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OFFER TO PURCHASE FOR CASH
ANY AND ALL UNITS REPRESENTING ASSIGNMENTS OF
LIMITED PARTNERSHIP INTERESTS
OF
SENIOR INCOME FUND L.P.
FOR
$5.90 NET PER UNIT
BY
LAVRA, INC.,
A WHOLLY-OWNED SUBSIDIARY
OF
ARV ASSISTED LIVING, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 31, 1997,
UNLESS THE OFFER IS EXTENDED.
LAVRA, Inc., a Delaware corporation (the "Purchaser") and wholly-owned
subsidiary of ARV Assisted Living, Inc., a California corporation ("ARV"), is
offering to purchase any and all units representing assignments of limited
partnership interests ("Units") in Senior Income Fund L.P., a Delaware limited
partnership (the "Partnership"), at a net cash price of $5.90 per Unit (the
"Purchase Price"), less the amount of Distributions (as defined below) per Unit,
if any, made, announced or paid by the Partnership from the date of the Offer
(as defined below), until the date on which the Purchaser purchases the Units
tendered pursuant to the Offer. The Offer is subject to certain terms and
conditions. See Section 7 under "DETAILS OF THE OFFER." This Offer is upon the
terms set forth in this Offer to Purchase (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal"), as each may be
supplemented or amended from time to time. The Offer to Purchase and the Letter
of Transmittal constitute the "Offer."
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For More Information or for Further Assistance Please Call
or Contact the Information Agent:
BEACON HILL PARTNERS, INC.
(000) 000-0000 (Toll Free)
December 23, 1996
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IMPORTANT
Any Unitholder desiring to tender Units should complete and sign the Letter
of Transmittal or a facsimile thereof in accordance with the Instructions in the
Letter of Transmittal and mail or deliver the Letter of Transmittal and any
other required documents, to IBJ Xxxxxxxx Bank & Trust Company, the Depositary
in connection with the Offer. A Unitholder may tender any or all of the Units
owned by that Unitholder. For a partial tender to be valid, the Partnership's
Depositary Agreement requires that after the sale of Units pursuant to the
Offer, the Unitholder must continue to hold at least: (i) 200 Units if the
Unitholder is an Individual Retirement Account, a Xxxxx or other employee
benefit plan (each a "Qualified Plan"), or (ii) 500 Units if the Unitholder is
not a Qualified Plan. Tenders of fractional Units will not be permitted, except
by a Unitholder who is tendering all of the Units owned by that Unitholder.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent at the address and telephone numbers on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other related materials may also be obtained from the
Information Agent.
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION.......................................................................... 1
PURPOSE OF THE OFFER................................................................ 1
SOME FACTORS TO BE CONSIDERED BY UNITHOLDERS........................................ 1
BACKGROUND OF THE OFFER............................................................... 3
PRIOR OFFER AND BACKGROUND.......................................................... 3
ACQUISITIONS OF UNITS............................................................... 5
DETERMINATION OF PURCHASE PRICE....................................................... 5
TRADING HISTORY OF THE UNITS........................................................ 5
NET ASSET VALUE..................................................................... 6
HOLDING PERIODS OF PROPERTIES; ALTERNATIVES......................................... 6
DISTRIBUTIONS....................................................................... 6
OUTSTANDING UNITS................................................................... 7
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP........................................ 7
GENERAL............................................................................. 7
ANTICIPATED HOLDING PERIODS OF THE PROPERTIES....................................... 7
SELECTED FINANCIAL AND PROPERTY RELATED DATA........................................ 7
DESCRIPTION OF THE PROPERTIES....................................................... 8
AVERAGE ANNUAL RENTAL RATE AND OCCUPANCY............................................ 10
CASH DISTRIBUTIONS HISTORY.......................................................... 10
CERTAIN INFORMATION CONCERNING THE PURCHASER AND ARV.................................. 10
THE PURCHASER....................................................................... 10
ARV................................................................................. 10
GENERAL............................................................................. 11
SOURCE OF FUNDS..................................................................... 11
FUTURE PLANS OF THE PURCHASER AND ARV................................................. 11
DETAILS OF THE OFFER.................................................................. 12
1. TERMS OF THE OFFER; EXPIRATION DATE............................................. 12
2. ACCEPTANCE FOR PAYMENT AND PAYMENT OF PURCHASE PRICE............................ 13
3. PROCEDURE TO ACCEPT THE OFFER................................................... 13
VALID TENDER.................................................................... 13
SIGNATURE GUARANTEES............................................................ 14
DELIVERY OF LETTER OF TRANSMITTAL............................................... 14
APPOINTMENT AS PROXY............................................................ 14
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS.................................. 14
4. DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER
OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS............................. 15
5. WITHDRAWAL RIGHTS............................................................... 15
6. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.............................. 15
7. CONDITIONS OF THE OFFER......................................................... 16
8. BACKUP FEDERAL INCOME TAX WITHHOLDING........................................... 18
9. FIRPTA WITHHOLDING.............................................................. 18
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES............................... 18
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PAGE
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EFFECTS OF THE OFFER.................................................................. 18
DISTRIBUTIONS UPON CHANGE IN CONTROL................................................ 18
LIMITATIONS ON RESALES.............................................................. 18
EFFECT ON TRADING MARKET; REGISTRATION UNDER SECTION 12(g) OF THE EXCHANGE ACT...... 18
CONTROL OF UNITHOLDER VOTING DECISIONS BY THE PURCHASER
AND ARV............................................................................. 19
CERTAIN FEDERAL INCOME TAX MATTERS.................................................. 19
CERTAIN LEGAL MATTERS................................................................. 22
GENERAL............................................................................. 22
ANTITRUST........................................................................... 22
MARGIN REQUIREMENTS................................................................. 22
STATE TAKEOVER STATUTES............................................................. 22
FEES AND EXPENSES................................................................... 23
MISCELLANEOUS....................................................................... 23
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND ARV................ I-1
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To: Unitholders of Senior Income Fund L.P.
INTRODUCTION
LAVRA, INC., a Delaware corporation (the "Purchaser") and wholly-owned
subsidiary of ARV Assisted Living, Inc., a California corporation ("ARV"),
hereby offers to purchase any and all units representing assignments of limited
partnership interests ("Units") in Senior Income Fund L.P., a Delaware limited
partnership (the "Partnership"), at a net cash purchase price of $5.90 per unit
(the "Purchase Price") less the amount of Distributions (as defined below) per
Unit, if any, made, announced or paid by the Partnership from the date of the
Offer (as defined below), until the date on which the Purchaser purchases the
Units tendered pursuant to the Offer. This Offer is on the terms and subject to
the conditions set forth in this Offer to Purchase, as it may be supplemented or
amended from time to time (the "Offer to Purchase"), and in the related Letter
of Transmittal as it may be supplemented or amended from time to time (the
"Letter of Transmittal"), and which together constitute the "Offer." Unitholders
of the Partnership ("Unitholders") who tender their Units will not be obligated
to pay any commissions or partnership transfer fees or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Units pursuant to the Offer; those fees and taxes will be paid by the Purchaser.
The Purchaser will pay all charges and expenses of Beacon Hill Partners, Inc.
(the "Information Agent"), Xxxxxxxxx, Xxxxxxxx & Xxxxxx, Inc., as financial
advisor to ARV and the Purchaser (the "Financial Advisor"), and IBJ Xxxxxxxx
Bank & Trust Company (the "Depositary"), in connection with the Offer.
A Unitholder may tender any or all of the Units owned by that Unitholder.
The Partnership's Depositary Agreement requires, however, that if the Unitholder
desires to tender less than all of its Units and (a) if the Unitholder is an
Individual Retirement Account, a Xxxxx or other employee benefit plan (each a
"Qualified Plan"), then the Unitholder must retain at least 200 Units, or (b) if
the Unitholder is not a Qualified Plan, then the Unitholder must retain at least
500 Units. Tenders of fractional Units will not be permitted except by a
Unitholder who is tendering all of the Units owned by that Unitholder. Units
validly tendered in response to this Offer will be purchased in 1997 if all
terms and conditions of the Offer are met and the tendered Units are accepted
for payment and paid for by the Purchaser.
According to the Partnership's Form 10-Q for the quarter ended September
30, 1996, the Partnership has outstanding 4,827,500 Units. The Purchaser and its
affiliates already beneficially own 424,272.50 Units and have contracted to
purchase an additional 1,000 Units. Approximately 48,325 of the Units held were
purchased in private transactions between August, 1995 and August, 1996 and the
remaining Units were accepted for purchase in a prior tender offer (the "Prior
Offer") that expired December 13, 1996. The Prior Offer was for a net purchase
price of $5.90 per Unit, after giving effect to a special distribution of $0.60
(the "Special Distribution") made by the Partnership in December, 1996.
Purpose of the Offer. The purpose of the Offer is for the Purchaser to
acquire a substantial equity interest in the Partnership primarily for
investment and with a view to making a profit for itself and ARV and to allow
the Purchaser and ARV to influence activities of the Partnership. If the
Purchaser is successful in acquiring sufficient Units, the Purchaser and ARV
will be in a position to exercise significant influence over or possibly
determine the outcome of any vote by Unitholders. The Purchaser and ARV intend
to contact the Partnership's general partner (the "General Partner") to conduct
a review of the Partnership's activities and consider possible recommendations,
suggestions, actions or changes. Such matters will include seeking to replace
the current operator of the Properties (as defined below) with ARV. See "FUTURE
PLANS OF THE PURCHASER AND ARV."
Some Factors to be Considered by Unitholders. In considering the Offer,
Unitholders may wish to consider the following:
- The Purchase Price of $5.90 net per Unit is equal to the amount to be
paid to Unitholders who validly tendered (without withdrawing) Units to
the Purchaser during the Prior Offer. The purchase price in the Prior
Offer was $6.50 net per Unit, less a deduction for the Special
Distribution, resulting in an effective purchase price of $5.90.
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- The Purchase Price of $5.90 net per Unit plus the Special Distribution
already paid to Unitholders matches the General Partner's minimum
estimate of net asset value per Unit prior to the Special Distribution as
set forth in the Partnership's Schedule 14D-9 (the "Prior Schedule
14D-9") filed with the Securities and Exchange Commission (the
"Commission") in response to the Prior Offer and as confirmed in the
Partnership's letter to Unitholders dated November 21, 1996 in response
to the Prior Offer (the "Prior Response Letter").
- The Purchase Price of $5.90 net per Unit plus the Special Distribution
also exceeds the $6.00 amount the General Partner has estimated in the
Prior Response Letter could be distributed primarily from the insurance
proceeds and sales of the Properties (based on offers received by the
General Partner as of date of the letter) and pays it without the
uncertainty and delay involved in waiting to see if, and at what price,
sales actually occur. In a second response letter dated December 5, 1996
(the "Second Response Letter," together with the Prior Response Letter,
the "Response Letters") the General Partner asserted that a greater
return could be realized by holding Units and waiting to receive
distributions from the sale of the Properties together with remaining
cash, but failed to give further details or state a specific time of
distribution.
- Unitholders can receive $5.90 net per Unit by accepting the Offer without
uncertainty about whether future sales of the Properties will occur (as
contemplated by the General Partner in the Response Letters) but will
give up the possibility that sales of the Properties could result in
Distributions totalling more than $5.90 per Unit at some time in the
future.
- There is, as the General Partner acknowledged in the Response Letters, no
assurance the Partnership can sell the Properties, what the sales price
will be, or when sales might actually occur.
- Original Unitholders who made a $10,000 investment have received
distributions totalling $5,335 prior to the date of this Offer. Upon
payment of the Purchase Price to tendering Unitholders pursuant to this
Offer, original Unitholders who made a $10,000 investment will have
received a total of $11,235 without uncertainty.
- The Partnership's Form 10-Q for the quarter ended September 30, 1996
anticipated significant expenses for repairs to the Partnership's
Properties and reduced occupancy while such repairs occur. These factors
could reduce future payments from the Partnership and further delay a
return of cash to the Unitholders.
- The Purchaser is making the Offer with a view to making a profit for
itself and ARV. Accordingly, there is a conflict between the desire of
the Purchaser to purchase Units at a low price and the desire of the
Unitholders to sell their Units at a high price.
- In August, 1996, based solely on financial and other information relating
to the Partnership that is publicly available in its reports filed with
the Commission, the Purchaser estimated the net asset value per Unit to
be approximately $4.24 as of June 30, 1996. This estimate was increased
to $4.53 per Unit following the subsequent receipt of a summary of the
Properties' appraised values from the General Partner. Thereafter, based
upon the receipt by the Purchaser of the Partnership's letter to
Unitholders dated October 25, 1996, this estimate was increased to $5.00
per Unit to match the minimum estimated net asset value, as of June 30,
1996, provided by the General Partner in the letter. Thereafter, based
upon the receipt by the Purchaser of the Prior Schedule 14D-9 and the
Prior Response Letter, the Purchaser increased the net price in its Prior
Offer to match the minimum net asset value of $6.50 per Unit (subject to
reduction to account for the Special Distribution) estimated by the
General Partner in the Prior Schedule 14D-9 and the Prior Response
Letter. For purposes of this Offer, the Purchaser continues to estimate
the net asset value at $5.90 per Unit ($6.50 per Unit less the Special
Distribution). (See "NET ASSET VALUE"). THE PURCHASER HAS NOT INSPECTED
THE PARTNERSHIP'S PROPERTIES AND HAS NO INDEPENDENT BASIS WHATSOEVER FOR
DETERMINING THE ACCURACY OR COMPLETENESS OF THE PARTNERSHIP'S PUBLICLY
FILED FINANCIAL INFORMATION OR THE OTHER INFORMATION MADE AVAILABLE BY
THE GENERAL PARTNER OR FOR DETERMIN-
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ING TO WHAT EXTENT, IF ANY, THE ESTIMATED NET ASSET VALUE SET FORTH ABOVE
REPRESENTS THE TRUE NET ASSET VALUE OF EACH UNIT.
- The Offer allows Unitholders to dispose of their Units without incurring
the sales commissions or transfer fees typically associated with
transfers of Units arranged through brokers or other intermediaries.
- If the Purchaser becomes the registered owner of sufficient Units, the
Purchaser (and through it, ARV) will be able to significantly influence
or possibly determine all voting decisions with respect to the
Partnership, including, among other things, decisions concerning
liquidation, termination, amendments to the Partnership's Partnership
Agreement (the "Partnership Agreement") and removal and replacement of
the General Partner. Consequently, (i) the non-tendering Unitholders
could be prevented from taking action they desire but that the Purchaser
and ARV oppose and (ii) the Purchaser and ARV may be able to take action
desired by them but opposed by the non-tendering Unitholders.
- The Offer is an immediate opportunity for Unitholders to liquidate their
investments in the Partnership, but Unitholders who tender their Units
will be giving up the opportunity to participate in any potential future
benefits from ownership of Units, including, for example, the right to
sell the Units later at a possibly higher price and the right to
participate in any future Distributions, whether from operations or the
proceeds of a sale of one or more of the facilities in which the
Partnership has an interest.
Each Unitholder must make its own decision, based on the Unitholder's
particular circumstances, whether to tender Units and, if so, how many Units to
tender. Unitholders should consult with their respective advisors about the
financial, tax, legal and other implications of accepting the Offer. UNITHOLDERS
ARE URGED TO READ THIS OFFER TO PURCHASE AND THE RELATED MATERIALS CAREFULLY AND
IN THEIR ENTIRETY BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
BACKGROUND OF THE OFFER
The Partnership, which is more fully described below, was formed in 1986.
It acquired an indirect interest (through a separate partnership with August
Property Partners, the "Property Partnership") in four residential facilities
for senior citizens (the "Properties") in March, 1987. The Properties are
managed by a separate management company in which the Partnership has no
interest. It was originally projected that the Properties would be held for five
to seven years, but economic conditions and other factors have resulted in a
longer holding period. According to the Prior Response Letter, the Partnership
was to acquire all the interest of the Property Partnership in late 1996.
ARV was formed in December, 1985 to acquire, develop and invest in licensed
assisted living facilities, and has become one of the largest operators (based
on numbers of residents) of such facilities in the United States. XXX seeks to
acquire additional interests in facilities such as the Properties.
Prior Offer and Background. The Purchaser and ARV purchased approximately
48,325 Units in private transactions and, beginning in August, 1996, discussed
with the General Partner (through the Purchaser's financial adviser, Xxxxxxxxx,
Xxxxxxxx & Xxxxxx, Inc.) the Purchaser's interest in acquiring additional Units
in the Partnership. Initial discussions focused on an offer at a price of $4.25
per Unit, which was increased after the General Partner provided more
information about the General Partner's view of the net asset value per Unit of
the Partnership. Because of restrictions requested by the General Partner that
would have limited the number of Units ARV and the Purchaser could acquire and
would have compelled them to vote as the General Partner recommended, these
discussions did not lead to an agreement and, on November 8, 1996, ARV and the
Purchaser commenced the Prior Offer. While these discussions were in place, as
previously described by the General Partner, Equity Resource Bay Fund ("Equity")
commenced an offer for Units at $1.50 per Unit. Equity's offer was at less than
prior sales, was made after the Purchaser had initially suggested a price of
$4.25 per Unit, and was unrelated to the Purchaser's discussions or offer. After
the Purchaser
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commenced the Prior Offer, as previously described by the General Partner,
XxxXxxxxx Xxxxxxxxx, Inc. ("MacKenzie") commenced a tender offer for 4.9% of the
Units outstanding at a purchase price of $5.50.
The General Partner recommended against acceptance of the Prior Offer,
stating the General Partner's belief that the net asset value per Unit
realizable on a liquidation of the Partnership was at least $6.50 per Unit. In
response, the Purchaser increased the Prior Offer to $6.50 net per Unit, reduced
by any Distributions such as the Special Distribution which the General Partner
made after the Prior Offer was commenced. In the Second Response Letter the
General Partner continued to assert that the Prior Offer was inadequate and
restated the belief that a liquidation of the Partnership would produce
distributions in excess of $6.50 per Unit (including the Special Distribution).
After considering the results of the Prior Offer, which resulted in the
Purchaser and ARV owning approximately 8.8% of the outstanding Units, the
Purchaser's board of directors, at a special meeting held on December 20, 1996,
determined to authorize this Offer. The $5.90 net per Unit Purchase Price is
equivalent to $6.50, reduced by the Special Distribution already received by
Unitholders.
The Purchaser believes that its interest in the Units may have encouraged
the General Partner to take actions which should have been taken earlier to
return value to the Unitholders, such as marketing the Properties. The Purchaser
is unable to ascertain whether some or all of these actions might have occurred
without its expression of an interest in acquiring additional Units.
In opposing the Prior Offer, the General Partner described "unsolicited
bona fide offers" to purchase all of the Partnership's assets and stated that
such offers might result in net proceeds to Unitholders greater than that being
offered in the Prior Offer or in this Offer. The General Partner also stated
there was no assurance that any sale actually could be consummated or that any
particular price could be obtained and did not specifically state when a sale
might occur. This Offer provides for a payment in a recent time frame, although
it does mean that any potentially greater return would not accrue to Unitholders
but would instead accrue to the Purchaser and ARV.
The General Partner also objected to the Prior Offer as being "coercive"
because only 51% of a Unitholder's Units would be purchased if pro-ration was in
effect. In this Offer, the Purchaser is offering to purchase any and all Units,
and there is no risk to tendering Unitholders that they will be left holding
part of their Units in a partnership controlled by the Purchaser and ARV,
although the Purchaser believes that any implication that this would be adverse
to Unitholders is unfair and unwarranted. Finally, the General Partner stated
there might be adverse tax implications to persons who continued to hold their
Units because there would be a constructive tax termination of the Partnership
if the Purchaser acquired a majority of the outstanding Units. Unitholders are
encouraged to read the section in this offering material entitled "Certain
Federal Income Tax Matters" for a description of the constructive termination
rules. However, the Purchaser notes that Unitholders who tender their Units will
not face any of these adverse consequences and will merely, for tax purposes,
need to report the consequence of selling at $5.90 net per Unit. The Purchaser
urges Unitholders to consult their tax advisers.
After the Prior Offer was completed, Xxxx X. Xxxxxxxx, the Chairman and
President of ARV, contacted Xxxxx Xxxxxx, President of the General Partner to
suggest a constructive and cooperative relationship. Xx. Xxxxxxxx stated that
ARV would like to manage the Properties on an arm's-length basis, which would
let ARV bring some of its experience in the congregate care industry to maximize
the value of Properties, improve operations and potentially increase the value
of the Units and assets. Those discussions have not been productive, and no
continuing discussions are presently underway.
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Acquisitions of Units. ARV now holds (directly or through subsidiaries)
424,272.50 Units and has a contract to purchase an additional 1,000 Units. Other
than Units acquired by the Purchaser pursuant to the Prior Offer, all of the
Units were acquired in privately negotiated sales conducted through a
broker/dealer located in Arizona. The following table shows the approximate
dates, prices and numbers of Units acquired.
NUMBER OF PRICE
APPROXIMATE DATE UNITS PER UNIT
-------------------------------------------------------------- ---------- --------
1995
August 31..................................................... 500(1) $3.65
October 26.................................................... 7,450 3.70
1996
January 4..................................................... 10,750 3.60
January 10.................................................... 1,000 3.60
February 15................................................... 3,400 3.60
April 30...................................................... 3,225 3.70
June 21....................................................... 5,100 3.75
June 27....................................................... 10,000 3.80
June 28....................................................... 600 3.75
July 10....................................................... 1,200 3.75
July 16....................................................... 1,600 3.75
August 2...................................................... 500 3.75
August 21..................................................... 3,000 3.80(2)
December 13................................................... 375,947.50(3) 5.90(4)
---------------
(1) Units acquired by Pacific Demographics Corporation, a wholly-owned
subsidiary of ARV, whose principal address is the same as that of ARV.
(2) The Purchaser has contracted to purchase an additional 1,000 Units. Due to
certain administrative reasons outside the control of the Purchaser, these
Units have not been transferred to the Purchaser as of the date of this
Offer. The Purchaser does not know when such transfer will be completed.
(3) Based on the number of Units accepted for payment by the Purchaser in
connection with the Prior Offer, subject to the terms and conditions of the
Prior Offer.
(4) The net price per Unit is equal to $6.50 less the amount of the Special
Distribution.
DETERMINATION OF PURCHASE PRICE
In establishing the purchase price with respect to the Prior Offer, the
Purchaser relied primarily on the General Partner's minimum estimate of net
asset value per Unit of $6.50 (prior to giving effect of the Special
Distribution) as disclosed in the Prior Response Letter and the Prior Schedule
14D-9. For purposes of this Offer, the Purchaser determined that it is fair to
offer $5.90 net per Unit, an amount equal to the General Partner's valuation of
$6.50 less the amount of the Special Distribution. The Purchaser also reviewed
the Summary (as defined below), the October 25 Letter and certain publicly
available information including among other things: (i) the Partnership's
Prospectus, dated January 30, 1987; (ii) the Partnership Agreement; (iii) the
Partnership's Form 10-K for its fiscal year ended December 31, 1995 (the "1995
Form 10-K") and Forms 10-Q for the quarters ended March 31, 1996, June 30, 1996
and September 30, 1996. Based on that information, the Purchaser also considered
several factors, some of which are discussed below.
Trading History of the Units. Secondary market sales activity for the
Units, including privately negotiated sales, has been limited and sporadic. The
1995 Form 10-K states that "[t]here is no market for the [U]nits nor is there
anticipated to be." At present, privately negotiated sales and sales through
intermediaries (such as through the trading system operated by Chicago
Partnership Board, Inc., which publishes sell offers by holders of Units) are
the only means available to a Unitholder to liquidate an investment in Units
(other than a transaction such as the Offer) because the Units are not listed or
traded on any exchange or quoted on The Nasdaq Stock Market.
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According to Chicago Partnership Board, Inc., an independent third party
source, the high and low sales price per Unit per quarter for the four
consecutive quarters ended on September 30, 1996 were as follows:
PERIOD HIGH LOW
---------------------------------------------------------------------- ----- ------
1995:
Fourth Quarter ended 12/31/95......................................... $3.40 $2.84
1996:
First Quarter ended 3/31/96........................................... 3.25 3.25
Second Quarter ended 6/30/96.......................................... 3.90 3.85
Third Quarter ended 9/30/96........................................... 3.88 3.56
Neither the Purchaser nor ARV knows whether the information provided by the
Chicago Partnership Board, Inc. is accurate or complete.
Prior to the Partnership's commencement of the Prior Offer, Equity
commenced a tender offer for Units at a purchase price of $1.50 per Unit.
Another independent tender offer for 4.9% of the outstanding Units was commenced
by XxxXxxxxx following the commencement of the Prior Offer, at a purchase price
of $5.50 per Unit.
Net Asset Value. The 1995 Form 10-K disclosed a write-down of the
Properties based upon a then recent fair market value appraisal. On this basis,
the Purchaser treated the "book" or "carrying" value of the Partnership's assets
as equivalent to the approximate fair market value and calculated a net asset
value for the Partnership as of June 30, 1996, of $4.24 per Unit. Subsequently
the General Partner delivered to the Purchaser a summary of fair market value
appraisals of the Properties conducted on or about January 1, 1996 (the
"Summary"). The values listed on the Summary for three of the Properties were
identical to the values disclosed in the 1995 Form 10-K. However, according to
the Summary, the remaining Property was valued at approximately $1.4 million
greater than the value disclosed in the 1995 Form 10-K. In November, 1996 the
General Partner stated in the prior Response Letter that its estimate of minimum
net asset value per Unit is approximately $6.50.
The Purchaser is offering to purchase Units, which are a relatively
illiquid investment, and is not offering to purchase the Partnership's
underlying assets. Consequently, the Purchaser does not believe that the
underlying asset value of the Partnership is determinative in arriving at the
Purchase Price.
Holding Periods of Properties; Alternatives. According to the
Partnership's Prospectus dated January 30, 1987, the original anticipated
holding period of each of the Properties was five to seven years, subject to
market conditions. Currently, the Properties have been held for almost ten
years. The termination of the Partnership as stated in the Partnership Agreement
is December 31, 2036. Unitholders could, as an alternative to tendering their
Units, take a variety of possible actions including voting to liquidate the
Partnership, removing and replacing the General Partner, causing the Partnership
to merge with another entity or engage in a "roll-up" or similar transaction.
The Purchaser and ARV considered the time and expense to develop the Properties,
the age of the Properties, and the Partnership's announcement that major
expenditures will be needed to repair two of the Properties in determining the
Purchase Price. According to publicly available information, the cities of Los
Angeles and Santa Xxxxxx have enacted ordinances that require enhancements to be
made which affect two of the Properties. Neither ARV nor the Purchaser has
inspected the Properties and determined for itself what renovations or repairs
are appropriate. The General Partner has asserted, in the Response Letters, that
it expects to be able to sell the Properties but has not disclosed the terms or
conditions of specific sales or an expected time of distribution.
Distributions. According to the 1995 Form 10-K and the Partnership's Forms
10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30,
1996, for the period from the Partnership's inception to September 30, 1996, and
including the Special Distribution paid in December, 1996, Unitholders were paid
cash Distributions totalling $5,335 per $10,000 investment. These reports
further provide that the level of future Distributions will be determined on a
quarterly basis and will be based on cash flow from operations, tempered by the
Partnership's capital needs, including earthquake related repairs and
retrofitting work to
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certain of the Properties, which the Partnership has stated may reduce cash
available for Distributions. The potential for future Distributions was
considered by the Purchaser when establishing the Purchase Price. Unitholders
who tender their Units will retain all of the Distributions made prior to the
Offer, and will be entitled to receive any other Distributions made, announced
or paid by the Partnership prior to the date on which the Purchaser purchases
tendered Units. However, (i) the Purchase Price per Unit will be reduced by the
amount of Distributions per Unit, if any, made, announced or paid by the
Partnership from the date of the Offer to the date on which the Purchaser
purchases the tendered Units and (ii) tendering Unitholders will not be entitled
to receive any Distributions (in respect to Units bought by the Purchaser) made
after the date on which the Purchaser accepts those Units for payment.
Outstanding Units. According to the Partnership's Form 10-Q for the
quarter ended September 30, 1996, there are 4,827,500 Units issued and
outstanding as of September 30, 1996. According to the 1995 Form 10-K, there
were approximately 3,830 Unitholders as of December 31, 1995. As of the date of
the Offer, the Purchaser and ARV beneficially own an aggregate of 424,272.50
Units and have a contract for the purchase of an additional 1,000 Units.
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP
Information contained in this section is based upon documents and reports
publicly filed by the Partnership. Although neither the Purchaser nor ARV has
information that any statements contained in this section are untrue, neither
the Purchaser nor ARV has independently investigated the accuracy of statements,
or takes responsibility for the accuracy, inaccuracy, completeness or
incompleteness, of any of the information contained in this section or for the
failure by the Partnership to disclose events which may have occurred and may
affect the significance or accuracy of any such information.
General. The Partnership, formerly named the Shearson Xxxxxx Senior Income
Fund Limited Partnership, was formed on October 14, 1986 under the laws of the
State of Delaware. Its principal executive offices are located at 0 Xxxxx
Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000. Its telephone number is
(000) 000-0000.
At September 30, 1996, the Partnership's investment portfolio consisted of
its interest in the Property Partnership, which held the Properties. According
to the General Partner in its public filings, the Property Partnership is to
have been liquidated in late 1996 and the Partnership will thereafter hold the
Properties directly. These included: Ocean House, a 121-unit complex in Santa
Monica, California located on leased land; Xxxxx Gardens, a 102-unit complex in
Van Nuys, California; Pacific Inn, a 134-unit complex in Torrance, California;
and Xxxx Ranch Inn, a 133-unit complex in Anaheim, California.
Anticipated Holding Periods of the Properties. According to the
Partnership's Prospectus dated January 30, 1987, the original anticipated
holding period of each of the Properties was five to seven years following the
acquisition of the Property (subject to market conditions). Currently, the
Properties have been held for almost ten years. The General Partner has
asserted, in the Response Letters, that it expects to be able to sell the
Properties but has not disclosed the terms or conditions of specific sales or an
expected time of distribution.
Selected Financial and Property Related Data. Set forth below is a summary
of certain financial and statistical information with respect to the Partnership
and the Properties, all of which, except as expressly provided below, has been
excerpted or derived from the Partnership's Forms 10-K for the years ended
December 31, 1995, 1994, 1993, 1992, 1991 and 1990 and from the Partnership's
Forms 10-Q for the quarters ended September 30, 1995, March 31, 1996, June 30,
1996 and September 30, 1996. 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.
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SENIOR INCOME FUND L.P.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER UNIT DATA)(1)
NINE MONTHS
ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------- ------- ------ ------ ------
(UNAUDITED)
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA
Rental Income...................... $8,031 $8,082 $10,838 $10,387 $9,526 $9,120 $9,230
Interest Income.................... 149 144 199 98 36 15 51
------ ------ ------- ------- ------ ------ ------
Total income.................... $8,180 $8,226 $11,037 $10,485 $9,561 $9,135 $9,281
====== ====== ======= ======= ====== ====== ======
Net Income (Loss).................. $ 567 $ 564 $(7,877) $ 137 $ 518 $ (44) $ 425
Net Income (Loss) per Unit*........ $ 0.12 $ 0.12 $ (1.63) $ 0.03 $ 0.11 $ (.01) $ 0.08
---------------
* Total Units outstanding: 4,827,500
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
BALANCE SHEET DATA
Total Assets.................. $22,575 $31,860 $22,976 $32,459 $33,465 $34,033 $35,397
Total Liabilities............. 2,226 2,175 2,097 2,240 1,921 1,544 2,224
General Partner's Equity...... (48) (33) (42) (28) (15) (5) 1
Limited Partner's Equity...... 20,396 29,718 20,921 30,247 31,559 32,494 33,172
---------------
(1) Consolidated to include the accounts of the Partnership and the Property
Partnership as reported in the Partnership's public filings.
Description of the Properties. On March 25, 1987, the Property Partnership
acquired three rental retirement projects in the Los Angeles area and one in the
Orange County area of Southern California: Pacific Inn, a 134-unit complex in
Torrance; Ocean House, a 121-unit complex in Santa Xxxxxx; Xxxxx Gardens, a
102-unit complex in Van Nuys and Xxxx Ranch Inn, a 133-unit complex in Anaheim.
The Property Partnership acquired the fee interest in the land, building and
improvements of Pacific Inn, Xxxxx Gardens and Xxxx Ranch Inn and the leasehold
interest in the land, building and improvements of Ocean House, for an aggregate
purchase price of $40,400,000 less a purchase price hold back used to cover a
minimum yield guaranty in connection with the acquisition of the Properties.
According to the 1995 Form 10-K, cash flows from the Properties were
insufficient to meet the continuing minimum yield guaranty. Following a
litigation settlement, the Property Partnership's partnership agreement was
amended to terminate the minimum yield guaranty. According to the General
Partner in its public filings, the Property Partnership is to have been
liquidated in late 1996 and the Partnership will thereafter hold the Properties.
Set forth on the next page is a table showing the location, acquisition costs,
gross carrying amount and accumulated depreciation for financial statement
purposes, for each of the Properties, according to Schedule III to the 1995 Form
10-K.
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PROPERTIES TABLE
GROSS
AMOUNT AT
INITIAL COST TO WHICH
CARRIED
SUBSEQUENT OTHER CHARGES
PARTNERSHIP CAPITALIZED COSTS (ADD/DEDUCT)(3) 12/31/95
------------------------ --------------------- ------------------------ ----------
BUILDING BUILDING BUILDINGS
AND AND AND
ENCUM- IMPROVE- IMPROVE- IMPROVE-
DESCRIPTION(1) BRANCES(2) LAND MENTS LAND MENTS LAND MENTS LAND
----------------------------- ---------- ---------- ----------- -------- ---------- --------- ------------ ----------
Ocean House.................. $ 0 $ 0 $ 7,496,394 $ 0 $1,110,619 $ 0 $ (8,607,013) $ 0
Santa Monica, CA
Xxxxx Gardens................ 0 1,441,614 4,613,166 103,834 974,115 (53,274) (4,579,455) 1,492,174
Van Nuys, CA
Pacific Inn.................. 0 2,402,690 11,436,807 173,057 941,186 (88,789) (422,638) 2,486,958
Torrance, CA
Xxxx Ranch Inc............... 0 816,915 12,157,614 58,840 1,078,056 (30,188) (7,431,237) 845,567
Anaheim, CA
---------- ---------- ----------- -------- ---------- --------- ------------ ----------
TOTALS................... $ 0 $4,661,219 $35,703,981 $335,731 $4,103,976 $(172,251) $(21,040,343) $4,824,699
========== ========== =========== ======== ========== ========= ============ ==========
BUILDINGS
AND ACCUMULATED
IMPROVE- DEPRECIA-
DESCRIPTION(1) MENTS TOTAL(4) TION(3)(4)(5)
----------------------------- ----------- ----------- -------------
Ocean House.................. $ 0 $ 0 $ 0
Santa Monica, CA
Xxxxx Gardens................ 1,007,826 2,500,000 0
Van Nuys, CA
Pacific Inn.................. 11,955,355 14,442,313(6) 4,896,442
Torrance, CA
Xxxx Ranch Inc............... 5,804,433 6,650,000 0
Anaheim, CA
----------- ----------- ----------
TOTALS................... $18,767,614 $23,592,313 $ 4,896,442
=========== =========== ==========
---------------
(1) These properties are senior residential properties and were acquired on
March 25, 1987.
(2) The Property Partnership purchased the Properties on an all cash basis.
(3) a) In 1990, the basis of the Properties was reduced by the amount of the
purchase price holdback used to cover the minimum yield guaranty to the
Partnership in the amount of $1,491,664;
b) In 1994, the building basis costs of Ocean House and Xxxxx Gardens were
reduced by the provision for earthquake loss in the amount of $750,000 and
increased by earthquake repairs of $325,411, resulting in a net building
basis reduction of $424,589. The balance at Xxxx Ranch includes the
disposition of transportation equipment.
c) During 1995, the Partnership recognized a write-down of the carrying
value of Ocean House, Xxxxx Gardens and Xxxx Ranch Inn of $4,809,497,
$2,081,900 and $1,820,895, respectively, aggregating $8,712,292. The net
book value adjusted for the write-down, became the new carrying value for
the properties, thus prior depreciation is eliminated.
(4) The aggregate amount of accumulated depreciation for federal income tax
purposes as of December 31, 1995, is $17,289,034.
(5) Depreciable life according to the latest financial statements: buildings and
improvements -- 40 years; personal property -- 10 years.
(6) According to the Summary the fair market value of Pacific Inn as appraised
on January 1, 1996 was approximately $15,875,000.
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Average Annual Rental Rate and Occupancy. Set forth below is a table
showing the average annual rental income and occupancy percentages for each of
the Properties.
AVERAGE
AVERAGE ANNUAL OCCUPANCY
RENTAL RATES -----------------------------
----------------- NINE MONTHS
ENDED
(IN THOUSANDS) SEPTEMBER 30,
PROPERTY 1995 1994 1996 1995 1994
------------------------------------------- ------ ------ ------------- --- ---
Ocean House................................ $3,417 $3,402 91% 92% 95%
Xxxxx Gardens.............................. 1,675 1,690 73 93 97
Pacific Inn................................ 3,573 3,440 97 97 94
Xxxx Ranch Inn............................. 2,174 1,854 97 95 83
Cash Distributions History. According to the 1995 Form 10-K and the
Partnership's Forms 10-Q for the quarters ended March 31, 1996, June 30, 1996
and September 30, 1996, from the Partnership's inception to September 30, 1996
and including the Special Distribution paid in December, 1996, Unitholders have
been paid cash Distributions totalling $5,335 per $10,000 investment. These
reports further provide that the level of future Distributions will be
determined on a quarterly basis and will be based on cash flow from operations,
tempered by the Partnership's capital needs, including earthquake related
repairs and retrofitting work to certain of the Properties. In the Partnership's
Form 10-Q for the quarter ended September 30, 1996, the General Partner
discussed several factors which could affect future Distributions. The potential
for future Distributions was considered by the Purchaser when establishing the
Purchase Price. Unitholders who tender their Units in response to the Offer will
retain all Distributions made by the Partnership prior to the date on which the
Purchaser purchases tendered Units pursuant to the Offer. However, (i) the
Purchase Price per Unit will be reduced by the amount of Distributions per Unit,
if any, made, announced or paid by the Partnership from the date of the Offer to
the date on which the Purchaser purchases the tendered Units pursuant to the
Offer and (ii) tendering Unitholders will not be entitled to receive any
Distributions in respect to tendered Units purchased by the Purchaser pursuant
to the Offer made after the date on which the Purchaser accepts those Units for
payment.
The Partnership is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
accordingly, is required to file reports and other information with the
Commission relating to its business, financial results and other matters. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and
at the regional offices of the Commission located in the Northwestern Atrium
Center, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, and 7 World
Trade Center, New York, New York 10048. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000.
CERTAIN INFORMATION CONCERNING THE PURCHASER AND ARV
The Purchaser. The Purchaser, a Delaware corporation, was incorporated on
February 6, 1995 and amended its Certificate of Incorporation on May 2, 1995 to
change its name to LAVRA, Inc. The Purchaser has not engaged in any activities
to date, other than those incidental to its organization, purchasing Units and
making the Offer and the Prior Offer. The Purchaser is a wholly-owned subsidiary
of ARV. The principal office of the Purchaser is 000 Xxxxxxx Xxxxxx, X-0, Xxxxx
Xxxx, Xxxxxxxxxx 00000.
ARV. ARV Assisted Living, Inc., a California corporation, was incorporated
on December 18, 1985. The principal office of ARV is 000 Xxxxxxx Xxxxxx, X-0,
Xxxxx Xxxx, Xxxxxxxxxx 00000. ARV is one of the largest operators of licensed
assisted living facilities in the United States based on the number of
residents. ARV is a fully integrated provider of assisted living accommodations
and services that operates, acquires, and develops assisted living facilities.
ARV's operating objective is to provide high quality, personalized assisted
living services to senior elderly residents in a cost effective manner, while
maintaining residents' independence, dignity and quality of life. Assisted
living facilities comprise a combination of housing, personalized support
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services and health care in a non-institutional setting designed to respond to
the individual needs of the elderly who need assistance with certain activities
of daily living, but who do not need the level of health care provided in a
skilled nursing facility.
ARV is subject to the information reporting requirements of the Exchange
Act and accordingly, is required to file reports and other information with the
Commission relating to its business, financial results and other matters. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and
at the regional offices of the Commission located in the Northwestern Atrium
Center, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, and 7 World
Trade Center, New York, New York 10048. Copies should be available by mail upon
payment of the Commission's customary charges by writing to the Commission's
principal offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000.
General. Except as set forth above or elsewhere in this Offer to Purchase:
(i) neither the Purchaser nor ARV beneficially owns or has a right to acquire,
and, to the best knowledge of the Purchaser and ARV, no associate or
majority-owned subsidiary of any of the Purchaser, or ARV, nor any of the
persons listed in Schedule I hereto, beneficially owns or has a right to acquire
any Units or any other equity securities of the Partnership; (ii) neither the
Purchaser nor ARV has, and, to the best knowledge of the Purchaser and ARV,
neither the persons and entities referred to in clause (i) above nor any of
their executive officers, directors or subsidiaries has, effected any
transaction in the Units or any other equity securities of the Partnership
during the past 60 days other than as stated in this Offer; (iii) neither the
Purchaser, nor ARV, has, and, to the best knowledge of the Purchaser and ARV,
none of the persons listed in Schedule I hereto has, any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Partnership, including, but not limited to, 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, consents or authorizations; (iv) since December 31, 1992, there have
been no transactions which would require reporting under the rules and
regulations of the Commission between the Partnership or any of its affiliates
and any of the Purchaser, ARV, or any of their respective subsidiaries or, to
the best knowledge of the Purchaser and ARV, any of their respective executive
officers, directors or affiliates that would require reporting under the rules
and regulations of the Commission; and (v) since December 31, 1992, there have
been no contacts, negotiations or transactions between the Purchaser, ARV, or
any of their respective subsidiaries or, to the best knowledge of the Purchaser
and ARV, any of the persons listed in Schedule I hereto, on the one hand, and
the Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
or a sale or other transfer of a material amount of assets of the Partnership.
Source of Funds. Based on the Purchase Price of $5.90 per Unit, the
Purchaser estimates that the total amount of funds necessary to purchase all
Units it is seeking to purchase in the Offer, and to pay related fees and
expenses, will be approximately $26,400,000. The Purchaser expects to obtain
these funds by means of an equity capital contribution from ARV at the time the
Units tendered pursuant to the Offer are accepted for payment. ARV will use some
existing cash, drawings on its regularly maintained lines of credit, and, if
necessary, additional financing from banks. ARV has not entered into any
agreements for the additional financing that would be needed if all or most of
the Units are tendered, but, based on discussions with several financial
institutions, ARV is confident it can obtain the funds needed to purchase all or
most of the tendered Units on customary commercial terms.
FUTURE PLANS OF THE PURCHASER AND ARV
The Purchaser is seeking to acquire Units pursuant to the Offer in order
for ARV to acquire a substantial equity interest in the Partnership, primarily
for investment and with a view to making a profit for itself and ARV and to
allow them to influence activities of the Partnership. Following completion of
the Offer, the Purchaser and persons related to or affiliated with the Purchaser
may acquire additional Units. Any such acquisition may be made through private
purchases, through one or more future tender or exchange offers or by any other
means deemed advisable by the Purchaser in its sole discretion. Any such
acquisition may be at a
11
16
price higher or lower than the price to be paid for the Units purchased pursuant
to the Offer, and may be for cash or other consideration. The Purchaser also may
consider selling some or all of the Units it acquires pursuant to the Offer,
either directly or by a sale of one or more interests in the Purchaser itself,
depending among other things on liquidity, strategic, tax and other
considerations.
If the Purchaser is successful in acquiring the Units it is tendering for
pursuant to the Offer, ARV intends to conduct a review of the Partnership and
the Partnership's assets, operations, properties, management and personnel and
consider what, if any, recommendations, suggestions, actions or changes ARV
believes would be desirable in connection with the Partnership in light of the
circumstances which then exist. XXX intends to approach the General Partner and
the manager of the Properties with such possible recommendations, suggestions,
actions and changes. Such matters will include seeking to replace the current
operator of the Properties with XXX. Such matters or other possible transactions
involving the Partnership could also include, but not be limited to: (i)
acquiring or selling assets, including selling any or all of the Properties;
(ii) reviewing or changing the frequency of cash Distributions from the
Partnership to the Unitholders or reducing the amount of reserves held by the
Partnership through cash Distributions to the Unitholders; (iii) considering a
merger or other consolidation transaction with the Partnership or a liquidation
of the Partnership; (iv) reviewing the performance of the General Partner, and
if necessary, seeking to take action to replace the General Partner of the
Partnership; and (v) reviewing the agreement with the Partnership's transfer
agent to determine if there are additional benefits for the Partnership which
can be gained and, if necessary, seeking to replace the transfer agent. If any
such transaction is effected by the Partnership and financial benefits accrue to
the Unitholders, the Purchaser and ARV and its affiliates will participate in
those benefits to the extent of their ownership of the Units.
Except as set forth in this Offer to Purchase, the Purchaser has no present
plans or proposals that would result in an extraordinary corporate transaction,
such as a merger, reorganization, liquidation, reallocation of operations or
sale or transfer of assets involving the Partnership or any material changes in
the Partnership's structure, business or composition of its management or
personnel.
DETAILS OF THE OFFER
1. Terms of the Offer; Expiration Date. On the terms and subject to the
conditions of the Offer, the Purchaser will accept and purchase all Units that
are validly tendered in accordance with the procedures set forth in Section 3 or
prior to the Expiration Date and not withdrawn in accordance with the procedures
set forth in Section 5. For purposes of the Offer, the term "Expiration Date"
means 12:00 Midnight, New York City time on Friday, January 31, 1997, unless the
Purchaser in its sole discretion extends the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as extended by the Purchaser, shall expire.
See Section 6 for a description of the Purchaser's right to extend the period of
time during which the Offer is open and to amend or terminate the Offer.
If, prior to the Expiration Date, the Purchaser increases the Purchase
Price offered to the Unitholders pursuant to the Offer, the increased Purchase
Price will be paid for all Units accepted for payment pursuant to the Offer,
whether or not the Units were tendered prior to the increase in consideration.
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17
The Offer is conditioned upon satisfaction of the conditions set forth in
Section 7 below. The Purchaser reserves the right (but in no event shall be
obligated), in its sole discretion, to waive any or all of those conditions. If
on or prior to the Expiration Date any or all of the conditions have not been
satisfied or waived, the Purchaser reserves the right to: (i) decline to
purchase any of the Units tendered, terminate the Offer and return all tendered
Units, (ii) waive the unsatisfied conditions and, subject to complying with
applicable rules and regulations of the Commission, purchase all Units validly
tendered, (iii) extend the Offer and, subject to the right of Unitholders to
withdraw Units until the Expiration Date, retain the Units that have been
tendered during the period or periods for which the Offer is extended, and (iv)
amend the Offer.
2. Acceptance for Payment and Payment of Purchase Price. On the terms and
subject to the conditions of the Offer, the Purchaser will purchase and will pay
for all Units validly tendered in accordance with the procedures set forth in
Section 3 and not withdrawn in accordance with the procedures specified in
Section 5, as promptly as practicable following the Expiration Date. For Units
whose registered owner is a Qualified Plan, payment will be made to the
custodian of such account or plan. In all cases, payment for Units purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of: (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with all required medallion signature guaranties,
(ii) all certificates issued to the tendering Unitholder that evidence ownership
of the Units tendered ("certificates"), if any, and (iii) any other documents
required in accordance with the Letter of Transmittal. Unitholders should
carefully read and comply with the procedures and requirements in the Letter of
Transmittal.
UNDER NO CIRCUMSTANCE WILL INTEREST ON THE PURCHASE PRICE BE PAID,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Units are not purchased for any reason, the original Letter
of Transmittal with respect to the Units may be destroyed by the Depositary (in
accordance with its customary practice) and any certificates will be returned to
the tendering Unitholder. If for any reason acceptance of payment of, or payment
for, any Units tendered pursuant to the Offer is delayed or the Purchaser is
unable to accept for payment, purchase or pay for Units tendered then, without
prejudice to the Purchaser's rights under Section 4, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Units, and those Units
may not be withdrawn except to the extent that the tendering Unitholders are
entitled to withdrawal rights as described in Section 5; subject, however, to
the Purchaser's obligation under Rule 14e-1(c) under the Exchange Act to pay
Unitholders the Purchase Price in respect of Units tendered or return
certificates, if any, representing those Units promptly after termination of
withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to ARV and any of ARV's subsidiaries or other affiliates,
the right to purchase Units tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer or prejudice the rights of tendering Unitholders to receive payment
for Units validly tendered and accepted for payment pursuant to the Offer.
3. Procedure to Accept the Offer.
Valid Tender. For Units to be validly tendered pursuant to the Offer the
Depositary must receive, at one of its addresses listed on the back cover of
this Offer to Purchase, on or prior to the Expiration Date, a properly completed
and duly executed Letter of Transmittal, together with all required medallion
signature guarantees, all certificates, if any, and any other documents required
by the Letter of Transmittal. In certain cases, certificates may have been
issued to Unitholders to evidence ownership of the Units. These Unitholders must
tender the certificates with the Letter of Transmittal. The tender of
certificates is not required of Unitholders who were issued Units in book-entry
form on the records of the Partnership only.
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18
A Unitholder may tender any or all of the Units owned by that Unitholder;
provided, however, if the Unitholder desires to tender less than all of its
Units and (a) if the Unitholder is a Qualified Plan, then the Unitholder must
retain at least 200 Units, or (b) if the Unitholder is not a Qualified Plan,
then the Unitholder must retain at least 500 Units. No alternative, conditional
or contingent tenders will be accepted and no fractional Units will be
purchased, except for fractional Units owned by a Unitholder who is tendering
all of its Units.
Signature Guarantees. All signatures on the Letter of Transmittal must be
medallion guaranteed by a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. (each an "Eligible Institution"). See Instructions 1
and 5 of the Letter of Transmittal.
If the Units are registered in the name of a person other than the signer
of the Letter of Transmittal, or if payment is to be made to a person other than
the registered owner, then the Letter of Transmittal must be accompanied by duly
executed unit powers, signed exactly as the name or names of the registered
owner or owners appear on the transfer books of the Partnership. The signature
on the unit powers must be guaranteed by an Eligible Institution as provided
above. See Instructions 1 and 5 of the Letter of Transmittal.
IN ALL CASES, NOTWITHSTANDING ANY OTHER PROVISION HEREOF, PAYMENT FOR UNITS
ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER WILL IN ALL CASES BE MADE ONLY AFTER
TIMELY RECEIPT BY THE DEPOSITARY OF A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL, ALL REQUIRED MEDALLION SIGNATURE GUARANTEES, ALL
CERTIFICATES, IF ANY, AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF
TRANSMITTAL. ACCORDINGLY, PAYMENT MAY BE MADE TO TENDERING UNITHOLDERS AT
DIFFERENT TIMES IF CERTIFICATES FOR UNITS AND THESE DOCUMENTS ARE DELIVERED AT
DIFFERENT TIMES. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE UNITS TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT AFTER THE DATE OF ACCEPTANCE FOR PAYMENT.
Delivery of Letter of Transmittal. The method of delivery of the Letter of
Transmittal, the certificates, if any, and all other required documents is at
the option and risk of the tendering Unitholder, and delivery will be deemed
made only when actually received by the Depositary. In all cases, sufficient
time should be allowed to assure timely delivery.
Appointment as Proxy. By executing and delivering a Letter of Transmittal,
a tendering Unitholder irrevocably appoints the Purchaser and its officers, and
each of them or any other designee of the Purchaser, the attorneys-in-fact and
proxies of the Unitholder, in the manner set forth in the Letter of Transmittal,
each with full power of substitution, to the full extent of the Unitholder's
rights with respect to the Units tendered by the Unitholder and accepted for
payment by the Purchaser (and with respect to any and all distributions, other
Units, rights or other securities issued or issuable in respect thereof;
collectively, "Distributions"). All such proxies will be considered coupled with
an interest in the tendered Units, are irrevocable and are granted in
consideration of, and are effective upon, the acceptance for payment of the
Units by the Purchaser in accordance with the terms of the Offer. Upon
acceptance for payment, all prior powers of attorney and proxies given by the
Unitholder with respect to the Units and Distributions will, without further
action, be revoked, and no subsequent powers of attorney and proxies may be
given (and, if given, will be without force or effect). The designees of the
Purchaser will, with respect to the Units for which the appointment is
effective, be empowered to exercise all voting and other rights of the
Unitholder as they in their sole discretion may deem proper at any meeting of
the Partnership or any adjournment or postponement thereof. In order for Units
to be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of the Units, the Purchaser or its designee must be able to exercise
full voting rights with respect to the Units, including voting at any meeting of
the Partnership's limited partners or Unitholders.
Assignment of Interest in Future Distributions. By executing and
delivering a Letter of Transmittal, a tendering Unitholder irrevocably assigns
to the Purchaser and its assigns all of the right, title and interest of the
Unitholder in and to any and all Distributions made by the Partnership from and
after the expiration of the Offer with respect to the Units accepted for payment
and thereby purchased by the Purchaser.
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4. Determination of Validity; Rejection of Units; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions about the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the Offer will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of any particular Units
determined by it not to be in proper form or if the acceptance of or payment for
those Units may, in the opinion of Purchaser's counsel, be unlawful. The
Purchaser also reserves the absolute right to waive or amend any of the
conditions of the Offer that it is legally permitted to waive and to waive any
defect in any tender with respect to any particular Units. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal) will be final and binding. No tender of Units will be deemed to
have been validly made until all defects have been cured or waived. Neither the
Purchaser, ARV, the Financial Advisor, the Information Agent, the Depositary nor
any other person will be under any duty to give notification of any defects in
the tender of any Units or will incur any liability for failure to give any such
notification.
A tender of Units pursuant to the procedure described above and the
acceptance for payment of such Units will constitute a binding agreement between
the tendering Unitholder and the Purchaser on the terms set forth in the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment pursuant to this Offer, and thereby purchased, validly tendered
Units if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance of those Units for payment pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Units accepted for payment pursuant to the Offer will be made by deposit of
the Purchase Price therefor with the Depositary, which will act as agent for
tendering Unitholders for the purpose of receiving payments from the Purchaser
and transmitting those payments to Unitholders whose Units have been accepted
for payment.
5. Withdrawal Rights. Tenders of Units made pursuant to the Offer are
irrevocable, except that Units tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless already accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after February 20, 1997. If purchase of, or payment for, Units is delayed
for any reason, including extension by the Purchaser of the Expiration Date, or
if the Purchaser is unable to purchase or pay for Units for any reason then,
without prejudice to the Purchaser's rights under the Offer, tendered Units may
be retained by the Depositary and may not be withdrawn, except to the extent
that tendering Unitholders are entitled to withdrawal rights as set forth in
this Section 5; subject, however, to the Purchaser's obligation, pursuant to
Rule 14e-1(c) under the Exchange Act, to pay Unitholders the Purchase Price in
respect of Units tendered or return the certificates representing such Units, if
any, promptly after termination or withdrawal of the Offer.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
listed on the back cover of this Offer to Purchase. Any notice of withdrawal
must specify the name of the person(s) who tendered the Units to be withdrawn
and must be signed by the person(s) who signed the Letter of Transmittal in the
same manner as the Letter of Transmittal was signed. Any Units properly
withdrawn will be deemed not validly tendered for purposes of the Offer.
Withdrawn Units may be re-tendered, however, by following the procedures
described in Section 3 at any time prior to the Expiration Date.
All questions about the validity and form (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. Neither the
Purchaser, ARV, the Financial Advisor, the Information Agent, the Depositary nor
any other person will be under any duty to give notice of any defects in any
notice of withdrawal or incur any liability for failure to give any such notice.
6. Extension of Tender Period; Termination; Amendment. The Purchaser
expressly reserves the right, in its sole discretion, 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 Units, (ii) to
terminate the Offer and not accept for payment any Units not already accepted
for payment, (iii) upon the occurrence of any of the conditions specified in
Section 7, to delay the acceptance for payment of, or payment for, any Units
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not already accepted for payment or paid for, and (iv) to amend the Offer in any
respect (including, without limitation, by increasing the consideration offered,
increasing or decreasing the number of Units being sought, or both). Notice of
any such extension, termination or amendment will promptly be disseminated to
Unitholders in a manner reasonably designed to inform Unitholders of such change
in compliance with Rule 14d-4(c) under the Exchange Act. In the case of an
extension of the Offer, the extension will be followed by a press release or
public announcement which will be issued no later than 9:00 a.m. New York City
time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act. The minimum period during which an offer must remain open
following a material change in the terms of the offer or information concerning
the offer will depend upon the terms or information. In the Commission's view,
an offer should remain open for a minimum of five business days from the date
the material change is first published, sent or given to security-holders, such
as Unitholders, and if material changes are made with respect to information
that approaches the significance of price or the percentage of securities, such
as Units, sought, a minimum of ten business days may be required to allow for
adequate dissemination to security-holders, such as Unitholders, and investor
response. As used in this Offer to Purchase, "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 Midnight on such day, New York City time.
7. Conditions of the Offer. Notwithstanding any other term of the Offer,
the Purchaser will not be required to accept for payment or to pay for any Units
tendered if 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 occurred or been filed, or
obtained. Furthermore, notwithstanding any other term of the Offer and in
addition to the Purchaser's right to withdraw the Offer at any time before the
Expiration Date, the Purchaser will not be required to accept for payment or pay
for any Units, or may delay the acceptance for payment of the Units tendered if
at any time on or after the date of the Offer and before the acceptance of such
Units for payment or the payment therefor, any of the following conditions
exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental agency shall have been
issued and shall remain in effect which: (i) makes illegal, delays or
otherwise directly or indirectly restrains or prohibits the making of the
Offer or the acceptance for payment, purchase of or payment for any Units
by the Purchaser, (ii) imposes or confirms limitations on the ability of
the Purchaser or ARV effectively to exercise full rights of both legal and
beneficial ownership of the Units, including, without limitation, the right
to instruct the Partnership's assignor limited partner to vote the Units
acquired by the Purchaser pursuant to the Offer or otherwise on all matters
properly presented to the Partnership's Unitholders, (iii) requires
divestiture by the Purchaser or ARV of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser or ARV as a
result of the transactions contemplated by the Offer, (v) might materially
adversely affect the business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects of the Purchaser,
ARV or the Partnership, or (vi) seeks to impose any material condition to
the Offer unacceptable to the Purchaser;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer by any federal or state court, government or
governmental authority or agency, including a conclusion that the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Action of 1976, as amended,
applies which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) of paragraph (a)
above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
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prospects of the Partnership, which is or may be materially adverse to the
Partnership, or the Purchaser or ARV shall have become aware of any fact
that does or may have a material adverse effect on the value of the Units
or the Properties;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange, The Nasdaq Stock Market, or in 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, (iii) any limitation
by any governmental authority on, or other event which might affect, the
extension of credit by lending institutions or result in any imposition of
currency controls in the United States, (iv) a commencement of a war or
armed hostilities or other national or international calamity directly or
indirectly involving the United States, (v) a material change in the United
States or other currency exchange rates or a suspension of a limitation on
the markets thereof, or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(e) the General Partner and/or the assignor limited partner of the
Partnership shall have failed or refused to take all other action that the
Purchaser deems necessary, in the Purchaser's judgment, for the Purchaser
to be the registered owner of the Units tendered and accepted for payment
hereunder simultaneously with the consummation of the Offer or as soon
thereafter as is permitted under the Partnership Agreement as in accordance
with the Partnership Agreement and applicable law;
(f) the General Partner and/or the assignor limited partner of the
Partnership shall have failed or refused to furnish the Purchaser such
information as is necessary, in the Purchaser's judgment, to verify that
the person purporting to transfer Units to the Purchaser pursuant to the
Offer is in fact the registered owner of the Units;
(g) the General Partner or the Unitholders shall have caused the
Partnership to impose unreasonable transfer, substitution or similar fees,
including, without limitation, those that would otherwise apply to: (i) the
tender of Units by holders pursuant to the Offer, (ii) the transfer of such
Units to the Purchaser and (iii) the addition of the Purchaser as a
registered owner of the Units;
(h) there shall have been threatened, instituted or pending any action
or proceeding before any court or governmental agency or other regulatory
or administrative agency or commission or by any other person, challenging
the acquisition of any Units pursuant to the Offer or otherwise directly or
indirectly relating to the Offer, or otherwise, in the sole judgment of the
Purchaser, adversely affecting the Purchaser, ARV, the Partnership or the
Properties or the value of the Units or the benefits expected to be derived
by the Purchaser as a result of the transactions contemplated by the Offer;
(i) the Partnership shall have (i) issued, or authorized or proposed
the issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such
interests or other convertible securities, (ii) issued or authorized or
proposed the issuance of any other securities, in respect of, in lieu of,
or in substitution for, all or any of the presently outstanding Units,
(iii) declared or paid any Distribution, other than in cash, on any of the
Units, or (iv) the Partnership or the General Partner shall have
authorized, proposed or announced its intention to propose any merger,
consolidation or business combination transaction, acquisition of assets,
disposition of assets or material change in its capitalization, or any
comparable event not in the ordinary course of business;
(j) the General Partner shall have modified, or taken any step or
steps to modify, in any way, the procedures or regulations applicable to
the registration of Units or transfers of Units on the books and records of
the Partnership or the admission of transferees of Units as registered
owners and as Unitholders; or
(k) it shall have been publicly disclosed or the Purchaser or ARV
shall have otherwise learned that more than five percent of the outstanding
Units have been or are proposed to be acquired by another person (including
a "group" within the meaning of Section 13(d)(3) of the Exchange Act).
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The foregoing conditions are for the sole benefit of the Purchaser and ARV
and may be (but need not be) asserted by the Purchaser or ARV regardless of the
circumstances giving rise to such conditions or may be waived by the Purchaser
or ARV in whole or in part at any time and from time to time in its sole
discretion. Any determination by the Purchaser or ARV concerning the events
described above will be final and binding upon all parties.
8. Backup Federal Income Tax Withholding. To prevent the possible
application of backup federal income tax withholding of 31 percent with respect
to payment of the Purchase Price, a tendering Unitholder must provide the
Purchaser with the Unitholder's correct taxpayer identification number by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
"CERTAIN FEDERAL INCOME TAX MATTERS."
9. FIRPTA Withholding. To prevent the withholding of federal income tax in
an amount equal to ten percent of the amount of the Purchase Price plus
Partnership liabilities allocable to each Unit purchased, each tendering
Unitholder must complete the FIRPTA Affidavit included in the Letter of
Transmittal certifying the Unitholder's taxpayer identification number and
address and that the Unitholder is not a foreign person.
10. Mutilated, Lost, Stolen or Destroyed Certificates. Any tendering
Unitholder who was issued certificates and the certificates have been mutilated,
lost, stolen or destroyed must complete the Statement of Destroyed, Lost or
Stolen Certificate(s) included with the Letter of Transmittal and deliver it to
the Depositary along with the Letter of Transmittal on or prior to the
Expiration Date.
EFFECTS OF THE OFFER
Distributions Upon Change in Control. According to the Partnership's Form
8-K, dated February 23, 1996, filed with the Commission, the General Partner
adopted a resolution that states, among other things, if an actual, potential or
threatened Change of Control (as defined below) occurs, the General Partner may
pay out to Unitholders that amount of the Partnership's cash balances not
required for its ordinary course day-to-day operations. For purposes of the
resolution, "Change of Control" means the acquisition of, or offer or proposal
to acquire, by any third person, pursuant to one or more of a tender offer, open
market purchase or privately negotiated purchase, any equity security of the
Partnership, if after the acquisition thereof the third party would, directly or
indirectly, be a beneficial owner of more than ten percent of any class of the
issued and outstanding equity securities of the Partnership. However, for
purposes of the resolution, "Change of Control" does not include any acquisition
of equity securities of the Partnership approved in advance by the General
Partner. This Offer constitutes a Change of Control for purposes of the
resolution because the Purchaser is offering to acquire enough Units to cause it
to be the beneficial owner of more than ten percent of the Units. Accordingly,
the General Partner may decide to make the Distributions to Unitholders
described above. If so, the Purchase Price will be reduced accordingly. The
Purchaser is of the view the General Partner should not make the Distributions
described above because the Partnership's funds are needed for the earthquake
repairs as described in the Partnership's Form 10-Q for the quarter ended
September 30, 1996 and for other purposes.
Limitations on Resales. The Partnership Agreement provides the General
Partner the discretion to defer the transfer and registration of Units if, among
other things, a transfer, when considered with all other transfers during the
same applicable twelve-month period, would cause a termination of the
Partnership for federal income tax purposes (which termination may occur when 50
percent or more of the Units are transferred in a twelve-month period). This
provision may limit sales of Units on the secondary market and in private
transactions for the twelve-month period following completion of the Offer.
Accordingly, the Partnership may decide not to recognize any requests for
recognition of a transferee Unitholder upon a transfer of Units during such
twelve-month period if the General Partner believes the transfers would cause a
tax termination of the Partnership.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange
Act. If a substantial number of Units are purchased pursuant to the Offer, the
result will be a reduction in the number of Unitholders. A reduction in the
number of holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the Units. In this case,
however, according to public
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documents filed by the Partnership, there is no established public trading
market for the Units and, therefore, the Purchaser does not believe a reduction
in the number of Unitholders will materially further restrict the Unitholders'
ability to find purchasers for their Units through secondary market
transactions. For certain limited information regarding recent secondary sales
of the Units see "TRADING HISTORY OF THE UNITS" above.
The Units are currently registered under the Exchange Act. Such
registration may be terminated upon application to the Commission if the Units
are not listed on a national securities exchange and there are fewer than 300
record holders. Termination of registration under the Exchange Act would
substantially reduce the information required to be furnished by the Partnership
to its Unitholders and to the Commission and would make inapplicable to the
Partnership certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement to furnish proxy
statements in connection with Unitholders' meetings pursuant to Section 14(a),
and the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, if the Purchaser acquires a substantial
number of Units, the ability of "affiliates" of the Partnership and persons
holding "restricted securities" of the Partnership to dispose of such securities
pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as
amended, may be impaired or eliminated. If, as a result of the purchase of Units
pursuant to the Offer, the Partnership is no longer required to maintain
registration of the Units under the Exchange Act, the Purchaser or its
affiliates plan to seek to cause the Partnership to apply for termination of
such registration.
Control of Unitholder Voting Decisions by the Purchaser and ARV. The
Partnership Agreement provides that a transferee of Units will not be recognized
as an assignee Unitholder unless and until the transfer is accepted and recorded
by the Partnership's transfer agent. The Partnership Agreement also provides
that a transfer fee must be paid to the Partnership to cover all reasonable
expenses incurred in connection with such transfer, unless waived by the General
Partner in its sole discretion. The Purchaser will seek to be listed on the
books and records of the Partnership as the registered owner of the tendered and
purchased Units upon or as soon as possible following consummation of the Offer
and, if and when so listed, will have the right to vote each Unit purchased
pursuant to the Offer in accordance with the Partnership Agreement.
Nevertheless, until and regardless of whether the Purchaser is listed on the
books and records of the Partnership as the registered owner of the Units
purchased hereunder, the Purchaser will have the right to determine the vote of
each Unit purchased in the Offer pursuant to the irrevocable appointment by
selling Unitholders of the Purchaser, its officers and designees as proxies with
respect to the Units tendered by such Unitholders and accepted for payment by
the Purchaser. See Section 3 under "DETAILS OF OFFER." As a result, the
Purchaser may be in a position to influence significantly or determine all
voting decisions of Unitholders with respect to the Partnership. This could (i)
prevent non-tendering Unitholders from taking action they desire but that the
Purchaser opposes and (ii) enable the Purchaser to take action desired by the
Purchaser but opposed by non-tendering Unitholders. Under the Partnership
Agreement, Unitholders holding a majority of the Units are entitled to direct
the Partnership's assignor limited partner to vote the Limited Partnership
Interests correlating to such Units to take action with respect to a variety of
matters, including removal of the General Partner, dissolution and termination
of the Partnership, and approval of most types of amendments to the Partnership
Agreement.
Certain Federal Income Tax Matters. The following summary is a general
discussion of certain of the federal income tax consequences of a sale of Units
pursuant to the Offer. The summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations thereunder,
administrative rulings, and judicial authority, all 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 Unitholder in
light of such Unitholder's specific circumstances or to certain types of
Unitholders subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does it
describe any aspect of state, local, foreign or other tax laws. Sales of Units
pursuant to the Offer will be taxable transactions under applicable state,
local, foreign and other tax laws. UNITHOLDERS SHOULD CONSULT THEIR
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RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO EACH SUCH
UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
In general, a Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unitholder's
"amount realized" on the sale and (ii) the Unitholder's adjusted tax basis in
the Units sold. The amount of a Unitholder's adjusted tax basis in such Units
will vary depending upon the Unitholder's particular circumstances. The "amount
realized" with respect to a Unit will be a sum equal to the amount of cash
received by the Unitholder of the Unit pursuant to the Offer (that is, the
Purchase Price), plus the amount of the Partnership's liabilities allocable to
the Unit (as determined under Code Section 752).
The gain or loss recognized by a Unitholder on a sale of a Unit pursuant to
the Offer generally will be treated as a capital gain or loss if the Unit was
held by the Unitholder as a capital asset. That capital gain or loss will be
treated as long-term capital gain or loss if the tendering Unitholder's holding
period for the Unit exceeds one year. Under current law, long-term capital gains
of individuals are taxed at a maximum marginal federal income tax rate of 28
percent, whereas the maximum marginal federal income tax rate for ordinary
income of such persons is approximately 39.6 percent. Capital losses are
deductible only to the extent of capital gains, except that individual 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 carry-forward period is
five years and an individual taxpayer can carry forward such losses
indefinitely).
If any portion of the amount realized by a Unitholder is attributable to
"unrealized receivables" (which includes depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Unitholder's gain or loss may be ordinary rather than capital.
A tendering Unitholder will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of the sale with respect to
the Units sold in accordance with the provisions of the Partnership Agreement
concerning transfers of Units. Such allocation and any cash distributed by the
Partnership to the Unitholder for that year will affect the Unitholder's
adjusted tax basis in Units and, therefore, the amount of such Unitholder's
taxable gain or loss upon a sale of Units pursuant to the Offer.
Under Code Section 469, individuals and certain types of corporations
generally are able to deduct "passive activity losses" in any year only to the
extent of the person's passive activity income for that year. Substantially all
post-1986 losses of Unitholders from the Partnership are passive activity
losses. Unitholders may have "suspended" passive activity losses from the
Partnership (i.e., post-1986 net taxable losses in excess of statutorily
permitted "phase-in" amounts and which have not been used to offset income from
other passive activities).
If a Unitholder sells less than all of its Units pursuant to the Offer, a
loss recognized by that Unitholder can be currently deducted (subject to the
other applicable limitations) to the extent of the Unitholder's passive income
from the Partnership for that year plus any other passive activity income for
that year, and a gain recognized by a Unitholder upon the sale of Units can be
offset by the Unitholders' current or "suspended" passive activity losses (if
any) from the Partnership and other sources. If, on the other hand, a Unitholder
sells 100 percent of its Units pursuant to the Offer, any "suspended" losses and
any losses recognized upon the sale of the Units will be offset first against
any other net passive gain to the Unitholder from the sale of the Units and any
other net passive activity income from other passive activity investments, and
the balance of any "suspended" net losses from the Units will no longer be
subject to the passive activity loss limitation and, therefore, will be
deductible by such Unitholder from its other income (subject to any other
applicable limitations).
Section 708(b) of the Code (and related Treasury Department regulations)
provides that a partnership terminates for federal income tax purposes if there
is a sale or exchange of 50 percent or more of the total interests in the
partnership capital and profits within a twelve-month period. Accordingly, it is
possible that transfers made pursuant to the Offer combined with others
transfers within a twelve-month period could cause a termination of the
Partnership for income tax purposes. In the event of a termination, the
Partnership would
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be treated for income tax purposes as if it had made a liquidating distribution
of its assets to the remaining partners and the new partners, followed by a
recontribution of the assets to a "new" partnership. The Purchaser believes that
this distribution and recontribution of assets should not result in the
recognition of current gain or loss by the partners. A partner receiving a
liquidating distribution from a partnership recognizes gain only to the extent
that the cash distributed to such partner exceeds the tax basis that the
distributee partner has in its partnership interest.
The "new" partnership created upon the deemed recontribution of assets by
the partners would be treated as having acquired its assets on the date of the
deemed recontribution. A new depreciation recovery period would begin on such
date, and the Partnership would be required to depreciate its properties over a
greater period of time than is currently being used; accordingly, the aggregate
present value of the Partnership's future depreciation deductions would be
reduced. In addition, a Section 708(b) termination of the Partnership could
require the Partnership to make certain complex allocations (pursuant to
Sections 737 and 704(c) of the Code) of future Partnership income and loss to
take into account the amount of gain or loss inherent in each Partner's share of
each asset that is deemed to have been recontributed to the Partnership
following the Section 708(b) termination.
Pursuant to income tax regulations proposed by the Treasury Department on
May 11, 1996 (the "Proposed Regulations"), the income tax treatment of Section
708(b) partnership terminations would be substantially modified. The Proposed
Regulations would deem a Section 708(b) termination to cause the terminating
partnership to contribute its assets to a new partnership, followed by a
liquidating distribution of interests in the new partnership to the partners of
the terminating partnership. The changes contained in the Proposed Regulations
would eliminate the possibility of gain recognition by the partners in the
terminating partnership and would eliminate the necessity of computing the
complex allocations required by Section 704(c) and Section 737. The change in
the depreciable lives of partnership property held by the terminating
partnership described in the preceding paragraph would continue to occur under
the Proposed Regulations.
The Proposed Regulations will be effective when they are published as final
regulations in the Federal Register. Although an earlier effective date of these
or similar regulations governing Section 708(b) terminations is possible, all
Partners should assume that the existing Section 708(b) regulations (rather than
the Proposed Regulations) will apply to a termination of the Partnership
incident to the Offer.
Unitholders (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 31 percent backup
withholding unless those Unitholders provide a taxpayer identification number
("TIN") and are certain that the TIN is correct or properly certify that they
are awaiting a TIN. A Unitholder may avoid backup withholding by properly
completing and signing the Substitute Form W-9 included as part of the Letter of
Transmittal. If a Unitholder who is subject to backup withholding does not
properly complete and sign the substitute Form W-9, the Purchaser will withhold
31 percent from payments to such Unitholder.
A Unitholder who tenders Units must file an information statement with his
federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3). The selling
Unitholder must also notify the Partnership of the date of the transfer and the
names, addresses and tax identification numbers of the transferrors and
transferee within 30 days of the date of the transfer (or, if earlier, January
15 of the following calendar year) (See IRS Form 8308).
Xxxx realized by a foreign Unitholder on the sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Code Section 1445, the
transferee of an interest held by a foreign person in a partnership which owns
United States real property generally is required to deduct and withhold a tax
equal to 10 percent of the amount realized on the disposition. In order to
comply with this requirement, the Purchaser will withhold 10 percent of the
amount realized by a tendering Unitholder unless the Unitholder properly
completes and signs the FIRPTA Affidavit included as part of the Letter of
Transmittal certifying the Unitholder's TIN, that such Unitholder is not a
foreign person and the Unitholder's address. Amounts withheld would be
creditable against a foreign Unitholder's 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.
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Units tendered in response to this Offer will be purchased in 1997 if all
terms and conditions of the Offer are met and the tendered Units are accepted
for payment and paid for by the Purchaser.
CERTAIN LEGAL MATTERS
General. Except as set forth in this Section, neither the Purchaser nor
ARV is aware of any filings, approvals or other actions by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Units by the Purchaser pursuant to the Offer. Should any such
approval or other action be required, it is the Purchaser's and ARV's present
intention that such additional approval or action would be sought. While there
is no present intent to delay the purchase of Units tendered pursuant to the
Offer pending receipt of any such additional approval or the taking of any such
action, 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 business might not have to be disposed of or other
substantial conditions complied with in order to obtain such approval or action,
any of which could cause the Purchaser to elect to terminate the Offer without
purchasing Units thereunder. The Purchaser's obligation to purchase and pay for
Units is subject to certain conditions, including conditions related to the
legal matters discussed in this Section.
Antitrust. The acquisition of all or substantially all of the outstanding
Units may, depending on the satisfaction of certain jurisdictional thresholds,
be subject to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Action of 1976, as
amended (the "HSR Act"). The HSR Act provides that certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice ("Antitrust
Division") and the Federal Trade Commission ("FTC") and certain waiting period
requirements have been satisfied.
The Purchaser intends to file, if and when deemed necessary by the
Purchaser, a Notification and Report Form as required by the HSR Act with
respect to the acquisition of all or substantially all of the Units. Filing may
also be required of the Partnership. Under the applicable provisions of the HSR
Act, such transactions may not be consummated until the expiration of a
30-calendar day waiting period following the required filings unless early
termination of the waiting period is granted or the Purchaser and the
Partnership receive a request for additional information or materials prior
thereto. If, within such 30-day waiting period, either the FTC or the Antitrust
Division were to request additional information or material from the Purchaser
and the Partnership, the waiting period would expire at 11:59 p.m., Eastern
time, on the twentieth calendar day after the date of substantial compliance by
the Purchaser and the Partnership with such request. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the rules promulgated under the HSR Act. Thereafter, such waiting period may be
extended only by court order or with the consent of the Purchaser and the
Partnership.
At any time before or after the Purchaser's purchase of Units, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the acquisition of Units pursuant to the Offer or seeking divestiture of
Units acquired by the Purchaser or the divestiture of substantial assets of the
Purchaser or the Partnership. Private parties and State antitrust authorities
also may bring legal action under the antitrust laws under certain
circumstances. The Purchaser believes that the Offer will not violate the
antitrust laws. Nevertheless, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made or, if a challenge is made, what the
result will be. See Section 7 under "DETAILS OF THE OFFER."
Margin Requirements. The Units 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.
State Takeover Statutes. A number of states have adopted "takeover"
statutes that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, principal executive offices or principal places of business in such
states. Certain decisions of the United States Supreme
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Court limit the applicability of such statutes. The Partnership was formed under
the laws of the State of Delaware, which currently does not have any takeover
statute applicable to limited partnerships, and Purchaser does not expect any
such statute to be enacted in Delaware during the pendency of the Offer.
However, it is a condition to the Offer that no state or federal statute impose
a material limitation on the Purchaser's right to vote the Units purchased
pursuant to the Offer. If this condition is not met, Purchaser may terminate or
amend the Offer.
If any person seeks to apply any state takeover statute, the Purchaser will
take such action as then appears desirable, which action may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. If there is a claim that one or more takeover statutes apply to the
Offer, and it is not determined by an appropriate court that such statutes do
not apply or are invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. This could prevent the Purchaser from purchasing or
paying for Units tendered pursuant to the Offer, or cause delay in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment or pay for Units tendered.
Fees and Expenses. Except as set forth in this Section, neither the
Purchaser nor ARV will pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Units pursuant to the Offer. The
Purchaser has retained Beacon Hill Partners, Inc. to act as Information Agent
and IBJ Xxxxxxxx Bank & Trust Company to act as Depositary in connection with
the Offer. The Purchaser will pay the Information Agent and the Depositary
reasonable and customary compensation for their respective services in
connection with the Offer, plus reimbursement of out-of-pocket expenses, and
will indemnify the Information Agent and the Depositary against certain
liabilities and expenses in connection therewith, including 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.
Xxxxxxxxx, Xxxxxxxx & Xxxxxx, Inc. has been retained to act as Financial
Advisor to the Purchaser and ARV in connection with the Offer. XXX has agreed to
pay the Financial Advisor compensation for such services and to reimburse the
Financial Advisor for all reasonable out-of-pocket expenses incurred by the
Financial Advisor. XXX has also agreed to indemnify the Financial Advisor
against certain liabilities and damages.
Miscellaneous. The Offer is not made to (nor will tenders be accepted on
behalf of) Unitholders residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities
or other laws of such jurisdiction. However, the Purchaser may, in its
discretion, take such action as it deems necessary to make the Offer in any
jurisdiction and extend the Offer to Unitholders in such jurisdiction.
In any jurisdiction where the securities or other laws require the Offer to
be made by a licensed broker or dealer, the Offer will be deemed to be made on
behalf of the Purchaser by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
The Purchaser and ARV have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. The Schedule 14D-1 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 under the caption "CERTAIN
INFORMATION CONCERNING THE PURCHASER AND ARV" (except that they will not be
available at the regional offices of the Commission).
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser or ARV 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.
LAVRA, Inc.
December 23, 1996
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE PURCHASER AND ARV
The names and principal occupation or employment of each executive officer
and director of ARV and the Purchaser are set forth below. The business address
of each executive officer and director is 000 Xxxxxxx Xxxxxx, Xxxxx X-0, Xxxxx
Xxxx, Xxxxxxxxxx 00000. Each executive officer and director is a United States
citizen. In addition, except as otherwise noted, each executive officer and
director of ARV has been employed with ARV in the positions listed below during
the last five years and each executive officer and director of the Purchaser has
been employed with the Purchaser in the positions listed below since its
inception in May, 1995.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
----------------------------------- --------------------------------------------------------
Xxxx X. Xxxxxxxx................... President and Chairman of the Board and Director of ARV;
President and Chairman of the Board and Director of the
Purchaser; Xx. Xxxxxxxx became the President of ARV on
September 30, 1996
Xxxx X. Xxxxx...................... Vice Chairman and Director of XXX
Xxxxx X. Xxxxxxx................... Senior Executive Vice President and Director of ARV;
Senior Executive Vice President and Director of the
Purchaser
Xxxxxx X. Xxxxxx-Xxxxx............. Chief Financial Officer and Executive Vice President of
ARV; Chief Financial Officer, Executive Vice President
and Director of the Purchaser
Xxxxxx X. Xxxxxxx.................. Vice President and Secretary of ARV; Vice President,
Secretary and Director of the Purchaser
X. Xxxxx Xxxxxxx................... Director of ARV; President and Chief Executive Officer,
Director, Nationwide Health Properties since 1989
Xxxxxxx X. XxXxxx.................. Director of ARV; Chairman and Chief Executive Officer,
Verity Financial Group since 1992; Director, Xxxxx
Healthcare Corporation, Dai-Ichi Kangyo Bank of
California and Monarch Funds; Managing Partner, KPMG
Peat Marwick prior to 1992
Xxxxx X. Xxxxxx.................... Director of ARV; Principal of Xxxxxx-Xxxxx Company Inc.
since 1973; President and Chief Executive Officer, X.X.
Xxxxxx Company from 1975 to 1993
Xxxx X. Xxxxxxxxx.................. Director of ARV; Principal, Xxxxxxxxx, Xxxxxxxx &
Xxxxxx, Inc. since 1993; Executive Vice-President and
Chief Financial Officer of Four Winds, Inc. in 1992;
Vice President, Health Care Group, Xxxxxx, Xxxxxxx & Co.
Incorporated from 1986 to 1992
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The Letter of Transmittal, certificates for Units and any other required
documents should be sent or delivered by each Unitholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addressees set forth below:
The Depositary for the Offer is:
IBJ XXXXXXXX BANK & TRUST COMPANY
(000) 000-0000 (Collect)
By Mail: By Hand/Overnight Delivery:
P.O. Box 84 One State Street
Bowling Green Station New York, New York 00000
Xxx Xxxx, Xxx Xxxx Attn: Securities Processing Window
10274-0084 Subcellar One
Attn: Reorganization
Operations Department
Questions and requests for assistance may be directed to the Information
Agent at its 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 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 for the Offer is:
BEACON HILL PARTNERS, INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (Toll Free)
