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EXHIBIT 99.(a)(1)(A)
OFFER TO PURCHASE FOR CASH
UP TO 10,000 LIMITED PARTNERSHIP UNITS
FOR
$300 NET PER UNIT
OF
AMERICAN RETIREMENT VILLAS PROPERTIES III, L.P.
BY
C3 CAPITAL, LLC
DATED
OCTOBER 4, 2001
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THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON FRIDAY, NOVEMBER 2, 2001 UNLESS THE OFFER IS EXTENDED.
================================================================================
C3 Capital, LLP, a California limited liability company ("C3 Capital") is
offering to purchase up to 10,000 units representing limited partnership
interests ("Units") in American Retirement Villas Properties III, L.P., a
California limited partnership (the "Partnership"), at a net cash price of $300
per Unit less the amount of Distributions (as defined below) per Unit (the
"Purchase Price"), if any, made by the Partnership from the date of the Offer,
(as defined below) until the date on which C3 Capital purchases the Units
tendered pursuant to the Offer.
This Offer is upon the terms set forth in this Offer to Purchase (the
"Offer to Purchase") and in the related Offer To Sell Letter (the "Offer to Sell
Letter"), as each may be supplemented or amended from time to time. Holders of
Units (each a "Unitholder") may accept the Offer and tender all or part of their
Units by following the instructions in this Offer to Purchase and in the
enclosed Offer to Sell Letter. The Offer to Purchase and the Offer to Sell
Letter constitute the "Offer."
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE CERTAIN
CONDITIONS OF THE OFFER, BELOW.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
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IF YOU WISH TO TENDER YOUR UNITS AND RECEIVE THE $300 PER UNIT
PURCHASE PRICE PLEASE COMPLY WITH THE FOLLOWING INSTRUCTIONS.
THIS OFFER TO PURCHASE AND THE ACCOMPANYING OFFER TO SELL LETTER CONTAIN
IMPORTANT INFORMATION AND WE URGE YOU TO READ THEM CAREFULLY.
Any Unitholder desiring to tender Units should complete and sign the Offer
to Sell Letter or a facsimile thereof in accordance with the Instructions in the
Offer to Sell Letter and mail or deliver the Offer to Sell Letter and any other
required documents, to P.H. Holdings Inc., the Exchange Agent in connection with
the Offer.
A Unitholder may tender any or all of the Units owned by that Unitholder.
For a partial tender to be valid, the partnership agreement requires that after
the sale of Units pursuant to the Offer, the Unitholder must continue to hold at
least: (i) 2 Units if the Unitholder is an Individual Retirement Account, a
Keogh or other employee benefit plan (each a "Qualified Plan"), or (ii) 5 Units
if the Unitholder is not a Qualified Plan. Tenders of fractional Units will not
be permitted, except by a Unitholder who is tendering all of the Units owned by
that Unitholder.
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Offer to Sell Letter may be directed to C3 Capital c/o
Vintage Senior Housing LLC at 359 San Miguel Drive, Suite 300, Newport Beach,
California 92660 or by telephone, toll free, at (866) 719-4093.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY
REPRESENTATION ON BEHALF OF C3 CAPITAL OR TO PROVIDE ANY INFORMATION OTHER THAN
AS CONTAINED HEREIN OR IN THE OFFER TO SELL LETTER. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, consent solicitation statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, consent solicitation statements and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. In addition, the
Commission maintains a site on the World Wide Web portion of the Internet that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.gov.
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TABLE OF CONTENTS
Page
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SUMMARY OF OFFER TO PURCHASE................................................ 1
INTRODUCTION OF OFFER TO PURCHASE........................................... 4
THE OFFER................................................................... 6
1. Background of the Offer................................................. 6
2. Purpose and Effect of the Offer......................................... 6
3. Terms of the Offer; Expiration Date; Proration.......................... 9
4. Acceptance for Payment and Payment of Purchase Price.................... 10
5. Procedure to Accept the Offer........................................... 11
6. Determination of Validity; Rejection of Units; Waiver of Defects;
No Obligation to Give Notice of Defects................................. 12
7. Withdrawal Rights....................................................... 13
8. Extension of Tender Period; Termination; Amendment...................... 13
9. Conditions of the Offer................................................. 14
10. Backup Federal Income Tax Withholding................................... 15
11. FIRPTA Withholding...................................................... 16
12. Source of Funds......................................................... 16
13. Certain Legal Matters................................................... 16
14. Fees and Expenses....................................................... 17
15. Miscellaneous........................................................... 17
CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.............................. 18
CERTAIN INFORMATION CONCERNING C3 CAPITAL................................... 20
SCHEDULE I.................................................................. 22
MEMBERS AND MANAGERS OF C3 CAPITAL.......................................... 22
SCHEDULE II................................................................. 23
CERTAIN FEDERAL INCOME TAX MATTERS.......................................... 23
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SUMMARY OF OFFER TO PURCHASE
C3 Capital, LLC is offering to purchase up to 10,000 units of limited
partnership interests in American Retirement Villas Properties III, L.P. for
$300 per unit in cash.
The following are some of the questions that you, as a unit holder and
limited partner of the American Retirement Villas Properties III, L.P. 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 Offer to Sell Letter.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase up to 10,000 units is being made by C3 Capital, LLC. C3
Capital, LLC is a company founded by persons formerly affiliated with the
current managing general partner, one of which was also formerly a general
partner and is now a special limited partner of American Retirement Villas
Properties III, L.P. Neither C3 Capital, LLC nor its affiliates are affiliated
with the current managing general partner of American Retirement Villas
Properties III, L.P. See "Background of the Offer" below.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
C3 Capital, LLC is seeking to purchase up to 10,000 of the units of limited
partnership interest, which are the "Units" issued to investors in American
Retirement Villas Properties III, L.P. See "Terms of the Offer; Expiration Date;
Proration" below.
HOW MUCH IS C3 CAPITAL, LLC OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
C3 Capital, LLC is offering $300 per unit, net to you in cash, less the amount
of any distributions made with respect to the units after September 15, 2001 and
the date the offer expires. The offer price would be reduced by the amount of
distributions made prior to the expiration date of the offer. Any distributions
made after the expiration date of the offer would, by the terms of the offer and
as set forth in the accompanying Offer to Sell Letter, be assigned by tendering
unit holders to C3 Capital, LLC. If you tender your units to C3 Capital, LLC in
the offer, you will not have to pay brokerage fees or similar expenses. See
"Terms of the Offer; Expiration Date; Proration" and "Acceptance for Payment and
Payment of Purchase Price" below
DOES C3 CAPITAL, LLC HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
If the total amount of units sought is purchased, C3 Capital, LLC's capital
commitment will be approximately $3,000,000. The members and affiliates of C3
Capital have agreed to contribute or lend sufficient cash to C3 Capital to
provide the funds required in connection with the Offer. See "Source of Funds"
below.
IS THE FINANCIAL CONDITION OF C3 CAPITAL, LLC RELEVANT TO MY DECISION ON WHETHER
TO TENDER IN THE OFFER?
This is a cash offer that is not conditioned on financing being available, and
C3 Capital, LLC has adequate financial resources. See "Source of Funds" below.
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HOW LONG DO I HAVE TO DECIDE WHETHER TO ACCEPT THE TERMS OF THE OFFER?
You will have at least until 12:00 midnight, New York City time, on Friday,
November 2, 2001, to decide whether to tender your units in the offer. See
"Terms of the Offer; Expiration Date; Proration" below.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
The offer can be extended in C3 Capital, LLC's discretion. See "Extension of
Tender Period; Termination; Amendment" below.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If C3 Capital, LLC extends the offer, it will make a public announcement of the
extension, not later than 9:00 a.m., New York City time, on the day after the
day on which the offer was last scheduled to expire. See "Extension of Tender
Period; Termination; Amendment" below.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There are no conditions to the offer based on minimum units tendered, the
availability of financing or otherwise determined by the success of the offer.
However, C3 Capital, LLC may not be obligated to purchase any units in the event
certain conditions occur, such as legal or government actions which would
prohibit the purchase. Furthermore, C3 Capital, LLC is not obligated to purchase
any units which are validly tendered if, among other things, there is a material
adverse change in the partnership or its business. See "Conditions of the Offer"
below.
HOW DO I SELL MY UNITS?
To sell your units, you must deliver a completed Offer to Sell Letter (printed
on blue paper), to the Exchange Agent at 110 Newport Center Drive, Suite 200,
Newport Beach, California 92660, no later than the time the offer expires, and
C3 Capital must accept your Offer to Sell Letter. Your signature on the Offer to
Sell Letter must be "medallion guaranteed" unless your Units are held in an IRA
or other similar custodial account. See "Procedure to Accept the Offer" below.
WHAT IS A MEDALLION SIGNATURE GUARANTY?
Any firm which is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
can "medallion guarantee" that your signature is valid and binding. All
signatures on the Offer to Sell Letter must be medallion guaranteed by one of
these firms unless your Units are held in an IRA or other similar custodial
account. The most convenient place to get a medallion guaranty will be at your
bank. Generally, banks require that you have an open account and a valid ID to
give a medallion guaranty. See "Procedure to Accept the Offer" below.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED UNITS?
You can withdraw previously tendered units at any time until the offer has
expired and, if C3 Capital, LLC has not agreed to accept your units for payment
by December 3, 2001, you can withdraw them at any time after such time until it
does accept your units for payment. See "Withdrawal Rights" below.
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HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
To withdraw units, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Exchange Agent while you
still have the right to withdraw the units. See "Withdrawal Rights" below.
WHAT DOES THE PARTNERSHIP'S MANAGING GENERAL PARTNER THINK OF THE OFFER?
C3 Capital, LLC has not sought the approval or disapproval of the current
managing general partner of American Retirement Villas Properties III, L.P.
WILL THE PARTNERSHIP CONTINUE AS A PUBLIC COMPANY?
American Retirement Villas Properties III, L.P. reported approximately 1,759
holders of its outstanding units as of December 31, 2000. Unless the total
number of unit holders were to fall below 300, it will continue as a public
reporting company. C3 Capital, LLC does not currently anticipate that the offer
will result in such a reduction in the number of unit holders, though it cannot
now determine the results with any certainty. See "Purpose and Effect of the
Offer" below.
IF I DECIDE NOT TO SELL, HOW WILL THE OFFER AFFECT MY UNITS?
C3 Capital, LLC does not anticipate that units held by non-tendering unit
holders will be affected by the completion of the offer. However, if C3 Capital,
LLC should acquire all of the units sought in the offer, C3 Capital, LLC would
control a large, and potentially controlling, block of units. In addition, if
the offer is successful, C3 Capital, LLC may replace the current managing
general partner with itself which may affect the Partnership and the units. See
"Purpose and Effect of the Offer" below.
WHAT ARE C3 CAPITAL'S PLANS CONCERNING THE PARTNERSHIP?
C3 Capital, LLC is seeking control of American Retirement Villas Properties III,
L.P. and may, if the offer is successful, replace the current managing general
partner with itself, and may change the Partnership's management or operations.
C3 Capital, LLC may seek to terminate the partnership's current property
management agreement and to replace ARV Assisted Living, Inc. with Vintage
Senior Housing, LLC as property manager. Although C3 Capital, LLC does not have
any present intention to take action in connection with the liquidation of
American Retirement Villas Properties III, L.P., C3 Capital, LLC reserves the
right, at an appropriate time, to exercise its rights as limited partner to vote
on matters subject to a limited partner vote, including any vote affecting the
sale of properties or the liquidation and dissolution of American Retirement
Villas Properties III, L.P. See "Purpose and Effect of the Offer" below.
WHAT IS THE MARKET VALUE OF MY UNITS?
There is currently no established public trading market for the units and it is
not anticipated that a public market for the units will develop. Bid prices
quoted by partnership exchanges vary widely and are not considered a reliable
indication of market value. See "Purpose and Effect of the Offer" below.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call C3 Capital, LLC, toll free, at (866) 719-4093.
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To: Unitholders of American Retirement Villas Properties III, L.P.
INTRODUCTION OF OFFER TO PURCHASE
C3 Capital, LLC, a California limited liability company ( "C3 Capital"),
hereby offers to purchase up to10,000 units of limited partnership interests
("Units") in American Retirement Villas Properties III, L.P., a California
limited partnership (the "Partnership"), at a net cash purchase price of $300
per Unit less the amount of Distributions (as defined below) per Unit, if any,
made by the Partnership (the "Purchase Price") from the date of the Offer (as
defined below), until the date on which C3 Capital purchases the Units tendered
pursuant to the Offer. This Offer is on the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Offer to Sell Letter, as
either may be supplemented or amended from time to time (respectively, the
"Offer to Purchase" and the "Offer to Sell Letter"), and which together
constitute the "Offer." Unitholders of the Partnership ("Unitholders") who
tender their Units will not be obligated to pay any commissions or partnership
transfer fees on the purchase of Units pursuant to the Offer; those fees and
taxes will be paid by C3 Capital. C3 Capital will pay all charges and expenses
of P.H. Holdings, Inc. (the "Exchange Agent"), in connection with the Offer.
A Unitholder may tender any or all of the Units owned by that Unitholder.
The partnership agreement requires, however, that if the Unitholder desires to
tender less than all of its Units and (a) if the Unitholder is an Individual
Retirement Account, a Keogh or other employee benefit plan (each a "Qualified
Plan"), then the Unitholder must retain at least 2 Units, or (b) if the
Unitholder is not a Qualified Plan, then the Unitholder must retain at least 5
Units. Tenders of fractional Units will not be permitted except by a Unitholder
who is tendering all of the Units owned by that Unitholder. The number of Units
subject to the Offer may be reduced to the extent necessary to cause the number
of Units purchased in the offer, when added to the number of all other Units
transferred within the 12 months preceding the closing of the Offer, to not
equal or exceed 50% of the outstanding Units. The Managing Partner may refuse to
recognize the transfer of Units in excess of this amount under the partnership
agreement.
According to the Partnership's Form 10-Q for the quarter ended June 30,
2001, the Partnership has outstanding 18,666 Units. C3 Capital and its
affiliates do not currently own any Units.
In considering the Offer, Unitholders may wish to consider the following:
o The Partnership's publicly filed documents state that there is no
established trading market for the Units. Consequently, the Offer
presents an opportunity to dispose of Units for a cash price that
might not be available otherwise.
o This Offer is 20% higher than the most recent tender offer for the
Units announced in mid-2001.
o The managing general partner has stated that it currently has no
intent to liquidate the Partnership properties. This Offer gives
Unitholders an opportunity to have increased liquidity in the near
term.
o C3 Capital is making the Offer with a view to making a profit for
itself. Accordingly, there is a conflict between the desire of C3
Capital to purchase Units at a favorable price to them and the desire
of the Unitholders to sell their Units at a favorable price to them.
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o Based solely on financial and other information relating to the
Partnership that is publicly available in its reports filed with the
Securities and Exchange Commission (the "Commission"), C3 Capital,
solely for consideration with other information in connection with
preparing a bid, estimated the net book value per Unit to be
approximately $105 as of June 30, 2001. C3 CAPITAL HAS NOT INSPECTED
THE PARTNERSHIP'S PROPERTIES AND HAS NO INDEPENDENT BASIS WHATSOEVER
FOR DETERMINING THE ACCURACY OR COMPLETENESS OF THE PARTNERSHIP'S
PUBLICLY FILED FINANCIAL INFORMATION OR FOR DETERMINING TO WHAT
EXTENT, IF ANY, THE ESTIMATED NET ASSET VALUE SET FORTH ABOVE
REPRESENTS THE TRUE NET ASSET VALUE OF EACH UNIT.
o The Offer allows Unitholders to dispose of their Units without
incurring the sales commissions or transfer fees typically associated
with transfers of Units arranged through brokers or other
intermediaries. Taxable Unitholders who sell all of their Units will
also eliminate the need to report form K-1 information for the
Partnership with their federal tax returns for years after 2001.
o If C3 Capital becomes the registered owner of sufficient Units, C3
Capital will be able to significantly influence or possibly determine
all voting decisions with respect to the Partnership, including, among
other things, decisions concerning liquidation, termination,
amendments to the partnership agreement and removal and replacement of
the current managing general partner.
o The Offer is a near term opportunity for Unitholders to liquidate
their investments in the Partnership, but Unitholders who tender their
Units will be giving up the opportunity to participate in any
potential future benefits from ownership of Units, including, for
example, the right to sell the Units later at a possibly higher price
and the right to participate in any future Distributions (defined
below), whether from operations or the proceeds of a sale of one or
more of the facilities in which the Partnership has an interest.
Considerations other than those identified, such as investment and tax
considerations, exist which should be weighed in deciding whether to offer to
sell your shares pursuant to this Offer. UNITHOLDERS ARE ADVISED TO READ THIS
ENTIRE OFFER TO PURCHASE CAREFULLY AND TO CONSULT WITH THEIR INVESTMENT AND TAX
ADVISORS BEFORE MAKING A DECISION WHETHER OR NOT TO TENDER UNITS. Each
Unitholder must make its own decision, based on the Unitholder's particular
circumstances, whether to tender Units and, if so, how many Units to tender.
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THE OFFER
1. BACKGROUND OF THE OFFER. The Partnership, which is more fully described
in "CERTAIN INFORMATION CONCERNING THE PARTNERSHIP" below, was formed in 1989.
It currently owns and operates two residential facilities for senior citizens
(the "Properties"). It was originally projected that the Properties would be
held for five to seven years.
At the time the Partnership was formed, the persons who now control C3
Capital were officers and directors of ARV Assisted Living, Inc. ("ARVAL"),
which sponsored the Partnership, and made up a significant portion of ARVAL's
management team. Mr. Gary L. Davidson is a 25% member of C3 Capital, and was the
Chairman, President, Chief Executive Officer and a significant stockholder of
ARVAL and a general partner of the Partnership. Mr. Graham Espley-Jones controls
BonGate LLC, a 25% member of C3 Capital, and was Executive Vice President, Chief
Financial Officer and a significant stockholder of ARVAL. Mr. Eric K. Davidson
jointly with Mr. Brian J. Flornes controls Vintage Senior Housing, LLC, a 50%
member of C3 Capital, and was the Senior Vice President of Acquisitions for
ARVAL. Mr. Flornes was the Vice President of Development for ARVAL.
The individual general partners of the Partnership at the time it was
formed were Mr. Gary L. Davidson, Mr. John A. Booty, Mr. David P. Collins, Mr.
John S. Jason and Mr. Tony Rota, all of whom were affiliated with ARVAL.
Currently, only Mr. Collins is affiliated with ARVAL.
In 1997, Mr. Gary L. Davidson resigned as an officer of ARVAL, and early in
1998 he sold his stock interest in ARVAL. Messrs. Graham Espley-Jones, Eric K.
Davidson and Brian J. Flornes resigned from ARVAL in 1998.
In 2000, Mr. Gary L. Davidson, and several others resigned as general
partners of the Partnership and are now special limited partners.
In December 2000, Vintage Senior Housing, LLC purchased one of the
Partnerships properties from the Partnership. This purchase by Vintage Senior
housing, LLC resulted in a significant distribution to the Unitholders.
2. PURPOSE AND EFFECT OF THE OFFER.
Purpose. C3 Capital is seeking to acquire Units pursuant to the Offer in
order to acquire a substantial equity interest in the Partnership, primarily for
investment and with a view to making a profit for itself and to allow it to
influence the activities of the Partnership. If successful in acquiring the
10,000 Units pursuant to the Offer, C3 Capital will beneficially own
approximately 54% of the outstanding Units of the Partnership at the conclusion
of the Offer. Following completion of the Offer, C3 Capital and persons related
to or affiliated with C3 Capital may acquire additional Units. Any such
acquisition may be made through private purchases, through one or more future
tender or exchange offers or by any other means deemed advisable by C3 Capital
in its sole discretion. Any such acquisition may be at a price higher or lower
than the price to be paid for the Units purchased pursuant to the Offer, and may
be for cash or other consideration. C3 Capital also may consider selling some or
all of the Units it acquires pursuant to the Offer, either directly or by a sale
of one or more interests in C3 Capital itself, depending among other things on
liquidity, strategic, tax and other considerations.
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If C3 Capital is successful in acquiring the Units it is tendering for
pursuant to the Offer, it intends to conduct a review of the Partnership and the
Partnership's assets, operations, properties, management and personnel and to
consider what, if any, recommendations, suggestions, actions or changes C3
Capital believes would be desirable in connection with the Partnership in light
of the circumstances which then exist. Such matters will include seeking to
replace the current managing general partner with itself and may include seeking
to replace the current manager of the Properties with Vintage Senior Housing,
LLC. Such matters or other possible transactions involving the Partnership could
also include, but are not limited to: (i) acquiring or selling assets, including
selling any or all of the Properties or the Partnership's interest in other
assets; (ii) reviewing or changing the frequency of cash distributions from the
Partnership to the Unitholders or reducing the amount of reserves held by the
Partnership through cash distributions to the Unitholders; and, (iii)
considering a merger or other consolidation transaction with the Partnership or
a liquidation of the Partnership. If any such transaction is effected by the
Partnership and financial benefits accrue to the Unitholders, C3 Capital and its
affiliates will participate in those benefits to the extent of their ownership
of the Units.
Except as set forth in this Offer to Purchase, C3 Capital has no present
plans or proposals that would result in an extraordinary corporate transaction,
such as a merger, reorganization, liquidation, reallocation of operations or
sale or transfer of assets involving the Partnership or any material changes in
the Partnership's structure, business or composition of its management or
personnel.
Limitations on Resales. The partnership agreement provides the managing
general partner the discretion to defer the transfer and registration of Units
if, among other things, a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a termination of the
Partnership for federal income tax purposes (which termination may occur when 50
percent or more of the Units are transferred in a twelve-month period). This
provision may limit sales of Units on the secondary market and in private
transactions for the twelve-month period following completion of the Offer.
Accordingly, the Partnership may decide not to recognize any requests for
recognition of a transferee Unitholder upon a transfer of Units during such
twelve-month period if the managing general partner believes the transfers would
cause a tax termination of the Partnership. C3 Capital may reduce the number of
Units subject to the Offer to the extent necessary to cause the number of Units
purchased in the Offer, when added to the number of all other Units transferred
within the 12 months preceding the closing of the Offer, to not equal or exceed
50% of the outstanding Units. If the Offer is successful, any additional
attempts to transfer Units by any party, including C3 Capital, in the twelve
months immediately following completion of the Offer may be limited by the
current managing general partner pursuant to this provision. Since C3 Capital
believes that the transfer of additional Units would not cause adverse tax
consequences to holders of Units, it does not intend to restrict transfers of
Units should it become the managing general partner.
Effect on Trading Market; Registration Under Section 12(g) of the Exchange
Act. If a substantial number of Units are purchased pursuant to the Offer, the
result will be a reduction in the number of Unitholders. A reduction in the
number of holders might be expected to result in a reduction in the liquidity
and volume of activity in the trading market for the Units; however, according
to public documents filed by the Partnership, there is no established public
trading market for the Units and, therefore, C3 Capital does not believe a
reduction in the number of Unitholders will materially further restrict the
Unitholders' ability to find purchasers for their Units through secondary market
transactions.
The Units are currently registered under the Exchange Act. Such
registration may be terminated upon application to the Commission if the Units
are not listed on a national securities exchange and there are fewer than 300
record holders. Termination of registration under the Exchange Act would
substantially reduce the information required to be furnished by the Partnership
to its Unitholders and to the Commission and would make inapplicable to the
Partnership certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement to furnish proxy
statements in connection with Unitholders' meetings pursuant to Section 14(a),
and the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, if C3 Capital acquires a substantial number
of Units, the ability of "affiliates" of the Partnership and persons
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holding "restricted securities" of the Partnership to dispose of such securities
pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as
amended, may be impaired or eliminated. If, as a result of the purchase of Units
pursuant to the Offer, the Partnership is no longer required to maintain
registration of the Units under the Exchange Act, C3 Capital or its affiliates
plan to seek to cause the Partnership to apply for termination of such
registration.
Control of Unitholder Voting Decisions by C3 Capital. The partnership
agreement provides that a transferee of Units will not be recognized as an
assignee Unitholder unless and until the transfer is accepted and recorded by
the Partnership's managing general partner. C3 Capital will seek to be listed on
the books and records of the Partnership as the registered owner of the tendered
and purchased Units upon or as soon as possible following consummation of the
Offer and, if and when so listed, will have the right to vote each Unit
purchased pursuant to the Offer in accordance with the partnership agreement.
Nevertheless, until and regardless of whether C3 Capital is listed on the books
and records of the Partnership as the registered owner of the Units purchased
hereunder, C3 Capital will have the right to determine the vote of each Unit
purchased in the Offer because the sale documents include the irrevocable
appointment by selling Unitholders of C3 Capital, its officers and designees as
proxies with respect to the Units tendered by such Unitholders and accepted for
payment by C3 Capital. As a result, C3 Capital will be in a position to
influence significantly or determine all voting decisions of Unitholders with
respect to the Partnership. This could (i) prevent non-tendering Unitholders
from taking action they desire but that C3 Capital opposes and (ii) enable C3
Capital to take action desired by C3 Capital but opposed by non-tendering
Unitholders. Under the partnership agreement, Unitholders holding a majority of
the Units are entitled to vote the limited partnership interests correlating to
such Units to take action with respect to a variety of matters, including
removal of the managing general partner, dissolution and termination of the
Partnership, and approval of most types of amendments to the partnership
agreement.
Certain Federal Income Tax Matters. The following summary is a general
discussion of certain of the federal income tax consequences of a sale of Units
pursuant to the Offer. The summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), applicable Treasury regulations thereunder,
administrative rulings, and judicial authority, all as of the date of the Offer.
All of the foregoing are subject to change, and any such change could affect the
continuing accuracy of this summary. This summary does not discuss all aspects
of federal income taxation that may be relevant to a particular Unitholder in
light of such Unitholder's specific circumstances or to certain types of
Unitholders subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks, insurance companies and
tax-exempt organizations), nor (except as otherwise expressly indicated) does it
describe any aspect of state, local, foreign or other tax laws. Sales of Units
pursuant to the Offer will be taxable transactions under applicable state,
local, foreign and other tax laws. For a discussion of additional federal income
tax matters, Unitholders are urged to review "SCHEDULE II" below. UNITHOLDERS
SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO EACH SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
Section 708(b) of the Code (and related Treasury Department regulations)
provides that a partnership terminates for federal income tax purposes if there
is a sale or exchange of 50% or more of the total interests in the partnership
capital and profits within a twelve-month period. Accordingly, it is possible
that transfers made pursuant to the successful completion of the Offer combined
with others transfers within a twelve-month period could cause a termination of
the Partnership for income tax purposes. In the event of a termination, the
Partnership would be treated for income tax purposes as if it had contributed
its assets to a new partnership in exchange for an interest in the new
partnership and immediately thereafter the terminated partnership distributed
its interests in the new partnership in liquidation. The termination will not
result in the recognition of current gain or loss by the partners. As a result
of the termination the partnership tax year will close and prior elections with
respect to the partnership may be invalidated.
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The "new" partnership created upon the deemed recontribution of assets by
the partners would be treated as having acquired its assets on the date of the
deemed recontribution. A new depreciation recovery period would begin on such
date, and the Partnership would be required to depreciate its properties over a
greater period of time than is currently being used; accordingly, the aggregate
present value of the Partnership's future depreciation deductions would be
reduced. In addition, a Section 708(b) termination of the Partnership could
require the Partnership to make certain complex allocations (pursuant to
Sections 737 and 704(c) of the Code) of future Partnership income and loss to
take into account the amount of gain or loss inherent in each partner's share of
each asset that is deemed to have been recontributed to the Partnership
following the Section 708(b) termination.
Pursuant to income tax regulations proposed by the Treasury Department on
May 11, 1996 (the "Proposed Regulations"), the income tax treatment of Section
708(b) partnership terminations would be substantially modified. The Proposed
Regulations would deem a Section 708(b) termination to cause the terminating
partnership to contribute its assets to a new partnership, followed by a
liquidating distribution of interests in the new partnership to the partners of
the terminating partnership. The changes contained in the Proposed Regulations
would eliminate the possibility of gain recognition by the partners in the
terminating partnership and would eliminate the necessity of computing the
complex allocations required by Section 704(c) and Section 737. The change in
the depreciable lives of partnership property held by the terminating
partnership described in the preceding paragraph would continue to occur under
the Proposed Regulations.
The Proposed Regulations will be effective when they are published as final
regulations in the Federal Register. Although an earlier effective date of these
or similar regulations governing Section 708(b) terminations is possible, all
Partners should assume that the existing Section 708(b) regulations (rather than
the Proposed Regulations) will apply to a termination of the Partnership
incident to the Offer.
3. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. On the terms and subject
to the conditions of the Offer, C3 Capital will accept and purchase up to 10,000
Units that are validly tendered in accordance with the procedures set forth in
"Procedure to Accept the Offer" below prior to the Expiration Date and not
withdrawn in accordance with the procedures set forth in "Withdrawal Rights"
below. For purposes of the Offer, the term "Expiration Date" means 12:00
Midnight, New York City time on Friday, November 2, 2001, unless C3 Capital in
its sole discretion extends the period of time during which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as extended by C3 Capital, shall expire. See "Extension of
Tender Period; Termination; Amendment" below for a description of C3 Capital's
right to extend the period of time during which the Offer is open and to amend
or terminate the Offer.
If, prior to the Expiration Date, C3 Capital increases the Purchase Price
offered to the Unitholders pursuant to the Offer, the increased Purchase Price
will be paid for all Units accepted for payment pursuant to the Offer, whether
or not the Units were tendered prior to the increase in consideration.
In response to the Offer, the managing general partner may pay out to
Unitholders that amount of the Partnership's cash balances not required for its
ordinary course day-to-day operations (a "Distribution"). If so, the Purchase
Price will be reduced accordingly.
If more than 10,000 Units are validly tendered in accordance with the
procedures specified in "Procedure to Accept the Offer" below and not properly
withdrawn in accordance with the procedures specified in "Withdrawal Rights"
below on or prior to the Expiration Date, C3 Capital will, upon the
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terms and subject to the conditions of the Offer, take into account the number
of Units so tendered, accept for payment and pay for an aggregate of 10,000
Units, pro rata, according to the number of Units validly tendered by each
Unitholder and not properly withdrawn on or prior to the Expiration Date, with
appropriate adjustments to avoid purchases of fractional Units, and purchases
that would cause a Unitholder who sells less than all of its Units to continue
to hold less than 2 Units if the Unitholder is a Qualified Plan or less than 5
Units if the Unitholder is not a Qualified Plan. If the number of Units validly
tendered and not properly withdrawn on or prior to the Expiration Date is less
than or equal to 10,000 Units, C3 Capital will purchase all Units so tendered
and not withdrawn, upon the terms and subject to the conditions of the Offer;
provided, however, that the number of Units subject to the Offer may be reduced
to the extent necessary to cause the number of Units purchased in the offer,
when added to the number of all other Units transferred within the 12 months
preceding the closing of the Offer, to not equal or exceed 50% of the
outstanding Units. The managing general partner may refuse to recognize the
transfer of Units in excess of this amount under the Partnership's limited
partnership agreement. If the managing general partner refuses to recognize the
transfer of Units, C3 Capital may not be able to announce the final results of
the Offer. Subject to C3 Capital's obligations under Rule 14e-1(c) under the
Exchange Act, to pay Unitholders the Purchase Price in respect of Units tendered
or return those Units promptly after the termination or withdrawal of the Offer,
C3 Capital does not intend to accept and pay for any Units pursuant to the Offer
until it is known whether the managing general partner is going to recognize the
transfer.
If proration of tendered Units is required, C3 Capital may not be able to
announce the final results of the proration until at least approximately ten
business days after the Expiration Date because of the difficulty of determining
the proration results. Subject to C3 Capital's obligation under Rule 14e-1(c)
under the Exchange Act, to pay Unitholders the Purchase Price in respect of
Units tendered or return those Units promptly after the termination or
withdrawal of the Offer, C3 Capital does not intend to pay for any Units
accepted for payment pursuant to the Offer until the final proration or other
adjustment results are known. NOTWITHSTANDING ANY SUCH DELAY IN PAYMENT, NO
INTEREST WILL BE PAID ON THE PURCHASE PRICE.
The Offer is conditioned upon satisfaction of the conditions set forth in
"Conditions of the Offer" below.
C3 Capital reserves the right (but in no event shall be obligated), in its
sole discretion, to waive any or all of those conditions. If on or prior to the
Expiration Date any or all of the conditions have not been satisfied or waived,
C3 Capital reserves the right to: (i) decline to purchase any of the Units
tendered, terminate the Offer and return all tendered Units, (ii) waive the
unsatisfied conditions and, subject to complying with applicable rules and
regulations of the Commission, purchase all Units validly tendered, (iii) extend
the Offer and, subject to the right of Unitholders to withdraw Units until the
Expiration Date, retain the Units that have been tendered during the period or
periods for which the Offer is extended, and (iv) amend the Offer.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT OF PURCHASE PRICE. On the terms and
subject to the conditions of the Offer, C3 Capital will purchase and will pay
for all Units validly tendered in accordance with the procedures set forth in
"Procedure to Accept the Offer" below and not withdrawn in accordance with the
procedures specified in "Withdrawal Rights" below, as promptly as practicable
following the Expiration Date. For Units whose registered owner is a Qualified
Plan, payment will be made to the custodian of such account or plan. In all
cases, payment for Units purchased pursuant to the Offer will be made only after
timely receipt by the Exchange Agent of: (i) a properly completed and duly
executed Offer to Sell Letter (or facsimile thereof), together with all required
medallion signature guaranties, and (ii) any other documents required in
accordance with the Offer to Sell Letter. Unitholders should carefully read and
comply with the procedures and requirements in the Offer to Sell Letter.
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UNDER NO CIRCUMSTANCE WILL INTEREST ON THE PURCHASE PRICE BE PAID,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Units are not purchased for any reason (other than pro rata
adjustments), the original Offer to Sell Letter with respect to the Units may be
destroyed by the Exchange Agent (in accordance with its customary practice). If
for any reason acceptance of payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or C3 Capital is unable to accept for payment,
purchase or pay for Units tendered (i.e., tenders subject to proration), then,
without prejudice to C3 Capital's rights under "Determination of Validity;
Rejection of Units; Waiver of Defects; No Obligation to Give Notice of Defects"
below, the Exchange Agent may, nevertheless, on behalf of C3 Capital, retain
tendered Units, and those Units may not be withdrawn except to the extent that
the tendering Unitholders are entitled to withdrawal rights as described in
"Withdrawal Rights" below; subject, however, to C3 Capital's obligation under
Rule 14e-1(c) under the Exchange Act to pay Unitholders the Purchase Price in
respect of Units tendered.
C3 Capital reserves the right to transfer or assign, in whole or from time
to time in part, the right to purchase Units tendered pursuant to the Offer, but
any such transfer or assignment will not relieve C3 Capital of its obligations
under the Offer or prejudice the rights of tendering Unitholders to receive
payment for Units validly tendered and accepted for payment pursuant to the
Offer.
5. PROCEDURE TO ACCEPT THE OFFER.
Valid Tender. For Units to be validly tendered the Exchange Agent must
receive, on or prior to the Expiration Date, a properly completed and duly
executed Offer to Sell Letter, together with all required medallion signature
guarantees, and any other documents required by the Offer to Sell Letter.
A Unitholder may tender any or all of that Unitholder's Units; provided,
however, if the Unitholder desires to tender less than all of its Units and (a)
if the Unitholder is a Qualified Plan, then the Unitholder must retain at least
2 Units, or (b) if the Unitholder is not a Qualified Plan, then the Unitholder
must retain at least 5 Units. No alternative, conditional or contingent tenders
will be accepted and no fractional Units will be purchased, except for
fractional Units owned by a Unitholder who is tendering all of its Units.
Signature Guarantees. All signatures on the Offer to Sell Letter must be
medallion guaranteed unless the tendered Units are held in a Qualified Plan. A
medallion guaranty can be given by any bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. (each an "Eligible Institution"). For example, if a
Unitholder holds his Units in his own name, and not in an IRA or other similar
custodial account, when that Unitholder signs his Offer to Sell Letter, he must
be in the presence of an authorized representative of a medallion guaranty such
as Wells Fargo Bank or Bank of America. See Instructions 1 and 4 of the Offer to
Sell Letter.
If you have any questions concerning this signature guarantee requirement,
or would like any help finding an Eligible Institution in your area, please call
C3 Capital, toll free, at (866) 719-4093.
If the Units are registered in the name of a person other than the signer
of the Offer to Sell Letter, or if payment is to be made to a person other than
the registered owner, then the Offer to Sell Letter must be accompanied by duly
executed unit powers, signed exactly as the name or names of the registered
owner or owners appear on the transfer books of the Partnership. The signature
on the unit powers must be guaranteed by an Eligible Institution as provided
above. See Instructions 1 and 4 of the Offer to Sell Letter.
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If you have any questions concerning a unit power, or would like a copy of
a unit power form, please call C3 Capital, toll free, at (866) 719-4093.
IN ALL CASES, NOTWITHSTANDING ANY OTHER PROVISION HEREOF, PAYMENT FOR UNITS
ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER WILL BE MADE ONLY AFTER TIMELY
RECEIPT BY THE EXCHANGE AGENT OF A PROPERLY COMPLETED AND DULY EXECUTED OFFER TO
SELL LETTER, ALL REQUIRED MEDALLION SIGNATURE GUARANTEES AND ANY OTHER DOCUMENTS
REQUIRED BY THE OFFER TO SELL LETTER. ACCORDINGLY, PAYMENT MAY BE MADE TO
TENDERING UNITHOLDERS AT DIFFERENT TIMES IF THESE DOCUMENTS ARE DELIVERED AT
DIFFERENT TIMES. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE UNITS TO BE PAID BY C3 CAPITAL, REGARDLESS OF ANY DELAY IN MAKING
SUCH PAYMENT AFTER THE DATE OF ACCEPTANCE FOR PAYMENT.
Delivery of Offer to Sell Letter. The method of delivery of the Offer to
Sell Letter and all other required documents is at the option and risk of the
tendering Unitholder, and delivery will be deemed made only when actually
received by the Exchange Agent. Tendering Unitholders should allow sufficient
time to assure timely delivery.
Appointment as Proxy. By executing and delivering an Offer to Sell Letter,
a tendering Unitholder irrevocably appoints C3 Capital, or any other designee of
C3 Capital, the attorneys-in-fact and proxies of the Unitholder, in the manner
set forth in the Offer to Sell Letter, each with full power of substitution, to
the full extent of the Unitholder's rights with respect to the Units tendered by
the Unitholder and accepted for payment by C3 Capital (and with respect to any
and all distributions, other Units, rights or other securities issued or
issuable in respect thereof). All such proxies will be considered coupled with
an interest in the tendered Units, are irrevocable and are granted in
consideration of, and are effective upon, the acceptance for payment of the
Units by C3 Capital in accordance with the terms of the Offer. Upon acceptance
for payment, all prior powers of attorney and proxies given by the Unitholder
with respect to the Units and Distributions will, without further action, be
revoked, and no subsequent powers of attorney and proxies may be given (and, if
given, will be without force or effect). The designees of C3 Capital will, with
respect to the Units for which the appointment is effective, be empowered to
exercise all voting and other rights of the Unitholder as they in their sole
discretion may deem proper at any meeting of the Partnership or any adjournment
or postponement thereof. In order for Units to be deemed validly tendered,
immediately upon C3 Capital's acceptance for payment of the Units, C3 Capital or
its designee must be able to exercise full voting rights with respect to the
Units, including voting at any meeting of the Partnership's limited partners or
Unitholders.
Assignment of Interest in Future Distributions. By executing and delivering
an Offer to Sell Letter, a tendering Unitholder irrevocably assigns to C3
Capital and its assigns all of the right, title and interest of the Unitholder
in and to any and all Distributions made by the Partnership from and after the
expiration of the Offer with respect to the Units accepted for payment and
thereby purchased by C3 Capital.
6. DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions about the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Units pursuant to the Offer will be determined by C3 Capital, in its sole
discretion, which determination will be final and binding. C3 Capital reserves
the absolute right to reject any or all tenders of any particular Units
determined by it not to be in proper form or if the acceptance of or payment for
those Units may, in the opinion of C3 Capital's counsel, be unlawful. C3 Capital
also reserves the absolute right to waive or amend any of the conditions of the
Offer that it is
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legally permitted to waive and to waive any defect in any tender with respect to
any particular Units. C3 Capital's interpretation of the terms and conditions of
the Offer (including the Offer to Sell Letter) will be final and binding. No
tender of Units will be deemed to have been validly made until all defects have
been cured or waived. Neither C3 Capital, the Exchange Agent nor any other
person will be under any duty to give notification of any defects in the tender
of any Units or will incur any liability for failure to give any such
notification.
A tender of Units pursuant to the procedure described above and the
acceptance for payment of such Units will constitute a binding agreement between
the tendering Unitholder and C3 Capital on the terms set forth in the Offer.
C3 Capital will be deemed to have accepted for payment pursuant to this
Offer, and thereby purchased, validly tendered Units if, as and when C3 Capital
gives written notice to the Exchange Agent of C3 Capital's acceptance of those
Units. Payment for Units accepted for payment pursuant to the Offer will be made
by deposit of the Purchase Price with the Exchange Agent, which will act as
agent for tendering Unitholders for the purpose of receiving payments from C3
Capital and transmitting those payments to Unitholders whose Units have been
accepted for payment.
7. WITHDRAWAL RIGHTS. Tenders of Units made pursuant to the Offer are
irrevocable, except that Units tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless already accepted for
payment by C3 Capital pursuant to the Offer, may also be withdrawn at any time
after December 3, 2001. If purchase of, or payment for, Units is delayed for any
reason, including extension by C3 Capital of the Expiration Date, or if C3
Capital is unable to purchase or pay for Units for any reason then, without
prejudice to C3 Capital's rights under the Offer, tendered Units may be retained
by the Exchange Agent and may not be withdrawn, except to the extent that
tendering Unitholders are entitled to withdrawal rights as set forth in this
section; subject, however, to C3 Capital's obligation, pursuant to Rule 14e-1(c)
under the Exchange Act, to pay Unitholders the Purchase Price in respect of
Units tendered.
For withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at 110 Newport
Center Drive, Suite 200, Newport Beach, California 92660. Any notice of
withdrawal must specify the name of the person(s) who tendered the Units to be
withdrawn and must be signed by the person(s) who signed the Offer to Sell
Letter in the same manner as the Offer to Sell Letter was signed. Any Units
properly withdrawn will be deemed not validly tendered for purposes of the
Offer. Withdrawn Units may be re-tendered, however, by following the procedures
described in "Procedure to Accept the Offer" above at any time prior to the
Expiration Date.
All questions about the validity and form (including time of receipt) of
notices of withdrawal will be determined by C3 Capital, in its sole discretion,
which determination shall be final and binding. Neither C3 Capital, the Exchange
Agent nor any other person will be under any duty to give notice of any defects
in any notice of withdrawal or incur any liability for failure to give any such
notice.
8. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. C3 Capital expressly
reserves the right, in its sole discretion, at any time and from time to time:
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Units, (ii) to
terminate the Offer and not accept for payment any Units not already accepted
for payment, (iii) upon the occurrence of any of the conditions specified in
"Conditions of the Offer" below, to delay the acceptance for payment of, or
payment for, any Units not already accepted for payment or paid for, and (iv) to
amend the Offer in any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units being
sought, or both). Notice of any such
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extension, termination or amendment will promptly be disseminated to Unitholders
in a manner reasonably designed to inform Unitholders of such change in
compliance with Rule 14d-4(c) under the Exchange Act. In the case of an
extension of the Offer, the extension will be followed by a press release or
public announcement which will be issued no later than 9:00 a.m. New York City
time, on the next business day after the scheduled Expiration Date, in
accordance with Rule 14e-1(d) under the Exchange Act.
9. CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer, C3
Capital will not be required to accept for payment or to pay for any Units
tendered if all authorizations, orders or expirations of waiting periods imposed
by any court, administrative agency or other governmental authority, domestic or
foreign, necessary for the consummation of the transactions contemplated by the
Offer shall not have occurred or been filed, or obtained. Furthermore,
notwithstanding any other term of the Offer and in addition to C3 Capital's
right to withdraw the Offer at any time before the Expiration Date, C3 Capital
will not be required to accept for payment or pay for any Units, or may delay
the acceptance for payment of the Units tendered if at any time on or after the
date of the Offer and before the acceptance of such Units for payment or the
payment therefor, any of the following conditions exists:
(a) a preliminary or permanent injunction or other order of any
federal or state court, government or governmental agency shall have been issued
and shall remain in effect which: (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment, purchase of or payment for any Units by C3 Capital, (ii)
imposes or confirms limitations on the ability of C3 Capital effectively to
exercise full rights of both legal and beneficial ownership of the Units,
including, without limitation, the right to instruct the Partnership's limited
partners to vote the Units acquired by C3 Capital pursuant to the Offer or
otherwise on all matters properly presented to the Partnership's Unitholders,
(iii) requires divestiture by C3 Capital of any Units, (iv) causes any material
diminution of the benefits to be derived by C3 Capital as a result of the
transactions contemplated by the Offer, (v) might materially adversely affect
the business, properties, assets, liabilities, financial condition, operations,
results of operations or prospects of C3 Capital or the Partnership, or (vi)
seeks to impose any material condition to the Offer unacceptable to C3 Capital;
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental authority
or agency, including a conclusion that the Hart-Scott-Rodino Antitrust
Improvements Action of 1976, as amended, applies which might, directly or
indirectly, result in any of the consequences referred to in clauses (i) through
(vi) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date of the Offer to Purchase, in the business, properties, assets,
liabilities, financial condition, operations, results of operations or prospects
of the Partnership, which is or may be materially adverse to the Partnership, or
C3 Capital shall have become aware of any fact that does or may have a material
adverse effect on the value of the Units or the Properties;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in the United States or other currency exchange rates or a suspension of
a limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof;
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(e) the managing general partner and/or the limited partners of the
Partnership shall have failed or refused to take all other action that C3
Capital deems necessary, in C3 Capital's judgment, for C3 Capital to be the
registered owner of the Units tendered and accepted for payment hereunder
simultaneously with the consummation of the Offer or as soon thereafter as is
permitted under the partnership agreement as in accordance with the partnership
agreement and applicable law;
(f) the managing general partner and/or the limited partners of the
Partnership shall have failed or refused to furnish C3 Capital such information
as is necessary, in C3 Capital's judgment, to verify that the person purporting
to transfer Units to C3 Capital pursuant to the Offer is in fact the registered
owner of the Units;
(g) the managing general partner or the Unitholders shall have caused
the Partnership to impose unreasonable transfer, substitution or similar fees,
including, without limitation, those that would otherwise apply to: (i) the
tender of Units by holders pursuant to the Offer, (ii) the transfer of such
Units to C3 Capital and (iii) the addition of C3 Capital as a registered owner
of the Units;
(h) the Partnership shall have (i) issued, or authorized or proposed
the issuance of, any partnership interests of any class, or any securities
convertible into, or rights, warrants or options to acquire, any such interests
or other convertible securities, (ii) issued or authorized or proposed the
issuance of any other securities, in respect of, in lieu of, or in substitution
for, all or any of the presently outstanding Units, (iii) declared or paid any
Distribution, other than in cash, on any of the Units, or (iv) the Partnership
or the managing general partner shall have authorized, proposed or announced its
intention to propose any merger, consolidation or business combination
transaction, acquisition of assets, disposition of assets or material change in
its capitalization, or any comparable event not in the ordinary course of
business;
(i) the managing general partner shall have modified, or taken any
step or steps to modify, in any way, the procedures or regulations applicable to
the registration of Units or transfers of Units on the books and records of the
Partnership or the admission of transferees of Units as registered owners and as
Unitholders; or
(j) it shall have been publicly disclosed or C3 Capital shall have
otherwise learned that more than five percent of the outstanding Units have been
or are proposed to be acquired by another person (including a "group" within the
meaning of Section 13(d)(3) of the Exchange Act).
The foregoing conditions are for the sole benefit of C3 Capital and may be
(but need not be) asserted by C3 Capital regardless of the circumstances giving
rise to such conditions or may be waived by C3 Capital in whole or in part at
any time and from time to time in its sole discretion. Any determination by C3
Capital concerning the events described above will be final and binding upon all
parties.
10. BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the possible
application of backup federal income tax withholding of 31 percent with respect
to payment of the Purchase Price, a tendering Unitholder must provide C3 Capital
with the Unitholder's correct taxpayer identification number with the Offer to
Sell Letter. See "SCHEDULE II" below.
If you do not have a valid taxpayer identification number do not send in
the Offer to Sell Letter; instead, please contact C3 Capital, toll free, at
(866) 719-4093, and C3 Capital will provide you with the appropriate forms.
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11. FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in
an amount equal to ten percent of the amount of the Purchase Price plus
Partnership liabilities allocable to each Unit purchased, each tendering
Unitholder must certify in the Offer to Sell Letter as to the Unitholder's
taxpayer identification number, address and that the Unitholder is not a foreign
person. See "SCHEDULE II" below.
If you are a foreign person do not send in the Offer to Sell Letter;
instead, please contact C3 Capital, toll free, at (866) 719-4093, and C3 Capital
will provide you with the appropriate forms.
12. SOURCE OF FUNDS. Based on the Purchase Price of $300 per Unit, C3
Capital estimates that the total amount of funds necessary to purchase all Units
it is seeking to purchase in the Offer, and to pay related fees and expenses,
will be approximately $3,000,000. The members of C3 Capital have agreed to
contribute or lend sufficient cash to C3 Capital to provide the funds required
in connection with the Offer without any borrowings.
13. CERTAIN LEGAL MATTERS.
General. Except as set forth in this Section, C3 Capital is unaware of any
filings, approvals or other actions by any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of Units
by C3 Capital pursuant to the Offer. Should any such approval or other action be
required, it is C3 Capital's present intention that such additional approval or
action would be sought. While there is no present intent to delay the purchase
of Units tendered pursuant to the Offer pending receipt of any such additional
approval or the taking of any such action, there can be no assurance that any
such additional approval or action, if needed, would be obtained without
substantial conditions or that adverse consequences might not result to the
Partnership's business, or that certain parts of the Partnership's business
might not have to be disposed of or other substantial conditions complied with
in order to obtain such approval or action, any of which could cause C3 Capital
to elect to terminate the Offer without purchasing Units thereunder. C3
Capital's obligation to purchase and pay for Units is subject to certain
conditions, including conditions related to the legal matters discussed in this
Section.
Antitrust. C3 Capital believes that the Hart-Scott-Rodino Antitrust
Improvements Action of 1976, as amended, does not apply to the acquisition of
Units contemplated by the Offer.
Margin Requirements. The Units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
State Takeover Statutes. A number of states have adopted "takeover"
statutes that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, principal executive offices or principal places of business in such
states. Certain decisions of the United States Supreme Court limit the
applicability of such statutes. The Partnership was formed under the laws of the
State of California, which currently does not have any takeover statute
applicable to limited partnerships, and C3 Capital does not expect any such
statute to be enacted in California during the pendency of the Offer. However,
it is a condition to the Offer that no state or federal statute impose a
material limitation on C3 Capital's right to vote the Units purchased pursuant
to the Offer. If this condition is not met, C3 Capital may terminate or amend
the Offer.
If any person seeks to apply any state takeover statute, C3 Capital will
take such action as then appears desirable, which action may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. If there is a claim that one or more takeover statutes apply to the
Offer,
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and it is not determined by an appropriate court that such statutes do not apply
or are invalid as applied to the Offer, C3 Capital might be required to file
certain information with, or receive approvals from, the relevant state
authorities. This could prevent C3 Capital from purchasing or paying for Units
tendered pursuant to the Offer, or cause delay in continuing or consummating the
Offer. In such case, C3 Capital may not be obligated to accept for payment or
pay for Units tendered.
14. FEES AND EXPENSES. Except as set forth in this Section, C3 Capital will
not pay any fees or commissions to any broker, dealer or other person for
soliciting tenders of Units pursuant to the Offer. C3 Capital has retained P.H.
Holdings, Inc. to act as Exchange Agent in connection with the Offer. C3 Capital
will pay the Exchange Agent reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement of out-of-pocket
expenses, and will indemnify the Exchange Agent against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. C3 Capital will also pay all costs and expenses of printing and
mailing the Offer and its legal fees and expenses.
C3 Capital may pay a fee to "soliciting dealers" in connection with the
Offer. "Soliciting dealers" will include the following entities: brokers or
dealers who are members of any national securities exchange or of the National
Association of Securities Dealers, or banks or trust companies, if they have
customers who hold Units. If C3 Capital pays a fee to soliciting dealers it
expects to pay a flat fee, in an amount which has not yet been determined,
either for each customer of a soliciting dealer who holds Units or for each Unit
the soliciting dealer's customer tenders.
If C3 Capital pays a soliciting dealers' fee, in consideration for the fee,
soliciting dealers will forward the Offer and accompanying materials to
Unitholders who are customers of theirs, and make telephone calls to Unitholders
regarding the Offer. Soliciting dealers would not be required to make any
recommendation to Unitholders regarding whether they should tender or refrain
from tendering Units in the Offer. Any soliciting dealer fee would not be
payable to dealers with regard to any Units beneficially owned by the dealer, or
if the soliciting dealer is required to transfer any amount of the fee to a
Unitholder. No soliciting dealer will be considered an agent of C3 Capital for
purposes of the Offer. Whether or not C3 Capital pays a soliciting dealer's fee,
it will reimburse brokers, dealers, commercial banks and trust companies for
customary handling and mailing expenses incurred in forwarding the Offer to
their customers.
Members and managers of C3 Capital or Vintage Senior Housing, LLC, a member
of C3 Capital, or employees of entities affiliated with C3 Capital or Vintage
Senior Housing, LLC, may solicit Unitholders to tender their Units in the Offer
by telephone, facsimile or in person. These individuals may receive reasonable
and customary compensation for making solicitations, and C3 Capital may
reimburse them for out-of-pocket expenses associated with the solicitations.
15. MISCELLANEOUS. The Offer is not made to (nor will tenders be accepted
on behalf of) Unitholders residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities or other laws of such jurisdiction. However, C3 Capital may, in its
discretion, take such action as it deems necessary to make the Offer in any
jurisdiction and extend the Offer to Unitholders in such jurisdiction.
In any jurisdiction where the securities or other laws require the Offer to
be made by a licensed broker or dealer, the Offer will be deemed to be made on
behalf of C3 Capital by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of C3 Capital not contained herein or in the Offer to
Sell Letter and, if given or made, such information or representation must not
be relied upon as having been authorized.
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CERTAIN INFORMATION CONCERNING THE PARTNERSHIP
1. GENERAL. Information contained in this section is based upon documents
and reports publicly filed by the Partnership. Although C3 Capital has no reason
to believe that the statements contained in these public documents and reports
are untrue, C3 Capital has not independently investigated the accuracy of these
statements and does not take responsibility for the accuracy, inaccuracy,
completeness or incompleteness, of any of the information contained in this
section or for the failure by the Partnership to disclose events which may have
occurred and may affect the significance or accuracy of any such information.
The Partnership is the owner and operator of two assisted living
communities, which house and provide personal care and support services to
senior residents. The Partnership is a California limited partnership that was
formed in June of 1989 to develop, finance, acquire and operate senior citizen
housing. Currently, the only managing general partner of the Partnership is
ARVAL. The managing general partner makes all decisions concerning property
acquisitions and dispositions of the communities, subject to the limited
partners' rights to approve or disapprove of the sale of substantially all of
the Partnerships assets.
The Partnership's address is 245 Fischer Avenue, Suite D-1, Costa Mesa,
California 92626 and the Partnership's phone number is (714) 751-7400.
As of June 30, 2001, there were approximately 1,759 Unitholders of record
owning 18,666 units. There is no established public trading market for the
Units.
Under the partnership agreement, the term of the Partnership will continue
until December 31, 2049 unless terminated earlier pursuant to the provisions of
the partnership agreement.
At June 30, 2001, the Partnership's investment portfolio consisted of the
Properties and an 8% promissory note maturing January 25, 2010 with an
outstanding balance of approximately $5 million. The Properties are: Chandler
Villas, a 164--unit complex in Chandler, Arizona ("Chandler"); and Villa Las
Posas, a 123-unit complex in Camarillo, California ("Los Posas"). According to
the Partnership's Offering Memorandum, the original anticipated holding period
of each of the Properties was five to seven years following the acquisition of
the Property (subject to market conditions). Los Posas has been operating almost
four years; however, the site was purchased by the Partnership over eleven years
ago. Chandler has been held and operated by the Partnership for more than nine
years.
2. ONGOING COMPENSATION AND REIMBURSEMENTS TO THE MANAGING GENERAL PARTNER.
A managing general partner is entitled to the following ongoing fees and
reimbursements under the partnership agreement:
Property Management Fees. A property management fee of 5% of gross revenues
paid for managerial services including general supervision, hiring of onsite
management personnel employed by the Partnership, renting of units, installation
and provision of food service, maintenance, and other operations. Property
management fees for 1998, 1999 and 2000 were $472,000, $421,000 and $442,000
respectively.
Partnership Management Fees. A partnership management fee of 10% of cash
flow before distributions is paid for implementing the Partnership's business
plan, supervising and management of the Partnership's affairs including general
administration, coordination of legal, audit, tax, and insurance matters.
Partnership management fees for 1998, 1999 and 2000 were $140,000, $151,000 and
$178,000 respectively.
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Sale of Partnership Projects. The partnership agreement neither
specifically authorizes nor prohibits payment or compensation in the form of
real estate commissions to the managing general partners or its affiliates. Any
such payments or compensation are subordinated to a return to the Limited
Partners of their capital contributions plus an 8% per annum, cumulative, but
not compounded, return thereon from all sources, including prior distribution of
cash flow. Any such compensation shall not exceed 3% of the gross sales price or
50% of the standard real estate brokerage commission, whichever is less. Upon
the sale of Bradford Square in December, 2000, a $240,060 real estate selling
commission was paid to ARVAL. In fiscal 1999, and 1998 no real estate selling
commissions were paid to ARVAL.
Subordinated Incentive Compensation. The general partners are entitled to
receive 15% of the proceeds of sale or refinancing, subordinated to a return of
initial Capital Contributions (as defined in the partnership agreement), plus
cumulative, but not compounded, return on capital contributions varying from 8%
to 10% per annum. In 2000, 1999 and 1998, no incentive compensation was paid.
Partnership Interest. .01% of all items of capital, profit or loss, and
liquidating distributions, subject to a capital account adjustment.
Reimbursed Expenses. All of the Partnership's expenses are to be billed
directly to and paid by the Partnership. The managing general partner may be
reimbursed for the actual cost of goods and materials obtained from unaffiliated
entities and used for or by the Partnership. In addition, the managing general
partner may be reimbursed for administrative services necessary to the
Partnership's prudent operation, provided that such reimbursement is at the
lower of its actual cost or the amount which the Partnership would be required
to pay to independent parties for comparable administrative services in the same
geographic location. The total reimbursements to ARVAL amounted to $3.1 million,
$3.7 million, and $2.5 million for the years ending December 31, 2000, 1999 and
1998, respectively.
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CERTAIN INFORMATION CONCERNING C3 CAPITAL
C3 Capital, a California limited liability company, was formed on July 16,
2001. C3 Capital has not engaged in any activities to date, other than those
incidental to its organization, purchasing Units, making the Offer. The
principal office of C3 Capital is 359 San Miguel, Suite 300, Newport Beach,
California 92660 and its phone number is (866) 719-4093. For certain information
concerning the members and controlling persons of C3 Capital, see "SCHEDULE I"
below.
C3 Capital is aware of the following contacts, transactions and agreements
between affiliates of C3 Capital and the Partnership:
o Gary L. Davidson, a member of C3 Capital and a former general partner
of the Partnership, retains a special limited partnership interest in
the Partnership which entitles him to .00198% share of the profits,
losses and distribution of the Partnership. This interest was acquired
by Mr. Davidson initially as a general partner of the Partnership and
was converted, pursuant to the terms of the Partnership Agreement, to
a special limited partnership interest upon Mr. Davidson's resignation
as a general partner of the Partnership which occurred in 2000. This
special limited partnership interest merely represents the same
economic interest that Mr. Davidson acquired as a general partner of
the Partnership and is not represented by limited partnership units or
a right to acquire any limited partnership units of the Partnership.
Mr. Davidson's special limited partnership interest continues to be
subject to the terms and conditions of the Partnership Agreement.
o In December of 2000, Vintage Senior Housing, LLC, a member of C3
Capital, purchased substantially all of the assets of Bradford Square,
L.P., a California limited partnership in which the Partnership was
the managing general partner and held a 50% interest. The assets
purchased included an existing 92-unit retirement facility known as
"Bradford Square", located at 1180 N. Bradford, Placentia, California.
Vintage paid an aggregate of $8,002,000 in cash to the Partnership for
the assets.
o An affiliated company of Vintage Senior Housing, LLC in which Vintage
holds a minority membership interest is currently a managing member in
five separate limited liability companies in which ARV Assisted
Living, Inc. is also a managing member. The purpose of these separate
limited liability companies is to develop and operate multi-unit
retirement facilities.
Neither C3 Capital, nor, to the best knowledge of C3 Capital, any of the
persons listed on "SCHEDULE I," have been convicted in a criminal proceeding
during the past five years (excluding traffic violations or similar
misdemeanors) or has been a party to any judicial or administrative proceeding
during the past five years 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.
Except as set forth in this Offer to Purchase, neither C3 Capital, nor, to
the best knowledge of C3 Capital, any of the persons listed on "SCHEDULE I," nor
any associate or majority owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any Units, and neither C3 Capital nor, to the
best of knowledge of C3 Capital, any of the persons or entities referred to
above, nor any of the respective executive officers, directors or subsidiaries
of any of the foregoing, has effected any transaction in the Units during the
past 60 days.
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Except as set forth in this Offer to Purchase, neither C3 Capital, nor, to
the best knowledge of C3 Capital, any of the persons listed on "SCHEDULE I," nor
any associate or majority owned subsidiary of any of the foregoing, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Partnership, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Partnership, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies.
Except as set forth in this Offer to Purchase, neither C3 Capital, nor any
of its affiliates, nor, to the best knowledge of C3 Capital, any of the persons
listed on "SCHEDULE I," have had any business relationships or transactions with
the Partnership or any of its executive officers, directors or affiliates that
are required to be reported under the rules of the Commission. Except as set
forth in this Offer to Purchase, there have been no contacts, negotiations or
transactions between C3 Capital, any of its affiliates or, to the best knowledge
of C3 Capital, any of the persons listed on "SCHEDULE I," and the Partnership or
its affiliates concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
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SCHEDULE I
MEMBERS AND MANAGERS OF C3 CAPITAL
The names and principal occupation or employment of each member and manager
of C3 Capital and its control persons are set forth below. Unless otherwise
noted below, the business address of each member and manager is 359 San Miguel
Drive, Suite 300, Newport Beach, California 92660 and its phone number is (866)
719-4093. Each member and manager and its control persons are United States
citizens.
BONGATE, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY. A member of C3 Capital,
LLC. BonGate, LLC engages in business and managerial consulting and holds a
controlling interest in Cooper Colony Affordable Housing, Inc., an owner and
operator of affordable senior apartments. Graham P. Espley-Jones is the
controlling member of BonGate. The business address of BonGate, LLC is 110
Newport Center Drive, Suite 200, Newport Beach, California 92660, and its phone
number is (949) 719-1166.
VINTAGE SENIOR HOUSING, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY. A member of
C3 Capital, LLC. Founded in 1998, Vintage Senior Housing LLC develops and
manages assisted living facilities. To date, Vintage has developed four new
assisted living facilities, refurbished three assisted living facilities
requiring substantial renovation and has acquired and now operates three other
existing assisted living facilities. Eric K. Davidson and Brian S. Flornes are
the controlling members of Vintage. The phone number for Mr. Davidson is (949)
719-4082. The phone number for Mr. Flores is (949) 719-4083.
GARY L. DAVIDSON, 67.
Chairman and member of C3 Capital, LLC. He is also a founder and currently
serves as Chairman of Windstone Group and Assured Horizons, owners and operators
of residential care facilities for the frail elderly. In 1979, he founded ARV
Assisted Living, Inc., formerly American Retirement Villas Corporation. He
served as Chairman, President and CEO of ARV Assisted Living, Inc. until 1997.
Prior to founding ARV Assisted Living, Inc. he practiced law and became active
in the senior housing industry in 1967. He was also one of the founders and
organizers of the American Basketball Association, the World Football League and
World Hockey Association. He graduated from UCLA with a Bachelor of Arts Degree
and also attended Law School at UCLA where he was awarded a Doctorate in Juris
Prudence.
GRAHAM P. ESPLEY-JONES, 41.
President and controlling member of BonGate, LLC, a member of C3 Capital, LLC.
He also serves as President of Cooper Colony Affordable Housing, Inc., an owner
and operator of affordable senior apartments. Most recently, he served as the
Chief Financial Officer and Chief Administrative Officer of The Meyers Group,
the largest data provider of real estate information in the country. Prior to
that, he served as Chief Financial Officer of Kaufman and Broad Multi-Housing
Group, an owner, operator and developer of senior and multi-family affordable
apartments. From 1988 until 1998, he served as Chief Financial Officer and
Executive Vice President of ARV Assisted Living, Inc. He received a Bachelor of
Science Degree from San Diego State University and a Masters in Business
Administration from Pepperdine University.
ERIC K. DAVIDSON, 40.
Principal and member of Vintage Senior Housing, LLC, a member of C3 Capital,
LLC. He co-founded Vintage Senior Housing, LLC in 1998 with Brian L. Flornes.
Prior to founding Vintage, he was a Senior Vice President at ARV Assisted
Living, Inc. overseeing both acquisitions and development. He began his career
at Cushman and Wakefield specializing in office leasing, investments and senior
housing. He received a Bachelor of Arts Degree from the University of California
at Berkley and attended Cambridge University in England.
BRIAN J. FLORNES, 38.
Principal and member of Vintage Senior Housing, LLC, a member of C3 Capital,
LLC. He co-founded Vintage Senior Housing, LLC in 1998 with Eric K. Davidson.
Prior to founding Vintage, he was President of American Housing Concepts which
handled all the development activities for ARV Assisted Living, Inc. from 1992
to 1998. Prior to that he worked with Calmark as a project manager overseeing
the development of senior housing apartments. He received a Bachelor of Arts
Degree and a Masters Degree in Business Administration from Loyola Maryland
University.
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SCHEDULE II
CERTAIN FEDERAL INCOME TAX MATTERS
The following summary is a general discussion of certain of the federal
income tax consequences of a sale of Units pursuant to the Offer. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury regulations thereunder, administrative rulings, and judicial authority,
all as of the date of the Offer. All of the foregoing are subject to change, and
any such change could affect the continuing accuracy of this summary. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular Unitholder in light of such Unitholder's specific
circumstances or to certain types of Unitholders subject to special treatment
under the federal income tax laws (for example, foreign persons, dealers in
securities, banks, insurance companies and tax-exempt organizations), nor
(except as otherwise expressly indicated) does it describe any aspect of state,
local, foreign or other tax laws. Sales of Units pursuant to the Offer will be
taxable transactions under applicable state, local, foreign and other tax laws.
UNITHOLDERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO EACH SUCH UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
In general, a Unitholder will recognize gain or loss on a sale of Units
pursuant to the Offer equal to the difference between (i) the Unitholder's
"amount realized" on the sale and (ii) the Unitholder's adjusted tax basis in
the Units sold. The amount of a Unitholder's adjusted tax basis in such Units
will vary depending upon the Unitholder's particular circumstances. The "amount
realized" with respect to a Unit will be a sum equal to the amount of cash
received by the Unitholder of the Unit pursuant to the Offer (that is, the
Purchase Price), plus the amount of the Partnership's liabilities allocable to
the Unit (as determined under Code Section 752).
The gain or loss recognized by a Unitholder on a sale of a Unit pursuant to
the Offer generally will be treated as a capital gain or loss if the Unit was
held by the Unitholder as a capital asset. That capital gain or loss will be
treated as long-term capital gain or loss if the tendering Unitholder's holding
period for the Unit exceeds one year. Under current law, long-term capital gains
of individuals are taxed at a maximum marginal federal income tax rate of 20
percent, whereas the maximum marginal federal income tax rate for ordinary
income of such persons is approximately 39.6 percent. Capital losses are
deductible only to the extent of capital gains, except that individual taxpayers
may deduct up to $3,000 of capital losses in excess of the amount of their
capital gains against ordinary income. Excess capital losses generally can be
carried forward to succeeding years (a corporation's carry-forward period is
five years and an individual taxpayer can carry forward such losses
indefinitely).
If any portion of the amount realized by a Unitholder is attributable to
"unrealized receivables" (which includes depreciation recapture) or
"substantially appreciated inventory" as defined in Code Section 751, then a
portion of the Unitholder's gain or loss may be treated as ordinary gain or loss
rather than capital gain or loss.
A tendering Unitholder will be allocated a pro rata share of the
Partnership's taxable income or loss for the year of the sale with respect to
the Units sold in accordance with the provisions of the partnership agreement
concerning transfers of Units. Such allocation and any cash distributed by the
Partnership to the Unitholder for that year will affect the Unitholder's
adjusted tax basis in Units and, therefore, the amount of such Unitholder's
taxable gain or loss upon a sale of Units pursuant to the Offer.
Under Code Section 469, individuals and certain types of corporations
generally are able to deduct "passive activity losses" in any year only to the
extent of the person's passive activity income for that year. Substantially all
post-1986 losses of Unitholders from the Partnership are passive activity
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losses. Unitholders may have "suspended" passive activity losses from the
Partnership (i.e., post-1986 net taxable losses in excess of statutorily
permitted "phase-in" amounts and which have not been used to offset income from
other passive activities).
If a Unitholder sells less than all of its Units pursuant to the Offer, a
loss recognized by that Unitholder can be currently deducted (subject to the
other applicable limitations) to the extent of the Unitholder's passive income
from the Partnership for that year plus any other passive activity income for
that year, and a gain recognized by a Unitholder upon the sale of Units can be
offset by the Unitholders' current or "suspended" passive activity losses (if
any) from the Partnership and other sources. If, on the other hand, a Unitholder
sells 100 percent of its Units pursuant to the Offer, any "suspended" losses and
any losses recognized upon the sale of the Units will be offset first against
any other net passive gain to the Unitholder from the sale of the Units and any
other net passive activity income from other passive activity investments, and
the balance of any "suspended" net losses from the Units will no longer be
subject to the passive activity loss limitation and, therefore, will be
deductible by such Unitholder from its other income (subject to any other
applicable limitations). If more than 10,000 Units are tendered, some tendering
Unitholders may not be able to sell 100 percent of their Units pursuant to the
Offer because of the proration of the number of Units to be purchased by C3
Capital.
Unitholders (other than tax-exempt persons, corporations and certain
foreign individuals) who tender Units may be subject to 31 percent backup
withholding unless those Unitholders provide a taxpayer identification number
("TIN") and are certain that the TIN is correct or properly certify that they
are awaiting a TIN. A Unitholder may avoid backup withholding by properly
completing and signing the Offer to Sell Letter. If a Unitholder who is subject
to backup withholding does not properly complete and sign the Offer to Sell
Letter, C3 Capital will withhold 31 percent from payments to such Unitholder.
A Unitholder who tenders Units must file an information statement with his
federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3). The selling
Unitholder must also notify the Partnership of the date of the transfer and the
names, addresses and tax identification numbers of the transferors and
transferee within 30 days of the date of the transfer (or, if earlier, January
15 of the following calendar year) (See IRS Form 8308).
Gain realized by a foreign Unitholder on the sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Code Section 1445, the
transferee of an interest held by a foreign person in a partnership which owns
United States real property generally is required to deduct and withhold a tax
equal to 10 percent of the amount realized on the disposition. In order to
comply with this requirement, C3 Capital will withhold 10 percent of the amount
realized by a tendering Unitholder unless the Unitholder properly completes and
signs the Offer to Sell Letter certifying the Unitholder's TIN, that such
Unitholder is not a foreign person and the Unitholder's address. Amounts
withheld would be creditable against a foreign Unitholder's income tax liability
and, if in excess thereof, a refund could be obtained from the Internal Revenue
Service by filing a U.S. income tax return.
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The Offer to Sell Letter and any other required documents should be sent or
delivered by each Unitholder or his broker, dealer, commercial bank, trust
company or other nominee to the Exchange Agent at one of its addressees set
forth below:
The Exchange Agent for the Offer is:
P.H. HOLDINGS INC.
By Mail and Hand/Overnight Delivery:
110 Newport Center Drive
Suite 200
Newport Beach, California 92660
By Facsimile:
(949) 719-1165
--------------------------------------------------------------------------------
Questions and requests for assistance may be directed to C3 Capital at 359
San Miguel Drive, Suite 300, Newport Beach, California 92660 or, toll free, at
(866) 719-4093. Additional copies of this Offer to Purchase, the Offer to Sell
Letter and other materials may also be obtained from C3 Capital at 359 San
Miguel Drive, Suite 300, Newport Beach, California 92660 or, toll free, at (866)
719-4093, and will be furnished promptly at C3 Capital's expense. You may also
contact your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
--------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS OFFER TO PURCHASE REGARDING THE OFFER TO PURCHASE UNITS
MADE HEREBY, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY C3 CAPITAL OR ANY OTHER
PERSON. THE DELIVERY OF THIS OFFER TO PURCHASE SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF C3 CAPITAL OR THE PARTNERSHIP
SINCE THE DATE HEREOF.