<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Southeast Acquisitions II, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SOUTHEAST ACQUISITIONS II, L.P.
250 KING OF PRUSSIA ROAD
RADNOR, PENNSYLVANIA
19087
July 25, 1997
Dear Limited Partner:
Southeast Acquisitions, Inc., general partner (the "General Partner") of
Southeast Acquisitions II, L.P. (the "Partnership") is soliciting your vote on
two sets of alternative amendments to the Partnership agreement (the
"Alternative Amendments"). The sets of Alternative Amendments would make the
following modifications to the Partnership agreement:
First Alternative Amendments:
- Extend the Partnership until December 31, 2000
- Substitute a new general partner
- Authorize new fees, commissions and rights to sell Partnership
properties for the new general partner
- Modify the Limited Partners' rights to consent to certain sales of
Partnership properties
Second Alternative Amendments:
- Extend the Partnership until December 31, 2000
- Retain the General Partner
- Authorize new fees, commissions and rights to sell Partnership
properties for the General Partner
- Eliminate the Limited Partners' rights to consent to certain sales
of Partnership properties
Although only one of the sets of Alternative Amendments can be adopted, if
neither is adopted, the General Partner would continue to act as general partner
under the current terms of the Partnership Agreement.
The General Partner recommends that you vote for either one of the sets of
Alternative Amendments.
The enclosed Proxy Statement discusses the sets of Alternative Amendments in
further detail. We encourage you to read the Proxy Statement and then vote your
units by filling out the enclosed proxy card and returning it to D.F. King &
Co., Inc. in the enclosed, postage paid, business reply envelope. If you have
any questions concerning the sets of Alternative Amendments, please call the
General Partner at (610) 964-7178.
<PAGE> 3
The enclosed Proxy Statement has been mailed by certified mail to the record
holders of Partnership units. Thank you for your consideration of these
proposals.
Very truly yours,
SOUTHEAST ACQUISITIONS, INC.
General Partner of Southeast Acquisitions II, L.P.
Arthur W. Mullin
President
2
<PAGE> 4
SOUTHEAST ACQUISITIONS II, L.P.
NOTICE OF SPECIAL MEETING OF
THE LIMITED PARTNERS ON SEPTEMBER 3, 1997
To the Limited Partners of Southeast Acquisitions II, L.P.:
A special meeting (the "Special Meeting") of the limited partners (the "Limited
Partners") of Southeast Acquisitions II, L.P. (the "Partnership") will be held
at 301 South Perimeter Park Drive, Suite 100, Nashville, Tennessee 37211 on
Wednesday, September 3, 1997 at 10:00 a.m. Central Daylight Savings Time, or at
any adjournment thereof, to consider and vote upon two sets of alternative
amendments (the "Alternative Amendments") to the Partnership Agreement (the
"Partnership Agreement"). ALTHOUGH ONLY ONE SET OF ALTERNATIVE AMENDMENTS CAN BE
ADOPTED, IF NEITHER IS ADOPTED, THE GENERAL PARTNER WILL CONTINUE TO ACT AS
GENERAL PARTNER UNDER THE CURRENT TERMS OF THE PARTNERSHIP AGREEMENT.
The First Alternative Amendments would:
- Extend the term of the Partnership from its current expiration date of
December 31, 1998 to December 31, 2000;
- Substitute Southern Management Group of Tennessee, LLC, a Tennessee
Limited Liability Company (the "New General Partner") for Southeast
Acquisitions, Inc. (the "General Partner") as the new general partner
of the Partnership;
- Authorize new commissions and new management fees for the New General
Partner;
- Give the New General Partner the exclusive right to sell the
Properties; and
- Modify the Partnership Agreement to require that, except in the
liquidation of the Partnership, a majority in interest of the Limited
Partners must consent to a sale or disposition at one time of 60% or
more of the real estate acreage held by the Partnership as of July 25,
1997 unless the sale or disposition returns to the Limited Partners at
least the original Acquisition Cost of the assets sold or disposed of.
The Second Alternative Amendments would:
- Extend the term of the Partnership from its current expiration date of
December 31, 1998 to December 31, 2000 with Southeast Acquisitions,
Inc. remaining as General Partner;
- Authorize new commissions, payable to the General Partner on the sale
or sales of the Properties, effective as of the date the Second
Alternative Amendments are adopted, and new management fees for the
General Partner, effective following December 31, 1998;
- Give the General Partner the exclusive right to sell the Properties;
and
3
<PAGE> 5
- Delete from the Partnership Agreement the requirement that, unless in a
liquidation or where the net proceeds provide Limited Partners with
distributions equal to the Unpaid Cumulative Return plus their Adjusted
Capital Contributions, a majority in interest of the Limited Partners
must consent to a sale or disposition at one time of all or
substantially all the assets of the Partnership.
YOU MAY VOTE IN FAVOR OF OR AGAINST OR ABSTAIN FROM VOTING WITH RESPECT TO EACH
AMENDMENT CONTAINED IN THE PROPOSED SETS OF ALTERNATIVE AMENDMENTS. HOWEVER, THE
ADOPTION OF ANY AMENDMENT CONTAINED IN A SET OF ALTERNATIVE AMENDMENTS IS
CONDITIONED UPON THE ADOPTION OF ALL OF THE AMENDMENTS WITHIN THAT SET OF
ALTERNATIVE AMENDMENTS.
The accompanying proxy statement (the "Proxy Statement") describes each set of
Alternative Amendments. The Proxy Statement also contains as exhibits copies of
the Partnership Agreement and the proposed sets of Alternative Amendments.
The General Partner recommends that you vote for either one of the sets of
Alternative Amendments.
Only Limited Partners of record as of the close of business on July 25, 1997 are
entitled to notice of, and to vote at, the Special Meeting. Such Limited
Partners may vote at the Special Meeting either in person or by proxy. Even if
you plan to attend the Special Meeting, please complete, sign, date, and return
the accompanying proxy card in the enclosed stamped and self-addressed envelope
so that the proxy holders may vote the Units that you hold as a Limited Partner
pursuant to your instructions. If you attend the Special Meeting, you may revoke
your proxy and vote such Units in person.
Very truly yours,
SOUTHEAST ACQUISITIONS, INC.,
General Partner
July 25, 1997
4
<PAGE> 6
SOUTHEAST ACQUISITIONS II, L.P.
PROXY STATEMENT
SPECIAL MEETING OF THE LIMITED PARTNERS
TO BE HELD ON SEPTEMBER 3, 1997
Southeast Acquisitions II, L.P. (the "Partnership") will hold a special meeting
of its limited partners (the "Limited Partners") at 301 South Perimeter Park
Drive, Suite 100, Nashville, Tennessee 37211 on Wednesday, September 3, 1997, at
10:00 a.m. Central Daylight Savings Time, or at any adjournment thereof (the
"Special Meeting") to consider and vote upon two sets of alternative amendments
(the "Alternative Amendments") to the Partnership Agreement (the "Partnership
Agreement"). ALTHOUGH ONLY ONE SET OF ALTERNATIVE AMENDMENTS CAN BE ADOPTED, IF
NEITHER IS ADOPTED, THE GENERAL PARTNER WILL CONTINUE TO ACT AS GENERAL PARTNER
UNDER THE CURRENT TERMS OF THE PARTNERSHIP AGREEMENT.
The first set of Alternative Amendments (the "First Alternative Amendments")
would:
- Extend the term of the Partnership from its current expiration date
of December 31, 1998 to December 31, 2000;
- Substitute Southern Management Group of Tennessee, LLC, a Tennessee
Limited Liability Company (the "New General Partner") for Southeast
Acquisitions, Inc. (the "General Partner") as the new general partner
of the Partnership;
- Authorize new commissions, payable to the New General Partner or an
Affiliate on the sale or sales of the Properties, and new management
fees for the New General Partner, both to be effective as of the date
the First Alternative Amendments are adopted and the New General
Partner signs the Partnership Agreement;
- Give the New General Partner the exclusive right to sell the
Properties; and
- Modify the Partnership Agreement to require that a majority in interest
of the Limited Partners must consent to a sale or disposition at one
time of 60% or more of the real estate acreage held by the Partnership
as of July 25, 1997 unless in connection with a liquidation of the
Partnership pursuant to the Partnership Agreement or in the event that
the net proceeds of such sale, when distributed in accordance with the
Partnership Agreement, will be sufficient to provide the Limited
Partners with distributions equal to the Acquisition Cost of the assets
sold.
The second set of Alternative Amendments (the "Second Alternative Amendments")
would:
- Extend the term of the Partnership from its current expiration date of
December 31, 1998 to December 31, 2000, with Southeast Acquisitions,
Inc. remaining as General Partner;
5
<PAGE> 7
- Authorize new commissions, payable to the General Partner or an
Affiliate on the sale or sales of the Properties, effective as of the
date the Second Alternative Amendments are adopted and new management
fees for the General Partner, effective following December 31, 1998;
- Give the General Partner the exclusive right to sell the Properties;
and
- Delete from the Partnership Agreement the requirement that a majority
in interest of the Limited Partners must consent to a sale or
disposition at one time of all or substantially all the assets of the
Partnership unless in connection with a liquidation of the Partnership
under the Partnership Agreement or in the event that the net proceeds
of such sale, when distributed in accordance with the Partnership
Agreement, will be sufficient to provide the Limited Partners with
distributions equal to the Unpaid Cumulative Return plus their Adjusted
Capital Contributions.
RISK FACTORS
Adoption of either set of Alternative Amendments as well as failure to adopt
either set of Alternative Amendments involves certain risks including but not
limited to:
First Alternative Amendments:
- Possible decrease in value of Properties if Partnership term extended.
- No assurance of improved return with New General Partner.
- Possible sales of Properties at low price without consent of the
Limited Partners.
Second Alternative Amendments:
- Possible decrease in value of Properties if Partnership term extended.
- No assurance of improved return continuing with General Partner.
- Possible sales of Properties at low price without consent of the
Limited Partners.
Neither Set of Alternative Amendments Adopted:
- Partnership Properties may be liquidated following December 31, 1998 at
below amount which would provide Unpaid Cumulative Return and Adjusted
Capital Contributions.
For a more detailed discussion of these and other risk factors see "RISK
FACTORS" at page 28 below.
The Partnership will mail this Proxy Statement (this "Proxy Statement") on or
about July 25, 1997
YOU MAY VOTE IN FAVOR OF OR AGAINST OR ABSTAIN FROM VOTING WITH RESPECT TO EACH
AMENDMENT CONTAINED IN THE PROPOSED SETS OF ALTERNATIVE AMENDMENTS. HOWEVER, THE
ADOPTION OF ANY AMENDMENT CONTAINED IN A SET OF ALTERNATIVE AMENDMENTS IS
CONDITIONED UPON
6
<PAGE> 8
THE ADOPTION OF ALL OF THE AMENDMENTS WITHIN THAT SET OF ALTERNATIVE
AMENDMENTS.
IN ORDER TO BE ADOPTED, ALL OF THE AMENDMENTS CONTAINED IN A SET OF ALTERNATIVE
AMENDMENTS MUST RECEIVE AT LEAST 50% OF THE VOTES OF LIMITED PARTNERSHIP UNITS
ELIGIBLE TO VOTE.
IN THE EVENT BOTH SETS OF ALTERNATIVE AMENDMENTS RECEIVES IN EXCESS OF 50% OF
THE VOTES OF LIMITED PARTNERSHIP UNITS ELIGIBLE TO VOTE, THE SET OF ALTERNATIVE
AMENDMENTS RECEIVING THE MOST VOTES IN EXCESS OF 50% WILL BE ADOPTED.
IN THE EVENT OF AN EQUAL NUMBER OF VOTES BEING CAST WHICH ARE SUFFICIENT FOR THE
ADOPTION OF BOTH THE FIRST ALTERNATIVE AMENDMENTS AND THE SECOND ALTERNATIVE
AMENDMENTS, THE GENERAL PARTNER WILL DETERMINE A METHOD OF RANDOM SELECTION AND
SELECT THE SET OF ALTERNATIVE AMENDMENTS TO BE ADOPTED PURSUANT THERETO.
IF YOU RETURN A SIGNED PROXY CARD WITHOUT INDICATING HOW YOU WISH TO VOTE ON
EITHER THE FIRST ALTERNATIVE AMENDMENTS OR THE SECOND ALTERNATIVE AMENDMENTS,
YOUR VOTE WILL BE COUNTED AS A VOTE FOR BOTH SETS OF ALTERNATIVE AMENDMENTS.
IF NEITHER THE FIRST ALTERNATIVE AMENDMENTS NOR THE SECOND ALTERNATIVE
AMENDMENTS RECEIVES THE AFFIRMATIVE VOTE OF A MAJORITY IN INTEREST OF THE UNITS,
THE GENERAL PARTNER WILL CONTINUE TO ACT AS GENERAL PARTNER OF THE PARTNERSHIP
IN ACCORDANCE WITH THE PARTNERSHIP AGREEMENT.
THE BOARD OF DIRECTORS OF THE GENERAL PARTNER HEREBY SOLICITS YOUR PROXY ON
BEHALF OF THE PARTNERSHIP FOR USE AT THE SPECIAL MEETING.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR EITHER ONE OF THE SETS OF
ALTERNATIVE AMENDMENTS.
THE PARTNERSHIP AGREEMENT DOES NOT PROVIDE FOR CONTRACTUAL APPRAISAL RIGHTS IN
CONNECTION WITH THE ALTERNATIVE AMENDMENTS. THEREFORE, IN THE EVENT ONE OF THE
SETS OF ALTERNATIVE AMENDMENTS IS ADOPTED, LIMITED PARTNERS WHO OPPOSED THE
ADOPTION OF SUCH ALTERNATIVE AMENDMENTS WILL NOT HAVE THE RIGHT TO DISSENT AND
DEMAND PAYMENT IN CASH FOR THE FAIR VALUE OF THEIR UNITS.
Only Limited Partners of record as of the close of business on July 25, 1997
(the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting. Such Limited Partners may vote at the Special Meeting either in person
or by proxy. Even if you plan to attend the Special Meeting, which will be held
at 301 South Perimeter Park Drive, Suite 100, Nashville, Tennessee
7
<PAGE> 9
37211, you should use the proxy card (the "Proxy Card") accompanying this proxy
statement to instruct the proxy holders concerning how to vote the Units that
you hold as a Limited Partner.
The Partnership has engaged D.F. King & Co., Inc., 77 Water Street, New York, NY
10005, Telephone No. (800) 829-6551; Fax No. (212) 809-8839 (the "Information
Agent") to distribute the attached letter from the General Partner, the attached
notice of the Special Meeting, this Proxy Statement, and the Proxy Card to the
Limited Partners and other interested persons. To request additional copies of
these documents, please contact the Information Agent at the address set forth
above. Whether or not you plan to attend the Special Meeting, it is important
that you return your completed Proxy Card to the Information Agent at the
address set forth above. If you have any questions concerning these proposals,
please call the General Partner at (610) 964-7178.
8
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY.................................................................................. 10
The Alternative Amendments ............................................ 10
Risk Factors .......................................................... 11
Conflicts of Interest ................................................. 13
Reasons for and Benefits of Each Set of Alternative Amendments ........ 14
Differences Between Each Set of Alternative Amendments ................ 16
Comparison of Fees and Commissions Under Each Set of
Alternative Amendments .............................................. 17
Comparison of Plans of New General Partner and General Partner ........ 18
History of the Partnership ............................................ 19
Purchase of Properties ................................................ 19
The General Partner ................................................... 19
The New General Partner ............................................... 22
The Properties ........................................................ 23
Voting ................................................................ 25
RISK FACTORS............................................................................. 28
FIRST ALTERNATIVE AMENDMENTS ......................................................... 28
Risk of Decrease in Value of Properties if Partnership Term Extended .. 28
No Assurance of Improved Return ....................................... 28
Possible Sales of Properties at Low Price Without Consent of
Limited Partners if Consent Requirements Modified ................... 28
Possible Death or Disability of Principal Member of
New General Partner ................................................. 29
Minimal Capitalization of New General Partner ......................... 29
New General Partner's Lack of Experience in Public
Real Estate Partnerships ............................................ 29
SECOND ALTERNATIVE AMENDMENTS......................................................... 30
Risk of Decrease in Value of Properties if Partnership Term Extended .. 30
No Assurance of Improved Return ....................................... 30
Limited Capitalization of General Partner ............................. 30
Possible Sales of Properties at Low Price Without Consent of
Limited Partners if Consent Requirements Eliminated ................. 30
Risk in Rehabilitation of Ultimate Parent of General Partner .......... 31
NEITHER SET OF ALTERNATIVE AMENDMENTS ADOPTED ........................................ 31
Risk of Liquidation of Properties at Low Price ........................ 31
Risk in Rehabilitation of Ultimate Parent of General Partners ......... 31
CONFLICTS OF INTEREST ................................................................... 31
FIRST ALTERNATIVE AMENDMENTS ......................................................... 31
Timing of Sale to Obtain Commission ................................... 31
Timing of Sale to Obtain Distribution ................................. 31
Broker Participation .................................................. 31
SECOND ALTERNATIVE AMENDMENTS ........................................................ 32
Timing of Sale to Obtain Commission ................................... 32
Timing of Sale to Obtain Distribution ................................. 32
Broker Participation .................................................. 32
HISTORY OF THE PARTNERSHIP .............................................................. 32
Public Offering ....................................................... 32
Purchase of Properties ................................................ 33
Distributions/Annual Preferred Return ................................. 33
Investment Objectives ................................................. 35
General Partner's Right to Sell Properties; Reserves .................. 36
Rights of the Limited Partners on Dissolution ......................... 36
THE GENERAL PARTNER ..................................................................... 37
Background ............................................................ 37
Directors and Officers ................................................ 39
Former Management/Consulting Relationship ............................. 40
Current Management .................................................... 40
Plans of Current Management if Second Alternative Amendments
are Approved ........................................................ 42
Plans of Current Management if Neither Set of Alternative
Amendments is Approved .............................................. 42
THE PROPERTIES .......................................................................... 43
Properties ............................................................ 43
1996-1997 Sales and Distributions ..................................... 43
Simpsonville, South Carolina .......................................... 43
Henry County, Georgia ................................................. 45
Nashville, Tennessee .................................................. 47
THE ALTERNATIVE AMENDMENTS .............................................................. 48
Reasons for and Benefits of Each Set of Alternative Amendments ........ 48
Benefits of Adopting First Alternative Amendments ..................... 49
Benefits of Adopting Second Alternative Amendments .................... 50
Differences Between the Alternative Amendments ........................ 51
FIRST ALTERNATIVE AMENDMENTS ......................................................... 52
Substitution of New General Partner ................................... 52
Extension of Partnership Term ......................................... 56
Authorization of Fees and Commissions for New General Partner ......... 56
Exclusive Right to Sell the Properties ................................ 58
Modification of Requirement that Limited Partners Consent to Sale
of All or Substantially All of Assets of the Partnership ............ 58
SECOND ALTERNATIVE AMENDMENTS ........................................................ 59
Extension of Partnership Term ......................................... 59
Authorization of Fees and Commissions for General Partner ............. 60
Exclusive Right to Sell the Properties ................................ 62
Elimination of Requirement that Limited Partners Consent to Sale
of All or Substantially All of Assets of the Partnership ............ 62
FEDERAL TAX CONSEQUENCES; LEGAL OPINION ................................................. 62
ELIGIBLE UNITS .......................................................................... 62
VOTING .................................................................................. 63
Record Date ........................................................... 63
Vote Conditioned on Adoption of All of Amendments in Either
the First or Second Alternative Amendments .......................... 63
Required Vote ......................................................... 63
Equal Number of Votes Cast ............................................ 63
No Indication of Vote ................................................. 63
If Neither Alternative Amendment Adopted .............................. 63
Abstentions/Broker Non-Votes .......................................... 64
Appraisal Rights ...................................................... 64
Proxies ............................................................... 64
Revocation of Proxies ................................................. 64
Information Agent ....................................................................... 65
Solicitations by the General Partner .................................................... 65
OWNERSHIP OF UNITS ...................................................................... 65
EXPERTS ................................................................................. 65
AVAILABLE INFORMATION ................................................................... 66
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......................................... 66
APPENDIX I: GLOSSARY OF DEFINED TERMS ................................................... 68
EXHIBIT A: PARTNERSHIP AGREEMENT ........................................................ A-1
EXHIBIT B: ALTERNATIVE AMENDMENTS ....................................................... B-1
EXHIBIT C: AGREEMENT BETWEEN SOUTHERN MANAGEMENT GROUP OF TENNESSEE,
R.W. SORENSON AND THE PARTNERSHIP ............................................ C-1
EXHIBIT D: LEGAL OPINION ................................................................ D-1
</TABLE>
9
<PAGE> 11
SUMMARY
THE FOLLOWING SUMMARY OF MATERIAL TERMS OF THIS PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE INFORMATION APPEARING ELSEWHERE IN THIS PROXY
STATEMENT.
THE ALTERNATIVE AMENDMENTS
A special meeting (the "Special Meeting") of the limited partners (the "Limited
Partners") of Southeast Acquisitions II, L.P. (the "Partnership") will be held
at 301 South Perimeter Park Drive, Suite 100, Nashville, Tennessee 37211 on
Wednesday, September 3, 1997 at 10:00 a.m., Central Daylight Savings Time, or at
any adjournment thereof, to consider and vote upon two sets of alternative
amendments (the "Alternative Amendments") to the Partnership Agreement (the
"Partnership Agreement"). ALTHOUGH ONLY ONE SET OF ALTERNATIVE AMENDMENTS CAN BE
ADOPTED, IF NEITHER IS ADOPTED, THE GENERAL PARTNER WILL CONTINUE TO ACT AS
GENERAL PARTNER UNDER THE CURRENT TERMS OF THE PARTNERSHIP AGREEMENT.
FIRST ALTERNATIVE AMENDMENTS
The first set of Alternative Amendments (the "First Alternative Amendments")
would:
- Extend the term of the Partnership from its current expiration date of
December 31, 1998 to December 31, 2000;
- Substitute Southern Management Group of Tennessee, LLC, a Tennessee
Limited Liability Company (the "New General Partner") for Southeast
Acquisitions, Inc. (the "General Partner") as the new general partner
of the Partnership;
- Authorize new commissions and new management fees for the New General
Partner;
- Give the New General Partner the exclusive right to sell the
Properties; and
- Modify the Partnership Agreement to require that, except in the
liquidation of the Partnership, a majority in interest of Limited
Partners must consent to a sale or disposition at one time of 60% or
more of the real estate acreage held by the Partnership as of July 25,
1997 unless the sale or disposition returns to the Limited Partners at
least the original Acquisition Cost of the assets sold or disposed of.
SECOND ALTERNATIVE AMENDMENTS
The second set of Alternative Amendments (the "Second Alternative Amendments")
would:
10
<PAGE> 12
- Extend the term of the Partnership from its current expiration date of
December 31, 1998 to December 31, 2000 with Southeast Acquisitions,
Inc. remaining as General Partner;
- Authorize new commissions, payable to the General Partner on the sale
or sales of the Property, effective as of the date the Second
Alternative Amendments are adopted, and new management fees for the
General Partner, effective following December 31, 1998;
- Give the General Partner the exclusive right to sell the Properties;
and
- Delete from the Partnership Agreement the requirement that, under
certain circumstances, a majority in interest of the Limited Partners
must consent to a sale or disposition at one time of all or
substantially all the assets of the Partnership.
RISK FACTORS
Adoption of either set of Alternative Amendments as well as the failure to
adopt either set of Alternative Amendments involves certain risks including
the following:
FIRST ALTERNATIVE AMENDMENTS
- POSSIBLE DECREASE IN VALUE OF THE PROPERTIES IF THE PARTNERSHIP TERM IS
EXTENDED.
Based on appraisals performed in 1996 and 1997 (See "THE PROPERTIES
- Appraisals" below), the estimated value of the Properties indicate that
it is unlikely that any sale of the Properties will result in a net
sales price which would result in a return to the Limited Partners
equal to the Unpaid Cumulative Return plus their Adjusted Capital
Contributions. It is possible that the value of the Properties may
decline over the proposed extended Partnership term.
- NO ASSURANCE OF IMPROVED RETURN.
There is no assurance that the New General Partner will be able to
achieve a better return during the proposed new term. Any return may be
negatively impacted by the cost of any improvements to the Properties,
new fees and any possible decline of the Properties' value during the
proposed extended Partnership term.
- POSSIBLE SALES OF PROPERTIES AT LOW PRICE WITHOUT CONSENT OF LIMITED
PARTNERS.
Under the proposed modification of the Limited Partners' rights to
consent to sales of all or substantially all of the assets of the
Partnership in a single sale, the New General Partner will have no
restrictions on the sale price that it may obtain for parcels of the
Property amounting to less than 60% of the acreage held by the
Partnership as of July 25, 1997 other than pursuant to its general
fiduciary duties. This could result in sales, without Limited Partners'
consent, at below the most recent appraised value of the Properties.
11
<PAGE> 13
- POSSIBLE DEATH OR DISABILITY OF PRINCIPAL MEMBER OF NEW GENERAL
PARTNER.
Mr. Sorenson, the individual member of the New General Partner, is
71 years old. He is expected to play a key role in the marketing and
sale of the Properties. In the event of his death or disability, the
Partnership would have to rely on employees and other members of the
New General Partner who individually are not as experienced as Mr.
Sorenson.
- MINIMAL CAPITALIZATION OF THE NEW GENERAL PARTNER.
The New General Partner will have minimal capitalization and may not
have sufficient assets to satisfy any future claims brought against it.
- NEW GENERAL PARTNER'S LACK OF EXPERIENCE IN PUBLIC REAL ESTATE
PARTNERSHIPS.
Although management of the New General Partner has considerable
experience in real estate matters, including private partnerships, none
has any experience in managing public real estate limited partnerships.
See "RISK FACTORS - First Alternative Amendments" below at p.28.
SECOND ALTERNATIVE AMENDMENTS
- POSSIBLE DECREASE IN VALUE OF THE PROPERTIES IF THE PARTNERSHIP TERM IS
EXTENDED.
Based on appraisals performed in 1996 and 1997 (See "THE PROPERTIES
- Appraisals" below), the estimated value of the Properties indicate
that it is unlikely that any sale of the Properties will result in a
net sales price which would result in a return to the Limited Partners
equal to the Unpaid Cumulative Return plus their Adjusted Capital
Contributions. It is possible that the value of the Properties may
decline over the proposed extended Partnership term.
- NO ASSURANCE OF IMPROVED RETURN.
There is no assurance that the General Partner will be able to
achieve a better return over the proposed new term. Any return may be
negatively impacted by the cost of any improvements to the Properties,
new fees and any possible decline of the Properties' value over the
proposed extended Partnership term.
- POSSIBLE SALES OF PROPERTIES AT A LOW PRICE WITHOUT CONSENT OF LIMITED
PARTNERS.
Eliminating any rights the Limited Partners have to consent to sales
of all or substantially all of the assets of the Partnership could
result in sales of the Properties at below its most recent appraised
value.
12
<PAGE> 14
- LIMITED CAPITALIZATION OF GENERAL PARTNER
The General Partner has limited capitalization and may not have
sufficient assets to satisfy any future claims brought against it.
- RISK IN REHABILITATION OF ULTIMATE PARENT OF GENERAL PARTNER
The ultimate parent company of the General Partner is in a state
directed Rehabilitation. It is possible that, pursuant to the proposed
Rehabilitation plan, a non affiliated investor would reduce or
reorganize management of the General Partner.
NEITHER SET OF ALTERNATIVE AMENDMENTS ADOPTED
- RISK OF LIQUIDATION OF PROPERTIES AT LOW PRICE
If the Properties are not sold prior to the end of the
Partnership term on December 31, 1998, it is possible that the
Properties would have to be liquidated at an amount which would
not return to the Limited Partners their Unpaid Cumulative Return
plus their Adjusted Capital Contributions.
- RISK IN REHABILITATION OF ULTIMATE GENERAL PARTNER
The ultimate parent company of the General Partner is in a state
directed Rehabilitation. It is possible that, pursuant to the proposed
Rehabilitation plan, a non affiliated investor would reduce or
reorganize management of the General Partner.
See "RISK FACTORS - Second Alternative Amendments" below at p.30.
CONFLICTS OF INTEREST
Each set of Alternative Amendments presents certain conflicts of interest for
the New General Partner and General Partner. The following summarizes the
conflicts of interest inherent in each set of Alternative Amendments.
FIRST ALTERNATIVE AMENDMENTS
- TIMING OF SALE TO OBTAIN COMMISSION
It is possible that the New General Partner would be confronted with
a conflict of interest in a desire to realize a commission upon an
immediate sale of the Properties rather than holding them for a more
extended period if it were in the best interests of the Partnership.
- TIMING OF SALE TO OBTAIN DISTRIBUTION
The New General Partner might wish to delay an immediate sale of the
Properties which might be in the Partnership's best interests if the
sales proceeds at the time would not be sufficient to result in any
distribution to the New General Partner under the Partnership
Agreement.
- BROKER PARTICIPATION
The New General Partner's exclusive agency and participation in
future commissions upon sale of the Properties could have an
adverse effect on the New General Partner's willingness to retain
local brokers and upon the local brokerage community's willingness to
participate in the sale of the Properties.
See "CONFLICTS OF INTEREST - First Alternative Amendments" below.
13
<PAGE> 15
SECOND ALTERNATIVE AMENDMENTS
- TIMING OF SALE TO OBTAIN COMMISSION
It is possible that the General Partner would be confronted with a
conflict of interest in a desire to realize a commission upon an
immediate sale of the Properties rather than holding them for a more
extended period if it were in the best interests of the Partnership.
- TIMING OF SALE TO OBTAIN DISTRIBUTION
The General Partner might wish to delay an immediate sale of the
Properties if the sales proceeds at the time would not be sufficient to
result in any distribution to the General Partner.
- BROKER PARTICIPATION
The General Partner's exclusive agency and participation in future
commissions upon sale of the Properties could have an adverse
effect on the General Partner's willingness to retain local brokers and
upon the local brokerage community's willingness to participate in the
sale of the Properties.
See "CONFLICTS OF INTEREST - Second Alternative Amendments" below.
REASONS FOR AND BENEFITS OF EACH SET OF ALTERNATIVE AMENDMENTS
As part of its fiduciary responsibility to protect the assets of the Partnership
and further the business objectives of the Partnership, the General Partner is
offering the Limited Partners the opportunity to vote to extend the term of the
Partnership pursuant to either of the two sets of Alternative Amendments.
The General Partner believes that the current market value of the Properties is
below an amount which would return to the Limited Partners the Unpaid Cumulative
Return plus their Adjusted Capital Contributions. This assessment is based upon
appraisals performed in 1996 and 1997 (See "THE PROPERTIES - Appraisals" below)
and the General Partner's inspection of the Properties and review of the
assumptions and conclusions of the appraisals with local real estate
professionals.
The main purpose for and benefit of either set of Alternative Amendments is to
provide the Partnership with an extended opportunity to improve the return on
the Limited Partners' investment, as the Partnership's original business
objectives will, in all likelihood, not be met within the existing term or in a
liquidation of the Partnership assets thereafter. The General Partner believes
that it is in the Partnership's best interests to extend the term of the
Partnership pursuant to either sets of Alternative Amendments, even though there
is no assurance that the return to the Limited Partners will be improved by
extending the term.
14
<PAGE> 16
The General Partner decided to offer the Limited Partners an alternative to the
General Partner continuing for the extended term in response to requests by a
few Limited Partners for a new general partner following the conclusion of Ms.
Deborah Dillon's involvement with the Partnership (See "THE GENERAL PARTNER -
Consulting Relationship" below) and expressions of concern by other Limited
Partners as to the impact of Fidelity Mutual's ownership interest in the General
Partner (See "THE GENERAL PARTNER-Background" below).
BENEFITS OF ADOPTING FIRST ALTERNATIVE AMENDMENTS
- EXTENDED TIME TO REALIZE PARTNERSHIP'S INVESTMENT OBJECTIVES.
Under the First Alternative Amendments, the Partnership term would
be extended by 2 years, which would provide the New General Partner
additional time to improve the return on the Limited Partners'
investment, as the Properties are currently valued at an amount which
indicates that it is unlikely that any sale of the Properties will
result in a net sales price which would result in a return to the
Limited Partners equal to the Unpaid Cumulative Return plus their
Adjusted Capital Contributions. However, there is no assurance that
purchasers will be found or that the Partnership will be able to
improve the return to the Limited Partners within such extended time
period (See "RISK FACTORS - First Alternative Amendments" below).
- NEW MANAGEMENT.
The New General Partner presents an opportunity to elect new
management with considerable experience in the Southeastern United
States real estate market for those Limited Partners who wish to extend
the term of the Partnership with a general partner unaffiliated with
Fidelity Mutual. For the relationship between Fidelity Mutual and the
General Partner (See "THE GENERAL PARTNER Background" below).
- ABILITY TO ACT QUICKLY ON PROSPECTIVE SALES.
In the case of the First Alternative Amendments, modifying the
requirement that a majority in interest of the Limited Partners consent
to a sale of all or substantially all the assets of the Partnership is
designed to facilitate potential sales of all or a portion of the
Property which could be jeopardized as a result of the time and
complexity involved in obtaining Limited Partners' consent to the
transaction.
See "THE ALTERNATIVE AMENDMENTS - Benefits of Adopting the First
Alternative Amendments" below.
BENEFITS OF ADOPTING SECOND ALTERNATIVE AMENDMENTS
- EXTENDED TIME TO REALIZE PARTNERSHIP'S INVESTMENT OBJECTIVES.
Under the Second Alternative Amendments, the Partnership term would
be extended by 2 years, which would provide the General Partner
additional time to
15
<PAGE> 17
improve the return on the Limited Partners' investment, as the
Properties are currently valued at an amount which indicates that it is
unlikely that any sale of the Properties will result in a net sales
price which would result in a return to the Limited Partners equal to
the Unpaid Cumulative Return plus their Adjusted Capital Contributions.
However, there is no assurance that purchasers will be found or that
the Partnership will be able to improve the return to the Limited
Partners within such extended time period (See "RISK FACTORS - Second
Alternative Amendments" below).
- CONTINUITY OF MANAGEMENT
Under the Second Alternative Amendments, the General Partner is
willing to offer the Limited Partners the option of it continuing as
the General Partner for the same extended term as proposed for the New
General Partner and on similar terms and conditions if the Limited
Partners decide they wish to extend the term of the Partnership but
retain current management. In addition, new fees authorized by the
Second Alternative Amendments would not be payable to the General
Partner until after the expiration of the original Partnership term on
December 31, 1998.
- ABILITY TO ACT QUICKLY ON PROSPECTIVE SALES.
In the case of the Second Alternative Amendments, eliminating the
requirement that a majority in interest of the Limited Partners consent
to a sale of all or substantially all the assets of the Partnership is
designed to facilitate potential sales of all or a portion of the
Properties which could be jeopardized as a result of the time and
complexity involved in obtaining Limited Partners' consent to the
transaction.
See "THE ALTERNATIVE AMENDMENTS - Benefits of Adopting the Second
Alternative Amendments" below.
DIFFERENCES BETWEEN EACH SET OF ALTERNATIVE AMENDMENTS
The terms of the First Alternative Amendments and the Second
Alternative Amendments are similar, with three principal exceptions:
- DIFFERENT GENERAL PARTNERS
Under the First Alternative Amendments, the New General Partner
would be substituted for the General Partner for the new term
of the Partnership Agreement, while under the Second Alternative
Amendments, the General Partner would continue in that
capacity for the new term.
- TIMING OF FEES
Under the First Alternative Amendments, management fees for the New
General Partner would commence as of the adoption of the First
Alternative Amendments, while the Second Alternative Amendments only
permit the current General Partner to begin receiving such fees
following the expiration of the current term of the Partnership
Agreement on December 31, 1998.
16
<PAGE> 18
- MODIFICATION VERSUS ELIMINATION OF LIMITED PARTNERS' CONSENT
Under the First Alternative Amendments the requirement that a
majority in interest of the Limited Partners consent to a sale of all
or substantially all the assets of the Partnership under certain
circumstances would be modified to only require such consent if 60% or
more of the real estate acreage of the Partnership as of July 25, 1997
is sold at one time at a price which would fail to return to the
Limited Partners the Acquisition Cost of the assets sold, while under
the Second Alternative Amendments, the requirement that Limited
Partners consent to sales of all or substantially all the assets of the
Partnership would be eliminated entirely.
COMPARISON OF FEES AND COMMISSIONS UNDER EACH SET OF ALTERNATIVE AMENDMENTS.
The following tables set forth a comparison of the commissions and management
fees to which the General Partner is entitled under the current Partnership
Agreement, the commissions and management fees to which the New General Partner
would be entitled under the First Alternative Amendments and the commissions and
management fees to which the General Partner would be entitled under the Second
Alternative Amendments.
COMMISSIONS AND MANAGEMENT FEES PAID TO GENERAL PARTNER
UNDER PARTNERSHIP AGREEMENT TERMINATING DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR AMOUNT OF COMMISSION TOTAL COMMISSION MANAGEMENT FEE TOTAL MANAGEMENT
FEE PAID
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1987-1998 up to 50% of the competitive real None to date; future $18,753/ annum $150,021.00
estate commission not to exceed commissions depend (maximum authorized
3%; Total compensation paid to all upon sale price of fees)
fees) not to exceed 10% contract Properties
price of Property; if compensation
to all exceeds 6% contract price
then General Partner and Affiliates
receive no compensation.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 19
PROPOSED COMMISSIONS AND MANAGEMENT FEES TO BE PAID TO NEW GENERAL PARTNER
UNDER FIRST ALTERNATIVE AMENDMENTS
<TABLE>
<CAPTION>
YEAR AMOUNT OF COMMISSION TOTAL COMMISSION MANAGEMENT FEE TOTAL POSSIBLE MANAGEMENT
FEE
<S> <C> <C> <C> <C>
1997 Commission equal to competitive Depends on sale $6,194
real estate commission or disposition fee, price of Property
the commission paid to all Persons
including New General Partner not to
exceed 10% of contract price for Property
- --------------------------------------------------------------------------------------------------------------------------------
1998 Same as 1997 Same $19,000.00/ annum *
- --------------------------------------------------------------------------------------------------------------------------------
1999 Same as 1997 Same $19,000.00/ annum *
- --------------------------------------------------------------------------------------------------------------------------------
2000 Same as 1997 Same $19,000.00/ annum *
- --------------------------------------------------------------------------------------------------------------------------------
1997-2000 $63,194 **
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
* or pro rata portion of fee if the Properties are sold before the end of the
year.
** or lesser amount, depending on a pro rata reduction if the Property is sold
before 12/31/00
PROPOSED COMMISSIONS AND MANAGEMENT FEES TO BE PAID TO GENERAL PARTNER
UNDER SECOND ALTERNATIVE AMENDMENTS
<TABLE>
<CAPTION>
YEAR AMOUNT OF COMMISSION TOTAL COMMISSION MANAGEMENT FEE TOTAL POSSIBLE MANAGEMENT
FEE
<S> <C> <C> <C> <C>
1997 Commission equal to competitive Depends on sale none
real estate commission or price of Property
disposition fee, the commission
paid to all Persons including
General Partner not to exceed 10%
of contract price for Property
- --------------------------------------------------------------------------------------------------------------------------------
1998 Same as 1997 Same none
- --------------------------------------------------------------------------------------------------------------------------------
1999 Same as 1997 Same $19,000/ annum *
- --------------------------------------------------------------------------------------------------------------------------------
2000 Same as 1997 Same $19,000/ annum *
- --------------------------------------------------------------------------------------------------------------------------------
1997-2000 $38,000 **
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
* or pro rata portion of fee if the Properties are sold before the end of the
year.
** or lesser amount, depending on a pro rata reduction if the Property is sold
before 12/31/00
COMPARISON OF PLANS OF NEW GENERAL PARTNER AND GENERAL PARTNER
The New General Partner and the General Partner have different plans with
respect to the marketing and sale of the Properties.
THE FOLLOWING DESCRIPTION OF THE NEW GENERAL PARTNER'S AND THE GENERAL PARTNER'S
INTENTIONS WITH RESPECT TO MANAGEMENT AND MARKETING THE PROPERTIES REPRESENTS
THEIR CURRENT PLANS WITH RESPECT THERETO. HOWEVER, THERE IS NO ASSURANCE THAT
THESE PLANS WILL BE IMPLEMENTED OR THAT, IF IMPLEMENTED, THEY WILL RESULT IN A
SALE OR SALES OF THE PROPERTIES.
18
<PAGE> 20
NEW GENERAL PARTNER'S PLANS IF FIRST ALTERNATIVE AMENDMENTS ARE ADOPTED
Simpsonville, South Carolina. The New General Partner will undertake an
evaluation to determine the advisability of building an internal road through
the remaining property, beginning along the frontage road near the Walmart tract
and ending along the access road behind the Wachovia Bank site. This evaluation
will determine whether the small parcels created along both sides of the new
road would continue to demand prices in excess of $110,000 per acre which would
more than justify the cost to build such a road. The Simpsonville market remains
very strong and, other than an analysis of possible road improvements, no
substantial change in course is expected to be undertaken.
Nashville, Tennessee. Using SVC's engineers, architects, and other site
specialists, all property on both sides of the interstate will undergo a
development evaluation which considers site characteristics (road frontage, soil
and rock conditions, topography, and other factors) to formulate possible
development scenarios, utility and road access plans, etc. Simultaneously,
SVC will be asked to undertake a detailed market evaluation to determine a
recommended utilization plan for the Property assuming completion of the Expo
center. While these activities are in process, there is likely to be sales
interest in small frontage sites which would be recommended if it did not
adversely impact the total plan.
Henry County, Georgia. The Henry County acreage is located in two non-contiguous
parcels. Before specific marketing plans can be created for the two parcels, the
New General Partner will evaluate utility and road access, floodplain (which
affects both parcels) and ascertain the highest and greatest residential density
possible for the parcels (not all parcels have been zoned). Only after the New
General Partner has determined the total number of housing units per usable acre
on each of the parcels will a market study be undertaken since residential land
is valued by the number of housing units it will yield. The assistance of area
brokers and agents will be utilized to market this Property.
THE GENERAL PARTNER'S PLANS IF SECOND ALTERNATIVE AMENDMENTS ARE ADOPTED
If the Second Alternative Amendments are adopted, current management of
the General Partner will continue its strategy of marketing smaller parcels of
each of the Properties.
GENERAL PARTNER'S PLANS IF NEITHER SET OF AMENDMENTS IS ADOPTED
If neither set of Alternative Amendments is adopted, the General
Partner will implement the marketing plan set forth above as if the Second
Alternative Amendments were adopted, and then upon the expiration of the
Partnership term on December 31, 1998, commence a liquidation of the
Properties, in accordance with the Partnership Agreement.
HISTORY OF THE PARTNERSHIP
The Partnership was formed on December 14, 1987, as a Delaware limited
partnership, and it terminates upon disposition of all its property or the
occurrence of certain other events specified in the Partnership Agreement. The
term of the Partnership expires on December 31, 1998 at which time, if the
Partnership is still in existence, it will be dissolved unless the term is
extended.
PURCHASE OF PROPERTIES
Three properties were acquired by the Partnership as described under
the heading "Properties" below.
INVESTMENT OBJECTIVES
The Partnership's primary business objective has been and continues to
be to try to realize appreciation in the value of the Properties by holding the
Properties for investment and eventual sale, although there has never been any
assurance that this will be attained within the term of the Partnership.
The Partnership has been marketing certain of the Properties, where
appropriate in light of market conditions, for a number of years. The General
Partner may sell each of the Properties in a single sale or divide them into
parcels which would be sold separately. The timing and manner of sale has been
and remains within the discretion of the General Partner. (See "HISTORY OF THE
PARTNERSHIP" below).
THE GENERAL PARTNER
The General Partner is an indirect wholly owned subsidiary of The Fidelity
Mutual Life Insurance Company, in Rehabilitation ("Fidelity Mutual"). A number
of the officers and directors of the General Partner are employees of or
consultants to Fidelity Mutual.
19
<PAGE> 21
The following organizational chart shows the relationship between Fidelity
Mutual and the General Partner.
------------------------------------------------------------
The Fidelity Mutual Life Insurance Company
(In Rehabilitation)
------------------------------------------------------------
Owns 100%
----------------------------------------
FML Holding Company, Inc.
----------------------------------------
Owns 100%
----------------------------------
Fidelity Enterprises, Inc.
----------------------------------
Owns 100%
------------------------------------------------------------------------
Southeast Acquisitions, Inc.
(General Partner of Southeast Acquisitions II, L.P.)
------------------------------------------------------------------------
On November 6, 1992, Fidelity Mutual's Board of Directors entered into a
voluntary agreement with the Commonwealth of Pennsylvania's Department of
Insurance to place Fidelity Mutual into a state-directed Rehabilitation. The
Rehabilitation is still in progress. The Partnership is a separate entity from
Fidelity Mutual, with all of its reserve funds and assets held in completely
segregated accounts.
Fidelity Mutual anticipates that it will file a revised plan of Rehabilitation
(the "Plan") within the next few months under which an outside investor may
acquire a controlling interest in a company which would acquire the assets of
Fidelity Mutual, including the General Partner. (See "THE GENERAL PARTNER -
Background" below).
Although it is the present intention of Fidelity Mutual to maintain the present
staffing levels of the General Partner, it is possible that if the Plan is
approved and the sale to a new investor described above is consummated, such new
investor, who would indirectly control the General Partner, would reduce or
reorganize the management of the General Partner during the new Partnership term
proposed under the Second Alternative Amendments.
20
<PAGE> 22
The following is an unaudited balance sheet of the General Partner.
SOUTHEAST ACQUISITIONS, INC.
UNAUDITED
BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash $ 791
Mortgage Receivable $ 563,770
Investment in Southeast Acquisitions
I, II & III $ 0
-----------
$ 564,561
SHAREHOLDER'S INVESTMENT
Common Stock (Per value $1
authorized 1,000 shares, issued
and outstanding 100 shares) $ 100
Paid-In Capital $ 1,534,891
Accumulated Deficit $ (970,430)
-----------
$ 564,561
</TABLE>
OFFICERS
The officers of the General Partner most directly involved in the management of
the General Partner are:
Arthur W. Mullin. Age 51. Mr. Mullin was elected a Director of the General
Partner in 1993. Mr. Mullin has also served as the President and Treasurer of
the General Partner since 1993. Mr. Mullin, originally retained as a consultant
to Fidelity Mutual in 1993, was appointed Senior Vice President and Director of
Real Estate for Fidelity Mutual the same year and served in that capacity until
1995. Mr. Mullin resumed his consulting relationship with Fidelity Mutual in
1995. Mr. Mullin received a B.S. in Political Science and M.S. in Education from
St. Joseph's University.
James W. Kelican, Jr., Age 49. Mr. Kelican was elected a Director of the General
Partner in 1994. He has also served as a Vice President of the General Partner
since 1994. Mr. Kelican has held the position of Senior Vice President, Real
Estate for Fidelity Mutual since 1993. Mr. Kelican is a graduate of Drexel
University and holds the Certified Property Manager (CPM(R)) designation from
the Institute of Real Estate Management of the National Association of Realtors.
Additional information concerning all the officers of the General Partner are
provided under the heading "THE GENERAL PARTNER - Current Management" below.
21
<PAGE> 23
FORMER MANAGEMENT/CONSULTING RELATIONSHIP
Ms. Deborah J. Dillon had been involved with the General Partner from the
Partnership's inception until the end of 1996, first as Vice President, then as
President from 1988 to 1993 and finally as a consultant from 1993 through 1996.
Ms. Dillon was also a director of the General Partner from 1988 to 1993. As an
officer of the General Partner at the time of the acquisition of the Property by
the Partnership, Ms. Dillon was instrumental in the Partnership's purchase of
the Property.
Following her resignation as President in 1993, Ms. Dillon acted as the General
Partner's Director of Operations under a performance-based consulting agreement
with the General Partner until the end of 1996. (See "THE GENERAL PARTNER -
Former Management/Consulting Relationship" below)
NEW GENERAL PARTNER
Under the First Alternative Amendments, Southeast Acquisitions, Inc. would be
removed as the General Partner of the Partnership and Southern Management Group
of Tennessee, LLC. ("SMGT") would be substituted as the New General Partner,
effective as of the date a majority in interest of the Units votes to approve
the First Alternative Amendments and the New General Partner signs the
Partnership Agreement.
SMGT is a Tennessee Limited Liability Company whose members are Richard W.
Sorenson, who owns a 51% interest in the company, and Southeast Venture
Corporation, Inc., a Tennessee corporation ("SVC") which owns 49% of SMGT.
Mr. Sorenson, age 71, has over 35 years experience in several real estate
disciplines, including land acquisition and development, development of office
buildings, shopping centers, warehouses and medical facilities. All of these
activities occurred in the Southeastern United States.
Mr. Sorenson graduated from the Northwestern University Business School with a
major in real estate.
The other member of the New General Partner is SVC. SVC is a Nashville,
Tennessee-based full service real estate corporation involved in real estate
brokerage, property management and development of office buildings, hospitals,
medical buildings and other medical facilities. SVC was formed in 1992. SVC
personnel include civil engineers, architects and other real estate
professionals whose services will be utilized by SMGT in the management and
marketing of the Property if SMGT is appointed the New General Partner. A more
detailed description of these professionals' qualifications is provided below.
(See "THE ALTERNATIVE AMENDMENTS - First Alternative Amendments" below).
22
<PAGE> 24
For eleven years, Mr. Sorenson has worked with Deborah Dillon, the former
President of and consultant to the General Partner.
Ms. Dillon has agreed to advise and consult with the New General Partner
concerning the Properties on a continuing basis for which she will be
compensated by the New General Partner solely from a percentage of real estate
commissions earned by the New General Partner in connection with sales of
Partnership property (See" THE ALTERNATIVE AMENDMENTS - First Alternative
Amendments" below).
The following is a balance sheet of the New General Partner audited by
Williams, Benator & Libby, LLP.
SOUTHERN MANAGEMENT GROUP OF TENNESSEE, LLC
BALANCE SHEET
June 12, 1997
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Organization costs $ 1,500
Capitalized legal fees 14,054
---------
$ 15,554
=========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,432
Due to members 8,022
---------
TOTAL CURRENT LIABILITIES $ 15,454
=========
MEMBERS' EQUITY - Note B 100
---------
$ 15,554
=========
</TABLE>
See notes to balance sheet.
NOTE A - DESCRIPTION OF SMGT AND SIGNIFICANT ACCOUNTING POLICIES
Southern Management Group of Tennessee, LLC ("SMGT") is a limited liability
company formed under the laws of the state of Tennessee. SMGT plans to become a
successor general partner in certain publicly traded real estate limited
partnerships and manage the operations of those partnerships. At June 12, 1997
SMGT was in the development stage and was in the process of submitting required
documentation in connection with becoming a successor general partner in such
partnerships.
The following accounting policies are presented to assist the reader in
understanding SMGT's financial statements:
Income Taxes: As a limited liability company, all items of income, loss,
deduction, and credit are passed through to, and taken into account by, SMGT's
members in computing their own taxable income.
Organization Costs: Organization costs will be amortized on a straight-line
basis over a sixty-month period.
Estimates: The preparation of a balance sheet in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the balance
sheet. Actual results could differ from those estimates.
NOTE B - MEMBERS' EQUITY
SMGT was formed in April 1997. Each member is entitled to a number of votes
equal to his percentage interest in SMGT. Each member has identical powers,
preferences and rights. SMGT provides limited liability to its members. SMGT has
no stated termination date. However, upon the termination of a member's
interest, SMGT's continued existence is dependent upon the consent of a majority
in interest of the remaining members.
THE PROPERTIES
THE PROPERTIES
The Properties acquired by the partnership (individually a "Property" and
collectively the "Properties")
(i) +/-91 acres in Simpsonville (Greenville), South Carolina which was acquired
by the Partnership on June 6, 1988 for a total purchase price of $2,583,931;
+/-41 acres of this Property remains unsold.
(ii) +/-353 acres in Henry County, Georgia which was purchased by the
Partnership on July 18, 1988 for a total purchase price of $946,303; +/-180
acres of this Property remains unsold.
(iii) +/-135 acres in Nashville, Tennessee which was acquired by the Partnership
in two separate transactions in June 1988 for a total purchase price of
$4,521,723; +/-97 acres of this Property remains unsold.
1996 - 1997 SALES AND DISTRIBUTIONS
The Partnership closed a number of transactions in 1996, all relating to the
Simpsonville (Greenville), South Carolina Property. Earlier in the year, the
Partnership sold +/-1.457 acres for use as a Jameson Inn for $225,000
($155,000/acre) and +/-0.512 acres for use as a Baskin Robbins for $75,000
($146,000/acre). These two transactions resulted in a distribution of $34 per
Unit in March 1996.
The Partnership closed three transactions in late 1996. A group affiliated with
Publix grocery stores purchased +/-7.378 acres for $811,580 ($110,000/acre),
Belk department store purchased +/-3.725 acres (along with +/-10 acres from an
adjacent land owner) for $316,625 ($85,000/acre),
23
<PAGE> 25
and a group intending to construct a Subway deli purchased +/-0.89 acres for
$110,000 ($123,600/acre). These sales resulted in a distribution of $100 per
Unit in November 1996.
The Partnership recently completed a transaction in which it sold 32.514 acres
of the Nashville, Tennessee Property for $50,000 per acre. This sale enabled the
General Partner to make a distribution of $150 per Unit in May 1997. The
Partnership also recently completed a transaction in which it sold +/- 1.0 acre
of the Simpsonville, South Carolina Property for $160,000.
SIMPSONVILLE, SOUTH CAROLINA
Recent Developments
The General Partner has updated the site plan and established list prices for
the remaining land. Parcel sizes range from 1 to 20 acres with list prices from
$75,000 to $200,000 per acre. The General Partner recently renewed the listing
agreement for the Property through June 30, 1997.
The Partnership completed a transaction in May, 1997 in which it sold +/-1.0
acre of land adjacent to the Subway site for $160,000. The General Partner has
been advised that the proposed use for the site is a full service car wash.
The General Partner is currently considering an offer for approximately 16
acres, including all the remaining frontage on I-385. It is too early to
determine whether the final price and terms of this offer will be acceptable
to the General Partner.
HENRY COUNTY, GEORGIA
Recent Developments
Late in 1996, discussions were held with two local residential developers
concerning this Property. These discussions did not materialize into offers to
purchase any portion of the Property.
The General Partner has been advised that Rabbit Run Road has been selected for
paving and improvement by the local municipality. Paving of the road will
permit the site to be platted and approved as a subdivision.
24
<PAGE> 26
NASHVILLE, TENNESSEE
Recent Developments
The intermittent discussions and negotiations about a sale of a portion of the
Property for use as an exposition center have been successful. In January, 1997,
the Partnership entered into a contract for the sale of 32.514 acres of the
Property at a price of $50,000 per acre. On April 30, 1997, settlement occurred
for 32.514 acres of the Property, resulting in gross sale proceeds of
$1,625,750. This transaction resulted in the distribution of $150 per
partnership unit.
As part of the consideration for the transaction, the purchaser is required to
construct a 450-foot access road, meeting the specifications of the local
municipality, on the Partnership's property adjacent to the exposition center
parcel. This access road will enable the partnership to market sites throughout
the property located on the northwest quadrant of Interstate 24 and Sam Ridley
Parkway. The exposition center should have a positive affect on the
marketability of all the remaining Partnership land in Nashville, TN.
VOTING
RECORD DATE. The General Partner has established the close of business on July
25, 1997, as the Record Date for determining the Limited Partners entitled to
notice of, and to vote at, the Special Meeting and at any adjournment thereof.
On that date, the Partnership had issued an outstanding 9,650 Units. No matters
other than the Alternative Amendments and certain procedural matters may be
discussed or voted upon at the Special Meeting.
VOTE CONDITIONED ON ADOPTION OF ALL OF AMENDMENTS IN EITHER THE FIRST OR SECOND
ALTERNATIVE AMENDMENTS. Limited Partners may vote in favor of or against or
abstain from voting with respect to each amendment contained in the proposed
sets of Alternative Amendments. However, the adoption of any amendment contained
in a set of
25
<PAGE> 27
Alternative Amendments is conditioned upon the adoption of all of the amendments
within that set of Alternative Amendments. In order to be adopted, all of the
amendments contained in a set of Alternative Amendments must receive at least
50% of the votes of limited partnership Units eligible to vote.
REQUIRED VOTE. In the event both sets of Alternative Amendments received in
excess of 50% of the votes of limited partnership Units eligible to vote, the
set of Alternative Amendments receiving the most votes in excess of 50% will be
adopted.
EQUAL NUMBER OF VOTES CAST. In the event of an equal number of votes being cast
sufficient for the adoption of both sets of Alternative Amendments, the General
Partner will determine a method of random selection and select the set of
Alternative Amendments to be adopted pursuant thereto.
NO INDICATION OF VOTE. If a Limited Partner returns a signed proxy card without
indicating how such Limited Partner wishes to vote on either the First
Alternative Amendments or the Second Alternative Amendments, the vote will be
counted as a vote for both sets of Alternative Amendments.
NEITHER ALTERNATIVE AMENDMENT ADOPTED. If neither the First Alternative
Amendments nor the Second Alternative Amendments receives the affirmative vote
of a majority in interest of the Units, the General Partner will continue to act
as general partner of the Partnership in accordance with the Partnership
Agreement.
VOTING BY PROXY. To vote by proxy, a Limited Partner must complete, sign, date,
and deliver the Proxy Card to the Information Agent before the Special Meeting.
Unless indicated to the contrary on the Proxy Card, the directions given on the
Proxy Card will be for all of the Units that such Limited Partner may vote.
REVOCATION OF A PROXY. A Limited Partner may revoke its proxy at any time prior
to the proxy holder's voting of the Units to which such proxy applies by: (i)
submitting a later dated proxy with a later date to the Information Agent, (ii)
attending the Special Meeting and delivering a written notice of revocation of
the proxy to the representative of the Information Agent present at the Special
Meeting or (iii) delivering a written notice of revocation of the proxy to the
Information Agent at its address set forth herein, to be received by the
Information Agent on or before September 2, 1997.
APPRAISAL RIGHTS. The Partnership Agreement does not provide for contractual
appraisal rights in connection with either set of Alternative Amendments.
Therefore, in the event one of the sets of Alternative Amendments is adopted,
Limited Partners who oppose such set of Alternative Amendments will not have the
right to dissent and demand payment in cash for the fair value of their Units.
QUESTIONS. If you have any questions concerning the Alternative Amendments
please call the General Partner at (610) 964-7178.
26
<PAGE> 28
DELIVERY OF PROXY CARDS. Limited Partners should deliver their Proxy Cards to
the Information Agent at the address set forth below:
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
TELEPHONE NO. (800) 829-6551
FACSIMILE NO. (212) 809-8839
27
<PAGE> 29
RISK FACTORS
Each set of Alternative Amendments as well as the failure to adopt either set
of Alternative Amendments presents risks for the Partnership. The following
outlines the principal risks inherent in the adoption of either set of
Alternative Amendments as well as the risks remaining if neither set of
Alternative Amendments is adopted.
FIRST ALTERNATIVE AMENDMENTS
The following risk factors should be considered in connection with the First
Alternative Amendments:
- RISK OF DECREASE IN VALUE OF PROPERTIES IF PARTNERSHIP TERM EXTENDED.
If the expiration date of the Partnership Agreement is extended to
December 31, 2000, there can be no assurance that eventual sale or
sales of the Property will be for a higher sales price than could be
achieved by the General Partner prior to the expiration of the current
term on December 31, 1998 or in the course of the subsequent
dissolution and liquidation of the Partnership assets pursuant to the
Partnership Agreement. The value of the Properties has fluctuated over
the term of the Partnership and may continue to do so (See "THE
PROPERTIES - Appraisals" below). It is possible that the value of the
Properties may decline over the additional two years proposed for the
new Partnership term.
- NO ASSURANCE OF IMPROVED RETURN
There is no assurance that the New General Partner, or any
alternative general partner, will be able to realize a better return on
the Properties than the General Partner could achieve within the
current term of the Partnership Agreement or in a liquidation of the
Partnership assets thereafter. In light of the current valuation of the
Properties, it is unlikely that any sale of the Properties in the near
future will result in a net sales price which would return to the
Limited Partners a distribution equal to the Unpaid Cumulative Return
plus their Adjusted Capital Contributions. Return on the Properties may
be negatively influenced by additional costs and expenses which may be
incurred in improving the Properties for marketing purposes (See "FIRST
ALTERNATIVE AMENDMENTS - Substitution of New General Partner" below),
the approval of additional fees provided for in the First Alternative
Amendments and the possibility that the value of the Properties may
decline over the new Partnership term (See "RISK FACTORS - Risk of
Decrease in Property Value if Partnership Term Extended" above).
- POSSIBLE SALES OF PROPERTIES AT LOW PRICE WITHOUT CONSENT OF LIMITED
PARTNERS IF CONSENT REQUIREMENTS MODIFIED
By adding a definition of "all or substantially all the assets of
the Partnership", to mean 60% of the real property acreage held by the
Partnership as of July 25, 1997, the New General Partner will have no
restrictions on the sales price that it may obtain for parcels of the
Properties amounting to less than 60% of the acreage held by the
28
<PAGE> 30
Partnership as of July 25, 1997 other than general limitations imposed
by its overall fiduciary duty with respect to the Partnership and its
assets. The amendment to this provision could not only result in a
combination of sales of parcels of the Properties which would fail to
return to the Limited Partners the Unpaid Cumulative Return plus their
Adjusted Capital Contributions, but also such sales could potentially
be below the most recent appraised value discussed below under the
heading "THE PROPERTIES-Appraisals". In addition, even if a sale
constituted 60% or more of the assets of the Partnership, Limited
Partners' consent would only be required if such sale were below the
Acquisition Cost of such assets rather than below an amount which would
return to the Limited Partners the Unpaid Cumulative Return plus their
Adjusted Capital Contributions.
- POSSIBLE DEATH OR DISABILITY OF PRINCIPAL MEMBER OF NEW GENERAL PARTNER
Mr. Sorenson, the individual managing member of the New General
Partner, is expected to play a key role in the marketing and sale of
the Properties, assisted by the principal officers and key employees of
SVC. Mr. Sorenson is 71 years old. The operating agreement of the New
General Partner provides that in the event of the death or disability
of Mr. Sorenson, SVC will become the managing member of the New General
Partner. In such event, the Limited Partners, if they did not elect to
replace the New General Partner, would have to rely on the officers and
key employees of SVC, who are not as individually experienced as Mr.
Sorenson, to manage the Partnership. (See "FIRST ALTERNATIVE AMENDMENTS
- Substitution of New General Partner" below.)
- MINIMAL CAPITALIZATION OF NEW GENERAL PARTNER
The New General Partner will have minimal capitalization, and there
is no assurance that, in the event claims are brought against the New
General Partner, the New General Partner would have sufficient assets
to satisfy any such claims. (See "FIRST ALTERNATIVE AMENDMENTS -
Substitution of New General Partner" below).
- NEW GENERAL PARTNER'S LACK OF EXPERIENCE IN PUBLIC REAL ESTATE
PARTNERSHIPS
The New General Partner has not previously engaged in business.
Although the personnel who will comprise the management of the New
General Partner have considerable experience in real estate matters,
including private limited partnerships, none has had any experience in
acting as the General Partner of a public real estate limited
partnership.
29
<PAGE> 31
SECOND ALTERNATIVE AMENDMENTS
The following risk factors should be considered in connection with the Second
Alternative Amendments.
- RISK OF DECREASE IN VALUE OF PROPERTIES IF PARTNERSHIP TERM EXTENDED
If the expiration date of the Partnership Agreement is extended to
December 31, 2000, there can be no assurance that eventual sale or
sales of the Properties will be for a higher sales price than could be
achieved by the General Partner prior to the expiration of the current
term on December 31, 1998 or in the course of the subsequent
dissolution and liquidation of the Partnership assets pursuant to the
Partnership Agreement. The value of the Properties has fluctuated over
the term of the Partnership and may continue to do so (See "THE
PROPERTY - Appraisal" below). It is possible that the value of the
Properties may decline over the additional two years proposed for the
new Partnership term.
- NO ASSURANCE OF IMPROVED RETURN
There is no assurance that the General Partner, or any alternative
General Partner, will be able to realize a better return on the
Property than the General Partner would be able to achieve within the
current term of the Partnership Agreement or in a liquidation of the
Partnership assets thereafter. In light of the current valuation of the
Properties, it is unlikely that any sale of the Properties in the near
future will result in a net sales price which would return to the
Limited Partners a distribution equal to the Unpaid Cumulative Return
plus their Adjusted Capital Contributions. Return on the Properties may
be negatively influenced by additional costs and expenses which may be
incurred in improving the Properties for marketing purposes (See "THE
GENERAL PARTNER - Current Management" below), the approval of
additional fees provided for in the Second Alternative Amendments and
the possibility that the value of the Properties may decline further
over the new Partnership term (See "RISK FACTORS - Risk of Decrease in
Property Value if Partnership Term Extended" above).
- LIMITED CAPITALIZATION OF GENERAL PARTNER
The General Partner has limited capitalization. Although the General
Partner presently intends to maintain its current capitalization, it
has the right to reduce such capitalization. There is no assurance
that, whether or not the General Partner retains its current
capitalization, in the event claims are brought against the General
Partner, the General Partner would have sufficient assets to satisfy
such claims. (See "THE GENERAL PARTNER - Background" below).
- POSSIBLE SALES OF PROPERTIES AT LOW PRICE WITHOUT CONSENT OF LIMITED
PARTNERS IF CONSENT REQUIREMENTS ELIMINATED
By eliminating the requirement in the Partnership Agreement that,
under certain circumstances, a majority in interest of the Limited
Partners consent to a sale of all or substantially all of the
Partnership's assets, the General Partner will have no restrictions on
the sales price that it may obtain for all or a portion of the
Properties other than general limitations imposed by its overall
fiduciary duty to the Partnership and its assets. The elimination of
this provision could not only result in a sale or sales
30
<PAGE> 32
which would fail to return to the Limited Partners the Unpaid
Cumulative Return plus their Adjusted Capital Contributions but also
could result in the sale of the Properties, or parcels thereof, at
below its most recent appraised value discussed below under the
heading "THE PROPERTIES - Appraisals".
- RISK IN REHABILITATION OF ULTIMATE PARENT OF GENERAL PARTNER
The ultimate parent company of the General Partner, Fidelity Mutual,
is in a state directed Rehabilitation. It is possible that, pursuant to
the proposed Rehabilitation plan, a non affiliated investor would,
through its indirect control of the General Partner, reduce or
reorganize management of the General Partner. (See "THE GENERAL PARTNER
- Background" below)
NEITHER SET OF ALTERNATIVE AMENDMENTS ADOPTED
The following risk factors should be considered if neither set of
Alternative Amendments is adopted.
- RISK OF LIQUIDATION OF PROPERTIES AT LOW PRICE
If neither set of Alternative Amendments is adopted, and if the
Properties are not sold prior to the end of the Partnership term, on
December 31, 1998 the General Partner will liquidate the assets of the
Partnership in accordance with the Partnership Agreement following the
expiration of the Partnership term. Based on the current estimated
value of the Properties (see "THE PROPERTIES -- APPRAISALS" below), it
is possible that the Properties will have to be liquidated at an amount
which would not return to the Limited Partners the Unpaid Cumulative
Return under their Adjusted Capital Contributions.
- RISK IN REHABILITATION OF ULTIMATE PARENT OF GENERAL PARTNER
The ultimate parent company of the General Partner, Fidelity Mutual,
is in a state directed Rehabilitation. It is possible that, pursuant to
the proposed Rehabilitation plan, a non affiliated investor would,
through its indirect control of the General Partner, reduce or
reorganize management of the General Partner. (See "THE GENERAL PARTNER
- Background" below)
CONFLICTS OF INTEREST
Each set of Alternative Amendments presents certain conflicts of interest
for the New General Partner and General Partner. The following describes the
conflicts of interest inherent in each set of Alternative Amendments.
FIRST ALTERNATIVE AMENDMENTS
TIMING OF SALE TO OBTAIN COMMISSION
The New General Partner will be able to receive the maximum 10%
commission to be paid in respect to a sale of all or a portion of the
Properties and will also be able to be the exclusive agent for the sale
of the Properties. It is possible that the New General Partner would be
confronted with a conflict of interest in a desire to realize a
commission upon an immediate sale of the Properties rather than holding
it for a more extended period if it were in the best interests of the
Partnership.
TIMING OF SALE TO OBTAIN DISTRIBUTION
The New General Partner might wish to delay an immediate sale of the
Properties which might be in the Partnership's best interests if the
sales proceeds at the time would not be sufficient to result in any
distribution to the New General Partner under the Partnership
Agreement.
BROKER PARTICIPATION
The New General Partner's exclusive agency and participation in
future commissions upon sale of the Properties could also have an
adverse effect on the New General Partnership's willingness to retain
local brokers and upon the local brokerage community's willingness to
participate in the sale of the Properties.
In resolving any of the above-mentioned conflicts, if they arose, the New
General Partner would need to be guided by its general fiduciary responsibility
to the Partnership and the Limited Partners to protect the assets of the
Partnership.
31
<PAGE> 33
SECOND ALTERNATIVE AMENDMENTS
TIMING OF SALE TO OBTAIN COMMISSION
The General Partner will be able to receive the maximum 10%
commission to be paid in respect to a sale of all or a portion of
the Properties and will also be able to be the exclusive agent
for the sale of the Properties. It is possible that the General
Partner would be confronted with a conflict of interest in a
desire to realize a commission upon an immediate sale of the
Properties rather than holding it for a more extended period if it
were in the best interests of the Partnership.
TIMING OF SALE TO OBTAIN DISTRIBUTION
The General Partner might wish to delay an immediate sale of
the Property if the sales proceeds at the time would not be
sufficient to result in any distribution to the General Partner.
BROKER PARTICIPATION
The General Partner's exclusive agency and participation in
future commissions upon sale of the Properties could also have an
adverse effect on the General Partner's willingness to retain
local brokers and upon the local brokerage community's willingness
to participate in the sale of the Properties.
In resolving any of the above-mentioned conflicts, if they arose, the General
Partner would need to be guided by its general fiduciary responsibility to the
Partnership and the Limited Partners to protect the assets of the Partnership.
HISTORY OF THE PARTNERSHIP
The Partnership was formed on December 14, 1987, as a Delaware limited
partnership, and it terminates upon disposition of all its property or the
occurrence of certain other events specified in the Partnership Agreement. The
term of the Partnership expires on December 31, 1998 at which time, if the
Partnership is still in existence, it will be dissolved unless the term is
extended.
PUBLIC OFFERING
The Partnership's public offering of 9,650 units of limited partnership interest
(the "Units") commenced on June 8, 1988 and terminated on July 18,1988. As of
the close of the offering, the Partnership had raised $8,829,750 through the
sale of 9,650 Units.
32
<PAGE> 34
PURCHASE OF PROPERTIES
Three properties were acquired by the Partnership (individually a "Property" and
collectively the "Properties") as follows:
(i) +/-91 acres in Simpsonville (Greenville), South Carolina which was acquired
by the Partnership on June 6, 1988 for a total purchase price of $2,583,931.
(ii) +/-353 acres in Henry County, Georgia which was purchased by the
Partnership on July 18, 1988 for $946,303.
(iii) +/-135 acres in Nashville, Tennessee which was acquired by the Partnership
in June 1988 for a total purchase price of $4,521,723.
DISTRIBUTIONS / ANNUAL PREFERRED RETURN
As of the date of this Proxy Statement, the Unit holders have received
cumulative aggregate distributions of $734 per Unit.
The following table shows a breakdown of distributions by year of distributions:
<TABLE>
<S> <C>
Sept. 1988 $ 32/unit
Sept. 1991 $ 30/unit
Dec. 1993 $238/unit
Mar. 1995 $115/unit
Aug. 1995 $ 35/unit
Mar. 1996 $ 34/unit
Nov. 1996 $100/unit
May 1997 $150/unit
---------- ---------
Total $734/unit
</TABLE>
The following table compares the initial capital contributions with the original
investment objective of achieving a cumulative annual preferred return of 10%
per annum.
33
<PAGE> 35
SOUTHEAST ACQUISITIONS II, L.P.
Adjusted Capital Contributions/Cumulative Annual Return
<TABLE>
<CAPTION>
1988 1989 1990
------------ ----------- ------------
<S> <C> <C> <C>
Beg. Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Distributions Applied To Capital -- -- --
------------ ----------- ------------
Ending Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Beg. Cumulative Annual Return $ -- $ 174,500 $ 1,139,500
Annual Return (10%) $ 482,500 $ 965,000 $ 965,000
Distributions Against Cumulative Return $ (308,000) $ -- $ --
------------ ----------- ------------
Ending Cumulative Annual Return $ 174,500 $ 1,139,500 $ 2,104,500
Adjusted Capital Contributions & $ 9,824,500 $10,789,500 $ 11,754,500
Cumulative Annual Return
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993
------------ ----------- ------------
<S> <C> <C> <C>
Beg. Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Distributions Applied To Capital -- -- --
------------ ----------- ------------
Ending Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Beg. Cumulative Annual Return $ 2,104,500 $ 2,780,000 $ 3,745,000
Annual Return (10%) $ 965,000 $ 965,000 $ 965,000
Distributions Against Cumulative Return $ (289,500) $ -- $ (2,296,700)
------------ ----------- ------------
Ending Cumulative Annual Return $ 2,780,000 $ 3,745,000 $ 2,413,300
Adjusted Capital Contributions & $ 12,430,000 $13,395,000 $ 12,063,300
Cumulative Annual Return
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Beg. Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Distributions Applied To Capital -- -- --
----------- ------------ ------------
Ending Adjusted Capital Contributions $ 9,650,000 $ 9,650,000 $ 9,650,000
Beg. Cumulative Annual Return $ 2,413,300 $ 3,378,300 $ 2,895,800
Annual Return (10%) $ 965,000 $ 965,000 $ 965,000
Distributions Against Cumulative Return -- $ (1,447,500) $ (1,293,100)
----------- ------------ ------------
Ending Cumulative Annual Return $ 3,378,300 $ 2,895,800 $ 2,567,700
Adjusted Capital Contributions & $13,028,300 $ 12,545,800 $ 12,217,700
Cumulative Annual Return
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
Unaudited
6/30/97
<S> <C>
Beg. Adjusted Capital Contributions $ 9,650,000
Distributions Applied To Capital --
------------
Ending Adjusted Capital Contributions $ 9,650,000
Beg. Cumulative Annual Return $ 2,567,700
Annual Return (10%) $ 478,534
Distributions Against Cumulative Return $ (1,447,500)
------------
End Cumulative Annual Return $ 1,598,734
Adjusted Capital Contributions & $ 11,248,734
Cumulative Annual Return
</TABLE>
INVESTMENT OBJECTIVES
The Partnership's primary business objective has been and continues to be to try
to realize appreciation in the value of the Properties by holding the Properties
for investment and eventual sale, although there has never been any assurance
that this will be attained within the term of the Partnership.
The Partnership has been marketing certain of the Properties, where appropriate
in light of market conditions, for a number of years. The Simpsonville, SC
Property has been subject to a listing agreement and continuously marketed by
Windsor/Aughtry Company since September, 1990.
By an understanding reached at the inception of the Partnership, Southeast
Venture Corporation ("SV") has been involved in the marketing and advised on the
planning of the Nashville, TN Property. This Property has also been marketed by
the General Partner's personnel since early 1994 when Nashville real estate
values began to rebound. SV's involvement with the Nashville, TN site is a
result of their role in SEA II's acquisition of the site.
The Henry County Property has been marketed directly by individuals associated
with Southeast Acquisitions, Inc. since the inception of the Partnership and
informally by local real estate professionals during the same time period.
The General Partner may sell each Property in a single sale or divide them into
parcels which would be sold separately. The timing and manner of sale has been
and remains within the discretion of the General Partner.
35
<PAGE> 37
GENERAL PARTNER'S RIGHT TO SELL PROPERTIES; RESERVES
The General Partner has broad powers to manage the business and affairs of the
Partnership and to sell the Properties consistent with its fiduciary duties
under the Partnership Agreement. However, the General Partner may not sell or
dispose of all or substantially all the assets of the Partnership at one time
without the consent of a majority in interest of the Limited Partners unless in
connection with a liquidation of the Partnership or in the event that the net
proceeds of the sale will be sufficient to return the Limited Partners' Adjusted
Capital Contributions plus their Unpaid Cumulative Return.
In the General Partner's opinion the Partnership's cash reserves will be
sufficient for an additional three years from December 31, 1997. The basis used
by the General Partner for calculating the sufficiency of the cash reserves is
the Partnership's current reserves divided by the amount of the Partnership's
historical expenses, adjusted for permanent differences, with an allowance for
possible unexpected expenditures.
RIGHTS OF THE LIMITED PARTNERS ON DISSOLUTION
On dissolution of the Partnership, the General Partner is required to liquidate
the assets of the Partnership and apply and distribute the proceeds thereof: (i)
to the payment of all debts and liabilities of the Partnership in accordance
with their terms; (ii) to the establishment, for such period as the General
Partner deems reasonably necessary, of such reserves as the General Partner
deems reasonably necessary to provide for contingent and unforeseen liabilities
or obligations of the Partnership; and (iii) to the partners in accordance with
the Partnership Agreement's priority of distribution provision.
In a liquidation, the General Partner may sell the Properties at the best
available price without consent of the Limited Partners even if the net proceeds
of the sale will not be sufficient to return the Limited Partners' Adjusted
Capital Contributions plus their Unpaid Cumulative Return. However, if the
General Partner determines that an immediate sale of part or all of the
Partnership assets would cause undue loss to the Partners, the General Partner,
in order to avoid such loss, may, to the extent not then prohibited by
applicable law, defer liquidation of and withhold from distribution for a
reasonable time, any assets of the Partnership except those necessary to satisfy
the Partnership's debts and obligations.
36
<PAGE> 38
THE GENERAL PARTNER
BACKGROUND
The General Partner is an indirect wholly owned subsidiary of The Fidelity
Mutual Life Insurance Company, in Rehabilitation ("Fidelity Mutual"). A number
of the officers and directors of the General Partner are employees of or
consultants to Fidelity Mutual.
The following organizational chart shows the relationship between Fidelity
Mutual and the General Partner.
------------------------------------------------------------
The Fidelity Mutual Life Insurance Company
(In Rehabilitation)
------------------------------------------------------------
Owns 100%
----------------------------------------
FML Holding Company, Inc.
----------------------------------------
Owns 100%
----------------------------------
Fidelity Enterprises, Inc.
----------------------------------
Owns 100%
-------------------------------------------------------------
Southeast Acquisitions, Inc.
(General Partner of Southeast Acquisitions II, L.P.)
-------------------------------------------------------------
On November 6, 1992, Fidelity Mutual's Board of Directors entered into a
voluntary agreement with the Commonwealth of Pennsylvania's Department of
Insurance to place Fidelity Mutual into a State directed Rehabilitation (the
"Rehabilitation"). The Rehabilitation is still in progress. The Partnership is a
separate entity from Fidelity Mutual, with all of its reserve funds and assets
held in completely segregated accounts. Management of the General Partner has
been kept generally advised of the status of the Rehabilitation from its
initiation.
37
<PAGE> 39
Fidelity Mutual anticipates that it will file a revised Rehabilitation plan (the
"Plan") within the next few months and that the Plan will affect all Fidelity
Mutual's assets, including its ownership of the General Partner. Although the
capital stock of the General Partner will be subject to the Plan, none of the
assets of the Partnership will be subject to the Plan.
Under the Plan, all Fidelity Mutual's assets are to be transferred to a stock
life insurance company Fidelity Mutual currently owns. The Plan envisions that
this company will be 100% owned by another Fidelity Mutual subsidiary. This
subsidiary will sell in excess of 50% of its common stock to a non-affiliated
investor, with the balance of the ownership interest in the company remaining
with the policy holders of Fidelity Mutual. Following the sale of stock, the
investor will have management control over such company. The General Partner
will be an indirect wholly owned subsidiary of the company controlled by the new
investor.
Although it is the present intention of Fidelity Mutual to continue the current
staffing levels of the General Partner, it is possible that, if the Plan is
approved and the sale to a new investor described above is consummated, such new
investor, who would indirectly control the General Partner, might reduce or
reorganize the management of the General Partner during the new Partnership term
proposed under the Second Alternative Amendments.
The following is an unaudited balance sheet of the General Partner:
SOUTHEAST ACQUISITIONS, INC.
UNAUDITED
BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash $ 791
Mortgage Receivable $ 563,770
Investment in Southeast
Acquisitions I, II and III $ 0
-----------
$ 564,561
SHAREHOLDER'S INVESTMENT
Common Stock (Per value $1
authorized 1,000 shares, issued
and outstanding 100 shares) $ 100
Paid-In Capital $ 1,534,891
Accumulated Deficit $ (970,430)
-----------
$ 564,561
</TABLE>
38
<PAGE> 40
DIRECTORS AND OFFICERS
The directors and officers of the General Partner are:
Arthur W. Mullin. Age 51. Mr. Mullin was elected a Director of the General
Partner in 1993. Mr. Mullin has also served as the President and Treasurer of
the General Partner since 1993. Mr. Mullin, originally retained as a consultant
to Fidelity Mutual in 1993, was appointed Senior Vice President and Director of
Real Estate for Fidelity Mutual the same year and served in that capacity until
1995. Mr. Mullin resumed his consulting relationship with Fidelity Mutual in
1995. Mr. Mullin received a B.S. in Political Science and M.S. in Education from
St. Joseph's University. Information concerning Mr. Mullin's background in real
estate is contained under the heading "THE GENERAL PARTNER - Current Management"
below.
James W. Kelican, Jr., Age 49. Mr. Kelican was elected a Director of the General
Partner in 1994. He has also served as a Vice President of the General Partner
since 1994. Mr. Kelican has held the position of Senior Vice President, Real
Estate for Fidelity Mutual since 1993. Mr. Kelican is a graduate of Drexel
University and holds the Certified Property Manager (CPM(R)) designation from
the Institute of Real Estate Management of the National Association of Realtors.
Information concerning Mr. Kelican's background in real estate is contained
under the heading "THE GENERAL PARTNER - Current Management" below.
William S. Taylor, Age 51. Mr. Taylor was a Director of the General Partner from
1993 to 1994. Mr. Taylor was reelected a Director of the General Partner in
1995. Mr. Taylor was also elected Vice President of the General Partner in 1995.
Mr. Taylor is the Deputy Insurance Commissioner for Liquidation's,
Rehabilitation's and Special Funds for the Commonwealth of Pennsylvania and has
had an oversight role in the Rehabilitation of Fidelity Mutual. Mr. Taylor has a
B.A. in Economics from Elizabethtown College and an M.A. in Governmental
Administration from the University of Pennsylvania.
Margaret M. Tamasitis, Age 51. Ms. Tamasitis has been the Assistant Secretary of
the General Partner since 1988. Ms. Tamasitis is also a Second Vice President of
Fidelity Mutual in the Controller's office. Ms. Tamasitis received her B.S. in
Accounting from Temple University.
Robert Bixler, Age 54. Mr. Bixler has been the Secretary of the General Partner
since 1988. He also served as General Counsel to the General Partner from 1994
to 1996. He is also Vice President and Associate Counsel of Fidelity Mutual. Mr.
Bixler received his A.B. degree in Economics from Temple University and his J.D.
degree from Temple University Law School.
39
<PAGE> 41
FORMER MANAGEMENT/CONSULTING RELATIONSHIP
Ms. Deborah J. Dillon had been involved with the General Partner from the
Partnership's inception until the end of 1996, first as Vice President, then as
President from 1988 to 1993 and finally as a consultant from 1993 through 1996.
Ms. Dillon was also a director of the General Partner from 1988 to 1993. As an
officer of the General Partner at the time of the acquisition of the Properties
by the Partnership, Ms. Dillon was instrumental in the Partnership's purchase of
the Properties.
Following her resignation as President in 1993, which coincided with her
resignation as an officer of Fidelity Mutual shortly after the commencement of
the Rehabilitation, and was prompted by a desire to return to Atlanta, Georgia,
Ms. Dillon acted as the General Partner's Director of Operations under a
performance-based consulting agreement with the General Partner (the
"Consulting Agreement") until the end of 1996. Under the Consulting Agreement
Ms. Dillon was paid a nominal consulting fee and was granted certain rights to
participate in any potential profits of the General Partner. No compensation
was earned by or paid to Ms. Dillon pursuant to the profit sharing provisions
of the Consulting Agreement because total proceeds from property sales during
the consulting period ended to exceed the threshold amount set forth in the
Consulting Agreement necessary to generate participation by the General Partner
in profits on sales and, therefore, payments to Ms. Dillon.
During her period as a consultant, Ms. Dillon was the principal advisor to the
officers and directors of the General Partner with respect to the management and
operations of the Partnership and marketing of the Properties. The Consulting
Agreement expired by its terms on June 30, 1996 and was extended by mutual
consent through December 31, 1996. The Consulting Agreement was not renewed
further principally because Ms. Dillon informed the General Partner that other
business commitments had grown to the point that she did not believe that she
could spend the time necessary to adequately advise on managing the
Partnership's assets in the future at the level of compensation provided for in
the Consulting Agreement and that she had concerns regarding the continuity of
the management of the General Partner as a result of the Rehabilitation. Ms.
Dillon has agreed to advise the New General Partner if the First Alternative
Amendments are adopted. (See "FIRST ALTERNATIVE AMENDMENTS - New General
Partner" below.)
CURRENT MANAGEMENT
The current management of the General Partner, led by Mr. Mullin and Mr. Kelican
who are assisted by several other professionals, oversee the management,
marketing and disposition of the Properties in addition to all other Partnership
issues. Together the management team has over 75 years experience in working
with all types of real estate, including vacant and developable land.
Mr. Mullin was a commercial banker for First Pennsylvania Bank from 1973 to
1981. In this capacity, he was involved with land development as the banker to
both a land development subsidiary of a major utility and to a major industrial
developer in the Philadelphia suburbs. Both of these companies held widely
diverse properties in suburban, rural and agrarian areas.
40
<PAGE> 42
After holding a position as a commercial banker for Meritor Savings Bank from
1981 to 1985, Mr. Mullin also worked briefly for Merrill Lynch Capital Markets
during 1985 and, in that capacity, facilitated a number of evaluations for
corporate clients of their commercial real estate holdings.
Mr. Mullin joined Kaiser Steel Corporation ("Kaiser") in 1986 as its Senior Vice
President and Chief Financial Officer. In that capacity, he evaluated the
development prospects for the thousands of acres that Kaiser owned throughout
Southern California and formulated development plans for certain portions of its
holdings, while selling off other holdings to either users or developers.
Since 1990, Mr. Mullin has been a principal in KMR Management, Inc., a
management consulting firm whose primary focus has been troubled businesses.
Assistance to these businesses has been in a variety of areas, including advice
on redeployment of real estate assets and strategizing with respect to land held
for development.
Since 1993, the most significant client Mr. Mullin has consulted for has been
Fidelity Mutual and its numerous real estate subsidiaries, including the General
Partner. On a combined basis, Fidelity Mutual, either directly or indirectly
through subsidiaries, partnerships or ventures, is involved with thousands of
acres of land in various stages of development. Mr. Mullin has personally been
involved in major decisions involving these properties, which are located in the
Northeast, Southeast and Southwest sections of the United States.
Mr. Kelican began his real estate career in the early seventies with Latimer &
Buck, Inc., a Philadelphia commercial real estate mortgage banking firm. He held
several positions, including Assistant Controller and Assistant Vice President,
with responsibility for real estate asset management. During this period he was
involved with a variety of general real estate and land development projects.
From 1980 to 1984, Mr. Kelican worked for Cigna Investments where he was a
Senior Real Estate Asset Manager, and, subsequently, the Director of Mortgage
Administration. His responsibilities extended to selected markets on a
nationwide basis.
In 1984 Mr. Kelican became Senior Vice President of GMAC Realty Advisors,
Inc./Mortgage and Realty Trust, where he was responsible for all aspects of the
company's real estate asset management until July, 1993.
Mr. Kelican was employed by Fidelity Mutual in July, 1993. He became a Vice
President and Director of the General Partner in early 1994. He has been
responsible for land and land development assets owned by Fidelity Mutual either
directly, or indirectly through subsidiaries, partnerships or ventures in the
states of Arizona, Colorado, Connecticut, Florida, Georgia, Pennsylvania,
Tennessee and Texas.
41
<PAGE> 43
Beginning in mid-1995, in anticipation of the expiration date of
Ms. Dillon's Consulting Agreement in June of 1996, the management of the General
Partner has been considering a range of management alternatives for the
Properties. The General Partner has investigated possible local representation,
talked with firms who might fill the consulting role performed by Ms. Dillon and
interviewed a number of candidates as potential successor General Partners,
including Richard W. Sorenson, a member of the proposed New General Partner who
had been proposed to the Partnership as a possible successor General Partner by
Ms. Dillon. Mr. Sorenson was previously known to management of the General
Partner as a result of his involvement in the management, leasing, sale and
equity participation in other real estate investments with the General Partner
or its Affiliates.
During 1996 and 1997, management of the General Partner commissioned appraisals
of the Properties in an ongoing effort to assess their current market value and
the best ways to market and sell the Properties. The results of the appraisal
are discussed below under the heading "THE PROPERTIES-Appraisals".
The officers of the General Partner other than Mr. Mullin and Mr. Kelican are
not actively involved in the marketing, sale or management of the Properties.
Officers of the General Partner most recently inspected the Simpsonville and
Henry County properties in October, 1996 and February 1997. Meetings with
Owen-Faulkner and Associates, Urban Realty Advisors, Inc., Windsor/Aughtry
Company, the Henry County Development Authority, and Grubb & Ellis were
conducted during these inspections.
THE FOLLOWING DESCRIPTION OF THE GENERAL PARTNER'S INTENTIONS WITH RESPECT TO
MANAGEMENT AND MARKETING THE PROPERTIES REPRESENTS ITS CURRENT PLANS WITH
RESPECT THERETO. HOWEVER, THERE IS NO ASSURANCE THAT THESE PLANS WILL BE
IMPLEMENTED OR THAT, IF IMPLEMENTED, THEY WILL RESULT IN A SALE OR SALES OF THE
PROPERTIES.
PLANS OF CURRENT MANAGEMENT IF SECOND ALTERNATIVE AMENDMENTS ARE APPROVED
If the Second Alternative Amendments are approved by a majority in interest of
the Unit holders current management will continue its strategy of marketing
smaller parcels of each of the Properties.
PLANS OF CURRENT MANAGEMENT IF NEITHER SET OF ALTERNATIVE AMENDMENTS IS
APPROVED
If neither set of Alternative Amendments is approved, the General Partner will
implement the marketing plan set forth above as if the Second Alternative
Amendments were adopted and then, upon expiration of The Partnership term on
December 31, 1998 commence a liquidation of the Properties in accordance with
the Partnership Agreement.
42
<PAGE> 44
THE PROPERTIES
THE PROPERTIES
The Properties acquired by the Partnership consist of the following:
(i) +/-91 acres in Simpsonville (Greenville), South Carolina which was acquired
by the Partnership on June 6, 1988 for a total purchase price of $2,583,931;
+/-41 acres of this Property remains unsold.
(ii) +/-353 acres in Henry County, Georgia which was purchased by the
Partnership on July 18, 1988 for a total purchase price of $946,303; +/-180
acres of this Property remains unsold.
(iii) +/-135 acres in Nashville, Tennessee which was acquired by the Partnership
in two separate transactions in June 1988 for a total purchase price of
$4,521,723; +/-97 acres of this Property remains unsold.
1996 - 1997 SALES AND DISTRIBUTIONS
The Partnership closed a number of transactions in 1996, all relating to the
Simpsonville (Greenville), South Carolina Property. Earlier in the year, the
Partnership sold +/-1.457 acres for use as a Jameson Inn for $225,000
($155,000/acre) and +/-0.512 acres for use as a Baskin Robbins for $75,000
($146,000/acre). These two transactions resulted in a distribution of $34 per
Unit in March 1996.
The Partnership closed three transactions in late 1996. A group affiliated with
Publix grocery stores purchased +/-7.378 acres for $811,580 ($110,000/acre),
Belk department store purchased +/-3.725 acres (along with +/-10 acres from an
adjacent land owner) for $316,625 ($85,000/acre), and a group intending to
construct a Subway deli purchased +/-0.89 acres for $110,000 ($123,600/acre).
These sales resulted in a distribution of $100 per Unit in November 1996.
The Partnership has closed two transactions in 1997. The Partnership sold 32.514
acres of the Nashville, Tennessee Property for $50,000 per acre. This sale
enabled the General Partner to make a distribution of $150 per Unit in May
1997. The Partnership also completed the sale of a +/-1.0 acre portion of the
Simpsonville, South Carolina Property for $160,000 in May, 1997.
SIMPSONVILLE, SOUTH CAROLINA
Background
The Simpsonville Property is located on the east side of Fairview Road, and on
the southwest side of the frontage road of Interstate 385. Just north of the
Property is the intersection of Fairview Road and Interstate 385. Interstate 385
and Interstate 26 form the primary route between Greenville and Columbia, the
capital of South Carolina. Interstate 385, know locally as the "Golden Strip
Highway", is also a major commuter route between downtown Greenville and
43
<PAGE> 45
the residential communities to the south of Greenville. +/-49 acres of the
Property have been sold since its acquisition.
Simpsonville is one of the fastest growing areas in Greenville County. The
Greenville/Spartanburg area has established itself as a diverse industrial
manufacturing district with an international reputation.
The Partnership has sold various parcels, totaling +/-49 acres, to a number of
entities. In addition to the Walmart that was constructed on property purchased
from the Partnership, the proposed uses of land sold by the Partnership include
banks, fast-food restaurants, grocery and department stores. The emerging retail
center in the area is known as Fairview Park. Fairview Park is adjacent to
another retail center known as Fairview Station Shopping Center. Stores in
Fairview Station Shopping Center include Kmart, a grocery store, local retail
and restaurants.
Recent Developments
The General Partner has updated the site plan and established list prices for
the remaining land. Parcel sizes range from 1 to 20 acres with list prices from
$75,000 to $200,000 per acre. The General Partner recently renewed the listing
agreement for the Property through June 30, 1997.
The Partnership completed the sale of +/-1.0 acre of land adjacent to the
Subway site in May, 1997 for $160,000. The General Partner has been advised
that the proposed use for the site is a full service car wash.
The General Partner is currently considering an offer for approximately 16
acres, including all the remaining frontage on I-385. It is too early to
determine whether the final price and terms of this offer will be acceptable to
the General Partner.
Real Estate Market Conditions
The real estate market in the area surrounding the Property has been very active
in recent years. Eight nearby residential subdivisions accounted for nearly 25%
of the total lots approved by Greenville County in 1995. As a result of the
residential growth, commercial growth in the area has followed. The construction
of a new high school and an expansion of the local hospital are also strong
indicators of the growth the local area has experienced. Indications are that
the local economy will continue to develop, and the further development of
Fairview Park will likely be supported by residential growth in the community.
Appraisals & Valuations
The General Partner had the Simpsonville Property appraised in 1996 by Owen
Faulkner & Associates. The appraiser has no relationship with the General
Partner, the New General Partner or their Affiliates.
The table below details various valuations of the Simpsonville Property during
the term of the Partnership. The first value is the acquisition cost of the
Property, the second and third values are the conclusion of appraisals performed
on the Property in 1992 and 1996, and the last value is the current book value
of the Property.
<TABLE>
<CAPTION>
ACQUISITION (7/88) APPRAISAL (1992) APPRAISAL (1996) BOOK VALUE (12/96)
------------------ ---------------- ---------------- ------------------
<S> <C> <C> <C>
$2,583,931(+/- 91 acres) $3,373,000(+/- 86.6 acres) $3,300,000(+/- 47.5 acres) $1,135,331(+/- 42 acres)
$28,395/acre $38,950/acre $69,474/acre $27,032/acre
</TABLE>
44
<PAGE> 46
The difference between the 1996 and 1992 appraisals is a result of the success
of the Property as a retail location. There were relatively few sales of this
Property prior to 1992. Since the sale of land for the construction of a
Walmart, a Publix shopping center and a Belk department store, and the sale of
numerous smaller commercial lots, the demand for the Property, and accordingly
the value, has experienced a substantial increase.
The 1992 appraiser used the sales comparison (market) approach to value, which
uses sales of comparable land to estimate the value of the property. The other
two prevalent methods of valuation, cost and income, are inappropriate for land.
The appraiser's opinion was that approximately 20 acres of the Property had a
near term commercial use. The appraiser suggested that the remaining 65 acres be
held while the market absorbed the first 20 acres. The appraiser also estimated
the Property's present value using a discounted cash flow analysis for
comparison to the conclusions of the market approach. The absorption schedule
used for the present value analysis was based on the sale of 20 acres over five
(5) years with the remaining land valued in bulk. The appraiser reconciled the
amounts generated by the sales comparison approach and the discounted cash flow
analysis for the final value.
The 1996 appraiser, Owen Faulkner & Associates, used similar methods to value
the Property. The appraiser used the sales comparison (market) approach to
value. A present value analysis (discounted cash flow) was also conducted to
support the market approach and reconcile the final value. The appraiser used
the current marketing plan and comparable sales in the area to estimate the
value of tracts of the Property.
The General Partner has reviewed the conclusions of the 1996 appraisal and
believes it is a reasonable approximation of the Property's value.
HENRY COUNTY, GEORGIA
Background
The Henry County, Georgia Property is located surrounding two roads, Iris Lake
Road and Rabbit Run Road, in Henry County, Georgia. Henry County is located
southeast of the center of metropolitan Atlanta, Georgia.
As a result of sales of portions of the Property in prior years, the Property
now consists of two non-contiguous parcels of land. The larger parcel is located
on the east side of Iris Lake Road at the intersection of Whitaker Road. The
other parcel is located approximately one mile to the southeast of the Iris Lake
Road parcel on the east side of Rabbit Run Road.
Recent Developments
Late in 1996, discussions were held with two local residential developers
concerning this Property. These discussions did not materialize into offers to
purchase any portion of the Property.
The General Partner has been advised that Rabbit Run Road has been selected for
paving and improvement by the local municipality. Paving of the road will
permit the site to be platted and approved as a subdivision.
45
<PAGE> 47
Real Estate Market Conditions
The single-family market is the strongest segment of the real estate market in
the Atlanta area. The Greater Atlanta Home Builders Association reported that
31,326 single-family housing permits were issued in 1993, 32,453 permits were
issued in 1995, and 23,165 permits were issued between January 1996 and July
1996.
Phase II of the Kings Forest subdivision, being built on property purchased from
the Partnership, adjoins the Iris Lake Road parcel to the southeast. Although
the roads and improvements have been constructed and no home construction has
commenced, the General Partner has been advised that single-family homes with an
average price of $150,000 - $160,000 are planned. As of February, 1997, there
are only two available lots remaining in Phase I of Kings Forest. Another nearby
residential development, Bethany Crossing, is constructing single-family homes
priced below $100,000 immediately south of the Rabbit Run Road parcel.
Appraisals & Valuations
The General Partner had the Henry County Property appraised in 1997 by Urban
Realty Advisors, Inc. The appraiser has no relationship with the General
Partner, the New General Partner or their Affiliates.
The table below details various valuations of the Henry County Property during
the term of the Partnership. The first value is the acquisition cost of the
Property, the second and third values are the conclusion of appraisals performed
on the Property in 1992 and 1997, and the last value is the current book value
of the Property.
<TABLE>
<CAPTION>
ACQUISITION (7/88) APPRAISAL (1992) APPRAISAL (1997) BOOK VALUE (12/96)
------------------ ---------------- ---------------- ------------------
<S> <C> <C> <C>
$916,431 (+/- 353 acres) $1,575,000 (+/- 314 acres) $585,000 (+/- 180 acres) $379,794 (+/- 180 acres)
$2,596/acre $5,016/acre $3,250/acre $2,110/acre
</TABLE>
The most determinant factor in the difference of value between the 1996 and 1992
appraisals is the quality of the remaining land. The parcels sold of this
Property have generally been those that were more easily accessed and developed.
The remaining land at this Property is likely to be more difficult to develop.
Accordingly, the remaining land is less valuable on a per acre basis.
The 1992 appraiser utilized the sales comparison (market) approach to value the
Property. The appraiser used prior sales of the Partnership's Property, sales
of residential land in the surrounding area, and the list prices of residential
land for sale in the vicinity to determine market values for each tract of the
Property.
The 1996 appraiser, Urban Realty Advisors, Inc., also used the sales comparison
(market) approach to value the Property. Using sales of similar residential land
from the surrounding area, the appraiser determined an estimate of value for the
remaining Partnership land. The General Partner has reviewed the conclusions of
the 1996 appraisal and believes it is a reasonable approximation of the
Property's value.
46
<PAGE> 48
NASHVILLE, TENNESSEE
Background
The Nashville, Tennessee Property is located in the northeast and northwest
quadrants of the intersection of Sam Ridley Parkway and Interstate 24 in Smyrna,
Rutherford County, Tennessee. Rutherford County is located generally in the
geographic center of Tennessee, southeast of the downtown Nashville, which is
approximately 17 miles to the northwest. Rutherford County is the second most
populous county in the Nashville metropolitan area.
A sale to the Middle Tennessee Electric Membership Cooperative and a related
easement are the only transactions with respect to this Property to date. This
sale, conducted in mid-1995, consisted of the +/-4.24 acres furthest from
Interstate 24, along Sam Ridley Parkway, in the northwest quadrant of the
Property. The Property currently comprises +/-45.05 acres in the northeast
quadrant and +/-52.0 acres in the northwest quadrant.
Recent Developments
The intermittent discussions and negotiations about a sale of a portion of the
Property for use as an exposition center have been successful. In January, 1997,
the Partnership entered into a contract for the sale of 32.514 acres of the
Property at a price of $50,000 per acre. On April 30, 1997, settlement occurred
for 32.514 acres of the Property, resulting in gross sale proceeds of
$1,625,750. This transaction resulted in the distribution of $150 per
partnership unit.
As part of the consideration for the transaction, the purchaser is required to
construct a 450-foot access road, meeting the specifications of the local
municipality, on the Partnership's property adjacent to the exposition center
parcel. This access road will enable the partnership to market sites throughout
the property located on the northwest quadrant of Interstate 24 and Sam Ridley
Parkway. The exposition center should have a positive affect on the
marketability of all the remaining Partnership land in Nashville, TN.
Real Estate Market Conditions
A number of real estate sales, totaling at least 42 acres, occurred along Sam
Ridley Parkway close to Interstate 24 in 1996. The General Partner has been
advised that the intended uses for these properties include multi-family
housing, a restaurant, a real estate office, and a church. The size of the
properties include sold ranged from 16.62 acres to 1 acre at prices from $42,000
to $115,000 per acre. There was one sale of 1.15 acres in early 1996 for
$300,000. This site is the only site that is currently accessible in a planned
+/-11 acre commercial development.
Appraisals & Valuations
The General Partner had the Nashville Property appraised in 1996 by Martin
Appraisal Services. Except as described in the immediately following sentence,
the appraiser has no relationship with the General Partner, the New General
Partner or their Affiliates. From April, 1984 to August, 1987, the president of
Martin Appraisal Services served as a Vice President of SV, the predecessor of
SVC, which owns 49% of SMGT.
The table below details various valuations of the Nashville Property during the
term of the Partnership. The first value is the acquisition cost of the
Property, the second and third values are the conclusion of appraisals performed
on the Property in 1992 and 1996, and the last value is the current book value
of the Property.
47
<PAGE> 49
<TABLE>
<CAPTION>
ACQUISITION (7/88) APPRAISAL (1992) APPRAISAL (1996) BOOK VALUE (12/96)
------------------ ---------------- ---------------- ------------------
<S> <C> <C> <C>
$4,545,981 (+/- 135 acres) $1,100,000 (+/- 135 acres) $2,740,000 (+/- 130 acres) $1,065,354 (+/- 130 acres)
$33,674/acre $8,148/acre $21,077/acre $8,195/acre
</TABLE>
The difference between the 1996 and 1992 appraisals is a result of the improved
real estate market conditions and the methodologies of the two appraisers. Real
estate market conditions have improved in general and in the vicinity of the
Partnership's land. This is most clearly demonstrated by the recent sale of a
significant portion of the Property for use as an exposition center.
The 1992 appraiser used the sales comparison (market) approach to value the
Property. The appraisal also estimated the present value using a discounted cash
flow analysis to confirm the results of the market approach. In the discounted
cash flow analysis, the appraiser was very conservative in determining the
Property's present value, using a 20% discount rate for example. The appraiser
also deducted the estimated cost to bring utilities to the Property from the
final value.
The 1996 appraiser, Martin Appraisal Services, also used the sales comparison
(market) approach to value the Property in bulk. The appraiser also estimated
the value of the Property if developed and sold as lots to end users. The
appraiser was able to use several sales of land that occurred in the past few
years along Sam Ridley Parkway in the sales comparison approach. In the
development analysis, the appraiser evaluated the sale of tracts of land over a
three (3) year period and estimated the costs of necessary utility improvements.
Due to the short period of time estimated as an absorption period, the appraiser
did not discount the cash flow for the absorption period. In this and previous
communication, the General Partner has presented the estimated market value of
the Property using the bulk valuation approach.
The General Partner has reviewed the conclusions of the 1996 appraisal and
believes that based on the sale of 32.514 acres for $50,000 per acre a higher
total sale value may be realized for the Property.
THE APPRAISED VALUES OF ALL OF THE PROPERTIES DISCUSSED IN THIS SECTION DO NOT
REFLECT THE COSTS, EXPENSES AND COMMISSIONS WHICH WOULD BE INCURRED IN
CONNECTION WITH A SALE OF ANY OF THE PROPERTIES.
THE ALTERNATIVE AMENDMENTS
REASONS FOR AND BENEFITS OF EACH SET OF ALTERNATIVE AMENDMENTS
As part of its fiduciary responsibility to protect the assets of the Partnership
and further the business objectives of the Partnership, the General Partner is
offering the Limited Partners the opportunity to vote to extend the term of the
Partnership pursuant to either of the two sets of Alternative Amendments.
The General Partner believes that the current market value of the Properties is
below an amount which would return to the Limited Partners their Adjusted
Capital Contributions plus their Unpaid Cumulative Return. This assessment is
based upon 1996 and 1997 appraisals (See "THE PROPERTIES - Appraisals" below)
and the General Partner's inspection of the Properties and review of the
assumptions and conclusions of the appraisals with local real estate
professionals.
48
<PAGE> 50
The main purpose for and benefit of either of the sets of Alternative Amendments
is to provide the Partnership with an extended opportunity to improve the return
on the Limited Partners' investment, as the Partnership's original business
objectives will, in all likelihood, not be met within the existing term or in a
liquidation of the Partnership assets thereafter. The General Partner believes
that it is in the Partnership's best interests to extend the term of the
Partnership pursuant to either sets of Alternative Amendments, even though there
is no assurance that the return to the Limited Partners will be improved by
extending the term.
The General Partner decided to offer the Limited Partners an alternative to the
General Partner continuing for the extended term in response to requests by a
few Limited Partners for a new general partner following news of the conclusion
of Ms. Deborah Dillon's involvement with the Partnership (See "THE GENERAL
PARTNER - Consulting Relationship" below) and expressions of concern by other
Limited Partners as to the impact of Fidelity Mutual's ownership interest in the
General Partner (See "THE GENERAL PARTNER - Background" above).
BENEFITS OF ADOPTING FIRST ALTERNATIVE AMENDMENTS
- EXTENDED TIME TO REALIZE PARTNERSHIP'S INVESTMENT OBJECTIVES.
Under the First Alternative Amendments, the Partnership term would
be extended by 2 years to December 31, 2000, which would provide the
New General Partner additional time to improve the return on the
Limited Partners' investment. The value of the Properties has
fluctuated over the Partnership term (See "THE PROPERTIES - Appraisals"
below). The extended time period would give the New General Partner the
chance to implement its marketing plan to find prospective purchasers.
However, there is no assurance that purchasers will be found or that
the Partnership will be able to improve the return to the Limited
Partners within such extended time period (See "RISK FACTORS - First
Alternative Amendments" below). In light of the current valuation of
the Properties, it is unlikely that any sale of the Properties in the
near future will result in a net sales price which would return to the
Limited Partners a distribution equal to the Unpaid Cumulative Return
plus their Adjusted Capital Contributions.
- NEW MANAGEMENT.
The New General Partner has considerable experience in the
marketplace where the Property is located. The New General Partner has
no affiliation with Fidelity Mutual, the parent of the General Partner.
The New General Partner presents an opportunity to elect new management
for those Limited Partners who wish to extend the term of the
Partnership but may be concerned about the conclusion of Ms. Dillon's
consulting relationship with the General Partner or the impact of the
Rehabilitation of Fidelity Mutual on the General Partner. For the
relationship between Fidelity Mutual and the General Partner See "THE
GENERAL PARTNER Background" above.
49
<PAGE> 51
- ABILITY TO ACT QUICKLY ON PROSPECTIVE SALES.
In the case of the First Alternative Amendments, modifying the
requirement that a majority in interest of the Limited Partners consent
to a sale of all or substantially all the assets of the Partnership is
designed to facilitate potential sales of all or a portion of the
Properties which could be jeopardized as a result of the time and
complexity involved in obtaining Limited Partners' consent to the
transaction.
In light of the current valuation of the Properties, it is
unlikely that any sale of the Properties will result in a net sales
price which would return to the Limited Partners a distribution equal
to the Unpaid Cumulative Return plus their Adjusted Capital
Contributions. As a result, under the current Partnership Agreement,
the New General Partner would have to obtain the consent to any sale of
the Properties in their entirety or any sale of a portion of the
Properties which, in the judgment of the New General Partner, would
amount to a sale of all or substantially all the assets of the
Partnership.
BENEFITS OF ADOPTING SECOND ALTERNATIVE AMENDMENTS
- EXTENDED TIME TO REALIZE PARTNERSHIP'S INVESTMENT OBJECTIVES.
Under the Second Alternative Amendments, the Partnership term would
be extended by 2 years to December 31, 2000, which would provide the
General Partner additional time to improve the return on the Limited
Partners' investment. The value of the Properties has fluctuated over
the partnership term (See "THE PROPERTIES - Appraisals" below). The
extended time period would give the General Partner the chance to
continue to market the Property. However there is no assurance that
purchasers will be found or that the Partnership will be able to
improve the return to the Limited Partners within such extended time
period (See "RISK FACTORS - Second Alternative Amendments" below). In
light of the current valuation of the Properties, it is unlikely that
any sale of the Properties in the near future will result in a net
sales price which would return to the Limited Partners a distribution
equal to the Unpaid Cumulative Return plus their Adjusted Capital
Contributions.
- CONTINUITY OF MANAGEMENT
Under the Second Alternative Amendments, the General Partner is
willing to offer the Limited Partners the option of it continuing as
the General Partner for the same extended term as proposed for the New
General Partner and on similar terms and conditions if the Limited
Partners decide they wish to extend the term of the Partnership but
retain current management. The General Partner is also prepared to
extend its term only upon receipt of additional fees, commission and
rights to sell the Properties.
50
<PAGE> 52
In addition to the benefit of continuity of management, new fees
would not be payable to the General Partner until after the expiration
of the original Partnership term on December 31, 1998.
- ABILITY TO ACT QUICKLY ON PROSPECTIVE SALES.
In the case of the Second Alternative Amendments, eliminating the
requirement that a majority in interest of the Limited Partners consent
to a sale of all or substantially all the assets of the Partnership is
designed to facilitate potential sales of all or a portion of the
Properties which could be jeopardized as a result of the time and
complexity involved in obtaining Limited Partners' consent to the
transaction.
In light of the current valuation of the Properties, it is unlikely
that any sale of the Properties in the near future will result in a net
sales price which would return to the Limited Partners a distribution
equal to the Unpaid Cumulative Return plus their Adjusted Capital
Contributions. As a result, under the current Partnership Agreement,
the General Partner would have to obtain the consent to any sale of the
Properties in their entirety or any sale of a portion of the Properties
which, in the judgment of the General Partner, would amount to a sale
of all or substantially all the assets of the Partnership. There is
presently no definition of "all or substantially all the assets of the
Partnership" in the Partnership Agreement.
DIFFERENCES BETWEEN THE ALTERNATIVE AMENDMENTS
The terms of the First Alternative Amendments and the Second Alternative
Amendments are similar, with three principal exceptions:
- DIFFERENT GENERAL PARTNERS
Under the First Alternative Amendments, the New General Partner
would be substituted for the General Partner for the new term
of the Partnership Agreement, while under the Second Alternative
Amendments, the General Partner would continue in that capacity for
the new term.
- TIMING OF FEES
Under the First Alternative Amendments, management fees for the New
General Partner would commence as of the adoption of the First
Alternative
51
<PAGE> 53
Amendments, while the Second Alternative Amendments only permit the
current General Partner to begin receiving such fees following the
expiration of the current term of the Partnership Agreement.
- MODIFICATION VERSUS ELIMINATION OF LIMITED PARTNERS CONSENT
Under the First Alternative Amendments the requirement that a
majority in interest of the Limited Partners consent to a sale of all
or substantially all the assets of the Partnership under certain
circumstances would be modified to only require such consent if 60
percent or more of the real estate acreage of the Partnership as
of July 25, 1997 is sold at one time at a price which would fail to
return to the Limited Partners the Acquisition Cost of the assets sold,
while under the Second Alternative Amendments, the requirement that
Limited Partners' consent to sales of all or substantially all the
assets of the Partnership would be eliminated entirely.
FIRST ALTERNATIVE AMENDMENTS
SUBSTITUTION OF NEW GENERAL PARTNER
Southeast Acquisitions, Inc. would be removed as the General Partner of the
Partnership and SMGT would be substituted as the New General Partner effective
as of the date the First Alternative Amendments are adopted and the New General
Partner signs the Partnership Agreement.
SMGT was identified as the proposed New General Partner based on the experience
of its members in real estate transactions, their familiarity with the
marketplace in the Southeastern United States, prior dealings with the General
Partner and its Affiliates and intent to use the advisory services of Ms. Dillon
whose knowledge of the Property would provide some continuity to management of
the Property.
Although preliminary discussions were held with a number of candidates, the
General Partner has not engaged in a comprehensive search for a new general
partner. An extended search for other potential successor general partners was
not undertaken because of the evident qualifications of SMGT, the willingness of
SMGT to become a successor general partner, the difficulty an Affiliate of
the General Partner had experienced in attempting to locate a successor general
partner for another limited partnership and the reluctance of other candidates
to assume the risks of becoming general partner of the Partnership.
52
<PAGE> 54
SMGT is a Tennessee Limited Liability Company whose members are Richard W.
Sorenson, who owns a 51% interest in the company, and Southeast Venture
Corporation, a Tennessee corporation ("SVC") which owns 49% of SMGT.
Mr. Sorenson, a resident of Atlanta, Georgia, recently visited Columbia, South
Carolina to inspect the Property. In prior years, he has completed real estate
transactions and developed projects in Columbia and other areas in South
Carolina.
Mr. Sorenson, age 71, has over 35 years experience in several real estate
disciplines, including land acquisition and development, development of office
buildings, shopping centers, warehouses and medical facilities. All of these
activities occurred in the Southeastern United States.
Mr. Sorenson was President of Phoenix Investment Company ("Phoenix"), a publicly
owned, Atlanta based real estate development and investment firm from 1965 to
1970. Concurrent with his employment at Phoenix, he was President of First
Atlanta Realty Fund, a publicly owned real estate investment trust. During his
tenure with the trust, he served as a Trustee of the National Association of
Real Estate Investment Trusts.
Following his departure from Phoenix in 1970, Mr. Sorenson became Vice President
of Cousins Properties in Atlanta, Georgia, where he was responsible for
development of office buildings, shopping centers and apartments until 1971.
Until forming Southeast Venture Companies ("SV") in 1979, Mr. Sorenson was an
independent real estate developer.
Mr. Sorenson was co-founder of SV in 1979. In 1992, substantially all of the
assets of SV were sold to SVC.
Mr. Sorenson is a graduate of the Northwestern University Business School with a
major in real estate.
The other member of the New General Partner is SVC. SVC is a Nashville,
Tennessee-based full service real estate corporation involved in real estate
brokerage, property management and development of office buildings, hospitals,
medical buildings and other medical facilities. SVC was formed in 1992. Its
personnel include civil engineers, architects and other real estate
professionals whose services will be utilized by the New General Partner. The
officers and key employees of SVC include the following:
Paul J. Plummer, Age 47. Mr. Plummer serves as director of project management
services for SVC. Mr. Plummer is responsible for management, team structuring,
cost control and scheduling of large scale projects for SVC including office
buildings, medical centers, commercial office buildings, commercial land
ventures and build-to-suit projects. Before joining SV in 1986, Mr. Plummer
served as a partner and director of design for the Nashville-based architecture
and engineering firm of Gresham, Smith and Partners. In that capacity he was
responsible for the design and planning of over 15 major projects
53
<PAGE> 55
throughout the United States and Saudi Arabia. Mr. Plummer earned his bachelor
of architecture degree from the University of Kentucky and is a member of the
American Institute of Architects.
Wood S. Caldwell, Age 44. Mr. Caldwell is responsible for all site development
activities on behalf of commercial and health care clients of SVC, including
managing all design consultants, permitting, scheduling, budgeting and
construction management. He contributes to SVC's development team in the areas
of land planning, zoning, permitting, engineering and construction. Before
joining SV in 1985, Mr. Caldwell served as a professional engineer for Gresham,
Smith and Partners. As the prime site design engineer for Gresham, Smith and
Partners, Mr. Caldwell produced and coordinated site development plans for over
50 separate medical facilities in over 40 different communities throughout the
southeast, Mr. Caldwell earned his bachelor of engineering degree from the
Vanderbilt University School of Engineering.
Axson E. West, Age 43. Mr. West serves as vice president of brokerage services
for SVC, specializing in office and industrial leasing, improved property sales
and land disposition for several commercial and residential projects. Mr. West
has sold real estate and real estate securities since 1980 and, since joining SV
in 1988, he has been responsible for the disposition of land encompassing
industrial, office and retail developments. Mr. West is director of the
Nashville Board of Realtors and president elect of the board's commercial
investment division. He received his bachelor of arts degree from Vanderbilt
University and is a Certified Commercial Investment Member, a designation of the
Commercial Investment Real Estate Institute.
Cameron W. Sorenson, Age 35. Mr. Sorenson serves as director of vertical
development for SVC. He is primarily responsible for providing development and
project management for the clients of SVC. Prior to assuming these
responsibilities, Mr. Sorenson was project director for two large scale land
development ventures for SVC. Prior to joining SV in 1987, Mr. Sorenson was with
Trust Company Bank in Atlanta, as an officer in the National Division, managing
a credit portfolio in excess of $150 million. He received his bachelor of
science degree in finance from the MacIntyre School of Business at the
University of Virginia. Cameron Sorenson is the son of Richard W. Sorenson, the
individual, majority member of the New General Partner.
Neither SMGT nor any of its members owns directly or indirectly any Units.
For eleven years, Mr. Richard Sorenson has worked with Deborah Dillon, the
former President and consultant of the General Partner. (See "THE GENERAL
PARTNER - Former Management/Consulting Relationship" above).
Ms. Dillon has agreed to advise and consult with the New General Partner
concerning the Property on a continuing basis for which she will be compensated
by the New General Partner solely from a percentage of real estate commissions
earned by the New General
54
<PAGE> 56
Partner in connection with sales of Partnership property. Ms. Dillon or her
immediate family own 160 Units but have no ownership interest in the New General
Partner. Ms. Dillon has informed the General Partner that the 160 Units will be
voted in favor of the First Alternative Amendments.
The New General Partner does not have any interest in the General Partner or its
Affiliates. The General Partner has no interest in the New General Partner or
its Affiliates and will receive no consideration in the event the New General
Partner is substituted as a successor general partner. The General Partner and
New General Partner do not have any common officers or directors.
SMGT and Mr. Sorenson have entered into an agreement with the Partnership to
substitute SMGT as the New General Partner of the Partnership upon adoption of
the First Alternative Amendments. The agreement provides that, following such
approval, SMGT will execute the Partnership Agreement, thereby agreeing to be
bound by all the terms and conditions of the Partnership. Under the agreement,
SMGT and Mr. Sorenson have agreed to indemnify the Partnership from and against
any costs and expenses incurred by the Partnership in accordance with the
substitution in the event that SMGT defaults under the agreement. The
Partnership has also agreed to indemnify Mr. Sorenson against his costs and
expenses if the Partnership defaults under the agreement by refusing to allow
SMGT to assume the position of New General Partner if an affirmative vote of the
Units approves SMGT as the New General Partner. Under the agreement, SMGT has
also agreed to be substituted as general partner of two other limited
partnerships in which the General Partner also acts as general partner, if the
limited partners of such partnerships approve such substitution. SMGT's
potential substitution as the New General Partner of the Partnership is not
dependent upon its substitution as general partner in any of the other
partnerships.
SMGT HAS REPRESENTED TO THE PARTNERSHIP THAT THE FOLLOWING DESCRIPTION OF ITS
INTENTIONS WITH RESPECT TO MANAGING AND MARKETING THE PROPERTIES IF IT IS
APPOINTED THE NEW GENERAL PARTNER REPRESENTS ITS CURRENT PLANS WITH RESPECT
THERETO. HOWEVER, THERE IS NO ASSURANCE THAT ALL OR ANY OF THESE PLANS WILL BE
IMPLEMENTED, OR THAT, IF IMPLEMENTED, THEY WILL RESULT IN A SALE OR SALES OF THE
PROPERTIES.
Simpsonville, South Carolina. SMGT will undertake an evaluation to determine the
advisability of building an internal road through the remaining property,
beginning along the frontage road near the Walmart tract and ending along the
access road behind the Wachovia Bank site. This evaluation will determine
whether the small parcels created along both sides of the new road would
continue to demand prices in excess of $110,000 per acre which would more than
justify the cost to build such a road. The Simpsonville market remains very
strong and, other than an analysis of possible road improvements, no substantial
change in course is expected to be undertaken.
Nashville, Tennessee. Using SVC's engineers, architects, and other site
specialists, all property on both sides of the interstate will undergo a
development evaluation which considers site characteristics (road frontage, soil
and rock conditions, topography, and other factors) to formulate possible
development scenarios, utility and road access plans, etc. Simultaneously,
55
<PAGE> 57
SVC will be asked to undertake a detailed market evaluation to determine a
recommended utilization plan for the Property assuming completion of the Expo
center. While these activities are in process, there is likely to be sales
interest in small frontage sites which would be recommended if it did not
adversely impact the total plan.
Henry County, Georgia. The Henry County acreage is located in two non-contiguous
parcels. Before specific marketing plans can be created for the two parcels, the
New General Partner will evaluate utility and road access, floodplain (which
affects both parcels) and ascertain the highest and greatest residential density
possible for the parcels (not all parcels have been zoned). Only after the New
General Partner has determined the total number of housing units per usable acre
on each of the parcels will a market study be undertaken since residential land
is valued by the number of housing units it will yield. The assistance of area
brokers and agents will be utilized to market this Property.
EXTENSION OF PARTNERSHIP TERM
The term of the Partnership would be extended by 2 years from December 31, 1998
to December 31, 2000. This additional period may give the Partnership more
latitude and flexibility to negotiate a favorable sale or sales agreements to
maximize the value of the Properties to the Partnership and improve the return
to the Limited Partners. However, these can be no guarantee that the
Partnership will be able to realize a better sale price during such extended
period than it would during the period prior to the expiration of the current
term or in the course of the subsequent dissolution and liquidation of the
Partnership assets pursuant to the Partnership Agreement. Moreover, there is
also a risk that the Properties will decrease in value during any such extended
term.
The Partnership currently has a termination date of December 31, 1998. At that
point in time, if the term is not extended, the Partnership will dissolve and
any distributions will be made in accordance with a liquidation. Pursuant to the
Partnership Agreement, all distributions in a liquidation will be made in the
following priority; first to any debts or obligations of the Partnership (there
currently are none); next to a reserve, as determined by the General Partner, to
facilitate the liquidation of all the Partnership's assets; and, finally to the
partners.
AUTHORIZATION OF FEES AND COMMISSIONS FOR NEW GENERAL PARTNER
As part of the First Alternative Amendments, the Partnership Agreement will also
be amended to provide the following fees and commissions for the New General
Partner:
(i) Management Fees
Under the existing Partnership Agreement, the General Partner was entitled to
receive a management fee pursuant to Section 4.5(b) as follows:
"(b) For the services to be performed by the General Partner in connection with
the management and administration of the Partnership, the Partnership shall pay
the General Partner an annual management fee equal to -1/4 of 1% of the cost of
the Partnership's properties, commencing on the
56
<PAGE> 58
date hereof and continuing, with respect to each property, until such time as
the property is sold or improvement of the property commences by the
Partnership. In no event shall this fee, with respect to any property, exceed a
cumulative total of 2% of the original cost of the property. The management fee
shall be paid to the General Partner for such services on conclusion of each
calendar quarter. If the Partnership does not have sufficient cash to pay the
management fee for any quarter or if the Partnership's reserves are less than
- -1/2 of 1% of the Limited Partners' Capital Contributions, such fee shall be
accrued (without interest) as a debt of the Partnership, payable out of Sale or
Financing proceeds after the Limited Partners have received distributions in a
total amount equal to the aggregate amount paid by them to the Partnership for
their Units."
This provision resulted in payments to the General Partner of $18,753 per year
through 1996 for a total of $150,021. The General Partner has received the
maximum in fees currently authorized under the Partnership Agreement. This
Amendment would approve additional fees for the New General Partner at an annual
rate comparable to that originally authorized. The fees would commence as of the
date of authorization of the First Alternative Amendments and the execution by
the New General Partner of the Partnership Agreement and continue through the
end of the extended Partnership term.
The effect of the First Alternative Amendment would be that the Partnership
would pay an additional management fee to the New General Partner (assuming the
adoption of the First Alternative Amendments on September 3, 1997) of $6,194 in
1997, $19,000 in 1998, $19,000 in 1999 and $19,000 in 2000; provided that if the
Properties were sold in their entirety prior to December 31, 2000, the
Partnership would only pay the New General Partner a pro rata portion of the
applicable annual fee to the date of such sale. Unlike the current provisions of
the Partnership Agreement which defer payment of management fees if reserves are
insufficient and the limited partners have not received distributions equaling
the amount they paid for their Units, the new Management Fees would be payable
prior to any such distribution.
(ii) Commissions
The Partnership Agreement currently contains the following restrictions
on the General Partner's right to receive commissions in connection with the
sale of Partnership property, in Section 4.5(c):
"(c) If the General Partner or its Affiliates provide a substantial
amount of the services in the sales effort for the sale of a
Partnership property, they may receive up to one-half of the
competitive real estate commission (that real estate or brokerage
commission paid for the purchase or sale of property which is
reasonable, customary and competitive in light of the size, type and
location of the property), not to exceed 3%, which amount shall not
be paid until the Limited Partners have received distributions equal
to their Capital Contributions plus the Cumulative Annual Return. If
the General Partner or its Affiliates participate with an independent
broker on such sale, the subordination requirement shall apply only
to the commission earned by the General Partner or its Affiliates.
The total compensation paid to all persons for the sale of a
Partnership property shall be limited to a competitive real estate
commission, not to exceed 10% of the contract price for the sale of the
property, and if such
57
<PAGE> 59
compensation to all Persons for the sale of a Partnership property exceeds 6%,
the, notwithstanding the other provisions of this Section 4.5(c), the General
Partner and its Affiliates shall not receive any compensation for such sale and
such compensation for such sale shall be paid only to Persons other than the
General Partner and its Affiliates."
The First Alternative Amendments would provide that the total compensation paid
to all persons, including the New General Partner, for the sale of Partnership
property shall be limited to a competitive real estate commission or disposition
fee not to exceed 10% of the contract sales price of the Properties. Unlike
current provisions of the Partnership Agreement, which defer payment of
commissions until after the Limited Partners have received distributions equal
to their Capital Contributions plus the Cumulative Annual Return, the New
General Partner will be able to realize the commission or disposition fee
immediately upon any such sale.
The following table sets forth the proposed commissions and management
fees to be paid to the New General Partner under the First Alternative
Amendments
PROPOSED COMMISSIONS AND MANAGEMENT FEES TO BE PAID TO NEW GENERAL PARTNER
UNDER FIRST ALTERNATIVE AMENDMENTS
<TABLE>
<CAPTION>
YEAR AMOUNT OF COMMISSION TOTAL COMMISSION MANAGEMENT FEE TOTAL POSSIBLE MANAGEMENT
FEE
<S> <C> <C> <C> <C>
1997 Commission equal to competitive Depends on sale $6,194
real estate commission or disposition fee, price of Property
the commission paid to all Persons
including New General Partner not to
exceed 10% of contract price for Property
- -----------------------------------------------------------------------------------------------------------------------------
1998 Same as 1997 Same $19,000.00/ annum *
- -----------------------------------------------------------------------------------------------------------------------------
1999 Same as 1997 Same $19,000.00/ annum *
- -----------------------------------------------------------------------------------------------------------------------------
2000 Same as 1997 Same $19,000.00/ annum *
- -----------------------------------------------------------------------------------------------------------------------------
1997-2000 $63,194 **
</TABLE>
- ------------------
* or pro rata portion of fee if the Properties are sold before the end of the
year.
** or lesser amount, depending on a pro rata reduction if the Property is sold
before 12/31/00
EXCLUSIVE RIGHT TO SELL THE PROPERTIES
The Partnership Agreement provides in Section 4.3(g):
"The Partnership shall not give the General Partner or its Affiliates an
exclusive right to sell or exclusive employment to sell properties for the
Partnership."
The First Alternative Amendments would delete Section 4.3(g) from the
Partnership Agreement in its entirety and expressly provide that the New General
Partner or an Affiliate would have the right to be given an exclusive right to
sell or exclusive employment to sell the Properties.
Section 4.2(a) "AUTHORITY OF GENERAL PARTNER" would be amended to add the
following provision, "(xiii) Reserve to itself or an Affiliate or enter into a
contract for the exclusive right to sell or exclusive employment to sell
property for the Partnership"
The foregoing amendments to Sections 4.3(g) and 4.2(a) are designed both as an
incentive to the New General Partner to continue as general partner and to
facilitate sales of the Properties.
MODIFICATION OF REQUIREMENT THAT LIMITED PARTNERS CONSENT TO SALE OF ALL OR
SUBSTANTIALLY ALL OF ASSETS OF THE PARTNERSHIP
The Partnership Agreement currently provides in Section 4.3(b):
"(b) Without the Consent of a majority in interest of the Limited Partners, the
General Partner shall not have the authority to sell all or substantially all
the assets of the Partnership in a single sale, except that the General Partner
may sell such assets without such consent (A) in connection
58
<PAGE> 60
with the liquidation of the Partnership under Section 3.1, will be sufficient to
provide the Limited Partners with distributions equal to the Unpaid Cumulative
Return plus their Adjusted Capital Contributions."
There is presently no definition of "all or substantially all the assets of the
Partnership" in the Partnership Agreement. As a result, there is continuing
uncertainty as to whether a vote of Limited Partners is required for certain
sales of the Properties. This uncertainty can lead to the possible delay, or
even loss of a sale since the General Partner may be forced to obtain a vote of
Limited Partners in order to resolve the uncertainty. The First Alternative
Amendments would add a definition of "all or substantially all the assets of the
Partnership" to mean 60% or more of the real estate acreage held by the
Partnership as of July 25, 1997.
The effect of adding the definition would be to permit the New General Partner
to sell the Properties, or portions thereof in a combination of sales amounting
to less than 60% of the acreage of the Partnership as of July 25, 1997, without
limitation as to price, other than general limitations imposed by its fiduciary
duty to the Partnership and its assets, without obtaining the consent of a
majority in interest of the Limited Partners. The modification of the
Partnership Agreement could not only result in sales of the Properties, or
portions thereof which, if the parcels sold constituted less than 60% of the
real estate acreage held by the Partnership on the date of this Proxy Statement,
would fail to return to the Limited Partners the Unpaid Cumulative Return plus
their Adjusted Capital Contributions, but such sales could also potentially be
below the recent appraised value discussed above under the heading "THE
PROPERTIES."
The additional modification of Section 4.3(b) would delete the phrase "Unpaid
Cumulative Return plus their Adjusted Capital Contributions" and insert
"Acquisition Cost of the assets sold."
"Acquisition Cost" will be defined in the First Alternative Amendments as "with
respect to a Partnership asset, the price originally paid by the Partnership to
acquire the asset, including the value of any mortgages or liens on the asset
assumed by the Partnership at the time of acquisition, excluding points and
prepared interest."
The effect of adding this definition is that, even if a sale or disposition of a
portion of the Properties constituted 60% or more of the assets of the
Partnership, Limited Partners' consent to the sale or disposition would only be
required if such sale were below an amount which would return to the Limited
Partners the Acquisition Cost of such assets rather than below an amount which
would return to the Limited Partners the Unpaid Cumulative Return plus their
Adjusted Capital Contributions.
SECOND ALTERNATIVE AMENDMENTS
EXTENSION OF PARTNERSHIP TERM
The term of the Partnership would be extended by 2 years from December 31, 1998
to December 31, 2000. The extended termination date is identical to that
proposed for the New General
59
<PAGE> 61
Partner under the First Alternative Amendments. This additional period may give
the Partnership more latitude and flexibility to negotiate a favorable sales or
sales agreements to maximize the value of the Properties to the Partnership and
improve the return to the Limited Partners. However, there can be no assurance
that the Partnership will be able to realize a higher sales price than could be
achieved by the General Partner during the period prior to the expiration of
the current term of in the course of the subsequent dissolution and liquidation
of the Partnership assets pursuant to the Partnership Agreement. There is also
a risk that the Properties will continue to decrease in value during any such
extended term.
The Partnership currently has a termination date of December 31, 1998. At that
point in time, if the term is not extended, the Partnership will dissolve and
any distributions will be made in accordance with a liquidation. Pursuant to the
Partnership Agreement, all distributions in a liquidation will be made in the
following priority: first to any debts or obligations of the Partnership (there
currently are none); next to a reserve, as determined by the General Partner, to
facilitate the liquidation of all the Partnership's assets; and, finally, to the
partners.
AUTHORIZATION OF FEES AND COMMISSIONS FOR GENERAL PARTNER
The Partnership Agreement will also be amended to provide that the General
Partner will be entitled to fees and commission as described below, commencing
on January 1, 1999. The fee and commission structure is identical to that
proposed for the New General Partner under the First Alternative Amendments,
except that they may not be earned the General Partner prior to the expiration
of the current term of the Partnership Agreement on December 31, 1998.
(i) Management Fees
Under the existing Partnership Agreement, the General Partner was entitled to
receive a management fee pursuant to Section 4.5(b) as follows:
"(b) For the services to be performed by the General Partner in
connection with the management and administration of the Partnership,
the Partnership shall pay the General Partner an annual management
fee equal to -1/4 of 1% of the cost of the Partnership's properties,
commencing on the date hereof and continuing, with respect to each
property, until such time as the property is sold or improvement
of the property commences by the Partnership. In no event shall this
fee, with respect to any property, exceed a cumulative total of 2% of
the original cost of the property. The management fee shall be paid
to the General Partner for such services on conclusion of each
calendar quarter. If the Partnership does not have sufficient cash to
pay the management fee for any quarter or if the Partnership's
reserves are less than -1/2 of 1% of the Limited Partners' Capital
Contributions, such fee shall be accrued (without interest) as a debt
of the Partnership, payable out of sale or Financing proceeds after
the Limited Partners have received distributions in a total amount
equal to the aggregate amount paid by them to the Partnership for
their Units."
This provision resulted in payments to the General Partner of $18,753 per year
through 1996 for a total of $150,021. The General Partner has received the
maximum in fees currently authorized under the Partnership Agreement. This
Amendment would approve additional fees for the
60
<PAGE> 62
General Partner at an annual rate comparable to that originally authorized. The
fees would commence as of January 1, 1999 and continue through the end of the
extended Partnership term.
The effect of the Second Alternative Amendments would be that the Partnership
would pay an additional management fee to the General Partner of $0 in 1997, $0
in 1998, $19,000 in 1999 and $19,000 in 2000; provided that if the Properties
were sold in their entirety prior to December 31, 2000, the Partnership would
only pay the General Partner a pro rata portion of the applicable annual fee to
the date of such sale. Unlike the current provisions of the Partnership
Agreement which defer payment of management fees if reserves are insufficient
and the Limited Partners have not received distributions equaling the amount
they paid for their Units, the new Management Fees would be payable prior to any
such distribution.
(ii) Commissions
The Partnership Agreement currently contains the following restrictions on the
General Partner's right to receive commissions in connection with the sale of
Partnership property, in Section 4.5(c):
"(c) If the General Partner or its Affiliates provide a substantial
amount of the services in the sales effort for the sale of a
Partnership property, they may receive up to one-half of the
competitive real estate commission (that real estate or brokerage
commission paid for the purchase or sale of property which is
reasonable, customary and competitive in light of the size, type and
location of the property), not to exceed 3%, which amount shall not be
paid until the Limited Partners have received distributions equal to
their Capital Contributions plus the Cumulative Annual Return. If the
General Partner or its Affiliates participate with an independent
broker on such sale, the subordination requirement shall apply only to
the commission earned by the General Partner or its Affiliates. The
total compensation paid to all persons for the sale of a Partnership
property shall be limited to a competitive real estate commission, not
to exceed 10% of the contract price for the sale of the property, and
if such compensation to all Persons for the sale of a Partnership
property exceeds 6%, them, notwithstanding the other provisions of this
Section 4.5(c), the General Partner and its Affiliates shall not
receive any compensation for such sale and such compensation for such
sale shall be paid only to Persons other than the General Partner and
its Affiliates."
The Second Alternative Amendments would delete Section 4.5(c) from the
Partnership Agreement in its entirety. The Amendments would also provide that
the total compensation paid to all persons, including the General Partner for
the sale of Partnership property shall be limited to a competitive real estate
commission or disposition fee not to exceed 10% of the contract sales price of
the Properties. Unlike the current provisions of the Partnership Agreement,
which defer payment of commissions until after the Limited Partners have
received distributions equal to their Capital Contributions plus the Cumulative
Annual Return, the General Partner will be able to realize the commission or
disposition fee immediately upon any such sale.
The following table sets forth the proposed commission and management
fees to be paid to the General Partner under the Second Alternative Amendments.
<TABLE>
<CAPTION>
YEAR AMOUNT OF COMMISSION TOTAL COMMISSION MANAGEMENT FEE TOTAL POSSIBLE MANAGEMENT
FEE
<S> <C> <C> <C> <C>
1997 Commission equal to competitive Depends on sale None
real estate commission or disposition price of Property
fee, the commission paid to all
Persons including General Partner
not to exceed 10% of contract price
for Property
- --------------------------------------------------------------------------------------------------------------------------
1998 Same as 1997 Same None
- --------------------------------------------------------------------------------------------------------------------------
1999 Same as 1997 Same $19,000/ annum *
- --------------------------------------------------------------------------------------------------------------------------
2000 Same as 1997 Same $19,000/ annum *
- --------------------------------------------------------------------------------------------------------------------------
1997-2000 $38,000 **
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* or pro rata portion of fee if the Properties are sold before the end of the
year.
** or lesser amount, depending on a pro rata reduction if the Property is sold
before 12/31/00
61
<PAGE> 63
EXCLUSIVE RIGHT TO SELL THE PROPERTIES
The Partnership Agreement also provides in Section 4.3(g) "The Partnership shall
not give the General Partner or its Affiliates an exclusive right to sell or
exclusive employment to sell property for the Partnership."
The First Alternative Amendments would delete Section 4.3(g) from the
Partnership Agreement in its entirety and expressly provide that the General
Partner or an Affiliate would have the right to be given an exclusive right to
sell or exclusive employment to sell the Properties.
Section 4.2(a) "AUTHORITY OF GENERAL PARTNER" would be amended to add the
following provision: "(xiii) Reserve to itself or an Affiliate or enter into a
contract for the exclusive right to sell or exclusive employment to sell
property for the Partnership."
The foregoing amendments to Sections 4.3(g) and 4.2(a) are designed both as an
incentive to the General Partner to continue as general partner and to
facilitate sales of the Properties.
ELIMINATION OF REQUIREMENT THAT LIMITED PARTNERS CONSENT TO SALE OF ALL OR
SUBSTANTIALLY ALL OF ASSETS OF THE PARTNERSHIP
The Partnership Agreement currently provides in Section 4.3(b):
"(b) Without the Consent of a majority in interest of the Limited
Partners, the General Partner shall not have the authority to sell all
or substantially all the assets of the Partnership in a single sale,
except that the General Partner may sell such assets without such
consent (A) in connection with the liquidation of the Partnership under
Section 5.4 or (B) if the net proceeds of such sale, when distributed
in accordance with Section 3.1, will be sufficient to provide the
Limited Partners with distributions equal to the Unpaid Cumulative
Return plus their Adjusted Capital Contributions."
The Second Alternative Amendments would delete subsection 4.3(b) in its
entirety.
The effect of the deletion would be to permit the General Partner to sell the
Properties in one or more sales without limitation as to price, other than
general limitations imposed by its overall fiduciary responsibility to the
Partnership and its assets, without obtaining the consent of a majority in
interest of the Limited Partners. The deletion of this provision could not only
result in sales which would fail to return to the Limited Partners the Unpaid
Cumulative Return plus their Adjusted Capital Contributions, but could also
result in the sale of all or a portion of the Properties at below their more
recent appraised values discussed above under the heading "THE PROPERTIES -
Appraisals".
FEDERAL TAX CONSEQUENCES; LEGAL OPINION
The Partnership has obtained an opinion from legal counsel as of the date of
this Proxy Statement that neither of the Alternative Amendments would cause: (i)
a material adverse effect on the Limited Partners by reason of a termination of
the Partnership for Federal income tax purposes; or (ii) the Partnership to be
treated as an association taxable as a corporation for Federal income tax
purposes. The opinion is enclosed as Exhibit D to this Proxy Statement. If for
some reason such legal counsel cannot restate the contemplated opinion on the
date of the Special Meeting, the General Partner would adjourn the Special
Meeting to a later date or cancel it.
ELIGIBLE UNITS
The presence, in person or by proxy, of Limited Partners holding more than 50%
of the total number of outstanding Units that Limited Partners hold will
constitute a quorum at the Special Meeting. An assignee of Units that the
General Partner has not admitted to the Partnership as a Limited Partner,
however, will be unable to vote at the Special Meeting. Such assignee's Units
will also not be considered outstanding for purposes of determining whether a
quorum exists at the Special Meeting or whether the Limited Partners approve one
of the Alternative Amendments. Additional Units acquired by a Limited Partner
with respect to which the General Partner has not admitted such Limited Partner
to the Partnership will also not be considered outstanding for purposes of the
Special Meeting and the Limited Partner will be unable to vote such Units.
The General Partner has admitted to the Partnership as Limited Partners all
assignees of Units as of the Record Date. As of the Record Date, there were
9,650 Units that Limited Partners held that were eligible to vote at the
Special Meeting.
62
<PAGE> 64
VOTING
RECORD DATE. The General Partner has established the close of business on July
25, 1997 as the Record Date for determining the Limited Partners entitled to
notice of, and to vote at, the Special Meeting and at any adjournment thereof.
On that date, the Partnership had issued and outstanding 9,650 Units. No matters
other than the sets of Alternative Amendments and certain procedural matters may
be discussed or voted upon at the Special Meeting. For either of the Alternative
Amendments to take effect, the Limited Partners must vote more than 50% of the
total number of outstanding Units in favor of one of the sets of Alternative
Amendments at the Special Meeting. Limited Partners will possess one vote for
each Unit eligible to be voted that they hold.
VOTE CONDITIONED ON ADOPTION OF ALL OF AMENDMENTS IN EITHER THE FIRST OR SECOND
ALTERNATIVE AMENDMENTS. Limited Partners may vote in favor of or against or
abstain from voting with respect to each of the amendments contained in the
proposed sets of Alternative Amendments. However, the adoption of any amendment
contained in a set of Alternative Amendments is conditioned upon the adoption of
all of the amendments within that set of Alternative Amendments. In order to be
adopted, all of the amendments contained in a set of Alternative Amendments must
receive at least 50% of the votes of limited partnership Units eligible to vote.
REQUIRED VOTE. In the event both sets of Alternative Amendments received in
excess of 50% of the votes of limited partnership units eligible to vote, the
set of Alternative Amendments receiving the most votes in excess of 50% will be
adopted.
EQUAL NUMBER OF VOTES CAST. In the event of an equal number of votes being cast
sufficient for the adoption of both sets of Alternative Amendments, the General
Partner will determine a method of random selection and select the set of
Alternative Amendments to be adopted pursuant thereto.
NO INDICATION OF VOTE. If a Limited Partner returns a signed proxy card without
indicating how such Limited Partner wishes to vote on either the First
Alternative Amendments or the Second Alternative Amendments, the vote will be
counted as a vote for both sets of Alternative Amendments.
IF NEITHER ALTERNATIVE AMENDMENT ADOPTED. If neither the First Alternative
Amendments nor the Second Alternative Amendments receives the affirmative vote
of a majority in interest of the Units, the General Partner will continue to act
as general partner of the Partnership in accordance with the Partnership
Agreement.
63
<PAGE> 65
ABSTENTIONS/BROKER NON-VOTES. With respect to each set of Alternative
Amendments, abstentions and broker non-votes will have the same effect as a
vote against approval because more than 50% of the total number of outstanding
eligible Units must approve a set of Alternative Amendment, rather than just a
majority of those eligible Units present at the Special Meeting.
APPRAISAL RIGHTS
Section 17-212 of the Delaware Revised Uniform Limited Partnership Act provides
that a partnership agreement may provide for contractual appraisal rights for a
partnership interest in a limited partnership held by any class, group of
partners, or partnership interests in connection with the amendment of a
partnership agreement. Dissenters' rights granted to holders of corporate
securities by state statute are not provided to limited partners under the
Delaware Revised Uniform Limited Partnership Act. The Partnership Agreement does
not provide for contractual appraisal rights in connection with the Alternative
Amendments. Therefore, Limited Partners who oppose the Alternative Amendments
will not have the right to dissent and demand payment in cash for the fair value
of their Units.
PROXIES
Proxyholders will vote the eligible Units represented by valid proxies at the
Special Meeting in accordance with the directions given on the Proxy Card and
this Proxy Statement concerning whether to approve one of the Alternative
Amendments. Moreover, the proxyholders intend to vote such Units on any
procedural matters coming before the Special Meeting in accordance with their
best judgment. Unless indicated to the contrary thereon, the directions given on
a Limited Partner's Proxy Card will be for all of such Limited Partner's
eligible Units.
If a Limited Partner signs and returns a Proxy Card without giving any
directions on how to vote on the Alternative Amendments, the Proxyholder will
vote such Limited Partner's eligible Units in favor of both Sets of Alternative
Amendments.
REVOCATION OF PROXIES
A Limited Partner may revoke its proxy at any time prior to the proxyholder's
voting of the Units to which such proxy applies by: (i) submitting a later dated
proxy to the Information Agent, (ii) attending the Special Meeting and
delivering a written notice of revocation of the proxy to the representative of
the Information Agent present at the Special Meeting, or (iii) delivering a
written notice of revocation of the proxy to the Information Agent at the
address set forth herein, which the Information Agent receives on or before
September 2, 1997.
64
<PAGE> 66
INFORMATION AGENT
The Partnership has retained the Information Agent to distribute the attached
letter from the General Partner, the attached notice of the Special Meeting,
this Proxy Statement, and the Proxy Card (the "Proxy Materials") and to collect
completed Proxy Cards. Pursuant to the requirements of the Partnership
Agreement, the Information Agent has mailed these documents, by certified mail,
to each Limited Partner as of the Record Date at his record mailing address. As
a result, the Information Agent has also distributed the Proxy Materials to
various banks, brokerage firms, and other custodians, nominees, and fiduciaries
that may hold Units on behalf of beneficial owners (collectively, the "Nominee
Holders"). The Partnership will pay the Information Agent a fee of approximately
$3,300 for such services and reimburse it for its out-of-pocket expenses. The
Partnership will also reimburse Nominee Holders for the reasonable expenses that
they incur when forwarding the attached letter from the General Partner and the
Proxy Materials to the beneficial owners of the Units.
SOLICITATIONS BY THE GENERAL PARTNER
The directors, officers, and employees of the General Partner may solicit
proxies with respect to the Alternative Amendments by mail, personal interview,
telephone, facsimile transmission, or other means. They will receive no
additional compensation therefor.
OWNERSHIP OF UNITS
The following table sets forth certain information regarding the beneficial
ownership of the Units and the capital stock of the General Partner (the "SEA
Shares"), respectively, as of July 25, 1997 by: (i) all persons who are
beneficial owners of 5% or more of the Units or the SEA Shares, respectively,
(ii) all directors and executive officers of the General Partner, and (iii) all
directors and executive officers of the General Partner as a group. The General
Partner does not itself own any Units but does hold a partnership interest as a
general partner. The disclosure that no person is the beneficial owner of 5% or
more of the Units is based upon the Partnership not having received any
Schedules 13D or 13G to the contrary on or before July 25, 1997. Unless stated
otherwise, the persons named below possess sole voting and investment power with
respect to the securities set forth opposite their names.
<TABLE>
<CAPTION>
UNITS SEA SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ------ ------- ------ ---------
<S> <C> <C> <C> <C>
Fidelity Enterprises, Inc. 100 100%
Radnor, PA 19087
</TABLE>
EXPERTS
The financial statements of the Partnership at December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996 incorporated
herein by reference have been
65
<PAGE> 67
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated by reference herein in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
Representatives of the firm of Ernst & Young LLP are expected to be present in
person or by telephone at the Special Meeting and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information that the Partnership has filed with the
Commission may be inspected and copied at the public reference facilities that
the Commission maintains at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at the Commission's regional offices located at Room 3190, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. In addition, such reports,
proxy statements, and other information concerning the Partnership may be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates. Additionally, the Partnership's reports, proxy
statements, and other information filed with the Commission may also be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005. They may also be accessed through the Commission's website
at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Partnership hereby incorporates herein by reference the Financial
Information (as hereinafter defined) appearing in: (i) the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, Commission File No.
0-17680, (as amended on July 15, 1997) and (ii) the Partnership's periodic
reports and amendments, if any, thereto, filed with the Commission under the
Exchange Act after the date hereof but on or before the Special Meeting. The
Partnership also hereby incorporates herein by reference any current reports
filed with the Commission after the date hereof but on or before the Special
Meeting. Any statement contained herein or in a document incorporated by
reference herein, however, shall be deemed to be modified or superseded for the
purposes of this Proxy Statement to the extent that a statement contained in a
subsequently dated document that is considered part of this Proxy Statement is
inconsistent therewith. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement. The term "Financial Information" shall mean any financial
statements, supplementary financial information, and management discussion and
analysis of financial condition and results of operations.
Upon request and without charge, the Partnership will send to any Limited
Partner a copy of any document incorporated herein by reference, excluding any
exhibits to such document. Any such request should be made to the General
Partner at the address or telephone number set forth on the back cover page of
this Proxy Statement. The General Partner will fulfill each such request by
66
<PAGE> 68
mailing the requested document to the requesting Limited Partner by first class
mail within one business day after receiving the request. Requests should be
made to Marget M. Tamasitis, Secretary, Southeast Acquisitions, Inc., 250 King
of Prussia Road, Radnor, PA 19087 (610) 964-7234.
67
<PAGE> 69
APPENDIX I
GLOSSARY OF TERMS
The following terms shall have the meanings specified in this Appendix for the
purpose of the foregoing Proxy Statement.
"Acquisition Cost" means the price originally paid for a Partnership asset,
including the value of any mortgages or liens on the asset assumed by the
Partnership at the time of acquisition, excluding points and prepaid interest.
"Adjusted Capital Contributions" means an amount equal to $4,225,000 reduced by
an amount equal to all distributions (other than distributions of operational
cash flow) made to the Limited Partners under Section 3.1(b), but in no event an
amount less than zero.
"Affiliate" or "Affiliated Person" of a specified Person means (i) and Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the specified Person; (ii) any
Person owning or controlling 10% or more of the outstanding voting securities of
the specified Person; (iii) any officer, director, or partner of the specified
Person; and (iv) if the specified Person is an officer, director or partner, any
company for which such a Person acts in any such capacity.
"Alternative Amendments" means the proposed First Alternative Amendments and
Second Alternative Amendments to the Partnership Agreement of Southeast
Acquisitions I L.P.
"Capital Contribution" means the total amount of money (and the initial Gross
Asset Value of any property other than money) contributed to the Partnership
(prior to the deduction of any selling commissions, selling allowances or
selling expenses) by any Partner or all the Partners (or the predecessor holders
of the Interests of any Partner or Partners).
"Commission" means The Securities and Exchange Commission.
"Consulting Agreement" means the Consulting Agreement between Deborah J. Dillon,
and the General Partner by which Ms. Dillon agreed to act as Director of
Operations under a performance-based consulting agreement.
"Closing Date" means the date on which subscriptions for all 4,225 Units are
accepted by the General Partner, and the subscribers therefor are admitted as
Limited Partners.
"Cumulative Annual Return" means an amount equal to 10% per year simple interest
on the Adjusted Capital Contributions of the Limited Partners, calculated from
the earlier of (i) the end of the calendar quarter in which the Capital
Contributions are made or (ii) the Closing Date.
"Exchange Act" means The Securities and Exchange Act of 1934, as amended.
68
<PAGE> 70
"Fidelity Mutual" means Fidelity Mutual Life Insurance Company, in
Rehabilitation, which indirectly owns the General Partner.
"Financial Information" means any financial statements, supplementary
information, and management discussion and analysis of financial condition and
results of operations.
"First Alternative Amendments" means the proposed set of Alternative Amendments
set forth on pages B1-B4 of Exhibit B hereto.
"General Partner" means Southeast Acquisitions, Inc., a Delaware corporation.
"Information Agent" means D.F. King & Co., Inc.
"Kaiser" means Kaiser Steel Corporation
"Limited Partners" means the limited partners of Southeast Acquisitions II, L.P.
"New General Partner" means Southern Management Group of Tennessee, LLC, a
Tennessee Limited Liability Company.
"Nominee Holders" means banks, brokerage firms, custodians, nominees, and
fiduciaries that may hold Units on behalf of beneficial owners in Southeast
Acquisitions II, L.P.
"Partnership Agreement" means the Partnership Agreement of Southeast
Acquisitions II, L.P.
"Partnership" means Southeast Acquisitions II, L.P.
"Phoenix" means Phoenix Investment Company, a publicly owned Atlanta based real
estate development company and investment firm.
"Plan" means the plan of Rehabilitation for Fidelity Mutual.
"Property/Properties" means the properties acquired by Southeast Acquisitions
II, LP in the states of Georgia, South Carolina; and Tennessee, either
referred to individually as "Property" or collectively as the "Properties".
"Proxy Card" means the proxy card distributed to all Limited Partners of Record
for the purpose of instructing proxy-holders how to vote a Limited Partner's
Units with respect to the Alternative Amendments if that partner cannot attend
the vote personally.
"Proxy Materials" means collectively, the notice of the Special Meeting, the
Proxy Statement, and Proxy Card distributed by the Partnership through its
Information Agent.
"Proxy Statement" means materials distributed by the Partnership to all Limited
Partners concerning the vote on the Alternative Amendments.
69
<PAGE> 71
"Record Date" means July 25, 1997.
"Rehabilitation" means the State directed rehabilitation of Fidelity Mutual.
"SEA Shares" means the beneficial ownership of the public offering of 9,650
units of limited partnership interest, and the capital stock of the General
Partner.
"Second Alternative Amendments" means the proposed set of Alternative Amendments
set forth on pages B4-B6 of Exhibit B hereto.
"SMGT" means Southern Management Group of Tennessee, LLC
"Special Meeting" means the meeting held at 10:00 a.m. (Central Daylight Savings
Time) on Wednesday, September 3, 1997 to consider and vote upon Alternative
Amendments to the Partnership Agreement.
"SV" means Southeast Venture Companies.
"SVC" means Southeast Venture Corporation, Inc., a Tennessee corporation which
owns 49% of SMGT.
"Units" means the units of limited partnership in the Partnership.
"Unpaid Cumulative Return" means an amount, determined as of the date of the
Partnership's receipt of Sale or Financing proceeds, equal to the Cumulative
Annual Return as of such date less the sum of all distributions to the Limited
Partners before such date under Section 3.1(a), but in no event less than zero.
70
<PAGE> 72
EXHIBIT A
PARTNERSHIP AGREEMENT
<PAGE> 73
TABLE OF CONTENTS
PAGE
INTRODUCTION ................................................. A-1
ARTICLE I ORGANIZATION .......................... A-1
1.1 Continuation .......................... A-1
1.2 Name .................................. A-1
1.3 Term .................................. A-1
1.4 Place of Business ..................... A-1
1.5 Registered Office and
Registered Agent ................... A-1
1.6 Business .............................. A-1
ARTICLE II PARTNERS AND CAPITAL .................. A-2
2.1 General Partner ....................... A-2
2.2 Units ................................. A-2
2.3 Capital Contributions of Limited
Partners ........................... A-2
2.4 Limited Partners ...................... A-2
2.5 Partnership Capital ................... A-2
2.6 Liability of Partners ................. A-2
2.7 Capital Accounts ...................... A-2
ARTICLE III DISTRIBUTIONS, PROFITS
AND LOSSES ......................... A-3
3.1 Cash Distributions .................... A-3
3.2 Profits and Losses .................... A-3
3.3 Allocations and Distributions
Among Limited Partners ............. A-4
3.4 Other Allocations ..................... A-5
3.5 Syndication Expenses .................. A-5
3.6 Recharacterization of Fees ............ A-5
3.7 Income Offset ......................... A-5
3.8 Minimum Gain Chargeback ............... A-5
ARTICLE IV MANAGEMENT ............................ A-5
4.1 Exclusive Management Rights
of General Partner ................. A-5
4.2 Authority of General Partner .......... A-5
4.3 Restrictions on Authority of
General Partner .................... A-6
4.4 Duties and Obligations of
General Partner .................... A-8
4.5 Compensation of General
Partner ............................ A-9
4.6 Partnership Expenses .................. A-9
4.7 Other Business of Partners ............ A-10
4.8 Limitation on Responsibility
of General Partner;
Indemnification .................... A-10
ARTICLE V DISSOLUTION, CONTINUATION
AND LIQUIDATION .................... A-11
5.1 Dissolution .......................... A-11
5.2 Continuation ......................... A-12
5.3 Valuation of Interest of General
Partner ........................... A-12
5.4 Liquidation .......................... A-13
ARTICLE VI TRANSFER OF UNITS .................... A-13
6.1 Assignment of Units .................. A-13
6.2 Substituted Limited Partners ......... A-14
6.3 Death, Incompetency or Bankruptcy
of Limited Partners ............... A-14
6.4 Transfer Fee ......................... A-14
ARTICLE VII ACCOUNTING AND FISCAL
MATTERS ........................... A-15
7.1 Partnership Records .................. A-15
7.2 Accounting and Fiscal Year ........... A-15
7.3 Bank Accounts and
Investments ....................... A-15
7.4 Reports .............................. A-15
ARTICLE VIII MEETINGS AND VOTING
RIGHTS OF LIMITED
PARTNERS .......................... A-16
8.1 Meetings ............................. A-16
8.2 Voting Rights of Limited
Partners .......................... A-17
ARTICLE IX MISCELLANEOUS ........................ A-17
9.1 Appointment of General Partner
as Attorney-in-Fact ............... A-17
9.2 Amendments ........................... A-18
9.3 Security Interest and Right of
Setoff ............................ A-18
9.4 Ownership by Limited Partner
of Interest in General Partner
or Affiliates ..................... A-18
9.5 Parties Bound ........................ A-19
9.6 Governing Law; Construction .......... A-19
ARTICLE X DEFINITIONS .......................... A-19
10.1 Defined Terms ........................ A-19
<PAGE> 74
RESTATED LIMITED PARTNERSHIP AGREEMENT
OF SOUTHEAST ACQUISITIONS II, L.P.
This Restated Limited Partnership Agreement is made as of the 24th day
of June 1988, by Southeast Acquisitions, Inc., a Delaware corporation, as
general partner, F M Initial, Inc., as the initial limited partner, and the
Persons who on or after the execution of this Agreement are admitted as limited
partners of the Partnership.
INTRODUCTION
On December 14, 1987, Southeast Acquisitions, Inc., as general partner,
and F M Initial, Inc. ("FMI"), as initial limited partner, formed a Delaware
limited partnership (the "Partnership") named Southeast Acquisitions II, L.P. by
the filing of a certificate of limited partnership in the Office of the
Secretary of State of Delaware. The parties hereto desire to effect the
withdrawal of FMI as initial limited partner of the Partnership, the admission
of the purchasers of the Partnership's Units of limited partnership interest as
the limited partners of the Partnership and the amendment of the agreement among
the Partners to read in its entirety as set forth in Articles I through X
hereof. To accomplish this, it is agreed that:
1. The Persons whose subscriptions for Units have been accepted by the
General Partner and who are reflected in the records of the Partnership as
purchasing Units on the date hereof are hereby admitted as limited partners of
the Partnership.
2. FMI hereby withdraws as a limited partner of the Partnership and is
released from all its obligations to the Partnership as the initial limited
partner. The Partnership shall promptly return FMI's capital contribution as
initial limited partner.
3. The agreement among the Partners of the Partnership is hereby
amended to read in its entirety as set forth in Articles I through X hereof.
ARTICLE I
ORGANIZATION
1.1. CONTINUATION. The Partnership shall continue as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act.
1.2. NAME. The name of the Partnership shall be Southeast Acquisitions
II, L.P., or such other name as may be selected by the General Partner, who
shall give notice of any change to the Limited Partners.
1.3. TERM. The Partnership shall exist for a term ending December 31,
1998, at which time it shall be dissolved, unless sooner dissolved as provided
in this Agreement.
1.4. PLACE OF BUSINESS. The principal place of business of the
Partnership shall be at 250 King of Prussia Road, Radnor, Pennsylvania 19087, or
at another location selected by the General Partner, who shall give notice of
any change to the Limited Partners. The Partnership may have such additional
offices or places of business as the General Partner may determine.
1.5. REGISTERED OFFICE AND REGISTERED AGENT. The Partnership's
registered office in the State of Delaware and its registered agent at such
office shall be determined by the General Partner.
1.6. BUSINESS. The business of the Partnership is to acquire, hold,
maintain, develop, operate, improve, lease, finance, refinance, sell, dispose
of, borrow money in connection with, and to otherwise deal with, real estate,
and to engage in any other activities related or incidental thereto. The
Partnership shall not engage in any other business or activity.
A-1
<PAGE> 75
ARTICLE II
PARTNERS AND CAPITAL
2.1. GENERAL PARTNER. The General Partner is Southeast Acquisitions,
Inc., a Delaware corporation, 250 King of Prussia Road, Radnor, Pennsylvania
19087. The General Partner has contributed $1,000 to the capital of the
Partnership. Except as set forth in Section 5.4(e), the General Partner shall
not be required to make any additional contribution to the capital of the
Partnership.
2.2. UNITS. The Partnership is authorized to offer and sell not less
than 3,165 and not more than 9,650 Units of limited partnership interest and to
admit as Limited Partners the Persons who contribute cash to the capital of the
Partnership as the purchase price for the Units.
2.3. CAPITAL CONTRIBUTIONS OF LIMITED PARTNERS. Each Limited Partner
shall make a Capital Contribution of $1,000 as the purchase price for each Unit
which he purchases from the Partnership, except that, as set forth in the
Prospectus, the General Partner and its Affiliates may purchase up to an
aggregate of $1,000,000 of Units for $915 per Unit. The Capital Contributions of
the Limited Partners shall be made in cash. Except as required by the Act, each
Unit shall be fully paid and non-assessable, and no assessments for payments by
the Limited Partners will be made by the General Partner.
2.4. LIMITED PARTNERS. (a) The Limited Partners shall be the Persons
identified from time to time as Limited Partners on the records of the
Partnership and shall be admitted as Limited Partners when their admission is
consented to by the General Partner and reflected in the records of the
Partnership.
(b) Purchasers of Units from the Partnership shall be admitted as
Limited Partners not later than 15 days after the release from impound of their
funds to the Partnership. The General Partner shall determine whether
subscriptions will be accepted or rejected within 30 days of their receipt; if a
subscription is rejected, the subscription funds shall be returned to the
subscriber within ten business days thereafter.
2.5. PARTNERSHIP CAPITAL. No Partner shall be paid interest on any
contribution to the capital of the Partnership. The Partnership shall not redeem
or repurchase any Units. No Partner shall have the right to reduce, withdraw, or
receive any return of, or on, his contribution to the capital of the
Partnership, except as provided in this Agreement. No Partner shall have the
right to bring an action for partition against the Partnership.
2.6. LIABILITY OF PARTNERS. (a) A Limited Partner, as such, shall be
liable only to make his Capital Contribution for his Units and shall not be
required to lend any funds to the Partnership or, after his Capital Contribution
has been paid, to make any further Capital Contribution to the Partnership or to
repay to the Partnership, any Partner or any creditor of the Partnership any
portion of any negative balance of his Capital Account. However, in accordance
with Delaware law, a Limited Partner may, under certain circumstances, be
required to return to the Partnership, for the benefit of Partnership creditors,
amounts previously distributed to him. If any court of competent jurisdiction
holds that any Limited Partner is obligated to make any such return, such
obligation shall be the obligation of the Limited Partner and not of the General
Partner.
(b) The General Partner shall have no personal liability for the
repayment of the Capital Contribution, of any Limited Partner or to repay to the
Partnership any portion or all of any negative balance of its, or any other
Partner's, Capital Account, except as provided in Section 5.4(e).
2.7. CAPITAL ACCOUNTS. (a) A Capital Account shall be established for
each Partner. To each Partner's Capital Account there shall be credited such
Partner's contributions to the capital of the Partnership, such Partner's
distributive share of Profits, and any items in the nature of income or gain
that are specially allocated pursuant to Sections 3.7 and 3.8, and the amount of
any Partnership liabilities that are assumed by such Partner or that are secured
by any Partnership property distributed to such Partner. To each Partner's
Capital Account there shall be debited distributions to such Partner pursuant to
this Agreement, such Partner's distributive share of Losses, any items in the
nature of expenses or losses that are specially allocated pursuant to Section
3.5, and the amount of any liabilities of such Partner that are assumed by the
Partnership or that are secured by any property contributed by such Partner to
the Partnership.
A-2
<PAGE> 76
(b) If any Interest in the Partnership is transferred in accordance
with this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the transferred Interest.
(c) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Treasury Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulation. If the General Partner determines that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits thereto, are
computed in order to comply with such Regulation, the General Partner may make
such modification, provided that it is not likely to have a material effect on
the distribution to any Partner pursuant to Section 5.4(a) on the liquidation of
the Partnership or of a Partner's interest therein. The General Partner shall
adjust the amounts debited or credited to Capital Accounts with respect to (i)
any property contributed to the Partnership or distributed to the Partners, and
(ii) any liabilities that are secured by such contributed or distributed
property or that are assumed by the Partnership or the General Partner, in the
event the General Partner determines such adjustments are necessary or
appropriate pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv). The
General Partner also shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Treasury Regulations Section 1.704-1(b).
ARTICLE III
DISTRIBUTIONS, PROFITS AND LOSSES
3.1. CASH DISTRIBUTIONS. (a) Subject to Section 3.1(b), cash
distributions for any calendar quarter shall be distributed within 60 days
following the close of such calendar quarter (or more frequently in the
discretion of the General Partner) in the following order of priority:
(i) 100% to the Limited Partners (in proportion to their
Units) until the Limited Partners have received an amount equal to the
Unpaid Cumulative Return as of the end of such quarter;
(ii) 100% to the Limited Partners (in proportion to their
Units) until the Limited Partners have received aggregate distributions
under this Section 3.1(a)(ii) in a total amount equal to the Capital
Contributions made by the Limited Partners on the purchase of their
Units;
(iii) then 70% to the Limited Partners (in proportion to their
Units) and 30% to the General Partner;
(b) Amounts distributed in connection with the liquidation of the
Partnership or a Partner's Interest (within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)) shall be
distributed in accordance with the Partner's positive Capital
Account as adjusted for all operations and transactions preceding
such distribution.
(c) Any amounts withheld pursuant to Section 4.2(a)(xii) shall be
treated as amounts distributed to the Partners for all purposes under this
Agreement. Amounts treated as distributed to a Partner pursuant to this Section
3.1(c) shall reduce the amounts otherwise distributed to such Partner pursuant
to this Agreement.
(d) Notwithstanding Section 3.1(a), the Limited Partners will receive
100% of all cash distributions from operations, if any.
3.2. PROFITS AND LOSSES. (a) Profits and Losses of the Partnership
shall be determined and allocated for each fiscal year of the Partnership as of
the end of such year. Notwithstanding anything to the contrary in this Section
3.2, for each fiscal year at least 1% of the Partnership's Profits or Losses, as
the case may be, shall be allocated to the General Partner; and for 1988 Profits
or Losses allocable pursuant to Section 3.2(b) or (c) to the Limited Partners
shall be ratably apportioned to and among each day for the period such items are
being apportioned and the Limited Partners' Profit or Losses for each day shall
be apportioned among the Limited Partners in accordance with their respective
number of Units on such day:
(b) Profits for a fiscal year not arising from a Sale shall be
allocated in the following order of priority:
A-3
<PAGE> 77
(i) Profits shall be allocated to each Partner in an amount
equal to the amount of cash distributed to him for that year. If the
Profits available to be so allocated are less than the amount of cash
distributed to all Partners for such year, then such Profits shall be
allocated to the Partners in proportion to their respective shares of
such cash.
(ii) Profits shall be allocated to each Partner in an amount
equal to the negative amount, if any, of his Capital Account. If the
Profits available to be so allocated are less than the sum of all
Partners' negative Capital Accounts, then such Profits shall be
allocated to the Partners in proportion to the negative amounts of
their respective Capital Accounts.
(iii) Any remaining Profits shall be allocated in the same
proportions that cash distributions equal to such remaining Profits
would be distributed pursuant to Section 3.1(a) without regard to
Section 3.1(b).
(c) Losses not arising from a Sale shall be allocated 99% to the
Limited Partners (in proportion to their Units) and 1% to the General Partner.
(d) Profits arising from a Sale shall be allocated in the following
order of priority:
(i) Profits shall be allocated to each Partner in an amount
equal to the negative amount, if any, of his Capital Account. If the
Profits available to be so allocated are less than the sum of all
Partners' negative Capital Accounts, then such Profits shall be
allocated to the Partners in proportion to the negative amounts of
their respective Capital Accounts.
(ii) An amount of Profits equal to the excess of (A) the Sale
proceeds that would be distributed to the Partners with respect to such
Sale pursuant to Section 3.1(a) (without regard to Section 3.1(b))
over (B) the aggregate Capital Accounts (as adjusted to reflect the
allocation of Profits pursuant to Section 3.2(d)(i)) of all Partners
shall be allocated among the Partners in proportion to their respective
shares of such excess.
(iii) Any remaining Profits shall be allocated in the same
proportions that cash distributions equal to such remaining Profits
would be distributed pursuant to Section 3.1(a) without regard to
Section 3.1(b).
(e) Losses arising from a Sale shall be allocated in the following
order of priority:
(i) Losses shall be allocated to each Partner in an amount
equal to the positive amount, if any, of his Capital Account. If the
Losses available to be so allocated are less than the sum of all
Partners' positive Capital Accounts, then such Losses shall be
allocated to the Partners in proportion to the positive amounts of
their respective Capital Accounts.
(ii) Any remaining Losses shall be allocated 99% to the
Limited Partners (in proportion to their Units) and 1% to the General
Partner.
3.3. ALLOCATIONS AND DISTRIBUTIONS AMONG LIMITED PARTNERS. (a) Except
as provided in Section 3.3(b), Profits and Losses not arising from a Sale
allocable to the Limited Partners shall be allocated, and cash distributions not
arising from a Sale or Financing distributable to the Limited Partners shall be
distributed, to the Persons recognized as the holders of Units as of the last
day of the fiscal period for which such allocation or distribution is to be
made.
(b) Profits or Losses not arising from a Sale for a fiscal year
allocable to any Unit which has been transferred during such year shall be
divided and allocated between the transferor and the transferee based on the
number of quarterly periods that each was recognized as the holder of the Unit,
without regard to whether Partnership operations during particular quarterly
periods of such fiscal year produced Profits or Losses or cash distributions.
(c) Profits or Losses arising from a Sale allocable to the Limited
Partners shall be allocated, and all Sale or Financing proceeds distributable to
the Limited Partners shall be distributed, to the Persons recognized as the
holders of Units as of the date of such Sale or Financing, except that Profits
or Losses which are attributable to, and Sale proceeds which represent, Sale
proceeds not received by the Partnership as cash on a Sale but later received as
a result of an installment or other deferred sale, shall be allocated or
distributed, as the case may be, to the Persons recognized as the holders of
Units as of the date such Sale proceeds are received by the Partnership.
A-4
<PAGE> 78
3.4. OTHER ALLOCATIONS. Any allocations not otherwise provided for
shall be divided among the Partners in the same proportions as they share
Profits or Losses, as the case may be, for the period.
3.5. SYNDICATION EXPENSES. "Syndication Expenses" means all
expenditures classified as syndication expenses pursuant to Treasury Regulations
Section 1.709-2(b). Syndication Expenses shall be taken into account under this
Agreement at the time they would be taken into account under the Partnership's
method of accounting if they were deductible expenses. Syndication Expenses
shall be specially allocated to the Limited Partners in proportion to their
Units.
3.6. RECHARACTERIZATION OF FEES. Any fees paid to the General Partner
or any of its Affiliates which are disallowed as deductible expenses by the
Internal Revenue Service shall constitute special allocations of gross income to
the General Partner for income tax purposes.
3.7. INCOME OFFSET. If any Partners unexpectedly receive any
adjustments, allocations., or distributions described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4) or (5) or (6), Profits shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate
the deficit balances in their Capital Accounts created thereby as quickly as
possible. Any special allocations of items of income or gain pursuant to this
Section 3.7 shall be taken into account in computing subsequent allocations of
Profits pursuant to this Article III, so that the net amount of any items so
allocated and the Profits, Losses, and all other items allocated to each Partner
pursuant to this Article III shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Partner pursuant to this
Article III if such unexpected adjustments, allocations or distributions had not
occurred.
3.8. MINIMUM GAIN CHARGEBACK. In the event of a net decrease in
Partnership "minimum gain" (within the meaning of Section 1.704-1 (b)(4)(iv)(C)
of the Treasury Regulations) during any fiscal year of the Partnership, all
Partners with a deficit Capital Account balance at the end of such year
(excluding from each Partner's deficit Capital Account balance any amount that
such Partner is obligated to restore hereunder) will be allocated, before any
other allocation, Profits for such year (and, if necessary, subsequent taxable
years) in the amount and in the proportions needed to eliminate such deficits as
quickly as possible.
ARTICLE IV
MANAGEMENT
4.1. EXCLUSIVE MANAGEMENT RIGHTS OF GENERAL PARTNER. Subject to this
Agreement and the Act, the General Partner shall have complete authority over
and exclusive control and management of the business and affairs of the
Partnership. The Limited Partners, as such, shall not take part in, or at any
time interfere in any manner with, the management, conduct or control of the
Partnership's business or operations and shall have no right or authority to act
for or bind the Partnership. Except as expressly provided elsewhere in this
Agreement, the Limited Partners have no right to remove the General Partner, to
compel the General Partner's withdrawal from the Partnership or to elect other
General Partners.
4.2. AUTHORITY OF GENERAL PARTNER. (a) Subject only to this Agreement
and the Act, in connection with the management of the Partnership, the General
Partner shall have and may exercise all of the rights, powers and privileges of
a general partner of a partnership without limited partners, including without
limitation the right, if, as and when the General Partner may deem necessary or
appropriate for the business of the Partnership, on behalf of, and at the
expense of, the Partnership to:
(i) Acquire, through purchase, lease, exchange or otherwise,
or otherwise make investments in, any real or personal
property.
(ii) Operate, maintain, develop, improve, finance, refinance,
own, grant options with respect to, sell, convey, assign,
mortgage, exchange or lease and have constructed any real
estate and any personal property.
A-5
<PAGE> 79
(iii) Execute any agreements, contracts, documents,
certifications and other instruments, and any deeds, leases,
mortgages, mortgage notes, bills of sale, contracts or other
instruments purporting to convey, exchange or encumber the
real or personal property of the Partnership.
(iv) Borrow money and issue evidences of indebtedness and
secure the same by mortgage, pledge or other lien on any
properties or other assets of the Partnership.
(v) Prepay in whole or in part, refinance, recast, increase,
modify or extend any mortgage affecting the Partnership's
property and in connection therewith execute any extensions,
consolidations, modifications or renewals of mortgages on the
property.
(vi) Engage in any kind of activity and perform and carry out
contracts of any kind.
(vii) Deal with, or otherwise engage in business with, any
Person who has dealt with or engaged in business with or may
in the future deal with or engage in business with the
General Partner or its Affiliates. No such dealing or engaging
in business may involve any arrangement which would circumvent
any of the provisions of this Agreement, including the
restrictions against dealing with the General Partner or its
Affiliates.
(viii) Execute a Dealer Manager Agreement with First Radnor
Equities, Inc. (an Affiliate of the General Partner) pursuant
to which said firm will assist the Partnership in the sale of
Units and be paid selling commissions and allowances therefor
and be indemnified against certain liabilities.
(ix) Establish, maintain, increase, decrease and eliminate
reserves for working capital and contingent liabilities and to
pay taxes, insurance, debt service, repairs, replacements,
renewals or other obligations, costs or expenses.
(x) Make and revoke any election permitted to the Partnership
by any taxing authority in such manner as the General Partner,
in its sole discretion, may decide.
(xi) Withhold income taxes as required by, and otherwise
comply with and take actions necessary as a result of, the
Code or any state or other tax law requiring withholding.
(xii) Require in all Partnership obligations that the General
Partner shall not have any personal liability thereon but that
the person or entity contracting with the Partnership is to
look solely to the Partnership and its assets for
satisfaction; provided, however, that the inclusion of such
provisions shall not affect the cost of the service or
material being supplied.
(b) Any Person dealing with the Partnership or the General Partner may
rely on a certificate signed by the General Partner as to (i) the identity of
any General Partner or Limited Partner; (ii) the existence or non-existence of
any facts which constitute a condition precedent to acts by the General Partner
or in any other manner germane to the affairs of the Partnership; (iii) the
Persons who are authorized to execute and deliver any instrument or document for
the Partnership; or (iv) any act or failure to act by the Partnership or as to
any other matter involving the Partnership or any Partner.
4.3. RESTRICTIONS ON AUTHORITY OF GENERAL PARTNER. (a) Without the
Consent of all the Limited Partners the General Partner shall not have the
authority to (i) do any act in contravention of this Agreement or the Act; (ii)
possess Partnership property, or assign its rights in specific Partnership
property, for other than a Partnership purpose; (iii) admit a Person as a
General or Limited Partner, except as provided in this Agreement; (iv) knowingly
perform any act that would subject any Limited Partner to liability as a general
partner in any jurisdiction; or (v) alter the business of the Partnership as set
forth in Section 1.6 or cause the Partnership to purchase any real estate other
than as provided in the Prospectus.
(b) Without the Consent of a majority in interest of the Limited
Partners, the General Partner shall not have the authority to sell all or
substantially all the assets of the Partnership in a single sale, except that
the General Partner may sell such assets without such consent (A) in connection
with the liquidation of the Partnership under Section 5.4 or (B) if the net
proceeds of such sale, when distributed in accordance with Section 3.1, will be
sufficient to provide the Limited Partners with distributions equal to the
Unpaid Cumulative Return plus their Adjusted Capital Contributions.
(c) The Partnership shall not purchase or lease property in which the
General Partner or its Affiliates have an interest except as set forth in the
Prospectus.
A-6
<PAGE> 80
(d) The Partnership shall not sell or lease property to the General
Partner or its Affiliates.
(e) The Partnership shall not acquire property from a real estate
program in which the General Partner or its Affiliates have an interest.
(f) The Partnership shall not acquire property in exchange for Units.
(g) The Partnership shall not give the General Partner or its
Affiliates an exclusive right to sell or exclusive employment to sell property
for the Partnership.
(h) The Partnership shall not pay, directly or indirectly, a commission
or fee (except as permitted under this Agreement) to the General Partner or its
Affiliates in connection with the reinvestment or distribution of the proceeds
of the resale, exchange, or refinancing of the Partnership's properties.
(i) No rebates or give-ups may be received by the General Partner or
its Affiliates, nor may the General Partner or its Affiliates participate in any
reciprocal business arrangements which would circumvent any of the provisions of
this Agreement, including the restrictions against dealing with the General
Partner or its Affiliates.
(j) The General Partner and its Affiliates shall not directly or
indirectly pay or award any commissions or other compensation to any Person
engaged by a potential Limited Partner for investment advice as an inducement to
such adviser to advise the purchase of Units; however, this Section 4.3(j) shall
not prohibit the normal sales commissions and allowances payable to a registered
broker-dealer or other properly licensed Person for selling Units.
(k) The funds of the Partnership shall not be commingled with the funds
of any other Person.
(1) The Partnership shall not invest in real estate limited
partnerships, general partnerships or joint ventures.
(m) The Partnership shall not make loans to the General Partner or its
Affiliates.
(n) Neither the General Partner nor its Affiliates shall lend money to
the Partnership if interest rates and other financing charges and fees in
connection with such loan are in excess of the amount which would be charged by
unrelated lending institutions on comparable loans for the same purpose (in the
locality of the property if the loan is made in connection with a particular
property) or make loans with a prepayment charge or penalty which are secured by
either a first or junior or all-inclusive or wraparound trust deed, mortgage or
encumbrance except to the extent that such prepayment charge or penalty is
attributable to an underlying encumbrance.
(o) Neither the General Partner nor its Affiliates shall provide
Financing to the Partnership. "Financing" is indebtedness encumbering
Partnership properties or incurred by the Partnership, the principal amount of
which is scheduled to be paid over a period of not less than 48 months, and not
more than 50 percent of the principal amount of which is scheduled to be paid
during the first 24 months.
(p) Neither the General Partner nor its Affiliates shall enter into an
agreement or contract with the Partnership for the General Partner or its
Affiliates to develop or construct improvements on the Partnership's properties.
(q) Cash Flow from operations and Sale or Financing proceeds shall not
be used to acquire real property.
(r) Other than as authorized in this Agreement or the Prospectus, the
General Partner shall not enter into any agreement, contract or arrangement on
behalf of the Partnership providing for compensation to the General Partner or
its Affiliates for performing services or selling or leasing goods to the
Partnership.
(s) The General Partner shall not voluntarily withdraw, retire or
resign as general partner of the Partnership, or assign, transfer or otherwise
dispose of all or any part of its general partner Interest (and no assignee or
transferee of all or any part of the general partner Interest of a General
Partner shall have any right to become a General Partner) unless:
A-7
<PAGE> 81
(i) the General Partner obtains the Consent of a majority in
interest of the Limited Partners;
(ii) in the case of withdrawal, retirement or resignation, if
the General Partner is the only general partner of the Partnership, the
General Partner provides an additional or successor general partner who
is approved by the Consent of a majority in interest of the Limited
Partners and who agrees in writing to be bound by this Agreement; and
(iii) the Partnership receives an opinion of its counsel to
the effect that such withdrawal, retirement, resignation, assignment,
transfer or other disposition would not subject the Partnership to
federal income taxation as an association taxable as a corporation
rather than as a partnership and would not have a material adverse
effect on the Limited Partners by reason of a termination of the
Partnership for federal income tax purposes.
(t) In connection with the borrowing of money, recourse for the payment
of which is limited solely to property of the Partnership, no lender shall be
granted or acquire, at any time as a result of making such a loan, any direct
or indirect interest in the profits capital or property of the Partnership
other than as a secured creditor.
4.4. DUTIES AND OBLIGATIONS OF GENERAL PARTNER. (a) The General Partner
shall devote to the Partnership such time as may be necessary for the proper
performance of its duties hereunder, but the officers, directors and employees
of the General Partner shall not be required to devote their full time to the
performance of such duties.
(b) The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not
in the General Partner's possession of control. The General Partner shall not
employ, or permit another to employ, such funds or assets in any manner except
for the exclusive benefit of the Partnership. The Limited Partners may not
contract away the fiduciary duty owed to them by the General Partner under the
common law.
(c) The General Partner shall commit at least 85% of the Limited
Partners' Capital Contributions toward Investment in Property. If the total
amount of Front-End Fees must be reduced in order to enable the Partnership to
commit this percentage of the Limited Partners' Capital Contributions to
Investment in Property, the General Partner shall, and shall cause its
Affiliates or other Persons to, reimburse the Partnership for such amount of
Front-End Fees received by them as is necessary to enable the Partnership to
meet such requirement.
(d) The General Partner shall establish initial reserves (for normal
repairs, replacements and contingencies) out of the Limited Partners' Capital
Contributions in an amount not less than 3% of the gross proceeds from the sale
of the Units and thereafter shall maintain reserves in such amounts as it deems
appropriate from time to time.
(e) The General Partner shall use its best efforts to maintain at all
times a net worth at a level sufficient to enable the Partnership either to
avoid having the corporate characteristic of limited liability for federal
income tax purposes or to avoid being treated as an association taxable as a
corporation for federal income tax purposes.
(f) The General Partner shall take all action which may be necessary or
appropriate for the continuation of the Partnership's valid existence as a
limited partnership under the Act.
(g) The General Partner shall prepare or have prepared and shall file
on or before the due date (or any extension thereof) any federal, state or local
tax returns required to be filed by the Partnership. The General Partner shall
cause the Partnership to pay any taxes payable by the Partnership.
(h) The General Partner shall be the "tax matters partner" under the
Code and shall manage administrative tax proceedings conducted at the
Partnership level by the Internal Revenue Service with respect to Partnership
matters. However, any Partner shall have the right to participate in such
administrative proceedings relating to the determination of partnership items at
the Partnership level. Expenses of such administrative proceedings undertaken by
the tax matters partner will be paid by the Partnership. Each Limited Partner
who elects to participate in such proceedings will be responsible for
A-8
<PAGE> 82
any expenses incurred by him in connection with such participation. The cost of
any adjustments to a Limited Partner and the cost of any resulting audits or
adjustments of a Limited Partner's tax return, will be borne solely by the
affected Limited Partner.
(i) The General Partner shall use its best efforts to obtain and keep
in force during the term hereof such public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General Partner deems
advisable, but in amounts not less (and with deductible amounts not greater)
than those customarily maintained with respect to properties comparable to the
Partnership's property.
(j) The General Partner shall use its best efforts to assure that the
Partnership will not be deemed an investment company as such term is defined in
the Investment Company Act of 1940.
4.5. COMPENSATION OF GENERAL PARTNER. (a) Subject to Section 4.4(c),
the Partnership shall pay to the General Partner in compensation for services
rendered in evaluating, selecting and acquiring the Partnership's properties, an
Acquisition Fee equal to 2.8% of the Limited Partners' Capital Contributions.
Such fee shall be paid at each closing of the sale of Units, except that, to the
extent necessary to establish the reserves required by Section 4.4(d), payment
shall be deferred, without interest, until the Partnership has sufficient
unreserved funds available therefor.
(b) For the services to be performed by the General Partner in
connection with the management and administration of the Partnership, the
Partnership shall pay the General Partner an annual management fee equal to 1/4
of 1% of the cost of the Partnership's properties, commencing on the date hereof
and continuing, with respect to each property, until such time as the property
is sold or improvement of the property commences by the Partnership. In no event
shall this fee, with respect to any property, exceed a cumulative total of 2% of
the original cost of the property. The management fee shall be paid to the
General Partner for such services on conclusion of each calendar quarter. If the
Partnership does not have sufficient cash to pay the management fee for any
quarter or if the Partnership's reserves are less than 1/2 of 1% of the Limited
Partners' Capital Contributions, such fee shall be accrued (without interest) as
a debt of the Partnership, payable out of Sale or Financing proceeds after the
Limited Partners have received distributions in a total amount equal to the
aggregate amount paid by them to the Partnership for their Units.
(c) If the General Partner or its Affiliates provide a substantial
amount of the services in the sales effort for the sale of a Partnership
property, they may receive up to one-half of the competitive real estate
commission (that real estate or brokerage commission paid for the purchase or
sale of property which is reasonable, customary and competitive in light of the
size, type and location of the property), not to exceed 3%, which amount shall
not be paid until the Limited Partners have received distributions equal to
their Capital Contributions plus the Cumulative Annual Return. If the General
Partner or its Affiliates participate with an independent broker on such sale,
the subordination requirement shall apply only to the commission earned by the
General Partner or its Affiliates. The total compensation paid to all Persons
for the sale of a Partnership property shall be limited to a competitive real
estate commission, not to exceed 10% of the contract price for the sale of the
property, and if such compensation to all Persons for the sale of a Partnership
property exceeds 6%, then, notwithstanding the other provisions of this Section
4.5(c), the General Partner and its Affiliates shall not receive any
compensation for such sale and such compensation for such sale shall be paid
only to Persons other than the General Partner and its Affiliates.
4.6. PARTNERSHIP EXPENSES. (a) The General Partner or its Affiliates
shall bear, and shall pay or reimburse the Partnership for, all Organization and
Offering Expenses in excess of 12.2% of the gross proceeds to the Partnership
from the sale of the Units. Subject to Section 4.4(c), the Partnership shall
bear, and shall pay, or reimburse the General Partner or its Affiliates for, the
actual cost of all other Organization and Offering Expenses.
(b) All expenses of the Partnership shall be billed (to the extent
practicable) directly to and paid by the Partnership. In addition to
reimbursement under Section 4.6(a), the General Partner and its Affiliates shall
be reimbursed for the actual cost of goods and materials used for or by the
Partnership and obtained from entities unaffiliated with the General Partner;
and the General Partner and its Affiliates shall be reimbursed for their
services necessary to the prudent operation of the Partnership, provided
A-9
<PAGE> 83
that the reimbursement for such services shall be at the lower of the General
Partner's (or its Affiliate's) actual cost or the amount the Partnership would
be required to pay to independent parties for comparable administrative services
in the same geographic location. No reimbursement shall be permitted for
services for which the General Partner or its Affiliates are entitled to
compensation by way of a separate fee. The following shall be excluded from
allowable reimbursements under this Section 4.6(b): (A) rent or depreciation,
utilities, capital equipment and other similar administrative items of the
General Partner or its Affiliates, and (B) salaries, fringe benefits, travel
expenses and other similar administrative items incurred by or allocated to any
Controlling Persons of the General Partner or its Affiliates. Subject to (and
only in accordance with) the foregoing, the Partnership shall pay (or reimburse
the General Partner and its Affiliates for) the actual cost of all expenses
related to the administration and operation of the Partnership, including
without limitation:
(i) all costs of personnel involved in the business of the
Partnership;
(ii) all taxes and assessments applicable to the Partnership;
(iii) legal, appraisal, audit, accounting and other
professional fees;
(iv) printing and other expenses incurred in connection with
the issuance, distribution, transfer, registration and recording of
documents evidencing ownership of Units;
(v) fees and expenses paid to independent contractors,
mortgage bankers, brokers, leasing agents, consultants, insurance
brokers and other agents;
(vi) expenses of organizing, revising, amending, converting,
modifying or terminating the Partnership;
(vii) costs incurred in selling or financing the Partnership's
property, including the cost of preparation and dissemination of the
informational material and documentation relating to potential sale,
financing or other disposition of the property;
(viii) costs incurred in connection with any actual or
threatened litigation in which the Partnership is involved or
proceedings conducted by any regulatory agency, including legal and
accounting fees incurred in connection therewith;
(ix) costs of any computer equipment or services used for or
by the Partnership;
(x) costs of any accounting, statistical or bookkeeping
services or equipment necessary for the maintenance of the books and
records of the Partnership;
(xi) costs of investor communications and relations and
regulatory and tax reports; and
(xii) such other related expenses as are necessary to the
prudent operation of the Partnership.
(c) In the Partnership's annual report to the Limited Partners, there
shall be provided a breakdown of reimbursements made to the General Partner and
its Affiliates.
4.7. OTHER BUSINESS OF PARTNERS. Any Partner may engage independently
or with others in other business ventures of every nature and description,
including, without limitation, the rendering of advice or services of any kind
to others and the making or management of other investments, including
investments in real estate. Nothing in this Agreement shall be deemed to
prohibit the General Partner or any Affiliate of the General Partner from
dealing, or otherwise engaging in business with, Persons transacting business
with the Partnership or from providing services relating to the purchase, sale,
financing, management, development or operation of real property and receiving
compensation therefor, not involving any rebate or reciprocal arrangement which
would have the effect of circumventing any restriction set forth herein on
dealing with the General Partner or any Affiliate of the General Partner.
Neither the Partnership nor any Partner shall have any right by virtue of this
Agreement or the partnership relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, even if
competitive with the business of the Partnership.
4.8. LIMITATION ON RESPONSIBILITY OF GENERAL PARTNER; INDEMNIFICATION.
(a) The General Partner and its Affiliates shall have no liability to the
Partnership or to any Partner for any loss suffered by the Partnership which
arises out of any action or inaction of the General Partner or its Affiliates if
the
A-10
<PAGE> 84
General Partner or its Affiliates, in good faith, determined that such course of
conduct was in the best interest of the Partnership and such course of conduct
did not constitute negligence or misconduct of the General Partner or its
Affiliates. The General Partner and its Affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partner or its Affiliates, and provided
further that for such indemnification to be made, the General Partner must have
made a good faith determination that the course of conduct involved was in the
best interests of the Partnership. Such indemnification shall be made from the
assets of the Partnership and no Partner shall be personally liable therefor.
(b) Notwithstanding the above, the General Partner and its Affiliates
and any Person acting as a broker-dealer shall not be indemnified for any
losses, liabilities or expenses arising from or out of an alleged violation of
federal or state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee and court approval of indemnification
of litigation costs, or (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee
and the court has approved indemnification of litigation costs or (iii) a court
of competent jurisdiction approves a settlement of the claims against a
particular indemnitee and indemnification of settlement and related costs. In
any claim for indemnification for federal or state securities law violations,
the party seeking indemnification shall place before the court the position of
the Securities and Exchange Commission, the Massachusetts Securities Division,
the Pennsylvania Securities Commission and other applicable state securities
commissions with respect to the issue of indemnification for securities law
violations.
(c) The Partnership shall not incur the cost of that portion of any
insurance, other than public liability insurance, which insures any party
against any liability the indemnification of which is herein prohibited.
(d) The provision of advances from Partnership funds to the General
Partner and its Affiliates for legal expenses and other costs incurred as a
result of any legal action initiated against the General Partner by a Limited
Partner of the Partnership is prohibited. The provision of advances from
Partnership funds to the General Partner and its Affiliates for legal expenses
and other costs incurred as a result of a legal action is permissible if the
following three conditions are satisfied: (i) the legal action relates to the
performance of duties or services by the General Partner or its Affiliates on
behalf of the Partnership; and (ii) the legal action is initiated by a third
party who is not a Limited Partner of the Partnership; and (iii) the General
Partner or its Affiliates undertake to repay the advanced funds to the
Partnership in cases in which they would not be entitled to indemnification
under this Section 4.8 and such undertaking is secured by a full recourse note
from the recipient of the advance.
(e) Notwithstanding the definition of "Affiliate" in Article XI, for
the purposes of this Section 4.8, the term "Affiliates" shall mean any Person
performing services on behalf of the Partnership within the scope of the General
Partner's authority who (i) directly or indirectly controls, is controlled by,
or is under common control with the General Partner; or (ii) owns or controls
10% or more of the outstanding voting securities of the General Partner or (iii)
is an officer or director of the General Partner or (iv) if the General Partner
is an officer, director, partner or trustee, is any company for which the
General Partner acts in any such capacity.
ARTICLE V
DISSOLUTION, CONTINUATION AND LIQUIDATION
5.1. DISSOLUTION. The Partnership shall be dissolved on the happening
of any of the following events:
(a) the Termination of the General Partner, unless the business of the
Partnership is continued under Section 5.2;
(b) the sale or other disposition of all or substantially all the
Partnership's property and the collection or other disposition of any purchase
money obligations received by the Partnership in connection with the disposition
of the property;
A-11
<PAGE> 85
(c) the expiration of the term set forth in Section 1.3;
(d) the Consent of a majority in interest of the Limited Partners
pursuant to Section 8.2 that the Partnership should be dissolved.
5.2. CONTINUATION. (a) On the Termination of a General Partner, if
there are one or more remaining General Partners, such remaining General Partner
or General Partners shall have the right to, and shall, continue the business of
the Partnership. If there is no remaining General Partner, the Limited Partners
(subject to Sections 5.2(b) and 5.3) (i) may elect, by the Consent of a majority
in interest of the Limited Partners, within 90 days thereafter, to reconstitute
the Partnership and continue its business in accordance with this Agreement by
selecting one or more new General Partners who agree in writing to be bound by
this Agreement, and all Limited Partners, as such, shall be bound by such
action, or (ii) may continue the business of the Partnership pursuant to Section
17-801 of the Act.
(b) The rights to continue the business of the Partnership provided in
this Section 5.2 shall be subject to prior receipt by the Partnership of an
opinion of counsel to the Partnership that such continuation would not result in
the Partnership's being classified for federal income tax purposes as an
association taxable as a corporation rather than as a partnership and would not
result in the termination of the Partnership for federal income tax purposes.
(c) Each of the Limited Partners by the execution of this Agreement
hereby Consents to any continuation or reconstitution of the Partnership and the
admission of any Person as a successor or additional General Partner, to which
there has at the time been express Consent of a majority in interest of the
Limited Partners pursuant to this Agreement. On receipt of the Consent of a
majority in interest of the Limited Partners to such continuation,
reconstitution or admission, such continuation, reconstitution or admission
shall, without any further Consent or approval of the Limited Partners, be an
act of all the Limited Partners.
5.3. VALUATION OF INTEREST OF GENERAL PARTNER. (a) In the event of the
Termination of a General Partner (other than a Termination in compliance with
Section 4.3(s)), if the business of the Partnership is continued under Section
5.2, the Partnership shall pay to such Terminated General Partner and its
Affiliates all amounts then accrued and owing to them, and shall pay the
Terminated General Partner, in consideration of the termination of its general
partner Interest, an amount (the "Price") equal to the then fair market value
of such general partner Interest determined by agreement of the Terminated
General Partner and the Partnership or, if they cannot agree within 45 days, by
appraisal in the manner set forth in Section 5.3(b).
(b) If appraisal of the Terminated General Partner's general partner
Interest is required, the general partner Interest of the Terminated General
Partner shall be appraised by two independent appraisers, one selected by the
Terminated General Partner and one by the Limited Partners. If the two
appraisers are unable to agree on the value of the Terminated General Partner's
Interest, they shall jointly appoint a third independent appraiser whose
determination shall be final and binding. The independent appraiser selected by
the Limited Partners shall be a qualified MAI appraiser selected by Consent of a
majority in interest of the Limited Partners within 120 days after the event
requiring appraisal of such Interest. If the Limited Partners fail so to choose
an appraiser, such appraiser shall be selected in the following manner: A list
of three qualified MAI appraisers shall be obtained from the American Institute
of Real Estate Appraisers and one of said three appraisers shall be selected by
random number and proposed for selection by the Limited Partners. Such appraiser
shall be deemed selected by the Limited Partners unless objected to in writing
by a majority in interest of the Limited Partners within 45 days after
Notification thereof is sent by the General Partner. The costs of the appraisal
shall be borne equally by the Terminated General Partner and the Partnership.
(c) Payment of the Price shall be made by delivery to the Terminated
General Partner of a promissory note, such delivery to be as soon as practicable
after determination of the Price. If the Termination is voluntary, the note
shall be a non-interest bearing unsecured promissory note payable, if at all,
from distributions which the Terminated General Partner otherwise would have
received under this Agreement if it had not voluntarily terminated. If the
Termination is involuntary, the note shall be an interest bearing promissory
note payable in five equal annual installments of principal, the first of which
A-12
<PAGE> 86
shall be paid one year after such determination; the unpaid portion of such
principal shall bear simple interest from the date of such determination at a
floating rate of interest equal to 1% in excess of the prime rate of The
Philadelphia National Bank, such interest to accrue and be paid annually in
addition to each such annual installment of principal.
(d) The Partnership shall make such special allocations of Profits and
Losses as are appropriate to enable it to make any payments to be made under
this Section 5.3.
5.4. LIQUIDATION. (a) On dissolution of the Partnership, absent any
continuation under Section 5.2, the General Partner shall liquidate the assets
of the Partnership and apply, or distribute, the net proceeds thereof in the
following order of priority:
(i) to the payment of all debts and liabilities of the
Partnership in accordance with their terms;
(ii) to the establishment, for such period as the General
Partner deems reasonably necessary, of such reserves as the General
Partner deems reasonably necessary to provide for contingent and
unforeseen liabilities or obligations of the Partnership;
(iii) to satisfy any obligations incurred under Section 5.3 in
accordance with their terms and to the Partners in accordance with
Section 3.1.
(b) Notwithstanding the foregoing, if the General Partner determines
that an immediate sale of part or all of the Partnership assets would cause
undue loss to the Partners, the General Partner, in order to avoid such loss,
may, to the extent not then prohibited by applicable law, defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Partnership except those necessary to satisfy the Partnership's debts and
obligations.
(c) No Limited Partner shall have the right to receive any property
other than cash.
(d) The debts and liabilities of the Partnership shall not include
liabilities or obligations of the Partnership to Partners for distributions or
on account of their contributions or in respect to profits (or other
compensation by way of income) or capital.
(e) If on dissolution and termination of the Partnership the General
Partner's Capital Account is less than zero, the General Partner shall
contribute to the capital of the Partnership an amount equal to (and shall in no
event be obligated to contribute more than) the lesser of (i) any negative
amount of its Capital Account existing after the distributions and allocations
required by Article III and this Section 5.4 or (ii) 1.01 % of the Capital
Contributions made by the Limited Partners. Any amount so contributed by the
General Partner shall be distributed to the Limited Partners in proportion to
the then positive balances in their Capital Accounts.
(f) Any capital contribution by the General Partner pursuant to Section
5.4(e) and any liquidating distribution pursuant to Section 5.4(a)(iii) or
5.4(e) shall be made no later than the later of (i) the end of the taxable year
during which such liquidation occurs or (ii) 90 days after the date of such
liquidation.
ARTICLE VI
TRANSFER OF UNITS
6.1. ASSIGNMENT OF UNITS. (a) No Limited Partner may transfer or assign
his Units or any interest therein except as permitted in this Article VI. Any
act in violation of this Article VI shall be null and void and shall not be
recognized by the Partnership.
(b) A Limited Partner may transfer or assign part or all of his Units
if, and only if:
(i) the assignor and the assignee execute, acknowledge and
deliver to the Partnership such instruments of transfer and assignment
and other documents as may be required by the General Partner;
(ii) either (A) at least five Units are being assigned and, if
any Units are retained by the assignor, at least five Units are
retained by the assignor or (B) the Units being assigned represent the
entire limited partnership Interest of the assignor (except that the
General Partner, in its discretion, may waive this requirement for
transfers by gift, inheritance or family dissolution or transfers to
Affiliates of the transferor);
A-13
<PAGE> 87
(iii) the assignee agrees in writing not to assign such Units
other than in accordance with this Article VI;
(iv) such assignment complies with any applicable state and
federal securities laws (including applicable investment suitability
standards);
(v) such assignment does not result in the termination of the
Partnership for federal income tax purposes and does not result in the
Partnership being classified as an association taxable as a corporation
for federal income tax purposes;
(vi) the assignment is effective as of the first day of an
appropriate calendar quarter.
(c) An assignee, if he does not become a Substituted Limited Partner
pursuant to Section 6.2, shall have no rights of a Limited Partner as a result
of the assignment, but shall only be entitled to receive his share of
distributions, Profits and Losses under Article III and Section 5.4(a)(iv) to
which the assignor would otherwise be entitled.
(d) Any Limited Partner who assigns all his Units shall cease to be a
Limited Partner of the Partnership, except that unless and until a Substituted
Limited Partner is admitted in his stead, such assigning Limited Partner shall
retain the statutory rights of an assignor of a limited partnership interest
under the Act.
(e) No transfer or assignment of any Unit shall be made if it would
result in the Partnership being treated as an association taxable as a
corporation for tax purposes or as a publicly traded partnership. The General
Partner, in its sole discretion, may, on behalf of the Partnership, impose any
restrictions on transfers or assignments of Units as it deems appropriate to
give effect to the preceding sentence. In connection therewith, the General
Partner shall be permitted to amend this Agreement without the consent of the
Limited Partners. The General Partner shall not list the Units on any
established securities market.
(f) There shall be no restrictions on the assignment of Units except as
provided in this Article VI.
6.2 SUBSTITUTED LIMITED PARTNERS. (a) No assignee of Units shall have
the right to become a Substituted Limited Partner in place of his assignor
unless all of the following conditions are first satisfied:
(i) the written instrument of assignment (or another writing)
sets forth the intention of the assignor that the assignee succeed to
the assignor's Interest represented by such Units as a Substituted
Limited Partner in his place;
(ii) the assignor and assignee execute, acknowledge and
deliver such instruments as the General Partner may deem necessary or
desirable to effect such substitution, including the written acceptance
and adoption by the assignee of this Agreement; and
(iii) the written consent of the General Partner to such
substitution is obtained, the granting or denial of which shall be
within the absolute discretion of the General Partner.
(b) The Partnership's records shall be amended to reflect the
substitution of Limited Partners at least once in each calendar quarter.
6.3. DEATH, INCOMPETENCY OR BANKRUPTCY OF LIMITED PARTNERS. If a
Limited Partner dies, his executor, administrator or trustee, or, if he is
adjudicated incompetent or insane, his committee, guardian or conservator, or,
if he becomes bankrupt, the trustee or receiver of his estate, shall have all
the rights of a Limited Partner for the purpose of settling or managing his
estate and such power as the decedent, incompetent or bankrupt possessed to
assign his Units and to join with the assignee thereof in satisfying conditions
precedent to such assignee becoming a Substituted Limited Partner.
6.4 TRANSFER FEE. On any assignment of Units or any substitution of an
assignee as a Limited Partner, the Partnership may charge a transfer fee (not to
exceed the lesser of actual costs or $150) to cover all reasonable out-of-pocket
expenses connected therewith.
A-14
<PAGE> 88
ARTICLE VII
ACCOUNTING AND FISCAL MATTERS
7.1. PARTNERSHIP RECORDS. The records of the Partnership shall be
maintained at the principal office of the Partnership. Every Limited Partner or
his duly authorized representative shall at any reasonable time have access to
the records of the Partnership and may inspect and copy any of them. A list of
the names and addresses of all of the Limited Partners shall be maintained as
part of the records of the Partnership and shall be mailed or made available, on
written request therefor, to any Limited Partner or his duly authorized
representative, on his payment of the reasonable costs of reproduction and
mailing.
7.2. ACCOUNTING AND FISCAL YEAR. The books of the Partnership shall be
kept on the accrual basis. The fiscal year of the Partnership shall end December
31 in each year.
7.3. BANK ACCOUNTS AND INVESTMENTS. The bank accounts of the
Partnership shall be maintained in such banking institutions as the General
Partner may determine, and withdrawals shall be made on such signature or
signatures as the General Partner may determine. Funds not needed in the
operation of the Partnership may be invested in United States government
securities, certificates of deposit of United States banks with assets of at
least $100,000,000, commercial paper rated A or better by Moody's Investors
Service, Inc., and money market funds having assets in excess of $100,000,000.
7.4. REPORTS. (a) Within 60 days after the end of each of the first
three calendar quarters of each calendar year, the General Partner shall send to
the Limited Partners a report containing (i) a balance sheet as of the end of
such quarter, a profit and loss statement for such quarter and a cash flow
statement for such quarter, all of which may be unaudited, (ii) a statement
describing any new agreement, contract or arrangement required to be reported by
Section 4.3(r), including the compensation to be paid thereunder by the
Partnership to the General Partner and its Affiliates, and (iii) other pertinent
information regarding the Partnership and its activities during such quarter.
(b) Within 75 days after the end of each calendar year, the General
Partner shall send to each Person who was a Limited Partner during such year all
Partnership information necessary for the preparation of such Limited Partner's
federal income tax return.
(c) Within 120 days after the end of each calendar year, the General
Partner shall send to the Limited Partners an annual report containing (i) a
balance sheet as of the end of such year and statements of income, partners'
equity and changes in financial position (or any replacement statement required
by generally accepted accounting principles) for such year, all of which shall
be prepared in accordance with generally accepted accounting principles and be
accompanied by an auditor's report of the Partnership's independent public
accountants, (ii) a cash flow statement for such year (which need not be
audited), (iii) a report of the activities of the Partnership during such year,
(iv) information (which need not be audited) setting forth the distributions
made to the Limited Partners for such year, separately identifying distributions
from (A) cash flow from operations during the period, (B) cash flow from
operations during a prior period which had been held as reserves, (C) proceeds
from disposition of property and investments, (D) lease payments on net leases
with builders and sellers, and (E) reserves from the gross proceeds of the
offering of the Units, (v) a breakdown of the costs reimbursed to the General
Partner and its Affiliates under Section 4.6(b), which shall be verified by
independent public accountants in accordance with generally accepted auditing
standards (the cost of such verification to be so reimbursable only to the
extent that such reimbursement, when added to the reimbursement for services,
does not exceed the competitive rate for such services), (vi) a statement
describing any new agreement, contract or arrangement required to be reported by
Section 4.3(r), including the compensation to be paid thereunder by the
Partnership to the General Partner and its Affiliates, and (vii) a detailed
statement of any transactions with the General Partner or its Affiliates, and of
fees, commissions, compensation and other benefits paid or accrued to the
General Partner or its Affiliates for such year, showing the amount paid or
accrued to each recipient and the services performed.
(d) The General Partner shall provide to the Limited Partners the
financial statements required by Form 10-K under the Securities Exchange Act of
1934 for the first full fiscal year of operations of the Partnership.
A-15
<PAGE> 89
(e) The Partnership will provide the Limited Partners with a report of
the value of each Unit at the end of each year. Such report may be based on a
valuation provided by the General Partner or an Affiliate of the General
Partner.
(f) The information required to be provided in the various reports
pursuant to this Section 7.4 may be sent earlier than or separately from any of
the other information required pursuant to this Section 7.4, and the information
required to be contained in any of the reports pursuant to this Section 7.4 may
be contained in more than one report.
(g) If the Securities and Exchange Commission or the North American
Securities Administrators Association, Inc. promulgates rules which allow a
reduction in reporting requirements, the Partnership may cease preparing and
filing certain of the aforementioned reports in compliance with such rules if
the General Partner determines such action to be in the best interests of the
Partnership.
(h) On request of the official or agency administering the securities
law of a state in which the Partnership has sold Units, the General Partner
shall submit to such official or agency any report or statement required to be
distributed to Limited Partners pursuant to this Section 7.4.
ARTICLE VIII
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
8.1. MEETINGS. (a) Meetings of the Limited Partners may be called by
the General Partner for any purpose and shall be called by the General Partner
for any matters for which the Limited Partners may vote as set forth in Section
8.2 on receipt of a written request therefor signed by Limited Partners holding
more than 10% of the outstanding Units. Such request shall state the purpose of
the proposed meeting and the matters proposed to be acted on. In addition, the
General Partner may submit any matter to the Limited Partners for a vote by
written Consent without a meeting.
(b) Notice of any meeting for any matters for which the Limited
Partners may vote under Section 8.2 shall be delivered personally or sent by
certified mail. Notice of any other meeting shall be delivered personally or
sent by certified or first class mail. Notices of meetings shall be delivered or
sent to each Limited Partner at his record mailing address not less than 15 days
and not more than 60 days before the date of the meeting and, in the case of a
meeting called at the request of Limited Partners pursuant to Section 8.1 (a),
shall be so delivered or sent within ten days after receipt of such request. (or
as soon thereafter as the Partnership is able to comply with the proxy rules of
the Securities and Exchange Commission if the Partnership is subject to such
rules.) Any such notice shall be in writing, shall state the place, date, time
and purpose of the meeting, shall indicate that it is being issued by or at the
request of the Partner or Partners calling or requesting the meeting and shall
include a detailed statement of the action proposed, including a verbatim
statement of the wording of any resolution proposed for adoption by the Limited
Partners and of any proposed amendment to this Agreement. If a meeting is
adjourned to another time or place, and it any announcement of the adjournment
of time or place is made at the meeting, it shall not be necessary to give
notice of the adjourned meeting. The presence in person or by proxy of the
holders of a majority of the Units shall constitute a quorum at all meetings of
the Limited Partners. If there is no such quorum, holders of a majority of the
Units of Limited Partners so present or represented may adjourn the meeting from
time to time without further notice until a quorum has been obtained. No notice
of the time, place or purpose of any meeting of Limited Partners need be given
to any Limited Partner who attends in person or is present by proxy (except when
a Limited Partner attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business on the ground that
the meeting is not lawfully called or convened), or to any Limited Partner
entitled to such notice who, in a writing executed and filed with the records of
the meeting, either before or after the time thereof, waives such notice.
(c) For the purpose of determining the Limited Partners entitled to
notice of and to vote at any meeting of the Partnership or any adjournment
thereof, the General Partner may fix, in advance, a date as the record date for
such determination. Such date shall be not more than 50 days nor less than ten
days before any such meeting.
A-16
<PAGE> 90
(d) Each Limited Partner may authorize any Person or Persons to act for
him by proxy or written consent in all matters in which a Limited Partner is
entitled to participate, whether by waiving notice of any meeting, or voting or
participating at a meeting. Every proxy or written consent must be signed by the
Limited Partner or his attorney-in-fact. No proxy or written consent shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy or written consent. Every proxy or written consent shall
be revocable at the pleasure of the Limited Partner executing it unless
otherwise provided therein. Every proxy or written consent shall specify a
choice between approval and disapproval of each matter to be acted on at the
meeting.
(e) Meetings of the Limited Partners shall be held at the principal
office of the Partnership or at another place, convenient to the Limited
Partners, selected by the General Partner. At each meeting of Limited Partners,
the General Partner shall appoint such officers and adopt such rules for the
conduct of the meeting as the General Partner deems appropriate.
8.2. VOTING RIGHTS OF LIMITED PARTNERS. After termination of the
offering of the Units, Limited Partners holding a majority of the outstanding
Units, without the necessity for concurrence by the General Partner, may vote
to:
(a) amend this Agreement, subject to Section 9.2(b); provided that any
such amendment (i) shall not in any manner allow the Limited Partners to take
part in the control of the Partnership's business and (ii) shall not, without
the Consent of the General Partner, alter the rights, powers or duties of the
General Partner as set forth in Article IV, the interest of the General Partner
in Profits, Losses, or distributions, or any of the provisions of Sections 5.3
and 5.4(e).
(b) dissolve the Partnership.
(c) subject to Section 5.3, remove the General Partner and elect a new
General Partner.
(d) subject to Section 4.3(b), approve or disapprove a sale of all or
substantially all of the assets of the Partnership.
ARTICLE IX
MISCELLANEOUS
9.1. APPOINTMENT OF GENERAL PARTNER AS ATTORNEY-IN-FACT. (a) Each
Limited Partner, including each Substituted Limited Partner, by his execution
or acceptance of this Agreement, irrevocably constitutes and appoints the
General Partner his true and lawful attorney-in-fact with full power and
authority in his name, place and stead to execute, acknowledge, deliver, swear
to, file and record at appropriate public offices such documents as may be
necessary or appropriate to carry out this Agreement, including but not limited
to:
(i) all certificates and other instruments (including
counterparts of this Agreement), and any amendment thereof, which
General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the
Limited Partners will have limited liability comparable to that
provided by the Act) in the jurisdictions in which the Partnership may
conduct business or in which such formation, qualification or
continuation is, in the opinion of the General Partner, necessary or
desirable to protect the limited liability of the Limited Partners;
(ii) all amendments to this Agreement adopted in accordance
with the terms hereof and all instruments which the General Partner
deems appropriate to reflect a change or modification of the
Partnership in accordance with this Agreement;
(iii) all conveyances and other instruments which the General
Partner deems appropriate to reflect the dissolution and termination of
the Partnership in accordance with this Agreement; and
(iv) all statements or other instruments which the General
Partner deems necessary or appropriate to comply with or minimize tax
withholding obligations under the law of any state.
(b) The appointment by all Limited Partners of the General Partner as
attorney-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Partners under this Agreement will be
relying on the power of the General Partner to act as contemplated by this
A-17
<PAGE> 91
Agreement in any filing and other action by it on behalf of the Partnership, and
shall survive the bankruptcy, death, adjudication of incompetence or insanity,
or dissolution of any Person hereby giving such power and the transfer or
assignment of all or any part of the Units of such Person; provided, however,
that in the event of the transfer by a Limited Partner of all his Units, the
power of attorney of a transferor Limited Partner shall survive such transfer
only until such time as the transferee has been admitted to the Partnership as a
Substituted Limited Partner and all required documents and instruments have been
duly executed, filed and recorded to effect such substitution.
9.2. AMENDMENTS. (a) Each Limited Partner and Substituted Limited
Partner on his admission to the Partnership as contemplated hereby and
reflection in the records of the Partnership as a Limited Partner shall be
deemed to have adopted, and to have agreed to be bound by all the provisions of,
this Agreement and to have authorized the General Partner to execute (should the
General Partner deem it advisable) a counterpart of this Agreement on his
behalf.
(b) In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner with the Consent of a majority in interest of the Limited Partners;
provided, however, that without the Consent of the Partners to be adversely
affected by the amendment, this Agreement may not be amended so as to (i)
convert a Limited Partner's Interest into a general partner's Interest; (ii)
modify the limited liability of a Limited Partner; or (iii) alter the interest
of a Partner in Profits, Losses, or distributions.
(c) In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner, without the consent of any of the Limited Partners, (i) to add to the
representations, duties or obligations of the General Partner or surrender any
right or power granted to the General Partner herein, for the benefit of the
Limited Partners; (ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Agreement which will not be inconsistent with the provisions of this
Agreement; (iii) to delete or add any provision of this Agreement required to be
so deleted or added by the staff of the Securities and Exchange Commission or
other federal agency or by a state securities commissioner or similar official,
which addition or deletion is deemed by such Commission, agency, commissioner or
official to be for the benefit or protection of the Limited Partners; (iv) to
take such action as may be necessary (if any) to cause the assets of the
Partnership not to come within the definition of plan assets under the Employee
Retirement Income Security Act of 1974; (v) to give effect to any action
permitted pursuant to Section 6.1 (e); and (vi) to make technical changes to the
Partnership's tax allocation provisions to conform such provisions to the
requirements of the Code and the Treasury Regulations; provided, however, that
no amendment shall be adopted pursuant to this Section 9.2(c) unless, in the
opinion of the General Partner, the adoption thereof (A) is for the benefit of
or not adverse to the interests of the Limited Partners; (B) is consistent with
Section 4.3; (C) does not affect distributions or the allocation of Profits or
Losses (except as otherwise provided herein) among the Limited Partners or
between the Limited Partners as a class and the General Partner; and (D) does
not affect the limited liability of the Limited Partners or the status of the
Partnership as a partnership for federal income tax purposes.
(d) In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as are
required to be prepared and filed under the Act and under the laws of the other
jurisdictions under the laws of which the Partnership is then formed or
qualified.
9.3. SECURITY INTEREST AND RIGHT OF SETOFF. As security for any
withholding tax or other liability or obligation to which the Partnership may be
subject as a result of any act or status of any Limited Partner or to which the
Partnership becomes subject with respect to the Interest of any Limited Partner,
the Partnership shall have (and each Limited Partner hereby grants to the
Partnership) a security interest in all distributions distributable to such
Limited Partner to the extent of the amount of such withholding tax or other
liability or obligation. The Partnership shall have a right of setoff against
any such distributions in the amount of such withholding tax or other liability
or obligation.
9.4. OWNERSHIP BY LIMITED PARTNER OF INTEREST IN GENERAL PARTNER OR
AFFILIATES. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General
A-18
<PAGE> 92
Partner or in any Affiliate of the General Partner if such ownership by itself
or in conjunction with the stock or other interest owned by other Limited
Partners would, in the opinion of counsel for the Partnership, jeopardize the
classification of the Partnership as a partnership for federal income tax
purposes. The General Partner shall be entitled to make such reasonable inquiry
of the Limited Partners and prospective Limited Partners as is required to
establish compliance with this Section 9.4.
9.5. PARTIES BOUND. Except as otherwise expressly provided in this
Agreement, all provisions of this Agreement shall bind, benefit, and be
enforceable by or against, the heirs, executors, administrators, personal
representatives, successors and permitted assigns of the parties hereto. None of
the provisions of this Agreement shall be for the benefit of or enforceable by
any creditor of the Partnership or any creditor (other than the Partnership) of
any Partner.
9.6. GOVERNING LAW; CONSTRUCTION. This Agreement and the rights and
obligations of the Partners shall be governed by and construed and enforced in
accordance with the laws of Delaware applicable to contracts made and to be
performed therein, without application of the principles of conflict of laws of
such state. Captions in this Agreement have been inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. The invalidity of any portion
of this Agreement shall not affect the validity of the remainder. As required by
the context, the use of the singular shall be construed to include the plural
and vice versa, and the use of any gender shall be construed to include all
genders.
ARTICLE X
DEFINITIONS
10.1. DEFINED TERMS. The following terms shall have the meanings
specified in this Article X unless the context otherwise requires.
"Acquisition Expenses" means expenses, including, but not limited to,
legal fees and expenses, travel and communications expenses, costs of
appraisals, nonrefundable option payments on property not acquired, accounting
fees and expenses, title insurance and miscellaneous expenses related to
selection and acquisition of properties, whether or not acquired.
"Acquisition Fees" means the total of all fees and commissions paid by
any party in connection with the making or investing in mortgage loans or the
purchase or development of property by the Partnership, except a Development Fee
paid to a Person not affiliated with the General Partner in connection with the
actual development of a project after acquisition of the land by the
Partnership. Included in the computation of such fees or commissions shall be
any real estate commission, selection fee, Development Fee, nonrecurring
management fee or any other fee of a similar nature, however designated.
"Act" means the Delaware Revised Uniform Limited Partnership Act.
"Adjusted Capital Contributions" means an amount equal to the Capital
Contributions made by the Limited Partners on the purchase of their Units,
reduced by an amount equal to all distributions (other than distributions of
Cash Flow) made to the Limited Partners under Section 3.1(a)(ii), but in no
event less than zero.
"Affiliate" or "Affiliated Person" of a specified Person means (i) any
Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the specified
Person, (ii) any Person owning or controlling 10% or more of the outstanding
voting securities of the specified Person, (iii) any officer, director or
partner of the specified Person, and (iv) if the specified Person is an
officer, director or partner, any company for which such Person acts in any
such capacity.
"Agreement" means this Restated Limited Partnership Agreement, as
originally executed and as amended from time to time, as the context requires.
Words such as "herein," "hereof," "hereto," "hereby" and "hereunder," when used
with reference to this Agreement, refer to this Agreement as a whole.
A-19
<PAGE> 93
"Capital Account" of any Partner means the capital account of such
Partner that is established on the books of the Partnership and adjusted
pursuant to Section 2.7.
"Capital Contribution" means the gross amount of investment in the
Partnership by a Limited Partner or all Limited Partners, as the case may be (or
the predecessor holders of the Units of any Partner or Partners).
"Cash Available for Distribution" means Cash Flow less amounts set
aside for restoration or creation of reserves.
"Cash Flow" means Partnership cash funds provided from operations
(including lease payments on net leases from builders and sellers) without
deduction for depreciation, but after deducting cash funds used to pay all other
expenses, debt payments, capital improvements and replacements (including (i)
contractual current interest payments, (ii) interest accrued or deferred, when
received, and (iii) contingent interest based on the Partnership's share of the
gross or net income from properties on which the Partnership has made a loan,
but not including contingent interest based on property appreciation with
respect to loans made by the Partnership or funds which constitute repayment of
principal of such a loan or which represent an equity interest in sale or
refinancing proceeds of a real property underlying such a loan).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference herein to a particular provision
of the Code shall mean, where appropriate, the corresponding provision in any
successor statute.
"Consent" means either (i) the consent given by vote at a meeting
called and held in accordance with Section 8.1, or (ii) a written consent given
pursuant to this Agreement or (iii) the act of granting such consent, as the
context may require.
"Construction Fee" means a fee for acting as general contractor to
construct improvements on the Partnership's property, either initially or at a
later date.
"Controlling Person" means any Person, whatever his or her title,
performing functions for the General Partner or its Affiliates similar to those
of chairman or member of the board of directors or executive management (such as
the president, vice president or senior vice president, corporate secretary or
treasurer), senior management (such as the vice president of an operating
division who reports directly to executive management), or any Person holding a
5% or more equity interest in the General Partner or its Affiliates or having
the power to direct or cause the direction of the General Partner or its
Affiliates, whether through the ownership of voting securities, by contract, or
otherwise.
"Cumulative Annual Return" means an amount equal to 10% per year
simple interest on the Adjusted Capital Contributions of the Limited Partners,
calculated from the earlier of (i) the end of the calendar quarter in which the
Capital Contributions were made or (ii) the Closing Date.
"Development Fee" means a fee for the packaging of the Partnership's
property, including negotiating and approving plans and undertaking to assist in
obtaining zoning and necessary variances and necessary financing for the
specific property, either initially or at a later date.
"Final Closing" means the last time at which subscribers for Units are
admitted as Limited Partners.
"Financing" means any mortgage financing, refinancing or borrowing
secured by the Partnership's property.
"Front-End Fees" means fees and expenses paid by any Person for any
services rendered during the Partnership's organizational or acquisition phase,
including Organization and Offering Expenses, Acquisition Fees, Acquisition
Expenses and any other similar fees, however designated.
"General Partner" means Southeast Acquisitions, Inc., a Delaware
corporation, and, as herein provided, any additional General Partner or any
successor to any General Partner.
"Initial Closing" means the first time at which subscribers for Units
are admitted as Limited Partners.
A-20
<PAGE> 94
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including the Partner's interest in Profits,
Losses, distributions and capital and the right of Such Partner to any and all
benefits to which a Partner may be entitled as provided in this Agreement,
together with the obligations of such Partner to comply with this Agreement.
Reference to a majority in interest of the Limited Partners means Limited
Partners whose combined Units represent over 50% of the Units of all Limited
Partners.
"Investment in Property" means the amount of Limited Partners' Capital
Contributions actually paid or allocated to the purchase, development,
construction or improvement of properties acquired by the Partnership (including
the purchase of properties, working capital reserves allocable thereto (not in
excess of 5%), and other cash payments such as interest and taxes, but excluding
Front-End Fees).
"Limited Partners" means the Persons admitted to the Partnership
pursuant to Sections 2.2, 2.4 and 6.2.
"Notification" or "Notice" means a writing, containing the information
required by this Agreement to be communicated to any Person, sent by registered,
certified or regular mail to such Person at his last known mailing address;
however, any written communication containing such information sent to such
Person and actually received by such Person shall constitute Notification or
Notice for all purposes of this Agreement.
"Organization and Offering Expenses" means all expenses incurred by the
Partnership in connection with the formation of the Partnership, the
registration and qualification of the Units under federal and state securities
laws and the offering and sale of the Units, including advertising expenses and
selling commissions and selling allowances paid in connection with the sale of
the Units.
"Partner" means any General Partner or Limited Partner.
"Person" means any individual, partnership, corporation, trust or other
entity.
"Profits" or "Losses" means, for each fiscal year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a), and for this purpose,
all items of income, gain, loss, deduction or credit required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in such taxable
income or loss, with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulations Section 1.704-1
(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses, shall be subtracted from such taxable income or
loss;
(c) Notwithstanding any other provisions of this Agreement,
any items which are specially allocated pursuant to Sections 3.5, 3.7
or 3.8 shall not be taken into account in computing Profits or Losses.
"Prospectus" means the Partnership's prospectus contained in the
Registration Statement filed with the Securities and Exchange Commission for the
registration of the Units under the Securities Act of 1933, in the final form in
which such Prospectus is filed with such Commission and as thereafter
supplemented pursuant to Rule 424 under such act. Any reference herein to "date
of the Prospectus" shall be deemed to refer to the date of the Prospectus in the
form filed pursuant to Rule 424(b) of such act.
"Purchase Price" means the price paid on the purchase or sale of a
particular property, including the amount of Acquisition Fees and all liens and
mortgages on the property, but excluding points and prepaid interest.
"Sale" means any Partnership transaction (other than the receipt of
Capital Contributions) not in the ordinary course of its business, including,
without limitation, sales, exchanges or other dispositions of real or personal
property, condemnations, recoveries of damage awards and insurance proceeds
(other than business or rental interruption insurance proceeds), but excluding
any Financing.
A-21
<PAGE> 95
"Sale or Financing proceeds," "Sale proceeds" or "Financing proceeds"
mean all cash receipts arising from a Sale or Financing, as the context
requires, less (i) the amount necessary for the payment of all debts and
obligations related to the particular Sale or Financing; (ii) the amount of cash
paid or to be paid in connection with such Sale or Financing (which shall
include, with regard to damage recoveries or insurance or condemnation proceeds,
cash paid or to be paid in connection with repairs, replacements or renewals, in
the discretion of the General Partner, relating to the damage to or partial
condemnation of the affected property); and (iii) the amount considered
appropriate by the General Partner to pay taxes, insurance, debt service,
repairs, replacements or renewals, or other costs or expenses of the Partnership
(including costs of improvements or additions in connection with the
Partnership's property) or to provide reserves.
"Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 6.2.
"Termination" of a General Partner means the occurrence as to such
General Partner of an event of withdrawal as defined in paragraphs (1), (2),
(3), (6), (7), (8), (9) and (10) of Section 17-402 of the Act (and the events
referred to in paragraphs (4) and (5) of Section 17-402 shall not constitute
such an event of withdrawal). Such Partner is referred to as a "Terminated"
Partner.
"Treasury Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Unit" means the Interest of a Limited Partner attributable to a
Capital Contribution of $1,000.
"Unpaid Cumulative Return" as of any date means an amount equal to the
Cumulative Annual Return as of such date less the sum of all distributions to
the Limited Partners on or before such date under Section 3.1 (a)(i) or, if made
from Cash Flow, under Section 3.1 (a)(ii), but in no event less than zero.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
GENERAL PARTNER: SOUTHEAST ACQUISITIONS, INC.
By: /s/ Deborah D. Baker
------------------------
Deborah D. Baker
INITIAL LIMITED PARTNER: F M INITIAL, INC.
By: /s/ Anthony R. Balabon
-------------------------
Anthony R. Balabon
A-22
<PAGE> 96
EXHIBIT B
ALTERNATIVE AMENDMENTS
<PAGE> 97
FIRST ALTERNATIVE AMENDMENTS
SEA II
FIRST AMENDMENT TO
RESTATED LIMITED PARTNERSHIP AGREEMENT OF
SOUTHEAST ACQUISITIONS II, L.P.
This FIRST AMENDMENT (this "Amendment"), dated as of September 3, 1997
is to the Restated Limited Partnership Agreement (the "Partnership Agreement")
of Southeast Acquisitions II, L.P. (the "Partnership"), dated June 24, 1988,
by and between SOUTHEAST ACQUISITIONS, INC., a Delaware corporation, as
general partner (the "General Partner") and the Persons admitted as limited
partners pursuant to the Partnership Agreement.
WHEREAS, a special meeting (the "Meeting") of the Limited Partners
was duly held on September 3, 1997; and
WHEREAS, at the Meeting a majority in interest of the Limited Partners
have voted to adopt the following Amendments to the Partnership Agreement.
NOW, THEREFORE, the Amendments are adopted and are effective as of
September 3, 1997.
1. Southeast Acquisitions, Inc. is hereby removed as the General
Partner of the Partnership, and Southern Management Group of
Tennessee, LLC, a Tennessee Limited Liability Company is substituted
therefor as successor General Partner of the Partnership. On and
after the date of this Amendment, except as the context may
otherwise require, all references to the General Partner in the
Partnership Agreement shall mean Southern Management Group of
Tennessee, LLC.
2. Section 1.3 is amended in its entirety to read as follows:
"1.3. TERM. The Partnership shall exist for a term ending December
31, 2000, at which time it shall be dissolved, unless sooner
dissolved or terminated as provided in this Agreement (the
"Term")."
3. Section 1.4 is hereby amended in its entirety to read as follows:
"1.4. PLACE OF BUSINESS. The principal place of business of the
Partnership shall be at 301 South Perimeter Park Drive, Suite 115,
Nashville, TN 37211 or at another location selected by the General
Partner, who shall give notice of any change to the Limited
Partners. The Partnership may have such additional offices or places
of business as the General Partner may determine."
B-1
<PAGE> 98
4. The first sentence of Section 2.1 is amended in its entirety to
read as follows:
"2.1. GENERAL PARTNER. The General Partner is Southern
Management Group of Tennessee, LLC, a Tennessee Limited
Liability Company, 301 South Perimeter Park Drive, Suite 115,
Nashville, Tennessee".
5. Section 4.2(a) is amended by adding at the end of the section
the following:
"(xiii) Reserve to itself or an Affiliate or enter into a
contract for an exclusive right to sell or exclusive
employment to sell property for the Partnership."
6. Section 4.3(b) is hereby amended in its entirety to read as
follows:
"(b) Without the consent of a majority in interest of the
Limited Partners, the General Partner shall not have the
authority to:
(i) sell or otherwise dispose of at one time all or
substantially all the assets of the Partnership, except
that the General Partner may sell such assets without
such consent (A) in connection with the liquidation of
the Partnership under Section 6.3 or (B) if the net
proceeds of such sale, when distributed in accordance
with the Section 3.1, will be sufficient to provide the
Limited Partners with distributions equal to the
Acquisition Cost of the assets sold."
7. Section 4.3(g) is deleted in its entirety and clauses 4.3(h)
through (t) are hereby renumbered 4.3(g) through (s)
respectively.
8. Section 4.5(b) is amended in its entirety to read as
follows:
"(b) For the services and activities to be performed by the
General Partner in connection with the administration and
management of the Partnership from September 3, 1997 to the end
of the Term, the General Partner shall receive a management fee
of $19,000 per year (prorated for a portion of a year) during
the Term of the Partnership. The management fee shall be paid to
the General Partner for such services on conclusion of each
calendar quarter. If the Partnership does not have sufficient
cash to pay the management fee for any quarter, such fee shall
be accrued (without interest) as a debt of the Partnership,
payable out of Sale or Financing proceeds prior to any Partner
receiving their distributions in accordance with this
Agreement."
9. Section 4.5(c) shall be amended in its entirety to read as
follows:
"(c) The General Partner or its Affiliates may receive the
entire competitive real estate commission or disposition fee
(that real estate or brokerage commission or disposition fee
paid for the purchase or sale of property which is reasonable,
customary and competitive in light of the size, type and
location of the property) with respect to sales of Partnership
property following September 3, 1997, which are not under
contract as of such date. The total compensation paid to all
Persons for the sale of Partnership property shall be limited to
a competitive real estate commission or disposition fee not to
exceed 10% of the contract price for the sale of the property.
The commission or disposition fee shall be paid upon sale of the
property prior to any distribution to the Partners in accordance
with this
B-2
<PAGE> 99
Agreement; provided that the amount of any such commission or
disposition fee paid to the General Partner shall reduce any
distribution to which it would otherwise be entitled pursuant to
this Agreement."
10. Section 11.1 is amended by adding the following definition as the
first definition in the Section:
"Acquisition Cost" with respect to a Partnership asset means the
price originally paid by the Partnership to acquire the asset,
including the value of any mortgages or liens on the asset assumed
by the Partnership at the time of acquisition, excluding points and
prepaid interest.
and by adding the following definition following the definition of
"Agreement":
"all or substantially all the assets of the Partnership" means 60%
or more of the real estate acreage held by the Partnership as of
July 25, 1997."
11. Except as amended hereby, the Partnership Agreement shall remain
in full force and effect.
12. Terms not defined herein which are defined in the Partnership
Agreement shall have the same meanings herein.
13. This Amendment and the rights and obligations of the Partners
hereunder shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed therein, without application of the principles of conflicts of laws
of such state.
B-3
<PAGE> 100
IN WITNESS WHEREOF, this Amendment has been executed by the parties set
forth below as of the date first above written.
GENERAL PARTNER SOUTHEAST ACQUISITIONS, INC.
By
----------------------------------
Name:
Title:
SUCCESSOR GENERAL PARTNER SOUTHERN MANAGEMENT GROUP
OF TENNESSEE, LLC
By
----------------------------------
Name:
Title:
LIMITED PARTNERS LIMITED PARTNERS
By
----------------------------------
Name:
Title:
B-4
<PAGE> 101
SECOND ALTERNATIVE AMENDMENTS
SEA II
FIRST AMENDMENT TO
RESTATED LIMITED PARTNERSHIP AGREEMENT OF
SOUTHEAST ACQUISITIONS II, L.P.
This FIRST AMENDMENT (this "Amendment"), dated as of September 3, 1997
is to the Restated Limited Partnership Agreement (the "Partnership Agreement")
of Southeast Acquisitions II, L.P. (the "Partnership"), dated June 24, 1988, by
and between SOUTHEAST ACQUISITIONS, INC., a Delaware corporation, as general
partner (the "General Partner") and the Persons admitted as limited partners
pursuant to the Partnership Agreement.
WHEREAS, a special meeting (the "Meeting") of the Limited Partners was
duly held on September 3, 1997; and
WHEREAS, at the Meeting a majority in interest of the Limited Partners
have voted to adopt the following Amendments to the Partnership Agreement.
NOW, THEREFORE, the Amendments are adopted and are effective as of
September 3, 1997.
1. Section 1.3 is amended in its entirety to read as follows:
"1.3. TERM. The Partnership shall exist for a term ending
December 31, 2000, at which time it shall be dissolved, unless
sooner dissolved or terminated as provided in this Agreement
(the "Term")."
2. Section 4.2(a) is amended by adding at the end of the section
the following:
"(xiii) Reserve to itself or an Affiliate or enter into a
contract for an exclusive right to sell or exclusive employment
to sell property for the Partnership."
3. Section 4.3(b) is hereby deleted in its entirety and Sections
4.3(c) through (f) are hereby renumbered 4.3(b) through (e)
respectively."
4. Section 4.3(g) is deleted in its entirety and Sections 4.3(h)
through (t) are hereby renumbered 4.3(f) through (r)
respectively.
68204
B-5
<PAGE> 102
5. Section 4.5(b) is amended in its entirety to read as follows:
"(a) For the services and activities to be performed by the
General Partner in connection with the administration and
management of the Partnership from January 1, 1999 to the end of
the Term, the General Partner shall receive a management fee of
$19,000 per year (prorated for a portion of a year) during the
Term of the Partnership. The management fee shall be paid to the
General Partner for such services on conclusion of each calendar
quarter. If the Partnership does not have sufficient cash to pay
the management fee for any quarter, such fee shall be accrued
(without interest) as a debt of the Partnership, payable out of
Sale or Financing proceeds prior to any Partner receiving his
distributions in accordance with this Agreement."
6. Section 4.5(c) is amended in its entirety as follows:
"(c) The General Partner or its Affiliates may receive the
entire competitive real estate commission or disposition fee
(that real estate or brokerage commission or disposition fee
paid for the purchase or sale of property which is reasonable,
customary and competitive in light of the size, type and
location of the property) with respect to sales of Partnership
property following September 3, 1997 which are not under
contract as of such date. The total compensation paid to all
Persons for the sale of Partnership property shall be limited to
a competitive real estate commission or disposition fee not to
exceed 10% of the contract price for the sale of the property.
The commission or disposition fee shall be paid upon sale of the
property prior to any distribution to the Partners in accordance
with this Agreement; provided that the amount of any such
commission or disposition fee paid to the General Partner shall
reduce any distribution to which it would otherwise be entitled
pursuant to this Agreement."
7. Except as amended hereby, the Partnership Agreement shall remain
in full force and effect.
8. Terms not defined herein which are defined in the Partnership
Agreement shall have the same meanings herein.
9. This Amendment and the rights and obligations of the Partners
hereunder shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein, without application
of the principles of conflicts of laws of such state.
B-6
<PAGE> 103
IN WITNESS WHEREOF, this Amendment has been executed by the parties set
forth below as of the date first above written.
GENERAL PARTNER SOUTHEAST ACQUISITIONS, INC.
By
----------------------------------
Name:
Title:
LIMITED PARTNERS LIMITED PARTNERS
By
----------------------------------
Name:
Title:
B-7
<PAGE> 104
EXHIBIT C
AGREEMENT BETWEEN SOUTHERN
MANAGEMENT GROUP OF TENNESSEE,
R. W. SORENSON AND THE PARTNERSHIP.
<PAGE> 105
AMENDED AND RESTATED
SUBSTITUTION AGREEMENT
THIS AMENDED AND RESTATED SUBSTITUTION AGREEMENT is made as of this 1st
day of July 1997, by and between SOUTHERN MANAGEMENT GROUP OF TENNESSEE, LLC, a
Tennessee Limited Liability Company ("SMGT"), Richard W. Sorenson, individually
("Sorenson"), SOUTHEAST ACQUISITIONS I, L.P. ("SEA I"), SOUTHEAST ACQUISITIONS
II, L.P. ("SEA II"), and SOUTHEAST ACQUISITIONS III, L.P. ("SEA III")
(collectively the "SEA Partnerships" and individually a "Partnership") by
SOUTHEAST ACQUISITIONS, INC. as General Partner of the SEA Partnerships (the
"General Partner").
RECITALS
WHEREAS, under an agreement dated April 1, 1997 by and between SMGT,
Sorenson, SEA I, SEA II, SEA III and the General Partner (the "Original
Agreement") SMGT agreed to be substituted as the new General Partner and assume
all the attendant responsibilities and obligations of the General Partner of
such of the SEA Partnerships as approve the substitution; and
WHEREAS, certain modifications to the Original Agreement are required as
a result of revised voting procedures and an extension of the dates for the
substitution; and
WHEREAS, each of the SEA Partnerships will incur certain costs and
expenses in connection with the substitution of a new General Partner including,
without limitation, those relating to the solicitation of proxies; and
WHEREAS, SMGT and Sorenson are willing to indemnify the SEA Partnerships
against such costs and expenses upon a default by SMGT or Sorenson under this
Agreement; and
WHEREAS, each of the SEA Partnerships is willing to indemnify Sorenson and
SMGT against their costs and expenses relating to the substitution with respect
to its respective Partnership, if such Partnership defaults under this
Agreement.
NOW, THEREFORE, upon the premises set forth herein, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, the parties hereto hereby agree to amend and
restate the original Agreement as follows:
Section 1. Substitution of New General Partner.
(a) If a majority in interest of the Unit holders of SEA I adopt the First
Alternative Amendments to the Partnership Agreement for SEA I, attached hereto
and made a part hereof (with such changes as shall be approved by all parties
hereto and filed with the Proxy Statement relating thereto to be mailed on or
about July 25, 1997 (the "SEA I Proxy")) at the
C-1
<PAGE> 106
special Meeting of Limited Partners to be held on or about September 4, 1997 (or
such other date to which the Special Meeting may be reasonably postponed), SMGT
agrees to be substituted as the new General Partner of SEA I.
(b) If the Unit holders of SEA II adopt the First Alternative Amendments
to the Partnership Agreement for SEA II, attached hereto and made a part hereof
(with such changes as shall be approved by all parties hereto and filed with the
Proxy Statement relating thereto to be mailed on or about July 25, 1997 (the
"SEA II Proxy")) at the Special Meeting of Limited Partners to be held on or
about September 3, 1997 (or such other date to which the Special Meeting may be
reasonably postponed), SMGT agrees to be substituted as the new General Partner
of SEA II.
(c) If the Unit holders of SEA III adopt the First Alternative Amendments
to the Partnership Agreement for SEA III, attached hereto and made a part hereof
(with such changes as shall be approved by all parties hereto and filed with the
Proxy Statement relating thereto to be mailed on or about July 25, 1997 (the
"SEA III Proxy")) at the Special Meeting of Limited Partners to be held on or
about September 3, 1997 (or such other date to which the Special Meeting may be
reasonably postponed), SMGT agrees to be substituted as the new General Partner
of SEA III.
Section 2. Execution of Partnership Agreements.
Following each approval as set forth in Section 1(a) through (c) above,
SMGT will execute the relevant Partnership Agreement, as amended by the First
Alternative Amendments, as attached to the respective Proxy Statements as
Exhibits A and B thereto, thereby agreeing to be bound by all the terms and
conditions of such Partnership Agreement, as amended.
Section 3. Transfer of General Partner Interest
Upon execution of a Partnership Agreement by SMGT in accordance with
Section 2, the General Partner agrees to transfer to SMGT all of its interest as
General Partner of such Partnership. The General Partner represents that it has
the right to transfer such interest and that following such transfer and the
satisfaction of all the conditions to SMGT being substituted as a General
Partner set forth in the relevant Partnership Agreement, SMGT will be a duly
appointed General Partner of such Partnership with all rights and obligations of
the General Partner of such Partnership.
Section 4. Transfer of Books and Records.
No later than ten (10) business days after the execution of a Partnership
Agreement by SMGT in accordance with Section 2, the General Partner will deliver
to SMGT all of the books and records in its possession of each of the
Partnerships which has approved the substitution of SMGT as the new General
Partner, along with a transmittal letter listing such books and records being
delivered; provided that the General Partner shall have the right to retain a
copy of all such books and records. The General Partner agrees to cooperate with
SMGT in the orderly
C-2
<PAGE> 107
transition of management and operation of such of the Partnerships as approve of
the substitution of SMGT as the new General Partner, including, without
limitation, making officers, employees and agents of the General Partner
available to SMGT at reasonable times and for reasonable periods at their
offices in Radnor, Pennsylvania and providing reasonable assistance to SMGT in
its preparation and filing of third quarter financial reports for such
Partnerships.
Section 5. Representations and Warranties
SMGT and Sorenson jointly and severally represent to the SEA Partnerships
and the General Partner that all of the information provided by them or their
affiliates to the General Partner or the SEA Partnerships and all statements
appearing in the SEA I Proxy, the SEA II Proxy and the SEA III Proxy
(individually a "Proxy Statement" and collectively the "Proxy Statements") based
on such information and in the light of the circumstances under which they were
made are not and, at the time the Proxy Statements are filed, will not be false
or misleading with respect to any material fact, or omit, or at the time the
Proxy Statements are filed, will omit to state any material fact necessary in
order to make the statements therein not false or misleading. SMGT and Sorenson
also undertake to provide to the Partnerships and the General Partner with any
information necessary to correct any such statement in the Proxy Statements
which becomes false or misleading prior to the Special Meetings referred to in
such Proxy Statements.
Each of the Partnerships represents to SMGT and Sorenson that all
statements appearing in the Proxy Statement relating to such Partnership, other
than statements based on materials or information provided by SMGT, Sorenson or
their affiliates, in the light of the circumstances under which they were made
are not and at the time such Proxy Statement is filed, will not be false or
misleading with respect to any material fact, or omit or, at the time such Proxy
Statement is filed, will omit to state any material fact necessary in order to
make the statements therein not false or misleading. Each of the Partnerships
undertakes to correct any such statement in the Proxy Statement relating to such
Partnership which becomes false or misleading prior to the Special Meeting
referred to in such Proxy Statement.
Section 6. Indemnity.
SMGT and Sorenson, as the principal member of SMGT, jointly and severally,
agree to indemnify the Partnerships from and against any and all claims,
liabilities, costs and expenses (including legal expenses) incurred by the
Partnerships in connection with the proposed substitution of SMGT as the new
General Partner, including, without limitation, the costs and expenses relating
to solicitation of proxies in connection with the substitution of SMGT for the
existing General Partner in the event that Sorenson or SMGT defaults under any
provision of this Agreement.
Each of the Partnerships hereby severally agrees to indemnify SMGT and
Sorenson from and against any and all claims, liabilities, costs and expenses
(including legal expenses) incurred by SMGT and Sorenson in connection with (i)
the proposed substitution of SMGT as the new
C-3
<PAGE> 108
General Partner of such Partnership, including, without limitation, the costs
and expenses relating to solicitation of proxies to substitute SMGT for the
existing General Partner, in the event that such Partnership defaults under any
provision of this Agreement; and (ii) actions of such Partnership prior to the
admission of SMGT as the new General Partner, including, without limitation, any
liabilities or obligations of such Partnership that arose prior to the admission
of SMGT as the new General Partner.
The General Partner hereby agrees to indemnify SMGT and Sorenson from and
against any and all claims, liabilities, costs and expenses (including legal
expenses) incurred by SMGT and Sorenson in connection with actions by the
General Partner prior to the admission of SMGT as the new General Partner of a
Partnership, including without limitation, any liabilities or obligations of the
General Partner that arose prior to the admission of SMGT as the New General
Partner of a Partnership.
Section 7. Miscellaneous.
(a) This Agreement and the rights and obligations of the parties hereto
shall be governed by and construed and enforced in accordance with the laws of
the Commonwealth of Pennsylvania applicable to contracts made and to be
performed therein. The invalidity of any portion of this Agreement shall not
affect the validity of the remainder. As required by the context, the use of the
singular shall be construed to include the plural and vice versa, and the use of
any gender shall be construed to include all genders.
(b) This Agreement constitutes the entire agreement of the parties hereto,
regarding the subject matter hereof, and all prior agreements, understandings,
representations and statements, oral or written, are hereby merged herein. In
the event of a conflict between the terms of this Agreement and any prior
written agreements, the terms of this Agreement shall prevail. This Agreement
may only be amended or modified by an instrument in writing, signed by the party
intending to be bound thereby.
(c) The Original Agreement is deemed to be amended and restated in its
entirety by this Agreement as of the date first set forth above.
(d) This Agreement may be executed in counterparts, all of which taken
together, shall constitute one and the same document.
C-4
<PAGE> 109
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
SOUTHERN MANAGEMENT GROUP OF TENNESSEE, LLC
By: /s/ RICHARD W. SORENSON
-----------------------------
Name: Richard W. Sorenson
Title: Member
RICHARD W. SORENSON
individually
/s/ RICHARD W. SORENSON
--------------------------------
SOUTHEAST ACQUISITIONS I, L.P.
by: SOUTHEAST ACQUISITIONS, INC.,
General Partner
By: /s/ JAMES W. KELICAN, JR.
-----------------------------
Name:
Title:
SOUTHEAST ACQUISITIONS II, L.P.
by: SOUTHEAST ACQUISITIONS, INC.,
General Partner
By: /s/ JAMES W. KELICAN, JR.
-----------------------------
Name:
Title:
C-5
<PAGE> 110
SOUTHEAST ACQUISITIONS III, L.P.
by: SOUTHEAST ACQUISITIONS, INC.,
General Partner
By: /s/ JAMES W. KELICAN, JR.
-----------------------------------
Name:
Title:
C-6
<PAGE> 111
The date of this Proxy Statement is set forth in the lower right hand corner of
this back cover page. Under no circumstances shall the information contained in
this Proxy Statement be considered unchanged as of any date subsequent to the
date hereof except with respect to information incorporated by reference herein
pursuant to a subsequently dated document.
Summary Table of Contents
Summary................................. 10
Risk Factors............................ 28
Conflicts of Interest................... 31
History of the Partnership.............. 32
The General Partner..................... 37
The Properties.......................... 43
The Alternative Amendments.............. 48
Federal Tax Consequences; Legal
Opinion................................ 62
Eligible Units.......................... 62
Voting.................................. 63
Information Agent....................... 65
Solicitations by The General Partner.... 65
Ownership of Units...................... 65
Experts................................. 65
Available Information................... 66
Incorporation of Certain Documents
by Reference.......................... 66
Appendix: Glossary of Defined Terms..... 68
Exhibit A: Partnership Agreement........ A-1
Exhibit B: Alternative Amendments....... B-1
Exhibit C: Agreement between
Southern Management Group of
Tennessee, R.W. Sorenson and
the Partnership....................... C-1
Exhibit D: Legal Opinion................ D-1
SOUTHEAST ACQUISITIONS II, L.P.
General Partner:
Southeast Acquisitions, Inc.
250 King of Prussia Road
Radnor, Pennsylvania 19087
Telephone No. (610) 964-7178
Facsimile No. (610) 964-7269
Information Agent:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone No. (800) 829-6551
Facsimile No. (212) 809-8839
Proxy Statement
July 25, 1997
<PAGE> 112
EXHIBIT D
LEGAL OPINION
<PAGE> 113
EXHIBIT D
OPINION OF COUNSEL
OBERMAYER REBMANN MAXWELL & HIPPEL LLP
ONE PENN CENTER - 19TH FLOOR
1617 JFK BLVD.
PHILADELPHIA, PA 19103
July 25, 1997
SOUTHEAST ACQUISITIONS II, L.P.
250 King of Prussia Road
Radnor, PA 19087
RE: EFFECT OF PROPOSED PARTNERSHIP AGREEMENT AMENDMENTS ON THE
FEDERAL INCOME TAX STATUS OF THE PARTNERSHIP
Ladies and Gentlemen:
Southeast Acquisitions II, L.P. (the "Partnership") was formed as a
limited partnership under Delaware law on December 14, 1987 and is presently
existing as a Delaware limited partnership pursuant to a Restated Limited
Partnership Agreement dated as of June 24, 1988 (the "Partnership Agreement").
You have asked for our opinion as to whether or not the amendments which are
proposed to be made to the Partnership Agreement as described in the Proxy
Statement referred to below (the "Alternative Amendments") would either (1)
adversely affect the classification of the Partnership as a partnership for
federal income tax purposes, or (2) cause a "termination" of the Partnership
for federal income tax purposes.
The sole general partner of the Partnership at the present time is
Southeast Acquisitions, Inc. (the "Existing General Partner"). Under cover of
letter dated July 25, 1997, the Existing General Partner delivered to the
limited partners of the Partnership (the "Limited Partners") a Proxy Statement
dated July 25, 1997 (the "Proxy Statement") soliciting Limited Partner consent
to one of two alternative sets of amendments to the Partnership Agreement.
Under the first alternative set of amendments, Southern Management Group of
Tennessee, LLC (the "Proposed New General Partner") would be substituted in
place of the Existing General Partner as the sole general partner of the
Partnership, and new commissions and management fees would be authorized for
the Proposed New General Partner. Under the second alternative set of
amendments, which would not involve a change in general partner of the
Partnership, new commissions and management fees would be authorized for the
Existing General Partner. In addition, under each alternative set of
amendments, the stated term of the Partnership would be extended from December
31, 1998 to December 31, 2000, and there would be a modification of the
requirement that a majority in interest of the Limited Partners consent to a
sale or disposition at one time of all or substantially all the assets of the
Partnership under certain circumstances.
D-1
<PAGE> 114
The interest of the Existing General Partner in the capital of the
Partnership is less than 50 percent of the total interest in Partnership
capital, and the interest of the Existing General Partner in the profits of the
Partnership is less than 50 percent of the total interest in Partnership
profits.
In rendering our opinion, we have examined (i) a copy of the Partnership
Agreement, (ii) a copy of the Proxy Statement, and (iii) such legal authorities
as we have deemed to be relevant in allowing us to form our opinion, including
United States Treasury Regulation Sections 301.7701-2, 301.7701-2, and
301.7701-3, as amended by Treasury Decision 8697 (the "Entity Regulations"), and
Treasury Regulation 1.708-1, as amended by Treasury Decision 6175 (the
"Termination Regulations"). The Entity Regulations were published in the Federal
Register on December 18, 1996, and are generally effective as of January 1,
1997. The Termination Regulations were published in the Federal Register on May
8, 1997.
The General Partner has represented to us, and we assume to be the case,
that (a) the Partnership Agreement is the partnership agreement under which the
Partnership currently exists, (b) the Partnership has filed all of its federal
income tax returns as a partnership, (c) the Partnership has otherwise been
treated by its partners as a partnership for federal income tax purposes (and
not as an association taxable as a corporation) throughout the existence of the
Partnership, (d) neither the Partnership nor any partner thereof was notified in
writing on or before May 8, 1996 that the Partnership's classification as a
partnership for federal income tax purposes was under examination by the
Internal Revenue Service, and (e) any transfer of the Existing General Partner's
interest in the Partnership by reason of the Alternative Amendments, when
combined with any other changes in ownership of interests in the Partnership
during the 12-month period ending on the date of such transfer, will not result
in a sale or exchange of 50 percent or more of the total interest in Partnership
capital and profits.
In our opinion, under current law, based on the facts and assumptions
set forth above, the adoption of either set of Alternative Amendments (1) would
not adversely affect the classification of the Partnership as a partnership for
federal income tax purposes (and not as an association taxable as a
corporation), and (2) would not cause a "termination" of the Partnership for
federal income tax purposes.
/s/ OBERMAYER REBMANN MAXWELL & HIPPEL LLP
D-2
<PAGE> 115
PROXY PROXY
SOUTHEAST ACQUISITIONS II, L.P.
250 KING OF PRUSSIA ROAD
RADNOR, PENNSYLVANIA 19087
TELEPHONE (610) 964-7178
THIS PROXY IS SOLICITED BY THE GENERAL PARTNER ON BEHALF OF THE PARTNERSHIP
The undersigned hereby appoints Arthur W. Mullin and James W. Kelican,
Jr. as Proxyholders, each with full power of substitution and resubstitution,
and hereby authorizes either of them to represent and vote, as designated
below, all of the Units of the Partnership that the undersigned held as a
Limited Partner on July 25, 1997 at the Special Meeting to be
held on September 3, 1997, and any adjournment thereof. Capitalized term
used but not defined in this Proxy Card have the meanings given to them in the
Partnership's Proxy Statement for the Special Meeting.
YOU MAY VOTE IN FAVOR OF OR AGAINST OR ABSTAIN FROM VOTING WITH RESPECT TO EACH
AMENDMENT CONTAINED IN EACH SET OF ALTERNATIVE AMENDMENTS. HOWEVER, THE ADOPTION
OF ANY AMENDMENT CONTAINED IN A SET OF ALTERNATIVE AMENDMENTS IS CONDITIONED
UPON THE ADOPTION OF ALL OF THE AMENDMENTS WITHIN THAT SET OF ALTERNATIVE
AMENDMENTS.
IN ORDER TO BE ADOPTED, ALL OF THE AMENDMENTS CONTAINED IN A SET OF ALTERNATIVE
AMENDMENTS MUST RECEIVE AT LEAST 50% OF THE VOTES OF LIMITED PARTNERSHIP UNITS
ELIGIBLE TO VOTE.
IN THE EVENT BOTH SETS OF ALTERNATIVE AMENDMENTS RECEIVE IN EXCESS OF 50% OF THE
VOTES OF LIMITED PARTNERSHIP UNITS ELIGIBLE TO VOTE, THE SET OF ALTERNATIVE
AMENDMENTS RECEIVING THE MOST VOTES IN EXCESS OF 50% WILL BE ADOPTED.
IN THE EVENT OF AN EQUAL NUMBER OF VOTES BEING CAST WHICH ARE SUFFICIENT FOR THE
ADOPTION OF BOTH THE FIRST ALTERNATIVE AMENDMENTS AND THE SECOND ALTERNATIVE
AMENDMENTS, THE GENERAL PARTNER WILL DETERMINE A METHOD OF RANDOM SELECTION AND
SELECT THE SET OF ALTERNATIVE AMENDMENTS TO BE ADOPTED PURSUANT THERETO.
IF NEITHER THE FIRST ALTERNATIVE AMENDMENTS NOR THE SECOND ALTERNATIVE
AMENDMENTS RECEIVE THE AFFIRMATIVE VOTE OF A MAJORITY IN INTEREST OF THE UNITS,
THE GENERAL PARTNER WILL CONTINUE TO ACT AS GENERAL PARTNER OF THE PARTNERSHIP
IN ACCORDANCE WITH THE PARTNERSHIP AMENDMENT.
1. PROPOSAL TO APPROVE FIRST ALTERNATIVE AMENDMENTS
(please select a, b, c or vote on individual amendments under d)
a. / / FOR approval of all of the First Alternative Amendments
b. / / AGAINST approval of all of the First Alternative
Amendments
c. / / ABSTAIN from voting for approval of all of the First
Alternative Amendments
or
d. As follows as to the individual amendments in the First
Alternative Amendments: PLEASE NOTE THAT NONE OF THE
FOLLOWING AMENDMENTS CAN BE ADOPTED ON ITS OWN. THE ADOPTION
OF ANY AMENDMENT SET FORTH IN THIS SECTION (d) IS
CONDITIONED UPON ADOPTION OF ALL OF THE OTHER AMENDMENTS IN
THIS SECTION (d)
i. As to the amendment extending the terms of the
Partnership to December 31, 2000:
/ / FOR
/ / AGAINST
/ / ABSTAIN
ii. As to the substitution of Southern Management Group of
Tennessee, LLC as the New General Partner of the
Partnership:
/ / FOR
/ / AGAINST
/ / ABSTAIN
iii. As to the authorization of new commissions and
management fees payable to the New General Partner,
effective September 3, 1997:
/ / FOR
/ / AGAINST
/ / ABSTAIN
iv. As to the proposal to give the New General Partner the
exclusive right to sell the Properties:
/ / FOR
/ / AGAINST
/ / ABSTAIN
v. As to the proposal to amend the Partnership Agreement to
provide that a majority in interest of the Limited
Partners must consent to the transfer at one time of 60%
or more of the real estate acreage held by the
Partnership as of July 25, 1997 unless (i) in
connection with the liquidation of the Partnership, or
(ii) where the proceeds of the transfer, when
distributed in accordance with the Partnership
Agreement, will be sufficient to provide the Limited
Partners with distributions equal to the Acquisition
Cost of the real property sold:
/ / FOR
/ / AGAINST
/ / ABSTAIN
2. PROPOSAL TO APPROVE SECOND ALTERNATIVE AMENDMENTS
(please select a, b, c or vote on individual amendments under d)
a. / / FOR approval of all of the Second Alternative Amendments
b. / / AGAINST approval of all of the Second Alternative
Amendments
c. / / ABSTAIN from voting for approval of all of the Second
Alternative Amendments
or
d. As follows as to the individual amendments in the Second
Alternative Amendments: PLEASE NOTE THAT NONE OF THE
FOLLOWING AMENDMENTS CAN BE ADOPTED ON ITS OWN. THE ADOPTION
OF ANY AMENDMENT SET FORTH IN THIS SECTION (d) IS
CONDITIONED UPON ADOPTION OF ALL OF THE OTHER AMENDMENTS IN
THIS SECTION (d)
i. As to the amendment extending the term of the
Partnership to December 31, 2000 (with Southeast
Acquisitions, Inc. remaining as General Partner):
/ / FOR
/ / AGAINST
/ / ABSTAIN
ii. As to the amendment authorizing new commissions payable
to the General Partner or an Affiliate on the sale of
the Property, effective September 4, 1997, and new
management fees for the General Partner, effective
December 31, 1998:
/ / FOR
/ / AGAINST
/ / ABSTAIN
iii. As to the proposal to give the New General Partner the
exclusive right to sell the Properties:
/ / FOR
/ / AGAINST
/ / ABSTAIN
iv. As to the amendment to delete from the Partnership the
requirement that a majority only in interest of the
Limited Partners must consent to a sale or disposition
at one time of all or substantially all the assets of
the Partnership unless in connection with a liquidation
of the Partnership under the Partnership Agreement or in
the event that the net proceeds of such sale, when
distributed in accordance with the Partnership
Agreement, would be sufficient to provide the Limited
Partners with distributions equal with Unpaid Cumulative
Return plus their Adjusted Capital Contributions:
/ / FOR
/ / AGAINST
/ / ABSTAIN
3. The Proxyholders are also authorized to vote upon procedural
matters coming before the Special Meeting in accordance
with their best judgment.
<PAGE> 116
THE PROXYHOLDERS WILL VOTE THE UNDERSIGNED'S UNITS IN THE MANNER DIRECTED
HEREON. IF YOU RETURN A SIGNED PROXY CARD WITHOUT INDICATING
HOW YOU WISH TO VOTE ON EITHER OF THE ALTERNATIVE AMENDMENTS, YOUR VOTE WILL BE
COUNTED AS A VOTE FOR BOTH SETS OF ALTERNATIVE AMENDMENTS.
Please sign and date below. When Units are held by joint tenants, both
joint tenants should sign. When signing as administrator, attorney-in-fact,
executor, fiduciary, guardian, officer, trustee, or other person acting in a
representative capacity, please give your full title. If a corporation, an
authorized officer should sign in the name of the corporation. If a
partnership, a general partner should sign in the name of the partnership.
----------------------------------------
PLEASE MARK, SIGN, DATE, ----------------------------------------
AND RETURN THIS PROXY Signature
PROMPTLY USING THE
ENCLOSED ENVELOPE. ----------------------------------------
Signature if held jointly
Dated: , 1997
-----------
----------------------------------------
