<PAGE>
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. 7)
--------------------------
SHELTER PROPERTIES I LIMITED PARTNERSHIP
(Name of Subject Company)
COOPER RIVER PROPERTIES, L.L.C.
INSIGNIA PROPERTIES, L.P.
INSIGNIA PROPERTIES TRUST
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
--------------------------
JEFFREY P. COHEN
SENIOR VICE PRESIDENT
INSIGNIA FINANCIAL GROUP, INC.
375 PARK AVENUE, SUITE 3401
NEW YORK, NEW YORK 10152
(212) 750-6070
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN A. HEALY, ESQ.
ROGERS & WELLS
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
--------------------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
Transaction Valuation*: $1,500,000 Amount of Filing Fee: $300
- -------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the purchase
of 2,400 units of limited partnership interest ("Units") of the subject
partnership for $625 per Unit. The amount of the filing fee, calculated in
accordance with Section 14(g)(3) and 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 bidders.
[ ] 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
- -------------------------------------------------------------------------------
<PAGE>
- --------------- --------
CUSIP No. NONE 14D-1 AND 13D/A Page 2
- --------------- --------
===============================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
COOPER RIVER PROPERTIES, L.L.C.
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Sources of Funds
AF
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,864
- -------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
[ ]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
39.1%
- -------------------------------------------------------------------------------
10. Type of Reporting Person
OO
===============================================================================
<PAGE>
- --------------- --------
CUSIP No. NONE 14D-1 AND 13D/A Page 3
- --------------- --------
===============================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA PROPERTIES, L.P.
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Sources of Funds
WC
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,864
- -------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
[ ]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
39.1%
- -------------------------------------------------------------------------------
10. Type of Reporting Person
PN
===============================================================================
<PAGE>
- --------------- --------
CUSIP No. NONE 14D-1 AND 13D/A Page 4
- --------------- --------
===============================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA PROPERTIES TRUST
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
MARYLAND
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,864
- -------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
[ ]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
39.1%
- -------------------------------------------------------------------------------
10. Type of Reporting Person
OO
===============================================================================
<PAGE>
- --------------- --------
CUSIP No. NONE 14D-1 AND 13D/A Page 5
- --------------- --------
===============================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
INSIGNIA FINANCIAL GROUP, INC.
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,864
- -------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
[ ]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
39.1%
- -------------------------------------------------------------------------------
10. Type of Reporting Person
CO
===============================================================================
<PAGE>
- --------------- --------
CUSIP No. NONE 14D-1 AND 13D/A Page 6
- --------------- --------
===============================================================================
1. Name of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
ANDREW L. FARKAS
- -------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Sources of Funds
NOT APPLICABLE
- -------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
UNITED STATES
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,864
- -------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row 7 Excludes Certain Shares
[ ]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row 7
39.1%
- -------------------------------------------------------------------------------
10. Type of Reporting Person
IN
===============================================================================
<PAGE>
SCHEDULE 14D-1/AMENDMENT NO. 7 TO SCHEDULE 13D
This Tender Offer Statement on Schedule 14D-1 (the "Statement") also
constitutes Amendment No. 7 to the Statement on Schedule 13D previously filed
by Insignia Properties, L.P. ("IPLP"), Insignia Properties Trust ("IPT"),
Insignia Financial Group, Inc. ("Insignia"), and Andrew L. Farkas in connection
with their beneficial ownership of Units (as defined below). The item numbers
and responses thereto set forth below are in accordance with the requirements
of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Shelter Properties I Limited
Partnership, a South Carolina limited partnership (the "Partnership"). The
address of the Partnership's principal executive offices is One Insignia
Financial Plaza, Greenville, South Carolina 29602.
(b) This Statement relates to an offer by Cooper River Properties,
L.L.C., a Delaware limited liability company (the "Purchaser"), to purchase up
to 2,400 of the outstanding units of limited partnership interest ("Units") of
the Partnership at a purchase price of $625 per Unit, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated July 21, 1998 (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)(1) and (a)(2) 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, IPLP, IPT
and Insignia (collectively, the "Bidders"), and solely, insofar as the filing
also constitutes Amendment No. 7 to the Schedule 13D, by Mr. Farkas. The
information set forth in the Offer to Purchase under "Introduction," in Section
11 ("Certain Information Concerning the Purchaser, IPLP, IPT and Insignia") and
in Schedules I, II and III to the Offer to Purchase is incorporated herein by
reference.
(e)-(f) During the last five years, none of the Bidders nor, to the
best of their knowledge, any of the persons listed in Schedules I, II and III
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 Insignia, IPT and the
Purchaser") is incorporated herein by reference.
7
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(c) The information set forth in the Offer to Purchase in Section 8
("Future Plans of Insignia, IPT and 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 Concerning the
Purchaser, IPLP, IPT 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 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 Concerning the Purchaser, IPLP, IPT and Insignia") and Section 13
("Background of the Offer") 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 Concerning the Purchaser, IPLP, IPT and Insignia") is
incorporated herein by reference. In addition, the following are expressly
incorporated in this Statement by reference: (i) the audited financial
statements of Insignia set forth at Part I-Item 8 of Insignia's Annual Report
on Form 10-K for the year ended December 31, 1997, which is on file with the
Commission; and (ii) the unaudited financial statements of Insignia set forth
at Part I-Item 1 of Insignia's Quarterly Report on Form 10-Q/A for the period
ended March 31, 1998, which is on file with the Commission.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase 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)(1) and (a)(2) hereto, respectively, is incorporated herein by reference in
its entirety.
8
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated July 21, 1998.
(a)(2) Assignment of Partnership Interest and Related
Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated July 21, 1998, from the Purchaser to
the Limited Partners of the Partnership.
(b)(1) Credit Agreement, dated December 30, 1997.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Summaries of appraisals referred to in the Offer to
Purchase in Section 13 ("Background of the Offer").
(z)(2) Agreement of Joint Filing, dated July 21, 1998, among the
Purchaser, IPLP, IPT, Insignia and Andrew L. Farkas.
9
<PAGE>
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: July 21, 1998
COOPER RIVER PROPERTIES, L.L.C. INSIGNIA FINANCIAL GROUP, INC.
By: /s/ JEFFREY P. COHEN By: /s/ FRANK M. GARRISON
--------------------------- ---------------------------------
Jeffrey P. Cohen Frank M. Garrison
Manager Executive Managing Director
INSIGNIA PROPERTIES, L.P. SOLELY FOR PURPOSES OF, AND INSOFAR
AS THIS FILING CONSTITUTES, AMENDMENT
By: Insignia Properties Trust, NO. 7 TO THE STATEMENT ON SCHEDULE
its General Partner 13D
By: /s/ JEFFREY P. COHEN /s/ ANDREW L. FARKAS
--------------------------- ------------------------------------
Jeffrey P. Cohen ANDREW L. FARKAS
Senior Vice President
INSIGNIA PROPERTIES TRUST
By: /s/ JEFFREY P. COHEN
---------------------------
Jeffrey P. Cohen
Senior Vice President
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Jeffrey P. Cohen his true and lawful
attorney-in-fact and agent to sign in any and all capacities this Amendment No.
7 and all further amendments to the Statement on Schedule 13D and to file the
same with all exhibits thereto and other documents in connection therewith with
the Securities and Exchange Commission, granting to such attorney-in-fact and
agent full power and authority to do all such other acts and execute all such
other documents as he may deem necessary or desirable in connection with the
foregoing, as fully as the undersigned might or could do in person, hereby
ratifying and confirming that such attorney-in-fact and agent may lawfully do
or cause to be done by virtue hereof.
/s/ ANDREW L. FARKAS
- ------------------------------
Andrew L. Farkas
Dated: July 21, 1998
10
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1) Offer to Purchase, dated July 21, 1998.
(a)(2) Assignment of Partnership Interest and Related Instructions.
(a)(3) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(4) Cover Letter, dated July 21, 1998, from the Purchaser to the
Limited Partners of the Partnership.
(b)(1) Credit Agreement, dated December 30, 1997.
(z)(1) Summaries of appraisals referred to in the Offer to Purchase
in Section 13 ("Background of the Offer").
(z)(2) Agreement of Joint Filing, dated July 21, 1998, among the
Purchaser, IPLP, IPT, Insignia and Andrew L. Farkas.
11
<PAGE>
Offer to Purchase for Cash
Up to 2,400 Units of Limited Partnership Interest
in
SHELTER PROPERTIES I LIMITED PARTNERSHIP,
a South Carolina limited partnership
for
$625 Net Per Unit
by
COOPER RIVER PROPERTIES, L.L.C.
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK TIME, ON AUGUST 17, 1998, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
IMPORTANT
Cooper River Properties, L.L.C., a Delaware limited liability company
(the "Purchaser"), is offering to purchase up to 2,400 of the outstanding units
of limited partnership interest ("Units") in Shelter Properties I Limited
Partnership, a South Carolina limited partnership (the "Partnership"), at a
purchase price of $625 per Unit (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. Holders of Units (each, a "Limited
Partner") who tender their Units in response to the Offer will not be obligated
to pay any commissions or partnership transfer fees. The Purchaser is an
affiliate of Shelter Realty Corporation, which is the corporate general partner
of the Partnership (the "General Partner").
Limited Partners are urged to consider the following factors:
o The Purchaser and the General Partner are both affiliates of and
controlled by Insignia Properties Trust ("IPT"), which is
controlled by Insignia Financial Group, Inc. ("Insignia"). IPT,
through its operating partnership Insignia Properties, L.P.
("IPLP"), currently owns 5,864 Units, (including 3,999 Units,
which were originally acquired by an affiliate of the General
Partner and Insignia, at a purchase price of $457.40 per Unit
pursuant to a tender offer commenced in April 1995).
o The net asset value per Unit most recently estimated by the
General Partner was $1,022 as of December 31, 1997, and the net
liquidation value per Unit (the "Estimated Liquidation Value")
estimated by the Purchaser (which is an affiliate of the General
Partner) in connection with the Offer is $961.87. The Purchaser
does not believe, however, that either the General Partner's net
asset value estimate or the Estimated Liquidation Value
represents a fair estimate of the market value of a Unit,
primarily due to the fact that such estimates do not take into
account timing considerations, market uncertainties 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 such estimates should be viewed
as representative of the amount a Limited Partner can
realistically expect to obtain on a sale of a Unit in the near
term.
<PAGE>
o The Purchaser will have the right to vote all Units acquired
pursuant to the Offer. If the Purchaser (which is an affiliate of
the General Partner) is successful in acquiring more than 1,636
Units, IPT will own in excess of 50% of the total Units
outstanding and, accordingly, will be able to control the outcome
of all voting decisions with respect to the Partnership,
including decisions regarding liquidation, amendments to the
Limited Partnership Agreement, removal and replacement of the
General Partner or an individual general partner and mergers,
consolidations and other extraordinary transactions. Even if the
Purchaser acquires a lesser number of Units pursuant to the
Offer, however, because IPT already owns (through IPLP)
approximately 39% of the outstanding Units it will be able to
significantly influence the outcome of all voting decisions with
respect to the Partnership.
o The Purchaser (which is an affiliate of the General Partner) is
making the Offer with a view to making a profit. Accordingly,
there is a conflict between the desire of the Purchaser (which is
an affiliate of the General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their Units
at a high price.
THE OFFER IS NOT CONDITIONED ON FINANCING OR UPON ANY MINIMUM
AGGREGATE NUMBER OF UNITS BEING TENDERED.
----------------------------------------
Any Limited Partner desiring to tender Units should complete and sign
the Assignment of Partnership Interest in accordance with the Instructions to
the Assignment of Partnership Interest and mail or deliver the signed
Assignment of Partnership Interest to the Depositary. A Limited Partner may
tender any or all of the Units owned by that Limited Partner; provided,
however, that because of restrictions in the Partnership's Limited Partnership
Agreement, in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold a minimum of
five Units. Tenders of fractional Units will not be permitted, except by a
Limited Partner who is tendering all of the Units owned by that 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 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 (which is an
affiliate of the General Partner).
----------------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
at
(800) 854-9486
July 21, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION............................................................. 1
The Purchaser; Affiliation with the General Partner.................. 1
Some Factors to Be Considered by Limited Partners.................... 1
Reasons for and Effects of the Offer................................. 3
Certain Tax Considerations........................................... 3
Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties;
Alternatives..................................................... 4
Conditions........................................................... 4
Distributions........................................................ 4
Outstanding Units.................................................... 4
THE OFFER................................................................ 5
Section 1. Terms of the Offer; Expiration Date; Proration........... 5
Section 2. Acceptance for Payment and Payment for Units............. 6
Section 3. Procedure for Tendering Units............................ 6
Valid Tender..................................................... 6
Signature Requirements........................................... 6
Delivery of Assignment of Partnership Interest................... 7
Appointment as Proxy; Power of Attorney.......................... 7
Assignment of Interest in Future Distributions................... 7
Determination of Validity; Rejection of Units; Waiver of
Defects; No Obligation to Give Notice of Defects.............. 8
Backup Federal Income Tax Withholding............................ 8
FIRPTA Withholding............................................... 8
Binding Obligation............................................... 8
Section 4. Withdrawal Rights........................................ 8
Section 5. Extension of Tender Period; Termination; Amendment....... 9
Section 6. Certain Federal Income Tax Matters....................... 9
General.......................................................... 9
Gain or Loss Generally........................................... 10
Pending Legislation.............................................. 10
Unrealized Receivables and Certain Inventory..................... 11
Passive Activity Loss Limitation................................. 11
Partnership Termination.......................................... 11
Backup Withholding and FIRPTA Withholding........................ 12
Section 7. Effects of the Offer..................................... 12
Limitations on Resales........................................... 12
Effect on Trading Market; Registration Under Section 12(g)
of the Exchange Act........................................... 12
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with General Partner................... 12
Section 8. Future Plans of Insignia, IPT and the Purchaser.......... 13
Section 9. Certain Information Concerning the Partnership........... 14
General.......................................................... 14
Originally Anticipated Term of Partnership; Alternatives......... 14
General Policy Regarding Sales and Refinancings of Partnership
Properties.................................................... 14
Selected Financial and Property-Related Data..................... 14
Cash Distributions History....................................... 17
Operating Budgets of the Partnership............................. 17
Section 10. Conflicts of Interest and Transactions with Affiliates.. 17
Conflicts of Interest with Respect to the Offer.................. 17
i
<PAGE>
Voting by the Purchaser.......................................... 18
Financing Arrangements........................................... 18
Transactions with Affiliates..................................... 18
Section 11. Certain Information Concerning the Purchaser,
IPLP, IPT and Insignia............................................. 19
The Purchaser.................................................... 19
IPT and IPLP..................................................... 19
Insignia......................................................... 20
Section 12. Source of Funds......................................... 22
Section 13. Background of the Offer................................. 23
Affiliation With the General Partner............................. 23
Determination of Purchase Price.................................. 23
Section 14. Conditions of the Offer................................. 28
Section 15. Certain Legal Matters................................... 29
General.......................................................... 29
Antitrust........................................................ 29
Margin Requirements.............................................. 29
Section 16. Fees and Expenses....................................... 29
Section 17. Miscellaneous........................................... 29
SCHEDULE I - Information Regarding the Managers of the Purchaser.... S-1
SCHEDULE II - Information Regarding the Trustees and Executive
Officers of IPT........................................ S-2
SCHEDULE III - Information Regarding the Directors and Executive
Officers of Insignia................................... S-4
SCHEDULE IV - IPT Partnerships....................................... S-7
ii
<PAGE>
TO THE LIMITED PARTNERS OF
SHELTER PROPERTIES I LIMITED PARTNERSHIP
INTRODUCTION
Cooper River Properties, L.L.C. (the "Purchaser"), which is a Delaware
limited liability company and an affiliate of the General Partner, hereby
offers to purchase up to 2,400 Units, representing approximately 16% of the
Units outstanding, in Shelter Properties I Limited Partnership, a South
Carolina limited partnership (the "Partnership"), at a purchase price of $625
per Unit (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
Offer is not conditioned on any aggregate minimum number of Units being
tendered. A Limited Partner may tender any or all of the Units owned by that
Limited Partner; provided, however, that because of restrictions in the
Partnership's Limited Partnership Agreement (the "Limited Partnership
Agreement"), in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer, the Limited Partner must continue to hold a minimum of
five Units. Tenders of fractional Units will not be permitted, except by a
Limited Partner who is tendering all of the Units owned by that Limited
Partner. The Purchaser (which is an affiliate of the General Partner) will pay
all charges and expenses of Beacon Hill Partners, Inc., who will serve as the
Purchaser's information agent for the Offer (the "Information Agent"), and
Harris Trust Company of New York, who will act as depositary for the Offer (the
"Depositary").
The Purchaser; Affiliation with the General Partner. Shelter Realty
Corporation, which is the corporate general partner of the Partnership (the
"General Partner"), is a wholly-owned subsidiary of Insignia Properties Trust,
a Maryland real estate investment trust ("IPT"). The individual general partner
of the Partnership, N. Barton Tuck, Jr., is prohibited by the Limited
Partnership Agreement from participating in the activities of the Partnership.
The Purchaser is a newly-formed, wholly-owned subsidiary of Insignia
Properties, L.P., a Delaware limited partnership ("IPLP"), which is the
operating partnership of IPT. IPT is the sole general partner of IPLP (owning
approximately 66% of the total equity interests in IPLP), and Insignia
Financial Group, Inc., a Delaware corporation ("Insignia"), is the sole limited
partner of IPLP (owning approximately 34% of the total equity interests in
IPLP). Insignia and its affiliates also own approximately 68% of the
outstanding common shares of IPT. For more than the past three years, Insignia
Residential Group, L.P. ("IRG"), which is an affiliate of Insignia and the
Purchaser, has provided property management services to the Partnership, and
Insignia (directly or through affiliates) has performed asset management,
partnership administration and investor relations services for the Partnership.
By reason of these relationships, the General Partner has conflicts of interest
in considering the Offer. The General Partner has indicated in a Statement on
Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange
Commission (the "Commission") that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Units in
response to the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE AND THE RELATED MATERIALS AND THE SCHEDULE 14D-9 CAREFULLY AND IN
THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS. See Sections 10
and 13.
Some Factors to Be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Aspects of the Offer for Limited Partners
o The Purchaser and the General Partner are affiliates of and
controlled by IPT, which is controlled by Insignia. The General
Partner has conflicts of interest in considering the Offer,
including (i) as a result of the fact that a sale or liquidation
of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its
affiliates and (ii) the fact that as a consequence of the
Purchaser's ownership of Units, the Purchaser (which is an
affiliate of the General Partner) may have incentives to seek to
maximize the value of its ownership of Units, which in turn may
result in a conflict for the General Partner in attempting to
reconcile the interests of the Purchaser (which is an affiliate
of the General Partner) with the interests of the other Limited
Partners. See Section 10.
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o The net asset value per Unit most recently estimated by the
General Partner was $1,022 as of December 31, 1997, and the net
liquidation value per Unit (the "Estimated Liquidation Value")
estimated by the Purchaser (which is an affiliate of the General
Partner) in connection with the Offer is $961.87. See Section 13
for a discussion of why the Purchaser (which is an affiliate of
the General Partner) believes that such estimates are not
necessarily indicative of the fair market value of a Unit. THE
PURCHASER (WHICH IS AN AFFILIATE OF THE GENERAL PARTNER) MAKES NO
REPRESENTATION AND EXPRESSES NO OPINION AS TO THE FAIRNESS OR
ADEQUACY OF THE PURCHASE PRICE.
o As with any rational investment decision, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a
view to making a profit. Accordingly, there is a conflict between
the desire of the Purchaser (which is an affiliate of the General
Partner) to purchase Units at a low price and the desire of the
Limited Partners to sell their Units at a high price.
o If the Purchaser is successful in acquiring more than 1,636 Units
pursuant to the Offer, IPT (which is an affiliate of the General
Partner) will own in excess of 50% of the total Units outstanding
and, accordingly, will be able to control the outcome of all
voting decisions with respect to the Partnership, including
decisions concerning liquidation, amendments to the Limited
Partnership Agreement, removal and replacement of the General
Partner or an individual general partner and mergers,
consolidations and other extraordinary transactions. Even if the
Purchaser acquires a lesser number of Units pursuant to the
Offer, however, because IPT already owns (through IPLP)
approximately 39% of the outstanding Units it will be able to
significantly influence the outcome of all voting decisions with
respect to the Partnership. This means that (i) non-tendering
Limited Partners could be prevented from taking action they
desire but that IPT (which is an affiliate of the General
Partner) opposes and (ii) IPT (which is an affiliate of the
General Partner) may be able to take action desired by IPT but
opposed by the non-tendering Limited Partners.
Potentially Beneficial Aspects of the Offer for Limited Partners
o Although there are some limited resale mechanisms available to
Limited Partners wishing to sell their Units, there is no formal
trading market for Units. At present, Limited Partners may seek
to negotiate private sales or sales through a trading system such
as the American Partnership Board, which publishes sell offers by
Limited Partners in respect of Units. Accordingly, THE OFFER
AFFORDS LIMITED PARTNERS AN OPPORTUNITY TO DISPOSE OF THEIR UNITS
FOR CASH WHICH OTHERWISE MIGHT NOT BE AVAILABLE TO THEM.
o THE OFFER MAY BE ATTRACTIVE TO LIMITED PARTNERS WHO HAVE AN
IMMEDIATE NEED FOR CASH. Although the Purchase Price is
approximately 4% greater than the highest reported sales price of
any Unit during the past six months (based on published
information and information provided by the General Partner), the
General Partner has information that indicates the highest
reported sales price represented an isolated transaction between
two affiliated parties for a minimal number of Units and such
sales price was materially higher than the range of sales prices
for arms length transactions between unaffiliated parties for the
six-month period. See Section 13. In addition, reported secondary
market sales prices do not take into account commissions and
transfer fees typically payable by a Limited Partner in
connection with a secondary market sale. Therefore, the actual
proceeds received by a Limited Partner who sells Units in the
secondary market are typically significantly less than the
reported sales prices.
o LIMITED PARTNERS WHO SELL UNITS PURSUANT TO THE OFFER WILL NOT BE
CHARGED ANY SALES COMMISSIONS (WHICH GENERALLY RANGE FROM 3% TO
10% OF THE SALES PRICE) OR PARTNERSHIP TRANSFER FEES (WHICH ARE
TYPICALLY $100 PER TRANSFER). The Purchaser will pay all transfer
fees imposed by the Partnership in connection with sales of Units
pursuant to the Offer.
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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, real estate markets also may be adversely affected by
a variety of factors, including possible fluctuations in interest
rates, economic slowdowns and overbuilding. Accordingly,
ownership of Units 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
Units. In addition, A LIMITED PARTNER WHO SELLS 100% OF ITS UNITS
PURSUANT TO THE OFFER WILL NO LONGER BE SUBJECT TO THE PASSIVE
ACTIVITY LOSS LIMITATION WITH RESPECT TO "SUSPENDED" LOSSES
ATTRIBUTABLE TO THOSE UNITS 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 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 Units will be giving up the opportunity
to participate in any potential future benefits represented by
the ownership of those Units, 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 Partnership's properties or in connection with
any future liquidation of the Partnership. Instead, any such
distributions of cash or property with respect to Units tendered
in the Offer and purchased by the Purchaser will be paid to the
Purchaser.
The Purchaser (which is an affiliate of the General Partner) makes no
recommendation to any Limited Partner as to whether to tender or refrain from
tendering Units and has been advised by the General Partner that the General
Partner also expects to make no recommendation. Each Limited Partner must make
its own decision, based on the Limited Partner's particular circumstances, as
to whether to tender Units and, if so, how many Units to tender. Limited
Partners should consult with their respective advisors regarding 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 UNITS.
Reasons for and Effects of the Offer. The Purchaser's purpose in
making the Offer is to increase IPT's equity interest in the Partnership,
primarily for investment purposes and with a view to making a profit. If the
Purchaser (which is an affiliate of the General Partner) is successful in
acquiring more than 1,636 Units pursuant to the Offer, IPT will own in excess
of 50% of the total Units outstanding and, accordingly, will be able to control
the outcome of all votes by Limited Partners. Even if the Purchaser acquires a
lesser number of Units pursuant to the Offer, however, because IPT already owns
(through IPLP) approximately 39% of the outstanding Units it will be able to
significantly influence the outcome of all voting decisions with respect to the
Partnership. See Sections 8, 10 and 13.
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 Units sold over (under)
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 Units since their
issuance by the Partnership, the sale is expected to result in a gain, which
may be taxable as ordinary income, capital gain or gain from real estate
depreciation recapture. If a Limited Partner has suspended "passive losses"
from the Partnership or other passive activity investments, such Limited
Partner generally may deduct these losses up to the amount of any gain from the
sale. A sale pursuant to the Offer of all of a Limited Partner's Units 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.
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Originally Anticipated Term of the Partnership; General Policy
Regarding Sales and Refinancings of Partnership Properties; Alternatives.
According to the Partnership's Prospectus dated July 3, 1980 the General
Partner anticipated that the Partnership would sell and/or refinance its
properties three to eight years after their acquisition, depending upon the
then current real estate and money markets, economic climate and income tax
consequences to the Limited Partners. In general, the General Partner regularly
evaluates the Partnership's properties by considering various factors, such as
the Partnership's financial position and real estate and capital markets
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. Based on the above considerations, the General Partner
has determined that it is not in the best interest of Limited Partners to sell
or refinance any of the Partnership's properties at the present time. Under the
Limited Partnership Agreement the term of the Partnership will continue until
December 31, 2019, unless sooner terminated as provided in the Limited
Partnership Agreement or by law. Limited Partners could, as an alternative to
tendering their Units, take a variety of possible actions, including voting to
liquidate the Partnership or causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any aggregate minimum
number of Units being tendered. Certain other conditions do apply, however. See
Section 14.
Distributions. The Partnership has made a cash distribution to Limited
Partners of $52.87 per Unit in 1998 (through July 21), and made a distribution
of $83.33 per Unit in 1997. In total, original investors in the Partnership
have received distributions of $1,030.31 in respect of their original $1,000
investment made in 1980. See Section 9. The Partnership is currently generating
positive cash flow from operations, and the Purchaser (which is an affiliate of
the General Partner) believes that the Partnership will continue to generate
positive cash flow from operations. The General Partner has advised the
Purchaser (which is an affiliate of the General Partner) that the General
Partner presently expects the Partnership to make a distribution of
approximately $53.00 per Unit sometime during the third quarter of 1998. The
potential for this and other future distributions was considered by the
Purchaser (which is an affiliate of the General Partner) when establishing the
Purchase Price. Limited Partners who tender their Units in response to the
Offer will retain any distributions made through July 21, 1998, and will be
entitled to receive and retain any subsequent distributions made by the
Partnership prior to the date on which the Purchaser pays for tendered Units
pursuant to the Offer, although any such subsequent distribution will result in
a reduction of the Purchase Price. See Section 1. However, tendering Limited
Partners will not be entitled to receive or retain any distributions in respect
of tendered Units which are made on or after the date on which the Purchaser
pays for such Units pursuant to the Offer, regardless of the fact that the
record date (as opposed to the payment date) for any such distribution may be a
date prior to the date of purchase. See Section 3.
Outstanding Units. According to information supplied by the
Partnership, as of July 1, 1998 there were 15,000 Units issued and outstanding,
which were held of record by 732 Limited Partners. IPLP currently owns 5,864
(representing approximately 39%) of the outstanding Units.
4
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THE OFFER
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) up to 2,400 Units 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" shall mean
12:00 midnight, New York City time, on August 17, 1998, unless the Purchaser
(which is an affiliate of the General Partner) in its sole discretion shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on 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 WILL AUTOMATICALLY BE REDUCED BY THE AGGREGATE
AMOUNT OF DISTRIBUTIONS PER UNIT, IF ANY, MADE BY THE PARTNERSHIP TO LIMITED
PARTNERS ON OR AFTER JULY 21, 1998 AND PRIOR TO THE DATE ON WHICH THE PURCHASER
PAYS FOR UNITS PURCHASED PURSUANT TO THE OFFER.
If, prior to the Expiration Date, the Purchaser (which is an affiliate
of the General Partner) increases the consideration offered to Limited Partners
pursuant to the Offer, the increased consideration will be paid for all Units
accepted for payment pursuant to the Offer, regardless of whether the Units
were tendered prior to the increase in the consideration offered.
If more than 2,400 Units are validly tendered prior to the Expiration
Date and not properly withdrawn prior to the Expiration Date in accordance with
the procedures specified in Section 4, the Purchaser (which is an affiliate of
the General Partner) will, upon the terms and subject to the conditions of the
Offer, accept for payment and pay for an aggregate of 2,400 of the Units so
tendered, pro rata according to the number of Units validly tendered by each
Limited Partner and not properly withdrawn on or prior to the Expiration Date,
with appropriate adjustments to avoid (i) purchases of fractional Units and
(ii) purchases that would violate Section 9.1 of the Limited Partnership
Agreement (which generally requires that, in order for a partial tender to be
valid, a Limited Partner continues to hold a minimum of five Units). If the
number of Units validly tendered and not properly withdrawn on or prior to the
Expiration Date is less than or equal to 2,400 Units, the Purchaser (which is
an affiliate of the General Partner) will purchase all Units so tendered and
not withdrawn, upon the terms and subject to the conditions of the Offer.
If proration of tendered Units is required, then, 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 Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, the Purchaser (which is an affiliate of the General
Partner) does not intend to pay for any Units 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
(which is an affiliate of the General Partner) 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 Units tendered and terminate the Offer,
(ii) waive all of the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iii) extend the Offer and, subject to the right of Limited Partners
to withdraw Units until the Expiration Date, retain the Units that have been
tendered during the period or periods for which the Offer is extended, and/or
(iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership
Interest are being mailed by the Purchaser (which is an affiliate of the
General Partner) to the persons shown by the Partnership's records to have been
Limited Partners or (in the case of Units owned of record by IRAs and qualified
plans) beneficial owners of Units as of July 1, 1998.
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SECTION 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. Upon the
terms and subject to the conditions of the Offer, the Purchaser (which is an
affiliate of the General Partner) will accept for payment (and thereby
purchase) and will pay for all Units 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
Units whose Units are held of record in an 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 Units
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Assignment of Partnership
Interest and any other documents required by the Assignment of Partnership
Interest. See Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
For purposes of the Offer, the Purchaser (which is an affiliate of the
General Partner) will be deemed to have accepted for payment pursuant to the
Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser (which is an affiliate of the General Partner) gives verbal or
written notice to the Depositary of the Purchaser's acceptance of those Units
for payment pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Units accepted for payment pursuant to the 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 those payments to Limited Partners whose Units
have been accepted for payment.
If any tendered Units are not purchased for any reason, the Assignment
of Partnership Interest with respect to such Units will be destroyed by the
Purchaser (which is an affiliate of the General Partner). If for any reason
acceptance for payment of, or payment for, any Units tendered pursuant to the
Offer is delayed or the Purchaser is unable to accept for payment, purchase or
pay for Units tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14, the Depositary may, nevertheless, on
behalf of the Purchaser (which is an affiliate of the General Partner) retain
tendered Units, and those Units 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 Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
The Purchaser (which is an affiliate of the General Partner) 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 Units 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 Units validly tendered and
accepted for payment pursuant to the Offer.
SECTION 3. PROCEDURE FOR TENDERING UNITS.
Valid Tender. In order for a tendering Limited Partner to participate
in the Offer, its Units must be validly tendered and not withdrawn on or prior
to the Expiration Date. To validly tender Units, a properly completed and duly
executed Assignment of Partnership Interest and any other documents required by
the Assignment of Partnership Interest must be received by the 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 Units
owned by that Limited Partner; provided, however, that because of restrictions
in the Limited Partnership Agreement, in order for a partial tender to be
valid, after the sale of Units pursuant to the Offer, the Limited Partner must
continue to hold a minimum of five Units. Tenders of fractional Units will not
be permitted, except by a Limited Partner who is tendering all of the Units
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 Units 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 Units 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
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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. Please contact the Information Agent for
assistance in obtaining a signature guarantee.
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 Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy; Power of Attorney. By executing an Assignment of
Partnership Interest, a tendering Limited Partner irrevocably appoints the
Purchaser (which is an affiliate of the General Partner), and its managers and
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 Units
tendered by the Limited Partner and accepted for payment by the Purchaser
(which is an affiliate of the General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the Purchaser (which is an
affiliate of the General Partner) accepts the tendered Units for payment. Upon
such acceptance for payment, all prior proxies given by the Limited Partner
with respect to the Units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
Purchaser (which is an affiliate of the General Partner) and its managers and
designees will, as to those Units, 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 (which is an affiliate of the General Partner) reserves the right to
require that, in order for Units to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of the Units, the Purchaser must be
able to exercise full voting rights with respect to the Units, 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 and its
managers and 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 Units 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 Units for payment. The
tendering Limited Partner agrees not to exercise any rights pertaining to the
tendered Units without the prior consent of the Purchaser. Upon such acceptance
for payment, all prior powers of attorney granted by the Limited Partner with
respect to such Units 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
and its managers and designees each will have the power, among other things,
(i) to transfer ownership of such Units 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 Depositary (as the tendering
Limited Partner's agent) of the Purchase Price, to become a substituted Limited
Partner, to receive any and all distributions made by the Partnership on or
after the date on which the Purchaser purchases such Units, and to receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Units 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 Units 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 in the
name and on behalf of the tendering Limited Partner.
Assignment of Interest in Future Distributions. By executing an
Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the General Partner) and its
assigns all of the right, title and interest of the Limited Partner in and to
any and all distributions made by the Partnership on or after the date on which
the Purchaser purchases such Units, in respect of the Units tendered by such
Limited Partner and accepted for payment by the Purchaser, regardless of the
fact that the record date for any
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such distribution may be a date prior to the date of such purchase. The
Purchaser will seek to be admitted to the Partnership as a substituted Limited
Partner upon consummation of the Offer.
Determination of Validity; Rejection of Units; 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 Units pursuant to the Offer will be determined by the Purchaser
(which is an affiliate of the General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the General Partner) reserves the absolute right to reject any or all
tenders of any particular Units determined by it not to be in proper form or if
the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
General Partner) 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 Units and to waive any defect or irregularity in any tender
with respect to any particular Units 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 Units will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of the
Purchaser (which is an affiliate of the General Partner), the Information
Agent, the Depositary or any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Units 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, each tendering Limited Partner must provide the
Purchaser (which is an affiliate of the General Partner) 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 Unit purchased, each tendering Limited Partner
must complete the FIRPTA Affidavit included in the Assignment of Partnership
Interest certifying the Limited Partner's taxpayer identification number and
address and that such Limited Partner is not a foreign person. See the
Instructions to the Assignment of Partnership Interest and Section 6.
Binding Obligation. A tender of Units pursuant to and in accordance
with the procedures described in this Section 3 and the acceptance for payment
of such Units will constitute a binding agreement between the tendering Limited
Partner and the Purchaser (which is an affiliate of the General Partner) on the
terms set forth in this Offer to Purchase and in the Assignment of Partnership
Interest.
SECTION 4. WITHDRAWAL RIGHTS. Tenders of Units pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless already accepted
for payment as provided in this Offer to Purchase, may also be withdrawn at any
time after September 18, 1998. 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 this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Units 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 (including signature guarantees
by an Eligible Institution). Units properly withdrawn will be deemed not to be
validly tendered for purposes of the Offer. Withdrawn Units may be re-tendered,
however, by following the procedures described in Section 3 at any time prior
to the Expiration Date.
If payment for Units is delayed for any reason or if the Purchaser
(which is an affiliate of the General Partner) is unable to pay for Units for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
tendered Units may be retained by the 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 Units tendered or return those Units
promptly after termination or withdrawal of the Offer.
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All questions as to the validity and form (including time of receipt)
of notices of withdrawal will be determined by the Purchaser (which is an
affiliate of the General Partner), in its sole discretion, which determination
shall be final and binding. None of the Purchaser, the Information Agent, the
Depositary or 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 (which is an affiliate of the General Partner) 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, validly tendered Units, (ii) to terminate
the Offer if any condition referred to in Section 14 has not been satisfied or
upon the occurrence of any event specified in Section 14 and (iii) to amend the
Offer in any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such extension, termination or amendment will
be disseminated promptly 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
then scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
If the Purchaser (which is an affiliate of the General Partner)
extends the Offer, or if the Purchaser (whether before or after its acceptance
for payment of Units) is delayed in its payment for Units or is unable to pay
for Units pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Units
and those Units 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 Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
If the Purchaser (which is an affiliate of the General Partner) 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 Units 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. 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 it describe any aspect of state, local,
foreign or other tax laws. Sales of Units 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
9
<PAGE>
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER
OF SELLING UNITS PURSUANT TO THE OFFER.
Gain or Loss Generally. In general, a Limited Partner will recognize
gain or loss on a sale of Units 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 Units sold. Generally, a Limited
Partner's adjusted tax basis with respect to a Unit equals its cost, increased
by the amount of income and the amount of Partnership liabilities (as
determined under Code Section 752) allocated to the Unit, and decreased by (i)
any distributions made with respect to such Unit, (ii) the amount of deductions
or losses allocated to the Unit and (iii) any decrease in the amount of
Partnership liabilities (as determined under Code Section 752) allocated to the
Unit. Thus, the amount of a Limited Partner's adjusted tax basis in tendered
Units will vary depending upon the Limited Partner's particular circumstances.
The "amount realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Limited Partner for the Unit pursuant to the Offer,
plus the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752).
A portion of the gain or loss recognized by a Limited Partner on a
sale of a Unit pursuant to the Offer generally will be treated as a capital
gain or loss, if (as is generally expected to be the case) the Unit was held by
the Limited Partner as a capital asset. Under the Taxpayer Relief Act of 1997
("TRA 1997"), the capital gains rate for individuals and other non-corporate
taxpayers is reduced to 20% for sales of capital assets after July 28, 1997 if
such assets were held for more than 18 months. See the discussion below in
Pending Legislation regarding a possible elimination of the 18-month holding
period currently required for being taxed at the reduced 20% capital gains
rate. However, any gain from the sale of such assets attributable to the
recapture of depreciation with respect to real property (other than certain
depreciation recapture taxable as ordinary income) is taxed at a maximum rate
of 25%. The 28% rate continues to apply to individual and noncorporate
taxpayers who sell a capital asset held for more than one year but not more
than 18 months. See the discussion below in Pending Legislation regarding a
possible elimination of the 18-month holding period currently required for
being taxed at the reduced 20% capital gains rate. Corporate taxpayers are
taxed at a maximum marginal rate of 35% for both capital gains and ordinary
income. The maximum marginal federal income tax rate for ordinary income of
individuals and other noncorporate taxpayers 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); and 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.
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
Units sold in accordance with the provisions of the Limited Partnership
Agreement concerning transfers of Units. 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 Units and, therefore, the amount of
such Limited Partner's taxable gain or loss upon a sale of Units pursuant to
the Offer.
Pending Legislation. Congress recently passed the IRS Restructuring
and Reform Act of 1998 ("IRRA 1998"), which eliminates the 18-month holding
period that is currently required to be met in order to take advantage of the
lowest capital gains rates. Under IRRA 1998, this holding period change
generally would be effective for tax years ending after December 31, 1997.
Accordingly, for tax years ending after 1997, capital gains recognized by
individuals or other non-corporate taxpayers on dispositions of capital assets
held for more than 12 months (rather than 18 months) would be eligible for the
reduced 20% capital gains rate introduced in TRA 1997. Although the Clinton
Administration has announced that the President will sign IRRA 1998 once he
receives it from Congress, IRRA 1998 has not been signed into law as of the
date of this Offer, and no assurance can be given that the legislation will in
fact be so signed.
10
<PAGE>
Unrealized Receivables and Certain Inventory. If any portion of the
amount of gain or loss 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 and, in addition, a portion of such gain may be taxed at the 25% rate
discussed above. A portion of the gain upon the sale of Units is expected to be
attributable to unrealized receivables. A Limited Partner who tenders Units
which are purchased pursuant to the Offer 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 ss.
1.751-1(a)(3). A 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 offset such losses against active income as well as passive
activity income for that year. A substantial portion of any post-1986 losses of
Limited Partners from the Partnership would have been 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 which have not been used to offset income from other passive
activities or from the Partnership). Substantially all gain or loss from a sale
of Units pursuant to the Offer will be passive income or loss.
If a Limited Partner sells less than all of its Units pursuant to the
Offer, suspended passive losses, if any (including a portion of any loss
recognized on the sale of Units), 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 Units) plus any other passive income for that year. If, on the other hand, a
Limited Partner sells 100% of its Units pursuant to the Offer, any "suspended"
losses and any losses recognized upon the sale of the Units will be offset
first against any other net passive gain to the Limited Partner from the sale
of the Units and any other net passive activity income from other passive
activity investments, and the balance of any "suspended" net losses from the
Units 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), including ordinary income. If a
tendering Limited Partner has suspended passive losses from the Partnership,
such Limited Partner must sell all of its Units to receive these tax benefits.
If more than 2,400 of the outstanding Units are tendered, some tendering
Limited Partners may not be able to sell 100% of their Units pursuant to the
Offer because of proration of the number of Units 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). 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
contributed all of its assets and liabilities to a "new" partnership in
exchange for an interest in the "new" partnership. The Partnership would then
be treated as making a distribution of the interests in the "new" partnership
to the new partners and the remaining partners, followed by the liquidation of
the Partnership. Because the "new" partnership would be treated as having
acquired its assets on the date of the deemed contribution, a new depreciation
recovery period would begin on such date, 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. A tax termination of
the Partnership would also terminate any partnership in which the Partnership
holds a majority interest (50% or more).
The Limited Partnership Agreement prohibits transfer of Units if a
transfer, when considered with all other transfers during the same applicable
twelve-month period, would cause a termination of the Partnership for tax
purposes. The Purchaser believes that even if the maximum number of Units is
purchased pursuant to the Offer, those transfers will not cause a tax
termination of the Partnership.
11
<PAGE>
Backup Withholding and FIRPTA Withholding. Limited Partners (other
than tax-exempt persons, corporations and certain foreign individuals) who
tender Units 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 a Unit
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 and address, and that
such Limited Partner is not a foreign person. 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.
Limitations on Resales. The Limited Partnership Agreement prohibits
transfers of Units 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 or any applicable state income tax purposes. This
provision may limit sales of Units in the secondary market and in private
transactions for the twelve-month period following completion of the Offer. The
General Partner has advised the Purchaser that the Partnership will not process
any requests for recognition of substitution of Limited Partners upon a
transfer of Units during such twelve-month period which the General Partner
believes may cause a tax termination in contravention of the Limited
Partnership Agreement. In determining the number of Units for which the Offer
is made (representing approximately 16% of the outstanding Units), the
Purchaser (which is an affiliate of the General Partner) took this restriction
into account so as to permit normal historical levels of transfers to occur
following the transfers of Units pursuant to the Offer without violating this
restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units 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 Units and,
therefore, the Purchaser (which is an affiliate of the General Partner) does
not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for their
Units through secondary market transactions. See Section 13 for certain limited
information regarding recent secondary market sales of the Units.
The Units 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 (which is an affiliate of the General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease
to be registered under Section 12(g) of the Exchange Act. If the Units were to
be held by fewer than 300 persons, the Partnership could apply to de-register
the Units under the Exchange Act. Because the Units are widely held, however,
the Purchaser (which is an affiliate of the General Partner) believes that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by more than 300 persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with General Partner. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
12
<PAGE>
of the Offer and, if admitted, will have the right to vote each Unit purchased
pursuant to the Offer. Even if the Purchaser (which is an affiliate of the
General Partner) is not admitted to the Partnership as a substituted Limited
Partner, however, the Purchaser nonetheless will have the right to vote each
Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser and its managers and designees as
proxies with respect to the Units tendered by such Limited Partners and
accepted for payment by the Purchaser.
See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 1,636 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result, will
be able to control the outcome of all voting decisions with respect to the
Partnership. Even if the Purchaser acquires a lesser number of Units pursuant
to the Offer, however, because IPT already owns (through IPLP) approximately
39% of the outstanding Units, it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership. In general,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Units owned by them in whatever manner they deem to be in the best
interests of IPT, which, because of their relationship with the General
Partner, also may be in the interest of the General Partner, but may not be in
the interest of other Limited Partners. This could (i) prevent non-tendering
Limited Partners from taking action they desire but that IPT opposes and (ii)
enable IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including: removal of the General Partner or an individual general
partner and in certain circumstances election of new or successor general
partners; dissolution of the Partnership; the sale of all or substantially all
of the assets of the Partnership; and most types of amendments to the Limited
Partnership Agreement.
The Offer will not result in any change in the compensation payable to
the General Partner or its affiliates. However, as a result of the Offer, the
Purchaser (which is an affiliate of the General Partner) will participate, in
its capacity as a Limited Partner, in any subsequent distributions to Limited
Partners to the extent of the Units purchased pursuant to the Offer.
SECTION 8. FUTURE PLANS OF INSIGNIA, IPT AND THE PURCHASER. IPT,
through the Purchaser (which is an affiliate of the General Partner), is
seeking to acquire Units pursuant to the Offer in order to increase its equity
interest in the Partnership, primarily for investment purposes and with a view
to making a profit. Following the completion of the Offer, IPT and/or persons
related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. Insignia and IPT (which are affiliates of the General Partner)
also may consider disposing of some or all of the Units the Purchaser acquires
pursuant to the Offer, either directly or by a sale or other disposition of one
or more interests in IPT or IPLP, depending among other things on the
requirements from time to time of Insignia, IPT and their affiliates in light
of liquidity, strategic, tax and other considerations.
Neither IPT nor the Purchaser (which are affiliates of the General
Partner) has any present plans or intentions with respect to an extraordinary
transaction, such as a merger, reorganization or liquidation of the Partnership
or a sale or refinancing of any of the Partnership's properties. However, IPT
and the Purchaser expect that consistent with the General Partner's fiduciary
obligations, the General Partner will seek and review opportunities (including
opportunities identified by IPT and the Purchaser) to engage in transactions
which could benefit the Partnership, such as sales or refinancings of assets or
a combination of the Partnership with one or more other entities, with the
objective of seeking to maximize returns to Limited Partners.
IPT and the Purchaser (which are affiliates of the General Partner)
have been advised that the possible future transactions the General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the General Partner or its
affiliates serve as general partners, or a combination of the
13
<PAGE>
Partnership with one or more existing, publicly traded entities (including,
possibly, affiliates of IPT (which is an affiliate of the General Partner) or
IPT itself), in any of which Limited Partners might receive cash, common stock
or other securities or consideration. There is no assurance, however, as to
when or whether any of the transactions referred to above might occur. If any
such transaction is effected by the Partnership and financial benefits accrue
to the Limited Partners of the Partnership, the Purchaser (and thus IPT) will
participate in those benefits to the extent of its ownership of Units.
A merger or other consolidation transaction and certain kinds of other
extraordinary transactions would require a vote of the Limited Partners, and if
the Purchaser is successful in acquiring more than 1,636 Units pursuant to the
Offer (or otherwise), IPT will be able to control the outcome of any such vote.
Even if the Purchaser acquires a lesser number of Units pursuant to the Offer,
however, because IPT already owns (through IPLP) approximately 39% of the
outstanding Units it will be able to significantly influence the outcome of all
voting decisions with respect to the Partnership. See Section 13. IPT's primary
objective in seeking to acquire the Units through the Purchaser pursuant to the
Offer is not, however, to influence the vote on any particular transaction, but
rather to generate a profit on the investment represented by those Units.
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.
General. The Partnership was organized on April 7, 1980 under the laws
of the State of South Carolina. Its principal executive offices are located at
One Insignia Financial Plaza, Greenville, South Carolina 29602, and its
telephone number at that address is (864) 239-2747.
The Partnership's primary business is real estate ownership and
related operations. The Partnership was formed for the purpose of acquiring
existing apartment properties which offered the potential for appreciation in
value and cash distributions to the Limited Partners from operations.
The Partnership's investment portfolio currently consists of four
residential apartment complexes: a 215- unit complex in West Columbia, South
Carolina; a 300-unit complex in Blacksburg, Virginia; a 149-unit complex in
Rome, Georgia; and a 142-unit complex in Stone Mountain, Georgia.
Originally Anticipated Term of Partnership; Alternatives. According to
the Partnership's Prospectus dated July 3, 1980, the General Partner
anticipated that the Partnership would sell and/or refinance its properties
three to eight years after their acquisition, depending upon the then current
real estate and money markets, economic climate and income tax consequences to
the Limited Partners. Under the Limited Partnership Agreement, the term of the
Partnership will continue until December 31, 2019, unless sooner terminated as
provided in the Limited Partnership Agreement or by law. Limited Partners
could, as an alternative to tendering their Units, take a variety of possible
actions including voting to liquidate the Partnership or causing the
Partnership to merge with another entity or engage in a "roll-up" or similar
transaction.
General Policy Regarding Sales and Refinancings of Partnership
Properties. In general, the General Partner regularly evaluates the
Partnership's properties by considering various factors, such as the
Partnership's financial position and real estate and capital markets
conditions. The General Partner monitors each property's specific locale and
sub-market conditions evaluating current trends, competition, new construction
and economic changes. The General Partner oversees each asset's operating
performance and continuously evaluates the physical improvement requirements.
In addition, the financing structure for each property, tax implications and
the investment climate are all considered. Any of these factors, and possibly
others, could potentially contribute to any decision by the General Partner to
sell, refinance, upgrade with capital improvements or hold a particular
Partnership property. There are no plans to sell or refinance any of the
Partnership's properties at the present time.
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-KSB for the years ended
December 31, 1997, 1996, 1995, 1994
14
<PAGE>
and 1993 and the Partnership's Quarterly Reports on Form 10-QSB for the periods
ended March 31, 1998 and 1997. 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.
<TABLE>
<CAPTION>
SHELTER PROPERTIES I LIMITED PARTNERSHIP
SELECTED FINANCIAL DATA
(in thousands, except Unit data)
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997 1996 1995 1994 1993
---------- ------------ ----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental Income................. $ 1,256 $ 1,172 $ 4,779 $ 4,550 $ 4,390 $ 4,220 $ 4,078
Other Income.................. $ 54 $ 78 $ 313 $ 277 $ 214 $ 147 $ 124
Total Revenues............. $ 1,310 $ 1,250 $ 5,092 $ 4,827 $ 4,604 $ 4,367 $ 4,202
Income (Loss) from Operations
(before extraordinary item) $ 271 $ 210 $ 465 $ 603 $ 242 $ (12) $ (177)
Net Income (Loss)............. $ 271 $ 210 $ 465 $ 54 $ 242 $ (68) $ (177)
Net Income (Loss) per Unit.... $ 17.87 $ 13.84 $ 30.67 $ 3.56 $ 15.99 $ (4.50) $(11.69)
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
1998 1997 1997 1996 1995 1994 1993
---------- ------------ ----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheets Data:
Total Assets.................. $ 9,300 $ 9,611 $ 9,936 $ 10,726 $ 8,501 $ 8,647 $ 9,055
Total Liabilities............. $ 11,989 $ 12,018 $ 12,096 $ 12,093 $ 9,916 $ 10,154 $ 10,487
Limited Partners' Equity
(Deficit)................... $ (2,637) $ (2,356) $ (2,112) $ (1,314) $ (1,361) $ (1,453) $ (1,378)
Units Outstanding............. 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Book Value per Unit........... $(175.80) $(157.07) $(140.80) $ (87.60) $ (90.73) $ (96.87) $ (91.87)
</TABLE>
Description of Properties. Set forth below is a table showing the
location, the date of purchase, the nature of the Partnership's ownership
interest in and the use of each of the Partnership's properties.
<TABLE>
<CAPTION>
DATE OF
PROPERTY PURCHASE TYPE OF OWNERSHIP USE
-------- -------- ----------------- ---
<S> <C> <C> <C>
Quail Hollow Apartments 9/1/80 Fee ownership Residential Apartments
West Columbia, South Carolina (subject to first mortgage) (215 units)
Windsor Hills Apartments 9/1/80 Fee ownership Residential Apartments
Blacksburg, Virginia (subject to first and second (300 units)
mortgages)
Heritage Pointe Apartments 9/15/80 Fee ownership Residential Apartments
Rome, Georgia (subject to first mortgage) (149 units)
Stone Mountain West Apartments 12/31/80 Fee ownership Residential Apartments
Stone Mountain, Georgia (subject to first mortgage) (142 units)
</TABLE>
15
<PAGE>
Accumulated Depreciation Schedule. Set forth below is a table showing
the gross carrying value, accumulated depreciation and federal tax basis of
each of the Partnership's properties as of December 31, 1997 ($ amounts in
thousands).
<TABLE>
<CAPTION>
GROSS
CARRYING ACCUMULATED FEDERAL
PROPERTY VALUE DEPRECIATION RATE METHOD TAX BASIS
- ------------------------------------- ------- ------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Quail Hollow Apartments $ 5,358 $ 3,605 5-34 yrs. S/L $2,110
Windsor Hills Apartments 6,454 4,406 5-30 yrs. S/L 2,246
Heritage Pointe Apartments 3,401 2,352 5-35 yrs. S/L 1,243
Stone Mountain West Apartments 4,714 3,227 5-37 yrs. S/L 1,975
------- ------- ------
TOTALS $19,927 $13,590 $7,574
======= ======= ======
</TABLE>
Schedule of Mortgages. Set forth below is a table showing certain
information regarding the outstanding mortgages encumbering each of the
Partnership's properties as of December 31, 1997 ($ amounts in thousands).
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT STATED BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1997 RATE AMORTIZED DATE MATURITY
- ---------------------------------- --------------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Quail Hollow Apartments $ 2,850 7.33% none 11/01/03 $ 2,850
Windsor Hills Apartments
1st Mortgage 4,260 7.60% (1) 11/15/02 3,489
2nd Mortgage 149 7.60% none 11/15/02 149
Heritage Pointe Apartments 1,400 7.33% none 11/01/03 1,400
Stone Mountain West
Apartments 3,000 7.33% none 11/01/03 3,000
-------- -------
$11,659 $10,888
Less unamortized discounts (189) =======
--------
TOTAL $11,470
========
</TABLE>
(1) The principal balance and discount are being amortized over 257 months with
a balloon payment due November 15, 2002.
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's properties during the past two years.
<TABLE>
<CAPTION>
PROPERTY AVERAGE ANNUAL RENTAL RATE AVERAGE ANNUAL OCCUPANCY
-------- -------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Quail Hollow Apartments $6,432/unit $6,196/unit 93% 96%
Windsor Hills Apartments $5,617/unit $5,217/unit 96% 95%
Heritage Pointe Apartments $5,297/unit $5,243/unit 91% 88%
Stone Mountain West $8,824/unit $8,435/unit 96% 95%
Apartments
</TABLE>
Schedule of Real Estate Taxes and Rates. Set forth below is a table
showing the real estate taxes and rates for 1997 for each of the Partnership's
properties.
<TABLE>
<CAPTION>
1997 1997
PROPERTY BILLING RATE
- ---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Quail Hollow Apartments $70,000 26.72%
Windsor Hills Apartments $73,000 0.92%
Heritage Pointe Apartments $38,000 3.51%
Stone Mountain West Apartments $57,000 4.73%
</TABLE>
16
<PAGE>
Other 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
inspected at the Commission's Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, where copies may be obtained at
prescribed rates, and at the regional offices of the Commission located in the
Citicorp Center, 500 West 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. The Commission also maintains a web site that contains reports, proxy
and other information filed electronically with the Commission, the address of
which is http://www.sec.gov.
Cash Distributions History. The Partnership has made a cash
distribution to Limited Partners of $52.87 per Unit in 1998 (through July 21),
and made a distribution of $83.33 per Unit in 1997. In total, original
investors in the Partnership have received distributions of $1,030.31 respect
of their original $1,000 investment made in 1980.
Operating Budgets of the Partnership. A summary of the fiscal 1997 and
1998 operating budgets and the audited results of operations for fiscal 1997 of
the Partnership are 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 budget presented for fiscal 1998 should not necessarily be
considered as indicative of what the audited operating results for fiscal 1998
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. Therefore, such information should not be relied on by Limited
Partners.
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1997 FISCAL 1998
BUDGETED AUDITED BUDGETED
-------- ------- --------
<S> <C> <C> <C>
Total Revenues from Property Operations......... $ 4,998,000 $ 5,092,000 $ 5,245,000
Total Operating Expenses ....................... $ 2,907,000 $ 3,029,000 $ 2,719,000
Net Operating Income............................ $ 2,091,000 $ 2,063,000 $ 2,526,000
Capital Expenditures............................ $ 821,000 $ 623,000 $ 586,000
</TABLE>
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES.
The General Partner and its affiliates have conflicts of interest with respect
to the Offer as set forth below.
Conflicts of Interest with Respect to the Offer. The General Partner
has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with IPT and the Purchaser. The General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the General Partner and/or its affiliates and
(ii) as a consequence of the Purchaser's ownership of Units, because the
Purchaser (which is an affiliate of the General Partner) may have incentives to
seek to maximize the value of its ownership of Units, which in turn may result
in a conflict for the General Partner in attempting to reconcile the interests
of the Purchaser (which is an affiliate of the General Partner) with the
interests of the other Limited Partners. In addition, the Purchaser (which is
an affiliate of the General Partner) is making the Offer with a view to making
a profit. Accordingly, there is a conflict between the desire of the Purchaser
(which is an affiliate of the General Partner) to purchase Units at a low price
and the desire of the Limited Partners to sell their Units at a high price. The
General Partner has indicated in the Schedule 14D-9 that it is remaining
neutral and making no recommendation as to whether Limited Partners should
tender their Units pursuant to the Offer. LIMITED PARTNERS ARE URGED TO READ
THIS OFFER TO PURCHASE AND THE SCHEDULE 14D-9 AND THE RELATED MATERIALS
CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
17
<PAGE>
Voting by the Purchaser. The Limited Partnership Agreement provides
that the General Partner has absolute discretion as to whether to admit an
assignee of Units to the Partnership as a substituted Limited Partner. The
Purchaser (which is an affiliate of the General Partner) will seek to be
admitted to the Partnership as a substituted Limited Partner upon consummation
of the Offer and, when admitted, will have the right to vote each Unit
purchased pursuant to the Offer. Even if the Purchaser (which is an affiliate
of the General Partner) is not admitted to the Partnership as a substituted
Limited Partner, however, the Purchaser nonetheless will have the right to vote
each Unit purchased in the Offer pursuant to the irrevocable appointment by
tendering Limited Partners of the Purchaser (which is an affiliate of the
General Partner) and its managers and designees as proxies with respect to the
Units tendered by such Limited Partners and accepted for payment by the
Purchaser. See Section 3.
If the Purchaser (which is an affiliate of the General Partner) is
successful in acquiring more than 1,636 Units pursuant to the Offer (or
otherwise), IPT (which controls the General Partner, IPLP and the Purchaser)
will own in excess of 50% of the total outstanding Units and, as a result, will
be able to control the outcome of all voting decisions with respect to the
Partnership. Even if the Purchaser acquires a lesser number of Units pursuant
to the Offer, however, because IPT already owns (through IPLP) approximately
39% of the outstanding Units it will be able to significantly influence the
outcome of all voting decisions with respect to the Partnership. In general,
IPLP and the Purchaser (which are affiliates of the General Partner) will vote
the Units owned by them in whatever manner they deem to be in IPT's best
interests, which, because of their relationship with the General Partner, also
may be in the interest of the General Partner, but may not be in the interest
of other Limited Partners. This could (i) prevent non-tendering Limited
Partners from taking action they desire but that IPT opposes and (ii) enable
IPT to take action desired by IPT but opposed by non-tendering Limited
Partners. Under the Limited Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including: removal of the General Partner or an individual general
partner and in certain circumstances election of new or successor general
partners; dissolution of the Partnership; the sale of all or substantially all
of the assets of the Partnership; and most types of amendments to the Limited
Partnership Agreement. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
General Partner) expects to pay for the Units it purchases pursuant to the
Offer with funds provided by IPLP as capital contributions. IPLP in turn
intends to use its cash on hand and, if necessary, funds available to it under
its credit facility (as described in Section 12) to make such contributions.
See Section 12. It is possible, however, that in connection with its future
financing activities, IPT or IPLP may cause or request the Purchaser (which is
an affiliate of the General Partner) to pledge the Units as collateral for
loans, or otherwise agree to terms which provide IPT, IPLP and the Purchaser
with incentives to generate substantial near-term cash flow from the
Purchaser's investment in the Units. This could be the case, for example, if a
loan has a "balloon" maturity after a relatively short time or bears a high or
increasing interest rate. In such a situation, the General Partner may
experience a conflict of interest in seeking to reconcile the best interests of
the Partnership with the need of its affiliates for cash flow from the
Partnership's activities.
Transactions with Affiliates. The Partnership paid IRG property
management fees for property management services in the amounts of
approximately $249,000, $238,000, and $228,000 for the years ended December 31,
1997, 1996 and 1995, respectively, and has paid IRG property management fees
equal to $65,000 during the first three months of 1998. The Partnership
reimbursed the General Partner and its affiliates (including Insignia) for
expenses incurred in connection with asset management and partnership
administration services performed by them for the Partnership for the years
ended 1997, 1996 and 1995 in the amounts of $129,000, $103,000 and $63,000,
respectively, and has reimbursed them for such services in the amount of
$37,000 through March 31, 1998. The reimbursement amounts for the years ended
December 31, 1997 and 1996 and the three-month period ended March 31, 1998
include $13,000, $4,000 and $5,000, respectively, which was paid to an
affiliate of the General Partner for costs incurred in connection with
construction oversight services. For the period January 1, 1996 through August
31, 1997, the Partnership insured its properties under a master policy through
an agency affiliated with the General Partner, but with an insurer unaffiliated
with the General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the then current year's
master policy. That agent assumed the financial obligations to the affiliate of
the General Partner who received payments on these obligations from the agent.
Insignia and the General Partner believe that the aggregate financial benefit
derived by Insignia and its affiliates from such arrangements was immaterial.
18
<PAGE>
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER, IPLP, IPT
AND INSIGNIA.
The Purchaser. The Purchaser (which is an affiliate of the General
Partner) is a newly formed entity controlled by IPT and organized for the
purpose of making the Offer. The Purchaser is a wholly-owned subsidiary of
IPLP. The Purchaser (which is an affiliate of the General Partner) has not
engaged in any business activity other than in connection with the Offer and
certain other tender offers for units of limited partnership interests in other
IPT Partnerships (as defined below) being made contemporaneously with the
Offer, and has no significant assets or liabilities at the present time. Upon
consummation of the Offer and such other offers, the Purchaser's only
significant assets will be the Units it acquires pursuant to the Offer and the
other limited partnership units it acquires pursuant to such other offers.
The principal executive offices of the Purchaser (which is an
affiliate of the General Partner) are located at One Insignia Financial Plaza,
P.O. Box 19059, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1300. For certain information concerning the managers of the
Purchaser (which is an affiliate of the General Partner), see Schedule I to
this Offer to Purchase.
IPT and IPLP. IPT was formed by Insignia in May 1996, for the purpose
of acquiring and owning interests in multi-family residential properties,
principally through ownership of limited and general partner interests in real
estate limited partnerships (including the Partnership). IPT has been organized
and operates in a manner that will qualify it to be taxed as a real estate
investment trust ("REIT") under the Code. Substantially all of IPT's
investments are held through IPLP, which is the operating partnership of IPT.
IPT is presently the sole general partner and Insignia is presently the sole
limited partner of IPLP.
IPT has engaged Insignia to provide certain investment banking and
related services to IPT and IPLP, including in connection with the Offer.
Substantially all of IPT's assets consist of (i) interests in entities
which comprise or control the managing general partners of real estate limited
partnerships, including the Partnership (the "IPT Partnerships"), which
interests are held by IPT directly, and (ii) limited partner interests in the
IPT Partnerships, which interests are held through IPLP. The IPT Partnerships
own, in the aggregate, 349 properties containing approximately 73,000
residential apartment units and approximately 5.9 million square feet of
commercial space. See Schedule IV for a list of the IPT Partnerships in which
IPT has a material investment.
On July 18, 1997, IPT, Insignia, MAE GP Corporation (which at the time
was an affiliate of IPT but has subsequently been merged into IPT, see Section
13) ("MAE GP"), and Angeles Mortgage Investment Trust, an unincorporated
California business trust ("AMIT"), entered into a definitive merger agreement
(the "AMIT Merger Agreement"), pursuant to which AMIT is to be merged with and
into IPT, with IPT being the surviving entity, in a stock for stock transaction
(the "AMIT Merger"). AMIT is a public company whose Class A shares trade on the
American Stock Exchange under the symbol ANM. Insignia and its affiliates
currently own 96,800 (or approximately 3.7%) of the 2,617,000 outstanding AMIT
Class A shares and all of the 1,675,113 outstanding AMIT Class B shares. If the
AMIT Merger is consummated, IPT will become a publicly traded company (IPT has
applied to list its shares on the American Stock Exchange, which listing is
subject to completion of the AMIT Merger), and it is anticipated that Insignia
and its affiliates will own approximately 57% of post-merger IPT, the former
AMIT shareholders (other than Insignia and its affiliates) will own
approximately 16% of post-merger IPT, and the current unaffiliated shareholders
of IPT will own the remaining 27% of post-merger IPT (see, however, the
discussion of the merger of Insignia and AIMCO in the following subsection of
this Section 9 captioned "Insignia").
The AMIT Merger is expected to be completed in the third quarter of
1998. However, consummation of the AMIT Merger is subject to several
conditions, including approval of the AMIT Merger Agreement and the AMIT Merger
by the shareholders of AMIT. Accordingly, there can be no assurance as to when
the AMIT Merger will occur, or that it will occur at all.
The principal executive offices of IPT and IPLP are located at One
Insignia Financial Plaza, P.O. Box 19059, Greenville, South Carolina 29602, and
the telephone number of each is (864) 239-1300. For certain
19
<PAGE>
information concerning the trustees and executive officers of IPT, see Schedule
II to this Offer to Purchase. IPLP does not have any officers or employees.
Set forth below is certain consolidated financial information with
respect to IPT and IPLP.
INSIGNIA PROPERTIES TRUST SELECTED
CONSOLIDATED FINANCIAL INFORMATION (in
thousands, except share and unit data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED Year Ended Year Ended
MARCH 31, 1998 December 31, 1997 December 31, 1996
-------------- ----------------- -----------------
(unaudited) (audited) (audited)
<S> <C> <C> <C>
Statements of Operations Data:
Revenues.......................................... $ 5,757 $ 16,826 $ 9,705
Income Before Extraordinary Item.................. $ 2,054 $ 6,074 $ 3,557
Net Income........................................ $ 2,080 $ 6,004 $ 2,425
Supplemental Data:
Funds From Operations(1).......................... $ 7,439 $ 20,939 $ 12,563
IPT Common Shares Outstanding..................... $ 19,427,760 $ 18,573,151 $ 11,168,036
IPLP Units Outstanding............................ $ 9,934,476 $ 9,415,947 $ 8,399,499
----------- ---------- ----------
IPT Common Shares and IPLP Units Outstanding(2)... $ 29,362,236 $ 27,989,098 $ 19,567,535
========== ========== ==========
Balance Sheets Data:
Cash.............................................. $ 23,338 $ 37,432 $ 4,928
Investments in IPT Partnerships(3)................ $ 177,681 $ 159,469 $ 118,741
Long-Term Debt.................................... $ 21,957 $ 19,300 $ 19,730
Shareholders' Equity(4)........................... $ 206,298 $ 200,659 $ 121,068
</TABLE>
- --------------
(1) Funds from Operations represent income or loss from real estate
operations, which is net income or loss in accordance with GAAP,
excluding gains or losses from debt restructuring or sales of property,
plus depreciation and provision for impairment.
(2) Assumes all outstanding IPLP units are exchanged for IPT Common Shares.
(3) As of March 31, 1998, represented IPT's investment in 41 of the 124 IPT
Partnerships which IPT accounts for using the equity method. Of the
remaining 83 IPT Partnerships, IPT accounts for 81 using the cost method
and two using the consolidation method.
(4) Includes Insignia's minority interest in IPLP.
Insignia. Insignia is a fully integrated real estate services
organization. Insignia is the largest manager of multi-family residential
properties in the United States and is among the largest managers of commercial
properties. Insignia's real estate services include property management,
providing all of the day-to-day services necessary to operate a property,
whether residential or commercial; asset management, including long-term
financial planning, monitoring and implementing capital improvement plans, and
development and execution of refinancings and dispositions; real estate leasing
and brokerage; maintenance and construction services; marketing and
advertising; investor reporting and accounting; and investment banking,
including assistance in workouts and restructurings, mergers and acquisitions,
and debt and equity securitizations.
Insignia provides property and/or asset management services for
approximately 3,800 properties, which include approximately 272,000 residential
units (including cooperative and condominium units), and in excess of 208
million square feet of retail, commercial and industrial space, located in over
500 cities in 48 states, Italy, the United Kingdom and Germany. Insignia
currently provides partnership administration services to approximately 900
limited partnerships having approximately 350,000 limited partners. Insignia is
a public company whose stock is traded on the New York Stock Exchange under the
symbol IFS.
On March 17, 1998, Insignia and Apartment Investment and Management
Company, a Maryland corporation ("AIMCO"), entered into a definitive merger
agreement (as subsequently amended and restated, the "AIMCO Merger Agreement"),
pursuant to which substantially all of Insignia's residential real estate
operations and ownership interests, including its interests in IPT and IPLP,
are to be merged with and into AIMCO, with AIMCO as the surviving corporation
(the "AIMCO Merger"). AIMCO is a public REIT whose Class A shares trade on the
New York Stock Exchange under the symbol AIV. The AIMCO Merger is expected to
be completed
20
<PAGE>
in the third quarter of 1998. However, consummation of the AIMCO Merger is
subject to certain conditions, including the approval of the shareholders of
Insignia. Accordingly, there can be no assurance as to when the AIMCO Merger
will occur, or that it will occur at all.
Assuming the AIMCO Merger is consummated, AIMCO will succeed to
Insignia's ownership of IPT and IPLP, and thus IPT (and the Partnership) will
thereafter be controlled by AIMCO. In addition, AIMCO is required pursuant to
the AIMCO Merger Agreement to acquire all of the outstanding shares of IPT not
owned by Insignia by causing IPT to merge with and into AIMCO (or a subsidiary
of AIMCO) as soon as practicable after the consummation of the AIMCO Merger, in
which event IPT would cease to exist as a separate entity and AIMCO would
effectively own all of the Units acquired by the Purchaser pursuant to the
Offer.
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 properties, capital
structure, material pending legal proceedings, operating results, financial
condition, directors and officers (including their 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.
Insignia's principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000. For certain information concerning the directors and executive
officers of Insignia, see Schedule III to this Offer to Purchase.
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1997, 1996 and 1995 and the three-month periods ended March
31, 1998 and 1997. More comprehensive financial and other information is
included in Insignia's Annual Report on Form 10-K for the year ended December
31, 1997 (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.
21
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------------- --------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues.................................. $ 130,458 $ 67,912 $ 400,843 $ 227,074 $ 123,032
Income Before Taxes and Extraordinary Item...... $ 3,486 $ 3,340 $ 17,055 $ 14,946 $ 10,093
Net Income...................................... $ 1,917 $ 2,004 $ 10,233 $ 8,564 $ 5,806
Earnings Per Share.............................. $ 0.06 $ 0.06 $ 0.32 $ 0.26 $ 0.20
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
------------------------- --------------------------------------
1998 1997 1997 1996 1995
----------- ------------ ------------ ------------ -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheets Data:
Cash and Cash Equivalents....................... $ 73,143 $ 69,821 $ 88,847 $ 54,614 $ 49,846
Receivables..................................... $ 151,919 $ 52,455 $ 122,180 $ 46,040 $ 26,445
Total Assets................................ $ 922,810 $ 486,809 $ 800,223 $ 492,402 $ 245,409
Accounts Payable................................ $ 17,347 $ 2,417 $ 13,705 $ 1,711 $ 1,497
Commissions Payable............................. $ 56,404 $ 18,264 $ 51,285 $ 18,736 $ 602
Accrued and Sundry Liabilities.................. $ 114,524 $ 32,186 $ 102,009 $ 40,741 $ 25,619
Long-Term Debt.................................. $ 258,422 $ 68,905 $ 189,704 $ 69,140 $ 42,996
Total Liabilities........................... $ 446,697 $ 121,772 $ 356,703 $ 130,328 $ 70,714
Redeemable Convertible Preferred Stock.......... -- -- -- -- $ 15,000
Redeemable Convertible Preferred Securities
of Subsidiary Trust........................... $ 144,137 143,943 $ 144,065 $ 144,169 --
Minority Interest in Consolidated Subsidiaries.. $ 65,082 $ -- $ 61,546 -- $ 2,682
Shareholders' Equity........................ $ 266,894 $ 221,094 $ 237,909 $ 217,905 $ 157,013
</TABLE>
Except as otherwise set forth herein, none of the Purchaser (which is
an affiliate of the General Partner), IPLP, IPT, Insignia or, to the best of
the Purchaser's knowledge, any of the persons listed on Schedules I, II or III
hereto, or any affiliate of the foregoing, (i) beneficially owns or has a right
to acquire any Units, (ii) has effected any transaction in the Units in the
last 60 days, 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, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies. Andrew
L. Farkas, who is the Chairman of the Board, Chief Executive Officer and
President of Insignia and a trustee of IPT, beneficially owns approximately 28%
of Insignia's outstanding common stock and, as a result, may be deemed to
beneficially own the Units owned by IPLP.
SECTION 12. SOURCE OF FUNDS. The Purchaser (which is an affiliate of
the General Partner) expects that approximately $1,750,000 will be required to
purchase 2,400 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the General Partner) expects to obtain all
of those funds from IPLP, which in turn intends to use its cash on hand and
borrowings from its credit facility with a commercial bank and financial
institution. The Purchaser has not conditioned the Offer on obtaining
financing.
The following is a summary description of the existing credit facility
(the "Facility") provided for the benefit of IPLP pursuant to the Credit
Agreement, dated as of December 30, 1997 (the "Credit Agreement"), among IPLP,
as borrower, Lehman Commercial Paper, Inc., as syndication agent, First Union
National Bank, as administrative agent and the lenders from time to time
parties thereto (the "Lenders"). This summary description does not purport to
be complete and is qualified in its entirety by reference to the Credit
Agreement, a copy of which has been filed as an exhibit to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
22
<PAGE>
Pursuant to the Credit Agreement, the Lenders have made available to
IPLP a revolving credit facility of up to $50.0 million at any one time
outstanding. Loans under the Facility (the "Loans") may be utilized to finance
certain permitted investments and refinance certain investments made prior to
the date of the Credit Agreement. The Facility matures in a single installment
on December 30, 2000.
Loans bear interest, at IPLP's election, (i) at a rate equal to the
higher of (a) the rate announced from time to time by First Union National Bank
as its base lending rate or (b) the daily effective federal funds rate as
quoted by First Union National Bank; or (ii) at rates based on the London
interbank offered rate, as adjusted for certain reserve and other requirements
applicable to lenders, for one-, two-, three- or six-month periods plus an
interest margin of 2.50%. As of the date hereof, IPT has no outstanding
indebtedness under the Facility.
IPT is obligated to pay a commitment fee at a rate of 0.25% per annum
on the undrawn portion of the Facility. Such commitment fee is payable
quarterly in arrears and calculated based on the actual number of days elapsed
over a 365-day year.
The Loans are subject to mandatory prepayment only to the extent that
the aggregate outstanding principal amount of the Loans on any day exceeds the
amount of the Facility then in effect. Voluntary prepayments of the Loans and
voluntary reductions of the Facility are permitted in whole or in part at the
option of IPLP, in minimum principal amounts, without premium or penalty,
subject to reimbursement of certain of the Lenders' costs under certain
conditions.
IPLP's obligations under the Facility have been guaranteed by IPT and
such guaranty is secured by a first priority pledge of and security interest in
the capital stock or other equity interests held by IPT in each of the
subsidiaries of IPT which directly or indirectly, owns or controls the general
partner interest (including an interest in the General Partner) in any Real
Estate Entity (as defined below) in which IPLP, directly or indirectly owns a
limited partner interest (including the Partnership). In addition, the Facility
is secured by a first priority pledge of and security interest in all limited
partnership interests from time to time owned by IPLP and the equity interests
from time to time held by IPLP in any subsidiary of IPLP which itself owns
limited partnership interests. The Credit Agreement defines a "Real Estate
Entity" as any limited partnership, limited liability company, corporation or
other entity which has as its principal business the ownership of real property
or debt secured by real property. Thus, the IPT Partnerships (including the
Partnership) constitute Real Estate Entities for purposes of the Credit
Agreement.
The Facility contains representations and warranties, conditions
precedent, covenants, events of default and other provisions customarily found
in similar transactions.
SECTION 13. BACKGROUND OF THE OFFER.
Affiliation With the General Partner. In December 1990, Insignia
purchased substantially all of the assets of U.S. Shelter Corporation, a major
property management and real estate services company and an affiliate of the
General Partner. In connection with this acquisition, Insignia acquired general
partner interests in approximately 150 limited partnerships, including the
Partnership. The individual general partner of the Partnership, N. Barton Tuck,
Jr., effectively is prohibited by the Limited Partnership Agreement from
participating in the management or conduct of the Partnership's business and
affairs, because those functions are reserved exclusively to the General
Partner.
Determination of Purchase Price. In establishing the Purchase Price,
the Purchaser (which is an affiliate of the General Partner) reviewed certain
publicly available information and certain information made available to it by
the General Partner and its other affiliates, including among other things: (i)
the Limited Partnership Agreement, as amended to date; (ii) the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1997 and the
Partnership's Quarterly Report on Form 10-QSB for the period ended March 31,
1998; (iii) unaudited results of operations of the Partnership's properties for
the period since the beginning of the Partnership's current fiscal year; (iv)
the operating budgets prepared by IRG with respect to the Partnership's
properties for the year ending December 31, 1998; and (v) other information
obtained by IRG, Insignia and other
23
<PAGE>
affiliates in their capacities as providers of property management, asset
management and partnership administration services to the Partnership. The
Purchaser's determination of the Purchase Price was based on its review and
analysis of the foregoing information, the other financial information and
analyses concerning the Partnership summarized below. In determining the
Purchase Price, the Purchaser did not rely upon any material, non-public
information concerning the Partnership not summarized below or elsewhere in
this Offer to Purchase.
Trading History of Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic.
According to information obtained from the General Partner, from July 1, 1996
to June 30, 1998 an aggregate of 116 Units (representing less than 1% of the
total outstanding Units) was transferred in sale transactions. Set forth in the
table below are the high and low sales prices of Units for the quarterly
periods from July 1, 1996 to June 30, 1998, as reported by the General Partner
and by The Partnership Spectrum, which is an independent, third-party source.
The gross sales prices reported by The Partnership Spectrum do not necessarily
reflect the net sales proceeds received by sellers of Units, which typically
are reduced by commissions and other secondary market transaction costs to
amounts less than the reported prices; thus the Purchaser does not know whether
the information compiled by The Partnership Spectrum is accurate or complete.
The transfer paperwork submitted to the General Partner often does not include
the requested price information or contains conflicting information as to the
actual sales price; accordingly, Limited Partners should not rely upon this
information as being completely accurate.
<TABLE>
<CAPTION>
SHELTER PROPERTIES I LIMITED PARTNERSHIP
REPORTED SALES PRICES OF PARTNERSHIP UNITS
AS REPORTED BY AS REPORTED BY
THE GENERAL PARTNER(a) THE PARTNERSHIP SPECTRUM(b)
---------------------- ---------------------------
LOW SALES HIGH SALES LOW SALES HIGH SALES
PRICE PRICE PRICE PRICE
PER UNIT PER UNIT PER UNIT PER UNIT
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998:
Second Quarter.................................... (c) (c) (d) (d)
First Quarter..................................... $410 $600(e) $405 $405
Fiscal Year Ended December 31, 1997:
Fourth Quarter.................................... 390 390 337 375
Third Quarter ................................... (c) (c) (d) (d)
Second Quarter.................................... (c) (c) 400 400
First Quarter .................................... 370 405 390 410
Fiscal Year Ended December 31, 1996:
Fourth Quarter ................................... 340 340 (d) (d)
Third Quarter..................................... 370 378 383 383
</TABLE>
- ----------------
(a) Although the General Partner requests and records information on the
prices at which Units are sold, it does not regularly receive or maintain
information regarding the bid or asked quotations of secondary market
makers, if any. The General Partner pely on information transfers of
Units 4 times per year - on the first day of each fiscal quarter. The
prices in the table are based solsactions believed to provided to the
General Partner by sellers and buyers of Units transferred in sale
transactions (i.e., excluding trantransfers, result from the death of a
Limited Partner, rollover to an IRA account, establishment of a trust,
trustee to trustee its or similar non- termination of a benefit plan,
distributions from a qualified or non-qualified plan, uniform gifts,
abandonment of Un sale transactions).
(b) The gross sales prices reported by The Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units,
which typically are reduced by commissions and other secondary market
transaction costs to amounts less than the reported by The prices. The
Purchaser (which is an affiliate of the General Partner) does not know
whether the information compiled Partnership Spectrum is accurate or
complete.
(c) No Units were reported by the General Partner as having been sold during
the quarter.
(d) No Units were reported by the Partnership Spectrum as having been sold
during the quarter.
(e) The General Partner has information that indicates this reported sales
price represented an isolated transaction betwrms length parties for a
minimal number of Units and such sales price was materially higher than
the range of sales prices for ae highest transactions between
unaffiliated parties during the quarter. The Purchase Price is
approximately 25% higher than thperiod prior to reported sales price of
$500 per Unit for arms length transactions between unaffiliated parties
during the six-month June 30, 1998.
24
<PAGE>
The Purchaser (which is an affiliate of the General Partner) 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 Units, this information may be relevant to a Limited Partner's decision as
to whether to tender its Units pursuant to the Offer. At present, privately
negotiated sales and sales through intermediaries (e.g., through the trading
system operated by American Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only means available to a Limited Partner
to liquidate an investment in Units (other than the Offer) because the Units
are not listed or traded on any exchange or quoted on NASDAQ.
General Partner's Annual Estimates of Net Asset Value. The General
Partner prepares an annual estimate of the Partnership's net asset value per
Unit of the Partnership's properties described above. The General Partner's
three most recent estimates of the Partnership's net asset value per Unit were
$1,022, $834 and $708 per Unit, respectively, as of December 31, 1997, 1996 and
1995. The General Partner estimates net asset value based on a hypothetical
sale (without taking into account any transaction costs) of all of the
Partnership's properties at their appraised values and the distribution to the
Limited Partners and the General Partner of the gross proceeds of such sales,
net of related indebtedness, together with the Partnership's cash, proceeds
from temporary investments, and all other assets that are believed to have
liquidation value, after provision in full for all of the Partnership's other
known liabilities. The net asset value estimates prepared by the General
Partner do not take into account (i) real estate transactional costs that would
be incurred on a sale of the Partnership's properties, such as brokerage
commissions and other selling and closing expenses, (ii) timing considerations
or (iii) costs associated with winding up the Partnership. Therefore, the
Purchaser believes that the General Partner's estimates of net asset value per
Unit do not necessarily represent either the fair market value of a Unit or the
amount a Limited Partner reasonably could expect to receive if the
Partnership's properties were sold and the Partnership was liquidated. For this
reason, the Purchaser considered the General Partner's net asset value
estimates to be less meaningful in determining the Purchase Price than the pro
forma liquidation analysis described below.
Appraisals. Each of the Partnership's properties have been appraised
in 1997 by an independent, third party appraiser (Koeppel Tener Real Estate
Services, Inc. ("KTR")) in connection with the General Partner's estimate of
the net asset value of a Unit. According to the appraisal reports, the scope of
the appraisals included an inspection of each property and an analysis of the
respective surrounding markets. KTR relied principally on the income
capitalization approach to valuation and secondarily on the sales comparison
approach, and represented that its report was prepared in accordance with the
Code of Professional Ethics and Standards of Professional Appraisal Practice of
the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice, and in compliance with the Appraisal Standards set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (known as
"FIRREA"). The estimated market values of the fee simple estate of each of the
Partnership's properties specified in the 1997 appraisal reports for the
Partnership's properties are set forth in the table below, and copies of the
summaries of those appraisals have been filed as exhibits to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission.
<TABLE>
<CAPTION>
APPRAISED DATE OF
PROPERTY NAME VALUE APPRAISAL
- ------------------------------------------- ------------- ---------
<S> <C> <C>
Quail Hollow Apartments $ 6,100,000 11/19/97
Windsor Hills Apartments $ 10,100,000 12/31/97
Heritage Pointe Apartments $ 2,700,000 12/29/97
Stone Mountain West Apartments $ 5,750,000 12/29/97
-------------
AGGREGATE APPRAISED VALUE $ 24,650,000
=============
</TABLE>
Purchaser's Estimate of Gross Real Estate Value. In estimating the
gross real estate value of the Partnership's properties, the Purchaser (which
is an affiliate of the General Partner) relied on the appraised values
described above in determining the estimated values of the Partnership's
properties. The Purchaser (which is an affiliate of the General Partner)
reviewed the capitalization rates and the analysis of operations utilized by
KTR in preparing its estimates of the values of the Partnership's properties,
and based on that review, the Purchaser determined that those capitalization
rates were within a range of reasonableness. Working backwards from the
appraised value of each property, the Purchaser (which is an affiliate of the
General Partner) calculated the implied gross rent multiplier for each of the
Partnership's properties, and determined that the multiplier for each property
25
<PAGE>
was within a range of reasonableness. The Purchaser (which is an affiliate of
the General Partner) also calculated, based on the appraised value of each of
the Partnership's properties, the implied cost per apartment unit, and
determined that those costs were within a range of reasonableness.
Based on the estimates of the appraised values of the Partnership's
properties described above, the Purchaser estimated that the current aggregate
gross real estate value of the Partnership's properties is $24,650,000 (the
"Gross Real Estate Value Estimate"). In relying upon the appraised values of
the Partnership's properties, the Purchaser considered the factors described
above as well as other unquantifiable factors such as the Purchaser's knowledge
of expenses relating to operating properties in the relative markets in which
the Partnership's properties are located and its experience in the real estate
markets in general. The Purchaser concluded that the appraised values of the
Partnership's properties are reasonable estimates of the gross fair values of
the Partnership's properties.
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 real estate 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. An appraisal is an estimate or opinion of value and cannot
be relied upon as a precise measure of value or worth. All of the assumptions
and limiting conditions as well as the analysis and methodology included in the
appraisal report are an integral part of the value conclusion. The amount which
could be realized on a sale of any of the Partnership's properties may be
substantially more or less than its appraised value. The Purchaser did not
solicit any offers or inquiries from prospective buyers of the Partnership's
properties.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser is offering to purchase Units, 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-Unit 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 a Unit. Conversely, the realizable value of
the Partnership's assets clearly is a relevant factor in determining the price
a prudent purchaser would offer for Units. 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 (as described above) and the other considerations
described below. The Purchaser based its pro forma liquidation analysis on the
Gross Real Estate Value Estimate (and thus in large part on the appraised
values of the Partnership's properties described above) as opposed to the
values estimated by the General Partner (as described above), because the
Purchaser believes that the Gross Real Estate Value Estimate represents the
best estimate, based on currently available information, of the values of the
Partnership's properties.
In estimating the pro forma net liquidation value per Unit, the
Purchaser adjusted its Gross Real Estate Value Estimate of $24,650,000 to
reflect the Partnership's other assets and liabilities (excluding prepaid and
deferred expenses and security deposits). Specifically, the Purchaser added the
amounts of cash, accounts receivable and escrow deposits shown on the
Partnership's unaudited balance sheet at March 31, 1998 ($2,753,000), and
subtracted the mortgage debt encumbering the Partnership's properties
($11,445,000) and all other liabilities shown on that balance sheet ($544,000).
The Purchaser then deducted from that amount $986,000, representing a reserve
equal to 4% 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, $14,428,000,
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 Limited Partnership Agreement, and winding up the
Partnership, because of the difficulty of estimating those amounts.
26
<PAGE>
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser
divided the estimated aggregate net liquidation proceeds of $14,428,000 by the
15,000 Units reported as outstanding by the General Partner as of July 1, 1998.
The resulting estimated pro forma liquidation value was $961.87 per Unit (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.
The Purchaser's pro forma liquidation analysis described above is
merely theoretical and does not itself reflect the value of the Units 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. In light of these factors, the Purchaser (which is an
affiliate of the General Partner) believes the actual current value of the
Units is substantially less than its estimate of the Estimated Liquidation
Value. Conversely, there is a substantial possibility that the per-Unit 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, 1997 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 applicable net
operating income generated by the Partnership's properties than the
capitalization rates applied by the appraiser. For example, a 5% increase or
decrease in the value of the Partnership's properties would produce a
corresponding increase or decrease in the Estimated Liquidation Value of
approximately $79 per Unit. Furthermore, the analysis described above is based
on a series of assumptions, some of which may not be correct. Accordingly, this
analysis should be viewed merely as indicative of the Purchaser's approach to
valuing Units and not as any way predictive of the likely result of any future
transactions.
Litigation. On March 24, 1998, certain persons claiming to own limited
partner interests in certain limited partnerships (including the Partnership)
whose general partners (the "General Partners") are affiliates of Insignia (the
"Partnerships") filed a purported class and derivative action in California
Superior Court in the County of San Mateo (the "Complaint") against Insignia,
the General Partners (including the General Partner), certain persons and
entities who purportedly formerly controlled the General Partners, and
additional entities affiliated with and individuals who are officers, directors
and/or principals of several of the defendants. The complaint contains
allegations that, among other things, (i) the defendants breached their
fiduciary duties to the plaintiffs by selling or agreeing to sell their
"fiduciary positions" as stockholders, officers and directors of the General
Partners for a profit and retaining said profit rather than distributing it to
the plaintiffs; (ii) the defendants breached their fiduciary duties by
mismanaging the Partnerships and misappropriating the assets of the
Partnerships by (a) manipulating the operations of the Partnerships to depress
the trading price of limited partnership units (the "Units") of the
Partnerships; (b) coercing and fraudulently inducing unitholders to sell Units
to certain of the defendants at depressed prices; and (c) using the voting
control obtained by purchasing Units at depressed prices to entrench certain of
the defendants' positions of control over the Partnerships; and (iii) the
defendants breached their fiduciary duties to the plaintiffs by (a) selling
assets of the Partnerships such as mailing lists of unitholders; and (b)
causing the General Partners to enter into exclusive arrangements with their
affiliates to sell goods and services to the General Partners, the unitholders
and tenants of Partnership properties. The complaint also alleges that the
foregoing allegations constitute violations of various California securities,
corporate and partnership statutes, as well as conversion and common law fraud.
The complaint seeks unspecified compensatory and punitive damages, an
injunction blocking the sale of control of the General Partners to AIMCO and a
court order directing the defendants to discharge their fiduciary duties to the
plaintiffs. As of the date of this Offer to Purchase, defendants have not
served or filed a reply to the complaint. IPT and Insignia believe that the
allegations contained in the Complaint are without merit and intend to
vigorously contest the plaintiffs' action.
27
<PAGE>
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser (which is an affiliate of the General Partner) will
not be required to accept for payment or to pay for any Units tendered if 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
prior to the Expiration Date. 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 (which is an affiliate of the
General Partner) will not be required to accept for payment or pay for any
Units not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Units if, at any time on or after the date of the
Offer and before the Expiration Date, 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 Units by the
Purchaser (which is an affiliate of the General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including without limitation the right
to vote any Units 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 Units, (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 (which is an affiliate of the General Partner)
shall have become aware of any fact that does or may have a material adverse
effect on the value of the Units;
(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, or
imposition of a limitation on, the markets thereof, or (vi) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is
an affiliate of the General Partner) shall have otherwise learned that (i) more
than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with the Commission pursuant to Section 13(d) or (g)
of the Exchange Act has increased or proposes to increase the number of Units
beneficially owned by such person or group as disclosed in such Statement by
two percent or more of the outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser
(which is an affiliate of the General Partner) 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
28
<PAGE>
determination by the Purchaser (which is an affiliate of the General Partner)
concerning the events described above will be final and binding upon all
parties.
SECTION 15. CERTAIN LEGAL MATTERS.
General. The Purchaser (which is an affiliate of the General Partner)
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 Units by the Purchaser (which is an affiliate of the General
Partner) 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 Units 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 (which is an affiliate of the General Partner)
to elect to terminate the Offer without purchasing Units thereunder.
Antitrust. The Purchaser (which is an affiliate of the General
Partner) does not believe that the Hart-Scott- Rodino Antitrust Improvements
Act of 1976, as amended, is applicable to the acquisition of Units contemplated
by the Offer.
Margin Requirements. The Units 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 (which is an affiliate of the General Partner) will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate of
the General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and Harris Trust Company of New York to act as Depositary in
connection with the Offer. The Purchaser (which is an affiliate of the General
Partner) will pay the Information Agent and the Depositary reasonable and
customary compensation for their respective services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and has agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser (which is an affiliate of the General Partner)
will also pay all costs and expenses of printing and mailing the Offer and its
legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser (which is an affiliate of the
General Partner) is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser (which is an
affiliate of the General Partner) becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser (which is an affiliate of the General
Partner) cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) Limited Partners residing in
such jurisdiction. In those jurisdictions whose securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser (which is an affiliate of the
General Partner) by one or more registered brokers or dealers licensed under
the laws of that jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the General
Partner) not contained in this Offer to Purchase 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.
29
<PAGE>
The Purchaser (which is an affiliate of the General Partner), IPLP,
IPT and Insignia have 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).
COOPER RIVER PROPERTIES, L.L.C.
JULY 21, 1998
30
<PAGE>
SCHEDULE I
INFORMATION REGARDING THE MANAGERS OF THE PURCHASER
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 managers of the Purchaser. Each
person identified below is employed by Insignia and is a United States citizen.
The principal business address of the Purchaser and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Jeffrey P. Cohen Jeffrey P. Cohen has been a Manager of the
375 Park Avenue Purchaser since its inception in July 1998.
Suite 3401 For additional information regarding Mr. Cohen,
New York, NY 10152 see Schedule II.
Adam B. Gilbert Adam B. Gilbert has been a Manager of the
200 Park Avenue Purchaser since July 1998. For additional
New York, NY 10166 information regarding Mr. Gilbert, see
Schedule III.
Ronald Uretta Ronald Uretta has been a Manager of the
Purchaser since its inception in July 1998.
For additional information regarding Mr. Uretta,
see Schedules II and III.
S-1
<PAGE>
SCHEDULE II
INFORMATION REGARDING THE
TRUSTEES AND EXECUTIVE OFFICERS OF IPT
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 trustees and executive officers
of IPT. Each person identified below is employed by Insignia and is a United
States citizen. The principal business address of IPT and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29602. Trustees are
identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has served as a Trustee of
375 Park Avenue IPT and as Chairman of the Board of Trustees
Suite 3401 and Chief Executive Officer of IPT since
New York, NY 10152 December 1996. For additional information
regarding Mr. Farkas, see Schedule III.
James A. Aston* James A. Aston has served as a Trustee of IPT
since its inception in May 1996, and has
served as President and Director of IPT since
December 1996. For additional information
regarding Mr. Aston, see Schedule III.
Frank M. Garrison* Frank M. Garrison has served as a Trustee of
102 Woodmont Boulevard IPT since December 1996. Mr. Garrison has
Suite 400 also served as an Executive Managing Director
Nashville, TN 37205 of IPT since December 1996. For additional
information regarding Mr. Garrison, see
Schedule III.
Jeffrey P. Cohen Jeffrey P. Cohen has served as a Senior Vice
375 Park Avenue President of IPT since August 1997, and has
Suite 3401 served as Secretary of IPT since January
New York, NY 10152 1998. From June until August 1997, Mr. Cohen
served as a Vice President of IPT. Since
April 1997, Mr. Cohen's principal occupation
has been to serve as a Senior Vice President
-- Investment Banking of Insignia. Prior to
April 1997, Mr. Cohen's principal occupation
was as an attorney with the law firm of
Rogers & Wells, New York, New York.
William D. Falls William D. Falls has served as the Controller
of IPT since August 1997. Since April 1995,
Mr. Falls' principal occupation has been to
serve as an accountant with Insignia. Prior
to April 1995, Mr. Falls' principal
occupation was as a senior auditor with the
accounting firm of Ernst & Young LLP.
William H. Jarrard, Jr. William H. Jarrard, Jr. has served as a
Senior Vice President of IPT since August
1997, and served as Vice President and
Director of Operations of IPT from December
1996 until August 1997. Mr. Jarrard's
principal employment has been with Insignia
for more than the past five years. From
January 1994 to September 1997, Mr. Jarrard
served as Managing Director-- Partnership
Administration of Insignia.
S-2
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Ronald Uretta Ronald Uretta has served as Vice President
and Treasurer of IPT since December 1996. Mr.
Uretta served as a Vice President of IPT from
December 1996 until August 1997 and as Chief
Financial Officer of IPT from May 1996 until
December 1996. For additional information
regarding Mr. Uretta, see Schedule III.
Carroll D. Vinson Carroll D. Vinson has served as Chief
Operating Officer of IPT since May 1997.
Since August 1994, Mr. Vinson's principal
occupation has been to serve as President of
the various corporate general partners of
partnerships controlled by Metropolitan Asset
Enhancement, L.P., which is an affiliate of
Insignia.
S-3
<PAGE>
SCHEDULE III
INFORMATION REGARDING THE
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. Unless otherwise indicated, each person identified below
is employed by Insignia and is a United States citizen. 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 29602. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Andrew L. Farkas* Andrew L. Farkas has been a Director of
375 Park Avenue Insignia since its inception in July 1990.
Suite 3401 Mr. Farkas has been Chairman and Chief
New York, NY 10152 Executive Officer of Insignia since January
1991 and President since May 1995. Mr. Farkas
has also been President of Metropolitan Asset
Group, Ltd. ("MAG"), a real estate investment
banking firm, since 1983.
Robert J. Denison* Robert J. Denison has been a Director of
1212 North Summit Drive Insignia since May 1996. For more than the
Santa Fe, NM 87501 past five years, Mr. Denison's principal
occupation has been as a General Partner of
First Security Company II, L.P., an
investment advisory firm.
Robin L. Farkas* Robin L. Farkas has been a Director of
730 Park Avenue Insignia since August 1993. Mr. Farkas is the
New York, NY 10021 retired Chairman of the Board and Chief
Executive Officer of Alexander's Inc., a real
estate company. He also serves as a director
of Refac Technology Development Corporation,
Noodle Kiddoodle, and Containerways
International Ltd.
Robert G. Koen* Robert G. Koen has been a Director of
125 West 55th Street Insignia since August 1993. Since February
New York, NY 10019 1996, Mr. Koen has been a partner in the law
firm of Akin, Gump, Strauss, Hauer & Feld,
which represents Insignia and certain of its
affiliates from time to time. From January
1991 to February 1996, Mr. Koen was a partner
in the law firm LeBoeuf, Lamb, Greene &
MacRae.
Michael I. Lipstein* Michael I. Lipstein has been a Director of
110 East 59th Street Insignia since August 1993. For more than the
New York, NY 10022 past five years, Mr. Lipstein's principal
occupation has been as a self-employed
consultant in the real estate business,
including ownership, management and lending.
Buck Mickel* Buck Mickel has been a Director of Insignia
301 N. Main Street since August 1993. For more than the past
Greenville, SC 29601 five years, Mr. Mickel's principal occupation
has been to serve as Chairman of the Board
and Chief Executive Officer of RSI Holdings,
a company which distributes outdoor
equipment. Mr. Mickel is also a director of
The Liberty Corporation, NationsBank
Corporation, Emergent Group, Inc., Delta
Woodside Industries, Inc., and Textile Hall
Corporation.
S-4
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
James A. Aston James A. Aston's principal employment has
been with Insignia for more than the past
five years. Mr. Aston currently serves as
Chief Financial Officer of Insignia (since
August 1996), with the Office of the Chairman
(since July 1994) and Executive Managing
Director of Investment Banking of Insignia
(since January 1991).
Joseph T. Aveni Joseph T. Aveni's principal employment has
6000 Rockside Woods Blvd. been with Realty One, Inc., a wholly-owned
Cleveland, OH 44131 subsidiary of Insignia ("Realty One"), for
more than the past five years. Mr. Aveni
currently serves as Chairman and Chief
Executive Officer of Realty One (since
October 1997).
Anthony M. Ciepiel Mr. Ciepiel currently serves as a Director
6000 Rockside Woods Blvd. and Chief Operating Officer of Realty One
Cleveland, OH 44131 (since October 1997). From 1994 to 1997, Mr.
Ciepiel was the President of Realty One.
Prior to 1994, Mr. Ciepiel was the Chief
Financial Officer and Executive Vice
President of Griswold, Inc., a full service
advertising agency.
Hugh V.A. Ellingham Hugh V.A. Ellingham's principal employment
Berkeley Square House has been with Richard Ellis for more than the
London W1X 6AN past five years. Mr. Ellingham currently
England serves as a Managing Director of Insignia for
Richard Ellis (since Insignia's acquisition
of Richard Ellis in 1998) and has been a
director of Richard Ellis since its inception
in 1997. Mr. Ellingham is a citizen of the
United Kingdom.
Albert J. Frazia Albert Frazia has been a Senior Vice
President -- Human Resources of Insignia
since August 1997. Prior to August 1997, Mr.
Frazia's principal employment for more than
the prior five years was as Director -- Human
Resources of E&Y Kenneth Leventhal Real
Estate Group, New York, New York.
Alan C. Froggatt Alan C. Froggatt's principal employment has
Berkeley Square House been with Richard Ellis for more than the
London W1X 6AN past five years. Mr. Froggatt currently
England serves as Chief Executive Officer of Richard
Ellis (since Insignia's acquisition of
Richard Ellis in 1998). Mr. Froggatt is a
citizen of the United Kingdom.
Frank M. Garrison Frank M. Garrison's principal employment has
102 Woodmont Boulevard been with Insignia for more than the past
Suite 400 five years. Mr. Garrison currently serves as
Nashville, TN 37205 an Executive Managing Director of Insignia
(since July 1994) and as President of
Insignia Financial Services, a division of
Insignia (since July 1994).
Adam B. Gilbert Adam B. Gilbert has been General Counsel and
200 Park Avenue Secretary of Insignia since March 1998. Prior
New York, NY 10166 to that time, Mr. Gilbert's principal
occupation was as a partner with the law firm
of Nixon, Hargrave, Devans & Doyle, LLP, New
York, New York.
Jeffrey L. Goldberg Jeffrey L. Goldberg's principal employment
200 Park Avenue has been with Insignia for more than the past
New York, NY 10166 five years. Mr. Goldberg currently serves as
a Managing Director -- Investment Banking of
Insignia (since July 1994).
S-5
<PAGE>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------
Edward S. Gordon Edward S. Gordon has been with the Office of
200 Park Avenue the Chairman of Insignia and has been
New York, NY 10166 Chairman of Insignia/ESG, Inc. since July
1996. Prior to July 1996, Mr. Gordon's
principal employment for more than the prior
five years was as a founder and Chairman of
Edward S. Gordon Company, Incorporated
("ESG"), a commercial property management and
brokerage firm located in New York, New York
that was acquired by Insignia in June 1996.
Albert H. Gossett Albert H. Gossett's principal employment has
been with Insignia for more than the past
five years. Mr. Gossett currently serves as a
Senior Vice President of Insignia (since July
1994) and as Chief Information Officer of
Insignia (since January 1991).
Andrew J.M. Huntley Andrew Huntley's principal employment has
Berkeley Square House been with Richard Ellis Group Limited, a
London W1X 6AN wholly-owned U.K. subsidiary of Insignia
England ("Richard Ellis"), for more than the past
five years. Mr. Huntley currently serves as
Chairman of Richard Ellis (since Insignia's
acquisition of Richard Ellis in 1998). Mr.
Huntley is a citizen of the United Kingdom.
Neil Kreisel Neil Kreisel has been an Executive Managing
909 Third Avenue Director of Insignia since September 1995 and
New York, NY 10022 President of Insignia Residential Group since
September 1997. Mr. Kreisel has also served
as President of Insignia Management Services
-- New York, Inc., a subsidiary of Insignia,
since September 1995. Prior to September
1995, Mr. Kreisel's principal occupation was
to serve as President and Chief Executive
Officer of Kreisel Company, Inc., a
residential property management firm located
in New York, New York which Insignia acquired
in September 1995.
Martha Long Martha Long has been a Senior Vice President
-- Finance of Insignia since January 1997 and
Controller of Insignia since June 1994. Prior
to June 1994, Ms. Long was Senior Vice
President and Controller of The First Savings
Bank, FSB located in Greenville, South
Carolina.
Thomas R. Shuler Thomas R. Shuler's principal employment has
been with Insignia for more than the past
five years. Mr. Shuler currently serves as
Chief Operating Officer of Insignia
Residential Group (since January 1997).
Stephen B. Siegel Stephen B. Siegel has been a Managing
200 Park Avenue Director of Insignia since June 1996,
New York, NY 10166 President of Insignia Commercial Group since
January 1997 and President of Insignia/ESG,
Inc. since June 1996. From February 1992
until July 1996, Mr. Siegel's principal
employment was as President of ESG. Mr.
Siegel currently serves as a Director of
Liberty Property Trust and Tower Realty, Inc.
Ronald Uretta Ronald Uretta's principal employment has been
with Insignia for more than the past five
years. Mr. Uretta currently serves as Chief
Operating Officer (since August 1996) and
Treasurer (since January 1992) of Insignia.
Mr. Uretta has also served as the Chief
Financial Officer and Controller of MAG since
September 1990.
S-6
<PAGE>
SCHEDULE IV
IPT PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Johnstown/Consolidated Income Partners
Multi-Benefit Realty Fund 87-1
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
Fox Strategic Housing Income Partners
Davidson Growth Plus, L.P.
Davidson Diversified Real Estate II, L.P.
Davidson Income Real Estate, L.P.
HCW Pension Real Estate Fund
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. IV
Angeles Income Properties, Ltd. 6
Angeles Opportunity Properties, Ltd.
Angeles Partners IX
Angeles Partners XII
S-7
<PAGE>
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
Depositary as set forth below.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
<S> <C> <C> <C>
Wall Street Station (212) 701-7636 (212) 701-7624 Wall Street Plaza
P.O. Box 1023 88 Pine Street, 19th Floor
New York, New York 10268-1023 New York, New York 10005
</TABLE>
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 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.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
20th Floor
New York, New York 10004
(800) 854-9486
(Toll Free)
(212) 843-8500
(Call Collect)
<PAGE>
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF UNITS OF LIMITED PARTNERSHIP INTEREST IN
SHELTER PROPERTIES I LIMITED PARTNERSHIP
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 21, 1998
- -------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON AUGUST 17, 1998 UNLESS THE OFFER IS EXTENDED
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
<S> <C> <C> <C>
Wall Street Station (212) 701-7636 (212) 701-7624 Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN COMPLETING THIS ASSIGNMENT
OF PARTNERSHIP INTEREST, PLEASE CALL OUR INFORMATION AGENT, BEACON HILL
PARTNERS, TOLL FREE AT (800) 854-9486.
DELIVERY OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
The undersigned hereby tenders to Cooper River Properties, L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of the
undersigned's units of limited partnership interest ("Units") in Shelter
Properties I Limited Partnership, a South Carolina limited partnership (the
"Partnership"), specified below, at a price of $625 per Unit (the "Purchase
Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the offer to purchase dated July 21, 1998 (the "Offer
to Purchase"), receipt of which is hereby acknowledged, and in this Assignment
of Partnership Interest (which, together with any supplements or amendments,
collectively constitute the "Offer"). The undersigned understands and agrees
that the Purchase Price will automatically be reduced by the aggregate amount
of distributions per Unit, if any, made by the Partnership on or after July 21,
1998 and prior to the date on which the Purchaser pays for the Units purchased
pursuant to the Offer. Holders of Units ("Limited Partners") who tender their
Units will not be obligated to pay any commissions or Partnership transfer
fees, which commissions and Partnership transfer fees, if any, will be borne by
the Purchaser. 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 Units tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of and payment for the
Units tendered hereby, the undersigned hereby sells, assigns and transfers to
or upon the order of the Purchaser all right, title and interest in and to all
of the Units tendered hereby. The undersigned understands that upon acceptance
for payment of and payment for the tendered Units, the Purchaser will be
entitled to seek admission to the Partnership as a substituted Limited Partner
in substitution for the undersigned as to all the tendered Units.
The undersigned irrevocably appoints the Purchaser and its managers and
designees as the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to exercise all voting and other rights with
respect to the Units tendered by the undersigned and purchased by the
Purchaser. Such power of attorney and proxy shall be considered coupled with an
interest in the tendered Units and is irrevocable. When the Units tendered
hereby are accepted for payment pursuant to the Offer, all prior proxies and
powers given by the undersigned with respect to the Units will, without further
action, be revoked, and no subsequent proxies or powers may be given (and if
given will not be effective). The Purchaser and its managers and designees
will, with respect to the Units, be empowered to exercise all voting and other
rights of the undersigned as they in their sole discretion may deem proper,
whether at any meeting of the Partnership's Limited Partners, by written
consent or otherwise, subject to the restrictions in the Limited Partnership
Agreement of the Partnership. The foregoing proxy and power may be exercised by
the Purchaser or any of the other persons referred to above acting alone.
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints the Purchaser and its managers and
designees (each an "Agent") as the undersigned's attorneys-in-fact, each with
full power of substitution, with an irrevocable instruction to each Agent to
execute all or any instrument of transfer and/or other documents in the Agent's
discretion in relation to the Units tendered hereby and accepted for payment by
the Purchaser, 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 and to vest in the Purchaser,
or as it may direct, those Units, effective when, and only to the extent that,
the Purchaser accepts the tendered Units for payment; (b) authorizes and
requests the Partnership and corporate general partner (the "General Partner")
to take any and all acts as may be required to effect the transfer of the
undersigned's Units to the Purchaser (or its designee) and admit the Purchaser
(or its designee) as a substituted Limited Partner in the Partnership; (c)
assigns to the Purchaser and its assigns all of the right, title and interest
of the undersigned in and to any and all distributions made by the Partnership
from and after the expiration of the Offer in respect of the Units tendered by
the undersigned; (d) grants to the Purchaser and its assigns the right to
receive any and all distributions made by the Partnership on or after the date
on which the Purchaser pays for the Units tendered by the undersigned
(regardless of the record date for any such distribution), and to receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Units; (e) empowers the Purchaser and the Agent 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 the address specified in the form, and
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 in the name and on behalf of the tendering
Limited Partner; and (f) agrees not to exercise any rights pertaining to the
Units without the prior consent of the Purchaser.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby and has full power and authority to validly tender,
sell, assign and transfer the Units tendered hereby and that when the same are
purchased by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations relating to the
sale or transfer thereof, and such Units will not be subject to any adverse
claims. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the Units tendered hereby.
The undersigned understands that a tender of Units pursuant to the
procedures described in the Offer to Purchase and in the Instructions to this
Assignment of Partnership Interest will constitute a binding agreement between
the undersigned and the Purchaser upon the terms and subject to the conditions
of the Offer. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
THIS TENDER IS IRREVOCABLE, EXCEPT THAT UNITS TENDERED PURSUANT TO THE
OFFER MAY BE WITHDRAWN AS DESCRIBED IN SECTION 4 OF THE OFFER TO PURCHASE.
<PAGE>
PLEASE COMPLETE ALL LETTERED AREAS
SIGN HERE TO TENDER YOUR UNITS
BOX A
- --------------------------------------------------------------------------------
The undersigned hereby tenders the number of Units of Shelter Properties I
Limited Partnership specified below pursuant to the terms of the Offer. The
undersigned hereby certifies, under penalties of perjury, that the information
and representations provided in Boxes A, B and C of this Assignment of
Partnership Interest, which have been duly completed by the undersigned, are
true and correct as of the date hereof.
X
------------------------------------------------
X
------------------------------------------------
SIGNATURE(S) OF LIMITED PARTNER (A)
DATE (B):
----------------------------------------
(MUST BE SIGNED BY REGISTERED LIMITED PARTNER EXACTLY AS NAME(S) APPEAR(S)
IN THE PARTNERSHIP'S RECORDS. IF SIGNATURE IS BY AN OFFICER OF A CORPORATION,
ATTORNEY-IN-FACT, AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR OTHER
PERSON(S) ACTING IN FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE COMPLETE THE
LINE CAPTIONED "CAPACITY (FULL TITLE)" AND SEE INSTRUCTION 5.)
ADDRESS (C):
-------------------------------------
- -------------------------------------------------
(INCLUDE ZIP CODE)
(THE ADDRESS PROVIDED ABOVE MUST BE THE REGISTERED ADDRESS OF THE LIMITED
PARTNER)
- ------------------------------- -----------------------------------------
AREA CODE AND SOCIAL SECURITY NUMBER
TELEPHONE NUMBER (D) OR TAXPAYER IDENTIFICATION (E)
NUMBER OF NUMBER OF
UNITS TENDERED (F): UNITS OWNED (G):
------------ ------------
(If no indication is given, all Units owned of record by the Limited Partner
will be deemed tendered.)
PRINT NAME(S) (H):
-------------------------------
CAPACITY (FULL TITLE) (I):
-----------------------
- -------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS - SECTION 1)
AUTHORIZED SIGNATURE: NAME OF FIRM:
--------------------- ----------------------
NAME: ADDRESS:
------------------------------------- ---------------------------
DATE: AREA CODE AND TEL. NO.:
------------------------------------- ------------
- -------------------------------------------------------------------------------
IMPORTANT!
LIMITED PARTNERS MUST ALSO COMPLETE LINES A THROUGH F BELOW.
BOX B
- -------------------------------------------------------------------------------
SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
Form W-9 CERTIFY BY SIGNING AND DATING BELOW
Department of
the Treasury
Internal Revenue Service ---------------------------------------
Social Security Number(s) or
Employer Identification Number (A)
------------------------------------------------------------
PAYER'S PART 2-- Certification-- Under penalties of perjury, I
REQUEST FOR certify that: (1) The number shown on this form is my
TAXPAYER correct Taxpayer a Identification Number (or I am waiting
IDENTIFICATION for a number to be issued to me) and (2) I am not subject
NUMBER (TIN) to back-up withholding either because I have not been
notified by the Internal Revenue Service ("IRS") that I am
subject to back-up withholding as result of failure to
report all interest or dividends, or the IRS has notified
me that I am no longer subject to back-up withholding
------------------------------------------------------------
PART 3
AWAITING TIN [ ]
Certification Instructions -- You must cross out item (2)
above if you have been notified by the IRS that you -- are
subject to back-up withholding because of underreporting
interest or dividends on your tax return However, if after
being notified by the IRS that you were subject to back-up
withholding you received another notification from the IRS
that you are no longer subject to back-up withholding, do
not cross out item (2).
SIGNATURE (B): DATE (C):
------------------------------- ----------------------
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(TO BE COMPLETED ONLY IF THE BOX IN PART 3 ABOVE IS CHECKED)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within sixty days, 31
percent of all reportable payments made to me thereafter will be withheld until
I provide a number.
- ------------------------------------ ------------------------------------
SIGNATURE SIGNATURE
- -------------------------------------------------------------------------------
BOX C
- -------------------------------------------------------------------------------
FIRPTA AFFIDAVIT -- CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the Purchaser that withholding of tax is not required upon
this disposition of a U.S. real property interest, the undersigned hereby
certifies the following on behalf of the tendering Limited Partner named above:
1. The Limited Partner, if an individual, is not a nonresident alien for
purposes of U.S. income taxation, and if not 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);
2. The Limited Partner's Social Security Number (for individuals) or
Employer Identification Number (for non-individuals) is (D): ; and
3. The Limited Partner's address is (E):
--------------------------------
I understand that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement I have made here
could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete.
- ------------------------------------ ------------------------------------
Signature (F) Signature
Title: Title:
------------------------------ ------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
TO
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR
SHELTER PROPERTIES I LIMITED PARTNERSHIP
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
- -------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE COMPLETING THE ASSIGNMENT OF
PARTNERSHIP INTEREST, PLEASE CALL BEACON HILL PARTNERS TOLL FREE AT
(800) 854-9486 OR COLLECT AT (212) 843-8500
- -------------------------------------------------------------------------------
1. GUARANTEE OF SIGNATURES. If the Assignment of Partnership Interest
is signed by the registered holder of the Units 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 Units 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. A notarization is not the same thing as a signature guarantee, and
a notarization of the Assignment of Partnership Interest will not be
sufficient. IN THE MAJORITY OF CASES, THE LOCAL BANK AT WHICH YOU DO YOUR DAY
TO DAY BANKING IS AN ELIGIBLE INSTITUTION AND WILL BE ABLE TO PROVIDE YOU WITH
THE REQUIRED MEDALLION GUARANTEE.
2. DELIVERY OF ASSIGNMENT OF PARTNERSHIP INTEREST. The Assignment of
Partnership Interest is to be completed by all Limited Partners who wish to
tender Units in response to the Offer. For a Limited Partner validly to tender
Units, a properly completed and duly executed Assignment of Partnership
Interest (or a facsimile copy), along with the required signature guarantees by
an Eligible Institution and any other required documents, must be received by
the Depositary at one of its addresses set forth on the Assignment of
Partnership Interest on or prior to the Expiration Date (as defined in the
Offer to Purchase).
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.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Units will be purchased (except from a Limited Partner who is
tendering all of the Units owned by that Limited Partner). All tendering
Limited Partners, by execution of the Assignment of Partnership Interest, waive
any right to receive any notice of the acceptance of their Units for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
additional information may be provided on a separate signed schedule attached
hereto.
4. MINIMUM TENDERS. A Limited Partner may tender any or all of his or
her Units; provided, however, that because of restrictions in the Partnership's
Limited Partnership Agreement, in order for a partial tender of Units to be
valid, after the sale of Units pursuant to the Offer, the Limited Partner must
continue to hold a minimum of five Units. Tenders of fractional Units will be
permitted only by a Limited Partner who is tendering all Units owned by that
Limited Partner.
5. SIGNATURES ON ASSIGNMENT OF PARTNERSHIP INTEREST. If the Assignment
of Partnership Interest is signed by the registered Limited Partner(s), the
signature(s) must correspond exactly with the name(s) as shown on the records
of the Partnership, without alteration, enlargement or any change whatsoever.
If any of the Units tendered hereby are held of record by two or more
joint Limited Partners, each such Limited Partner must sign the Assignment of
Partnership Interest.
If the Assignment of Partnership Interest is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
the Depositary of their authority to so act must be submitted.
6. WAIVER OF CONDITIONS. The Purchaser expressly reserves the absolute
right, in its sole discretion, to waive any of the specified conditions of the
Offer, in whole or in part, in the case of any Units tendered.
7. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions or
requests for assistance may be directed to Beacon Hill Partners, the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase. Copies of the Offer to Purchase and the
Assignment of Partnership Interest may be obtained from the Information Agent.
(Continued on Reverse Side)
<PAGE>
8. SUBSTITUTE FORM W-9. Each tendering Limited Partner is required to
provide the Depositary with a correct taxpayer identification number ("TIN"),
generally the Limited Partner's social security or federal employer's
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below. You must cross out item (2) in the
Certification box on Substitute Form W-9 if you are subject to back-up
withholding. Failure to provide the information on the form may subject the
tendering Limited Partner to 31% federal income tax withholding on the payments
made to the Limited Partner with respect to Units purchased pursuant to the
Offer. The box in Part 3 of the form may be checked if the tendering Limited
Partner has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty (60) days, thereafter the
Depositary will withhold 31% on all such payments of the Purchase Price until a
TIN is provided to the Depositary.
9. 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 Units purchased pursuant to the Offer, plus the amount of
any liabilities of the Partnership allocable to such Units, each Limited
Partner who or which is a United States person must complete the FIRPTA
Affidavit contained in the Assignment of Partnership Interest stating, under
penalties of perjury, such Limited Partner's TIN and address, and that such
Limited Partner is not a foreign person. 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.
IMPORTANT: THE ASSIGNMENT OF PARTNERSHIP INTEREST (OR A FACSIMILE COPY)
(TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE.
----------------
IMPORTANT TAX INFORMATION
To prevent backup withholding on payments made to a Limited Partner or
other payee with respect to Units purchased pursuant to the Offer, the Limited
Partner is required to notify the Depositary of the Units of the Limited
Partner's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Limited Partner is
awaiting a TIN) and that (1) the Limited Partner has not been notified by the
Internal Revenue Service that the Limited Partner is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the Limited Partner that the Limited
Partner is no longer subject to backup withholding. If backup withholding
applies, the Depositary is required to withhold 31% of any payments made to the
Limited Partner. Backup withholding is not an additional tax. Rather, the
federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
The Limited Partner is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the record owner
of the Units. If the Units are in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain Limited Partners (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Limited Partner must submit to the Depositary a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Limited Partner's exempt status. A Form W-8 can be obtained
from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional institutions.
----------------
INDIVIDUAL RETIREMENT ACCOUNT (IRAS)
PLEASE NOTE THAT A TENDERING BENEFICIAL OWNER OF UNITS WHOSE UNITS 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. IF THE UNITS ARE HELD IN
AN IRA ACCOUNT, THE CUSTODIAN OF THE ACCOUNT MUST SIGN THE ASSIGNMENT OF
PARTNERSHIP INTEREST.
<PAGE>
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.
- ---------------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the first
individual on the account
3. Husband and wife The actual owner of
(joint account) the account or, if joint
funds, either person1
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent(3)
designated ward, minor, or
incompetent person(3)
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------------------------
GIVE THE
TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------------------------------
9. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifyin
number of the personal
representative or truste
unless the legal entity itself
is not designated in th
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nomine
15. 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
- -------------------------------------------------------------------------------
(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) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your social security number or employer identification number.
(5) 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>
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 do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), 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) of the Internal Revenue
Code of 1986, as amended (the "Code"), 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) of the Code.
- - 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 Company Act of 1940.
- - A foreign central bank of issue.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
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 of
the Code.
- - 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 made to an appropriate nominee.
- - Section 404(k) payments made by an ESOP.
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 of the Code).
- - Payments described in section 6049(b)(5) of the Code to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451 of the Code.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
- - Payments made to an appropriate nominee.
Exempt payees described above should file substitute 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. IF YOU ARE A NONRESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
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 correct taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct 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 correct 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis that results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) 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>
Exhibit (a)(4)
COOPER RIVER PROPERTIES, L.L.C.
One Insignia Financial Plaza
Greenville, South Carolina 29602
July 21, 1998
To: The Limited Partners of
Shelter Properties I Limited Partnership
Enclosed for your review and consideration are documents relating to an
offer by Cooper River Properties, L.L.C. ("Cooper River") to purchase your units
of limited partnership interest in Shelter Properties I Limited Partnership for
$625 in cash per unit. This offer will expire midnight, New York City time on
August 17, 1998 (unless extended by Cooper River).
Cooper River is an affiliate of the General Partner of the Partnership.
THE ENCLOSED DOCUMENTS CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ
CAREFULLY AND IN THEIR ENTIRETY BEFORE YOU DECIDE WHETHER TO SELL YOUR UNITS TO
COOPER RIVER PURSUANT TO THIS OFFER.
If you have any questions concerning the terms of the offer, or need
assistance in completing the forms necessary to tender your units, please
contact our Information Agent, Beacon Hill Partners, at (800) 854-9486.
Thank you.
Sincerely,
Cooper River Properties, L.L.C.
<PAGE>
================================================================================
CREDIT AGREEMENT
dated as of December 30, 1997
by and among
INSIGNIA PROPERTIES, L.P.,
as Borrower,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent
and
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I - DEFINITIONS.........................................................................................1
SECTION 1.1 Definitions....................................................................................1
SECTION 1.2 General.......................................................................................12
SECTION 1.3 Other Definitions and Provisions..............................................................12
ARTICLE II - CREDIT FACILITY...................................................................................12
SECTION 2.1 Commitment....................................................................................12
SECTION 2.2 Procedure for Advances of Loans...............................................................13
SECTION 2.3 Repayment of Loans............................................................................13
SECTION 2.4 Revolving Credit Notes........................................................................14
SECTION 2.5 Increase/Reduction of the Aggregate Commitment................................................14
SECTION 2.6 Termination of Credit Facility................................................................15
SECTION 2.7 Use of Proceeds...............................................................................15
ARTICLE III - GENERAL LOAN PROVISIONS..........................................................................15
SECTION 3.1 Interest......................................................................................15
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans......................................17
SECTION 3.3 Fees..........................................................................................17
SECTION 3.4 Manner of Payment.............................................................................17
SECTION 3.5 Crediting of Payments and Proceeds............................................................18
SECTION 3.6 Adjustments...................................................................................18
SECTION 3.7 Nature of Obligations of Lenders Regarding Loans; Assumption by the
Administrative Agent..........................................................................18
SECTION 3.8 Changed Circumstances.........................................................................19
SECTION 3.9 Reimbursement.................................................................................22
SECTION 3.10 Capital Requirements..........................................................................22
SECTION 3.11 Taxes.........................................................................................22
SECTION 3.12 Claims for Increased Costs and Taxes..........................................................24
ARTICLE IV - CLOSING; CONDITIONS OF CLOSING AND BORROWING......................................................25
SECTION 4.1 Closing........................................................................................25
SECTION 4.2 Conditions to Closing and Initial Loan.........................................................25
<PAGE>
SECTION 4.3 Conditions to All Loans........................................................................27
SECTION 4.4 Delivery of Certificates by Administrative Agent...............................................28
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE BORROWER.....................................................28
SECTION 5.1 Representations and Warranties.................................................................28
SECTION 5.2 Survival of Representations and Warranties, Etc................................................33
ARTICLE VI - FINANCIAL INFORMATION AND NOTICES.................................................................34
SECTION 6.1 Financial Statements and Information...........................................................34
SECTION 6.2 Officer's Compliance Certificate...............................................................35
SECTION 6.3 Accountants' Certificate.......................................................................35
SECTION 6.4 Other Reports..................................................................................35
SECTION 6.5 Notice of Litigation and Other Matters.........................................................35
ARTICLE VII - AFFIRMATIVE COVENANTS............................................................................36
SECTION 7.1 Preservation of Existence and Related Matters..................................................36
SECTION 7.2 Maintenance of Property........................................................................36
SECTION 7.3 Insurance......................................................................................36
SECTION 7.4 Accounting Methods and Financial Records.......................................................36
SECTION 7.5 Payment and Performance of Obligations.........................................................36
SECTION 7.6 Compliance With Laws and Approvals.............................................................37
SECTION 7.7 Environmental Laws.............................................................................37
SECTION 7.8 Compliance with ERISA..........................................................................37
SECTION 7.9 Compliance With Agreements.....................................................................37
SECTION 7.10 Visits and Inspections37
SECTION 7.11 Pledge of Partner Interests38
SECTION 7.12 Further Assurances38
SECTION 7.13 Application of Non-Operational Distributions38
SECTION 7.14 Year 2000 Compatibility38
ARTICLE VIII - FINANCIAL COVENANTS.............................................................................38
SECTION 8.1 Maximum Leverage................................................................................39
SECTION 8.2 Interest and Dividend Coverage..................................................................39
SECTION 8.3 Interest Coverage Ratio.........................................................................39
<PAGE>
ARTICLE IX - NEGATIVE COVENANTS..........................................................................39
SECTION 9.1 Limitations on Debt.......................................................................39
SECTION 9.2 Limitations on Contingent Obligations.....................................................40
SECTION 9.3 Negative Pledge; Limitation on Lien.......................................................40
SECTION 9.4 Limitations on Loans, Advances, Investments and Acquisitions..............................40
SECTION 9.5 Limitations on Mergers and Liquidation....................................................42
SECTION 9.6 Limitations on Sale of Assets.............................................................42
SECTION 9.7 Limitations on Distributions..............................................................42
SECTION 9.8 Transactions with Affiliates..............................................................43
SECTION 9.9 Certain Accounting Changes................................................................43
SECTION 9.10 Lines of Business.........................................................................43
SECTION 9.11 Restrictive Agreements....................................................................43
ARTICLE X - DEFAULT AND REMEDIES.........................................................................43
SECTION 10.1 Events of Default.........................................................................43
SECTION 10.2 Remedies..................................................................................45
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc...........................................46
ARTICLE XI - THE AGENTS..................................................................................46
SECTION 11.1 Appointment and Authorization.............................................................46
SECTION 11.2 Delegation of Duties......................................................................46
SECTION 11.3 Exculpatory Provisions....................................................................46
SECTION 11.4 Reliance by the Agents....................................................................47
SECTION 11.5 Notice of Default.........................................................................47
SECTION 11.6 Non-Reliance on the Agents and Other Lenders..............................................47
SECTION 11.7 Indemnification...........................................................................48
SECTION 11.8 Agent in Its Individual Capacity..........................................................48
SECTION 11.9 Resignation of the Agent; Successor Agent.................................................48
ARTICLE XII - MISCELLANEOUS..............................................................................49
SECTION 12.1 Notices...................................................................................49
SECTION 12.2 Expenses; Indemnity.......................................................................51
SECTION 12.3 Governing Law.............................................................................52
SECTION 12.4 Consent to Jurisdiction...................................................................52
SECTION 12.5 Waiver of Jury Trial......................................................................52
SECTION 12.6 Reversal of Payments......................................................................52
SECTION 12.7 Accounting Matters........................................................................53
<PAGE>
SECTION 12.8 Successors and Assigns; Participations....................................................53
SECTION 12.9 Amendments, Waivers and Consents..........................................................56
SECTION 12.10 Performance of Duties.....................................................................56
SECTION 12.11 No Fiduciary Relationship.................................................................56
SECTION 12.12 All Powers Coupled with Interest..........................................................56
SECTION 12.13 Survival of Indemnities...................................................................57
SECTION 12.14 Titles and Captions.......................................................................57
SECTION 12.15 Severability of Provisions................................................................57
SECTION 12.16 Counterparts..............................................................................57
SECTION 12.17 Term of Agreement.........................................................................57
SECTION 12.18 Independent Effect of Covenants...........................................................57
</TABLE>
<PAGE>
Exhibits and Schedules
----------------------
EXHIBITS
--------
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Conversion/Continuation
Exhibit D - Form of Officer's Compliance Certificate
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Guaranty Agreement
Exhibit G - Form of IPLP Pledge Agreement
Exhibit H - Form of IPT Pledge Agreement
Exhibit I - Form of Notice of Account Designation
SCHEDULES
---------
Schedule 1 - Lenders and Commitments
Schedule 5.1(h) - Employee Benefit Plans
Schedule 5.1(q) - Debt and Contingent Obligations
Schedule 5.1(r) - Litigation
Schedule 9.4 - Existing Loans, Advances and Investments
Schedule 9.8 - Transactions with Affiliates
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 30th day of December, 1997, by
and among INSIGNIA PROPERTIES, L.P., a Delaware limited partnership, the
Lenders who are or may become a party to this Agreement (the "Lenders"), FIRST
UNION NATIONAL BANK, as Administrative Agent for the Lenders, and LEHMAN
COMMERCIAL PAPER INC., as Syndication Agent.
STATEMENT OF PURPOSE
The Borrower has requested and the Lenders have agreed to extend a
credit facility to the Borrower on the terms and conditions in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1. Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Actual Knowledge" means information actually known to Andrew L.
Farkas, James A. Aston, Ronald Uretta, John K. Lines, Thomas R. Shuler, Carroll
Vinson, William Jarrard or Frank Garrison, or any other individual hereafter
holding the office of the Borrower currently held by such individuals, in each
case at the date of determination.
"Adjusted DCFO" means, as of any date of determination, an amount
equal to the aggregate of the Borrower's Pro Rata Portion of the DCFO of each
Real Estate Entity in which the Borrower owns an equity interest after giving
effect to any acquisition by the Borrower of an equity interest in such Real
Estate Entity during the quarterly period ending on the determination date,
plus all fee and other income received by the Borrower during such quarterly
period (excluding extraordinary items) less all fees and expenses paid by the
Borrower or IPT during such period not reimbursed.
"Adjusted Portfolio Equity" means, as of any date of determination
and with respect to each Real Estate Entity, an amount equal to the Pro Rata
Portion of the EFV of the real property owned by each Real Estate Entity whose
Leverage is less than sixty percent (60%) less an amount equal to the Pro Rata
Portion of the Debt of such Real Estate Entity.
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 11.9.
<PAGE>
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
12.1.
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary of such first Person) which directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such first Person or any of its Subsidiaries.
"Agents" means the collective reference to the Administrative Agent
and the Syndication Agent; "Agent" means either of such Persons.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be increased or reduced at any time
or from time to time pursuant to Section 2.5. On the Closing Date, the
Aggregate Commitment shall be Fifty Million Dollars ($50,000,000).
"Agreement" means this Credit Agreement, as amended, modified,
restated or supplemented from time to time.
"Applicable Law" means in respect of any Person all provisions of
constitutions, statutes, laws, rules, treaties, regulations and orders of all
Governmental Authorities and all orders and decrees of all courts and
arbitrators applicable to such Person.
"Applicable Margin" means as to the LIBOR Rate, 2.50% per annum.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 12.8.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or
(b) the Federal Funds Rate plus 1/2 of 1%, as applicable; each change in the
Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate, as applicable.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 3.1(a).
"Borrower" means IPLP in its capacity as borrower hereunder.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day, other than a Saturday, Sunday or legal holiday, on
which banks in Greenville, South Carolina, Charlotte, North Carolina and New
York, New York are open for the conduct of their commercial banking business,
and (b) with respect to all notices and determinations in connection with, and
payments of principal and interest on, any LIBOR Rate Loan, any day that is a
Business Day described in clause (a) and that is also a day for trading by and
between banks in Dollar deposits in the London interbank market.
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate cost of all assets acquired by such Person during such
period which should, in accordance with GAAP, be classified as capital assets
on the balance sheet of such Person.
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"Capital Lease" means, with respect to the Borrower and its
Subsidiaries, any lease of any property that is, in accordance with GAAP,
classified and accounted for as a capital lease on a consolidated balance sheet
of the Borrower and its Subsidiaries.
"Closing Date" means December 30, 1997.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to the Borrower hereunder in an aggregate principal amount at any
time outstanding not to exceed the amount set forth opposite such Lender's name
on Schedule 1, as the same may be reduced or modified at any time or from time
to time pursuant to Sections 2.5, 2.6 and 12.8.
"Commitment Percentage" means, as to any Lender at any time prior to
the Termination Date, the ratio (expressed as a percentage) of (a) the amount
of the Commitment of such Lender to (b) the Aggregate Commitment of all of the
Lenders, and on and after the Termination Date, the ratio of (c) the amount of
the Loans of such Lender to (d) the aggregate amount of all Loans then
outstanding.
"Contingent Obligation" means, with respect to the Borrower, without
duplication, any obligation, contingent or otherwise, of the Borrower pursuant
to which the Borrower has directly or indirectly guaranteed any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of the
Borrower (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by agreement to keep
well, to purchase assets, goods, securities or services or to take-or-pay) or
(b) entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, that the term
Contingent Obligation shall not include (i) endorsements for collection or
deposit in the ordinary course of business, and (ii) for purposes of
determining compliance by IPT and the Borrower with Section 9.2, the
obligations set forth on Schedule 5.1(q) .
"Credit Facility" means the revolving credit facility established
pursuant to Article II.
"DCFO" means, as to any period of time, the aggregate NOI for such
period of each Real Estate Entity in which the Borrower owns an equity interest
less with respect to each Real Estate Entity for such period the sum of the
following:
(i) Cash Interest Expense, plus
(ii) All principal payments (other than in connection with
refinancings) on the Debt of such Real Estate Entity, plus
(iii) An amount equal to the greater of (x) the capital
expenditures (exclusive of capital expenditures to restore
newly-acquired properties to their original condition in accordance
with a budget provided to the Agents within ninety (90) days after the
acquisition) less funded capital expenditures or (y) an amount equal
to $500 for each
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apartment unit and $.20 per square foot for each commercial
property owned by such Real Estate Entity.
"Debt" means, with respect to any Person at any date and without
duplication, the sum of the following calculated in accordance with GAAP: (a)
all Debt for Money Borrowed, (b) all obligations to pay the deferred purchase
price of property or services of the Borrower, except trade payables arising in
the ordinary course of business not more than ninety (90) days past due, (c)
all Debt of any other Person secured by a Lien on any asset of such Person, (d)
all Contingent Obligations of the Borrower and (e) all net obligations incurred
by the Borrower pursuant to Hedging Agreements; provided that the obligations
of the Borrower to pay the purchase price in connection with investments and
acquisitions permitted hereunder shall not be included in Debt.
"Debt for Money Borrowed" means, with respect to any Person at any
date and without duplication, the sum of the following calculated in accordance
with GAAP: (a) all liabilities, obligations and indebtedness for borrowed money
including, but not limited to, obligations evidenced by bonds, debentures,
notes or other similar instruments of the Borrower, (b) all obligations of such
Person as lessee under Capital Leases, and (c) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, and banker's acceptances issued for the account of such
Person.
"Default" means any of the events specified in Section 10.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"EFV" means the estimated fair value of the real property owned
by any Real Estate Entity as determined by the Borrower based on assumptions
consistent with those set forth in the December 31, 1996 valuation schedules
provided to the Agents and reasonably acceptable to the Agents.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under, or which has a
branch or agency licensed under, the laws of the United States or any state
thereof, having combined capital and surplus in excess of $500,000,000, (b) a
finance company, insurance company or other financial institution which in the
ordinary course of business extends credit of the type extended hereunder and
that has total assets in excess of $500,000,000, (c) already a Lender hereunder
(whether as an original party to this Agreement or as the assignee of another
Lender), (d) the successor (whether by transfer of assets, merger or otherwise)
to all or substantially all of the commercial lending business of the assigning
Lender, (e) any Affiliate of the assigning Lender that is not a competitor of
the Borrower and is engaged in the business of making commercial loans in the
ordinary course of its business, or (f) any other Person that has been approved
in writing as an Eligible Assignee by the Agents and the Borrower, which
approval by Borrower shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, if a Lender proposes to assign its right,
interest and obligations hereunder to a Person that is at the time of such
assignment either (i) a competitor of the Borrower, or (ii) an Affiliate of a
competitor of the Borrower or a Person who is not engaged in the business of
making
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commercial loans in the ordinary course of its business, then it shall
be within the Borrower's sole discretion whether such Person is an Eligible
Assignee.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or
former ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et. seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 331 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et. seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et. seq.), the Clean Air Act (42
U.S.C. ss. 7401 et. seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et. seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300, et. seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. ss. 651 et. seq.), analogous state statutes, and the rules and
regulations promulgated under the foregoing as such statutes are amended or
modified from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person which is, together with the
Borrower, treated as a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified in Section 10.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean the
average of the quotations for the day for such transactions received by the
Administrative Agent from three brokers of national standing. Rates for
weekends or holidays shall be the same as the rate for the most immediate
preceding Business Day.
"First Union" means First Union National Bank, a national banking
association, and its successors.
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"Fiscal Quarter" means any quarter of any Fiscal Year.
"Fiscal Year" means any fiscal year of the Borrower ending on
December 31.
"Funded Capital Expenditures" means, with respect to any Person for
any period, all Capital Expenditures during such period for which funds have
been set aside or reserved and which will not be paid from operating revenues
of such Person.
"Funded Debt" means all of the Borrower's Debt for Borrowed Money
(other than Subordinated Debt).
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants or the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Borrower, provided,
however, that any accounting principle or practice required to be changed by
such American Institute of Certified Public Accounts or the Financial
Accounting Standards Board (or other appropriate board or committee of either)
in order to continue as a generally accepted accounting principal or practice
may be so changed.
"General Partner" means IPT in its capacity as general partner of the
Borrower.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty Agreement" means the reference to the Guaranty Agreement of
even date executed by IPT in favor of the Administrative Agent for the ratable
benefit of the Agents and the Lenders substantially in the form of Exhibit F,
as such agreement may be amended or supplemented.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law, (d) the discharge or emission or release of which
requires a permit or license under any Environmental Law or other Governmental
Approval, (e) which are deemed by a court of law or a Governmental Authority to
constitute a nuisance, a trespass or pose a health or safety hazard to persons
or neighboring properties, (f) which are materials consisting of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
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"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Borrower under this Agreement,
and any confirming letter executed pursuant to such hedging agreement, all as
amended or modified.
"Insignia" means Insignia Financial Group, Inc., a Delaware
corporation.
"Interest Expense" means, with respect to the Borrower for any period,
the gross cash interest expense (including but without limitation interest
expense attributable to Capital Leases but excluding interest expense with
respect to Subordinated Debt) of the Borrower, all determined for such period
in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
3.1(b).
"IPLP" means Insignia Properties, L.P., a Delaware limited partnership.
"IPLP Pledge Agreement" means the Pledge Agreement of even date
executed by IPLP in favor of the Administrative Agent for the ratable benefit
of the Agents and the Lenders substantially in the form of Exhibit G, as such
Pledge Agreement may be amended or supplemented, with the consent of the
Lenders.
"IPT" means Insignia Properties Trust, a Maryland real estate
investment trust.
"IPT Advisory Agreement" means the Second Amended and Restated
Advisory Agreement dated August 1, 1997 among the Borrower, IPT and Insignia.
"IPT Pledge Agreement" means the Pledge Agreement of even date
executed by IPT in favor of the Administrative Agent for the ratable benefit of
the Agents and the Lenders substantially in the form of Exhibit H, as such
Pledge Agreement may be amended or supplemented, with the consent of the
Lenders.
"Lehman" means Lehman Commercial Paper Inc., a Delaware corporation,
and its successors.
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 12.8.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Leverage" means, with respect to any Real Estate Entity, an amount
determined by dividing the Debt of such Real Estate Entity by the EFV of the
real property owned by such Real Estate Entity.
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"LIBOR" means the rate for deposits in Dollars for a period equal to
the Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such rate
is not available, then "LIBOR" shall mean the rate per annum at which, as
determined by First Union in its reasonable judgment, Dollars are being offered
to leading banks at approximately 11:00 a.m., London time, two (2) Business
Days prior to the commencement of the applicable Interest Period for settlement
in immediately available funds by leading banks in the London interbank market
for a period equal to the Interest Period selected and in an amount
approximately equal to the applicable Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
-----------------------------
1.00-LIBOR Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 3.1(a).
"LIBOR Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) in respect of Eurocurrency Liabilities as
defined in Regulation D of the Board of Governors of the Federal Reserve
System.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any revolving credit loan made to the Borrower pursuant
to Section 2.1, and all such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Revolving
Credit Notes, the Security Documents, and each other document, instrument and
agreement executed and delivered by the Borrower, its Subsidiaries or their
counsel in connection with this Agreement or otherwise referred to herein or
contemplated hereby, all as may be amended or supplemented from time to time.
"Material Adverse Effect" means, with respect to IPT or the Borrower,
a material adverse effect on the properties, business, operations or condition
(financial or otherwise) of IPT or the Borrower or the ability of IPT or the
Borrower to perform the payment or other material obligations under the Loan
Documents to which it is a party or which would materially impair the
enforceability of any of the Loan Documents against any Person party thereto,
other than the Agents or any of the Lenders or their Affiliates.
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"Material Contract" means (a) any contract or other agreement, written
or oral, of the Borrower involving monetary liability of or to the Borrower in
an amount in excess of $1,000,000 per annum, or (b) any other contract or
agreement, written or oral, of the Borrower the failure to comply with which
could reasonably be expected to have a Material Adverse Effect.
"Maturity Date" shall have the meaning given thereto in Section 2.6.
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, and its successors; provided that, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, then "Moody's" shall mean any other nationally
recognized securities rating agency reasonably acceptable to the Borrower which
is designated by the Required Lenders by notice to Administrative Agent and the
Borrower.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions within the
preceding six years.
"Net Operating Income" means, with respect to the Borrower for any
period, the net operating income (or loss) of the Borrower for such period
determined in accordance with GAAP.
"NOI" means for any period:
(a) With respect to any Real Estate Entity in which the
Borrower owned a limited partner or other equity interest prior to the
first day of the quarter ending on the date of such determination, the
Net Operating Income of such Real Estate Entity for the period of four
fiscal quarters ending on the date of determination;
(b) With respect to any Real Estate Entity in which the
Borrower did not own a limited partner or other equity interest on the
first day of the quarter ending on the date of determination (a "New
Real Estate Entity") and for which audited financial statements for
the most recently-completed fiscal year of such New Real Estate Entity
are available, the Net Operating Income of such New Real Estate Entity
for the period of four fiscal quarters ending on the date of
determination; and
(c) With respect to any New Real Estate Entity for which
audited financial statements are not available, 75% of the pro forma Net
Operating Income of the New Real Estate Entity for the period of four
consecutive fiscal quarters commencing on the date of determination.
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 3.2.
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
all payment and other obligations owing by the Borrower to any Lender, an
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Affiliate of any Lender, or any Agent under any Hedging Agreement and (c) all
other fees and commissions (including attorney's fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Borrower to any Lender or Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Revolving Credit Note or any of the other Loan
Documents.
"Other Taxes" shall have the meaning assigned thereto in Section
3.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding
six years been maintained for the employees of the Borrower or any of their
current or former ERISA Affiliates.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Pledge Agreements" means the collective reference to the IPLP Pledge
Agreement and the IPT Pledge Agreement.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate then in
effect. The parties hereto acknowledge that the rate announced publicly by
First Union as its Prime Rate is an index or base rate and shall not
necessarily be its lowest or best rate charged to its customers or other banks.
"Pro Rata Portion" means, with respect to any Real Estate Entity, the
ratio (expressed as a percentage) of (a) the equity interest owned by the
Borrower in such Real Estate Entity to (b) the total equity in such Real Estate
Entity.
"Real Estate Entity" means any limited partnership, limited liability
company, corporation or other Person which has as its principal business the
ownership of real property or debt secured by real property.
"Register" shall have the meaning assigned thereto in Section 12.8(d).
"Required Lenders" means, at any date, any combination of holders of
greater than fifty percent of the aggregate unpaid principal amount of the
Revolving Credit Notes, or if no amounts are outstanding under the Revolving
Credit Notes, any combination of Lenders whose Commitment Percentages aggregate
greater than fifty percent.
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"Revolving Credit Notes" means the separate Revolving Credit Notes
made by the Borrower payable to the order of each Lender, substantially in the
form of Exhibit A hereto, evidencing the Credit Facility, and any amendments
and modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Note" means
any of such Revolving Credit Notes.
"S&P" means Standard & Poor's Ratings Group, a division of the
McGraw-Hill Companies, a New York corporation, and its successors; provided
that, if such division shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, then "S&P" shall mean any
other nationally recognized securities rating agency reasonably acceptable to
the Borrower which is designated by the Required Lenders by notice to
Administrative Agent and the Borrower.
"Security Documents" means the collective reference to the Guaranty
Agreement and the Pledge Agreements and each other agreement or writing
pursuant to which the Borrower or the Guarantor pledges or grants a security
interest in any property or assets securing the Obligations or any such Person
guaranties the payment and/or performance of the Obligations.
"Solvent" means, as to the Borrower on a particular date, that the
Borrower (a) has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage and is able to
pay its debts as they mature and (b) is not "Insolvent" as defined under the
United States Bankruptcy Code or any applicable State insolvency law.
"Subordinated Debt" means the collective reference to all Debt of the
Borrower which (a) has a scheduled maturity date more than one year after the
Maturity Date hereunder, (b) is not subject to any scheduled amortization or
mandatory redemption feature of any kind, and (c) is subordinated with respect
to payment, remedies and covenants to the Obligations and (with respect to Debt
which is incurred by the Borrower after the date hereof) otherwise subordinated
thereto to the reasonable satisfaction of the Agents and Required Lenders.
"Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by
such Person (irrespective of whether, at such time, capital stock or other
ownership interest of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"Syndication Agent" means Lehman in its capacity as Syndication Agent.
"Taxes" shall have the meaning assigned thereto in Section 3.11(a).
"Termination Date" means the date on which the Credit Facility
terminates pursuant to Section 2.6.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA for which notice has not been waived, or (b) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the institution of proceedings to terminate, or the
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appointment of a trustee with respect to, any Pension Plan by the PBGC, or (d)
any other event or condition which would constitute grounds under Section
4042(a) of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan, or (e) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA, or (f) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA which results in a Material Adverse Effect, or
(g) any event or condition which results in the termination of a Multiemployer
Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA which results in a
Material Adverse Effect.
"United States" means the United States of America.
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either
the singular or plural shall include the singular and plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter. Any reference herein to "Charlotte time" shall
refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Revolving Credit Notes and the other Loan
Documents or any certificate, report or other document made or delivered
pursuant to this Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE
CREDIT FACILITY
SECTION.2.1 Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally irrevocably commits to make Loans to the
Borrower from time to time from the Closing Date through the Termination Date
as requested by the Borrower in accordance with the terms of Section 2.2;
provided, that (a) the aggregate principal amount of all outstanding Loans
(after giving effect to any amount requested and funded and the use of the
proceeds thereof) shall not exceed the Aggregate Commitment and (b) the
principal amount of outstanding Loans from any Lender to the Borrower shall not
at any time exceed such Lender's Commitment. Each Loan by a Lender shall be in
a principal amount equal to such Lender's Commitment Percentage of the
aggregate principal amount of Loans requested on such occasion. Subject to the
terms and conditions hereof, the Borrower may borrow, repay and reborrow Loans
hereunder until the Termination Date.
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SECTION 2.2 Procedure for Advances of Loans.
(a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice substantially in the form attached
hereto as Exhibit B (a "Notice of Borrowing") not later than 12:00 noon
(Charlotte time) (i) at least one Business Day before each Base Rate Loan and
(ii) at least three (3) Business Days before each LIBOR Rate Loan, of its
intention to borrow, specifying (A) the date of such borrowing, which shall be
a Business Day, (B) the amount of such borrowing, which shall be with respect
to Base Rate Loans in an aggregate principal amount of $2,500,000 or a whole
multiple of $500,000 in excess thereof and with respect to LIBOR Rate Loans in
an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000
in excess thereof, (C) whether the Loans are to be LIBOR Rate Loans or Base
Rate Loans or a combination thereof and, if a combination thereof, the amount
allocable to each and (D) in the case of a LIBOR Rate Loan, the duration of the
Interest Period applicable thereto. Notices received after 12:00 noon
(Charlotte time) shall be deemed received on the next Business Day. The
Administrative Agent shall promptly notify and furnish each Lender with a copy
of each Notice of Borrowing.
(b) Disbursement of Loans. Not later than 1:00 p.m. (Charlotte time)
on the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative
Agent, such Lender's Commitment Percentage of the Loans to be made on such
borrowing date. The Borrower hereby irrevocably authorizes the Administrative
Agent to disburse the proceeds of each borrowing requested pursuant to this
Section 2.2 in immediately available funds by crediting or wiring such proceeds
to the deposit account of the Borrower maintained with the Administrative Agent
as identified in the most recent Notice of Account Designation substantially in
the form of Exhibit I hereto (a "Notice of Account Designation") delivered by
the Borrower to the Administrative Agent or as may be otherwise agreed upon by
the Borrower and the Administrative Agent from time to time. Subject to Section
3.7 hereof, the Administrative Agent shall not be obligated to disburse the
amounts to be funded by a Lender pursuant to this Section 2.2 to the extent
that such Lender has not made such amounts available to the Administrative
Agent.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full, together with all accrued
but unpaid interest thereon, on the Termination Date.
(b) Mandatory Repayment of Excess Loans. If at any time the outstanding
principal amount of all Loans exceeds the Aggregate Commitment, the Borrower
shall repay within ten (10) Business Days after notice from the Administrative
Agent, by payment to the Administrative Agent for the account of the Lenders,
the Loans in an amount equal to such excess. Each such repayment shall be
accompanied by accrued interest on the amount repaid and any amount required to
be paid pursuant to Section 3.9 hereof.
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(c) Optional Repayments. The Borrower may at any time and from time to
time repay the Loans, in whole or in part without premium (but subject to
Section 3.9), upon irrevocable prior notice to the Administrative Agent not
later than 12:00 noon (Charlotte time) (i) at least three (3) Business Days
with respect to LIBOR Rate Loans and (ii) at least one (1) Business Day with
respect to Base Rate Loans specifying the date and amount of repayment and
whether the repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination
thereof, and, if of a combination thereof, the amount allocable to each. Upon
receipt of such notice, the Administrative Agent shall promptly notify each
Lender. If any such notice is given, the amount specified in such notice shall
be due and payable on the date set forth in such notice. Partial repayments
shall be in an aggregate amount of $2,500,000 or a whole multiple of $500,000
in excess thereof with respect to Base Rate Loans and $5,000,000 or a whole
multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans.
SECTION 2.4 Revolving Credit Notes. Each Lender's Loans and the
obligation of the Borrower to repay such Loans shall be evidenced by a
Revolving Credit Note executed by the Borrower payable to the order of such
Lender representing the Borrower's obligation to pay such Lender's Commitment
or, if less, the aggregate unpaid principal amount of all Loans made and to be
made by such Lender to the Borrower hereunder, plus interest and all other
fees, charges and other amounts due thereon. Each Revolving Credit Note shall
be dated the Closing Date and shall bear interest on the unpaid principal
amount thereof at the applicable interest rate per annum specified in Section
3.1.
SECTION 2.5 Increase/Reduction of the Aggregate Commitment.
(a) The Borrower shall have the option, which may be exercised upon at
least three (3) Business Days prior written notice to the Administrative Agent
not later than one hundred eighty (180) days after the Closing Date, to
increase the Aggregate Commitment from Fifty Million Dollars ($50,000,000) to
Seventy Million Dollars ($70,000,000), subject to the satisfaction of each of
the following conditions:
(i) The merger of IPT and Angeles Mortgage Investment (the
"IPT/Angeles Merger") shall have been consummated;
(ii) No Default or Event of Default shall have occurred and
be continuing; and
(iii) The Borrower shall have paid to First Union and Lehman
the fees and amounts set forth or referenced in Section 3.3(b) of
this Agreement.
(b) The Borrower shall have the right at any time and from time to
time, upon at least three (3) Business Days prior written notice to the
Administrative Agent, to permanently reduce, in whole at any time or in part
from time to time, without premium, the Aggregate Commitment in an aggregate
principal amount not less than $1,000,000 or any whole multiple of $1,000,000
in excess thereof.
(c) Each permanent reduction permitted pursuant to this Section 2.5
shall be accompanied by a payment of principal sufficient to reduce the
aggregate outstanding Loans of the Lenders to an amount not in excess of the
Aggregate Commitment as so reduced and by
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payment of accrued interest on the amount of such repaid principal. Any
reduction of the Aggregate Commitment to zero shall be accompanied by payment
of all outstanding Obligations and, if such reduction is permanent, termination
of the Commitments and Credit Facility. Any repayment of a LIBOR Rate Loan
resulting from the reduction of the Aggregate Commitment shall, if such
repayment occurs on a day which is not the last day of the then current
Interest Period applicable thereto, be subject to the provisions of Section 3.9
hereof.
SECTION 2.6 Termination of Credit Facility. The Credit Facility shall
terminate on the earliest of (a) the third anniversary of the Closing Date (the
"Maturity Date"), (b) the date of termination by the Borrower pursuant to
Section 2.5(a) and (c) the date of termination by the Administrative Agent on
behalf of the Lenders pursuant to Section 10.2(a).
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds of
the Loans to make investments permitted by and subject to the limitations of
Section 9.4(c). The proceeds of the Loans may also be used to reimburse the
Borrower for amounts previously expended by the Borrower to fund such
acquisitions subject to compliance by the Borrower with Section 9.4(c).
ARTICLE
GENERAL LOAN PROVISIONS
SECTION 3.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
3.1, at the election of the Borrower, the aggregate principal balance of the
Revolving Credit Notes or any portion thereof shall bear interest at the Base
Rate or the LIBOR Rate plus the Applicable Margin. The Borrower shall select
the rate of interest and Interest Period, if any, applicable to any Loan at the
time a Notice of Borrowing is given pursuant to Section 2.2 or at the time a
Notice of Conversion/Continuation is given pursuant to Section 3.2. Each Loan
or portion thereof bearing interest based on the Base Rate shall be a "Base
Rate Loan" and each Loan or portion thereof bearing interest based on the LIBOR
Rate shall be a "LIBOR Rate Loan". Any Loan or any portion thereof as to which
the Borrower has not duly specified an interest rate as provided herein shall
be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 3.1(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1), two (2), three (3) or
six (6) months with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan or and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
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(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, that if any Interest Period
with respect to a LIBOR Rate Loan would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate Loan
that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month at the end of such
Interest Period;
(iv) no Interest Period shall be permitted to extend beyond
the Termination Date; and
(v) there shall be no more than five (5) Interest Periods
outstanding at any time.
(c) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) all outstanding LIBOR Rate Loans shall upon the request
of the Required Lenders bear interest at a rate per annum two percent (2%) in
excess of the rate then applicable to LIBOR Rate Loans until the end of the
applicable Interest Period and thereafter at a rate equal to two percent (2%)
in excess of the rate then applicable to Base Rate Loans, and (ii) all
outstanding Base Rate Loans shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base Rate Loans. To
the maximum extent permitted by applicable law, interest shall continue to
accrue on the Revolving Credit Notes after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any act or
law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(d) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each fiscal quarter and
interest on each LIBOR Rate Loan shall be payable on the last day of each
Interest Period applicable thereto, provided that, in the case of an Interest
Period in excess of three (3) months, accrued interest shall also be paid on
the day which is three (3) months after the commencement of such Interest
Period. All interest rates, fees and commissions provided hereunder shall be
computed on the basis of a 360-day year and assessed for the actual number of
days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the
Revolving Credit Notes and charged or collected pursuant to the terms of this
Agreement or pursuant to any of the Revolving Credit Notes exceed the highest
rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lenders have charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and the Lenders shall at the Administrative Agent's option
promptly refund to the Borrower any interest received by Lenders in excess of
the maximum lawful rate or shall apply such excess to the principal balance of
the Obligations. It is the intent hereof that the Borrower not pay or contract
to pay, and that neither the
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Administrative Agent nor any Lender receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by the Borrower under Applicable Law.
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Default (other than a Default arising from any of the events
specified in Section 10.1(e), (f) and (n) hereof) or Event of Default has
occurred and is then continuing, the Borrower shall have the option to (a)
convert at any time all or any portion of its outstanding Base Rate Loans in a
principal amount equal to $5,000,000 or any whole multiple of $1,000,000 in
excess thereof into one or more LIBOR Rate Loans or (b) upon the expiration of
any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate
Loans in a principal amount equal to $2,500,000 or a whole multiple of $500,000
in excess thereof into Base Rate Loans or (c) upon the expiration of any
Interest Period, continue the relevant LIBOR Rate Loans as LIBOR Rate Loans.
Whenever the Borrower desires to convert or continue Loans as provided above,
the Borrower shall give the Administrative Agent irrevocable prior written
notice in substantially the form attached as Exhibit C (a "Notice of
Conversion/ Continuation") not later than 12:00 noon (Charlotte time) three (3)
Business Days before the day on which a proposed conversion or continuation of
such Loan is to be effective specifying (A) the Loans to be converted or
continued, and, in the case of any LIBOR Rate Loan to be converted or
continued, the last day of the Interest Period therefor, (B) the effective date
of such conversion or continuation (which shall be a Business Day), (C) the
principal amount of such Loans to be converted or continued, and (D) the
Interest Period to be applicable to such converted or continued LIBOR Rate
Loan. The Administrative Agent shall promptly notify the Lenders of such Notice
of Conversion/Continuation.
SECTION 3.3 Fees.
(a) Commitment Fee. The Borrower shall pay to the Administrative Agent,
for the account of the Lenders, a non-refundable commitment fee (the
"Commitment Fee") of 0.25% per annum for so long as Loans under Section 2.1 are
limited to an aggregate amount of $50,000,000 and 0.375% per annum for each
day, if any, after the Borrower elects to increase the Aggregate Commitment to
Seventy Millions Dollars ($70,000,000) in accordance with Section 2.5(a). The
Commitment Fee due to each Lender shall commence to accrue on the date hereof
and shall cease to accrue on the earlier of (i) the termination of the
Commitment of such Lender and (ii) the Termination Date. The Commitment Fee
shall be payable in arrears (i) on the last Business Day of each fiscal quarter
during the term of this Agreement with the first payment due on March 31, 1998,
and (ii) on the Termination Date. Such Commitment Fee shall be promptly
distributed by the Administrative Agent to the Lenders pro rata in accordance
with the Lenders' respective Commitment Percentages.
(b) Other Fees. The Borrower agrees to pay to First Union and Lehman,
for their respective accounts, the fees set forth in the separate fee letter
agreement executed by the Borrower in favor of such Persons dated October 24,
1997, as amended by letter agreement of even date.
SECTION 3.4 Manner of Payment. Except as otherwise provided herein,
each payment (including repayments described in Article II) by the Borrower on
account of the principal of or interest on the Loans or of any fee, commission
or other amounts payable to the
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Lenders under this Agreement or any Revolving Credit Note shall be made not
later than 1:00 p.m. (Charlotte time) on the date specified for payment under
this Agreement to the Administrative Agent for the account of the Lenders pro
rata in accordance with their respective Commitment Percentages at the
Administrative Agent's Office, in Dollars, in immediately available funds and
shall be made without any set-off, counterclaim or deduction whatsoever. Any
payment received after such time but before 2:00 p.m. (Charlotte time) on such
day shall be deemed a payment on such date for the purposes of Section 10.1,
but for all other purposes shall be deemed to have been made on the next
succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time)
shall be deemed to have been made on the next succeeding Business Day for all
purposes. Upon receipt by the Administrative Agent of each such payment, the
Administrative Agent shall credit each Lender's account with its pro rata share
of such payment in accordance with such Lender's Commitment Percentage and
shall wire advice of the amount of such credit to each Lender. Subject to
Section 3.1(b)(ii), if any payment under this Agreement or any Revolving Credit
Note shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing any interest if
payable along with such payment.
SECTION 3.5 Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 10.2, all payments received by the
Lenders upon the Revolving Credit Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied first to all
expenses then due and payable by the Borrower hereunder, then to all indemnity
obligations then due and payable by the Borrower hereunder, then to all
Administrative Agent's fees then due and payable, then to all commitment and
other fees and commissions then due and payable, then to accrued and unpaid
interest on the Revolving Credit Notes and then to the principal amount of the
Revolving Credit Notes, in that order.
SECTION 3.6 Adjustments. If any Lender (a "Benefitted Lender") shall at
any time receive any payment of all or part of its Loans, or interest thereon,
or if any Lender shall at any time receive any collateral in respect to its
Loans (whether voluntarily or involuntarily, by set-off or otherwise) in a
greater proportion than any such payment to and collateral received by any
other Lender, if any, in respect of such other Lender's Loans, or interest
thereon, such Benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Loans, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loans may exercise all rights of
payment with respect to such portion as fully as if such Lender were the direct
holder of such portion.
SECTION 3.7 Nature of Obligations of Lenders Regarding Loans;
Assumption by the Administrative Agent. The obligations of the Lenders under
this Agreement to make the Loans are several and are not joint or joint and
several. Unless the Administrative Agent shall
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have received notice from a Lender prior to a proposed borrowing date that such
Lender will not make available to the Administrative Agent such Lender's
ratable portion of the amount to be borrowed on such date (which notice shall
not release such Lender of its obligations hereunder), the Administrative Agent
may assume that such Lender has made such portion available to the
Administrative Agent on the proposed borrowing date in accordance with Section
2.2(b) and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If such amount
is made available to the Administrative Agent on a date after such borrowing
date, such Lender shall pay to the Administrative Agent on demand an amount,
until paid, equal to the product of (a) the amount of such Lender's Commitment
Percentage of such borrowing, times (b) the average Federal Funds Rate during
such period as determined by the Administrative Agent, times (c) a fraction the
numerator of which is the number of days that elapse from and including such
borrowing date to the date on which such Lender's Commitment Percentage of such
borrowing shall have become immediately available to the Administrative Agent
and the denominator of which is 360. A certificate of the Administrative Agent
with respect to any amounts owing under this Section 3.7 shall be conclusive,
absent manifest error. If such Lender's Commitment Percentage of such borrowing
is not made available to the Administrative Agent by such Lender within three
(3) Business Days of such borrowing date, the Administrative Agent shall be
entitled to recover such amount made available by the Administrative Agent with
interest thereon at the rate per annum applicable to Base Rate Loans hereunder,
on demand, from the Borrower. The failure of any Lender to make its Commitment
Percentage of any Loan available shall not relieve it or any other Lender of
its obligation hereunder to make its Commitment Percentage of such Loan
available on such borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Commitment Percentage of such Loan
available on the borrowing date.
In the event that, at any time when the Borrower is not in Default and
has otherwise satisfied each of the conditions in Section 4.3 hereof, a Lender
for any reason fails or refuses to fund its portion of a borrowing and such
failure shall continue for a period in excess of thirty (30) days, then, until
such time as such Lender has funded its portion of such borrowing (which late
funding shall not absolve such Lender from any liability it may have to the
Borrower), or all other Lenders have received payment in full from the Borrower
(whether by repayment or prepayment) or otherwise of an amount equal to the
principal and interest due in respect of such borrowing, such non-funding
Lender shall not have the right (A) to vote regarding any issue on which voting
is required or advisable under this Agreement or any other Loan Document, and
such Lender's Commitment Percentage of the Loans shall not be counted as
outstanding for purposes of determining "Required Lenders" hereunder, and (B)
to receive payments of principal, interest or fees from the Borrower, the
Administrative Agent or the other Lenders in respect of its Commitment
Percentage of the Loans.
SECTION 3.8 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with respect to
any Interest Period the Administrative Agent or any Lender (after consultation
with the Administrative Agent) shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars, in the applicable amounts are not being quoted via Telerate Page
3750 or offered to the Administrative Agent or such Lender for such Interest
Period, then the Administrative Agent shall forthwith give notice thereof to
the Borrower. Thereafter, until the Administrative Agent notifies the Borrower
that such circumstances no longer exist, the
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obligation of any affected Lender to make or continue its portion of such LIBOR
Rate Loans shall be suspended. Upon receipt of such notice, notwithstanding
anything contained herein, the then outstanding principal amount of such
Lender's Commitment Percentage of each affected LIBOR Rate Loan, together with
accrued interest thereon, shall automatically be converted to a Base Rate Loan
on either (a) the last day of the then current Interest Period applicable to
such affected LIBOR Rate Loan if such Lender may lawfully continue to maintain
and fund its portion of such LIBOR Rate Loan to such date or (b) immediately if
such Lender may not lawfully continue to fund and maintain its portion of such
affected LIBOR Rate Loan to such day.
(b) Laws Affecting LIBOR Rate Availability. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Authority, central bank or comparable agency, shall make it
unlawful for any Lender (or its Lending Office) to honor its obligations
hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly
give notice thereof to the Administrative Agent and the Administrative Agent
shall promptly give notice to the Borrower and the other Lenders.
Before giving any notice to the Administrative Agent pursuant to this
Section 3.8, such Lender shall designate a different lending office if such
designation will avoid the need for giving such notice and will not, in the
reasonable judgment of such Lender, be otherwise materially disadvantageous to
such Lender. Upon receipt of such notice, notwithstanding anything contained
herein, the then outstanding principal amount of such Lender's Commitment
Percentage of each affected LIBOR Rate Loan, together with accrued interest
thereon, shall automatically be converted to a Base Rate Loan on either (a) the
last day of the then current Interest Period applicable to such affected LIBOR
Rate Loan if such Lender may lawfully continue to maintain and fund its portion
of such LIBOR Rate Loan to such date or (b) immediately if such Lender may not
lawfully continue to fund and maintain its portion of such affected LIBOR Rate
Loan to such day.
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender (or its Lending Office) with any request or directive (whether or not
having the force of law) of such Authority, central bank or comparable agency:
(i) shall subject any Lender (or its Lending Office) to any
tax, duty or other charge with respect to any Revolving Credit Note or
shall change the basis of taxation of payments to any Lender (or its
Lending Office) of the principal of or interest on any Revolving
Credit Note or any other amounts due under this Agreement in respect
thereof (except taxes contemplated by Section 3.11 and for changes in
the rate of tax on the overall net income of such Lender or its
Lending Office imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending
Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve
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System), special deposit, insurance or capital or similar requirement
against assets of, deposits with or for the account of, or credit
extended by any Lender (or its Lending Office) or shall impose on any
Lender (or its Lending Office) or the foreign exchange and interbank
markets any other condition affecting its obligation to make its
Commitment Percentage of such LIBOR Rate Loans or its Commitment
Percentage of existing LIBOR Rate Loans;
and the result of any of the foregoing is to increase the costs to such
Lender of maintaining any LIBOR Rate Loan or to reduce the yield or
amount of any sum received or receivable by such Lender under this
Agreement or under the Revolving Credit Notes in respect of a LIBOR
Rate Loan, then, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or
Lenders for such increased cost or reduction. Each Lender will
promptly notify the Borrower and the Administrative Agent of any
event of which it has knowledge, occurring after the date hereof,
which will entitle such Lender to compensation pursuant to this
Section 3.8(c) and will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the reasonable judgment of such Lender
made in good faith, be otherwise disadvantageous to such Lender. Any
Lender claiming compensation under this Section 3.8(c) shall notify
the Borrower of any event occurring after the Closing Date entitling
such Lender to such compensation as promptly as practicable; provided
that if such Lender fails to give such notice within forty-five (45)
days after its obtains actual knowledge of such an event, such Lender
shall, with respect to such compensation in respect of any costs
resulting from such event, only be entitled to payment under this
Section 3.8(c) for costs incurred from and after the date forty-five
(45) days prior to the date that such Lender does give such notice.
Any Lender claiming compensation under this Section 3.8(c)
shall provide the Borrower with a written certificate setting forth
the additional amount or amounts to be paid to it hereunder and
calculations therefor in reasonable detail. Such certificate shall be
presumptively correct absent manifest error. In determining such
amount, such Lender may use any reasonable averaging and attribution
methods. If any Lender demands compensation under this Section 3.8(c),
the Borrower may at any time, upon at least five (5) Business Days'
prior notice to such Lender, prepay in full such Lender's Commitment
Percentage of the then outstanding LIBOR Rate Loans, together with
accrued interest thereon to the date of prepayment, along with any
reimbursement required under Section 3.9 hereof. Concurrently with
prepaying such Commitment Percentage of LIBOR Rate Loans the Borrower
may borrow a Base Rate Loan, or a LIBOR Rate Loan not so affected,
from such Lender, and such Lender shall, if so requested, make such
Advance in an amount such that the outstanding principal amount of the
affected Revolving Credit Note or Revolving Credit Notes held by such
Lender shall equal the outstanding principal amount of such Revolving
Credit Note or Revolving Credit Notes immediately prior to such
prepayment.
(d) Effect on Other Advances. If notice has been given pursuant to
Section 3.8(a), (b) or (c) suspending the obligation of any Lender to make its
Commitment Percentage of any type of LIBOR Rate Loan, or requiring such
Lender's Commitment Percentage of LIBOR Rate Loans to be repaid or prepaid,
then, unless and until such Lender notifies the Borrower that the circumstances
giving rise to such repayment no longer apply (which notice such Lender shall
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give promptly), all advances which would otherwise be made by such Lender as
its Commitment Percentage of LIBOR Rate Loans shall, unless otherwise notified
by the Borrower, be made instead as Base Rate Loans.
SECTION 3.9 Reimbursement. Whenever any Lender shall sustain or incur
any losses, other than lost profits, or out-of-pocket expenses (a) as a
consequence of any failure by the Borrower to make any payment when due of any
amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any
failure of the Borrower to borrow on a date specified therefor in a Notice of
Borrowing or Notice of Continuation/Conversion or (c) due to any payment,
prepayment or conversion of any LIBOR Rate Loan on a date other than the last
day of the Interest Period therefor, the Borrower agrees to pay to such Lender,
promptly following such Lender's demand, an amount sufficient to compensate
such Lender for all such losses and out-of-pocket expenses. Such Lender's good
faith determination of the amount of such losses or out-of-pocket expenses, as
set forth in writing and accompanied by calculations in reasonable detail
demonstrating the basis for its demand, shall be presumptively correct absent
manifest error. The obligations of the Borrower contained in this Section 3.9
shall survive for a period of one year following the payment in full of the
Revolving Credit Notes and the termination of the Commitments.
SECTION 3.10 Capital Requirements. If either (a) the introduction of,
or any change in, or in the interpretation of, any Applicable Law after the date
hereof or (b) compliance with any guideline or request made after the date
hereof by any central bank or comparable agency or other Governmental Authority
(whether or not having the force of law), has or would have the effect of
reducing the rate of return on the capital of, or has affected or would affect
the amount of capital required to be maintained by, any Lender or any
corporation controlling such Lender as a consequence of, or with reference to
the Commitments and other commitments of this type, below the rate which the
Lender or such other corporation could have achieved but for such introduction,
change or compliance, then within five (5) Business Days after written demand
by any such Lender, the Borrower shall pay to such Lender from time to time as
specified by such Lender additional amounts sufficient to compensate such
Lender or other corporation for such reduction. Any Lender claiming
compensation under this Section 3.10 shall notify the Borrower of any event
occurring after the date of this Agreement entitling such Lender to such
compensation as promptly as practicable, but in any event within forty-five
(45) days, after such Lender obtains actual knowledge thereof; provided that if
such Lender fails to give such notice within forty-five (45) days after it
obtains actual knowledge of such an event, such Lender shall, with respect to
such compensation in respect of any costs resulting from such event, only be
entitled to payment under this Section 3.10 for costs incurred from and after
the date forty-five (45) days prior to the date that such Lender does give such
notice. A certificate of such Lender setting forth the amount to be paid to
such Lender by the Borrower as a result of any event referred to in this
paragraph and supporting calculations in reasonable detail shall be
presumptively correct absent manifest error.
SECTION 3.11 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Revolving Credit Notes shall be made free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholding, and all liabilities with respect thereto
excluding, (i) in the case of each Lender and the Administrative
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Agent, income and franchise taxes imposed by the jurisdiction under the laws of
which such Lender or the Administrative Agent (as the case may be) is organized
or is or should be qualified to do business or any political subdivision
thereof and (ii) in the case of each Lender, income and franchise taxes imposed
by the jurisdiction of such Lender's Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Revolving Credit Note to
any Lender or the Administrative Agent, (A) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 3.11) such
Lender or the Administrative Agent (as the case may be) receives an amount
equal to the amount such party would have received had no such deductions been
made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other authority in
accordance with Applicable Law, and (D) the Borrower shall deliver to the
Administrative Agent evidence of such payment to the relevant taxing authority
or other authority in the manner provided in Section 3.11(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the other Loan Documents, or the perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes"). The
Borrower shall not be liable for the payment of Other Taxes which are payable
solely by reason of the assignment by any Lender of its interests, rights and
obligations under this Agreement.
(c) Indemnity. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 12.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence
of payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8
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or W-9 or successor applicable form, as the case may be, to establish an
exemption from United States backup withholding taxes. Each such Lender further
agrees to deliver to the Borrower, with a copy to the Administrative Agent, a
Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or manner
of certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes (unless in any such case an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which
renders such forms inapplicable or the exemption to which such forms relate
unavailable and such Lender notifies the Borrower and the Administrative Agent
that it is not entitled to receive payments without deduction or withholding of
United States federal income taxes) and, in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding tax. The
Borrower shall not be required to gross-up pursuant to this Section 3.11 or
otherwise for any deductions on account of withholding taxes from amounts owing
to a Lender who has not complied with this clause (e).
(f) Survival. Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.11 shall survive the payment in full of the
Revolving Credit Notes and the termination of the Commitments.
SECTION 3.12 Claims for Increased Costs and Taxes. In the event that
any Lender shall decline to make LIBOR Rate Loans pursuant to Section 3.8(a) or
(b) hereof or shall have notified the Borrower that it is entitled to claim
compensation pursuant to Section 3.8(c), 3.10 or 3.11 hereof or is unable to
complete the form required or is subject to withholding as provided in Section
3.11 hereof (each such lender being an "Affected Lender"), the Borrower at its
own cost and expense may designate a replacement bank (a "Replacement Lender")
to assume the Commitment and the obligations of any such Affected Lender
hereunder, and to purchase the outstanding Revolving Credit Note of such
Affected Lender and such Affected Lender's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or expense to, such Affected
Lender, for a purchase price equal to (unless such Lender agrees to a lesser
amount) the outstanding principal amount of the Loans of such Affected Lender
plus all interest accrued and unpaid thereon and all other amounts owing to
such Affected Lender hereunder, including without limitation, any amount which
would be payable to such Affected Lender pursuant to Section 3.8(c), and upon
such assumption and purchase by the Replacement Lender, such Replacement Lender
shall be deemed to be a "Lender" for purposes of this Agreement and such
Affected Lender shall cease to be a "Lender" for purposes of this Agreement and
shall no longer have any obligations or rights hereunder (other than any
obligations or rights which according to this Agreement shall survive the
termination of the Commitment). In the event any Lender receives a refund or
credit with respect to withholding taxes paid by the Borrower, such Lender
shall promptly repay such amounts to the Borrower.
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ARTICLE
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 4.1 Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on December 30, 1997,
or on such other place or date as the parties hereto shall mutually agree.
SECTION 4.2 Conditions to Closing and Initial Loan. The obligation of
the Lenders to close this Agreement and to make the initial Loan are subject to
the satisfaction of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Revolving
Credit Notes, the Guaranty Agreement and the Pledge Agreements shall each have
been duly authorized, executed and delivered to the Administrative Agent by the
parties thereto, shall be in full force and effect and no Default shall exist
hereunder.
(b) Closing Certificates; etc.
(i) Certificate of IPT. The Administrative Agent shall
have received a certificate from the chief executive
officer or president of the General Partner, in form and
substance reasonably satisfactory to the Administrative Agent,
to the effect that all representations and warranties of the
Borrower contained in this Agreement and the other Loan
Documents are in all material respects true, correct and
complete to the best knowledge of such Person; that to the best
knowledge of such Person, the Borrower is not in violation of
any of the covenants contained in this Agreement and the other
Loan Documents; that, after giving effect to the transactions
contemplated by this Agreement to occur on the Closing Date, no
Default or Event of Default has occurred and is continuing; and
that to the best knowledge of such Person, the Borrower has
satisfied each of the closing conditions.
(ii) Certificate of Secretary of the General Partner.
The Administrative Agent shall have received a certificate
of the secretary or assistant secretary of the General Partner
certifying on behalf of the Borrower that attached thereto is a
true and complete copy of the certificate of limited partnership
of the Borrower and all amendments thereto, certified as of a
recent date by the appropriate Governmental Authority in its
jurisdiction of formation; that attached thereto is a true and
complete copy of the partnership agreement of the Borrower as in
effect on the date of such certification; that attached thereto
is a true and complete copy of resolutions duly adopted by the
Board of Directors or other governing body of IPT in its
capacity as general partner of the Borrower authorizing the
execution, delivery and performance of the Loan Documents to
which the Borrower is a party; and as to the incumbency and
genuineness of the signature of each officer of the General
Partner executing Loan Documents to which the Borrower is a
party.
(iii) Certificates of Good Standing. The Administrative
Agent shall have received long-form certificates as of a recent
date of the good standing of the
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Borrower and IPT under the laws of its jurisdiction of
formation and, where available, a certificate of the relevant
taxing authorities of such jurisdictions certifying that such
Person has filed required tax returns and owes no delinquent
taxes.
(iv) Opinions of Counsel. The Administrative Agent shall
have received a favorable opinion of Simpson Thacher & Bartlett,
special counsel to the Borrower and IPT, John K. Lines,
Secretary of IPT, and Douglas G. Brown, Esq., special counsel to
the Borrower and IPT with respect to certain matters of South
Carolina law, addressed to the Agents and Lenders with respect
to such Persons, the Loan Documents, the security interests
created thereunder and such other matters as the Lenders shall
reasonably request. (The opinion of Simpson Thacher & Bartlett
shall be in form and substance customary for transactions of
this type.)
(v) Insurance. Certificates or other evidence reasonably
satisfactory to the Agents that the insurance coverage
required by this Agreement and the other Loan Documents is in
full force and effect, and true, correct and complete copies of
the policies of such insurance, if requested by the
Administrative Agent.
(vi) Tax Forms. Unless the Borrower otherwise consents,
the Administrative Agent shall have received copies of the
United States Internal Revenue Service forms required by Section
3.11 hereof.
(c) No Default. No Default or Event of Default shall have
occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The Agents shall have received
the most recent audited consolidated financial statements
of IPT and its Subsidiaries and unaudited consolidated financial
statements for the Borrower and its Subsidiaries. The Agents
shall have also received a certificate of the president or
treasurer of the General Partner in the form of Exhibit D.
(ii) Financial Condition Certificate. The Borrower
shall have delivered to the Administrative Agent a certificate,
in form and substance reasonably satisfactory to the Agents, and
certified as accurate by the chief executive officer or president
of the General Partner on behalf of the Borrower, that (A)
the Borrower is Solvent, (B) the Borrower's material payables
are current and not past due and (C) the financial data and
models previously delivered to the Agents represent the good
faith opinion (based upon the assumptions set forth therein) of
the Borrower as to the results contained therein.
(iii) Payment at Closing; Fee Letter. The Borrower shall
have paid to First Union, Lehman and the Lenders the fees
set forth or referenced in Section 3.3 of this Agreement and (to
the extent submitted for payment a reasonable time prior to the
Closing Date) any accrued and unpaid fees or commissions then
due hereunder (including, without limitation, reasonable legal
fees and expenses), and
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(to the extent submitted for payment a reasonable time
prior to the Closing Date) to any other Person such amount as
may be due thereto in connection with the transactions
contemplated hereby, including all taxes, fees and other charges
in connection with the execution, delivery, recording, filing
and registration of any of the Loan Documents. The Agents shall
have received a duly authorized and executed copy of the fee
letter agreement referred to in Section 3.3(b).
(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent
shall have received the Notice of Borrowing.
(ii) Proceedings and Documents. All opinions,
certificates and other instruments and all proceedings in
connection with the transactions contemplated by this
Agreement shall be in form and substance reasonably satisfactory
to the Agents and Lenders. The Agents and Lenders shall have
received copies of all other instruments and other evidence as
such Persons may reasonably request, in form and substance
reasonably satisfactory thereto with respect to the transactions
contemplated by this Agreement.
(iii) Due Diligence and Other Documents. The Borrower
shall have delivered to the Agents such other documents and
certificates as the Agents may reasonably request sufficiently
prior to the Closing Date to permit the delivery thereof, all
certified by a secretary or assistant secretary of the General
Partner on behalf of the Borrower as a true and correct copy
thereof.
(iv) Perfection. The Borrower shall have executed and
delivered to the Administrative Agent such instruments and
documents (including, without limitation, UCC Financing
Statements, stock certificates and stock powers, notices to
general partners, etc.) as the Administrative Agent may
reasonably deem necessary to perfect the Liens purported to be
granted under the Security Documents.
(v) IPT Advisory Agreement. The Borrower shall have
delivered to the Agents a fully executed counterpart of the
IPT Advisory Agreement, which shall be in full force and effect.
(vi) Letter Agreement. The Agent shall have received a
fully-executed counterpart of the letter agreement of even
date with this Agreement between Insignia Commercial Group,
Inc., Insignia Residential Group, Inc. and the Administrative
Agent confirming the right to terminate Management Agreements,
without penalty, upon the occurrence of a Default or an Event
of Default under this Agreement.
SECTION 4.3 Conditions to All Loans. The obligation of the Lenders to
make any Loan is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date:
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(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article V shall be true
and correct in all material respects on and as of such borrowing with
the same effect as if made on and as of such date.
(b) No Existing Default. No Default or Event of Default shall
have occurred and be continuing hereunder on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made
on such date.
(c) Notice of Borrowing. The Administrative Agent shall have
received the Notice of Borrowing.
SECTION 4.4 Delivery of Certificates by Administrative Agent.
The Administrative Agent shall furnish each Lender with a copy of each
certificate delivered to the Administrative Agent pursuant to Section
4.2(b) and (d) and Section 4.3(c) hereof.
------------------------------
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 5. Representations and Warranties. To induce the Agents and
Lenders to enter into this Agreement and the Lenders to make Loans hereunder,
the Borrower hereby represents and warrants to the Agents and Lenders that:
(a) Organization; Power; Qualification. The Borrower is a
limited partnership duly organized, validly existing and in good
standing under the laws of Delaware, has the power and authority to
own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character
of its properties or the nature of its business requires such
qualification and authorization, the failure in which to so qualify or
be authorized could reasonably be expected to have a Material Adverse
Effect.
(b) Authorization of Agreement, Loan Documents and Borrowing.
The Borrower has the right, power and authority and has taken all
necessary action to authorize the execution, delivery and performance
of this Agreement and each of the other Loan Documents to which it is
a party in accordance with their respective terms. This Agreement and
each of the other Loan Documents to which the Borrower is a party have
been duly executed and delivered by the duly authorized officers of
the General Partner on behalf of the Borrower, and each such document
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general
and the availability of equitable remedies, and public policy.
(c) Compliance of Agreement, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance by the Borrower of
the Loan Documents to
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which it is a party, in accordance with their respective terms, the
borrowings hereunder and the transactions contemplated hereby do not
and will not, by the passage of time, the giving of notice or
otherwise, (i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower, (ii) conflict with, result
in a breach of or constitute a default under the Partnership
Agreement of the Borrower or any material indenture, agreement or
other instrument to which the Borrower is a party or by which any of
its properties may be bound or any Governmental Approval relating to
the Borrower, or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned
or hereafter acquired by the Borrower other than Liens arising under
the Loan Documents or permitted by Section 9.3.
(d) Compliance with Law; Governmental Approvals. The Borrower
(i) has all material Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and
effect, is final and not subject to review on appeal and is not the
subject of any pending or, to the best knowledge of the Borrower,
overtly threatened attack by direct or collateral proceeding, and (ii)
is in compliance in all material respects with each Governmental
Approval applicable to it and in compliance in all material respects
with all other Applicable Laws relating to it or any of its respective
properties, except to the extent that the failure to have any such
approval or to so be in compliance would not reasonably be expected to
have a Material Adverse Effect.
(e) Tax Returns and Payments. The Borrower has duly filed or
caused to be filed, or has received an extension for, all material
federal, state, local and other tax returns required by Applicable Law
to be filed, and has paid, or made adequate provision for the payment
of, all federal, state, local and other taxes, assessments and
governmental charges or levies upon it and its property, income,
profits and assets which are then due and payable. No Governmental
Authority has asserted any material Lien or other claim against the
Borrower with respect to unpaid taxes which has not been discharged or
resolved. The charges, accruals and reserves on the books of the
Borrower in respect of federal, state, local and other taxes for all
Fiscal Years and portions thereof since the organization of the
Borrower are in the judgment of the Borrower adequate, and the
Borrower does not have any knowledge of additional taxes or
assessments for any of such years.
(f) Intellectual Property Matters. The Borrower owns or
possesses rights to use all franchises, licenses, copyrights,
copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name
rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. No event has occurred which permits,
or after notice or lapse of time or both would permit, the revocation
or termination of any such rights, and (to the best of its knowledge)
the Borrower is not liable to any Person for infringement under
Applicable Law with respect to any such rights as a result of its
business operations, to the extent that such revocation, infringement
or liability would reasonably be expected to have a Material Adverse
Effect.
(g) Environmental Matters.
(i) To the Borrower's Actual Knowledge, the properties
owned by the Borrower do not contain, and to its Actual
Knowledge have not previously
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contained, any Hazardous Materials in amounts or
concentrations which (A) constitute or constituted a
violation of, or (B) could give rise to liability under,
applicable Environmental Laws, in each case which could
reasonably be expected to have a Material Adverse Effect
upon the Borrower;
(ii) To the Borrower's Actual Knowledge, such properties
and all operations of the Borrower are conducted in
compliance in all respects, and have been in compliance in
all respects, with all applicable Environmental Laws the
violation of which could reasonably be expected to have a
Material Adverse Effect upon the Borrower, and the Borrower
has not caused contamination at, under or about such
properties or such operations which could reasonably be
expected to have a Material Adverse Effect upon the
continued operation of such properties and which could
reasonably be expected to have a Material Adverse Effect
upon the Borrower;
(iii) The Borrower (a) has not received any notice of
violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of
its properties or its operations, nor (b) has Actual
Knowledge that any such notice will be received or is being
overtly threatened, in each case which could reasonably be
expected to have a Material Adverse Effect upon the
Borrower;
(iv) To the Borrower's Actual Knowledge, the Borrower
has not caused Hazardous Materials to be transported
or disposed of from the properties of the Borrower in
violation of, or in a manner or to a location which gives
rise to liability under, Environmental Laws, which
violation or liability could reasonably be expected to have
a Material Adverse Effect upon the Borrower, nor to the
Borrower's Actual Knowledge has the Borrower caused any
Hazardous Materials to be generated, treated, stored or
disposed of at, on or under any of such properties in
violation of, or in a manner that could give rise to
liability under, any applicable Environmental Laws which
could reasonably be expected to have a Material Adverse
Effect upon the Borrower;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the Actual
Knowledge of the Borrower, overtly threatened, under any
Environmental Law to which the Borrower is or will be named
as a party with respect to such properties or operations of
the Borrower conducted thereon, nor are there any consent
decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with
respect to such properties or such operations which in each
case could reasonably be expected to have a Material
Adverse Effect upon the Borrower; and
(vi) To its Actual Knowledge, the Borrower has not caused
any release, or to the Borrower's Actual Knowledge,
the threat of release, of Hazardous Materials at or from
such properties, in violation of or in amounts or in a
manner that gives rise to liability under Environmental
Laws, in each case which could reasonably be expected to
have a Material Adverse Effect upon the Borrower.
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(h) ERISA.
(i) Neither the Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under,
any Employee Benefit Plans other than those identified on
Schedule 5.1(h);
(ii) The Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with
respect to all Employee Benefit Plans except for any required
amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each
Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, and each trust
related to such plan has been determined to be exempt under
Section 501(a) of the Code. No liability has been incurred
by the Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan of the Borrower has been terminated,
and to the knowledge of the Borrower no Pension Plan
of any ERISA Affiliate has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412
of the Code) been incurred (without regard to any waiver
granted under Section 412 of the Code), nor has any funding
waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the
Borrower or any ERISA Affiliate failed to make any
contributions or to pay any amounts due and owing as
required by Section 412 of the Code, Section 302 of ERISA
or the terms of any Pension Plan prior to the due dates of
such contributions under Section 412 of the Code or Section
302 of ERISA, nor has there been any event requiring any
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA
with respect to any Pension Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has:
(A) engaged in a nonexempt prohibited transaction
described in Section 406 of the ERISA or Section 4975 of
the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and
there are no premium payments which are due and unpaid, (C)
failed to make a required contribution or payment to a
Multiemployer Plan, or (D) failed to make a required
installment or other required payment under Section 412 of
the Code;
(v) No Termination Event has occurred or, to the
knowledge of the Borrower, is reasonably expected to occur;
and
(vi) No proceeding, claim, lawsuit and/or investigation
(other than routine claims for benefits in the ordinary
course) is existing or, to the best knowledge of the
Borrower after due inquiry, threatened concerning or
involving any (A) employee welfare benefit plan (as defined
in Section 3(1) of ERISA)
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currently maintained or contributed to by the Borrower
or any ERISA Affiliate, (B) Pension Plan or (C)
Multiemployer Plan.
(i) Margin Stock. The Borrower is not engaged principally
in or has as one of its activities the business of
extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" (as each such term is defined
or used in Regulations G and U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any
of the Loans will be used for purchasing or carrying margin
stock or for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation G, T, U or
X of such Board of Governors or without executing and
delivering to the Administrative Agent a properly completed
Federal Reserve Form U-1.
(j) Government Regulation. The Borrower is not an
"investment company" or a company "controlled" by an
"investment company" (as each such term is defined or used
in the Investment Company Act of 1940, as amended) and
neither the Borrower nor any Material Subsidiary thereof
is, or after giving effect to any Loan will be, subject to
regulation under the Public Utility Holding Company Act of
1935 or the Interstate Commerce Act, each as amended, or
any other Applicable Law which limits its ability to incur
or consummate the transactions contemplated hereby.
(k) Certain Contracts and Properties. Each Material
Contract is, and after giving effect to the consummation of
the transactions contemplated by the Loan Documents will be,
in full force and effect in accordance with the terms thereof.
The Borrower has delivered to eac Agent a true and complete
copy of each Material Contract with respect to which a copy
has been requested by such Agent.
(l) Financial Statements. The balance sheet of IPT as of
September 30, 1997 and the related statements of income and
retained earnings and cash flows for the fiscal period then
ended, copies of which have been furnished to the Agents
and each Lender, fairly present the financial condition of
IPT as at such dates, and the results of the operations and
changes of financial position for the periods then ended
(subject to year-end audit adjustments). All such financial
statements have been prepared in accordance with GAAP
(other than the absence of footnotes). The Borrower has no
material Debt, obligation or other unusual forward or
long-term commitment which is not fairly reflected in the
foregoing financial statements or in the notes to IPT's
financial statements of December 31, 1996.
(m) No Material Adverse Change. Since September 30, 1997,
there has been no material adverse change in the business,
operations, or condition (financial or otherwise) of the
Borrower and no event has occurred or condition arisen that
could reasonably be expected to have Material Adverse Effect.
(n) Solvency. As of the Closing Date and after giving
effect to each Loan made hereunder, the Borrower will be
Solvent.
(o) Titles to Properties. The Borrower has such title to
the real property owned by it as is necessary to the
conduct of its business and valid and legal title to all of
its material personal property and assets, including, but
not limited to, those reflected on the
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balance sheets of the Borrower delivered pursuant to
Section 5.1(l), except those which have been disposed of by
the Borrower subsequent to such date, which dispositions
have been in the ordinary course of business or as
otherwise of a type permitted hereunder.
(p) Liens. None of the material properties and assets of
the Borrower is subject to any Lien, except Liens permitted
pursuant to Section 9.3.
(q) Debt and Contingent Obligations. Schedule 5.1(q) is a
complete and correct listing of all Debt and Contingent
Obligations of the Borrower as of the date hereof. The
Borrower has performed and is in compliance with all of the
terms of such Debt and Contingent Obligations and all
instruments and agreements relating thereto, and no default
or event of default, or event or condition which with
notice or lapse of time or both would constitute such a
default or event of default on the part of the Borrower
exists with respect to any such Debt or Contingent
Obligation.
(r) Litigation. Except as set forth on Schedule 5.1(r),
there are no actions, suits or proceedings pending nor, to
the Actual Knowledge of the Borrower, overtly threatened
against or in any other way directly relating to or
directly affecting the Borrower or any of its properties in
any court or before any arbitrator of any kind or before or
by any Governmental Authority that would reasonably be
expected to have a Material Adverse Effect.
(s) Absence of Defaults. No event has occurred or is
continuing which constitutes a Default or an Event of
Default, or which constitutes, or which with the passage of
time or giving of notice or both would constitute, a
default or event of default by the Borrower under any
Material Contract or judgment, decree or order to which the
Borrower is a party or by which the Borrower or any of its
properties may be bound or (to the extent the making of
such payment is prohibited hereunder) which would require
the Borrower to make any payment thereunder prior to the
scheduled maturity date therefor.
SECTION 5.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article V and all
representations and warranties contained in any certificate delivered pursuant
to the terms hereof, or any of the Loan Documents (including but not limited to
any such representation or warranty made in or in connection with any amendment
thereto) shall constitute representations and warranties made under this
Agreement. All representations and warranties made under this Agreement shall
be made or deemed to be made, and shall be true and correct in all material
respects, at and as of the Closing Date and the date of each Loan hereunder,
shall survive the Closing Date and the date of each Loan hereunder, shall not
be waived by the execution and delivery of this Agreement, (except to the
extent that such Lender has actual knowledge to the contrary) any investigation
made by or on behalf of the Lenders or any borrowing hereunder.
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ARTICLE VI
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.9 hereof, the Borrower will
furnish or cause to be furnished to the Administrative Agent and each Lender at
its address set forth in Schedule 1, or such other office as may be designated
by the Agent or the applicable Lender from time to time:
SECTION 6.1 Financial Statements and Information.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter (other
than the last fiscal quarter of each Fiscal Year), an unaudited consolidated
balance sheet of IPT and its Subsidiaries and an unaudited consolidated balance
sheet of the Borrower and its Subsidiaries as of the close of such fiscal
quarter and unaudited statements of income, retained earnings and cash flows
for the fiscal quarter then ended and that portion of the Fiscal Year then
ended, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared in accordance
with GAAP, and certified by the president or principal accounting officer of
IPT to present fairly in all material respects the financial condition of IPT
and Subsidiaries and of the Borrower and its Subsidiaries as of their
respective dates and the results of operations of IPT and Subsidiaries and of
the Borrower and its Subsidiaries for the respective periods then ended,
subject to normal year end adjustments and the absence of footnotes.
(b) Annual Financial Statements. As soon as practicable and in any
event within ninety (90) days after the end of each Fiscal Year, an audited
consolidated balance sheet of IPT and its Subsidiaries and an unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal Year and audited consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended (unaudited as to the
Borrower and its Subsidiaries), including the notes thereto, all in reasonable
detail and prepared in accordance with GAAP and setting forth in comparative
form the corresponding figures for the preceding Fiscal Year and accompanied by
a report thereon prepared by Ernst & Young, or other independent certified
public accounting firm reasonably acceptable to the Agents, that is not
qualified with respect to scope limitations imposed by IPT or its Subsidiaries
or with respect to accounting principles followed by IPT and its Subsidiaries
or not in accordance with GAAP.
(c) Annual Budget. As soon as practicable and in any event not later
than March 30 of each Fiscal Year, a budget of the Borrower and its
Subsidiaries for such Fiscal Year, such plan to be prepared in a form and on a
basis similar to the plan(s) previously furnished to the Lenders and to
include, on a quarterly basis, the following: a quarterly operating and capital
budget, an income statement, statement of cash flows and balance sheet,
accompanied by a certificate from the chief financial officer of the Borrower,
on behalf of the Borrower, to the effect that, to the best of such officer's
knowledge, such information is a good faith estimate of the financial condition
and operations of the Borrower and its Subsidiaries for such period.
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SECTION 6.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 6.1(a) or (b) and at such other
times as an Agent shall reasonably request or the Borrower shall elect, a
certificate on behalf of the Borrower of the president or the treasurer of the
General Partner in the form of Exhibit D.
SECTION 6.3 Accountants' Certificate. At each time financial
statements are delivered pursuant to Section 6.1(b), a certificate of the
independent public accountants certifying such financial statements addressed
to the Administrative Agent for the benefit of the Agents and Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge
of any Default or Event of Default or, if such is not the case,
specifying such Default or Event of Default and its nature and period
of existence; and
(b) including the calculations prepared by such accountants
required to establish whether or not the Borrower is in compliance with
the financial covenants set forth in Article VIII hereof as at the end
of each respective period.
SECTION 6.4 Other Reports. Such other information regarding the
operations, business affairs and financial condition of the Borrower as any
Agent or Lender (acting through the Administrative Agent) may reasonably
request.
SECTION 6.5 Notice of Litigation and Other Matters. Prompt (but in
no event later than ten (10) Business Days after an executive officer of the
General Partner obtains Actual Knowledge thereof) written notice of:
(a) the commencement of all proceedings and investigations by
or before any Governmental Authority and all actions and
proceedings in any court or before any arbitrator against or
involving the Borrower or any of its properties, assets or businesses
which would reasonably be expected to have Material Adverse Effect;
(b) any labor controversy that has resulted in, or threatens
to result in, a strike or other work action against the Borrower
which in any such case would reasonably be expected to have a
Material Adverse Effect;
(c) (i) any Default or Event of Default or (ii) any event
which constitutes or which with the passage of time or giving of
notice or both would constitute a default or event of default under
any Material Contract to which the Borrower is a party or by which the
Borrower or any of its properties may be bound;
(d) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit
Plan under Section 401(a) of the Code (along with a copy thereof),
(ii) all notices received by the Borrower or any ERISA Affiliate of
the PBGC's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan, (iii) all notices received
by the Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining
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knowledge or reason to know that the Borrower or any ERISA Affiliate
has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of
Section 4041(c) of ERISA; and
(e) any event which would reasonably be expected to have a
Material Adverse Effect.
ARTICLE
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner provided for in Section 12.9, each of IPT and the Borrower will:
SECTION 7.1 Preservation of Existence and Related Matters. Except as
permitted by Section 9.5, preserve and maintain its separate existence as a
real estate investment trust and partnership, as applicable, and all rights,
franchises, licenses and privileges necessary to the conduct of its business,
and qualify and remain qualified and authorized to do business in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect.
SECTION 7.2 Maintenance of Property. Protect and preserve all of its
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; and from time to time make or cause to be
made all renewals, replacements and additions to such property necessary for
the conduct of its business, so that the business carried on in connection
therewith may be conducted at all times.
SECTION 7.3 Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law; deliver to any Agent upon its request (which request shall not
be made by the Agents, in the aggregate, more than once per Fiscal Year) a
detailed list of the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, the dates of the
expiration thereof and the properties and risks covered thereby.
SECTION 7.4 Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority
having jurisdiction over it or any of its properties.
SECTION 7.5 Payment and Performance of Obligations. Pay and perform all
material Obligations under this Agreement and the other Loan Documents, and pay
or perform (a) all taxes, assessments and other governmental charges that may
be levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; except to the extent that IPT or the Borrower is contesting any item
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described in clauses (a) or (b) of this Section 7.5 in good faith and is
maintaining adequate reserves with respect thereto in accordance with GAAP.
SECTION 7.6 Compliance With Laws and Approvals. Subject to
Section 7.7, observe and remain in compliance with all Applicable Laws and
maintain in full force and effect all Governmental Approvals, in each case
applicable to the conduct of its business and where the failure to comply or
maintain could reasonably be expected to have a Material Adverse Effect.
SECTION 7.7 Environmental Laws. (a) Use reasonable commercial efforts
to comply with all applicable Environmental Laws and use reasonable commercial
efforts to obtain, comply with and maintain any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, in each case where the failure to so obtain or comply with which could
reasonably be expected to have a Material Adverse Effect upon IPT or the
Borrower, and (b) defend, indemnify and hold harmless the Agents and Lenders,
and their respective parents, Subsidiaries, Affiliates, employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements authorized by IPT or the Borrower, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of, noncompliance with
or liability under any Environmental Laws applicable to the operations of IPT
or the Borrower, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of
the foregoing directly result from the negligence or misconduct of the party
seeking indemnification therefor.
SECTION 7.8 Compliance with ERISA. In addition to and without limiting
the generality of Section 7.6, (a) materially comply with all applicable
provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans, (b) not take any action
or fail to take action the result of which could be a material liability to the
PBGC (other than for the payment of premiums) or to a Multiemployer Plan, (c)
not participate in any prohibited transaction that could result in any material
civil penalty under ERISA or tax under the Code, (d) operate each Employee
Benefit Plan in such a manner that will not incur any material tax liability
under Section 4980B of the Code or any material liability to any qualified
beneficiary as defined in Section 4980B of the Code and (e) furnish to any
Agent upon its request such additional information about any Employee Benefit
Plan as may be reasonably requested by such Agent.
SECTION 7.9 Compliance With Agreements. Comply in all material
respects with each material term, condition and provision of all Material
Contracts, except to the extent that IPT or the Borrower is contesting any
provision or Material Contract in good faith through applicable proceedings
and is maintaining adequate reserves in accordance with GAAP.
SECTION 7.10 Visits and Inspections. Permit representatives of any
Agent or Lender (acting through an Agent), from time to time, upon reasonable
notice and during normal business hours, to visit and inspect its properties;
inspect, audit and make extracts from its books, records and files; and discuss
with its principal officers, and (during such time as a Default or an
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Event of Default is continuing) its independent accountants, its business,
assets, liabilities, financial condition, results of operations and business
prospects.
SECTION 7.11 Pledge of Partner Interests. Pledge to the Administrative
Agent for the benefit of the Agents and Lenders, pursuant to the terms of the
IPLP Pledge Agreement substantially in the form of Exhibit G hereto, as
collateral for the Obligations, a first priority security interest in all
limited partner interest now or hereafter owned by the Borrower and in the
equity interest of any Subsidiary of the Borrower which now or hereafter owns
any limited partner interest. IPT shall pledge to the Administrative Agent for
the benefit of the Agents and Lenders, pursuant to the terms of the IPT Pledge
Agreement, as collateral for the performance of the obligations of IPT under
the Guaranty Agreement, a first priority security interest in the stock or
other equity interest of IPT in each Subsidiary which now or hereafter owns,
directly or indirectly, the general partner interest in any Real Estate Entity
in which the Borrower owns, directly or indirectly, a limited partnership
interest.
SECTION 7.12 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as either Agent may
reasonably require to document and consummate the transactions contemplated
hereby and to vest completely in and insure the Agents and Lenders their
respective rights under this Agreement, the Revolving Credit Notes and the
other Loan Documents.
SECTION 7.13 Application of Non-Operational Distributions. Apply all
distributions received by the Borrower from any Real Estate Entity resulting
from the sale or the refinancing of properties owned by such Real Estate Entity
("Non-Operational Distributions") to the payment of all Loans then outstanding;
provided that if no Default or Event of Default shall have occurred and be
continuing, the Non-Operational Distributions may be used by the Borrower to
purchase additional limited partner or other equity interests in Real Estate
Entities, subject to the limitations of Section 9.4(c)(ii) or distributed to
the limited partners of the Borrower, provided that immediately after giving
effect to any such distribution, (i) the Interest Coverage Ratio is greater
than 7.00 to 1.00, (ii) the Borrower is compliance on a pro forma basis with
all other financial covenants contained in this Agreement and (iii) no Default
or Event of Default exists or would result from such distribution.
SECTION 7. 14 Year 2000 Compatibility. Take all action necessary to
assure that from and after January 1, 2000 the computer-based systems of IPT
and the Borrower are able to operate and effectively process data that includes
dates on and after January 1, 2000. At the request of the Agents, IPT and the
Borrower shall provide to the Agents assurance acceptable to the Agents of the
timely year 2000 compatibility of IPT and the Borrower.
ARTICLE
FINANCIAL COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner set forth in Section 12.9 hereof, the Borrower will not:
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SECTION 8.1 Maximum Leverage. Permit, as of any fiscal quarter end,
the ratio of (a) Adjusted Portfolio Equity as of such fiscal quarter end to (b)
Funded Debt as of such fiscal quarter end, to be less than 5.00 to 1.00.
SECTION 8.2 Interest and Dividend Coverage. Permit, as of any fiscal
quarter end, the ratio of (a) Adjusted DCFO for the four (4) preceding fiscal
quarters ending on such date to (b) the sum of (i) Interest Expense of the
Borrower for such period (including interest expense on Subordinated Debt) plus
(ii) an amount equal to the dividends paid which would be payable by IPT during
such period on a fully-diluted basis, to be less than 1.10 to 1.0 .
SECTION 8.3 Interest Coverage Ratio. Permit, as of any fiscal quarter
end, the ratio of (a) Adjusted DCFO for the four (4) preceding fiscal quarters
ending on such fiscal quarter end to (b) Interest Expense of the Borrower for
such period, to be less than 6.0 to 1.0.
ARTICLE
NEGATIVE COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner set forth in Section 12.9 hereof, IPT and the Borrower will not:
SECTION 9.1 Limitations on Debt. Create, incur, assume or suffer to
exist any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement
entered into in the ordinary course of business for protective and not
speculative purposes;
(c) Subordinated Debt to Insignia not to exceed $100,000,000
at any one time outstanding;
(d) existing Debt set forth on Schedule 5.1(q) and the renewal
and refinancing (but not the increase) thereof;
(e) Debt consisting of Contingent Obligations permitted by
Section 9.2;
(f) Debt incurred by a Special Purpose Subsidiary to the
extent permitted under Section 9.4(e);
(g) Debt incurred for all or a portion of the deferred
purchase price of property to the extent IPT or the Borrower, as
applicable, would have been permitted under this Agreement to purchase
such property for cash; and
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(h) other Debt of the Borrower not to exceed an aggregate of
$5,000,000 at any time outstanding.
SECTION 9.2 Limitations on Contingent Obligations. Create, incur,
assume or suffer to exist any Contingent Obligations except:
(a) Contingent Obligations in favor of the Administrative
Agent for the benefit of the Agents and the Lenders;
(b) Contingent Obligations of IPT on account of Debt of
the Borrower, to the extent such Debt is permitted by Section 9.1; and
(c) other Contingent Obligations not to exceed $5,000,000 at
any one time outstanding.
SECTION 9.3 NEGATIVE PLEDGE; LIMITATION ON LIENS. CREATE, INCUR,
ASSUME OR SUFFER TO EXIST, ANY LIEN ON OR WITH RESPECT TO ANY OF ITS ASSETS OR
PROPERTIES, REAL OR PERSONAL, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, EXCEPT:
(a) Liens for taxes, assessments and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the
provisions of ERISA or Environmental Laws) not yet due or as to which
the period of grace, if any, related thereto has not expired or which
are being contested in good faith and by appropriate proceedings if
adequate reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies
or rentals incurred in the ordinary course of business, (i) which are
not overdue for a period of more than thirty (30) days or (ii) which
are being contested in good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure
payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or obligations under customer
service contracts;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the
use of real property, which in the aggregate are not substantial in
amount and which do not, in any case, detract from the value of such
property or impair the use thereof in the ordinary conduct of
business; and
(e) Liens of the Administrative Agent for the benefit of the
Agents and the Lenders.
SECTION 9.4 Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture,
evidence of Debt or other obligation or security, substantially all or a
portion of the business or assets of any other Person or any other investment
or interest
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whatsoever in any other Person, or make or permit to exist, directly or
indirectly, any loans, advances or extensions of credit to, or any investment
in cash or by delivery of property in, any Person, or enter into, directly or
indirectly, any commitment in respect of the foregoing except:
(a) investments existing on the Closing Date and the other
existing loans, advances and investments described on Schedule 9.4;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency thereof maturing within 120 days from the date of acquisition
thereof, (ii) marketable direct obligations issued by any State of the
United States or any political subdivision of any such State or any
public instrumentality thereof maturing within 120 days from the date
of acquisition thereof and, at the time of acquisition, having the
highest or second highest rating obtainable from S&P or Moody's; (iii)
commercial paper maturing within 120 days from the date of the
acquisition thereof, and, at the time of acquisition, having a rating
of A-1 or higher by S&P or P-1 or higher by Moody's, (iv) certificates
of deposit maturing no more than 120 days from the date of creation
thereof issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and
undivided profits of not less than $500,000,000 and having a rating of
A or better by a nationally recognized rating agency; (v) time
deposits maturing no more than 30 days from the date of creation
thereof with commercial banks or savings banks or savings and loan
associations each having membership either in the FDIC or the deposits
of which are insured by the FDIC and in amounts not exceeding the
maximum amounts of insurance thereunder; (vi) eligible bankers'
acceptances, repurchase agreements and tax-exempt municipal bonds
having a maturity of less than one year and in each case having a
rating, or being the full recourse obligation of a Person whose senior
debt rating has a rating, of A or higher by S&P or Moody's; or (vii)
any money market fund organized under the laws of the United States or
any State thereof;
(c) investments in Real Estate Entities in which the general
partner or other managing interest is held by a Person in which IPT or
a wholly-owned Subsidiary of IPT owns the controlling interest;
provided (i) an aggregate of up to $5,000,000 may be invested in Real
Estate Entities in which the general partner interest or other
managing interest is not held by a Person in which IPT or a
wholly-owned Subsidiary of IPT owns the controlling interest; (ii) not
more than 50% of the aggregate cost of all limited partner or other
equity interests purchased by the Borrower subsequent to June 30, 1997
may be funded from the proceeds of any Loan; and (iii) the Borrower
shall have invested at least $50,000,000 of its own funds in such
limited partner or other equity interests at all times that any Loan
is outstanding;
(d) investments in the form of the acquisition of general
partner or other managing interests in Real Estate Entities;
(e) investment of up to $10,000,000 in the aggregate in one or
more new Subsidiaries (each, a "Special-Purpose Subsidiary") to
acquire interests in real estate and in Real Estate Entities, and such
Special-Purpose Subsidiaries shall be permitted to incur Debt of up to
an aggregate of $40,000,000 at any time outstanding, the payment of
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which may be secured by a security interest in the limited partner or
other equity interests owned by the relevant Special-Purpose
Subsidiary, provided:
(i) Recourse for payment of such Debt shall be
limited to the Special-Purpose Subsidiary and its assets and
all limited partner or other equity interests pledged by the
Special-Purpose Subsidiary as collateral for such Debt, and
neither the Borrower, IPT nor any other Subsidiary of IPT or
the Borrower shall be liable for the payment of such Debt,
contingently or otherwise;
(ii) The equity of each Special-Purpose Subsidiary
shall be pledged as collateral for the Obligations; and
(f) investments by IPT in Subsidiaries and Affiliates
which hold the general partner interest in Real Estate Entities.
SECTION 9.5 Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), except:
(a) The merger of Angeles Mortgage Investment Trust into IPT;
(b) Any Subsidiary may merge into the Person such Subsidiary
was formed to acquire in connection with an acquisition permitted by
Section 9.4(c); and
(c) Any Person may merge with IPT or the Borrower, provided
such Person is engaged in a similar or complementary line of
business to that of IPT or the Borrower, no Event of Default shall
result from such merger and IPT or the Borrower shall be the surviving
Person.
SECTION 9.6 Limitations on Sale of Assets . Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, any capital stock or other ownership
interest in any Subsidiary or Affiliate or the sale of any receivables and
leasehold interests and any sale-leaseback or similar transaction), whether now
owned or hereafter acquired, except:
(a) The sale of obsolete assets no longer used or usable
in the business of IPT or any of its Subsidiaries, including the
Borrower;
(b) The sale of interests in Real Estate Entities;
(c) Inter-company sales; and
(d) The sale of assets, other than as otherwise permitted
hereunder, not to exceed an aggregate of $10,000,000 in any Fiscal
Year.
SECTION 9.7 Limitations on Distributions. Purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock or
other ownership interests, or make any distribution of cash, property or assets
among the holders of its shares or of its
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partnership interests or other ownership interests, during such time as any
Default or Event of Default has occurred and is continuing or would result
therefrom, or make any change in its capital structure or amend any
organizational document which change or amendment could reasonably be expected
to have a Material Adverse Effect.
SECTION 9.8 Transactions with Affiliates. Except as set forth on
Schedule 9.8 and as otherwise expressly permitted hereunder, directly or
indirectly: (a) make any loan or advance to, or purchase or assume any note or
other obligation to or from, any of its partners or officers, directors or
shareholders of any partner or any other Affiliates, or to or from any member
of the immediate family of any officer, director or shareholder of any partner
or other Affiliates, or subcontract any operations to any of its Affiliates, or
(b) enter into, or be a party to, any transaction with any of its Affiliates,
in both cases except upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm's length transaction with a Person not
its Affiliate.
SECTION 9.9 Certain Accounting Changes. Change its Fiscal Year end,
or make any change in its accounting treatment and reporting practices except
as permitted by GAAP.
SECTION 9.10 Lines of Business. Change the lines of business in which
it currently is engaged and those reasonably related thereto or change,
directly or indirectly, or substantially alter its method of doing business in
a manner which would have a Material Adverse Effect.
SECTION 9.11 Restrictive Agreements. Incur any Debt which (a) contains
any negative pledge on assets or any other covenants more restrictive (taken as
a whole) than the provisions of Articles VII, VIII and IX hereof, or (b)
restricts, limits or otherwise encumbers its ability to incur Liens on or with
respect to any of its assets or properties, other than (in any such case) the
assets or properties securing such Debt.
ARTICLE
DEFAULT AND REMEDIES
SECTION 10.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower
shall default in any payment of principal of any Loan or
Revolving Credit Note when and as due (whether at maturity, by reason
of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the
payment when and as due (whether at maturity, by reason of
acceleration or otherwise) of interest on any Loan or Revolving Credit
Note or the payment of any other Obligation and such payment shall not
have been made within five (5) Business Days thereafter.
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(c) Misrepresentation. Any representation or warranty made
or deemed to be made by the Borrower or any of its Subsidiaries
under this Agreement, any Loan Document or any amendment hereto or
thereto, shall at any time prove to have been incorrect in any
material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. The Borrower
shall default in the performance or observance of any covenant or
agreement contained in Articles VIII or IX of this Agreement.
(e) Default in Performance of Other Covenants and Conditions.
The Borrower or any Subsidiary thereof shall default in the
performance or observance of any term, covenant, condition or
agreement contained in this Agreement (other than as specifically
provided for otherwise in this Section 10.1) or any other Loan
Document and such default shall continue for a period of thirty (30)
days after written notice thereof has been given to the Borrower by
the Administrative Agent.
(f) Hedging Agreement. Any termination payment shall be due
by the Borrower under any Hedging Agreement and such amount is
not paid within ten (10) Business Days of the due date thereof.
(g) Other Cross-Defaults. The Borrower shall default in the
payment when due, or in the performance or observance, of any material
obligation or condition of any Material Contract involving monetary
liability in an amount in excess of $5,000,000 unless, but only as
long as, the existence of any such default is being contested by the
Borrower or such Subsidiary in good faith by appropriate proceedings
and adequate reserves in respect thereof have been established on the
books of the Borrower or such Subsidiary to the extent required by
GAAP.
(h) Voluntary Bankruptcy Proceeding. The Borrower thereof
shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take
advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a timely
and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its
property, domestic or foreign, (v) admit in writing its inability to
pay its debts as they become due, (vi) make a general assignment for
the benefit of creditors, or (vii) take any corporate action for the
purpose of authorizing any of the foregoing.
(i) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the Borrower thereof in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like
for the Borrower or any Material Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and
such case or proceeding shall
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continue undismissed or unstayed for a period of ninety (90)
consecutive days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for
relief under such federal bankruptcy laws) shall be entered.
(j) Failure of Agreements. Any material provision of this
Agreement or of any other Loan Document shall for any reason cease to
be valid and binding on the Borrower or the Borrower shall so state in
writing, or this Agreement or any Security Document shall for any
reason cease to create a valid and perfected first priority Lien on,
or security interest in, any material portion of the collateral
purported to be covered thereby, in each case other than in accordance
with the express terms hereof or thereof and except where due solely
to the failure to file, on a timely basis, appropriate financing or
continuation statements under the Uniform Commercial Code.
(k) Termination Event. The occurrence of any of the following
events: (i) the Borrower or any ERISA Affiliate fails to make full
payment when due of all amounts which, under the provisions of any
Pension Plan or Section 412 of the Code, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto, (ii) an
accumulated funding deficiency in excess of $250,000 occurs or exists,
whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or
partial withdrawal from any such Multiemployer Plan and the plan
sponsor of such Multiemployer Plans notifies such withdrawing employer
that such employer has incurred a withdrawal liability requiring
payments in an amount exceeding $5,000,000.
(l) Judgment. A judgment or order for the payment of money not
covered by insurance which causes the aggregate amount of such
undischarged, unstayed and not removed judgments to exceed $3,000,000
in any Fiscal Year shall be entered against the Borrower by any court
and such judgment or order shall continue undischarged, unstayed or
not removed to bond for a period of thirty (30) days.
SECTION 10.2 Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Borrower:
(a) Acceleration; Termination of Facilities. Declare the
principal of and interest on the Loans, the Revolving Credit Notes at
the time outstanding, and all other amounts owed to the Lenders and
Agents under this Agreement or any of the other Loan Documents and all
other Obligations, to be forthwith due and payable, whereupon the same
shall immediately become due and payable without presentment, demand,
protest or other notice of any kind, all of which are expressly
waived, anything in this Agreement or the other Loan Documents to the
contrary notwithstanding, and terminate the Credit Facility and any
right of the Borrower to request borrowings thereunder; provided, that
upon the occurrence of an Event of Default specified in Section
10.1(h) or (i), the Credit Facility shall be automatically terminated
and all Obligations shall automatically become due and payable.
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(b) Rights of Collection. Exercise on behalf of the Lenders
all of its other rights and remedies under this Agreement, the other Loan
Documents and Applicable Law, in order to satisfy all of the Borrower's
Obligations.
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Agents and the Lenders set forth
in this Agreement is not intended to be exhaustive and the exercise by the
Agents and Lenders of any right or remedy shall not preclude the exercise of
any other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of any Agent or
Lender in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude other or further exercise thereof or the exercise of any
other right, power or privilege or shall be construed to be a waiver of any
Event of Default. No course of dealing between the Borrower, the Agents and
Lenders or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the other Loan
Documents or to constitute a waiver of any Event of Default.
ARTICLE
THE AGENTS
SECTION 11.1 Appointment and Authorization. Each of the Lenders hereby
irrevocably designates and appoints First Union as Administrative Agent of such
Lender and Lehman as Syndication Agent of such Lender under this Agreement and
the other Loan Documents and each such Lender irrevocably authorizes First
Union as Administrative Agent for such Lender and Lehman as Syndication Agent
for such Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to such Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, no Agent shall have
any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or the other Loan Documents or otherwise
exist against any Agent.
SECTION 11.2 Delegation of Duties. Each Agent may execute any of its
respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
such Agent with reasonable care.
SECTION 11.3 Exculpatory Provisions. Neither any Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for actions occasioned by its or such Person's
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own gross negligence or willful misconduct), or (b) responsible in any manner
to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower or any officer of the General Partner contained
in this Agreement or the other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by such
Agent under or in connection with, this Agreement or the other Loan Documents
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or for any failure of
the Borrower to perform its obligations hereunder or thereunder. No Agent shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower.
SECTION 11.4 Reliance by the Agents. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by such Agent.
Each Agent may deem and treat the payee of any Revolving Credit Note as the
owner thereof for all purposes unless such Revolving Credit Note shall have
been transferred in accordance with Section 12.8 hereof. Each Agent shall be
fully justified in failing or refusing to take any action under this Agreement
and the other Loan Documents unless it shall first receive such advice or
concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking
or continuing to take any such action except for its own gross negligence or
willful misconduct. Each Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the Revolving Credit
Notes in accordance with a request of the Required Lenders (or, when expressly
required hereby, all the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Revolving Credit Notes.
SECTION 11.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that an Agent receives such
a notice, it shall promptly give notice thereof to the other Agent and Lenders.
Each Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided that
unless and until such Agent shall have received such directions, such Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
SECTION 11.6 Non-Reliance on the Agents and Other Lenders. Each Lender
expressly acknowledges that neither any Agent nor any of its respective
officers, directors, employees, agents, attorneys-in-fact, subsidiaries or
affiliates has made any representations or warranties to it and that no act by
any Agent hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by such
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance
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upon any Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
and enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon any Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by an Agent
hereunder or by the other Loan Documents, such Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of such
Agent or any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 11.7 Indemnification. The Lenders agree to indemnify each Agent
in its capacity as such and (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
the respective amounts of their Commitment Percentages, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Revolving Credit Notes) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of this Agreement or
the other Loan Documents, or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by such Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
gross negligence or willful misconduct. The agreements in this Section 11.7
shall survive the payment of the Revolving Credit Notes and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 11.8 Agent in Its Individual Capacity. Each Agent and its
respective subsidiaries and affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though it
were not an Agent hereunder. With respect to any Loans made or renewed by it
and any Revolving Credit Note issued to it, each Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
SECTION 11.9 Resignation of the Agent; Successor Agent. Subject (in the
case of the Administrative Agent) to the appointment and acceptance of a
successor as provided below, the Administrative Agent or the Syndication Agent
may resign at any time by giving notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Required Lenders with, as long as no
Event of Default has occurred and is continuing, the consent of the Borrower,
which consent shall not be unreasonably withheld, shall have the right to
appoint a successor Administrative Agent, which successor shall have minimum
capital and surplus of at least $1,000,000,000. If no successor Administrative
Agent shall have been so appointed by the Required Lenders and shall
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have accepted such appointment within thirty (30) days after the Administrative
Agent's giving of notice of resignation, then the Administrative Agent may, on
behalf of the Lenders and with, as long as no Event of Default has occurred and
is continuing, the consent of the Borrower (not to be unreasonably withheld),
appoint a successor Administrative Agent, which successor shall be any Lender
or a commercial bank organized under the laws of the United States or any
political subdivision thereof which has minimum capital and surplus of at least
$1,000,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 11.9 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Administrative Agent. In the event of the
resignation of the Syndication Agent, the Administrative Agent immediately
shall assume the obligations of the Syndication Agent hereunder.
ARTICLE
MISCELLANEOUS
SECTION 12.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to
be received by a party hereto (i) on the date of delivery if delivered by hand
or sent by telecopy, (ii) on the next Business Day if sent by recognized
overnight courier service and (iii) on the third Business Day following the
date sent by certified mail, return receipt requested.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrower: Insignia Properties, L.P.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attention: James A. Aston
Telecopy Number: (864) 239-1699
With a copy to: John K. Lines, Esq.
General Counsel
Insignia Financial Group, Inc.
One Insignia Financial Plaza
P. O. Box 1089
Greenville, South Carolina 29602
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With a copy (in the case
of extraordinary notices
only) to (which shall not
constitute notice
hereunder): Simpson Thacher & Bartlett
425 Lexington Avenue - 19th Floor
New York, New York 10017-3954
Attention: Charles H. F. Garner
Telecopy Number: (212) 455-2502
If to First Union as First Union National Bank
Administrative Agent One Insignia Financial Plaza
P.O. Box 1329
Greenville, South Carolina 29602
Attention: Portfolio Management and
Relationship Manager
Telecopy Number: (864) 255-8357
With a copy to: First Union National Bank
One First Union Center
301 S. College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopy Number: (704) 383-0288
With a copy to
(which shall not
constitute notice
hereunder): Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202-4006
Attention: J. Donnell Lassiter, Esquire
Telecopy Number: (704) 331-7598
If to the
Syndication Agent: Lehman Commercial Paper Inc.
Three World Financial Center
10th Floor
New York, New York 10285
Attention: Michelle Swanson
Telecopy Number: (212) 528-0819
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If to any Lender: To its Address set forth on
Schedule 1
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to
the Borrower and Lenders, as the Administrative Agent's Office referred to
herein, to which payments due are to be made and at which Loans will be
disbursed.
SECTION 12.2 Expenses; Indemnity. The Borrower will (a) pay all
reasonable out-of-pocket expenses of the Agents in connection with: (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all reasonable out-of-pocket syndication and due diligence expenses
and reasonable fees and disbursements of a single counsel for the Agents (with
the right of such counsel to engage such special or local counsel as the Agents
reasonably deem necessary), (ii) the preparation, execution and delivery of any
waiver, amendment or consent by the Agents or the Lenders relating to this
Agreement or any other Loan Document, including without limitation reasonable
fees and disbursements of a single counsel for the Agents and (iii) the
administration and enforcement of any rights and remedies of the Agents and
Lenders under the Credit Facility, and (b) defend, indemnify and hold harmless
the Agents and Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors (collectively, the "indemnitees"),
from and against any losses, penalties, fines, liabilities, settlements,
damages, costs and expenses, suffered by any such indemnitee in connection with
any claim, investigation, litigation or other proceeding (whether or not any
Agent or Lender is a party thereto) and the prosecution and defense thereof,
arising out of the Agreement, any other Loan Document or the Loans, including
without limitation reasonable attorney's and consultant's fees, except to the
extent that any of the foregoing result from the gross negligence or willful
misconduct of the party seeking indemnification therefor or the breach by the
Agents or the Lenders of this Agreement. If any claim, demand, action or cause
of action is asserted against any indemnitee, such indemnitee shall promptly
notify the Borrower, but the failure to so promptly notify the Borrower shall
not affect the Borrower's obligations under this Section 12.2 unless such
failure materially prejudices the Borrower's right to participate in the
contest of such claim, demand, action or cause of action, as hereinafter
provided. If requested by the Borrower in writing, and so long as no Default or
Event of Default shall have occurred and be continuing, such indemnitee shall
in good faith contest the validity, applicability and amount of such claim,
demand, action or cause of action and shall permit the Borrower to participate
in such contest. Any indemnitee that proposes to settle or compromise any claim
or proceeding for which the Borrower may be liable for payment of indemnity
hereunder shall give the Borrower written notice of the terms of such proposed
settlement or compromise reasonably in advance of settling or compromising such
claim or proceeding and shall obtain the Borrower's concurrence thereto. The
Agents are authorized at the Borrower's cost and expense to employ one counsel
in enforcing the rights of the Agents and Lenders hereunder and in defending
against any claim, demand, action or cause of action covered by this Section
12.2. In addition, each indemnitee shall have the right to employ its own
separate counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnitee unless the employment of such
counsel shall have been authorized in writing by the Borrower in connection
with the defense of such action, in which case such fees and expenses shall be
paid by the Borrower. If an indemnitee shall have reasonably concluded (based
upon the
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written advice of counsel to the Administrative Agent) that the
representation by one counsel of the Agents and Lenders creates a conflict of
interest for such counsel, the reasonable fees and expenses of such additional
counsel as are necessary to resolve that conflict chosen by such indemnitee and
reasonably satisfactory to the Borrower (provided that the Borrower's approval
of such counsel shall not be unreasonably delayed or withheld) shall be borne
by the Borrower. Any obligation or liability of the Borrower to any indemnitee
under this Section 12.2 shall survive the expiration or termination of this
Agreement and the repayment of the Obligations.
SECTION 12.3 GOVERNING LAW. THIS AGREEMENT, THE REVOLVING CREDIT
NOTES AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH
THEREIN, SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF SOUTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 12.4 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN GREENVILLE COUNTY, SOUTH CAROLINA, IN ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE REVOLVING
CREDIT NOTES AND THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER
OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER
HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF A SUMMONS AND COMPLAINT AND OTHER
PROCESS IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY ANY AGENT OR LENDER IN
CONNECTION WITH THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, ON BEHALF OF ITSELF OR ITS
PROPERTY, BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OTHERWISE
IN THE MANNER SPECIFIED IN SECTION 12.1. NOTHING IN THIS SECTION 12.4 SHALL
AFFECT THE RIGHT OF ANY AGENT OR LENDER TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY APPLICABLE LAW OR AFFECT THE RIGHT OF ANY AGENT OR LENDER
TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTIES IN THE
COURTS OF ANY OTHER JURISDICTIONS.
SECTION 12.5 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH AGENT AND LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE REVOLVING CREDIT NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS.
SECTION 12.6 Reversal of Payments. To the extent the Borrower makes a
payment or payments to any Agent for the ratable benefit of the Lenders or any
Agent receives any payment or proceeds of the collateral which payments or
proceeds or any part thereof are
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subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or proceeds repaid, the Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by such Agent.
SECTION 12.7 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Agents to the contrary
agreed to by the Borrower, be performed in accordance with GAAP. In the event
of changes in GAAP in accordance with the definition thereof, the Borrower and
the Lenders will thereafter negotiate in good faith to revise, by amendment of
this Agreement, any covenants of this Agreement affected thereby in order to
make such covenants consistent with GAAP then in effect. All projections and
estimates of financial results shall be made in good faith and based on
reasonable assumptions.
SECTION 12.8 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agents and Lenders, all permitted
future holders of the Revolving Credit Notes, and their respective successors
and assigns, except that the Borrower shall not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Agents, which consent shall not be unreasonably withheld or delayed, and, as
long as no Event of Default has occurred and is continuing, the consent of the
Borrower, which consent of the Borrower shall not be unreasonably withheld or
delayed, assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including, without
limitation, all or a portion of the Loans at the time owing to it and the
Revolving Credit Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's
Commitment is to be assigned, the Commitment so assigned shall not be
less than $5,000,000 and the assigning Lender shall retain a Commitment
of at least $5,000,000;
(iii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance in the form of Exhibit E
(an "Assignment and Acceptance"), together with any Revolving Credit
Note or Revolving Credit Notes subject to such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission or
53
<PAGE>
apply to or qualify the Loans or the Revolving Credit Notes under the
blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent
an assignment fee of $3,000 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable
upon any assignment by a Lender to an Affiliate thereof or upon any
assignment requested by the Borrower pursuant to the terms of Sections
2.8 or 3.12.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall, unless the Administrative Agent otherwise agrees, be at least five
(5) Business Days after the execution thereof, (A) the assignee thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereby and (B) the
Lender thereunder shall, to the extent provided in such assignment, be released
from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Loans with respect
to each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Revolving Credit Notes. Upon its receipt of an
Assignment and Acceptance executed by an assigning Lender and an Eligible
Assignee together with any Revolving Credit Note or Revolving Credit Notes
subject to such assignment and the written consent to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been
completed and is substantially in the form of Exhibit E:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower;
and
(iv) promptly deliver a copy of such Assignment and Acceptance to
the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the
surrendered Revolving Credit Note or Revolving Credit Notes, a new Revolving
Credit Note or Revolving Credit Notes to the order of such Eligible
54
<PAGE>
Assignee in amounts equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and a new Revolving Credit Note or Revolving Credit
Notes to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Revolving Credit Note or Revolving Credit
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Credit Note or Revolving Credit
Notes, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of the assigned Revolving Credit
Notes delivered to the assigning Lender. Each surrendered Revolving Credit Note
or Revolving Credit Notes shall be canceled and returned to the Borrower.
(f) Participations. Each Lender may sell participations to one or more
banks or other financial institutions which are not competitors of the Borrower
in all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Loans and the Revolving
Credit Notes held by it); provided that:
(i) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iii) such Lender shall remain the holder of the Revolving
Credit Notes held by it for all purposes of this Agreement;
(iv) the Borrower, the Agents and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement;
(v) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than (to the extent that
such Lender would have an approval right with respect thereto)
waivers, amendments or modifications which would reduce the principal
of or the interest rate on any Loan or extend the term or increase
the amount of the Commitment, reduce the amount of any fees to which
such participant is entitled, extend any scheduled payment date for
principal of any Loan; and
(vi) any such disposition shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission to apply to qualify the Loans
or the Revolving Credit Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Agents and each
Lender agree to hold any confidential information which it may receive from the
Borrower pursuant to this Agreement in confidence, except for disclosure to (i)
legal counsel, accountants, and other professional advisors, on a need-to-know
basis, (ii) regulatory officials, (iii) as required by law or legal process
(including by subpoena) or in connection with any legal proceeding, and (iv)
another financial institution in connection with a disposition or proposed
disposition of any of its interests hereunder or under any Loan Document, upon
execution by such institution of an agreement to
55
<PAGE>
keep such information confidential to the extent described in this Section
12.8(g). The Agents and Lenders agree that the breach of this Section 12.8(g),
including the disclosure of any confidential information received from the
Borrower pursuant to this Agreement, shall constitute a material breach of this
Agreement. Notwithstanding (ii) and (iii) above, in the event that any such
Person is requested pursuant to, or required by, Applicable Law or Governmental
Authority to disclose any such information, such Person will provide the
Borrower with prompt notice of such request or requirement, unless prohibited
by law or regulation, in order to enable the Borrower to seek an appropriate
protective order or other remedy, or to consult with such Person with respect
to the Borrower's taking steps to resist or narrow the scope of such request or
legal process. If, in such event, the Borrower has not provided such Person
with a protective order or other remedy in sufficient time, with such Person
acting in good faith and otherwise in its sole discretion, for such Person to
avoid unlawful nondisclosure of such information, such Person may disclose such
information pursuant to such Applicable Law or Governmental Authority, as the
case may be, without any recourse or remedy against such Person by the Borrower
or any Affiliate of the Borrower, which the Borrower hereby expressly waives.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Revolving Credit Note to any Federal
Reserve Bank in accordance with Applicable Law.
SECTION 12.9 Amendments, Waivers and Consents. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, such amendment, waiver or
consent is in writing signed by the Required Lenders (or by the Administrative
Agent with the consent of the Required Lenders) and delivered to the
Administrative Agent and, in the case of an amendment, signed by the Borrower;
provided, that no amendment, waiver or consent shall (a) except as specifically
set forth in Section 2.8, increase the amount or extend the time of the
obligation of the Lenders to make Loans (including without limitation pursuant
to Section 2.6), (b) extend the originally scheduled time or times of payment
of the principal of any Loan or the time or times of payment of interest on any
Loan, (c) reduce the rate of interest or fees payable on any Loan, (d) permit
any subordination of the principal or interest on any Loan, (e) release any
collateral or Security Document (other than as specifically permitted in this
Agreement) or (f) amend the provisions of this Section 12.9 or the definition
of Required Lenders, without the prior written consent of each Lender directly
affected thereby. In addition, no amendment, waiver or consent to the
provisions of Article XI shall be made without the written consent of the
Agents.
SECTION 12.10 Performance of Duties. The Borrower's obligations under
this Agreement and each of the Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 12.11 No Fiduciary Relationship. Notwithstanding any provision
to the contrary elsewhere in this Agreement or the other Loan Documents,
neither the Agent nor any Lender shall have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with the Borrower or any of its Subsidiaries, any Guarantor or any
Pledgor.
56
<PAGE>
SECTION 12.12 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lenders, the Agents and any Persons
designated by any Agent or Lender pursuant to any provisions of this Agreement
or any of the other Loan Documents shall be deemed coupled with an interest and
shall be irrevocable so long as any of the Obligations remain unpaid or
unsatisfied or the Credit Facility has not been terminated.
SECTION 12.13 Survival of Indemnities. Notwithstanding any termination
of this Agreement, the indemnities to which the Agents and the Lenders are
entitled under the provisions of this Article XII and any other provision of
this Agreement and the Loan Documents shall continue in full force and effect
and shall protect the Agents and Lenders against events arising after such
termination as well as before.
SECTION 12.14 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
SECTION 12.15 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 12.16 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
SECTION 12.17 Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been paid and satisfied in full. No termination of this Agreement
shall affect the rights and obligations of th parties hereto arising prior to
such termination.
SECTION 12.18 Independent Effect of Covenants. The Borrower expressly
acknowledges and agrees that each covenant contained in Articles VII, VIII or
IX hereof shall be given independent effect. Accordingly, the Borrower shall
not engage in any transaction or other act otherwise permitted under any
covenant contained in Articles VII, VIII or IX if, before or after giving
effect to such transaction or act, the Borrower shall or would be in breach of
any other covenant contained in Articles VII, VIII or IX.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, all as of the day and year first
written above.
INSIGNIA PROPERTIES, L.P.
By Its General Partner
Insignia Properties Trust
By: /s/ C D Vinson
----------------------------------------
Name: C D VINSON
----------------------------------
Title: C O O
----------------------------------
BORROWER
INSIGNIA PROPERTIES TRUST
By: /s/ C D Vinson
----------------------------------------
Name: C D VINSON
Title: C O O
GUARANTOR
<PAGE>
FIRST UNION NATIONAL BANK,
As Administrative Agent and Lender
By: /s/ Charles P. Cecil
-----------------------------------
Name: Charles P. Cecil
Title: SVP
<PAGE>
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and Lender
By: /s/ Dennis J. Dee
------------------------------------
Name: DENNIS J. DEE
Title: ASSISTANT SECRETARY
<PAGE>
EXHIBIT A
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
REVOLVING CREDIT NOTE
---------------------
<PAGE>
EXHIBIT B
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
NOTICE OF BORROWING
-------------------
<PAGE>
EXHIBIT C
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
NOTICE OF CONVERSION/CONTINUATION
---------------------------------
<PAGE>
EXHIBIT D
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
OFFICER'S COMPLIANCE CERTIFICATE
--------------------------------
<PAGE>
EXHIBIT E
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
ASSIGNMENT AND ACCEPTANCE
-------------------------
<PAGE>
EXHIBIT F
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
GUARANTY AGREEMENT
------------------
<PAGE>
EXHIBIT G
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
IPLP PLEDGE AGREEMENT
---------------------
<PAGE>
EXHIBIT H
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
IPT PLEDGE AGREEMENT
--------------------
<PAGE>
EXHIBIT I
TO
CREDIT AGREEMENT
BY AND AMONG
INSIGNIA PROPERTIES, L.P.,
FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND LEHMAN COMMERCIAL PAPER INC.
DATED
DECEMBER 30, 1997
NOTICE OF ACCOUNT DESIGNATION
-----------------------------
<PAGE>
Mr. Jim Duey January 6, 1998
Insignia Properties Trust
One Insignia Financial Plaza
P. O. Box 1089
Greenville, South Carolina 29602
Reference: Appraisal report of the Stone Mountain West Apartments located at
1150 Rankin Street, Stone Mountain, Georgia
Dear Mr. Duey:
In compliance with your request, we have inspected and appraised the above
captioned property as of December 29, 1997. This appraisal and final estimate
of value have been based upon a careful and personal inspection of the property
and upon research into various factors that influence value.
Briefly described, the subject property consists of three contiguous tracts of
land totaling 12.68 acres which are partially improved with a 133-unit
apartment complex. The smallest of the three tracts is vacant and is zoned R-75
which restricts development to single-family and duplex uses. The improvements
consist of 16 two story townhouse buildings containing a total of 205,222
net rentable square feet, built in 1972. Additional improvements include a
leasing office/clubhouse building, swimming pool, small playground area,
asphalt paved parking areas, concrete paved walkways and landscaping.
The purpose of the appraisal is to estimate the Market Value of the Fee Simple
Estate of the subject property. The results of our analysis are contained
within the attached Summary Appraisal Report which has been prepared in
compliance with and subject to the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute and Uniform
Standards of Professional Appraisal Practice (USPAP) as promulgated by the
Appraisal Standards Board of the Appraisal Institute.
The depth of discussion contained in this report is specific to the needs of
the client. The intended use of the report is to provide an independent
opinion of Market Value to be utilized by the client for their internal
purposes.
<PAGE>
Mr. Jim Duey January 6, 1998
Insignia Properties Trust Page 2
Attached is our Summary Appraisal Report, together with the Certification and
Basic Assumptions and Limiting Conditions, upon which we have based our
opinion that the Market Value of the Fee Simple Estate of the subject property,
as of December 29, 1997 is:
FIVE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($5,750,000)
It has been a pleasure to be of service to you. Please do not hesitate to call
with any questions you may have regarding our assumptions, observations or
conclusions.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Steven J. Goldberg /s/ John J. Fisher
By: Steven J. Goldberg, MAI By: John J. Fisher
Senior Vice President Senior Appraiser
<PAGE>
Mr. Jim Duey December 17, 1997
Financial Analyst
Insignia Financial Group Corporation
One Insignia Financial Plaza
P. O. Box 1089
Greenville, South Carolina 29602
Reference: Quail Hollow Apartments
2700 Feather Run Trail
West Columbia, South Carolina
Dear Mr. Duey:
In compliance with your request, we have inspected and appraised the above
captioned property as of November 19, 1997. This appraisal and final estimate
of value have been based upon a careful and personal inspection of the property
and upon research into various factors that influence value.
Briefly described, the subject property consists of approximately 18.07 acres
of land improved with a 215 unit apartment project. The improvements, which
were constructed in 1974, contain 259,858 net rentable square feet. Additional
improvements include a management/leasing office, tennis courts, swimming pool,
clubhouse, paved surface parking and walkways, and landscaping.
The purpose of this report is to estimate the Market Value of the Fee Simple
Estate of the subject property. The results of our analysis are contained
within the attached Summary Appraisal Report which has been prepared in
compliance with the reporting requirements set forth under Standards
Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice
(USPAP). This report presents summary discussions of the data, reasoning, and
analyses that were used in the appraisal process to develop the appraisers'
opinion of value.
This Summary Appraisal Report updates a Self-contained Appraisal Report
previously prepared on the subject property by this firm. The aforementioned
appraisal report is dated April 5, 1996 and has an effective date of value
of March 19, 1996 (referred to hereafter as the April 5, 1996 report).
Detailed information not contained within this report may be available within
the aforementioned appraisal or has been retained within the appraisers' file.
<PAGE>
Mr. Jim Duey December 17, 1997
Insignia Financial Group, Inc. Page 2
The depth of discussion contained in this report is specific to the needs of
the client. The intended use of the report is to provide an independent
opinion of Market Value to be utilized by the client for their internal
purposes.
Attached is our Summary Appraisal Report, together with the Certification and
Basic Assumptions and Limiting Conditions, upon which we have based our
opinion that the Market Value of the Fee Simple Estate of the subject property,
as of November 19, 1997 is:
SIX MILLION ONE HUNDRED THOUSAND DOLLARS
($6,100,000)
It has been a pleasure to be of service to you. Please do not hesitate to call
with any questions you may have regarding our assumptions, observations or
conclusions.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Steven J. Goldberg /s/ David E. Dodd
By: Steven J. Goldberg, MAI By: David E. Dodd
Senior Vice President Senior Appraiser
<PAGE>
Mr. Jim Duey January 6, 1998
Insignia Properties Trust
One Insignia Financial Plaza
P. O. Box 1089
Greenville, South Carolina 29602
Reference: Appraisal report of the Heritage Point Apartments located at
1349 Redmond Circle, Rome, Georgia
Dear Mr. Duey:
In compliance with your request, we have inspected and appraised the above
captioned property as of December 29, 1997. This appraisal and final estimate
of value have been based upon a careful and personal inspection of the property
and upon research into various factors that influence value.
Briefly described, the subject property consists of two contiguous tracts of
land totaling 10.3 acres, which are zoned R-2C, High Density Multi Family
Residential and improved with a 149-unit apartment complex. The improvements
consist of 19 two-story buildings containing a total of 139,456 net rentable
square feet, built in 1966 and 1970. Additional improvements include a swimming
pool, playground area, laundry facilities, asphalt paved parking areas,
concrete paved walkways and landscaping.
The scope of the appraisal included an inspection of the subject and extensive
analysis of the economic factors affecting the subject's competitive position
in the influencing market. Primary emphasis was placed on the value derived
within the Income Capitalization Approach with secondary support coming from
the value derived within the Sales Comparison Approach. The analyses, opinions,
assumptions and conclusions were prepared by the undersigned and are contained
within the attached Summary Appraisal Report.
The depth of discussion contained in this report is specific to the needs of
the client. The intended use of the report is to provide an independent
opinion of Market Value to be utilized by the client for their internal
purposes.
<PAGE>
Mr. Jim Duey January 6, 1998
Insignia Properties Trust Page 2
Attached is our Summary Appraisal Report, together with the Certification and
Basic Assumptions and Limiting Conditions, upon which we have based our
opinion that the Market Value of the Fee Simple Estate of the subject property,
as of December 29, 1997 is:
TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS
($2,700,000)
It has been a pleasure to be of service to you. Please do not hesitate to call
with any questions you may have regarding our assumptions, observations or
conclusions.
Sincerely,
KOEPPEL TENER REAL ESTATE SERVICES, INC.
/s/ Steven J. Goldberg /s/ John J. Fisher
By: Steven J. Goldberg, MAI By: John J. Fisher
Senior Vice President Senior Appraiser
<PAGE>
Mr. J.L. Snedigar February 4, 1998
Senior Asset Manager
Insignia Financial Group, Inc.
One Shelter Place
P. O. Box 1089
Greenville, South Carolina 29602
Reference: Windsor Hills Apartments
Ascot Lane
Blacksburg, Montgomery County, Virginia
Dear Mr. Snedigar:
In accordance with your request, we have prepared an appraisal on the above
referenced property. The purpose of the appraisal is to estimate of the Market
Value of the Fee Simple Estate of the subject property as of January 31, 1998.
Briefly described, the subject site consists of 22 acres located at the
intersection of Ascot Lane and Harding Avenue. The complex consists 25
three-story, walk-up, garden apartment buildings containing 300 units. There
are 25 studio units, 78 one-bedroom units, 152 two-bedroom units and 45
three-bedroom units. Additional improvements include a clubhouse building
(which also houses the office and a fitness center), a swimming pool, tennis
court, Basketball court, playground, laundry facilities, asphalt paved
parking area, concrete paved walkways and extensive landscaping.
The scope of the assignment consisted of a Complete Appraisal and included
an inspection of the subject property and an analysis of the surrounding
market. The Sales Comparison and Income Capitalization Approaches have been
employed in the valuation of the subject property. Due to the income producing
nature of the subject property, the Income Approach has been accorded most
significance in the appraisal process.
Continued...
<PAGE>
Mr. J.L. Snedigar February 4, 1998
Insignia Financial Group, Inc. Page 2
The analysis, opinions, assumptions and conclusions were prepared by the
undersigned and are contained within the attached Summary Appraisal Report.
This report presents only summary discussions of the data, reasoning, and
analyses that were used in the appraisal process to develop the appraisers'
opinion of value.
Special attention must be given to the Appraisal Assumptions and Limiting
Conditions section of the report which further identify the scope and use of
this appraisal. The depth of discussion contained in this report is specific
to the needs of the client. The intended use of the report is to provide an
independent opinion of Market Value to be utilized by the client for their
internal purposes.
Based upon the data, analyses and conclusions contained within this appraisal
report, it is our opinion that the Market Value of the Fee Simple Estate of the
subject property, as of December 31, 1997 is:
TEN MILLION ONE HUNDRED THOUSAND DOLLARS
($10,100,000)
It has been a pleasure to be of service to you. Please do not hesitate to call
with any questions you may have regarding our assumptions, observations or
conclusions.
Sincerely,
/s/ F. Brian Johnson
By: F. Brian Johnson, MAI
Senior Vice President
<PAGE>
Exhibit (z)(2)
AGREEMENT OF JOINT FILING
Cooper River Properties, L.L.C., Insignia Properties, L.P., Insignia
Properties Trust, Insignia Financial Group, Inc. and Andrew L. Farkas hereby
agree that the Amendment No. 7 to Statement on Schedule 13D to which this
agreement is attached as an exhibit, and all further amendments thereto, shall
be filed on behalf of each of them. This agreement is intended to satisfy the
requirements of Rule 13d- 1(f)(1)(iii) under the Securities Exchange Act of
1934, as amended.
Dated: July 21, 1998
COOPER RIVER PROPERTIES, L.L.C.
By: /s/ JEFFREY P. COHEN
--------------------------------
Jeffrey P. Cohen
Manager
INSIGNIA PROPERTIES, L.P.
By: Insignia Properties Trust,
its General Partner
By: /s/ JEFFREY P. COHEN
--------------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA PROPERTIES TRUST
By: /s/ JEFFREY P. COHEN
--------------------------------
Jeffrey P. Cohen
Senior Vice President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
--------------------------------
Frank M. Garrison
Executive Managing Director
/s/ ANDREW L. FARKAS
-----------------------------------
ANDREW L. FARKAS
