As filed with the Securities and Exchange Commission on June 18, 1997
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934 (Amendment No. 1)
Check the appropriate box:
{ ]Preliminary Information Statement [ ]Confidential, for Use of the Commission
[x]Definitive Information Statement Only (as permitted by Rule 14c-5(d)(2))
Prudential-Bache Tax Credit Properties L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) 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 to:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C> <C>
Related Capital Prudential-Bache Goodkind Labaton Milberg Weiss Bershad
Company Properties, Inc. Rudoff & Sucharow LLP Hynes & Lerach LLP
625 Madison Avenue One Seaport Plaza 100 Park Avenue One Pennsylvania Plaza
New York, NY 10022 New York, NY 10292 New York, NY 10017 New York, NY 10119
</TABLE>
June 18, 1997
Dear Investor:
Enclosed you will find a notice and an information statement concerning a
proposed settlement (the "Related Settlement") of a pending class action that
affects units you own in Prudential-Bache Tax Credit Properties L.P. (the
"Partnership"). As part of the proposed settlement, if it is approved by the
Court after a hearing to be held on August 28, 1997, Prudential-Bache
Properties, Inc., the general partner of the Partnership (the "P-B General
Partner") will withdraw from the Partnership and a new general partner
affiliated with Related Capital Company ("New GP") will be admitted to the
Partnership (the "Transaction"). In addition, in connection with the
Transaction, the P-B General Partner has agreed to forgive, and the New GP has
agreed in the future to reduce, certain fees otherwise payable to the general
partner pursuant to the terms of the Partnership's agreement of limited
partnership.
The enclosed information statement is being furnished to you solely to
provide information concerning the Related Settlement with respect to the
Partnership. YOU NEED NOT DO ANYTHING IF YOU APPROVE OF THE RELATED SETTLEMENT,
WHICH WILL ONLY BE IMPLEMENTED IF, AMONG OTHER THINGS, THE COURT ISSUES AN
APPROVAL ORDER. Although no vote is being conducted on the portion of the
Related Settlement concerning the Partnership, you may object to any aspect of
the Related Settlement including (without limitation) the Transaction, at a
fairness hearing by following the procedures set forth in the Class Notice which
accompanies the information statement.
For additional information, you may call: Related Capital Company
(Investor Services Department) at 800-600-6422 for information about the
Transaction; or write to counsel for the plaintiff class in In re Prudential
Securities Incorporated Limited Partnerships Litigation, M.D.L. No. 1005
(S.D.N.Y.) at the addresses set forth above for information about the
Related Settlement.
Sincerely,
Milberg Weiss Bershad Related Capital Company Prudential-Bache Properties,
Hynes & Lerach LLP Inc.
by Melvyn I. Weiss, Esq.
-and-
Goodkind Labaton
Rudoff & Sucharow LLP
by Lawrence A. Sucharow, Esq.
Class Counsel Co-Chairmen
<PAGE>
INFORMATION STATEMENT
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
Dated June 18, 1997
INTRODUCTION
This Information Statement is being provided to the limited partners and
holders of beneficial unit certificates representing assignments of limited
partnership interests (collectively, the "BUC$holders") of Prudential-Bache Tax
Credit Properties L.P., a Delaware limited partnership (the "Partnership"),
pursuant to a preliminary order, dated December 31, 1996 (the "Order"), of the
United States District Court for the Southern District of New York (the "Court")
issued in connection with the proposed settlement of class action litigation
(the "Litigation") captioned In re Prudential Securities Incorporated Limited
Partnerships Litigation brought on behalf of the BUC$holders and others. The
Litigation named as defendants Prudential Securities Incorporated ("PSI"),
Prudential-Bache Properties, Inc., the general partner of the Partnership (the
"P-B General Partner"), and affiliates of Related Capital Company ("Related")
that serve as co-general partners (the "Related General Partners") of seven
other partnerships with the P-B General Partner (the "Other P-B Partnerships"
and together with the Partnership, the "P-B Partnerships"). PSI and the P-B
General Partner have previously settled claims against them in the Litigation;
the proposed settlement relates to the settlement of the causes of action
against the Related General Partners (the "Related Settlement").
This Information Statement is being furnished by Related and the P-B
General Partner solely to provide information to the BUC$holders with respect to
the portion of the Related Settlement which is for their benefit. No approval by
the Buc$holders is required or sought in connection with the transaction
described in this Information Statement. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
The approximate date on which this Information Statement was first sent or
given to the BUC$holders was June 18, 1997.
Related and the P-B General Partner are hereby advising the BUC$holders of
a transaction (the "Transaction") that, if approved by the Court (the "Approval
Order"), would result in the following, among other matters:
[bullet] Withdrawal of P-B General Partner. The P-B General Partner will
withdraw as general partner of the Partnership.
[bullet] Admission of New General Partner. RCC Partners 96, L.L.C., a new
general partner affiliated with Related ("New GP"), will replace
the P-B General Partner.
[bullet] Reduction in Fees. The Partnership's agreement of limited partnership
(the "Partnership Agreement") will be amended to (i) reduce the general
partner's maximum Participating Interest in Cash Flow (as defined in
the Partnership Agreement) from 0.5% annually of Invested Assets (as
defined in the Partnership Agreement) to 0.375% annually and (ii)
reduce by 50% the general partner's (a) Subordinated Interest in
Disposition Proceeds (as defined in the Partnership Agreement) and (b)
interest in distributions of Sale or Refinancing Proceeds (as defined
in the Partnership Agreement). In addition, the P-B General Partner
and its affiliates will forgive all deferred and unpaid fees due them
by the Partnership.
[bullet] Name Change. The name of the Partnership will be changed to "Patriot
Tax Credit Properties L.P."
[bullet] Replacement of Special and Assignor Limited Partners. The special
limited partner and assignor limited partner of the Partnership (each
of which is an affiliate of the P-B General Partner) will be replaced
by an affiliate of Related.
The components of the Transaction are more particularly described under the
heading "THE TRANSACTION" and the text of the amendments to the Partnership
Agreement which effectuate the Transaction is included in "ANNEX I".
<PAGE>
Affiliates of Related have in the past provided, and currently provide,
services to the Partnership and also serve as co-general partners of four of the
eight local partnerships (the "Local Partnerships") in which the Partnership has
an interest. See "INFORMATION CONCERNING NEW GP--History of Related's
Involvement with the Partnership."
The closing of the Transaction is conditioned upon, among other things,
the issuance of the Approval Order by the Court following a fairness hearing
(the "Fairness Hearing") that is scheduled for 10:30 a.m. on August 28, 1997 at
United States Courthouse, 40 Centre Street, New York, New York 10007, Courtroom
1305. See "CONDITIONS TO CONSUMMATION OF THE TRANSACTION."
Although the BUC$holders may not vote on the Transaction, they may object
to any aspect of the Related Settlement, including the Transaction, at the
Fairness Hearing by following the procedures set forth in the Class Notice which
accompanies this Information Statement.
All questions and inquiries should be directed to Related Capital Company,
625 Madison Avenue, New York, New York 10022, Attention: Investor Services
Department, telephone: 1-(800)-600-6422.
2
<PAGE>
THE PARTNERSHIP
Overview. The Partnership was formed on May 3, 1989 and raised
approximately $38,125,000 in its initial public offering. The Partnership
presently holds interests in eight Local Partnerships which own an aggregate of
eight low-income, multi-family residential complexes in six states. The primary
objective of the Partnership is to provide the BUC$holders with low-income
housing tax credits allowed under Section 42 of the Internal Revenue Code of
1986, as amended, over the credit period for each Property in which the
Partnership has invested. The operations and business of the Partnership are
conducted solely by the P-B General Partner and its affiliates pursuant to the
Partnership Agreement.
Management. The P-B General Partner is the general partner of the
Partnership. Prudential-Bache Investor Services II, Inc. ("P-B II"), an
affiliate of the P-B General Partner, is the assignee limited partner which
acquired and holds limited partnership interests on behalf of the BUC$holders.
P-B Tax Credit S.L.P. ("P-B SLP"), an affiliate of the P-B General Partner, acts
as Special Limited Partner of each Local Partnership, entitling it to certain
rights with respect to the operation and management of each Local Partnership.
Compensation to General Partner and Affiliates. The P-B General Partner is
entitled to receive a partnership management fee, payable from operations and
reserves, in an amount not to exceed (together with the local administrative fee
payable to the special limited partner as described below) .5% per annum of
Invested Assets (as defined in the Partnership Agreement) for administering the
affairs of the Partnership. Unpaid portions of the partnership management fee
for any year accrue without interest. As of the date of this Information
Statement, no portion of the partnership management fee is being paid on a
current basis.
The Partnership reimburses the P-B General Partner and its affiliates for
actual Partnership operating expenses payable by or allocable to the
Partnership. The Partnership also pays amounts directly to unrelated third
parties for certain operating expenses. The P-B General Partner and its
affiliates perform services for the Partnership which include, but are not
limited to: accounting and financial management; registrar, transfer and
assignment functions; asset management; investor communications; printing and
other administrative services. The P-B General Partner and its affiliates
receive reimbursements for costs incurred in connection with these services, the
amount of which is limited by the provisions of the Partnership Agreement.
The P-B General Partner is also entitled to receive 1% of all distributions
and tax credits as well as a subordinated interest in the proceeds of any
dispositions of Partnership assets and a share of any sale or refinancing
proceeds.
P-B SLP acts as a special limited partner of each Local Partnership and is
entitled to receive up to $2,750 per year from each Local Partnership as a local
administrative fee. A portion of the partnership management fees paid to the P-B
General Partner is remitted to an affiliate of the local general partner of five
of the Local Partnerships. As of the date of this Information Statement, no
portion of the local administrative fee is being paid on a current basis.
The principal executive offices of the Partnership and the P-B General
Partner are located at One Seaport Plaza, New York, New York 10292.
THE TRANSACTION
Background
As previously disclosed to BUC$holders in the Partnership's investor report
for the third fiscal quarter ending December 31, 1996, the Order was issued by
the Court in connection with the Related Settlement. In light of the Order, and
with respect to the portion of the Related Settlement for the benefit of the
BUC$holders, the P-B General Partner and its affiliates have agreed to sell
their respective interests in the Partnership and the eight Local Partnerships
to affiliates of Related.
The Transaction will be consummated only upon receipt of the Approval
Order. See "CONDITIONS TO CONSUMMATION OF THE TRANSACTION." Under the
Partnership Agreement, if the Transaction were not subject to a judicial
determination and court order following a fairness hearing, it could only be
consummated by obtaining the approval of a majority of the Partnership's
outstanding limited partner interests and beneficial unit certificates
(collectively, the "Units").
3
<PAGE>
The P-B General Partner takes no position with respect to the Transaction
due to the fact that it (i) has not been a party to the negotiations which led
to the Related Settlement (PSI and the P-B General Partners have previously
settled) and (ii) will have no involvement with the Partnership after
consummation of the Transaction. Furthermore, the P-B General Partner has an
inherent conflict of interest in selling the P-B Group's interests to Related,
due to the fact that consummation of the Purchase Agreement (defined below) is
dependent upon consummation of the Transaction which, in turn, is dependent upon
approval of the Consolidations (defined below) and/or the P-B General Partner's
withdrawal from the P-B Partnerships. See "CONDITIONS TO CONSUMMATION OF THE
TRANSACTION."
The cost of preparing, assembling and mailing this Information Statement to
BUC$holders (the "Transaction Expenses") are estimated to aggregate $25,000. If
the Transaction is consummated, the Transaction Expenses will be paid by the
Partnership. If the Transaction is not consummated, Related will bear all the
Transaction Expenses. In no event shall Related or any affiliate be entitled to
any reimbursement from the Partnership for any costs attributable to the
withdrawal of the P-B General Partner or the admission of New GP, as general
partner of the Partnership.
Purchase Agreement between Related and the P-B General Partner
On December 19, 1996, Related and the P-B General Partner, P-B SLP and P-B
II (collectively, the "P-B Group") entered into an agreement (the "Purchase
Agreement"), pursuant to which, among other things and subject to the conditions
set forth therein, the P-B General Partner has agreed to withdraw as the general
partner of the Partnership and to transfer its general partner interest in the
Partnership to New GP. In addition, the Purchase Agreement provides that Related
or its affiliate will also acquire the interests of the P-B General Partner in
each of the other P-B Partnerships (all of which were co-sponsored by Related).
The total amount payable to the P-B Group pursuant to the Purchase
Agreement is $4,000,000, subject to adjustment as set forth in the Purchase
Agreement, to purchase all of the P-B Group's interests in the P-B Partnerships.
No portion of the purchase price is allocable to Related's purchase of the P-B
Group's interests with respect to the Partnership. Rather, Related is entitled
to acquire such interest if it acquires any other interest of the P-B General
Partner in the Other P-B Partnerships. The P-B Group paid a nominal amount for
its interests in the Partnership. Related has also agreed to pay a portion of
the P-B Group's expenses in connection with the Purchase Agreement and the
transactions contemplated thereby up to a maximum amount of $50,000.
Pursuant to the Purchase Agreement, the P-B General Partner is not required
to consummate the Transaction if Related makes a tender offer for any Units
(except in response to a third party tender offer) and Related has otherwise
agreed not to tender without the P-B General Partners' prior consent, except as
set forth in the Purchase Agreement. Furthermore, Related has agreed not to
consolidate the Partnership with any of the Other P-B Partnerships as part of
the Consolidations although this restriction does not limit Related's or New
GP's actions with respect to the Partnership after consummation of the
Consolidations.
The P-B General Partner has advised the Related General Partners that it
agreed to the Transaction based upon Related's agreement to pay fair
consideration for the P-B Group's Interests in the P-B Partnerships and its
desire to terminate its involvement in the sponsorship and management of limited
partnerships.
Overview of the Transaction
Pursuant to the Purchase Agreement, the P-B General Partner will withdraw
as general partner of the Partnership, and New GP will be substituted in its
place. Management of the operations and business of the Partnership will be
conducted solely by New GP and its affiliates pursuant to the Partnership
Agreement. The management services provided by New GP to the Partnership will be
the same as those services currently provided to the Partnership by the P-B
General Partner. The partnership management fees payable to New GP will be
significantly less than fees currently payable by the Partnership to the P-B
General Partner (although as of the date of this Information Statement no
portion of such fees is being paid on a current basis). Furthermore, the P-B
General Partner and P-B SLP will forgive all deferred and unpaid fees due to
them by the Partnership and the Local Partnerships.
Pursuant to the Purchase Agreement, New GP has agreed to assume the
obligations of P-B General Partner (subject to certain specified exceptions) and
to amend the Partnership Agreement on or before consummation of the Transaction
to confirm that the P-B Group will continue to be entitled to the benefits of
the indemnification provisions following consummation of the Transaction. New GP
will also advance funds to the Partnership in suf-
4
<PAGE>
ficient amounts to permit the Partnership to pay certain third-party expenses to
the extent that the Partnership is unable to do so. Such expenses include, for
example, the preparation of SEC filings, audited financial statements, tax
returns and IRS K-1's, reports to investors and general and administrative
expenses.
Elements of the Transaction
The specific elements of the Transaction which will be consummated if the
Court issues the Approval Order are as follows:
1. General Partner
(i) New GP will be admitted to the Partnership; the P-B General Partner
will transfer all of its general partnership interest in the Partnership to New
GP and the P-B General Partner will withdraw as general partner of the
Partnership.
(ii) The Partnership Agreement will be amended to reflect such withdrawal
and admission and to authorize the general partner of the Partnership to
transfer and assign its interest in the Partnership to New GP and to voluntarily
withdraw from the Partnership.
(iii) The Partnership Agreement will also be amended to confirm that the
limitations and restrictions on an affiliate of the general partner to provide
services to, or receive compensation from, a Local Partnership do not apply to
any Local Partnerships in which an affiliate of Related currently serves as a
local general partner provided any such compensation does not exceed, with
respect to the same services, the amounts currently paid to such affiliates or,
with respect to any reduced or new services, the competitive rate payable to
third parties.
2. Reduction in Fees
The Partnership Agreement will be amended to reflect (a) the reduction in
the general partner's maximum Participating Interest in Cash Flow from 0.5%
annually of Invested Assets to 0.375% annually; (b) the reduction by 50% of the
general partner's residual interest in the Partnership comprised of (x)
Subordinated Interest in Disposition Proceeds and (y) interest in distributions
of Sale or Refinancing Proceeds; and (c) corresponding reductions in the general
partner's interest in profits and losses. Further, the P-B General Partner and
P-B SLP will forgive all deferred and unpaid fees due to them by the Partnership
and the Local Partnerships. The aggregate amount of such deferred and unpaid
fees was $840,394, as of March 31, 1997.
3. Assignor Limited Partner
(i) An affiliate of Related (the "New Assignor Limited Partner") will be
admitted to the Partnership; P-B II will transfer its assignor limited
partnership interest in the Partnership to New Assignor Limited Partner; and P-B
II will withdraw as assignor limited partner of the Partnership.
(ii) The Partnership Agreement will be amended to reflect such withdrawal
and admission.
4. Special Limited Partner
(i) An affiliate of Related (the "New Special Limited Partner") will be
admitted to the Local Partnerships; P-B SLP will transfer its special limited
partnership interests in the Local Partnerships to New Special Limited Partner;
and P-B SLP will withdraw as special limited partner of the Local Partnerships.
(ii) The partnership agreements of the Local Partnerships will be amended
to reflect such withdrawals and admissions.
5. Name Change
The Partnership Agreement will be amended to change the name of the
Partnership to "Patriot Tax Credit Properties L.P."
6. Indemnification
The Partnership Agreement will be amended to confirm that the P-B General
Partner will continue to enjoy the benefits of the indemnification provisions
after consummation of the Transaction.
The text of the amendments to the Partnership Agreement which effectuate
the terms of the Transaction is included on "ANNEX I".
5
<PAGE>
Certain Income Tax Considerations
The Transaction will not have any federal income tax consequences to the
BUC$holders. Pursuant to the Purchase Agreement, New GP has agreed that after
the consummation of the Transaction the Partnership will continue to be
classified as a partnership and not as an association taxable as a corporation
for federal income tax purposes.
Under recently issued regulations ("check the box regulations"), an
organization with two or more members will be classified as a partnership on or
after January 1, 1997 unless it elects to be treated as an association (and
therefore taxable as a corporation) or falls within one of several specific
provisions which define a corporation. Based on the provisions of the check the
box regulations, the provisions of the Partnership Agreement, certain factual
assumptions and certain factual representations of New GP, counsel to New GP is
of the opinion that the Partnership will be treated as a partnership for federal
income tax purposes and not as an association taxable as a corporation.
An opinion of counsel is not binding on the IRS, and no assurance can be
given that the IRS will not challenge the status of the Partnership as a
partnership for federal income tax purposes. If, for any reason, the Partnership
were to be unable to qualify as a partnership for Federal income tax purposes,
the Partnership would itself become subject to tax (at corporate income tax
rates) and the Partnership's income, gain, loss, deductions and tax credits
would be reflected only on the Partnership tax return rather than being passed
through to the partners, and distributions by the Partnership generally would be
taxable as dividends to the extent of the Partnership's earnings and profits.
Because the P-B General Partner and P-B SLP have agreed to relinquish their
claim for fees the Partnership has accrued and deducted, the Partnership will
recognize taxable income equal to the amount of such relinquished fees. However,
it is anticipated that the Partnership will recognize a loss during any year in
which the Transaction is consummated in an amount in excess of such income.
Consequently, BUC$holders are not expected to recognize any taxable income as a
result of the forgiveness of such fees.
CONDITIONS TO CONSUMMATION OF THE TRANSACTION
As discussed in detail under the heading "THE LITIGATION", the Transaction
is one of several components of the proposed Related Settlement. In particular,
the Related Settlement contemplates that in addition to the Transaction, each of
the Other P-B Partnerships will be consolidated (the "Consolidations") into one
of two new entities in which the limited partners of the Other P-B Partnerships
will receive interests in place of their limited partnership interests in the
Other P-B Partnerships. The consummation of the Consolidations is subject to,
among other things, (i) approval by the Court, (ii) the absence of objections to
the Consolidations by the holders of more than 33-1/3% of the limited
partnership interests in the Other P-B Partnerships necessary to reach the
minimum participation threshold for the Consolidations to proceed and (iii) if
only the minimum participation threshold is achieved, Related's waiver of its
right to not proceed unless there is full participation by all of the Other P-B
Partnerships in the Consolidations.
Pursuant to the Purchase Agreement, Related is only required to consummate
the Transaction if, among other things, each of the following conditions is
satisfied: (i) the Court issues the Approval Order with respect to the
Transaction and (ii) at least one of the Consolidations is consummated.
Notwithstanding the failure to consummate either Consolidation, Related, at its
option, may elect to acquire the P-B General Partner's interests in each of the
P-B Partnerships (including the Partnership) and thereby consummate the
Transaction provided Court Approval is obtained for the withdrawal of the P-B
General Partner and the admission of New GP.
There are also certain other standard conditions contained in the Purchase
Agreement which are customary to transactions of this type. Accordingly,
notwithstanding the satisfaction of all conditions to consummation of the
Transaction described above, there can be no assurance that the Transaction will
be consummated.
INFORMATION CONCERNING NEW GP
Overview
New GP, RCC Partners 96, L.L.C., is a Delaware limited liability company
which was formed in July 1996, and is owned and controlled by the partners of
Related. The New GP will only have a specified net worth, if any, as may be
necessary for the Partnership to be treated as a Partnership for federal income
tax purposes. The principal offices of New GP are located at 625 Madison Avenue,
New York, New York 10022; telephone: 212-421-5333. No officer or member of New
GP owns any Units.
6
<PAGE>
As set forth below, the members and officers of New GP have substantial
experience in the real estate field, including the acquisition, management,
refinancing and sale of residential apartment complexes and the management of
limited partnerships organized to provide tax credit benefits to investors.
Affiliates of Related currently serve as co-general partners with the P-B
General Partner in each of the seven Other P-B Partnerships. It is anticipated
that New GP will retain affiliates of Related to provide the services which it
is required to provide to the Partnership under the Partnership Agreement.
History of Related's Involvement with the Partnership
Affiliates of the New GP and Related have had significant involvement with
the Partnership and the Local Partnerships. Affiliates of Related currently
serve as co-general partners of four of the eight Local Partnerships in which
the Partnership owns limited partnership interests.
During the acquisition phase of the Partnership's operations, among other
services, affiliates of Related provided various services to the P-B General
Partner pursuant to a Real Estate Consulting Services Agreement. These services
included the identification, evaluation, negotiation and closing of certain of
the Partnership's investments for which Related was paid a portion of the
acquisition fees and expenses paid to the P-B General Partner.
Related provides to the P-B General Partner ongoing monitoring services
with respect to the Partnership's investments pursuant to the Property
Investment Monitoring Agreement for which Related receives from the P-B General
Partner a portion of the partnership management fee payable to the P-B General
Partner (i.e. 45% of the P-B General Partner's Participating Interest in Cash
Flow) and an annual expense allowance of up to $1,300 per site visit (after the
initial four site visits).
Officers and Members
The officers and members of New GP are as follows:
<TABLE>
<CAPTION>
Name Age Offices Held
- ---- --- ------------
<S> <C> <C>
J. Michael Fried 51 Member, President and Chief Executive Officer
Stuart J. Boesky 40 Member, Executive Vice President and Chief
Operating Officer
Alan P. Hirmes 41 Member, Senior Vice President and Chief Financial
Officer
Bruce H. Brown 43 Senior Vice President
Arthur G. Hatzopoulos 42 Vice President
Denise L. Kiley 37 Vice President
Mark J. Schlacter 45 Vice President
Marc D. Schnitzer 36 Vice President
Richard A. Palermo 36 Treasurer
Lynn A. McMahon 40 Secretary
Related General II, L.P. -- Member
</TABLE>
J. Michael Fried is the sole stockholder of one of the general partners of
Related, the real estate finance affiliate of The Related Companies, L.P. In
that capacity, he is generally responsible for all of the syndication, finance,
acquisition and investor reporting activities of Related and its affiliates. Mr.
Fried practiced corporate law in New York City with the law firm of Proskauer
Rose Goetz & Mendelsohn from 1974 until he joined Related in 1979. Mr. Fried
graduated from Brooklyn Law School with a Juris Doctor Degree, magna cum laude;
from Long Island University Graduate School with a Master of Science degree in
Psychology; and from Michigan State University with a Bachelor of Arts degree in
History.
Stuart J. Boesky is the sole stockholder of one of the general partners of
Related, the real estate finance affiliate of The Related Companies, L.P. Mr.
Boesky practiced real estate and tax law in New York City with the law firm of
Shipley & Rothstein from 1984 until February 1986 when he joined Related. From
1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow,
Richmond & Rothstein (which subsequently merged with Strook & Strook & Lavan)
and from 1978 to 1980 was a consultant specializing in real estate at the
accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State
University with a Bachelor of Arts degree and from Wayne State School of Law
with a Juris Doctor degree. He then received a Master of Laws degree in Taxation
from Boston University School of Law.
7
<PAGE>
Alan P. Hirmes is the sole stockholder of one of the general partners of
Related, the real estate finance affiliate of The Related Companies, L.P. Mr.
Hirmes has been a Certified Public Accountant in New York since 1978. Prior to
joining Related in October 1983, Mr. Hirmes was employed by Wiener & Co.,
certified public accountants. Mr. Hirmes graduated from Hofstra University with
a Bachelor of Arts degree.
Bruce H. Brown is a Senior Vice President of Related and a director of the
Portfolio Management Group. He is responsible for overseeing the administration
of the firm's public debt and equity partnerships encompassing the monitoring of
the performance of each partnership and each investment. He is also responsible
for Related's loan servicing activities with respect to the firm's $600 million
participating and insured and co-insured mortgage portfolio. Prior to joining
Related in 1987, Mr. Brown was a real estate lending officer at U.S. Trust
Company of New York and previously held management positions in the hotel and
resort industry with Helmsley-Spear and Westin Hotels. Mr. Brown graduated from
Colgate University with a Bachelor of Arts degree.
Arthur G. Hatzopoulos is a Vice President of Related AMI Associates, Inc.,
an affiliate of Related, and he is a Senior Vice President of Related where he
directs the mortgage acquisition group. Mr. Hatzopoulos has been with Related
since August 1992. Prior to joining Related, Mr. Hatzopoulos was a First Vice
President and Portfolio Manager for First Nationwide Bank, where he was
responsible for debt restructuring, special lending relationships and asset
sales. He has also been associated with an investment banking firm where he was
responsible for monitoring a national portfolio of multifamily revenue bond
projects. From 1981 to 1985 he served as Deputy Director of the Jersey City
Department of Housing and Economic Development. Mr. Hatzopoulos graduated from
Columbia University with a Bachelor of Arts degree. He also holds a Masters in
City and Regional Planning from Harvard University, Kennedy School of
Government.
Denise L. Kiley is an Executive Vice President and Chief Underwriter for
Related, responsible for overseeing the investment underwriting and approval of
all multifamily residential properties invested in Related sponsored corporate,
public and private equity and debt funds. Ms. Kiley is also responsible for the
strategic planning and implementation of the firm's mortgage financing programs.
Prior to joining Related in 1990, Ms. Kiley had experience acquiring, financing,
and managing the assets of multifamily residential properties. From 1981 through
1985 she was an auditor with a national accounting firm. Ms. Kiley holds a
Bachelor of Science in Accounting from Boston College and is a Member of the
Affordable Housing Roundtable.
Mark J. Schlacter is a Vice President of Mortgage Acquisitions of Related,
and has been with Related since June 1989. Mr. Schlacter is responsible for the
origination of Related's taxable participating debt programs and low-income
housing tax credit debt programs. Prior to joining Related, Mr. Schlacter
garnered 16 years of direct real estate experience covering commercial and
residential construction, single and multifamily mortgage origination and
servicing, commercial mortgage origination and servicing, multifamily property
acquisition and financing, and multifamily mortgage lending program underwriting
and development. He was a Vice President with Bankers Trust Company from 1986 to
June 1989, and held prior positions with Citibank, Anchor Savings Bank and the
Pyramid Companies covering the 1972-1986 period. Mr. Schlacter holds a Bachelor
of Arts degree in Political Science from Pennsylvania State University and
periodically teaches multifamily underwriting at the New York University School
of Continuing Education, Real Estate Institute.
Marc D. Schnitzer is an Executive Vice President of Related and Director of
the firm's Tax Credit Acquisitions Group. Mr. Schnitzer received a Master of
Business Administration degree from The Wharton School of The University of
Pennsylvania in december 1987, and joined Related in January 1988. From 1983 to
1986, Mr. Schnitzer was a Financial Analyst in the Fixed Income Research
department of The First Boston Corporation in New York. Mr Schnitzer received a
Bachelor of Science degree, summa cum laude, in Business Administration from the
School of Management at Boston University.
Richard A. Palermo has been a Certified Public Accountant in New York
since 1985. Prior to joining Related in September 1993, Mr. Palermo was
employed by Sterling Grace Capital Management from October 1990 to September
1993, Integrated Resources, Inc. from October 1988 to October 1990 and E.F.
Hutton & Company, Inc. from June 1986 to October 1988. From October 1982 to
June 1986, Mr. Palermo was employed by Marks Shron & Company and Mann Judd
Landau, certified public accountants. Mr. Palermo graduated from Adelphi
University with a Bachelor of Business Administration degree.
Lynn A. McMahon has served since 1983 as assistant to J. Michael Fried.
From 1978 to 1983, she was employed at Sony Corporation of America in the
Government Relations Department.
8
<PAGE>
Related General II, L.P. is a New York limited partnership formed in
January 1992 whose general partner is RCMP, Inc., a Delaware corporation which
is indirectly controlled by Stephen M. Ross. Mr. Ross is also president,
director and shareholder of The Related Realty Group, Inc., the general partner
of The Related Companies, L.P. He graduated from the University of Michigan
School of Business Administration with a Bachelor of Science degree and from
Wayne State University School of Law with a Juris Doctor degree. Mr. Ross then
received a Master of Laws degree in taxation from New York University School of
Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax
specialist and later moved to New York, where he worked for two large Wall
Street investment banking firms in their real estate and corporate finance
departments. Mr. Ross formed the predecessor of The Related Companies, L.P. in
1972 to develop, manage, finance and acquire subsidized and conventional
apartment developments.
Related Capital Company
As noted above, New GP is owned and controlled by the partners of Related.
Affiliates of Related were founded in 1972 by Stephen M. Ross to engage in the
business of providing financial and real estate acquisition, development and
management services. Its real estate related products include luxury apartments,
commercial office properties, retail centers and affordable multifamily
properties located in nearly every state and major market place in the U.S. and
Puerto Rico.
Through Related's Financial Services Division, Related and its affiliates
have sponsored 22 public and 238 private real estate investment programs that
have raised in excess of $3.1 billion from more than 106,000 investors. This
positions Related as one of the nation's largest sponsors of real estate
investment programs for retail and institutional investors. These programs have
accounted for the acquisition of over 800 properties with a valuation, at cost,
of approximately $7.3 billion. The Related portfolio, in the aggregate, consists
of approximately 112,000 residential apartment units, 25 shopping centers and 5
regional malls. This division also provides asset monitoring services for the
properties comprising the Related sponsored investment programs' real estate
portfolio. This involves regular site visits, monitoring of financial and
operating reports, regulatory compliance checks and independent periodic
analysis of local marketplace conditions. These services are currently provided
with respect to approximately 440 properties encompassing 59,000 residential
units.
Related's Development Division ranks as one of New York's largest
developers of luxury rental housing and as one of Florida's largest developers
of multifamily rental housing. To date, the Development Division has completed
approximately 3.5 million square feet of commercial space, 6,300 units of market
rate housing and 9,700 units of government-assisted affordable rental housing,
together valued at approximately $2 billion. Among its commercial projects are
the U.S. headquarters for Nestle Foods, Revlon and American Brands.
Related's Property Management Division provides property management
services. It directly manages approximately 11,400 residential units and 3.2
million square feet of first class commercial and mixed use space from its New
York offices. From its Florida offices, Related manages approximately 16,400
residential units and 17 shopping centers.
THE LITIGATION
Description of the Litigation
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of the BUC$holders. Among those named as defendants in the Litigation were the
Partnership, PSI, the P-B General Partner and a number of other defendants
including the Other P-B Partnerships. Plaintiffs alleged violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO") statutes, breach of
fiduciary duty, fraud, deceit and negligence, and demanded an accounting.
Plaintiffs sought unspecified compensatory, punitive and treble damages, and
rescission, including costs and attorneys' fees.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes case, together with a number of other actions, was transferred
to a single judge of the Court and consolidated for pretrial proceedings under
the caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket No. 1005). On June 8, 1994, plaintiffs in the transferred
cases filed a complaint (the "Consolidated Complaint") covering, for pretrial
purposes, all of the transferred actions and their constituent complaints (the
"Constituent Complaints"), and naming as defendants, among others, PSI, the P-B
General Partner and the Related General Partners. The Part-
9
<PAGE>
nership is not named as a defendant in the Consolidated Complaint (although it
remains a named defendant in certain of the Constituent Complaints), but the
name of the Partnership is listed as being among the limited partnerships at
issue in the case.
The Consolidated Complaint alleges violations of the federal and New Jersey
RICO statutes, fraud, negligent misrepresentation, breach of fiduciary duties,
breach of third-party beneficiary contracts and breach of implied covenants in
connection with the marketing and sale of the Units. In particular, the
Consolidated Complaint alleges material misrepresentations and omissions
respecting the level of safety, income and growth and complains about the
illiquidity of the Units. PSI and the P-B General Partner have previously
settled claims against them in the Litigation.
Plaintiffs request relief in the nature of rescission of the purchase of
the Units and recovery of all consideration and expenses in connection
therewith, as well as compensation for lost use of money invested less cash
distributions; compensatory damages; consequential damages; treble damages for
defendants' RICO violations (both federal and New Jersey); general damages for
all injuries resulting from negligence, fraud, breaches of contract, and
breaches of duty in an amount to be determined at trial; disgorgement and
restitution of all earnings, profits, benefits and compensation received by
defendants as a result of their unlawful acts; costs and disbursements of the
action; reasonable attorneys' fees; and such other and further relief as the
Court deems just and proper.
On November 28, 1994, the Court deemed certain of the Constituent
Complaints (including Kinnes) amended to incorporate into the Constituent
Complaints the new allegations and new parties (e.g. the Related General
Partners) set forth in the Consolidated Complaint.
The defendants have vigorously denied and continue to deny all liability to
the members of the class (collectively, the "Class Members") and all allegations
of wrongdoing directed at defendants in the Consolidated Complaint.
Notwithstanding the foregoing, settlement discussions with the plaintiffs have
resulted in proposed settlements with some, but not all, of the defendants. In
particular, after a fairness hearing on November 17, 1995, the Court, among
other matters, granted (i) final approval to the class certification and (ii)
final approval of a partial settlement of the Litigation against PSI and the P-B
General Partner pursuant to which they agreed to establish a settlement fund of
$110 million. Settlement negotiations with respect to defendants other than PSI,
the P-B General Partner and the Related General Partners are continuing.
The Related Settlement
History of Settlement Negotiations. Related first explored the possibility
of a settlement of the Litigation with counsel to the BUC$holders ("Class
Counsel") at a meeting on or about August 8, 1994. During that meeting, Related
described the broad outlines of a settlement involving a monetary payment and
the Consolidation of the Other P-B Partnerships. As a result of that meeting,
and at Class Counsel's request, on or about September 26, 1994, Related
delivered to Class Counsel a written outline of a possible settlement. That
outline assumed that the P-B General Partner would be negotiating a settlement
with Class Counsel which would result in, among other things, the P-B General
Partner's withdrawal as the general partner of the Partnership and as a general
partner of the other P-B Partnerships without compensation for doing so.
For approximately one year thereafter, there was little communication with
Class Counsel regarding a possible settlement. During that time Class Counsel
negotiated and ultimately reached a settlement with PSI and the P-B General
Partner in the amount of $110,000,000.
On July 11, 1995, Related met with Class Counsel to review certain aspects
of the proposal that had been made. On August 17, 1995, Related sent to Class
Counsel a draft memorandum of understanding that contained more detail than the
original August 1994 settlement outline. At about this time, Related and PSI
determined that the P-B General Partner would be compensated by Related for
withdrawing as a general partner of the Partnership and the Other P-B
Partnerships. As a result, Related sought to reduce the cash component of the
settlement inasmuch as it would now have to compensate the P-B General Partner
for its interests. Class Counsel, however, refused.
On September 14, 1995, Class Counsel delivered a term sheet to Related
containing a draft of the settlement terms. A series of meetings then ensued
between Related, its counsel, Class Counsel and their financial consultant,
including meetings on September 19, 1995, October 19, 1995, December 1, 1995,
December 7, 1995, December 15, 1995 and January 3, 1996. Various issues were
negotiated at those meetings including the structure and terms of the
Consolidations of the Other P-B Partnerships, the scope of releases to be given,
the scope of the monetary
10
<PAGE>
class and the equitable class, the extent to which fees payable by the P-B
Partnerships would be reduced, the extent to which Related would be responsible
for the costs attendant to the Consolidations and the extent to which Related
would be reimbursed if the Consolidations were approved and became effective. In
addition, during this period, at Class Counsel's request, Related delivered to
Class Counsel detailed information, including a break-down of the fees the P-B
General Partners and the Related General Partners had been receiving from each
of the P-B Partnerships and the reduction in each type of fee which would inure
to the benefit of the P-B Partnerships.
On January 16, 1996, Related sent Class Counsel a term sheet outlining the
proposed Consolidations. On March 12, 1996, Class Counsel sent an initial draft
of the proposed stipulation of settlement. On March 28, 1996, Class Counsel sent
a revised draft of the term sheet. On or about March 29, 1996, Related
communicated its comments regarding the term sheet and the proposed stipulation
of settlement. As a result, on May 16, 1996, Class Counsel sent a revised draft
of the proposed stipulation of settlement to Related. Subsequently, several
revised drafts of the proposed stipulation of settlement and term sheets were
prepared and distributed in June 1996. In addition, Related met with Class
Counsel several times in June 1996 to discuss, among other items, the addition
of the BUC$holders of the Partnership to the equitable class and the equitable
relief that members of the Partnership would be receiving. After the details of
the equitable relief had been determined, Related and representatives of Class
Counsel discussed and agreed upon the methodology that the Court would be asked
to approve pursuant to which Class Counsel would be compensated for their
services to the Equitable Class (defined below). The stipulation of settlement
and other documents respecting the Related Settlement were further negotiated,
drafted and revised during the period from June to December 1996.
On December 24, 1996, Class Counsel and Related entered into the
stipulation of settlement, which was preliminarily approved by the Court in its
Order dated December 31, 1996.
The Order, among other matters, (i) preliminarily certified two classes for
settlement purposes: (a) all BUC$holders of the Partnership and the limited
partners and holders of BUC$ of the Other P-B Partnerships (the "Equitable
Class"), pursuant to Rules 23(b)(1) and (2) of the Federal Rules of Civil
Procedure for equitable relief; and (b) generally, all persons that purchased
limited partnership interests and BUC$ in the P-B Partnerships between January
1, 1980 and June 8, 1994, regardless of whether they currently hold limited
partnership interests or BUC$ (the "Monetary Class"), pursuant to Rule 23(b)(3)
of the Federal Rules of Civil Procedure for monetary relief; (ii) approved the
form of class notices ("Class Notices") and directed that the Class Notices be
sent, along with this Information Statement, to the applicable Class Members
after review and approval by the Court subsequent to the filing and clearance of
the Information Statement with the Securities and Exchange Commission; and (iii)
scheduled a date for the Fairness Hearing at which the BUC$holders of the
Partnership and all Class Members will have an opportunity to be heard. In
addition, the Court enjoined: (i) the Class Members from (a) transferring their
Units prior to the Fairness Hearing unless the transferee agrees to be bound by
the Related Settlement, (b) conducting a tender offer for Units, or (c)
transferring their right to vote or granting a proxy with respect to the
Consolidations; and (ii) the general partners of the P-B Partnerships from (a)
recognizing or processing transfers of Units except in accordance with the
Order, and (b) making the list of unitholders in each P-B Partnership available
to any person seeking to conduct a tender offer.
The Monetary Class members consist of, among others, all persons who
between January 1, 1980 and June 8, 1994 purchased Units, regardless of whether
they currently hold Units, excluding those BUC$holders who have previously
settled or litigated to conclusion with PSI or the P-B General Partner in
arbitrations or court proceedings other than MDL Docket No. 1005. The Equitable
Class members consist of, among others, all current holders of Units, regardless
of whether they have settled with PSI or the P-B General Partner. There is
substantial overlap between the two classes and they are not mutually exclusive.
Accordingly, many people will be a member of both classes. However, some
Monetary Class members will not be members of the Equitable Class (e.g., persons
who purchased their Units between January 1, 1980 through June 8, 1994 but who
have sold their Units and are no longer BUC$holders). Conversely, some Equitable
Class members will not be members of the Monetary Class (e.g., persons who are
current BUC$holders but who purchased their Units after June 8, 1994). If a
person who is a member of both classes opts out of the Monetary Class, he will
still be able to sue individually for money damages notwithstanding the fact
that he remains a member of the Equitable Class. Conversely, a person who is an
Equitable Class member who is also a Monetary Class member will be able to
object to the Consolidation in response to the Information Statement without
opting out of the Monetary Class.
11
<PAGE>
Summary of Related Settlement. The Related Settlement is comprised of two
parts, a monetary settlement (the "Monetary Settlement"), in which only Monetary
Class members may participate, and an equitable settlement (the "Equitable
Settlement"), in which only Equitable Class members will participate.
The Monetary Settlement requires Related to pay $2,058,333 (the "Settlement
Amount") in settlement of its portion of the Monetary Class claims. The
Settlement Amount, less Court-approved fees and expenses, will be distributed
among Monetary Class members in accordance with a plan of allocation that was
formulated by Class Counsel and approved by the Court.
Equitable relief provided to the Equitable Class members as part of the
Related Settlement consists of (a) the Consolidations with respect to the Other
P-B Partnerships and/or (b) the withdrawal of the P-B General Partner as a
general partner of each of the P-B Partnerships.
The Related Settlement will result in the full and complete settlement,
discharge and release of the claims by Monetary Class members against the
Related General Partners and their affiliates in connection with or which arise
out of the allegations set forth in the Consolidated Complaint or in any
pleading in any Constituent Action or which relate to (i) the marketing,
purchase, sale or holding of Units during the period January 1, 1980 through
June 8, 1994 or (ii) the operation, oversight, monitoring or management of the
Partnerships and Other Partnerships during such period (other than claims,
rights, causes of action or liabilities described in this clause (ii) that are
based on actual fraud committed by the Related General Partners, their officers,
directors and employees). Each BUC$holder who invested in a Partnership that is
part of the Consolidation is restrained from commencing or prosecuting any
settled claims.
If the Transaction is approved by the Court, all BUC$holders will release
and discharge, and be enjoined from bringing, all claims against the Related
General Partners and their affiliates based on allegations similar to those made
in the Consolidated Complaint or in any Constituent Action which seeks equitable
relief different from that provided by the Related Settlement. If the
Transaction is approved by the Court, all BUC$holders will also release and
discharge, and be enjoined from bringing, all claims against the Related General
Partners, their affiliates, the P-B General Partner and its affiliates relating
to or arising out of the terms or implementation of the Related Settlement with
the Equitable Class, including the Transaction.
Related will advance payment for all costs of notice and administering the
Related Settlement. However, if the Monetary Settlement is approved, Related
will be reimbursed, subject to Court approval of such reimbursement, for all
costs of notice and administration incurred by Related in connection with the
Monetary Settlement in excess of $100,000. Such reimbursement will be made from
the settlement pool created by the Related General Partners cash settlement
payment. Related will initially pay all expenses incurred in connection with the
Equitable Settlement. If approval of the Transaction is obtained, the
Partnership will reimburse Related for the expenses incurred in connection with
the Transaction. If the Transaction is not consummated for any reason then
Related will bear all costs related to the Equitable Settlement and will not be
entitled to any reimbursement of such costs from the Partnership.
Right to Terminate. The Related General Partners may, at their discretion,
terminate the Related Settlement for any of the following reasons: (1) requests
for exclusion from the Monetary Class are validly filed by persons otherwise
entitled to be Monetary Class Members who purchased Units in the P-B
Partnerships having an aggregate original purchase price equal to or greater
than a certain specified amount agreed upon by Class Counsel and the Related
General Partners; (2) the Court fails or declines to enter the Order and final
judgment within 180 days after the Fairness Hearing; (3) the Court enters an
alternative judgment; (4) the action entitled Romano v. Prudential Insurance
Company of America, No. 94 Civ. 3527 is not dismissed with respect to the
Related General Partners and their affiliates named as defendants in such
action; (5) the minimum requirements for proceeding with the Consolidation are
not satisfied or such minimum requirements are met but, as permitted by the
Settlement Stipulation, Related refuses to proceed without 100% participation by
all of the Other P-B Partnerships; or (6) the Court has not approved the Related
Settlement, including the Consolidation.
12
<PAGE>
AVAILABLE INFORMATION
The Partnership is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is required to file
reports and other information with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street N.W., Washington, D.C. 20549. For further
information concerning the Partnership, please refer to the reports of the
Partnership filed under the Exchange Act, copies of which may be examined
without charge at, or obtained upon payment of prescribed fees from, the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and which will also be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at its web site
(http://www.sec.gov) and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Statements contained in this Information Statement as to the contents of
any agreement or other document which are referenced in this Information
Statement are not necessarily complete, and each such statement is qualified in
its entirety by reference to the full text of such agreement or document, copies
of which may be obtained from Related without charge. All requests should be
directed to Related Capital Company, 625 Madison Avenue, New York, NY 10022;
Telephone (800) 600-6422; Attention: Investor Services Department.
13
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
ANNEX I
The Partnership Agreement will be amended as set forth below (as the same
may be modified pursuant to, and in accordance with, the Approval Order).
AMENDMENT NO. 1 TO PRUDENTIAL-BACHE
TAX CREDIT PROPERTIES L.P. AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
This Amendment, dated as of [ ], 1997 to the Amended and Restated Agreement
of Limited Partnership dated as of [ ], 1989 (the "Partnership Agreement"), of
Prudential-Bache Tax Credit Properties L.P. (the "Partnership") among
Prudential-Bache Properties Inc., a Delaware corporation (the "General
Partner"), Prudential-Bache Investor Services II, Inc., a Delaware corporation
(the "Assignor Limited Partner") and those persons who have become limited
partners in the Partnership (the "Limited Partners") pursuant to the terms set
forth in the Partnership Agreement. Terms not otherwise defined herein shall
have the meanings ascribed to them in the Partnership Agreement.
W I T N E S S E T H:
WHEREAS, the General Partner, the Assignor Limited Partner, P-B Tax Credit
S.L.P., a Delaware corporation, and Related Capital Company, a New York general
partnership ("Related") have entered into a Purchase Agreement, dated as of
December 19, 1996 (the "Purchase Agreement"), in connection with the settlement
of class action litigation (the "Litigation") brought on behalf of the Limited
Partners (and holders of beneficial unit certificates representing assignments
of limited partner interests in the Partnership) against, among others, the
General Partner and Related; and
WHEREAS, the Purchase Agreement provides for, among other things, (i) the
admission to the Partnership of an affiliate of Related to serve as the new
general partner of the Partnership ("New GP"), (ii) the transfer by the General
Partner of its interest in the Partnership to New GP, (iii) the withdrawal of
the General Partner as general partner of the Partnership, (iv) the admission to
the Partnership of an affiliate of Related to serve as the new assignor limited
partner of the Partnership ("New Assignor Limited Partner"), (v) the transfer by
the Assignor Limited Partner of its interest in the Partnership to New Assignor
Limited Partner and (vi) the admission of an affiliate of Related to the Local
Partnerships to serve as the new special limited partner of the Local
Partnerships ("New Special Limited Partner") (collectively, the "Transaction").
WHEREAS, the General Partner, the Assignor Limited Partner and the Limited
Partners wish to amend the Partnership Agreement to reflect, among other
matters, the foregoing withdrawals and admissions and to (i) authorize the
General Partner to transfer its general partnership interest to New GP and to
voluntarily withdraw from the Partnership, (ii) reduce certain fees payable by
the Partnership to the general partner, (iii) cause the indemnification
provisions in the Partnership Agreement to remain effective with respect to the
General Partner following its withdrawal from the Partnership and (iv) to change
the name of the Partnership to Patriot Tax Credit Properties L.P. (collectively,
the "Amendments").
WHEREAS, because certain of the Amendments would otherwise require a
Majority Vote, the closing of the Transaction is contingent upon the issuance of
an approval order with respect to the Transaction by the United States District
Court for the Southern District of New York (the "Court") pursuant to the
Purchase Agreement; and
WHEREAS, the Court has issued its final approval order, dated [ ], 1997,
which among other matters, approved the Transaction and the Amendments;
NOW THEREFORE, the Partnership Agreement is hereby amended as follows:
7. Section 1 of the Partnership Agreement is hereby amended to read in its
entirety as follows:
"1. NAME AND PLACE OF BUSINESS
The name of the Partnership is Patriot Tax Credit Properties L.P.; its
registered office in Delaware is [ ]; and the name of the Partnership's
registered agent for service of process at that address is [ ]. Its
principal place of business is 625 Madison Avenue, New York, New York
10022, or such other place(s) as the General Partner may hereafter
determine."
A-1
<PAGE>
8. The definition of "Assignor Limited Partner" in Section 2 of the
Partnership Agreement is hereby amended to replace "Prudential-Bache Investor
Services II, Inc." in the first line thereof with "[ ]."
9. The definition of "Certificate" in Section 2 of the Partnership
Agreement is hereby amended to insert "and [ ], 1997" following "June 22, 1989"
in the third line thereof.
10. The definition of "General Partner" in Section 2 of the Partnership
Agreement is hereby amended to replace "Prudential-Bache Properties, Inc." in
the first line thereof with "RCC Partners 96, L.L.C."
11. The definition of "Participating Interest in Cash Flow" in Section 2
of the Partnership Agreement is hereby amended to replace "0.5%" in the second
line thereof with ".375%."
12. The definition of "Special Limited Partner" in Section 2 of the
Partnership Agreement is hereby amended to replace "P.B. Tax Credit S.L.P." in
the first line thereof with "[ ]."
13. Section 9.6 of the Partnership Agreement is hereby amended to replace
(i) "one-half" in the ninth line thereof with "one-quarter," (ii) "3%" in the
tenth line thereof with "1.5%" and (iii) "6%" in the last line thereof with
"3%."
14. Section 9.7 of the Partnership Agreement is hereby amended to replace
"0.5%" in the sixth line thereof with "0.375%."
15. Section 11.4.1(c) of the Partnership Agreement as to Profits is hereby
amended to replace "99%" with "99.5%" and to replace "1%" with "0.5%", each in
the first line thereof.
16. Section 11.4.1(d) of the Partnership Agreement as to Profits is hereby
amended to replace "99%" with "99.5%" and to replace "1%" with "0.5%", each in
the first line thereof.
17. Section 11.4.1(c) of the Partnership Agreement as to Losses is hereby
amended to replace "85%" with "92.5%" and to replace "15%" with "7.5%".
18. Section 11.6(d) of the Partnership Agreement is hereby amended to
replace "99%" with "99.5%" and to replace "1%" with "0.5%", each in the first
line thereof.
19. Section 11.6(e) of the Partnership Agreement is hereby amended to
replace "99%" with "99.5%" and to replace "1%" with "0.5%", each in the first
line thereof.
20. Section 11.6(h) of the Partnership Agreement is hereby amended to
replace "85%" with "92.5%" in the first, third and seventh lines thereof and to
replace "15%" with "7.5%" in the first, fourth, seventh and eleventh lines
thereof.
21. Section 11.12 of the Partnership Agreement is hereby amended to replace
"0.5%" with "0.375%" in the third and sixteenth lines thereof and to replace
"$5,000" with "$3,750" in the eighth line thereof.
22. Article 15 of the Partnership Agreement is hereby amended to insert a
new Section 15.12 as follows:
"15.12 Pre-existing Relationships. Notwithstanding any provisions in this
Agreement to the contrary, any limitations or restrictions contained in
this Agreement with respect to the right of an Affiliate of the General
Partner to provide services to, or receive compensation from, a Local
Partnership in which the Partnership owns a Local Partnership Interest as
of [insert date of this Amendment] shall not apply to RCC Partners 96,
L.L.C. or its Affiliates, provided any such compensation does not exceed,
(i) with respect to the same services, the amounts paid to such entity as
of [insert date of this Amendment] or, (ii) with respect to any reduced
or new services, the competitive rate payable to third parties."
23. Section 16.2.7 of the Partnership Agreement is hereby amended to
replace "Section 17.5" with "Section 17.4 or 17.5."
24. Section 17.2 of the Partnership Agreement is hereby amended to replace
"Upon" in the first line thereof with "Subject to Section 17.5, upon."
25. Section 17.3 of the Partnership Agreement is hereby amended to read in
its entirety as follows:
A-2
<PAGE>
"17.3 No Voluntary Dissolution or Withdrawal. Until the dissolution of
the Partnership, the General Partner shall not take any voluntary steps
to dissolve itself and shall not voluntarily withdraw from the
Partnership, provided however, that Pru-Bache Properties shall be
permitted to voluntarily withdraw from the Partnership upon the
assignment of its interest in the Partnership pursuant to Section 17.5."
26. Section 17.4 of the Partnership Agreement is hereby amended to insert
"and Section 17.5" at the end of the first sentence thereof.
27. Article 17 of the Partnership Agreement is hereby amended to insert a
new Section 17.5 as follows:
"17.5 Assignment by Pru-Bache Properties/Admission of Successor General
Partner. Notwithstanding the provisions of Section 17.4, Pru-Bache
Properties shall be permitted to assign its interest in the Partnership
without a Majority Vote. The admission of a successor General Partner to
replace Pru-Bache Properties shall not require a Majority Vote and such
successor General Partner shall succeed to Pru-Bache Properties' interest
in the Profits, Losses, Tax Credits and Distributions of the Partnership
for a price determined by agreement between Pru-Bache Properties and such
successor General Partner."
28. Article 21 of the Partnership Agreement is hereby amended to insert a
new Section 21.3 as follows:
"21.3 Survival of Indemnity. Notwithstanding anything to the contrary in
this Agreement, the provisions of this Section 21 shall survive the
withdrawal of a General Partner and any such General Partner shall be
entitled to the benefits of this Section 21 as a result of any liability,
loss or damage incurred by such General Partner or by the Partnership as
a result of any acts or omissions prior to the withdrawal of such General
Partner notwithstanding the withdrawal of such General Partner. Pru-Bache
Properties and its employees, directors, officers, agents and affiliates
agree that the indemnity provided in this Section 21 shall not permit
them to be indemnified for, and they agree not to make any claim for
indemnity with respect to, any liability, loss, or damage incurred by
them in connection with (i) the class action captioned In re Prudential
Securities Incorporated Limited Partnerships Litigation and (ii) the
consent decree in Securities and Exchange Commission vs. Prudential
Securities Incorporated, 93 Civ. 2164 (D.D.C.)."
22. Except as provided in this Amendment, the Partnership Agreement shall
remain unchanged and in full force and effect.
WITHDRAWING GENERAL PARTNER:
PRUDENTIAL-BACHE PROPERTIES, INC.
By: ---------------------------------------------
Name:
Title:
WITHDRAWING ASSIGNOR LIMITED PARTNER:
PRUDENTIAL-BACHE INVESTOR SERVICES II, INC.
By: ---------------------------------------------
Name:
Title:
A-3
<PAGE>
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted
as limited partners of the Partnership, pursuant
to powers of attorney now and hereafter granted
in favor of the General Partner:
By: ---------------------------------------------
PRUDENTIAL-BACHE PROPERTIES, INC.
ATTORNEY-IN-FACT
By: ---------------------------------------------
Name:
Title:
NEW GENERAL PARTNER:
RCC Partners 96, L.L.C.
By: ---------------------------------------------
Name:
Title:
NEW ASSIGNOR LIMITED PARTNER:
[------------------------------------------------]
By: ---------------------------------------------
Name:
Title:
A-4
