SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
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INDEPENDENCE TAX CREDIT PLUS L.P. II
(Name of Subject Company)
LEHIGH TAX CREDIT PARTNERS L.L.C.
LEHIGH TAX CREDIT PARTNERS, INC.
(Bidders)
BENEFICIAL ASSIGNMENT CERTIFICATES
(Title of Class of Securities)
45378B 10 4
(CUSIP Number of Class of Securities)
- --------------------------------------------------------------------------------
J. Michael Fried
c/o Related Capital Company
625 Madison Avenue
New York, NY 10022
(212) 421-5333
Copy to:
Peter M. Fass
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
(212) 856-7000
(Name, Address and Telephone Numbers of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
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<TABLE>
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Transaction Amount of
Valuation* Filing Fee
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$10,680,700 $2,136.14
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</TABLE>
*For purposes of calculating the filing fee only. This amount assumes the
purchase of 14,732 Beneficial Assignment Certificates (representing
assignments of limited partnership interests) ("BACs") of the subject company
for $725 per BAC in cash.
{ } Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
</TABLE>
(Continued on following pages)
(Page 1 of 7 pages)
<PAGE>
CUSIP No.:45378B 10 4 14D-1 Page 2 of 7
<TABLE>
<S> <C>
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1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
LEHIGH TAX CREDIT PARTNERS L.L.C.
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2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) { }
(b) {X}
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3. SEC Use Only
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4. Sources of Funds (See Instructions)
AF; BK
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
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6. Citizenship or Place of Organization
Delaware
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
85 Beneficial Assignment Certificates (representing assignments of
limited partnership interests)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
(See Instructions)
[ ]
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9. Percent of Class Represented by Amount in Row (7)
Less than 1%
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10. Type of Reporting Person (See Instructions)
OO
</TABLE>
<PAGE>
CUSIP No.:45378B 10 4 14D-1 Page 3 of 7
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
LEHIGH TAX CREDIT PARTNERS, INC.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) { }
(b) {X}
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3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds (See Instructions)
AF; BK
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
[ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
85 Beneficial Assignment Certificates (representing assignments of
limited partnership interests)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares
(See Instructions)
[ ]
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9. Percent of Class Represented by Amount in Row (7)
Less than 1%
- --------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
CO
</TABLE>
<PAGE>
Item 1. Security and Subject Company.
(a) The name of the subject company is Independence Tax Credit Plus L.P.
II, a Delaware limited partnership (the "Partnership"), which has its principal
executive offices at 625 Madison Avenue, New York, New York 10022.
(b) This Schedule 14D-1 relates to the offer by Lehigh Tax Credit Partners
L.L.C., a Delaware limited liability company ("the Purchaser"), to purchase up
to 14,732 issued and outstanding Beneficial Assignment Certificates ("BACs")
representing assignments of limited partnership interests in the Partnership
("Limited Partnership Interests") at $725 per BAC, net to the seller in cash
(the "Purchase Price"), without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated November 10, 1997 (the
"Offer to Purchase") and the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively. The Purchase Price
will be automatically reduced by $14 per BAC for each month (or part of a month)
between December 31, 1997 and the date of transfer for BACs transferred after
December 31, 1997. Information concerning the number of outstanding BACs is set
forth in the Introduction to the Offer to Purchase and is incorporated herein by
reference.
(c) The information set forth in Section 13 ("Purchase Price
Considerations") of the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth in Section 10 ("Certain Information
Concerning the Purchaser") and Schedule I to the Offer to Purchase is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor, to the
best of its knowledge, any of the persons listed in Schedule I or referred to in
Section 10 ("Certain Information Concerning the Purchaser") of the Offer to
Purchase (i) have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) were a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding were or are subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, Federal or
state securities laws or finding any violation of such laws.
(g) The information set forth in Schedule I to the Offer to Purchase is
incorporated herein by reference.
Item 3. Past Contacts, Transactions or Negotiations With the Subject
Company.
(a) The Purchaser is an affiliate of Related Independence Associates L.P.,
the general partner of the Partnership. Accordingly, the information contained
in Section 9 ("Certain Information Concerning the Partnership") of the Offer to
Purchase, including the terms of the Partnership's amended and restated
agreement of limited partnership (the "Partnership Agreement"), is incorporated
herein by reference. Additionally, the information set forth in Section 10
("Certain Information Concerning the Purchaser") and Schedule I to the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth in Section 11 ("Background of the Offer") of
the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(c) The information set forth in Section 12 ("Source of Funds") of the
Offer to Purchase is incorporated herein by reference.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a)-(b) The information set forth in Section 8 ("Purpose of the Offer;
Future Plans") of the Offer to Purchase is incorporated herein by reference.
(c)-(e) Not applicable.
(f)-(g) The information set forth in Section 7 ("Effects of the Offer") of
the Offer to Purchase is incorporated herein by reference.
4
<PAGE>
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the Introduction and Section 10
("Certain Information Concerning the Purchaser") of the Offer to Purchase is
incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with
Respect to the Subject Company's Securities.
The information set forth in Section 10 ("Certain Information Concerning
the Purchaser") and Section 11 ("Background of the Offer") of the Offer to
Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to Be Compensated.
The information set forth in Section 16 ("Certain Fees and Expenses") of
the Offer to Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
Not applicable.
Item 10. Additional Information.
(a) None.
(b)-(d) The information set forth in Section 15 ("Certain Legal Matters")
of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
related Letter of Transmittal is incorporated herein in its
entirety by reference.
Item 11. Material to Be Filed as Exhibits.
(a)(1) Offer to Purchase, dated November 10, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter, dated November 10, 1997, from Lehigh Tax Credit
Partners L.L.C. to the holders of BACs.
(a)(4) Form of Notice to Brokers, dated November 10, 1997.
(b)(1) Promissory Note, dated November 7, 1997.
(c)(1) Letter Agreement, dated November 7, 1997, among Independence Tax
Credit Plus L.P. II, Lehigh Tax Credit Partners L.L.C. and Related
Independence Associates L.P. (the "Standstill Agreement").
(c)(2) Letter Agreement, dated April 23, 1997, between Lehigh Tax
Credit Partners L.L.C. and Everest Properties (the "Everest
Agreement").
(d) None.
(e) Not applicable.
(f) None.
5
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 10, 1997
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: Lehigh Tax Credit Partners, Inc.,
its managing member
By:/s/ Alan P. Hirmes
----------------------------------
Name: Alan P. Hirmes
Title: Vice President
LEHIGH TAX CREDIT PARTNERS, INC.
By: /s/ Alan P. Hirmes
-------------------------------------
Name: Alan P. Hirmes
Title: Vice President
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
- -------- --------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase, dated November 10, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter, dated November 10, 1997, from Lehigh Tax Credit Partners L.L.C. to the holders of
BACs.
(a)(4) Form of Notice to Brokers, dated November 10, 1997.
(b)(1) Promissory Note, dated November 7, 1997.
(c)(1) Letter Agreement, dated November 7, 1997, among Independence Tax Credit Plus L.P. II, Lehigh
Tax Credit Partners L.L.C. and Related Independence Associates L.P. (the "Standstill Agreement").
(c)(2) Letter Agreement, dated April 23, 1997, between Lehigh Tax Credit Partners L.L.C. and Everest
Properties (the "Everest Agreement").
</TABLE>
7
OFFER TO PURCHASE
UP TO 14,732
BENEFICIAL ASSIGNMENT CERTIFICATES
in
INDEPENDENCE TAX CREDIT PLUS L.P. II
for
$725 NET PER BAC IN CASH
by
LEHIGH TAX CREDIT PARTNERS L.L.C.
- --------------------------------------------------------------------------------
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 10, 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
(the "Purchaser") and an affiliate of the general partner of the Partnership
(as defined below), hereby offers to purchase up to 14,732 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests ("Limited Partnership Interests")
in Independence Tax Credit Plus L.P. II, a Delaware limited partnership (the
"Partnership"), at a purchase price of $725 per BAC, net to the seller in cash
(the "Purchase Price"), without interest thereon, upon the terms and subject to
the conditions set forth in this Offer to Purchase (the "Offer to Purchase")
and in the related Letter of Transmittal, as each may be supplemented, modified
or amended from time to time (which together constitute the "Offer"). The
Purchase Price will be automatically reduced by $14 per BAC for each month (or
part of a month) between December 31, 1997 and the date of transfer for BACs
transferred after December 31, 1997. BACs HOLDERS WHO TENDER THEIR BACs WILL
NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH
COMMISSIONS AND FEES WILL BE BORNE BY THE PURCHASER. The 14,732 BACs sought
pursuant to the Offer represent, to the best knowledge of the Purchaser,
approximately 25% of the BACs outstanding as of the date of this Offer.
------------------------
THE PURCHASER AND RELATED INDEPENDENCE ASSOCIATES L.P., THE GENERAL PARTNER
OF THE PARTNERSHIP, ARE AFFILIATED.
------------------------
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF BACs BEING
TENDERED. SEE SECTION 14 ("CONDITIONS OF THE OFFER").
------------------------
IN ORDER TO COMPLY WITH CERTAIN RESTRICTIONS SET FORTH IN THE PARTNERSHIP'S
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, TENDERS OF LESS THAN
ALL BACs OWNED BY A BACs HOLDER THAT WOULD RESULT IN A BACs HOLDER HOLDING
LESS THAN 5 BACs WILL NOT BE ACCEPTED.
------------------------
Before tendering, BACs holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the tax credits
and/or tax losses from the BACs may prefer to retain their BACs and
not tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit
that would be realized from retaining ownership of BACs together with
any cash distributions from operations and any net proceeds from a
future sale of the properties owned by the Local Partnerships in which
the Partnership has an interest (the "Properties") could be greater
than or less than the Purchase Price. See Section 13 ("Purchase Price
Considerations").
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs
holders may vote, including decisions regarding removal of the General
Partner, certain amendments to the Partnership Agreement (as defined
in the Glossary) and dissolution of the Partnership.
[bullet] The Purchaser believes that the projected aggregate per BAC benefit of
the Offer, together with the benefits already received by a BACs
holder, compares favorably with the potential benefits the Purchaser
believes a BACs holder will receive if he or she remains in the
Partnership, together with the benefits already received by a BACs
holder. See Section 13 ("Purchase Price Considerations").
<PAGE>
IMPORTANT
Any (i) BACs holder, (ii) beneficial owner, in the case of BACs owned by
Individual Retirement Accounts or Keogh Plans (a "Beneficial Owner"), or (iii)
person who has purchased BACs but has not yet been reflected on the
Partnership's books as a transferee of such BACs (an "Assignee"), desiring to
tender any or all of such person's BACs should either (1) complete and sign the
Letter of Transmittal, or a facsimile copy thereof, in accordance with the
instructions in the Letter of Transmittal and mail or deliver the Letter of
Transmittal, or a facsimile copy thereof, and any other required documents to
The Herman Group, Inc. (the "Information Agent/Depositary"), at the address or
facsimile number set forth below, or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. Unless the context requires otherwise, references to BACs holders
in this Offer to Purchase shall be deemed to also refer to Beneficial Owners
and Assignees. Questions or requests for assistance may be directed to the
Information Agent/Depositary at the address and telephone number set forth
below. Requests for additional copies of this Offer to Purchase, the Letter of
Transmittal and other related documents may be directed to the Information
Agent/Depositary.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
EACH BACs HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE,
THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS.
For Additional Information Call:
The Herman Group, Inc.
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
Telephone: (800) 532-5664
Facsimile: (214) 999-9323
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
INTRODUCTION .................................................................. 1
THE TENDER OFFER .................................................................. 4
1. Terms of the Offer ............................................. 4
2. Proration; Acceptance for Payment and Payment for BACs ............ 5
3. Procedures for Tendering BACs .................................... 6
4. Withdrawal Rights ................................................ 7
5. Extension of Tender Period; Termination; Amendment ............... 8
6. Certain Federal Income Tax Consequences ........................... 9
7. Effects of the Offer ............................................. 10
8. Purpose of the Offer; Future Plans .............................. 12
9. Certain Information Concerning the Partnership .................. 13
10. Certain Information Concerning the Purchaser ..................... 19
11. Background of the Offer .......................................... 20
12. Source of Funds ................................................... 21
13. Purchase Price Considerations .................................... 21
14. Conditions of the Offer .......................................... 23
15. Certain Legal Matters ............................................. 24
16. Certain Fees and Expenses ....................................... 25
17. Miscellaneous ................................................... 25
Appendix A. Glossary ......................................................... A-1
Schedule I. Information with respect to the executive officers and directors of
Lehigh Tax Credit Partners, Inc. ................................. S-1
Schedule II. Local Partnership Schedule ....................................... S-2
Schedule III. Certain Information Concerning the Properties ..................... S-3
</TABLE>
iii
<PAGE>
[This page intentionally left blank]
<PAGE>
To the Holders of Beneficial Assignment Certificates of Independence Tax Credit
Plus L.P. II:
INTRODUCTION
Lehigh Tax Credit Partners L.L.C., a Delaware limited liability company
(the "Purchaser") and an affiliate of the general partner of the Partnership
(as defined below), hereby offers to purchase up to 14,732 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing limited
partnership interests in Independence Tax Credit Plus L.P. II, a Delaware
limited partnership (the "Partnership"), at a purchase price of $725 per BAC,
net to the seller in cash (the "Purchase Price"), without interest, upon the
terms and subject to the conditions set forth in this Offer to Purchase (the
"Offer to Purchase") and in the related Letter of Transmittal, as each may be
supplemented, modified or amended from time to time (which together constitute
the "Offer"). The Purchase Price will be automatically reduced by $14 per BAC
for each month (or part of a month) between December 31, 1997 and the date of
transfer for BACs transferred after December 31, 1997. BACs holders who tender
their BACs will not be obligated to pay any commissions or Partnership transfer
fees, which commissions and fees will be borne by the Purchaser. The 14,732
BACs sought pursuant to the Offer represent, to the best knowledge of the
Purchaser, approximately 25% of the BACs issued and outstanding as of the date
of this Offer.
The Purchaser is affiliated with Related Independence Associates L.P., the
general partner of the Partnership (the "General Partner"). In order to comply
with certain restrictions set forth in the Partnership's Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"), tenders of less
than all BACs owned by a BACs holder that would result in a BACs holder holding
less than 5 BACs will not be accepted.
The Purchaser is making this Offer because it believes that the BACs
represent an attractive investment at the price offered based upon, in part,
the expected remaining Tax Credits and tax losses. There can be no assurance,
however, that the Purchaser's judgment is correct, and, as a result, ownership
of BACs (either by the Purchaser or BACs holders who retain their BACs) will
remain a speculative investment. The Purchaser is acquiring the BACs for
investment purposes and does not intend to make any effort to change current
management or the operations of the Partnership. Because the Purchaser is
affiliated with the General Partner, the Purchaser's acquisition of BACs may
have the effect of making any future change of current management more
difficult. The Purchaser has no current plans for any extraordinary transaction
involving the Partnership.
Factors to be considered by BACs holders. In considering the Offer, BACs
holders are urged to consider the following factors:
[bullet] BACs holders who have a present or future need for the Tax Credits
and/or tax losses from the BACs may prefer to retain their BACs and
not tender them pursuant to the Offer, or any other tender offer.
[bullet] Although the Purchaser cannot predict the future value of the
Partnership's assets on a per BAC basis, the net after-tax benefit
that would be realized from retaining ownership of the BACs together
with any cash distributions from operations and any net proceeds from
a future sale of the properties owned by the Local Partnerships in
which the Partnership has an interest (the "Properties") could be
greater than or less than the Purchase Price. See Section 13
("Purchase Price Considerations").
[bullet] There may be a conflict between the desire of the Purchaser to acquire
the BACs at a low price and the desire of the BACs holders to sell
their BACs at a high price. Therefore, BACs holders might receive
greater value if they hold their BACs, rather than tender, continue to
be allocated Tax Credits and tax losses, and receive any distributions
from operations and any proceeds, if any, from the liquidation of the
Partnership. Alternatively, BACs holders may prefer to receive the
Purchase Price now rather than wait to be allocated future Tax Credits
and tax losses and uncertain future cash distributions. The return to
BACs holders could be higher or lower than the Purchase Price for
persons who retain their BACs.
[bullet] BACs holders should note that the most recent trading activity in the
BACs occurred in March 1997. The selling price for BACs reported in
the limited and sporadic secondary market during the two-month period
ended March 31, 1997 was $860. See Section 13 ("Purchase Price
Considerations"). Such secondary market selling prices, however, do
not take into account commissions charged by secondary market makers
effectuating such sales which the Purchaser believes, based on a
typical 5 BAC sales transaction, range from 5% to 8.75% of the sales
price (which would result in a reduction of the net proceeds to the
seller of approximately $43 to approximately
<PAGE>
$75.25 per BAC). Additionally, because the BACs are less valuable with
the passage of time since fewer Tax Credits remain, the Purchaser
believes the price per BAC should be reduced by at least $14 for each
passing month, or a total of approximately $112 per BAC from March 31,
1997 to November 30, 1997. Therefore, the Purchaser believes the value
of BACs in December (when the Offer expires), based upon the most
recently reported secondary market sales, net of sales commissions,
would be approximately $673 to $705 per BAC. The Purchase Price
represents a premium to this range of values.
[bullet] The Offer is being made in order to acquire BACs for investment
purposes. The Purchaser intends to sell, and has begun the process of
selling, membership interests in the Purchaser to third parties
(predominantly corporations) with a need for the Tax Credits and/or
tax losses attributable to the tendered BACs. The aggregate sales
price of the Purchaser's membership interests to third parties will be
equal to the aggregate purchase price for the tendered BACs and all
other securities acquired by the Purchaser pursuant to secondary
market transactions and other tender offers conducted to date,
together with the expenses associated therewith, the expenses
associated with the Purchaser's sale of membership interests and the
prepayment of certain fees and expenses in connection with the
Purchaser's operations. Neither the Purchaser nor its current members
will derive a profit from the sale of the Purchaser's membership
interests.
In connection with such sales and in consideration for structuring this
transaction and for certain services to be performed for the Purchaser,
however, it is expected that affiliates of the Purchaser will earn
fees. These fees will be, in part, dependent on the amount third
parties are willing to pay for membership interests and the amount of
membership interests sold. There can be no assurance, however, that any
membership interests in the Purchaser will be sold or at what price.
[bullet] If the Purchaser is successful in acquiring a significant number of
BACs pursuant to the Offer, the Purchaser could, subject to the
Standstill Agreement (as defined in the Glossary), be in a position to
significantly influence all Partnership decisions on which BACs
holders may vote. Additionally, because the Purchaser is affiliated
with the General Partner, the Purchaser's acquisition of BACs may have
the effect of making any future change of the Partnership's current
management more difficult. If the maximum number of BACs sought by the
Purchaser is tendered and accepted for payment pursuant to the Offer,
the Purchaser will own approximately 25% of the outstanding BACs.
After November 7, 2007 (the "Standstill Expiration Date"), the
ownership of tendered BACs by the Purchaser could effectively (i)
prevent non-tendering BACs holders from taking actions they desire but
that the Purchaser opposes and (ii) enable the Purchaser to take
actions desired by it but opposed by certain non-tendering BACs
holders. Under the Partnership Agreement, Limited Partners and BACs
holders holding more than 50% of aggregate Limited Partnership
Interests and BACs representing Limited Partnership Interests are
entitled, either directly or through the Assignor Limited Partner, as
the case may be, to take action with respect to a variety of matters,
including: approving the dissolution of the Partnership; approving the
removal of any General Partner and proposing and approving a
replacement therefor; approving or disapproving the sale of all or
substantially all of the assets of the Partnership; and most types of
amendments to the Partnership Agreement. Although the Purchaser does
not have any current intentions with regard to any of these matters,
it will, following the Standstill Expiration Date, vote the BACs
acquired pursuant to the Offer in its interest, which may, or may not,
be in the best interest of non-tendering BACs holders. Until the
Standstill Expiration Date, the Purchaser has agreed to vote its BACs
in the same manner as the majority of all voting BACs holders;
provided, however, the Purchaser shall be entitled to vote its BACs as
it determines with regard to any proposal (i) to remove the General
Partner or (ii) concerning the reduction of any fees, profits,
distributions or allocations for the benefit of the General Partner or
its affiliates.
[bullet] Most of the properties owned by the Local Partnerships in which the
Partnership has an interest began to qualify for Housing Tax Credits
in 1993 and 1994. Housing Tax Credits are generally available for 10
years. The amount of the Housing Tax Credits claimed by the
Partnership was $6,413,606 for the 1996 calendar year, $4,564,313 for
the 1995 calendar year, and $2,542,233 for the 1994 calendar year.
Although there can be no assurance as to whether Housing Tax Credits
will continue to be available, the Purchaser estimates that a total of
approximately $1,198 Housing Tax Credits per BAC will be available
during the period beginning December 16, 1997 and ending December 31,
2006. In addition, although there can be no assurance as to whether
tax losses will continue to be available, in calendar year 1996 each
BAC was allocated approximately $61 of tax losses and the Purchaser
estimates that each BAC will be allocated (a) approximately $1,256 of
tax losses per year through December 31, 2011, and (b) approximately
$536 of taxable income upon a liquidation of the Partnership, assum-
2
<PAGE>
ing no cash distributions are made. Actual future tax benefits may
differ significantly from the foregoing estimates. Tax losses are less
valuable than tax credits because tax losses can reduce income (thereby
resulting in a savings equal to the product of the tax loss and the
taxpayer's applicable tax rate) and require a reduction in tax basis
(which may cause taxable income to be recognized in subsequent years),
whereas tax credits result in a dollar-for-dollar reduction in tax
liability. BACs holders should consider whether the benefits of the
Offer, including the Purchase Price, are more valuable to them than the
present value of anticipated future tax benefits. See Section 13
("Purchase Price Considerations").
BACs holders may no longer wish to continue with their investment in the
Partnership for a number of reasons, including:
[bullet] Although there are some limited resale mechanisms available to the
BACs holders wishing to sell their BACs, there is no formal or
organized trading market for the BACs. The Partnership's Form 10-K for
the fiscal year ended March 31, 1997 (the "Form 10-K") states:
"Neither the BACs nor the Limited Partnership Interests are traded on
any established trading market. The Partnership does not intend to
include the BACs for quotation on NASDAQ or for listing on any
national or regional stock exchange or any other established
securities market." Accordingly, BACs holders who desire resale
liquidity may wish to consider the Offer. The Offer affords a
significant number of BACs holders with an opportunity to dispose of
their BACs for cash, which alternative otherwise might not be
available to them. The Purchase Price is not intended to represent
either the fair market value of a BAC or the fair market value of the
Tax Credits and tax losses attributable to each BAC and the
Partnership's assets on a per BAC basis.
[bullet] The Offer will provide BACs holders with an immediate opportunity to
liquidate their investment in the Partnership without the usual
transaction costs associated with market sales or partnership transfer
fees.
[bullet] The Purchaser believes that the projected aggregate per BAC benefit
from the Offer, together with the benefits received since 1993, total
approximately $1,603. Such benefits include $725 (the Purchase Price)
plus $393 (representing the Tax Credits allocated through December 15,
1997) plus approximately $81 (representing the tax savings, assuming a
tax rate of 20% for capital gain and 36% for ordinary income,
attributable to the use of a capital loss of $15 and an ordinary loss
of $225 the Purchaser believes an individual BACs holder will realize
if all of his BACs are sold in the Offer and the individual has not
previously used such losses to offset passive income) plus
approximately $426 (representing the assumed return on the
reinvestment of the Purchase Price at 5.75% for approximately 12
years, discounted at a rate of 9%) less approximately $22
(representing a recapture of Historic Tax Credits). See Section 13
("Purchase Price Considerations"). The Purchaser believes that such
aggregate projected benefit compares favorably with the potential
benefits to a BACs holder who remains in the Partnership (together
with the benefits received since 1993), continuing to receive Tax
Credits, and assuming a return of the present value of the original
investment of $1,000 as, and if, the 15 properties owned by the Local
Partnerships in which the Partnership has an interest are sold for
amounts in excess of the then existing indebtedness and other
liabilities. The aggregate of such potential benefits (including Tax
Credits allocated through December 15, 1997) is estimated by the
Purchaser to be approximately $1,587. BACs HOLDERS SHOULD CONSULT WITH
THEIR RESPECTIVE TAX AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF
THE OFFER TO THEM.
[bullet] The Offer may be attractive for BACs holders whose circumstances have
changed such that anticipated future allocation of Tax Credits and tax
losses may no longer be beneficial to them.
[bullet] Acceptance of the Offer will eliminate any future risk to the selling
BACs holder of recapture of the Tax Credits received, since such risk
will be borne by the Purchaser. The Purchaser believes, however, that
any risk of such recapture is minimal.
[bullet] General disenchantment with real estate investments and with long-term
investments in limited partnerships because of, among other things,
their illiquidity.
[bullet] The Offer may be attractive to certain BACs holders who wish in the
future to avoid the continued additional expense, delay and
complication in filing income tax returns which result from the
ownership of BACs.
[bullet] The Offer provides BACs holders with the opportunity to liquidate
their BACs and to reinvest the proceeds in other investments should
they desire to do so.
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[bullet] The Purchaser believes that the BACs represent an attractive
investment at the Purchase Price based upon, in part, the expected
remaining Tax Credits and tax losses. There can be no assurance,
however, that this judgment is correct. Therefore, ownership of BACs
will remain a speculative investment.
Following the completion of the Offer and subject to the terms of the
Standstill Agreement, the Purchaser and its affiliates may acquire additional
BACs. Any such acquisitions may be made through private purchases, through one
or more future tender offers or by any other means deemed advisable, and may be
at prices higher or lower than the price to be paid for the BACs purchased
pursuant to the Offer. See Section 8 ("Purpose of the Offer; Future Plans").
The Offer is not conditioned upon any minimum number of BACs being
tendered. If, as of the Expiration Date, more than 14,732 BACs are validly
tendered and not properly withdrawn, the Purchaser will only accept for
purchase on a pro rata basis 14,732 BACs, subject to the terms and conditions
herein. See Section 14 ("Conditions of the Offer").
BACs holders are urged to consider carefully all of the information
contained herein before accepting the Offer.
The Purchaser expressly reserves the right, in its sole discretion and for
any reason, to terminate the Offer at any time and to waive any or all of the
conditions of the Offer, although the Purchaser does not presently intend to
waive any such conditions. See Section 7 ("Effects of the Offer"). In order to
comply with certain restrictions set forth in the Partnership Agreement,
tenders of less than all BACs owned by a BACs holder that would result in a
BACs holder holding less than 5 BACs will not be accepted.
According to the Form 10-Q, there were 58,928 BACs issued and outstanding,
which represent 58,928 Limited Partnership Interests issued to the Assignor
Limited Partner. The 10-K reports that as of March 31, 1997 the Partnership had
3,855 registered holders of the issued and outstanding BACs. The Purchaser owns
85 BACs.
Certain historical and factual statements and information contained in
this Offer to Purchase pertaining to the Partnership (such as information with
respect to the properties owned by the Local Partnerships in which the
Partnership has an interest or the financial statements of the Partnership)
were taken directly from statements and information included in the reports and
documents publicly filed by the Partnership with the Securities and Exchange
Commission (the "Commission"). The Purchaser did not prepare any such
information and makes no representation as to the accuracy or completeness of
such statements or information.
Each BACs holder must make his or her own decision whether to accept the
Offer based on his or her particular circumstances. BACs holders should consult
with their respective advisors about the financial, tax, legal and other
implications to them of accepting the Offer. BACs holders are urged to read
this Offer to Purchase, the related Letter of Transmittal and the other
accompanying materials carefully before deciding whether to tender their BACs.
THE TENDER OFFER
1. Terms of the Offer.
Upon the terms of the Offer (including the terms and conditions of any
extension or amendment of the Offer), the Purchaser will accept for payment and
pay for up to 14,732 BACs that are validly tendered on or prior to the
Expiration Date (as hereinafter defined) and not withdrawn in accordance with
Section 4 ("Withdrawal Rights"). The term "Expiration Date" shall mean 12:00
midnight, New York City time, on December 10, 1997, unless the Purchaser, in
its sole discretion, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall refer to the
latest time and date at which the Offer, as so extended by the Purchaser, will
expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
PURCHASE PRICE OFFERED TO BACs HOLDERS, SUCH INCREASED PURCHASE PRICE SHALL BE
PAID FOR ALL BACs ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT
SUCH BACs WERE TENDERED PRIOR TO THE INCREASE OF THE PURCHASE PRICE.
The Offer is conditioned on satisfaction of certain conditions. See
Section 14 ("Conditions of the Offer"). The Purchaser reserves the right (but
shall not be obligated), in its sole discretion, to waive any or all of such
conditions.
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If, on or prior to the Expiration Date, any or all of such conditions have not
been satisfied or waived, the Purchaser may (i) decline to purchase any of the
BACs tendered, terminate the Offer and return all tendered BACs to tendering
BACs holders, (ii) waive all the then unsatisfied conditions and, subject to
complying with applicable rules and regulations of the Commission, purchase all
BACs validly tendered, (iii) extend the Offer and, subject to the right of BACs
holders to withdraw BACs until the Expiration Date, retain the BACs that have
been tendered during the period or periods for which the Offer is extended, or
(iv) amend the Offer.
At the request of the Purchaser, and pursuant to Rule 14d-5 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Offer to
Purchase, the related Letter of Transmittal and, if required, any other
relevant materials are being mailed, at the Purchaser's expense, by the
Partnership to BACs holders, Beneficial Owners and Assignees who hold BACs, to
the extent their names and addresses are reflected on the books and records of
the Partnership.
2. Proration; Acceptance for Payment and Payment for BACs.
If more than 14,732 BACs are validly tendered on or prior to the
Expiration Date and not properly withdrawn on or prior to the Expiration Date,
the Purchaser will only accept for payment, upon the terms and subject to the
conditions of the Offer, and pay for an aggregate of 14,732 BACs so tendered,
pro rata according to the number of BACs validly tendered and not properly
withdrawn on or prior to the Expiration Date, with appropriate adjustments to
avoid purchases that would violate the transfer restrictions in Section 7.1 of
the Partnership Agreement (the "Transfer Restrictions"). If the number of BACs
validly tendered and not properly withdrawn on or prior to the Expiration Date
is less than or equal to 14,732 BACs, the Purchaser will purchase all BACs so
tendered and not properly withdrawn, upon the terms and subject to the
conditions of the Offer.
If proration of tendered BACs is required, and because of the difficulty
of determining the proration results, the Purchaser may not be able to announce
the final results of such proration until at least approximately seven business
days after the Expiration Date. Subject to the Purchaser's obligation under
Rule 14e-1(c) under the Exchange Act, to pay BACs holders the Purchase Price in
respect of BACs tendered or return those BACs promptly after the termination or
withdrawal of the Offer, the Purchaser does not intend to pay for any BACs
accepted for payment pursuant to the Offer until the final proration results
are known.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will purchase, by accepting for payment,
and will pay for, all BACs validly tendered and not withdrawn in accordance
with Section 4 on or prior to the Expiration Date as promptly as practicable
following the Expiration Date. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, BACs pending receipt of any regulatory or
governmental approvals specified in Section 15 ("Certain Legal Matters") or
pending receipt of any additional documentation required by the Letter of
Transmittal. In all cases, payment for BACs accepted for payment pursuant to
the Offer will be made only after timely receipt by the Information
Agent/Depositary of (a) the Letter of Transmittal properly completed and duly
executed and (b) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered BACs when, as and if the Purchaser gives oral or written
notice to the Information Agent/Depositary of the Purchaser's acceptance for
payment of such BACs pursuant to the Offer. No tender of BACs will be deemed to
have been validly made until all defects and irregularities with respect to
such tender have been cured or waived. Upon the terms and subject to the
conditions of the Offer, payment for BACs tendered and accepted for payment
pursuant to the Offer will in all cases be made by deposit of the Purchase
Price with the Information Agent/Depositary, which will act as agent for the
tendering BACs holders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering BACs holders.
The Purchase Price will be automatically reduced by $14 per BAC for each
month (or part of a month) between December 31, 1997 and the date of transfer
for BACs transferred after December 31, 1997. Under no circumstances will the
Purchaser pay interest on the Purchase Price for BACs.
If any tendered BACs are not purchased pursuant to the Offer for any
reason, the Letter of Transmittal with respect to such BACs will be destroyed
by the Information Agent/Depositary. If, for any reason whatsoever, acceptance
for payment of or payment for any BACs tendered pursuant to the Offer is
delayed or the Purchaser is unable
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to accept for payment, purchase or pay for BACs tendered pursuant to the Offer,
then, without prejudice to the Purchaser's rights under Section 14 ("Conditions
of the Offer"), the Information Agent/Depositary may, nevertheless, on behalf
of the Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain
tendered BACs, and such BACs may not be withdrawn except to the extent that the
tendering BACs holder is entitled to withdrawal rights as described in Section
4 ("Withdrawal Rights").
3. Procedures for Tendering BACs.
Valid Tender. For BACs to be validly tendered pursuant to the Offer, a
Letter of Transmittal or facsimile thereof properly completed and duly
executed, together with any other documents required by the Letter of
Transmittal, must be received by the Information Agent/Depositary at its
address or facsimile number on the back cover page of the Offer to Purchase on
or prior to the Expiration Date. If tendering by facsimile, a BACs holder
should subsequently send original copies of the Letter of Transmittal and any
other documents required by the Letter of Transmittal to the Information
Agent/Depositary at its address on the back cover of the Offer to Purchase. In
order to comply with certain restrictions set forth in the Partnership
Agreement, tenders of less than all BACs owned by a BACs holder that would
result in a BACs holder holding less than 5 BACs will not be accepted. See
Instructions to the Letter of Transmittal.
In order for a tendering BACs holder to participate in the Offer, BACs
must be validly tendered and not withdrawn on or prior to the Expiration Date,
which is 12:00 midnight, New York City time, on December 10, 1997, unless
extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering BACs holder and delivery
will be deemed made only when actually received by the Information
Agent/Depositary. If delivery is by mail, registered mail with return receipt
requested is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
Backup Federal Income Tax Withholding. To prevent the possible application
of backup federal income tax withholding with respect to payment of the
Purchase Price pursuant to the Offer, a tendering BACs holder must execute the
Letter of Transmittal, thereby certifying such BACs holder's correct taxpayer
identification number or social security number.
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Purchase Price plus the amount of
Partnership liabilities allocable to each BAC purchased, each BACs holder must
execute the Letter of Transmittal, thereby certifying such BACs holder's
taxpayer identification number and address and that the BACs holder is not a
foreign person.
Appointment as Proxy; Power of Attorney. By executing and delivering the
Letter of Transmittal, a tendering BACs holder irrevocably appoints the
Purchaser and the designees of the Purchaser and each of them as such BACs
holder's proxies, in the manner set forth in the Letter of Transmittal, each
with full power of substitution, to the full extent of such BACs holder's
rights with respect to the BACs tendered by such BACs holder and accepted for
payment by the Purchaser (and with respect to any and all other BACs or other
securities issued or issuable in respect of such BACs on or after the date
hereof). All such proxies shall be considered irrevocable and coupled with an
interest in the tendered BACs. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such BACs for payment. Upon such
acceptance for payment, all prior proxies given by such BACs holder with
respect to such BACs (and such other BACs and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consents executed (and, if given or executed, will not be
deemed effective). The Purchaser and its designees will, with respect to the
BACs (and such other BACs and securities) for which such appointment is
effective, be empowered to exercise all voting and other rights of such BACs
holder as it in its sole discretion may deem proper pursuant to the Partnership
Agreement or otherwise. The Purchaser may assign such proxy and/or power of
attorney to any person with or without assigning the related BACs with respect
to which such proxy and/or power of attorney was granted. The Purchaser
reserves the right to require that, in order for BACs to be deemed validly
tendered, immediately upon the Purchaser's payment for such BACs, the Purchaser
must be able to exercise full voting rights with respect to such BACs and other
securities.
In addition, pursuant to such appointment as attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i)
to seek to transfer ownership of such BACs on the books and records of the
Partnership maintained by the Assignor Limited Partner (and execute and deliver
any accompanying evidences of
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transfer and authenticity any of them may deem necessary or appropriate in
connection therewith, including, without limitation, any documents or
instruments required to be executed under the Partnership Agreement or a
"Transferor's (Seller's) Application for Transfer" created by the NASD, if
required), (ii) upon receipt by the Information Agent/Depositary (as the
tendering BACs holder's agent) of the Purchase Price, to be allocated all Tax
Credits and tax losses and to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all benefits and
otherwise exercise all rights of beneficial ownership of such BACs in
accordance with the terms of the Offer, (iii) to execute and deliver to the
Partnership, the General Partner and/or the Assignor Limited Partner (as the
case may be) a change of address form instructing the Partnership to send any
and all future distributions to which the Purchaser is entitled pursuant to the
terms of the Offer in respect of tendered BACs to the address specified in such
form, and (iv) to endorse any check payable to or upon the order of such BACs
holder representing a distribution, if any, to which the Purchaser is entitled
pursuant to the terms of the Offer, in each case on behalf of the tendering
BACs holder.
Assignment of Entire Interest in the Partnership. By executing and
delivering the Letter of Transmittal, a tendering BACs holder irrevocably
assigns to the Purchaser and its assigns all of the, direct and indirect,
right, title and interest of such BACs holder in the Partnership with respect
to the BACs tendered and purchased pursuant to the Offer, including, without
limitation, such BACs holder's right, title and interest in and to any and all
Tax Credits and tax losses and any and all distributions made by the
Partnership after the Expiration Date in respect of the BACs tendered by such
BACs holder and accepted for payment by the Purchaser, regardless of the fact
that the record date for any such distribution may be a date prior to the
Expiration Date. Upon the Purchaser's acceptance of, and payment for, tendered
BACs, a tendering BACs holder will no longer be entitled to any benefits as a
BACs holder, regardless of whether such BACs holder retains a Beneficial
Assignment Certificate. The Purchaser reserves the right to transfer or assign,
in whole or from time to time in part, to any third party, the right to
purchase BACs tendered pursuant to the Offer, together with its rights under
the Letter of Transmittal, but any such transfer or assignment will not relieve
the assigning party of its obligations under the Offer or prejudice the rights
of tendering BACs holders to receive payment for BACs validly tendered and
accepted for payment pursuant to the Offer.
Determination of Validity. All questions as to the form of documents and
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of BACs will be determined by the Purchaser, in its sole discretion,
whose determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not
to be in proper form, or the acceptance of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender of BACs of any particular BACs holder whether or not
similar defects or irregularities are waived in the case of other BACs holders.
Assignee Status. Assignees must provide documentation to the Information
Agent/Depositary which demonstrates, to the satisfaction of the Purchaser, such
person's status as an assignee of a BAC.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of BACs will be deemed to have been validly made
until all defects and irregularities with respect to such tender have been
cured or waived. None of the Purchaser, any of its affiliates or assigns, if
any, the Information Agent/Depositary or any other person will be under any
duty to give any notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification.
The Purchaser's acceptance for payment of BACs tendered pursuant to the
procedures described above will constitute a binding agreement between the
tendering BACs holder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights.
Tenders of BACs made pursuant to the Offer are irrevocable, except that
BACs tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided in
this Offer to Purchase, may also be withdrawn at any time after January 9,
1998.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Information
Agent/Depositary at the address set forth on the back cover of this Offer to
Purchase. Any such notice of withdrawal must specify the name(s) of the
person(s) who tendered the BACs to be withdrawn,
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the number of BACs to be withdrawn and the name(s) of the registered holder(s)
of the BACs, if different from that of the person(s) who tendered such BACs.
Such notice of withdrawal must also be signed by the same person(s) who signed
the Letter of Transmittal in the same manner as the Letter of Transmittal was
signed (including, if applicable, medallion signature guarantees). If the BACs
are held in the name of two or more persons, all such persons must sign the
notice of withdrawal. Any BACs properly withdrawn will be deemed not validly
tendered for purposes of the Offer, but may be re-tendered at any subsequent
time prior to the Expiration Date by following the procedures described in
Section 3 ("Procedures for Tendering BACs").
If, for any reason whatsoever, acceptance for payment of any BACs tendered
pursuant to the Offer is delayed, or the Purchaser is unable to accept for
payment or pay for BACs tendered pursuant to the Offer, then, without prejudice
to the Purchaser's rights set forth herein, the Information Agent/Depositary
may, nevertheless, on behalf of the Purchaser, retain tendered BACs and such
BACs may not be withdrawn except to the extent that the tendering BACs holder
is entitled to and duly exercises withdrawal rights as described herein. The
reservation by the Purchaser of the right to delay the acceptance or purchase
of or payment for BACs is subject to the provisions of Rule 14e-1(c) under the
Exchange Act, which requires the Purchaser to pay the consideration offered or
return BACs tendered by or on behalf of BACs holders promptly after the
termination or withdrawal of the Offer.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, any of its affiliates or assigns, if any, the Information
Agent/Depositary or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. Extension of Tender Period; Termination; Amendment.
The Purchaser reserves the right, in its sole discretion and regardless of
whether any of the conditions set forth in Section 14 ("Conditions of the
Offer") shall have been satisfied, at any time and from time to time, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any BACs, (ii) to terminate the
Offer and not accept for payment any BACs not already accepted for payment or
paid for, and (iii) to amend the Offer in any respect by giving oral or written
notice of such amendment to the Information Agent/Depositary.
If the Purchaser increases or decreases either the number of the BACs
being sought or the consideration to be paid for any BACs pursuant to the Offer
and the Offer is scheduled to expire at any time before the expiration of a
period of 10 business days from, and including, the date that notice of such
increase or decrease is first published, sent or given in the manner specified
below, the Offer will be extended until, at a minimum, the expiration of such
period of 10 business days. If the Purchaser makes a material change in the
terms of the Offer (other than a change in price or percentage of securities
sought) or in the information concerning the Offer, or waives a material
condition of the Offer, the Purchaser will extend the Offer, if required by
applicable law, for a period sufficient to allow BACs holders to consider the
amended terms of the Offer.
The Purchaser also reserves the right, in its sole discretion, if any of
the conditions specified under Section 14 ("Conditions of the Offer") shall not
have been satisfied and so long as BACs have not theretofore been accepted for
payment, to delay (except as otherwise required by applicable law) acceptance
for payment of or payment for BACs or to terminate the Offer and not accept for
payment or pay for BACs.
If the Purchaser extends the period of time during which the Offer is
open, delays acceptance for payment of or payment for BACs or is unable to
accept for payment or pay for BACs pursuant to the Offer for any reason, then,
without prejudice to the Purchaser's rights under the Offer, the Information
Agent/Depositary may, on behalf of the Purchaser, retain all BACs tendered, and
such BACs may not be withdrawn except as otherwise provided under Section 4
("Withdrawal Rights"). The reservation by the Purchaser of the right to delay
acceptance for payment of or payment for BACs is subject to applicable law,
which requires that the Purchaser pay the consideration offered or return the
BACs deposited by or on behalf of BACs holders promptly after the termination
or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser will have no obligation (except as otherwise required by applicable
law) to publish,
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advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service. In the case of an extension of
the Offer, the Purchaser will make a public announcement of such extension no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
6. Certain Federal Income Tax Consequences.
The following summary is a general discussion of certain federal income
tax consequences of a sale of BACs pursuant to the Offer assuming that the
Partnership is a partnership for federal income tax purposes and that it is not
a "publicly traded partnership" as defined in Section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code"). This summary is based on the
Code, applicable Treasury Regulations thereunder, administrative rulings,
practice and procedures and judicial authority as of the date of the Offer. All
of the foregoing are subject to change, and any such change could affect the
continuing accuracy of this summary. This summary does not discuss all aspects
of federal income taxation that may be relevant to a particular BACs holder in
light of such BACs holder's specific circumstances or to certain types of BACs
holders subject to special treatment under the federal income tax laws (for
example, foreign persons (if any), dealers in securities, banks, insurance
companies and tax-exempt entities), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of BACs pursuant to the Offer will be
taxable transactions for federal income tax purposes, and may also be taxable
transactions under applicable state, local, foreign and other tax laws. EACH
BACs HOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH BACs HOLDER OF SELLING BACs PURSUANT TO THE OFFER,
INCLUDING, WITHOUT LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
Consequences to Tendering BACs holder. A BACs holder will recognize gain
or loss on a sale of BACs pursuant to the Offer equal to the difference between
(i) the BACs holder's "amount realized" on the sale and (ii) the BACs holder's
adjusted tax basis in the BACs sold. The "amount realized" with respect to a
BAC sold pursuant to the Offer will be a sum equal to the amount of cash
received by the BACs holder for the BAC plus the amount of Partnership
liabilities allocable to the BAC (as determined under Code Section 752). The
amount of a BACs holder's adjusted tax basis in BACs sold pursuant to the Offer
will vary depending upon the BACs holder's particular circumstances, and will
be affected by allocations of Partnership income, gain or loss, and any
historic tax credits to a BACs holder with respect to such BACs. In this
regard, tendering BACs holders will be allocated a pro rata share of the
Partnership's taxable income or loss with respect to BACs sold pursuant to the
Offer through the effective date of the sale.
Tendering BACs holders who have not utilized passive losses: A BACs holder
who sells his or her BACs pursuant to this Offer will receive $725 of proceeds
per BAC that may result in a tax loss of approximately $240 per BAC, which loss
could be available to reduce income from other sources. Tendering BACs holders
who have utilized passive losses: An individual BACs holder who sells his or
her BACs pursuant to this Offer, who acquired BACs pursuant to the original
offering of BACs by the Partnership and who has utilized all of his passive
losses is expected to recognize a tax loss of approximately $15 per BAC.
In general, the character (as capital or ordinary) of BACs holder's gain
or loss on a sale of a BAC pursuant to the Offer will be determined by
allocating the BACs holder's amount realized on the sale and his adjusted tax
basis in the BACs sold between "Section 751 items," which are "inventory items
of the partnership" and "unrealized receivables" (including depreciation
recapture) as defined in Code Section 751, and non-Section 751 items. The
difference between the portion of the BACs holder's amount realized that is
allocable to Section 751 items and the portion of the BACs holder's adjusted
tax basis in the BACs sold that is so allocable will be treated as ordinary
income or loss, and the difference between the BACs holder's remaining amount
realized and adjusted tax basis will be treated as capital gain or loss
assuming the BACs were held by the BACs holder as a capital asset. The
Purchaser believes that substantially all of any tax loss realized on a sale of
BACs pursuant to the Offer will be treated as a capital loss under these rules,
although it is possible, because a BACs holder's adjusted tax basis in the BACs
sold will be allocated to Section 751 items based on the Partnership's tax
basis in these items, that a BACs holder may recognize ordinary income with
respect to the portion of the BACs holder's amount realized on the sale of a
BAC that is attributable to Section 751 items while recognizing a capital loss
with respect to the balance of the selling price.
Under current law, long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 20% with respect to assets held more than 18 months (a maximum federal
9
<PAGE>
income tax rate of 28% applies to gains with respect to assets held more than
one year but less than 18 months), whereas the maximum marginal federal income
tax rate for other income of such persons is 39.6%. Capital losses are
deductible only to the extent of capital gains, except that non-corporate
taxpayers may deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carryforward period
is five years and a non-corporate taxpayer can carry forward such losses
indefinitely); in addition, corporations, but not non-corporate taxpayers, are
allowed to carry back excess capital losses to the three preceding taxable
years.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any year only to the extent
of such person's passive activity income for such year, and closely held
corporations may not offset such losses against so-called "portfolio" income.
If a BACs holder is subject to these restrictions and has unused tax losses
from prior years, such tax losses will generally become available upon a sale
of BACs, provided the BACs holder sells all his BACs. If a BACs holder is
unable to sell all his BACs, the deductibility of such losses would continue to
be subject to the passive activity loss limitation until the BACs holder sells
his remaining BACs. See Section 7 ("Effects of the Offer").
In certain cases, the transfer of an interest in a partnership from which
tax credits were allocated can result in a recapture of the tax credits to the
seller (i.e., the seller would be required to pay an additional amount of tax
equal to the credit "recaptured"). A disposition by a BACs holder of his entire
interest in the Partnership within five years from the date property for which
the Historic Tax Credit was claimed was placed in service will trigger a
recapture of a portion of the Historic Tax Credits previously claimed by the
BACs holder. The Purchaser anticipates that $22 per BAC of Historic Tax Credits
will be recaptured with respect to BACs acquired in the original offering. The
transfer of an interest in an entity that has generated Housing Tax Credits
generally results in a recapture of a portion of the Housing Tax Credits.
However, an exception to this rule is provided for partnerships with 35 or more
partners, such as the Partnership. In order for this rule to be applicable,
within a 12-month period at least 50% (in value) of the ownership of the
Partnership must remain unchanged. The Purchaser anticipates that, as a result
of this rule, the sale of BACs will not cause a recapture of Housing Tax
Credits.
A BACs holder (other than corporations and certain foreign individuals)
who tenders BACs may be subject to 31% backup withholding unless the BACs
holder provides a taxpayer identification number ("TIN") and certifies that the
TIN is correct or properly certifies that he is awaiting a TIN. A BACs holder
may avoid backup withholding by properly completing and signing the Letter of
Transmittal. If a BACs holder does not properly complete and sign the Letter of
Transmittal, thereby failing to make the requisite certifications, the
Purchaser is required to withhold 31% from payments to such BACs holder.
Gain realized by a foreign BACs holder on a sale of a BAC pursuant to the
Offer will be subject to federal income tax. Under Section 1445 of the Code,
the transferee of a partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount realized on
the disposition. The Purchaser will withhold 10% of the amount realized by a
tendering BACs holder from the Purchase Price payable to such BACs holder
unless the BACs holder properly completes and signs the Letter of Transmittal
certifying the BACs holder's TIN, that such BACs holder is not a foreign person
and the BACs holder's address. Amounts withheld would be creditable against a
foreign BACs holder's federal income tax liability and, if in excess thereof, a
refund could be obtained from the Internal Revenue Service by filing a U.S.
income tax return.
Consequences to a Non-Tendering BACs holder. The Purchaser does not
anticipate that a BACs holder who does not tender his or her BACs will realize
any material tax consequences as a result of the election not to tender. The
Purchaser has retained two independent law firms which will deliver opinion
letters that consummation of the Offer will not result in the Partnership being
treated as a publicly-traded partnership for federal income tax purposes. There
can be no assurance, however, that the Internal Revenue Service (the "IRS")
will agree with the conclusions reached in such opinions. There is no precedent
governing whether the Offer will cause the Partnership to be treated as a
publicly-traded partnership for federal income tax purposes. If the IRS
successfully asserted that the Partnership should be treated as a
publicly-traded partnership, investors who are subject to the passive activity
loss rules would not be able to use tax losses derived from the Partnership to
offset income from sources other than the Partnership prior to the investor's
disposition of his entire interest in the Partnership.
7. Effects of the Offer.
Certain Restrictions on Transfer of Interests. The Partnership Agreement
restricts transfers of BACs if, among other things, such transfer would cause a
termination of the Partnership for federal income tax purposes
10
<PAGE>
(which termination would occur when BACs that represent 50% or more of the
total Partnership capital and profits are transferred within a twelve-month
period). Consequently, sales of BACs in the secondary market and in private
transactions during the twelve-month period following completion of the Offer
may be restricted, and requests for transfers of BACs during such twelve-month
period may not be recognized. The Purchaser does not intend to purchase BACs to
the extent such purchase would violate the transfer restrictions set forth in
the Partnership Agreement. Based on information provided by the Partnership,
for the period from November 1, 1996 to November 1, 1997, approximately 961
BACs (representing approximately 1.6% of the outstanding BACs) were
transferred. Therefore, the Purchaser does not believe the number of BACs
sought in the Offer will violate the Transfer Restrictions.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange
Act. If a substantial number of BACs are purchased pursuant to the Offer, the
result will be a reduction in the number of BACs holders. In the case of
certain kinds of equity securities like the BACs, a reduction in the number of
securityholders might be expected to result in a reduction in the liquidity and
volume of activity in the trading market for the security. The Form 10-K
states: "Neither the BACs nor the Limited Partnership Interests are traded on
any established trading market. The Partnership does not intend to include the
BACs for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market." Therefore, the Purchaser
does not believe a reduction in the number of BACs holders will materially
further restrict the BACs holders' ability to find purchasers for their BACs
through secondary market transactions.
Partnership Profiles, Inc., which publishes the Partnership Spectrum,
tracks recent trades in certain limited partnership interests. The most recent
issue of the Partnership Spectrum (March/April 1997) in which trades in the
BACs were reported indicates that 66 BACs traded in the period from February 1,
1997 through March 31, 1997 at a per BAC price of $860, exclusive of
commissions and transfer costs.
The BACs currently are registered under Section 12(g) of the Exchange Act,
which means, among other things, that the Partnership is required to file
periodic reports with the Commission and to comply with the Commission's proxy
rules. The Purchaser does not expect or intend that consummation of the Offer
will cause the BACs to cease to be registered under Section 12(g) of the
Exchange Act. If the BACs were to be held by fewer than 300 persons, the
Partnership could apply to de-register the BACs under the Exchange Act. Because
the BACs are widely held, however, the Purchaser expects that even if it
purchases the maximum number of BACs in the Offer, the BACs will continue to be
held of record by substantially more than 300 persons.
Influence over All BACs Holder Voting Decisions by Purchaser. Pursuant to
the Partnership Agreement, the Purchaser, through the Assignor Limited Partner,
will have the right to vote each BAC purchased by it pursuant to the Offer. If
the Purchaser is successful in acquiring a significant number of BACs pursuant
to the Offer, the Purchaser could, subject to the Standstill Agreement, be in a
position to significantly influence all Partnership decisions on which BACs
holders, through the Assignor Limited Partner, and Limited Partners,
collectively, may vote. If the maximum number of BACs sought by the Purchaser
is tendered and accepted for payment pursuant to the Offer, the Purchaser will
own approximately 25% of the outstanding BACs. After the Standstill Expiration
Date, the ownership of tendered BACs by the Purchaser could effectively (i)
prevent non-tendering BACs holders from taking actions they desire but that the
Purchaser opposes and (ii) enable the Purchaser to take actions desired by it
but opposed by non-tendering BACs holders. Generally, under the Partnership
Agreement, holders of more than 50% of the Limited Partnership Interests and
BACs (which represent Limited Partnership Interests) are entitled, directly or
through the Assignor Limited Partner, as the case may be, to take action with
respect to a variety of matters, including: approving the removal of any
General Partner and proposing and approving a replacement therefor; approving
the dissolution of the Partnership; approving or disapproving the sale of all
or substantially all of the assets of the Partnership; and most types of
amendments to the Partnership Agreement. No such votes have, however, ever been
taken and the General Partner has indicated that none are presently scheduled
or expected. Although the Purchaser does not have any current plans or
intentions with regard to any of these matters, it will, following the
Standstill Expiration Date, vote the BACs acquired pursuant to the Offer in its
interest, which may, or may not, be in the best interest of non-tendering BACs
holders. Until the Standstill Expiration Date, the Purchaser has agreed to vote
its BACs in the same manner as a majority of all voting BACs holders; provided,
however, the Purchaser shall be entitled to vote its BACs as it determines with
regard to any proposal (i) to remove the General Partner or (ii) concerning the
reduction of any fees, profits, distributions or allocations for the benefit of
the General Partner or its affiliates.
It is likely that the Purchaser, which is affiliated with the General
Partner, will vote all of its BACs to continue the General Partner as the
general partner of the Partnership and in a manner that is otherwise consistent
with the
11
<PAGE>
decisions and recommendations of the General Partner, including as they relate
to matters involving transactions between the Partnership and affiliates of the
Purchaser. Therefore, the Purchaser's acquisition of BACs may have the effect
of making any future change of the Partnership's policies and/or current
management more difficult.
8. Purpose of the Offer; Future Plans.
Purpose of the Offer. The purpose of the Offer is to enable the Purchaser
to acquire a significant interest in the Partnership for investment purposes
based on its expectation that the Partnership will continue to generate Tax
Credits and tax losses attributable to the BACs. The Purchaser intends to sell,
and has begun the process of selling, membership interests in the Purchaser to
third parties with a need for Tax Credits and/or tax losses. The aggregate
sales price of the Purchaser's membership interests to third parties will be
equal to the aggregate purchase price for the tendered BACs and all other
securities acquired by the Purchaser pursuant to secondary market transactions
and other tender offers conducted to date, together with the expenses
associated therewith, the expenses associated with the Purchaser's sale of
membership interests and the prepayment of certain fees and expenses in
connection with the Purchaser's operations. Neither the Purchaser nor its
current members will derive a profit from the sale of the Purchaser's
membership interests. However, affiliates of the Purchaser expect to earn fees
in connection with such sales, for structuring this transaction and for
performing certain services for the Purchaser.
Another purpose of the Offer is to allow BACs holders who have a current
or anticipated need or desire for liquidity to sell their BACs. An additional
purpose of the Offer is to establish a standard against which any subsequent
tender offers for BACs can be judged.
The Purchaser does not currently intend to make any effort to change
current management or the operation of the Partnership nor does it have any
current plans or intentions for any extraordinary transaction involving the
Partnership. However, the Purchaser's plans with respect to its investment in
the BACs could change at any time in the future. If such plans with respect to
the Partnership change in the future, the ability of the Purchaser to influence
actions on which BACs holders (through the Assignor Limited Partner) have a
right to vote will depend on the BACs holders' response to the Offer (i.e., the
number of BACs tendered). If the Purchaser acquires only a small number of BACs
pursuant to the Offer, it will not be in a position to influence matters over
which BACs holders have a right to vote. Conversely, if the maximum number of
BACs sought are tendered and accepted for payment pursuant to the Offer, the
Purchaser will own approximately 25% of the issued and outstanding BACs and, as
a result, will, subject to the Standstill Agreement, be in a position to exert
significant influence over matters on which BACs holders (through the Assignor
Limited Partner) have a right to vote. The purchase of the BACs will allow the
Purchaser to benefit from any of the following: (a) any and all Tax Credits and
tax losses attributable to such BACs; (b) any cash distributions from
Partnership operations in the ordinary course of business; (c) distributions,
if any, of net proceeds from the sale of any Properties after the Partnership
has satisfied its liabilities; and (d) any distributions of net proceeds from
the dissolution of the Partnership.
Future Plans. Following the completion of the Offer and subject to the
terms of the Standstill Agreement, the Purchaser and its affiliates may acquire
additional BACs. Any such acquisition may be made through private purchases,
through one or more future tender offers or by any other means deemed
advisable, and may be at prices higher or lower than the price to be paid for
the BACs purchased pursuant to the Offer. Additionally, the Purchaser intends
to sell, and has begun the process of selling, membership interests in the
Purchaser to third parties with a need for Tax Credits and/or tax losses. The
aggregate sales price of the Purchaser's membership interests to third parties
will be equal to the aggregate purchase price for the tendered BACs and all
other securities acquired by the Purchaser pursuant to secondary market
transactions and other tender offers conducted to date, together with the
expenses associated therewith, the expenses associated with the Purchaser's
sale of membership interests and the prepayment of certain fees and expenses in
connection with the Purchaser's operations. Neither the Purchaser nor its
current members will derive a profit from the sale of the Purchaser's
membership interests. In connection with such sales and in consideration for
structuring this transaction and for certain services to be performed for the
Purchaser, however, it is expected that affiliates of the Purchaser will earn
fees. These fees will be, in part, dependent on the amount third parties are
willing to pay for membership interests and the amount of membership interests
sold. There can be no assurance, however, that any membership interests in the
Purchaser will be sold or at what price.
Pursuant to the Standstill Agreement with the Partnership and the General
Partner (a copy of which has been filed as Exhibit (c)(1) to the Purchaser's
Tender Offer Statement on Schedule 14D-1 filed with the Commission on November
10, 1997), the Purchaser agreed that, prior to the Standstill Expiration Date,
it will not and it will
12
<PAGE>
cause certain affiliates not to (i) seek to propose to enter into, directly or
indirectly, any merger, consolidation, business combination, sale or
acquisition of assets, liquidation, dissolution or other similar transaction
involving the Partnership, (ii) form, join or otherwise participate in a
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of the Partnership, except that those
affiliates bound by the Standstill Agreement will not be deemed to have
violated it and formed a "group" solely by acting in accordance with the
Standstill Agreement, (iii) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of the Standstill
Agreement, or (iv) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Standstill
Agreement. By the terms of the Standstill Agreement, the Purchaser has also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, the Purchaser is entitled to vote its BACs as it
determines with regard to any proposal (i) to remove the General Partner or
(ii) concerning the reduction of any fees, profits, distributions or
allocations for the benefit of the General Partner or its affiliates.
9. Certain Information Concerning the Partnership.
Information included herein concerning the Partnership is derived from the
Partnership and its publicly filed reports. Additional financial and other
information concerning the Partnership is contained in the Partnership's Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the
Commission. Such reports and other documents may be examined and copies may be
obtained from the public reference facilities maintained at the principal
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
the regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and at the Commission's World Wide Web site at
http://www.sec.gov. Copies should be available by mail upon payment of the
Commission's customary charges by writing to the Commission's principal offices
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Purchaser did not
prepare any information included in such reports and extracted in this Offer to
Purchase and the Purchaser makes no representation as to the accuracy or
completeness of such information.
The Partnership's Assets and Business
The Partnership is a limited partnership formed in 1992, under the laws of
the State of Delaware. Its principal executive offices are located at 625
Madison Avenue, New York, New York 10022. Its telephone number is (212)
421-5333. The Partnership's fiscal year ends March 31st.
The Partnership was formed to invest, as a limited partner, in other
limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary
Partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Tax Credit"). Some of the Apartment Complexes benefit from
one or more other forms of federal or state housing assistance. The
Partnership's investment in each Local Partnership represents 98.99% of the
partnership interests in the Local Partnership. According to the Form 10-Q, as
of June 30, 1997, the Partnership had acquired an interest in 15 Local
Partnerships. The Partnership does not anticipate making any additional
investments.
Independence SLP L.P. ("Independence SLP") is the special limited partner
in all 15 Local Partnerships and is an affiliate of the General Partner.
Independence SLP has certain rights and obligations in its role as special
limited partner which permit Independence SLP to exercise control over the
management and policies of the Local Partnerships.
According to the Form 10-K, the stated investment objectives of the
Partnership are to:
1. Entitle qualified BACs holders to Housing Tax Credits over the Credit
Period (as defined below) with respect to each Apartment Complex;
2. Preserve and protect the Partnership's capital;
3. Participate in any capital appreciation in value of the Apartment
Complexes and provide distributions of sale or refinancing proceeds upon the
disposition of the Apartment Complexes; and
4. Allocate passive losses to individual BACs holders to offset passive
income that they may realize from rental real estate investments and other
passive activities, and allocate passive losses to corporate BACs holders to
offset business income.
13
<PAGE>
According to the Form 10-K, one of the Partnership's objectives is to
entitle qualified BACs holders to Housing Tax Credits over the period of the
Partnership's entitlement to claim such Tax Credits (for each Apartment
Complex, generally ten years from the date of investment or, if later, the date
the Apartment Complex is placed in service; referred to herein as the "Credit
Period"). Each of the Local Partnerships in which the Partnership has acquired
an interest has been allocated by the relevant state credit agency the
authority to recognize Housing Tax Credits during the Credit Period provided
that the Local Partnership satisfies the rent restriction, minimum set-aside
and other requirements for recognition of the Housing Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Housing Tax Credits, it may lose such eligibility and suffer an event of
"recapture" if its property fails to remain in compliance with the Housing Tax
Credit requirements. According to the Form 10-K, none of the Local Partnerships
in which the Partnership has acquired an interest has suffered an event of
recapture. According to the Form 10-K, as of March 31, 1997, there can be no
assurance that the Partnership will achieve its investment objectives as
described above.
According to the Form 10-K, the Partnership and BACs holders began to
recognize Housing Tax Credits with respect to an Apartment Complex when the
Credit Period for such Apartment Complex commenced. Because of the time
required for the acquisition, completion and rent-up of Apartment Complexes,
the amount of Tax Credits per BAC gradually increased over the first three
years of the Partnership. Housing Tax Credits not recognized in the first three
years will be recognized in the 11th through 13th years. According to the Form
10-K, the Partnership generated $6,399,740, $3,997,227 and $624,796 Housing Tax
Credits and $37,112, $619,383 and $1,962,743 Historic Tax Credits during the
1996, 1995 and 1994 tax years, respectively.
According to the Form 10-K, the Partnership holds a 98.99% limited
partnership interest in the 15 Local Partnerships. Attached to this Offer to
Purchase as Schedule II is a schedule of these Local Partnerships (the "Local
Partnership Schedule"), including certain information concerning their
respective Apartment Complexes. Attached to this Offer to Purchase as Schedule
III is additional information concerning these Local Partnerships and their
Apartment Complexes, including information relating to mortgage encumbrances
and accumulated depreciation. The information set forth in Schedules II and III
repeats information set forth in the Form 10-K.
According to the Form 10-K, the General Partner has generally required in
connection with investments in development-stage Apartment Complexes that the
general partners of the Local Partnerships (the "Local General Partners")
provide completion guarantees and/or undertake to repurchase the Partnership's
interest in the Local Partnership if construction or rehabilitation is not
completed substantially on time or on budget ("Development Deficit
Guarantees"). The Development Deficit Guarantees have generally also required
the Local General Partner to provide any funds necessary to cover net operating
deficits of the Local Partnership until such time as the Apartment Complex has
achieved break-even operations. In addition, the General Partner has generally
required that the Local General Partners undertake an obligation to fund
operating deficits of the Local Partnership (up to a stated maximum amount)
during a limited period of time (typically three to five years) following the
achievement of break-even operations ("Operating Deficit Guarantees"). Under
the terms of the Development and Operating Deficit Guarantees, amounts funded
will be treated as operating loans which will not bear interest and which will
be repaid only out of 50% of available cash flow or out of available net sale
or refinancing proceeds. In some instances, the Local General Partners are
required to undertake an obligation to comply with a Rent-Up Guaranty
Agreement, whereby the Local General Partner agrees to pay liquidating damages
if predetermined occupancy rates are not achieved. These payments are made
without right of repayment. In cases where the General Partner deems it
appropriate, the obligations of a Local General Partner under the Development
Deficit, Operating Deficit and/or Rent-Up Guarantees are secured by letters of
credit and/or cash escrow deposits. See "Liquidity and Capital Resources"
below.
According to the Form 10-K, one of the Local Partnerships has experienced
operating difficulties. See "Results of Operations of Certain Local
Partnerships" below.
According to the Form 10-K, all leases at the Properties are generally for
periods not exceeding one to two years and no tenant occupies more than 10% of
the rentable square footage.
Rent from commercial tenants (to which average rental per square foot
applies) comprise less than 5% of the rental revenues of the Partnership. Rents
for the residential units are determined annually by HUD and reflect increases
in consumer price indexes in various geographic areas.
According to the Form 10-K, management of the Partnership continuously
reviews the physical state of the properties and budgets improvements when
required, which are generally funded from cash flow from operations or release
of replacement reserve escrows. No improvements are expected to require
additional financing.
14
<PAGE>
According to the Form 10-K, management of the Partnership continuously
reviews the insurance coverage of the properties and believes such coverage is
adequate.
Real estate taxes are calculated using rates and assessed valuations
determined by the township or city in which the property is located. Such taxes
have approximated 1% of the aggregate cost of the Apartment Complexes.
Selected Financial Data. Set forth below is a summary of certain financial
data for the Partnership which has been excerpted from the Form 10-K and the
Form 10-Q. More comprehensive financial and other information is included in
such reports and other documents filed by the Partnership with the Commission,
and the following summary is qualified in its entirety by reference to such
reports and other documents and all the financial information and related notes
contained therein.
Statements of Operations
For the Three Months Ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------
1997 1996
------------ --------------
<S> <C> <C>
Revenues:
Rental income ............................................. $1,865,812 $1,352,485
Other income ............................................. 66,506 116,399
---------- ----------
Total Revenues .......................................... 1,932,318 1,468,884
---------- ----------
Expenses:
General and administrative .............................. 428,846 342,388
General and administrative--related parties ............... 132,382 96,209
Repairs and maintenance ................................. 284,832 238,124
Operating ................................................ 360,052 172,628
Taxes ................................................... 165,481 136,590
Insurance ................................................ 150,790 127,695
Financial, principally interest ........................... 513,489 346,778
Depreciation and amortization ........................... 851,415 557,183
---------- ----------
Total Expenses .......................................... 2,887,287 2,017,595
---------- ----------
Net loss before minority interest ........................ (954,969) (548,711)
Minority interest in loss of subsidiary partnerships ...... 2,850 2,305
---------- ----------
Net loss ................................................... $(952,119) $ (546,406)
========== ==========
Net loss--limited partners ................................. $(942,598) $ (540,942)
========== ==========
Number of BACs outstanding ................................. 58,928 58,928
========== ==========
Net loss per BAC .......................................... $ (16.00) $ (9.18)
========== ==========
</TABLE>
15
<PAGE>
Summary Selected Financial Data
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1997 1996 1995 1994
OPERATIONS --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues ........................... $ 6,663,351 $ 5,325,045 $ 2,433,861 $ 643,475
Operating Expenses .................. 10,687,879 8,277,953 3,634,184 911,326
------------ ------------ ------------ ----------
Loss before minority interest ...... (4,024,528) (2,952,908) (1,200,323) (267,851)
Minority interest in loss
of subsidiaries .................. 8,916 8,519 7,106 1,404
------------ ------------ ------------ ----------
Net loss ........................... $ (4,015,612) $ (2,944,389) $ (1,193,217) $ (266,447)
============ ============ ============ ==========
Net loss per weighted
average BAC ........................ $ (67.46) $ (49.47) $ (20.06) $ (7.69)
============ ============ ============ ==========
</TABLE>
<TABLE>
<CAPTION>
March 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
FINANCIAL POSITION -------------- -------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Total assets ............ $112,831,500 $116,928,522 $104,107,965 $69,285,916 $5,385,138
============= ============= ============= ============ ===========
Total liabilities ...... $ 68,438,976 $ 68,086,980 $ 52,049,809 $17,077,396 $ 829,838
============= ============= ============= ============ ===========
Minority interest ...... $ 317,189 $ 750,595 $ 1,022,820 $ 859,064 $ 0
============= ============= ============= ============ ===========
Total partners' capital ... $ 44,075,335 $ 48,090,947 $ 51,035,336 $51,349,456 $4,555,300
============= ============= ============= ============ ===========
</TABLE>
According to the Form 10-K, during the year ended March 31, 1997, total
assets decreased primarily due to a decrease in cash and cash equivalents
resulting from construction in progress and acquisitions of property and
equipment in excess of net proceeds from mortgage and construction loans and
also the repayments of amounts due to local general partners and affiliates.
This decrease in cash and cash equivalents was partially offset by the increase
in construction in progress and acquisitions of property and equipment net of
depreciation. During the years ended March 31, 1996, 1995 and 1994, total
assets and liabilities increased primarily due to the continued acquisition of
Local Partnerships. Property and equipment increased approximately $37,000,000,
$22,000,000 and $22,000,000 for the years ended March 31, 1996, 1995 and 1994,
respectively. Construction in progress decreased approximately $4,000,000 for
the year ended March 31, 1996 and increased approximately $19,000,000 and
$5,000,000 for the years ended March 31, 1995 and 1994, respectively. Mortgage
notes increased approximately $16,000,000, $9,000,000 and $12,000,000 for the
years ended March 31, 1996, 1995 and 1994, respectively. Construction notes
increased approximately $18,000,000 and $1,000,000 for the years ended March
31, 1995 and 1994, respectively. Due to local general partners and affiliates
increased approximately $6,000,000 and $1,000,000 for the years ended March 31,
1995 and 1994, respectively. For the year ended March 31, 1996, the increase in
property and equipment and construction in progress was partially funded by
capital contributions made to the Local Partnerships resulting in a decrease in
cash and cash equivalents. For the year ended March 31, 1993, there was also an
increase in assets due to capital contributions which were not fully expended.
For the year ended March 31, 1996, minority interest increased due to
distributions received by the local general partners. Minority interest
increased due to capital contributions from local general partners for the
years ended March 31, 1995 and 1994.
Cash Distributions
According to the Form 10-K, the Partnership has made no distributions to
the BACs holders as of March 31, 1997.
Liquidity and Capital Resources
According to the Form 10-Q, the Partnership's primary source of funds
includes interest earned on the proceeds from its offering that terminated as
of April 7, 1994 which were invested in tax-exempt money market instruments
pending final payments to Local Partnerships and a working capital reserve and
interest earned thereon.
According to the Form 10-Q, cash and cash equivalents of the Partnership
and its 15 consolidated subsidiary partnerships decreased approximately
$406,000 during the three months ended June 30, 1997 primarily due to net
16
<PAGE>
cash used in operating activities of $246,000; a decrease in due to local
general partners and affiliates relating to investing activities of $124,000;
improvements to property and equipment of $47,000; and a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
of $18,000 which exceeded a decrease in cash held in escrow relating to
investing activities of $15,000; and net proceeds from mortgage notes and
construction loans of $15,000. Included in the adjustments to reconcile the net
loss to cash used in operating activities is depreciation and amortization of
approximately $851,000.
According to the Form 10-Q, the Partnership has working capital reserves
of approximately $445,000 and $493,000 at June 30, 1997 and March 31, 1997,
respectively.
According to the Form 10-Q, Partnership Management Fees owed to the
General Partner amounting to approximately $127,000 and $115,000 were accrued
and unpaid as of June 30, 1997 and March 31, 1997, respectively.
According to the Form 10-K, the Partnership has negotiated Operating
Deficit Guaranty Agreements with all Local Partnerships pursuant to which the
Local General Partners have agreed to fund operating deficits for a specified
period of time. The terms of the Operating Deficit Guaranty Agreements vary for
each Local Partnership, with maximum dollar amounts to be funded for a
specified period of time, generally three years, commencing on the break-even
date. According to the Form 10-K, the gross amount of the Operating Deficit
Guarantees aggregates approximately $5,670,000, none of which had expired as of
March 31, 1997. As of March 31, 1997 and 1996, $193,032 and $187,614,
respectively, had been funded under the Operating Deficit Guaranty Agreements.
All current operating deficit guarantees expire within the next three years.
Management of the Partnership does not expect their expiration to have a
material impact on liquidity, based on prior years' fundings.
In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each Local Partnership, with maximum dollar
amounts to be funded for a specified period of time. According to the Form
10-K, the gross amount of unexpired Rent-Up Guarantees for the Local
Partnerships is approximately $700,000 as of March 31, 1997. All rent-up
deficit guarantees expire within the next three years. Management of the
Partnership does not expect their expiration to have a material impact on
liquidity, based on prior years' fundings.
According to the Form 10-Q, amounts received from operations of the Local
Partnerships were approximately $0 and $16,000 during the three months ended
June 30, 1997 and 1996, respectively. Management of the Partnership anticipates
receiving distributions in the future, although not to a level sufficient to
permit cash distributions to BACs holders. Management of the Partnership
believes that these distributions, as well as the working capital reserves
referred to above, will be sufficient to fund the Partnership's ongoing
operations for the foreseeable future.
Results of Operations of Certain Local Partnerships
Martha Bryant Manor, L.P.
According to the Form 10-K, Martha Bryant Manor, L.P. agreed to an
out-of-court settlement resulting from an alleged breach of contract suit. The
settlement resulted in a loss of $164,860, which is included in general and
administrative expenses in the March 31, 1996 financial statements.
Clear Horizons Limited Partnership
According to the Form 10-K, at December 31, 1996, Clear Horizons Limited
Partnership's ("Clear Horizons") current liabilities exceed its current assets
by over $88,000. Although this condition could raise substantial doubt about
Clear Horizons' ability to continue as a going concern, according to the Form
10-K, such doubt is alleviated as follows:
1. Included in current liabilities at December 31, 1996 is $93,956 owed to
related parties who do not intend to pursue collection beyond Clear
Horizons' ability to pay.
2. The general partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.
Accordingly, management of the Partnership believes that Clear Horizons
has the ability to continue as a going concern for at least one year from
December 31, 1996. According to the Form 10-K, Clear Horizons is named as a
defendant in a lawsuit involving the death of a person shot on the premises of
the apartment project. Clear Horizons' defense is being handled by its
liability insurer. Legal counsel believes that any settlement will be within
17
<PAGE>
insurance policy limits, $3,000,000, and there will be no loss to Clear
Horizons. The maximum loss which the Partnership would be liable for is its net
investment in Clear Horizons. According to the Form 10-K, the Partnership's
investment in Clear Horizons at March 31, 1997 and 1996 was approximately
$963,000 and $1,026,000, respectively, and the minority interest balance was
approximately $0 and $45,000, respectively. Clear Horizons' net loss after
minority interest amounted to approximately $63,000, $27,000 and $6,500 for the
years ended March 31, 1997, 1996 and 1995, respectively.
United Germano-Millgate Limited Partnership
According to the Form 10-K, a former management agent had filed a $70,000
breach of contract claim against United Germano Millgate Limited Partnership
("United Germano") for utility expense billings the former management company
paid on United Germano's behalf prior to 1991. During 1996, United Germano
agreed to pay $47,000 under an installment arrangement to reimburse these
utility advances.
Other
According to the Form 10-K, the Partnership's investment as a limited
partner in the Local Partnerships is subject to the risks of potential losses
arising from management and ownership of improved real estate. The
Partnership's investments also could be adversely affected by poor economic
conditions generally, which could increase vacancy levels, rental payment
defaults, and operating expenses, any or all of which could threaten the
financial viability of one or more of the Local Partnerships.
According to the Form 10-K, there also are substantial risks associated
with the operation of Apartment Complexes receiving government assistance.
These risks stem from governmental regulations concerning tenant eligibility,
which may make it more difficult to rent apartments in the complexes;
difficulties in obtaining government approval for rent increases; limitations
on the percentage of income which low- and moderate-income tenants may pay as
rent; the possibility that Congress may not appropriate funds to enable HUD to
make the rental assistance payments it has contracted to make; and that when
the rental assistance contracts expire there may not be market demand for
apartments at full market rents in a Local Partnership's Apartment Complex.
According to the Form 10-K, the Local Partnerships are impacted by
inflation in several ways. Inflation allows for increases in rental rates
generally to reflect the impact of higher operating and replacement costs.
Inflation also affects the Local Partnerships adversely by increasing operating
costs, such as fuel, utilities and labor.
The Partnership Agreement
The General Partner and its affiliates have received or will receive
certain types of compensation, fees or other distributions in connection with
the operations of the Partnership. The arrangements for payment of compensation
and fees set forth in the Partnership Agreement were not determined in
arm's-length negotiations with the Partnership.
Pursuant to the Partnership Agreement, the General Partner is entitled to
a fee (the "Partnership Management Fee") for its services in connection with
the administration of the affairs of the Partnership (including, without
limitation, coordination of communications between the Partnership and BACs
holders and with the Local Partnerships). The Partnership Management Fee is
payable annually and is determined by the General Partner based on its review
of the Partnership's investments, up to a maximum of 0.5% of the Partnership's
Invested Assets (as defined below); provided, however, Partnership Management
Fees for any year will be reduced to the extent that the sum of (i) the
aggregate amount of operating cash flow received by affiliates of the General
Partner or the General Partner itself from Local Partnerships and (ii) the
amount of operating cash flow received by the General Partner from the
Partnership exceeds 1% of all distributions of operating cash flow by the
Partnership for such year. "Invested Assets" means the purchase price paid upon
the acquisition by the Partnership of the Properties and interests in Local
Partnerships, including (i) the total of all fees and commissions paid in
connection with the selection or purchase by the Partnership or Local
Partnerships of any interests in Local Partnerships or any Properties, and (ii)
the amount of all liens and mortgages on the Properties. For the three months
ended June 30, 1997 and the three years ended March 31, 1997, 1996 and 1995,
the General Partner earned aggregate Partnership Management Fees of $12,500,
$87,500, $434,550 and $475,023, respectively. According to the Form 10-Q,
Partnership Management Fees owed to the General Partner amounting to
approximately $127,000 and $115,000 were accrued and unpaid as of June 30, 1997
and March 31, 1997, respectively.
Independence SLP is an affiliate of the General Partner. Independence SLP,
as special limited partner of the Local Partnerships, earned a fee (the "Local
Administrative Fee") of $5,000, $20,000, $12,500 and $15,000 from
18
<PAGE>
the Local Partnerships for the three months ended June 30, 1997 and the three
years ended March 31, 1997, 1996 and 1995. According to the Form 10-Q,
Independence SLP is entitled to receive up to $5,000 per year as a Local
Administrative Fee from each Local Partnership of which it is a special limited
partner, but the sum of the aggregate Local Administrative Fee and the
Partnership Management Fee for any year shall not exceed 0.5% of Invested
Assets.
The General Partner and the officers and directors of the General Partner
are each entitled to indemnification under certain circumstances from the
Partnership pursuant to provisions of the Partnership Agreement. Generally, the
General Partner is also entitled to reimbursement of expenditures made on
behalf of the Partnership. An affiliate of the General Partner performs asset
monitoring services for the Partnership. These services include site visits and
evaluations of the Local Partnerships' performance. For the three months ended
June 30, 1997 and the three years ended March 31, 1997, 1996 and 1995, the
Partnership incurred, in the aggregate, $52,603, $101,581, $91,757 and $94,702,
respectively, to the General Partner and its affiliates as reimbursement of
expenditures and asset monitoring made on behalf of the Partnership.
In addition, under the terms of the Partnership Agreement, upon the
removal of a General Partner by the Limited Partners or upon the occurrence of
a "Removal Event", as defined below, the General Partner may be entitled to
receive a fee, which will be payable with interest over a five-year period and
may be secured by the assets of the Partnership. The amount of such fee shall
be the fair market value of the removed General Partner's interest, which
amount could be substantial. The Partnership Agreement deems a "Removal Event"
to have occurred if the business of the Partnership is continued after the
bankruptcy, death, adjudication of incompetence or removal of a General Partner
(subject to certain exceptions pursuant to the Partnership Agreement). A
majority in interest of the Limited Partners may approve the removal of any
General Partner without the concurrence of any General Partner at a meeting of
the Partnership.
10. Certain Information Concerning the Purchaser.
The Purchaser was organized for the purpose of acquiring the BACs pursuant
to the Offer. The principal executive office of the Purchaser is at 625 Madison
Avenue, New York, New York 10022. The managing member of the Purchaser (the
"Managing Member") is Lehigh Tax Credit Partners, Inc., a Delaware corporation.
Since its inception, the directors of the Managing Member have been J. Michael
Fried, Stuart J. Boesky and Alan P. Hirmes. The executive officers of the
Managing Member are J. Michael Fried, Stuart J. Boesky, Alan P. Hirmes, Marc D.
Schnitzer and Denise L. Kiley. The business address for each of Messrs. Fried,
Boesky, Hirmes and Schnitzer and Ms. Kiley is 625 Madison Avenue, New York, New
York 10022.
For certain information concerning the executive officers and directors of
the Managing Member, see Schedule I to this Offer to Purchase. Other than Ms.
Kiley, the persons set forth on Schedule I, who effectively control the
Purchaser, are also officers of Related Independence Associates Inc., the sole
general partner of the General Partner. Therefore, the Purchaser and the
General Partner, subject to its fiduciary duties, may have a conflict of
interest with respect to certain matters involving BACs holders, Limited
Partners and/or the Partnership.
Except as otherwise set forth in this Offer to Purchase or Schedule I
hereto, (1) neither the Purchaser, the Managing Member and, to the best of the
Purchaser's knowledge, the persons listed on Schedule I, nor any affiliate of
the foregoing beneficially owns or has a right to acquire any BACs, (2) neither
the Purchaser, the Managing Member and, to the best of the Purchaser's
knowledge, the persons listed on Schedule I, nor any affiliate thereof or
director, executive officer or subsidiary of the Managing Member has effected
any transaction in the BACs within the past 60 days, (3) neither the Purchaser,
the Managing Member and, to the best of the Purchaser's knowledge, any of the
persons listed on Schedule I, nor any director or executive officer of the
Managing Member has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Partnership,
including, but not limited to, contracts, arrangements, understandings or
relationships concerning the transfer or voting thereof, joint ventures, loan
or option arrangements, puts or calls, guarantees of loans, guarantees against
loss or the giving or withholding of proxies, (4) there have been no
transactions or business relationships which would be required to be disclosed
under the rules and regulations of the Commission between any of the Purchaser,
the Managing Member, or, to the best of the Purchaser's knowledge, the persons
listed on Schedule I, on the one hand, and the Partnership or its affiliates,
on the other hand, and (5) there have been no contracts, negotiations or
transactions between the Purchaser, the Managing Member or, to the best of the
Purchaser's knowledge, the persons listed on Schedule I, on the one hand, and
the Partnership or its affiliates, on the other hand, concerning
19
<PAGE>
a merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
The Purchaser owns 85 BACs, which represents less than 1% of the number of
BACs outstanding as reported in the Form 10-Q (the most recently available
filing containing such information). Effective as of October 1, 1997, the
Purchaser effected a private transaction and acquired 45 BACs at a price per
BAC of $807.50. The Purchaser was referred to that selling BACs holder by its
affiliate, Related Capital Company, which received a telephone call from such
party requesting information with respect to persons that may be interested in
purchasing BACs. The Purchaser did not solicit the selling BACs holder.
11. Background of the Offer.
The purpose of the Offer is to enable the Purchaser to acquire a
significant interest in the Partnership for investment purposes based on its
expectation that the Partnership will continue to generate Tax Credits and tax
losses attributable to the BACs. The Purchaser intends to sell, and has begun
the process of selling, membership interests in the Purchaser to third parties
with a need for Tax Credits and/or tax losses. The aggregate sales price of the
Purchaser's membership interests to third parties will be equal to the
aggregate purchase price for the tendered BACs and all other securities
acquired by the Purchaser pursuant to secondary market transactions and other
tender offers conducted to date, together with the expenses associated
therewith, the expenses associated with the Purchaser's sale of membership
interests and the prepayment of certain fees and expenses in connection with
the Purchaser's operations. Neither the Purchaser nor its current members will
derive a profit from the sale of the Purchaser's membership interests. However,
affiliates of the Purchaser expect to earn fees in connection with such sales,
for structuring this transaction and for performing certain services for the
Purchaser.
The Purchaser has commenced other tender offers for the securities of
affiliated partnerships and expects to commence additional tender offers in the
future. In connection with a tender offer commenced on April 10, 1997 by the
Purchaser and the settlement of matters relating to such tender offer, the
Purchaser entered into an agreement with Everest Properties, Inc. ("Everest"),
dated April 23, 1997 (the "Everest Agreement", a copy of which has been filed
as Exhibit (c)(2) to the Purchaser's Tender Offer Statement on Schedule 14D-1
filed with the Commission on November 10, 1997). Pursuant to the Everest
Agreement, the Purchaser granted to Everest, among other things, an option to
purchase up to 25% of the BACs tendered in the Offer on the same terms and
conditions as the Purchaser's purchase of BACs (the "Everest Option"). In
consideration of the foregoing, Everest agreed, among other things, that
neither it nor any of its affiliates will, directly or indirectly: (i) in any
manner, including, without limitation, by tender offer (whether or not pursuant
to a filing made with the Commission), acquire, attempt to acquire or make a
proposal to acquire, directly or indirectly, any securities of the Partnership,
except for (a) the BACs it acquires pursuant to the Everest Option and (b)
purchases of de minimis amounts of securities in the secondary market at the
prevailing secondary market price (it being understood that the purchaser of
such de minimis amounts of securities shall be bound by the terms and
conditions of the Everest Agreement); (ii) seek or propose to enter into,
directly or indirectly, any merger, consolidation, business combination, sale
or acquisition of assets, liquidation, dissolution or other similar transaction
involving the Partnership; (iii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" or "consents" (as such terms are
used in the proxy rules of the Commission) to vote, or seek to advise or
influence any person with respect to the voting of, any voting securities of
the Partnership; (iv) form, join or otherwise participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Partnership; (v) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of the Everest
Agreement; or (vi) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Everest
Agreement. The foregoing restrictions shall continue in full force and effect
forever, in perpetuity, with respect to the securities of the Partnership
unless the Purchaser fails to perform its obligations under the Everest
Agreement. The foregoing description of the Everest Agreement is subject to and
qualified in its entirety by reference to such agreement, which agreement is
incorporated herein by reference.
The Purchaser and the General Partner are effectively controlled by the
same persons. Therefore, the Purchaser and the General Partner, subject to its
fiduciary duties, may have a conflict of interest with respect to certain
matters involving BACs holders, Limited Partners and/or the Partnership. In
order to address certain of those matters, the Purchaser entered into the
Standstill Agreement.
The Partnership expressed concern that consummation of the Offer would
cause it to be classified as a "publicly-traded partnership" (a "PTP") for
federal income tax purposes and, therefore, suffer adverse tax conse-
20
<PAGE>
quences. To address this concern, the Purchaser agreed to retain two
independent law firms to deliver legal opinions to the Partnership that
consummation of the Offer will not result in it being treated as a PTP.
The Purchaser requested that the Partnership mail this Offer to Purchase,
the related Letter of Transmittal and other relevant material. On November 10,
1997, the Partnership notified the Purchaser that it anticipated mailing such
materials at the Purchaser's expense on such date and the Offer was commenced
on such date.
12. Source of Funds.
The Purchaser expects that approximately $10,681,000 (exclusive of fees
and expenses) would be required to purchase all of the BACs sought pursuant to
the Offer, if tendered. Other than BACs purchased by Everest pursuant to the
Everest Option, if any, the Purchaser presently contemplates that it will
borrow all of such funds from one of its members pursuant to a promissory note
dated as of November 7, 1997 (a copy of which has been filed as Exhibit (b)(1)
to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed on November
10, 1997), containing substantially the same economic terms and conditions that
such member borrows such funds under an existing credit facility it has
available to it with BankBoston, National Association (formerly known as The
First National Bank of Boston) ("BankBoston") and Fleet National Bank (the
"Lenders"). Alternatively, if the Purchaser has completed its contemplated sale
of membership interests to third parties with a need for the Tax Credits and/or
tax losses attributable to the BACs, the Purchaser may obtain the funds
required to purchase the BACs pursuant to the Offer from capital contributions
from its members.
The existing credit agreement is among the Lenders and RCC Credit
Facility, L.L.C., Related Capital Company and The Related Companies, L.P.. The
stated interest rate is the "Base Rate" (as publicly announced by BankBoston,
from time to time) plus 0.5%, which is presently equal to 9.0% per annum or, at
the election of RCC Credit Facility, L.L.C., the "Euro Loan Rate" plus 2.375%.
All of the BACs tendered pursuant to the Offer and all of the Purchaser's
membership interests will be pledged to the Lenders to secure the loan.
Additionally, Related Capital Company will guarantee all amounts borrowed under
such credit facility.
The Purchaser expects to repay all amounts borrowed from its member by
selling additional membership interests to persons or entities that have a need
for the Tax Credits and/or tax losses from the BACs. No plans or arrangements
have been made with regard to the payment of periodic interest required by the
terms of the loan. However, it is expected that if interest payments are due
and payable, the Purchaser may borrow those funds from its affiliate(s).
If Everest exercises the Everest Option for 25% of all of the BACs sought
pursuant to the Offer and 14,732 BACs are tendered and accepted for payment,
the Purchaser expects that approximately $2,670,000 (exclusive of fees and
expenses) of the aggregate purchase price would be paid by Everest. Everest has
informed the Purchaser that Everest will obtain all of such funds from
investment funds Everest has raised from investors.
13. Purchase Price Considerations.
The Purchaser has set the Purchase Price at $725 net per BAC (subject to
adjustment as set forth in this Offer to Purchase). The Purchaser considered
the estimated potential benefits to a non-tendering BACs holder (see below in
this Section 13) and determined the Purchase Price in order to provide
comparable potential benefits to a tendering BACs holder.
If you tender your BACs pursuant to the Offer, the Purchaser believes your
aggregate benefits will total $1,603:
<TABLE>
<S> <C>
Purchase Price: $ 725
Tax Credits Received through December 15, 1997: 393
Tax Savings: 81
Interest to Be Earned on Investing Purchase Price: 426
Historic Tax Credit Recapture: (22)
------
$1,603
======
</TABLE>
21
<PAGE>
If you retain your BACs, the Purchaser believes your aggregate benefits
will total $1,587:
<TABLE>
<S> <C>
Tax Credits Received through December 15, 1997: $ 393
Present Value of Expected Remaining Tax Credits: 907
Present Value of Original Investment, if returned: 287
-------
$1,587
=======
</TABLE>
The Purchaser believes that the projected aggregate per BAC benefit from
the Offer, together with the benefits received since 1993, total approximately
$1,603. Such benefits include $725 (the Purchase Price) plus $393 (representing
the Tax Credits allocated through December 15, 1997) plus approximately $81
(representing the tax savings, assuming a tax rate of 20% for capital gain and
36% for ordinary income, attributable to the use of a capital loss of $15 and
an ordinary loss of $225 the Purchaser believes an individual BACs holder will
realize if all of his BACs are sold in the Offer) plus approximately $426
(representing the assumed return on the reinvestment of the Purchase Price at
5.75% for approximately 12 years, discounted at a rate of 9%) less
approximately $22 (representing a recapture of Historic Tax Credits). The
projected benefit of $1,603 assumes the BACs holder acquired the BACs pursuant
to the original offering and such BACs holder did not utilize any passive
losses. The projected benefit may be more or less depending on, among other
things, a tendering BACs holder's tax rate and the return a tendering BACs
holder may earn upon investing the Purchase Price.
The Purchaser believes that such aggregate projected benefit compares
favorably with the potential benefits to a BACs holder who remains in the
Partnership (together with the benefits received since 1993), continuing to
receive Tax Credits, and assuming a return of the present value of the original
investment of $1,000 as, and if, the 15 properties owned by the Local
Partnerships in which the Partnership has an interest are sold for amounts in
excess of the then existing indebtedness and other liabilities. The aggregate
of such potential benefits is estimated by the Purchaser to be approximately
$1,587, which includes $393 (the Tax Credits allocated through December 15,
1997) plus $907 (the present value at 9% of the remaining Tax Credits to be
allocated over the remaining compliance period) plus approximately $287 (the
present value at 9% of a BACs holder's original $1,000 investment, returned
ratably over the 4 years following the end of the compliance period and
assuming a discount rate of 9%). There can, however, be no assurance that these
benefits will be realized. Neither the General Partner nor the Purchaser is
making any representation, and there can be no assurance, that any or all of
the properties owned by the Local Partnerships in which the Partnership has an
interest will be sold and, if sold, will result in distributable cash
sufficient to return any of a BACs holder's original investment.
The Form 10-K states that: "Neither the BACs nor the Limited Partnership
Interests are traded on any established trading market. The Partnership does
not intend to include the BACs for quotation on NASDAQ or for listing on any
national or regional stock exchange or any other established securities
market." At present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by Chicago
Partnership Board, Inc., which publishes sales by holders of BACs) are the only
means available to BACs holders to liquidate an investment in BACs (other than
the Offer) because the BACs are not listed or traded on any exchange or quoted
on any NASDAQ list or system. According to Partnership Spectrum, an independent
third-party industry publication, for the two months ended March 31, 1997, a
total of 66 BACs traded at a per BAC price of $860. Set forth below is a
schedule of the trading activity of BACs during the year ended March 31, 1997,
in two-month intervals, as reported by The Partnership Spectrum:
<TABLE>
<CAPTION>
Trading Activity for Year Ended March 31, 1997
- ---------------------------------------------------------------------------
Period Low/High No. of BACs Traded
- ------------------------------------ -------------- -------------------
<S> <C> <C>
April 1, 1996--May 31, 1996 $725/$750 52
June 1, 1996--July 31, 1996 $810/$880 35
August 1, 1996--September 30, 1996 $750/$840 35
October 1, 1996--November 30, 1996 $880/$890 99
December 1, 1996--January 31, 1997 $750/$871.50 126
February 1, 1997--March 31, 1997 $860/$860 66
</TABLE>
22
<PAGE>
BACs holders are advised, however, that such gross sales prices reported by The
Partnership Spectrum do not necessarily reflect the net sales proceeds received
by sellers of BACs, which typically are reduced by commissions and other
secondary market transaction costs to amounts less than the reported prices.
The Purchase Price represents the price at which the Purchaser is willing
to purchase BACs. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. The Purchaser did not attempt to obtain current independent
valuations or appraisals of the underlying assets owned by the Partnership.
Other measures of the value of the BACs may be relevant to BACs holders. BACs
holders are urged to consider carefully all of the information contained herein
and should consult with their respective tax and other advisors regarding the
terms of the Offer before deciding whether to tender BACs.
14. Conditions of the Offer.
Notwithstanding any other provisions of the Offer and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion, the Purchaser shall not be required to accept
for payment, subject to Rule 14e-1(c) under the Exchange Act, any tendered BACs
and may terminate the Offer as to any BACs not then paid for if, prior to the
Expiration Date, (i) the Purchaser shall not have confirmed to its reasonable
satisfaction that, upon purchase of the BACs pursuant to the Offer, the
Purchaser will have full rights to ownership as to all such BACs and the
Purchaser will become the transferee of the purchased BACs for all purposes
under the Partnership Agreement, (ii) the Purchaser shall not have confirmed to
its reasonable satisfaction that, upon the purchase of the BACs pursuant to the
Offer, the Transfer Restrictions will have been satisfied, or (iii) all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or been obtained.
Furthermore, notwithstanding any other term of the Offer, the Purchaser will
not be required to accept for payment and may terminate or amend the Offer as
to such BACs if, at any time on or after the date of the Offer and before the
Expiration Date, any of the following conditions exist:
(a) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or the
over-the-counter market in the United States, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) the commencement or escalation of a
war, armed hostilities or other national or international crisis involving the
United States, (iv) any limitation (whether or not mandatory) imposed by any
governmental authority on, or any other event that might have material adverse
significance with respect to, the nature or extension of credit by banks or
other lending institutions in the United States, or (v) in the case of any of
the foregoing, a material acceleration or worsening thereof; or
(b) any material adverse change (or any condition, event or development
involving a prospective material adverse change) shall have occurred or be
likely to occur in the business, prospects, financial condition, results of
operations, properties, assets, liabilities, capitalization, partners' equity,
licenses, franchises or businesses of the Partnership and its subsidiaries
taken as a whole; or
(c) there shall have been threatened, instituted or pending any action,
proceeding, application, audit, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, or by or before any
court or governmental, regulatory or administrative agency, authority or
tribunal, domestic, foreign or supranational, which (i) challenges the
acquisition by the Purchaser of the BACs or seeks to obtain any material
damages as a result thereof, (ii) makes or seeks to make illegal, the
acceptance for payment, purchase or payment for any BACs or the consummation of
the Offer, (iii) imposes or seeks to impose limitations on the ability of the
Purchaser or any affiliate of the Purchaser to acquire or hold or to exercise
full rights of ownership of the BACs, including, but not limited to, the right
to vote (through the Assignor Limited Partner) any BACs purchased by them on
all matters with respect to which BACs holders have the right to direct the
Assignor Limited Partner on the manner in which it will vote on matters
presented to the Limited Partners and BACs holders, (iv) may result in a
material diminution in the benefits expected to be derived by the Purchaser or
any of their affiliates as a result of the Offer, (v) requires divestiture by
the Purchaser of any BACs, (vi) might materially adversely affect the business,
properties, assets, liabilities, financial condition, operations, results of
operations or prospects of the Partnership or the Purchaser, or (vii)
challenges or adversely affects the Offer; or
23
<PAGE>
(d) there shall be any action taken, or any statute, rule, regulation,
order or injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Offer, or any other action shall have been taken, by
any government, governmental authority or court, domestic or foreign, other
than the routine application to the Offer of waiting periods that has resulted,
or in the reasonable good faith judgment of the Purchaser could be expected to
result, in any of the consequences referred to in clauses (i) through (vii) of
paragraph (c) above; or
(e) the Partnership or any of its subsidiaries shall have authorized,
recommended, proposed or announced an agreement or intention to enter into an
agreement, with respect to any merger, consolidation, liquidation or business
combination, any acquisition or disposition of a material amount of assets or
securities, or any comparable event, not in the ordinary course of business
consistent with past practices; or
(f) the failure to occur of any necessary approval or authorization by any
federal or state authorities necessary to the consummation of the purchase of
all or any part of the BACs to be acquired hereby, which in the reasonable
judgment of the Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto, makes it
inadvisable to proceed with such purchase or payment; or
(g) the Purchaser shall become aware that any material right of the
Partnership or any of its subsidiaries under any governmental license, permit
or authorization relating to any environmental law or regulation is reasonably
likely to be impaired or otherwise adversely affected as a result of, or in
connection with, the Offer; or
(h) the Partnership or its General Partner shall have amended, or proposed
or authorized any amendment to, the Partnership Agreement or the Purchaser
shall have become aware that the Partnership or its General Partner has
proposed any such amendment.
The foregoing conditions are for the sole benefit of the Purchaser and its
affiliates and may be asserted by the Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by the Purchaser or any
of its affiliates) giving rise to such condition, or may be waived by the
Purchaser, in whole or in part, from time to time in its sole discretion. The
failure by the Purchaser at any time to exercise the foregoing rights will not
be deemed a waiver of such rights, which will be deemed to be ongoing and may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning the events described in this Section 14 will be final and
binding upon all parties.
15. Certain Legal Matters.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Partnership with the Commission and other
publicly available information regarding the Partnership, the Purchaser is not
aware of any licenses or regulatory permits that would be material to the
business of the Partnership, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of BACs as contemplated herein, or any
filings, approvals or other actions by or with any domestic or foreign
governmental authority or administrative or regulatory agency that would be
required prior to the acquisition of BACs by the Purchaser pursuant to the
Offer as contemplated herein, other than the filing of a Tender Offer Statement
on Schedule 14D-1 (which has been filed) and any required amendments thereto.
Should any such approval or other action be required, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's or the
Purchaser's businesses might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action in the event that such approvals were not obtained or such actions were
not taken.
Appraisal Rights. BACs holders will not have appraisal rights as a result
of the Offer.
State Anti-takeover Laws. A number of states have adopted anti-takeover
laws which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations or other entities which are incorporated or
organized in such states or which have substantial assets, securityholders,
principal executive offices or principal places of business therein. Although
the Purchaser has not attempted to comply with any state anti-takeover statutes
in connection with the Offer, the Purchaser reserves the right to challenge the
validity or applicability of any state law allegedly applicable to the Offer
and nothing in this Offer to Purchase nor any action taken in connection
therewith is intended as a waiver of such right. If any state anti-takeover
statute is applicable to the Offer, the Purchaser might be unable to accept for
payment or purchase BACs tendered pursuant to the Offer or be delayed in
continuing
24
<PAGE>
or consummating the Offer. In such case, the Purchaser may not be obliged to
accept for purchase or pay for any BACs tendered.
ERISA. By executing and returning the Letter of Transmittal, a BACs holder
will be representing that either (a) the BACs holder is not a plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or an entity deemed to hold "plan
assets" within the meaning of 29.C.F.R. ss.2510.3-101 of any such plan; or (b)
the tender and acceptance of BACs pursuant to the Offer will not result in a
nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Margin Requirements. The BACs are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice and the FTC and certain waiting period requirements
have been satisfied. The Purchaser does not believe any filing is required
under the HSR Act with respect to its acquisition of BACs contemplated by the
Offer.
16. Certain Fees and Expenses.
Except as set forth in this Section 16, the Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of BACs pursuant to the Offer. The Purchaser has retained The Herman
Group, Inc. to act as Information Agent/Depositary in connection with the
Offer. The Purchaser will pay to the Information Agent/Depositary reasonable
and customary compensation for its services, plus reimbursement for certain
reasonable out-of-pocket expenses, and has agreed to indemnify the Information
Agent/Depositary against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws. The
Purchaser will also pay all costs and expenses of printing and mailing the
Offer and its legal fees and expenses.
17. Miscellaneous.
The Offer is being made to all BACs holders, Beneficial Owners and
Assignees, all to the extent their names and addresses are reflected on the
books and records of the Partnership. The Purchaser is not aware of any state
in which the making of the Offer is prohibited by administrative or judicial
action pursuant to a state statute. If the Purchaser becomes aware of any state
where the making of the Offer is so prohibited, the Purchaser will make a good
faith effort to comply with any such statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, the
Purchaser cannot comply with any applicable statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) BACs holders in such
state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, furnishing certain
additional information with respect to the Offer. Such statement and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained at the same places and in the same manner as set forth with respect to
information concerning the Partnership in Section 9 ("Certain Information
Concerning the Partnership") (except that they will not be available at the
regional offices of the Commission).
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
Lehigh Tax Credit Partners L.L.C.
November 10, 1997
25
<PAGE>
[This page intentionally left blank]
<PAGE>
APPENDIX A
GLOSSARY OF DEFINED TERMS
"Assignee" means a person or entity who has purchased BACs but is not
recognized on the books and records of the Partnership maintained by the
Assignor Limited Partner as a registered holder of such BACs.
"Assignor Limited Partner" means Independence Assignor Inc., a Delaware
corporation, or any successor to it which holds Limited Partnership Interests
on behalf of BACs holders.
"BACs" means the beneficial assignment certificates executed by the
Assignor Limited Partner and delivered to a purchaser of BACs in evidence of
the assignment by the Assignor Limited Partner to such BACs holder of all of
the economic and virtually all of the other rights, benefits and privileges of
the ownership of a portion of the Partnership interest of the Assignor Limited
Partner.
"BACs holder" means a holder of BACs and who is reflected as an assignee
of record of BACs on the books and records of the Partnership maintained by the
Assignor Limited Partner.
"Beneficial Owner" means a BACs holder in the case of BACs owned by
Individual Retirement Accounts or Keogh plans.
"business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time, and any time period of business days will be computed in
accordance with Rule 14d-1(c)(6) under the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Credit Period" has the meaning set forth in Section 9.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Everest" means Everest Properties, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Expiration Date" has the meaning set forth in Section 1.
"Form 10-K" means the Partnership's Form 10-K for the fiscal year ended
March 31, 1997.
"Form 10-Q" means the Partnership's Form 10-Q for the quarter ended June
30, 1997.
"FTC" means the Federal Trade Commission.
"General Partner" means Related Independence Associates L.P., a Delaware
limited partnership and the general partner of the Partnership. The General
Partner is affiliated with the Purchaser.
"Historic Tax Credits" means any historic rehabilitation credits to tax
allowed to the Partnership and its partners under Section 47 of the Code.
"Housing Tax Credits" means any low-income housing credits to tax allowed
to the Partnership and its partners under Section 42 of the Code.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Independence SLP" means Independence SLP L.P., a Delaware limited
partnership and an affiliate of the General Partner.
"Information Agent/Depositary" means The Herman Group, Inc.
"IRA" means an individual retirement account.
A-1
<PAGE>
"Limited Partner" means the Assignor Limited Partner, the Original Limited
Partner or any other person or entity who is admitted as a Substituted Limited
Partner, at the time of reference thereto, in such person's or entity's
capacity as a limited partner of the Partnership.
"Limited Partnership Interest" means the ownership interest of a Limited
Partner, including its interest in distributions, including liquidating
distributions, and profits and losses of the Partnership and all of its other
rights, duties and obligations under the Partnership Agreement.
"Managing Member" means Lehigh Tax Credit Partners, Inc., a Delaware
corporation and the managing member of the Purchaser.
"NASD" means the National Association of Securities Dealers, Inc.
"Offer" has the meaning set forth in the Introduction.
"Offer to Purchase" means this Offer to Purchase dated November 10, 1997.
"Partnership" means Independence Tax Credit Plus L.P. II, a Delaware
limited partnership.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of March 31, 1993, by and
among Related Independence Associates L.P., a Delaware limited partnership, as
General Partner, Alan P. Hirmes as Original Limited Partner, Independence SLP
L.P., a Delaware limited partnership, as Special Limited Partner of Local
Partnerships, Independence Assignor Inc., a Delaware corporation, as Assignor
Limited Partner, and those persons or entities admitted to the Partnership from
time to time as Limited Partners.
"Purchase Price" has the meaning set forth in the Introduction.
"Purchaser" means Lehigh Tax Credit Partners L.L.C., a Delaware limited
liability company and an affiliate of the General Partner.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Standstill Agreement" means the letter agreement, dated November 7, 1997,
among the Partnership, the Purchaser and the General Partner.
"Standstill Expiration Date" means November 7, 2007.
"Substituted Limited Partner" means any person or entity admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.2D of
the Partnership Agreement.
"Tax Credits" means Historic Tax Credits and Housing Tax Credits.
"TIN" means taxpayer identification number.
"Transfer Restrictions" has the meaning set forth in Section 2.
"UBTI" means unrelated business taxable income.
"Unit" means a unit of limited partner interest in the Partnership,
representing a cash contribution of $1,000 to the capital of the Partnership.
A-2
<PAGE>
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF LEHIGH TAX CREDIT PARTNERS, INC.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
executive officer and director of Lehigh Tax Credit Partners, Inc. (the
"Managing Member" of the Purchaser). Each person listed below is a citizen of
the United States.
J. Michael Fried is a director and executive officer of the Managing
Member. Mr. Fried is also the President and a Director of Related Independence
Associates Inc., the sole general partner of the General Partner. Additionally,
Mr. Fried is the sole stockholder of one of the general partners of Related
Capital Company ("Related Capital"), a New York general partnership that has,
directly or indirectly, sponsored 22 public and 238 private real estate
investment programs that have raised in excess of $2.8 billion from more than
106,000 investors. In that capacity, he is generally responsible for all of
syndication, finance, acquisition and investor reporting activities of Related
Capital 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. Mr. Fried's business
address is 625 Madison Avenue, New York, New York 10022.
Stuart J. Boesky is a director and executive officer of the Managing
Member. Mr. Boesky is also a Vice President of Related Independence Associates
Inc., the sole general partner of the General Partner. 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 Capital. From
1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye,
Fialkow, Richmond & Rothstein and from 1978 to 1980 was a consultant
specializing in real estate at the accounting firm of Laventhol & Horwath. Mr.
Boesky is the sole stockholder of one of the general partners of Related
Capital. 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. Mr. Boesky's business address is 625 Madison Avenue, New York, New York
10022.
Alan P. Hirmes is a director and executive officer of the Managing Member.
Mr. Hirmes is also the Senior Vice President of Related Independence Associates
Inc., the sole general partner of the General Partner. Additionally, Mr. Hirmes
has been a Certified Public Accountant in New York since 1978. Prior to joining
Related Capital in October 1983, Mr. Hirmes was employed by Wiener & Co.,
certified public accountants. Mr. Hirmes is the sole stockholder of one of the
general partners of Related Capital. Mr. Hirmes graduated from Hofstra
University with a Bachelor of Arts degree. Mr. Hirmes' business address is 625
Madison Avenue, New York, New York 10022.
Marc D. Schnitzer is an executive officer of the Managing Member. Mr.
Schnitzer is also a Vice President of Related Independence Associates Inc., the
sole general partner of the General Partner. Mr. Schnitzer received a Master of
Business Administration degree from The Wharton School of The University of
Pennsylvania in December 1987 and joined Related Capital 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
is an Executive Vice President of Related Capital. Mr. Schnitzer received a
Bachelor of Science degree, summa cum laude, in Business Administration from
the School of Management at Boston University in May 1983. Mr. Schnitzer's
business address is 625 Madison Avenue, New York, New York 10022.
Denise L. Kiley is an executive officer of the Managing Member. Prior to
joining Related Capital in 1990, Ms. Kiley was a First Vice President with
Resources Funding Corporation where she was responsible for acquiring,
financing, and asset managing multifamily residential properties. From 1981
through 1985 she was an auditor with Price Waterhouse. Ms. Kiley is an
Executive Vice President of Related Capital. Ms. Kiley holds a Bachelor of
Science in Accounting from The Carroll School of Management at Boston College.
Ms. Kiley's business address is 625 Madison Avenue, New York, New York 10022.
S-1
<PAGE>
SCHEDULE II
Local Partnership Schedule
<TABLE>
<CAPTION>
% of Units Occupied at May 1,
---------------------------------------------------------------
Name and Location (Number of Units) Date Acquired 1997 1996 1995 1994 1993
- ------------------------------------- ---------------- ------------- ------------- ------------- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Lincoln Renaissance
Reading, PA (52) April 1993 100% 98% 100% 0%(1) 0%*
United Germano-Millgate
Limited Partnership
Chicago, IL (350) October 1993 98% 98% 98% 64%*(1)
Mansion Court Associates
Philadelphia, PA (30) November 1993 93% 100% 100% 47%(1)
Derby Run Associates, L.P.
Hampton, VA (160) February 1994 94% 95% 96% 0%*
Renaissance Plaza '93
Associates, L.P.
Baltimore, MD (95) February 1994 99% 98% 83%(1) 0%*
Tasker Village Associates
Philadelphia, PA (28) May 1994 93% 100% 0%(1) 0%*
Martha Bryant Manor, L.P.
Los Angeles, CA (77) September 1994 92% 0%* 0%*
Colden Oaks
Limited Partnership
Los Angeles, CA (38) September 1994 95% 97% 100%
Brynview Terrace, L.P.
Los Angeles, CA (8) September 1994 100% 0%* 0%*
NLEDC, L.P.
Los Angeles, CA (43) September 1994 93% 93% 0%*
Creative Choice
Homes VI, Ltd.
Miami, FL (102) September 1994 98% 98% 0%*
P&P Homes for the
Elderly, L.P.
Los Angeles, CA (107) September 1994 68%(1) 0%* 0%*
Clear Horizons
Limited Partnership
Shreveport, LA (84) December 1994 93% 95% 100%
Neptune Venture, L.P.
Neptune Township, NJ (99) April 1995 100% 35%(1)
Affordable Green
Associates L.P.
New York, NY (41) April 1995 100% 100%
</TABLE>
- ----------------
* Properties in construction phase during year indicated.
(1) Properties in rent-up phase during year indicated.
S-2
<PAGE>
SCHEDULE III
Certain Information Concerning the Properties
As of March 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at which Carried
Partnership At Close of Period
--------------------------- Cost ------------------------------------------
Capitalized
Subsequent to
Buildings and Acquisition: Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
- -------------------------- -------------- ----------- --------------- --------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lincoln Renaissance
Reading, PA $ 2,600,000 $ 0 $ 5,240,173 $ 213,623 $ 5,373 $ 5,448,423 $ 5,453,796
United Germano Millgate
Limited Partnership
Chicago, IL 10,618,998 580,000 6,070,477 10,105,329 585,374 16,170,432 16,755,806
Mansion Court Associates
Philadelphia, PA 1,431,244 19,072 3,224,984 183,450 25,095 3,402,411 3,427,506
Derby Run Associates L.P.
Hampton, VA 4,624,748 407,410 3,069,628 4,557,603 409,771 7,624,870 8,034,641
Renaissance Plaza Assoc.
Baltimore, MD 6,660,547 684,255 9,840,170 4,137,905 686,616 13,975,714 14,662,330
Tasker Village
Philadelphia, PA 1,784,881 18,235 0 3,929,038 20,596 3,926,677 3,947,273
Martha Bryant Manor, L.P.
Los Angeles, CA 7,806,343 966,577 0 10,198,171 968,938 10,195,810 11,164,748
Colden Oaks Limited
Partnership
Los Angeles, CA 5,308,064 840,374 0 5,872,999 842,735 5,870,638 6,713,373
Brynview Terrrace
Limited Partnership
Los Agneles, CA 949,587 175,943 0 1,354,623 178,304 1,352,262 1,530,566
NLEDC, L.P.
Los Angeles, CA 4,520,203 624,000 0 5,881,927 626,361 5,879,566 6,505,927
Creative Choice Homes
VI Ltd.
Miami, FL 3,243,746 650,072 13,134 5,332,621 652,433 5,343,394 5,995,827
P&P Homes for the
Elderly, L.P.
Los Angeles, CA 6,786,592 0 0 9,633,340 642,360 8,990,980 9,633,340
<CAPTION>
Life on which
Depreciation in
Year of Latest Income
Accumulated Construction/ Date Statements is
Description Depreciation Renovation Acquired Computed (a)(b)
- -------------------------- -------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Lincoln Renaissance
Reading, PA $ 405,523 1993-94 Apr. 1993 20-40 years
United Germano Millgate
Limited Partnership
Chicago, IL 2,091,698 1993-94 Oct. 1993 10-25 years
Mansion Court Associates
Philadelphia, PA 260,148 1993-94 Nov. 1993 40 years
Derby Run Associates L.P.
Hampton, VA 506,194 1994-95 Feb. 1994 40 years
Renaissance Plaza Assoc.
Baltimore, MD 719,971 1994-95 Feb. 1994 27.5 years
Tasker Village
Philadelphia, PA 161,114 1994-95 May 1994 27.5 years
Martha Bryant Manor, L.P.
Los Angeles, CA 128,303 1994-95 Sept. 1994 27.5 years
Colden Oaks Limited
Partnership
Los Angeles, CA 428,766 1994-95 Sept. 1994 27.5 years
Brynview Terrrace
Limited Partnership
Los Agneles, CA 22,910 1994-95 Sept. 1994 27.5 years
NLEDC, L.P.
Los Angeles, CA 164,331 1994-95 Sept. 1994 27.5 years
Creative Choice Homes
VI Ltd.
Miami, FL 315,870 1994-95 Sept. 1994 40 years
P&P Homes for the
Elderly, L.P.
Los Angeles, CA 129,388 1994-95 Sept. 1994 27.5 years
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at which Carried
Partnership At Close of Period
---------------------------- Cost -------------------------------------------
Capitalized
Subsequent to
Buildings and Acquisition: Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
- ----------------------- -------------- ------------ --------------- --------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Clear Horizons Limited
Partnership
Shreveport, LA 1,290,000 15,304 2,058,729 59,931 17,665 2,116,299 2,133,964
Neptune Venture L.P.
Neptune Township, NJ 0 460,631 10,151,873 114,606 462,465 10,264,645 10,727,110
Affordable Green
Associates L.P.
New York, NY 2,237,12 20,500 3,506,961 30,419 22,334 3,535,546 3,557,880
------------ ----------- ------------ ------------ ----------- ------------- -------------
$59,862,081 $5,462,373 $43,176,129 $61,605,585 $6,146,420 $104,097,667 $110,244,087
============ =========== ============ ============ =========== ============= =============
<CAPTION>
Life on which
Depreciation in
Year of Latest Income
Accumulated Construction/ Date Statements is
Description Depreciation Renovation Acquired Computed (a)(b)
- ----------------------- -------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C>
Clear Horizons Limited
Partnership
Shreveport, LA 171,785 1994-95 Dec. 1994 27.5 years
Neptune Venture L.P.
Neptune Township, NJ 244,803 1995-96 Apr. 1995 40 years
Affordable Green
Associates L.P.
New York, NY 178,886 1995-96 May 1995 27.5 years
----------- ------- ---------- -------------
$5,929,690
===========
</TABLE>
- ------------
(a) Depreciation is computed using primarily the straight line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight lie method over
the estimated useful lives ranging from 5 to 10 years.
<TABLE>
<CAPTION>
Cost of Property and Equipment Accumulated Depreciation
---------------------------------------------- ---------------------------------------
Year Ended March 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995
-------------- ------------- ------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $ 83,486,772 $44,926,639 $22,190,071 $2,959,862 $ 857,939 $ 97,077
Additions during period:
Improvements 26,757,315 38,560,133 22,736,568
Depreciation expense 2,969,828 2,101,923 760,862
Deductions during period:
Dispositions 0 0 0 0 0
------------- ------------ ------------ ----------- ----------- ---------
Balance at close of period $110,244,087 $83,486,772 $44,926,639 $5,929,690 $2,959,862 $857,939
============= ============ ============ =========== =========== =========
</TABLE>
At the time the Local Partnerships were acquired by Independence Tax Credit
Plus L.P. II, the entire purchase price paid by Independence Tax Credit Plus
L.P. II was pushed down to the Local Partnerships as property and equipment
with an offsetting credit to capital. Since the projects were in the
construction phase at the time of acquisition, the capital accounts were
insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.
S-4
<PAGE>
[This page intentionally left blank]
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. Questions and requests for assistance may be
directed to the Information Agent/Depositary at the address and telephone
number listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent/Depositary as set forth below, and will be furnished promptly
at the Purchaser's expense. The Letter of Transmittal and any other required
documents should be sent or delivered by each BACs holder to the Information
Agent/Depositary at its address or facsimile number set forth below. If
tendering by facsimile, a BACs holder should subsequently send original copies
of the Letter of Transmittal and any other required documents to the
Information Agent/Depositary at its address set forth below. To be effective, a
duly completed and signed Letter of Transmittal or facsimile thereof must be
received by the Information Agent/Depositary at the address or facsimile
number set forth below before 12:00 midnight, New York City Time, on Wednesday,
December 10, 1997.
By Mail/Hand or Overnight Delivery:
The Herman Group, Inc.
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
By Facsimile: (214) 999-9323
For Additional Information Call:
The Herman Group, Inc.
(800) 532-5664
LETTER OF TRANSMITTAL
TO
TENDER BENEFICIAL ASSIGNMENT CERTIFICATES
IN
INDEPENDENCE TAX CREDIT PLUS L.P. II
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 10, 1997
BY
LEHIGH TAX CREDIT PARTNERS L.L.C.
Taxpayer Identification Number:
Total Purchase(3)
Number of Number of(1)(2) Purchase Price(3) Price if all
BACs Owned BACs Tendered Per BAC BACs Tendered
---------- ------------- ------- -------------
$725
(1) If no indication is marked in the Number of BACs Tendered column, all
BACs issued to you will be deemed to have been tendered.
(2) Tenders of less than all BACs owned by a BACs holder that would result
in such BACs holder holding less than 5 BACs will not be accepted.
(3) The Purchase Price will be automatically reduced by $14 per BAC for
each month (or part of a month) between December 31, 1997 and the date of
transfer for BACs transferred after December 31, 1997.
Please indicate changes or corrections to the information printed above.
================================================================================
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW
YORK CITY TIME, ON THE EXPIRATION DATE (AS SUCH TERM IS DEFINED IN THE OFFER TO
PURCHASE, AS DEFINED BELOW) UNLESS SUCH OFFER IS EXTENDED.
The undersigned hereby tender(s) to Lehigh Tax Credit Partners L.L.C., a
Delaware limited liability company (the "Purchaser"), the number of Beneficial
Assignment Certificates ("BACs") representing assignments of limited partnership
interests in Independence Tax Credit Plus L.P. II, a Delaware limited
partnership (the "Partnership"), specified above, pursuant to the Purchaser's
offer to purchase up to 14,732 of the issued and outstanding BACs at a purchase
price of $725 per BAC, net to the seller in cash (the "Purchase Price"), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated November 10, 1997 (the "Offer to Purchase") and this
Letter of Transmittal (the "Letter of Transmittal", which, together with the
Offer to Purchase and any supplements, modifications or amendments thereto,
constitute the "Offer"), all as more fully described in the Offer to Purchase.
The Purchase Price will be automatically reduced by $14 per BAC for each month
(or part of a month) between December 31, 1997 and the date of transfer for BACs
transferred after December 31, 1997. BACs HOLDERS WHO TENDER THEIR BACS WILL NOT
BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES, WHICH
COMMISSIONS AND FEES WILL BE BORNE BY THE PURCHASER. Receipt of the Offer to
Purchase is hereby acknowledged. Capitalized terms used but not defined herein
have the respective meanings ascribed to them in the Offer to Purchase.
By executing and delivering this Letter of Transmittal, a tendering BACs
holder irrevocably appoints the Purchaser and the designees of the Purchaser and
each of them as such BACs holder's attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of such BACs holder's rights with
respect to the BACs tendered by such BACs holder and accepted for payment by the
Purchaser (and with respect to any and all other BACs or other securities issued
or issuable in respect of such BACs on or after the date hereof). Such
appointment and such proxies shall be considered irrevocable and coupled with an
interest in the tendered BACs. Such appointment will be effective when, and only
to the extent that, the Purchaser accepts such BACs for payment. Upon such
acceptance for payment, all prior grants and proxies given by such BACs holder
with respect to such BACs (and such other BACs and securities) will be revoked
without further action, and no subsequent grants and/or proxies may be given nor
any subsequent written consents executed (and, if given or executed, will not be
deemed effective). The Purchaser and its designees will, with respect to the
BACs (and such other BACs and securities) for which such appointment is
effective, be empowered to exercise all voting and other rights of such BACs
holder as it in its sole discretion may deem proper pursuant to the Partnership
Agreement or otherwise. Pursuant to such appointment as attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i) to
seek to transfer ownership of such BACs on the books and records of the
Partnership maintained by the Assignor Limited Partner (and execute and deliver
any accompanying evidences of transfer and authenticity any of them may deem
necessary or appropriate in connection therewith, including, without limitation,
any documents or instruments required to be executed under the Partnership
Agreement or a "Transferor's (Seller's)
(Continued on Back)
YOU MUST READ CAREFULLY BOTH SIDES OF THIS LETTER OF TRANSMITTAL
================================================================================
SIGNATURE BOX
- --------------------------------------------------------------------------------
Please sign exactly as your name is printed (or corrected) above. For joint
owners, each joint owner must sign. The signatory hereto hereby certifies under
penalties of perjury that: (i) the Taxpayer Identification Number ("TIN"; i.e.,
the signatory's social security number) printed or corrected above is the
correct TIN of the BACs holder; (ii) the BACs holder is not subject to backup
withholding either because the BACs holder (a) is exempt from backup
withholding, (b) has not been notified by the Internal Revenue Service that the
BACs holder is subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) has been notified by the IRS that such BACs
holder is no longer subject to backup withholding; and (iii) if an individual,
is a U.S. citizen or a resident alien for purposes of U.S. income taxation, and
if other than an individual, is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Code and
Income Tax Regulations). The undersigned hereby represents and warrants for the
benefit of the Partnership and the Purchaser that the undersigned owns (or
beneficially owns) the BACs tendered hereby and has full power and authority to
validly tender, sell, assign, transfer, convey and deliver the BACs tendered
hereby and that when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, such
BACs will not be subject to any adverse claims, the transfer and assignment
contemplated herein are in compliance with all applicable laws and regulations,
and that upon such transfer and assignment the undersigned will not own less
than 5 BACs. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in Section 4
("Withdrawal Rights") of the Offer to Purchase, this tender is irrevocable.
- --------------------------------------------------------------------------------
X ------------------------------------------------------------------------------
(Signature of Owner) (Date)
X ------------------------------------------------------------------------------
(Signature of Co-Owner, if any) (Date)
- --------------------------------------------------------------------------------
(Title)
Telephone (Day) ( ) Telephone (Eve) ( )
------------------------ ---------------------
If signing as a fiduciary, additional documentation will be required to
evidence proper authority. Please call The Herman Group, Inc. at (800) 532-5664.
================================================================================
<PAGE>
Application for Transfer" created by the NASD, if required), (ii) upon receipt
by the Information Agent/Depositary (as the tendering BACs holder's agent) of
the Purchase Price, to be allocated all Tax Credits and tax losses and to
receive any and all distributions made by the Partnership after the Expiration
Date, and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such BACs in accordance with the terms of the Offer,
(iii) to execute and deliver to the Partnership, the General Partner and/or the
Assignor Limited Partner (as the case may be) a change of address form
instructing the Partnership to send any and all future distributions to which
the Purchaser is entitled pursuant to the terms of the Offer in respect of
tendered BACs to the address specified in such form, and (iv) to endorse any
check payable to or upon the order of such BACs holder representing a
distribution, if any, to which the Purchaser is entitled pursuant to the terms
of the Offer, in each case on behalf of the tendering BACs holder. This power of
attorney shall not be affected by the subsequent mental disability of the BACs
holder, and the Purchaser shall not be required to post bond in any nature in
connection with this power of attorney. The Purchaser may assign such power of
attorney and/or proxy to any person with or without assigning the related BACs
with respect to which such power of attorney and/or proxy was granted. The
Purchaser reserves the right to require that, in order for BACs to be deemed
validly tendered, immediately upon the Purchaser's payment for such BACs, the
Purchaser must be able to exercise full voting rights with respect to such BACs
and other securities, including voting at any meeting of BACs holders.
By executing and delivering this Letter of Transmittal, a tendering BACs
holder irrevocably assigns to the Purchaser and its assigns all of the, direct
and indirect, right, title and interest of such BACs holder in the Partnership
with respect to the BACs tendered and purchased pursuant to the Offer,
including, without limitation, such BACs holder's right, title and interest in
and to any and all Tax Credits and tax losses and any and all distributions made
by the Partnership after the Expiration Date in respect of the BACs tendered by
such BACs holder and accepted for payment by the Purchaser, regardless of the
fact that the record date for any such distribution may be a date prior to the
Expiration Date. The Purchaser reserves the right to transfer or assign, in
whole or from time to time in part, to any third party, the right to purchase
BACs tendered pursuant to the Offer, together with its rights under the Letter
of Transmittal, but any such transfer or assignment will not relieve the
assigning party of its obligations under the Offer or prejudice the rights of
tendering BACs holders to receive payment for BACs validly tendered and accepted
for payment pursuant to the Offer.
A tendering BACs holder recognizes that, if proration is required pursuant
to the terms of the Offer, the Purchaser will accept for payment from among
those BACs validly tendered on or prior to the Expiration Date and not properly
withdrawn, the maximum number of BACs permitted pursuant to the Offer on a pro
rata basis, with adjustments to avoid purchases which would violate the terms of
the Offer, based upon the number of BACs validly tendered prior to the
Expiration Date and not properly withdrawn.
A tendering BACs holder understands that a tender of BACs to the Purchaser
will constitute a binding agreement between a tendering BACs holder and the
Purchaser upon the terms and subject to the conditions of the Offer. A tendering
BACs holder recognizes that under certain circumstances set forth in Section 2
("Proration; Acceptance for Payment and Payment for BACs") and Section 14
("Conditions of the Offer") of the Offer to Purchase, the Purchaser may not be
required to accept for payment any of the BACs tendered hereby. In such event, a
tendering BACs holder understands that any Letter of Transmittal for BACs not
accepted for payment will be destroyed by the Purchaser. Except as stated in
Section 4 ("Withdrawal Rights") of the Offer to Purchase, this tender is
irrevocable, provided BACs tendered pursuant to the Offer may be withdrawn at
any time prior to the Expiration Date. A tendering BACs holder acknowledges that
(i) upon acceptance of, and payment for, tendered BACs, a tendering BACs holder
shall no longer be entitled to any benefits as a BACs holder and (ii)
notwithstanding that a tendering BACs holder may retain a Beneficial Assignment
Certificate, such certificate shall not entitle a tendering BACs holder or any
purported transferees (other than the Purchaser) to any benefits as a BACs
holder.
================================================================================
INSTRUCTIONS FOR COMPLETING LETTER OF TRANSMITTAL
Forming Part of the Terms and Conditions of the Offer
================================================================================
FOR ASSISTANCE IN COMPLETING THE LETTER OF TRANSMITTAL, CALL:
THE HERMAN GROUP, INC. AT (800) 532-5664
================================================================================
Delivery of Letter of Transmittal. For convenience in responding to the Offer, a
self-addressed, postage-paid envelope had been enclosed with the Offer to
Purchase. However, to ensure receipt of the Letter of Transmittal, it is
suggested that you use an overnight courier or, if the Letter of Transmittal is
to be delivered by United States mail, that you use certified or registered
mail, return receipt requested.
To be effective, a duly completed and signed Letter of Transmittal must be
received by the Information Agent/Depositary at the address (or facsimile
number) set forth below before the Expiration Date, as such term is defined in
the Offer to Purchase, unless extended. Letters of Transmittal which have been
duly executed, but where no indication is marked in the "Number of BACs
Tendered" column, shall be deemed to have tendered all BACs pursuant to the
Offer. Tenders of less than all BACs owned by a BACs holder that would result in
such BACs holder holding less than 5 BACs will not be accepted.
By Mail/Hand or Overnight Delivery: THE HERMAN GROUP, INC.
2121 San Jacinto Street, 26th Floor
Dallas, Texas 75201
By Facsimile (see note below): (214) 999-9323
For Additional Information Call: THE HERMAN GROUP, INC.
(800) 532-5664
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING BACS HOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. IF TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND
BACK OF THIS LETTER OF TRANSMITTAL TO THE INFORMATION AGENT/DEPOSITARY AT THE
FACSIMILE NUMBER LISTED ABOVE PRIOR TO THE EXPIRATION OF THE OFFER AND THEN MAIL
THE ORIGINAL COPIES OF SUCH PAGES TO THE INFORMATION AGENT/DEPOSITARY AT THE
ADDRESS LISTED ABOVE.
All tendering holders of BACs, by execution of this Letter of Transmittal or
facsimile hereof, waive any right to receive any notice of the acceptance of
their BACs for payment.
Validity of Letter of Transmittal. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal will be determined by the Purchaser and such determination will be
final and binding. The Purchaser's interpretation of the terms and conditions of
the Offer (including these instructions for the Letter of Transmittal) also will
be final and binding. The Purchaser will have the right to waive any
irregularities or conditions as to the manner of tendering. Any irregularities
in connection with tenders must be cured within such time as the Purchaser shall
determine unless waived by them.
The Letter of Transmittal will not be valid unless and until any irregularities
have been cured or waived. Neither the Purchaser nor the Information
Agent/Depositary is under any duty to give notification of defects in a Letter
of Transmittal and will incur no liability for failure to give such
notification.
Questions and requests for assistance may be directed to the Information
Agent/Depositary at its address and telephone number listed below. Additional
copies of the Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent/Depositary as set
forth below, and will be furnished promptly at the Purchaser's expense. You may
also contact your broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent/Depositary for the Offer is:
[The Herman Group, Inc. logo]
2121 San Jacinto Street
26th Floor
Dallas, Texas 75201
Facsimile No. (214) 999-9323
or
Call Toll-Free (800) 532-5664
LEHIGH TAX CREDIT PARTNERS L.L.C.
625 Madison Avenue
New York, New York 10022
November 10, 1997
$725 PER BAC OFFER TO PURCHASE
To BACs holders in Independence Tax Credit Plus L.P. II:
Lehigh Tax Credit Partners L.L.C., a Delaware limited
liability company (the "Purchaser"), is offering to purchase up to 14,732 of the
outstanding Beneficial Assignment Certificates ("BACs") representing assignments
of limited partnership interests of Independence Tax Credit Plus L.P. II (the
"Partnership") for a cash purchase price of $725 per BAC, net to the seller in
cash (the "Purchase Price"), upon the terms and subject to the conditions in the
attached Offer to Purchase, dated November 10, 1997, and the related Letter of
Transmittal (which together constitute the "Offer"). The Purchase Price will be
automatically reduced by $14 per BAC for each month (or part of a month) between
December 31, 1997 and the date of transfer for BACs transferred after December
31, 1997. THE PURCHASER AND RELATED INDEPENDENCE ASSOCIATES L.P., THE GENERAL
PARTNER OF THE PARTNERSHIP, ARE AFFILIATED.
Unless extended by the Purchaser, the Offer will expire at
midnight, New York City time, on December 10, 1997. The Offer is not conditioned
upon any minimum number of BACs being tendered; however, tenders of less than
all BACs owned by a BACs holder that would result in a BACs holder holding less
than 5 BACs will not be accepted.
The materials included in this package include important
information concerning the Purchaser, the terms and conditions to the Offer, tax
implications and instructions for tendering your BACs. It is important that you
take some time to read carefully the enclosed Offer to Purchase, the Letter of
Transmittal and other accompanying materials in order to evaluate the Offer
being made by the Purchaser.
The Offer is being made to provide BACs holders that have a
current or anticipated need or desire for liquidity with an opportunity to sell
their BACs. Such BACs holders may feel that their circumstances have changed
such that anticipated future allocation of tax credits and tax losses will no
longer be beneficial to them.
The Purchaser believes that the projected aggregate per BAC
benefit from the Offer, together with the benefits received since 1993, total
approximately $1,603. Such benefits include $725 (the Purchase Price) plus $393
(representing the Tax Credits allocated through December 15, 1997) plus
approximately $81 (representing the tax savings attributable to the use of a
capital loss of $15 and an ordinary loss of $225, assuming a tax rate of 20% for
capital gain and 36% for ordinary income) plus approximately $426 (representing
the assumed return on the reinvestment of the Purchase Price at 5.75% for
approximately 12 years, discounted at a rate of 9%) less approximately $22
(representing a recapture of Historic Tax Credits). The projected benefit of
$1,603 assumes the BACs holder acquired the BACs pursuant to the original
offering and such BACs holder did not utilize any passive losses. The projected
benefit may be more or less depending on, among other things, a tendering BACs
holder's tax rate and the return a tendering BACs holder may earn upon investing
the Purchase Price.
The Purchaser believes that such aggregate projected benefit
compares favorably with the potential benefits to a BACs holder who remains in
the Partnership (together with the benefits received since 1993), continuing to
receive Tax Credits, and assuming a return of the present value of the original
investment of
<PAGE>
$1,000 as, and if, the 15 properties owned by the Local Partnerships in which
the Partnership has an interest are sold for amounts in excess of the then
existing indebtedness and other liabilities. The aggregate of such potential
benefits is estimated by the Purchaser to be approximately $1,587, which include
$393 (the Tax Credits allocated through December 15, 1997) plus $907 (the
present value at 9% of the remaining Tax Credits to be allocated over the
remaining compliance period) plus approximately $287 (the present value at 9% of
a BACs holder's original $1,000 investment, returned ratably over the 4 years
following the end of the compliance period and assuming a discount rate of 9%).
There can, however, be no assurance that these benefits will be realized.
Neither the General Partner of the Partnership nor the Purchaser is making any
representation, and there can be no assurance, that any or all of the properties
owned by the Local Partnerships in which the Partnership has an interest will be
sold and, if sold, will result in distributable cash sufficient to return any of
a BACs holder's original investment.
Possible tax consequences to tendering BACs holders:
Tendering BACs holders who have not utilized passive losses: A
BACs holder who sells his or her BACs pursuant to this Offer will
receive $725 of proceeds per BAC that may result in a tax loss of
approximately $240 per BAC, which loss could be available to reduce
income from other sources.
Tendering BACs holders who have utilized passive losses: An
individual BACs holder who sells his or her BACs pursuant to this
Offer, who acquired BACs pursuant to the original offering of BACs by
the Partnership and who has utilized all of his passive losses is
expected to recognize a tax loss of approximately $15 per BAC.
You must decide whether to tender your BACs based on your own
particular circumstances. YOU SHOULD CONSULT WITH YOUR ADVISORS ABOUT THE
FINANCIAL, TAX, LEGAL AND OTHER IMPLICATIONS TO YOU OF ACCEPTING THE OFFER.
If you desire additional information regarding the Offer or
need assistance in tendering your BACs, please do not hesitate to call The
Herman Group, Inc., which is acting as Information Agent/Depositary for the
Offer, at (800) 532-5664. Informed and courteous agents are available to assist
you.
THE HERMAN GROUP, INC.
2121 San Jacinto Street, 26th Floor
Dallas, Texas 75201
Facsimile No. (214) 999-9323
For information call 1-800-532-5664
LEHIGH TAX CREDIT PARTNERS L.L.C.
LEHIGH TAX CREDIT PARTNERS L.L.C.
625 MADISON AVENUE
NEW YORK, NY 10022
November 10, 1997
RE: Independence Tax Credit Plus L.P. II
Dear American Express Financial Advisor:
Today, a tender offer (the "Offer") for your client's BACs/limited partnership
interests in Independence Tax Credit Plus L.P. II (the "Partnership") was
commenced by Lehigh Tax Credit Partners L.L.C. ("Lehigh") for a purchase price
of $3,625 per $5,000 (BAC) invested by your client(s).
We are writing to explain the background of the Offer. Since the formation of
the Partnership, corporations have shown significant interest in investing in
programs benefitting from Low Income Housing Tax Credits. Such corporate
investors, in addition to utilizing such tax credits, are able to fully utilize
passive losses such as those generated by the Partnership, while individuals,
such as your clients, usually can not utilize such passive losses. Lehigh
believes this new corporate interest in tax credits has created an opportunity
for your client(s) to sell their interests, at what we believe to be an
attractive price.
Lehigh, which is an affiliate of the general partner of the Partnership,
believes that the per BAC benefit from the Offer, together with the value of the
benefits already received by your client since 1993, compares favorably with the
present value of the benefits your client has received and may expect to receive
by remaining in the Partnership. Lehigh estimates the per BAC benefit of
accepting the Offer is approximately $1,603, which consists of tax credits
received through December 15, 1997 ($393), plus the purchase price ($725), plus
future earnings from reinvesting the purchase price ($426, assuming a compounded
return of 5.75% per annum for approximately 12 years, discounted at a rate of
9%), plus estimated tax savings resulting from a tax loss (approximately $81),
less a recapture of historic tax credits ($22). If your client were to remain in
the Partnership, Lehigh's estimate of his benefits, together with the benefits
already received, is approximately $1,587, which consists of the tax credits
received through December 15, 1997 ($393), plus the present value of the
expected remaining tax credits ($907), plus the present value of a projected
return of your client's original $1,000 investment, assumed to be paid ratably
during the four years following the end of the compliance period ($287). You are
encouraged to read Lehigh's Offer to Purchase, which is incorporated herein by
reference.
Attached please find a list of your client(s) who are BACs holders in the
Partnership. In addition, enclosed please find a copy of the cover letter each
of your clients is receiving in connection with the Offer. If your client is
interested in tendering, please have your clients sign the Letter of Transmittal
and return it to us in the prepaid envelope enclosed with the Offer.
If you have any questions or would like a copy of the Offer to Purchase, please
call The Herman Group, Inc., our Information Agent/Depositary, at 800-532-5664
or Brenda Abuaf of Related Capital Company's Investor Services Department at
800-600-6422, extension 2090.
Lehigh Tax Credit Partners, Inc.
Managing Member
GRID NOTE
---------
$10,685,000 New York, New York
November 7, 1997
FOR VALUE RECEIVED, LEHIGH TAX CREDIT PARTNERS L.L.C., a Delaware
limited liability company (the "Debtor"), hereby promises to pay to the order of
RCC CREDIT FACILITY, L.L.C., a Delaware limited liability company (the "Payee"),
at its offices located at 625 Madison Avenue, New York, New York 10022, or at
such other place as the Payee or any holder hereof may from time to time
designate, in lawful money of the United States, the principal sum of TEN
MILLION SIX HUNDRED EIGHTY FIVE THOUSAND DOLLARS ($10,685,000), or, if less than
such sum, the aggregate principal amount of all monies advanced to the Debtor by
the Payee hereunder as indicated on the grid schedule attached hereto and made a
part hereof. All principal outstanding hereunder shall be payable in full on the
date (the "Payment Date") which is the earlier to occur of (i) the earlier to
occur of (x) the date on which the portion of the RCC Credit Loan (as
hereinafter defined) used to fund the loan to the Debtor evidenced hereby shall
be due and payable or (y) "Maturity Date" as such term is defined in the Loan
Agreement dated August 22, 1997 (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"), among the Payee, The
Related Companies, L.P. ("TRCLP"), a New York limited partnership, Related
Capital Company ("RCC"), a New York general partnership, BankBoston, National
Association (f/k/a The First National Bank of Boston) ("BKB"), Fleet National
Bank ("Fleet" and together with BKB, the "Banks") and BKB, as agent for the
Banks, or such earlier or later date as the Payee shall be obligated under the
Loan Agreement to pay to the Banks the amounts outstanding under the RCC Credit
Loan and (ii) the date on which the Debtor shall receive cash proceeds in an
amount equal to or greater than the amount of principal, and interest thereon,
due and owing hereunder, from the sale of its membership interests as
contemplated by the Debtor's Offer to Purchase of Beneficial Assignment
Certificates ("BACs") of Independence Tax Credit Plus L.P. II, dated November
10, 1997 (as amended, the "Offer").
The Debtor hereby authorizes the Payee to record on the grid
schedule attached hereto and made a part hereof the amount and date of each
advance made hereunder and the date and amount of each payment of principal
thereon. All such notations shall be presumptive as to the correctness thereof
and the aggregate unpaid amount of advances set forth on such schedule shall be
presumed to be the unpaid principal amount hereof.
The principal amount of this Note may be prepaid at any time
or from time to time by Debtor, in whole or in part, without premium or penalty,
provided that all partial prepayments shall be in a minimum amount of $100,000
(or such lesser amount as may then be outstanding
<PAGE>
hereunder) and integral multiples of $25,000 thereof. All prepayments shall be
accompanied by the payment of interest accrued on the amount of such prepayment
to the date thereof. Amounts of principal prepaid or repaid under this Note may
not be reborrowed.
In addition, the Debtor promises to pay accrued interest to
the Payee, on the date of each prepayment of the principal hereof as set forth
in the previous paragraph, on the Payment Date and thereafter on demand, in like
money at said office or place from the date hereof on the unpaid principal
balance hereof at a rate per annum equal to the rate of interest payable at any
time and from time to time by the Payee to the Banks on advances made to the
Payee under the Loan Agreement (collectively, at any time, all such advances,
the "RCC Credit Loan") and advanced by the Payee to the Debtor hereunder.
Interest shall be calculated on the basis of a 360-day year and actual days.
If Payment of all outstanding principal and accrued interest
is not made in full on or prior to the Payment Date, then the Debtor shall pay,
as additional interest, all other amounts owing by Payee to the Banks under the
Loan Agreement as a result of such non-payment or incomplete payment, as the
case may be.
This Note is secured by the Pledge and Security Agreement (as amended,
modified or supplemented from time to time, the "Pledge Agreement") between the
Debtor and the Payee and is a note referred to therein and is entitled to the
benefits thereof.
The holder of this Note may declare all principal and interest thereon
evidenced by this Note immediately due and payable upon the happening of any of
the following events (each, an "Event of Default"): (i) nonpayment when the same
becomes due, whether by acceleration or otherwise, of any principal, interest or
other amount on or under this Note; (ii) default by the Debtor in the payment or
performance of any obligation under, or termination of, the Pledge Agreement;
(iii) Debtor shall (a) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code or any other Federal,
state or foreign bankruptcy, insolvency, liquidation or similar law, (b) consent
to the institution of, or fail to contravene in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (c) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official for Debtor or for a substantial part of its property or assets, (d)
file an answer admitting the material allegations of a petition filed against it
in any such proceeding, (e) make a general assignment for the benefit of
creditors, (f) become unable, admit in writing its inability or fail generally
to pay its debts as they become due or (g) take corporate action for the purpose
of effecting any of the foregoing; (iv) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a court of competent
jurisdiction seeking (a) relief in respect of Debtor, or of a substantial part
of the property or assets of Debtor, under Title 11 of the United States Code or
any other Federal state or foreign bankruptcy, insolvency, receivership or
similar law, (b) the appointment of a receiver, trustee, custodian, sequestrator
or similar official for Debtor or for a substantial part of the property of
Debtor or (c) the winding-up or liquidation of Debtor, and such proceeding or
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall continue unstayed and in effect for 30
days; or (v) the occurrence of any event described in clause
-2-
<PAGE>
(iii) or (iv) of this paragraph with respect to any endorser, guarantor or any
other party liable for, or whose assets or any interest therein secures, payment
of any indebtedness evidenced by this Note.
The Debtor hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the party to be charged.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AND SHALL BE BINDING UPON THE SUCCESSORS AND
ASSIGNS OF THE DEBTOR AND INURE TO THE BENEFIT OF THE PAYEE AND ITS SUCCESSORS
AND ASSIGNS.
IN WITNESS WHEREOF, the Debtor, by its duly authorized officer, has
executed and delivered this Note on the date first above written.
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: Lehigh Tax Credit Partners, Inc.,
its managing member
By: /s/ Alan P. Hirmes
----------------------------
Name: Alan P. Hirmes
Title: Vice President
-3-
<PAGE>
Loans and Payment
-----------------
<TABLE>
<S> <C> <C> <C>
Payments of Unpaid Principal
Date Amount of Loan Principal/Interest Balance of Note
- ---- -------------- ------------------ ---------------
</TABLE>
-4-
INDEPENDENCE TAX CREDIT PLUS L.P. II
625 Madison Avenue
New York, NY 10022
November 7, 1997
Personal and Confidential
- -------------------------
Related Independence Associates L.P.
Lehigh Tax Credit Partners L.L.C.
625 Madison Avenue
New York, NY 10022
Gentlemen:
As you requested, the purpose of this letter is to set forth our
understanding with regard to any proposed acquisition of beneficial assignment
certificates ("BACs") of Independence Tax Credit Plus L.P. II, a Delaware
limited partnership (the "Partnership"), from holders of BACs (each a "BACs
holder" and collectively, "BACs holders") by Related Independence Associates
L.P. ("RIA"), Lehigh Tax Credit Partners L.L.C. ("Lehigh") or any person who is
their Affiliate (as defined below) (collectively, "you").
In response to your proposal to commence a tender offer for BACs and in
consideration of the agreements set forth in this letter agreement, the
Partnership agrees to mail your tender offer materials, at your expense, subject
to the terms set forth below and whether or not such tender offer is subject to
the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Nothing in this letter agreement shall be construed as requiring the
Partnership to provide you with a current list of the names and addresses of the
BACs holders. The Partnership will not be obligated to mail your tender offer
materials until it has received from you an amount of cash equal to $10,000,
representing the estimated cost of such mailing together with the Partnership's
other expenses, including, without limitation, reasonable attorney fees.
You represent and warrant that on the date hereof you beneficially own
not more than eighty five (85) BACs. You also agree that prior to the tenth
anniversary of the date of this letter agreement, neither you nor any person who
is your Affiliate (as defined under Rule 405 of the Securities Act of 1933, as
amended) will, without the prior written consent of the Partnership, which may
be withheld for any reason, directly or indirectly, (i) seek or propose to enter
into, directly or indirectly, any merger, consolidation, business combination,
sale or acquisition of assets, liquidation, dissolution or other
<PAGE>
similar transaction involving the Partnership, (ii) form, join or otherwise
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any voting securities of the Partnership, except that those
Affiliates bound by this letter agreement will not be deemed to have violated
this letter agreement and formed a "group" solely by acting in accordance with
this letter agreement, (iii) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of this letter
agreement or (iv) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of this letter agreement.
Notwithstanding the foregoing restrictions, nothing in this letter agreement
shall apply to, govern, restrict or limit any sales, purchases, transfers or
assignments of interests in Lehigh.
You hereby represent, warrant and covenant to the Partnership that any
tender offer to purchase BACs commenced by you will be conducted in compliance
with Section 14(e) (misleading statements), Rule 14d-7 (additional withdrawal
rights), Rule 14d-8 (pro rata requirements), Rule 14e-1 (unlawful tender offer
practices) and Rule 14e-3 (non-public information) of the Exchange Act,
notwithstanding that such tender offer may be for less than 5.0% of the
outstanding BACs.
You understand that the general partner of the Partnership may consider
from time to time selling all or substantially all of the assets of the
Partnership or entering into any other transaction determined by the general
partner to be in the best interests of the BACs holders and the Partnership. The
result of any such transaction, if approved by a majority vote of the BACs
holders, might be the dissolution and liquidation of the Partnership in
accordance with the partnership agreement. Accordingly, in order to avoid
disrupting any possible sale of all or substantially all of the Partnership's
assets or any other transaction determined by the general partner to be in the
best interests of the BACs holders and the Partnership and any required vote of
BACs holders, you agree that, prior to the ten-year anniversary of the date of
this letter agreement, all BACs obtained by you pursuant to any means will be
voted by you on all issues in the same manner as by the majority of all other
BACs holders who vote on such proposal. Notwithstanding the foregoing, you may
vote all BACs in the manner you determine, in your sole and absolute discretion,
on proposals (i) concerning the removal of RIA as general partner of the
Partnership or (ii) seeking to reduce any fees, profits, distributions or
allocations attributable to RIA or its Affiliates.
If at any time during such ten year period you (excluding your
affiliate which serves as the general partner of the Partnership while acting in
its capacity as general partner) are contacted in writing by any third party
concerning participation
2
<PAGE>
in any transaction involving the assets, businesses or securities of the
Partnership or involving any action inconsistent with the terms of this letter
agreement, you will promptly forward a copy of such writing to the Partnership
and you may inform such third party that this letter agreement requires you to
so notify the Partnership, provided, however, this paragraph shall not apply to
any transaction or proposed transaction involving all or substantially all of
the assets, businesses or securities of Related Capital Company and/or its
Affiliates (other than the Partnership and RIA).
Nothing in this letter agreement shall apply to, govern, restrict or
limit any sales, purchases, transfers or assignments of interests in Lehigh.
Notwithstanding the immediately preceding sentence, Lehigh shall remain bound by
this letter agreement notwithstanding that any interests in Lehigh have been
sold, purchased, transferred or assigned.
Lehigh, RIA and Related Capital Company agree to indemnify and hold
harmless, to the fullest extent permitted by law, the Partnership, Independence
SLP L.P., and each of their partners, directors, officers, employees,
representatives and agents (the "Indemnified Parties") against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law), judgments, fines and amounts (collectively, "Damages") paid
in connection with any threatened or actual claim, action, suit, proceeding or
investigation which arises out of or is the result of a breach of this letter
agreement, any tender offer commenced by you (regardless of whether such tender
offer is subject to the provisions of the Exchange Act) or the actual or
proposed acquisition of BACs by you by any other means; provided, however, that
if such claim, action, suit, proceeding or investigation is threatened but not
actual, your obligation to indemnify the Indemnified Parties shall apply only if
such threat is in writing and only with respect to any legal fees incurred in
connection with such threat. If such threat becomes an actual claim, action,
suit, proceeding or investigation, you shall then be responsible for the full
indemnification provided for in this paragraph. If an Indemnified Party intends
to seek indemnification pursuant to this paragraph, it shall promptly notify you
of such claim, in writing, describing such claim in reasonable detail; provided,
that the failure to provide such notice shall not affect your obligations herein
unless you are materially prejudiced by the failure to provide such notice.
Counsel for the Indemnified Party shall be chosen at your discretion and shall
be directed by you. We both agree that you will be materially prejudiced if, due
to the failure of an Indemnified Party to provide the notice required above, you
were not given the opportunity to obtain the counsel of your choice or
3
<PAGE>
direct such counsel. You may participate at your own expense in the defense of
any such action; provided, that counsel for the Indemnified Party shall not
(except with the consent of the Indemnified Party) also serve as your counsel.
You shall not, without first obtaining a general release from liability for the
Indemnified Parties in a form satisfactory to such Indemnified Parties, settle
or compromise or consent to the entry of any judgment with respect to any
threatened or actual claim, action, suit, proceeding or investigation involving
an Indemnified Party which seeks indemnity under this paragraph. If the
indemnification provided in this paragraph is for any reason unavailable to or
insufficient to hold harmless an Indemnified Party in respect of any Damages
referred to above, then you and each party seeking indemnification shall
contribute to the aggregate amount of such Damages incurred by such Indemnified
Party in such proportion as is appropriate to reflect the relative benefits
received by each party from the act which gives rise to the indemnification
claim. You agree that the amount of such economic benefit received by each
Indemnified Party shall be $1 and the amount of such economic benefit received
by you shall be computed by multiplying your per BAC offer price by the total
number of BACs which were sought in your tender offer. Both you and the
Indemnified Parties each hereby agree to cooperate fully in all aspects of any
investigation, defense, pre-trial activities, trial, compromise, settlement or
discharge of any claim in respect of which indemnity is sought pursuant to this
paragraph, including, but not limited to, by providing the other party
reasonable access upon reasonable notice to employees and officers and other
information during reasonable business hours. Nothing in this paragraph is
intended to limit your ability to obtain indemnification from the Partnership if
such indemnification is available to you pursuant to the Partnership's
partnership agreement and applicable law, provided, however, that your
obligations herein shall not be affected by your ability or inability to obtain
such indemnification. We each hereby agree that the provisions of this paragraph
shall have no effect on any other partnership which you or any of our respective
Affiliates may be a partner.
Notwithstanding the immediately preceding paragraph, we acknowledge
that you may engage a third party lender(s) to finance your proposed acquisition
of BACs. We hereby acknowledge and agree for the benefit of such third party
lender(s) that the indemnification provisions in the immediately preceding
paragraph are not intended to apply to or obligate, and in no event shall be
binding upon, such third party lender(s) or any of its assigns or successors in
interest to any of the BACs acquired by you.
We each hereby acknowledge that we are aware, and that we will advise
our respective Affiliates, of our respective responsibilities under the
securities laws. We each agree that the other of us or our respective
Affiliates, as the case may be,
4
<PAGE>
shall be entitled to equitable relief, including injunctive relief and specific
performance, in the event of any breach of the provisions of this letter
agreement, in addition to all other remedies available at law or in equity.
In case any provision in or obligation under this letter agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
This letter agreement shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law thereof. This
letter agreement may be executed in counterparts, each of which shall be deemed
an original, but all of which together constitute one and the same instrument.
5
<PAGE>
If you agree with the foregoing, please sign and return two copies of
this letter agreement, which will constitute our agreement with respect to the
subject matter of this letter agreement.
Very truly yours,
INDEPENDENCE TAX CREDIT PLUS L.P. II
By: Related Independence Associates
L.P., its general partner
By: Related Independence Associates
Inc., its general partner
By: /s/ Stuart J. Boesky
---------------------------------
Name: Stuart J. Boesky
Title: Vice President
Confirmed and agreed to as of
the date first above written
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: Lehigh Tax Credit Partners, Inc.,
its managing member
By: /s/ Alan P. Hirmes
-------------------------------
Name: Alan P. Hirmes
Title: Vice President
RELATED INDEPENDENCE ASSOCIATES L.P.
By: Related Independence Associates Inc.,
its general partner
By: /s/ Alan P. Hirmes
-------------------------------
Name: Alan P. Hirmes
Title: Senior Vice President
LEHIGH TAX CREDIT PARTNERS L.L.C.
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
April 23, 1997
Everest Properties
3280 E. Foothill Boulevard
Suite 320
Pasadena, California 91107
Attention: W. Robert Kohorst
Gentlemen:
This letter agreement confirms our mutual agreement to be
bound by the terms of this letter agreement, including the terms and conditions
set forth in Exhibit A annexed hereto and made a part hereof. This agreement is
intended to be legally binding and enforceable upon execution and delivery
hereof.
Each of the parties represents and warrants to the other that
(1) it has the right, power and authority to enter into this letter agreement
and perform its obligations hereunder, (2) upon the execution of this letter
agreement by each of the parties hereto, this letter agreement will constitute
the legal, valid and binding obligation of such party, enforceable against such
party in accordance with its terms, and (3) no consent or approval of any third
party or governmental agency or authority is required for such party to execute
and deliver this letter agreement or to perform its obligations hereunder.
Each of the parties hereto agrees that the terms of this
letter agreement are confidential and may not be disclosed by any party hereto,
except as may be required by law and except to the principals and authorized
representatives of the parties hereto and the general partners of Liberty III
and the Additional Partnerships (as defined in Exhibit A), without the written
consent of all of the parties. Except as may be required by law, any public
announcement regarding this letter agreement or the transactions contemplated
herein may not be made by any party without the prior consent of all other
parties hereto.
This letter agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to the
conflicts of law provisions thereof. Nothing herein shall be deemed to grant
jurisdiction to the State of New York over any dispute concerning this letter
agreement.
This letter agreement may be executed in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
This letter agreement supersedes any and all prior agreements,
written or oral, by or among any of the parties hereto with respect to the
subject matter hereof and may not be amended or otherwise modified except in
writing signed by all of the parties hereto.
This letter agreement shall be binding upon the parties hereto
and their respective successors, assigns and controlled affiliates.
Any party may execute this letter agreement by transmitting a
copy of its signature by facsimile to the other parties. In such event the
signing party shall deliver an original of the signature page to each of the
other parties within one business day of signing and failure to so deliver such
originals shall result in the facsimile copy of that party's signature being
treated as an original.
Very truly yours,
LEHIGH TAX CREDIT PARTNERS L.L.C.
By: Lehigh Tax Credit Partners, Inc.,
Managing Member
By: /s/ Alan P. Hirmes
-------------------------------------
Alan P. Hirmes, Vice President
LEHIGH TAX CREDIT PARTNERS, INC.
By: /s/ Alan P. Hirmes
-------------------------------------
Alan P. Hirmes, Vice President
RELATED CAPITAL COMPANY
By: /s/ Alan P. Hirmes
-----------------------------------
Name: Alan P. Hirmes
Title: Senior Managing Director
ACCEPTED AND AGREED TO AS
OF THE DATE FIRST ABOVE WRITTEN:
EVEREST PROPERTIES, INC.
By: /s/ David I. Lesser
---------------------------
Name: David I. Lesser
Title: Executive Vice President
-2-
<PAGE>
EVEREST PROPERTIES II, LLC
By: /s/ David I. Lesser
------------------------
Name: David I. Lesser
Title: Executive Vice President
EVEREST PROPERTIES, LLC
By: /s/ David I. Lesser
------------------------
Name: David I. Lesser
Title: Executive Vice President
EVEREST TAX CREDIT INVESTORS, LLC
By: /s/ David I. Lesser
------------------------
Name: David I. Lesser
Title: Executive Vice President
-3-
<PAGE>
EXHIBIT A
OPTION TO PURCHASE SECURITIES
Tender Offer(s)
I. Liberty Tax Credit Plus III L.P.
--------------------------------
Lehigh Tax Credit Partners L.L.C. has commenced a tender offer
(the "Liberty III Offer") to purchase up to 17,500 of the issued and
outstanding Beneficial Assignment Certificates ("BACs") representing
limited partnership interests in Liberty Tax Credit Plus III L.P.
("Liberty III") at a purchase price of $588.20 per BAC, net to the
seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated April 10, 1997.
The Liberty III Offer expires at 12:00 midnight, New York City time, on
May 8, 1997 or such later date to which the Liberty III Offer may be
extended. Lehigh filed a Tender Offer Statement on Schedule 14D-1 (the
"Liberty III Schedule 14D-1") with the Securities and Exchange
Commission (the "Commission") with respect to the Liberty III Offer on
April 10, 1997. References herein to the Liberty III Offer shall
include (a) any amendments to the Liberty III Schedule 14D-1 and (b)
any subsequent tender offer made by Lehigh for BACs in Liberty III.
II. Additional Tender Offers Contemplated
-------------------------------------
Attached hereto as Schedule I is a list of additional
partnerships (the "Additional Partnerships"), the securities of which
may be subject to a tender offer by Lehigh Tax Credit Partners L.L.C.,
Related Capital Company or any direct or indirect affiliate thereof
(collectively, "Lehigh"). Those additional tender offers, the Liberty
III Offer and any other tender offers for Liberty III or the Additional
Partnerships in which Lehigh participates (participation meaning the
activities covered by clauses (ii), (iv) and (vi) set forth under
"Standstill" below) are collectively referred to herein as the "Tender
Offers", and each a "Tender Offer". The BACs tendered pursuant to the
Liberty III Offer and the securities tendered pursuant to the other
Tender Offers are referred to herein as "Tendered Securities". Lehigh
agrees (a) that the tender offers for securities of any Additional
Partnerships shall be for at least 25% of the outstanding securities of
such Additional Partnership and (b) to commence Tender Offers for the
securities of at least two Additional Partnerships by July 31, 1997.
Option to Purchase Securities; Payment of Securities and Expenses
Subject to the terms and conditions set forth below, Lehigh hereby
grants, or will cause to be granted, to Everest Properties II, LLC and its
affiliates (collectively, "Everest") an option to purchase up to 25% of the
securities tendered in each Tender Offer; provided, however, the maximum amount
of all Tendered Securities purchased by Everest pursuant to this letter
agreement shall not exceed an amount that has an aggregate purchase price of
more than Ten Million ($10,000,000) Dollars; provided further, however, if
Everest has not had the opportunity to exercise its option to purchase Tendered
Securities with an aggregate purchase price of Ten Million ($10,000,000) Dollars
in connection with the first three Tender Offers, the 25% limitation set forth
above shall be increased in connection with any future Tender Offer(s) to a
percentage that will provide Everest with the opportunity to exercise its option
to
<PAGE>
purchase Tendered Securities with an aggregate purchase price of Ten Million
($10,000,000) Dollars. Upon the expiration of a Tender Offer, Lehigh shall
provide written notice to Everest of the amount of Tendered Securities accepted
by Lehigh pursuant to such Tender Offer. Within two business days following
Lehigh's notice to Everest, Everest shall notify Lehigh in writing whether or
not it elects to exercise its option and to what extent. If Everest fails to
notify Lehigh of the exercise of its option within such two business day period,
Everest shall be deemed not to have exercised its option. If such option is
exercised, Everest shall pay Lehigh, by wire transfer, on the later of (a) one
business day after Everest delivers written notice of its election to exercise,
(b) one business day after Lehigh has given notice to Everest that Lehigh will
pay tendering security holders in accordance with the terms of the Tender Offer
(such notice to be given by Lehigh to Everest not less than one business day
prior to the date of such payment) and (c) the date that Lehigh makes such
payment, an amount equal to (i) the number of Tendered Securities with respect
to which Everest exercised its option (the "Option Securities") multiplied by
the price per Tendered Security paid by Lehigh in the applicable Tender Offer
plus (ii) Everest's share of the "Total Expenses" (as defined below) for such
applicable Tender Offer (see "Allocation of Expenses" below). Upon receipt of
such payment, (1) Lehigh will deliver the Option Securities to Everest, together
with all necessary documentation to transfer to Everest all of Lehigh's right,
title and interest in and to such Option Securities, (2) Lehigh will assign to
Everest its rights under all letters of transmittal (including related proxies
and powers-of-attorney) relating to such Option Securities, and (3) Everest will
agree in writing to be bound by the terms and conditions of the "Partnership
Standstill Agreement" (as defined below), if any, governing the Tendered
Securities. Lehigh will deliver (or will cause to be delivered), concurrently
with the receipt of such payment from Everest by Lehigh, a confirmation from the
subject partnership setting forth the number of Option Securities that will be
transferred to Everest.
Allocation of Expenses
At the time of the purchase of any Option Securities, Everest shall pay
to Lehigh a portion of Total Expenses related to such Tender Offer equal to the
lesser of (a) $25,000 and (b) Total Expenses multiplied by a fraction, the
numerator of which is the number of Tendered Securities purchased by Everest and
the denominator of which is the total number of Tendered Securities purchased
pursuant to the Tender Offer. "Total Expenses" with respect to each Tender Offer
means all third-party out-of-pocket costs and expenses incurred by Lehigh,
Everest or their respective affiliates (including attorneys fees and expenses in
connection with the preparation and filing of any Tender Offer documents, but
excluding litigation expenses) with respect to each Tender Offer, including,
without duplication, Commission filing fees, the out-of-pocket expenses of any
person for acting as the information agent/depositary for the Tender Offer,
printing and mailing expenses, and the out-of-pocket expenses of the general
partners of Liberty III or any Additional Partnership which are paid for by
Lehigh. Total Expenses shall not include the costs of purchasing the Tendered
Securities or any non-third-party costs, including the overhead of Lehigh. Each
party will provide, upon the execution and delivery hereof, an estimate of its
costs and expenses incurred to date in connection with any Tender Offers and
shall provide, upon request, invoices or other appropriate evidence of the
incurrence of costs and expenses constituting Total Expenses hereunder.
Liabilities, costs, obligations and damages incurred by any party in connection
with any litigation or threatened litigation relating to, or arising from, the
Tender Offers ("Tender Offer Litigation") shall be borne by Lehigh and not
Everest. Lehigh agrees to indemnify and defend Everest and its affiliates,
officers, directors, members, employees and agents from and against all
liabilities, costs, obligations and damages in connection with Tender Offer
Litigation (even if the same are covered by an indemnification assumed by
Everest under the Partnership Standstill Agreement).
-2-
<PAGE>
Standstill Agreement
Everest covenants and agrees that neither it nor any person who is its
Affiliate (as defined under Rule 405 of the Securities Act of 1933, as amended)
will, directly or indirectly: (i) in any manner including, without limitation,
by tender offer (whether or not pursuant to a filing made with the Commission),
acquire, attempt to acquire or make a proposal to acquire, directly or
indirectly, any securities of Liberty III or any Additional Partnership, except
for (a) the Option Securities and (b) purchases of de minimis amounts of
securities in the secondary market at the prevailing secondary market price (it
being understood that the purchaser of such de minimis amounts of securities
shall be bound by the terms and conditions of this agreement); (ii) seek or
propose to enter into, directly or indirectly, any merger, consolidation,
business combination, sale or acquisition of assets, liquidation, dissolution or
other similar transaction involving Liberty III or any Additional Partnership;
(iii) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" or "consents" (as such terms are used in the proxy
rules of the Commission) to vote, or seek to advise or influence any person with
respect to the voting of, any voting securities of Liberty III or any Additional
Partnership; (iv) form, join or otherwise participate in a "group" (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
with respect to any voting securities of Liberty III or any Additional
Partnership; (v) disclose in writing to any third party any intention, plan or
arrangement inconsistent with the terms of this letter agreement; or (vi) loan
money to, advise, assist or encourage any person in connection with any action
inconsistent with the terms of this letter agreement. The foregoing restrictions
shall continue in full force and effect from the date hereof and forever, in
perpetuity, with respect to the securities of Liberty III and any Additional
Partnership, on a partnership by partnership basis if Lehigh has accepted
Tendered Securities of the subject partnership and Everest has either (a)
exercised its option, (b) not exercised its option or (c) such option is deemed
not to have been exercised in accordance with the terms hereof. The foregoing
restrictions shall continue in full force and effect from the date hereof and
forever, in perpetuity, with respect to the securities of Liberty III and all of
the Additional Partnership if Everest has been granted an option by Lehigh to
purchase Option Securities for an aggregate purchase price of Ten Million
($10,000,000) Dollars. If Lehigh fails to commence Tender Offers for the
securities of any Additional Partnership by October 31, 1997 and the aggregate
purchase price for which Everest could have exercised its option to purchase
Tendered Securities prior to such date (but for its failure or deemed failure to
exercise such option) is less than Ten Million ($10,000,000) Dollars or if
Lehigh defaults in any material respect in the performance of its obligations
hereunder, then Everest shall cease to be bound by the foregoing restrictions,
but only with respect to Additional Partnerships for which Lehigh has failed to
commence Tender Offers. If Lehigh defaults in any material respect in the
performance of its obligations under the section titled "Option to Purchase
Securities; Payment of Securities and Expenses" above, then Everest shall cease
to be bound by the foregoing restrictions, but only with respect to the
partnership to which such default relates and any Additional Partnerships for
which Lehigh has failed to commence tender offers prior to the date of such
default.
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Partnership Standstill Agreement(s)
Lehigh entered into a letter agreement with Liberty III, dated April 4,
1997 (the "Liberty III Standstill Agreement"), a copy of which has been filed as
an exhibit to the Liberty III Schedule 14D-1. It is expected that some or all of
the Additional Partnerships may require similar standstill agreements prior to
Lehigh commencing an offer for the securities of such Additional Partnerships
(such agreements, together with the Liberty III Standstill Agreement, are
referred to herein as the "Partnership Standstill Agreements"). Everest
covenants and agrees that upon the purchase of any Tendered Securities, it will,
if applicable, agree to be bound by the terms and conditions of any Partnership
Standstill Agreement (including without limitation the Liberty III Standstill
Agreement) or execute a replacement standstill agreement reasonably acceptable
to the subject partnership.
Litigation
Reference is made to the following actions pending in Delaware Chancery
Court: (i) Everest Properties, Inc. v. Liberty Tax Credit Plus III L.P., Related
Credit Properties III L.P., Liberty GP III Inc., Lehigh Tax Credit Partners
L.L.C. and Lehigh Tax Credit Partners, Inc. (C.A. No. 15660) (commenced April
15, 1997); and (ii) Everest Properties, Inc. v. Liberty Tax Credit Plus III
L.P., et al. (C.A. No. 15531) (commenced February 10, 1997). Everest covenants
and agrees that it shall immediately cause these actions to be dismissed,
without prejudice, and without costs to any of Lehigh, its affiliates or the
defendants in such actions. Each of Lehigh and Everest hereby releases the
other, and Everest hereby releases all of the defendants in the foregoing
actions, from any and all claims for events that have occurred prior to the date
of this letter agreement, such releases being expressly conditioned upon the
performance by Lehigh, in the case of Everest's release, Everest, in the case of
Lehigh's release, and the other defendants, in the case of Everest's release, of
their respective obligations, if any, hereunder.
Conduct of Offer(s)
All decisions relating to the conduct of the Tender Offers and the
acquisition and transfer of Tendered Securities pursuant thereto, including
without limitation any change in the terms or waiver of any of the conditions
thereof, shall be made solely by Lehigh. Notwithstanding the foregoing, if
requested by Everest, Lehigh agrees to consult with Everest prior to commencing
a Tender Offer with regard to the purchase price offered therein and prior to
increasing the offered price in any Tender Offer commenced prior to the date
hereof. Lehigh agrees to amend the Liberty III Offer materials to include the
following statement:
In its filed pleadings, Everest stated that the estimated
offer price of $414 per BAC for a possible tender offer by
Everest, as disclosed in the Offer to Purchase, was incorrect
and Everest intended to offer BACs holders a price higher than
the then-Purchase Price offered by the Purchaser.
Cooperation
Everest and Lehigh shall cooperate and provide each other with such
information as may be necessary or desirable to disclose the transaction(s)
contemplated hereby in accordance with applicable securities laws and the rules
and regulations promulgated thereunder. In addition, subject to applicable laws,
Lehigh agrees to provide Everest, promptly upon request (but in no event later
than five days prior
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to the commencement of a Tender Offer), with copies of all reports sent to
limited partners, filings with the Commission and other public information
reasonably requested by Everest. Additionally, Lehigh agrees to furnish Everest,
promptly upon request, a report of securities tendered in any pending Tender
Offer.
No Other Contracts
Except as expressly set forth herein, there are no contracts,
arrangements, understandings or relationships between Everest and Lehigh with
respect to the BACs or the securities of any Additional Partnership.
Further Assurances
Each of the parties agrees that it shall take whatever action or
actions as are deemed by counsel to any party hereto to be reasonably necessary,
advisable or convenient from time to time to effectuate the provisions or intent
of this agreement, and to that end, each party agrees that it will execute,
acknowledge and deliver any further instruments or documents as give force and
effect to this letter agreement or any of the provisions hereof, or to carry out
the intent of this letter agreement or any of the provisions hereof. Related
Capital Company agrees that it shall, and shall cause its affiliates to, take
such action as may be necessary to effectuate the provisions or intent of this
letter agreement. Furthermore, Related Capital Company agrees to (i) effect the
transfer to Everest of any Option Securities on the books and records of Liberty
III and any Additional Partnership to Everest contemporaneously with effecting
any such transfer to Lehigh on such books and records and (ii) consistent with
past practice and subject to the advice of legal counsel that the requested
transfer will result in the subject partnership being treated as a
"publicly-traded partnership" for federal income tax purposes, promptly effect
all other transfers to Everest of the securities of Liberty III and any
Additional Partnership permitted by the terms of this letter agreement.
Remedies
It is understood and agreed that monetary damages would be an
inadequate remedy for violation of this agreement, and in the case of an actual
breach by a party of the provisions hereof, any one or more of the other parties
shall be entitled to relief by way of injunction, specific performance or other
equitable relief. The prevailing party in any dispute arising out of this letter
agreement shall, in addition to any monetary damages or equitable relief, be
entitled to recover from the other party, the prevailing party's attorney's fees
and expenses (including the time of personnel employed by Lehigh or Everest)
incurred in connection with such dispute.
Notices
Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, sent by facsimile transmission
or sent by reputable overnight courier, postage or other charges prepaid. Any
such notice shall be deemed given when so delivered personally, or by facsimile
transmission or, if sent by overnight courier, one day after delivery to the
courier, as follows:
If to Lehigh, to:
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Lehigh Tax Credit Partners L.L.C.
c/o Related Capital Company
625 Madison Avenue
New York, New York 10022
Attention: Alan P. Hirmes
Telephone: (212) 421-5333
Telecopier: (212) 593-5794
If to Everest, to:
Everest Properties
3280 E. Foothill Boulevard
Suite 320
Pasadena, California 91107
Attention: W. Robert Kohorst
Telephone: (818) 585-5920
Telecopier: (818) 585-5929
Any party may designate another address or person for receipt of
notices hereunder by notice given in accordance with this section to the other
party.
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