IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAUL WILLIAMS, et al., )
)
Plaintiffs, )
) No. 90 C 0726
v. )
) Honorable James B. Zagel
BALCOR PENSION INVESTORS, )
et al., )
)
Defendants. )
)
)
BALCOR MORTGAGE ADVISORS, et al., )
)
Counter-plaintiffs, )
)
v. )
)
PAUL WILLIAMS, et al., )
)
Counter-defendants. )
NOTICE OF PROPOSED
CLASS ACTION SETTLEMENT AND HEARING
THIS IS NOT NOTICE OF A LAWSUIT AGAINST YOU. This Notice is to
advise you of a proposed settlement of the class action lawsuit captioned above
and of a court hearing on the proposed settlement.
1. Summary of Proposed Settlement. The proposed settlement resolves
all issues raised by this lawsuit. The parties in these suits are the First
Union National Bank of North Carolina, Trustee of the Ploof Truck Lines, Inc.
Profit Sharing and 401(k) Plan, Bruce McGlasson and Tom Chipain (collectively
the "Class Representatives") on behalf of themselves and the plaintiff class as
defined below (the "Class"), Paul Williams, Beverly Kennedy, William B.
Copeland, Allan Hirschfield, Gregory Baird, individually and as trustee of the
Iva Medical Center, P.A. Pension and Profit Sharing Plan, and Samuel Wegbreit
(collectively "the Individual Plaintiffs"), who brought this suit as a class
action and Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension Investors-V,
Balcor Pension Investors-VI, Balcor Pension Investors-VII, Balcor Preferred
Pension-12, Balcor Mortgage Advisors, Balcor Mortgage Advisors-II, Balcor
Mortgage Advisors-III, Balcor Mortgage Advisors-V, Balcor Mortgage Advisors-VI,
Balcor Mortgage Advisors-VII, Balcor Mortgage Advisors-VIII, Balcor Mortgage
Advisors, Inc., Balcor Mortgage Advisors-V, Inc., The Balcor Company, Balcor
Securities Co., Shearson Lehman Hutton Inc., and American Express Company
(collectively "Defendants"). Plaintiffs assert that Defendants violated the
law by misrepresenting or concealing material information concerning Balcor
Pension Investors, Balcor Pension Investors-II, Balcor Pension Investors-III,
Balcor Pension Investors-IV, Balcor Pension Investors-V, Balcor Pension
Investors-VI, Balcor Pension Investors-VII, and Balcor Preferred Pension-12
(the "BPI Partnerships") in connection with purchases of interests in them by
members of the Class. Defendants vigorously deny any wrongdoing and assert
that their conduct was proper and conformed to the law. To avoid the further
expense and risks of continued litigation, the parties have determined to
compromise their differences and have agreed to a proposed settlement that
resolves all issues raised by these lawsuits.
The class of persons who will be affected by the proposed settlement
consists of all individuals, partnerships, corporations and other entities who
invested in Balcor Pension Investors, Balcor Pension Investors-II, Balcor
Pension Investors-III, Balcor Pension Investors-IV, Balcor Pension
Investors-V, Balcor Pension Investors-VI, Balcor Pension Investors-VII, and
Balcor Preferred Pension-12 (the "BPI Partnerships"), during the original
public offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
This Notice contains important information regarding the settlement,
the final hearing on the settlement, and your right to participate in the
settlement hearing, which will be held on November 20, 1996 at 11:00 a.m. If
the Court approves the settlement, you will be bound by the Final Judgment.
YOU SHOULD READ THE ENTIRE NOTICE CAREFULLY, SINCE YOUR RIGHTS WILL BE AFFECTED
BY THIS SETTLEMENT.
2. History of the Lawsuits. There is now pending in the United
States District Court for the Northern District of Illinois an action captioned
Paul Williams, et al. v. The Balcor Company, et al., No. 90 C 0726, which was
filed on February 7, 1990. The lawsuit alleges violations by Defendants of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.
ee 78j(b) and 78t(a), Rule 10b-5 promulgated under e 10(b) of the Securities
Exchange Act of 1934, 17 C.F.R. d 240.10b-5, the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
ee 1961, et seq., and the common law in connection with the original offering
of interests in the BPI Partnerships. Defendants have denied these allegations
and have filed a class action counterclaim for declaratory judgment, which,
inter alia, concerns the propriety of defendants obtaining indemnification for
the attorneys' fees and expenses incurred defending this litigation from the
assets of the BPI Partnerships.
After the lawsuit was filed, the Seventh Circuit Court of Appeals
held in Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990), that
actions brought to enforce those provisions of the Securities Exchange Act of
1934 alleged in the lawsuit to have been violated by Defendants must be brought
within one year after discovery of the alleged violation and within three years
after such violation. Shortly thereafter, the United States Supreme Court made
a similar ruling in Lampf, Pleva, Lipkind, Prupis & Petrigrow v. Gilbertson,
111 S.Ct. 2773 (1991). On July 21, 1994, the court granted the motion for
class certification filed by the class representatives and certified a class
solely on plaintiffs' claims of violations of the Securities and Exchange Act
of 1934.
On July 12, 1996, the Honorable James B. Zagel of the United States
District Court for the Northern District of Illinois preliminarily determined
that the proposed settlement is fair and reasonable.
3. Purpose of this Notice. This Notice is given pursuant to Federal
Rule of Civil Procedure 23 and an Order of the United States District Court for
the Northern District of Illinois. This Notice is not an expression of any
opinion by that Court as to the merits of any of the claims or defenses
asserted by any party in this lawsuit. The purpose of this Notice is to inform
you of the pendency of this lawsuit, the terms of the proposed class
settlement, the date of the court hearing on the settlement, and your rights
with respect to the settlement and hearing.
4. Definition of the Class. The proposed Class on whose behalf this
settlement is made consists of all individuals, partnerships, corporations and
other entities who invested in Balcor Pension Investors, Balcor Pension
Investors-II, Balcor Pension Investors-III, Balcor Pension Investors-IV,
Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor Pension
Investors-VII, and Balcor Preferred Pension-12, during the original public
offerings of such interests. The Class excludes the Defendants and any
entities owned or controlled by the Defendants, those individuals and/or
entities who acquired their Partnership interests after the original offering
periods ended and those individuals who notified Class Counsel on or before
November 20, 1995 that they wished to be excluded from the Class.
5. The Proposed Settlement. The parties have agreed to the
following settlement terms:
Consideration to the Class. As a condition of settlement, Defendants
will make the following consideration to the Class:
a. Defendants will deposit $100,000 into one of the bank
accounts of Balcor Preferred Pension-12 which shall be distributed to
members of the Class who invested in Balcor Preferred Pension-12.
b. The general partner ("General Partner") of each of the BPI
Partnerships will forego and instead distribute among the members of the
Class its distributive partnership share of Cash Flow from operations for
one of the four quarters immediately following the effective date of the
Settlement Agreement, excluding that percentage of such distributive share
of Cash Flow that, pursuant to the Partnership Agreement for each of the
BPI Partnerships (except Balcor Pension Investors), is to be set aside for
and deposited into the Early Investment Incentive Fund for such BPI
Partnership. The quarter for which the General Partner of each of the BPI
Partnerships will forego such distributive share of Cash Flow will be
chosen by Defendants by determining which quarter, of the four quarters
immediately following the effective date of the Settlement Agreement,
represents an average distributive Partnership share of Cash Flow earned
by such General Partner.
c. Defendant The Balcor Company will guarantee to members of
the Class who invested in the following partnerships and who continue to
hold their units until termination of the partnership that the total
distributions from all sources, including Cash Flow, Mortgage Reductions,
distributions from the Early Investment Incentive Fund, and pursuant to
Section 18.4 of the Partnership Agreement for each of the BPI
Partnerships, made throughout the existence of the partnership, and
including monies distributed pursuant to this Settlement Agreement
will equal the following percentages of their respective initial capital
contributions:
Balcor Pension Investors VI - 90%
Balcor Pension Investors VII - 80%
Balcor Preferred Pension-12 - 80%
This guarantee will be null and void:
(1) As to any of the above partnerships in which there is
an effective change in control, including but not limited to:
(a) the replacement of the General Partner by an entity or individual
not affiliated with the current General Partner; (b) the General
Partner having been joined by any entity or individual not affiliated
with it as co-general partner; or (c) material restrictions having
been placed on the powers of the General Partner;
(2) As to any Class member who sells any of his/her/its
units, including any transfer of interests into the Early Investment
Incentive Fund, in any of the BPI Partnerships, with respect to such
units sold;
(3) As to any Class member who receives a tender offer
after April 1, 1996 for any of his/her/its units and does not accept
such tender offer, but which, if the Class member had accepted the
offer, would have resulted in the Class member having received
(including total partnership distributions to the Class member plus
the offer price of the tender) an amount equal to or greater than the
amount he/she/it would receive pursuant to the guarantee, the
percentage of the Initial Guarantee (the "Tender Percentage") equal
to the number of units which were not tendered pursuant to the tender
offer divided by the total number of units of the partnership
remaining eligible for the guarantee at the date of the termination
of said tender offer. In the event that more than one tender offer
is initiated, a Tender Percentage shall be computed for each tender
offer and the Tender Percentage for which the Initial Guarantee shall
be null and void shall be the sum of the Tender Percentages of all
tender offers. The "Initial Guarantee" for each of Balcor Pension
Investors-VI, Balcor Pension Investors-VII and Balcor Preferred
Pension-12 shall be a dollar amount per partnership interest equal to
the percentage of initial capital contribution described above as the
guarantee level in this Section 5(c) minus the actual dollar amount
distributed per partnership interest as of the date of the Settlement
Agreement. As of March 31, 1996, total distributions per interest in
these partnerships and the amount of additional distributions
guaranteed were:
Additional Distributions
Per Interest Pursuant to
Total Distributions Per Initial Guarantee as of
Partnership Interest Through 03/31/96 03/31/96
Balcor Pension
Investors-VI $206.18 per $250 Interest $18.82 per $250 Interest
Balcor Pension
Investors-VII $147.05 per $250 Interest $52.95 per $250 Interest
Balcor Preferred
Pension-12 $55.87 per $100 Interest $24.13 per $100 Interest
As a result of distributions to holders of interests in these partnerships
and/or tender offers to holders of interests in certain of these partnerships
after April 1, 1996, the additional distributions per interest pursuant to the
Initial Guarantee have decreased and may decrease further. As of ,
defendants' records reflected that the number of interests held by members of
the Class who were original investors in these partnerships was approximately:
Units Held by
Partnership Class Members
Balcor Pension Investors-VI 1,032,269
Balcor Pension Investors-VII 379,261
Balcor Preferred Pension-12 262,174
The distributions provided for in subparagraphs 5.a. and 5.b. above
shall be made only to investors who purchased units in the BPI Partnerships
during the original public offerings of such interests, excluding those
individuals who excluded themselves from the Class. Those investors who
purchased interests in the BPI Partnerships during the original public
offerings but have excluded themselves from the Class and those investors who
purchased interests following the termination of the original offering periods
for such interests will receive only quarterly distributions of Cash Flow from
operations as provided in the Partnership Agreements for the BPI Partnerships.
6. Class Counsels' Attorneys' Fees and Costs. Defendants will pay
the fees and costs of class counsel that may be awarded or approved by the
Court.
7. Release. If the settlement is approved by the Court, all Class
members who did not timely exclude themselves from the Class will release
Defendants from all claims that were or could have been raised by the Class or
the Class Representatives against Defendants in these lawsuits.
8. Class Membership. If you invested in Balcor Pension Investors,
Balcor Pension Investors-II, Balcor Pension Investors-III, Balcor Pension
Investors-IV, Balcor Pension Investors-V, Balcor Pension Investors-VI, Balcor
Pension Investors-VII or Balcor Pension Preferred Pension-12 during the
original public offerings of such interests, you are a member of the Class,
unless you expressly requested to be excluded ("opted out") on or before
November 20, 1995. As a member of the Class, any claims you may have against
defendants with respect to your interests in the BPI Partnerships will be
forever resolved and cannot be pursued in another lawsuit, except that you
shall not be precluded from participating in and sharing in any fund deposited
by any Defendant with the Securities and Exchange Commission, any state
securities commission or any governmental or regulatory entity in connection
with the resolution of proceedings relating to sales, marketing and related
activities as a soliciting dealer for the offering of interests in the BPI
Partnerships. YOU NEED DO NOTHING TO REMAIN A MEMBER OF THE CLASS, and your
rights in this lawsuit will be represented by class counsel, one of whom is
Norman Rifkind, Beigel, Schy, Lasky, Rifkind, Fertik & Gelber, 250 South Wacker
Drive, Suite 1500, Chicago, Illinois 60606.
9. Objecting to the Terms of the Settlement Agreement. If you have
any objections to the proposed settlement, you must file a written objection,
together with all briefs and other papers in support of the objection, with the
Court on or before November 4, 1996, and you must also serve copies of that
written objection on class counsel, Norman Rifkind, Esq., at the address set
forth in paragraph 8, above, and on counsel for Defendants, David L. Carden,
Esq., Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601-1692,
postmarked no later than October 20, 1996.
10. Final Hearing on Fairness of Settlement. A final hearing to
determine the fairness, reasonableness and adequacy of the proposed settlement
will be held on November 20, 1996 in the United States District Court for the
Northern District of Illinois, located in the Federal Building, 219 South
Dearborn Street, Chicago, Illinois, in Room 1919 at 11:00 a.m.
11. Further Information. This Notice is not all-inclusive. For
further information concerning the litigation, you may refer to the pleadings
and other papers, including the proposed Settlement Agreement, that have been
filed with the Court, which may be inspected during regular business hours at
the Office of the Clerk of the Court identified in paragraph 10, above, 20th
floor, or you may obtain further information about this action, the terms of
the settlement, the settlement hearing and how the settlement may affect your
rights by calling the following toll-free number for a recorded message:
1-800-XXX-XXXX. PLEASE DO NOT CONTACT THE CLERK OF THE COURT.
Dated: ______________
Clerk of the Court, United States
District Court for the Northern
District of Illinois