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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A/A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Oxford Tax Exempt Fund II Limited Partnership
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(Exact Name of Registrant as Specified in its Charter)
Maryland 52-1394232
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(State of Incorporation (I.R.S. Employer
or Organization) Identification no.)
7200 Wisconsin Avenue; Suite 1100
Bethesda, Maryland 20814
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(Address of principal (zip code)
executive offices)
If this Form relates to the If this Form relates to the
registration of a class registration of a class of debt
of debt securities and is securities and is to become
effective upon filing pursuant effective simultaneously with
to General Instruction A(c)(1) the effectiveness of a
please check the following box. concurrent registration
[ ] statement under the Securities
Act of 1933 pursuant to General
Instruction A(c)(2) please
check the following box. [ ]
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Beneficial Assignee Interests American Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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Item 1. Description of Registrant's Securities to be Registered.
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The securities to be registered are beneficial assignee
interests ("BACs") which represent assignments of the existing
limited partnership interests in Oxford Tax Exempt Fund II Limited
Partnership ("OTEF II"). Information concerning the BACs to be
registered hereunder is incorporated by reference from the
following:
1. "Item 2. Changes in Securities" of OTEF II's Quarterly Report
on Form 10-Q for the period ended June 30, 1995, which appears
on pages 2 through 6 of such report.
2. "Item 2. Changes in Securities" of OTEF II's Quarterly Report
on Form 10-Q/A for the period ended March 31, 1997, which
appears on pages 2 through 8 of such report.
3. "Item 11. Description of Registrant's Securities to be
Registered" of Amendment No. 2 to OTEF II's Registration
Statement on Form 10/A (No.0-25600), which appears on pages 42
through 56 of such Registration Statement. Amendment No. 2 to
such Registration Statement was filed with the Commission on
April 27, 1995 pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended.
Item 2. Exhibits.
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The following Exhibits are filed with the American Stock
Exchange, Inc., and not filed with the Securities and Exchange
Commission, in accordance with Instructions As To Exhibits, II, of
Form 8-A:
1. Articles of Incorporation of OTEF II Corporation.
2. Bylaws for OTEF II Corporation.
3. Articles of Incorporation of OTEF II Assignor Corporation.
4. Bylaws of OTEF II Assignor Corporation.
5. Certificate of Limited Partnership of OTEF II, dated
February 2, 1995.
6. Agreement of Limited Partnership of OTEF II, dated as of
February 2, 1995.
7. Amendment to the Certificate of Limited Partnership of
OTEF II, dated February 16, 1995.
8. First Amendment to the Agreement of Limited Partnership of
OTEF II, dated as of February 16, 1995.
9. First Amended and Restated Agreement of Limited Partnership of
OTEF II, dated as of June 1, 1995.
10. Second Amended and Restated Agreement of Limited Partnership
of OTEF II, dated as of June 26, 1995.
11. Third Amended and Restated Agreement of Limited Partnership of
OTEF II, dated as of June 26, 1995.
12. OTEF II's Annual Report on Form 10-K for the year ended
December 31, 1996.
13. OTEF II's Annual Report to securityholders for the fiscal year
ended December 31, 1996.
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14. OTEF II's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.
15. OTEF II's Quarterly Report on Form 10-Q/A for the quarter
ended March 31, 1997.
16. OTEF II's Registration Statement on Form 10/A pursuant to
Section 12(g) of the Securities Exchange Act of 1934 dated as
of February 22, 1995, together with all amendments to such
Registration Statement (No. 0-25600).
17. A specimen certificate of the OTEF II BACs.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereto duly authorized.
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
By: Oxford Tax Exempt Fund II Corporation,
Managing General Partner of the Registrant
Date: July 21, 1997 By:/s/Richard R. Singleton
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Richard R. Singleton,
Senior Vice President and
Chief Financial Officer
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
PART II -OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
The General Partners and the Initial Limited Partner entered into
a Second Amended and Restated Agreement of Limited Partnership,
effective June 26, 1995 ("OTEF II Partnership Agreement"). That
agreement amended and restated the First Amended and Restated
Agreement of Limited Partnership, dated June 1, 1995 ("First
Agreement"). The principal provisions of the OTEF II Partnership
Agreement that relate to the rights and obligations of the OTEF II
BAC Holders are summarized below. To the extent that the
provisions summarized below differ in any material respects from
the provisions of the First Agreement, the differences are noted.
Transfers. Subject to applicable federal and state securities
laws and regulations and certain other restrictions, the OTEF II
BACs will be transferable on the books of OTEF II. The transfer
agent for OTEF II currently charges $25 for each transfer of OTEF
II BACs between related parties and $50 for other transfers.
The Managing General Partner may defer a transfer of OTEF II BACs
or assignment of limited partnership interests if it would result
in the transfer (as defined by the federal income tax laws) of 50%
or more of all limited partnership interests and OTEF II BACs
within a 12-month period and if the Managing General Partner
determines, following receipt of advice from counsel, that the
resulting termination of OTEF II as a partnership for tax purposes
would have a material adverse effect on the financial interests of
the OTEF II BAC Holders or the limited partners of OTEF II.
Liability of Partners to Third Parties. The General Partners of
OTEF II are liable to third parties for all general obligations of
OTEF II to the extent not paid by OTEF II. Each partner of OTEF II
and OTEF II BAC Holder may look only to the assets of OTEF II for
any distribution with respect to his interest in OTEF II and shall
have no recourse against any other OTEF II BAC Holder or partner of
OTEF II. The General Partners of OTEF II will not be liable for any
nonrecourse obligations of OTEF II.
OTEF II BAC Holders are not obligated to make any capital
contributions to OTEF II other than, in the case of OTEF II BAC
Holders who receive their OTEF II BACs in the Distribution, the
deemed contribution of the transferred assets and, in the case of
any additional OTEF II BAC Holders, the consideration for receipt
of their
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
OTEF II BACs. No OTEF II BAC Holder is personally liable for the
debts, liabilities, contracts or other obligations of OTEF II,
unless, in addition to the exercise of his rights and powers as an
OTEF II BAC Holder, he takes part in the control of the business of
OTEF II. Notwithstanding the foregoing, if an OTEF II BAC Holder
receives the return of any part of his capital contribution without
violation of the OTEF II Partnership Agreement or the Maryland
Revised Uniform Limited Partnership Act (the "Act"), he is liable
to OTEF II for a period of one year thereafter for the amount of
the returned contribution, but only to the extent necessary to
discharge OTEF II's liabilities to creditors who extended credit to
OTEF II during the period the contribution was held by OTEF II. In
addition, if an OTEF II BAC Holder receives the return of any part
of his capital contribution in violation of the OTEF II Partnership
Agreement or the Act, he is liable to OTEF II for a period of six
years thereafter for the amount of the capital contribution
wrongfully returned.
Withdrawal of Capital and Redemption of Limited Partners'
Interest. Each OTEF II BAC Holder may look solely to the assets
of OTEF II for all distributions with respect to OTEF II and will
have no recourse against any partner of OTEF II. OTEF II does not
intend to repurchase or redeem OTEF II BACs from OTEF II BAC
Holders, although it has the right to do so under the OTEF II
Partnership Agreement. The First Agreement did not provide for
repurchases and redemptions. An OTEF II BAC Holder will have no
right to withdraw or receive any return of his capital contribution
other than as provided in the OTEF II Partnership Agreement.
Allocations and Distributions. OTEF II BAC Holders' capital
accounts will be increased by all contributions made by them to
OTEF II and will be reduced by all distributions made to them by
OTEF II. The capital accounts will be increased by the amount of
all taxable as well as tax-exempt income of OTEF II (defined for
purposes of these provisions as "Profits") and will be reduced by
the amount of all tax deductible as well as non-tax-deductible
expenditures of OTEF II (defined for purposes of these provisions
as "Losses"). The capital accounts of the OTEF II BAC Holders will
be revalued upon certain events, including the admission of
additional BAC Holders to OTEF II in exchange for additional
capital contributions.
Distributions of Cash Flow. All "Cash Flow" (which, in general
terms, means OTEF II's cash receipts, other than Residual and
Liquidation Proceeds [as defined below], less its cash expenses) in
any year will first be distributed 98% to the OTEF II BAC Holders
and 2% to the General Partners until the OTEF II BAC Holders as a
class (other than the holders of the OTEF II BACs issued to Two
Broadway Associates IV B, an affiliate of the selling agent for the
original offering of OTEF BACs, which OTEF II BACs are referred to
herein as the "Affiliated OTEF II BACs") have received, during such
year, a noncumulative 11% preferred return on the BAC Holders'
Preference Amount (as defined below) and, thereafter during such
year, 90% to the OTEF II BAC Holders as a class and 10% to the
General Partners. The "BAC Holders' Preference Amount" means an
amount equal to the total capital contributions of the OTEF BAC
Holders to OTEF (reduced by any distributions of residual proceeds
previously made by OTEF to the OTEF BAC Holders), increased by the
amount of any capital contributions that may be made subsequent to
the formation of OTEF II by additional OTEF II BAC Holders admitted
to OTEF II, and reduced by all distributions of Residual and
Liquidation Proceeds by OTEF II to the OTEF II BAC Holders.
Distributions of Residual and Liquidation Proceeds. All "Residual
Proceeds" (which, in general, means the cash OTEF II receives from
capital contributions, loans to OTEF II, the sale of a Mortgaged
Property or Other Asset [a "Sale"], the sale of a Mortgage Revenue
Bond or interest therein or the repayment of the principal and
interest payable upon maturity or remarketing of a mortgage revenue
bond [a "Repayment"], other than a Sale or Repayment that occurs in
connection with the liquidation of OTEF II) will be applied to the
payment of expenses or utilized for Partnership investments at the
discretion of the Managing General Partner, and will be available
for application and distribution to the extent not so applied or
invested, in which case such amounts will be applied and
distributed generally in the following amounts and order of
priority:
(a) to the payment of all debts and obligations of OTEF II
(except for loans made by the General Partner or their
affiliates to OTEF II) and to any additions to the
working capital reserve that the General Partner deems
necessary;
(b) to the OTEF II BAC Holders as a class (other than the
holders of the Affiliated OTEF II BACs, as described
below) until the OTEF II BAC Holders receive aggregate
distributions from Residual Proceeds equal to the BAC
Holders' Preference Amount;
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
(c) to the holders of the Affiliated OTEF II BACs in an
amount equal to $1,000 times the number of OTEF II BACs
held by them, less any prior distributions of Residual
Proceeds (and prior distributions of residual proceeds by
OTEF);
(d) to the General Partners and their affiliates to repay
loans, if any, from the General Partners or their
affiliates to OTEF II, with interest thereon;
(e) to the General Partners to repay their capital
contributions to OTEF II; and
(f) the remainder, if any, 98% to the OTEF II BAC Holders
and 2% to the General Partners, except that the 2%
return to the General Partners generally is deferred
until OTEF II BAC Holders receive an amount (when
combined with all prior distributions of Cash Flow and
Residual Proceeds) equal to an average annual
noncompounded return of 10% on the BAC Holders Preference
Amount. The First Agreement did not provide for a
deferral of the General Partners' 2% interest.
"Liquidation Proceeds" (which, in general, means all cash
receipts of OTEF II arising from the dissolution of OTEF II and
liquidation of OTEF II's assets) generally will be distributed in
the same order of priority as Residual Proceeds, except that the
first distributions of Liquidation Proceeds will be to the
establishment of certain reserves.
Allocations of Profits and Losses. Profits from operations
generally will be allocated between the OTEF II BAC Holders and the
General Partners as follows: first, to each partner or OTEF II BAC
Holder in proportion to the excess of his respective distributions
of Cash Flow over the total Profits allocated to such partner or
OTEF II BAC Holder, until the cumulative Profits so allocated are
equal to the cumulative Cash Flow distributions, and thereafter 2%
to the General Partners and 98% to the OTEF II BAC Holders. Losses
from operations generally are allocated 2% to the General Partners
and 98% to the OTEF II BAC Holders. Profits and Losses arising
from a Sale or Repayment (including Profits which represent the
receipt of interest income on a Mortgage Revenue Bond), sale of a
Mortgage Revenue Bond (or interest therein), or liquidation of OTEF
II generally will be allocated in a manner so as to cause the
capital account balances of the General Partners and OTEF II BAC
Holders to equal the amounts that would be distributable to them as
described above in paragraphs (b) through (f) of "Distributions of
Residual and Liquidation Proceeds".
Self-Administration. OTEF II may enter into a transaction (the
"Self-Administration Transaction") to acquire all of the assets
(the "Management Assets") relating to the management services
currently provided and proposed to be provided to OTEF II (the
"Management Services") by an affiliate of the Managing General
Partner to enable OTEF II to become self-administered. The
Managing General Partner had the authority under the First
Agreement to acquire the Management Assets and to hire employees
(who may be affiliates of the General Partners) to perform
Management Services. However, the First Agreement did not address
certain matters, including the issuance of OTEF II BACs in exchange
for Management Assets, subject to receipt of a valuation from a
recognized valuation firm, and the provision of Management Services
by OTEF II to unaffiliated entities, subject to the approval of the
OTEF II BAC Holders or OTEF II's Independent Real Estate Consultant
("IREC").
Voting Rights and Meetings. Each OTEF II BAC Holder, through the
Initial Limited Partner of OTEF II, shall be entitled to cast one
vote for each OTEF II BAC that he owns, at a meeting, in person, by
written proxy, or by a signed writing directing the manner in which
he desires his vote to be cast. Every proxy shall be revocable at
the pleasure of the OTEF II BAC Holder executing it. Only the
votes of OTEF II BAC Holders of record on the notice date relating
to such vote shall be counted.
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
The OTEF II BAC Holders owning two-thirds in interest of the OTEF
II BACs (unless such percentage is reduced to a majority-in-
interest as described below), and without the concurrence of the
General Partners of OTEF II, have the right to vote to:
(a) approve or disapprove the sale of all or substantially
all of the assets of OTEF II at any one time, except for
the remarketing of mortgage revenue bonds in accordance
with their terms and a sale approved by the IREC;
(b) amend the OTEF II Partnership Agreement, except that (i)
no such amendment may in any manner allow the OTEF II
BAC Holders in their capacity as such to take part in the
control of the business of OTEF II, (ii) without the
consent of each partner of OTEF II or OTEF II BAC Holder
affected thereby, no such amendment may enlarge the
obligations of any Partner of OTEF II or OTEF II BAC
Holder under the OTEF II Partnership Agreement, modify
the order of or the method of determining distributions
of Cash Flow, Residual Proceeds or Liquidation Proceeds
or of allocations of Profits and Losses, except that the
General Partners may so amend the OTEF II Partnership
Agreement without such consent to reflect an issuance of
additional limited partnership interests, OTEF II BACs,
or other securities, and (iii) without the consent of all
partners of OTEF II and OTEF II BAC Holders, no such
amendment may modify the purposes of OTEF II as
established by the OTEF II Partnership Agreement or
change the foregoing provisions;
(c) remove a General Partner and, if such General Partner was
the sole remaining General Partner, elect a replacement
therefor;
(d) dissolve OTEF II, and approve or disapprove the provision
by OTEF II for the engagement of OTEF II management
services with respect to assets owned by unaffiliated
entities, unless OTEF II obtains an opinion of the IREC
with respect to the fairness thereof; and
(e) approve or disapprove the provision by OTEF II of, or
the engagement of OTEF II in, management services with
respect to assets owned by unaffiliated entities, unless
OTEF II obtains an opinion of the IREC with respect to
the fairness thereof.
As noted above in "Self-Administration Transaction," the
provision in (e) above was added to the OTEF II Partnership
Agreement. In addition, the OTEF II Partnership Agreement
corrected an ambiguity with respect to the issuance by OTEF II of
additional securities by making clear in (b) above that the General
Partners may amend the OTEF II Partnership without the consent of
the OTEF II BAC Holders to reflect an issuance of additional
limited partnership interests, OTEF II BACs, or other securities,
even if such amendments modify the order of distributions or the
method of determining distributions to the OTEF II BAC Holders.
The OTEF II Partnership Agreement provides that the percentage-
in-interest of the OTEF II BAC Holders required to effect the
actions described in items (a) through (e) above may be reduced
from two-thirds in interest to a majority-in-interest, if such
reduction is approved by the Managing General Partner and a
majority-in-interest of the OTEF II BAC Holders.
There will be no annual or other periodic meetings of the OTEF II
BAC Holders', however, meetings of the OTEF II BAC Holders for any
purpose may be called by the Managing General Partner and are
required to be called by the Managing General Partner upon written
request of OTEF II BAC Holders owning in the aggregate 20% or more
of the outstanding OTEF II BACs.
Bankruptcy, Withdrawal, Dissolution or Removal of General
Partner. The remaining General Partner(s) of OTEF II may elect to
continue the business of OTEF II in the event of the bankruptcy,
withdrawal, dissolution or removal of a General Partner of OTEF II;
provided, however, that if such bankrupt, withdrawn, dissolved or
removed General Partner of OTEF II is the sole General Partner of
OTEF II, then OTEF II shall be dissolved, unless, within 90 days of
the bankruptcy, dissolution, withdrawal or removal of such General
Partner of OTEF II, all of the OTEF II BAC Holders agree in writing
to continue the business of OTEF II and to the appointment of one
or more successor General Partners of OTEF II.
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
The OTEF II Partnership Agreement also provides that, if at the
time of the bankruptcy, withdrawal, dissolution, or removal of a
General Partner, the aggregate of the partnership interests of the
remaining General Partner(s) is less than 1%, there shall be
assigned and transferred, at a cash purchase price equal to the
value of such transferred interest and on a pro rata basis, to the
remaining General Partner(s) of OTEF II, such portion of the
partnership interest of the bankrupt, withdrawn, dissolved, or
removed General Partner of OTEF II as is necessary to increase the
aggregate of the partnership interest of the remaining General
Partner(s) to 1%. To the extent that any partnership interest of
the bankrupt, withdrawn, dissolved, or removed General Partner is
not so transferred or assigned, such interest shall thereafter be
converted to a special limited partner interest with no rights to
participate in the management or affairs of the Partnership or to
vote on any matter requiring the consent of the OTEF II BAC
Holders.
Books and Records. The books and records of OTEF II shall be
maintained at the office of OTEF II, currently located at 7200
Wisconsin Avenue, 11th floor, Bethesda, Maryland 20814. In
general, OTEF II BAC Holders who own in the aggregate at least five
percent of the outstanding OTEF II BACs have the right to secure a
copy of the OTEF II Partnership Agreement, a current list of the
OTEF II BAC Holders and certain other information.
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q/A
Amendment No. 1
PART II
Item 2. Changes in Securities
Reformation of OTEF II Partnership Agreement
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On January 31, 1997, the United States District Court for the
District of Maryland issued a final order and judgment (the "Final
Order") and memorandum opinion which approved the terms of the
settlement (the "Settlement") of certain putative class and
derivative lawsuits consolidated under the caption In re Oxford Tax
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Exempt Fund Securities Litigation. The Final Order reforms certain
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provisions of OTEF II's limited partnership agreement. The
revisions have been incorporated into a Third Amended and Restated
Agreement of Limited Partnership (the "Reformed Partnership
Agreement"), which amends and restates OTEF II's Second Amended and
Restated Agreement of Limited Partnership dated as of June 26, 1995
(together, generally, with the Reformed Partnership Agreement, the
"OTEF II Partnership Agreement"). The court ordered revisions
embodied in the Reformed Partnership Agreement are deemed effective
as of June 26, 1995.
The substance of these revisions is as follows:
1) Oxford Tax Exempt Fund II Corporation, OTEF II's managing
general partner (the "MGP"), agreed to limitations on certain
fees payable to its parent in connection with OTEF II's new
business plan (the "Liquidity and Growth Plan").
2) The MGP is authorized to reinvest cash flow of OTEF II in
acquisitions of additional tax-exempt mortgage revenue bonds
("MRBs"), but it may not reinvest any cash flow attributable to
the assets segregated for the Status Quo BACs (defined below).
3) The MGP has the authority under certain provisions of the OTEF
II Partnership Agreement to invest in certain assets which may
produce taxable income.
4) Any contracts for services rendered to OTEF-II by the general
partners of OTEF II (the "General Partners") or their
affiliates shall be terminable by a vote of a majority in
interest of the OTEF II BAC Holders.
5) Capital improvements to a property securing OTEF II's existing
MRBs, costing in excess of $250,000 in a calendar year
(adjusted for inflation), shall not be approved for payment by
OTEF II without approval of OTEF II's independent real estate
consultant (the "IREC").
6) If the MGP or its affiliates (but not OTEF II) initiates a
tender offer for more than 10% of the OTEF II BACs then
outstanding, and at the time such tender offer is initiated
there is not pending any public offer to purchase OTEF II BACs,
then the MGP shall not employ the OTEF II BAC Holder Rights
Plan to prevent the closing of subsequent competing offers to
purchase OTEF II BACs that are published and outstanding prior
to the termination date of the tender by the MGP or its
affiliate.
7) The percentage of vote required to take certain actions shall
be as follows:
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(a) Actions Requiring a Two-Thirds Vote:
i. approval or disapproval of the sale of all or
substantially all of the assets of OTEF II, unless
OTEF II obtains a written opinion of the IREC;
ii. any amendment to the OTEF II Partnership Agreement
that modifies or alters the voting requirements;
iii. any amendment to the OTEF II Partnership Agreement
that authorizes the payment of additional fees
not already authorized by the OTEF II Partnership
Agreement to the MGP or its affiliates, or modifies
any such existing fees in a way not already
authorized by the OTEF II Partnership Agreement;
iv. the removal of any General Partner and, if such
General Partner was the sole remaining General
Partner, the election of a replacement general
partner; or
v. the dissolution of OTEF II.
(b) Actions Requiring a Majority Vote:
i. OTEF II's acquisition of control of any management
entity, or of management assets of any management
entity affiliated with the MGP, unless any such
acquisition is incidental to the acquisition by OTEF
II of any additional MRBs or other assets, or is
incidental to the acquisition of any entity the
principal assets of which are MRBs or other assets
(and which is not itself a management entity);
ii. the provision by OTEF II of or the engagement of
OTEF II in management services (other than those
services provided by OTEF II in the ordinary course
of its business on and after June 25, 1995) with
respect to any of the MRBs or with respect to any of
the mortgaged properties, unless OTEF II obtains an
opinion of the IREC;
iii. the termination of any contract for management
services provided to OTEF II by the MGP or its
affiliates; and
iv. any amendment to the OTEF II Partnership Agreement,
other than those amendments described above in item
7(a)(ii) and (iii).
8) Any OTEF II BACs or Status Quo BACs purchased or redeemed by
OTEF II shall, to the extent permissible under law, be voted in
the same proportion as all other OTEF II BACs or Status Quo
BACs voting, for so long as OTEF II holds them.
9) Any OTEF II BACs or Status Quo BACs acquired from OTEF II by
any person pursuant to any compensation plan, option plan or
incentive plan established by OTEF II ("Management BACs")
shall, for so long as such Management BACs have not been sold
or transferred in an arms-length transaction, be voted in the
same proportion as all other BACs or Status Quo BACs, except
that these proportionate voting requirements do not apply to
any amendments that require only a majority vote (other than
amendments required in connection with a determination that
OTEF II shall engage in the business of providing management
services to unaffiliated parties). The MGP shall not permit
OTEF II to accept any promissory note or other debt
instrument, securities, property or services in payment for
the exercise by any holder of an option to acquire Management
BACs.
10) Unless otherwise authorized by a majority vote, OTEF II shall
not assume or incur debt in excess of sixty-five percent of the
value of OTEF II's assets (unless, in the sole discretion of
the MGP, a higher percentage is required on an urgent basis to
avoid any adverse effect on the business, operations or
prospects of OTEF II or such higher percentage is required for
one or more periods not exceeding one year.
Issuance of Status Quo BACs
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Effective April 1, 1997, OTEF II issued a new class of BACs
("Status Quo BACs") to the holders of OTEF II BACs who made a
timely election to convert all or a portion of their OTEF II BACs
into Status Quo BACs on the terms and conditions described in the
Information Memorandum that was distributed on December 2, 1996 to
the OTEF II BAC Holders. The Status Quo BACs were issued on a one-
for-one basis for the OTEF II BACs that were elected to be
converted. The Status Quo BACs are designed to replicate, to the
extent possible, the economic interests that the holders of the
Status Quo BACs (the "Status Quo BAC Holders") would have had in
OTEF II's existing assets if the partnership agreement for Oxford
Tax Exempt Fund Limited Partnership, OTEF II's predecessor
("OTEF"), had continued to govern and the Liquidity and Growth Plan
were not implemented. The rights and obligations of the Status Quo
BAC Holders are set forth in a supplement to the OTEF II
Partnership Agreement entitled the "Designation of the Rights and
Preferences of the Holders of Status Quo BACs."
In connection with the issuance of the Status Quo BACs, the MGP
designated as "Status Quo Assets" a pro rata portion of OTEF II's
existing assets based on the number of OTEF II BACs converted into
Status Quo BACs. The Status Quo Assets are held for the benefit of
the Status Quo BAC Holders. The remaining assets of OTEF II (the
"Liquidity Assets") are now designated for the benefit of the OTEF
II BAC Holders who did not elect the Status Quo BAC option and any
other holders of OTEF II BACs (together, the "Liquidity BAC
Holders"). Any new assets that OTEF II acquires pursuant to the
Liquidity and Growth Plan ("New Assets") also will be held for the
benefit of the Liquidity BAC Holders.
<PAGE> 4
The following discussion summarizes the effect of the issuance of
the Status Quo BACs on certain rights of the Liquidity BAC Holders
and the Status Quo BAC Holders.
Rights to Allocations and Distributions
- ---------------------------------------
Capital Accounts. Following the issuance of the Status Quo BACs,
the BAC Holders who retained their OTEF II BACs had the same
capital accounts as they had prior to the issuance of the Status
Quo BACs. Their capital accounts and the capital accounts of the
Liquidity BAC Holders will be increased by profits relating to the
Liquidity Assets and the New Assets ("Liquidity Profits"), but not
by any profits relating to the Status Quo Assets ("Status Quo
Profits"), and will be reduced by the amount of all distributions
made to them by OTEF II (the "Liquidity Cash Flow") and losses
relating only to the Liquidity Assets and the New Assets
("Liquidity Losses"), but not by any losses relating to the Status
Quo Assets ("Status Quo Losses").
Status Quo BAC Holders have the same capital accounts as they had
prior to the conversion of their OTEF II BACs into Status Quo BACs.
Their capital accounts will be increased by the Status Quo Profits,
but not by any Liquidity Profits, and will be reduced by the amount
of all distributions made to them by OTEF II (the "Status Quo Cash
Flow") and all Status Quo Losses, but not by any Liquidity Losses.
OTEF II will maintain two capital accounts for BAC Holders who
elect to convert only a portion of their OTEF II BACs into Status
Quo BACs.
Subordinated BACs. Two Broadway Associates IV, an affiliate of
Merrill Lynch, Pierce, Fenner & Smith Incorporated, the selling
agent for the 1985 offering of OTEF BACs, directly owns 1,500 OTEF
II BACs (the "Affiliated OTEF II BACs"), which were issued in
exchange for services rendered by Merrill Lynch in connection with
the 1985 offering and which are subordinated to the other OTEF II
BACs with respect to allocations and distributions of Liquidity
Residual and Liquidation Proceeds (as defined below).
Distributions of Cash Flow. Liquidity Cash Flow and Status Quo
Cash Flow will be distributed as described below.
Liquidity Cash Flow. Liquidity Cash Flow, in any year will first
be distributed 98% to the Liquidity BAC Holders and 2% to the
General Partners until the Liquidity BAC Holders as a class (other
than the holder(s) of the Affiliated OTEF II BACs) have received,
during such year, a noncumulative 11% preferred return on the
Liquidity BAC Holders Preference Amount (as defined below) and,
thereafter during such year, 90% to the Liquidity BAC Holders as a
class and 10% to the General Partners. The "Liquidity BAC Holders
Preference Amount" means an amount equal to the total capital
contributions of the Liquidity BAC Holders to OTEF or OTEF II,
reduced by any distributions of residual proceeds previously made
to them by OTEF, and further reduced by all distributions of
Liquidity Residual and Liquidation Proceeds made by OTEF II to the
Liquidity BAC Holders.
Status Quo Cash Flow. All Status Quo Cash Flow in any year will
first be distributed 98% to the Status Quo BAC Holders as a class
and 2% to the General Partners until the Status Quo BAC Holders as
a class have received a noncumulative return in such year equal to
11% of the Status Quo BAC Holders Preference Amount (defined below)
and, thereafter during such year, 90% to the Status Quo BAC Holders
as a class and 10% to the General Partners. The "Status Quo BAC
Holders Preference Amount" means an amount equal to the total
capital contributions of the Status Quo BAC Holders to OTEF,
reduced by any distributions of residual proceeds previously made
to them by OTEF, and further reduced by all distributions of Status
Quo Residual and Liquidation Proceeds (defined below) made by OTEF
II to the Status Quo BAC Holders.
Distributions of Residual Proceeds and Liquidation Proceeds. All
Residual Proceeds of OTEF II (which, in general, means the cash
OTEF II receives from the sale of a mortgaged property or New Asset
(a "Sale") or the repayment of the principal and interest payable
upon maturity or remarketing of a MRB (a "Repayment"), other than a
Sale or Repayment that occurs in connection with the liquidation of
OTEF II) will be designated as "Liquidity Residual Proceeds" to
the extent such Residual Proceeds relate to the Liquidity and New
Assets and as "Status Quo Residual Proceeds" to the extent that
they relate to the Status Quo Assets. The Liquidity Residual
Proceeds, but not the Status Quo Residual Proceeds, may be
reinvested in New Assets at the discretion of the MGP. The
Liquidity Residual Proceeds, to the extent they are not reinvested,
and the Status Quo Residual Proceeds, will be applied and
distributed generally as described below.
Liquidity Residual and Liquidation Proceeds. The Liquidity
Residual Proceeds shall be applied to the payment of the expenses
allocable to the OTEF II BACs or reinvested in New Assets at the
discretion of the MGP, and to the extent not so applied or
reinvested, shall be available for distribution in which case such
amounts generally shall be applied and distributed in the following
amounts and order of priority:
<PAGE> 5
(a) 100% to the payment of all debts and obligations of OTEF II
that are then due and owing related to the Liquidity and New
Assets (other than loans from the General Partners and their
affiliates) and to any additions to the working capital
reserve with respect to the Liquidity and New Assets that the
MGP may determine to be necessary;
(b) 100% to the Liquidity BAC Holders as a class (other than the
holder(s) of the Affiliated OTEF II BACs) until the Liquidity
BAC Holders (other than the holder(s) of the Affiliated OTEF
II BACs) receive aggregate distributions from Liquidity
Residual Proceeds equal to the Liquidity BAC Holders
Preference Amount;
(c) 100% to the holder(s) of the Affiliated OTEF II BACs in an
amount equal to $1,000 times the number of Affiliated OTEF II
BACs less any prior distributions of Residual Proceeds with
respect to such Affiliated OTEF II BACs;
(d) 100% to the General Partners and their affiliates to repay
loans, if any, from them to OTEF II, with interest thereon,
except to the extent the proceeds of any such loans were used
to pay amounts relating to the Status Quo Assets or OTEF II's
ownership thereof;
(e) 100% to the General Partners until the General Partners
receive aggregate distributions from Liquidity Residual
Proceeds and Status Quo Residual Proceeds equal to the General
Partners Preference Amount (generally, an amount equal to the
total capital contributions of the General Partners to OTEF
II reduced by all distributions of Liquidity Residual and
Liquidation Proceeds and Status Quo Residual and Liquidation
Proceeds); and
(f) the remainder, if any, 98% to the Liquidity BAC Holders and 2%
to the General Partners, except that the 2% return to the
General Partners generally is deferred until the Liquidity BAC
Holders receive an amount (when combined with all prior
distributions of Liquidity Cash Flow and Liquidity Residual
Proceeds) equal to an average annual noncompounded return of
10% on the Liquidity BAC Holders Preference Amount.
Liquidity Liquidation Proceeds (which, in general, means all cash
receipts of OTEF II arising from the dissolution of OTEF II and
liquidation of the Liquidity and New Assets) generally will be
distributed in the same order of priority as Liquidity Residual
Proceeds, except the first application of Liquidity Liquidation
Proceeds will be to establish certain reserves.
If Liquidity Residual Proceeds or Liquidity Liquidation Proceeds
are insufficient to make any payment set forth in a particular
paragraph (b) through (f) above, then Liquidity Residual Proceeds
or Liquidity Liquidation Proceeds available to make the payment
will be distributed proportionately among the parties entitled to
the payment under such paragraph.
Status Quo Residual and Liquidation Proceeds. Status Quo
Residual Proceeds shall be applied to the payment of the expenses
allocable to the Status Quo BACs, and to the extent not so applied,
shall be available for distribution in which case such amounts
generally shall be applied and distributed in the following amounts
and order of priority:
(a) 100% to the payment of all debts and obligations of OTEF II
that are then due and owing related to the Status Quo Assets
(other than loans from the General Partners and their
affiliates) and to any additions to the working capital
reserve with respect to the Status Quo Assets that the MGP may
determine to be necessary;
(b) 100% to the Status Quo BAC Holders as a class until the Status
Quo BAC Holders receive aggregate distributions from Status
Quo Residual Proceeds equal to the Status Quo BAC Holders
Preference Amount;
(c) 100% to the General Partners and their affiliates to repay
loans, if any, from them to OTEF II, the proceeds of which
were used to pay amounts relating to the Status Quo Assets or
OTEF II's ownership thereof;
(d) 100% to the General Partners until the General Partners
receive aggregate distributions from Liquidity Residual
Proceeds and Status Quo Residual Proceeds equal to the General
Partners Preference Amount; and
(e) the remainder, if any, 98% to the Status Quo BAC Holders as a
class and 2% to the General Partners until the Status Quo BAC
Holders as a class have received an amount (when combined
with all prior distributions of cash flow and Residual
Proceeds) equal to an average annual noncompounded return of
11% on the Status Quo BAC Holders Preference Amount, except
that the amounts otherwise payable to the General Partners
hereunder shall be deferred until the Status Quo BAC Holders
as a class have received an amount (when combined with all
prior distributions of Status Quo Cash Flow and Residual
Proceeds) equal to an average annual noncompounded return of
10% on the Status Quo BAC Holders Preference Amount.
Status Quo Liquidation Proceeds (which, in general, means all
cash receipts of OTEF II arising from the dissolution of OTEF II
and liquidation of the Status Quo Assets) generally will be
distributed in the same order of priority as Status Quo Residual
Proceeds, except the first application of Status Quo Liquidation
Proceeds will be to establish certain reserves.
If Status Quo Residual Proceeds or Status Quo Liquidation
Proceeds are insufficient to make any payment set forth in a
particular paragraph (b) through (e) above, then Status Quo
Residual Proceeds or Status Quo Liquidation Proceeds available to
make the payment will be distributed proportionately among the
parties entitled to the payment under such paragraph.
<PAGE> 6
Allocation of Profits and Losses. Liquidity Profits from
operations generally will be allocated between the Liquidity BAC
Holders and the General Partners as follows: first, in accordance
with distributions of Liquidity Cash Flow, until the cumulative
Liquidity Profits so allocated are equal to the cumulative
Liquidity Cash Flow distributions, and thereafter 2% to the General
Partners and 98% to the Liquidity BAC Holders. Liquidity Losses
from operations generally will be allocated 2% to the General
Partners and 98% to the Liquidity BAC Holders. Liquidity Profits
and Liquidity Losses arising from a Sale or Repayment (including
Liquidity Profits which represent the receipt of interest income on
a MRB) or liquidation of OTEF II generally will be allocated in a
manner so as to cause the capital account balances of the General
Partners and Liquidity BAC Holders to equal the amounts that would
be distributable to them as described above in paragraphs (b), (c),
(e) and (f) of "-- Distributions of Residual Proceeds and
Liquidation Proceeds -- Liquidity Residual and Liquidation
Proceeds."
Status Quo Profits from operations generally will be allocated
between the Status Quo BAC Holders and the General Partners as
follows: first, in accordance with distributions of Status Quo
Cash Flow, until the cumulative Status Quo Profits so allocated are
equal to the cumulative Status Quo Cash Flow distributions, and
thereafter 2% to the General Partners and 98% to the Status Quo BAC
Holders. Status Quo Losses from operations generally are allocated
2% to the General Partners and 98% to the Status Quo BAC Holders.
Status Quo Profits and Losses arising from a Sale or Repayment of a
Status Quo Asset (including Status Quo Profits which represent the
receipt of interest income on a MRB) or liquidation of OTEF II
generally will be allocated in a manner so as to cause the Status
Quo capital account balances of the General Partners and Status Quo
BAC Holders to equal the amounts that would be distributable to
them as described above in paragraphs (b), (d) and (e) of "--
Distributions of Residual and Liquidation Proceeds -- Status Quo
Residual and Liquidation Proceeds."
The above allocations of Liquidity and Status Quo Profits and
Losses will be subject to compliance with the principles of the
Internal Revenue Code of 1986 sections 704(b) (containing rules
concerning the determination of a partner's distributive share and
capital account maintenance) and 704(c) (containing rules for
reflecting disparities in the adjusted tax basis and the fair
market value of property contributed or revalued by a partnership)
and the regulations promulgated thereunder.
Voting Rights After Issuance of Status Quo BACs
- -----------------------------------------------
Both the Status Quo BAC Holders and the Liquidity BAC Holders
generally will continue to have voting rights with respect to
actions that could materially affect their rights or interests in
OTEF II, but neither will have voting rights with respect to
actions that would have no material effect on their rights or their
interests in OTEF II. The following discussion summarizes the
provisions in the OTEF II Partnership Agreement (as it has been
supplemented by the Designation of Rights and Preferences of the
Status Quo BACs) relating to the voting rights of the BAC Holders
and the procedure for calling meetings of the BAC Holders.
Actions Subject to Approval by All BAC Holders. Both the
Liquidity BAC Holders and the Status Quo BAC Holders have the
right, voting as a single class, to vote on:
(a) removal of a General Partner of OTEF II and, if such General
Partner of OTEF II was the sole remaining General Partner of
OTEF II, election of a replacement therefor;
(b) dissolution of OTEF II;
(c) amendments to the OTEF II Partnership Agreement ("All BAC
Holder Amendments") that could adversely affect the rights
of both the Liquidity BAC Holders (or their interests
in the Liquidity Assets or New Assets) and the Status Quo
BAC Holders (or their interests in the Status Quo Assets);
and
(d) in the case of the Status Quo BAC Holders, any matter with
respect to which the vote of the Liquidity BAC Holders is
solicited, other than any matters relating exclusively to
the Liquidity Assets or New Assets or the Liquidity and
Growth Plan, and in the case of the Liquidity BAC
Holders, any matter with respect to which the vote of the
Status Quo BAC Holders is solicited, other than any
matters relating exclusively to the Status Quo Assets.
Actions Subject to Approval by Liquidity BAC Holders. The
Liquidity BAC Holders also will have the right, without the
concurrence of the Status Quo BAC Holders or the General Partners,
to vote on:
(a) the sale of all or substantially all of the Liquidity Assets
and New Assets, taken as a whole (except for any sale of any
property or asset securing a MRB or any sale approved by the
IREC);
(b) amendments to the OTEF II Partnership Agreement, except for
(i) All BAC Holder Amendments (with respect to which the
Liquidity BAC Holders will vote together with the Status
Quo BAC Holders, as described above) and (ii) amendments
that could adversely affect the rights of the Status Quo BAC
Holders or their interests in the Status Quo Assets, but
would not materially affect the rights of the Liquidity BAC
Holders;
<PAGE> 7
(c) the acquisition of control of any management entity or of
the assets of any management entity that is an affiliate of
the MGP, unless such acquisition is incidental to the
acquisition by OTEF II of New Assets, or is incidental to
the acquisition of any entity the principal assets of which
are mortgage revenue bonds or other related assets (and
which is not itself a management entity);
(d) the provision by OTEF II of, or the engagement of OTEF II
in, management services with respect to its assets (other
than those services provided by OTEF II in the ordinary
course of its business on and after June 25, 1995) unless
OTEF II obtains an opinion of the IREC with respect thereto;
(e) the termination of any contract for management services
provided to OTEF II by the MGP or its affiliates.
Actions Subject to Approval by Status Quo BAC Holders. The
Status Quo BAC Holders will have the right, without the concurrence
of the Liquidity BAC Holders or the General Partners, to vote on:
(a) the sale of all or substantially all of the Status Quo
Assets (except for any sale of any property or asset
securing a MRB or for any sale approved by the IREC); and
(b) amendments to the OTEF II Partnership Agreement, except
for (i) All BAC Holder Amendments (with respect to which the
Status Quo BAC Holders will vote together with the Liquidity
BAC Holders, as described above) and (ii) amendments that
could adversely affect the rights of the Liquidity BAC
Holders or their interests in the Liquidity Assets, but
would not materially affect the rights of the Status Quo BAC
Holders.
<PAGE> 8
Votes and Meetings
On any action with respect to which a BAC Holder has voting
rights, such BAC Holder shall be entitled to cast one vote for each
BAC that he or she owns. Any action required or permitted to be
taken by the Liquidity BAC Holders or all of the BAC Holders must
be effected at a meeting and may not be effected by any written
consent other than a written consent at a meeting; provided,
however, that the requirement that such actions must be effected at
a meeting may be waived with respect to one or more of such actions
if such waiver is approved (i) by the MGP and (ii) by the
affirmative vote (which vote itself may be effected by written
consent) of a majority in interest of the BAC Holders. Actions
that require the approval of only the Status Quo BAC Holders may be
effected by written consent without a meeting.
BAC Holder Protection Provisions
- --------------------------------
The OTEF II Partnership Agreement contains certain provisions
relating to changes of control of OTEF II and OTEF II has
established a BAC Holder Rights Plan, which provides OTEF II BAC
Holders with certain economic rights upon a change in control of
OTEF II. The purpose of the OTEF II Partnership Agreement
provisions and the BAC Holder Rights Plan (together, the "BAC
Holder Protection Provisions") is to provide OTEF II and the BAC
Holders with protection from unfair or abusive takeover attempts.
The BAC Holder Protection Provisions are designed to encourage any
persons who may seek to acquire control of OTEF II to consult first
with the MGP to negotiate the terms of any proposed business
combination or offer.
Fair Price and Control BAC Acquisition Provisions. Article XII
(the "Fair Price Provision") and Article XIII (the "Control BAC
Acquisition Provision") of the OTEF II Partnership Agreement are
based on Maryland statutory provisions that provide similar
protections to shareholders of Maryland corporations, which as
included in the agreement have been modified to accommodate a
limited partnership. All BAC Holders, including the Status Quo BAC
Holders, will be subject to and protected by the Fair Price
Provision and Control BAC Acquisition Provision.
The Fair Price Provision provides that certain business
combinations involving an "Interested Party" (generally, any person
or group that is the beneficial owner, directly or indirectly, of
10% or more of the outstanding BACs) must be approved by: (i) 80%
in interest of all of the BAC Holders and (ii) two-thirds in
interest of the BAC Holders other than the Interested Party. In
general, these voting requirements are not applicable if the
business combination is approved by the MGP prior to the date on
which the Interested Party became an Interested Party or a "fair
price" (generally, the greater of market value or the highest price
paid by the acquiror for BACs) is paid for the remaining BACs.
The Control BAC Acquisition Provision provides, in general, that
any person or group that acquires 20% or more of the outstanding
BACs is denied voting rights with respect to the acquired BACs
unless two-thirds in interest of the BAC Holders other than the
acquiror vote to restore such voting rights.
BAC Holder Rights Plan. OTEF II and the MGP entered into a BAC
Holder Rights Agreement dated as of May 30, 1995 with Crestar Bank
which governs the terms of the BAC Holder Rights Plan. Under the
BAC Holder Rights Plan, one Right was issued for each outstanding
OTEF II BAC. Each Right entitles the holder thereof to buy one
OTEF II BAC at an exercise price of $1,000, subject to adjustment.
In the event that OTEF II issues additional OTEF II BACs, the BAC
Holder Rights Plan provides that Rights will be issued to the
holders of such OTEF II BACs on substantially the same terms
described herein. Rights were not issued with respect to the
Status Quo BACs and the Rights previously issued with respect to
OTEF II BACs that were converted into Status Quo BACs were
canceled.
<PAGE> 42
Item 11. Description of Registrant's Securities to be Registered
The Partnership will issue limited partnership interests in
the Partnership (the "Limited Partnership Interests") to the
Initial Limited Partner. In exchange for the assets to be
transferred by OTEF to the Partnership as part of the 1995 OTEF
Restructuring Plan, the Initial Limited Partner will issue the
BACs, representing undivided beneficial interests in the Initial
Limited Partner's Limited Partnership Interests, to OTEF, which
will distribute the Partnership's BACs to the OTEF BAC Holders.
The Partnership's BACs will be transferable on the books of the
Partnership (subject to the limitations described below under
"Transfers"). Under the Partnership Agreement, all of the
ownership attributes of the Limited Partnership Interests held by
the Initial Limited Partner are granted to the Partnership's BAC
Holders, including the right to take certain actions without the
approval of the General Partners of the Partnership and the right
to inspect the books and records of the Partnership.
No OTEF BAC Holder will be required to pay any cash or other
consideration or to exchange or surrender his OTEF BACs for the
Partnership's BACs that he will receive in the Distribution. The
Distribution will not affect an OTEF BAC Holder's number of OTEF
BACs or interest in any assets remaining in OTEF.
The Managing General Partner has the authority to issue
additional Limited Partnership Interests, BACs or other securities
for such consideration and on such terms and conditions as are
deemed appropriate by the Managing General Partner, except that the
approval of the IREC will be required for any such issuance if the
securities proposed to be issued would have distribution,
liquidation or other rights senior to the BACs issued to the OTEF
BAC Holders on the Distribution Date. The Managing General Partner
has the authority to amend the Partnership Agreement to, among
other things, reflect the issuance of additional securities or to
delete or add any provision which the Managing General Partner
believes is necessary in order to effect an offering of securities.
<PAGE> 43
Transfers
The Partnership's BACs will be transferable on the books of
the Partnership (subject to the restrictions discussed below)
beginning on the day after the Distribution. BAC Holders may elect
to be admitted as Limited Partners with the consent of the Managing
General Partner (which consent is expected to be given under normal
circumstances) by (i) delivering to the Partnership prior to the
end of any calendar quarter an executed subscription agreement and
admission application, (ii) executing the Partnership Agreement
and (iii) paying a fee (initially $150), plus reasonable legal
fees and recording costs associated with the admission. Upon
compliance with these requirements, the admission will be effected
within 20 days immediately following the end of the calendar
quarter during which all of the foregoing requirements have been
met. In general, admission to the Partnership as a Limited Partner
would not provide a BAC Holder with any additional economic or
other rights or benefits. A BAC Holder admitted to the Partnership
as a Limited Partner may not thereafter exchange his Limited
Partnership Interest for BACs. No public trading market for
Limited Partnership Interests will exist.
Limited Partnership Interests may be assigned by Limited
Partners other than the Initial Limited Partner subject to certain
limitations set forth in the Partnership Agreement, including
payment of a fee (initially $150) and the absence of a
determination by the Managing General Partner that such assignment
would be in violation of any applicable federal or state securities
laws. The rights of an assignee of a Limited Partnership Interest,
other than a BAC Holder who does not become a substitute Limited
Partner, are limited to whatever rights are assigned in the
assignment instrument to the assigning Limited Partner's profits
and losses and cash distributions from the Partnership.
Neither a transfer of BACs nor an assignment of Limited
Partnership Interests will be permitted if such transfer or
assignment would be in violation of any applicable federal or state
securities laws. The securities laws of some states impose
additional restrictions on transfers and assignments of limited
partnership interests, including applying investor suitability
standards to prospective transferees or assignees. Transferring BAC
Holders and assigning Limited Partners may be required, at their
own expense, to obtain an opinion from their counsel acceptable to
the Partnership to the effect that there has been no violation of
federal or state securities laws with respect to the transfer of
BACs or the assignment of the Limited Partnership Interests. The
Partnership will require that any applicable state law standards
are met before agreeing to any transfer of BACs or assignment
of Limited Partnership Interests.
The Managing General Partner may defer a transfer of BACs or
assignment of Limited Partnership Interests if it would result in
the transfer (as defined by the federal income tax laws) of 50% or
more of all Limited Partnership Interests and BACs within a 12-
month period and if the Managing General Partner determines,
following receipt of advice from counsel, that the resulting
termination of the Partnership as a partnership for tax purposes
would have a material adverse effect on the financial interests of
the BAC Holders or the Limited Partners. The transferring BAC
Holder or assigning Limited Partner will be notified in such event,
and any deferred transfers or assignments will be effected (in
chronological order to the extent practicable) as of the first day
of the next succeeding period in which such transfers or
assignments can be effected without either premature termination of
the Partnership as a partnership for tax purposes or any adverse
effects from such premature termination, as the case may be. In
the event transfers or assignments are suspended for the foregoing
reasons, the Managing General Partner will give written notice of
such suspension to all BAC Holders and Limited Partners as soon as
practicable.
<PAGE> 44
Liability of Partners to Third Parties and Capital Obligations
The General Partners will be liable to third parties for all
general obligations of the Partnership to the extent not paid by
the Partnership. Each partner and BAC Holder may look only to the
assets of the Partnership for any distribution with respect to his
interest in the Partnership and shall have no recourse therefor
against any General Partner or Limited Partner. The General
Partners will not be liable for any nonrecourse obligations of the
Partnership.
OTEF will contribute the Transferred Assets to the Partnership
in exchange for the BACs that OTEF will distribute to the OTEF BAC
Holders. BAC Holders are not obligated to make any capital
contributions to the Partnership. No BAC Holder is personally
liable for the debts, liabilities, contracts or other obligations
of the Partnership, unless, in addition to the exercise of his
rights and powers as a Limited Partner or BAC Holder, including his
rights and powers conferred under the Partnership Agreement, he
takes part in the control of the business of the Partnership.
Notwithstanding the foregoing, if a Limited Partner or BAC Holder
receives the return of any part of his capital contribution without
violation of the Partnership Agreement or the Maryland Revised
Uniform Limited Partnership Act (the "Act"), he is liable to the
Partnership for a period of one year thereafter for the amount of
the returned contribution, but only to the extent necessary to
discharge the Partnership's liabilities to creditors who extended
credit to the Partnership during the period the contribution was
held by the Partnership. In addition, if a Limited Partner or BAC
Holder receives the return of any part of his capital contribution
in violation of the Partnership Agreement or the Act, he is liable
to the Partnership for a period of six years thereafter for the
amount of the capital contribution wrongfully returned.
The Partnership will not redeem or repurchase any BACs and a
BAC Holder will have no right to withdraw or receive any return of
his capital contribution (other than as provided in the Partnership
Agreement).
Allocations and Distributions
General. BAC Holders' capital accounts will be increased by
all contributions made by them to the Partnership and will be
reduced by all distributions made to them by the Partnership. The
capital accounts will be increased by the amount of all taxable as
well as tax-exempt income of the Partnership (defined for purposes
of these provisions as "Profits") and will be reduced by the amount
of all tax deductible as well as non-tax-deductible expenditures of
the Partnership (defined for purposes of these provisions as
"Losses"). The capital accounts of the BAC Holders will be
revalued upon certain events, including the admission of additional
BAC Holders to the Partnership in exchange for additional capital
contributions.
Distributions of Cash Flow. All Cash Flow (which, in general
terms, means the Partnership's cash receipts, other than the
capital contributions and Residual and Liquidation Proceeds (as
defined below), less its cash expenses) in any year will first be
distributed 98% to the BAC Holders and 2% to the General Partners
until the BAC Holders as a class have received, during such year, a
noncumulative 11% preferred return on the BAC Holders Preference
Amount (as defined below) and, thereafter during such year, 90% to
the BAC Holders as a class and 10% to the General Partners. The
"BAC Holders Preference Amount" means an amount equal to the total
capital contributions of the BAC Holders to OTEF, increased by the
amount of any capital contributions that may be made subsequent to
the formation of the Partnership by additional BAC Holders admitted
to the Partnership, and reduced by all distributions of Residual
and Liquidation Proceeds by the Partnership to the BAC Holders.
<PAGE> 45
Cash Flow will be determined for each applicable period only
after the Partnership has paid all expenses of operating the
Partnership, including the expense reimbursements paid to the
General Partners and their affiliates, fees paid to affiliates of
the General Partners for providing services to the Partnership and
repayments of Partnership debts, if any, and has made all additions
to the working capital reserve deemed advisable by the Managing
General Partner.
Distributions of Residual and Liquidation Proceeds. All
Residual Proceeds (which, in general, means the cash the
Partnership receives from the sale of a Mortgaged Property or Other
Asset (a "Sale") or the repayment of the principal and interest
payable upon maturity or remarketing of a Mortgage Revenue Bond (a
"Repayment"), other than a Sale or Repayment that occurs in
connection with the liquidation of the Partnership) will be applied
to the payment of expenses or utilized for Partnership investments
at the discretion of the Managing General Partner, and will be
available for application and distribution to the extent not so
applied or invested, in which case such amounts will be applied and
distributed generally in the following amounts and order of
priority:
(a) 100% to the payment of all debts and obligations of the
Partnership (except for loans made by the General Partners or
their affiliates to the Partnership) and to any additions to
the working capital reserve that the Managing General Partner
deems necessary;
(b) 100% to the BAC Holders as a class until the BAC Holders
receive aggregate distributions from Residual Proceeds equal
to the BAC Holders Preference Amount;
(c) 100% to the General Partners and their affiliates to repay
loans, if any, from the General Partners or their affiliates
to the Partnership with interest thereon;
(d) 100% to the General Partners to repay their capital
contributions to the Partnership; and
(e) the remainder, if any, 98% to the BAC Holders and 2% to the
General Partners.
Liquidation Proceeds (which, in general, means all cash
receipts of the Partnership arising from the dissolution of the
Partnership and liquidation of the Partnership's assets) generally
will be distributed in the same order of priority as Residual
Proceeds, except that the first distributions of Liquidation
Proceeds will be to the establishment of certain reserves.
Allocations of Profits and Losses. Profits from operations
generally will be allocated between the BAC Holders and the General
Partners as follows: first, in accordance with distributions of
Cash Flow, until the cumulative Profits so allocated are equal to
the cumulative Cash Flow distributions, and thereafter 2% to the
General Partners and 98% to the BAC Holders. Losses from
operations generally are allocated 2% to the General Partners and
98% to the BAC Holders. Profits and Losses arising from a Sale or
Repayment (including Profits which represent the receipt of
interest income on a Mortgage Revenue Bond) or liquidation of the
Partnership generally will be allocated in a manner so as to cause
the capital account balances of the General Partners and BAC
Holders to equal the amounts that would be distributable to them as
described above in paragraphs (b), (d) and (e) of "Distributions of
Residual and Liquidation Proceeds."
<PAGE> 46
The above allocations of Profits and Losses will be subject to
compliance with the principles of Internal Revenue Code sections
704(b) (containing rules concerning the determination of a
partner's distributive share and capital account maintenance) and
704(c) (containing rules for reflecting disparities in the adjusted
tax basis and the fair market value of property contributed or
revalued by a partnership) and the regulations promulgated
thereunder. In addition, the Managing General Partner has the
authority to make special allocations of income or deduction for
federal income tax purposes as appropriate to preserve the
uniformity for federal income tax purposes of BACs that are
transferred.
Voting Rights and Meetings
Each BAC Holder, through the Initial Limited Partner, shall be
entitled to cast one vote for each BAC which he owns at a meeting,
in person, by written proxy or by a signed writing directing the
manner in which he desires that his vote be cast. Every proxy
shall be revocable at the pleasure of the BAC Holder executing it.
Only the votes of BAC Holders of record on the record date relating
to such vote shall be counted.
BAC Holders owning two-thirds in interest of the Limited
Partnership Interests, and without the concurrence of the General
Partners, generally will have the right to vote to:
(a) approve or disapprove the sale of all or substantially all of
the assets of the Partnership at any one time (except for the
remarketing of Mortgage Revenue Bonds in accordance with
their terms and except for any sale approved by the IREC);
(b) amend the Partnership Agreement, except that no such
amendment may in any manner allow the BAC Holders in their
capacity as such to take part in the control of the
Partnership's business and, without the consent of each
partner or BAC Holder affected thereby, no such amendment may
enlarge the obligations of any partner or BAC Holder under
the Partnership Agreement, modify the order of or the method
of determining distributions of Cash Flow, Residual Proceeds
or Liquidation Proceeds or of allocations of Profits and
Losses, and, without the consent of all partners and BAC
Holders, no such amendment may modify the purposes of the
Partnership or change the foregoing provisions;
(c) remove a General Partner and (unless such General Partner was
the sole remaining General Partner) elect a replacement
therefor; and
(d) dissolve the Partnership.
There will be no annual or other periodic meetings of the BAC
Holders. However, meetings of the BAC Holders for any purpose may
be called by the Managing General Partner and are required to be
called by the Managing General Partner upon written request of the
BAC Holders owning in the aggregate 20% or more of the Limited
Partnership Interests.
<PAGE> 47
BAC Holder Protection Provisions; BAC Holder Rights Plan
The Partnership Agreement contains certain provisions relating
to changes of control of the Partnership. In addition, the
Partnership will adopt a BAC Holder Rights Plan, which provides BAC
Holders with certain economic rights upon a change in control of
the Partnership. The purpose of the Partnership Agreement
provisions and the BAC Holder Rights Plan (together, the "BAC
Holder Protection Provisions") is to encourage any persons who may
seek to acquire control of the Partnership to consult first with
the Managing General Partner to negotiate the terms of any proposed
business combination or offer. The BAC Holder Protection
Provisions are designed to reduce the vulnerability of the
Partnership to an unsolicited proposal for a takeover of the
Partnership that does not have the effect of maximizing value for
the BAC Holders or that is otherwise unfair or abusive to the BAC
Holders, or an unsolicited proposal for the restructuring or sale
of all or part of the Partnership that could have such effects.
The BAC Holder Protection Provisions, individually and
collectively, will make more difficult, and may discourage, certain
types of potential acquirors from proposing a merger, tender offer
or proxy contest, even if such transaction or occurrence may be
favorable to the interests of the BAC Holders, and may delay or
frustrate the assumption of control by a holder of a large block of
the BACs or other securities of the Partnership and the removal of
the General Partners, even if such removal might be beneficial to
the BAC Holders. By discouraging takeover attempts, these
provisions might have the incidental effect of inhibiting certain
changes in management and the temporary fluctuations in the market
price of the shares that often result from actual or considered
takeover attempts.
Set forth below is a description of the provisions in the
Partnership Agreement that could have an antitakeover effect and a
description of the BAC Holder Rights Plan. The description is
intended as a summary only and is qualified in its entirety by
reference to the Partnership Agreement and the BAC Holder Rights
Plan, copies of which have been filed as exhibits to this
Registration Statement.
Fair Price and Control BAC Acquisition Provisions
- -------------------------------------------------
Article XII (the "Fair Price Provision") and Article XIII (the
"Control BAC Acquisition Provision") of the Partnership Agreement
are based on Maryland statutory provisions that provide similar
protections to shareholders of Maryland corporations, modified to
the extent necessary to apply to a limited partnership.
Fair Price Provision. The Fair Price Provision in Article XII
of the Partnership Agreement, in general, provides that unless
either certain minimum price criteria and procedural requirements
are satisfied or the transaction is approved by the Managing
General Partner prior to the date (the "Determination Date") an
Interested Party (as defined below) became an Interested Party, any
of the transactions described in paragraphs (a) through (f) below
(each, a "Business Combination") involving an Interested Party must
be approved by (i) 80% in interest of all of the BAC Holders and
(ii) two-thirds in interest of the BAC Holders other than the
Interested Party (together with item (i), the "Special Vote
Requirements").
<PAGE> 48
A "Business Combination" includes the following transactions:
(a) Unless the merger, consolidation or exchange of interests
does not alter the contract rights of the BACs as expressly
set forth in the Partnership Agreement or change or convert
in whole or in part the outstanding BACs, any merger,
consolidation or exchange of interests of the Partnership or
any subsidiary with (A) any Interested Party or (B) any other
entity (whether or not itself an Interested Party) which is,
or after the merger, consolidation or exchange of interests
would be, an affiliate of an Interested Party that was an
Interested Party prior to the transaction;
(b) Any sale, lease, transfer or other disposition, other than in
the ordinary course of business, in one transaction or a
series of transactions in any 12-month period, to any
Interested Party or any affiliate of any Interested Party
(other than the Partnership or any of its subsidiaries) of
any assets of the Partnership or any subsidiary having,
measured as of the effective date of such transaction or
transactions, an aggregate book value as of the end of the
Partnership's most recently ended fiscal quarter of 10% or
more of the total market value of the outstanding BACs or of
its net worth as of the end of its most recently ended fiscal
quarter;
(c) The issuance or transfer by the Partnership or any
subsidiary, in one transaction or a series of transactions,
of any BACs or any equity securities of a subsidiary which
have an aggregate market value of 5% or more of the total
market value of the outstanding BACs to any Interested Party
or any affiliate of any Interested Party (other than the
Partnership or any of its subsidiaries) except pursuant to
the exercise of warrants or rights to purchase securities
offered pro rata to all BAC Holders or any other method
affording substantially proportionate treatment to the BAC
Holders;
(d) The adoption of any plan or proposal for the liquidation or
dissolution of the Partnership in which anything other than
cash will be received by an Interested Party or any affiliate
of any Interested Party;
(e) Any reclassification of securities or recapitalization of the
Partnership, or any merger, consolidation or exchange of
interests of the Partnership with any of its subsidiaries
which has the effect, directly or indirectly, in one
transaction or a series of transactions, of increasing by 5%
or more of the total number of outstanding BACs, the
proportionate amount of the outstanding BACs or the
outstanding number of any class of equity securities of any
subsidiary which is directly or indirectly owned by any
Interested Party or any affiliate of any Interested Party; or
(f) The receipt by any Interested Party or any affiliate of any
Interested Party (other than the Partnership or any of its
subsidiaries) of the benefit, directly or indirectly (except
proportionately as a BAC Holder), of any loan, advance,
guarantee, pledge or other financial assistance or any tax
credit or other tax advantage provided by the Partnership or
any of its subsidiaries.
<PAGE> 49
An "Interested Party" is defined as any person (other than the
Partnership or any subsidiary of the Partnership) that: (i) is the
beneficial owner, directly or indirectly, of 10% or more of the
outstanding BACs; or (ii) is an affiliate or associate of the
Partnership and at any time within the two year period immediately
prior to the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then
outstanding BACs.
The effect of the Special Vote Requirements is to place a veto
power over certain transactions in the hands of the BAC Holders
other than an Interested Party. Thus, the more BACs which are
owned by the Interested Party in a transaction, the fewer BACs will
be required to exercise that veto power. The Managing General
Partner is not aware of any person who will be an Interested Party
immediately following the Distribution.
The Special Vote Requirements will not be applicable if (i)
the Business Combination is approved by the Managing General
Partner prior to the Determination Date or (ii) the minimum price
and procedural requirements described in paragraphs (a) and (b)
below have been met.
(a) Minimum Price Requirements. In a Business Combination
involving cash or other consideration being paid to the BAC
Holders, the consideration would be required to be either in cash
or in the same form as the Interested Party paid in acquiring the
largest number of BACs that it has acquired in any one transaction
or series of related transactions. In addition, the transaction
constituting the Business Combination must provide for payment of
consideration per BAC at least equal to the highest of the
following: (i) the highest per BAC price paid by the Interested
Party for any of the BACs acquired by it (A) within the five-year
period immediately prior to the first public announcement of the
proposed Business Combination (the "Announcement Date") or (B)
within the five-year period immediately before the Determination
Date; (ii) the highest preferential amount per BAC to which the
holders of the BACs of such class or series are entitled in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Partnership; (iii) the fair market value per BAC
on the Announcement Date or the Determination Date, whichever is
higher; or (iv) the price per BAC equal to the fair market value
per BAC on the Announcement Date or on the Determination Date,
whichever is higher, multiplied by a fraction equal to (A) the
highest per BAC price paid by the Interested Party for any the BACs
acquired by it within the five-year period immediately prior to the
Announcement Date over (B) the fair market value per BAC on the
first day in such five-year period on which the Interested Party
acquired any of the BACs.
For purposes of the Fair Price Provision, the fair market
value of the BACs on the Announcement Date or the Determination
Date would be the highest closing sale price during the 30-day
period immediately preceding the date in question of a BAC on the
composite tape for New York Stock Exchange-listed stocks, or, if
the BACs are not quoted on the composite tape, on the New York
Stock Exchange, or, if the BACs are not listed on such Exchange, on
the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the BACs are listed,
or, if the BACs are not listed on any such exchange, the highest
closing bid quotation with respect to a BAC during the 30-day
period preceding the date in question on the National Association
of Securities Dealers, Inc. automated quotations system or any
system then in use, or, if no such quotations are available, the
fair market value on the date in question of a BAC as determined by
the Managing General Partner in good faith.
<PAGE> 50
The Interested Party would be required to meet the minimum
price requirements with respect to each class or series of the
BACs, whether or not the Interested Party owned shares of that
class or series prior to proposing the Business Combination. If
the minimum price criteria and procedural requirements (discussed
below) were not met with respect to each class or series of BACs,
the Special Vote Requirements would be applicable unless the
Business Combination were approved by the Managing General Partner
prior to the Determination Date. If the transaction is not of a
type which involves the receipt of any cash, securities or other
consideration by BAC Holders generally, such as a sale of assets or
an issuance of partnership interests to an Interested Party, the
minimum price requirements discussed above could not be met and the
Special Vote Requirements would be applicable unless the
transaction were approved by the Managing General Partner prior to
the Determination Date.
(b) Procedural Requirements. Under the Fair Price Provision,
in order to avoid the Special Vote Requirements, after an
Interested Party becomes an Interested Party it would have to
comply with the procedural requirements, as well as the minimum
price criteria, unless the Business Combination is approved by the
Managing General Partner prior to the Determination Date.
The Fair Price Provision provides that the Special Vote
Requirements apply (unless the Managing General Partner approves
the Business Combination prior to the Determination Date) if the
Partnership, after the Interested Party has proposed a Business
Combination and prior to consummation of such Business Combination,
fails to pay in a timely manner the full amount of any
distributions on any BACs then outstanding or other securities of
the Partnership, fails to increase the annual rate of distributions
made with respect to any partnership interests to reflect any
reclassification, recapitalization, reorganization or similar
transaction which has the effect of reducing the number of
outstanding BACs or reduces the annual rate of distributions paid
on such BACs, unless such failures or reduction are approved by the
Managing General Partner. This provision is designed to prevent an
Interested Party who controls the necessary voting power from
attempting to depress the market price of the BACs prior to
consummating a Business Combination by reducing distributions
thereon and thereby reducing the consideration required to be paid
pursuant to the minimum price criteria.
The Special Vote Requirements also apply to a proposed
Business Combination (unless the Managing General Partner approves
the Business Combination prior to the Determination Date) if the
Interested Party acquired any additional BACs (except as part of
the transaction in which it became an Interested Party or by virtue
of proportionate BAC splits or distributions) in any transaction
subsequent to the time it proposes a Business Combination. This
provision is intended to prevent an Interested Party from
purchasing additional BACs at prices that are lower than those set
by the minimum price criteria after it proposes a Business
Combination.
Advantages and Disadvantages of the Fair Price Provision. A
number of publicly held limited partnerships recently have been the
subject of tender offers for, or other acquisitions of, substantial
positions in their limited partnership interests. As previously
discussed, the Fair Price Provision is designed to prevent certain
of the potential inequities of Business Combinations that involve
two or more steps by requiring that in order to complete a Business
Combination that is not approved by the Managing General Partner,
an Interested Party must either acquire (or assure itself of
obtaining the affirmative votes of) at least two-thirds in interest
of the BAC Holders prior to the vote on the Business Combination,
or be prepared to meet the minimum price criteria and procedural
requirements. The Fair Price Provision also is designed to protect
those BAC Holders who have not tendered or otherwise sold their
BACs to a third party who is attempting to acquire control by
helping to assure that at least the same price and form is paid to
such BAC Holders in a Business Combination as were paid to BAC
Holders in the initial step of the acquisition. In the absence of
these changes, an Interested Party who acquires control of the
Partnership could subsequently, by virtue of such control, force
minority BAC Holders to sell or exchange their BACs at a price that
may not reflect any premium the Interested Party may have paid in
order to acquire its interest. Such a price could be lower than
the price paid by the Interested Party in acquiring control and
could also be in a less desirable form of consideration (e.g.,
equity or debt securities of the Interested Party instead of cash).
<PAGE> 51
In many situations, the minimum price criteria and procedural
requirements would require that an Interested Party pay BAC Holders
a higher price for their BACs and/or structure the transaction
differently from what would be the case without the provision.
Accordingly, the Managing General Partner believes that, to the
extent a Business Combination were involved as part of a plan to
acquire control of the Partnership, the Fair Price Provision may
increase the likelihood that an Interested Party would negotiate
directly with the Managing General Partner. The Managing General
Partner believes that it is in a better position than individual
BAC Holders of the Partnership to negotiate effectively on behalf
of all BAC Holders in that the Managing General Partner is likely
to be more knowledgeable than most individual BAC Holders in
assessing the business and prospects of the Partnership.
Therefore, the Managing General Partner is of the view that
negotiations between the Managing General Partner and an Interested
Party would increase the likelihood that BAC Holders in general
would receive a higher price for their BACs than otherwise might be
obtained.
Although some substantial acquisitions of equity securities
are made without the objective of effecting a subsequent business
combination, in many cases a purchaser acquiring control desires to
have the option to consummate such a business combination.
Assuming that to be the case, the Fair Price Provision would tend
to deter a potential purchaser whose objective is to seek control
of the Partnership at a relatively low price, since acquiring the
remaining equity interest would not be assured unless the minimum
price criteria and procedural requirements were satisfied or the
Managing General Partner were to approve the transaction. The Fair
Price Provision also should help to deter the accumulation of large
blocks of the BACs, which the Managing General Partner believes to
be potentially disruptive to the stability of the Partnership and
which could precipitate a change of control of the Partnership on
terms unfavorable to other BAC Holders.
Tender offers or other non-open market acquisitions of equity
securities usually are made at prices above their prevailing market
price. In addition, acquisitions of equity securities by persons
attempting to acquire control through market purchases may cause
the market price of the securities to reach levels that are higher
than might otherwise be the case. The presence of the Fair Price
Provision may deter such purchases, particularly those of less than
all the BACs, and therefore may deprive the Partnership's BAC
Holders of an opportunity to sell their BACs at a temporarily
higher market price. Because of the Special Vote Requirements for
approval of any subsequent Business Combination and the possibility
of having to pay a price to other BAC Holders in such a Business
Combination that is not less than the price paid for its initial
holdings, the Fair Price Provision may make it more costly for a
third party to acquire control of the Partnership. It should be
noted that the provisions of the Fair Price Provision would not
necessarily deter persons who might be willing to seek control by
acquiring a substantial portion of the BACs when they have no
intention of acquiring the remaining BACs.
<PAGE> 52
In certain cases, the Fair Price Provision's minimum price
provisions, while providing objective pricing criteria, could be
arbitrary and not indicative of value. In addition, an Interested
Party may be unable, as a practical matter, to comply with all of
the procedural requirements. In these circumstances, unless an
Interested Party were willing to purchase a sufficient number of
the BACs to meet the Special Voting Requirements, it would be
forced either to negotiate with the Managing General Partner and
offer terms acceptable to the Managing General Partner or to
abandon such proposed Business Combination.
Control BAC Acquisition Provision. The Control BAC
Acquisition Provision in Article XIII of the Partnership Agreement,
in general, provides that any person or entity that acquires one-
fifth or more of the outstanding BACs acquires voting rights with
respect to the acquired BACs only to the extent approved by the
affirmative vote of two-thirds in interest of the BAC Holders, but
excluding any votes cast with respect to BACs in respect of which
the acquiror is entitled to exercise or direct the exercise of the
voting power.
The Control BAC Acquisition Provision provides that a person
or entity acquires "Control BACs" whenever it acquires BACs that,
but for the operation of the Control BAC Acquisition Provision,
would bring its voting power within any of the following ranges:
(i) one-fifth to one-third, (ii) one-third to a majority and (iii)
a majority or more. A "Control BAC Acquisition" generally means
the acquisition of BACs that would entitle the acquiring person
immediately after the acquisition to exercise or direct the
exercise of the voting power of BACs within one of these ranges of
voting power. Excepted from the definition of Control BAC
Acquisition is an acquisition of BACs from any person whose
previous acquisition of BACs was pursuant to the laws of descent or
distribution, the satisfaction of a pledge or other security
interest created in good faith and not for the purpose of
circumventing the Control BAC Acquisition Provision or a merger,
consolidation or exchange of interests if the Partnership is a
party thereto. In general, a Control BAC Acquisition does not
include the acquisition of BACs in good faith and not for the
purpose of circumventing the Control BAC Acquisition Provision by
or from any person whose voting rights have previously been
authorized by the BAC Holders in compliance with the Control BAC
Acquisition Provision or any person whose previous acquisition of
the BACs would have constituted a Control BAC Acquisition but for
the exclusions in the preceding sentence.
Voting Rights of Control BACs. Under the Control BAC
Acquisition Provision, a person or entity that acquires Control
BACs pursuant to a Control BAC Acquisition acquires voting rights
with respect to those Control BACs only to the extent approved by
the affirmative vote of two-thirds in interest of the BAC Holders,
but excluding any votes cast with respect to BACs in respect of
which the acquiror is entitled to exercise or direct the exercise
of the voting power.
The acquiror may require the Partnership to hold a meeting of
the BAC Holders for the purpose of considering the status of its
voting rights by complying with the requirements of the Partnership
Agreement. The acquiror must deliver to the Partnership an
acquiring person statement, which must set forth, among other
things, the terms of the proposed acquisition and representations
that the proposed Control BAC Acquisition, if consummated, would
not be contrary to law, and that the acquiror has the financial
capacity to make such acquisition. If the acquiror so requests at
the time of delivery of the acquiring person statement, and gives a
written undertaking to pay the expenses of a meeting, the Managing
General Partner is required to call and hold, within 50 days after
receipt of the acquiring person statement, a special meeting of the
BAC Holders to consider the voting rights to be accorded the BACs
to be acquired in the Control BAC Acquisition. In connection with
calling the meeting, the Partnership must send a notice to the BAC
Holders which includes or is accompanied by both the acquiring
person statement and a statement by the Managing General Partner
setting forth its position or recommendation, or stating that it is
taking no position or making no recommendation, with respect to the
issue of voting rights to be accorded the BACs acquired in the
Control BAC Acquisition.
<PAGE> 53
Redemption of Control BACs. If an acquiring person statement
has been delivered on or before the tenth day after the Control BAC
Acquisition and the BAC Holders do not vote to approve voting
rights to the Control BACs, the Partnership may redeem the Control
BACs from the acquiror at any time during the 60-day period
commencing on the day of a meeting at which the voting rights of
the Control BACs were considered and not approved. If the acquiror
fails to deliver an acquiring person statement on or before the
tenth day after the Control BAC Acquisition, the Partnership may
redeem the Control BACs (except Control BACs for which voting
rights have been restored) at any time during the period commencing
on the 11th day after the Control BAC Acquisition and ending 60
days after the acquiror's last acquisition of Control BACs. Any
redemption of Control BACs shall be at the fair value of the
Control BACs as of the date of the last acquisition of Control BACs
by the acquiror or, if a meeting is held to consider the voting
rights of the Control BACs, as of the date of the meeting and
without regard to the absence of voting rights for the Control
BACs.
Advantages and Disadvantages of the Control BAC Acquisition
Provision. The provisions of the Control BAC Acquisition Provision
will permit the BAC Holders to review, on a collective basis, the
merits of a proposed acquisition of control of the Partnership
without the time pressure and coercive atmosphere often present
with tender offers and other unnegotiated transactions. Although a
change of control may in certain circumstances be beneficial to
security holders, the Control BAC Acquisition Provision is intended
to provide the BAC Holders with the continued ability to make a
reasoned, thoughtful decision on proposed acquisitions of
significant voting power. It also may enhance the Partnership's
bargaining power with a potential acquiror.
The Control BAC Acquisition Provision also may make it more
difficult or costly for another party to acquire significant
ownership in the Partnership and may make it more difficult to
acquire and exercise control of the Partnership. To the extent
that it has the effect of discouraging a future takeover attempt,
it could prevent BAC Holders from realizing any premium over the
prevailing market price that might be involved in any such
transaction. The Control BAC Acquisition Provision also may
discourage gradual market purchases by an acquiror, thereby
depriving some BAC Holders of an opportunity to sell their BACs at
a temporarily higher market price, though the provisions of the
Control BAC Acquisition Provision may force an acquiror to pay a
higher price for control and BAC Holders would thereby benefit.
Finally, to the extent that the Control BAC Acquisition Provision
enables the Partnership to resist a takeover or a change in control
or removal of the General Partners, it could make it more difficult
to remove the existing management of the Partnership, even if such
removal would be beneficial to the BAC Holders.
<PAGE> 54
Other BAC Holder Protection Provisions
- --------------------------------------
No Action by Written Consent. The Partnership Agreement
provides that any action required or permitted to be taken by the
BAC Holders must be effected at a meeting and may not be effected
by any written consent other than a written consent at a meeting.
The purpose of this provision is to prevent a potential acquiror
from taking significant actions, including removal of the Managing
General Partner, amending the Partnership Agreement or taking other
action to effect a change of control of the Partnership without
having to call a meeting, which all BAC Holders would be allowed to
attend and at which they would be given the opportunity to express
their views.
Supermajority Voting. The Partnership Agreement provides that
two-thirds in interest of the Partnership's BAC Holders is required
to effect the following actions: (i) the sale of all or
substantially all of the Partnership's assets (unless such sale is
approved by the IREC and no consent of the BAC Holders or approval
of the IREC is required for the sale of any property or asset
securing a Mortgage Revenue Bond), (ii) dissolution of the
Partnership, (iii) removal of a General Partner and election of a
replacement and (iv) certain amendments to the Partnership
Agreement. See "Voting Rights and Meetings" above.
BAC Holder Rights Plan
- ----------------------
The Partnership intends to enter into a BAC Holder Rights
Agreement (the "Rights Agreement") with a rights agent that will
provide for the issuance of one right (a "Right") for each
outstanding BAC to the Partnership's BAC Holders of record on a
record date to be established by the Managing General Partner (the
"Record Date"). Each Right will entitle the holder thereof to buy
one BAC at a specified exercise price, which will be subject to
adjustment.
Set forth below is a description of the proposed terms of the
BAC Holder Rights Plan.
Distribution Date. Until the close of business on the tenth
day after the earlier to occur of (i) the date a person (an
"Acquiring Person") (other than the Partnership, any subsidiary of
the Partnership, or any employee benefit plan of the Partnership or
any subsidiary of the Partnership) alone or together with
affiliates and associates, has become the beneficial owner of 5% or
more of the outstanding BACs or (ii) the date of the commencement
of, or announcement of an intention to make a tender offer or
exchange offer the consummation of which would result in the
beneficial ownership by a person or group (other than the
Partnership, any subsidiary of the Partnership, or any employee
benefit plan of the Partnership or any subsidiary of the
Partnership) of 10% or more of the outstanding BACs (the earlier of
(i) or (ii) being called the "Rights Distribution Date"), the
Rights will be evidenced by the BACs registered in the name of the
holders of the BACs and not by separate Right certificates.
The Rights Agreement is expected to provide that, until the
Rights Distribution Date, the Rights will be transferred with and
only with the BACs. Until the Rights Distribution Date (or earlier
termination or expiration of the Rights), the transfer of any BACs
also will constitute the transfer of the Rights associated with
such BACs. As soon as practicable following the Rights
Distribution Date, separate certificates evidencing the Rights (a
"Right Certificate") will be mailed to holders of record of the
BACs as of the close of business on the Rights Distribution Date
and such separate Right Certificates alone will evidence the
Rights.
<PAGE> 55
The Rights are not exercisable until the Rights Distribution
Date. The Rights will expire on the tenth anniversary of the
Record Date (the "Final Expiration Date") unless the Final
Expiration Date is extended or unless the Rights are earlier
redeemed by the Partnership, as described below.
Adjustments to Purchase Price. The purchase price payable
(the "Exercise Price"), and the number of the BACs or other
securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution in the
event the Partnership (i) declares or pays any distribution on the
BACs payable in BACs or other securities, (ii) subdivides or splits
the outstanding BACs into a greater number of interests or (iii)
combines or consolidates the outstanding BACs into a smaller number
of interests or effects a reverse split of the outstanding BACs.
Exercise of Rights. In the event that on or after the Rights
Distribution Date, the Partnership is acquired in a merger or other
business combination transaction or 50% or more of its consolidated
assets or earning power are sold (in one transaction or a series of
transactions other than in the ordinary course of business), proper
provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at
the then current Exercise Price, that number of partnership
interests, common shares or other equity securities of the
acquiring entity which at the time of such transaction will have a
market value of two times the Exercise Price. In the event that
any person, together with its affiliates and associates, becomes
the beneficial owner of 5% or more of the BACs then outstanding,
unless such acquisition is approved by the Managing General
Partner, each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise thereof and
payment of the Exercise Price, the greater of (i) the number of
BACs for which such Right was exercisable immediately prior to such
event or (ii) that number of BACs having a market value of two
times the Exercise Price. Under no circumstances may a Right be
exercised, even if an event set forth in the preceding sentence has
occurred, prior to the expiration of the Partnership's right of
termination.
Redemption of Rights. At any time prior to the earlier to
occur of (i) the acquisition by a person, together with its
affiliates and associates of beneficial ownership of 5% or more of
the outstanding BACs or (ii) the Final Expiration Date, the
Managing General Partner may cause the Partnership to redeem the
Rights in whole, but not in part, at a redemption price of $.01 per
Right. Immediately upon any redemption of the Rights, all rights
relating to the Rights (except the right to receive the redemption
price for each Right), including the right to exercise the Rights,
will terminate.
Amendments. The terms of the Rights may be amended by the
Managing General Partner in any manner without the consent of the
holders of the Rights, except that from and after such time as any
person becomes an Acquiring Person, no such amendment may adversely
affect the interest of the holders of the Rights (other than
Acquiring Persons).
Effect of the Rights Plan. While the Rights will not prevent
a takeover of the Partnership, the Rights may have certain anti-
takeover effects. The Rights could cause substantial dilution to a
person or group that attempts to acquire the Partnership in a
manner or on terms not approved by the Managing General Partner.
The Rights, however, should not deter any prospective offeror
willing to negotiate in good faith with the Partnership.
