May 20, 2008
Dear Shareholder:
On May 13, 2008, we received a letter from Institutional Bond Investors II, LLC (IBI) dated May 7, 2008, in which IBI offers to purchase (the "IBI Tender Offer") 3,000 shares of common stock (the "Shares") of Tower Properties Company ("we", "us" or the "Company"). The IBI Tender Offer states the price offered is $307 per Share, in cash, which amount will be reduced by any distributions declared or paid by the Company after November 1, 2007 as well as by any transfer fees charged by the transfer agent.
Rule 14e-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires us to take one of three permissible types of positions with respect to the IBI Tender Offer within ten business days of the date it commenced (which we have assumed is the date it was dated). We note that the last trade we are aware of for the Company's common stock was $297 per Share on January 25, 2008. The trading price range that we are aware of for the preceding 52 weeks ended January 25, 2008 was from $297 to $360 per Share. However, the Company's common stock is not actively traded and this recent trade may not be representative of its intrinsic value. In addition, our Board of Directors has not received a recent valuation of the Company's common stock, or obtained a recent appraisal of its assets or liabilities, and is therefore not able at this time to determine whether the IBI Tender Offer of $307 per Share is higher or lower than the intrinsic value of the Shares.
As a consequence, we are not now expressing an opinion, nor making a recommendation, and are remaining neutral with respect to the IBI Tender Offer, which is one of the types of positions we are permitted to take under Rule 14e-2.
Each shareholder of the Company should therefore make his, her or its own independent investment decision with respect to accepting or rejecting the IBI Tender Offer. You are encouraged to seek the advice of your own financial, tax and other advisors before making your investment decision.
In considering your investment decision, you should be aware that our Board of Directors is actively considering the possibility of authorizing the Company to initiate a transaction in which the number of shareholders, both beneficial and of record, would be reduced to 100 or less so that the Company would become subject to Subchapter S rather than Subchapter C of the Internal Revenue Code of 1986, as amended. If the conversion to Subchapter S were to be made, the Company would generally no longer be subject to federal or state income taxation at the
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corporate level. Instead, the Company's income would flow through to its shareholders and each shareholder would be taxed on such shareholder's allocable share of the Company's income regardless of whether or not such income were to be distributed. However, in that event, no further income tax would be due on any distributions of Subchapter S earnings that are actually paid in cash to the shareholders.
The Board has appointed a special committee of independent directors (the "Special Committee") in connection with any transaction which may be initiated by the Company to convert to Subchapter S. The Special Committee is authorized to negotiate with the Company the price, terms and conditions of any such transaction and has engaged independent counsel and financial advisors to assist it in evaluating any such transaction.
The Board of Directors has made no decision as to the manner or timing of seeking to convert to Subchapter S and has not determined the price that might be offered for Shares of common stock. No negotiations have taken place between the Board and the Special Committee concerning the price, terms and conditions of any such transaction. Accordingly, there can be no assurance that the Company will proceed with such a transaction and no reliance should be placed on the possibility that any such transaction would be initiated or consummated. The Company and the Special Committee are expected to receive a valuation of the Company's common stock and appraisals of certain of the Company's assets before the expiration of the IBI Tender Offer. If this information is received prior to the expiration of the IBI Tender Offer, the Company intends to reconsider its position on and response to the IBI Tender Offer and to communicate its position and response in a letter to the Company's shareholders.
Very truly yours,
/s/ Thomas R. Willard
Thomas R. Willard
President and Chief Executive Officer