SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ) *
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
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(Name of Subject Company (Issuer))
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
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(Names of Filing Persons (Identifying Status as Offeror, Issuer or Other
Person))
LIMITED PARTNERSHIP UNITS
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(Title of Class Securities)
None
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(CUSIP Number of Class Securities)
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DAVID FARAHI
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
1175 WEST MOANA LANE
SUITE 200
RENO, NEVADA 89509
(775) 825-3355
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Copy To:
DON S. HERSHMAN, ESQ.
MUCH SHELIST FREED DENENBERG AMENT & RUBENSTEIN, P.C.
191 NORTH WACKER DRIVE
SUITE 1800
CHICAGO, ILLINOIS 60606
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CALCULATION OF FILING FEE
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Transaction Valuation* $816,000 Amount of Filing Fee $163.20
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* For purposes of calculating the fee only. This amount assumes the
purchase of 12,000 units of limited partnership interest of the subject
partnership for $68 per unit. The amount of the filing fee, calculated in
accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, as
amended, equals 1/50th of one percent of the aggregate of the cash offered by
the bidder.
[ ] Check the box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: N/A
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Form or Registration No.:
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Filing Party:
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Date Filed:
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[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
TENDER OFFER STATEMENT
This statement (the "Statement") constitutes the Tender Offer Statement on
Schedule TO of Virginia Springs Limited Liability Company (the "Purchaser")
relating to an offer to purchase units of limited partnership interest (the
"Units") of Resources Accrued Mortgage Investors 2 L.P. (the "Partnership")
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated February 18, 2003 (the "Offer to Purchase") and the related Letter of
Transmittal, copies of which are filed as Exhibits (a)(1) and (a)(2) hereto,
respectively. The information in the Offer to Purchase is incorporated herein
by reference in answer to all of the Items of this Schedule TO except as
otherwise set forth below:
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
During the last five years, neither the Purchaser nor, to the best of its
knowledge, any of the persons listed in Schedule 1 to the Offer to Purchase:
(i) has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors); or (ii) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to federal or state securities laws or
finding any violation with respect to such laws.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as described in the Offer to Purchase, none of the events set forth
in Item 1005(a) and (b) of Regulation M-A has occurred.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in the Offer to Purchase, none of the events set forth
in Item 1006(c) of Regulation M-A are planned, proposed or being negotiated.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Except as set forth in the Offer to Purchase, there are no alternative
plans to finance the tender offer and no plans to repay any borrowed funds used
in the tender offer.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The Purchaser owns 9,703 Units representing 5.2% of the total outstanding
Units. Mr. Ben Farahi, a member of the Purchaser owns 44 Units representing
..02% of the total outstanding Units. Mr. Farahi is also a partner in Farahi
Investment Company, a general partnership which is the sole member of Western
Real Investments LLC, an affiliate of the Purchaser ("Western"), which owns
68,084 Units representing 36.2% of the total outstanding Units. The Purchaser,
Western and Mr. Farahi own in the aggregate 77,831 Units or 41.4% of the total
Units outstanding based on the 187,919 Units outstanding as of the date hereof.
ITEM 10. FINANCIAL STATEMENTS.
Not Applicable.
ITEM 12. EXHIBITS.
(a)(1) Offer to Purchase, dated February 18, 2003.
(a)(2) Letter of Transmittal and Related Instructions.
(a)(3) Cover Letter, dated February 18, 2003, from the Purchaser to
Limited Partners.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
Not Applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
By /s/ David Farahi
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David Farahi
Manager
Dated: February 18, 2003
Exhibit Index
Exhibit No.
(a)(1) Offer to Purchase, dated February 18, 2003.
(a)(2) Letter of Transmittal and Related Instructions.
(a)(3) Cover Letter, dated February 18, 2003, from the Purchaser to
Limited Partners.
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
IS OFFERING TO PURCHASE UP TO 12,000 UNITS OF
LIMITED PARTNERSHIP INTEREST IN
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
FOR $68 PER UNIT IN CASH
We will purchase up to 12,000 (approximately 6.4%) of the outstanding
units of limited partnership interest in your partnership. If more units are
tendered to us, we will accept units on a pro rata basis according to the
number of units tendered by each person. You will not pay any fees or
commissions if you tender your units. Our offer is not subject to any minimum
number of units being tendered. Please be advised that we will pay for the
units tendered to us within five days after the expiration date of this tender
offer.
We are an affiliate of your general partner. We are making this offer
with a view towards making a profit.
Depending on your tax circumstances, there may be federal income tax
benefits associated with a tender of your units.
Our offer and your withdrawal rights will expire at 12:00 midnight, New
York City time, on April 23, 2003, unless we extend the deadline.
SEE "RISK FACTORS" BEGINNING ON PAGE 1 OF THIS OFFER TO PURCHASE FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER, INCLUDING THE FOLLOWING:
We are making our offer to make a return on our investment.
Accordingly, in establishing our purchase price we are motivated to
set the lowest price for your units that might be acceptable to you
consistent with our objectives. Such objectives may conflict with your
interest in receiving the highest price for your units.
Our purchase price of $68 is not based on any third party appraisal or
valuation. In addition, our purchase price was determined without any
arm's-length negotiation between us and your partnership. No
independent person has given an opinion on the fairness of our offer,
and no representation is made by us or the general partner of your
partnership on the fairness of our offer.
If you tender your units you will be giving up future potential value
from owning the units.
You may receive more value by retaining your units than by selling
your units to us.
We are an affiliate of the general partner of your partnership.
It is possible that in the future we may conduct an additional offer
at a higher price.
Our affiliates currently own approximately 41.4% of the outstanding
units. We and our affiliates may be in a position to influence the
outcome of partnership decisions on which limited partners may vote.
To accept our offer, please execute the enclosed letter of transmittal and
return it to American Stock Transfer & Trust Company, which is acting as
Depositary for our offer, together with any additional documents required, in
the enclosed pre-addressed, postage paid envelope (see Section 3. "Procedures
for Tendering Units"). Questions and requests for assistance or for additional
copies of this offer to purchase or the letter of transmittal should be
directed to MacKenzie Partners, Inc., which is acting as Information Agent for
our offer, at (800) 322-2885.
February 18, 2003
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET 1
RISK FACTORS 2
Offer Price May Not Represent Fair Market Value 2
Estimated Liquidation Value May Not Properly Reflect Current Market
Value 3
Loss of Future Benefits from Your Ownership of Units 3
Control of Your Partnership by Us 3
Conflicts of Interest with Respect to the Offer 4
No General Partner Recommendation 4
Conflicts of Interest Relating to Fees 4
Possible Future Offer at a Higher Price 4
Recognition of Taxable Gain on a Sale of Your Units 4
Continuation of the Partnership 5
THE OFFER 5
Section 1. Terms of the Offer 5
Section 2. Proration; Acceptance for Payment and Payment for Units 5
Section 3. Procedures for Tendering Units 6
Section 4. Withdrawal Rights 9
Section 5. Extension of Tender Period; Termination; Amendment 9
Section 6. Certain Federal Income Tax Consequences 10
Section 7. Effects of the Offer 13
Section 8. Future Plans 14
Section 9. Certain Information Concerning Your Partnership 14
Section 10. Conflicts of Interest and Transactions with Affiliates 17
Section 11. Certain Information Concerning Us 17
Section 12. Source of Funds 19
Section 13. Background of the Offer 19
Section 14. Conditions of the Offer 21
Section 15. Certain Legal Matters 21
Section 16. Fees and Expenses 22
Section 17. Miscellaneous 22
Schedule 1 Information With Respect to the Members of Virginia Springs
Limited Liability Company
SUMMARY TERM SHEET
This summary term sheet highlights the most material information regarding
our offer, but it does not describe all of the details thereof. We urge you to
read this entire offer to purchase, which contains the full details of our
offer. We have also included in the summary term sheet references to the
sections of this offer to purchase where a more complete discussion may be
found. As used herein, the term "general partner" refers to Maxum LLC.
THE OFFER. Subject to the terms hereof, we are offering to purchase
from you 12,000 of the limited partnership units of RESOURCES ACCRUED
MORTGAGE INVESTORS 2, L.P., your partnership, for $68.00 per unit in
cash. Our office price of $68 per unit is less than the estimated
liquidation value of your partnership as of September 30, 2002. In
addition, should you tender your units to us you will be giving up
future potential value from owning the units, which value may change
if and when your partnership undertakes the process to take title to
the property which currently secures its remaining mortgage loan
However, by tendering now you obtain liquidity. See "Section 1. Terms
of the Offer", "Section 9. Certain Information Concerning Your
Partnership" and "Section 13. Background of the Offer."
EXPIRATION DATE. Our offer expires on April 23, 2003, unless extended,
and you can tender your units until our offer expires. See "Section 1.
Terms of the Offer."
RIGHT TO EXTEND THE EXPIRATION DATE. We can extend the expiration date
of our offer in our sole discretion and, if we do, we will either
issue a press release or send you a notice of any such extension. See
"Section 5. Extension of Tender Period; Termination; Amendment."
HOW TO TENDER. To tender your units, complete the accompanying
acknowledgment and agreement and send it, along with any other
documents required by the letter of transmittal, to the Depositary,
American Stock Transfer & Trust Company, at one of the addresses set
forth on the back of this offer to purchase. See "Section 3.
Procedures for Tendering Units."
WITHDRAWAL RIGHTS. You can withdraw your units at any time prior to
the expiration of the offer, including any extensions. In addition,
you can withdraw your units at any time on or after April 23, 2003 if
we have not already accepted units for purchase and payment. See
"Section 4. Withdrawal Rights."
HOW TO WITHDRAW. To withdraw your units, you must send a notice of
withdrawal to the Depositary, identifying yourself and the units to be
withdrawn. See "Section 4. Withdrawal Rights."
TAX CONSEQUENCES. Your sale of units in this offer will be a taxable
transaction for federal income tax purposes. The consequences to each
limited partner may vary and you should consult your tax advisor on
the precise tax consequences to you. See "Section 6. Certain Federal
Income Tax Consequences."
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AVAILABILITY OF FUNDS. We currently have the necessary cash to
consummate our offer. See "Section 12. Source of Funds."
REMAINING AS A LIMITED PARTNER. If you do not tender your units, you
will remain a limited partner in your partnership. See "Section 7.
Effects of the Offer."
CONFLICTS OF INTEREST. The general partner of your partnership (which
is our affiliate) and another of our affiliates are entitled to
receive payment for services and reimbursement of certain expenses
involving your partnership and its assets. As a result, a conflict of
interest exists between continuing the partnership and receiving these
fees, and the liquidation of the partnership and the termination of
these fees. See "Section 9. Certain Information Concerning Your
Partnership" and "Section 10. Conflicts of Interest and Transactions
with Affiliates. "
NO GENERAL PARTNER RECOMMENDATION. The general partner of your
partnership makes no recommendation as to whether you should tender or
refrain from tendering your units, and believes each limited partner
should make his or her own decision whether or not to tender. See
"Section 13. Background of the Offer."
CONDITIONS TO THE OFFER. There are a number of conditions to our
offer. See "Section 14. Conditions of the Offer."
NO SUBSEQUENT OFFERING PERIOD. We do not intend to have a subsequent
offering period after the expiration date of the initial offering
period (including any extensions). See "Section 5. Extension of Tender
Period; Termination; Amendment."
ADDITIONAL INFORMATION. For more assistance in tendering your units,
please contact our Information Agent at one of the addresses or the
telephone number set forth on the back cover page of this offer to
purchase.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT, THE
LETTER OF TRANSMITTAL AND OTHER DOCUMENTS TO WHICH WE HAVE REFERRED. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
RISK FACTORS
Before deciding whether or not to tender any of your units, you should
consider carefully the following risks and disadvantages of the offer:
OFFER PRICE MAY NOT REPRESENT FAIR MARKET VALUE
There is no established or regular trading market for your units, nor is
there another reliable standard for determining the fair market value of the
units. Our offer price may not reflect the price that you could receive in the
open market for your units which could be higher than our offer price.
According to Partnership Spectrum, an independent industry publication, between
December 1, 2001 and November 30, 2002, a limited number of units in your
partnership were traded in the informal secondary market for units at
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prices ranging from a high of $120 per unit to a low of $70 per unit, with a
weighted average price of approximately $105.37 per unit and without taking
into account commissions and other transactional costs. The majority of these
sales of units in the secondary market occurred prior to either the first or
both distributions of the settlement from the litigation described in the
following paragraph.
On February 12, 2001, one of our affiliates acquired 6,841 units at a
purchase price of $127 per unit. At the end of 2001, the partnership made a
distribution to the limited partners of $25.12 per unit. In addition, as of
January 1, 2002, such affiliate acquired 57,695 units from certain limited
partners affiliated with the former general partners of your partnership and
another affiliate of ours acquired the general partnership interests, for a
combined purchase price of $4,395,181.46 and an assignment of the settlement
rights of our affiliated entities with respect to the then litigation pending
against the then selling entities. On August 14, 2002, we acquired 9,703 units
at a purchase price of $95 per unit. In late September 2002, your partnership
made a distribution to the limited partners of $33.79 per Unit which
represented 90% of the settlement proceeds with respect to the litigation
brought against the former general partners of the partnership and two of their
affiliates. On December 11, 2002, the partnership made a distribution to the
limited partners of $3.72 per Unit which represented the remaining portion of
the settlement proceeds. See "Section 9. Certain Information Concerning Your
Partnership - Litigation" and "Section 11. Certain Information Concerning Us -
Units Owned by Our Affiliates."
ESTIMATED LIQUIDATION VALUE MAY NOT PROPERLY REFLECT CURRENT MARKET VALUE
We have estimated that the liquidation value of your partnership as of
September 30, 2002 was $89.37 per unit. This estimate may not reflect the
current market value of your partnership's one remaining mortgage loan or the
property securing such loan. We did not undertake an independent analysis of
the liquidation value of the partnership.
LOSS OF FUTURE BENEFITS FROM YOUR OWNERSHIP OF UNITS
If you tender your units in response to our offer you will transfer to us
all right, title and interest in and to all of the units we accept, including
the right to participate in any future potential benefits represented by the
ownership of the units. Accordingly, you will not receive any future potential
benefits from units you sell to us, such as future distributions by your
partnership and the potential for appreciation in the value of the units you
sell to us.
CONTROL OF YOUR PARTNERSHIP BY US
Our affiliates currently beneficially own approximately 41.4% of the
outstanding units. Should this tender offer be fully subscribed, we, along
with our affiliates, will control in excess of 47% of all the outstanding units
and, therefore, will be in a position to influence the outcome of all voting
decisions with respect to your partnership, including decisions on the removal
of your general partner, amendments to the partnership's limited partnership
agreement, the sale of the partnership's assets and the liquidation of your
partnership.
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CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER
We are making this offer with a view to making a profit. There is a
conflict between our desire to purchase your units at a low price and your
desire to sell your units at a high price. We determined our offer price
without negotiation with any other party, including the general or any limited
partner.
NO GENERAL PARTNER RECOMMENDATION
The general partner of your partnership, our affiliate, makes no
recommendation as to whether or not you should tender or refrain from tendering
your units. You must make your own decision whether or not to participate in
the offer based upon a number of factors, including several factors that may be
personal to you, such as your financial position, your need or desire for
liquidity, your preferences regarding the timing of when you might wish to sell
your units, other financial opportunities available to you, and your tax
position and the tax consequences to you of selling your units.
CONFLICTS OF INTEREST RELATING TO FEES
Because our affiliates receive fees for managing your partnership and its
assets, a conflict of interest exists between continuing the partnership and
receiving such fees, and the liquidation of the partnership and the termination
of such fees. Also, a decision of the limited partners of your partnership to
remove, for any reason, the general partner of your partnership would result in
a decrease or elimination of the substantial fees to which it is entitled for
services provided to your partnership. Our affiliate currently acts as the
general partner of your partnership. For acting in such a capacity, Maxum LLC
was allocated an aggregate of $31,344 of taxable income for the nine months
ended September 30, 2002.
POSSIBLE FUTURE OFFER AT A HIGHER PRICE
It is possible that we may conduct an unrelated future offer for units at
a higher price. Such a decision will depend on, among other things, the
performance of the partnership, prevailing economic conditions and our interest
in acquiring additional units.
RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS
Your sale of units for cash will be a taxable sale, with the result that
you will recognize taxable gain or loss measured by the difference between the
amount realized on the sale and your adjusted tax basis in the units of limited
partnership interest of your partnership you transfer to us. The "amount
realized" with respect to a unit of limited partnership interest you transfer
to us will be equal to the sum of the amount of cash received by you for the
unit sold pursuant to the offer plus the amount of partnership liabilities
allocable to the unit. The particular tax consequences for you of the sale will
depend upon a number of factors related to your tax situation, including your
tax basis in the units you transfer to us, whether you dispose of all of your
units; whether you have available suspended passive losses, credits or other
tax items to offset any gain recognized as a result of your sale of your units;
and whether you are considered a "dealer" of units.
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Therefore, depending on your basis in the units, your tax position and your
status, your taxable gain and any tax liability resulting from a sale of units
to us pursuant to the offer could exceed our offer price. Because the income
tax consequences of tendering units will not be the same for everyone, you
should consult your own tax advisor to determine the tax consequences of the
offer to you.
CONTINUATION OF THE PARTNERSHIP
Your partnership will continue to be operated as it has in the past.
Accordingly, there may be no way to liquidate your investment in the
partnership in the future until the assets are sold and the partnership is
liquidated.
THE OFFER
SECTION 1. TERMS OF THE OFFER. Upon the terms and subject to the
conditions of this offer, we will accept and thereby purchase up to 12,000
units that are validly tendered on or prior to the expiration date, and not
withdrawn in accordance with the procedures set forth in Section 4 of this
offer to purchase. For purposes of this offer, the term "expiration date" means
12:00 Midnight, New York City time, on April 23, 2003, unless we have extended
the period of time during which the offer is open, in which case the term
"expiration date" means the latest time and date on which the offer, as
extended by us, expires. See Section 5 of this offer to purchase for a
description of our right to extend the period of time during which the offer is
open and to amend or terminate our offer. We will pay for the units tendered
within five days after the expiration date of the tender offer.
Our offer is subject to satisfaction of certain conditions. THE OFFER IS
NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING TENDERED. See Section 14
of this offer to purchase, which sets forth in full the conditions of the
offer. We reserve the right, in our sole discretion, to waive any or all of
those conditions. If, on or prior to the expiration date, any or all of such
conditions have not been satisfied or waived, we may: (i) decline to purchase
any of the units tendered, terminate the offer and return all tendered units to
the tendering limited partners; (ii) waive all the unsatisfied conditions and,
subject to complying with applicable rules and regulations of the Securities
and Exchange Commission (the "Commission"), purchase all units validly
tendered; (iii) extend the offer and, subject to the withdrawal rights of
limited partners, retain the units that have been tendered during the period or
periods for which the offer is extended; or (iv) amend the offer.
SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS. If the
number of units validly tendered on or before the expiration date and not
properly withdrawn is 12,000 or less, we will accept for payment, subject to
the terms and conditions of the offer, all units so tendered. If more than
12,000 units are validly tendered on or prior to the expiration date and not
properly withdrawn, we will accept for payment an aggregate of 12,000 units so
tendered on a pro rata basis according to the number of units validly tendered
by each limited partner with appropriate adjustments to avoid purchases of
fractional units.
We will pay for up to the maximum number of units validly tendered and not
withdrawn in accordance with Section 4, as promptly as practicable following
the expiration date. In all cases, the payments for units purchased
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in our offer will be made only after timely receipt by our Depositary of a
properly completed and duly executed letter of transmittal or a facsimile
thereof, and any other documents required by the terms of this offer or by the
letter of transmittal. See "Section 3. Procedures for Tendering Units."
For purposes of the offer, we will be deemed to have accepted for payment,
and thereby purchased, validly tendered units under the offer when, as and if
we give verbal or written notice to our Depositary of our acceptance of those
units for payment pursuant to the offer. Upon the terms and subject to the
conditions of the offer, payment for units tendered and accepted for payment
pursuant to the offer will in all cases be made through our Depositary, which
will act as agent for tendering limited partners for the purpose of receiving
cash payments from us and transmitting cash payments to tendering limited
partners. Under no circumstances will interest be paid on the offer price by
reason of any delay in making such payment.
If any tendered units are not purchased for any reason, the letter of
transmittal with respect to such units will be destroyed by us and we will
return any certificates representing such units. If, for any reason, acceptance
for payment of, or payment for, any units tendered in our offer is delayed or
we are unable to accept for payment, purchase or pay for units tendered in our
offer, then, without prejudice to our rights under Section 14 of this offer to
purchase, we may cause our Depositary to retain tendered units and those units
may not be withdrawn except to the extent that the tendering limited partners
are entitled to withdrawal rights as described in Section 4 of this offer to
purchase; subject, however, to our obligation under Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to pay
limited partners the offer price for units tendered or return those units
promptly after termination or withdrawal of the offer.
SECTION 3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. To validly tender units, a properly completed and duly
executed letter of transmittal or a facsimile thereof and any other documents
required by the terms hereof or by the letter of transmittal including the
certificates, if any, representing the units being tendered, must be received
by our Depositary on or prior to the expiration date. If you do not provide us
with the certificate(s) representing your units which you would like to tender
to us, by signing the letter of transmittal you are certifying that the
certificate(s) representing your units have been lost or misplaced and agreeing
to indemnify us and your partnership in the manner provided for in the letter
of transmittal. In order to comply with certain restrictions on transfer in the
partnership agreement, a tender which would result in the tendering limited
partner owning less than ten units, or four units in the case of a limited
partner which is an IRA or Keogh Plan, will not be effective. Should you
tender some but not all of your units we may be required to reject a portion of
your tender so as to comply with the terms of the partnership agreement.
However, we will accept as many of your units as possible without violating any
of the terms of the partnership agreement.
SIGNATURE REQUIREMENTS. If the letter of transmittal is signed by the
registered holder of a unit, then no notarization or signature guarantee is
required on the letter of transmittal. Similarly, if a unit is tendered for the
account of eligible institutions such as a member firm of a registered national
securities exchange, a member of the National Association of
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Securities Dealers, Inc. or a commercial bank, savings bank, credit union,
savings and loan association or trust company having an office, branch or
agency in the United States, no notarization or signature guarantee is required
on the letter of transmittal. HOWEVER, IN ALL OTHER CASES, ALL SIGNATURES ON
THE LETTER OF TRANSMITTAL MUST EITHER BE NOTARIZED OR GUARANTEED BY AN ELIGIBLE
INSTITUTION.
IN ORDER FOR YOU TO TAKE PART IN THE OFFER, YOUR UNITS MUST BE VALIDLY
TENDERED AND NOT WITHDRAWN ON OR PRIOR TO THE EXPIRATION DATE. The method of
delivery of the letter of transmittal and all other required documents,
including certificates representing the units being tendered, is at your option
and delivery will be deemed made only when actually received by our Depositary.
BACKUP FEDERAL INCOME TAX WITHHOLDING. If you tender your units and you
are not a corporation or foreign individual, you may be subject to 30% backup
federal income tax withholding unless you provide us with your correct taxpayer
identification number ("TIN"). To avoid this backup withholding, you should
complete and sign the Substitute Form W-9 included in the letter of
transmittal. If you tender your units and do not complete the Substitute Form
W-9, we are required to withhold 30% (and if you fail to provide your TIN, an
additional $50 or such other amount as may be imposed by law) from the purchase
price payment made to you. See the instructions to the letter of transmittal
and "Section 6. Certain Federal Income Tax Consequences."
FIRPTA WITHHOLDING. To prevent the withholding of federal income tax in an
amount equal to 10% of the amount realized on the disposition (the amount
realized is generally the offer price plus the partnership liabilities
allocable to each unit purchased), you must certify that you are not a foreign
person if you tender units. See the instructions to the acknowledgment and
agreement set forth in the letter of transmittal and "Section 6. Certain
Federal Income Tax Consequences."
TRANSFER TAXES. The amount of any transfer taxes (whether imposed on the
registered holder of units or any person) payable on account of the transfer of
units will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes or exemption therefrom is submitted.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing the letter of
transmittal, you are irrevocably appointing us and our designees as your proxy,
in the manner set forth in the acknowledgment and agreement and each with full
power of substitution, to the fullest extent of your rights with respect to the
units tendered by you and accepted for payment by us. Each such proxy will be
considered coupled with an interest in the tendered units. Such appointment
will be effective when, and only to the extent that, we accept the tendered
units for payment. Upon such acceptance for payment, all prior proxies given by
you with respect to the units will, without further action, be revoked, and no
subsequent proxies may be given (and if given will not be effective). We and
our designees will, as to accepted units, be empowered to exercise all voting
and other rights as a limited partner as we, in our sole discretion, deem
proper at any meeting of limited partners, by written consent or otherwise. We
reserve the right to require that, in order for units to be deemed validly
tendered, immediately upon our acceptance for payment of the units, we must be
able to exercise full voting rights with respect to the units, including voting
at any meeting of limited partners and/or limited partners then scheduled or
acting by written consent without a meeting. By
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executing the letter of transmittal, you agree to execute all such documents
and take such other actions as are required to enable the units tendered to be
voted in accordance with our directions. The proxy granted by you to us will
remain effective and is irrevocable for a period of ten years following the
termination of our offer.
By executing the letter of transmittal, you also irrevocably constitute
and appoint us and our designees as your attorneys-in-fact, each with full
power of substitution, to the full extent of your rights with respect to the
units tendered by you and accepted for payment by us. Such appointment will be
effective when, and only to the extent that, we pay for your units and will
remain effective and be irrevocable for a period of ten years following the
termination of our offer. You agree not to exercise any rights pertaining to
the tendered units without our prior consent. Upon such payment, all prior
powers of attorney granted by you with respect to such units will, without
further action, be revoked, and no subsequent powers of attorney may be granted
(and if granted will not be effective). Pursuant to such appointment as
attorneys-in-fact, we and our designees each will have the power, among other
things: (i) to transfer ownership of such units on the partnership books
maintained by your general partner (and execute and deliver any accompanying
evidences of transfer and authenticity it may deem necessary or appropriate in
connection therewith); (ii) upon receipt by the Depositary of the offer
consideration, to become a substituted limited partner, to receive any and all
distributions made by your partnership on or after the date on which we acquire
such units, and to receive all benefits and otherwise exercise all rights of
beneficial ownership of such units in accordance with the terms of our offer;
(iii) to execute and deliver to the general partner of your partnership a
change of address form instructing the general partner to send any and all
future distributions to which we are entitled pursuant to the terms of the
offer in respect of tendered units to the address specified in such form; and
(iv) to endorse any check payable to you or upon your order representing a
distribution to which we are entitled pursuant to the terms of our offer, in
each case, in your name and on your behalf.
ASSIGNMENT OF INTEREST IN FUTURE DISTRIBUTIONS. By executing the letter of
transmittal, you irrevocably assign to us and our assigns all of your right,
title and interest in and to any and all distributions made by your partnership
from any source and of any nature, including, without limitation, distributions
in the ordinary course, distributions from sales of assets, distributions upon
liquidation, winding-up or dissolution, payments in settlement of existing or
future litigation, and all other distributions and payments from and after the
expiration date of our offer, in respect of the units tendered by you and
accepted for payment and thereby purchased by us. If, after the unit is
accepted for payment and purchased by us, you receive any distribution from any
source and of any nature, including, without limitation, distributions in the
ordinary course, distributions from sales of assets, distributions upon
liquidation, winding-up or dissolution, payments in settlement of existing or
future litigation and all other distributions and payments, from your
partnership in respect of such unit, you will agree to promptly forward such
distribution to us.
DETERMINATION OF VALIDITY; REJECTION OF UNITS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the validity, form,
eligibility, including time of receipt, and acceptance for payment of any
tender of units in our offer will be determined by us, in our sole discretion,
which determination will be final and binding. We reserve the absolute right
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to reject any or all tenders of any particular unit determined by us not to be
in proper form or if the acceptance of, or payment for, that unit may, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defect or irregularity in any tender with respect to any particular unit of any
particular limited partner, and our interpretation of the terms and conditions
of the offer, including the letter of transmittal and the instructions thereto,
will be final and binding. Neither us, our Depositary, our Information Agent,
nor any other person will be under any duty to give notification of any defects
or irregularities in the tender of any unit or will incur any liability for
failure to give any such notification.
BINDING AGREEMENT. A tender of a unit under any of the procedures
described above and the acceptance for payment of such unit constitutes a
binding agreement between the tendering unit holder and us on the terms set
forth in this offer and the related letter of transmittal.
SECTION 4. WITHDRAWAL RIGHTS. You may withdraw tendered units at any time
prior to the expiration date if the units have not been previously accepted for
payment.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by our Depositary at the address
set forth on the back cover of this offer to purchase. Any such notice of
withdrawal must specify the name of the person who tendered, the number of
units to be withdrawn and must be signed by the person(s) who signed the letter
of transmittal in the same manner as the letter of transmittal was signed.
If purchase of, or payment for, a unit is delayed for any reason, or if we
are unable to purchase or pay for a unit for any reason, then, without
prejudice to our rights under the offer, we may cause our Depositary to retain
tendered units and such units may not be withdrawn except to the extent that a
tendering limited partner is entitled to withdrawal rights as set forth in this
Section 4; subject, however, to our obligation, pursuant to Rule 14e-1(c) under
the Exchange Act, to pay the offer price in respect of units tendered or return
those units promptly after termination or withdrawal of the offer.
Any units properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of our offer. However, withdrawn units may be re-
tendered by following any of the procedures described in Section 3 at any time
prior to the expiration date.
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. We
expressly reserve the right, in our sole discretion, at any time and from time
to time: (i) to extend the period of time during which our offer is open, and
thereby delay acceptance for payment of, and the payment for, any unit; (ii) to
terminate the offer and not accept any units not theretofore accepted for
payment or paid for if any of the conditions of the offer is not satisfied or
if any event occurs that might reasonably be expected to result in a failure to
satisfy such conditions; (iii) upon the occurrence of any of the conditions
specified in Section 14 of this offer to purchase, to delay the acceptance for
payment of, or payment for, any units not already accepted for payment or paid
for; and (iv) to amend our 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 an amendment will promptly be
disseminated to you in a manner reasonably designed to inform you
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of the change in compliance with Rule 14d-4(c) under the Exchange Act. An
extension of the offer 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 of our offer, in
accordance with Rule 14e-1(d) under the Exchange Act.
If we extend the offer, or if we delay payment for a unit, whether before
or after its acceptance for payment, or are unable to pay for units pursuant to
our offer for any reason, then, without prejudice to our rights under the
offer, we may cause our Depositary to retain tendered units and those units may
not be withdrawn except to the extent tendering limited partners are entitled
to withdrawal rights as described in Section 4; subject, however, to our
obligation, pursuant to Rule 14e-1(c) under the Exchange Act to pay the offer
price in respect of units tendered or return those units promptly after
termination or withdrawal of the offer.
If we make a material change in the information concerning the offer or if
we waive a material condition to our offer, we will extend the offer and
disseminate additional tender offer materials to the extent required by Rules
14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which
an offer must remain open following any material change in the information
concerning the offer will depend upon the facts and circumstances, including
the relative materiality of the change in information. In the Commission's
view, an offer should remain open for a minimum of five business days from the
date the material change is first published, sent or given to security holders,
and if material changes are made with respect to information that approaches
the significance of price or the percentage of securities sought, a minimum of
ten business days may be required to allow for adequate dissemination to
security holders and for investor response. As used in this offer to purchase,
"business day" means any day other than a Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through 12:00
Midnight, New York City time.
SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary
is a general discussion of certain federal income tax considerations that
should be considered in connection with a sale of units in our offer. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations thereunder, administrative rulings, practice
and procedures and judicial authority, all as of the date of our
offer. All of the foregoing are subject to change at any time, 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 you
in light of your specific circumstances or to certain types of investors
subject to special tax rules (for example, dealers in securities, banks,
insurance companies and, except as discussed below, foreign and tax-exempt
investors), nor does it discuss any aspect of state, local, foreign or other
tax laws. Sales of units pursuant to our offer will be taxable transactions for
federal income tax purposes, and may also be taxable transactions under
applicable state, local, foreign and other tax laws. Your resulting tax
consequences will depend, in part, on your personal tax situation. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES, INCLUDING
STATE AND LOCAL TAX CONSEQUENCES, TO YOU OF SELLING UNITS IN OUR OFFER.
You will recognize gain or loss on a sale of units in our offer equal to
the difference between: (i) your "amount realized" on the sale; and (ii) your
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adjusted tax basis in the units sold. The amount of your adjusted tax basis
will vary depending upon your particular circumstances, but generally will
equal your cash investment in your units, increased by your share of your
partnership's income and gain and decreased by your share of your partnership's
losses and distributions. The "amount realized" with respect to a unit sold
will be a sum equal to the amount of cash received by you for the unit plus the
amount of your share of the partnership's liabilities that are allocable to the
unit.
In connection with the closing of our purchase of your units, you will be
allocated a share of your partnership's taxable income or loss with respect to
the units sold by you in accordance with the provisions of your partnership's
partnership agreement governing allocations to transferees of units. Such
allocations and any cash distributed to you or for your benefit prior to the
closing by your partnership will affect your adjusted tax basis in your units
and, therefore, your taxable gain or loss upon a sale of units in our offer. In
this regard, if you tender your units, you will be allocated a pro rata share
of taxable income with respect to your units sold in our offer through the end
of the calendar quarter in which the units are sold, but we will receive all
future distributions made with respect to your units. See "Section 9. Certain
Information Concerning Your Partnership."
Based on the results of your partnership's operations through September
30, 2002, and without giving effect to your partnership's operations,
transactions or distributions after that date, depending on your date of entry
into your partnership, if you sell your units in our offer and you purchased
your units in your partnership's original offering, we estimate that you will
realize a loss for federal income tax purposes. For purposes of the passive
activity loss rules (discussed below), such loss may be 100% allocable to your
partnership's remaining mortgage loan asset. Based on your partnership's
treatment of its interest income from the mortgage loan as non-passive activity
income, such loss generally could be deductible by you in the year of sale free
of the Code's applicable passive activity loss limitation (but subject to any
other applicable limitations) even if you do not sell all of your units in our
offer.
Your gain or loss on a sale of a unit in our offer generally will be
treated as a capital gain or loss if you held the unit as a capital asset. Gain
recognized by you on the disposition of a unit with a holding period of 12
months or less will be classified as short-term capital gain and subject to
taxation at ordinary income tax rates. Your capital gain or loss will be
treated as long-term capital gain or loss if your holding period for the unit
exceeds 12 months. Under current law, capital gains and losses of individuals
and non-corporate taxpayers are taxed under tax rules different from the rules
applicable to corporations. Long-term capital gains of individuals and other
non-corporate taxpayers are taxed at a maximum marginal federal income tax rate
of 20%; however, such gain attributable to the recapture of straight-line
depreciation deductions is taxed at a federal income tax rate of 25%. The
maximum marginal federal income tax rate for other income of such persons is
38.6%. Capital losses are deductible only to the extent of capital gains,
except that non-corporate taxpayers can deduct up to $3,000 of capital losses
in excess of the amount of their capital gains against their ordinary income.
An individual's long-term capital losses in excess of his long-term capital
gains can offset his short-term capital gains on which he would otherwise be
subject to tax at the same federal income tax rates as his ordinary income.
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Excess capital losses generally can be carried forward to succeeding years (a
corporation's carryforward period is five years and a non-corporate taxpayer
can carry forward such losses indefinitely); in addition, corporations, but not
non-corporate taxpayers, are allowed to carry back excess capital losses to the
three preceding taxable years.
Under special tax rules applicable to "passive activity losses," if you
are a non-corporate taxpayer, you generally cannot use your losses from your
partnership's passive activities to offset your non-passive activity income
(and if you are a closely-held corporation, you generally cannot use your
losses from your partnership's passive activities to offset your portfolio
income). One hundred percent of your loss on a sale of your units in our offer
may be allocable to your partnership's mortgage loan asset, and, therefore, may
be deductible in full by you in the year of sale free of the passive activity
loss limitation (based on your partnership's treatment of its income from this
asset as non-passive activity income and such treatment is proper). In any
event, if you sell all your units in our offer, then your loss on the sale (and
any previously suspended passive losses from the partnership) could be deducted
by you in full in the year of sale (subject to any other applicable
limitations).
In order to avoid liability for federal estimated tax penalties, an
individual generally is required to make quarterly estimated tax payments on
account of his annual tax liability. Penalties generally may be avoided by the
individual's paying at least 90% of his taxes due for the current year or a
percentage of his prior year's tax equal to 112% if the preceding tax year is
2001 and 110% if the preceding tax year is 2002 or thereafter.
If you are a tax-exempt investor, you generally should not realize
unrelated business taxable income upon a sale of your units in our offer
assuming you do not hold your units subject to acquisition indebtedness.
However, if you are a tax-exempt investor described in section 501(c)(7),
(c)(9), (c)(17) or (c)(20) of the Code, you should consult your tax advisor
concerning the application of "set aside" and reserve requirements to a sale of
your units.
In addition to federal income tax, you may be subject to state and local
taxes on your gain (if any) on a sale of your units. You should consult with
your own professional tax advisors concerning the state and local tax
consequences of a sale of your units.
If you sell your units, you must report the sale by filing a statement
with your federal income tax return for the year of sale. To prevent the
possible application of back-up federal income tax withholding of 30% with
respect to the payment of the purchase price, you will have to provide us with
your correct taxpayer identification number. See the instructions to the letter
of transmittal.
TAX CONSEQUENCES TO NON-TENDERING AND PARTIALLY-TENDERING LIMITED
PARTNERS. Section 708 of the Code provides that if there is a sale or exchange
of 50% or more of the total interest in capital and profits of a partnership
within any 12-month period, such partnership terminates for United States
federal income tax purposes. The partnership will not process any requests for
transfers of units during any 12-month period which could cause a tax
termination. If your partnership is deemed to terminate for tax purposes, the
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following federal income tax events will be deemed to occur: the terminated
partnership will be deemed to have contributed all of its assets (subject to
its liabilities) to a new partnership in exchange for an interest in the new
partnership and, immediately thereafter, the old partnership will be deemed to
have distributed interests in the new partnership to the remaining limited
partners in proportion to their respective interests in the old partnership in
liquidation of the old partnership.
You will not recognize any gain or loss upon such deemed contribution of
your partnership's assets to the new partnership or upon such deemed
distribution of interests in the new partnership, and your capital account in
your partnership will carry over to the new partnership.
A termination of your partnership for federal income tax purposes may also
subject the assets of your partnership to longer depreciable lives than those
currently applicable to the assets of your partnership. This would generally
decrease the annual average depreciation deductions allocable to you for
certain years following our offer if you do not tender all of your interests in
your partnership (thereby increasing the taxable income allocable to your
interests in your partnership each such year), but would have no effect on the
total depreciation deductions available over the total recovery period of the
assets of your partnership. Additionally, upon a termination of your
partnership, the taxable year of your partnership will close for federal income
tax purposes.
SECTION 7. EFFECTS OF THE OFFER.
LIMITATIONS ON RESALES. Under the partnership agreement, transfers of
units which in the opinion of counsel to your partnership would cause a
termination of your partnership for federal income tax purposes are not
permitted. A termination may occur when 50% or more of the units are
transferred in a 12-month period. Depending upon the number of units tendered
in our offer, sales of units on the secondary market for the 12-month period
following completion of our offer may be limited. The partnership will not
process any requests for transfers of units during such 12-month period which
the general partner of your partnership believes may cause a tax termination.
EFFECT ON TRADING MARKET. There is no established public trading market
for the units and, therefore, a reduction in the number of limited partners
should not materially further restrict your ability to find purchasers for your
units in the secondary market.
INFLUENCE ON LIMITED PARTNER VOTING DECISIONS BY US AND OUR AFFILIATES.
We will have the right to vote each unit that we purchase in the offer.
Depending on the number of units that we purchase in the offer, we and our
affiliates may be in a position to influence the outcome of voting decisions
with respect to your partnership. Accordingly, we and our affiliates could: (i)
prevent non-tendering limited partners from taking action they desire but
that we and our affiliates oppose; and (ii) take action desired by us and our
affiliates but opposed by non-tendering limited partners. Under the partnership
agreement, limited partners holding a majority of the units are entitled to
take action with respect to a variety of matters, including: removing your
general partner; dissolving your partnership; selling all or substantially all
of your partnership's assets; effecting material changes in the investment
objectives and policies of your partnership; and causing most
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types of amendments to the partnership agreement. When voting on matters, we
and our affiliates will vote units owned and acquired by us, in our interest.
The units are registered under the Exchange Act, which means, among other
things, that your partnership is required to furnish certain information to its
limited partners and to the Commission and comply with the Commission's proxy
rules in connection with meetings of, and solicitation of consents from,
limited partners. Our purchase of units under the offer will not result in the
units becoming eligible for deregistration under Section 12(g) of the Exchange
Act.
SECTION 8. FUTURE PLANS. We are seeking to acquire units primarily for
investment purposes and with a view to making a profit.
SECTION 9. CERTAIN INFORMATION CONCERNING YOUR PARTNERSHIP. Information
included herein concerning your partnership is derived from your partnership's
publicly-filed reports. Additional financial and other information concerning
your partnership is contained in your partnership's annual reports on Form 10-K
and Form 10-KSB, quarterly reports on Form 10-Q and Form 10-QSB and other
filings with the Commission. Such reports and other documents may be examined
and copies may be obtained from the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located in the Northwestern Atrium Center, 500 Madison Street, Suite
1400, Chicago, Illinois 60661. Copies should be available by mail upon payment
of the Commission's customary charges by writing to the Commission's principal
offices at 450 Fifth Street, N.W., Washington, D.C. 20549. The materials may
also be reviewed through the Commission's Web site (http://www.sec.gov).
Your partnership was organized on August 14, 1986 under the laws of the
State of Delaware. Its principal executive offices are located at 1775 West
Moana Lane, Suite 200, Reno, Nevada 89509. Its telephone number is (775) 825-
3355. Your partnership was formed for the purpose of investing in "zero coupon"
first and junior mortgage loans which were secured by real property. Your
original general partners anticipated making first and junior loans which would
be satisfied within 8 to 12 years after funding.
YOUR PARTNERSHIP'S CURRENT INVESTMENTS. Your partnership currently holds a
zero-coupon first mortgage loan secured by an approximately 233,000 square foot
shopping center located in Reno, Nevada. The property consists of two main
buildings and three anchor tenant buildings with surface parking for 1,184
automobiles. The loan had an original principal balance of $6,500,000, bears
interest at a rate of 11.22% per annum, compounded monthly, was originally
scheduled to mature on February 28, 2001, at which time a balloon payment of
$24,966,653, together with additional interest which may be owed as described
immediately below, if any, was due and payable, and was modified on December
21, 2000. One of the provisions of the loan stated that if the sum of (i) the
principal balance of the loan plus all other then outstanding indebtedness
secured by the property plus (ii) all accrued and unpaid interest in excess of
5% per annum of the principal balance of such mortgages, exceed 85% of the
current appraised value of the mortgaged property, the borrower
shall be immediately obligated to pay such excess. In the event that such
excess becomes due, the borrower may not have sufficient liquidity to satisfy
its obligation to your partnership. If this were to occur, the borrower could
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be forced to sell the property or seek other relief, including protection under
the bankruptcy laws.
In 1997, your partnership prepared a valuation of the collateral property
and based on that valuation, no additional amounts were then presently due.
However, as a result of such valuation, the borrower wrote the property down on
its financial statements to what its management believed to be its estimated
fair market value of $15,875,000. Your former general partners performed their
own evaluation and determined that this estimate was a fair representation of
the property's value at that time. The balance of the loan at December 31,
1996 was approximately $15,979,000 and the then general partners of your
partnership determined that it was unlikely that any additional interest
accrued on the loan would ultimately be recovered from the value of the
underlying property. Consequently, as of January 1, 1997, your partnership
ceased accruing interest on the loan.
The borrower advised your partnership in 2000 that it believed that the
value of the property had increased since the beginning of 1997 and that,
depending on the results of an appraisal of the property required to be made in
connection with any modification of the loan, the value of the loan may exceed
the value at which the loan was then being carried on your partnership's
financial statements. The borrower also requested that the loan be
restructured prior to its original maturity date (February 1, 2001). After
extensive negotiations, on December 21, 2000, your partnership and the borrower
agreed to modify the loan as follows:
1. The term of the loan was extended until February 28, 2003.
2. The borrower placed in escrow a deed as well as documents necessary
to convey the property, which documents will be released to your
partnership on the earlier (A) March 1, 2003, (B) at such time as a
third-party purchaser is identified to acquire the property or (C) at
any time after March 1, 2002 if your partnership deems it necessary
to protect its economic interest.
3. The borrower will pay to your partnership to be applied towards the
loan all cash flow generated from the property in excess of $100,000
per year.
4. The borrower was required to have an appraisal prepared on the
property to determine if an excess payment, as described above, was
due and, if such a payment is due, to make such payment. On March 27,
2001, your partnership received an appraisal from the borrower which
valued the property at $20,000,000. As a result, based on current
information available to your partnership, no excess payment is
presently required. However, the general partner believes that the
recent valuation of the property by the borrower is greater than the
net amount that could currently be obtained from a third-party
purchaser of the property.
5. The borrower has the right to prepay the loan by paying to your
partnership the sum of the then unpaid principal balance of the loan
together with accrued interest and other charges due under the loan
and 66% of the value of the property in excess of such amount.
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It is currently anticipated that the documents described in paragraph 2
above will be released to the partnership on March 1, 2003 and that the
partnership will, on March 3, 2003, record the deed and the other attendant
documents which will result in the partnership becoming the owner of the
shopping center in Reno, Nevada. The current owner will have no further
obligation to your partnership. At this point, we were unable to determine
what effect this will have on the valuation of your units nor the impact it may
have on the ongoing operations of the partnership. Should the partnership
become the owner of the shopping center, we will not adjust our purchase price
of $68 per unit.
LITIGATION. On or about May 19, 2000, Dr. Warren Heller, a limited
partner, commenced a putative class action and derivative lawsuit in the
Delaware Court of Chancery against, among others, your partnership, as a
nominal defendant, the former general partners and two of their affiliates
seeking, among other things, monetary damages resulting from purported breaches
of fiduciary duties and breaches of your partnership's partnership agreement in
connection with the March 1999 sale of one of your partnership's mortgage loans
and the marketing of the property which had been secured by that loan. In
addition, the action alleges breaches of fiduciary duty in connection with the
purported failure of your partnership to distribute cash and the purported
failure of the former general partners of the partnership to enforce the
provisions of your partnership's remaining mortgage loan.
On January 22, 2002, following completion of discovery, and further
negotiations which resulted in an increase in the settlement consideration, a
stipulation of settlement was executed setting forth the final terms of the
settlement. The settlement, which was approved by the Court of Chancery of
the State of Delaware on June 4, 2002, required the defendants to establish a
fund in the amount of $9,000,000 in full settlement and compromise of the
claims made by the plaintiff, the partnership and all members of the class.
From the settlement of this litigation, the partnership distributed the first
installment to the limited partners as well as other members of the plaintiffs'
class in the amount of $33.79 per unit, which distribution was made in
September 2002. The balance of the settlement fund, in the amount of $3.72 per
unit, was distributed in December 2002.
SELECTED FINANCIAL DATA. The following is a summary of certain financial
data for your partnership for the periods indicated. The summary financial
information for your partnership for the years ended 2001, 2000 and 1999 is
based on audited financial statements.
SELECTED FINANCIAL DATA
FISCAL YEAR ENDED DECEMBER 31,
2001 2000 1999
------ ------ ------
Mortgage Loan Interest Income $1,283,920 $ - $ -
Short-Term Investment Interest 174,790 252,169 145,513
Other Income 19,150 - 23,375
---------- ---------- --------
Total Revenues 1,477,860 252,169 168,888
Recovery of Loan Losses, Net - - (400,000)
Total Expenses (291,251) (176,628) (312,427)
Net Income 1,186,609 75,541 481,315
Net Income per Unit 6.16 0.39 2.50
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Nine Months Ended September 30,
2002 2001
---------- ----------
Mortgage Loan Interest Income $1,380,667 $ 827,947
Short-Term Investment Interest - 147,422
Other Income 88,712 12,850
Proceeds from Class Action
Settlement 9,000,000 -
---------- ----------
Total Revenues 10,469,379 988,219
Recovery of Loan Losses, Net - -
Total Expenses 2,161,007 129,425
Net Income 8,308,372 858,794
Net Income per Unit 44.05 4.46
BALANCE SHEET DATA
December 31, December 31, September 30,
(unaudited)
Total Assets $16,733,491 $20,321,625 $18,609,563
Total Liabilities 124,147 57,315 41,003
Partners' Equity (187,919 units
outstanding) 16,609,344 20,264,310 18,568,560
STATEMENT OF CASH FLOWS DATA
Cash and Cash Equivalents 754,136 4,324,270 1,884,326
Net Cash Provided by Operating
Activities 1,253,441 65,427 1,130,190
SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES. We
have certain conflicts of interest with respect to the offer as set forth
below.
VOTING BY US AND OUR AFFILIATES. As a result of our offer, we and our
affiliates will be in a position to influence the outcome of partnership
decisions on which limited partners may vote. This means that: (i) non-
tendering limited partners could be prevented from taking action they desire
but that we and our affiliates oppose; and (ii) we and our affiliates may be
able to take action desired by us and our affiliates but opposed by non-
tendering limited partners. See "Section 7. Effects of the Offer."
TRANSACTIONS WITH AFFILIATES. Under the partnership agreement, your
general partner is entitled to receive 2.5% of your partnership's income, loss,
capital and distributions including without limitation your partnership's cash
flow from operations and disposition proceeds.
SECTION 11. CERTAIN INFORMATION CONCERNING US. We are Virginia Springs
Limited Liability Company, a Nevada limited liability company formed for the
purpose of investing in real estate-related investments. Our members are John
Farahi, Bob Farahi and Ben Farahi. Our principal executive office is located
at 1175 West Moana Lane, Suite 200, Reno, Nevada 89509, and our telephone
number is (775) 825-3355.
-17-
The names, positions and business addresses of our members as well as a
biographical summary of the experience of such persons for the past five years
or more, are set forth on Schedule 1 attached hereto and are incorporated
herein by reference.
Neither we, John Farahi, Bob Farahi nor Ben Farahi was convicted in a
criminal proceeding during the past five years (excluding traffic violations or
similar misdemeanors). In addition, none of such persons or entities was a
party to any judicial or administrative proceeding during the past five years
(except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws.
As of the date of this offer to purchase, we own 9,703 units. We acquired
the units at a purchase price of $95 per unit pursuant to a tender offer which
we undertook on March 29, 2002. Western Real Estate Investments, LLC owns
68,040. In addition, Ben Farahi own 44 units. To the best of our knowledge,
no other affiliate of ours beneficially owns or has a right to acquire any
units.
UNITS OWNED BY OUR AFFILIATES. Western purchased 166 units at prices per
unit ranging from $82.75 to $102.00 in a series of transactions that occurred
between January 10, 2001 and January 30, 2001. In addition, Western purchased
120 units on February 14, 2001 for approximately $102.00 per unit; 299 units on
February 15, 2001 for approximately $104.00 per unit; 24 units on March 22,
2001 for approximately $130.00 per unit; and 140 units on March 30, 2001 for
approximately $125.00 per unit. Western purchased such units through
intermediaries (e.g. through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of units).
In addition to the foregoing, on February 12, 2001, Western commenced a
tender offer for an aggregate of 40,000 units at a purchase price of $127.00
per unit payable in cash, pursuant to which it acquired 6,841 units at an
aggregate purchase price of $848,106.
As of January 1, 2002, in accordance with the terms and conditions of the
General and Limited Partner Interest Assignment Agreement, dated as of October
10, 2001 (the "Assignment Agreement"), among your general partner, Western, RAM
Funding, Inc. (the former managing general partner of your partnership),
Presidio AGP Corp. (the former associate general partner of your partnership),
and certain affiliates of RAM Funding and Presidio AGP who are former limited
partners of your partnership, Western acquired an aggregate of 57,695 units
from such former limited partners and your general partner acquired the general
partnership interests for a total purchase price of $4,395,181.46 and an
assignment of the settlement rights of our affiliated entities with respect to
the settled litigation to the selling entities. The funds necessary to
purchase these interests were obtained from capital contributions made directly
or indirectly by Farahi Investment Company, the sole member of Western. The
Assignment Agreement also required the former general partners to cause the
partnership to distribute all cash reserves other than $500,000 immediately
prior to the change in general partners, resulting in a distribution equal to
$25.12 per unit on December 31, 2001.
-18-
Except as set forth immediately above in this Section 11, neither we, nor
your general partner, nor Western, nor Farahi Investment Company nor any of the
individuals listed on Schedule I nor, to the best of our knowledge, any
affiliate thereof has effected any transaction in the units within the past 60
days.
RELATED PARTY CONTRACTS AND TRANSACTIONS. Except as otherwise set forth
in Section 10 hereof, neither we, nor your general partner, nor Western, nor
Farahi Investment Company nor any of the individuals listed on Schedule I nor,
to the best of our knowledge, any affiliate thereof has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of your partnership, including, but not limited to,
contracts, arrangements, understandings or relationships concerning the
transfer or voting thereof, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies.
Except as otherwise set forth in Section 10 hereof, there have been no
transactions or business relationships which would be required to be disclosed
under the rules and regulations of the Commission between us, your general
partner, Western, Farahi Investment Company, any of the individuals listed on
Schedule I or, to the best of our knowledge, any affiliate thereof, on the one
hand, and your partnership or its affiliates, on the other hand.
Except as set forth above in this Section 11, there have been no
contracts, negotiations or transactions between us, your general partner,
Western, Farahi Investment Company, any of the individuals listed on Schedule I
or, to the best of our knowledge, any affiliate thereof, on the one hand, and
your partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
SECTION 12. SOURCE OF FUNDS. Approximately $816,000 exclusive of fees and
expenses, will be required to purchase all 12,000 of the units. We currently
have approximately $1,100,000 in available funds to pay for the units. Our
other assets are the units of the partnership which we already own and a real
estate property located in Reno, Nevada. We have no liabilities. Therefore,
we are able to fulfill each of the financial obligations with respect to this
tender offer.
SECTION 13. BACKGROUND OF THE OFFER. We are offering to purchase units
which are a relatively illiquid investment and which do not presently generate
current income. We are not offering to purchase your partnership's underlying
assets. Consequently, we do not believe that the underlying asset value of your
partnership is determinative in arriving at the purchase price. Nevertheless,
as set forth below, we have determined an estimated liquidation value for your
partnership.
We valued your partnership's mortgage loan at $15,979,355, the value of
the mortgage loan on your partnership's December 31, 2001 balance sheet. This
value represented the outstanding balance on the mortgage loan at December 31,
1996. As a result of a 1997 evaluation by your former managing general partner
of the value of the property securing the mortgage loan, your partnership has
not accrued any interest on the mortgage loan since January 1, 1997. If the
full amount of interest had been accrued, as of December 31, 2001 the mortgage
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loan would have a value of $26,062,593. As discussed under "Section 9.
Certain Information Concerning Your Partnership - Your Partnership's Current
Investments," the borrower has advised your partnership that it believes that
the value of its property has increased since the beginning of 1997. Thus the
value of your partnership's mortgage loan may exceed the value we have used in
our estimate.
To determine the estimated liquidation value of your partnership, we added
to the value we attributed to your partnership's mortgage loan the net
unencumbered cash of your partnership at September 30, 2002 ($1,884,326) and
deducted $639,174 or 4% of the value of the mortgage loan as an estimated
reserve to cover disposition of the mortgage loan and wind up your partnership.
The resulting estimated liquidation value of your partnership is $17,224,507 or
$89.37 per unit based upon the share of proceeds that limited partners are
entitled to receive.
The following chart summarizes our determination of the estimated
liquidation value of your partnership:
Estimated Value of Mortgage Investment $15,979,355
Unencumbered Cash Reserves as of
September 30, 2002
Net of Accounts Payable 1,884,326
Less: Liquidation Costs 639,174
Net Cash 17,224,507
Per Unit Liquidation value $89.37
We believe that the above methodology is an appropriate method for
determining the liquidation value of your partnership's assets. The utilization
of different valuation methods or assumptions also could be appropriate. In
this regard, you should understand that other appropriate valuation methods
could yield a higher value. Furthermore, we did not take into account the
value of the property securing the loan and the fact that is more likely than
not that the partnership will foreclose its interest in March 2003 and will
become the owner of the property.
The purchase price, which is less than the estimated liquidation value,
represents the price at which we are willing to purchase the units. No
independent person has been retained to evaluate or render any opinion on the
fairness of the offer price and no representation is made by us, or the general
partner of your partnership, as to the fairness of our offer. We did not, nor
did the general partner of your partnership, attempt to obtain a current
independent valuation or appraisal of your partnership's mortgage loan or the
real estate securing the loan. You are urged to consider carefully all of the
information contained herein and consult with your own advisors, tax, financial
or otherwise, in evaluating the terms of our offer before deciding whether to
tender your units.
Secondary market sales activity for the units, including privately
negotiated sales, has been limited. At present, privately negotiated sales and
sales through intermediaries (e.g., through the trading system operated by
American Partnership Board, Inc., which publishes sell offers by holders of
units) are the only means available known to us for a limited partner to
liquidate an investment in units because the units are not listed or traded on
any exchange or quoted on any Nasdaq list or system. According to Partnership
-20-
Spectrum, an independent third party industry publication, between December 1,
2001 and November 30, 2002, there were 50 reported trades in the secondary
market (for a total of 2,334 units) which were made at between a high of $120
per unit and a low of $70 per unit, with a weighted average price of
approximately $105.37 per unit. These prices do not take into account
commissions and other transactional costs which sellers of units may be
required to pay (which typically range between $250 and $400). The majority of
these sales of units in the secondary market occurred prior to either the first
or both distributions of the settlement from the litigation described in the
section of this document entitled "Section 9. Certain Information Concerning
Your Partnership - Litigation."
Your partnership is making no recommendation as to whether limited
partners should tender their units.
SECTION 14. CONDITIONS OF THE OFFER. Notwithstanding any other term of
our offer, we are not required to accept for payment or pay for any units not
theretofore accepted for payment or paid for and may terminate or amend our
offer as to such units, if at any time prior to the expiration of the offer:
(a) a preliminary or permanent injunction or other order of any federal or
state court, government or governmental authority or agency shall have been
issued and shall remain in effect which makes illegal, delays or otherwise
directly or indirectly restrains or prohibits making of our offer or the
acceptance for payment of or payment for any units by us;
(b) there shall be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable to
our offer by any federal or state court, government or governmental authority
or agency, which might, directly or indirectly, result in any of the
consequences referred to in paragraph (a) above; or
(c) there shall have been threatened, instituted or pending any action or
proceeding before any court or government agency or other regulatory or
administrative agency or commission or by any other person challenging the
acquisition of any units in our offer, or otherwise directly or indirectly
relating to our offer, or otherwise, in our reasonable judgment, adversely
affecting us or your partnership.
The above conditions must be satisfied or waived prior to the expiration
date of our offer and we will exercise the standard of reasonableness in
determining whether the conditions have been satisfied. Finally, we will not
purchase units under the offer if it will result in the units becoming eligible
for deregistration under Section 12(g) of the Exchange Act.
SECTION 15. CERTAIN LEGAL MATTERS.
GENERAL. Except as set forth in this Section 15, we are not aware of any
filings, approvals or other actions by any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of units
by us in our offer. Should any such approval or other action be required, it is
our present intention that such additional approval or action would be sought.
While there is no present intent to delay the purchase of units tendered in our
offer pending receipt of any such additional approval or the taking of any such
action, there can be no assurance that any such additional
-21-
approval or action, if needed, could be obtained without substantial conditions
or that adverse consequences might not result to your partnership's business,
or that certain parts of your partnership's business might not have to be
disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or action, any of which could cause us to
terminate our offer without purchasing units hereunder. Our obligation to
purchase and pay for units is subject to certain conditions, including
conditions related to the legal matters discussed in this Section 15.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of units
contemplated by our offer.
MARGIN REQUIREMENTS. The units are not "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System and,
accordingly, such regulations are not applicable to our offer.
STATE TAKEOVER LAWS. A number of states have adopted anti-takeover laws
which purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
substantial assets, security holders, principal executive offices or principal
places of business therein. Although we have not attempted to comply with any
state anti-takeover statutes in connection with our offer, we reserve the right
to challenge the validity or applicability of any state law allegedly
applicable to our offer and nothing in this offer to purchase nor any action
taken in connection herewith is intended as a waiver of such right. If any
state anti-takeover statute is applicable to our offer, we might be unable to
accept for payment or purchase units tendered in our offer or be delayed in
continuing or consummating our offer. In such case, we may not be obligated to
accept for purchase or pay for any units tendered.
SECTION 16. FEES AND EXPENSES. Except as set forth in this Section 16, we
will not pay any fees or commissions to any broker, dealer or other person for
soliciting tenders of units in our offer. We have retained MacKenzie Partners,
Inc. to act as Information Agent and American Stock Transfer & Trust Company to
act as Depositary in connection with our offer. We will pay MacKenzie Partners,
Inc. and American Stock Transfer & Trust Company, Inc. reasonable and customary
compensation for their services in connection with the offer, plus
reimbursement for out-of-pocket expenses. We will also pay all costs and
expenses of printing and mailing our offer and its legal fees and expenses. You
will not be required to pay any fees or commissions to us in connection with a
tender. However, you will be responsible for the payment of any fees charged by
your broker for assisting you in tendering your units or any fee charged by a
custodian or other trustee of an Individual Retirement Account or profit
sharing plan that is the record owner of your units. Although we do not know
the fees charged by these brokers and trustees, we believe that such fees are
typically $24 to $100 per transaction.
SECTION 17. MISCELLANEOUS. We are not aware of any jurisdiction in which
the making of our offer is not in compliance with applicable law. If we become
aware of any jurisdiction in which the making of our offer would not be in
compliance with applicable law, we will make a good faith effort to comply with
any such law. If, after such good faith effort, we cannot comply with any such
law, our offer will not be made to, nor will tenders be accepted from or on
behalf of, the holders of units residing in such jurisdiction.
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No person has been authorized to give any information or to make any
representation on our behalf not contained herein or in the letter of
transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.
We have filed with the Commission a Schedule TO, pursuant to Rule 14d-3
under the Exchange Act, furnishing certain additional information with respect
to our offer, and may file amendments thereto. The Schedule TO and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained at the same places and in the same manner as set forth in Section 9
hereof, except that they will not be available at the regional offices of the
Commission.
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
February 18, 2003
SCHEDULE 1
INFORMATION WITH RESPECT TO THE MEMBERS OF VIRGINIA SPRINGS LIMITED LIABILITY
COMPANY.
Set forth below is the name, current business address, present principal
occupation, and employment history for at least the past five years of each
member of Virginia Springs Limited Liability Company. Each person listed below
is a citizen of the United States.
John Farahi, 54, has been Co-Chairman of the Board, Chief Executive
Officer and Chief Operating Officer of Monarch Casino & Resort, Inc.
("Monarch"), which through its wholly owned subsidiary Golden Road Motor Inn
("Golden Road") operates the Atlantis Casino Resort in Reno, Nevada, since its
inception in 1993, and has held the same positions with Golden Road since June
1993. From 1973 until June 1993, Mr. Farahi was President, Director and
General Manager of Golden Road. Mr. Farahi is a partner in Farahi Investment
Company ("FIC"), which is engaged in real estate investment and development in
the Reno area. Mr. Farahi holds a political science degree from the California
State University, Hayward.
Bob Farahi, 52, has been Co-Chairman of the Board and President of Monarch
since its inception, and of Golden Road since June 1993. From 1973 until June
1993, Mr. Farahi was Vice President and a director of Golden Road. Mr. Farahi
is a partner in FIC. Mr. Farahi holds a biochemistry degree from the
University of California at Berkeley.
Ben Farahi, 50, has been Co-Chairman of the Board, Chief Financial
Officer, Secretary and Treasurer of Monarch since its inception, and of Golden
Road since June 1993. From 1973 until June 1993, Mr. Farahi was Secretary,
Treasurer and a Director of Golden Road in charge of financial planning and
construction. Mr. Farahi is a partner in FIC. Mr. Farahi is also the managing
member of Maxum LLC, the general partner of Resources Accrued Mortgage
Investors 2, L.P. Mr. Farahi holds a mechanical engineering degree from the
University of California at Berkeley and a M.B.A. degree in accounting from the
California State University, Hayward.
The address for each member of Virginia Springs Limited Liability Company
is 1175 West Moana Lane, Suite 200, Reno, Nevada 89509.
The letter of transmittal and any other required documents should be sent
or delivered by you or your broker, dealer, commercial bank, trust company or
other nominee to the Depositary at its address set forth below:
VIA U.S. MAIL American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attn: Reorg. Department - RAM 2
VIA HAND AND American Stock Transfer & Trust Company
OVERNIGHT COURIER 6201 15th Avenue
Brooklyn, New York 11219
Attn: Reorg. Department - RAM 2
VIA FACSIMILE: (718) 234-5001
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below. Additional copies of
this Offer to Purchase and the Letter of Transmittal may be obtained from the
Information Agent.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
800-322-2885
212-929-5500
Exhibit (a)(2)
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
LETTER OF TRANSMITTAL
- ---------------------
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON APRIL 23, 2003 (THE "EXPIRATION DATE") UNLESS EXTENDED.
(Please indicate changes or corrections to the name, address and Tax
Identification Number printed above.)
===========================================================================
To participate in the Offer, a duly executed copy of this Letter of
Transmittal and any other documents required by this Letter of Transmittal must
be received by the Purchaser (as defined below) on or prior to the Expiration
Date. Delivery of this Letter of Transmittal or any other required documents to
an address other than as set forth below does not constitute valid delivery.
The method of delivery of all documents is at the election and risk of the
tendering Limited Partner. Please use the pre-addressed, postage paid envelope
provided.
This Letter of Transmittal is to be completed by limited partners (the
"Limited Partners") of Resources Accrued Mortgage Investors 2, L.P. (the
"Partnership") pursuant to the procedures set forth in the Offer to Purchase
(as defined below). Capitalized terms used herein and not defined herein have
the meanings ascribed to such terms in the Offer to Purchase, dated February
18, 2003, as amended (the "Offer to Purchase"), made by Virginia Springs
Limited Liability Company, a Nevada limited liability company (the
"Purchaser").
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
- --------------------------------
IF YOU HAVE THE CERTIFICATE ORIGINALLY ISSUED TO REPRESENT YOUR UNITS IN THE
PARTNERSHIP, PLEASE SEND IT TO THE DEPOSITARY WITH THIS LETTER OF TRANSMITTAL
- --------------------------------
FOR INFORMATION OR ASSISTANCE IN CONNECTION WITH THE OFFER OR THE COMPLETION OF
THIS LETTER OF TRANSMITTAL, PLEASE CONTACT OUR INFORMATION AGENT, MACKENZIE
PARTNERS, INC., AT (800) 322-2885
TO: VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
The undersigned hereby tenders the number of its units of limited
partnership interest in the Partnership as set forth herein (the "Units") to
Virginia Springs Limited Liability Company, a Nevada limited liability company
(the "Purchaser") for $68 cash per Unit, less any distributions made by the
Partnership prior to the date of payment, upon the terms and subject to the
conditions set forth in the Offer to Purchase, receipt of which is hereby
acknowledged, and this Letter of Transmittal (the "Letter of Transmittal",
which, together with the Offer to Purchase and any supplements, modifications
or amendments thereto, constitute the "Offer").
The undersigned recognizes that, under the circumstances described in the
Offer to Purchase, the Purchaser will accept Units for payment on a pro rata
basis (with adjustments to avoid purchases of certain fractional Units) based
upon the number of Units tendered prior to or on the Expiration Date and not
withdrawn.
Subject to and effective upon acceptance for payment of any Units tendered
hereby in accordance with the terms of the Offer, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Purchaser all right, title
and interest in and to such Units purchased and requests, authorizes and
directs the general partner of the Partnership (the "General Partner") to
substitute the Purchaser as a limited partner of the Partnership in place of
the undersigned with respect to such Units. The undersigned hereby irrevocably
constitutes and appoints the Purchaser as the Limited Partner's proxy and true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Units, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest) to deliver such Units and
transfer ownership thereof on the Partnership books maintained by the General
Partner, together with all accompanying evidences of transfer and authenticity,
to or upon the order of the Purchaser and upon payment of the purchase price
payable by the Purchaser in accordance with the terms of the Offer to Purchase
in respect of such Units (the "Purchase Price"), to receive all benefits and
otherwise exercise all rights of beneficial ownership of such Units, including,
without limitation, all voting rights and the right to receive distributions
from the Partnership, all in accordance with the Offer. Subject to and
effective upon the purchase of any Units tendered hereby, the undersigned
hereby requests that the Purchaser be admitted as a "substitute Limited
Partner" under the terms of the Limited Partnership Agreement of the
Partnership. Upon the purchase of such Units pursuant to the Offer, all prior
proxies and consents given by the undersigned with respect thereto will be
revoked and no subsequent proxies or consents may be given (and if given will
not be deemed effective).
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, and has full power and authority to validly
tender, sell, assign and transfer the Units tendered hereby, and that when any
such Units are accepted for payment by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges, encumbrances, conditional sales agreements or
other obligations relating to the sale or transfer thereof, and such Units will
not be subject to any adverse claim. Upon request, the undersigned will execute
and deliver any additional documents deemed by the Purchaser to be necessary or
desirable to complete the assignment, transfer or purchase of the Units
tendered hereby.
The undersigned understands that a valid tender of Units to the Purchaser
will constitute a binding agreement upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Purchaser may not accept
for payment any Units tendered hereby. In such event, the undersigned
understands that this Letter of Transmittal will be of no force or effect. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned and any obligations of the undersigned shall be
binding upon the heirs, personal representatives, administrators, executors,
successors, assigns and trustees in bankruptcy and other legal representatives
of the undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned further represents and warrants that, to the extent a
certificate evidencing the Units tendered hereby (the "original certificate")
is not delivered by the undersigned together with this Letter of Transmittal:
(i) the undersigned has not sold, transferred, conveyed, assigned, pledged,
deposited or otherwise disposed of any portion of the Units; (ii) the
undersigned has caused a diligent search of its records to be taken and has
been unable to locate the original certificate; (iii) if the undersigned shall
find or recover the original certificate evidencing the Units, it will
immediately and without consideration surrender it to the Purchaser; and (iv)
the undersigned shall at all times indemnify, defend and save harmless the
Purchaser and the Partnership (which shall be a third party beneficiary), their
successors and their assigns from and against any and all claims, actions and
suits, whether groundless or otherwise, and from and against any and all
liabilities, losses, damages, judgments, costs, charges, counsel fees and other
expenses of every nature and character by reason of honoring or refusing to
honor the original certificate when presented by or on behalf of a holder in
due course or a holder appearing to or believed by the Partnership to be such,
or by issuance or delivery of a replacement certificate, or the making of any
payment, delivery or credit in respect of the original certificate without
surrender thereof, or in respect of the replacement certificate.
FOR INFORMATION AND ASSISTANCE WITH THE OFFER, PLEASE CALL OUR INFORMATION
AGENT, MACKENZIE PARTNERS, INC.: (800) 322-2885. For Units to be validly
tendered, Limited Partners should complete and sign this Letter of Transmittal
and return it in the self addressed, postage-paid envelope enclosed, or by Hand
or Overnight Delivery to American Stock Transfer & Trust Company at the address
set forth on the back cover of this Letter of Transmittal or by Facsimile to
(718) 234-5001.
BEFORE SIGNING AND RETURNING THIS LETTER OF TRANSMITTAL, PLEASE REFER TO THE
ACCOMPANYING INSTRUCTIONS.
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SIGNATURE BOX (ALL OWNERS)
(SEE INSTRUCTIONS 1, 3 AND 4 AS NECESSARY)
Please sign exactly as your name is printed on the front of this Letter of
Transmittal. For joint owners, each owner must sign. (See Instruction 1.)
If the undersigned is tendering less than all Units held, the number of
Units tendered is set forth below. Otherwise, all Units held by the
undersigned are tendered hereby. The signatory hereby certifies under
penalties of perjury the statements in Box B and, if applicable, Box C.
-----------------------
Signature
-----------------------
Signature
-----------------------
Tax ID Number
----------------------------------------------
Name and Capacity ( if other than individuals)
-----------------------
Title
----------------------------------------------
Address
----------------------------------------------
City, State, Zip
(---)-------------------------
Area Code and Telephone Number
(---)-------------------------
Evening
-----------------------
Units Being Tendered
BOX A
Medallion Signature Guarantee (If Required)
(See Instruction 1)
You do not need to have your signature guaranteed unless you are a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or a representative capacity.
Name and Address of Eligible Institution
________________________________________
Authorized Signature __________________________
Title _________________________
Name ______________________________________
Date _________________________
- ------------------------------------------------------------------------------
BOX B
SUBSTITUTE FORM W-9
(See Instruction 4 - Box B)
The person signing this Letter of Transmittal hereby certifies the
following to the Purchaser of the Units indicated in this Letter of Transmittal
under penalties of perjury:
(i) The Taxpayer Identification Number ("TIN") printed (or corrected) on
the front of this Letter of Transmittal is the correct TIN of the Limited
Partner, or if this box [ ] is checked, the Limited Partner has applied for a
TIN. If the Limited Partner has applied for a TIN, a TIN has not been issued to
the Limited Partner, and either: (a) the Limited Partner has mailed or
delivered an application to receive a TIN to the appropriate IRS Center or
Social Security Administration Office; or (b) the Limited Partner intends to
mail or deliver an application in the near future (it being understood that if
the Limited Partner does not provide a TIN to the Purchaser within 60 days, 30%
of all reportable payments made to the Limited Partner will be withheld until
the TIN is provided to the Purchaser); and
(ii) Unless this box [ ] is checked, the Limited Partner is not subject
to backup withholding either because the Limited Partner: (a) is exempt from
backup withholding; (b) has not been notified by the IRS that the Limited
Partner is no longer subject to backup withholding as a result of a failure to
report all interest or dividends; or (c) has been notified by the IRS that such
Limited Partner is no longer subject to backup withholding.
- ------------------------------------------------------------------------------
BOX C
SUBSTITUTE FORM W-8
(See instruction 4)
By checking this box [ ], the person signing this Letter of Transmittal
hereby certifies under penalties of perjury that the Limited Partner is an
"exempt foreign person" for purposes of the backup withholding rules under the
U.S. federal income tax laws, because the Limited Partner:
(i) is a non-resident alien individual or a foreign corporation,
partnership, estate or trust;
(ii) if an individual, has not been and plans not to be present in U.S.
for a total of 183 days or more during the calendar year; and
(iii) neither engages, nor plans to engage, in a U.S. trade or business
that has effectively connected gains from transactions with a
broker or barter exchange.
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The Depositary for the offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attn: Reorg. Department - RAM2
By Overnight Courier or Hand:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Attn: Reorg. Department - RAM2
By Facsimile:
(718) 234-5001
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone numbers listed below. Additional copies of
this Offer to Purchase and the Letter of Transmittal may be obtained from the
Information Agent.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
800-322-2885
212-929-5500
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. SIGNATURE AND DELIVERY REQUIREMENTS
Individual and Joint Owners - Signature Requirements. After carefully
reading and completing the Letter of Transmittal, in order to tender your
Units, Limited Partner(s) must sign at the "X" in the Signature Box. The
signature(s) must correspond exactly with the name printed (or corrected)
on the front of the Letter of Transmittal without any change whatsoever.
Note: For Units held in a custodial account, the beneficial owner should
sign in the Signature Box. If the Units are registered in the names of two
or more joint holders, all such holders must sign the Letter of
Transmittal. No signature guarantee on the Letter of Transmittal is
required if the Letter of Transmittal is signed by the unitholder (or
beneficial owner in the case of an IRA).
Trustees, Corporation and Fiduciaries - Signature Requirements. Trustees,
executors, administrators, guardians, attorneys-in-fact, officers of a
corporation, authorized partner of a partnership or other persons acting in
a fiduciary or representative capacity must sign at the "X" in the
Signature Box and have their signatures guaranteed by an Eligible
Institution by completing the signature guarantee set forth in the Letter
of Transmittal. Signatories should indicate their title when signing and
must submit proper evidence satisfactory to the Purchaser of their
authority to act.
Delivery Requirements. For Units to be validly assigned, a properly
completed and duly executed copy of the Letter of Transmittal, together
with any required signature guarantees in Box A, and any other documents
required by the Letter of Transmittal (including the original certificate,
to the extent in your possession), must be received by the Purchaser prior
to or on the Expiration Date
To ensure receipt of the Letter of Transmittal, it is suggested that you
use overnight courier delivery or, if the Letter of Transmittal is to be
delivered by U.S. Mail, you use certified or registered mail, return
receipt requested. Facsimiles will be accepted subject to the receipt by
the Purchaser of original documentation. All Letters of Transmittal should
be addressed as follows:
By Mail or Overnight Courier: American Stock Transfer & Trust Company at
one of the addresses set forth on the back
cover of the Letter of Transmittal
By Facsimile: (718) 234-5001
Documentation
Deceased Owner - Original Death Certificate. If other than a
Joint Tenant, see also Executor /
Administrator / Guardian below.
Deceased Owner (other) - See Executor/Administrator/Guardian (a)
below.
Executor/Administrator/Guardian - (a) Send copy of Court Appointment
Documents; (b) letter of testamentary
notarized within 60 days of receipt; (c)
affidavit of domicile notarized; and (d) a
copy of applicable provisions of Will (Title
Page, Executor powers asset distributions);
or (e) Estate distribution documents.
Attorney-in-fact Power of Attorney.
Corporate/Partnerships Resolution(s) of Board of Directors or other
evidence of authority to so act.
Trust/Pension Plans Cover pages of the trust or plan, along with
the trustee(s) section and/or amendments or
resolutions of the above to prove authority
to so act.
2. TRANSFER TAXES. The Purchaser will pay or cause to be paid all
transfer
taxes, if any, payable in respect of Units accepted for payment
pursuant
to the Offer.
3. U.S. PERSONS. A Limited Partner who or which is a United States
citizen
or resident alien individual, a domestic corporation, a domestic
partnership, a domestic trust or a domestic estate (collectively,
"United
States persons") as those terms are defined in the Internal Revenue
Code
and Income Tax Regulations, should complete the following:
Box B - Substitute Form W-9. In order to avoid 30% federal income tax
backup withholding, the Limited Partner must provide to the Purchaser
the
Limited Partner's correct Taxpayer Identification Number ("TIN") and
certify, under penalties of perjury, that such Limited Partner is not
subject to such backup withholding. The TIN that must be provided on
the
Substitute W-9 is that of the registered Limited Partner as printed
(or
corrected) on the front of the Letter of Transmittal. If a correct
TIN
is not provided, penalties may be imposed by the Internal Revenue
Service
("IRS"), in addition to the Limited Partner being subject to backup
withholding. Certain Limited Partners (including, among others, all
corporations) are not subject to backup withholding. Backup
withholding
is not an additional tax. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS. NOTE: The correct TIN
for
an IRA account is that of the Custodian (not the individual Social
Security number of the beneficial owner).
4. BOX C - FOREIGN PERSONS. In order for a Limited Partner who is a
foreign
person (i.e., not a United States person as defined in 3 above) to
qualify as exempt from 30% backup withholding, such foreign Limited
Partner must certify, under penalties of perjury, the statement in BOX
B
of the Letter of Transmittal attesting that foreign person's status by
checking the box preceding such statement. Unless such box is
checked,
such foreign person will be subject to withholding tax under Section
3406
of the Code.
5. ADDITIONAL COPIES OF OFFER TO PURCHASE AND LETTER OF TRANSMITTAL.
Request for assistance or additional copies of the Offer to Purchase
and
the Letter of Transmittal may be obtained from our Information Agent,
MacKenzie Partners, Inc. by calling (800) 322-2885.
Exhibit (a)(3)
VIRGINIA SPRINGS LIMITED LIABILITY COMPANY
1175 West Moana Lane
Suite 200
Reno, Nevada 89509
February 18, 2003
OFFER TO PURCHASE FOR CASH
LIMITED PARTNERSHIP UNITS OF
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FOR $68.00 PER UNIT IN CASH
Dear Limited Partner:
We have begun a tender offer to purchase limited partnership units of your
partnership for $68.00 per unit. Our offer is being made pursuant to the
enclosed Offer to Purchase, which sets forth all of the terms and conditions of
the offer. Please carefully review the Offer to Purchase prior to making a
decision whether or not to tender your interests. The offer is scheduled to
expire at 12:00 midnight, New York City time, on April 23, 2003, unless
otherwise extended. You will not be required to pay any fees, commissions or
partnership transfer fees, which could total between $250 and $400, in
connection with any sale of your units pursuant to our offer.
Our offer provides you with liquidity if we purchase your tendered units,
you will receive cash, but you may recognize a gain or loss for federal income
tax purposes. If you retain your units, you will continue to be a limited
partner. However, you may not be able to liquidate your investment until the
partnership terminates.
As with any investment decision, there are benefits and detriments to you
from accepting or declining our offer. The general partner of your partnership
is remaining neutral and makes no recommendation as to whether you should
tender or refrain from tendering your units in any offer. The general partner
believes that you must make your own decision whether or not to participate in
any offer, based upon the factors described in the Offer to Purchase.
The general partner of your partnership is our affiliate. As a result, it
has substantial conflicts of interest with respect to our offer. This conflict
may affect the general partner's ability to reconcile our interests with those
of the other limited partners, particularly in assessing the fairness of our
offer price. We seek to purchase units at a low price, but you desire to sell
units at a high price. In addition, your general partner and another of its
affiliates are entitled to receive fees for certain transactions involving the
partnership and its assets.
If you desire to tender any of your units in response to our offer, you
should complete and sign the enclosed acknowledgment and agreement in
accordance with the instructions set forth in the letter of transmittal. The
signed acknowledgment and agreement and any other required documents should be
sent to the Depositary, American Stock Transfer & Trust Company, prior to the
expiration of our offer. The addresses for the Depositary are 59 Maiden Lane,
New York, New York 10038 or by overnight courier service or by hand at 6201 15th
Avenue, Brooklyn, New York 11219 -- Attention: Reorg. Department - RAM 2.
If you have any questions or require further information, please call our
Information Agent, MacKenzie Partners, Inc. toll free, at (800) 322-2885.
Very truly yours,
VIRGINIA SPRINGS
LIMITED LIABILITY COMPANY