<PAGE>
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
_________________________
T. ROWE PRICE REALTY INCOME FUND III,
AMERICA'S SALES-COMMISSION-FREE
REAL ESTATE LIMITED PARTNERSHIP
(Name or Subject Company)
LIDO ASSOCIATES, L.L.C.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
_________________________
GREGORY W. PRESTON, ESQ.
ROBERT I. NEWTON, ESQ.
McDermott, Will & Emery
1301 Dove Street, Suite 500
Newport Beach, CA 92660
(714) 851-0633
(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
----------- ----------
$12,305,000 $2,461.00
- --------------------------------------------------------------------------------
*For purposes of calculating the filing fee only. This amount assumes the
purchase of 115,000 Units of limited partnership interests ("Units") of the
subject company at $107 in cash per Unit.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:
Form or Registration Number:
Filing Party:
Date Filed:
<PAGE>
CUSIP No. None 14D-1
----
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
Lido Associates, 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)
WC, AF
5. Check if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f)
/ /
6. Citizenship or Place of Organization
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting Person
20 Units
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See Instructions)
/ /
9. Percent of Class Represented by Amount in Row (7)
.008%
10. Type of Reporting Person (See Instructions)
CO
2
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject partnership is T. Rowe Price Realty
Income Fund III, America's Sales-Commission-Free Real Estate Limited
Partnership, a Delaware limited partnership (the "Partnership"), which has its
principal executive offices at 100 East Pratt Street, Baltimore, Maryland
21202.
(b) This Schedule relates to the offer by Lido Associates, L.L.C., a
Delaware limited liability company(the "Purchaser"), to purchase up to 115,000
outstanding units of limited partnership interests (the "Units") of the
Partnership at $107 per Unit, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated December 10,
1996 (the "Offer to Purchase") and the related Letter of Transmittal, copies of
which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. The
Partnership has 253,599 Units outstanding as of September 30, 1996, according
to the Partnership's September 30, 1996 Form 10-Q.
(c) The information set forth in "Introduction" and "Purpose and
Effects of the Offer - Effect on Trading Market and Price Range of Units" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) The information set forth in "Introduction," "Certain
Information Concerning the Purchaser" and in Schedules 1 and 2 of the Offer to
Purchase is incorporated herein by reference.
(e)-(g) During the last five years, neither the Purchaser nor any
of the persons described in "Certain Information Concerning the Purchaser" or
listed on Schedules 1 or 2 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. All such persons are United States
citizens or United States domestic entities.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Certain Information
Concerning the Purchaser" and "Past Contacts and Negotiations with the General
Partner" of the Offer to Purchase is incorporated herein by reference.
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ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "Source of Funds" of the Offer to
Purchase is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in "Introduction," "Purpose and
Effects of the Offer" and in "Future Plans" of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Introduction" and "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 "Certain Information Concerning the
Purchaser" and "Past Contacts and Negotiations with the General Partner" of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under
"Introduction" and "Fees and Expenses" is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(c) The information set forth in "Certain Legal Matters and
Required Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(d) None.
(e) None.
-4-
<PAGE>
(f) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, and which are incorporated herein in their entirety by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated December 10, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Letter to Unitholders dated December 10, 1996.
(b) Not applicable.
(c)(1) Lido Associates, L.L.C. Operating Agreement.
(c)(2) Agreement for Delivery and Use of List of Limited Partners.
(c)(3) Waiver Agreement.
(d)-(f) Not applicable.
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<PAGE>
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: December 10, 1996
LIDO ASSOCIATES, L.L.C.
By: Koll Tender Corporation II
Its: Managing Member
By: /s/ HAROLD HOFER
------------------------------------
Name: Harold Hofer
Title: Executive Vice President
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<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
(a)(1) Offer to Purchase dated December 10, 1996
(a)(2) Letter of Transmittal
(a)(3) Letter to Unitholders dated December 10, 1996
(c)(1) Lido Associates, L.L.C. Operating Agreement
(c)(2) Agreement for Delivery and Use of List of Limited Partners
(c)(3) Waiver Agreement
-7-
<PAGE>
EXHIBIT 99(A).1
OFFER TO PURCHASE FOR CASH
UNITS OF LIMITED PARTNERSHIP INTERESTS
OF
T. ROWE PRICE REALTY INCOME FUND III,
AMERICA'S SALES-COMMISSION-FREE
REAL ESTATE LIMITED PARTNERSHIP
AT
$107 NET PER UNIT
BY
LIDO ASSOCIATES, L.L.C.
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL
EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME,
ON JANUARY 17, 1997, UNLESS THE OFFER IS EXTENDED.
Lido Associates, L.L.C., a Delaware limited liability company (the
"Purchaser"), hereby offers to purchase up to 115,000 of the units of limited
partnership interest (the "Units") of T. Rowe Price Realty Income Fund III,
America's Sales-Commission-Free Real Estate Limited Partnership, a Delaware
limited partnership (the "Partnership"), at a purchase price of $107 per Unit,
net to the seller in cash, without interest, less the amount of any
distributions declared or paid with respect to the Units between November 25,
1996 and the date of payment for the Units, 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 or amended from
time to time (which together constitute the "Offer"). The 115,000 Units sought
to be purchased pursuant to the Offer represent, to the best knowledge of the
Purchaser, approximately 45% of the Units outstanding as of the date of the
Offer.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON THE VALID TENDER OF ANY
MINIMUM NUMBER OF UNITS. IF MORE THAN 115,000 UNITS ARE VALIDLY TENDERED AND NOT
WITHDRAWN, THE PURCHASER WILL ACCEPT FOR PURCHASE UP TO 115,000 OF THE TENDERED
UNITS, ON A PRO RATA BASIS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN, SEE
"TENDER OFFER -- SECTION 13. CERTAIN CONDITIONS OF THE OFFER."
A HOLDER OF UNITS ("UNITHOLDER") MAY TENDER ANY OR ALL UNITS OWNED BY SUCH
UNITHOLDER.
------------------------
FOR MORE INFORMATION OR FOR FURTHER ASSISTANCE PLEASE CALL:
THE HERMAN GROUP, INC.
(800) 992-6213
December 10, 1996
<PAGE>
IMPORTANT
Any Unitholder desiring to tender any or all of such Unitholder's Units
should 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 facsimile and any other required documents
to The Herman Group, Inc. (the "Information Agent and Depositary") at the
address or facsimile number set forth on the back cover of this Offer to
Purchase.
QUESTIONS OR REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THIS OFFER TO
PURCHASE OR THE LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE HERMAN GROUP, INC.
BY CALLING THE TOLL-FREE INFORMATION LINE: (800) 992-6213.
------------------------
THE GENERAL PARTNER HAS NOT ADVISED THE PURCHASER THAT IT IS MAKING ANY
RECOMMENDATION TO ANY UNITHOLDER AS TO WHETHER TO TENDER UNITS PURSUANT TO THE
OFFER TO PURCHASE. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR
ANY REPRESENTATION ON BEHALF OF THE GENERAL PARTNER OR 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C> <C>
1
INTRODUCTION..............................................................................................
4
TENDER OFFER..............................................................................................
Section 1. Terms of the Offer.................................................................... 4
Section 2. Proration; Acceptance for Payment and Payment for Units 4
Section 3. Procedures for Tendering Units........................................................ 5
Section 4. Withdrawal Rights..................................................................... 7
Section 5. Extension of Tender Period; Termination; Amendment.................................... 8
Section 6. Certain Tax Consequences.............................................................. 9
Section 7. Purpose and Effects of the Offer...................................................... 10
Section 8. Future Plans.......................................................................... 12
Section 9. Past Contacts and Negotiations with General Partner................................... 12
Section 10. Certain Information Concerning the Business of the Partnership and Related Matters.... 12
Section 11. Certain Information Concerning the Purchaser.......................................... 13
Section 12. Source of Funds....................................................................... 14
Section 13. Certain Conditions of the Offer....................................................... 14
Section 14. Certain Legal Matters and Required Regulatory Approvals............................... 16
Section 15. Fees and Expenses..................................................................... 16
Section 16. Miscellaneous......................................................................... 17
S-1
SCHEDULE 1 -- INFORMATION REGARDING THE DIRECTORS AND EXECUTIVE OFFICERS OF KOLL TENDER CORPORATION II AND
KOLL MANAGEMENT SERVICES....................................................................
S-2
SCHEDULE 2 -- INFORMATION REGARDING THE DIRECTORS AND EXECUTIVE OFFICERS OF AP-GP PROM PARTNERS INC.......
</TABLE>
<PAGE>
To the Holders of Units of Limited Partnership Interests
of T. Rowe Price Realty Income Fund III
America's Sales-Commission-Free
Real Estate Limited Partnership
INTRODUCTION
Lido Associates, L.L.C., a Delaware limited liability company (the
"Purchaser"), hereby offers to purchase up to 115,000 of the units of limited
partnership interests (the "Units") of T. Rowe Price Realty Income Fund III,
America's Sales-Commission-Free Real Estate Limited Partnership, a Delaware
limited partnership (the "Partnership"), at a purchase price of $107 per Unit,
net to the seller in cash, without interest, less the amount of any
distributions declared or paid with respect to the Units between November 25,
1996 and the date of payment for the Units (the "Purchase Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which together constitute the "Offer").
Holders of Units ("Unitholders") who tender their Units will not be obligated to
pay any partnership transfer fees or commissions. The Purchaser will pay all
charges and expenses of The Herman Group, Inc., which will act as the
Information Agent ("Information Agent") and as the Depositary (the "Depositary")
in connection with the Offer. The 115,000 Units sought to be purchased pursuant
to the Offer represent, to the best knowledge of the Purchaser, approximately
45% of the Units outstanding as of the date of the Offer.
In considering the Offer, Unitholders may wish to consider the following
factors in connection with the Offer:
- The Offer provides Unitholders with an opportunity to dispose of their
Units for $107 per Unit, net to seller in cash, which is equal to
approximately 75% of the net asset value ("NAV") reported in the
Partnership's November 12, 1996 Form 8-K.
- The Offer is 179% higher than the $38.40 per Unit offer recently made by
Fir Investors, LLC, which offer was adjusted, in accordance with its terms
from the original $60 offer, to reflect a reduction for the recently
announced $21.60 per Unit distribution.
- The Offer provides Unitholders with an opportunity to immediately
liquidate their investment in the Partnership for $107 per Unit net to the
seller in cash. The General Partner stated in the Partnership's Form 10-K
for the year ended December 31, 1995, ("Form 10-K") that "Units cannot
currently be sold at a price equal to the estimated (net asset) value."
Although not necessarily indicative of value, as reported in the
PARTNERSHIP SPECTRUM, the range of prices paid for Units in the so-called
"secondary market" during the twelve-month period ending September 30,
1996, was $90 per Unit to $242 per Unit. An affiliate of the Purchaser
acquired the Units at the $242 price, which was substantially in excess of
the then-reported NAV of $154 per Unit. The affiliate of the Purchaser
acquired a total of twenty (20) Units and was willing to pay a substantial
premium for these Units in order to facilitate the ability of the
Purchaser to commence this Offer. According to the PARTNERSHIP SPECTRUM,
872 Units (or 0.3% of the outstanding Units) have traded in the secondary
market during the twelve-month period ended September 30, 1996. The
secondary market is made up of third party resale services specializing in
limited partnership units.
- Unitholders who tender their Units will be giving up the opportunity to
participate in any future potential benefits represented by ownership of
Units, including, for example, the right to participate in any future
distribution of cash or property, whether from operations, the proceeds of
a sale or refinancing of one or more of the Partnership's properties or in
connection with any future liquidation of the Partnership. However, there
is no guarantee of future results of the Partnership and investment in the
Partnership remains speculative. While the General Partner has stated its
intention to sell the Partnership's properties by the end of 1998, there
is
1
<PAGE>
no guarantee such sales will occur or that such sales will allow
Unitholders to realize the per Unit NAV. As the General Partner noted in
the Form 10-K, the NAV "is not necessarily representative of the value of
the Units when the Partnership ultimately liquidates its holdings." Also,
property selling costs and expenses (E.G. real estate brokers commissions,
attorneys' fees, escrow fees, title company costs, rent guarantees, repair
of deferred maintenance items, etc.), which could be incurred by the
Partnership in disposing of its properties, generally can range from 3% to
10% of a given property's gross sale price and may reduce the amount of
cash available for distribution to the Unitholders per Unit to an amount
that is less than the NAV.
- The Offer will permit Unitholders to liquidate their investment in the
Partnership, which could then allow such holders to invest in less
speculative and more liquid alternative investments which may yield
greater annual cashflows. According to information provided by the
Partnership, the Partnership distributed $2.00 per Unit in operational
cashflow for each of the first three quarters of 1996. Based on the then
applicable NAV of $154 per Unit, annualized cashflow per Unit for the
first three quarters of 1996 is approximately 5.2% of NAV. In addition,
the Partnership expends hundreds of thousands of dollars each year in
Partnership management expenses (approximately $290,000 through September
30, 1996). A portion of those expenses are fixed, and, accordingly, will
be incurred by the Partnership regardless of how many properties it owns.
Therefore, as Partnership properties are sold, the Partnership cashflow
available for distribution to Unitholders will likely be reduced as a
percentage of NAV.
- The Offer will expire on January 17, 1997 (the "Expiration Date"), unless
extended. By accepting the Offer, Unitholders may avoid the expenses,
delays and complications of tax filings in connection with ownership of
Units in the Partnership.
- The Purchaser is making the Offer with a view towards making a profit. The
Purchaser's intent is to acquire the Units at a discount to the value that
the Purchaser might ultimately realize from owning the Units. No
independent person has been retained to evaluate or render any opinion
with respect to the fairness of the $107 Purchase Price and no
representation is made as to such fairness. Other measures of value may be
relevant to a Unitholder and all Unitholders are urged to carefully
consider all of the information contained in the Offer to Purchase and
Letter of Transmittal and to consult with their own advisors (tax,
financial or otherwise) in evaluating the terms of the Offer before
deciding whether to tender Units.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER INCREASES THE CONSIDERATION
OFFERED TO UNITHOLDERS PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION WILL
BE PAID WITH RESPECT TO ALL UNITS THAT ARE PURCHASED PURSUANT TO THE OFFER,
WHETHER OR NOT SUCH UNITS WERE TENDERED PRIOR TO SUCH INCREASE IN CONSIDERATION.
The purpose of the Offer is to allow the Purchaser to benefit from any one
or a combination of the following: (i) any cash distributions from the
operations in the ordinary course of the Partnership; (ii) any distributions of
net proceeds from the sale of assets by the Partnership; (iii) any distributions
of net proceeds from the liquidation of the Partnership; and (iv) any cash from
any redemption of the Units by the Partnership. The Purchaser does not have any
present plans or intentions with respect to a liquidation, sale of assets or
refinancing of the Partnership's properties. The Purchaser has entered into an
agreement with the General Partner which provides, among other things, that the
Purchaser will vote all Units it acquires, on all matters for which Unitholders
are entitled to vote, pro rata in accordance with how other Unitholders vote.
The Agreement also provides that the Purchaser will not initiate any effort to
remove the General Partner or to cause a change of control of the Partnership.
The Offer is not conditioned upon the valid tender of any minimum number of
the Units. If more than 115,000 Units, are validly tendered and not withdrawn,
the Purchaser will accept up to 115,000 of the tendered Units for purchase on a
pro rata basis, subject to the terms and conditions herein. See
2
<PAGE>
"Tender Offer--Section 13. Certain Conditions of the Offer." The Purchaser
expressly reserves the right, in its sole discretion and for any reason, to
terminate the Offer at anytime and to waive any or all of the conditions of the
Offer, although the Purchaser does not presently intend to waive any such
conditions.
The Partnership is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), and in
accordance therewith is required to file reports and other information with the
Commission relating to its business, financial condition and other matters. Such
reports and other information may be inspected at the public reference
facilities maintained by the Commission at room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and is available for inspection and
copying at the regional offices of the Commission located in Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Room of the commission
in Washington, D.C. at prescribed rates or from the Commission's Website at
http://www.sec.gov.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 of the General Rules
and Regulations under the Exchange Act, which provides certain additional
information with respect to the Offer. Such Statements and any amendments
thereto, including exhibits, may be inspected and copies may be obtained from
the Commission in the manner specified above.
According to publicly available information, there were 253,599 Units issued
and outstanding at September 30, 1996, held by 10,364 Unitholders. The Purchaser
owns twenty (20) Units, which were contributed to the Purchaser by Mr. Wirta, on
behalf of an affiliate of the Purchaser.
Information contained in this Offer to Purchase which relates to, or
represents statements made by the Partnership or the General Partner, has been
derived from information provided in reports and other information filed with
the Commission by the Partnership and General Partner.
UNITHOLDERS ARE URGED TO READ THIS OFFER TO PURCHASE AND THE ACCOMPANYING
LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
3
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TENDER OFFER
SECTION 1. TERMS OF THE OFFER. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for up to
115,000 Units that are validly tendered on or prior to the Expiration Date and
not withdrawn in accordance with Section 4 of this Offer to Purchase. The term
"Expiration Date" shall mean 12:00 midnight, Eastern Standard Time, on January
17, 1997, unless and until the Purchaser shall have extended the period of time
for which the Offer is open, in which event the term "Expiration Date" shall
mean the latest date on which the Offer, as so extended by the Purchaser shall
expire.
Subject to any approval rights of the General Partner under the terms of the
Partnership Agreement, the Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to one or more of the Purchaser's
affiliates, the right to purchase all or any portion of the Units tendered
pursuant to the Offer. Any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
The Offer is conditioned on satisfaction of certain conditions. See "Tender
Offer--Section 13. Certain Conditions of the Offer," which sets forth in full
the conditions of the Offer. The Purchaser reserves the right (but shall not be
obligated), in its sole discretion and for any reason, to waive any or all of
such conditions. If any or all of such conditions have not been satisfied or
waived by the Expiration Date, the Purchaser reserves the right (but shall not
be obligated) to (i) decline to purchase any of the Units tendered, (ii)
terminate the Offer and return all tendered Units to tendering Unitholders,
(iii) waive all the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iv) extend the Offer and, subject to the right of Unitholders 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 (v) to
otherwise amend the Offer.
The Offer to Purchase and the related Letter of Transmittal are being mailed
at the Purchaser's expense to Unitholders or beneficial owners of Units (in case
of Individual Retirement Accounts (IRA) and qualified plans).
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If not
more than 115,000 Units are validly tendered and not properly withdrawn prior to
the Expiration Date the Purchaser, upon the terms and subject to the conditions
of the Offer, will accept for payment all such Units so tendered.
If more than 115,000 Units are validly tendered and not properly withdrawn
on or prior to the Expiration Date, the Purchaser, upon the terms and subject to
the conditions of the Offer, will accept for payment 115,000 Units so tendered,
on a pro rata basis with appropriate adjustments to avoid tenders of fractional
Units and purchases that would violate transfer restrictions contained in the
Partnership Agreement (the "Transfer Restrictions").
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchaser will announce the final results of proration as soon as practicable,
but in no event later than five business days following the Expiration Date.
Subject to the Purchaser's obligations under Rule 14e-1(c) under the Exchange
Act to pay Unitholders the Purchase Price in respect of Units tendered or to
return those Units promptly after termination or withdrawal of the Offer, the
Purchaser will not pay for any Units tendered until after the final proration
factor has been determined.
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 extension or
amendment), the Purchaser will accept for payment, and will pay for, Units
validly tendered and not withdrawn in accordance with Section 4
4
<PAGE>
below, as promptly as practicable following the Expiration Date. In all cases,
payment for Units purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required by the
Letter of Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) tendered Units when, as and if the Purchaser
gives oral or written notice to the Depositary of the Purchaser's acceptance for
payment of such Units pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Units purchased pursuant to the Offer will
in all cases be made by deposit of the Purchase Price with the Depositary, which
will act as agent for the tendering Unitholders for the purpose of receiving
payment from the Purchaser and transmitting payment to tendering Unitholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR ANY UNIT
BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Units are not purchased for any reason, the Letter of
Transmittal with respect to such Units not purchased will be of no force or
effect. If, for any reason whatsoever, acceptance for payment of, or payment
for, any Units tendered pursuant to the Offer is delayed, then, without
prejudice to the Purchaser's rights under Section 13 (but subject to compliance
with Rule 14e-1(c) under the Exchange Act), the Depositary may on behalf of the
Purchaser retain tendered Units, subject to any limitations of applicable law,
and such Units may not be withdrawn except to the extent that the tendering
Unitholders are entitled to withdrawal rights as described in Section 4.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Unitholders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The Purchaser reserves the right to transfer or assign, at any time and from
time to time, in whole or in part, to one or more affiliates or direct or
indirect subsidiaries of the Purchaser, the right to purchase Units tendered
pursuant to the Offer, but no such transfer or assignment will relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering Unitholders to receive payment for Units validly tendered and accepted
for payment pursuant to the Offer.
SECTION 3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. For Units to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal must be received by
the Depositary at its address set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date. A Unitholder may tender any or all
Units owned by such Unitholder.
IN ORDER FOR A TENDERING UNITHOLDER TO PARTICIPATE IN THE OFFER, UNITS MUST
BE VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE, WHICH IS
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON JANUARY 17, 1997.
Although the Purchaser has included a pre-addressed envelope to the
Depositary with this Offer for the convenience of Unitholders, the method of
delivery of the Letter of Transmittal is at the option and sole risk of the
tendering Unitholder, and the delivery will be deemed made only when actually
received by the 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.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible application
of backup federal income tax withholding with respect to payment of the purchase
price for Units purchased pursuant to the Offer, a tendering Unitholder must
verify such Unitholder's correct taxpayer identification number or social
security number, as applicable, and make certain certifications that it is not
subject to backup federal income tax withholding. To be certain that the
Purchaser has the Unitholders correct taxpayer identification number or social
security number, as applicable, and that
5
<PAGE>
the Unitholder is not subject to backup federal income tax withholding, if the
Unitholder 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"), such Unitholder should complete the
Substitute Form W-9 and the FIRPTA Affidavit included in the Letter of
Transmittal and, if the Unitholder is not a United States Person, such
Unitholder should complete the Substitute Form W-8 included in the Letter of
Transmittal.
OTHER REQUIREMENTS. By executing and delivering the Letter of Transmittal,
a tendering Unitholder irrevocably appoints the Purchaser and designees of the
Purchaser and each of them as such Unitholder's proxies, with full power of
substitution, in the manner set forth in this Letter of Transmittal to the full
extent of such Unitholder's rights with respect to the Units tendered by such
Unitholder and accepted for payment by the Purchaser (and with respect to any
and all other interests 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 Unitholder with respect to such Units (and such other interests 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 effective). The Purchaser and its designees will, with
respect to the Units (and such other interests and securities) for which such
appointment is effective, be empowered to exercise all voting and other rights
of such Unitholder 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 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.
By executing and delivering the Letter of Transmittal, a tendering
Unitholder also irrevocably constitutes and appoints the Purchaser and its
designees as the Unitholder's attorneys-in-fact, each with full power of
substitution to the extent of the Unitholder's rights with respect to the Units
tendered by the Unitholder 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 Unitholder with respect to such Units
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 Unitholder'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 a change of
address form instructing the General Partner to send 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 Unitholder representing a
distribution to which the Purchaser is entitled pursuant to the terms of the
Offer. If legal title to the Units is held through an IRA or KEOGH or similar
account, the Unitholder understands that this Agreement must be signed by the
custodian of such IRA or KEOGH account and the Unitholder hereby authorizes and
directs the custodian of such IRA or KEOGH to confirm this Agreement, in each
case on behalf of the tendering Unitholder. This Power of Attorney shall not be
6
<PAGE>
affected by the subsequent mental disability of the Unitholder, and the
Purchaser shall not be required to post a bond in any nature in connection with
this Power of Attorney.
By executing and delivering the Letter of Transmittal, a tendering
Unitholder irrevocably assigns to the Purchaser and its assigns all of the
right, title and interest of such Unitholder in the Partnership with respect to
the Units tendered and purchased pursuant to the applicable Offer, including,
without limitation, such Unitholder'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 Unitholder 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 substitute limited partner upon consummation of
the purchase of Unitholder's Units pursuant to the Offer and it is the intention
of the Unitholder that upon consummation of the purchase of Unitholder's Units
pursuant to the Offer that the Purchaser succeed to the Unitholder's interest as
a substitute limited partner of the Partnership in such Unitholder's place.
By executing the Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title 1 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 Section2510-3-101 of any
such plan; or (b) the tender and acceptance of Units pursuant to the applicable
Offer will not result in a nonexempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code.
By executing a Letter of Transmittal as set forth above, a tendering
Unitholder also agrees that notwithstanding any provisions of the Partnership
Agreement which provide that any transfer is not effective until a date
subsequent to the date of any transfer of Units under the Offer, the Purchase
Price shall be reduced by any distributions with respect to the Units between
November 25, 1996 and the date of payment for the Units.
Unitholders will not have any appraisal or dissenter's rights with respect
to or in connection with the Offer.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. 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, which determination will 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 or 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 Unitholder
whether or not similar defects or irregularities are waived in the case of other
Unitholders.
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. Neither the Purchaser nor any of its affiliates or assigns, if any, the
Information Agent, the 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.
The Purchaser's acceptance for payment of Units tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering Unitholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
SECTION 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section
4, tenders of Units made pursuant to the Offer are irrevocable. Units tendered
pursuant to the Offer may be withdrawn at any time on or prior to the Expiration
Date and, unless previously accepted for payment
7
<PAGE>
as provided herein, may also be withdrawn at any time after February 8, 1996 (or
such later date as may apply in case the Offer is extended).
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 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 Unitholder is entitled to and
duly exercises withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the last page of this Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Units
to be withdrawn, the number of Units to be withdrawn, and (if the Letter of
Transmittal has been delivered) the name of the Unitholder as set forth in the
Letter of Transmittal. Withdrawals of Units may not be rescinded. Any Units
properly withdrawn will be deemed not validly tendered for purposes of the
Offer, but may be retendered at any subsequent time prior to the Expiration Date
by following any of the procedures described in Section 3.
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 will be final and binding. Neither the Purchaser
nor any of its affiliates or assigns, if any, the Information Agent, the
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.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. The
Purchaser expressly reserves the right, in its sole discretion, at any time and
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any Units
by giving oral or written notice of such extension to the Depositary, (ii) to
terminate the Offer and not accept for payment any Units not theretofore
accepted for payment or paid for, by giving oral or written notice of such
termination to the Depositary, (iii) upon the failure to satisfy any of the
conditions specified in Section 13, to delay the acceptance for payment of, or
payment for, any Units not heretofore accepted for payment or paid for, by
giving oral or written notice of such termination or delay to the Depositary,
and (iv) to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the consideration offered or the number of Units being
sought in the Offer or both) by giving oral or written notice of such amendment
to the Depositary. Any extension, termination or amendment will be followed as
promptly as practicable by public announcement, the announcement in the case of
an extension to be issued no later than 9:00 a.m., Eastern Standard Time, on the
next business day after the previously scheduled Expiration Date, in accordance
with the public announcement requirement of Rule 14e-1(d) under the Exchange
Act.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer to the extent required by Rules 14d-4(c) and
14d-6(d) under the Exchange Act. The minimum period during which an offer must
remain open following a material change in the terms of the offer or of
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer, "business day" means any day other than a Saturday, Sunday or a
8
<PAGE>
federal holiday, and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Standard Time.
SECTION 6. CERTAIN TAX CONSEQUENCES. The following summary is a general
discussion of certain federal income tax consequences of a sale of Units
pursuant to the Offer. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations thereunder,
administrative rulings, practice and procedures and judicial authority all as of
the date of the Offer. All of the foregoing are subject to change, and any such
change could affect the continuing accuracy of this summary. This summary does
not discuss all aspects of federal income taxation that may be relevant to a
particular Unitholder in light of such Unitholder's specific circumstances or to
certain types of Unitholders subject to special treatment under the federal
income tax laws (for example, foreign persons, dealers in securities, banks,
insurance companies and tax-exempt organizations), nor does it discuss any
aspect of state, local foreign or other tax laws. Sales of Units pursuant to the
Offer will be taxable transactions for federal income tax purposes, and may also
be taxable transactions under applicable state, local, foreign and other tax
laws. UNITHOLDERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO EACH SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO
THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of Units pursuant
to the Offer equal to the difference between (i) the Unitholder's "amount
realized" on the sale and (ii) the Unitholder's adjusted tax basis in the Units
sold. The amount of a Unitholder's adjusted tax basis in such Units will vary
depending upon such Unitholder's particular circumstances. The "amount realized"
with respect to a Unit will be a sum equal to the amount of cash received by the
Unitholder for the Unit pursuant to the Offer plus the amount of Partnership
liabilities allocable to the Unit (as determined under Code Section 752).
A non-corporate taxpayer or personal service corporation generally can
deduct "passive activity losses" in any year only to the extent of such person's
passive activity income for such year. Closely held corporations may not offset
such losses against so-called "portfolio" income. Substantially all post-1986
losses of Unitholders from the Partnership are passive activity losses.
Unitholders who sell Units pursuant to the Offer may have "suspended" passive
activity losses from the Partnership (I.E., post-1986 net taxable losses in
excess of statutorily permitted "phase-in" amounts which have not been used to
offset income from other passive activities). If such a Unitholder sells all his
or her Units, any suspended losses and any losses upon the sale of the Units
will be offset first against any other net passive gain to the Unitholder from
sale of the Units and any other net passive activity income from other passive
activity investments, and the balance of any suspended net losses from the Units
will no longer be subject to the passive activity loss limitation, and therefore
will be deductible by that Unitholder from his or her other income, subject to
any other applicable limitations.
The gain or loss recognized by a Unitholder on a sale of a Unit pursuant to
the Offer generally will be treated as a capital gain or loss if (as is
generally expected to be the case) the Unit was held by the Unitholder as a
capital asset. That capital gain or loss will be treated as long-term capital
gain or loss if the tendering Unitholder's holding period for the Unit exceeds
one year. Under current law, long-term capital gains of individuals and other
non-corporate taxpayers currently are taxed at a maximum marginal federal income
tax rate of 28%, whereas the maximum marginal federal income tax rate for
ordinary income of such persons is 39.6%. Capital losses are deductible only to
the extent of capital gains, except that non-corporate taxpayers may deduct up
to $3,000 of capital losses in excess of the amount of their capital gains
against ordinary income. Excess capital losses generally can be carried forward
to succeeding years (a corporation's carryforward period is five years and a
non-corporate taxpayer can carry forward such losses indefinitely); in addition,
a corporation is permitted to carry back excess capital losses to the three
preceding taxable years.
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<PAGE>
If any portion of the amount realized by a Unitholder is attributable to
"unrealized receivables" (which includes depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Unitholder's gain or loss amy be ordinary rather than capital. It
is possible that the basis allocation rules of Code Section 751 may result in a
Unitholder's recognizing ordinary income with respect to such items while
recognizing a larger capital loss with respect to the remainder of the Unit,
even though such Unitholder has an overall loss on the sale.
A tendering Unitholder will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of sale with respect to the
Units sold in accordance with the provisions of the Partnership Agreement
concerning transfers of Units. Such allocation and any cash distributed by the
Partnership to such Unitholder for such year will affect the Unitholder's
adjusted tax basis in Units and, therefore, the amount of such Unitholder's
taxable gain or loss upon a sale of Units pursuant to the Offer.
A taxable Unitholder (other than corporations and certain foreign
individuals) who tenders Units may be subject to 31% backup withholding by
properly completing and signing the Substitute From W-9 included as part of the
Assignment of Partnership Interest. If a Unitholder who is subject to backup
withholding does not properly complete and sign the Substitute From W-9, the
Purchaser will withhold 31% from payments to such Unitholder.
A Unitholder who tenders Units must file an information statement with his
federal income tax return for the year of the sale which provides information
set forth in Treasury Regulation Section1.751-1(a)(3). The selling Unitholder
also must notify the Partnership of the date of the transfer and the names,
addresses and tax identification numbers of the transferors and transferee
within 30 days of the date of the transfer (or, if earlier, January 15 of the
following calendar year).
Gain realized by a foreign Unitholder on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code, the
transferee of an interest held by a foreign person in a partnership which owns
United States real property generally is required to deduct and withhold a tax
equal to 10% of the amount realized on the disposition. In order to comply with
this requirement, the Purchaser will withhold 10% of the amount realized by a
tendering Unitholder unless the Unitholder properly completes and signs the
FIRPTA Affidavit included as part of the Letter of Transmittal certifying the
Unitholder's TIN, that such Unitholder is not a foreign person and the
Unitholder's address. Amounts withheld would be creditable against a foreign
Unitholder's federal income tax liability and, if in excess thereof, a refund
could be obtained from the Internal Revenue Service by filing a U.S. income tax
return.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE BASED UPON PRESENT
LAW, ARE FOR GENERAL INFORMATION ONLY AND DO NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS WHICH MAY APPLY TO A
UNITHOLDER. THE TAX CONSEQUENCES TO A PARTICULAR UNITHOLDER MAY BE DIFFERENT
FROM THE TAX CONSEQUENCES TO OTHER UNITHOLDERS, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND OTHER TAX LAW, AND THUS, UNITHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS.
SECTION 7. PURPOSE AND EFFECTS OF THE OFFER.
PURPOSE OF THE OFFER. The Purchaser is making the Offer with a view towards
making a profit. The Purchaser's intent is to acquire the Units at a discount to
the value that the Purchaser might ultimately realize from owning the Units. No
independent person has been retained to evaluate or render any opinion with
respect to the fairness of the $107 Purchase Price and no representation is made
as to such fairness. Other measures of value may be relevant to a Unitholder and
all Unitholders are urged to carefully consider all of the information contained
in the Offer to Purchase and Letter of Transmittal and to consult with their own
advisors (tax, financial or otherwise) in evaluating the
10
<PAGE>
terms of the Offer before deciding whether to tender Units. The Offer is being
made as a speculative investment by the Purchaser based on its belief that there
is inherent underlying value in the assets of the Partnership. The purpose of
the Offer is to allow the Purchaser to benefit to the greatest extent possible
from any one or a combination of the following: (i) any cash distributions from
the operations in the ordinary course of the Partnership; (ii) any distributions
of net proceeds from the sale of assets by the Partnership; (iii) any
distributions of net proceeds from the liquidation of the Partnership; and (iv)
any cash from any redemption of the Units by the Partnership.
CERTAIN RESTRICTIONS ON TRANSFER OF UNITS. The Partnership Agreement
restricts transfers of Units if a transfer, when considered with all other
transfers during the same applicable twelve-month period, would cause a
termination of the Partnership for federal or applicable state income tax
purposes (which termination may occur when 50% or more of the Units are
transferred in a twelve-month period). This provision may limit sales of Units
on the secondary market and in private transactions for the twelve-month period
following completion of the Offer. The Partnership will not process any requests
for recognition of substitution of limited partners upon a transfer of Units
during such twelve-month period which the General Partner believes may cause a
tax termination in contravention of the Partnership Agreement. In determining
the number of Units for which the Offer to Purchase is made (representing
approximately 45% of the outstanding Units), the Purchaser took this restriction
into account and has conditioned the Offer on not violating such restriction.
See "Tender Offer--Section 13. Certain Conditions of the Offer."
The Partnership Agreement also contains certain transfer restrictions
providing that a Unitholder must trasnfer certain minimum number of Units. These
transfer restrictions have been waived by the General Partner with respect to
the Offer pursuant to an agreement between affiliates of the Purchaser and the
General Partner.
EFFECT ON TRADING MARKET AND PRICE RANGE OF THE UNITS. If a substantial
number of Units are purchased pursuant to the Offer, the result will be a
reduction in the number of Unitholders. In the case of certain kinds of equity
securities, a reduction in the number of security-holders might be expected to
result in a reduction in the liquidity and volume of activity in the trading
market for the security. In this case, however, there is a limited public
trading market for the Units and, therefore, the Purchaser does not believe a
reduction in the number of Unitholders will materially further restrict the
Unitholders' ability to find purchasers for their Units.
The Units are registered under Section 12(g) of the Exchange Act, which
means, among other things, that the Partnership is required to file periodic
reports with the Commission and to comply with the Commission's proxy rules. The
Purchaser 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.
Currently, there are approximately 10,364 Unitholders. 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, after that purchase the Units will be held of record by substantially
more than 300 persons.
SECTION 8. FUTURE PLANS. The Purchaser is acquiring the Units pursuant to
the Offer primarily for investment purposes. Pursuant to the Purchaser's
agreement with the General Partner, following the completion of the Offer, the
Purchaser and/or persons related to or affiliated with it are prohibited from
acquiring additional Units through private purchases, through one or more future
tender or exchange offers or by any other means which would cause the Purchaser
to be the beneficial owner of more than 46% of the outstanding Units. As
described below, pursuant to the Purchaser's agreement with the General Partner,
the Purchaser will be obligated to vote Units it acquires pro rata in accordance
with how other Unitholders vote, and accordingly, the Purchaser does not have
any present plans or intentions with respect to a liquidation, sale of assets or
refinancing of any of the
11
<PAGE>
Partnership's properties or with respect to removal of the General Partner or a
change of control of the Partnership.
SECTION 9. PAST CONTACTS AND NEGOTIATIONS WITH GENERAL PARTNER. Commencing
in October, 1996, affiliates of the Purchaser contacted the General Partner in
order to request access to a list of Unitholders necessary to permit the
Purchaser to make the Offer. Representatives of the Purchaser and the General
Partner have since engaged in negotiations over access to such list which
negotiations resulted in an agreement between such affiliates of the Purchaser
and the General Partner. The agreement provides, among other things, as follows:
(i) the Purchaser and its affiliates will utilize a list of Unitholders provided
by the General Partner solely for the purpose of making the Offer and will
return such list upon completion of the Offer, (ii) Purchaser and its affiliates
will make only one tender offer for Units and at no time will acquire more than
46% of the outstanding Units, (iii) the Purchaser and its affiliates will make
certain of the disclosures provided in this Offer to Purchase, (iv) Purchaser
and its affiliates will vote Units acquired pro rata in accordance with how
other Unitholder's vote on any matters for which Unitholder's are entitled to
vote, (v) neither Purchaser nor its affiliates will act to initiate or effect a
removal of the General Partner or a change of control of the Partnership,
provided that Purchaser may vote pro rata in accordance with how other
Unitholders vote on any such matters, (vi) neither the Purchaser nor its
affiliates will transfer more than 5% of the Units acquired pursuant to the
Offer unless the acquiring party agrees to be bound by the agreement with the
General Partner with respect to Units transferred and (vii) in the event the
transfer of Units pursuant to the Offer presented for transfer to the
Partnership might cause the Partnership to be treated as a "publicly traded
partnership" for federal tax purposes, the General Partner will recognize such
transfers of Units only upon receipt of an opinion of counsel satisfactory to
the General Partner that the recognition of such transfers will not cause the
Partnership to be treated as a "publicly traded partnership" under the Code. In
addition to the foregoing, the General Partner has agreed to waive certain
transfer restrictions in connection with the Offer as described above in
"Purpose and Effects of the Offer-Certain Restrictions on Transfer of Units."
The General Partner has expressed no opinion to the Purchaser as to whether or
not the General Partner recommends or supports the Offer.
SECTION 10. CERTAIN INFORMATION CONCERNING THE BUSINESS OF THE PARTNERSHIP
AND RELATED MATTERS. The Partnership was organized in October of 1986 under the
laws of the State of Delaware for the purpose of acquiring, owning, operating
and ultimately disposing of income producing real properties for the benefit of
its limited partners. Its principal executive offices are located at 100 E.
Pratt Street, Baltimore, Maryland 21202. Its telephone number is (800) 638-5660.
The Partnership's primary business is real estate related operations.
Set forth below is a summary of certain financial information with respect
to the Partnership, which has been excerpted or derived from the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and the
Partnership's Quarterly Reports on Form 10-Q for the nine months ended September
30, 1996. 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. Such reports and other documents may be examined and copies
may be obtained from the offices of the Commission at the addresses set forth
above in "Introduction."
12
<PAGE>
T. ROWE PRICE REALTY INCOME FUND III
SELECTED FINANCIAL DATA
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT AMOUNTS AND UNITS OUTSTANDING)
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
NINE MONTHS ENDED ENDED
ENDED 9/30/96 12/31/95 12/31/94
--------------- ------------ ------------
<S> <C> <C> <C>
Income Statement Data:
Total Revenue................................. $ 4,848 $ 6,094 $ 6,357
Net Income.................................... $ 3,082 $ 1,783 $ 579
Net Income per Unit........................... $ 12.20 $ 7.03 $ 2.26
<CAPTION>
AS OF AS OF AS OF
9/30/96 12/31/95 12/31/94
--------------- ------------ ------------
<S> <C> <C> <C>
Balance Sheet Data:
Total Assets.................................. $ 42,090 $ 41,733 $ 41,885
Total Liabilities............................. $ 1,078 $ 1,159 $ 1,064
Limited Partners' Equity...................... $ 41,183 $ 40,762 $ 41,007
Units Outstanding............................. 253,599 253,599 253,605
</TABLE>
SECTION 11. CERTAIN INFORMATION CONCERNING THE PURCHASER. The Purchaser is
a Delaware limited liability company which was organized for the purpose of
acquiring the Units pursuant to the Offer. Interests in the Purchaser are owned
95% by AP Lido, L.L.C., a Delaware limited liability company and 5% by Koll
Tender Corporation II. The managing member of the Purchaser is Koll Tender
Corporation II, which is a direct wholly-owned subsidiary of Koll Management
Services, Inc. ("Koll Management Services"), a real estate management company.
The managing member of AP Lido, L.L.C. is AP-GP Lido, L.L.C., a Delaware limited
liability company, whose managing member is AP-GP Prom Partners Inc., a Delaware
corporation, which is ultimately controlled by Apollo Real Estate Capital
Advisors II, Inc. ("Advisors"). Advisors is the 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 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
Koll Tender Corporation II and Koll Management Services, and of AP-GP Prom
Partners Inc., see Schedules 1 and 2 to this Offer to Purchase, respectively.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to the
best knowledge of the Purchaser, any of the persons listed on Schedules 1 or 2
or any affiliate of the Purchaser beneficially owns or has a right to acquire
any Units other than the twenty (20) Units purchased by Mr. Wirta in the
secondary market within the past 60 days for $242 per Unit and contributed to
the Purchaser in order to facilitate the making of the Offer, (ii) neither the
Purchaser nor, to the best knowledge of the Purchaser, any of the persons listed
on Schedules 1 or 2 or any affiliate of the Purchaser or any director, executive
officer or subsidiary of any of the foregoing has effected any transaction in
the
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<PAGE>
Units, (iii) neither the Purchaser nor, to the best knowledge of the Purchaser,
any of the persons listed on Schedules 1 or 2 or any affiliate of the Purchaser
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, consents or authorizations, (iv) 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,
or, to the best knowledge of the Purchaser, any of the persons listed on
Schedules 1 or 2 or any affiliate of the Purchaser, on the one hand, and the
Partnership or affiliates, on the other hand, and (v) there have been no
contracts, negotiations or transactions between the Purchaser or to the best
knowledge of the Purchaser, any of the persons listed on Schedules 1 or 2 or any
affiliate of the Purchaser, 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 or
removal of any general partner or a sale or other transfer of a material amount
of assets.
SECTION 12. SOURCE OF FUNDS. The Purchaser expects that approximately
$12.4 million will be required to purchase 115,000 Units (approximately 45% of
the 253,599 Units outstanding), if tendered, and to pay related fees and
expenses. The Purchaser will obtain all of those funds from capital
contributions from its members, which in turn expect to obtain those funds from
their respective parent entities, which have an aggregate net worth
substantially in excess of the amount required to purchase the Units. However,
the Purchaser may seek to obtain financing to facilitate the purchase of the
Units, but no commitment has been obtained for any such financing.
SECTION 13. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provisions of the Offer, the Purchaser will not be required to accept for
payment or, subject to any applicable rules or regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Units promptly after the expiration or
termination of the Offer), to pay for any Units tendered, and may postpone the
acceptance for payment or, subject to the restriction referred to above, payment
for any Units tendered, and may amend or terminate the Offer (whether or not any
Units have theretofore been purchased or paid for) if (i) 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, the Purchaser will become a registered owner of the purchased
Units for all purposes, (ii) the Purchaser shall not have confirmed to its
reasonable satisfaction that, upon the purchase of the Units pursuant to the
Offer, the Transfer Restrictions will have been satisfied, 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 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) the acceptance by Purchaser of Units tendered and not withdrawn pursuant
to the Offer or the transfer of such Units to the Purchaser violates
restrictions in the Partnership Agreement which prohibit any transfer of Units
which would cause a termination of the Partnership or would cause the
Partnership to be taxed as a "publicly traded partnership" under the Code;
(b) there shall have been threatened, instituted or pending any action or
proceeding before any court or governmental agency or other regulatory or
administrative agency or commission or by any other person, challenging the
acquisition of any Units pursuant to the Offer or otherwise directly or
14
<PAGE>
indirectly relating to the Offer, or otherwise, in the judgment of the
Purchaser, adversely affecting the Purchaser or the Partnership;
(c) any statute, rule or regulation shall have been proposed, enacted,
promulgated or deemed applicable to the Offer, or any action or order shall have
been proposed, entered or taken, by any government, governmental agency, or
other regulatory or administrative agency or authority, which, in the judgment
of the Purchaser, might (x) result in a delay in the ability of the Purchaser or
render the Purchaser unable, to purchase or pay for some or all of the tendered
Units, (y) make such purchase or payment illegal, or (z) otherwise adversely
affect the Purchaser or the Partnership;
(d) any change shall have occurred or be threatened in the business,
financial condition, results of operations, tax status or prospects of the
Partnership which, in the judgment of the Purchaser, is or may be adverse to the
Partnership, or the Purchaser shall have become aware of any facts which, in the
judgment of the Purchaser, have or may have adverse significance with respect to
the value of the Units;
(e) there shall have occurred (x) any general suspension of, or limitation
on prices for or trading in, securities in the over-the-counter market or on the
New York Stock Exchange, Inc., (y) a declaration of a banking moratorium or any
suspension of payment in respect of banks in the United States or any limitation
by federal or state authorities on the extension of credit by lending
institutions or (z) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States; or, in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(f) a tender or exchange offer for some or all of the Units is made, or
publicly proposed to be made or amended, by another person;
(g) the Partnership shall have (v) issued, or authorized or proposed the
issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such interests
or other convertible securities, (w) issued or authorized or proposed the
issuance of any other securities, in respect of, in lieu of, or in substitution
for, all or any of the presently outstanding Units, (x) declared or paid any
distribution, other than in cash, on any of its partnership interests, (y)
authorized, proposed or announced its intention to propose any merger,
consolidation or business combination transaction, acquisition of assets,
disposition of assets or material change in its capitalization, or any
comparable event not in the ordinary course of business, or (z) proposed or
effected any amendment to the Partnership Agreement;
(h) the failure to occur of any necessary approval or authorization by any
Federal or state authorities necessary to consummation of the purchaser of all
or any part of the Units to be acquired hereby, which in the sole 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
(i) (y) the Purchaser or any of its affiliates shall have entered into a
definitive agreement or announced an agreement in principle with respect to a
merger or any other business combination with the Partnership or any of its
affiliates or the purchase of any material portion of the securities or assets
of the Partnership or any of its subsidiaries or (z) the Purchaser or any of its
affiliates and the Partnership shall have agreed that the Purchaser shall amend
or terminate the Offer or postpone the payment for the Units pursuant thereto.
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 rights
15
<PAGE>
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 13 will be final and binding upon all parties.
SECTION 14. CERTAIN LEGAL MATTERS AND REQUIRED REGULATORY APPROVALS.
GENERAL. 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, foreign or
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. 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. The Purchaser's obligation to purchase and pay
for Units is subject to certain conditions. See "Tender Offer-- Section 13.
Certain Conditions of 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 (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The Purchaser does not
currently believe any filing is required under the HSR Act with respect to its
acquisition of Units contemplated by the Offer.
Based upon an examination of publicly available information relating to the
businesses in which the Partnership is engaged, the Purchaser believes that the
acquisition of Units pursuant to the Offer would not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made, or, if such challenge is made, what the
result will be.
STATE TAKEOVER LAWS. The Purchaser has not attempted to comply with any
state takeover statutes in connection with the Offer. The Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in the Offer, nor any action taken in
connection herewith, is intended as a waiver of that right. In the event that
any state takeover statute is found applicable to the Offer, the Purchaser might
be unable to accept for payment or purchase Units tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase, or pay for, any Units
tendered.
SECTION 15. FEES AND EXPENSES. The Herman Group, Inc. has been retained by
the Purchaser to act as the Information Agent in connection with the Offer. The
Information Agent will receive reasonable and customary compensation for its
services in connection with the Offer and will be indemnified against certain
liabilities and expenses in connection therewith. The Herman Group, Inc. has
been retained as the Depositary. The Depositary will receive reasonable and
customary compensation for its services in connection with the Offer, will be
reimbursed for its reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith.
Except as set forth in this Section 15, 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. Brokers, dealers,
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<PAGE>
commercial banks and trust companies and other nominees, if any, will, upon
request, be reimbursed by the Purchaser for customary clerical and mailing
expenses incurred by them in forwarding materials to their customers.
SECTION 16. MISCELLANEOUS. THE OFFER IS NOT BEING MADE TO (NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF) UNITHOLDERS IN ANY JURISDICTION IN
WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY
JURISDICTION WITHIN THE UNITED STATES IN WHICH THE MAKING OF THE OFFER OR THE
ACCEPTANCE THEREOF WOULD BE ILLEGAL.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Purchaser will engage one
or more registered brokers or dealers that are licensed under the laws of such
jurisdiction to make the Offer.
The Purchaser has filed with the Commission the Schedule 14D-1, together
with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under
the Exchange Act, furnishing certain information with respect to the Offer, and
may file amendments thereto. Such Schedule 14D-1 and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
Commission as set forth above in "Introduction."
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, any such
information or representation must not be relied upon as having been authorized.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to the
Offer shall, under any circumstances, create any implication that there has been
no change in the affairs of the Purchaser or the Partnership since the date as
of which information is furnished or the date of this Offer to Purchase.
LIDO ASSOCIATES, L.L.C.
December 10, 1996
17
<PAGE>
SCHEDULE 1
INFORMATION REGARDING THE DIRECTORS AND
EXECUTIVE OFFICERS OF KOLL TENDER CORPORATION II AND
KOLL MANAGEMENT SERVICES
Set forth in the table below are the names of the directors and executive
officers of Koll Tender Corporation II and Koll Management Services and their
present principal occupations and five (5) year employment histories. Each
individual is a citizen of the United States and the business address of each
person is 4343 Von Karman Avenue, Newport Beach, California 92660 other than
Messrs. Freeman and Spogli whose business address is 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, California 90025 and Mr. Scheetz whose
business address is 1301 Avenue of Americas, New York, New York 10019.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Donald M. Koll Donald M. Koll has been the Chairman of the Board of Koll Management Services since prior
to 1989. Mr. Koll also has been Chairman of the Board and Chief Executive Officer of The
Koll Company, a real estate development company, since prior to 1989. Mr. Koll was Managing
Director--President and a director of Koll Real Estate Group, Inc., a publicly traded real
estate development company, from 1990 to 1992, and has been its Chairman of the Board since
1993 and its Chief Executive Offer since October of 1996.
Ray Wirta Ray Wirta has been the Vice Chairman of the Board and Chief Executive Officer of Koll
Management Services and President and Chief Operating Officer of The Koll Company since
prior to 1989. Mr. Wirta also has been Chairman of the Board and Chief Executive Officer of
Koll Tender Corporation II since April 1995. Mr Wirta was Chief Executive Officer of Koll
Real Estate Group, Inc. from March of 1993 until October of 1996 and has been a Director of
Koll Real Estate Group, Inc. since March of 1993.
Ronald P. Spogli Ronald P. Spogli has been Director of Koll Management Services since 1994. Since founding
Freeman Spogli & Co., an investment banking firm, prior to 1989, Mr. Spogli has served as a
chief executive manager.
Bradford M. Freeman Bradford M. Freeman has been a Director of Koll Management Services since 1994. Since
founding Freeman Spogli & Co., an investment banking firm, prior to 1989, Mr. Freeman has
served as a chief executive manager.
William S. Rothe William S. Rothe has been a Director, the President and Chief Operating Officer of Koll
Management Services since 1991. Prior to that time, he served as Senior Vice President of
the Southern California Division of Koll Management Services. Mr. Rothe has been a Director
and the President, Treasurer and Secretary of Purchaser since April 1995.
W. Edward Scheetz W. Edward Scheetz has been a director of Koll Management Services since October, 1995. 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. Prior to 1993, Mr. Scheetz was a principal
of Trammel Crow Ventures, a national real estate investment firm.
Harold Hofer Harold Hofer has been the Executive Vice President of Koll Tender Corporation II since
April 1995. Mr. Hofer has been President of Koll General Partner Services, a divisions of
Koll Management Services, since March 1994. For the ten years prior to March 1994, Mr.
Hofer was President of Bonutto-Hofer Investments, a general partner and asset manager of
commercial real estate investments. Bonutto-Hofer Investments was acquired by an affiliate
of Koll Management Services in January 1994.
</TABLE>
S-1
<PAGE>
SCHEDULE 2
INFORMATION REGARDING THE DIRECTORS AND
EXECUTIVE OFFICERS OF AP-GP PROM PARTNERS INC.
Set forth in the table below are the names of the directors and executive
officers of AP-GP Prom Partners Inc. and their present principal occupations and
five (5) year employment histories. Each individual is a citizen of the United
States and the business address of each person is 1301 Avenue of the Americas,
New York, New York 10019.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND
NAME FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------- -------------------------------------------------------------------------------------
<S> <C>
Lee S. Neibart Lee 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 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 is also a director of Capital Apartment Properties,
Inc., Roland International, Inc. and a past President of the NAIOP in New York.
W. Edward Scheetz W. Edward 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. Prior to 1993,
Mr. Scheetz was a principal of Trammel Crow Ventures, a national real estate
investment firm. Mr. Scheetz is also a director of Koll Management Services.
Richard Mack Richard 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. 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.
</TABLE>
S-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and any other required
documents should be sent or delivered by each Unitholder or his broker, dealer,
commercial bank, trust company or other nominee to the Information Agent and
Depositary at its address set forth below:
THE INFORMATION AGENT AND DEPOSITARY FOR THE OFFER IS:
[LOGO]
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
THE HERMAN GROUP, INC. (214) 999-9323 THE HERMAN GROUP, INC.
2121 San Jacinto Street or 2121 San Jacinto Street
26th Floor (214) 999-9348 26th Floor
Dallas, TX 75201 Dallas, TX 75201
</TABLE>
TO CONFIRM:
(800) 992-6213
FOR INFORMATION CALL:
(800) 992-6213
(Toll-Free)
Questions and requests for assistance may be directed to The Herman Group,
Inc. at the address and telephone number listed above. Additional copies of this
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent and Depositary as set forth above,
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.
<PAGE>
LETTER OF TRANSMITTAL
TO
TENDER UNITS OF LIMITED PARTNERSHIP INTERESTS
OF
T. ROWE PRICE REALTY INCOME FUND I, A NO-LOAD LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND II, AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND III,AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND IV, AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
PURSUANT TO THE RESPECTIVE OFFERS TO PURCHASE DECEMBER 10, 1996, AS EACH MAY BE
AMENDED FROM TIME TO TIME
BY
LIDO ASSOCIATES, L.L.C.
<TABLE>
<CAPTION>
TOTAL PURCHASE
NUMBER OF NUMBER OF(1) PURCHASE PRICE(2)
PARTNERSHIP UNITS OWNED UNITS TENDERED PER UNIT IF ALL UNITS TENDERED
----------- ----------- -------------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
(1) If no indication is marked above, all Units
issued will be deemed to have been tendered.
(2) Reduced by the amount of any distributions made
or declared by the Partnership subsequent to the
PLEASE INDICATE CHANGES OR CORRECTIONS date of the Offer.
TO THE ADDRESS PRINTED ABOVE.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EACH OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT
EASTERN TIME, ON JANUARY 17, 1997 (THE "EXPIRATION DATE") UNLESS THE APPLICABLE
OFFER IS EXTENDED.
The undersigned ("Unitholder") hereby tender(s) to Lido Associates, L.L.C.,
a Delaware limited liability company (the "Purchaser"), the number of the
undersigned's units of limited partnership interests ("Units") of the applicable
Partnership as specified above for the Purchase Price indicated in the
applicable Offer to Purchase, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the applicable Offer to
Purchase and this Letter of Transmittal (the "Letter of Transmittal"; which,
together with any supplements or amendments, collectively constitute the
"Offer"), all as more fully described in the applicable Offer to Purchase. The
Purchase Price will automatically be reduced by the aggregate amount of
distributions per Unit, if any, made or declared by the applicable partnership
after November 25, 1996. In addition, if a distribution is made or declared
after the Expiration Date but prior to the date on which the Purchaser or its
assignee pays for tendered Units, the Purchaser will offset the amount otherwise
due to a Unitholder 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. Receipt of the applicable Offer to Purchase is hereby
acknowledged. Capitalized terms used but not defined herein have the respective
meanings assigned in the applicable Offer to Purchase.
By executing and delivering this Letter of Transmittal, a tendering
Unitholder irrevocably appoints the Purchaser and designees of the Purchaser and
each of them as such Unitholder's proxies, with full power of substitution, in
the manner set forth in this Letter of Transmittal to the full extent of such
Unitholder's rights with respect to the Units tendered by such Unitholder and
accepted for payment by the Purchaser (and with respect to any and all other
interests 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
Unitholder with respect to such Units (and such other interests 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 effective). The Purchaser and its designees will, with respect to the Units
(and such other interests and securities) for which such appointment is
effective, be empowered to exercise all voting and other rights of such
Unitholder 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.
By executing and delivering the Letter of Transmittal, a tendering
Unitholder also irrevocably constitutes and appoints the Purchaser and its
designees as the Unitholder's attorneys-in-fact, each with full power of
substitution to the extent of the Unitholder's rights with respect to the Units
tendered by the Unitholder 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 Unitholder with respect to such Units
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 Unitholder'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 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, and
(iv) to endorse any check payable to or upon the order of such Unitholder
representing a distribution to which the Purchaser is entitled pursuant to the
terms of the Offer. If legal title to the Units is held through an IRA or KEOGH
or similar account, the Unitholder understands that this Agreement must be
signed by the custodian of such IRA or KEOGH account and the Unitholder hereby
authorizes and directs the custodian of such IRA or KEOGH to confirm this
Agreement, in each case on behalf of the tendering Unitholder. This power of
attorney shall not be affected by the subsequent mental disability of the
Unitholder, and the Purchaser shall not be required to post a bond in connection
with this power of attorney.
By executing and delivering the Letter of Transmittal, a tendering
Unitholder irrevocably assigns to the Purchaser and its assigns all of the
right, title and interest of such Unitholder in the Partnership with respect to
the Units tendered and purchased pursuant to the applicable Offer, including,
without limitation, such Unitholder'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 Unitholder 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 substitute limited partners upon consummation of
the Offer and it is the intention of the Unitholder that upon consummation of
the purchase of Unitholder's Units pursuant hereto that the Purchaser suceed to
the Unitholder's interest as a substitute limited partner of the Partnership in
such Unitholders place.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title 1 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 applicable
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 applicable 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 applicable
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 applicable Offer. The undersigned
recognizes that under certain circumstances set forth in the applicable 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 the applicable Offer to Purchase, this tender
is irrevocable, provided that Units tendered pursuant to the applicable Offer
may be withdrawn at any time prior to the applicable Expiration Date.
<PAGE>
<TABLE>
<S> <C>
SIGNATURE BOX
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 (Signature of Owner) (Date)
holder(s) of the Units and payment is to be made X
directly to that holder(s) or Eligible ----------------------------------------------------------------------
Institution, then no signature guarantee is Taxpayer Identification Number of Owner (other than IRA's)
necessary. In all other cases, all signatures must X
be guaranteed by an Eligible Institution. (SEE ----------------------------------------------------------------------
INSTRUCTION 2.) The signatory hereto hereby (Signature of Co-Owner) (Date)
certifies under penalties of perjury the Taxpayer X
I.D. No. furnished in the blank provided above and ----------------------------------------------------------------------
the statements in Box A, Box B and, if applicable, (Title)
Box C. The undersigned hereby represents and Telephone (Day) ( ) Telephone (Eve) ( )
warrants for the benefit of the Partnership(s) and --------------- --------------- ------------------
the Purchasers that the undersigned owns theUnits ----------------------- - - ---- ---------
tendered hereby and has full power and authority GUARANTEE OF SIGNATURE (IF REQUIRED. SEE INSTRUCTION 2)
to validly tender, sell, assign, transfer, convey Name of Firm: ---------------------------------------------------
and deliver the Units tendered hereby and that Authorized Signature: ---------------------------------------------
when the same are accepted for payment by the
Purchasers, the Purchasers will acquire good,
marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or
other obligations relating to the sale or transfer
thereof, and such Units will not be subject to any
adverse claims and that the transfer and
assignment contemplated herein are in compliance
with all applicable laws and regulations. All
authority herein conferred or agreed to be
conferred shall survive the death or incapacity of
the undersigned and any obligations of the
undersigned shall be binding upon the heirs,
personal representatives, successors and assigns
of the undersigned. Except as stated in the
applicable Offer to Purchase, this tender is
irrevocable.
</TABLE>
TAX CERTIFICATIONS
BOX A
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 4 - U.S. PERSONS AND BOX A)
The person signing this Letter of Transmittal hereby certifies the following
to the Purchaser under penalties of perjury:
(i) The Taxpayer Identification No. ("TIN") furnished in the space provided
for that purpose on the front of this Letter of Transmittal is the correct TIN
of the Unitholder, unless theUnits are held in an Individual Retirement Account
(IRA); or if this box / / is checked, the Unitholder has applied for a TIN. If
the Unitholder has applied for a TIN, a TIN has not been issued to the
Unitholder, and either: (a) the Unitholder has mailed or delivered an
application to receive a TIN to the appropriate IRS Center or Social Security
Administration Office, or (b) the Unitholder intends to mail or deliver an
application in the near future (it being understood that if the Unitholder does
not provide a TIN to the Purchaser within sixty (60) days, 31% of all reportable
payments made to the Unitholder thereafter will be withheld until a TIN is
provided to the Purchaser); and
(ii) Unless this box / / is checked, the Unitholder is not subject to backup
withholding either because the Unitholder: (a) is exempt from backup
withholding, (b) has not been notified by the IRS that the Unitholder is subject
to backup withholding as a result of a failure to report all interest or
dividends, or (c) has been notified by the IRS that such Unitholder is no longer
subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to certify
that the Unitholder is not subject to backup withholding.
BOX B
FIRPTA AFFIDAVIT
(SEE INSTRUCTION 3 - BOX B)
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.1445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership 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 Purchasers that no
withholding is required with respect to the Unitholder's interest in the
Partnership, the person signing this Letter of Transmittal hereby certifies the
following under penalties of perjury:
(i) Unless this box / / is checked, the Unitholder, if an individual, is a
U.S. citizen or a resident alien for purposes of U.S. income taxation, and if
other than an individual, is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Internal
Revenue code and Income Tax Regulations);
(ii) the Unitholder's U.S. social security number (for individuals) or
employer identification number (for non-individuals) is correct as furnished in
the blank provided for that purpose on the front of this Letter of Transmittal;
and
(iii) the Unitholder's home address (for individuals), or office address
(for non-individuals), is correctly printed (or corrected) on the front of this
Letter of Transmittal. If a corporation, the jurisdiction of incorporation is
________________________.
The person signing this Letter of Transmittal understands that this
certification may be disclosed to the IRS by the Purchaser and that any false
statements contained herein could be punished by fine, imprisonment, or both.
BOX C
SUBSTITUTE FORM W-8
(SEE INSTRUCTION 3 - BOX C)
By checking this box / /, the person signing this Letter of Transmittal hereby
certifies under penalties of perjury that the Unitholder is an "exempt foreign
person" for purposes of the backup withholding rules under U.S. federal income
tax laws, because the Unitholder:
(i) Is a nonresident alien individual or a foreign corporation, partnership,
estate or trust;
(ii) If an individual, has not been and plans not to 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 UNIS TO BE ACCEPTED FOR PURCHASE, UNITHOLDERS 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 DELIVERY TO: THE HERMAN
GROUP, INC. 2121 SAN JACINTO STREET, 26TH FLOOR, 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.
<PAGE>
INSTRUCTIONS FOR COMPLETING LETTER OF TRANSMITTAL
LIDO ASSOCIATES, L.L.C.
OFFER TO PURCHASE UNITS OF LIMITED PARTNERSHIP INTERESTS
OF
T. ROWE PRICE REALTY INCOME FUND I, A NO-LOAD LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND II, AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND III,AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
T. ROWE PRICE REALTY INCOME FUND IV, AMERICA'S SALES-COMMISSION-FREE REAL
ESTATE LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR ASSISTANCE IN COMPLETING THE LETTER OF TRANSMITTAL CALL:
THE HERMAN GROUP, INC.
AT (800) 992-6213
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. DELIVERY OF LETTER OF TRANSMITTAL. For convenience in responding to the
applicable Offer, a pre-addressed, postage-paid envelope has been enclosed
with the Offers to Purchase. HOWEVER, TO ENSURE RECEIPT OF THE LETTER OF
TRANSMITTAL, IT IS SUGGESTED THAT YOU USE OVERNIGHT COURIER DELIVERY OR, IF
THE LETTER OF TRANSMITTAL IS TO BE DELIVERED BY UNITED STATES MAIL, 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, Midnight, Eastern Time on January 17, 1997, unless extended. LETTERS
OF TRANSMITTAL WHICH HAVE BEEN DULY EXECUTED, BUT WHERE NO INDICATION IS
MARKED IN THE "UNITS TENDERED" COLUMN, SHALL BE DEEMED TO HAVE TENDERED ALL
UNITS PURSUANT TO THE APPLICABLE OFFER.
<TABLE>
<S> <C>
BY MAIL: THE HERMAN GROUP, INC.
2121 San Jacinto
26th Floor
Dallas, TX 75201
BY HAND DELIVERY: 2121 San Jacinto Street, 26th Floor
Dallas, TX 75201
BY FACSIMILE: (214) 999-9323
or
(214) 999-9348
FOR ADDITIONAL INFORMATION CALL: (800) 992-6213
</TABLE>
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING UNITHOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
2. SIGNATURES. All Unitholders must sign in the Signature Box on the front of
the Letter of Transmittal. If the Units are held in the names of two or more
persons, all such persons must sign. 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 with
this Letter of Transmittal. With respect to most trusts, the applicable
Partnership will generally require only the named trustee to sign. 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 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
guarantee is required on the Letter of Transmittal. Similarly, if theUnits
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 Unitholder 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 Internal Revenue 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 Unitholder must furnish his, her's or it's Taxpayer
Identification Number in the blank provided for that purpose on the front of
the Letter of Transmittal and certify under penalties of perjury Box A, B
and, if applicable, Box C.
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
Unitholder must provide to the Purchasers in the blank provided for that
purpose on the front of the Letter of Transmittal the Unitholder's
correct Taxpayer Identification Number ("TIN") and certify, under
penalties of perjury, that such Unitholder is not subject to such backup
withholding. The TIN being provided on the Substitute Form W-9 is that of
the registered Unitholder as indicated on the front of the Letter of
Transmittal. If a correct TIN is not provided, penalties may be imposed
by the Internal Revenue Service ("IRS"), in addition to the Unitholder
being subject to backup withholding. Certain Unitholders (including,
among others, all corporations) are not subject to backup withholding.
Backup withholding is not an additional tax. If withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
(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 Internal Revenue Code, each Unitholder who or which is a United
States Person (as defined in Instruction 3 above) must certify, under
penalties of perjury, the Unitholder's TIN and address, and that the
Unitholder is not a foreign person. Tax withheld under Section 1445 of the
Internal Revenue Code is not an additional tax. If withholding results in an
overpayment of tax, a refund may be obtained from the IRS. CHECK THE BOX IN
BOX B, PART (ii), ONLY IF YOU ARE NOT A U.S. PERSON, AS DESCRIBED THEREIN.
<PAGE>
4. FOREIGN PERSONS - BOX C. In order for a Unitholder 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 Unitholder must
certify, under penalties of perjury, the statement in BOX C of this Letter
of Transmittal attesting to that foreign person's status by checking the box
in such statement. UNLESS THE 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 Purchasers and such determination will
be final and binding. The Purchasers' interpretation of the terms and
conditions of the applicable Offer (including these instructions for the
Letter of Transmittal) also will be final and binding. The Purchasers 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 Purchasers shall determine unless waived by it.
The Letter of Transmittal will not be valid until any irregularities have
been cured or waived. Neither the Purchasers nor the Information
Agent/Depositary are 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 Purchasers,
such person's status as an assignee.
FOR INFORMATION PLEASE CALL:
[logo to come]
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
or
Call Toll-Free (800) 992-6213
<PAGE>
- --------------------------------------------------------------------------------
LIDO ASSOCIATES, L.L.C.
4343 VON KARMAN AVENUE
NEWPORT BEACH, CA 92660
DECEMBER 10, 1996
To Holders of Units of Limited Partnership Interests
of T. Rowe Price Realty Income Fund III,
America's Sales-Commission-Free
Real Estate Limited Partnership
Dear Unitholder:
We are pleased to enclose with this letter the offer (the "Offer") by Lido
Associates, L.L.C. (the "Purchaser") to pay $107 for each unit of limited
partnership interest ("Unit") of T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership (the "Partnership"), less
the amount per Unit of distributions declared or paid with respect to each Unit
between November 25, 1996 and the close of business, Eastern Standard Time on
January 17, 1997. The Offer is for up to 115,000 Units, representing
approximately 45% of the Units outstanding on the date of the Offer. If more
than 115,000 Units are tendered, Units will be accepted on a pro rata basis.
THE PURCHASER IS NOT AN AFFILIATE OF THE GENERAL PARTNER OF THE PARTNERSHIP.
The Offer will provide you with an opportunity to sell your Units for $107
per Unit, net to you in cash, without brokerage commissions or other transaction
costs generally associated with market sales.
We encourage you to consider the following points:
-The Offer provides Unitholders with an opportunity to dispose of their
Units for $107 per Unit, net to seller in cash, which is equal to
approximately 75% of the $143 per Unit net asset value ("NAV") reported in
the Partnership's November 12, 1996 Form 8-K.
-The Offer is approximately 179% higher than the $38.40 per Unit offer
recently made by Fir Investors, LLC, which offer was adjusted, in
accordance with its terms, from the original $60 offer, to reflect a
reduction to such offer for a recently announced $21.60 per Unit
distribution.
Limited Partners might consider accepting a 25% discount from the NAV for
one or more of the following reasons:
A. ILLIQUIDITY.
The Offer provides Unitholders with an opportunity to immediately
liquidate their investment in the Partnership for $107 per Unit net to
the seller in cash. The General Partner stated in the Partnership's Form
10-K for the year ended December 31, 1995 ("Form 10-K") that "Units
cannot currently be sold at a price equal to the estimated (net asset)
value."
As reported in the PARTNERSHIP SPECTRUM, the range of prices paid for
Units in the so-called "secondary market" during the twelve-month period
ending September 30, 1996, was $90 per Unit to $242 per Unit. An
affiliate of the Purchaser acquired the Units at the $242 price, which
was substantially in excess of the then-reported NAV of $154 per Unit.
The affiliate of the Purchaser acquired a total of twenty (20) Units and
was willing to pay a substantial premium for these Units in order to
facilitate the ability of the Purchaser to commence this Offer.
According to the PARTNERSHIP SPECTRUM, 872 Units (or .3% of the
outstanding Units) have traded in the secondary market during the
twelve-month period ended September 30, 1996. The secondary market is
made up of third party resale services specializing in limited
partnership units.
B. UNCERTAINTY.
Unitholders who tender their Units will be giving up the opportunity to
participate in any future potential benefits represented by ownership of
Units, including, for example, the right to participate in any future
distribution of cash or property, whether from operations, the
<PAGE>
Holders of Units of Limited Partnership Interests Page 2
of T. Rowe Price Realty Income Fund III,
America's Sales-Commission-Free
Real Estate Limited Partnership
proceeds of a sale or refinancing of one or more of the Partnership's
properties or in connection with any future liquidation of the
Partnership. However, there is no guarantee of future results of the
Partnership and investment in the Partnership remains speculative. While
the General Partner has stated its intention to sell the Partnership's
properties by the end of 1998, there is no guarantee such sales will
occur or that such sales will allow Unitholders to realize the per Unit
NAV. As the General Partner noted in the Form 10-K, the NAV "is not
necessarily representative of the value of the Units when the
Partnership ultimately liquidates its holdings." Also, property selling
costs and expenses (E.G. real estate brokers commissions, attorneys'
fees, escrow fees, title company costs, rent guarantees, repair of
deferred maintenance items, etc.), which could be incurred by the
Partnership in disposing of its properties, generally can range from 3%
to 10% of a given property's gross sale price and may reduce the amount
of cash available for distribution to the Unitholders per Unit to an
amount that is less than the NAV.
C. ALTERNATIVE INVESTMENTS.
The Offer will permit Unitholders to liquidate their investment in the
Partnership, which could then allow such holders to invest in less
speculative and more liquid alternative investments which may yield
greater annual cashflows. According to information provided by the
Partnership, the Partnership distributed $2.00 per Unit in operational
cashflow for each of the first three quarters of 1996. Based on the then
applicable NAV of $154 per Unit, applicable to the first three quarters
of 1996, annualized cashflow per Unit is approximately 5.2% of NAV.
In addition, the Partnership expends hundreds of thousands of dollars
each year in Partnership management expenses (approximately $290,000
through September 30, 1996). A portion of those expenses are fixed, and,
accordingly, will be incurred by the Partnership regardless of how many
properties it owns. Therefore, as Partnership properties are sold, the
Partnership cashflow available for distribution to Unitholders will
likely be reduced as a percentage of NAV.
D. TAX RETURNS.
The Offer will expire on January 17, 1997, unless extended. By accepting
the Offer, Unitholders may avoid the expenses, delays and complications
of tax filings in connection with ownership of Units in the Partnership.
The Purchaser is making the Offer with a view towards making a profit. The
Purchaser's intent is to acquire the Units at a discount to the value that the
Purchaser might ultimately realize from owning the Units. No independent person
has been retained to evaluate or render any opinion with respect to the fairness
of the $107 Offer price and no representation is made as to such fairness. Other
measures of value may be relevant to a Unitholder and all Unitholders are urged
to carefully consider all of the information contained in the Offer to Purchase
and Letter of Transmittal and to consult with their own advisors (tax, financial
or otherwise) in evaluating the terms of the Offer before deciding whether to
tender Units.
If you wish to sell some or all of your Units now, please read carefully the
enclosed Offer to Purchase and the Letter of Transmittal. All you need to do is
complete the Letter of Transmittal in accordance with the instructions provided
therein, sign where indicated, and return it to The Herman Group, Inc., the
Information Agent and Depository, in the pre-addressed return envelope or by
facsimile to (214) 999-9322 or (214) 999-9348.
Except as indicated above, no other action on your part is required. This
Offer will expire at 12:00 midnight, Eastern Standard Time, on January 17, 1997,
unless extended.
If you have any questions or need assistance in completing the Letter of
Transmittal, please call The Herman Group, Inc. at (800) 992-6213.
Very truly yours,
Lido Associates, L.L.C.
<PAGE>
LIDO ASSOCIATES, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
-------------------------
OPERATING AGREEMENT
-------------------------
This Operating Agreement (this "Agreement") of Lido Associates, L.L.C.
(the "Company"), a limited liability company organized pursuant to the
Delaware iLmited Liability Company Act (the "Act") is entered into and shall
be effective as of November ___, 1996 by and among the Company, AP Lido,
L.L.C., a Delaware limited liability company ("Apollo") and Koll Tender
Corporation II, a Delaware corporation ("Koll") (Apollo, Koll and any other
member(s) admitted to the Company are hereinafter referred to as the
"Members").
ARTICLE I
OFFICES
-------
Section 1. REGISTERED OFFICE. The registered office of the Company
shall be established and maintained at The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, in the
County of New Castle.
Section 2. OTHER OFFICES. The Company may have other offices, either
within or without the state of Delaware, at such place or places as Koll, in
its capacity as the managing Member of the Company ("Managing Member"), may
from time to time determine.
ARTICLE II
PURPOSE
-------
Section 1. PURPOSE. The Company was formed for the purpose of engaging
in any lawful act or activity for which limited liability companies may be
organized under the Act. While this Agreement is in effect, the sole and
exclusive purposes of the Company shall be to acquire (the "Acquisitions"),
through tender offers (the "Offers") and thereafter to hold for investment
and ultimately dispose of, units of limited partnership interest ("Units") in
T. Rowe Price Realty Income Fund I, a Maryland limited partnership ("Fund
I"), T. Rowe Price Realty Income Fund II, a Delaware limited partnership
("Fund II"), T. Rowe Price Realty Income Fund III, a Delaware limited
partnership ("Fund III") and T. Rowe Price Realty Income Fund IV, a Delaware
limited partnership ("Fund IV") (Funds I through IV are collectively referred
to herein as the "Partnerships") and to conduct any other activities
reasonably necessary or incidental to such purposes including exercising any
and all voting and other rights appurtenant to the ownership of such Units.
-1-
<PAGE>
ARTICLE III
OFFERS AND ACQUISITIONS
-----------------------
Section 1. THE OFFERS. The Offers shall be for a maximum of
approximately 45% of the outstanding Units of each of the Partnerships, with
no minimum amount, at an initial price per Unit and subject to the terms and
conditions of the Offers as shall be set forth in the documents filed by the
Company with the Securities and Exchange Commission with respect to the
Offers (the "Tender Offer Materials") which shall have been approved by each
of the Members. The purchase price for the Units shall be provided to the
Company by the Members pursuant to the provisions of Article VI. Each Member
shall provide all information required to be included in the Tender Offer
Materials and to complete the Offers and the Acquisitions. Without the
consent of each Member, there shall be no change to the provisions of the
Tender Offer Materials regarding the time, price or material condition of the
Offers.
Section 2. PUBLIC ANNOUNCEMENTS. Subject to the requirements of
applicable law, rule, regulation or order, no Member shall make any public
announcement or filing with respect to the Offers, the Acquisitions or any of
the transactions or events incidental to the commencement, continuance or
completion of the Offers or the Acquisitions without the prior written
consent of the other Members, which consent shall not be unreasonably
withheld, provided that, to the extent disclosure is required by law, rule,
regulation or order, each Member shall use reasonable efforts, consistent
with its legal obligations, to submit the form of proposed disclosure to the
other Members and permit the other Members a reasonable opportunity to
comment thereon prior to publication.
Section 3. VOTING AND OTHER REQUIREMENTS OF UNITS ACQUIRED. All Units
acquired by the Company shall be subject to the voting and other requirements
of the Agreement for Delivery and Use of List of Limited Partners entered
into by an affiliate of Koll and each of the Partnerships, copies of which
agreements have been delivered to the Members.
ARTICLE IV
MEMBERS
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Section 1. PLACE OF MEETINGS. Meetings of the Members of the Company
shall be held at such place as may from time to time be designated by the
Managing Member and stated in a notice of meeting or in a duly executed
waiver of notice thereof.
Section 2. ANNUAL MEETING. An annual meeting of the Members of the
Company for the transaction of such business as may properly come before the
meeting shall be held annually at such time as may be designated by the
Managing Member and stated in the notice of meeting or waiver of notice
thereof.
Section 3. SPECIAL MEETINGS. Special meetings of the Members, to be
held for such purpose or purposes as may be specified in the notice of
meeting, may be called by any Member.
Section 4. NOTICE OF MEETINGS; WAIVER. Written notice of the date,
hour, place and purpose or purposes of every meeting of Members shall be
mailed or served personally by the Managing Member, or by such person as the
Managing Member may designate to perform this duty, not more than 60 days nor
less than 10 days before the meeting to each Member of record entitled to
vote at such meeting. If such notice is mailed, it shall be
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directed to the Member at his address as it appears in the Members' interest
ledger. If such notice is mailed via first-class mail with postage thereon
prepaid, such notice shall be deemed to be given when deposited in the United
States mail addressed to the Member at the Member's post office address as it
appears in the records of the Company.
Notwithstanding the foregoing provisions, each person who is entitled to
notice of any meeting of Members shall be deemed to have waived such notice if
the Member attends such meeting in person or by proxy, or if the Member, before
or after the meeting, submits a signed waiver of such notice to the Company.
When a meeting of Members is adjourned to another time and place, unless the
Managing Member after the adjournment shall fix a new record date for such
adjourned meeting or the adjournment is for more than 30 days, notice of such
adjourned meeting need not be given if the time and place to which such meeting
has been adjourned was announced at the meeting at which the adjournment was
taken.
Section 5. QUORUM. Unless otherwise required by law or the provisions
of the Certificate of Formation of the Company (the "Certificate of
Formation"), the presence of the holders of record, in person or represented
by proxy, of a majority of the units of interest of the Company ("Shares"),
entitled to vote thereat, shall be necessary to constitute a quorum for the
transaction of business at any meeting of Members. Shares owned by the
Company, or held in its treasury, if any, shall not be deemed outstanding for
this purpose. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting interest of those
present in person or represented by proxy, may adjourn such meeting from time
to time until a quorum is present thereat. At any adjourned meeting at which
a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
Section 6. ORGANIZATION. At each meeting of the Members, the Managing
Member, or in its absence, a chairman chosen by a majority of the Members
present in person or represented by proxy and entitled to vote thereat, shall
call meetings of the Members to order and act as chairman thereof. The
Managing Member shall act as secretary at each meeting of Members, or in his
absence the presiding officer may appoint any person present to act as
secretary of the meeting.
Section 7. ORDER OF BUSINESS. The order of business at all meetings of
the Members shall be as determined by the chairman of the meeting. The
chairman of the meeting may rule on questions of order and procedure coming
before the meeting or submit such questions to the vote of the meeting.
Section 8. VOTING. Each Member entitled to vote at any meeting of
Members on any matter shall be entitled to one vote for each Share held in
its name according to the Membership interest ledger of the Company and may
vote either in person or by proxy. Every proxy must be in writing and
executed by the Member or by his duly authorized attorney-in-fact, in which
case the Company may request the delivery of the original power of attorney
as a condition of honoring such proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of
them unless at or prior to exercise of the proxy the Company receives written
notice to the contrary from any one of such persons. No proxy shall be valid
after a period of three years from the date thereof unless otherwise provided
in such proxy.
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The following decisions shall require the unanimous approval of all
Members: (i) authorization and sales of additional Shares in the Company;
(ii) amendments to the Certificate of Formation or to this Agreement, other
than amendments for the sole purpose of changing the name of the Company;
(iii) any material amendment to the Tender Offer Materials; (iv) any change
in the purpose of the Company as set forth in Article II, Section 1; and (v)
any capital contributions other than as provided by Article VI.
Notwithstanding anything to the contrary contained in this Agreement, Apollo
may in good faith, settle any litigation relating to the Offers or the
Acquisitions on behalf of the Company. Except as otherwise provided by law or
in the Certificate of Formation or in this Agreement, votes on any other
matters coming before any meeting of Members and any approvals contemplated
by this Agreement shall be decided by the vote of the holders of a majority
of the number of the Shares present in person or represented by proxy and
entitled to vote thereat. Unless demanded by a Member present in person or
represented by proxy at any meeting of the Members and entitled to vote
thereat or so directed by the chairman of the meeting, the vote thereat may
be by voice vote and need not be by ballot. Upon a demand by any such Member
for a vote by ballot on any question, or at the direction of such chairman
that a vote by ballot be taken on any question, such vote shall be taken. On
a vote by ballot each ballot shall be signed by the Member voting, or by his
proxy as such if there be such proxy, and it shall show the number of Shares
voted by such Member or proxy.
Section 9. CONSENT OF MEMBERS IN LIEU OF MEETING. Any action permitted
or required to be taken by vote at any meeting of the Members and any
approvals contemplated by this Agreement may be taken without a meeting upon
the receipt by the Company of the written consent of the holders of a
majority (or such greater or lesser amount as may be required by the
Company's Certificate of Formation or this Agreement for the taking of a
given action) of the outstanding Shares entitled to vote thereon; provided,
that such written consent shall set forth the action so consented to. Notice
of any action approved by written consent shall be promptly given to all
non-consenting Members.
Section 10. EVENTS OF DISSOLUTION.
(a) The Company shall continue until the earliest to occur of any
one of the following events:
(i) Except as provided in Section 10(c), below, the death,
retirement, resignation, expulsion, bankruptcy, or dissolution of any Member;
(ii) An election to dissolve the Company being made in writing
by all Members; and
(iii) The sale, exchange or other disposition of all or
substantially all of the Company assets.
(b) Notwithstanding anything to the contrary contained in this
Agreement, until the dissolution of the Company otherwise occurs, no Member
shall voluntarily retire, resign or withdraw from the Company, take any step
voluntarily to dissolve itself or voluntarily cause a dissolution of the
Company, except as provided in Section 10(a)(ii).
(c) Upon an event described in Section 10(a)(i) above, the Company
shall be dissolved unless within ninety (90) days subsequent to such event
the remaining
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Members elect to reconstitute the Company and to continue the business of the
Company. If such election is made, then (i) the Company shall not be
dissolved; and (ii) the Company and the business of the Company may be
continued, under and pursuant to the provisions of this Agreement.
ARTICLE V
MANAGING MEMBER
---------------
Section 1. APPOINTMENT AND REMOVAL. Koll is hereby appointed as the
Managing Member of the Company. The Managing Member may be removed at any
time by the affirmative vote of a majority of the Shares. The Managing
Member may resign at any time, such resignation to take effect upon receipt
of written notice thereof by the Company unless otherwise specified in the
resignation notice. If the office of the Managing Member becomes vacant for
any reason, the vacancy may be filled by the affirmative vote of holders of a
majority of the Shares.
Section 2. GENERAL DUTIES AND POWERS. The Managing Member shall direct,
coordinate, and control the Company's business and activities and its
incurrence of operating expenses, and shall have general authority to
exercise all the powers necessary for the Managing Member of the Company
subject to the limitations set forth herein. The Managing Member may appoint
and discharge officers and agents of the Company and may delegate any of its
powers; provided, however, that the Managing Member may not employ persons
who are affiliates of or employees of the Managing Member without the prior
written consent of the other Members. The Managing Member shall have general
authority to execute contracts in the name and on behalf of the Company
subject to the limitations set forth herein.
Section 3. POWER TO OBTAIN FINANCING. Provided that the Company
acquires at least 20% of the aggregate Units outstanding of the Partnerships
following the completion of the Offers and the Acquisitions, the Managing
Member shall have full power and authority on behalf of the Company to obtain
financing on commercially reasonable terms, provided that such financing is
without recourse to the Members of the Company and is approved by all of the
Members.
ARTICLE VI
CONTRIBUTIONS OF CAPITAL; DISTRIBUTIONS; SHARES
-----------------------------------------------
Section 1. INITIAL CONTRIBUTIONS. Each Member shall contribute to the
Company the amount of cash or property set forth on SCHEDULE A to this
Agreement (the "Initial Contribution") in exchange for the Shares set forth
opposite each Member's name on SCHEDULE A. As set forth in Section 2 of this
Article VI, Members will be required from time to time to make additional
capital contributions. Members may finance any such additional capital
contribution, on a basis which does not require pledge of the Shares unless
consented to by the other Members. The Company shall cooperate with and
assist any such Member or its bank or financial institution with respect to
their reasonable request for information to complete such financing.
Section 2. ADDITIONAL CAPITAL CALLS, REMEDIES WITH RESPECT TO DEFAULTING
MEMBER.
(a) ADDITIONAL CALLS. The Managing Member may from time to time
require Members to make additional contributions ("Additional Contributions" and
together with
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the Initial Contribution, the "Total Contributions") to the capital of the
Company in amounts and at times the Managing Member reasonably deems
necessary, for the purpose of (i) funding the cost of purchasing Units in
connection with Units accepted for purchase in the Acquisitions (the "Offer
Call") or (ii) funding any other costs, expenses or liabilities of the
Company reasonably incurred or to be incurred within the six months following
such call in connection with the business activities contemplated by this
Agreement (an "Operating Call"). The amounts of the required Additional
Contributions shall be specified in written notices (each a "Call Notice")
given to the Members. Each Call Notice shall specify (i) the aggregate amount
of capital required to be contributed by all Members; and (ii) each Member's
pro rata Additional Contribution of that amount, which shall be the aggregate
amount of additional capital so required multiplied by the percentage which
represents the total number of Shares owned of record by a Member divided by
the total number of Shares then outstanding ("Ownership Percentage"); and
(iii) a date (not less than two (2) business days after the date of a Call
Notice relating to an Offer Call, or five (5) business days in the case of a
Call Notice which relates solely to an Operating Call) by which each Member
is to pay the required amount to the Company in immediately available funds.
An Offer Call notice shall not be sent more than five (5) business days
before the date the Additional Contributions are anticipated to be disbursed.
(b) DEFAULTING MEMBERS. If any Member fails to contribute the full
amount of its Additional Contributions required to be made pursuant to this
Section 2 on or prior to the date (the "Due Date") specified in the Call
Notice (such Member, a "Defaulting Member"), then, in addition to such Member
losing its voting rights under this Agreement, as the exclusive remedies of
the Company and the other Members (each a "Non-Defaulting Member"), the
Non-Defaulting Member shall have the following remedies, exercisable by
notice from the Non-Defaulting Member to the Defaulting Member: (i) to cause
the Company to sue the Defaulting Member for damages, and (ii) either: (A)
to elect to lend (or to cause the Non-Defaulting Member's affiliates to
lend), to the Defaulting Member or to the Company, as determined in the sole
discretion of the Non-Defaulting Member, the amount of such Additional
Contribution that was not made timely by the Defaulting Member, or (B) to
elect to contribute the amount of such Additional Contribution that was not
made timely by the Defaulting Member. Upon a Member becoming a Defaulting
Member and the Non-Defaulting Member timely contributing both (x) the
Additional Contribution required to be made by the Non-Defaulting Member and
(y) the portion of the Additional Contribution that was not made timely by
the Defaulting Member, Shares of the Defaulting Member shall be deemed
immediately redeemed by the Company and reissued to the Defaulting Member and
the Non-Defaulting Member(s) in the proportion that each Member's Invested
Capital (as hereinafter defined) bears to the total Invested Capital of all
Members. Upon the failure of the Non-Defaulting Member to elect which of the
remedies specified in clause (ii)(A) or (ii)(B) of this Section 2(b) has been
selected, by written notice to the Company and the Defaulting Member given
within thirty (30) days after funding the share of the Additional
Contribution not made by the Defaulting Member, the remedy described in such
clause (ii)(B) shall be deemed to have been selected. The remedies described
in clauses (i) and (ii) of this Section 2 shall be cumulative, and all or any
of them may be elected and apply simultaneously, except that the remedies
described in clauses (ii)(A) and (ii)(B) of this Section 2(b) shall be
mutually exclusive with respect to each Call Notice.
(c) PROCEDURES WITH RESPECT TO LOANS. If the Non-Defaulting Member
lends (or causes its affiliates to lend) the amount of the Additional
Contribution not made by the Defaulting Member, the loan shall be a recourse
loan to the Company or to the Defaulting
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Member, as the case may be, and shall bear interest, compounded monthly, at
the rate equal to the lesser of (i) fifteen percent (15%) per annum, and (ii)
the maximum interest rate permitted by law, from the Due Date until the date
of repayment. Such loan shall be deemed to have been made to the Defaulting
Member (and not to the Company) only if the Non-Defaulting Member (or the
Non-Defaulting Member's affiliate) has paid such amount directly to the
Company and specifies, by notice to the Members given within two (2) business
days after such funding, that the loan is being made to the Defaulting
Member, in which case said amount shall be deemed to have been contributed to
the Company by the Defaulting Member for purposes of determining the Total
Contributions made by the Defaulting Member, its Invested Capital and its
Incentive Return. Repayment of any such loan to the Defaulting Member shall
be effected by the Managing Member causing the Company to pay directly to the
Non-Defaulting Member all distributions otherwise payable to the Defaulting
Member under this Agreement as and when payable, instead of making such
distributions to the Defaulting Member (with such distributions being deemed
for all purposes to have been made to the Defaulting Member and then paid by
the Defaulting Member to the Non-Defaulting Member or its affiliates, as the
case may be). Repayment of any such loan to the Company shall be made as
provided in Article VI, Section 3. Any payments made with respect to loans
described in this Section 2 shall first be deemed to pay accrued but unpaid
interest, and then be deemed to repay outstanding principal.
Section 3. CAPITAL ACCOUNTS, DISTRIBUTIONS, AND ALLOCATIONS.
(a) ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS. The Managing
Member shall establish and cause the Company to maintain a single Capital
Account for each Member which reflects each Member's Total Contributions to
the Company. Each Capital Account shall also reflect the allocations and
distributions made pursuant to Sections 3(b) and 3(c), below, and otherwise
be adjusted in accordance with Code Section 704 and the principles set forth
in Regulations Sections 1.704-1(b) and 1.704-24 in applying such principles,
any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i) shall be allocated among the Members in the same
manner as such expenditures would be allocated among the Members pursuant to
this Section 3 if such expenditures were treated as additional items of
deduction of the Company that were recognized and required to be allocated
among the Members pursuant to this Section 3 with respect to the Accounting
Year in which such expenditures were made. The foregoing provisions and the
other provisions of this Agreement relating to maintenance of Capital
Accounts and allocations to Members (collectively, the "Allocation
Provisions") are intended to comply with Code Section 514(c)(9)(E) and the
Treasury Regulations thereunder (the "Fractions Rule") and Code Section
704(b) and the Treasury Regulations thereunder and shall be interpreted and
applied in a manner consistent with such Regulations, in each case as
directed and reasonably approved by the Members. The Allocation Provisions
are deemed modified, with effect from the date of this Agreement, to the
extent necessary to comply with the Fractions Rule. Without limiting the
foregoing, any allocation for a particular year pursuant to the Allocation
Provisions which would violate the requirements of Code Sections 704(b) and
514(c)(9)(E) shall not be made, and there shall instead be made (i)
allocations generally provided herein as directed and reasonably approved by
the Members and (ii) any adjustments pursuant to Section 3(c)(x).
Notwithstanding anything to the contrary in the preceding provisions of this
Section 3(a) or 3(c)(v), in no event shall any change or modification made
pursuant to such sections modify the distribution provisions in this
Agreement. The Members intend that the Company be treated as a partnership
for tax purposes.
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(b) DISTRIBUTIONS. Except as contemplated by Article VIII, Section
3, all amounts available for distribution to Members by the Company (after
payment of expenses and reasonable reserves) will be applied promptly as
follows: (i) to the repayment of any Member loans pursuant to Section 2 of
this Article IV;(ii) to the Members until such time as each Member has
received its Incentive Return;(iii) to the Members in proportion to their
respective Ownership Percentages until such time as each Member has received
an amount equal to such Member's Invested Capital; and (iv) 10% to Koll, and
90% to the other Members on a pro rata basis (the "Residual Interests").
(c) ALLOCATIONS.
(i) Profits of the Company for each fiscal year shall be
allocated among the Members as follows:
(A) first, in the same proportions and order as the
aggregate losses (if any) for all previous years allocated pursuant to
Subsections 3(c)(ii)(D), then 3(c)(ii)(C), then 3(c)(ii)(B), then
3(c)(ii)(A), until the aggregate profits allocated to each Member pursuant to
this Subsection 3(c)(i)(A) for such year and all previous years is equal to
the aggregate losses allocated to such Member pursuant to Subsections
3(c)(ii)(D), 3(c)(ii)(C), 3(c)(ii)(B) and 3(c)(ii)(A) for all previous years;
(B) second, pro rata in proportion to each Member's
Ownership Percentage until each Member has achieved its Incentive Return,
until the aggregate profits allocated pursuant to this Subsection 3(c)(i)(B)
for such year and all previous years (net of any losses allocated pursuant to
Subsection 3(c)(ii)(B) for all previous years) is equal to such Incentive
Return; and
(C) thereafter, the balance, if any, 10% to Koll and 90%
to the other Members on a pro rata basis in proportion to their respective
Ownership Percentages.
(ii) Losses of the Company for each fiscal year shall be
allocated among the Members as follows:
(A) first, in the same proportions as the aggregate
profits (if any) for all previous years allocated pursuant to Subsection
3(c)(i)(C), until the aggregate losses allocated to each Member pursuant to
this Subsection 3(c)(ii)(A) for such year and all previous years is equal to
the aggregate profits allocated to such Member pursuant to Subsection
3(c)(i)(C) for all previous years;
(B) second, in the same proportions as the aggregate
profits (if any) for all previous years allocated pursuant to Subsection
3(c)(i)(B), until the aggregate losses allocated to each Member pursuant to
this Subsection 3(c)(ii)(B) for such year and all previous years is equal to
the aggregate profits allocated to such Member pursuant to Subsection
3(c)(i)(B) for all previous years; and
(C) third, except as contemplated by Article VIII,
Section 3, in proportion to the unreturned Total Contributions of each Member
until the aggregate losses allocated to each Member pursuant to this
Subsection 3(c)(ii)(C) equals the unreturned Total Contributions of each
Member; and
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(D) fourth, except as contemplated by Article VIII,
Section 3, pro rata in proportion to each Member's Ownership Percentage.
(iii) MINIMUM GAIN CHARGEBACK AND QUALIFIED INCOME OFFSET.
(A) NO IMPERMISSIBLE DEFICITS. Notwithstanding any other
provision of this Agreement, taxable loss (or items of deduction) shall not
be allocated to a Member to the extent that the Member has or would have, as
a result of such allocations, an Adjusted Capital Account Deficit. Any
taxable loss (or items of deduction which otherwise would be allocated to a
Member, but which cannot be allocated to such member because of the
application of the immediately preceding sentence, shall instead be allocated
to the other Members.
(B) QUALIFIED INCOME OFFSET. In order to comply with the
"qualified income offset" requirement of the Regulations under Code Section
704(b), and notwithstanding any other provision of this Agreement to the
contrary except Section 3(c)(iii)(C) below in the event a Member for any
reason (whether or not expected) has an Adjusted Capital Account Deficit,
items of Profits and Gain on Disposition (consisting of a pro rata portion of
each item of income comprising the Company's Profits and Gain on Disposition,
including both gross income and gain for the taxable year) shall be allocated
to such member in an amount and manner sufficient to eliminate as quickly as
possible the Adjusted Capital Account Deficit.
(C) MINIMUM GAIN CHARGEBACK. In order to comply with the
"minimum gain chargeback" requirements of Regulations Sections 1.704-2(f)(1)
and 1.704-2(i)(4), and notwithstanding any other provision of this Agreement
to the contrary, in the event there is a net decrease in a Member's share of
Company Minimum Gain and/or Member Nonrecourse Debt Minimum Gain during a
Company taxable year, such Member shall be allocated items of income and gain
for that year (and it necessary, other years) as required by and in
accordance with Regulations Sections 1.704-2(f)(1) and 1.704-2(i)(4) before
any other allocation is made.
(iv) OTHER TAX ALLOCATION PROVISIONS.
(A) INCOME CHARACTERIZATION. For purposes of determining
the character (as ordinary income or capital gain) of any profit allocated to
the Members pursuant to Section 3(c), such portion of the taxable income of
the Company allocated pursuant to Section 3(c) which is treated as ordinary
income attributable to the recapture of depreciation shall, to the extent
possible, be allocated among the Members in the proportion which (i) the
amount of depreciation previously allocated to each Member bears to (ii) the
total of such depreciation allocated to all Members. This Section
3(c)(iv)(A) shall not alter the amount of allocations among the Members
pursuant to Section 3(c) but merely the character of income so allocated.
(B) CHANGE IN RESIDUAL INTERESTS. Notwithstanding the
foregoing, in the event any member's Residual Interest changes during a
fiscal year for any reason other than an adjustment thereof pursuant to
Section 2, including the Transfer of any interest in the Company or an
adjustment of the Members' Residual Interests hereunder other than an
adjustment thereof pursuant to Section 2, the allocations of taxable income
or loss under this Section 3, and distributions, shall be adjusted as
necessary to reflect the varying interests of the Members during such year
using an interim closing of the
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books method as of the date of such change, or such other method as is
reasonably approved by the Members.
(C) MANDATORY ALLOCATIONS -- SECTION 704(C) AND MEMBER
NONRECOURSE DEBT.
(1) Notwithstanding the foregoing, (i) in the event
Code Section 704(c) or Code Section 704(c) principles applicable under
Regulations Section 1.704-1(b)(2)(iv) require allocations of income or loss
of the Company in a manner different than that set forth above, the
provisions of Code Section 704(c) and the Regulations thereunder shall
control such allocations among the Members; and (ii) all tax deductions and
taxable losses of the Company that, pursuant to Regulations Section
1.704-2(i), are attributable to a Member Nonrecourse Debt for which a Member
(or a person related to such Member under Treasury Regulations Section
1,752-4(b)) bears the economic risk of loss (within the Meaning of
Regulations Section 1.752-2) shall be allocated to such Member as required by
Regulations Section 1.704-2(c).
(2) Any item of income, gain, loss and deduction with
respect to any property (other than cash) that has been contributed by a
Member to the capital of the Company or which has been revalued for Capital
Account purposes pursuant to Regulations Section 1.704-1(b)(2)(iv), and which
is required or permitted to be allocated to such Member for income tax
purposes under Code Section 704(c) so as to take into account the variation
between the tax basis of such property and its fair market value at the time
of its contribution or at the time of its revaluation for Capital Account
purposes pursuant to Regulations Section 1.704-1(b)(2)(iv) (such contributed
or revalued property is referred to as "Revalued Property") shall be
allocated solely for income tax purposes in the manner so required or
permitted under Code Section 704(c) using the "traditional method" described
in Regulations Section 1.704-3(b) (or any successor Regulation), such
allocations to be made as shall be reasonably approved by the Members;
PROVIDED, HOWEVER, that curative allocations consisting of the special
allocation of gain or loss upon the sale or other disposition of the Revalued
Property shall be made in accordance with Regulations Section 1.704-3(c) to
the extent necessary to eliminate any disparity, to the extent possible,
between the Members' book and tax Capital Accounts attributable to such
property; and FURTHER PROVIDED, however, that any other method allowable
under applicable Regulations amy be used in connection with any Revalued
Property as shall be reasonably approved by the Members. Allocations under
this Section 3(c)(iv)(C)(2) are solely for purposes of federal, state and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profit, Loss, Gain or
Loss on Disposition or other items or distributions under any provision of
this Agreement. Notwithstanding anything in this Agreement to the contrary,
the determination of Gross Asset Value for any asset contributed to the
Company, distributed from the Company or any other Revalued Property shall be
as approved by the Members.
(D) GUARANTEE OF COMPANY INDEBTEDNESS. Except for
arrangements expressly described in this Agreement, no Member shall enter
into (or permit any person or party related to the Member to enter into) any
arrangement with respect to any liability of the Company that would result in
such Member (or a person or party related to such Member under Regulations
section 1.752-4(b)) bearing the economic risk of loss (within the meaning of
Regulations Section 1.752-2) with respect to such liability unless such
arrangement has been approved by the Members. This Section 3(c)(iv)(D) shall
not prohibit any Member of the Company from satisfying its obligations under
state law to pay
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monies owed to any creditor of the Company on account of the Company's
obligations. To the extent a Member is permitted to guarantee the repayment
of any Company indebtedness under this Agreement, each of the other Members
shall be afforded the opportunity to guarantee such Member's pro rata share
of such indebtedness, determined in accordance with the Members' respective
Ownership Percentage.
(E) REFERENCES TO REGULATIONS. Any reference in this
Agreement to a provision of final, proposed and/or temporary regulations (the
"Regulations") promulgated under any Section of the Internal Revenue Code of
1986, shall, in the event such provision is modified or renumbered, be deemed
to refer to the successor provision as so modified or renumbered, but only to
the extent such successor provision applies to the Company under the
effective date rules applicable to such successor provision or the Members
otherwise so reasonably approve under applicable elections contained in such
Regulations.
(F) TAX DEFINITIONS.
(1) "ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean
with respect to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant taxable year, after giving
effect to the following adjustments:
(a) Credit to such Capital Account any amounts
which such Member is obligated to restore or is deemed to be obligated to
restore to the Company pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5) ; and
(b) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
(2) "CAPITAL ACCOUNT" shall mean, with respect to any
Member, the Capital Account maintained for such Member in accordance with the
provisions of section 3(a).
(3) "COMPANY MINIMUM GAIN" has the meaning ascribed
to the term "Partnership Minimum Gain" in Regulations Section 1.704-2(d)(1)
(and includes the Partnership's share of the Partnership Minimum Gain of any
Investment Entity).
(4) "MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an
amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated
as a Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(2).
(5) "MEMBER NONRECOURSE DEBT" has the meaning for the
term "Partner Nonrecourse Debt" set forth in Regulations Section
1.704-2(b)(4).
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(6) "MEMBER NONRECOURSE DEDUCTIONS" has the meaning
for the term "Partner Nonrecourse Deductions" set forth in Regulations
Section 1.7O4-2(i). The amount of Member Nonrecourse Deductions with respect
to a Member Nonrecourse Debt for an Accounting Year equals the excess, if
any, (i) of the net increase, if any, in the amount of the Company Minimum
Gain attributable to such Member Nonrecourse Debt during such Accounting
Year, over (ii) the aggregate amount of any distributions during such year to
the Member that bears the economic risk of loss for such Member Nonrecourse
Debt to the extent such distributions are from proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined
according to the provisions of Regulations Section 1.704-2(i).
(7) "NONRECOURSE DEDUCTIONS" has the meaning set
forth in Regulations Section 1.704-2(c). The amount of Nonrecourse
Deductions for an Accounting Year equals the excess, if any, of the net
increase, if any, in the amount of Company Minimum Gain during that fiscal
year, over the aggregate amount of any distributions during that fiscal year
of proceeds of a Nonrecourse Liability that are allocable to an increase in
Company Minimum Gain, determined according to the provisions of Regulations
Section 1.704-2(c).
(8) "NONRECOURSE LIABILITY" has the meaning set forth
in Regulations Section 1.704-2(b)(3).
(v) INTENT OF ALLOCATIONS. The parties intend that the
foregoing tax allocation provisions of this Section 3 shall produce final
Capital Account balances of the Members that would permit liquidating
distributions, if such distributions were made in accordance with final
Capital Account balances (instead of being made in the order of priorities
set forth in Section 3(b)), to be made (after unpaid loans and interest
thereon, including those owed to Members have been paid) in a manner
identical to the order of priorities set forth in Section 3(b). To the
extent that the tax allocation provisions of this Section 3 would fail to
produce such final Capital Account balances, (i) such provisions shall be
amended by the Members if and to the extent necessary to produce such result
and (ii) taxable income and taxable loss of the Company for prior open years
(or items of gross income and deduction of the Company for such years) shall
be reallocated among the Members to the extent it is not possible to achieve
such result with allocations of items of income (including gross income) and
deduction for the current year and future years, as reasonably approved by
the Members. This Section 3(c)(v) shall control notwithstanding any
reallocation or adjustment of taxable income, taxable loss, or items thereof
by the Internal Revenue Service or any other taxing authority.
(vi) BASIS ELECTIONS. The Company shall elect to adjust the
basis of the company's assets under Code Section 754. The Member who
benefits from such 754 election shall pay all costs of preparing and filing
all instruments or documents necessary to effectuate such election if made
plus any additional ongoing costs incurred by the company as a result of such
election.
(vii) GENERAL ALLOCATION RULES. All Profit and Loss of the
Company and Gain or Loss on Disposition shall be allocated with respect to
each Accounting Year (or part thereof) as of the end of, and within ninety
(90) days after the end of, such year, or as soon thereafter as possible.
All Profit and Loss shall be allocated to the Members shown on the records of
the Company to have been Members as of the last day of the
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Accounting Year for which such allocation is to be made, except that, if a
Member sells or exchanges its interest in the Company or otherwise is
admitted as a substituted Member, the Profit or Loss and Gain or Loss on
Disposition shall be allocated between the transferor and the transferee by
taking into account their varying interests during the Accounting Year in
accordance with Code Section 706(d), using the interim closing of the books
method or such other method as shall be reasonably approved by the Members.
(viii) SHARING OF COMPANY NONRECOURSE DEBT. Throughout the
term of the Company, the nonrecourse debt of the Company (other than Member
Nonrecourse Debt) shall be allocated for tax purposes among the Members in
accordance with their then respective Residual Interests. To the extent that
any Member's share of such nonrecourse debt as so specified exceeds the
amounts referred to in Regulations Sections 1.752-3(a)(1) and (2), it is
intended that the foregoing shares shall be viewed and treated as reasonably
consistent with allocations (which have substantial economic effect) of some
significant item of Company income or gain within the meaning of Regulations
Section 1.752-3(a)(3).
(ix) ADJUSTMENT OF GROSS ASSET VALUE. Gross Asset Value, with
respect to any asset, shall be the adjusted basis for federal income tax
purposes of that asset, except as follows:
(A) The initial Gross Asset Value of any asset contributed
(or deemed contributed under Regulations Section 1.708-1(b)(1)(iv)) by a
Member to the Company shall be the fair market value of the asset on the date
of the contribution, as reasonably approved by the Members.
(B) The Gross Asset Values of all Company assets shall be
adjusted to equal the respective fair market values of the assets, as
reasonably approved by the Members.
(1) If the Members reasonably approve that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company, as a result of (i) the acquisition
of an additional interest in the Company by any new or existing Member in
exchange for more than a DE MINIMIS capital contribution; or (ii) the
distribution by the Company to a Member of more than a DE MINIMIS amount of
Company property as consideration for an interest in the Company; and
(2) As of the liquidation of the Company within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
(C) The Gross Asset Value of any Company asset distributed
to any Member shall be the gross fair market value of the asset on the date
of distribution as reasonably approved by the Members.
(D) The Gross Asset Values of Company assets shall be
increased or decreased to reflect any adjustment to the adjusted basis of the
assets under Code Section 734(b) or 743(b), but only to the extent that the
adjustment is taken into account in determining Capital Accounts under
Regulations Section 1.7041(b)(2)(iv)(m), provided that Gross Asset Values
shall not be adjusted under this Section 3(c)(ix)(D) to the extent that the
Members reasonably approve that an adjustment under Section 3(c)(ix)(B) is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment under this Section 3(c)(ix)(D).
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After the Gross Asset Value of any asset has been determined or adjusted
under Section 3(c)(ix)(A), 3(c)(ix)(B) or 3(c)(ix)(D), Gross Asset Value
shall be adjusted by the depreciation taken into account with respect to the
asset for purposes of computing Profits or Losses.
(x) MODIFICATION OF ALLOCATION PROVISIONS. If the Allocation
Provisions are modified pursuant to Section 3(a), allocations hereunder for
subsequent periods shall be adjusted so as to reverse the effect of such
modifications on the Capital Accounts of the Members as rapidly as possible
but without causing this Agreement to fail to comply with the Fractions Rule.
(d) CERTAIN DEFINITIONS. The following defined terms shall be
applicable to this Section 3:
"INCENTIVE RETURN" shall mean an amount of cumulative distributions
from the Company paid to each Member equal to an Internal Rate of Return at
an annual rate of 12% compounded monthly with respect to (and including
repayment of) its Invested Capital. Distributions in payment of the
Incentive Return shall be deemed to first pay the portion of the Incentive
Return other than the portion thereof representing Invested Capital, and then
be deemed to repay Invested Capital.
"INTERNAL RATE OF RETURN" shall mean that discount rate (expressed
as an annual rate) that, when applied to calculate the present value of
Invested Capital in respect of Shares held by a Member and the present value
of all distributions (whether representing return of capital or otherwise)
made by the Company in respect of such Shares, causes the sum of the present
values of all amounts of Invested Capital of such Member to be equal to the
sum of the present values of all such distributions.
In determining the Internal Rate of Return, the following shall
apply:
(i) all present value calculations are to be made as of the
date of this Agreement;
(ii) all amounts of Invested Capital shall be treated as having
been contributed to the Company on the first day of the month in which a
Member's funds were actually delivered to the Company;
(iii) all distributions shall be treated as if received on the
last day of the month in which the distribution was made;
(iv) all distribution amounts shall be based on the amount of
the distribution prior to the application of any federal, state or local
taxation to Members (including any withholding or deduction requirements);
(v) all amounts shall be calculated on a compounded monthly
basis, and on the basis of a 360-day year composed of twelve 30-day months;
and
(vi) Internal Rate of Return calculations shall use the
methodology of the Lotus 1-2-3 computer program, Release 3.4 (or equivalent).
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"INVESTED CAPITAL" shall mean with respect to each Member the Total
Contributions made from time to time to the Company by such Member (or its
predecessors in interest), reduced by any distributions previously made to
such Member pursuant to Article VI, Section 3 to the extent that such
distributions are deemed to repay such member's Invested Capital under the
definition of "Incentive Return" set forth above. If at any time during the
term of this Agreement, the "Invested Capital" of any Member shall have been
reduced to zero, "Invested Capital" thereafter shall be calculated with
respect to such Member only by considering such Member's subsequent
Additional Contributions and subsequent distributions pursuant to Article VI,
Section 3.
Section 4. CERTIFICATE. Every holder of Shares in the Company shall be
entitled to have a certificate or certificates which represents and certifies
the number, kind and class of Shares owned by each such holder of Shares in
the Company. Certificates for fractional Shares shall not be issued. Each
Share certificate shall include on its face the name of the Company, the name
of the Member or other person to whom it is issued, the class of Membership
interest and the number of Shares represented by the certificate, and shall
be in such form, not inconsistent with the Act, the Certificate of Formation
or this Agreement, as shall have been approved by the Managing Member. Each
Membership interest certificate shall be signed by the President of the
Managing Member, and countersigned by its Secretary, if any. Any other
signature on the certificate, including but not limited to the signature of
or on behalf of a transfer agent of the Company, may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may nevertheless be issued by the Company with the same effect as
if such officer, transfer agent or registrar had not ceased to be such as of
the date of its issue.
Section 5. AUTHORIZED SHARES. The total number of Shares which the
Company shall have authority to issue is 10,000 (ten thousand), of which all
Shares shall be units of common Member interest.
Section 6. ISSUE, TRANSFER AND REGISTRATION OF CERTIFICATES. Subject to
the restrictions, if any, imposed by the Certificate of Formation, this
Agreement or any agreement to which the Company is a party, Shares shall be
transferred on the books of the Company only by the surrender to the Company
or its transfer agent of the certificate representing such Shares properly
endorsed or accompanied by a written assignment of such Shares or by a
written power of attorney to sell, assign, or transfer such Shares, properly
executed, with necessary transfer stamps affixed, and with such proof that
the endorsement, assignment or power of attorney is genuine and effective as
the Company or its transfer agent may reasonably require. Except as may be
otherwise required by law, the Company shall be entitled to treat the record
holder of Shares as shown on its books as the owner of such for all purposes,
including the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other disposition of such
Shares, until the Shares have been transferred on the books of the Company in
accordance with the requirements of this Agreement. It shall be the duty of
each Member to notify the Company of its post office address. The duties of
transfer agent and registrar may be combined.
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Section 7. TRANSFERS OF SHARES.
(a) VOLUNTARY TRANSFERS. No Member and no transferee of a Member's
Shares may sell, assign, transfer, exchange, encumber or otherwise dispose of
21% of the Shares or the interest therein now held or hereafter acquired by
such Member without first obtaining the written consent of the other Members.
If and only if such written consents are obtained and the purported
transferee executes and delivers to the Company a copy of this Agreement and
agrees to assume, perform and be bound by the obligations of the transferor,
such Shares may be transferred to the purported transferee and the purported
transferee will become a Member of the Company. Notwithstanding the previous
provisions of this Section 7(a), to the extent the "check the box"
regulations are adopted, and pursuant to such regulations the previous
provisions are not required in the context of this Agreement to ensure that
the Company is taxed as a partnership, then the previous provisions shall no
longer apply. The Members agree to perform all acts necessary to ensure that
the Company shall be taxed as a partnership, including without limitation,
the signing of any form or making of any elections under the "check the box"
regulation.
(b) TRANSFERS BY OPERATION OF LAW. In the event that a Member (i)
declares its intention to file a voluntary petition under bankruptcy or
insolvency law or files a voluntary petition under any bankruptcy or
insolvency law or a petition for the appointment of a receiver or makes an
assignment for the benefit of creditors, or (ii) is subjected involuntarily
to such a petition or assignment or to an attachment or other legal or
equitable interest with respect to the Member's Shares, and such involuntary
petition or assignment or attachment is not discharged within 30 days after
its date, or (iii) is subject to a transfer of his Shares by operation of
law, the Company shall have the right to elect to purchase all of the Shares
which are owned by said Member. Failure of the Company to elect to purchase
said Shares under this Paragraph (b) shall not affect the Member's right to
consent or withhold consent to the transfer of such Shares under Section 7(a)
in the event of a proposed sale, assignment, pledge or other disposition by
or to any receiver, petitioner, assignee, transferee or other person
obtaining an interest in said Shares.
(c) TRANSFERS IN VIOLATION OF THIS AGREEMENT. Any transfer of
Shares in violation of this section 7 shall be void ab initio and of no
effect, and the purchaser thereof shall not be entitled to any rights under
this Agreement.
(d) PURCHASE PRICE. Except as otherwise provided in this Agreement,
the purchase price per Share which the Company elects to purchase under
Section 7(b) or (c) shall be the total invested capital of the owner of the
Share, net of all dividends previously paid on the Share.
(e) TENDERS. All Shares which the Company has elected to purchase
hereunder shall be tendered to the Company, or to one or more assignees or
substitute purchasers designated by it, at the principal office of the
Company within 10 days of the Company's election, by delivery of certificates
representing such Shares endorsed in blank and in proper form for offer
against payment of the purchase price.
(f) WAIVER; DISPOSITION OF SHARES. From time to time the Company
may waive its rights hereunder either generally or with respect to one or
more specific transfers which have been proposed, attempted or made. All
action to be taken by the Company hereunder shall be taken by a vote of a
majority of the Managers then in office. Any Shares which the Company has
elected to purchase hereunder may be disposed of by the
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Board in such manner as it deems appropriate, with or without further
restrictions on the transfer thereof.
(g) The Company shall cause each certificate issued by the Company
representing Shares to bear one or more legends intended to assure compliance
with applicable federal and state securities laws, together with a
restrictive legend substantially as follows:
AS PROVIDED IN THE OPERATING AGREEMENT OF THE COMPANY, NONE
OF THE SHARES EVIDENCED BY THIS CERTIFICATE MAY BE
TRANSFERRED BY THE HOLDER THEREOF EXCEPT IN ACCORDANCE WITH
THE TERMS AND PROVISIONS OF THE OPERATING AGREEMENT. ANY
TRANSFER OR ATTEMPTED TRANSFER IN VIOLATION OF THE FOREGOING
SHALL BE VOID AND OF NO EFFECT.
(h) NOTICES. Any and all notices, offers, acceptances or any other
communications provided for herein shall be given in writing by certified
mail, postage prepaid, return receipt requested, which shall be addressed to
the respective Member at his address appearing on the Membership record book
of the Company. A duplicate of all such notices, offers, acceptances or
other communications shall be mailed to the Company.
Section 8. QUALIFICATION OF VOTERS. The Managing Member may fix a time,
not more than 60 nor less then 10 days prior to the date of any meeting of
Members, or prior to the last day on which the consent or dissent of Members
may be effectively expressed with respect to any action proposed to be taken
without a meeting, as the time as of which Members entitled to notice of, and
to vote at such a meeting, or whose consent or dissent is required or may be
expressed with respect to any such action, as the case may be, shall be
determined, and all persons who were holders of record of voting Shares at
such time, and no others, shall be entitled to notice of, and to vote at such
meeting, or to express their consent or dissent, as the case may be.
Section 9. DETERMINATION OF MEMBERS OF RECORD FOR OTHER PURPOSES. The
Managing Member may fix a time, not less than 10 days preceding the date
fixed for the payment of any dividend or for the making of any distribution
or for the delivery of evidences of rights or evidences of interests arising
out of any change, conversion, or exchange of Shares, as a record date for
the determination of the Members entitled to receive any such dividend,
distribution, rights or interests, and in such case only Members on record at
the time so fixed shall be entitled to receive such dividend, distribution,
rights or interest.
Section 10. MEMBERSHIP INTEREST LEDGER. The Managing Member shall
maintain a Membership interest ledger which contains the name and address of
each Member of the Company and the number of Shares and the particular class
of Shares which the Member holds. The Membership interest ledger may be in
written form or in any other form capable of producing copies for visual
inspection. The original or duplicate of the Membership interest ledger shall
be kept at the offices of the transfer agent, with or without the state of
Delaware, or, if none, at the principal executive office of the Company.
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Section 11. LOST, DESTROYED OR MUTILATED CERTIFICATES. Subject to such
rules, regulations and procedures as may be determined or set by the Managing
Member, the holder of any certificates representing Shares in the Company
shall immediately notify the Company of any loss, destruction or mutilation
of such certificate, and the Company may issue a new certificate of
Membership interest in the place of any certificate theretofore issued by the
Company upon the making of an affidavit of that fact by the person claiming
the certificate of Membership interest to be stolen, lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Managing
Member may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and to give the Company a bond, with sufficient
surety, to indemnify it against any loss or claim which may arise by reason
of the issuance of a new certificate.
Section 12. DISTRIBUTIONS; SURPLUS. Subject to the provisions of the
Certificate of Formation, and to the extent permitted by law, the Managing
Member shall promptly declare distribution of profits on the Shares in the
Company at such time and in such amounts as, in its reasonable discretion, it
shall deem to be available after establishment or replenishment of reasonable
working capital reserves. Before payment of any dividend or making any
distribution of profits, the Managing Member may set aside out of the surplus
or net profits of the Company such sum or sums as the Managing Member from
time to time, in its reasonable discretion, shall deem proper as a reserve
fund to meet contingencies or for any other purpose or purposes.
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. INDEMNIFICATION OF MEMBERS BY THE COMPANY.
(a) Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that he is or was a
Managing Member or a Member of the Company (or an affiliate of any of the
foregoing), or is or was serving at the specific request of the Company as an
officer, employee or agent of another company or of a corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (an "Indemnitee"), whether the basis of
such Proceeding is alleged action in an official capacity as a Managing
Member, officer, Member, employee or agent or in any other capacity while
serving as a Manager, officer, employee or agent, shall be indemnified and
held harmless by the Company to the fullest extent authorized by the laws of
the state of Delaware, as the same exist or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than such law
permitted the Company to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
excise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such Indemnitee in connection therewith. Notwithstanding the
foregoing, indemnification under this Section l(a) shall not be available to
any Indemnitee in respect of any claim for which the Indemnitee is required
to furnish indemnification to the Company under any other provision of this
Article VII.
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(b) The right to indemnification conferred in Section 1 of this
Article VII shall include the right to be paid by the Company the expenses
(including attorneys' fees) incurred in defending any such Proceeding in
advance of its final disposition (an "Advancement of Expenses"); provided,
however, that, an Advancement of Expenses incurred by an Indemnitee shall be
made only upon delivery to the Company of an undertaking, by or on behalf of
such Indemnitee, to repay all amounts so advanced (i) if it shall ultimately
be determined by final judicial decision from which there is no further right
to appeal that such Indemnitee is not entitled to be indemnified for such
expenses under the provisions of the laws of the state of Delaware or (ii) by
reason of a final judicial determination contained in a nonappealable order,
that such beneficiary is not entitled to be indemnified under this Section 1,
whether by reason of the last sentence of Section l(a) or otherwise. No
Member shall be required to make Additional Contributions with respect to the
Company's indemnification obligations pursuant to this Article VII, without
such Member's prior written consent.
Section 2. INDEMNIFICATION BY MEMBERS. Each Member agrees to indemnify,
defend and hold each other Member and the Company harmless from and against
any and all losses, claims, damages and liabilities, including, but not
limited to, reasonable attorneys fees, arising out of or in connection with
any untrue statement or alleged untrue statement of material fact contained
in the Tender Offer Materials or any omission or alleged omission of a
material fact required to be stated in the Tender Offer Materials or
necessary in order to make the statements contained therein not misleading,
but only with reference to information relating to such Member or its
affiliates furnished by or on behalf of such Member or its affiliates for use
in the Tender Offer Materials.
Section 3. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the Advancement of Expenses conferred in this Article VII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Certificate of Formation, this Agreement, any other
agreement, or otherwise.
Section 4. INSURANCE. The Company may maintain insurance, at its
expense, to protect itself and any Manager, officer, employee or agent of the
Company or another company or corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or not
the Company would have the power to indemnify such person against such
expense, liability or loss under the laws of the state of Delaware.
Section 5. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE COMPANY. The
Company may, to the extent authorized from time to time by the Members, grant
rights to indemnification and to the Advancement of Expenses to any employee
or agent of the Company to the fullest extent of the provisions of this
Article VII with respect to the indemnification and Advancement of Expenses
of the Managing Member and officers of the Company.
ARTICLE VIII
FINANCE
-------
Section 1. CHECKS, DRAFTS, ETC. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the
name of the Company shall be signed by such officer or officers or such other
person or persons as the Managing Member may from time to time designate.
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Section 2. FISCAL YEAR. The fiscal year of the Company shall be the
calendar year.
Section 3. EXPENSES. All fees and expenses incurred by the Company, or
any Member, associated with the Offers or the Acquisitions or by the Company,
or any Member, associated with the organization of the Company will be paid
directly or reimbursed by the Company out of the Initial Contributions and
any Additional Contributions of the Members; provided, however, that if the
Company fails to complete at least one (1) Acquisition resulting in the
purchase of Units, the expenses incurred by the Company in connection with
all of the Offers and Acquisitions shall be shared by the Members as follows:
50% by Koll and 50% by the other Members on a pro rata basis in proportion
to their respective Ownership Percentages.
Section 4. TAX CHARACTERIZATION AND RETURNS. The Members acknowledge
that the Company will be treated as a "partnership" for United States federal
income tax purposes. All provisions of this Agreement and the Certificate of
Formation are to be construed so as to preserve that tax status. As soon as
reasonably possible after the end of each fiscal year, the Managing Member
shall cause to be delivered to each person who was a Member at any time
during such fiscal year a Form K-1 and such other information, if any, with
respect to the Company as may be necessary for the preparation of each such
Member's federal and state income tax (or information) returns.
Section 5. TAX MATTERS MEMBER. The Managing Member is hereby designated
as the "tax matters partner" as such term is defined in Section 6231(a)(7) of
the Code and the regulations promulgated thereunder, and it shall serve as
such at Company expense with all powers granted to a "tax matters partner"
under the Code. Notwithstanding the previous sentence, the "tax matters
partner" shall not extend the statute of limitations with respect to any item
that would extend the statute of limitations with respect to any Member
without such Member's reasonable consent. The "tax matters partner" shall
furnish each Member with status reports regarding any negotiation between the
Internal Revenue Service and the Company.
ARTICLE IX
MISCELLANEOUS PROVISIONS
------------------------
Section 1. BOOKS AND RECORDS. The Company shall keep correct and
complete books and records of its accounts and transactions and minutes of
the proceedings of its Members and the Managing Member when exercising any of
the powers of the Managing Member. Members and their representatives, and
any other persons or entities as may be admitted as Members, will have
reasonable access to all such books and records at all times and may receive
copies upon reasonable request.
Section 2. MANAGEMENT AND ADMINISTRATION FEES. Koll will provide all
acquisition, management and administrative services for the Company,
including coordinating and implementing the Offers and the Acquisitions,
monitoring and assisting the efforts of the Partnerships in disposing of the
real estate owned by them, bookkeeping and accounting, maintenance of bank
accounts, reporting to Members, monitoring the preparation and filing of tax
returns by a third party, preparation and filing of other reports, and
maintaining corporate books and records. All third party professionals
retained for the purposes of providing such services will be retained by and
their reasonable expenses paid by the Company. The Company shall pay to
Koll, a .75% acquisition fee which shall be calculated on the gross
investment (debt plus equity) made by the Company to acquire the Units,
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including all organizational and operating costs and expenses associated
therewith. Additionally, should Koll provide other services to any of the
Partnerships as a general partner or otherwise, any such fees earned for such
services shall be distributed in accordance with the provisions of Section 3
of Article VI, except for that portion of such fees which covers Koll's
direct cost to provide such services.
Section 3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement.
Section 4. ENTIRE AGREEMENT. This Agreement supersedes any and all
prior or contemporaneous communications or agreements between the parties
hereto concerning the subject matter hereof, whether written or oral.
Section 5. GOVERNING LAW. The validity, interpretation, enforceability
and performance of this Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, without reference to its
conflicts of law rules. To the fullest extent permitted by law, each of the
parties hereto hereby waive any right to trial by jury in any action with
respect to the matters set forth herein. The provisions of this Agreement
cannot be amended, waived or modified unless such amendment, waiver or
modification is in writing and signed by all of the Members. If any
provision of this Agreement shall be held invalid or unenforceable in whole
or in part, that invalidity or unenforceability shall not affect the validity
or enforceability of the balance of this Agreement. Without limiting the
generality of the foregoing, if a provision is held by a court of competent
jurisdiction to be invalid or unenforceable by reason of the length of time
during which it is to remain in effect, such provision nonetheless shall be
enforceable to the maximum extent and for the maximum period of time
determined by such court to be permissible.
Section 6. REMEDIES. It is understood and agreed that monetary damages
would be an inadequate remedy for violation of this Agreement, and that in
the case of an actual or threatened breach by either party or any of its
representatives, the other party shall be entitled to relief by way of
injunction, specific performance or other equitable remedy, without proof of
irrevocable harm and without the need for posting of a bond.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned being all of the Members of the
Company hereby evidence their adoption and ratification of the foregoing
Agreement of the Company by their signatures below.
APOLLO:
AP Lido, L.L.C.
By:
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Name:
Title:
KOLL:
Koll Tender Corporation II
By:
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Name:
Title:
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SCHEDULE A
INITIAL NUMBER OF PERCENTAGE OF
MEMBER CONTRIBUTION SHARES SHARES
------ ------------ --------- -------------
Koll $25,000* 500 5%
Apollo 475,000 9,500 95%
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Total: $500,000 10,000 100
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------------ --------- -------------
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* Koll's Initial Contribution shall consist of (i) $14,341 in cash, and (ii)
the transfer to the Company of the following Units in the Partnerships
currently held in the name of Mr. Ray Wirta, chief executive officer of
Koll:
Number Purchase
Partnership of Units Price
----------- -------- ---------
Fund I 5 $1,275
Fund II 5 3,304
Fund III 20 4,840
Fund IV 40 1,240
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TOTAL: 70 10,659
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AGREEMENT FOR DELIVERY AND USE OF LIST OF LIMITED PARTNERS
This Agreement for Delivery and Use of List of Limited Partners
("AGREEMENT") is entered into as of October __, 1996 by and between T. Rowe
Price Realty Income Fund III Management, Inc., a Maryland corporation (the
"General Partner") Ray Wirta, an individual (the "LIMITED PARTNER") and Koll
Real Estate Services, a Delaware corporation ("KOLL") with respect to a list of
limited partners of T. Rowe Price Realty Income Fund III, America's Sales-
Commission-Free Real Estate Limited Partnership, a Delaware Limited Partnership
(the "PARTNERSHIP").
WHEREAS the General Partner is the general partner of the Partnership, and
the Limited Partner is a limited partner of the Partnership; and
WHEREAS the Limited Partner has requested a list ("LIST") of the names,
addresses, and number of units of limited partnership interest ("UNITS") held by
each of the limited partners in the Partnership; and
WHEREAS the Limited Partner has represented that he is requesting the list
for the purpose of making a tender offer, regardless of whether any others make
such offer, for Units exclusively in concert with Koll and affiliates of Koll
which are controlled by Koll ("KOLL AFFILIATES"); and
WHEREAS General Partner believes that it is necessary to establish
reasonable standards, including certain restrictions to be placed on the use of
the List by Limited Partner, Koll and the Koll Affiliates, in order to protect
the Partnership and the limited partners from harm and preclude interference
with the orderly dissolution and liquidation of the Partnership by the General
Partner as publicly disclosed by the General Partner;
THEREFORE, in consideration of the representations, promises, and covenants
of Limited Partner and Koll as contained herein, General Partner hereby agrees
to deliver the list to Limited Partner on magnetic floppy disk, and Limited
Partner and Koll jointly and severally represent, promise and covenant on behalf
of themselves and their affiliates and the Koll Affiliates that they will use
the List only in accordance with the following:
1. Limited Partner, Koll and the Koll Affiliates (collectively
"OFFERORS") shall utilize the list only for the purpose of making a single
written offer by Offerors, and any amendments thereto, to limited partners
to purchase Units ("TENDER OFFER"), whether such Tender Offer shall
constitute a tender offer or not, and shall solicit each limited partner no
more than once in connection with such Tender Offer. Offerors will keep
the List confidential and will not disclose it to anyone, including any
affiliated or unaffiliated person or entities, other than a professional
mailing house, information agent, or depository in connection with the
Tender Offer. The Tender Offer will be transmitted by Offerors within 30
days after delivery of the List to Limited Partner and Koll.
2. Offerors shall simultaneously copy the General Partner by fax on any
Tender Offer and any amendment thereto.
3. After the expiration of the Tender Offer, Limited Partner shall return
the List to the General Partner and destroy it in a manner which cannot be
retrieved any and all copies thereof and words derived therefrom, whether
in written, electronic, or other form, and
<PAGE>
deliver an affidavit to the General Partner that Offerors have complied
with the provisions of this section 3.
4. Offerors will not make and will not cause to be made more than one
unsolicited telephone call to each Limited Partner in connection with the
Tender Offer, provided that an additional phone call may be made in
connection with any material amendment to the Tender Offer. An unsolicited
telephone call shall be deemed made when Offerors or their agent call a
limited partner and either speak with an individual or leave a message for
the Limited partner.
5. Offerors will not purchase Units which, when taken together with all
other Units beneficially owned by all Offerors, affiliates of Offerors, or
any person or entity participating in the purchasing group (collectively
the "GROUP") cause the members of the Group to be the beneficial owners of
46% or more of the outstanding Units.
6. Any Tender Offer shall include the following disclosure:
A. That the price being offered by Offerors for Units was determined
based on an estimate by Offerors of the current net asset value of the
Units, to which a discount was then applied by Limited Partner.
B. The existence of third-party resale services, the range of prices
paid for Units in secondary market sales for the year preceding the
transmission of the Tender Offer, and a statement as to the source of
such information.
C. The most recent estimated unit value published by the General
Partner prior to the transmission of the Tender Offer.
D. That the General Partner disclosed in its quarterly report to
limited partners for the quarter ended June 30, 1996 a plan of
disposition for the properties owned by the Partnership.
E. The identity of all persons or entities for whose benefit,
directly or indirectly, the Tender Offer is made.
7. In any vote of the limited partners subsequently to the date hereof,
Offerors will vote any and all Units owned by it, directly or indirectly,
pro rata to the vote of all other limited partners.
8. From and at all times after the date of this agreement none of the
Offerors will, either individually or in concert with others, attempt to
remove the General Partner from its position as general partner of the
Partnership, provided that a vote by one or more of Offerors in accordance
with the provisions of section 7 hereof shall not constitute a breach of
this section 8.
9. From and at all times after the date of this agreement none of the
Offerors will act, either individually or in concert with others, to effect
a change in control of the Partnership,
2
<PAGE>
provided that a vote by one or more of Offerors in accordance with the
provisions of section 7 hereof shall not constitute a breach of this
section 9.
10. Offerors will not transfer any interest, direct or indirect, in all or
any of the Units acquired by either of them in the Tender Offer unless the
transferee or transferees agree in writing for the benefit of the
Partnership and the General Partner, in a form reasonably satisfactory to
the Partnership and the General Partner, to abide by and comply with all of
the terms, promises and covenants made by Offerors herein, provided however
that the Offerors may collectively transfer no more than 5% of the Units
and section 10 shall not apply to such transfer. For purposes of the
preceding sentence, the transfer of less than 5% of such units may be made
in one or more transactions as long as all such transfers, when added
together, do not exceed 5%.
11. In the event the transfer of Units presented for transfer within a tax
year of the Partnership could cause the Partnership to be treated as a
"publicly traded partnership" for federal tax purposes, the General Partner
will accept such transfers only after receiving an opinion of reputable
counsel satisfactory to the General Partner that the recognition of such
transfers will not cause the Partnership to be treated as a "publicly
traded partnership" under the Internal Revenue Code of 1986, as amended.
12. This Agreement shall be governed by and construed in accordance with
Delaware law without regard to choice of law rules.
Agreed and accepted.
T. ROWE PRICE REALTY INCOME FUND III MANAGEMENT, INC.
BY: /s/ Lucy Nolin
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TITLE: V.P.
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DATE: 11/1/96
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RAY WIRTA
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KOLL REAL ESTATE SERVICES
BY:
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TITLE:
----------------------------------
DATE:
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<PAGE>
EXHIBIT (C)(3)
[LETTERHEAD]
Via FAX (410) 345-6575
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November 13, 1996
Lucy B. Robins, Esq., Vice President
T. Rowe Price Realty Income Fund I Management, Inc., General Partner of
T. Rowe Price Realty Income Fund I ("RIF I")
T. Rowe Price Realty Income Fund II Management, Inc., General Partner of
T. Rowe Price Realty Income Fund II ("RIF II")
T. Rowe Price Realty Income Fund III Management, Inc., General Partner of
T. Rowe Price Realty Income Fund III ("RIF III")
T. Rowe Price Realty Income Fund IV Management, Inc., General Partner of
T. Rowe Price Realty Income Fund ("RIF IV")
100 East Pratt Street
Baltimore, MD 21202
Dear Ms. Robins:
By your counter-execution below, please let this letter act as consent of the
general partner to the waiver of the application of those certain limited
partnership agreement provisions which require that limited partners, who
elect to sell all or a portion of their Units, be left with no less than a
certain minimum level of Units. The relevant partnership agreement sections
are Section 7.1(C) for RIF I, Section 12.1 for RIF II, Section 12.1 for RIF
III, and Section 12.1 for RIF IV.
Thank you.
Sincerely,
/s/ HAROLD C. HOFER
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Harold C. Hofer
Agreed:
/s/ LUCY B. ROBINS
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Lucy B. Robins, Vice President
