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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d) (4) OF THE
SECURITIES EXCHANGE ACT OF 1934
S/M REAL ESTATE FUND VII, LTD.
(Name of Subject Company)
S/M REAL ESTATE FUND VII, LTD.
(Name of Person(s) Filing Statement)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
((CUSIP) Number of Class of Securities)
RICHARD E. HOFFMANN
SM7 APARTMENT INVESTORS, INC.
5520 LBJ FREEWAY, SUITE 500
DALLAS, TEXAS 75240
(972) 404-7100
(Name, address and telephone number of person
authorized to receive notice and communications on behalf of
the person(s) filing statement)
With a copy to:
STEPHEN L. SAPP, ESQ.
LOCKE LIDDELL & SAPP LLP
2001 ROSS AVENUE, SUITE 3000
DALLAS, TEXAS 75201
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is S/M Real Estate Fund VII, Ltd., a
Texas limited partnership (the "Partnership"). The address of the Partnership is
5520 LBJ Freeway, Suite 500, Dallas, Texas 75240. The title of the class of
equity securities to which this statement relates is the units of limited
partnership interest in the Partnership ("Units")
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the cash tender offer made by MP Value Fund
4, LLC; Moraga-Dewaay Fund, LLC; MP Value Fund 6, LLC; and IG Holdings
(collectively, the "Purchasers") to purchase up to 3,324 Units at a purchase
price equal to $65 per Unit, less the amount of any distributions declared or
made with respect to the Units between December 22, 1998 and January 25, 1999,
or such other date to which the Offer (as hereinafter defined) may be extended,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated December 22, 1998 of the Purchasers and the related Letter of Transmittal
(which together constitute the "Offer"), disclosed in a tender offer statement
on Schedule 14D-1 filed with the Securities and Exchange Commission on December
22, 1998 (the "Schedule 14D-1"). The Agreement of Limited Partnership of the
Partnership provides, among other things, that, as a condition to assignment of
Units, the Partnership has received from the assignor or assignee a transfer fee
to cover all reasonable expenses of the transfer, not to exceed $50 per
transaction.
Based on the information in the Schedule 14D-1, the address of the
principal executive offices of the Purchasers other than IG Holdings is 1640
School Street, Moraga, California 94556, and the address of the principal
executive offices of IG Holdings is 1717 East Morten Avenue, Suite 250, Phoenix,
Arizona 85020.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Partnership, which is the person filing
this statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings and
actual or potential conflicts of interest between the Partnership or its
affiliates and the Partnership, its executive officers, directors or affiliates
are described under Item 13 of the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "Form 10-K"). A copy of such item is filed
as Exhibit 1 hereto and incorporated herein by reference. Except as described
below, as of the date hereof, except as set forth in Item 13(a) of the Form
10-K, there exists no material contract, agreement, arrangement or understanding
and no actual or potential conflict of interest between the Partnership or its
affiliates and (i) the Partnership's executive officers, directors or affiliates
or (ii) the Purchasers' executive officers, directors or affiliates.
On June 23, 1997, the Partnership entered into a letter agreement (the
"Letter Agreement") with Peachtree Partners, an affiliate of IG Holdings, which
(based on information in the Schedule 14D-1) is one of the Purchasers, which set
forth such parties' agreement regarding any proposed acquisition of outstanding
Units from Limited Partners by Peachtree Partners or Ira J. Gaines, who (based
on information in the Schedule 14D-1) is the sole general partner of IG
Holdings, or any of their affiliates. In the Letter Agreement, Peachtree
Partners agreed, among other things, that prior to June 23, 1999, neither it nor
any of its affiliates, including any person that Peachtree Partners, Mr. Gaines
or their affiliates has an advisory relationship with, will, without the prior
written consent of the Partnership, directly or indirectly, in any manner,
including, without limitation, by tender offer (whether or not pursuant to a
filing made with the Securities and Exchange Commission), acquire, attempt to
acquire or make a proposal to acquire, directly or indirectly, more than 4.9%
(including Units acquired through other means) of the outstanding Units of the
Partnership from any Limited Partner or otherwise. A copy of the Letter
Agreement is filed as Exhibit 2 hereto and incorporated by reference. The
Partnership has not consented to the Offer. The General Partners therefore
believe that the Offer by IG Holdings constitutes a breach of the Letter
Agreement. Additionally, if any of the other Purchasers is an affiliate of Mr.
Gaines or otherwise has an advisory relationship with Mr. Gaines, the General
Partners believe such other Purchasers would be in violation of the Letter
Agreement. The General Partners are considering their alternatives as a result
of this breach.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the General Partners.
Neither SM7 Apartment Investors Inc. nor Murray Realty Investors VII,
Inc., the general partners of the Partnership (collectively, the "General
Partners"), has approved the Offer. The General Partners believe that the price
per Unit offered to holders of Units ("Limited Partners") in the Offer may not
fairly compensate Limited Partners for their interest in the Partnership, and,
therefore, recommend that Limited Partners do not tender Units pursuant to the
Offer.
(b) Reasons for the Recommendation.
In determining to recommend that Limited Partners do not tender their
Units in the Offer, the General Partners considered a number of factors,
including, without limitation, the following:
(1) The price offered by the Purchasers in the offer is
approximately 50% below the General Partnership's estimate of net asset
value of $130 per Unit. This estimated net asset value was calculated
based on a recent appraisal, which valued the Fifth Avenue Apartments
(the "Property") at approximately $8 million, adjusted for the cost of
sales, the Partnership's remaining assets and liabilities and
liquidation expenses. The appraisal was completed in September 1998 as
a part of a refinancing that was completed on December 3, 1998. Of
course, the actual realizable value per Unit upon a sale of the
Property and liquidation of the Partnership would depend on many other
factors, including the actual selling price of the Property and
Partnership liquidation expenses.
(2) The General Partners believe that the tender offer does
not adequately reflect the favorable impact of the recent refinancing
of the Property. In the refinancing, the Partnership entered into a new
loan, which will reduce debt service payments in 1999 by approximately
$170,341 (approximately a 25% reduction from the previous loan) and
provides $114,375 to be used primarily for the replacement of the
existing roof. Although there can be no assurance, the General Partners
believe that this refinancing will improve the financial condition of
the Partnership and may enable the General Partners to realize a
greater sales price than the current appraised value.
(3) The General Partners' plan, over the next two years, is to
complete the improvements described above and market the Property for
sale in an orderly fashion, with the goal of selling the Property to
maximize liquidating cash distributions to Limited Partners. Although
there can be no assurance as to a particular selling price, it is
anticipated that planned improvements to the Property may allow the
actual selling price to exceed the current appraised value. There can,
however, be no assurance as to when or whether a sale will occur, or
whether such a sale will be on terms favorable to the Partnership.
(4) A transfer fee, not to exceed $50 per transaction, will
apply to any transfers of Units. Therefore, net proceeds to each
Limited Partner will be reduced by at least $50.
(5) The tender of Units pursuant to the Offer may constitute a
taxable event to the participating Limited Partner. See "Item
8--Certain Federal Income Tax Considerations."
The General Partners did not assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
General Partners viewed their positions and recommendations as being based on
the totality of information presented to and considered by them.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf has
retained any person to make solicitations or recommendations to Limited Partners
on the Partnership's behalf concerning the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transaction in Units has been effected during the past 60 days
by the Partnership or, to the best of the Partnership's knowledge, by any
executive officer, director, affiliate or subsidiary of the Partnership.
(b) None of the Partnership's executive officers, directors or
affiliates own beneficially or of record any Units.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) The Partnership is not engaged in any negotiation in response to
the Offer which relates to or would result in: (i) an extraordinary transaction
such as a merger or reorganization, involving the Partnership or any subsidiary
of the Partnership; (ii) a purchase, sale or transfer of a material amount of
assets by the Partnership or any subsidiary of the Partnership; (iii) a tender
offer for or other acquisition of securities by or of the Partnership; or (iv)
any material change in the present capitalization or dividend policy of the
Partnership.
(b) There is no transaction, General Partner resolution, agreement in
principle or signed contract in response to the Offer that relates to or would
result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Certain Federal Income Tax Considerations.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED HEREIN
FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO ADDRESS ALL ASPECT OF
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR LIMITED PARTNER. For example, this
discussion does not address the effect of any applicable foreign, state, local
or other tax law other than federal income tax laws. Certain Limited Partners
(including trusts, foreign persons, tax-exempt organizations or corporations)
may be subject to special rules not discussed below. This discussion is based on
the Internal Revenue Code of 1986, as amended (the "Code"), existing
regulations, court decisions and Internal Revenue Service rulings and other
pronouncements.
EACH LIMITED PARTNER SHOULD CONSULT SUCH LIMITED PARTNER'S OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF THE
OFFER, INCLUDING THE APPLICATION OF ALTERNATIVE MINIMUM TAX AND FEDERAL,
FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
The following discussion is based on the assumption that the
Partnership is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership," as that term is defined in the Code.
Gain or Loss. A taxable Limited Partner will recognize a gain or loss
on the sale of such Limited Partner's Units in an amount equal to the difference
between (i) the amount realized by such Limited Partner on the sale and (ii)
such Limited Partner's adjusted tax basis in the Units sold. The amount realized
by a Limited Partner will include the Limited Partner's share of the
Partnership's liabilities, if any (as determined under Section 752 of the Code
and the regulations thereunder). If the Limited Partner reports a loss on the
sale, such loss generally could not be currently deducted by such Limited
Partner except against such Limited Partner's capital gains from other
investments. However, non-corporate taxpayers may deduct up to $3,000 of capital
losses in excess of the amount of their capital gains against ordinary income.
The adjusted tax basis in the Units of a Limited Partner will depend
upon individual circumstances. See "Partnership Allocations in Year of Sale"
below. Each Limited Partner who plans to tender Units pursuant to the Offer
should consult with such Limited Partner's own tax advisor as to such Limited
Partner's adjusted tax basis in such Limited Partner's Units and the resulting
tax consequences of a sale.
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If any portion of the amount realized by a Limited Partner is
attributable to such Limited Partner's share of "unrealized receivables" or
"inventory items" (as such terms are defined in Section 751 of the Code), a
corresponding portion of such Limited Partner's gain or loss will be treated as
ordinary gain or loss. It is possible that the basis allocation rules of Section
751 of the Code may result in such Limited Partner recognizing ordinary income
with respect to the portion of such Limited Partner's amount realized on the
sale of Units that is attributable to such items, while recognizing a capital
loss with respect to the remainder of Units.
A tax-exempt Limited Partner (other than an organization described in
Code Sections 501(c)(7) (social club), 501(c)(9) (voluntary employee benefit
association, 501(c)(17) (supplementary unemployment benefit trust) or 501(c)(20)
(qualified group legal services plan)) should not be required to recognize
unrelated trade or business income upon the sale of its Units pursuant to the
Offer, assuming that such Limited Partner does not hold its Units as a "dealer"
and has not acquired such Units with debt financed proceeds.
Partnership Allocations in Year of Sale. A tendering Limited Partner
will be allocated the Limited Partner's pro rata share of the annual taxable
income and losses from the Partnership with respect to the Units sold for the
period through the date of sale, even though such Limited Partner will assign to
the Purchasers his, her or its rights to receive certain cash distributions with
respect to such Units. Such allocations and any Partnership distributions for
such period would affect a Limited Partner's adjusted tax basis in the tendered
Units and, therefore, the amount of gain or loss recognized by such Limited
Partner on the sale of Units.
Possible Tax Termination. The Code provides that if 50% or more of the
capital and profits interest in a partnership are sold or exchanged within a
single 12-month period, such partnership generally will terminate for federal
income tax purposes. Accordingly, it is possible that transfers of Units made
pursuant to the Offer, in combination with other transfers made within 12 months
of the Offer, could result in a termination of the Partnership. If so, 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 it assets on the date of the deemed contribution, a
new depreciation recovery period would begin on such date, and the Partnership's
annual depreciation deductions over the next few years could be reduced. If so,
the Partnership would have greater taxable income (or less tax loss) than if no
tax termination had occurred. In addition, depreciation may be required to be
allocated to those Limited Partners that have a higher tax basis, such as the
Purchasers. In addition, a tax termination of the Partnership could have an
adverse effect on Limited Partners whose tax year is not the calendar year, of
the inclusion of more than one year of Partnership tax items in one tax return
of such Limited Partners, resulting in a "bunching" of income.
Suspended Passive Activity Losses. If a Limited Partner sells less than
all of its Units pursuant to the Offer, suspended passive losses can be
currently deducted (subject to other applicable limitations) to the extent of
the Limited Partner's passive income from the Partnership for that year
(including any gain recognized on the sale of 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, such Limited Partner would be able to deduct
"suspended" passive activity losses from the Partnership, if any, in the year of
sale, free of the passive activity loss limitation. As a limited partner of the
Partnership, which was engaged in real estate activities, the ability of a
Limited Partner who is subject to the passive activity loss rules to claim tax
losses from the Partnership was limited. Upon sale of all of a Limited Partner's
Units, such Limited Partner would be able to use any "suspended" passive
activity losses first against any net income or gain from the sale of such
Limited Partner's Units and any net income or gain for the taxable year from all
other passive activities and second against income from any other source.
Backup Withholding and FIRPTA Withholding. Limited Partners (other than
tax-exempt persons, corporations and certain foreign individuals) who tender
Units may be subject to a 31% backup withholding unless those Limited Partners
provide a taxpayer identification number and certify that the tax identification
number is correct. Additionally,
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gain realized by a foreign Limited Partner on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code, the
transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on the
disposition. As reported in the Schedule 14D-1, the Purchasers will withhold 10%
of the amount realized by a tendering Limited Partner from the purchase price
payment to be made to such Limited Partner unless such Limited Partner properly
completes and signs the FIRPTA Affidavit included as part of the Letter of
Transmittal certifying such Limited Partner's tax identification number, that
such Limited Partner is not a foreign person and such Limited Partner's address.
Amounts withheld would be credited 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.
(b) Certain Other Information.
No Affiliation with Purchasers. There is no affiliation between any of
the Purchasers and the Partnership or the General Partners. The Offer was not
solicited by the General Partners nor anyone associated with the General
Partners.
Secondary Market for Units. While there is not an active market for
individual Units, Units are traded on an informal secondary market. The price of
limited partnership units sold on the secondary market is subject to negotiation
between the buyer and seller (based on, among other things, the number of units
held and the seller's willingness to solicit additional offers). Financial
representatives and brokers may be able to assist a potential seller of Units.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Item 13 of S/M Real Estate Fund VII, Ltd.'s Annual Report on Form
10-K for the year ended December 31, 1997.
Exhibit 9(a) Letter to Limited Partners, dated January 6, 1999.
Exhibit 9(c) Letter Agreement, dated June 23, 1997, between Peachtree Partners
and S/M Real Estate Fund VII.
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SIGNATURE
After reasonable 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: January 6, 1999
S/M REAL ESTATE FUND VII, LTD.
By: SM7 Apartment Investors Inc.,
a general partner
By: /s/ Richard E. Hoffmann
--------------------------------------------------
Richard E. Hoffmann
President, Treasurer and Director
By: MURRAY REALTY INVESTORS III, Inc.,
a general partner
By: /s/ Charles W. Karlen
--------------------------------------------------
Charles W. Karlen
Vice President
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
Exhibit 1 Item 13 of S/M Real Estate Fund VII, Ltd.'s Annual Report on
Form 10-K for the year ended December 31, 1997.
Exhibit 9(a) Letter to Limited Partners, dated January 6, 1999.
Exhibit 9(c) Letter Agreement, dated June 23, 1997, between Peachtree
Partners and S/M Real Estate Fund VII.
</TABLE>
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EXHIBIT 1
ITEM 13 OF ANNUAL REPORT ON FORM 10-K OF
S/M REAL ESTATE FUND VII, LTD. FOR THE YEAR ENDED
DECEMBER 31, 1997
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) For the years ended December 31, 1997, 1996 and 1995, the
General Partners or their affiliates were reimbursed for
Partnership administrative and operating expenses, excluding
property management fees, in the amounts of $1,262, $7,132 and
$8,024, respectively.
On January 1, 1990, Murray Management Corporation
subcontracted with Anterra Management Corporation to provide
certain administrative and management services with respect to
the Partnership and its Properties. Anterra Management
Corporation is a real estate related service company formed by
former executive officers of Murray and its affiliates, and
earned property management fees of $52,420, $55,489 and
$65,378 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Effective as of January 1, 1997, the Partnership began
reimbursing certain expenses incurred by an unaffiliated third
party service provider in servicing the Partnership to the
extent permitted by the partnership agreement. In prior years,
affiliates of SM7 Apartment Investors Inc. had voluntarily
absorbed these expenses.
(b) None.
(c) No management person is indebted to the Partnership.
(d) Not applicable.
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Exhibit 9(a)
SM7 APARTMENT INVESTORS, INC.
5520 LBJ Freeway, Suite 500
Dallas, Texas 75240
January 6, 1999
Dear Limited Partner:
You may have received materials describing the offer (the "Offer") by
MP Value Fund 4, LLC; Moraga-Dewaay Fund, LLC; MP Value Fund 6, LLC and IG
Holdings (collectively, the "Purchasers") to purchase up to 3,324 units of
limited partnership interest ("Units") of S/M Real Estate Fund VII, Ltd. (the
"Partnership") at a price of $65 per Unit. Please note that affiliates of the
Purchasers offered a price of $10 and $35 per Unit in January 1998 and August
1998, respectively.
AFTER CAREFULLY REVIEWING THE OFFER, THE GENERAL PARTNERS BELIEVE THAT
THE PRICE PER UNIT OFFERED TO YOU BY THE PURCHASERS IN THE OFFER MAY NOT FAIRLY
COMPENSATE YOU FOR YOUR INTEREST IN THE PARTNERSHIP AND, THEREFORE, RECOMMEND
THAT YOU DO NOT TENDER YOUR UNITS PURSUANT TO THE OFFER.
As stated in our earlier correspondence, we believe that the
purchasers' underlying objective is to purchase your units at a substantial
discount. In determining to recommend that Limited Partners do not tender their
Units in the Offer, the General Partners considered a number of factors,
including, without limitation, the following:
(1) The price offered by the Purchasers in the offer is
approximately 50% below the General Partnership's estimate of net asset
value of $130 per Unit. This estimated net asset value was calculated
based on a recent appraisal, which valued the Fifth Avenue Apartments
(the "Property") at approximately $8 million, adjusted for the cost of
sales, the Partnership's remaining assets and liabilities and
liquidation expenses. The appraisal was completed in September 1998 as
a part of a refinancing that was completed on December 3, 1998. Of
course, the actual realizable value per Unit upon a sale of the
Property and liquidation of the Partnership would depend on many other
factors, including the actual selling price of the Property and
Partnership liquidation expenses.
(2) The General Partners believe that the Offer does not
adequately reflect the favorable impact of the recent refinancing of
the Property. In the refinancing, the Partnership entered into a new
loan, which will reduce debt service payments in 1999 by approximately
$170,341 (approximately a 25% reduction from the previous loan) and
provides for $114,375 to be used for the replacement of the existing
roof. Although there can be no assurance, the General Partners believe
that this refinancing will improve the financial condition of the
Partnership and may enable the General Partners to realize a greater
sales price than the current appraisal value.
(3) The General Partners' plan, over the next two years is to
complete the improvements described above and market the Property for
sale in an orderly fashion, with the goal of selling the Property to
maximize liquidating cash distributions to Limited Partners. Although
there can be no assurance as to a
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particular selling price, it is anticipated that planned improvements
to the Property may allow the actual selling price to exceed the
current appraised value. There can, however, be no assurance as to when
or whether a sale will occur, or whether such a sale will be on terms
favorable to the Partnership.
(4) A transfer fee, not to exceed $50 per transaction, will
apply to any transfers of Units in connection with the Offer.
Therefore, net proceeds to each Limited Partner will be reduced by at
least $50.
(5) The tender of Units pursuant to the Offer may constitute a
taxable event to the participating Limited Partner.
IN SUMMARY, WE DO NOT BELIEVE THAT THE OFFER IS IN YOUR BEST INTEREST.
WE RECOMMEND THAT YOU DO NOT TENDER ANY UNITS AND DO NOT SIGN THE FORMS SENT
TO YOU BY THE PURCHASERS.
In arriving at their recommendation, the General Partners of the
Partnership gave careful consideration to the factors described in the attached
Schedule 14D-9, which is being filed today with the Securities and Exchange
Commission. This document contains important information relating to the Offer,
and we urge you to read it carefully.
We will, of course, keep you informed of significant events concerning
the Partnership. If you have any questions, please call S/M VII Investor
Services at (972) 404-7106.
Very truly yours,
SM7 Apartment Investors Inc. Murray Realty Investors VII, Inc.
a general partner a general partner
Richard E. Hoffmann Charles W. Karlen
President Vice President
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Exhibit 9(c)
S/M REAL ESTATE FUND VII, LTD.
3 World Financial Center - 29th Fl.
New York, N.Y. 10285
June 23, 1997
Personal and Confidential
Peachtree Partners
P.O. Box 30989
Phoenix, Arizona 85046
Attn: Ira J. Gaines
Dear Mr. Gaines:
The purpose of this letter is to set forth our understanding with
regard to any proposed acquisition of outstanding units of limited partnership
interests ("Units") of S/M Real Estate Fund VII, Ltd., a Texas limited
partnership (the "Partnership"), from holders of Units (each a "Unitholder" and
collectively, the "Unitholders") by Peachtree Partners, Ira J. Gaines or any
person who is an Affiliate (as defined below) (collectively, "you").
In response to your request earlier this month and in consideration of
the agreements set forth in this letter agreement, the Partnership agrees to
provide you a current list of the names and addresses of the Unitholders along
with the number of Units owned by each of them in a computer readable form
reasonably requested by you. You agree that you may only use the list to acquire
up to 4.9% (including Units acquired through all other means) of the
Partnership's outstanding Units.
You represent and warrant that on the date hereof you beneficially own
not more than ________ (5) Units. You also agree that prior to the second
anniversary of the date of this letter agreement, neither you nor any person who
is your Affiliate (as defined under Rule 405 of the Securities Act of 1933, as
amended) and, in addition including any person you or your Affiliate has an
advisory relationship with who you will procure to be bound by the terms of this
agreement, will, without the prior written consent of the Partnership, which may
be withheld for any reason, directly or indirectly, (i) in any manner including,
without limitation, by tender offer (whether or not pursuant to a filing made
with the Securities and Exchange Commission), acquire, attempt to acquire or
make a proposal to acquire, directly or indirectly, more than 4.9% (including
Units acquired through all other means) of the outstanding Units of the
Partnership from any Unitholder, Unitholders or otherwise, (ii) seek or propose
to enter into, directly or indirectly, any merger, consolidation, business
combination, sale or acquisition of assets, liquidation, dissolution or other
similar
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transaction involving the Partnership, (iii) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" or "consents" (as
such terms are used in the proxy rules of the Securities and Exchange
Commission) to vote, or seek to advise or influence any person with respect to
the voting of any voting securities of the Partnership, (iv) form, join or
otherwise participate in a "group" (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) with
respect to any voting securities of the Partnership, (v) disclose to any third
party any intention, plan or arrangement inconsistent with the terms of this
letter agreement or (vi) loan money to, advise, assist or encourage any person
in connection with any action inconsistent with the terms of this letter
agreement.
You also agree during such two year period that the Partnership shall
be entitled in its absolute sole discretion to deny any proposal or request,
directly or indirectly, to amend, waive or terminate any provision of this
letter agreement. In addition, you agree that you will notify the Partnership at
least five days before initiating any communication with Unitholders and provide
the Partnership a copy of such communication (if written) with such notice.
You have advised us that, if requested by us, you will incorporate in
any communication with Unitholders a statement as to the net asset value per
unit as determined by the Partnership. In addition, if you commence a tender
offer for less than 5% of the outstanding Units, you will include verbatim the
following language in any such communication:
"TENDER OFFERS OF THIS NATURE ARE NOT REQUIRED TO COMPLY
WITH CERTAIN RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION. Accordingly, this tender offer does not need to
comply with certain disclosure requirements and rules governing tender
offers set forth in the Securities Exchange Act of 1934."
You understand that the general partners of the Partnership may
consider from time to time selling all or substantially all of the assets of the
Partnership or entering into any other transaction determined by the general
partners to be in the best interests of the Unitholders and the Partnership. The
result of any such transaction, if approved by a majority vote of the
Unitholders, might be the dissolution and liquidation of the Partnership in
accordance with the partnership agreement. Accordingly, in order to avoid
disrupting any possible sale of all or substantially all of the Partnership's
assets or any other transaction determined by the general partners to be in the
best interests of the Unitholders and the Partnership and any required vote of
Unitholders, you agree that, prior to the two-year anniversary of the date of
this letter agreement, all Units obtained by you pursuant to any means will be
voted by you on all issues in the same manner as by the majority of all other
Unitholders who vote on any such proposal.
If at any time during such two year period you are approached by any
third party concerning participation in any transaction involving the assets,
business or securities of the Partnership or involving any action inconsistent
with the terms of this letter agreement, you will promptly inform the
Partnership of the nature of any such contact and the parties thereto and you
may inform such
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third party that this letter agreement requires you to so notify the
Partnership. You shall not, without the prior written consent of the
Partnership, disclose to any third party the list of Unitholders' names,
addresses and number of Units held that was provided to you by the Partnership.
You will not sell any Units owned by you prior to the second
anniversary of the date of this letter agreement, unless each buyer or
transferee agrees in writing with the Partnership to be bound by the terms and
conditions of this letter agreement until such second anniversary.
We each hereby acknowledge that we are aware, and that we will advise
our respective Affiliates of our respective responsibilities under the
securities laws. We each agree that the other of us or our respective
Affiliates, as the case may be, shall be entitled to equitable relief, including
injunctive relief and specific performance in the event of any breach of the
provisions of this letter agreement, in addition to all other remedies available
at law or in equity.
In case any provision in or obligation under this letter agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
This letter agreement shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of laws thereof. This
letter agreement may be executed in counterparts, each of which shall be deemed
an original, but all of which together constitute one and the same instrument.
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If you agree with the foregoing, please sign and return two copies of
this letter agreement, which will constitute our agreement with respect to the
subject matter of this letter agreement.
Very truly yours,
S/M REAL ESTATE FUND VII, LTD.
By: SM7 Apartment Investors, Inc.
Its: General Partner
By:
-----------------------------------
Name: Kenneth L. Zakin
Title: President
Confirmed and agreed to as of
the date first above written:
PEACHTREE PARTNERS
By: /s/ Ira J. Gaines
-----------------------------------
Name: Ira J. Gaines
Title: President
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