SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------
DAVIDSON GROWTH PLUS, L.P.
(Name of Subject Issuer)
DGP ACQUISITION, L.L.C.
INSIGNIA FINANCIAL GROUP, INC.
IB HOLDING, INC.
RIVERDALE INVESTORS CORP., INC.
CARL C. ICAHN
(Bidders)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
NONE
(Cusip Number of Class of Securities)
----------
JOHN K. LINES, ESQ.
GENERAL COUNSEL AND SECRETARY
INSIGNIA FINANCIAL GROUP, INC.
ONE INSIGNIA FINANCIAL PLAZA
GREENVILLE, SOUTH CAROLINA 29602
(803) 239-1675
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
----------
Copy to:
John A. Healy, Esq. Keith L. Schaitkin, Esq.
Robert E. King, Jr., Esq. Gordon Altman Butowsky
Rogers & Wells Weitzen Shalov & Wein
200 Park Avenue 114 W. 47th Street, 21st Floor
New York, New York 10166 New York, New York 10036
(212) 878-8000 (212) 626-0838
----------
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation*: $2,723,760.00 Amount of Filing Fee: $544.75
- --------------------------------------------------------------------------------
* For purposes of calculating the fee only. This amount assumes the
purchase of 11,349 units of limited partnership interest (the "Units")
of the subject partnership for $240.00 per Unit. The amount of the
filing fee, calculated in accordance with Rule 0-11(d) under the
Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate of the cash offered by the bidder.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
- --------------------------------------------------------------------------------
Index to Exhibits Located at Page 6
<PAGE>
SCHEDULE 14D-1
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Davidson Growth Plus, L.P., a
Delaware limited partnership (the "Partnership"). The address of the
Partnership's principal executive offices is One Insignia Financial Plaza, P.O.
Box 1089, Greenville, South Carolina 29602.
(b) This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates
to an offer by DGP Acquisition, L.L.C., a Delaware limited liability company
(the "Purchaser"), to purchase up to 11,349 of the outstanding units of limited
partnership interest (the "Units") of the Partnership at $240.00 per Unit, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 8, 1995 (the "Offer to Purchase") and the
related Assignment of Partnership Interest (which, together with any supplements
or amendments, collectively constitute the "Offer"), copies of which are filed
as Exhibits (a)(2) and (a)(3) hereto, respectively. Capitalized terms used but
not defined herein have the meanings ascribed to them in the Offer to Purchase.
The information set forth in the Offer to Purchase under "Introduction" is
incorporated herein by reference.
(c) The information set forth in the Offer to Purchase under "Introduction"
and in Section 13 ("Background of the Offer") is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, Insignia
Financial Group, Inc. ("Insignia"), IB Holding, Inc. ("Holding"), Riverdale
Investors Corp., Inc. ("Riverdale"), and Carl C. Icahn ("Icahn"). The
information set forth in the Offer to Purchase under "Introduction," in Section
11 ("Certain Information Concerning the Purchaser, Insignia, Riverdale and
Highcrest") and in Schedules I and II to the Offer to Purchase is incorporated
herein by reference.
(e)-(f) During the last five years, none of the Purchaser, Insignia,
Holding, Riverdale, Icahn or, to the best of their knowledge, any of the persons
listed in Schedules I and II to the Offer to Purchase (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining further violations of or prohibiting
activities subject to federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in (i) the Offer to Purchase in Section
10 ("Conflicts of Interest and Transactions with Affiliates") and in Section 11
("Certain Information Concerning the Purchaser, Insignia, Riverdale and
Highcrest") and (ii) the agreement (the "Insignia/MAE Agreement") dated August
13, 1993, between Insignia and Metropolitan Asset Enhancement, L.P., a copy of
which is filed as Exhibit (c)(2) hereto, is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the Offer to Purchase in Section 10
("Conflicts of Interest and Transactions with Affiliates") and in Section 12
("Source of Funds") is incorporated herein by reference.
(c) Not applicable.
2
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER.
(a)-(b), (e) The information set forth in the Offer to Purchase in Section
8 ("Future Plans of the Purchaser") is incorporated herein by reference.
(c) The information set forth in the Offer to Purchase in Section 8
("Future Plans of the Purchaser") and in Section 10 ("Conflicts of Interest and
Transactions with Affiliates") is incorporated herein by reference.
(d) Not applicable.
(f)-(g) The information set forth in the Offer to Purchase in Section 7
("Effects of the Offer") is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Offer to Purchase under "Introduction"
and in Section 11 ("Certain Information Concerning the Purchaser, Insignia,
Riverdale and Highcrest") is incorporated herein by reference.
(b) The information set forth in the Offer to Purchase under "Introduction"
and in Section 11 ("Certain Information Concerning the Purchaser, Insignia,
Riverdale and Highcrest") is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in (i) the Offer to Purchase under "Introduction"
and in Section 11 ("Certain Information Concerning the Purchaser, Insignia,
Riverdale and Highcrest") and (ii) the Operating Agreement of the Purchaser, a
copy of which is filed as Exhibit (c)(1) hereto, is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under "Introduction" and
in Section 16 ("Fees and Expenses") is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase in Section 11 ("Certain
Information Concerning the Purchaser, Insignia, Riverdale and Highcrest") is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(d) The information set forth in the Offer to Purchase under
"Introduction" and in Section 15 ("Certain Legal Matters") is incorporated
herein by reference.
(e) None.
3
<PAGE>
(f) The information set forth in the Offer to Purchase and the related
Assignment of Partnership Interest, copies of which are filed as Exhibits (a)(2)
and (a)(3) hereto, respectively, is incorporated herein by reference in its
entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Summary Advertisement, dated December 8, 1995.
(a)(2) Offer to Purchase, dated December 8, 1995.
(a)(3) Assignment of Partnership Interest and related Instructions.
(a)(4) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(b) Not applicable.
(c)(1) Operating Agreement, dated December 7, 1995, by and among the
Purchaser, Holding, Riverdale, Insignia and Highcrest Investors
Corporation.
(c)(2) Insignia/MAE Agreement, dated August 13, 1993, between
Insignia and Metropolitan Asset Enhancement, L.P.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(z)(1) Power of Attorney granted by Carl C. Icahn, dated November 16, 1995.
4
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 8, 1995
DGP ACQUISITION, L.L.C.
By: IB Holding, Inc.,
Manager
By: /s/ JEFFREY L. GOLDBERG
----------------------------
Jeffrey L. Goldberg
President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
----------------------------
Frank M. Garrison
Executive Managing Director
IB HOLDING, INC.
By: /s/ JEFFREY L. GOLDBERG
----------------------------
Jeffrey L. Goldberg
President
RIVERDALE INVESTORS CORP., INC.
By: /s/ ROBERT J. MITCHELL
----------------------------
Robert J. Mitchell
Vice President
CARL C. ICAHN*
*By: /s/ THEODORE ALTMAN
----------------------------
Theodore Altman
Attorney-in-Fact
5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1) Summary advertisement, dated December 8, 1995.
(a)(2) Offer to Purchase, dated December 8, 1995.
(a)(3) Assignment of Partnership Interest and related Instructions.
(a)(4) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(c)(1) Operating Agreement, dated December 7, 1995, by and among the
Purchaser, Holding, Riverdale, Insignia and Highcrest Investors
Corporation.
(c)(2) Insignia/MAE Agreement, dated August 13, 1993,
between Insignia and Metropolitan Asset
Enhancement, L.P.
(z)(1) Power of Attorney granted by Carl C. Icahn, dated November 16, 1995.
6
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Units. The Offer is being made solely by the Offer to Purchase dated
December 8, 1995 and the related Assignment of Partnership Interest and is being
made to all holders of Units. The Purchaser is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to any valid state statute. If the Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of Units pursuant
thereto, the Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Units in such state. In any jurisdiction where
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
UP TO 11,349 UNITS OF LIMITED PARTNERSHIP INTEREST
OF
DAVIDSON GROWTH PLUS, L.P.
AT
$240.00 NET PER UNIT
BY
DGP ACQUISITION, L.L.C.
THE OFFER IS NOT CONDITIONED UPON FINANCING OR UPON ANY MINIMUM AGGREGATE
NUMBER OF UNITS BEING TENDERED.
DGP Acquisition, L.L.C., a Delaware limited liability company (the
"Purchaser"), is offering to purchase up to 11,349 of the outstanding units of
limited partnership interest ("Units") of Davidson Growth Plus, L.P., a Delaware
limited partnership (the "Partnership"), at a purchase price of $240.00 per
Unit, net to the seller in cash, without interest, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated December 8, 1995 and in
the related Assignment of Partnership Interest (which, together with any
supplements or amendments thereto, collectively constitute the "Offer"). As more
fully described in the Offer to Purchase, the Purchaser is an affiliate of the
managing general partner of the Partnership.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD, AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON MONDAY, JANUARY 8, 1996,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Purchaser is making the Offer for investment purposes. Although the
Purchaser does not intend to change current management or the operation of the
Partnership and has no current plans for any extraordinary transaction involving
the Partnership, these plans could change in the future.
Limited Partners who tender their Units in response to the Offer will not
be obligated to pay any commissions or partnership transfer fees. A Limited
Partner may tender any or all of the Units owned by that Limited Partner;
provided, however, that in order for a partial tender to be valid, after the
sale of Units pursuant to the Offer the Limited Partner must continue to hold at
least five Units. Tenders of fractional Units will not be permitted, except by a
Limited Partner who is tendering all of the Units owned by that Limited Partner.
<PAGE>
If more than 11,349 Units are validly tendered and not properly withdrawn
on or prior to the Expiration Date, the Purchaser will, upon the terms and
subject to the conditions of the Offer, accept for payment and pay for an
aggregate of 40% of the Units so tendered, pro rata according to the number of
Units validly tendered by each Limited Partner and not properly withdrawn on or
prior to the Expiration Date, with appropriate adjustments to avoid (i)
purchases of fractional Units and (ii) purchases that would violate Section 12.1
of the Partnership Agreement (which generally requires that a Limited Partner
who sells less than all of its Units must continue to own a minimum of five, or
in some instances two, Units). If the number of Units validly tendered and not
properly withdrawn on or prior to the Expiration Date is less than or equal to
11,349 Units, the Purchaser will purchase all Units so tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment pursuant to the Offer, and thereby purchased, validly tendered Units
if, as and when the Purchaser gives verbal or written notice to the Depositary
(as defined in the Offer to Purchase) of the Purchaser's acceptance for payment
of those Units pursuant to the Offer. A tendering beneficial owner of Units
whose Units are owned of record by an Individual Retirement Account or other
qualified plan will not receive direct payment of the Purchase Price; rather,
payment will be made to the custodian of such account or plan. Upon the terms
and subject to the conditions of the Offer, payment for Units accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering Limited
Partners for the purpose of receiving payments from the Purchaser and
transmitting such payments to Limited Partners whose Units have been accepted
for payment. In all cases, payment for Units purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of a properly completed
and duly executed Assignment of Partnership Interest (or facsimile thereof) and
any other documents required by the Assignment of Partnership Interest. Under no
circumstance will interest on the purchase price for Shares be paid, regardless
of any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, January 8, 1996, unless and until the Purchaser, in its sole discretion,
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Purchaser, shall expire. The Purchaser
expressly reserves the right, at any time and from time to time, to extend the
period of time during which the Offer is open for any reason, including the
occurrence of any of the events specified in Section 14 of the Offer to
Purchase, by giving verbal or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement to be made no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Tenders of Units made pursuant to the Offer are irrevocable, except that
Units tendered pursuant to the Offer may be withdrawn at any time on or prior to
the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
February 6, 1996. For withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover of the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Units
to be withdrawn and must be signed by the person(s) who signed the Assignment of
Partnership Interest in the same manner as the Assignment of Partnership
Interest was signed. Any Units properly withdrawn will be deemed not validly
tendered for purposes of the Offer. Withdrawn Units may be retendered, however,
at any time prior to the Expiration Date.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Offer to Purchase and the Assignment of Partnership Interest are being
mailed by the Purchaser to the persons shown by the Partnership's records to
have been Limited Partners or (in the case
2
<PAGE>
of Units owned of record by Individual Retirement Accounts and qualified plans)
beneficial owners of Units as of October 1, 1995 (the last date on which such
persons were admitted to the Partnership as Limited Partners), as well as to
those persons who the Partnership knows are transferees of Units but who have
not yet been admitted to the Partnership as Limited Partners.
THE OFFER TO PURCHASE AND THE RELATED ASSIGNMENT OF PARTNERSHIP INTEREST
CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY AND IN THEIR
ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth below. Requests for copies
of the Offer to Purchase and the related Assignment of Partnership Interest may
be directed to the Information Agent, and copies will be furnished promptly at
the Purchaser's expense. The Purchaser will not pay any fees or commissions to
any broker or dealer or any other person (other than the Information Agent and
the Depositary) in connection with the solicitation of tenders of Units pursuant
to the Offer.
The Information Agent for the Offer is:
[BEACON HILL PARTNER LOGO]
90 Broad Street
20th Floor
New York, New York 10004
(800) 755-5001
(Toll Free)
DECEMBER 8, 1995
3
Offer to Purchase for Cash
Up to 11,349 Units of Limited Partnership Interest
in
Davidson Growth Plus, L.P.
for
$240.00 Net Per Unit
by
DGP Acquisition, L.L.C.
- ------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 8, 1996,
UNLESS THE OFFER IS EXTENDED.
- ------------------------------------------------------------------------------
IMPORTANT
DGP Acquisition, L.L.C., a Delaware limited liability company (the
"Purchaser"), is offering to purchase up to 40% of the outstanding units of
limited partnership interest ("Units") in Davidson Growth Plus, L.P., a Delaware
limited partnership (the "Partnership"), at a purchase price of $240.00 per Unit
(the "Purchase Price"), net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). The Purchaser
is an affiliate of the Managing General Partner (as defined herein) of the
Partnership.
Limited Partners are urged to consider the following factors:
o The Purchaser and the Managing General Partner are affiliates of
Insignia Financial Group, Inc. ("Insignia") and are both under common
control.
o The net asset value per Unit most recently estimated by the Managing
General Partner was $474.00 as of December 31, 1994 (which does not
reflect a reduction for the February 1995 cash distribution of $11.77
per Unit made out of 1994 operating cash flow, which cash was
reflected on the December 31, 1994 balance sheet), and the liquidation
value per Unit (the "Estimated Liquidation Value") estimated by the
Purchaser (which is an affiliate of the Managing General Partner) is
$424.41. The Purchaser (which is an affiliate of the Managing General
Partner) does not believe, however, that either the Managing General
Partner's net asset value estimate or the Estimated Liquidation Value
represents a fair estimate of the market value of a Unit, primarily
due to the fact that these estimates do not take into account timing
considerations and legal and other expenses that would be incurred in
connection with a liquidation of the Partnership. See Section 13.
Accordingly, the Purchaser does not believe that these estimates
should be viewed as representative of an amount a Limited Partner can
realistically expect to obtain for a Unit.
o The Purchaser (which is an affiliate of the Managing General Partner)
is making the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser (which is an
affiliate of the Managing General Partner) to purchase Units at a low
price and the desire of the Limited Partners to sell their Units at a
high price.
o If the Purchaser is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser (which is an affiliate of
the Managing General Partner) will have the right to vote those Units
and thereby significantly influence all voting decisions with respect
to the Partnership, including decisions concerning liquidation,
amendments to the Partnership Agreement, and removal and replacement
of the General Partners.
The Offer is not conditioned upon financing or upon any minimum aggregate
number of Units being tendered.
Any Limited Partner desiring to tender Units should complete and sign the
Assignment of Partnership Interest or a facsimile thereof in accordance with the
Instructions in the Assignment of Partnership Interest and mail or deliver the
signed Assignment of Partnership Interest to the Depositary. A Limited Partner
may tender any or all of the Units owned by that Limited Partner; provided,
however, that in order for a partial tender to be valid, after the sale of Units
pursuant to the Offer the Limited Partner must continue to hold at least five
Units. Tenders of fractional Units will not be permitted, except by a Limited
Partner who is tendering all of the Units owned by that Limited Partner.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at the address and telephone numbers set forth below and
on the back cover of this Offer to Purchase. No soliciting dealer fees or other
payments to brokers for tenders are being paid by the Purchaser (which is an
affiliate of the Managing General Partner).
------------------------------
For More Information or for Further Assistance Please Call:
Beacon Hill Partners, Inc.
(800) 755-5001
December 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION................................................................ 1
Some Factors to be Considered by Limited Partners...................... 1
The Purchaser; Affiliation With the Managing General Partner........... 3
The Purchaser's Reasons for the Offer.................................. 3
Riverdale's Recent Affiliation with Insignia........................... 4
Certain Tax Considerations............................................. 4
Holding Periods of Properties; Alternatives............................ 4
Conditions............................................................. 4
Distributions.......................................................... 4
Outstanding Units...................................................... 5
THE OFFER................................................................... 5
Section 1. Terms of the Offer; Expiration Date; Proration.............. 5
Section 2. Acceptance for Payment and Payment for Units................ 6
Section 3. Procedure for Tendering Units............................... 7
Valid Tender................................................... 7
Signature Requirements......................................... 7
Delivery of Assignment of Partnership Interest................. 7
Appointment as Proxy........................................... 7
Assignment of Interest in Future Distributions................. 8
Determination of Validity; Rejection of Units; Waiver of
Defects; No Obligation to Give Notice of Defects............... 8
Backup Federal Income Tax Withholding.......................... 8
FIRPTA Withholding............................................. 8
Section 4. Withdrawal Rights........................................... 9
Section 5. Extension of Tender Period; Termination; Amendment.......... 9
Section 6. Certain Federal Income Tax Matters.......................... 10
Section 7. Effects of the Offer........................................ 12
Limitations on Resales......................................... 12
Effect on Trading Market; Registration Under Section 12(g)
of the Exchange Act.......................................... 12
Control of Limited Partner Voting Decisions by Purchaser;
Effect of Relationship with Managing General Partner......... 13
Section 8. Future Plans of the Purchaser............................... 13
Section 9. Certain Information Concerning the Partnership.............. 14
General........................................................ 14
Holding Periods of Partnership Properties...................... 15
General Policy Regarding Sales of Partnership Properties....... 15
Selected Financial and Property-Related Data................... 15
Cash Distribution History...................................... 18
Operating Budgets of the Partnership........................... 18
Section 10. Conflicts of Interest and Transactions with Affiliates..... 19
Conflicts of Interest With Respect to the Offer................ 19
Voting by the Purchaser........................................ 19
Financing Arrangements......................................... 20
Transactions with Affiliates................................... 20
The Insignia/MAE Agreement..................................... 21
i
<PAGE>
Section 11. Certain Information Concerning the Purchaser, Insignia,
Holding, Mr. Icahn, Riverdale and Highcrest.................... 21
The Purchaser.................................................. 21
Insignia and Holding........................................... 21
Mr. Icahn, Riverdale and Highcrest............................. 23
Section 12. Source of Funds............................................. 25
Section 13. Background of the Offer..................................... 25
Insignia's Affiliation with the Managing General Partner.. 25
Riverdale's Recent Affiliation with Insignia.............. 25
Determination of Purchase Price........................... 26
Section 14. Conditions of the Offer..................................... 32
Section 15. Certain Legal Matters....................................... 33
General................................................... 33
Antitrust................................................. 33
Margin Requirements....................................... 33
Section 16. Fees and Expenses........................................... 33
Section 17. Miscellaneous............................................... 33
SCHEDULE I--Information Regarding the Directors and Executive Officers
of Insignia and Holding.......................................S-1
SCHEDULE II--Information Regarding the Directors and Executive Officers
of Riverdale and Highcrest...................................S-6
ii
<PAGE>
To: Limited Partners of
Davidson Growth Plus, L.P.
INTRODUCTION
The Purchaser (which is an affiliate of the Managing General Partner)
hereby offers to purchase up to 11,349 Units at a purchase price of $240.00 per
Unit (the "Purchase Price"), net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Assignment of Partnership Interest (which, together with any
supplements or amendments, collectively constitute the "Offer"). Limited
Partners who tender their Units in response to the Offer will not be obligated
to pay any commissions or partnership transfer fees; those fees will be paid by
the Purchaser. The Purchaser (which is an affiliate of the Managing General
Partner) will pay all charges and expenses of Beacon Hill Partners, Inc. (the
"Information Agent") and IFGP Corporation (the "Depositary"), an affiliate of
Insignia, in connection with the Offer. The Offer is not conditioned on any
minimum number of Units being tendered. A Limited Partner may tender any or all
of the Units owned by that Limited Partner; provided, however, that in order for
a partial tender to be valid, after the sale of Units pursuant to the Offer the
Limited Partner must continue to hold at least five Units. Tenders of fractional
Units will not be permitted, except by a Limited Partner who is tendering all of
the Units owned by that Limited Partner.
Some Factors to be Considered by Limited Partners. In considering the
Offer, Limited Partners may wish to consider the following factors:
Potential Adverse Effects to Limited Partners of Participating in the Offer
o The Purchaser and the Managing General Partner are affiliates of
Insignia and are both under common control. The Managing General
Partner has conflicts of interest in considering the Offer, including
(i) as a result of the fact that a sale or liquidation of the
Partnership's assets would result in a decrease or elimination of the
fees paid to the Managing General Partner and/or its affiliates and
(ii) the fact that as a consequence of the Purchaser's ownership of
Units the Purchaser (which is an affiliate of the Managing General
Partner) may have incentives to seek to maximize the value of its
ownership of Units, which in turn may result in a conflict for the
Managing General Partner in attempting to reconcile the interests of
Purchaser (which is an affiliate of the Managing General Partner) with
the interests of the other Limited Partners. See Section 10.
o The most recent estimate by the Managing General Partner (which is an
affiliate of the Purchaser) of the net asset value per Unit is $474.00
as of December 31, 1994 (which does not reflect a reduction for the
February 1995 cash distribution of $11.77 per Unit made out of 1994
operating cash flow, which cash was reflected on the December 31, 1994
balance sheet), and the Estimated Liquidation Value estimated by the
Purchaser (which is an affiliate of the Managing General Partner) is
$424.41. See Section 13 for a discussion of why the Purchaser (which
is an affiliate of the Managing General Partner) believes that the
1994 NAV and the Estimated Liquidation Value are not necessarily
indicative of the fair market value of a Unit. The Purchase Price is,
however, in excess of prices at which Units have traded during 1995.
See Section 13. The Purchaser (which is an affiliate of the Managing
General Partner) makes no representation and expresses no opinion as
to the fairness or adequacy of the Purchase Price. In addition, the
Managing General Partner has advised the Purchaser that neither the
Managing General Partner nor the Individual General Partner expects to
express any opinion and each expects to remain neutral and
1
<PAGE>
make no recommendation as to whether Limited Partners should tender
their Units in response to the Offer.
o As with any rational investment decision, the Purchaser (which is an
affiliate of the Managing General Partner) is making the Offer with a
view to making a profit. Accordingly, there is a conflict between the
desire of the Purchaser (which is an affiliate of the Managing General
Partner) to purchase Units at a low price and the desire of the
Limited Partners to sell their Units at a high price.
o If the Purchaser is successful in acquiring a significant number of
Units pursuant to the Offer, the Purchaser (which is an affiliate of
the Managing General Partner) will have the right to vote those Units
and thereby significantly influence all voting decisions with respect
to the Partnership, including decisions concerning liquidation,
amendments to the Partnership Agreement, and removal and replacement
of the General Partners. This means that (i) non-tendering Limited
Partners could be prevented from taking action they desire but that
the Purchaser (which is an affiliate of the Managing General Partner)
opposes and (ii) the Purchaser (which is an affiliate of the Managing
General Partner) may be able to take action desired by the Purchaser
but opposed by the non-tendering Limited Partners.
Potential Beneficial Effects to Limited Partners of Participating in the Offer
o Although there are some limited resale mechanisms available to Limited
Partners wishing to sell their Units, there is no formal trading
market for Units. Accordingly, the Offer affords Limited Partners an
opportunity to dispose of their Units for cash which otherwise might
not be available to them.
o The Offer will permit Limited Partners to dispose of their Units
without incurring sales commissions (which generally range from 3% to
10% of the transaction value), and in some instances other costs
(which can be as much as $100 to $200 per sale), typically associated
with transfers of Units arranged through brokers or other
intermediaries. Also, Limited Partners who tender their Units will not
be required to pay the $100 transfer fee typically imposed to process
transfers of Units.
o Real estate markets in the United States generally have recovered and
experienced an upward trend since the end of the last recession. That
recovery and upward trend might continue. On the other hand, those
markets also may be adversely affected by a variety of factors,
including possible fluctuations in interest rates. Accordingly,
ownership of Units continues to be a speculative investment. The Offer
may provide Limited Partners with the opportunity to liquidate their
interests in the Partnership and replace them with investments that
are less speculative.
o The Offer may be attractive to those Limited Partners who have become
disenchanted with real estate investments generally, and in particular
with the perceived illiquidity of investments made through limited
partnerships, because it may afford an immediate opportunity for those
Limited Partners to liquidate their investments in the Partnership. On
the other hand, Limited Partners who tender their Units will be giving
up the opportunity to participate in any potential future benefits
represented by the ownership of those Units, including, for example,
the right to participate in any future distributions of cash or
property, whether from operations, the proceeds of a sale or
refinancing of one or more of the Partnerships' properties, or in
connection with any future liquidation of the Partnership.
2
<PAGE>
Instead, any such distributions of cash or property with respect to
Units tendered in the Offer and purchased by the Purchaser (which is
an affiliate of the Managing General Partner) will be paid to the
Purchaser.
o The Offer may be attractive to Limited Partners who have an immediate
need for cash.
o The Offer may be attractive to Limited Partners who wish to avoid in
the future the expenses, delays, and complications in filing personal
income tax returns which may be caused by ownership of Units.
The Purchaser makes no recommendation to any Limited Partner as to whether
to tender or refrain from tendering Units and has been advised by the Managing
General Partner that the Managing General Partner also expects to make no such
recommendation. Each Limited Partner must make its own decision, based on the
Limited Partner's particular circumstances, as to whether to tender Units and,
if so, how many Units to tender. Limited Partners should consult with their
respective advisors about the financial, tax, legal and other implications of
accepting the Offer. Limited Partners are urged to read this Offer to Purchase
and the related materials carefully and in their entirety before deciding
whether to tender their Units.
The Purchaser; Affiliation With the Managing General Partner. The Purchaser
is a newly-formed entity indirectly controlled by Insignia Financial Group, Inc.
("Insignia") and Carl C. Icahn ("Icahn"). IB Holding, Inc. ("Holding"), which is
a wholly-owned subsidiary of Insignia, owns a 50% interest in the Purchaser, and
Riverdale Investors Corp., Inc. ("Riverdale"), which is an entity directly 100%
owned by Mr. Icahn, owns the other 50% interest in the Purchaser. Neither Mr.
Icahn nor Riverdale is affiliated with Insignia or the Managing General Partner
other than through their affiliation with the Purchaser.
Since December 1991, an affiliate of Insignia has been the indirect parent
company of Davidson Diversified Properties, Inc., the managing general partner
of the Partnership (the "Managing General Partner"). Insignia Management Group,
L.P. ("IMG"), which is an affiliate of Insignia and the Purchaser, provides
property management services to the Partnership, and Insignia (directly or
through affiliates) performs asset management and partnership administration
services for the Partnership. By reason of these relationships, the Managing
General Partner has conflicts of interest in considering the Offer. James T.
Gunn, the individual general partner (the "Individual General Partner," and
together with the Managing General Partner, the "General Partners") of the
Partnership, takes no active role in the management of the Partnership as
required by the Partnership's Partnership Agreement, as amended (the
"Partnership Agreement"), which provides that the conduct of the Partnership's
business shall be controlled solely by the Managing General Partner. See Section
10. The Managing General Partner has advised the Purchaser (which is an
affiliate of the Managing General Partner) that the Partnership intends to
indicate in its Statement on Schedule 14D-9 to be filed with the Securities and
Exchange Commission (the "Commission") and mailed to Limited Partners that it
and the Individual General Partner expects to remain neutral and make no
recommendation as to whether Limited Partners should tender their Units pursuant
to the Offer. See Section 13.
The Purchaser's Reasons for the Offer. The Purchaser is an affiliate of the
Managing General Partner. The Purchaser's purpose in making the Offer is to
acquire a substantial equity interest in the Partnership primarily for
investment purposes and with a view to making a profit. Although the number of
Units being sought in the Offer will not give the Purchaser (which is an
affiliate of the Managing General Partner) absolute control over the
Partnership, if the Purchaser is successful in acquiring all or a substantial
portion of the Units it is tendering for, it will be in a position to exercise
significant influence over the outcome of any vote by Limited Partners. See
Sections 8 and 10.
3
<PAGE>
Riverdale's Recent Affiliation with Insignia. On December 7, 1995, Holding
and Riverdale executed the operating agreement of the Purchaser (the "Operating
Agreement"), which provides in substance that (i) immediately following the
purchase of Units pursuant to the Offer, the Purchaser would take all actions
reasonably required to seek its admission to the Partnership as a substitute
Limited Partner as to all of the Units pursuant to the Offer; (ii) the Units
purchased pursuant to the Offer would be voted as directed by Holding and
Riverdale in proportion to their respective interests in the Purchaser, except
that Holding would control certain aspects of the voting, including votes on any
proposal (a) made by the Managing General Partner of the Partnership, (b) to
remove the Managing General Partner, (c) that would in any way adversely alter
the rights, authority or obligations of the General Partner or (d) to reduce any
compensation payable to the Managing General Partner or any other affiliate of
Insignia; and (iii) except as contemplated by the foregoing provisions and
subject to certain limited exceptions, (a) neither Holding nor Riverdale or
their respective affiliates and other related persons shall commence a tender
offer for Units or purchase, buy, acquire or otherwise become the beneficial
owner of Units, and (b) so long as an affiliate of Insignia is the Managing
General Partner, Riverdale will not (1) make, or in any way participate in,
directly, or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 of the Exchange Act) with respect to the Partnership, (2) initiate,
propose or otherwise solicit Limited Partners for the approval of one or more
proposals with respect to the Partnership, or (3) instigate or encourage any
Limited Partner or other third party to do any of the foregoing. The Operating
Agreement also provides that under certain limited circumstances Insignia could
be required to cause its affiliate to sell to Riverdale or its designee either
the managing general partner interest in the Partnership currently held by the
Managing General Partner or the stock of the entity that owns such interest, in
either case for a formula price based primarily on the amount of property
management fees paid by the Partnership to Insignia and its affiliates during
the year preceding the date of such transfer. The foregoing is only a summary of
the terms of the Operating Agreement and is qualified in its entirety by
reference to the full text of the Operating Agreement, a copy of which has been
filed as Exhibit (c)(1) to the Purchaser's Tender Offer Statement on Schedule
14D-1 and is incorporated herein by reference in its entirety.
Certain Tax Considerations. As discussed in Section 6 below, the sale of
50% or more of the Units in the Partnership over a period of twelve months will
result in the termination of the Partnership for federal income tax purposes.
Such a termination would result in lower depreciation deductions to the
Partnership for a few years subsequent to the termination. If the acquisition of
Units pursuant to the Offer, when combined with other transfers within twelve
months, results in a termination of the Partnership, non-tendering Limited
Partners may, depending on their individual circumstances, have a greater tax
liability with respect to the Partnership than they would have had in the
absence of a termination. See Section 6.
Holding Periods of Properties; Alternatives. According to the Partnership's
Prospectus dated August 13, 1986, the original anticipated holding period of the
Partnership's properties was five to seven years following the acquisition of a
property. Currently, properties in the Partnership's portfolio have been held
for approximately seven to eight years from acquisition. Limited Partners could,
as an alternative to tendering their Units, take a variety of possible actions
including voting to liquidate the Partnership, removing and replacing the
Managing General Partner and causing the Partnership to merge with another
entity or engage in a "roll-up" or similar transaction.
Conditions. The Offer is not conditioned on any minimum number of Units
being tendered. Certain other conditions do apply, however. See Section 14.
Distributions. The Partnership has been making semi-annual cash
distributions to Limited Partners on a regular basis since 1987. In February,
June and August 1995, the Partnership made cash distributions to Limited
Partners aggregating $47.47 per Unit. See Section 9. Based on the Purchaser's
review of the
4
<PAGE>
operating statements of the Partnership's properties, the Purchaser (which is an
affiliate of the Managing General Partner) believes that the February and August
1995 distributions were made from operating cash flow, whereas the Purchaser
believes that the June 1995 distribution was made from the Partnership's cash
reserves. The Purchaser (which is an affiliate of the Managing General Partner)
believes that the Partnership will continue to generate positive cash flow from
operations, and has been advised that the Managing General Partner presently
expects the Partnership will continue to make further distributions. The
potential for future distributions was considered by the Purchaser (which is an
affiliate of the Managing General Partner) when establishing the Purchase Price.
Limited Partners who tender their Units in response to the Offer will retain all
of the distributions made in February, June and August 1995, and will be
entitled to receive any subsequent distributions made by the Partnership prior
to the date on which the Purchaser purchases tendered Units pursuant to the
Offer. However, tendering Limited Partners will not be entitled to receive any
distributions in respect of tendered Units purchased by the Purchaser pursuant
to the Offer made after the date on which the Purchaser accepts those Units for
payment.
Outstanding Units. According to information supplied by the Partnership,
there are 28,371.75 Units issued and outstanding, which at January 1, 1995 were
held by approximately 2,973 Limited Partners and at October 1, 1995 were held by
approximately 3,118 Limited Partners. Neither the Purchaser (which is an
affiliate of the Managing General Partner) nor the Managing General Partner owns
any Units.
THE OFFER
Section 1. Terms of the Offer; Expiration Date; Proration. Upon the terms
and subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms of any such extension or amendment), the Purchaser (which
is an affiliate of the Managing General Partner) will accept (and thereby
purchase) up to 11,349 Units that are validly tendered on or prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth in
Section 4. For purposes of the Offer, the term "Expiration Date" means 12:00
Midnight, New York City time, on Monday, January 8, 1996, unless the Purchaser
(which is an affiliate of the Managing General Partner) in its sole discretion
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as extended by the Purchaser, shall expire. See Section 5 for a
description of the Purchaser's right to extend the period of time during which
the Offer is open and to amend or terminate the Offer.
If, prior to the Expiration Date, the Purchaser (which is an affiliate of
the Managing General Partner) increases the Purchase Price offered to Limited
Partners pursuant to the Offer, the increased Purchase Price will be paid for
all Units accepted for payment pursuant to the Offer, whether or not the Units
were tendered prior to the increase in consideration.
If more than 11,349 Units are validly tendered in accordance with the
procedure specified in Section 3 and not properly withdrawn in accordance with
the procedures specified in Section 4 on or prior to the Expiration Date, the
Purchaser (which is an affiliate of the Managing General Partner) will, upon the
terms and subject to the conditions of the Offer, accept for payment and pay for
an aggregate of 40% of the Units so tendered, pro rata according to the number
of Units validly tendered by each Limited Partner and not properly withdrawn on
or prior to the Expiration Date, with appropriate adjustments to avoid (i)
purchases of fractional Units and (ii) purchases that would violate Section 12.1
of the Partnership Agreement (which generally requires that a Limited Partner
who sells less than all of its Units must continue to own a minimum of five, or
in some instances two, Units). If the number of Units validly tendered and not
properly withdrawn on or prior to the Expiration Date is less than or equal to
11,349 Units, the Purchaser (which is an affiliate
5
<PAGE>
of the Managing General Partner) will purchase all Units so tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer.
If proration of tendered Units is required, the Purchaser (which is an
affiliate of the Managing General Partner) may not be able to announce the final
results of such proration until at least approximately seven business days after
the Expiration Date because of the difficulty of determining the proration
results. Subject to the Purchaser's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934 (the "Exchange Act") to pay Limited Partners the
Purchase Price in respect of Units tendered or return those Units promptly after
the termination or withdrawal of the Offer, the Purchaser (which is an affiliate
of the Managing General Partner) does not intend to pay for any Units accepted
for payment pursuant to the Offer until the final proration results are known.
Notwithstanding any such delay in payment, no interest will be paid on the
Purchase Price.
The Offer is conditioned on satisfaction of certain conditions. See Section
14, which sets forth in full the conditions of the Offer. The Purchaser (which
is an affiliate of the Managing General Partner) reserves the right (but in no
event shall be obligated), in its sole discretion, to waive any or all of those
conditions. If, on or prior to the Expiration Date, any or all of the conditions
have not been satisfied or waived, the Purchaser reserves the right to (i)
decline to purchase any of the Units tendered, terminate the Offer and return
all tendered Units to tendering Limited Partners, (ii) waive all the unsatisfied
conditions and, subject to complying with applicable rules and regulations of
the Commission, purchase all Units validly tendered, (iii) extend the Offer and,
subject to the right of Limited Partners to withdraw Units until the Expiration
Date, retain the Units that have been tendered during the period or periods for
which the Offer is extended, and (iv) amend the Offer.
This Offer to Purchase and the related Assignment of Partnership Interest
are being mailed by the Purchaser (which is an affiliate of the Managing General
Partner) to the persons shown by the Partnership's records to have been Limited
Partners or (in the case of Units owned of record by Individual Retirement
Accounts and qualified plans) beneficial owners of Units as of October 1, 1995
(the last date on which such persons were admitted to the Partnership as Limited
Partners), as well as to those persons who the Partnership knows are transferees
of Units but who have not yet been admitted to the Partnership as Limited
Partners.
Section 2. Acceptance for Payment and Payment for Units. Upon the terms and
subject to the conditions of the Offer, the Purchaser (which is an affiliate of
the Managing General Partner) will purchase by accepting for payment and will
pay for all Units validly tendered and not withdrawn in accordance with the
procedures specified in Section 4, as promptly as practicable following the
Expiration Date. A tendering beneficial owner of Units whose Units are owned of
record by an Individual Retirement Account or other qualified plan will not
receive direct payment of the Purchase Price; rather, payment will be made to
the custodian of such account or plan. In all cases, payment for Units purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of a properly completed and duly executed Assignment of Partnership Interest (or
facsimile thereof) and any other documents required by the Assignment of
Partnership Interest. See Section 3.
For purposes of the Offer, the Purchaser (which is an affiliate of the
Managing General Partner) will be deemed to have accepted for payment pursuant
to this Offer, and thereby purchased, validly tendered Units if, as and when the
Purchaser gives verbal or written notice to the Depositary of the Purchaser's
acceptance of those Units for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Units accepted for payment
pursuant to the Offer will be made by deposit of the Purchase Price therefor
with the depositary, which will act as agent for tendering Limited Partners for
the purpose of receiving payments from the Purchaser and transmitting those
payments to Limited Partners whose Units have
6
<PAGE>
been accepted for payment. Under no circumstances will interest on the Purchase
Price be paid, regardless of any extension of the Offer or any delay in making
such payment.
If any tendered Units are not purchased for any reason, the Assignment of
Partnership Interest with respect to such Units will be destroyed by the
Purchaser (which is an affiliate of the Managing General Partner). If for any
reason acceptance for payment of, or payment for, any Units tendered pursuant to
the Offer is delayed or the Purchaser (which is an affiliate of the Managing
General Partner) is unable to accept for payment, purchase or pay for Units
tendered pursuant to the Offer, then, without prejudice to the Purchaser's
rights under Section 14, the Depositary may, nevertheless, on behalf of the
Purchaser retain tendered Units, and those Units may not be withdrawn except to
the extent that the tendering Limited Partners are entitled to withdrawal rights
as described in Section 4; subject, however, to the Purchaser's obligation under
Rule 14e-1(c) under the Exchange Act to pay Limited Partners the Purchase Price
in respect of Units tendered or return those Units promptly after termination or
withdrawal of the Offer.
The Purchaser (which is an affiliate of the Managing General Partner)
reserves the right to transfer or assign, in whole or from time to time in part,
to one or more of the Purchaser's affiliates, the right to purchase Units
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Purchaser of its obligations under the Offer or prejudice the rights
of tendering Limited Partners to receive payment for Units validly tendered and
accepted for payment pursuant to the Offer.
Section 3. Procedure for Tendering Units.
Valid Tender. In order for a tendering Limited Partner to participate in
the Offer, its Units must be validly tendered and not withdrawn on or prior to
the Expiration Date. In order for Units to be validly tendered pursuant to the
Offer, a properly completed and duly executed Assignment of Partnership Interest
(or facsimile thereof) and any other documents required by the Assignment of
Partnership Interest must be received by the Depositary, at its address set
forth on the back cover of this Offer to Purchase, on or prior to the Expiration
Date. A Limited Partner may tender any or all of the Units owned by that Limited
Partner; provided, however, that in order for a partial tender to be valid,
after the sale of Units pursuant to the Offer the Limited Partner must continue
to hold at least five Units. Accordingly, any Limited Partner who owns five or
fewer Units must tender all or none of its Units. Tenders of fractional Units
will not be permitted, except by a Limited Partner who is tendering all of the
Units owned by that Limited Partner. No alternative, conditional or contingent
tenders will be accepted.
Signature Requirements. If the Assignment of Partnership Interest is signed
by the registered holder of the Units and payment is to be made directly to that
holder, then no signature guarantee is required on the Assignment of Partnership
Interest. Similarly, if the Units are tendered for the account of a member firm
of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank, savings bank,
credit union, savings and loan association or trust company having an office,
branch or agency in the United States (each an "Eligible Institution"), no
signature guarantee is required on the Assignment of Partnership Interest.
However, in all other cases, all signatures on the Assignment of Partnership
Interest must be guaranteed by an Eligible Institution.
Delivery of Assignment of Partnership Interest. The method of delivery of
the Assignment of Partnership Interest and all other required documents is at
the option and risk of the tendering Limited Partner, and delivery will be
deemed made only when actually received by the Depositary. In all cases,
sufficient time should be allowed to assure timely delivery.
Appointment as Proxy. By executing an Assignment of Partnership Interest, a
tendering Limited Partner irrevocably appoints the Purchaser (which is an
affiliate of the Managing General Partner), its officers
7
<PAGE>
and its designees as the Limited Partner's proxies, in the manner set forth in
the Assignment of Partnership Interest, each with full power of substitution, to
the full extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the Purchaser (which
is an affiliate of the Managing General Partner). Each such proxy shall be
considered coupled with an interest in the tendered Units. Such appointment will
be effective when, and only to the extent that, the Purchaser (which is an
affiliate of the Managing General Partner) accepts the tendered Units for
payment. Upon such acceptance for payment, all prior proxies given by the
Limited Partner with respect to the Units will, without further action, be
revoked, and no subsequent proxies may be given (and if given will not be
effective). The Purchaser (which is an affiliate of the Managing General
Partner), its officers and the designees of the Purchaser will, as to those
Units, be empowered to exercise all voting and other rights of the Limited
Partner as they in their sole discretion may deem proper at any meeting of
Limited Partners, by written consent or otherwise. The Purchaser (which is an
affiliate of the Managing General Partner) reserves the right to require that,
in order for Units to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of the Units, the Purchaser must be able to
exercise full voting rights with respect to the Units, including voting at any
meeting of Limited Partners then scheduled or acting by written consent without
a meeting.
Assignment of Interest in Future Distributions. By executing and delivering
an Assignment of Partnership Interest, a tendering Limited Partner irrevocably
assigns to the Purchaser (which is an affiliate of the Managing General Partner)
and its assigns all of the right, title and interest of the Limited Partner in
and to any and all distributions made by the Partnership from and after the
expiration of the Offer in respect of the Units tendered by the Limited Partner
and accepted for payment and thereby purchased by the Purchaser.
Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the Offer will be determined by the Purchaser (which is an
affiliate of the Managing General Partner), in its sole discretion, which
determination shall be final and binding. The Purchaser (which is an affiliate
of the Managing General Partner) reserves the absolute right to reject any or
all tenders of any particular Units determined by it not to be in proper form or
if the acceptance of or payment for those Units may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser (which is an affiliate of the
Managing General Partner) also reserves the absolute right to waive or amend any
of the conditions of the Offer that it is legally permitted to waive as to the
tender of any particular Units and to waive any defect or irregularity in any
tender with respect to any particular Units of any particular Limited Partner.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Assignment of Partnership Interest and the Instructions thereto)
will be final and binding. No tender of Units will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
Neither the Purchaser (which is an affiliate of the Managing General Partner),
the Information Agent, the Depositary nor any other person will be under any
duty to give notification of any defects or irregularities in the tender of any
Units or will incur any liability for failure to give any such notification.
Backup Federal Income Tax Withholding. To prevent the possible application
of backup federal income tax withholding of 31% with respect to payment of the
Purchase Price, a tendering Limited Partner must provide the Purchaser (which is
an affiliate of the Managing General Partner) with the Limited Partner's correct
taxpayer identification number by completing the Substitute Form W-9 included in
the Assignment of Partnership Interest. See the Instructions to the Assignment
of Partnership Interest and Section 6.
FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to 10% of the amount of the Purchase Price plus Partnership
liabilities allocable to each Unit purchased, each Limited Partner must complete
the FIRPTA Affidavit included in the Assignment of Partnership Interest
certifying
8
<PAGE>
the Limited Partner's taxpayer identification number and address and that the
Limited Partner is not a foreign person. See the Instructions to the Assignment
of Partnership Interest and Section 6.
A tender of Units pursuant to the procedure described above and the
acceptance for payment of such Units will constitute a binding agreement between
the tendering Limited Partner and the Purchaser (which is an affiliate of the
Managing General Partner) on the terms set forth in the Offer.
Section 4. Withdrawal Rights. Tenders of Units made pursuant to the Offer
are irrevocable, except that Units tendered pursuant to the Offer may be
withdrawn at any time on or prior to the expiration Date and, unless already
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after February 5, 1996. For withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Depositary at its address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person(s)
who tendered the Units to be withdrawn and must be signed by the person(s) who
signed the Assignment of Partnership Interest in the same manner as the
Assignment of Partnership Interest was signed. Any Units properly withdrawn will
be deemed not validly tendered for purposes of the Offer. Withdrawn Units may be
re-tendered, however, by following the procedures described in Section 3 at any
time prior to the Expiration Date.
If purchase of, or payment for, Units is delayed for any reason or if the
Purchaser (which is an affiliate of the Managing General Partner) is unable to
purchase or pay for Units for any reason, then, without prejudice to the
Purchaser's rights under the Offer, tendered Units may be retained by the
Depositary and may not be withdrawn except to the extent that tendering Limited
Partners are entitled to withdrawal rights as set forth in this Section 4;
subject, however, to the Purchaser's obligation, pursuant to Rule 14e-1(c) under
the Exchange Act, to pay Limited Partners the Purchase Price in respect of Units
tendered or return those Units promptly after termination or withdrawal of the
Offer.
All questions as to the validity and form (including time of receipt) of
notices of withdrawal will be determined by the Purchaser (which is an affiliate
of the Managing General Partner), in its sole discretion, which determination
shall be final and binding. Neither the Purchaser, the Information Agent, the
Depositary nor any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
Section 5. Extension of Tender Period; Termination; Amendment. The
Purchaser (which is an affiliate of the Managing General Partner) expressly
reserves the right, in its sole discretion, at any time and from time to time,
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Units, (ii) to
terminate the Offer and not accept for payment any Units not already accepted
for payment or paid for, (iii) upon the occurrence of any of the conditions
specified in Section 14, to delay the acceptance for payment of, or payment for,
any Units not already accepted for payment or paid for, and (iv) to amend the
Offer in any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such extension, termination or amendment will
promptly be disseminated to Limited Partners in a manner reasonably designed to
inform Limited Partners of such change in compliance with Rule 14d-4(c) under
the Exchange Act. In the case of an extension of the Offer, the extension will
be followed by a press release or public announcement which will be issued no
later than 9:00 a.m., New York City time, on the next business day after the
scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange
Act.
If the Purchaser (which is an affiliate of the Managing General
Partner) extends the Offer, or if the Purchaser (whether before or after its
acceptance for payment of Units) is delayed in its payment for Units or is
unable to pay for Units pursuant to the Offer for any reason, then, without
prejudice to the Purchaser's
9
<PAGE>
rights under the Offer, the Depositary may retain tendered Units and those Units
may not be withdrawn except to the extent tendering Limited Partners are
entitled to withdrawal rights as described in Section 4; subject, however, to
the Purchaser's obligation, pursuant to Rule 14e-1(c) under the Exchange Act, to
pay Limited Partners the Purchase Price in respect of Units tendered or return
those Units promptly after termination or withdrawal of the Offer.
If the Purchaser (which is an affiliate of the Managing General Partner)
makes a material change in the terms of the Offer or the information concerning
the Offer or waives a material condition of the Offer, the Purchaser will extend
the Offer and disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum
period during which an offer must remain open following a material change in the
terms of the offer or information concerning the offer will depend upon the
facts and circumstances, including the relative materiality of the change in the
terms or information. In the Commission's view, an offer should remain open for
a minimum of five business days from the date the material change is first
published, sent or given to securityholders, and if material changes are made
with respect to information that approaches the significance of price or the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders and investor response. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 Midnight, New York City time.
Section 6. Certain Federal Income Tax Matters. The following summary is a
general discussion of certain of the federal income tax consequences of a sale
of Units pursuant to the Offer. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), applicable Treasury regulations
thereunder, administrative rulings, practice and procedures and judicial
authority, all as of the date of the Offer. All of the foregoing are subject to
change, and any such change could affect the continuing accuracy of this
summary. This summary does not discuss all aspects of federal income taxation
that may be relevant to a particular Limited Partner in light of such Limited
Partner's specific circumstances or to certain types of Limited Partners subject
to special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-exempt
organizations), nor (except as otherwise expressly indicated) does it describe
any aspect of state, local, foreign or other tax laws. Sales of Units pursuant
to the Offer will be taxable transactions for federal income tax purposes, and
also may be taxable transactions under applicable state, local, foreign and
other tax laws. LIMITED PARTNERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES TO EACH SUCH LIMITED PARTNER OF SELLING UNITS
PURSUANT TO THE OFFER.
In general, a Limited Partner will recognize gain or loss on a sale of
Units pursuant to the Offer equal to the difference between (i) the Limited
Partner's "amount realized" on the sale and (ii) the Limited Partner's adjusted
tax basis in the Units sold. The amount of a Limited Partner's adjusted tax
basis in such Units will vary depending upon the Limited Partner's particular
circumstances. The "amount realized" with respect to a Unit will be a sum equal
to the amount of cash received by the Limited Partner for the Unit pursuant to
the Offer (that is, the Purchase Price) plus the amount of the Partnership's
liabilities allocable to the Unit (as determined under Code Section 752).
The gain or loss recognized by a Limited Partner on a sale of a Unit
pursuant to the Offer generally will be treated as a capital gain or loss if (as
is generally expected to be the case) the Unit was held by the Limited Partner
as a capital asset. That capital gain or loss will be treated as long-term
capital gain or loss if the tendering Limited Partner's holding period for the
Unit exceeds one year. Under current law, long-term capital gains of individuals
and other non-corporate taxpayers are taxed at a maximum marginal federal income
tax rate of 28%, whereas the maximum marginal federal income tax rate for
ordinary income of such
10
<PAGE>
persons is 39.6%. Capital losses are deductible only to the extent of capital
gains, except that non-corporate taxpayers may deduct up to $3,000 of capital
losses in excess of the amount of their capital gains against ordinary income.
Excess capital losses generally can be carried forward to succeeding years (a
corporation's carryforward period is five years and a non-corporate taxpayer can
carry forward such losses indefinitely); in addition, a corporation is permitted
to carry back excess capital losses to the three preceding taxable years,
provided the carryback does not increase or produce a net operating loss for any
of those years.
If any portion of the amount realized by a Limited Partner is attributable
to "unrealized receivables" (which includes depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Limited Partner's gain or loss may be ordinary rather than
capital.
A tendering Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Partnership Agreement
concerning transfers of Units. Such allocation and any cash distributed by the
Partnership to the Limited Partner for that year will affect the Limited
Partner's adjusted tax basis in Units and, therefore, the amount of such Limited
Partner's taxable gain or loss upon a sale of Units pursuant to the Offer.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation generally can deduct "passive activity losses" in any year only to
the extent of the person's passive activity income for that year. Closely held
corporations may not offset such losses against so-called "portfolio" income.
Substantially all post-1986 losses of Limited Partners from the Partnership are
passive activity losses. Limited Partners may have "suspended" passive activity
losses from the Partnership (i.e., post-1986 net taxable losses in excess of
statutorily permitted "phase-in" amounts and which have not been used to offset
income from other passive activities).
If a Limited Partner sells less than all of its Units pursuant to the
Offer, a loss recognized by that Limited Partner can be currently deducted
(subject to other applicable limitations) to the extent of the Limited Partner's
passive income from the Partnership for that year plus any other passive
activity income for that year, and a gain recognized by a Limited Partner upon
the sale of Units can be offset by the Limited Partner's current or "suspended"
passive activity losses (if any) from the Partnership and other sources. If, on
the other hand, a Limited Partner sells 100% of its Units pursuant to the Offer,
any "suspended" losses and any losses recognized upon the sale of the Units will
be offset first against any other net passive gain to the Limited Partner from
the sale of the Units and any other net passive activity income from other
passive activity investments, and the balance of any "suspended" net losses from
the Units will no longer be subject to the passive activity loss limitation and,
therefore, will be deductible by such Limited Partner from its other income
(subject to any other applicable limitations). A tendering Limited Partner must
sell all of its Units to receive these tax benefits. If more than 40% of the
outstanding Units are tendered, some tendering Limited Partners may not be able
to sell 100% of their Units pursuant to the Offer because of proration of the
number of Units to be purchased by the Purchaser (which is an affiliate of the
Managing General Partner). See Section 1.
Section 708(b) of the Code provides that a partnership terminates for
income tax purposes if there is a sale or exchange of 50 percent or more of the
total interest in partnership capital and profits within a twelve-month period.
Accordingly, it is possible that transfers made pursuant to the Offer, in
combination with other transfers made within twelve months of the Offer, will
result in a termination of the Partnership for income tax purposes. In the event
of a termination, the Partnership would be treated for income tax purposes as if
it had made a liquidating distribution of its assets to the remaining partners
and the new partners, followed by a recontribution of the assets to a "new"
partnership. Because the "new" partnership would be treated as having acquired
its assets on the date of the deemed recontribution, a new depreciation recovery
period would begin on such date, and the Partnership would be required to
depreciate its properties
11
<PAGE>
over a greater period of time than is currently being used; accordingly, the
aggregate present value of the Partnership's future depreciation deductions
would be reduced.
Limited Partners (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 31% backup withholding
unless those Limited Partners provide a taxpayer identification number ("TIN")
and certify that the TIN is correct or properly certify that they are awaiting a
TIN. A Limited Partner may avoid backup withholding by properly completing and
signing the Substitute Form W-9 included as part of the Assignment of
Partnership Interest. If a Limited Partner who is subject to backup withholding
does not properly complete and sign the Substitute Form W-9, the Purchaser
(which is an affiliate of the Managing General Partner) will withhold 31% from
payments to such Limited Partner.
A Limited Partner who tenders Units must file an information statement with
his federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation ss.1.751-1(a)(3). The selling
Limited Partner also must notify the Partnership of the date of the transfer and
the names, addresses and tax identification numbers of the transferors and
transferee within 30 days of the date of the transfer (or, if earlier, January
15 of the following calendar year).
Gain realized by a foreign Limited Partner on the sale of a Unit pursuant
to the Offer will be subject to federal income tax. Under Code Section 1445, the
transferee of an interest held by a foreign person in a partnership which owns
United States real property generally is required to deduct and withhold a tax
equal to 10% of the amount realized on the disposition. In order to comply with
this requirement, the Purchaser (which is an affiliate of the Managing General
Partner) will withhold 10% of the amount realized by a tendering Limited Partner
unless the Limited Partner properly completes and signs the FIRPTA Affidavit
included as part of the Assignment of Partnership Interest certifying the
Limited Partner's TIN, that such Limited Partner is not a foreign person and the
Limited Partner's address. Amounts withheld would be creditable against a
foreign Limited Partner's federal income tax liability and, if in excess
thereof, a refund could be obtained from the Internal Revenue Service by filing
a U.S. income tax return.
Section 7. Effects of the Offer.
Limitations on Resales. The Partnership Agreement prohibits transfers of
Units if a transfer, when considered with all other transfers during the same
applicable twelve-month period, would cause a termination of the Partnership for
federal or any applicable state income tax purposes (which termination may occur
when 50% or more of the Units are transferred in a twelve-month period). This
provision may limit sales of Units on the secondary market and in private
transactions for the twelve-month period following completion of the Offer. The
Partnership will not process any requests for recognition of substitution of
Limited Partners upon a transfer of Units during such twelve-month period which
the Managing General Partner believes may cause a tax termination in
contravention of the Partnership Agreement. In determining the number of Units
for which the Offer to Purchase is made (representing approximately 40% of the
outstanding Units if 11,349 Units are tendered), the Purchaser (which is an
affiliate of the Managing General Partner) took this restriction into account in
order to permit normal historical levels of transfers to occur following the
transfers of Units pursuant to the Offer without violating this restriction.
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act. If a substantial number of Units are purchased pursuant to the
Offer, the result will be a reduction in the number of Limited Partners. In the
case of certain kinds of equity securities, a reduction in the number of
security-holders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. In this case,
however, there is no established public trading market for the Units and,
therefore, the Purchaser (which is an affiliate of the Managing General Partner)
does not believe a reduction in the number of Limited Partners will materially
further restrict the Limited Partners' ability to find purchasers for
12
<PAGE>
their Units through secondary market transactions. See Section 13 for certain
limited information regarding recent secondary sales of the Units.
The Units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that the Partnership is required to file periodic
reports with the Commission and to comply with the Commission's proxy rules. The
Purchaser (which is an affiliate of the Managing General Partner) does not
expect or intend that consummation of the Offer will cause the Units to cease to
be registered under Section 12(g) of the Exchange Act. If the Units were to be
held by fewer than 300 persons, the Partnership could apply to de-register the
Units under the Exchange Act. Because the Units are widely held, however, the
Purchaser (which is an affiliate of the Managing General Partner) expects that,
even if it purchases the maximum number of Units in the Offer, after that
purchase the Units will be held of record by substantially more than 300
persons.
Control of Limited Partner Voting Decisions by Purchaser; Effect of
Relationship with Managing General Partner. The Partnership Agreement provides
that in order for an assignee of Units to be admitted to the Partnership as a
substitute Limited Partner, (i) the assignment must have been effected in
accordance with the provisions of the Partnership Agreement; (ii) the instrument
of assignment must set forth the intention of the assignor that the assignee
succeed to the assignor's interest as a substituted Limited Partner in his
place; (iii) the assignor and assignee must have executed and acknowledged such
other documents as the Managing General Partner deemed necessary or desirable to
effect such substitution; and (iv) a transfer fee not greater than $150 must
have been paid to the Partnership to cover all reasonable expenses incurred in
connection with such substitution. The Purchaser (which is an affiliate of the
Managing General Partner) will seek to be admitted to the Partnership as a
substitute Limited Partner upon consummation of the Offer and, if admitted, will
have the right to vote each Unit purchased pursuant to the Offer. Even if the
Purchaser (which is an affiliate of the Managing General Partner) is not
admitted to the Partnership as a substitute Limited Partner, however, the
Purchaser nonetheless will have the right to vote each Unit purchased in the
Offer pursuant to the irrevocable appointment by tendering Limited Partners of
the Purchaser, its officers and designees as proxies with respect to the Units
tendered by such Limited Partners and accepted for payment by the Purchaser. See
Section 3. As a result, the Purchaser (which is an affiliate of the Managing
General Partner) could be in a position to significantly influence all voting
decisions with respect to the Partnership. This could (i) prevent non-tendering
Limited Partners from taking action they desire but that the Purchaser (which is
an affiliate of the Managing General Partner) opposes and (ii) enable the
Purchaser to take action desired by the Purchaser but opposed by non-tendering
Limited Partners. Under the Partnership Agreement, Limited Partners holding a
majority of the Units are entitled to take action with respect to a variety of
matters, including: removal of a general partner; dissolution of the
Partnership; a sale of all or substantially all of the Partnership's properties;
material changes in the investment objectives and policies of the Partnership;
and most types of amendments to the Partnership Agreement. When voting on those
matters, the Purchaser (which is an affiliate of the Managing General Partner)
will vote the Units owned by it in whatever manner it deems to be in the
Purchaser's best interests, which, because of its relationship with the Managing
General Partner, also may be in the interest of the Managing General Partner.
The Offer will not result in any change in the compensation payable to the
Managing General Partner. However, as a result of the Offer and in the
Purchaser's capacity as a Limited Partner of the Partnership, the Purchaser
(which is an affiliate of the Managing General Partner) will participate in any
subsequent distributions to Limited Partners to the extent of the Units
purchased pursuant to the Offer.
Section 8. Future Plans of the Purchaser. The Purchaser (which is an
affiliate of the Managing General Partner) is seeking to acquire Units pursuant
to the Offer in order to acquire a substantial equity interest in the
Partnership, primarily for investment purposes and with a view to making a
profit. The Purchaser's organizational documents provide that immediately
following the purchase of Units pursuant to
13
<PAGE>
the Offer, the Purchaser will take all actions reasonably required to seek its
admission to the Partnership as a substitute Limited Partner as to all of the
Units purchased pursuant to the Offer. Following the completion of the Offer,
the Purchaser (which is an affiliate of the Managing General Partner) and/or
persons related to or affiliated with it may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable. Any such
acquisition may be at a price higher or lower than the price to be paid for the
Units purchased pursuant to the Offer, and may be for cash or other
consideration. The Purchaser (which is an affiliate of the Managing General
Partner) also may consider selling some or all of the Units it acquires pursuant
to the Offer, either directly or by a sale of one or more interests in the
Purchaser itself, depending among other things on liquidity, strategic, tax and
other considerations.
Although the Purchaser (which is an affiliate of the Managing General
Partner) does not intend to change current management or the operation of the
Partnership and has no current plans for any extraordinary transaction involving
the Partnership, these plans could change in the future. In addition, the
Purchaser (which is an affiliate of the Managing General Partner) expects that
consistent with the Managing General Partner's fiduciary obligations, the
Managing General Partner will seek and review opportunities to engage in
transactions which could benefit the Partnership, such as sales or refinancings
of assets or combinations of the Partnership with one or more other entities,
with the objective of seeking to maximize returns to Limited Partners. In that
regard, the Purchaser (which is an affiliate of the Managing General Partner)
expects the Managing General Partner will carefully consider any suggestions or
proposals the Purchaser may make.
The Purchaser (which is an affiliate of the Managing General Partner) has
been advised that the possible future transactions the Managing General Partner
expects to consider on behalf of the Partnership include (i) payment of
extraordinary distributions; (ii) refinancing, reducing or increasing existing
indebtedness of the Partnership; (iii) sales of assets, individually or as part
of a complete liquidation; and (iv) mergers or other consolidation transactions
involving the Partnership. Any such merger or consolidation transaction could
involve other limited partnerships in which the Managing General Partner or its
affiliates serve as general partners, or a combination of the Partnership with
one or more existing, publicly traded entities (including, possibly, affiliates
of the Purchaser (which is an affiliate of the Managing General Partner)), in
any of which Limited Partners might receive cash, common stock or other
securities or consideration. There is no assurance, however, as to when or
whether any of the transactions referred to above might occur. If any such
transaction is effected by the Partnership and financial benefits accrue to the
Limited Partners of the Partnership, the Purchaser (which is an affiliate of the
Managing General Partner) will participate in those benefits to the extent of
its ownership of Units. A merger or other consolidation transaction and certain
kinds of other extraordinary transactions would require a vote of the Limited
Partners in the Partnership, and by acquiring a substantial number of Units the
Purchaser (which is an affiliate of the Managing General Partner) will enhance
its ability to influence the outcome of any such vote. The Purchaser's primary
objective in seeking to acquire the Units is not, however, to influence the vote
on any particular transaction, but rather to generate a profit on the investment
represented by those Units.
Section 9. Certain Information Concerning the Partnership.
General. The Partnership was organized in May 1986 under the laws of the
State of Delaware. Its principal executive offices are located at One Insignia
Financial Plaza, Greenville, South Carolina 29601. Its telephone number is (803)
239-1000.
The Partnership's primary business is real estate ownership and related
operations. The Partnership was formed for the purpose of investing in, holding
and managing existing residential and commercial real estate and selling and
collecting the receivables derived from such properties. Under the Partnership
14
<PAGE>
Agreement, the term of the Partnership will continue until December 2011, unless
sooner terminated as provided in the Partnership Agreement or by law.
At September 30, 1995, the Partnership's investment portfolio consisted of
three residential apartment complexes: a 112-unit complex in Brandon, Florida; a
256-unit complex in Plano, Texas; and a 320-unit complex in Marietta, Georgia,
in which the Partnership has a 82.5% joint venture interest (Davidson Income
Real Estate, L.P., whose general partner is Davidson Diversified Properties,
Inc., the Managing General Partner of the Partnership, owns the other 17.5%
interest in this property).
Holding Periods of Partnership Properties. The original anticipated holding
period of the Partnership's properties, as described in the Partnership's
Prospectus dated August 13, 1986, was five to seven years following acquisition
of a property. Currently, properties in the Partnership's portfolio have been
held for approximately seven to eight years after acquisition. The Purchaser
(which is an affiliate of the Managing General Partner) believes that due to
several factors, including the present condition of the real estate market and
other factors discussed in "General Policy Regarding Sales of Partnership
Properties" below, it would not be in the best interest of the Partnership or
its Limited Partners to sell all of the Partnership properties and effect a
liquidation of the Partnership at this time. In addition, the Managing General
Partner has advised the Purchaser that there are no plans to sell any property
at the present time; however, the Managing General Partner may decide to attempt
to sell a property or properties at any given time based on its analysis of
those considerations.
General Policy Regarding Sales of Partnership Properties. In general, the
Managing General Partner regularly evaluates the Partnership's ownership
positions by considering various factors, such as the Partnership's financial
position, governmental influences, and real estate and capital market
conditions. The Managing General Partner monitors each property's specific
locale and sub-market conditions evaluating current trends, competition, new
construction and economic changes. The Managing General Partner oversees each
asset's operating performance and continuously evaluates the physical
improvement requirements. In addition, the financing structure for each asset,
tax implications and the investment climate are all considered. Any of these
factors, and possibly others, could potentially contribute to any decision of
the Managing General Partner to sell, refinance, upgrade with capital
improvements or hold a particular Partnership property. There are no plans to
sell or refinance any property at the present time.
Selected Financial and Property-Related Data. Set forth below is a summary
of certain financial and statistical information with respect to the Partnership
and its properties, all of which has been excerpted or derived from the
Partnership's Annual Reports on Form 10-KSB or 10-K, as applicable, for the
years ended December 31, 1994, 1993, 1992, 1991 and 1990 and the Partnership's
Quarterly Reports on Form 10-QSB (the "Form 10-QSB") for the nine months ended
September 30, 1995 and 1994. The Partnership's Form 10-QSB for the nine months
ended September 30, 1995 was mailed to Limited Partners on November 15, 1995.
More comprehensive financial and other information is included in such reports
and other documents filed by the Partnership with the Commission, and the
following summary is qualified in its entirety by reference to such reports and
other documents and all the financial information and related notes contained
therein.
15
<PAGE>
DAVIDSON GROWTH PLUS, L.P.
<TABLE>
SELECTED FINANCIAL DATA
(in thousands, except per Unit data)
<CAPTION>
Nine Months
Ended Fiscal Year Ended
September 30, December 31,
------------------------ ---------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:*
Total Revenues from
Property Operations............. $ 3,647 $ 3,422 $ 4,598 $ 4,758 $ 5,423 $ 5,207 $ 5,038
Income (Loss) from
Property Operations............. $ 410 $ 297 $ 283 $ 198 $ (41) $ (254) $ (751)
Minority Interest in Net Income
of Joint Venture................ $ (38) $ (35) $ (42) $ (74) $ 654 $ (35) $ (52)
Net Income (Loss)................. $ 258 $ 165 $ 124 $ (757) $ (5,143) $ (346) $ (802)
Net Income (Loss) per Unit........ $ 8.83 $ 5.64 $ 4.25 $ (25.86) $ (175.80) $ (11.81) $ (27.43)
As of As of
September 30, December 31,
---------------------- ---------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(unaudited)
Balance Sheet Data:*
Total Assets...................... $ 18,450 $ 19,620 $ 19,581 $ 19,784 $ 28,214 $ 34,344 $ 35,310
Total Liabilities................. $ 13,349 $ 13,219 $ 13,214 $ 13,200 $ 12,496 $ 11,659 $ 11,939
Minority Interest in
Joint Venture................... $ 314 $ 443 $ 451 $ 502 $ 1,637 $ 2,291 $ 2,339
Limited Partners' Equity.......... $ 5,462 $ 6,597 $ 6,558 $ 6,660 $ 14,418 $ 20,542 $ 21,161
Units Outstanding................. 28,371.75 28,371.75 28,371.75 28,371.75 28,376.75 28,376.00 28,376.00
Book Value per Unit............... $ 192.50 $ 232.53 $ 231.14 $ 234.73 $ 508.08 $ 723.91 $ 745.72
<FN>
- ----------
* Includes 100% of the operations of the Brighton Crest property; however,
the Partnership only owns an 82.5% joint venture interest in Brighton
Crest.
</FN>
</TABLE>
Description of Properties. Set forth below is a table showing the location,
the date of purchase, the nature of the Partnership's ownership interest in and
the use of each of the Partnership's three properties.
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
- -------- -------- ----------------- ---
<S> <C> <C> <C>
Brighton Crest Phase I 82.5% interest in the joint venture Apartment
Marietta, GA 09/25/87 which has fee ownership subject to 320 units
Phase II first and second mortgages
12/15/87
The Village 05/31/88 Fee ownership subject to first and Apartment
Brandon, Florida second mortgages 112 units
The Fairway 05/18/88 Fee ownership subject to first and Apartment
Plano, Texas second mortgages 256 units
</TABLE>
16
<PAGE>
Accumulated Depreciation Schedule. Set forth below is a table showing the
gross carrying value, accumulated depreciation and federal tax basis of each of
the Partnership's properties as of December 31, 1994.
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
-------- ----------- ------------ --------- ------ -----------
Brighton Crest .... $12,491,203 $(4,031,028) 5-25 Yrs. S/L $13,170,964
The Village ....... 4,192,949 (1,259,010) 5-25 Yrs. S/L 3,848,892
The Fairway ....... 6,447,285 (1,629,749) 5-25 Yrs. S/L 6,121,366
----------- ----------- -----------
Totals ....... $23,131,437 $(6,919,787) $23,141,222
=========== =========== ===========
Schedule of Mortgages. Set forth below is a table showing certain information
regarding the outstanding mortgages encumbering each of the Partnership's three
properties.
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1994 Rate Amortized Date Maturity
-------- ----------- -------- --------- -------- ----------
Brighton Crest
1st mortgage ... $ 6,357,525 7.83% 28.67 yrs 10/15/03 $5,516,196
2nd mortgage ... 198,900 7.83% (1) 10/15/03 198,900
The Village
1st mortgage ... 1,956,063 7.83% 28.67 yrs 10/15/03 1,697,334
2nd mortgage ... 61,200 7.83% (1) 10/15/03 61,200
The Fairway
1st mortgage ... 4,174,490 7.60% 21.42 yrs 11/15/02 3,142,190
2nd mortgage ... 134,781 7.60% (1) 11/15/02 134,781
Total .......... 12,882,959
Less unamortized
discounts (2)... (413,903)
-----------
Total (2)....... $12,469,056
===========
- -----------
(1) Interest only payments.
(2) Unamortized debt discounts represent the difference between the amounts at
which the above mortgages are carried on the Partnership's balance sheet
and the contractual amount of those mortgages. The amount of debt for
which the Partnership was contractually obligated as of December 31, 1994
was $12,882,959.
17
<PAGE>
Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental rates and occupancy percentages for each of
the Partnership's three properties.
<TABLE>
<CAPTION>
Average Annual Average Annual
Rental Rates Occupancy
--------------------- -------------------------------------
Nine Months Ended
Property 1994 1993 September 30, 1995 1994 1993
- ---------- ----- ---- ------------------ ---- ----
<S> <C> <C> <C> <C> <C>
Brighton Crest .... $7,077 $7,095 95% 95% 96%
The Village ....... 7,330 7,098 98% 97% 95%
The Fairway ....... 6,187 5,998 97% 96% 95%
</TABLE>
The Partnership is subject to the information reporting requirements of the
Exchange Act and accordingly is required to file reports and other information
with the Commission relating to its business, financial results and other
matters. Such reports and other documents may be examined and copies may be
obtained from the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C 20549, and at the regional offices of the Commission located in
the Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, New York, New York 10048. Copies
should be available by mail upon payment of the Commission's customary charges
by writing to the Commission's principal offices at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Cash Distributions History. The following table sets forth the cash
distributions to the Limited Partners and the General Partners made by the
Partnership from its inception.
<TABLE>
<CAPTION>
Per Unit
Distribution to Distribution to Aggregate
Year Limited Partners(1) General Partners Distribution(2)
- ---- ------------------- ---------------- ---------------
<S> <C> <C> <C>
1986 ........... 0 0 0
1987* .......... 11.12 4,950 164,995
1988* .......... 33.11 28,498 949,919
1989 ........... 36.60 32,121 1,070,673
1990 ........... 40.00 35,105 1,170,173
1991 ........... 10.00 8,776 292,545
1992 ........... 40.00 35,105 1,170,175
1993 ........... 247.58 217,264 7,241,417
1994 ........... 7.84 6,777 229,224
1995** ......... 47.47 41,654 1,388,461
------- ------- ------------
TOTAL* ......... $473.72 $410,250 $13,677,582
- -------------
(1) The amounts shown in this column only reflect actual cash distributions
paid directly to Limited Partners based on the weighted average numbers of
Units outstanding during the appropriate year, and do not include amounts
withheld and paid directly to state tax authorities on behalf of Limited
Partners in respect of state income tax obligations.
(2) Pursuant to the Partnership Agreement, cash distributions by the
Partnership generally are allocated 97% to the Limited Partners and 3% to
the General Partners.
* Assumes Limited Partner was admitted to the Partnership on December 1, 1986
(the first admission date).
** Through December 1, 1995.
</TABLE>
The Managing General Partner has advised the Purchaser that of the $473.72
per Unit aggregate distributions to Limited Partners, $215.00 of that amount was
a return of capital (based upon generally accepted accounting principles
("GAAP")). This return of capital was made as a special distribution in 1993 as
a result of the refinancing of the Partnership's properties.
Operating Budgets of the Partnership. A summary of the 1995 operating budgets
and the unaudited results of operations of the Partnership for the eleven months
ended November 30, 1995 is set forth in the table below. The budgeted amounts
provided below are figures that were not computed in accordance with
18
<PAGE>
GAAP. Historically, budgeted operating results of operations for a particular
fiscal year have differed significantly in certain respects from the audited
operating results for that year. In particular, items that are categorized as
capital expenditures for purposes of preparing the operating budgets are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budgets
presented for 1995 should not necessarily be considered as indicative of what
the audited operating results for 1995 will be. Furthermore, any estimate of the
future performance of a business, such as the Partnership's business, is
forward-looking and based on numerous assumptions, some of which inevitably will
prove to be incorrect. For this reason, it is probable that the Partnership's
future operating results will differ from those projected in the operating
budget, and those differences may be material. As a result, such information
should not be relied on by Limited Partners.
<TABLE>
<CAPTION>
Budgeted Actual
Budgeted 1995 First 1995 First
Fiscal 1995* Eleven Months* Eleven Months*
------------ -------------- --------------
<S> <C> <C> <C>
Total Revenues from Property Operations....... $4,824,277 $4,410,717 $4,445,946
Total Operating Expenses ..................... $2,388,445 $2,210,480 $2,221,612
Net Operating Income.......................... $2,435,832 $2,200,237 $2,224,333
Capital Expenditures.......................... $ 303,073 $ 290,590 $ 305,626
- ------------
* Includes 100% of the operations of the Brighton Crest property; however,
the Partnership only owns an 82.5% joint venture interest in Brighton
Crest.
</TABLE>
Section 10. Conflicts of Interest and Transactions with Affiliates. The
Managing General Partner and its affiliates have conflicts of interest with
respect to the Offer as set forth below.
Conflicts of Interest With Respect to the Offer. The Managing General
Partner has conflicts of interest with respect to the Offer, including conflicts
resulting from its affiliation with the Purchaser. The Managing General Partner
also would have a conflict of interest (i) as a result of the fact that a sale
or liquidation of the Partnership's assets would result in a decrease or
elimination of the fees paid to the Managing General Partner and/or its
affiliates and (ii) as a consequence of the Purchaser's ownership of Units,
because the Purchaser (which is an affiliate of the Managing General Partner)
may have incentives to seek to maximize the value of its ownership of Units,
which in turn may result in a conflict for the Managing General Partner in
attempting to reconcile the interests of the Purchaser (which is an affiliate of
the Managing General Partner) with the interests of the other Limited Partners.
In addition, the Purchaser (which is an affiliate of the Managing General
Partner) is making the Offer with a view to making a profit. Accordingly, there
is a conflict between the desire of the Purchaser (which is an affiliate of the
Managing General Partner) to purchase Units at a low price and the desire of the
Limited Partners to sell their Units at a high price. The Managing General
Partner has advised the Purchaser (which is an affiliate of the Managing General
Partner) that the Partnership intends to indicate in its Statement on Schedule
14D-9 to be filed with the Commission that it is remaining neutral and making no
recommendation as to whether Limited Partners should tender their Units pursuant
to the Offer. See Section 13.
Voting by the Purchaser. The Partnership Agreement provides that in order for
an assignee of Units to be admitted to the Partnership as a substitute Limited
Partner, (i) the assignment must have been effected in accordance with the
provisions of the Partnership Agreement; (ii) the instrument of assignment must
set forth the intention of the assignor that the assignee succeed to the
assignor's interest as a substituted Limited Partner in his place; (iii) the
assignor and assignee must have executed and acknowledged such other documents
as the Managing General Partner deemed necessary or desirable to effect such
substitution; and (iv) a transfer fee not greater than $150 must have been paid
to the Partnership to cover all reasonable expenses incurred in connection with
such substitution. The Purchaser (which is an affiliate of the Managing General
Partner) will seek to be admitted to the Partnership as a substitute Limited
Partner upon
19
<PAGE>
consummation of the Offer and, if admitted, will have the right to vote each
Unit purchased pursuant to the Offer. Even if the Purchaser (which is an
affiliate of the Managing General Partner) is not admitted to the Partnership as
a substitute Limited Partner, however, the Purchaser nonetheless will have the
right to vote each Unit purchased in the Offer pursuant to the irrevocable
appointment by tendering Limited Partners of the Purchaser (which is an
affiliate of the Managing General Partner), its officers and designees as
proxies with respect to the Units tendered by such Limited Partners and accepted
for payment by the Purchaser. See Section 3. As a result, if the Purchaser
(which is an affiliate of the Managing General Partner) is successful in
acquiring a significant number of Units pursuant to the Offer, the Purchaser
will have the right to vote those Units and thereby significantly influence all
voting decisions with respect to the Partnership, including decisions concerning
liquidation, amendments to the Partnership Agreement, and removal and
replacement of the General Partners. This means that (i) non-tendering Limited
Partners could be prevented from taking action they desire but that the
Purchaser (which is an affiliate of the Managing General Partner) opposes and
(ii) the Purchaser (which is an affiliate of the Managing General Partner) may
be able to take action desired by the Purchaser but opposed by the non-tendering
Limited Partners. See Section 7.
Financing Arrangements. The Purchaser (which is an affiliate of the
Managing General Partner) expects to pay for the Units it purchases pursuant to
the Offer with funds obtained from capital contributions to be made by Holding
and Riverdale. Holding expects to obtain its share of those funds from capital
contributions or loans from Insignia, which will obtain such funds from its
working capital; Riverdale expects to obtain its share of those funds from its
working capital or from a loan from Highcrest Investors Corporation
("Highcrest"), which is also indirectly 100% owned by Mr. Icahn and is an
affiliate of Riverdale, or an affiliate of Highcrest, which will obtain such
funds from its liquid assets and/or the liquid assets of its wholly-owned,
direct or indirect subsidiaries. Highcrest has irrevocably committed to make or
cause its affiliates to make such loan. See Section 12. It is possible, however,
that in connection with its future financing activities, Holding and Riverdale
may cause or request the Purchaser (which is an affiliate of the Managing
General Partner) to pledge the Units as collateral for loans, or otherwise agree
to terms which provide Holding, Riverdale and the Purchaser with incentives to
generate substantial near-term cash flow from the Purchaser's investment in the
Units. This could be the case, for example, if a loan has a "bullet" maturity
after a relatively short time or bears a high or increasing interest rate. In
such a situation, the Managing General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with the
potential need of its affiliates for cash flow from the Partnership's
activities.
Transactions with Affiliates. Under the Partnership Agreement, the Managing
General Partner holds an interest in the Partnership and is entitled to
participate in certain cash distributions made by the Partnership to its
Partners. The Managing General Partner has received a cash distribution each
year since 1987 in respect of its general partner interest. Pursuant to an
agreement (the "Insignia/MAE Agreement") between Insignia and Metropolitan Asset
Enhancement, L.P. ("MAE") (which is the direct parent of the Managing General
Partner), MAE has agreed, among other things, to cause Insignia or its affiliate
to be retained as a manager of all properties controlled by MAE. For purposes of
the Insignia/MAE Agreement, MAE controls the Partnership's properties. Pursuant
to this arrangement, the Partnership has paid IMG, an affiliate of the Managing
General Partner, property management fees for property management services and
for reimbursement of certain expenses in each of the three years ended December
31, 1994. Property management fees paid to IMG amounted to $229,833, $235,904
and $269,272, respectively, for the three years ended December 31, 1994, 1993
and 1992, and the Partnership paid IMG property management fees equal to
$180,785 during the nine months ended September 30, 1995. Insignia and its
affiliates do not receive any fees from the Partnership on a current basis for
the asset management or partnership administration services they provide,
although Insignia and its affiliates are reimbursed by the Partnership for the
expenses they incur in connection with providing those services pursuant to the
Partnership Agreement. The Managing General Partner is entitled to receive a
deferred management fee of 2% of Adjusted Cash from Operations (as defined in
the Partnership Agreement) once the Partnership either has distributed to
Limited
20
<PAGE>
Partners an amount equal to a 10% return on capital or has generated
Cash from Sales or Refinancings (as defined in the Partnership Agreement). As
reflected in the Partnership's Form 10-QSB for the nine months ended September
30, 1995, the accrued deferred management fee totalled $161,043 as of September
30, 1995, none of which has been distributed to the Managing General Partner.
Pursuant to these provisions and in addition to the property management fees
referred to above, the Partnership paid the Managing General Partner and its
affiliates (including the reimbursements to Insignia and its affiliates in
connection with asset management and partnership administration services) an
aggregate of $141,735, $172,659 and $174,687, respectively, for the three years
ended December 31, 1994, 1993 and 1992, and $109,982 during the nine months
ended September 30, 1995. During 1992 and 1993, an affiliate of the Purchaser
(which is an affiliate of the Managing General Partner) assisted an unaffiliated
third party engaged by the Partnership in connection with a refinancing of the
Partnership's properties, and received $41,800 in 1992 and $106,250 in 1993 from
the third party for providing such assistance. In addition, at various times
during the past three fiscal years an affiliate of the Purchaser (which is an
affiliate of the Managing General Partner) has held a promissory note or
preferred stock issued by an unaffiliated company that provides insurance
brokerage services to the Partnership. The financial benefits derived by
Insignia or its affiliates from these arrangements and attributable to the
Partnership are included in the amounts described above as reimbursements to
affiliates of the Managing General Partner during the Partnership's fiscal years
ended December 31, 1993 and 1992, but not for 1994. Insignia believes that the
aggregate financial benefit derived by Insignia and its affiliates from the
arrangements described in the two preceding sentences during the three years
ended December 31, 1994 and since that date was immaterial.
The Insignia/MAE Agreement. In addition to the matters described in the
preceding paragraph, in the Insignia/MAE Agreement, MAE also has agreed with
Insignia that it will not, and will not permit any of its subsidiaries or
controlled affiliates (including the Partnership) to, dispose of any asset which
represents a direct or indirect interest in a property unless Insignia receives
proceeds or fees upon the disposition of such asset equal to or greater than
150% of Insignia's then-current annualized revenues with respect to such asset.
This restriction is not applicable if MAE makes certain "make-up" payments to
Insignia in connection with disposition or if MAE is required by contract or
fiduciary duty to sell such asset. This agreement may create a conflict with
respect to the Managing General Partner's determination to sell assets or
complete other Partnership transactions, or affect the terms of any such
transactions.
Section 11. Certain Information Concerning the Purchaser, Insignia,
Holding, Mr. Icahn, Riverdale and Highcrest.
The Purchaser. The Purchaser (which is an affiliate of the Managing General
Partner) was organized for the purpose of acquiring the Units. Holding and
Riverdale each own a 50% interest in the Purchaser. Holding is a wholly-owned
subsidiary of Insignia, and Riverdale is directly 100% owned by Mr. Icahn. The
Purchaser has not engaged in any business activity other than in connection with
the Offer and has no significant assets or liabilities at the present time. Upon
consummation of the Offer, the Purchaser's only significant assets will be the
Units it acquires pursuant to the Offer and it is anticipated that the Purchaser
will have no significant liabilities. The principal executive offices of the
Purchaser (which is an affiliate of the Managing General Partner) are located at
One Insignia Financial Plaza, Greenville, South Carolina 29601. The Purchaser
has no officers, and its sole manager is Holding.
Insignia and Holding. Holding is a newly-formed, wholly-owned subsidiary of
Insignia. Holding and Insignia are each affiliates of the Managing General
Partner. Holding's only significant asset is its 50% interest in the Purchaser,
and it does not presently have any liabilities. The principal executive officers
of Insignia and Holding are each located at One Insignia Financial Plaza,
Greenville, South Carolina 29601. For certain information concerning the
directors and executive officers of Insignia and Holding, see Schedule I to this
Offer to Purchase.
21
<PAGE>
Insignia is a full service real estate service organization which performs
property management, asset management, investor services, partnership
administration, mortgage banking, real estate brokerage services, and real
estate investment banking services for various ownership entities, including
approximately 900 limited partnerships having approximately 260,000 limited
partners. Insignia believes it is the largest manager of multifamily residential
properties in the United States, managing approximately 208,000 units of
multifamily residential housing similar to those owned by the Partnership. In
addition, Insignia, through its subsidiary Insignia Management Services--New
York, Inc., purchased the residential property management business of Douglas
Elliman-Gibbons & Ives and all of the outstanding stock of Kreisel Company,
Inc.; as a result of this purchase, Insignia also manages approximately 54,000
units of residential housing at 299 properties, all of which are in the
metropolitan New York market, and a substantial majority of which are within
Manhattan. Insignia also is a significant manager of commercial property,
managing approximately 64,000,000 square feet of retail and commercial space.
These properties are located in approximately 500 cities and 48 states. Insignia
is a public company whose stock is listed on the New York Stock Exchange, Inc.
Insignia is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning Insignia's business, principal physical properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the principal holders of Insignia's securities,
any material interests of such persons in transactions with Insignia and certain
other matters is required to be disclosed in proxy statements and annual reports
distributed to Insignia's shareholders and filed with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the Commission's public reference facilities and should also be available for
inspection in the same manner as set forth with respect to the Partnership in
Section 9.
Set forth below is certain consolidated financial information with respect
to Insignia and its consolidated subsidiaries for its fiscal years ended
December 31, 1994 and 1993 and its fiscal third quarters ended September 30,
1995 and 1994. More comprehensive financial and other information is included in
Insignia's Annual Report on Form 10-K for the year ended December 31, 1994
(including management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed by Insignia with
the Commission. The financial information set forth below is qualified in its
entirety by reference to such reports and documents filed with the Commission
and the financial statements and related notes contained therein. These reports
and other documents may be examined and copies thereof may be obtained in the
manner set forth above.
22
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
1995 1994 1994 1993
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Total Revenues............................... $89,177 $50,443 $75,566 $52,577
Income Before Taxes and Extraordinary Item... 8,840 8,808 12,101 8,074
Net Income................................... 5,304 5,286 7,261 4,670
As of September 30, As of December 31,
1995 1994 1994 1993
---- ---- ---- ----
(unaudited)
Balance Sheet Data:
Cash and Cash Equivalents.................... $ 27,643 $33,153 $36,596 $34,005
Receivables.................................. 27,738 11,833 13,572 8,428
Total Assets.............................. 226,988 96,553 174,272 88,835
Accounts Payable............................. 1,832 2,682 3,478 1,948
Accrued and Sundry Liabilities............... 24,394 12,085 18,790 14,208
Long-term Debt............................... 97,119 5,084 73,198 1,139
Total Liabilities......................... 123,345 19,851 95,466 17,295
Redeemable Convertible Preferred Stock....... 15,000 -- -- --
Minority Interests in Consolidated
Subsidiaries ............................... 2,688 -- -- --
Shareholders' Equity...................... 85,955 76,702 78,806 71,540
</TABLE>
Liquidity Assistance L.L.C. ("Liquidity"), an affiliate of the Purchaser,
owns 55 Units. The principal executive officers of Liquidity are located at One
Insignia Financial Plaza, Greenville, South Carolina 29601. In addition, Frank
M. Garrison, Executive Managing Director of Insignia, owns 17 Units. Mr.
Garrison's principal business address is set forth in Schedule I to this Offer
to Purchase.
Mr. Icahn, Riverdale and Highcrest. Riverdale is directly 100% owned by Mr.
Icahn, and Highcrest is indirectly 100% owned by Mr. Icahn. Riverdale is
primarily engaged in the business of owning real estate and acting as general
partner of High River Limited Partnership, an entity primarily engaged in the
business of investing in securities. Highcrest is primarily engaged in the
business of investing and holding securities, and in leasing, selling and
manufacturing railroad freight and tank cars, either directly or through
subsidiaries. The address of the principal office of each of Highcrest and
Riverdale is 100 South Bedford Road, Mount Kisco, New York 10549. The principal
business address of Mr. Icahn is c/o Icahn Associates Corp., 114 West 47th
Street, 19th Floor, New York, New York 10036. For certain information concerning
Mr. Icahn and the directors and executive officers of Riverdale and Highcrest,
see Schedule II to this Offer to Purchase.
Set forth below is financial information with respect to Riverdale and
Highcrest and its consolidated subsidiaries. Neither Riverdale nor Highcrest is
subject to periodic reporting requirements under the Exchange Act. The financial
information set forth below with respect to Riverdale is unaudited. Riverdale
does not prepare audited financial statements in the ordinary course of its
business and, accordingly, such audited financial statements were not available
or obtainable without unreasonable cost or expense. Highcrest prepares
consolidated financial statements only on an annual basis.
23
<PAGE>
RIVERDALE INVESTORS CORP., INC.
SELECTED FINANCIAL INFORMATION
($ in thousands)
As of September 30,
1995
-------------------
(unaudited)
Balance Sheet Data:
Cash............................................. $ 1,441
Securities owned at market value................. 28,254
Receivables and other assets..................... 55
Investment in High River at market value......... 5,688
Due from Brokers................................. 0
Total Assets.................................. 35,438
Due to Meadowstar................................ 2,736
Due to Brokers................................... 10,556
Total Liabilities............................. 13,292
Total Equity.................................. 22,146
Total Liabilities and Equity............... 35,438
HIGHCREST INVESTORS CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ in thousands)
As of December 31,
1994
------------------
Statements of Operations Data:
Total Revenues..................................... $438,000
Income Before Taxes and Extraordinary Item......... 44,000
Net Income......................................... 30,000
As of December 31,
1994
------------------
Balance Sheet Data:
Cash and Cash Equivalents (including reverse
repurchase agreements of $54,000)............... $ 61,000
Receivables (trade receivables, less allowances
for doubtful accounts of $1,000)................ 30,000
Total Assets.................................... 1,859,000
Trade Payables..................................... 30,000
Total Current Liabilities.......................... 384,000
Long-term Debt (includes railcar equipment debt
due within one year of $181,000)............... 638,000
Total Liabilities............................... 1,414,000
Minority Interest.................................. 6,000
Shareholders' Equity............................ 439,000
Longacre Corp., which is also indirectly 100% owned by Mr. Icahn, owns 25
Units. The principal executive offices of Longacre Corp. are located at 1 Wall
Street Court, New York, New York 10005.
Except as otherwise set forth in this Offer to Purchase, neither the
Purchaser (which is an affiliate of the Managing General Partner) nor, to the
best of the Purchaser's knowledge, any of the persons listed on Schedule I or
II, nor any affiliate of the foregoing (i) beneficially owns or has a right to
acquire any Units, (ii) has effected any transaction in the Units, or (iii) has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Partnership, including, but not limited
to, contracts, arrangements, understandings or relationships concerning the
transfer or voting thereof, joint
24
<PAGE>
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies.
Section 12. Source of Funds. The Purchaser (which is an affiliate of the
Managing General Partner) expects that approximately $3,025,000 will be required
to purchase 11,349 Units, if tendered, and to pay related fees and expenses. The
Purchaser (which is an affiliate of the Managing General Partner) will obtain
all of those funds from capital contributions to be made by Holding and
Riverdale. Holding expects to obtain its share of those funds from capital
contributions or loans from Insignia, which will obtain such funds from its
working capital; Riverdale expects to obtain its share of those funds from its
working capital or from a loan from Highcrest or an affiliate of Highcrest,
which will obtain such funds from its liquid assets and/or the liquid assets of
its wholly-owned, direct or indirect subsidiaries. Highcrest has irrevocably
committed to make or cause its affiliates to make such loan. Under the Operating
Agreement of the Purchaser, Riverdale has the right, under certain
circumstances, to decline to provide the additional capital contribution
required to fund the purchase of Units, in which event Holding may elect to
require the Purchaser to redeem Riverdale's interest in the Purchaser and
Holding will furnish all of the required funds.
Section 13. Background of the Offer.
Insignia's Affiliation with the Managing General Partner. On December 31,
1991, an affiliate of Insignia acquired substantially all of the assets of
Jacques-Miller, Inc. (the former management company for the Partnership), and
MAE acquired 100% ownership of the Managing General Partner. Insignia also
indirectly owns 50% of the Purchaser. In addition, under the Insignia/MAE
Agreement, MAE (which is the direct parent of the Managing General Partner) has
agreed, among other things to cause Insignia to be retained as a manager of all
properties controlled by MAE, which, for purposes of the Insignia/MAE Agreement,
include the Partnership's properties. Pursuant to that Agreement, IMG provides
property management services to the Partnership, and Insignia (directly or
through affiliates) performs asset management and partnership administration
services for the Partnership. Because of these relationships, Insignia and the
Purchaser (which is an affiliate of the Managing General Partner) are familiar
with the Partnership and the properties it owns and operates.
Riverdale's Recent Affiliation with Insignia. The Operating Agreement of the
Purchaser provides in substance that (i) immediately following the purchase of
Units pursuant to the Offer, the Purchaser would take all actions reasonably
required to seek its admission to the Partnership as a substitute Limited
Partner as to all of the Units pursuant to the Offer; (ii) the Units purchased
pursuant to the Offer would be voted as directed by Holding and Riverdale in
proportion to their respective interests in the Purchaser, except that Holding
would control certain aspects of the voting, including votes on any proposal (a)
made by the Managing General Partner of the Partnership, (b) to remove the
Managing General Partner, (c) that would in any way adversely alter the rights,
authority or obligations of the General Partner or (d) to reduce any
compensation payable to the Managing General Partner or any other affiliate of
Insignia; and (iii) except as contemplated by the foregoing provisions and
subject to certain limited exceptions, (a) neither Holding nor Riverdale or
their respective affiliates and other related persons shall commence a tender
offer for Units or purchase, buy, acquire or otherwise become the beneficial
owner of Units, and (b) so long as an affiliate of Insignia is the Managing
General Partner, Riverdale will not (1) make, or in any way participate in,
directly, or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 of the Exchange Act) with respect to the Partnership, (2) initiate,
propose or otherwise solicit Limited Partners for the approval of one or more
proposals with respect to the Partnership, or (3) instigate or encourage any
Limited Partner or other third party to do any of the foregoing. The Operating
Agreement also provides that under certain limited circumstances Insignia could
be required to cause its affiliate to sell to Riverdale or its designee either
the managing general partner interest in the Partnership currently held by
25
<PAGE>
the Managing General Partner or the stock of the entity that owns such interest,
in either case for a formula price based primarily on the amount of property
management fees paid by the Partnership to Insignia and its affiliates during
the year preceding the date of such transfer. The foregoing is only a summary of
the terms of the Operating Agreement and is qualified in its entirety by
reference to the full text of the Operating Agreement, a copy of which has been
filed as Exhibit (c)(1) to the Purchaser's Tender Offer Statement on Schedule
14D-1 and is incorporated herein by reference in its entirety.
Determination of Purchase Price. In establishing the Purchase Price, the
Purchaser (which is an affiliate of the Managing General Partner) reviewed
certain publicly available information and certain information made available to
it by the Managing General Partner and its other affiliates, including among
other things: (i) the Partnership Agreement, as amended to date; (ii) the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1994
and the Form 10-QSB for the nine months ended September 30, 1995; (iii)
unaudited results of operations of the Partnership's properties for the period
since the beginning of the Partnership's last fiscal year; (iv) the operating
budgets prepared by IMG with respect to the Partnership's properties for the
year ending December 31, 1995; and (v) other information obtained by IMG,
Insignia and other affiliates in their capacities as providers of property
management, asset management and partnership administration services to the
Partnership. Based on that information, the Purchaser (which is an affiliate of
the Managing General Partner) considered several factors, as discussed below.
Trading History of Units. Secondary market sales activity for the Units,
including privately negotiated sales, has been limited and sporadic. According
to information obtained from the Managing General Partner, from January 1, 1993
through December 1, 1995 and as set forth in more detail in the table below, an
aggregate of 939.5 Units (representing less than 3.4% of the total outstanding
Units) were transferred in sale transactions. Set forth in the table below are
the high and low sales prices of Units for the quarterly periods from January
1993 to September 1995, as reported by the Managing General Partner and Robert
A. Stanger & Co., Inc. ("Stanger"), an independent, third-party source. The
Managing General Partner did not begin requesting price-related information in
connection with processing transfers of Units until March 1994. Accordingly,
price-related information for periods prior to March 1994 is not presented under
the column captioned "As Reported by the Managing General Partner" in the table
below. The gross sales prices reported by Stanger do not necessarily reflect the
net sales proceeds received by sellers of Units, which typically are reduced by
commissions and other secondary market transaction costs to amounts less than
the reported prices. The Purchaser (which is an affiliate of the Managing
General Partner) does not know whether the information compiled by Stanger is
accurate or complete.
26
<PAGE>
DAVIDSON GROWTH PLUS, L.P.
REPORTED SALES PRICES OF PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
As Reported by the Managing As Reported
General Partner(1) by Stanger(2)
--------------------------- --------------------------
Low Sales High Sales Low Sales High Sales
Price Price Price Price
Per Unit Per Unit Per Unit Per Unit
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1995:
Fourth Quarter (through December 1, 1995)....... 130.00 227.00 -- --
Third Quarter................................... 58.50 169.00 203.00 227.00
Second Quarter.................................. 0 0 35.00 169.00
First Quarter .................................. 101.00 270.27* 35.00 169.00
Fiscal Year Ended December 31, 1994:
Fourth Quarter ................................. 96.00 96.00 101.00 101.00
Third Quarter................................... 100.00 100.00 96.00 96.00
Second Quarter.................................. n/a n/a n/a n/a
First Quarter................................... n/a n/a 92.00 100.00
Fiscal Year Ended December 31, 1993:
Fourth Quarter.................................. (1) (1) n/a n/a
Third Quarter................................... (1) (1) 193.91 193.91
Second Quarter.................................. (1) (1) n/a n/a
First Quarter................................... (1) (1) 190.00 205.00
- ------------
<FN>
(1) This information was provided to the Purchaser by the Managing General
Partner. The Purchaser (which is an affiliate of the Managing General
Partner) has been informed that since March 1994 the Managing General
Partner has requested and recorded information on the prices at which Units
are sold, but that it does not regularly receive or maintain information
regarding the bid or asked quotations of secondary market makers, if any.
The Managing General Partner has advised the Purchaser (which is an
affiliate of the Managing General Partner) that it processes transfers of
Units only four times a year--on the first day of each fiscal quarter.
Accordingly, the information presented for each fiscal quarter in the table
above reflects transactions that were reported to the Managing General
Partner in the preceding quarter. The data in the table are based solely on
information provided to the Managing General Partner by sellers and buyers
of Units transferred in sale transactions (i.e., excluding transactions
believed to result from the death of a Limited Partner, rollover to an IRA
account, establishment of a trust, trustee to trustee transfers, termination
of a benefit plan, distributions from a qualified or non-qualified plan,
uniform gifts, abandonment of Units or similar non-sale transactions).
(2) The gross sales prices reported by Stanger do not necessarily reflect the
net sales proceeds received by sellers of Units, which typically are reduced
by commissions and other secondary market transaction costs to amounts less
than the reported prices. The Purchaser (which is an affiliate of the
Managing General Partner) does not know whether the information compiled by
Stanger is accurate or complete.
* According to information provided by the Managing General Partner, the
$270.27 high sales price for the first quarter of 1995 reflects a single
transaction that was not at arms'-length.
</FN>
</TABLE>
The Purchaser (which is an affiliate of the Managing General Partner)
believes that, although secondary market sales information probably is not a
reliable measure of value because of the limited and inefficient nature of the
market for Units, this information may be relevant to a Limited Partner's
decision as to whether to tender its Units pursuant to the Offer. At present,
privately negotiated sales and sales through intermediaries (e.g., through the
trading system operated by Chicago Partnership Board, Inc., which publishes sell
offers by holders of Units) are the only means available to a Limited Partner to
liquidate an investment in Units (other than the Offer) because the Units are
not listed or traded on any exchange or quoted on any NASDAQ list or system.
Managing General Partner's Annual Estimates of Net Asset Value. The
Managing General Partner prepares annual estimates of the Partnership's net
asset value per Unit, which it makes available to Limited Partners upon request
for use in satisfying various requirements associated with the ownership of
Units, such as fiduciary obligations which may apply in the case of Units held
by trusts. The estimates of net asset value
27
<PAGE>
prepared by the Managing General Partner (the "NAV Estimates") do not
purport to be estimates of the fair market value of the Units themselves, and
the Purchaser (which is an affiliate of the Managing General Partner) believes
they should not be viewed as reflecting the fair value of Units. Furthermore, as
explained below, the NAV Estimates do not purport to reflect the amounts the
Limited Partners might actually receive upon a hypothetical liquidation of the
Partnership, because they do not take into account transactional and other costs
that would be incurred in a liquidation. The Managing General Partner prepares
the NAV Estimates based on its estimates of the values of the Partnership's
properties. The Managing General Partner does not solicit offers or inquiries
from prospective buyers of the Partnership's properties in connection with its
preparation of NAV Estimates. As used in this Offer to Purchase, "net operating
income" is calculated before depreciation amortization, debt service payments
and certain capital expenditure items.
In estimating the value of the Partnership's properties as of December 31,
1994, the Managing General Partner utilized the capitalization of income
approach. The following is a description of the methodology employed by the
Managing General Partner in preparing such estimates:
BRIGHTON CREST APARTMENTS. In estimating the value of this property, the
Managing General Partner reviewed the net operating income of the property for
the year ended December 31, 1994, which was $1,244,815, and the estimated net
operating income of the property for the year ended December 31, 1995 based on
the 1995 budget prepared by IMG, which was $1,333,537. Because the Managing
General Partner recognized that the net operating income trend was increasing at
the end of 1994, the Managing General Partner used an adjusted net operating
income amount to estimate the value of the property. To arrive at adjusted net
operating income, the Managing General Partner annualized the December 1994
rental revenue of $185,953, added the budgeted 1995 other income of $84,468, and
subtracted 1994 expenses of $964,121. The Managing General Partner further
adjusted the net operating income by increasing expenses by $200 per apartment
unit (to adjust for the amount of expenses the Managing General Partner
determined would be utilized by third party purchasers). The adjusted net
operating income was then capitalized at a 9.5% rate, resulting in an estimated
property value of $13,555,611, of which $11,183,379 is attributable to the
Partnership in respect of its 82.5% joint venture interest in the property. The
Managing General Partner believed that a 9.5% capitalization rate was
appropriate because this property is located in an attractive neighborhood in a
high-growth suburb of Atlanta, Georgia.
THE VILLAGE APARTMENTS. In estimating the value of this property, the
Managing General Partner reviewed the net operating income of the property for
the year ended December 31, 1994, which was $383,486, and the estimated net
operating income of the property for the year ending December 31, 1995 based on
the 1995 operating budget prepared by IMG, which was $357,806. Because the
Managing General Partner recognized that the rental income trend was increasing
at the end of 1994, the Managing General Partner used an adjusted net operating
income amount to estimate the value of the property. To arrive at adjusted net
operating income, the Managing General Partner annualized the December 1994
rental revenue of $69,413, added the budgeted 1995 other income of $20,700 and
subtracted 1994 operating expenses of $433,963. The Managing General Partner did
not further adjust the net operating income. The adjusted net operating income
was then capitalized at a 10% rate, resulting in an estimated property value of
$4,197,050. The Managing General Partner believed that a 10% capitalization rate
was appropriate because this is a smaller property located in an attractive
neighborhood of a high-growth suburb of the Tampa-St. Petersburg, Florida
metropolitan area.
THE FAIRWAY APARTMENTS. In estimating the value of this property, the
Managing General Partner reviewed the net operating income of the property for
the year ended December 31, 1994, which was $725,951, and the estimated net
operating income of the property for the year ending December 31, 1995 based on
the 1995 operating budget prepared by IMG, which was $744,489. Because the
Managing General Partner recognized that the rental income trend was increasing
at the end of 1994, the Managing General
28
<PAGE>
Partner used an adjusted net operating income amount to estimate the value
of the property. To arrive at adjusted net operating income, the Managing
General Partner annualized the December 1994 rental revenue of $130,863, added
the budgeted 1995 other income of $51,390 and subtracted 1994 operating expenses
of $857,187. The Managing General Partner did not further adjust the net
operating income. The adjusted net operating income was then capitalized at a
9.5% rate, resulting in an estimated property value of $8,048,000. The Managing
General Partner believed that a 9.5% capitalization rate was appropriate because
this is a well-performing property situated near one of the larger medical
centers in the Dallas, Texas area.
Based on the individual estimates of the values of the Partnership's
properties described above, the Managing General Partner estimated that the
aggregate gross real estate value of the Partnership's properties as of December
31, 1994 was $23,428,429. The Managing General Partner adjusted that amount to
reflect the Partnership's net current assets, the mortgage debt encumbering the
properties and the Managing General Partner's non-subordinated interest in the
Partnership to arrive at its NAV Estimate of $474.00 per Unit as of December 31,
1994. The Managing General Partner's NAV Estimates as of December 31, 1993 and
1992 were $240.00 and $531.16 per Unit, respectively. The decrease in the NAV
Estimate from 1992 to 1993 reflects, in part, the foreclosure on one of the
Partnership's properties and distributions made from refinancing proceeds during
1993.
The Managing General Partner prepares its NAV Estimates based on a
hypothetical sale (without taking into account any transaction costs) of all of
the Partnership's properties at their estimated aggregate value and the
distribution to the partners of the gross proceeds of that sale, net of related
indebtedness, together with the Partnership's cash, proceeds from temporary
investments, and all other assets that are believed to have liquidation value,
after provision in full for all of the Partnership's other known liabilities.
The NAV Estimates prepared by the Managing General Partner do not take into
account (i) real estate transaction costs that would be incurred on a sale of
the Partnership's properties, such as brokerage commissions and other selling
and closing expenses, (ii) timing considerations, or (iii) costs associated with
winding up the Partnership. Therefore, the Managing General Partner's NAV
Estimates do not necessarily represent either the fair market value of a Unit or
the amount a Limited Partner reasonably could expect to receive if the
Partnership's properties were sold and the Partnership was liquidated. For this
reason, the Purchaser (which is an affiliate of the Managing General Partner)
considered the Managing General Partner's NAV Estimates to be less meaningful in
determining the Purchase Price than the Purchaser's pro forma estimate of the
net liquidation value per interest described below.
Purchaser's Estimate of Gross Real Estate Value. In estimating the gross
real estate value of the Partnership's properties, the Purchaser (which is an
affiliate of the Managing General Partner) utilized the capitalization of income
approach. The estimate of the gross real estate value of the Partnership's
properties prepared by the Purchaser does not purport to be an estimate of the
aggregate fair market value of the Units themselves, nor should it be viewed as
such by Limited Partners. Neither the Purchaser nor Insignia prepared any
estimates of the values of the Partnership's properties based upon any other
valuation method.
The following is a description of the methodology employed by the Purchaser
(which is an affiliate of the Managing General Partner) in preparing such
estimates:
BRIGHTON CREST APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the net operating income generated by the property through
November 1995 of $1,171,278 and then annualized this amount, resulting in
forecasted net operating income for the year ending December 31, 1995 of
$1,277,758. The annualized net operating income was then capitalized at a 9.0%
rate, resulting in an estimated property value of $14,197,311, in which the
Partnership has a 82.5% joint venture interest amounting to $11,712,782.
29
<PAGE>
THE VILLAGE APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the net operating income generated by the property through
November 1995 of $396,886 and then annualized this amount, resulting in
forecasted net operating income for the year ending December 31, 1995 of
$432,967. The annualized net operating income was then capitalized at a 9.5%
rate, resulting in an estimated property value of $4,557,547.
THE FAIRWAY APARTMENTS. In estimating the value of this property, the
Purchaser reviewed the net operating income generated by the property through
November 1995 of $656,169 and then annualized this amount, resulting in
forecasted net operating income for the year ending December 31, 1995 of
$715,821. The annualized net operating income was then capitalized at a 9.5%
rate, resulting in an estimated property value of $7,534,958.
Based on the individual estimates of the gross values of the Partnership's
properties described above, the Purchaser (which is an affiliate of the Managing
General Partner) estimated that the current aggregate gross real estate value of
the Partnership's properties is $23,805,287 (the "Gross Real Estate Value
Estimate"). The property-specific capitalization rates used by the Purchaser in
the valuation estimates described above were based upon the Purchaser's
knowledge of expenses relating to operating properties in the relative markets
in which the Partnership's properties are located and its experience in the real
estate market in general. The Gross Real Estate Value Estimate does not take
into account (i) the debt encumbering the Partnership's properties or the other
liabilities of the Partnership, (ii) cash and other assets held by the
Partnership, (iii) real estate transaction costs that would be incurred on a
sale of the Partnership's properties, such as brokerage commissions and other
selling and closing expenses, (iv) timing considerations or (v) costs associated
with winding up the Partnership.
Although there are several other methods of estimating the value of real
estate of this type, the Purchaser (which is an affiliate of the Managing
General Partner) believes that this approach represents a reasonable method of
estimating the aggregate gross value of the Partnership's properties (without
taking into account the costs of disposing of the properties), subject to the
substantial uncertainties inherent in any estimate of value. The use of other
assumptions, however, particularly as to the applicable capitalization rate,
could produce substantially different results. The Purchaser did not solicit any
offers or inquiries from prospective buyers of the Partnership's properties in
preparing the Purchaser's estimates of their fair market values, and the actual
amounts for which the Partnership's properties might be sold could be
significantly higher or significantly lower than the Purchaser's estimates.
Purchaser's Pro Forma Estimate of Net Liquidation Value per Unit. The
Purchaser (which is an affiliate of the Managing General Partner) is offering to
purchase Units, which are a relatively illiquid investment, and is not offering
to purchase the Partnership's underlying assets or assume any of its
liabilities. Consequently, the Purchaser does not believe that the per-Unit
amount which might be distributed to Limited Partners following a future sale of
all the Partnership's properties necessarily reflects the present fair value of
a Unit. Conversely, the realizable value of the Partnership's assets clearly is
a relevant factor in determining the price a prudent purchaser would offer for
Units. In considering this factor, the Purchaser (which is an affiliate of the
Managing General Partner) made a pro forma estimate of the amount a Limited
Partner might receive in a theoretical orderly liquidation of the Partnership
(which may not be realistically possible, particularly in the near term, due to
real estate market conditions, the general difficulty of disposing of real
estate in a short period of time, and other general economic factors), based on
Gross Real Estate Value Estimate and the other considerations described below.
In estimating the pro forma net liquidation value per Unit, the Purchaser
(which is an affiliate of the Managing General Partner) adjusted its Gross Real
Estate Value Estimate of $23,805,287 to reflect the Partnership's other assets
(excluding prepaid and deferred expenses) and liabilities. Specifically, the
30
<PAGE>
Purchaser added the amounts of cash, accounts receivable and escrow deposits
shown on the Partnership's unaudited balance sheet at September 30, 1995 and
subtracted (i) all liabilities shown on that balance sheet and (ii) unamortized
debt discounts (representing the differences between the amounts at which
certain liabilities are carried on the Partnership's balance sheet and the
contractual amount of those obligations), which adjustments include the effect
of the aggregate cash distributions of $1,346,807 (or $47.47 per Unit) made to
Limited Partners during 1995. The Purchaser (which is an affiliate of the
Managing General Partner) then deducted from that amount a reserve equal to 4%
of the Gross Real Estate Value Estimate, which represents the Purchaser's
estimate of the probable costs of brokerage commissions (some of which may be
payable to the Managing General Partner or its affiliates), real estate transfer
taxes and other disposition expenses (assuming no prepayment penalties on
indebtedness encumbering the properties). The result, $12,413,726, represents
the Purchaser's pro forma estimate of the aggregate net liquidation proceeds
(before provision for the costs described in the following sentence) which could
be realized on an orderly liquidation of the Partnership, based on the
assumptions implicit in the calculations described above. The Purchaser (which
is an affiliate of the Managing General Partner) did not deduct any amounts in
respect of the legal and other costs which the Purchaser expects would be
incurred in a liquidation, including costs of negotiating purchase and sale
contracts, possibly conducting a consent solicitation in order to obtain the
Limited Partners' approvals for the sales as may be required by the Partnership
Agreement, and winding up the Partnership, because of the difficulty of
estimating those amounts.
To complete its pro forma estimate of the amount of the theoretical
liquidation proceeds that would be distributable per Unit, the Purchaser (which
is an affiliate of the Managing General Partner) deducted from the $12,413,726
estimated aggregate net liquidation proceeds the 3% of such proceeds that would
be payable to the General Partners in respect of their non-subordinated
interests in the Partnership, and then divided such amount by the 28,371.75
Units currently outstanding. The resulting estimated pro forma liquidation value
was $424.41 per Unit (the "Estimated Liquidation Value"), before provision for
the legal and other costs of liquidating the Partnership described in the
preceding paragraph.
The Purchaser's pro forma liquidation analysis described above is merely
theoretical and does not itself reflect the value of the Units because (i) there
is no assurance that any such liquidation in fact will occur in the foreseeable
future and (ii) any liquidation in which the estimated fair market values
described above might be realized would take an extended period of time (at
least a year, and quite possibly significantly longer), during which time the
Partnership and its partners would continue to be exposed to the risk of
fluctuations in asset values because of changing market conditions and other
factors. For any property sales in which the Partnership is required to
indemnify the buyer for matters arising after the closing, a portion of the
sales proceeds could be held by the Partnership until all possible claims were
satisfied, further extending the delay in the receipt by the Limited Partners of
liquidation proceeds. Because of these factors, the Purchaser believes the
actual current value of a Unit is substantially less than its estimate of the
Estimated Liquidation Value. Conversely, there is a substantial likelihood that
the value realized in an orderly liquidation could be greater than the Estimated
Liquidation Value. A reduction in either operating expenses or capital
expenditures from the levels reflected in the property operating statements for
the eleven months ended November 30, 1995 would result in a higher liquidation
value under the method described above. Similarly, a higher liquidation value
would result if a buyer applied lower capitalization rates (reflecting a
willingness to accept a lower rate of return on its investment) to the net
operating income generated by the Partnership's properties than the
capitalization rates applied by the Purchaser. A 5% increase or decrease in the
aggregate value of the Partnership's properties would produce a corresponding
increase or decrease in the liquidating distribution to Limited Partners of
approximately $39.00 per Unit. Furthermore, the analysis described above is
based on a series of assumptions, some of which may not be correct. Accordingly,
this analysis should be viewed merely as indicative of the Purchaser's approach
to valuing Units and not as any way predictive of the likely result of any
future transactions.
31
<PAGE>
Section 14. Conditions of the Offer. Notwithstanding any other term of the
Offer, the Purchaser (which is an affiliate of the Managing General Partner)
will not be required to accept for payment or to pay for any Units tendered if
all authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer and in addition to the
Purchaser's right to withdraw the Offer at any time before the Expiration Date,
the Purchaser (which is an affiliate of the Managing General Partner) will not
be required to accept for payment or pay for any Units not theretofore accepted
for payment or paid for and may terminate or amend the Offer as to such Units
if, at any time on or after the date of the Offer and before the acceptance of
such Units for payment or the payment therefor, any of the following conditions
exists:
(a) a preliminary or permanent injunction or other order of any federal or
state court, government or governmental authority or agency shall have been
issued and shall remain in effect which (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment, purchase of or payment for any Units by the Purchaser
(which is an affiliate of the Managing General Partner), (ii) imposes or
confirms limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of any Units, including, without limitation, the right
to vote any Units acquired by the Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Partnership's Limited Partners, (iii)
requires divestiture by the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer, or (v) might materially adversely affect
the business, properties, assets, liabilities, financial condition, operations,
results of operations or prospects of the Purchaser or the Partnership;
(b) there shall be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable to
the Offer by any federal or state court, government or governmental authority or
agency, which might, directly or indirectly, result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened since
the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or prospects
of the Partnership, which is or may be materially adverse to the Partnership, or
the Purchaser (which is an affiliate of the Managing General Partner) shall have
become aware of any fact that does or may have a material adverse effect on the
value of the Units.
(d) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchaser (which is an
affiliate of the Managing General Partner) shall have otherwise learned that (i)
more than ten percent of the outstanding Units have been or are proposed to be
acquired by another person (including a "group" within the meaning of Section
13(d)(3) of the Exchange Act), or (ii) any person or group that prior to such
date had filed a Statement with
32
<PAGE>
the Commission pursuant to Section 13(d) or (g) of the Exchange Act has
increased or proposes to increase the number of Units beneficially owned by such
person or group as disclosed in such Statement by two percent or more of the
outstanding Units.
The foregoing conditions are for the sole benefit of the Purchaser (which
is an affiliate of the Managing General Partner) and may be asserted by the
Purchaser regardless of the circumstances giving rise to such conditions or may
be waived by the Purchaser in whole or in part at any time and from time to time
in its sole discretion. Any determination by the Purchaser (which is an
affiliate of the Managing General Partner) concerning the events described above
will be final and binding upon all parties.
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the Purchaser (which is an
affiliate of the Managing General Partner) is not aware of any filings,
approvals or other actions by any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of Units
by the Purchaser (which is an affiliate of the Managing General Partner)
pursuant to the Offer. Should any such approval or other action be required, it
is the Purchaser's present intention that such additional approval or action
would be sought. While there is no present intent to delay the purchase of Units
tendered pursuant to the Offer pending receipt of any such additional approval
or the taking of any such action, there can be no assurance that any such
additional approval or action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to the Partnership's
business, or that certain parts of the Partnership's business might not have to
be disposed of or other substantial conditions complied with in order to obtain
such approval or action, any of which could cause the Purchaser (which is an
affiliate of the Managing General Partner) to elect to terminate the Offer
without purchasing Units thereunder. The Purchaser's obligation to purchase and
pay for Units is subject to certain conditions, including conditions related to
the legal matters discussed in this Section 15.
Antitrust. The Purchaser (which is an affiliate of the Managing General
Partner) does not believe that the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, is applicable to the acquisition of Units contemplated by
the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
Section 16. Fees and Expenses. Except as set forth in this Section 16, the
Purchaser (which is an affiliate of the Managing General Partner) will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Units pursuant to the Offer. The Purchaser (which is an affiliate of
the Managing General Partner) has retained Beacon Hill Partners, Inc. to act as
Information Agent and IFGP Corporation to act as Depositary in connection with
the Offer. The Purchaser (which is an affiliate of the Managing General Partner)
will pay the Information Agent and the Depositary reasonable and customary
compensation for their respective services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Information
Agent and the Depositary against certain liabilities and expenses in connection
therewith, including liabilities under the federal securities laws. The
Purchaser (which is an affiliate of the Managing General Partner) will also pay
all costs and expenses of printing and mailing the Offer and its legal fees and
expenses.
Section 17. Miscellaneous. The Offer is being made solely by this Offer to
Purchase and the related Assignment of Partnership Interest and is being made to
all holders of Units. The Purchaser is not aware of any state where the making
of the Offer is prohibited by administrative or judicial action pursuant to any
valid
33
<PAGE>
state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Units pursuant thereto,
the Purchaser will make a good faith effort to comply with any such state
statute. If after such good faith effort the Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Units in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may
be inspected and copies may be obtained at the same places and in the same
manner as set forth in Section 9 (except that they will not be available at the
regional offices of the Commission).
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser (which is an affiliate of the Managing
General Partner) not contained herein or in the Assignment of Partnership
Interest and, if given or made, such information or representation must not be
relied upon as having been authorized.
DGP ACQUISITION, L.L.C.
December 8, 1995
34
<PAGE>
SCHEDULE I
INFORMATION REGARDING THE DIRECTORS AND
EXECUTIVE OFFICERS OF INSIGNIA AND HOLDING
1. Directors and Executive Officers of Insignia. Set forth in the table below
are the name and the present principal occupations or employment and the name,
principal business and address of any corporation or other organization in which
such occupation or employment is conducted, and the five-year employment history
of each of the directors and executive officers of Insignia. Insignia owns its
interest in the Purchaser (which is an affiliate of the Managing General
Partner) through its wholly-owned subsidiary Insignia Capital Corporation, a
passive investment company with no significant operations of its own. Unless
otherwise indicated, each person identified below is employed by Insignia. The
principal business address of Insignia and, unless otherwise indicated, the
business address of each person identified below, is One Insignia Financial
Plaza, Greenville, South Carolina 29601. Directors are identified by an
asterisk. All persons identified below are United States citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Andrew L. Farkas* Andrew L. Farkas has been a director of Insignia since its inception in July
1990, and has been Chairman and Chief Executive Officer of Insignia since
January 1991. Prior to August 1993, Mr. Farkas was the sole director of
Insignia. Mr. Farkas has been the president and sole director and stockholder
of Metropolitan Asset Group, Ltd. ("MAG"), a real estate investment banking
firm, since January 1983.
Robin L. Farkas* Robin L. Farkas has been a director of Insignia since August 1993. Mr. Farkas
is the retired Chairman of the Board and Chief Executive Officer of Alexander's
Inc., a real estate company. He served in that capacity from 1984 until 1993.
Alexander's Inc. filed a petition under Chapter 11 of the Federal Bankruptcy
Code in May 1992. He is also a director of Refac Technology Development
Corporation and of Greenman Bros. Inc.
Merril M. Halpern* Merril M. Halpern has been a director of Insignia since August 1993. Mr. Halpern
c/o Charterhouse has been Chairman of the Board of Directors and co-chief executive officer of
535 Madison Avenue Charterhouse Group International, Inc. ("Charterhouse"), a privately-owned
New York, NY 10022 investment firm which, among other things, actively engages in making private
equity investments in a broad range of industrial and service companies located
primarily in the United States, for more than the past five years. Mr. Halpern is
also a director of Charter Power Systems, Inc., Del Monte Foods, Inc., Microwave
Power Devices, Inc., International Exhaust Holdings and Dreyer's Grand Ice Cream, Inc.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
John F. Jacques* John F. Jacques has been a director of Insignia since August 1993 and with the
102 Woodmont Blvd. Office of the Chairman of Insignia since January 1992. From January 1969 until
Suite 400 December 1991, Mr. Jacques was the Chief Executive Officer of Jacques-Miller,
Nashville, TN 37205 Inc., a real estate syndication firm that sold substantially all of its assets
to Metropolitan Asset Enhancement, L.P., a limited partnership in which Insignia
has a limited partnership interest ("MAE"), in December 1991.
Robert G. Koen* Robert G. Koen has been a director of Insignia since August 1993. Since
125 West 55th Street January 1991, Mr. Koen has been a partner in the law firm LeBoeuf, Lamb, Greene
New York, NY 10019 & MacRae, which represents Insignia or certain of its affiliates from time to
time. From February 1984 until January 1991, Mr. Koen was a partner in the law
firm of Fulbright & Jaworski (formerly Reavis & McGrath).
Michael Lipstein* Michael Lipstein has been a director of Insignia since August 1993. Mr.
110 East 59th Street Lipstein is, and for more than the past five years has been, self-employed in
New York, NY 10022 the real estate business, including ownership, management, and lending.
Buck Mickel* Buck Mickel has been a director of Insignia since August 1993. Mr. Mickel has
Fluor/Daniel been Chairman of the Board and Chief Executive Officer of RSI Holdings, a
301 N. Main Street company offering distribution of outdoor equipment, for more than the past five
Greenville, SC 29601 years. Mr. Mickel is also a director of Fluor Corporation, The Liberty
Corporation, NationsBank Corporation, Emergent Group, Inc., Delta Woodside
Industries, Inc., Duke Power Company, and Textile Hall Corporation.
John A. Sprague* John A. Sprague has been a director of Insignia since August 1993. Mr. Sprague
30 Rockefeller Plaza is the general partner of Jupiter Partners L.P., an investment firm. From
Suite 4525 January 1993 until February 1994, Mr. Sprague was an independent investor.
New York, NY 10112 From prior to March 1989 to December 31, 1992, Mr. Sprague served as General
Partner of Forstmann Little & Co., an investment firm. Mr. Sprague is also a
director of Heartland Wireless Communications, Inc. In March 1995, a class
action complaint was filed against Aldila, Inc., of which Mr. Sprague is a former
director, alleging certain securities violations. No answer has been filed at this
time.
James A. Aston James A. Aston has been with the Office of the Chairman since July 1994. From
January 1991 to July 1994, Mr. Aston was Managing Director--Investment Banking
of Insignia.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Frank M. Garrison Frank M. Garrison has been Executive Managing Director of Insignia and
102 Woodmont Blvd. President of Insignia Financial Services, a division of Insignia, since July
Suite 400 1994, and was Managing Director--Investment Banking of Insignia from January
Nashville, TN 37205 1993 to July 1994. From January 1992 to December 1992, Mr. Garrison was the
Senior Vice President of Investment Banking. From January 1991 to December 1991, Mr.
Garrison was employed by Donelson Ventures Holdings, L.P., a limited partnership engaged
in real estate investing activities. From January 1989 to December 1990, he was an
employee of Jacques-Miller, Inc.
Neil Kreisel Neil Kreisel has been an Executive Managing Director of Insignia
Kreisel Company, Inc. and President of Insignia Management Services--New
331 Madison Avenue York, Inc., a subsidiary of Insignia, since September 1995.
New York, NY 10017 For more than the past five years, Mr. Kreisel has been
President and Chief Executive Officer of Kreisel Company, Inc.
Thomas R. Shuler Thomas R. Shuler has been Managing Director--Residential Property Management
of Insignia since March 1991 and Executive Managing Director of Insignia and President of
Insignia Management Services, a division of Insignia, since July 1994. From January
1983 until March 1991, Mr. Shuler was President of the Management Division of Hall
Financial Group, Inc., a property management organization located in Dallas, Texas.
Ronald Uretta Ronald Uretta has been Insignia's Chief Financial Officer and Treasurer since January
1992. He also served as Secretary of Insignia from January 1992 to June 1994. Since September
1990, Mr. Uretta has also served as the Chief Financial Officer and Controller of MAG. From May
1988 until September 1990, Mr. Uretta was a self-employed financial consultant.
John M. Beam, Jr. John M. Beam, Jr. has been President of Insignia's mortgage banking affiliate,
Insignia Mortgage and Investment Company, since January 1991. From January 1988 until December
1990, Mr. Beam was employed by U.S. Shelter as President of its mortgage banking division.
Jeffrey L. Goldberg Jeffrey L. Goldberg has been Managing Director--Investment Banking of Insignia since
July 1994 and served as Managing Director--Asset Management of Insignia from January 1991 until
July 1994. Since April 1990, Mr. Goldberg has been an officer of MAG, currently an Executive Vice
President. From July 1989 until March 1990, Mr. Goldberg was employed in the Mergers and
Acquisitions Group of Drexel Burnham Lambert Incorporated, an investment banking firm.
S-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Albert H. Gossett Albert H. Gossett has been Vice President and Chief Information Officer of Insignia
since January 1991 and Senior Vice President and Chief Information Officer of Insignia since July
1994. From May 1979 until December 1990, Mr. Gossett was employed by U.S. Shelter as Director of
Management Information Systems.
Henry Horowitz Henry Horowitz has been Managing Director--Commercial Property Management of Insignia
since January 1993. From January 1987 to January 1993, Mr. Horowitz was the Chief Executive
Officer of First Resource Realty, Inc., a commercial property management organization that
Insignia acquired in January 1993.
William H. Jarrard, Jr. William H. Jarrard, Jr. has been Managing Director--Partnership Administration
of Insignia since January 1991 and Managing Director--Partnership Administration and Asset
Management since July 1994. Mr. Jarrard was employed by U.S. Shelter in a similar capacity for
three years prior to his joining Insignia.
John K. Lines John K. Lines has been General Counsel of Insignia since June 1994 and General Counsel
and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines was employed as Assistant
General Counsel and Vice President of Ocwen Financial Corporation, a thrift holding company in
West Palm Beach, Florida. From October 1991 until April 1993, Mr. Lines was employed as Senior
Attorney of Banc One Corporation, a bank holding company in Columbus, Ohio. From May 1984 until
October 1991, Mr. Lines was employed as an associate with the law firm of Squire Sanders &
Dempsey in Columbus, Ohio.
S. Richard Sargent S. Richard Sargent has been Senior Vice President--Human Resources of Insignia
since July 1994. From May 1989 until June 1994, Mr. Sargent was employed as Vice President, Human
Resources of Guilford Mills, Inc., a manufacturer of knitted textile products, in Greensboro,
North Carolina.
S-4
</TABLE>
<PAGE>
2. Director and Executive Officers of Holding. Set forth in the table below are
the name and the present principal occupation or employment and the name,
principal business and address of any corporation or other organization in which
such occupation or employment is conducted, and the five-year employment history
of the director and executive officers of Holding. Unless otherwise indicated,
each person identified below is employed by Insignia. The principal business
address of Holding and the business address of each person identified below is
One Insignia Financial Plaza, Greenville, South Carolina 29601. The director is
identified by an asterisk. All persons identified below are United States
citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Jeffrey L. Goldberg* Jeffrey L. Goldberg has been the sole director and President of Holding since its
organization in December 1995. In addition, Mr. Goldberg has been Managing Director--Investment
Banking of Insignia since July 1994 and served as Managing Director--Asset Management of Insignia
from January 1991 until July 1994. Since April 1990, Mr. Goldberg has been an officer of MAG,
currently an Executive Vice President. From July 1989 until March 1990, Mr. Goldberg was employed
in the Mergers and Acquisitions Group of Drexel Burnham Lambert Incorporated, an investment
banking firm.
John K. Lines John K. Lines has been the Secretary and a Vice President of Holding since its
organization in December 1995 and has been General Counsel of Insignia since June 1994 and
General Counsel and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines was
employed as Assistant General Counsel and Vice President of Ocwen Financial Corporation, a thrift
holding company in West Palm Beach, Florida. From October 1991 until April 1993, Mr. Lines was
employed as Senior Attorney of Banc One Corporation, a bank holding company in Columbus, Ohio.
From May 1984 until October 1991, Mr. Lines was employed as an associate with the law firm of
Squire Sanders & Dempsey in Columbus, Ohio.
Ronald Uretta Ronald Uretta has been the Treasurer and a Vice President of Holding since its
organization in December 1995 and has been Insignia's Chief Financial Officer and Treasurer since
January 1992. He also served as Secretary of Insignia from January 1992 to June 1994. Since
September 1990, Mr. Uretta has also served as the Chief Financial Officer and Controller of MAG.
From May 1988 until September 1990, Mr. Uretta was a self-employed financial consultant.
</TABLE>
S-5
<PAGE>
SCHEDULE II
INFORMATION REGARDING THE DIRECTORS AND
EXECUTIVE OFFICERS OF RIVERDALE AND HIGHCREST
1. Directors and Executive Officers of Riverdale. Set forth in the table below
are the name and the present principal occupations or employment and the name,
principal business and address of any corporation or other organization in which
such occupation or employment is conducted, and the five-year employment history
of each of the directors and executive officers of Riverdale. Riverdale owns a
50% interest in the Purchaser (which is an affiliate of the Managing General
Partner). The principal business address of Riverdale is 100 South Bedford Road,
Mount Kisco, New York 10549. The business address of each person identified
below is c/o Icahn Associates Corp., 114 West 47th Street, 19th Floor, New York,
New York 10036. The director is identified by an asterisk. All persons
identified below are United States citizens.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Carl C. Icahn* Mr. Icahn has been the sole Director of Riverdale since May 1986 and the Chairman of
the Board and President of Highcrest since August 1993. He is also President and a Director of
Icahn Holding Corporation, a Delaware corporation ("IHC") and Chairman of the Board and a
Director of various of IHC's subsidiaries, including ACF Industries, Inc., a New Jersey
corporation ("ACF"). IHC is primarily engaged in the business of holding, either directly or
through subsidiaries, a majority of the common stock of ACF and its address is 100 South Bedford
Road, Mount Kisco, N.Y. 10549. ACF is primarily engaged in the business of leasing, selling and
manufacturing railroad freight and tank cars and its address is 3301 Rider Trail South, Earth
City, Missouri 63045. Mr. Icahn has been President and a Director of IHC since August 1982 and
has been a director of ACF since June 1984 and Chairman of the Board of ACF since October 1984.
Mr. Icahn also maintains similar positions with various of ACF's affiliates, including: (i) since
1968, Mr. Icahn has been Chairman of the Board, President and a Director of Icahn & Co., Inc. a
Delaware corporation (collectively with its predecessor companies by merger, "Icahn & Co."),
which is a registered broker-dealer and a member firm of the New York Stock Exchange, Inc. and
whose address is 1 Wall Street Court, New York, N.Y. 10005; (ii) since November 1990, Mr. Icahn
has been Chairman of the Board and a Director of American Property Investors, Inc., a Delaware
corporation ("API") primarily engaged in the business of acting as general partner of American
Real Estate Partners, L.P. and whose address is 90 South Bedford Road, Mount Kisco, N.Y. 10549;
and (iii) from 1986 until January 1993, when he resigned, Mr. Icahn was a Director and Chairman
of the Board of Trans World Airlines, Inc. ("TWA"), whose address is One City Centre, 515 N.
Sixth Street, St. Louis, Missouri 63101. Since
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
June 1993, Mr. Icahn has also served as a Director of Astrum International Corp., a Delaware
holding company ("Astrum") whose principal subsidiaries are Samsonite Corporation, a manufacturer
and distributor of luggage, Culligan International Company, a manufacturer of water purification
and treatment equipment and McGregor Corporation, a manufacturer and distributor of apparel
products and a licensor of apparel brand names. Astrum's address is 40301 Fisher Island Drive,
Fisher Island, Florida 33109.
Edward E. Mattner Mr. Mattner has been President of Riverdale and a director of Highcrest since August
1993. He is also a securities trader at Icahn & Co. since May 1986, a registered broker-dealer
and a member firm of the New York Stock Exchange, Inc. whose address is 1 Wall Street Court, New
York, N.Y. 10005. Mr. Mattner has served in this capacity since May 1976.
Robert J. Mitchell Mr. Mitchell has been Treasurer of Riverdale since May 1986 and Vice President of
Riverdale since January 1994. He is also Senior Vice President Finance of ACF. ACF is primarily
engaged in the business of leasing, selling and manufacturing railroad freight and tank cars and
its address is 3301 Rider Trail South, Earth City, Missouri 63045. Mr. Mitchell has served as
Senior Vice President Finance since March 1995 and also served as Secretary of ACF since August
1993, Treasurer from December 1984 to March 1995 and Assistant Secretary from September 1986 to
August 1993. Mr. Mitchell has also served as Treasurer (since May 1988) and Chief Financial
Officer (since March 1995) of American Railcar Industries, Inc., a subsidiary of ACF primarily
engaged in the business of repairing, refurbishing, painting and maintaining railcars and in
manufacturing and selling parts for railcars and other industrial purposes. The address of
American Railcar Industries, Inc. is 3301 Rider Trail South, Earth City, Missouri 63045. Mr.
Mitchell became Treasurer of TWA, whose address is One City Centre, 515 N. Sixth Street, St.
Louis, Missouri 63101, in 1987 and held that position until he resigned, effective as of January
5, 1993. From March 1982 until November 1984, Mr. Mitchell was a Vice President-Department Head
of National Westminster Bank, USA, located at 175 Water Street, New York, N.Y. 10038.
</TABLE>
S-7
<PAGE>
2. Directors and Executive Officers of Highcrest. Set forth in the table below
are the name and the present principal occupations or employment and the name,
principal business and address of any corporation or other organization in which
such occupation or employment is conducted, and the five-year employment history
of each of the directors and executive officers of Highcrest. The principal
business address of Highcrest is 100 South Bedford Road, Mount Kisco, New York
10549. Directors are identified by an asterisk. All persons identified below are
United States citizens. Except as noted below, the business address of each
person identified below is c/o Icahn Associates Corp., 114 West 47th Street,
19th Floor, New York, New York 10036. Name Present Principal Occupation
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and
Name Five-Year Employment History
- ---- ----------------------------
<S> <C>
Carl C. Icahn* See above.
Richard T. Buonato* Mr. Buonato has been Senior Vice President, Treasurer and Director of
1 Wall Street Court Highcrest since August 1993. He is also Vice President and Controller of
Suite 920 Icahn & Co., a registered broker-dealer and a member firm of the New York
New York, N.Y. 10005 Stock Exchange, Inc., whose address is 1 Wall Street, Court, New York,
N.Y. 10005. Mr. Buonato has served as Vice President since December 1977
and as Controller since May 1976. Since February 1982, Mr. Buonato has
also served as Vice President and Controller of IHC, a company primarily
engaged in the business of holding, either directly or through
subsidiaries, a majority of the common stock of ACF. The address of IHC
is 100 South Bedford Road, Mount Kisco, N.Y. 10549.
Mark H. Rachesky* Mr. Rachesky has been Managing Director of Highcrest since August 1993.
He is also Managing Director of IHC, which is primarily engaged in the
business of holding, either directly or through subsidiaries, a majority
of the common stock of ACF and whose address is 100 South Bedford Road,
Mount Kisco, N.Y. 10549. Mr. Rachesky has served as Managing Director of
IHC since February 1990. Since November 1990, Mr. Rachesky has also
served as a Director and Vice President of API, the general partner of
American Real Estate Partners, L.P. API's address is 90 South Bedford
Road, Mount Kisco, N.Y. 10549.
Edward E. Mattner* See above.
</TABLE>
S-8
<PAGE>
Manually signed facsimile copies of the Assignment of Partnership Interest
will be accepted. The Assignment of Partnership Interest and any other required
documents should be sent or delivered by each Limited Partner or such Limited
Partner's broker, dealer, bank, trust company or other nominee to the Depositary
as set forth below.
The Depositary for the Offer is:
IFGP CORPORATION
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
-------- ------------- ----------- ---------------------------
<S> <C> <C> <C>
P.O. Box 909 (803) 239-1032 (800) 313-1542 One Insignia Financial Plaza
Greenville, SC 29602 Greenville, SC 29601
</TABLE>
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Assignment of Partnership Interest may be directed to
the Information Agent at its telephone number and address listed below. You may
also contact your broker, dealer, bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
(800) 755-5001
(Toll Free)
(212) 843-8500
(Call Collect)
ASSIGNMENT OF PARTNERSHIP INTEREST
FOR THE TENDER OF UNITS OF LIMITED PARTNERSHIP INTEREST IN
DAVIDSON GROWTH PLUS, L.P.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 8, 1995
- --------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK TIME, ON JANUARY 8, 1996 UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
IFGP CORPORATION
<TABLE>
<CAPTION>
By Mail: By Facsimile: To Confirm: By Hand/Overnight Delivery:
<S> <C> <C> <C>
P.O. Box 909 (803) 239-1032 (800) 313-1542 One Insignia Financial Plaza
Greenville, South Carolina 29602 Greenville, South Carolina 29601
</TABLE>
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN COMPLETING THE ASSIGNMENT
OF PARTNERSHIP INTEREST, PLEASE CALL OUR INFORMATION AGENT, BEACON HILL
PARTNERS, TOLL FREE AT (800) 755-5001.
DELIVERY OF THIS ASSIGNMENT OF PARTNERSHIP INTEREST OR ANY OTHER REQUIRED
DOCUMENTS TO AN ADDRESS OTHER THAN THE ONE SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE
VALID DELIVERY.
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Dear Limited Partner:
The undersigned hereby tenders to DGP Acquisition, L.L.C., a Delaware
limited liability company (the "Purchaser"), the number of the undersigned's
units of limited partnership interest (the "Units") specified below in Davidson
Growth Plus, L.P., a Delaware limited partnership (the "Partnership"), at a
price of $240.00 per Unit, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated December 8, 1995,
receipt of which is hereby acknowledged, and in this Assignment of Partnership
Interest (which, together with any supplements or amendments, collectively
constitute the "Offer"). The Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to one or more of its affiliates, the
right to purchase Units tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer or
prejudice the rights of tendering Limited Partners to receive payment for Units
validly tendered and accepted for payment pursuant to the Offer.
Subject to and effective upon acceptance for payment of and payment for the
Units tendered hereby, the undersigned hereby sells, assigns and transfers to or
upon the order of the Purchaser all right, title and interest in and to all of
the Units tendered hereby; provided, that if proration of tendered Units is
required as described in Section 1 of the Offer to Purchase, this Assignment of
Partnership Interest shall be effective to transfer to the Purchaser only that
number of the undersigned's Units as is accepted for payment and thereby
purchased by the Purchaser. The undersigned understands that upon acceptance for
payment of and payment for the tendered Units, the Purchaser will be entitled to
seek admission to the Partnership as a Limited Partner in substitution for the
undersigned as to all the tendered Units, except that if proration of tendered
Units is required as described in Section 1 of the Offer to Purchase, and as a
result the Purchaser accepts for payment and thereby purchases less than all of
the undersigned's Units tendered hereby, then the undersigned may continue to be
a Limited Partner with respect to the tendered Units that are not purchased.
The undersigned irrevocably appoints the Purchaser, its officers, and any
designees of the Purchaser, as the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to exercise all voting and
other rights with respect to the Units tendered by the undersigned and accepted
for payment by the Purchaser. Such power of attorney and proxy shall be
considered coupled with an interest in the tendered Units and is irrevocable.
When the Units tendered hereby are accepted for payment pursuant to the Offer,
all prior proxies and powers given by the undersigned with respect to the Units
will, without further action, be revoked, and no subsequent proxies or powers
may be given, and if given will not be effective. The Purchaser, its officers
and any designee of the Purchaser will, with respect to the Units, be empowered
to exercise all voting and other rights of the undersigned as they, in their
sole discretion, may deem proper, whether at any meeting of the Partnership's
Limited Partners, by written consent or otherwise. The foregoing proxy and power
may be exercised by the Purchaser or any of the other persons referred to above
acting alone.
In addition to and without limiting the generality of the foregoing, the
undersigned hereby irrevocably (a) appoints any person nominated by the
Purchaser (the "Agent") as the undersigned's attorney-in-fact, with an
irrevocable instruction to the Agent to execute all or any instrument of
transfer and/or other documents in the Agent's discretion in relation to the
Units tendered hereby and to do all such other acts and things as may in the
opinion of the Agent be necessary or expedient for the purpose of, or in
connection with, the undersigned's acceptance of the Offer and to vest in the
Purchaser, or as it may direct, those Units (or, if proration of tendered Units
is required as described in Section 1 of the Offer to Purchase, such of those
Units as are purchased by the Purchaser); (b) authorizes and requests the
Partnership and its general partners to take any and all acts as may be required
to effect the transfer of the undersigned's Units (or, if proration of tendered
Units is required as described in Section 1 of the Offer to Purchase, such of
those Units as are purchased by the Purchaser) to the Purchaser or the
Purchaser's nominee and admit the Purchaser as a substitute Limited Partner in
the Partnership; (c) assigns to the Purchaser and assigns all of the right,
title and interest of the Limited Partner in and to any and all distributions
made by the Partnership from and after the expiration of the Offer in respect of
the Units tendered by the Limited Partner (or, if proration is required, as
described in section 1 of the Offer to Purchase, such of those Units as are
purchased by the Purchaser); and (d) agrees not to exercise any rights
pertaining to the Units without the prior consent of the Purchaser.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby and has full power and authority to validly tender,
sell, assign and transfer the Units tendered hereby and that when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, encumbrances, conditional sales agreements or other
obligations relating to the sale or transfer thereof, and such Units will not be
subject to any adverse claims. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of the Units tendered
hereby.
The undersigned understands that a tender of Units pursuant to the
procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
PLEASE COMPLETE ALL SHADED AREAS*
SIGN HERE TO TENDER YOUR UNITS
- -------------------------------------------------------------------------------
BOX A
The undersigned Limited Partner (or authorized person signing on behalf of
the registered Limited Partner) hereby tenders the number of Units specified
below pursuant to the terms of the Offer. The undersigned hereby certifies,
under penalties of perjury, that the information and representations provided in
Boxes A, B and C of this Assignment of Partnership Interest, which have been
duly completed by the undersigned, are true and correct as of the date hereof.
X_______________________________________
X_______________________________________
Signature(s) of Limited Partners
Date:_______________________________________
(Must be signed by registered Limited Partner(s) exactly as name(s)
appear(s) in the Partnership's records. If signature is by an officer of a
corporation, attorney-in-fact, agent, executor, administrator, trustee, guardian
or other person(s) acting in fiduciary or representative capacity, please
complete the line captioned "Capacity (Full Title)" and see Instruction 5.)
Print Name(s):______________________________________
______________________________________
Capacity (Full Title):______________________________
Address: ___________________________________________
____________________________________________________
(Include Zip Code)
(The address provided above must be the registered address of the Limited
Partner, or else a signature guarantee is required below.)
_______________________________ _____________________________________
Area Code and Social Security Number
Telephone Number or Taxpayer Identification
Number of Number of
Units Tendered:_______________ Units Owned: ________________________
(If no indication is given, all units owned of record by the Limited Partner
will be deemed tendered. If you wish to tender less than all of your Units, you
must continue to own at least 5 Units.)
GUARANTEE OF SIGNATURE(S)
*(If Required--See Instructions 1 and 6)
Authorized Signature:________________
Name: _______________________________
Date: _______________________________
Name of Firm:________________________
Address:_____________________________
Area Code and Tel. No.: _____________
- --------------------------------------------------------------------------------
IMPORTANT!
LIMITED PARTNERS MUST ALSO COMPLETE BOTH BOX B AND BOX C BELOW.
- --------------------------------------------------------------------------------
BOX B
SUBSTITUTE
Form W-9 Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
Department of CERTIFY BY SIGNING AND DATING BELOW
the Treasury
Internal --------------------------------------
Revenue Service Social Security Number(s) or
Employer Identification Number
-----------------------------------------------------------
Part 2--Certification--Under penalties of perjury, I
certify that: (1) The number shown on this form is my
correct Taxpayer Identification Number (or I am waiting for
a number to be issued to me) and (2) I am not subject to
Payer's back-up withholding either because I have not been notified
Request for by the Internal Revenue Service (IRS) that I am subject to
Taxpayer back-up withholding as a result of failure to report all
Identification interest or dividends, or the IRS has notified me that I am
Number (TIN) no longer subject to back-up withholding.
-----------------------------------------------------------
Certification Instructions--You must cross out item (2)
above if you have been notified by the IRS that you are
subject to back-up withholding because of underreporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to back-up
withholding you received another notification from the IRS
that you are no longer subject to back-up withholding, do
not cross out item (2).
SIGNATURE:________________________ DATE: _________________
Part 3--
Awaiting TIN [ ]
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(To be completed only if the box in Part 3 above is checked)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty days, 31
percent of all reportable payments made to me thereafter will be withheld until
I provide a number.
- -------------------------------------- ------------------------------------
Signature Signature
- --------------------------------------------------------------------------------
BOX C
FIRPTA AFFIDAVIT--CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the Purchaser that withholding of tax is not required upon
this disposition of a U.S. real property interest, the undersigned hereby
certifies the following on behalf of the tendering Limited Partner named above:
1. The Limited Partner, if an individual, is not a nonresident alien
for purposes of U.S. income taxation, and if not an individual, is
not a foreign corporation, foreign partnership, foreign trust, or
foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);
2. The Limited Partner's Social Security Number (for individuals) or
Employer Identification Number (for non-individuals) is: ______________;
and
3. The Limited Partner's address is: _____________________________________.
I understand that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement I have made here
could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete.
- -------------------------------------- ------------------------------------
Signature Signature
Title: _______________________________ Title: _____________________________
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
to
ASSIGNMENT OF PARTNERSHIP INTEREST
for
DAVIDSON GROWTH PLUS, L.P.
FORMING PART OF TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. If the Assignment of Partnership Interest is
signed by the registered holder of the Units and payment is to be made directly
to that holder at that holder's registered address, then no signature guarantee
is required on the Assignment of Partnership Interest. Similarly, if the Units
are tendered for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank, savings bank, credit union, savings and loan
association or trust company having an office, branch or agency in the United
States (each an "Eligible Institution"), no signature guarantee is required on
the Assignment of Partnership Interest. HOWEVER, IN ALL OTHER CASES, ALL
SIGNATURES ON THE ASSIGNMENT OF PARTNERSHIP INTEREST MUST BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, AND THEREFORE THE SECTION OF BOX A ENTITLED "GUARANTEE OF
SIGNATURE(S)" MUST BE COMPLETED IN ADDITION TO THE SHADED AREAS.
2. DELIVERY OF ASSIGNMENT OF PARTNERSHIP INTEREST. The Assignment of
Partnership Interest is to be completed by all Limited Partners who wish to
tender Units in response to the Offer. For a Limited Partner validly to tender
Units, a properly completed and duly executed Assignment of Partnership Interest
(or a facsimile thereof), along with any required signature guarantees and any
other required documents, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in the
Offer to Purchase).
THE METHOD OF DELIVERY OF THE ASSIGNMENT OF PARTNERSHIP INTEREST AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED
PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Units will be purchased (except from a Limited Partner who is
tendering all of the Units owned by that Limited Partner). All tendering Limited
Partners, by execution of the Assignment of Partnership Interest (or facsimile
thereof), waive any right to receive any notice of the acceptance of their Units
for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, additional
information may be provided on a separate signed schedule attached hereto.
4. MINIMUM TENDERS. A Limited Partner may tender any or all of his or her
Units; provided, however, that in order for a partial tender to be valid, after
the sale of Units pursuant to the Offer the Limited Partner must continue to
hold at least five Units. Accordingly, a Limited Partner who owns five or fewer
Units must tender all or none of that Limited Partner's Units.
5. SIGNATURES ON ASSIGNMENT OF PARTNERSHIP INTEREST. If the Assignment of
Partnership Interest is signed by the registered holder(s) of the Units tendered
hereby, THE SIGNATURE(S) MUST CORRESPOND EXACTLY WITH THE NAME(S) AS SHOWN ON
THE RECORDS OF THE PARTNERSHIP WITHOUT ALTERATION, ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
IF ANY OF THE UNITS TENDERED HEREBY ARE HELD OF RECORD BY TWO OR MORE JOINT
HOLDERS, ALL SUCH HOLDERS MUST SIGN THE ASSIGNMENT OF PARTNERSHIP INTEREST.
A Limited Partner may tender any or all of the Units owned by that Limited
Partner; provided, however, that in order for a partial tender to be valid,
after the sale of Units pursuant to the Offer, the Limited Partner must continue
to hold at least five Units. No alternative, conditional or contingent tenders
will be accepted.
If the Assignment of Partnership is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of corporations
or others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and proper evidence satisfactory to the Depositary of
their authority so to act must be submitted.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name(s) of a person(s) other than the signer(s) of the Assignment of
Partnership Interest or if a check is to be sent to someone other than the
signer(s) of the Assignment of Partnership Interest or to an address other than
that shown on the Assignment of Partnership Interest, signature guarantees are
required. See Section 1.
7. WAIVER OF CONDITIONS. The Purchaser expressly reserves the absolute
right, in its sole discretion, to waive any of the specified conditions of the
Offer, in whole or in part, in the case of any Units tendered.
8. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Information Agent at its address and telephone
number set forth below. Copies of the Offer to Purchase and the Assignment of
Partnership Interest may be obtained from the Information Agent.
<PAGE>
9. SUBSTITUTE FORM W-9. Each tendering Limited Partner is required to
provide the Depositary with a correct taxpayer identification number ("TIN"),
generally the Limited Partner's social security or federal employer's
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below. You must cross out item (2) in the
Certification box on Substitute Form W-9 if you are subject to back-up
withholding. Failure to provide the information on the form may subject the
tendering Limited Partner to 31% federal income tax withholding on the payments
made to the Limited Partner or other payee with respect to Units purchased
pursuant to the Offer. The box in Part 3 of the form may be checked if the
tendering Limited Partner has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked
and the Depositary is not provided with a TIN within sixty (60) days, thereafter
the Depositary will withhold 31% on all such payments of the purchase price
until a TIN is provided to the Depositary.
10. FIRPTA AFFIDAVIT. To avoid potential withholding of tax pursuant to
Section 1445 of the Internal Revenue Code in an amount equal to 10% of the
purchase price for Units purchased pursuant to the Offer, plus the amount of any
liabilities of the Partnership allocable to such Units, each Limited Partner who
or which is a United States person must complete the FIRPTA Affidavit contained
in the Assignment of Partnership stating, under penalties of perjury, such
Limited Partner's TIN and address, and that such Limited Partner is not a
foreign person. Tax withheld under Section 1445 of the Internal Revenue Code is
not an additional tax. If withholding results in an overpayment of tax, a refund
may be obtained from the IRS.
IMPORTANT: THE ASSIGNMENT OF PARTNERSHIP INTEREST OR FACSIMILE COPY THEREOF
(TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR PRIOR TO THE EXPIRATION DATE. IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE
COMPLETING THE ASSIGNMENT OF PARTNERSHIP INTEREST, PLEASE CALL THE INFORMATION
AGENT, BEACON HILL PARTNERS, TOLL FREE AT (800) 755-5001 OR COLLECT AT (212)
843-8500.
IMPORTANT TAX INFORMATION
Under the federal tax law, a Limited Partner whose tendered Units are
accepted for payment is required by law to provide the Depositary with such
Limited Partner's correct TIN on Substitute Form W-9 below. If such Limited
Partner is an individual, the TIN is his or her social security number. If the
Depositary is not provided with the correct TIN, the Limited Partner or other
payee may be subject to a penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such Limited Partner or other payee with
respect to Units purchased pursuant to the Offer may be subject to backup
withholding.
Certain Limited Partners (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Limited Partner must submit to the Depositary a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Limited Partner's exempt status. A Form W-8 can be obtained
from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional institutions.
If backup withholding applies, the Depositary is required to withhold 31
percent of any payments made to the Limited Partner or other payee. Backup
withholding is not an additional tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PLEASE NOTE THAT A TENDERING BENEFICIAL OWNER OF UNITS WHOSE UNITS ARE
OWNED OF RECORD BY AN INDIVIDUAL RETIREMENT ACCOUNT OR OTHER QUALIFIED PLAN WILL
NOT RECEIVE DIRECT PAYMENT OF THE PURCHASE PRICE; RATHER, PAYMENT WILL BE MADE
TO THE CUSTODIAN OF SUCH ACCOUNT OR PLAN. IF THE ACCOUNT IS AN IRA ACCOUNT, THE
CUSTODIAN OF THE ACCOUNT MUST SIGN THIS ASSIGNMENT OF PARTNERSHIP INTEREST.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a Limited Partner or
other payee with respect to Units purchased pursuant to the Offer, the Limited
Partner is required to notify the Depositary of the Unit of the Limited
Partner's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Limited Partner is
awaiting a TIN) and that (1) the Limited Partner has not been notified by the
Internal Revenue Service that the Limited Partner is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the Limited Partner that the Limited
Partner is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Limited Partner is required to give the Depositary the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Units. If the Units are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- -------------------------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined funds,
any one of the individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(2)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner(4)
- -------------------------------------------------------------------------------
Give the
For this type of account: EMPLOYER IDENTIFICATION
number of--
- -------------------------------------------------------------------------------
9. A valid trust, estate, or pension Legal entity (Do not furnish
trust the identifying number of the
personal representative or
trustee unless the legal
entity itself is not
designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department The public entity
of Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives agricultural
program payments
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's, or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments including
the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt interest dividends under
section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS.
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1993, payers
must generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal panalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
2
DGP ACQUISITION, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
----------------------------------------
OPERATING AGREEMENT
----------------------------------------
This Operating Agreement (this "Agreement") of DGP Acquisition, L.L.C. (the
"Company"), a limited liability company organized pursuant to the Delaware
Limited Liability Company Act (the "Act"), is entered into and shall be
effective as of December 7, 1995 (the "Effective Date") by and among the
Company, IB Holding, Inc., a Delaware corporation ("Insignia"), and Riverdale
Investors Corp., Inc., a Delaware corporation ("Riverdale"). As used in this
Agreement, the term "Members" shall mean the members (as such term is used in
the Act) of the Company from time to time. Initially, Insignia and Riverdale
shall be the only Members; however, any Person may cease to be a Member and any
Person may become a Member, in either case as provided in this Agreement and in
the Act.
ARTICLE I
DEFINITIONS AND REPRESENTATIONS AND WARRANTIES
Section 1. Definitions. As used in this Agreement, the terms set forth
below shall have the following meanings:
"Affiliate" means, as to any Person, (i) any other Person (and the
immediate family members of such Person) that controls, is controlled by, or is
under common control with the first Person; and (ii) if the first Person is a
natural person, the immediate family members of that Person.
"Associate" has the meaning specified in Rule 12b-2 under the Exchange Act.
A person shall be deemed to "Beneficially Own" (and to be the "Beneficial
Owner" and have "Beneficial Ownership" of) any security if (i) such Person
"beneficially owns" such security within the meaning of Rule 13d-3 under the
Exchange Act or (ii) such Person has any direct or indirect economic interest in
such security.
"Business Day" has the meaning specified in Rule 14d-1 under the Exchange
Act.
"Buy/Sell Notice" means an Insignia Buy/Sell Notice or a Riverdale Buy/Sell
Notice, as the case may be.
"Buy/Sell Notice Date" means the date on which a Riverdale Buy/Sell Notice
or an Insignia Buy/Sell Notice, as the case may be, is received by the Noticed
Member.
<PAGE>
"Buy/Sell Purchase Price" means, with respect to any sale of Shares and
Member Units by a Member Group pursuant to a Buy/Sell Notice, the sum of (i)
product of (a) the number of Shares being sold by such Member Group times (b)
the Buy/Sell Price, plus (ii) the product of (x) the number of Member Units
being sold by such Member Group times (y) the Imputed Unit Price.
"Buy/Sell Right" means the right of a Member Group to give a Buy/Sell
Notice.
"Buy/Sell Trigger" means any of the events described in Section 5(b)(i) of
Article VII, each of which gives the specified Member Groups a Buy/Sell Right
upon the occurrence (and during the continuation) of such Buy/Sell Trigger.
"Closing Date" means the date on which the Offer expires pursuant to its
terms and the Company accepts for payment, and thereby purchases, Units validly
tendered and not withdrawn pursuant to the Offer.
"Commenced" means the commencement of a Tender Offer, as determined under
Rule 14d-2 of the Exchange Act or, if such Tender Offer is not subject to
Section 14(d) of the Exchange Act, as determined in good faith by the Manager.
"Commission" means the United States Securities and Exchange Commission.
"Company Units" means all Units acquired by the Company pursuant to a
Tender Offer by the Company or in a Negotiated Purchase.
"Competing Offer" means a Tender Offer for Units which (i) is Commenced
prior to the expiration of the Offer by a Person that is not an Affiliate of any
Member and (ii) has a cash purchase price per Unit that is at least 5% greater
than the purchase price per Unit of the Offer on the date such Competing Offer
is Commenced; provided, however, that a Tender Offer for Units which satisfies
the criteria set forth in clauses (i) and (ii) nonetheless will not constitute a
Competing Offer if, on the date such Tender Offer is Commenced, 15% or more of
the outstanding Units have been validly tendered and not withdrawn pursuant to
the Offer.
"Covered Fees" means the aggregate amount of all real estate brokerage fees
and commissions, if any, paid by the Partnership to the General Partner or its
Affiliates from and after a Buy/Sell Closing in which Insignia or any member of
the Insignia Group sells Shares and Member Units pursuant to Section 5(b) of
Article VII of this Agreement, after deducting the aggregate amount of all
brokerage fees and commissions actually paid by the General Partner and its
Affiliates to Third Party brokers in connection with the transactions generating
the Covered Fees.
"Donelson" means Donelson Ventures, L.P. or any successor entity.
"Donelson Payment" means the portion of a GP Payment required to be paid to
Donelson pursuant to the Asset Purchase Agreement, dated December 31, 1991,
between
2
<PAGE>
Donelson, IFG and certain Affiliates of the foregoing, as amended by the letter
agreement with respect thereto dated November 28, 1995.
"Effect a Redemption" has the meaning specified in Section 14 of Article X
of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Extraordinary Transaction" means any of (i) a liquidation of the
Partnership, (ii) a sale of all or substantially all of the Partnership's
assets, (iii) a merger, consolidation, business combination, "roll-up" or other
similar transaction involving the Partnership, including without limitation any
such transaction to be achieved in whole or in part by means of an exchange
offer, or (iv) any other transaction which will result in a material structural
change in the Partnership or its assets outside the ordinary course of business.
"Follow-up Offer" means a Tender Offer for Units made by the Company in
response to a Competing Offer in accordance with the provisions of Section
3(a)(i) of Article IV; provided that the terms and conditions (other than the
purchase price, which shall be determined by the Manager in his sole discretion)
of the Follow-up Offer shall be reasonable and customary under the
circumstances.
"Follow-up Offer Notice" means a written notice from the Company to the
Members notifying them that the Company intends to make a Follow-up Offer, which
notice shall set forth the material terms and conditions of the Follow-up Offer.
"Future Hostile Offer" means a Tender Offer for Units which (i) is
Commenced after the expiration of the Offer by a Person that is not an Affiliate
of any Member and (ii) has a purchase price per Unit that is at least 35% of Net
Asset Value; provided that if the purchase price of the Future Hostile Offer is
increased prior to the Commencement of a Responsive Offer or a Qualifying Offer,
then such price increase shall be deemed to constitute the Commencement of a new
Future Hostile Offer for purposes of Section 3 of Article IV.
"General Partner" means the managing general partner of the Partnership
identified in the Partnership Agreement, which is Davidson Diversified
Properties, Inc. as of the Effective Date.
"GP Exercise Notice" means a written notice to Insignia from Riverdale that
Riverdale has elected to exercise the GP Transfer Option.
"GP Interest" means, collectively, the general partner interest in the
Partnership held by the General Partner and any GP Units.
"GP Payments" means the cash payments required to be made to the General
Partner in respect of the GP Interest pursuant to Section 11.5 ("Distribution of
Distributable Cash From Operations") and Section 11.6 ("Distributions of Cash
From Sales or Refinancings") of the Partnership Agreement.
3
<PAGE>
"GP Purchase Price" means an amount in cash equal to: (i) the Imputed Unit
Price multiplied by the number of GP Units owned by the Corporate General
Partner on the date of the GP Transfer Closing, plus (ii) 175% of the gross
property management fees paid by the Partnership during the Partnership's most
recently ended fiscal year preceding the Buy/Sell Closing (with respect to
properties owned by the Partnership and not under contract for sale as of the
date of the GP Transfer Closing), minus (iii) 50% of the aggregate gross
property management fees paid by the Partnership from and after the Buy/Sell
Closing until the GP Transfer Closing or the Substantial Liquidation Date, as
the case may be, minus (iv) 50% of the Covered Fees. The GP Purchase Price shall
be computed and certified by the Partnership's independent public accountants.
"GP Stock" means 100% of the issued and outstanding capital stock of the
General Partner.
"GP Transfer" means the transfer of the GP Interest to Riverdale or its
designee by an Affiliate of Insignia pursuant to the exercise of the GP Transfer
Option.
"GP Transfer Option" means the option, exercisable by Riverdale from and
after the date (if ever) on which (i) Insignia notifies (or is deemed to have
notified) Riverdale pursuant to Section 5(b)(iii)(1) or (2) of Article VII that
the Insignia Group has elected to sell its Shares and Member Units pursuant to a
Riverdale Buy/Sell Notice or (ii) any member of the Insignia Group has sold
Shares or Member Units at a Buy/Sell Closing, to purchase either the GP Interest
or the GP Stock, in either case for the GP Purchase Price and in accordance with
the provisions of Section 5(b)(v) of Article VII of this Agreement.
"GP Units" means all Units owned of record by the General Partner on the
date hereof.
"Group" means a "partnership, limited partnership, syndicate or other
group" within the meaning of Section 13(d)(3) of the Exchange Act.
"Highcrest" means Highcrest Investors Corporation, a Delaware corporation
and an Affiliate of Riverdale.
"ICA" means the United States Investment Company Act of 1940, as amended.
"Icahn" means Carl C. Icahn, an individual.
"Icahn Group" means, collectively, (i) Icahn, Riverdale and their
respective Affiliates and (ii) each Person who is a direct or indirect
transferee of any Riverdale Shares.
"IFG" means Insignia Financial Group, Inc., a Delaware corporation.
"Imputed Unit Price" means, in connection with any buy/sell transaction, an
amount in cash equal to the quotient of (A) the sum of (i) the product of (a)
the Buy/Sell Price times (b) the total number of Shares outstanding on the
Buy/Sell Notice Date, plus (ii) all
4
<PAGE>
liabilities of the Company as of the Buy/Sell Notice Date, minus (iii) all
assets of the Company (other than the Company Units) as of the Buy/Sell Notice
Date, divided by (B) the total number of Company Units as of the Buy/Sell Notice
Date.
"Insignia Buy/Sell Notice" means a notice that the Insignia Group has
elected to exercise its Buy/Sell Right pursuant to and as provided in Section 5
of Article VII of this Agreement, which notice shall contain and constitute an
irrevocable offer by Insignia, on behalf of the Insignia Group, to either (i)
purchase all Shares and all Member Units Beneficially Owned by the Icahn Group,
or (ii) sell to Riverdale all Shares and all Member Units Beneficially Owned by
the Insignia Group, in either case for the same cash price per Share (the
"Buy/Sell Price") specified by Insignia in such notice and for the Imputed Unit
Price per Member Unit.
"Insignia Group" means, collectively, (i) IFG, Insignia and their
respective Affiliates, (ii) Metropolitan Asset Enhancement, L.P. and (iii) each
Person who is a direct or indirect transferee of any Insignia Shares.
"Insignia Member" means each Person who is both a member of the Insignia
Group and a Member.
"Insignia Shares" means the 500 Shares originally issued to Insignia and
any other Shares subsequently acquired by Insignia or any of its Affiliates.
"Insignia Transfer Notice" means a written notice given by Insignia to
Riverdale indicating that a member of the Insignia Group intends to make a
transfer that is prohibited by Section 5(a) of Article VII of this Agreement,
which notice shall specify in detail the terms and conditions (including the
proposed transferee) of the proposed transfer.
"Limited Partner" means a limited partner of the Partnership.
"Member Group" means the Insignia Group or the Icahn Group, as the case may
be.
"Member Units" means, with respect to any Member, all Units Beneficially
Owned by such Member and its Affiliates, other than (i) Company Units and (ii)
GP Units.
"Negotiated Purchase" means a purchase of Units by the Company in a
negotiated transaction.
"Net Asset Value" means, at any given time, the net asset value per Unit as
most recently calculated by the General Partner for purposes of making such
calculations available to Limited Partners upon request.
"Noticed Group" means the Member Group of which the Noticed Member is a
member.
5
<PAGE>
"Noticed Member" means, as applicable, (i) Insignia, if it has received a
Riverdale Buy/Sell Notice, or (ii) Riverdale, if it has received an Insignia
Buy/Sell Notice.
"Offer" means the Tender Offer for Units to be made by the Company pursuant
to Section 2 of Article IV, as such Tender Offer may be amended and supplemented
from time to time.
"Offer Documents" means all documents relating to the Offer which are
required to be filed with the Commission, including but not limited to the Offer
to Purchase and any supplements and amendments thereto.
"Offering Group" means the Member Group of which the Offering Member is a
member.
"Offering Member" means, as applicable, (i) Insignia, if it has exercised
its Buy/Sell Right and delivered an Insignia Buy/Sell Notice to Riverdale
pursuant thereto, or (ii) Riverdale, if it has exercised its Buy/Sell Right and
delivered a Riverdale Buy/Sell Notice to Insignia pursuant thereto.
"Partnership" means Davidson Growth Plus, L.P., a Delaware limited
partnership.
"Partnership Agreement" means the Agreement of Limited Partnership of the
Partnership, as in effect on the Effective Date and as the same may be amended
from time to time after the Effective Date.
"Person" means any natural person or any corporation, partnership, venture,
association or other entity.
"Qualified Purchase" means a purchase of Units by a Member or Members in a
negotiated transaction permitted to be made pursuant to Section 3(b)(iii),
3(b)(iv) or 3(b)(v) of Article IV, provided that the following conditions are
satisfied:
(i) the Qualified Purchase may only be made on terms and conditions
that are the same in all material respects as the terms and conditions of
the proposed Negotiated Purchase set forth in the Unrestricted Purchase
Notice or the Restricted Purchase Notice, as the case may be, that resulted
in the right to make a Qualified Purchase (except that the purchase price
per Unit may be greater than that stated in the Unrestricted Purchase
Notice); and
(ii) prior to making the Qualified Purchase, the Member or Members
making the Qualified Purchase agree in writing with the Company for the
benefit of the other Members (a) to register any Units purchased pursuant
to such Qualified Purchase on the books of the Partnership in the record
name of the Company, as nominee for such Member or Members, and (b) that
any Units so purchased by such Member or Members pursuant to such Qualified
Purchase and
6
<PAGE>
registered in the record name of the Company shall be voted as provided in
Section 7 of Article IV of this Agreement and shall be subject to the
buy/sell provisions of Section 5(b) of Article VII.
"Qualifying Offer" means a Tender Offer for Units by a Member or Members
permitted to be made pursuant to Section 3(a) of Article IV, provided that the
following conditions are satisfied:
(i) the Member or Members making the Qualifying Offer agree in writing
with the Company for the benefit of the other Members prior to the
Commencement of the Qualifying Offer (a) to register any Units purchased
pursuant to such Qualifying Offer on the books of the Partnership in the
record name of the Company, as nominee for such Member or Members, and (b)
that any Units so purchased by such Member or Members pursuant to such
Qualifying Offer and registered in the record name of the Company shall be
voted as provided in Section 7 of Article IV of this Agreement and shall be
subject to the buy/sell provisions of Section 5(b) of Article VII; and
(ii) the Member or Members making the Qualifying Offer adequately
disclose, in a manner reasonably acceptable to counsel to the Company, the
agreements described in clause (i) above and the effects thereof in the
tender offer documents relating to such Qualifying Offer sent to the
Limited Partners and filed with the Commission (if required to be filed).
Counsel to the Company must provide its comments to such disclosure within
24 hours after the receipt thereof.
"Redemption Amount" means (A) the aggregate amount of contributions to the
Company's capital made pursuant to this Agreement in respect of Shares being
redeemed, less any amounts paid by the Company to Members by way of dividends or
distributions in respect of such Shares, plus (B) the product of (i) the number
of Member Units being purchased, times (ii) 72.5% of Net Asset Value.
"Responsive Offer" means a Tender Offer for Units made by the Company in
response to a Future Hostile Offer in accordance with the provisions of Section
3(a)(ii) of Article IV; provided that the terms and conditions (other than the
purchase price, which shall be in the sole discretion of the Manager) of the
Responsive Offer shall be reasonable and customary under the circumstances.
"Responsive Offer Notice" means a written notice from the Company to the
Members notifying them that the Company intends to make a Responsive Offer,
which notice shall set forth the material terms and conditions of the Responsive
Offer.
"Restricted Purchase Notice" means a written notice from Insignia to
Riverdale or from Riverdale to Insignia, as the case may be, proposing that the
Company make a Negotiated Purchase that does not satisfy the criteria set forth
in clauses (1) and (2) of Section 3(b)(i) of Article IV, which notice must set
forth all of the material terms and conditions of the
7
<PAGE>
proposed Negotiated Purchase, including without limitation the proposed number
of Units to be purchased and the proposed purchase price per Unit.
"Riverdale Buy/Sell Notice" means a notice that the Icahn Group has elected
to exercise its Buy/Sell Right pursuant to and as provided in Section 5 of
Article VII of this Agreement, which notice shall contain and constitute an
irrevocable offer by Riverdale, on behalf of the Icahn Group, to either (i)
purchase all Shares and all Member Units Beneficially Owned by the Insignia
Group, or (ii) sell to Insignia all Shares and all Member Units Beneficially
Owned by the Icahn Group, in either case for the same cash price per Share (the
"Buy/Sell Price") specified by Riverdale in such notice and for the Imputed Unit
Price per Member Unit.
"Riverdale Member" means each Person who is both a member of the Icahn
Group and a Member.
"Riverdale Shares" means the 500 Shares originally issued to Riverdale and
any other Shares subsequently acquired by Riverdale or any of its Affiliates.
"Riverdale Transfer Notice" means a written notice given by Riverdale to
Insignia indicating that a member of the Riverdale Group intends to make a
transfer that is prohibited by Section 5(a) of Article VII of this Agreement,
which notice shall specify in detail the terms and conditions (including the
proposed transferee) of the proposed transfer.
"Substantial Liquidation Date" means the first date on which fee interests
in real property owned by the Partnership have been sold which represent in the
aggregate 75% or more of the real property assets owned by the Partnership at
the Effective Date, such percentage to be calculated based on the book value of
each such asset as reflected in the most recent Report on Form 10-K or 10-KSB of
the Partnership prior to the Effective Date.
"Tender Offer" means a tender offer that is subject to Section 14(e) of the
Exchange Act.
"Terms" means the following terms and conditions of a Tender Offer: (i) the
purchase price, (ii) the minimum and maximum number of Units to be tendered for,
(iii) the expiration date, and (iv) the conditions to the Offer.
"Third Party" means, as to any Person, another Person that is not an
Affiliate or an Associate of the first Person.
"Third Party Proposal" means a proposal by a Person which is a Third Party
as to each Member Group to cause the Partnership to engage in an Extraordinary
Transaction.
"Third Party Proposal Trigger" means the distribution by a Third Party to
Limited Partners of proxy and/or consent solicitation materials relating to a
Third Party Proposal, if and only if within five Business Days of the date such
proxy and/or consent solicitation materials are
8
<PAGE>
first received by any member of the Insignia Group, Insignia does not notify
Riverdale that Insignia objects to the Third Party Proposal.
"Units" means units of limited partnership interest in the Partnership.
"Unrestricted Purchase Notice" means a written notice from Riverdale to the
Company proposing that the Company make a Negotiated Purchase that satisfies the
criteria set forth in clauses (1) and (2) of Section 3(b)(i) of Article IV,
which notice must set forth all of the material terms and conditions of the
proposed Negotiated Purchase, including without limitation the proposed number
of Units to be purchased and the proposed purchase price per Unit.
Section 2. Representations and Warranties of Insignia. Insignia hereby
represents and warrants to the Company and Riverdale as follows:
(a) The Insignia Group Beneficially Owns 72 Units as of the Effective Date.
The General Partner is the managing general partner of the Partnership and does
not own any Units of record.
(b) Attached hereto as Exhibit A is a true and correct copy of the
Partnership Agreement, as in effect on the Effective Date.
(c) Attached hereto as Exhibit B is a true and correct copy of the
Certificate of Formation of the Company (the "Certificate of Formation"). The
Certificate of Formation was filed with the Secretary of State of the State of
Delaware on November 13, 1995 and has not been amended on or prior to the
Effective Date.
(d) For purposes of Section 3(c)(1) of the ICA, as of the Effective Date,
no more than 25 Persons shall be deemed to "own" (within the meaning of Section
3(c)(1)) Shares by reason of Insignia's ownership of Shares.
(e) None of the Partnership's contracts or other transactions with any
member of the Insignia Group is, and any such contract or other transaction
entered into during the term of this Agreement will not be, prohibited by the
Partnership Agreement.
(f) Each of the Partnership's contracts with any member of the Insignia
Group is, and any such contract entered into during the term of this Agreement
will be, terminable by the Partnership without premium or penalty upon 60 days'
prior notice.
(g) Insignia has obtained, prior to the Effective Date, a waiver of any and
all contractual restrictions (other than restrictions contained in the
Partnership Agreement) on the ability of Insignia's Affiliate to transfer the GP
Interest to Riverdale pursuant to the provisions of Section 5(b)(v) of Article
VII, a copy of which is attached hereto as Exhibit C.
Section 3. Representations and Warranties of Riverdale. Riverdale hereby
represents and warrants to the Company and Insignia as follows:
9
<PAGE>
(a) The Icahn Group Beneficially Owns 25 Units as of the Effective Date.
(b) For purposes of Section 3(c)(1) of the ICA, as of the Effective Date,
no more than 25 Persons shall be deemed to "own" (within the meaning of Section
3(c)(1)) Shares by reason of Riverdale's ownership of Shares.
ARTICLE II
OFFICES
Section 1. Registered Office. The registered office of the Company shall be
established and maintained at 1209 Orange Street, Wilmington, Delaware 19801, in
the County of New Castle.
Section 2. Other Offices. The Company may have other offices, either within
or without the State of Delaware, at such place or places as the manager (the
"Manager") of the Company may from time to time appoint or the business of the
Company may require.
ARTICLE III
PURPOSE
Section 1. Purpose. The Company was formed for the purpose of engaging in
any lawful act or activity for which limited liability companies may be
organized under the Act. While this Agreement is in effect, the sole and
exclusive purposes of the Company shall be to acquire (including without
limitation pursuant to the Offer), and thereafter to hold for investment and
ultimately dispose of, or otherwise realize the value of, Units, and to conduct
any other activities necessary or incidental to such purposes including without
limitation exercising any and all voting and other rights appurtenant to the
ownership of such Units.
ARTICLE IV
STANDSTILL AND OFFER PROVISIONS
Section 1. Standstill Provisions.
(a) Subject to Sections 1(d) and 1(e) below and except as provided in
Section 3 of this Article IV, no member of the Insignia Group or the Icahn Group
shall (i) commence a Tender Offer for Units or (ii) purchase, buy, acquire or
otherwise become or seek to become the Beneficial Owner of Units (or any other
interest in the Partnership), in each case other than pursuant to the Offer;
provided, however, that the foregoing shall not prohibit (x) the acquisition of
Beneficial Ownership of Units by any member of the Insignia Group or the Icahn
Group as a result of any acquisition of Units by the Company or (y) the
acquisition by any member of the Insignia Group or the Icahn Group of the
capital stock of or any other interest in any other member of the Insignia Group
or the Icahn Group.
10
<PAGE>
(b) Except as provided in Section 1(c) and in Section 7 of this Article IV,
any Member may, on behalf of the Company, exercise the Company's rights as a
Limited Partner with respect to the Company Units and any Member Units
registered in the name of the Company as nominee for such Member, including
without limitation the Company's rights to access the books and records of the
Partnership; provided, however, that no member of the Icahn Group may call or
initiate a Limited Partner meeting or consent solicitation; and further provided
that (i) from and after the date of a Buy/Sell Closing in which the Insignia
Group sells Shares and Member Units to Riverdale (or its designee), and so long
as an Affiliate of Insignia continues to be the General Partner, the
participation by any member of the Insignia Group in any activity with respect
to the Partnership (whether referred to in this Section 1(b) of Article IV or
otherwise) shall be limited to activities of the General Partner required under
the Partnership Agreement or by the fiduciary obligations of such entity, and
(ii) from and after the date of the GP Transfer Closing, each member of the
Insignia Group shall also be prohibited from calling or initiating a Limited
Partner meeting or consent solicitation and from engaging in any other activity
with respect to the Partnership.
(c) No member of the Insignia Group or the Icahn Group, singly or as part
of a Group, directly or indirectly, through one or more intermediaries or
otherwise, may: (i) make, or in any way participate in, directly or indirectly,
any "solicitation" of "proxies" (as such terms are defined or used in Regulation
14A under the Exchange Act) or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 of the Exchange Act) with
respect to the Partnership; (ii) initiate, propose or otherwise solicit Limited
Partners for the approval of one or more proposals with respect to the
Partnership; or (iii) instigate or encourage any Limited Partner or other Third
Party to do any of the foregoing; provided, however, that until a Buy/Sell
Closing occurs, this Section 1(c) of Article IV shall not (A) apply to members
of the Insignia Group with respect to the matters set forth in clauses (i)-(iii)
of Section 7(b) of this Article IV or (B) restrict the ability of the members of
the Icahn Group to engage in the activities permitted by the final proviso of
Section 5(b)(v)(4) of Article VII; and further provided that (x) from and after
the date of a Buy/Sell Closing in which the Insignia Group sells Shares and
Member Units to Riverdale (or its designee), and so long as an Affiliate of
Insignia continues to be the General Partner, the participation by any member of
the Insignia Group in any activity with respect to the Partnership (whether
referred to in this Section 1(c) of Article IV or otherwise) shall be limited to
activities required under the Partnership Agreement or by the fiduciary
obligations of such entity, and (y) from and after the date of the GP Transfer
Closing, each member of the Insignia Group shall also be prohibited from
participating in any activity referred to in this Section 1(c) of Article IV and
from engaging in any other activity with respect to the Partnership.
(d) If at any time the only remaining Members are all members of the same
Member Group, then the provisions of this Section 1 and Section 3(a)(vi) of
Article IV shall no longer apply to the members of such Member Group or to any
Person who thereafter becomes a Member.
(e) Notwithstanding anything in this Agreement to the contrary, no Person
shall be deemed to have violated this Section 1(a) of Article IV in the event
that such Person acquires Beneficial Ownership of Units representing a de
minimis amount of the total outstanding
11
<PAGE>
Units pursuant to a transaction in which such Person acquires an interest in
another entity; provided that (i) the purpose of such transaction is not to
acquire Units or otherwise circumvent the intent of this Agreement, and (ii) if
such acquisition occurs while such Person or any of its Affiliates is a member
of a Member Group, then promptly after such acquisition such Person shall
register such Units on the books of the Partnership in the record name of the
Company, as nominee for such Person, and such Units shall constitute Member
Units for purposes of this Agreement.
(f) It is understood and agreed that except as provided in Section 2(a) of
this Article IV, the obligations of the Members (and any Person who becomes a
Member) and the members of their respective Member Groups under the provisions
of this Section 1 of Article IV shall survive (i) termination or modification of
this Agreement, (ii) termination (by sale, assignment, redemption or otherwise)
of any Member's Beneficial Ownership of Shares, (iii) termination or dissolution
of the Company, and (iv) termination of such Person as a Member.
Section 2. The Offer.
(a) The Offer shall initially be made upon the Terms mutually agreed upon
by the Members. If the Members are unable to agree on the Terms of the Offer
within 20 days of the Effective Date, then, notwithstanding any other provision
of this Agreement to the contrary, the provisions of Section 1 of this Article
IV shall be void and of no effect, and the Manager shall liquidate and dissolve
the Company as soon as practicable. All terms and conditions other than the
Terms of the Offer (including any supplements and amendments thereto) shall be
determined by the Manager, provided that such other terms and conditions must be
reasonable and customary under the circumstances. Each Member shall provide all
information reasonably requested by the Company to complete the Offer Documents
and consummate the Offer. Immediately following the Closing Date, the Company
shall take all actions as are necessary for it to be admitted to the Partnership
as a substitute Limited Partner as to all of the Units purchased pursuant to the
Offer.
(b) Except as provided in Section 2(c) below, any amendment to the Terms of
the Offer after the Offer has been Commenced must be approved by all Members;
provided, however, that only the Manager need approve any extension of the
expiration date of the Offer which, in the opinion of legal counsel to the
Company in connection with the Offer, (i) is required by the Exchange Act and
the rules and regulations thereunder or by the Commission or (ii) is otherwise
advisable under the circumstances.
(c) If a Competing Offer has been Commenced, then the Manager may, in his
sole discretion, increase the purchase price of the Offer from time to time;
provided, however, that the purchase price of the Offer may not be increased to
an amount that is greater than 115% of the purchase price of the Competing Offer
at the time of any such increase. If the purchase price of the Offer is
increased pursuant to this Section 2(c) of Article IV, then, within one Business
Day of the receipt of the Capital Call Notice relating to the Offer pursuant to
Section 6 of Article VII, Riverdale, on behalf of all Riverdale Members, may
elect not to fund the Riverdale Members' pro rata share of the Offer Call amount
specified in such Capital Call
12
<PAGE>
Notice, in which event the Company shall be required to Effect a Redemption with
respect to the Icahn Group.
(d) If (i) a Competing Offer has been Commenced, (ii) Riverdale (on behalf
of all Riverdale Members) proposes in writing to Insignia (on behalf of all
Insignia Members) to increase the purchase price of the Offer to a price that is
at least equal to, but not greater than 115% of, the purchase price of the
Competing Offer, and (iii) Insignia does not agree within two Business Days
after Riverdale's request to increase the purchase price of the Offer, then the
Company shall continue to make the Offer on unchanged terms and Riverdale may
elect within two Business Days following the expiration of the two Business Day
period referred to in the foregoing clause (iii) to require the Company to
Effect a Redemption in respect of the Icahn Group, in which case all members of
the Icahn Group will continue to be subject to the provisions of Section 1 of
this Article IV. If Insignia agrees to the increase in the purchase price of the
Offer proposed by Riverdale within such two Business day period, then the
Manager shall take such action as is reasonably necessary to amend the Offer and
effect such price increase.
(e) IFGP Corporation, which is an Affiliate of Insignia, will be retained
to act as depositary (the "Depositary") for the Offer. For its services, the
Company will pay the Depositary a base fee not to exceed $1,000, plus a fee per
assignment of partnership interest processed not to exceed $5.00 per piece. In
addition, the Depositary will be reimbursed for its reasonable out-of-pocket
expenses incurred in connection with the Offer. It is understood and agreed,
however, that the aggregate amount to be paid to the Depositary pursuant to this
Section 2(e) shall not exceed $10,000.
Section 3. Future Purchases of Units by the Company and Members.
(a) Tender Offers.
(i) If a Competing Offer has been Commenced and if within 48 hours of
the Closing Date the Manager determines that the Company should make a
Follow-up Offer, then (1) within 48 hours of the Closing Date the Company
shall provide Riverdale with a Follow-up Offer Notice, and (2) within three
Business Days after the Closing Date the Company shall Commence a Follow-up
Offer; provided, however, that if the Competing Offer is withdrawn prior to
the Commencement of the Follow-up Offer, then the Company shall not
Commence a Follow-up Offer. If the Company makes a Follow-up Offer in
accordance with the preceding sentence, then, by written notice to the
Company given on or prior to the next Business Day following the date of
receipt by Riverdale of a Capital Call Notice relating to such Follow-up
Offer pursuant to Section 6 of Article VII, Riverdale, on behalf of all
Riverdale Members, may elect not to fund the Riverdale Members' pro rata
share of the Offer Call amount specified in such Capital Call Notice, in
which event the Company shall be required to Effect a Redemption with
respect to the Icahn Group. Immediately following the date on which the
Company accepts for payment Units validly tendered pursuant to the
Follow-up Offer, the Company shall take all actions as are necessary for it
to be
13
<PAGE>
admitted to the Partnership as a substitute Limited Partner with respect to
all such Units accepted for payment.
(ii) If a Future Hostile Offer is Commenced and if within five
Business Days of the date on which the Future Hostile Offer is Commenced
the Manager determines that the Company should make a Responsive Offer,
then (1) within such five Business Day period the Company shall issue a
press release (which may omit information relating to the number of Units
to be tendered for, the purchase price of the Responsive Offer and any
other information counsel to the Company deems necessary in order to
prevent the issuance of such press release from constituting the
Commencement of a Tender Offer under Rule 14d-2 of the Exchange Act)
announcing the Company's intention to make a Responsive Offer, (2) within
two Business Days following the issuance of such press release the Company
shall provide Riverdale with a Responsive Offer Notice, and (3) the Company
shall Commence a Responsive Offer within ten Business Days of the date on
which the Future Hostile Offer is Commenced; provided, however, that if the
Future Hostile Offer is withdrawn prior to the Commencement of the
Responsive Offer, then the Company shall not Commence a Responsive Offer.
If the Company makes a Responsive Offer, then, by written notice to the
Company given on or prior to the next Business Day following the date of
receipt by Riverdale of a Capital Call Notice relating to such Responsive
Offer pursuant to Section 6 of Article VII, Riverdale, on behalf of all
Riverdale Members, may elect not to fund the Riverdale Members' pro rata
share of the Offer Call amount specified in such Capital Call Notice, in
which event the Company shall be required to Effect a Redemption with
respect to the Icahn Group. Immediately following the date on which the
Company accepts for payment Units validly tendered pursuant to the
Responsive Offer, the Company shall take all actions as are necessary for
it to be admitted to the Partnership as a substitute Limited Partner with
respect to all such Units accepted for payment.
(iii) If (1) the Company does not provide Riverdale with a Follow-up
Offer Notice within the 48 hour period referred to in clause (a)(i)(1) of
this Section 3, (2) the Company does not Commence a Follow-up Offer within
three Business Days after the Closing Date (other than as a result of the
fact that the Competing Offer was withdrawn), (3) the Company does not
issue a press release announcing the Company's intention to make a
Responsive Offer within five Business Days following the date on which a
Future Hostile Offer is Commenced, or (4) the Company does not Commence a
Responsive Offer (other than as a result of the fact that the Future
Hostile Offer was withdrawn within ten Business Days of the date on which a
Future Hostile Offer is Commenced), then, in any such case, the Company
shall not make a Follow-up Offer or a Responsive Offer, as the case may be,
and the Riverdale Members shall be permitted to Commence a Qualifying Offer
prior to the withdrawal or expiration of the Competing Offer or within
fifteen Business Days of the date on which the Future Hostile Offer is
Commenced (but prior to the withdrawal of such Future Hostile Offer), as
the case may be; provided, however, that if clause (2) or clause (4) gives
rise to the
14
<PAGE>
right to make a Qualifying Offer, then the Insignia Members also shall be
permitted to make a Qualifying Offer if the reason that the Company did not
Commence a Follow-up Offer within two Business Days after the Closing Date
or a Responsive Offer within ten Business Days after the Commencement of
the Future Hostile Offer, as the case may be, was outside the control of
the Company, the Manager, and any member of the Insignia Group. The Company
shall promptly provide a Member who makes a Qualifying Offer with all
information relating to the Company reasonably requested by such Member in
connection with such Qualifying Offer.
(iv) Immediately following the date on which the Member of Members
making a Qualifying Offer accepts for payment Units validly tendered
pursuant to such Qualifying Offer, the Company shall take all actions as
are necessary for it to be admitted to the Partnership as a substitute
Limited Partner with respect to all Units purchased by such Member or
Members (and registered in the record name of the Company) pursuant to the
Qualifying Offer.
(v) The Company shall take all action reasonably necessary to ensure
that any distribution received by the Company in respect of any Units
purchased pursuant to a Qualifying Offer and registered in the record name
of the Company as a result of a Qualifying Offer is received by the Member
or Members for whom the Company is the nominee with respect to such Units
as promptly as practicable after receipt thereof by the Company.
(vi) The Company and the Members covenant and agree that other than as
provided in (i), (ii) and (iii) above, none of the Company, the Members or
any of their respective Affiliates may Commence a Tender Offer for Units
after the expiration of the Offer.
(b) Negotiated Purchases.
(i) Without the consent of Riverdale, the Company may make a
Negotiated Purchase provided each of the following conditions are met:
(1) the number of Units purchased by the Company in the
Negotiated Purchase, together with all other Units purchased by the
Company in prior Negotiated Purchases, does not exceed 10% of the
total number of Units purchased by the Company pursuant to the Offer
and any subsequent Tender Offer for Units by the Company; and
(2) the price per Unit paid by the Company in the Negotiated
Purchase does not exceed 72.5% of the Net Asset Value.
(ii) The Company may make a Negotiated Purchase that does not satisfy
the criteria set forth in clauses (1) and (2) of (i) above if Riverdale
consents to such Negotiated Purchase.
15
<PAGE>
(iii) If Riverdale provides an Unrestricted Purchase Notice to the
Company and the Manager does not consent to the proposed Negotiated
Purchase that is the subject of the Unrestricted Purchase Notice within
three days of the date the Unrestricted Purchase Notice is received, then
the Riverdale Members shall be permitted to make a Qualified Purchase. The
Company shall take all action reasonably necessary to ensure that any
distribution received by the Company in respect of any Units registered in
the record name of the Company pursuant to this Section 3(b)(iii) is
received by the Riverdale Members for whom the Company is the nominee with
respect to such Units as promptly as practicable after receipt thereof by
the Company.
(iv) If Riverdale provides a Restricted Purchase Notice to Insignia
and Insignia does not consent in writing to the proposed Negotiated
Purchase by the Company that is the subject of the Restricted Purchase
Notice within three days of the date the Purchase Notice is received, then
the Riverdale Members shall be permitted to make a Qualified Purchase. The
Company shall take all action reasonably necessary to ensure that any
distribution received by the Company in respect of any Units registered in
the record name of the Company pursuant to this Section 3(b)(iv) is
received by the Riverdale Member or Riverdale Members for whom the Company
is the nominee with respect to such Units as promptly as practicable after
receipt thereof by the Company.
(v) If Insignia provides a Restricted Purchase Notice to Riverdale and
Riverdale does not consent in writing to the proposed Negotiated Purchase
by the Company that is the subject of the Restricted Purchase Notice within
three days of the date the Purchase Notice is received, then the Insignia
Members shall be permitted to make a Qualified Purchase. The Company shall
take all action reasonably necessary to ensure that any distribution
received by the Company in respect of any Units registered in the record
name of the Company pursuant to this Section 3(b)(v) is received by the
Insignia Member or Insignia Members for whom the Company is the nominee
with respect to such Units as promptly as practicable after receipt thereof
by the Company.
Section 4. Members' Review of Offer Documents. Each Member shall have the
right to review in a timely manner all of the Offer Documents and to comment
upon the Offer Documents, which comments shall be given due consideration by the
Manager. If a Riverdale Member requests that the Manager modify or add
disclosure in the Offer Documents relating to such Riverdale Member and the
Manager does not modify or add such disclosure as requested, then the indemnity
obligations of such Riverdale Member under Article VIII of this Agreement shall
not apply to any loss, claim, damage or liability that results from the
Manager's failure to make such requested modification or addition.
Section 5. Public Announcements. Subject to the requirements of applicable
law, rule, regulation or order, no Member shall make any public announcement
with respect to the Offer or any of the transactions or events incidental to the
commencement, continuance or consummation of the Offer without the prior written
consent of the other Members, which
16
<PAGE>
consent shall not be unreasonably withheld or delayed, provided that, to the
extent disclosure is required by law, rule, regulation or order, each Member
shall use reasonable efforts, consistent with its legal obligations, to submit
the form of proposed disclosure to the other Members and permit the other
Members a reasonable opportunity to comment thereon prior to publication.
Section 6. Litigation.
(a) All litigation which in any way arises out of or relates to the Offer
or any other purchase of Units by the Company, whether pursuant to a Tender
Offer or in a Negotiated Purchase, shall be exclusively controlled by the
Manager, including the selection of counsel for the Company and the Members
(which counsel shall be reasonably acceptable to all Members), and all costs and
expenses related to that litigation, including costs of settlement, shall be
paid by the Company; provided, however, that any Member may retain its own
counsel at its own expense and, if such Member so elects, may be represented by
its own counsel in any such litigation and may control any aspect of such
litigation relating solely to such Member and its Affiliates (other than the
Company). The foregoing provisions shall apply notwithstanding that the
defendants in the litigation are Persons other than the Company or its Members.
Under no circumstances will the Manager or the Company agree to any settlement
of litigation unless as part of that settlement each Member and all of their
respective Affiliates named as defendants receive unconditional releases of
liability.
(b) If within 10 days after being advised of the terms of any litigation
settlement Riverdale objects to the settlement and the Manager declines to
modify the terms of that settlement in a manner reasonably acceptable to such
objecting Member, then Riverdale may elect to require the Company to Effect a
Redemption with respect to the Icahn Group, and the Company and the remaining
Members will be fully responsible for all costs and liability associated with
the litigation, except only for costs and liabilities for which the Riverdale
Members are required to furnish indemnity under Article VIII.
Section 7. Voting of Partnership Units.
(a) Subject to the provisions of (b) below, (i) the Company Units shall be
voted (or waivers or written consents in respect thereof shall be executed) by
the Company as directed by the Members in proportion to their respective
interests in the Company, and (ii) the Member Units shall be voted (or waivers
or written consents in respect thereof shall be executed) as directed by the
Person or Persons for whom the Company is the nominee with respect to such
Units.
(b) Subject to the provisions of Section 5(b)(v)(4)(C) of Article VII,
until a Buy/Sell Closing occurs, and unless Insignia is in material default
hereunder, the Company Units and the Member Units shall be voted as directed by
the Manager:
(i) on any proposal to remove the General Partner or any proposal that
in any way adversely alters the rights, authority or obligations of the
General
17
<PAGE>
Partner, or to reduce any compensation payable to the General Partner or
Affiliate of Insignia;
(ii) on any proposal to cause the Partnership to engage in an
Extraordinary Transaction; provided, however, that if such proposal is a
Third Party Proposal or is proposed by a general partner of the Partnership
(other than the General Partner) and such proposal does not result in a
Buy/Sell Trigger exercisable by Riverdale on behalf of the Icahn Group,
then the Company Units shall be voted against the Third Party Proposal or
such proposal by a general partner and Insignia shall, and shall cause its
Affiliates (other than the General Partner) to, take such action as is
reasonably necessary under the circumstances to defeat such Third Party
Proposal or such proposal by a general partner; and
(iii) on any proposal made by the General Partner of the Partnership.
ARTICLE V
MEMBERS
Section 1. Place of Meetings. Meetings of the Members of the Company shall
be held at such place, either within or without the state of Delaware, as may
from time to time be designated by the Manager and stated in a notice of meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the Members of the Company
for the election of the Manager and for the transaction of such other business
as may properly come before the meeting shall be held annually at such time as
may be designated by the Manager and stated in the notice of meeting or waiver
of notice thereof.
Section 3. Special Meetings. Special meetings of the Members, to be held
for such purpose or purposes as may be specified in the notice of meeting, may
be called by the Manager or by any Member.
Section 4. Notice of Meetings; Waiver.
(a) Written notice of the date, hour, place and purpose or purposes of
every meeting of Members shall be delivered as provided in Section 9 of Article
X by the Manager (in the case of an annual meeting) or by the Member calling the
meeting (in the case of a special meeting), or by such person as the foregoing
may designate to perform this duty, not more than 60 days nor less than five
days before the meeting, to each Member of record entitled to vote at such
meeting.
(b) Notwithstanding the provisions of Section 4(a) of this Article V, each
person who is entitled to notice of any meeting of Members shall be deemed to
have waived such notice if the Member attends such meeting in person or by
proxy, or if the Member, before or after the meeting, submits a signed waiver of
such notice to the Company. When a meeting
18
<PAGE>
of Members is adjourned to another time and place, unless the Manager after the
adjournment shall fix a new record date for such adjourned meeting or the
adjournment is for more than 30 days, notice of such adjourned meeting need not
be given if the time and place to which such meeting has been adjourned was
announced at the meeting at which the adjournment was taken.
Section 5. Quorum. Unless otherwise required by law or the provisions of
the Certificate of Formation, the presence of the holders of record, in person
or represented by proxy, of 100% of the units of common membership interest of
the Company ("Shares") entitled to vote thereat shall be necessary to constitute
a quorum for the transaction of business at any meeting of Members. Shares owned
by the Company, or held in its treasury, if any, shall not be deemed outstanding
for this purpose. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting interest of those
present in person or represented by proxy may adjourn such meeting from time to
time until a quorum is present thereat. At any adjourned meeting at which a
quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 6. Voting; Proxies.
(a) Each Member shall be entitled to one vote for each Share held in its
name according to the membership interest ledger of the Company and may vote
either in person or by proxy with respect to any matter submitted to a vote of
the Members. Every proxy must be in writing and executed by the Member or by his
duly authorized attorney-in-fact, in which case the Company may request the
delivery of the original power of attorney as a condition of honoring such
proxy. A proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the company receives written notice to the contrary from any one of
such persons. No proxy shall be valid after a period of three years from the
date thereof unless otherwise provided in such proxy.
(b) The following actions shall require the unanimous approval of all
Members: (i) authorization and sales of additional Shares or other rights or
interests in the Company; and (ii) amendments to the Certificate of Formation or
to this Agreement. In addition, all other actions not specifically contemplated
by this Agreement to be taken by the Manager or the Company shall require the
unanimous approval of all Members, and no Member (other than Insignia acting in
its capacity as Manager pursuant to the express terms of this Agreement) shall
have the authority to or shall take any action on behalf of the Company without
the written approval of all Members. Unless demanded by a Member present in
person or represented by proxy at any meeting of the Members and entitled to
vote thereat, the vote thereat may be by voice vote and need not be by ballot.
Upon a demand by any such Member for a vote by ballot on any question, or at the
direction of such chairman that a vote by ballot be taken on any question, such
vote shall be taken. On a vote by ballot each ballot shall be signed by the
Member voting, or by his proxy as such if there be such proxy, and it shall show
the number of Shares voted by such Member or proxy.
19
<PAGE>
Section 7. Consent of Members in Lieu of Meeting. Any action permitted or
required to be taken by vote at any meeting of the Members may be taken without
a meeting upon the receipt by the Company of the written consent of all Members
entitled to vote thereon; provided, that such written consent shall set forth
the action so consented to.
Section 8. Continuation on Withdrawal of a Member. The Company's existence
will automatically terminate 90 days following the death, retirement,
resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence
of any event which terminates the continued membership of a Member in the
Company (each, a "Withdrawal"), unless there are at least two remaining Members
and the remaining Members agree to continue the Company by unanimous written
consent within 90 days after the Withdrawal of a Member. In order to permit the
continuation of the Company's existence in the event only one Member would
otherwise be remaining, additional Shares may be issued to any Person approved
by such remaining Member so that there are two Members to make the election
contemplated in the preceding sentence. In the event of a Withdrawal of a
Member, other than a Withdrawal resulting from a transfer of Shares permitted by
Section 5 of Article VII, the Company may elect to Effect a Redemption with
respect to the Member Group of which such Member is a member.
ARTICLE VI
MANAGER
Section 1. Number and Powers.
(a) There shall be only one Manager of the Company, and the affairs of the
Company shall be managed by the Manager to the limited extent specifically
contemplated in this Agreement. The Members hereby agree that the initial
Manager shall be Insignia.
(b) The Manager shall hold office until the expiration of his term and the
election and qualification of his successor. The powers of the Manager shall be
limited to those contemplated by this Agreement.
Section 2. Election and Qualifications. So long as any member of the
Insignia Group Beneficially Owns any Shares, the Manager shall be elected by
Insignia; thereafter the Manager shall be elected by a majority of the votes
cast at a meeting of the Members duly called and held. Except as provided in
Section 1 and Section 3 of this Article VI, the Manager shall be elected at the
Annual Meeting of Members to hold office until the next Annual Meeting of
Members and until his successor has been elected and shall have qualified. The
Manager must be at least eighteen years of age.
Section 3. Vacancies. Any vacancy in the position of Manager, whether
caused by resignation, death, disqualification, or removal of the Manager or
otherwise, may be filled as provided in the first sentence of Section 2 of this
Article VI.
Section 4. Resignation or Removal. The Manager may resign at any time and
such resignation shall take effect upon receipt thereof by the Members unless
otherwise specified
20
<PAGE>
in the resignation. The Manager may be removed either (i) by vote of a majority
of the Shares owned by Members entitled to elect or designate such Manager, with
or without Cause, or (ii) by vote of 50% of the outstanding Shares, for Cause.
For purposes of this Agreement, "Cause" shall be defined as (i) fraud,
dishonesty or willful misconduct, (ii) the commission of theft, embezzlement,
obtaining funds or property under false pretenses, or similar acts of misconduct
with respect to the property of the Company or its employees or (iii) conviction
of a felony.
Section 5. Compensation. The Manager may receive compensation for services
to the Company only to the extent approved by all Members.
ARTICLE VII
CONTRIBUTIONS OF CAPITAL; SHARES; TRANSFERS OF SHARES
Section 1. Contributions. Each Member shall contribute to the Company the
amount of cash set forth on Schedule I to this Agreement (the "Initial
Contribution") in exchange for the number of Shares set forth opposite each
Member's name on Schedule I. As set forth in Section 6 of this Article VII,
Members will be required from time to time to make additional capital
contributions.
Section 2. Share Certificates. Every holder of Shares in the Company shall
be entitled to have a certificate or certificates which represents and certifies
the number, kind and class of Shares owned by each such holder of Shares in the
Company. Certificates for fractional Shares shall not be issued. Each membership
interest certificate shall include on its face the name of the Company, the name
of the Member or other person to whom it is issued, the class of membership
interest and the number of Shares represented by the certificate. It shall be in
such form, not inconsistent with the Act, the Certificate of Formation or this
Agreement, as shall have been approved by the Manager. Each membership interest
certificate shall be signed by the Manager. In case the Manager who has signed a
certificate shall have ceased to be the Manager before such certificate is
issued, the certificate may nevertheless be issued by the Company with the same
effect as if the Manager had not ceased to be such as of the date of its issue.
Section 3. Authorized Shares. The total number of Shares which the Company
shall have authority to issue is 1,000 (one-thousand), of which all Shares shall
be units of common membership interest.
Section 4. Issue, Transfer and Registration of Certificates. Shares shall
be transferred on the books of the Company only by the surrender to the Company
of the certificate representing such Shares properly endorsed or accompanied by
a written assignment of such Shares or by a written power of attorney to sell,
assign, or transfer such Shares, properly executed, with necessary transfer
stamps affixed, and with such proof that the endorsement, assignment or power of
attorney is genuine and effective as the Manager may reasonably require. Except
as may be otherwise required by law, the Company shall be entitled to treat the
record holder of Shares as shown on its books as the owner of such for all
purposes, including the payment of dividends and the right to vote with respect
thereto, regardless of any transfer,
21
<PAGE>
pledge or other disposition of such Shares, until the Shares have been
transferred on the books of the Company in accordance with the requirements of
this Agreement. It shall be the duty of each Member to notify the Company of its
post office address.
Section 5. Transfers of Shares.
(a) Voluntary Transfers.
(i) Except as otherwise provided in this Agreement, no Member and no
transferee of a Member's Shares may directly or indirectly sell, assign,
transfer, exchange, encumber or otherwise dispose of Beneficial Ownership
of any Shares or any interest therein now held or hereafter acquired by a
Member; provided, however, that (1) any Member may transfer Shares to
another Member; (2) any Member may transfer Shares another member of such
Member's Member Group who agrees in a written amendment to this Agreement
to become a Member and thus be bound by the provisions of this Agreement,
provided that any such transfer does not result in a reduction in the
indirect Beneficial Ownership by IFG of the Insignia Shares or by Icahn of
the Riverdale Shares, as the case may be; and (3) transfers of interests in
an entity that Beneficially Owns Shares shall not constitute assignments or
transfers of Shares in violation of this provision, provided that any such
transfer does not result in a reduction in the indirect Beneficial
Ownership by IFG of the Insignia Shares or by Icahn of the Riverdale
Shares, as the case may be; and further provided that notwithstanding
anything to the contrary in this Agreement, (x) no direct or indirect
transfer of Shares by any Person shall be deemed to occur by reason of any
direct or indirect transfer of the capital stock or other security of
Insignia, including without limitation any transfer of the capital stock or
other security of Insignia pursuant to a merger, consolidation or other
extraordinary corporate transaction to which Insignia or any of its
subsidiaries is a party, and (y) it is expressly understood and agreed by
the Members that nothing in this Agreement shall prohibit any Shares that
are Beneficially Owned by a Member from being pledged to collateralize or
otherwise support general corporate obligations of such Member or its
Affiliates existing on the Effective Date or incurred during the term of
this Agreement, in either case in the ordinary course of business, but that
the foregoing shall not relieve any Member from its obligation to fully
perform its undertakings in this Agreement.
(ii) A transfer that would otherwise be prohibited by paragraph (i) of
this Section 5(a) nonetheless may be effected by a member of the Insignia
Group if at least 16 but not more than 60 days prior to the date of such
transfer Riverdale receives an Insignia Transfer Notice; provided, however,
that if Riverdale properly exercises its Buy/Sell Right in respect of such
Insignia Transfer Notice as provided in Section 5(b) of this Article VII,
then such transfer may not be consummated until after the Buy/Sell Closing
has occurred.
22
<PAGE>
(iii) A transfer that would otherwise be prohibited by paragraph (i)
of this Section 5(a) nonetheless may be effected by a member of the Icahn
Group if at least 16 but not more than 60 days prior to the date of such
transfer Insignia receives a Riverdale Transfer Notice; provided, however,
that if Insignia properly exercises its Buy/Sell Right in respect of such
Riverdale Transfer Notice as provided in Section 5(b) of this Article VII,
then such transfer may not be consummated until after the Buy/Sell Closing
has occurred.
(b) Buy/Sell Provisions.
(i) Buy/Sell Triggers. Each of the following events constitutes a
Buy/Sell Trigger:
(1) the expiration of a 10-day period following the filing by the
Partnership with the Commission of each Annual Report on Form 10-K or
10-KSB, beginning with the Report for the Partnership's fiscal year
ending in 1996; provided that if for any reason the Partnership is not
required to file an Annual Report on Form 10-K or 10-KSB with the
Commission, then for purposes of this Buy/Sell Trigger the Company
shall be deemed to have filed such Report on the 90th day following
the last day of the applicable fiscal year of the Partnership; and
further provided that if the Partnership is required to file an Annual
Report with the Commission but does not timely file such Report
(including any applicable extension under Rule 12b-25 under the
Exchange Act), then for purposes of this Buy/Sell Trigger the Company
shall be deemed to have filed such Report on the 105th day following
the last day of the applicable fiscal year of the Partnership;
(2) the giving of a notice (an "Objection Notice") by Riverdale
to Insignia to the effect that Riverdale opposes (x) any proposal made
by the General Partner or any member of the Insignia Group that is to
be submitted to a vote of the Limited Partners (whether such vote is
to be taken at a meeting or by written consent) or (y) any Third Party
Proposal or any proposal by a general partner of the Partnership
(other than the General Partner) with respect to which the General
Partner does not take a neutral position or recommend that Limited
Partners vote against, which Objection Notice must be given by
Riverdale not later than the 15th day after Insignia first gives
Riverdale written notice of the proposed vote (which written notice
shall be given by Insignia as promptly as practicable); provided,
however, that no Buy/Sell Trigger shall be deemed to have occurred if,
within 15 days after receipt by Insignia of an Objection Notice from
Riverdale, the proposal that is the subject matter of the Objection
Notice is withdrawn; and further provided that the giving of an
Objection Notice shall result in a Buy/Sell Right exercisable only by
Riverdale on behalf the Icahn Group;
23
<PAGE>
(3) the expiration of a Responsive Offer; provided, however, that
the expiration of a Responsive Offer shall result in a Buy/Sell Right
exercisable only by Riverdale on behalf the Icahn Group;
(4) a Third Party Proposal Trigger; provided, however, that a
Third Party Proposal Trigger shall result in a Buy/Sell Right
exercisable only by Riverdale on behalf the Icahn Group;
(5) the receipt by Riverdale of an Insignia Transfer Notice;
provided, however, that the receipt by Riverdale of an Insignia
Transfer Notice shall result in a Buy/Sell Right exercisable only by
Riverdale on behalf of the Icahn Group;
(6) the receipt by Insignia of a Riverdale Transfer Notice;
provided, however, that the receipt by Insignia of a Riverdale
Transfer Notice shall result in a Buy/Sell Right exercisable only by
Insignia on behalf of the Insignia Group;
(7) the occurrence of a material default by an Insignia Member
under this Agreement, which default continues uncured or unwaived for
a period of 15 consecutive days; provided, however, that such default
shall result in a Buy/Sell Right exercisable only by Riverdale on
behalf the Icahn Group; and
(8) the occurrence of a material default by a Riverdale Member
under this Agreement, which default continues uncured or unwaived for
a period of 15 consecutive days; provided, however, that such default
shall result in a Buy/Sell Right exercisable only by Insignia on
behalf the Insignia Group.
(ii) Buy/Sell Elections.
(1) Within 15 days after any Buy/Sell Trigger that results in a
Buy/Sell Right exercisable by Riverdale, Riverdale may exercise its
Buy/Sell Right by delivering a Riverdale Buy/Sell Notice to Insignia;
provided, however, that if the Company has purchased Units pursuant to
a Responsive Offer within the six-month period immediately preceding
the date of any Buy/Sell Trigger and the number of Units purchased by
the Company pursuant to the Responsive Offer exceeds 10% of the number
of Units owned by the Company immediately prior to the expiration of
the Responsive Offer, then for purposes of this paragraph the date of
such Buy/Sell Trigger will deemed to be the date that is 186 days
following the date on which Units are paid for by the Company pursuant
to the Responsive Offer.
24
<PAGE>
(2) Within 15 days after any Buy/Sell Trigger that results in a
Buy/Sell Right exercisable by Insignia, Insignia may exercise its
Buy/Sell Right by delivering an Insignia Buy/Sell Notice to Riverdale;
provided, however, that if the Company has purchased Units pursuant to
a Responsive Offer within the six-month period immediately preceding
the date of any Buy/Sell Trigger and the number of Units purchased by
the Company pursuant to the Responsive Offer exceeds 10% of the number
of Units owned by the Company immediately prior to the expiration of
the Responsive Offer, then for purposes of this paragraph the date of
such Buy/Sell Trigger will deemed to be the date that is 186 days
following the date on which Units are paid for by the Company pursuant
to the Responsive Offer.
(3) Notwithstanding the foregoing, Insignia shall not be entitled
to give an Insignia Buy/Sell Notice if Insignia has already received a
Riverdale Buy/Sell Notice, and Riverdale shall not be entitled to give
a Riverdale Buy/Sell Notice if Riverdale has already received an
Insignia Buy/Sell Notice.
(4) If a Buy/Sell Notice is not received within the applicable
15-day period specified above following a particular Buy/Sell Trigger,
then no Buy/Sell Right shall be exercisable in respect of such
Buy/Sell Trigger.
(iii) Buy/Sell Process.
(1) Not later than the 15th day after the Buy/Sell Notice Date
(or the eighth day in the case of a Buy/Sell Notice given pursuant to
a Buy/Sell Trigger described in Section 5(b)(i)(2), (3), (4) or (5))
(the "Response Date"), the Noticed Member shall irrevocably notify the
Offering Member in writing whether the Noticed Member (A) has elected
to buy Shares and Member Units Beneficially Owned by each member of
the Offering Group pursuant to the Buy/Sell Notice, or (B) has
elected, on behalf of each member of the Noticed Group, to sell Shares
and Members Units Beneficially Owned by each member of the Noticed
Group pursuant to the Buy/Sell Notice.
(2) If the Noticed Member fails to give that notice by the
Response Date, the Noticed Member will be deemed to have elected, on
behalf of each member of the Noticed Group, to sell Shares and Member
Units Beneficially Owned by each member of the Noticed Group.
(3) If the Noticed Member gives (or is deemed to have given)
notice to the Offering Member that the Noticed Group has elected to
sell Shares and Member Units pursuant to (1) or (2) above, then the
Offering Member shall be obligated to purchase from each member of the
Noticed
25
<PAGE>
Group (and each member of the Noticed Group shall be obligated to sell
to the Offering Member) all Shares Beneficially Owned by each member
of the Noticed Group at a price per Share equal to the Buy/Sell Price
and all Member Units with respect to which the Company is the nominee
for each such member of the Noticed Group at a price per Member Unit
equal to the Imputed Unit Price.
(4) If the Noticed Member gives notice to the Offering Member
that the Noticed Group has elected to buy Shares and Member Units
pursuant to (1) above, then each member of the Offering Group shall be
obligated to sell to the Noticed Member (and the Noticed Member shall
be obligated to purchase from each member of the Offering Group), all
Shares Beneficially Owned by each such member of the Offering Group at
a price per Share equal to the Buy/Sell Price and all Member Units
with respect to which the Company is the nominee for each such member
of the Noticed Group at a price per Member Unit equal to the Imputed
Unit Price.
(iv) Buy/Sell Closings. The closing (a "Buy/Sell Closing") of any sale
or sales of Shares and Member Units required by the exercise of a Member's
Buy/Sell Right shall take place at the principal offices of the Company at
10:00 a.m., local time, on the first Business Day which is 30 days after
the Buy/Sell Notice Date (or such earlier Business Day as the buyer of
Shares and Member Units specifies on not less than two Business Days prior
written notice to the seller(s) or such later Business Day as the buyer and
the seller(s) shall mutually agree to). At the Buy/Sell Closing, the
seller(s) will execute and deliver such documents as may be required by the
buyer to evidence the sale and transfer of the seller's(s') entire interest
in their Shares and Member Units, to be sold free and clear of all liens
and encumbrances whatsoever, and the buyer will pay the Buy/Sell Purchase
Price in immediately available funds. In addition, each Person selling or
purchasing Shares and/or Member Units at the Buy/Sell Closing shall execute
and deliver an instrument acknowledging, representing and warranting to the
other parties that such Person (a) made its purchase or sale decision on a
fully informed basis, (b) had full access to the books and records of the
Company and the Partnership prior to making its decision, (c) had ample
opportunity to ask questions of the management of the Company and the
Partnership prior to making its decision and received satisfactory answers
to those questions, and (d) did not rely on any representation of any other
Person in making its decision.
(v) GP Transfer Provisions.
(1) Once a Buy/Sell Notice has been received by either Insignia
or Riverdale, Insignia will not, and will not cause or permit any
Member of the Insignia Group to, take any action, or fail to take any
reasonable action, intended to alter adversely the rights, authority
or obligations of the General Partner in any way. After a Buy/Sell
Closing in which the
26
<PAGE>
members of the Insignia Group are sellers, upon written request from
Riverdale, Insignia shall, and shall cause the members of the Insignia
Group to, cause the GP Interest to be held by a single-asset
corporation (which may be Davidson Diversified Properties, Inc.) so
that, if Riverdale so elects, Insignia may transfer or cause to be
transferred to Riverdale or its designee the GP Stock instead of the
GP Interest at the GP Transfer Closing; provided, however, that (x)
Insignia and its Affiliates shall not be required to spend more than
nominal sums to effect such ownership structure, and (y) Riverdale
shall fully and unconditionally indemnify and hold harmless Insignia
and IFG and their respective controlling persons, Affiliates,
officers, directors and employees from and against any and all loss,
liability or damage, in each case arising out of any claim, whether
for breach of contract, breach of fiduciary duty or otherwise, by the
Partnership or any partner or former partner thereof, in its capacity
as such, that any of them may incur by reason of the transfer of the
GP Stock to Riverdale or its designee or any of the transactions
required to facilitate or incidental to such transfer.
(2) If Insignia notifies (or is deemed to have notified)
Riverdale that the Insignia Group has elected to sell Shares and
Member Units pursuant to Section 5(b)(iii)(1) or (2) above or if any
member of the Insignia Group is a seller at the Buy/Sell Closing, then
from and after the date of such notice (or deemed notice) or Buy/Sell
Closing Riverdale may exercise the GP Transfer Option by delivering a
GP Exercise Notice to Insignia.
(3) The closing of the GP Transfer (the "GP Transfer Closing")
shall take place at the principal offices of Insignia at 10:00 a.m.,
local time, on the first Business Day which is 30 days after the
receipt by Insignia of the GP Exercise Notice, in the event that
neither the Vote Requirement nor the Debt Requirement (each as defined
below) is applicable, otherwise the GP Transfer Closing will take
place as soon as practicable after the Vote Requirement is satisfied
and/or the Debt Requirement is satisfied, waived by Riverdale or
otherwise eliminated; provided, however, that if Riverdale delivers
the GP Exercise Notice to Insignia at least 20 days prior to the
Buy/Sell Closing pursuant to Section 5(b)(iv) and if neither the Vote
Requirement nor the Debt Requirement is applicable, then the GP
Transfer Closing shall take place simultaneously with the Buy/Sell
Closing. At the GP Transfer Closing, Insignia or its Affiliate will
execute and deliver such documents as may be required by Riverdale to
evidence the sale and transfer of Insignia's entire interest in the GP
Interest or the GP Stock, as the case may be, to Riverdale or its
designee, to be sold free and clear of all liens and encumbrances
whatsoever, and Riverdale will pay the GP Purchase Price in
immediately available funds. In addition, each Person who is a party
to the GP Transfer transaction shall execute and deliver an instrument
27
<PAGE>
acknowledging, representing and warranting to the other parties that
such Person (a) made its purchase or sale decision on a fully informed
basis, (b) had full access to the books and records of the Company and
the Partnership prior to making its decision, (c) had ample
opportunity to ask questions of the management of the Partnership
prior to making its decision and received satisfactory answers to
those questions, and (d) did not rely on any representation of any
other Person in making its decision. Also at the GP Transfer Closing,
Insignia and IFG, on the one hand, and Riverdale and Highcrest, on the
other hand, shall enter into an agreement by which: (i) Riverdale and
Highcrest agree to indemnify Insignia and IFG and their respective
controlling persons, Affiliates, officers, directors and employees
from and against any and all loss, liability or damage any of them may
incur by reason of (x) findings that in light of the conduct of the
General Partner following the GP Transfer Closing, the GP Transfer
breached the fiduciary duties of Insignia or any of its Affiliates or
otherwise was unlawful or (y) the activities of the General Partner or
the Partnership after the GP Transfer Closing; and (ii) Insignia and
IFG agree to indemnify the Riverdale and Highcrest and their
respective controlling persons, Affiliates, officers, directors and
employees from and against any and all loss, liability or damage any
of them may incur by reason of the activities of the General Partner
before the GP Transfer Closing (other than in respect of any claim for
which Riverdale is required to indemnify Insignia and IFG and their
respective controlling persons, Affiliates, officers, directors and
employers pursuant to Section 5(b)(v)(1) of this Article VII).
(4) If the GP Transfer would result in an acceleration of a
material amount of the Partnership's mortgage or other debt
obligations and/or the incurrence of prepayment premiums (a "Debt
Requirement") or would require a vote of the Limited Partners (a "Vote
Requirement"), then:
(A) Insignia will, and will cause its Affiliates to, use
commercially reasonable efforts to facilitate the elimination or
waiver of the Debt Requirement and/or to obtain the satisfaction
of the Vote Requirement, as applicable, and without limiting the
generality of the foregoing will (subject to its fiduciary
obligations) vote all of the GP Units in a manner reasonably
required to facilitate the GP Transfer.
(B) Until the GP Transfer Closing and except as otherwise
provided above, the General Partner and its Affiliates will
continue to perform the same functions and receive the same
compensation for and from the Partnership as before the Closing
and will take no action to diminish the rights and privileges of
the General Partner.
28
<PAGE>
(C) Until the GP Transfer Closing occurs, no member of the
Icahn Group may, singly or as part of a Group, directly or
indirectly, through one or more intermediaries or otherwise:
(i) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms
are defined or used in Regulation 14A under the Exchange
Act) or become a "participant" in any "election contest" (as
such terms are defined or used in Rule 14a-11 of the
Exchange Act) with respect to the Partnership;
(ii) initiate, propose or otherwise solicit, directly
or indirectly, Limited Partners for the approval of one or
more proposals with respect to the Partnership; or
(iii) instigate or encourage, directly or indirectly,
any Limited Partner or other Third Party to do any of the
foregoing;
if in any such case the purpose or effect of such conduct is or
is likely to be (1) to remove the General Partner without payment
of the GP Purchase Price, (2) to in any way adversely alter the
rights, authority or obligations of a general partner of the
Partnership, (3) to reduce the rights, authority or obligations
of a general partner of the Partnership, or (4) to reduce any
compensation payable to, or increase the obligations of, any
general partner of the Partnership or any Affiliate of Insignia;
provided, however, that the foregoing shall not prohibit
Riverdale from taking any action in order to satisfy the Vote
Requirement.
(5) From and after the date of the GP Transfer Closing and so
long as any member of the Icahn Group controls the General Partner,
the General Partner shall not elect to defer any amount payable to the
General Partner pursuant to Section 11.5 of the Partnership Agreement
as permitted by such Section, unless in the opinion of counsel to the
General Partner the fiduciary duties of the General Partner require
otherwise. In addition, subject to the terms of the immediately
following paragraph, from and after the date of the GP Transfer
Closing, Riverdale shall pay or cause to be paid to IFG an amount
equal to one-hundred percent (100%) of each GP Payment received by the
General Partner after the GP Transfer Closing, regardless of whether
the General Partner is a member of the Icahn Group at the time any
such GP Payment is received by the
29
<PAGE>
General Partner. Each such payment to IFG shall be paid in immediately
available funds within three Business Days following the receipt by
the General Partner of the relevant GP Payment. Riverdale agrees,
subject to the terms of the immediately following paragraph, that
without the written consent of IFG, Riverdale will not, and it will
not cause or permit any member of the Icahn Group to, amend Section
11.5 or 11.6 of the Partnership Agreement in a manner adverse to the
General Partner. Riverdale also expressly acknowledges and agrees,
subject to the terms of the immediately following paragraph, that in
the event Section 11.5 or Section 11.6 of the Partnership Agreement is
amended at any time after the GP Transfer Closing in a manner adverse
to the General Partner, Riverdale will nonetheless pay or cause to be
paid to IFG an amount equal to 100% of any amount that would have been
payable to the General Partner pursuant to Section 11.5 or Section
11.6 of the Partnership Agreement but for such amendment or
amendments, such payments to IFG to be paid in immediately available
funds within three Business Days following the mailing to the Limited
Partners of the payments required to be made to Limited Partners by
Section 11.5 or Section 11.6 of the Partnership agreement, as the case
may be.
(6) If it is determined by a court of competent jurisdiction that
any GP Payment paid to the General Partner after the date of the GP
Transfer Closing was made in violation of the Partnership Agreement
and such court orders that such GP Payment be returned to the
Partnership, then IFG shall, and shall cause the members of the
Insignia Group to, return to Riverdale the amount paid to IFG pursuant
to this paragraph in respect of such GP Payment, less the amount of
the corresponding Donelson Payment, and use commercially reasonable
efforts to cause Donelson to return to Riverdale such corresponding
Donelson Payment. In addition, if after the GP Transfer Closing the
General Partner is removed by a vote (whether such vote is taken at a
meeting or by written consent) of the Limited Partners in accordance
with the terms of the Partnership Agreement, and provided that the
General Partner actively opposes its removal in connection with any
such vote, then from and after the effective date of such removal, the
provisions of the immediately preceding paragraph shall cease to apply
(unless and until any member of the Icahn Group shall again become, or
otherwise gain control of, the General Partner, in which case the
provisions of the immediately preceding paragraph shall automatically
be revived and apply to periods following the date of such
occurrence), unless IFG can prove that the Limited Partners had Cause
(as such term is defined in Section 4 of Article VI, except that for
purposes of this paragraph the definition shall also be deemed to
include the taking of (or failure to take) any action which
constitutes a breach of the General Partner's fiduciary duties to the
Partnership or the Limited Partners) to remove the General Partner.
For purposes of determining the foregoing, unless the parties can
mutually
30
<PAGE>
agree the parties shall submit the issue to binding arbitration for
determination, which determination shall be final and binding on all
parties for all purposes of this Agreement, with the losing party to
pay all reasonable costs incurred by all relevant parties in
connection with such arbitration proceeding.
(7) If the GP Transfer Option exists but the GP Transfer Closing
has not occurred within the 18-month period following the date of the
Buy/Sell Closing, and within such 18-month period any member of the
Icahn Group votes (whether in person, by proxy or by written consent)
any Units in favor of a sale of any of the Partnerships properties,
then within three business days of the date of the first such vote
(the "Vote Date") Riverdale shall pay to IFG, in immediately available
funds, an amount equal to the GP Purchase Price (calculated as of the
date of the Buy/Sell Closing, except that for the purpose of this
calculation, the words "GP Transfer Closing" in the definition of GP
Purchase Price contained in Article I hereof shall be deemed to mean
the Vote Date). In addition, if the GP Transfer Option exists but the
GP Transfer Closing has not occurred by the Substantial Liquidation
Date, and provided that the preceding sentence is not applicable, then
Riverdale shall pay to IFG within 15 days after the Substantial
Liquidation Date an amount in immediately available funds equal to the
GP Purchase Price that would be payable under this Article VII if the
GP Transfer Closing had taken place on the Substantial Liquidation
Date; provided, however, that if Riverdale has made a good faith
effort to satisfy the Vote Requirement but the Limited Partners do not
approve the transfer of the GP Interest as required by the terms of
the Partnership Agreement, then this sentence shall not apply. From
and after the date of the payment made pursuant to the first or second
sentence of this paragraph (7), (x) Insignia shall pay to Riverdale an
amount equal to 50% of the aggregate gross property management fees
paid by the Partnership to any member of the Insignia Group following
that date, plus 50% of all Covered Fees, and (y) upon the request of
Riverdale, Insignia shall, subject to the relevant provisions of
paragraphs (1), (3) and (4) of this Section 5(b)(v), cause the GP
Interest or the GP Stock to be transferred to Riverdale (or
Riverdale's designee) without the payment of any further consideration
to Insignia by any Person; provided, however, that if the GP Interest
or the GP Stock is transferred pursuant to clause (y), then the
provisions of the immediately preceding two paragraphs shall apply
from and after the date of such transfer.
(8) During the term of this Agreement, except for a transfer to
Riverdale or its designee as contemplated herein, Insignia will not,
and will not cause or permit any of its Affiliates to, directly or
indirectly, sell, convey, transfer, assign, pledge or hypothecate the
GP Stock or the GP Interest to any Person, other than transfers of the
GP Stock to an Affiliate
31
<PAGE>
who agrees in writing for the benefit of Riverdale to remain an
Affiliate of Insignia; provided, however, that (i) no direct or
indirect transfer of the GP Stock or the GP Interest by Insignia or
any of its Affiliates shall be deemed to occur by reason of any direct
or indirect transfer of the capital stock or other security of
Insignia, including without limitation any transfer of the capital
stock or other security of Insignia pursuant to a merger,
consolidation or other extraordinary corporate transaction to which
Insignia or any of its subsidiaries is a party, and (ii) it is
expressly understood and agreed by the Members that the foregoing
shall not prohibit the GP Stock or the GP Interest from being pledged
by Insignia or its Affiliates to collateralize or otherwise support
general corporate obligations of Insignia or its Affiliates existing
on the Effective Date or incurred during the term of this Agreement,
in either case in the ordinary course of business.
(c) Transfers by Operation of Law. In the event that a Member (i) declares
its intention to file a voluntary petition under bankruptcy or insolvency law or
files a voluntary petition under any bankruptcy or insolvency law or a petition
for the appointment of a receiver or makes an assignment for the benefit of
creditors, or (ii) is subjected involuntarily to such a petition or assignment
or to an attachment or other legal or equitable interest with respect to the
Member's Shares, and such involuntary petition or assignment or attachment is
not discharged within 30 days after the date thereof, or (iii) is subject to a
transfer of its Shares by operation of law, then if such Member is a Riverdale
Member, Insignia may elect to require the Company to Effect a Redemption with
respect to the Icahn Group, and if such Member is an Insignia Member, then
Riverdale may elect to require the Company to Effect a Redemption with respect
to the Insignia Group.
(d) Transfers in Violation of this Agreement. If any transfer of Shares or
Member Units is made or attempted by any member of the Riverdale Group contrary
to the provisions of this Section 5, then Insignia may elect to require the
Company to Effect a Redemption with respect to the Icahn Group at any time
before or after the transfer; and if any transfer of Shares or Member Units is
made or attempted by any member of the Insignia Group contrary to the provisions
of this Section 5, then Riverdale may elect to require the Company to Effect a
Redemption with respect to the Insignia Group at any time before or after the
transfer. In addition to any other legal or equitable remedies which it may
have, the Company may enforce its rights by specific performance or injunctive
relief, without proof of irreparable harm and without any need to post a bond.
(e) Share Certificate Legend. The Company shall cause each certificate
issued by the Company evidencing Shares to bear one or more legends intended to
assure compliance with applicable federal and state securities laws, together
with a restrictive legend substantially as follows:
AS PROVIDED IN THE OPERATING AGREEMENT OF
THE COMPANY, NONE OF THE SHARES EVIDENCED BY
THIS CERTIFICATE MAY BE TRANSFERRED BY THE
32
<PAGE>
HOLDER THEREOF EXCEPT IN ACCORDANCE WITH THE TERMS AND
PROVISIONS OF THE OPERATING AGREEMENT, INCLUDING WITHOUT
LIMITATION THE REQUIREMENT THAT ANY TRANSFEREE OF SHARES
AGREES IN WRITING, PRIOR TO THE DATE OF TRANSFER, TO BE BOUND
BY THE OPERATING AGREEMENT. ANY TRANSFER OR ATTEMPTED TRANSFER
IN VIOLATION OF THE FOREGOING SHALL BE VOID AND OF NO EFFECT.
Section 6. Capital Calls; Minimum Working Capital Reserve; Redemption of
Shares of Defaulting Member.
(a) The Company may from time to time require Members to make additional
contributions to the capital of the Company in amounts and at times the Company
reasonably deems necessary, for the purposes of (i) funding the cost of
purchasing Units accepted for purchase by the Company pursuant to the Offer, a
Follow-up Offer, any Responsive Offer or any Negotiated Purchase (an "Offer
Call"), and (ii) funding any other costs, expenses or liabilities of the Company
(an "Operating Call") (x) which have been incurred and were permitted to be
incurred under this Agreement or (y) which will be incurred within the six
months following the date of the Capital Call Notice relating thereto and are
permitted to be incurred under this Agreement, in the case of both (x) and (y)
in connection with any redemption of Shares by the Company or any of the
administrative activities contemplated by Section 2 of Article X. The Company
may not make a capital call for any other purpose (including in respect of the
Company's indemnification obligations pursuant to Sections 1(a) and 1(b) of
Article VIII) without the consent of all Members. The amounts of such required
additional contributions shall be specified in written notices (each a "Capital
Call Notice") given to the Members. Each Capital Call Notice shall specify (i)
the aggregate amount of capital required to be contributed by all Members; and
(ii) each Member's pro rata share of that amount, which shall be the aggregate
amount of additional capital so required multiplied by the percentage which
represents the total number of Shares owned of record by a Member divided by the
total number of Shares then outstanding; and (iii) a date (not less than two
Business Days after the date of a Capital Call Notice relating to an Offer Call,
or five Business Days in the case of a Capital Call Notice which relates solely
to an Operating Call) by which each Member is to pay the required amount to the
Company in immediately available funds. A Capital Call Notice in respect of the
Offer Call shall not be sent more than five Business Days before the date the
funds are anticipated to be disbursed by the Company.
(b) The Members agree that the Company shall at all times maintain a
working capital reserve (the "Reserve") of not less than $50,000 in cash. If at
any time the amount of the Reserve shall fall below $50,000, then the Company
shall (i) make an Operating Call in an amount necessary to restore the Reserve
to $75,000 and (ii) send a Capital Call Notice to each Member in respect of such
Operating Call. The Members shall be required to fund the Operating Call as set
forth in paragraph (a) of this Section 6.
33
<PAGE>
(c) Subject to the provisions of Sections 2(c), 3(a)(i) and 3(a)(ii) of
Article IV (under which the Icahn Group is entitled to receive 100% of the
Redemption Amount in the event Riverdale elects to have the Company Effect a
Redemption), (i) if a Riverdale Member fails to make a capital contribution
pursuant to a Capital Call Notice as and when required, then Insignia may elect
to require the Company to Effect a Redemption with respect to the Icahn Group,
and (ii) if an Insignia Member fails to make a capital contribution pursuant to
a Capital Call Notice as and when required, then Riverdale may elect to require
the Company to Effect a Redemption with respect to the Insignia Group.
Section 7. Qualification of Voters. The Manager may fix a time, not more
than 60 nor less then five days prior to the date of any meeting of Members, or
prior to the last day on which the consent or dissent of Members may be
effectively expressed with respect to any action proposed to be taken without a
meeting, as the time as of which Members entitled to notice of, and to vote at
such a meeting, or whose consent or dissent is required or may be expressed with
respect to any such action, as the case may be, shall be determined, and all
persons who were holders of record of voting Shares at such time, and no others,
shall be entitled to notice of, and to vote at such meeting, or to express their
consent or dissent, as the case may be.
Section 8. Determination of Members of Record for Other Purposes. The
Manager may fix a time, not less than ten days preceding the date fixed for the
payment of any dividend or for the making of any distribution or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion, or exchange of Shares, as a record date for the
determination of the Members entitled to receive any such dividend,
distribution, rights or interests, and in such case only Members on record at
the time so fixed shall be entitled to receive such dividend, distribution,
rights or interest.
Section 9. Membership Interest Ledger. The Company shall maintain a
membership interest ledger which contains the name and address of each Member of
the Company and the number of Shares and the particular class of Shares which
the Member holds. The membership interest ledger may be in written form or in
any other form capable of producing copies for visual inspection. The original
or duplicate of the membership interest ledger shall be kept at the offices of
the transfer agent, within or without the state of Delaware, or, if none, at the
principal executive office of the Company.
Section 10. Lost, Destroyed or Mutilated Certificates. Subject to such
rules, regulations and procedures as may be determined or set by the Manager,
the holder of any certificates representing Shares in the Company shall
immediately notify the Company of any loss, destruction or mutilation of such
certificate, and the Company may issue a new certificate of membership interest
in the place of any certificate theretofore issued by the Company upon the
making of an affidavit of that fact by the person claiming the certificate of
membership interest to be stolen, lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Manager may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such stolen,
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and to give the Company
34
<PAGE>
a bond, with sufficient surety, to indemnify it against any loss or claim which
may arise by reason of the issuance of a new certificate.
Section 11. Distributions; Surplus. Subject to the provisions of the
Certificate of Formation, and to the extent permitted by law, the Manager shall
declare and pay dividends on the Shares in the Company out of the income, if
any, of the Company at such time and in such amounts as, in his reasonable
discretion, the Manager shall deem to be available after establishment or
replenishment of reasonable working capital reserves; provided, however, that
after (i) the Offer has expired, (ii) all litigation relating to the Offer has
been resolved and (iii) all other costs and expenses of the Offer have been paid
or duly provided for, the Manager shall declare and pay dividends on the Shares
promptly after the receipt by the Company of any cash distributions made by the
Partnership in respect of Company Units in the aggregate amount of such
distributions received by the Company.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification of Managers, Officers and Members.
(a) Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
Manager or officer of the Company (an "Indemnitee") shall be indemnified and
held harmless by the Company to the fullest extent authorized by the laws of the
state of Delaware, as the same exist or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than such law permitted the
Company to provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgments, fines, excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such Indemnitee
in connection therewith; provided, however, that no Indemnitee shall be entitled
to indemnity under this paragraph for any expense, liability or loss resulting
from conduct that is determined, by final judicial decision from which there is
no further right to appeal, to constitute gross negligence or willful misconduct
on the part of such Indemnitee. Notwithstanding the foregoing, indemnification
under this Section 1(a) shall not be available to any Indemnitee in respect of
any claim for which the Indemnitee or any of its Affiliates is required to
furnish indemnification to the Company under any other provision of this Article
VIII.
(b) The right to indemnification conferred in Section 1 of this Article
VIII shall include the right to be paid by the Company the expenses (including
attorneys' fees) incurred in defending any such Proceeding in advance of its
final disposition (an "Advancement of Expenses"); provided, however, that an
Advancement of Expenses incurred by an Indemnitee shall be made only upon
delivery to the Company of an undertaking, by or on behalf of such Indemnitee,
to repay all amounts so advanced (i) if it shall ultimately be determined by
final judicial decision from which there is no further right to appeal that such
Indemnitee is not entitled to be indemnified for such expenses under the
provisions of the laws of the state of
35
<PAGE>
Delaware or (ii) by reason of a final judicial determination contained in a
nonappealable order, that such beneficiary is not entitled to be indemnified
under this Section 1, whether by reason of the last sentence of Section 1(a) or
otherwise.
(c) It is expressly understood and agreed by the Members that
notwithstanding anything contained in this Agreement to the contrary, to the
extent necessary to satisfy its indemnification obligations under this Section 1
of Article VIII, the Company may, upon ten days prior written notice to
Riverdale, sell or otherwise liquidate Company Units.
Section 2. Indemnification by Insignia. Insignia shall indemnify and hold
harmless the Company and its Members against any loss, claim, damage or
liability (or any action in respect thereof), joint or several, to which the
Company or any Member may become subject, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement of a material fact contained in any of the Offer Documents, or
the omission to state in the Offer Documents a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that any such loss, claim, damage, liability or action is
finally judicially determined in a nonappealable order to have arisen out of or
to be based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
furnished by Insignia, its Affiliates or their respective officers, employees or
representatives for inclusion in the Offer Documents; or (ii) any breach or
alleged breach by the General Partner of the Partnership, at any time it was
controlled by Insignia, of its fiduciary duties to the Partnership or its
partners; provided, however, that if such breach or alleged breach relates to
the Offer, Insignia shall have an indemnification obligation hereunder only to
the extent of a final nonappealable determination by a court of competent
jurisdiction to the effect that the General Partner, at the time it was
controlled by an Affiliate of Insignia, did in fact breach a fiduciary duty to
the Partnership or its partners.
Section 3. Indemnification by Riverdale. Subject to Section 4 of Article
IV, Riverdale shall indemnify and hold harmless the Company and its Members
against any loss, claim, damage or liability (or any action in respect thereof),
joint or several, to which the Company or any Member may become subject, insofar
as such loss, claim, damage or liability (or action in respect thereof) arises
out of or is based upon any untrue statement of a material fact contained in any
of the Offer Documents, or the omission to state in the Offer Documents a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that any such loss, claim,
damage, liability or action is finally judicially determined in a nonappealable
order to have arisen out of or to be based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with information furnished by Riverdale, its Affiliates or their
respective officers, employees or representatives for inclusion in the Offer
Documents.
Section 4. Non-Exclusivity of Rights. The rights to indemnification and to
the Advancement of Expenses conferred in this Article VIII shall not be
exclusive of any other right which any Person may have or hereafter acquire
under this Agreement or otherwise.
36
<PAGE>
Section 5. Indemnification of Employees and Agents of the Company. The
Company may, to the extent authorized from time to time by the Manager, grant
rights to indemnification and to the Advancement of Expenses to any employee or
agent of the Company to the fullest extent of the provisions of this Article
VIII with respect to the indemnification and Advancement of Expenses of Managers
and officers of the Company; provided, however, the Company may not hire any
employees (other than the Manager) without the consent of all Members.
ARTICLE IX
FINANCE
Section 1. Checks, Drafts, etc. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Company shall be signed by the Manager or such other person or persons as
the Manager may from time to time designate.
Section 2. Fiscal Year. The fiscal year of the Company shall be the
calendar year.
Section 3. Incurrence of Debt. The Company may not borrow money; except
that (a) if a Riverdale Member fails to make a capital contribution pursuant to
a Capital Call Notice given pursuant to Section 6 of Article VII as and when
required and Insignia does not elect to require the Company to Effect a
Redemption with respect the Icahn Group as a result of such failure, then one or
more Insignia Members may elect to fund the entire amount of the capital
contribution required to be made by the Riverdale Members by a loan to the
Company, in which case (i) any capital contribution made by any Riverdale Member
pursuant to such Capital Call Notice shall be returned to such Riverdale Member
and (ii) the capital contributions made by the Insignia Members shall be
reclassified and treated for all purposes as loans to the Company, and (b) if an
Insignia Member fails to make a capital contribution pursuant to a Capital Call
Notice given pursuant to Section 6 of Article VII as and when required and
Riverdale does not elect to require the Company to Effect a Redemption with
respect to the Insignia Group as a result of such failure, then one or more
Riverdale Members may elect to fund the entire amount of the capital
contribution required to be made by the Insignia Members by a loan to the
Company, in which case (x) any capital contribution made by any Insignia Member
pursuant to such Capital Notice shall be returned to such Insignia Member and
(ii) the capital contributions made by the Riverdale Members shall be
reclassified and treated for all purposes as loans to the Company. Any such
loans referred to in the preceding sentence shall bear interest at the rate of
18% per annum, compounded daily, and the Company may pledge Company Units to
secure such loans. Such loans shall, by their terms, be payable only out of
funds which otherwise would be available for distributions to Members and shall
be paid in full prior to any further distributions to Members being made by the
Company.
Section 4. Tax Status. The Members intend and agree that the Company shall
constitute a partnership for federal, state and local tax purposes. The Members
agree that they shall not take any action (including, without limitation,
reporting items of income, gain, loss and
37
<PAGE>
deduction from the Company) that is inconsistent with the Company's status as a
partnership for federal, state and local tax purposes.
Section 5. Reports. The Company will deliver to each Member annual reports
containing financial statements prepared in accordance with U.S. generally
accepted accounting principles (such reports to be delivered within 90 days of
the close of the fiscal year to which they relate).
Section 6. Expenses. All reasonable fees and expenses incurred by the
Company associated with the Offer, as well as all reasonable legal fees and
expenses incurred through the Effective Date by Insignia and Riverdale in
connection with the negotiation and documentation of this Agreement, will be
paid directly or reimbursed by the Company.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 1. Books and Records. The Company shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Members and the Manager. Members and their representatives,
and any other persons or entities as may be admitted as Members, will have
complete access to all such books and records and to all other information
relating to the Company at all reasonable times. So long as Insignia or any of
its Affiliates Beneficially Owns any Shares, Insignia will cause the Partnership
to furnish each Member with access to any and all information reasonably
requested by the Members, including without limitation for purposes of
exercising the Members' rights under this Agreement.
Section 2. Administration. So long as Insignia or any of its Affiliates
Beneficially Owns any Shares, Insignia will provide all administrative services
for the Company, including bookkeeping and accounting, maintenance of bank
accounts, monitoring of performance of assets, reporting to the Members,
monitoring the preparation and filing of tax returns by a third party,
preparation and filing of other reports (including audited financial statements
of the Company prepared by independent accountants), and maintaining corporate
books and records. All third-party professionals retained for the purposes of
providing such services will be retained by and their reasonable fees and
expenses paid by the Company (subject to a $5,000 per year maximum for fees and
expenses relating to the preparation of audited financial statements). The
Company shall pay to Insignia an annual administration fee for providing the
services described in the first sentence of this Section equal to 0.85% per
annum of total invested capital, but not less than $20,000 or greater than
$30,000 per annum, which amount shall constitute the sole fee to be paid by the
Company to Insignia and its Affiliates. Such administration fee shall be paid
quarterly in advance.
Section 3. Distributions. All distributions from the Company (after payment
of expenses and reasonable reserves, in each case to the extent expressly
permitted hereunder) will be made to the Members in proportion to their
ownership interests in the Company. Units
38
<PAGE>
may not be sold (other than as expressly permitted by Section 1(c) of Article
VIII) or distributed by the Company without the written consent of all Members.
Section 4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
Section 5. Entire Agreement. This Agreement supersedes any and all prior or
contemporaneous communications or agreements between the parties hereto
concerning the subject matter hereof, whether written or oral.
Section 6. Governing Law. The validity, interpretation, enforceability and
performance of this Agreement shall be governed by and construed in accordance
with the law of the State of Delaware, without reference to its conflicts of law
rules. To the fullest extent permitted by law, each of the parties hereto hereby
waive any right to trial by jury in any action with respect to the matters set
forth herein. The provisions of this Agreement cannot be waived or modified
unless such waiver or modification is in writing and signed by the parties
hereto. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part, that invalidity or unenforceability shall not
affect the validity or enforceability of the balance of this Agreement. Without
limiting the generality of the foregoing, if a provision is held by a court of
competent jurisdiction to be invalid or unenforceable by reason of the length of
time during which it is to remain in effect, such provision nonetheless shall be
enforceable to the maximum extent and for the maximum period of time determined
by such court to be permissible.
Section 7. Parties Contractually Bound; Remedies; Enforcement and Late
Payments.
(a) For purposes of Section 5(b)(v) of Article VII of this Agreement and
Article VIII of this Agreement, the contractual obligations of Riverdale shall
be joint and several obligations Riverdale and Highcrest. In addition, if the
net worth (meaning total assets (excluding goodwill) less total liabilities) of
Riverdale is at any time less than $20 million, then for all purposes of this
Agreement the contractual obligations of Riverdale shall be joint and several
obligations of Riverdale and Highcrest; provided, however, that the aggregate
liability of Highcrest and Riverdale pursuant to this sentence shall not exceed
$20 million.
(b) For purposes of Section 5(b)(v) of Article VII of this Agreement and
Article VIII of this Agreement, the contractual obligations of Insignia shall be
joint and several obligations of Insignia and IFG. In addition, for all other
purposes of this Agreement the contractual obligations of Insignia shall be
joint and several obligations of Insignia and IFG; provided, however, that the
aggregate liability of IFG and Insignia pursuant to this sentence shall not
exceed $20 million.
(c) It is understood and agreed that monetary damages would be an
inadequate remedy for violation of this Agreement, and that in the case of an
actual or threatened breach by either party or any of its representatives, the
other party shall be entitled to relief by way of
39
<PAGE>
injunction, specific performance or other equitable remedy, without proof of
irrevocable harm and without the need for posting of a bond.
(d) Insignia shall be jointly and severally liable for the obligations of
Insignia and of its Affiliates (other than the Company) hereunder (and, in this
regard, any action or inaction required hereunder to be taken or not taken (or
which Insignia is required to cause or prevent or not permit) by any such
Affiliate shall be deemed to be an obligation of both such Affiliate and
Insignia hereunder), and the Company and/or the Members shall have the right to
enforce this Agreement with respect to all such matters directly against
Insignia, without first being required to file suit or seek recourse of any kind
against any other Person. In addition, if Insignia is required to buy Shares and
Member Units pursuant to Section 5(b) of Article VII and if Insignia fails to
perform its obligations thereunder, then Insignia shall pay directly to
Riverdale 100% of the Buy/Sell Purchase Price, plus interest thereon accrued
from the date of such nonperformance at a rate per annum equal to the prime rate
established by Citibank N.A. in effect on the date of such nonperformance, plus
eight percent (but in no event greater than the maximum rate permitted by law).
(e) Riverdale shall be jointly and severally liable for the obligations of
Riverdale and of its Affiliates (other than the Company) hereunder (and, in this
regard, any action or inaction required hereunder to be taken or not taken (or
which Riverdale is required to cause or prevent or not permit) by any such
Affiliate shall be deemed to be an obligation of both such Affiliate and
Riverdale hereunder), and the Company and/or the Members shall have the right to
enforce this Agreement with respect to all such matters directly against
Riverdale, without first being required to file suit or seek recourse of any
kind against any other Person. In addition, if Riverdale is required to buy
Shares and Member Units pursuant to Section 5(b) of Article VII and if Riverdale
or its Affiliate fails to perform its obligations thereunder, then Riverdale
shall pay directly to Insignia 100% of the Buy/Sell Purchase Price, plus
interest thereon accrued from the date of such nonperformance at a rate per
annum equal to the prime rate established by Citibank N.A. in effect on the date
of such nonperformance, plus eight percent (but in no event greater than the
maximum rate permitted by law).
Section 8. Survival. Except as otherwise expressly provided in this
Agreement, or as the context otherwise clearly requires, the provisions of this
Agreement shall survive any termination of this Agreement or of the interest of
a Member in the Company. Without limiting the generality of the foregoing, the
parties expressly acknowledge and agree that the provisions of Sections 1 and 6
of Article IV, Section 5(b)(v) of Article VII, Article VIII and Sections 6, 7,
8, 10 of this Article X shall survive any termination of this Agreement or of
the interest of a Member in the Company.
Section 9. Notices. Any and all notices, offers, acceptances or any other
communications provided for in this Agreement shall be in writing and, except as
otherwise expressly provided in this Agreement, shall be deemed given when
delivered by hand. Notice may also be given by telegram or by electronic
facsimile transmission, but in such case will be deemed given only when the
telegram or transmission has been received by the addressee. A duplicate of all
such notices, offers, acceptances or other communications between or among
Members shall be mailed to the Company at its principal offices. Notices shall
be directed to
40
<PAGE>
the Members at their respective addresses set forth below (or such other address
as the party to be notified may have requested in writing):
If to Insignia:
Insignia Financial Group, Inc.
Attn: General Counsel
One Insignia Financial Plaza
Greenville, South Carolina 20602
Tel. No.: (803) 239-1000
Fax No.: (803) 239-1096
with a copy to:
John A. Healy, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
Tel. No.: (212) 878-8000
Fax No.: (212) 878-8375
If to Riverdale:
Riverdale Investors Corp., Inc.
Attn: Robert J. Mitchell
100 South Bedford Road
Mount Kisco, New York 10549
Tel. No.: (914) 241-9000
Fax No.: (914)
with a copy to:
Theodore Altman, Esq.
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
Tel. No.: (212) 626-0812
Fax No.: (212) 626-0799
Section 10. Interpretation. The parties hereto acknowledge that this
Agreement is the product of arm's-length negotiations between the parties, each
of whom was represented by counsel, and agree that in any dispute concerning the
interpretation of any provision of this Agreement, there will be no presumption
that any provision is to be construed against or in favor of any particular
party.
41
<PAGE>
Section 11. Access to Partnership Information and Properties. From and
after the Commencement of the Offer, Insignia will, or will cause its Affiliates
to, provide to the Members and any of their Affiliates, and their respective
officers, employees, agents or appointees, reasonable access at all times,
during normal business hours, to all properties, books and records, financial
information, agreements, deeds of trust, mortgages and other debt instruments
and any and all other documents, information and data (whether written or
computer-based) pertaining to the operations and assets of the Partnership in
the possession or control of Insignia or any of its Affiliates, including,
without limitation, the General Partner.
Section 12. Written Consents. Notwithstanding any provision of this
Agreement to the contrary, any action required under this Agreement to be taken
or prohibited from being taken by the Company or any Member may not be taken or
may be taken, as the case may be, without the need to amend this Agreement if
all Members deliver written consents to such action or inaction to the Manager,
which consents shall be filed in the minute book of the Company.
Section 13. Notice of Filing of the Partnership's Report on Form 10-K or
10-KSB. Insignia covenants and agrees that Insignia will, or will cause an
Affiliate to, provide notice to each Member (other than Insignia and its
Affiliates), within two Business Days after the date on which the Partnership
files its Report on Form 10-K or 10-KSB (including any amendment thereto) with
the Commission, that the Partnership has filed such Report (or amendment).
Section 14. Redemptions. As used in this Agreement, the requirement of or
election by the Company to "Effect a Redemption" with respect to a Member Group
means that the Company shall be required or may elect, as the case may be, to
redeem all Shares held by each Member who is a member of the Member Group being
redeemed and purchase from each member of such Member Group all Member Units of
such member (and each such member shall be required to sell such Member Units to
the Company), for an aggregate consideration equal to the Redemption Amount;
provided, however, than in the case of a Redemption pursuant to Section 8 of
Article V or Section 5(c), 5(d) or 6(c) of Article VII, the aggregate
consideration to be paid by the Company will equal 75% of the Redemption Amount.
In the event the Company Effects a Redemption with respect to a Member Group in
accordance with the provisions of this Agreement, then (i) as of the date of
such election or the date of the event that gives rise to such requirement, the
interest in the Company of each Member being redeemed shall automatically
terminate and be converted into the right solely to receive such Member's pro
rata share of the Redemption Amount (or 75% of the Redemption Amount, as the
case may be), and (ii) the applicable amount shall be paid to Riverdale or
Insignia, as the case may be, in cash within 10 days after the effective date of
the Redemption; provided, however, that in the case of a Redemption pursuant to
Section 8 at Article V or Section 5(c), 5(d) or 6(c) of Article VII, the
applicable percentage of the Redemption Amount shall be payable as and when
dividends or distributions in respect of Shares are paid to the remaining
Members, pro rata based on the redeemed Members' aggregate percentage interest
in the Company at the time of the Redemption. In the event the Company elects or
is required to Effect a Redemption with respect to a Member Group, the members
of the Member Group not being redeemed who are
42
<PAGE>
Members shall be obligated to cause such Redemption to be completed and to fund
the applicable Redemption Amount to the extent necessary.
IN WITNESS WHEREOF, IB Holding, Inc. and Riverdale Investors Corp., Inc.,
being all of the Members of DGP Acquisition, L.L.C., a Delaware limited
liability company, evidence their adoption and ratification of the foregoing
Operating Agreement of the Company.
EXECUTED by each Member on the date indicated below:
IB HOLDING, INC.
By: /s/ JEFFREY L. GOLDBERG
--------------------------
Jeffrey L. Goldberg
President
RIVERDALE INVESTORS CORP., INC.
By: /s/ ROBERT J. MITCHELL
---------------------------
Robert J. Mitchell
Vice President
Dated: December 7, 1995
43
<PAGE>
The undersigned, being the parent company of IB Holding, Inc., hereby
accepts and agrees to be bound by the provisions of this Agreement to the extent
specified in Section 7(b) of Article X hereof.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
-----------------------------
Frank M. Garrison
Executive Managing Director
Dated: December 7, 1995
44
<PAGE>
The undersigned, being an Affiliate of Riverdale Investors Corp., Inc.,
hereby accepts and agrees to be bound by the provisions of this Agreement to the
extent specified in Section 7(a) of Article X hereof.
HIGHCREST INVESTORS CORPORATION
By: /s/ RICHARD T. BUONATO
---------------------------
Richard T. Buonato
Senior Vice President
Dated: December 7, 1995
45
<PAGE>
Schedule I
Number of Percentage of
Member Contribution Shares Shares
------ ------------ --------- -------------
IB Holding, Inc. ................ $150,000 500 50%
Riverdale Investors Corp. Inc. .. $150,000 500 50%
I-1
INSIGNIA FINANCIAL GROUP, INC.
One Insignia Financial Plaza o P.O. Box 1089
Greenville, South Carolina 29602
(803) 239-1000
August 13, 1993
Metropolitan Asset Enhancement, L.P.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Gentlemen:
We are pleased to set forth the terms of the retention of Insignia
Financial Group, Inc. and its subsidiaries ("Insignia") by Metropolitan Asset
Enhancement, L.P. ("MAE"). Capitalized terms used herein but not otherwise
defined herein shall have the meanings ascribed thereto in that certain
Securities Purchase Agreement, dated as of May 27, 1992, as amended, by and
among Insignia Financial Group, Inc., Metropolitan Acquisition Partners IV,
L.P., and M-VI Limited Liability Company (then known as IFG Limited Liability
Company). The parties hereto understand and agree that this Agreement supersedes
all previous agreements between the parties hereto with respect to the subject
matter hereof including, without limitation, that certain Agreement, dated April
15, 1993, between the parties hereto (the "Prior Agreement") in its entirety,
and that the Prior Agreement shall be of no further force or effect upon the
execution and delivery of this Agreement by the parties hereto.
1. From the date hereof to the Termination Date (as hereinafter defined),
Insignia will assist MAE as its advisor and agent in connection with MAE's
acquisition, asset management, property management, and securitization
activities, and in connection therewith shall perform all services relating to
the foregoing (the "Financial Services"), which Financial Services shall
include, without limitation, preparation of audits of MAE's financial
statements, preparation of MAE's tax returns, analysis and consummation of
distributions to the partners in MAE, the rendering of advice regarding
dispositions of assets by MAE, analyses of the tax status of and tax planning
for MAE, preparation and distribution of correspondence from MAE to its
partners, and other administrative services.
2. From the date hereof to the Termination Date, Insignia shall render to
MAE full investment banking, financial advisory, recapitalization, asset
restructuring, securitization, and mortgage banking services. As sole
compensation for the provision of such services, Insignia shall receive
Incentive Management Fees and Transaction Fees. For purposes of this Agreement,
(a) "Incentive Management Fees" shall be defined as fifty percent (50%) of all
Net Proceeds (as hereinafter defined) with respect to assets acquired by MAE on
and after the date hereof and prior to the Termination Date; provided, however,
that the
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Two
August 13, 1993
Incentive Management Fee with respect to any such asset shall be 75% of all
such Net Proceeds if Insignia provided financing to MAE in accordance with
Section 3 hereof in connection with MAE's acquisition of such asset; and (b)
"Transaction Fees" shall be defined as fees payable to Insignia by MAE in
connection with specific transactions, which fees shall be negotiated on a
case-by-case basis. As used herein, "Net Proceeds," with respect to any such
asset, shall mean (i) the total aggregate proceeds actually realized by MAE from
the sale of such asset, net of (v) all principal of and accrued interest upon
any indebtedness secured in whole or in part by such asset to the extent repaid
with such proceeds, (w) all federal, state, and local taxes paid by the seller
of such asset with respect to such sale, (x) all costs and other expenses,
including, without limitation, accounting fees, legal fees and disbursements,
survey fees, title fees, and recording fees, incurred by the seller of such
asset with respect to such sale, (y) all payments made hereunder with respect to
such sale other than the Incentive Management Fee, and (z) all of such proceeds
paid to any person who is not then an Affiliate of MAE pursuant to any equity
participation arrangement, (ii) the total aggregate proceeds actually realized
by MAE from any refinancing of such asset, net of (v) all principal of and
accrued interest upon any indebtedness secured in whole or in part by such asset
to the extent repaid with such proceeds, (w) all federal, state, and local taxes
paid by the owner of such asset with respect to such refinancing, (x) all costs
and other expenses, including, without limitation, accounting fees, legal fees
and disbursements, survey fees, title fees, and recording fees, incurred by the
owner of such asset with respect to such refinancing, (y) all payments made
hereunder with respect to such refinancing other than the Incentive Management
Fee, and (z) all of such proceeds paid to any person who is not then an
Affiliate of MAE pursuant to any equity participation arrangement, and (iii) all
of the net cash flow of such asset actually received by MAE. Nothing contained
herein shall preclude Insignia from collecting asset fees or property management
fees from assets controlled by MAE if Insignia is a party to a contract between
Insignia and such asset or the owner thereof.
3. MAE and Insignia agree that, in the event either obtains an opportunity
to acquire interests in real estate or in entities which own or control real
estate, Insignia shall be granted the first right to acquire such interests. MAE
and Insignia further agree that, if Insignia elects not to acquire such
interests, but MAE does elect to acquire such interests and Insignia elects to
provide any financing to MAE for such acquisition, such financing shall be by
means of loans, bearing interest at a rate equal to the rate then paid by
Insignia on any revolving credit facility (or, if Insignia then has no such
facility, the rate Insignia estimates in good faith it would pay on such a
facility) and containing such other terms as shall be approved by a majority of
the directors of Insignia then in office who are neither (a) officers of
Insignia, or (b) partners (or officers, directors, or principal stockholders of
partners) of MAE of any of its partners (collectively, the "Independent
Directors"). Notwithstanding any provision of this Agreement to the contrary,
the parties hereto understand and agree that (i) MAE may request that Insignia
provide financing to MAE for any asset owned by MAE on the date hereof (an
"Existing Asset"), (ii) if Insignia elects to
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Three
August 13, 1993
provide any financing to MAE for an Existing Asset on and after the date
hereof, such financing shall be by means of loans, bearing interest at a rate
equal to the rate then paid by Insignia on any revolving credit facility (or, if
Insignia then has no such facility, the rate Insignia estimates in good faith it
would pay on such a facility) and containing such other terms as shall be
approved by a majority of the Independent Directors, and (iii) in the event that
Insignia provides any such financing to MAE for any Existing Asset on or after
the date hereof, Insignia shall receive Existing Asset Incentive Management Fees
(as hereinafter defined) with respect to such Existing Asset on and after the
date that Insignia so provides such financing. For purposes of this Agreement,
"Existing Asset Incentive Management Fees" shall be defined as fifty percent
(50%) of all Net Proceeds with respect to any such Existing Asset. Insignia
agrees that it shall be responsible for, and shall indemnify and hold harmless
MAE and its subsidiaries against any liability on account of, the bank
indebtedness incurred jointly by Insignia and a subsidiary of MAE in connection
with the acquisition of assets from Angeles Corporation and certain of the
affiliates thereof.
4. As additional consideration for the performance by Insignia of Financial
Services for MAE, MAE agrees:
(a) to cause, and to cause each of its Subsidiaries and Control Affiliates
(as hereinafter defined) to cause, Insignia to be retained (directly or by
assignment of a management agreement (a "Pre-Existing Agreement") in existence
on the date hereof or the date a property becomes a Controlled Property or a
Managed Property (each as hereinafter defined)) as manager of all Controlled
Properties and Managed Properties, until the termination of this Agreement
pursuant to Section 8 hereof, unless (i) MAE or such Subsidiary or Controlled
Affiliate does not possess the power to cause Insignia to be so retained, (ii)
assignment of a management contract is prohibited by a pre-existing condition in
such Pre-Existing Agreement, provided that MAE shall or shall cause such
Subsidiary or Controlled Affiliate to use its reasonable efforts to cause such
pre-Existing Agreement to terminate as soon as possible and thereafter to cause
Insignia to be retained in accordance with this Section 4(a), (iii) a
Pre-Existing Agreement has a non-renewable term of 30 days or less, or (iv) MAE
determines that so retaining Insignia in such instance could cause MAE or such
Subsidiary or Controlled Affiliate to violate any of its fiduciary duties;
(b) that, until the Termination Date, it will not, and will not permit any
of its Subsidiaries or Controlled Affiliates to, acquire any ownership interest
in real property (or in a person that has an ownership interest in real
property), unless in compliance with Section 4(a) hereof; and
(c) that it will not, and will not permit any of its Subsidiaries or
Controlled Affiliates to, dispose of any asset which represents a direct or
indirect interest in a Controlled Property or a Managed Property unless the sum
(the "Insignia Payment") of (i) the proceeds of such disposition that are
attributable to Insignia with respect to its limited partnership
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Four
August 13, 1993
interest in MAE, (ii) any brokerage or other fees paid to Insignia in
connection with such disposition, and (iii) any incentive fees or other
participations (including, without limitation, Incentive Management Fees and
Transaction Fees) payable to Insignia upon the disposition of such asset, is
equal to or greater than 150% of the Annualized Fees (as hereinafter defined)
with respect to such asset; provided, however, that (x) MAE or such Subsidiary
or Controlled Affiliate may dispose of such asset notwithstanding the foregoing
if (A) MAE or such Subsidiary or Controlled Affiliate pays to Insignia an amount
(the "Insignia Fee") equal to the excess of 150% of the Annualized Fees over the
Insignia Payment, (B) MAE or such Subsidiary or Controlled Affiliate is
required, in its good faith determination, to dispose of such asset to fulfill
any of its fiduciary duties and MAE or such Subsidiary or Controlled Affiliate
pays to Insignia the Net Proceeds realized by MAE or such Subsidiary or
Controlled Affiliate as a result of such disposition, or (C) MAE or such
Subsidiary or Controlled Affilate is required to make such disposition as a
result of any provision in any partnership or other agreement relating to such
asset, any vote of partners or stockholders, any foreclosure or similar
proceeding, or any order of a court of competent jurisdiction and MAE or such
Subsidiary or Controlled Affiliate pays to Insignia the Net Proceeds realized by
MAE or such Subsidiary or Controlled Affiliate as a result of such disposition,
and (y) MAE and its Subsidiaries and Controlled Affiliates shall not be
obligated to pay the Insignia Payment or any of the foregoing payments with
respect to the disposition of an asset if (A) neither MAE nor any of its
Subsidiaries or Controlled Affiliates controlled the determination to make such
disposition and MAE or such Subsidiary or Controlled Affiliate pays to Insignia
the Net Proceeds realized by MAE or such Subsidiary or Controlled Affiliate as a
result of such disposition, or (B) such disposition does not result in the
termination of any Recurring Fee Income (as hereinafter defined) to Insignia
with respect to the assets being disposed.
As used in this Agreement, (I) "Controlled Affiliate" of any person shall
mean any Affiliate of such person which is controlled by such person, (II)
"Affiliate," "Control," and "Controlled" shall have the meaning ascribed to such
terms in Rule 12b-2 promulgated by the Commission under the Securities Exchange
Act, (III) "Controlled Properties" shall mean all properties which on the date
hereof are, or at any time hereafter and prior to the Termination Date become,
and so long as such properties are, owned by any partnership or other entity
which is Controlled by MAE or any Subsidiary or Controlled Affiliate, (IV)
"Managed Properties" shall mean all properties which on the date hereof are, or
at any time hereafter and prior to the Termination Date become, and so long as
such properties are, managed by MAE or any Subsidiary or Controlled Affiliate;
(V) "Annualized Fees," with respect to any asset, shall mean the aggregate gross
amount of all Recurring Fee Income received by Insignia attributable to such
asset during the twelve-month period ending on the last day of the month prior
to the month in which a disposition of such asset occurs, provided that if MAE
or its subsidiary or Controlled Affiliate has held such asset for less than
twelve full calendar months, "Annualized Fees" with respect to such asset shall
mean the aggregate amount of all Recurring Fee Income received by Insignia for
the full calendar
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Five
August 13, 1993
months in the period ending on the last day of such prior month multiplied
by a fraction, the numerator of which is 12 and the denominator of which is the
number of such full calendar months; and (VI) "Recurring Fee Income," with
respect to any asset, shall mean all fees payable to Insignia for property
management, asset management, and other Financial Services, excluding only fees
payable to Insignia in connection with specific non-recurring transactions.
5. In connection with Insignia's activities on MAE's behalf, (i) Insignia
will familiarize itself with the business, operations, properties, financial
condition, and prospects of MAE, and (ii) MAE will cooperate with Insignia,
furnish Insignia with all information and data concerning MAE and other parties
as appropriate (the "Information") which Insignia deems appropriate, and provide
Insignia with access to MAE's officers, directors, employees, independent
accountants, and legal counsel. MAE acknowledges and agrees that Insignia does
not assume responsibility for the accuracy or completeness of the Information or
any other information regarding MAE or any other person other than Insignia. Any
advice rendered by Insignia pursuant to this Agreement may not be disclosed
publicly without Insignia's prior written consent, which consent shall not be
unreasonably withheld.
6. MAE shall promptly reimburse Insignia, upon request from time to time,
for all pre-approved third party out-of-pocket expenses incurred by Insignia in
connection with the matters contemplated by this Agreement.
7. MAE agrees to indemnify Insignia in accordance with the indemnification
provisions (the "Insignia Indemnification Provisions") attached to this
Agreement as Exhibit A hereto, which Insignia Indemnification Provisions are
incorporated herein and hereby made a part hereof. Insignia agrees to indemnify
MAE and its general partner in accordance with the indemnification provisions
(the "MAE Indemnification Provisions") attached to this Agreement as Exhibit B
hereto, which MAE Indemnification Provisions are incorporated herein and hereby
made a part hereof.
8. This Agreement shall terminate upon April 15, 2018 without liability or
continuing obligation except as set forth in the following sentence. This
Agreement may be terminated prior to such date by the provision by MAE to
Insignia of written notice of such termination in the event that (i) MAE
provides Insignia with written notice of any act or failure to take action by
Insignia that constitutes "material negligence or willful misconduct" (as
hereinafter defined) by Insignia in the performance of its duties hereunder,
which written notice shall set forth in reasonable detail such material
negligence or willful misconduct, and (ii) such material negligence or willful
misconduct either shall continued unremedied for a period of 15 days after
Insignia receives such notice or is not capable of being remedied within 15 days
after Insignia receives such notice, which earlier termination shall be without
continuing liability or obligation except as otherwise set forth in this Section
8. For purposes of this Section 8, "material negligence or willful misconduct"
shall mean negligence or wilful
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Six
August 13, 1993
misconduct that is material to the relationship between MAE and Insignia
contemplated by this Agreement, including the engagement of Insignia as manager
of all Controlled Properties and Managed Properties, taken as a whole, such that
failure to terminate this Agreement would constitute a breach by MAE of its
fiduciary duties. Neither termination of this Agreement nor completion of any
assignment contemplated hereby shall effect (a) the reimbursement of expenses
incurred by Insignia up to the date of termination or completion, as the case
may be, (b) the provisions of Sections 6 through 12, inclusive, of this
Agreement, or (c) the attached Insignia Indemnification Provisions and MAE
Indemnification Provisions which are incorporated by reference herein, all of
which shall remain operative and in full force and effect.
9. Notwithstanding any provision of this Agreement to the contrary, this
Agreement shall not be effective with respect to any assets acquired by MAE or
any of its Subsidiaries or Controlled Affiliates after the date which is the
earliest to occur of (a) the date that Andrew L. Farkas is no longer employed by
or subject to a legally binding non-competition agreement in favor of Insignia,
(b) the date that neither Andrew L. Farkas nor any of his Affiliates Controls
MAE, and (c) the date of termination of this Agreement pursuant to Section 8
(the earliest to occur of such dates being referred to herein as the
"Termination Date").
10. The validity and interpretation of this Agreement shall be governed by
the laws of the State of South Carolina applicable to agreements made and to be
fully performed therein. MAE irrevocably submits to the jurisdiction and venue
of any court of the State of South Carolina or the United States District Court
for the State of South Carolina for the purpose of any suit, action, or other
proceeding arising out of this Agreement.
11. The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the indemnified parties hereunder and
their successors and assigns and representatives, and the obligations and
liabilities assumed in this Agreement by the parties hereto shall be binding
upon their respective successors and assigns.
12. For the convenience of the parties hereto, any number of counterparts
of this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement. This
Agreement may not be modified or amended except in writing signed by the parties
hereto and approved by a majority of the Independent Directors.
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Seven
August 13, 1993
If the foregoing correctly sets forth our Agreement, please execute the
enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ WILLIAM N. PAGE
-------------------------
Name: William N. Page
Title: President
Confirmed and agreed to as of the date first above written:
METROPOLITAN ASSET ENHANCEMENT, L.P.
By: MAE Parent, Incorporated, General Partner
By: /s/ ANDREW L. FARKAS
----------------------
Name: Andrew L. Farkas
Title: President
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Eight
August 13, 1993
EXHIBIT A
INSIGNIA INDEMNIFICATION PROVISIONS
Metropolitan Asset Enhancement, L.P. ("MAE") agrees to indemnify and hold
harmless Insignia Financial Group, Inc. ("Insignia") against any and all losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses, and disbursements (and any and all actions, suits, proceedings, and
investigations in respect thereof and any and all legal and other costs,
expenses, and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, preparing
or defending any such action, suits, proceedings, or investigation (whether or
not in connection with litigation in which Insignia is a party), directly or
indirectly caused by, relating to, based upon, arising out of, or in connection
with Insignia's acting for MAE or any of its Subsidiaries or Controlled
Affiliates (as defined in the Agreement hereinafter referred to), including,
without limitation, any act or omission by Insignia in connection with its
acceptance of or the performance or non-performance of its obligations under the
letter agreement, dated August 13, 1993, between Insignia and MAE, as it may be
amended, modified, or superseded at any time and from time to time (the
"Agreement"); provided, however, that such indemnity agreement shall not apply
to any portion of any such loss, claim, damage, obligation, penalty, judgment,
award, liability, cost, expense, or disbursement to the extent it is found to
have resulted from the negligence or willful misconduct of Insignia.
These Insignia Indemnification Provisions shall be in addition to any
liability which MAE may otherwise have to Insignia or the persons indemnified
below in this sentence and shall extend to the following: Insignia, its
affiliates other than MAE, and their respective directors, officers, partners,
employees, legal counsel, agents, and controlling persons (within the meanings
of the federal securities laws). All references to Insignia in these Insignia
Indemnification Provisions shall be understood to include any and all of the
foregoing.
If any action, suit, proceeding, or investigation is commenced, as to which
Insignia proposes to demand indemnification, it shall notify MAE with reasonable
promptness; provided, however, that any failure by Insignia to notify MAE shall
not relieve MAE from its obligations hereunder. Insignia shall have the right to
retain counsel of its own choice to represent it, and MAE shall pay the fees,
expenses, and disbursements of such counsel; and such counsel shall, to the
extent consistent with its professional responsibilities, cooperate with MAE and
any counsel designated by MAE. MAE shall be liable for any settlement of any
claim against Insignia made with MAE's written consent. MAE shall not, without
the prior written consent of Insignia, settle or compromise any claim, or permit
a default or consent to the entry of any judgment in respect thereof, unless
such settlement, compromise, or consent includes, as an unconditional term
thereof, the giving by the claimant to Insignia of an unconditional release from
all liability in respect of such claim.
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Nine
August 13, 1993
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Insignia Indemnification Provisions is made
but is found in a judgment by a court of competent jurisdiction that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then MAE, on the one
hand, and Insignia, on the other hand, shall contribute to the losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses, and disbursements to which the indemnified persons may be subject in
accordance with the relative benefits received by MAE, on the one hand, and
Insignia, on the other hand, in connection with the statements, acts, or
omissions which resulted in such losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses, or disbursements and
the relevant equitable considerations shall also be considered. No person found
liable for a fraudulent misrepresentation shall be entitled to contribution from
any person who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, Insignia shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees previously received by Insignia
pursuant to the Agreement.
Neither termination nor completion of the engagement of Insignia referred
to above shall affect these Insignia Indemnification Provisions which shall
then remain operative and in full force and effect.
<PAGE>
Metropolitan Asset Enhancement, L.P.
Page Ten
August 13, 1993
MAE INDEMNIFICATION PROVISIONS
Insignia Financial Group, Inc. ("Insignia") agrees to indemnify and hold
harmless Metropolitan Asset Enhancement, L.P. ("MAE") against any and all
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses, and disbursements (and any and all actions, suits, proceedings,
and investigations in respect thereof and any and all legal and other costs,
expenses, and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, preparing
or defending any such action, suits, proceeding, or investigation (whether or
not in connection with litigation in which MAE is a party), directly or
indirectly caused by, relating to, based upon, arising out of, or in connection
with Insignia's acting for MAE or any of its Subsidiaries or Controlled
Affiliates (as defined in the Agreement hereinafter referred to), including,
without limitation, any act or omission by Insignia, to the extent that any such
loss, claim, damage, obligation, penalty, judgment, award, liability, cost,
expense, or disbursement resulted from the negligence or willful misconduct of
Insignia in connection with its acceptance of or the performance or
non-performance of its obligations under the letter agreement, dated August 13,
1993, between Insignia Financial Group, Inc. and Metropolitan Asset Enhancement,
L.P., as it may be amended, modified, or superseded at any time and from time to
time (the "Agreement").
These MAE Indemnification Provisions shall be in addition to any liability
which Insignia may otherwise have to MAE or the persons indemnified below in
this sentence and shall extend to the following: MAE, its affiliates other than
Insignia and its Subsidiaries, their respective directors, officers, partners,
employees, legal counsel, agents, and controlling persons (within the meanings
of the federal securities laws). All references to Isignia in these MAE
Indemnification Provisions shall be understood to include any and all of the
foregoing.
If any action, suit, proceeding, or investigation is commenced, as to
which MAE proposes to demand indemnification, it shall notify Insignia with
reasonable promptness; provided, however, that any failure by MAE to notify
Insignia shall not relieve Insignia from its obligations hereunder. MAE shall
have the right to retain counsel of its own choice to represent it, and Insignia
shall pay the fees, expenses, and disbursements of such counsel; and such
counsel shall, to the extent consistent with its professional responsibilities,
cooperate with Insignia and any counsel designated by Insignia. Insignia shall
be liable for any settlement of any claim against MAE made with Insignia's
written consent. Insignia shall not, without the prior written consent of MAE,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereto, unless such settlement, compromise, or consent
includes, as an unconditional term thereof, the giving by the claimant to MAE
of an unconditional release from all liability in respect of such claim.
POWER OF ATTORNEY
KNOW EVERYONE BY THESE PRESENTS, which are intended to constitute a Power
of Attorney, that I, CARL C. ICAHN, residing at Museum Towers, 15 W. 53rd
Street, Apt. 51C, New York, N.Y., do hereby appoint THEODORE ALTMAN, residing
at 94 Haights Cross Road, Chappaqua, New York.
MY ATTORNEY-IN-FACT TO ACT: As Attorney-In-Fact for the limited purpose of
executing: (i) a Statement on Schedule 14D-1 and all amendments to such
statement on Schedule 14D-1 in connection with the tender offer (the "Tender
Offer") with respect to Davidson Growth Plus, Ltd.; (ii) a Schedule 13D and
all amendments thereto, in connection with the Tender Offer, including any joint
filing agreement in connection thereto; and (iii) Forms 3, 4 and 5, and all
amendments thereto, in connection with the Tender Offer.
To induce any third party to act hereunder, I hereby agree that any third
party receiving a duly executed copy or facsimile of this instrument may act
hereunder, and that revocation or termination hereof, shall be ineffective as to
such third party unless and until actual notice or knowledge of such revocation
or termination shall have been received by such third party.
IN WITNESS WHEREOF, I have hereunto signed my name this 16th day of
November, 1995.
/s/ CARL C. ICAHN
-----------------------------------
Carl C. Icahn
STATE OF NEW YORK
COUNTY OF NEW YORK
On November 16th, 1995 before me, Robyn G. Steinberg, the undersigned
officer, personally appeared CARL C. ICAHN, known personally to me to be the
individual described in and who executed the foregoing instrument and
acknowledged that he executed the same.
/S/ ROBYN G. STEINBERG
-----------------------------------
Notary Public
ROBYN G. STEINBERG
Notary Public, State of New York
No. 01ST5026204
Qualified in New York County
Commission Expires April 18, 1996
(Signature Page to Power of Attorney for Davidson Growth Plus, L.P.)
