SIERRA PACIFIC DEVELOPMENT FUND
A CALIFORNIA LIMITED PARTNERSHIP
OFFER TO PURCHASE FOR CASH
ANY AND ALL LIMITED PARTNERSHIP UNITS
AT $27.50 NET PER UNIT
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
PACIFIC TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
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John N. Galardi (the "Offeror"), is offering to purchase any and all the
Limited Partnership Units ("Units") of Sierra Pacific Development Fund, a
California Limited Partnership (the "Partnership"), at $27.50 per Unit, net to
the seller in cash, on the terms and subject to the conditions set forth herein
and in the related Letter of Transmittal (which together constitute the
"Offer").
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THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 8.
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THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS
OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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NEITHER THE PARTNERSHIP NOR ITS GENERAL PARTNER OR ANY OF THE GENERAL PARTNER'S
DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY LIMITED
PARTNER AS TO WHETHER TO TENDER ANY UNITS. EACH LIMITED PARTNER MUST MAKE
HIS OR HER OWN DECISION AS TO WHETHER TO TENDER UNITS AND, IF SO, HOW MANY
UNITS TO TENDER. NO DIRECTOR OR EXECUTIVE OFFICER OF THE GENERAL
PARTNER OR ANY OF ITS AFFILIATES INTENDS TO TENDER SHARES
PURSUANT TO THE OFFER.
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IMPORTANT
Any Limited Partner desiring to tender all or any portion of his or her
Units should complete and sign the Letter of Transmittal or a photocopy thereof
in accordance with the instructions in the Letter of Transmittal, mail or
deliver it and any other required documents to the Offeror at the Partnership.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE PARTNERSHIP AS TO WHETHER LIMITED PARTNERS SHOULD TENDER UNITS PURSUANT TO
THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE PARTNERSHIP.
October 27, 1997
TO THE HOLDERS OF LIMITED PARTNERSHIP UNITS OF
SIERRA PACIFIC DEVELOPMENT FUND,
A CALIFORNIA LIMITED PARTNERSHIP:
INTRODUCTION
John N. Galardi (the "Offeror") is offering to purchase any and all of the
Limited Partnership Units ("Units") of Sierra Pacific Development Fund, a
California Limited Partnership (the "Partnership"), at $27.50 per Unit (the
"Purchase Price"), net to the seller in cash, on the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal (which
together constitute the "Offer"). Galardi is the owner of 50% of the outstanding
capital and voting stock of CGS Real Estate Company, Inc., of which S-P
Properties, Inc., the General Partner of the Partnership, is a wholly-owned
subsidiary. The address of the principal executive offices of the Partnership is
5850 San Felipe, Suite 500, Houston, Texas 77057, and its telephone number is
(713) 706-2671.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF UNITS BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 8.
Tendering Limited Partners will not be obligated to pay brokerage
commissions, solicitation fees, transfer fees or transfer taxes on the purchase
of Units by the Offeror. HOWEVER, ANY TENDERING LIMITED PARTNER WHO FAILS TO
COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING
OF 31% OF THE GROSS PAYMENTS PAYABLE TO SUCH LIMITED PARTNER PURSUANT TO THE
OFFER.
NEITHER THE PARTNERSHIP NOR ITS GENERAL PARTNER NOR ANY OF THE GENERAL
PARTNER'S DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY
LIMITED PARTNER AS TO WHETHER TO TENDER ANY UNITS. EACH LIMITED PARTNER MUST
MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER UNITS AND, IF SO, HOW MANY
UNITS TO TENDER. THE OFFEROR HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE
OFFICER OF THE GENERAL PARTNER OR ANY OF ITS AFFILIATES INTENDS TO TENDER UNITS
PURSUANT TO THE OFFER.
As of September 30, 1997, the Partnership had issued and outstanding 29,354
Units. As of September 30, 1997, there were approximately 2,177 Limited
Partners. The Units are not currently registered for trading on any exchange.
SPECIAL FACTORS
1. PURPOSE OF THE OFFER
The Offeror is making the Offer because it believes that the purchase of
the Units at this time pursuant to the Offer is economically attractive to the
Offeror, and at the same time Limited Partners who require or desire liquidity
are being afforded the opportunity to receive cash for their Units. Each Limited
Partner has the opportunity to make an individual decision on whether or not to
tender Units pursuant to the Offer.
Following the consummation of the Offer, except as discussed below, it is
expected that the business and operations of the Partnership will be continued
by the Partnership substantially as they are currently being conducted. The
Partnership has informed the Offeror that, except as discussed below, it has no
plans or proposals which relate to or would result in: (a) the acquisition by
any person of additional securities of the Partnership or the disposition of
securities of the Partnership; (b) an extraordinary transaction, such as a
merger, reorganization or liquidation, involving the Partnership; (c) a sale or
transfer of a material amount of assets of the Partnership; (d) any change in
the present management of the Partnership; (e) any material change in the
present distribution policy or capitalization or indebtedness of the
Partnership; or (f) any other material change in the Partnership's structure or
business. Except as discussed below, the Offeror has no plans or proposals which
relate to or would result in: (a) the acquisition by any person of additional
securities of the Partnership or the disposition of securities of the
Partnership; (b) an extraordinary transaction, such as a merger, reorganization
or liquidation, involving the Partnership; (c) a sale or transfer of a material
amount of assets of the Partnership; (d) any change in the present management of
the Partnership; (e) any material change in the present distribution policy or
capitalization or indebtedness of the Partnership; or (f) any other material
change in the Partnership's structure or business. An affiliate of the Offeror
(and the Partnership) is considering an initial public offering of the
affiliate's securities, and the affiliate may wish to acquire all or part of the
Partnership and/or all or part of its assets, subsequent to the affiliate's
initial public offering. However, there can be no assurance that any such
initial public offer will occur and there can be no assurance that such
affiliate will attempt to acquire any portion of the Partnership or its assets.
Additionally, the Partnership is considering other possible sales or
dispositions of the Partnership's properties.
The Offeror's purchase of Units pursuant to the Offer will reduce the
number of Limited Partners and the number of Units that might otherwise trade,
and depending on the number of Units so purchased, could adversely affect the
liquidity and market value of the remaining Units held by the public, although
there is currently no established trading market for the Units.
The Units are currently registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Registration of the Units under the
Exchange Act may be terminated upon application of the Partnership to the
Securities and Exchange Commission (the "Commission") if the Units are held by
fewer than 300 Limited Partners. It is possible that the number of Limited
Partners will be reduced below 300 by reason of the Offer and termination of
registration of the Units under the Exchange Act would substantially reduce the
information required to be furnished by the Partnership to holders of the Units
and would make certain provisions of the Exchange Act, such as the requirements
of Rule 13e-3 thereunder with respect to "going private" transactions, no longer
applicable in respect of the Partnership.
The Partnership has paid no dividends with respect to the Units since
January 1, 1992 and there are currently no plans to pay any dividends with
respect to the Units. Neither the Partnership nor the Offeror has made any
public offering of Units since January 1, 1994 nor has either the Partnership or
the Offeror purchased any Units since January 1, 1995.
Following the expiration of the Offer, the Offeror may, in its sole
discretion, determine to purchase any remaining Units through privately
negotiated transactions, open market purchases or otherwise, on such terms and
at such prices as the Offeror may determine from time to time, the terms of
which purchases or offers could differ from those of the Offer, except that the
Offeror will not make any such purchases of Units until the expiration of at
least ten business days after the termination of the Offer. Any possible future
purchases of Units by the Offeror will depend on many factors.
Purchases of Units by the Offeror will, in addition to the effects
described above, have the effect of increasing the Offeror's interest in the
Partnership's net book value and net earnings.
2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The sale of Units by a Limited Partner pursuant to the Offer will be
treated for federal income tax purposes as a taxable sale of such tendered
Units. However, the specific federal income tax consequences to a Limited
Partner resulting from a sale of Units will depend on a number of factors
related to such Limited Partner's individual tax situation, including such
Limited Partner's adjusted basis in his or her Units, whether such Limited
Partner is subject to the limitation on utilization of "passive activity
losses," whether such Limited Partner has suspended "passive activity losses"
attributable to his or her ownership of Units, whether such Limited Partner
disposes of all of his or her Units pursuant to the Offer (which would generally
allow such Limited Partner to utilize in the year of sale any suspended "passive
activity losses" attributable to his or her ownership of Units) and whether such
Limited Partner would be able to utilize currently any capital losses resulting
from the sale of such Units pursuant to the Offer. The Company expects that a
Limited Partner who acquired his or her Units in the original offering and who
sells Units pursuant to the Offer will generally recognize an ordinary loss of
approximately $13 per Unit attributable to Partnership operations for 1997
through the estimated date of sale and a capital loss attributable to the sale
of his or her Units equal to the sum of (i) approximately $27 per Unit and (ii)
such Limited Partner's distributive share per Unit of syndication expenses of
the Partnership (generally costs incurred by Partnership's in connection with
the sale of Units in the original offering). Although the Partnership was unable
to claim syndication expenses as a deductible expense for federal income tax
purposes, each Limited Partner who acquired his or her Units in the original
offering continues to have his or her share of such expenses reflected in the
adjusted basis of his or her Units. The federal income tax impact could be
significantly different, however, for a Limited Partner who acquired his or her
Units after the original offering. To the extent that a Limited Partner who is
subject to the "passive activity loss" restrictions has not previously utilized
such losses to offset passive activity income from other sources (and sells all
of his or her Units), such suspended losses will generally become available to
such Limited Partner in the year of sale. Any capital loss recognized by a
Limited Partner from the sale of Units may be applied to offset capital gains
from other sources. In addition, capital losses in excess of capital gains may
be used to offset up to $3,000 of ordinary income in any taxable year ($1,500
for a married individual filing a separate return). Any capital losses that are
not used currently may be carried forward and used in subsequent years (subject
to the same limitations).
THE FOREGOING TAX DISCUSSION IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES
ONLY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING
UPON, AMONG OTHER THINGS, THE PARTICULAR TAX CIRCUMSTANCES OF THE TENDERING
LIMITED PARTNER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF A SALE OF UNITS PURSUANT TO THE OFFER. EACH LIMITED
PARTNER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER TO DETERMINE THE
PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF A SALE OF UNITS
PURSUANT TO THE OFFER.
3. FAIRNESS OF THE TRANSACTION; REPORTS, OPINIONS, APPRAISALS AND CERTAIN
NEGOTIATIONS; NO APPROVALS REQUIRED; NO APPRAISAL RIGHTS
The Offeror reasonably believes that the terms of the Offer are fair to
unaffiliated Limited Partners for the following reasons: (i) the Purchase Price
reflects an approximately 10% premium over the most recently reported third
party trading price of the Units and the trading price trend of the Units,<F1>
and (ii) the Partnership is not currently making any distributions and the Offer
provides a mechanism whereby Limited Partners who desire liquidity are being
afforded the opportunity to receive cash for their Units. Although the Purchase
Price is less than $55.97, the per Unit partners' equity stated in the
Partnership's 10-Q for the quarter ended June 30, 1997, the Offeror believes
that the Purchase Price accurately reflects a premium over the actual going
concern value and the liquidation value of the Partnership. However, since
January 1, 1995, the Offeror has not sought or obtained any report, appraisal or
opinion with respect to the value of the Units and neither the Partnership nor
is the Offeror aware of any such report, appraisal or opinion that may have
prepared by any other person. Additionally, neither the Partnership nor is the
Offeror aware of any other firm offers made by any person unaffiliated with the
Partnership during the preceding eighteen months (i) for the merger or
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<F1>Determined on the basis of the trades reported in THE PARTNERSHIP SPECTRUM,
as discussed in more detail in Section 9 below.
consolidation of the Partnership with such person, (ii) for the sale or other
transfer of all or any substantial part of the assets of the Partnership or
(iii) for Units which would enable the holder of the Units to exercise control
of the Partnership.
The Offeror understands that an offer was made by KM Investments, LLC. on
September 23, 1997 to purchase up to 4.9% of the outstanding Units at a price of
$21.00 per Unit, reduced, however, by the amount of any transfer fees imposed in
connection with the transfer of Units. The Offeror, as part of the Offer, will
be responsible for the payment of any registration and transfer fees or taxes.
The Offeror is not aware of any license or regulatory permit that appears
to be material to the Partnership's business that might be adversely affected by
its acquisition of Units as contemplated in the Offer or of any approval or
other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
Offeror's acquisition or ownership of Units pursuant to the Offer. Should any
such approval or other action be required, the Offeror currently contemplates
that it will seek such approval or other action.
There is no vote of Limited Partners required in connection with the Offer
and there are no appraisal rights available to Limited Partners in connection
with the Offer. The General Partner of the Partnership has informed the Offeror
that the Partnership has not retained, and does not intend to retain, an
unaffiliated representative to act solely on behalf of unaffiliated Limited
Partners or to prepare a report or an opinion with respect to the fairness of
the Offer.
4. NUMBER OF UNITS; EXPIRATION DATE; EXTENSION OF THE OFFER
On the terms and subject to the conditions described herein and in the
Letter of Transmittal, the Offeror will purchase any and all Units that are
validly tendered on or prior to the Expiration Date (and not properly withdrawn
in accordance with Section 6) at the Purchase Price. The later of 5:00 p.m.,
Pacific time, on Monday, December 1, 1997, or the latest time and date to which
the Offer is extended, is referred to herein as the "Expiration Date." The Offer
is not conditioned on any minimum number of Shares being tendered.
If (i) the Offeror increases or decreases the price to be paid for Units or
decreases the number of Units being sought and (ii) the Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given in the manner described in Section
14, the Offer will be extended until the expiration of ten business days from
the date of publication of such notice.
The Offeror also expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Partnership and making a public announcement thereof. See Section 14. There can
be no assurance, however, that the Offeror will exercise its right to extend the
Offer.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Copies of this Offer to Purchase and the Letter of Transmittal are being
mailed to Limited Partners.
5. PROCEDURE FOR TENDERING UNITS.
PROPER TENDER OF UNITS. To tender Units validly pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal or photocopy thereof,
together with any required signature guarantees and any other documents required
by the Letter of Transmittal, must be received by the Partnership at the address
set forth in the "Introduction" of this Offer to Purchase.
FEDERAL BACKUP WITHHOLDING. TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING
EQUAL TO 31% OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING
LIMITED PARTNER MUST NOTIFY THE PARTNERSHIP OF SUCH LIMITED PARTNER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL.
FOREIGN LIMITED PARTNERS MAY BE REQUIRED TO SUBMIT A PROPERLY COMPLETED FORM
W-8, CERTIFYING NON-UNITED STATES STATUS, IN ORDER TO AVOID BACKUP WITHHOLDING.
IN ADDITION, FOREIGN STOCKHOLDERS MAY BE SUBJECT TO 30% (OR LOWER TREATY RATE)
WITHHOLDING ON GROSS PAYMENTS RECEIVED PURSUANT TO THE OFFER. FOR A DISCUSSION
OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO TENDERING LIMITED PARTNERS, SEE
SECTION 2. EACH LIMITED PARTNER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISER.
DETERMINATIONS OF VALIDITY. All questions as to the Purchase Price, the
form of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Units will be determined by the Offeror,
in its sole discretion, and its determination shall be final and binding. The
Offeror reserves the absolute right to reject any or all tenders of Units that
it determines are not in proper form or the acceptance for payment of or payment
for Units that may, in the opinion of the Offeror's counsel, be unlawful. The
Offeror also reserves the absolute right to waive any defect or irregularity in
any tender of Units. Neither the Offeror, the Partnership, or any other person
will be under any duty to give notice of any defect or irregularity in tenders,
nor shall any of them incur any liability for failure to give any such notice.
RULE 14E-4. It is a violation of Rule 14e-4 promulgated under the Exchange
Act for a person to tender Units for his or her own account unless the person so
tendering (i) has a net long position equal to or greater than the amount of
Units tendered and (ii) will cause such Units to be delivered in accordance with
the terms of the Offer. The tender of Units pursuant to the procedures described
above will constitute the tendering Limited Partner's representation and
warranty that (i) such Limited Partner has a net long position in the Units
being tendered within the meaning of Rule 14e-4 promulgated under the Exchange
Act, and (ii) the tender of such Units complies with Rule 14e-4. The Offeror's
acceptance for payment of Units tendered pursuant to the Offer will constitute a
binding agreement between the tendering Limited Partner and the Offeror on the
terms and subject to the conditions of the Offer.
6. WITHDRAWAL RIGHTS
Tenders of Units made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after December 1, 1997, unless theretofore accepted
for payment as provided in this Offer to Purchase. If the Offeror extends the
period of time during which the Offer is open, is delayed in accepting for
payment or paying for Units or is unable to accept for payment or pay for Units
pursuant to the Offer for any reason, then, without prejudice to the Offeror's
rights under the Offer, the Partnership may, on behalf of the Offeror, retain
all Units tendered, and such Units may not be withdrawn except as otherwise
provided in this Section 6, subject to Rule 14e-1(c) under the Exchange Act,
which provides that the person making the tender offer shall either pay the
consideration offered, or return the tendered securities promptly after the
termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Partnership at its address set forth in this
Offer to Purchase and must specify the name of the person who tendered the Units
to be withdrawn and the number of Units to be withdrawn. Withdrawals may not be
rescinded, and Units withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Units may be retendered by again
following the procedures described in Section 5 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Offeror, in its sole
discretion, which determination shall be final and binding. Neither of the
Offeror, the Partnership, nor any other person will be under any duty to give
notification of any defect or irregularity in any notice of withdrawal or incur
any liability for failure to give any such notification.
7. PAYMENT OF PURCHASE PRICE.
On the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment, and will pay for, Units validly
tendered and not withdrawn in accordance with the Offer, as promptly 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
Partnership of a properly completed and duly executed Letter of Transmittal and
any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Offeror shall be deemed to have accepted for
payment (and thereby purchased) tendered Units when, as and if the Offeror gives
oral or written notice to the Partnership of the Offeror's acceptance for
payment of such Units pursuant to the Offer. On the terms and subject to the
conditions of the Offer, payment for Units purchased pursuant to the Offer will
in all cases be made by deposit of the Purchase Price with the Partnership,
which will act as agent for the tendering Limited Partners for the purpose of
receiving payment from the Offeror and transmitting payment to tendering Limited
Partners. Under no circumstances will interest be paid on the Purchase Price by
reason of any delay in making such payment.
If any tendered Units are not accepted for payment pursuant to the terms
and conditions of the Offer, the Letter of Transmittal with respect to such
Units not purchased will be destroyed by the Partnership. If, for any reason
whatsoever, acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Offeror is unable to accept for payment,
purchase or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Offeror's rights under the Offer (but subject to compliance
with Rule 14e-1(c) under the Exchange Act), the Partnership may, nevertheless,
on behalf of the Offeror, retain tendered Units, subject to any limitations of
applicable law, and such Units may not be withdrawn, except to the extent that
the tendering Limited Partners are entitled to withdrawal rights as described in
the Offer.
If, prior to the Expiration Date, the Offeror shall increase the
consideration offered to Limited Partners pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
The Offeror reserves the right to transfer or assign, at any time and from
time to time, in whole or in part, to one or more affiliates, the right to
purchase Units tendered pursuant to the Offer, but no such transfer or
assignment will relieve the Offeror of its obligations under the Offer or
prejudice the rights of tendering Limited Partners to receive payments for Units
validly tendered and accepted for payment pursuant to the Offer.
8. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, the Offeror will not be
required to accept for payment or pay for any Units tendered, and may terminate
or amend the Offer or may postpone (subject to the requirements of the Exchange
Act for prompt payment for or return of Units) the acceptance for payment of or
payment for Units tendered, if at any time on or after October 27, 1997, and
before acceptance for payment of or payment for any such Units, any of the
following events shall have occurred (or shall have been determined by the
Offeror in its sole judgment to have occurred) regardless of the circumstances
giving rise thereto (including any action or omission to act by the Offeror):
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
that (i) challenges or seeks to challenge the acquisition of Units pursuant
to the Offer or otherwise in any manner relates to or affects the Offer or
(ii) in the sole judgment of the Offeror, could materially and adversely
affect the business, condition (financial or other), income, operations or
prospects of the Partnership, or otherwise materially impair in any way the
contemplated future conduct of the business of the Partnership or
materially impair the contemplated benefits of the Offer to the Offeror;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, withdrawn or abrogated or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the Offer
or the Partnership, by any legislative body, court, authority, agency or
tribunal which, in the Offeror's sole judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Units illegal or otherwise restrict or prohibit consummation of
the Offer, (ii) delay or restrict the ability of the Offeror, or render the
Offeror unable, to accept for payment or pay for some or all of the Units,
(iii) imposes or seeks to impose limitations on the ability of the Offeror
to acquire or hold or to exercise full rights of ownership of the Units,
(iv) materially impair the contemplated benefits of the Offer to the
Offeror or (v) materially affect the business, condition (financial or
other), income, operations or prospects of the Partnership, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Partnership;
(c) it shall have been publicly disclosed or the Offeror shall have
learned that any person or "group" (within the meaning of Section 13(d)(3)
of the Exchange Act) has acquired or proposes to acquire beneficial
ownership of more than 5% of the outstanding Units;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market, (ii) any significant decline in
the general level of market prices of equity securities in the United
States or abroad, (iii) any change in the general political, market,
economic or financial condition in the United States or abroad that could
have a material adverse effect on the Partnership's business, condition
(financial or other), income, operations or prospects, (iv) the declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States or any limitation on, or any event which, in the
Offeror's sole judgment, might affect, the extension of credit by lending
institutions in the United States, (v) the commencement of a war, armed
hostilities or other international or national crisis directly or
indirectly involving the United States or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, in the
Offeror's sole judgment, a material acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or all of the
Units (other than the Offer) or a merger, acquisition or other business
combination proposal for the Partnership, shall have been proposed,
announced or made;
(f) there shall have occurred any event or events that have resulted,
or may in the sole judgment of the Offeror result, in an actual or
threatened change in the business, condition (financial or other), income,
operations, stock ownership or prospects of the Partnership; or materially
impair the contemplated benefits of the Offer;
(g) there shall have occurred any decline in the S&P Composite 500
Stock Index by an amount in excess of 15% measured from the close of
business on October 24, 1997; or
(h) the Offeror shall not have received the approval of the
Partnership to the assignment to the Offeror of the Units tendered pursuant
to the Offer;
and, in the sole judgment of the Offeror, such event or events make it
undesirable or inadvisable to proceed with the Offer or with such acceptance for
payment or payment.
Any of the foregoing conditions may be waived by the Offeror, in whole or
in part, at any time and from time to time in its sole discretion. The failure
by the Offeror at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
by the Offeror concerning the events described above will be final and binding
on all parties.
9. PRICE RANGE OF UNITS; DISTRIBUTIONS; TRADING VOLUME
The Units are not listed on any national securities exchange or quoted in
the over-the-counter market, and there is no established public trading market
for the Units. Secondary sales activity for the Units has been extremely limited
and sporadic. The Partnership monitors transfers of the Units because the
admission of the transferee as a substitute limited partner requires the consent
of the General Partner under the Partnership Agreement. However, neither the
Partnership nor the Offeror has information regarding the prices at which all
secondary sales transactions in the Units have been effectuated. Various
organizations offer to purchase and sell limited partnership interests (such as
the Units) in secondary sales transactions. Various publications such as The
Partnership Spectrum summarize and report information (on a monthly, bimonthly
or less frequent basis) regarding secondary sales transactions in limited
partnership interests (including the Units), including the prices at which such
secondary sales transactions are effectuated.
The Offeror has been informed that the Partnership estimates, based solely
on the transfer records of the Partnership, that the number of Units transferred
in sales transactions (I.E., excluding transactions believed to be between
related parties, family members or the same beneficial owner) was as follows:
Number of Total Percentage of Number of
YEAR UNITS TRANSFERRED UNITS OUTSTANDING TRANSACTIONS
---- ----------------- ----------------- ------------
1995 272 0.93% 4
1996 926 3.15% 39
1997 (through 407 1.39% 53
September 30)
The information set forth below is extracted from sections of the
September/October 1996, November/December, 1996, January/February, 1997,
March/April, 1997, May/June, 1997 and July/August, 1997 issues of The
Partnership Spectrum (the "Partnership Spectrum") captioned "Secondary
Spectrum." The Partnership Spectrum, a periodical published by Partnership
Profiles, Inc., summarizes secondary market prices for public limited
partnerships based on actual transactions during the reporting periods listed on
the tables below. The following secondary-market firms provided high and low
price data to The Partnership Spectrum for some or all of the reporting periods:
American Partnership Services - (800) 736-9797/(801) 756-1166, Chicago
Partnership Board - (800) 272-6273/(312) 332-4100, Cuyler & Associates - (800)
274-9991/(602) 596-0120, DCC Securities - (800) 945-0440/(212) 370-1090, Fox &
Henry/Secondary Income Funds (800) 578-6289/(708) 325-4445, Frain Asset
Management - (800) 654-6110, Laidlaw Equities, Inc.. - (212) 628-3174,
MacKenzie-Patterson Securities - (800) 854-8357/(510) 631-9100, Nationwide
Partnership Marketplace - (800) 969-8996/(415) 456-8825, Pacific Partnership
Group - (800) 727-7244/(602) 957-3050, Partnership Service Network - (800)
483-0776/(818) 591-3707, Raymond James & Associates - (800) 248-8863/(813)
573-3800 and Securities Service Network. - (800) 700-7998/(407) 496-5387.
IN EVALUATING WHETHER OR NOT TO TENDER THEIR UNITS IN THE OFFER, LIMITED
PARTNERS MAY WISH TO CONTACT THESE FIRMS OR OTHER FIRMS INVOLVED IN SECONDARY
SALES OF INTERESTS IN LIMITED PARTNERSHIPS.
The information regarding sale transactions in Units from the Partnership
Spectrum is as follows:
REPORTING PERIOD PER UNIT TRANSACTION PRICE NO. OF UNITS
---------------- -------------------------- ------------
September/October 1996 $35.00 80
November/December 1996 $56.00 25
January/February 1997 N/A None
March/April 1997 N/A None
May/June 1997 N/A None
July/August 1997 N/A None
The information from The Partnership Spectrum contained above is provided
without verification by the Offeror and is subject to the following
qualifications in The Partnership Spectrum: "Limited partnership investments are
generally illiquid, long-term investments. Sellers of such investments are often
considered distressed for various reasons and find it necessary to accepted
discounted sales prices. As a result, the above price information may not
reflect the intrinsic valued of a limited partnership interest. In some cases,
discounts from original purchase prices result from a partnership having already
liquidated, financed or refinanced a portion of its investment portfolio."
Transaction data has been provided by the firms listed above and has not been
verified by The Partnership Spectrum.
10. CERTAIN INFORMATION CONCERNING THE OFFEROR
John N. Galardi, the Offeror, is the owner of 50% of the outstanding
capital and voting stock and a director of CGS Real Estate Company, Inc., of
which S-P Properties, Inc., the General Partner of the Partnership, is a
wholly-owned subsidiary. The Offeror is the Chairman and founder of Galardi
Group, Inc., a privately held operation encompassing more than 500 restaurants,
including Wienershcnitzel, the largest privately held hot dog chain in the
United States. The Offeror's business address is 4440 Von Karman, Suite 200,
Newport Beach, California 92660. During the past five years, the Offeror has
also served on the board of directors of American Franchise Group located in
Fort Lauderdale, Florida. The Offeror is a citizen of the United States.
During the past five years, the Offeror has not been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), nor
has the Offeror been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
11. SOURCE AND AMOUNT OF FUNDS
Assuming that the Offeror purchases 20,000 Units pursuant to the Offer at
the Purchase Price, the total amount required by the Offeror to purchase such
Units will be approximately $550,000, exclusive of fees and other expenses. The
source of these funds will be the Offeror's personal funds.
12. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS; TRANSACTIONS AND AGREEMENTS
CONCERNING THE UNITS.
The Offeror has not been a party to any contract, transaction or
negotiation since January 1, 1995 with the Partnership where the aggregate
amount of such transaction was not less than 1% of the Partnership's
consolidated revenues. Except as disclosed herein in connection with the Offer,
the Offeror has not been a party to contacts, negotiations or transactions with
the Partnership concerning a merger, consolidation or acquisition of the
Partnership; a tender offer or acquisition of securities of the Partnership, an
election of a new general partner of the Partnership, or a sale or other
transfer of a material amount of assets of the Partnership. Additionally, the
Offeror is not a party to any contract, arrangement, understanding or
relationship, directly or indirectly, with any other person with respect to any
securities of the Partnership, has not been a party to any contract, transaction
or negotiation with any person with respect to the Units, including any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any Units, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations and is not aware of
any contacts or negotiations between the Partnership and any of its affiliates,
or between the Partnership (including its affiliates) and any person not
affiliated with the Partnership concerning a merger, consolidation or
acquisition of the Partnership; a tender offer or acquisition of securities of
the Partnership, an election of a new general partner of the Partnership, or a
sale or other transfer of a material amount of assets of the Partnership.
Schedule A hereto sets forth the number of Units purchased by the Offeror
or other affiliates of the Partnership (including the directors of the General
Partner) since January 1, 1995, the range of prices paid for such Units and the
average purchase price paid for each quarterly period since January 1, 1995.
13. INTEREST IN UNITS
The Offeror beneficially owns no Units. Except as disclosed in Schedule A,
neither the Partnership, the Offeror nor any person affiliated with either the
Partnership or the Offeror has engaged in any transactions with respect to the
Units within the 60 days immediately preceding the date of the Offer.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Offeror expressly reserves the right, in its sole discretion and at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Partnership.
There can be no assurance, however, that the Offeror will exercise its right to
extend the Offer. During any such extension, all Units previously tendered will
remain subject to the Offer, except to the extent that such Units may be
withdrawn as set forth in Section 7. The Offeror also expressly reserves the
right, in its sole discretion, (i) to terminate the Offer and not accept for
payment any Units not theretofore accepted for payment or, subject to Rule
14e-1(c) under the Exchange Act, which requires the Offeror either to pay the
consideration offered or to return the Units tendered promptly after the
termination or withdrawal of the Offer, to postpone payment for Units upon the
occurrence of any of the conditions specified in Section 9 hereof by giving oral
or written notice of such termination to the Partnership and making a public
announcement thereof and (ii) at any time or from time to time, to amend the
Offer in any respect. Amendments to the Offer may be effected by public
announcement. Without limiting the manner in which the Offeror may choose to
make public announcement of any termination or amendment, the Offeror shall have
no obligation (except as otherwise required by applicable law) to publish,
advertise or otherwise communicate any such public announcement, other than by
making a release to the Dow Jones News Service, except in the case of an
announcement of an extension of the Offer, in which case the Offeror shall have
no obligation to publish, advertise or otherwise communicate such announcement
other than by issuing a notice of such extension by press release or other
public announcement, which notice shall be issued no later than 9:00 a.m.,
Pacific time, on the next business day after the previously scheduled Expiration
Date. Material changes to information previously provided to Limited Partners in
this Offer or in documents furnished subsequent thereto will be disseminated to
Limited Partners in compliance with Rule 14d-6(d) promulgated under the Exchange
Act.
If the Offeror materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Offeror will extend the Offer to the extent required by Rules 14d-6(d) and Rule
14e-1(a) under the Exchange Act. Those rules require that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a change in price,
change in dealer's soliciting fee or change in percentage of securities sought)
will depend on the facts and circumstances, including the relative materiality
of such terms or information. In a published release, the Commission has stated
that in its view, an offer should remain open for a minimum of five business
days from the date that notice of such a material change is first published,
sent or given. The Offer will continue or be extended for at least ten business
days from the time the Offeror publishes, sends or gives to holders of Units a
notice that it will (a) increase or decrease the price it will pay for Units or
(b) decrease the number of Units it seeks.
15. PERSONS RETAINED; FEES AND EXPENSES.
The Offeror has retained the Partnership to act as the tender agent as in
connection with the Offer. The Partnership will receive reasonable compensation
for its services and will also be reimbursed for certain out-of-pocket expenses.
The Offeror has agreed to indemnify the Partnership against certain liabilities,
including certain liabilities under the federal securities laws, in connection
with the Offer. The Partnership has not been retained to, and will not, make
solicitations or recommendations in connection with the Offer.
The Offeror does not otherwise intend to retain the services of any
officer, employee or class of employees of the Partnership in connection with
the Offer. Similarly, the Offeror does not intend to use any corporate asset of
the Partnership in connection with the conduct or consummation of the Offer.
The Offeror will not pay any solicitation fees to any broker, dealer, bank,
trust Offeror or other person for any Units purchased in connection with the
Offer. The Offeror will reimburse such persons for customary handling and
mailing expenses incurred in connection with the Offer.
The Offeror will pay all transfer fees or transfer taxes, if any, payable
on account of the acquisition of the Units by the Offeror pursuant to the Offer.
The expenses incurred, or estimated to be incurred, by the Offeror in
connection with the Offer are set forth below. The Offeror will be responsible
for paying all such expenses.
Printing and Mailing Fees...................................... $ 5,000
Filing Fees.................................................... 110
Legal, Accounting and Miscellaneous............................ 5,000
Total......................................................... $ 10,110
16. MISCELLANEOUS.
The Partnership is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission relating to its business, financial condition and other
matters. The Offeror has filed a Rule 13e-3 Transaction Statement on Schedule
13e-3 and a Transaction Statement on Tender Offer Statement on Schedule 14D-1
with the Commission, which includes certain additional information relating to
the Offer. Such reports, as well as such other material, may be inspected and
copies may be obtained at the Commission's Public Reference Section at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at the regional offices of
the Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained by mail, upon payment of
the Commission's customary fees, from the Commission's Public Reference Section
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the Commission's
Electronic Data Gathering, Analysis, and Retrieval system. This Web site can be
accessed at http://www.sec.gov. The Offeror's Schedule 13e-3 and Schedule 14D-1
may not be available at the Commission's regional offices.
The Offer is being made to all Limited Partners. The Offeror is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Offeror becomes aware
of any valid state statute prohibiting the making of the Offer, the Offeror will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Offeror cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Units in such
state.
October 27, 1997 JOHN N. GALARDI
SCHEDULE A
Period Number of Units Purchased by Range of Prices Average
Affiliates of the Partnership Paid Purchase
Price
1/1/95 to 3/31/95 None N/A N/A
4/1/95 to 6/30/95 78 $10.00 per unit $10.00
7/1/95 to 9/30/95 4 $10.00 per unit $10.00
10/1/95 to 12/31/95 50 $20.00 per unit $20.00
1/1/96 to 3/31/96 292 $10.00 to $25.00 $15.16
per unit
4/1/96 to 6/30/96 130 $10.00 to $15.00 $12.55
per unit
7/1/96 to 9/30/96 160 $10.00 per unit $10.00
10/1/96 to 12/31/96 84 $20.00 per unit $20.00
1/1/97 to 3/31/97 54 $20.00 per unit $20.00
4/1/97 to 6/30/97 50 $20.00 per unit $20.00
7/1/97 to present 282 $20.00 to $25.00 $23.81
per unit