minimum gain chargeback within
the meaning of Treas. Reg. Section 1.704-2(f)(1) and
shall be interpreted and applied consistent
therewith.
(ii) If there is a net decrease in the
minimum gain attributable to a Member Nonrecourse
Loan during any Fiscal Year or period so that an
allocation is required by Treas. Reg. Section
1.704-2(i)(4) (minimum gain chargeback attributable
to a member nonrecourse debt), items of income and
gain shall be allocated in the manner and to the
extent required by such Regulation.
(b) If, at the close of any Fiscal Year,
allocations of Net Profits or Net Losses pursuant to Section 5.3 or
distributions made or to be made pursuant to Section 5.2 or Section
9.2(c) would not prevent or
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would cause any Member to have a negative Adjusted Capital Account
balance, then gross income of the Company for such year and each
subsequent year (if necessary) shall be allocated to such Member to
the extent required to eliminate, as quickly as possible, such
negative Adjusted Capital Account balance. This Section 5.4(b) is
intended to comply with the qualified income offset requirement of
Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(c) Nonrecourse Deductions, if any, for any
Fiscal Year or period shall be allocated to the Members in proportion
to their Percentage Interests.
(d) Any Member Nonrecourse Deduction shall be
allocated to the Member who bears the economic risk of loss with
respect to the loan giving rise to such deduction within the meaning
of Treas. Reg. Section 1.752-2.
5.5 Tax Allocations.
(a) For federal, state and local income tax
purposes, all items of taxable income, gain, loss, and deduction for
each Fiscal Year or period shall be allocated among the Members in
accordance with the manner in which the corresponding items were
allocated under Sections 5.3 and 5.4, except as provided in Sections
5.5(b) and (c) hereof.
(b) If property is contributed to the Company by
a Member and there is a difference between the basis of such property
to the Company for federal income tax purposes and the Fair Market
Value at the time of its contribution, then items of income, gain,
deduction and loss with respect to such property and other property,
as computed for federal income tax purposes (but not for book
purposes), shall be allocated (in any permitted manner determined by
the Managing Member) among the Members so as to take account of such
book/tax difference as required by Code Section 704(c).
(c) If property (other than property described in
Section 5.5(b) hereof) of the Company is reflected in the Capital
Accounts of the Members and on the books of the Company at a book
value that differs from the adjusted basis of such property for
federal income tax purposes by reason of a revaluation of such
property, then items of income, gain, deduction and loss with respect
to such property and other property, as computed for federal income
tax purposes (but not for book purposes), shall be allocated (in any
permitted manner determined by the Managing Member) among the Members
in a manner that takes account of the difference between the adjusted
basis of such property for federal income tax purposes and its book
value in the same manner as differences between adjusted basis and
Fair Market Value are
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taken into account in determining the Members' shares of tax items
under Code Section 704(c).
5.6 Allocations and Elections In the Event of Transfers of Company
Interests. During a year in which a sale or other transfer of an Interest in
the Company shall occur, the following allocations and elections shall be made:
5.6.1 (a) If there is a transfer of all or a part of a
Member's Interest in accordance with this Agreement, the allocation of
Net Profits, Net Losses, gross income and deductions pursuant to this
Article V attributable to that Interest shall be divided between the
transferor and transferee by taking into account their varying
interests during the Fiscal Year and by utilizing any conventions
permitted by law and selected by the Managing Member. Except as
provided in Section 5.6.1(b), solely for purposes of making such
allocations, the Company shall not recognize any transfer until the
first day of the calendar quarter following the calendar quarter in
which such transfer occurred.
(b) Notwithstanding the foregoing, if during the
calendar quarter in which there is a transfer of an Interest, the
Company shall derive substantial income from activities outside of the
ordinary course of business (as determined by the Managing Member),
the allocations of Net Profits, Net Losses, gross income and
deductions attributable to that Interest shall be divided between the
transferor and transferee by taking into account the date on which
such Transfer actually occurred.
5.6.2 The foregoing provisions are intended to comply with
Treas. Reg. section 1.704-1(b), and shall be interpreted and applied as
provided in such Treasury Regulations. If the Managing Member shall reasonably
determine that the manner in which the Capital Accounts or Adjusted Capital
Accounts, or nay increases or decreased thereto, are computed, or the manner in
which any allocations are made under Article V, should be adjusted in order to
comply with Section 704(b) and Section 704(c) of the Code and Regulations
thereunder, the Managing Member shall make such modifications, provided that
the Managing member shall not, pursuant to this Section 5.6.2, modify the
manner of making distributions pursuant to this Agreement. Without limiting
the generality of the foregoing, the Managing Member shall apply the provisions
of this Article V in a manner that does not result in the duplication of the
allocation of items of income, gain, deduction or loss. All elections,
decisions and other matters concerning the allocations hereunder among the
Members, and accounting procedures, not specifically and expressly provided for
by the terms of this Agreement, including, but not limited to, the election
pursuant to section 754 of the Code (or corresponding provisions of subsequent
law)
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to adjust the basis of the Company's assets as provided by sections 734 and 743
of the Code, shall be determined by the Managing Member.
5.7 Other Considerations. Without altering the overall amount of
Net Profits or gross income allocable to any Member, Net Profits or gross
income taxable as ordinary income under Sections 1245 and 1250 of the Code, or
similar provisions of the Code (the "Depreciation Recapture"), shall, to the
extent possible, be allocated to those Members to whom allowances for
depreciation or amortization giving rise to Depreciation Recapture were
allocated.
ARTICLE VI
Management
6.1 Management of the Company.
(a) MAP VII Acquisition Corporation shall be the
managing member of the Company (the "Managing Member") and, in such
capacity, shall manage the Company in accordance with this Agreement.
The actions of the Managing Member taken in such capacity and in
accordance with this Agreement shall bind the Company.
(b) The Managing Member shall have full,
exclusive and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the
business and affairs of the Company and to take all such actions as it
deems necessary or appropriate to accomplish the purpose of the
Company as set forth herein. The Managing Member shall be the sole
Person with the power to bind the Company, except and to the extent
that such power is expressly delegated to any other Person by the
Managing Member, and such delegation shall not cause the Managing
Member to cease to be a Member or the managing member of the Company.
The other Members do not have the right, power or authority to remove
the Managing Member from its position as the managing member of the
Company.
(c) The Managing Member may appoint individuals
with such titles as it may elect, including the titles of President,
Vice President, Treasurer and Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may
delegate in writing to any such Person.
6.2 Powers of the Managing Member. The Managing Member shall have
the right, power and authority, in the management of the business and affairs
of the Company, to do or cause to be done any and all acts, at the expense of
the Company, deemed by
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the Managing Member to be necessary or appropriate to effectuate the business,
purposes and objectives of the Company. Without limiting the generality of the
foregoing, the Managing Member shall have the power and authority to:
(i) purchase, sell, or otherwise acquire or
dispose of any asset when the Managing Member in its sole
discretion deems such purchase, sale, acquisition, or
disposition to be advisable;
(ii) borrow money from any Person (including any
Member) for any Company purpose, or guarantee loans made to
any Person, and to secure such borrowings or guaranties with
Company assets;
(iii) perform, or arrange for the performance of,
the management and administrative services necessary for the
operations of the Company;
(iv) prepare or cause to be prepared in conformity
with good business practice (A) all reports that are to be
furnished to the Members or that are required by or to be
furnished to taxing bodies or other governmental agencies, and
(B) the financial statements and reports referred to in
Section 13.2;
(v) incur all expenditures permitted by this
Agreement and, to the extent that funds of the Company are
available, pay all expenses, debts and obligations of the
Company;
(vi) employ and dismiss from employment any and
all employees, consultants, agents, attorneys, accountants and
professional advisors;
(vii) enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements or
other instruments as the Managing Member shall determine to be
appropriate in furtherance of the purposes of the Company;
(viii) pay, collect, compromise, arbitrate, resort
to legal action for or otherwise adjust claims or demands of
or against the Company;
(ix) engage in any kind of activity and perform
and carry out contracts of any kind necessary to, or in
connection with, or incidental to, the purposes of the Company
(as set forth in Section 3.1), to the extent the same may be
lawfully carried on or performed by a limited liability
company under the laws of each state in which the Company is
then formed or qualified;
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(x) cause Interests in the Company to be sold,
and admit individuals or entities to the Company as Members or
Substitute Members in accordance with the terms and conditions
of this Agreement; and
(xi) execute on behalf of the Members, pursuant to
the powers of attorney delivered to the Managing Member
pursuant to Article XII, such amendments to this Agreement as
are permitted by and approved by the Members in accordance
with the provisions of Section 10.1, and such amendments to
the Certificate as the Managing Member deems necessary or
advisable to effect the purposes of the Company or the
admission of a new Member or a Substitute Member or to comply
with any applicable income tax or other laws and regulations;
6.3 Reimbursement of Expenses to An Affiliate of the Managing
Member; Reimbursement of Expenses to the Managing Member; Engagement of
Affiliates of Members; Fees and Certain Other Payments to Affiliates of the
Managing Member.
6.3.1 Reimbursement of IFG for Third Party Expenses. The
Company shall reimburse IFG, an Affiliate of the Managing Member, for all
out-of-pocket expenses paid to third parties by IFG in connection with (i) the
formation and organization of the Company, (ii) the offer and sale of Interests
in the Company to the Members, and (iii) other business or affairs of the
Company, in each case at such times as the Managing Member may determine in its
sole discretion.
6.3.2 Reimbursement of the Managing Member and its
Affiliates; IFG's Provision of Corporate Services. The Company shall reimburse
the Managing Member and its Affiliates for all out-of-pocket expenses
(including, without limitation, allocable portions of rent, salaries, and other
overhead items, and legal, accounting, and other expenses) incurred by the
Managing Member and its Affiliates in connection with the business or affairs
of the Company (other than expenses reimbursed pursuant to Section 6.3.1 and
expenses incurred by the Managing Member and its Affiliates in connection with
the formation and organization of the Company which were not paid to third
parties. Additionally, the Managing Member and its Affiliates may cause the
Company to enter into an agreement with IFG pursuant to which IFG, for the
period beginning after the Offering, would provide the Company with financial,
legal and other corporate services at IFG's cost (including an allocation of
rent, salaries and other overhead items that the Managing Member and IFG
determine in their sole discretion to be reasonable).
6.3.3 Engagement of IFG as the Company's Investment
Advisory Firm. Upon the first closing of any of the Company's tender offers
for Balcor Securities (if ever), the Company shall
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pay IFG a one-time investment advisory fee in the amount of $500,000.
6.3.4 INTENTIONALLY OMITTED
6.3.5 Engagement of Affiliates of Members. Except to the
extent restricted by Section 7.1.2(a), the Company, in the sole discretion of
the Managing Member, may retain, and may cause each other entity controlled by
the Company to retain, Affiliates of any Member for any purpose at rates
comparable to the rates charged by comparable individuals or entities that are
not Affiliated with such Member for comparable services.
6.3.6 Potential Engagement of IFG as the Company's Property
and Asset Manager. If the Company (or an entity controlled by the Company)
purchases or otherwise acquires real property and/or other assets from any of
the Balcor Partnerships in which the Company (or an entity controlled by the
Company) owns an interest (pursuant to Sections 3.1.2 and 7.1.2), the Company
shall be able to retain (or where applicable, cause its controlled entity to
retain) IFG or an Affiliate of IFG, as the exclusive provider of property and
asset management services to the Company (and such other entities, as the case
may be) in connection with all real property and other assets acquired from the
Balcor Partnerships, in each case on substantially the same terms as such
services are currently being provided and in no event for property management
fee rates greater than those fee rates presently being paid.
6.4 No Management by Other Members. Except as otherwise expressly
provided herein, no Member other than the Managing Member shall take part in
the day-to-day management, or the operation or control of the business and
affairs of the Company. Except and only to the extent expressly delegated by
the Managing Member, no Member or other Person other than the Managing Member
shall have any right, power or authority to transact any business in the name
of the Company or to act for or on behalf of or to bind the Company.
6.5 Reliance by Third Parties. Third parties dealing with the
Company may rely conclusively upon any certificate of the Managing Member to
the effect that it (or its designee) is acting on behalf of the Company. The
signature of the Managing Member shall be sufficient to bind the Company in
every manner to any agreement or on any document.
6.6 Limitations on Managing Member. Notwithstanding the
provisions of Section 6.2, the Managing Member shall not do any of the
following:
(i) take any action which would make it
impossible to carry on the ordinary operations of the
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Company, except as otherwise provided in this Agreement;
(ii) admit a Person as a Member, except as
otherwise provided in this Agreement;
(iii) amend this Agreement, except as otherwise
provided in Article X; or
(iv) take any of the actions set forth in Section
7.1 hereof without the prior written consent of Members
holding over 50% of the Percentage Interests of the Company.
6.7 Indemnification of the Managing Member. The Company shall
indemnify and hold harmless the Managing Member, its stockholders, each of
their respective Affiliates, including IFG and its Affiliates, and each of the
directors, officers, stockholders, partners, employees, counsel, agents, and
control persons, if any, of each of the foregoing (each, an "Indemnitee"), from
and against any and all losses, liabilities, or damages incurred or suffered,
and any and all expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement incurred or suffered, by any Indemnitee as a result
of any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, related in whole or in part
to the activities of the Company (including, without limitation, the activities
of such Indemnitee as a director, officer, stockholder, partner, employee,
counsel, agent, or control persons of any other entity, as follows:
6.7.1 An Indemnitee shall be indemnified hereunder for any
loss, liability, damage, expense, judgment, fine, or amount paid in settlement
incurred or suffered by it as a result of any action, suit, or proceeding
arising in whole or in part out of any action that such Indemnitee took or
omitted to take related to the activities of the Company, unless (i) such
Indemnitee is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to have taken
or omitted to take such action in bad faith or in a manner that such Indemnitee
did not reasonably believe to be in or not opposed to the best interests of the
Company, or (ii) if the Indemnitee is the Managing Member, such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or gross negligence by the Managing Member in the
performance of its duties as the managing member of the Company, including,
without limitation, the management of the Company's business, the purchase,
sale and management of its assets, any extraordinary transaction by the
Company, such as a merger or sale of assets, and the offering and sale of
Units.
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6.7.2 The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that an
Indemnitee did not satisfy the conditions to its indemnification hereunder set
forth in the preceding Section 6.7.1.
6.7.3 The Managing Member (except as otherwise provided in
this Section 6.7.3, acting in its sole discretion) may cause the Company to
make advances (each, a "Litigation Advance") from time to time to any
Indemnitee (including, without limitation, the Managing Member) who incurs, or
who expects to incur, attorneys' fees or other expenses in connection with any
threatened, pending, or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative) related in whole or in part to the
activities of the Company, upon the written request made by such Indemnitee
from time to time to the Company (each, an "Advance Request"); provided,
however, that (i) no Litigation Advance shall be in an amount greater than the
amount that, as set forth by such Indemnitee in the relevant Advance Request,
is then required to enable such Indemnitee to pay, or to reimburse such
Indemnitee for payment of, such attorneys' fees and other expenses, and (ii) as
a condition precedent to the making by the Company of any Litigation Advance to
an Indemnitee, such Indemnitee must agree in writing with the Company to repay
promptly such Litigation Advance to the Company in the event that such
Indemnitee is subsequently determined not to be entitled to indemnification
under this Agreement (which written agreement must be satisfactory in form and
substance to the Managing Member, acting in its sole discretion).
6.7.4 Indemnification and Litigation Advances shall be made
from the assets of the Company, and no Member shall be personally liable to any
Indemnitee.
6.7.5 The Managing Member shall not be liable to the
Company or to any Member in damages or otherwise (i) if taxing authorities
disallow or adjust any allocations of profit or loss or any deductions or
credits in the Company's tax returns, (ii) for the repayment of Capital
Contributions made to the Company by any Member, or (iii) for the taking of any
action by the Managing Member, or the failure of the Managing Member to take
any action, the effect of which may be to cause or result in loss, damage, or
liability to the Company, unless the Managing Member is determined in a final
decision of a court of competent jurisdiction, which decision is not subject to
review or appeal, to have taken or omitted to take such action in bad faith or
in a manner which the Managing Member did not reasonably believe to be in or
not opposed to the best interests of the Company, or unless such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or
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grossly negligent conduct by the Managing Member in the performance of its
duties as the managing member of the Company.
6.7.6 This Section 6.7 shall inure to the benefit of the
Indemnitees and their respective heirs, executors, administrators, successors,
and assigns, if any, and shall not be deemed exclusive of any other rights to
which such individuals or entities may be entitled under any agreement, vote of
the Members, or law.
6.8 Exculpation. Neither the Managing Member, nor its
stockholders, each of their respective Affiliates (including IFG and its
Affiliates), nor each of the directors, officers, stockholders, partners,
employees, counsel, agents and control persons, if any, of each of the
foregoing, shall be liable to any Member or the Company for honest mistakes of
judgment, or for action or inaction, taken in good faith for a purpose that was
reasonably believed to be in the best interests of the Company, or for losses
due to such mistakes, action or inaction, or to the gross negligence,
dishonesty, or bad faith of any employee, broker, or other agent of the
Company, provided that such employee, broker, or agent was selected, engaged,
or retained and monitored with reasonable care. The Managing Member and such
persons may consult with counsel and accountants in respect of Company affairs
and be fully protected and justified in any action or inaction that is taken in
accordance with the advice or opinion of such counsel or accountants, provided
that they shall have been selected and monitored with reasonable care.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 6.8 shall not be construed so as to relieve (or attempt to relieve) any
person of any liability by reason of gross negligence, fraud or willful
misconduct or to the extent (but only to the extent) that such liability may
not be waived, modified or limited under applicable law, but shall be construed
so as to effectuate the provisions of this Section 6.8 to the fullest extent
permitted by law.
6.9 Other Activities of the Managing Member and its Affiliates.
The Managing Member and its Affiliates have engaged in, possessed interests in,
and have provided services to, and currently and in the future may engage in,
possess interests in, or provide services to other business ventures of every
kind and description, including, without limitation, ventures directly
competitive with or affiliated with the Company or any Member, for its own
account. Neither the Company nor any of the Members shall have any rights by
virtue of this Agreement in and to such business ventures or services or to the
income or profits derived therefrom. If IFG determines, in its sole
discretion, at any time to make a tender offer to purchase or otherwise acquire
Balcor Securities and IFG believes, in its sole discretion, that the Company
does not have the financial ability to make such offer or acquisition and
cannot obtain financing on an expeditious basis, then none of IFG, the Managing
Member, the
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directors or officers of the Managing Member, or any of their respective
Affiliates will have any requirement or duty to provide such opportunity to the
Company; provided, however, that with respect to any general partner interests
in the Balcor Partnerships, IFG (or any of its Affiliates) will be entitled,
but not required, to purchase such general partner interests without having any
requirement or duty to provide such opportunity to the Company.
6.10 The WIG Partnerships and the Buy/Sell Rights.
6.10.1 Ownership of the WIG Interests will subject the
Company to the terms and conditions set forth in the Agreement of Partnership
of each WIG Partnership, all of which are in substantially identical form.
Such terms and conditions include a right of first refusal for either partner
to cause the WIG Partnerships (or new entities formed on substantially similar
terms except that each partner would have a 50% interest with joint control as
co-managing partners) to make any tender offer for Balcor Partnership Interests
of the Subject Partnership Interests that the other partner desires to make.
Therefore, if the Company desires to make a tender offer for such Balcor
Partnership Interests, it must give the other partner in the WIG Partnerships,
Walton Street Acquisition Company L.L.C. ("Walton"), the right to cause the WIG
Partnerships to make such tender offer. The partners of the WIG Partnerships
are also restricted from participating, without the consent of the other
partner, in any proxy solicitation or any election contest with respect to the
general partner interest in the Subject Partnerships.
Furthermore, the Agreement of Partnership of each WIG
Partnership permits either partner (the "Triggering Partner") to require the
other partner (the "Noticed Partner") to elect either to purchase all of the
Triggering Partner's interests in any or all of the WIG Partnerships, or to
sell all of the Noticed Partner's interests in any or all of the WIG
Partnerships to the Triggering Partner, at a price that is fixed by the
Triggering Partner in its notice to the Noticed Partner (the "Buy/Sell Right").
Such right may be exercised between January 15 and January 30 of each year,
beginning January 15, 1997, or within 30 days following a filing with the
Securities and Exchange Commission by or in respect of the Subject Partnerships
of a proposed solicitation or offering of securities in respect of a merger,
sale of all or substantially all the assets, combination, or dissolution
involving the Subject Partnerships.
6.10.2 If the Managing Member determines, in its sole
discretion, that it would be advisable to purchase the interests of Walton in
one or more WIG Partnerships pursuant to the Buy/Sell Right, either as a
Triggering Partner or as a Noticed Partner in response to one or more offers by
Walton as the Triggering Partner, then the Managing Member will have the
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discretion to cause such purchases to be made other than by the Company.
However, the Managing Member will, in such case, give the Members the right,
exercisable within five days following delivery of notice by the Managing
Member, to participate in such purchases, pro rata based on the respective
amounts of the Members interests in the Company. If, following the expiration
of such five-day period, the Managing Member has not received funds from the
Members in an amount equal to the price required to purchase Walton's interests
in such WIG Partnerships, then the Managing Member may offer the right to
purchase the balance of such interests to any other person or entity, including
affiliates of the Managing Member, on such terms and conditions as the Managing
Member may determine, in its sole discretion. The Managing Member may, in its
sole discretion, cause such purchase to be made by a partnership or other
entity in which Members and other persons who elected to participate in such
purchases will hold equity interests.
ARTICLE VII
Rights and Obligations of Members
7.1 Powers of Members.
7.1.1 Limitations. Except as otherwise specifically
provided in or contemplated by this Agreement or required by the Delaware Act,
no Member other than the Managing Member shall have the power to act for or on
behalf of, or to bind, the Company. Notwithstanding the foregoing sentence,
all Members shall constitute one class or group of members of the Company for
all purposes of the Delaware Act.
7.1.2 Consent Rights. The Managing Member shall not cause
the Company to take, and shall not take on behalf of the Company, any of the
following actions without obtaining the prior written consent of a
Majority-In-Interest of the Members:
(a) the payment by the Company of any salary or other
fees or compensation to the Managing Member, IFG, or
any of their respective Affiliates, except (A) as
contemplated by Sections 6.3.1, 6.3.2, 6.3.3, 6.3.4,
6.4.5, and 14.11, and Articles V and IX, and (B) to
pay at any time and from time to time the principal
of and interest upon any loan made to the Company by
the Managing Member, IFG, or any of their respective
Affiliates in connection with any Company Acquisition
in each case in accordance with the terms of such
loan; or
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(b) purchase or otherwise acquire any real
property and/or other assets from any Balcor
Partnership in which the Company owns an
interest.
Without limiting the foregoing, the Managing Member is
expressly authorized and permitted to transfer any Balcor Securities acquired
by the Company to any REIT, which may include any REIT including a REIT
sponsored, formed, or controlled by IFG (or any of its Affiliates), in exchange
for cash or for equity, debt (including convertible debt) or other securities
in such REIT, without consent of the Members being required. Additionally, the
Managing Member is expressly authorized and permitted to transfer all (and not
less than all) of its Interests in the Company to any such REIT in exchange for
cash or for equity, debt (including convertible debt) or other securities in
such REIT, without any consent of the other Members being required. Upon any
such transfer of the Managing Member's Interest, all the other Members shall be
required to transfer all their Interests in the Company to such REIT in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT.
7.1.3 Special Meetings. A special meeting of the Members
may be called by the Managing Member on its own motion or at the written
request executed and delivered to the Managing Member by Members holding at
least 80% of the Percentage Interests in the Company, at which meeting the
Members may exercise in person or by proxy only those powers expressly granted
to Members pursuant to this Agreement.
7.2 Outside Activities of Members. Each Member may engage in or
possess interests in other business ventures of every kind and description for
its own account. Neither the Company nor any of the Members shall have any
rights by virtue of this Agreement in and to such business ventures or to the
income or profits derived therefrom.
7.3 Reimbursement of Fees and Expenses. The Company shall bear
all of the out-of-pocket expenses, including attorneys' fees and accountants'
fees, incurred in connection with the organization of the Company and the
operation and maintenance of the Company and its assets and business.
7.4 Liability. No Member shall be obligated to (a) provide any
funds to the Company in excess of the amount of its agreed Capital Contribution
to the Company, or (b) make advances or loans to the Company. Except as
otherwise expressly required by law, no Member, including the Managing Member,
in its capacity as Member or Managing Member, shall have any liability for the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise.
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7.5 No Interference with Balcor Contracts. Each Member hereby
agrees that it will not, directly or indirectly, (a) terminate, seek to
terminate, cause the termination of, reduce the compensation then payable
under, or otherwise interfere in any way with any contract between IFG (or an
Affiliate of IFG) and any of the Balcor Partnerships regarding the provision of
management services for the properties held by such Balcor Partnership (the
"Balcor Contracts"); or (b) instigate, encourage or assist any other limited
partner of a Balcor Partnership or any other third party to do any of the
foregoing.
ARTICLE VIII
Transfer of Interests
8.1 Transfer of Managing Member's Interest in the Company.
8.1.1 (a) The Managing Member may (not assign its
Interest in the Company, in whole or in part (and no proposed assignee of all
or a portion of the Managing Member's Interest in the Company shall be admitted
to the Company as a Managing Member of the Company), unless (A) the Managing
Member obtains the prior written consent of a Majority-In-Interest of the
Members (other than the Managing Member) to such assignment and admission, and
(B) such proposed assignee meets the tests set forth in Section 8.1.1(b), or
8.1.1(c), whichever is applicable. A sale of the stock of the Managing Member
shall not be deemed to be an assignment of its Interest in the Company.
(b) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any individual (and no
proposed assignee of all or a portion of the Managing Member's Interest in the
Company shall be admitted to the Company as a managing member of the Company)
if, in the opinion of counsel to the Company, such assignment or admission will
cause the termination of the Company for federal income tax purposes.
(c) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any entity (and no proposed
assignee of all or a portion of the Managing Member's Interest in the Company
shall be admitted to the Company as a managing member of the Company) if, in
the opinion of counsel to the Company, (A) such assignment or admission will
cause the Company to lose its exclusion from the definition of an investment
company under Section 3(c)(1) of the Investment Company Act of 1940, as
amended, after such assignment or admission, (B) such proposed assignee is not
qualified to do business in such states as counsel to the Company determines is
necessary or advisable, or (C) such assignment or admission will cause the
termination of the Company for federal income tax purposes.
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(d) Except in connection with an assignment
permitted by this Section 8.1, the Managing Member may not resign or withdraw
as the managing member of the Company or take any action which would cause its
resignation or withdrawal as the managing member of the Company.
(e) Any purported assignment of all or a portion
of the Managing Member's Interest in the Company that violates any of
subsections 8.1.1(a) through 8.1.1(c) above (other than as provided in
Subsection (f) below) shall be null and void ab initio.
(f) Notwithstanding anything to the contrary in
this Agreement, the stock of the Managing Member may be pledged by IFG to
secure any IFG indebtedness without the consent of the other Members.
8.1.2 (a) Upon the Incapacity or withdrawal of the
Managing Member, which pursuant to the terms of this Agreement and under the
laws of the State of Delaware requires the dissolution of the Company, the
Company shall be dissolved and wound up unless, within a period of 90 days from
the date of the occurrence of such event, Members holding 75% of the Percentage
Interests designate an individual or entity to serve as the new managing member
of the Company that, in the opinion of counsel to the Company, meets the tests
set forth in Section 8.1.1(a) or 8.1.1(b), whichever is applicable (the
"Successor Managing Member"). In such event, the Company shall not be
dissolved and wound up but shall be continued with the Successor Managing
Member being admitted to the Company as its managing member and thereafter
being the Managing Member for all purposes of this Agreement and with the
existing Managing Member thereupon withdrawing as a managing member of the
Company (the "Withdrawing Managing Member"). In such event, the Successor
Managing Member shall purchase from the Withdrawing Managing Member, and the
Withdrawing Managing Member shall sell to the Successor Managing Member, the
Withdrawing Managing Member's Interest in the Company for a purchase price (the
"Successor Purchase Price") determined in accordance with subsection (b) below.
(b) The Successor Purchase Price shall be the
fair market value of the Withdrawing Managing Member's Interest in the Company
as determined by agreement between the Withdrawing Managing Member and the
Successor Managing Member. In the event that such an agreement has not been
reached within 30 days after the designation of the Successor Managing Member,
such determination shall be made by a committee consisting of three members,
with one member being chosen by the Withdrawing Managing Member, one member
being chosen by the Successor Managing Member, and one member being chosen by
the two members so chosen. In the event that the two members so chosen fail to
agree upon the appointment of a third member to the committee, then such third
member shall be selected in accordance with the rules of the
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American Arbitration Association. In the event that either the Withdrawing
Managing Member or the Successor Managing Member fails to choose its committee
member within 30 days after the other has chosen its committee member, the sole
appointed member of the committee shall determine the fair market value of the
Withdrawing Managing Member's Interest in the Company. The proceedings of such
committee shall conform to the rules of the American Arbitration Association to
the extent practicable. Such committee shall determine the fair market value
of the Withdrawing Managing Member's Interest in the Company as promptly as
practicable, and such committee's determination of the fair market value of the
Withdrawing Managing Member's Interest in the Company shall be final and
binding upon the parties hereto, the Withdrawing Managing Member, and the
Successor Managing Member.
8.2 Admission of a Managing Member. Notwithstanding the
provisions of Section 8.1, no assignee of the Managing Member or other
individual or entity shall be admitted as a managing member of the Company
unless and until such individual or entity executes a counterpart of this
Agreement and thereby assumes the rights, duties, and obligations of the
Managing Member pursuant to this Agreement.
8.3 Transfer of Membership Interests by Members other than the
Managing Member.
8.3.1 A Member's Interest will not be assignable or
transferable without the prior written consent of the Managing Member, which
consent (a) will not be unreasonably withheld in the event of a proposed
assignment or transfer to an Affiliate or member of the immediate family of the
assignor or transferor and (b) may be granted or withheld in the Managing
Member's sole discretion in all other instances. In no event will a proposed
assignment or transfer be permitted if, in the opinion of counsel to the
Managing Member, such an assignment or transfer would subject the Company to
any additional regulatory requirements, result in the violation of any
applicable law, or otherwise adversely affect the interests of the Company or
any other Member. No assignee or transferee of a Member shall be admitted to
the Company as a Member in the place of his assignor except in accordance with
the provisions of Section 8.4. The Company shall have no obligation to
recognize, or furnish information or make distributions to, any assignee or
transferee of a Member who does not comply with the provisions of Section 8.4,
and such assignee or transferee shall not have any rights against the Company
and shall have rights only against his assignor/transferor. Any purported
assignment or transfer of all or a portion of any Member's Interest in the
Company that violates any of the provisions of this Section 8.3 shall be null
and void ab initio.
8.3.2 No action of, or event affecting, a Member (other
than the Managing Member) shall dissolve or terminate the Company.
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8.3.3 Upon the death of a Member, (i) the Interest of such
Member (the "Death Interest") shall descend to and vest in the heirs, legatees,
or legal representatives of such Member, and (ii) all of such Member's rights
and obligations under this Agreement as a Member shall descend to and vest in
the heirs, legatees, or legal representatives of such Member, in each case if
the Managing Member consents to the admission of such heir, legatee, or legal
representative to the Company as a Member pursuant to and in compliance with
the provisions of Section 8.4. If the Managing Member does not consent to such
individual's or entity's admission to the Company as a Member pursuant to and
in compliance with the provisions of Section 8.4, such individual or entity
shall not be admitted to the Company as a Member but shall be entitled to the
distributions and allocations to which a Member holding such Death Interest
would be entitled.
8.4 Substitution of Member.
8.4.1 No assignee (including, without limitation, any
transferee, heir, legatee, or purchaser) of all or any portion of an Interest
in the Company shall be admitted to the Company as a Member without the prior
written consent of the Managing Member, which consent may be granted or
withheld in the Managing Member's sole discretion. As a condition to the
consent of the Managing Member to the admission of such an assignee of a Member
to the Company as a Member, the Managing Member, in its sole discretion, may
require such assignee to meet such conditions as it deems necessary or
advisable in its sole discretion including, without limitation, the following:
(i) Accept and assume, in a writing satisfactory
in form and substance to the Managing Member, the rights,
duties and obligations of a Member under this Agreement;
(ii) Execute and deliver to the Managing Member a
power of attorney as contemplated by Article XII;
(iii) Provide to the Company an opinion of counsel,
in form and substance satisfactory to counsel to the Company,
that (A) neither the offering of an Interest in the Company to
such assignee, the assignment of an Interest in the Company to
such assignee, nor the admission of such assignee to the
Company as a Member violates any registration or other
provision of any federal or state securities or other law, and
(B) such assignee will not be deemed to be more than one
beneficial owner of securities of the Company under Section
3(c)(1) of the Investment Company Act of 1940, as amended,
after such assignment and admission;
(iv) Execute and deliver such other documents or
instruments as the Managing Member may reasonably
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require to effect the admission of such assignee to the
Company as a Member; and
(v) Pay such reasonable expenses as the Company
may incur in connection with such admission.
8.4.2 The term "Member" shall include the assignee of all
or a portion of the Interest of a Member, but only if such assignee shall have
been admitted to the Company as a Member (any such assignee who has been so
admitted being referred to herein as a "Substitute Member").
8.5 Amendment of Agreement. Upon the admission of a new Managing
Member or a new or additional Member to the Company, the Managing Member shall
promptly take such steps as may be necessary or appropriate to prepare, file,
and/or record an amendment to this Agreement and, if necessary or appropriate
in the sole discretion of the Managing Member, to the Certificate, to reflect
such admission, and each Member agrees that his attorney-in-fact (appointed
under the power of attorney delivered to the Managing Member by such Member
pursuant to Article XII) may execute each such amendment on its behalf.
8.6 Limitation on Sale or Exchange of Company Interests.
Notwithstanding any other provision of this Agreement to the contrary, no sale,
assignment, exchange, or other transfer of an Interest in the Company may be
made (a) if the Interest sought to be sold, assigned, exchanged, or
transferred, when added to the total of all other Interests in the Company
sold, assigned, exchanged, or transferred within a period of 12 consecutive
months prior thereto, equals or exceeds 50% of the aggregate of all Interests
in the Company, or (b) if such sale, assignment, exchange, or transfer, in the
opinion of counsel to the Company, will cause the Company to be subject to
regulation as an investment company under the Investment Company Act of 1940,
as amended. Any attempt to make any such sale, assignment, exchange, or
transfer shall be null and void ab initio.
8.7 This Article VIII is subject to the last paragraph of Section
7.1.2 hereof.
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership
9.1 Dissolution.
The Company shall be dissolved and its affairs wound up upon
the happening of any of the following events:
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(i) the expiration of its term as set forth in
Section 2.4;
(ii) the Incapacity or withdrawal of any Managing
Member, or the occurrence of any other event under the
Delaware Act that terminates the continued membership of any
Managing Member in the Company, unless the remaining Members
holding at least 75% of the Percentage Interests (x) agree in
writing, within 90 days thereafter, to continue the business
of the Company and, (y) if there is no other Managing Member,
appoint a Successor Managing Member pursuant to Section 8.1.2;
(iii) upon the sale or other disposition by the
Company of all or substantially all of the assets it then
owns;
(iv) an election to dissolve the Company made in
writing by the Managing Member (which election may be made by
the Managing Member at any time in its sole discretion);
(v) an election to dissolve the Company made in
writing by Members (other than the Managing Member) holding at
least 80% of the Percentage Interests in the Company; or
(vi) the entry of a decree of judicial dissolution
under Section 18-802 of the Delaware Act.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate
until the winding up of the Company has been completed, the assets of the
Company have been distributed as provided in Section 9.2 and the Certificate
shall have been cancelled.
9.2 Liquidation.
(a) Upon dissolution of the Company, the Managing Member
or, if there is none, a Person approved by the remaining Members to
act as a liquidating trustee (the "Liquidating Trustee"), shall wind
up the affairs of the Company and proceed within a reasonable period
of time to sell or otherwise liquidate the assets of the Company and,
after paying or making provision by the setting up of reasonable
reserves for all liabilities to creditors of the Company, to
distribute the assets among the Members in accordance with the
provisions for the making of distributions set forth in this
Agreement.
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(b) The Members shall not be responsible for restoring
any negative balance in their Capital Accounts.
(c) The assets of the Company or the proceeds from
liquidation thereof shall be distributed in the following manner:
(i) First, to pay or make reasonable provision to
pay the liabilities and debts of the Company (including all
contingent, conditional or unmatured claims and obligations,
including the expenses of liquidation and including all loans
made by any Member to the Company), other than liabilities for
distributions to Members; and
(ii) Thereafter, all remaining assets or proceeds
shall be paid or distributed to all Members in accordance with
their Percentage interests.
(d) In any such liquidation, the Company may distribute
to Members the assets of the Company in cash, ratably in kind or any
combination thereof. Each distribution in kind of securities, assets
and/or other property pursuant to Section 9.2.(c)(ii) shall be
distributed based upon the Fair Market Value of such property. To the
extent deemed desirable by the Managing Member or the Liquidating
Trustee, distributions may be made into a liquidating trust or other
appropriate entity, and reserves may be established for contingencies.
(e) When the Managing Member or the Liquidating Trustee
has complied with the foregoing liquidation plan, the Managing Member
or the Liquidating Trustee, on behalf of all Members, shall execute,
acknowledge and cause to be filed an instrument evidencing the
cancellation of the Certificate in the manner required by the Delaware
Act.
ARTICLE X
Amendments
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 Amendments of this Agreement may be proposed by (i)
the Managing Member or (ii) Members holding at least 80% of the Percentage
Interests. The Managing Member, on behalf of the Member or Members proposing
such amendment, shall submit to all Members a verbatim statement of any such
proposed amendment and identify the persons proposing it. Each such submission
shall include a notice to the effect that the proposed amendment, unless the
laws of the State of Delaware shall otherwise require, shall become effective
(and the Managing Member shall then be
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authorized to file any appropriate amendment to the Certificate) if a
Majority-In-Interest (unless the provision to be changed explicitly requires a
greater percentage consent of the Members) and the Managing Member (if the
provision to be changed explicitly requires the consent of the Managing Member)
shall have consented to such proposed amendment in writing within 90 days after
the mailing of such notice.
10.1.2 An amendment to this Agreement shall not (i) extend
the term of the Company, (ii) reduce the liabilities, obligations, commitments,
or responsibilities of the Managing Member, (iii) increase the liabilities or
commitments of any Member not specifically consenting thereto, (iv) require any
Member to make additional Capital Contributions to the Company, or (v) reduce
(A) the interest of any Member in Company items of income, gain, loss, credit,
or deduction, (B) the distributions to any Member, or (C) the interest of any
Member in the assets of the Company, in each case unless each Member has
consented to such amendment in writing or unless such amendment, in the opinion
of the Managing Member, is required in order to comply with applicable federal
income tax statutes or regulations.
10.1.3 Notwithstanding any provision of this Agreement to
the contrary, and as provided in Section 8.5, the Managing Member will be
entitled to cause this Agreement to be amended to the full extent necessary to
effectuate and properly reflect the admission of an additional or new Member to
the Company upon the terms and conditions set forth in this Agreement.
10.1.4 Notwithstanding the limitations contained in Section
10.1.1, this Agreement may be amended from time to time by the Managing Member
without the consent of all of the Members (i) to add to the representations,
duties or obligations of the Managing Member or surrender any right or power
granted to the Managing Member herein; (ii) to comply with the then existing
requirements imposed by the Code or the Internal Revenue Service affecting the
status of the Company as a partnership for federal income tax purposes; and
(iii) to amend Schedules A and B hereto to provide any necessary information
regarding any Member or any additional or successor Members, and to reflect any
change in the amount of the Capital Contributions of any Member in accordance
with the terms of this Agreement.
10.1.5 Upon the adoption of any amendment to this Agreement,
the amendment shall be executed by the Members and, if required, shall be
recorded in the proper records of each jurisdiction in which recordation is
necessary for the Company to conduct business or to preserve the limited
liability of the Members. Any such adopted amendment may be executed by the
Managing Member on behalf of the Members pursuant to the power of attorney
granted in Article XII. The Managing Member shall send
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each Member a copy of any amendment adopted pursuant to Section 10.1.2.
10.2 Amendment of Certificate. In the event this Agreement shall
be amended pursuant to this Article X, the Managing Member shall amend the
Certificate to reflect such change if such amendment is required or if the
Managing Member deem such amendment to be desirable and shall make any other
filings or publications required or desirable to reflect such amendment,
including any required filing for recordation of any certificate of limited
liability company or similar document of the type contemplated by Section 2.5.
ARTICLE XI
Consents, Voting and Meetings
11.1 Method of Giving Consent. Any Consent required by this
Agreement may be given as follows:
(i) by a written Consent given by the approving
Member at or prior to the doing of the act or thing for which the
Consent is solicited, provided that such Consent shall not have been
nullified by notice to the Managing Member by the approving Member at
or prior to the time of, or the negative vote by such approving Member
at, any meeting held to consider the doing of such act or thing; or
(ii) by the affirmative vote by the approving
Member to the doing of the act or thing for which the Consent is
solicited at any meeting called and held to consider the doing of such
act or thing.
11.2 Meetings. Any matter requiring the Consent of the Members
pursuant to this Agreement may be considered at a meeting of the Members.
ARTICLE XII
Power of Attorney
Each Member, by its execution hereof, hereby irrevocably
makes, constitutes and appoints the Managing Member and the then President and
each Vice President of the Managing Member and the Liquidating Trustee, if any,
in such capacity as Liquidating Trustee for so long as it acts as such (each is
hereinafter referred to as the "Attorney"), as its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
deliver, record and file (i) this Agreement and any amendment to this Agreement
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<PAGE> 43
which has been adopted as herein provided; (ii) the original certificate of
limited membership of the Company and all amendments thereto required or
permitted by law or the provisions of this Agreement; (iii) all certificates
and other instruments deemed advisable by the Member or the Liquidating
Trustee, as the case may be, to carry out the provisions of this Agreement and
applicable law or to permit the Company to continue as a limited liability
company wherein the Members have limited liability in each jurisdiction where
the Company may be doing business; (iv) all instruments that the Members or the
Liquidating Trustee deems appropriate to reflect a change, modification or
termination of this Agreement or the Company in accordance with this Agreement;
(v) all conveyances and other instruments or papers deemed advisable by the
Members or the Liquidating Trustee, including, without limitation, those to
effect the dissolution and termination of the Company, including a certificate
of cancellation; (vi) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Membership; and (vii) all other
instruments or papers which may be required by law to be filed on behalf of the
Company.
The foregoing power of attorney (i) is coupled with an
interest, shall be irrevocable and shall survive and shall not be affected by
the subsequent death, disability or Incapacity of any Member; and (ii) shall
survive the delivery of an assignment by a Member of the whole or any fraction
of its Interest; except that, where the assignee of the whole of such
Membership has been approved by the Members for admission to the Company, as a
Substituted Member, the power of attorney of the assignor shall survive the
delivery of such assignment for the sole purpose of enabling the Attorney to
execute, swear to, acknowledge and file any instrument necessary or appropriate
to effect such substitution.
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs
13.1 Records and Accounting.
(a) Proper and complete records and books of account of
the business of the Company, including a list of the names, addresses
and Interests of all Members, shall be maintained at the Company's
principal place of business.
(b) The books and records of the Company shall be kept on
an income tax basis or in accordance with generally accepted
accounting principles, as the Managing Member shall elect. The
accrual basis of accounting shall be followed by the Company for
federal income tax purposes unless the cash method shall be allowed
under the Code and the Managing
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Member shall elect to apply such accounting method. The taxable year
of the Company shall be its Fiscal Year.
13.2 Financial Statements. Commencing after the closing of the
sales of the Units pursuant to the Offering, all Members will be provided
annually with financial statements of the Company. including a balance sheet
and the related statements of income and retained earnings and changes in
financial position. The financial statements of the Company shall be
accompanied by a report of an independent public accountant stating that an
audit of such financial statements has been made in accordance with generally
accepted accounting principles, stating the opinion of such accountant with
respect to the financial statements and the accounting principles and practices
reflected therein and with respect to the consistency of the application of
such accounting principles, and identifying any matters to which such
accountant takes exception and stating, to the extent practicable, the effect
of each such exception on such financial statements. In addition, the Company
shall file all federal, state, and local income tax returns and information
returns, if any, which the Partnership is required to file. Within ninety (90)
days after the end of each Fiscal Year, the Managing Member will cause to be
delivered to each Person who was a Member at any time during such Fiscal Year a
Form K-1 and such other information, if any, with respect to the Company as may
be necessary for the preparation of such Member's federal, state and local
income tax returns, including a statement showing each Member's share of
income, gain or loss, expense and credits for such Fiscal Year for federal
income tax purposes.
13.3 Bank Accounts. The funds of the Company held in Permitted
Temporary Investments or in bank accounts shall be deposited in the name of the
Company in such Permitted Temporary Investments or in such bank account or
accounts as shall be designated by the Managing Member in its sole discretion.
Withdrawals therefrom shall be made upon the signature of the Managing Member
or of any authorized agent of the Managing Member.
ARTICLE XIV
Miscellaneous
14.1 Notices.
(a) Any notice to a Member shall be sent to the address
of such Member set forth in Schedule A hereto or such other mailing
address of which such Member shall advise the Managing Member in
writing. Any notice to the Company shall be sent to the principal
office of the Company as set forth in Section 2.3. The Managing
Member may at any time
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<PAGE> 45
change the location of such office. Prompt notice of any such change
shall be given to the Members.
(b) Any notice shall be deemed to have been duly given if
(i) sent by United States certified or registered mail, return receipt
requested, when received, (ii) personally delivered or delivered by
telecopy, when received, (iii) sent by United States Express Mail or
overnight courier, on the second following business day, or (iv) by
telegram or telex on the following business day.
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS. IT IS THE
INTENTION OF THE PARTIES THAT THE INTERNAL LAWS OF THE STATE OF DELAWARE AND,
IN PARTICULAR, THE PROVISIONS OF THE DELAWARE ACT, SHALL GOVERN THE VALIDITY OF
THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND INTERPRETATION OF THE RIGHTS
AND DUTIES OF THE PARTIES. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO
BE INVALID, THE REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED THEREBY.
14.3 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING INVOLVING ANY
DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
TO THE COMPANY'S AFFAIRS OR THE RIGHTS OR INTERESTS OF THE MEMBERS OR ANY OF
THEM OR THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER ARISING DURING
THE COMPANY'S TERM OR AT OR AFTER ITS TERMINATION OR DURING OR AFTER THE
LIQUIDATION OF THE COMPANY (EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND
CLAIMS IS HEREINAFTER REFERRED TO AS A "COMPANY DISPUTE"), SHALL BE BROUGHT
ONLY IN A COURT LOCATED IN THE STATE OF NEW YORK, AND EACH OF THE PARTIES
HERETO (I) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS
AND ANY RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES
HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING A COMPANY DISPUTE.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and it supersedes any prior agreement or
understandings among them, oral or written. There are no representations,
agreements, arrangements or understandings, oral or written, between or among
the Members relating only to the subject matter of this Agreement which are not
fully expressed herein. This Agreement may not be modified or amended other
than pursuant to Article XI.
14.5 Headings, etc. The headings in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and
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pronouns stated in either the masculine or the neuter gender shall include the
masculine, the feminine and the neuter.
14.6 Binding Provisions. The covenants and agreements contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, personal or legal representatives, successors and assigns of
the respective parties hereto.
14.7 No Waiver. The failure of any Member to seek redress for
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted
a violation from having the effect of an original violation.
14.8 No Right to Partition. To the extent permitted by law, and
except as otherwise expressly provided in this Agreement, the Members, on
behalf of themselves and their shareholders, members, heirs, executors,
administrators, personal or legal representatives, successors and assigns, if
any, hereby specifically renounce, waive and forfeit all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the Company
or any asset of the Company, or any interest which is considered to be Company
property, regardless of the manner in which title to any such property may be
held.
14.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.10 Reasonable Consents. Each of the Members agrees that whenever
the consent of a Member is required or provided for pursuant to this Agreement
(other than the consent of the Managing Member pursuant to Section 8.3.1(b),
Section 8.4, or Section 10.1), such Member shall not unreasonably withhold or
delay its consent.
14.11 Tax Matters Partner. Each Member hereby appoints and
designates the Managing Member as the tax matters partner (the "Tax Matters
Partner"), as such term is defined in the Code and the regulations thereunder.
The Tax Matters Partner is authorized to take all action on behalf of the
Company and the Members permitted under the Code. The Tax Matters Partner may
engage accountants or attorneys to assist the Tax Matters Partner in
discharging its duties hereunder. All reasonable expenses incurred by the Tax
Matters Partner in connection with any administrative proceeding before the
Internal Revenue Service and/or judicial review of such proceeding, including
reasonable accountants' and attorneys' fees, shall be deemed an operating
expense of the Company and shall be paid by the Company.
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ARTICLE XV
Interpretation and Dispute Resolution
The Managing Member shall decide all issues relating to the
Company, and shall have sole authority to interpret this Agreement and to
resolve all ambiguities relating to the interpretation of this Agreement, in
each case in such manner as it deems appropriate in its sole discretion, and
all such decisions, interpretations, and resolutions made by the Managing
Member shall be conclusive and shall bind all of the Members in all respects.
ARTICLE XVI
Release
As a condition to being admitted to the Company, each Member
hereby fully and unconditionally releases and discharges all claims and causes
of action, whether known or unknown, which it or its heirs, personal
representatives, successors, or assigns ever had, now have, or hereafter may
have, against any of the Company, the Managing Member, the Initial Member, IFG,
their respective Affiliates, and their respective directors, officers,
stockholders, partners, employees, agents, counsel, control persons,
successors, and assigns, if any, on account of any matter, act, or occurrence
prior to or on the date that such Member is admitted to the Company in
compliance with the provisions of this Agreement that relates to the Company,
the management of the Company by the Managing Member, the preparation of
valuations of Balcor Securities, the purchase, sale or management of the
Company's assets by the Managing Member, any extraordinary transactions by the
Company, such as a merger or sale of assets, and the Member's purchase of
Units.
ARTICLE XVII
IFG Covenant
IFG covenants to use its commercially reasonable best efforts
to cause any Balcor Partnership Interests that may be acquired by the Company
or its Subsidiaries to be transferred (whether directly or indirectly, by
merger, consolidation, or otherwise) to any REIT that IFG may, in its sole
discretion, directly or indirectly sponsor, control, or form in exchange for
cash or equity, debt (including convertible debt) or other securities in such
REIT. The terms of any such exchange will be set by IFG and the Managing
Member. For the purposes of this Article XVII, IFG shall not be deemed to
directly or indirectly sponsor or control the Angeles Mortgage Investment
Trust.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Members:
MAP VII ACQUISITION CORPORATION
By: /s/ Andrew L. Farkas
--------------------------------------------
Name: Andrew L. Farkas
Title: President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
--------------------------------------------
Name: Frank M. Garrison
Title: Executive Managing
Director
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Schedule A
February 29, 1996
<TABLE>
<CAPTION>
Name of Member: Address of Member
- --------------- -----------------
<S> <C>
MAP VII Acquisition Corporation One Insignia Financial Plaza
Greenville, South Carolina 29602
Insignia Financial Group, Inc. One Insignia Financial Plaza
Greenville, South Carolina 29602
</TABLE>
<PAGE> 50
Schedule B
February 29, 1996
<TABLE>
<CAPTION>
Capital Percentage
Name of Member: Contribution Interest
- --------------- ------------ ----------
<S> <C> <C>
MAP VII Acquisition Corporation $1.01 1%
Insignia Financial Group, Inc. $100 99%
</TABLE>
B-1
