<PAGE> 1
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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
----------------------
BALCOR EQUITY PENSION INVESTORS - I
(Name of Subject Company)
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
BEATTIE PLACE LLC
METROPOLITAN ACQUISITION VII, L.L.C.
MAP VII ACQUISITION CORPORATION
INSIGNIA FINANCIAL GROUP, INC.
(Bidders)
TAX-EXEMPT LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
----------------------
copy to:
Edward J. Schneidman John A. Healy
Mayer, Brown & Platt Jeffrey P. Cohen
190 South LaSalle Street Rogers & Wells
Chicago, Illinois 60603 200 Park Avenue
(312) 782-0600 New York, New York 10166
(212) 872-8000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
CALCULATION OF FILING FEE
================================================================================
Transaction Valuation* Amount of Filing Fee
- - - --------------------------------------------------------------------------------
$20,616,200 $4,123.24
================================================================================
* For purposes of calculating the filing fee only. This amount assumes the
purchase of 103,081 Tax-Exempt Limited Partnership Interests ("Tax-Exempt
Interests") of the subject company at $200 in cash per Interest.
[ ] 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:
Form or Registration Number:
Filing Party:
Date Filed:
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject partnership is Balcor Equity Pension
Investors - I, an Illinois limited partnership (the "Partnership"), which has
its principal executive offices at 2355 Waukegan Road, Bannockburn, Illinois
60015. Capitalized terms used in this Schedule 14D-1 and not defined herein
shall have the meanings set forth in the Offer to Purchase dated May 20, 1996
(the "Offer to Purchase"), a copy of which is filed as Exhibit (a)(1) to this
Schedule 14D-1.
(b) The information set forth in the "Introduction" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Purpose and Effects of the Offer -
Effect on Trading Market; Registration Under Section 12(g) of the Exchange Act"
of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information set forth in "Introduction" and "Certain
Information Concerning the Purchaser, Beattie Place, Metropolitan, MAP and
Insignia" of the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, none of the Purchaser, Beattie Place,
Metropolitan, MAP, Insignia, nor to the best of their knowledge, any of the
individuals listed in "Certain Information Concerning the Purchaser, Beattie
Place, Metropolitan, MAP and Insignia" of the Offer to Purchase has (i) been
convicted in a criminal proceeding or (ii) been 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 future violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Certain Information Concerning the
Purchaser, Beattie Place, Metropolitan, MAP and Insignia" and "Background of
the Offer" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "Source and Amount of Funds" of the
Offer to Purchase is incorporated herein by reference.
(b)-(c) None.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in "Purpose and Effects of the Offer"
and "Future Plans" of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction" and in "Certain
Information Concerning the Purchaser, Beattie Place, Metropolitan, MAP and
Insignia" of the Offer to Purchase is incorporated herein by reference.
2
<PAGE> 3
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information contained in "Introduction," "Purpose and Effects of the
Offer," "Future Plans" and "Background of the Offer" of the Offer to Purchase
is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and "Certain Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Certain Information Concerning the
Purchaser, Beattie Place, Metropolitan, MAP and Insignia" to the Offer to
Purchase is incorporated herein by reference.
This incorporation by reference herein of the above referenced financial
information does not constitute an admission that such information is material
to a decision by a Limited Partner whether to sell, tender or hold Tax- Exempt
Interests being sought in this tender offer.
Since none of the Purchaser, Beattie Place, Metropolitan or MAP is subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended, and since audited financial statements for such parties is not
available or obtainable without unreasonable cost or expense, the financial
statements of the Purchaser, Beattie Place, Metropolitan and MAP included in
the Offer to Purchase are unaudited.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(d) The information set forth in "Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase and the related
Letter of Acceptance, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, and which are incorporated herein in their entirety
by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
99.(a)(1) Offer to Purchase dated May 20, 1996.
99.(a)(2) Letter of Acceptance and related Instructions.
99.(a)(3) Form of Letter to Limited Partners dated May 20, 1996.
99.(a)(4) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
99.(a)(5) Form of Summary Advertisement published in The New York Times on
May 20, 1996.
99.(b) None.
3
<PAGE> 4
99.(c)(1) Agreement Between Walton Street Capital Acquisition Co. II,
L.L.C. and Beattie Place LLC dated as of May 16, 1996.
99.(c)(2) Agreement as to Other Partnerships, dated as of November 20,
1995.
99.(c)(3) Operating Agreement of Metropolitan, dated as of February 29,
1996.
99.(c)(4) Form of Disposition Support Agreement
99.(d) None.
99.(e)-(f) Not Applicable.
4
<PAGE> 5
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 20, 1996. WALTON STREET CAPITAL ACQUISITION CO.
II, L.L.C.
By:/s/ William J. Abrams
-----------------------------------
William J. Abrams
Manager
BEATTIE PLACE LLC
By: MAP VII Acquisition Corporation,
its managing member
By:/s/ Jeffrey L. Goldberg
-----------------------------------
Jeffrey L. Goldberg
Vice President
METROPOLITAN ACQUISITION VII, L.L.C.
By: MAP VII Acquisition Corporation,
its managing member
By:/s/ Jeffrey L. Goldberg
-----------------------------------
Jeffrey L. Goldberg
Vice President
MAP VII ACQUISITION CORPORATION
By:/s/ Jeffrey L. Goldberg
-----------------------------------
Jeffrey L. Goldberg
Vice President
INSIGNIA FINANCIAL GROUP, INC.
By:/s/ Frank M. Garrison
-----------------------------------
Frank M. Garrison
Executive Managing Director
<PAGE> 6
EXHIBIT INDEX
Exhibit Description
99.(a)(1) Offer to Purchase dated May 20, 1996
99.(a)(2) Letter of Acceptance and related Instructions
99.(a)(3) Form of Letter to Limited Partners dated May 20, 1996
99.(a)(4) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
99.(a)(5) Form of Summary Advertisement published in The New York Times on
May 20, 1996.
99.(c)(1) Agreement Between Walton Street Capital Acquisition Co. II,
L.L.C. and Beattie Place LLC dated as of May 16, 1996
99.(c)(2) Agreement as to Other Partnerships, dated as of November 20,
1995
99.(c)(3) Operating Agreement of Metropolitan, dated as of February 29,
1996
99.(c)(4) Form of Disposition Support Agreement
6
<PAGE> 1
EXHIBIT 99.(a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 103,081 OF THE TAX-EXEMPT LIMITED PARTNERSHIP INTERESTS
of
BALCOR EQUITY PENSION INVESTORS - I
at
$200 NET PER TAX-EXEMPT LIMITED PARTNERSHIP INTEREST
by
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
***************************************************************************
* *
* THE OFFER, PRORATION PERIOD, AND WITHDRAWAL RIGHTS WILL EXPIRE AT *
* 12:00 MIDNIGHT, EASTERN TIME, ON JUNE 17, 1996, UNLESS THE OFFER IS *
* EXTENDED. *
* *
***************************************************************************
Walton Street Capital Acquisition Co. II, L.L.C., a Delaware limited
liability company (the "Purchaser"), hereby offers to purchase up to 103,081 of
the class of Limited Partnership Interests which were originally sold to tax-
exempt entities (the "Tax-Exempt Interests") of Balcor Equity Pension Investors
- - - - I, an Illinois limited partnership (the "Partnership"), which are outstanding
as of the Expiration Date (as defined below in "The Offer--1. Terms of the
Offer; Number of Interests; Proration"), at a purchase price of $200 per
Tax-Exempt Interest, net to the seller in cash (the "Purchase Price"), without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase (the "Offer to Purchase") and in the related Letter of Acceptance
(as defined below), as each may be supplemented, modified or amended from time
to time (which together constitute the "Offer"). The Purchaser will pay any
transfer fees charged by the Partnership in connection with transferring
ownership of Tax-Exempt Interests pursuant to the Offer. The Purchase Price
will automatically be reduced by the aggregate amount of distributions per
Tax-Exempt Interest, if any, made or declared by the Partnership after May 1,
1996 and on or prior to the Expiration Date. In addition, if a distribution is
made or declared after the Expiration Date but prior to the date on which the
Purchaser or its assignee pays for tendered Tax-Exempt Interests, the Purchaser
will offset the amount otherwise due to a Limited Partner pursuant to the Offer
in respect of tendered Tax-Exempt Interests which have been accepted for
payment but not yet paid for by the amount of any such distribution. The
103,081 Tax-Exempt Interests sought pursuant to the Offer represent, to the
best knowledge of the Purchaser, approximately 33% of the Tax-Exempt Interests
outstanding as of the date of this Offer. The Purchaser has entered into an
agreement (the "Assignment Agreement") with Beattie Place LLC ("Beattie
Place"), an affiliate of Insignia Financial Group, Inc. ("Insignia"), pursuant
to which, among other things, the Purchaser has assigned to Beattie Place the
right to purchase approximately 16.2% of the Tax-Exempt Interests tendered
pursuant to the Offer.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF TAX-EXEMPT
INTERESTS BEING TENDERED. IF, AS OF THE EXPIRATION DATE, MORE THAN 103,081
TAX-EXEMPT INTERESTS ARE VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN, THE
PURCHASER WILL ONLY ACCEPT FOR PURCHASE ON A PRO RATA BASIS 103,081 TAX-EXEMPT
INTERESTS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN. SEE "THE OFFER--14.
CONDITIONS OF THE OFFER." A LIMITED PARTNER MAY TENDER ANY OR ALL TAX-EXEMPT
INTERESTS OWNED BY SUCH LIMITED PARTNER; HOWEVER TENDERS OF FRACTIONAL
TAX-EXEMPT INTERESTS WILL ONLY BE ACCEPTED IF ALL OF THE TAX-EXEMPT INTERESTS
HELD BY SUCH LIMITED PARTNER ARE TENDERED.
Limited Partners are urged to consider the following factors:
o Although the Purchaser cannot predict the future value of the
Partnership's assets on a per Tax-Exempt Interest basis, the
Purchase Price could be substantially less than the net
proceeds that would be realized on a per Tax-Exempt Interest
basis from a current sale of the properties owned by the
Partnership ("Properties") or that may be realized upon a
future liquidation of the Partnership. The Purchase Price of
$200 is approximately 64% of the Purchaser's estimate of the
net asset value of the Partnership's assets on a per
Tax-Exempt Interest basis of $315, assuming such assets were
to be sold today. See "The Offer -- 12. Determination of
Purchase Price."
o The Purchaser is making the Offer with a view to making a
profit. Accordingly, there may be a conflict between the
desire of the Purchaser to purchase Tax-Exempt Interests at a
low price and the desire of the Limited Partners to sell their
Tax-Exempt Interests at a high price.
o An affiliate of Beattie Place is employed as property manager
for the Properties. Since a liquidation or sale of the
Partnership's assets would result in a decrease or elimination
of the property management fees paid to such affiliate,
Beattie Place will have conflicting interests in deciding how
to vote on future extraordinary transactions affecting the
Partnership. In addition, Walton Street Capital, L.L.C.
("Walton Street"), an affiliate of the Purchaser, has agreed
with Insignia that, subject to any fiduciary duties it may
have, Walton Street will, and will cause certain of its
affiliates to, use their reasonable efforts to cause Insignia
or one of its affiliates to continue to be engaged as the
property manager for the Properties. As a result, it may be
more difficult to replace the affiliate of Insignia as the
property manager.
o If the Purchaser and Beattie Place are successful in acquiring
a significant number of Tax-Exempt Interests pursuant to the
Offer, they will have the right to vote those Tax-Exempt
Interests and thereby significantly influence all voting
decisions with respect to the Partnership, including decisions
concerning liquidation, amendments to the Partnership
Agreement and removal and replacement of Balcor Equity
Partners - I (the "General Partner").
May 20, 1996
<PAGE> 2
IMPORTANT
Any (i) owner of record of Tax-Exempt Interests (a "Limited Partner"),
(ii) beneficial owner, in the case of Tax-Exempt Interests owned by Individual
Retirement Accounts or qualified plans (a "Beneficial Owner"), or (iii) person
who has purchased Tax-Exempt Interests but has not yet been reflected as a
Limited Partner on the books and records of the Partnership (an "Assignee"),
desiring to tender any or all of such person's Tax-Exempt Interests should
either (1) complete and sign the Letter of Acceptance, or a facsimile copy
thereof, in accordance with the instructions in the Letter of Acceptance and
mail or deliver the Letter of Acceptance (or facsimile thereof) and any other
required documents to The Herman Group, Inc. (the "Information
Agent/Depositary"), at the address or facsimile number set forth on the back
cover of this Offer to Purchase, or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. Unless the context requires otherwise, references to Limited
Partners in this Offer to Purchase shall be deemed to also refer to Beneficial
Owners and Assignees. Questions or requests for assistance may be directed to
the Information Agent/Depositary at the address and telephone number set forth
on the back cover of this Offer to Purchase. Requests for additional copies of
this Offer to Purchase, the Letter of Acceptance and other related documents
may be directed to the Information Agent/Depositary.
This Offer is only being made to Limited Partners owning Tax-Exempt
Interests; no offer is made hereby to owners of the class of Limited
Partnership Interests originally sold to taxable investors (collectively, with
the Tax- Exempt Investors, the "Interests").
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF ACCEPTANCE. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO
PURCHASE, THE LETTER OF ACCEPTANCE AND RELATED DOCUMENTS.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1. Terms of the Offer; Number of Interests; Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. Acceptance for Payment and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Procedures for Tendering Tax-Exempt Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
o Valid Tender of Tax-Exempt Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
o Signature Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
o Back-up Federal Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
o FIRPTA Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
o Appointment as Proxy; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
o Assignment of Entire Interest in the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 9
o Determination of Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
o Assignee Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Extension of Tender Period; Termination; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Federal Income Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
o Consequences to a Tendering Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
o Consequences to a Non-Tendering Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 13
o Consequences to a Tax-Exempt Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. Purpose and Effects of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
o Purpose of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
o Certain Restrictions on Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
o Effect on Trading Market; Registration Under Section 12(g)
of the Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
o Potential Control of Limited Partners' Voting Decisions by the
Purchaser and Beattie Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. Future Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9. Certain Information Concerning the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
o General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
o Selected Financial and Property-Related Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
o Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
o Operating Budgets of the Partnership's Properties . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. Certain Information Concerning the Purchaser, Beattie Place, Metropolitan, MAP and Insignia. . . . . . . . 23
o The Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
o Beattie Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
o Metropolitan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
o MAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
o Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11. Background of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12. Determination of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13. Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14. Conditions of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15. Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
o Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
o State Anti-takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
o ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
o Margin Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
o Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
16. Certain Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
i
<PAGE> 4
To the Holders of Tax-Exempt Limited Partnership Interests of
Balcor Equity Pension Investors - I:
INTRODUCTION
Walton Street Capital Acquisition Co. II, L.L.C., a Delaware limited
liability company (the "Purchaser"), hereby offers to purchase up to 103,081 of
the class of Limited Partnership Interests which were originally sold to tax-
exempt entities (the "Tax-Exempt Interests") of Balcor Equity Pension Investors
- - - - I, an Illinois limited partnership (the "Partnership"), issued pursuant to
the Amended and Restated Agreement of Limited Partnership dated as of September
30, 1983, as amended (the "Partnership Agreement"), which are outstanding as of
the Expiration Date (as defined in "The Offer--1. Terms of the Offer; Number of
Interests; Proration,") at a purchase price of $200 per Tax-Exempt Interest,
net to the seller in cash (the "Purchase Price"), without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in the related Letter of Acceptance (the "Letter of
Acceptance"), as each may be supplemented, modified or amended from time to
time (which together constitute the "Offer"). The Purchaser has entered into
an agreement (the "Assignment Agreement") with Beattie Place LLC ("Beattie
Place") pursuant to which, among other things, the Purchaser has assigned to
Beattie Place the right to purchase approximately 16.2% of the Tax-Exempt
Interests tendered pursuant to the Offer. Beattie Place is an affiliate of
Insignia Financial Group, Inc. ("Insignia"). Other affiliates of Insignia act
as property manager for the properties owned by the Partnership (the
"Properties"). See "The Offer -- 10. Certain Information Concerning the
Purchaser, Beattie Place, Metropolitan, MAP and Insignia." The Purchase Price
will automatically be reduced by the aggregate amount of distributions made or
declared by the Partnership after May 1, 1996 and on or prior to the Expiration
Date. In addition, if a distribution is made or declared after the Expiration
Date but prior to the date on which the Purchaser or its assignee pays for
tendered Tax-Exempt Interests, the Purchaser will offset the amount otherwise
due to a Limited Partner pursuant to the Offer in respect of tendered
Tax-Exempt Interests which have been accepted for payment but not yet paid for
by the amount of any such distribution. The Offer is not conditioned upon a
minimum number of Tax- Exempt Interests being tendered.
The Purchaser is making this Offer because it believes that the
Tax-Exempt Interests represent an attractive investment at the price offered.
There can be no assurance, however, that the Purchaser's judgment is correct,
and, as a result, ownership of Tax-Exempt Interests (either by the Purchaser or
Limited Partners who retain their Tax-Exempt Interests) will remain a
speculative investment. The Purchaser is acquiring the Tax-Exempt Interests
for investment purposes and does not intend to change current management or the
operations of the Partnership and has no current plans for any extraordinary
transaction involving the Partnership.
Factors to be considered by Limited Partners. In considering the
Offer, Limited Partners should consider the following factors:
* PURCHASE PRICE DOES NOT EQUAL LIQUIDATION VALUE. Although the
Purchaser cannot predict the future value of the Partnership's
assets on a per Tax-Exempt Interest basis, the Purchase Price
could be substantially less than the net proceeds that would
be realized on a per Tax-Exempt Interest basis from a current
sale of the Properties or that may be realized upon a future
liquidation of the Partnership. The Purchase Price of $200 is
approximately 64% of the Purchaser's estimate of the net asset
value of the Partnership's assets on a per Tax-Exempt Interest
basis of $315, assuming such assets were to be sold today.
See "The Offer -- 12. Determination of Purchase Price."
However, the ability to receive cash quickly may be attractive
to certain Limited Partners.
* NO RELIANCE ON INDEPENDENT VALUATION OF TAX-EXEMPT INTERESTS.
The Purchaser has made its own independent analysis in
establishing the Purchase Price. See "The Offer--12.
Determination of Purchase Price." No independent person has
been retained by the Purchaser to evaluate or render any
opinion with respect to the fairness of the Purchase Price,
and no appraisals have been obtained by the Purchaser of any
of the Properties. When the assets of the Partnership are
ultimately sold, the return to Limited Partners could be
higher or lower than the Purchase Price.
<PAGE> 5
Limited Partners are urged to consider carefully all of the
information contained herein before accepting the Offer.
* GENERAL PARTNER VALUATIONS. Pursuant to a Repurchase Fund (as
defined in the Partnership Agreement), the General Partner
repurchased 647 Interests during 1995 at a total cost of
$176,469. For purposes of the Repurchase Fund, repurchases are
made on a first-come, first-served basis and the total price
paid for all repurchases is limited to 2.5% of cash flow as
defined in the Partnership Agreement. The repurchase price is
equal to 90% of the value of such Limited Partner's interest
in the Partnership, as determined by the Partnership's regular
quarterly valuation, as of the close of the fiscal quarter
immediately preceding the date that the Interests are
repurchased, less any distributions made to Limited Partners
since such valuation date. In addition, the Purchaser
believes that the General Partner has hired Alex. Brown & Sons
Incorporated ("Alex Brown") to value the Tax-Exempt Interests.
Based on oral information provided to the Purchaser by the
General Partner, the Purchaser believes that, on a preliminary
basis, Alex Brown has indicated that the approximate value of
the Tax-Exempt Interests is $308. See "The Offer--11.
Background of the Offer."
* POTENTIAL CONFLICTS OF INTEREST. The Purchaser is making the
Offer with a view to making a profit. Accordingly, there may
be a conflict between the desire of the Purchaser to purchase
Tax-Exempt Interests at a low price and the desire of the
Limited Partners to sell their Tax-Exempt Interests at a high
price. Upon the liquidation of the Partnership, the Purchaser
will benefit to the extent that the amount per Tax-Exempt
Interest it receives in the liquidation exceeds the Purchase
Price, if any. Therefore, Limited Partners might receive more
money if they hold their Tax-Exempt Interests, rather than
tender, and receive proceeds from the liquidation of the
Partnership. Alternatively, Limited Partners may prefer to
receive the Purchase Price now rather than wait for uncertain
future net liquidation proceeds.
* BEATTIE PLACE AND CERTAIN OF ITS AFFILIATES. Beattie Place is
a newly-formed Delaware limited liability company organized by
Metropolitan Acquisition VII, L.L.C. ("Metropolitan") for the
purpose of acquiring Tax-Exempt Interests pursuant to the
Offer. Metropolitan owns 99.9% of the equity interests in
Beattie Place, and MAP VII Acquisition Corporation ("MAP"),
which is the managing member of Beattie Place, owns the
remaining 0.1% interest in Beattie Place. MAP also owns a
9.9% equity interest in, and is the managing member of,
Metropolitan. Each of Beattie Place, Metropolitan and MAP is
controlled by Insignia. Insignia Management Group, L.P.
("IMG") and Insignia Commercial Group, Inc. ("ICG"), each of
which is also an affiliate of Beattie Place and Insignia,
provide property management services to the Partnership.
Walton Street, an affiliate of the Purchaser, has agreed with
Insignia that, subject to any fiduciary duties it may have,
Walton Street will, and will cause certain of its affiliates
to, use their reasonable efforts to cause Insignia or one of
its affiliates to continue to be engaged as the property
manager for the Properties. See "The Offer -- 7. Purpose and
Effects of the Offer." and "The Offer -- 8. Future Plans."
* SUPPORT SERVICES AGREEMENT. In April 1996, Insignia and the
Partnership entered into Disposition Support Agreements (each
a "Support Agreement") with respect to two of the
Partnership's residential properties, pursuant to which among
other things, the Partnership has engaged Insignia to assist
in the marketing of those residential properties in connection
with their proposed sale. However, each Support Agreement
specifically states that Insignia is not authorized to
negotiate on behalf of the Partnership, or bind the
Partnership to, any contract or other agreement of any kind.
Each Support Agreement provides that Insignia will be paid a
fee for its services which is based on the sale price of the
subject Property, but Insignia is only entitled to such
compensation if the Property is sold. See "The Offer--11.
Background of the Offer." Neither the Purchaser
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<PAGE> 6
nor any affiliate of the Purchaser is a party to or would
receive any income from the Support Agreement.
* POTENTIAL VOTING POWER. Limited Partners cannot participate
in the management or control of the Partnership's business and
cannot control either the timing or amount of cash
distributions, or the timing or terms of a sale of the
Partnership's assets, except insofar as the Limited Partners
are entitled to vote as permitted by the Partnership
Agreement. If the maximum number of Tax-Exempt Interests
sought by the Purchaser are tendered and accepted for payment
pursuant to the Offer, the Purchaser will own approximately
24.0% of the total outstanding Interests and Beattie Place
will own approximately 4.6% of the total outstanding
Interests. As a result, the Purchaser and Beattie Place could
be in a position to influence significantly decisions of the
Partnership on which Limited Partners are entitled to vote.
This could effectively (i) prevent non-tendering Limited
Partners from taking actions they desire but that the
Purchaser and Beattie Place oppose and (ii) enable the
Purchaser and Beattie Place to take action desired by them but
opposed by the non-tendering Limited Partners. Under the
Partnership Agreement, Limited Partners holding a majority of
the Interests are entitled to take action with respect to a
variety of matters, including: removal of a general partner;
dissolution of the Partnership; sale of all or substantially
all of the Partnership's assets; and most types of amendments
to the Partnership Agreement. Although the Purchaser and
Beattie Place have no current intentions with regard to any of
these matters, they will vote the Tax-Exempt Interests
acquired pursuant to the Offer in their respective interests,
which may, or may not, be in the best interests of
non-tendering Limited Partners. Except as described elsewhere
in this Offer to Purchase, there is no agreement, arrangement
or understanding, express or implied, between the Purchaser,
Walton Street and their respective affiliates, on the one
hand, and Beattie Place, Insignia and their respective
affiliates, on the other hand, as to how the Tax-Exempt
Interests purchased pursuant to the Offer will be voted. See
"The Offer--Item 8. Future Plans." This does not preclude
any of such persons from deciding to vote together in the
future.
* TAX CONSIDERATIONS. A Limited Partner may recognize gain or
loss on the sale of Tax-Exempt Interests pursuant to the Offer
depending on the specific circumstances of each Limited
Partner. See "The Offer--6. Federal Income Tax
Considerations." The Offer may be attractive to certain
Limited Partners who wish in the future to avoid the expenses,
delays and complications in filing complex income tax returns
which result from an ownership of Tax-Exempt Interests. In
addition, certain Limited Partners who sell 100% of their
Tax-Exempt Interests pursuant to the Offer will no longer be
subject to the passive activity loss limitation with respect
to "suspended" losses attributable to those Tax-Exempt
Interests and, therefore, will be able to utilize fully any
such losses.
* LACK OF TRADING MARKET AND LIQUIDITY. The Form 10-K states:
"There has not been an established public market for Limited
Partnership Interests and it is not anticipated that one will
develop." Although there are some limited resale mechanisms
available to the Limited Partners wishing to sell their Tax-
Exempt Interests, there is no formal trading market for the
Tax-Exempt Interests. Accordingly, Limited Partners who
desire liquidity may wish to consider the Offer. The Offer
affords a significant number of Limited Partners an
opportunity to dispose of their Tax-Exempt Interests for cash,
which alternative otherwise might not be available to them.
However, the Purchase Price is not intended to represent
either the fair market value of a Tax-Exempt Interest or the
fair market value of the Partnership's assets on a per
Tax-Exempt Interest basis.
* SPECULATIVE NATURE OF INTERESTS. The Purchaser believes that
the Tax-Exempt Interests represent an attractive investment at
the Purchase Price. There can be no assurance, however, that
this
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<PAGE> 7
judgment is correct. Ownership of Tax-Exempt Interests will
remain a speculative investment. The Offer provides Limited
Partners with the opportunity to liquidate their Tax-Exempt
Interests and to reinvest the proceeds in other investments
should they desire to do so.
* PURCHASER WILL PAY TRANSFER FEES. The Purchaser will pay
transfer fees, if any, charged by the Partnership in
connection with transferring ownership of Tax-Exempt Interests
pursuant to the Offer. As a result, the Offer provides
Limited Partners with an opportunity to sell their Tax-Exempt
Interests at $200 per Tax-Exempt Interest without the usual
transaction costs or commissions associated with market sales.
Following the completion of the Offer, the Purchaser and Beattie Place
and their respective affiliates may acquire additional Tax-Exempt Interests.
Any such acquisitions may be made through private purchases, through one or
more future tender offers or by any other means deemed advisable, and may be at
prices higher or lower than the price to be paid for the Tax-Exempt Interests
purchased pursuant to the Offer. See "The Offer--8. Future Plans."
The Offer is not conditioned upon any minimum number of Tax-Exempt
Interests being tendered. If more than 103,081 Tax-Exempt Interests are
validly tendered and not withdrawn, the Purchaser will only accept up to
103,081 Tax- Exempt Interests for purchase, on a pro rata basis, subject to the
terms and conditions herein. See "The Offer--14. Conditions of the Offer" for
certain conditions of the Offer. The Purchaser expressly reserves the right,
in its sole discretion and for any reason, to terminate the Offer at any time
and to waive any or all of the conditions of the Offer, although the Purchaser
does not presently intend to waive any such conditions. See "The Offer--7.
Purpose and Effects of the Offer -- Certain Restrictions on Transfer of
Interests." A Limited Partner may tender any or all of his or her Tax-Exempt
Interests; however tenders of fractional Tax-Exempt Interests will only be
accepted if all the Tax- Exempt Interests held by such Limited Partner are
tendered.
As described above, Insignia has been engaged by the Partnership under
one or more Support Agreements to assist in the marketing of the residential
properties owned by the Partnership. In such capacity, Insignia has been
provided by the General Partner with its asking price for the possible sale of
each such property. These prices do not necessarily represent the fair market
value of the property, and there can be no assurance the property can be sold
at these prices or in the near term or at all. The Purchaser and Insignia are
also unable to assess the likelihood of a sale of any such property to any
party at this time. The asking price provided by the General Partner to
Insignia for Oxford Hills is $23,500,000; and for Oxford Square is $11,500,000.
According to Partnership's Annual Report on Form 10-K for the year
ended December 31, 1995 (the "Form 10-K") filed with the Securities and
Exchange Commission (the "Commission"), there were 359,229 Interests issued and
outstanding, held of record by approximately 19,950 Limited Partners. The
Purchaser does not directly or indirectly own any Interests. Market Ventures
L.L.C., which is an affiliate of Beattie Place and Insignia, owns 317.10
Interests. Included in the number of Interests owned by Market Ventures L.L.C.
are 19.1 Tax-Exempt Interests which it purchased in the secondary market
through The Chicago Partnership Board on March 21, 1996, at a purchase price of
$161 per Tax-Exempt Interest.
Except as otherwise indicated, information contained in this Offer to
Purchase is based upon documents and reports publicly filed by the Partnership
with the Commission. Although the Purchaser has no information that any
statements contained in this Offer to Purchase are untrue, the Purchaser does
not take responsibility for the accuracy or completeness of any information
contained in this Offer to Purchase which is derived from such public
documents, or for any failure by the Partnership to disclose events which may
have occurred and may affect the significance or accuracy of any such
information but which are unknown to the Purchaser.
Each Limited Partner must make his or her own decision based on his or
her particular circumstances. Limited Partners should consult with their
respective advisors about the financial, tax, legal and other implications
4
<PAGE> 8
to them of accepting the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER
TO PURCHASE, THE RELATED LETTER OF ACCEPTANCE AND THE OTHER ACCOMPANYING
MATERIALS CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR TAX-EXEMPT
INTERESTS.
THE OFFER
1. TERMS OF THE OFFER; NUMBER OF INTERESTS; PRORATION.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept and purchase up to 103,081
Tax- Exempt Interests that are validly tendered on or prior to the Expiration
Date (as hereafter defined) and not properly withdrawn in accordance with the
procedures set forth in "--4. Withdrawal Rights." Pursuant to the Assignment
Agreement, the Purchaser has assigned to Beattie Place the right to purchase
approximately 16.2% of the Tax-Exempt Interests tendered pursuant to the Offer;
however, such assignment does not relieve the Purchaser of its obligations
under the Offer or prejudice the rights of tendering Limited Partners to
receive payment for Tax-Exempt Interests validly tendered and accepted for
payment pursuant to the Offer.
As used herein, the term "Expiration Date" shall mean 12:00 midnight,
Eastern Time, on June 17, 1996, unless the Purchaser, 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 at which
the Offer, as so extended by the Purchaser, shall expire. For a discussion of
the Purchaser's right to extend the period of time during which the Offer is
open and to amend, delay or terminate the Offer, see "--5. Extension of Tender
Period; Termination; Amendment."
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER INCREASES OR DECREASES
THE CONSIDERATION OFFERED TO LIMITED PARTNERS PURSUANT TO THE OFFER, SUCH
INCREASED OR DECREASED CONSIDERATION WILL BE PAID FOR ALL TAX-EXEMPT INTERESTS
ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT THE TAX-EXEMPT
INTERESTS WERE TENDERED PRIOR TO THE INCREASE OR DECREASE IN CONSIDERATION.
If more than 103,081 Tax-Exempt Interests are validly tendered on or
prior to the Expiration Date and not properly withdrawn on or prior to the
Expiration Date, the Purchaser will only accept for payment, upon the terms and
subject to the conditions of the Offer, and pay for an aggregate of 103,081
Tax-Exempt Interests so tendered, pro rata according to the number of
Tax-Exempt Interests validly tendered and not properly withdrawn on or prior to
the Expiration Date, with appropriate adjustments to minimize purchases of
fractional Tax-Exempt Interests. If the number of Tax-Exempt Interests validly
tendered and not properly withdrawn on or prior to the Expiration Date is less
than or equal to 103,081 Tax-Exempt Interests, the Purchaser will purchase all
Tax-Exempt Interests so tendered and not properly withdrawn, upon the terms and
subject to the conditions of the Offer.
In the event that proration of tendered Tax-Exempt Interests is
required, and because of the difficulty of determining the proration results,
the Purchaser may not be able to announce the final results of such proration
until at least approximately seven business days after the Expiration Date.
Subject to the Purchaser's obligation under Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay Limited Partners
the Purchase Price in respect of Tax-Exempt Interests tendered or return those
Tax-Exempt Interests promptly after the termination or withdrawal of the Offer,
the Purchaser does not intend to pay for any Tax-Exempt Interests accepted for
payment pursuant to the Offer until the final proration results are known. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Eastern Time, and any time period of business
days will be computed in accordance with Rule 14d- 1(c)(6) under the Exchange
Act.
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<PAGE> 9
The Offer is conditioned on satisfaction of certain conditions. See
"--14. Conditions of the Offer." The Purchaser reserves the right (but in no
event shall be obligated), in its sole discretion, to terminate the Offer at
any time and to waive in whole at any time or in part from time to time 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 Tax-Exempt Interests tendered and
terminate the Offer, (ii) waive all the then unsatisfied conditions, subject to
complying with applicable rules and regulations of the Commission, and purchase
all Tax-Exempt Interests validly tendered and not properly withdrawn, (iii)
extend the Offer and, subject to the right of Limited Partners to withdraw
Tax-Exempt Interests until the Expiration Date, retain the Tax-Exempt Interests
that have been tendered during the period or periods for which the Offer is
extended or (iv) amend the Offer.
The General Partner has provided the Purchaser with a list of the
Limited Partners and this Offer to Purchase, the related Letter of Acceptance
and, if required, any other relevant materials are being mailed to the Limited
Partners, Beneficial Owners and Assignees who hold Tax-Exempt Interests, to the
extent their names and addresses are on this list.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will purchase, by accepting for payment,
and will pay for all Tax-Exempt Interests validly tendered and not properly
withdrawn on or prior to the Expiration Date as promptly as practicable after
the Expiration Date. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Tax-Exempt Interests pending receipt of any
regulatory or governmental approvals specified in "--15. Certain Legal Matters"
or pending receipt of any additional documentation required by the Letter of
Acceptance.
In all cases, payment for Tax-Exempt Interests accepted for payment
pursuant to the Offer will be made only after timely receipt by the Information
Agent/Depositary of (a) the Letter of Acceptance (or facsimile thereof)
properly completed and duly executed, with any required signature guarantees,
if applicable, and (b) any other documents required by the Letter of
Acceptance.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Tax-Exempt Interests validly
tendered and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Information Agent/Depositary of the Purchaser's acceptance of
such Tax-Exempt Interests for payment pursuant to the Offer. No tender of
Tax-Exempt Interests will be deemed to have been validly made until all defects
and irregularities with respect to such tender have been cured or waived. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Tax-Exempt Interests purchased pursuant to the Offer will be made by
deposit of the Purchase Price therefor with the Information Agent/Depositary,
which will act as agent for tendering Limited Partners for the purpose of
receiving payments from the Purchaser and transmitting such payments to validly
tendering Limited Partners.
The Purchase Price will automatically be reduced by the aggregate
amount of distributions per Tax-Exempt Interest, if any, made or declared by
the Partnership after May 1, 1996 and on or prior to the Expiration Date. In
addition, if a distribution is made or declared after the Expiration Date but
prior to the date on which the Purchaser or its assignee pays for tendered
Tax-Exempt Interests, the Purchaser will offset the amount otherwise due to a
Limited Partner pursuant to the Offer in respect of tendered Tax-Exempt
Interests which have been accepted for payment but not yet paid for by the
amount of any such distribution. UNDER NO CIRCUMSTANCES WILL THE PURCHASER PAY
INTEREST ON THE PURCHASE PRICE FOR TAX-EXEMPT INTERESTS.
If any tendered Tax-Exempt Interests are not purchased pursuant to the
Offer for any reason, the Letter of Acceptance with respect to such Tax-Exempt
Interests will be destroyed by the Information Agent/Depositary
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<PAGE> 10
and the tendering Limited Partner will be so notified. If, for any reason
whatsoever, acceptance for payment of or payment for any Tax-Exempt Interests
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Tax-Exempt Interests tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights set forth herein, the
Information Agent/Depositary may, nevertheless, on behalf of the Purchaser and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Tax-Exempt
Interests, and such Tax-Exempt Interests may not be withdrawn except to the
extent that the tendering Limited Partner is entitled to withdrawal rights as
described in "--4. Withdrawal Rights."
In addition to the assignment already made by the Purchaser to Beattie
Place with respect to approximately 16.2% of the Tax-Exempt Interests pursuant
to the Assignment Agreement, the Purchaser and Beattie Place each reserves the
right to transfer or assign, in whole or from time to time in part, to one or
more of its respective subsidiaries or affiliates the right to purchase
Tax-Exempt Interests tendered pursuant to the Offer. Neither the assignment to
Beattie Place nor any other transfer or assignment pursuant to the preceding
sentence will relieve the Purchaser of its obligations under the Offer or
prejudice the rights of tendering Limited Partners to receive payment for
Tax-Exempt Interests validly tendered and accepted for payment pursuant to the
Offer.
3. PROCEDURES FOR TENDERING TAX-EXEMPT INTERESTS
VALID TENDER OF TAX-EXEMPT INTERESTS. Except as set forth below, for
Tax-Exempt Interests to be validly tendered pursuant to the Offer, the Letter
of Acceptance (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, if applicable, and any other
documents required by the Letter of Acceptance, must be received by the
Information Agent/Depositary at one of its addresses 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 Tax-Exempt Interests owned by such Limited
Partner; however tenders of fractional interests will only be accepted if all
of the Tax-Exempt Interests held by such Limited Partner are tendered. See
Instruction 2 to the Letter of Acceptance.
THE METHOD OF DELIVERY OF THE LETTER OF ACCEPTANCE AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING LIMITED
PARTNER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE INFORMATION AGENT/DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ENSURE TIMELY DELIVERY. SEE INSTRUCTION 1 TO THE LETTER OF
ACCEPTANCE.
IN ORDER FOR A TENDERING LIMITED PARTNER TO PARTICIPATE IN THE OFFER,
TAX-EXEMPT INTERESTS MUST BE VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR
TO THE EXPIRATION DATE, WHICH IS 12:00 MIDNIGHT, EASTERN TIME, ON JUNE 17,
1996, UNLESS EXTENDED BY THE PURCHASER IN ITS SOLE DISCRETION.
NOTWITHSTANDING ANY OTHER PROVISION HEREOF, PAYMENT FOR TAX-EXEMPT
INTERESTS ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER WILL IN ALL CASES BE MADE
ONLY AFTER TIMELY RECEIPT BY THE INFORMATION AGENT/DEPOSITARY OF A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF ACCEPTANCE (OR A FACSIMILE THEREOF),
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, AND ANY OTHER DOCUMENTS
REQUIRED BY THE LETTER OF ACCEPTANCE.
SIGNATURE GUARANTEES. If the Tax-Exempt Interests are registered in
the name of the signer of the Letter of Acceptance and payment is to be made
directly to such registered holder, then no signature guarantees are required.
However, if the Tax-Exempt Interests are registered in the name of a person
other than the signer of the Letter of Acceptance, or if payment is to be made
to a person other than the registered holder, then the signature on the Letter
of Acceptance must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. (the "NASD") 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 as provided in the Letter of Acceptance. See
Instruction 2 of the Letter of Acceptance.
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<PAGE> 11
BACK-UP FEDERAL TAX WITHHOLDING. To prevent back-up federal income
tax withholding on payments made to certain Limited Partners with respect to
the Purchase Price of Tax-Exempt Interests purchased pursuant to the Offer,
each Limited Partner tendering Tax-Exempt Interests must provide the
Information Agent/Depositary with such Limited Partner's correct taxpayer
identification number or social security number and certify that such Limited
Partner is not subject to back-up federal income tax withholding by completing
the Substitute Form W-9 on the reverse side of the Letter of Acceptance. See
Instruction 4 of the Letter of Acceptance.
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax
in an amount up to 10% of the Purchase Price plus Partnership liabilities
allocable to each Tax-Exempt Interest purchased, each Limited Partner must
complete the FIRPTA Affidavit included in the Letter of Acceptance certifying
the Limited Partner's taxpayer identification number and address and that the
Limited Partner is not a foreign person. See Instruction 4 of the Letter of
Acceptance and "--6. Federal Income Tax Considerations."
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing and delivering
the Letter of Acceptance, a tendering Limited Partner irrevocably appoints the
Purchaser and designees of the Purchaser and each of them as such Limited
Partner's proxies, with full power of substitution, in the manner set forth in
the Letter of Acceptance, each with full power of substitution, to the full
extent of such Limited Partner's rights with respect to the Tax-Exempt
Interests tendered by such Limited Partner and accepted for payment by the
Purchaser (and with respect to any and all other Tax- Exempt Interests or other
securities issued or issuable in respect of such Tax-Exempt Interests on or
after the date hereof). All such proxies shall be considered irrevocable and
coupled with an interest in the tendered Tax-Exempt Interests. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts such Tax-Exempt Interests for payment. Upon such acceptance for
payment, all prior proxies given by such Limited Partner with respect to such
Tax-Exempt Interests (and such other Tax-Exempt Interests and securities) will
be revoked without further action, and no subsequent proxies may be given nor
any subsequent written consents executed (and, if given or executed, will not
be deemed effective). The Purchaser and its designees will, with respect to
the Tax-Exempt Interests (and such other Tax-Exempt Interests and securities)
for which such appointment is effective, be empowered to exercise all voting
and other rights of such Limited Partner as they in their sole discretion may
deem proper at any meeting of Limited Partners or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for
Tax-Exempt Interests to be deemed validly tendered, immediately upon the
Purchaser's payment for such Tax-Exempt Interests, the Purchaser must be able
to exercise full voting rights with respect to such Tax-Exempt Interests and
other securities, including voting at any meeting of Limited Partners.
By executing and delivering the Letter of Acceptance, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
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 Tax-Exempt Interests tendered by the Limited Partner and accepted for
payment by the Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts the tendered Tax-Exempt Interests for
payment. Upon such acceptance for payment, all prior powers of attorney
granted by the Limited Partner with respect to such Tax-Exempt Interests will,
without further action, be revoked, and no subsequent powers of attorney may be
granted (and if granted will not be effective). Pursuant to such appointment
as attorneys-in-fact, the Purchaser and its designees each will have the power,
among other things, (i) to seek to transfer ownership of such Tax-Exempt
Interests on the Partnership books maintained by the transfer agent and
registrar for the Partnership (and execute and deliver any accompanying
evidences of transfer and authenticity any of them may deem necessary or
appropriate in connection therewith, including, without limitation, a
"Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) upon receipt by the Information Agent/Depositary (as the
tendering Limited Partner's agent) of the Purchase Price, to become a
substitute Limited Partner, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Tax-Exempt
Interests in accordance with the terms of the Offer, (iii) to execute and
deliver to the General Partner a change of address form instructing the General
Partner to send any and all future distributions to which the Purchaser is
entitled pursuant to the terms of the Offer in respect of tendered Tax-Exempt
Interests
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<PAGE> 12
to the address specified in such form, and (iv) to endorse any check payable to
or upon the order of such Limited Partner representing a distribution to which
the Purchaser is entitled pursuant to the terms of the Offer, in each case on
behalf of the tendering Limited Partner.
ASSIGNMENT OF ENTIRE INTEREST IN THE PARTNERSHIP. By executing and
delivering the Letter of Acceptance, a tendering Limited Partner irrevocably
assigns to the Purchaser and its assigns all of the right, title and interest
of such Limited Partner in the Partnership with respect to the Tax-Exempt
Interests tendered and purchased pursuant to the Offer, including, without
limitation, such Limited Partner's right, title and interest in and to any and
all distributions made by the Partnership after the Expiration Date in respect
of the Tax-Exempt Interests tendered by such Limited Partner and accepted for
payment by the Purchaser, regardless of the fact that the record date for any
such distribution may be a date prior to the Expiration Date. The Purchaser
and Beattie Place will seek to be admitted to the Partnership as substitute
Limited Partners upon consummation of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents
and validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Tax-Exempt Interests will be determined by the
Purchaser, in its sole discretion, whose determination shall be final and
binding on all parties. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form, or the acceptance
of or payment for which may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in any tender of
Tax-Exempt Interests of any particular Limited Partner whether or not similar
defects or irregularities are waived in the case of other Limited Partners.
ASSIGNEE STATUS. Assignees must provide documentation to the
Information Agent/Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an assignee of a Tax-Exempt Interest.
The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Acceptance and the instructions thereto) will be
final and binding. No tender of Tax-Exempt Interests will be deemed to have
been validly made until all defects and irregularities with respect to such
tender have been cured or waived. None of the Purchaser, Beattie Place, any of
their respective affiliates or assigns, if any, the Information
Agent/Depositary or any other person will be under any duty to give any
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
The Purchaser's acceptance for payment of Tax-Exempt Interests
tendered pursuant to the procedures described above will constitute a binding
agreement between the tendering Limited Partner and the Purchaser upon the
terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided herein, tenders of Tax-Exempt Interests
made pursuant to the Offer are irrevocable. Tax-Exempt Interests tendered
pursuant to the Offer may be withdrawn at any time on or prior to the
Expiration Date and, unless theretofore accepted for payment as provided
herein, may also be withdrawn at any time after July 18, 1996. If, for any
reason whatsoever, acceptance for payment of any Tax-Exempt Interests tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for Tax-Exempt Interests tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Information
Agent/Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Tax-Exempt Interests and such Tax-Exempt Interests may not be withdrawn except
to the extent that the tendering Limited Partner is entitled to and duly
exercises withdrawal rights as described herein. Any such delay will be by an
extension of the Offer to the extent required by law.
The reservation by the Purchaser of the right to delay the acceptance
or purchase of or payment for Tax-Exempt Interests is subject to the provisions
of Rule 14e-1(c) under the Exchange Act, which requires the Purchaser
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to pay the consideration offered or return Tax-Exempt Interests tendered by or
on behalf of Limited Partners' promptly after the termination or withdrawal of
the Offer.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Information
Agent/Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name(s) of the
person(s) who tendered the Tax-Exempt Interests to be withdrawn, the number of
Tax-Exempt Interests to be withdrawn and the name(s) of the registered
holder(s) of the Tax- Exempt Interests, if different from that of the person(s)
who tendered such Tax-Exempt Interests. Such notice of withdrawal must also be
signed by the same person(s) who signed the Letter of Acceptance in the same
manner as the Letter of Acceptance was signed (including any signature
guarantees, if applicable). If the Tax-Exempt Interests are held in the name
of two or more persons, all such persons must sign the notice of withdrawal.
Any Tax-Exempt Interests properly withdrawn will be deemed not validly tendered
for purposes of the Offer, but may be re-tendered at any subsequent time prior
to the Expiration Date by following the procedures described in "--3.
Procedures for Tendering Tax-Exempt Interests."
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, any of its affiliates or assigns, if any, the Information
Agent/Depositary or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser reserves the right, at any time or from time to time, in
its sole discretion and regardless of whether or not any of the conditions
specified under "--14. Conditions of the Offer" shall have been satisfied, (i)
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Tax-Exempt Interests by
giving oral or written notice of such extension to the Information
Agent/Depositary and by making a public announcement of such extension, (ii) to
terminate the Offer and not accept for payment any Tax-Exempt Interests not
already accepted for payment or paid for or (iii) to amend the Offer in any
respect by making a public announcement of such amendment. There can be no
assurance that the Purchaser will exercise its right to extend or amend the
Offer.
If the Purchaser increases or decreases either the number of
Tax-Exempt Interests being sought or the consideration to be paid for any
Tax-Exempt Interests pursuant to the Offer and the Offer is scheduled to expire
at any time before the expiration of a period of 10 business days from, and
including, the date that notice of such increase or decrease is first
published, sent or given in the manner specified below, the Offer will be
extended until, at a minimum, the expiration of such period of 10 business
days. If the Purchaser makes a material change in the terms of the Offer
(other than a change in price or percentage of securities sought) or in the
information concerning the Offer, or waives a material condition of the Offer,
the Purchaser will extend the Offer, if required by applicable law, for a
period sufficient to allow Limited Partners to consider the amended terms of
the Offer.
The Purchaser also reserves the right, in its sole discretion, in the
event any of the conditions specified under "--14. Condition of the Offer"
shall not have been satisfied and so long as Tax-Exempt Interests have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for Tax-Exempt
Interests or to terminate the Offer and not accept for payment or pay for
Tax-Exempt Interests.
If the Purchaser extends the period of time during which the Offer is
open, delays acceptance for payment of or payment for Tax-Exempt Interests or
is unable to accept for payment or pay for Tax-Exempt Interests pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Information Agent/Depositary may, on behalf of the Purchaser,
retain all Tax-Exempt Interests tendered, and such Tax-Exempt Interests may not
be withdrawn except as otherwise provided under "--4. Withdrawal Rights." The
reservation
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by the Purchaser of the right to delay acceptance for payment of or payment for
Tax-Exempt Interests is subject to applicable law, which requires that the
Purchaser pay the consideration offered or return the Tax-Exempt Interests
deposited by or on behalf of Limited Partners promptly after the termination or
withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed
as promptly as practicable by a public announcement thereof. Without limiting
the manner in which the Purchaser may choose to make any public announcement,
the Purchaser will have no obligation (except as otherwise required by
applicable law) to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service. In
the case of an extension of the Offer, the Purchaser will make a public
announcement of such extension no later than 9:00 a.m., Eastern Time, on the
next business day after the previously scheduled Expiration Date.
6. FEDERAL INCOME TAX CONSIDERATIONS.
The following summary is a general discussion of certain federal
income tax considerations with respect to a sale of Tax-Exempt Interests
pursuant to the Offer. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), final and proposed regulations promulgated
thereunder ("Treasury Regulations"), court decisions and Internal Revenue
Service ("IRS") rulings and positions 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. The following discussion assumes that the
Partnership is treated as a partnership for federal income tax purposes and is
not treated as a "publicly traded partnership" within the meaning of Section
7704 of the Code, and that the Tax-Exempt Interests constitute partnership
interests for federal income tax purposes. 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 specific types of tax-exempt organizations), nor does it discuss
any aspect of state, local, foreign or other tax laws. Sales of Tax-Exempt
Interests pursuant to the Offer will be taxable transactions for federal income
tax purposes, and may also be taxable transactions under applicable state,
local, foreign and other tax laws. A general discussion is provided below with
respect to tax-exempt Limited Partners. EACH LIMITED PARTNER SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
LIMITED PARTNER OF SELLING OR NOT SELLING TAX-EXEMPT INTERESTS PURSUANT TO THE
OFFER. THE PURCHASER HAS HAD VERY LIMITED ACCESS TO TAX INFORMATION FILED BY,
OR OTHERWISE CONTAINED IN THE RECORDS OF, THE PARTNERSHIP AND THE STATEMENTS
CONTAINED HEREIN MAY BE SUBJECT TO CHANGE OR SUPPLEMENTAL DISCUSSION BASED ON A
MORE COMPLETE REVIEW OF SUCH TAX INFORMATION.
CONSEQUENCES TO A TENDERING LIMITED PARTNER. The gain recognized by a
Limited Partner on the sale of a Tax- Exempt Interest should be equal to the
"amount realized" on the sale less the Limited Partner's adjusted tax basis in
the Tax-Exempt Interest. The "amount realized" by such Limited Partner with
respect to the sale of a Tax-Exempt Interest generally will be a sum equal to
the amount of cash received by the Limited Partner pursuant to the Offer (i.e.,
the Purchase Price) plus the amount of the Partnership's liabilities allocable
to the Tax-Exempt Interest (as determined under Code Section 752). As
discussed more fully below, any gain realized by a Limited Partner may possibly
be offset by any "suspended" passive activity losses (e.g., post-1986 suspended
net taxable losses in excess of statutorily provided "phase-in" amounts), if
any, from the Partnership or from other passive activities. In the event the
Limited Partner realizes a loss on the disposition, such loss may be deductible
only to the extent permitted under the passive activity loss rules and other
applicable limitations. If the Limited Partner sells all of his or her Tax-
Exempt Interests (and such Tax-Exempt Interests have not been aggregated for
purposes of the passive loss rules with activities not currently being sold),
any passive activity loss recognized on the sale and any suspended passive
activity losses from the Partnership (to the extent not used to offset any gain
recognized on the sale) will no longer be subject to the passive activity loss
limitation, and therefore should be deductible by such Limited Partner from his
or her other income, subject to any other applicable limitations (including
at-risk
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limitations and tax basis limitations). If more than 103,081 Tax-Exempt
Interests are validly tendered and not withdrawn, most tendering Limited
Partners may not be able to sell all of their Tax-Exempt Interests pursuant to
the Offer because of proration of the number of Tax-Exempt Interests to be
purchased by the Purchaser. See "--1. Terms of the Offer; Number of Interests;
Proration."
Subject to the foregoing, the gain or loss recognized by a Limited
Partner on a sale of Tax-Exempt Interests pursuant to the Offer generally will
be treated as a capital gain or loss if such Tax-Exempt Interests were held by
the Limited Partner as a capital asset and were not deemed held by such Limited
Partner as a "dealer." Such capital gain or loss will be treated as long-term
capital gain or loss if the tendering Limited Partner's holding period for the
Tax- Exempt Interest exceeds one year. Capital losses are deductible only to
the extent of capital gains, except that 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 carry forward period is five years
and a non-corporate taxpayer can carry forward such losses indefinitely); in
addition, corporations are allowed to carry back excess capital losses to the
three preceding taxable years.
If any portion of the amount realized by a Limited Partner is
attributable to "unrealized receivables" (which includes depreciation
recapture) or "substantially appreciated inventory items" as defined in Code
Section 751, then all or a portion of the Limited Partner's gain or loss may be
treated as ordinary income rather than as capital gain. It is possible that
the basis allocation rules of Code Section 751 may result in a Limited
Partner's recognizing ordinary income with respect to such items while
recognizing a larger capital loss with respect to the remainder of the Tax-
Exempt Interest, even though such Limited Partner has an overall loss on the
sale.
In addition, Section 6050K of the Code requires each person who
transfers an interest in a partnership possessing "unrealized receivables" or
"substantially appreciated inventory items" (within the meaning of Code Section
751) to report such transfer to the partnership. If so notified, the
partnership must report the identity of the transferor and transferee to the
Service, together with other information required under applicable Treasury
regulations. Failure by a partner to report a transfer covered by this
provision may result in a penalty of $50 per occurrence. Limited Partners are
advised to consult with their own tax advisors regarding the reporting
requirements under Section 6050K of the Code.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year which does not include
portfolio income (as described below), and closely held corporations may not
offset such losses against so-called portfolio income. Portfolio income
includes interest, dividends, annuities and royalties, unless such income is
derived in the ordinary course of a trade or businesses, less (a) expenses
(other than interest) clearly and directly allocable to such income and (b)
interest expenses properly allocable to such income. For this purpose,
portfolio income also includes any gain or loss from the disposition of
property that produces portfolio income or that is held for investment. To the
extent that such a taxpayer holds a partnership interest in a limited
partnership engaged in one or more activities that produce passive activity
income and one or more activities that produce portfolio income, upon a sale or
other disposition of such taxpayer's partnership interest, a ratable portion of
any gain or loss from such sale or other disposition shall be treated as gain
or loss from the sale or disposition of an interest in each passive activity or
portfolio income activity in which such limited partnership holds an interest.
Such allocation is generally based on the fair market value of each such
passive or portfolio activity, and is made in accordance with applicable
Treasury Regulations. Accordingly, to the extent that the Partnership holds
mortgage loans (or other assets) producing portfolio income, a portion of any
gain (or loss) from the sale of a Tax-Exempt Interest in the Partnership would
be considered as arising from a portfolio income activity, and to the extent
that portfolio gain arises therefrom, such portfolio gain cannot be offset by
current or suspended passive activity losses (except to the extent such passive
activity losses arise from the complete disposition of a passive activity as
described below).
Under passive loss rules, a loss attributable to a passive activity
that is recognized by a Limited Partner upon a sale of a Tax-Exempt Interest
pursuant to the Offer can be currently deducted (subject to other applicable
limitations) to the extent of such Limited Partner's taxable income from the
Partnership for that year (except to the
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extent such income arises from a portfolio income activity), and gain
recognized by a Limited Partner upon such sale (except to the extent that such
gain arises from a portfolio income activity) can be offset by such Limited
Partner's passive activity losses (if any) from the Partnership. Subject to
applicable limitations, if a Limited Partner disposes of all of his or her
Tax-Exempt Interests pursuant to the Offer, such Limited Partner generally will
be able to offset any portfolio income by passive activity losses and will be
able to deduct remaining passive activity losses (if any) from the Partnership
that could not previously be deducted by such Limited Partner due to the
passive loss limitations. If a Limited Partner has grouped together all or a
portion of the investment in his or her Tax-Exempt Interests and any other
passive investment in a rental real estate project under income tax regulations
providing for the grouping of activities under certain circumstances and
disposes of less than substantially all of his or her rental real estate
activities, such Limited Partner generally will not be able to deduct
previously nondeducted passive activity losses attributable to such Tax-Exempt
Interests, until disposing of substantially all of his or her rental real
estate activities.
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
Tax-Exempt Interests sold in accordance with the provisions of the Partnership
Agreement concerning transfers of Interests. Such allocation and cash
distributed, if any, by the Partnership to such Limited Partner for such year
will affect the Limited Partner's adjusted tax basis in the Tax-Exempt Interest
and, therefore, the amount of such Limited Partner's taxable gain or loss upon
a sale of Tax-Exempt Interests pursuant to the Offer.
A taxable Limited Partner (other than corporations and certain foreign
individuals) who tenders Tax-Exempt Interests may be subject to 31% backup
withholding unless the Limited Partner provides its taxpayer identification
number ("TIN") and certifies that the TIN is correct or properly certifies that
such Limited Partner is 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 Letter of Acceptance. 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. See
Instruction 4 to the Letter of Acceptance.
Gain realized by a foreign Limited Partner on a sale of a Tax-Exempt
Interest 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. 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
Letter of Acceptance certifying the Limited Partner's TIN, that such Limited
Partner is not a foreign person and the Limited Partner's address. Amounts
withheld would be creditable against a foreign Limited Partner's federal income
tax liability and, if in excess thereof, a refund may be obtained from the IRS
by filing a U.S. income tax return. Alternatively, if the amount withheld is
less than the Limited Partner's U.S. tax liability, the Limited Partner may be
required to make an additional tax payment. See Instruction 4 to the Letter of
Acceptance.
CONSEQUENCES TO A NON-TENDERING LIMITED PARTNER. The Purchaser does
not anticipate that a Limited Partner who does not tender his or her Tax-Exempt
Interests will realize any material tax consequences as a result of the
election not to tender. However, if as a result of the Offer there is a sale
or exchange of 50% or more of the total Interests in Partnership capital and
profits within a 12 month period, a termination of the Partnership for federal
income tax purposes would occur, and the taxable year of the Partnership would
close. In the case of such a sale or exchange, the properties (subject to
related debt) of the Partnership would be treated as distributed to the
partners, and following the deemed distribution, contribution of the same
properties would be deemed to be made to a new partnership or to an association
taxable as a corporation. The Purchaser has not, however, had access to
complete information concerning assignments of Interests and cannot, therefore,
be certain that the Partnership will not terminate for tax purposes as a result
of sales pursuant to the Offer. The consequences of a termination of the
Partnership could include changes in the methods of depreciation available to
the Partnership for tax purposes, changes in the tax basis of the Partnership's
assets, possible recognition of taxable gain resulting from any deemed
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cash distribution in excess of the non-tendering Limited Partner's tax basis in
his or her Tax-Exempt Interests, and possibly other consequences the extent of
which cannot be determined by the Purchaser without access to the books and
records of the Partnership. In addition, a termination of the Partnership
could cause the Partnership or its assets to become subject to unfavorable
statutory or regulatory changes enacted or issued prior to the termination but
previously not applicable to the Partnership or its assets because of
protective "transitional" rules. The Purchaser has reserved the right not to
purchase Tax-Exempt Interests to the extent such purchase would cause a
termination of the Partnership for federal income tax purposes.
CONSEQUENCES TO A TAX-EXEMPT LIMITED PARTNER. Although certain
entities are generally exempt from federal income taxation, such tax-exempt
entities (including individual retirement accounts (each an "IRA")) are subject
to federal income tax on any "unrelated business taxable income" ("UBTI").
UBTI generally includes, among other things, income (other than, in the case of
property which is not "debt-financed property", interest, dividends, real
property rents not dependent upon income or profits, and gain from disposition
of non-inventory property) derived by certain trusts (including IRAs) from a
trade or business or by certain other tax-exempt organizations from a trade or
business, the conduct of which is not substantially related to the exercise of
such organization's charitable, educational or other exempt purpose and income
to the extent derived from debt-financed property. Subject to certain
exceptions, "debt-financed property" is generally any property which is held to
produce income and with respect to which there is an "acquisition indebtedness"
at any time during the taxable year (or if the property was disposed of during
the taxable year, with respect to which there was an acquisition indebtedness
at any time during the 12 months preceding the date of disposition).
Acquisition indebtedness is generally indebtedness incurred by a tax-exempt
entity directly or through a partnership (i) in acquiring or improving a
property; (ii) before acquiring or improving a property if the indebtedness
would not have been incurred but for such acquisition or improvement; or (iii)
after acquiring or improving a property if the indebtedness would not have been
incurred but for such acquisition or improvement and the incurrence of such
indebtedness was reasonably foreseeable at the time of the acquisition or
improvement. It is unclear from available information to what extent the
Partnership's assets are debt financed or otherwise generate UBTI.
To the extent the Partnership holds debt financed property or
inventory or other assets as a dealer, a tax- exempt Limited Partner (including
an IRA) could realize UBTI on the sale of a Partnership interest. In addition,
a tax- exempt Limited Partner will realize UBTI upon the sale of a Tax-Exempt
Interest, if such Limited Partner held its Partnership interest as inventory or
otherwise as dealer property, or acquired its Tax-Exempt Interest with
acquisition indebtedness. However, any UBTI recognized by a tax-exempt Limited
Partner as a result of a sale of a Tax-Exempt Interest, in general, may be
offset by such Limited Partner's net operating loss carryover (determined
without taking into account any amount of income or deduction which is excluded
in computing UBTI), subject to applicable limitations.
EACH TAX-EXEMPT LIMITED PARTNER SHOULD CONSULT ITS TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING OR NOT
SELLING INTERESTS PURSUANT TO THE OFFER.
7. PURPOSE AND EFFECTS OF THE OFFER.
PURPOSE OF THE OFFER. The purpose of the Offer is to enable the
Purchaser and Beattie Place to acquire a significant interest in the
Partnership for investment purposes based on their expectation that there may
be underlying value in the Properties. Neither the Purchaser nor Beattie Place
intends to change current management or the operation of the Partnership or has
any current plans for any extraordinary transaction involving the Partnership.
If the Purchaser's or Beattie Place's plans with respect to the Partnership
change in the future, the ability of the Purchaser or Beattie Place to
influence actions on which Limited Partners have a right to vote will depend on
the Limited Partner's response to the Offer (i.e., the number of Tax-Exempt
Interests tendered). If the Purchaser and Beattie Place acquire only a few
Tax-Exempt Interests pursuant to the Offer, they would not be in a position to
influence matters over which Limited Partners have a right to vote.
Conversely, if the maximum number of Tax-Exempt Interests sought are tendered
and accepted for payment pursuant to the Offer, the Purchaser
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and Beattie Place will own approximately 28.7% of the outstanding Interests
and, as a result, will be in a position to exert significant control over
matters on which Limited Partners have a right to vote. Except as described
elsewhere in this Offer to Purchase, there is no agreement, arrangement or
understanding, express or implied, between the Purchaser, Walton Street and
their respective affiliates, on the one hand, and Beattie Place, Insignia and
their respective affiliates, on the other hand, as to how the Tax-Exempt
Interests purchased pursuant to the Offer will be voted. See "The Offer--Item
8. Future Plans." This does not preclude any of such persons from deciding to
vote together in the future.
The purchase of the Tax-Exempt Interests will allow the Purchaser and
Beattie Place to benefit from any of the following: (a) any cash distributions
from the operations in the ordinary course of the Partnership; (b) any
distributions of net proceeds from the sale of any Properties; and (c) any
distributions of net proceeds from the liquidation of the Partnership.
CERTAIN RESTRICTIONS ON TRANSFER OF INTERESTS. The Partnership
Agreement provides that the effectiveness of any assignment may be deferred if
the General Partner determines that deferral is necessary for federal income
tax purposes. The Partnership Agreement restricts transfers of Interests if a
transfer would cause a termination of the Partnership for federal income tax
purposes (which termination will occur when 50% or more of the total Interests
in Partnership capital and profits are transferred within a twelve-month
period). Consequently, sales of Interests in the secondary market and in
private transactions during the twelve-month period following completion of the
Offer may be restricted, and the Partnership may not process any requests for
recognition of transfers or substitution of Limited Partners upon a transfer of
Interests during such twelve-month period which the General Partner believes
may cause a tax termination. The Purchaser has, however, taken this
restriction, as well as the number of Interests historically transferred, into
account in determining the number of Tax-Exempt Interests for which the Offer
is made (representing approximately 28.7% of the outstanding Interests) in
order to permit normal historical levels of transfers to occur following the
transfers of Tax-Exempt Interests pursuant to the Offer without violating this
prohibition. Based on information provided by the General Partner, for the
period from May 1, 1995 to April 16, 1996, approximately 6.3% of the Interests
were transferred. The Purchaser does not intend to purchase Tax-Exempt
Interests to the extent such purchase would cause a termination of the
Partnership. See "--1. Terms of the Offer; Number of Interests; Proration."
Non-tendering Limited Partners should consult their own tax advisors regarding
the tax consequences of the Partnership's termination in their particular
situations. See "--6. Federal Income Tax Considerations -- Consequences to a
Non- Tendering Limited Partner."
EFFECT ON TRADING MARKET; REGISTRATION UNDER SECTION 12(G) OF THE
EXCHANGE ACT. If a substantial number of Tax-Exempt Interests are purchased
pursuant to the Offer, the result will be a reduction in the number of Limited
Partners. In the case of certain kinds of equity securities like the
Tax-Exempt Interests, a reduction in the number of securityholders might be
expected to result in a reduction in the liquidity and volume of activity in
the trading market for the security. There is no established trading market
for the Tax-Exempt Interests. The Form 10-K states: "There has not been an
established public market for Limited Partnership Interests and it is not
anticipated that one will develop." Therefore, the Purchaser does not believe
a reduction in the number of Limited Partners will materially further restrict
the Limited Partners' ability to find purchasers for their Tax-Exempt Interests
through secondary market transactions.
Partnership Profiles, Inc. tracks recent trades in certain limited
partnership interests. The most recent issue of the Partnership Spectrum
(January/February, 1996) indicates that 1,180 Tax-Exempt Interests traded in
the period December 1, 1995 through January 31, 1996 at per Tax-Exempt Interest
prices between $135 and $175 per Tax-Exempt Interest with a weighted average
price of $159 per Tax-Exempt Interest.
All of the Interests currently are registered under Section 12(g)
under the Exchange Act, which means, among other things, that the Partnership
is required to file periodic reports with the Commission and to comply with the
Commission's proxy rules. The Purchaser does not expect or intend that
consummation of the Offer will cause the Partnership to cease its registration
from under Section 12(g) of the Exchange Act. If the number of holders
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of record were to become fewer than 300 persons, the Partnership could apply to
de-register under the Exchange Act. Because of the large number of record
holders, however, the Purchaser expects that even if it purchases the maximum
number of Tax-Exempt Interests in the Offer, there will continue to be
substantially more than 300 holders of record.
POTENTIAL CONTROL OF LIMITED PARTNERS' VOTING DECISIONS BY THE
PURCHASER AND BEATTIE PLACE. The Purchaser and Beattie Place will seek to be
admitted to the Partnership as a substitute Limited Partner upon consummation
of the Offer and, if admitted, will have the right (subject to certain
limitations described below) to vote each Tax-Exempt Interest purchased
pursuant to the Offer. Even if the Purchaser and/or Beattie Place are not
admitted to the Partnership as substitute Limited Partners, however, the
Purchaser and Beattie Place nonetheless will have the right to vote each Tax-
Exempt Interest purchased in the Offer pursuant to the irrevocable appointment
by tendering Limited Partners of the Purchaser and its designees as proxies
with respect to the Tax-Exempt Interests tendered by such Limited Partners and
accepted for payment by the Purchaser. If the maximum number of Tax-Exempt
Interests sought are tendered and accepted for payment pursuant to the Offer,
the Purchaser will own approximately 24.0% of the outstanding Interests and
Beattie Place will own approximately 4.6% of the outstanding Interests and, as
a result, the Purchaser and Beattie Place will be in a position to exert
significant control over matters on which Limited Partners have a right to
vote. This could effectively (i) prevent non-tendering Limited Partners from
taking action they desire but that the Purchaser and Beattie Place oppose and
(ii) enable the Purchaser and Beattie Place to take action desired by them but
opposed by a majority of the non-tendering Limited Partners. Although Limited
Partners generally cannot participate in the management or control of the
Partnership's business, and generally cannot control either the timing or
amount of cash distributions, or the timing or terms of a sale of the
Partnership's assets, Limited Partners holding a majority of the total of
Interests are entitled under the Partnership Agreement to take action with
respect to a variety of matters, including: removal of a general partner;
dissolution of the Partnership; sale of all or substantially all of the
Partnership's assets; and most types of amendments to the Partnership
Agreement. When voting on those matters, the Purchaser and Beattie Place will
vote the Tax-Exempt Interests they acquire in the Offer in their respective
sole interests, which may, or may not, be in the best interests of
non-tendering Limited Partners. Except as described elsewhere in this Offer to
Purchase, there is no agreement, arrangement or understanding, express or
implied, between the Purchaser, Walton Street and their respective affiliates,
on the one hand, and Beattie Place, Insignia and their respective affiliates,
on the other hand, as to how the Tax-Exempt Interests purchased pursuant to the
Offer will be voted. See "The Offer--Item 8. Future Plans." This does not
preclude any of such persons from deciding to vote together in the future.
See "-- 8. Future Plans" for certain contractual limitations of the
Purchaser regarding its participation in the solicitation of proxies to replace
the General Partner.
As discussed in greater detail in "--11. Background of the Offer," IMG
(with respect to residential properties) and ICG (with respect to commercial
properties) have been retained by the Partnership as the property manager for
six of the Properties. Although Limited Partners do not have the direct right
to remove or replace IMG or ICG as property manager or otherwise affect the
terms of their engagement under the terms of the Partnership Agreement, if the
Purchaser and Beattie Place are successful in acquiring the number of
Tax-Exempt Interests sought in the Offer the Purchaser and Beattie Place may
have significant influence with respect to any future decisions by the
Partnership concerning IMG's and/or ICG's engagement as property manager,
including possibly the compensation paid by the Partnership for their services.
8. FUTURE PLANS.
The Purchaser and Beattie Place are acquiring the Tax-Exempt Interests
pursuant to the Offer for investment purposes on their own behalf. Although
neither the Purchaser nor Beattie Place intends to change current management or
the operation of the Partnership and neither has any current plans for any
extraordinary transaction (such as a merger, reorganization or sale of a
material amount of assets) involving the Partnership, these
16
<PAGE> 20
plans could change in the future. In addition, neither the Purchaser nor
Beattie Place has any current plans to attempt to remove the General Partner by
a vote of Limited Partners or otherwise.
Following the completion of the Offer, the Purchaser, Beattie Place
and their respective affiliates may acquire additional Tax-Exempt Interests.
Any such acquisition may be made through private purchases, through one or more
future tender offers or by any other means deemed advisable, and may be at
prices higher or lower than the price to be paid for the Tax-Exempt Interests
purchased pursuant to the Offer.
There is a substantial possibility that Beattie Place will sell or
otherwise transfer some or all of the Tax- Exempt Interests it acquires
pursuant to the Offer within the next year, either directly or in connection
with a merger or other extraordinary transaction involving Beattie Place and
one or more of its affiliates, depending among other things on liquidity,
strategic, tax and other considerations applicable to Beattie Place, Insignia
and their affiliates. It is also possible that Beattie Place could seek to
sell additional membership interests in Beattie Place to affiliates or to
unaffiliated third parties, although neither Beattie Place nor Insignia has any
definitive plans in this regard. The operating agreement (the "Operating
Agreement") of Metropolitan, which is the 99.9% parent company of Beattie
Place, provides that if Insignia forms or sponsors a real estate investment
trust (a "REIT") under its direct or indirect control, then it will covenant to
use its commercially reasonable best efforts to cause any Interests directly or
indirectly owned by Metropolitan to be transferred (whether directly or
indirectly, by merger, consolidation, or otherwise) to any such REIT in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT. In addition, the Operating Agreement expressly
authorizes and permits MAP, which is the managing member of both Metropolitan
and Beattie Place and is a wholly-owned subsidiary of Insignia, to transfer
(whether directly or indirectly, by merger, consolidation, or otherwise) any
Interests owned by Metropolitan to any REIT, which may include any REIT
sponsored, formed or controlled by Insignia, in exchange for cash or for
equity, debt (including convertible debt) or other securities in such REIT
without the consent of the other members of Metropolitan. MAP is also
permitted to transfer all (but not less than all) of its interests in
Metropolitan to any such REIT in exchange for cash or for equity, debt
(including convertible debt) or other securities in such REIT, without any
consent of the other members of Metropolitan. Upon any such transfer, all of
the other members of Metropolitan are required to transfer all of their
interests in Metropolitan to such REIT in an exchange that is pro rata with the
terms of MAP's exchange. A copy of the Operating Agreement has been filed as
exhibit (c)(3) to the Purchaser's Tender Offer Statement on Schedule 14D-1
relating to the Offer filed with the Commission, and it may be examined and
copies may be obtained at the same places and in the same manner as set forth
in Section 9 (except that it will not be available at the regional offices of
the Commission).
In the past, affiliates of Walton Street have had discussions with The
Balcor Company ("Balcor") and American Express Company ("American Express")
regarding the potential purchase of the General Partner or its interest in the
Partnership. The Purchaser or its affiliates may consider doing so again in
the future. In addition, Insignia has previously had preliminary discussions
with Balcor concerning the acquisition by Insignia of the general partner
interest in the Partnership held by the General Partner, but those discussions
are not currently active. Insignia may, however, seek to reinitiate such
discussions in the future. If any such party should in fact come to acquire
either the general partner interest in the Partnership held by the General
Partner or the General Partner itself, such party would have outright control
over virtually all aspects of the Partnership's operations.
Under the terms of the Partnership Agreement, Limited Partners do not
have the direct right to remove or replace the property manager for the
Properties. Pursuant to an agreement between Walton Street and Insignia dated
as of November 20, 1995 (the "Agreement as to Other Partnerships") (a copy of
which has been filed as Exhibit (c)(2) to the Purchasers' Tender Offer
Statement on Schedule 14D-1 filed with the Commission on May 20, 1996), Walton
Street agreed that it will not and it will cause certain of its affiliates not
to (a) make, or in any way participate in, directly or indirectly, any
solicitation of proxies or become a participant in any election contest with
respect to the Partnership, if in any such case the purpose or effect of such
conduct is to remove or is likely to remove the General Partner of the
Partnership, unless the replacement for such General Partner is (i) Insignia or
any of its affiliates or (ii) Walton Street or any of its affiliates; (b)
directly or indirectly terminate, seek to terminate,
17
<PAGE> 21
cause the termination of, reduce the compensation then payable under, or
otherwise interfere in any way with any contract between the Partnership and
Insignia and certain of its affiliates, unless Insignia or its affiliates has
engaged in conduct with respect to such contract that constitutes gross
negligence, intentional misconduct or fraud or a material breach of such
contract; or (c) instigate, encourage or assist any Limited Partner of the
Partnership or any other third party to do any of the foregoing. In addition,
Walton Street has agreed that if at any time Walton Street or certain of its
affiliates becomes the general partner of, or otherwise controls, the
Partnership, then Walton Street, subject to its fiduciary duties, will, and
will cause certain of its affiliates to, use their reasonable efforts to cause
Insignia or one of its affiliates to continue to be engaged as the property
manager for the Properties. Similarly, the Operating Agreement of Metropolitan
provides that the members of Metropolitan (other than MAP) may not, directly or
indirectly, take any actions to terminate or otherwise interfere with any
property management contract between the Partnership and Insignia or any of its
affiliates.
None of the Purchaser, Walton Street, Beattie Place, Insignia or any
of their controlled affiliates has any present plans or intentions with respect
to a liquidation, sale of assets or refinancing of any of the Partnership's
properties, nor do they presently intend to change the current management or
the operations of the Partnership or to seek to cause the Partnership to engage
in any extraordinary transaction. However, their respective plans in these
regards could change at any time in the future.
9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Except as otherwise indicated, information contained in this Section 9
is based upon documents and reports publicly filed by the Partnership with the
Commission. Although the Purchaser has no information that any statements
contained in this Section 9 are untrue, the Purchaser does not take
responsibility for the accuracy or completeness of any information contained in
this Section 9 which is derived from such public documents, or for any failure
by the Partnership to disclose events which may have occurred and may affect
the significance or accuracy of any such information but which are unknown to
the Purchaser.
GENERAL. The principal executive offices of the Partnership are
located at 2355 Waukegan Road, Bannockburn, Illinois 60015, and its telephone
number at that address is (847) 267-1600.
The Partnership is a limited partnership formed in 1983 under the laws
of the State of Illinois. The Partnership raised $179,614,500 from sales of
Interests. The Partnership's operations consist exclusively of holding first
mortgage loans for investment and investment in and operation of
income-producing real property.
The Partnership used the net offering proceeds to fund six loans and
acquire three real property investments. During 1995 one loan was prepaid. In
prior years, two loans were prepaid and the Partnership accepted deeds in lieu
of foreclosure on two loans and foreclosed on one additional loan. As a
result, the Partnership currently has no loans remaining and owns the six
properties described below:
18
<PAGE> 22
<TABLE>
<CAPTION>
Location Description of Property
- - - -------- -----------------------
<S> <C> <C>
McLean, Virginia 8280 Greensboro Drive Office Building: a nine-story office building
containing approximately 197,000 square feet.
Bala Cynwyd, Pennsylvania GSB Office Building: a twelve-story office building containing approximately
228,000 square feet.
St. Louis County, Missouri Oxford Hills Apartments: a 480-unit apartment complex on approximately 28
acres.
Casselberry, Florida Oxford Square Apartments: a 283-unit apartment complex on approximately 22
acres.
Dallas, Texas * Pacific Center Office Buildings: two nine-story office buildings containing
approximately 222,000 square feet.
Maitland, Florida Park Center Office Building: a four-story office building containing
approximately 111,000 square feet.
</TABLE>
* Owned by the Partnership through a joint venture with an affiliate.
In the opinion of the General Partner, the Partnership has provided
for adequate insurance coverage for its real estate investment properties.
The Partnership Agreement generally provides that the proceeds of any
sale, refinancing or other disposition of properties made by the Partnership
will not be reinvested, but will be distributed to the extent not required to
meet the Partnership's cash requirements. The Partnership Agreement also
provides that proceeds from the repayment of mortgage loans (including any
sales proceeds of properties acquired through foreclosure) within 14 years of
the termination of the offering may be used to make new mortgage loans. Any
such new mortgage loan would generally provide for repayment in full within 15
years after the termination of the offering. The General Partner currently has
no plans to make any such new mortgage loans on behalf of the Partnership.
Overall, the investment real estate market saw gradual improvement
over the last year. This improvement has taken place in an environment of
generally low interest rates and little or no new supply, parameters which may
not exist in the next few years. Demand for real estate space, while projected
to improve in line with the overall economy, is also vulnerable to external
forces. The major challenges facing the real estate industry today include
increased international competition, corporate restructurings, new computer and
communications technologies, an aging population and potential revisions of the
tax code. In addition, the increased flow of capital to real estate through
new vehicles such as commercial mortgage-backed securities and REITs could spur
new construction at insupportable levels, as well as impact existing property
values.
Operationally, existing apartment properties continued to register
occupancy percentages in the 90s, with average rents rising at an annual rate
of between 3 and 4 percent. Apartments are still considered one of the top
real estate asset classes in terms of performance. However, some markets are
experiencing new construction of rental units which, if unrestrained, could
impact the performance of existing properties. Most of the new construction is
aimed at the two segments of the rental market which are growing the fastest:
low-income households and upper-income households who prefer to rent rather
than own. Of all the major asset classes, apartments typically display the
least volatility in terms of property values.
19
<PAGE> 23
With virtually no new construction over the past few years, the
national office market has experienced consistently rising occupancy rates and,
recently, rising rental rates. Investor interest has also returned, typically
preferring suburban buildings over their downtown counterparts. Except for
properties built for a specific tenant, the economic feasibility of new
construction in most markets is still several years away. Build-to-suit
construction for large companies currently in leased space could restrict
office appreciation rates over the next few years. In addition, increased
vacancies could result from companies who restructure their workforce in order
to reduce their occupancy costs.
The General Partner believes that the market for multifamily housing
properties has become increasingly favorable to sellers of these properties.
As a result the General Partner is exploring an acceleration of its strategy to
sell the Partnership's residential property. Additionally, the General Partner
will explore the sale of its commercial properties over the next year if market
conditions are favorable.
During 1995, the Partnership received a prepayment of the Fairview loan
receivable.
As of March 31, 1996, the occupancy rates of the Partnership's
residential properties ranged from 92% to 98% while rates for the commercial
properties ranged from 95% to 100%.
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 Form 10-K. More comprehensive financial and other
information is included in such reports and other documents filed by the
Partnership with the Commission and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein. IN ADDITION, THE PARTNERSHIP
FILED WITH THE COMMISSION ITS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD
ENDED MARCH 31, 1996 ON OR ABOUT MAY 15, 1996. SUCH REPORT CONTAINS
INFORMATION, INCLUDING UNAUDITED FINANCIAL INFORMATION WITH RESPECT TO THE
PARTNERSHIP'S OPERATIONS, THAT IS MORE CURRENT THAN THE INFORMATION SUMMARIZED
HEREIN. LIMITED PARTNERS ARE URGED TO READ THAT REPORT IN ITS ENTIRETY.
20
<PAGE> 24
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . . . . $17,688,318 $17,358,359 $16,954,147 $16,933,654 $17,360,168
Provision for loan receivable
writedown . . . . . . . . . . . . 0 0 0 0 3,435,632
Provision for investment property
writedowns . . . . . . . . . . . 0 0 7,300,000 6,100,000 20,000,000
Net income (loss) . . . . . . . . . 2,236,014 1,205,826 (5,278,978) (1,652,405) (17,856,956)
Net income (loss) per Limited
Partnership Interest . . . . . . 4.66 2.11 (16.02) (6.30) (51.19)
Total assets . . . . . . . . . . . 76,467,433 78,832,718 83,318,884 93,878,245 103,895,612
Distributions per Taxable
Limited Partnership Interest (A) . 8.50 10.00 10.75 13.75 16.50
Distributions per Tax-Exempt
Limited Partnership Interest (A) . 11.32 13.32 14.31 18.28 21.95
</TABLE>
(A) No distributions of original capital were made in any of the last five
years.
ADDITIONAL INFORMATION. The Partnership is subject to the
informational filing requirements of the Exchange Act and is required to file
reports and other information with the Commission relating to its business,
financial condition and other matters. Certain information, as of particular
dates, concerning the General Partner, its remuneration, the principal holders
of the Partnership's securities and any material interest of such persons in
transactions with the Partnership is required to be described in proxy
statements (if applicable) distributed to the Limited Partners and filed with
the Commission. These reports, proxy statements and other information should
be available for inspection at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, Thirteenth Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
OPERATING BUDGETS OF THE PARTNERSHIP'S PROPERTIES. Balcor has
provided the Purchaser and Insignia with the Partnership's fiscal 1996
operating budgets for the Properties. The operating budgets for each of the
Properties for fiscal 1996 as a whole, as compared to the historical results of
the Properties for 1994 and 1995 as a whole, are set forth in the tables below.
The budgeted amounts provided below are figures that were not computed in
accordance with generally accepted accounting principles ("GAAP"). Budgeted
operating results of operations for a particular fiscal year may differ
significantly in certain respects from the audited operating results for a
particular year. Therefore, the summary operating budgets presented for fiscal
1996 should not necessarily be considered as indicative of what the audited
operating results for fiscal 1996 will be. Furthermore, any estimate of the
future performance of a business, such as the Partnership's business, is
forward-looking and based on numerous assumptions, some of which inevitably
will prove to be incorrect. For this reason, it is probable that the
21
<PAGE> 25
Partnership's future operating results will differ from those projected in the
operating budgets and those differences may be material. As a result, such
information should not be relied on by Limited Partners.
<TABLE>
<CAPTION>
8280 Greensboro Drive Office Building
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 3,773,081 $ 3,532,472 $ 4,109,477
Total Expenses . . . . . . . . . . . . . . . . . $ 1,438,282 $ 1,435,274 $ 1,463,729
Net Operating Income . . . . . . . . . . . . . . $ 2,334,800 $ 2,097,198 $ 2,645,748
Extraordinary Expenditures . . . . . . . . . . . $ 153,339 $ 153,941 $ 394,542
New Construction . . . . . . . . . . . . . . . . $ 7,158 $ (7,168) $ 0
Tenant Improvements . . . . . . . . . . . . . . . $ 417,629 $ 232,173 $ 575,158
Leasing Commissions . . . . . . . . . . . . . . . $ 61,483 $ 27,091 $ 46,065
Net Cash Flow Before Debt Service . . . . . . . . $ 1,695,190 $ 1,691,162 $ 1,629,983
<CAPTION>
GSB Office Building
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 3,992,554 $ 4,090,638 $ 3,943,370
Total Expenses . . . . . . . . . . . . . . . . . $ 2,266,309 $ 2,129,949 $ 1,937,369
Net Operating Income . . . . . . . . . . . . . . $ 1,726,246 $ 1,960,689 $ 2,006,001
Extraordinary Expenditures . . . . . . . . . . . $ 255,980 $ 588,813 $ 992,397
New Construction . . . . . . . . . . . . . . . . $ 644,670 $ 218,154 $ 105,000
Tenant Improvements . . . . . . . . . . . . . . . $ 346,154 $ 292,119 $ 487,221
Leasing Commissions . . . . . . . . . . . . . . . $ 38,773 $ 147,452 $ 266,971
Net Cash Flow Before Debt Service . . . . . . . . $ 440,669 $ 714,150 $ 154,412
<CAPTION>
Oxford Hills Apartments
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 3,581,399 $ 3,530,651 $ 3,829,090
Total Expenses . . . . . . . . . . . . . . . . . $ 1,838,802 $ 1,516,875 $ 1,499,099
Net Operating Income . . . . . . . . . . . . . . $ 1,742,598 $ 2,013,776 $ 2,329,991
Extraordinary Expenditures . . . . . . . . . . . $ 629,154 $ 402,712 $ 398,195
Insurance Claims . . . . . . . . . . . . . . . . $ 3,866 $ 4,762 $ 0
Interior Improvements . . . . . . . . . . . . . . $ 155,815 $ 172,300 $ 168,124
Net Cash Flow Before Debt Service . . . . . . . . $ 953,764 $ 1,434,002 $ 1,763,672
</TABLE>
22
<PAGE> 26
<TABLE>
<CAPTION>
Oxford Square Apartments
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 1,762,961 $ 1,803,119 $ 1,832,795
Total Expenses . . . . . . . . . . . . . . . . . $ 869,941 $ 876,671 $ 904,852
Net Operating Income . . . . . . . . . . . . . . $ 893,020 $ 926,448 $ 927,943
Extraordinary Expenditures . . . . . . . . . . . $ 168,513 $ 109,702 $ 84,663
Insurance Claims . . . . . . . . . . . . . . . . $ (182,186) $ 2,213 $ 0
Interior Improvements . . . . . . . . . . . . . . $ 98,270 $ 66,417 $ 68,161
Net Cash Flow Before Debt Service . . . . . . . . $ 808,423 $ 748,116 $ 775,119
<CAPTION>
Pacific Center Office Building
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 2,370,235 $ 2,360,788 $ 2,539,445
Total Expenses . . . . . . . . . . . . . . . . . $ 1,414,868 $ 1,305,726 $ 1,330,368
Net Operating Income . . . . . . . . . . . . . . $ 955,367 $ 1,055,062 $ 1,209,077
Extraordinary Expenditures . . . . . . . . . . . $ 80,450 $ 116,762 $ 211,853
New Construction . . . . . . . . . . . . . . . . $ 2,429 $ 0 $ 0
Tenant Improvements . . . . . . . . . . . . . . . $ 549,828 $ 433,446 $ 82,739
Leasing Commissions . . . . . . . . . . . . . . . $ 194,697 $ 346,137 $ 25,420
Net Cash Flow Before Debt Service . . . . . . . . $ 127,963 $ 158,716 $ 889,065
<CAPTION>
Park Center Office Building
Fiscal Fiscal Fiscal
1994 1995 1996
Actual Actual Budgeted
------ ------ --------
<S> <C> <C> <C>
Total Income . . . . . . . . . . . . . . . . . . $ 1,378,597 $ 1,319,889 $ 1,428,248
Total Expenses . . . . . . . . . . . . . . . . . $ 823,759 $ 751,764 $ 781,433
Net Operating Income . . . . . . . . . . . . . . $ 554,838 $ 568,125 $ 646,815
Extraordinary Expenditures . . . . . . . . . . . $ 74,249 $ 281,687 $ 118,500
New Construction . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0
Tenant Improvements . . . . . . . . . . . . . . . $ 73,143 $ 301,204 $ 249,761
Leasing Commissions . . . . . . . . . . . . . . . $ 76,005 $ 43,540 $ 81,960
Net Cash Flow Before Debt Service . . . . . . . . $ 331,441 $ (58,306) $ 196,594
</TABLE>
10. CERTAIN INFORMATION CONCERNING THE PURCHASER, BEATTIE PLACE,
METROPOLITAN, MAP AND INSIGNIA.
THE PURCHASER. The Purchaser was recently formed for the purpose of
acquiring certain limited partnership interests, including Tax-Exempt Interests
in the Partnership. The Managers of the Purchaser are Neil G. Bluhm, Ira J.
Schulman, Jeffrey S. Quicksilver and William J. Abrams. In addition to the
four Managers, the other members (collectively, the "Members") of the Purchaser
are WSC Tender Investors I, L.P. ("WSCTI I"), WSC Tender Investors II, L.P.
("WSCTI II") and WSCREF - III, L.P. ("WSCREF III"). WSCTI I, WSCTI II and
WSCREF III, each a recently formed Delaware limited partnership, are each
controlled by their respective
23
<PAGE> 27
general partner, Walton Street Managers I, L.P. ("WS Managers, L.P."), which
entity is in turn controlled by WSC Managers I, Inc. ("WSC Managers, Inc.").
WSC Managers, Inc. is owned and controlled by Neil G. Bluhm, Ira J. Schulman,
Jeffrey S. Quicksilver and William J. Abrams.
The Purchaser may add additional members and the Members may add
additional partners in the future. The executive offices of the Purchaser,
Walton Street, WSCTI I, WSCTI II, WSCREF III, WS Managers, L.P. and WSC
Managers, Inc. and for each person listed below is located at 900 North
Michigan Avenue, Suite 1900, Chicago, Illinois 60611.
Set forth below is certain unaudited financial information with
respect to the Purchaser. The Purchaser has not prepared audited financial
statements in the ordinary course of its business (and does not intend to do so
in the future); accordingly, audited financial statements of the Purchaser were
not available or obtainable without unreasonable expense.
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS May 15, 1996
------------
<S> <C>
Marketable Securities $7,500,000
Total Assets $7,500,000
==========
LIABILITIES AND MEMBERS' CAPITAL
Liabilities --
----------
Members' Capital:
Contributed Capital $7,500,000
Total Liabilities and Members' Capital $7,500,000
==========
</TABLE>
The Purchaser may add additional members and the Members may add
additional partners in the future. The executive offices of the Purchaser,
Walton Street, WSCTI I, WSCTI II, WSCREF III, WS Managers, L.P. and WSC
Managers, Inc. and for each person listed below is located at 900 North
Michigan Avenue, Suite 1900, Chicago, Illinois 60611. Set forth below is
biographical information concerning the Managers and Officers of the Purchaser.
All persons identified below are United States citizens.
Neil G. Bluhm . . . . . . . . Manager, Walton Street Capital Acquisition
Co. II, L.L.C. Co-Founder and Managing
Principal of Walton Street since its
inception on January 1, 1995. Walton
Street's office is located at 900 North
Michigan Avenue, Suite 1900, Chicago,
Illinois, 60611. Prior to founding Walton
Street, Mr. Bluhm was co-founder and
President of JMB Realty Corporation ("JMB")
since its inception in 1968. JMB's office is
located at 900 North Michigan Avenue,
Chicago, Illinois, 60611. He has a BBA from
the University of Illinois and a JD from
Northwestern University. Mr. Bluhm is 58
years old and a CPA.
Ira J. Schulman . . . . . . . Manager, Walton Street Capital Acquisition
Co. II, L.L.C. Co-Founder and Managing
Principal of Walton Street since its
inception on January 1, 1995.
24
<PAGE> 28
Prior to starting Walton Street, Mr.Schulman
was an Executive Vice President of JMB. Mr.
Schulman joined JMB in 1983. He has a BA
from Washington and Jefferson College and a
MBA from the University of Pittsburgh. Mr.
Schulman is 44 years old.
Jeffrey S. Quicksilver . . . . Manager, Walton Street Capital Acquisition
Co. II, L.L.C. Co-Founder and Managing
Principal of Walton Street since its
inception on January 1, 1995. Prior to
starting Walton Street, Mr. Quicksilver was a
Managing Director of JMB. Mr. Quicksilver
joined JMB in 1989. He has a BA from the
University of Michigan and a JD from Stanford
University. Mr. Quicksilver is 35 years old.
William J. Abrams . . . . . . Manager, Walton Street Capital Acquisition
Co. II, L.L.C. Co-Founder and Managing
Principal of Walton Street since its
inception on January 1, 1995. Prior to
starting Walton Street, Mr. Abrams was a
Managing Director of JMB. Mr. Abrams joined
JMB in 1990. He has a BSE from The Wharton
School of the University of Pennsylvania and
a MM from The J.L. Kellogg Graduate School of
Management at Northwestern University. Mr.
Abrams is 31 years old.
Eric C. Mogentale . . . . . . Officer, Walton Street Capital Acquisition
Co. II, L.L.C. Principal of Walton Street
since its inception on January 1, 1995.
Prior to joining Walton Street, Mr. Mogentale
was a Vice President of JMB Institutional
Realty Corporation, which he joined in 1986.
It's office was located at 900 North Michigan
Avenue, Chicago, Illinois, 60611. He has a
BA from Northwestern University. Mr.
Mogentale is 33 years old.
Andrew G. Bluhm . . . . . . . Officer, Walton Street Capital Acquisition
Co. II, L.L.C. Principal of Walton Street
since its inception on January 1, 1995.
Prior to joining Walton Street, Mr. Bluhm was
a Vice President of JMB. Mr. Bluhm joined
JMB in 1993. Prior thereto, Mr. Bluhm was an
Analyst at Goldman, Sachs & Co. ("GS"). GS's
office is located at 85 Broad Street, New
York, New York, 10004. Mr. Bluhm joined GS
in 1988. He has a BSE from the Wharton
School of the University of Pennsylvania and
a MBA from Harvard University. Mr. Bluhm is
29 years old.
K. Jay Weaver . . . . . . . . Officer, Walton Street Capital Acquisition
Co. II, L.L.C. Principal of Walton Street
since June 1, 1995. Prior to joining Walton
Street, Mr. Weaver was a Senior Vice
President of JMB. Mr. Weaver joined JMB in
1989. He has a BBA from the University of
Alaska and a MM from the J.L. Kellogg
Graduate School of Management at Northwestern
University. Mr. Weaver is 30 years old.
Howard J. Brody . . . . . . . Officer, Walton Street Capital Acquisition
Co. II, L.L.C. Principal of Walton Street
since its inception on January 1, 1995.
Prior to joining Walton Street, Mr. Brody was
a Portfolio Manager at JMB. Mr. Brody joined
JMB in 1984. He has a BBA from the
University of Wisconsin and a MM from the
J.L. Kellogg Graduate School of Management at
Northwestern University. Mr. Brody is a CPA.
Mr. Brody is 39 years old.
25
<PAGE> 29
Perry M. Pinto . . . . . . . . Officer, Walton Street Capital Acquisition
Co. II, L.L.C. Associate of Walton Street
Capital, L.L.C. since its inception on
January 1, 1995. Prior to joining Walton
Street Capital, Mr. Pinto was an Associate at
JMB Institutional Realty Corporation, which
he joined in 1992. He has a BBA from the
University of Michigan. Mr. Pinto is 26
years old.
BEATTIE PLACE. Beattie Place is a newly-formed Delaware limited
liability company controlled by Insignia which was organized for the purpose of
acquiring the Tax-Exempt Interests, as well as limited partnership interests in
other real estate partnerships that are affiliated with the Partnership.
Metropolitan owns 99.9% of the equity interests in Beattie Place, and MAP,
which is the managing member of Beattie Place, owns the remaining 0.1%
interest. Beattie Place has not engaged in any business activity other than in
connection with the Offer and the acquisition of limited partnership interests
in such other partnerships. Set forth below is certain unaudited financial
information with respect to Beattie Place. Beattie Place has not prepared
audited financial statements in the ordinary course of its business (and does
not intend to do so in the future); accordingly, audited financial statements
of Beattie Place were not available or obtainable without unreasonable expense.
BEATTIE PLACE LLC
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS May 17, 1996
------------
<S> <C>
Cash and Cash Equivalents $30,000,000
Total Assets $30,000,000
===========
LIABILITIES AND MEMBERS' CAPITAL
Liabilities $ 0
Members' Capital $30,000,000
Total Liabilities and Members' Capital $30,000,000
===========
</TABLE>
The principal executive offices of Beattie Place are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601. Beattie Place does
not have any employees.
26
<PAGE> 30
METROPOLITAN. Metropolitan is a newly-formed Delaware limited
liability company controlled by Insignia which was organized for the purpose of
acquiring limited partnership interests in real estate limited partnerships.
Metropolitan recently consummated tender offers for limited partnership
interests in eight other real estate limited partnerships which are affiliated
with the Partnership. Set forth below is certain unaudited financial
information with respect to Metropolitan. Metropolitan has not prepared
audited financial statements in the ordinary course of its business (and does
not intend to do so in the future); accordingly, audited financial statements
of Metropolitan were not available or obtainable without unreasonable expense.
METROPOLITAN ACQUISITION VII, L.L.C.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
As of
May 17, 1996
------------
<S> <C>
ASSETS
Cash and Cash Equivalents $ 1,961,016
Investments in Real Estate Limited Partnership $ 7,049,435
Investment in Beattie Place $29,970,000
-----------
Total Assets $38,980,451
===========
LIABILITIES AND MEMBERS' CAPITAL
Liabilities $ 0
Members' Capital $38,980,451
-----------
Total Liabilities and Members' Capital $38,980,451
===========
</TABLE>
The principal executive offices of Metropolitan are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601. Metropolitan does
not have any employees.
MAP. MAP is a wholly-owned subsidiary of Insignia. MAP's only
significant assets are its 9.9% membership interest in Metropolitan and its
0.1% membership interest in Beattie Place, and it does not presently have any
liabilities. MAP is the managing member of both Beattie Place and
Metropolitan. The principal executive offices of MAP are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601.
Set forth in the table below are the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the directors and
executive officers of MAP. Each person identified below is employed by
Insignia. The principal business address of MAP and, unless otherwise
indicated, the business address of each person identified below, is One
Insignia Financial Plaza, Greenville, South Carolina 29601. Directors are
identified by an asterisk. All persons identified below are United States
citizens.
27
<PAGE> 31
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been the sole director and the Chairman
and Chief Executive Officer of MAP since its organization in
February 1996. For further information concerning Mr. Farkas,
see below.
Frank M. Garrison Frank M. Garrison has been the President of MAP since its
organization in February 1996. For further information
concerning Mr. Garrison, see below.
Jeffrey L. Goldberg Jeffrey L. Goldberg has been a Vice President of MAP since its
organization in February 1996. For further information
concerning Mr. Goldberg, see below.
James A. Aston James A. Aston has been a Vice President of MAP since its
organization in February 1996. For further information
concerning Mr. Aston, see below.
John K. Lines John K. Lines has been a Vice President and the Secretary of
MAP since its organization in February 1996. For further
information concerning Mr. Lines, see below.
Ronald Uretta Ronald Uretta has been a Vice President and the Treasurer of
MAP since its organization in February 1996. For further
information concerning Mr. Uretta, see below.
</TABLE>
INSIGNIA. Insignia is a full service real estate service organization
which performs property management, asset management, investor services,
partnership administration, mortgage banking, real estate brokerage services,
and real estate investment banking services for various ownership entities,
including approximately 1,000 limited partnerships having approximately 400,000
limited partners. Insignia believes it is the largest manager of multifamily
residential properties in the United States, managing approximately 300,000
units of multifamily residential housing. Insignia also is a significant
manager of commercial property, managing approximately 64,000,000 square feet
of retail and commercial space. Insignia has offices in approximately 510
cities in 49 states. Insignia is a public company whose stock is listed on the
New York Stock Exchange (the "NYSE"). The principal executive offices of
Insignia are located at One Insignia Financial Plaza, Greenville, South
Carolina 29601.
Insignia is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as
of particular dates, concerning Insignia's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and stock options granted to them), the principal holders of
Insignia's securities, any material interests of such persons in transactions
with Insignia and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to Insignia's shareholders and filed
with the Commission. Such reports, proxy statements and other information may
be inspected and copied at the Commission's public reference facilities and
should also be available for inspection in the same manner as set forth with
respect to the Partnership in Section 9. In addition, such material should
also be available for inspection at the library of the NYSE, located at 20
Broad Street, New York, New York 10005.
28
<PAGE> 32
Set forth below is certain consolidated financial information with
respect to Insignia and its consolidated subsidiaries for its fiscal years
ended December 31, 1995 and 1994 and its fiscal first quarters ended March 31,
1996 and 1995. More comprehensive financial and other information is included
in Insignia's Annual Report on Form 10-K for the year ended December 31, 1995
(including management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed by Insignia
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth above.
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
1996 1995 1995 1994
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues . . . . . . . . . . . . $40,221 $26,561 $125,493 $75,566
Income Before Taxes and Extraordinary
Item . . . . . . . . . . . . . . . . 3,420 3,868 10,093 12,101
Net Income . . . . . . . . . . . . . . 2,120 2,321 5,806 7,261
Net Income Per Share . . . . . . . . . 0.07 0.10 0.20 0.35
<CAPTION>
As of March 31, As of December 31,
1996 1995 1995 1994
-------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Balance Sheets Data:
Cash and Cash Equivalents . . . . . . $56,865 $49,846 $49,846 $36,596
Receivables . . . . . . . . . . . . . 12,764 26,445 26,445 13,572
Total Assets . . . . . . . . . . . 372,363 245,409 245,409 174,272
Accounts Payable . . . . . . . . . . . 1,503 1,497 1,497 3,478
Accrued and Sundry Liabilities . . . . 39,963 26,221 26,221 18,790
Long-term Debt . . . . . . . . . . . . 151,086 42,996 42,996 73,198
Total Liabilities . . . . . . . . . 192,552 70,714 70,714 95,466
Redeemable Convertible Preferred Stock 15,000 15,000 15,000 --
Minority Interest of Consolidated
Subsidiaries . . . . . . . . . . . . 4,997 2,682 2,682 --
Shareholders' Equity . . . . . . . 159,814 157,013 157,013 78,806
</TABLE>
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. The principal business address of
Insignia and, unless otherwise indicated, the business address of each person
identified below, is One
29
<PAGE> 33
Insignia Financial Plaza, Greenville, South Carolina 29601. Directors are
identified by an asterisk. All persons identified below are United States
citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- -----------------------------------------------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been a director of Insignia since its
inception in July 1990, has been Chairman and Chief Executive
Officer of Insignia since January 1991, and has been President
since May 1995. Prior to August 1993, Mr. Farkas was the sole
director of Insignia. Mr. Farkas has been the resident and sole
director and stockholder of Metropolitan Asset Group, Ltd.
("MAG"), a real estate investment banking firm, since January
1983.
Robin L. Farkas* Robin L. Farkas has been a director of Insignia since August 1993.
Mr. Farkas is the retired Chairman of the Board and Chief
Executive Officer of Alexander's Inc., a real estate company. He
served in that capacity from 1984 until 1993. Alexander's Inc.
filed a petition under Chapter 11 of the Federal Bankruptcy Code
in May 1992. He is also a director of Refac Technology
Development Corporation and of Greenman Bros. Inc.
Merril M. Halpern* Merril M. Halpern has been a director of Insignia since August
c/o Charterhouse 1993. Mr. Halpern has been Chairman of the Board of Directors and
535 Madison Avenue co-chief executive officer of Charterhouse Group International,
New York, NY 10022 Inc. ("Charterhouse"), a privately-owned investment firm which,
among other things, actively engages in making private equity
investments in a broad range of industrial and service companies
located primarily in the United states, for more than the past
five years. Mr. Halpern is also a director of Charter Power
Systems, Inc., DMPF Corp. and Dreyer's Grand Ice Cream, Inc.
John F. Jacques* John F. Jacques has been a director of Insignia since August 1993
102 Woodmont Blvd. and with the Office of the Chairman of Insignia since January
Suite 400 1992. Since July 1995 he has served as President of Compleat
Nashville, TN 37205 Resource Group, Inc. From January 1969 until December 1991, Mr.
Jacques was the Chief Executive Officer of Jacques-Miller, Inc., a
real estate syndication firm that sold substantially all of its
assets to Metropolitan Asset Enhancement, L.P., a limited
partnership in which Insignia has a limited partnership interest
("MAE"), in December 1991.
Robert G. Koen* Robert G. Koen has been a director of Insignia since August 1993.
399 Park Avenue Since January 1996, Mr. Koen has been a partner in the law firm
New York, NY 10022 Akin, Gump, Strauss, Hauer & Feld, which represents Insignia or
certain of its affiliates from time to time. From January 1991 to
January 1996, Mr. Koen was a partner in the law firm LeBoeuf,
Lamb, Greene & MacRae.
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- -----------------------------------------------------------------
<S> <C>
Michael Lipstein* Michael Lipstein has been a director of Insignia since August
110 East 59th Street 1993. Mr. Lipstein is, and for more than the past five years has
New York, NY 10022 been, self-employed in the real estate business, including
ownership, management, and lending.
Buck Mickel* Buck Mickel has been a director of Insignia since August 1993.
Fluor Daniel Mr. Mickel has been Chairman of the Board and Chief Executive
301 N. Main Street Officer of RSI Holdings, a company offering distribution of
Greenville, SC 29601 outdoor equipment, for more than the past five years. Mr. Mickel
is also a director of Fluor Corporation, The Liberty Corporation,
NationsBank Corporation, Emergent Group, Inc., Delta Woodside
Industries, Inc., Duke Power Company and Textile Hall Corporation.
James A. Aston James A. Aston has been with the Office of the Chairman since July
1994. From January 1991 to July 1994, Mr. Aston was Managing
Director -- Investment Banking of Insignia.
Frank M. Garrison Frank M. Garrison has been an Executive Managing Director of
102 Woodmont Blvd. Insignia and President of Insignia Financial Services, a division
Suite 400 of Insignia, since July 1994, and was Managing Director --
Nashville, TN 37205 Investment Banking of Insignia from January 1993 to July 1994.
From January 1992 to December 1992, Mr. Garrison was the Vice
President -- Investment Banking of Insignia. From January 1991 to
December 1991, Mr. Garrison was employed by Donelson Ventures
Holdings, L.P., a limited partnership engaged in real estate
investing activities.
Neil J. Kreisel Neil J. Kreisel has been an Executive Managing Director of
Kreisel Company, Inc. Insignia and President of Insignia Management Services -- New
331 Madison Avenue York, Inc., a subsidiary of Insignia, since September 1995. For
New York, NY 10017 more than the past five years, Mr. Kreisel has been President and
Chief Executive Officer of Kreisel Company, Inc.
Thomas R. Shuler Thomas R. Shuler has been Managing Director -- Residential
Property Management of Insignia since March 1991 and Executive
Managing Director and President of Insignia Management Services, a
division of Insignia, since July 1994. From January 1983 until
March 1991, Mr. Shuler served in various capacities, including
President of the Management Division of Hall Financial Group,
Inc., a property management organization located in Dallas, Texas.
Ronald Uretta Ronald Uretta has been Insignia's Chief Financial Officer and
Treasurer since January 1992. He also served as Secretary of
Insignia from January 1992 to June 1994. Since September 1990,
Mr. Uretta has also served as the Chief Financial Officer and
Controller of MAG.
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
---- -----------------------------------------------------------------
<S> <C>
John M. Beam, Jr. John M. Beam Jr. has been President of Insignia's mortgage banking
affiliate, Insignia Mortgage & Investment Company, since January
1991.
Jeffrey L. Goldberg Jeffrey L. Goldberg has been Managing Director -- Investment
Banking of Insignia since July 1994 and served as Managing
Director -- Asset Management of Insignia from January 1991 until
July 1994. Since April 1990, Mr. Goldberg has been an officer of
MAG, and currently serves as an Executive Vice President.
Albert H. Gossett Albert H. Gossett has been Vice President and Chief Information
Officer of Insignia since January 1991 and Senior Vice President
and Chief Information Officer of Insignia since July 1994.
Henry Horowitz Henry Horowitz has been Managing Director of Insignia Commercial
Group, Inc. since January 1993. From January 1987 to January
1993, Mr. Horowitz was the Chief Executive Officer of First
Resource Realty, Inc., a commercial property management
organization that Insignia acquired in January 1993.
William H. Jarrard, Jr. William H. Jarrard, Jr. has been Managing Director -- Partnership
Administration of Insignia since January 1991.
John K. Lines John K. Lines has been General Counsel of Insignia since June 1994
and General Counsel and Secretary since July 1994. From May 1993
until June 1994, Mr. Lines was employed as Assistant General
Counsel and Vice President of Ocwen Financial Corporation, in West
Palm Beach, Florida. From October 1991 until April 1993, Mr.
Lines was employed as Senior Attorney of Banc One Corporation, in
Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was
employed as an associate with Squire Sanders & Dempsey in
Columbus, Ohio.
S. Richard Sargent S. Richard Sargent has been Senior Vice President -- Human
Resources of Insignia since June 1994. From May 1989 until June
1994, Mr. Sargent was employed as Vice President, Human Resources
of Guilford Mills, Inc., in Greensboro, North Carolina.
Stephen C. Schoenbaechler Stephen C. Schoenbaechler has been Senior Vice President -- Asset
Management of Insignia since August 1994. From January 1992 to
August 1994, Mr. Schoenbaechler was Vice President -- Asset
Management. Mr. Schoenbaechler was an Executive Vice President
with Jacques-Miller, Inc. from July 1988 to January 1992.
</TABLE>
Except as otherwise set forth in this Offer to Purchase, none of the
Purchaser, Beattie Place, Metropolitan, MAP, Insignia, or, to the best of the
Purchaser's knowledge, any of the persons listed above, or any affiliate of the
foregoing, (i) beneficially owns or has a right to acquire any Tax-Exempt
Interests, (ii) has effected any
32
<PAGE> 36
transaction in the Interests in the past 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.
11. BACKGROUND OF THE OFFER.
In the past, various present and former affiliates of Walton Street
have talked with, or made proposals to, affiliates of the General Partner in
the ordinary course about purchasing individual properties that were being
marketed for sale by such affiliates of the General Partner. Walton Street
does not have access to any materials that may have been provided during such
discussions; however, were such information available, it would likely be dated
and of little use in valuing the properties today.
In late 1993, affiliates of Walton Street had several meetings with
Balcor with regard to the acquisition of the General Partner. The affiliates
of Walton Street believed that consolidation was going to occur in the industry
and sought out Balcor to discuss whether they might be interested in pursuing a
transaction. These meetings were exploratory in nature, were unsolicited by
Balcor and no information was exchanged as a result of these meetings.
In mid-1994, affiliates of the General Partner placed Allegiance
Realty Group, Inc. ("Allegiance"), the property management company for the
Partnership and its affiliates, up for sale. Affiliates of Walton Street and
Beattie Place were contacted as part of the auction process and made a bid to
purchase Allegiance. As part of their discussions with the seller, these
persons received detailed information regarding the properties managed by
Allegiance subject to a confidentiality agreement. The bid by affiliates of
Walton Street to purchase Allegiance was not successful and, as described
below, Allegiance was ultimately sold to an affiliate of Insignia. Pursuant to
the confidentiality agreement, the information received by the affiliates of
Walton Street from the seller was destroyed when these affiliates were
unsuccessful in their attempt to purchase Allegiance.
On November 4, 1994, Insignia acquired substantially all of the assets
of Allegiance. Those assets included the property management contracts for the
Properties. Insignia assigned the management contracts for the residential
Properties to IMG and assigned the management contracts for the commercial
Properties to ICG. The purchase agreement between Insignia and Allegiance
contains non-compete provisions prohibiting Allegiance, its affiliate, Balcor,
which is an affiliate of the General Partner, and other affiliates from
providing property management services with respect to any Balcor owned or
controlled property subject to the acquisition for a period of five years and
from providing property management services with respect to any non-Balcor
owned or controlled property for a period of three years. In addition, if
during the five years beginning with 1995, either (i) the management agreements
with respect to Balcor owned or controlled properties are terminated without
cause and Balcor or its affiliates subsequently receive financial consideration
for entering into property management agreements or selling or transferring
property management agreements with respect to such properties or (ii) Balcor
sells or disposes of control of the general partner interest in such property
owners (or if Balcor or any of its parents is sold) and, in either case, as a
result thereof, Insignia suffers a loss of more than 5% of aggregate annual
management fees from such properties, then Insignia is entitled to compensation
from Balcor in the form of a retroactive decrease in the purchase price.
Pursuant to this arrangement, since November 1994 the Partnership has paid IMG
and ICG property management fees for property management services and
reimbursed IMG and ICG for certain expenses incurred by them. Property
management fees paid to IMG amounted to $38,775 for the period from November 4
to December 31, 1994 and $248,311 for the year ended December 31, 1995; and
property management fees paid to ICG amounted to $63,587 for the period from
November 4, 1994 to December 31, 1994 and $317,848 for the year ended December
31, 1995. As a result of the foregoing business relationship, Insignia and
Beattie Place are familiar with the Partnership and the Properties.
Between March and June of 1995, affiliates of Walton Street approached
Balcor and American Express with regard to a variety of business proposals,
including a proposal to purchase all or a portion of the general partners
33
<PAGE> 37
of the partnerships (including the Partnership) sponsored by Balcor, or
operating some or all of their various general partner functions. These
contacts were very preliminary and exploratory in nature and the discussions
concluded without reaching any agreement. In addition, Insignia has previously
had preliminary discussions with Balcor concerning the acquisition by Insignia
of the general partner interest in the Partnership held by the General Partner,
but those discussions are not currently active. Insignia may, however, seek to
reinitiate such discussions in the future. If any such party should in fact
come to acquire either the general partner interest in the Partnership held by
the General Partner or the General Partner itself, such party would have
outright control over virtually all aspects of the Partnership's operations.
In February, March and April 1996, representatives of the Purchaser
met with representatives of Balcor. The purpose of these meetings was to (i)
inform the Balcor representatives that the Purchaser was considering making an
offer to Limited Partners to purchase Tax-Exempt Interests in the Partnership
and for limited partnership interests in certain partnerships affiliated with
the Partnership, (ii) to request information on the Properties, (iii) to
request a list naming all of the Limited Partners of the Partnership holding
Tax-Exempt Interests and (iv) to discuss certain procedural issues in
connection with the making of the Offer and the transferring of Tax-Exempt
Interests pursuant to the Offer. After the first meeting, the Purchaser sent a
letter to Balcor requesting a list of Limited Partners holding Tax-Exempt
Interests with which to make the Offer. Balcor provided this list to the
Purchaser on or about March 15, 1996.
After these meetings, representatives of the Purchaser and
representatives of Balcor orally discussed several issues relating to the Offer
including the proposed price at which the Purchaser would make its Offer. As
part of these discussions, representatives of the Purchaser received certain
preliminary information orally concerning valuations being performed by Alex.
Brown & Sons Incorporated ("Alex Brown") at the request of the General Partner
which indicated an approximate value of $308 per Tax-Exempt Interest. This
value is preliminary in nature and subject to change. The General Partner
tentatively indicated orally that the Purchaser's perception of the value of a
Tax-Exempt Interest was not materially different from the General Partner's
perception of such value. The General Partner has an obligation pursuant to
Rule 14d-9 of the Exchange Act to respond to the Offer no later than ten
business days from the date of commencement of the Offer. The Purchaser
expects that the General Partner will inform the Limited Partners of the final
Alex Brown valuation when the General Partner makes such response.
In April 1996, Insignia and the Partnership entered into separate
Support Agreements with respect to Oxford Hills and Oxford Square, pursuant to
which among other things, the Partnership has engaged Insignia to (i) assist in
the compilation, preparation and dissemination of "sales packages" of
information to be utilized by prospective purchasers of the subject Property in
determining whether to purchase that Property; (ii) assist in discussions with
prospective purchases regarding the sale of the subject Property; and (iii)
conduct or assist in the visits or tours by prospective purchasers of the
subject Property. However, each Support Agreement specifically states that
Insignia is not authorized to negotiate on behalf of the Partnership, or bind
the Partnership to, any contract or other agreement of any kind. Each Support
Agreement provides that Insignia will be paid a fee for its services equal to
1.25% of the purchase price of the subject Property if the purchase price does
not exceed $7.5 million, 1% of the purchase price if the purchase price exceeds
$7.5 million but does not exceed $12.5 million, or 0.75% of the purchase price
if the purchase price exceeds $12.5 million; provided, however, that no event
may the aggregate compensation paid to Insignia and to other parties in
connection with a sale of the subject Property exceed the prevailing rate for
real estate brokerage services when considering the type, the sale price and
the geographic locale of the Property. Insignia is only entitled to such
compensation if the Property is sold. One of the Support Agreements has been
filed as Exhibit (c)(4) to Schedule 14D-1. All of the Support Agreements are
virtually identical in their terms.
In early 1996, both the Purchaser and an affiliate of Beattie Place
were independently considering making an offer for the Tax-Exempt Interests.
In March 1996, the Purchaser informed Insignia that the Purchaser was
considering making such an offer. Pursuant to the Agreement as to Other
Partnerships, the Purchaser and Insignia are entitled to a 50% share of any
tender offer proposed by the other in respect of any partnership sponsored by
Balcor. After further discussion, the parties entered into the Assignment
Agreement. Pursuant to the Assignment
34
<PAGE> 38
Agreement, dated May 16, 1996 (a copy of which has been filed as Exhibit (c)(1)
to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the
Commission on May 20, 1996), the Purchaser has, among other things, assigned
the right to purchase approximately 16.2% of the Tax-Exempt Interests tendered
pursuant to the Offer to Beattie Place, an affiliate of Insignia; however, such
assignment does not relieve the Purchaser of its obligations under the Offer or
prejudice the rights of tendering Limited Partners to receive payment for
Tax-Exempt Interests validly tendered and accepted for payment pursuant to the
Offer.
12. DETERMINATION OF PURCHASE PRICE.
The Purchaser established the Purchase Price based on its own
independent analysis of the Partnership, the Properties, the other assets of
the Partnership and the financial condition of the Partnership. No appraisal
was obtained for any of the Properties, and no independent person was retained
by the Purchaser to render any valuation or fairness opinion. The Purchaser
derived the estimated net asset value per Tax-Exempt Interest from its analysis
of financial information from publicly-available information in the Form 10-K
and March 31, 1996 Form 10-Q, its review of the property information provided
by Balcor showing 1995 financial results and estimated 1996 budget information
for each of the Properties held by the Partnership, its inspection of certain
of the Properties and its expertise in the markets in which the Properties are
located. The Purchaser also received rent rolls for most of the commercial
properties. The Purchaser believes that such information is captured in the
1996 budget information and no piece of information is individually material.
The Purchaser made certain adjustments to the operating statements to reflect
capital expenses and certain other items. The resultant estimated gross asset
value reflects a capitalization rate of 9.2% on the reported 1995 net operating
income and 10.4% on the budgeted 1996 net operating income. The Partnership
has one joint venture investment. The Purchaser valued this investment
following a methodology similar to that used in valuing the Properties and then
allocated to the Partnership its pro rata share of the resultant value of such
investment based upon its ownership percentage in the joint venture. The net
asset value was derived by taking into account the other assets and liabilities
of the Partnership as set forth in the Form 10-K, and certain other factors,
resulting in an estimated net asset value of $98,307,064. The Purchaser then
calculated the aggregate amount that would be distributable with respect to the
Tax-Exempt Interests based on an assumed liquidation of the Partnership at such
net asset value in accordance with the distribution provisions in the
Partnership Agreement. Dividing that amount by the number of Tax-Exempt
Interests outstanding, the Purchaser arrived at an estimated net asset value
per Tax-Exempt Interest of $315.
The amount set forth above is only an estimate. The amount of
adjusted net operating income and other assets used to establish estimated net
asset value will vary from period to period. If the Purchaser used results
from another period and used the same analysis, the estimated net asset value
would vary. In addition, a different capitalization rate would result in
higher or lower estimated valuations for the Properties.
In connection with entering into the Assignment Agreement, the
Purchaser informed Insignia of its estimate of the gross asset value of the
Properties. Insignia and Beattie Place considered the Purchaser's estimate in
light of the information available to them, including historical and budgeted
net operating incomes generated by the Properties, historical and budgeted
capital expenditures, selected rent rolls and property tax bills, IMG's and
ICG's first-hand knowledge of the Properties and the geographic markets in
which they are located, including their knowledge of the year- to-date
operating results of the Properties (which do not differ materially from the
budgeted results), and Insignia's expertise in the real estate market in
general. Insignia and Beattie Place analyzed all of this information in the
manner in which, in their experience, a knowledgeable purchaser of real estate
of the type owned by the Partnership would analyze such information. Based on
that review and analysis, Insignia and Beattie Place concluded that the
Purchaser's estimate of the gross asset value of the Properties was reasonable,
subject to the substantial uncertainties inherent in any estimate of value.
It is important for Limited Partners to note that the Purchase Price
is believed by the Purchaser to be below the estimated net asset value on a per
Tax-Exempt Interest basis based upon the Purchaser's knowledge of the
properties and the general trends in the markets where the properties are
located. The Purchaser believes that the fair value of a Tax-Exempt Interest
should be less than the estimated net asset value on a per Tax-Exempt Interest
35
<PAGE> 39
basis, for reasons such as lack of liquidity, uncertainty as to future timing
and amount of distributions and the Limited Partners' lack of control over the
Partnership. Further, Limited Partners should note that the amounts that might
be realized upon the sale of the properties now or in the future are
necessarily speculative.
If the Purchaser is correct in believing that the Purchase Price is
lower than the Purchaser's estimated net asset value of the Partnership's
assets on a per Tax-Exempt Interest basis, and if this estimated net asset
value is maintained or increased, the proceeds that are distributed upon a
future liquidation could be greater than the Purchase Price. However, such net
asset value is only an estimate and actual net proceeds may be higher or lower.
Whether it is in the best interest of the Partnership to sell the Partnership's
properties at any particular time is a matter that must be determined by the
General Partner.
13. SOURCE AND AMOUNT OF FUNDS.
The Purchaser expects that approximately $21,250,000 would be required
to acquire the maximum number of Tax- Exempt Interests sought pursuant to the
Offer and to pay related fees and expenses. The Purchaser will obtain all of
those funds from: (i) its liquid assets and (ii) equity contributions from its
Members. The Members have agreed to make such equity contributions. Such
equity contributions will be funded by marketable securities and other liquid
assets. The contributions required of such Members will be made prior to the
closing of each tender offer, and an escrow of such amounts is not expected to
be arranged in advance of the closing.
The Purchaser is simultaneously making tender offers for limited
partnership interests in nine other partnerships affiliated with the
Partnership. If the Purchaser is successful in purchasing the maximum number
of limited partnership interests sought in each of the ten tender offers, it
will be required to pay a total of approximately $185 million to purchase such
interests and pay related transaction costs. The Purchaser and its Members
have sufficient net worth and liquid resources to fund its obligations with
respect to all ten tender offers.
Pursuant to the Assignment Agreement, the Purchaser expects that
approximately $17,804,000 would be required to purchase approximately 83.8% of
the tendered Tax-Exempt Interests and to pay its share of related fees and
expenses and Beattie Place expects that approximately $3,446,000 would be
required to purchase approximately 16.2% of the tendered Tax-Exempt Interests
and to pay its share of related fees and expenses. Beattie Place intends to
use its existing working capital to fund these purchases.
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer and in addition to
(and not in limitation of) the Purchaser's rights to extend and amend the Offer
at any time in its sole discretion, the Purchaser shall not be required to
accept for payment, purchase or pay for, subject to Rule 14e-1(c) under the
Exchange Act, any tendered Tax-Exempt Interests (whether or not any Tax-Exempt
Interests have theretofore been accepted for payment or paid for pursuant to
the Offer), and may terminate the Offer as to any Tax-Exempt Interests not then
paid for, if (i) the Purchaser shall not have confirmed to its reasonable
satisfaction that, upon purchase of the Tax-Exempt Interests pursuant to the
Offer, the Purchaser will have full rights of ownership as to all such
Tax-Exempt Interests and that it will be admitted as a substitute Limited
Partner of the Partnership or (ii) all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by the Offer shall not have
been filed, occurred or been obtained. Furthermore, notwithstanding any other
term of the Offer, the Purchaser will not be required to accept for payment or
pay for any Tax-Exempt Interests not theretofore accepted for payment or paid
for and may terminate or amend the Offer as to such Tax-Exempt Interests if, at
any time on or after the date of the Offer and before the acceptance of such
Tax-Exempt Interests for payment or the payment therefor, any of the following
conditions exist:
36
<PAGE> 40
(a) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any national
securities exchange or 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 (whether or not
mandatory), (iii) the commencement or escalation of a war, armed
hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed
by any governmental authority on, or any other event that might have
material adverse significance with respect to, the nature or extension
of credit or further extension of credit by banks or other lending
institutions in the United States, or (v) in the case of any of the
foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event
or development involving a prospective material adverse change) shall
have occurred or be likely to occur in the business, prospects,
financial condition, results of operations, properties, assets,
liabilities, capitalization, partners' equity, licenses, franchises or
businesses of the Partnership and its subsidiaries taken as a whole;
or
(c) there shall have been threatened, instituted or
pending any action, proceeding, application, audit, claim or
counterclaim by any government or governmental authority or agency,
domestic or foreign, or by or before any court or governmental,
regulatory or administrative agency, authority or tribunal, domestic,
foreign or supranational, which (i) challenges the acquisition by the
Purchaser of the Tax-Exempt Interests or seeks to obtain any material
damages as a result thereof, (ii) makes or seeks to make illegal, the
acceptance for payment, purchase or payment for any Tax-Exempt
Interests or the consummation of the Offer, (iii) imposes or seeks to
impose limitations on the ability of the Purchaser or any affiliate of
the Purchaser to acquire or hold or to exercise full rights of
ownership of the Tax-Exempt Interests, including, but not limited to,
the right to vote any Tax-Exempt Interests purchased by them on all
matters properly presented to the Limited Partners, (iv) may result in
a material diminution in the benefits expected to be derived by the
Purchaser or any of its affiliates as a result of the Offer, (v)
requires divestiture by the Purchaser of any Tax-Exempt Interests,
(vi) might materially adversely affect the business, properties,
assets, liabilities, financial condition, operations, results of
operations or prospects of the Partnership or the Purchaser or (vii)
challenges or adversely affects the Offer; or
(d) there shall be any action taken, or any statute,
rule, regulation, order or injunction shall have been enacted,
promulgated, entered, enforced or deemed applicable to the Offer, or
any other action shall have been taken, by any government,
governmental authority or court, domestic or foreign, other than the
routine application to the Offer of waiting periods that has resulted,
or in the reasonable good faith judgment of the Purchaser could be
expected to result, in any of the consequences referred to in clauses
(i) through (vii) of paragraph (c) above; or
(e) the Partnership or any of its subsidiaries shall have
authorized, recommended, proposed or announced an agreement or
intention to enter into an agreement, with respect to any merger,
consolidation, liquidation or business combination, any acquisition or
disposition of a material amount of assets or securities, or any
comparable event, not in the ordinary course of business consistent
with past practices; or
(f) the failure to occur of any necessary approval or
authorization by any federal or state authorities necessary to the
consummation of the purchase of all or any part of the Tax-Exempt
Interests to be acquired hereby, which in the reasonable judgment of
the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(g) the Purchaser shall become aware that any material
right of the Partnership or any of its subsidiaries under any
governmental license, permit or authorization relating to any
environmental law or
37
<PAGE> 41
regulation is reasonably likely to be impaired or otherwise adversely
affected as a result of, or in connection with, the Offer.
The foregoing conditions are for the sole benefit of the Purchaser and
its affiliates and may be asserted by the Purchaser regardless of the
circumstances (including, without limitation, any action or inaction by the
Purchaser or any of its affiliates) giving rise to such condition, or may be
waived by the Purchaser, in whole or in part, from time to time in its sole
discretion. The failure by the Purchaser at any time to exercise the foregoing
rights will not be deemed a waiver of such rights, which will be deemed to be
ongoing and may be asserted at any time and from time to time. Any
determination by the Purchaser concerning the events described in this Section
14 will be final and binding upon all parties.
15. CERTAIN LEGAL MATTERS.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Tax-Exempt Interests as contemplated
herein, or any filings, approvals or other actions by or with any domestic or
foreign governmental authority or administrative or regulatory agency that
would be required prior to the acquisition of Tax-Exempt Interests by the
Purchaser pursuant to the Offer as contemplated herein, other than the filing
of a Tender Offer Statement on Schedule 14D-1 (which has been filed) and any
required amendments thereto. Should any such approval or other action be
required, 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 or the Purchaser's business might not have
to be disposed of or held separate or other substantial conditions complied
with in order to obtain such approval or action or in the event that such
approvals were not obtained or such actions were not taken.
APPRAISAL RIGHTS. Limited Partners will not have appraisal rights as
a result of the Offer.
STATE ANTI-TAKEOVER LAWS. A number of states have adopted
anti-takeover laws which purport, to varying degrees, to be applicable to
attempts to acquire securities of corporations or other entities which are
incorporated or organized in such states or which have substantial assets,
securityholders, principal executive offices or principal places of business
therein. Although the Purchaser has not attempted to comply with any state
anti-takeover statutes in connection with the Offer, the Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection therewith is intended as a waiver of such right. If any
state anti-takeover statute is applicable to the Offer, the Purchaser might be
unable to accept for payment or purchase Tax-Exempt Interests tendered pursuant
to the Offer or be delayed in continuing or consummating the Offer. In such
case, the Purchaser may not be obligated to accept for purchase or pay for any
Tax-Exempt Interests tendered.
ERISA. By executing and returning the Letter of Acceptance, a Limited
Partner will be representing that either (a) the Limited Partner is not a plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code, or an entity deemed to hold
"plan assets" within the meaning of 29.C.F.R. Section 2510.3-101 of any such
plan; or (b) the tender and acceptance of Tax-Exempt Interests pursuant to the
Offer will not result in a nonexempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code.
MARGIN REQUIREMENTS. The Tax-Exempt Interests are not "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System and, accordingly, those regulations generally are not applicable
to the Offer.
38
<PAGE> 42
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe any filing is required
under the HSR Act with respect to its acquisition of Tax-Exempt Interests
contemplated by the Offer.
16. CERTAIN FEES AND EXPENSES.
Except as set forth in this Section 16, the Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Tax-Exempt Interests pursuant to the Offer. The Purchaser has
retained The Herman Group, Inc. to act as Information Agent/Depositary in
connection with the Offer. The Purchaser will pay the Information
Agent/Depositary reasonable and customary compensation for its services, plus
reimbursement for certain reasonable out-of-pocket expenses, and has agreed to
indemnify the Information Agent/Depositary against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. The Purchaser will also pay all costs and expenses of
printing and mailing the Offer and its legal fees and expenses.
17. MISCELLANEOUS.
The Offer is being made to all Limited Partners, Beneficial Owners and
Assignees, all to the extent known by the Purchaser, who hold Tax-Exempt
Interests. The Purchaser is not aware of any state in which the making of the
Offer is prohibited by administrative or judicial action pursuant to a state
statute. If the Purchaser becomes aware of any state where the making of the
Offer is so prohibited, the Purchaser will make a good faith effort to comply
with any such statute or seek to have such statute declared inapplicable to the
Offer. If, after such good faith effort, the Purchaser cannot comply with any
applicable statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) Limited Partners in such state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, furnishing certain
additional information with respect to the Offer. Such Statement 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 with respect to
information concerning the Partnership in "--9. Certain Information Concerning
the Partnership" (except that they will not be available at the regional
offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER
OF ACCEPTANCE AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Walton Street Capital Acquisition Co. II, L.L.C.
May 20, 1996
39
<PAGE> 43
Facsimile copies of the Letter of Acceptance, properly completed and
duly executed, will be accepted. Questions and requests for assistance may be
directed to the Information Agent/Depositary at the address and telephone
number listed below. Additional copies of this Offer to Purchase, the Letter
of Acceptance and other tender offer materials may be obtained from the
Information Agent/Depositary as set forth below, and will be furnished promptly
at the Purchaser's expense. The Letter of Acceptance and any other required
documents should be sent or delivered by each Limited Partner to the
Information Agent/Depositary at its address set forth below. To be effective,
a duly completed and signed Letter of Acceptance (or facsimile thereof) must be
received by the Information Agent/Depositary at the address (or facsimile
number) set forth below before 12:00 midnight, Eastern Time, on Monday, June
17, 1996.
By Mail:
The Herman Group, Inc.
P.O. Box 357
Dallas, TX 75221-9602
By Hand/Overnight Delivery:
2121 San Jacinto Street
26th Floor
Dallas, TX 75201
By Facsimile:
(214) 999-9348
or
(214) 999-9323
FOR ADDITIONAL INFORMATION CALL:
THE HERMAN GROUP, INC.
(800) 747-2979
or
(214) 999-9393
<PAGE> 1
EXHIBIT 99.(a)(2)
LETTER OF ACCEPTANCE
TO
TENDER LIMITED PARTNERSHIP INTERESTS
OF
<TABLE>
<S> <C>
BALCOR PENSION INVESTORS - II BALCOR PENSION INVESTORS - VII
BALCOR PENSION INVESTORS - III BALCOR EQUITY PENSION INVESTORS - I
BALCOR PENSION INVESTORS - IV BALCOR EQUITY PENSION INVESTORS - II, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR PENSION INVESTORS - V BALCOR EQUITY PENSION INVESTORS - III, A REAL ESTATE LIMITEDPARTNERSHIP
BALCOR PENSION INVESTORS - VI BALCOR EQUITY PENSION INVESTORS - IV, A REAL ESTATE LIMITED PARTNERSHIP
</TABLE>
PURSUANT TO THE RESPECTIVE OFFERS TO PURCHASE DATED MAY 20, 1996, AS EACH MAY
BE AMENDED FROM TIME TO TIME
BY
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
Please indicate changes or corrections to the address printed above.
================================================================================
EACH OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT
EASTERN TIME, ON MONDAY, JUNE 17, 1996 (THE "EXPIRATION DATE") UNLESS SUCH
OFFER IS EXTENDED.
The undersigned hereby tender(s) to Walton Street Capital Acquisition
Co. II, L.L.C., a Delaware limited liability company (the "Purchaser"),the
number of the undersigned's Interests of the applicable Partnership as
specified below for the Purchase Price indicated in the applicable Offer to
Purchase herein, net to the seller and its assigns in cash, without interest,
upon the terms and subject to the conditions set forth in the applicable Offer
to Purchase dated May 20, 1996 (the "Offer to Purchase") and this Letter of
Acceptance (the "Letter of Acceptance"; which, together with any supplements or
amendments, collectively constitute the "Offer"), all as more fully described
in the applicable Offer to Purchase. The Purchase Price will automatically be
reduced by the aggregate amount of distributions per Interest, if any, made or
declared by the Partnership after May 1, 1996 and on or prior to the Expiration
Date. In addition, if a distribution is made or declared after the Expiration
Date but prior to the date on which the Purchaser or its assignee pays for
tendered Interests, the Purchaser will offset the amount otherwise due to a
Limited Partner pursuant to the Offer in respect of tendered Interests which
have been accepted for payment but not yet paid for by the amount of any such
distribution. Receipt of the applicable Offer to Purchase is hereby
acknowledged. Capitalized terms used but not defined herein have the
respective meanings assigned in the applicable Offer to Purchase.
By executing and delivering this Letter of Acceptance, a tendering
Limited Partner irrevocably appoints the Purchaser and designees of the
Purchaser and each of them as such Limited Partner's proxies, with full power
of substitution, in the manner set forth in this Letter of Acceptance to the
full extent of such Limited Partner's rights with respect to the Interests
tendered by such Limited Partner and accepted for payment by the Purchaser (and
with respect to any and all other Interests or other securities issued or
issuable in respect of such Interest on or after the date hereof.). All such
proxies shall be considered irrevocable and coupled with an interest in the
tendered Interests. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Interests for payment. Upon such
acceptance for payment, all prior proxies given by such Limited Partner with
respect to such Interests (and such other Interests and securities) will be
revoked without further action, and no subsequent proxies may be given nor any
subsequent written consent executed (and, if given or executed, will not be
deemed effective). The Purchaser and its designees will, with respect to the
Interests (and such other Interests and securities) for which such appointment
is effective, be empowered to exercise all voting and other rights of such
Limited Partner as they in their sole discretion may deem proper at any meeting
of Limited Partners or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Interests to be deemed validly tendered,
immediately upon the Purchaser's payment for such Interest, the Purchaser must
be able to exercise full voting rights with respect to such Interest and other
securities, including voting at any meeting of Limited Partners.
By executing and delivering the Letter of Acceptance, a tendering
Limited Partner also irrevocably constitutes and appoints the Purchaser and its
designees as the Limited Partner's attorneys-in-fact, each with full power of
substitution to the extent of the Limited Partner's rights with respect to the
Interests tendered by the Limited Partner and accepted for payment by the
Purchaser. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts the tendered Interests for payment. Upon such
acceptance for payment, all prior powers of attorney granted by the Limited
Partner with respect to such Interest 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 designees each will have the power, among other things, (i)
to seek to transfer ownership of such Interests on the Partnership books
maintained by the transfer agent and registrar for the Partnership (and execute
and deliver any accompanying evidences of transfer and authenticity any of them
may deem necessary or appropriate in connection therewith, including, without
limitation, a "Transferor's (Seller's) Application for Transfer" created by the
NASD, if required), (ii) upon receipt by the Information Agent/Depositary (as
the tendering Limited Partner's agent) of the Purchase Price, to become a
substitute Limited Partner, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Interests in
accordance with the terms of the Offer, (iii) to execute and deliver to the
General Partner a change of address form instruction the General Partner to
send any and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Interests to the
address specified in such form, and (iv) to endorse any check payable to or
upon the order of such Limited Partner representing a distribution to which the
Purchaser is entitled pursuant to the terms of the Offer, in each case on
behalf of the tendering Limited Partner.
By executing and delivering the Letter of Acceptance, a tendering
Limited Partner irrevocably assigns to the Purchaser and its assigns all of the
right, title and interest of such Limited Partner in the Partnership with
respect to the Interests tendered and purchased pursuant to the Offer,
including, without limitation, such Limited Partner's right, title and interest
in and to any and all distributions made by the Partnership after the
Expiration Date in respect of the Interests tendered by such Limited Partner
and accepted for payment by the Purchaser, regardless of the fact that the
record date for any such distribution may be a date prior to the Expiration
Date. The Purchaser and Beattie Place will seek to be admitted to the
Partnership as substitute Limited Partners upon consummation of the Offer.
By executing this Letter of Acceptance, the undersigned represents
that either (a) the undersigned is not a plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or
an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of any such plan; or (b) the tender and acceptance of Interests
pursuant to the Offer will not result in a nonexempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
The undersigned recognizes that, if proration is required pursuant to
the terms of the Offer, the Purchaser will accept for payment from among those
Interests validly tendered on or prior to the Expiration Date and not properly
withdrawn, the maximum number of Interests permitted pursuant to the Offer on a
pro rata basis, with adjustments to avoid purchases of certain fractional
Interests, based upon the number of Interests validly tendered prior to the
Expiration Date and not properly withdrawn.
The undersigned understands that a tender of Interests to the
Purchaser will constitute a binding agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, the Purchaser may not be required to accept for payment any of the
Interests tendered hereby. In such event, the undersigned understands that any
Letter of Acceptance for Interests not accepted for payment will be destroyed
by the Purchaser. Except as stated in the Offer to Purchase, this tender is
irrevocable, provided Interests tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date.
Our records indicate the following with respect to your ownership of
Interests in the Partnerships. IF NO INDICATION IS MARKED BELOW, ALL INTERESTS
LISTED WILL BE DEEMED TO HAVE BEEN TENDERED PURSUANT TO THE APPLICABLE OFFER.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PURCHASE PRICE(S) TOTAL PURCHASE PRICE(S)*
PARTNERSHIP(S) INTERESTS OWNED INTERESTS TENDERED PER INTEREST IF ALL INTERESTS TENDERED
<S> <C> <C> <C> <C>
</TABLE>
* Reduced by the amount of any distribution made or declared by the
Partnership subsequent to the date of the applicable Offer.
<PAGE> 2
================================================================================
SIGNATURE BOX
================================================================================
Please sign exactly as your name is printed (or corrected) above. For joint
owners, each joint owner must sign. If signed by the registered holder(s) of
the Interests and payment is to be made directly to that holder(s) or Eligible
Institution, then no signature guarantee is necessary. In all other cases, all
signatures must be guaranteed by an Eligible Institution. (See Instruction 2.)
The signatory hereto hereby certifies under penalties of perjury the Taxpayer
I.D. No. furnished in the blank provided above and the statements in Box A, Box
B and, if applicable, Box C. The undersigned hereby represents and warrants for
the benefit of the Partnership and the Purchaser that the undersigned owns the
Interests tendered hereby and has full power and authority to validly tender,
sell, assign, transfer, convey and deliver the Interests tendered hereby and
that when the same are accepted for payment 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 Interests
will not be subject to any adverse claims and that the transfer and assignment
contemplated herein are in compliance with all applicable laws and regulations.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and any obligations of the undersigned shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
================================================================================
X
- - - -------------------------------------------------------------------------------
(Signature of Owner) (Date)
- - - -------------------------------------------------------------------------------
Taxpayer Identification Number of Owner (other than IRA's)
- - - -------------------------------------------------------------------------------
(Signature of Co-Owner) (Date)
- - - -------------------------------------------------------------------------------
(Title)
Telephone (Day) ( ) Telephone (Eve) ( )
----------------------- -------------------------
GUARANTEE OF SIGNATURE (IF REQUIRED. SEE INSTRUCTION 2)
Name of Firm:
------------------------------------------------------------------
Authorized Signature:
----------------------------------------------------------
================================================================================
TAX CERTIFICATIONS
================================================================================
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 4 - U.S. PERSONS AND BOX A)
The person signing this Letter of Acceptance hereby certifies the following to
the Purchasers under penalties of perjury:
(i) The Taxpayer Identification No. ("TIN") furnished in the space provided for
that purpose in the Signature Box of this Letter of Acceptance is the correct
TIN of the Limited Parttner, unless the Interests are held in an Individual
Retirement Account (IRA); or if this box [ ] is checked, the Limited Partner has
applied for a TIN. If the Limited Partner has applied for a TIN, a TIN has not
been issued to the Limited Partner, and either: (a) the Limited Partner has
mailed or delivered an application to receive a TIN to the appropriate IRS
Center or Social Security Administration Office, or (b) the Limited Partner
intends to mail or deliver an application in the near future (it being
understood that if the Limited Partner does not provide a TIN to the Purchasers
within sixty (60) days, 31% of all reportable payments made to the Limited
Partner thereafter will be withheld until a TIN is provided to the Purchasers);
and
(ii) Unless this box [ ] is checked, the Limited Parttner is not subject to
backup withholding either because the Limited Partner: (a) is exempt from
backup withholding, (b) has not been notified by the IRS that the Limited
Partner is subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) has been notified by the IRS that such Limited
Partner is no longer subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to certify that
the Limited Partner is not subject to backup withholding.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 4 - BOX B)
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership if
50% or more of the value of its gross assets consists of U.S. real property
interests and 90% or more of the value of its gross assets consists of U.S. real
property interests plus cash or cash equivalents, and the holder of the
partnership interest is a foreign person. To inform the Purchasers that no
withholding is required with respect to the Limited Partner's interest in the
Partnership, the person signing this Letter of Acceptance hereby certifies the
following under penalties of perjury:
(i) Unless this box [ ] is checked, the Limited Partner, if an individual, is
a U.S. citizen or a resident alien for purposes of U.S. income taxation, and if
other than an individual, is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Internal
Revenue code and Income Tax Regulations);
(ii) the Limited Partner's U.S. social security number (for individuals) or
employer identification number (for non-individuals) is correct as furnished in
the blank provided for that purpose on the back of this Letter of Acceptance;
and
(iii) the Limited Partner's home address (for individuals), or office address
(for non-individuals), is correctly printed (or corrected) on the back of this
Letter of Acceptance. If a corporation, the jurisdiction of incorporation is
________________________.
The person signing this Letter of Acceptance understands that this certification
may be disclosed to the IRS by the Purchasers and that any false statements
contained herein could be punished by fine, imprisonment, or both.
================================================================================
================================================================================
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 4 - BOX C)
By checking this box [ ], the person signing this Letter of Acceptance hereby
certifies under penalties of perjury that the Limited Partner is an "exempt
foreign person" for purposes of the backup withholding rules under U.S. federal
income tax laws, because the Limited Partner:
(i) Is a nonresident alien individual or a foreign corporation, partnership,
estate or trust;
(ii) If an individual, has not been and plans not to be present in the U.S.
for a total of 183 days or more during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade or business that
has effectively connected gains from transactions with a broker or barter
exchange.
================================================================================
FOR INTERESTS TO BE ACCEPTED FOR PURCHASE, LIMITED PARTNERS SHOULD COMPLETE AND
SIGN THIS LETTER OF ACCEPTANCE IN THE SIGNATURE BOX AND RETURN IT IN THE
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE ENCLOSED, OR BY HAND OR OVERNIGHT DELIVERY
TO: THE HERMAN GROUP, INC. 2121 SAN JACINTO STREET, SUITE 2600, DALLAS, TX
75201, OR BY FACSIMILE TO: (214) 999-9323 OR (214) 999-9348. DELIVERY OF THIS
LETTER OF ACCEPTANCE OR ANY OTHER REQUIRED DOCUMENTS TO AN ADDRESS OTHER THAN
THE ONE SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
PLEASE CAREFULLY READ THE INSTRUCTIONS AND BOXES A, B AND C ABOVE.
FOR INFORMATION AND ASSISTANCE WITH THE OFFER, PLEASE CALL: THE
HERMAN GROUP, INC. AT (800) 747-2979.
<PAGE> 3
INSTRUCTIONS FOR COMPLETING LETTER OF ACCEPTANCE
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
OFFER TO PURCHASE INTERESTS
OF
<TABLE>
<S> <C>
BALCOR PENSION INVESTORS - II BALCOR PENSION INVESTORS - VII
BALCOR PENSION INVESTORS - III BALCOR EQUITY PENSION INVESTORS - I
BALCOR PENSION INVESTORS - IV BALCOR EQUITY PENSION INVESTORS - II, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR PENSION INVESTORS - V BALCOR EQUITY PENSION INVESTORS - III, A REAL ESTATE LIMITED PARTNERSHIP
BALCOR PENSION INVESTORS - VI BALCOR EQUITY PENSION INVESTORS - IV, A REAL ESTATE LIMITED PARTNERSHIP
</TABLE>
================================================================================
FOR ASSISTANCE IN COMPLETING THE LETTER OF ACCEPTANCE CALL:
THE HERMAN GROUP, INC.
AT (800)747-2979
================================================================================
1. DELIVERY OF LETTER OF ACCEPTANCE. For convenience in responding to
the Offer, a pre-addressed, postage-paid envelope has been enclosed
with the Offer to Purchase. However, to ensure receipt of the Letter
of Acceptance, it is suggested that you use overnight courier delivery
or, if the Letter of Acceptance is to be delivered by United States
mail, that you use certified or registered mail, return receipt
requested.
To be effective, a duly completed and signed Letter of Acceptance (or
facsimile thereof) must be received by the Information
Agent/Depositary at the address (or facsimile number) set forth below
before the Expiration Date, Midnight, Eastern Time on Monday, June 17,
1996, unless extended. LETTERS OF ACCEPTANCE WHICH HAVE BEEN DULY
EXECUTED, BUT WHERE NO INDICATION IS MARKED IN THE "INTERESTS
TENDERED" COLUMN, SHALL BE DEEMED TO HAVE TENDERED ALL INTERESTS
PURSUANT TO THE OFFER.
BY MAIL:
THE HERMAN GROUP, INC.
P.O. Box 357
Dallas, TX 75221-9602
BY HAND DELIVERY:
2121 San Jacinto Street, Suite 2600
Dallas, TX 75201
BY FACSIMILE:
(214) 999-9323
or
(214) 999-9348
FOR ADDITIONAL INFORMATION CALL:
(800) 747-2979
THE METHOD OF DELIVERY OF THE LETTER OF ACCEPTANCE AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED
PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE INFORMATION AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY.
2. SIGNATURES. All Limited Partners must sign in the Signature Box on the
back of the Letter of Acceptance. If the Interests are held in the
names of two or more persons, all such persons must sign. When signing
as a general partner, corporate officer, attorney-in-fact, executor,
custodian, administrator or guardian, please give full title and send
proper evidence of authority with this Letter of Acceptance. With
respect to most trusts, the Partnership will generally require only the
named trustee to sign. For Interests held in a custodial account for
minors, only the signature of the custodian will be required.
For IRA custodial accounts, the beneficial owner should return the
executed Letter of Acceptance to the Information Agent/Depositary as
specified in Instruction 1 herein. Such Letter of Acceptance will then
be forwarded by the Information Agent/Depositary to the Custodian for
additional execution. Such Letter of Acceptance will not be considered
duly completed until after it has been executed by the Custodian.
If the Letter of Acceptance is signed by the registered holder of the
Interests and payment is to be made directly to that holder, then no
signature guarantee is required on the Letter of Acceptance.
Similarly, if the Interests are tendered for the account of a member
firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States (each
an "Eligible Institution"), no signature guarantee is required on the
Letter of Acceptance. However, in all other cases, all signatures on
the Letter of Acceptance must be guaranteed by an Eligible Institution.
3. U.S. PERSONS. A Limited Partner who or which is a United States
citizen OR a resident alien individual, a domestic corporation, a
domestic partnership, a domestic trust or a domestic estate
(collectively, "United States Persons") as those terms are defined in
the Internal Revenue Code and Income Tax Regulations, should follow the
instructions below with respect to certifying Boxes A and B (on the
reverse side of the Letter of Acceptance).
(Continued on Back)
<PAGE> 4
TAXPAYER IDENTIFICATION NUMBER. To avoid 31% federal income tax backup
withholding, the Limited Partner must furnish his, her's or it's
Taxpayer Identification Number in the blank provided for that purpose
on the back of the Letter of Acceptance and certify under penalties of
perjury Box A, B and, if applicable, Box C.
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE REFER TO THE FOLLOWING
NOTE AS A GUIDELINE:
NOTE: INDIVIDUAL ACCOUNTS should reflect their own TIN. JOINT
ACCOUNTS should reflect the TIN of the person whose name appears first.
TRUST ACCOUNTS should reflect the TIN assigned to the Trust. IRA
CUSTODIAL ACCOUNTS should reflect the TIN of the custodian. CUSTODIAL
ACCOUNTS FOR THE BENEFIT OF MINORS should reflect the TIN of the minor.
CORPORATIONS OR OTHER BUSINESS ENTITIES should reflect the TIN assigned
to that entity. If you need additional information, please see the
enclosed copy of the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
SUBSTITUTE FORM W-9 - BOX A.
(i) In order to avoid 31% federal income tax backup withholding, the
Limited Partner must provide to the Purchaser in the blank
provided for that purpose on the back of the Letter of Acceptance
the Limited Partner's correct Taxpayer Identification Number
("TIN") and certify, under penalties of perjury, that such Limited
Partner is not subject to such backup withholding. The TIN being
provided on the Substitute Form W-9 is that of the registered
Limited Partner as indicated on the back of the Letter of
Acceptance. If a correct TIN is not provided, penalties may be
imposed by the Internal Revenue Service ("IRS"), in addition to
the Limited Partner being subject to backup withholding. Certain
Limited Partners (including, among others, all corporations) are
not subject to backup withholding. Backup withholding is not an
additional tax. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
(ii) DO NOT CHECK THE BOX IN BOX A, PART (ii), UNLESS YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
FIRPTA AFFIDAVIT - BOX B. To avoid withholding of tax pursuant to
Section 1445 of the Internal Revenue Code, each Limited Partner who or
which is a United States Person (as defined in Instruction 3 above)
must certify, under penalties of perjury, the Limited Partner's TIN and
address, and that the 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. CHECK THE BOX IN BOX B, PART
(ii), ONLY IF YOU ARE NOT A U.S. PERSON, AS DESCRIBED THEREIN.
4. FOREIGN PERSONS - BOX C. In order for a Limited Partner who is a
foreign person (i.e., not a United States Person as defined in
Instruction 3 above) to qualify as exempt from 31% backup withholding,
such foreign Limited Partner must certify, under penalties of perjury,
the statement in BOX C of this Letter of Acceptance attesting to that
foreign person's status by checking the box in such statement. UNLESS
THE BOX IS CHECKED, SUCH FOREIGN PERSON WILL BE SUBJECT TO 31%
WITHHOLDING OF TAX UNDER SECTION 1445 OF THE CODE.
5. CONDITIONAL TENDERS. No alternative, conditional or contingent tenders
will be accepted.
6. VALIDITY OF LETTER OF ACCEPTANCE. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of a
Letter of Acceptance will be determined by the Purchasers and such
determination will be final and binding. The Purchaser interpretation
of the terms and conditions of the Offer (including these instructions
for the Letter of Acceptance) also will be final and binding. The
Purchaser will have the right to waive any irregularities or conditions
as to the manner of tendering. Any irregularities in connection with
tenders must be cured within such time as the Purchaser shall determine
unless waived by it.
The Letter of Acceptance will not be valid unless and until any
irregularities have been cured or waived. Neither the Purchaser nor
the Information Agent/Depositary are under any duty to give
notification of defects in a Letter of Acceptance and will incur no
liability for failure to give such notification.
7. ASSIGNEE STATUS. Assignees must provide documentation to the
Information Agent/Depositary which demonstrates, to the satisfaction of
the Purchaser, such person's status as an Assignee.
FOR INFORMATION PLEASE CALL:
(800) 747-2979
<PAGE> 1
EXHIBIT 99.(a)(3)
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
900 NORTH MICHIGAN AVENUE
CHICAGO, IL 60611
May 20, 1996
To Tax-Exempt Limited Partners In Balcor Equity Pension Investors - I:
Walton Street Capital Acquisition Co. II, L.L.C., a Delaware limited
liability company (the "Purchaser"), is offering to purchase up to 103,081 of
the outstanding tax-exempt Limited Partnership Interests (the "Tax-Exempt
Interests") in Balcor Equity Pension Investors - I (the "Partnership") for a
cash purchase price of $200 per Tax-Exempt Interest, net to the seller, upon
the terms and subject to the conditions set forth in the attached Offer to
Purchase dated May 20, 1996 and the Letter of Acceptance (which together
constitute the "Offer"). Unless extended by the Purchaser, the Offer is
effective until midnight, Eastern Time, on June 17, 1996. The Offer is not
conditioned upon any minimum number of Tax-Exempt Interests being tendered;
however tender offers of fractional Tax-Exempt Interests will only be accepted
if all of the Tax-Exempt Interests held by such Limited Partner are tendered.
The Purchaser will pay any transfer fees charged by the Partnership in
connection with transferring ownership of Tax-Exempt Interests pursuant to the
Offer. In addition, a Limited Partner will not incur any commissions in
connection with a tender of Tax-Exempt Interests pursuant to the Offer.
The materials included in this package include important information
concerning the Purchaser, Beattie Place, the terms and conditions to the Offer,
tax implications and instructions for tendering your Tax-Exempt Interests. It
is important that Limited Partners take some time to read carefully the
enclosed Offer to Purchase, the Letter of Acceptance and other accompanying
materials in order to evaluate the Offer being made by the Purchaser.
Each Limited Partner must decide whether to tender based on his or her
particular circumstances. Limited Partners should consult with their
respective advisors about the financial, tax, legal and other implications to
them of accepting the Offer.
If you desire additional information regarding the Offer or need
assistance in tendering your Tax-Exempt Interests, you may call The Herman
Group, Inc., which is acting as Information Agent/Depositary for the Offer, at
(800) 747-2979. Informed and courteous agents are available to assist you.
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
<PAGE> 1
EXHIBIT 99.(a)(4)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. An individual's account The individual 8. Assoc., club, religious, The organization
charitable, or
2. Two or more individuals (joint The actual owner of the educational organization
account) account or, if combined account
funds, the first
individual on the
account)(1)
3. Custodian account of a minor The minor(2) 9. Partnership account held The partnership
(Uniform Gift to Minors Act) in the name of the
business
4.a.The usual revocable savings The grantor-trustee(1) 10. Association, club, or other The organization
trust account (grantor is also tax-exempt organization
trustee)
b.So-called trust account that is The actual owner(1) 11. A broker or registered The broker or nominee
not a legal or valid trust under nominee
State law
5. Sole proprietorship account The owner(3) 12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
6. A valid trust, estate, The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(4)
7. Corporate account The corporation
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Advisors Act of
1940 who regularly acts as a broker.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
o 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.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF
THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND
DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
EXHIBIT 99.(a)(5)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Interests. Each Offer is being made solely by the applicable
Offer to Purchase dated May 20, 1996 and the related Letter of Acceptance. The
Purchaser is not aware of any state in which the making of the Offer is
prohibited by administrative or judicial action pursuant to a state statute. If
the Purchaser becomes aware of any state where the making of the offer is so
prohibited, the Purchaser will make a good faith effort to comply with any such
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Purchaser cannot comply with any applicable
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) Limited Partners in such state.
NOTICE OF OFFER TO PURCHASE FOR CASH:
UP TO 28,053 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - II,
AT $249 NET PER INTEREST
UP TO 78,367 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - III,
AT $130 NET PER INTEREST
UP TO 141,770 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - IV,
AT $65 NET PER INTEREST
UP TO 144,971 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - V,
AT $161 NET PER INTEREST
UP TO 456,245 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - VI,
AT $80 NET PER INTEREST
UP TO 152,285 LIMITED PARTNERSHIP INTERESTS OF BALCOR PENSION INVESTORS - VII,
AT $109 NET PER INTEREST
UP TO 103,081 TAX-EXEMPT LIMITED PARTNERSHIP INTERESTS OF BALCOR
EQUITY PENSION INVESTORS - I, AT $200 NET PER INTEREST
UP TO 272,919 TAX-EXEMPT LIMITED PARTNERSHIP INTERESTS OF BALCOR EQUITY
PENSION INVESTORS - II, A REAL ESTATE LIMITED PARTNERSHIP,
AT $92 NET PER INTEREST
UP TO 209,244 TAX-EXEMPT LIMITED PARTNERSHIP INTERESTS OF BALCOR EQUITY
PENSION INVESTORS - III, A REAL ESTATE LIMITED PARTNERSHIP,
AT $120 NET PER INTEREST
UP TO 61,210 LIMITED PARTNERSHIP INTERESTS OF BALCOR EQUITY PENSION INVESTORS
- IV, A REAL ESTATE LIMITED PARTNERSHIP, AT $95 NET PER INTEREST
BY
WALTON STREET CAPITAL ACQUISITION CO. II, L.L.C.
Walton Street Capital Acquisition Co. II, L.L.C., a Delaware limited
liability company (the "Purchaser"), is offering to purchase up to: (i) 28,053
of the outstanding Limited Partnership Interests of Balcor Pension Investors -
II, an Illinois Limited Partnership ("BPI II"), held by the Limited Partners of
BPI II at a purchase price of $249 per Interest; (ii) 78,367 of the outstanding
Limited Partnership Interests of Balcor Pension Investors - III, an Illinois
Limited Partnership ("BPI III"), held by the Limited Partners of BPI III at a
purchase price of $130 per Interest; (iii) 141,770 of the outstanding Limited
Partnership Interests of Balcor Pension Investors - IV, an Illinois Limited
Partnership ("BPI IV"), held by the Limited Partners of BPI IV at a purchase
price of $65 per Interest; (iv) 144,971 of the outstanding Limited Partnership
Interests of Balcor Pension Investors - V, an Illinois Limited Partnership
("BPI V"), held by the Limited Partners of BPI V at a purchase price of $161
per Interest; (v) 456,245 of the outstanding Limited Partnership Interests of
Balcor Pension Investors - VI, an Illinois Limited Partnership ("BPI VI"), held
by the Limited Partners of BPI VI at a purchase price of $80 per Interest; (vi)
152,285 of the outstanding Limited Partnership Interests of Balcor Pension
Investors - VII, an Illinois Limited Partnership ("BPI VII"), held by the
Limited Partners of BPI VII at a purchase price of $109 per Interest; (vii)
103,081 of the outstanding tax-exempt Limited Partnership Interests of Balcor
Equity Pension Investors - I, an Illinois Limited Partnership ("BEPI I"), held
by the Limited Partners of BEPI I at a purchase price of $200 per Interest;
(viii) 272,919 of the outstanding tax-exempt Limited Partnership Interests of
Balcor Equity Pension Investors - II, A Real Estate Limited Partnership, an
Illinois Limited Partnership ("BEPI II"), held by the Limited Partners of BEPI
II at a purchase price of $92 per Interest; (ix) 209,244 of the outstanding
tax-exempt Limited Partnership Interests of Balcor Equity Pension Investors -
III, A Real Estate Limited Partnership, an Illinois Limited Partnership ("BEPI
III"), held by the Limited Partners of BEPI III at a purchase price of $120 per
Interest; and (x) 61,210 of the outstanding Limited Partnership Interests of
Balcor Equity Pension Investors - IV, A Real Estate Limited Partnership, an
Illinois Limited Partnership ("BEPI IV"), held by the Limited Partners of BEPI
IV at a purchase price of $95 per Interest (each of the foregoing partnerships
a "Partnership" and collectively the "Partnerships"); in each case, net to the
seller in cash, without Interest, upon the terms and subject to the conditions
set forth in the Purchaser's Offer to Purchase with respect to each Partnership
dated May 20, 1996 and in the related Letter of Acceptance (which, together
with any amendments of supplements thereto, collectively constitute each
"Offer"). Limited partnership Interests in each of the Partnerships are
hereinafter referred to as "Interests," and holders of Interests are
hereinafter referred to as "Limited Partners." The purchase price for an Offer
will automatically be reduced by the aggregate amount of distributions per
Interest, if any, made or declared by the Partnership which is paid or payable
to Limited Partners of the applicable Partnership from and including May 1
through and including the Expiration Date. In addition, if a distribution is
made or declared after the Expiration Date but prior to the date on which the
purchaser or its
<PAGE> 2
assignee pays for tendered Interests, the Purchaser will offset the amount
otherwise due to a Limited Partner pursuant to the offer in respect of tendered
Interests which have been accepted for payment but not yet paid for by the
amount of any such distribution.
***************************************************************************
* *
* EACH OFFER AND THE RELATED PRORATION PERIOD AND WITHDRAWAL RIGHTS *
* WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON JUNE 17, 1996, *
* UNLESS SUCH OFFER IS EXTENDED. *
* *
***************************************************************************
The Purchaser is making each Offer for investment purposes. The
Purchaser has been organized for the purpose of making the Offer, and the
Purchaser has entered into an agreement with Beattie Place LLC ("Beattie
Place") pursuant to which the Purchaser has assigned to Beattie Place the right
to purchase 16.2% of the Interests tendered pursuant to each Offer. Although
neither the Purchaser nor Beattie Place intend to change current management or
the operation of the Partnership or has any current plans for any extraordinary
transaction involving one or more of the Partnerships, the plans of either of
them could change in the future.
Limited Partners who tender their Interests in response to an Offer
will not be obligated to pay any commissions or partnership transfer fees. A
Limited Partner may tender any or all of the Interests owned by that Limited
Partner; provided, however, that tenders of fractional Interests will not be
permitted, except by a Limited Partner who is tendering all of the Interests
owned by that Limited Partner.
If more than the number of Interests that the Purchaser seeks to
purchase pursuant to an Offer are validly tendered and not properly withdrawn
on or prior to the Expiration Date, the Purchaser will take into account the
number of Interests so tendered and will, upon the terms and subject to the
conditions of such Offer, take up and pay for, in the aggregate, the maximum
number of Interests sought, pro rata according to the number of Interests
validly tendered by each Limited Partner and not properly withdrawn on or prior
to the Expiration Date, with appropriate adjustments to avoid purchases of
fractional Interests. If the number of Interests validly tendered and not
properly withdrawn on or prior to the Expiration Date is less than or equal to
the maximum number of Interests sought in an Offer, the Purchaser will purchase
all Interests so tendered and not withdrawn, upon the terms and subject to the
conditions of such Offer.
For purposes of the Offers, the Purchaser will be deemed to have
accepted for payment pursuant to each Offer, and thereby purchased, validly
tendered Interests if, as and when the Purchaser gives verbal or written notice
to The Herman Group, Inc., which is acting as Information Agent/Depositary for
each Offer, of the Purchaser's acceptance for payment of those Interests
pursuant to such Offer. A tendering beneficial owner of Interests whose
Interests are owned of record by an Individual Retirement Account ("IRA") or
other qualified plan will not receive direct payment of the purchase price;
rather, payment will be made to the custodian of such account or plan. Upon
the terms and subject to the conditions of each Offer, payment for Interests
accepted for payment pursuant to an Offer will be made by deposit of the
purchase price with the Information Agent/Depositary, which will act as agent
for tendering Limited Partners for the purpose of receiving payments from the
Purchaser and transmitting such payments to Limited Partners whose Interests
have been accepted for payment. In all cases, payment for the Interests
purchased pursuant to an Offer will be made only after timely receipt by the
Information Agent/Depositary of a properly completed and duly executed Letter
of Acceptance (or facsimile thereof) with any required signature guarantees and
any other documents required by the Letter of Acceptance. Under no
circumstances will interest on the purchase price for Interests be paid,
regardless of any delay in making such payment.
The term "Expiration Date" means 12:00 midnight, Eastern Time, on
Monday, June 17, 1996, unless and until the Purchaser, in its sole discretion,
shall have extended the period of time during which an Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
such Offer, as so extended by the Purchaser, shall expire. The Purchaser
expressly reserves the right, at any time and from time to time, to extend the
period of time during which an Offer is open for any reason, including the
occurrence of any of the events specified in Section 14 of the applicable Offer
to Purchaser, by giving verbal or written notice of such extension to the
Information Agent/Depositary. In the case of an extension of an Offer, such
extension will be followed by a press release or public announcement which will
be issued not later than 9:00 a.m., Eastern Time, on the next business day
after the previously scheduled Expiration Date.
Tenders of Interests made pursuant to an Offer are irrevocable, except
that Interests tendered pursuant to an Offer may be withdrawn at any time on or
prior to the applicable Expiration Date and, unless theretofore accepted for
payment by the Purchaser pursuant to such Offer, may also be withdrawn at any
time after July 18, 1996. For withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at its address set forth on the back cover of the applicable Offer
to Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Interests to be withdrawn and must be signed by the person(s)
who signed the Letter of Acceptance in the same manner as the Letter of
Acceptance was signed. Any Interests properly withdrawn will be deemed not
validly tendered for purposes of such Offer. Withdrawn Interests may be
re-tendered, however, at any time prior to the Expiration Date.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in each Offer to Purchase and is incorporated herein by
reference.
The general partner of each of the Partnerships has provided the
Purchaser with a current list of the Limited Partners of such Partnership. The
tender offer documents and, if required, other relevant materials with respect
to an Offer will be mailed by the Purchaser to the persons shown on the
applicable list as holders of Interests and, to the extent known by the
Purchaser, to persons who have purchased Interests but have not yet been
reflected as Limited Partners on the books and records of the applicable
Partnership.
EACH OFFER TO PURCHASE AND THE RELATED LETTER OF ACCEPTANCE CONTAINS
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY BEFORE
ANY DECISION IS MADE WITH RESPECT TO AN OFFER.
<PAGE> 3
Questions and requests for assistance may be directed to the
Information Agent/Depositary at its address and telephone number set forth
below. Requests for copies of an Offer to Purchase and the related Letter of
Acceptance may also be directed to the Information Agent/Depositary, and copies
will be furnished promptly at the Purchaser's expense. The Purchaser will not
pay any fees or commissions to any broker or dealer or any other person (other
than the Information Agent/Depositary) in connection with the solicitation of
tenders of Interests pursuant to any Offer.
The Information Agent for the Offers is:
[HERMAN GROUP LOGO]
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
(800) 647-2543
(Toll Free)
May 20, 1996
<PAGE> 1
99.(c)(1)
LETTER AGREEMENT
May 16, 1996
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, SC 29601
Attention: Jeffrey L. Goldberg
Re: Tender Offers for Certain Balcor limited partnership interests
Walton Street Capital Acquisition Co. II, L.L.C. (the "Purchaser"), an
affiliate of Walton Street Capital, L.L.C. ("Walton Street"), intends to make
tender offers (each such offer, an "Offer") for certain units of limited
partnership interest ("Units") in the ten limited partnerships (each a "Target
Partnership") listed on Schedule A attached hereto. The purpose of the Offers
is for the Purchaser to acquire the Units for investment purposes.
This letter (the "Agreement") will confirm our agreement as to the
terms upon which the Purchaser will assign (the "Assignment") to Beattie Place
LLC ("Beattie Place"), an affiliate of Insignia Financial Group, Inc.
("Insignia"), the right to purchase a portion of the Units being purchased by
the Purchaser pursuant to the Offers.
I. The Original Agreement
Walton Street and Insignia entered into an Agreement as to Other
Partnerships, dated as of November 20, 1995 (the "Original Agreement") pursuant
to which Walton Street and Insignia agreed to various terms and conditions
defining their respective relationships with respect to, among other things:
(i) certain limited partnerships controlled by The Balcor Company and the
general partners of such partnerships and (ii) the voting or other control of
outstanding units of limited partnership interest of such partnerships.
Except as otherwise specifically described below with respect to the
Offers, the terms and conditions of the Original Agreement remain in full force
and effect.
<PAGE> 2
Jeffrey L. Goldberg
May 16, 1996
Page 2
Unless the context otherwise requires, capitalized terms used but not
defined herein have the meanings ascribed to them in the Original Agreement.
II. The Offers
The Purchaser will make the Offers upon the terms specified on
Schedule A (the "Offer Terms") to this Agreement. Such Offer Terms may be
amended only upon the joint agreement of the Purchaser, Walton Street, Beattie
Place and Insignia (each, a "Party").
Any changes or amendments to the Offer Terms, and all terms and
conditions, including the form and substance, of any documents relating to each
Offer (the "Offer Documents") that are required to be filed with the Securities
and Exchange Commission (the "Commission"), including any supplements and
amendments thereto, shall be determined by the Purchaser and Beattie Place.
Each of the Purchaser and Beattie Place will notify the other, no
later than 24 hours prior to the scheduled expiration of any Offer, of its
inability, for any reason, to purchase any Units tendered pursuant to such
Offer.
Each Party shall provide all information reasonably necessary to
complete each Offer Document and consummate each Offer.
III. The Assignment
The Purchaser hereby assigns to Beattie Place the Purchaser's rights
to purchase 16.22% of the Units tendered pursuant to each of the Offers.
Beattie Place hereby assumes the Purchaser's obligation to pay for all of such
Units. The Purchaser and Beattie Place shall each pay for the Units to be
purchased by them promptly after the Purchaser accepts all such Units for
payment pursuant to the terms of the respective Offers.
The Tender Costs of the Offers will be borne 83.78% by the Purchaser
and 16.22% by Beattie Place whether or not any Units are purchased pursuant to
the Offers. The Purchaser will provide Beattie Place with a monthly accounting
of the Tender Costs and settlement of any amounts due shall be made by payment
in cash within five business days after receipt of such accounting by Beattie
Place. Walton Street shall keep, or cause to be kept, at its principal office
appropriate books and records with respect
<PAGE> 3
Jeffrey L. Goldberg
May 16, 1996
Page 3
to Tender Costs. Such books and records shall be available for inspection by
any Party on reasonable notice to Walton Street and during regular business
hours. All decisions as to accounting matters, except as specifically provided
to the contrary herein, shall be made by Walton Street. As used herein, the
term "Tender Costs" means all out-of pocket expenses paid by any Party to
unaffiliated third parties in connection with the Offers, including without
limitation, those (i) incurred by any Party after the date hereof in connection
with the Offers including legal, solicitation, mailing and printing expenses,
(ii) miscellaneous accountable expenses incurred by any Party prior to the date
hereof which directly relate to the Offers, and (iii) legal expenses incurred
by any Party in connection with the preparation and negotiation of this
Agreement.
The terms of the Assignment will be disclosed in the Offer Documents.
IV. Interests of each Party in Units Purchased in the Offers
Neither Beattie Place nor Insignia shall have any ownership interest
whatsoever in the Units purchased by the Purchaser pursuant to the Offers.
Neither the Purchaser nor Walton Street shall have any ownership interest
whatsoever in the Units purchased by Beattie Place pursuant to the Assignment.
Except as provided in the Original Agreement, there is no agreement,
arrangement or understanding, express or implied, between the Purchaser, Walton
Street and their respective Affiliates, on the one hand, and Beattie Place,
Insignia and their respective Affiliates, on the other hand, as to how the
Units purchased pursuant to the Offers will be voted.
V. Indemnification
The Purchaser and Walton Street (the "Walton Parties"), jointly and
severally, shall indemnify and hold harmless Beattie Place and its Affiliates,
including Insignia, against any loss, claim, damage or liability (or any action
in respect thereof), joint or several, to which Beattie Place or any of its
Affiliates, including Insignia, may become subject, insofar as such loss,
claim, damage or liability or action in respect thereof arises out of or is
based upon (i) any untrue statement of a material fact contained in any Offer
Document, or the omission to state in any Offer Document a material fact
required to be stated therein or necessary to make the statements made
<PAGE> 4
Jeffrey L. Goldberg
May 16, 1996
Page 4
therein not misleading, except to the extent that any such loss, claim, damage,
liability or action arose out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission describing or relating
to (x) any matter for which Beattie Place has indemnified the Walton Parties as
provided below or (y) information included in any Offer Document which is
accurately derived from public documents filed by the Target Partnership or
(ii) any violation of law by a Walton Party, its Associates or the respective
officers, employees or representatives of the foregoing.
Beattie Place shall indemnify and hold harmless the Walton Parties and
their Affiliates against any loss, claim, damage or liability (or any action in
respect thereof), joint or several, to which a Walton Party or its Affiliates
may become subject, insofar as such loss, claim, damage or liability or action
in respect thereof arises out of or is based upon (i) any untrue statement of a
material fact contained in any Offer Document, or the omission to state in any
Offer Document a material fact required to be stated therein or necessary to
make the statements made therein not misleading, but only to the extent that
any such loss, claim, damage, liability or action arose out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
of Beattie Place or its Affiliates describing or relating to Beattie Place, its
Affiliates or their respective officers, employees or representatives or their
activities and background, including activities and background relating to The
Balcor Company or any Target Partnership, or (ii) any violation of law by
Beattie Place, its Affiliates or the respective officers, employees or
representatives of the foregoing.
Each party entitled to indemnification under this Article V shall give
notice as promptly as reasonably practicable to each party from which such
indemnification may be sought of any claims asserted against or any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability which it may have otherwise than on account of this
indemnity agreement except to the extent the indemnifying party has been
prejudiced in any material respect by such failure. An indemnifying party may
participate at its own expense in the defense of any such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and reasonably
approved by the indemnified
<PAGE> 5
Jeffrey L. Goldberg
May 16, 1996
Page 5
parties defendant in such action, unless such indemnified parties reasonably
object to such assumption on the ground that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties retained by an indemnified party which
are incurred thereafter in connection with such action. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. Anything in this Article V
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent
provided that such consent was not unreasonably withheld.
The rights to indemnification shall not be exclusive of any other
right which any Party may have or hereafter acquire under this Agreement or
otherwise.
VI. Amendment
This Agreement may not be amended except by a written instrument
signed by all of the Parties.
VII. Termination
This Agreement shall terminate (a) upon the termination of all Offers
either (i) by their terms or (ii) without any Units being purchased by the
Parties, or (b) upon the mutual agreement of the Parties; provided, however,
that the indemnification provisions contained in Section V of this Agreement
shall survive until the expiration of the longest applicable statute of
limitations (including extensions and waivers) with respect to the matter for
which a Party would be entitled to be indemnified.
VIII. Notice
Any notice, demand, request or report required or permitted to be
given or made to a Party under this Agreement shall be in writing and shall be
delivered in person or sent by first class
<PAGE> 6
Jeffrey L. Goldberg
May 16, 1996
Page 6
mail or by other means of written communication to the Party at the address
described below.
If to the Purchaser or to Walton Street:
William J. Abrams
Walton Street Capital Acquisition Co. II, LLC
900 North Michigan Avenue, 19th Floor
Chicago, Illinois 60611
With a copy to:
Edward J. Schneidman
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
If to Beattie Place or to Insignia:
Jeffrey L. Goldberg
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29601
With a copy to:
Jeffrey P. Cohen
Rogers & Wells
200 Park Avenue
New York, New York 10166
Such notice will be effective when delivered, if in person, or when
received, if delivery is made other than in person.
IX. Litigation
Except as otherwise agreed, under no circumstances may a Party agree
to any settlement of litigation arising in connection with the Offers without
the consent of the other affected Parties, which consent will not be
unreasonably withheld, unless as part of that settlement each other Party and
their respective Affiliates named as defendants receive an unconditional
release of liability and each other Party has have no monetary obligations in
connection with such settlement.
<PAGE> 7
Jeffrey L. Goldberg
May 16, 1996
Page 7
X. Miscellaneous
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
This Agreement, together with the Original Agreement, constitutes the
entire agreement among the Parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
None of the provisions of this Agreement shall be for the benefit of
or enforceable by any creditors of the Parties.
No failure by any Party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the Parties, the fact that all
such Parties are not signatories to the original or the same counterpart
notwithstanding.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois without regard to the principles of conflicts
of law. The Parties agree that any litigation relating to this Agreement may
be brought in a federal court in the Eastern Division of the Northern District
of Illinois or the Southern District of New York. Each Party hereby consents
to personal jurisdiction in any such action or proceeding brought in any court,
consents to service of process by mail made upon such Party and such Party's
agent (or in any other manner permitted by the rules of the court in which the
action or proceeding is brought) and waives any objection to venue in any such
court or to any claim that any such court is an inconvenient forum.
Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
<PAGE> 8
Jeffrey L. Goldberg
May 16, 1996
Page 8
If this Agreement is satisfactory to you, please sign in the
appropriate place below.
WALTON STREET CAPITAL ACQUISITION CO.
II, L.L.C.
By: /s/ William J. Abrams
-----------------------------------
Managing Principal
WALTON STREET CAPITAL, L.L.C.
By: /s/ Willia, J. Abrams
-----------------------------------
Managing Principal
BEATTIE PLACE LLC
By: MAP VII Acquisition Corporation,
its managing member
By: /s/ Jeffrey L. Goldberg
-----------------------------------
Title:
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Jeffrey L. goldber
-----------------------------------
Title:
<PAGE> 9
SCHEDULE A
<TABLE>
<CAPTION>
====================================================================================================================================
Price per Percentage of
Unit to be Units Expiration Date Units Sought To
Target Partnership Offered Bid For of Offer Be Acquired
------------------ ------- ------- ----- --------
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balcor Pension Investors - II $249 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Pension Investors - III $133 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Pension Investors - IV $65 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Pension Investors - V $161 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Pension Investors - VI $80 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Pension Investors - VII $109 All Units 20 business days 33%
from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Equity Pension Investors - I $200 Tax Exempt Units 20 business days 33%
Only from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Equity Pension Investors -II, A Real Estate $92 Tax Exempt Units 20 business days 33%
Limited Partnership Only from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
Balcor Equity Pension Investors -III, A Real Estate $120 Tax Exempt Units 20 business days 33%
Limited Partnership Only from commencement
of Offer
- - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
====================================================================================================================================
Price per Percentage of
Unit to be Units Expiration Date Units Sought To
Target Partnership Offered Bid For of Offer Be Acquired
------------------ ------- ------- ----- --------
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balcor Equity Pension Investors -IV, A Real Estate $95 All Units 20 business days 33%
Limited Partnership from commencement
of Offer
====================================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 99.(c)(2)
AGREEMENT AS TO OTHER PARTNERSHIPS
THIS AGREEMENT, dated as of November 20, 1995, is entered into by and
among Insignia Financial Group, Inc., a Delaware corporation ("Insignia"), on
the one hand, and Walton Street Capital, L.L.C., a Delaware limited liability
company ("Walton Street"), on the other hand.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement Insignia, through FMG Acquisition, L.L.C., and Walton Street, through
Walton Street Capital Acquisition Co., L.L.C., have formed nine joint-venture
partnerships (the "JV Partnerships") and entered into nine separate Partnership
Agreements relating thereto, each dated as of November 20, 1995 (the
"Partnership Agreements"), pursuant to which the Walton Street Group and the
Insignia Group (each as defined below) have agreed jointly to invest in limited
partnership interests ("Units") in certain limited partnerships (the "Subject
Partnerships") controlled by The Balcor Company ("Balcor");
WHEREAS, pursuant to property management contracts between the Subject
Partnerships and an affiliate of Insignia, Insignia and its affiliates provide
property management services to the Subject Partnerships with respect to the
properties held by the Subject Partnerships;
WHEREAS, pursuant to similar property management contracts between
other limited partnerships controlled by Balcor (the "Other Partnerships") and
an affiliate of Insignia, Insignia and
<PAGE> 2
its affiliates provide property management services to those partnerships with
respect to the properties held by such partnerships; and
WHEREAS, the execution and delivery of the Partnership Agreements is
conditioned on the execution and delivery of an agreement with respect to the
Subject Partnerships and this Agreement with respect to the Other Partnerships;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties to this Agreement hereby agrees as
follows with respect to the Other Partnerships only:
ARTICLE I
DEFINITIONS
"Affiliate" means, as to any Person, (i) any other Person (and the
immediate family members of such Person) that controls, is controlled by, or is
under common control with the first Person; and (ii) if the first Person is a
natural person, the immediate family members of that Person.
"Balcor Contract" means any existing contract between any Balcor
Entity and any member of the Insignia Group pursuant to which any member of the
Insignia Group provides property management services to such Balcor Entity.
"Balcor Entity" means (i) any existing entity of which Balcor or any
of its controlled Affiliates is a general partner or which is controlled by
Balcor or any of its controlled
-2-
<PAGE> 3
Affiliates which is party to a Balcor Contract (other than the Subject
Partnerships), and (ii) any successor to any entity described in clause (i).
"Balcor Property" means any property owned by a Balcor Entity which is
subject to a Balcor Contract, but does not include any property no longer owned
by a Balcor Entity.
"Insignia Group" means (i) Insignia and each of its current and future
controlling persons, subsidiaries and controlled Affiliates, (ii) the
respective successors and assigns of any of the Persons identified in clause
(i), (iii) the current and future directors and officers of any of the
foregoing.
"Person" means any natural person or any corporation, partnership,
venture, association or other entity.
"Principal" means each of Neil G. Bluhm, Ira J. Schulman, William J.
Abrams and Jeffrey S. Quicksilver, severally and not jointly.
"Walton Street Group" (i) Walton Street, and each of its respective
current and future Principals and other controlling persons, subsidiaries and
its controlled Affiliates, (ii) the respective successors and assigns of any of
the Persons identified in clause (i), and (iii) the current and future
directors and officers of any of the foregoing.
-3-
<PAGE> 4
ARTICLE II
STANDSTILL PROVISIONS
1. Walton Street agrees that during the term of this Agreement it
will not, and it will cause each member of the Walton Street Group not to, (a)
make, or in any way participate in, directly or indirectly, any solicitation of
proxies or become a participant in any election contest with respect to any
Balcor Entity, if in any such case the purpose or effect of such conduct is to
remove or is likely to remove a general partner of any Balcor Entity, unless
the replacement for such general partner is (x) Insignia or any of its
Affiliates, or (y) Walton Street or any of its Affiliates; or (b) directly or
indirectly terminate, seek to terminate, cause the termination of, reduce the
compensation then payable under, or otherwise interfere in any way with any
Balcor Contract, unless a member of the Insignia Group has engaged in conduct
with respect to such Balcor Contract that constitutes gross negligence,
intentional misconduct or fraud or a material breach of such Balcor Contract
which has not been cured within a reasonable period; or (c) instigate,
encourage or assist any limited partner of any Balcor Entity or any other third
party to do any of the foregoing. Nothing contained in this paragraph 1 shall
prohibit any member of the Walton Group or any of its Affiliates from selling a
property that is subject to a Balcor Contract. Except as set forth in this
Agreement, the Walton Street Group, and its Affiliates shall not be prohibited
from entering into agreements with Balcor.
-4-
<PAGE> 5
2. If at any time after the date of this Agreement any member of
the Walton Street Group becomes the general partner of, or otherwise controls,
an entity that is a Balcor Entity, or otherwise controls any Balcor Property,
then Walton Street, subject to their fiduciary duties to any Balcor Entity or
other owner of a Balcor Property, will, and will cause the members of the
Walton Street Group, to, use their reasonable efforts to cause Insignia or an
Affiliate designated by Insignia to continue to be engaged as the property
manager for such Balcor Entity or with respect to such Balcor Property on terms
substantially similar to the then current Balcor Contracts.
3. Walton Street agrees that during the term of this Agreement it
will not, and it will cause the members of the Walton Street Group not to,
provide any property management services to any Balcor Entity in respect of any
Balcor Property.
4. Insignia agrees that it will not, and it will cause the
members of the Insignia Group not to, commence a cash tender offer with respect
to any Balcor Entity without first offering Walton Street a reasonable
opportunity to choose to participate in such tender offer on a 50-50 basis with
the parties having joint control as co-managing general partners and on other
terms substantially similar to those contained in the Partnership Agreements.
5. Walton Street agrees that it will not, and it will cause the
members of the Walton Street Group not to, commence a cash tender offer with
respect to any Balcor Entity without first
-5-
<PAGE> 6
offering Insignia a reasonable opportunity to choose to participate in such
tender offer on a 50-50 basis with the parties having joint control as
co-managing general partners and on other terms substantially similar to those
contained in the Partnership Agreements.
6. Applicability to Principals. Each Principal, severally and
not jointly, agrees that the restrictions on the Walton Street Group of
paragraphs 2, 3 and 5 of this Article II shall apply to such Principal and
Persons controlled by such Principal for a ten-year period from the date hereof
(twenty years for Neil Bluhm); provided that each Principal shall have no
obligations under this Article II for the actions or inactions of the Walton
Street Group other than such Principal and Persons they control.
7. Nothing in this Article II shall restrict any Person who
employs, uses, hires or otherwise contracts with a Principal other than the
Walton Street Group; provided that such Principal does not control such Person.
ARTICLE III
MISCELLANEOUS PROVISIONS
1. Term. The term of this Agreement shall be for a period of
twenty (20) years from the date hereof; provided that the term of this
Agreement shall be ten (10) years with respect to each Principal other than
Neil Bluhm.
2. Entire Agreement. This Agreement supersedes any and all prior
or contemporaneous communications or agreements between
-6-
<PAGE> 7
the parties hereto concerning the subject matter hereof, whether written or
oral.
3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
4. Waivers; Amendments. The provisions of this Agreement cannot
be waived or modified unless such waiver or modification is in writing and
signed by the parties hereto.
5. Interpretation. The parties hereto acknowledge that this
Agreement is the product of arm's-length negotiations between the parties, each
of whom was represented by counsel, and agree that in any dispute concerning
the interpretation of any provision of this Agreement, there will be no
presumption that any provision is to be construed against or in favor of any
particular party.
6. Expenses. The reasonable expenses incurred by each party
(including legal fees and expenses) in connection with the negotiation and
documentation of this Agreement shall be borne and paid by Walton Street and
Insignia.
7. No Support. Neither Walton Street nor any Principal thereof
will support or encourage the taking of any action by any Affiliate of Walton
Street which is prohibited hereunder to be taken by Walton Street Group or any
member of Walton Street Group.
-7-
<PAGE> 8
8. Governing Law. The validity, interpretation, enforceability
and performance of this Agreement shall be governed by and construed in
accordance with the law of the State of Illinois, without reference to its
conflicts of law rules. To the fullest extent permitted by law, each of the
parties hereto hereby waive any right to trial by jury in any action with
respect to the matters set forth herein. If any provision of this Agreement
shall be held invalid or unenforceable in whole or in part, that invalidity or
unenforceability shall not affect the validity or enforceability of the balance
of this Agreement. Without limiting the generality of the foregoing, if a
provision is held by a court of competent jurisdiction to be invalid or
unenforceable by reason of the length of time during which it is to remain in
effect, such provision nonetheless shall be enforceable to the maximum extent
and for the maximum period of time determined by such court to be permissible.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed or caused to be
executed on their behalf this Agreement as of the date first set forth above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
----------------------------------
Frank M. Garrison
Executive Managing Director
WALTON STREET CAPITAL, L.L.C.
By: /s/ Ira J. Schulman
----------------------------------
Ira J. Schulman
Principal
(THE FOLLOWING INDIVIDUALS ARE PARTIES
FOR PURPOSES OF PARAGRAPHS 2, 3, 5 AND
6 OF ARTICLE II ONLY)
/s/ Neil G. Bluhm
------------------------------
Neil G. Bluhm
/s/ Ira J. Schulman
------------------------------
Ira J. Schulman
/s/ Jeffrey S. Quicksilver
------------------------------
Jeffrey S. Quicksilver
/s/ William J. Abrams
------------------------------
William J. Abrams
<PAGE> 1
99(c)3
OPERATING AGREEMENT OF
METROPOLITAN ACQUISITION VII, L.L.C.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Place of Business and Office; Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Qualification in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
Purpose and Powers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Powers of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
Capital Contributions and Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Capital Contributions by Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Capital Contributions by non-Managing Members . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Investment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Other Matters Relating to Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V
Distributions and Allocation of Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Distributions -- General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Amounts and Priority of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Allocations of Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Allocations and Elections In the Event of Transfers of Company Interests . . . . . . . . . . . . 19
5.7 Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Powers of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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6.3 Reimbursement of Expenses to An Affiliate of the Managing Member; Reimbursement of Expenses
to the Managing Member; Engagement of Affiliates of Members; Fees and Certain Other
Payments to Affiliates of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 No Management by Other Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Limitations on Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Indemnification of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Other Activities of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.10 The WIG Partnerships and the Buy/Sell Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
Rights and Obligations of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Outside Activities of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Reimbursement of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 No Interference with Balcor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Transfer of Managing Member's Interest in the Company . . . . . . . . . . . . . . . . . . . . . 30
8.2 Admission of a Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Transfer of Membership Interests by Members other than the Managing Member . . . . . . . . . . . 32
8.4 Substitution of Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Limitation on Sale or Exchange of Company Interests . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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TABLE OF CONTENTS (cont'd)
<TABLE>
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ARTICLE XI
Consents, Voting and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XII
Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.3 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.3 JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Binding Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8 No Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.10 Reasonable Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.11 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XV
Interpretation and Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVI
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVII
IFG Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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<PAGE> 5
This Operating Agreement (this "Agreement") of Metropolitan
Acquisition VII, L.L.C. (the "Company"), a limited liability company organized
pursuant to the Delaware Limited Liability Company Act (the "Act") is entered
into and shall be effective as of February 29, 1996 by and between MAP VII
Acquisition Corporation, a Delaware corporation having its principal office at
One Insignia Financial Plaza, Greenville, South Carolina 29602 (the "Managing
Member") and Insignia Financial Group, Inc., a Delaware Corporation having its
principal office at One Insignia Financial Plaza, Greenville, South Carolina,
29102 ("IFG"), as the initial members of the Company. The Managing Member, IFG
and the individuals or entities who are subsequently admitted to the Company
formed hereby as members thereof are collectively referred to as the "Members"
and each is separately referred to as a "Member".
W I T N E S S E T H:
WHEREAS, the parties hereto wish to enter into this Agreement
to provide for their respective rights and obligations in connection with a
limited liability company formed pursuant to the Delaware Limited Liability
Company Act, 6 Del. C. Section 18-101, et. seq., as amended from time to time
(the "Delaware Act"), by filing a Certificate of Formation of the Company (the
"Certificate") with the offices of the Secretary of State of Delaware and
entering into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein made and intending to be legally bound, the Members hereby
agree as follows:
ARTICLE I
Defined Terms
Defined terms used in this Agreement that are not defined
elsewhere herein shall, unless the context otherwise requires, have the
meanings specified in this Article I.
"Adjusted Capital Account" shall mean, with respect to any
Member, the balance in such Member's Capital Account as of the end of the
relevant Fiscal Year or period, adjusted as follows:
(i) Credit to such Capital Account the sum of (x)
any amount which such Member is obligated or has agreed to contribute
(but has not yet contributed) to the Company and (y) the amount which
such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treas.
<PAGE> 6
Reg. Section 1.704-2(g)(1) and the penultimate sentence of Treas.
Reg. Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in subclauses (4), (5) and (6) of Treas. Reg. Section
1.704-1(b)(2)(ii)(d).
"Advance Request" shall have the meaning set forth in Section
6.7.3.
"Affiliate" of, or a Person "Affiliated" with, a specified
Member, shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
"Agreement" shall mean this Operating Agreement, as originally
executed and as amended, modified, supplemented or restated from time to time,
as the context requires.
"Balcor Contract" shall have the meaning set forth in Section
7.5.
"Balcor Partnerships" shall have the meaning set forth in
Section 3.1.2.
"Balcor Partnership Interests" shall have the meaning set
forth in Section 3.1.2.
"Balcor Securities" shall have the meaning set forth in
Section 3.1.2.
"Bankruptcy" shall mean, with respect to a Person, (i) that
such Person has (A) made an assignment for the benefit of creditors; (B) filed
a voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or
had entered against such Person an order of relief in any bankruptcy or
insolvency proceeding; (D) filed a petition or an answer seeking for such
Person any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation or filed an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Person in any proceeding of such
nature; or (E) sought, consented to, or acquiesced in the appointment of a
trustee, receiver or liquidator of such Person or of all or any substantial
part of such Person's properties; (ii) 90 days have elapsed after the
commencement of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation and such proceeding has not been
dismissed; or (iii) 60 days have elapsed since the appointment without such
Person's consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any
2
<PAGE> 7
substantial part of such Person's properties and such appointment has not been
vacated or stayed or the appointment is not vacated within 60 days after the
expiration of such stay.
"Capital Account" shall mean, with respect to any Member, the
account maintained by the Company for such Member in accordance with Section
4.7 hereof.
"Capital Commitment" shall have the meaning set forth in
Section 4.3.
"Capital Contributions" of a Member shall mean the total
amount of contributions such Member has made to the Company pursuant to Article
IV, as of the date in question.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor federal income tax code.
"Commencement Date" shall have the meaning set forth in
Section 3.4.
"Company Minimum Gain" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(d), substituting the term "Company" for the term
"partnership" as the context requires.
"Consent" shall mean the approval of a Person, given as
provided in Section 11.1, to do the act or thing for which the approval is
solicited, or the act of granting such approval, as the context may require.
"Death Interest" shall have the meaning set forth in Section
8.3.3.
"Depreciation Recapture" shall have the meaning set forth in
Section 5.7.
"Distributable Cash" shall have the meaning set forth in
Section 5.1(b).
"Fair Market Value" shall mean
(i) for securities which are listed on a national
securities exchange, the value at their last sales prices on the date of
determination;
(ii) for securities which are not so listed, the
value at their last sales prices on the date of determination on the basis of
quotations in the over-the-counter market;
(iii) for securities which are in the form of
unlisted put or call options, their value as determined by the Managing Member
or the Liquidating Trustee, as the case may be.
3
<PAGE> 8
(iv) for all other assets, the value of such assets,
as determined from time to time by the Managing Member or Liquidating Trustee,
as the case may be.
"Fiscal Year" shall mean the calendar year or, in the case of
the first and the last fiscal years, the fraction thereof commencing on the
date on which the Company is formed under the Delaware Act or ending on the
date on which the winding up of the Company is completed, as the case may be.
"Incapacity" shall mean, as to any Person, (i) the
adjudication of incompetence or insanity of such Person, or the Bankruptcy of
such Person, or (ii) the death, dissolution (except in any case in which a
Member which is a partnership or limited liability company shall be
reconstituted by its remaining partners or members, as applicable, following
any liquidation or dissolution caused by the legal incapacity of one or more of
its partners or members, as applicable) or termination (other than by merger or
consolidation), as the case may be, of such Person.
"Indemnitee" shall have the meaning set forth in Section 6.7.
"Interest" shall mean all, or the part (as the context
requires), of the interest of a Member in the Company at any particular time,
including the right of such Member to any and all benefits to which a Member
may be entitled as provided in this Agreement, together with the obligations of
such Member to comply with all the terms and provisions of this Agreement.
"Investment" shall have the meaning set forth in Section 3.1.2
"Liquidating Trustee" shall mean a Person selected by the
Managing Member, or, if there is none, by the other Members, to act as a
liquidating trustee as provided in Section 9.2.
"Litigation Advance" shall have the meaning set forth in
Section 6.7.3.
"Majority-in-Interest of the Members" shall mean Members
holding more than 50% of the Percentage Interests in the Company.
"Managing Member" shall have the meaning set forth in Section
6.1.
"Net Profits" and "Net Losses" for any Fiscal Year or period
shall mean, respectively, an amount equal to the Company's income or loss for
such Fiscal Year or period, as computed for federal income tax purposes with
the following adjustments:
4
<PAGE> 9
(i) Any income of the Company which is exempt
from federal income tax shall increase such taxable income or shall
reduce such loss;
(ii) Any expenditures of the Company which are
described in Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i), shall reduce such taxable income or shall
increase such loss;
(iii) Any item which is specially allocated
pursuant to Section 5.4 hereof shall not be taken into account in
computing such income or loss;
(iv) For purposes of computing gain or loss
(whether realized by reason of a sale or distribution) and
depreciation and amortization, the basis of any property shall be
equal to the amount shown on the Company's books; and
(v) Any deemed gain or deemed loss for book
purposes resulting from the distribution of appreciated or depreciated
property or the adjustment of the value of such property on the
Company's books shall be taken into account in computing such income
or loss.
"Nonrecourse Deductions" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(b).
"Noticed Partner" shall have the meaning set forth in Section
6.10.1.
"Member Nonrecourse Deduction" shall have the meaning set
forth in Treas. Reg. Section 1.704-2(i), substituting the term "Member" for
the term "partner" as the context requires.
"Member Nonrecourse Loan" shall mean a loan made to, or credit
arrangement for the benefit of, the Company by a Member, substituting the term
"Member" for the term "partner" as the context requires, or by a person related
to a Member (as defined in Treas. Reg. Section 1.752-4(b)) which by its terms
exculpates the Members from personal liability on the debt, but under which
such Member or related person bears the ultimate economic risk of loss within
the meaning of Treas. Reg. Section 1.752-2.
"Offering" shall have the meaning set forth in Section 3.3.
"Offering Memo" shall have the meaning set forth in Section
3.3.
"Percentage Interest" shall mean, with respect to each Member,
the percentage obtained by multiplying 100% by a
5
<PAGE> 10
fraction, the numerator of which is the total number of Units owned by such
Member and the denominator of which is the total number of outstanding Units.
"Permitted Temporary Investments" shall have the meaning set
forth in Section 3.1.2.
"Person" shall mean any individual, membership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity.
"REIT" shall have the meaning set forth in Section 3.1.2.
"Subject Partnership Interests" shall have the meaning set
forth in Section 4.5.6.
"Subject Partnerships" shall have the meaning set forth in
Section 4.5.6.
"Subscription Agreement" shall have the meaning set forth in
Section 3.3.
"Substitute Member" shall have the meaning set forth in
Section 8.4.2.
"Successor Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
"Tax Advances" shall have the meaning set forth in Section
5.1(d).
"Treas. Reg." and "Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Triggering Partner" shall have the meaning set forth in
Section 6.10.1.
"Unit" shall have the meaning set forth in Section 4.1.
"Walton" shall have the meaning set forth in Section 6.10.1.
"WIG Partnerships" shall have the meaning set forth in Section
4.5.6.
"Withdrawing Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
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ARTICLE II
Organization
2.1 Formation.
(a) The Members hereby agree to form the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the
Members shall be as provided in the Delaware Act, except as otherwise
provided herein.
(b) Upon the execution of this Agreement, MAP VII
Acquisition Corporation and IFG shall be members of the Company.
(c) The name and mailing address of each Member of the
Company shall be listed on Schedule A attached hereto. The Managing
Member shall be required to update Schedule A and Schedule B from
time-to-time as necessary to accurately reflect the information
therein. Any reference in this Agreement to Schedule A or Schedule B
shall be deemed to be a reference to Schedule A or Schedule B as
amended and in effect from time-to-time.
(d) The Members hereby authorize and approve the
execution, delivery and filing with the office of the Secretary of
State of Delaware, the Certificate and any and all amendments thereto
and restatements thereof by the Managing Member as an authorized
person within the meaning of the Delaware Act.
(e) Upon admission to the Company of any Member other
than the Managing Member and IFG, IFG shall automatically be deemed to
have withdrawn from the Company and shall no longer be bound by any
provision of this Agreement, except for Article XVII.
2.2 Name. The name of the limited liability company formed hereby
and by the filing of the Certificate is Metropolitan Acquisition VII, L.L.C.
The business of the Company may be conducted upon compliance with all
applicable laws under any other name designated by the Managing Member.
2.3 Place of Business and Office; Registered Agent. The principal
office of the Company shall be c/o Insignia Financial Group, Inc., One Insignia
Financial Plaza, Greenville, South Carolina 29602. The registered office of
the Company in the State of Delaware shall be at Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle, State of Delaware, and
its registered agent shall be The Corporation Trust Company. The Managing
Member may from time to time (i) designate other places as the Company's
principal or registered office,
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(ii) designate other individuals or entities as the Company's registered agent,
and (iii) establish additional offices of the Company, in each case in
compliance with the laws of the State of Delaware and otherwise in its sole
discretion. The Managing Member shall notify each of the other Members in
writing of the taking by it of any such action.
2.4 Term. The term of the Company shall commence at the time of
filing of the Certificate in the Office of the Secretary of State of Delaware,
and shall continue in full force and effect until March 31, 2016 unless the
Company is sooner dissolved pursuant to the provisions hereof.
2.5 Qualification in Other Jurisdictions. The Managing Member
shall cause the Company to be qualified or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company owns property or transacts business to the extent, in the reasonable
judgment of the Managing Member, such qualification or registration is
necessary or advisable in order to protect the limited liability of the Members
or to permit the Company lawfully to own property or transact business. The
Managing Member, as an authorized person within the meaning of the Delaware
Act, shall execute, deliver and file any certificates (and any amendments
and/or restatements thereof) necessary for the Company to qualify to do
business in a jurisdiction in which the Company may wish to conduct business.
ARTICLE III
Purpose and Powers of the Company
3.1 Purpose. Purposes of the Company.
3.1.1 The purposes of the Company are to engage in any
business in which a limited liability company may engage pursuant to the laws
of the State of Delaware.
3.1.2 The Company may (i) make tender offers to purchase or
otherwise acquire limited partnership interests (the "Balcor Partnership
Interests"), notes, general partner interests and any other securities
(collectively, the "Balcor Securities"), either directly or via special purpose
subsidiaries of the Company, in certain limited partnerships of which The
Balcor Company or any Affiliate thereof serves as the general partner (the
"Balcor Partnerships") at such time, or from time to time, and for such
purchase prices, and on such terms as the Managing Member may determine in its
sole discretion (each such acquisition being referred to herein as an
"Investment"); (ii) in the Managing Member's sole discretion, possibly to vote
on matters with respect to which partners of the Balcor Partnerships may
participate, including, without limitation, calling meetings, amending the
limited partnership agreement, and removing or
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replacing the general partner of one or more of the Balcor Partnerships with
any person or entity, including the Managing Member or an Affiliate thereof;
(iii) dispose of any or all of the Balcor Securities in a securitization
transaction or transactions at any time or from time to time in the sole
discretion of the Managing Member, including in exchange for cash or equity,
debt (including convertible debt) or other securities (whether directly or
indirectly, by merger, consolidation or otherwise) in a real estate investment
trust (a "REIT") which may be a REIT sponsored, controlled or formed (directly
or indirectly) by IFG or any Affiliate of IFG; and (iv) otherwise owning,
holding, selling, or otherwise disposing of any or all of such Balcor
Securities, at any time and from time to time, as may be determined by the
Managing Member in its sole discretion, and (v) purchase or otherwise acquire
real property and/or other assets from any Balcor Partnership in which the
Company owns an interest, provided such acquisition is made in accordance with
Section 7.1.2 hereof. Additionally, the Company may purchase securities issued
by governmental agencies backed by the full faith and credit of the United
States government, certificates of deposit issued by a commercial bank located
in the United States with assets in excess of $10,000,000,000, commercial paper
rated A-1 or P-1, or interest bearing bank deposits in a commercial bank
located in the United States with assets in excess of $10,000,000,000
("Permitted Temporary Investments").
3.2 Powers of the Company.
(a) The Company shall have the power and authority to
take any and all actions necessary, appropriate, proper, advisable,
convenient or incidental to or for the furtherance of the purposes set
forth in Section 3.1, including, but not limited to the power:
(i) to conduct its business, carry on its
operations and have and exercise the powers granted to a
limited liability company by the Delaware Act in any state,
territory, district or possession of the United States, or in
any foreign country that may be necessary, convenient or
incidental to the accomplishment of the purpose of the
Company;
(ii) to acquire by purchase, lease,
contribution of property or otherwise, own, hold, operate,
maintain, finance, improve, lease, sell, convey, mortgage,
transfer, demolish or dispose of any real or personal property
that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(iii) to enter into, perform and carry out
contracts of any kind, including, without limitation,
contracts with any Member or any Affiliate thereof, or
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any agent of the Company necessary to, in connection with,
convenient to, or incidental to the accomplishment of the
purpose of the Company;
(iv) to purchase, take, receive, subscribe for
or otherwise acquire, own, hold, vote, use, employ, sell,
mortgage, lend, pledge, or otherwise dispose of, and otherwise
use and deal in and with, shares or other interests in or
obligations of domestic or foreign corporations, associations,
general or limited partnerships (including, without
limitation, the power to be admitted as a partner thereof and
to exercise the rights and perform the duties created
thereby), trusts, limited liability companies (including,
without limitation, the power to be admitted as a member or
appointed as a manager thereof and to exercise the rights and
perform the duties created thereby) or individuals or direct
or indirect obligations of the United States or of any
government, state, territory, governmental district or
municipality or of any instrumentality of any of them;
(v) to lend money for any proper purpose, to
invest and reinvest its funds, and to take and hold real and
personal property for the payment of funds so loaned or
invested;
(vi) to sue and be sued, complain and defend,
and participate in administrative or other proceedings, in its
name;
(vii) to appoint employees and agents of the
Company, and define their duties and fix their compensation;
(viii) to indemnify any Person in accordance with
the Delaware Act and to obtain any and all types of insurance;
(ix) to cease its activities and cancel its
Certificate;
(x) to negotiate, enter into, renegotiate,
extend, renew, terminate, modify, amend, waive, execute,
acknowledge or take any other action with respect to any
lease, contract or security agreement in respect of any assets
of the Company.
(xi) to borrow money and issue evidences of
indebtedness, and to secure the same by a mortgage, pledge or
other lien on the assets of the Company;
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(xii) to pay, collect, compromise, litigate,
arbitrate or otherwise adjust or settle any and all other
claims or demands of or against the Company or to hold such
proceeds against the payment of contingent liabilities; and
(xiii) to make, execute, acknowledge and file any
and all documents or instruments necessary, convenient or
incidental to the accomplishment of the purpose of the
Company.
(b) Subject to the other provisions of this Agreement,
the Company, and the Managing Member, on behalf of the Company, may
enter into and perform any and all documents, agreements and
instruments contemplated thereby, all without any further act, vote or
approval of any Member. The Managing Member may authorize any Person
(including, without limitation, any other Member) to enter into and
perform any document on behalf of the Company.
(c) The Company may merge with, or consolidate into, a
REIT, another Delaware limited liability company or any other business
entity (as defined in Section 18-209(a) of the Delaware Act) without
any approval of the Members.
3.3 Admission.
(a) Subject to Section 3.4(c) and 3.4(d) below, the
Managing Member is hereby authorized to admit one or more Persons who
purchase the Units offered in the offering (the "Offering") pursuant
to the Private Placement Memorandum dated March 4, 1996 (the "Offering
Memo") as Members of the Company at any time (each, a "Commencement
Date") after the date hereof to and until April 30, 1996 (with each
Commencement Date being chosen by the Managing Member in its sole
discretion); provided, however, that (i) each additional Member must
purchase at least one Unit, and cannot purchase more than 5 Units, and
(ii) no more than 40 Units may be purchased pursuant to the Offering
Memo (in the sole discretion of the Managing Member subscriptions for
fractional Units may be accepted from subscribers who purchase at
least one Unit). Notwithstanding the immediately preceding sentence,
the Managing Member may, in its sole discretion, (i) waive the five
Unit maximum purchase limit with respect to any investor and (ii)
increase the number of Units that may be purchased pursuant to the
Offering Memo from 40 Units to 50 Units.
(b) After the Offering, the Managing Member may, for any
permitted purpose including funding the Company's acquisition of
additional Balcor Securities, in its sole discretion (i) cause the
Company to issue and sell a number of additional Units (including
fractions of Units) equal to
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up to one-third of the Units purchased pursuant to the Offering Memo
without the consent of the other Members and (ii) cause the Company to
issue and sell a number of additional Units exceeding one-third of the
Units purchased pursuant to the Offering Memo with the consent of a
Majority-In-Interest of the Members. The terms of the issuance and
sale of additional Units shall be determined by the Managing Member in
its sole discretion; provided, however that the price per additional
Unit shall equal the net asset value of the Company, as determined by
the Managing Member in its sole discretion (taking into account a
variety of factors including, but not limited to, the estimated
liquidation value of the assets underlying the Balcor Securities owned
by the Company, the anticipated holding period of the assets
underlying the Balcor Securities, whether the Company controls the
Balcor Partnerships and the Company's ownership percentage of the
Balcor Partnerships), divided by the number of Units (after giving
effect to the sale of the Additional Units (as defined below)). Prior
to consummating any sale of Additional Units, the Managing Member
shall give the Members notice of the impending sale. Each Member will
have a period of three days after delivery of such notice to subscribe
irrevocably to purchase up to its pro rata share, based upon the
number of Units then held by such Member, of the additional Units
covered by such notice (the "Additional Units"); provided, however,
that a Member may subscribe for Additional Units in excess of its pro
rata share to the extent that other Members decline to subscribe for
all of their pro rata share of the Additional Units. If necessary,
such excess Additional Units shall be allocated among the
oversubscribing Members pro rata based upon the respective numbers of
Additional Units for which they oversubscribed. If the Members do not
subscribe for all of the Additional Units, the Managing Member shall
have a period of 90 days in which to obtain subscriptions for the
remaining Additional Units to any person or persons (including
existing Members). Any Additional Units not purchased within such
90-day period shall again be subject to the pre-emption rights of the
Members. The Managing Member may, in its sole discretion, elect to
make more than one offering of Additional Units.
(c) Prior to the admission of any additional Member to
the Company pursuant to Section 3.4(a) above, the Managing Member must
receive from such additional Member (i) an executed copy of a
subscription agreement relating, among other things, to the
subscription by such additional Member to its Interest in the Company,
which subscription agreement shall be satisfactory in form and
substance to the Managing Member in its sole discretion (each, a
"Subscription Agreement"), (ii) such other documents, instruments, and
agreements as may be required by this Agreement or by the
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Managing Member in its sole discretion and (iii) full payment of such
additional Member's Capital Commitment.
(d) Notwithstanding anything to the contrary in this
Section 3.3, the Managing Member will not admit any additional Members
to the Company unless and until a minimum of at least 10 Units have
been subscribed for (including the subscriptions of the Managing
Member) by March 31, 1996.
ARTICLE IV
Capital Contributions and Capital Accounts
4.1 Capital Contributions. "Capital Contributions" shall mean,
for each Member, the aggregate amount of such Member's cash contributions to
the Company pursuant to Sections 4.2 and 4.3 of this Agreement through the date
of determination, and in the case of the Managing Member, shall also include
the Managing Member's non-cash contribution to the Company pursuant to Section
4.5.6 hereof. The total capital of the Company shall consist of the Capital
Contributions made to the Company by the Managing Member pursuant to or as
described in Section 4.2, plus the Capital Contributions made to the Company by
the other Members pursuant to or as described in Section 4.3. The capital of
the Company shall be divided into units of Membership Interests (each, a
"Unit"), and each Member shall hold that number of Units equal to his aggregate
Capital Contributions divided by $1 million.
4.2 Capital Contributions by Managing Member. The Managing Member
has contributed $1.01 to the capital of the Company, and shall make additional
Capital Contributions in the amount and form set forth and described in the
Offering Memo payable on the same terms and conditions as for the Capital
Contributions of the non-managing Members.
4.3 Capital Contributions by non-Managing Members. IFG has
contributed $100 to the capital of the Company. Each additional Member shall
agree in its Subscription Agreement to make Capital Contributions in the amount
set forth in such Subscription Agreement (aggregating not less than $1 million,
or one Unit), as accepted by the Managing Member, acting on behalf of the
Company (the "Capital Commitment"). A Member's Capital Contribution is to be
made at the time the Managing Member accepts such Member's Subscription
Agreement. A complete list of Members and the amount of their Capital
Contributions shall be set forth on Exhibit B hereto, as amended from time to
time.
4.4 Investment of Capital Contributions. Pending use by the
Company for Investments, Capital Contributions may be invested in Permitted
Temporary Investments.
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4.5 Other Matters Relating to Capital Contributions.
4.5.1 Subject to Section 7.1.2(a), any funds provided to
the Company by any Member (other than the Capital Contributions contemplated by
Sections 4.2 and 4.3) shall be treated as a loan made to the Company by such
Member at the time of such provision and not as a Capital Contribution to the
Company. Subject to Section 7.1.2(a), a Member's loans to the Company shall
bear interest at such rate per annum, and shall have such other terms and
conditions, as the Managing Member may determine in its sole discretion;
provided, however, that any loan made to the Company by the Managing Member or
IFG shall bear interest at a rate per annum equal to the Managing Member's cost
of funds or IFG's cost of funds, respectively.
4.5.2 The Managing Member may cause the Company to repay
any loan made to the Company pursuant to this Section 4.5 in accordance with
the terms of such loan as a preference to distributions of the Company to the
Members.
4.5.3 Except as otherwise provided in this Agreement, the
Company shall not pay any interest on any Capital Contributions made by any
Member to the Company.
4.5.4 Except as otherwise provided in this Agreement, a
Member shall not be entitled to withdraw, or to a return of, any part of the
Capital Contributions that it has made to the Company or to receive property or
assets other than cash in return thereof, and the Managing Member shall not be
liable to any Member for a return of the Capital Contributions that such Member
has made to the Company.
4.5.5 Except as otherwise provided in this Agreement, a
Member shall not be entitled to priority over any other Member with respect to
(i) a return to such Member of the Capital Contributions that it has made to
the Company, (ii) allocations of Company items of income, gain, loss,
deduction, or credit, or (iii) Company distributions.
4.5.6 All Capital Contributions to the Company shall be
made in cash provided, however, that the Managing Member shall satisfy
approximately $1,700,000 of the subscription price for its purchase of Units in
the Company by causing FMG Acquisition I, L.L.C. to contribute its 25%
interests in nine partnerships (the "WIG Partnerships") that have previously
acquired interests (the "Subject Partnership Interests") in nine of the Balcor
Partnerships (the "Subject Partnerships"). The effects of such contribution to
the Company are more fully discussed in Section 6.10 hereof.
4.6 Member's Interest. A Member's Interest shall for all purposes
be personal property. A Member has no interest in specific Company property.
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4.7 Capital Accounts.
(a) There shall be established for each Member on
the books of the Company a Capital Account initially reflecting an
amount equal to such Member's Capital Contribution. The Capital
Accounts shall be adjusted from time to time to reflect the Members'
additional Capital Contributions, if any, allocable shares of Net
Profits or Net Losses, special allocations pursuant to Section 5.4,
distributions pursuant to Sections 5.1, and 8.2(c), and as otherwise
required by the Code and Regulations, including but not limited to,
the rules of Treas. Reg. Section 1.704-1(b)(2)(iv).
(b) A Member's Capital Account shall not be
decreased by the payment of any fee to, or the reimbursement of any
expense incurred by such Member, nor shall a Member's Capital Account
be increased by the failure to pay any fee to, or the failure to
reimburse any expense incurred by, such Member.
(c) The Company shall establish and maintain an
Adjusted Capital Account for each Member in its workpapers (and not on
its books).
ARTICLE V
Distributions and Allocation of Profits and Losses
5.1 Distributions -- General Principles.
(a) Distributions made by the Company shall be
made in accordance with this Article V.
(b) The Managing Member shall have discretion as
to the making and timing of distributions out of Distributable Cash.
For purposes of this Section 5.1, "Distributable Cash" shall mean the
gross cash proceeds of the Company regardless of source (excluding
Capital Contributions by the Members and loans obtained by the
Company) less the portion thereof that the Managing Member reasonably
determines necessary to cover the Company's anticipated expenses and
losses or to facilitate the Company's potential acquisition of
additional Balcor Securities or reserves to satisfy any required
withholding pursuant to Section 5.1(d). Notwithstanding the first
sentence of this Section 5.1(b), the Managing Member will distribute
50% of the Distributable Cash no less frequently than annually in
order to assist Members in the payment of taxes on their allocable
portions of the Company's taxable income.
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(c) The Managing Member may elect to distribute
securities, assets or other property in kind. Each distribution in
kind of securities, assets or other property shall be made in
accordance with Section 5.2 based upon the Fair Market Value of such
property.
(d) To the extent the Company is required by law
to withhold or to make tax payments on behalf of or with respect to
any Member (e.g., backup withholding) ("Tax Advances"), the Managing
Member may withhold such amounts and make such tax payments as so
required. All Tax Advances (other than Tax Advances withheld from
distributions) made on behalf of a Member, together with interest
thereon at the "applicable federal rate," shall, at the option of the
Managing Member, (i) be promptly paid to the Company by the Member on
whose behalf such Tax Advances were made or (ii) be repaid by reducing
the amount of the current or next succeeding distribution or
distributions which would otherwise have been made to such Member or,
if such distributions are not sufficient for that purpose, by so
reducing the liquidation proceeds otherwise payable to such Member.
Whenever the Managing Member selects option (ii) pursuant to the
preceding sentence for repayment of a Tax Advance by a Member, for all
other purposes of this Agreement, such Member shall be treated as
having received all distributions (whether before or upon liquidation)
unreduced by the amount of such Tax Advance. Each Member hereby
agrees to indemnify and hold harmless the Company from and against any
liability with respect to Tax Advances required on behalf of or with
respect to such Member.
(e) Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not make a distribution
to any Member with respect to such Member's Interest if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
5.2 Amounts and Priority of Distributions. Distributions shall be
made to the Members in proportion to their Percentage Interests.
5.3 Allocations of Net Profits and Net Losses.
(a) Net Losses shall be allocated to the Members as
follows:
(i) First, to the Members in accordance with
their Percentage Interests; provided, however, that Net Losses
shall not be allocated to a Member to the extent such
allocation would cause the balance of such Member's Adjusted
Capital Account to become negative. Such Net Losses shall be
allocated to the Members who have positive balances in their
Adjusted Capital
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Accounts until the Adjusted Capital Accounts of each of the
Members has a balance of zero.
(ii) Thereafter, to the Managing Member.
(b) Net Profits shall be allocated as follows:
(i) First, to those Members, if any, having
negative balances in their respective Adjusted Capital
Accounts, an amount equal, and in proportion to such negative
balances;
(ii) Second, to the Members in such manner as may
be necessary so that each Member's respective Adjusted Capital
Account balance as a percentage of the total Adjusted Capital
Account balances corresponds with such Member's Percentage
Interest; and
(iii) Thereafter, to the Members in accordance with
their Percentage Interests.
5.4 Special Allocations.
(a) Notwithstanding any other provision of this
Agreement, the following allocations shall be made prior to any other
allocations under this Agreement and in the following order of
priority:
(i) If there is a net decrease in Company
Minimum Gain during any Fiscal Year or period so that
an allocation is required by Treas. Reg. Section
1.704-2(f), items of income and gain shall be
allocated to the Members in the manner and to the
extent required by such Regulation. This provision
is intended to be a minimum gain chargeback within
the meaning of Treas. Reg. Section 1.704-2(f)(1) and
shall be interpreted and applied consistent
therewith.
(ii) If there is a net decrease in the
minimum gain attributable to a Member Nonrecourse
Loan during any Fiscal Year or period so that an
allocation is required by Treas. Reg. Section
1.704-2(i)(4) (minimum gain chargeback attributable
to a member nonrecourse debt), items of income and
gain shall be allocated in the manner and to the
extent required by such Regulation.
(b) If, at the close of any Fiscal Year,
allocations of Net Profits or Net Losses pursuant to Section 5.3 or
distributions made or to be made pursuant to Section 5.2 or Section
9.2(c) would not prevent or
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would cause any Member to have a negative Adjusted Capital Account
balance, then gross income of the Company for such year and each
subsequent year (if necessary) shall be allocated to such Member to
the extent required to eliminate, as quickly as possible, such
negative Adjusted Capital Account balance. This Section 5.4(b) is
intended to comply with the qualified income offset requirement of
Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(c) Nonrecourse Deductions, if any, for any
Fiscal Year or period shall be allocated to the Members in proportion
to their Percentage Interests.
(d) Any Member Nonrecourse Deduction shall be
allocated to the Member who bears the economic risk of loss with
respect to the loan giving rise to such deduction within the meaning
of Treas. Reg. Section 1.752-2.
5.5 Tax Allocations.
(a) For federal, state and local income tax
purposes, all items of taxable income, gain, loss, and deduction for
each Fiscal Year or period shall be allocated among the Members in
accordance with the manner in which the corresponding items were
allocated under Sections 5.3 and 5.4, except as provided in Sections
5.5(b) and (c) hereof.
(b) If property is contributed to the Company by
a Member and there is a difference between the basis of such property
to the Company for federal income tax purposes and the Fair Market
Value at the time of its contribution, then items of income, gain,
deduction and loss with respect to such property and other property,
as computed for federal income tax purposes (but not for book
purposes), shall be allocated (in any permitted manner determined by
the Managing Member) among the Members so as to take account of such
book/tax difference as required by Code Section 704(c).
(c) If property (other than property described in
Section 5.5(b) hereof) of the Company is reflected in the Capital
Accounts of the Members and on the books of the Company at a book
value that differs from the adjusted basis of such property for
federal income tax purposes by reason of a revaluation of such
property, then items of income, gain, deduction and loss with respect
to such property and other property, as computed for federal income
tax purposes (but not for book purposes), shall be allocated (in any
permitted manner determined by the Managing Member) among the Members
in a manner that takes account of the difference between the adjusted
basis of such property for federal income tax purposes and its book
value in the same manner as differences between adjusted basis and
Fair Market Value are
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taken into account in determining the Members' shares of tax items
under Code Section 704(c).
5.6 Allocations and Elections In the Event of Transfers of Company
Interests. During a year in which a sale or other transfer of an Interest in
the Company shall occur, the following allocations and elections shall be made:
5.6.1 (a) If there is a transfer of all or a part of a
Member's Interest in accordance with this Agreement, the allocation of
Net Profits, Net Losses, gross income and deductions pursuant to this
Article V attributable to that Interest shall be divided between the
transferor and transferee by taking into account their varying
interests during the Fiscal Year and by utilizing any conventions
permitted by law and selected by the Managing Member. Except as
provided in Section 5.6.1(b), solely for purposes of making such
allocations, the Company shall not recognize any transfer until the
first day of the calendar quarter following the calendar quarter in
which such transfer occurred.
(b) Notwithstanding the foregoing, if during the
calendar quarter in which there is a transfer of an Interest, the
Company shall derive substantial income from activities outside of the
ordinary course of business (as determined by the Managing Member),
the allocations of Net Profits, Net Losses, gross income and
deductions attributable to that Interest shall be divided between the
transferor and transferee by taking into account the date on which
such Transfer actually occurred.
5.6.2 The foregoing provisions are intended to comply with
Treas. Reg. section 1.704-1(b), and shall be interpreted and applied as
provided in such Treasury Regulations. If the Managing Member shall reasonably
determine that the manner in which the Capital Accounts or Adjusted Capital
Accounts, or nay increases or decreased thereto, are computed, or the manner in
which any allocations are made under Article V, should be adjusted in order to
comply with Section 704(b) and Section 704(c) of the Code and Regulations
thereunder, the Managing Member shall make such modifications, provided that
the Managing member shall not, pursuant to this Section 5.6.2, modify the
manner of making distributions pursuant to this Agreement. Without limiting
the generality of the foregoing, the Managing Member shall apply the provisions
of this Article V in a manner that does not result in the duplication of the
allocation of items of income, gain, deduction or loss. All elections,
decisions and other matters concerning the allocations hereunder among the
Members, and accounting procedures, not specifically and expressly provided for
by the terms of this Agreement, including, but not limited to, the election
pursuant to section 754 of the Code (or corresponding provisions of subsequent
law)
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to adjust the basis of the Company's assets as provided by sections 734 and 743
of the Code, shall be determined by the Managing Member.
5.7 Other Considerations. Without altering the overall amount of
Net Profits or gross income allocable to any Member, Net Profits or gross
income taxable as ordinary income under Sections 1245 and 1250 of the Code, or
similar provisions of the Code (the "Depreciation Recapture"), shall, to the
extent possible, be allocated to those Members to whom allowances for
depreciation or amortization giving rise to Depreciation Recapture were
allocated.
ARTICLE VI
Management
6.1 Management of the Company.
(a) MAP VII Acquisition Corporation shall be the
managing member of the Company (the "Managing Member") and, in such
capacity, shall manage the Company in accordance with this Agreement.
The actions of the Managing Member taken in such capacity and in
accordance with this Agreement shall bind the Company.
(b) The Managing Member shall have full,
exclusive and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the
business and affairs of the Company and to take all such actions as it
deems necessary or appropriate to accomplish the purpose of the
Company as set forth herein. The Managing Member shall be the sole
Person with the power to bind the Company, except and to the extent
that such power is expressly delegated to any other Person by the
Managing Member, and such delegation shall not cause the Managing
Member to cease to be a Member or the managing member of the Company.
The other Members do not have the right, power or authority to remove
the Managing Member from its position as the managing member of the
Company.
(c) The Managing Member may appoint individuals
with such titles as it may elect, including the titles of President,
Vice President, Treasurer and Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may
delegate in writing to any such Person.
6.2 Powers of the Managing Member. The Managing Member shall have
the right, power and authority, in the management of the business and affairs
of the Company, to do or cause to be done any and all acts, at the expense of
the Company, deemed by
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the Managing Member to be necessary or appropriate to effectuate the business,
purposes and objectives of the Company. Without limiting the generality of the
foregoing, the Managing Member shall have the power and authority to:
(i) purchase, sell, or otherwise acquire or
dispose of any asset when the Managing Member in its sole
discretion deems such purchase, sale, acquisition, or
disposition to be advisable;
(ii) borrow money from any Person (including any
Member) for any Company purpose, or guarantee loans made to
any Person, and to secure such borrowings or guaranties with
Company assets;
(iii) perform, or arrange for the performance of,
the management and administrative services necessary for the
operations of the Company;
(iv) prepare or cause to be prepared in conformity
with good business practice (A) all reports that are to be
furnished to the Members or that are required by or to be
furnished to taxing bodies or other governmental agencies, and
(B) the financial statements and reports referred to in
Section 13.2;
(v) incur all expenditures permitted by this
Agreement and, to the extent that funds of the Company are
available, pay all expenses, debts and obligations of the
Company;
(vi) employ and dismiss from employment any and
all employees, consultants, agents, attorneys, accountants and
professional advisors;
(vii) enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements or
other instruments as the Managing Member shall determine to be
appropriate in furtherance of the purposes of the Company;
(viii) pay, collect, compromise, arbitrate, resort
to legal action for or otherwise adjust claims or demands of
or against the Company;
(ix) engage in any kind of activity and perform
and carry out contracts of any kind necessary to, or in
connection with, or incidental to, the purposes of the Company
(as set forth in Section 3.1), to the extent the same may be
lawfully carried on or performed by a limited liability
company under the laws of each state in which the Company is
then formed or qualified;
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(x) cause Interests in the Company to be sold,
and admit individuals or entities to the Company as Members or
Substitute Members in accordance with the terms and conditions
of this Agreement; and
(xi) execute on behalf of the Members, pursuant to
the powers of attorney delivered to the Managing Member
pursuant to Article XII, such amendments to this Agreement as
are permitted by and approved by the Members in accordance
with the provisions of Section 10.1, and such amendments to
the Certificate as the Managing Member deems necessary or
advisable to effect the purposes of the Company or the
admission of a new Member or a Substitute Member or to comply
with any applicable income tax or other laws and regulations;
6.3 Reimbursement of Expenses to An Affiliate of the Managing
Member; Reimbursement of Expenses to the Managing Member; Engagement of
Affiliates of Members; Fees and Certain Other Payments to Affiliates of the
Managing Member.
6.3.1 Reimbursement of IFG for Third Party Expenses. The
Company shall reimburse IFG, an Affiliate of the Managing Member, for all
out-of-pocket expenses paid to third parties by IFG in connection with (i) the
formation and organization of the Company, (ii) the offer and sale of Interests
in the Company to the Members, and (iii) other business or affairs of the
Company, in each case at such times as the Managing Member may determine in its
sole discretion.
6.3.2 Reimbursement of the Managing Member and its
Affiliates; IFG's Provision of Corporate Services. The Company shall reimburse
the Managing Member and its Affiliates for all out-of-pocket expenses
(including, without limitation, allocable portions of rent, salaries, and other
overhead items, and legal, accounting, and other expenses) incurred by the
Managing Member and its Affiliates in connection with the business or affairs
of the Company (other than expenses reimbursed pursuant to Section 6.3.1 and
expenses incurred by the Managing Member and its Affiliates in connection with
the formation and organization of the Company which were not paid to third
parties. Additionally, the Managing Member and its Affiliates may cause the
Company to enter into an agreement with IFG pursuant to which IFG, for the
period beginning after the Offering, would provide the Company with financial,
legal and other corporate services at IFG's cost (including an allocation of
rent, salaries and other overhead items that the Managing Member and IFG
determine in their sole discretion to be reasonable).
6.3.3 Engagement of IFG as the Company's Investment
Advisory Firm. Upon the first closing of any of the Company's tender offers
for Balcor Securities (if ever), the Company shall
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pay IFG a one-time investment advisory fee in the amount of $500,000.
6.3.4 INTENTIONALLY OMITTED
6.3.5 Engagement of Affiliates of Members. Except to the
extent restricted by Section 7.1.2(a), the Company, in the sole discretion of
the Managing Member, may retain, and may cause each other entity controlled by
the Company to retain, Affiliates of any Member for any purpose at rates
comparable to the rates charged by comparable individuals or entities that are
not Affiliated with such Member for comparable services.
6.3.6 Potential Engagement of IFG as the Company's Property
and Asset Manager. If the Company (or an entity controlled by the Company)
purchases or otherwise acquires real property and/or other assets from any of
the Balcor Partnerships in which the Company (or an entity controlled by the
Company) owns an interest (pursuant to Sections 3.1.2 and 7.1.2), the Company
shall be able to retain (or where applicable, cause its controlled entity to
retain) IFG or an Affiliate of IFG, as the exclusive provider of property and
asset management services to the Company (and such other entities, as the case
may be) in connection with all real property and other assets acquired from the
Balcor Partnerships, in each case on substantially the same terms as such
services are currently being provided and in no event for property management
fee rates greater than those fee rates presently being paid.
6.4 No Management by Other Members. Except as otherwise expressly
provided herein, no Member other than the Managing Member shall take part in
the day-to-day management, or the operation or control of the business and
affairs of the Company. Except and only to the extent expressly delegated by
the Managing Member, no Member or other Person other than the Managing Member
shall have any right, power or authority to transact any business in the name
of the Company or to act for or on behalf of or to bind the Company.
6.5 Reliance by Third Parties. Third parties dealing with the
Company may rely conclusively upon any certificate of the Managing Member to
the effect that it (or its designee) is acting on behalf of the Company. The
signature of the Managing Member shall be sufficient to bind the Company in
every manner to any agreement or on any document.
6.6 Limitations on Managing Member. Notwithstanding the
provisions of Section 6.2, the Managing Member shall not do any of the
following:
(i) take any action which would make it
impossible to carry on the ordinary operations of the
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Company, except as otherwise provided in this Agreement;
(ii) admit a Person as a Member, except as
otherwise provided in this Agreement;
(iii) amend this Agreement, except as otherwise
provided in Article X; or
(iv) take any of the actions set forth in Section
7.1 hereof without the prior written consent of Members
holding over 50% of the Percentage Interests of the Company.
6.7 Indemnification of the Managing Member. The Company shall
indemnify and hold harmless the Managing Member, its stockholders, each of
their respective Affiliates, including IFG and its Affiliates, and each of the
directors, officers, stockholders, partners, employees, counsel, agents, and
control persons, if any, of each of the foregoing (each, an "Indemnitee"), from
and against any and all losses, liabilities, or damages incurred or suffered,
and any and all expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement incurred or suffered, by any Indemnitee as a result
of any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, related in whole or in part
to the activities of the Company (including, without limitation, the activities
of such Indemnitee as a director, officer, stockholder, partner, employee,
counsel, agent, or control persons of any other entity, as follows:
6.7.1 An Indemnitee shall be indemnified hereunder for any
loss, liability, damage, expense, judgment, fine, or amount paid in settlement
incurred or suffered by it as a result of any action, suit, or proceeding
arising in whole or in part out of any action that such Indemnitee took or
omitted to take related to the activities of the Company, unless (i) such
Indemnitee is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to have taken
or omitted to take such action in bad faith or in a manner that such Indemnitee
did not reasonably believe to be in or not opposed to the best interests of the
Company, or (ii) if the Indemnitee is the Managing Member, such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or gross negligence by the Managing Member in the
performance of its duties as the managing member of the Company, including,
without limitation, the management of the Company's business, the purchase,
sale and management of its assets, any extraordinary transaction by the
Company, such as a merger or sale of assets, and the offering and sale of
Units.
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6.7.2 The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that an
Indemnitee did not satisfy the conditions to its indemnification hereunder set
forth in the preceding Section 6.7.1.
6.7.3 The Managing Member (except as otherwise provided in
this Section 6.7.3, acting in its sole discretion) may cause the Company to
make advances (each, a "Litigation Advance") from time to time to any
Indemnitee (including, without limitation, the Managing Member) who incurs, or
who expects to incur, attorneys' fees or other expenses in connection with any
threatened, pending, or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative) related in whole or in part to the
activities of the Company, upon the written request made by such Indemnitee
from time to time to the Company (each, an "Advance Request"); provided,
however, that (i) no Litigation Advance shall be in an amount greater than the
amount that, as set forth by such Indemnitee in the relevant Advance Request,
is then required to enable such Indemnitee to pay, or to reimburse such
Indemnitee for payment of, such attorneys' fees and other expenses, and (ii) as
a condition precedent to the making by the Company of any Litigation Advance to
an Indemnitee, such Indemnitee must agree in writing with the Company to repay
promptly such Litigation Advance to the Company in the event that such
Indemnitee is subsequently determined not to be entitled to indemnification
under this Agreement (which written agreement must be satisfactory in form and
substance to the Managing Member, acting in its sole discretion).
6.7.4 Indemnification and Litigation Advances shall be made
from the assets of the Company, and no Member shall be personally liable to any
Indemnitee.
6.7.5 The Managing Member shall not be liable to the
Company or to any Member in damages or otherwise (i) if taxing authorities
disallow or adjust any allocations of profit or loss or any deductions or
credits in the Company's tax returns, (ii) for the repayment of Capital
Contributions made to the Company by any Member, or (iii) for the taking of any
action by the Managing Member, or the failure of the Managing Member to take
any action, the effect of which may be to cause or result in loss, damage, or
liability to the Company, unless the Managing Member is determined in a final
decision of a court of competent jurisdiction, which decision is not subject to
review or appeal, to have taken or omitted to take such action in bad faith or
in a manner which the Managing Member did not reasonably believe to be in or
not opposed to the best interests of the Company, or unless such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or
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grossly negligent conduct by the Managing Member in the performance of its
duties as the managing member of the Company.
6.7.6 This Section 6.7 shall inure to the benefit of the
Indemnitees and their respective heirs, executors, administrators, successors,
and assigns, if any, and shall not be deemed exclusive of any other rights to
which such individuals or entities may be entitled under any agreement, vote of
the Members, or law.
6.8 Exculpation. Neither the Managing Member, nor its
stockholders, each of their respective Affiliates (including IFG and its
Affiliates), nor each of the directors, officers, stockholders, partners,
employees, counsel, agents and control persons, if any, of each of the
foregoing, shall be liable to any Member or the Company for honest mistakes of
judgment, or for action or inaction, taken in good faith for a purpose that was
reasonably believed to be in the best interests of the Company, or for losses
due to such mistakes, action or inaction, or to the gross negligence,
dishonesty, or bad faith of any employee, broker, or other agent of the
Company, provided that such employee, broker, or agent was selected, engaged,
or retained and monitored with reasonable care. The Managing Member and such
persons may consult with counsel and accountants in respect of Company affairs
and be fully protected and justified in any action or inaction that is taken in
accordance with the advice or opinion of such counsel or accountants, provided
that they shall have been selected and monitored with reasonable care.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 6.8 shall not be construed so as to relieve (or attempt to relieve) any
person of any liability by reason of gross negligence, fraud or willful
misconduct or to the extent (but only to the extent) that such liability may
not be waived, modified or limited under applicable law, but shall be construed
so as to effectuate the provisions of this Section 6.8 to the fullest extent
permitted by law.
6.9 Other Activities of the Managing Member and its Affiliates.
The Managing Member and its Affiliates have engaged in, possessed interests in,
and have provided services to, and currently and in the future may engage in,
possess interests in, or provide services to other business ventures of every
kind and description, including, without limitation, ventures directly
competitive with or affiliated with the Company or any Member, for its own
account. Neither the Company nor any of the Members shall have any rights by
virtue of this Agreement in and to such business ventures or services or to the
income or profits derived therefrom. If IFG determines, in its sole
discretion, at any time to make a tender offer to purchase or otherwise acquire
Balcor Securities and IFG believes, in its sole discretion, that the Company
does not have the financial ability to make such offer or acquisition and
cannot obtain financing on an expeditious basis, then none of IFG, the Managing
Member, the
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directors or officers of the Managing Member, or any of their respective
Affiliates will have any requirement or duty to provide such opportunity to the
Company; provided, however, that with respect to any general partner interests
in the Balcor Partnerships, IFG (or any of its Affiliates) will be entitled,
but not required, to purchase such general partner interests without having any
requirement or duty to provide such opportunity to the Company.
6.10 The WIG Partnerships and the Buy/Sell Rights.
6.10.1 Ownership of the WIG Interests will subject the
Company to the terms and conditions set forth in the Agreement of Partnership
of each WIG Partnership, all of which are in substantially identical form.
Such terms and conditions include a right of first refusal for either partner
to cause the WIG Partnerships (or new entities formed on substantially similar
terms except that each partner would have a 50% interest with joint control as
co-managing partners) to make any tender offer for Balcor Partnership Interests
of the Subject Partnership Interests that the other partner desires to make.
Therefore, if the Company desires to make a tender offer for such Balcor
Partnership Interests, it must give the other partner in the WIG Partnerships,
Walton Street Acquisition Company L.L.C. ("Walton"), the right to cause the WIG
Partnerships to make such tender offer. The partners of the WIG Partnerships
are also restricted from participating, without the consent of the other
partner, in any proxy solicitation or any election contest with respect to the
general partner interest in the Subject Partnerships.
Furthermore, the Agreement of Partnership of each WIG
Partnership permits either partner (the "Triggering Partner") to require the
other partner (the "Noticed Partner") to elect either to purchase all of the
Triggering Partner's interests in any or all of the WIG Partnerships, or to
sell all of the Noticed Partner's interests in any or all of the WIG
Partnerships to the Triggering Partner, at a price that is fixed by the
Triggering Partner in its notice to the Noticed Partner (the "Buy/Sell Right").
Such right may be exercised between January 15 and January 30 of each year,
beginning January 15, 1997, or within 30 days following a filing with the
Securities and Exchange Commission by or in respect of the Subject Partnerships
of a proposed solicitation or offering of securities in respect of a merger,
sale of all or substantially all the assets, combination, or dissolution
involving the Subject Partnerships.
6.10.2 If the Managing Member determines, in its sole
discretion, that it would be advisable to purchase the interests of Walton in
one or more WIG Partnerships pursuant to the Buy/Sell Right, either as a
Triggering Partner or as a Noticed Partner in response to one or more offers by
Walton as the Triggering Partner, then the Managing Member will have the
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discretion to cause such purchases to be made other than by the Company.
However, the Managing Member will, in such case, give the Members the right,
exercisable within five days following delivery of notice by the Managing
Member, to participate in such purchases, pro rata based on the respective
amounts of the Members interests in the Company. If, following the expiration
of such five-day period, the Managing Member has not received funds from the
Members in an amount equal to the price required to purchase Walton's interests
in such WIG Partnerships, then the Managing Member may offer the right to
purchase the balance of such interests to any other person or entity, including
affiliates of the Managing Member, on such terms and conditions as the Managing
Member may determine, in its sole discretion. The Managing Member may, in its
sole discretion, cause such purchase to be made by a partnership or other
entity in which Members and other persons who elected to participate in such
purchases will hold equity interests.
ARTICLE VII
Rights and Obligations of Members
7.1 Powers of Members.
7.1.1 Limitations. Except as otherwise specifically
provided in or contemplated by this Agreement or required by the Delaware Act,
no Member other than the Managing Member shall have the power to act for or on
behalf of, or to bind, the Company. Notwithstanding the foregoing sentence,
all Members shall constitute one class or group of members of the Company for
all purposes of the Delaware Act.
7.1.2 Consent Rights. The Managing Member shall not cause
the Company to take, and shall not take on behalf of the Company, any of the
following actions without obtaining the prior written consent of a
Majority-In-Interest of the Members:
(a) the payment by the Company of any salary or other
fees or compensation to the Managing Member, IFG, or
any of their respective Affiliates, except (A) as
contemplated by Sections 6.3.1, 6.3.2, 6.3.3, 6.3.4,
6.4.5, and 14.11, and Articles V and IX, and (B) to
pay at any time and from time to time the principal
of and interest upon any loan made to the Company by
the Managing Member, IFG, or any of their respective
Affiliates in connection with any Company Acquisition
in each case in accordance with the terms of such
loan; or
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(b) purchase or otherwise acquire any real
property and/or other assets from any Balcor
Partnership in which the Company owns an
interest.
Without limiting the foregoing, the Managing Member is
expressly authorized and permitted to transfer any Balcor Securities acquired
by the Company to any REIT, which may include any REIT including a REIT
sponsored, formed, or controlled by IFG (or any of its Affiliates), in exchange
for cash or for equity, debt (including convertible debt) or other securities
in such REIT, without consent of the Members being required. Additionally, the
Managing Member is expressly authorized and permitted to transfer all (and not
less than all) of its Interests in the Company to any such REIT in exchange for
cash or for equity, debt (including convertible debt) or other securities in
such REIT, without any consent of the other Members being required. Upon any
such transfer of the Managing Member's Interest, all the other Members shall be
required to transfer all their Interests in the Company to such REIT in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT.
7.1.3 Special Meetings. A special meeting of the Members
may be called by the Managing Member on its own motion or at the written
request executed and delivered to the Managing Member by Members holding at
least 80% of the Percentage Interests in the Company, at which meeting the
Members may exercise in person or by proxy only those powers expressly granted
to Members pursuant to this Agreement.
7.2 Outside Activities of Members. Each Member may engage in or
possess interests in other business ventures of every kind and description for
its own account. Neither the Company nor any of the Members shall have any
rights by virtue of this Agreement in and to such business ventures or to the
income or profits derived therefrom.
7.3 Reimbursement of Fees and Expenses. The Company shall bear
all of the out-of-pocket expenses, including attorneys' fees and accountants'
fees, incurred in connection with the organization of the Company and the
operation and maintenance of the Company and its assets and business.
7.4 Liability. No Member shall be obligated to (a) provide any
funds to the Company in excess of the amount of its agreed Capital Contribution
to the Company, or (b) make advances or loans to the Company. Except as
otherwise expressly required by law, no Member, including the Managing Member,
in its capacity as Member or Managing Member, shall have any liability for the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise.
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7.5 No Interference with Balcor Contracts. Each Member hereby
agrees that it will not, directly or indirectly, (a) terminate, seek to
terminate, cause the termination of, reduce the compensation then payable
under, or otherwise interfere in any way with any contract between IFG (or an
Affiliate of IFG) and any of the Balcor Partnerships regarding the provision of
management services for the properties held by such Balcor Partnership (the
"Balcor Contracts"); or (b) instigate, encourage or assist any other limited
partner of a Balcor Partnership or any other third party to do any of the
foregoing.
ARTICLE VIII
Transfer of Interests
8.1 Transfer of Managing Member's Interest in the Company.
8.1.1 (a) The Managing Member may (not assign its
Interest in the Company, in whole or in part (and no proposed assignee of all
or a portion of the Managing Member's Interest in the Company shall be admitted
to the Company as a Managing Member of the Company), unless (A) the Managing
Member obtains the prior written consent of a Majority-In-Interest of the
Members (other than the Managing Member) to such assignment and admission, and
(B) such proposed assignee meets the tests set forth in Section 8.1.1(b), or
8.1.1(c), whichever is applicable. A sale of the stock of the Managing Member
shall not be deemed to be an assignment of its Interest in the Company.
(b) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any individual (and no
proposed assignee of all or a portion of the Managing Member's Interest in the
Company shall be admitted to the Company as a managing member of the Company)
if, in the opinion of counsel to the Company, such assignment or admission will
cause the termination of the Company for federal income tax purposes.
(c) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any entity (and no proposed
assignee of all or a portion of the Managing Member's Interest in the Company
shall be admitted to the Company as a managing member of the Company) if, in
the opinion of counsel to the Company, (A) such assignment or admission will
cause the Company to lose its exclusion from the definition of an investment
company under Section 3(c)(1) of the Investment Company Act of 1940, as
amended, after such assignment or admission, (B) such proposed assignee is not
qualified to do business in such states as counsel to the Company determines is
necessary or advisable, or (C) such assignment or admission will cause the
termination of the Company for federal income tax purposes.
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(d) Except in connection with an assignment
permitted by this Section 8.1, the Managing Member may not resign or withdraw
as the managing member of the Company or take any action which would cause its
resignation or withdrawal as the managing member of the Company.
(e) Any purported assignment of all or a portion
of the Managing Member's Interest in the Company that violates any of
subsections 8.1.1(a) through 8.1.1(c) above (other than as provided in
Subsection (f) below) shall be null and void ab initio.
(f) Notwithstanding anything to the contrary in
this Agreement, the stock of the Managing Member may be pledged by IFG to
secure any IFG indebtedness without the consent of the other Members.
8.1.2 (a) Upon the Incapacity or withdrawal of the
Managing Member, which pursuant to the terms of this Agreement and under the
laws of the State of Delaware requires the dissolution of the Company, the
Company shall be dissolved and wound up unless, within a period of 90 days from
the date of the occurrence of such event, Members holding 75% of the Percentage
Interests designate an individual or entity to serve as the new managing member
of the Company that, in the opinion of counsel to the Company, meets the tests
set forth in Section 8.1.1(a) or 8.1.1(b), whichever is applicable (the
"Successor Managing Member"). In such event, the Company shall not be
dissolved and wound up but shall be continued with the Successor Managing
Member being admitted to the Company as its managing member and thereafter
being the Managing Member for all purposes of this Agreement and with the
existing Managing Member thereupon withdrawing as a managing member of the
Company (the "Withdrawing Managing Member"). In such event, the Successor
Managing Member shall purchase from the Withdrawing Managing Member, and the
Withdrawing Managing Member shall sell to the Successor Managing Member, the
Withdrawing Managing Member's Interest in the Company for a purchase price (the
"Successor Purchase Price") determined in accordance with subsection (b) below.
(b) The Successor Purchase Price shall be the
fair market value of the Withdrawing Managing Member's Interest in the Company
as determined by agreement between the Withdrawing Managing Member and the
Successor Managing Member. In the event that such an agreement has not been
reached within 30 days after the designation of the Successor Managing Member,
such determination shall be made by a committee consisting of three members,
with one member being chosen by the Withdrawing Managing Member, one member
being chosen by the Successor Managing Member, and one member being chosen by
the two members so chosen. In the event that the two members so chosen fail to
agree upon the appointment of a third member to the committee, then such third
member shall be selected in accordance with the rules of the
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American Arbitration Association. In the event that either the Withdrawing
Managing Member or the Successor Managing Member fails to choose its committee
member within 30 days after the other has chosen its committee member, the sole
appointed member of the committee shall determine the fair market value of the
Withdrawing Managing Member's Interest in the Company. The proceedings of such
committee shall conform to the rules of the American Arbitration Association to
the extent practicable. Such committee shall determine the fair market value
of the Withdrawing Managing Member's Interest in the Company as promptly as
practicable, and such committee's determination of the fair market value of the
Withdrawing Managing Member's Interest in the Company shall be final and
binding upon the parties hereto, the Withdrawing Managing Member, and the
Successor Managing Member.
8.2 Admission of a Managing Member. Notwithstanding the
provisions of Section 8.1, no assignee of the Managing Member or other
individual or entity shall be admitted as a managing member of the Company
unless and until such individual or entity executes a counterpart of this
Agreement and thereby assumes the rights, duties, and obligations of the
Managing Member pursuant to this Agreement.
8.3 Transfer of Membership Interests by Members other than the
Managing Member.
8.3.1 A Member's Interest will not be assignable or
transferable without the prior written consent of the Managing Member, which
consent (a) will not be unreasonably withheld in the event of a proposed
assignment or transfer to an Affiliate or member of the immediate family of the
assignor or transferor and (b) may be granted or withheld in the Managing
Member's sole discretion in all other instances. In no event will a proposed
assignment or transfer be permitted if, in the opinion of counsel to the
Managing Member, such an assignment or transfer would subject the Company to
any additional regulatory requirements, result in the violation of any
applicable law, or otherwise adversely affect the interests of the Company or
any other Member. No assignee or transferee of a Member shall be admitted to
the Company as a Member in the place of his assignor except in accordance with
the provisions of Section 8.4. The Company shall have no obligation to
recognize, or furnish information or make distributions to, any assignee or
transferee of a Member who does not comply with the provisions of Section 8.4,
and such assignee or transferee shall not have any rights against the Company
and shall have rights only against his assignor/transferor. Any purported
assignment or transfer of all or a portion of any Member's Interest in the
Company that violates any of the provisions of this Section 8.3 shall be null
and void ab initio.
8.3.2 No action of, or event affecting, a Member (other
than the Managing Member) shall dissolve or terminate the Company.
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<PAGE> 37
8.3.3 Upon the death of a Member, (i) the Interest of such
Member (the "Death Interest") shall descend to and vest in the heirs, legatees,
or legal representatives of such Member, and (ii) all of such Member's rights
and obligations under this Agreement as a Member shall descend to and vest in
the heirs, legatees, or legal representatives of such Member, in each case if
the Managing Member consents to the admission of such heir, legatee, or legal
representative to the Company as a Member pursuant to and in compliance with
the provisions of Section 8.4. If the Managing Member does not consent to such
individual's or entity's admission to the Company as a Member pursuant to and
in compliance with the provisions of Section 8.4, such individual or entity
shall not be admitted to the Company as a Member but shall be entitled to the
distributions and allocations to which a Member holding such Death Interest
would be entitled.
8.4 Substitution of Member.
8.4.1 No assignee (including, without limitation, any
transferee, heir, legatee, or purchaser) of all or any portion of an Interest
in the Company shall be admitted to the Company as a Member without the prior
written consent of the Managing Member, which consent may be granted or
withheld in the Managing Member's sole discretion. As a condition to the
consent of the Managing Member to the admission of such an assignee of a Member
to the Company as a Member, the Managing Member, in its sole discretion, may
require such assignee to meet such conditions as it deems necessary or
advisable in its sole discretion including, without limitation, the following:
(i) Accept and assume, in a writing satisfactory
in form and substance to the Managing Member, the rights,
duties and obligations of a Member under this Agreement;
(ii) Execute and deliver to the Managing Member a
power of attorney as contemplated by Article XII;
(iii) Provide to the Company an opinion of counsel,
in form and substance satisfactory to counsel to the Company,
that (A) neither the offering of an Interest in the Company to
such assignee, the assignment of an Interest in the Company to
such assignee, nor the admission of such assignee to the
Company as a Member violates any registration or other
provision of any federal or state securities or other law, and
(B) such assignee will not be deemed to be more than one
beneficial owner of securities of the Company under Section
3(c)(1) of the Investment Company Act of 1940, as amended,
after such assignment and admission;
(iv) Execute and deliver such other documents or
instruments as the Managing Member may reasonably
33
<PAGE> 38
require to effect the admission of such assignee to the
Company as a Member; and
(v) Pay such reasonable expenses as the Company
may incur in connection with such admission.
8.4.2 The term "Member" shall include the assignee of all
or a portion of the Interest of a Member, but only if such assignee shall have
been admitted to the Company as a Member (any such assignee who has been so
admitted being referred to herein as a "Substitute Member").
8.5 Amendment of Agreement. Upon the admission of a new Managing
Member or a new or additional Member to the Company, the Managing Member shall
promptly take such steps as may be necessary or appropriate to prepare, file,
and/or record an amendment to this Agreement and, if necessary or appropriate
in the sole discretion of the Managing Member, to the Certificate, to reflect
such admission, and each Member agrees that his attorney-in-fact (appointed
under the power of attorney delivered to the Managing Member by such Member
pursuant to Article XII) may execute each such amendment on its behalf.
8.6 Limitation on Sale or Exchange of Company Interests.
Notwithstanding any other provision of this Agreement to the contrary, no sale,
assignment, exchange, or other transfer of an Interest in the Company may be
made (a) if the Interest sought to be sold, assigned, exchanged, or
transferred, when added to the total of all other Interests in the Company
sold, assigned, exchanged, or transferred within a period of 12 consecutive
months prior thereto, equals or exceeds 50% of the aggregate of all Interests
in the Company, or (b) if such sale, assignment, exchange, or transfer, in the
opinion of counsel to the Company, will cause the Company to be subject to
regulation as an investment company under the Investment Company Act of 1940,
as amended. Any attempt to make any such sale, assignment, exchange, or
transfer shall be null and void ab initio.
8.7 This Article VIII is subject to the last paragraph of Section
7.1.2 hereof.
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership
9.1 Dissolution.
The Company shall be dissolved and its affairs wound up upon
the happening of any of the following events:
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<PAGE> 39
(i) the expiration of its term as set forth in
Section 2.4;
(ii) the Incapacity or withdrawal of any Managing
Member, or the occurrence of any other event under the
Delaware Act that terminates the continued membership of any
Managing Member in the Company, unless the remaining Members
holding at least 75% of the Percentage Interests (x) agree in
writing, within 90 days thereafter, to continue the business
of the Company and, (y) if there is no other Managing Member,
appoint a Successor Managing Member pursuant to Section 8.1.2;
(iii) upon the sale or other disposition by the
Company of all or substantially all of the assets it then
owns;
(iv) an election to dissolve the Company made in
writing by the Managing Member (which election may be made by
the Managing Member at any time in its sole discretion);
(v) an election to dissolve the Company made in
writing by Members (other than the Managing Member) holding at
least 80% of the Percentage Interests in the Company; or
(vi) the entry of a decree of judicial dissolution
under Section 18-802 of the Delaware Act.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate
until the winding up of the Company has been completed, the assets of the
Company have been distributed as provided in Section 9.2 and the Certificate
shall have been cancelled.
9.2 Liquidation.
(a) Upon dissolution of the Company, the Managing Member
or, if there is none, a Person approved by the remaining Members to
act as a liquidating trustee (the "Liquidating Trustee"), shall wind
up the affairs of the Company and proceed within a reasonable period
of time to sell or otherwise liquidate the assets of the Company and,
after paying or making provision by the setting up of reasonable
reserves for all liabilities to creditors of the Company, to
distribute the assets among the Members in accordance with the
provisions for the making of distributions set forth in this
Agreement.
35
<PAGE> 40
(b) The Members shall not be responsible for restoring
any negative balance in their Capital Accounts.
(c) The assets of the Company or the proceeds from
liquidation thereof shall be distributed in the following manner:
(i) First, to pay or make reasonable provision to
pay the liabilities and debts of the Company (including all
contingent, conditional or unmatured claims and obligations,
including the expenses of liquidation and including all loans
made by any Member to the Company), other than liabilities for
distributions to Members; and
(ii) Thereafter, all remaining assets or proceeds
shall be paid or distributed to all Members in accordance with
their Percentage interests.
(d) In any such liquidation, the Company may distribute
to Members the assets of the Company in cash, ratably in kind or any
combination thereof. Each distribution in kind of securities, assets
and/or other property pursuant to Section 9.2.(c)(ii) shall be
distributed based upon the Fair Market Value of such property. To the
extent deemed desirable by the Managing Member or the Liquidating
Trustee, distributions may be made into a liquidating trust or other
appropriate entity, and reserves may be established for contingencies.
(e) When the Managing Member or the Liquidating Trustee
has complied with the foregoing liquidation plan, the Managing Member
or the Liquidating Trustee, on behalf of all Members, shall execute,
acknowledge and cause to be filed an instrument evidencing the
cancellation of the Certificate in the manner required by the Delaware
Act.
ARTICLE X
Amendments
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 Amendments of this Agreement may be proposed by (i)
the Managing Member or (ii) Members holding at least 80% of the Percentage
Interests. The Managing Member, on behalf of the Member or Members proposing
such amendment, shall submit to all Members a verbatim statement of any such
proposed amendment and identify the persons proposing it. Each such submission
shall include a notice to the effect that the proposed amendment, unless the
laws of the State of Delaware shall otherwise require, shall become effective
(and the Managing Member shall then be
36
<PAGE> 41
authorized to file any appropriate amendment to the Certificate) if a
Majority-In-Interest (unless the provision to be changed explicitly requires a
greater percentage consent of the Members) and the Managing Member (if the
provision to be changed explicitly requires the consent of the Managing Member)
shall have consented to such proposed amendment in writing within 90 days after
the mailing of such notice.
10.1.2 An amendment to this Agreement shall not (i) extend
the term of the Company, (ii) reduce the liabilities, obligations, commitments,
or responsibilities of the Managing Member, (iii) increase the liabilities or
commitments of any Member not specifically consenting thereto, (iv) require any
Member to make additional Capital Contributions to the Company, or (v) reduce
(A) the interest of any Member in Company items of income, gain, loss, credit,
or deduction, (B) the distributions to any Member, or (C) the interest of any
Member in the assets of the Company, in each case unless each Member has
consented to such amendment in writing or unless such amendment, in the opinion
of the Managing Member, is required in order to comply with applicable federal
income tax statutes or regulations.
10.1.3 Notwithstanding any provision of this Agreement to
the contrary, and as provided in Section 8.5, the Managing Member will be
entitled to cause this Agreement to be amended to the full extent necessary to
effectuate and properly reflect the admission of an additional or new Member to
the Company upon the terms and conditions set forth in this Agreement.
10.1.4 Notwithstanding the limitations contained in Section
10.1.1, this Agreement may be amended from time to time by the Managing Member
without the consent of all of the Members (i) to add to the representations,
duties or obligations of the Managing Member or surrender any right or power
granted to the Managing Member herein; (ii) to comply with the then existing
requirements imposed by the Code or the Internal Revenue Service affecting the
status of the Company as a partnership for federal income tax purposes; and
(iii) to amend Schedules A and B hereto to provide any necessary information
regarding any Member or any additional or successor Members, and to reflect any
change in the amount of the Capital Contributions of any Member in accordance
with the terms of this Agreement.
10.1.5 Upon the adoption of any amendment to this Agreement,
the amendment shall be executed by the Members and, if required, shall be
recorded in the proper records of each jurisdiction in which recordation is
necessary for the Company to conduct business or to preserve the limited
liability of the Members. Any such adopted amendment may be executed by the
Managing Member on behalf of the Members pursuant to the power of attorney
granted in Article XII. The Managing Member shall send
37
<PAGE> 42
each Member a copy of any amendment adopted pursuant to Section 10.1.2.
10.2 Amendment of Certificate. In the event this Agreement shall
be amended pursuant to this Article X, the Managing Member shall amend the
Certificate to reflect such change if such amendment is required or if the
Managing Member deem such amendment to be desirable and shall make any other
filings or publications required or desirable to reflect such amendment,
including any required filing for recordation of any certificate of limited
liability company or similar document of the type contemplated by Section 2.5.
ARTICLE XI
Consents, Voting and Meetings
11.1 Method of Giving Consent. Any Consent required by this
Agreement may be given as follows:
(i) by a written Consent given by the approving
Member at or prior to the doing of the act or thing for which the
Consent is solicited, provided that such Consent shall not have been
nullified by notice to the Managing Member by the approving Member at
or prior to the time of, or the negative vote by such approving Member
at, any meeting held to consider the doing of such act or thing; or
(ii) by the affirmative vote by the approving
Member to the doing of the act or thing for which the Consent is
solicited at any meeting called and held to consider the doing of such
act or thing.
11.2 Meetings. Any matter requiring the Consent of the Members
pursuant to this Agreement may be considered at a meeting of the Members.
ARTICLE XII
Power of Attorney
Each Member, by its execution hereof, hereby irrevocably
makes, constitutes and appoints the Managing Member and the then President and
each Vice President of the Managing Member and the Liquidating Trustee, if any,
in such capacity as Liquidating Trustee for so long as it acts as such (each is
hereinafter referred to as the "Attorney"), as its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
deliver, record and file (i) this Agreement and any amendment to this Agreement
38
<PAGE> 43
which has been adopted as herein provided; (ii) the original certificate of
limited membership of the Company and all amendments thereto required or
permitted by law or the provisions of this Agreement; (iii) all certificates
and other instruments deemed advisable by the Member or the Liquidating
Trustee, as the case may be, to carry out the provisions of this Agreement and
applicable law or to permit the Company to continue as a limited liability
company wherein the Members have limited liability in each jurisdiction where
the Company may be doing business; (iv) all instruments that the Members or the
Liquidating Trustee deems appropriate to reflect a change, modification or
termination of this Agreement or the Company in accordance with this Agreement;
(v) all conveyances and other instruments or papers deemed advisable by the
Members or the Liquidating Trustee, including, without limitation, those to
effect the dissolution and termination of the Company, including a certificate
of cancellation; (vi) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Membership; and (vii) all other
instruments or papers which may be required by law to be filed on behalf of the
Company.
The foregoing power of attorney (i) is coupled with an
interest, shall be irrevocable and shall survive and shall not be affected by
the subsequent death, disability or Incapacity of any Member; and (ii) shall
survive the delivery of an assignment by a Member of the whole or any fraction
of its Interest; except that, where the assignee of the whole of such
Membership has been approved by the Members for admission to the Company, as a
Substituted Member, the power of attorney of the assignor shall survive the
delivery of such assignment for the sole purpose of enabling the Attorney to
execute, swear to, acknowledge and file any instrument necessary or appropriate
to effect such substitution.
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs
13.1 Records and Accounting.
(a) Proper and complete records and books of account of
the business of the Company, including a list of the names, addresses
and Interests of all Members, shall be maintained at the Company's
principal place of business.
(b) The books and records of the Company shall be kept on
an income tax basis or in accordance with generally accepted
accounting principles, as the Managing Member shall elect. The
accrual basis of accounting shall be followed by the Company for
federal income tax purposes unless the cash method shall be allowed
under the Code and the Managing
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<PAGE> 44
Member shall elect to apply such accounting method. The taxable year
of the Company shall be its Fiscal Year.
13.2 Financial Statements. Commencing after the closing of the
sales of the Units pursuant to the Offering, all Members will be provided
annually with financial statements of the Company. including a balance sheet
and the related statements of income and retained earnings and changes in
financial position. The financial statements of the Company shall be
accompanied by a report of an independent public accountant stating that an
audit of such financial statements has been made in accordance with generally
accepted accounting principles, stating the opinion of such accountant with
respect to the financial statements and the accounting principles and practices
reflected therein and with respect to the consistency of the application of
such accounting principles, and identifying any matters to which such
accountant takes exception and stating, to the extent practicable, the effect
of each such exception on such financial statements. In addition, the Company
shall file all federal, state, and local income tax returns and information
returns, if any, which the Partnership is required to file. Within ninety (90)
days after the end of each Fiscal Year, the Managing Member will cause to be
delivered to each Person who was a Member at any time during such Fiscal Year a
Form K-1 and such other information, if any, with respect to the Company as may
be necessary for the preparation of such Member's federal, state and local
income tax returns, including a statement showing each Member's share of
income, gain or loss, expense and credits for such Fiscal Year for federal
income tax purposes.
13.3 Bank Accounts. The funds of the Company held in Permitted
Temporary Investments or in bank accounts shall be deposited in the name of the
Company in such Permitted Temporary Investments or in such bank account or
accounts as shall be designated by the Managing Member in its sole discretion.
Withdrawals therefrom shall be made upon the signature of the Managing Member
or of any authorized agent of the Managing Member.
ARTICLE XIV
Miscellaneous
14.1 Notices.
(a) Any notice to a Member shall be sent to the address
of such Member set forth in Schedule A hereto or such other mailing
address of which such Member shall advise the Managing Member in
writing. Any notice to the Company shall be sent to the principal
office of the Company as set forth in Section 2.3. The Managing
Member may at any time
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<PAGE> 45
change the location of such office. Prompt notice of any such change
shall be given to the Members.
(b) Any notice shall be deemed to have been duly given if
(i) sent by United States certified or registered mail, return receipt
requested, when received, (ii) personally delivered or delivered by
telecopy, when received, (iii) sent by United States Express Mail or
overnight courier, on the second following business day, or (iv) by
telegram or telex on the following business day.
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS. IT IS THE
INTENTION OF THE PARTIES THAT THE INTERNAL LAWS OF THE STATE OF DELAWARE AND,
IN PARTICULAR, THE PROVISIONS OF THE DELAWARE ACT, SHALL GOVERN THE VALIDITY OF
THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND INTERPRETATION OF THE RIGHTS
AND DUTIES OF THE PARTIES. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO
BE INVALID, THE REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED THEREBY.
14.3 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING INVOLVING ANY
DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
TO THE COMPANY'S AFFAIRS OR THE RIGHTS OR INTERESTS OF THE MEMBERS OR ANY OF
THEM OR THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER ARISING DURING
THE COMPANY'S TERM OR AT OR AFTER ITS TERMINATION OR DURING OR AFTER THE
LIQUIDATION OF THE COMPANY (EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND
CLAIMS IS HEREINAFTER REFERRED TO AS A "COMPANY DISPUTE"), SHALL BE BROUGHT
ONLY IN A COURT LOCATED IN THE STATE OF NEW YORK, AND EACH OF THE PARTIES
HERETO (I) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS
AND ANY RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES
HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING A COMPANY DISPUTE.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and it supersedes any prior agreement or
understandings among them, oral or written. There are no representations,
agreements, arrangements or understandings, oral or written, between or among
the Members relating only to the subject matter of this Agreement which are not
fully expressed herein. This Agreement may not be modified or amended other
than pursuant to Article XI.
14.5 Headings, etc. The headings in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and
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pronouns stated in either the masculine or the neuter gender shall include the
masculine, the feminine and the neuter.
14.6 Binding Provisions. The covenants and agreements contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, personal or legal representatives, successors and assigns of
the respective parties hereto.
14.7 No Waiver. The failure of any Member to seek redress for
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted
a violation from having the effect of an original violation.
14.8 No Right to Partition. To the extent permitted by law, and
except as otherwise expressly provided in this Agreement, the Members, on
behalf of themselves and their shareholders, members, heirs, executors,
administrators, personal or legal representatives, successors and assigns, if
any, hereby specifically renounce, waive and forfeit all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the Company
or any asset of the Company, or any interest which is considered to be Company
property, regardless of the manner in which title to any such property may be
held.
14.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.10 Reasonable Consents. Each of the Members agrees that whenever
the consent of a Member is required or provided for pursuant to this Agreement
(other than the consent of the Managing Member pursuant to Section 8.3.1(b),
Section 8.4, or Section 10.1), such Member shall not unreasonably withhold or
delay its consent.
14.11 Tax Matters Partner. Each Member hereby appoints and
designates the Managing Member as the tax matters partner (the "Tax Matters
Partner"), as such term is defined in the Code and the regulations thereunder.
The Tax Matters Partner is authorized to take all action on behalf of the
Company and the Members permitted under the Code. The Tax Matters Partner may
engage accountants or attorneys to assist the Tax Matters Partner in
discharging its duties hereunder. All reasonable expenses incurred by the Tax
Matters Partner in connection with any administrative proceeding before the
Internal Revenue Service and/or judicial review of such proceeding, including
reasonable accountants' and attorneys' fees, shall be deemed an operating
expense of the Company and shall be paid by the Company.
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<PAGE> 47
ARTICLE XV
Interpretation and Dispute Resolution
The Managing Member shall decide all issues relating to the
Company, and shall have sole authority to interpret this Agreement and to
resolve all ambiguities relating to the interpretation of this Agreement, in
each case in such manner as it deems appropriate in its sole discretion, and
all such decisions, interpretations, and resolutions made by the Managing
Member shall be conclusive and shall bind all of the Members in all respects.
ARTICLE XVI
Release
As a condition to being admitted to the Company, each Member
hereby fully and unconditionally releases and discharges all claims and causes
of action, whether known or unknown, which it or its heirs, personal
representatives, successors, or assigns ever had, now have, or hereafter may
have, against any of the Company, the Managing Member, the Initial Member, IFG,
their respective Affiliates, and their respective directors, officers,
stockholders, partners, employees, agents, counsel, control persons,
successors, and assigns, if any, on account of any matter, act, or occurrence
prior to or on the date that such Member is admitted to the Company in
compliance with the provisions of this Agreement that relates to the Company,
the management of the Company by the Managing Member, the preparation of
valuations of Balcor Securities, the purchase, sale or management of the
Company's assets by the Managing Member, any extraordinary transactions by the
Company, such as a merger or sale of assets, and the Member's purchase of
Units.
ARTICLE XVII
IFG Covenant
IFG covenants to use its commercially reasonable best efforts
to cause any Balcor Partnership Interests that may be acquired by the Company
or its Subsidiaries to be transferred (whether directly or indirectly, by
merger, consolidation, or otherwise) to any REIT that IFG may, in its sole
discretion, directly or indirectly sponsor, control, or form in exchange for
cash or equity, debt (including convertible debt) or other securities in such
REIT. The terms of any such exchange will be set by IFG and the Managing
Member. For the purposes of this Article XVII, IFG shall not be deemed to
directly or indirectly sponsor or control the Angeles Mortgage Investment
Trust.
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<PAGE> 48
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Members:
MAP VII ACQUISITION CORPORATION
By: /s/ Andrew L. Farkas
--------------------------------------------
Name: Andrew L. Farkas
Title: President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
--------------------------------------------
Name: Frank M. Garrison
Title: Executive Managing
Director
44
<PAGE> 49
Schedule A
February 29, 1996
<TABLE>
<CAPTION>
Name of Member: Address of Member
- - - --------------- -----------------
<S> <C>
MAP VII Acquisition Corporation One Insignia Financial Plaza
Greenville, South Carolina 29602
Insignia Financial Group, Inc. One Insignia Financial Plaza
Greenville, South Carolina 29602
</TABLE>
<PAGE> 50
Schedule B
February 29, 1996
<TABLE>
<CAPTION>
Capital Percentage
Name of Member: Contribution Interest
- - - --------------- ------------ ----------
<S> <C> <C>
MAP VII Acquisition Corporation $1.01 1%
Insignia Financial Group, Inc. $100 99%
</TABLE>
B-1
<PAGE> 1
EXHIBIT 99.(c)(4)
FORM OF DISPOSITION SUPPORT AGREEMENT
This Disposition Support Agreement is entered into as of the ____ day
of _____, 1996, between Insignia Financial Group, Inc. hereafter referred to as
the "ADVISOR", and _____________________, an Illinois limited partnership, the
owner of the Property (as hereinafter defined), hereafter referred to as the
"OWNER". This Agreement shall terminate at 5:00 p.m. Chicago time one year
from the date of this Agreement ("Scheduled Termination Date") unless earlier
terminated by OWNER on the terms described herein.
In consideration of the services rendered by the ADVISOR and the other
terms of this Agreement relating to the sale of the real estate commonly known
as ___________ ("Property"), located in _____________, __, the parties hereto
agree as follows:
1. OWNER hereby appoints ADVISOR as disposition support advisor for the
term hereof to perform the services described herein relating to the marketing
of said Property for sale, upon the following terms and conditions or on such
other terms as approved by OWNER:
A. ADVISOR is not authorized to negotiate on behalf of, or bind,
OWNER to any contract or other agreement of any kind on behalf
of OWNER. ADVISOR shall perform the services described on
Exhibit A hereto (the "Services").
B. OWNER and ADVISOR specifically agree that ADVISOR shall
receive the compensation described in Exhibit B attached
hereto only is the Property is sold and the transaction is
consummated. ADVISOR may divide any compensation payable
hereunder with any licensed agent provided that the
cooperating agent or agents participated in the performance of
the Services and delivers to OWNER a receipt and release of
all claims due. Payment to ADVISOR of their compensation
provided for herein shall be payment in full of all
compensation due under this Agreement, and ADVISOR shall
deliver to OWNER a receipt and release of any claims due.
C. ADVISOR agrees to cooperate fully with any and all licensed
real estate brokers in connection with the sale of the
Property. ADVISOR agrees to indemnify and hold OWNER and its
agents harmless against any loss, claim, cause of action,
liability and expense including reasonable attorney's fees, in
connection with the claims of any brokers, finders or other
persons who may claim to have procured a purchaser as a result
of their dealings through ADVISOR. The terms and conditions
of this indemnification shall survive the termination of this
Agreement.
D. In the event it becomes necessary for either party to initiate
legal proceedings of any nature in order to secure payment of
the compensation provided for in this Agreement, or to enforce
the terms hereof, the prevailing party shall be entitled to
recover reasonable attorney fees and costs.
E. OWNER may terminate this Agreement at any time without cause
upon sixty (60) days prior written notice to ADVISOR or with
cause upon seven (7) days prior written notice to ADVISOR. If
OWNER (a) terminates this Agreement prior to the Schedule
Termination Date without cause and OWNER executes a contract
for a sale of the Property prior to the Schedule Termination
Date or (b) this Agreement expires on the Scheduled
Termination Date, and in either event OWNER closes a sale
within 60 days following the Scheduled Termination Date, then
OWNER will pay ADVISOR the compensation described in this
Agreement.
2. Time is of the essence of this Agreement.
<PAGE> 2
3. The laws of the State of Illinois shall govern the validity,
enforcement and interpretation of this Agreement.
4. This Agreement contains the entire agreement between OWNER and
ADVISOR, and no oral statement or prior written matter shall have any force or
effect. No variation, modification or amendment of this Agreement shall be
binding on the parties hereto unless and until set forth in a document executed
by the parties hereto. This Agreement may not be assigned by either party
without the consent of the other party hereto, except that ADVISOR may assign
this Agreement without the consent of OWNER to Insignia Mortgage and Investment
Company.
5. This Agreement is expressly subject to the terms and conditions
contained in the Exhibits attached hereto and made a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
OWNER: ADVISOR:
- - - ----- -------
, Insignia Financial Group, Inc.
- - - --------------------
an Illinois limited partnership
By: By:
-----------------------, ----------------------------------
an Illinois corporation, Its:
its general partner ---------------------------------
By:
---------------------------
Its:
---------------------------
-2-
<PAGE> 3
EXHIBIT A
ADVISOR shall provide the following disposition support services (the
"Services") in connection with the sale of the Property:
1. Assist under the supervision and direction of OWNER personnel in the
compilation, preparation and dissemination of property sales packages
of information to be utilized by prospective purchasers in their
financial and other analyses in determining whether to purchase the
Property.
2. Assist OWNER and any third party real estate broker that OWNER may
utilize, in its sole discretion, in connection with the Property sale
under the supervision and direction of OWNER personnel in discussions
with prospective purchasers regarding sales of the Property.
3. At OWNER's direction, to conduct or assist in site visits and tours of
the Property by prospective purchasers of the Property.
4. During the period the Property is listed for sale, maintain stability
and consistency of operations of the Property, including maintaining
key property and district personnel, close monitoring of expenses,
maintaining rental and occupancy rates (in accordance with the budget
for the Property previously agreed to by OWNER unless OWNER shall
direct ADVISOR in writing to deviate from such budget) and maintaining
the Property in excellent visible condition for property inspections.
5. Such other services as OWNER and ADVISOR may agree to such as
coordinating appraisals, construction inspections and environmental
inspections.
To the extent that ADVISOR shall be engaged as the real estate broker in
connection with the proposed sale of the Property, ADVISOR shall not be
separately engaged to perform the Services with respect to such Property sale.
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<PAGE> 4
EXHIBIT B
This EXHIBIT is attached to and made a part of that certain Disposition Support
Agreement ("Agreement"), by and between OWNER and ADVISOR, as said terms are
defined in the Agreement, concerning the proposed sale of the Property. In the
event of any conflict between the terms and conditions of this Exhibit B and
the terms appearing in the Agreement, the terms and conditions of this Exhibit
B shall control.
1. Compensation and Time of Payment
If and when, pursuant to the terms of the Agreement, a written sales
agreement is entered into between OWNER and a purchaser and the
transaction is subsequently consummated and title is transferred to a
third party during the term of the Agreement and subject to Paragraph
1(E) of the Agreement, OWNER agrees to pay to ADVISOR, upon closing of
the transaction, a fee in consideration of the Services performed
equal to 1.25% of the purchase price if the purchase price does not
exceed $7.5 million, 1% of the purchase price if the purchase price
exceeds $7.5 million but does not exceed $12.5 million, or 0.75% of
the purchase price if the purchase price exceeds $12.5 million.
Furthermore, in the event OWNER has in effect an agreement with
________________________ ("___") relating to the marketing of certain
services at the Property, and OWNER has paid certain fees to ___ or
its vendors or agents on behalf of residents at the Property, and
OWNER has paid certain fees to ___ or its vendors or agents on behalf
of residents at the Property, and OWNER has not received compensation
as of the date of the closing of the sale of the Property from ___ or
its vendors or agents in an amount equal to such fees paid by OWNER,
ADVISOR agrees that its compensation under this Agreement shall be
reduced by any such deficiency under the ___ Agreement.
Notwithstanding the foregoing statements, ADVISOR acknowledges and
agrees that the compensation to all parties in connection with such
sale, including compensation to be payable to ADVISOR, in the
aggregate may not exceed the prevailing rate for real estate brokerage
services when considering the type of real property to be sold, the
sale price of the Property and the geographic locale of the Property
(the "Prevailing Rate") and that, as a result, ADVISOR's and such
third party's compensation may be reduced proportionately. In
addition, in the event that it is determined that the compensation
paid to ADVISOR hereunder, when combined with compensation paid to
other third parties by the OWNER in connection with the sale of the
Property is in excess of the Prevailing Rate, ADVISOR will reduce its
compensation hereunder and repay to OWNER an amount necessary to make
such total compensation not greater than the Prevailing Rate, but in
no event in excess of the amount paid to ADVISOR in connection with
the sale of such Property.
If for any reason whatsoever, including but not limited to acts,
omissions, negligence or the willful default of OWNER, its agents,
employees or representatives, the closing of a transaction is not
consummated, no compensation or fee of any sort will be deemed to be
due or earned or shall be paid to ADVISOR by OWNER, and OWNER is and
shall be relieved from liability for the payment of any and all
compensation, fees, claims or charges whatsoever. It is expressly
agreed that OWNER shall have the unqualified right, in its sole and
absolute discretion, to refuse to enter into any sales agreement for
any reason whatsoever without incurring any obligation to ADVISOR for
the payment of compensation or otherwise.
2. Indemnify
In the event of a claim against OWNER for compensation, a fee or
damages of any nature or sort whatsoever by any party not a party to
this Agreement, which claim arises out of the acts, failure to act or
omissions of ADVISOR, ADVISOR agrees to indemnify OWNER against any
damages and costs, including reasonable attorneys' fee suffered by
OWNER. All the terms and conditions of this indemnity shall survive
the termination of the Agreement.
B-1
<PAGE> 5
3. Assignment
It is understood and agreed between the parties hereto that ADVISOR
shall not assign, convey or transfer any interest or obligation under
the terms of this Agreement without the OWNER's prior written consent.
4. Limitation of Liability of Owner
Anything contained in this Agreement to the contrary notwithstanding,
ADVISOR agrees that ADVISOR shall look solely to the interest of OWNER
in the Property or the proceeds thereof for the collection of any
judgment requiring the payment of money by OWNER because of a default
or breach by OWNER with respect to any of the terms, covenants and
conditions of this Agreement and that no other assets of OWNER or its
employees, officers, directors, partners, affiliates, attorneys,
successors or assigns shall be subject to levy, execution or other
judicial process for the satisfaction of ADVISOR's claim.
B-2
