Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH UP TO 296,948
COMMON SHARES
OF
CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE INVESTMENT TRUST
AT
$4.50 PER Share
SUTTER OPPORTUNITY FUND 2, LLC
(the "Purchaser")
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT
12:00 MIDNIGHT, PACIFIC STANDARD TIME, ON MAY 4, 2001, UNLESS THE
OFFER IS EXTENDED.
The Purchaser hereby seeks to acquire Shares of Common Stock $0.01 par value
(the "Shares") in CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE INVESTMENT
TRUST, a Delaware corporation (the "Trust"). The Purchaser is not affiliated
with the Trust. The Purchaser hereby offers to purchase up to 296,948 Shares at
a purchase price equal to $4.50 per Share, less the amount of any distributions
declared or made with respect to the Shares between April 9, 2001 and May 4,
2001, or such other date to which this Offer may be extended (the "Expiration
Date"), in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal, as each may be supplemented or amended from time to time
(which together constitute the "Offer"). As noted above, the Offer price would
be subject to reduction for distributions made or declared prior to the
Expiration Date. Any distributions made or declared after the Expiration Date
would, by the terms of the Offer and as set forth in the Letter of Transmittal,
be assigned by tendering Share holders to the Purchaser. The Purchaser
understands that the Issuer may impose certain limitations on Share ownership by
any single Share holder in order to assure compliance with Internal Revenue Code
requirements for the Issuer's qualification as a real estate investment trust.
Such limitations may limit the total amount of Shares which may be held by the
Purchaser to fewer than 10% of the outstanding Shares. The Purchaser is seeking
up to 296,948 Shares, which is equal to approximately 20% of the total number of
Shares reported by the Issuer to be outstanding as of December 31, 1999. The
Issuer has also described in its public reports certain warrants and options to
purchase Shares, as well as its authority to repurchase Shares. The Purchaser
cannot with certainty determine the Issuer's policies on limiting Share
ownership, nor the precise number of Shares currently deemed outstanding for
purposes of such limitations. Accordingly, this Offer is for a maximum number of
Shares equal to the lesser of 296,948 or the total number of Shares permitted by
the Issuer to be transferred to the Purchaser under its limitations on
individual Share ownership (the "Maximum Offer").
Tender of Shares will include the tender of any and all securities into which
the Shares may be converted or exchanged, and any securities distributed with
respect to the Shares, by way of stock dividend or otherwise, from and after the
Offer Date.
The 296,948 Shares sought pursuant to the Offer represent approximately 20% of
the Shares outstanding as of December 31, 1999. The Purchaser currently
beneficially owns an aggregate total of 9,300 Shares, or approximately 0.6% of
the total of 1,484,740 outstanding Shares. If the Offer is successful and the
Purchaser acquires all of the Shares sought, it will beneficially own
approximately 20.6% of the outstanding Shares.
Holders of Shares ("Share holders") are urged to consider the following factors:
- Share holders who tender their Shares will give up the
opportunity to participate in any future benefits from the
ownership of Shares, including potential future
distributions by the Trust.
- The Purchaser is making the Offer for investment purposes
and with the intention of making a profit from the
ownership of the Shares. In establishing the purchase price
of $4.50 per Share, the Purchaser is motivated to establish
the lowest price which might be acceptable to Share holders
consistent with the Purchaser' objectives.
- As a result of consummation of the Offer, the Purchaser may
be in a position to significantly influence all Trust
decisions on which Share holders may vote. The Purchaser
1
will vote the Shares acquired in the Offer in its own
interest, which may be different from or in conflict with
the interests of the remaining Share holders.
- The Purchaser may accept only a portion of the Shares
tendered by a Share holder in the event Shares in excess of
the Maximum Offer are tendered.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. IF SHARES IN EXCESS OF THE MAXIMUM OFFER ARE VALIDLY TENDERED AND NOT
WITHDRAWN, THE PURCHASER WILL ACCEPT FOR PURCHASE SHARES EQUAL TO THE MAXIMUM
OFFER FROM TENDERING SHARE HOLDERS ON A PRO RATA BASIS, SUBJECT TO THE TERMS AND
CONDITIONS HEREIN. A SHARE HOLDER MAY TENDER ANY OR ALL SHARES OWNED BY SUCH
SHARE HOLDER.
The Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, (i) to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and the payment for, any
Shares, (ii) upon the occurrence of any of the conditions specified in Section
13 of this Offer to Purchase, to terminate the Offer and not accept for payment
any Shares not theretofore accepted for payment or paid for, or to delay the
acceptance for payment of, or payment for, any Shares not theretofore accepted
for payment or paid for, and (iii) to amend the Offer in any respect. Notice of
any such extension, termination or amendment will promptly be disseminated to
Share holders in a manner reasonably designed to inform Share holders of such
change in compliance with Rule 14d- 4(c) under the Securities Exchange Act of
1934 (the "Exchange Act"). In the case of an extension of the Offer, such
extension will be followed by a press release or public announcement which will
be issued no later than 9:00 a.m., Eastern Standard Time, on the next business
day after the scheduled Expiration Date, in accordance with Rule 14e-1(d) under
the Exchange Act.
April 9, 2001
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IMPORTANT
Any Share holder desiring to tender any or all of such Share holder's Shares
should complete and sign the Letter of Transmittal (a copy of which is enclosed
with this Offer to Purchase, printed on green paper) in accordance with the
instructions in the Letter of Transmittal and mail, deliver or telecopy the
Letter of Transmittal and any other required documents to North Coast
Securities, Inc. (the "Depositary"), at the address or facsimile number set
forth below.
North Coast Securities, Inc.
595 Market Street, Suite 2100
San Francisco, California 94105
Facsimile Transmission: 415-977-1510
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Letter of Transmittal may be directed to the Purchaser at
415-777-2140.
- ---------------------------
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY INFORMATION OTHER THAN AS CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
- ---------------------------
The Trust is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Such reports and other information are available on the
Commission's electronic data gathering and retrieval (EDGAR) system, at its
internet web site at www.sec.gov, may be inspected at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and are available for inspection and
copying at the regional offices of the Commission located in Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Room of the Commission
in Washington, D.C. at prescribed rates.
The Purchaser has filed with the Commission a Tender Offer Statement on Schedule
TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer. Such statement and any amendments thereto, including
exhibits, may be inspected and copies may be obtained from the offices of the
Commission in the manner specified above.
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TABLE OF CONTENTS
Page
SUMMARY TERM SHEET.............................................................5
INTRODUCTION...................................................................7
TENDER OFFER...................................................................9
Section 1. Terms of the Offer...........................................9
Section 2. Proration; Acceptance for Payment and Payment for Shares....10
Section 3. Procedures for Tendering Shares.............................11
Section 4. Withdrawal Rights...........................................12
Section 5. Extension of Tender Period; Termination; Amendment..........13
Section 6. Federal Income Tax Consequences.............................13
Section 7. Effects of the Offer........................................16
Section 8. Future Plans................................................17
Section 9. The Business of the Trust...................................17
Section 10. Conflicts of Interest.......................................18
Section 11. Certain Information Concerning the Purchaser................18
Section 12. Source of Funds.............................................19
Section 13. Conditions of the Offer.....................................19
Section 14. Certain Legal Matters.......................................21
Section 15. Fees and Expenses...........................................22
Section 16. Miscellaneous...............................................22
Schedule I - The Purchaser and Its Principal
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SUMMARY TERM SHEET
The Purchaser is offering to purchase up to 296,948 Shares for $4.50 per Share
in cash. The following are some of the questions that you, as a Share holder of
the Trust may have and answers to those questions. The information in this
summary is not complete and we urge you to carefully read the remainder of this
Offer to Purchase and the accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase up to 296,948 Shares is being made by SUTTER OPPORTUNITY
FUND 2, LLC. The Purchaser is a private investment fund managed by Sutter
Capital Management, LLC and its principal Robert Dixon. None of the foregoing is
affiliated with the Trust.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase up to 296,948 of the Shares of Common Stock $0.01 par
value, which are the "Shares" issued to public investors in the Trust. The
Purchaser understands that the Issuer may impose certain limitations on Share
ownership by any single Share holder in order to assure compliance with Internal
Revenue Code requirements for the Issuer's qualification as a real estate
investment trust. These limitations could limit the total amount of Shares which
may be held by the Purchaser to fewer than 10% of the outstanding Shares. The
Purchaser is seeking up to 296,948 Shares, equal to approximately 20% of the
total number of Shares reported by the Issuer to be outstanding as of December
31, 1999. The Issuer has also described in its public reports certain warrants
and options to purchase Shares, as well as its authority to repurchase Shares.
The Purchaser cannot with certainty determine the Issuer's policies on limiting
Share ownership, nor the precise number of Shares currently deemed outstanding
for purposes of such limitations. Accordingly, this Offer is for a maximum
number of Shares equal to the lesser of 296,948 or the total number of Shares
permitted by the Issuer to be transferred to the Purchaser under its limitations
on individual Share ownership (the "Maximum Offer").
Tender of Shares will include the tender of any and all securities into which
the Shares may be converted or exchanged, and any securities distributed with
respect to the Shares, by way of stock dividend or otherwise, from and after the
Offer Date.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $4.50 per Share, net to you in cash, less the amount of
any distributions declared or made on the Shares between April 9, 2001 and the
date the Offer expires. Any distributions made or declared after the Expiration
Date would, by the terms of the Offer and as set forth in the Letter of
Transmittal, be assigned by tendering Share holders to the Purchaser. If you
tender your shares to us in the Offer, you will not have to pay brokerage fees
or similar expenses you might incur in a market sale.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
If the total amount of Shares sought is purchased, the Purchaser' capital
commitment will be approximately $1.34 million. The Purchaser has approximately
$6 million in liquid net assets at its disposal to fund payment to selling Share
holders.
IS THE FINANCIAL CONDITION OF THE BIDDER RELEVANT TO MY DECISION ON WHETHER TO
TENDER IN THE OFFER?
Because this is a cash offer that is not conditioned on financing being
available, and the Purchaser has more than adequate liquid resources and no
intention to take control of the Trust, other information concerning the
Purchaser's financial condition would seem to have little relevance to your
decision. The Purchaser has attached a copy of its most recent financial
statements to the Offer as Schedule II if you wish to review this information.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, pacific standard time, on May 4,
2001, to decide whether to tender your shares in the Offer.
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CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
The Offer can be extended in our discretion.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will make a public announcement of the extension, not
later than 9:00 a.m., eastern standard time, on the day after the day on which
the Offer was scheduled to expire.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There are no conditions to the offer based on minimum Shares tendered, the
availability of financing or otherwise determined by the success of the offer.
However, we may not be obligated to purchase any Shares in the event certain
conditions occur, such as legal or government actions which would prohibit the
purchase. Furthermore, we are not obligated to purchase any Shares which are
validly tendered if, among other things, there is a material adverse change in
the Trust or its business.
HOW DO I TENDER MY SHARES?
To tender your shares, you must deliver a completed Letter of Transmittal
(printed on green paper), to the Depositary at: North Coast Securities, Inc.,
595 Market Street, Suite 2100, San Francisco, California 94105 (Facsimile
Transmission: 415-977-1510), no later than the time the Offer expires.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw previously tendered shares at any time until the Offer has
expired and, if we have not agreed to accept your shares for payment by June 8,
2001, you can withdraw them at any time after such time until we do accept your
shares for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the shares.
WHAT DOES THE TRUST THINK OF THE OFFER?
The Purchaser has not sought the approval or disapproval of the Trust. The Trust
management may be expected to respond with the Trust's position on the offer in
the next two weeks.
WILL THE TRUST CONTINUE AS A PUBLIC COMPANY?
The Trust reported 202 holders of record of its outstanding Shares as of the end
of 1999, the most recent year for which it has filed an annual report. The
Issuer estimated that there were approximately 750 beneficial owners of the
Shares as of such date. Public registration and reporting requirements can be
terminated by the Trust if the number of record holders is below 300 as of any
fiscal year end. Accordingly, the Purchaser does not believe that the purchase
of Shares pursuant to the Offer will affect the Shares' eligibility for
de-registration under the Exchange Act.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
The Purchaser does not anticipate that Shares held by non-tendering Share
holders will be affected by the completion of the offer. However, if the
Purchaser should acquire all of the Shares sought in the Offer, the Purchaser
would control a large, though not necessarily controlling, block of Shares.
WHAT ARE THE PURCHASER'S FUTURE INTENTIONS CONCERNING THE TRUST?
The Purchaser has no present intention to seek control of the Trust or to change
the management or operations of the Trust. The Purchaser does not have any
present intention to seek or cause a liquidation of the Trust. Although the
6
Purchaser does not have any present intention to take any action with
respect to management or control of the Trust, the Purchaser reserves the right,
at an appropriate time, to exercise its rights as a Share holder to vote on
matters subject to a Share holder vote.
WHAT IS THE MARKET VALUE OF MY SHARES?
According to recently reported trading information, the Shares have traded
during the first quarter of 2001 at prices ranging from $2.50 per Share to $3.90
per Share.
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call the Purchaser at 415-777-2140.
7
TO THE SHARE HOLDERS OF CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE
INVESTMENT TRUST
INTRODUCTION
The Purchaser hereby offers to purchase up to 296,948 Shares at a
purchase price of $4.50 per Share ("Offer Price"), less the amount of any
distributions declared or paid with respect to the Shares between April 9, 2001,
and the Expiration Date, in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer. The Purchaser is unaware of any
distributions declared or paid since April 9, 2001. The Purchaser understands
that the Issuer may impose certain limitations on Share ownership by any single
Share holder in order to assure compliance with Internal Revenue Code
requirements for the Issuer's qualification as a real estate investment trust.
Such limitations may limit the total amount of Shares which may be held by the
Purchaser to fewer than 10% of the outstanding Shares. The Purchaser is seeking
up to 296,948 Shares, which is equal to approximately 20% of the total number of
Shares reported by the Issuer to be outstanding as of December 31, 1999. The
Issuer has also described in its public reports certain warrants and options to
purchase Shares, as well as its authority to repurchase Shares. The Purchaser
cannot with certainty determine the Issuer's policies on limiting Share
ownership, nor the precise number of Shares currently deemed outstanding for
purposes of such limitations. Accordingly, this Offer is for a maximum number of
Shares equal to the lesser of 296,948 or the total number of Shares permitted by
the Issuer to be transferred to the Purchaser under its limitations on
individual Share ownership (the "Maximum Offer").
Tender of Shares will include the tender of any and all securities into
which the Shares may be converted or exchanged, and any securities distributed
with respect to the Shares, by way of stock dividend or otherwise, from and
after the Offer Date.
Share holders who tender their Shares will not be obligated to pay any
Trust transfer fees, or other fees, expenses or commissions in connection with
the tender of Shares. The Purchaser will pay all transfer costs and all charges
and expenses of the Depositary as depositary in connection with the Offer.
For further information concerning the Purchaser, see Section 11 below
and Schedule I.
Neither the Purchaser nor the Depositary is affiliated with
the Trust. The address of the Trust's principal executive offices is 50
California Street, Suite 2020, San Francisco, California 94111.
Share holders are urged to consider the following factors:
- Share holders who tender their Shares will give up the
opportunity to participate in any future benefits from the
ownership of Shares, including potential future distributions
by the Trust.
- The Purchaser is making the Offer for investment purposes and
with the intention of making a profit from the ownership of
the Shares. In establishing the purchase price of $4.50 per
Share, the Purchaser is motivated to establish the lowest
price which might be acceptable to Share holders consistent
with the Purchaser's objectives.
- As a result of consummation of the Offer, the Purchaser may be
in a position to significantly influence all Trust decisions
on which Share holders may vote. The Purchaser will vote the
Shares acquired in the Offer in its own interest, which may be
different from or in conflict with the interests of the
remaining Share holders.
- The Purchaser may accept only a portion of the Shares tendered
by a Share holder in the event Shares in excess of the Maximum
Offer are tendered.
The Offer will provide Share holders with an opportunity to liquidate
all or a portion of their investment without the usual transaction costs
associated with market sales. Share holders may have a more immediate need to
use the cash now tied up in an investment in the Shares and wish to sell them to
the Purchaser.
8
Establishment of the Offer Price
The Purchaser has set the Offer Price at $4.50 per Share, less the
amount of any distributions declared or made with respect to the Shares between
April 9, 2001 and the Expiration Date. The Shares are currently traded on the
American Stock Exchange ("AMEX") under the symbol "CAA". The following table
shows the range of high and low bid prices of the Shares reported through AMEX
from initial listing of the Shares in October 1998. These quotations represent
prices between dealers without any retail markup, markdown or commissions and
may not represent actual transactions.
1998
Quarter High Low
Fourth $6.63 $4.00
1999
Quarter High Low
First $5.63 $4.00
Second 4.50 3.06
Third 4.00 2.88
Fourth 3.56 2.38
2000
Quarter High Low
First $3.88 $2.38
Second 3.38 2.75
Third 3.25 2.50
Fourth 3.38 2.81
2001 (through March 30, 2001)
Quarter High Low
First $3.90 $2.50
The Purchaser acquired a total of 9,300 Shares in open market
transactions during the period March 1, 2001, through March 30, 2001, for prices
ranging from $3.25 to $3.50 per Share.
General Background Information
Certain information contained in this Offer to Purchase which relates
to, or represents, statements made by the Trust, has been derived from
information provided in reports filed by the Trust with the Securities and
Exchange Commission.
The Issuer had 1,484,740 Shares issued and outstanding held by
approximately 202 Share holders of record as of December 31, 1999, according to
its annual report on Form 10-K for the year then ended. The Issuer estimated
that there were approximately 750 beneficial owners of the Shares as of such
date.
Tendering Share holders will not be obligated to pay transfer fees,
brokerage fees or commissions on the sale of the Shares to the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses incurred
by it in connection with the Offer. The Purchaser desires to purchase all Shares
tendered by each Share holder.
9
If, prior to the Expiration Date, the Purchaser increases the
consideration offered to Share holders pursuant to the Offer, such increased
consideration will be paid with respect to all Shares that are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
Share holders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding whether to tender
their Shares.
TENDER OFFER
Section 1. Terms of the Offer. Upon the terms and subject to the conditions of
the Offer, the Purchaser will accept for payment and pay for Shares validly
tendered on or prior to the Expiration Date and not withdrawn in accordance with
Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00
midnight, Pacific Standard Time, on May 4, 2001, unless and until the Purchaser
shall have extended the period of time for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date on which
the Offer, as so extended by the Purchaser, shall expire.
The Offer is conditioned on satisfaction of certain conditions. See
Section 13, which sets forth in full the conditions of the Offer. The Purchaser
reserves the right (but shall not be obligated), in its sole discretion and for
any reason, to waive any or all of such conditions. If, by the Expiration Date,
any or all of such conditions have not been satisfied or waived, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Shares tendered, terminate the Offer and return all tendered Shares to
tendering Share holders, (ii) waive all the unsatisfied conditions and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Shares validly tendered, (iii) extend the Offer and, subject to the right of
Share holders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (iv) to amend the Offer. Notwithstanding the foregoing, upon the
expiration of the Offer, if all conditions are either satisfied or waived, the
Purchaser will promptly pay for all validly tendered Shares, and the Purchaser
do not intend to imply that the foregoing rights of the Purchaser would permit
the Purchaser to delay payment for validly tendered Shares following expiration.
The Purchaser does not anticipate and has no reason to believe that any
condition or event will occur that would prevent the Purchaser from purchasing
tendered Shares as offered herein.
Section 2. Proration; Acceptance for Payment and Payment for Shares. If the
number of Shares validly tendered prior to the Expiration Date and not withdrawn
less than the maximum number of Shares sought (the "Maximum Offer"), the
Purchaser, upon the terms and subject to the conditions of the Offer, will
accept for payment all Shares so tendered. If the number of Shares validly
tendered prior to the Expiration Date and not withdrawn exceeds the Maximum
Offer, the Purchaser, upon the terms and subject to the conditions of the Offer,
will accept for payment Shares so tendered on a pro rata basis.
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Shares to be accepted, the
Purchaser will announce the final results of proration as soon as practicable,
but in no event later than five business days following the Expiration Date. The
Purchaser will not pay for any Shares tendered until after the final proration
factor has been determined.
Upon 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 Purchaser will accept for payment, and will pay for, Shares
validly tendered and not withdrawn in accordance with Section 4, promptly
following the Expiration Date. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment (and thereby purchased) tendered Shares when, as and if the
Purchaser give oral or written notice to the Depositary of the Purchaser'
acceptance for payment of such Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares purchased pursuant to
the Offer will in all cases be made by deposit of the Offer Price with the
10
Depositary, which will act as agent for the tendering Share holders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering Share holders.
Under no circumstances will interest be paid on the Offer Price by
reason of any delay in making such payment.
If any tendered Shares are not purchased for any reason, the Letter of
Transmittal with respect to such Shares not purchased will be of no force or
effect. If, for any reason whatsoever, acceptance for payment of, or payment
for, any Shares tendered pursuant to the Offer is delayed or the Purchaser is
unable to accept for payment, purchase or pay for Shares tendered pursuant to
the Offer, then, without prejudice to the Purchaser' rights under Section 13
(but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, subject to any limitations of applicable law, and such Shares may not be
withdrawn except to the extent that the tendering Share holders are entitled to
withdrawal rights as described in Section 4.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to Share holders pursuant to the Offer, such increased
consideration shall be paid for all Shares accepted for payment pursuant to the
Offer, whether or not such Shares were tendered prior to such increase.
Section 3. Procedures for Tendering Shares.
Valid Tender. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (a copy of which is
enclosed with this Offer to Purchase, printed on green paper) with any other
documents required by the Letter of Transmittal must be received by the
Depositary at its address set forth on the back cover of this Offer to Purchase
on or prior to the Expiration Date. A Share holder may tender any or all Shares
owned by such Share holder.
In order for a tendering Share holder to participate in the Offer, Shares must
be validly tendered and not withdrawn prior to the Expiration Date, which is
12:00 midnight, Pacific Standard Time, on May 4, 2001, or such date to which the
Offer may be extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering Share holder and delivery
will be deemed made only when actually received by the Depositary.
Backup Federal Income Tax Withholding. To prevent the possible application of
31% backup federal income tax withholding with respect to payment of the Offer
Price for Shares purchased pursuant to the Offer, a tendering Share holder must
provide the Depositary with such Share holder's correct taxpayer identification
number and make certain certifications that such Share holder is not subject to
backup federal income tax withholding. Each tendering Share holder must insert
in the Letter of Transmittal the Share holder's taxpayer identification number
or social security number in the space provided on the front of the Letter of
Transmittal. The Letter of Transmittal also includes a substitute Form W-9,
which contains the certifications referred to above. (See the Instructions to
the Letter of Transmittal.)
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Offer Price for each Share tendered, each
Share holder must complete the FIRPTA Affidavit included in the Letter of
Transmittal certifying such Share holder's taxpayer identification number and
address and that the Share holder is not a foreign person. (See the Instructions
to the Letter of Transmittal and "Section 6. Certain Federal Income Tax
Consequences.")
Other Requirements. By executing a Letter of Transmittal as set forth above, a
tendering Share holder irrevocably appoints the designees of the Purchaser as
such Share holder's proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, to the full extent of such
Share holder's rights with respect to the Shares tendered by such Share holder
and accepted for payment by the Purchaser. Such appointment will be effective
when, and only to the extent that, the Purchaser accept such Shares for payment.
Upon such acceptance for payment, all prior proxies given by such Share holder
with respect to such Shares will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). The
designees of the Purchaser will, with respect to such Shares, be empowered to
exercise all voting and other rights of such Share holder as they in their sole
discretion may deem proper at any meeting of Share holders, by written consent
or otherwise. In addition, by executing a Letter of Transmittal, a Share holder
also assigns to the Purchaser all of the Share holder's rights to receive
11
distributions from the Trust with respect to Shares which are accepted for
payment and purchased pursuant to the Offer, other than those distributions
declared or paid during the period commencing on the Offer Date and terminating
on the Expiration Date.
Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
pursuant to the procedures described above will be determined by the Purchaser,
in its sole discretion, which determination shall be final and binding. The
Purchaser reserves the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the absolute right to
reject any or all tenders if not in proper form or if the acceptance of, or
payment for, the Shares tendered may, in the opinion of the Purchaser's counsel,
be unlawful. The Purchaser also reserves the right to waive any defect or
irregularity in any tender with respect to any particular Shares of any
particular Share holder, and the Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
Instructions thereto) will be final and binding. Neither the Purchaser, the
Depositary, nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Shares or will incur any
liability for failure to give any such notification.
A tender of Shares pursuant to any of the procedures described above
will constitute a binding agreement between the tendering Share holder and the
Purchaser upon the terms and subject to the conditions of the Offer, including
the tendering Share holder's representation and warranty that (i) such Share
holder owns the Shares being tendered within the meaning of Rule 14e-4 under the
Exchange Act and (ii) the tender of such Share complies with Rule 14e-4. Rule
14e-4 requires, in general, that a tendering security holder actually be able to
deliver the security subject to the tender offer, and is of concern particularly
to any Share holders who have granted options to sell or purchase the Shares,
hold option rights to acquire such securities, maintain "short" positions in the
Shares (i.e., have borrowed the Shares) or have loaned the Shares to a short
seller. A Share holder will be deemed to tender Shares in compliance with Rule
14e-4 and the Offer if the holder is the record owner of the Shares and the
holder (i) delivers the Shares pursuant to the terms of the Offer, (ii) causes
such delivery to be made, (iii) guarantees such delivery, (iv) causes a guaranty
of such delivery, or (v) uses any other method permitted in the Offer (such as
facsimile delivery of the Transmittal Letter).
Section 4. Withdrawal Rights. Except as otherwise provided in this Section 4,
all tenders of Shares pursuant to the Offer are irrevocable, provided that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided in this
Offer to Purchase, may also be withdrawn at any time on or after June 8, 2001
For withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address or
the facsimile number set forth in the attached Letter of Transmittal. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
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.
If purchase of, or payment for, Shares is delayed for any reason or if
the Purchaser is unable to purchase or pay for Shares for any reason, then,
without prejudice to the Purchaser's rights under the Offer, tendered Shares may
be retained by the Depositary on behalf of the Purchaser and may not be
withdrawn except to the extent that tendering Share holders are entitled to
withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c) under
the Exchange Act, which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the tender offer.
All questions as to the form and validity (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, the Depositary, nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn Shares may be re-tendered, however, by
following the procedures described in Section 3 at any time prior to the
Expiration Date.
Section 5. Extension of Tender Period; Termination; Amendment. The Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares by
giving oral or written notice of such extension to the Depositary, (ii) upon the
occurrence or failure to occur of any of the conditions specified in Section
12
13, to delay the acceptance for payment of, or payment for, any Shares not
heretofore accepted for payment or paid for, or to terminate the Offer and not
accept for payment any Shares not theretofore accepted for payment or paid for,
by giving oral or written notice of such termination to the Depositary, and
(iii) to amend the Offer in any respect (including, without limitation, by
increasing or decreasing the consideration offered or the number of Shares being
sought in the Offer or both or changing the type of consideration) by giving
oral or written notice of such amendment to the Depositary. Any extension,
termination or amendment will be followed as promptly as practicable by public
announcement, the announcement in the case of an extension to be issued no later
than 9:00 a.m., Eastern Standard Time, on the next business day after the
previously scheduled Expiration Date, in accordance with the public announcement
requirement of Rule 14d-4(c) under the Exchange Act. Without limiting the manner
in which the Purchaser may choose to make any public announcement, except as
provided by applicable law (including Rule 14d-4(c) under the Exchange Act), the
Purchaser will have no obligation to publish, advertise or otherwise communicate
any such public announcement, other than by issuing a release to the Dow Jones
News Service or other national news agency. The Purchaser may also be required
by applicable law to disseminate to Share holders certain information concerning
the extensions of the Offer and any material changes in the terms of the Offer.
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Shares) is delayed in their payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering Share holders are
entitled to withdrawal rights as described in Section 4. However, the ability of
the Purchaser to delay payment for Shares that the Purchaser has accepted for
payment is limited by Rule 14e-1 under the Exchange Act, which requires that the
Purchaser pay the consideration offered or return the securities deposited by or
on behalf of holders of securities promptly after the termination or withdrawal
of the Offer.
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 to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following a material change in the terms of the
offer or information concerning the offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the change in the terms or
information. With respect to a change in price or a change in percentage of
securities sought (other than an increase of not more than 2% of the securities
sought), however, a minimum ten business day period is generally required to
allow for adequate dissemination to security holders and for investor response.
As used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, Pacific Standard Time.
Section 6. Federal Income Tax Consequences. Sale of Shares will result in
income tax consequences to the selling Share holder. EACH SHARE HOLDER TENDERING
SHARES SHOULD CONSULT SUCH SHARE HOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO SUCH SHARE HOLDER OF ACCEPTING THE OFFER, INCLUDING THE
APPLICATION OF FEDERAL, FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
Section 7. Effects of the Offer.
Effect on Trading Market. See the discussion above under "Establishment of the
Offer Price." The Purchaser is not aware of any specific effect the Offer will
have on the trading market for Shares.
Voting Power of Purchaser. Depending on the number of Shares acquired by the
Purchaser pursuant to the Offer, the Purchaser may have the ability to exert
certain influence on matters subject to the vote of Share holders, though the
maximum number of Shares sought hereunder would not give the Purchaser a
controlling voting interest.
Other Potential Effects. The Shares are registered under the Exchange Act, which
requires, among other things that the Trust furnish certain information to its
Share holders and to the Commission and comply with the Commission's proxy rules
in connection with meetings of, and solicitation of consents from, Share
holders. Registration and reporting requirements could be terminated by the
Trust if the number of record holders is below 300, or below 500 if the Trust's
total assets are below $10 million for three consecutive preceding fiscal years.
The Trust reported a total of 202 Share holders of record as of its most recent
fiscal year end, and in excess of $16 million in total assets as of each of its
first two fiscal year ends. Accordingly, the Purchaser does not believe that the
purchase of Shares pursuant to the Offer will affect the Shares' eligibility for
de-registration under the Exchange Act.
13
Section 8. Future Plans. The Purchaser is seeking to purchase a total of 296,948
Shares. If the Purchaser acquires fewer than 296,948 Shares pursuant to the
Offer, the Purchaser may seek to make further purchases on the open market at
prevailing prices, or solicit Shares pursuant to one or more future tender
offers at the same price, a higher price or, if the Trust's circumstances
change, at a lower price. Alternatively, the Purchaser may discontinue any
further purchases of Shares after termination of the Offer, regardless of the
number of Shares purchased. The Offer is not made with any current view toward
or plan or purpose of acquiring Shares in a series of successive and periodic
offers. Nevertheless, as noted above, the Purchaser reserves the right to gauge
the response to this solicitation, and, if not successful in achieving the
Maximum Offer, may consider future offers. Factors affecting the Purchaser'
future interest in acquiring additional Shares include, but are not limited to,
the relative success of the current Offer, any increase or decrease in the
availability of capital for investment by the Purchaser, the current
diversification and performance of its portfolio of investment securities,
developments in the public market in the Shares or actions by unrelated parties
to tender for or purchase Shares, the status of and changes and trends in the
Trust's operations, and local and national real estate and financial market
developments and trends.
The Purchaser is acquiring the Shares pursuant to the Offer solely for
investment purposes. The Purchaser has no present intention to seek control of
the Trust or to change the management or operations of the Trust. The Purchaser
do not have any present intention to seek or cause a liquidation of the Trust.
The Purchaser nevertheless reserves the right, at an appropriate time, to
exercise its rights as a Share holder to vote on matters subject to Share holder
vote.
Section 9. The Business of the Trust. Information included herein concerning the
Trust is derived from the Trust's publicly-filed reports. Information concerning
the Trust, its assets, operations and management is contained in its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q and other filings with
the Securities and Exchange Commission. Such reports and filings are available
on the Commission's EDGAR system, at its internet web site at www.sec.gov, and
are available for inspection at the Commission's principal office in Washington,
D.C. and at its regional offices in New York, New York and Chicago, Illinois.
The Purchaser have relied on such information to the extent information is
presented herein concerning the Trust, and expressly disclaim any responsibility
for the information included in such reports and extracted in this Offer.
Section 10. Conflicts of Interest. The Purchaser knows of no material conflicts
of interest affecting it in the course of the Offer.
Section 11. Certain Information Concerning the Purchaser. The Purchaser is
SUTTER OPPORTUNITY FUND 2, LLC, a privately held investment fund. For
information concerning the Purchaser and its principal, please refer to Schedule
I attached hereto. The principal business of the Purchaser is investment in
securities. The principal business address of the Purchaser 595 Market Street,
Suite 2100, San Francisco, California 94105.
See Schedule II attached hereto for the Purchaser's audited financial
statements.
Except as otherwise set forth herein, (i) neither the Purchaser nor, to
the best knowledge of the Purchaser, the persons listed on Schedule I nor any
affiliate of the Purchaser beneficially owns or has a right to acquire any
Shares, (ii) neither the Purchaser nor, to the best knowledge of the Purchaser,
the persons listed on Schedule I nor any affiliate of the Purchaser, or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Shares within the past 60 days, (iii) neither the
Purchaser nor, to the best knowledge of the Purchaser, the persons listed on
Schedule I nor any affiliate of the Purchaser has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Trust, including but not limited to, contracts, arrangements,
understandings or relationships concerning the transfer or voting thereof, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies, consents or
authorizations, (iv) there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
Commission between any of the Purchaser or, to the best knowledge of the
Purchaser, the persons listed on Schedule I, or any affiliate of the Purchaser
on the one hand, and the Trust or its affiliates, on the other hand, (v) there
have been no contracts, negotiations or transactions between the Purchaser, or
to the best knowledge of the Purchaser any affiliate of the Purchaser on the one
hand, the persons listed on Schedule I, and the Trust 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, (vi) no person listed on Schedule I has
been convicted in a criminal proceeding during the past five years (excluding
traffic violations or similar misdemeanors), and (vii) no person listed on
Schedule I has been a party to any judicial or administrative proceeding during
the past five years (except for matters dismissed without sanction or
14
settlement) that resulted in a judgment, decree, or final order enjoining
the person from future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation of federal or
state securities laws.
Section 12. Source of Funds. The Purchaser expects that approximately $1,336,266
would be required to purchase 296,948 Shares, if tendered, and an additional
$20,000 may be required to pay related fees and expenses. The Purchaser
anticipates funding all of the purchase price and related expenses through its
existing liquid capital reserves. The cash to complete the entire purchase is in
the Purchaser's hands and is committed to that purpose. Accordingly, there are
no financing arrangements to fall through and no alternative financing plans.
Section 13. Conditions of the Offer. Notwithstanding any other term of the
Offer, the Purchaser shall not be required to accept for payment or to pay for
any Units tendered unless all authorizations or approvals of, 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 have been obtained or occurred on or before the
Expiration Date.
The Purchaser shall not be required to accept for payment or pay for
any Shares not theretofore accepted for payment or paid for and may terminate or
amend the Offer as to such Shares if, at any time on or after the date of the
Offer and before the Expiration Date, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any federal
or state court, government or governmental authority or 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 of or payment for any Shares by the Purchaser, (ii)
imposes or confirms limitations on the ability of the Purchaser effectively to
exercise full rights of ownership of any Shares, including, without limitation,
the right to vote any Shares acquired by the Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Trust's Share holders, (iii)
requires divestiture by the Purchaser of any Shares, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as a result of the
transactions contemplated by the Offer or (v) might materially adversely affect
the business, properties, assets, liabilities, financial condition, operations,
results of operations or prospects of the Purchaser or the Trust, in the
reasonable judgment of 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, other than the application of the waiting period provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which might,
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date hereof, in the business, properties, assets, liabilities,
financial condition, operations, results of operations or prospects of the
Trust, which, in the reasonable judgment of the Purchaser, is or may be
materially adverse to the Trust, or the Purchaser shall have become aware of any
fact that, in the reasonable judgment of the Purchaser, does or may have a
material adverse effect on the value of the Shares;
(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 in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
15
(e) it shall have been publicly disclosed or the Purchaser shall have
otherwise learned that (i) more than fifty percent of the outstanding Shares
have been or are proposed to be acquired by another person (including a "group"
within the meaning of Section 13(d)(3) of the Exchange Act), or (ii) any person
or group that prior to such date had filed a Statement with the Commission
pursuant to Sections 13(d) or (g) of the Exchange Act has increased or proposes
to increase the number of Shares beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding Shares.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser or may be waived by the Purchaser in whole or
in part in its sole exercise of reasonable discretion, and the Offer will remain
open for a period of at least five business days following any such waiver of a
material condition. Any termination by the Purchaser concerning the events
described above will be final and binding upon all parties.
Section 14. Certain Legal Matters.
General. Except as set forth in this Section 14, 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
Shares by the Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is the Purchaser' present intention that such additional
approval or action would be sought. While there is no present intent to delay
the purchase of Shares tendered pursuant to the Offer pending receipt of any
such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Trust's business, or that certain parts of the Trust's business
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser to elect to terminate the Offer without
purchasing Shares thereunder. The Purchaser' obligation to purchase and pay for
Shares is subject to certain conditions, including conditions related to the
legal matters discussed in this Section 14.
Antitrust. The Purchaser does not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of Shares
pursuant to the Offer.
Margin Requirements. The Shares are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. These laws are directed at the acquisition of corporations and
not Trusts. The Purchaser, therefore, do not believe that any anti-takeover laws
apply to the transactions contemplated by the Offer.
Although the Purchaser have not attempted to comply with any state
anti-takeover statutes in connection with the Offer, the Purchaser reserve the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer nor any action taken in
connection herewith is intended as a waiver of such right. If any state
anti-takeover statute is applicable to the Offer, the Purchaser might be unable
to accept for payment or purchase Shares tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer. In such case, the Purchaser may
not be obligated to accept for purchase or pay for any Shares tendered.
Section 15. Fees and Expenses. The Purchaser has retained North Coast
Securities, Inc. to act as Depositary in connection with the Offer. The
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. The Purchaser will also pay all costs and expenses of printing,
publication and mailing of the Offer and all costs of transfer.
16
Section 16. Miscellaneous. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) SHARE HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION. THE PURCHASER IS NOT AWARE OF ANY JURISDICTION
WITHIN THE UNITED STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE
THEREOF WOULD BE ILLEGAL.
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.
April 9, 2001
SUTTER OPPORTUNITY FUND 2, LLC
17
SCHEDULE I
THE PURCHASER AND ITS PRINCIPAL
The Purchaser is SUTTER OPPORTUNITY FUND 2, LLC, a California limited
liability company formed in 2000 to invest in a portfolio of investment
securities. The managing member of the Purchaser is Sutter Capital Management,
LLC. The Purchaser has 29 non-managing members. None of the non-managing members
holds a controlling interest in the Purchaser, nor does any hold any direct or
indirect role in management of the Purchaser. Further information concerning the
managing member is set forth below.
The principal business address for the Purchaser, its manager and Robert
Dixon is 595 Market Street, Suite 2100, San Francisco, California 94105.
Sutter Capital Management, LLC
Sutter Capital Management, LLC is a California limited liability company
formed in 1998. The managing member and controlling interest holder in Sutter
Capital Management, LLC is Robert E. Dixon.
Mr. Dixon received his Bachelors degree in economics from the University of
California at Los Angeles in 1992. He worked for Lehman Brothers, Inc. in equity
sales and trading during 1993 and 1994. From October 1994 to June, 1996 he
worked for MacKenzie Patterson, Inc. as a securities research analyst. Mr. Dixon
became a Chartered Financial Analyst in 1996, and received his Master of
Business Administration degree from Cornell University in 1998. In July of 1998
he began buying and selling securities for his own account and that of the
entities he controls, and he has principally been engaged in that activity since
that date. Mr. Dixon was a registered representative of North Coast Securities
from 1994 through 1997. Mr. Dixon is a U.S. citizen.
SCHEDULE II
THE PURCHASER'S FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SUTTER OPPORTUNITY FUND 2, LLC
- --------------------------------------------------------------------------------
Balance Sheet
December 31, 2000
ASSETS
2000
------------------
Current assets:
Cash and cash equivalents $ -
Accounts receivable 10,000
Loan receivable 712,500
------------------
Total current assets 722,500
------------------
Noncurrent assets:
Investments, at fair value 1,995,704
Investments, at cost 1,241,405
------------------
Total noncurrent assets 3,237,109
------------------
$ 3,959,609
==================
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 173,715
Brokerage margin balance 365,502
Income taxes payable 1,842
------------------
Total current liabilities 541,059
------------------
Members' equity:
Members' equity 3,767,941
Unrealized gain (loss) on investments (349,391)
------------------
3,418,550
------------------
$ 3,959,609
==================
See accompanying auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
SUTTER OPPORTUNITY FUND 2, LLC
- --------------------------------------------------------------------------------
Statements of Income and Comprehensive Income
For The Period from Inception (June 1, 2000) Through December 31, 2000
2000
------------------
Revenues:
Interest and dividends $ 145,174
Realized gains on investments, net 141,244
Income allocated from K-1's, net 122
------------------
Total revenues 286,540
------------------
Expenses:
Bank charges and investments fees 1,030
Interest expense 6,224
Expense allocated from K-1 2,775
Legal fees 3,857
Miscellaneous expense 3,304
Management fees 60,533
Incentive fees 28,081
------------------
Total expenses 105,804
------------------
Income before income taxes 180,736
Provision for income tax expense 1,842
------------------
Net income $ 178,894
==================
Other comprehensive income:
Unrealized holding losses on
available-for-sale investments (349,391)
------------------
Total comprehensive income (loss) $ (170,497)
==================
See accompanying auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
SUTTER OPPORTUNITY FUND, LLC
- --------------------------------------------------------------------------------
Statement of Members' Equity
For The Period from Inception (June 1, 2000) Through December 31, 2000
Num- Net Share Share of
ber of Beginning Contributions of Net Comprehensive Ending
Units Balance (Disbursements) Income Income Balance
---------------------------------------------------------------------------------------------
Members:
Non-managing members 7030 $ - 3,433,997 171,105 (334,179) 3,270,923
Managing Member 320
- 155,050 7,789 (15,212) 147,627
---------------------------------------------------------------------------------------------
Totals 7350 $ - 3,589,047 178,894 (349,391) 3,418,550
=============================================================================================
See accompanying auditors' report and notes to financial statements.
- --------------------------------------------------------------------------------
SUTTER OPPORTUNITY FUND, LLC
- --------------------------------------------------------------------------------
Statement of Cash Flows
For The Period from Inception (June 1, 2000) Through December 31, 2000
2000
------------------
Operating activities:
Net income $ 178,894
Adjustments to reconcile to cash provided
by operating activities:
Realized gains on sales of investments, net (141,244)
Changes in:
Accounts receivable (10,000)
Loan receivable (712,500)
Accounts payable and accrued liabilities 173,715
Brokerage margin balance 365,502
Income taxes payable 1,842
------------------
Net cash used for operating activities (143,791)
------------------
Investing activities:
Proceeds from sales of investments 904,891
Cash paid for acquisition of investments (4,000,756)
------------------
Net cash used for investing activities (3,095,865)
Financing activities:
Proceeds from capital contributions made by members 3,702,750
Distributions made to members (113,703)
Unrealized loss on investments (349,391)
------------------
Cash provided by financing activities 3,239,656
Increase (decrease) in cash -
Cash, beginning of period -
------------------
Cash, end of period $ -
==================
Supplemental disclosures:
Income taxes paid $ -
==================
Interest paid $ 6,224
==================
Noncash investing transactions:
Amounts payable on the purchase of investments $ (8,073)
==================
See accompanying auditors' report and notes to financial statements.
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SUTTER OPPORTUNITY FUND 2, LLC
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Notes to Financial Statements
December 31, 2000
1. Organization
Sutter Opportunity Fund 2, LLC (the "Fund") is a limited liability company
incorporated in the State of California on June 27, 2000.
The primary purpose of the Fund is to make investments, principally by investing
in securities for capital appreciation. An operating agreement (the "Agreement")
between the Fund and the managing member, Sutter Capital Management, LLC (the
"managing member"), specifies the provisions for capitalizing, operation, and
termination for the Fund. The Agreement sets a termination date of December 31,
2030 for the Fund.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Fund have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Income Taxes
The Fund is a limited liability company and is taxed in a manner similar to a
partnership. Income and expenses are passed through to the members based on
their proportional ownership in the Fund. Therefore, the Fund is not subject to
Federal income taxes. The Fund is subject to the California minimum franchise
tax and a gross receipts fee assessed to limited liability companies.
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash and investments that have a
maturity of less than three months when purchased.
Accounts Receivable
Accounts receivable represent funds due to the Fund from an investor for the
first capital call. No allowance for doubtful accounts is necessary due to the
nature of the receivable.
Investments
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Debt and Equity Securities" (SFAS 115) securities are
classified into three categories: held-to-maturity, available-for-sale, and
trading. At December 31, 2000, the Fund had no trading or held-to-maturity
investments. Securities classified as available-for-sale may be sold in response
to changes in interest rates, liquidity needs, and for other purposes.
Available-for-sale securities are reported at fair value if quoted market prices
are available.
Page 1
Continued
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SUTTER OPPORTUNITY FUND 2, LLC
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Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
Unrealized Holding Gains and Losses
Unrealized holding gains and losses on available-for-sale securities are
excluded from earnings and reported, net of any income tax effect, as a separate
component of members' equity. Realized gains and losses are reported in earnings
based on the adjusted cost of the specific investment sold.
Accounts Payable
Accounts payable amounts represent unsettled investment purchases, dividends
payable to the investors, a loan payable and the fourth quarter incentive fee
payable to the managing partner and other outstanding payables to vendors.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
3. Investments
If a quoted market price is available for an investment, the fair value is
calculated as the number of units times its quoted price. Some of the
investments of the Fund are illiquid and do not have readily determinable fair
values. Such investments are stated at cost on the balance sheet.
The cost and fair value of investments available for sale at December 31, 2000
are as follows:
Unrealized Unrealized
Cost Gains Losses Fair Value
------------ ------------ ------------ ------------
Long-term investments
reported at fair value:
Equities $ 873,614 - 104,600 769,014
Corporate bonds 1,471,482 - 244,791 1,226,690
------------ ------------ ------------ ------------
Total $2,345,096 - 349,391 1,995,704
------------ ------------ ------------ ------------
Long-term investments
reported at cost:
Equities $1,241,405
------------
Total $3,586,501
------------
Page 2
Continued
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SUTTER OPPORTUNITY FUND 2, LLC
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Notes to Financial Statements
3. Investments (continued)
Investment Restrictions
Under the terms of the Operating Agreement, the Fund intends to buy and hold
securities of any asset class, consisting of any combination of debt or equity
instruments. Investment in any single industry (except real estate) may not
exceed the greatest of 50% of the total commitment or 50% of the market value of
the Fund. Securities of any type or class issued by any one issuer or its
affiliates shall not exceed the greatest of 50% of the total commitment or 50%
of the market value of the Fund. It is the intention of the Manager that no
investment in a single security shall exceed 15% of the market value of the
Fund, unless in the Manager's opinion there is a compelling reason to increase
the Fund's commitment to a specific investment for a specified purpose and with
the intent that such increased investment shall generally be made on a
short-term basis.
4. Managing Member
Management of the Fund is described in the Operating Agreement dated June 1,
2000 between the Managing member and the Members of the Fund. The agreement
specifies that the managing member shall receive a management fee for each
fiscal quarter equal to one-half of one percent (0.05%) of the total commitment
during the investment period, and equal to one-half of one percent of the market
value of the Fund at the close of business on the last day of the quarter for
each quarter subsequent to the investment period, payable quarterly in advance.
Total commitment is defined by the Agreement as the total amount of capital
committed to the Fund by the members.
The managing member has agreed to reimburse a portion of the management fee,
equal to 0.125% per quarter (0.5% per year), to members whose subscription
equals or exceeds one thousand units (one million dollars based on the initial
offering price.) The reimbursement will be calculated on such member's
individual commitment. Such reimbursement shall be an expense of the managing
member and will not affect the Fund in any way.
The agreement also specifies that the managing member shall receive an incentive
fee equal to 20% of the total return in dollars. The total return in dollars is
defined by the Agreement as the market value of the Fund at the close of
business on the last day of the quarter minus the market value of the Fund at
the open of business on the first day of the quarter. The incentive fee shall be
payable quarterly in arrears. During the investment period, the incentive fee
shall be payable no more than 50% in cash and at least 50% in newly issued
Units. The incentive fee will be subject to a look-back provision whereby if in
any quarter the total return is negative, the managing member will surrender an
amount of Units whose value is equal to 20% of such negative total return for
that quarter. In no event will the managing member be required to contribute
cash or any other security, including Units purchased by it for cash
consideration, toward the satisfaction of the look-back provision.
Page 3
Continued
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SUTTER OPPORTUNITY FUND 2, LLC
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Notes to Financial Statements
4. Managing Member (continued)
The Fund paid $60,533 in management fees and $28,081 in incentive fees (payable
$14,041 in cash and $14,040 in newly issued units) to the managing member for
the year ended December 31, 2000.
If the non-managing members elect to terminate the Fund earlier than five years
from the end of the investment period under the terms of the agreement, the
managing member is immediately entitled to the management fees it would have
received during the remainder of the five year period following the end of the
investment period. As defined by the Agreement, the investment period began on
August 1, 2000 and ends on August 1, 2003.
Under the terms of the Agreement, the managing member shall bear all ordinary
general and administrative expenses associated with the operation of the Fund,
including but not limited to salaries, rents, overhead, bookkeeping, tax
preparation and reporting. The Fund is responsible for all expenses incurred in
its formation. The Fund is responsible for all extraordinary expenses, taxes and
fees related to its operation, transaction costs associated with making
investments on behalf of the Fund and all legal expenses incurred in its
operation.
5. Allocation of Distributable Cash to Members
Distributable cash received from any source will be allocated to the members in
accordance with the number of Units owned by each of them. The managing member
intends to make quarterly contributions of distributable cash. Distributable
cash, as defined by the agreement means cash available for distributions after
payment of the management fee, the incentive fee, other expenses, reinvestment
of funds, and the establishment of any reserves deemed necessary by the managing
member.
6. Member Capital
At December 31, 2000, 29 members had subscribed 7,350 units. Members have
contributed $3,702,750 as of December 31, 2000. At December 31, 2000, 29 members
had subscribed 7,350 units. Members have contributed $3,702,750 as of December
31, 2000. On January 15, 2001, an additional $1,837,500 was contributed. Members
are committed to contributing an additional $1,837,500 upon two weeks notice by
the managing member.
Page 4
The Board of Directors
Sutter Opportunity Fund 2, LLC
We have audited the accompanying balance sheet of Sutter Opportunity Fund 2, LLC
(the Fund) as of December 31, 2000 and the related statements of income and
comprehensive income, members' equity, and cash flows for the period from
inception (June 1, 2000) through December 31, 2000. These financial statements
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Fund as of December 31,
2000 and the results of its operations and its cash flows for the period from
inception (June 1, 2000) through December 31, 2000 in conformity with generally
accepted accounting principles.
REGALIA & ASSOCIATES
April 1, 2001
Danville, California