<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
TEMPO-LP, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
TEMPO-GP, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------------
5. Total fee paid:
------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
- - --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
3. Filing Party:
- - --------------------------------------------------------------------------------
4. Date Filed:
- - --------------------------------------------------------------------------------
<PAGE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
December 29, 1997
Dear Assigned Benefit Certificate Holder,
The General Partner of Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund,
L.P. (the "Partnership") is pleased to report that the Partnership has entered
into an agreement, subject to the approval of the holders of Assigned Benefit
Certificates ("ABCs"), with CAPREIT Acquisition Corp., a party unaffiliated with
the Partnership, to sell the Partnership's tax-exempt mortgage bonds and other
assets.
In connection with the sale, the holders of ABCs will receive total
consideration equal to approximately $127,000,000 in cash, less expenses of the
sale. The General Partner seeks your consent to the sale, which the General
Partner believes is well-timed to take advantage of low interest rates, a strong
bond market and substantially improved values in the multi-family residential
housing market. After the sale, the Partnership intends to dissolve and
distribute the net cash proceeds from the sale equal to approximately $16.84 per
ABC. The Partnership has previously distributed the proceeds from the sale of
the bond relating to the Township at Hampton Woods Apartments equal to $1.55 per
ABC. When combined with the approximately $12.90 per ABC previously distributed,
and expected to be distributed, from operations, the Partnership will have
distributed approximately $31.29 per ABC during the existence of the
Partnership.
The General Partner expects to wind up the Partnership's affairs and make
final distributions by the end of 1998. Neither the General Partner nor its
affiliates will receive any proceeds from the sale.
THE GENERAL PARTNER HAS RECEIVED AN OPINION FROM CUSHMAN & WAKEFIELD, INC.
THAT THE SALE IS ADVISABLE AT THIS TIME AND THE PURCHASE PRICE PAYABLE BY
CAPREIT IS FAIR TO YOU FROM A FINANCIAL POINT OF VIEW. THE GENERAL PARTNER
BELIEVES THAT THE SALE IS IN YOUR BEST INTERESTS, AND RECOMMENDS THAT YOU
CONSENT.
In case the sale to CAPREIT is not consummated, the General Partner also
seeks your consent to sell the Partnership's assets to another purchaser or
purchasers at any time during the twelve month period beginning when the consent
of the holders of a majority of the ABCs is received, so long as the General
Partner receives a fairness opinion from an unaffiliated third party.
Thank you and I look forward to receiving your consent.
/s/ William B. Smith
William B. Smith
Chairman, Tempo-GP, Inc.
General Partner
YOUR CONSENT IS IMPORTANT. FAILURE TO RETURN THE CONSENT FORM WILL BE
CONSIDERED WITHHOLDING CONSENT FOR THE TRANSACTION.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR CONSENT BY JANUARY 30, 1998.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED THE TRANSACTIONS DESCRIBED IN THIS INFORMATION
STATEMENT, NOR HAVE THEY DETERMINED IF THIS INFORMATION STATEMENT IS ACCURATE OR
ADEQUATE. FURTHER, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT DETERMINED THE
FAIRNESS OR MERITS OF THE TRANSACTIONS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT IS DATED DECEMBER 29, 1997 AND IS FIRST BEING MAILED
TO HOLDERS OF
ABCS ON OR ABOUT DECEMBER 29, 1997.
<PAGE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
INFORMATION STATEMENT FURNISHED IN CONNECTION
WITH THE SOLICITATION OF CONSENTS
This Information Statement is furnished to the holders (the "ABC Holders")
of Assigned Benefit Certificates (the "ABCs") of the limited partner of Dean
Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P., a Delaware limited
partnership (the "Partnership"), by Tempo-GP, Inc., a Delaware corporation and
general partner of the Partnership (the "General Partner"). The General Partner
seeks your consent to (i) the proposed sale of the assets of the Partnership to
CAPREIT Acquisition Corp., a party unaffiliated with the Partnership or its
affiliates, including Realty (as defined herein) (the "Purchaser"), and (ii) the
subsequent dissolution and liquidation of the Partnership (the "Dissolution").
The Partnership's assets consist of federally tax-exempt revenue bonds (the
"Revenue Bonds") and equity interests (the "Equity Interests" and, collectively
with the Revenue Bonds, the "Partnership Assets") in entities which own certain
of the real properties securing the Revenue Bonds. The total consideration to be
received in connection with the sale of the Partnership Assets and the sale of
certain assets owned by Dean Witter Realty Inc., a Delaware corporation and
affiliate of the General Partner ("Realty"), and related to the Partnership (the
"Realty Assets"), the proceeds of which have been assigned to the Partnership,
is $127,000,000 (the "Sale Price"). The sale of the Partnership Assets and
Realty Assets to the Purchaser is hereinafter referred to as the "Sale." In
connection with the Sale, the General Partner received the opinion of Cushman &
Wakefield, Inc. ("C & W, Inc.") as to the timing of the sale of the Partnership
Assets and the fairness of the Sale Price to the ABC Holders from a financial
point of view.
The Partnership intends to distribute approximately $15.00 per ABC, which
represents approximately 90% of the estimated net cash proceeds of the Sale,
within ten days after the consummation of the Sale. The Partnership expects to
distribute the remaining approximately 10% of the estimated net cash proceeds of
the Sale, equal to approximately $1.84 per ABC, upon winding up its affairs,
which the General Partner anticipates will occur by December 31, 1998. The
Partnership has previously distributed sales proceeds of $1.55 per ABC from the
sale of the tax-exempt revenue bond relating to the Township at Hampton Woods
Apartments. As a result, ABC Holders will have received total sales proceeds of
approximately $18.39 per ABC. The Partnership has also distributed approximately
$11.97 per ABC from operations from inception through November 11, 1997. The
Partnership expects to distribute approximately $.93 per ABC from a combination
of quarterly distributions from operations and cash reserves by December 31,
1998 for total distributions of approximately $12.90 per ABC from operations. As
a result, aggregate distributions of approximately $31.29 per ABC will have been
made during the existence of the Partnership. The actual amounts distributed to
the ABC Holders may vary from the amounts set forth above as a result of
contingent liabilities, transaction-related costs, sales price adjustments and
other matters. The General Partner expects ABC Holders who purchased their ABCs
in the original offering by the Partnership to incur a tax loss as a result of
the Sale and the Dissolution but the state and federal income tax consequences
will vary for those ABC Holders who purchased their ABCs through secondary
market purchases after the original offering by the Partnership.
Neither the General Partner nor any of its affiliates will receive a fee or
any proceeds of the Sale or any other compensation or distributions in
connection with the Sale.
In case the Sale is not consummated, the General Partner seeks the consent
of the ABC Holders to sell all the Partnership's assets during the twelve-month
period beginning when the consent of the ABC Holders is received (the
"Substitute Sale Period") in one transaction or in a series of related
transactions so long as the General Partner receives a fairness opinion rendered
by an unaffiliated third party (collectively, with the sale of the Realty
Assets, the "Substitute Sale"). The Sale of the Partnership Assets pursuant to
the Sale, or a Substitute Sale if necessary, and the Dissolution are hereinafter
referred to as the "Transaction." If the Sale or a Substitute Sale is not
consummated, the Partnership will not be liquidated and will continue its
current business activities.
Holders of record of ABCs at the close of business on December 12, 1997 will
be entitled to consent to the Transaction.
THE BOARD OF DIRECTORS OF THE GENERAL PARTNER, HAVING DETERMINED THAT THE
TRANSACTION IS FAIR TO, AND IN THE BEST INTERESTS OF, THE ABC HOLDERS, HAS
UNANIMOUSLY APPROVED THE TRANSACTION, AND UNANIMOUSLY RECOMMENDS THAT ABC
HOLDERS CONSENT TO THE TRANSACTION.
YOUR CONSENT IS IMPORTANT. FAILURE TO RETURN THE CONSENT FORM WILL BE CONSIDERED
WITHHOLDING CONSENT FOR THE TRANSACTION.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR CONSENT BY JANUARY 30, 1998
December 29, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE SALE....................................................................... 3
SUMMARY.................................................................................................... 6
SELECTED FINANCIAL DATA.................................................................................... 10
THE TRANSACTION............................................................................................ 12
BACKGROUND FOR THE TRANSACTION........................................................................... 12
Formation of the Partnership........................................................................... 12
Acquisition of Equity Interests........................................................................ 12
Performance of the Partnership......................................................................... 12
Prospects of the Partnership........................................................................... 13
CONDUCT OF DECISION--MAKING PROCESS...................................................................... 13
General Partner........................................................................................ 13
Meetings of the Board of Directors of the General Partner in 1997...................................... 13
Selection of Financial Advisors........................................................................ 14
Competitive Auction.................................................................................... 14
Negotiations with Potential Purchasers................................................................. 15
Approval of the General Partner........................................................................ 15
Fairness Opinion....................................................................................... 15
RECOMMENDATIONS OF THE GENERAL PARTNER................................................................... 17
PLANS IF THE SALE IS NOT CONSUMMATED..................................................................... 17
RISKS AND BENEFITS TO ABC HOLDERS IF THE PARTNERSHIP SELLS ITS ASSETS.................................... 18
RISKS AND BENEFITS TO ABC HOLDERS IF THE PARTNERSHIP DOES NOT SELL ITS ASSTES............................ 18
Interest Rate Structure................................................................................ 18
Real Estate Investments................................................................................ 19
Non-Recourse Mortgage Loans............................................................................ 19
Income Tax Risks....................................................................................... 19
Transaction Costs...................................................................................... 20
Possible Benefits from Continuation of the Partnership's Business...................................... 20
THE SALE................................................................................................... 20
THE PURCHASE AGREEMENTS.................................................................................. 20
General................................................................................................ 20
Sale Price............................................................................................. 21
Conditions to Closing.................................................................................. 22
Representations and Warranties......................................................................... 22
Limitation of Remedies Upon a Breach Prior to Closing.................................................. 23
Indemnification after Closing.......................................................................... 23
FINAL DISTRIBUTION, LIQUIDATION AND DISSOLUTION.......................................................... 23
INTERESTS OF THE GENERAL PARTNER AND AFFILIATES............................................................ 24
DISTRIBUTION TO THE GENERAL PARTNER IF THE TRANSACTION IS CONSUMMATED.................................... 24
DISTRIBUTIONS AND FEES TO THE GENERAL PARTNER OR ITS AFFILIATES IF THE TRANSACTION IS NOT CONSUMMATED.... 24
INCOME TAX MATTERS......................................................................................... 25
FEDERAL INCOME TAX CONSEQUENCES OF THE SALE OF THE PARTNERSHIP'S ASSETS.................................. 25
FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION OF THE PARTNERSHIP.................................... 25
OTHER MATTERS.............................................................................................. 26
RECORD DATE; CONSENTS; REVOCATION OF CONSENTS............................................................ 26
OPINION OF COUNSEL....................................................................................... 26
SOLICITATION............................................................................................. 26
CONSENT REQUIRED......................................................................................... 27
NO RIGHT TO APPRAISAL OF ABC VALUE....................................................................... 27
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 27
EXHIBITS
Exhibit A--Fairness Opinion of Cushman & Wakefield, Inc.
Exhibit B--Bond Purchase Agreement
Exhibit C--Equity Interest Purchase Agreement
Exhibit D--Opinion of Bingham Dana LLP
</TABLE>
2
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SALE
Q: Why is the General Partner proposing to sell the Partnership's assets?
A: We propose to sell the Partnership's assets because:
- We believe that the asset sale is in your best interests.
- We believe that selling the Partnership's assets at this time will
maximize your return while minimizing your risk.
- We believe that the sale is well timed to take advantage of low interest
rates, the strong bond market, substantially improved values in the
multi-family residential housing market and the high level of interest in
the Partnership's assets among potential buyers which is in part due to
the recent strength and growth in the publicly traded REIT market.
- While the properties securing the Partnership's Revenue Bonds have
recently performed well, we have reduced expectations for the
Partnership's long term financial performance given ongoing developments
in several markets.
- We have been concerned about recent solicitations of the ABC Holders by
"Mini Tender Offers" and have repeatedly advised you that such offers to
purchase ABCs at prices between $8.25 and $11.00 were inadequate.
- The ABCs are trading in the informal secondary market at prices
significantly below the $18.39 per ABC to be received from the sale to the
Purchaser and the prior sale of the tax-exempt revenue bond relating to
the Township at Hampton Woods.
- The Sale will provide you with liquidity.
To review the reasons for the asset sale in greater detail, as well as the
risks of the asset sale, see pages 13 through 17.
Q: What will I receive if the Sale occurs?
A: You will receive the net cash proceeds of the Sale equal to approximately
$125,500,000, based upon a gross sale price of $127,000,000 less the expenses of
the Sale and the Partnership's operating expenses through the Dissolution,
estimated to be approximately $1,500,000. We intend to distribute approximately
$15.00 per ABC, which represents approximately 90% of the estimated net cash
proceeds of the Sale, within ten days after the closing of the Sale. We expect
to distribute the remaining approximately 10% of the estimated net cash proceeds
of the Sale, equal to approximately $1.84 per ABC, upon winding up of the
Partnership's affairs, which we anticipate will occur by December 31, 1998. As a
result, you will have received total proceeds of the Sale of approximately
$16.84 per ABC. Neither we nor any of our affiliates will receive a fee or any
proceeds of the Sale or any other compensation or distributions in connection
with the Sale.
Q: Upon completion of the Sale what will the total return be from my
investment in the Partnership?
A:
- Through November 11, 1997, we have distributed approximately $11.97 per
ABC from operations.
- We have previously distributed sales proceeds of $1.55 per ABC from the
sale of the tax-exempt revenue bond relating to the Township at Hampton
Woods Apartments.
- We expect to distribute approximately $.93 per ABC from operations and
cash reserves by December 31, 1998.
- We expect to distribute approximately $16.84 per ABC from proceeds of the
Sale.
3
<PAGE>
- In total, we will have distributed aggregate distributions of
approximately $31.29 per ABC during the Partnership's existence.
Q: When is the Sale expected to occur?
A: The Sale will occur within twenty days after you approve the Transaction
and we and Realty inform the Purchaser that all of the conditions to the Sale
have been satisfied or waived. Currently, we believe the Sale will close on or
about February 20, 1998.
Q: What will happen if the Sale does not occur?
A: If the Sale does not occur after you approve the Transaction, we will
attempt to consummate a Substitute Sale during the Substitute Sale Period. A
Substitute Sale will only occur if (i) we have determined that the terms of the
Substitute Sale are in your best interests, taking into account the then
existing condition of the Partnership's assets and the financial and real estate
markets, (ii) we obtain an opinion from a financial advisory firm of recognized
standing, such as Cushman & Wakefield, Inc., that the Substitute Sale is fair to
you from a financial point of view and (iii) the purchaser is not affiliated
with us. If the Sale does not occur, Realty has agreed to sell the Realty Assets
in connection with any Substitute Sale and to assign the sales proceeds thereof
to the Partnership. If a Substitute Sale is not consummated during the
Substitute Sale Period, the Partnership will continue its current business
activities and you will have an illiquid investment for an indeterminate period.
Q: What are the federal income tax consequences to me of the Transaction?
A: The Transaction will result in a distribution of cash to you. A portion
of your distribution will consist of interest on the Revenue Bonds and will be
federally tax-exempt. The remainder of your distribution will be a result of the
Sale and taxed as a capital gain to the extent that it exceeds your adjusted tax
basis in your ABCs. We expect that if you purchased your ABCs in the
Partnership's original offering, you will incur a tax loss as a result of the
Transaction. If you purchased your ABCs through secondary purchases after the
original public offering, you may incur a gain or a loss depending upon the
terms of your purchase. To review the tax consequences to you in greater detail,
see pages 25 through 26.
Q: Why is the General Partner asking for my consent?
A: Under the Partnership's Agreement of Limited Partnership we are required
to obtain your approval of the sale of the Partnership's assets and the
dissolution and termination of the Partnership.
Q: Will I continue to receive quarterly distributions of tax-exempt income?
A: The Partnership will continue to make quarterly distributions of cash
from operations until the Sale or a Substitute Sale occurs.
Q: Why isn't the Partnership distributing the total net proceeds of the
Sale, cash from operations and cash reserves immediately after the Sale occurs?
A: We are withholding approximately 10% of the net proceeds of the Sale,
cash from operations and cash reserves to pay liabilities, including contingent
liabilities and obligations, if any. A portion of such amount must be held in
escrow for at least nine months after the closing of the Sale. For more
information on the escrow, see pages 23 through 24.
Q: What will happen to the Partnership after distribution of the proceeds of
the Sale?
A: After we distribute the net proceeds of the Sale or a Substitute Sale and
any remaining cash from operations and reserves, the Partnership will be
dissolved and terminated and you will receive a final Schedule K-1 from the
Partnership. You will have no further relationship with the Partnership.
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<PAGE>
Q: What do I need to do now?
A: Just indicate on the enclosed consent form whether or not you approve of
the Transaction, and sign and mail it in the enclosed return envelope as soon as
possible, so that your ABCs will be represented. If your consent form indicates
that you do not approve of the Transaction, or if you abstain, it will be
counted as withholding consent for the Transaction. Your failure to return a
consent form will be counted as withholding consent for the Transaction. You can
revoke your consent up to January 30, 1998 by signing and delivering to
Georgeson & Company, Inc. a consent form with a later date.
Q: Should I return my ABC certificate with my consent form?
A: No. You should not return your ABC certificate with your consent form.
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have more questions about the Transaction you should contact:
Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P.
Two World Trade Center
New York, New York, 10048
Attention: Investor Services Group
Phone Number: (800) 359-9111
If you would like additional copies of the Information Statement or if you
have questions about the Transaction, you can contact:
Georgeson & Company, Inc.
Wall Street Plaza
88 Pine Street
New York, NY 10005
Phone Number: (800) 223-2064
You can also obtain information concerning the Transaction by contacting
your Dean Witter Reynolds Account Executive.
5
<PAGE>
SUMMARY
This Summary highlights selected information from this Information Statement
and does not contain all of the information that is important to you. To
understand the Transaction fully and for a more complete description of the
terms of the Sale, you should read carefully this entire document and the other
documents to which we have referred you. See "Where You Can Find More
Information" (page 27). We have included page references parenthetically to
direct you to a more complete description of the topics presented in this
Summary.
THE PARTNERSHIP (PAGE 12)
Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P.
Two World Trade Center
New York, New York 10048
(800) 359-9111
The Partnership was formed to invest in a portfolio of federally tax-exempt
revenue bonds. In 1986 the Partnership raised $149,082,200 of capital from the
sale of its ABCs. The proceeds were used to purchase ten series of federally
tax-exempt revenue bonds. The Partnership's objectives are: (1) safety and
preservation of capital, (2) periodic distribution of federally tax-exempt
interest, and (3) distribution of additional federally tax-exempt interest as a
result of the Partnership's right to receive payment of contingent interest
derived from designated portions of the net cash flows of the properties
securing the Revenue Bonds (the "Underlying Properties") and the proceeds of the
sales or refinancings of the Underlying Properties. Since its formation, the
Partnership has acquired equity interests in entities which own, directly or
indirectly, certain of the Underlying Properties as a result of defaults by the
former owners.
REASONS FOR THE SALE OF ASSETS (PAGE 13)
We believe that the current sale of the Partnership's assets will maximize
your return and minimize your risk while also providing liquidity. Our belief is
based on the currently low interest rates, the strength of the bond market, the
substantially improved values in the multi-family residential housing market and
the interest of potential purchasers in the Partnership's assets. Although the
Partnership has consistently made quarterly distributions of federally
tax-exempt interest to you, the performance of certain of the Underlying
Properties, and the prepayment of a Revenue Bond secured by a financially
successful Underlying Property, have diminished our expectations with respect to
the long-term financial performance of the Partnership's assets.
CONSEQUENCES TO YOU IF A SALE IS CONSUMMATED (PAGE 18)
If the Partnership sells its assets, you will no longer receive any benefits
of ownership of the Revenue Bonds or Equity Interests, including, among other
things, the receipt of distributions of tax-exempt income from distributions of
tax-exempt interest on the Revenue Bonds. Such distributions would likely
increase if the performance of the Underlying Properties were to improve.
RECOMMENDATION (PAGE 17)
We believe that the Transaction is in your best interest and recommend that
you consent to the Transaction, which includes the sale of the Partnership
Assets pursuant to the Sale to CAPREIT Acquisition Corp., or a Substitute Sale
if necessary, and the dissolution and liquidation of the Partnership.
RECORD DATE; CONSENTS REQUIRED (PAGE 26)
You are entitled to consent to the Transaction if you owned ABCs as of the
close of business on December 12, 1997, the Record Date.
6
<PAGE>
The Transaction will not occur without the consent of holders of a majority
of the ABCs outstanding on the Record Date. On the Record Date, there were
7,454,110 ABCs outstanding. You have the right to submit one consent for each
ABC you owned on the Record Date. The consent of holders of at least 3,727,056
ABCs is required in order to approve the Transaction. If your consent form
indicates that you do not approve of the Transaction, or abstain, it will be
counted as withholding consent for the Transaction. In addition, if you fail to
return a consent form, it will be counted as withholding consent for the
Transaction.
CONDUCT OF THE SALE (PAGE 13)
ENGAGEMENT OF FINANCIAL ADVISORS. We and Realty selected Cushman &
Wakefield of Washington D.C., Inc. ("C&W of D.C.") and its affiliate C&W, Inc.
(collectively, the "Financial Advisors") to act as financial advisors to the
Partnership and Realty in connection with the proposed sale of the Partnership
Assets and the Realty Assets. The Financial Advisors were retained because of
their expertise, reputation and familiarity with assets similar to the
Partnership's and Realty's and their experience conducting competitive auctions.
COMPETITIVE AUCTION. In order to maximize the purchase price for the
Partnership Assets and Realty Assets, we and Realty, with the assistance of C&W
of D.C., conducted a competitive auction for such assets. C&W of D.C. contacted
approximately 150 potential bidders. Of these potential bidders, 33 requested
and received detailed bidding packages. Seventeen potential bidders conducted
due diligence reviews, and 14 potential purchasers submitted bids. We and
Realty, along with legal counsel and C&W of D.C., evaluated the bids with a view
to maximizing the purchase price. Based on the results of negotiations with
certain bidders, we and Realty accepted the bid submitted by CAPREIT Acquisition
Corp., subject to your approval.
FAIRNESS OPINION. In connection with the Sale, we received the opinion of
C&W, Inc. that the timing of the sale of the Partnership Assets is advisable and
the Sale Price is fair to you from a financial point of view (the "Fairness
Opinion"). The Fairness Opinion is attached as Exhibit A to this Information
Statement. YOU ARE ENCOURAGED TO READ THE FAIRNESS OPINION CAREFULLY.
THE SALE (PAGE 20)
We intend to sell the Partnership Assets and Realty intends to sell the
Realty Assets pursuant to a Bond Purchase Agreement and an Equity Interest
Purchase Agreement (the "Bond Purchase Agreement" and "Equity Interest Purchase
Agreement," respectively, and collectively, the "Purchase Agreements") each
dated as of November 21, 1997 and among the Partnership, Realty and the
Purchaser. The Bond Purchase Agreement and Equity Interest Purchase Agreement
are attached as Exhibit B and Exhibit C hereto, respectively.
THE SALE. Upon your approval of the Transaction, the Partnership and Realty
intend to sell the Partnership Assets and the Realty Assets to the Purchaser.
The Realty Assets consist of equity interests in the entities which own,
directly or indirectly, certain of the Underlying Properties (the "Realty Equity
Interests") and Realty's rights to service the mortgage loans relating to the
Revenue Bonds (the "Realty Servicing Rights"). Realty has agreed to assign the
right to the proceeds of the sale of the Realty Assets to the Partnership. The
Partnership purchased the Revenue Bonds for $131,826,500. When the Sale Price
($127,000,000) is combined with the approximately $11,562,000 the ABC holders
received in connection with the sale of the tax-exempt revenue bond relating to
the Township at Hampton Woods Apartments, the total consideration the ABC
Holders will receive in connection with the sale of the partnership's assets is
approximately $138,562,000.
THE CLOSING. The closing of the Sale (the "Closing") will occur within
twenty days after we and Realty provide the Purchaser with notice that all
conditions to the consummation of the Sale have been satisfied or waived, but no
later than June 20, 1998.
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ADJUSTMENTS TO THE SALE PRICE. The Sale Price is subject to adjustment in
the event of (i) a principal or interest payment on, or the prepayment of, any
Revenue Bond, (ii) the non-purchase of any Revenue Bond, or (iii) a casualty
loss or environmental contamination or taking under the power of eminent domain
affecting an Underlying Property. The maximum amount of a downward adjustment of
the Sale Price is equal to the amount received by the Partnership or Realty as a
result of such event, subject to certain limitations.
WHAT YOU WILL RECEIVE FROM THE TRANSACTION. We intend to distribute
approximately $15.00 per ABC, which represents approximately 90% of the
estimated net cash proceeds of the Sale, within ten days after the Sale occurs.
Thereafter, upon winding up the Partnership's affairs, which we anticipate will
occur by December 31, 1998, we expect to distribute the remaining approximately
10% of the net cash proceeds of the Sale, equal to approximately $1.84 per ABC,
and the remaining cash from operations and reserves equal to approximately $.93
per ABC. The foregoing amounts are based on various assumptions with respect to
contingent liabilities, costs of the Transaction, adjustments to the Sale Price
and other matters. As a result, the actual amounts we distribute to you may vary
from the foregoing amounts.
CONDITIONS TO CLOSING. The Sale will be consummated only if the
Partnership, Realty and the Purchaser satisfy several conditions, including
approval of the Transaction by the holders of a majority of the ABCs
outstanding.
INDEMNIFICATION. The Partnership and Realty have agreed to indemnify the
Purchaser with respect to certain claims after the date of the Closing (the
"Closing Date"), including:
(i) breaches of representations and warranties and covenants contained
in the Purchase Agreements and any suit arising out of the transactions
contemplated thereby, so long as the claim is brought within nine months
after the Closing Date, or one year if the Sale is consummated after April
1, 1998;
(ii) the pending class action suit filed against the Partnership and the
pending petition filed against the General Partner described more fully in
the Partnership's periodic reports previously filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
(iii) facts, circumstances, actions or events occurring, existing or
arising at any time prior to the Closing Date with respect to the Park at
Landmark Apartments and the SunBrook Apartments so long as the claim is
brought within nine months after the Closing Date, or one year if the Sale
is consummated after April 1, 1998.
The Partnership's and Realty's indemnification obligations are limited to a
maximum of $8,890,000, which will be placed in an escrow account for a period of
nine months after the Closing Date, or one year if the Sale is consummated after
April 1, 1998.
TERMINATION. If the Sale does not occur as a result of a default by the
Purchaser, the Partnership's and Realty's remedy is limited to the $6,350,000
deposited by the Purchaser. If the Sale does not occur as a result of a default
by the Partnership or Realty, the Purchaser's remedy is limited to the return of
such deposit and reimbursement of the Purchaser's expenses. Reimbursement of the
Purchaser's expenses is limited to $1,250,000 if the default does not result
from failure of the ABC Holders to approve the Transaction and $2,000,000 if the
default results from the failure of the ABC Holders to approve the Transaction.
In addition, the Purchaser is entitled to 50% of the proceeds exceeding
$127,000,000 of a Substitute Sale if such proceeds exceed $127,000,000 and
certain other conditions are satisfied.
THE SUBSTITUTE SALE (PAGE 17)
If the Sale does not occur for any reason after the ABC Holders approve the
Transaction, we will attempt to consummate a Substitute Sale during the
Substitute Sale Period. A Substitute Sale will only occur if (i) we believe that
the terms of the Substitute Sale are in your best interests taking into account
the
8
<PAGE>
then existing condition of the Partnership's assets and the financial and real
estate markets, (ii) we obtain an opinion from a financial advisory firm of
recognized standing, such as C&W, Inc., that the Substitute Sale is fair to you
from a financial point of view and (iii) the purchaser is not affiliated with
us. If the Sale does not occur, Realty has agreed to sell the Realty Assets in
connection with any Substitute Sale and to assign the sale proceeds thereof to
the Partnership. If we cannot consummate a Substitute Sale within the Substitute
Sale Period, the Partnership will continue its current business activities.
FINAL DISTRIBUTIONS, LIQUIDATION AND DISSOLUTION (PAGE 23)
A Sale or a Substitute Sale will have the ultimate effect of dissolving and
terminating the Partnership. Within ten days following the consummation of the
Sale, we will determine the amount of assets, then to consist solely of cash and
cash equivalents, that would be sufficient to provide for the Partnership's
liabilities, including contingent liabilities and obligations, if any, which
shall include the $8,890,000 held in escrow to cover potential claims by the
Purchaser. After making such determination, we will distribute to you the
remainder of the Partnership's assets, which we estimate to be equal to
approximately 90% of the net cash proceeds of the Sale. After satisfaction of
all contingent obligations and liabilities, which is expected to occur prior to
December 31, 1998, we will distribute the remainder of the Partnership's assets
to you in accordance with the Partnership's Agreement of Limited Partnership and
the Partnership will terminate.
FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION (PAGE 25)
The Transaction will result in a distribution of cash to you. A portion of
your distribution will consist of interest on the Revenue Bonds and will be
federally tax-exempt. The remainder of your distribution will be a result of the
Sale, or a Substitute Sale, and taxed as a capital gain to the extent that it
exceeds your adjusted tax basis in your ABCs. We expect that if you purchased
your ABCs in the Partnership's original offering, you will incur a tax loss as a
result of the Sale. If you purchased your ABCs through secondary market
purchases after the Partnership's original offering, you may incur a gain or a
loss depending upon the terms of your purchase. To review the tax consequences
to you in greater detail, see pages 25 through 26.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE TRANSACTION
TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE TRANSACTION
TO YOU.
OUR INTERESTS IN THE TRANSACTION (PAGE 24)
Neither we nor any of our affiliates will receive a fee or any proceeds of
the Sale or any Substitute Sale or any other compensation or distributions as a
result of the Transaction.
APPRAISAL RIGHTS (PAGE 27)
If the ABC Holders who hold a majority of the ABCs approve the Transaction,
ABC Holders who do not consent will not be entitled to any rights of appraisal
or similar rights.
9
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for, and as of the end of, the
five one-year periods ended December 31, 1996, have been derived from the
audited financial statements of the Partnership. The selected financial data
presented below for, and as of the end of, the nine-month periods ended
September 30, 1997 and 1996 have been derived from unaudited financial
statements of the Partnership. In the opinion of management, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation thereof. Operating
results for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997.
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993(A) 1992(A)
------------ ------------ ------------ ------------ ------------ ------------ ------------
INCOME STATEMENT DATA:
Interest income:
Revenue bonds........... $ 7,213,145 $ 6,818,899 $ 9,265,615 $ 8,683,309 $ 8,426,095 $ 7,491,957 $ 7,676,722
Short term
investments........... 137,926 116,374 157,551 167,320 63,673 74,933 112,826
------------ ------------ ------------ ------------ ------------ ------------ ------------
7,351,071 6,935,273 9,423,166 8,850,629 8,489,768 7,566,890 7,789,548
------------ ------------ ------------ ------------ ------------ ------------ ------------
Equity in losses of
property owning
investees............... 636,587 600,363 978,533 926,852 907,886 1,135,497 1,356,686
------------ ------------ ------------ ------------ ------------ ------------ ------------
Expenses:
General and
administrative........ 350,683 273,754 354,005 364,408 735,649 355,047 510,578
Other................... 0 0 0 0 0 17,345,397(1) 825,000(2)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income (loss)......... $ 6,363,801 $ 6,061,156 $ 8,090,628 $ 7,559,369 $ 6,846,233 ($11,269,051) $ 5,097,284
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income (loss)
allocated to:
Limited Partner......... $ 6,236,525 $ 5,939,933 $ 7,928,815 $ 7,408,182 $ 6,709,308 ($11,043,670) $ 4,995,338
General Partner......... 127,276 121,223 161,813 151,187 136,925 (225,381) 101,946
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,363,801 $ 6,061,156 $ 8,090,628 $ 7,559,369 $ 6,846,233 ($11,269,051) $ 5,097,284
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE SHEET DATA:
Cash and equivalents.... $ 5,024,383 $ 5,399,390 $ 4,743,191 $ 5,255,586 $ 3,736,746 $ 3,214,536 $ 3,116,206
Investments in revenue
bonds (B)............. 117,786,000 107,827,228 110,696,721 108,635,226 107,374,117 107,922,089 124,675,998
Deferred bond selection
fee, net.............. 888,301 1,101,275 1,048,032 1,261,006 1,473,980 1,686,954 1,899,928
Escrowed funds/other
assets................ 932,251 877,095 774,756 741,613 727,644 168,750 0
Accrued interest
receivable............ 458,356 456,814 1,015,685 543,723 733,012 533,357 533,536
------------ ------------ ------------ ------------ ------------ ------------ ------------
$125,089,291 $115,661,802 $118,278,385 $116,437,154 $114,045,499 $113,525,686 $130,225,668
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
Excess of equity in
losses of property-
owning investees over
investments therein... $ 6,656,249 $ 5,720,472 $ 6,098,642 5,135,109 4,150,698 3,630,859 2,378,220
Accounts payable and
other liabilities..... 1,127,799 1,097,041 908,516 865,304 957,538 790,525 438,331
Partners capital........ 117,305,243 108,844,289 111,271,227 110,436,741 108,937,263 109,104,302 127,409,117
------------ ------------ ------------ ------------ ------------ ------------ ------------
$125,089,291 $115,661,802 $118,278,385 $116,437,154 $114,045,499 $113,525,686 $130,225,668
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
CASH DISTRIBUTION DATA:
Cash distributions to:
Limited Partners...... $ 7,270,741 $ 6,708,698 $ 9,131,285 $ 7,174,581 $ 6,335,994 $ 6,895,050 $ 7,454,110
General Partners...... 148,323 136,912 186,352 146,419 129,306 140,714 152,124
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 7,419,064 $ 6,845,610 $ 9,317,637 $ 7,321,000 $ 6,465,300 $ 7,035,764 $ 7,606,234
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
Cumulative cash
distributions from
inception to end of
period
Limited Partners...... $ 86,801,336 $ 77,108,008 $ 79,530,595 $ 70,399,310 $ 63,224,729 $ 56,888,735 $ 49,993,685
General Partners...... 1,796,211 1,598,448 1,647,888 1,461,536 1,315,117 1,185,811 1,045,097
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 88,597,547 $ 78,706,456 $ 81,178,483 $ 71,860,846 $ 64,539,846 $ 58,074,546 $ 51,038,782
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
10
<PAGE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
1997 1996 1996 1995 1994 1993(A) 1992(A)
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER COMPENSATION OF
GENERAL PARTNER
Reimbursement of
expenses.............. $ 386,000 $ 387,000 $ 516,000 $ 516,000 $ 516,000 $ 516,000 $ 508,000
Management fees......... $ 79,615 $ 76,424 $ 101,844 $ 104,635 $ 99,512 $ 125,655 $ 164,982
PER ASSIGNED BENEFIT
CERTIFICATE DATA:
Net income (loss)....... $ 0.84 $ 0.80 $ 1.06 $ 0.99 $ 0.90 ($ 1.48) $ 0.67
ABC Holders' equity..... $ 14.50 $ 14.70 $ 14.64 $ 14.80 $ 14.77 $ 14.72 $ 17.13
Cash distributions...... $ 0.97 $ 0.90 $ 1.23 $ 0.96 $ 0.85 $ 0.92 $ 1.00
Cumulative cash
distributions from
inception to end of
period................ $ 11.64 $ 10.34 $ 10.67 $ 9.44 $ 8.48 $ 7.63 $ 6.71
</TABLE>
- - ------------------------
(1) Represents provision for loss on investments.
(2) Represents settlement of litigation.
(A) Certain 1992 and 1993 amounts have been reclassified to conform to 1994-1997
presentation.
(B) Prior to 1994, carried at cost less writedowns due to impairment. Effective
January 1, 1994, carried as debt securities available for sale, at estimated
fair value.
11
<PAGE>
THE TRANSACTION
BACKGROUND FOR THE TRANSACTION
FORMATION OF THE PARTNERSHIP. The Partnership was formed to invest in a
portfolio of federally tax-exempt revenue bonds. In October 1986, the
Partnership issued 7,454,110 ABCs, receiving in return gross proceeds from such
offering of $149,082,200. The proceeds from the offering were used by the
Partnership to purchase ten series of federally tax-exempt revenue bonds for
$131,826,500. These bonds were issued as special obligations of various state or
local governments or their agencies or authorities. The proceeds of the issuance
of the revenue bonds were used to fund mortgage loans (the "Mortgage Loans") to
finance the development or purchase of eight multi-family residential
properties. Each of the Revenue Bonds is primarily secured by the related
Underlying Property. Realty is the servicer of the Mortgage Loans pursuant to
various Servicing Agreements among the Partnership, Realty, the various trustees
with respect to the Revenue Bonds and the owners of the Underlying Properties
(the "Servicing Agreements").
Since its formation the Partnership has pursued the following investment
objectives: (1) safety and preservation of capital, (2) periodic distribution of
federally tax-exempt interest (the "Base Interest") and (3) distribution of
additional federally tax-exempt interest as a result of the Partnership's right
to receive payments of contingent interest derived from designated portions of
the net cash flows of the Underlying Properties (the "Contingent Interest").
ACQUISITION OF EQUITY INTERESTS. As a result of defaults by certain
borrowers, the Partnership acquired equity interests in entities which own,
directly or indirectly, certain of the Underlying Properties. Landmark
Acquisition Corp., a corporation owned 50% by the Partnership and 50% by Realty,
acquired the Park at Landmark Apartments located in Alexandria, Virginia. DWR SB
Partnership, a partnership indirectly owned 50% by the Partnership and 50% by
Realty, acquired the SunBrook Apartments located in St. Louis, Missouri as a
part of a bankruptcy settlement in May 1992. The Partnership also owns a 50%
interest in Fountain Head Acquisition Corp., the owner of the Fountain Head
Apartments located in Kansas City, Missouri. The remaining 50% interest in
Fountain Head Acquisition Corp. is owned by an unaffiliated party. In addition,
the Partnership owns a 6% limited partnership interest in Pine Club Phase II,
Ltd., which is the owner of the Pine Club Apartments Phase II, located in
Orlando, Florida. The remaining 94% interest in Pine Club Phase II, Ltd. is
owned by unaffiliated parties. Realty has not received any cash flow or other
economic benefit from ownership of the Realty Equity Interests.
PERFORMANCE OF THE PARTNERSHIP. While the Partnership has been providing
regular quarterly distributions, and the Underlying Properties have performed
well recently, the General Partner has reduced expectations for the
Partnership's long term financial performance given ongoing developments in
several markets. The primary source of payments due under the Revenue Bonds is
interest paid on the Mortgage Loans. The terms of the Mortgage Loans provide
that a portion of Base Interest is unconditionally payable monthly (the "Minimum
Required Interest"). The remainder of Base Interest and the Contingent Interest
accrues without further interest and becomes due and payable when the Underlying
Properties' cash flows permit such repayment or upon the sale or refinancing of
the Underlying Property. Therefore, the Partnership's performance is contingent
on the performance of the Underlying Properties.
For the nine months ended September 30, 1997, five of the Underlying
Properties paid interest in excess of the Minimum Required Interest. The
remaining Underlying Properties paid the Minimum Required Interest or less.
Specifically, during the nine months ended September 30, 1997, the cash flow
from the High Ridge Apartments, the Township at Hampton Woods Apartments, the
Wildcreek Apartments, the SunBrook Apartments and the Burlington Arboretum
Apartments enabled their owners to pay debt service at interest rates of 7.91%,
8.85%, 8.58%, 9.3% and 8.74%, respectively. The Minimum Required Interest under
the Mortgage Loans relating to these Properties is 7.25%, 8.5%, 7.5%, 7.25% and
5.35%, respectively. On October 24, 1997, the Partnership sold the Township at
Hampton Woods Apartments revenue bond to the owner of the property for
approximately $11,562,000. The Partnership
12
<PAGE>
expects the remaining four of these Underlying Properties to continue to operate
at a modest cash flow surplus after payment by each of them of the Minimum
Required Interest, allowing each to pay modest Base Interest in excess of the
Minimum Required Interest.
During the same period, the cash flow from the Pine Club Apartments and
Fountain Head Apartments enabled their owners to pay only the Minimum Required
Interest. The Partnership expects these two properties to continue to pay only
the Minimum Required Interest in the future.
For the nine months ended September 30 1997, the Park at Landmark Apartments
did not generate sufficient cash flow for Landmark Acquisition Corp. (which is
50% owned, indirectly, by the Partnership and 50% owned by Realty) to pay the
Minimum Required Interest. All of the cash flow generated by this property is
paid to the Partnership. The Partnership believes that cash flow from the Park
at Landmark Apartments will not be sufficient to pay the Minimum Required
Interest for several years.
PROSPECTS OF THE PARTNERSHIP. In general, the Underlying Properties are
located in strong multi-family rental markets with supply and demand currently
near equilibrium. The Burlington Arboretum Apartments, located in a suburb of
Boston, Massachusetts, continues to operate in a strong market. Occupancy during
the quarter ended September 30, 1997 remained at 98%. New apartment construction
is planned in nearby communities, which, if completed, would add nearly 1,500
apartments to the region, and rental rates may become more competitive over the
longer term. With respect to the High Ridge Apartments, located in Albuquerque,
New Mexico, the occupancy rate is approximately 91%, having steadily declined
since 1995 when the occupancy rate was 95%. The Fountain Head Apartments,
located in Kansas City, Missouri, is in a stable market with a vacancy rate of
5% and rental rates remaining flat during the quarter ended September 30, 1997.
The Wildcreek Apartments, located in a suburb of Atlanta, Georgia, is in a
highly competitive market with a current vacancy rate of approximately 10% and
rental rates remaining stagnant. The SunBrook Apartments, located in a suburb of
St. Louis, Missouri, consists primarily of furnished apartments offered under
short-term leases. The demand for these units is seasonal, decreasing to 87% for
the quarter ended September 30, 1997. The Park at Landmark Apartments, located
in Alexandria, Virginia, operates in a very competitive market experiencing a
current vacancy rate of approximately 10%. The occupancy rate of the property is
currently approximately 97%. The Pine Club Apartments, located in Orlando,
Florida, operate in a market with a current vacancy rate of approximately 6%.
Occupancy at the property is currently approximately 91%. Generally, although
demand in these markets has increased, the Partnership expects the increased
demand to be offset by increased development and does not expect occupancy rates
or rental rates for the Underlying Properties to increase significantly.
The Partnership does not expect the cash flows of the Underlying Properties
to materially increase in the future. Therefore, in order to maximize the
returns and limit the risk to the ABC Holders, the General Partner has
determined that sale of the Partnership Assets and liquidation and dissolution
of the Partnership is in the best interests of the ABC Holders.
CONDUCT OF DECISION--MAKING PROCESS
GENERAL PARTNER. The actions of the General Partner are controlled by its
Board of Directors (the "Board"). The sale of the Partnership Assets and the
liquidation and dissolution of the Partnership require the approval of the
General Partner and the consent of the holders of a majority of the ABCs.
MEETINGS OF THE BOARD OF DIRECTORS OF THE GENERAL PARTNER IN 1997. At
various meetings of the Board early in 1997, including a meeting on February 20
and 21, 1997, the members of the Board discussed opportunities to sell some or
all of the Partnership Assets. It was noted that a sale of the Partnership
Assets would provide liquidity to the ABC Holders at a higher price than that
offered pursuant to recent tender offers. At its June 9, 1997 and September 23,
1997 meetings, the Board decided that officers of the General Partner should
explore a sale of the Partnership Assets with a goal of maximizing the return to
the ABC Holders.
13
<PAGE>
SELECTION OF FINANCIAL ADVISORS. Following the General Partner's
determination to explore the sale of the Partnership Assets, the General Partner
interviewed financial advisors to, among other things, assist in the offering of
the Partnership Assets for sale and render an opinion as to the advisability of
the timing of the proposed sale and the fairness, from a financial point of
view, of the consideration to be received by the ABC Holders in connection with
the proposed sale. In August and September 1997, the General Partner met with
representatives of C&W of D.C. and C&W, Inc. and four other financial advisory
firms of recognized standing for possible retention as financial advisor.
Officers of the General Partner discussed with such representatives, among other
things, the expertise of their firms with respect to limited partnerships, their
familiarity with federally tax-exempt revenue bonds in general and the market
for the Revenue Bonds in particular, their familiarity with the rental property
markets in the various locations of the Underlying Properties, the procedures
that might be undertaken with any disposition of the Partnership Assets, and the
fees that such firms would charge for their services.
The General Partner and Realty retained C&W, Inc. and C&W of D.C. to act as
financial advisors because of their expertise, reputation and familiarity with
assets similar to those being sold by the Partnership and Realty and because of
their substantial experience in conducting competitive auctions of such assets.
C&W of D.C. acted as financial advisor with respect to the competitive auction
and sale of the Partnership Assets and Realty Assets. C&W, Inc. acted as
financial advisor with respect to the Fairness Opinion. The Financial Advisors,
as part of their financial advisory business, are continually engaged in the
valuation of real estate related assets in connection with transactions of many
types and valuations for estate, corporate and other purposes.
C&W, Inc. and its affiliates have rendered various financial advisory and
real estate brokerage services to Realty and its affiliates in the past, and may
render such services in the future, for which it has received, and may continue
to receive, customary compensation. During the last two fiscal years C&W, Inc.,
and its affiliates, have performed the following services: (i) annual appraisals
of various properties owned by entities for which affiliates of the General
Partner serve as general partner; (ii) advisory and brokerage services in
connection with the disposal of office buildings and a portfolio of shopping
centers by entities for which affiliates of the General Partner act as general
partner and (iii) various fairness opinions. For the foregoing services C&W,
Inc., and its affiliates, have received aggregate fees of approximately
$2,100,000.
Pursuant to an engagement letter with the Financial Advisors, the
Partnership and Realty agreed to pay a fee to C&W of D.C., the amount of which
is contingent upon the outcome of the Sale. If the Sale is not consummated for
any reason, C&W of D.C. shall be entitled to reimbursement of expenses not in
excess of $15,000. If the Sale is consummated, C&W of D.C. shall receive a fee
equal to 0.65% of the proceeds of the Sale up to the Threshold Amount plus 0.8%
of the proceeds of the Sale in excess of the Threshold Amount. Pursuant to the
engagement letter, the original "Threshold Amount" was $130,000,000. However,
because the Partnership sold the revenue bond relating to the Township at
Hampton Woods Apartments in a separate transaction, the Threshold Amount was
reduced to $119,200,000. C&W of D.C. is entitled, for services rendered, to
0.325% of the proceeds of the sale of the revenue bond relating to the Township
at Hampton Woods Apartments. If any of the other Revenue Bonds is not included
in the Sale because it is sold or prepaid in a transaction other than the Sale,
then the proceeds of such sale or prepayment shall be included for the purpose
of determining C&W of D.C.'s fee. C&W, Inc. received a fee of $150,000 from the
Partnership upon delivery of its Fairness Opinion, payment of which was not
contingent upon the consummation of the Sale. The Partnership and Realty also
agreed to indemnify C&W, Inc. against certain liabilities relating to the
Fairness Opinion.
COMPETITIVE AUCTION. The General Partner and Realty, with the assistance of
C&W of D.C., established procedures for a competitive auction of the Partnership
Assets and Realty Assets that were designed to elicit multiple bids. C&W of D.C.
contacted approximately 150 potential bidders regarding the proposed sale. Of
these potential bidders, 33 requested and received detailed bidding packages
which contained information concerning the assets offered and each of the
Underlying Properties. Seventeen potential bidders conducted due diligence
reviews. Prospective bidders were advised that the Partnership and Realty
14
<PAGE>
had no obligation to accept any bid even if it represented the highest and best
proposed sales price. In addition, potential bidders were told that in
connection with the evaluation of bids, the Partnership and Realty would
consider such matters as deemed appropriate, including each bidder's ability to
perform on a timely basis.
NEGOTIATIONS WITH POTENTIAL PURCHASERS. On November 17, 1997, bids were
submitted by 14 potential purchasers. The General Partner and Realty, along with
representatives of C&W of D.C. and legal counsel, evaluated the bids received
with a view to maximizing the return to the ABC Holders, based on such factors
as price, the bidder's ability to perform and optimization of the gross proceeds
to the Partnership. Based on the results of negotiations with certain bidders,
the Purchaser's bid was accepted, subject to approval by the ABC Holders.
APPROVAL OF THE GENERAL PARTNER. On November 21, 1997, the Board met to
review and discuss the Sale. Officers of the General Partner reported that the
Partnership, Realty and the Purchaser had agreed to the terms of a sale of the
Partnership Assets and Realty Assets and representatives of the Financial
Advisors made presentations to the Board regarding the proposed Sale. Outside
counsel then reviewed certain legal matters, including a review of the terms of
the Purchase Agreements, and discussed other relevant aspects of the law.
Following such presentations, the Board received the opinion of C&W, Inc. that
as of November 21, 1997 and based on the procedures followed, assumptions made,
matters considered and limitations on review undertaken, as set forth in the
Fairness Opinion, the sale of the Partnership Assets was advisable at this time
and the Sale Price was fair to the ABC Holders from a financial point of view.
See "Fairness Opinion." The Board also heard a presentation from officers of the
General Partner regarding the advisability of a Substitute Sale should the Sale
not be consummated for some reason. After hearing such reports from the officers
of the General Partner and its legal advisors and Financial Advisors and after
receiving C&W, Inc.'s opinion, the Board unanimously determined that the Sale
was fair to and in the best interests of the ABC Holders, approved the Purchase
Agreements, and resolved to recommend to the ABC Holders that they consent to
the Transaction.
The Purchase Agreements were signed by the parties on November 21, 1997
after the meeting of the Board described above.
FAIRNESS OPINION. In the course of its review, C&W, Inc. assumed and relied
upon the accuracy and completeness of all of the financial and other information
provided to it or discussed with it or publicly available and neither attempted
to verify nor assumed responsibility for verifying any such information. C&W,
Inc. also assumed that the financial forecasts provided to it were reasonably
prepared on bases reflecting the best available estimates and judgments of the
General Partner for the period covered. C&W, Inc. expresses no opinion with
respect to such forecasts or the assumptions on which they are based.
A COPY OF THE FAIRNESS OPINION IS ATTACHED AS EXHIBIT A TO THIS INFORMATION
STATEMENT. ABC HOLDERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY
FOR INFORMATION WITH RESPECT TO THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN BY C&W, INC. IN RENDERING
THE FAIRNESS OPINION. REFERENCES TO THE FAIRNESS OPINION AND THE SUMMARY OF THE
FAIRNESS OPINION ARE QUALIFIED BY REFERENCE TO THE FULL TEXT OF THE FAIRNESS
OPINION, WHICH IS INCORPORATED HEREIN BY REFERENCE. THE FAIRNESS OPINION IS
DIRECTED TO THE ADVISABILITY OF EFFECTING THE SALE OF THE PARTNERSHIP ASSETS AT
THIS TIME, AND TO THE FAIRNESS OF THE SALE PRICE TO THE ABC HOLDERS FROM A
FINANCIAL POINT OF VIEW, BUT DOES NOT CONSTITUTE A RECOMMENDATION TO ANY ABC
HOLDER AS TO WHETHER SUCH ABC HOLDER SHOULD GIVE HIS OR HER CONSENT WITH RESPECT
TO THE TRANSACTION.
In addition, C&W, Inc. did not review any of the books and records of the
Partnership or assume any responsibility for conducting a detailed physical
inspection of the Underlying Properties, or for making or obtaining an
independent valuation or appraisal of the Partnership Assets. C&W, Inc. has not
been furnished with any such valuation or appraisal. In addition, the Fairness
Opinion assumes that the Sale will be consummated in accordance with the terms
of the Purchase Agreements. The Fairness Opinion is
15
<PAGE>
necessarily based on economic and market conditions and other circumstances as
they exist and can be evaluated by C&W, Inc. as of the date thereof.
No limitations were imposed by the Partnership or the General Partner with
respect to the scope of the investigation made or the procedures followed by
C&W, Inc. in rendering the Fairness Opinion. The General Partner cooperated
fully with C&W, Inc. in connection with its investigation.
Set forth below is a summary of the factors considered by C&W, Inc. in
connection with providing the Fairness Opinion to the Board. These factors
included:
(1) reviewing certain publicly available financial statements and other
information of the Partnership;
(2) reviewing certain financial and operating data concerning the
Partnership, prepared by the Partnership;
(3) discussing the past and current operations and financial condition
and the prospects of the Partnership with the General Partner;
(4) analyzing historical results of operations and certain financial
projections related to the Underlying Properties prepared by the
Partnership;
(5) visiting the Underlying Properties;
(6) reviewing the financial terms, to the extent publicly available, of
certain comparable precedent transactions;
(7) being advised by C&W of D.C. that it participated in discussions and
negotiations between the General Partner, Realty and the Purchaser in
connection with the Sale, and of the course and substance of such
discussions and negotiations;
(8) reviewing bids solicited by C&W of D.C. from approximately 150
potential purchasers for all or a portion of the Revenue Bonds and the
Equity Interests;
(9) considering today's historically low interest rate environment;
(10) considering conditions of the relevant real estate markets for each
of the Underlying Properties and the competitive positions of these
properties within each of these markets;
(11) considering the original planned liquidation of the Partnership 14
to 17 years from inception;
(12) considering the risk of holding the Revenue Bonds until maturity;
(13) considering unrated tax exempt investments available as
alternatives to an investment in the Partnership;
(14) considering the assignment by Realty to the Partnership of the
proceeds of the sale of the Realty Assets; and
(15) considering such other factors as C&W, Inc. deemed appropriate.
The foregoing summary is not a complete description of the analyses
performed by C&W, Inc. or of its presentation to the Board. The preparation of
financial analyses and fairness opinions is a complex process and is not
necessarily susceptible to partial analysis or summary description. C&W, Inc.
believes its analyses (and the summary set forth above) must be considered as a
whole, and that selecting portions of such analyses and of the factors
considered by C&W, Inc. without considering all of such factors and analyses,
could create an incomplete view of the processes underlying the analyses
conducted by C&W, Inc. and the Fairness Opinion. C&W, Inc. made no attempt to
assign a specific weight to any particular factor or analysis. No company or
transaction used in the above analyses as a comparison is identical to the
Partnership or the transactions contemplated by the Purchase Agreements. Any
estimates contained in
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<PAGE>
C&W, Inc.'s analyses are not necessarily indicative of actual value, which may
be significantly more or less favorable than as set forth therein. Estimates of
values of assets do not purport to be appraisals or necessarily reflect the
prices at which assets may actually be sold.
C&W of D.C., an affiliate of C&W, Inc., acted as financial advisor to the
Partnership and Realty in connection with the Sale. The fee to be received by
C&W of D.C. is contingent upon the consummation of the Sale. See "Conduct of
Decision-Making Process--Selection of Financial Advisors."
RECOMMENDATIONS OF THE GENERAL PARTNER
The General Partner's decision to pursue a sale of the Partnership Assets
was based upon its belief that a sale is in the best interests of the ABC
Holders. In making this decision, the General Partner considered the amount
likely to be distributed to the ABC Holders upon sale of the Partnership Assets
and the investment risks to which the ABC Holders would be exposed if the
Partnership retained its assets.
In reaching its conclusion that the Sale was fair to, and in the best
interests of the ABC Holders, the General Partner considered many factors,
including the following:
(i) The business, results of operations, financial condition,
competitive position and prospects of the Partnership and the Underlying
Properties.
(ii) The terms of the Purchase Agreements.
(iii) The Fairness Opinion rendered by C&W, Inc.
(iv) The absence of an active secondary trading market in the ABCs and
thus the ABC Holders' lack of liquidity in their investment.
(v) The estimated total distribution of the net proceeds of the Sale,
which will be equal to approximately $16.84 per ABC and which would provide,
when combined with prior distributions to ABC Holders from the sale of the
tax-exempt revenue bond relating to the Township at Hampton Woods Apartments
and operations, which are equal to approximately $13.52 per ABC, and the
expected distribution of approximately $.93 per ABC from operations and cash
reserves, a total cash return of $31.29 per ABC on an original investment of
$20.00 per ABC.
(vi) The performance and prospects of the Partnership (see "Background
for the Transaction-- Performance of the Partnership" "--Prospects of the
Partnership").
The General Partner evaluated such factors in light of its knowledge of the
business and operations of the Partnership and in the exercise of its business
judgment. In view of the wide variety of factors considered in connection with
the evaluation of the Transaction, the General Partner did not find it practical
to, and did not, quantify or otherwise attempt to assign relative weights or
positive or negative labels to the specified factors considered in making its
determinations.
With respect to a Substitute Sale, the General Partner has an obligation to
ensure that any Substitute Sale is in the best interests of the ABC Holders.
Furthermore, the General Partner believes that the conditions that must be
satisfied in connection with any Substitute Sale (see "Conduct of
Decision-Making Process--Plans if the Sale is not Consummated") ensure that the
sale price for the Substitute Sale will be fair to the ABC Holders from a
financial point of view. The General Partner notes that Realty has agreed to
sell the Realty Assets in connection with a Substitute Sale and to assign the
sales proceeds thereof to the Partnership. In addition, the General Partner
believes that it is in the best interests of the ABC Holders to approve a
Substitute Sale at this time due to the time and expense associated with another
solicitation.
PLANS IF THE SALE IS NOT CONSUMMATED
The General Partner expects to consummate the Sale if it obtains the
requisite consent of the ABC Holders to the Transaction. If for any reason,
however, the Sale is not consummated after the requisite
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<PAGE>
consent has been obtained, the General Partner intends to again offer to sell
the Partnership Assets during the Substitute Sale Period. In addition, the
General Partner has been advised that if the Sale is not consummated and the
General Partner again offers the Partnership Assets for sale, Realty intends to
simultaneously offer to sell the Realty Assets and assign its rights to the
proceeds of such sale to the Partnership. A Substitute Sale will only be
consummated during the Substitute Sale Period if (i) the General Partner has
determined that the terms of the Substitute Sale are in the best interests of
the ABC Holders, taking into account the then existing condition of the
Partnership Assets and the financial and real estate markets; (ii) the General
Partner obtains an opinion from a financial advisory firm of recognized
standing, such as C&W, Inc., that the consideration to be received pursuant to
the Substitute Sale is fair to the ABC Holders from a financial point of view
and (iii) the alternative purchaser is not affiliated with the General Partner.
There can be no assurance that the General Partner could arrange for a
Substitute Sale on terms as favorable to the Partnership as the Sale. In the
event that no Substitute Sale is consummated during the Substitute Sale Period,
the Partnership would continue its current business activities.
RISKS AND BENEFITS TO ABC HOLDERS IF THE PARTNERSHIP SELLS ITS ASSETS
If the Transaction is approved and the Sale or a Substitute Sale
consummated, thereafter the ABC Holders' investment in the Partnership will be
liquidated and the ABC Holders will have no further investment risks with
respect to the Partnership.
After consummation of the Sale or a Substitute Sale, ABC Holders will no
longer receive any benefits of ownership of the Partnership Assets, including
the receipt of tax-exempt income from distributions of tax-exempt interest on
the Revenue Bonds. Since the amount of tax-exempt income, including tax-exempt
income from distributions of accrued Base Interest and Contingent Interest,
received by the ABC Holders depends on the cash flows of the Underlying
Properties, if the cash flows of the Underlying Properties increase in the
future, tax-exempt income received by the ABC Holders on the Revenue Bonds would
likely increase as well. If the Sale or a Substitute Sale is consummated, all
income generated from the Revenue Bonds after the Sale or Substitute Sale will
accrue to the purchaser or purchasers of the Revenue Bonds.
After consummation of the Sale or a Substitute Sale, ABC Holders will also
no longer receive any benefits of ownership of the Equity Interests. If the cash
flows of the Park at Landmark Apartments, SunBrook Apartments, Fountain Head
Apartments or Pine Club Apartments or the value of such properties increase, the
owners of such properties will receive those benefits in the form of increased
income and greater potential sale proceeds. If the Sale or a Substitute Sale is
consummated, all income generated from such properties after the Sale or a
Substitute Sale and the proceeds of any sale will accrue to the purchaser of
such properties.
RISKS AND BENEFITS TO ABC HOLDERS IF THE PARTNERSHIP DOES NOT SELL ITS ASSETS
If ABC Holders do not approve the Transaction, the Partnership Assets will
not be sold and the Partnership will not be liquidated. As a result, the
Partnership will continue its current business activities. There is no active
secondary market for the ABCs. Thus, the economic return from a continuation of
the Partnership will depend upon cash flows of the Underlying Properties which
can not be predicted with certainty. The Partnership's current business
activities involve the following risks.
INTEREST RATE STRUCTURE. The Revenue Bonds provide for the payment of Base
Interest (at a lower rate than would be expected to be borne by similar mortgage
bonds that do not provide for possible Contingent Interest) and Contingent
Interest. A portion of Base Interest is unconditionally payable monthly. The
remaining portion of Base Interest and Contingent Interest accrues (without
interest) and is due and payable when net cash flows from the related Underlying
Property are sufficient to pay such amount and, in any event, upon the sale or
refinancing of the related Underlying Property. Accordingly, the rate of
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<PAGE>
return realized by the Partnership will be less than the stated rate of
Contingent Interest on the Revenue Bonds to the extent the remaining Base
Interest and Contingent Interest is deferred or is never paid. Subsequent to the
repayment of a Revenue Bond and distribution of principal to ABC Holders, the
total interest received by the Partnership will decline, reflecting a reduction
in the principal amount of Revenue Bonds outstanding. If any portion of the
remaining Base Interest and Contingent Interest never becomes due and payable
because of insufficient net cash flows and insufficient sale or refinancing
proceeds from the respective Underlying Properties, the nonpayment of such
remaining Base Interest and Contingent Interest will not constitute a default
under the Revenue Bond or the corresponding Mortgage Loan, and there can be no
assurance that such remaining Base Interest and Contingent Interest will ever
become due and be paid.
REAL ESTATE INVESTMENTS. In the future, the Underlying Properties may not
generate income sufficient to meet operating expenses, including debt service,
and may generate income and achieve capital appreciation at a rate less than
that anticipated or available through investment in other real estate projects
or other investments. Because the Revenue Bonds are nonrecourse and, in the
event of default, the Partnership can only look to the income derived from, and
value of, the Underlying Property to satisfy amounts due on each Revenue Bond,
and since the terms of the Revenue Bond permit the Partnership to share in the
net cash flows and the sale or refinancing proceeds of the Underlying Properties
through Contingent Interest, such investments are subject to the general risks
inherent in the ownership of real property. In addition, the Partnership's
ownership of the Equity Interests subject it to the risks inherent in the
ownership of real property. Such risks include reduction in rental income due to
an inability to maintain occupancy levels, rent controls, adverse changes in
general economic conditions, adverse local conditions (such as competitive
overbuilding or a decrease in employment), adverse changes in real estate zoning
laws, particularly "down-zoning", which may reduce the desirability of real
estate in the area, or acts of God, such as earthquakes and floods. Furthermore,
failure of rental income to reach expected levels may cause the owner of an
Underlying Property to default on its obligations, including its obligations to
pay principal and interest under a Mortgage Loan.
NON-RECOURSE MORTGAGE LOANS. The Mortgage Loans are not personal
obligations of the borrowers, and the Partnership relies solely on the net cash
flows from and value of the Underlying Properties for its security. No state or
local government or agency or authority thereof that issued the Revenue Bonds is
liable for repayment of such Revenue Bonds, nor is the taxing power of any state
or local government pledged to the payment of principal, premium, if any, or
interest on such Revenue Bonds.
INCOME TAX RISKS. If the Partnership is classified as an association
taxable as a corporation rather than as a partnership, the Partnership itself
would be subject to federal income tax and Partnership distributions made to ABC
Holders would be treated as taxable dividends to the extent of the Partnership's
current or accumulated earnings and profits (which would include tax-exempt
interest received by the Partnership) and would be included in gross income of
the ABC Holders for federal income tax purposes and subjected to income tax as
ordinary dividend income.
ABC Holders are not partners of the Partnership. Rather, such persons hold a
beneficial interest in the Partnership's sole limited partner's limited
partnership interest. Although the Partnership has received an opinion of
counsel to the effect that ABC Holders will be considered to be partners of the
Partnership for federal income tax purposes, such opinion is not binding on the
Internal Revenue Service (the "Service") or any court. If ABC Holders were not
considered to be partners, Partnership distributions to ABC Holders might be
included in the gross income of ABC Holders for federal income tax purposes.
The Partnership has received an opinion that (i) Contingent Interest will be
treated as interest on the Revenue Bonds and the receipt of Contingent Interest
will not result in the Partnership being treated as a "substantial user" of the
corresponding Underlying Property, and (ii) interest accruing on the Revenue
Bond, including Contingent Interest, will be exempt from federal income
taxation, except for any period during which a Revenue Bond is held by a
"substantial user" of the corresponding Underlying Property or
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<PAGE>
by a "related person" to a substantial user. That opinion will not bind the
Service or any court. Furthermore, in order for interest accruing on a Revenue
Bond to be excluded from the Partnership's gross income, the Internal Revenue
Code of 1986 (the "Code") requires, among other things, the continuing
satisfaction of certain regulatory requirements, which relate to matters not
within the control of the Partnership. The opinion of bond counsel that interest
on the Revenue Bonds is excluded from the Partnership's gross income is based
upon, among other things, an assumption that those regulatory requirements will
be continually satisfied. If those regulatory requirements are not satisfied,
the interest from the Revenue Bond could be subject to federal income taxation
retroactively to the date of issue. In addition, if the Partnership or an ABC
Holder were treated as a "substantial user" of an Underlying Property or a
"related person" to a substantial user, the Partnership or the ABC Holder would
lose the tax-exempt treatment for interest received on the corresponding Revenue
Bonds. There is a risk that the Partnership would be treated as a substantial
user of certain of the Underlying Properties as a result of its ownership of the
Equity Interests. If, due to the payment of Contingent Interest, the Revenue
Bonds were determined to involve an equity investment by the Partnership in the
respective Underlying Properties, all or part of the interest on the Revenue
Bonds may be included in the Partnership's gross income for federal income tax
purposes.
Interest derived from a Revenue Bond may be includable in gross income for
state income tax purposes.
TRANSACTION COSTS. Expenses incurred in connection with the Transaction,
such as the fee payable to C&W, Inc. in connection with the Fairness Opinion,
accounting fees, legal fees and the cost of preparing and printing this
Information Statement, will be payable by the Partnership regardless of whether
the Transaction is consummated. If the Transaction is approved by the ABC
Holders, the General Partner estimates that the total amount of such expenses
payable by the Partnership and costs of operations through the Dissolution will
be approximately $1,500,000 which includes the amount that the Partnership would
be required to pay to C&W of D.C. for services rendered in connection with the
Sale.
POSSIBLE BENEFITS FROM CONTINUATION OF THE PARTNERSHIP'S
BUSINESS. Significant increases in the cash flows of the Underlying Properties
resulting from higher than anticipated rental rates and occupancy rates and
increases in the values of the Park at Landmark Apartments, SunBrook Apartments,
Fountain Head Apartments and Pine Club Apartments as a result of general
property value increases in such properties' markets could result in a higher
rate of return to the ABC Holders than that offered by the Transaction. Based on
the information currently available, the General Partner does not expect such
significant increases to occur.
THE SALE
THE PURCHASE AGREEMENTS
The description of the Purchase Agreements set forth in this Information
Statement does not purport to be complete and is qualified in its entirety by
reference to the Purchase Agreements, copies of which are attached hereto as
Exhibit B and Exhibit C and which are incorporated by reference herein. All ABC
Holders are urged to read carefully the Purchase Agreements.
GENERAL. Pursuant to the Purchase Agreements, the Partnership and Realty
will sell to Purchaser the Partnership Assets and Realty Assets, respectively,
including (i) the Partnership's interests in the Revenue Bonds, (ii) the
Partnership's 50% equity interest and Realty's 50% equity interest in Landmark
Acquisition Corp., (iii) the Partnership's 50% equity interest in Fountain Head
Acquisition Corp., (iv) the Partnership's 50% equity interest and Realty's 50%
equity interest in DWR SB Partnership, (v) the Partnership's 6% equity interest
in Pine Club Phase II, Ltd. and (vi) Realty's mortgage servicing rights under
the Servicing Agreements. Realty has assigned its rights to the proceeds of the
sale of the Realty Assets to the Partnership.
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SALE PRICE. The Sale Price is apportioned as follows:
<TABLE>
<S> <C>
Revenue Bonds................................................. $120,317,750
Equity Interests and Realty Equity Interests.................. 4,850,000
Realty Servicing Rights....................................... 1,832,250
-----------
Total......................................................... $127,000,000
-----------
-----------
</TABLE>
With respect to the Revenue Bonds, the Sale Price is subject to the
following adjustments as of the Closing Date:
(i) the amount of any principal payments or prepayments or interest
payments on any Revenue Bond of any kind or character actually received by
the Partnership on or after the effective date of the Purchase Agreements
(the "Effective Date"), excluding amounts in respect of (A) accrued Minimum
Required Interest first accrued on or after the Effective Date and (B)
remaining Base Interest first accrued on or after the Effective Date through
the date of such principal payment or prepayment; provided that the amount
of such adjustment shall not be in excess of the portion of the Sale Price
allocated to such Revenue Bond or Bonds, which shall be deemed to be that
portion of the Sale Price that bears the same proportion to the Sale Price
as the outstanding principal balance of such Revenue Bond or Bonds bears to
the then total outstanding principal balance of all Revenue Bonds;
(ii) the aggregate amount of the Revenue Bonds, if any, not purchased by
the Purchaser pursuant to the Purchase Agreement; provided that the amount
of such adjustment shall not be in excess of the portion of the Sale Price
allocated to such Revenue Bond or Bonds, which shall be deemed to be that
portion of the Sale Price that bears the same proportion to the Sale Price
as the outstanding principal balance of such Revenue Bond or Bonds bears to
the then total outstanding principal balance of all Revenue Bonds; and
(iii) if the Purchaser purchases a Revenue Bond relating to an
Underlying Property affected by a Material Adverse Change, the actual amount
of proceeds received by the Partnership prior to the Closing Date as a
result of such Material Adverse Change; provided that the amount of such
adjustment shall not be in excess of the portion of the Sale Price allocated
to such Revenue Bond or Bonds, which shall be deemed to be that portion of
the Sale Price that bears the same proportion to the Sale Price as the
outstanding principal balance of such Revenue Bond or Bonds bears to the
then total outstanding principal balance of all Revenue Bonds.
With respect to the Equity Interests and the Realty Equity Interests, the
Purchaser will receive a credit against the Sale Price in the amount of any
proceeds received by the Partnership or Realty prior to the Closing Date as a
result of a Material Adverse Change affecting the Park at Landmark Apartments,
the SunBrook Apartments, the Fountain Head Apartments or the Pine Club
Apartments; provided that the amount of such adjustment shall not be in excess
of the portion of the Sale Price allocated to such Equity Interests and Realty
Equity Interests which shall be deemed to be that portion of the Sale Price that
bears the same proportion to the Sale Price as the outstanding principal amount
of the Revenue Bonds secured by such property affected by the Material Adverse
Change bears to the total outstanding principal balance of all of the Revenue
Bonds.
A "Material Adverse Change" includes a substantial casualty loss or
environmental contamination affecting an Underlying Property or the taking of a
substantial portion of an Underlying Property under the power of eminent domain.
Any payments received by the Partnership on or after the Closing Date for
which Purchaser would have been entitled to an adjustment had such payment been
received prior to the Closing Date shall be delivered to the Purchaser.
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CONDITIONS TO CLOSING. The Sale will not be consummated pursuant to the
Purchase Agreements unless, among other things, the following conditions have
been satisfied: (i) the holders of a majority of the ABCs approve the
Transaction, (ii) the absence of a material adverse change in the condition of
title to the Underlying Properties from the condition of title indicated in the
title commitments delivered to the Purchaser, (iii) the Partnership and Realty
shall have received all necessary consents and approvals to the transfer of the
Partnership Assets and the Realty Assets, if any, and otherwise complied with
all of the provisions of the documents relating to the transfer of the
Partnership Assets and Realty Assets, (iv) all of the representations and
warranties of the parties contained in the Purchase Agreements are true and
correct and all covenants and conditions contained in the Purchase Agreements
have been complied with as of the Closing Date. Furthermore, the obligation of
the Purchaser to purchase each Revenue Bond, Equity Interest, Realty Equity
Interest and Realty Servicing Right is contingent on the absence of a Material
Adverse Change affecting a substantial portion of each Underlying Property
relating to such Revenue Bond, Equity Interest, Realty Equity Interest and
Realty Servicing Right.
REPRESENTATIONS AND WARRANTIES. The Purchase Agreements contain customary
representations and warranties with respect to the Partnership, Realty and the
Purchaser related to, among other things, (i) corporate or partnership power,
existence and good standing, (ii) authorization and enforceability of the
Purchase Agreements, (iii) legal proceedings, (iv) solvency and (v) broker's and
finder's fees. The Purchaser has further represented and warranted to, among
other things, Purchaser's sophistication, knowledge and experience, independent
evaluation of the assets purchased and compliance with the Securities Act of
1933, as amended. The Partnership and Realty have further represented and
warranted to, among other things, (i) ownership of the Partnership Assets and
the Realty Assets and the receipt of necessary consents to their transfer, (ii)
the absence of undisclosed agreements modifying the Revenue Bonds and the
Servicing Agreements, (iii) the provision of all material information relating
to the Partnership Assets, Realty Assets and Underlying Properties, (iv)
defaults under any of the documents relating to the Revenue Bonds, (v) notices
challenging the tax exempt status of the Revenue Bonds, (vi) the existence of
the entities in which the Partnership and Realty own the Equity Interests and
Realty Equity Interests, respectively; (vii) the delivery of corporate or
partnership documents relating to the entities in which the Partnership and
Realty own the Equity Interests and Realty Equity Interests, respectively, and
the absence of litigation with respect to such equity interests; (viii) the
absence of actions by the Partnership or Realty or the entities in which the
Partnership and Realty own Equity Interests and Realty Equity Interests,
respectively, that may cause interest on any of the Revenue Bonds to be taxable
to Purchaser, (ix) the amount of the unpaid principal balance and accrued
interest with respect to the Revenue Bonds and the amounts held by the trustees
with respect to the Revenue Bonds and (x) the existence of certain escrows and
reserves, and absence of undisclosed debts, with respect to the properties owned
by the entities in which the Partnership and Realty own Equity Interests and
Realty Equity Interests, respectively.
The Partnership and Realty have made no representations or warranties in the
Purchase Agreements and have disclaimed all representations and warranties,
express or implied, with respect to (i) the collectability of the Revenue Bonds
and Mortgage Loans and amounts due pursuant to the Servicing Agreements, (ii)
the creditworthiness of any borrower under a Mortgage Loan, (iii) the value of
any of the Underlying Properties, (iv) the accuracy of any property description
contained in the Mortgage Loan documents, (v) the enforceability of the Mortgage
Loan documents or the Servicing Agreements, (vi) the perfection or priority of
any lien securing a Mortgage Loan, (vii) the existence or basis for any claim,
counterclaim, defense or offset relating to any Mortgage Loan, (viii) the
condition of the Underlying Properties, and (ix) the accuracy or reliability of
any information contained in the bidding package or any other information made
available to the Purchaser. Furthermore, except as set forth in the Purchase
Agreements, Purchaser agreed to purchase all Partnership Assets and Realty
Assets "as is."
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LIMITATION OF REMEDIES UPON A BREACH PRIOR TO CLOSING. If Purchaser fails
to consummate the Sale or otherwise breaches the Purchase Agreements prior to
the consummation of the Sale, then the Partnership's and Realty's damages are
limited to the $6,350,000 deposited by Purchaser pursuant to the Purchase
Agreements (the "Deposit"). If the Sale does not occur as a result of a default
by the Partnership or Realty involving anything other than the ABC Holders'
failure to consent to the Transaction, the Purchaser's remedy is limited to the
return of the Deposit plus reasonable third party expenses incurred by the
Purchaser up to a maximum of $1,250,000. If the Sale does not occur as a result
of the ABC Holders' failure to consent to the Transaction, the Purchasers'
remedy is limited to a return of the Deposit plus reasonable third party and
other verifiable expenses up to a maximum of $2,000,000. If (i) the Sale fails
to close as a result of a default by the Partnership or Realty and (ii) within
six months following termination of the Purchase Agreements the Partnership and
Realty sell the Partnership Assets and Realty Assets to a third party pursuant
to an offer received prior to such termination, the Partnership and Realty must
pay to the Purchaser one half of the amount by which the proceeds of such sale
exceed the Sale Price, up to a maximum of $5,000,000.
INDEMNIFICATION AFTER CLOSING. After the Closing Date, the Purchaser has
agreed to indemnify the Partnership and Realty with respect to claims (i) for
breaches of Purchaser's representations and warranties, covenants, obligations
and agreements contained in the Purchase Agreements and (ii) arising from
business done, transactions entered into or events occurring after the Closing
Date with respect to the Equity Interests, Realty Equity Interests or Underlying
Properties; provided that such indemnification does not extend to claims related
to federal or state income tax liability of the Partnership arising in
connection with the operation of the Park at Landmark Apartments and the
SunBrook Apartments.
The Partnership and Realty have agreed to indemnify the Purchaser with
respect to certain claims, including:
(i) breaches of representations and warranties and covenants contained
in the Purchase Agreements and any suit arising out of the transactions
contemplated thereby, so long as the claim is brought within nine months
after the Closing Date, or one year if the Sale is consummated after April
1, 1998;
(ii) the pending class action suit filed against the Partnership and the
pending petition filed against the General Partner described more fully in
the Partnership's periodic reports previously filed under the Exchange Act
for an indefinite period; and
(iii) facts, circumstances, actions, or events occurring, existing or
arising at any time prior to the Closing Date with respect to the Park at
Landmark Apartments and the SunBrook Apartments, so long as the claim is
brought within nine months after the Closing Date, or one year if the Sale
is consummated after April 1, 1998.
The Partnership's and Realty's indemnification obligations are limited to a
maximum of $8,890,000 which will be placed in an escrow account for a period of
nine months after the Closing Date, or one year if the Sale is consummated after
April 1, 1998.
FINAL DISTRIBUTION, LIQUIDATION AND DISSOLUTION
The General Partner expects to distribute the net proceeds of the Sale by
December 31, 1998. The first distribution will include the net proceeds of the
Sale reduced by (i) the Partnership's expenses of the Sale, (ii) liabilities
owing to the creditors of the Partnership, and (iii) any reserve set aside by
the General Partner for any liabilities, including contingent or unforeseen
liabilities or obligations of the Partnership, which is expected to amount to
approximately 10% of the net cash proceeds of the Sale in the aggregate. The
subsequent distributions will consist of the remaining net cash proceeds of the
Sale, and any other remaining cash from operations or reserves. After the final
distribution, the Partnership will be terminated
23
<PAGE>
pursuant to the Partnership's Agreement of Limited Partnership. In addition, the
Partnership's registration pursuant to the Exchange Act and its obligation to
file reports thereunder will be terminated.
The Partnership estimates that the total distribution from the net proceeds
of the Sale will be approximately $16.84 per ABC. This estimate is based on the
facts set forth below. There can be no assurances as to the actual amounts
distributed, or as to the amounts set forth below. Actual amounts may vary
materially from the figures:
<TABLE>
<S> <C>
Gross purchase price.......................................... $127,000,000
Expenses...................................................... $ 1,500,000
Net distributable amount...................................... $125,500,000
General Partner distribution.................................. $ 0
Net ABC Holders distributable amount.......................... $125,500,000
Per ABC....................................................... $ 16.84
</TABLE>
The Partnership estimates that the total distribution from remaining cash
from operations and reserves will be approximately $.93 per ABC.
INTERESTS OF THE GENERAL PARTNER AND AFFILIATES
DISTRIBUTION TO THE GENERAL PARTNER IF THE TRANSACTION IS CONSUMMATED
Pursuant to the Partnership Agreement, if the Transaction is consummated and
certain criteria are satisfied, the General Partner would be entitled to receive
a portion of the net proceeds of the Sale or a Substitute Sale. However,
assuming a sale price of $127,000,000, neither the General Partner nor any of
its affiliates will receive a fee or any other compensation or distribution as a
result of the Transaction. In connection with the Transaction, Realty has
assigned its right to any portion of the proceeds of the Sale or Substitute Sale
to the Partnership.
DISTRIBUTIONS AND FEES TO THE GENERAL PARTNER OR ITS AFFILIATES IF THE
TRANSACTION IS NOT CONSUMMATED
If the Transaction is not consummated and the Partnership continues its
current business activities, each year the General Partner is entitled to
receive 2% of the Partnership's net interest income until the ABC Holders have
received distributions of net interest income sufficient to provide an average
cumulative, but not compounded, return of 9.5% on their average capital
contributions, as adjusted pursuant to the Partnership Agreement. Interest shall
be calculated as accruing from the earlier of the date of termination of the
original offering of the ABCs or the end of second calendar quarter following
the date on which an ABC Holder purchased his or her ABCs. After the ABC Holders
have received such a return, the General Partner is entitled to receive 10% of
net interest income. The General Partner is also entitled to reimbursement for
goods and materials acquired and services performed. If the Transaction is not
consummated, the General Partner will also be entitled to receive a percentage
of the proceeds of the sale or refinancing of any Revenue Bond in the future,
assuming certain criteria are satisfied.
An affiliate of the General Partner performs bond servicing and
administrative functions, processes investor transactions and prepares tax
information for the Partnership. The Partnership incurred approximately $386,000
for the nine-month period ended September 30, 1997 and $516,000 in each of 1996
and 1995 for these services. As of September 30, 1997, the affiliate was owed
approximately $15,600 for these services.
Another affiliate of the General Partner earned fees of $79,615 for the
nine-month period ended September 30, 1997 and $101,844 in 1996 and $104,635 in
1995 for the management of the Park at Landmark Apartments during such
nine-month period and years, respectively. As of September 30, 1997, the
affiliate was owed approximately $9,172 for these services.
24
<PAGE>
If the Transaction is not consummated, the Partnership will continue to
incur comparable expenses for such services.
INCOME TAX MATTERS
The following is a summary of the material Federal income tax consequences
of the Transaction. This summary is based on the Code and relevant
administrative and judicial precedent as of the date hereof, all of which are
subject to change, possibly with retroactive effect. This discussion does not
address any state, foreign or local tax consequences of the Transaction. The tax
treatment of an ABC Holder may vary depending upon the ABC Holder's particular
situation, and certain ABC Holders (including, for example, insurance companies
and qualified employee benefit plans) may be subject to special rules not
discussed below. Whether or not the Sale is consummated, the General Partner
estimates that an ABC Holder's Schedule K-1 for the years 1997 and for the
period from January 1, 1998 to the Dissolution will reflect a distributive share
of federally tax-exempt income as a result of Partnership operations.
ABC HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE TRANSACTION, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FEDERAL LAWS, AND OF CHANGES IN APPLICABLE TAX
LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE SALE OF THE PARTNERSHIP'S ASSETS
The Sale or a Substitute Sale of the Partnership's assets will result in the
Partnership selling substantially all of its non-cash assets. Because such a
sale will constitute a taxable event, each ABC Holder will be required to take
into account his or her distributive share of the gain or loss resulting from
such a sale. Such gain or loss will be reportable by the ABC Holders for the
Partnership taxable year ending within or with the taxable year of each ABC
Holder. With respect to the Sale, assuming the net cash proceeds of the Sale are
equal to approximately $125,500,000, the General Partner expects the ABC Holders
who purchased their ABCs in the original offering by the Partnership to incur a
tax loss. ABC Holders who purchased their ABCs through secondary market
purchases after the original offering by the Partnership may have a gain or loss
from the liquidation of the Partnership, depending upon the terms of their
purchase. Any such gain or loss will be capital gain or loss to ABC Holders
holding their ABCs as capital assets; the deduction of capital losses is subject
to limitation. The amount of this gain or loss first will be determined at the
Partnership level and will be equal to the aggregate of the differences between
the consideration received with respect to each of the Revenue Bonds sold and
the Partnership's tax basis in each such Revenue Bond.
The General Partner estimates that, under the Partnership Agreement, at
least 98% of the gain or loss resulting from the Sale at the Partnership level
will be allocated to the ABC Holders. The provisions of the Partnership
Agreement further allocate the ABC Holders' share of the gain or loss among the
ABC Holders on the basis of the number of of ABCs owned by each ABC Holder. This
gain or loss is reportable by each ABC Holder on his or her own tax return.
FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION OF THE PARTNERSHIP
The dissolution of the Partnership will result in a distribution of cash by
the Partnership to each ABC Holder. Each ABC Holder will be treated for federal
income tax purposes as a limited partner of a partnership. A limited partner of
a limited partnership only recognizes income as a result of receipt of cash
distributions from the partnership if those distributions exceed the limited
partner's adjusted tax basis in his or her partnership interest. Assuming a
holder's ABCs were assigned to such holder in connection with the original
offering by the Partnership, such ABC Holder's basis in ABCs will be equal to
(i) the gross purchase price of his or her ABC ($20 of original capital
contribution), (ii) increased by his or her allocable share of Partnership
taxable income, if any, and his or her allocable share of Partnership tax-exempt
25
<PAGE>
income, and (iii) decreased by his or her share of Partnership distributions,
his or her allocable share of Partnership taxable losses and his or her
allocable share of partnership expenditures which are not deductible in
computing his or her taxable income and not properly chargeable to capital. With
respect to ABC Holders who purchased their ABCs in the original offering by the
Partnership, the General Partner expects such ABC Holders to incur a tax loss.
ABC Holders who purchased their ABCs through secondary market purchases after
the original offering by the Partnership may have a gain or loss from the
liquidation of the Partnership, depending upon the terms of their purchase. Any
such gain or loss will be capital gain or loss to ABC Holders holding their ABCs
as capital assets; the deduction of capital losses is subject to limitation.
Following the Dissolution, the General Partner, on behalf of the
Partnership, will file a final tax return for the Partnership, and, on a timely
basis, will provide Schedule K-1 forms to all ABC Holders setting forth their
allocated shares of the Partnership's income, gains, losses and deductions.
OTHER MATTERS
RECORD DATE; CONSENTS; REVOCATION OF CONSENTS
The General Partner has fixed the close of business on December 12, 1997 as
the record date for determining the ABC Holders entitled to consent to the
Transaction. Accordingly, only holders of ABCs as of December 12, 1997 will be
entitled to consent to the Transaction.
An ABC Holder may consent to the Transaction by properly completing the
consent form which accompanies this Information Statement. Consents will be
solicited until January 30, 1998 (which date may be extended at the sole
discretion of the General Partner if the General Partner determines that further
time is required to solicit additional consents or to provide more information
to the ABC Holders). A consent form shall be deemed to have been "returned" to
the Partnership on the date it is given personally to an authorized
representative of the General Partner or deposited in the mail or other delivery
service, postage or delivery service fees prepaid. Consents may be revoked by a
later dated consent form which is received by the Partnership on or before the
end of the consent solicitation period.
OPINION OF COUNSEL
Pursuant to the Limited Partnership Agreement, prior to obtaining any
consent by the ABC Holders, the Partnership must provide the ABC Holders with
written advice from legal counsel as to whether such consent might (i)
materially affect the tax status of the Partnership, (ii) impair the limited
liability of the ABC Holders or (iii) result in the dissolution or termination
of the Partnership. The opinion of Bingham Dana LLP, legal counsel to the
Partnership with respect to such matters, is attached as Exhibit D to this
Information Statement.
SOLICITATION
In addition to soliciting consents by mail, consents may be solicited by
directors, officers and employees of the General Partner and its affiliates, who
will not receive additional compensation therefor, by personal interview,
telephone, telegram, courier service, or similar means of communication. In
addition, the Partnership has retained Georgeson & Company, Inc. as solicitation
agent (the "Solicitation Agent"). The Solicitation Agent will receive a fee and
will be reimbursed for its out-of-pocket expenses by the Partnership, and the
Partnership has agreed to indemnify the Solicitation Agent against certain
liabilities. The Solicitation Agent will administer the delivery of information
to the Limited Partners and receive and tally consents. The estimated cost of
the solicitation is approximately $40,000.
26
<PAGE>
CONSENT REQUIRED
Pursuant to the Limited Partnership Agreement, approval of the Transaction
requires the consent of the holders of a majority of the outstanding limited
partnership interests, including assigned limited partnership interests on
behalf of which Tempo-LP, Inc., a Delaware corporation and sole limited partner
of the Partnership (the "Limited Partner"), will consent, abstain or withhold
consent as directed by the ABC Holders. Under the Limited Partnership Agreement,
each ABC Holder is entitled to instruct the Limited Partner with respect to the
consent of a number of limited partnership interests equal to the number of ABCs
he or she holds on the Record Date. The Limited Partner will act on behalf of
the limited partnership interests assigned to the ABC Holders as directed by the
ABC Holders pursuant to the consent forms. As of the Record Date, 7,454,110 ABCs
were outstanding and were held of record by 7,934 ABC Holders, none of whom were
officers or directors of the General Partner. No person is known to the
Partnership to be the beneficial owner of more than five percent of the ABCs.
The consent of holders of at least 3,727,056 ABCs is required to approve the
Transaction.
NO RIGHTS TO APPRAISAL OF ABC VALUE
If ABC Holders owning a majority of the ABCs consent to the Transaction, all
ABC Holders will be bound by such consents, including ABC Holders who have not
returned their consents or who have not consented. ABC Holders who do not
consent are not entitled to any rights of appraisal or similar rights under the
Delaware Revised Uniform Limited Partnership Act or the Limited Partnership
Agreement in connection with the consummation of the Transaction.
WHERE YOU CAN FIND MORE INFORMATION
The Securities and Exchange Commission (the "Commission") allows us to
"incorporate by reference" information into this Information Statement, which
means that we can disclose important information to you by referring you to
another document filed separately with the Commission. The information
incorporated by reference is deemed to be part of this Information Statement,
except for any information superseded by information in this Information
Statement. This Information Statement incorporates by reference the
Partnership's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 and Quarterly Reports on Form 10-Q for quarters ended March 31, 1997, June
30, 1997 and September 30, 1997. These documents contain important information
about the Partnership and its financial performance.
We are also incorporating by reference additional documents that we file
with the Commission between the date of this Information Statement and the later
of January 30, 1998 and the date we receive the consent to the Transaction of
the holders of a majority of the ABCs.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Information Statement. ABC Holders may obtain documents
incorporated by reference in this Information Statement by requesting them in
writing or by telephone from Dean Witter/Coldwell Banker Tax Exempt Mortgage
Fund, L.P., Two World Trade Center, New York, New York, 10048, attention:
Investor Services Group, (800) 359-9111.
27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
Exhibit A Fairness Opinion dated as of November 21, 1997 issued by Cushman & Wakefield, Inc.........
Exhibit B Bond Purchase Agreement dated as of November 21, 1997 among Dean Witter/ Coldwell Banker
Tax Exempt Mortgage Fund, L.P., Dean Witter Realty Inc. and CAPREIT Acquisition Corp......
Exhibit C Equity Interest Purchase Agreement dated as of November 21, 1997 among Dean
Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P., Dean Witter Realty Inc. and CAPREIT
Acquisition Corp..........................................................................
Exhibit D Opinion of Bingham Dana LLP...............................................................
</TABLE>
<PAGE>
EXHIBIT A
[Cushman & Wakefield Letterhead]
November 21, 1997
BOARD OF DIRECTORS
TEMPO-GP, INC.
Two World Trade Center
New York, NY 10048
Ladies and Gentlemen:
Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P. (the "Fund")
proposes to sell all of its non-cash assets, consisting of unrated federally tax
exempt revenue bonds (the "Bonds") and equity interests (the "Equity Interests")
in certain of the real properties underlying the Bonds, pursuant to the terms of
the Bond Purchase Agreement and the Equity Interest Purchase Agreement, each
dated as of November 21, 1997 (collectively, the "Agreements"), between the
Fund, Dean Witter Realty Inc. ("Realty") and CAPREIT Acquisition Corp., an
unaffiliated third party purchaser ("Purchaser"). Realty proposes to sell
certain of its assets related to the Fund's assets pursuant to the Agreements
and to assign to the Fund the proceeds of such sale. The foregoing sales are
hereinafter referred to as the "Transaction." The total consideration to be
received by the Fund in connection with the Transaction is $127,000,000 cash.
The real properties underlying the Bonds are referred to herein as the
"Properties."
We have been requested by the Board of Directors of Tempo-GP, Inc., the sole
general partner of the Fund (the "General Partner"), to render our opinion with
respect to the advisability of selling the Bonds and Equity Interests at this
time and to the fairness, from a financial point of view, to the holders of
Assigned Benefit Certificates (interests in the Limited Partner of the Fund [the
"ABC Holders"]) of the consideration to be received by the ABC Holders in
connection with the Transaction.
In arriving at our opinions, we have:
1) reviewed certain publicly available financial statements and other
information of the Fund;
2) reviewed certain financial and operating data concerning the Fund
prepared by the Fund;
3) discussed the past and current operations and financial condition and
the prospects of the Fund with the General Partner;
4) analyzed historical results of operations and certain financial
projections related to the Properties prepared by the Fund;
5) visited the Properties
6) reviewed the financial terms, to the extent publicly available, of
certain comparable precedent transactions;
7) been advised by Cushman & Wakefield of Washington D.C., Inc. that it
participated in discussions and negotiations between the General Partner,
Realty and the Purchaser in connection with the Transaction, and of the
course and substance of such discussions and negotiations;
8) reviewed bids solicited by Cushman & Wakefield of Washington D.C.,
Inc. from approximately 150 potential purchasers for all or a portion of the
Bonds and the Equity Interests;
9) considered today's historically low interest rate environment;
10) considered conditions in the relevant real estate markets for each
of the Properties and the competitive positions of the Properties within
each of these markets;
<PAGE>
11) considered the original planned liquidation of the Fund, 14 to 17
years from inception;
12) considered the risk of holding the Bonds until maturity;
13) considered unrated tax exempt investments available as alternatives
to investments in the Fund; and
14) considered the assignment by Realty to the Fund of its sales
proceeds from the Transaction; and
15) considered such other factors as we have deemed appropriate.
With respect to items (2), (3) and (4) above, we have assumed and relied
upon without independent verification the accuracy and completeness of the
information supplied or otherwise made available to us by the General Partner
for the purposes of this opinion. We have not made any independent valuation or
appraisal of the Bonds or Properties. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Cushman & Wakefield of Washington D.C., Inc. acted as financial advisor to
the Fund and Realty in connection with the Transaction and will be reimbursed
for its expenses and receive a fee for its services which is contingent upon
consummation of the Transaction. Other affiliates of the undersigned have
performed advisory services in the past for the Fund and received fees for such
services. In addition, our affiliates have performed advisory and appraisal
services in the past for affiliates of the Fund and the General Partner and
received fees for such services. It is understood that this letter is solely for
the benefit and use of the Board of Directors of the General Partner in
consideration of the Transaction and may not be used for any other purpose or
reproduced or referred to at any time or in any manner without our prior written
consent, except that it may be disclosed in its entirety in, and referred to in,
any information statement circulated to the ABC Holders in connection with the
Transaction.
Based upon the foregoing, we are of the opinion that it is advisable that
the Fund sell the Bonds and Equity Interests in the Properties in the
Transaction at this time and the consideration to be received by the ABC Holders
in the Transaction is fair to the ABC Holders from a financial point of view.
Sincerely,
CUSHMAN & WAKEFIELD, INC.
<TABLE>
<S> <C>
/s/ FRANK P. LIANTONIO /s/ JAMES W. MONTANARI
- - ---------------------------------------- ----------------------------------------
Frank P. Liantonio, MAI, CRE James W. Montanari
Executive Managing Director Managing Director
</TABLE>
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<PAGE>
EXHIBIT B
BOND PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of November 21, 1997
(the "Effective Date") between DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE
FUND, L.P., a Delaware limited partnership ("Seller"), DEAN WITTER REALTY INC.,
a Delaware corporation ("Servicer"), and CAPREIT Acquisition Corp., a Maryland
corporation ("Purchaser").
WHEREAS, Seller is the owner of each tax exempt revenue bond (the "Bonds"
and each a "Bond") listed on SCHEDULE A hereto (the "Bond Schedule");
WHEREAS, with respect to the mortgage loan underlying each Bond (each a
"Mortgage Loan") listed on the Bond Schedule, Servicer acts as servicer of such
Mortgage Loan pursuant to a Servicing Agreement (each a "Servicing Agreement")
listed on SCHEDULE B hereto (the "Servicing Agreement Schedule");
WHEREAS, Seller wishes to sell all of its right, title and interest in and
to the Bonds, Servicer wishes to assign all of its rights and obligations under
the Servicing Agreements and Purchaser wishes to acquire the Bonds and the
rights and obligations of Servicer under the Servicing Agreements; and
WHEREAS, Purchaser has conducted an independent investigation of the Bonds,
including without limitation a review of the documents and other materials
related to the Bonds and the Servicing Agreements (collectively, the "Purchase
Related Materials") made available at the office of Cushman & Wakefield of D.C.,
Inc. (the "Agent").
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF BONDS
Section 1.1. AGREEMENT TO BUY AND SELL BONDS. Seller hereby agrees to sell
to Purchaser, and Purchaser hereby agrees to buy from Seller, subject to the
terms and conditions of this Agreement, all of Seller's right, title and
interest in and to the Bonds, and all of Seller's right, title and interest in
and to the Bond Documents for each of the Bonds, and to assume all of Seller's
duties, if any, under the Bond Documents. Reference in this Agreement to any
Bonds shall include such right, title and interest in and to the corresponding
Bond Documents. "Bond Documents" means, with respect to any Bonds, such Bonds
and the corresponding indenture, loan agreement, land use restriction agreement,
mortgage, Servicing Agreement, and all other documents, certificates, and
instruments executed and delivered in connection with such Bonds and Servicing
Agreements, including but not limited to any and all amendments or supplements
to any of the foregoing.
Section 1.2. PURCHASE PRICE. The purchase price for the Bonds shall be One
Hundred Twenty Million Three Hundred Seventeen Thousand Seven Hundred Fifty
Dollars ($120,317,750) (the "Bond Price" and together with the Servicing Rights
Price (as defined herein), the "Purchase Price").
Section 1.3. DEPOSIT. In consideration of Seller's agreement to sell the
Bonds Purchaser hereby deposits the sum of Six Million Fifteen Thousand Nine
Hundred Dollars ($6,015,900) (the "Bond Deposit" and together with the Servicing
Rights Deposit (as defined herein), the "Deposit") with Seller as an earnest
money deposit under this Agreement. Seller shall hold the Bond Deposit in an
interest bearing account until December 15, 1997. Thereafter, the Bond Deposit
shall be held by Chicago Title Insurance Company pursuant to an escrow agreement
in form and substance mutually acceptable to the parties.
1
<PAGE>
Section 1.4. ALL BONDS TO BE PURCHASED. Subject to the other terms and
provisions of this Agreement, Purchaser may not purchase less than all of the
Bonds listed in the Bond Schedule that are outstanding as of the Closing Date.
If any of the Bonds is prepaid in its entirety (each a "Prepaid Bond") before
the Closing Date, Seller may retain the sums so prepaid and shall notify
Purchaser of the prepayment. Seller shall have no obligation to sell to
Purchaser, and Purchaser shall have no right or obligation to purchase from
Seller, such Prepaid Bond at the Closing (as herein defined). In the event of
such prepayment, Purchaser shall buy all of the remaining Bonds at the Closing
subject to the Purchase Price adjustment set forth in Section 6.3 of this
Agreement. If any of the Bonds is prepaid before the Closing but only in part,
Seller may retain the sums so prepaid and Purchaser shall buy such Bond subject
to the Purchase Price adjustment set forth in Section 6.3 of this Agreement.
ARTICLE II
ASSIGNMENT AND ASSUMPTION OF SERVICING RIGHTS AND OBLIGATIONS
Section 2.1. AGREEMENT TO ASSIGN AND ASSUME SERVICING RIGHTS AND
OBLIGATIONS. Servicer hereby agrees to assign to Purchaser, and Purchaser hereby
agrees to assume from Servicer, subject to the terms and conditions of this
Agreement, all of Servicer's rights and obligations under the Servicing
Agreements and all documents, agreements, and instruments relating thereto (the
"Servicing Rights").
Section 2.2. PURCHASE PRICE. The purchase price for the Servicing Rights
shall be One Million Eight Hundred Thirty-Two Thousand Two Hundred Fifty Dollars
($1,832,250) (the "Servicing Rights Price").
Section 2.3. DEPOSIT. In consideration of Servicer's agreement to assign the
Servicing Rights to Purchaser, Purchaser hereby deposits the sum of Ninety-One
Thousand Six Hundred Dollars ($91,600) (the "Servicing Rights Deposit") with
Servicer as an earnest money deposit under this Agreement. Servicer shall hold
the Servicing Rights Deposit in an interest bearing account until December 15,
1997. Thereafter, the Servicing Rights Deposit shall be held by Chicago Title
Insurance Company pursuant to an escrow agreement in form and substance mutually
acceptable to the parties.
Section 2.4. ALL SERVICING RIGHTS TO BE PURCHASED. Purchaser may not
purchase less than all of the Servicing Rights. If any of the Bonds is prepaid
in its entirety before the Closing Date, the Servicing Rights Price shall be
reduced by an amount that bears the same proportion to the total Servicing
Rights Price as the outstanding principal balance of the Bonds so prepaid bears
to the total outstanding principal balance of all of the Bonds. In the event of
such prepayment, Purchaser shall buy all of the remaining Servicing Rights. If
any of the Bonds is prepaid before the Closing but only in part, the Servicing
Rights Price with respect to such Bond shall be reduced pro rata.
ARTICLE III
CLOSING
Section 3.1. CLOSING. Seller, Servicer and Purchaser agree that the closing
of the purchase and sale of the Bonds and the assignment and assumption of the
Servicing Rights (the "Closing") shall be held on a date (the "Closing Date")
not later than twenty (20) days after the date on which the Seller and Servicer
provide notice to the Purchaser that all of the conditions precedent to the
consummation of the transactions contemplated hereby set forth in Section 5.1
and Section 5.2 of this Agreement have been satisfied, or waived, (which notice
from Seller and Servicer need not address whether the Purchaser is ready,
willing and able to consummate the transactions contemplated by the Equity
Interest Purchase Agreement (as hereinafter defined) as described in Section
5.2(d) hereof), but in any event not later than June 30, 1998; PROVIDED,
HOWEVER, that if the only condition precedent to the consummation of the
transactions contemplated hereby that remains unsatisfied as of June 30, 1998 is
that condition precedent set forth in Section 5.1(f) and Section 5.2(a) of this
Agreement, then, with the consent of all parties hereto, the Closing Date may be
extended for the purpose of satisfying such condition to a date mutually
2
<PAGE>
acceptable to the parties. If the transactions contemplated hereby shall not
have been consummated by June 30, 1998, as such date may be extended by the
mutual agreement of the parties, any party hereto shall have the right to
terminate this Agreement by notice to the other parties. The Closing shall
commence at 10:00 a.m., at the offices of Bingham Dana LLP, 150 Federal Street,
Boston, Massachusetts, or such other time and place mutually selected by
Purchaser, Servicer and Seller.
Section 3.2. CLOSING. On the Closing Date,
(a) Seller shall
(i) sell, assign, convey, transfer and deliver to Purchaser all of
the Bonds being acquired hereunder (including, but not limited to, all
claims (including proofs of claim), causes of action and judgments
relating thereto);
(ii) execute and deliver to Purchaser a consent to the assignment of
the Servicing Agreements;
(iii) deliver to Purchaser an opinion of counsel for Seller dated
the Closing Date, substantially in the form of EXHIBIT A hereto;
(iv) credit to Purchaser the Bond Deposit and all the amounts, if
any, creditable on the Closing Date to Purchaser pursuant to Section 6.3
of this Agreement;
(v) deliver to Purchaser (A) a certified copy of the Certificate of
Limited Partnership of Seller, and any amendments thereto, (B) a
certificate of an officer of the General Partner of Seller with respect
to (I) the Seller's Partnership Agreement, and any amendments thereto,
(II) incumbency and (III) corporate resolutions of the General Partner of
Seller authorizing the transactions contemplated by this Agreement and
(C) a certificate of good standing of Seller issued by the Delaware
Secretary of State, or alternatively, similar corporate and/or
partnership documents as applicable for any permitted assignee of
Purchaser;
(vi) execute and deliver to Purchaser an assignment and assumption
agreement, in form and substance mutually acceptable to the parties
hereto, assigning all of Seller's right, title and interest in, and
delegating all of Seller's duties, if any, under, the Bond Documents for
each Bond;
(vii) deliver to Purchaser all of the Bond Documents, including any
originals in Seller's possession, and Seller's Purchase Related
Materials, with a certificate that such Bond Documents and Purchase
Related Materials contain all material agreements, documents and
instruments constituting or relating to the Bonds;
(viii) deliver to Purchaser all deposits, escrows, replacement
reserves and other property-related moneys, including without limitation
tax and insurance escrows, but excluding without limitation any principal
and interest paid on the Bonds, held by or for the benefit of Seller
pursuant to the terms and provisions of any of the Bond Documents, all of
which deposits, escrows, reserves and other property-related moneys are
listed on SCHEDULE F hereto;
(ix) deliver to Purchaser any financial statements, litigation
papers, correspondence, or other documents or materials held by the
Seller relating to the Bonds;
(x) execute and deliver such other assignments and instruments of
transfer as Purchaser may reasonably require in order to effectuate the
transactions contemplated herein; and
(xi) execute and deliver to Purchaser a closing statement setting
forth the amounts payable by Purchaser to Seller under this Agreement
(including adjustments to be made between Seller and Purchaser pursuant
to Section 6.3 of this Agreement).
(b) Servicer shall
3
<PAGE>
(i) execute and deliver to Purchaser an assignment and assumption
agreement, in form and substance mutually acceptable to the parties
hereto, assigning all of Servicer's rights, and delegating all of
Servicer's obligations, under the Servicing Agreements;
(ii) deliver to Purchaser an opinion of counsel for Servicer dated
the Closing Date, substantially in the form of EXHIBIT B hereto;
(iii) deliver to Purchaser (A) a certified copy of the Certificate
of Incorporation of Servicer, (B) a certificate of an officer of Servicer
with respect to (I) incumbency, (II) by-laws of Servicer and (III)
resolutions authorizing the transactions contemplated by this Agreement
and (C) a certificate of good standing of Servicer issued by the Delaware
Secretary of State;
(iv) credit to Purchaser the Servicing Rights Deposit and all
amounts, if any, creditable on the Closing Date to Purchaser pursuant to
Section 2.4 of this Agreement;
(v) deliver to Purchaser all of the Servicing Agreements and all
other documents and materials held by Servicer related thereto;
(vi) deliver to Purchaser all deposits, escrows, replacement
reserves and other property-related moneys, including without limitation
tax and insurance escrows, but excluding without limitation fees received
by Servicer pursuant to the Servicing Agreements, held by Servicer
pursuant to the terms and provisions of any of the Servicing Agreements;
and
(vii) execute and deliver to Purchaser a closing statement setting
forth the amounts payable by Purchaser to Servicer (including adjustments
to be made between Servicer and Purchaser pursuant to Section 2.4 of this
Agreement).
(c) Purchaser shall
(i) pay to Seller by wire transfer, cashier's check or in other
immediately available funds an amount equal to the Bond Price (including
the Bond Deposit) MINUS the amounts, if any, creditable on the Closing
Date to Purchaser pursuant to Section 6.3;
(ii) pay to Servicer by wire transfer, cashier's check or in other
immediately available funds an amount equal to the Servicing Rights Price
(including the Servicing Rights Deposit) MINUS any reductions provided
for in Section 2.4;
(iii) execute and deliver (A) to Seller an assignment and assumption
agreement, in form and substance mutually acceptable to the parties
hereto, pursuant to which Purchaser shall accept the assignment of all of
Seller's rights and shall assume all of Seller's duties, if any, under
the Bond Documents, and (B) to Servicer an assignment and assumption
agreement, in form and substance mutually acceptable to the parties
hereto, pursuant to which Purchaser shall accept the assignment of all of
Servicer's rights and shall assume all of Seller's obligations under the
Servicing Agreements;
(iv) deliver to Seller and Servicer an opinion of outside counsel
for Purchaser dated the Closing Date, substantially in the form of
EXHIBIT C hereto;
(v) deliver to Seller (A) a certified copy of the Certificate of
Incorporation of Purchaser, (B) a certificate of an officer of Purchaser
with respect to (I) incumbency, (II) by-laws of Purchaser and (III)
resolutions authorizing the transactions contemplated by this Agreement
and (C) a certificate of good standing of Purchaser issued by the
Maryland Secretary of State or, alternatively, similar corporate and/or
partnership documents as applicable for any permitted assignee of
Purchaser; and
(vi) execute and deliver such other assumption agreements and
instruments of transfer as Seller and/or Servicer may reasonably require
in order to effectuate the transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Except as set forth on
SCHEDULE C hereto, Seller hereby represents and warrants to Purchaser as follows
as of the Effective Date:
(a) Seller is a limited partnership, validly existing and in good
standing under the laws of the State of Delaware.
(b) Seller has the full legal capacity, right, power, and authority to
enter into and perform its obligations under this Agreement.
(c) The general partner of Seller is Tempo-GP, Inc., which is a
corporation validly existing and in good standing under the laws of the
state of Delaware (the "General Partner").
(d) The execution, delivery and performance of this Agreement by Seller
have been duly authorized by all necessary partnership action and require no
action by, or in respect of, or filing with, any governmental body, agency
or official and do not contravene or constitute a default under any
provision of applicable law or regulation or of Seller's Certificate of
Limited Partnership as amended to date or Partnership Agreement as amended
to date or of any agreement, judgment, injunction, order, decree or other
instrument binding on Seller.
(e) The obligations imposed on Seller under this Agreement are
enforceable against Seller according to their terms, except as such
enforceability may be limited by the federal bankruptcy laws, similar laws
relating to or affecting creditors' rights generally and general principles
of equity.
(f) Seller is the legal owner of the Bonds, free and clear of any lien,
security interests and other encumbrances, and Seller has the right to
assign the Bonds to Purchaser without the consent of any third party, except
such consents as have been obtained or will be obtained prior to the Closing
Date and delivered to Purchaser and such consents the failure to obtain
which would not have a material adverse effect upon the value of any Bonds
or Seller's ability to perform its obligations under this Agreement. Seller
has not assigned or transferred the Bonds, directly or indirectly, to any
other person and has not assigned or transferred to any other person,
directly or indirectly, any of its rights under the Bonds.
(g) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending or, to Seller's knowledge, threatened,
which have, or are likely to have, any material adverse effect on the
ability of Seller to perform its obligations under this Agreement.
(h) Seller has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief against Seller under any law relating to
bankruptcy or insolvency, nor has any such petition been filed against
Seller. No general assignment of Seller's property has been made for the
benefit of creditors, and no receiver, master, liquidator or trustee has
been appointed for Seller or any of its properties.
(i) Seller has made available to Purchaser for its review all of the
material information relating to the Bonds and the Mortgage Loans that was
in Seller's possession as of the date (the "Due Diligence Commencement
Date") on which such material information was first made available to
prospective purchasers of the Bonds, including the Purchase Related
Materials. All other material information relating to the Bonds and the
Mortgage Loans that was in Seller's possession prior to the Effective Date
was made available to Purchaser. There are no other documents containing
terms and provisions that would be material to an investment decision to
acquire the Bonds.
(j) The Bond Documents constitute all of the material documents,
instruments and agreements relating to the Bonds, copies of which have been
provided to Purchaser. The copies of the Bond Documents provided to
Purchaser are true, complete and correct copies of the documents they
purport to be. Except by written instrument or other written documentation
included in the Bond
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Documents, Seller has not modified, terminated, acknowledged as satisfied,
or subordinated any Bond Document, in whole or in part, or released,
canceled, or acknowledged as satisfied any lien or encumbrance purported to
be created by any of the Bond Documents or any indebtedness or obligation
purported to be created, actually or contingently, by any of the Bond
Documents.
(k) No payment default has occurred which is continuing under any of
the Bond Documents. Seller has not received notice, and is not otherwise
aware, of any other default or event of default which is continuing under
any of the Bond Documents.
(l) Seller has not received any notice, and is not otherwise aware, of
any governmental, judicial, or other action or claim by any person which is
pending or threatened against the owner of property financed with or
securing the Bonds (a "Borrower") or any general partner of a Borrower, or
any of the mortgaged property financed with or securing the Bonds, any
issuer of any Bonds or the trustee under any indenture pursuant to which any
Bonds are outstanding, or with respect to or affecting any of the Bond
Documents.
(m) Neither Seller nor any of its affiliates has taken any action or
failed to take any action which, individually or in the aggregate, would
cause interest on any Bonds to be includable in the federal gross income of
the owners of any Bonds (other than Seller during the period of its
ownership of any Bonds), and Seller has not received any notice, and is not
otherwise aware of any fact or circumstance, or of any action or omission by
Seller or any of its affiliates, or by any Borrower or any of its
affiliates, or by any other person, which could cause interest payable on
any of the Bonds to be includable in the gross income of the holder of any
such Bonds (other than Seller during the period of its ownership of the
Bonds) for federal income tax purposes.
(n) The amounts listed on the Bond Schedule accurately reflect in all
material respects the outstanding principal balance of each series of the
Bonds, the amount of each category of accrued and unpaid interest on each
series of Bonds, and all amounts held by the trustee with respect to each
series of Bonds.
(o) Except as disclosed in the Purchase Related Materials or otherwise
disclosed in writing to Purchaser before the Effective Date, there are no
agreements modifying any of the Bonds or Mortgage Loans, except agreements
that are no longer in effect and agreements that individually, or in the
aggregate, do not have a material adverse effect on the holder of the Bonds.
(p) Seller has not engaged the services of any agent, broker or other
similar party in connection with the sale of the Bonds except the Agent
whose fees and commission shall be paid by Seller in accordance with a
separate agreement between Seller, Servicer and Agent.
Section 4.2. SERVICER'S REPRESENTATIONS AND WARRANTIES. Except as set forth
on SCHEDULE D hereto, Servicer represents and warrants to Purchaser as follows
as of the Effective Date:
(a) Servicer is a corporation validly existing and in good standing
under the laws of the State of Delaware.
(b) Servicer has the full legal capacity, right, power, and authority
to enter into and perform its obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement by
Servicer have been duly authorized by all necessary corporate action and
require no action by, or in respect of, or filing with, any governmental
body, agency or official and do not contravene or constitute a default under
any provision of applicable law or regulation or of Servicer's certificate
of incorporation or by-laws or of any agreement, judgment, injunction,
order, decree or other instrument binding on Servicer.
(d) The obligations imposed on Servicer under this Agreement are
enforceable against Servicer according to their terms, except as such
enforceability may be limited by the federal bankruptcy laws, similar laws
relating to or affecting creditors' rights generally and general principles
of equity.
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(e) Servicer has the right to assign its rights and obligations under
the Servicing Agreements without the consent of any third party, except such
consents as have been obtained or will be obtained on or prior to the
Closing Date and delivered to Purchaser and such consents the failure to
obtain which would not have a material adverse effect upon the value of the
Servicing Agreements or Servicer's ability to perform its obligations under
this Agreement, and Servicer has not assigned, directly or indirectly, its
rights and obligations under the Servicing Agreements to any other person.
(f) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending, or to Servicer's knowledge, threatened,
which have, or are likely to have, any material adverse effect on the
ability of Servicer to perform its obligations under this Agreement.
(g) Servicer has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief against Servicer under any law relating to
bankruptcy or insolvency, nor has any such petition been filed against
Servicer. No general assignment of Servicer's property has been made for the
benefit of creditors, and no receiver, master, liquidator or trustee has
been appointed for Servicer or any of its properties.
(h) Servicer has made available to Purchaser for its review all of the
material information relating to the Servicing Agreements that was in
Servicer's possession as of the Due Diligence Commencement Date, including
the Purchase Related Materials. All other material information relating to
the Servicing Agreements that was in Servicer's possession prior to the
Effective Date was made available to Purchaser.
(i) Except as disclosed in the Purchase Related Materials or otherwise
described in writing to Purchaser before the Effective Date, there are no
agreements modifying any of the Servicing Agreements, except agreements that
are no longer in effect and agreements that individually, or in the
aggregate, do not have a material adverse effect on the servicer under, or
on the value of, such Servicing Agreements.
(j) Servicer has not engaged the services of any agent, broker or other
similar party in connection with the assignment of the Servicing Agreements
except the Agent whose fees and commission shall be paid by Servicer in
accordance with a separate agreement between Seller, Servicer and Agent.
Section 4.3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Except as set forth
on SCHEDULE E hereto, Purchaser hereby represents and warrants to Seller and
Servicer as follows as of the Effective Date:
(a) Purchaser is a corporation, validly existing and in good standing
under the laws of Maryland.
(b) Purchaser has the full legal capacity, right, power, and authority
to enter into and perform its obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement by
Purchaser have been duly authorized by all necessary corporate action and
require no action by, or in respect of, or filing with, any governmental
body, agency or official and do not contravene or constitute a default under
any provision of applicable law or regulation or of Purchaser's certificate
of incorporation or by-laws or of any agreement, judgment, injunction,
order, decree or other instrument binding on Purchaser.
(d) The obligations imposed on Purchaser under this Agreement are
enforceable against Purchaser according to their terms, except as such
enforceability may be limited by the federal bankruptcy laws, similar laws
relating to or affecting creditors' rights generally and general principles
of equity.
(e) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending, or, to Purchaser's knowledge,
threatened, which have, or are likely to have, any material adverse effect
on the ability of the Purchaser to perform its obligations under this
Agreement.
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(f) Purchaser has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief against Purchaser under any law relating to
bankruptcy or insolvency, nor has any such petition been filed against
Purchaser. No general assignment of Purchaser's property has been made for
the benefit of creditors, and no receiver, master, liquidator or trustee has
been appointed for Purchaser or any of its property.
(g) Purchaser is a sophisticated investor and has independently
reviewed such documents and other materials relating to the Bonds, Servicing
Agreements and Mortgage Loans as were made available to it and it deemed
relevant and material, including without limitation the Purchase Related
Materials, and has undertaken such other independent investigation as it
deemed necessary or desirable in connection with its purchase of the Bonds
and the assumption of the Servicing Rights. Purchaser has made its decision
to buy the Bonds and assume the Servicing Rights based upon its own
independent evaluation of the information set forth in Sections 4.1(i) and
4.1(j) of this Agreement and has not relied upon any oral or other written
statements, representations or information provided by Seller, Servicer or
Agent or any officer, employee, agent or representative of Seller, Servicer
or Agent, including (without limitation) the information contained in the
Bid Information and Detailed Information Package provided by Agent to
Purchaser (the "Bid Information Package"), other than those representations
and warranties expressly set forth in this Agreement.
(h) Purchaser is aware that the consideration being paid by it
hereunder may differ from the amounts ultimately received by Purchaser with
respect to the Bonds and the Servicing Agreements and that the Bonds may
have limited liquidity. Purchaser is sufficiently experienced and
knowledgeable or advised in all tax, financial, legal, regulatory and other
issues and concerns necessary to participate in the transactions
contemplated by this Agreement and has sufficient financial resources to
bear the economic risks of purchasing the Bonds and holding the Bonds until
maturity and assuming the Servicing Rights.
(i) The Purchaser or its permitted assignee is purchasing the Bonds and
the Servicing Rights in accordance with the terms hereof for its own account
without a view to any distribution thereof in violation of the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser or its
permitted assignee has been informed and understands that the Bonds and the
Servicing Rights have not been registered pursuant to the provisions of
Section 5 of the Securities Act and must be held indefinitely unless such
Bonds and the Servicing Rights are subsequently registered under the
provisions of the Securities Act or an exemption from such registration is
available for the disposition of such Bonds and Servicing Rights.
(j) The Purchaser represents that it or its permitted assignee is an
"accredited investor" within the meaning of Rule 501(a) promulgated under
the Securities Act.
(k) Purchaser has not engaged the services of any agent, broker, or
other similar party, and is not otherwise liable for the payment of any
fees, commissions or other compensation, in connection with its purchase of
the Bonds or the assumption of the Servicing Rights.
Section 4.4. DISCLAIMER OF WARRANTIES AND REPRESENTATIONS. EXCEPT FOR THOSE
EXPRESSED IN SECTIONS 4.1 AND 4.2, NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, HAVE BEEN MADE BY SELLER OR SERVICER OR AGENT OR BY ANYONE ACTING ON
THEIR BEHALF, INCLUDING, BUT WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE
FOREGOING, ANY WARRANTIES OR REPRESENTATIONS REGARDING (i) THE COLLECTABILITY OF
ANY BOND, (ii) THE COLLECTABILITY OF ANY AMOUNTS DUE PURSUANT TO THE SERVICING
AGREEMENTS, (iii) THE COLLECTABILITY OF ANY MORTGAGE LOAN, (iv) THE
CREDITWORTHINESS OF ANY BORROWER OF A MORTGAGE LOAN, (v) THE VALUE OF ANY
COLLATERAL SECURING ANY MORTGAGE LOAN, (vi) THE ACCURACY OF ANY PROPERTY
DESCRIPTION CONTAINED IN DOCUMENTS RELATED TO THE MORTGAGE LOANS (THE "LOAN
DOCUMENTS") OR THE
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ENFORCEABILITY OF THE LOAN DOCUMENTS OR SERVICING AGREEMENTS, (vii) THE
PERFECTION OR PRIORITY OF ANY LIEN SECURING A MORTGAGE LOAN, (viii) THE
EXISTENCE OR BASIS FOR ANY CLAIM, COUNTERCLAIM, DEFENSE OR OFFSET RELATING TO
ANY MORTGAGE LOAN, (ix) THE CONDITION OF THE COLLATERAL SECURING ANY MORTGAGE
LOAN, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL CONDITION, WHETHER LATENT
OR OBSERVABLE, OR (x) THE ACCURACY, COMPLETENESS OR RELIABILITY OF ANY OF THE
INFORMATION CONTAINED IN THE BID INFORMATION PACKAGE OR OF ANY REPORT CONTAINED
IN THE PURCHASE RELATED MATERIALS OR OTHERWISE FURNISHED OR MADE AVAILABLE TO
PURCHASER, INCLUDING (WITHOUT LIMITATION) ANY ENVIRONMENTAL ASSESSMENT REPORT,
APPRAISAL, OPERATING OR FINANCIAL STATEMENT, OR RENT ROLL. SELLER AND SERVICER
EXPRESSLY DISCLAIM ANY AND ALL REPRESENTATIONS AND WARRANTIES EXCEPT FOR THOSE
EXPRESSLY SET FORTH IN SECTIONS 4.1 AND 4.2.
Section 4.5. BONDS SOLD AND SERVICING RIGHTS ASSIGNED "AS IS." EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL BONDS SOLD TO PURCHASER AND
ALL SERVICING RIGHTS ASSIGNED TO AND ASSUMED BY PURCHASER UNDER THIS AGREEMENT
ARE SOLD, ASSIGNED AND TRANSFERRED "AS IS," WITHOUT RECOURSE, REPRESENTATION OR
WARRANTY.
Section 4.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Seller, Servicer and Purchaser in this Agreement shall
survive, in the case of those set forth in Section 4.1 and Section 4.2 hereof
solely for the purpose of effectuating the indemnification provisions set forth
in Section 7.2 hereof, and in all cases for a period of nine (9) months after
the Closing Date; PROVIDED THAT, in the event that the Closing does not occur
prior to April 1, 1998, the representations and warranties in this Agreement
shall survive for a period of one (1) year after the Closing Date.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1. CONDITIONS TO PURCHASER'S OBLIGATIONS. Pursuant to the terms of
Section 5.3 hereof, Purchaser's obligations under this Agreement to purchase the
Bonds and the Servicing Rights and assume the duties, if any, of the Seller
under the Bond Documents and the obligations of the Servicer under the Servicing
Agreements shall be contingent and specifically conditioned upon the following:
(a) Seller and Servicer shall have complied in all material respects
with all of the covenants, agreements and conditions required by this
Agreement to be complied with by Seller and Servicer prior to or as of the
Closing.
(b) All of the representations and warranties of Seller and Servicer set
forth in this Agreement, except as set forth in SCHEDULES C and D hereto,
shall be true and correct at and as of the Closing in all material respects,
as though such representations and warranties were made at and as of the
Closing.
(c) There shall have been no material adverse change in the condition of
title to the properties financed with or securing the Bonds from the
condition of title indicated in the title commitments delivered to Purchaser
as part of the Purchase Related Materials.
(d) Seller and Servicer shall have received all necessary consents and
approvals, if any, and otherwise shall have effected compliance with all of
the provisions of the Bond Documents relating to the transfer of the Bonds,
the Bond Documents and the Servicing Agreements to Purchaser and copies of
all such consents and approvals shall have been delivered to Purchaser.
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(e) All of the conditions precedent to Purchaser's obligations to
consummate the transactions contemplated by the Equity Interest Purchase
Agreement dated as of the date hereof among Seller, Servicer and Purchaser
(the "Equity Interest Purchase Agreement") shall have been satisfied (other
than the condition that all of the conditions to Purchaser's obligations to
consummate the transactions contemplated by this Agreement have been
satisfied) and Seller and Servicer are ready, willing and able to comply
with their obligations under, and to consummate the transactions
contemplated by, the Equity Interest Purchase Agreement.
(f) Seller shall have obtained the consent of the requisite percentage
of the issued and outstanding Assigned Benefit Certificates of the limited
partner of the Seller in order to consummate the sale of the Bonds as
contemplated by this Agreement.
(g) None of the following events (each a "Material Adverse Change")
shall have occurred during the period beginning on the Due Diligence
Commencement Date and ending on the Closing Date: a substantial casualty
loss or environmental contamination affecting the collateral for a Mortgage
Loan or the taking of a substantial portion of the collateral for a Mortgage
Loan under the power of eminent domain.
Section 5.2. CONDITIONS TO SELLER'S AND SERVICER'S OBLIGATIONS. Pursuant to
the terms of Section 5.3 hereof, Seller's obligation to sell the Bonds and
Servicer's obligation to assign the Servicing Agreements and the Servicing
Rights under this Agreement shall be contingent and specifically conditioned
upon the following:
(a) Seller shall obtain the consent of the holders of the requisite
percentage of the issued and outstanding Assigned Benefit Certificates of
the limited partner of the Seller to consummate the sale of the Bonds as
contemplated by this Agreement.
(b) Purchaser shall have complied in all material respects with all of
the covenants, agreements and conditions required by this Agreement to be
complied with by Purchaser prior to or as of the Closing.
(c) All of the representations and warranties of Purchaser set forth in
this Agreement, except as set forth in SCHEDULE E hereto, shall be true and
correct at and as of the Closing in all material respects, as though such
representations and warranties were made at and as of the Closing.
(d) All of the conditions precedent to Seller's and Servicer's
obligations to consummate the transactions contemplated by the Equity
Interest Purchase Agreement shall have been satisfied (other than the
condition that all of the conditions to Seller's and Servicer's obligations
to consummate the transactions contemplated by this Agreement have been
consummated) and Purchaser is ready, willing and able to comply with its
obligations under, and to consummate the transaction contemplated by, the
Equity Interest Purchase Agreement.
Section 5.3. TERMINATION FOR FAILURE TO SATISFY CONDITIONS. If any of the
conditions precedent described in Section 5.1 (other than subsections (f) and
(g) thereof) are not satisfied as of June 30, 1998, the Purchaser shall have the
option (i) to terminate this Agreement by giving notice thereof to Seller and
Servicer, in which case the Deposit and all interest earned thereon shall be
refunded to Purchaser and thereafter no party hereto shall have any liability
hereunder or (ii) to waive such condition and proceed to Closing. If the
condition precedent described in Section 5.1(g) is not satisfied as of the
Closing Date with respect to one or more of the Bonds identified on the Bond
Schedule, Purchaser shall have the option (i) to be relieved of its obligation
to purchase such Bond or Bonds and assume the related Servicing Rights affected
by such Material Adverse Change, in which case the pro rata share of the Deposit
(based upon the proportion that the outstanding principal balance of such Bond
or Bonds bears to the total outstanding principal balance of all of the Bonds)
and the interest earned thereon allocable to both such Bond or Bonds affected by
the Material Adverse Change and the related Servicing Rights, shall be refunded
to the
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Purchaser; PROVIDED THAT Purchaser's obligation to purchase the remaining Bonds
and assume the remaining Servicing Rights shall not be affected thereby or (ii)
to waive such condition and proceed to Closing. If the condition precedent
described in Section 5.1(f) and Section 5.2(a) is not satisfied as of June 30,
1998, as such date may be extended by mutual agreement of the parties as set
forth in Section 3.1 hereof, then Purchaser or Seller shall have the option to
terminate this Agreement by giving written notice thereof to the other parties
hereto, in which case the Deposit and all interest earned thereon shall be
refunded to Purchaser, and Seller shall pay to Purchaser the amount of any
reasonable third party expenses (except that any lender's and lender's counsel
fees shall be deemed reasonable) and other verifiable costs and expenses
(including overhead costs), in each case incurred by Purchaser in connection
with this Agreement; PROVIDED, HOWEVER, that the total amount that Seller shall
be obligated to pay to Purchaser pursuant to this sentence, together with all
amounts payable by Seller pursuant to the third sentence of Section 4.3 of the
Equity Interest Purchase Agreement, shall not exceed an aggregate amount equal
to $2,000,000, and thereafter no party hereto shall have any further liability
hereunder. If any of the conditions precedent described in Sections 5.2(b),
5.2(c) or 5.2(d) (based on Purchaser's default in any representation, warranty
or covenant, in the case of Section 5.2(d)) is not satisfied as of June 30,
1998, then Seller and Servicer shall have the option (i) to terminate this
Agreement by giving notice thereof to Purchaser, in which case the Bond Deposit
and all interest earned thereon may be retained by Seller, and the Servicing
Rights Deposit and all interest earned thereon may be retained by Servicer, as
liquidated damages as provided in Article VII, and thereafter no party hereto
shall have any further liability hereunder or (ii) to waive such conditions and
proceed to Closing.
ARTICLE VI
ADDITIONAL COVENANTS OF PARTIES
Section 6.1. SERVICING MORTGAGE LOANS BEFORE CLOSING. Until the Closing
Date, Servicer shall continue to service the Mortgage Loans in a commercially
reasonable manner. As to any Mortgage Loan that is or becomes in default before
the Closing Date, Servicer reserves the right, at its option, to take such
action as it deems necessary or appropriate in its sole discretion to collect
any delinquent payments, to accelerate the Mortgage Loan, to foreclose or
otherwise realize on collateral for the Mortgage Loan, or to exercise any other
rights and remedies that may be available on account of such default; PROVIDED,
HOWEVER, that Servicer shall not be obligated to take any such action and
Servicer shall consult with Purchaser regarding the advisability of taking any
action. Notwithstanding the foregoing provisions of this Section 6.1, without
the prior written consent of Purchaser, not to be unreasonably withheld, neither
Seller nor Servicer shall, at any time while this Agreement is in effect, (a)
release any collateral or any party from any liability on or with respect to any
of the Bonds or the Mortgage Loans, except in connection with the entire
prepayment of any Bond by any third party unaffiliated with Seller or Servicer,
(b) compromise or settle any claim of Seller or Servicer against a Borrower or
any other obligor with respect to any of the Bonds or Mortgage Loans, or (c)
sell or encumber, or contract to sell or encumber, any right, title, or interest
of Seller or Servicer under or with respect to any Bonds or Mortgage Loans.
Section 6.2. TRANSFER OF SERVICING AGREEMENTS AND SERVICING RIGHTS. After
the Closing Date, Servicer shall not continue to service the Mortgage Loans, and
Purchaser shall assume all of Servicer's duties with respect to servicing the
Mortgage Loans. All payments received by Servicer after the Closing Date with
respect to any Servicing Agreement assumed by Purchaser (other than payments
relating to services performed by Servicer prior to the Closing Date) shall
belong to Purchaser, and Servicer shall, if it receives any such payment after
the Closing Date, promptly deliver all such payments to Purchaser within a
reasonable time after their receipt. All payments received by Purchaser after
the Closing Date with respect to any Servicing Agreement assumed from Servicer
and relating to services performed by Servicer prior to the Closing Date, shall
belong to Servicer, and Purchaser shall, if it receives any such payment after
the Closing Date, promptly deliver all such payments to Servicer within a
reasonable time after their receipt.
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In addition, for six (6) months after the Closing Date, Servicer shall promptly
after receipt, forward to Purchaser copies of any correspondence relating to the
Servicing Agreements received by Servicer.
Section 6.3. CERTAIN PAYMENTS.
(a) CREDITS TO PURCHASER. Purchaser shall receive a credit against the
Purchase Price with respect to the following amounts:
(i) the amount of principal payments or prepayments or interest
payments on any Bond of any kind or character actually received by Seller
on or after the Effective Date excluding amounts in respect of (A)
minimum base interest first accrued on or after the Effective Date and
prior to the Closing Date and (B) additional base interest first accrued
on or after the Effective Date and prior to the Closing Date to the
extent such amounts are actually payable from cash flow generated after
the Effective Date through the date of such prepayment or payment;
PROVIDED THAT the amount of the credit afforded to Purchaser by this
clause (i) shall not be in excess of the portion of the Bond Price
allocated to such Bond or Bonds, which shall be deemed to be that portion
of the Bond Price that bears the same proportion to the Bond Price as the
outstanding principal balance of such Bond or Bonds bears to the then
total outstanding principal balance of all of the Bonds;
(ii) the aggregate amount of the Bonds, if any, deleted from the Bond
Schedule by Seller prior to the Closing Date (pursuant to this Agreement,
including Section 1.4 of this Agreement); PROVIDED THAT the amount of the
credit afforded to Purchaser by this clause (ii) shall not be in excess
of the portion of the Bond Price allocated to such Bond or Bonds, which
shall be deemed to be that portion of the Bond Price that bears the same
proportion to the Bond Price as the outstanding principal balance of such
Bond or Bonds bears to the then total outstanding principal balance of
all of the Bonds; and
(iii) if Purchaser exercises its option under Section 5.3 to purchase
a Bond affected by a Material Adverse Change consisting of a casualty to,
or condemnation of, a property securing such Bond, the actual amount of
the proceeds received by the Seller prior to the Closing Date as a result
of such Material Adverse Change; PROVIDED THAT the amount of the credit
afforded to Purchaser by this clause (iii) shall not be in excess of the
portion of the Bond Price allocated to such Bond or Bonds, which shall be
deemed to be that portion of the Bond Price that bears the same
proportion to the Bond Price as the outstanding principal balance of such
Bond or Bonds bears to the then total outstanding principal balance of
all of the Bonds.
With respect to any and all payments received by Seller on or after the
Closing Date for which Purchaser is entitled to a credit under this Section
6.3(a) on account of any Bond (but as to which Purchaser did not receive a
credit because such payments were not received prior to the Closing Date),
Seller shall promptly remit such payments to Purchaser in immediately available
funds. In addition, for six (6) months after the Closing Date, Seller shall
promptly after receipt, forward to Purchaser copies of any correspondence
relating to any Bond received by Seller.
(b) AMOUNTS IN RESPECT OF BANKRUPTCIES. With respect to amounts held by
a bankruptcy court, bankruptcy trustee, bankruptcy debtor-in-possession,
receiver in foreclosure or similar third party in respect of any Bond
purchased by Purchaser, Seller's interest in same to the extent applicable
to the period on and after the Effective Date shall be assigned to Purchaser
and, if any portion thereof is received by Seller, it shall be paid or
credited to Purchaser promptly after receipt, excluding (i) amounts in
respect of payments for services performed by Servicer pursuant to the
Servicing Agreement relating to such Bond prior to the Closing Date and (ii)
amounts in respect of (A) minimum base interest first accrued on or after
the Effective Date and prior to the Closing Date and (B) additional base
interest first accrued on or after the Effective Date and prior to the
Closing Date to the extent such amounts are actually payable from cash flow
generated after the Effective Date
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through the Closing Date; PROVIDED THAT the amount assigned, paid or
credited to Purchaser shall not be in excess of the portion of the Bond
Price allocated to such Bond or Bonds, which shall be deemed to be that
portion of the Bond Price that bears the same proportion to the Bond Price
as the outstanding principal balance of such Bond or Bonds bears to the then
total outstanding principal balance of all of the Bonds.
(c) FURTHER ADJUSTMENTS. In the event any of the adjustments required to
be made under this Agreement is not determined at Closing and shown on the
closing statements, the parties shall make such calculations and adjustments
promptly after such adjustment can be determined.
Section 6.4. ACCESS. Before the Closing Date, Purchaser shall have the right
from time to time to review and copy at its expense any of the Purchase Related
Materials during Seller's and/or Servicer's regular business hours and upon
reasonable notice to Seller and/or Servicer. For a period of two years after the
Bond Documents are delivered to Purchaser, Seller and Servicer shall have the
right from time to time to review and copy at their expense any of the Bond
Documents during Purchaser's regular business hours and upon reasonable notice
to Purchaser.
Section 6.5. ASSUMPTION OF SELLER'S AND SERVICER'S DUTIES. From and after
the Closing, Purchaser shall assume and comply with all of the terms, conditions
and covenants of the Bonds, the Bond Documents and the Servicing Agreements that
are required to be complied with by Seller and/or the Servicer and Seller and/or
Servicer shall have no further obligations with respect thereto.
Section 6.6. COMMUNICATIONS WITH BORROWER AND TRUSTEES. Before the Closing
without the consent of Seller, Purchaser shall not, directly or indirectly,
notify, contact or otherwise communicate orally or in writing with any Borrower
under any Mortgage Loan or its affiliates in connection with the Purchaser's
purchase of the Bonds or assumption of the Bond Documents and Servicing Rights.
Seller shall use its reasonable efforts to assist Purchaser in obtaining from
the trustee under each indenture pursuant to which any of the Bonds were issued
and remain outstanding, a certificate specifying: (i) the outstanding principal
amount of such Bonds and the accrued and unpaid interest on such Bonds, and all
accounts maintained by the trustee with respect to all of such Bonds and the
amounts held in each and all of such accounts, all of which shall be consistent
in all material respects with the information furnished by Seller to Purchaser
prior to the Effective Date; and (ii) such other information as Purchaser shall
reasonably request.
Section 6.7. ACCESS TO PROPERTIES. Purchaser, its officers, employees,
agents and contractors (all of whom shall be considered "Purchaser" for purposes
of this Section) shall not enter any of the real properties securing the
Mortgage Loans (the "Properties") before the Closing for any purpose without
Seller's or Servicer's prior approval, which shall not be unreasonably withheld
or delayed. If Seller or Servicer permits Purchaser to have access to a
Property, (i) Purchaser shall not interfere with the use and enjoyment of the
Property by the Borrowers under the Mortgage Loans, their tenants or others and
(ii) Purchaser shall indemnify, defend and hold Seller and Servicer harmless
from and against any and all claims, liabilities, damages and costs (including
reasonable attorneys' fees) arising directly or indirectly from Purchaser's
entry onto any of the Properties.
Section 6.8. CONFIDENTIALITY AGREEMENT. Purchaser previously executed a
confidentiality agreement (as amended from time to time, the "Confidentiality
Agreement") in which it agreed, among other things, to keep certain information
regarding the Bonds, the Servicing Agreements and the Mortgage Loans
confidential. Purchaser shall continue to be bound by the Confidentiality
Agreement after the Effective Date, and all of the terms and conditions of the
Confidentiality Agreement are incorporated herein by reference and shall
continue in full force and effect. Seller shall use reasonable efforts to
enforce the terms and provisions of each Confidentiality Agreement signed by an
unsuccessful bidder for the Bonds and the Servicing Rights.
Section 6.9. RELEASE OF SELLER AND SERVICER. Except as set forth in Section
7.2 of this Agreement, Purchaser hereby releases and forever discharges Seller
and Seller's partners and Servicer, and their
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respective agents, servants, shareholders, partners, directors, officers,
employees, successors, assigns and affiliates (all such persons being
collectively referred to as the "Related Persons"), of and from any and all
causes of action, claims, demands and remedies of whatever kind and nature that
Purchaser has or may in the future have against the Seller or Servicer or any
Related Persons, and in any manner on account of, arising out of or related to
the Bonds purchased hereunder, or the Servicing Agreements assumed hereunder.
Section 6.10. TITLE INSURANCE. Promptly after the Effective Date, Purchaser
shall use its reasonable efforts to obtain, at its expense, policies of, or
commitments for, title insurance with respect to each of the mortgages
encumbering the real properties relating to the Bonds.
ARTICLE VII
REMEDIES UPON DEFAULT
Section 7.1. DEFAULT BY PURCHASER.
(a) DEFAULT BEFORE CLOSING. If (i) Purchaser shall fail to purchase the
Bonds and/or assume the Servicing Rights in accordance with this Agreement
for any reason, other than after termination of this Agreement by Purchaser
pursuant to Section 5.3 or pursuant to any other right of termination
expressly provided herein for Purchaser's benefit ("Purchaser's Failure to
Close") or (ii) Purchaser is ready, willing and able to purchase the Bonds
and assume the Servicing Rights but Purchaser defaults in any material
respect in the performance of any of its other obligations under this
Agreement or breaches in any material respect any of its representations or
warranties set forth herein, and such default or breach is not cured or
waived prior to the Closing ("Purchaser's Pre-Closing Default"), then in
either case Purchaser agrees that it shall be liable to Seller and Servicer
for damages incurred by Seller and Servicer by reason of Purchaser's Failure
to Close or Purchaser's Pre-Closing Default but that the amount of such
damages are not ascertainable. Therefore, such damages shall be agreed as a
liquidated amount to be equal to the Deposit and all interest earned
thereon. Forfeiture of the Deposit and interest earned thereon shall be
Seller's and Servicer's sole and exclusive remedy for the Purchaser's
Failure to Close or for Purchaser's Pre-Closing Default, Seller and Servicer
hereby waiving any and all other remedies. Upon payment of the Deposit and
interest earned thereon to Seller and Servicer pursuant to the preceding
sentence, this Agreement shall terminate and no party shall have any further
liability hereunder. If Seller and Servicer elect to proceed to Closing
notwithstanding Purchaser's Pre-Closing Default, as provided in Section 5.3,
Purchaser's Pre-Closing Default shall be deemed waived.
(b) INDEMNIFICATION COVENANTS OF PURCHASER. In the event the Closing is
consummated, Purchaser shall indemnify, save and keep Seller and Seller's
partners and Servicer and each of their respective shareholders, partners,
directors, officers, employees, agents and other affiliates and their
respective successors and assigns harmless against and from all liabilities,
demands, claims, actions, causes of action, assessments, losses, fines,
penalties, costs, damages and expenses, including reasonable attorneys' and
expert witness fees, alleged against, sustained or incurred by any such
persons as a result of or arising out of or by virtue of the breach by
Purchaser of any of the representations or warranties of Purchaser, or any
of the covenants, obligations or agreements set forth in this Agreement, or
in the documents and instruments executed in connection herewith, to be
performed by Purchaser after the Closing. The parties hereto agree that
Purchaser's indemnification obligations under this Section 7.1(b) shall not
extend to any federal or state income tax liability of Seller or any of its
partners with respect to the period during which Seller owned the Bonds.
(c) INDEMNIFICATION PROCEDURES.
(i) COOPERATION. Subject to the provisions of Section 7.1(c)(ii), a
party against whom a claim giving rise to a right to indemnification
pursuant to this Agreement has been asserted (an
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"Indemnified Party") shall have the right, at its own expense, to
participate in the defense of any claim, action or proceeding brought by
a third party (a "Third Party Claim") which resulted in said claim for
indemnification, and if said right is exercised, the parties shall
cooperate in the defense of said action or proceeding.
(ii) THIRD PARTY CLAIMS. Immediately following the receipt of notice
of a Third Party Claim, the party receiving the notice of the Third Party
Claim shall notify the other parties of its existence. Subject to the
remaining provisions of this Section 7.1(c)(ii), if a party is entitled
to indemnification against a Third Party Claim, the party against whom a
claim for indemnification has been asserted (the "Indemnifying Party")
shall have the right, in its discretion, to defend against and settle any
litigation, at such time and upon such terms as the Indemnifying Party
deems fair and reasonable, provided that the terms of such settlement
include an unconditional release of the Indemnified Party with respect to
such Third Party Claim or the Indemnified Party consents to such
settlement. Notwithstanding the foregoing, the Indemnifying Party shall
lose its right to defend and settle the Third Party Claim if it shall
fail to diligently contest the Third Party Claim. No failure by an
Indemnifying Party to acknowledge in writing its indemnification
obligations under this Article VII shall relieve it of such obligations
to the extent they exist. The Indemnifying Party may also at any time,
upon reasonable notice, tender the defense of a Third Party Claim to the
Indemnified Party. If: (A) the defense of a Third Party Claim is so
tendered and such tender is accepted without qualification by the
Indemnified Party; or (B) within thirty (30) days after the date on which
written notice of a Third Party Claim has been given pursuant to this
Section 7.1(c), the Indemnifying Party shall fail to acknowledge without
qualification its indemnification obligations as provided in this Section
7.1(c) in writing to the Indemnified Party, then the Indemnified Party
shall have the right to defend or settle such Third Party Claim and the
Indemnifying Party shall have no right to contest, defend, litigate or
settle the Third Party Claim, and all reasonable expenses (including
without limitation reasonable attorneys' fees) incurred by the
Indemnified Party in connection therewith shall be paid by the
Indemnifying Party. The Indemnified Party shall have the right to be
represented by counsel at its own expense in any such contest, defense,
litigation or settlement conducted by the Indemnifying Party provided
that the Indemnified Party shall be entitled to reimbursement therefor
only if the Indemnifying Party shall lose its right to defend and settle
as herein provided or if in the judgment of counsel to the Indemnified
Party a conflict of interest between the Indemnifying Party and the
Indemnified Party exists such that separate counsel is necessary for the
proper conduct of the defense of such Third Party Claim, PROVIDED,
HOWEVER, that the Indemnifying Party shall not be responsible for the
fees of more than one counsel for all Indemnified Parties with respect to
any one Third Party Claim. As long as the Indemnified Party has a right
to defend and (except as hereinabove provided) settle a Third Party Claim
as hereinabove provided, the Indemnified Party shall be reimbursed by the
Indemnifying Party for the reasonable attorneys' fees and other expenses
of defending the Third Party Claim which are incurred from time to time,
immediately following the presentation to the Indemnifying Party of
itemized bills for said reasonable attorneys' fees and other expenses.
Section 7.2. DEFAULT BY SELLER AND/OR SERVICER.
(a) DEFAULT BEFORE CLOSING. (1) If (i) Seller fails to sell the Bonds to
Purchaser in accordance with this Agreement and/or Servicer fails to assign
the Servicing Rights to Purchaser in accordance with this Agreement, other
than after termination of this Agreement by Seller and/or Servicer pursuant
to Section 5.3 or pursuant to any other right of termination provided herein
for Seller's or Servicer's benefit ("Seller's/Servicer's Failure to Close"),
or (ii) Seller is ready, willing and able to sell the Bonds to Purchaser and
Servicer is ready, willing and able to assign the Servicing Rights, but
either party defaults in any material respect in the performance of any of
its other respective obligations under this Agreement or breaches in any
material respect any of its respective representations or warranties set
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<PAGE>
forth herein, and such default or breach is in fact known to Purchaser
before the Closing and is not cured prior to the Closing
("Seller's/Servicer's Pre-Closing Default"), then Purchaser's sole and
exclusive remedy for Seller's/Servicer's Failure to Close or
Seller's/Servicer's Pre-Closing Default shall be to terminate this Agreement
and receive a refund of the Deposit and all interest earned thereon, plus
payment by Seller of all reasonable third party expenses (except that any
lender's counsel and other lender's fees shall be deemed reasonable), but no
other costs or expenses (including overhead costs), incurred by Purchaser in
connection with this Agreement; PROVIDED, HOWEVER, that the total amount
that Seller shall be obligated to pay to Purchaser pursuant to this
sentence, together with all amounts payable by Seller pursuant to the first
sentence of Section 6.2(a) of the Equity Interest Purchase Agreement, shall
not exceed an aggregate amount equal to $1,250,000 (unless Purchaser shall
have terminated this Agreement as a result of the failure of the condition
precedent to Purchaser's obligation to consummate the transaction
contemplated hereby set forth in Section 5.1(f) hereof, in which case such
amount shall be increased to $2,000,000 as described in Section 5.3 hereof).
Upon Purchaser's receipt of the Deposit and interest earned thereon, plus
payment of all reasonable third party expenses incurred by Purchaser in
connection with this Agreement as set forth, and subject to the limitations
contained, in the preceding sentence, this Agreement shall terminate and
none of the parties hereto shall have any further liability hereunder. If
Purchaser elects to proceed to the Closing notwithstanding
Seller's/Servicer's Pre-Closing Default, as provided in Section 5.3,
Seller's/Servicer's Pre-Closing Default shall be deemed waived.
(2) Notwithstanding the provisions of Section 7.2(a)(1), if at any
time prior to the termination of this Agreement, Seller shall receive a
bona fide offer from a third party to purchase all of the Bonds for an
aggregate purchase price in excess of $127,000,000 and Seller shall sell
the Bonds to such third party at any time within the period commencing on
the date of such bona fide offer and ending six (6) months after the
termination of this Agreement (unless such termination shall have
resulted from (i) Purchaser's failure to satisfy all of those conditions
precedent to Seller's and Servicer's obligations to consummate the
transaction contemplated hereby that are under Purchaser's control or
(ii) Purchaser's breach of any representation, warranty or covenant
hereunder, in either of which events Seller shall have no liability to
Purchaser pursuant to this Section 7.2(a)(2)) then upon the consummation
of such a sale of the Bonds to such a third party within such period,
Seller shall pay to Purchaser one-half ( 1/2) of the excess, if any, of
(i) the aggregate purchase price paid by such third party for all of the
Bonds OVER (ii) $127,000,000; PROVIDED, HOWEVER, that the maximum amount
payable by Seller to Purchaser pursuant to this Section 7.2(a)(2) shall
not exceed $5,000,000.
(b) INDEMNIFICATION COVENANTS OF SELLER AND SERVICER. In the event the
Closing is consummated, Seller and Servicer (A) severally with respect to
clause (i) below and (B) jointly with respect to clauses (ii) and (iii)
below, shall indemnify, save and keep Purchaser and its respective
shareholders, partners, directors, officers, employees, agents and other
affiliates harmless against and from all liabilities, demands, claims,
actions, causes of actions, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorney's and expert witness
fees, alleged against, sustained or incurred by any of such persons as a
result of or arising out of or by virtue of:
(i) the breach by Seller or Servicer, respectively, as the case may
be, of any of the representations or warranties of Seller or Servicer or
the breach by Seller or Servicer of any of the covenants of Seller or
Servicer to be performed by Seller or Servicer after the Closing, as the
case may be, set forth in this Agreement or in the Equity Interest
Purchase Agreement; PROVIDED THAT any claims for indemnification under
this clause (i) shall be brought no later than nine (9) months after the
Closing Date, or in the event the Closing does not occur prior to April
1, 1998, no later than one (1) year after the Closing Date, and any
claims for indemnification first brought after the expiration of such
time period shall be void and of no force or effect;
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(ii) the class action suit filed against the Seller on October 7,
1996 in the Delaware Court of Chancery for New Castle County or the
petition filed against the General Partner of the Seller on August 27,
1996 in the Delaware Court of Chancery for New Castle County; and
(iii) any suit arising as a result of the transactions contemplated
by this Agreement which shall have been brought no later than nine months
after the Closing Date, or, in the event that the Closing does not occur
prior to April 1, 1998, no later than one year after the Closing Date,
and any suit first brought after the expiration of such time period shall
not give rise to any right of indemnification against Seller or Servicer
hereunder.
(c) INDEMNIFICATION PROCEDURES. The indemnification procedures set forth
in Section 7.1(c) shall be followed in connection with any claim for
indemnification under Section 7.2(b).
(d) LIMITATION ON SELLER'S AND SERVICER'S OBLIGATIONS. The
indemnification obligations of Seller and Servicer pursuant to Section
7.2(b) hereof (and pursuant to the procedures set forth in Section 7.1(c)
hereof) shall be the sole and exclusive remedy of Purchaser in respect of
the matters described in clauses (i), (ii) and (iii) of Section 7.2(b) and
in connection with all matters with respect to which Seller and/or Servicer
are required to indemnify Purchaser pursuant to the Equity Interest Purchase
Agreement, including, without limitation, those matters described in Section
6.2(b) thereof, or otherwise in connection with the transactions described
herein and therein, and all of such indemnification obligations (under any
and all of Section 7.2(b) hereof, Section 7.1(c) hereof, Section 6.2(b) of
the Equity Interest Purchase Agreement and otherwise) shall be limited in
all events to a maximum aggregate amount equal to $8,890,000. In no event
shall Seller and/or Servicer, individually or collectively, be obligated to
pay to, and/or reimburse, the Purchaser and/or any of the other persons
specified above in Section 7.2(b) hereof, Section 7.1(c) hereof, or
specified in Section 6.2(b) of the Equity Interest Purchase Agreement,
individually or collectively, pursuant to Section 7.2(b) hereof, or pursuant
to Section 6.2(b) of the Equity Interest Purchase Agreement, or otherwise,
in respect of any breach of any representation, warranty, term, covenant,
condition or obligation of Seller and/or Servicer hereunder, or under the
Equity Interest Purchase Agreement, or for the other matters specified in
Section 7.2(b) hereof or Section 6.2(b) of the Equity Interest Purchase
Agreement, for (i) an amount in excess of $8,890,000 in the aggregate, or
(ii) any claim for indemnification first brought after the expiration of the
time limits described in Section 7.2(b) hereof or in Section 6.2(b) of the
Equity Interest Purchase Agreement.
(e) ESCROW AGREEMENT. Seller and Servicer shall deposit into an escrow,
pursuant to an escrow agreement mutually satisfactory to Seller, Servicer
and Purchaser, an amount equal to $8,890,000 for the purpose of satisfying
any and all claims for indemnification against Seller and/or Servicer
pursuant to Section 7.2(b) hereof, Section 7.1(c) hereof, Section 6.2(b) of
the Equity Interest Purchase Agreement, or otherwise. The amounts held in
such escrow shall be available to Seller and/or Servicer, as the case may
be, for the purpose of paying, and/or reimbursing Purchaser and the other
persons identified in Section 7.2(b) and Section 6.2(b) of the Equity
Interest Purchase Agreement for, any settlement or judgment relating to any
such claim or claims and for all costs and expenses, including attorneys'
fees incurred in connection with any such claim for indemnification. Seller
and Servicer shall select an escrow agent, which shall be subject to the
reasonable approval of Purchaser. The terms of the escrow agreement to be
executed and delivered by the Seller, Servicer, Purchaser and such escrow
agent shall provide, inter alia, that all amounts held pursuant thereto
shall be released to the Seller and Servicer immediately upon the expiration
of the period ending nine (9) months after the Closing Date, or, in the
event that the Closing does not occur prior to April 1, 1998, ending one (1)
year after the Closing Date, except for amounts subject to claims made prior
to expiration of such period and such amounts subject to claims shall be
disbursed from such escrow account pursuant to the resolution of such claims
by a court of competent jurisdiction or by agreement of the parties.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. NOTICES. Any notice, request, demand or other communication
required or permitted under this Agreement shall be given in writing and shall
be delivered or sent by registered or certified mail, return receipt requested
in a prepaid envelope, by overnight mail or courier, or by facsimile
transmission, to the address set forth below or such other addresses as such
party shall hereafter specify in writing in accordance with this Section:
If to Seller:
Mr. Ronald J. DiPietro
Dean Witter/Coldwell Banker Tax
Exempt Mortgage Fund, L.P.
2 World Trade Center
New York, New York 10048
Fax: 212-392-3123
If to Servicer:
Mr. William B. Smith
Dean Witter Realty Inc.
2 World Trade Center
New York, New York 10048
Fax: 212-392-3123
In each case with a copy to:
Victor J. Paci
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Fax: 617-951-8736
If to Purchaser:
Capital Apartment Properties, Inc.
Attention: Richard L. Kadish
11200 Rockville Pike, Suite 400
Rockville, Maryland 20852
Fax: 301-468-8391
with a copy to:
Harlan P. Cohen
Locke Purnell Rain Harrell (A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Fax 214-740-8800
Such notice or other communication shall be deemed to have been given (i)
when delivered, if sent by registered or certified mail, facsimile transmission
or delivered personally, or (ii) on the business day following delivery to the
U. S. Postal Service or courier if sent by overnight mail or overnight courier.
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Section 8.2. CLOSING EXPENSES. Except as otherwise provided herein, whether
or not the transactions contemplated hereunder are completed, Purchaser, Seller
and Servicer shall each be responsible for the payment of its own closing
expenses and its expenses in negotiating and carrying out its obligations under
this Agreement, including without limitation the costs of its respective
counsel.
Section 8.3. SEVERABILITY. Each part of this Agreement is intended to be
severable. If any term, covenant, condition or provision of this Agreement is
unlawful, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the remaining provisions of this Agreement,
which shall remain in full force and effect and shall be binding upon the
parties.
Section 8.4. HEADINGS. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision thereof.
Section 8.5. GOVERNING LAW. The parties agree that this Agreement shall be
construed, and the rights and obligations of the parties under the Agreement
shall be determined, in accordance with the laws of the State of New York,
without regard to its conflict of laws provisions.
Section 8.6. ASSIGNMENTS; BINDING EFFECT. The Purchaser shall not assign or
delegate any of its obligations under this Agreement without the express written
consent of Seller and Servicer, but may assign any of its rights under this
Agreement to purchase the Bonds and the Servicing Rights without the written
consent of Seller or Servicer; PROVIDED THAT notwithstanding an assignment
pursuant to Section 8.6 of this Agreement of the Purchaser's rights under this
Agreement to purchase the Bonds and the Servicing Rights, the Purchaser shall
not be relieved of its obligations under this Agreement as a result thereof.
Section 8.7. SURVIVAL. Seller, Servicer and Purchaser agree that the
covenants contained in this Agreement shall survive the Closing, except as
otherwise expressly provided herein, and shall be independently enforceable.
Section 8.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including any
addenda, attachments, exhibits and schedules referred to herein and attached
hereto, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes any and all prior agreements,
representations and understandings of the parties, written or oral, except for
the Equity Interest Purchase Agreement and the Confidentiality Agreement, each
of which is incorporated herein and shall continue in full force and effect.
This Agreement may not be amended or modified except by written agreement
executed by all parties hereto.
Section 8.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
Section 8.10. CONSTRUCTION. Unless the context requires otherwise, singular
nouns and pronouns used herein shall be deemed to include the plural, and
pronouns of one gender shall be deemed to include the equivalent pronoun of the
other gender.
Section 8.11. WAIVER. No waiver by any party of another party's breach of
any term, covenant or condition contained in this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement. In addition, no waiver by Seller or Servicer of any
condition prior to Closing is enforceable unless in writing.
Section 8.12. CONSENTS AND APPROVALS. Wherever this Agreement requires or
permits the consent or approval of a party or provides that certain action may
not be taken unless the other parties agree, each such consent, approval or
agreement shall be in writing, shall be signed by the party from whom the
consent, approval or agreement is sought and, unless otherwise provided herein,
may be withheld by such party in its sole discretion.
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Section 8.13. TIME OF THE ESSENCE. Time shall be of the essence with respect
to the performance of the parties' obligations hereunder, the satisfaction of
all conditions to a party's obligations and all of the other provisions of this
Agreement.
Section 8.14. FURTHER ASSURANCES. Each party shall execute and deliver to
each other party such documents, instruments and agreements and shall use its
best efforts and take such other actions as may be necessary or reasonably
requested by another party to satisfy or cause the satisfaction of all of the
conditions precedent to the other party's obligations hereunder and to
consummate the transactions contemplated herein or to confirm or effectuate the
sale of the Bonds and the assignment and assumption of the Bond Documents and
the Servicing Agreements pursuant to this Agreement.
Section 8.15. WAIVER OF JURY TRIAL. To the extent permitted by law, each
party hereto waives any right it may have to a trial by jury in any action or
proceeding relating to this Agreement, whether such action or proceeding is
instituted by Seller, Servicer, Purchaser or any other party.
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WITNESS the following signatures.
<TABLE>
<S> <C> <C>
SELLER:
DEAN WITTER/COLDWELL
BANKER TAX EXEMPT
MORTGAGE FUND, L.P.
By: TEMPO-GP, Inc.,
its General Partner
By: -----------------------------------------
Title: ---------------------------------------
SERVICER:
DEAN WITTER REALTY INC.
By: -----------------------------------------
Title: ---------------------------------------
PURCHASER:
CAPREIT ACQUISITION CORP.
By: -----------------------------------------
Richard L. Kadish, President
Title: ---------------------------------------
</TABLE>
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EXHIBIT C
EQUITY INTEREST
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made as of November 21, 1997
(the "EFFECTIVE DATE") between DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE
FUND, L.P., a Delaware limited partnership ("FUND"), DEAN WITTER REALTY INC. a
Delaware corporation ("REALTY"), and CAPREIT ACQUISITION CORP., a Maryland
corporation ("PURCHASER").
WHEREAS, Fund is the owner of the equity interests (the "FUND EQUITY
INTERESTS") in the entities (the "ENTITIES") listed on SCHEDULE A hereto (the
"FUND EQUITY INTEREST SCHEDULE");
WHEREAS, Realty is the owner of the equity interests (the "REALTY EQUITY
INTERESTS" and, collectively with the Fund Equity Interests, the "EQUITY
INTERESTS") in those Entities listed on SCHEDULE B hereto (the "REALTY EQUITY
INTEREST SCHEDULE;" and collectively, with the Fund Equity Interest Schedule,
the "Equity Interest Schedule");
WHEREAS, Certain of the Entities own interests in the real properties (the
"PROPERTIES") listed on SCHEDULE C hereto (the "PROPERTY SCHEDULE") and certain
of the Entities own interests in entities that own interests in certain of the
Properties, the entities that operate the Properties being referred to herein as
the "OPERATING ENTITIES";
WHEREAS, Fund and Realty wish to sell all of their right, title and interest
in and to their respective Equity Interests and Purchaser wishes to acquire such
Equity Interests; and
WHEREAS, Purchaser has conducted an independent investigation of the
Entities and the Properties, including without limitation a review of the
documents and other materials related to the Properties (collectively, the
"Purchase Related Materials") made available at the office of Cushman &
Wakefield of D.C., Inc. (the "Agent").
NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF EQUITY INTERESTS
Section 1.1. AGREEMENT TO BUY AND SELL EQUITY INTERESTS. Fund and Realty
hereby agree to sell to Purchaser, and Purchaser hereby agrees to buy from Fund
and Realty, subject to the terms and conditions of this Agreement, all of Fund's
right, title and interest in and to the Fund Equity Interests and all of
Realty's right, title and interest in and to the Realty Equity Interests.
Section 1.2. PURCHASE PRICE. The total purchase price for the Fund Equity
Interests and the Realty Equity Interests shall be Four Million Eight Hundred
Fifty Thousand Dollars ($4,850,000) which total purchase price shall be
allocated by the Fund and Realty as between themselves pursuant to a separate
agreement (the amount of such purchase price allocable to the Fund is referred
to herein as the "FUND PURCHASE PRICE"; and the amount of such purchase price
allocable to Realty is referred to herein as the "REALTY PURCHASE PRICE").
Section 1.3. DEPOSIT. In consideration of the Fund's and Realty's agreement
to sell the Equity Interests, Purchaser hereby deposits the sum of Two Hundred
Forty-Two Thousand Five Hundred Dollars ($242,500) with the Fund and Realty (as
such amount is allocated between the Fund and Realty as described above, the
"FUND DEPOSIT" and the "REALTY DEPOSIT") as earnest money deposits under this
Agreement. Fund and Realty shall hold the Fund Deposit and the Realty Deposit,
respectively, in interest
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bearing accounts until December 15, 1998. Thereafter, the Fund Deposit and
Realty Deposit shall be held by Chicago Title Insurance Company pursuant to an
escrow agreement in form and substance mutually acceptable to the parties.
Section 1.4. ALL EQUITY INTERESTS TO BE PURCHASED. Subject to the other
terms and provisions of this Agreement, Purchaser may not purchase less than all
of the Equity Interests listed in the Equity Interest Schedule.
ARTICLE II
CLOSING
Section 2.1. CLOSING. Fund, Realty and Purchaser agree that the closing of
the purchase and sale of the Equity Interests (the "CLOSING") shall be held on a
date (the "CLOSING DATE") not later than twenty (20) days after the date on
which the Fund and Realty provide notice to the Purchaser that all of the
conditions precedent to the consummation of the transactions contemplated hereby
set forth in Section 4.1 and Section 4.2 of this Agreement have been satisfied,
or waived, (which notice from Fund and Realty need not address whether the
Purchaser is ready, willing and able to consummate the transactions contemplated
by the Bond Purchase Agreement (as hereinafter defined) as described in Section
4.2(d) hereof) but in any event not later than June 30, 1998; provided, however,
that if the only condition precedent to Purchaser's obligations that remains
unsatisfied as of June 30, 1998 is that set forth in Section 4.1(e) and 4.2(a)
of this Agreement, then, with the consent of all parties hereto, the Closing
Date may be extended for the purpose of satisfying such condition to a date
mutually acceptable to the parties. If the transactions contemplated hereby
shall not have been consummated by June 30, 1998, as such date may be extended
by the mutual agreement of the parties, any party hereto shall have the right to
terminate this Agreement by notice to the other parties. The Closing shall
commence at 10:00 a.m., at the offices of Bingham Dana LLP, 150 Federal Street,
Boston, Massachusetts, or such other time and place mutually selected by
Purchaser, Realty and Fund.
Section 2.2. CLOSING. On the Closing Date,
(a) Fund shall
(i) sell, assign, convey, transfer and deliver to Purchaser all of the
Fund Equity Interests being acquired hereunder free and clear of any liens,
encumbrances, pledges or other agreements to transfer same;
(ii) with respect to Fund Equity Interests consisting of shares of the
capital stock of corporations (the "FUND SHARES"), deliver to Purchaser
stock certificates and duly executed stock transfer powers with respect to
such Fund Shares;
(iii) with respect to Fund Equity Interests consisting of partnership
interests ("FUND PARTNERSHIP INTERESTS"), execute and deliver to Purchaser
an assignment of such Fund Partnership Interests, together with such
documents as are necessary to admit Purchaser as a partner in the applicable
Entities, all such assignment and partnership admission documents to be in a
form mutually acceptable to the parties hereto;
(iv) deliver to Purchaser an opinion of outside counsel for Fund dated
the Closing Date, substantially in the form of EXHIBIT A hereto; and
(v) deliver to Purchaser (A) a certified copy of the Certificate of
Limited Partnership of Fund, and any amendments thereto, (B) a certificate
of an officer of the General Partner of Fund with respect to (I) Fund's
Partnership Agreement, and any amendments thereto, (II) incumbency and (III)
corporate resolutions of the General Partner of Fund authorizing the
transactions contemplated by this Agreement, and (C) a certificate of good
standing of Fund issued by the Delaware Secretary of State.
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(b) Realty shall
(i) sell, assign, convey, transfer and deliver to Purchaser all of the
Realty Equity Interests free and clear of any liens, encumbrances, pledges
or other agreements to transfer same;
(ii) with respect to Realty Equity Interests consisting of shares of the
capital stock of corporations (the "REALTY SHARES"), deliver to Purchaser
stock certificates and duly executed stock transfer powers with respect to
such Realty Shares;
(iii) with respect to Realty Equity Interests consisting of partnership
interests (the "REALTY PARTNERSHIP INTERESTS"), execute and deliver to
Purchaser an assignment of such Realty Partnership Interests, together with
such documents as are necessary to admit Purchaser as a partner in the
applicable Entities, all such assignment and partnership admission documents
to be in a form mutually acceptable to the parties hereto;
(iv) deliver to Purchaser an opinion of outside counsel for Realty dated
the Closing Date, substantially in the form of EXHIBIT B hereto; and
(v) deliver to Purchaser (A) a certified copy of the Certificate of
Incorporation of Realty, (B) a certificate of an officer of Realty with
respect to (I) incumbency, (II) by-laws and (III) resolutions authorizing
the transactions contemplated by this Agreement and (C) a certificate of
good standing of Realty issued by the Delaware Secretary of State.
(c) Purchaser shall
(i) pay to Fund by wire transfer, cashier's check or in other
immediately available funds an amount equal to the Fund Purchase Price less
the Fund Deposit (which deposit Purchaser shall cause the escrow agent to
pay to Fund) and less any adjustments pursuant to Section 5.2 hereof;
(ii) pay to Realty by wire transfer, cashier's check or in other
immediately available funds an amount equal to the Realty Purchase Price
less the Realty Deposit (which deposit Purchaser shall cause the escrow
agent to pay to Realty) and less any adjustments pursuant to Section 5.2
hereof;
(iii) deliver to each of Fund and Realty an opinion of outside counsel
for Purchaser dated the Closing Date, substantially in the form of EXHIBIT C
hereto; and
(iv) deliver to each of Fund and Realty (A) a certified copy of the
certificate of incorporation of Purchaser, and any amendments thereto, (B) a
certificate of an officer of Purchaser with respect to (I) incumbency, (II)
by-laws of Purchaser and (III) resolutions authorizing the transactions
contemplated by this Agreement; and (C) a certificate of good standing of
Purchaser issued by the Maryland Secretary of State, or alternatively,
similar corporate and/or partnership documents, as applicable, for any
permitted assignee of Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. FUND'S REPRESENTATIONS AND WARRANTIES. Except as set forth on
SCHEDULE D hereto, Fund (solely in its capacity as the owner of the Fund Equity
Interests and with respect to the Properties related thereto and not in its
capacity as owner of the Bonds, as such term is defined in the Bond Purchase
Agreement (as hereinafter defined), hereby represents and warrants to Purchaser
as follows as of the Effective Date:
(a) Fund is a limited partnership, validly existing and in good standing
under the laws of the State of Delaware.
(b) Fund has the full legal capacity, right, power, and authority to
enter into and perform its obligations under this Agreement.
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(c) The general partner of Fund is Tempo-GP, Inc., which is a
corporation validly existing and in good standing under the laws of the
State of Delaware (the "General Partner"). The General Partner, acting on
behalf of the Fund, has the full legal capacity, right, power and authority
to enter into and perform, on behalf of the Fund, the Fund's obligations
under this Agreement.
(d) The execution, delivery and performance of this Agreement by Fund
have been duly authorized by all necessary partnership action and require no
action by, or in respect of, or filing with, any governmental body, agency
or official and do not contravene or constitute a default under any
provision of applicable law or regulation or of Fund's Certificate of
Limited Partnership, as amended to date, or Partnership Agreement, as
amended to date, or of any agreement, judgment, injunction, order, decree or
other instrument binding on Fund.
(e) The obligations imposed on Fund under this Agreement are enforceable
against Fund according to their terms, except as such enforceability may be
limited by the federal bankruptcy laws, similar laws relating to or
affecting creditors' rights generally and general principles of equity.
(f) Fund is the legal owner of the Fund Equity Interests, free and clear
of any lien, security interest or other encumbrance, and Fund has the right
to assign and transfer the Fund Equity Interests to Purchaser without the
consent of any third party, except such consents as have been obtained or
will be obtained on or prior to the Closing Date and such consents the
failure of which to obtain shall not have a material adverse effect upon the
value of the Fund Equity Interests or the Fund's ability to perform its
obligations under this Agreement. Fund has not assigned or transferred the
Fund Equity Interests, directly or indirectly, to any other person.
(g) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending or, to Fund's knowledge, threatened,
which have, or are likely to have, any material adverse effect on the
ability of Fund to perform its obligations under this Agreement.
(h) Fund has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief against Fund under any law relating to
bankruptcy or insolvency, nor has any such petition been filed against Fund.
No general assignment of Fund's property has been made for the benefit of
creditors, and no receiver, master, liquidator or trustee has been appointed
for Fund or any of its properties.
(i) Fund has made available to Purchaser for its review before the
execution of this Agreement all of the material information relating to the
Fund Equity Interests, the related Entities, the Operating Entities and the
Properties that was in Fund's possession as of the date (the "Due Diligence
Commencement Date") on which such material information was first made
available to prospective purchasers of the Fund Equity Interests, including
the Purchase Related Materials. All other material information relating to
the Fund Equity Interests, the related Entities, the Operating Entities and
the Properties that was in Fund's possession prior to the Effective Date was
made available to Purchaser.
(j) Fund has not engaged the services of any agent, broker or other
similar party in connection with the sale of the Fund Equity Interests
except the Agent whose fees and commission shall be paid by Fund in
accordance with a separate agreement between Fund, Realty and Agent.
(k) There is no default or event of default under any of the Bond
Documents relating to any of the Properties; PROVIDED, HOWEVER, that with
respect to the Operating Entities known as, and the Properties owned by,
Fountain Head Acquisition Corp. and Pine Club Phase II, Ltd., the foregoing
representation is limited to the Fund's knowledge. "Bond Documents" means
with respect to any issues of Bonds (as such term is defined in the Bond
Purchase Agreement dated as of the date hereof, among Fund, Realty and
Purchaser (the "Bond Purchase Agreement")), such Bonds and the corresponding
indenture, loan agreement, land use restriction agreement, mortgage,
Servicing Agreement (as such term is defined in the Bond Purchase
Agreement), and all other documents, certificates, and
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instruments executed and delivered in connection with such Bonds, and
Servicing Agreements, including but not limited to any and all amendments or
supplements to any of the foregoing.
(l) Intentionally Omitted.
(m) Fund has delivered to Purchaser true and complete copies of all
corporate and partnership documents relating to the Operating Entities, and
the Entities in which the Fund holds the Fund Equity Interests, together
with all amendments and modifications thereto, and there are no pending or,
to the best of Fund's knowledge threatened, actions against the Fund Equity
Interests or the related Entities or the Operating Entities by any
governmental entity or other third party; PROVIDED, HOWEVER, that with
respect to the Operating Entities known as, and the Properties owned by,
Fountain Head Acquisition Corp. and Pine Club Phase II, Ltd., the foregoing
representation is limited to the Fund's knowledge.
(n) Other than the Mortgage Loans (as defined in the Bond Purchase
Agreement), there are no outstanding debts or liabilities with respect to
the Properties, the Operating Entities, or the Entities relating to the Fund
Equity Interests other than trade payables incurred in the ordinary course
of business, none of which are in default; PROVIDED, HOWEVER, that with
respect to the Operating entities known as, and the Properties owned by,
Fountain Head Acquisition Corp. and Pine Club Phase II, Ltd., the foregoing
representation is limited to the Fund's knowledge.
(o) The Entities relating to the Fund Equity Interests, and the
Operating Entities are duly formed, validly existing and are authorized to
transact business in the applicable states in which their respective
Properties are located; PROVIDED, HOWEVER, that with respect to the
Operating Entities known as, and the Properties owned by, Fountain Head
Acquisition Corp. and Pine Club Phase II, Ltd., the foregoing representation
is limited to the Fund's knowledge.
(p) Fund has not received any notice, and is not otherwise aware, of any
governmental, judicial, or other action or claim by any person which is
pending or threatened against the Entities relating to the Fund Equity
Interests, or any Operating Entities, or any general partner of such
Entities or Operating Entities, or any of the Properties, any issuer of any
related Bonds with respect to any such Property or the trustee under any
indenture pursuant to which any related Bonds with respect to any such
Property are outstanding, or with respect to or affecting any of the related
Bond Documents; PROVIDED, HOWEVER, that with respect to the Operating
Entities known as, and the Properties owned by, Fountain Head Acquisition
Corp. and Pine Club Phase II, Ltd., the foregoing representation is limited
to the Fund's knowledge.
(q) Neither Fund nor the Entities relating to the Fund Equity Interests
nor the Operating Entities nor any of their affiliates have (i) taken any
action or failed to take any action, which, individually or in the
aggregate, would cause interest on any Bonds relating to a Property to be
includable, or (ii) received any notice from any third party, including
without limitation, the Internal Revenue Service, that any such interest
could be includable, in the federal gross income of the owners of such Bonds
(other than the Fund during the period of its ownership of any such Bonds);
PROVIDED, HOWEVER, that with respect to the Operating Entities known as, and
the Properties owned by, Fountain Head Acquisition Corp. and Pine Club Phase
II, Ltd., the foregoing representation is limited to the Fund's knowledge.
(r) Certain of the Entities and/or Operating Entities relating to the
Fund Equity Interests have and will have escrows or reserves (upon execution
of this Agreement and at Closing, respectively) for taxes, insurance, and
repairs or replacements as set forth in Schedule D hereto; and each of the
Operating Entities has set aside and will have set aside at Closing an
amount equal to its tenant security deposit liability under applicable state
law; PROVIDED, HOWEVER, that with respect to the Operating Entities known
as, and the Properties owned by, Fountain Head Acquisition Corp. and Pine
Club Phase II, Ltd., the foregoing representation is limited to the Fund's
knowledge.
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Section 3.2. REALTY'S REPRESENTATIONS AND WARRANTIES. Except as set forth on
SCHEDULE E hereto, Realty (solely in its capacity as owner of the Realty Equity
Interests and with respect to the Properties relating thereto, and not in its
capacity as servicer of the Mortgage Loans) represents and warrants to Purchaser
as follows as of the Effective Date:
(a) Realty is a Corporation validly existing and in good standing under
the laws of the State of Delaware.
(b) Realty has the full legal capacity, right, power, and authority to
enter into and perform its obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement by Realty
have been duly authorized by all necessary corporate action and require no
action by, or in respect of, or filing with, any governmental body, agency
or official and do not contravene or constitute a default under any
provision of applicable law or regulation or of Realty's articles of
incorporation or by-laws or of any agreement, judgment, injunction, order,
decree or other instrument binding on Realty.
(d) The obligations imposed on Realty under this Agreement are
enforceable against Realty according to their terms, except as such
enforceability may be limited by the federal bankruptcy laws, similar laws
relating to or affecting creditors' rights generally and general principles
of equity.
(e) Realty is the legal owner of the Realty Equity Interests, free and
clear of any lien, security interest or other encumbrance, and Realty has
the right to assign and transfer the Realty Equity Interests to Purchaser
without the consent of any third party, except such consents as have been
obtained or will be obtained on or prior to the Closing Date and such
consents the failure to obtain which would not have a material adverse
effect upon the value of the Realty Equity Interests or Realty's ability to
perform its obligations under this Agreement. Realty has not assigned or
transferred the Realty Equity Interests, directly or indirectly, to any
other person.
(f) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending or, to Realty's knowledge, threatened,
which have, or are likely to have, any material adverse effect on the
ability of Realty to perform its obligations under this Agreement.
(g) Realty has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief against Realty under any law relating to
bankruptcy or insolvency, nor has any such petition been filed against
Realty. No general assignment of Realty's property has been made for the
benefit of creditors, and no receiver, master, liquidator or trustee has
been appointed for Realty or any of its properties.
(h) Realty has made available to Purchaser for its review before the
execution of this Agreement all of the material information relating to the
Realty Equity Interests and the related Entities and Operating Entities and
the related Properties that was in Realty's possession as of the date (the
"Due Diligence Commencement Date") on which such material information was
first made available to prospective purchasers of the Realty Equity
Interests, including the Purchase Related Materials. All other material
information relating to the Realty Equity Interests, the related Entities
and Operating Entities and the related Properties that was in Realty's
possession prior to the Effective Date was made available to Purchaser.
(i) Realty has not engaged the services of any agent, broker or other
similar party in connection with the sale of the Realty Equity Interests
except for the Agent whose fees and commission shall be paid by Realty in
accordance with a separate agreement between Fund, Realty and Agent.
(j) There is no default or event of default under any Bond Documents
relating to any of the Properties relating to a Realty Equity Interest.
(k) Intentionally Omitted.
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(l) Realty has delivered to Purchaser true and complete copies of all
corporate and partnership documents relating to the Entities and Operating
Entities in which Realty holds Realty Equity Interests, directly or
indirectly, together with all amendments and modifications thereto, and
there are no pending or, to the best of Realty's knowledge, threatened,
actions against either the Realty Equity Interests or the related Entities
or Operating Entities by any governmental entity or other third party.
(m) Other than the Mortgage Loans, there are no outstanding debts with
respect to any Property, Entity or Operating Entity relating to a Realty
Equity Interest other than trade payables incurred in the ordinary course of
business, none of which are in default.
(n) The Entities and Operating Entities related to the Realty Equity
Interests are duly formed, validly existing and are authorized to transact
business in the applicable states in which their respective Properties are
located.
(o) Realty has not received any notice, and is not otherwise aware, of
any governmental, judicial, or other action or claim by any person which is
pending or threatened against any Entity or Operating Entity relating to a
Realty Equity Interest or any general partner of such an Entity or Operating
Entity, or any of the Properties relating to a Realty Equity Interest, any
issuer of any Bonds relating to any Property relating to the Realty Equity
Interests or the trustee under any indenture pursuant to which any Bonds
relating to any Property relating to the Realty Equity Interests are
outstanding, or with respect to or affecting any of the related Bond
Documents.
(p) Neither Realty nor any Entity or Operating Entity relating to a
Realty Equity Interest nor any of their affiliates have (i) taken any action
or failed to take any action, which, individually or in the aggregate, would
cause interest on any Bonds relating to any Property relating to a Realty
Equity Interest to be includable, or (ii) received any notice from any third
party, including without limitation the Internal Revenue Service, that any
such interest could be includable, in the federal gross income of the owners
of any such Bonds (other than the Fund during the period of its ownership of
the Bonds).
(q) Certain of the Entities and/or Operating Entities relating to the
Realty Equity Interests have and will have escrows or reserves (upon
execution of this Agreement and at Closing, respectively) for taxes,
insurance, and repairs or replacements as set forth on Schedule E hereto;
and each of such Operating Entities has set aside an amount equal to its
tenant security deposit liability under applicable state law.
Section 3.3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Except as set forth
on SCHEDULE F hereto, Purchaser hereby represents and warrants to Fund and
Realty as follows as of the Effective Date:
(a) Purchaser is a corporation, validly existing and in good standing
under the laws of Maryland.
(b) Purchaser has the full legal capacity, right, power, and authority
to enter into and perform its obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement by
Purchaser have been duly authorized by all necessary corporate action and
require no action by, or in respect of, or filing with, any governmental
body, agency or official and do not contravene or constitute a default under
any provision of applicable law or regulation or of Purchaser's Certificate
of Incorporation or by-laws or of any agreement, judgment, injunction,
order, decree or other instrument binding on Purchaser.
(d) The obligations imposed on Purchaser under this Agreement are
enforceable against Purchaser according to their terms, except as such
enforceability may be limited by the federal bankruptcy laws, similar laws
relating to or affecting creditors' rights generally and general principles
of equity.
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(e) There are no legal actions, suits, investigations or other legal or
administrative proceedings pending, or, to Purchaser's knowledge,
threatened, which have, or are likely to have, any material adverse effect
on the ability of the Purchaser to perform its obligations under this
Agreement.
(f) Purchaser has not filed any petition seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation
dissolution or similar relief against Purchaser under any law relating to
bankruptcy, or insolvency, nor has any such petition been filed against
Purchaser. No general assignment of Purchaser's property has been made for
the benefit of creditors, and no receiver, master, liquidator or trustee has
been appointed for Purchaser or any of its property.
(g) Purchaser is a sophisticated investor and has independently reviewed
such documents and other materials relating to the Equity Interests and
Properties as were made available to it and it deemed relevant and material,
including without limitation the Purchase Related Materials, and has
undertaken such other independent investigation as it deemed necessary or
desirable in connection with its purchase of the Equity Interests. Purchaser
has made its decision to buy the Equity Interests based upon its own
independent evaluation of the information set forth in Sections 3.1(i) and
3.2(h) of this Agreement and has not relied upon any oral or other written
statements, representations or information provided by Fund, Realty or Agent
or any officer, employee, agent or representative of Fund, Realty or Agent,
including (without limitation) the information contained in the Bid
Information and Detailed Information Package provided by Agent to Purchaser
(the "Bid Information Package"), other than those representations and
warranties expressly set forth in this Agreement.
(h) The Purchaser or its permitted assignee is purchasing the Equity
Interests in accordance with the terms hereof for its own account without a
view to any distribution thereof in violation of the Securities Act of 1933,
as amended (the "Securities Act"). The Purchaser or its permitted assignee
has been informed and understands that the Equity Interests have not been
registered pursuant to the provisions of Section 5 of the Securities Act and
must be held indefinitely unless such Equity Interests are subsequently
registered under the provisions of the Securities Act or an exemption from
such registration is available for the disposition of such Equity Interests.
(i) The Purchaser represents that it or its permitted assignee is an
"accredited investor" within the meaning of Rule 501(a) promulgated under
the Securities Act.
(j) The Purchaser acknowledges that each certificate representing an
interest in Fund Shares and Realty Shares shall bear a legend in or
substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR DISPOSED OF UNLESS THE REGISTRATION PROVISIONS OF THE SAID
ACT HAVE BEEN COMPLIED WITH OR UNLESS COMPLIANCE WITH SUCH PROVISIONS IS NOT
REQUIRED."
(i) Purchaser has not engaged the services of any agent, broker, or
other similar party, and is not otherwise liable for the payment of any
fees, commissions or other compensation, in connection with its purchase of
the Equity Interests.
Section 3.4. DISCLAIMER OF WARRANTIES AND REPRESENTATIONS. EXCEPT FOR THOSE
EXPRESSED IN SECTIONS 3.1 AND 3.2, NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, HAVE BEEN MADE BY FUND, REALTY OR AGENT OR BY ANYONE ACTING ON THEIR
BEHALF, INCLUDING, BUT WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE
FOREGOING, ANY WARRANTIES OR REPRESENTATIONS REGARDING (i) THE ACCURACY OF ANY
PROPERTY DESCRIPTION, (ii) THE CONDITION OF THE PROPERTIES, INCLUDING BUT NOT
LIMITED TO ANY ENVIRONMENTAL CONDITION, WHETHER LATENT OR OBSERVABLE, OR (iii)
THE ACCURACY, COMPLETENESS OR RELIABILITY OF
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ANY OF THE INFORMATION CONTAINED IN THE BID INFORMATION PACKAGE OR OF ANY REPORT
CONTAINED IN THE PURCHASE RELATED MATERIALS OR OTHERWISE FURNISHED OR MADE
AVAILABLE TO PURCHASER, INCLUDING (WITHOUT LIMITATION) ANY ENVIRONMENTAL
ASSESSMENT REPORT, APPRAISAL, OPERATING OR FINANCIAL STATEMENT, OR RENT ROLL.
FUND AND REALTY EXPRESSLY DISCLAIM ANY AND ALL REPRESENTATIONS AND WARRANTIES
EXCEPT FOR THOSE EXPRESSLY SET FORTH IN SECTIONS 3.1 AND 3.2. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL EQUITY INTERESTS SOLD TO
PURCHASER UNDER THIS AGREEMENT ARE SOLD, ASSIGNED AND TRANSFERRED "AS IS,"
WITHOUT RECOURSE, REPRESENTATION OR WARRANTY.
Section 3.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Fund, Realty and Purchaser in this Agreement shall
survive, in the case of those set forth in Section 3.1 and Section 3.2 hereof
solely for the purpose of effectuating the indemnification provisions contained
in Section 7.2 of the Bond Purchase Agreement, and in all cases for a period of
nine (9) months after the Closing Date; PROVIDED THAT, if the Closing does not
occur prior to April 1, 1998, the representations and warranties in this
Agreement shall survive for a period of one year after the Closing Date.
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.1. CONDITIONS TO PURCHASER'S OBLIGATIONS. Pursuant to the terms of
Section 4.3 hereof, Purchaser's obligation under this Agreement to purchase the
Equity Interests shall be contingent and specifically conditioned upon the
following:
(a) Fund and Realty shall have complied in all material respects with
all of the covenants, agreements and conditions required by this Agreement
to be complied with by Fund and Realty prior to or as of the Closing.
(b) All of the representations and warranties of Fund and Realty set
forth in this Agreement, except as set forth in SCHEDULES D and E hereto,
shall be true and correct at and as of the Closing in all material respects,
as though such representations and warranties were made at and as of the
Closing.
(c) There shall have been no material adverse change in the condition of
title to the Properties from the condition of title indicated in the title
commitments delivered to Purchaser as part of the Purchase Related
Materials.
(d) Fund and Realty shall have received all necessary consents and
approvals, if any, to effect the transactions contemplated by this
Agreement, and copies of all such consents and approvals shall have been
delivered to Purchaser; provided that notwithstanding the failure to obtain
any consent from the appropriate Bond issuer or indenture trustee with
respect to the transfers of Equity Interests hereunder corresponding to the
Property known as Park at Landmark Apartments or the Property known as
SunBrook Apartments, in the event of such failure, Purchaser agrees to
proceed hereunder in acquiring the ownership interests in the entities
owning such Equity Interests, and Fund and Realty agree to sell to Purchaser
such ownership interests; and further provided that notwithstanding the
failure to obtain the consent of the shareholders of Fountain Head
Acquisition Corp. or of the general partner of Pine Club Phase II, Ltd. with
respect to the transfers of the Fund Equity Interests in such entities,
Purchaser agrees to proceed hereunder in acquiring the other Equity
Interests and in consummating the transactions contemplated by the Bond
Purchase Agreement and Fund and Realty agree to proceed to sell the other
Equity Interests to Purchaser and to consummate the transactions
contemplated by the Bond Purchase Agreement and there shall be no purchase
price adjustment and the provisions of Section 5.5 hereof shall apply.
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(e) Fund shall have obtained the consent of the holders of the requisite
percentage of the issued and outstanding Assigned Benefit Certificates of
the limited partner of the Fund in order to consummate the sale of the Fund
Equity Interests as contemplated by this Agreement.
(f) All of the conditions precedent to Purchaser's obligations to
consummate the transactions contemplated by the Bond Purchase Agreement
shall have been satisfied (other than the condition that all of the
conditions to Purchaser's obligations to consummate the transactions
contemplated by this Agreement have been satisfied) and Fund and Realty are
ready, willing and able to comply with their obligations under, and to
consummate the transactions contemplated by, the Bond Purchase Agreement.
(g) None of the following events (each a "MATERIAL ADVERSE CHANGE")
shall have occurred during the period beginning on the Due Diligence
Commencement Date and ending on the Closing Date: (i) a substantial casualty
loss or environmental contamination affecting one or more of the Properties,
or (ii) the taking of a substantial portion of one or more of the Properties
under the power of eminent domain.
Section 4.2. CONDITIONS TO FUND'S AND REALTY'S OBLIGATIONS. Pursuant to the
terms of Section 4.3 hereof, Fund's obligation to sell Fund Equity Interests and
Realty's obligation to sell Realty Equity Interests under this Agreement shall
be contingent and specifically conditioned upon the following:
(a) Fund shall obtain the consent of the requisite percentage of the
issued and outstanding Assigned Benefit Certificates of the limited partner
of the Fund to consummate the sale of the Fund Equity Interests as
contemplated by this Agreement.
(b) Purchaser shall have complied in all material respects with all of
the covenants, agreements and conditions required by this Agreement to be
complied with by Purchaser prior to or as of the Closing.
(c) All of the representations and warranties of Purchaser set forth in
this Agreement, except as set forth in SCHEDULE F hereto, shall be true and
correct at and as of the Closing in all material respects, as though such
representations and warranties were made at and as of the Closing.
(d) All of the conditions to Fund's and Realty's obligations to
consummate the transactions contemplated by the Bond Purchase Agreement
shall have been satisfied (other than the condition that all of the
conditions to Fund's and Realty's obligations to consummate the transactions
contemplated by this Agreement have been satisfied) and Purchaser is ready,
willing and able to comply with its obligations under, and to consummate the
transactions contemplated by, the Bond Purchase Agreement.
Section 4.3. TERMINATION FOR FAILURE TO SATISFY CONDITIONS. If any of the
conditions precedent described in Section 4.1 (other than subsections (e) and
(g)) are not satisfied as of June 30, 1998, the Purchaser shall have the option
(i) to terminate this Agreement by giving notice thereof to Fund and Realty, in
which case the Fund Deposit and Realty Deposit and all interest earned thereon
shall be refunded to Purchaser and thereafter no party hereto shall have any
liability hereunder or (ii) to waive such condition and proceed to Closing. If
the condition precedent described in Section 4.1(g) is not satisfied as of the
Closing Date with respect to one or more Properties, Purchaser shall have the
option (i) to be relieved of its obligation to purchase the Equity Interests in
the Entity or the Operating Entity, as the case may be, which owns the Property
affected by such Material Adverse Change, in which case the pro rata share of
the Fund Deposit and Realty Deposit (based upon the same proportion as the
outstanding principal balance of the Bond or Bonds secured by such Property or
Properties bears to the total outstanding principal balance of all of the Bonds
being purchased pursuant to the Bond Purchase Agreement) and the interest earned
thereon allocable to the Equity Interest in the Entity or the Operating Entity,
as the case may be, which owns the Property affected by the Material Adverse
Change, shall be refunded to the Purchaser; PROVIDED THAT Purchaser's obligation
to purchase the remaining Equity Interests
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shall not be affected thereby, or (ii) to waive such condition and proceed to
Closing. If the condition precedent described in Sections 4.1(e) and 4.2(a) is
not satisfied as of June 30, 1998, as such date may be extended by mutual
agreement of the parties as set forth in Section 2.1 hereof, then Purchaser or
Fund shall have the option to terminate this Agreement by giving written notice
thereof to the other parties hereto, in which case the Fund Deposit and Realty
Deposit and the interest earned thereon shall be refunded to Purchaser, and Fund
shall pay to Purchaser the amount of any reasonable third party expenses (except
that any lender's or lender's counsel fees shall be deemed reasonable) and other
verifiable costs and expenses (including overhead costs), in each case incurred
by Purchaser in connection with this Agreement; PROVIDED, HOWEVER, that the
total amount that Fund shall be obligated to pay to Purchaser pursuant to this
sentence, together with all amounts payable by Fund pursuant to the third
sentence of Section 5.3 of the Bond Purchase Agreement, shall not exceed an
aggregate amount equal to $2,000,000, and thereafter no party hereto shall have
any further liability hereunder. If any of the conditions precedent described in
Sections 4.2(b), 4.2(c) or 4.2(d) (based on Purchaser's default in any
representation, warranty or covenant, in the case Section 4.2(d)) is not
satisfied as of June 30, 1998, then Fund and Realty shall have the option (i) to
terminate this Agreement by giving notice thereof to Purchaser, in which case
the Fund Deposit and all interest earned thereon may be retained by Fund, and
the Realty Deposit and all interest earned thereon may be retained by Realty, as
liquidated damages as provided in Article VI, and thereafter no party hereto
shall have any further liability hereunder or (ii) to waive such conditions and
proceed to Closing.
ARTICLE V
ADDITIONAL COVENANTS OF PARTIES
Section 5.1. OPERATING PROPERTIES BEFORE CLOSING. Until the Closing Date,
Fund and Realty shall continue to cause, to the extent that their Equity
Interests permit, the Operating Entities to operate the Properties owned by the
Operating Entities in a commercially reasonable manner consistent with past
practice and in compliance with the Bond Documents. From and after the Closing,
Fund and Realty shall have no further obligations with respect to the operation
of the Properties owned by the Operating Entities.
Section 5.2. CERTAIN PAYMENTS.
(a) If Purchaser exercises its option pursuant to Section 4.3 to
purchase an Equity Interest in an Entity which owns or is related to an
entity that owns a Property affected by a Material Adverse Change consisting
of a casualty to, or condemnation of, a Property, Purchaser shall receive a
credit against the Fund Purchase Price and the Realty Purchase Price equal
to the amount of the proceeds, if any, received by the Fund and Realty,
respectively (other than in their capacity as "Seller" or "Servicer" as such
terms are defined in the Bond Purchase Agreement) prior to the Closing Date
as a result of such Material Adverse Change, provided that the amount of the
credit afforded to Purchaser by this Section 5.2(a) shall not be in excess
of the portion of the sum of the Fund Purchase Price and Realty Purchase
Price allocated to such Property or Properties, which shall be deemed to be
that portion of the sum of the Fund Purchase Price and Realty Purchase Price
that bears the same proportion to the sum of the total Fund Purchase Price
and total Realty Purchase Price as the outstanding principal balance of the
Bond or Bonds secured by such Property or Properties bears to the total
outstanding principal balance of all of the Bonds. In such event, Fund's and
Realty's rights to any insurance proceeds shall be assigned to Purchaser
and, with respect to any and all payments received by Fund or Realty on or
after the Closing Date for which Purchaser is entitled to a credit under
this Section 5.2 on account of any Equity Interest (but as to which
Purchaser did not receive a credit because such payments were not received
prior to the Closing Date), Fund and Realty shall remit such payments to
Purchaser in immediately available funds promptly after receipt.
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(b) AMOUNTS IN RESPECT OF BANKRUPTCIES. With respect to amounts held
with respect to an Equity Interest by a bankruptcy court, bankruptcy
trustee, bankruptcy debtor-in-possession, receiver in foreclosure or similar
third party, Fund's and Realty's interest in same to the extent applicable
to the period on and after the Effective Date shall be assigned to Purchaser
and, if any portion thereof is received by Fund or Realty (other than in
their capacities as "Seller" and "Servicer," as such terms are defined in,
and pursuant to, the Bond Purchase Agreement), it shall be paid or credited
to Purchaser promptly after receipt; provided that the amount paid or
credited to Purchaser shall not be in excess of the portion of the sum of
the Fund Purchase Price and Realty Purchase Price allocated to such Property
or Properties which shall be deemed to be that portion of the sum of the
Fund Purchase Price and Realty Purchase Price that bears the same proportion
to the sum of the total Fund Purchase Price and total Realty Purchase Price
as the outstanding principal balance of the Bond or Bonds secured by such
Property or Properties bears to the total outstanding principal balance of
all of the Bonds.
(c) FURTHER ADJUSTMENTS. In the event any of the adjustments required to
be made under this Agreement is not determined at Closing, the parties shall
make such calculations and adjustments promptly after such adjustment can be
determined.
Section 5.3. ACCESS TO PROPERTIES. Subject to the last sentence of this
Section 5.3, Purchaser, its officers, employees, agents and contractors (all of
whom shall be considered "Purchaser" for purposes of this Section) shall not
enter any of the Properties before the Closing for any purpose without Fund's or
Realty's prior approval, not to be unreasonably withheld or delayed. If Fund or
Realty permits Purchaser to have access to a Property, (i) Purchaser shall not
interfere with the use and enjoyment of such Property by the tenants of such
Property or others and (ii) Purchaser shall indemnify, defend and hold Fund and
Realty harmless from and against any and all claims, liabilities, damages and
costs (including reasonable attorneys' fees) arising directly or indirectly from
Purchaser's entry onto such Property, except those which arise out of the gross
negligence or willful misconduct of Fund and Realty. Fund and Realty hereby
agree to deliver to Purchaser no later than December 15, 1997 a detailed list of
the personal property located at the Properties known as Park at Landmark
Apartments and SunBrook Apartments, which list shall be updated and reconfirmed
in all material respects at Closing. It is hereby agreed that prior to the
Closing Date, Purchaser will have access to the Properties known as Park at
Landmark Apartments and SunBrook Apartments for the purpose of conducting, at
its sole expense, marketing, engineering and environmental studies (to aid in
its operation of such Properties following the Closing Date) and to inspect the
personal property at said Properties; PROVIDED, HOWEVER, that neither the
results of the foregoing, nor Purchaser's satisfaction therewith, shall be
deemed to give rise to a condition precedent to Purchaser's obligation to
perform its obligations hereunder, except to the extent expressly provided in
Section 4.1; and provided further that, in the event that the value of the
personal property located at either of the Properties known as the Park at
Landmark Apartments or SunBrook Apartments on the Closing Date ("Value A") is
more than $25,000 less than the value of the respective personal property listed
on the schedule dated December 15, 1997 ("Value B"), then the Purchaser shall
receive a credit against the total of the sum of the Fund Purchase Price and the
Realty Purchase Price equal to the excess of either Value B over the related
Value A.
Section 5.4. CONFIDENTIALITY AGREEMENT. Purchaser previously executed a
confidentiality agreement (as amended from time to time, the "Confidentiality
Agreement") in which it agreed, among other things, to keep certain information
regarding the Equity Interests and Properties confidential. Purchaser shall
continue to be bound by the Confidentiality Agreement after the Effective Date,
and all of the terms and conditions of the Confidentiality Agreement are
incorporated herein by reference and shall continue in full force and effect.
Fund and Realty shall use reasonable efforts to enforce the terms and provisions
of each Confidentiality Agreement signed by an unsuccessful bidder for the Bonds
and/or Equity Interests.
Section 5.5. TRANSFER OF EQUITY. Fund and Realty agree to use all reasonable
efforts to effect the transfers of Equity Interests to Purchaser as contemplated
in this Agreement. In the event Fund cannot
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<PAGE>
obtain all consents, or otherwise effect any other requirements of transfer, at
or before Closing with respect to the Equity Interests in Fountain Head
Acquisition Corp. and/or the Equity Interests in Pine Club Phase II, Ltd., then
Fund, as the owner of the retained Equity Interests, agrees to act in accordance
with the directions of Purchaser (but not in violation of applicable law or any
document, agreement, instrument, judgment, decree, or order to which Fund is a
party or its assets are subject or by which Fund is bound, or requiring the
expenditure of any money) in voting, exercising control, or otherwise acting
with respect to such retained Equity Interests.
Section 5.6. RELEASE OF FUND AND REALTY. Except as set forth in Section 6.2
of this Agreement, Purchaser hereby releases and forever discharges Fund and
Realty, and their respective servants, directors, officers, employees,
successors, assigns and affiliates (all such persons being collectively referred
to as the "Related Persons"), of and from any and all causes of action, claims,
demands and remedies of whatsoever kind and nature that Purchaser has or may in
the future have against the Fund or Realty or any Related Persons, and in any
manner on account of, arising out of or related to the Equity Interests
purchased hereunder.
Section 5.7 TITLE INSURANCE. Promptly after the Effective Date, Purchaser
shall use its reasonable efforts to obtain, at its expense, policies of, or
commitments for, title insurance with respect to the Properties securing the
Bonds.
ARTICLE VI
REMEDIES UPON DEFAULT
Section 6.1. DEFAULT BY PURCHASER.
(a) DEFAULT BEFORE CLOSING. If (i) Purchaser shall fail to purchase the
Equity Interests in accordance with this Agreement for any reason, other
than after termination of this Agreement by Purchaser pursuant to Section
4.3 or pursuant to any other right of termination expressly provided herein
for Purchaser's benefit ("PURCHASER'S FAILURE TO CLOSE") or (ii) Purchaser
is ready, willing and able to purchase the Equity Interests but Purchaser
defaults in any material respect in the performance of any of its other
obligations under this Agreement or breaches in any material respect any of
its representations or warranties set forth herein, and such default or
breach is not cured or waived prior to Closing ("PURCHASER'S PRE-CLOSING
DEFAULT"), then in either case Purchaser agrees that it shall be liable to
Fund and Realty for damages incurred by Fund and Realty by reason of
Purchaser's Failure to Close or Purchaser's Pre-Closing Default but that the
amount of such damages is not ascertainable. Therefore, such damages shall
be agreed as a liquidated amount to be equal to the Fund Deposit and Realty
Deposit and all interest earned thereon. Forfeiture of the Fund Deposit and
the Realty Deposit and interest earned thereon shall be Fund's and Realty's
sole and exclusive remedy for the Purchaser's Failure to Close or for
Purchaser's Pre-Closing Default, Fund and Realty hereby waiving any and all
other remedies. Upon payment of the Fund Deposit and the Realty Deposit and
interest earned thereon to Fund and Realty pursuant to the preceding
sentence, this Agreement shall terminate and no party shall have any further
liability hereunder. If Fund and Realty elect to proceed to Closing
notwithstanding Purchaser's Pre-Closing Default, as provided in Section 4.3,
Purchaser's Pre-Closing Default shall be deemed waived.
(b) INDEMNIFICATION COVENANTS OF PURCHASER. In the event the Closing is
consummated, Purchaser shall indemnify, save and keep Fund and Fund's
partners and Realty and each of their respective shareholders, partners,
directors, officers, employees, and other affiliates and their respective
successors and assigns harmless against and from all liabilities, demands,
claims, actions, causes of action, assessments, losses, fines, penalties,
costs, damages and expenses, including reasonable attorneys' and expert
witness fees, alleged against, sustained or incurred by any such persons as
a result of or arising out of or by virtue of all debts, liabilities and
obligations arising from business done by Purchaser, transactions entered
into by Purchaser, and acts or omissions of Purchaser after the Closing with
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respect to any Equity Interests, either of the Properties known as Park at
Landmark Apartments and SunBrook Apartments and, to the extent that the
ownership of the related Equity Interests permits, each of the other
Properties, and the operation of any of the Entities, including the
Operating Entities relating to either of the properties known as Park at
Landmark Apartments and SunBrook Apartments and, to the extent that the
ownership of the related Equity Interests permits, each of the other
properties, and from the breach by Purchaser of any of the representations
or warranties of Purchaser or any of the covenants, obligations or
agreements set forth in this Agreement, or in the documents and instruments
executed in connection herewith, to be performed by Purchaser after the
Closing. The parties hereto agree that Purchaser's indemnification
obligations under this Section 6.1(b) shall include any federal or state
income tax liability of Fund or any of its partners with respect to the
period during which the Fund owned the Bonds secured by the Properties known
as SunBrook Apartments and the Park at Landmark Apartments, which tax
liability arises from the actions or omissions of Purchaser in connection
with the operation of such Property or Properties or the related Entities or
Operating Entities by Purchaser on or after the Closing Date.
(c) INDEMNIFICATION PROCEDURES. The indemnification procedures set forth
in Section 7.1(c) of the Bond Purchase Agreement shall be followed in
connection with any claim for indemnification under this Article VI.
Section 6.2. DEFAULT BY FUND AND/OR REALTY.
(a) DEFAULT BEFORE CLOSING. If (i) Fund and Realty fail to sell the
Equity Interests to Purchaser in accordance with this Agreement, other than
after termination of this Agreement by Fund and/or Realty pursuant to
Section 4.3 or pursuant to any other right of termination provided herein
for Fund's or Realty's benefit ("FUND'S/REALTY'S FAILURE TO CLOSE"), or (ii)
Fund and Realty are ready, willing and able to sell the Equity Interests to
Purchaser, but either of them defaults in any material respect in the
performance of any of its other respective obligations under this Agreement
or breaches in any material respect any of its respective representations or
warranties set forth herein, and such default or breach is not cured prior
to the Closing ("FUND'S/REALTY'S PRE-CLOSING DEFAULT"), Purchaser's sole and
exclusive remedy for Fund's/Realty's Failure to Close or Fund's/Realty's
Pre-Closing Default shall be to terminate this Agreement and receive a
refund of the Fund Deposit and the Realty Deposit and all interest earned
thereon, plus payment by Fund of all reasonable third party expenses (except
that any lender's counsel and other lender's fees shall be deemed
reasonable), but no other costs or expenses (including overhead costs),
incurred by Purchaser in connection with this Agreement; PROVIDED, HOWEVER,
that the total amount that Fund shall be obligated to pay to Purchaser
pursuant to this sentence, together with all amounts payable by Fund
pursuant to the first sentence of Section 7.2(a)(1) of the Bond Purchase
Agreement, shall not exceed an aggregate amount equal to $1,250,000 (unless
Purchaser shall have terminated this Agreement as a result of the failure of
the condition precedent to Purchaser's obligation to consummate the
transaction contemplated hereby set forth in Section 4.1(e) hereof, in which
case such amount shall be increased to $2,000,000 as set forth in Section
4.3 hereof). Upon Purchaser's receipt of the Fund Deposit and the Realty
Deposit and interest earned thereon, plus payment of all reasonable third
party expenses incurred by Purchaser in connection with this Agreement as
set forth, and subject to the limitations contained in the preceding
sentence, this Agreement shall terminate and none of the parties hereto
shall have any further liability hereunder. If Purchaser elects to proceed
to the Closing notwithstanding Fund's/Realty's Pre-Closing Default, as
provided in Section 4.3, Fund's/Realty's Pre-Closing Default shall be deemed
waived.
(b) INDEMNIFICATION COVENANTS OF FUND AND REALTY. (1) In the event the
Closing is consummated, the Fund and Realty shall indemnify, save and keep
Purchaser and its respective shareholders, partners, directors, officers,
employees, agents and other affiliates harmless against and from all
liabilities, demands, claims, actions, causes of actions, assessments,
losses, fines, penalties, costs, damages and expenses, including reasonable
attorneys' and expert witness fees, alleged against,
14
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sustained or incurred by such persons to the extent set forth, but only to
the extent set forth in Sections 7.2(b), 7.2(c), 7.2(d) and 7.2(e) of the
Bond Purchase Agreement.
(2) Fund and Realty agree to indemnify, save, and hold Purchaser and its
shareholders, partners, directors, employees, agents, and other affiliates
harmless from and against all liabilities, demands, claims, actions, causes of
action, judgments, decrees, assessments, losses, fines, penalties, costs,
damages, and expenses, including reasonable attorneys' and expert witness fees,
alleged against, sustained, or incurred by any of such persons or entities, or
any affiliated entity owning the Property known as Park at Landmark Apartments
or the Property known as SunBrook Apartments, due to facts, circumstances,
actions, or events, whether actual or alleged, occurring, existing, or arising
at any time prior to the Closing hereunder; provided, however, that the
foregoing indemnification obligations of Fund and Realty shall be subject to and
limited by the terms and provisions of Sections 7.2(b), 7.2(c), 7.2(d), and
7.2(e) of the Bond Purchase Agreement, including, in particular, but not without
limitation, the limitation on the aggregate amount for which Fund and Realty may
be held liable for any and all claims in connection with the transactions
contemplated hereby and by the Bond Purchase Agreement as set forth in Section
7.2(d) of the Bond Purchase Agreement; and further provided, that the foregoing
indemnification obligation shall apply only to such facts, circumstances,
actions, or events, whether actual or alleged, which first shall have become
known to Purchaser, and of which Purchaser shall have notified Fund and Realty
in writing, within nine (9) months after the Closing Date or, in the event that
the Closing does not occur prior to April 1, 1998, then which first shall have
become known to Purchaser, and of which Purchaser shall have notified Fund and
Realty in writing, within one (1) year after the Closing Date.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. NOTICES. Any notice, request, demand or other communication
required or permitted under this Agreement shall be given in writing and shall
be delivered or sent by registered or certified mail, return receipt requested
in a prepaid envelope, by overnight mail or courier, or by facsimile
transmission, to the address set forth below or such other addresses as such
party shall hereafter specify in writing in accordance with this Section:
If to Fund:
Mr. Ronald J. DiPietro
Dean Witter/Coldwell Banker Tax
Exempt Mortgage Fund, L.P.
2 World Trade Center
New York, New York 10048
Fax: 212-392-3123
If to Realty:
Mr. William B. Smith
Dean Witter Realty Inc.
2 World Trade Center
New York, New York 10048
Fax: 212-392-3123
In each case with a copy to:
Victor J. Paci
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Fax: 617-951-8736
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If to Purchaser:
Capital Apartment Properties, Inc.
Attention: Richard L. Kadish
11200 Rockville Pike, Suite 400
Rockville, Maryland 20852
Fax: 301-468-8391
with a copy to:
Harlan P. Cohen
Locke Purnell Rain Harrell (A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Fax: 214-740-8800
Such notice or other communication shall be deemed to have been given (i)
when delivered, if sent by registered or certified mail, facsimile transmission
or delivered personally, or (ii) on the business day following delivery to the
U. S. Postal Service or courier if sent by overnight mail or overnight courier.
Section 7.2. CLOSING EXPENSES. Except as otherwise provided herein, whether
or not the transactions contemplated hereunder are completed, Purchaser, Fund
and Realty shall each be responsible for the payment of its own closing expenses
and its expenses in negotiating and carrying out its obligations under this
Agreement, including without limitation the costs of its respective counsel.
Section 7.3. SEVERABILITY. Each part of this Agreement is intended to be
severable. If any term, covenant, condition or provision of this Agreement is
unlawful, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the remaining provisions of this Agreement,
which shall remain in full force and effect and shall be binding upon the
parties.
Section 7.4. HEADINGS. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision thereof.
Section 7.5. GOVERNING LAW. The parties agree that this Agreement shall be
construed, and the rights and obligations of the parties under the Agreement
shall be determined, in accordance with the laws of the State of New York,
without regard to its conflict of laws provisions.
Section 7.6. ASSIGNMENTS; BINDING EFFECT. The Purchaser shall not assign or
delegate any of its obligations under this Agreement without the express written
consent of Fund and Realty, but may assign any of its rights under this
Agreement to purchase the Fund Equity Interests and the Realty Equity Interests
without the written consent of Fund or Realty; PROVIDED THAT notwithstanding an
assignment pursuant to this Section 7.6 of any of the Purchaser's rights under
this Agreement to purchase the Fund Equity Interests and Realty Equity
Interests, the Purchaser shall not be relieved of its obligations under this
Agreement as a result thereof.
Section 7.7. SURVIVAL. Fund, Realty and Purchaser agree that the covenants
contained in this Agreement shall survive the Closing, except as otherwise
expressly provided herein, and shall be independently enforceable.
Section 7.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including any
addenda, attachments, exhibits and schedules referred to herein and attached
hereto, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes any and all prior agreements,
representations and understandings of the parties, written or oral, except for
the Bond Purchase Agreement and the Confidentiality Agreement, each of which is
incorporated herein and shall continue in full force and effect.
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Section 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
Section 7.10. CONSTRUCTION. Unless the context requires otherwise, singular
nouns and pronouns used herein shall be deemed to include the plural, and
pronouns of one gender shall be deemed to include the equivalent pronoun of the
other gender.
Section 7.11. WAIVER. No waiver by any party of another party's breach of
any term, covenant or condition contained in this Agreement shall be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement. In addition, no waiver by Fund or Realty or
Purchaser of any condition prior to Closing is enforceable unless in writing.
Section 7.12. CONSENTS AND APPROVALS. Wherever this Agreement requires or
permits the consent or approval of a party or provides that certain action may
not be taken unless another party otherwise agrees, each such consent, approval
or agreement shall be in writing, shall be signed by the party from whom the
consent, approval or agreement is sought and, unless otherwise provided herein,
may be withheld by such party in its sole discretion.
Section 7.13. TIME OF THE ESSENCE. Time shall be of the essence with respect
to the performance of the parties' obligations hereunder, the satisfaction of
all conditions to a party's obligations and all of the other provisions of this
Agreement.
Section 7.14. FURTHER ASSURANCES. Each party shall execute and deliver to
the other party such documents, instruments and agreements and shall use its
best efforts and take such other actions as may be necessary or reasonably
requested by the other party to satisfy or cause the satisfaction of all of the
conditions precedent to the other party's obligations hereunder and to
consummate the transactions contemplated herein or to confirm or effectuate the
sale of the Equity Interests.
Section 7.15. WAIVER OF JURY TRIAL. To the extent permitted by law, each
party hereto waives any right it may have to a trial by jury in any action or
proceeding to enforce this Agreement or otherwise relating to this Agreement,
whether such action or proceeding is instituted by Fund, Realty, Purchaser or
any other party.
Section 7.16. PROPERTY MANAGEMENT. Fund and Realty agree that, on and after
the Closing Date, Purchaser or its designee will become manager of the
Properties known as Park at Landmark Apartments and SunBrook Apartments.
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WITNESS the following signatures.
<TABLE>
<S> <C> <C>
FUND:
DEAN WITTER/COLDWELL
BANKER TAX EXEMPT
MORTGAGE FUND, L.P.
By: TEMPO-GP, Inc.,
its General Partner
By: -----------------------------------------
Title: ---------------------------------------
REALTY:
DEAN WITTER REALTY INC.
By: -----------------------------------------
Title: ---------------------------------------
PURCHASER:
CAPREIT ACQUISITION CORP.
By: -----------------------------------------
Richard L. Kadish, President
Title: ---------------------------------------
</TABLE>
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[Bingham Dana LLP Letterhead]
EXHIBIT D
December 29, 1997
Holders of Assigned Benefit Certificates of
Tempo-LP, Inc.
c/o Tempo-GP, Inc.
Two World Trade Center
New York, New York 10048
Re: Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P.
Ladies and Gentlemen:
In connection with the solicitation by Tempo-GP, Inc., the general partner
(the "General Partner") of Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund,
L.P. (the "Partnership"), of the consent of the holders of the Assigned Benefit
Certificates of the limited partner of the Partnership (the "ABC Holders") to
the sale by the Partnership of substantially all of the Partnership's assets and
the subsequent dissolution and liquidation of the Partnership (the
"Transaction"), and pursuant to Section 10.03 of the Partnership's Agreement of
Limited Partnership dated as of August 20, 1986 (the "Partnership Agreement"),
we have been requested by the General Partner to provide our opinion to the ABC
Holders as to the consequences of such consent with respect to certain matters
under the Delaware Revised Uniform Limited Partnership Act and the Internal
Revenue Code of 1986, as amended. Each capitalized term used but not otherwise
defined herein shall have the respective meaning ascribed to that term in the
Partnership Agreement.
For the purposes of this opinion, we have examined and relied upon the
following instruments:
(i) the Partnership Agreement; and
(ii) such other instruments and documents as we have deemed necessary or
appropriate for the purposes of this opinion.
In our examination we have assumed the genuineness of all signatures, the
conformity to the originals of all documents reviewed by us as copies, the
authenticity and completeness of all original documents reviewed by us in
original or copy form and the capacity, power, legal competence (as to
individuals) and authority of each party executing a document to so execute such
document. As to all facts material to the opinions set forth below (including
factual conclusions and characterizations) we have relied entirely upon
representations contained in the documents examined for the purposes of this
opinion and made by representatives of the Partnership and the General Partner
and have assumed, without independent inquiry, the accuracy of such
representations.
This opinion is limited solely to the Delaware Revised Uniform Limited
Partnership Act, as applied by courts located in Delaware, and the Internal
Revenue Code of 1986, as amended, to the extent that the same may be applicable,
and does not cover matters arising under the laws of any other jurisdiction. No
opinion is given as to the choice of law or internal substantive rules of law
that any tribunal may apply to the transactions referred to herein. The opinions
set forth herein are based upon applicable law as of the date of this opinion,
and we assume no obligation to update any advice set forth herein to reflect any
facts or circumstances that may hereafter come to our attention or any changes
in law that may hereafter occur.
With respect to our advice concerning the effect of the Transaction on the
Partnership's status as a partnership for federal income tax purposes as set
forth in paragraph (i) below, it is not possible to predict with certainty how
federal income tax law will develop or how the courts will decide various issues
if they are litigated. In addition, our opinion is not binding on the Internal
Revenue Service (the "IRS") or the courts. Furthermore, changes in tax law may
be made as a result of court decisions, regulatory actions, or new enactments,
and these changes may be applied retroactively to the Transaction. We undertake
no responsibility to advise you of any such changes or of changes in facts of
which we may become aware, and disclaim any such responsibility. Accordingly,
even as to those issues on which we have given our opinion,
<PAGE>
there can be no assurance that the law will not change, possibly with
retroactive effect, or that the IRS will not raise a challenge or that the IRS
will not ultimately succeed in such challenge. No opinion is given as to any
state, local, or foreign consequences of the Transaction on the Partnership's
status as a partnership for federal income tax purposes.
With respect to our opinion concerning the personal liability of the ABC
Holders as set forth in paragraph (ii) below, very little authority exists under
the Delaware Revised Uniform Limited Partnership Act and its predecessor as to
what constitutes participation in control of partnership business. Under the
Partnership Agreement, the limited partner of the Partnership, acting at the
direction of the ABC Holders, may approve or disapprove the sale of all or
substantially all of the Partnership's assets in one transaction or in a related
series of transactions and the dissolution of the Partnership. While neither the
existence nor the exercise of such rights should constitute participation in
control of the business of the Partnership and the Delaware Revised Uniform
Limited Partnership Act indicates that consenting to the sale of any asset or
assets of a limited partnership and the dissolution and winding up of a limited
partnership does not constitute participation in the control of the business of
the Partnership, in the absence of direct precedents, the matter is not free
from doubt and it is possible that a court could disagree with our opinion.
Based upon and subject to the foregoing, it is our opinion that:
(i) Assuming that the Partnership is taxable as a partnership, as
defined in Sections 7701(a)(2) and 761(a) of the Internal Revenue Code of
1986, as amended, and not as an association taxable as a corporation, the
status of the Partnership as a partnership for federal income tax purposes
will not be materially affected as a result of the Transaction, except as
set forth in clause (iii) below.
(ii) Assuming the ABC Holders are treated as limited partners of a
partnership, a limited partner is not liable for the obligations of a
limited partnership unless he or she participates in the control of the
business of the Partnership. Consenting to the sale of the assets of the
Partnership and the dissolution and winding up of the Partnership should not
constitute participation in the control of the business of the Partnership.
As a result, the ABC Holders should not be treated as having any liability
as a general partner with respect to the liabilities or obligations of the
Partnership as a result of the ABC Holders' consent to the Transaction or
the consummation of the Transaction, except for liability imposed by the
Delaware Revised Uniform Limited Partnership Act for the amount of the
distribution to each ABC Holder upon dissolution and liquidation of the
Partnership if such ABC Holder knew at the time of such distribution that,
after giving effect to such distribution, the liabilities of the Partnership
exceed the fair value of the assets of the Partnership, provided that such
liability terminates three years after the date of such distribution.
(iii) The consummation of the Transaction will result in the dissolution,
liquidation and termination of the Partnership.
This opinion is rendered to you for your benefit and may not be delivered
to, or relied upon by, any other party without our prior written consent and may
not be relied upon by you in connection with any other transaction.
Very truly yours,
/s/ BINGHAM DANA LLP
---------------------------------------------
BINGHAM DANA LLP
2
<PAGE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
ASSIGNED BENEFIT CERTIFICATE HOLDER CONSENT FORM
The undersigned by signing below hereby represents and warrants to and for the
benefit of Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P. (the
"Partnership") and Tempo -- GP, Inc. (the "General Partner") as follows:
(i) the undersigned has, if the undersigned is a natural person, the capacity,
or, if the undersigned is not a natural person, the legal power and authority,
to execute this Consent Form, and this Consent Form is valid and binding upon
the undersigned;
(ii) the execution and delivery of this Consent Form do not and will not violate
or conflict with any law, regulation, or judgment applicable to the undersigned
or any contract to which the undersigned is a party, or, if the undersigned is
not a natural person, any organizational document of the undersigned;
(iii) if the undersigned is not a natural person, it is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
organization; and
(iv) the undersigned has been provided with a copy of the Information Statement
of Tempo -- GP, Inc. dated December 29, 1997 (the "Information Statement") and
has carefully reviewed the same.
The undersigned also acknowledges that (i) in the event the Sale (as defined in,
and more fully described in, the Information Statement) is not consummated for
any reason, the General Partner may agree to a Substitute Sale (as defined in,
and more fully described in, the Information Statement) in accordance with the
terms and conditions set forth in the Information Statement, and (ii) after
consummation of the Sale or a Substitute Sale described in the Information
Statement, the Partnership will dissolve, liquidate and terminate, as set forth
in the Information Statement (the "Dissolution").
This Consent Form may be withdrawn by the undersigned by written notice received
by the General Partner not later than the close of business on the last day on
which Consent Forms may be delivered to the General Partner as stated in the
Information Statement.
IMPORTANT -- THIS CONSENT FORM MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
<PAGE>
PLEASE MARK
/X/ AS IN THIS
EXAMPLE
<TABLE>
<S> <C>
THIS CONSENT IS BEING SOUGHT BY THE BOARD OF DIRECTORS OF TEMPO-GP, INC., WITHHOLDS
THE GENERAL PARTNER OF DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P. CONSENTS CONSENT ABSTAINS
TO FROM FROM
The undersigned, being a holder of the Assigned Benefit Certificates (the
"ABCs") of Tempo-LP, Inc., a Delaware corporation and the limited partner of the / / / / / /
Partnership, hereby (CHECK ONE BOX ONLY):
the sale of the Partnership's assets pursuant to the Sale, or a Substitute Sale, and the Dissolution,
substantially on such terms as set forth in the Information Statement, with such changes therein as the General Partner
may, in its discretion, determine necessary or appropriate and in the best interests of the
ABC Holders (as defined in the Information Statement), so long as such changes do not alter the
terms of the Transaction (as defined in the Information Statement) from the description thereof in the Information
Statement in a manner that is material and adverse to the ABC Holders.
THIS CONSENT FORM REVOKES ALL PRIOR CONSENT FORMS GIVEN BY THE UNDERSIGNED AND, WHEN PROPERLY EXECUTED, WILL BE GIVEN
EFFECT BY TEMPO-LP, INC. ON BEHALF OF THE LIMITED PARTNERSHIP INTERESTS ASSIGNED TO THE UNDERSIGNED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, TEMPO-LP, INC. WILL GIVE
EFFECT TO THIS CONSENT BY CONSENTING TO THE PROPOSAL ON BEHALF OF THE LIMITED PARTNERSHIP
INTERESTS ASSIGNED TO THE UNDERSIGNED.
Dated _________________, 1998
PLEASE SIGN NAME EXACTLY AS IT APPEARS ON THE PARTNERSHIP'S
RECORDS. IF ABCS ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND
OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD INDICATE
THE CAPACITY IN WHICH THEY SIGN. AN AUTHORIZED OFFICER MAY
SIGN ON BEHALF OF A CORPORATION AND SHOULD INDICATE THE NAME
OF THE CORPORATION AND HIS OR HER CAPACITY.
____________________________________________________________
Signature
____________________________________________________________
Signature if held jointly
PLEASE MARK, DATE AND RETURN THIS CONSENT FORM PROMPTLY AND NO LATER THAN JANUARY 30, 1998
</TABLE>
