SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
60 EAST 42ND ST. ASSOCIATES
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Aggregate number of securities to which transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and determined):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Total fee paid:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[ ] Fee paid previously with preliminary materials.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Form, Schedule or Registration Statement No.:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Filing Party:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Date Filed:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
PRELIMINARY COPY
60 EAST 42ND ST. ASSOCIATES
C/O WIEN & MALKIN LLP
LINCOLN BUILDING
60 EAST 42ND ST.
NEW YORK, NEW YORK 10165-0015
August __, 1997
TO: PARTICIPANTS IN 60 EAST 42ND ST. ASSOCIATES:
60 East 42nd St. Associates ("Associates"), a New York partnership, was
formed in 1958 to acquire The Lincoln Building and underlying land at 60 East
42nd St., New York, New York (the "Premises"), subject to a Net Lease to
Lincoln Building Associates, the continuing Net Lessee. The investment in
Associates is divided among seven Participating Groups. Under the
Participating Agreement of each Group, an Agent, who also serves as a partner
in Associates, represents the Participants in the Group. Through its Agent,
each Group holds an undivided one-seventh interest (the "Property") in
Associates. Agent discretion, however, either as Agent or as a partner in
Associates, is virtually non-existent, as the Premises are held subject to the
Net Lease. Additionally, all significant transactions with respect to the
Premises or the Property must be consented to by 100% in interest of the
Participants in a Group, except that, once 90% in interest of Participants in
a Group consent, then the Participation Agreement for each Group provides that
the remaining 10% in interest of dissenting or abstaining Participants may be
bought out at a nominal price.
As a result of resignations, retirements and deaths, none of the
successor Agents listed in the Participating Agreements of each Group is now
available to serve, and two of the Groups currently have no Agent.
Additionally, the remaining Agents believe that the vote required to permit
significant transactions with respect to the Property or the Premises should
be changed, as the current provision allows a relatively small number of
Participants in any one Group to block a transaction that might otherwise
enjoy the broad support of all other Participants. Moreover, the reason for
the current high voting percentage is no longer relevant.
This letter and the accompanying statement is a Solicitation of Consents
of the Participants in 60 East 42nd St. Associates (1) to the designation of
new successor Agents, including a simplified format for Agent designation in
the future, (2) to allow an Agent to serve as an agent for more than one
Group, and (3) to change the vote required for significant transactions
involving the Property or the Premises from 100% in interest of each Group,
with a buy-out provision if consents from 90% in interest of such Group are
obtained, to 66 2/3% in
<PAGE>
interest, with no buy-out provision. Each of these changes to the
Participating Agreements is intended to provide better for the continued
long-term needs of your investment.
This solicitation is being made by Peter L. Malkin, Stanley Katzman, John
L. Loehr, Richard A. Shapiro and Thomas N. Keltner, Jr., as Agents on behalf
of Associates. We are requesting your cooperation by consenting to the
proposals, each of which is discussed in more detail in the attached
Statement.
The Participating Agreement for each Group requires the consent of 75% in
interest of the Participants in that Group to designate new successor Agents
for the Group, and 100% in interest of the Participants in that Group to
approve each of the other two proposals. Each of the proposals will be put
into place for each Group as and when the requisite consents are received for
that Group.
If you have any question concerning this Solicitation of Consents, please
communicate with Stanley Katzman, Richard A. Shapiro or Alvin Silverman,
partners in Wien & Malkin LLP, by mail at 60 East 42nd Street, New York, New
York 10165, by phone at 212-687-8700, or by fax at 212-986-7679.
This Solicitation of Consents will terminate sixty days after the date of
this letter, and, therefore, your cooperation by signing, dating and
immediately returning the colored copy of the Consent in the enclosed envelope
provided for your convenience will be greatly appreciated. Once given, a
Consent may not be revoked. This Solicitation may be extended by the Agents
for up to an additional ninety days.
Sincerely,
__________________
Peter L. Malkin
Enclosures
<PAGE>
PRELIMINARY COPY
60 East 42nd St. Associates
c/o Wien & Malkin LLP
60 East 42nd Street
New York, New York 10165
60 EAST 42ND ST. ASSOCIATES
STATEMENT ISSUED BY THE AGENTS IN CONNECTION WITH THE
SOLICITATION OF CONSENTS OF THE
PARTICIPANTS
Dated __________, 1997
This Statement is issued in connection with the solicitation of Consents
of the Participants in 60 East 42nd St. Associates ("Associates") by Peter L.
Malkin, Stanley Katzman, John L. Loehr, Richard A. Shapiro and Thomas N.
Keltner, Jr., as Agents (the "Agents") for participants in Associates.
Associates was formed to own The Lincoln Building and underlying land
(collectively the "Premises") located at 60 East 42nd Street, New York, New
York, subject to a net lease (the "Net Lease") to Lincoln Building Associates
(the "Net Lessee"). Each Agent holds a one-seventh interest (the "Property")
in Associates on behalf of a group of Participants represented by that Agent.
The Agents are requesting the consent of the participants in Associates
(the "Participants") to each of the following proposals:
(1) The designation of new successor Agents;
(2) An amendment to the Participating Agreements (as later defined) to
eliminate the requirement that no person may serve as Agent for more than one
group of Participants; and
(3) An amendment to the Participating Agreements to change the
percentage of Participation interests required to approve any sale, mortgage,
transfer, or lease arrangement with respect to the Property or the Premises
from 100%, with an opportunity to buy out the interests of dissenting or
abstaining Participants in a group if 90% of Participation interests in that
group approve of the transaction, to 66 2/3%, with no opportunity to buy out
the interests of dissenting or abstaining Participants.
The Agents recommend approval of all of these proposals, which are
discussed in greater detail in Section II, below. The following discussion
summarizes the principal advantages and disadvantages of approving the
proposals:
<PAGE>
DESIGNATION OF NEW SUCCESSOR AGENTS.
As a result of resignations, retirements and deaths, there are no
successor Agents at this time for any of the Participant groups. Moreover,
because of recent retirements, two of the seven Participant groups do not
currently have an Agent. The circumstances, therefore, require the appointment
of successor Agents for the orderly functioning and administration of
Associates now and in the future. The Agent vacancies that exist in two of the
groups would be filled from among the successor Agents proposed.
We believe that the individuals and categories of individuals proposed as
successor Agents possess, and will possess, the business experience and
backgrounds that will serve the best interests of all Participants. If new
successor Agents are not approved, the two Participant groups without an Agent
will not have the benefit of an Agent in place for the conduct of business in
the normal course as contemplated by the Participating Agreements. The same
will be true as and when Agent vacancies occur in the other Participant groups
in the future. Accordingly, the failure to approve successor Agents could
frustrate the operation of Associates and the investment of the Participants.
PERMITTING A PERSON TO SERVE AS AGENT FOR MORE THAN ONE GROUP OF
PARTICIPANTS
We believe that this change will simplify the administration of
Associates and that no Participant would be disadvantaged if an Agent acts as
Agent for another group of Participants. Agent discretion in most areas is
virtually non-existent. The Premises are held subject to the Net Lease and in
those few instances when a decision from Associates is called for with respect
to the Property or the Premises, the Agent for any group cannot act without
consent of the Participants of that group. Even if an Agent acted for more
than one group, the Agent would act independently for each group based solely
on that group's vote. In addition, an Agent's ability to serve as Agent for
more than one group, as is the case with other investment groups represented
by Wien & Malkin LLP, would more efficiently facilitate the implementation of
the first proposal in this Consent Solicitation regarding appointment of
successor Agents.
CHANGE IN VOTING PERCENTAGE FOR PARTICIPANT APPROVAL.
The current requirement for 100% Participant approval of significant
transactions, with the 90% buy-out provision, was included in the original
Participating Agreements in 1958, when Associates was formed, to address
income tax considerations that are no longer relevant. The requirement has
resulted in cumbersome, time-consuming and more costly consent solicitations.
Moreover, this "super-majority" requirement allows a small number of
Participants within any group to block significant transactions that enjoy
broad support among Participants.
The 66 2/3% voting requirement proposed for each group to approve
significant transactions is, the Agents believe, consistent with the vote
generally required for approval of major actions by investors in a modern
business entity. In any group approving this proposal, a Participant's
2
<PAGE>
individual power to block a significant transaction will be reduced, because
dissent or abstention will be required from Participants representing at least
33.4% in interest of the group instead of 10.1% as now required. In a group
not approving this proposal, a Participant's blocking power will remain
undiminished in the group and in Associates as a whole, since consent of all
groups is needed for a significant transaction by Associates. The Agents
believe that this proposal is in the best interest of all Participants because
it moderates individual veto power and enables Participants representing 66
2/3% in interest in every group to take effective action.
In any group approving this proposal, a Participant who dissents or
abstains from voting on a future significant transaction will no longer be
subject to the possibility of being bought out at a nominal price.
--------------------
It is anticipated that this Statement and the accompanying form of
Consent will be mailed to the Participants on ______, 1997. The solicitation
of Consents will terminate on _______, 1997 unless extended by the Agents, but
in no event later than _________________. The Agents will advise all
Participants of the results of the solicitation no later than 90 days after
the termination date noted above or any extension thereof.
I. BACKGROUND
Associates, a New York partnership, was organized on September 25, 1958
for the purpose of acquiring title to the Premises subject to the Net Lease.
Associates is comprised of seven investment groups of Participants, each of
which is a party to a participating agreement ("Participating Agreement")
between an agent ("Agent") and his investor Participants. Through its Agent,
each of the seven Participant groups owns a one-seventh interest (the
"Property") in Associates, representing $1,000,000 in interests of the
original $7,000,000 cash investment in Associates. Each Agent also serves as a
partner in Associates.
The original partners in Associates were the late Lawrence A. Wien, the
late Harry B. Helmsley, Alvin S. Lane, the late Henry W. Klein, the late
William F. Purcell, Alvin Silverman and Fred Linden. Peter L. Malkin, Stanley
Katzman, John L. Loehr, Richard A. Shapiro and Thomas N. Keltner, Jr. are the
current partners in Associates, and each serves as Agent to one of the five
groups of Participants that has an Agent. The Agent position is currently
vacant for two of the seven groups.
The terms of each Participating Agreement are identical to all others.
Under each of the Participating Agreements between an Agent and his respective
group, and supplements thereto, Participants have the right to approve or
disapprove certain actions proposed by their Agent, including the sale,
mortgage or transfer of the Property or the Premises or any amendment to the
Net Lease. Since an Agent is so restricted and the Premises are held subject
to the Net Lease, Agent
3
<PAGE>
discretion in most areas is virtually non-existent. There is no specific term
of office of any Agent, and Agents receive no compensation for their service.
The percentage of Participants (based on Participation interests held)
required to approve each proposal discussed in this Statement is described in
Section V. - Terms of Solicitation of Consents.
II. DISCUSSION OF PROPOSALS
A. DESIGNATION OF SUCCESSORS TO THE AGENTS
Paragraph Sixth of each Participating Agreement provides that, in the
event of the resignation, removal, death, incompetency or other disability of
an Agent, he shall be succeeded by certain persons in the order listed therein
or by any other person of full age designated in writing by the holders of at
least 75% of the Participations in that group. The individuals designated as
successor Agents in each Participating Agreement are the same in all
Participating Agreements. Additionally, all of the Participating Agreements
currently provide that no Agent may serve in that capacity for more than one
group.
Recently, two agents retired, leaving two groups with no Agent. Moreover,
as a result of resignations, retirement or death, no successor Agent named in
the Participating Agreements is available to serve at this time. Therefore, it
is necessary to designate new successors for the two retired Agents and to
designate new successors for each Agent in order to provide for the long-term
future of the investment.
The Agents recommend that the Participants in each group approve the
following as successor Agents for its group: (a) any individual who, at the
time of his or her designation as Agent, is a partner in Wien & Malkin LLP or
any successor thereto("W&MLLP"); (b) any individual who, at the time of his or
her designation as Agent, is employed by W&MLLP and has appropriate business
experience and qualifications as determined by the Chairman of the Executive
Committee of W&MLLP; (c) Anthony E. Malkin; and (d) Scott D. Malkin. The order
of succession shall be determined by Peter L. Malkin or, failing such
determination, by the Executive Committee of W&MLLP. Currently, Peter L.
Malkin serves as Chairman of the Executive Committee. Upon approval of the
designation of new successor Agents by Participants of the two groups that
currently have no Agent, it is currently anticipated that Anthony E. Malkin
and Scott D. Malkin, or one of them, will be named as Agent for one (or both,
if permitted pursuant to the second proposal) of those groups.
The Participants' consent to the designation of a category of persons
qualified to act as successor Agents, such as is represented by partners
(category (a) above) and selected employees (category (b) above) of W&MLLP,
will provide greater assurance of the continued availability of individuals
who are eligible to serve as Agents as vacancies occur in the future.
Designation of categories of appropriate individuals also will reduce the need
to conduct solicitations to approve
4
<PAGE>
new successor Agents, thus eliminating the expensive, burdensome and
time-consuming process of consent solicitations.
W&MLLP has continuously provided supervisory, accounting, professional
and various other services to Associates since Associates was formed in 1958.
The Agents, each of whom is a partner in W&MLLP, believe that W&MLLP's
experience in providing services to Associates uniquely qualifies its partners
and employees, as selected by the Chairman of its Executive Committee, to
serve as successor Agents.
Anthony E. Malkin and Scott D. Malkin are sons of Peter L. Malkin and
each is a graduate of Harvard College and experienced in real estate. After
receiving law and business degrees from Harvard University, Scott D. Malkin
has been actively involved in leading real estate ownership and development in
the United States and Europe for the past thirteen years. Anthony E. Malkin
has served for the past eight years as President of W&M Properties, Inc., the
real estate management firm owned by Peter L. Malkin and him. During his
tenure at W&M Properties, Inc., Anthony E. Malkin has initiated over
$220,000,000 in property acquisitions, and $270,000,000 in property-related
financing transactions, and has had primary responsibility for day-to-day
management and operation of office, residential and industrial properties
located in six states of the United States.
B. PERMITTING AN AGENT TO SERVE AS THE AGENT FOR MORE THAN ONE GROUP
OF PARTICIPANTS
Paragraph Sixth of each Participating Agreement provides that no Agent
shall serve as the Agent for more than one group of Participants. Each group
of Participants is requested to consent to an amendment to its Participating
Agreement to permit an Agent to represent more than one group of Participants.
This amendment to the Participating Agreements will eliminate the need
for seven different Agents at all times and will simplify administration. This
change will not affect the voting power of each Participant within the
Participating group in which he or she is a member.
An individual designated as Agent for more than one group of Participants
will be bound to act for each such group separately. When consent of each
group of Participants is requested by the Agents in the future, an Agent
acting for more than one group will not be authorized to act on a given matter
for any group not approving the matter in question, even if such Agent is
authorized to act with respect to such matter by another group for which the
Agent also acts.
If 100% consent is received from Participants in two or more groups
permitting an Agent to represent more than one group, one Agent thereafter
will represent those groups. Depending on which of the groups of Participants
consent, Peter L. Malkin (or, if he fails to act, the Executive Committee of
W&MLLP) will decide which Agent will represent the consenting groups. However,
no individual will be able to act as Agent for all groups. Accordingly, there
will always be at least two different Agents among all the Participating
groups. If 100% consent is not received as to any group, the non-consenting
group will continue to be represented by a separate Agent.
5
<PAGE>
C. CHANGING THE PERCENTAGE FOR PARTICIPANT APPROVAL
Subject to the terms of the Participating Agreement of each group of
Participants, the Agent has the power to deal with the Property as though he
were the sole owner thereof. Pursuant to paragraph FOURTH of the Participating
Agreement:
The Agent shall not agree to sell, mortgage or transfer
The Property, nor to modify any existing Lease [the Net
Lease] affecting the aforesaid premises, nor to make any
new lease affecting the same, without the consent of the
parties owning one hundred percent (100%) of The
Property.
Moreover, pursuant to a supplement to the Participating Agreement, each
Agent acknowledges that Paragraph FOURTH also limits, to the same extent, the
Agent's ability to join the other Agents, in their capacity as partners in
Associates, and sell, mortgage or transfer the Premises.
Paragraph FOURTH, however, also provides that if, in connection with any
matter for which 100% consent of Participants is required, the Agent has
received consents from 90% of the group's Participation interests, the Agent
is authorized to purchase the interest of any non-consenting Participants for
a stipulated price of (a) the book value of the Participant's interest or (b)
$100, whichever is greater. Prior to exercising this right, however, the Agent
must provide to such nonconsenting Participants written notice and an
opportunity to consent to the action. Because of the existence of this buy-out
provision, the effective vote required to authorize an Agent to act on behalf
of a group pursuant to paragraph FOURTH is 90%. (The full text of Paragraph
FOURTH is included as Appendix A to this Statement.)
Each group of Participants is requested to consent to an amendment to its
Participating Agreement to modify paragraph FOURTH to read as follows:
The Agent shall not agree to sell, mortgage or transfer
The Property, nor to modify any existing Lease affecting
the aforesaid premises, nor to make any new lease
affecting the same, without the consent of the parties
owning sixty-six and two-thirds percent (66 2/3%) of The
Property.
The balance of paragraph FOURTH, dealing with the buy-out provision,
would be eliminated. Because paragraph FOURTH limits an Agents' ability to act
with respect to the Property or the Premises, this change would alter the vote
required to authorize an Agent to act either in his capacity as Agent on
behalf of a group or as a partner in Associates. This change, however, would
not affect paragraph SIXTH of the Participating Agreement, which allows for
removal of Agents and designation of new Agents by a 75% vote of interests.
As Associates is now constituted, in order for Associates to undertake
any significant action with respect to the Property, in effect consent of 90%
of all Participation interests in each group is required. Similarly, consent
of 90% of all Participation interests in any one group is required to
6
<PAGE>
authorize an Agent, in his capacity as a partner in Associates, to join the
other partners in Associates to take an action with respect to the Premises.
As a result, just over 10% of any one group, representing $101,000 of
interests, can effectively block an action approved by all the other
Participants. If the proposed amendment is adopted by all groups, then for any
one group to block significant actions approved by all other groups with
respect to the Property or the Premises, at least $334,000 of interests in
such group must not consent to the proposed action.
Additionally, the buy-out provision will be eliminated. Because the
current book value of an original $10,000 participation has a negative balance
of [$6,392.00] as of [June 30], 1997 (computed by dividing Associates'
negative equity of [$4,474,094] by the original $7,000,000 cash investment,
would only be entitled to a payment of $100 for his Participation.
If 100% consent is received from Participants in any one group of
Participants permitting a change in the percentage vote required for approval
of significant transactions involving the Property or the Premises, then the
Participating Agreement for that group will be amended. If 100% consent to
this amendment is not received as to any group of Participants, such group
will continue to operate under the existing paragraph FOURTH. Accordingly,
when consent of Participants is sought in the future, those groups which have
consented to the 66 2/3% requirement will be appropriately designated in the
Consent Solicitation and those groups which have retained the 100% consent
requirement with the buy-out provision will be separately designated. However,
if some groups consent to the amendment, and others do not, the ability of the
Participants within the nonconsenting groups to block transactions will be
greater than that held by the Participants in the consenting groups.
Associates is currently considering a program to increase the mortgage
applicable to the Premises, to increase the Net Rent payable by the Net Lessee
to Associates and the distributions to Participants, and to extend the Net
Lease, in connection with the undertaking by the Net Lessee of an improvement
program for various building systems and public areas, to be financed in part
with proceeds of the mortgage increase. The proposed structure for this
proposed transaction would ultimately result in half the cost of the capital
improvement program being borne by the Associates and half by the Net Lessee.
At such time as the terms, conditions and scope of the program have been
determined, the consent of Participants will be solicited. If the amendment to
the Participating Agreement proposed in this Statement is approved by any
group, any vote by Participants in that group on a future transaction such as
that described in this paragraph would be conducted in accordance with new
Paragraph FOURTH.
III. POTENTIAL CONFLICTS OF INTEREST
A. CERTAIN OWNERSHIP OF PARTICIPATIONS:
As of June 30, 1997, the Agents beneficially owned, directly or
indirectly, the following Participations:
7
<PAGE>
<TABLE>
<CAPTION>
Name & Address Amount of
of Beneficial Beneficial Percent
Title of Class Owner Ownership Of Class
-------------- -------------- ---------- --------
<S> <C> <C> <C>
Participations Thomas N. Keltner, Jr. $ 2,500.00 .036%
in Partnership 1111 Park Avenue
Interests New York, N.Y. 10128
John L. Loehr $ 5,000.00 .071%
286 Alpine Circle
River Vale, N.J. 07675
Peter L. Malkin $40,833.34 .583%
21 Bobolink Lane
Greenwich, CT 06830
</TABLE>
At such date, Peter L. Malkin owned of record, as trustee or co-trustee
but not beneficially, $55,714 of Participations and his wife owned $35,000 of
Participations. Mr. Malkin disclaims any beneficial ownership of such
Participations. Richard A. Shapiro owns as custodian a $5,000 Participation
but he disclaims any beneficial ownership of such Participation.
The wife of one member of W&MLLP owns an aggregate of $10,000 of
Participations, or approximately .142% of the outstanding Participations. Her
husband disclaims any beneficial ownership in those Participations.
Scott D. Malkin owns of record and beneficially $33,334 of
Participations, or .476% of the outstanding Participations. Anthony E. Malkin
owns of record and beneficially $25,833 of Participations, or .369% of the
outstanding Participations.
B. RELATIONSHIPS WITH NET LESSEE
Peter L. Malkin, one of the Agents, also is a partner in the Net Lessee
and owns 5.00% of the partnership interests in the Net Lessee, and his wife
owns 2.5% of the partnership interests in the Net Lessee. Additionally, he
acts as trustee for certain trusts owning 12.08% of the partnership interests
in the Net Lessee. Peter L. Malkin disclaims any beneficial ownership in the
partnership interests in the Net Lessee held by his wife and such trusts.
As a consequence of (a) one of the Agents being a partner in the Net
Lessee, and (b) the current and certain potential future Agents being members
of W&MLLP (which represents Associates and the Net Lessee), certain actual or
potential conflicts of interest may arise with respect to the management and
administration of the business of Associates. However, under the respective
Participating Agreements, and supplements thereto, certain transactions
require the prior consent from Participants owning a specified interest under
the Agreements in order for the Agents to act on their behalf. Such
transactions include (a) modifications and extensions of the Net Lease, and
the granting of a new Net Lease (b) the granting of a new, and the extending
or modifying of a
8
<PAGE>
new or existing, mortgage loan secured by the Property or the Premises, or (c)
a sale or other disposition of the Property, the Premises, or substantially
all of Associates' other assets. The interest, if any, of each Agent in
Associates and in the Net Lessee, as a partner therein, arises solely from
ownership of Participations in Associates and direct or indirect partnership
interests in the Net Lessee. The Agents, as investors in Associates, receive
no extra or special benefit not shared pro rata with all other Participations
in Associates or partners in the Net Lessee. The Agents thus receive no
compensation, or any extra or special benefit, for their services as such. Any
Agent who is a Partner in W&MLLP is entitled to receive a share of any legal
fee or other remuneration paid to W&MLLP for professional services rendered to
the Net Lessee or to Associates, as described below.
W&MLLP receives $180,000 annually from the Net Lessee for acting as
supervisor of the Net Lessee's partnership agreement and additional
compensation of 10% of the distribution of cash profit of Net Lessee in excess
of $400,000 per annum.
Also, during the year ended December 31, 1996, the Net Lessee paid W&MLLP
$50,750 for legal services rendered in connection with the possible
significant transaction currently being considered which may go forward at a
later date. See "C. Changing the Percentage for Participant Approval," under
Section II., above.
C. W&MLLP SERVICES TO ASSOCIATES
Each of the current Agents is a member of W&MLLP, which receives
compensation from Associates for providing various supervisory services to
Associates. In consideration for such supervisory services, W&MLLP receives
payment of $24,000 a year and an additional payment of 10% of cash available
for distribution to Participants in excess of 14% in any year on the original
cash investment of Associates. From Associates' payments to it, W&MLLP pays
all disbursements of Associates relating to W&MLLP's supervisory services to
Associates, including accounting and other professional fees, filing and
search fees, and certain document preparation and mailing costs. During the
fiscal year ended December 31, 1996, Associates paid W&MLLP $236,528 for
supervisory services.
W&MLLP also acts as legal counsel to Associates, and provides certain
legal services in addition to the supervisory services described above. As
legal counsel to Associates, W&MLLP participated in the preparation of this
Consent Solicitation Statement and will receive compensation for its services.
During the fiscal year ended December 31, 1996, no fee was paid by Associates
for legal services rendered by W&MLLP.
IV. FEES AND EXPENSES
All fees and expenses relating to the solicitation of Consents hereunder,
including those of third parties engaged by W&MLLP to assist in the
preparation of this Consent Statement, will be advanced by W&MLLP and then
reimbursed by Associates by deducting such amounts from overage rent otherwise
available for distribution to Participants.
9
<PAGE>
V. TERMS OF SOLICITATIONS OF CONSENTS
The Participating Agreement between an Agent and the Participants in that
Agent's group requires that consents be received from the following percentage
of Participants to approve each proposal described in this Statement:
1. As to the designation of new successor Agents, referred to in
Section II.A., above - 75% in interest of the Participants in a group.
2. As to the amendment to the Participation Agreements to permit an
Agent to represent more than one group of Participants, referred to in Section
II.B., above - 100% in interest of the Participants in a group. Two or more
groups must so consent to implement the proposal.
3. As to the amendment to the Participation Agreement to change the
percentage of Participant interests required to approve certain actions by its
Agent with respect to the Property or the Premises, referred to in Section
II.C., above - 100% in interest of the Participants in a group.
On June 30, 1997, there was a total of 740 Participants in the seven
groups. Each Participant's voting percentage in his or her group is determined
by a fraction, the numerator of which is the face amount of the participation
owned and the denominator of which is the group's original $1,000,000
investment in Associates. At December 31, 1996, no person held Participations
aggregating more than 5% of the total outstanding Participations.
The solicitation of consents will terminate 60 days after the date of
this letter, but may be extended by the Agents through _________________.
There is no record date establishing the identity of the Participants entitled
to vote for the proposals. Holders of Participations as of June 30, 1997 will
be recognized as entitled to vote. However, if any Participation is
transferred before the consent with respect to that Participation is given,
the transferee will be entitled to vote. If consent to the proposals has been
given prior to the transfer of a Participation, however, the transferee will
be bound by the vote of the transferor.
W&MLLP has been authorized by the Agents to solicit the consents of
Participants by mail, fax, telephone and telegram after the mailing of this
Statement. Forms of Consent that are signed and returned without a choice
indicated as to any proposal for which consent is sought will be deemed to
constitute a consent to the applicable proposal or proposals, as the case may
be, and will be binding on each Participant as if such Participant had
actually indicated such choice on such form. If the Consent is returned
undated, it will be deemed dated as of the date received by the Agents.
The Agents recommend that Participants consent to each of the proposals.
PLEASE NOTE THAT A VOTE TO ABSTAIN IS TREATED THE SAME AS A VOTE TO
DISAPPROVE.
10
<PAGE>
Participations are not traded on an established securities market, nor
are they readily tradeable on a secondary market or the substantial equivalent
thereof. Based on Associates' transfer records, Participations are sold by
holders from time to time in privately negotiated transactions, and, in many
instances, Associates is unaware of the prices at which such transactions
occur (other than certain intra-family transfers involving Participations
owned by members of W&MLLP or their families). However, Associates has been
advised that sales prices during the past two calendar years for an original
$10,000 Participation were $20,000.
If you have any question or desire any additional information concerning
this consent solicitation, please communicate with Stanley Katzman, Richard A.
Shapiro or Alvin Silverman, partners in Wien & Malkin LLP, by mail at 60 East
42nd Street, New York, New York 10165-0015, by phone at 212-687-8700, or by
fax at 212-986-7679.
PLEASE SIGN, DATE AND IMMEDIATELY RETURN THE COLORED COPY OF THE CONSENT
IN THE ENCLOSED ENVELOPE. ONCE GIVEN, CONSENT MAY NOT BE REVOKED.
11
<PAGE>
APPENDIX A
The full text of existing Paragraph FOURTH of each Participating
Agreement is as follows:
"The Agent shall not agree to sell, mortgage or transfer The Property
[the undivided one-seventh interest of Agent as partner in Associates],
nor to modify any existing Lease affecting the aforesaid premises, nor to
make any new lease affecting the same, without the consent of the parties
owning one hundred percent (100%) of The Property.
If the consents of parties owning at least ninety per cent (90%) of The
Property have been obtained, the Agent or his designee (herein called
"purchaser") shall have the absolute right to purchase the entire
interest of any party who has not given such consent within ten (10) days
after the mailing by the Agent of a written request therefor. The price
shall be the original cost of the interest, less any capital repaid
thereon, but under no circumstances shall such price be less than One
Hundred Dollars ($100.00). The mailing by the purchaser, by registered
mail, of a certified check for such price, at any time within ninety (90)
days after such ten (10) day period, directed to such non-consenting
party at his last known address, shall effect the sale and transfer to
the purchaser of the interest of such party in The Property. The Agent is
hereby irrevocably appointed attorney-in-fact for such party to execute
any papers and to take any other action necessary to evidence such sale
and transfer. The purchaser shall then accept the transfer in writing,
and shall thereupon be a member of the joint venture with the same rights
and liabilities as the parties hereto."
