<PAGE> 1
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
- --------------------------------------------------------------------------------
PROMETHEUS INCOME PARTNERS
(Name of Subject Company)
PROM INVESTMENT PARTNERS L.L.C.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class
of Securities)
742941 10 7
(CUSIP Number of Class
of Securities)
- --------------------------------------------------------------------------------
W. Edward Scheetz
Prom Investment Partners L.L.C.
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Copy to:
Peter M. Fass
Steven L. Lichtenfeld
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
(212) 856-7000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Amount of
Valuation* Filing Fee
- -------------------------- --------------------------
$3,645,000 $729.00
- --------------------------------------------------------------------------------
*For purposes of calculating the filing fee only. This amount
assumes the purchase of 9,000 units of limited partnership interest ("Units")
of the subject company for $405 per Unit in cash.
{ } Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and
date of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
(Continued on following pages)
(Page 1 of 7 pages)
<PAGE> 2
<TABLE>
<S> <C>
Cusip No.: 742941 10 7 14D-1 Page 2
- -------------------------------------------------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
PROM INVESTMENT PARTNERS L.L.C.
- -------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) { }
(b) { }
- -------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
AF; WC
- -------------------------------------------------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f)
[ ]
- -------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- -------------------------------------------------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
5 Units of Limited Partnership Interest
- -------------------------------------------------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
[ ]
- ------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
Less than 1%
- -------------------------------------------------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
OO
</TABLE>
2
<PAGE> 3
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Prometheus Income Partners,
a California limited partnership (the "Partnership"), which has its principal
executive offices at 350 Bridge Parkway, Redwood City, California 94065.
(b) This Schedule 14D-1 relates to the offer by Prom Investment
Partners L.L.C., a Delaware limited liability company (the "Purchaser"), to
purchase up to 9,000 issued and outstanding units of limited partnership
interest ("Units") of the Partnership at $405 per Unit less the amount of any
distributions declared or made with respect to the Units between October 18,
1996 and the date of payment of the purchase price (the "Purchase Price") for
the Units by the Purchaser, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated October 18, 1996 (the "Offer to Purchase") and the related Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. Information concerning the number of outstanding Units is set
forth in the Introduction to the Offer to Purchase and is incorporated herein by
reference.
(b) The information set forth in Section 13 ("Purchase Price
Considerations") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) The information set forth in Section 10 ("Certain Information
Concerning the Purchaser") and Schedule I to the Offer to Purchase is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor, to
the best of its knowledge, any of the persons listed in Schedule I or referred
to in Section 10 ("Certain Information Concerning the Purchaser") of 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
future violations of, or prohibiting activities subject to, Federal or state
securities laws or finding any violation of such laws.
(g) The information set forth in Schedule I to the Offer to Purchase is
incorporated herein by reference.
3
<PAGE> 4
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in Section 11 ("Background of the
Offer") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 12 ("Source of Funds") of
the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(b) The information set forth in Section 8 ("Purpose of the Offer;
Future Plans") of the Offer to Purchase is incorporated herein by reference.
(c)-(e) Not applicable.
(f)-(g) The information set forth in Section 7 ("Effects of the Offer")
of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction and Section 10
("Certain Information Concerning the Purchaser") of the Offer to Purchase 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 Section 10 ("Certain Information Concerning
the Purchaser") and Section 11 ("Background of the Offer") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Certain Fees and Expenses") of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
4
<PAGE> 5
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(d) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Letter of Transmittal is incorporated herein in their entirety by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
99.(a)(1) Offer to Purchase dated October 18, 1996.
99.(a)(2) Letter of Transmittal.
99.(a)(3) Cover Letter, dated October 18, 1996, from Prom Investment
Partners L.L.C. to the holders of Units.
99.(b) None.
99.(c) Option Agreement, dated as of October 17, 1996, between
Liquidity Financial Group, L.P., and Apollo Real Estate
Investment Fund II, L.P.
99.(d) None.
99.(e) Not applicable.
99.(f) None.
5
<PAGE> 6
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: October 18, 1996
PROM INVESTMENT PARTNERS L.L.C.
By: AP-GP Prom Partners Inc., its
managing member
By: /s/ W. Edward Scheetz
------------------------
Name: W. Edward Scheetz
Title: President
6
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- --- -----
<S> <C>
99.(a)(1) Offer to Purchase dated October 18, 1996 . . . . . . . . . . .
99.(a)(2) Letter of Transmittal. . . . . . . . . . . . . . . . . . . . .
99.(a)(3) Cover Letter, dated October 18, 1996, from Prom Investment
Partners L.L.C. to the holders of Units. . . . . . . . . . . .
99.(c) Option Agreement, dated as of October 17, 1996, between
Liquidity Financial Group, L.P. and Apollo Real Estate
Investment Fund II, L.P. . . . . . . . . . . . . . . . . . . .
</TABLE>
7
<PAGE> 1
OFFER TO PURCHASE FOR CASH
UP TO 9,000 UNITS OF LIMITED PARTNERSHIP INTEREST
of
PROMETHEUS INCOME PARTNERS
at
$405 NET PER UNIT OF LIMITED PARTNERSHIP INTEREST
by
PROM INVESTMENT PARTNERS L.L.C.
***************************************************************************
* *
* THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT *
* 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 15, 1996, UNLESS *
* EXTENDED. *
* *
***************************************************************************
Prom Investment Partners L.L.C., a Delaware limited liability company
(the "Purchaser"), hereby offers to purchase up to 9,000 of the issued and
outstanding units of limited partnership interest (the "Units") of Prometheus
Income Partners, a California limited partnership (the "Partnership"), at a
purchase price of $405 per Unit, net to the seller in cash (the "Purchase
Price"), without interest thereon, upon the terms and subject to the conditions
set forth in this Offer to Purchase (the "Offer to Purchase") and in the
related Letter of Transmittal, as each may be supplemented, modified or amended
from time to time (which together constitute the "Offer"). The Purchase Price
will be automatically reduced by the aggregate amount of distributions per
Unit, if any, made or declared by the Partnership after October 18, 1996 and on
or prior to the Expiration Date (as defined in Section 1 ("Terms of the
Offer")). In addition, if a distribution is made or declared after the
Expiration Date but prior to the date on which the Purchaser pays the Purchase
Price for the tendered Units, the Purchaser will offset the amount otherwise
due a Limited Partner (as defined herein) pursuant to the Offer in respect of
the tendered Units which have been accepted for payment but not yet paid for by
the amount of any such distribution. LIMITED PARTNERS WHO TENDER THEIR UNITS
WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES,
WHICH COMMISSIONS AND FEES WILL BE BORNE BY THE PURCHASER. The 9,000 Units
sought pursuant to the Offer represent, to the best knowledge of the Purchaser,
approximately 47.4% of the Units outstanding as of the date of this Offer.
-------------------------
THE PURCHASER IS NOT AFFILIATED WITH THE GENERAL PARTNER OF THE PARTNERSHIP.
-------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, A MINIMUM OF 4,750 UNITS
BEING TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. IF,
AS OF THE EXPIRATION DATE, MORE THAN 9,000 UNITS ARE VALIDLY TENDERED AND
NOT PROPERLY WITHDRAWN, THE PURCHASER WILL ONLY ACCEPT FOR PURCHASE ON A
PRO RATA BASIS 9,000 UNITS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN.
SEE SECTION 14 ("CONDITIONS OF THE OFFER.") A LIMITED PARTNER MAY TENDER
ANY OR ALL UNITS OWNED BY SUCH LIMITED PARTNER; HOWEVER, TENDERS OF
FRACTIONAL UNITS WILL ONLY BE ACCEPTED IF
ALL OF THE UNITS HELD BY SUCH LIMITED PARTNER ARE TENDERED.
-------------------------
Before tendering, Limited Partners are urged to consider the following factors:
- - Although the Purchaser cannot predict the future value of the Partnership's
assets on a per Unit basis, the Purchase Price could differ significantly
from the net proceeds that would be realized from a current sale of the
properties owned by the Partnership (the "Properties") or that may be
realized upon a future liquidation of the Partnership.
- - The Purchaser is making the Offer with a view to making a profit.
Accordingly, there may be a conflict between the desire of the Purchaser to
acquire the Units at a low price and the desire of Limited Partners to sell
their Units at a high price.
- - As a result of the Offer, the Purchaser could be in a position to
significantly influence all Partnership decisions on which Limited Partners
may vote, including decisions regarding removal of the General Partner,
merger, sales of assets and liquidation of the Partnership.
- - Pursuant to the Partnership's limited partnership agreement (the
"Partnership Agreement") and subject to certain limitations, the
Partnership is obligated to purchase up to 5% of the outstanding Units at a
price equal to approximately 80% of value. Since this liquidity plan
became effective, the Partnership has purchased five Units from a Limited
Partner in January 1994 at a purchase price of $309 per Unit. Instead of
following the valuation formula set forth in the Partnership Agreement,
such purchase price was negotiated between the parties.
<PAGE> 2
IMPORTANT
Any (i) owner of record of Units (a "Limited Partner"), (ii) beneficial
owner, in the case of Units owned by Individual Retirement Accounts or
qualified plans (a "Beneficial Owner"), or (iii) person who has purchased Units
but has not yet been reflected on the Partnership's books as the record owner
of such Units (an "Assignee"), desiring to tender any or all of such person's
Units should either (1) complete and sign the Letter of Transmittal, or a
facsimile copy thereof, in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal, or a facsimile copy
thereof, and any other required documents to The Herman Group, Inc. (the
"Information Agent/Depositary"), at the address or facsimile number set forth
below, or (2) request his or her broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for him or her. Unless the context
requires otherwise, references to Limited Partners in this Offer to Purchase
shall be deemed to also refer to Beneficial Owners and Assignees. Questions or
requests for assistance may be directed to the Information Agent/Depositary at
the address and telephone number set forth below. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal and other related
documents may be directed to the Information Agent/Depositary.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO
PURCHASE, THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.
FOR ADDITIONAL INFORMATION CALL:
THE HERMAN GROUP, INC.
2121 SAN JACINTO STREET
26TH FLOOR
DALLAS, TX 75201
TELEPHONE: (800) 992-6176
FACSIMILE: (214) 999-9348 OR (214) 999-9323
ii
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1. Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Proration; Acceptance for Payment and Payment for Units . . . . . . 4
3. Procedures for Tendering Units . . . . . . . . . . . . . . . . . . 5
4. Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Extension of Tender Period; Termination; Amendment . . . . . . . . 7
6. Certain Federal Income Tax Consequences . . . . . . . . . . . . . . 8
7. Effects of the Offer . . . . . . . . . . . . . . . . . . . . . . . 10
8. Purpose of the Offer; Future Plans . . . . . . . . . . . . . . . . 11
9. Certain Information Concerning the Partnership . . . . . . . . . . 12
10. Certain Information Concerning the Purchaser . . . . . . . . . . . 14
11. Background Of The Offer. . . . . . . . . . . . . . . . . . . . . . 15
12. Source Of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13. Purchase Price Considerations . . . . . . . . . . . . . . . . . . . 16
14. Conditions of the Offer. . . . . . . . . . . . . . . . . . . . . . 17
15. Certain Legal Matters. . . . . . . . . . . . . . . . . . . . . . . 18
16. Certain Fees and Expenses. . . . . . . . . . . . . . . . . . . . . 19
17. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Appendix A. Glossary . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Schedule I. Information with respect to the executive officers and
directors of AP-GP Prom Partners Inc. . . . . . . . . . . S-1
</TABLE>
iii
<PAGE> 4
TO THE HOLDERS OF UNITS OF LIMITED PARTNERSHIP INTEREST OF PROMETHEUS INCOME
PARTNERS:
INTRODUCTION
Prom Investment Partners L.L.C., a Delaware limited liability company
(the "Purchaser"), hereby offers to purchase up to 9,000 of the issued and
outstanding units of limited partnership interest (the "Units") of Prometheus
Income Partners, a California limited partnership (the "Partnership"), at a
purchase price of $405 per Unit, net to the seller in cash (the "Purchase
Price"), without interest, upon the terms and subject to the conditions set
forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal, as each may be supplemented, modified or amended from
time to time (which together constitute the "Offer"). The Purchase Price will
be automatically reduced by the aggregate amount of distributions per Unit, if
any, made or declared by the Partnership after October 18, 1996 and on or prior
to the Expiration Date (as defined in Section 1 ("Terms of the Offer")). In
addition, if a distribution is made or declared after the Expiration Date but
prior to the date on which the Purchaser pays the Purchase Price for the
tendered Units, the Purchaser will offset the amount otherwise due a Limited
Partner pursuant to the Offer in respect of the tendered Units which have been
accepted for payment but not yet paid for by the amount of any such
distribution. Limited Partners who tender their Units will not be obligated to
pay any commissions or partnership transfer fees, which commissions and fees
will be borne by the Purchaser. The 9,000 Units sought pursuant to the Offer
represent, to the best knowledge of the Purchaser, approximately 47.4% of the
Units issued and outstanding as of the date of this Offer.
THE PURCHASER IS NOT AFFILIATED WITH THE GENERAL PARTNER OF THE
PARTNERSHIP. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, A MINIMUM OF
4,750 UNITS BEING TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (THE
"MINIMUM CONDITION"). IF, AS OF THE EXPIRATION DATE, MORE THAN 9,000 UNITS ARE
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN, THE PURCHASER WILL ONLY ACCEPT FOR
PURCHASE ON A PRO RATA BASIS 9,000 UNITS, SUBJECT TO THE TERMS AND CONDITIONS
HEREIN. SEE SECTION 14 ("CONDITIONS OF THE OFFER"). A LIMITED PARTNER MAY
TENDER ANY OR ALL UNITS OWNED BY SUCH LIMITED PARTNER; HOWEVER, TENDERS OF
FRACTIONAL UNITS WILL ONLY BE ACCEPTED IF ALL OF THE UNITS HELD BY SUCH LIMITED
PARTNER ARE TENDERED.
The Purchaser is making this Offer because it believes that the Units
represent an attractive investment at the price offered. There can be no
assurance, however, that the Purchaser's judgment is correct, and, as a result,
ownership of Units (either by the Purchaser or Limited Partners who retain
their Units) will remain a speculative investment. The Purchaser is acquiring
the Units for investment purposes and has no current plan to change current
management or the operations of the Partnership or effectuate any extraordinary
transaction involving the Partnership.
In considering the Offer, Limited Partners are urged to consider the
following factors:
- - Although the Purchaser cannot predict the future value of the
Partnership's assets on a per Unit basis, the Purchase Price could
differ significantly from the net proceeds that would be realized on a
per Unit basis from a current sale of the Partnership's properties
(the "Properties") or that may be realized upon a future liquidation
of the Partnership.
- - The Purchaser is making the Offer with a view to making a profit.
Accordingly, there may be a conflict between the desire of the
Purchaser to acquire the Units at a low price and the desire of the
Limited Partners to sell their Units at a high price. Upon the
liquidation of the Partnership, the Purchaser will benefit to the
extent the amount per Unit it receives in the liquidation exceeds the
Purchase Price, if any. Therefore, Limited Partners might receive
more value if they hold their Units, rather than tender, and receive
proceeds from the liquidation of the Partnership. Alternatively,
Limited Partners may prefer to receive the Purchase Price now rather
than wait for uncertain future net liquidation proceeds. No
independent person has been retained to evaluate or render any opinion
with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the
Purchaser as to such fairness. When the assets of the Partnership are
ultimately sold, the return to Limited Partners could be higher or
lower than the Purchase Price. Limited Partners are urged to consider
carefully all of the information contained herein before accepting the
Offer.
- - Pursuant to the terms of the Offer, the Purchaser is expected to
acquire, at a minimum, at least 25% of the Units outstanding and, as a
result, will be in a position to significantly influence all
Partnership decisions on which Limited Partners may vote. If the
maximum number of Units sought by the
1
<PAGE> 5
Purchaser are tendered and accepted for payment pursuant to the Offer,
the Purchaser will own approximately 47.4% of the outstanding Units.
This could effectively (i) prevent non-tendering Limited Partners from
taking actions they desire but that the Purchaser opposes and (ii)
enable the Purchaser to take action desired by it but opposed by
non-tendering Limited Partners. Under the Partnership Agreement,
Limited Partners holding the majority of the Units are entitled to
take action with respect to a variety of matters, including:
dissolution and winding up of the Partnership; removal of the General
Partner; approve or disapprove the sale of all or substantially all of
the Partnership's assets; and most types of amendments to the
Partnership Agreement. Although the Purchaser has no current
intentions with regard to any of these matters, it will vote the Units
acquired pursuant to the Offer in its interest, which may, or may not,
be in the best interest of non-tendering Limited Partners.
- - Pursuant to the Partnership's limited partnership agreement (the
"Partnership Agreement"), the Partnership is obligated to purchase up
to 5% of the outstanding Units (the "Limited Liquidity Plan").
Repurchases are required to be made on a first come, first served
basis and are generally limited to 10% of distributable cash from
operations (as such term is defined in the Partnership Agreement).
The repurchase price is equal to 80% of the value of the Units
repurchased, as determined by the General Partner, utilizing a
sales/liquidation analysis that is based on independent appraisals.
According to the Partnership's Form 10-K for year ended December 31,
1995 (the "Form 10-K"), effective January 1, 1994, the Partnership
acquired five Units from a Limited Partner for a total of $1,545 ($309
per Unit). The valuation method used for this repurchase did not
follow the provisions of the Limited Liquidity Plan as set forth in
the Partnership Agreement. The Form 10-K reports that instead, the
Partnership and the Limited Partner agreed to a valuation method,
which is used by local real estate brokers, based upon an estimated
market value of the Properties, less debt prepayment penalties and a
discount as provided in the Partnership Agreement.
Limited Partners may no longer wish to continue with their investment
in the Partnership for a number of reasons, including:
- - Although not necessarily an indication of value, the $405 Purchase
Price is approximately a 52.7% premium over the $265.18 weighted
average selling price for Units reported for the limited secondary
market during the two month period ended July 31, 1996. Such
secondary market selling prices do not take into account commissions
charged by secondary market makers effectuating such sales which the
Purchaser believes, based on a typical 10 Unit sales transaction,
range from 5% to 8.75% of the sales price (which would result in a
reduction of the net proceeds to the seller of at least $13.25 per
Unit).
- - The Offer will provide Limited Partners with an immediate opportunity
to liquidate their investment in the Partnership without the usual
transaction costs associated with market sales or partnership transfer
fees.
- - Although there are some limited resale mechanisms available to the
Limited Partners wishing to sell their Units, including the Limited
Liquidity Plan, there is no formal trading market for the Units. The
Form 10-K states: "No public trading market exists or is expected to
be established for the . . . Units." Accordingly, Limited Partners
who desire liquidity may wish to consider the Offer. The Offer
affords a significant number of Limited Partners an opportunity to
dispose of their Units for cash, which alternative otherwise might not
be available to them. However, the Purchase Price is not intended to
represent either the fair market value of a Unit or the fair market
value of the Partnership's assets on a per Unit basis.
- - General disenchantment with real estate investments.
- - General disenchantment with long-term investments in limited
partnerships because of, among other things, their illiquidity and the
inability of Limited Partners to effectuate management control over
the Partnership's affairs through the annual election of the General
Partner. Limited Partners should note, however, that they do have the
right to remove the General Partner by the majority vote.
- - The Offer may be attractive to certain Limited Partners who wish in
the future to avoid the expenses, delays and complications in filing
complex income tax returns which result from an ownership of Units.
In addition, certain Limited Partners who sell 100% of their Units
pursuant to the Offer will no longer
2
<PAGE> 6
be subject to the passive activity loss limitation with respect to
"suspended" losses attributable to those Units and, therefore, will be
able to utilize fully any such losses.
- - The Offer provides Limited Partners with the opportunity to liquidate
their Units and to reinvest the proceeds in other investments should
they desire to do so. The Purchaser believes that the Units represent
an attractive investment at the Purchase Price. There can be no
assurance, however, that this judgment is correct. Ownership of Units
will remain a speculative investment.
Following the completion of the Offer, the Purchaser and its
affiliates may acquire additional Units. Any such acquisitions may be made
through private purchases, through one or more future tender offers or by any
other means deemed advisable, and may be at prices higher or lower than the
price to be paid for the Units purchased pursuant to the Offer. See Section 8
("Purpose of the Offer; Future Plans").
The Purchaser expressly reserves the right, in its sole discretion and
for any reason, to terminate the Offer at any time and to waive any or all of
the conditions of the Offer, although the Purchaser does not presently intend
to waive any such conditions. See Section 7 ("Effects of the Offer"). A
Limited Partner may tender any or all of his or her Units; however, tenders of
fractional Units will only be accepted if all the Units held by such Limited
Partner are tendered.
According to the Form 10-K, there were 18,995 Units issued and
outstanding, held of record by approximately 1,295 Limited Partners. The
Purchaser owns five Units.
Except as otherwise indicated, information contained in this Offer to
Purchase is based upon documents and reports publicly filed by the Partnership
with the Commission. Although the Purchaser has no information that any
statements contained in this Offer to Purchase are untrue, the Purchaser does
not take responsibility for the accuracy or completeness of any information
contained in this Offer to Purchase which is derived from such public
documents, or for any failure by the Partnership to disclose events which may
have occurred and may affect the significance or accuracy of any such
information but which are unknown to the Purchaser.
Each Limited Partner must make his or her own decision based on his or
her particular circumstances. Limited Partners should consult with their
respective advisors about the financial, tax, legal and other implications to
them of accepting the Offer. LIMITED PARTNERS ARE URGED TO READ THIS OFFER TO
PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND THE OTHER ACCOMPANYING
MATERIALS CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms of the Offer (including the terms and conditions of any
extension or amendment of the Offer), the Purchaser will accept for payment and
pay for up to 9,000 Units that are validly tendered on or prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
Section 4 ("Withdrawal Rights"). The term "Expiration Date" shall mean 12:00
midnight, New York City time, on November 15, 1996, unless 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 refer to the
latest time and date at which the Offer, as so extended by the Purchaser, will
expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
PURCHASE PRICE OFFERED TO LIMITED PARTNERS, SUCH INCREASED PURCHASE PRICE SHALL
BE PAID FOR ALL UNITS ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR
NOT SUCH UNITS WERE TENDERED PRIOR TO THE INCREASE IN CONSIDERATION.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. See Section 14 (which sets forth in full the conditions of
the Offer). The Purchaser reserves the right (but shall not be
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obligated), in its sole discretion, to waive any or all of such conditions.
If, on or prior to the Expiration Date, any or all of such conditions have not
been satisfied or waived, the Purchaser may (i) decline to purchase any of the
Units tendered, terminate the Offer and return all tendered Units to tendering
Limited Partners, (ii) waive all the then 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, or (iv) amend the Offer. The rights reserved by the Purchaser in
this paragraph are in addition to the Purchaser's right to terminate the Offer
at any time prior to acceptance of tendered Units for payment.
The Purchaser's financial advisor, Liquidity Financial Advisors, Inc.
("Liquidity Financial"), provided the Purchaser with a list of the Limited
Partners, and this Offer to Purchase, the related Letter of Transmittal and, if
required, any other relevant materials are being mailed to Limited Partners,
Beneficial Owners and Assignees who hold Units, to the extent their names and
addresses are on this list. See Section 11 ("Background of the Offer").
2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS.
If more than 9,000 Units are validly tendered on or prior to the
Expiration Date and not properly withdrawn on or prior to the Expiration Date,
the Purchaser will only accept for payment, upon the terms and subject to the
conditions of the Offer, and pay for an aggregate of 9,000 Units so tendered,
pro rata according to the number of Units validly tendered and not properly
withdrawn on or prior to the Expiration Date, with appropriate adjustments to
minimize purchases of fractional 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 9,000 Units, the Purchaser will purchase all Units so tendered
and not properly withdrawn, upon the terms and subject to the conditions of the
Offer.
In the event that proration of tendered Units is required, and because
of the difficulty of determining the proration results, the Purchaser may not
be able to announce the final results of such proration until at least
approximately seven business days after the Expiration Date. Subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to pay Limited Partners the Purchase
Price in respect of Units tendered or return those Units promptly after the
termination or withdrawal of the Offer, the Purchaser does not intend to pay
for any Units accepted for payment pursuant to the Offer until the final
proration results are known.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will purchase, by accepting for payment,
and will pay for, all Units validly tendered and not withdrawn in accordance
with Section 4 on or prior to the Expiration Date as promptly as practicable
following the Expiration Date. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Units pending receipt of any regulatory or
governmental approvals specified in Section 15 ("Certain Legal Matters") or
pending receipt of any additional documentation required by the Letter of
Transmittal. In all cases, payment for Units accepted for payment pursuant to
the Offer will be made only after timely receipt by the Information
Agent/Depositary of (a) the Letter of Transmittal (or a facsimile copy thereof)
properly completed and duly executed, with any required signature guarantees,
if applicable, and (b) any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment tendered Units when, as and if the Purchaser gives oral or
written notice to the Information Agent/Depositary of the Purchaser's
acceptance for payment of such Units pursuant to the Offer. No tender of Units
will be deemed to have been validly made until all defects and irregularities
with respect to such tender have been cured or waived. Upon the terms and
subject to the conditions of the Offer, payment for Units tendered and accepted
for payment pursuant to the Offer will in all cases be made by deposit of the
Purchase Price with the Information Agent/Depositary, which will act as agent
for the tendering Limited Partners for the purpose of receiving payment from
the Purchaser and transmitting payment to tendering Limited Partners.
The Purchase Price will automatically be reduced by the aggregate
amount of distributions per Unit, if any, made or declared by the Partnership
after October 18, 1996 and on or prior to the Expiration Date. In addition, if
a distribution is made or declared after the Expiration Date but prior to the
date on which the
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Purchaser pays for tendered Units, the Purchaser will offset the amount
otherwise due to a Limited Partner pursuant to the Offer in respect of tendered
Units which have been accepted for payment but not yet paid for by the amount
of any such distribution. UNDER NO CIRCUMSTANCES WILL THE PURCHASER PAY
INTEREST ON THE PURCHASE PRICE FOR UNITS.
If any tendered Units are not purchased pursuant to the Offer for any
reason, the Letter of Transmittal with respect to such Units will be destroyed
by the Information Agent/Depositary. If, for any reason whatsoever, acceptance
for payment of or payment for any Units tendered pursuant to the Offer is
delayed or the Purchaser is unable to accept for payment, purchase or pay for
Units tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14 ("Conditions of the Offer"), the
Information Agent/Depositary may, nevertheless, on behalf of the Purchaser and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Units, and
such Units may not be withdrawn except to the extent that the tendering Limited
Partner is entitled to withdrawal rights as described in Section 4 ("Withdrawal
Rights").
3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. For Units to be validly tendered pursuant to the Offer,
a Letter of Transmittal (or a facsimile copy thereof), properly completed and
duly executed, together with any other documents required by the Letter of
Transmittal, must be received by the Information Agent/Depositary at its
address on the back cover page of the Offer to Purchase on or prior to the
Expiration Date. A Limited Partner may tender any or all Units owned by such
Limited Partner; however, tenders of fractional Units will only be accepted if
all of the Units held by such Limited Partner are tendered. See Instruction 1
to the Letter of Transmittal.
IN ORDER FOR A TENDERING LIMITED PARTNER TO PARTICIPATE IN THE OFFER,
UNITS MUST BE VALIDLY TENDERED AND NOT WITHDRAWN ON OR PRIOR TO THE EXPIRATION
DATE, WHICH IS 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 15, 1996, UNLESS
EXTENDED.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING LIMITED PARTNER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY. SEE INSTRUCTION 1 TO THE LETTER OF TRANSMITTAL.
SIGNATURE GUARANTEES. If the Letter of Transmittal is signed by the
registered holder of the Units and payment is to be made directly to that
holder, then no signature guarantees are required. However, if the Units are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made to a person other than the registered
holder, then the signature on the Letter of Transmittal must be guaranteed by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. (the "NASD") or a commercial
bank, savings bank, credit union, savings and loan association or trust company
having an office, branch or agency in the United States as provided in the
Letter of Transmittal. See Instruction 2 of the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of backup federal income tax withholding with respect to payment of
the Purchase Price pursuant to the offer, a tendering Limited Partner must
provide the Purchaser with such Limited Partner's correct taxpayer
identification number or social security number by completing the Substitute
Form W-9 included in the Letter of Transmittal. See Instruction 3 to the
Letter of Transmittal.
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax
in an amount equal to 10% of the sum of the Purchase Price plus the amount of
Partnership liabilities allocable to each Unit purchased, each Limited Partner
must complete the FIRPTA Affidavit included in the Letter of Transmittal
certifying such Limited Partner's taxpayer identification number and address
and that the Limited Partner is not a foreign person. See Instruction 3 to the
Letter of Transmittal.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing and delivering
the Letter of Transmittal, a tendering Limited Partner irrevocably appoints the
Purchaser and the designees of the Purchaser and each of them as such Limited
Partner's proxies, with full power of substitution, in the manner set forth in
the Letter of
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Transmittal, each with full power of substitution, to the full extent of such
Limited Partner's rights with respect to the Units tendered by such Limited
Partner and accepted for payment by the Purchaser (and with respect to any and
all other Units or other securities issued or issuable in respect of such Units
on or after the date hereof). All such proxies shall be considered irrevocable
and coupled with an interest in the tendered Units. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Units
for payment. Upon such acceptance for payment, all prior proxies given by such
Limited Partner with respect to such Units (and such other Units and
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consents executed (and, if given or
executed, will not be deemed effective). The Purchaser and its designees will,
with respect to the Units (and such other Units and securities) for which such
appointment is effective, be empowered to exercise all voting and other rights
of such Limited Partner as they in their sole discretion may deem proper at any
meeting of Limited Partners or any adjournment or postponement thereof, by
written consent in lieu of any such meeting or otherwise. The Purchaser
reserves the right to require that, in order for Units to be deemed validly
tendered, immediately upon the Purchaser's payment for such Units, the
Purchaser must be able to exercise full voting rights with respect to such
Units and other securities, including voting at any meeting of Limited
Partners.
In addition, pursuant to such appointment as attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i)
to seek to transfer ownership of such Units on the Partnership's books (and
execute and deliver any accompanying evidences of transfer and authenticity any
of them may deem necessary or appropriate in connection therewith, including,
without limitation, any documents or instruments required to be executed under
a "Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) upon receipt by the Information Agent/Depositary (as the
tendering Limited Partner's agent) of the Purchase Price, to become a record
holder of the purchased Unit, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units in
accordance with the terms of the Offer, (iii) to execute and deliver to the
Partnership and/or the General Partner (as the case may be) a change of address
form instructing the Partnership to send any and all future distributions to
which the Purchaser is entitled pursuant to the terms of the Offer in respect
of tendered Units to the address specified in such form, and (iv) to endorse
any check payable to or upon the order of such Limited Partner representing a
distribution to which the Purchaser is entitled pursuant to the terms of the
Offer, in each case on behalf of the tendering Limited Partner.
ASSIGNMENT OF ENTIRE INTEREST IN THE PARTNERSHIP. By executing and
delivering the Letter of Transmittal, a tendering Limited Partner irrevocably
assigns to the Purchaser and its assigns all of the right, title and interest
of such Limited Partner in the Partnership with respect to the Units tendered
and purchased pursuant to the Offer, including, without limitation, such
Limited Partner's right, title and interest in and to any and all distributions
made by the Partnership after the Expiration Date in respect of the Units
tendered by such Limited Partner and accepted for payment by the Purchaser,
regardless of the fact that the record date for any such distribution may be a
date prior to the Expiration Date. The Purchaser will seek to become a
Substituted Limited Partner in accordance with the Partnership Agreement upon
consummation of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents
and validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Units will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined
by it not to be in proper form, or the acceptance of or payment for which may,
in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also
reserves the absolute right to waive any of the conditions of the Offer or any
defect or irregularity in any tender of Units of any particular Limited Partner
whether or not similar defects or irregularities are waived in the case of
other Limited Partners.
ASSIGNEE STATUS. Assignees must provide documentation to the
Information Agent/Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an assignee of a Unit.
The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding. No tender of Units will be deemed to have been validly
made until all defects and irregularities with respect to such tender have been
cured or waived. None of the Purchaser, any of its affiliates or assigns, if
any, the Information Agent/Depositary or any other person will be under any
duty to give any notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification.
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The Purchaser's acceptance for payment of Units tendered pursuant to
the procedures described above will constitute a binding agreement between the
tendering Limited Partner and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Units made pursuant to the Offer are irrevocable, except
that Units tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment as provided in
this Offer to Purchase, may also be withdrawn at any time after December 17,
1996.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Information
Agent/Depositary at the address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name(s) of the
person(s) who tendered the Units to be withdrawn, the number of Units to be
withdrawn and the name(s) of the registered holder(s) of the Units, if
different from that of the person(s) who tendered such Units. Such notice of
withdrawal must also be signed by the same person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed
(including any signature guarantees, if applicable). If the Units are held in
the name of two or more persons, all such persons must sign the notice of
withdrawal. Any Units properly withdrawn will be deemed not validly tendered
for purposes of the Offer, but may be re- tendered at any subsequent time prior
to the Expiration Date by following the procedures described in Section 3
("Procedures for Tendering Units").
If, for any reason whatsoever, acceptance for payment of any Units
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Information
Agent/Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Units and such Units may not be withdrawn except to the extent that the
tendering Limited Partner is entitled to and duly exercises withdrawal rights
as described herein. The reservation by the Purchaser of the right to delay
the acceptance or purchase of or payment for Units is subject to the provisions
of Rule 14e-1(c) under the Exchange Act, which requires the Purchaser to pay
the consideration offered or return Units tendered by or on behalf of Limited
Partners promptly after the termination or withdrawal of the Offer.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, any of its affiliates, the Information Agent/Depositary or any other
person will be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser reserves the right, in its sole discretion and
regardless of whether any of the conditions set forth in Section 14
("Conditions of the Offer") shall have been satisfied, 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, and (iii) to amend the Offer in any respect
by giving oral or written notice of such amendment to the Information
Agent/Depositary.
If the Purchaser increases or decreases either the number of the Units
being sought or the consideration to be paid for any Units pursuant to the
Offer and the Offer is scheduled to expire at any time before the expiration of
a period of 10 business days from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner specified
below, the Offer will be extended until, at a minimum, the expiration of such
period of 10 business days. If the Purchaser makes a material change in the
terms of the Offer (other than a change in price or percentage of securities
sought) or in the information concerning the Offer, or waives a material
condition of the Offer, the Purchaser will extend the Offer, if required by
applicable law, for a period sufficient to allow Limited Partners to consider
the amended terms of the Offer.
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The Purchaser also reserves the right, in its sole discretion, in the
event any of the conditions specified under Section 14 ("Conditions of the
Offer") shall not have been satisfied and so long as Units have not theretofore
been accepted for payment, to delay (except as otherwise required by applicable
law) acceptance for payment of or payment for Units or to terminate the Offer
and not accept for payment or pay for Units.
If the Purchaser extends the period of time during which the Offer is
open, delays acceptance for payment of or payment for Units or is unable to
accept for payment or pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Information
Agent/Depositary may, on behalf of the Purchaser, retain all Units tendered,
and such Units may not be withdrawn except as otherwise provided under Section
4 ("Withdrawal Rights"). The reservation by the Purchaser of the right to
delay acceptance for payment of or payment for Units is subject to applicable
law, which requires that the Purchaser pay the consideration offered or return
the Units deposited by or on behalf of Limited Partners promptly after the
termination or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed
as promptly as practicable by a public announcement thereof. Without limiting
the manner in which the Purchaser may choose to make any public announcement,
the Purchaser will have no obligation (except as otherwise required by
applicable law) to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service. In
the case of an extension of the Offer, the Purchaser will make a public
announcement of such extension no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain federal
income tax consequences of a sale of Units pursuant to the Offer assuming that
the Partnership is a partnership for federal income tax purposes and that it is
not a "publicly traded partnership" as defined in Section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code"). This summary is based on the
Code, applicable Treasury Regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of the Offer.
All of the foregoing are subject to change, and any such change could affect
the continuing accuracy of this summary. This summary does not discuss all
aspects of federal income taxation that may be relevant to a particular 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 does it discuss any aspect of
state, local, foreign or other tax laws. Sales of Units pursuant to the Offer
will be taxable transactions for federal income tax purposes, and may also be
taxable transactions under applicable state, local, foreign and other tax laws.
EACH LIMITED PARTNER SHOULD CONSULT HIS OR ITS TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE
OFFER.
CONSEQUENCES TO TENDERING LIMITED PARTNER. 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
realized" with respect to a Unit sold pursuant to the Offer will be a sum equal
to the amount of cash received by the Limited Partner for the Unit plus the
amount of Partnership liabilities allocable to the Unit (as determined under
Code Section 752). The amount of a Limited Partner's adjusted tax basis in
Units sold pursuant to the Offer will vary depending upon the Limited Partner's
particular circumstances, and will be affected by both allocations of
Partnership income, gain or loss, and any cash distributions made by the
Partnership to a Limited Partner with respect to such Units. In this regard,
tendering Limited Partners will be allocated a pro rata share of the
Partnership's taxable income or loss with respect to Units sold pursuant to the
Offer through the effective date of the sale.
A Limited Partner who acquired Units pursuant to the original offering
of Units by the Partnership is expected to recognize a tax gain on a sale of
Units pursuant to the Offer.
In general, the character (as capital or ordinary) of Limited
Partner's gain or loss on a sale of a Unit pursuant to the Offer will be
determined by allocating the Limited Partner's amount realized on the sale and
his adjusted tax basis in the Units sold between "Section 751 items," which are
"substantially appreciated inventory"
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and "unrealized receivables" (including depreciation recapture) as defined in
Code Section 751, and non-Section 751 items. The difference between the
portion of the Limited Partner's amount realized that is allocable to Section
751 items and the portion of the Limited Partner's adjusted tax basis in the
Units sold that is so allocable will be treated as ordinary income or loss, and
the difference between the Limited Partner's remaining amount realized and
adjusted tax basis will be treated as capital gain or loss assuming the Units
were held by the Limited Partner as a capital asset. The Purchaser believes
that substantially all of any tax gain realized on a sale of Units pursuant to
the Offer will be treated as a capital gain under these rules.
A Limited Partner's capital gain (if any) or loss on a sale of Units
pursuant to the Offer will be treated as long-term capital gain or loss if the
Limited Partner's holding period for the Units exceeds one year. Under current
law (which is subject to change), 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 other
income of such persons is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that non-corporate taxpayers may deduct up to
$3,000 of capital losses in excess of the amount of their capital gains against
ordinary income. Excess capital losses generally can be carried forward to
succeeding years (a corporation's carryforward period is five years and a
non-corporate taxpayer can carry forward such losses indefinitely); in
addition, corporations, but not non-corporate taxpayers, are allowed to carry
back excess capital losses to the three preceding taxable years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
A Limited Partner with "suspended" passive activity losses (i.e., net tax
losses in excess of statutorily provided "phase-in" amounts) from the
Partnership generally will be entitled to offset such losses against any income
or gain recognized by the Limited Partner on a sale of his Units pursuant to
the Offer. If a Limited Partner is unable to sell all his Units, the
deductibility of any unused losses would continue to be subject to the passive
activity loss limitation until the Limited Partner sells his remaining Units.
A Limited Partner (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding unless
the Limited Partner provides a taxpayer identification number ("TIN") and
certifies that the TIN is correct or properly certifies that he is awaiting a
TIN. A Limited Partner may avoid backup withholding by properly completing and
signing the Substitute Form W-9 included as part of the Letter of Transmittal.
IF A LIMITED PARTNER WHO IS SUBJECT TO BACKUP WITHHOLDING DOES NOT PROPERLY
COMPLETE AND SIGN THE SUBSTITUTE FORM W-9, THE PURCHASER WILL WITHHOLD 31% FROM
PAYMENTS TO SUCH LIMITED PARTNER. SEE INSTRUCTION 3 TO THE LETTER OF
TRANSMITTAL.
Gain realized by a foreign Limited Partner on a sale of a Unit
pursuant to the Offer will be subject to federal income tax. Under Section
1445 of the Code, the transferee of a partnership interest held by a foreign
person is generally required to deduct and withhold a tax equal to 10% of the
amount realized on the disposition. The Purchaser will withhold 10% of the
amount realized by a tendering Limited Partner from the Purchase Price payable
to such Limited Partner unless the Limited Partner properly completes and signs
the FIRPTA Affidavit included as part of the Letter of Transmittal 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.
CONSEQUENCES TO A NON-TENDERING LIMITED PARTNER. The Purchaser does
not anticipate that a Limited Partner who does not tender his or its Units will
realize any material tax consequences as a result of the election not to
tender. However, if as a result of the Offer there is a sale or exchange of
50% or more of the total Units in Partnership capital and profits within a
12-month period, a termination of the Partnership for federal income tax
purposes would occur, and the taxable year of the Partnership would close. In
the case of such a sale or exchange, the Properties (subject to related debt)
of the Partnership would be treated as distributed to the partners, and
following the deemed distribution, contribution of the same properties would be
deemed to be made to a new partnership or to an association taxable as a
corporation. The Purchaser has not, however, had access to complete
information concerning assignments of Units and cannot, therefore, be certain
that the Partnership will not terminate for tax purposes as a result of sales
pursuant to the Offer. The consequences of a termination of the
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Partnership could include changes in the methods of depreciation available to
the Partnership for tax purposes, changes in the tax basis of the Partnership's
assets, possible recognition of taxable gain resulting from any deemed cash
distribution in excess of the non-tendering Limited Partner's tax basis in his
or her Units, and possibly other consequences the extent of which cannot be
determined by the Purchaser without access to the books and records of the
Partnership. In addition, a termination of the Partnership could cause the
Partnership or its assets to become subject to unfavorable statutory or
regulatory changes enacted or issued prior to the termination but previously
not applicable to the Partnership or its assets because of protective
"transitional" rules. The Purchaser has reserved the right not to purchase
Units to the extent such purchase would cause a termination of the Partnership
for federal income tax purposes.
CONSEQUENCES TO A TAX-EXEMPT LIMITED PARTNER. Although certain
entities are generally exempt from federal income taxation, such tax-exempt
entities (including individual retirement accounts (each an "IRA")) are subject
to federal income tax on any "unrelated business taxable income" ("UBTI").
UBTI generally includes, among other things, income (other than, in the case of
property which is not "debt-financed property", interest, dividends, real
property rents not dependent upon income or profits, and gain from disposition
of non-inventory property) derived by certain trusts (including IRAs) from a
trade or business or by certain other tax-exempt organizations from a trade or
business, the conduct of which is not substantially related to the exercise of
such organization's charitable, educational or other exempt purpose and income
to the extent derived from debt-financed property. Subject to certain
exceptions, "debt-financed property" is generally any property which is held to
produce income and with respect to which there is an "acquisition indebtedness"
at any time during the taxable year. Acquisition indebtedness is generally
indebtedness incurred by a tax-exempt entity directly or through a partnership:
(i) in acquiring or improving a property; (ii) before acquiring or improving a
property if the indebtedness would not have been incurred but for such
acquisition or improvement; or (iii) after acquiring or improving a property if
the indebtedness would not have been incurred but for such acquisition or
improvement and the incurrence of such indebtedness was reasonably foreseeable
at the time of the acquisition or improvement.
To the extent the Partnership holds debt financed property or
inventory or other assets as a dealer, a tax- exempt Limited Partner (including
an IRA) could realize UBTI on the sale of a Partnership interest. In addition,
a tax- exempt Limited Partner will realize UBTI upon the sale of a Unit, if
such Limited Partner held its Units as inventory or otherwise as dealer
property, or acquired its Units with acquisition indebtedness. However, any
UBTI recognized by a tax-exempt Limited Partner as a result of a sale of a
Unit, in general, may be offset by such Limited Partner's net operating loss
carryover (determined without taking into account any amount of income or
deduction which is excluded in computing UBTI), subject to applicable
limitations.
EACH TAX-EXEMPT LIMITED PARTNER SHOULD CONSULT ITS TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING OR NOT
SELLING UNITS PURSUANT TO THE OFFER.
7. EFFECTS OF THE OFFER.
CERTAIN RESTRICTIONS ON TRANSFER OF INTERESTS. The Partnership
Agreement restricts transfers of Units if, among other things, a transfer would
cause a termination of the Partnership for federal income tax purposes (which
termination will occur when Units representing 50% or more of the total
Partnership capital and profits are transferred within a twelve-month period).
Consequently, sales of Units in the secondary market and in private
transactions during the twelve-month period following completion of the Offer
may be restricted, and the Partnership may not process any requests for
recognition of transfers or Units during such twelve-month period which the
General Partner believes may cause a tax termination. The Purchaser has,
however, taken this restriction, as well as the number of Units historically
transferred, into account in determining the number of Units for which the
Offer is made (representing approximately 47.4% of the issued and outstanding
Units) in order to permit normal historical levels of transfers to occur
following the transfers of Units pursuant to the Offer without violating this
prohibition. Based on information contained in the Partnership Spectrum, for
the period from August 1, 1995 to July 31, 1996, less than 1% of the Units were
transferred. The Purchaser does not intend to purchase Units to the extent
such purchase would cause a termination of the Partnership. Non-tendering
Limited Partners should consult their own tax advisors regarding the tax
consequences of the Partnership's termination in their particular situations.
See Section 6 ("Federal Income Tax Considerations--Consequences to a
Non-Tendering Limited Partner").
10
<PAGE> 14
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 like the Units, a reduction in
the number of securityholders might be expected to result in a reduction in the
liquidity and volume of activity in the trading market for the security. The
Form 10-K states: "No public trading market exists or is expected to be
established for the . . . Units." Therefore, the Purchaser does not believe a
reduction in the number of Limited Partners will materially further restrict
the Limited Partners' ability to find purchasers for their Units through
secondary market transactions.
Partnership Profiles, Inc. tracks recent trades in certain limited
partnership interests. The most recent issue of the Partnership Spectrum
(July/August, 1996) indicates that 45 Units traded in the period from June 1,
1996 through July 31, 1996 at per Unit prices between $255.00 and $271.32 with
a weighted average price of $265.18 per Unit.
The Units currently 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 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 expects that even if
it purchases the maximum number of Units in the Offer, the Units will continue
to be held of record by more than 300 persons.
CONTROL OF ALL LIMITED PARTNER VOTING DECISIONS BY PURCHASER. The
Purchaser will have the right to vote each Unit purchased pursuant to the
Offer. Pursuant to the terms of the Offer, the Purchaser is expected to
acquire, at a minimum, at least 25% of the Units outstanding and, as a result,
will be in a position to significantly influence all Partnership decisions on
which Limited Partners may vote. If the maximum number of Units sought by the
Purchaser are tendered and accepted for payment pursuant to the Offer, the
Purchaser will own approximately 47.4% of the outstanding Units. This would
effectively (i) prevent non-tendering Limited Partners from taking action they
desire but that the Purchaser opposes and (ii) enable the Purchaser to take
action desired by it 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 the General Partner; dissolution of the Partnership; sale of all or
substantially all of the Partnership's properties; and most types of amendments
to the Partnership Agreement. Although the Purchaser has no current intentions
with regard to any of these matters, it will vote the Units acquired pursuant
to the Offer in its interest, which may, or may not, be in the best interest of
non-tendering Limited Partners. See Section 8 ("Purpose of the Offer; Future
Plans").
8. PURPOSE OF THE OFFER; FUTURE PLANS.
PURPOSE OF THE OFFER. The purpose of the Offer is to enable the
Purchaser to acquire a significant interest in the Partnership for investment
purposes based on its expectation that there may be underlying value in the
Properties. The Purchaser does not currently intend to change current
management or the operation of the Partnership and does not have current plans
for any extraordinary transaction involving the Partnership. However, these
plans could change at any time in the future. If the Purchaser's plans with
respect to the Partnership change in the future, the ability of the Purchaser
to influence actions on which Limited Partners have a right to vote will depend
on the Limited Partner's response to the Offer (i.e., the number of Units
tendered). If the Purchaser acquires only a few Units pursuant to the Offer,
it would not be in a position to influence matters over which Limited Partners
have a right to vote. Conversely, if the maximum number of Units sought are
tendered and accepted for payment pursuant to the Offer, the Purchaser will own
approximately 47.4% of the issued and outstanding Units and, as a result, will
be in a position to exert significant control over matters on which Limited
Partners have a right to vote. The purchase of the Units will allow the
Purchaser to benefit from any of the following: (a) any cash distributions
from Partnership operations in the ordinary course of business; (b) any
distributions of net proceeds from the sale of any Properties; and (c) any
distributions of net proceeds from the liquidation of the Partnership.
FUTURE PLANS. Following the completion of the Offer, the Purchaser
and its affiliates may acquire additional Units. Any such acquisition may be
made through private purchases, through one or more future tender
11
<PAGE> 15
offers or by any other means deemed advisable, and may be at prices higher or
lower than the price to be paid for the Units purchased to the Offer.
9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Information included herein concerning the Partnership is derived from
the Partnership's publicly-filed reports. Additional financial and other
information concerning the Partnership is contained in the Partnership's Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
Commission. 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 Commission's Web site at http://www.sec.gov.
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. The Purchaser disclaims any responsibility for
the information included in such reports and extracted in this Offer to
Purchase.
THE PARTNERSHIP'S ASSETS AND BUSINESS. The Partnership is a limited
partnership formed in 1985, under the laws of the State of California. Its
principal executive offices are located at 350 Bridge Parkway, Redwood City,
California 94065. Its telephone number is (415) 596-5300.
The principal business of the Partnership is investing in,
constructing, holding, operating, and ultimately selling two multi-family
rental apartment projects, Alderwood Apartments and Timberleaf Apartments,
located in Santa Clara, California. Alderwood Apartments and Timberleaf
Apartments are the sole assets of the Partnership.
The City of Santa Clara, with a population of approximately 100,000,
is the third largest city in Santa Clara County. Santa Clara County, commonly
referred to as Silicon Valley, is approximately 47 miles south of San
Francisco, encompasses 1,300 square miles and has a population of approximately
1.6 million people, making it the most populous of the nine counties in the
greater San Francisco Bay Area.
The Alderwood luxury garden apartment complex is located at 900 Pepper
Tree Lane in Santa Clara, California. Construction began in November 1985 and
was fully completed by December 31, 1986. The complex contains 234 apartment
units housed in 19 two-story buildings on a 9.4-acre site. Covered and
uncovered parking for 468 cars is provided.
The Timberleaf luxury garden apartment complex is located at 2147
Newhall Street in Santa Clara, California. Construction began in November 1985
and was fully completed by December 31, 1986. The complex contains 124
apartment units housed in 9 buildings of two or three stories on a five-acre
site. Covered and uncovered parking for 248 cars is provided.
The Properties are encumbered by first mortgage liens which secure
promissory notes payable to Prudential Insurance Company in the original amount
of $10,200,000 and $5,600,000, respectively. Both notes (collectively, the
"Notes") bear interest at the rate of 10.375% per annum for the entire term of
10 years. The Notes provide for the deferral of a portion of the interest. The
portion of interest which is payable monthly is based on a rate of 6.25%. The
unpaid interest on the Notes, as it accrues on a monthly basis, is added to the
outstanding principal balance and bears interest at 4.125% thereafter.
Payments of principal on the Notes began in December 1992 and equals $4,928 per
month on the Alderwood Note and $2,706 per month on the Timberleaf Note. The
Notes may be prepaid subject to certain prepayment penalties.
12
<PAGE> 16
For the years ended December 31, 1995, 1994, and 1993, the average
rents obtained from leased units and the average occupancy at the Properties
were as follows:
<TABLE>
<CAPTION>
Average Rental Rates
--------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
One Bedroom Units $ 982 $ 874 $ 856
Two Bedroom Units $1,193 $1,098 $1,078
<CAPTION>
Average Occupancy
-----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Alderwood 97% 95% 96%
Timberleaf 98% 96% 95%
</TABLE>
SELECTED FINANCIAL DATA. Set forth below is a summary of certain
financial data for the Partnership which has been excerpted from the Form 10-K
and the Form 10-Q. 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.
Consolidated Statements of Operations
For the Six Months Ended June 30, 1996 and 1995
(in thousands, except for Unit data)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Rental revenues . . . . . . . . . . . . . . $ 2,384 $ 2,048
Other income . . . . . . . . . . . . . . . . 57 53
Interest income . . . . . . . . . . . . . . 17 11
------- -------
2,458 2,112
------- -------
EXPENSES:
Interest . . . . . . . . . . . . . . . . . . 1,249 1,180
Operating and administrative . . . . . . . . 857 745
Depreciation and amortization . . . . . . . 316 307
------- -------
Total expenses . . . . . . . . . . . 2,422 2,232
------- -------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . $ 36 $ (120)
======= =======
Net income (loss) per $1,000 limited
partnership unit . . . . . . . . . . . . . . . . . $ 2 $ (6)
======= =======
Number of limited partnership 18,995 18,995
====== ======
units used in computation . . . . . . . . . . . . .
</TABLE>
13
<PAGE> 17
Summary Selected Financial Data
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands except per unit data)
<S> <C> <C> <C> <C> <C>
Rental revenues $4,188 $3,899 $3,864 $3,912 $3,873
Net loss $ (192) $ (382) $ (275) $ (100) $ (123)
Net loss per $1,000 unit $ (10) $ (20) $ (14) $ (5) $ (6)
Net cash per $1,000
unit subsequent to partner
distributions $ 32 27 $ 39 $ 40 $ 25
Number of units used in
computation 18,995 18,995 19,000 19,000 19,000
Total assets $24,172 $24,553 $25,385 $26,034 $26,473
Notes payable $23,791 $22,477 $21,292 $20,223 $19,179
Cash distributions per
$1,000 unit,
representing a
return of capital $ 82 $ 88 $ 79 $ 69 $ 64
</TABLE>
10. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser was organized for the purpose of acquiring the Units pursuant to
the Offer. The principal executive office of the Purchaser is at 1301 Avenue
of the Americas, 38th Floor, New York, New York 10019. The managing member of
the Purchaser (the "Managing Member") is AP-GP Prom Partners Inc., a
newly-formed Delaware corporation which is ultimately controlled by Apollo Real
Estate Capital Advisors II, Inc. ("Advisors"), as general partner of Apollo
Real Estate Advisors II, L.P. ("AREA II"), the general partner of Apollo Real
Estate Investment Fund II, L.P., a recently formed private real estate
investment fund and the sole shareholder of AP-GP Prom Partners Inc.. Since
its inception, the directors of Advisors have been Leon D. Black and John J.
Hannan, who were founding principals of Apollo Advisors, L.P., the respective
managing general partner of Apollo Investment Fund, L.P., AIF II, L.P. and
Apollo Investment Fund III, L.P., private securities investment funds, and,
together with William L. Mack, of Apollo Real Estate Advisors, L.P. ("AREA")
and AREA II, the respective managing general partners of Apollo Real Estate
Investment Fund, L.P. and Apollo Real Estate Investment Fund II, L.P.. Mr.
Mack has been the President and Managing Partner of the Mack Organization, a
national owner and developer of and investor in office and industrial buildings
as well as other commercial properties principally in the New York/New Jersey
metropolitan area as well as throughout the United States since 1963. The
business address for Messrs. Black, Hannan and Mack is 1301 Avenue of the
Americas, New York, New York 10019.
For certain information concerning the executive officers and directors of
the Managing Member, see Schedule I to this Offer to Purchase.
14
<PAGE> 18
Except as otherwise set forth in this Offer to Purchase or Schedule I
hereto, (1) neither the Purchaser, the Managing Member, Advisors, and to the
best of Purchaser's knowledge, the persons listed on Schedule I, nor any
affiliate of the foregoing beneficially owns or has a right to acquire any
Units, (2) neither the Purchaser, the Managing Member, Advisors, and to the
best of Purchaser's knowledge, the persons listed on Schedule I, nor any
affiliate thereof or director, executive officer or subsidiary of the Managing
Member or Advisors has effected any transaction in the Units within the past 60
days, (3) neither the Purchaser, the Managing Member, Advisors, and to the best
of Purchaser's knowledge, any of the persons listed on Schedule I, nor any
director or executive officer of the Managing Member or Advisors has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Partnership, including, but not limited to,
contracts, arrangements, understandings or relationships concerning the
transfer or voting thereof, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, (4) there have been no transactions or business
relationships which would be required to be disclosed under the rules and
regulations of the Commission between any of the Purchaser, the Managing
Member, Advisors, or, to the best of Purchaser's knowledge, the persons listed
on Schedule I, on the one hand, and the Partnership or its affiliates, on the
other hand, and (5) there have been no contracts, negotiations or transactions
between the Purchaser, the Managing Member, Advisors, or, to the best of
Purchaser's knowledge, the persons listed on Schedule I, on the one hand, and
the Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
The Purchaser owns five Units, which represents less than 1% of the number
of Units outstanding as reported in the Form 10-K (the most recently available
filing containing such information). The Purchaser acquired such five Units on
October 15, 1996 from an affiliate of Liquidity Financial at a price per Unit
of $405.
Liquidity Financial, a registered investment advisor, is acting as
financial advisor to the Purchaser in connection with the Offer and has
provided certain financial advisory services to the Purchaser in connection
with the Offer. See Section 11 ("Background of the Offer").
11. BACKGROUND OF THE OFFER.
In late 1994, representatives of Liquidity Financial met with
representatives of AREA to discuss a possible financial advisory relationship
between the parties. Specifically, Liquidity Financial proposed to act as
financial advisor to AREA with respect to strategic investments in limited
partnerships which are not controlled by AREA. Negotiations regarding this
proposed financial advisory relationship continued through the winter of 1995
and ultimately culminated the execution in March 1995 of an agreement in
principle (the "1995 Agreement in Principle"). During the spring and summer of
1995, Liquidity Financial and AREA discussed the terms of a number of potential
tender offers for limited partnership interests, however no specific terms were
agreed on and no tender offers involving Liquidity Financial and AREA and their
respective affiliates were commenced. Ultimately, the 1995 Agreement in
Principle terminated pursuant to its terms.
Liquidity Financial has advised the Purchaser that following the
termination of the 1995 Agreement in Principle it continued its business of
evaluating limited partnerships and utilized its position as a limited partner
to obtain lists of limited partners from a number of partnerships in which it
held interests. In June 1996, as part of this business plan, Liquidity
Financial requested a list of Limited Partners from the Partnership. A second
request was made in writing by Liquidity Financial in July 1996 that was
followed by a series of telephone conversations between representatives of the
Partnership and Liquidity Financial. Liquidity Financial obtained a list of
Limited Partners from the Partnership in August 1996.
In July 1996, representatives of Liquidity Financial contacted
representatives of AREA II for the purpose of exploring a possible new
financial advisory relationship between Liquidity Financial and AREA II. These
15
<PAGE> 19
discussions continued throughout the summer of 1996 and culminated in the
execution of a new Agreement in Principle in September 1996 (the "1996
Agreement in Principle"). The 1996 Agreement in Principle outlines the terms
of a financial advisory relationship between Liquidity Financial and its
affiliates and AREA II and its affiliates with respect to certain tender offers
for limited partnership interests. The 1996 Agreement in Principle identified
the Partnership as a potential target for such tender offers.
On October 17, 1996, immediately prior to the commencement of this Offer,
(i) Liquidity Financial and the Purchaser entered into a definitive advisory
agreement (the "Advisory Agreement") relating to the Offer, and (ii) Liquidity
Financial provided the Purchaser with its list of Limited Partners. Pursuant
to the terms of an option agreement, dated as of October 17, 1996, Liquidity
Financial Group, L.P., an affiliate of Liquidity Financial, has the option, for
the 6 month period following the Purchaser's acceptance for payment of the
tendered Units, to acquire, indirectly through a member of the Purchaser, up to
a 5% interest in the Purchaser.
12. SOURCE OF FUNDS.
The Purchaser expects that approximately $3,645,000 (exclusive of fees and
expenses) would be required to purchase the Units sought pursuant to the Offer,
if tendered. The Purchaser presently contemplates that it will obtain all of
such funds from capital contributions from its members who have an aggregate
net worth substantially in excess of the amount required to purchase the Units.
However, the Purchaser may seek to obtain debt financing to facilitate the
purchase of Units, but no commitment has been obtained for any such debt
financing.
13. PURCHASE PRICE CONSIDERATIONS. The Purchaser has set the Purchase
Price at $405 net per Unit (subject to adjustment as set forth in this Offer to
Purchase). The Purchaser established the Purchase Price by analyzing a number
of quantitative and qualitative factors including: (i) the absence of a
significant number of recent secondary market resales of the Units; (ii) the
lack of liquidity of an investment in the Partnership; (iii) the costs to the
Purchaser associated with acquiring the Units; (iv) the administrative costs of
continuing to own the Partnership's assets through a publicly registered
limited partnership; (v) the possibility that Limited Partners may realize
taxable income in excess of tax distributions from the Partnership in future
years; (vi) the inability of Limited Partners to exercise effective control
over the management of the Partnership through the annual election of the
General Partner; and (vii) estimated transaction costs of completing the Offer.
Form 10-K states that "No public trading market exists or is expected to be
established for the . . . Units." At present, privately negotiated sales and
sales through intermediaries (e.g., through the trading system operated by
Chicago Partnership Board, Inc., which publishes sales 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. According to Partnership
Spectrum, an independent third-party industry publication, between June 1, 1996
and July 31, 1996, a total of 45 Units traded at prices ranging from a low of
$255.00 to a high of $271.32 per Unit with a weighted average of $265.18 per
Unit. Such gross sales prices reported by Partnership Spectrum do not
necessarily reflect the net sales proceeds received by sellers of Units, which
typically are reduced by commissions and other secondary market transaction
costs to amounts less than the reported prices.
The Purchase Price represents the price at which the Purchaser is willing
to purchase Units. No independent person has been retained to evaluate or
render any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. The Purchaser did not attempt to obtain current independent
valuations or appraisals of the underlying assets owned by the Partnership.
Other measures of the value of the Units may be relevant to Unitholders.
Limited Partners are urged to consider carefully all of the information
contained herein and consult with their own advisors, tax, financial or
otherwise, in evaluating the terms of the Offer before deciding whether to
tender Units.
16
<PAGE> 20
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion, the Purchaser shall not be required to accept
for payment, purchase or pay for, subject to Rule 14e-1(c) under the Exchange
Act, any tendered Units (whether or not any Units have theretofore been
accepted for payment or paid for pursuant to the Offer), and may terminate the
Offer as to any Units not then paid for, if (i) the Minimum Condition shall not
have been satisfied, (ii) the Purchaser shall not have confirmed to its
reasonable satisfaction that, upon purchase of the Units pursuant to the Offer,
the Purchaser will have full rights to ownership as to all such Units and the
Purchaser will be admitted as a Substituted Limited Partner or (iii) all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer, the Purchaser will
not be required to accept for payment or pay for any 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 therefore, any of the
following conditions exist:
(a) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or the
over-the-counter market in the United States, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) the commencement or escalation of a
war, armed hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed by any
governmental authority on, or any other event that might have material adverse
significance with respect to, the nature or extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any of
the foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event or development
involving a prospective material adverse change) shall have occurred or be
likely to occur in the business, prospects, financial condition, results of
operations, properties, assets, liabilities, capitalization, partners' equity,
licenses, franchises or businesses of the Partnership and its subsidiaries
taken as a whole; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application, audit, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by or before any
court or governmental, regulatory or administrative agency, authority or
tribunal, domestic, foreign or supranational, which (i) challenges the
acquisition by the Purchaser of the Units or seeks to obtain any material
damages as a result thereof, (ii) makes or seeks to make illegal, the
acceptance for payment, purchase or payment for any Units or the consummation
of the Offer, (iii) imposes or seeks to impose limitations on the ability of
the Purchaser or any affiliate of the Purchaser to acquire or hold or to
exercise full rights of ownership of the Units, including, but not limited to,
the right to vote any Units purchased by them on all matters properly presented
to the Limited Partners, (iv) may result in a material diminution in the
benefits expected to be derived by the Purchaser or any of its affiliates as a
result of the Offer, (v) requires divestiture by the Purchaser of any Units,
(vi) might materially adversely affect the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Partnership or the Purchaser or (vii) challenges or adversely
affects the Offer; or
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Offer, or any other action shall have been taken, by
any government, governmental authority or court, domestic or foreign, other
than the routine application to the Offer of waiting periods that has resulted,
or in the reasonable good faith judgment of the Purchaser could
17
<PAGE> 21
be expected to result, in any of the consequences referred to in clauses (i)
through (vii) of paragraph (c) above; or
(e) the Partnership or any of its subsidiaries shall have authorized,
recommended, proposed or announced an agreement or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or business
combination, any acquisition or disposition of a material amount of assets or
securities, or any comparable event, not in the ordinary course of business
consistent with past practices; or
(f) the failure to occur of any necessary approval or authorization by any
federal or state authorities necessary to the consummation of the purchase of
all or any part of the Units to be acquired hereby, which in the reasonable
judgment of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(g) the Purchaser shall become aware that any material right of the
Partnership or any of its subsidiaries under any governmental license, permit
or authorization relating to any environmental law or regulation is reasonably
likely to be impaired or otherwise adversely affected as a result of, or in
connection with, the Offer.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise the foregoing rights will not
be deemed a waiver of such rights, which will be deemed to be ongoing and may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 14 will be final and
binding upon all parties.
15. CERTAIN LEGAL MATTERS.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of Units by the Purchaser pursuant to the
Offer as contemplated herein, other than the filing of a Tender Offer Statement
on Schedule 14D-1 (which has been filed) and any required amendments thereto.
Should any such approval or other action be required, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's or the
Purchaser's business might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or action
in the event that such approvals were not obtained or such actions were not
taken.
APPRAISAL RIGHTS. Limited Partners will not have appraisal rights as a
result of the Offer.
STATE ANTI-TAKEOVER LAWS. A number of states have adopted anti-takeover
laws which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated or
organized in such states or which have substantial assets, securityholders,
principal executive officers or principal places of business therein. Although
the Purchaser has not attempted to comply with any state anti-takeover statutes
in connection with the Offer, the Purchaser reserves the right to challenge the
validity or applicability or any state law allegedly applicable to the Offer
and nothing in this Offer to Purchase nor any action taken in connection
therewith is intended as a waiver of such right. If any state anti-takeover
statute is applicable to the Offer, the Purchaser might be unable to accept for
payment or purchase Units tendered pursuant to the Offer or be delayed in
continuing or consummating the Offer. In such case, the Purchaser may not be
obliged to accept for purchase or pay for any Units tendered.
18
<PAGE> 22
ERISA. By executing and returning the Letter of Transmittal, a Limited
Partner will be representing that either (a) the Limited Partner is not a plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code, or an entity deemed to hold
"plan assets" within the meaning of 29.C.F.R. Section 2510.3-101 of any such
plan; or (b) the tender and acceptance of Units pursuant to the Offer will not
result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
MARGIN REQUIREMENTS. The 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.
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe any filing is required
under the HSR Act with respect to its acquisition of Units contemplated by the
Offer.
16. CERTAIN FEES AND EXPENSES.
Except as set forth in this Section 16, the Purchaser will not pay any fees
or commissions to any broker, dealer or other person for soliciting tenders of
Units pursuant to the Offer. The Purchaser has retained The Herman Group, Inc.
to act as Information Agent/Depositary in connection with the Offer. The
Purchaser will pay the Information Agent/Depositary reasonable and customary
compensation for its services, plus reimbursement for certain reasonable out-
of-pocket expenses, and has agreed to indemnify the Information
Agent/Depositary against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
The Purchaser will also pay all costs and expenses of printing and mailing the
Offer and its legal fees and expenses.
17. MISCELLANEOUS.
The Offer is being made to all Limited Partners, Beneficial Owners and
Assignees, all to the extent known by the Purchaser. The Purchaser is not
aware of any state in which the making of the Offer is prohibited by
administrative or judicial action pursuant to a state statute. If the
Purchaser becomes aware of any state where the making of the Offer is so
prohibited, the Purchaser will make a good faith effort to comply with any such
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Purchaser cannot comply with any applicable
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) Limited Partners in such state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, furnishing certain
additional information with respect to the Offer. Such statement and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained at the same places and in the same manner as set forth with respect to
information concerning the Partnership in Section 9 ("Certain Information
Concerning the Partnership").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER
OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Prom Investment Partners L.L.C.
October 18, 1996
19
<PAGE> 23
APPENDIX A
GLOSSARY OF DEFINED TERMS
"Advisors" means Apollo Real Estate Capital Advisors II, Inc.
"Advisory Agreement" means the definitive advisory agreement entered into
between Liquidity Financial and the Purchaser as of October 17, 1996.
"AREA" means Apollo Real Estate Advisors, L.P.
"AREA II" means Apollo Real Estate Advisors II, L.P.
"Assignee" means a person who has purchased Units but has not yet been
reflected on the Partnership's books as the record owner of such Units.
"Beneficial Owner" means a Limited Partner in the case of Units owned by
Individual Retirement Accounts or qualified plans.
"business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time, and any time period of business days will be computed in
accordance with Rule 14d-1(c)(6) under the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" has the meaning set forth in Section 1.
"Form 10-K" means the Partnership's Form 10-K for the year ended December
31, 1995.
"Form 10-Q" means the Partnership's Form 10-Q for the quarter ended June
30, 1996.
"FTC" means the Federal Trade Commission.
"General Partner" means Prometheus Development Co., Inc., a California
corporation and the general partner of the Partnership.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Information Agent/Depositary" means The Herman Group, Inc.
"IRA" means an individual retirement account.
"Limited Liquidity Plan" means the provision in the Partnership Agreement
pursuant to which the Partnership is required to purchase up to 5% of the
outstanding Units at 80% of their value (determined
A-1
<PAGE> 24
pursuant to an appraisal process), subject to certain availability restrictions
based on the Partnership's cash from operations.
"Limited Partner" means any owner of record of Unit(s).
"Liquidity Financial" means Liquidity Financial Advisors, Inc., the
Purchaser's financial advisor.
"Managing Member" means AP-GP Prom Partners Inc. a newly-formed Delaware
corporation and the managing member of the Purchaser.
"Minimum Condition" shall mean the condition to the consummation of the
Offer that a minimum of 4,750 Units are tendered and not withdrawn prior to the
Expiration Date.
"NASD" means the National Association of Securities Dealers, Inc.
"1995 Agreement in Principle" means the letter agreement executed in
March 1995 that outlined an agreement in principle regarding the establishment
of a financial advisory relationship between Liquidity Financial and AREA with
respect to strategic investments in certain limited partnerships.
"1996 Agreement in Principle" means the letter agreement executed in
September 1996 that outlined an agreement in principle regarding the
establishment of a financial advisory relationship between Liquidity Financial
and AREA II with respect to strategic investments in certain limited
partnerships.
"Offer" has the meaning set forth in the Introduction.
"Offer to Purchase" means this Offer to Purchase dated October 18, 1996.
"Partnership" means Prometheus Income Partners, a California limited
partnership.
"Partnership Agreement" means the Second Amended and Restated Limited
Partnership Agreement of the Partnership.
"Properties" means both the Alderwood Apartments and the Timberleaf
Apartments.
"Purchase Price" has the meaning set forth in the Introduction.
"Purchaser" means Prom Investment Partners L.L.C., a Delaware limited
liability company.
"Substituted Limited Partner" means an assignee of a Limited Partner or a
substituted Limited Partner who is admitted as a Limited Partner pursuant to
the terms of the Partnership Agreement.
"TIN" means taxpayer identification number.
"UBTI" means unrelated business taxable income.
"Units" means units of limited partnership interest in the partnership.
A-2
<PAGE> 25
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF AP-GP PROM PARTNERS INC.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
executive officer and director of AP-GP Prom Partners Inc. Each person listed
below is a citizen of the United States.
LEE S. NEIBART. Mr. Neibart has been an officer and a director of AP-GP Prom
Partners Inc. since October 1996 and an officer of Advisors since its
inception. Since 1993, Mr. Neibart has been associated with AREA and since May
1996 with Apollo Real Estate Advisors II, L.P. ("AREA II") which respectively
act as managing general partner of Apollo Real Estate Investment Fund, L.P.
("Apollo I") and Apollo Real Estate Investment Fund II, L.P. ("Apollo" and
together with Apollo I, the "Apollo Funds"). The Apollo Funds are private real
estate investment funds formed to invest in direct and indirect real property
interests, including direct property investments and public and private debt
and equity securities. Prior to 1993, Mr. Neibart was Executive Vice President
and Chief Operating Officer of the Robert Martin Company, a private real estate
development and management firm based in Westchester County, New York. Mr.
Neibart received his MBA degree from New York University. Mr. Neibart is also
a director of Capital Apartment Properties, Inc., Roland International, Inc.
and a past President of the NAIOP in New York. Mr. Neibart's business address
is 1301 Avenue of the Americas, New York, New York 10019.
W. EDWARD SCHEETZ. Mr. Scheetz has been an officer and a director of AP-GP
Prom Partners Inc. since October 1996 and an officer of Advisors since its
inception. Since 1993, Mr. Scheetz has been a principal of AREA and since May
1996 of AREA II, which respectively act as managing general partner of Apollo I
and Apollo II. Prior to 1993, Mr. Scheetz was a principal of Trammell Crow
Ventures, a national real estate investment firm. Mr. Scheetz is also a
director of Capital Apartment Properties, Inc., Roland International, Inc.,
Koll Management Services, Inc. and Western Pacific Housing Corp. Mr. Scheetz'
business address is 1301 Avenue of the Americas, New York, New York 10019.
RICHARD MACK. Mr. Mack has been an officer and a director of AP-GP Prom
Partners Inc. since October 1996. Since May 1993, Mr. Mack has been associated
with AREA and since May 1996 has been associated with AREA II, which
respectively act as managing general partner of Apollo I and Apollo II. Prior
to May 1993, Mr. Mack attended Columbia Law School. Prior to April 1990, Mr.
Mack was employed by the real estate investment banking group at Shearson
Lehman Hutton, Inc., an investment banking and brokerage firm.
S-1
<PAGE> 26
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. Questions and requests for assistance may be
directed to the Information Agent/Depositary at the address and telephone
number listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agent/Depositary as set forth below, and will be furnished promptly
at the Purchaser's expense. The Letter of Transmittal and any other required
documents should be sent or delivered by each Limited Partner to the
Information Agent/Depositary at its address set forth below. To be effective,
a duly completed and signed Letter of Transmittal (or facsimile thereof) must
be received by the Information Agent/Depositary at the address (or facsimile
number) set forth below before 12:00 midnight, New York City Time, on Friday,
November 15, 1996.
By Mail:
The Herman Group, Inc.
P.O. Box 357
Dallas, TX 75221-9602
By Hand/Overnight Delivery:
2121 San Jacinto Street
26th Floor
Dallas, TX 75201
By Facsimile:
(214) 999-9348
or
(212) 999-9323
For Additional Information Call:
[THE HERMAN GROUP, INC. LOGO]
(800) 992-6176
or
(214) 999-9393
<PAGE> 1
EXHIBIT 99.A2
LETTER OF TRANSMITTAL
TO
TENDER UNITS OF LIMITED PARTNERSHIP INTEREST
OF
PROMETHEUS INCOME PARTNERS
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 18, 1996
BY
PROM INVESTMENT PARTNERS L.L.C.
<TABLE>
<CAPTION>
Number of(*) Purchase Price
Units Tendered Per Unit
-------------- --------
<C> <C>
$ 405
(*) If no indication is marked above, all Units issued to you will be deemed to have been tendered.
Please indicate changes or corrections to the address printed above.
</TABLE>
================================================================================
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996 (THE "EXPIRATION DATE") UNLESS
SUCH OFFER IS EXTENDED.
The undersigned hereby tender(s) to Prom Investment Partners L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of units of
limited partnership interest ("Units") of Prometheus Income Partners, a
California limited partnership (the "Partnership"), specified below, pursuant
to the Purchaser's offer to purchase up to 9,000 of the issued and outstanding
Units at a purchase price of $405 per Unit, net to the seller in cash (the
"Purchase Price"), without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated October 18, 1996 (the
"Offer to Purchase") and this Letter of Transmittal ("the "Letter of
Transmittal," which, together with the Offer to Purchase and any supplements,
modifications or amendments thereto, constitute the "Offer"), all as more fully
described in the Offer to Purchase. The Purchase Price will be automatically
reduced by the aggregate amount of distributions per Unit, if any, made or
declared by the Partnership after October 18, 1996 and on or prior to 12:00
midnight, New York City time, on November 15, 1996 (the "Expiration Date"). In
addition, if a distribution is made or declared after the Expiration Date but
prior to the date on which the Purchaser pays the Purchase Price for the
tendered Units, the Purchaser will offset the amount otherwise due a holder of
Units pursuant to the Offer in respect of tendered Units which have been
accepted for payment but not yet paid for by the amount of any such
distribution. LIMITED PARTNERS WHO TENDER THEIR UNITS WILL NOT BE OBLIGATED TO
PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH COMMISSIONS OR
PARTNERSHIP TRANSFER FEES WILL BE BORNE BY THE PURCHASER. Receipt of the Offer
to Purchase is hereby acknowledged. Capitalized terms used but not defined
herein have the respective meanings ascribed to them in the Offer to Purchase.
By executing and delivering this Letter of Transmittal, a tendering Limited
Partner irrevocably appoints the Purchaser and designees of the Purchaser and
each of them as such Limited Partner's proxies, with full power of
substitution, in the manner set forth in this Letter of Transmittal to the full
extent of such Limited Partner's rights with respect to the Units tendered by
such Limited Partner and accepted for payment by the Purchaser (and with
respect to any and all other Units or other securities issued or issuable in
respect of such Unit on or after the date hereof). All such proxies shall be
considered irrevocable and coupled with an interest in the tendered Units.
Such appointment will be effective when, and only to the extent that, the
Purchaser accepts such Units for payment. Upon such acceptance for payment,
all prior proxies given by such Limited Partner with respect to such Units (and
such other Units and securities) will be revoked without further action, and no
subsequent proxies may be given nor any subsequent written consent executed
(and, if given or executed, will not be deemed effective). The Purchaser and
its designees will, with respect to the Units (and such other Units and
securities) for which such appointment is effective, be empowered to exercise
all voting and other rights of such Limited Partner as they in their sole
discretion may deem proper at any meeting of Limited Partners or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. The Purchaser reserves the right to require that, in
order for a Unit to be deemed validly tendered, immediately upon the
Purchaser's payment for such Unit, the Purchaser must be able to exercise full
voting rights with respect to such Unit and other securities, including voting
at any meeting of Limited Partners.
By executing and delivering the Letter of Transmittal, a tendering Limited
Partner also irrevocably constitutes and appoints the Purchaser and its
designees as the Limited Partner's attorneys-in-fact, each with full power of
substitution to the extent of the Limited Partner's rights with respect to the
Units tendered by the Limited Partner and accepted for payment by the
Purchaser. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts the tendered Units for payment. Upon such
acceptance for payment, all prior powers of attorney granted by the Limited
Partner with respect to such Unit will, without further action, be revoked, and
no subsequent powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in- fact, the Purchaser
and its designees each will have the power, among other things, (i) to seek to
transfer ownership of such Units on the Partnership books maintained by the
transfer agent and registrar for the Partnership (and execute and deliver any
accompanying evidences of transfer and authenticity any of them may deem
necessary or appropriate in connection therewith), (ii) upon receipt by the
Information Agent/Depositary (as the tendering Limited Partner's agent) of the
Purchase Price, to become a substitute Limited Partner, to receive any and all
distributions made by the Partnership after the Expiration Date, and to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Units in accordance with the terms of the Offer, (iii) to execute and deliver
to the general partner of the Partnership (the "General Partner") a change of
address form instructing the General Partner to send any and all future
distributions to which the Purchaser is entitled pursuant to the terms of the
Offer in respect of tendered Units to the address specified in such form, (iv)
to endorse any check payable to or upon the order of such Limited Partner
representing a distribution to which the Purchaser is entitled pursuant to the
terms of the Offer, in each case on behalf of the tendering Limited Partner,
and (v) if legal title to the Units is held through an IRA or KEOGH or similar
account, the Limited Partner understands that this Letter of Transmittal must
be signed by the custodian of such IRA or KEOGH account and the Limited Partner
hereby authorizes and directs the custodian of such IRA or KEOGH to confirm this
Letter of Transmittal. This Power of Attorney shall not be affected by the
subsequent mental disability of the Limited Partner, and the Purchaser shall
not be required to post bond in any nature in connection with this Power of
Attorney.
By executing and delivering the Letter of Transmittal, a tendering Limited
Partner irrevocably assigns to the Purchaser and its assigns all of the right,
title and interest of such Limited Partner in the Partnership with respect to
the Units tendered and purchased pursuant to the Offer, including, without
limitation, such Limited Partner's right, title and interest in and to any and
all distributions made by the Partnership after the Expiration Date in respect
of the Units tendered by such Limited Partner and accepted for payment by the
Purchaser, regardless of the fact that the record date for any such
distribution may be a date prior to the Expiration Date. The Purchaser will
seek to be admitted to the Partnership as a substitute Limited Partner upon
consummation of the Offer.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. Section 2510.3-101 of any
such plan; or (b) the tender and acceptance of Units pursuant to the Offer will
not result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned recognizes that, if proration is required pursuant to the
terms of the Offer, the Purchaser will accept for payment from among those
Units validly tendered on or prior to the Expiration Date and not properly
withdrawn, the maximum number of Units permitted pursuant to the Offer on a pro
rata basis, with adjustments to avoid purchases of certain fractional Units,
based upon the number of Units validly tendered prior to the Expiration Date
and not properly withdrawn.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned
recognizes that under certain circumstances set forth in Section 2 ("Proration;
Acceptance for Payment and Payment for Units") and Section 14 ("Conditions of
the Offer") of the Offer to Purchase, the Purchaser may not be required to
accept for payment any of the Units tendered hereby. In such event, the
undersigned understands that any Letter of Transmittal for Units not accepted
for payment will be destroyed by the Purchaser. Except as stated in Section 4
("Withdrawal Rights") of the Offer to Purchase, this tender is irrevocable,
provided Units tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date.
<PAGE> 2
================================================================================
SIGNATURE BOX
<TABLE>
<S> <C>
Please sign exactly as your name is printed (or X
corrected) above. For joint owners, each joint owner -----------------------------------------------------------
must sign. If signed by the registered holder(s) of the (Signature of Owner) (Date)
Units and payment is to be made directly to that
holder(s) or Eligible Institution, then no signature
guarantee is necessary. In all other cases, all
signatures must be guaranteed by an Eligible ------------------------------------------------------------
Institution. (See Instruction 2.) The signatory hereto Taxpayer Identification Number of Owner
hereby certifies under penalties of perjury the Taxpayer (other than IRA's)
Identification Number furnished in the blank provided in
this Signature Box and the statements in Box A, Box B
and, if applicable, Box C. The undersigned hereby ------------------------------------------------------------
represents and warrants for the benefit of the (Signature of Co-Owner) (Date)
Partnership and the Purchaser that the undersigned owns
the Units tendered hereby and has full power and
authority to validly tender, sell, assign, transfer, ------------------------------------------------------------
convey and deliver the Units tendered hereby and that (Title)
when the same are accepted for payment by the Purchaser,
the Purchaser will acquire good, marketable and Telephone (Day) ( ) Telephone (Eve) ( )
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 GUARANTEE OF SIGNATURE (IF REQUIRED. SEE INSTRUCTION 2)
any adverse claims and that the transfer and assignment
contemplated herein are in compliance with all Name of Firm:
applicable laws and regulations. All authority herein -----------------------------------------------
conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any Authorized Signature:
obligations of the undersigned shall be binding upon the ---------------------------------------
heirs, personal representatives, successors and assigns
of the undersigned. Except as stated in Section 4
("Withdrawal Rights") of the Offer to Purchase, this
tender is irrevocable.
</TABLE>
================================================================================
TAX CERTIFICATIONS
================================================================================
BOX A
SUBSTITUTE FORM W-9
(See Instruction 3)
The person signing this Letter of Transmittal hereby certifies the following
to the Purchaser under penalties of perjury:
(i) The Taxpayer Identification Number ("TIN") furnished in the space
provided for that purpose in the Signature Box of this Letter of Transmittal
is the correct TIN of the Limited Partner, unless the Units are held in an
Individual Retirement Account ("IRA"); or if this box [ ] is checked, the
Limited Partner has applied for a TIN. If the Limited Partner has applied
for a TIN, a TIN has not been issued to the Limited Partner, and either: (a)
the Limited Partner has mailed or delivered an application to receive a TIN
to the appropriate Internal Revenue Service ("IRS") Center or Social Security
Administration Office, or (b) the Limited Partner intends to mail or deliver
an application in the near future, it is hereby understood that if the
Limited Partner does not provide a TIN to the Purchaser within sixty (60)
days 31% of all reportable payments made to the Limited Partner thereafter
will be withheld until a TIN is provided to the Purchaser; and
(ii) Unless this box [ ] is checked, the Limited Partner is not subject to
backup withholding either because the Limited Partner: (a) is exempt from
backup withholding, (b) has not been notified by the IRS that the Limited
Partner is subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) has been notified by the IRS that such
Limited Partner is no longer subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to certify
that the Limited Partner is not subject to backup withholding.
================================================================================
================================================================================
BOX B
FIRPTA AFFIDAVIT
(See Instruction 3)
Under Section 1445(c)(5) of the Code and Treas. Reg. 1.1445-IIT(d), a
transferee must withhold tax equal to 10% of the amount realized with respect
to certain transfers of an interest in a partnership if 50% or more of the
value of its gross assets consists of U.S. real property interests and 90% or
more of the value of its gross assets consists of U.S. real property
interests plus cash or cash equivalents, and the holder of the partnership
interest is a foreign person. To inform the Purchaser that no withholding is
required with respect to the Limited Partner's interest in the Partnership,
the person signing this Letter of Transmittal hereby certifies the following
under penalties of perjury:
(i) Unless this box [ ] is checked, the Limited Partner, if an individual,
is a U.S. citizen or a resident alien for purposes of U.S. income taxation,
and if other than an individual, is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as those terms are defined in
the Code and Income Tax Regulations);
(ii) the Limited Partner's U.S. social security number (for individuals) or
employer identification number (for non-individuals) is correct as furnished
in the blank provided for that purpose on the back of this Letter of
Transmittal; and
(iii) the Limited Partner's home address (for individuals), or office
address (for non-individuals), is correctly printed (or corrected) on the
back of this Letter of Transmittal. If a corporation, the jurisdiction of
incorporation is _________________________.
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
================================================================================
================================================================================
BOX C
SUBSTITUTE FORM W-8
(See Instruction 3)
By checking this box [ ], the person signing this Letter of Transmittal
hereby certifies under penalties of perjury that the Limited Partner is an
"exempt foreign person" for purposes of the backup withholding rules under
U.S. federal income tax laws, because the Limited Partner:
(i) Is a nonresident alien or a foreign corporation, partnership, estate or
trust;
(ii) If an individual, has not been and plans not be present in the U.S. for
a total of 183 days or more during the calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade or business that
has effectively connected gains from transactions with a broker or
barter exchange.
================================================================================
For Units to be accepted for purchase, Limited Partners should complete and
sign this Letter of Transmittal in the Signature Box and return it in the
self-addressed, postage-paid envelope enclosed, or by hand or overnight courier
to: The Herman Group, Inc., 2121 San Jacinto Street, Suite 2600, Dallas, TX
75201, or by Facsimile to: (214) 999-9323 or (214) 999-9348. Delivery of this
Letter of Transmittal or any other required documents to an address other than
the one set forth above or transmission via facsimile other than as set forth
above does not constitute valid delivery.
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANSMITTAL AND BOXES A, B AND C ABOVE.
<PAGE> 3
INSTRUCTIONS FOR COMPLETING LETTER OF TRANSMITTAL
Forming Part of the Terms and Conditions of the Offer
================================================================================
ASSISTANCE IN COMPLETING THE LETTER OF TRANSMITTAL, CALL:
THE HERMAN GROUP, INC. AT (800) 992-6176
================================================================================
1. DELIVERY OF LETTER OF TRANSMITTAL. For convenience in responding to
the Offer, a self-addressed, postage-paid envelope had been enclosed
with the Offer to Purchase. However, to ensure receipt of the Letter
of Transmittal, it is suggested that you use an overnight courier or,
if the Letter of Transmittal is to be delivered by United States mail,
that you use certified or registered mail, return receipt requested.
To be effective, a duly completed and signed Letter of Transmittal (or
facsimile thereof) must be received by the Information
Agent/Depositary at the address (or facsimile number) set forth below
before the Expiration Date, 12:00 Midnight, New York City Time on
Friday, November 15, 1996, unless extended. LETTERS OF TRANSMITTAL
WHICH HAVE BEEN DULY EXECUTED, BUT WHERE NO INDICATION IS MARKED IN
THE "NUMBER OF UNITS TENDERED" COLUMN, SHALL BE DEEMED TO HAVE
TENDERED ALL UNITS PURSUANT TO THE OFFER. Tenders of fractional Units
will only be accepted if all of the Units held by such Limited Partner
are tendered.
BY MAIL: THE HERMAN GROUP, INC.
P.O. Box 357
Dallas, Texas 75221-9602
BY HAND DELIVERY OR OVERNIGHT COURIER: THE HERMAN GROUP, INC.
2121 San Jacinto Street,
Suite 2600
Dallas, Texas 75201
BY FACSIMILE: (214) 999-9323
or
(214) 999-9348
FOR ADDITIONAL INFORMATION CALL: (800) 992-6176
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING LIMITED PARTNER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. IF TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND
BACK OF THE LETTER OF TRANSMITTAL AND THE TAX CERTIFICATION PAGE AND MAIL THE
ORIGINAL COPIES OF SUCH PAGES TO THE INFORMATION AGENT/DEPOSITARY AT THE
ADDRESS LISTED ABOVE.
All tendering holders of Units, by execution of this Letter of
Transmittal or facsimile hereof, waive any right to receive any notice of the
acceptance of their Units for payment.
2. SIGNATURES. All Limited Partners must sign in the Signature Box on
the back of the Letter of Transmittal. If the Units are held in the
names of two or more persons, all such persons must sign the Letter of
Transmittal. When signing as a general partner, corporate officer,
attorney-in-fact, executor, custodian, administrator or guardian,
please give full title and send proper evidence of authority
satisfactory to the Purchaser with this Letter of Transmittal. With
respect to most trusts, the Partnership will generally require only
the named trustee to sign the Letter of Transmittal. For Units held
in a custodial account for minors, only the signature of the custodian
will be required.
For IRA custodial accounts, the beneficial owner should return the
executed Letter of Transmittal to the Information Agent/Depositary as
specified in Instruction 1 herein. Such Letter of Transmittal will
then be forwarded by the Information Agent/Depositary to the custodian
for additional execution. Such Letter of Transmittal will not be
considered duly completed until after it has been executed by the
custodian.
If any tendered Units are registered in different names, it will be
necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of certificates.
If the Letter of Transmittal is signed by the registered holder of the
Units tendered herewith and payment is to be made directly to that
holder, then no signature guarantee is required on the Letter of
Transmittal. Similarly, if the Units are tendered for the account of
a member firm of a registered national securities exchange, a member
of the National Association of Securities Dealers, Inc. or a
commercial bank, savings bank, credit union, savings and loan
association or trust company having an office, branch or agency in the
United States (each an "Eligible Institution"), no signature guarantee
is required on the Letter of Transmittal. However, in all other
cases, all signatures on the Letter of Transmittal must be guaranteed
by an Eligible Institution.
3. U.S. PERSONS. A Limited Partner who or which is a United States
citizen OR a resident alien individual, a domestic corporation, a
domestic partnership, a domestic trust or a domestic estate
(collectively, "United States Persons") as those terms are defined in
the Code and Income Tax Regulations, should follow the instructions
below with respect to certifying Boxes A and B (on the reverse side of
the Letter of Transmittal).
TAXPAYER IDENTIFICATION NUMBER. To avoid 31% federal income tax
backup withholding, the Limited Partner must furnish his, her or its
TIN in the blank provided for that purpose on the back of the Letter
of Transmittal and certify under penalties of perjury Box A, B and, if
applicable, Box C.
(Continued on Back)
<PAGE> 4
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE REFER TO THE
FOLLOWING NOTE AS A GUIDELINE:
NOTE: INDIVIDUAL ACCOUNTS should reflect their own TIN.
JOINT ACCOUNTS should reflect the TIN of the person whose name
appears first. TRUST ACCOUNTS should reflect the TIN assigned
to the Trust. IRA CUSTODIAL ACCOUNTS should reflect the TIN
of the custodian. CUSTODIAL ACCOUNTS FOR THE BENEFIT OF
MINORS should reflect the TIN of the minor. CORPORATIONS OR
OTHER BUSINESS ENTITIES should reflect the TIN assigned to
that entity. If you need additional information, please see
the enclosed copy of the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
SUBSTITUTE FORM W-9 - BOX A.
(i) In order to avoid 31% federal income tax backup withholding, the
Limited Partner must provide to the Purchaser in the blank provided
for that purpose on the back of the Letter of Transmittal the Limited
Partner's correct TIN and certify, under penalties of perjury, that
such Limited Partner is not subject to such backup withholding, The
TIN being provided on the Substitute Form W-9 is that of the
registered Limited Partner as indicated on the back of the Letter of
Transmittal. If a correct TIN is not provided, penalties may be
imposed by the IRS, in addition to the Limited Partner being subject
to backup withholding. Certain Limited Partners (including, among
others, all corporations) are not subject to backup withholding.
Backup withholding is not an additional tax. If withholding results
in an overpayment of taxes, a refund may be obtained from the IRS.
(ii) DO NOT CHECK THE BOX IN BOX A, PART (ii), UNLESS YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
FIRPTA AFFIDAVIT - BOX. B. To avoid withholding of tax pursuant to
Section 1445 of the Code, each Limited Partner who or which is a United
States Person (as defined in Instruction 3 above) must certify, under
penalties of perjury, the Limited Partner's TIN and address, and that the
Limited Partner is not a foreign person. Tax withheld under Section 1445
of the Internal Revenue Code is not an additional tax. If withholding
results in an overpayment of tax, a refund may be obtained from the IRS.
CHECK THE BOX IN BOX B, PART (ii) ONLY IF YOU ARE NOT A U.S. PERSON, AS
DESCRIBED THEREIN.
4. FOREIGN PERSONS - BOX C. In order for a Limited Partner who is a foreign
person (i.e., not a United States Person as defined in Instruction 3
above) to qualify as exempt from 31% backup withholding, such foreign
Limited Partner must certify, under penalties of perjury, the statement
in Box C of this Letter of Transmittal attesting to that foreign person's
status by checking the box in such statement. UNLESS SUCH BOX IS
CHECKED, SUCH FOREIGN PERSON WILL BE SUBJECT TO 31% WITHHOLDING OF TAX
UNDER SECTION 1445 OF THE CODE.
5. CONDITIONAL TENDERS. No alternative, conditional or contingent tenders
will be accepted.
6. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of a Letter
of Transmittal will be determined by the Purchaser and such determination
will be final and binding. The Purchaser's interpretation of the terms
and conditions of the Offer (including these instructions for the Letter
of Transmittal) also will be final and binding. The Purchaser will have
the right to waive any irregularities or conditions as to the manner of
tendering. Any irregularities in connection with tenders must be cured
within such time as the Purchaser shall determine unless waived by it.
The Letter of Transmittal will not be valid unless and until any
irregularities have been cured or waived. Neither the Purchaser nor the
Information Agent/Depositary is under any duty to give notification of
defects in a Letter of Transmittal and will incur no liability for
failure to give such notification.
7. ASSIGNEE STATUS. Assignees must provide documentation to the Information
Agent/Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an assignee.
8. INADEQUATE SPACE. If the space provided herein is inadequate, the
numbers of Units and any other information should be listed on a separate
schedule attached hereto and separately signed on each page thereof in
the same manner as this Letter of Transmittal is signed.
Questions and requests for assistance may be directed to the Information
Agent/Depositary at its address and telephone number listed below. Additional
copies of the Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent as set forth below,
and will be furnished promptly at the Purchaser's expense. You may also
contact your broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent/Depositary for the Offer is:
[THE HERMAN GROUP, INC. LOGO]
2121 San Jacinto Street
Suite 2600
Dallas, Texas 75221-9602
or
Call Toll-Free (800) 992-6176
<PAGE> 1
EXHIBIT 99.A3
PROM INVESTMENT PARTNERS L.L.C.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
October 18, 1996
$405 PER UNIT OFFER TO PURCHASE
To Limited Partners in Prometheus Income Partners:
PROM INVESTMENT PARTNERS L.L.C., A DELAWARE LIMITED LIABILITY
COMPANY (THE "PURCHASER"), IS OFFERING TO PURCHASE UP TO 9,000 OF THE
OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST (THE "UNITS") IN PROMETHEUS
INCOME PARTNERS (THE "PARTNERSHIP") FOR A CASH PURCHASE PRICE OF $405 PER UNIT,
NET TO THE SELLER, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN
THE ATTACHED OFFER TO PURCHASE DATED OCTOBER 18, 1996 AND THE RELATED LETTER OF
TRANSMITTAL (WHICH TOGETHER CONSTITUTE THE "OFFER").
Unless extended by the Purchaser, the Offer is effective until
midnight, New York City time, on November 15, 1996. The Offer is conditioned
upon a minimum number of 4,750 Units being tendered. Additionally, tenders of
fractional Units will only be accepted if all of the Units held by such Limited
Partner are tendered.
The materials included in this package include important
information concerning the Purchaser, the terms and conditions to the Offer,
tax implications and instructions for tendering your Units. It is important
that you take some time to read carefully the enclosed Offer to Purchase, the
Letter of Transmittal and other accompanying materials in order to evaluate the
Offer being made by the Purchaser.
In reviewing the Offer, please note:
- Offer is a Premium to $265 per Unit Weighted Average Secondary
Market Price.
$265 per Unit was the weighted average selling price
for Units in the limited secondary market for the two
months ended July 31, 1996. Limited Partners are
advised, however, that such amount is not necessarily
indicative of value.
- No Commissions and No Transfer Fees.
The Purchaser will pay any transfer fees charged by
the Partnership in connection with transferring the
ownership of your Units pursuant to the Offer and you
will not incur any commissions in connection with
tendering your Units pursuant to the Offer.
- No More K-1 Reporting Costs if You Sell All of Your Units.
If you sell all of your Units you will avoid the
expense, delay, and complications in filing complex
tax returns which result from an ownership of Units.
You must decide whether to tender your Units based on your own
particular circumstances, including your judgment of the value of your Units
taking into account their upside potential and risks. You should consult with
your advisors about the financial, tax, legal and other implications to you of
accepting the Offer.
If you desire additional information regarding the Offer or
need assistance in tendering your Units, you may call The Herman Group, Inc.,
which is acting as Information Agent/Depositary for the Offer, at (800)
992-6176. Informed and courteous agents are available to assist you.
PROM INVESTMENT PARTNERS L.L.C.
<PAGE> 1
EXHIBIT 99.C
OPTION AGREEMENT
AGREEMENT, dated as of October 17, 1996 (this "Agreement"), by
and between Liquidity Financial Group, L.P., a California limited partnership
(the "Optionee"), and Apollo Real Estate Investment Fund II, L.P., a Delaware
limited partnership (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund owns 29.23% of the outstanding limited
liability company interests (the "Prom Interests") of Prom LFG L.L.C., a
Delaware limited liability company ("Prom LFG");
WHEREAS, Prom LFG owns 17.1% of the outstanding limited
liability company interests (the "Bidder Interests") of Prom Investment
Partners L.L.C., a Delaware limited liability company (the "Bidder");
WHEREAS, the Bidder has commenced or will commence a tender
offer (the "Tender Offer") to acquire up to 9,000 of the issued and outstanding
limited partnership units (the "Units"), or approximately 47.4%, of Prometheus
Income Partners, a California limited partnership (the "Target"), at a price of
$405 per Unit; and
WHEREAS, the Fund desires to grant to the Optionee an option
to acquire up to 100% of the Fund's Prom Interests (the "Option Interests"),
upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual covenants set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Optionee and the Fund hereby agree as follows:
1. Grant of the Option. The Fund hereby grants to the Optionee
the right to purchase (the "Option") all or any part of the Option Interests
from the Fund exercisable from the date Bidder accepts for payment Units
tendered pursuant to the Tender Offer until that date which is six months after
the date the Option becomes exercisable (the "Option Period"), at a purchase
price (the "Purchase Price") equal to five percent (5%) of the aggregate
consideration paid and expenses incurred by the Bidder for the Units in the
Tender Offer together with interest at a rate of 10% per annum based on a year
of 366 days (calculated from and after the date of the closing of the Tender
Offer through and including the date of the closing of the Option). If
Optionee does not exercise the entire Option, the Purchase Price shall be
reduced pro rata in accordance with the percentage of the entire Option
exercised by the Optionee.
<PAGE> 2
2. Exercise of the Option. The Option to purchase the Option
Interests shall be exercisable in whole or in part on the terms and subject to
the conditions hereinafter set forth:
(a) In the event that the Optionee is entitled to and
wishes to exercise the Option, the Optionee shall, during the Option Period,
send a written notice (the "Exercise Notice") to the Fund identifying the date
and place for the closing (the "Closing") of the Option Interests to be
purchased. Delivery of the Exercise Notice prior to the expiration of the
Option Period shall be sufficient to entitle the Optionee to purchase the
Option Interests notwithstanding that the Closing may occur after the
expiration of the Option Period; provided, however, that the Closing shall not
be more than fifteen (15) business days from the date that the Exercise Notice
is received by the Fund unless another date is agreed upon in writing by the
Fund and the Optionee.
(b) Payment of the Purchase Price for the Option
Interests to be acquired pursuant to the exercise of the Option will be made by
the Optionee at the Closing by delivering to the Fund, by wire transfer or by
certified check payable to the order of the Fund, an amount equal to the
Purchase Price.
3. Transferability of the Option. The Option may not be
assigned, transferred, or otherwise disposed of, or pledged or hypothecated or
in any way be subject to execution, attachment or other process. Any
assignment, transfer, pledge, hypothecation or other disposition of the Option
attempted contrary to the provisions of this Agreement or any levy, execution,
attachment or other process attempted upon the Option will be null and void and
without effect.
4. Sale of Option Interests. Except as provided in this
Agreement, the Fund shall not, without the express written consent of the
Optionee, during the Option Period, (i) sell or otherwise dispose of any or all
of the Option Interests, or (ii) convert such Option Interests into cash,
capital stock or other securities.
5. Adjustment Upon Changes in Capitalization. In the event of
any change in the Prom Interests by reason of dividends, split-ups,
recapitalizations, combinations, exchanges of interests or the like, the type
and number of interests of Prom Interests subject to the Option and the
Purchase Price shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional Prom Interests become
outstanding as a result of any such change after the date of this Agreement,
the Option shall be adjusted so that, after such change and together with the
Prom Interests previously outstanding pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing change in Prom Interests), it
equals 29.23% of the number of Prom Interests then outstanding.
6. Investment. The Optionee acknowledges that the Option
Interests are not being offered pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act"), or any other securities laws.
The Optionee acknowledges that the Option Interests are being acquired for the
Optionee's own account for investment purposes only and not with a view to, or
for sale in connection with, any public distribution thereof and will not sell,
or offer to sell or otherwise dispose of, any interest in the Option Interests
acquired by the Optionee in violation of the Act. The Optionee has had
substantial experience in business and financial matters and in making
investments of the type contemplated by this Agreement, is capable of
evaluating the merits and risks of the purchase of the Option Interests and is
able to bear the economic risks of such investment.
<PAGE> 3
7. Representations and Warranties of the Fund. The Fund hereby
represents and warrants to the Optionee as follows:
a. Organization. The Fund is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware, has all requisite power and authority to execute and deliver this
Agreement and perform its obligations hereunder. The execution and delivery by
the Fund of this Agreement and the performance by the Fund of its obligations
hereunder have been duly and validly authorized by the general partner of the
Fund and no other partnership actions on the part of the Fund are necessary to
authorize the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
b. Authorization. This Agreement has been duly and validly
executed and delivered by the Fund and constitutes a valid and binding
agreement enforceable against the Fund in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
c. Title to Option Interests. As of the date hereof,
the Fund is the legal, beneficial and record owner of the Option Interests.
The Fund has good and marketable title to all of the Option Interests, free and
clear of any liens, encumbrances, equities, restrictions and claims of every
kind and nature. No person other than the Fund has any interest in or right to
acquire any interest in any of the Option Interests. There are no rights,
options, convertible or exchangeable, instruments or interests or commitments,
agreements, arrangements or undertakings of any kind to which the Fund is a
party or by which the Fund is bound obligating the Fund to deliver, sell, or
cause to be sold or delivered, the Option Interests.
d. No Conflicts. Except for authorizations, consents
and approvals as may be required hereunder, (i) no filing with, and permit,
authorization, consent or approval of any state or federal public body or
authority is necessary for the execution of this Agreement by the Fund and the
consummation by the Fund of the transactions contemplated hereby and (ii) none
of the execution and delivery of this Agreement by the Fund and the
consummation by the Fund of the transactions contemplated hereby will (A)
conflict with any or result in any breach of any provision of the
organizational documents of the Fund, (B) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any indenture, license, contract,
agreement or other instrument or obligation to which the Fund is a party or by
which it may be bound, or (C) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Fund.
8. Representations and Warranties of the Optionee. The Optionee
hereby represents and warrants to the Fund as follows:
a. Organization. The Optionee is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
California, has all requisite power and authority to execute and deliver this
Agreement and perform its obligations hereunder. The execution and delivery by
the Optionee of this Agreement and the performance by the Optionee of its
obligations
-3-
<PAGE> 4
hereunder have been duly and validly authorized by the general partner of the
Optionee and no other partnership actions on the part of the Optionee are
necessary to authorize the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby.
b. Authorization. This Agreement has been duly and validly
executed and delivered by the Optionee and constitutes a valid and binding
agreement enforceable against the Optionee in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
c. No Conflicts. Except for authorizations, consents
and approvals as may be required hereunder, (i) no filing with, and permit,
authorization, consent or approval of any state or federal public body or
authority is necessary for the execution of this Agreement by the Optionee and
the consummation by the Optionee of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by the Optionee and
the consummation by the Optionee of the transactions contemplated hereby will
(A) conflict with any or result in any breach of any provision of the
organizational documents of the Optionee, (B) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
indenture, license, contract, agreement or other instrument or obligation to
which the Optionee is a party or by which it may be bound, or (C) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Optionee.
9. Termination. Except as otherwise provided herein, the
covenants and agreements contained herein with respect to the Option Interests
shall terminate upon the expiration of the Option Period.
10. Notices. Notices relating to this Agreement shall be in
writing and delivered in person or by hand delivery or certified mail, return
receipt requested, postage prepaid, as follows:
If to the Optionee:
Liquidity Financial Group, L.P.
2200 Powell Street, Suite 700
Emeryville, California 94608
Attention: Brent Donaldson
with a copy to:
Morgan, Lewis & Bockius
1800 M Street N.W.
Washington, D.C. 20036
Attention: Lloyd Feller, Esq.
-4-
<PAGE> 5
If to the Fund:
c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: W. Edward Scheetz
Richard Mack
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Fax: (212) 856-7811
Attention: Peter M. Fass, Esq.
Steven L. Lichtenfeld, Esq.
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and is hereby deemed to have been
given or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, three (3) days
after mailing.
11. Benefits of Agreement. This Agreement shall inure to the
benefit and shall be binding upon the successors, heirs, legal representatives
and permitted assigns of the parties hereto.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the principles thereof respecting conflicts of laws.
13. Holidays. Whenever any payment to be made hereunder shall be
stated to be due on a Saturday, Sunday or any national holiday, such payment
may be made on the next succeeding business day.
14. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15. Entire Understanding and Release. (a) This Agreement
contains the entire agreement between the Fund and the Optionee and supersedes
any and all prior agreements, understandings and undertakings, whether written
or oral, between the Fund and its officers, directors, employees or agents on
the one hand, and the Optionee on the other hand. No representations,
warranties, covenants or agreements, except those expressly set forth in this
Agreement will be deemed to have been made by either the Fund and its officers,
directors, employees or agents on the one hand, and the Optionee on the other
hand.
-5-
<PAGE> 6
(b) The Optionee hereby releases, acquits and forever
discharges the Fund and its partners, employees and agents, as well as each of
their respective heirs, personal representatives, successors and assigns, from
any and all losses, damages, claims, demands, debts, actions, causes of action,
suits, contracts, agreements, obligations, accounts, defenses and liabilities
of any kind or character whatsoever, known or unknown, suspected or
unsuspected, in contract or in tort, at law or in equity, which the Optionee
ever had, now has, or might hereafter have against the Fund and its partners,
employees and agents for or by reason of any matter, cause or thing whatsoever
which relates in any manner, in whole or in part, directly or indirectly, to
any agreement, understanding, or undertaking of the Fund and its partners,
employees, and agents in connection with the transactions contemplated by this
Agreement
16. Severability. If any of the provisions of this Agreement
shall be held by a court of competent jurisdiction to be void or unenforceable,
the balance of the provisions of this Agreement shall remain in effect and be
enforced so as to give effect as nearly as possible to the intentions of the
Fund and the Optionee.
17. Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed as original, but all of which
together shall constitute one and the same instrument. Facsimile signatures
shall be deemed an original.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LIQUIDITY FINANCIAL GROUP
By: Liquidity Financial Corporation, its general
partner
By: /s/ Brent Donaldson
--------------------------------------------
Name: Brent Donaldson
Title: President
APOLLO REAL ESTATE INVESTMENT FUND II, L.P.
By: Apollo Real Estate Advisors II, L.P., its
general partner
By: Apollo Real Estate Capital Advisors II, Inc.,
its general partner
By: /s/ W. Edward Scheetz
--------------------------------------------
Name: W. Edward Scheetz
Title: Vice President
