<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
-----------------------
GROWTH HOTEL INVESTORS II,
a California Limited Partnership
(Name of Subject Company)
DEVON ASSOCIATES
(Bidder)
LIMITED PARTNERSHIP ASSIGNEE UNITS
(Title of Class
of Securities)
NONE
(CUSIP Number of Class
of Securities)
-----------------------
Michael L. Ashner Copy to:
Devon Associates Mark I. Fisher
100 Jericho Quadrangle Rosenman & Colin
Suite 214 575 Madison Avenue
Jericho, New York 11735-2717 New York, New York 10022-2585
(516) 822-0022 (212) 940-8877
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
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Transaction Amount of
Valuation* Filing Fee
----------- ----------
$15,750,000 $3,150
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*For purposes of calculating the filing fee only. This amount assumes the
purchase of 21,000 Limited Partnership Assignee Units ("Units") of the subject
company for $750 per Unit in cash.
[ ] 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 date
of its filing.
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Devon Associates
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
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3. SEC Use Only
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4. Sources of Funds (See Instructions)
WC; OO
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) of 2(f)
[ ]
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6. Citizenship or Place of Organization
New York
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
1 Unit
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
(See Instructions)
[ ]
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9. Percent of Class Represented by Amount in Row (7)
Less than 1%
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10. Type of Reporting Person (See Instructions)
PN
2
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Item 1. Security and Subject Company.
(a) The name of the subject company is Growth Hotel Investors
II, a California limited partnership (the "Partnership"), which has its
principal executive offices at One Insignia Financial Plaza, Greenville, South
Carolina 29602.
(b) This Schedule relates to the offer by Devon Associates, a
New York general partnership (the "Purchaser"), to purchase up to 21,000
outstanding Limited Partnership Assignee Units ("Units") of the Partnership at
$750 per Unit, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated February 15, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively. The number of Units outstanding is set forth
under "INTRODUCTION" in the Offer to Purchase and is incorporated herein by
reference.
(c) The information set forth under "THE TENDER OFFER --
Section 13. Background of the Offer" of the Offer to Purchase is incorporated
herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth under "INTRODUCTION", "THE
TENDER OFFER -- Section 11. Certain Information Concerning the Purchaser" and
Schedule 1 of the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither the Purchaser
nor, to the best of its knowledge, any of the persons
3
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listed in Schedule 1 of the Offer to Purchase (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) were a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding were or are 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.
(g) The information set forth in Schedule 1 of the Offer to
Purchase is incorporated herein by reference.
Item 3. Past Contracts, Transactions or Negotiations with the Subject
Company.
(a) The information set forth in "THE TENDER OFFER -- Section
10. Conflicts of Interest and Transactions with Affiliates" and "THE TENDER
OFFER -- Section 13. Background of the Offer" of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in "THE TENDER OFFER -- Section
13. Background of the Offer" of the Offer to Purchase is incorporated herein
by reference.
4
<PAGE> 5
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in "THE TENDER OFFER --
Section 10. Conflicts of Interest and Transactions with Affiliates" and "THE
TENDER OFFER -- Section 12. Source of Funds" of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
(a)-(b) The information set forth in "THE TENDER OFFER --
Section 8. Future Plans" and "THE TENDER OFFER -- Section 13. Background of
the Offer" of the Offer to Purchase is incorporated herein by reference.
(c)-(e) Not applicable.
(f)-(g) The information set forth in "THE TENDER OFFER --
Section 7. Effects of the Offer" 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 "INTRODUCTION" and "THE
TENDER OFFER -- Section 11. Certain Information Concerning the Purchaser" of
the Offer to Purchase is incorporated herein by reference.
5
<PAGE> 6
Item 7. Contracts, Arrangements, Understandings or Relationships with
Respect to the Subject Company's Securities.
The information set forth in "THE TENDER OFFER -- Section 11.
Certain information concerning the Purchaser" and "THE TENDER OFFER - Section
12. Source of Funds" of the Offer to Purchase is incorporated herein by
reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in "THE TENDER OFFER -- Section 16.
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 "THE TENDER OFFER -- Section 11.
Certain Information Concerning the Purchaser" and Schedule 2 of the Offer to
Purchase is incorporated herein by reference.
Item 10. Additional Information.
(d) None.
(e)-(d) The information set forth in "THE TENDER OFFER --
Section 15. 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 Transmittal, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively, and which are
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incorporated herein in their entirety by reference.
Item 11. Material to be Filed as Exhibits.
99.(a)(1) Offer to Purchase dated February 15, 1996.
99.(a)(2) Letter of Transmittal.
99.(a)(3) Cover Letter, dated February 15, 1996, from Devon
Associates to Unitholders.
99.(b)(1) Commitment Letter, dated February 13, 1996, among
Paine Webber Real Estate Securities Inc. and Devon
Associates.
99.(c)(1) Devon Associates Partnership Agreement, dated
February 13, 1996, between Cayuga Associates L.P.
and Fleetwood Corp.
99.(g)(1) Form 8-K for the Partnership dated January 19,
1996.
7
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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: February 15, 1996
DEVON ASSOCIATES
By: Cayuga Associates L.P.
By: Cayuga Capital Corp.,
its General Partner
By: /s/ Michael L. Ashner
--------------------------
Name: Michael L. Ashner
Title: President
By: Fleetwood Corp.
By: /s/ Edward E. Mattner
--------------------------
Name: Edward E. Mattner
Title: President
8
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Exhibit Index
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
<S> <C> <C>
99.(a)(1) Offer to Purchase dated February 15, 1996 . . . . . . . . . . . . . . . . . . . . . . . .
99.(a)(2) Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99.(a)(3) Cover Letter, dated February 15, 1996, from Devon Associates to Unitholders . . . . . . .
99.(b)(1) Commitment Letter, dated February 13, 1996, among Paine Webber Real Estate Securities
Inc. and Devon Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99.(c)(1) Devon Associates Partnership Agreement, dated February 13, 1996, between Cayuga
Associates L.P. and Fleetwood Corp.. . . . . . . . . . .
99.(g)(1) Form 8-K for the Partnership dated January 19, 1996 . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 99.(a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 21,000 LIMITED PARTNERSHIP ASSIGNEE UNITS
OF
GROWTH HOTEL INVESTORS II,
A CALIFORNIA LIMITED PARTNERSHIP
FOR
$750 NET PER UNIT
BY
DEVON ASSOCIATES
***************************************************************************
* *
* THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT *
* 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 14, 1996, UNLESS *
* EXTENDED. *
* *
***************************************************************************
Devon Associates, a New York general partnership (the "Purchaser"),
hereby offers to purchase up to 21,000 of the outstanding Limited Partnership
Assignee Units (the "Units") of Growth Hotel Investors II, a California limited
partnership (the "Partnership"), for $750 per Unit (the "Purchase Price"), net
to the seller in cash, without interest, upon the terms set forth in this Offer
to Purchase (the "Offer to Purchase") and in the related Letter of Transmittal,
as each may be supplemented or amended from time to time (which together
constitute the "Offer"). Certain beneficial owners of the Purchaser are
affiliated with Montgomery Realty Company-85 and GHI Associates, the general
partners of the Partnership (together, the "General Partner"). The 21,000
Units sought pursuant to the Offer represent approximately 35.6% of the total
Units outstanding as of January 1, 1996. A Unitholder must tender all Units
owned by such Unitholder in order for the tender to be valid.
Before tendering, Unitholders are urged to consider the following
factors:
o The liquidation value of the Partnership's assets as of December 31, 1995
has been estimated by the Purchaser (whose beneficial owners include
affiliates of the General Partner) at $1,058 per Unit (the "Liquidation
Value"). In addition, during the first quarter of 1994, Metric Realty,
an unaffiliated third party, expressed an interest in purchasing, subject
to satisfaction of numerous conditions, all of the Partnership's property
interests for a purchase price which the General Partner estimated would
have resulted in a distribution to Unitholders of approximately $878 per
Unit (See "THE TENDER OFFER - Section 13. Background of the Offer".)
o The Purchaser (whose beneficial owners include affiliates of the General
Partner) is making the Offer with a view to making a profit.
Accordingly, in establishing the Purchase Price, the Purchaser (whose
beneficial owners include affiliates of the General Partner) was
motivated to set the lowest price for the Units which might be acceptable
to Unitholders consistent with the Purchaser's objectives. Such
objectives and motivations may conflict with the interest of Unitholders
in receiving the highest price for their Units. No independent person has
been retained to evaluate or render any opinion with respect to the
fairness of the Purchase Price and no representation is made by the
Purchaser, any affiliate of the Purchaser or the General Partner as to
such fairness.
(continued on next page)
-----------------------
If you have any questions or need additional information, you may contact
the Information Agent for the Offer at:
The Herman Group, Inc.
February 15, 1996 (800) 530-4966
<PAGE> 2
(continued from cover page)
o The General Partner and certain beneficial owners of the Purchaser are
affiliated and, accordingly, certain conflicts of interest with respect
to the Offer may exist for the General Partner. Such conflicts include
those resulting from the terms of a loan which will be used by the
Purchaser to finance the Offer. Such terms may create a conflict of
interest for the General Partner in determining whether to sell and/or
refinance the Partnership's properties and whether to distribute the
proceeds of any such sale or refinancing (See "THE TENDER OFFER - Section
10. Conflicts of Interest and Transactions with Affiliates" for a more
detailed explanation of this conflict.)
o Depending upon the number of Units tendered pursuant to the Offer, the
Purchaser (whose beneficial owners include affiliates of the General
Partner) could be in a position to significantly influence all
Partnership decisions on which Unitholders may vote. (See "THE TENDER
OFFER - Section 7. Effects of the Offer".) This means that (i)
non-tendering Unitholders could be prevented from taking action they
desire but that the Purchaser (whose beneficial owners include affiliates
of the General Partner) opposes and (ii) the Purchaser may be able to
take action desired by the Purchaser but opposed by the non- tendering
Unitholders.
o Consummation of the Offer may limit the ability of Unitholders to dispose
of Units in the secondary market during the twelve-month period following
completion of the Offer. (See "THE TENDER OFFER - Section 7. Effects of
the Offer" in this Offer to Purchase.)
o Unitholders who tender their Units will be giving up the opportunity to
participate in any future potential benefits represented by the ownership
of such Units, including potential future distributions by the
Partnership with respect to periods of time after April 30, 1996.
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 21,000 Units are validly tendered and not withdrawn,
the Purchaser will accept for purchase on a pro rata basis 21,000 Units,
subject to the terms and conditions herein.
The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, (i) to extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the payment
for, any Units, (ii) to terminate the Offer and not accept for payment any
Units not theretofore accepted for payment or paid for, (iii) upon the
occurrence of any of the conditions specified in Section 14 of this Offer to
Purchase, to delay the acceptance for payment of, or payment for, any Units not
theretofore accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the consideration
offered, increasing or decreasing the number of Units being sought, or both).
Notice of any such extension, termination or amendment will promptly be
disseminated to Unitholders in a manner reasonably designed to inform
Unitholders of such change in compliance with Rule 14d-4(c) under the
Securities Exchange Act of 1934 (the "Exchange Act"). In the case of an
extension of the Offer, such extension will be followed by a press release or
public announcement which will be issued no later than 9:00 a.m., New York City
time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1. Terms of the Offer . . . . . . . . . . . . . . . . . . . 4
Section 2. Proration; Acceptance for Payment and Payment for Units . 4
Section 3. Procedures for Tendering Units . . . . . . . . . . . . . 5
Section 4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . 6
Section 5. Extension of Tender Period; Termination; Amendment . . . 6
Section 6. Certain Federal Income Tax Consequences . . . . . . . . . 7
Section 7. Effects of the Offer . . . . . . . . . . . . . . . . . . 8
Section 8. Future Plans . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Certain Information Concerning the Partnership . . . . . 10
Section 10. Conflicts of Interest and Transactions with Affiliates . 18
Section 11. Certain Information Concerning the Purchaser . . . . . . 19
Section 12. Source of Funds . . . . . . . . . . . . . . . . . . . . . 20
Section 13. Background of the Offer . . . . . . . . . . . . . . . . . 21
Section 14. Conditions of the Offer . . . . . . . . . . . . . . . . . 26
Section 15. Certain Legal Matters. . . . . . . . . . . . . . . . . . 27
Section 16. Fees and Expenses . . . . . . . . . . . . . . . . . . . . 28
Section 17. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 28
Appendix A Glossary
Schedule 1 Information with respect to the Purchaser's Partners and
their respective Principals
Schedule 2 Financial Statements of the Purchaser and its Partners
</TABLE>
<PAGE> 4
To the Holders of Limited Partnership Assignee Units of
Growth Hotel Investors II, a California Limited Partnership
INTRODUCTION
The Purchaser (whose beneficial owners include affiliates of the General
Partner) hereby offers to purchase up to 21,000 of the outstanding Units for
$750 per Unit, net to the seller in cash, without interest, upon the terms set
forth in this Offer to Purchase and in the related Letter of Transmittal, as
each may be supplemented or amended from time to time. Unitholders who tender
their Units will not be obligated to pay any commissions or partnership
transfer fees, which commissions and fees will be borne by the Purchaser (whose
beneficial owners include affiliates of the General Partner). A Unitholder
must tender all Units owned by such Unitholder in order for the tender to be
valid.
The $750 Purchase Price was determined as a result of the Purchaser's own
independent analysis. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase Price.
Unitholders are urged to consider carefully all of the information contained
herein before accepting the Offer. (See "THE TENDER OFFER - Section 13.
Background of the Offer".)
The partners of the Purchaser are Cayuga Associates L.P. ("Cayuga") and
Fleetwood Corp. ("Fleetwood"). Cayuga Capital Corp. ("Cayuga Capital") is the
general partner of Cayuga. The shareholders of Cayuga Capital are Michael L.
Ashner, W. Edward Scheetz and a subsidiary of Insignia Financial Group, Inc.
("Insignia"). Insignia, which through its affiliate owns approximately 8% of
the Purchaser, also controls NPI Realty Management Corp. ("NPI Realty"), the
indirect managing general partner of the Partnership, having acquired all of
the outstanding stock of National Property Investors, Inc. ("NPI"), the parent
of NPI Realty, on January 19, 1996. Prior to such transaction, NPI was owned
by Mr. Ashner, affiliates of Apollo Real Estate Advisors, L.P. ("Apollo") and
certain other individual limited partners of Cayuga and their affiliates. (See
"THE TENDER OFFER - Section 11. Certain Information Concerning the Purchaser";
and "Section 13. Background of the Offer".) As a result of the relationship
between the General Partner and Insignia, the General Partner may have certain
conflicts of interest with respect to the Offer. (See "THE TENDER OFFER -
"Section 10. Conflicts of Interest and Transactions with Affiliates".)
Concurrently with the commencement of the Offer, the Purchaser also
commenced a tender offer for limited partnership assignee units of Growth Hotel
Investors, a California limited partnership.
Before tendering, Unitholders are urged to consider the following
factors:
o The Liquidation Value of the Partnership's assets as of December 31, 1995
has been estimated by the Purchaser (whose beneficial owners include
affiliates of the General Partner) at $1,058 per Unit. In addition,
during the first quarter of 1994, Metric Realty, an unaffiliated third
party, expressed an interest in purchasing, subject to satisfaction of
numerous conditions, all of the Partnership's property interests for a
purchase price which the General Partner estimated would have resulted in
a distribution to Unitholders of approximately $878 per Unit (See "THE
TENDER OFFER - Section 13. Background of the Offer".)
o The Purchaser (whose beneficial owners include affiliates of the General
Partner) is making the Offer with a view to making a profit.
Accordingly, in establishing the Purchase Price, the Purchaser (whose
beneficial owners include affiliates of the General Partner) was
motivated to set the lowest price for the Units which might be acceptable
to Unitholders consistent with the Purchaser's objectives. Such
objectives and motivations may conflict with the interest of Unitholders
in receiving the highest price for their Units. No independent person has
been retained to evaluate or render any opinion with respect to the
fairness of the Purchase Price and no representation is made by the
Purchaser, any affiliate of the Purchaser or the General Partner as to
such fairness.
o The General Partner and certain beneficial owners of the Purchaser are
affiliated and, accordingly, certain conflicts of interest with respect
to the Offer may exist for the General Partner. Such conflicts include
those
<PAGE> 5
resulting from the terms of a loan which will be used by the Purchaser to
finance the Offer. Such terms may create a conflict of interest for the
General Partner in determining whether to sell and/or refinance the
Partnership's properties and whether to distribute the proceeds of any
such sale or refinancing (See "THE TENDER OFFER - Section 10. Conflicts
of Interest and Transactions with Affiliates" for a more detailed
explanation of this conflict.)
o Depending upon the number of Units tendered pursuant to the Offer, the
Purchaser (whose beneficial owners include affiliates of the General
Partner) could be in a position to significantly influence all
Partnership decisions on which Unitholders may vote, including decisions
regarding removal of the General Partner, merger, sales of assets and
liquidation. (See "THE TENDER OFFER - Section 7. Effects of the Offer".)
This means that (i) non-tendering Unitholders could be prevented from
taking action they desire but that the Purchaser (whose beneficial owners
include affiliates of the General Partner) opposes and (ii) the Purchaser
may be able to take action desired by the Purchaser but opposed by the
non-tendering Unitholders.
o Consummation of the Offer may limit the ability of Unitholders to dispose
of Units in the secondary market during the twelve-month period following
completion of the Offer. (See "THE TENDER OFFER -- Section 7. Effects
of the Offer" in this Offer to Purchase.)
o Unitholders who tender their Units will be giving up the opportunity to
participate in future potential benefits represented by the ownership of
such Units, including potential future distributions by the Partnership
with respect to periods of time after April 30, 1996.
o The original anticipated holding period of the Partnership's properties
was five to ten years following the acquisition of a property.
Currently, properties in the Partnership's portfolio have been held for
approximately seven to ten years from acquisition. Unitholders could, as
an alternative to tendering their Units, take a variety of possible
actions including voting to liquidate the Partnership, removing and
replacing the General Partner and causing the Partnership to merge with
another entity or engage in a "roll-up" or similar transaction.
Unitholders who desire liquidity may wish to consider the Offer.
However, each Unitholder must make his or her own decision based upon such
Unitholder's particular circumstances, including the Unitholder's own financial
needs, other investment opportunities and tax position. Each Unitholder should
consult with his or her own advisors, tax, financial or otherwise, in
evaluating the terms of and whether to tender Units pursuant to the Offer.
The Offer will provide Unitholders with an opportunity to liquidate their
investment without the usual transaction costs associated with market sales.
Unitholders may no longer wish to continue with their investment in the
Partnership for a number of reasons, including:
o Although not necessarily an indication of value, the Purchase Price is
substantially in excess of recent secondary market trades for Units.
o The absence of a formal trading market for the Units.
o General disenchantment with real estate investments, particularly
long-term investments in limited partnerships.
o The continuing administrative costs (such as accounting, tax reporting,
limited partner reporting and public company reporting requirements) and
resultant indirect negative financial impact on the value of the Units of
a publicly registered limited partnership.
o More immediate use for the cash tied up in an investment in the Units.
2
<PAGE> 6
o The delays and complications in preparing and filing personal income tax
returns which may result from an investment in the Units.
o The opportunity to transfer Units without the costs and commissions
normally associated with a transfer.
The Offer is not conditioned upon any minimum number of Units being
tendered. If more than 21,000 Units are validly tendered and not withdrawn,
the Purchaser will accept for purchase on a pro rata basis 21,000 Units,
subject to the terms and conditions herein.
According to information supplied by the Partnership, there are 58,982
Units issued and outstanding held by 4,955 Unitholders. The Purchaser and
certain beneficial owners (or their affiliates) own 2,997 Units in the
aggregate, constituting approximately 5.1% of the Units outstanding.
Certain information contained in this Offer to Purchase which relates to
the Partnership, or represents statements made by the General Partner, has been
derived from information provided to the Purchaser by the General Partner.
UNITHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE ACCOMPANYING
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
ANY UNITHOLDER DESIRING TO TENDER UNITS SHOULD COMPLETE AND SIGN THE LETTER OF
TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS TO THE
LETTER OF TRANSMITTAL AND MAIL OR DELIVER THE SIGNED LETTER OF TRANSMITTAL TO
THE HERMAN GROUP, INC., THE DEPOSITARY FOR THE OFFER (THE "DEPOSITARY"), AT THE
FOLLOWING ADDRESS:
THE HERMAN GROUP, INC.
BY HAND OR OVERNIGHT DELIVERY: 2121 JACINTO STREET
26TH FLOOR
DALLAS, TEXAS 75201
BY MAIL: P.O. BOX 357
DALLAS, TEXAS 75221-9602
BY FACSIMILE: (214) 999-9348 OR
(214) 999-9323
FOR ASSISTANCE IN COMPLETION OF THE LETTER OF TRANSMITTAL, YOU MAY CONTACT THE
HERMAN GROUP, INC., THE INFORMATION AGENT FOR THE OFFER (THE "INFORMATION
AGENT"), BY CALLING:
(800) 530-4966
3
<PAGE> 7
THE TENDER OFFER
SECTION 1. TERMS OF THE OFFER. Upon the terms of the Offer, the
Purchaser will pay for Units validly tendered on or prior to the Expiration
Date and not withdrawn in accordance with Section 4 of this Offer to Purchase.
The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on
March 14, 1996, unless the Purchaser extends the period of time during which
the Offer is open. In the event the Offer is extended, the term "Expiration
Date" shall mean the latest time and date on which the Offer, as extended by
the Purchaser, shall expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
PURCHASE PRICE OFFERED TO UNITHOLDERS, SUCH INCREASED PURCHASE PRICE SHALL BE
PAID FOR ALL UNITS ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT
SUCH UNITS WERE TENDERED PRIOR TO SUCH INCREASE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14, which sets forth in full the conditions of the Offer. The
Purchaser reserves the right (but shall not be obligated), in its sole
discretion, to waive any or all of such conditions. If, on or prior to the
Expiration Date, any or all of such conditions have not been satisfied or
waived, the Purchaser may (i) decline to purchase any of the Units tendered,
terminate the Offer and return all tendered Units to tendering Unitholders,
(ii) waive all the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission"), purchase all Units validly tendered, (iii) extend the Offer and,
subject to the right of Unitholders to withdraw Units until the Expiration
Date, cause the Depositary to retain the Units that have been tendered during
the period or periods for which the Offer is extended, or (iv) amend the Offer,
including by increasing the Purchase Price.
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If
the number of Units validly tendered on or prior to the Expiration Date and not
withdrawn is 21,000 or less, the Purchaser will accept for payment, subject to
the terms and conditions of the Offer, all Units so tendered. If the number of
Units validly tendered on or prior to the Expiration Date and not withdrawn
exceeds 21,000, the Purchaser will accept for payment, subject to the terms and
conditions of the Offer, 21,000 Units so tendered on a pro rata basis (with
such adjustments to avoid purchase of fractional Units).
The Purchaser will pay for Units validly tendered and not withdrawn in
accordance with Section 4 as promptly as practicable following the Expiration
Date. In all cases, the Purchase Price will be paid only after timely receipt
by the Depositary of a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and any other documents required by the
Letter of Transmittal. (See "Section 3. Procedures for Tendering Units".)
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered Units when, as and if the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Units pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, payment for Units tendered and accepted for payment pursuant to the
Offer will in all cases be made by deposit of the Purchase Price with the
Depositary, which will act as agent for the tendering Unitholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering Unitholders. Under no circumstances will interest be paid on the
Purchase Price by reason of any delay in making such payment.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal with respect to such Units will be destroyed by the Purchaser. If
for any reason acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchaser is unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights under Section 14, the Purchaser may
cause the Depositary to retain tendered Units and such Units may not be
withdrawn except to the extent that the tendering Unitholders are entitled to
withdrawal rights as described in Section 4; provided, however, that the
Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or return such
Units promptly after termination or withdrawal of the Offer.
4
<PAGE> 8
SECTION 3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. To validly tender Units, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and any other documents
required by the Letter of Transmittal, must be received by the Purchaser on or
prior to the Expiration Date. A Unitholder must tender all Units owned by such
Unitholder in order for the tender to be valid.
SIGNATURE REQUIREMENTS. If the Letter of Transmittal is signed by the
registered holder of the Units and payment is to be made directly to that
holder, then no notarization or signature guarantee is required on the Letter
of Transmittal. Similarly, if the Units are tendered for the account of a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. or a commercial bank, savings
bank, credit union, savings and loan association or trust company having an
office, branch or agency in the United States (each an "Eligible Institution"),
no notarization or signature guarantee is required on the Letter of
Transmittal. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON THE LETTER OF
TRANSMITTAL MUST EITHER BE NOTARIZED OR GUARANTEED BY AN ELIGIBLE INSTITUTION.
IN ORDER FOR A TENDERING UNITHOLDER TO PARTICIPATE IN THE OFFER, UNITS
MUST BE VALIDLY TENDERED AND NOT WITHDRAWN ON OR PRIOR TO THE EXPIRATION DATE,
WHICH IS 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MARCH 14, 1996, UNLESS
EXTENDED.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of backup federal income tax withholding with respect to payment of
the Purchase Price, a tendering Unitholder must provide the Purchaser with such
Unitholder's correct taxpayer identification number by completing the
Substitute Form W-9 included in the Letter of Transmittal. (See the
Instructions to the Letter of Transmittal and "Section 6. Certain Federal
Income Tax Consequences".)
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to 10% of the sum of the Purchase Price plus the amount of
Partnership liabilities allocable to each Unit purchased, each Unitholder must
complete the FIRPTA Affidavit included in the Letter of Transmittal certifying
such Unitholder's taxpayer identification number and address and that the
Unitholder is not a foreign person. (See the Instructions to the Letter of
Transmittal and "Section 6. Certain Federal Income Tax Consequences".)
OTHER REQUIREMENTS. By executing a Letter of Transmittal, a tendering
Unitholder irrevocably appoints the designees of the Purchaser, effective as of
May 1, 1996, as such Unitholder's proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such Unitholder's rights with respect to the Units tendered by such
Unitholder and accepted for payment and purchased by the Purchaser. Such
appointment will be effective as of May 1, 1996, to the extent that the
Purchaser accepts such Units for payment. Upon such acceptance for payment,
all prior proxies given by such Unitholder with respect to such Units will,
without further action, be revoked, and no subsequent proxies may be given (and
if given will not be effective). The designees of the Purchaser will, as to
such Units, be empowered, as of May 1, 1996, to exercise all voting and other
rights of such Unitholder as they in their sole discretion may deem proper at
any meeting of Unitholders, by written consent or otherwise. The Purchaser
reserves the right to require that, in order for Units to be deemed validly
tendered, upon the Purchaser's acceptance for payment of such Units, the
Purchaser must be able to exercise full voting rights with respect to such
Units, effective as of May 1, 1996, including voting at any meeting of
Unitholders then scheduled to be held after April 30, 1996. In addition, by
executing a Letter of Transmittal, a Unitholder also assigns to the Purchaser
all of the Unitholder's rights to receive distributions from the Partnership
attributable to all periods of time after April 30, 1996 with respect to Units
which are accepted for payment and purchased pursuant to the Offer. (See
"Section 6. Certain Federal Income Tax Consequences" and "Section 9. Certain
Information Concerning the Partnership".)
5
<PAGE> 9
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Units pursuant to the procedures described above will be determined
by the Purchaser, in its sole discretion, which determination shall be final
and binding. The Purchaser reserves the absolute right to reject any or all
tenders if not in proper form or if the acceptance of, or payment for, the
Units tendered may, in the opinion of the Purchaser's counsel, be unlawful.
The Purchaser also reserves the right to waive any defect or irregularity in
any tender with respect to any particular Units of any particular Unitholder,
and the Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the Instructions thereto) will be
final and binding. Neither the Purchaser, the Depositary nor any other person
will be under any duty to give notification of any defects or irregularities in
the tender of any Units or will incur any liability for failure to give any
such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unitholder and the
Purchaser on the terms set forth in the Offer.
SECTION 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this
Section 4, all tenders of Units pursuant to the Offer are irrevocable, provided
that Units tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless already accepted for payment as provided in
this Offer to Purchase, may also be withdrawn at any time after April 14, 1996.
For withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Units to be
withdrawn and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or if the
Purchaser is unable to purchase or pay for Units for any reason, then, without
prejudice to the Purchaser's rights under the Offer, the Purchaser may cause
the Depositary to retain tendered Units and such Units may not be withdrawn
except to the extent that tendering Unitholders are entitled to withdrawal
rights as set forth in this Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders
the Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
Any Units properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn Units may be re-tendered, however, by
following any of the procedures described in Section 3 at any time prior to the
Expiration Date.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Units, (ii) to terminate the Offer and not accept for payment any Units not
already accepted for payment or paid for, (iii) upon the occurrence of any of
the conditions specified in Section 14, to delay the acceptance for payment of,
or payment for, any Units not already accepted for payment or paid for, and
(iv) to amend the Offer in any respect (including, without limitation, by
increasing the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension, termination or
amendment will promptly be disseminated to Unitholders in a manner reasonably
designed to inform Unitholders of such change in compliance with Rule 14d-4(c)
under the Exchange Act. In the case of an extension of the Offer, such
extension will be followed by a press release or public announcement which will
be issued no later than 9:00 a.m., New York City time, on the next business day
after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Units) is delayed in its payment for
Units or is unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Purchaser may
cause the Depositary to retain tendered Units and such Units may not be
withdrawn except to the extent tendering Unitholders are entitled to withdrawal
6
<PAGE> 10
rights as described in Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay Unitholders
the Purchase Price in respect of Units tendered or return such Units promptly
after termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act. The minimum period during which an offer must remain open
following a material change in the terms of the offer or information concerning
the offer will depend upon the facts and circumstances, including the relative
materiality of the change in the terms or information. In the Commission's
view, an offer should remain open for a minimum of five business days from the
date the material change is first published, sent or given to securityholders,
and if material changes are made with respect to information that approaches
the significance of price or the percentage of securities sought, a minimum of
ten business days may be required to allow for adequate dissemination to
securityholders and for investor response. As used in this Offer to Purchase,
"business day" means any day other than a Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following
summary is a general discussion of certain federal income tax consequences of a
sale of Units pursuant to the Offer. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations
thereunder, administrative rulings, practice and procedures and judicial
authority as of the date of the Offer. All of the foregoing are subject to
change, and any such change could affect the continuing accuracy of this
summary. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular Unitholder in light of such Unitholder's
specific circumstances or to certain types of Unitholders subject to special
treatment under the federal income tax laws (for example, foreign persons,
dealers in securities, banks, insurance companies and tax-exempt
organizations), nor does it discuss any aspect of state, local, foreign or
other tax laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
UNITHOLDER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unitholder's
"amount realized" on the sale and (ii) the Unitholder's adjusted tax basis in
the Units sold. The "amount realized" with respect to a Unit sold pursuant to
the Offer will be a sum equal to the amount of cash received by the Unitholder
for the Unit plus the amount of Partnership liabilities allocable to the Unit
(as determined under Code Section 752). The amount of a Unitholder's adjusted
tax basis in Units sold pursuant to the Offer will vary depending upon the
Unitholder's particular circumstances, and will be affected by both allocations
of Partnership income, gain or loss and any cash distributions made by the
Partnership to a Unitholder with respect to such Units. In this regard,
tendering Unitholders will be allocated a pro rata share of the Partnership's
taxable income or loss with respect to Units sold pursuant to the Offer through
April 30, 1996 and will also receive cash distributions with respect to such
Units with respect to the period of time ending April 30, 1996.
Based on the results of Partnership operations through December 31, 1994,
and without giving effect to Partnership operations or transactions since that
time, it is estimated that, depending on the Unitholder's date of entry into
the Partnership, a taxable Unitholder who or which sells Units pursuant to the
Offer that were acquired by such Unitholder at the time of the Partnership's
original offering of Units will recognize a gain for federal income tax
purposes of $109 per Unit. Under the passive activity loss rules (discussed
below), such gain would be treated as passive activity income, which can be
offset (subject to any other applicable limitations) by a Unitholder's passive
activity losses from other investments.
The gain or loss recognized by a Unitholder on a sale of a Unit pursuant
to the Offer generally will be treated as a capital gain or loss if the Unit
was held by the Unitholder as a capital asset. Such capital gain or loss will
be treated as long- term capital gain or loss if the tendering Unitholder's
holding period for the Unit exceeds one year. Under current law (which is
subject to change), long-term capital gains of individuals and other
non-corporate
7
<PAGE> 11
taxpayers are taxed at a maximum marginal federal income tax rate of 28%,
whereas the maximum marginal federal income tax rate for other income of such
persons is 39.6%. 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 carryforward period is five years and a non-corporate taxpayer
can carry forward such losses indefinitely); in addition, corporations, but not
non-corporate taxpayers, are allowed to carry back excess capital losses to the
three preceding taxable years.
The portion of a Unitholder's gain on the sale that is attributable to
"unrealized receivables" (which include depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, however,
would be treated as ordinary income rather than capital gain. It is possible
that the basis allocation rules of Code Section 751 may result in a
Unitholder's recognizing ordinary income with respect to the portion of the
Unitholder's amount realized on the sale of a Unit that is attributable to such
items while recognizing a capital loss with respect to the remainder of the
Unit.
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, and closely held
corporations may not offset such losses against so-called "portfolio" income.
Gain or loss recognized upon a sale of a Unit pursuant to the Offer by a
Unitholder who or which is subject to the passive activity loss limitation
would be treated as passive activity income or loss. Such loss, if any, should
no longer be subject to the passive activity loss limitation once the
Unitholder sells all his Units. If a Unitholder is unable to sell all of his
Units pursuant to the Offer, such loss could not be deducted under the passive
activity loss rules (except to the extent of the Unitholder's passive activity
income from the Partnership or other sources) until the Unitholder's remaining
Units are sold. (See "Section 7. Effects of the Offer".)
A taxable Unitholder (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding unless
the Unitholder provides a taxpayer identification number ("TIN") and certifies
that the TIN is correct or properly certifies that he is awaiting a TIN. A
Unitholder may avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Letter of Transmittal. If a
Unitholder 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 Unitholder.
Gain realized by a foreign Unitholder on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code,
the transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on
the disposition. The Purchaser will withhold 10% of the amount realized by a
tendering Unitholder from the Purchase Price payable to such Unitholder unless
the Unitholder properly completes and signs the FIRPTA Affidavit included as
part of the Letter of Transmittal certifying the Unitholder's TIN, that such
Unitholder is not a foreign person and the Unitholder's address. Amounts
withheld would be creditable against a foreign Unitholder's federal income tax
liability and, if in excess thereof, a refund could be obtained from the
Internal Revenue Service by filing a U.S. income tax return.
SECTION 7. EFFECTS OF THE OFFER.
LIMITATIONS ON RESALES. Pursuant to the Partnership Agreement of the
Partnership, transfers of Units which, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of
the Partnership for federal or applicable state income tax purposes (which
termination may occur when 50% or more of the Units are transferred in a
twelve-month period) are not permitted. Depending upon the number of Units
tendered pursuant to the Offer, sales of Units on the secondary market for the
twelve-month period following completion of the Offer may be limited. The
Partnership will not process any requests for transfers of Units during such
twelve-month period which the General Partner believes may cause a tax
termination. In determining the number of Units subject to the Offer, the
Purchaser took this restriction into account so as to permit transfers of at
8
<PAGE> 12
least 315 of the outstanding Units to occur prior to August 1, 1996 and an
additional 3,058 Units from August 1, 1996 until April 30, 1997 without
violating this restriction.
EFFECT ON TRADING MARKET. There is no established public trading market
for the Units and, therefore, a reduction in the number of Unitholders should
not materially further restrict the Unitholders' ability to find purchasers for
their Units.
CONTROL OF ALL UNITHOLDER VOTING DECISIONS BY PURCHASER. Following the
consummation of the Offer, the Purchaser anticipates that it will be admitted
to the Partnership as a substitute Limited Partner as of May 1, 1996 with
respect to the Units purchased pursuant to the Offer. As a substitute Limited
Partner or pursuant to the power of attorney granted pursuant to the Letter of
Transmittal, the Purchaser will have the right on and after May 1, 1996 to vote
each Unit purchased pursuant to the Offer. Depending on the number of Units
purchased pursuant to the Offer, the Purchaser could be in a position to
significantly influence all voting decisions with respect to the Partnership.
Accordingly, the Purchaser could (i) prevent non- tendering Unitholders from
taking action they desire but that the Purchaser opposes and (ii) take action
desired by the Purchaser but opposed by non-tendering Unitholders. Under the
Partnership Agreement, Unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters, including: removal of the
General Partner; dissolution of the Partnership; the sale of all or
substantially all of the Partnership's properties; material changes in the
investment objectives and policies of the Partnership; and most types of
amendments to the Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"). When voting on such matters, the Purchaser will vote
Units owned and acquired by it in its interest, which, because certain of its
beneficial owners are affiliated with the General Partner, may also be in the
interest of the General Partner.
The Units are registered under the Exchange Act, which requires, among
other things, that the Partnership furnish certain information to its
Unitholders and to the Commission and comply with the Commission's proxy rules
in connection with meetings of, and solicitation of consents from, Unitholders.
Purchases of Units pursuant to the Offer will not result in the Units becoming
eligible for deregistration under Section 12(g) of the Exchange Act.
POSSIBLE DEFAULT UNDER LICENSE AGREEMENTS. The consummation of the Offer
may result in a breach of the license agreements with Hampton Inns, Inc.
("Hampton Inns") covering the Partnership's properties. The General Partner
has advised the Purchaser that if a breach is asserted, the General Partner
will endeavor to obtain the consent of Hampton Inns, which consent, under the
terms of the license agreements, may not be unreasonably withheld. Termination
of the license agreements would also constitute a default under all of the
mortgages encumbering the Partnership's properties (See "Section 9. Certain
Information Concerning the Partnership" for a description of such mortgages.)
Any required consent under the license agreements is not a condition to the
Offer.
POSSIBLE ACCELERATION OF MORTGAGE DEBT. A mortgage encumbering the Eden
Prairie, MN property, representing approximately $2,630,000 outstanding
principal amount of indebtedness, contains provisions which could give the
holder thereof the right to accelerate the mortgage debt as a result of the
consummation of the transactions contemplated by the Offer. If the lender
successfully asserts that its mortgage debt may be accelerated, the Partnership
will be required to satisfy the outstanding mortgage debt and to pay any
prepayment fees, expenses or other sums required pursuant to the terms of the
mortgage under such circumstance. In such event, the General Partner has
advised the Purchaser that the Partnership may arrange for alternative sources
of mortgage financing for such property. However, any such refinancing may be
at interest rates which are higher or otherwise on terms which are less
favorable than those provided for by the current mortgage.
SECTION 8. FUTURE PLANS. The Purchaser is acquiring the Units for
investment purposes and with a view to making a profit. Subject to the
limitation on resales discussed in Section 7, following the completion of the
Offer, the Purchaser may acquire additional Units. Any such acquisition may be
made through private purchases or by any other means deemed advisable. Any
such acquisition may be at a price higher or lower than the price to be paid
for the Units purchased pursuant to the Offer. Neither the Purchaser nor the
General Partner has any present plans or intentions with respect to a merger,
reorganization or liquidation of the Partnership, a sale of assets or
refinancing of any of the Partnership's properties (except that substantially
all of the outstanding mortgage debt is scheduled to
9
<PAGE> 13
mature (and will likely require refinancing) during or before April 1998), or a
change in the management, capitalization or distribution policy of the
Partnership. (See "Section 9. Certain Information Concerning the
Partnership".) However, the Purchaser believes that consistent with its
fiduciary obligations the General Partner will continue to review any
opportunities such as sales or refinancings and will seek to maximize returns
to investors in the Units. The General Partner's intentions are to manage the
Partnership's assets to maximize capital appreciation and improve property
operations. See "Section 10. Conflicts of Interest and Transactions with
Affiliates" for certain information concerning the General Partner's potential
conflict of interest with respect to sales or refinancings.
The purchase of Units will allow the Purchaser to benefit from any of the
following: (a) any cash distributions from the operations in the ordinary
course of the business of the Partnership; (b) any distributions of net
proceeds from the sale or refinancing of any of the Partnership's properties;
(c) any gain on a resale of Units; and (d) any distributions of net proceeds
from a liquidation of the Partnership.
SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP. The
Partnership was organized on June 28, 1984, under the laws of the State of
California. Its principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29602. Its telephone number is
(864) 239-1000.
The Partnership's primary business is the ownership of limited service
hotels and it presently owns interests in 24 Hampton Inn Hotels. Eighteen of
the Hampton Inn Hotels are owned in a joint venture with Hampton Inns (the
"Hampton Inns Joint Venture") in which the Partnership and an affiliated
partnership, Growth Hotel Investors (through Growth Hotel Investors Combined
Fund No 1 (the "Combined Fund")) own an 80% interest and Hampton Inns owns a
20% subordinated interest. Under the terms of the joint venture agreement,
Hampton Inns is not entitled to receive any distributions of sale proceeds on
account of its interest until such time as the Combined Fund has received
cumulative distributions equal to 100% of its capital contribution plus a 12%
return thereon. 68% of the Combined Fund is owned by the Partnership and 32%
is owned by Growth Hotel Investors. All of the Hampton Inn Hotels are operated
under a license agreement with Hampton Inns, and the 18 hotels owned by the
Hampton Inns Joint Venture, and an additional hotel owned by the Partnership,
are managed by Hampton Inns. Substantially all of the mortgage debt on the
Hampton Inn Hotels in which the Partnership owns interests is scheduled to
mature (and will likely require refinancing) during or before April 1998. (See
" Schedule of Mortgages" below.)
The original anticipated holding period of the Partnership's properties
was 5 to 10 years following the acquisition of a property. Currently,
properties in the Partnership's portfolio have been held for varying periods
ranging from approximately 7 to 10 years. The Partnership believes that the
General Partner will continue to review opportunities to sell the Partnership's
properties and refinance its indebtedness consistent with its fiduciary
obligations and with a view to maximizing returns to Unitholders.
PROPERTIES.
A description of the hotel properties in which the Partnership has an
ownership interest is as follows. Except as otherwise indicated, all
properties are owned in fee.
<TABLE>
<CAPTION>
Date of
Name and Location Purchase Rooms
- ------------------------------------ -------- -----
<S> <C> <C>
Hampton Inn-Kansas City 12/87 122
11212 North Newark Circle
Kansas City, Missouri
Hampton Inn-Eden Prairie 12/87 124
7740 Flying Cloud Drive
Eden Prairie, Minnesota
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
Date of
Name and Location Purchase Rooms
- ------------------------------------ -------- -----
<S> <C> <C>
Hampton Inn-Dublin 04/88 123
3720 Tuller Road
Dublin, Ohio
Hampton Inn-North Dallas(1) 07/88 160
4555 Beltway Drive
Addison, Texas
Hampton Inn-St. Louis(1) 07/89 124
2454 Old Dorsett Road
Maryland Heights, Missouri
Hampton Inn-Colorado Springs 12/89 128
7245 Commerce Center Drive
Colorado Springs, Colorado
GROWTH HOTEL INVESTORS
- ----------------------
COMBINED FUND NO. 1 (2)
- -----------------------
Hampton Inn-Memphis I-40 East(3) 12/86 117
1585 Sycamore View Drive
Memphis, Tennessee
Hampton Inn-Columbia-West 12/86 121
1094 Chris Drive
West Columbia, SC
Hampton Inn-Spartanburg 12/86 112
6023 Alexander Road
Spartanburg, South Carolina
Hampton Inn-Little Rock-North 12/86 123
500 West 29th Street
North Little Rock, Arkansas
Hampton Inn-Amarillo 12/86 116
1700 I40 East
Amarillo, Texas
Hampton Inn-Greenville 12/86 123
246 Congaree Road
Greenville, South Carolina
Hampton Inn-Charleston-Airport 12/86 125
4701 Arco Lane
North Charleston, SC
Hampton Inn-Memphis-Poplar 12/86 126
5320 Poplar Avenue
Memphis, Tennessee
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
Date of
Name and Location Purchase Rooms
- ----------------------------------- -------- -----
<S> <C> <C>
Hampton Inn-Greensboro 12/86 121
2004 Veasly Street
Greensboro, North Carolina
Hampton Inn-Birmingham 12/86 123
1466 Montgomery Hwy.
Birmingham, Alabama
Hampton Inn-Atlanta-Roswell 03/87 129
9995 Dogwood Road
Roswell, Georgia
Hampton Inn-Chapel Hill 03/87 122
1740 US 15 & 501 Highway
Chapel Hill, North Carolina
Hampton Inn-Dallas-Richardson 03/87 130
1577 Gateway
Richardson, Texas
Hampton Inn-Nashville-Briley 03/87 120
Parkway(3)
2350 Elm Hill Parkway
Nashville, Tennessee
Hampton Inn-San Antonio-Northwest 06/87 123
4803 Manitou Drive
San Antonio, Texas
Hampton Inn-Madison Heights 12/87 126
32420 Stephenson Highway
Madison Heights, Michigan
Hampton Inn-Mountain Brook(3) 12/87 131
2731 U.S. Highway 280
Birmingham, Alabama
Hampton Inn-Northlake(3) 09/88 130
3400 Northlake Parkway
Atlanta, Georgia
</TABLE>
(1) Property is owned by a joint venture in which the Partnership has a
controlling interest.
(2) The properties listed under this heading are owned by the Hampton Inns
Joint Venture.
(3) The property is subject to a land lease extending as follows:
12
<PAGE> 16
<TABLE>
<CAPTION>
Year Option
Lease Period
Property Expires (Years)
---------------------------------------- ------- -------
<S> <C> <C>
Hampton Inn-Memphis I-40 East 2004 20
Hampton Inn-Nashville-Briley Parkway 2006 20
Hampton Inn-Mountain Brook 2007 50
Hampton Inn-Northlake 2008 40
</TABLE>
ACCUMULATED DEPRECIATION SCHEDULE.
Set forth below is a table showing the gross carrying value and
accumulated depreciation and federal tax basis of each of the Partnership's
properties as of December 31, 1995. The information included in the table
under the heading Growth Hotel Investors Combined Fund No. 1 represents 100% of
interest of the Combined Fund in the properties. 68% of the Combined Fund is
owned by the Partnership.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
- ----------------------------- ----------- ------------ --------- -------- --------------
<S> <C> <C> <C> <C> <C>
GROWTH HOTEL INVESTORS II
- -------------------------
Hampton Inn-Kansas City $ 5,902,000 $1,937,000 5-39 yrs. S/L $ 4,166,000
Hampton Inn-Eden Prairie 5,560,000 1,694,000 5-39 yrs. S/L 3,975,000
Hampton Inn-Dublin 6,275,000 2,048,000 5-39 yrs. S/L 4,291,000
Hampton Inn-North Dallas 6,538,000 1,920,000 5-30 yrs. S/L 4,621,000
Hampton Inn-St. Louis 6,340,000 1,942,000 5-30 yrs. S/L 4,441,000
Hampton Inn-Colorado Springs 3,869,000 1,274,000 5-39 yrs. S/L 2,591,000
GROWTH HOTEL INVESTORS
- ----------------------
COMBINED FUND NO. 1
- -------------------
Hampton Inn-Memphis I-40 4,123,000 1,525,000 5-30 yrs. S/L 1,921,000
Hampton Inn-Columbia West 4,618,000 1,588,000 5-30 yrs. S/L 2,334,000
Hampton Inn-Spartanburg 4,072,000 1,390,000 5-39 yrs. S/L 2,080,000
Hampton Inn-Little Rock 4,434,000 1,378,000 5-39 yrs. S/L 2,376,000
Hampton Inn-Amarillo 2,534,000 758,000 5-39 yrs. S/L 1,628,000
Hampton Inn-Greenville 4,473,000 1,396,000 5-30 yrs. S/L 2,400,000
Hampton Inn-Charleston Airport 4,862,000 1,562,000 5-39 yrs. S/L 2,569,000
Hampton Inn-Memphis Poplar 6,183,000 1,753,000 5-30 yrs. S/L 3,474,000
Hampton Inn-Greensboro 4,376,000 1,380,000 5-39 yrs. S/L 2,358,000
Hampton Inn-Birmingham 5,061,000 1,522,000 5-30 yrs. S/L 2,816,000
Hampton Inn-Atlanta Roswell 5,622,000 1,395,000 5-30 yrs. S/L 4,010,000
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
- ----------------------------- ----------- ------------ --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Hampton Inn-Chapel Hill 4,685,000 1,226,000 5-30 yrs. S/L 3,274,000
Hampton Inn-Dallas Richardson 5,717,000 1,328,000 5-30 yrs. S/L 4,177,000
Hampton Inn-Nashville-Briley 4,654,000 1,487,000 5-30 yrs. S/L 2,980,000
Parkway
Hampton Inn-San Antonio 4,999,000 1,293,000 5-30 yrs. S/L 3,519,000
Hampton Inn-Madison Heights 6,795,000 2,209,000 5-30 yrs. S/L 4,338,000
Hampton Inn-Mountain Brook 5,360,000 2,144,000 5-30 yrs. S/L 3,004,000
Hampton Inn-Northlake 4,838,000 1,978,000 5-30 yrs. S/L 2,810,000
------------ ----------- -----------
$121,890,000(1) $38,127,000(1) $76,153,000(1)
============ =========== ===========
</TABLE>
__________________________________
(1) $93,920,000, $29,387,160 and $59,491,240 of gross carrying value,
accumulated depreciation and Federal tax basis, respectively, are
attributable to interests owned by the Partnership.
14
<PAGE> 18
SCHEDULE OF MORTGAGES.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
BALANCE AT BALANCE
DECEMBER 31, INTEREST PERIOD MATURITY DUE AT
PROPERTY 1995 RATE (%) AMORTIZED DATE MATURITY
-------- ------------ -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
GROWTH HOTEL INVESTORS II
- -------------------------
Hampton Inn-Eden Prairie 2,630,702 11.5 30 yrs. 4/1/98 2,565,000
Hampton Inn-North Dallas 2,976,461 7.63 30 yrs. 12/1/96 2,927,000
Hampton Inn-St. Louis 3,700,000 (1) N/A 12/1/2016 3,700,000
GROWTH HOTEL INVESTORS
- ----------------------
COMBINED FUND NO.1 (2)
- ----------------------
Hampton Inn-Memphis I-40 East 1,797,398 10 30 yrs. 12/1/96 1,774,000
Hampton Inn-Columbia-West 2,092,809 10 30 yrs. 12/1/96 2,065,000
Hampton Inn-Spartanburg 1,793,705 10 30 yrs. 12/1/96 1,770,000
Hampton Inn-Little Rock-North 2,045,728 10 30 yrs. 12/1/96 2,018,000
Hampton Inn-Amarillo 1,137,337 10 30 yrs. 12/1/96 1,122,000
Hampton Inn-Greenville 2,084,500 10 30 yrs. 12/1/96 2,057,000
Hampton Inn-Charleston-Airport 2,175,894 10 30 yrs. 12/1/96 2,146,000
Hampton Inn-Memphis-Poplar 2,839,648 10 30 yrs. 12/1/96 2,801,000
Hampton Inn-Greensboro 2,011,571 10 30 yrs. 12/1/96 1,985,000
Hampton Inn-Birmingham 2,462,074 10 30 yrs. 12/1/96 2,429,000
Hampton Inn-Atlanta-Roswell 2,682,608 10 30 yrs. 12/1/96 2,646,000
Hampton Inn-Chapel Hill 2,290,661 10 30 yrs. 12/1/96 2,260,000
Hampton Inn-Dallas-Richardson 2,810,174 10 30 yrs. 12/1/96 2,772,000
Hampton Inn-Nashville-Briley 2,215,785 10 30 yrs. 12/1/96 2,185,000
Parkway
Hampton Inn-San Antonio- 2,488,135 10 30 yrs. 12/1/96 2,455,000
Northwest
Hampton Inn-Madison Heights 2,876,371 10 30 yrs. 12/1/96 2,837,000
Hampton Inn-Mountain Brook 2,586,905 7.63 30 yrs. 8/1/96 2,565,000
Hampton Inn-Northlake 2,406,754 7.63 30 yrs. 8/1/96 2,387,000
----------- -----------
$50,105,220(2) $49,466,000(2)
=========== ===========
</TABLE>
- -----------------------------
(1) Variable rate equal to lesser of 10% or formula rate. Rate is currently
4.4%.
(2) The information included in the table underthe heading Growth Hotel
Investors Combined Fund No. 1 represents 100% ofthe interest of the Combined
Fund in the properties. 68% of the Combined Fund is owned by the Partnership.
Accordingly, $37,859,042 and $36,578,320 of theprincipal balance at December
31, 1995 and at maturity, respectively, are attributable to interests owned by
the Partnership.
15
<PAGE> 19
OCCUPANCY.
An occupancy and room rate summary for the years ended December 31, 1995,
1994 and 1993 is set forth on the following chart:
<TABLE>
<CAPTION>
Average Average
Occupancy Rate (%) Daily Room Rate ($)
<S> <C> <C> <C> <C> <C> <C>
HOTELS: 1995 1994 1993 1995 1994 1993
- ------- ---- ---- ---- ---- ----- ----
Hampton Inn-Kansas City . . . . . 82 83 75 55.41 51.87 50.21
Hampton Inn-Eden Prairie . . . . 75 76 74 56.96 54.33 50.25
Hampton Inn-Dublin . . . . . . . 72 72 73 53.91 49.05 48.00
Hampton Inn-North Dallas . . . . 78 79 75 61.89 56.83 53.74
Hampton Inn-St. Louis . . . . . . 71 75 72 58.12 56.57 55.43
Hampton Inn-Colorado Springs . . 77 75 69 53.07 47.45 45.97
GROWTH HOTEL INVESTORS COMBINED
FUND NO.1
Hampton Inn-Memphis I-40 East . . 80 82 80 53.49 50.32 48.59
Hampton Inn-Columbia-West . . . . 81 84 84 54.42 51.17 47.32
Hampton Inn-Spartanburg . . . . . 69 70 68 47.83 42.89 40.36
Hampton Inn-Little Rock-North . . 79 78 77 48.79 45.52 43.20
Hampton Inn-Amarillo . . . . . . 75 77 79 50.55 47.12 44.31
Hampton Inn-Greenville . . . . . 81 80 79 52.30 47.62 44.99
Hampton Inn-Charleston-Airport . 76 80 79 53.48 50.16 47.35
Hampton Inn-Memphis-Poplar . . . 84 87 88 64.64 60.18 56.12
Hampton Inn-Greensboro . . . . . 86 87 84 57.99 51.50 47.11
Hampton Inn-Birmingham . . . . . 82 83 85 58.65 55.01 50.71
Hampton Inn-Atlanta-Roswell . . . 82 82 77 58.54 54.17 50.39
Hampton Inn-Chapel Hill . . . . . 87 82 79 56.14 50.95 46.39
Hampton Inn-Dallas-Richardson . . 78 76 67 50.82 46.63 45.77
Hampton Inn-Nashville-Briley
Parkway . . . . . . . . . . 87 88 86 62.03 56.98 52.69
Hampton Inn-San Antonio-Northwest 62 72 78 57.67 57.19 55.11
Hampton Inn-Madison Heights . . . 71 72 67 54.04 51.21 49.68
Hampton Inn-Mountain Brook . . . 79 80 83 58.17 54.92 51.08
Hampton Inn-Northlake . . . . . . 81 76 73 54.86 52.33 48.68
</TABLE>
16
<PAGE> 20
SELECTED FINANCIAL DATA.
Set forth below is a summary of certain financial data which has been
excerpted or derived from the Partnership's Annual Reports on Form 10-K for the
years ended December 31, 1994, 1993, 1992, 1991 and 1990 and the Quarterly
Reports on Form 10-Q for the nine months ended September 30, 1995 and September
30, 1994. The quarterly data is unaudited. More comprehensive financial and
other information is included in such reports and other documents filed by the
Partnership with the Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all the financial
information and related notes contained therein.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31,
September 30,
------------- ------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL REVENUES: $38,781 $35,998 $47,164 $43,458 $40,075 $37,672 $35,914
======= ======= ======= ======= ======= ======= =======
INCOME (LOSS) BEFORE
MINORITY INTEREST
IN JOINT VENTURES'
OPERATIONS $6,827 $5,517 $6,348 $3,270 $355 $(1,213) $(1,510)
MINORITY INTEREST IN
JOINT VENTURE
OPERATIONS (1,832) (1,259) (1,417) (546) 413 828 796
EXTRAORDINARY ITEM -
GAIN ON
EXTINGUISHMENT
OF DEBT ---- 98 98 ---- ---- ---- ----
------ ---- --- ---- ---- ---- ----
NET INCOME (LOSS) $4,995 $4,356 $5,029 $2,724 $768 $(385) $714
====== ====== ====== ====== ==== ====== ====
NET INCOME (LOSS)
PER LIMITED
PARTNERSHIP ASSIGNEE
UNIT (1):
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $83 $70 $82 --- --- --- ---
EXTRAORDINARY ITEM
GAIN ON
EXTINGUISHMENT
OF DEBT ---- 2 2 ---- ---- ---- ----
---- --- --- ------ ------ ------ ------
NET INCOME (LOSS) $83 $72 $84 $45 $13 $(6) $(12)
=== === === === === ==== =====
TOTAL ASSETS $101,298 $102,275 $99,974 $100,254 $101,930 $105,191 $109,705
======== ======== ======= ======== ======== ======== ========
LONG TERM OBLIGATIONS:
Notes payable $56,236 $57,053 $56,885 $57,740 $58,305 $58,809 $59,048
======= ======= ======= ======= ======= ======= =======
CASH DISTRIBUTIONS
PER LIMITED
PARTNERSHIP
ASSIGNEE UNIT (actual
amount based on
admission to partnership) $44 $43 $58 $51 $35 $28 $41
=== === === === === === ===
</TABLE>
_____________________________
(1) $1,000 original contribution per unit.
17
<PAGE> 21
Unitholders are referred to the financial and other information included
in the Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and the Partnership's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1995. Such reports and other documents may be
examined and copies may be obtained from the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, New York, New York
10048. Copies should be available by mail upon payment of the Commission's
customary charges by writing to the Commission's principal offices at 450 Fifth
Street, N.W., Washington, D.C. 20549.
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES. The
General Partner, the Purchaser and their affiliates have conflicts of interest
with respect to the Offer as set forth below.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. The General Partner has
a conflict of interest with respect to the Offer, including as a result of its
affiliation with certain beneficial owners of the Purchaser. (See "Section 13.
Background of the Offer".)
VOTING BY THE PURCHASER. As a result of the Offer, the Purchaser may be
in a position to significantly influence all Partnership decisions on which
Unitholders may vote. (See "Section 7. Effects of the Offer".) This means that
(i) non-tendering Unitholders could be prevented from taking action they desire
but that the Purchaser opposes and (ii) the Purchaser may be able to take
action desired by the Purchaser but opposed by the non-tendering Unitholders.
REPAYMENT OF TENDER OFFER LOAN. A loan (the "PWRES Loan") may be
obtained by the Purchaser in connection with the Offer. (See "Section 12.
Source of Funds".) The Purchaser plans to service the PWRES Loan with amounts
to be received by the Purchaser or its affiliates, whether in the form of
distributions of cash flow from operations of the Growth Hotel Partnerships (as
defined in Section 12) or from the sale or other disposition of Tendered Units
(as defined in Section 12) and general partnership interests in the Growth
Hotel Partnerships ("Tender Cash Flow"), and capital contributions from its
partners. The amount of the PWRES Loan is dependent upon the number of
Tendered Units purchased in the Growth Hotel Tender Offers (as defined in
Section 12), which number is not yet ascertainable. In the event that the
Growth Hotel Tender Offers are fully subscribed, it is anticipated that the
PWRES Loan will be approximately $20,800,000. One of several possible sources
of Tender Cash Flow is the Purchaser's distributable portion of the proceeds of
any sales or refinancings of Partnership properties attributable to Units owned
by the Purchaser. Consequently, a conflict of interest may exist for the
General Partner in determining whether and when to sell and/or refinance the
Partnership's properties. Any such conflict, however, may be mitigated by the
fact that (i) there exist other repayment sources, including capital
contributions from the Purchaser's partners, (ii) the Purchaser's partners have
agreed to advance funds to the Purchaser in order to enable the Purchaser to
make timely interest payments, and (iii) the Purchaser may be able to refinance
all or a portion of the PWRES Loan.
DISTRIBUTIONS UPON SALES OR REFINANCINGS. As mentioned above, one source
of Tender Cash Flow is the Purchaser's distributable portion of the proceeds of
any sales or refinancings of Partnership properties attributable to Units owned
by the Purchaser. The agreement governing the PWRES Loan will provide that the
Purchaser is required to make a prepayment on the PWRES Loan of an amount equal
to the Purchaser's distributable portion of the net proceeds (less amounts for
taxes) of a sale (and 100% of the net proceeds of a refinancing) of the
Purchaser's distributable portion of the proceeds of such sale or refinancing,
whether or not distributed by the Partnership. Consequently, unless the
Purchaser otherwise has funds available to make such a required prepayment, a
conflict of interest may exist for the General Partner in determining whether
and when to cause the Partnership to distribute the proceeds of any such sale
or refinancing to the Partnership's partners.
DISTRIBUTIONS GENERALLY. As set forth in Section 3, tendering
Unitholders will be entitled to receive all distributions from the Partnership
attributable to periods prior to May 1, 1996. Since the beneficial owners of
the Purchaser include affiliates of the General Partner, a conflict of interest
exists for the General Partner with respect to the timing and amount, if any,
of distributions made by the Partnership for such period.
18
<PAGE> 22
TRANSACTIONS WITH AFFILIATES. The General Partner of the Partnership, an
affiliate of certain beneficial owners of the Purchaser, owns a 2% interest in
the Partnership and thus receives, as a continuing interest in the Partnership,
an amount equal to a 2% allocation of the Partnership's profits, and 2% of
distributions. The General Partner also receives a Partnership management
incentive equal to 10% of cash available for distribution, and the General
Partner and its affiliates are entitled to be reimbursed for certain expenses.
(See "Section 13. Background of the Offer" for information with regard to a
recent change in control of the General Partner.)
The following chart sets forth amounts paid to the General Partner and
its affiliates during the last three fiscal years and the nine months ended
September 30, 1995.
<TABLE>
<CAPTION>
9 Months Ended
1992 1993 1994 9/30/95
---- ---- ---- -------
<S> <C> <C> <C> <C>
Continuing Interest $42,000 $62,000 $ 69,000 $ 52,000
Partnership Management 234,000 343,000 385,000 288,000
Incentive
Reimbursement of 521,000 --- 199,000 117,000
Expenses
Tax certiorari fee --- --- 9,695 ---
</TABLE>
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER. The Purchaser
was organized for the purpose of acquiring the Units. The partners of the
Purchaser are Fleetwood and Cayuga. Fleetwood is a newly-formed Delaware
corporation beneficially owned by Carl C. Icahn. Cayuga is a newly-formed
Delaware limited partnership, and Cayuga Capital is a newly-formed Delaware
corporation. The limited partners of Cayuga include employees, partners and/or
affiliates of Apollo, an affiliate of Insignia and the former stockholders of
NPI. The stockholders of Cayuga Capital include a partner of Apollo, an
affiliate of Insignia and a former stockholder of NPI. The principal executive
office of the Purchaser, Cayuga and Cayuga Capital is at 100 Jericho
Quadrangle, Jericho, New York 11753. The principal executive office of
Fleetwood is at 100 South Bedford Road, Mt. Kisco, New York 10549.
For certain information concerning the partners of the Purchaser and
their respective principals, see Schedule 1 to this Offer to Purchase.
For certain financial information concerning the Purchaser and its
partners, see Schedule 2 to this Offer to Purchase.
Except as otherwise set forth herein, (i) neither the Purchaser,
Fleetwood, Cayuga, Cayuga Capital, to the best of Purchaser's knowledge, the
persons listed on Schedule 1 nor any affiliate of the foregoing beneficially
owns or has a right to acquire any Units, (ii) neither the Purchaser,
Fleetwood, Cayuga, Cayuga Capital, to the best of Purchaser's knowledge, the
persons listed on Schedule 1, nor any affiliate thereof or director, executive
officer or subsidiary of Cayuga Capital or Fleetwood has effected any
transaction in the Units within the past 60 days, (iii) neither the Purchaser,
Fleetwood, Cayuga, Cayuga Capital, to the best of Purchaser's knowledge, any of
the persons listed on Schedule 1, nor any director or executive officer of
Cayuga Capital or Fleetwood 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, (iv)
there have been no transactions or business relationships which would be
required to be disclosed under the rules and regulations of the
19
<PAGE> 23
Commission between any of the Purchaser, Fleetwood, Cayuga, Cayuga Capital or,
to the best of Purchaser's knowledge, the persons listed on Schedule 1, on the
one hand, and the Partnership or its affiliates, on the other hand, and (v)
there have been no contracts, negotiations or transactions between the
Purchaser, Fleetwood, Cayuga, Cayuga Capital or, to the best of Purchaser's
knowledge, the persons listed on Schedule 1, on the one hand, and the
Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
The Purchaser currently owns 1 Unit which it acquired in February 1996
from Cayuga for $750.
SECTION 12. SOURCE OF FUNDS. The Purchaser expects that approximately
$16,750,000 (inclusive of fees and expenses) would be required to purchase the
Units sought pursuant to the Offer, if tendered. Simultaneously with the
commencement of the Offer, the Purchaser also commenced a tender offer for
limited partnership assignee units of Growth Hotel Investors, a California
Limited Partnership (together with the Partnership, the "Growth Hotel
Partnerships"). The Offer and the other tender offer are collectively referred
to herein as the "Growth Hotel Tender Offers" and the limited partnership
assignee units of the Growth Hotel Partnerships which are purchased by the
Purchaser pursuant to the Growth Hotel Tender Offers are referred to herein as
the "Tendered Units". Neither of the Growth Hotel Tender Offers is dependent
or conditioned upon the other Growth Hotel Tender Offer.
Assuming the Growth Hotel Tender Offers are fully subscribed, the
Purchaser will obtain not less than $10 million of the funds necessary to
consummate the Growth Hotel Tender Offers from capital contributions from its
partners. The remainder of such funds will be obtained from debt financing to
be provided by Paine Webber Real Estate Securities Inc. (the "Lender")
concurrently with the consummation of the Offer pursuant to the terms of a
commitment letter, dated February 13, 1996 (the "Commitment Letter") between
the Lender and the Purchaser. The Commitment Letter, which is subject to the
completion by the Lender of its satisfactory review and due diligence analysis
of the legal, business and financial aspects of the Offer, provides for a loan
(the "PWRES Loan") to be made to the Purchaser in order to enable it to
consummate the Growth Hotel Tender Offers. A funding fee of not less than
$100,000 and up to $400,000 is payable by the Purchaser to the Lender in
connection with the PWRES Loan.
The PWRES Loan will be due and payable one year after initial funding
subject to the right of the Purchaser to extend for two consecutive one-year
periods provided that the PWRES Loan is not then in default. Interest on the
PWRES Loan will accrue monthly and be payable in arrears at a rate per annum
equal to 250 basis points over LIBOR during the initial 12 months of the loan,
350 basis points over LIBOR during the second 12 months of the loan and 450
basis points over LIBOR during the last 12 months of the loan. As of February
1, 1996 the LIBOR rate was 5 1/16% per annum.
The Lender will also be entitled to additional interest on the PWRES Loan
in the form of a residual fee. Payment of the Lender's additional interest,
however, is subordinate to the prior return of the aggregate capital
contributions received by the Purchaser, together with a 15% per annum return
thereon. The residual fee will consist of not less than 10% and not more than
15% of Tender Cash Flow. The specified percentage to be received by the Lender
will be based upon the period of time during which the PWRES Loan was
outstanding. The amount of the PWRES Loan is dependent upon the number of
Tendered Units acquired. Because such amount and the time of repayment of the
PWRES Loan cannot be ascertained at this time, the effective rate of interest
on the PWRES Loan cannot be determined.
Although the PWRES Loan will be prepayable at any time without premium or
penalty, a prepayment is required upon the occurrence of certain events. The
Purchaser will be required to prepay the outstanding principal amount of the
PWRES Loan in an amount equal to the Purchaser's distributable portion of the
net proceeds (less amounts for taxes) of a sale (and 100% of the net proceeds
of a refinancing) of a property owned by the Growth Hotel Partnerships, whether
or not such amounts are distributed to the Purchaser. (See "Section 10.
Conflicts of Interest and Transactions With Affiliates" for a discussion of
certain conflicts of interest which
20
<PAGE> 24
will be created as a result of the Purchaser's obligation to prepay the PWRES
Loan with the proceeds of sales or refinancings of Partnership properties.)
As collateral security for the PWRES Loan, among other things, the
Purchaser will be required to pledge and collaterally assign to the Lender the
Tendered Units and other Units owned by affiliates of the Purchaser and
approximately $2 million of additional collateral, and the Purchaser's partners
will be required to pledge all their interests in the Purchaser. As additional
collateral security, NPI Realty, the indirect managing general partner of the
Partnership, will be required to pledge its general partnership interest in the
General Partner to the Lender. Further, the Purchaser will establish an
interest reserve account for the benefit of the Lender in an amount equal to
125% of the annualized interest on the PWRES Loan minus the actual or
annualized distributions paid with respect to the Tendered Units during the
most recent 12 month period.
The Purchaser anticipates that the loan agreement governing the PWRES
Loan will contain certain customary affirmative and negative reporting and
operational covenants. The Purchaser will be required to pay the Lender
reasonable and customary fees in connection with the PWRES Loan. It is also
anticipated that the agreement governing the PWRES Loan will provide that
certain actions (i.e., bankruptcy or insolvency and default under mortgage
indebtedness) by the Growth Hotel Partnerships shall constitute a default under
the PWRES Loan.
Neither the Purchaser nor the General Partner has any present plans or
intentions with respect to a merger, reorganization or liquidation of the
Partnership, a sale of assets or refinancing of any of the properties (except
that substantially all of the outstanding mortgage debt is scheduled to mature
(and will likely require refinancing) during or before April 1998) or a change
in the management, capitalization or distribution policy of the Partnership.
However, the Purchaser believes that the General Partner will continue to
review opportunities to sell the Partnership's properties and refinance its
indebtedness consistent with its fiduciary obligations and with a view to
maximizing returns to Unitholders.
The amount of the PWRES Loan is dependent upon the number of Tendered
Units to be acquired, which amount is not currently ascertainable. If the
Growth Hotel Tender Offers are successful, and the maximum number of Tender
Units sought are tendered, unless properties owned by the Growth Hotel
Partnerships are sold or refinanced and the proceeds thereof are distributed to
the partners, repayment of the PWRES Loan would be dependent upon the ability
of the Purchaser to obtain replacement financing. (See "Section 10. Conflicts
of Interest and Transactions with Affiliates" for a discussion of certain
conflicts of interest which will be created as a result of the Purchaser
consummating the PWRES Loan.) Neither the Purchaser nor the General Partner is
able to identify any specific property owned by the Growth Hotel Partnerships
which is intended to be sold. The Purchaser anticipates that, over the course
of the PWRES Loan or any refinancing thereof, the allocable share of sale or
refinancing proceeds to be received by it on account of its investment in the
Tendered Units will be sufficient to retire the principal balance of the PWRES
Loan or any replacement loans. However, the Purchaser has not made any plans
or arrangements to refinance the PWRES Loan.
SECTION 13. BACKGROUND OF THE OFFER.
ACQUISITION OF CONTROL. On December 6, 1993, a wholly-owned subsidiary
of NPI assumed management and obtained control of the General Partner of the
Partnership and certain other affiliated partnerships, by being appointed as
substitute managing partner of the indirect managing general partner of the
Partnership. At the time of such appointment, NPI was controlled by Michael L.
Ashner, Arthur N. Queler and Martin Lifton.
On October 12, 1994, NPI sold one-third of its stock to an affiliate of
Apollo. On August 17, 1995, the stockholders of NPI entered into an agreement
to sell all of the issued and outstanding stock of NPI to IFGP Corporation, an
affiliate of Insignia. This transaction was consummated on January 19, 1996.
(See the Form 8-K for the Partnership dated January 19, 1996 for additional
information with respect to this transaction.)
21
<PAGE> 25
On October 19, 1995, Carl Icahn telephoned Andrew Farkas, Chairman of
Insignia, and expressed an interest in making a tender offer for limited
partnership assignee units of the Growth Hotel Partnerships. During the month
of October, Mr. Icahn met with Mr. Farkas and Mr. Ashner and proposed making
such tender offers through a joint venture with affiliates of NPI and Insignia.
On October 31, 1995, Mr. Ashner informed Mr. Icahn that there was no interest
in entering into such a joint venture. Discussions were again held regarding
such a transaction in December 1995 and January and February 1996. On February
13, 1996, Mr. Ashner (on behalf of Cayuga) agreed to commence the Growth Hotel
Tender Offers together with Mr. Icahn, provided that the Offers were made at
the purchase prices specified in the Growth Hotel Tender Offers.
On February 13, 1996, Cayuga and Fleetwood executed the partnership
agreement of the Purchaser (the "Joint Venture Agreement"), which provides in
substance that (i) the Units purchased pursuant to the Offer would be voted as
directed by Cayuga and Fleetwood in proportion to their respective interests in
the Purchaser, except that Cayuga would control certain aspects of the voting,
including votes on any proposal (a) made by the General Partner of the
Partnership, (b) to remove the General Partner, (c) that would in any way
adversely alter the rights, authority or obligations of the General Partner or
(d) to reduce any compensation payable to the General Partner or any affiliate
of the General Partner; and (ii) except as contemplated by the foregoing
provisions and subject to certain limited exceptions, (a) neither Cayuga nor
Fleetwood or their respective affiliates and other related persons shall
commence a tender offer for Units or purchase, buy, acquire or otherwise become
the beneficial owner of Units, and (b) so long as an affiliate of NPI is the
General Partner, Fleetwood will not (1) make, or in any way participate in,
directly, or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 of the Exchange Act) with respect to the Partnership, (2) initiate,
propose or otherwise solicit Unitholders for the approval of one or more
proposals with respect to the Partnership, or (3) instigate or encourage any
Unitholder or other third party to do any of the foregoing. The Joint Venture
Agreement also provides that under certain limited circumstances NPI could be
required to cause its affiliate to sell to Fleetwood or its designee the
outstanding stock of NPI Realty for a formula price based primarily on the
amount of property management fees paid by the Partnership to third parties
(other than Hampton Inns and its affiliates) in the prior year. The foregoing
is only a summary of the terms of the Joint Venture Agreement and is qualified
in its entirety by reference to the full text of the Joint Venture Agreement, a
copy of which has been filed as Exhibit (c)(1) to the Purchaser's Tender Offer
Statement on Schedule 14D-1 and is incorporated herein by reference in its
entirety.
ESTABLISHMENT OF PURCHASE PRICE. The Purchaser has set the Purchase
Price at $750 net per Unit. The Purchaser established the Purchase Price by
analyzing a number of quantitative and qualitative factors including: (i) the
volume and prices of recent secondary market resales of the Units; (ii) the
lack of liquidity of an investment in the Partnership; (iii) an estimate of the
liquidation value of the Partnership's assets; (iv) the costs to the Purchaser
associated with acquiring the Units; (v) the administrative costs of continuing
to own the Partnership's assets through a publicly registered limited
partnership, and (vi) estimated transaction costs of completing the Offer of
approximately $1,000,000.
Secondary market sales activity for the Units, including privately
negotiated sales, has been limited and sporadic. The Partnership's Form 10-K
for the year ended December 31, 1994 states that "[n]o market for Limited
Partnership Assignee Units exists, nor is expected to develop." At present,
privately negotiated sales and sales through intermediaries (e.g., through the
trading system operated by Chicago Partnership Board, Inc., which publishes
sell offers by holders of Units) are the only means available to a Unitholder
to liquidate an investment in Units (other than the Offer) because the Units
are not listed or traded on any exchange or quoted on any NASDAQ list or
system. High and low sales prices of Units may be obtained through certain
entities such as Partnership Spectrum, an independent, third-party source which
reports such information; however, the gross sales prices reported by
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of Units, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
Set forth below are the high and the low sales prices for Units as reported by
Partnership Spectrum during the periods indicated.
22
<PAGE> 26
<TABLE>
<CAPTION>
Low Sales High Sales
Price Per Unit Price Per Unit
-------------- --------------
<S> <C> <C>
12/01/94 - 01/31/95 . . . . . . . 370.00 500.00
02/01/95 - 03/31/95 . . . . . . . 460.00 546.00
04/01/95 - 05/31/95 . . . . . . . 460.00 530.00
06/01/95 - 07/31/95 . . . . . . . 515.00 542.05
08/01/95 - 09/30/95 . . . . . . . 500.00 630.36
10/01/95 - 11/30/95 . . . . . . . 550.00 615.00
</TABLE>
The Purchaser is offering to purchase Units which are a relatively
illiquid investment and is not offering to purchase the Partnership's
underlying assets. Consequently, the Purchaser does not believe that the
underlying asset value of the Partnership is determinative in arriving at the
Purchase Price. Nevertheless, the Purchaser derived the Liquidation Value for
the Partnership's assets using the capitalization of income approach. In
determining the Liquidation Value, the Purchaser first calculated the "Adjusted
Value" of each of the Partnership's properties. The Adjusted Value was
determined by reducing a property's net operating income ("NOI") for the twelve
month period commencing on January 1, 1995 and ending December 31, 1995 (i.e.,
the excess of actual property revenues over actual property expenses during
such period) by an amount customarily reserved for capital expenditures at
hotel properties (the "FF&E Reserve"). This amount was then divided by an
11.5% capitalization rate (the "Cap Rate") and reduced by reason of the
adjustments referred to in the table below to determine the property's Adjusted
Value. The FF&E Reserve used was 5% of gross revenues.
THE PURCHASER BELIEVES THAT THE FF&E RESERVE AND CAP RATE UTILIZED BY IT
ARE WITHIN A RANGE OF RESERVES AND CAPITALIZATION RATES CURRENTLY EMPLOYED IN
THE MARKETPLACE. THE UTILIZATION OF DIFFERENT RESERVES AND CAPITALIZATION
RATES COULD ALSO BE APPROPRIATE. IN THIS REGARD, UNITHOLDERS SHOULD BE AWARE
THAT THE USE OF LOWER RESERVES AND/OR CAPITALIZATION RATES OR AN INCREASE IN
NOI WOULD RESULT IN HIGHER ADJUSTED VALUES FOR THE PARTNERSHIP'S PROPERTIES.
23
<PAGE> 27
The following table applies the method used by the Purchaser to determine
the Adjusted Value.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PROPERTY NOI FF&E RESERVE ADJUSTMENTS ADJUSTED VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kansas City 848,236 105,984 276,750(1) 6,177,615
- --------------------------------------------------------------------------------
Eden Prairie 783,697 100,544 494,990(1) 5,445,471
- --------------------------------------------------------------------------------
Dublin 712,394 97,469 532,330(1) 4,814,844
- --------------------------------------------------------------------------------
North Dallas 1,255,354 147,833 153,925(1) 9,476,692
- --------------------------------------------------------------------------------
St. Louis 795,203 99,534 423,030(1) 5,626,266
- --------------------------------------------------------------------------------
Colorado Springs 494,835 104,213 177,040(1) 3,219,673
- --------------------------------------------------------------------------------
Memphis I-40 530,177 88,220 1,250,172(1)(2) 2,592,932
- --------------------------------------------------------------------------------
Columbia-West 911,528 104,431 215,720(1) 6,802,515
- --------------------------------------------------------------------------------
Spartanburg 379,375 68,413 218,990(1) 2,485,027
- --------------------------------------------------------------------------------
Little Rock 654,919 83,947 228,217(1) 4,736,757
- --------------------------------------------------------------------------------
Amarillo 690,617 86,623 201,129(1) 5,050,993
- --------------------------------------------------------------------------------
Greenville 682,231 93,852 171,086(1) 4,945,253
- --------------------------------------------------------------------------------
Charleston 785,162 98,950 195,323(1) 5,771,738
- --------------------------------------------------------------------------------
Memphis-Poplar 1,108,456 126,668 45,625(1) 8,491,662
- --------------------------------------------------------------------------------
Greensboro 907,535 108,414 54,475(1) 6,894,403
- --------------------------------------------------------------------------------
Birmingham 959,129 110,811 221,375(1) 7,155,303
- --------------------------------------------------------------------------------
Atlanta 972,108 112,006 49,790(1) 7,429,358
- --------------------------------------------------------------------------------
Chapel Hill 789,866 99,229 116,165(1) 5,889,374
- --------------------------------------------------------------------------------
Dallas 595,194 88,219 168,360(1) 4,240,118
- --------------------------------------------------------------------------------
Nashville 828,736 112,391 1,901,732(1)(2) 4,327,355
- --------------------------------------------------------------------------------
San Antonio 815,631 103,844 157,349(1) 6,032,103
- --------------------------------------------------------------------------------
Madison Heights 571,124 89,856 169,415(1) 4,015,524
- --------------------------------------------------------------------------------
Mountain Brook 828,906 110,896 1,075,277(1)(2) 5,168,288
- --------------------------------------------------------------------------------
Northlake 756,179 102,772 1,079,347(1)(2) 4,602,453
- --------------------------------------------------------------------------------
TOTAL 18,656,592 2,445,119 9,577,612 131,165,717
- --------------------------------------------------------------------------------
</TABLE>
(1) Includes the following amounts presently required under agreement with
Hampton Inns to be expended on capital improvements by a purchaser of
property as a condition to transfer of license to operate property as a
Hampton Inn: Kansas City - $276,750, Eden Prairie - $494,990, Dublin -
$532,330, North Dallas - $153,925, St. Louis - $423,030, Colorado Springs
- $177,040, Memphis I-40 - $82,185, Columbia-West - $215,720,
Spartanburg - $218,990, Little Rock - $228,217, Amarillo - $201,129,
Greenville-$171,086, Charleston - $195,323, Memphis - Poplar - $45,625,
Greensboro - $54,475, Birmingham - $221,375, Atlanta - $49,790,
24
<PAGE> 28
Chapel Hill - $116,165, Dallas - $168,360, Nashville - $135,465, San
Antonio - $157,349, Madison Heights -$169,415, Mountain Brook - $216,045
and Northlake - $155,160.
(2) Includes the following adjustments attributable to property being held
under a land lease: Memphis I-40 - $1,167,987; Nashville - $1,766,267;
Mountain Brook - $859,232; and Northlake - $924,187. Such amounts have
been determined by dividing the Adjusted Value (prior to any adjustment
other than that referred to in note 1) by the number of years remaining
under the applicable land lease and dividing the amount so determined by
the Cap Rate.
To determine the Liquidation Value of the Partnership's assets, the
Purchaser then (i) reduced the aggregate Adjusted Value by 3.5% ($4,598,710) to
take into account the estimated closing costs which would be incurred upon the
sale by the Partnership of its properties, including brokerage commissions,
title costs, surveys, appraisals, legal fees and transfer taxes, and (ii) added
to the aggregate Adjusted Value the amount of all net current assets (inclusive
of assets of the Combined Fund) at December 31, 1995, which equaled $6,337,000.
Finally, the Adjusted Value of each property was (i) reduced by subtracting to
the extent of such property's Adjusted Value its long term debt as of December
31, 1995 (including any applicable prepayment penalty), which reduction
amounted to approximately $50,666,000 in the aggregate, and (ii) further
reduced the Adjusted Value to reflect the Partnership's 68% interest in the
properties owned by the Combined Fund and the amount required to be paid to
Hampton Inns under its joint venture agreement with the Combined Fund. The
resulting Liquidation Value of the Partnership's assets was approximately
$63,663,200 or $1,058 per Unit (based upon the percentage of capital
distributions to which Unitholders are entitled).
The Purchaser believes that realization by the Partnership of the
Liquidation Value may be impacted by factors affecting real estate and the
hotel industry generally. No Partnership properties or assets have been
identified for sale, and neither the General Partner nor the Purchaser has any
present plans or intentions with respect to liquidation of the Partnership.
Furthermore, the Purchaser believes that sales of the Partnership's properties
for all cash purchase prices may be affected by the foregoing factors.
During the first quarter of 1994, Metric Realty, an unaffiliated third
party whose affiliate performed asset management services for the Partnership
and currently performs such services for affiliates of the General Partner,
expressed an interest in purchasing all of the Partnership's property interests
for a purchase price which the General Partner estimated would have resulted in
a distribution to Unitholders of approximately $878 per Unit. Such expression
of interest was preliminary in nature and was subject to the satisfaction of
numerous conditions, including preparation and execution of a purchase
contract, extensive due diligence and the consent of Unitholders and third
parties.
The Partnership Agreement provides, among other things, that upon
dissolution of the Partnership subsequent to the sale of all of the
Partnership's properties, the General Partner is required to contribute capital
to the Partnership in an amount equal to any deficit then existing in its
capital account. Through ownership of Units by the Purchaser, the potential
liability of the General Partner and its present and former beneficial owners
is effectively reduced. Although there was a deficit in the capital account of
the General Partner of $320,257 as of the end of 1994 (equal to $5.43 per
Unit), such amount is subject to future reduction through allocation of a
portion of the taxable gain, if any, that results from the sale by the
Partnership of its properties under the Partnership Agreement. Consequently,
the ultimate amount, if any, of the deficit and the date on which it would be
paid are indeterminable. Accordingly, the Purchaser has attributed no value to
this obligation in establishing the Purchase Price.
The Purchase Price represents the price at which the Purchaser is willing
to purchase Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser, any affiliate of the Purchaser or the
General Partner as to such fairness. The Purchaser did not attempt to obtain
current independent valuations or appraisals of the underlying properties and
other assets owned by the Partnership. As indicated above, the Purchaser does
not believe that such valuations or appraisals should be determinative as to
the Purchaser's
25
<PAGE> 29
establishment of the Purchase Price. Other measures of the value of the Units
may be relevant to Unitholders. Unitholders are urged to consider carefully
all of the information contained herein and consult with their own advisors,
tax, financial or otherwise, in evaluating the terms of the Offer before
deciding whether to tender Units.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
the Offer, the Purchaser shall not be required to accept for payment or to pay
for any Units tendered if all authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any court, administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been filed, occurred or
been obtained. Furthermore, notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Units if, at any time on or after the date of the Offer and
before the acceptance of such Units for payment or the payment therefor, any of
the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental authority or agency
shall have been issued and shall remain in effect which (i) makes
illegal, delays or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment of or
payment for any Units by the Purchaser, (ii) imposes or confirms
limitations on the ability of the Purchaser effectively to exercise full
rights of ownership of any Units, including, without limitation, the
right to vote any Units acquired by the Purchaser pursuant to the Offer
or otherwise on all matters properly presented to the Partnership's
Unitholders, (iii) requires divestiture by the Purchaser of any Units,
(iv) causes any material diminution of the benefits to be derived by the
Purchaser as a result of the transactions contemplated by the Offer, or
(v) might materially adversely affect the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule,
regulation or order proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer by any federal or state court, government
or governmental authority or agency, which might, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (v)
of paragraph (a) above;
(c) any change or development shall have occurred or been
threatened since the date hereof, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership, which, in the reasonable judgment of the
Purchaser, is or may be materially adverse to the Partnership, or the
Purchaser shall have become aware of any fact that, in the reasonable
judgment of the Purchaser, does or may have a material adverse effect on
the value of the Units;
(d) there shall have been threatened, instituted or pending any
action or proceeding before any court or government agency or other
regulatory or administrative agency or commission or by any other person
challenging the acquisition of any Units pursuant to the Offer, or
otherwise directly or indirectly relating to the Offer, or otherwise, in
the reasonable judgment of the Purchaser, adversely affecting the
Purchaser or the Partnership;
(e) the Partnership shall have (i) issued, or authorized or
proposed the issuance of, any partnership interests of any class, or any
securities convertible into, or rights, warrants or options to acquire,
any such interests or other convertible securities, (ii) issued or
authorized or proposed the issuance of any other securities, in respect
of, in lieu of, or in substitution for, all or any of the presently
outstanding Units, (iii) refinanced any of the Partnership's properties,
other than in the ordinary course of the Partnership's business and
consistent with the past practice, (iv) declared or paid any
distribution, other than in cash and consistent with past practice, on
any of its partnership interests, or (v) the Partnership or the General
Partner shall have authorized, proposed or announced its intention to
propose any merger, consolidation or business combination transaction,
acquisition of assets, disposition
26
<PAGE> 30
of assets or material change in its capitalization, or any comparable
event not in the ordinary course of business and consistent with past
practice;
(f) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
by any governmental authority on, or other event which might affect, the
extension of credit by lending institutions or result in any imposition
of currency controls in the United States, (iv) a commencement of a war
or armed hostilities or other national or international calamity directly
or indirectly involving the United States, (v) a material change in
United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(g) the transactions contemplated by the Commitment Letter shall
not have been consummated.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
such conditions or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion. Any determination by the
Purchaser concerning the events described above will be final and binding upon
all parties.
SECTION 15. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 15, the Purchaser is not
aware of any filings, approvals or other actions by any domestic or foreign
governmental or administrative agency that would be required prior to the
acquisition of Units by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, it is the Purchaser's present intention
that such additional approval or action would be sought. While there is no
present intent to delay the purchase of Units tendered pursuant to the Offer
pending receipt of any such additional approval or the taking of any such
action, there can be no assurance that any such additional approval or action,
if needed, would be obtained without substantial conditions or that adverse
consequences might not result to the Partnership's business, or that certain
parts of the Partnership's business might not have to be disposed of or held
separate or other substantial conditions complied with in order to obtain such
approval or action, any of which could cause the Purchaser to elect to
terminate the Offer without purchasing Units thereunder. The Purchaser's
obligation to purchase and pay for Units is subject to certain conditions,
including conditions related to the legal matters discussed in this Section 15.
ANTITRUST. The Purchaser does not believe that the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, is applicable to the
acquisition of Units contemplated by the Offer.
MARGIN REQUIREMENTS. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to the Offer.
STATE 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 which are incorporated 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 herewith 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 Units 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 Units tendered.
27
<PAGE> 31
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16,
the Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. The
Purchaser has retained The Herman Group, Inc. to act as Information Agent and
as Depositary in connection with the Offer. The Purchaser will pay The Herman
Group reasonable and customary compensation for their respective services in
connection with the Offer, plus reimbursement for out-of-pocket expenses. The
Purchaser will also pay all costs and expenses of printing and mailing the
Offer and its legal fees and expenses.
SECTION 17. MISCELLANEOUS. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance with
applicable law. If the Purchaser becomes aware of any jurisdiction in which
the making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser cannot comply with any such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Units residing in such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Schedule 14D-1, pursuant to
Rule 14d-3 under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected and copies may
be obtained at the same places and in the same manner as set forth in Section 9
hereof (except that they will not be available at the regional offices of the
Commission).
Devon Associates
February 15, 1996
28
<PAGE> 32
Appendix A
GLOSSARY
APOLLO: Apollo Real Estate Advisors, L.P.
BUSINESS DAY: Any day other than Saturday, Sunday or a federal holiday, and
consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time
CAP RATE: The 11.5% capitalization rate used in calculating the Liquidation
Value
CAYUGA: Cayuga Associates L.P.
CAYUGA CAPITAL: Cayuga Capital Corporation, the general partner of Cayuga
CODE: The Internal Revenue Code of 1986, as amended
COMBINED FUND: Growth Hotel Investors Combined Fund No. 1
COMMISSION: The Securities and Exchange Commission
COMMITMENT LETTER: The commitment letter dated February 13, 1996 between the
Lender and the Purchaser
DEPOSITARY: The Herman Group, Inc.
ELIGIBLE INSTITUTION: A member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank, savings bank, credit union, savings and loan association or
trust company having an office, branch or agency in the United States
EXCHANGE ACT: Securities Exchange Act of 1934, as amended
EXPIRATION DATE: 12:00 Midnight, New York City Time on March 14, 1996, unless
and as extended
GENERAL PARTNER: Montgomery Realty Company-85
GROWTH HOTEL PARTNERSHIPS: The Partnership together with Growth Hotel
Investors, a California limited partnership
GROWTH HOTEL TENDER OFFERS: The Offer together with the offer of the
Partnership for limited partnership assignee units of Growth Hotel Investors, a
California limited partnership
INSIGNIA: Insignia Financial Group, Inc.
INFORMATION AGENT: The Herman Group, Inc.
LENDER: Paine Webber Real Estate Securities Inc.
LIQUIDATION VALUE: The Purchaser's estimate of the liquidation value of the
Partnership's assets, as determined in Section 13 of the Offer to Purchase
NOI: Net Operating Income
NPI: National Property Investors, Inc.
NPI REALTY: NPI Realty Management Corp.
<PAGE> 33
OFFER: This offer of the Purchaser set forth in this Offer to Purchase and the
related Letter of Transmittal, as each may be supplemented or amended from time
to time
OFFER TO PURCHASE: This Offer of the Purchaser, dated February 15, 1996
PARTNERSHIP: Growth Hotel Investors II, a California limited partnership
PURCHASER: Devon Associates
PWRES LOAN: The loan to the Purchaser contemplated by the Commitment Letter
TIN: Taxpayer identification number
UNITHOLDERS: Holders of Units
UNITS: limited partnership assignee units of the Partnership
2
<PAGE> 34
SCHEDULE 1
PARTNERS OF THE PURCHASER AND THEIR RESPECTIVE PRINCIPALS
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
director and executive officer of Cayuga Capital and Fleetwood. Each person
listed below is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL OCCUPATION, POSITION, OFFICE
OR EMPLOYMENT FOR THE PAST FIVE YEARS
Cayuga Capital
MICHAEL L. ASHNER. Mr. Ashner has been a Director and President of
Cayuga Capital since November 1995. Since January 1996, Mr. Ashner has also
been President and Chief Executive Officer of Winthrop Financial Associates, A
Limited Partnership ("Winthrop"). From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-Chairman of NPI. Mr. Ashner was also a
Director and executive officer of NPI Property Management Corporation ("NPI
Management") from April 1984 until January 1996. Since 1981, Mr. Ashner has
also served as President of Exeter Capital Corporation, a firm which has
organized and administered real estate limited partnerships. Mr. Ashner's
business address is 100 Jericho Quadrangle, Suite 214, Jericho, New York 11753.
W. EDWARD SCHEETZ. Mr. Scheetz has been a Director of Cayuga Capital
since November 1995. Mr. Scheetz was a Director of NPI from October 1994 until
January 1996. Since May 1993, Mr. Scheetz has been a limited partner of
Apollo, the managing general partner of Apollo Real Estate Investment Fund,
L.P., a private investment fund. Mr. Scheetz has also served as a Director of
Roland International, Inc., a real estate investment company since January
1994, and as a Director of Capital Apartment Properties, Inc., a multi-family
residential real estate investment trust, since January 1994. Since June 1995,
Mr. Scheetz has also served as a Director of Crocker Realty Trust, Inc. From
1989 to May 1993, Mr. Scheetz was a principal of Trammel Crow Ventures, a
national real estate investment firm. Mr. Scheetz received his A.B. in
Economics, Magna Cum Laude, from Princeton University. Mr. Scheetz's business
address is 1301 Avenue of the Americas, 38th floor, New York, New York 10019.
FRANK M. GARRISON. Mr. Garrison has been a Director, Vice President and
Assistant Treasurer of Cayuga Capital since February 1996. Mr. Garrison has
also been Executive Managing Director of Insignia and President of Insignia
Financial Services since July 1994. Between January 1993 and July 1994, Mr.
Garrison was Manager Director of Investment Banking of Insignia. From January
1992 to December 1992, Mr. Garrison was 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. From January 1989 to December 1990, he was an employee
of Jacques-Miller Inc. Mr. Garrison's business address is 102 Woodmont Blvd.,
St. 400, Nashville, TN 37205.
PETER BRAVERMAN. Mr. Braverman has been a Vice President of Cayuga
Capital since November 1995. Since January 1996, Mr. Braverman has been a
Senior Vice President of Winthrop. From June 1995 until January 1996, Mr.
Braverman was a Vice President of NPI and NPI Management. From June 1991 until
March 1994, Mr. Braverman was President of the Braverman Group, a firm
specializing in management consulting for the real estate and construction
industries. From 1988 to 1991, Mr. Braverman was Vice President and Assistant
Secretary of Fischbach Corporation, a publicly traded, international real
estate and construction firm. Mr. Braverman's business address is 100 Jericho
Quadrangle, Suite 214, Jericho, New York 11753.
<PAGE> 35
ARTHUR N. QUELER. Mr. Queler has been a Director and Treasurer of
Cayuga Capital since November 1995. From June 1994 until January 1996, Mr.
Queler was a Director, Executive Vice President, Secretary and Treasurer of NPI
and from 1984 until January 1996 was a Director and executive officer of NPI
Management. Mr. Queler has also served as President of ANQ Securities, Inc.,
a NASD registered broker-dealer firm which has been responsible for supervision
of licensed brokers and coordination with a nationwide broker-dealer network
for the marketing of NPI investment programs, since 1983. Mr. Queler's
business address is 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia
30328.
Fleetwood Corp.
CARL C. ICAHN. Mr. Icahn has been the sole Director of Fleetwood since
February 1996. He is also President and a Director of Starfire Holding
Corporation (formerly Icahn Holding Corporation), a Delaware corporation
("SHC") and Chairman of the Board and a Director of various of SHC's
subsidiaries, including ACF Industries, Inc., a New Jersey corporation ("ACF").
SHC is primarily engaged in the business of holding, either directly or through
subsidiaries, a majority of the common stock of ACF. ACF is primarily engaged
in the business of leasing, selling and manufacturing railroad freight and tank
cars. Mr. Icahn has been President and a Director of SHC since August 1982 and
has been a Director of ACF since June 1984 and Chairman of the Board of ACF
since October 1984. Mr. Icahn also maintains similar positions with various of
ACF's affiliates, including; (i) since 1968, Mr. Icahn has been Chairman of the
Board, President and a Director of Icahn & Co., Inc., a Delaware corporation
(collectively with its predecessor companies by merger, "Icahn & Co."), which
is a registered broker-dealer and a member of the NASD; (ii) since November
1990, Mr. Icahn has been Chairman of the Board and a Director of American
Property Investors, Inc., a Delaware corporation ("API"), primarily engaged in
the business of acting as general partner of American Real Estate Partners,
L.P., and (iii) from 1986 until January 1993, when he resigned, Mr. Icahn was a
Director and Chairman of the Board of Trans World Airlines, Inc. ("TWA").
Since June 1993, Mr. Icahn has also served as a Director of Astrum
International Corp., a Delaware holding company ("Astrum") whose principal
subsidiaries are Samsonite Corporation, a manufacturer and distributor of
luggage, Culligan International Company, a manufacturer of water purification
and treatment equipment and McGregor Corporation, a manufacturer and
distributor of apparel products and licensor of apparel brand names. Mr.
Icahn's business address is 114 West 47th Street, 19th floor, New York, New
York 10036.
EDWARD E. MATTNER. Mr. Mattner has been President of Fleetwood since
February 1996. Since May 1976, Mr. Mattner has been employed as a securities
trader at Icahn & Co., a registered broker-dealer and a member of the NASD.
Mr. Mattner's business address is 114 West 47th Street, 19th floor, New York,
New York 10036.
RICHARD T. BUONATO. Mr. Buonato has been Treasurer of Fleetwood since
February 1996. He is also Vice President and Controller of Icahn & Co., a
registered broker-dealer and member of the NASD. Mr. Buonato has served as
Vice President since December 1977 and as Controller since May 1976. Since
February 1982, Mr. Buonato has also served as Vice President and Controller of
SHC. Mr. Buonato's business address is 114 West 47th Street, 19th floor, New
York, New York 10036.
GAIL GOLDEN. Ms. Golden has been Vice President and Secretary of
Fleetwood since February 1996. She has also been acting as Chief Executive
Officer of Global Travel Marketing Service since December 1995. Since August
1978, Ms. Golden has acted as Vice President -- Administration of Icahn & Co.,
Inc. Ms. Golden's business address is 114 West 47th Street, 19th Floor, New
York, New York 10036.
<PAGE> 36
SCHEDULE 2
Independent Auditor's Report
To the Partners
Cayuga Associates L.P.
(A Delaware Limited Partnership)
Jericho, New York
We have audited the accompanying consolidated balance sheet of Cayuga
Associates L.P. (A Delaware Limited Partnership) and subsidiary as of February
14, 1996. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the consolidated financial position of Cayuga Associates
L.P. (A Delaware Limited Partnership) and subsidiary as of February 14, 1996 in
conformity with generally accepted accounting principles.
IMOWITZ KOENIG & CO., LLP
Certified Public Accountants
New York, New York
February 14, 1996
<PAGE> 37
CAYUGA ASSOCIATES L.P., AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Balance Sheet
February 14, 1996
<TABLE>
<S> <C>
ASSETS
- ------
Cash $ 998,500
Investment in Limited Partnerships 1,500
Deferred Costs 1,100,000
----------
Total Assets $2,100,000
==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accrued Expenses $1,100,000
----------
Minority Interest 330,000
----------
Commitment
Partners' Equity:
General Partner 6,700
Limited Partners 663,300
----------
Total Partners' Equity 670,000
----------
Total Liabilities and Partners' Equity $2,100,000
==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENT
<PAGE> 38
CAYUGA ASSOCIATES L.P., AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statement
1. ORGANIZATION
Cayuga Associates L.P., a Delaware Limited Partnership ("Cayuga"), was
formed on October 30, 1995. Cayuga is a general partner in Devon
Associates ("Devon"), a joint venture which plans to acquire limited
partnership assignee units in Growth Hotel Investors, a California
limited partnership, and in Growth Hotel Investors II, a California
limited partnership (the "Limited Partnerships"). The general partner of
Cayuga is Cayuga Capital Corporation, a Delaware Corporation ("Cayuga
Capital").
A shareholder of Cayuga Capital controls the general partners of the
Limited Partnerships.
2. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes the accounts of Cayuga and its
majority owned subsidiary, Devon Associates (collectively referred to as
the "Partnership"). Material intercompany transactions and account
balances are eliminated in consolidation.
3. DEFERRED COSTS
Deferred costs consist of fees and expenses related to the proposed
offers to purchase units in the Limited Partnerships. The costs will be
capitalized as part of the Partnership's investment upon the consummation
of the purchases.
4. PARTNERS' EQUITY
The partnership agreements of Cayuga and Devon require the partners to
contribute up to an additional $9,000,000, in the aggregate, to the
Partnership in order to effect the acquisition of the Limited Partnership
assignee units. The timing of the contributions will be made in
conjunction with the requirements of the loan commitment (See Note 5).
<PAGE> 39
CAYUGA ASSOCIATES L.P., AND SUBSIDIARY
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statement
5. COMMITMENT
In order to complete the purchase of Limited Partnership assignee units,
the Partnership has received a commitment for debt financing from Paine
Webber Real Estate Securities Inc. ("Paine Webber") subject to final
approval by Paine Webber. The amount of the financing to be received is
subject to a formula, based on capital contributed to the Partnership, as
outlined in the commitment. The loan will be due one year after initial
funding, subject to the right to extend such loan for two consecutive
one-year periods, provided that the loan is not then in default.
Interest will accrue at a rate per annum equal to 250 basis points over
one-month LIBOR (approximately 5% per annum at February 14, 1996) during
the initial twelve months of the loan, 350 basis points over one- month
LIBOR during the second twelve months of the loan and 450 basis points
over one-month LIBOR during the last twelve months of the loan. The
lender will also be entitled to additional interest on the loan pursuant
to the terms of the formula set forth in the commitment. Prepayment of
the loan is required upon the occurrence of certain events.
The collateral for the loan includes the Limited Partnership assignee
units acquired, additional Limited Partnership assignee units owned by
affiliates, approximately $2,000,000 of additional collateral and all
interests in Devon. It is anticipated that the Partnership will incur
approximately $1,000,000 in fees and expenses relating to the financing.
<PAGE> 40
Independent Auditor's Report
To the Partners
Devon Associates
Jericho, New York
We have audited the accompanying balance sheet of Devon Associates as of
February 14, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Devon Associates as of February
14, 1996 in conformity with generally accepted accounting principles.
IMOWITZ KOENIG & CO., LLP Certified
Public Accountants
New York, New York
February 14, 1996
<PAGE> 41
DEVON ASSOCIATES
Balance Sheet
February 14, 1996
<TABLE>
<S> <C>
ASSETS
- ------
Cash $ 998,500
Investment in Limited Partnerships 1,500
Deferred Costs 1,000,000
-----------
Total Assets $ 2,000,000
===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accrued Expenses $ 1,000,000
-----------
Commitment
Partners' Equity 1,000,000
-----------
Total Liabilities and Partners' Equity $ 2,000,000
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENT
<PAGE> 42
DEVON ASSOCIATES
NOTES TO FINANCIAL STATEMENT
1. ORGANIZATION
Devon Associates ("Devon" or the "Partnership"), was formed on February
13, 1996. Devon proposes to acquire limited partnership assignee units
in Growth Hotel Investors, a California limited partnership, and in
Growth Hotel Investors II, a California limited partnership (the "Limited
Partnerships"). The general partners of Devon are Cayuga Associates
L.P., a Delaware Limited Partnership ("Cayuga") and Fleetwood Corp., A
Delaware Corporation ("Fleetwood").
A shareholder of the general partner of Cayuga controls the general
partners of the Limited Partnerships.
2. DEFERRED COSTS
Deferred costs consist of fees and expenses related to the offers to
purchase units in the Limited Partnerships. These costs will be
capitalized as part of Devon's investment upon consummation of the
purchases.
3. PARTNERS' EQUITY
The partnership agreement requires the partners to contribute up to an
additional $9,000,000 to the Partnership in order to effect the
acquisition of the Limited Partnership assignee units. The timing of the
contributions will be made in conjunction with the requirements of the
loan commitment (See Note 4).
4. COMMITMENT
In order to complete the purchase of limited partnership assignee units,
Devon has received a commitment for debt financing from Paine Webber Real
Estate Securities Inc. ("Paine Webber") subject to final approval by
Paine Webber. The amount of the financing to be received is subject to a
formula, based on capital contributed to the Partnership, as outlined in
the commitment. The loan will be due one year after initial funding,
subject to the right to extend such loan for two consecutive one-year
periods,
<PAGE> 43
provided that the loan is not then in default. Interest will accrue at a
rate per annum equal to 250 basis points over one-month LIBOR
(approximately 5% per annum at February 14, 1996) during the initial
twelve months of the loan, 350 basis points over one-month LIBOR during
the second twelve months of the loan and 450 basis points over one-month
LIBOR during the last twelve months of the loan. The lender will also be
entitled to additional interest on the loan pursuant to the terms of the
formula set forth in the commitment. Prepayment of the loan is required
upon the occurrence of certain events.
The collateral for the loan includes the Limited Partnership assignee
units acquired, additional Limited Partnership assignee units owned by
affiliates, approximately $2,000,000 of additional collateral and all
interests in Devon. It is anticipated that Devon will incur
approximately $1,000,000 in fees and expenses relating to the financing.
<PAGE> 44
FLEETWOOD CORP.
BALANCE SHEET
FEBRUARY 13, 1996
(NOT AUDITED)
<TABLE>
<S> <C>
ASSETS
- ------
Cash $ 20,000
Investment in Devon Associates $ 330,000
---------
Total Assets $ 350,000
=========
SHAREHOLDER'S EQUITY
- --------------------
Common Stock $ 1
---------
Additional Paid - in Capital $ 349,999
---------
Total Shareholder's Equity $ 350,000
=========
</TABLE>
<PAGE> 45
The Letter of Transmittal and any other required documents should be sent
or delivered by each Unitholder or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary at the address set forth below:
THE HERMAN GROUP, INC.
By Hand or Overnight Delivery: 2121 Jacinto Street
26th Floor
Dallas, Texas 75201
By Mail (insured or registered recommended): P.O. Box 357
Dallas, Texas 75221-9602
By Facsimile: (214) 999-9348 or (214) 999-9323
For Telephone Information contact the Purchaser at:
(800) 530-4966
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be directed to the Information Agent at the telephone number listed above.
You may also contact your broker for assistance concerning the Offer.
<PAGE> 1
EXHIBIT 99.(a)(2)
GROWTH HOTEL INVESTORS II, A CALIFORNIA LIMITED PARTNERSHIP
LETTER OF TRANSMITTAL
TAX IDENTIFICATION NO.:
(Please indicate changes or corrections to the name, address and Tax
Identification Number printed above.)
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MARCH 14, 1996 (THE "EXPIRATION DATE") UNLESS
EXTENDED.
To participate in the Offer, a duly executed copy of this Letter of
Transmittal and any other documents required by this Letter of Transmittal must
be received by the Depositary on or prior to the Expiration Date. Delivery of
this Letter of Transmittal or any other required documents to an address other
than as set forth below does not constitute valid delivery. The method of
delivery of all documents is at the election and risk of the tendering
Unitholder. Please use the pre-addressed, postage-paid envelope provided.
This Letter of Transmittal is to be completed by Unitholders of Growth
Hotel Investors II, a California limited partnership (the "Partnership"),
pursuant to the procedures set forth in the Offer to Purchase (as defined
below). Capitalized terms used herein and not defined herein have the meanings
ascribed to such terms in the Offer to Purchase.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Gentlemen:
The undersigned hereby tenders to Devon Associates (the "Purchaser")
the number of assignee limited partnership units ("Units") in the Partnership
set forth below at $750 per Unit upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated February 15, 1996 (the "Offer to
Purchase"), and this Letter of Transmittal (which together constitute the
"Offer"). Receipt of the Offer to Purchase is hereby acknowledged.
The undersigned recognizes that, if more than 21,000 Units are validly
tendered prior to or on the Expiration Date and not properly withdrawn, the
Purchaser will, upon the terms of the Offer, accept for payment from among
those Units tendered prior to or on the Expiration Date 21,000 Units on a pro
rata basis, with adjustments to avoid payment for certain fractional Units,
based upon the number of Units validly tendered prior to the Expiration Date
and not withdrawn.
Subject to acceptance for payment of any of the Units tendered hereby,
the undersigned hereby sells, assigns and transfers to, or upon the order of,
Purchaser, effective as of May 1, 1996, all right, title and interest in and to
such Units which are purchased pursuant to the Offer. Effective as of May 1,
1996, the undersigned hereby irrevocably constitutes and appoints the Purchaser
as the true and lawful agent and attorney-in-fact of the undersigned with
respect to such Units, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to deliver
such Units and transfer ownership of such Units on the books of the
Partnership, together with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser and, as of May 1, 1996, to
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Units including, without limitation, all voting rights all in
accordance with the terms of the Offer. Subject to and effective upon the
purchase of any Units tendered hereby, the undersigned hereby requests that the
Purchaser be admitted to the Partnership as a "substitute Limited Partner"
under the terms of the Partnership Agreement of the Partnership as of May 1,
1996. Upon acceptance for payment of Units pursuant to the Offer, all prior
proxies and consents given by the undersigned with respect to such Units will
be revoked and no subsequent proxies or consents may be given (and if given
will not be deemed effective). In addition, by executing this Letter of
Transmittal, the undersigned assignes to the Purchaser all of the undersigned's
right to receive distributions from the Partnership attributable to all
periods of time after April 30, 1996 with respect to Units which are purchased
pursuant to the Offer.
The undersigned hereby represents and warrants that the undersigned
owns the Units tendered hereby within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and has full power and authority
to validly tender, sell, assign and transfer the Units tendered hereby, and
that when any such Units are purchased by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges, encumbrances, conditional sales agreements or
other obligations relating to the sale or transfer thereof, and such Units will
not be subject to any adverse claim. Upon request, the undersigned will execute
and deliver any additional documents deemed by the Purchaser to be necessary
or desirable to complete the assignment, transfer, or purchase of Units
tendered hereby.
The undersigned understands that a tender of Units 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 Units
tendered hereby. In such event, the undersigned understands that any Letter of
Transmittal for Units not accepted for payment will be destroyed by the
Purchaser. 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.
NO. UNITS UNIT PRICE TOTAL PURCHASE PRICE
================================================================================
SIGNATURE BOX-1 INDIVIDUALS AND JOINT OWNERS
(PLEASE READ AND COMPLETE AS NECESSARY BOXES A, B, AND C ON THE FOLLOWING PAGE)
================================================================================
Please sign exactly as your name is printed (or corrected) above. For joint
owners, each joint owner must sign. (See Instruction 1.) The signatory hereto
hereby certifies under penalties of perjury the statements in Box A, Box B and,
if applicable Box C.
IMPORTANT: TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT,
OFFICERS OF CORPORATIONS OR OTHER PERSONS ACTING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY, SHOULD COMPLETE SIGNATURE BOX 2 FOR TRUSTEES,
CORPORATIONS AND FIDUCIARIES.
================================================================================
X_____________________________________________________________________________
(Signature of Owner) (Date)
X_____________________________________________________________________________
(Signature of Owner) (Date)
Tel: (_____) ______- __________ (Day) (_____) ____-______(Evening)
================================================================================
FOR INFORMATION AND ASSISTANCE WITH ASSISTANCE WITH THE OFFER, PLEASE CALL: THE
HERMAN GROUP, INC. (800) 530-4966. For Units to be validly tendered,
Unitholders should complete and sign this Letter of Transmittal 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, 26th Floor,
Dallas, TX 75201, or by Facsimile (214) 999-9348 or (214) 999-9323.
<PAGE> 2
================================================================================
SIGNATURE BOX-2 TRUSTEES, CORPORATIONS, AND FIDUCIARIES
(SEE INSTRUCTIONS 1, 3 AND 4 AS NECESSARY)
- --------------------------------------------------------------------------------
TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS OF
A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY,
PLEASE COMPLETE THIS BOX AND SEE INSTRUCTION 1.
The signatory hereto hereby certifies under penalties of perjury the statements
in Box A, Box B, and, if applicable Box C.
X____________________________________ X_____________________________________
(Signature) (Signature)
Name and Capacity ____________________________ (Title) ________________________
Address ________________________________________________________________________
(city) (state) (zip)
Area Code and Telephone No. (___)_____________ (Day)(___)_____________ (Evening)
NOTARIZATION OF SIGNATURE
(If required. See Instruction 1)
STATE OF ____________ )
) SS.:
COUNTY OF ____________ )
On this ___day of ________________, 1996, before me came personally ____________
________________________________________________________________________________
(Please Print)
to me known to be the person who executed this Letter of Transmittal.
___________________________________
Notary Public
OR
SIGNATURE GUARANTEE
(If required. See Instruction 1)
Name and Address of Eligible Institution _______________________________________
________________________________________________________________________________
________________________________________________________________________________
Authorized Signature __________________________ Title _______________________
Name _____________________________________________ Date _________________, 199__
================================================================================
================================================================================
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 3 - BOX A)
- --------------------------------------------------------------------------------
The person signing this Letter of Transmittal hereby certifies the
following to the Purchaser under penalties of perjury:
(i) The TIN printed (or corrected) on the front of this Letter
of Transmittal is the correct TIN of the Unitholder, or if this box [ ] is
checked, the Unitholder has applied for a TIN. If the Unitholder has applied
for a TIN, a TIN has not been issued to the Unitholder, and either: (a) the
Unitholder has mailed or delivered an application to receive a TIN to the
appropriate IRS Center of Social Security Administration Office, or (b) the
Unitholder intends to mail or deliver an application in the near future (it
being understood that if the Unitholder does not provide a TIN to the Purchaser
31% of all reportable payments made to the Unitholder will be withheld until a
TIN is provided to the Purchaser); and
(ii) Unless this box [ ] is checked, the Unitholder is not
subject to a backup withholding either because the Unitholder: (a) is exempt
from backup withholding, (b) has not been notified by the IRS that the
Unitholder 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
Unitholder is no longer subject to backup withholding.
Note: Place and "X" in the box in (ii) if you are unable to certify
that the Unitholder is not subject to backup withholding.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 3 - 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 of
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 equivalents, and the holder of the
partnership interest is a foreign person. To inform the Purchaser that no
withholding is required with respect to the Unitholder's interest in the
Partnership, the person signing this Letter of Transmittal hereby certifies
the following under penalties of perjury:
(i) Unless this box [ ] is checked, the Unitholder, 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 estate or foreign trust (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations); (ii) the Unitholder's U.S. social
security number (for individuals) or employer identification number (for non-
individuals) is correctly printed (or corrected) on the front of this Letter of
Transmittal; and (iii) the Unitholder's home address (for individuals), or
office address (for non-individuals), is correctly printed (or corrected) on
the front of this Letter of Transmittal. If a corporation, the jurisdiction of
incorporation is ____________________.
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
================================================================================
================================================================================
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 4 - BOX C)
- --------------------------------------------------------------------------------
By checking this box [ ], the person signing this Letter of Transmittal hereby
certifies under penalties of perjury that the Unitholder is an "exempt foreign
person" for purposes of the backup withholding rules under the U.S. federal
income tax laws, because the Unitholder:
(i) Is a nonresident alien individual or a foreign
corporation, partnership, estate or trust;
(ii) If an individual, has not been and plans not be
present in the U.S. for a total of 183 days or more
during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade
or business that has effectively connected gains from
transactions with a broker or barter exchange.
================================================================================
<PAGE> 3
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. SIGNATURE AND DELIVERY REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS - TENDER, SIGNATURE REQUIREMENTS. After
carefully reading and completing this Letter of Transmittal, in order
to tender Units Unitholder(s) must sign at the "X" in SIGNATURE BOX-1
on the bottom of the front page of this Letter of Transmittal. The
signature(s) must correspond exactly with the name printed (or
corrected) on the front of this Letter of Transmittal without any
change whatsoever. If this Letter of Transmittal is signed by the
registered Unitholder(s) of the Units, no notarization or signature
guarantee on this Letter of Transmittal is required. NOTE: FOR UNITS
HELD IN CUSTODIAL ACCOUNT, THE BENEFICIAL OWNER SHOULD SIGN IN BOX 1.
Similarly, if Units are tendered for the account of a member firm of a
registered national security exchange, a member firm 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 notarization or signature guarantee is
required. If any tendered Units are registered in the names of two or
more joint holders, all such holders must sign this Letter of
Transmittal.
TRUSTEES, CORPORATIONS AND FIDUCIARIES - TENDER, SIGNATURE
REQUIREMENTS. Trustees, executors, administrators, guardians,
attorneys-in-fact, officers of a corporation, authorized partner of a
partnership or other persons acting in a fiduciary or representative
capacity must sign at the "X" in SIGNATURE BOX-2 and have their
signatures notarized or guaranteed by an Eligible Institution, by
completing the Notarization or Signature Guarantee set forth in
SIGNATURE BOX-2 of this Letter of Transmittal. If this Letter of
Transmittal is signed by trustees, administrators, guardians,
attorneys-in-fact, officers of corporations, authorized partners or
others acting in a fiduciary or representative capacity, such persons
should so indicate their title when signing (see SIGNATURE BOX-2) and
must submit proper evidence satisfactory to the Purchaser of their
authority to so act.
DELIVERY REQUIREMENTS. For Units to be validly tendered, a properly
completed and duly executed Letter of Transmittal, together with any
required notarizations or signature guarantees in SIGNATURE BOX-2 and
any other documents required by this Letter of Transmittal, but be
received by the Depositary prior to or on the Expiration Date at its
address set forth on the front of this Letter of Transmittal. No
alternative, conditional or contingent tenders will be accepted. All
tendering Unitholders by execution of this Letter of Transmittal
waive any right to receive any notice of the acceptance of their
tender. Delivery of the Letter of Transmittal is at the risk of the
Investor. To ensure receipt of the Letter of Transmittal, it is
suggested that you use overnight courier delivery or, if the Letter
of Transmittal is to be delivered by United States mail, you use
certified or registered mail, return receipt requested. TO BE
EFFECTIVE, A DULY COMPLETED AND SIGNED LETTER OF TRANSMITTAL (OR
FACSIMILE THEREOF) MUST BE RECEIVED BY THE INFORMATION AGENT AT THE
ADDRESS (OR FACSIMILE NUMBER) SET FORTH BELOW BEFORE 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MARCH 14, 1996.
<TABLE>
<S> <C>
By Mail: THE HERMAN GROUP, INC.
P.O. Box 357
Dallas, Texas 75221-9602
By Hand Delivery: 2121 San Jacinto Street, 26th Floor
Dallas, Texas 75201
By Facsimile: (214) 999-9348 or (214) 999-9323
For Additional Information Call: (800) 530-4966
</TABLE>
<PAGE> 4
DOCUMENTATION.
<TABLE>
<S> <C>
Deceased Owner - Copy of Death Certificate. If other than a Joint Tenant,
see also Executor/Administrator/Guardian below.
Deceased Owner (Other) - See Executor/Administrator/Guardian (a) below.
Executor/Administrator/Guardian - (a) Send copy of Court Appointment Documents;
and (b) a copy of applicable provisions of Will (Title
Page, Executor powers asset distribution); OR (c) Estate
distribution documents.
Attorney-in-Fact - Power of Attorney
Corporate/Partnerships - Resolution(s) of Board of Directors or other evidence
of authority to so act.
Trust/Pension Plans - Cover pages of the trust or plan, along with the
trustee(s) section and/or amendments or resolutions of
the above to prove authority to so act.
</TABLE>
2. TRANSFER TAXES. The purchaser will pay or cause to be paid all
transfer taxes, if any, payable in respect of Units accepted for
payment pursuant to the Offer.
3. U.S. PERSONS. A Unitholder who or which is a United States citizen or
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 complete the
following:
BOX A - SUBSTITUTE FORM W-9. In order to avoid 31% federal income tax
backup withholding, the Unitholder must provide to the Purchaser the
Unitholder's correct Taxpayer Identification Number ("TIN") and
certify, under penalties of perjury, that such Unitholder is not
subject to such backup withholding. The TIN that must be provided on
the Substitute W-9 is that of the registered Unitholder as printed (or
corrected) on the front of this Letter of Transmittal. If a correct
TIN is not provided, penalties may be imposed by the Internal Revenue
Service ("IRS"), in addition to the Unitholder being subject to backup
withholding. Certain Unitholders (including, among others, all
corporations) are not subject to backup withholding. Backup
withholding is not an additional tax. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS. NOTE: THE
CORRECT TIN FOR AN IRA ACCOUNT IS THAT OF THE CUSTODIAN (NOT THE
INDIVIDUAL SOCIAL SECURITY NUMBER OF THE BENEFICIAL OWNER).
BOX B - FIRPTA AFFIDAVIT. To avoid potential withholding of tax
pursuant to Section 1445 of the Internal Revenue Code, each Unitholder
who or which is a United States Person (as defined in Instructions 3
above) must certify, under penalties of perjury, the Unitholder's TIN
and address, and that the Unitholder 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.
4. BOX C - FOREIGN PERSONS. In order for a Unitholder who is a foreign
person (i.e., not a Unites States person as defined in 3 above) to
qualify as exempt from 31% backup withholding, such foreign Unitholder
must certify, under penalties of perjury, the statement in BOX C of
this Letter of Transmittal attesting to that foreign person's status by
checking the box preceding such statement. However, such person will
be subject to withholding of tax under Section 1445 of the Code.
5. ADDITIONAL COPIES OF OFFER TO PURCHASE AND LETTER OF TRANSMITTAL
Requests for assistance or additional copies of the Offer to Purchase
and this Letter of Transmittal may be obtained from the Purchaser by
calling (800) 530-4966.
<PAGE> 1
EXHIBIT 99.(a)(3)
DEVON ASSOCIATES
100 JERICHO QUADRANGLE, SUITE 214
JERICHO, NEW YORK 11753
February 15, 1996
Dear Limited Partner:
As described in the enclosed Offer to Purchase and related Letter of
Transmittal (the "Offer"), Devon Associates is offering to purchase your
Limited Partnership Assignee Units (the "Units") in Growth Hotel Investors II
(the "Partnership") for $750 cash per Unit.
The Offer will provide you with an opportunity to liquidate your
investment without the usual transaction costs and commissions associated with
a market sale. Moreover, if Devon subsequently increases the price of its
Offer, you will automatically receive the higher price for your purchased
Units.
We suggest that you review the enclosed Offer with your personal
financial and tax advisor. If you choose to tender your Units, mail (using the
enclosed pre-addressed, postage-paid envelope) or telecopy a duly completed and
executed copy of the Letter of Transmittal and any documents required by the
Letter of Transmittal to:
The Herman Group, Inc.
By Hand or Overnight Delivery By Mail (insured or registered
recommended)
2121 Jacinto Street P.O. Box 357
26th Floor Dallas, Texas 75221-9602
Dallas, Texas 75201
By Facsimile (214) 999-9348 or (214) 999-9323
IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE HERMAN GROUP AT 1-800-530-4966.
DEVON ASSOCIATES
<PAGE> 1
EXHIBIT (b)(1)
PAINE WEBBER
REAL ESTATE SECURITIES INC.
1285 Avenue of the Americas
New York, New York 10019
February ___, 1996
Devon Associates
100 Jericho Quadrangle
Suite 214
Jericho, New York 11753
Attention: Mr. Michael L. Ashner
re Senior Secured Financing
Gentlemen:
You have advised Paine Webber Real Estate Securities Inc. ("PWRES")
that you intend to make an offer (the "Acquisition") for the acquisition of
limited partnership units (the "LP Units") in each of the partnerships (the
"Tender Offer Partnerships") identified in Exhibit A to Annex A attached to
this letter (this "Commitment") and made a part hereof by means of offers to
purchase (the "Tender Offers") initiated by Devon Associates (the "Borrower").
1. The Borrower.
The Borrower will be a newly-formed, bankruptcy remote single purpose
New York general partnership, the equity interests in which will be owned as
follows:
(i) One-third of the partnership interests in the
Borrower will be owned by Fleetwood Corp. ("Icahn Corp."), a
newly-formed, bankruptcy remote single purpose Delaware corporation.
100% of the stock in Icahn Corp. will be owned by Carl C. Icahn
(collectively, the "Icahn Investors").
<PAGE> 2
-2
(ii) The remaining two-thirds of the partnership interests
in the Borrower will be owned by Cayuga Associates, L.P. ("Cayuga"), a
newly-formed, bankruptcy remote single purpose Delaware limited
partnership. The partnership interests in Cayuga will be owned as
follows:
(a) The general partnership interests in Cayuga,
which interests will constitute 1% of the partnership
interests in Cayuga, will be owned by Cayuga Capital
Corporation ("Cayuga Corp."), a newly- formed, bankruptcy
remote single purpose Delaware corporation. 33.33% of the
stock in Cayuga Corp. will be owned directly by Michael L.
Ashner, 33.33% of the stock in Cayuga Corp. will be owned
directly by the Apollo Investors (as hereinafter defined), and
33.33% of the stock in Cayuga Corp. will be owned directly by
the Insignia Investors (as hereinafter defined);
(b) 11.724% of the remaining 99% partnership
interests in Cayuga, which interests will constitute limited
partnership interests, will be owned directly by Insignia
Financial Group, Inc. and/or its affiliates (collectively,
the "Insignia Investors");
(c) 24.12% of the remaining 99% partnership
interests in Cayuga, which interests will constitute limited
partnership interests, will be owned directly by Emmet J.
Cashin, Jr., Jarold A. Evans and/or W. Patrick McDowell (or
trusts created by such persons) (collectively, the "Fox
Investors");
(d) 23.785% of the remaining 99% partnership
interests in Cayuga, which interests will constitute limited
partnership interests, will be owned directly by Apollo Real
Estate Advisors, L.P. and/or its partners, employees or
affiliates (collectively, the "Apollo Investors"); and
(e) 40.37% of the remaining 99% partnership
interests in Cayuga, which interests will constitute limited
partnership interests, will be owned directly by Michael L.
Ashner, Martin Lifton, Arthur N. Queler and Peter Braverman
and/or their spouses and issue (and trusts established for the
benefit of their spouses and issue) (collectively, the "QALB
Investors").
<PAGE> 3
-3
2. The Acquisition.
PWRES understands that the Acquisition of the LP Units pursuant to the
Tender Offers and the payment of related reasonable fees and expenses (which
shall not be payable to the Icahn Investors, the QALB Investors, the Apollo
Investors, the Insignia Investors, the Fox Investors or any affiliates of any
of the foregoing) will be funded by (i) a secured credit facility in the
original principal amount of up to $40,000,000 (the "Credit Facility") to be
made available to the Borrower and (ii) cash equity contributions to the
Borrower equal in the aggregate to (x) $2,500,000 as a condition precedent to
the funding of the first $10,000,000 under the Credit Facility, plus (y) an
additional $2,500,000 as a condition precedent to the funding of each
additional $10,000,000 under the Credit Facility. Annex A to this Commitment
contains a Summary of Certain Terms (the "Term Sheet") setting forth the
principal terms and conditions of the Credit Facility.
3. Commitment; Due Diligence; Conditions to Funding.
PWRES is pleased to confirm that subject to satisfaction of all of the
conditions set forth in this Commitment and in the Term Sheet, PWRES will
provide 100% of the Credit Facility. As you are aware, PWRES and its advisors
are in the process of performing certain legal, business and financial due
diligence analysis and review of the proposed transaction (the "Transaction")
including, without limitation, with respect to (i) the limited partnerships
(including, without limitation, the Tender Offer Partnerships) which have been
formed for the purpose of investing in real estate and the partnerships,
subsidiaries and joint ventures in which such limited partnerships have an
interest (each an "Operating Partnership" and, collectively, the "Operating
Partnerships"), (ii) the Borrower, Icahn Corp., Cayuga and Cayuga Corp.,
Montgomery Realty Company-85, the managing general partner in each of the
Tender Offer Partnerships (the "TOP-GP"), NPI Realty Management Corporation,
the managing general partner in the TOP-GP ("NPI Realty"), QALA III, a Georgia
general partnership ("QALA") (the owner of the "Additional LP Units" as defined
in the Term Sheet), the Icahn Investors, the QALB Investors, the Apollo
Investors, the Insignia Investors and the Fox Investors (collectively, the
"Credit Parties"), and (iii) the Tender Offers. PWRES's willingness to provide
the Credit Facility described in this Commitment is subject to (a) PWRES being
satisfied in its sole discretion (1) with the partnership and corporate
structure of the Borrower, the TOP-GP, NPI Realty, the Tender Offer
Partnerships and the entities which, directly or indirectly, own interests in
the Borrower, the Operating Partnerships (including the Tender Offer
Partnerships), the TOP-GP (and any other general partner in a Tender Offer
Partnership), NPI Realty
<PAGE> 4
-4
and the provisions of the partnership agreements and corporate documents of
such entities, (2) that, subject to the provisions of the partnership
agreements of the Tender Offer Partnerships, following the exercise of its
rights under the security for the Credit Facility, PWRES and its successors and
assigns (or any other purchaser of the collateral securing the Credit Facility)
will have the right to exercise the rights of the TOP-GP to control the
liquidation and dissolution of the Tender Offer Partnerships and the sale,
financing and management of property owned, directly or indirectly, by the
Tender Offer Partnerships, (3) that all consents of all persons and entities
will be obtained which PWRES determines are required to ensure that PWRES (and
its successors and assigns or any other purchaser of the collateral securing
the Credit Facility) will have the ability to realize the benefits intended to
be afforded pursuant to the security agreements securing the Credit Facility,
(4) with the management agreements, franchise agreements, licensing agreements
and any other agreements relating to the management and operation of property
owned, directly or indirectly, by the Tender Offer Partnerships, (5) with the
state of title held by the Operating Partnerships in their respective
properties, and (6) with the impact of the results of the diligence analyses
described in clauses (1) through (5) above upon PWRES' underwriting of the
Credit Facility and property owned, directly or indirectly, by the Tender Offer
Partnerships; (b) PWRES not becoming aware of any facts or information after
the date hereof (which, if other than information in the nature of that
described in clause (a) above, was not previously disclosed to it) which in its
sole judgement has a material adverse effect on its evaluation of the Tender
Offers or the business, property, operations, nature of assets, assets,
liabilities, condition (financial or otherwise) or prospects of (1) the
Borrower, Cayuga, Icahn Corp., Cayuga Corp., QALA, the TOP-GP or NPI Realty,
(2) any Tender Offer Partnership or (3) the Operating Partnerships (other than
the Tender Offer Partnerships) taken as a whole; and (c) no material adverse
change having occurred in the Tender Offers or the business, property,
operations, nature of assets, assets, liabilities, condition (financial or
otherwise) or prospects of (1) the Borrower, Cayuga, Icahn Corp., Cayuga Corp.,
QALA, the TOP-GP or NPI Realty, (2) any Tender Offer Partnership, or (3) the
Operating Partnerships (other than the Tender Offer Partnerships) taken as a
whole. In the event that PWRES becomes aware of any such fact or information,
PWRES is not so satisfied as described above or any material adverse change
occurs, PWRES may, in its sole discretion, suggest alternative financing,
amounts or structures (including, without limitation, interest and fees) that
assure adequate protection for PWRES or decline to provide or participate in
the proposed financing. PWRES shall not be responsible or liable for any
consequential damages which may be alleged as a result of its failure to
provide the Credit Facilities or for any damages for its failure to provide the
Credit Facilities as permitted above.
<PAGE> 5
-5
4. Payment of Fees and Expenses; Indemnity.
To induce PWRES to issue this Commitment and to continue with its due
diligence analysis and review, you hereby agree that all reasonable fees and
expenses (including the reasonable fees and expenses of counsel for PWRES,
auditors, field examiners, appraisers, consultants or other outside experts) of
PWRES arising in connection with this Commitment (and the due diligence in
connection herewith) and in connection with the Transaction shall be for your
account, whether or not the Transaction is consummated, the Credit Facility is
made available or the definitive legal documents with respect thereto are
executed and are delivered by any party. You further agree to indemnify and
hold harmless PWRES and each director, officer, employee and affiliate thereof
(each an "indemnified person") from and against any and all actions, suits,
proceedings (including any investigations or inquiries), claims, losses,
damages, liabilities or reasonable costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel and amounts paid in settlement of court costs) which
may be incurred by or asserted against or involve PWRES or any such indemnified
person as a result of or arising out of or in any way related to or resulting
from any transaction (whether or not consummated) contemplated by this
Commitment and, upon demand, to pay and reimburse PWRES and each indemnified
person for any reasonable legal or other out-of-pocket expenses incurred in
connection with investigating, defending or preparing to defend any such
action, suit, proceeding (including any inquiry or investigation) or claim
(whether or not PWRES or any such person is a party to any action or proceeding
out of which any such expenses arise), provided that you shall not have to
indemnify any indemnified person against any loss, claim, damage, expense or
liability which resulted solely from the gross negligence or wilful misconduct
of such indemnified person. This Commitment is issued for your benefit only
and no other person or entity may rely hereon. The provisions of this
paragraph shall survive any termination of this Commitment.
5. Confidentiality.
This Commitment is delivered to you with the understanding that,
whether or not this or any other commitment is accepted from PWRES relating to
any aspect of the Transaction outlined herein, this Commitment and the terms
outlined herein and in the Term Sheet will be kept confidential by you and not
disclosed to any third party (including, without limitation, other sources of
financing) without the express prior written consent of PWRES, except that (a)
you may disclose this Commitment and the
<PAGE> 6
-6
Term Sheet and the contents hereof and thereof (i) to the Credit Parties and to
your and their partners, shareholders, officers, directors, employees,
accountants, attorneys and other advisors on a confidential basis in connection
with the transactions contemplated hereby or thereby or (ii) as required by
law, and (b) after your acceptance of this Commitment you may disclose this
Commitment, the Term Sheet and the contents hereof and thereof (as well as a
summary of the principal terms and conditions of PWRES's commitment and
obligations hereunder or thereunder) in any public filings whether in
connection with the transactions contemplated hereby or otherwise (provided
that any such written disclosure shall be subject to PWRES's review and
approval, which approval will not be unreasonably withheld). The provisions of
this paragraph shall survive any termination of this Commitment.
6. No Brokers.
As a material inducement for PWRES to execute and deliver this
Commitment, you hereby represent and warrant that neither you nor any person
acting on your behalf (including, without limitation, any Credit Party) have
employed or used a broker in connection with the transactions contemplated
herein, and you agree to indemnify and hold harmless PWRES and each other
indemnified person from and against all loss, cost, damage or expense arising
by reason of any claim made by any such broker. The provisions of this
paragraph shall survive any termination of this Commitment.
7. Advertising.
Upon the closing of the transactions contemplated in this Commitment,
PWRES and its affiliates shall be entitled, but not required, to advertise the
same from time to time in media selected by PWRES or its affiliates at their
expense, provided that no such advertisement shall refer to the use of the
proceeds of the Credit Facility. Neither you nor your affiliates shall
advertise the closing of the transactions contemplated herein prior to such
closing. Upon the closing of the transactions contemplated herein, you and
your affiliates shall be entitled, but not required, to advertise the same from
time to time in media selected by you at your expense, provided that your
advertisements shall include a disclosure, in each case approved in writing by
PWRES, that PWRES provided the Credit Facility.
<PAGE> 7
-7
8. Independent Contractor.
Any services provided by PWRES pursuant hereto are those of an
independent contractor providing a service. Nothing contained herein (i) shall
constitute PWRES or any of its affiliates or you or any of your affiliates as
members of any partnership, joint venture, association or other separate
entity, (ii) shall be construed to impose any liability as such on PWRES or
(iii) shall constitute a general or limited agency or be deemed to confer on
any party hereto any express, implied or apparent authority to incur any
obligation or liability on behalf of any other.
9. Entire Agreement.
This Commitment and the Term Sheet attached hereto contain all of the
agreements and understandings of the parties hereto and their respective
obligations in connection therewith. All prior negotiations, proposals,
agreements and understandings relating to the subject matter of this Commitment
and the Term Sheet are hereby agreed to be superseded hereby.
10. Governing Law.
This Commitment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
State of New York.
If you are in agreement with the foregoing, please sign and return to
PWRES the enclosed copy of this Commitment by no later than 5:00 p.m., New York
time on February 15, 1996. This Commitment shall terminate at such time unless
you accept this Commitment as provided above.
Very truly yours,
PAINE WEBBER REAL ESTATE
SECURITIES INC.
By
---------------------------------
William W. Evans, III
Managing Director
<PAGE> 8
-8
Agreed to and Accepted this
__ day of February, 1996
DEVON ASSOCIATES,
a New York general partnership
By: Fleetwood Corp.,
a general partner
By:
--------------------------
Edward Mattner
President
By: Cayuga Associates, L.P.,
a general partner
By: Cayuga Capital Corporation,
its general partner
By:
--------------------------
Michael L. Ashner
President
<PAGE> 9
ANNEX A
SUMMARY OF CERTAIN TERMS AND CONDITIONS*/
Borrower: A newly-formed, bankruptcy remote, single
purpose general partnership satisfactory to
Paine Webber Real Estate Securities Inc.
("PWRES") in all respects. The Borrower will
tender for outstanding limited partnership
units ("LP Units") in the two limited
partnerships listed on Exhibit A hereto (the
"Tender Offer Partnerships"), which Tender
Offer Partnerships are controlled by
Montgomery Realty Company-85, the managing
general partner in each of the Tender Offer
Partnerships (the "TOP-GP").
Lender: PWRES (or its designee).
Equity
Contribution: As a condition precedent to the initial $10,000,000
incurrence of loans under the Credit Facility (any
incurrence of loans under the Credit Facility being
hereinafter referred to as a "Loan"), an aggregate of
$2,500,000 in cash equity contributions must be made
to the Borrower by the partners therein and such cash
equity contributions must be utilized by the Borrower
to (i) acquire the LP Units pursuant to the Tender
Offers and (ii) pay related reasonable fees and
expenses incurred in connection with the Tender
Offers. As a condition precedent to each subsequent
$10,000,000 incurrence of Loans under the Credit
Facility, an aggregate of $2,500,000 in additional
cash equity contributions must be made to the
Borrower by the partners therein and such cash equity
contributions must be utilized by the Borrower to
acquire the LP Units pursuant to the Tender Offers
and pay related reasonable fees and expenses incurred
in connection
__________________________________
*/ All capitalized terms used herein but not defined shall have the meanings
provided in the Commitment Letter to which this summary is attached.
<PAGE> 10
therewith. Additional cash equity contributions may
be made to the Borrower by the partners therein from
time to time during the Availability Period (as
defined below) for purposes of paying the costs and
expenses of the Tender Offers and funding any
increases in the purchase prices of the LP Units
pursuant to the Tender Offers over the initial
purchase prices for the LP Units (such initial
purchase prices to be as previously agreed between
the Borrower and PWRES (for each LP Unit its "Initial
Price").
The aggregate amount of cash equity
contributions actually made to the Borrower
in accordance with the immediately preceding
paragraph and not refunded with proceeds of
the Loans in accordance with the Section of
this Term Sheet entitled "Use of Proceeds" is
hereinafter referred to as the "Capital
Contribution Amount"; each cash equity
contribution made to the Borrower in
accordance with the immediately preceding
paragraph is hereinafter referred to as a
"Capital Contribution"; and the minimum
amount of aggregate cash equity contributions
required to have been made to the Borrower in
accordance with the immediately preceding
paragraph as of the date of any advance of
Loan proceeds is hereinafter referred to as
the "Required Capital Contribution Amount".
Use of Proceeds: The proceeds of the Loans incurred under the Credit
Facility will be used by the Borrower solely (i) to
fund the acquisition of the LP Units in the Tender
Offer Partnerships pursuant to the Tender Offers and
(ii) to pay fees and expenses incurred in connection
with the acquisition of the LP Units, up to a maximum
amount of $3,300,000, which have been approved by
PWRES and which are not payable to the Icahn
Investors, the QALB Investors, the Apollo Investors,
the Insignia Investors, the Fox Investors or any
affiliates of any of the foregoing. Notwithstanding
the foregoing, (i) the aggregate purchase price paid
for the LP Units of a Tender Offer Partnership may
not exceed the Initial Price for such LP Units and
the fees and expenses related to the Tender Offers
may not exceed $3,300,000 in the aggregate, unless
the sum of the aggregate excess purchase prices paid
for all LP Units, plus the related fees and expenses
in excess of $3,300,000 does not exceed the amount by
which the Capital Contributions
-2-
<PAGE> 11
actually received by the Borrower which are not
repaid with proceeds of the Loans as contemplated by
clause (ii) below exceeds the Required Capital
Contribution Amount, (ii) the proceeds of the Loans
made on the Closing Date may be utilized to (x) repay
loan advances made by the partners in the Borrower to
the Borrower in connection with the Tender Offers, or
(y) return Capital Contributions made by such
partners which exceed the Required Capital
Contribution Amount, and (iii) the proceeds of the
Loans made on the last day of the Availability Period
may be utilized to return Capital Contributions made
to the Borrower in an amount equal to the lesser of
(x) the amount by which such Capital Contributions
exceed the Required Capital Contribution Amount and
(y) the amount by which the aggregate Initial Price
for all LP Units (assuming that the full number of LP
Units tendered for pursuant to the Tender Offers are
purchased) exceeds the aggregate Initial Price for
all LP Units actually acquired pursuant to the Tender
Offer. The maximum number of LP Units of any Tender
Offer Partnership accepted by the Borrower shall in
all events be less than the number of such LP Units
which, (A) when added to the number of LP Units in
such Tender Offer Partnership that were transferred
during the preceding 12-month period, would cause a
liquidation or termination of the relevant Tender
Offer Partnership for tax purposes or (B) would
result in any Tender Offer Partnership being deemed
to be "going private".
Commitment: Up to $40,000,000. In no event will the aggregate
principal amount of the Loans made to the Borrower
exceed 85% of the aggregate Initial Prices allocated
to the LP Units actually acquired by the Borrower in
the Tender Offers.
Availability: The Loans may be incurred under the Credit Facility
at any time prior to the 360th day after the initial
borrowing of the Loans under the Credit Facility (the
"Closing Date") upon at least five days prior written
notice, provided that (x) the aggregate principal
amount of the Loans incurred on the Closing Date
shall be no less than $5 million and (y) Loans may
not be incurred on more than five different days.
The period during which Loans may be incurred under
the Credit Facility is hereinafter referred to as the
"Availability Period."
-3-
<PAGE> 12
Commitment
Termination: The commitment, and PWRES's obligations to make Loans
under the Credit Facility, will terminate if the
Closing Date has not occurred on or before June 30,
1996.
Maturity: The first anniversary of the Closing Date
(the "Initial Maturity Date"), provided that
the Borrower will have a right to two 1-year
extensions of the maturity date provided that
no default or event of default exists on the
date of any such extension (such maturity
date as it may be extended, the "Maturity
Date").
Interest Rate: The Loans will bear interest at the LIBOR Rate (as
defined below) as determined by PWRES for interest
periods of one month plus the Applicable Margin,
provided that the initial interest period for Loans
incurred after the Closing Date will terminate on the
date the interest period for the Loans incurred on
the Closing Date terminates.
"LIBOR Rate" shall mean, for any interest
period, the rate per annum from time to time
equal to the rate (rounded upward, if
necessary, to the nearest 1/32 of one
percent), shown on the Telerate page 3750 (or
such display substituted therefor as is then
customarily used to quote the London
interbank offering rate as determined by
PWRES in its reasonable discretion) as the
offered rate per annum for one month U.S.
dollar deposits of amounts in same day funds
comparable to the principal amount of the
Loans as of approximately 11:00 a.m. (London
time) on each interest rate determination
date for each interest period for such Loan,
provided that if on any interest rate
determination date the quotation specified in
the preceding clause above does not appear on
Telerate Page 3750, the LIBOR Rate will be
either (a) the arithmetic mean (rounded
upwards as aforesaid) of the offered rates
which leading New York City banks selected by
PWRES are quoting at approximately 11:00 a.m.
(New York City time) on the relevant interest
rate determination date for United States
dollar deposits for the next month to the
principal London office of each of the
reference banks or those of them (being at
least two in number) to which
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<PAGE> 13
such offered quotations are, in the opinion
of PWRES, being so made, or (b) in the event
that PWRES can determine no such arithmetic
mean, the arithmetic mean (rounded upwards as
aforesaid) of the offered rates which leading
New York City banks selected by PWRES are
quoting on such interest rate determination
date to leading European banks for United
States dollar deposits for the next month.
"Applicable Margin" shall mean a percentage
per annum equal to (x) prior to the first
anniversary of the Closing Date, 2.5%, (y) on
and after the first anniversary of the
Closing Date and prior to the second
anniversary of the Closing Date, 3.5% and (z)
on and after the second anniversary of the
Closing Date, 4.5%.
The Credit Facility shall include customary
protective provisions for such matters as
capital adequacy, increased costs, funding
losses, illegality and withholding taxes.
Interest in respect of the Loans shall be
payable at the end of the applicable interest
period. All interest calculations shall be
based on a 360-day year and actual days
elapsed.
Upon the happening and continuance of any
default in the payment of principal or
interest, subject to limitations imposed by
applicable law, all Loans shall bear interest
at a rate per annum equal to the rate which
is the greater of (x) 12% and (y) 3% in
excess of the prime lending rate announced
from time to time by Bankers Trust Company.
Such interest shall be payable on demand.
Residual Fee: As additional compensation on the Loans, after the
Initial Return Obligation (as defined below) has been
satisfied, PWRES will receive a residual fee (the
"Residual Fee"). The amount of the Residual Fee will
be the Participation Percentage (as defined below) of
the Partnership Cash Flows (as defined below). The
Borrower will be required to buy out PWRES's right to
receive the Residual Fee not later than the 180th day
following the Loan Satisfaction Date (as defined
below). The purchase price to be paid by the
Borrower for PWRES's right to receive the Residual
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<PAGE> 14
Fee (the "Buy-out Price") shall be determined as of
the Loan Satisfaction Date and shall be equal to the
product of (a) an amount equal to the portion of the
resultant liquidation value of the Tender Offer
Partnerships on the Loan Satisfaction Date, assuming
a sale of the properties owned by the Tender Offer
Partnerships on the Loan Satisfaction Date and a full
liquidation of the Tender Offer Partnerships in an
orderly manner, which would be distributable in
respect of the LP Units after giving effect as of the
Loan Satisfaction Date to the satisfaction in full of
the Loans and assuming the payment of all amounts
attributable to the return on capital and return of
capital referred to in clauses (ii) and (iii) of the
definition of the "Initial Return Obligation",
multiplied by (b) the Participation Percentage.
There shall be credited to the Buy-out Price any
amounts distributed to PWRES in respect of the
Residual Fee during the period commencing on the Loan
Satisfaction Date and expiring on the date the
Borrower pays the Buy-out Price to PWRES which are
attributable to (i) the sale or other disposition by
the Borrower of LP Units and (ii) the sale,
refinancing or other disposition of a Property. The
liquidation value of the Tender Offer Partnerships
shall be determined by an MAI appraiser mutually
satisfactory to PWRES and the Borrower, and the cost
of such appraisals shall be shared equally by PWRES
and the Borrower. Interest shall accrue and shall be
paid monthly by the Borrower on the daily outstanding
balance of the Buy-out Price, from the Loan
Satisfaction Date to the date upon which the Borrower
pays the Buy-out Price, at a rate per annum equal to
the LIBOR Rate plus 250 basis points. PWRES shall
receive its Participation Percentage of Partnership
Cash Flows from the date of satisfaction of the
Initial Return Obligation until the date upon which
the Borrower pays the Buy-out Price to PWRES.
The "Initial Return Obligation" will be
satisfied when each of the following has
occurred:
(i) the Loans, together with all
interest accrued thereon and all
other amounts owing under the Credit
Facility (other than the Residual
Fee) have been paid in full (such
date, the "Loan Satisfaction Date");
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<PAGE> 15
(ii) there has been deemed applied to a
return on capital as provided under
"Application of Partnership Cash
Flows" below, a cumulative,
compounded (annually) amount equal
to 15% per annum of the Capital
Contribution Amount; and
(iii) there has been deemed applied to a
return of capital as provided under
"Application of Partnership Cash
Flows" below, an amount equal to the
Capital Contribution Amount.
"Partnership Cash Flows" shall mean, without
duplication, for any period, (x)
distributions received by the Borrower in
respect of the LP Units during such period,
and (y) proceeds received by the Borrower
during such period from the sale or other
disposition of the LP Units.
"Participation Percentage" shall mean the
lesser of (i) 15%, or (ii) the sum of (x) 10%
plus (y) 5/24ths of 1.0% for each full or
partial month in the term of the Loans after
the Initial Maturity Date.
Definitions of
Cash Flow
and Capital
Event Proceeds: "Cash Flow" shall mean, for any period, and without
duplication, (a) all distributions received by any of
the Credit Parties during such period in respect of
the Additional LP Units (hereinafter defined) which
are not Capital Event Proceeds (hereinafter defined)
or Deficit Distributions (hereinafter defined), (b)
all distributions received by the Borrower during
such period in respect of the LP Units which are not
Capital Event Proceeds or Deficit Distributions, (c)
all distributions (other than distributions of Loan
proceeds made to the partners in the Borrower to
return Capital Contributions made by such partners
pursuant to and in accordance with the sections of
this Term Sheet entitled "Equity Contribution" and
"Use of Proceeds") and reimbursements received by any
of the Credit Parties in respect of their respective
partnership interests in the Borrower and Cayuga, and
(d) all dividends and reimbursements received by any
of the Credit
-7-
<PAGE> 16
Parties in respect of their shareholder interests in
Cayuga Corp. and Icahn Corp.
"Capital Event Proceeds" shall mean, for any
period and without duplication, (a)
distributions and any other amounts received
by the Borrower or any of the other Credit
Parties (including, without limitation, any
sales commissions, fees or other compensation
paid to the Borrower, any other Credit Party
or any of their respective affiliates in
connection with the related capital event)
during such period in respect of the LP Units
or the Additional LP Units on account of a
sale of LP Units or Additional LP Units and
(b) the Refinancing Amount (as defined below)
and the Liquidation Amount (as defined below)
for each Distribution Date (as defined below)
occurring during such period in respect of
the properties owned, directly or indirectly,
by the Tender Offer Partnerships.
"Distribution Date" shall mean each June 30
and December 31.
"Capital Event Interest" in any amount shall
mean the portion of such amount which would
have been distributed to the Borrower and the
other Credit Parties in respect of the LP
Units and the Additional LP Units in the
Tender Offer Partnership receiving such
amount had 100% of such amount been
distributed by the relevant Tender Offer
Partnership.
"Liquidation Amount" shall mean, for any
Distribution Date and for any property owned,
directly or indirectly, by a Tender Offer
Partnership, the Capital Event Interest in
the proceeds of (x) any sale of the
properties owned, directly or indirectly, by
such Tender Offer Partnership or (y) to the
extent not applied to the repair, restoration
or replacement of the affected property,
condemnation or insurance proceeds with
respect to such properties, which in the case
of this clause (y) exceed $100,000 for each
event for which such insurance or
condemnation proceeds are payable, to the
extent that such sale, condemnation or
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<PAGE> 17
insurance proceeds are received during the
period (for each Distribution Date, its
"Measurement Period") commencing on the 15th
day preceding the immediately preceding
Distribution Date and ending on the 15th day
preceding such Distribution Date and are not
distributed in full by the relevant Tender
Offer Partnership on or before such
Distribution Date.
"Refinancing Amount" shall mean, for any
Distribution Date and for any property owned,
directly or indirectly, by a Tender Offer
Partnership: (x) if indebtedness in respect
of such property is outstanding on the
Closing Date, 100% of the Capital Event
Interest in the amount by which the principal
amount of indebtedness incurred in respect of
such property (including any refinancing of
existing indebtedness) during the Measurement
Period for such Distribution Date exceeds
107% of the principal amount of the
indebtedness in respect of such property
which is outstanding on the Closing Date or
(y) if no such indebtedness in respect of
such property is outstanding on the Closing
Date, the amount equal to 100% of the Capital
Event Interest in indebtedness incurred in
respect of such property during the
Measurement Period for such Distribution Date
to the extent that such excess indebtedness
amounts are not distributed in full by the
relevant Tender Offer Partnership.
Deficit
Contributions/
Deficit
Distributions: "Deficit Contributions" shall mean capital
contributions made to a Tender Offer Partnership by a
general partner in such Tender Offer Partnership
pursuant to Section 5 of the partnership agreement of
such Tender Offer Partnership in connection with a
dissolution or termination of such Tender Offer
Partnership, which capital contributions are required
to be made in order to (i) return Original Invested
Capital (as defined in the partnership agreement of
such Tender Offer Partnership), or (ii) restore a
deficit balance in such general partner's Capital
Account (as defined in the partnership agreement of
such Tender Offer Partnership).
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<PAGE> 18
"Deficit Distributions" shall mean any
distributions made to the holders of the LP
Units or the Additional LP Units which are
distributions of amounts constituting Deficit
Contributions.
PWRES and its assignees will agree that it
will pay to the Borrower any portion of any
Deficit Distribution received by PWRES or
such assignee, net of any tax liabilities
attributable thereto (without taking into
account any tax credits or net operating loss
carry forwards otherwise available to PWRES
or such assignee, as the case may be). PWRES
and its assignees will agree that it will not
retain any amount in respect of tax
liabilities attributable to Deficit
Distributions received by it if at the time
of such receipt it shall have received an
opinion of counsel satisfactory to it to the
effect that no such tax liability will result
from PWRES' or such assignee's, as the case
may be, receipt of the Deficit Distribution.
Those Credit Parties satisfactory to PWRES
which are limited partners in Cayuga shall
agree, jointly and severally, to indemnify
and hold harmless PWRES and its successors
and assigns from and against the payment of
all or any portion of any Deficit
Contribution, including, without limitation,
any such payment requirement arising directly
or indirectly by reason of the enforcement by
PWRES (or its successors and assigns) of any
of its rights in the Collateral.
Application of
Cash Flow/
Capital Event
Proceeds/
Partnership
Cash Flows: A. Application of Cash Flow.
Until the occurrence of the Loan Satisfaction
Date, Cash Flow will be applied as follows
(with such application to be made on a
monthly basis):
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<PAGE> 19
(i) first, to the payment of interest on
the Loans and the other obligations
of the Borrower under the Credit
Facility (other than the obligations
to repay the principal amount of the
Loans) which are then due and
payable;
(ii) second, provided that no default or
event of default then exists, an
amount equal to 35% of the Cash Flow
remaining after application pursuant
to clause (i) above shall be
retained by the relevant Credit
Parties for application to the
satisfaction of their reasonable
income tax obligations; and
(iii) third, with respect to Cash Flow
remaining after application pursuant
to clauses (i) and (ii) above, 100%
of such remaining Cash Flow shall be
applied to the repayment of the
principal of the Loans.
Amounts retained for application to the
satisfaction of income tax obligations of the
Credit Parties pursuant to clause (ii) above
may be accessed by the Credit Parties on a
quarterly basis and until such time as such
amounts have been so accessed such amounts
shall be retained in the Security Account
(hereinafter defined).
Any shortfall in the amounts available for
the payment of interest in respect of the
Loans pursuant to clause (i) above shall be
funded by the Borrower or, in the sole
discretion of PWRES, from the Interest
Reserve Account (as hereinafter defined).
B. Application of Capital Event
Proceeds.
Until the occurrence of the Loan Satisfaction
Date, Capital Event Proceeds will be applied
as follows (with such application to be made
upon receipt of such proceeds (with the
Refinancing Amount and Liquidation Amount for
a Distribution Date being deemed received on
such Distribution Date)):
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<PAGE> 20
(i) first, provided that no default or
event of default then exists, a
portion of any Capital Event
Proceeds (other than Capital Event
Proceeds constituting a Refinancing
Amount) in an amount equal to the
capital gains tax obligations which
would be incurred by the Credit
Parties in connection with the
related capital event, assuming the
applicable capital gains tax rate
were equal to the maximum federal
capital gains tax rate than in
effect plus 6.0%, shall be retained
by the Credit Parties for
application to the satisfaction of
the income tax obligations of the
Credit Parties; and
(ii) second, with respect to Capital
Event Proceeds remaining after
application pursuant to clause (i)
above, 100% of such remaining
Capital Events Proceeds shall be
applied to the repayment of the
principal of the Loans.
Amounts retained for application to the
satisfaction of the income tax obligations of
the Credit Parties pursuant to clause (i)
above may be accessed by the Credit Parties
on a quarterly basis and until such time as
such amounts have been so accessed they shall
be retained in the Security Account.
C. Application of Partnership Cash
Flows.
After the occurrence of the Loan Satisfaction
Date, Partnership Cash Flows will be applied
as follows (with such applications to be made
on a monthly basis):
(i) first, an amount equal to 15% per
annum (computed on a cumulative
compounded (annually) basis) of the
Capital Contribution Amount shall be
deemed applied to a return on
capital pursuant to this clause (i)
to the extent not theretofore deemed
applied to said return on capital;
(ii) second, the Partnership Cash Flows
remaining after application pursuant
to clause (i) above to the
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<PAGE> 21
full amount of the deemed return on
capital then accrued shall be deemed
applied to the return of capital
until such time as an aggregate
amount equal to the Capital
Contribution Amount shall be deemed
applied to a return of capital
pursuant to this clause (ii); and
(iii) third, the Partnership Cash Flows
remaining after application pursuant
to clauses (i) and (ii) above shall
be applied to the Residual Fee and
the remainder may be used by the
Credit Parties for general corporate
and partnership purposes.
D. Application After an Event of
Default.
Notwithstanding anything to the contrary
contained herein, upon the occurrence and
during the continuance of an event of
default, after PWRES shall give notice
thereof to the Borrower, all Collateral and
the proceeds thereof (including, without
limitation, Capital Event Proceeds) shall be
applied to the repayment of principal and
interest on the Loans and to the satisfaction
of the Borrower's other obligations under the
Credit Facility.
Repayment of
the Loans: The Loans shall be repaid as follows:
(i) the entire unpaid principal amount
of the Loans shall be due and owing
on the Maturity Date; and
(ii) the Loans shall be repaid at the
times, and in the amounts, required
under "Application of Cash
Flow/Capital Events
Proceeds/Partnership Cash Flows"
above.
Security Account: PWRES shall establish, with a financial institution
satisfactory to PWRES, a trust account (the "Security
Account"), under the sole dominion and control of
PWRES, and PWRES shall have a continuing security
interest in and lien upon the Security Account and
all funds on deposit therein from time to time
(together with interest accruing thereon). The
Security Account will be divided
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<PAGE> 22
into a number of sub-accounts (each a "Sub-Account")
to be determined. All Cash Flow and Capital Event
Proceeds shall be deposited directly into the
appropriate Sub-Account (with all entities making
such payments being directed to make such payments
directly into the appropriate Sub-Account). Amounts
on deposit in the Security Account shall be applied
in accordance with the section hereof entitled
"Application of Cash Flow/Capital Event Proceeds/
Partnership Cash Flows".
Interest Reserve: PWRES shall establish, with a financial institution
satisfactory to PWRES, a trust account (the "Interest
Reserve Account"), under the sole dominion and
control of PWRES, and PWRES shall have a continuing
security interest in and lien upon the Interest
Reserve Account and all funds on deposit therein from
time to time (together with interest accruing
thereon). The Borrower shall maintain on deposit in
the Interest Reserve Account at all times during the
term of the Loans an amount determined by PWRES to be
equal to the Required Interest Reserve Amount (as
defined below). The Borrower shall deposit into the
Interest Reserve Account, from time to time within 7
days following its receipt of notice from PWRES, the
amount of any shortfall in the Required Interest
Reserve Amount, it being understood that if the
amount of any such shortfall is contributed to the
Borrower by the constituent partners in the Borrower,
the amounts so contributed shall not constitute
Capital Contributions as defined in the section
hereof entitled "Equity Contribution".
"Annualized Loan Interest" shall mean, as of
any determination date, an amount equal to
(i) the aggregate amount of interest which
would be payable in respect of the then-
outstanding aggregate principal balance of
the Loans in a twelve-month period, assuming
that (x) the then-current interest rate would
be applicable to the Loans during such
twelve-month period and (y) no repayments
would be made in respect of the Loans during
such twelve-month period, multiplied by (ii)
125%.
"Annualized LP Unit Distributions" shall
mean, as of any determination date, an amount
equal to the lesser of (i) the cash
distributions (other than cash distributions
which constitute Capital Event Proceeds) paid
in respect of the
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<PAGE> 23
LP Units on the most recent quarterly
distribution payment date (assuming such LP
Units were owned by the Borrower on such
quarterly payment date), multiplied by four,
and (ii) the cash distributions (other than
cash distributions which constitute Capital
Event Proceeds) paid in respect of the LP
Units on the four most recent quarterly
distribution payment dates (assuming such LP
Units were owned by the Borrower on each of
such quarterly payment dates).
"Required Interest Reserve Amount" shall
mean, as of any determination date, an amount
equal to (i) the Annualized Loan Interest,
minus (ii) the Annualized LP Unit
Distributions.
Collateral: All obligations of the Borrower under the Credit
Facility (including, without limitation, the
obligation to pay principal and interest on the
Loans) shall be secured by a first priority perfected
security interest in all of the following
(collectively, the "Collateral"):
(i) the partnership interests in the
Borrower and the general and limited
partnership interests in Cayuga,
including all rights to
distributions in respect thereof;
(ii) the LP Units held by the Borrower,
including all rights to
distributions in respect thereof;
(iii) all limited partnership interests in
the Tender Offer Partnerships which
are owned, directly or indirectly,
by any of the Credit Parties (the
"Additional LP Units"), including
all rights to distributions in
respect thereof;
(iv) all stock of Cayuga Corp., Icahn
Corp. and NPI Realty;
(v) all partnership interests in the
TOP-GP held by NPI Realty Management
Corporation;
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<PAGE> 24
(vi) the Security Account;
(vii) the Interest Reserve Account; and
(viii) cash, United States Treasuries or
equivalents reasonably satisfactory
to PWRES in an aggregate amount
equal to (a) $2,000,000, minus (b)
the value as of the Closing Date of
the Additional LP Units pledged as
Collateral by the Icahn Investors,
which cash, treasuries or
equivalents shall be pledged as
Collateral in a manner satisfactory
to PWRES.
The Collateral will be released in full on
the Loan Satisfaction Date.
Prepayment: The Loans shall be fully prepayable in whole or in
part on any interest payment date. PWRES shall
retain its right to its Residual Fee following
repayment of the Loans.
Recourse: The obligations under the Credit Facility
will be fully recourse to the Borrower,
Cayuga, Icahn Corp., Cayuga Corp. (other than
with respect to the demand funding notes from
RJN Corporation, Michael L. Ashner and W.
Edward Scheetz, each in the original
principal amount of $70,000.00) and the
Collateral and shall be non-recourse to the
other Credit Parties.
Fees: A non-refundable facility fee of $100,000 shall be
deemed earned in full and shall be paid to PWRES on
the Closing Date. In addition, PWRES shall be paid a
funding fee on the date each Loan is advanced under
the Credit Facility (including on the Closing Date)
in an amount equal to 0.75% of the principal amount
of each such Loan.
In addition to the fees described above, as
and to the extent set forth in paragraph 4 of
the Commitment, the Borrower acknowledges and
agrees that PWRES is entitled to receive
payment for all of its reasonable fees and
expenses arising in connection with the
Commitment and the transactions contemplated
therein and in this Term
-16-
<PAGE> 25
Sheet, whether or not any of such
transactions are consummated, the Credit
Facility is made available or the definitive
legal documents with respect thereto are
executed and delivered by any party.
Conditions
Precedent to
Initial Loans: The conditions which shall be required to be
satisfied prior to or simultaneously with the making
of the Loans on the Closing Date will include those
listed below, those listed in the Commitment to which
this Summary of Certain Terms and Conditions is
attached and any other typical for this type of
facility and any others appropriate in the context of
the proposed transaction:
(i) The Tender Offer documentation
(collectively, the "Tender Offer
Materials") shall be in full force
and effect and any modifications
thereto from the Tender Offer
Materials approved by PWRES pursuant
to the section hereof entitled
"Tender Offer Materials" shall be
satisfactory to PWRES.
(ii) All conditions precedent under the
Tender Offer Materials to the
consummation of the Tender Offer(s)
with respect to the LP Units then
being acquired shall have been
satisfied. The Tender Offer(s) with
respect to the LP Units then being
acquired shall have been consummated
after the receipt of all necessary
governmental, regulatory and other
third party approvals.
(iii) The Borrower shall have received
Capital Contributions in an amount
at least equal to the Required
Capital Contribution Amount and
shall have utilized the full
Required Capital Contribution Amount
so made available to purchase the LP
Units and pay related fees and
expenses as contemplated above under
"Use of Proceeds."
(iv) The documentation evidencing the
Credit Facility including the
related security documentation (the
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<PAGE> 26
"Credit Documents") shall have been
executed and delivered reflecting
the terms and conditions set forth
in this Summary of Certain Terms and
Conditions and shall otherwise be in
form and substance satisfactory to
PWRES and all conditions to the
making of the Loans set forth
therein shall have been satisfied on
or prior to the date of funding.
All Loans shall be in full
compliance with all requirements of
law including Regulations G, T, U
and X of the Board of Governors of
the Federal Reserve System.
(v) No litigation by any entity (private
or governmental) shall be pending or
threatened (x) with respect to the
Acquisition, the Credit Facility or
the Tender Offers or any
documentation executed in connection
therewith or (y) which PWRES shall
determine could have a materially
adverse effect on the business,
assets, liabilities, condition
(financial or otherwise) or
prospects of (m) the Borrower,
Cayuga, Cayuga Corp., Icahn Corp.,
QALA, the TOP-GP or NPI Realty, (n)
the Tender Offer Partnerships or (o)
the Operating Partnerships (other
than the Tender Offer Partnerships)
taken as a whole.
(vi) All necessary governmental,
regulatory and third party approvals
in connection with the Tender
Offers, the transactions
contemplated by the Credit Facility
and otherwise referred to herein
shall have been obtained and remain
in effect, and all applicable
waiting periods shall have expired
without any action being taken by
any competent authority which
restrains, prevents, or imposes
materially adverse conditions upon,
the consummation of the Tender
Offers. Additionally, there shall
not exist any judgment, order,
injunction or other restraint
prohibiting or imposing materially
adverse conditions upon, or
materially delaying, or making
economically unfeasible, the
purchase of LP Units pursuant to the
Tender Offers.
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<PAGE> 27
(vii) All costs, fees, expenses
(including, without limitation,
legal fees and expenses) and other
compensation contemplated hereby
payable to PWRES shall have been
paid to the extent due.
(viii) PWRES shall have received legal
opinions from counsel, in form and
substance reasonably acceptable to
PWRES.
(ix) The security agreements required as
described under the heading
"Collateral" above shall have been
executed and delivered and shall be
satisfactory in form and substance
to PWRES and PWRES shall have a
first priority perfected interest in
all Collateral as required above.
In addition, (x) all payors of
amounts required to be deposited in
the Security Account shall have been
instructed to make such payments
directly to the Security Account and
each such payor shall have
acknowledged such instructions and
consented thereto and (y) the
Borrower shall have obtained all
consents from all persons and
entities which PWRES determines are
necessary to ensure the validity,
priority, perfection and
enforceability of all security
interests intended to be granted to
PWRES pursuant to the section of
this Term Sheet entitled
"Collateral", including without
limitation, any consents requested
by PWRES from NPI Realty, GHI
Associates, Fox Realty Investors
and/or one or more of the
constituent partners of Fox Realty
Investors.
(x) PWRES shall be satisfied that the
aggregate net operating income
(after reserves) of the properties
owned, directly or indirectly, by
the Tender Offer Partnerships is at
least equal to $19,000,000 for the
most recent 12-month period.
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<PAGE> 28
Conditions to All
Loans (including
Loans incurred on
the Closing Date): Absence of material adverse change, absence of
material litigation, absence of default or unmatured
default under the Credit Facility, continued accuracy
of representations and warranties, continued
satisfaction of the conditions precedent set forth
under "Conditions Precedent to Initial Loans" with
respect to the Tender Offer(s) for the LP Units then
being acquired and receipt of such documentation
(including, without limitation, opinions of counsel)
as shall be required by PWRES.
Representations
and Warranties: The Credit Documents shall contain customary
representations and warranties for transactions in
the nature of the Transaction, including, without
limitation, the following:
(i) due organization, valid existence,
good standing and authority and
qualification to do business of the
Borrower, Cayuga, the TOP-GP, NPI
Realty, Cayuga Corp., Icahn Corp.,
QALA and each Operating Partnership;
(ii) due authorization, execution and
delivery of the Credit Documents by
the Borrower and the other parties
thereto;
(iii) no conflicts with laws, regulations
or orders of governmental
authorities applicable to the
Borrower, any other Credit Party or
any Operating Partnership or their
respective assets, and no conflicts
with agreements to which the
Borrower, any other Credit Party or
any Operating Partnership is a party
or which purport to bind them or
their respective assets, and no
conflicts with the organizational
documents of the Borrower, any other
Credit Party or any Operating
Partnership (except that certain
change of control provisions in the
indebtedness of the Tender Offer
Partnerships may be breached by the
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<PAGE> 29
consummation of the Tender Offer and
the financing under the Credit
Facility);
(iv) no governmental approvals, filings
or registrations are required other
than those previously obtained or
made;
(v) no litigation which could have a
material adverse effect on the
Loans, the security therefor or the
ability of the Borrower or any other
person or entity to perform its
obligations under the Credit
Documents or which could have a
material adverse effect on the
business, assets, liabilities,
condition (financial or otherwise)
or prospects of (m) the Borrower,
(n) Cayuga, (o) Cayuga Corp., (p)
Icahn Corp., (q) the TOP-GP, (r) NPI
Realty, (s) QALA, (t) the Tender
Offer Partnerships or (u) the other
Operating Partnerships taken as a
whole;
(vi) the Borrower or the appropriate
Credit Party having good,
unencumbered title to each item of
Collateral being pledged by it as
security for the Loans and PWRES's
security interest therein being a
first priority perfected security
interest;
(vii) full and accurate disclosure by the
Borrower and all other Credit
Parties;
(viii) the Borrower, Cayuga, Cayuga Corp.,
Icahn Corp., QALA, the TOP-GP, NPI
Realty and all Operating
Partnerships having made all
required tax filings and having paid
all taxes and other impositions
applicable to them and/or their
respective assets;
(ix) (y) the Borrower, Cayuga, the
TOP-GP, Cayuga Corp., Icahn Corp.,
QALA, NPI Realty and each Tender
Offer Partnership being in
substantial compliance with the
terms of any indebtedness owed by it
(whether secured or unsecured), no
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<PAGE> 30
payment defaults existing under any
such indebtedness and no notice of
default having been received
thereunder, except that (a) certain
change of control provisions in the
indebtedness of the Tender Offer
Partnerships may have been breached
by reason of the acquisition of
control of such partnerships by
affiliates of the QALB Investors and
(b) certain change of control
provisions in the indebtedness of
the Tender Offer Partnerships may be
breached by the consummation of the
Tender Offer and the consummation of
the financing under the Credit
Facility, and (z) each Operating
Partnership (other than a Tender
Offer Partnership) being in
substantial compliance with the
terms of any indebtedness owed by it
(whether secured or unsecured)
except for noncompliances which in
the aggregate could not reasonably
be expected to have a material
adverse effect on the Operating
Partnerships taken as a whole;
(x) the properties owned by each
Operating Partnership being in
material compliance with applicable
laws and governmental requirements,
and all taxes and other impositions
(including insurance premiums)
relating to such properties having
been duly paid, escrowed against or
contested in good faith;
(xi) all financial information provided
in respect of the Borrower, Cayuga,
Cayuga Corp., Icahn Corp., QALA, the
TOP-GP, NPI Realty and the Operating
Partnerships and their respective
assets being true, complete and
correct in all material respects;
(xii) no pending or threatened
condemnation existing in respect of
any property owned by an Operating
Partnership and no casualty existing
at any such property;
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<PAGE> 31
(xiii) neither the Borrower, Cayuga, Cayuga
Corp., Icahn Corp., NPI Realty, QALA
nor the TOP-GP having any
indebtedness other than the Credit
Facility, and no Operating
Partnership having any indebtedness
other than as listed on Exhibit B
hereto or advances made by partners
in the Borrower to the Borrower
which are being repaid with the
proceeds of the Loans incurred on
the Closing Date;
(xiv) each Operating Partnership having
good and marketable title to its
property except as disclosed in the
title reports relating thereto
previously provided to PWRES;
(xv) no state of facts existing with
respect to zoning, ingress and
egress, permitting, separate tax lot
status and access to utilities which
would materially impair the value or
use of the properties owned by (x)
the Tender Offer Partnerships or (y)
the Operating Partnerships taken as
a whole;
(xvi) the special purpose nature of the
Borrower, Cayuga, Icahn Corp. and
Cayuga Corp. being in full force and
effect;
(xvii) Exhibit A hereto being a true and
complete list of Tender Offer
Partnerships and a list of all real
property owned, directly or
indirectly, by each such partnership
and in the case of any such real
property which is not owned directly
by a Tender Offer Partnership, the
entity which directly holds such
real property and the means by which
such Tender Offer Partnership owns
an interest in such entity and its
ownership interest therein;
(xviii) the TOP-GP having the right to
control, without the consent of any
other person (except to the extent
otherwise provided in the
partnership agreements of the Tender
Offer Partnerships, which provisions
shall be satisfactory to PWRES),
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<PAGE> 32
the Tender Offer Partnership and the
liquidation and dissolution of the
Tender Offer Partnerships and the
sale, financing and management of
property owned, directly or
indirectly, by the Tender Offer
Partnerships;
(xix) true and complete copies having been
provided to PWRES of (x) all
organizational documents of the
Borrower, Cayuga, the TOP-GP, NPI
Realty, Cayuga Corp., Icahn Corp.,
QALA and the Operating Partnerships,
and, to the extent requested by
PWRES, the organizational documents
of any other entity which is a
partner or shareholder in any of the
foregoing entities, (y) all
agreements relating to the
indebtedness of the Borrower,
Cayuga, the TOP-GP, NPI Realty,
Cayuga Corp., Icahn Corp., QALA and
the Operating Partnerships and (z)
all agreements relating to the
management and operation of the
assets of the Operating
Partnerships, all of which
agreements are listed on Exhibit C,
and no amendments having been made
to any of the foregoing;
(xx) the Tender Offers having been
consummated in compliance with
applicable law and all the
information in the Tender Offer
Materials disclosing all material
facts and not omitting any material
facts;
(xxi) the Borrower, Cayuga, the TOP-GP,
QALA and each Tender Offer
Partnership being a partnership for
federal income tax purposes and not
constituting a publicly traded
partnership for purposes of Section
7704 of the Internal Revenue Code of
1986, as amended; and
(xxii) no defaults existing under the
partnership agreements of the
Borrower, Cayuga, the TOP-GP, QALA
or the Operating Partnerships.
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<PAGE> 33
Covenants: The Credit Documents shall contain customary
covenants for transactions in the nature of the
Transaction, including, without limitation, the
following:
(i) maintenance of existence and
compliance with laws by the
Borrower, Cayuga, the TOP-GP, NPI
Realty, Cayuga Corp., Icahn Corp.,
QALA and each Tender Offer
Partnership;
(ii) payment of taxes and other
impositions (including insurance
premiums) applicable to the
Borrower, Cayuga, the TOP-GP, NPI
Realty, Cayuga Corp., Icahn Corp.,
QALA and each Tender Offer
Partnership and/or its respective
assets;
(iii) notice of pending or threatened
litigation, proceedings or
condemnation actions with respect to
the Borrower, Cayuga, the TOP-GP,
NPI Realty, Cayuga Corp., Icahn
Corp., QALA or any Operating
Partnership;
(iv) notice of pending defaults under the
Credit Documents;
(v) notice of defaults under the
indebtedness of the Operating
Partnerships;
(vi) management of the properties of the
Operating Partnerships in a manner
consistent with past practice and
requirement that a monthly
certificate be provided certifying
that, except as is disclosed in said
exhibit, all insurance premiums in
respect of the insurance policies of
the Operating Partnerships have been
paid, all debt payments in respect
of indebtedness of the Operating
Partnerships have been made and all
real estate taxes of the Operating
Partnerships have been paid;
(vii) financial reporting requirements;
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<PAGE> 34
(viii) maintenance of existence and
businesses and operations of the
Borrower, Cayuga, the TOP-GP, NPI
Realty, Cayuga Corp., Icahn Corp.,
QALA and each Tender Offer
Partnership;
(ix) each of the Borrower, Cayuga, Icahn
Corp. and Cayuga Corp. remaining a
single purpose, bankruptcy remote
entity;
(x) prohibition on other indebtedness,
provided that the Borrower may incur
advances from its partners prior to
the Closing Date provided that such
advances are paid in full on the
Closing Date;
(xi) restrictions on mergers,
acquisitions, joint ventures,
partnerships and acquisitions and
dispositions of assets;
(xii) restrictions on sale-leaseback
transactions and lease payments;
(xiii) restrictions on dividends,
distributions, and on amendments of
management agreements, partnership
agreements and organizational,
corporate and other documents;
(xiv) restrictions on voluntary
prepayments of other indebtedness
and amendments thereto;
(xv) restrictions on (x) transactions
with affiliates other than (m)
transactions disclosed in writing to
PWRES prior to the date of the
Commitment and (n) transactions
consummated on an arm's length basis
and (y) formation of subsidiaries;
(xvi) restrictions on investments;
(xvii) no liens other than the liens
securing the Credit Facility and
other exceptions to be negotiated;
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<PAGE> 35
(xviii) adequate insurance coverage;
(xix) ERISA covenants;
(xx) restrictions on capital expenditures;
(xxi) payment of costs (including
enforcement costs);
(xxii) application of Loan proceeds;
(xxiii) no transfers of Collateral or of
properties owned by the Borrower,
Cayuga, Cayuga Corp. Icahn Corp.,
NPI Realty, or the TOP-GP.
The covenants set forth above will be
terminated on the Loan Satisfaction Date,
provided that on and after the Loan
Satisfaction Date the Borrower, Cayuga, Icahn
Corp., and Cayuga Corp. will agree (x) to be
bound by the same fiduciary duty to PWRES in
respect of the Residual Fee as the general
partners in the Operating Partnerships owe to
the holders of the LP Units and (y) not to
sell or transfer the LP Units to an affiliate
or to any third party for consideration other
than cash.
Events of Default: The Credit Documents shall contain customary events
of default for transactions in the nature of the
Transaction, including, without limitation, the
following:
(i) failure to pay principal when due,
interest within five days of due
date or any other amount due under
the Credit Documents within 30 days
of notice by PWRES;
(ii) failure to make required deposits
into the Security Account or the
Interest Reserve Account;
(iii) failure to pay taxes or other
impositions (including insurance
premiums);
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<PAGE> 36
(iv) any representation or warranty in
the Credit Documents having been
untrue in any material respect as of
the date made or deemed made;
(v) bankruptcy or insolvency of the
Borrower, Cayuga, Icahn Corp.,
Cayuga Corp., the TOP-GP, NPI Realty
or QALA;
(vi) bankruptcy or insolvency of any
Operating Partnership (including any
Tender Offer Partnership);
(vii) direct or indirect change in control
of the Borrower, Cayuga, Icahn
Corp., Cayuga Corp., the TOP-GP or
QALA, with exceptions (including
exceptions relating to the buy-sell
provisions in the partnership
agreements of the Borrower and
Cayuga) and consent requirements to
be negotiated;
(viii) dissolution or other termination of
the Borrower, Cayuga, Icahn Corp.,
Cayuga Corp., the TOP-GP, NPI
Realty, or QALA;
(ix) breach of other covenants in the
Credit Documents, with cure periods
after notice (if applicable) to be
negotiated;
(x) failure of any security for the
Loans;
(xi) cross-defaults to other indebtedness
of the Borrower, Cayuga, Icahn
Corp., NPI Realty, Cayuga Corp.,
QALA and the TOP-GP;
(xii) cross-defaults to indebtedness of
any Operating Partnership (including
any Tender Offer Partnership);
(xiii) material unsatisfied judgments with
respect to the Borrower, Cayuga,
Icahn Corp., Cayuga Corp.,
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<PAGE> 37
the TOP-GP, NPI Realty, QALA, the
Credit Facility or the Tender Offers;
and
(xiv) ERISA defaults.
Assignments and
Participations: The Borrower may not assign its rights or obligations
under the Credit Facility without the prior written
consent of PWRES. PWRES may assign, and may sell
participations in, its rights and obligations under
the Credit Facility. The Credit Facility shall
provide for a mechanism which will allow for each
assignee to become, after the termination of the
Availability Period, a direct signatory to the Credit
Facility and will, after the termination of the
Availability Period, relieve the assigning lender of
its obligations with respect to the assigned portion
of its commitment.
Governing Law: The Credit Documents and the rights and
obligations of the parties thereunder shall
be construed in accordance with and governed
by the law of the State of New York.
Tender
Offer
Materials: The Commitment and this Term Sheet are expressly
subject to approval by PWRES of the Tender Offer
Materials.
Securitization: PWRES intends to underwrite the Loans and the
Collateral to rating agency standards, in order to
facilitate a refinancing and securitization of the
Loans and the Collateral in the event the Borrower
has not satisfied its obligations in full by the
Maturity Date. The Borrower and the other Credit
Parties shall covenant and agree to cooperate in good
faith with PWRES in connection with such underwriting
and the performance of all due diligence deemed
necessary or desirable by PWRES in connection
therewith, and shall take all actions deemed
necessary or desirable by PWRES to effect any such
securitization of the Loans and the Collateral,
provided that the Borrower and the other Credit
Parties will not be obligated to agree to have their
obligations materially increased or their rights
materially decreased. Notwithstanding such
underwriting by PWRES, unless PWRES agrees otherwise
prior to the Maturity Date, the
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<PAGE> 38
Borrower will be required to repay the Loans in full
and satisfy all of its other obligations under the
Credit Documents not later than the Maturity Date.
-30-
<PAGE> 39
Subsequent
Transaction: The term "Subsequent Transaction" shall mean a
transaction in the nature of any of the following
which is consummated not later than the earlier to
occur of (x) the date which is 12 months following
the Loan Satisfaction Date and (y) the date which is
12 months following the date of termination or
expiration of the Commitment: (i) the issuance of any
debt or equity security, publicly or privately, or
any other borrowing, assumption of debt, contribution
to capital (other than contributions to capital made
by the partners in the Borrower to the Borrower in
the ordinary course of business and other than
Capital Contributions made pursuant to the section of
this Term Sheet entitled "Equity Contribution") or
other transaction by which the Borrower raises funds
for any purpose, or (ii) any borrowing by an entity
in which any of the QALB Investors or any of their
affiliates have a direct or indirect interest (a
"QALB Tenderor"), the proceeds of which, in whole or
in part, are intended to be applied to the
acquisition of equity interests in either or both of
the Tender Offer Partnerships. The term "Subsequent
Transaction" shall not include a sale or financing of
all or any portion of the assets owned by the
Operating Partnerships.
In the event the Borrower or a QALB Tenderor
desires to enter into a Subsequent
Transaction, it shall afford PWRES the same
opportunity as that offered to any other
person or entity to negotiate the arrangement
of, or otherwise to provide, as lead manager,
sole placement agent and/or lender/loan
purchaser, as the case may be, such
Subsequent Transaction. If the Borrower or a
QALB Tenderor shall select another person or
entity to arrange such Subsequent Transaction
on economic terms substantially equal to or
less favorable than those offered by PWRES,
subject to and upon consummation of such
Subsequent Transaction, PWRES shall be paid a
fee in an amount equal to 1.0% of the
aggregate gross value of all consideration
(whether cash or otherwise) received by the
Borrower, any QALB Tenderor or any of their
affiliates in connection with such
Alternative Transaction. Such fee shall be
paid by the entity receiving such
consideration.
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<PAGE> 40
The rights and obligations of PWRES and the
Borrower set forth in this section entitled
"Subsequent Transaction" shall be effective
as of the date of execution and delivery of
the Commitment and shall survive until the
earlier to occur of (x) the date which is 12
months following the Loan Satisfaction Date
and (y) the date which is 12 months following
the date of termination or expiration of the
Commitment.
If a Subsequent Transaction is consummated
with a person or entity other than PWRES, the
Borrower and the QALB Investors,
respectively, shall be liable to PWRES for
any fee owed to PWRES pursuant to this
section for Subsequent Transactions
consummated by the Borrower or the QALB
Investors (or their respective affiliates),
respectively.
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<PAGE> 41
Exhibit A
To Annex A
Partnership Name Property
<PAGE> 1
DEVON ASSOCIATES
-----------------------
PARTNERSHIP AGREEMENT
-----------------------
This Partnership Agreement (this "Agreement") of Devon
Associates (the "Company"), a general partnership organized pursuant to the
laws of the State of New York, is entered into and shall be effective as of
February 13, 1996 (the "Effective Date") by and between Cayuga Associates L.P.,
a Delaware limited partnership ("Cayuga"), and Fleetwood Corp., a Delaware
corporation ("Fleetwood"). As used in this Agreement, the term "Members" shall
mean the partners of the Company from time to time. Initially, Cayuga and
Fleetwood shall be the only Members; however, any Person may cease to be a
Member and any Person may become a Member, in either case as provided in this
Agreement.
ARTICLE I.
DEFINITIONS AND REPRESENTATIONS AND WARRANTIES
Section 1.01 Definitions. As used in this Agreement, the
terms set forth below shall have the following meanings:
"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.
"Associate" has the meaning specified in Rule 12b-2 under the
Exchange Act.
A Person shall be deemed to "Beneficially Own" (and to be the
"Beneficial Owner" and have "Beneficial Ownership" of) any security if (i) such
Person "beneficially owns" such security within the meaning of Rule 13d-3 under
the Exchange Act or (ii) such Person has any direct or indirect economic
interest in such security.
"Business Day" has the meaning specified in Rule 14d-1 under
the Exchange Act.
"Buy/Sell Closing" has the meaning specified in Section
7.05(b)(iv).
"Buy/Sell Notice" means a Cayuga Buy/Sell Notice or a
Fleetwood Buy/Sell Notice, as the case may be.
"Buy/Sell Notice Date" means the date on which a Fleetwood
Buy/Sell Notice or a Cayuga Buy/Sell Notice, as the case may be, is received by
the Noticed Member.
"Buy/Sell Price" has the meaning specified in the terms Cayuga
Buy/Sell Notice and Fleetwood Buy/Sell Notice.
<PAGE> 2
"Buy/Sell Purchase Price" means, with respect to any sale of
Interests, Member Units and Member Loans by a Member Group pursuant to a
Buy/Sell Notice, the sum of (i) product of (a) the amount of Interests being
sold by such Member Group times (b) the Buy/Sell Price, plus (ii) the product
of (x) the number of Member Units being sold by such Member Group times (y) the
Imputed Unit Price, plus (iii) the principal amount of Member Loans being sold
by such Member Group together with accrued interest on such Member Loans
through the Buy/Sell Closing.
"Buy/Sell Right" means the right of a Member Group to give a
Buy/Sell Notice.
"Buy/Sell Trigger" means any of the events described in
Section 7.05(b)(i), each of which gives the specified Member Groups a Buy/Sell
Right upon the occurrence (and during the continuation) of such Buy/Sell
Trigger.
"Cayuga Buy/Sell Notice" means a notice that the Cayuga Group
has elected to exercise its Buy/Sell Right pursuant to and as provided in
Section 7.05, which notice shall contain and constitute an irrevocable offer by
Cayuga, on behalf of the Cayuga Group, to either (i) purchase all Interests,
all Member Units and all Member Loans Beneficially Owned by the Icahn Group, or
(ii) sell to Fleetwood all Interests, all Member Units and all Member Loans
Beneficially Owned by the Cayuga Group, in either case for the same cash price
for each percentage point of Interests (the "Buy/Sell Price") specified by
Cayuga in such notice, for the Imputed Unit Price per Member Unit and for the
principal amount of such Member Loans together with accrued interest thereon
through the Buy/Sell Closing.
"Cayuga Group" means, collectively, (i) Cayuga and its
respective Affiliates, (ii) each Person who shall be a general or limited
partner in Cayuga and each of their respective Affiliates and (iii) each Person
who is a direct or indirect transferee of any Cayuga Interests.
"Cayuga Member" means each Person who is both a member of the
Cayuga Group and a Member.
"Cayuga Interests" means the Interests originally issued to
Cayuga and any other Interests subsequently acquired by Cayuga or any of its
Affiliates.
"Cayuga Transfer Notice" means a written notice given by
Cayuga to Fleetwood indicating that a member of the Cayuga Group intends to
make a transfer pursuant to Section 7.05(a)(ii), which notice shall specify in
detail the terms and conditions (including the proposed transferee) of the
proposed transfer.
"Closing Date" means each date on which an Offer expires
pursuant to its terms and the Company accepts for payment, and thereby
purchases, Units validly tendered and not withdrawn pursuant to the Offer.
"Commenced" means the commencement of a Tender Offer, as
determined under Rule 14d-2 of the Exchange Act or, if such Tender Offer is not
subject to Section 14(d) of the Exchange Act, as determined in good faith by
the Manager.
2
<PAGE> 3
"Commission" means the United States Securities and Exchange
Commission.
"Company Units" means all Units acquired by the Company
pursuant to a Tender Offer by the Company or in a Negotiated Purchase.
"Competing Offer" means a Tender Offer for Units which (i) is
Commenced prior to the expiration of the Offer by a Person that is not an
Affiliate of any Member and (ii) has a cash purchase price per Unit that is at
least 5% greater than the purchase price per Unit of the Offer on the date such
Competing Offer is Commenced; provided, however, that a Tender Offer for Units
which satisfies the criteria set forth in clauses (i) and (ii) nonetheless will
not constitute a Competing Offer if, on the date such Tender Offer is
Commenced, 15% or more of the outstanding Units have been validly tendered and
not withdrawn pursuant to the Offer; provided, however, that if the purchase
price of the Competing Offer is increased prior to the termination of the
Offer,then such price increase shall be deemed to constitute the Commencement
of a new Competing Offer for purposes of Section 4.02.
"Effect a Redemption" has the meaning specified in Section
10.14.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Extraordinary Transaction" means any of (i) a liquidation of
a Partnership, (ii) a sale of all or substantially all of a Partnership's
assets, (iii) a merger, consolidation, business combination, "roll-up" or other
similar transaction involving a Partnership, including without limitation any
such transaction to be achieved in whole or in part by means of an exchange
offer, or (iv) any other transaction, including but not limited to a
termination of all or substantially all of the license agreements with Hampton
Inns, which will result in a material structural change in a Partnership or its
assets outside the ordinary course of business.
"Fleetwood Buy/Sell Notice" means a notice that the Icahn
Group has elected to exercise its Buy/Sell Right pursuant to and as provided in
Section 7.05, which notice shall contain and constitute an irrevocable offer by
Fleetwood, on behalf of the Icahn Group, to either (i) purchase all Interests,
all Member Units and all Member Loans Beneficially Owned by the Cayuga Group,
or (ii) sell to Cayuga all Interests, all Member Units and all Member Loans
Beneficially Owned by the Icahn Group, in either case for the same cash price
for each percentage point of Interests (the "Buy/Sell Price") specified by
Fleetwood in such notice, for the Imputed Unit Price per Member Unit and for
the principal amount of such Member Loans together with accrued interest
thereon through the Buy/Sell Closing. In order to be effective such notice must
be accompanied by evidence, reasonably satisfactory to the Cayuga Group, that
(i) Fleetwood has, and will continue to maintain, the Required Net Worth or
(ii) Fleetwood's obligations under Section 7.05(b) are guaranteed by an entity
which has, and will continue to maintain, the Required Net Worth.
"Fleetwood Member" means each Person who is both a member of
the Icahn Group and a Member.
3
<PAGE> 4
"Fleetwood Interests" means the Interests originally issued to
Fleetwood and any other Interests subsequently acquired by Fleetwood or any of
its Affiliates.
"Fleetwood Transfer Notice" means a written notice given by
Fleetwood to Cayuga indicating that a member of the Fleetwood Group intends to
make a transfer pursuant to Section 7.05(a)(ii), which notice shall specify in
detail the terms and conditions (including the proposed transferee) of the
proposed transfer.
"Follow-up Offer" means a Tender Offer for Units made by the
Company in response to a Competing Offer in accordance with the provisions of
Section 4.03(a)(i); provided that the terms and conditions (other than the
purchase price, which shall be determined by the Manager in its sole
discretion) of the Follow-up Offer shall be reasonable and customary under the
circumstances.
"Follow-up Offer Notice" means a written notice from the
Company to the Members notifying them that the Company intends to make a
Follow-up Offer, which notice shall set forth the material terms and conditions
of the Follow- up Offer.
"Future Hostile Offer" means a Tender Offer for Units which
(i) is Commenced after the expiration of the Offer by a Person that is not an
Affiliate of any Member and (ii) has a purchase price per Unit that is at least
35% of Net Asset Value; provided, however, that if the purchase price of the
Future Hostile Offer is increased prior to the Commencement of a Responsive
Offer or a Qualifying Offer, then such price increase shall be deemed to
constitute the Commencement of a new Future Hostile Offer for purposes of
Section 4.03.
"General Partner" means Montgomery Realty Company-85, a
California general partnership, which is the general partner of Growth Hotel
Investors and the managing general partner of Growth Hotel Investors II as of
the Effective Date.
"GP Exercise Notice" means a written notice to Cayuga and NPI
from Fleetwood that Fleetwood has elected to exercise the GP Transfer Option.
In order to be effective such notice must be accompanied by evidence,
reasonably satisfactory to the Cayuga Group, that (i) Fleetwood has, and will
continue to maintain, the Required Net Worth or (ii) Fleetwood's obligations
under Section 7.05(b) are guaranteed by an entity with the Required Net Worth.
"GP Interest" means, collectively, the general partner
interest in each Partnership held by the General Partner and any GP Units.
"GP Purchase Price" means an amount in cash equal to: the sum
of (i) the Imputed Unit Price multiplied by the number of GP Units owned by the
General Partner on the date of the GP Transfer Closing plus (ii) 175% of the
gross property management fees paid by the Partnership to all parties (other
than Hampton Inns, Inc. or one of its Affiliates) during the Partnerships' most
recently ended fiscal year preceding the Buy/Sell Closing with respect to
properties owned by the Partnerships and not sold or under contract for sale as
of the date of
4
<PAGE> 5
the GP Transfer Closing. The GP Purchase Price shall be computed and certified
by the Partnership's independent public accountants.
"GP Stock" means 100% of the issued and outstanding capital
stock of NPI Realty Management Corp., a Florida corporation and the co-general
partner with Fox Realty Investors, a California general partnership, in the
General Partner.
"GP Transfer Closing" has the meaning specified in Section
7.05(b)(v).
"GP Transfer Option" means the option, exercisable by
Fleetwood from and after the date (if ever) on which (i) Cayuga notifies (or is
deemed to have notified) Fleetwood pursuant to Section 7.05(b)(iii)(1) or (2)
that the Cayuga Group has elected to sell its Interests and Member Units
pursuant to a Fleetwood Buy/Sell Notice or (ii) any member of the Cayuga Group
has sold Interests or Member Units at a Buy/Sell Closing, to purchase the GP
Stock for the GP Purchase Price and in accordance with the provisions of
Section 7.05(b)(v).
"GP Units" means all Units owned of record by the General
Partner on the date hereof.
"Group" means a "partnership, limited partnership, syndicate
or other group" within the meaning of Section 13(d)(3) of the Exchange Act.
"Icahn" means Carl C. Icahn, an individual.
"Icahn Group" means, collectively, (i) Icahn, Fleetwood and
their respective Affiliates and (ii) each Person who is a direct or indirect
transferee of any Fleetwood Interests.
"Insignia" means Insignia Financial Group, Inc., a Delaware
corporation.
"Imputed Unit Price" means, in connection with any buy/sell
transaction, an amount in cash equal to the quotient of (A) the sum of (i) the
product of (a) the Buy/Sell Price times (b) one hundred percent of the
Interests plus (ii) all liabilities of the Company as of the Buy/Sell Notice
Date, minus (iii) all assets of the Company (other than the Company Units) as
of the Buy/Sell Notice Date, divided by (B) the total number of Company Units
as of the Buy/Sell Notice Date.
"Institutional Debt" means the indebtedness of the Company for
borrowed money due to PWRES and its successors and assigns.
"Interests" means the percentage of beneficial interests in
the profits and losses of the Company owned by the Members.
"Limited Partner" means a limited partner of a Partnership.
"Manager" has the meaning specified in Article VI.
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"Member Group" means the Cayuga Group or the Icahn Group, as
the case may be.
"Member Loans" has the meaning specified in Section 9.03(a).
"Member Units" means, with respect to any Member, all Units
Beneficially Owned by such Member, any Member of such Member's Member Group or
any Affiliate of any of the foregoing persons, other than (i) Company Units and
(ii) GP Units.
"NPI" means National Property Investors, Inc., a Delaware
corporation.
"Negotiated Purchase" means a purchase of Units by the Company
in a negotiated transaction.
"Net Asset Value" means, at any given time, the liquidation
value per Unit as determined by the Manager and set forth in the Offer
Documents for purposes of making an Offer.
"Noticed Group" means the Member Group of which the Noticed
Member is a member.
"Noticed Member" means, as applicable, (i) Cayuga, if it has
received a Fleetwood Buy/Sell Notice, or (ii) Fleetwood, if it has received a
Cayuga Buy/Sell Notice.
"Offer" means Tender Offers for Units to be made by the
Company pursuant to Section 4.02, as such Tender Offers may be amended and
supplemented from time to time.
"Offer Documents" means all documents relating to a Tender
Offer which are required to be filed with the Commission, including but not
limited to the Offer to Purchase and any supplements and amendments thereto,
and any press releases related thereto.
"Offering Group" means the Member Group of which the Offering
Member is a member.
"Offering Member" means, as applicable, (i) Cayuga, if it has
exercised its Buy/Sell Right and delivered a Cayuga Buy/Sell Notice to
Fleetwood pursuant thereto, or (ii) Fleetwood, if it has exercised its Buy/Sell
Right and delivered a Fleetwood Buy/Sell Notice to Cayuga pursuant thereto.
"Partnership" means either Growth Hotel Investors, a
California limited partnership, or Growth Hotel Investors II, a California
limited partnership, as the context may require.
"Partnership Agreement" means the Agreement of Limited
Partnership of a Partnership, as in effect on the Effective Date and as the
same may be amended from time to time after the Effective Date.
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"Person" means any natural person or any corporation,
partnership, venture, association or other entity.
"PWRES" means PaineWebber Real Estate Securities Inc.
"Qualified Purchase" means a purchase of Units by a Member or
Members in a negotiated transaction permitted to be made pursuant to Section
4.03(b)(iii), 4.03(b)(iv) or 4.03(b)(v), provided that the following conditions
are satisfied:
(i) the Qualified Purchase may only be made on
terms and conditions that are the same in all material
respects as the terms and conditions of the proposed
Negotiated Purchase set forth in the Unrestricted Purchase
Notice or the Restricted Purchase Notice, as the case may be,
that resulted in the right to make a Qualified Purchase
(except that the purchase price per Unit may be greater than
that stated in the Unrestricted Purchase Notice); and
(ii) prior to making the Qualified Purchase, the
Member or Members making the Qualified Purchase agree in
writing with the Company for the benefit of the other Members
(a) to register any Units purchased pursuant to such Qualified
Purchase on the books of the Partnership in the record name of
the Company, as nominee for such Member or Members, and (b)
that any Units so purchased by such Member or Members pursuant
to such Qualified Purchase and registered in the record name
of the Company shall be voted as provided in Section 4.07 and
shall be subject to the buy/sell provisions of Section
7.05(b).
"Qualifying Offer" means a Tender Offer for Units by a Member
or Members permitted to be made pursuant to Section 4.03(a), provided that the
following conditions are satisfied:
(i) the Member or Members making the Qualifying
Offer agree in writing with the Company for the benefit of the
other Members prior to the Commencement of the Qualifying
Offer (a) to register any Units purchased pursuant to such
Qualifying Offer on the books of the Partnership in the record
name of the Company, as nominee for such Member or Members,
and (b) that any Units so purchased by such Member or Members
pursuant to such Qualifying Offer and registered in the record
name of the Company shall be voted as provided in Section 4.07
and shall be subject to the buy/sell provisions of Section
7.05(b); and
(ii) the Member or Members making the Qualifying
Offer adequately disclose, in a manner reasonably acceptable
to counsel to the other Members, the agreements described in
clause (i) above and the effects thereof in the tender offer
documents relating to such Qualifying Offer sent to the
Limited Partners and filed with the Commission (if required to
be filed). Counsel to the other Members must provide its or
their comments to such disclosure within 24 hours after the
receipt thereof.
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"Redemption Amount" means (A) the aggregate amount of
contributions to the Company's capital made pursuant to this Agreement in
respect of Interests being redeemed, less any amounts paid by the Company to
Members by way of distributions in respect of such Interests, plus (B) the
product of (i) the number of Member Units being purchased, times (ii) 80.0% of
Net Asset Value. Anything in this Agreement to the contrary notwithstanding,
upon the election to Effect a Redemption with respect to any Member (the
"Redeemed Member"), the remaining Members shall provide for the release to the
Redeemed Member (or members of such Member's Member Group) of the collateral
(other than Member Units) with respect to which the Redeemed Member has granted
a security interest to PWRES pursuant to Section 9.03(c).
"Required Net Worth" means total assets (excluding goodwill)
less total liabilities of not less than $10 million.
"Responsive Offer" means a Tender Offer for Units made by the
Company in response to a Future Hostile Offer in accordance with the provisions
of Section 4.03(a)(ii), provided that the terms and conditions (other than the
purchase price, which shall be in the sole discretion of the Manager) of the
Responsive Offer shall be reasonable and customary under the circumstances.
"Responsive Offer Notice" means a written notice from the
Company to the Members notifying them that the Company intends to make a
Responsive Offer, which notice shall set forth the material terms and
conditions of the Responsive Offer.
"Restricted Purchase Notice" means a written notice from
Cayuga to Fleetwood or from Fleetwood to Cayuga, as the case may be, proposing
that the Company make a Negotiated Purchase that does not satisfy the criteria
set forth in clauses (1) and (2) of Section 4.03(b)(i), which notice must set
forth all of the material terms and conditions of the proposed Negotiated
Purchase, including without limitation the proposed number of Units to be
purchased and the proposed purchase price per Unit.
"Tender Offer" means a tender offer that is subject to Section
14(e) of the Exchange Act.
"Terms" means the following terms and conditions of a Tender
Offer: (i) the purchase price, (ii) the minimum and maximum number of Units to
be tendered for, (iii) the expiration date, and (iv) the conditions to the
Offer.
"Third Party" means, as to any Person, another Person that is
not an Affiliate or an Associate of the first Person.
"Third Party Proposal" means a proposal by a Person which is a
Third Party as to each Member Group to cause the Partnership to engage in an
Extraordinary Transaction.
"Third Party Proposal Trigger" means the distribution by a
Third Party to Limited Partners of proxy and/or consent solicitation materials
relating to a Third Party Proposal, if and only if within five Business Days of
the date such proxy and/or consent solicitation materials are
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first received by any member of the Cayuga Group, Cayuga does not notify
Fleetwood that Cayuga objects to the Third Party Proposal.
"Units" means units of limited partnership interest in a
Partnership.
"Unrestricted Purchase Notice" means a written notice from
Fleetwood to the Company proposing that the Company make a Negotiated Purchase
that satisfies the criteria set forth in clauses (1) and (2) of Section
4.03(b)(i), which notice must set forth all of the material terms and
conditions of the proposed Negotiated Purchase, including without limitation
the proposed number of Units to be purchased and the proposed purchase price
per Unit.
Section 1.02 Representations and Warranties of Cayuga.
Cayuga hereby represents and warrants to the Company and Fleetwood as follows:
(a) The Cayuga Group Beneficially owns no Units as of the
Effective Date. Partners in the Cayuga Group Beneficially Own Member Units
consisting of 1,076 Units of Growth Hotel Investors and Member Units consisting
of 2,941 Units of Growth Hotel Investors II as of the Effective Date. The
General Partner does not own any Units of record.
(b) [Intentionally omitted].
(c) None of the Partnership's contracts or other
transactions with any member of the Cayuga Group is, and any such contract or
other transaction entered into during the term of this Agreement will not be,
prohibited by a Partnership Agreement.
(d) For purposes of Section 3(c)(1) of the Investment
Company Act of 1940, as amended, as of the Effective Date, no more than 45
Persons shall be deemed to "own" (within the meaning of Section 3(c)(1))
Interests by reason of the Cayuga Group's ownership of Interests.
(e) Each Partnership's contracts with any member of the
Cayuga Group is, and any such contract entered into during the term of this
Agreement will be, terminable by such Partnership without premium or penalty
upon 60 days' prior notice.
(f) Cayuga has obtained, prior to the Effective Date, an
amendment to the partnership agreement of the General Partner which grants to
NPI Realty Management Corp. all rights as managing general partner of the
General Partner to conduct the affairs of the General Partner and each
Partnership.
Section 1.03 Representations and Warranties of Fleetwood.
Fleetwood hereby represents and warrants to the Company and Cayuga as follows:
(a) The Icahn Group Beneficially owns Member Units
consisting of 15 Units of Growth Hotel Investors and Member Units consisting of
55 Units of Growth Hotel Investors II as of the Effective Date.
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(b) For purposes of Section 3(c)(1) of the Investment
Company Act of 1940, as amended, as of the Effective Date, no more than 45
Persons shall be deemed to "own" (within the meaning of Section 3(c)(1))
Interests by reason of the Icahn Group's ownership of Interests.
ARTICLE II.
OFFICES
Section 2.01 Office. The office of the Company shall be
established and maintained at 100 Jericho Quadrangle, Suite 214, Jericho, New
York 11753.
Section 2.02 Other Offices. The Company may have other
offices, either within or without the State of New York, at such place or
places as the managing member (the "Manager") of the Company may from time to
time appoint or the business of the Company may require.
ARTICLE III.
PURPOSE
Section 3.01 Purpose. The Company was formed for the
purpose of engaging in any lawful act or activity for which general
partnerships may be organized under laws of the State of New York. While this
Agreement is in effect, the sole and exclusive purposes of the Company shall be
to acquire (including without limitation pursuant to an Offer), and thereafter
to hold for investment and ultimately dispose of, or otherwise realize the
value of, Units, and to conduct any other activities necessary or incidental to
such purposes including without limitation exercising any and all voting and
other rights appurtenant to the ownership of such Units.
ARTICLE IV.
STANDSTILL AND OFFER PROVISIONS
Section 4.01 Standstill Provisions.
(a) Subject to Sections 4.01(d) and 4.01(e) below and
except as provided in Section 4.03, no member of the Cayuga Group or the Icahn
Group shall (i) commence a Tender Offer for Units or (ii) purchase, buy,
acquire or otherwise become or seek to become the Beneficial Owner of Units (or
any other interest in the Partnership), in each case other than pursuant to the
Offer; provided, however, that the foregoing shall not prohibit (x) the
acquisition of Beneficial Ownership of Units by any member of the Cayuga Group
or the Icahn Group as a result of any acquisition of Units by the Company or,
(y) the acquisition by any member of the Cayuga Group or the Icahn Group of the
capital stock of or any other interest in any other member of the Cayuga Group
or the Icahn Group or (z) the Purchase by the Company from Cayuga of 1 Unit in
each Partnership at a price of $705 for the Unit in Growth Hotel Investors
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and $750 for the Unit in Growth Hotel Investors II which purchase is being
consummated simultaneously with the execution and delivery of this Agreement.
(b) Except as provided in Section 4.01(c) and in Section
4.07, any Member may, on behalf of the Company, exercise the Company's rights
as a Limited Partner with respect to the Company Units and any Member Units
registered in the name of the Company as nominee for such Member, including
without limitation the Company's rights to access the books and records of the
Partnership; provided, however, that no member of the Icahn Group may call or
initiate a Limited Partner meeting or consent solicitation; and further
provided that (i) from and after the date of a Buy/Sell Closing in which the
Cayuga Group sells its Interests and Member Units to Fleetwood (or its
designee), and so long as an Affiliate of NPI continues to be the General
Partner, the participation by such Affiliate of NPI in any activity with
respect to the Partnership (whether referred to in this Section 4.01(b) or
otherwise) shall be limited to activities of the General Partner required under
a Partnership Agreement or by the fiduciary obligations of such entity, and
(ii) from and after the date of the GP Transfer Closing, such Affiliate of NPI
shall also be prohibited from calling or initiating a Limited Partner meeting
or consent solicitation and from engaging in any other activity with respect to
a Partnership.
(c) No member of the Cayuga Group or the Icahn Group,
singly or as part of a Group, directly or indirectly, through one or more
intermediaries or otherwise, may: (i) make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 of the Exchange Act) with respect to the Partnership; (ii)
initiate, propose or otherwise solicit Limited Partners for the approval of one
or more proposals with respect to a Partnership; or (iii) instigate or
encourage any Limited Partner or other Third Party to do any of the foregoing;
provided, however, that until a Buy/Sell Closing occurs, this Section 4.01(c)
shall not apply to members of the Cayuga Group with respect to the matters set
forth in clauses (i)-(iii) of Section 4.07(b); and further provided that (x)
from and after the date of a Buy/Sell Closing in which the Cayuga Group sells
its Interests and Member Units to Fleetwood (or its designee), and so long as
an Affiliate of NPI continues to be the General Partner, the participation by
such Affiliate of NPI in any activity with respect to a Partnership (whether
referred to in this Section 4.01(c) or otherwise) shall be limited to
activities required under the Partnership Agreement or by the fiduciary
obligations of such entity, and (y) from and after the date of the GP Transfer
Closing, such Affiliate of NPI shall also be prohibited from participating in
any activity referred to in this Section 4.01(c) and from engaging in any other
activity with respect to a Partnership.
(d) If at any time the only remaining Members are all
members of the same Member Group, then the provisions of this Section 4.01 and
Section 4.03(a)(vi) shall no longer apply to the members of such Member Group
or to any Person who thereafter becomes a Member.
(e) Notwithstanding anything in this Agreement to the
contrary, no Person shall be deemed to have violated this Section 4.01(a) in
the event that such Person acquires Beneficial Ownership of Units representing
a de minimis amount of the total outstanding Units pursuant to a transaction in
which such Person acquires an interest in another entity; provided that (i) the
purpose of such transaction is not to acquire Units or otherwise circumvent the
intent
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of this Agreement, and (ii) if such acquisition occurs while such Person or any
of its Affiliates is a member of a Member Group, then promptly after such
acquisition such Person shall register such Units on the books of the
Partnership in the record name of the Company, as nominee for such Person, and
such Units shall constitute Member Units for purposes of this Agreement.
(f) It is understood and agreed that except as provided
in Section 4.02(a), the obligations of the Members (and any Person who becomes
a Member) and the members of their respective Member Groups under the
provisions of this Section 4.01 shall survive (i) termination or modification
of this Agreement, (ii) termination (by sale, assignment, redemption or
otherwise) of any Member's Beneficial Ownership of Interests, (iii) termination
or dissolution of the Company, and (iv) termination of such Person as a Member.
Section 4.02 The Offer.
(a) The Offer shall initially be made upon the Terms
mutually agreed upon by the Members. The Members acknowledge that they have
agreed to the Terms contained in the draft dated February 13, 1996 of the Offer
Documents. If the Members are unable to agree on any additional Terms of the
Offer within 20 days of the Effective Date, then, notwithstanding any other
provision of this Agreement to the contrary, the provisions of Section 4.01
shall be void and of no effect, and the Manager shall liquidate and dissolve
the Company as soon as practicable. All terms and conditions other than the
Terms of the Offer (including any supplements and amendments thereto) shall be
determined by the Manager, provided that such other terms and conditions must
be reasonable and customary under the circumstances. Each Member shall provide
all information reasonably requested by the Company to complete the Offer
Documents and consummate the Offer. Immediately following the Closing Date,
the Company shall take all actions as are necessary for it to be admitted to
the Partnership as a substitute Limited Partner as to all of the Units
purchased pursuant to the Offer.
(b) Except as provided in Section 4.02(c) below, any
amendment to the Terms of the Offer after the Offer has been Commenced must be
approved by all Members; provided, however, that only the Manager need approve
any extension of the expiration date of the Offer which, in the opinion of
legal counsel to the Company in connection with the Offer, (i) is required by
the Exchange Act and the rules and regulations thereunder or by the Commission
or (ii) is otherwise advisable under the circumstances.
(c) If a Competing Offer has been Commenced, then the
Manager may, in its sole discretion, increase the purchase price of the Offer
from time to time; provided, however, that the purchase price of the Offer may
not be increased to an amount that is greater than 110% of the purchase price
of the Competing Offer at the time of any such increase. If the purchase price
of the Offer is to be increased pursuant to this Section 4.02(c), then, within
two Business Days of the receipt by Fleetwood of notice of a Competing Offer,
Fleetwood, on behalf of all Fleetwood Members, shall elect whether or not to
fund the Fleetwood Members' pro rata share of the Offer Call amount to be
specified in a properly issued Capital Call Notice. If Fleetwood shall elect
not to so fund, the Company shall be required to Effect a Redemption with
respect to the Icahn Group.
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(d) If (i) a Competing Offer has been Commenced, (ii)
Fleetwood (on behalf of all Fleetwood Members) proposes in writing to Cayuga
(on behalf of all Cayuga Members) to increase the purchase price of the Offer
to a price that is at least equal to, but not greater than 110% of, the
purchase price of the Competing Offer, and (iii) Cayuga does not agree within
two Business Days after Fleetwood's request to increase the purchase price of
the Offer, then the Company shall continue to make the Offer on unchanged terms
and Fleetwood may elect within two Business Days following the expiration of
the two Business Day period referred to in the foregoing clause (iii) to
require the Company to Effect a Redemption in respect of the Icahn Group, in
which case all members of the Icahn Group will continue to be subject to the
provisions of Section 4.01. If Cayuga agrees to the increase in the purchase
price of the Offer proposed by Fleetwood within such two Business day period,
then the Manager shall take such action as is reasonably necessary to amend the
Offer and effect such price increase.
(e) The Herman Group, Inc. will be retained to act as
depositary (the "Depositary") for each Offer on such terms as the Manager in
its sole discretion shall determine. In addition, the Depositary will be
reimbursed for its reasonable out-of-pocket expenses incurred in connection
with each Offer.
Section 4.03 Future Purchases of Units by the Company and
Members.
(a) Tender Offers.
(i) If a Competing Offer has been Commenced and
if within 48 hours of the Closing Date the Manager determines
that the Company should make a Follow-up Offer, then (1)
within 48 hours of the Closing Date the Company shall provide
Fleetwood with a Follow-up Offer Notice, and (2) within three
Business Days after the Closing Date the Company shall
Commence a Follow-up Offer; provided, however, that if the
Competing Offer is withdrawn prior to the Commencement of the
Follow-up Offer, then the Company shall not Commence a
Follow-up Offer. If the Company makes a Follow-up Offer in
accordance with the preceding sentence, then, by written
notice to the Company given on or prior to the second Business
Day following the date of receipt by Fleetwood of a notice
relating to such Follow-up Offer and specifying the purchase
price to be paid, Fleetwood, on behalf of all Fleetwood
Members, shall elect whether or not to fund the Fleetwood
Members' pro rata share of the Offer Call amount to be
specified in a properly issued Capital Call Notice. If
Fleetwood shall elect not to so fund, the Company shall be
required to Effect a Redemption with respect to the Icahn
Group. Immediately following the date on which the Company
accepts for payment Units validly tendered pursuant to the
Follow-up Offer, the Company shall take all actions as are
necessary for it to be admitted to the Partnership as a
substitute Limited Partner with respect to all such Units
accepted for payment.
(ii) If a Future Hostile Offer is Commenced and if
within five Business Days of the date on which the Future
Hostile Offer is Commenced the Manager determines that the
Company should make a Responsive Offer, then (1) within such
five Business Day period the Company shall issue a press
release (which
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may omit information relating to the number of Units to be
tendered for, the purchase price of the Responsive Offer and
any other information counsel to the Company deems necessary
in order to prevent the issuance of such press release from
constituting the Commencement of a Tender Offer under Rule
14d- 2 of the Exchange Act) announcing the Company's intention
to make a Responsive Offer, (2) within two Business Days
following the issuance of such press release the Company shall
provide Fleetwood with a Responsive Offer Notice, and (3) the
Company shall Commence a Responsive Offer within ten Business
Days of the date on which the Future Hostile Offer is
Commenced; provided, however, that if the Future Hostile
Offer is withdrawn prior to the Commencement of the Responsive
Offer, then the Company shall not Commence a Responsive Offer.
If the Company makes a Responsive Offer, then, by written
notice to the Company given on or prior to the next Business
Day following the date of receipt by Fleetwood of a notice
relating to such Responsive Offer and specifying the purchase
price to be paid, Fleetwood, on behalf of all Fleetwood
Members, shall elect whether or not to fund the Fleetwood
Members' pro rata share of the Offer Call amount to be
specified in a properly issued Capital Call Notice. If
Fleetwood shall elect not to fund then (i) if such Responsive
Offer has a purchase price per Unit equal to or less then 80%
of Net Asset Value, the Company shall be required to Effect a
Redemption with respect to the Icahn Group or (ii) if such
Responsive Offer has a purchase price per Unit greater than
80% of Net Asset Value, the Company shall not proceed with a
Responsive Offer and the Cayuga Group shall be permitted to
Commence a Qualifying Offer prior to the withdrawal or
expiration of the Future Hostile Offer or within fifteen
Business Days of the date on which the Future Hostile Offer is
Commenced (but prior to the withdrawal of such Future Hostile
Offers). Immediately following the date on which the Company
accepts for payment Units validly tendered pursuant to the
Responsive Offer, the Company shall take all actions as are
necessary for it to be admitted to the Partnership as a
substitute Limited Partner with respect to all such Units
accepted for payment.
(iii) If (1) the Company does not provide Fleetwood
with a Follow-up Offer Notice within the 48 hour period
referred to in Section 4.03(a)(i)(1), (2) the Company does not
Commence a Follow-up Offer within three Business Days after
the Closing Date (other than as a result of the fact that the
Competing Offer was withdrawn), (3) the Company does not issue
a press release announcing the Company's intention to make a
Responsive Offer within five Business Days following the date
on which a Future Hostile Offer is Commenced, or (4) the
Company does not Commence a Responsive Offer (other than as a
result of the fact that the Future Hostile Offer was withdrawn
within ten Business Days of the date on which a Future Hostile
Offer is Commenced), then, in any such case, the Company shall
not make a Follow-up Offer or a Responsive Offer, as the case
may be, and the Fleetwood Members shall be permitted to
Commence a Qualifying Offer prior to the withdrawal or
expiration of the Competing Offer or within fifteen Business
Days of the date on which the Future Hostile Offer is
Commenced (but prior to the withdrawal of such Future Hostile
Offer), as the case may be; provided, however, that if clause
(2) or clause (4) gives rise to the
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right to make a Qualifying Offer, then the Cayuga Members also
shall be permitted to make a Qualifying Offer if the reason
that the Company did not Commence a Follow-up Offer within two
Business Days after the Closing Date or a Responsive Offer
within ten Business Days after the Commencement of the Future
Hostile Offer, as the case may be, was outside the control of
the Company, the Manager, and any member of the Cayuga Group.
The Company shall promptly provide a Member who makes a
Qualifying Offer with all information relating to the Company
reasonably requested by such Member in connection with such
Qualifying Offer.
(iv) Immediately following the date on which the
Member or Members making a Qualifying Offer accepts for
payment Units validly tendered pursuant to such Qualifying
Offer, the Company shall take all actions as are necessary for
it to be admitted to the Partnership as a substitute Limited
Partner with respect to all Units purchased by such Member or
Members (and registered in the record name of the Company)
pursuant to the Qualifying Offer.
(v) The Company shall take all action reasonably
necessary to ensure that any distribution received by the
Company in respect of any Units purchased pursuant to a
Qualifying Offer and registered in the record name of the
Company as a result of a Qualifying Offer is received by the
Member or Members for whom the Company is the nominee with
respect to such Units as promptly as practicable after receipt
thereof by the Company.
(vi) The Company and the Members covenant and
agree that other than as provided in (i), (ii) and (iii)
above, none of the Company, the Members or any of their
respective Affiliates may Commence a Tender Offer for Units
after the expiration of the Offer.
(b) Negotiated Purchases.
(i) Without the consent of Fleetwood, the Company
may make a Negotiated Purchase provided each of the following
conditions are met:
(1) the number of Units purchased by the
Company in the Negotiated Purchase, together with all
other Units purchased by the Company in prior
Negotiated Purchases, does not exceed 10% of the
total number of Units purchased by the Company
pursuant to the Offer and any subsequent Tender Offer
for Units by the Company; and
(2) the price per Unit paid by the
Company in the Negotiated Purchase does not exceed
80.0% of the Net Asset Value.
(ii) The Company may make a Negotiated Purchase
that does not satisfy the criteria set forth in clauses (1)
and (2) of (i) above if Fleetwood consents to such Negotiated
Purchase.
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(iii) If Fleetwood provides an Unrestricted
Purchase Notice to the Company and the Manager does not
consent to the proposed Negotiated Purchase that is the
subject of the Unrestricted Purchase Notice within three days
of the date the Unrestricted Purchase Notice is received, then
the Fleetwood Members shall be permitted to make a Qualified
Purchase. The Company shall take all action reasonably
necessary to ensure that any distribution received by the
Company in respect of any Units registered in the record name
of the Company pursuant to this Section 4.03(b)(iii) is
received by the Fleetwood Members for whom the Company is the
nominee with respect to such Units as promptly as practicable
after receipt thereof by the Company.
(iv) If Fleetwood provides a Restricted Purchase
Notice to Cayuga and Cayuga does not consent in writing to the
proposed Negotiated Purchase by the Company that is the
subject of the Restricted Purchase Notice within three days of
the date the Purchase Notice is received, then the Fleetwood
Members shall be permitted to make a Qualified Purchase. The
Company shall take all action reasonably necessary to ensure
that any distribution received by the Company in respect of
any Units registered in the record name of the Company
pursuant to this Section 4.03(b)(iv) is received by the
Fleetwood Member or Fleetwood Members for whom the Company is
the nominee with respect to such Units as promptly as
practicable after receipt thereof by the Company.
(v) If Cayuga provides a Restricted Purchase
Notice to Fleetwood and Fleetwood does not consent in writing
to the proposed Negotiated Purchase by the Company that is the
subject of the Restricted Purchase Notice within three days of
the date the Purchase Notice is received, then the Cayuga
Members shall be permitted to make a Qualified Purchase. The
Company shall take all action reasonably necessary to ensure
that any distribution received by the Company in respect of
any Units registered in the record name of the Company
pursuant to this Section 4.03(b)(v) is received by the Cayuga
Member or Cayuga Members for whom the Company is the nominee
with respect to such Units as promptly as practicable after
receipt thereof by the Company.
Section 4.04 Members' Review of Offer Documents. Each
Member shall have the right to review in a timely manner all of the Offer
Documents and to comment upon the Offer Documents, which comments shall be
given due consideration by the Manager. If a Fleetwood Member requests that
the Manager modify or add disclosure in the Offer Documents relating to such
Fleetwood Member and the Manager does not modify or add such disclosure as
requested, then the indemnity obligations of such Fleetwood Member under
Article VIII of this Agreement shall not apply to any loss, claim, damage or
liability that results from the Manager's failure to make such requested
modification or addition.
Section 4.05 Public Announcements. Subject to the
requirements of applicable law, rule, regulation or order, no Member shall make
any public announcement with respect to the Offer or any of the transactions or
events incidental to the commencement, continuance or consummation of the Offer
without the prior written consent of the other Members, which consent shall not
be unreasonably withheld or delayed, provided that, to the extent disclosure
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is required by law, rule, regulation or order, each Member shall use reasonable
efforts, consistent with its legal obligations, to submit the form of proposed
disclosure to the other Members and permit the other Members a reasonable
opportunity to comment thereon prior to publication.
Section 4.06 Litigation.
(a) All litigation which in any way arises out of or
relates to the Offer or any other purchase of Units by the Company, whether
pursuant to a Tender Offer or in a Negotiated Purchase, shall be exclusively
controlled by the Manager, including the selection of counsel for the Company
and the Members (which counsel shall be reasonably acceptable to all Members),
and all costs and expenses related to that litigation, including costs of
settlement, shall be paid by the Company; provided, however, that any Member or
member of the Cayuga Group or the Icahn Group may retain its own counsel at its
own expense and, if such Member or member so elects, may be represented by its
own counsel in any such litigation and may control any aspect of such
litigation relating solely to such Member or member of the Cayuga Group and its
Affiliates (other than the Company) or the Icahn Group and its Affiliates
(other than the Company), as the case may be. The foregoing provisions shall
apply notwithstanding that the defendants in the litigation are Persons other
than the Company or its Members. Under no circumstances will the Manager or
the Company agree to any settlement of litigation unless as part of that
settlement each Member and all of their respective members or Affiliates named
as defendants receive unconditional releases of liability relating to the
allegations in the complaint in such litigation.
(b) If within 10 days after being advised of the terms of
any litigation settlement Fleetwood objects to the settlement and the Manager
declines to modify the terms of that settlement in a manner reasonably
acceptable to Fleetwood, then Fleetwood may elect to require the Company to
Effect a Redemption with respect to the Icahn Group, and the Company and the
remaining Members will be fully responsible for all costs and liability
associated with the litigation, except only for costs and liabilities for which
the Fleetwood Members are required to furnish indemnity under Section 8.03.
Section 4.07 Voting of Partnership Units.
(a) Subject to the provisions of Section 4.07(b) below,
(i) the Company Units shall be voted (or waivers or written consents in respect
thereof shall be executed) by the Company as directed by the Members in
proportion to their respective interests in the Company, and (ii) the Member
Units shall be voted (or waivers or written consents in respect thereof shall
be executed) as directed by the Person or Persons for whom the Company is the
nominee with respect to such Units.
(b) Subject to the provisions of Section
7.05(b)(v)(4)(C), until a Buy/Sell Closing occurs, and unless Cayuga is in
material default hereunder, the Company Units and the Member Units shall be
voted as directed by the Manager:
(i) on any proposal to remove the General Partner
or any proposal that in any way adversely alters the rights,
authority or obligations of the General
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Partner, or to reduce any compensation payable to the General
Partner or Affiliate of Cayuga;
(ii) on any proposal to cause the Partnership to
engage in an Extraordinary Transaction; provided, however,
that if such proposal is a Third Party Proposal or is proposed
by a general partner of the Partnership (other than the
General Partner) and such proposal does not result in a
Buy/Sell Trigger exercisable by Fleetwood on behalf of the
Icahn Group, then the Company Units shall be voted against the
Third Party Proposal or such proposal by a general partner and
Cayuga shall, and shall cause its Affiliates (other than the
General Partner) to, take such action as is reasonably
necessary under the circumstances to defeat such Third Party
Proposal or such proposal by a general partner; and
(iii) on any proposal made by the General Partner
of the Partnership.
ARTICLE V.
MEMBERS
Section 5.01 Place of Meetings. Meetings of the Members
of the Company shall be held at such place, either within or without the State
of New York, as may from time to time be designated by the Manager and stated
in a notice of meeting or in a duly executed waiver of notice thereof.
Section 5.02 Annual Meeting. An annual meeting of the
Members of the Company for the election of the Manager and for the transaction
of such other business as may properly come before the meeting shall be held
annually at such time as may be designated by the Manager and stated in the
notice of meeting or waiver of notice thereof.
Section 5.03 Special Meetings. Special meetings of the
Members, to be held for such purpose or purposes as may be specified in the
notice of meeting, may be called by the Manager or by any Member.
Section 5.04 Notice of Meetings; Waiver.
(a) Written notice of the date, hour, place and purpose
or purposes of every meeting of Members shall be delivered as provided in
Section 10.9 by the Manager (in the case of an annual meeting) or by the Member
calling the meeting (in the case of a special meeting), or by such person as
the foregoing may designate to perform this duty, not more than 60 days nor
less than five days before the meeting, to each Member of record entitled to
vote at such meeting.
(b) Notwithstanding the provisions of Section 5.04(a),
each person who is entitled to notice of any meeting of Members shall be deemed
to have waived such notice if the Member attends such meeting in person or by
proxy, or if the Member, before or after the meeting, submits a signed waiver
of such notice to the Company. When a meeting of Members is adjourned to
another time and place, unless the Manager after the adjournment shall fix a
new
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record date for such adjourned meeting or the adjournment is for more than 30
days, notice of such adjourned meeting need not be given if the time and place
to which such meeting has been adjourned was announced at the meeting at which
the adjournment was taken.
Section 5.05 Quorum. Unless otherwise required by law,
the presence in person or represented by proxy, of all of the Members thereat
shall be necessary to constitute a quorum for the transaction of business at
any meeting of Members. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting interest of those
present in person or represented by proxy may adjourn such meeting from time to
time until a quorum is present thereat. At any adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 5.06 Voting; Proxies.
(a) Each Member shall be entitled to one vote for each
percentage point of Interests held in its name according to the membership
interest ledger of the Company and may vote either in person or by proxy with
respect to any matter submitted to a vote of the Members. Every proxy must be
in writing and executed by the Member or by his duly authorized
attorney-in-fact, in which case the Company may request the delivery of the
original power of attorney as a condition of honoring such proxy. A proxy with
respect to Interests held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Company receives written notice to the contrary from any one of such persons.
No proxy shall be valid after a period of three years from the date thereof
unless otherwise provided in such proxy.
(b) The following actions shall require the unanimous
approval of all Members: (i) authorization and sales of additional Interests
or other rights or interests in the Company; and (ii) amendments to this
Agreement. In addition, all other actions not specifically contemplated by
this Agreement to be taken by the Manager or the Company shall require the
unanimous approval of all Members, and no Member (other than Cayuga acting in
its capacity as Manager pursuant to the express terms of this Agreement) shall
have the authority to or shall take any action on behalf of the Company without
the written approval of all Members. Unless demanded by a Member present in
person or represented by proxy at any meeting of the Members, the vote thereat
may be by voice vote and need not be by ballot. Upon a demand by any such
Member for a vote by ballot on any question, or at the direction of such
chairman that a vote by ballot be taken on any question, such vote shall be
taken. On a vote by ballot each ballot shall be signed by the Member voting,
or by his proxy as such if there be such proxy, and it shall show the number of
Interests voted by such Member or proxy.
Section 5.07 Consent of Members in Lieu of Meeting. Any
action permitted or required to be taken by vote at any meeting of the Members
may be taken without a meeting upon the receipt by the Company of the written
consent of all Members entitled to vote thereon; provided, that such written
consent shall set forth the action so consented to.
Section 5.08 Continuation on Withdrawal of a Member. The
Company's existence will automatically terminate 90 days following the death,
retirement, resignation,
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expulsion, bankruptcy or dissolution of a Member or the occurrence of any event
which terminates the continued membership of a Member in the Company (each, a
"Withdrawal"), unless there are at least two remaining Members and the
remaining Members agree to continue the Company by unanimous written consent
within 90 days after the Withdrawal of a Member. In order to permit the
continuation of the Company's existence in the event only one Member would
otherwise be remaining, Interests may be transferred immediately to any Person
approved by such remaining Member so that there are two Members to make the
election contemplated in the preceding sentence. In the event of a Withdrawal
of a Member, other than a Withdrawal resulting from a transfer of Interests
permitted by Section 7.05, the Company may elect to Effect a Redemption with
respect to the Member Group of which such Member is a member.
ARTICLE VI.
MANAGER
Section 6.01 Number and Powers.
(a) There shall be only one Manager of the Company, and
the affairs of the Company shall be managed by the Manager to the limited
extent specifically contemplated in this Agreement. The Members hereby agree
that the initial Manager shall be Cayuga.
(b) The Manager shall hold office until the expiration of
his term and the election and qualification of his successor. The powers of
the Manager shall be limited to those contemplated by this Agreement.
Section 6.02 Election and Qualifications. So long as any
member of the Cayuga Group Beneficially Owns any Interests and subject to
clause (ii) of the second sentence of Section 6.04, the Manager shall be
elected by Cayuga; thereafter the Manager shall be elected by 100% of the votes
cast at a meeting of the Members duly called and held. Except as provided in
Section 6.01 and this Section 6.02, the Manager shall be elected at the Annual
Meeting of Members to hold office until the next Annual Meeting of Members and
until his successor has been elected and shall have qualified.
Section 6.03 Vacancies. Any vacancy in the position of
Manager, whether caused by resignation, death, disqualification, or removal of
the Manager or otherwise, may be filled as provided in the first sentence of
Section 6.02.
Section 6.04 Resignation or Removal. The Manager may
resign at any time and such resignation shall take effect upon receipt thereof
by the Members unless otherwise specified in the resignation. The Manager may
be removed either (i) by vote of a majority of the Interests owned by Members
entitled to elect or designate such Manager, with or without Cause, or (ii) by
vote of 33 1/3% of the outstanding Interests for Cause. For purposes of this
Agreement, "Cause" shall be defined as (i) fraud, dishonesty or willful
misconduct, (ii) the commission of theft, embezzlement, obtaining funds or
property under false pretenses, or similar acts of misconduct with respect to
the property of the Company or its employees or (iii) conviction of a felony.
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Section 6.05 Compensation. The Manager may receive
compensation for services to the Company only to the extent approved by all
Members or as otherwise set forth in this Agreement.
ARTICLE VII.
CONTRIBUTIONS OF CAPITAL; INTERESTS; TRANSFERS OF INTERESTS
Section 7.01 Contributions. Each Member shall contribute
to the Company the amount of cash set forth on Schedule I to this Agreement
(the "Initial Contribution") in exchange for the amount of Interests set forth
opposite such Member's name on Schedule I. As set forth in Section 7.06,
Members will be required from time to time to make additional capital
contributions.
Section 7.02 [Intentionally Omitted]
Section 7.03 [Intentionally Omitted]
Section 7.04 [Intentionally Omitted]
Section 7.05 Transfers of Interests.
(a) Voluntary Transfers.
(i) Except as otherwise provided in this
Agreement, no Member and no transferee of a Member's Interests
may directly or indirectly sell, assign, transfer, exchange,
encumber or otherwise dispose of Beneficial Ownership of any
Interests or any interest therein now held or hereafter
acquired by a Member; provided, however, that (1) any Member
may transfer all or any part of its Interests to another
Member; (2) any Member may transfer Interests to another
member of such Member's Member Group who agrees in a written
amendment to this Agreement to become a Member and thus be
bound by the provisions of this Agreement, provided that any
such transfer does not result in a reduction in the indirect
Beneficial Ownership by Icahn of the Fleetwood Interests or
any reduction in the indirect Beneficial Ownership by the
Cayuga Group (as defined in clause (i) and (ii) of the
definition of the Cayuga Group) of the Cayuga Interests, and
(3) transfers of interests in an entity that Beneficially Owns
Interests shall not constitute assignments or transfers of
Interests in violation of this provision, provided that any
such transfer does not result in a reduction in the indirect
Beneficial Ownership by Icahn of the Fleetwood Interests or a
reduction in the indirect Beneficial Ownership by the Cayuga
Group (as defined in clause (i) and (ii) of the definition of
the Cayuga Group) of the Cayuga Interests; and further
provided that notwithstanding anything to the contrary in this
Agreement, (x) no direct or indirect transfer of Interests by
any Person shall be deemed to occur by reason of any direct or
indirect transfer of the capital stock or other security of
Insignia, including without limitation any transfer of the
capital stock or other security of Insignia pursuant to a
merger, consolidation or other
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extraordinary corporate transaction to which Insignia or any
of its subsidiaries is a party, (y) it is expressly understood
and agreed by the Members that nothing in this Agreement shall
prohibit any Interests that are Beneficially Owned by a Member
from being pledged to collateralize or otherwise support
general corporate obligations of such Member or its Affiliates
existing on the Effective Date or incurred during the term of
this Agreement, in either case in the ordinary course of
business, but that the foregoing shall not relieve any Member
from its obligation to fully perform its undertakings in this
Agreement and (z) no direct or indirect transfer by any Person
shall be deemed to occur by reason of any transfer of any
interest in an entity that Beneficially Owns Interests to
partners, employees or Affiliates of Apollo Real Estate
Advisors, L.P.
(ii) A transfer that would otherwise be prohibited
by paragraph (i) of this Section 7.05(a) nonetheless may be
effected by a member of the Cayuga Group if at least 16 but
not more than 60 days prior to the date of such transfer
Fleetwood receives a Cayuga Transfer Notice; provided,
however, that if Fleetwood properly exercises its Buy/Sell
Right in respect of such Cayuga Transfer Notice as provided in
Section 7.05(b), then such transfer may not be consummated
until after the Buy/Sell Closing has occurred.
(iii) A transfer that would otherwise be prohibited
by paragraph (i) of this Section 7.05(a) nonetheless may be
effected by a member of the Icahn Group if at least 16 but not
more than 60 days prior to the date of such transfer Cayuga
receives a Fleetwood Transfer Notice; provided, however, that
if Cayuga properly exercises its Buy/Sell Right in respect of
such Fleetwood Transfer Notice as provided in Section 7.05(b),
then such transfer may not be consummated until after the
Buy/Sell Closing has occurred.
(b) Buy/Sell Provisions.
(i) Buy/Sell Triggers. Each of the following
events constitutes a Buy/Sell Trigger:
(1) the expiration of a 10-day period
following the filing by a Partnership with the
Commission of each Annual Report on Form 10-K or
10-KSB, beginning six months after the filing (or
deemed filing) of the Report for the Partnership's
fiscal year ending in 1996; provided, however, that
if for any reason the Partnership is not required to
file an Annual Report on Form 10-K or 10-KSB with the
Commission, then for purposes of this Buy/Sell
Trigger the Company shall be deemed to have filed
such Report on the 90th day following the last day of
the applicable fiscal year of the Partnership; and
further provided that if a Partnership is required to
file an Annual Report with the Commission but does
not timely file such Report (including any applicable
extension under Rule 12b-25 under the Exchange Act),
then for purposes of this Buy/Sell Trigger the
Company shall be deemed to have filed such Report on
the 105th day following the last day of the
applicable fiscal year of the
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Partnership (either party may exercise a Buy/Sell
Right under this Section);
(2) the giving of a notice (an
"Objection Notice") by Fleetwood to Cayuga to the
effect that Fleetwood opposes (x) any proposal made
by the General Partner or any member of the Cayuga
Group that is to be submitted to a vote of the
Limited Partners (whether such vote is to be taken at
a meeting or by written consent) or (y) any Third
Party Proposal or any proposal by a general partner
of a Partnership (other than the General Partner)
with respect to which the General Partner does not
take a neutral position or recommend that Limited
Partners vote against, which Objection Notice must be
given by Fleetwood not later than the 15th day after
Cayuga first gives Fleetwood written notice of the
proposed vote (which written notice shall be given by
Cayuga as promptly as practicable); provided,
however, that no Buy/Sell Trigger shall be deemed to
have occurred if, within 15 days after receipt by
Cayuga of an Objection Notice from Fleetwood, the
proposal that is the subject matter of the Objection
Notice is withdrawn; and further provided that the
giving of an Objection Notice shall result in a
Buy/Sell Right exercisable only by Fleetwood on
behalf the Icahn Group;
(3) the expiration of a Responsive
Offer; provided, however, that the expiration of a
Responsive Offer shall result in a Buy/Sell Right
exercisable only by Fleetwood on behalf of the Icahn
Group;
(4) a Third Party Proposal Trigger;
provided, however, that a Third Party Proposal
Trigger shall result in a Buy/Sell Right exercisable
only by Fleetwood on behalf of the Icahn Group;
(5) the receipt by Fleetwood of a Cayuga
Transfer Notice; provided, however, that the receipt
by Fleetwood of a Cayuga Transfer Notice shall result
in a Buy/Sell Right exercisable only by Fleetwood on
behalf of the Icahn Group;
(6) the receipt by Cayuga of a Fleetwood
Transfer Notice; provided, however, that the receipt
by Cayuga of a Fleetwood Transfer Notice shall result
in a Buy/Sell Right exercisable only by Cayuga on
behalf of the Cayuga Group;
(7) the occurrence of a material default
by a Cayuga Member under this Agreement, which
default continues uncured or unwaived for a period of
15 consecutive days; provided, however, that such
default shall result in a Buy/Sell Right exercisable
only by Fleetwood on behalf the Icahn Group;
(8) the occurrence of a material default
by a Fleetwood Member under this Agreement, which
default continues uncured or
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unwaived for a period of 15 consecutive days;
provided, however, that such default shall result in
a Buy/Sell Right exercisable only by Cayuga on behalf
the Cayuga Group;
(9) the receipt by the Company of
written notice from the holder of the Institutional
Debt advising the Company of the occurrence of any
event of default which permits such holder to
accelerate the payment of all indebtedness
thereunder; provided, however, that such default
shall result in a Buy/Sell Right exercisable by
either Cayuga on behalf of the Cayuga Group or
Fleetwood on behalf of the Icahn Group (A) unless
such default relates to an act or omission of any
member of the Cayuga Group, acting in any capacity,
in which case the Buy/Sell Right may not be exercised
by the Cayuga Group or (B) unless such default
relates to an act or omission of any member of the
Icahn Group, acting in any capacity, in which case
the Buy/Sell Right may not be exercised by the Icahn
Group;
(10) the termination of all license
agreements between the Partnerships and Hampton Inns,
Inc.; provided, however, that such event shall result
in a Buy/Sell Right exercisable only by Fleetwood on
behalf of the Icahn Group.
(ii) Buy/Sell Elections.
(1) Within 15 days after any Buy/Sell
Trigger that results in a Buy/Sell Right exercisable
by Fleetwood, Fleetwood may exercise its Buy/Sell
Right by delivering a Fleetwood Buy/Sell Notice to
Cayuga; provided, however, that if the Company has
purchased Units pursuant to a Responsive Offer or a
Negotiated Purchase, or a Member or Members have
purchased Units pursuant to a Qualified Purchase or a
Qualifying Offer, in either case within the six-month
period immediately preceding the date of any Buy/Sell
Trigger and the number of Units purchased by the
Company pursuant to the Responsive Offer or
Negotiated Purchase exceeds 10% of the number of
Units owned by the Company immediately prior to the
expiration of the Responsive Offer or the closing of
the Negotiated Purchase, or the number of Units
purchased by the Member or Members pursuant to a
Qualified Purchase or a Qualifying Offer exceeds 10%
of the number of Units owned by such Member or
Members immediately prior to the closing of the
Qualified Purchase or the Qualifying Offer, then for
purposes of this paragraph the date of such Buy/Sell
Trigger will deemed to be the date that is 186 days
following the date on which Units are paid for by the
Company pursuant to the Responsive Offer or the
Negotiated Purchase or paid for by the Member or
Members pursuant to the Qualified Purchase or the
Qualifying Offer.
(2) Within 15 days after any Buy/Sell
Trigger that results in a Buy/Sell Right exercisable
by Cayuga, Cayuga may exercise its Buy/Sell
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Right by delivering a Cayuga Buy/Sell Notice to
Fleetwood; provided, however, that if the Company has
purchased Units pursuant to a Responsive Offer or a
Negotiated Purchase, or a Member or Members have
purchased Units pursuant to a Qualified Purchase or a
Qualifying Offer, in either case, within the
six-month period immediately preceding the date of
any Buy/Sell Trigger and the number of Units
purchased by the Company pursuant to the Responsive
Offer or Negotiated Purchase exceeds 10% of the
number of Units owned by the Company immediately
prior to the expiration of the Responsive Offer or
the closing of the Negotiated Purchase, or the number
of Units purchased by the Member or Members pursuant
to a Qualified Purchase or a Qualifying Offer exceeds
10% of the number of Units owned by such Member or
Members immediately prior to the closing of the
Qualified Purchase or the Qualifying Offer, then for
purposes of this paragraph the date of such Buy/Sell
Trigger will deemed to be the date that is 186 days
following the date on which Units are paid for by the
Company pursuant to the Responsive Offer or the
Negotiated Purchase or paid for by the Member or
Members pursuant to the Qualified Purchase or the
Qualifying Offer.
(3) Notwithstanding the foregoing,
Cayuga shall not be entitled to give a Cayuga
Buy/Sell Notice if Cayuga has already received a
Fleetwood Buy/Sell Notice, and Fleetwood shall not be
entitled to give a Fleetwood Buy/Sell Notice if
Fleetwood has already received an Cayuga Buy/Sell
Notice.
(4) If a Buy/Sell Notice is not received
within the applicable 15-day period specified above
following a particular Buy/Sell Trigger, then no
Buy/Sell Right shall be exercisable in respect of
such Buy/Sell Trigger.
(iii) Buy/Sell Process.
(1) Not later than the 15th day after
the Buy/Sell Notice Date (the "Response Date"), the
Noticed Member shall irrevocably notify the Offering
Member in writing whether the Noticed Member (A) has
elected to buy the Interest, Member Units and Member
Loans Beneficially Owned by each member of the
Offering Group pursuant to the Buy/Sell Notice, or
(B) has elected, on behalf of each member of the
Noticed Group, to sell the Interests, Members Units
and Member Loans Beneficially Owned by each member of
the Noticed Group pursuant to the Buy/Sell Notice;
provided, however, that the Icahn Group may not elect
to buy Interests, Member Units or Member Loans
unless, in the case it is the Noticed Member, the
notice given by it pursuant to this Section (1) is
accompanied by evidence, reasonably satisfactory to
the Cayuga Group, that (i) Fleetwood has, and will
continue to maintain, the Required Net Worth or (ii)
Fleetwood's obligations under Section 7.05(b) are
guaranteed by an entity which has, and will continue
to maintain, the Required Net Worth.
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(2) If the Noticed Member fails to give
that notice by the Response Date, the Noticed Member
will be deemed to have elected, on behalf of each
member of the Noticed Group, to sell the Interests,
Member Units and Member Loans Beneficially Owned by
each member of the Noticed Group.
(3) If the Noticed Member gives (or is
deemed to have given) notice to the Offering Member
that the Noticed Group has elected to sell the
Interests, Member Units and Member Loans pursuant to
(1) or (2) above, then the Offering Member shall be
obligated to purchase from each member of the Noticed
Group (and each member of the Noticed Group shall be
obligated to sell to the Offering Member) (a) all
Interests Beneficially Owned by each member of the
Noticed Group at a price for each percentage point of
Interests equal to the Buy/Sell Price and all Member
Units with respect to which the Company is the
nominee for each such member of the Noticed Group at
a price per Member Unit equal to the Imputed Unit
Price and (b) all Member Loans held by each Member of
the Noticed Group at a price equal to the principal
amount of such Member Loans together with accrued
interest on such Member Loans through the Buy/Sell
Closing.
(4) If the Noticed Member gives notice
to the Offering Member that the Noticed Group has
elected to buy Interests, Member Units and Member
Loans pursuant to (1) above, then each member of the
Offering Group shall be obligated to sell to the
Noticed Member (and the Noticed Member shall be
obligated to purchase from each member of the
Offering Group), (a) all Interests Beneficially Owned
by each such member of the Offering Group at a price
for each percentage point of Interests equal to the
Buy/Sell Price and all Member Units with respect to
which the Company is the nominee for each such member
of the Noticed Group at a price per Member Unit equal
to the Imputed Unit Price and (b) all Member Loans
held by each Member of the Offering Group at a price
equal to the principal amount of such Loans together
with accrued interest on such Member Loans through
the Buy/Sell Closing.
(iv) Buy/Sell Closings. The closing (a "Buy/Sell
Closing") of any sale or sales of Interests and Member Units
required by the exercise of a Member's Buy/Sell Right shall
take place at the principal offices of the Company at 10:00
a.m., local time, on the first Business Day which is 45 days
after the Buy/Sell Notice Date (or such earlier Business Day
as the buyer of Interests, Member Units and Member Loans
specifies on not less than two Business Days prior written
notice to the seller(s) or such later Business Day as the
buyer and the seller(s) shall mutually agree to). At the
Buy/Sell Closing, the seller(s) will execute and deliver such
documents as may be required by the buyer to evidence the sale
and transfer of the seller's(s') entire Interests in the
Company, Member Units and Member Loans, to be sold free and
clear of all liens and encumbrances whatsoever (other than the
Institutional Debt), the buyer will pay the Buy/Sell
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Purchase Price in immediately available funds and the buyer
will provide for the release to the seller of collateral
(other than Member Units) with respect to which the seller has
granted a security interest to PWRES pursuant to Section
9.03(c). In addition, each Person selling or purchasing
Interests and/or Member Units and/or Member Loans at the
Buy/Sell Closing shall execute and deliver an instrument
acknowledging, representing and warranting to the other
parties that such Person (a) made its purchase or sale
decision on a fully informed basis, (b) had full access to the
books and records of the Company and the Partnership prior to
making its decision, (c) had ample opportunity to ask
questions of the management of the Company and the Partnership
prior to making its decision and received satisfactory answers
to those questions, and (d) did not rely on any representation
of any other Person in making its decision.
(v) GP Transfer Provisions.
(1) Once a Buy/Sell Notice has been
received by either Cayuga or Fleetwood, Cayuga and
NPI will not, and will not cause or permit any Member
of the Cayuga Group to, take any action, or fail to
take any reasonable action, intended to alter
adversely the rights, authority or obligations of the
General Partner in any way. After a Buy/Sell Closing
in which the members of the Cayuga Group are sellers,
upon written request from Fleetwood, NPI shall cause
the GP Interest to continue to be held by the General
Partner so that, if Fleetwood so elects, NPI may
transfer or cause to be transferred to Fleetwood or
its designee the GP Stock at the GP Transfer Closing.
(2) If Cayuga notifies (or is deemed to
have notified) Fleetwood that the Cayuga Group has
elected to sell Interests, Member Units and Member
Loans pursuant to Section 7.05(b)(iii)(1) or (2) or
if any member of the Cayuga Group is a seller at the
Buy/Sell Closing, then from and after the date of
such notice (or deemed notice) or Buy/Sell Closing
Fleetwood may exercise the GP Transfer Option by
delivering a GP Exercise Notice to Cayuga and NPI.
(3) The closing of the GP Transfer (the
"GP Transfer Closing") shall take place at the
principal offices of NPI at 10:00 a.m., local time,
on the first Business Day which is 45 days after the
receipt by Cayuga and NPI of the GP Exercise Notice,
in the event that the Debt Requirement (as defined
below) is not applicable, otherwise the GP Transfer
Closing will take place as soon as practicable after
the Debt Requirement is satisfied, waived by
Fleetwood or otherwise eliminated; provided, however,
that if Fleetwood delivers the GP Exercise Notice to
Cayuga and NPI at least 20 days prior to the Buy/Sell
Closing pursuant to Section 7.05(b)(iv) and if the
Debt Requirement is not applicable, then the GP
Transfer Closing shall take place simultaneously with
the Buy/Sell Closing. At the GP Transfer Closing,
NPI or its Affiliate will execute and deliver such
documents as may be required by Fleetwood to evidence
the sale and
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transfer of NPI's or its Affiliate's entire interest
in the GP Stock to Fleetwood or its designee, to be
sold free and clear of all liens and encumbrances
whatsoever (other than the Institutional Debt), and
Fleetwood will pay the GP Purchase Price to NPI or
its designee in immediately available funds. In
addition, each Person who is a party to the GP
Transfer transaction shall execute and deliver an
instrument acknowledging, representing and warranting
to the other parties that such Person (a) made its
purchase or sale decision on a fully informed basis,
(b) had full access to the books and records of the
Company and the Partnership prior to making its
decision, (c) had ample opportunity to ask questions
of the management of the Partnership prior to making
its decision and received satisfactory answers to
those questions, and (d) did not rely on any
representation of any other Person in making its
decision. Also at the GP Transfer Closing, NPI and
Fleetwood shall enter into an agreement by which:
(i) Fleetwood agrees to indemnify Cayuga and NPI and
their respective controlling persons, partners,
Affiliates, officers, directors and employees from
and against any and all loss, liability or damage any
of them may incur by reason of (x) findings that in
light of the conduct of the General Partner following
the GP Transfer Closing, the GP Transfer breached the
fiduciary duties of NPI or any of its Affiliates or
otherwise was unlawful or (y) the activities of the
General Partner or the Partnership after the GP
Transfer Closing; and (ii) subject to Section
10.07(b), NPI agrees to indemnify Fleetwood and its
controlling persons, Affiliates, officers, directors
and employees from and against any and all loss,
liability or damage any of them may incur by reason
of the activities of the General Partner or the
Partnership before the GP Transfer Closing other than
those maters for which NPI and its Affiliates are
indemnified pursuant to Section 8.06.
(4) If the GP Transfer would result in
an acceleration of a material amount of a
Partnership's mortgage or other debt obligations
and/or the incurrence of prepayment premiums (a "Debt
Requirement"), then:
(A) NPI will, and will cause its
Affiliates to, use commercially
reasonable efforts to facilitate the
elimination or waiver of the Debt
Requirement and, without limiting
the generality of the foregoing,
will (subject to its fiduciary
obligations) vote all of the GP
Units in a manner reasonably
required to facilitate the GP
Transfer.
(B) Until the GP Transfer Closing
and except as otherwise provided
above, the General Partner and its
Affiliates will continue to perform
the same functions and receive the
same compensation for and from a
Partnership as before the Closing
and will take no action to diminish
the rights and privileges of the
General Partner.
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(C) Until the GP Transfer Closing
occurs, no member of the Icahn Group
may, singly or as part of a Group,
directly or indirectly, through one
or more intermediaries or otherwise:
(i) make, or in any way
participate in, directly or
indirectly, any "solicitation"
of "proxies" (as such terms are
defined or used in Regulation
14A under the Exchange Act) or
become a "participant" in any
"election contest" (as such
terms are defined or used in
Rule 14a-11 of the Exchange
Act) with respect to a
Partnership;
(ii) initiate, propose or
otherwise solicit, directly or
indirectly, Limited Partners
for the approval of one or
more proposals with respect
to a Partnership; or
(iii) instigate or encourage,
directly or indirectly, any
Limited Partner or other
Third Party to do any of the
foregoing;
if in any such case the purpose or
effect of such conduct is or is
likely to be (1) to remove the
General Partner without payment of
the GP Purchase Price, (2) to in any
way adversely alter the rights,
authority or obligations of a
general partner of a Partnership,
(3) to reduce the rights, authority
or obligations of a general partner
of a Partnership, or (4) to reduce
any compensation payable to, or
increase the obligations of, any
general partner of the Partnership
or any Affiliate of the General
Partner.
(5) From and after the date of the GP
Transfer Closing and so long as any member of the
Icahn Group controls the General Partner, the General
Partner shall not elect to defer any amount payable
to the General Partner pursuant to Sections 9.4.2,
9.5.1, 11.2.3 or 11.3 of a Partnership Agreement,
unless in the opinion of counsel to the General
Partner the fiduciary duties of the General Partner
require otherwise. Fleetwood agrees, subject to the
terms of the immediately following paragraph, that
without the written consent of NPI, Fleetwood will
not, and it will not cause or permit any member of
the Icahn Group to, amend Sections 9.4.2, 9.5.1,
11.2.3 or 11.3 of a Partnership Agreement in a manner
adverse to the General Partner. Fleetwood also
expressly acknowledges and agrees, subject to the
terms of the immediately following paragraph, that in
the event Sections 9.4.2, 9.5.1, 11.2.3 or 11.3 of a
Partnership Agreement is amended at any time after
the GP Transfer Closing in a manner adverse to the
General Partner, Fleetwood will nonetheless pay or
cause to be paid
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to the General Partner an amount equal to 100% of any
amount that would have been payable to the General
Partner pursuant to Section 9.4.2, 9.5.1, 11.2.3 or
11.3 of a Partnership Agreement but for such
amendment or amendments, such payments to be paid in
immediately available funds within three Business
Days following the mailing to the Limited Partners of
any distributions pursuant to the Partnership
Agreement.
(6) If after the GP Transfer Closing the
General Partner is removed by a vote (whether such
vote is taken at a meeting or by written consent) of
the Limited Partners in accordance with the terms of
the Partnership Agreement, and provided that the
General Partner actively opposes its removal in
connection with any such vote, then from and after
the effective date of such removal, the provisions of
the immediately preceding paragraph shall cease to
apply (unless and until any member of the Icahn Group
shall again become, or otherwise gain control of, the
general partner of a Partnership, in which case the
provisions of the immediately preceding paragraph
shall automatically be revived and apply to periods
following the date of such occurrence), unless NPI
can prove that the Limited Partners had Cause (as
such term is defined in Section 6.04, except that for
purposes of this paragraph the definition shall also
be deemed to include the taking of (or failure to
take) any action which constitutes a breach of the
General Partner's fiduciary duties to the Partnership
or the Limited Partners) to remove the General
Partner. For purposes of determining the foregoing,
unless the parties can mutually agree the parties
shall submit the issue to binding arbitration for
determination, which determination shall be final and
binding on all parties for all purposes of this
Agreement, with the losing party to pay all
reasonable costs incurred by all relevant parties in
connection with such arbitration proceeding.
(7) During the term of this Agreement,
except for a transfer to Fleetwood or its designee as
contemplated herein, and except as may be required by
the terms of the Institutional Debt, NPI will not,
and will not cause or permit any of its Affiliates
to, directly or indirectly, sell, convey, transfer,
assign, pledge or hypothecate the GP Stock or the GP
Interest to any Person, other than transfers of the
GP Stock to an Affiliate who agrees in writing for
the benefit of Fleetwood to remain an Affiliate of
NPI; provided, however, that (i) no direct or
indirect transfer of the GP Stock or the GP Interest
by NPI or any of its Affiliates shall be deemed to
occur by reason of any direct or indirect transfer of
the capital stock or other security of NPI, including
without limitation any transfer of the capital stock
or other security of NPI pursuant to a merger,
consolidation or other extraordinary corporate
transaction to which NPI or any of its subsidiaries
is a party, and (ii) it is expressly understood and
agreed by the Members that the foregoing shall not
prohibit the GP Stock or the GP Interest from being
pledged by NPI or its Affiliates to collateralize or
otherwise support general corporate obligations of
NPI or its Affiliates
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existing on the Effective Date or incurred during the
term of this Agreement, in either case in the
ordinary course of business.
(c) Transfers by Operation of Law. In the event that a
Member (i) declares its intention to file a voluntary petition under bankruptcy
or insolvency law or files a voluntary petition under any bankruptcy or
insolvency law or a petition for the appointment of a receiver or makes an
assignment for the benefit of creditors, or (ii) is subjected involuntarily to
such a petition or assignment or to an attachment or other legal or equitable
interest with respect to the Member's Interests, and such involuntary petition
or assignment or attachment is not discharged within 30 days after the date
thereof, or (iii) is subject to a transfer of its Interests by operation of
law, then if such Member is a Fleetwood Member, Cayuga may elect to require the
Company to Effect a Redemption with respect to the Icahn Group, and if such
Member is an Cayuga Member, then Fleetwood may elect to require the Company to
Effect a Redemption with respect to the Cayuga Group.
(d) Transfers in Violation of this Agreement. If any
transfer of Interests or Member Units is made or attempted by any member of the
Fleetwood Group contrary to the provisions of this Section 7.05, then Cayuga
may elect to require the Company to Effect a Redemption with respect to the
Icahn Group at any time before or after the transfer; and if any transfer of
Interests or Member Units is made or attempted by any member of the Cayuga
Group contrary to the provisions of this Section 7.05, then Fleetwood may elect
to require the Company to Effect a Redemption with respect to the Cayuga Group
at any time before or after the transfer. In addition to any other legal or
equitable remedies which it may have, the Company may enforce its rights by
specific performance or injunctive relief, without proof of irreparable harm
and without any need to post a bond.
Section 7.06 Capital Calls; Minimum Working Capital
Reserve; Redemption of Interests of Defaulting Member.
(a) The Company may from time to time require Members to
make additional contributions to the capital of the Company in amounts and at
times the Company reasonably deems necessary, for the purposes of (i) funding
the cost of purchasing Units accepted for purchase by the Company pursuant to
the Offer, a Follow-up Offer, any Responsive Offer or any Negotiated Purchase
(an "Offer Call"), and (ii) funding any other costs, expenses or liabilities
(including litigation and settlement costs and indemnity obligations under this
Agreement) of the Company (an "Operating Call") (x) which have been incurred
and were permitted to be incurred under this Agreement, including but not
limited to payments of principal and interest and other amounts required to be
made pursuant to the terms of the Institutional Debt, or (y) which will be
incurred within the six months following the date of the Capital Call Notice
relating thereto and are permitted to be incurred under this Agreement, in the
case of both (x) and (y) in connection with any redemption of Interests by the
Company or any of the administrative activities contemplated by Section 10.02.
Except as provided in the preceding sentence, the Company may not make a
capital call for any other purpose without the consent of all Members. The
amounts of such required additional contributions shall be specified in written
notices (each a "Capital Call Notice") given to the Members. Each Capital Call
Notice shall specify (i) the aggregate amount of capital required to be
contributed by all Members; and (ii) each Member's pro rata share of that
amount, which shall be the aggregate
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amount of additional capital so required multiplied by the percentage which
represents the total amount of Interests owned of record by a Member; and (iii)
a date (not less than two Business Days after the date of a Capital Call Notice
relating to an Offer Call, or five Business Days in the case of a Capital Call
Notice which relates solely to an Operating Call) by which each Member is to
pay the required amount to the Company in immediately available funds. A
Capital Call Notice in respect of the Offer Call shall not be sent more than
five Business Days before the date the funds are anticipated to be disbursed by
the Company. The Members hereby agree, upon receipt of an Offer Call, to make
additional contributions to the capital of the Company up to a maximum of an
additional $9,000,000 to fund costs incurred in connection with the Offer.
(b) The Members agree that the Company shall at all times
maintain a working capital reserve (the "Reserve") of not less than $50,000 in
cash. If at any time the amount of the Reserve shall fall below $50,000, then
the Company shall (i) make an Operating Call in an amount necessary to restore
the Reserve to $75,000 and (ii) send a Capital Call Notice to each Member in
respect of such Operating Call. The Members shall be required to fund the
Operating Call as set forth in Section 7.06(a).
(c) Subject to the provisions of Sections 4.02(c),
4.02(d), 4.03(a)(i), 4.03(a)(ii) and 4.06(b) (under which the Icahn Group is
entitled to receive 100% of the Redemption Amount in the event Fleetwood elects
to have the Company Effect a Redemption), (i) if a Fleetwood Member fails to
make a capital contribution pursuant to a Capital Call Notice as and when
required, then Cayuga may elect to require the Company to Effect a Redemption
with respect to the Icahn Group, and (ii) if a Cayuga Member fails to make a
capital contribution pursuant to a Capital Call Notice as and when required,
then Fleetwood may elect to require the Company to Effect a Redemption with
respect to the Cayuga Group.
Section 7.07 Qualification of Voters. The Manager may fix
a time, not more than 60 nor less then five days prior to the date of any
meeting of Members, or prior to the last day on which the consent or dissent of
Members may be effectively expressed with respect to any action proposed to be
taken without a meeting, as the time as of which Members entitled to notice of,
and to vote at such a meeting, or whose consent or dissent is required or may
be expressed with respect to any such action, as the case may be, shall be
determined, and all persons who were holders of record of Interests at such
time, and no others, shall be entitled to notice of, and to vote at such
meeting, or to express their consent or dissent, as the case may be.
Section 7.08 Determination of Members of Record for Other
Purposes. The Manager may fix a time, not less than ten days or more than
sixty days preceding the date fixed for the payment of any dividend or for the
making of any distribution or for the delivery of evidences of rights or
evidences of interests arising out of any change, conversion, or exchange of
Interests, as a record date for the determination of the Members entitled to
receive any such dividend, distribution, rights or interests, and in such case
only Members on record at the time so fixed shall be entitled to receive such
dividend, distribution, rights or interest.
Section 7.09 Membership Interest Ledger. The Company
shall maintain a membership interest ledger which contains the name and address
of each Member of the
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<PAGE> 33
Company and the amount of Interests which the Member holds. The membership
interest ledger may be in written form or in any other form capable of
producing copies for visual inspection. The original or duplicate of the
membership interest ledger shall be kept at the offices of the Manager, within
or without the State of New York, or, if none, at the principal executive
office of the Company.
Section 7.10 [Intentionally Omitted]
Section 7.11 Distributions; Surplus. To the extent
permitted by law and by the terms of the Institutional Debt, the Manager shall
declare and make distributions out of the income, if any, of the Company at
such time and in such amounts as, in its reasonable discretion, the Manager
shall deem to be available after establishment or replenishment of reasonable
working capital reserves; provided, however, that after (i) the Offer has
expired, (ii) all litigation relating to the Offer has been resolved and (iii)
all other costs and expenses of the Offer have been paid or duly provided for,
the Manager shall declare and make distributions promptly after the receipt by
the Company of any cash distributions made by the Partnership in respect of
Company Units in the aggregate amount of such distributions received by the
Company.
ARTICLE VIII.
INDEMNIFICATION
Section 8.01 Indemnification of Managers, Officers and
Members.
(a) Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by reason of the fact that he
is or was a Manager or officer of the Company (an "Indemnitee") shall be
indemnified and held harmless by the Company to the fullest extent authorized
by the laws of the State of New York, as the same exist or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
such law permitted the Company to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
excise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such Indemnitee in connection therewith; provided, however, that
no Indemnitee shall be entitled to indemnity under this paragraph for any
expense, liability or loss resulting from conduct that is determined, by final
judicial decision from which there is no further right to appeal, to constitute
gross negligence or willful misconduct on the part of such Indemnitee.
Notwithstanding the foregoing, indemnification under this Section 8.01(a) shall
not be available to any Indemnitee in respect of any claim for which the
Indemnitee or any of its Affiliates is required to furnish indemnification to
the Company under any other provision of this Article VIII.
(b) The right to indemnification conferred in Section
8.01 shall include the right to be paid by the Company the expenses (including
attorneys' fees) incurred in defending any such Proceeding in advance of its
final disposition (an "Advancement of Expenses"); provided, however, that an
Advancement of Expenses incurred by an Indemnitee shall be made
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<PAGE> 34
only upon delivery to the Company of an undertaking, by or on behalf of such
Indemnitee, to repay all amounts so advanced (i) if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such Indemnitee is not entitled to be indemnified for such expenses
under the provisions of the laws of the State of New York or (ii) by reason of
a final judicial determination contained in a nonappealable order, that such
beneficiary is not entitled to be indemnified under this Section 8.01, whether
by reason of the last sentence of Section 8.01(a) or otherwise.
(c) It is expressly understood and agreed by the Members
that notwithstanding anything contained in this Agreement to the contrary, to
the extent necessary to satisfy its indemnification obligations under this
Section 8.01, the Company may, upon ten days prior written notice to Fleetwood,
sell or otherwise liquidate Company Units; provided, unless such sale or other
liquidation of the Company Units is made at a price equal to or greater than
the Net Asset Value, the Company may not sell or otherwise liquidate Company
Units unless it has first made an Operating Call to fund such indemnification
obligations.
Section 8.02 Indemnification by Cayuga. Cayuga shall
indemnify and hold harmless the Company and its Members against any loss,
claim, damage or liability (or any action in respect thereof), joint or
several, to which the Company or any Member 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
of the Offer Documents, or the omission to state in the Offer Documents a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that any such loss, claim,
damage, liability or action is finally judicially determined in a nonappealable
order to have arisen out of or to be based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with information furnished by members of the Cayuga Group or their
respective officers, employees or representatives for inclusion in the Offer
Documents; or (ii) any breach or alleged breach by the General Partner of the
Partnership, at any time it was controlled by Affiliates of members of the
Cayuga Group, of its fiduciary duties to the Partnership or its partners;
provided, however, that if such breach or alleged breach relates to the Offer,
Cayuga shall have an indemnification obligation hereunder only to the extent of
a final nonappealable determination by a court of competent jurisdiction to the
effect that the General Partner, at the time it was controlled by an Affiliate
of members of the Cayuga Group, did in fact breach a fiduciary duty to the
Partnership or its partners or (iii) any capital account deficit restoration
obligation of any direct or indirect general partner of a Partnership.
Section 8.03 Indemnification by Fleetwood. Subject to
Section 4.04, Fleetwood shall indemnify and hold harmless the Company and its
Members against any loss, claim, damage or liability (or any action in respect
thereof), joint or several, to which the Company or any Member may become
subject, insofar as such loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon any untrue statement of a material fact
contained in any of the Offer Documents, or the omission to state in the Offer
Documents a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that any such
loss, claim, damage, liability or action is finally judicially determined in a
nonappealable order to have arisen out of or to be based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance
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upon and in conformity with information furnished by Fleetwood, its Affiliates
or their respective officers, employees or representatives for inclusion in the
Offer Documents.
Section 8.04 Non-Exclusivity of Rights. The rights to
indemnification and to the Advancement of Expenses conferred in this Article
VIII shall not be exclusive of any other right which any Person may have or
hereafter acquire under this Agreement or otherwise.
Section 8.05 Indemnification of Employees and Agents of
the Company. The Company may, to the extent authorized from time to time by
the Manager, grant rights to indemnification and to the Advancement of Expenses
to any employee or agent of the Company to the fullest extent of the provisions
of this Article VIII with respect to the indemnification and Advancement of
Expenses of Managers and officers of the Company; provided, however, the
Company may not hire any employees (other than the Manager) without the consent
of all Members.
Section 8.06 Indemnification of NPI. In consideration of
the pledge (the "Pledge") of the shares of the GP Stock and/or the general
partnership interest in the General Partner held by NPI Realty Management Corp.
to secure a loan from PWRES (or another institutional lender) to the Company
and for other consideration, the Company agrees to indemnify and hold harmless
NPI, its Affiliates and their respective controlling Persons, directors,
officers, employees, servants, attorneys and agents (each, an "NPI Indemnitee")
from and against damages, losses, penalties, fines, settlement payments,
obligations (contractual or otherwise), liabilities, claims, actions and causes
of action (actual or threatened, matured or unmatured, known or unknown,
contingent or otherwise) and costs and expenses suffered, sustained, incurred
or required to be paid by any NPI Indemnitee (other than a loss of, or
diminution in value attributable to, the investment of RJN Corporation in
Cayuga and Cayuga Capital Corporation), including without limitation any costs
of investigation and attorneys' or experts' fees and disbursements, based upon
or arising from or relating to any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, made, commenced
or initiated by the Named Persons (as defined below) (other than by any of the
Named Persons solely in his capacity as a limited partner of Cayuga) which are
based upon, arise out of or related to (i) the designation of NPI Realty
Management Corp. as the managing general partner of the General Partner and any
other amendment to the partnership agreement of the General Partner effected by
the Second Amended and Restated General Partnership Agreement of the General
Partner, dated as of November 15, 1995, and the Third Amended and Restated
General Partnership Agreement of the General Partner, dated as of February 13,
1996; (ii) the transactions contemplated by this Agreement, as it may be
amended from time to time (including any termination of the license agreements
between the Partnership and Hampton Inns, Inc. and any acceleration of
mortgages encumbering Partnership properties resulting from the Offers) and the
Pledge; and (iii) any action of the NPI Indemnitees, the General Partner, Fox
Realty Investors or NPI Equity Investments II, Inc. taken or omitted in good
faith in order to facilitate the transactions contemplated by this Agreement.
For purposes of this Section, the term "Named Persons" are any of Portfolio
Realty Associates, L.P., Emmet J. Cashin, Jr., Jarold A. Evans, Janet E.
Larson, Trustee, Phillip A. Larson Family Revocable Trust Dated April 17, 1974;
As Amended, W. Patrick McDowell and Lisle W. Payne, whether acting individually
or in a derivative capacity on behalf of the General Partner, GHI Associates or
Fox Realty Investors, and the respective heirs, beneficiaries, successor and
assigns of each of the
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foregoing. Subject to the next two succeeding sentences, the rights of NPI and
any NPI Indemnitee to indemnification under this Section 8.06 for any
settlement with any Named Person shall be subject to (i) such settlement having
been made by NPI or the NPI Indemnitee acting reasonably and in good faith and
(ii) the prior written consent of Fleetwood. If Fleetwood shall object or fail
to consent to the terms of any such settlement within five Business Days after
written notice specifying the terms thereof (which notice must also be given to
Cayuga), Cayuga shall pay to Fleetwood its pro rata share of any such
settlement, and Fleetwood shall assume all of the indemnification obligations
of the Company to NPI and any NPI Indemnitee hereunder. In such event,
Fleetwood shall assume the control of any litigation initiated by any Named
Person, shall provide NPI with such assurances as shall be reasonably requested
by NPI as to Fleetwood's having, and continuing to maintain, the Required Net
Worth, which shall be deemed necessary to permit it to assume such control and
satisfy any resultant judgment. NPI shall be required in connection with any
such assumption of control to cooperate with Fleetwood in the defense of such
litigation. NPI and any NPI Indemnitee shall give prompt written notice to
Cayuga and Fleetwood of any claim based on the indemnity agreement contained in
this Section 8.06. No failure to give such notice shall affect the
indemnification obligations of any indemnifying party hereunder, except to the
extent such failure materially prejudiced such indemnifying party's ability to
successfully defend the matter giving rise to the indemnification claim. NPI
and any NPI Indemnitee shall have the right to settle any claim initiated by
any Named Person without obtaining any consent hereunder in the event that
indemnification is not sought pursuant to this Section 8.06.
ARTICLE IX.
FINANCE
Section 9.01 Checks, Drafts, etc. All checks, drafts and
orders for the payment of money, notes and other evidences of indebtedness,
issued in the name of the Company shall be signed by the Manager or such other
person or persons as the Manager may from time to time designate.
Section 9.02 Fiscal Year. The fiscal year of the Company
shall be the calendar year.
Section 9.03 Incurrence of Debt.
(a) If a Fleetwood Member fails to make a capital
contribution pursuant to a Capital Call Notice given pursuant to Section 7.06
as and when required and Cayuga does not elect to require the Company to Effect
a Redemption with respect the Icahn Group as a result of such failure, then one
or more Cayuga Members may, at any time prior to the date the Fleetwood Member
makes the required capital contribution, elect to fund the entire amount of the
capital contribution required to be made by the Fleetwood Members by a loan to
the Company, in which case (i) any capital contribution made by any Fleetwood
Member pursuant to such Capital Call Notice shall be returned to such Fleetwood
Member and (ii) the capital contribution so made by the Cayuga Members shall be
reclassified and treated for all purposes as loans to the Company. If a Cayuga
Member fails to make a capital contribution pursuant to a Capital Call Notice
given pursuant to Section 7.06 as and when required and Fleetwood does
36
<PAGE> 37
not elect to require the Company to Effect a Redemption with respect to the
Cayuga Group as a result of such failure, then one or more Fleetwood Members
may, at any time prior to the date the Cayuga Members make the required capital
contribution, elect to fund the entire amount of the capital contribution
required to be made by the Cayuga Members by a loan to the Company, in which
case (x) any capital contribution made by any Cayuga Member pursuant to such
Capital Notice shall be returned to such Cayuga Member and (ii) the capital
contribution so made by the Fleetwood Members shall be reclassified and treated
for all purposes as loans to the Company. Any such loans referred to in the
preceding sentences ("Member Loans") shall bear interest at the rate of 18% per
annum, compounded daily, and the Company may pledge Company Units to secure
such loans. Such Member Loans shall, by their terms, be payable only out of
funds which otherwise would be available for distributions to Members and shall
be paid in full prior to any further distributions to Members being made by the
Company.
(b) The Manager shall be authorized on behalf of the Company
to enter into a loan agreement with PWRES on substantially the terms and
conditions set forth in a commitment letter, dated February 13, 1996, from
PWRES. The Manager shall be further authorized from time to time to enter into
such amendments of such loan agreement as it may in its sole discretion
determine to be in the best interests of the Company, provided, however, that,
without the consent of all of the Members, the Manager shall not be authorized
to make a material modification to the loan agreement that is inconsistent with
the commitment letter, including increasing the amount to be borrowed
thereunder, increasing the interest rate or fees to be paid thereunder, taking
any action which would permit the holder of the Institutional Debt to look
solely to the collateral security posted by the Icahn Group and not to the
collateral security posted by or on behalf of the Cayuga Group or otherwise
imposing personal liability on any Member or its Affiliates for the repayment
of such indebtedness. The Manager shall give a Capital Call Notice to the
Members if required to generate amounts necessary to pay when due any principal
or interest or fees required to be paid pursuant to the terms of the
Institutional Debt.
(c) Cayuga shall cause to be granted to PWRES a security
interest in each of the Member Units identified in Section 1.02(a) as
Beneficially Owned by partners in the Cayuga Group. Fleetwood shall cause to
be granted to PWRES a security interest in (i) the Member Units identified in
Section 1.03(b) as Beneficially Owned by the Icahn Group and (ii) not less than
$1,948,275 of negotiable instruments satisfactory to PWRES. In consideration of
the grant of such security interests, Fleetwood and Cayuga will be entitled to
receive from the Company during the period of time that their respective
collateral is being held as security by PWRES and provided they remain a Member
of the Company, quarterly payments in arrears of $25,000 in the case of
Fleetwood and quarterly payments in arrears of $50,000 in the case of Cayuga.
(d) After the Institutional Debt has been paid in full (other
than any residual fees payable thereunder), and prior to any further general
distributions to Members being made by the Company, there shall be paid to
Fleetwood and Cayuga, respectively, the amount of any payments made pursuant to
the Institutional Debt from the proceeds of any collateral security thereunder
provided by Fleetwood or partners in Cayuga, as the case may be.
(e) Except as otherwise provided in this Section 9.03, the
Company may not incur indebtedness for borrowed money.
37
<PAGE> 38
Section 9.04 Subordination.
(a) The Company, for itself and its successors and
assigns, covenants and agrees and each Member likewise covenants and agrees
that the payment of all obligations of the Company to the Members (the
"Subordinated Obligations") are hereby expressly subordinated, to the extent
and in the manner hereinafter set forth, to the prior payment in full in cash
of Senior Indebtedness (as defined in Section 9.04(i) hereof). These
provisions shall constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are hereby made obligees hereunder to the
same extent as if their names were written herein as such, and they and/or each
of them may proceed to enforce such provisions.
(b) All Senior Indebtedness (including interest thereon or
fees or any other amounts owing in respect thereof), all principal thereof and
premium, if any, and interest thereon (including, without limitation, any
interest accruing subsequent to the filing of a petition in bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) or fees or any other
amounts owing in respect thereof, shall first be paid in full in cash before
any payment (other than payments permitted to be made by the Credit Agreements)
of any kind or character (whether in cash, property or securities) is made on
account of the principal of (including installments thereof), or interest on,
or any amount otherwise owing in respect of the Subordinated Obligations (the
date on which all such amounts in respect of Senior Indebtedness shall be paid
in full is hereinafter referred to as the "Satisfaction Date"). Each holder of
the Subordinated Obligations hereby agrees that it will not sue for, or
otherwise take, accept or receive, any amounts owing in respect of the
Subordinated Obligations prior to the Satisfaction Date; provided, however,
that holders of Subordinated Obligations may file proofs of claim in connection
with any bankruptcy proceeding involving the Company.
(c) In the event that notwithstanding the provisions of
Section 9.04(b), the Company shall make any payment on account of the principal
of, or interest on, or amounts otherwise owing in respect of, the Subordinated
Obligations, at a time when payment is not permitted by Section 9.04(b), such
payment shall be held by the holder of the Subordinated Obligations, in trust
for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness or their representative or representatives under
the agreements pursuant to which the Senior Indebtedness may have been issued,
as their respective interests may appear, for application pro rata to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in cash in accordance with the terms of
such Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
(d) Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):
(i) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full in cash of such of the principal
of, premium, if any, and interest (including,
38
<PAGE> 39
without limitation, any interest accruing subsequent to the filing of
a petition in bankruptcy at the rate provided in the documentation
with respect thereto, whether or not such interest is an allowed claim
under applicable law) and all other amounts due on such Senior
Indebtedness before any holder of the Subordinated Obligations is
entitled to receive any payment of any kind or character (whether in
cash, property or securities) on account of the principal of or
interest on or any other amount owing in respect of the Subordination
Obligations;
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities to
which any holder of the Subordinated Obligations would be entitled
except for these provisions, shall be paid by the liquidating trustee
or agent or other person making such payment or distribution, whether
a trustee or agent, directly to the holders of Senior Indebtedness or
their representative or representatives under the agreements pursuant
to which the Senior Indebtedness may have been issued, to the extent
necessary to make payment in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 9.04(d), any payment or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any holder of the
Subordinated Obligations on account of principal of, or interest or
other amounts due on, the Subordinated Obligations before all Senior
Indebtedness is paid in full in cash, such payment or distribution
shall be received and held in trust for and shall be paid over to the
holders of the Senior Indebtedness remaining unpaid or unprovided for
or their representative or representatives under the agreements
pursuant to which the Senior Indebtedness may have been issued, for
application to the payment of such Senior Indebtedness until all such
Senior Indebtedness shall have been paid in full in cash, after giving
effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.
Without in any way modifying these provisions or affecting the
subordination effected hereby if such notice is not given, the Company shall
give prompt written notice to the holder of the Subordinated Obligations of any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise).
(e) Subject to the prior payment in full of all Senior
Indebtedness in cash, the holders of the Subordinated Obligations shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness until all amounts owing on the Subordinated Obligations shall be
paid in full, and for the purpose of such subrogation no payments of
distributions to the holders of the Senior Indebtedness by or on behalf of the
Company or by or on behalf of the holder of the Subordinated Obligations by
virtue of these provisions which otherwise would have been made to the holder
of the Subordinated Obligations, shall be deemed to be payment by the Company
to or on account of the Senior Indebtedness, it being understood that these
provisions are and are intended solely for the purpose of defining the relative
rights of the holder of the
39
<PAGE> 40
Subordinated Obligations, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
(f) Nothing contained in these provisions or in the
Subordinated Obligations is intended to or shall impair, as between the Company
and the holder of the Subordinated Obligations, the obligation of the Company
(but not the Manager or the Members), which is absolute and unconditional, to
pay to the holder of the Subordinated Obligations the principal of and interest
on the Subordinated Obligations as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holder of the Subordinated Obligations and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the holder of the Subordinated Obligations
from exercising all remedies otherwise permitted by applicable law, subject to
(x) the rights, if any, under these provisions of the holders of Senior
Indebtedness in respect of cash, property, or securities of the Company
received upon the exercise of any such remedy and (y) the requirement set forth
in Section 9.04(b) that no such exercise shall be permitted prior to the
Satisfaction Date. Upon any distribution of assets of the Company referred to
in these provisions, the holder of the Subordinated Obligations shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the holder of the
Subordinated Obligations, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount of amounts paid or distributed thereon and all other facts pertinent
thereto or to these provisions.
(g) No right of any present or future holders of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by an act or failure to act on the part of
the Company or by any act or failure to act in good faith by any such holder,
or by any noncompliance by the Company with the terms and provisions of the
Subordinated Obligations, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of the Senior
Indebtedness may, without in any way affecting the obligations of the holder of
the Subordinated Obligations with respect thereof, at any time or from time to
time and in their absolute discretion, change the manner, place or terms of
payment of, change or extend the time of payment of, or renew or alter, any
Senior Indebtedness, or amend, modify or supplement any agreement or instrument
governing or evidencing such Senior Indebtedness or any other document referred
to therein, or exercise or refrain from exercising any other of their rights
under the Senior Indebtedness including, without limitation, the waiver of a
default thereunder, the release of any collateral securing such Senior
Indebtedness and an increase in the amount of the Senior Indebtedness, all
without notice to or assent from the holder of the Subordinated Obligations.
(h) Each Member agrees that it shall not assign, transfer,
pledge or otherwise dispose of or encumber the Subordinated Obligations except
pursuant to the Credit Documents (as hereinafter defined).
(i) The term "Senior Indebtedness" shall mean all Obligations
(as defined below) of the Company under the Credit Agreements (as defined
below) and any other Credit Document
40
<PAGE> 41
(as defined in the Credit Agreements) and any renewal, extension, restatement,
refinancing or refunding thereof.
(j) As used herein, (i) the term "Credit Agreements" shall
mean any agreement between the Company and PWRES or any of its Affiliates for
the provision of financing, (ii) the term "Credit Parties" shall have the
meaning provided in the Credit Agreements and (iii) the term "Obligations"
shall mean any principal, interest (other than residual fees or interest),
premium, penalties, fees, indemnities and other liabilities and obligations
payable under the documentation governing any Senior Indebtedness (including,
without limitation, all interest accruing subsequent to the filing of a
petition in bankruptcy at the rate provided in the governing documentation,
whether or not such interest is an allowed claim under applicable law).
Section 9.05 Tax Status. The Members intend and agree
that the Company shall constitute a partnership for federal, state and local
tax purposes. The Members agree that they shall not take any action
(including, without limitation, reporting items of income, gain, loss and
deduction from the Company) that is inconsistent with the Company's status as a
partnership for federal, state and local tax purposes.
Section 9.06 Reports. The Company will deliver to each
Member annual reports containing financial statements prepared in accordance
with U.S. generally accepted accounting principles (such reports to be
delivered within 90 days of the close of the fiscal year to which they relate).
Section 9.07 Expenses. All reasonable fees and expenses
incurred by the Company associated with the Offer, as well as all reasonable
legal fees and expenses incurred through the Effective Date by Cayuga and
Fleetwood in connection with the negotiation and documentation of this
Agreement, will be paid directly or reimbursed by the Company.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Books and Records. The Company shall keep
correct and complete books and records of its accounts and transactions and
minutes of the proceedings of its Members and the Manager. Members and their
representatives, and any other persons or entities as may be admitted as
Members, will have complete access to all such books and records and to all
other information relating to the Company at all reasonable times. So long as
NPI or any of its Affiliates Beneficially Owns any Interests, NPI will cause
the Partnership to furnish each Member with access to any and all information
reasonably requested by the Members, including without limitation for purposes
of exercising the Members' rights under this Agreement.
Section 10.02 Administration. So long as Cayuga or any of
its Affiliates is the Manager, Cayuga will provide all administrative services
for the Company, including bookkeeping and accounting, maintenance of bank
accounts, monitoring of performance of assets, reporting to the Members,
monitoring the preparation and filing of tax returns by a third party,
preparation and filing of other reports (including audited financial statements
of the
41
<PAGE> 42
Company prepared by independent accountants), and maintaining corporate books
and records. All third-party professionals retained for the purposes of
providing such services will be retained by and their reasonable fees and
expenses paid by the Company (subject to a $5,000 per year maximum for fees and
expenses relating to the preparation of audited financial statements). The
Company shall pay to Cayuga an annual administration fee for providing the
services described in the first sentence of this equal to 1.0% per annum of
total capital contributions not to exceed $60,000 per annum. Such
administration fee shall be paid quarterly in advance.
Section 10.03 Distributions. All distributions from the
Company (after payment of expenses and reasonable reserves, in each case to the
extent expressly permitted hereunder) will be made to the Members in proportion
to their Interests in the Company. Units may not be sold (other than as
expressly permitted by Section 7.01(c) or distributed by the Company without
the written consent of all Members. All items of Company income, gain, loss,
deduction and credit shall be allocated to the Members in proportion to their
Interests in the Company.
Section 10.04 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.
Section 10.05 Entire Agreement. This Agreement supersedes any
and all prior or contemporaneous communications or agreements between the
parties hereto concerning the subject matter hereof, whether written or oral.
Section 10.06 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 New York, 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. The provisions of this
Agreement cannot be waived or modified unless such waiver or modification is in
writing and signed by the parties hereto. 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.
Section 10.07 Parties Contractually Bound; Remedies;
Enforcement and Late Payments.
(a) [Intentionally omitted].
(b) For purposes of Section 7.05(b)(v), the aggregate
liability of NPI shall not exceed $10 million.
42
<PAGE> 43
(c) It is understood and agreed that monetary damages
would be an inadequate remedy for violation of this Agreement, and that in the
case of an actual or threatened breach by either party or any of its
representatives, the other party shall be entitled to relief by way of
injunction, specific performance or other equitable remedy, without proof of
irrevocable harm and without the need for posting of a bond.
(d) Except for the obligations contained in Section
7.05(b)(v)(3), Cayuga shall be jointly and severally liable for the obligations
of Cayuga and of its Affiliates (other than the Company) hereunder (and, in
this regard, any action or inaction required hereunder to be taken or not taken
(or which Cayuga is required to cause or prevent or not permit) by any such
Affiliate shall be deemed to be an obligation of both such Affiliate and Cayuga
hereunder), and the Company and/or the Members shall have the right to enforce
this Agreement with respect to all such matters directly against Cayuga,
without first being required to file suit or seek recourse of any kind against
any other Person. In addition, if Cayuga is required to buy Interests and
Member Units pursuant to Section 7.05(b) and if Cayuga fails to perform its
obligations thereunder, then Cayuga shall pay directly to Fleetwood 100% of the
Buy/Sell Purchase Price, plus interest thereon accrued from the date of such
nonperformance at a rate per annum equal to the prime rate established by
Citibank N.A. in effect on the date of such nonperformance, plus eight percent
(but in no event greater than the maximum rate permitted by law).
(e) Fleetwood shall be jointly and severally liable for
the obligations of Fleetwood and of its Affiliates (other than the Company)
hereunder (and, in this regard, any action or inaction required hereunder to be
taken or not taken (or which Fleetwood is required to cause or prevent or not
permit) by any such Affiliate shall be deemed to be an obligation of both such
Affiliate and Fleetwood hereunder), and the Company and/or the Members shall
have the right to enforce this Agreement with respect to all such matters
directly against Fleetwood, without first being required to file suit or seek
recourse of any kind against any other Person. In addition, if Fleetwood is
required to buy Interests and Member Units pursuant to Section 7.05(b) and if
Fleetwood or its Affiliate fails to perform its obligations thereunder, then
Fleetwood shall pay directly to Cayuga 100% of the Buy/Sell Purchase Price,
plus interest thereon accrued from the date of such nonperformance at a rate
per annum equal to the prime rate established by Citibank N.A. in effect on the
date of such nonperformance, plus eight percent (but in no event greater than
the maximum rate permitted by law).
Section 10.08 Survival. Except as otherwise expressly
provided in this Agreement, or as the context otherwise clearly requires, the
provisions of this Agreement shall survive any termination of this Agreement or
of the interest of a Member in the Company. Without limiting the generality of
the foregoing, the parties expressly acknowledge and agree that the provisions
of Sections 4.01 and 4.06, Section 7.05(b)(v), Section 8.06 and Sections 10.06,
10.07, 10.08 and 10.10 shall survive any termination of this Agreement or of
the interest of a Member in the Company.
Section 10.09 Notices. Any and all notices, offers,
acceptances or any other communications provided for in this Agreement shall be
in writing and, except as otherwise expressly provided in this Agreement, shall
be deemed given when delivered by hand. Notice may also be given by telegram
or by electronic facsimile transmission, but in such case will be
43
<PAGE> 44
deemed given only when the telegram or transmission has been received by the
addressee. A duplicate of all such notices, offers, acceptances or other
communications between or among Members shall be mailed to the Company at its
principal offices. Notices shall be directed to the Members at their
respective addresses set forth below (or such other address as the party to be
notified may have requested in writing):
If to Cayuga:
Cayuga Associates L.P.
Attn: Michael L. Ashner
100 Jericho Quadrangle
Jericho, New York 11753
Tel. No.: (516) 822-0022
Fax No.: (516) 433-2777
with copies to:
Joseph L. Getraer, Esq.
Mark I. Fisher, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Tel. No.: (212) 940-8800
Fax No.: (212) 940-8776
and
Steven L. Lichtenfeld, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10023
Tel. No.: (212) 856-6996
Fax No.: (212) 339-9151
If to Fleetwood:
Fleetwood Corp.
Attn: Robert J. Mitchell
100 South Bedford Road
Mount Kisco, New York 10549
Tel. No.: (914) 241-9000
Fax No.: (914) 242-9282
44
<PAGE> 45
with a copy to:
G. David Brinton, Esq.
Craig S. Medwick, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
Tel. No.: (212) 878-8000
Fax No.: (212) 878-8375
If to NPI:
Insignia Financial Group, Inc.
Attn: General Counsel
One Insignia Financial Plaza
Greenville, South Carolina 20602
Tel. No.: (864) 239-1000
Fax No.: (864) 239-1096
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<PAGE> 46
with a copy to:
Arnold S. Jacobs, Esq.
Proskauer Rose Goetz & Mendelsohn, LLP
1585 Broadway
New York, New York 10036
Tel. No.: (212) 969-3000
Fax No.: (212) 969-2900
Section 10.10 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.
Section 10.11 Access to Partnership Information and
Properties. From and after the Commencement of the Offer, Cayuga will, or will
cause its Affiliates to, provide to the Members and any of their Affiliates,
and their respective officers, employees, agents or appointees, reasonable
access at all times, during normal business hours, to all properties, books and
records, financial information, agreements, deeds of trust, mortgages and other
debt instruments and any and all other documents, information and data (whether
written or computer-based) pertaining to the operations and assets of the
Partnership in the possession or control of Cayuga or any of its Affiliates,
including, without limitation, the General Partner.
Section 10.12 Written Consents. Notwithstanding any
provision of this Agreement to the contrary, any action required under this
Agreement to be taken or prohibited from being taken by the Company or any
Member may not be taken or may be taken, as the case may be, without the need
to amend this Agreement if all Members deliver written consents to such action
or inaction to the Manager, which consents shall be filed in the minute book of
the Company.
Section 10.13 Notice of Filing of the Partnership's Report
on Form 10-K or 10-KSB. Cayuga covenants and agrees that Cayuga will, or will
cause an Affiliate to, provide notice to each Member (other than Cayuga and its
Affiliates), within two Business Days after the date on which the Partnership
files its Report on Form 10-K or 10-KSB (including any amendment thereto) with
the Commission, that the Partnership has filed such Report (or amendment).
Section 10.14 Redemptions. As used in this Agreement,
the requirement of or election by the Company to "Effect a Redemption" with
respect to a Member Group means that the Company shall be required or may
elect, as the case may be, to redeem all Interests held by each Member who is a
member of the Member Group being redeemed and purchase from each member of such
Member Group all Member Units of such member (and each such member shall be
required to sell such Member Units to the Company), for an aggregate
consideration equal to the Redemption Amount; provided, however, that in the
case of a Redemption pursuant to Section 5.08 or Section 7.05(c),
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<PAGE> 47
7.05(d) or 7.06(c), the aggregate consideration to be paid by the Company will
equal 75% of the Redemption Amount. In the event the Company Effects a
Redemption with respect to a Member Group in accordance with the provisions of
this Agreement, then (i) as of the date of such election or the date of the
event that gives rise to such requirement, the interest in the Company of each
Member being redeemed shall automatically terminate and be converted into the
right solely to receive such Member's pro rata share of the Redemption Amount
(or 75% of the Redemption Amount, as the case may be), and (ii) the applicable
amount shall be paid to Fleetwood or Cayuga, as the case may be, in cash within
10 days after the effective date of the Redemption; provided, however, that in
the case of a Redemption pursuant to Section 5.08 or Section 7.05(c), 7.05(d)
or 7.06(c), the applicable percentage of the Redemption Amount shall be payable
as and when dividends or distributions in respect of Interests are paid to the
remaining Members, pro rata based on the redeemed Members' aggregate percentage
interest in the Company at the time of the Redemption. In the event the
Company elects or is required to Effect a Redemption with respect to a Member
Group, the members of the Member Group not being redeemed who are Members shall
be obligated to cause such Redemption to be completed and to fund the
applicable Redemption Amount to the extent necessary.
IN WITNESS WHEREOF, Cayuga Associates L.P. and Fleetwood
Corp., being all of the Members of Devon Associates, a New York general
partnership, evidence their adoption and ratification of the foregoing
Partnership Agreement of the Company.
EXECUTED by each Member on the date indicated below:
CAYUGA ASSOCIATES L.P.
By: Cayuga Capital Corporation,
its general partner
By: /s/ Michael L. Ashner
-----------------------------------
Michael L. Ashner
President
FLEETWOOD CORP.
By: /s/ Edward E. Mattner
-----------------------------------
Edward E. Mattner
President
Dated: February 13, 1996
47
<PAGE> 48
The undersigned hereby accepts and agrees to be bound by the
provisions of this Agreement to the extent specified in Sections 7.05(b)(v).
NATIONAL PROPERTY INVESTORS, INC.
By: /s/
-----------------------------------
Dated: February 13, 1996
48
<PAGE> 49
SCHEDULE I
<TABLE>
<CAPTION>
Percentage
Member Contribution Interest
------ ------------ --------
<S> <C> <C>
Cayuga Associates L.P. $670,000 67%
Fleetwood Corp. $330,000 33%
</TABLE>
I-1
<PAGE> 1
EXHIBIT 99.(g)(1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 19, 1996
Growth Hotel Investors II
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
California
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(State or Other Jurisdiction of Incorporation)
0-16491 94-2997382
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(Commission File Number) (I.R.S. Employer Identification No.
c/o Insignia Financial Group, Inc.,
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
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(Address of Principal Executive Offices) (Zip Code)
(803) 239-1000
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(Registrant's Telephone Number, Including Area Code)
5665 Northside Drive, N.W., Atlanta, Georgia 29602
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 1. Change in Control
On August 17, 1995, Michael L. Ashner, Martin Lifton, Arthur
N. Queler and certain of their respective family members, and AP-NPI II L.P., a
Delaware limited partnership, entered into an agreement to sell to IFGP
Corporation, a Delaware corporation, an affiliate of Insignia Financial Group,
Inc., a Delaware corporation ("Insignia"), all of the issued and outstanding
common stock of National Property Investors, Inc., a Delaware corporation
("NPI"), for an aggregate purchase price of $1,000,000. NPI is the sole
shareholder of NPI Equity Investments II, Inc., a Florida corporation ("NPI
Equity"), the managing general partner of Fox Realty Investors, a California
general partnership ("FRI"). FRI is the general partner of Montgomery Realty
Company-85, the managing general partner of the Registrant. All of the funds
used in making the purchase were drawn under a revolving credit facility
established by a syndicate of lenders for the benefit of Insignia, with First
Union National Bank of South Carolina as Administrative Agent and Lehman
Commercial Paper, Inc. as Syndication Agent. The closing of the transactions
contemplated by the above mentioned agreement (the "Closing") occurred on
January 19, 1996.
Upon the Closing, the officers and directors of NPI and NPI
Equity resigned and Insignia caused new officers and directors of each of those
entities to be elected. Insignia does not now own, directly or indirectly, any
units of limited partnership of the Registrant.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GROWTH HOTEL INVESTORS II
By: Montgomery Realty Company-85,
its general partner
By: Fox Realty Investors,
its general partner
By: NPI Equity Investments II, Inc.
its managing partner
Date: February 5, 1996 By: /s/ John K. Lines
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Name: John K. Lines
Title: Vice President/Secretary
