Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH 173,732
BENEFICIAL ASSIGNMENT CERTIFICATES REPRESENTING
LIMITED PARTNERSHIP INTERESTS
OF
CRI HOTEL INCOME PARTNERS, LP
AT
$14 PER BAC
by:
MPF-NY 2007, LLC; MPF Badger Acquisition Co. LLC; MPF DeWaay Fund 4, LLC;
MPF Senior Note Program I, LP; Steven Gold; MP Income Fund 16 LLC; MPF Income
Fund 23, LLC; MPF DeWaay Fund 6, LLC; MPF Flagship Fund 13 LLC; MPF Special Fund
8, LLC; MPF Flagship Fund 11, LLC; MPF Acquisition Co. 3, LLC; MPF DeWaay Fund
5, LLC; MPF Flagship Fund 12, LLC
(collectively the "Purchasers")
THE OFFER, WITHDRAWAL RIGHTS, AND PRORATION PERIOD WILL EXPIRE AT 11:59 P.M.,
PACIFIC TIME, ON NOVEMBER 20, 2007, UNLESS THE OFFER IS EXTENDED.
The Purchasers hereby seek to acquire 173,732 beneficial assignment certificates
representing limited partnership interests (the "BACs") in CRI HOTEL INCOME
PARTNERS, LP (the "Partnership"). The Purchasers are not affiliated with the
Partnership or its general partner. The general partner of the Partnership is
CRICO Hotel Associates I, LP (the "General Partner"). The Purchasers hereby
offer to purchase 173,732 BACs at a purchase price equal to $14 per BAC, less
the amount of any distributions declared or made with respect to the BACs
between October 11, 2007 and November 20, 2007, or such other date to which this
offer may be extended (the "Expiration Date"), in cash, without interest, upon
the terms and subject to the conditions set forth in this offer to purchase (the
"Offer to Purchase") and in the related Letter of Transmittal, as each may be
supplemented or amended from time to time (which together constitute the
"Offer"). As noted above, the Offer price would be subject to reduction for
distributions made or declared prior to the Expiration Date. Any distributions
made or declared after the Expiration Date would, by the terms of the Offer and
as set forth in the Letter of Transmittal, be assigned by tendering BAC holders
to the Purchasers.
Tender of BACs will include the tender of any and all securities into which the
BACs may be converted and any securities distributed with respect to the BACs
from and after the Offer Date. The Partnership had 997 holders of record owning
an aggregate of 868,662 BACs as of December 31, 2006, according to its Annual
Report on Form 10-K for the fiscal year ending December 31, 2006. The Purchasers
and their affiliates currently beneficially own 91,480 BACs, or 10.53% of the
outstanding BACs. The 173,732 BACs subject to the Offer constitute 20% of the
outstanding BACs. Consummation of the Offer, if all BACs sought are tendered,
would require payment by the Purchasers of up to $2,432,248 in aggregate
purchase price, which the Purchasers intend to fund out of their current working
capital.
Holders of BACs ("BAC holders") are urged to consider the following factors:
o This offer is 20%, or $2.50 per BAC, higher than our previous offer.
o According to the Partnership's most recent Annual Report on Form 10-K, "The
General Partner is not currently soliciting sale offers" and that the
Partnership "will continue until December 31, 2016, unless dissolved
earlier..." (emphasis added). Further, the General Partner has stated that
it will "review sale opportunities for the portfolio of hotels in the next
few years" but that "we believe that a refinancing at this time, rather
than a sale of the hotels, is the most appropriate investment strategy."
Therefore, investors may not see liquidity until 2016.
o The tax year in which you sell your BAC will be the final year for which
you will be obligated to file a K-1 for the Partnership with your tax
return. This may represent a reduction in costs associated with filing
complicated tax returns. Your decision to sell may have other favorable or
unfavorable tax consequences and potential sellers should consult their
individual tax advisers.
o BAC holders who tender their BAC will give up the opportunity to
participate in any future benefits from the ownership of BAC, including
potential future distributions by the Partnership from property operations
or dispositions, and the purchase price per BAC payable to a tendering BAC
holder by the Purchasers may be less than the total amount which might
otherwise be received by the BAC holder with respect to the BAC over the
remaining term of the Partnership.
o The Purchasers are making the Offer for investment purposes and with the
intention of making a profit from the ownership of the BAC. In establishing
the purchase price of $14 per BAC, the Purchasers are motivated to
establish the lowest price which might be acceptable to BAC holders
consistent with the Purchasers' objectives. There is no public market for
the BAC, and neither the BAC holders nor the Purchasers have any accurate
means for determining the actual present value of the BAC. Although there
can be no certainty as to the actual present value of the BAC, the
1
Purchasers have estimated, solely for the purposes of determining an
acceptable Offer price, that the Partnership could have an estimated
liquidation value of approximately $15.61 per BAC. It should be noted,
however, that the Purchasers have not made an independent appraisal of the
BAC or the Partnership's properties, and are not qualified to appraise real
estate. Furthermore, there can be no assurance as to the timing or amount
of any future Partnership distributions, and there cannot be any assurance
that the Purchasers' estimate accurately reflects an approximate value of
the BAC or that the actual amounts which may be realized by holders for the
BAC may not vary substantially from this estimate.
o The Depositary, MacKenzie Patterson Fuller, LP, is an affiliate of certain
of the Purchasers. No independent party will hold securities tendered until
the offer closes and payment is made. Because there is no independent
intermediary to hold the Purchasers' funds and tendered securities, the
Purchasers may have access to the securities before all conditions to the
Offer have been satisfied and selling BAC holders have been paid; however,
neither the Depositary nor the Purchasers has any rights with respect to
the BAC prior to the Expiration Date and acceptance by the Purchasers for
payment. Further, by tendering your BAC, you are agreeing to arbitrate any
disputes that may arise between you and the Purchasers or the Depositary,
to subject yourself to personal jurisdiction in California, and that the
prevailing party in any such action will be entitled to recover attorney
fees and costs.
o The Offer allows Unitholders the option to sell 'All or None' of their
Units, thereby allowing Unitholders the option to avoid proration if more
than 173,732 Units are tendered. See Section 2--Acceptance for Payment and
Payment for Units; Proration and Section 4--Withdrawal Rights; Automatic
Withdrawal Option. The Purchasers may accept only a portion of the Units
tendered by a Unitholder if a total of more than 173,732 Units are tendered
and the Unitholder does not select the 'All or None' option.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF BACS BEING
TENDERED. IF MORE THAN 173,732 UNITS ARE VALIDLY TENDERED AND NOT WITHDRAWN, THE
PURCHASERS WILL ACCEPT FOR PURCHASE 173,732 UNITS FROM TENDERING UNITHOLDERS
(WHO DO NOT ELECT THE 'ALL OR NONE' OPTION) ON A PRO RATA BASIS, SUBJECT TO THE
TERMS AND CONDITIONS HEREIN. A BAC HOLDER MAY TENDER ANY OR ALL BACS OWNED BY
SUCH BAC HOLDER.
The Purchasers expressly reserve the right, in their sole discretion, at any
time and from time to time, (i) to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment for,
any BAC, subject to the restriction below, (ii) upon the occurrence of any of
the conditions specified in Section 13 of this Offer to Purchase prior to the
Expiration Date, to terminate the Offer and not accept for payment any BAC, and
(iii) to amend the Offer in any respect prior to the Expiration Date. Notice of
any such extension, termination, or amendment will promptly be disseminated to
BAC holders in a manner reasonably designed to inform BAC holders of such change
in compliance with Rule 14d-4(c) under the Securities Exchange Act of 1934 (the
"Exchange Act"). In the case of an extension of the Offer, such extension will
be followed by a press release or public announcement which will be issued no
later than 9:00 a.m., Eastern Time, on the next business day after the scheduled
Expiration Date, in accordance with Rule 14e-1(d) under the Exchange Act.
IMPORTANT
Any BAC holder desiring to tender any or all of such BAC holder's BAC should
complete and sign the Letter of Transmittal (a copy of which is enclosed with
this Offer to Purchase, printed on purple paper) in accordance with the
instructions in the Letter of Transmittal and mail, deliver or telecopy the
Letter of Transmittal and any other required documents to MacKenzie Patterson
Fuller, LP (the "Depositary"), an affiliate of the Purchasers, at the address or
facsimile number set forth below.
MacKenzie Patterson Fuller, LP
1640 School Street, Moraga, California 94556
Telephone: 800-854-8357; Facsimile: 925-631-9119
E-Mail Address: offers@mpfi.com
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Letter of Transmittal may be directed to the Purchasers at
1-800-854-8357.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASERS OR TO PROVIDE ANY INFORMATION OTHER THAN AS
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
- ---------------------------
2
The Partnership is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file reports and other
information with the Securities and Exchange Commission ("Commission") relating
to its business, financial condition and other matters. Such reports and other
information are available on the Commission's electronic data gathering and
retrieval (EDGAR) system, at its internet web site at www.sec.gov, may be
inspected at the public reference facilities maintained by the Commission at 100
F Street, NE, Room 1580, Washington, D.C. 20549. Copies of such material can
also be obtained from the Public Reference Room of the Commission in Washington,
D.C. at prescribed rates.
The Purchasers have filed with the Commission a Tender Offer Statement on
Schedule TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer. Such statement and any amendments thereto, including
exhibits, may be inspected and copies may be obtained from the offices of the
Commission in the manner specified above.
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET.............................................................4
INTRODUCTION...................................................................7
TENDER OFFER..................................................................10
Section 1. Terms of the Offer................................................10
Section 2. Acceptance for Payment and Payment for BAC;Proration...............10
Section 3. Procedures for Tendering BAC.......................................11
Section 4. Withdrawal Rights..................................................12
Section 5. Extension of Tender Period; Termination; Amendment.................12
Section 6. Material Federal Income Tax Consequences...........................13
Section 7. Effects of the Offer...............................................14
Section 8. Future Plans......................................................15
Section 9. The Business of the Partnership....................................16
Section 10. Conflicts of Interest.............................................16
Section 11. Certain Information Concerning the Purchasers.....................16
Section 12. Source of Funds...................................................17
Section 13. Conditions of the Offer...........................................17
Section 14. Certain Legal Matters.............................................18
Section 15. Fees and Expenses.................................................18
Section 16. Miscellaneous.....................................................18
SCHEDULE I....................................................................19
3
SUMMARY TERM SHEET
The Purchasers are offering to purchase up to 173,732 BAC for $14 per BAC in
cash. The following are some of the questions that you, as a BAC holder of the
Partnership, may have and answers to those questions. The information in this
summary is not complete, and we urge you to carefully read the remainder of this
Offer to Purchase and the accompanying Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
The offer to purchase your BAC is being made jointly by MPF-NY 2007, LLC; MPF
Badger Acquisition Co. LLC; MPF DeWaay Fund 4, LLC; MPF Senior Note Program I,
LP; Steven Gold; MP Income Fund 16 LLC; MPF Income Fund 23, LLC; MPF DeWaay Fund
6, LLC; MPF Flagship Fund 13 LLC; MPF Special Fund 8, LLC; MPF Flagship Fund 11,
LLC; MPF Acquisition Co. 3, LLC; MPF DeWaay Fund 5, LLC; MPF Flagship Fund 12,
LLC. Each of the entity Purchasers is a real estate investment fund managed or
advised by MacKenzie Patterson Fuller, LP, a private, independent real estate
investment firm or its affiliate Sutter Capital Management, LLC. None of these
entities is affiliated with the Partnership or its General Partner.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase up to 173,732 beneficial assignment certificates
representing limited partnership interests, which are the "BACs" issued to
investors in the Partnership.
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
We are offering to pay $14 per BAC, net to you in cash, less the amount of any
distributions declared or made with respect to the BAC between October 11, 2007
and the date the Offer expires. The Offer price would be reduced by the amount
of distributions made or declared prior to the Expiration Date. Any
distributions made or declared after the Expiration Date would, by the terms of
the Offer and as set forth in the Letter of Transmittal, be assigned by
tendering BAC holders to the Purchasers. If you tender your BAC to us in the
Offer, you will not have to pay brokerage fees or similar expenses.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
If the total amount of BAC sought is purchased, the Purchasers' capital
commitment will be approximately $2,432,248. The Purchasers have an aggregate of
approximately $40 million in total assets at their disposal to fund payment to
selling BAC holders. The Purchasers currently have sufficient funded capital to
fund all of their commitments under this Offer and all other tender offers they
may be presently making.
IS THE FINANCIAL CONDITION OF THE BIDDERS RELEVANT TO MY DECISION ON WHETHER TO
TENDER IN THE OFFER?
Because this is a cash offer that is not conditioned on financing being
available, and the Purchasers have more than adequate resources and no intention
to take control of the Partnership, other information concerning the Purchasers'
financial condition would seem to have little relevance to your decision.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 11:59 p.m., Pacific Time, on November 20, 2007, to
decide whether to tender your BAC in the Offer.
WILL ALL OF THE BACS I TENDER BE ACCEPTED BY THE PURCHASERS?
The Purchasers desire to purchase up to 173,732 BAC. If the number of Units
validly tendered and not properly withdrawn on or prior to the Expiration Date
is less than or equal to 173,732, we will purchase all Units so tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer. However,
if more than 173,732 Units are so tendered and not withdrawn, we will accept for
payment and pay for 173,732 Units so tendered, pro rata according to the number
of Units so tendered, adjusted by rounding down to the nearest whole number of
Units tendered by each Unit holder to avoid purchases of fractional Units, as
appropriate. However, you have the option to sell `All or None' of your Units by
checking the appropriate box on the Letter of Transmittal. If you check that
box, we will not purchase your Units if more than 173,732 Units are tendered,
and you will be deemed to automatically withdraw your tender. See Section 2.
Acceptance for Payment and Payment for Units; Proration and Section 4.
Withdrawal Rights.
4
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
The Offer can be extended in our discretion.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will make a public announcement of the extension, not
later than 9:00 a.m., Eastern Time, on the day after the day on which the Offer
was scheduled to expire. You can check our website at www.mpfi.com (click on MPF
Tenders) to see if it has been extended, or check the SEC's EDGAR database.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There are no conditions to the offer based on a minimum number of BAC tendered,
the availability of financing, or the success of the offer. However, we may not
be obligated to purchase any BAC if certain conditions occur, such as legal or
government actions which would prohibit the purchase. Furthermore, we are not
obligated to purchase any BAC which are validly tendered if, among other things,
there is a material adverse change in the Partnership or its business. Please
see the discussion in Section 13, Conditions of the Offer, for a description of
all conditions. Further, by tendering your BAC, you are agreeing to arbitrate
any disputes that may arise between you and the Purchasers or the Depositary, to
subject yourself to personal jurisdiction in California, and that the prevailing
party in any such action will be entitled to recover attorney fees and costs.
WHEN WILL YOU PAY ME FOR THE BACS I TENDER?
Upon the Expiration of the Offer and our acceptance of the BAC you tender, we
will pay you upon confirmation that the general partner will either transfer the
BAC or recognize the change of address for distributions and correspondence on
the BAC.
HOW DO I TENDER MY BACS?
To tender your BAC, you must deliver a completed Letter of Transmittal (printed
on purple paper), to the Depositary at: MacKenzie Patterson Fuller, LP, 1640
School Street, Moraga, California 94556 (Telephone: 800-854-8357; Facsimile
Transmission: 925-631-9119), no later than the time the Offer expires.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED BACS?
You can withdraw previously tendered BAC at any time until the Offer has expired
and, if we have not agreed to accept your BAC for payment by December 10, 2007,
you can withdraw them at any time after such time until we do accept your BAC
for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED BACS?
To withdraw BAC, you must deliver a written notice of withdrawal, or a facsimile
of one, with the required information to the Depositary while you still have the
right to withdraw the BAC.
WHAT DOES THE PARTNERSHIP'S GENERAL PARTNER THINK OF THE OFFER?
The Purchasers have not sought the approval or disapproval of the General
Partner. The General Partner may be expected to respond with the Partnership's
position on the offer in the next two weeks.
WILL THE PARTNERSHIP CONTINUE AS A PUBLIC COMPANY?
The Partnership reported 997 holders of its outstanding BAC as of the date of
its most recent annual report. If the total number of BAC holders is below 300,
the Partnership can elect to discontinue its status as a public reporting
company. Accordingly, it is possible that the Offer could result in the total
number of BAC holders falling below the 300 holder level. However, there has
never been a public trading market for the BAC and none is expected to develop,
so the Partnership's status as a public company will not affect a trading market
in the BAC. While the Partnership's Agreement of Limited Partnership requires
that all BAC holders be provided annual audited financial statements, quarterly
interim financial statements, and timely reports providing other information
regarding the operations and condition of the Partnership, a change in the
Partnership's status as a public company could reduce the information available
to BAC holders about the Partnership in the event the information required by
the Partnership Agreement is not as extensive as that provided in reports
required to be filed by public companies under applicable rules of the
Securities and Exchange Commission. Further, such potential deregistration would
result in the loss of the other protections afforded by registration.
5
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY BACS?
The Purchasers do not anticipate that BAC held by non-tendering BAC holders will
be affected by the completion of the offer.
WHAT ARE THE PURCHASERS' FUTURE INTENTIONS CONCERNING THE PARTNERSHIP?
The Purchasers have no present intention to seek control of the Partnership or
to change the management or operations of the Partnership. The Purchasers do not
have any present intention to take action in connection with the liquidation of
the Partnership or with any extraordinary transaction concerning the Partnership
or its assets. Although the Purchasers do not have any present intention to take
any action with respect to management or control of the Partnership, the
Purchasers reserve the right, at an appropriate time, to exercise their rights
as limited partners to vote on matters subject to a limited partner vote,
including any vote affecting the sale of the Partnership's assets and the
liquidation and dissolution of the Partnership. Thus, if the Purchasers purchase
over 50% of the outstanding BAC of the Partnership (pursuant to this and any
other tender offers and other purchases), they will be in a position to control
the Partnership by virtue of being able to remove and replace the General
Partner, to cause the Partnership to sell its assets, and to liquidate the
Partnership.
WHAT IS THE MARKET VALUE OF MY BACS?
The BAC do not have a readily ascertainable market value, and neither the BAC
holders nor the Purchasers have any accurate means for determining the actual
present value of the BAC. According to the Partnership, "There is no established
market for the purchase and sale of BACs, although a various informal secondary
market services exist. Due to the limited markets, however, investors may be
unable to sell or otherwise dispose of their BACs." (Annual Report on Form 10-K
for the fiscal year ending December 31, 2006). The Purchasers' review of
independent secondary market reporting publications such as The Stanger Report
and The Direct Investments Spectrum (formerly The Partnership Spectrum),
reported sales of Units on secondary markets at $10 during the 2nd Quarter 2007
and sales of Units on secondary markets at $15.25 per Unit in Jul/Aug 2007,
respectively. The American Partnership Board, another independent, third-party
source, reported no trades in 3rd quarter 2007. The information published by
these independent sources is believed to be the product of their private market
research and does not constitute the comprehensive transaction reporting of a
securities exchange. Accordingly, the Purchasers do not know whether the
foregoing information is accurate or complete. In August 2006, the Purchasers
received 46,476 BAC through a registered tender offer of $11 per BAC. In April
2007, the Purchasers received 17,740 BAC through a registered tender offer of
$12.50 per BAC. The Purchasers are unaware of any other recent trading prices.
Although there can be no certainty as to the actual present value of the BAC,
the Purchasers have estimated, solely for the purposes of determining an
acceptable Offer price, that the Partnership could have an estimated liquidation
value of approximately $15.61 per BAC, or higher. It should be noted, that the
Purchasers have not made an independent appraisal of the BAC or the
Partnership's properties, and are not qualified to appraise real estate.
Accordingly, there can be no assurance that this estimate accurately reflects an
approximate value of the BAC or that the actual amounts which may be realized by
BAC holders for the BAC may not vary substantially from this estimate.
TO WHOM CAN I TALK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call MacKenzie Patterson Fuller, LP, toll-free, at 800-854-8357.
6
To the BAC holders of CRI HOTEL INCOME PARTNERS, LP:
INTRODUCTION
The Purchasers hereby offer to purchase 173,732 BAC at a purchase price
of $14 per BAC ("Offer Price"), less the amount of any distributions declared or
paid with respect to the BAC between October 11, 2007, and the Expiration Date,
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer. The Purchasers are unaware of any distributions declared or
paid since October 11, 2007. BAC holders who tender their BAC will not be
obligated to pay any Partnership transfer fees, or any other fees, expenses or
commissions in connection with the tender of BAC. The Purchasers will pay all
such costs and all charges and expenses of the Depositary, an affiliate of
certain of the Purchasers, as depositary in connection with the Offer.
For further information concerning the Purchasers, see Section 11 below
and Schedule I. None of the Purchasers or the Depositary is affiliated with the
Partnership or the Partnership's General Partner. The address of the
Partnership's principal executive offices is 11200 Rockville Pike, Rockville,
Maryland 20852, and its phone number is (301) 468-9200.
BAC holders are urged to consider the following factors:
o This offer is 20%, or $2.50 per BAC, higher than our previous offer.
o According to the Partnership's most recent Annual Report on Form 10-K, "The
General Partner is not currently soliciting sale offers" and that the
Partnership "will continue until December 31, 2016, unless dissolved
earlier..." (emphasis added). Further, the General Partner has stated that
it will "review sale opportunities for the portfolio of hotels in the next
few years" but that "we believe that a refinancing at this time, rather
than a sale of the hotels, is the most appropriate investment strategy."
Therefore, investors may not see liquidity until 2016.
o The tax year in which you sell your BAC will be the final year for which
you will be obligated to file a K-1 for the Partnership with your tax
return. This may represent a reduction in costs associated with filing
complicated tax returns. Your decision to sell may have other favorable or
unfavorable tax consequences and potential sellers should consult their
individual tax advisers.
o The Offer will provide BAC holders with an opportunity to liquidate their
investment without the usual transaction costs associated with market
sales. BAC holders may have a more immediate need to use the cash now tied
up in an investment in the BAC and may wish to sell them to the Purchasers.
o BAC holders who tender their BAC will give up the opportunity to
participate in any future benefits from the ownership of BAC, including
potential future distributions by the Partnership from property
dispositions or operations from future development, if any, and the
purchase price per BAC payable to a tendering BAC holder by the Purchasers
may be less than the total amount which might otherwise be received by the
BAC holder with respect to the BAC over the remaining term of the
Partnership.
o The Purchasers are making the Offer for investment purposes and with the
intention of making a profit from the ownership of the BAC. In establishing
the purchase price of $14 per BAC, the Purchasers are motivated to
establish the lowest price which might be acceptable to BAC holders
consistent with the Purchasers' objectives. There is no public market for
the BAC, and neither the BAC holders nor the Purchasers have any accurate
means for determining the actual present value of the BAC. Although there
can be no certainty as to the actual present value of the BAC, the
Purchasers have estimated, solely for the purposes of determining an
acceptable Offer price, that the Partnership could have an estimated
liquidation value of approximately $15.61 per BAC. It should be noted,
however, that the Purchasers have not made an independent appraisal of the
BAC or the Partnership's properties, and are not qualified to appraise real
estate. Furthermore, there can be no assurance as to the timing or amount
of any future Partnership distributions, and there can be no assurance that
the Purchasers' estimate accurately reflects an approximate value of the
BAC or that the actual amounts which may be realized by holders for the BAC
may not vary substantially from this estimate.
o The Depositary, MacKenzie Patterson Fuller, LP, is an affiliate of certain
of the Purchasers. No independent party will hold securities tendered until
the offer closes and payment is made. Because there is no independent
intermediary to hold the Purchasers' funds and tendered securities, the
Purchasers may have access to the securities before all conditions to the
Offer have been satisfied and selling BAC holders have been paid; however,
neither the Depositary nor the Purchasers has any rights with respect to
the BAC prior to the Expiration Date and acceptance by the Purchasers for
payment. Further, by tendering your BAC, you are agreeing to arbitrate any
disputes that may arise between you and the Purchasers or the Depositary,
to subject yourself to personal jurisdiction in California, and that the
prevailing party in any such action will be entitled to recover attorney
fees and costs.
7
o The Offer allows Unitholders the option to sell 'All or None' of their
Units, thereby allowing Unitholders the option to avoid proration if more
than 173,732 Units are tendered. See Section 2--Acceptance for Payment and
Payment for Units; Proration and Section 4--Withdrawal Rights; Automatic
Withdrawal Option. The Purchasers may accept only a portion of the Units
tendered by a Unitholder if a total of more than 173,732 Units are tendered
and the Unitholder does not select the 'All or None' option.
Establishment of the Offer Price
The Purchasers have set the Offer Price at $14 per BAC, less the amount
of any distributions declared or made with respect to the BAC between October
11, 2007 and the Expiration Date. In determining the Offer Price, the Purchasers
analyzed a number of quantitative and qualitative factors, including: (i) the
lack of a secondary market for resales of the BAC and the resulting lack of
liquidity of an investment in the Partnership; (ii) the estimated value of the
Partnership's real estate assets; and (iii) the costs to the Purchasers
associated with acquiring the BAC.
The Partnership made the following statements in its Annual Report on
Form 10-K for the fiscal year ending December 31, 2006: "There is no established
market for the purchase and sale of BACs, although a various informal secondary
market services exist. Due to the limited markets, however, investors may be
unable to sell or otherwise dispose of their BACs.." The lack of any public
market for the sale of BAC means that BAC holders have limited alternatives if
they seek to sell their BAC. As a result of such limited alternatives for BAC
holders, the Purchasers may not need to offer as high a price for the BAC as
they would otherwise. On the other hand, the Purchasers take a greater risk in
establishing a purchase price as there is no prevailing market price to be used
for reference and the Purchasers themselves will have limited liquidity for the
BAC upon consummation of the purchase. The Purchasers' review of independent
secondary market reporting publications such as Stanger Report and The Direct
Investments Spectrum (formerly The Partnership Spectrum), reported sales of
Units on secondary markets at $10 during the 2nd Quarter 2007 and sales of Units
on secondary markets at $15.25 per Unit in Jul/Aug 2007, respectively. The
American Partnership Board, another independent, third-party source, reported no
trades in 3rd quarter 2007. The information published by these independent
sources is believed to be the product of their private market research and does
not constitute the comprehensive transaction reporting of a securities exchange.
Accordingly, the Purchasers do not know whether the foregoing information is
accurate or complete. In August 2006, the Purchasers received 46,476 BAC through
a registered tender offer of $11 per BAC. In April 2007, the Purchasers received
17,740 BAC through a registered tender offer of $12.50 per BAC. The Purchasers
are unaware of any other recent trading prices.
The Purchasers are offering to purchase BAC which are an illiquid
investment and are not offering to purchase the Partnership's underlying assets.
The Purchasers' valuation is based upon the sale of the assets of the
Partnership, but such assets may not be liquidated for an indefinite period of
time. Accordingly, the underlying asset value of the Partnership is only one
factor used by the Purchasers in arriving at the Offer Price. However, in the
absence of trading price information, the Purchasers' estimate of the net asset
value of the Partnership may be relevant to BAC holders' review of the Offer
Price. Using publicly available information concerning the Partnership contained
in the Partnership's Annual Report on Form 10-K for the fiscal year ending
December 31, 2006 and the quarterly reports for the quarters ended March 31,
2007, June 30, 2007, and September 30, 2006, the Purchasers derived an estimated
net asset value for the BAC. The Purchasers are not qualified as real estate
appraisers and have relied solely on publicly available information in making
their estimate of the value of the Partnership's assets. The Purchasers'
estimated value of Partnership assets was calculated solely for purposes of
formulating their offer and cannot be relied upon as representing an amount
which might actually be realized upon a liquidation of the Partnership's assets,
whether now or at any time in the future.
In determining their estimated value of the BAC, the Purchasers first
calculated the "Estimated Net Sales Value" of the Partnership's real property
investments. The Estimated Net Sales Value was determined by first determining
the net operating income ("NOI") for the Partnership's properties. The NOI was
calculated by subtracting from rental income the property operating expenses.
The Purchasers then subtracted $400,000 from the NOI to account for the
disclosure by the Partnership that up to $400,000 of cash returns would be lost
due to the termination of the Scottsdale, Arizona lease with Days Inn. This NOI
was then divided by a 14.5% capitalization rate (the "Cap Rate"). The result
reduced by 6% to take into account the estimated closing costs which would be
incurred upon sale by the Partnership of the properties, including brokerage
commissions, title costs, surveys, appraisals, legal fees and transfer taxes.
The NOI and the rental income were obtained from the Partnership's Form 10-Q for
the second quarter ended June 30, 2007 (available on the Commission's EDGAR
system, at its internet web site at www.sec.gov, and available for inspection at
the Commission's principal office in Washington, D.C.).
The Purchasers believe that the Cap Rate utilized is within a range of
capitalization rates currently employed in the marketplace for properties of
similar type, age, and quality. The utilization of different capitalization
rates, however, could also be appropriate. In this regard, BAC holders should be
aware that the use of lower capitalization rate would result in a higher
Estimated Net Sales Value.
8
To determine the Estimated Liquidation Value of the Partnership's
assets, the Purchaser added to the Estimated Net Sales Value of the
Partnership's properties the net current assets, as reported in the
Partnership's most recent Form 10-Q for the quarter ended June 30, 2007, and
calculated the amount of the balance allocable to the BAC. The resulting
Estimated Liquidation Value of the Partnership's assets was approximately $15.61
per BAC. The Purchasers emphasize that this value was calculated by them solely
for purposes of selecting an Offer Price. There can be no assurance as to the
actual liquidation value of Partnership assets or as to the amount or timing of
distributions of liquidation proceeds which may be received by BAC holders. The
Partnership has not announced any pending offer to purchase its assets.
Accordingly, there can be no assurance as to the availability or timing of any
liquidation proceeds. Details on our analysis of the Estimated Valuation per BAC
based upon this information is given below:
- ------------------------------------------------------ ------------------------
Gross valuation of partnership properties $20,226,000
- ------------------------------------------------------ ------------------------
Less: Selling Costs at 6% ($1,214,000)
- ------------------------------------------------------ ------------------------
Less: Notes Payable ($7,386,000)
- ------------------------------------------------------ ------------------------
Plus: Net Current Assets $2,214,000
- ------------------------------------------------------ ------------------------
Estimated net valuation of your partnership $13,840,000
- ------------------------------------------------------ ------------------------
Percentage of estimated net valuation 98%
allocated to holders of BACs based upon
subordinated general partner participation
- ------------------------------------------------------ ------------------------
Estimated net valuation of BACs $13,563,000
- ------------------------------------------------------ ------------------------
Total number of BACs 868,662
- ------------------------------------------------------ ------------------------
Estimated valuation per BAC $15.61
- ------------------------------------------------------ ------------------------
The Offer Price represents the price at which the Purchasers are
willing to purchase BAC. The Purchasers arrived at the $14 Offer Price by
applying a liquidity discount to their calculations of Estimated Liquidation
Value of the Partnership's assets, after deducting selling and liquidation
costs. The Purchasers apply such a discount with the intention of making a
profit by holding on to the BAC until the Partnership is liquidated, hopefully
at close to the full Estimated Liquidation Value. No independent person has been
retained to evaluate or render any opinion with respect to the fairness of the
Offer Price and no representation is made by the Purchasers or any affiliate of
the Purchasers as to such fairness. Other measures of the value of the BAC may
be relevant to BAC holders. BAC holders are urged to consider carefully all of
the information contained herein and consult with their own advisers, tax,
financial or otherwise, in evaluating the terms of the Offer before deciding
whether to tender BAC.
The Offer is not made with any current view toward or plan or purpose
of acquiring BAC in a series of successive and periodic offers. Nevertheless,
the Purchasers reserve the right to gauge the response to this solicitation,
and, if not successful in purchasing 173,732 BAC pursuant to this Offer, may
consider future offers. Factors affecting the Purchasers' future interest in
acquiring additional BAC include, but are not limited to, the relative success
of the current Offer, any increase or decrease in the availability of capital
for investment by the Purchasers and their investment fund affiliates, the
current diversification and performance of each affiliated fund's portfolio of
real estate interests, the development of any public market in the BAC or
actions by unrelated parties to tender for or purchase BAC, the status of and
changes and trends in the Partnership's operations, announcement of pending
property sales and the proposed terms of sales, and local and national real
estate and financial market developments and trends.
General Background Information
Certain information contained in this Offer to Purchase which relates
to, or represents, statements made by the Partnership or the General Partner,
has been derived from information provided in reports filed by the Partnership
with the Securities and Exchange Commission.
Tendering BAC holders will not be obligated to pay transfer fees,
brokerage fees, or commissions on the sale of the BAC to the Purchasers pursuant
to the Offer. The Purchasers will pay all charges and expenses incurred in
connection with the Offer. The Purchasers desire to purchase up to 173,732 BAC.
If the number of Units validly tendered and not properly withdrawn on or prior
to the Expiration Date is less than or equal to 173,732, we will purchase all
Units so tendered and not withdrawn, upon the terms and subject to the
conditions of the Offer. However, if more than 173,732 Units are so tendered and
not withdrawn, we will accept for payment and pay for 173,732 Units so tendered,
pro rata according to the number of Units so tendered, adjusted by rounding down
to the nearest whole number of Units tendered by each Unit holder to avoid
purchases of fractional Units, as appropriate. However, you have the option to
sell `All or None' of your Units by checking the appropriate box on the Letter
9
of Transmittal. If you check that box, we will only purchase your Units if we
can purchase all of your Units; otherwise, you will be deemed to automatically
withdraw your tender. See Section 2. Acceptance for Payment and Payment for
Units; Proration and Section 4. Withdrawal Rights.
If, prior to the Expiration Date, the Purchasers increase the
consideration offered to BAC holders pursuant to the Offer, such increased
consideration will be paid with respect to all BAC that are purchased pursuant
to the Offer, whether or not such BAC were tendered prior to such increase in
consideration.
BAC holders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding whether to tender
their BAC.
TENDER OFFER
Section 1. Terms of the Offer. Upon the terms and subject to the conditions of
the Offer, the Purchasers will accept for payment and pay for BAC validly
tendered on or prior to the Expiration Date and not withdrawn in accordance with
Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean 11:59
p.m., Pacific Time, on November 20, 2007, unless and until the Purchasers shall
have extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date on which the Offer,
as so extended by the Purchasers, shall expire.
The Offer is conditioned on satisfaction of certain conditions. See
Section 13, which sets forth in full the conditions of the Offer. The Purchasers
reserve the right (but shall not be obligated), in their sole discretion and for
any reason, to waive any or all of such conditions. If, by the Expiration Date,
any or all of such conditions have not been satisfied or waived, the Purchasers
reserve the right (but shall not be obligated) to (i) decline to purchase any of
the BAC tendered, terminate the Offer and return all tendered BAC to tendering
BAC holders, (ii) waive all the unsatisfied conditions and, subject to complying
with applicable rules and regulations of the Commission, purchase all BAC
validly tendered, (iii) extend the Offer and, subject to the right of BAC
holders to withdraw BAC until the Expiration Date, retain the BAC that have been
tendered during the period or periods for which the Offer is extended or (iv) to
amend the Offer. Notwithstanding the foregoing, upon the expiration of the
Offer, if all conditions are either satisfied or waived, the Purchasers will
promptly pay for all validly tendered BAC upon confirmation that the general
partner will either transfer the BAC or recognize the change of address for
distributions and correspondence on the BAC, and the Purchasers do not intend to
imply that the foregoing rights of the Purchasers would permit the Purchasers to
delay payment for validly tendered BAC following expiration.
The Purchasers do not anticipate and have no reason to believe that any
condition or event will occur that would prevent the Purchasers from purchasing
tendered BAC as offered herein.
Further, by tendering your BAC, you are agreeing to arbitrate any
disputes that may arise between you and the Purchasers or the Depositary, to
subject yourself to personal jurisdiction in California, and that the prevailing
party in any such action will be entitled to recover attorney fees and costs.
However, by so doing, you are not waiving any of your rights under the federal
securities laws or any rule or regulation thereunder.
Section 2. Acceptance for Payment and Payment for BAC Acceptance for Payment and
Payment for BAC; Proration. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any extension or amendment), the Purchasers will accept for payment, and will
pay for, BAC validly tendered and not withdrawn in accordance with Section 4,
promptly following the Expiration Date and upon confirmation that the general
partner will either transfer the BAC or recognize the change of address for
distributions and correspondence on the BAC. In all cases, payment for BAC
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal.
The Purchasers desire to purchase up to 173,732 Units. If the number of
Units validly tendered and not properly withdrawn on or prior to the Expiration
Date is less than or equal to 173,732, we will purchase all Units so tendered
and not withdrawn, upon the terms and subject to the conditions of the Offer.
However, if more than 173,732 Units are so tendered and not withdrawn, we will
accept for payment and pay for 173,732 Units so tendered, pro rata according to
the number of Units so tendered, adjusted by rounding down to the nearest whole
number of Units tendered by each Unit holder to avoid purchases of fractional
Units, as appropriate.
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchasers will announce the final results of proration as soon as practicable,
but in no event later than five business days following the Expiration Date. The
Purchasers will not pay for any Units tendered until after the final proration
factor has been determined.
10
Unitholders may indicate, by checking a box on the Letter of
Transmittal (the 'All or None' Box), that they only wish to sell their Units if
they will be able to sell all of their Units, without any proration. See Section
4--Withdrawal Rights. If more than 173,732 Units have been properly tendered
without checking the All or None Box, then the above description of proration
will apply only to tenders of such Units that do not have the All or None Box
checked.
For purposes of the Offer, the Purchasers shall be deemed to have
accepted for payment (and thereby purchased) tendered BAC when, as and if the
Purchasers give oral or written notice to the Depositary of the Purchasers'
acceptance for payment of such BAC pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for BAC purchased pursuant to
the Offer will in all cases be made by deposit of the Offer Price with the
Depositary, which will act as agent for the tendering BAC holders for the
purpose of receiving payment from the Purchasers and transmitting payment to
tendering BAC holders.
Under no circumstances will interest be paid on the Offer Price by
reason of any delay in making such payment.
If any tendered BAC are not purchased for any reason (other than due to
proration as described above), the Letter of Transmittal with respect to such
BAC not purchased will be of no force or effect. If, for any reason whatsoever,
acceptance for payment of, or payment for, any BAC tendered pursuant to the
Offer is delayed or the Purchasers are unable to accept for payment, purchase or
pay for BAC tendered pursuant to the Offer, then, without prejudice to the
Purchasers' rights under Section 13, the Depositary may, nevertheless, on behalf
of the Purchasers, retain tendered BAC and such BAC may not be withdrawn (but
subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires
that the Purchasers pay the consideration offered or return the BAC deposited by
or on behalf of the BAC holder promptly after the termination or withdrawal of a
tender offer), except to the extent that the tendering BAC holders are entitled
to withdrawal rights as described in Section 4.
If, prior to the Expiration Date, the Purchasers shall increase the
consideration offered to BAC holders pursuant to the Offer, such increased
consideration shall be paid for all BAC accepted for payment pursuant to the
Offer, whether or not such BAC were tendered prior to such increase.
Section 3. Procedures for Tendering BAC.
Valid Tender. For BAC to be validly tendered pursuant to the Offer, a properly
completed and duly executed Letter of Transmittal (a copy of which is enclosed
with this Offer to Purchase, printed on purple paper) with any other documents
required by the Letter of Transmittal must be received by the Depositary at its
address set forth on the back cover of this Offer to Purchase on or prior to the
Expiration Date. A BAC holder may tender any or all BAC owned by such BAC
holder.
In order for a tendering BAC holder to participate in the Offer, BAC must be
validly tendered and not withdrawn prior to the Expiration Date, which is 11:59
p.m., Pacific Time, on November 20, 2007, or such date to which the Offer may be
extended.
The method of delivery of the Letter of Transmittal and all other required
documents is at the option and risk of the tendering BAC holder and delivery
will be deemed made only when actually received by the Depositary.
Backup Federal Income Tax Withholding. To prevent the possible application of
31% backup federal income tax withholding with respect to payment of the Offer
Price for BAC purchased pursuant to the Offer, a tendering BAC holder must
provide the Depositary with such BAC holder's correct taxpayer identification
number and make certain certifications that such BAC holder is not subject to
backup federal income tax withholding. Each tendering BAC holder must insert in
the Letter of Transmittal the BAC holder's taxpayer identification number or
social security number in the space provided on the front of the Letter of
Transmittal. The Letter of Transmittal also includes a substitute Form W-9,
which contains the certifications referred to above. (See the Instructions to
the Letter of Transmittal.)
FIRPTA Withholding. To prevent the withholding of federal income tax in an
amount equal to 10% of the sum of the Offer Price plus the amount of Partnership
liabilities allocable to each BAC tendered, each BAC holder must complete the
FIRPTA Affidavit included in the Letter of Transmittal certifying such BAC
holder's taxpayer identification number and address and that the BAC holder is
not a foreign person. (See the Instructions to the Letter of Transmittal and
"Section 6. Certain Federal Income Tax Consequences.")
Other Requirements. By executing a Letter of Transmittal as set forth above, a
tendering BAC holder irrevocably appoints the designees of the Purchasers as
such BAC holder's proxies, in the manner set forth in the Letter of Transmittal,
each with full power of substitution, to the full extent of such BAC holder's
rights with respect to the BAC tendered by such BAC holder and accepted for
11
payment by the Purchasers. Such appointment will be effective when, and only to
the extent that, the Purchasers accept such BAC for payment. Upon such
acceptance for payment, all prior proxies given by such BAC holder with respect
to such BAC will, without further action, be revoked, and no subsequent proxies
may be given (and if given will not be effective). The designees of the
Purchasers will, with respect to such BAC, be empowered to exercise all voting
and other rights of such BAC holder as they in their sole discretion may deem
proper at any meeting of BAC holders, by written consent or otherwise. In
addition, by executing a Letter of Transmittal, a BAC holder also assigns to the
Purchasers all of the BAC holder's rights to receive distributions from the
Partnership with respect to BAC which are accepted for payment and purchased
pursuant to the Offer, other than those distributions declared or paid during
the period commencing on the Offer Date and terminating on the Expiration Date.
Determination of Validity; Rejection of BAC; 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 BAC
pursuant to the procedures described above will be determined by the Purchasers,
in their sole discretion, which determination shall be final and binding. The
Purchasers reserve the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the absolute right to
reject any or all tenders if not in proper form or if the acceptance of, or
payment for, the BAC tendered may, in the opinion of the Purchasers' counsel, be
unlawful. The Purchasers also reserve the right to waive any defect or
irregularity in any tender with respect to any particular BAC of any particular
BAC holder, and the Purchasers' interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the Instructions thereto)
will be final and binding. Neither the Purchasers, the Depositary, nor any other
person will be under any duty to give notification of any defects or
irregularities in the tender of any BAC or will incur any liability for failure
to give any such notification.
A tender of BAC pursuant to any of the procedures described above will
constitute a binding agreement between the tendering BAC holder and the
Purchasers upon the terms and subject to the conditions of the Offer, including
the tendering BAC holder's representation and warranty that (i) such BAC holder
owns the BAC being tendered within the meaning of Rule 14e-4 under the Exchange
Act and (ii) the tender of such BAC complies with Rule 14e-4. Rule 14e-4
requires, in general, that a tendering security holder actually be able to
deliver the security subject to the tender offer, and is of concern particularly
to any BAC holders who have granted options to sell or purchase the BAC, hold
option rights to acquire such securities, maintain "short" positions in the BAC
(i.e., have borrowed the BAC) or have loaned the BAC to a short seller. Because
of the nature of limited partnership interests, the Purchasers believe it is
unlikely that any option trading or short selling activity exists with respect
to the BAC. In any event, a BAC holder will be deemed to tender BAC in
compliance with Rule 14e-4 and the Offer if the holder is the record owner of
the BAC and the holder (i) delivers the BAC pursuant to the terms of the Offer,
(ii) causes such delivery to be made, (iii) guarantees such delivery, (iv)
causes a guaranty of such delivery, or (v) uses any other method permitted in
the Offer (such as facsimile delivery of the Transmittal Letter).
Section 4. Withdrawal Rights. Except as otherwise provided in this Section 4,
all tenders of BAC pursuant to the Offer are irrevocable, provided that BAC
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment as provided in this
Offer to Purchase, may also be withdrawn at any time on or after December 10,
2007.
For withdrawal to be effective a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address or
the facsimile number set forth in the attached Letter of Transmittal. Any such
notice of withdrawal must specify the name of the person who tendered the BAC 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, BAC is delayed for any reason or if the
Purchasers are unable to purchase or pay for BAC for any reason, then, without
prejudice to the Purchasers' rights under the Offer, tendered BAC may be
retained by the Depositary on behalf of the Purchasers and may not be withdrawn
except to the extent that tendering BAC holders are entitled to withdrawal
rights as set forth in this Section 4, subject to Rule 14e-1(c) under the
Exchange Act, which provides that no person who makes a tender offer shall fail
to pay the consideration offered or return the securities deposited by or on
behalf of security holders promptly after the termination or withdrawal of the
tender offer.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchasers, in their sole
discretion, which determination shall be final and binding. Neither the
Purchasers, nor the Depositary, nor any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or will incur any liability for failure to give any such notification.
Any BAC properly withdrawn will be deemed not to be validly tendered
for purposes of the Offer. Withdrawn BAC may be re-tendered, however, by
following the procedures described in Section 3 at any time prior to the
Expiration Date.
12
Automatic Withdrawal Option. Unitholders may indicate, by checking a
box on the Letter of Transmittal (the 'All or None Box'), that they only wish to
sell their Units if they will be able to sell all of their Units, without any
proration. If at any time during the day of the Expiration Date more than
173,732 Units have been properly tendered, unless the Purchaser amends the Offer
to increase the number of Units to be purchased, the Purchaser will deem all
Units from Unitholders that checked the All or None Box to be withdrawn and not
validly tendered for purposes of the Offer. Neither the Purchaser nor any other
person will be under any duty to give any notice that such automatic withdrawal
will occur. Unitholders may change their election whether or not to check the
All or None Box at any time on or prior to the Expiration Date by submitting a
new Letter of Transmittal with their preferred election, in the manner described
in Section 3 herein.
Section 5. Extension of Tender Period; Termination; Amendment. The Purchasers
expressly reserve the right, in their sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any BAC by giving
oral or written notice of such extension to the Depositary, (ii) upon the
occurrence or failure to occur of any of the conditions specified in Section 13,
to terminate the Offer and not accept for payment any BAC by giving oral or
written notice of such termination to the Depositary, and (iii) to amend the
Offer in any respect (including, without limitation, by increasing or decreasing
the consideration offered or the number of BAC being sought in the Offer or both
or changing the type of consideration) by giving oral or written notice of such
amendment to the Depositary prior to the Expiration Date. Any extension,
termination, or amendment will be followed as promptly as practicable by public
announcement, the announcement in the case of an extension to be issued no later
than 9:00 a.m., Eastern Time, on the next business day after the previously
scheduled Expiration Date, in accordance with the public announcement
requirement of Rule 14d-4(c) under the Exchange Act. Without limiting the manner
in which the Purchasers may choose to make any public announcement, except as
provided by applicable law (including Rule 14d-4(c) under the Exchange Act), the
Purchasers will have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by issuing a press release.
The Purchasers may also be required by applicable law to disseminate to BAC
holders certain information concerning the extensions of the Offer and any
material changes in the terms of the Offer. The Purchasers will not provide a
subsequent offering period following the Expiration Date.
If the Purchasers extend the Offer, or if the Purchasers (whether
before or after its acceptance for payment of BAC) are delayed in their payment
for BAC or are unable to pay for BAC pursuant to the Offer for any reason, then,
without prejudice to the Purchasers' rights under the Offer, the Depositary may
retain tendered BAC on behalf of the Purchasers, and such BAC may be withdrawn
to the extent tendering BAC holders are entitled to withdrawal rights as
described in Section 4 (generally, if notice of withdrawal is given to the
Depositary prior to the Expiration Date). However, the ability of the Purchasers
to delay payment for BAC that the Purchasers have accepted for payment is
limited by Rule 14e-1 under the Exchange Act, which requires that the Purchasers
pay the consideration offered or return the securities deposited by or on behalf
of holders of securities promptly after the termination or withdrawal of the
Offer, except that the Purchasers may delay payment until they receive
confirmation that the general partner will either transfer the BAC or recognize
the change of address for distributions and correspondence on the BAC.
If the Purchasers make a material change in the terms of the Offer or
the information concerning the Offer or waive a material condition of the Offer,
the Purchasers will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer to Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m. through
midnight, Pacific Time. Any material change in the terms of the Offer will be
published, sent, or given to you in a manner reasonably designed to inform you
of such change; in most cases we will mail you supplemental materials.
Section 6. Material Federal Income Tax Consequences. THE FEDERAL INCOME TAX
DISCUSSION SET FORTH BELOW DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF TAXATION
THAT MAY BE RELEVANT TO A PARTICULAR BAC HOLDER. For example, this discussion
does not address the effect of any applicable foreign, state, local or other tax
laws other than federal income tax laws. Certain BAC holders (including trusts,
foreign persons, tax-exempt organizations or corporations subject to special
rules, such as life insurance companies or S corporations) may be subject to
special rules not discussed below. This discussion is based on the Internal
Revenue Code of 1986, as amended (the "Code"), existing regulations, court
decisions and Internal Revenue Service ("IRS") rulings and other pronouncements.
13
EACH BAC HOLDER TENDERING BACS SHOULD CONSULT SUCH BAC HOLDER'S OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH BAC HOLDER OF ACCEPTING THE OFFER,
INCLUDING THE APPLICATION OF THE ALTERNATIVE MINIMUM TAX AND FEDERAL, FOREIGN,
STATE, LOCAL AND OTHER TAX LAWS.
The following discussion is based on the assumption that the
Partnership is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership" as that term is defined in the Code. Certain
partnerships are classified as "publicly traded partnerships" and, subject to
certain exceptions, are taxed as corporations for federal income tax purposes. A
partnership is a publicly traded partnership if the partnership interests are
traded on an established securities market or readily tradable on a secondary
market (or the substantial equivalent of a secondary market). The BACs are not
traded on an established securities market. In the unlikely event that the
Partnership becomes a "publicly traded partnership" and is not excepted from
federal income tax, there would be several adverse tax consequences to the BAC
holders. For instance, the Partnership would be regarded as having transferred
all of its assets (subject to all of its liabilities) to a newly-formed
corporation in exchange for stock which would be deemed distributed to the BAC
holders in liquidation of their interests in the Partnership. In addition, if
the Partnership is deemed to be a "publicly traded partnership," then special
rules under Code Section 469 govern the treatment of losses and income of the
Partnership. We cannot assure you that the Partnership will not be treated as a
publicly traded partnership because the IRS could determine that the BAC are
readily traded on a secondary market by virtue of the fact that there have been
some tender offers and auction trades of BAC, however unlikely and inconsistent
with the Code that would be.
Gain or Loss. A taxable BAC holder will recognize a gain or loss on the sale of
such BAC holder's BAC in an amount equal to the difference between (i) the
amount realized by such BAC holder on the sale and (ii) such BAC holder's
adjusted tax basis in the BAC sold. The amount realized by a BAC holder will
include the BAC holder's share of the Partnership's liabilities, if any (as
determined under Code section 752 and the regulations thereunder). If the BAC
holder reports a loss on the sale, such loss generally could not be currently
deducted by such BAC holder except against such BAC holder's capital gains from
other investments. In addition, such loss would be treated as a passive activity
loss. (See "Suspended Passive Activity Losses" below.)
The adjusted tax basis in the BAC of a BAC holder will depend upon
individual circumstances. (See also "Partnership Allocations in Year of Sale"
below.) Each BAC holder who plans to tender hereunder should consult with the
BAC holder's own tax advisor as to the BAC holder's adjusted tax basis in the
BAC holder's BAC and the resulting tax consequences of a sale.
If any portion of the amount realized by a BAC holder is attributable
to such BAC holder's share of "unrealized receivables" or "substantially
appreciated inventory items" as defined in Code section 751, a corresponding
portion of such BAC holder's gain or loss will be treated as ordinary gain or
loss. It is possible that the basis allocation rules of Code Section 751 may
result in a BAC holder's recognizing ordinary income with respect to the portion
of the BAC holder's amount realized on the sale of a BAC that is attributable to
such items while recognizing a capital loss with respect to the remainder of the
BAC.
A tax-exempt BAC holder (other than an organization described in Code
Section 501(c)(7) (social club), 501(c)(9) (voluntary employee benefit
association), 501(c)(17) (supplementary unemployment benefit trust), or
501(c)(20) (qualified group legal services plan)) should not be required to
recognize unrelated trade or business income upon the sale of its BAC pursuant
to the Offer, assuming that such BAC holder does not hold its BAC as a "dealer"
and has not acquired such BAC with debt financed proceeds.
Partnership Allocations in Year of Sale. A tendering BAC holder will be
allocated the BAC holder's pro rata share of the annual taxable income and
losses from the Partnership with respect to the BAC sold for the period through
the date of sale, even though such BAC holder will assign to the Purchasers
their rights to receive certain cash distributions with respect to such BAC.
Such allocations and any Partnership distributions for such period would affect
a BAC holder's adjusted tax basis in the tendered BAC and, therefore, the amount
of gain or loss recognized by the BAC holder on the sale of the BAC.
Possible Tax Termination. The Code provides that if 50% or more of the capital
and profits interests in a partnership are sold or exchanged within a single
12-month period, such partnership generally will terminate for federal income
tax purposes. It is possible that the Partnership could terminate for federal
income tax purposes as a result of consummation of the Offer (although the
Partnership Agreement prevents transfers of BAC that would cause such a
termination). A tax termination of the Partnership could have an effect on a
corporate or other non-individual BAC holder whose tax year is not the calendar
year, as such a BAC holder might recognize more than one year's Partnership tax
items in one tax return, thus accelerating by a fraction of a year the effects
from such items.
14
Suspended "Passive Activity Losses". A BAC holder who sells all of the BAC
holder's BAC would be able to deduct "suspended" passive activity losses from
the Partnership, if any, in the year of sale free of the passive activity loss
limitation. As a limited partner of the Partnership, which was engaged in real
estate activities, the ability of a BAC holder, who or which is subject to the
passive activity loss rules, to claim tax losses from the Partnership was
limited. Upon sale of all of the BAC holder's BAC, such BAC holder would be able
to use any "suspended" passive activity losses first against gain, if any, on
sale of the BAC holder's BAC and then against income from any other source.
Foreign BAC holders. Gain realized by a foreign BAC holder on a sale of a BAC
pursuant to the Offer will be subject to federal income tax. Under Section 1445
of the Code, the transferee of a partnership interest held by a foreign person
is generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchasers will withhold 10% of the amount
realized by a tendering BAC holder from the purchase price payment to be made to
such BAC holder unless the BAC holder properly completes and signs the FIRPTA
Affidavit included as part of the Letter of Transmittal certifying the BAC
holder's TIN, that such BAC holder is not a foreign person and the BAC holder's
address. Amounts withheld would be creditable against a foreign BAC holder's
federal income tax liability and, if in excess thereof, a refund could be
obtained from the Internal Revenue Service by filing a U.S. income tax return.
Section 7. Effects of the Offer.
Limitations on Resales. The Purchasers do not believe the provisions of the
Partnership Agreement should restrict transfers of BAC pursuant to the Offer,
although no more than 50% of the BAC may be transferred in any 12-month period.
This limitation will not affect the tender of BAC under this Offer because,
subject to the terms of the Offer, we will pay for the BAC upon confirmation
that the general partner will either transfer the BAC or recognize the change of
address for distributions and correspondence on the BAC, and, under the terms of
the Letter of Transmittal, we will take a power of attorney over your BAC that
will permit us to change the address to which distributions are sent. We will
then wait to transfer the BAC tendered until the Partnership can effect the
transfer of record title in accordance with the Partnership Agreement.
Effect on Trading Market. If a substantial number of BAC are purchased pursuant
to the Offer the result would be a reduction in the number of BAC holders.
Reducing the number of security holders in certain kinds of equity securities
might be expected to result in a reduction in the liquidity and volume of
activity in the trading market for the security. However, there is no
established public trading market for the BAC and none is expected to develop.
Therefore, the Purchasers do not believe a reduction in the number of BAC
holders will materially further restrict the BAC holders' ability to find
purchasers for their BAC through secondary market transactions.
Voting Power of Purchasers. If the Purchasers acquire a significant number of
the BAC sought hereunder could give the Purchasers a controlling voting interest
in matters subject to a limited partner vote. The Partnership does not hold
annual or regular meetings to elect directors, and does not have a
representative board of directors overseeing management. Votes of BAC holders
would only be solicited, if ever, for matters affecting the fundamental
structure of the Partnership, such as the sale of the properties and termination
of the Partnership, and the affirmative vote of more than 50% of the outstanding
BAC (not a mere quorum) is required to effect action. The Purchasers and their
affiliates do not intend to call for any such vote in the foreseeable future. A
BAC holder who tenders BAC to the Purchasers grants a proxy to the Purchasers as
of the date of acceptance of the tender, granting the Purchasers the right to
vote such BAC in their sole discretion as to any matters for which the
Partnership has established a record date prior to the time such. BAC are
transferred by the Partnership to the Purchasers. The Purchasers reserve the
right to exercise any and all rights they might hold in the event that any vote
is called by the General Partner, or if, in the future, changes in circumstances
would dictate that they or other limited partners exercise their right to call a
vote. Thus, if the Purchasers purchase over 50% of the outstanding BAC of the
Partnership (pursuant to this and any other tender offers and other purchases),
they will be in a position to control the Partnership by virtue of being able to
remove and replace the General Partner, to cause the Partnership to sell its
assets, and to liquidate the Partnership.
Other Potential Effects. The BAC are registered under the Exchange Act, which
requires, among other things that the Partnership furnish certain information to
its BAC holders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of, and solicitation of consents from, BAC
holders. Registration and reporting requirements could be terminated by the
Partnership if the number of record holders falls below 300, or below 500 if the
Partnership's total assets are below $10 million for three consecutive preceding
fiscal years. The Partnership reported a total of 997 limited partners as of its
most recent fiscal year end, but the Purchasers are offering to purchase up to
173,732 BAC. Accordingly, it is possible that the Offer could result in the
total number of BAC holders falling below the foregoing 300 holder level. As
disclosed by the Partnership in its public reports, however, there has never
been a public trading market for the BAC and none is expected to develop, so the
Partnership's status as a public company will not affect a trading market in the
BAC. While the Partnership's Agreement of Limited Partnership requires that all
BAC holders be provided annual audited financial statements, quarterly interim
financial statements and timely reports providing other information regarding
15
the operations and condition of the Partnership, a change in the Partnership's
status as a public company could reduce the information available to BAC holders
about the Partnership in the event the information required by the Partnership
Agreement is not as extensive as that provided in reports required to be filed
by public companies under applicable rules of the Securities and Exchange
Commission.
Section 8. Future Plans. Following the completion of the Offer, the Purchasers,
or their affiliates, may acquire additional BAC. Any such acquisitions may be
made through private purchases, one or more future tender offers or by any other
means deemed advisable or appropriate. Any such acquisitions may be at a
consideration higher or lower than the consideration to be paid for the BAC
purchased pursuant to the Offer. The Purchasers are seeking to purchase a total
of 173,732 BAC. If the Purchasers acquire fewer than 173,732 BAC pursuant to the
Offer, the Purchasers may seek to make further purchases on the open market at
prevailing prices, or solicit BAC pursuant to one or more future tender offers
at the same price, a higher price or, if the Partnership's circumstances change,
at a lower price. Alternatively, the Purchasers may discontinue any further
purchases of BAC after termination of the Offer, regardless of the number of BAC
purchased. The Offer is not made with any current view toward or plan or purpose
of acquiring BAC in a series of successive and periodic offers. Nevertheless, as
noted above, the Purchasers reserve the right to gauge the response to this
solicitation, and, if not successful in purchasing 173,732 BAC in this Offer,
may consider future offers. Factors affecting the Purchasers' future interest in
acquiring additional BAC include, but are not limited to, the relative success
of the current Offer, any increase or decrease in the availability of capital
for investment by the Purchasers and their investment fund affiliates, the
current diversification and performance of each affiliated fund's portfolio of
real estate interests, the development of any public market in the BAC or
actions by unrelated parties to tender for or purchase BAC, the status of and
changes and trends in the Partnership's operations, announcement of pending
property sales and the proposed terms of sales, and local and national real
estate and financial market developments and trends.
The Purchasers are acquiring the BAC pursuant to the Offer solely for
investment purposes. The Purchasers have no present intention to seek control of
the Partnership or to change the management or operations of the Partnership.
The Purchasers do not have any present intention to take any action in
connection with the liquidation of the Partnership. The Purchasers nevertheless
reserve the right, at an appropriate time, to exercise their rights as limited
partners to vote on matters subject to a limited partner vote, including, but
not limited to, any vote to affecting the sale of the Partnership's properties
and the liquidation and dissolution of the Partnership. Except as expressly set
forth herein, the Purchasers have no present intention to seek control of the
Partnership, to cause the Partnership to engage in any extraordinary
transaction, to cause any purchase, sale or transfer of a material amount of the
assets of any Partnership, to make any change in the distribution policies,
indebtedness or capitalization of any Partnership or to change the structure,
management or operations of the Partnership, the listing status of the BAC or
the reporting requirements of the Partnership. However, if the Purchasers
purchase over 50% of the outstanding BAC of the Partnership (pursuant to this
and any other tender offers and other purchases), they will be in a position to
control the Partnership by virtue of being able to remove and replace the
General Partner, to cause the Partnership to sell its assets, and to liquidate
the Partnership.
Section 9. The Business of the Partnership. For information about the
Partnership, please refer to the annual report prepared by the Partnership which
was sent to you earlier, particularly Item 2 of Form 10-K, the Quarterly Reports
on Form 10-Q, Schedule 14D-9s, and any other materials sent to you by the
Partnership. These documents contain updated information concerning the
Partnership, including detailed information regarding the properties owned,
including mortgages, rental rates, operations, management, and taxes. In
addition, the Partnership is subject to the information and reporting
requirements of the Exchange Act and information about the Partnership can be
obtained on the Commission's EDGAR system, at its internet web site at
www.sec.gov, and are available for inspection at the Commission's principal
office in Washington, D.C.
Section 10. Conflicts of Interest. The Depositary is affiliated with certain
Purchasers. Therefore, by virtue of this affiliation, the Depositary may have
inherent conflicts of interest in acting as Depositary for the Offer. The
Depositary's role is administrative only, however, and any conflict of interest
should not be deemed material to BAC holders.
Section 11. Certain Information Concerning the Purchasers. The Purchasers are
MPF-NY 2007, LLC; MPF Badger Acquisition Co. LLC; MPF DeWaay Fund 4, LLC; MPF
Senior Note Program I, LP; Steven Gold; MP Income Fund 16 LLC; MPF Income Fund
23, LLC; MPF DeWaay Fund 6, LLC; MPF Flagship Fund 13 LLC; MPF Special Fund 8,
LLC; MPF Flagship Fund 11, LLC; MPF Acquisition Co. 3, LLC; MPF DeWaay Fund 5,
LLC; MPF Flagship Fund 12, LLC. For information concerning the Purchasers and
their respective principals, please refer to Schedule I attached hereto. The
principal business of each of the Purchasers is investment in securities,
particularly real estate-based securities. The principal business address of
each of the Purchasers is 1640 School Street, Moraga, California 94556.
16
The Purchasers have made binding commitments to contribute and have
available sufficient amounts of capital necessary to fund the acquisition of all
BAC subject to the Offer, the expenses to be incurred in connection with the
Offer, and all other anticipated costs of the Purchasers. The Purchasers are not
public companies and have not prepared audited financial statements or financial
statements prepared in accordance with generally accepted accounting principles.
MacKenzie Patterson Fuller, LP and its affiliates have been in the business of
purchasing illiquid real estate securities, both in open market transactions and
by means of tender offers, since 1982 and have acquired more than $170 million
in such securities for affiliated portfolios during the last ten years. The
Purchasers have aggregate assets that are more than sufficient to fund their
collective obligation to purchase BAC in this Offer and any other outstanding
tender offers.
Except as otherwise set forth herein, (i) neither the Purchasers nor, to the
best knowledge of the Purchasers, the persons listed on Schedule I nor any
affiliate of the Purchasers beneficially owns or has a right to acquire any BAC,
(ii) neither the Purchasers nor, to the best knowledge of the Purchasers, the
persons listed on Schedule I nor any affiliate of the Purchasers, or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the BAC within the past 60 days, (iii) neither the Purchasers
nor, to the best knowledge of the Purchasers, the persons listed on Schedule I
nor any affiliate of the Purchasers has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
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, consents or
authorizations, (iv) there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
Commission between any of the Purchasers or, to the best knowledge of the
Purchasers, the persons listed on Schedule I, or any affiliate of the Purchasers
on the one hand, and the Partnership or its affiliates, on the other hand, (v)
there have been no contracts, negotiations or transactions between the
Purchasers, or to the best knowledge of the Purchasers any affiliate of the
Purchasers on the one hand, the persons listed on Schedule I, and the
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, (vi) no person listed on Schedule I has been convicted in a criminal
proceeding during the past five years (excluding traffic violations or similar
misdemeanors), and (vii) no person listed on Schedule I has been a party to any
judicial or administrative proceeding during the past five years (except for
matters dismissed without sanction or settlement) that resulted in a judgment,
decree, or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws. .
Section 12. Source of Funds. The Purchasers expect that approximately $2,432,248
would be required to purchase 173,732 BAC, if tendered, and an additional
$20,000 may be required to pay related fees and expenses. The Purchasers
anticipate funding all of the purchase price and related expenses through their
existing capital and assets. The cash and liquid securities necessary to
complete the entire purchase are readily available and are committed to that
purpose. Accordingly, there are no financing arrangements to fall through and no
alternative financing plans.
Section 13. Conditions of the Offer. Notwithstanding any other term of the
Offer, the Purchasers shall not be required to accept for payment or to pay for
any BAC tendered unless all authorizations or approvals of, or expirations of
waiting periods imposed by, any court, administrative agency or other
governmental authority necessary for the consummation of the transactions
contemplated by the Offer shall have been obtained or occurred on or before the
Expiration Date. As of the Offer Date, the Purchasers are unaware of any such
required authorizations, approvals, or waiting periods relating to this Offer.
The Purchasers shall not be required to accept for payment or pay for
any BAC and may terminate or amend the Offer as to such BAC if, at any time on
or after the date of the Offer and before the Expiration Date, any of the
following conditions exists:
(a) a preliminary or permanent injunction or other order of any federal
or state court, government or governmental authority or agency shall have been
issued and shall remain in effect which (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment of or payment for any BAC by the Purchasers, (ii) imposes
or confirms limitations on the ability of the Purchasers effectively to exercise
full rights of ownership of any BAC, including, without limitation, the right to
vote any BAC acquired by the Purchasers pursuant to the Offer or otherwise on
all matters properly presented to the Partnership's BAC holders, (iii) requires
divestiture by the Purchasers of any BAC, (iv) causes any material diminution of
the benefits to be derived by the Purchasers as a result of the transactions
contemplated by the Offer (see the discussion of such benefits in the Summary
Term Sheet and Introduction sections of the Offer to Purchase) or (v) materially
adversely affect the business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects of the Purchasers or
the Partnership, in the reasonable judgment of the Purchasers;
17
(b) there shall be any action taken, or any statute, rule, regulation
or order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental authority
or agency, other than the application of the waiting period provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which will,
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change or development shall have occurred or been threatened
since the date hereof, in the business, properties, assets, liabilities,
financial condition, operations, results of operations or prospects of the
Partnership, which, in the reasonable judgment of the Purchasers, is or will be
materially adverse to the Partnership, or the Purchasers shall have become aware
of any fact that, in the reasonable judgment of the Purchasers, does or will
have a material adverse effect on the value of the BAC;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation by any governmental authority on, or other
event which might affect, the extension of credit by lending institutions or
result in any imposition of currency controls in the United States, (iv) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) a material
change in United States or other currency exchange rates or a suspension of a
limitation on the markets thereof, or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(e) it shall have been publicly disclosed or the Purchasers shall have
otherwise learned that (i) more than fifty percent of the outstanding BAC have
been or are proposed to be acquired by another person (including a "group"
within the meaning of Section 13(d)(3) of the Exchange Act), or (ii) any person
or group that prior to such date had filed a Statement with the Commission
pursuant to Sections 13(d) or (g) of the Exchange Act has increased or proposes
to increase the number of BAC beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding BAC.
The foregoing conditions are for the sole benefit of the Purchasers and
may be asserted by the Purchasers or may be waived by the Purchasers in whole or
in part at any time and from time to time prior to the Expiration Date in their
sole exercise of reasonable discretion, and the Offer will remain open for a
period of at least five business days following any such waiver of a material
condition. However, if we waive a certain condition for one tendering BAC
holder, we will waive that condition for all BAC holders tendering BAC. Any
determination by the Purchasers concerning the events described above will be
final and binding upon all parties, subject, of course, to the parties' ability
to seek review of any contested determination by an arbitrator pursuant to
Section 16.
Section 14. Certain Legal Matters.
General. Except as set forth in this Section 14, the Purchasers 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 BAC
by the Purchasers pursuant to the Offer. Should any such approval or other
action be required, it is the Purchasers' present intention that such additional
approval or action would be sought. While there is no present intent to delay
the purchase of BAC tendered pursuant to the Offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's business
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchasers to elect to terminate the Offer without
purchasing BAC thereunder. The Purchasers' obligation to purchase and pay for
BAC is subject to certain conditions, including conditions related to the legal
matters discussed in this Section 14.
Antitrust. The Purchasers do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the acquisition of BAC
pursuant to the Offer.
Margin Requirements. The BAC are not "margin securities" under the regulations
of the Board of Governors of the Federal Reserve System and, accordingly, such
regulations are not applicable to the Offer.
State Takeover Laws. A number of states have adopted anti-takeover laws which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. These laws are directed at the acquisition of corporations and
not partnerships. The Purchasers, therefore, do not believe that any
anti-takeover laws apply to the transactions contemplated by the Offer.
18
Although the Purchasers have not attempted to comply with any state
anti-takeover statutes in connection with the Offer, the Purchasers reserve the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer nor any action taken in
connection herewith is intended as a waiver of such right. If any state
anti-takeover statute is applicable to the Offer, the Purchasers might be unable
to accept for payment or purchase BAC tendered pursuant to the Offer or be
delayed in continuing or consummating the Offer. In such case, the Purchasers
may not be obligated to accept for purchase or pay for any BAC tendered.
Section 15. Fees and Expenses. The Purchasers have retained MacKenzie Patterson
Fuller, LP, an affiliate of certain Purchasers, to act as Depositary in
connection with the Offer. The Purchasers will pay the Depositary reasonable and
customary compensation for its services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
liabilities under the federal securities laws. The Purchasers will also pay all
costs and expenses of printing, publication and mailing of the Offer and all
costs of transfer.
Section 16. Miscellaneous. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) BAC HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION. THE PURCHASERS ARE NOT AWARE OF ANY JURISDICTION
WITHIN THE UNITED STATES IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE
THEREOF WOULD BE ILLEGAL.
No person has been authorized to give any information or to make any
representation on behalf of the Purchasers 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.
Further, by tendering your BAC, you are agreeing to arbitrate any disputes that
may arise between you and the Purchasers or the Depositary, to subject yourself
to personal jurisdiction in California, and that the prevailing party in any
such action will be entitled to recover attorney fees and costs.
October 11, 2007
MPF-NY 2007, LLC; MPF Badger Acquisition Co. LLC; MPF DeWaay Fund 4, LLC; MPF
Senior Note Program I, LP; Steven Gold; MP Income Fund 16 LLC; MPF Income Fund
23, LLC; MPF DeWaay Fund 6, LLC; MPF Flagship Fund 13 LLC; MPF Special Fund 8,
LLC; MPF Flagship Fund 11, LLC; MPF Acquisition Co. 3, LLC; MPF DeWaay Fund 5,
LLC; MPF Flagship Fund 12, LLC
19
SCHEDULE I
THE PURCHASERS AND THEIR RESPECTIVE PRINCIPALS
The Purchasers are MPF-NY 2007, LLC; MPF Badger Acquisition Co.
LLC; MPF DeWaay Fund 4, LLC; MPF Senior Note Program I, LP; Steven Gold; MP
Income Fund 16 LLC; MPF Income Fund 23, LLC; MPF DeWaay Fund 6, LLC; MPF
Flagship Fund 13 LLC; MPF Special Fund 8, LLC; MPF Flagship Fund 11, LLC; MPF
Acquisition Co. 3, LLC; MPF DeWaay Fund 5, LLC; MPF Flagship Fund 12, LLC. Each
of the entity Purchasers is organized as a limited liability company or limited
partnership. The Manager of each of the limited liability company Purchasers and
the general partner of each of the limited partnership Purchasers is MacKenzie
Patterson Fuller, LP or its affiliate Sutter Capital Management, LLC. The names
of the directors and executive officers of MacKenzie Patterson Fuller, LP are
set forth below. Sutter Capital Management, LLC is wholly owned by MPF Advisers,
LP, an affiliate of MacKenzie Patterson Fuller, LP. The Purchasers have jointly
made the offer and are jointly and severally liable for satisfying its terms.
Other than the foregoing, the Purchasers' relationship consists of an informal
agreement to share the costs associated with making the offer and to allocate
any resulting purchases of BAC among them in such manner and proportions as they
may determine in the future. Each of the entities is organized in California.
The Purchasers intend, if the Offer is fully subscribed, to allocate the BAC
among themselves as follows: MPF-NY 2007, LLC - 8,686.62 BAC; MPF Badger
Acquisition Co. LLC - 8,686.62 BAC; MPF DeWaay Fund 4, LLC - 8,928.57 BAC; MPF
Senior Note Program I, LP - 21,428.57 BAC; Steven Gold - 7,142.86 BAC; MP Income
Fund 16 LLC - 10,714.29 BAC; MPF Income Fund 23, LLC - 17,857.14 BAC; MPF DeWaay
Fund 6, LLC - 17,857.14 BAC; MPF Flagship Fund 13 LLC - 17,857.14 BAC; MPF
Special Fund 8, LLC - 14,285.71 BAC; MPF Flagship Fund 11, LLC - 10,714.29 BAC;
MPF Acquisition Co. 3, LLC - 3,571.43 BAC; MPF DeWaay Fund 5, LLC - 17,857.14
BAC; MPF Flagship Fund 12, LLC - 8,144.87 BAC. We will determine modifications
to this allocation based upon the number of BAC tendered. Priority is given to
Purchasers which already hold BAC, then to Purchasers which raised capital
first, then to the remaining Purchasers in equal shares. BAC will be allocated
according to this priority until the maximum number of BAC listed above are
allocated to Purchasers within a given priority, then BAC will be allocated
similarly among Purchasers in the next level of priority, until all BAC are
allocated; provided that MPF-NY 2007 will receive at least 10% of all BAC
tendered.
MacKenzie Patterson Fuller, LP
The names of the directors and executive officers of MacKenzie Patterson Fuller,
LP are set forth below. Each individual is a citizen of the United States of
America. The principal business address of MacKenzie Patterson Fuller, LP, each
Purchaser, and each individual is 1640 School Street, Moraga, California 94556,
and the business telephone number for each is 925-631-9100. The general partner
is BC-GP, Inc., a California corporation owned by the limited partners.
C.E. Patterson is President and a director of MacKenzie Patterson Fuller, LP,
which acts as manager and general partner of a number of real estate investment
vehicles, and has served in those positions since January 1989. In 1981, Mr.
Patterson founded Patterson Financial Services, Inc. (now MPF Advisers, LP), a
registered investment adviser ("MPFA"), with Berniece A. Patterson, as a
financial planning firm, and he has served as its President since that date. Mr.
Patterson founded Patterson Real Estate Services, a licensed California Real
Estate Broker, in 1982. As President of MPFA, Mr. Patterson is responsible for
all investment counseling activities. He supervises the analysis of investment
opportunities for the clients of the firm. Mr. Patterson previously served as
president of Host Funding, Inc., an owner of lodging properties, from December
1999 through 2003. Mr. Patterson is also an officer and controlling shareholder
of Cal-Kan, Inc., a closely held real estate investment company. Mr. Patterson,
through his affiliates, manages a number of investment and real estate
companies.
Berniece A. Patterson is a director of MacKenzie Patterson Fuller, LP and has
served in that capacity since January 1989. In 1981, Ms. Patterson and C.E.
Patterson established MPFA. She has served as Chair of the Board and Secretary
of MPFA since that date. Her responsibilities with MPFA include oversight of
administrative matters and monitoring of past projects underwritten by MPFA.
Since October 1990, Ms. Patterson has been responsible for the day-to-day
operations of two nursing homes and over 200 employees.
Glen W. Fuller became senior vice president and a director of MacKenzie
Patterson Fuller, LP in May 2000. Since 2004 he has been a director and vice
president of MPFA. Prior to becoming senior vice president, from August 1998 to
April 2000, he was with MacKenzie Patterson Fuller, LP as a portfolio manager
and research analyst. From December 1999 to 2003, Mr. Fuller served as an
officer and director of Host Funding, Inc. Prior to joining MacKenzie Patterson
Fuller, LP, from May 1996 to July 1998, Mr. Fuller ran the over-the-counter
trading desk for North Coast Securities Corp. (previously Morgan Fuller Capital
Group) with responsibility for both the proprietary and retail trading desks.
Mr. Fuller was also the registered options principal and registered municipal
bond principal for North Coast Securities, a registered broker dealer. Mr.
Fuller was formerly a NASD-registered options principal and registered bond
principal, and he held his NASD Series 7, general securities license (now
inactive). Mr. Fuller has also spent time working on the floor of the New York
Stock Exchange as a trading clerk and on the floor of the Pacific Stock Exchange
in San Francisco as an assistant specialist for LIT America.
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Chip Patterson is senior vice president, general counsel, and a director of the
MacKenzie Patterson Fuller, LP Since 2004 he has been a director and vice
president of MPFA. Prior to joining MacKenzie Patterson Fuller, LP in July 2003,
he was a securities and corporate finance attorney with the national law firm of
Davis Wright Tremaine LLP from August 2000 to January 2003. From August 1997 to
May 2000 he attended the University of Michigan Law School, where he graduated
magna cum laude with a Juris Doctor Degree. Prior to law school, Chip Patterson
taught physics, chemistry, and math at the high school level for three years,
from June 1994 to June 1997. He graduated with high distinction and Phi Beta
Kappa from the University of California at Berkeley with a Bachelor of Arts
Degree in Political Science. He also has prior experience in sales, retail, and
banking.
Christine Simpson is senior vice president of MacKenzie Patterson Fuller, LP and
MPFA and is responsible for the day-to-day management of research and securities
purchases and sales on behalf of the entities managed by MacKenzie Patterson
Fuller, LP Ms. Simpson has served in that position since January 1997; from
January 1994 until her promotion to vice president, she was a research analyst
with MacKenzie Patterson Fuller, LP She joined MacKenzie Patterson Fuller, LP as
an administrative assistant in July 1990. Ms. Simpson received her Bachelor of
Arts degree in Management from Saint Mary's College of California in May 2005
and her Master of Science in Financial Analysis and Investment Management from
Saint Mary's College of California in October 2006.
Robert E. Dixon is senior vice president and a director of MPFA and MacKenzie
Patterson Fuller, LP and served as an officer and director of Sutter Holding
Company, Inc. from March 2002 to October 2006. Mr. Dixon received his Bachelor's
degree in economics from the University of California at Los Angeles in 1992. He
worked for Lehman Brothers, Inc. in equity sales and trading during 1993 and
1994. From October 1994 to June, 1996 he worked for MacKenzie Patterson, Inc. as
a securities research analyst. Mr. Dixon became a Chartered Financial Analyst in
1996, and received his Master of Business Administration degree from Cornell
University in 1998. In July of 1998 he began buying and selling securities for
his own account and those of the entities he controlled, and he was principally
engaged in that activity until May 2005, when he rejoined MPFA. Mr. Dixon was a
registered representative of North Coast Securities from 1994 through 1997.
Andrea K. Meyer is vice president of Trading and Portfolios for MPFA and
MacKenzie Patterson Fuller, LP As vice president of Trading and Portfolios, Ms.
Meyer is responsible for handling the day-to-day operations of the trading
department. She graduated from St. Mary's College of California in 1997 with a
Bachelor of Science in Business Administration with a concentration in Finance
and a Minor in Accounting. Prior to joining MPFA in 1998, she worked for a year
for State Street Bank and Trust, one of the leading financial services
specialists worldwide, as a portfolio accountant.
Steven Gold
Steven Gold, a California attorney, has been working during the last five years
analyzing investments on behalf of the David B. Gold Foundation, a charitable
foundation for which he is the Treasurer. The business address of the Foundation
is 44 Montgomery Street, Suite 3750, San Francisco, California 94104. Mr. Gold
is a U.S. citizen. In addition, he has participated in starting a number of
business ventures, including T/O devices and an import/export company.
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