SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
INDEPENDENCE TAX CREDIT PLUS L.P. III
(Name of Subject Company)
INDEPENDENCE TAX CREDIT PLUS L.P. III
(Name of Person(s) Filing Statement)
BENEFICIAL ASSIGNMENT CERTIFICATES
(Title of Class of Securities)
45378D 10 0
(CUSIP Number of Class of Securities)
J. Michael Fried
Related Independence Associates III L.P.
625 Madison Avenue
New York, NY 10022
(212) 421-5333
(Name, Address and Telephone Number of
Persons Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
Copy to:
Peter M. Fass, Esq.
Mark Schonberger, Esq.
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
(212) 856-7000
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Item 1. Security and Subject Company.
The name of the subject company is Independence Tax Credit Plus L.P.
III, a Delaware limited partnership (the "Partnership"), which has its principal
executive offices at 625 Madison Avenue, New York, New York 10022. The general
partner of the Partnership is Related Independence Associates III L.P. (the
"General Partner"), a Delaware limited partnership, which has its principal
executive offices at 625 Madison Avenue, New York, New York 10022. The title of
the class of equity securities to which this statement relates is the
Partnership's Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership.
Item 2. Tender Offer of the Bidder.
This Schedule 14D-9 relates to the offer by Lehigh Tax Credit
Partners III L.L.C. (the "Purchaser"), a Delaware limited liability company and
an affiliate of the General Partner, disclosed in a Tender Offer Statement on
Schedule 14D-1 dated October 9, 1998 (the "Schedule 14D-1"), to purchase up to
10,860 issued and outstanding BACs at a purchase price of $750 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
October 9, 1998 and the related Letter of Transmittal, as each may be
supplemented, modified or amended from time to time (which collectively
constitute the "Lehigh Offer" and are contained within the Schedule 14D-1).
The address of the Purchaser's principal executive offices is 625
Madison Avenue, New York, New York 10022.
Item 3. Identity and Background.
(a) The name and business address of the Partnership, which is the
person filing this statement, are set forth in Item 1 above.
(b)(1) The Partnership does not have any employees, directors or
executive officers. All decisions with respect to the management of the
Partnership and its affairs are made by the General Partner. Except as described
below, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
General Partner or its affiliates and the Partnership and its affiliates.
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, as set forth in the Partnership's Amended and Restated Agreement of
Limited Partnership, dated as of August 2, 1994 (the "Partnership Agreement"),
the Partnership's prospectus and other publicly filed documents, 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
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the Partnership (including, without limitation, coordination of communications
between the Partnership and BACs holders and with the partnerships (the "Local
Partnerships") in which the Partnership has acquired a partnership interest).
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 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 properties acquired by the
Local Partnerships. For the three months ended June 30, 1998 and the three years
ended March 31, 1998, 1997 and 1996, the General Partner earned aggregate
Partnership Management Fees of $80,000, $50,000, $237,252 and $245,805,
respectively.
Independence SLP III L.P. ("Independence SLP") is an affiliate of
the General Partner. Independence SLP is entitled to receive up to $5,000 per
year as a fee (the "Local Administrative Fee") from each Local Partnership of
which it is a special limited partner; provided, however, the sum of the
aggregate Local Administrative Fee and the Partnership Management Fee for any
year shall not exceed 0.5% of Invested Assets. Independence SLP, as special
limited partner of the Local Partnerships, earned Local Administrative Fees of
$11,000, $44,000, $25,000 and $16,500 from the Local Partnerships for the three
months ended June 30, 1998 and the three years ended March 31, 1998, 1997 and
1996, respectively.
The General Partner and the officers and directors of its 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, 1998 and the three years ended March 31, 1998, 1997 and 1996, the
Partnership incurred, in the aggregate, $37,484, $119,911, $91,999 and $79,409,
respectively, to the General Partner and its affiliates as reimbursement of
expenditures and asset monitoring services made on behalf of the Partnership.
In addition, under the terms of the Partnership Agreement, upon the
removal of the General Partner by the limited partners of the Partnership (the
"Limited Partners") or upon the occurrence of a "Removal Event", as defined
below, the General Partner may be entitled to receive compensating payments,
which will be payable with interest for a term of not less than five years. The
amount of such payments 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.
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(2) The managing member of the Purchaser (the "Managing Member") is
Lehigh Tax Credit Partners, Inc., a Delaware corporation. Except as described
below, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
General Partner or its affiliates and the Purchaser or the Managing Member, its
executive officers, directors or affiliates. The Purchaser is an affiliate of
the General Partner. Most of the executive officers and directors of the
Managing Member also serve as executive officers and directors of 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 the Partnership, its partners and its
investors.
The Partnership, the Purchaser and the General Partner entered into
a letter agreement, dated October 6, 1998 (the "Standstill Agreement") (a copy
of which has been filed as Exhibit (c)(1) hereto), pursuant to which the
Purchaser agreed that, prior to October 6, 2008 (the "Standstill Expiration
Date"), it will not and it will 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 Securities Exchange Act of 1934, as amended) 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. The
Purchaser, the General Partner and Related Capital Company also agreed to
indemnify and hold harmless the Partnership, Independence SLP and certain
associated parties against any claims or damages arising from a breach of the
Standstill Agreement or from a tender offer or acquisition of BACs by the
Purchaser or its affiliates. The foregoing discussion of the Standstill
Agreement is subject to and qualified in its entirety by reference to such
agreement, which is incorporated herein by reference.
The Partnership has been informed that the Purchaser expects to
purchase all of the BACs tendered pursuant to the Lehigh Offer (other than BACs
purchased by Everest Properties, Inc. or its affiliates ("Everest") pursuant to
the Everest Option (as defined according to the Lehigh Offer)) with funds
borrowed from one of its members pursuant to a promissory note dated as of
October 9, 1998, 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, N.A. (formerly known as The First National Bank
of Boston) and Fleet National Bank (the "Lenders"). Alternatively, the
Partnership has been informed that 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 Lehigh 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. All of the BACs tendered pursuant to the Lehigh Offer
and all of the Purchaser's membership interests will be pledged
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to the Lenders to secure the loan. Additionally, Related Capital Company will
guarantee all amounts borrowed under such credit facility.
Item 4. The Solicitation or Recommendation.
(a) Following receipt of the terms of the Lehigh Offer, the General
Partner reviewed and considered the Lehigh Offer. The General Partner is
expressing no opinion and is remaining neutral with respect to the Lehigh Offer.
(b) Although the General Partner is not making a recommendation with
respect to the Lehigh Offer, the General Partner believes that BACs holders
should carefully consider the following factors in making their own decisions of
whether to accept or reject the Lehigh Offer:
o BACs holders should note that the selling price for BACs
reported in the limited and sporadic secondary market during
the two-month period ended July 31, 1997 was $850. No trading
of BACs has occurred from July, 1997 through August 31, 1998
(the last date for which public information concerning trading
in BACs is available). However, the Purchaser states its
belief in the Lehigh Offer that such secondary market selling
prices do not take into account commissions charged by
secondary market makers effectuating such sales and the fact
that the BACs become less valuable with the passage of time as
fewer tax credits remain. Additionally, based on certain
assumptions therein, the Purchaser states in the Lehigh Offer
that the present value of the potential aggregate benefits to
a BACs holder who tenders to the Purchaser exceeds the
Purchaser's estimate of the present value of the potential
aggregate benefits if a BACs holder does not tender.
o The Lehigh Offer will provide BACs holders with an immediate
opportunity to liquidate their investment in the Partnership.
BACs holders who have a present or future need for the tax
credits and/or tax losses from the BACs may, however, prefer
to retain their BACs and not tender them pursuant to the
Lehigh Offer.
o As stated by the Purchaser in the Lehigh Offer, there may be a
conflict of interest between the Purchaser's desire to
purchase the BACs at a low price and a BACs holder's desire to
sell its BACs at a high price. Therefore, BACs holders might
receive greater value if they hold their BACs, rather than
tender. Furthermore, BACs holders should be aware that a
secondary market exists for the BACs.
o BACs HOLDERS WILL NO LONGER RECEIVE THE TAX CREDITS AND/OR TAX
LOSSES FROM THE BACs SHOULD THEY TENDER PURSUANT TO THE LEHIGH
OFFER.
o BACs holders who tender their BACs will lose the right to
receive any future distributions from the Partnership,
including distributions from any refinancing or sale. The
Partnership has made no distributions to BACs holders in the
past, and there can be no assurance as to the timing, amount
or occurrence of any future distributions.
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o BACs holders should consult with their respective advisors
about the financial, tax, legal and other consequences of the
Lehigh Offer.
Item 5. Persons Retained, Employed or to Be Compensated.
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated, or intends to employ, retain or compensate,
any person to make solicitations or recommendations to BACs holders on its
behalf concerning the Lehigh Offer.
Item 6. Recent Transactions and Intent With Respect to Securities.
(a) Neither the Partnership nor the General Partner has effected any
transactions in the BACs during the past 60 days. The General Partner is not
aware of any transactions in the BACs during the past 60 days by any of its
executive officers, directors, affiliates or subsidiaries. According to the
Lehigh Offer materials, neither the Purchaser, an affiliate of the General
Partner, nor any of its executive officers, directors, affiliates or
subsidiaries have entered into any transactions in the BACs during the past 60
days.
(b) Neither the General Partner nor, to the knowledge of the General
Partner, any of its executive officers, directors, affiliates or subsidiaries
own any BACs and, therefore, cannot tender BACs to the Purchaser pursuant to the
Lehigh Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) No negotiation is being undertaken or is underway by the
Partnership in response to the Lehigh Offer which relates to or would result in:
an extraordinary transaction such as a merger or reorganization, involving the
Partnership or any subsidiary of the Partnership; a purchase, sale or transfer
of a material amount of assets by the Partnership or any subsidiary; except as
set forth in Item 8 below, a tender offer for or other acquisition of securities
by or of the Partnership; or any material change in the present capitalization
or dividend policy of the Partnership.
(b) Except as described above or in Item 3(b), there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Lehigh Offer which relate to or would result in one or more of
the matters referred to in Item 7(a).
Item 8. Additional Information to Be Furnished.
The General Partner has in the past received from third parties
requests that such parties be provided with a list of the Partnership's BACs
holders (the "List"). Such a List would only be provided by the General Partner
to parties in cases where the General Partner has been satisfied that such List
has been properly requested by a person entitled by the Partnership Agreement
and applicable law to receive such a List, the party requesting the List has
demonstrated that such party has
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a proper partnership business purpose in connection with such request and the
General Partner has been satisfied that the Partnership and the BACs holders
have obtained appropriate protections from such party with respect to the use of
such List. The General Partner has sought such protections to ensure, among
other things, compliance with federal securities tender offer rules (i.e., full
and adequate disclosure, withdrawal rights and rights to proration) if the List
will be used to conduct a tender offer and compliance with certain tax
provisions to protect against possible adverse tax consequences to the
Partnership.
Item 9. Material to be Filed as Exhibits.
(a)(1) Letter from Independence Tax Credit Plus L.P. III to BACs
holders, dated October 23, 1998.
(b) None.
(c)(1) Letter Agreement, dated October 6, 1998, among Independence
Tax Credit Plus L.P. III, Lehigh Tax Credit Partners III
L.L.C. and Related Independence Associates III L.P.
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SIGNATURES
After reasonable 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: October 23, 1998
INDEPENDENCE TAX CREDIT PLUS L.P. III
By: RELATED INDEPENDENCE
ASSOCIATES III L.P.
By: Related Independence Associates III
Inc., its general partner
By: /s/ Alan P. Hirmes
---------------------
Name: Alan P. Hirmes
Title: Vice President
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EXHIBIT INDEX
EXHIBIT
NO. TITLE
(a)(1) Letter from Independence Tax Credit Plus L.P. III to BACs holders,
dated October 23, 1998.
(c)(1) Letter Agreement, dated October 6, 1998, among Independence Tax
Credit Plus L.P. III, Lehigh Tax Credit Partners III L.L.C. and
Related Independence Associates III L.P.
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INDEPENDENCE TAX CREDIT PLUS L.P. III
625 Madison Avenue
New York, New York 10022
October 23, 1998
Dear BACs holder:
As you are by now aware, Lehigh Tax Credit Partners III L.L.C., a
Delaware limited liability company (the "Purchaser"), has made an offer (the
"Lehigh Offer") to purchase Beneficial Assignment Certificates representing
assignments of limited partnership interests ("BACs") of Independence Tax Credit
Plus L.P. III (the "Partnership") for a cash purchase price of $750 per BAC. THE
PURCHASER IS AN AFFILIATE OF RELATED INDEPENDENCE ASSOCIATES III L.P., THE
GENERAL PARTNER OF THE PARTNERSHIP (THE "GENERAL PARTNER").
The General Partner is expressing no opinion and is remaining
neutral with respect to the Lehigh Offer. Although the General Partner is not
making a recommendation with respect to the Lehigh Offer, the General Partner
believes that BACs holders should carefully consider the following factors in
making their own decision of whether to accept or reject the Lehigh Offer:
o BACs holders should note that the selling price for BACs
reported in the limited and sporadic secondary market during
the two-month period ended July 31, 1997 was $850. No trading
of BACs has occurred from July, 1997 through August 31, 1998
(the last date for which public information concerning trading
in BACs is available). However, the Purchaser states its
belief in the Lehigh Offer that such secondary market selling
prices do not take into account commissions charged by
secondary market makers effectuating such sales and the fact
that the BACs become less valuable with the passage of time as
fewer tax credits remain. Additionally, based on certain
assumptions made therein, the Purchaser states in the Lehigh
Offer that the present value of the potential aggregate
benefits to a BACs holder who tenders to the Purchaser exceeds
the Purchaser's estimate of the present value of the potential
aggregate benefits if a BACs holder does not tender.
o The Lehigh Offer will provide BACs holders with an immediate
opportunity to liquidate their investment in the Partnership.
BACs holders who have a present or future need for the tax
credits and/or tax losses from the BACs may, however, prefer
to retain their BACs and not tender them pursuant to the
Lehigh Offer.
o As stated by the Purchaser in the Lehigh Offer, there may be a
conflict of interest between the Purchaser's desire to
purchase the BACs at a low price and a BACs holder's desire to
sell its BACs at a high price. Therefore, BACs holders might
receive greater value if they hold their BACs, rather than
tender. Furthermore, BACs holders should be aware that a
secondary market exists for the BACs.
o BACs HOLDERS WILL NO LONGER RECEIVE THE TAX CREDITS AND/OR TAX
LOSSES FROM THE BACs SHOULD THEY TENDER PURSUANT TO THE LEHIGH
OFFER.
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Enclosed is a copy of the Partnership's Statement on Schedule 14D-9
which has been filed with the Securities and Exchange Commission and sets forth
the Partnership's response to the Lehigh Offer. BACs holders are advised to
carefully read the Schedule 14D-9 and consult with their advisors about the
financial, tax, legal and other implications of accepting the Lehigh Offer.
Please do not hesitate to call Denise Bernstein, c/o Related Capital
Company, at (800) 600-6422 (ext. 2030) for assistance in any Partnership matter.
INDEPENDENCE TAX CREDIT PLUS L.P. III
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INDEPENDENCE TAX CREDIT PLUS L.P. III
625 Madison Avenue
New York, NY 10022
October 6, 1998
Personal and Confidential
Lehigh Tax Credit Partners III L.L.C.
Lehigh Tax Credit Partners, Inc.
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. III, a Delaware
limited partnership (the "Partnership"), from holders of BACs (each a "BACs
holder" and collectively, "BACs holders") by Lehigh Tax Credit Partners III
L.L.C. ("Lehigh"), Lehigh Tax Credit Partners, Inc. ("Lehigh, Inc.") 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 fifty-seven (57) 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 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
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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 Related Independence Associates III
L.P. ("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 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 III 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
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(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 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
3
<PAGE>
us or our respective Affiliates, as the case may be, 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.
[signature page follows]
4
<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. III
By: Related Independence Associates III L.P., its general
partner
By: Related Independence Associates III 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 III L.L.C. LEHIGH TAX CREDIT PARTNERS, INC.
By: Lehigh Tax Credit Partners, Inc., By: /s/ Alan P. Hirmes
its managing member ----------------------
Name: Alan P. Hirmes
Title: Vice President
By: /s/ Alan P. Hirmes
----------------------
Name: Alan P. Hirmes
Title: Vice President
RELATED INDEPENDENCE ASSOCIATES III L.P. For purposes of the indemnification
provisions on pages 2-3 only:
By: Related Independence Associates III
Inc., its general partner RELATED CAPITAL COMPANY,
a New York general partnership
By: /s/ Alan P. Hirmes
----------------------- By: APH Associates, L.P.
Name: Alan P. Hirmes
Title: Senior Vice President By: APH Associates, Inc.,
its general partner
/s/ Alan P. Hirmes
---------------------
Name: Alan P. Hirmes
Title: President
