1
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
11(a)(1) Cover Letter to Unit Holders and Offer to Purchase,
dated May 12, 1998.
11(a)(2) Agreement of Transfer and Letter of Transmittal, with
Instructions.
11(a)(3) Summary Publication.
11(c) Letter Agreement for Option to Purchase Securities,
dated April 29, 1998, by and among the Purchaser,
Global Capital Management, Inc. and Valley Creek
Capital, Inc.
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EXHIBIT 11(a)(1)
EVEREST TAX CREDIT INVESTORS, LLC
000 XXXXX XXX XXXXXX XXXXXX, XXXXX 000
XXXXXXXX, XXXXXXXXXX 00000
May 12, 1998
$500.00 PER UNIT CASH OFFER
TO ALL UNIT HOLDERS OF LIMITED PARTNERSHIP INTERESTS IN
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
Dear Unit Holder:
Enclosed is an OFFER TO PURCHASE up to 1,799 units of limited
partnership interests ("Units") in WNC California Housing Tax Credits III, L.P.
(the "Partnership") for a cash price of $500.00 per Unit, without interest, less
the amount of Distributions (as defined in the Offer to Purchase) per Unit made
to you by the Partnership after April 14, 1998 and less any tax credits which
are allocated to selling Unit Holders after June 30, 1998 (allocable at the rate
of approximately $10.00 per month per Unit), and less any Partnership transfer
fees.
PLEASE CONSIDER THE FOLLOWING POINTS:
o The Partnership's publicly filed documents state that there is
no established public trading market for the Units and it is not
anticipated that any public market will develop. Partnership
Spectrum, an independent industry publication, reflects ONLY TWO
TRANSFERS OF THE UNITS BETWEEN DECEMBER 1, 1995 AND JANUARY 31,
1998.
o Everest estimates, based on the Partnership's public filings and
assuming a sale date of June 30, 1998, that most sellers will
receive the following cumulative after-tax benefits from
inception of the Partnership for each Unit sold to Everest:
Total
1998 Tax After-Tax
Effects* Benefit*
---------------------------------------------------- ---------
Cash................................ $ 500.00
Tax deduction against ordinary income $305.50
Tax benefit...................... $ 109.98
Long-term capital loss.............. $194.50
Tax benefit...................... $ 38.90
Estimated tax credits from inception
to 6/30/98.......................... $ 755.00
---------
TOTAL BENEFIT*...................... $1,403.88
* Assumes: the Units were held by individuals from inception; each
seller can fully utilize the long term capital loss recognized
upon the sale of the Units; prior passive activity losses have not
been utilized; ordinary income and capital gain federal tax rates
of 36% and 20%, respectively; and the sellers sell all of their
interest in the Partnership.
o The Offer is an immediate opportunity for Unit Holders to
liquidate their investment in the Partnership, but Unit Holders
who tender their Units will be giving up the opportunity to
participate in any potential future benefits, including
allocations of tax credits and passive activity losses, from
ownership of Units.
We encourage you to read the Offer to Purchase completely and to return
your completed Letter of Transmittal promptly. The Offer is scheduled to expire
on June 15, 1998.
For answers to any questions you might have regarding these materials or
our Offer, or assistance in the procedures for accepting our Offer and tendering
your Units, please contact us at (000) 000-0000 (toll free).
Sincerely,
Everest Tax Credit Investors, LLC
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OFFER TO PURCHASE FOR CASH
UP TO 1,799 UNITS OF LIMITED PARTNERSHIP INTERESTS IN
WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
FOR
$500.00 PER UNIT
BY
EVEREST TAX CREDIT INVESTORS, LLC
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME ON MONDAY, JUNE 15, 1998
UNLESS THE OFFER IS EXTENDED.
Everest Tax Credit Investors, LLC, a California limited liability
company, (the "Purchaser" or "Everest"), is offering to purchase up to 1,799
units of limited partnership interests ("Units") in WNC California Housing Tax
Credits III, L. P., a California limited partnership (the "Partnership"), at a
net cash price of $500.00 per Unit (the "Purchase Price"), without interest,
less the amount of the Distributions (as defined below) per Unit, if any, made
to the holders of Units ("Unit Holders") by the Partnership after April 14, 1998
and less any tax credits allocated to selling Unit Holders after June 30, 1998
(allocable at approximately $10.00 per month per Unit), and less any transfer
fees imposed by the Partnership for each transfer. The Offer (as defined below)
is subject to certain terms and conditions. This Offer is upon the terms set
forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Agreement of Transfer and 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." The Offer is not
conditioned upon financing.
------------------
For More Information or for Further Assistance Please Call
or Contact the Purchaser at:
EVEREST PROPERTIES II, LLC
(MANAGER)
000 XXXXX XXX XXXXXX XXXXXX
XXXXX 000
XXXXXXXX, XXXXXXXXXX 00000
(000) 000-0000
(000) 000-0000 (TOLL FREE)
May 12, 1998
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION......................................................... 1
PURPOSE OF THE OFFER............................................ 1
DETAILS OF THE OFFER................................................. 2
1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION.............. 2
2. ACCEPTANCE FOR PAYMENT AND PAYMENT OF
PURCHASE PRICE.............................................. 2
3. PROCEDURE TO ACCEPT THE OFFER............................... 3
4. DETERMINATION OF VALIDITY, REJECTION OF UNITS, WAIVER
OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS......... 4
5. WITHDRAWAL RIGHTS........................................... 4
6 EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.......... 4
7. CONDITIONS OF THE OFFER..................................... 5
8. BACKUP FEDERAL INCOME TAX WITHHOLDING....................... 6
9. FIRPTA WITHHOLDING.......................................... 6
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP....................... 6
GENERAL......................................................... 6
OUTSTANDING UNITS............................................... 7
SELECTED FINANCIAL AND PROPERTY RELATED DATA.................... 7
PRIOR ACQUISITIONS OF UNITS AND PRIOR CONTACTS.................. 8
DETERMINATION OF PURCHASE PRICE...................................... 8
TRADING HISTORY OF THE UNITS.................................... 8
REMAINING TAX CREDITS........................................... 8
CERTAIN INFORMATION CONCERNING THE PURCHASER......................... 8
THE PURCHASER................................................... 8
LETTER AGREEMENT FOR OPTION TO PURCHASE SECURITIES.............. 9
GENERAL......................................................... 9
SOURCE OF FUNDS................................................. 9
FUTURE PLANS OF THE PURCHASER........................................ 9
EFFECTS OF THE OFFER................................................. 10
FUTURE BENEFITS OF UNIT OWNERSHIP............................... 10
LIMITATIONS ON RESALES.......................................... 10
INFLUENCE ON VOTING DECISIONS BY THE PURCHASER.................. 10
CERTAIN FEDERAL INCOME TAX MATTERS................................... 10
CERTAIN LEGAL MATTERS................................................ 12
GENERAL......................................................... 12
STATE TAKEOVER STATUTES......................................... 12
FEES AND EXPENSES............................................... 12
MISCELLANEOUS................................................... 12
SCHEDULE I - DIRECTORS AND EXECUTIVE OFFICERS........................ 14
APPENDIX A........................................................... A-1
PART I - SELECTED FINANCIAL DATA................................ A-1
PART II - PROPERTY DESCRIPTIONS................................. A-4
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INTRODUCTION
The Purchaser hereby offers to purchase up to 1,799 Units of limited
partnership interests in the Partnership at a cash purchase price of $500.00 per
Unit, without interest, less the amount of Distributions per Unit, if any, made
to Unit Holders by the Partnership after April 14, 1998, less tax credits
allocated after June 30, 1998 (allocable at approximately $10.00 per month per
Unit), and less any transfer fees imposed by the Partnership for each transfer.
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.
In considering the Offer, Unit Holders may wish to consider the
following:
o The Partnership's publicly filed documents state that there is
no established public trading market for the Units and it is not
anticipated that any public market will develop. Partnership
Spectrum, an independent industry publication, reflects ONLY TWO
TRANSFERS OF THE UNITS BETWEEN DECEMBER 1, 1995 AND JANUARY 31,
1998. For further information, see "DETERMINATION OF PURCHASE
PRICE -- TRADING HISTORY OF THE UNITS."
o The Purchaser estimates, based on the Partnership's public
filings and assuming a sale date of June 30, 1998, that most
sellers will receive the following cumulative after-tax benefits
from inception of the Partnership for each Unit sold to
Purchaser:
Total
1998 Tax After-Tax
Effects* Benefit*
--------------------------------------------------- ---------
Cash................................ $ 500.00
Tax deduction against ordinary income $305.50
Tax benefit...................... $ 109.98
Long-term capital loss.............. $194.50
Tax benefit...................... $ 38.90
Estimated tax credits from inception
to 6/30/98.......................... $ 755.00
---------
TOTAL BENEFIT*...................... $1,403.88
* Assumes: the Units were held by individuals from inception;
each seller can fully utilize the long term capital loss
recognized upon the sale of the Units; prior passive activity
losses have not been utilized; ordinary income and capital gain
federal tax rates of 36% and 20%, respectively; and the sellers
sell all of their interest in the Partnership. See "CERTAIN
FEDERAL INCOME TAX MATTERS."
o The Purchaser estimates, based on the Partnership's public
filings, that the value of the remaining tax credits in the
Units is approximately $745.00 per Unit from July 1998 through
December 2005. Current tax laws restrict individual use of both
tax credits and passive losses. The Purchaser is offering a
guaranteed $500.00 per Unit in cash now, and sellers of Units
can avoid the risk of tax credit recapture after 1998.
o The Offer allows Unit Holders to dispose of their Units without
incurring the sales commissions (approximately 5% to 10%)
typically associated with transfers of Units arranged through
brokers or other intermediaries.
o Unit Holders who accept the Offer for all their Units will
receive no further Partnership K-1's after the 1998 K-1.
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o The Purchaser is making the Offer with a view to making a profit
for itself. Accordingly, there is a conflict between the desire
of the Purchaser to purchase Units at a low price and the desire
of the Unit Holders to sell their Units at a high price.
o The Offer is an immediate opportunity for Unit Holders to
liquidate their investments in the Partnership, but Unit Holders
who tender their Units will be giving up the opportunity to
participate in any potential future benefits, including
allocations of tax credits and passive activity losses, from
ownership of Units.
Each Unit Holder must make its own decision, based on the Unit Holder's
particular circumstances, whether to tender Units and, if so, how many Units to
tender. Unit Holders should consult with their respective advisors about the
financial, tax, legal and other implications of accepting the Offer.
DETAILS OF THE OFFER
1. Terms of the Offer; Expiration Date; Proration. On the terms and
subject to the conditions of the Offer, the Purchaser will accept and purchase
up to 1,799 Units that are validly tendered in accordance with the procedures
set forth in Section 3 on or prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in Section 5 ("Properly Tendered"). For
purposes of the Offer, the term "Expiration Date" means 12:00 Midnight, New York
City time on Monday, June 15, 1998, 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 to which the Offer is
extended by the Purchaser.
If, prior to the Expiration Date, the Purchaser increases the Purchase
Price offered to the Unit Holders 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.
If more than 1,799 Units are Properly Tendered (or if the number of
Units that are Properly Tendered exceeds the number that can be transferred
without imposing limitations on resales) the Purchaser will, upon the terms and
subject to the conditions of the Offer, accept for payment and pay for an
aggregate of 1,799 Units (or, if less, the maximum number of Units which can be
transferred without imposing limitations on resales), pro rata, according to the
number of Units that are Properly Tendered by each Unit Holder, with appropriate
adjustments to avoid purchases of fractional Units and purchases that would
cause a Unit Holder that sells fewer than all of its Units to continue to hold
fewer than 5 Units. If the number of Units that are Properly Tendered is less
than or equal to 1,799 Units (or, if less, the maximum number of Units which can
be transferred without imposing limitations on resales), the Purchaser will
purchase all Units that are Properly Tendered, upon the terms and subject to the
conditions of the Offer.
If proration of tendered Units is required, the Purchaser may not be
able to announce the final results of the proration until at least seven
business days after the Expiration Date because of the difficulty of determining
the proration results. The Purchaser does not intend to pay for any Units
accepted for payment pursuant to the Offer until the final proration or other
adjustment results are known.
If on or prior to the Expiration Date any or all of the conditions of
the Offer 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 Securities and Exchange
Commission (the "Commission"), purchase all Units that are Properly Tendered,
(iii) extend the Offer and, subject to the right of Unit Holders to withdraw
Units until the Expiration Date, retain previously tendered Units for 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 up to 1,799 Units that are Properly Tendered, as promptly
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as practicable following the Expiration Date. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely receipt by the
Purchaser of: (i) a properly completed and duly executed and acknowledged Letter
of Transmittal (or facsimile thereof), (ii) any other documents required in
accordance with the Letter of Transmittal, and (iii) written confirmation from
the Partnership of the transfer of the Units to the Purchaser.
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 (other than
proration adjustments), the original Letter of Transmittal with respect to the
Units may be destroyed by the Purchaser. If for any reason acceptance for
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
Purchaser may, nevertheless, retain documents concerning tendered Units, and
those Units may not be withdrawn except to the extent that the tendering Unit
Holders are otherwise entitled to withdrawal rights as described in Section 5;
subject, however, to the Purchaser's obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay Unit
Holders the Purchase Price in respect of Units tendered or return documents, if
any, representing those Units promptly after termination or withdrawal of the
Offer.
3. PROCEDURE TO ACCEPT THE OFFER. A UNIT HOLDER MAY TENDER ANY OR ALL OF
THE UNITS OWNED BY THAT UNIT HOLDER. FOR UNITS TO BE VALIDLY TENDERED PURSUANT
TO THE OFFER, THE PURCHASER MUST RECEIVE, AT THE ADDRESS LISTED ON THE BACK PAGE
OF THIS OFFER TO PURCHASE ON OR PRIOR TO THE EXPIRATION DATE, A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL, THE ORIGINAL PARTNERSHIP
CERTIFICATE (IF AVAILABLE) AND ALL DOCUMENTS REQUIRED BY THE LETTER OF
TRANSMITTAL.
The method of delivery of the Letter of Transmittal, and all other
required documents is at the option and risk of the tendering Unit Holder, and
delivery will be deemed made only when actually received by the Purchaser. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure timely delivery.
A Unit Holder may tender any or all of the Units owned by that Unit
Holder; provided, however, that to comply with the Partnership Agreement, if the
Unit Holder desires to tender less than all of its Units, the Unit Holder must
retain at least 5 Units. By executing and delivering a Letter of Transmittal, a
tendering Unit Holder irrevocably appoints the Purchaser and its officers and
any other designee of the Purchaser, and each of them, the attorneys-in-fact and
proxies of the Unit Holder, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of the
Unit Holder's rights with respect to the Units tendered by the Unit Holder 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")), including without limitation
the right to direct any XXX custodian, trustee or other record owner to execute
and deliver the Letter of Transmittal, the right to accomplish withdrawal of any
previous tender of the Unit Holder's Units and the right to complete the
transfer contemplated thereby. 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
Unit Holder with respect to the Units and Distributions will, without further
action, be revoked, and no subsequent powers of attorney or proxies may be given
(and, if given, will be without force or effect). The officers and 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 Unit
Holder 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.
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By executing and delivering a Letter of Transmittal, a tendering Unit
Holder irrevocably assigns to the Purchaser and its assigns all of the right,
title and interest of the Unit Holder in and to any and all Distributions or tax
credit allocations made by the Partnership from and after the date of acceptance
with respect to Units accepted for payment and thereby purchased by the
Purchaser.
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 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 Unit Holder 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, Properly Tendered
Units if, as and when the Purchaser gives written notice to the Partnership or
its Transfer Agent 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
and transmitted directly to Unit Holders 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 July 13, 1998. 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 (for
example, because of proration adjustments) then, without prejudice to the
Purchaser's rights under the Offer, tendered Units may be retained by the
Purchaser and may not be withdrawn, except to the extent that tendering Unit
Holders are otherwise 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 Unit Holders the Purchase Price in respect of
Units tendered 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 Purchaser at its address
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 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, (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
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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 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 Unit Holders in a manner reasonably designed to
inform Unit Holders 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.
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 of, or filings with, or
expirations of waiting periods imposed by, any court, administrative agency or
other governmental authority 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 effectively to exercise
full rights of both legal and beneficial ownership of the Units, (iii) requires
divestiture by the Purchaser of any Units, (iv) causes any material diminution
of the benefits to be derived by the Purchaser 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, 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 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 or
disclosed in the business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Partnership, which is or
may be materially adverse to the Partnership, or there shall be any material
lien not disclosed in the Partnership's financial statements, or the Purchaser
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 (as defined below);
(d) the General Partner (as defined below) 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, in accordance with the Partnership Agreement and
applicable law;
(e) 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
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Offer, or otherwise, in the sole judgment of the Purchaser, adversely affecting
the Purchaser, 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;
(f) 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; or
(g) 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
Unit Holders.
The foregoing conditions are for the sole benefit of the Purchaser and
may be (but need not be) asserted by the Purchaser regardless of the
circumstances giving rise to such conditions or may be waived by the Purchaser
in whole or in part at any time in its sole discretion. Any determination by the
Purchaser 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 Unit Holder must provide the
Purchaser with the Unit Holder's correct taxpayer identification number in the
space provided in the Letter of Transmittal.
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, the Letter of
Transmittal includes FIRPTA representations certifying the Unit Holder's
taxpayer identification number and address and that the Unit Holder is not a
foreign person.
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP
Information contained in this section is based upon documents and
reports publicly filed by the Partnership, including the Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "Form 10-K"). Although the
Purchaser has no information that any statements contained in this section are
untrue, the Purchaser has not independently investigated the accuracy of
statements, and takes no 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 is a California limited partnership formed
under the laws of the State of California on October 5, 1992. Its principal
executive offices are located at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxx, XX
00000. The general partner of the Partnership is WNC Tax Credit Partners III,
L.P. (the "General Partner" or "TCP III"). The general partner of TCP III is WNC
& Associates, Inc. ("Associates"). The business of the Partnership is conducted
primarily through Associates as neither TCP III nor the Partnership has
employees of its own.
The Partnership was formed to acquire limited partnership interests in
local limited partnerships ("Local Limited Partnerships") which own multifamily
apartment complexes that are eligible for low-income housing federal and (in
some cases) California income tax credits ("the Low Income Housing Credit"). The
Partnership's principal business therefore consists of investing as a limited
partner in Local Limited Partnerships each of which
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will own and operate an apartment complex ("Apartment Complex" or "Property"),
which will qualify for the Low Income Housing Credit. In general, under Section
42 of the Internal Revenue Code, an owner of low-income housing can receive the
Low Income Housing Credit to be used against Federal income taxes otherwise due
in each year of a ten year period. In general, under Section 17058 of the
California Revenue and Taxation Code, an owner of low-income housing can receive
the Low Income Housing Credit to be used against California income taxes
otherwise due in each year of a four year period. The Apartment Complex is
subject to a fifteen-year compliance period (the "Compliance Period").
The Partnership issues Units and invests in Local Limited
Partnerships on behalf of the Units issued. The Partnership Agreement authorized
the sale of up to 30,000 Units at $1,000 per Unit. The offering of Units
commenced on February 17, 1993 and concluded on July 22, 1994 at which time
17,990 Units issued for $17,990,000 had been accepted. During 1995 an additional
10 Units amounting to $10,000 was collected on subscriptions accepted and
previously deemed uncollectible. The Partnership returned to its limited
partners $900,000 ($50 per Unit) in January 1998. Approximately $14,400,00 of
the net proceeds from the offering has been committed to the purchase price and
acquisition fees and costs of investments in Local Limited Partnerships. As of
December 31, 1997, the Partnership had invested $10,400,720 and held investments
in 18 Local Limited Partnerships which own and operate Apartment Complexes
consisting of 663 apartment units. As of December 31, 1997, all the Apartment
Complexes were completed and in operation. Each Apartment Complex owned by the
Local Limited Partnership is or is expected to be eligible for Low Income
Housing Credit. The limited partners received $113 and $113 federal Low Income
Housing Credits per Unit for the years 1997 and 1996, respectively and $66 and
$85 state Low Income Housing Credits per Unit for the years 1997 and 1996,
respectively. All of the Local Limited Partnerships also benefit or will benefit
from government programs promoting low and moderate income housing.
Attached to this Offer to Purchase as Part II of Appendix A is a
schedule of the Apartment Complexes held as of December 31, 1997, and further
information.
The Partnership's operating profits and losses (subject to certain
priority allocations and distributions) and tax credits are allocated 99% to
limited partners and 1% to the General Partner. Subject to the terms of the
Partnership Agreement, the benefits of ownership of any Unit which is
transferred during the year shall be allocated between the transferee and the
transferor based upon the number of quarterly periods that each was the holder
of the Units. The Partnership's investment objectives do not include receipt of
significant cash flow from the Local Limited Partnerships in which it invests.
Investments in Local Limited Partnerships are made principally with a view
towards realizing Low Income Housing Credits for allocation to the Partnership's
General Partner and limited partners.
In general, in order to avoid recapture of Low Income Housing Credits,
the Partnership does not expect that it will dispose of its interests in Local
Limited Partnerships or approve the sale by a Local Limited Partnership of any
Apartment Complex prior to the end of the applicable Compliance Period. The Form
10-K does not indicate that any Local Limited Partnership in which the
Partnership has invested has suffered an event of recapture.
The Partnership is subject to the information reporting requirements of
the Exchange Act and 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, or
electronically at xxxx://xxx.xxx.xxx. 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.
Outstanding Units. According to the Form 10-K, there were 18,000 Units
issued and outstanding and the Partnership had 961 limited partners as of
December 31, 1997.
Selected Financial and Property Related Data. Attached as Appendix A is
a summary of certain financial and statistical information with respect to the
Partnership and the Properties, all of which has been taken from the
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Form 10-K. More comprehensive financial and other information is included in
such reports and other documents filed by the Partnership with the Commission,
and Appendix A is qualified in its entirety by reference to such reports and
other documents and all the financial information and related notes contained
therein.
Prior Acquisitions of Units and Prior Contacts. Neither the Purchaser
nor any of its affiliates holds any Units of the Partnership. During the past
year, Purchaser had several conversations with representatives of the
Partnership and its affiliates regarding an investment in, or acquisition of,
some or all of the equity stock of certain Partnership affiliates and regarding
a proposal by Purchaser to acquire the tax credits held by the general partners
of the Partnership and other affiliated partnerships. In connection with such
discussions, the Purchaser received information regarding the value of such tax
credits. Purchaser's proposal included a provision for the Purchaser to receive
a list of the Unit Holders for the purpose of making a tender offer to acquire
Units. Purchaser's proposal was not accepted and no agreements were reached. On
May 11, 1998, the Purchaser informed representatives of the Partnership of its
desire to make an offer to purchase Units and requested a list of Unit Holders
for such purpose. As of the date of this Offer, the Purchaser has received no
response. Except as set forth above, neither the Purchaser nor its affiliates
are party to any past, present or proposed material contracts, arrangements,
understandings, relationships, or negotiations with the Partnership or with the
General Partner concerning the Partnership.
DETERMINATION OF PURCHASE PRICE
In establishing the Purchase Price, the Purchaser reviewed certain
publicly available information including among other things: (i) the Partnership
Agreement and (ii) the Form 10-K. Based on that information, the Purchaser
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 highly
sporadic. The Form 10-K states that "[t]he Units are not traded on a public
exchange....It is not anticipated that any public market will develop for the
purchase and sale of any Unit." At present, privately negotiated sales and sales
through intermediaries (such as through the American Partnership Board) are the
only means available to a Unit Holder to liquidate an investment in Units (other
than this Offer or other occasional offers by other partnership investors, if
any) because the Units are not listed or traded on any exchange or quoted on any
NASDAQ list or system.
According to Partnership Spectrum, an independent third party
publication, there have been two sales of the Partnership's Units from December
1, 1995 to January 31, 1998: one in June-July 1997, for $900.00 per Unit and one
in December 1995-January 1996 for $720.00 per Unit. Sales may be conducted which
are not reported in the Partnership Spectrum and the prices of sales through
other channels may differ from those reported by the Partnership Spectrum. The
reported gross sales prices may not reflect the net sales proceeds received by
sellers of Units, which typically are reduced by commissions (approximately 5%
to 10%) and other secondary market transaction costs. The Purchaser does not
know whether the information provided by the Partnership Spectrum is accurate or
complete.
Remaining Tax Credits. Based on information contained in public filings,
the Purchaser believes that additional tax credits of approximately $745.00 per
Unit will be available to Unit Holders who hold their Units through 2005.
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser. The Purchaser is a California limited liability company
that was formed in 1997. The principal office of the Purchaser is 000 Xxxxx Xxx
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000. Everest Tax Credit Investors, LLC
is owned by Everest Properties II, LLC, a California limited liability company
("EPII"), and by Imperial Bank, a California state-chartered bank. Imperial Bank
is the wholly owned operating subsidiary of Imperial Bancorp, a bank holding
company registered under the Bank Holding Company Act of 1956. The Manager of
the Purchaser is EPII, and it is the person that manages Purchaser's affairs.
For certain information
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concerning the directors and executive officers of EPII, Imperial Bank and
Imperial Bancorp, see Schedule I to the Offer to Purchase.
Letter Agreement for Option to Purchase Securities. The Purchaser has
entered into a certain Letter Agreement for the Option to Purchase Securities,
dated April 29, 1998 (the "Option Agreement"), by and among the Purchaser,
Global Capital Management, Inc. ("GCM") and Valley Creek Capital, Inc. ("Valley
Creek"). Pursuant to the terms of the Option Agreement, Purchaser has granted or
will caused to be granted to Valley Creek an option to purchase up to 50% of the
total Units tendered in the Offer for the same price paid by Purchaser. A copy
of the Option Agreement is filed as an exhibit to Purchaser's Schedule 14D-1.
For certain information concerning the directors and executive officers of GCM
and Valley Creek, see Schedule I to the offer to Purchase. The inclusion of
information concerning GCM and Valley Creek does not constitute an
acknowledgement or agreement that either of them is a co-bidder in the Offer.
General. Except as set forth above or elsewhere in this Offer to
Purchase: (i) each of the Purchaser, GCM and Valley Creek does not beneficially
own or have a right to acquire, and, to the best knowledge of the Purchaser, GCM
and Valley Creek, no associate or majority-owned subsidiary of any of them or
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) each
of the Purchaser, GCM and Valley Creek has not, and to the best knowledge of the
Purchaser, GCM and Valley Creek, none of the persons and entities referred to in
clause (i) above or 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)
each of the Purchaser, GCM and Valley Creek does not have and, to the best
knowledge of the Purchaser, GCM and Valley Creek, 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 arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies, consents or authorizations; (iv) since
December 31, 1994, 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, GCM or Valley Creek or any of their
subsidiaries or, to the best knowledge of the Purchaser, GCM and Valley Creek,
any of their executive officers, directors or affiliates; and (v) since December
31, 1994 except as otherwise stated in this Offer, there have been no contacts,
negotiations or transactions between the Purchaser, GCM or Valley Creek, or any
of their subsidiaries or, to the best knowledge of the Purchaser, GCM and Valley
Creek, 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,
an election of directors, or a sale or other transfer of a material amount of
assets of the Partnership.
Source of Funds. Based on the Purchase Price of $500.00 per Unit, the
Purchaser estimates that the total amount of funds necessary to purchase all
Units sought by this Offer and to pay related fees and expenses, will be
approximately $914,500. The Purchaser expects to obtain these funds by means of
equity capital contributions from its members at the time the Units tendered
pursuant to the Offer are accepted for payment. Such members will fund their
capital contributions through existing cash and other financial assets which in
the aggregate are sufficient to provide the funds required in connection with
the Offer without any additional borrowings. If Valley Creek exercises fully its
option under the Option Agreement, approximately half of such funds would be
paid by Valley Creek. Valley Creek has informed Purchaser that Valley Creek
would obtain such funds from capital contribution of its members.
FUTURE PLANS OF THE PURCHASER
The Purchaser is seeking to acquire Units pursuant to the Offer to
obtain a substantial equity interest in the Partnership, primarily for
investment. Following the 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 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 upon liquidity, strategic, tax and other considerations.
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The Purchaser does not currently intend to change current management or
the operation of the Partnership and does not have current plans for any
extraordinary transaction involving the Partnership. However, these plans could
change at any time in the future. If any transaction is effected by the
Partnership and financial benefits accrue to the Unit Holders, the Purchaser and
its affiliates will participate in those benefits to the extent of their
ownership of the Units.
The Purchaser has no present plans or proposals that would result in an
extraordinary 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.
EFFECTS OF THE OFFER
Future Benefits of Unit Ownership. Tendering Unit Holders shall receive
cash in exchange for their Units purchased by the Purchaser and will forego all
future distributions and tax credit and loss allocations from the Partnership
with respect to such Units.
Limitations on Resales. Transfers of 50% or more of the Units in a
twelve-month period may result in a termination of the Partnership for federal
income tax purposes and would also result in a recapture of tax credits.
Pursuant to the Partnership Agreement, no sale, exchange, transfer or assignment
of any Units may be made if such sale, exchange, transfer or assignment will
have the effect as stated in the preceding sentence. Any deferred sales or
exchanges, if made, shall be made (in chronological order to the extent
practicable) as of the first day of a fiscal quarter after the end of any such
twelve-month period. The Purchaser believes that its Offer (for approximately
10% of the Units) will not likely result in a tax termination.
Influence on Voting Decisions by the Purchaser. Under the Partnership
Agreement, Unit Holders holding a majority of the Units are entitled 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. If the Purchaser obtains all
or most of the 1,799 Units sought, the influence of Purchaser and its affiliates
on such actions may be significant.
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 Unit Holder in light of such Unit Holder's specific
circumstances, nor 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. UNIT HOLDERS SHOULD
CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THE UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER..
In general, a Unit Holder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unit Holder's
"amount realized" on the sale and (ii) the Unit Holder's adjusted tax basis in
the Units sold. The amount of a Unit Holder's adjusted tax basis in a Unit will
vary depending upon the Unit Holder's particular circumstances, and it will
include the amount of the Partnership's liabilities allocable to the Unit (as
determined under Code Section 752). The "amount realized" with respect to a Unit
will be a sum equal to the amount of cash received by the Unit Holder for 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).
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The gain or loss recognized by a Unit Holder 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 Unit Holder as a capital asset. Recent changes to the tax
laws made by the Taxpayer Relief Act of 1997 (the "Act") modified applicable
capital gain rates and holding periods. Gain with respect to Units held for more
than 18 months will be taxed at a maximum long-term capital gain rate of 20
percent. Gain with respect to Units held more than one year but less than 18
months will be taxed at a maximum mid-term capital gain rate of 28 percent. Gain
with respect to Units held one year or less will be taxed at ordinary income
rates. It should also be noted that the Act imposed depreciation recapture of
previously deducted straight line depreciation with respect to real property at
a rate of 25 percent (assuming eligibility for long-term capital gain
treatment). A portion of the gain realized by a Unit Holder with respect to a
disposition of the Units may be subjected to this 25 percent rate to the extent
that the gain is attributable to depreciation recapture inherent in the
properties of the Partnership.
Capital losses are deductible only to the extent of capital gains,
except that taxpayers who are natural persons may deduct up to $3,000 per year
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 "C" corporation's carry-forward period is five years and an
individual taxpayer can carry forward such losses indefinitely).
A tendering Unit Holder will be allocated a pro rata share of the
Partnership's tax credits and 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 allocations and any
cash distributed by the Partnership to the Unit Holder for that year will affect
the Unit Holder's adjusted tax basis in Units and, therefore, the amount of such
Unit Holder's taxable gain or loss upon a sale of Units pursuant to the Offer.
Under Code Section 469, individuals, S corporations and certain
closely-held 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 Unit Holders from the Partnership
are passive activity losses. Unit Holders 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). The benefits estimated to be realized by
each seller of a Unit assumes that all of the seller's losses from the
Partnership have been suspended and not utilized.
If a Unit Holder sells less than all of its Units pursuant to the Offer,
a passive loss recognized by that Unit Holder can be currently deducted (subject
to the other applicable limitations) to the extent of the Unit Holder's passive
income from the Partnership for that year plus any other net passive activity
income for that year, and a gain recognized by a Unit Holder upon the sale of
Units can be offset by the Unit Holder's current or "suspended" passive activity
losses (if any) from the Partnership and other sources. If, on the other hand, a
Unit Holder sells 100 percent of its Units pursuant to the Offer, any
"suspended" losses from the Partnership and any losses recognized upon the sale
of the Units will be offset first against any other net passive gain to the Unit
Holder 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 Unit Holder from its other
"ordinary" income (subject to any other applicable limitations). If more than
1,799 Units are tendered, some tendering Unit Holders may not be able to sell
100 percent of their Units pursuant to the Offer because of proration of the
number of Units to be purchased by the Purchaser, unless the Purchaser amends
the Offer to increase the number of Units to be purchased.
Unit Holders (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 31 percent backup
withholding unless those Unit Holders provide a taxpayer identification number
("TIN") and are certain that the TIN is correct or properly certify that they
are awaiting a TIN. A Unit Holder may avoid backup withholding by properly
completing and signing the Letter of Transmittal. If a Unit Holder who is
subject to backup withholding does not include its TIN, the Purchaser will
withhold 31 percent from payments to such Unit Holder.
A Unit Holder 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
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selling Unit Holder must also notify the Partnership of the date of the transfer
and the names, addresses and tax identification numbers of the transferors 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).
CERTAIN LEGAL MATTERS
General. Except as set forth in this Section, the Purchaser is not 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. 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.
State Takeover Statutes. The Partnership was formed under the laws of
the State of California, which currently does not have any takeover statute
applicable to limited partnerships. 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. Purchaser will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Units pursuant to the
Offer. The Purchaser will pay all costs and expenses of printing and mailing the
Offer and its legal fees and expenses; provided, however, if Valley Creek
exercises its option pursuant to the Option Agreement, Valley Creek will pay for
a portion of such costs and expenses, excluding any litigation expenses, in an
amount determined in accordance with the terms of the Option Agreement. The
Purchaser will reduce the purchase price of Units by any transfer fees imposed
by the Partnership.
Miscellaneous. The Offer is not made to (nor will tenders be accepted on
behalf of) Unit Holders 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 Unit Holders 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 has 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
PARTNERSHIP -- GENERAL".
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No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained herein or in the Letter
of Transmittal and, if given or made, such information or representation must
not be relied upon as having been authorized.
EVEREST TAX CREDIT INVESTORS, LLC
May 12, 1998
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
The business address of each executive officer and director of Everest
Properties II, LLC is 000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxxxx 00000. Each executive officer and director is a United States
citizen. The name and principal occupation or employment of each executive
officer and director of Everest Properties II, LLC, are set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------
W. Xxxxxx Xxxxxxx President of Everest Properties II, LLC from 1996 -
present. President and Director of Everest Properties,
Inc. from 1994 - present. President and Director of KH
Financial, Inc. from 1991 - present.
Xxxxx X. Xxxxxx Executive Vice President and Secretary of Everest
Properties II, LLC from 1996 - present. Executive Vice
President of Everest Properties, Inc. from 1995 -
present. Principal and member of Xxxxx, Xxxxxxx &
Xxxxxxxx, Inc. from 1992 - 1996.
The business address of each executive officer and director of Imperial
Bank and Imperial Bancorp is 0000 Xxxxx Xx Xxxxxxx Xxxxxxxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000. Each executive officer and director is a United States
citizen. The name and principal occupation or employment of each executive
officer and director of Imperial Bank and Imperial Bancorp are set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------
Xxxxxx X. Xxxxxxxxx, Xx. Chairman of the Board, President and Chief Executive
Officer of Imperial Bancorp for the past five years.
Chairman of the Board and Co-Founder of Imperial
Bank. Chairman of the Board of Imperial Financial
Group, Inc. Xx. Xxxxxxxxx is also engaged as an owner
or partner in many other business activities
primarily in the real estate industry. Director of
Coastcast Corp.
J. Xxxxxxx Xxxxxxx Executive Vice President and Director, Human
Resources for the past five years.
Xxxxxxx X. Xxxxx Executive Vice President of Imperial Bank for the
past five years.
Xxxxx X. Xxxxxxxxx Executive Vice President of Imperial Bank commencing
in 1997. Previously served as a Senior Vice President
with Union Bank for five years.
Xxxxxx X. Xxxxxxxxx Vice Chairman and Chief Executive Officer and
Director of Imperial Bank for the past five years.
Director of Imperial Bancorp.
Xxxxxxx X. Xxxxx Director of Imperial Bank and Imperial Bancorp.
Chairman Emeritus of Xxxxx Healthcare Corporation.
Chairman of National Medical Enterprises.
Xxxxxx X. Xxxxxx President and Director of Imperial Finance Group, Inc.
commencing in 1997. Executive Vice President and
Chief Financial Officer of Imperial Bank from 1995-1997.
Previously served as President and Chief Executive
Officer of Springfield Bank and Trust Ltd.
G. Xxxxx Xxxxxxxxx, III Director of Imperial Bancorp. President of Ginarra
Holdings, Inc. Co-Chairman of the Board of Imperial
Financial Group, Inc.
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Xxxxxxx X. XxXxxx Director of Imperial Bancorp and Imperial Bank.
Chairman of the Board of Imperial Bank from 1982 -
1995.
Xxxxx X. Xxxxx Executive Vice President, Chief Credit Officer of
Imperial Bank for the past five years.
Xxxxxxx X. XxxXxxxxx Director of Imperial Bank. President and Chief
Executive Officer of Compensation Resource Group.
Xxxxxx X. Xxxxxx Director, President and Chief Operating Officer of
Imperial Bank.
Xxxxxxxxx XxXxxxxx Executive Vice President and Chief Financial Officer
of Imperial Bank commencing in 1997. Executive Vice
President and Chief Financial Officer of First
Interstate Bank for the five years prior to 1997.
Xxx X. Xxxxxx Director of Imperial Bank from 1994 to present.
Investment Advisor, Xxxxxx/Xxxxxx Management, Inc.
Director of Coastcast Corp.
Xxxx X. Xxxxxxx Director of Imperial Bank. President of Apex Oil Co.
Director of Imperial Financial Group, Inc. Director
of Coastcast Corp., Vista 2000, Inc., and Intrawest
Corp.
Xxxxxx X. Xxxxxxxxxxx Executive Vice President of Imperial Bank since 1993.
President of Xxxxxxx, Inc. for five years prior
thereto.
Xxxxxxx X. Xxxx Director of Imperial Bank. President and Publisher of
the San Diego Business Journal.
Xxxx X. Xxxxxxxx Director of Imperial Bank. Chairman of Xxxxxxxx & Co.
Xxxxx X. Xxxx Executive Vice President of Imperial Bank since 1996.
Previously served as President of Sunrise Bank.
Xxxxxxx Xxxxx Senior Vice President, General Counsel and Secretary
of Imperial Bancorp and Imperial Bank since 1983.
Previously served as Senior Vice President and
General Counsel for American City Bank.
The Manager of Valley Creek Capital, Inc., a Delaware limited liability
company ("Valley Creek"), is Global Capital Management, Inc., a Delaware
corporation ("GCM"), which is controlled by its three officers and directors,
Xxxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxxxxxx and Xxxxxxx X. Xxxx. GCM is also the
general partner of and exercises sole control over the limited partnership which
is a member of Valley Creek and which owns all of the interests of Valley Creek.
The business address of each executive officer and director of GCM is 000
Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxx 00000. Each executive officer
and director is a United States citizen. The name and principal occupation or
employment of each executive officer and director of GCM are set forth below.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
---- ------------------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx has been the President and a
Director of GCM from August 1988 to present.
Xxxx X. Xxxxxxxxxxx Xxxx X. Xxxxxxxxxxx has been a Vice President,
Treasurer and a Director of GCM from August 1988 to
present.
Xxxxxxx X. Xxxx Xxxxxxx X. Xxxx has been Secretary, Vice President
and a Director of GCM from 1988 to present.
15
20
APPENDIX A
Set forth below is a summary of certain financial data for the
Partnership which has been excerpted or developed from the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (the "Form
10-K"), filed with the Securities and Exchange Commission. Such reports and
other documents filed by the Partnership with the Commission contain more
comprehensive financial and other information, including the notes accompanying
the financial statements, and the following summary is qualified in its entirety
by reference to such report and other documents and all the financial
information and related notes contained therein.
PART I
SELECTED FINANCIAL DATA
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
----------- ----------- -----------
Interest income ............. $ 57,279 $ 74,947 $ 145,959
Operating expenses:
Amortization .............. 58,596 57,933 57,466
Partnership management fees 186,166 186,422 173,406
Bad debt expense .......... -- 8,680 --
Office .................... 18,093 19,635 20,510
----------- ----------- -----------
Total operating expenses .. 262,855 272,670 251,382
----------- ----------- -----------
Loss from operations ........ (205,576) (197,723) (105,423)
Equity in losses from limited
partnerships .............. (1,028,617) (1,132,216) (1,155,114)
----------- ----------- -----------
Net loss .................... $(1,234,193) $(1,329,939) $(1,260,537)
=========== =========== ===========
Net loss allocable to:
General partners .......... $ (12,342) $ (13,300) $ (12,605)
=========== =========== ===========
Limited partners .......... $(1,221,851) $(1,316,639) $(1,247,932)
=========== =========== ===========
Net loss per weighted limited
partners units ........... $ (67.88) $ (73.15) $ (69.33)
=========== =========== ===========
Outstanding weighted limited
partner units ............. 18,000 18,000 18,000
=========== =========== ===========
A-1
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BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
------------ ------------
ASSETS
Cash and cash equivalents ................ $ 1,451,071 $ 1,498,036
Investments in limited partnerships ...... 10,400,720 11,447,928
Other assets ............................. 2,242 5,419
------------ ------------
$ 11,854,033 $ 12,951,383
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Payables to limited partnerships ......... $ 16,836 $ 16,836
Due to General Partner and affiliates .... 370,223 233,380
Due to limited partners .................. 900,000 --
------------ ------------
Total liabilities ...................... 1,287,059 250,216
------------ ------------
Partners' equity (deficit):
General partners ......................... (64,461) (52,119)
Limited partners (30,000 units authorized;
18,000 units issued and outstanding at
December 31, 1997 and 1996) ............ 10,631,435 12,753,286
------------ ------------
Total partners' equity ................. 10,566,974 12,701,167
------------ ------------
$ 11,854,033 $ 12,951,383
============ ============
DIVIDEND HISTORY
The Partnership has made distributions of capital to Unit Holders of
$50.00 per Unit paid in January 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership raised approximately $18,000,000 from the sale of the
Units. Approximately $14,400,00 of the net proceeds from the offering has been
committed to the purchase price and acquisition fees and costs of investments in
Local Limited Partnerships. As of December 31, 1997, the Partnership had made
capital contributions to Local Limited Partnerships in the amount of
approximately $12,576,000 and an additional $17,000 has been so committed.
As of December 31, 1997 and 1996 the Partnership was indebted to an
affiliate of the General Partner or affiliates in the amounts of approximately
$370,200. The component items of such indebtedness were as follows: accrued
asset management fees of approximately $369,500 and $700, respectively.
Overall, the Partnership had a net decrease in cash and cash equivalents
of approximately $47,000 for the year ended December 31, 1997. This decrease in
cash consists of cash used in the Partnership's operating activities and
investing activities of approximately $7,000 and $40,000, respectively. Cash
provided from investing activities consisted of distributions from Local Limited
Partnerships of approximately $16,000 and cash used consisted primarily
acquisition fees and costs of approximately $56,000. Cash provided by operating
activities consisted primarily of interest income. Cash used consisted primarily
of payments for operating fees and expenses.
A-2
22
Prior to sale of the Apartment Complexes, it is not expected that any of
the Local Limited Partnerships in which the Partnership has invested or will
invest will generate cash sufficient to provide distributions to the Partnership
of any material amount. Distributions to the Partnership would first be used to
meet operating expenses of the Partnership, including the payment of the Asset
Management Fee to the General Partner. As a result, it is not anticipated that
the Partnership will provide distributions to the Limited Partners prior to the
sale of the Apartment Complexes.
The Partnership's investments are not readily marketable and may be
affected by adverse general economic conditions which, in turn, could
substantially increase the risk of operating losses for the Apartment Complexes,
the Local Limited Partnerships and the Partnership. These problems may result
from a number of factors, many of which cannot be controlled by the General
Partner. Nevertheless, the General Partner anticipates that capital raised from
the sale of Local Limited Partnership interests is sufficient to fund the
Partnership's operations.
Upon completion of its public offering, the Partnership established
working capital reserves of approximately 3% of the limited partners' capital
contributions. This amount is anticipated to be sufficient to satisfy general
working capital and administrative expense requirements of the Partnership
including payment of the asset management fee as well as expenses attendant to
the preparation of tax returns and reports to the Limited Partners and other
investor servicing obligations of the Partnership. Liquidity would, however, be
adversely affected by unanticipated or greater than anticipated operating costs.
The Partnership's liquidity could also be affected by defaults or delays in
payment of the limited partners' promissory notes, from which a portion of the
working capital reserves is expected to be funded. To the extent that working
capital reserves are insufficient to satisfy the cash requirements of the
Partnership, it is anticipated that additional funds would be sought through
bank loans or other institutional financing. The General Partner may also apply
any cash distributions received from the local limited Partnerships for such
purposes or to replenish or increase working capital reserves.
A-3
23
PART II
PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH THE PARTNERSHIP HAS AN INVESTMENT
AS OF DECEMBER 31, 1997
PERCENTAGE
OF TOTAL
UNITS UNITS UNITS
NAME & LOCATION NO. OF APTS. COMPLETED OCCUPIED OCCUPIED
--------------- ------------ --------- -------- --------
Almond Garden...................... 34 34 34 100%
Delhi, California
Almond View........................ 72 72 69 96%
Stockton, California
Buccaneer.......................... 48 48 46 96%
Fernandia Beach, Florida
Candleridge - Xxxxx XX............. 24 24 24 100%
Perry, Iowa
Colonial Village................... 56 56 54 97%
Roseville, California
Dallas County Housing.............. 19 19 18 95%
Dallas, North Carolina
La Paloma del Sol.................. 38 38 34 90%
Deming, New Mexico
Memory Lane........................ 18 18 18 100%
Yankton, South Dakota
Neuva Sierra....................... 35 35 34 97%
Vista Richgrove, California
Old Fort........................... 40 40 40 100%
Hidalgo, Texas
Orosi.............................. 42 42 41 98%
Orosi, California
Xxxxxxx Garden..................... 41 41 41 100%
Parlier, California
Rosewood Housing................... 20 20 19 95%
Superior, Wisconsin
Sun Manor.......................... 36 36 36 100%
Itta Bena, Mississippi
Tahoe Pines........................ 56 56 56 100%
South Lake Tahoe, California
Venus Retirement................... 24 24 23 96%
Venus, Texas
Walnut Pixlie...................... 22 22 22 100%
Orange, California
Xxxxxxx Seniors.................... 38 38 38 100%
Winters, California --- --- --- ---
663 663 647 98%
=== === === ===
A-4
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The Letter of Transmittal, and any other required documents should be
sent or delivered by each Unit Holder or his broker, dealer, commercial bank,
trust company or other nominee to the Purchaser at its address set forth below:
EVEREST PROPERTIES II, LLC
(MANAGER)
000 XXXXX XXX XXXXXX XXXXXX
XXXXX 000
XXXXXXXX, XXXXXXXXXX 00000
Questions and requests for assistance may be directed to the Purchaser
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 Purchaser 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.
For information regarding the Offer contact:
EVEREST PROPERTIES II, LLC
(Manager)
000 XXXXX XXX XXXXXX XXXXXX
XXXXX 000
XXXXXXXX, XXXXXXXXXX 00000
(000) 000-0000 OR (000) 000-0000
FACSIMILE: (000) 000-0000
