SUPPLEMENT NO. 2 TO THE OFFER TO PURCHASE
This Supplement (the "Supplement") supplements the Offer to Purchase,
dated May 14, 1999, previously supplemented by the Supplement dated May 14, 1999
(as so supplemented, the "Offer to Purchase") with respect to the offer by KRF3
Acquisition Company, L.L.C. (the "Purchaser") to purchase all of the limited
partnership interests ("Units") of Krupp Realty Fund, Ltd.-III at a price of
$550 per Unit, payable to the holder in cash, less the aggregate amount of
distributions per Unit, if any, made by the Partnership from and after May 14,
1999, without interest. This Supplement should be read in conjunction with the
Offer to Purchase. Capitalized terms used but not defined herein have the
meanings assigned to them in the Offer to Purchase.
The purpose of this Supplement is to (1) extend the expiration date of
the Offer and (2) waive the Minimum Condition. The Offer has been extended to
12:00 midnight, New York City time, on June 18, 1999, unless further extended
(the "Expiration Date"). The Minimum Condition has been waived so that the Offer
is no longer conditioned upon a minimum number of shares of Units being validly
tendered and not withdrawn prior to the Expiration Date. EXCEPT AS SET FORTH
HEREIN, THE TERMS AND CONDITIONS OF THE OFFER REMAIN AS SET FORTH IN THE OFFER
TO PURCHASE.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION. NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
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THE OFFER HAS BEEN EXTENDED TO 12:00 MIDNIGHT, NEW YORK CITY TIME ON
JUNE 18, 1999 (THE "EXPIRATION DATE"). UNITS TENDERED PURSUANT TO THE OFFER MAY
BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
UNITHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN THEIR UNITS PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY FURTHER
ACTION.
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THE DATE OF THIS SUPPLEMENT IS JUNE 11, 1999.
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AMENDMENTS TO THE OFFER TO PURCHASE
The following sections of the Offer to Purchase have been modified as
described below. Except as set forth below and elsewhere in this Supplement, the
terms and conditions of the Offer remain as stated in the Offer to Purchase.
COVER PAGE
The first paragraph of the cover page is amended by deleting such
paragraph and substituting the following therefor:
"THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT NEW
YORK CITY TIME, ON JUNE 18, 1999, UNLESS THE OFFER IS
EXTENDED."
The third paragraph of the cover page is amended by deleting such
paragraph and substituting the following therefor:
"The Offer is conditioned upon, among other things, the
satisfaction of the conditions set forth in "The
Offer--Section 8. Conditions of the Offer," any of which, the
Purchaser reserves the right to waive without notice to the
Unitholders. The Offer is not subject to any financing
condition and is not conditioned on any minimum number of
Units being validly tendered and not withdrawn prior to the
Expiration Date ( the "Minimum Condition"). "
INTRODUCTION
This section is amended by deleting the second paragraph thereof and
substituting the following therefor:
"The Offer is conditioned upon, among other things, the
satisfaction of the conditions set forth in "The
Offer--Section 8. Conditions of the Offer," any of which, the
Purchaser reserves the right to waive without notice to the
Unitholders. The Offer is not subject to any financing
condition and is not conditioned on any minimum number of
Units being validly tendered and not withdrawn prior to the
Expiration Date ( the "Minimum Condition"). "
This section is further amended by deleting the fifth sentence of the
third paragraph thereof and substituting the following therefor:
"The Purchaser may, following the consummation of the Offer,
propose and seek to have the Partnership consummate a merger
or similar business combination with the Purchaser (the
"Proposed Merger"). In the event the Purchaser acquires a
majority of the outstanding Units in the Offer, the Purchaser
currently intends to propose the Proposed Merger."
This section is further amended by deleting the final sentence of the
fourth paragraph thereof and substituting the following therefor:
"Accordingly, if the Purchaser seeks to consummate the
Proposed Merger it will propose and seek to have the
Partnership amend the Partnership Agreement to permit the
Partnership to enter into a merger agreement as described
above and to consummate the Proposed Merger (the "Proposed
Amendment")."
This section is further amended by deleting the sentence comprising the
fifth paragraph thereof.
This section is further amended by deleting the fifth negative factor
listed and substituting therefor:
"Consummation of the Offer will result in a termination of the
Partnership for Federal income tax purposes if 50% or more of
Units will have been sold in the 12-month period preceding
(and including) the date on which the Offer is consummated.
Any such termination will, among other things, cause the
Partnership to start new depreciable lives for its assets.
This generally would decrease the annual average depreciation
deductions allocable to Units not tendered pursuant to the
Offer (thereby increasing the taxable income allocable to such
Units in each such year), but would
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have no effect on the total depreciation deductions available
over the useful lives of the assets of the Partnership.
However, if the Purchaser consummates the Offer, and the
Proposed Merger is consummated, Units held by Unitholders who
do not tender their Units in the Offer will be converted into
cash in the Proposed Merger."
SPECIAL FACTORS - SECTION 3. PURPOSE OF THE OFFER AND PLANS FOR THE
PARTNERSHIP-Purpose.
This section is amended and supplemented by deleting the third sentence
of the first paragraph thereof and substituting the following therefor:
"Following consummation of the Offer, the Purchaser may (i)
seek to acquire additional Units through open market
purchases, privately negotiated transactions, a tender offer
or exchange offer or otherwise, upon such terms and at such
prices as it may determine, which may be more or less than the
Offer Price, and/or (ii) solicit the approval of the
Partnership for the Proposed Amendment and Proposed Merger.
Alternatively, the Purchaser may abandon plans to acquire
control of the Partnership or any additional Units and/or sell
or otherwise dispose of any or all of the Units acquired by
them pursuant to the Offer or otherwise, upon such terms and
at such prices as they shall determine. If the Purchaser
acquires a majority of the outstanding Units in the Offer, the
Purchaser intends, as soon as soon as practicable following
consummation of the Offer, to propose and seek to consummate
the Proposed Amendment and the Proposed Merger."
This section is further amended and supplemented by deleting the first
sentence of the fourth paragraph thereof and substituting the following
therefor:
"If the Purchaser acquires a majority of the Units pursuant to
the Offer, as soon as practicable following the consummation
of the Offer the Purchaser intends to solicit (or, pursuant to
the Partnership Agreement, request the General Partners to
solicit) the approval of Unitholders to the Proposed Amendment
and the Proposed Merger. If the Purchaser acquires less than a
majority of the Units pursuant to the Offer, the Purchaser may
also elect to effect such a solicitation."
This section is further amended and supplemented by deleting the third
sentence of the fourth paragraph thereof and substituting the following
therefor:
"Although the Purchaser presently intends to seek to effect
the Proposed Amendment and the Proposed Merger promptly
following the consummation of the Offer if the Purchaser
acquires a majority of the Units pursuant to the Offer, there
is no assurance that such proposals will be made, or that if
proposed, they will not be delayed or abandoned."
This section is further amended by deleting the fifth paragraph
thereof.
SPECIAL FACTORS -- SECTION 4. CONFLICTS OF INTEREST AND TRANSACTIONS WITH
AFFILIATE - Voting Power of the Purchaser.
This section is amended by deleting the first and second sentences
thereof and substituting the following therefor:
"The Offer is not conditioned on any minimum number of Units
being validly tendered and not withdrawn prior to the
Expiration Date. If more than 50% of Units are tendered
pursuant to this Offer, the Purchaser accepts for payment the
Units tendered and the General Partners admit the Purchaser as
a substitute limited partner under the Partnership Agreement
(which admittance allows a Unitholder to vote), then the
Purchaser would have the power to vote a majority of the
Partnership's Units."
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SPECIAL FACTORS -- SECTION 7. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
CONSEQUENCES TO A NON-TENDERING UNITHOLDER.
This section is amended by deleting the first paragraph thereof and
substituting the following therefor:
"Depending on the number of Unitholders who tender their
Units, sales of Units pursuant to the Offer could result in a
sale or exchange of 50% or more of the total Units in
Partnership capital and profits within a 12-month period. If
this occurs, a termination of the Partnership for Federal
income tax purposes will occur and the taxable year of the
Partnership will close. The Properties (subject to related
debt) of the Partnership will be treated as contributed to a
new partnership. The Partnership will then be deemed to
distribute to its Unitholders interests in the new partnership
in a deemed liquidation of the Partnership. Following a
constructive termination of the Partnership, the Partnership
will start a new depreciable life for its assets and, as a
result, the Partnership's current annual depreciation
deductions will be reduced and taken over a longer period of
years than is the case currently. In addition, the
consequences of a termination of the Partnership include
erasure of the Partnership's tax elections and changes in the
methods of depreciation available to the Partnership for tax
purposes."
THE OFFER -- SECTION 7. CERTAIN INFORMATION CONCERNING THE PURCHASER AND
ITS AFFILIATES.
This section is amended by supplementing the following after the eighth
paragraph thereof:
"By 12:00 noon on June 11, 1999, New York City time, valid
acceptances of the Offer had been received in respect of
7,862.5 Units representing approxmately 31.45% of Units.
Pursuant to the Agreement of Assignment of Transfer executed
in connection with such tenders, unless such assignments are
withdrawn, the Purchaser may exercise the voting rights of
such Units."
THE OFFER -- SECTION 8. CONDITIONS OF THE OFFER
This section is amended by deleting the first paragraph thereof and
substituting the following therefor:
"Notwithstanding any other provisions of the Offer and in
addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole
discretion, the Purchaser shall not be required to accept for
payment, purchase or pay for, subject to Rule 14e-1(c) under
the Exchange Act, any tendered Units (whether or not any Units
have theretofore been accepted for payment or paid for
pursuant to the Offer), and may terminate the Offer as to any
Units not then paid for, if (i) the Purchaser shall not have
confirmed to its reasonable satisfaction that, upon purchase
of the Units pursuant to the Offer, the Purchaser will have
full rights to ownership as to all such Units and the
Purchaser will be admitted as a substitute limited partner
under Section 10.3 of the Partnership Agreement, (ii) the
Purchaser shall not have confirmed to its reasonable
satisfaction that, upon the purchase of the Units pursuant to
the Offer, the transfer restrictions set forth in Section 10.4
of the Partnership Agreement are inapplicable, or (iii) all
authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting
periods imposed by, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign, necessary for the consummation of the
transactions contemplated by the Offer shall not have been
filed, occurred or been obtained on or before the Expiration
Date. The Offer is not conditioned on any minimum number of
Units being validly tendered and not withdrawn prior to the
Expiration Date."
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Agreement of Assignment and Transfer
The Purchaser has updated its Agreement of Assignment and Transfer,
which is being distributed herewith. Unitholders may use the updated Agreement
of Assignment and Transfer or the originally distributed Agreement of Assignment
and Transfer to tender their Units. All such documents shall be deemed to have
been amended, as appropriate, by this Supplement. If needed, assistance or
additional copies of the Offer to Purchase and Supplement No. 1 can be obtained
by making a request to the Information Agent at the following address:
KRUPP FUNDS GROUP LIMITED PARTNERSHIP
One Beacon Street
Suite 1500
Boston, Massachusetts 02108
Attention: Investor Services
Phone: 1-800-25-KRUPP
(1-800-255-7877)
Fax: (617) 423-8919