Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH ALL
BENEFICIAL ASSIGNMENT CERTIFICATES REPRESENTING
LIMITED PARTNERSHIP INTERESTS
OF
CRI HOTEL INCOME PARTNERS, LP
AT
$12.50 PER BAC
MPF-NY 2007, LLC; Moraga Gold, LLC; Steven Gold; MPF Badger Acquisition
Co., LLC; MPF Senior Note Program I, LP; MPF DeWaay Fund 4, LLC; MP Income
Fund 11, LP; MP Income Fund 12, LLC; MP Income Fund 14, LLC; MPF Flagship
Fund 12, LLC; Sutter Opportunity Fund 4, LLC; MPF ePlanning Opportunity
Fund, LP; MacKenzie Patterson Special Fund 6, LLC; MacKenzie Patterson
Special Fund 6-A, LLC; MPF Acquisition Co. 3, LLC; MP Value Fund 7, LLC;
MacKenzie Patterson Special Fund 5, LLC; MPF Special Fund 8, LLC; MPF Blue
Ridge Fund I, LLC; MPF Blue Ridge Fund II, LLC; MPF DeWaay Premier Fund 3,
LLC; MPF DeWaay Premier Fund 4, LLC; MPF DeWaay Fund 3, LLC; MPF DeWaay
Fund 5, LLC; MPF Income Fund 22, LLC; MPF Income Fund 23, LLC
(collectively the "Purchasers")
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., PACIFIC TIME,
ON MAY 4, 2007, UNLESS THE OFFER IS EXTENDED.
The Purchasers hereby seek to acquire ALL beneficial assignment certificates
representing limited partnership interests (the "BACs") in CRI HOTEL INCOME
PARTNERS, LP (the "Partnership") not already held by purchasers and their
affiliates. 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 782,163 BACs at a purchase price equal to $12.50 per BAC, less the
amount of any distributions declared or made with respect to the BACs between
April 3, 2007 and May 4, 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 units
as of March 23, 2007, 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 81,130 BACs, or 9.96% of the outstanding BACs. The 782,163 BACs
subject to the Offer constitute 100% of the outstanding BACs not already owned
by the Purchasers and their affiliates. Consummation of the Offer, if all BACs
sought are tendered, would require payment by the Purchasers of up to $9,777,038
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 BAC holders who tender their BACs will give up the opportunity to
participate in any future benefits from the ownership of BACs,
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 BACs. In
establishing the purchase price of $12.50 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 BACs, and neither the
BAC holders nor the Purchasers have any accurate means for
determining the actual present value of the BACs. Although there can
be no certainty as to the actual present value of the BACs, the
Purchasers have estimated, solely for the
1
purposes of determining an acceptable Offer price, that the
Partnership could have an estimated liquidation value of
approximately $16.42 per BAC. It should be noted, however, that the
Purchasers have not made an independent appraisal of the BACs 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 BACs or that the actual amounts which may
be realized by holders for the BACs 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
BACs prior to the Expiration Date and acceptance by the Purchasers
for payment. Further, by tendering your BACs, 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 Purchasers are offering to purchase ANY and ALL BACs pursuant to
the terms of the Offer.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF BACS BEING
TENDERED. 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 BACs, 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 BACs, 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.
April 3, 2007
2
IMPORTANT
Any BAC holder desiring to tender any or all of such BAC holder's BACs should
complete and sign the Letter of Transmittal (a copy of which is enclosed with
this Offer to Purchase, printed on green 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 certain 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.
- ---------------------------
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.
- ---------------------------
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.
3
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET.............................................................5
INTRODUCTION...................................................................8
TENDER OFFER..................................................................11
Section 1. Terms of the Offer................................................11
Section 2. Acceptance for Payment and Payment for BACs;Proration..............11
Section 3. Procedures for Tendering BACs......................................12
Section 4. Withdrawal Rights..................................................13
Section 5. Extension of Tender Period; Termination; Amendment.................13
Section 6. Material Federal Income Tax Consequences...........................14
Section 7. Effects of the Offer...............................................16
Section 8. Future Plans......................................................17
Section 9. The Business of the Partnership....................................17
Section 10. Conflicts of Interest.............................................17
Section 11. Certain Information Concerning the Purchasers.....................17
Section 12. Source of Funds...................................................18
Section 13. Conditions of the Offer...........................................18
Section 14. Certain Legal Matters.............................................19
Section 15. Fees and Expenses.................................................20
Section 16. Miscellaneous.....................................................20
SCHEDULE I....................................................................21
4
SUMMARY TERM SHEET
The Purchasers are offering to purchase all BACs for $12.50 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 BACs is being made jointly by MPF-NY 2007, LLC;
Moraga Gold, LLC; Steven Gold; MPF Badger Acquisition Co., LLC; MPF Senior Note
Program I, LP; MPF DeWaay Fund 4, LLC; MP Income Fund 11, LP; MP Income Fund 12,
LLC; MP Income Fund 14, LLC; MPF Flagship Fund 12, LLC; Sutter Opportunity Fund
4, LLC; MPF ePlanning Opportunity Fund, LP; MacKenzie Patterson Special Fund 6,
LLC; MacKenzie Patterson Special Fund 6-A, LLC; MPF Acquisition Co. 3, LLC; MP
Value Fund 7, LLC; MacKenzie Patterson Special Fund 5, LLC; MPF Special Fund 8,
LLC; MPF Blue Ridge Fund I, LLC; MPF Blue Ridge Fund II, LLC; MPF DeWaay Premier
Fund 3, LLC; MPF DeWaay Premier Fund 4, LLC; MPF DeWaay Fund 3, LLC; MPF DeWaay
Fund 5, LLC; MPF Income Fund 22, LLC; MPF Income Fund 23, 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 all 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 $12.50 per BAC, net to you in cash, less the amount of
any distributions declared or made with respect to the BACs between April 3,
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 BACs 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 BACs sought is purchased, the Purchasers' capital
commitment will be approximately $9,777,038. The Purchasers have an aggregate of
approximately $62 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 May 4, 2007, to decide
whether to tender your BACs in the Offer.
WILL ALL OF THE BACS I TENDER BE ACCEPTED BY THE PURCHASERS?
The Purchasers desire to purchase any and all of the outstanding BACs.
5
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.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There are no conditions to the offer based on a minimum number of BACs tendered,
the availability of financing, or the success of the offer. However, we may not
be obligated to purchase any BACs if certain conditions occur, such as legal or
government actions which would prohibit the purchase. Furthermore, we are not
obligated to purchase any BACs 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 BACs, 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 BACs you tender, we
will pay you upon confirmation that the general partner will either transfer the
BACs or recognize the change of address for distributions and correspondence on
the BACs.
HOW DO I TENDER MY BACS?
To tender your BACs, you must deliver a completed Letter of Transmittal (printed
on green 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 BACs at any time until the Offer has
expired and, if we have not agreed to accept your BACs for payment by June 2,
2007, you can withdraw them at any time after such time until we do accept your
BACs for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED BACS?
To withdraw BACs, 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 BACs.
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 BACs 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 BACs and none is expected to develop,
so the Partnership's status as a public company will not affect a trading market
in the BACs. 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
6
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.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY BACS?
The Purchasers do not anticipate that BACs 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 BACs 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 BACs 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 BACs. 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 BACs on secondary markets at $10 during
the 4th Quarter 2006 and sales of BACs on secondary markets at $6.25 per BAC in
July/Aug 2006, respectively. The American Partnership Board, another
independent, third-party source, reported sales of BACs at $4.86 per BAC in
Second Quarter 2006. 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. The Purchasers are unaware of any other recent trading
prices, other than a tender offer initiated by Affiliates of the Purchasers in
August of 2006 for $10 per BAC. Although there can be no certainty as to the
actual present value of the BACs, 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 $16.42 per BAC, or higher.
It should be noted, that the Purchasers have not made an independent appraisal
of the BACs 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 BACs or that the actual amounts
which may be realized by BAC holders for the 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.
7
To the BAC holders of CRI HOTEL INCOME PARTNERS, LP:
INTRODUCTION
The Purchasers hereby offer to purchase ALL BACs at a purchase price of
$12.50 per BAC ("Offer Price"), less the amount of any distributions declared or
paid with respect to the BACs between April 3, 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 April 3, 2007. BAC holders who tender their BACs will not be obligated to
pay any Partnership transfer fees, or any other fees, expenses or commissions in
connection with the tender of BACs. 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 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 BACs and may wish to sell
them to the Purchasers.
o BAC holders who tender their BACs will give up the opportunity to
participate in any future benefits from the ownership of BACs,
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 BACs. In
establishing the purchase price of $12.50 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 BACs, and neither the
BAC holders nor the Purchasers have any accurate means for
determining the actual present value of the BACs. Although there can
be no certainty as to the actual present value of the BACs, 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 $16.42 per BAC. It should be
noted, however, that the Purchasers have not made an independent
appraisal of the BACs 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 BACs or
that the actual amounts which may be realized by holders for the
BACs 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
BACs prior to the Expiration Date and acceptance by the Purchasers
for payment. Further, by tendering your BACs, 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 Purchasers are offering to purchase ANY and ALL BACs pursuant to
the terms of the Offer.
8
Establishment of the Offer Price
The Purchasers have set the Offer Price at $12.50 per BAC, less the amount
of any distributions declared or made with respect to the BACs between April 3,
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 BACs 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 BACs.
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 BACs means that BAC holders have limited alternatives if
they seek to sell their BACs. As a result of such limited alternatives for BAC
holders, the Purchasers may not need to offer as high a price for the BACs as
they would otherwise. On the other hand, the Purchasers take a greater risk in
establishing a purchase price because there is no prevailing market price to be
used for reference and the Purchasers themselves will have limited liquidity for
the BACs 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 BACs on secondary markets at $10 during the 4th Quarter 2006 and sales
of BACs on secondary markets at $6.25 per BAC in July/Aug 2006, respectively.
The American Partnership Board, another independent, third-party source,
reported sales of BACs at $4.86 per BAC in Second Quarter 2006. 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. The Purchasers are
unaware of any other recent trading prices, other than a tender offer initiated
by certain of the Purchasers and their affiliates in August of 2006 for $10 per
BAC pursuant to which they purchased 41,476 BACs.
The Purchasers are offering to purchase BACs 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,
2006, June 30, 2006, and September 30, 2006, the Purchasers derived an estimated
net asset value for the BACs. 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 BACs, 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.
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-K for the year ended December 31, 2006 (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.
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-K for the year ended December 31, 2006, and calculated the amount of the
balance allocable to the
9
BACs. The resulting Estimated Liquidation Value of the Partnership's assets was
approximately $16.42 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 $21,359,000
-----------------------------------------------------------------------------------
Less: Selling Costs at 6% ($1,282,000)
-----------------------------------------------------------------------------------
Less: Notes Payable ($7,499,000)
-----------------------------------------------------------------------------------
Plus: Net Current Assets $ 1,681,000
-----------------------------------------------------------------------------------
Estimated net valuation of your partnership $14,259,000
-----------------------------------------------------------------------------------
Percentage of estimated net valuation allocated to holders of units 100%
based upon subordinated general partner participation
-----------------------------------------------------------------------------------
Estimated net valuation of units $14,259,000
-----------------------------------------------------------------------------------
Total number of units 868,662
-----------------------------------------------------------------------------------
Estimated valuation per unit $ 16.42
-----------------------------------------------------------------------------------
The Offer Price represents the price at which the Purchasers are willing
to purchase BACs. The Purchasers arrived at the $12.50 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 BACs 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 BACs 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 BACs.
The Offer is not made with any current view toward or plan or purpose of
acquiring BACs 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 868,662 BACs pursuant to this Offer, may consider
future offers. Factors affecting the Purchasers' future interest in acquiring
additional BACs 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 BACs or actions by
unrelated parties to tender for or purchase BACs, 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 BACs 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 any and all of
the outstanding BACs.
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 BACs that are purchased pursuant
to the Offer, whether or not such BACs 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 BACs.
10
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 BACs 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 May 4, 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 BACs tendered, terminate the Offer and return all tendered BACs to tendering
BAC holders, (ii) waive all the unsatisfied conditions and, subject to complying
with applicable rules and regulations of the Commission, purchase all BACs
validly tendered, (iii) extend the Offer and, subject to the right of BAC
holders to withdraw BACs until the Expiration Date, retain the BACs 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 BACs upon confirmation that the general
partner will either transfer the BACs or recognize the change of address for
distributions and correspondence on the BACs, 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 BACs 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 BACs as offered herein.
Further, by tendering your BACs, 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 BACs Acceptance for Payment
and Payment for BACs. 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, BACs 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 BACs or recognize the change of address for
distributions and correspondence on the BACs. In all cases, payment for BACs
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.
For purposes of the Offer, the Purchasers shall be deemed to have accepted
for payment (and thereby purchased) tendered BACs when, as and if the Purchasers
give oral or written notice to the Depositary of the Purchasers' acceptance for
payment of such BACs pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for BACs 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 BACs are not purchased for any reason, the Letter of
Transmittal with respect to such BACs not purchased will be of no force or
effect. If, for any reason whatsoever, acceptance for payment of, or payment
for, any BACs tendered pursuant to the Offer is delayed or the Purchasers are
unable to accept for payment, purchase or pay for BACs tendered pursuant to the
Offer, then, without prejudice to the Purchasers' rights under
11
Section 13, the Depositary may, nevertheless, on behalf of the Purchasers,
retain tendered BACs and such BACs 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 BACs 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 BACs accepted for payment pursuant to the
Offer, whether or not such BACs were tendered prior to such increase.
Section 3. Procedures for Tendering BACs.
Valid Tender. For BACs 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 green 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 BACs owned by such BAC
holder.
In order for a tendering BAC holder to participate in the Offer, BACs must be
validly tendered and not withdrawn prior to the Expiration Date, which is 11:59
p.m., Pacific Time, on May 4, 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 BACs 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 BACs tendered by such BAC holder and accepted for
payment by the Purchasers. Such appointment will be effective when, and only to
the extent that, the Purchasers accept such BACs for payment. Upon such
acceptance for payment, all prior proxies given by such BAC holder with respect
to such BACs 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 BACs, 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 BACs 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 BACs; 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 BACs
pursuant to the procedures described above will be determined by the Purchasers,
in their sole
12
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 BACs
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 BACs 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 BACs or will incur any liability for failure to give any such
notification.
A tender of BACs 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 BACs 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 BACs, hold
option rights to acquire such securities, maintain "short" positions in the BACs
(i.e., have borrowed the BACs) or have loaned the BACs 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 BACs. In any event, a BAC holder will be deemed to tender BACs in
compliance with Rule 14e-4 and the Offer if the holder is the record owner of
the BACs and the holder (i) delivers the BACs 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 BACs pursuant to the Offer are irrevocable, provided that BACs
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 June 2, 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 BACs
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, BACs is delayed for any reason or if the
Purchasers are unable to purchase or pay for BACs for any reason, then, without
prejudice to the Purchasers' rights under the Offer, tendered BACs 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 BACs properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn BACs may be re-tendered, however, by following
the procedures described in Section 3 at any time prior to the Expiration Date.
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 BACs 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 BACs by giving oral or
written notice of such
13
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 BACs 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 BACs) are delayed in their payment for
BACs or are unable to pay for BACs pursuant to the Offer for any reason, then,
without prejudice to the Purchasers' rights under the Offer, the Depositary may
retain tendered BACs on behalf of the Purchasers, and such BACs 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 BACs 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 BACs or recognize
the change of address for distributions and correspondence on the BACs.
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, 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.
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
14
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 BACs are readily traded on a secondary market by virtue of the fact that
there have been some tender offers and auction trades of BACs, 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 BACs 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 BACs 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 BACs 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 BACs 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 BACs pursuant
to the Offer, assuming that such BAC holder does not hold its BACs as a "dealer"
and has not acquired such BACs 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 BACs 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 BACs.
Such allocations and any Partnership distributions for such period would affect
a BAC holder's adjusted tax basis in the tendered BACs and, therefore, the
amount of gain or loss recognized by the BAC holder on the sale of the BACs.
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 BACs 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.
Suspended "Passive Activity Losses". A BAC holder who sells all of the BAC
holder's BACs 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 BACs, 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 BACs and then against income from any other source.
15
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 BACs pursuant to the Offer,
although no more than 50% of the BACs may be transferred in any 12-month period.
This limitation will not affect the tender of BACs under this Offer because,
subject to the terms of the Offer, we will pay for the BACs upon confirmation
that the general partner will either transfer the BACs or recognize the change
of address for distributions and correspondence on the BACs, and, under the
terms of the Letter of Transmittal, we will take a power of attorney over your
BACs that will permit us to change the address to which distributions are sent.
We will then wait to transfer the BACs 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 BACs 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 BACs 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 BACs through secondary market transactions.
Voting Power of Purchasers. If the Purchasers acquire a significant number of
the BACs 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
BACs (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 BACs 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 BACs in their sole discretion as to any matters for which the
Partnership has established a record date prior to the time such. BACs 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 BACs 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 BACs 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
868,662 BACs. 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 BACs and none is expected to develop, so
the Partnership's status as a public company will not affect a trading market in
the BACs. 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
16
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 BACs. 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 BACs
purchased pursuant to the Offer. The Purchasers are seeking to purchase a total
of 868,662 BACs. If the Purchasers acquire fewer than 868,662 BACs pursuant to
the Offer, the Purchasers may seek to make further purchases on the open market
at prevailing prices, or solicit BACs 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 BACs after termination of the Offer, regardless of the
number of BACs purchased. The Offer is not made with any current view toward or
plan or purpose of acquiring BACs 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 868,662 BACs
in this Offer, may consider future offers. Factors affecting the Purchasers'
future interest in acquiring additional BACs 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 BACs or actions by unrelated parties to tender for or purchase BACs, 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 BACs 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 BACs or
the reporting requirements of the Partnership. However, if the Purchasers
purchase over 50% of the outstanding BACs 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, 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; Moraga Gold, LLC; Steven Gold; MPF Badger Acquisition Co.,
LLC; MPF Senior Note Program I, LP; MPF DeWaay Fund 4, LLC; MP Income Fund 11,
LP; MP Income Fund 12, LLC; MP Income Fund 14, LLC; MPF Flagship Fund 12, LLC;
Sutter Opportunity Fund 4, LLC; MPF ePlanning Opportunity Fund, LP; MacKenzie
Patterson Special Fund 6, LLC; MacKenzie Patterson Special Fund 6-A, LLC; MPF
Acquisition Co. 3, LLC; MP Value Fund 7, LLC; MacKenzie Patterson Special Fund
5, LLC; MPF Special Fund 8, LLC; MPF Blue Ridge Fund I, LLC; MPF Blue
17
Ridge Fund II, LLC; MPF DeWaay Premier Fund 3, LLC; MPF DeWaay Premier Fund 4,
LLC; MPF DeWaay Fund 3, LLC; MPF DeWaay Fund 5, LLC; MPF Income Fund 22, LLC;
MPF Income Fund 23, 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.
The Purchasers have made binding commitments to contribute and have
available sufficient amounts of capital necessary to fund the acquisition of all
BACs 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 $75 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 BACs 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
BACs, (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 BACs 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 $9,777,038
would be required to purchase 782,163 BACs, 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 BACs 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
BACs and may terminate or amend the Offer as to such BACs 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
18
otherwise directly or indirectly restrains or prohibits the making of the Offer
or the acceptance for payment of or payment for any BACs by the Purchasers, (ii)
imposes or confirms limitations on the ability of the Purchasers effectively to
exercise full rights of ownership of any BACs, including, without limitation,
the right to vote any BACs 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 BACs, (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;
(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 BACs;
(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 BACs 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 BACs beneficially owned by such person or group as
disclosed in such Statement by two percent or more of the outstanding BACs.
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 BACs. 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 BACs
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 BACs 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
19
cause the Purchasers to elect to terminate the Offer without purchasing BACs
thereunder. The Purchasers' obligation to purchase and pay for BACs 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 BACs
pursuant to the Offer.
Margin Requirements. The BACs 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.
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 BACs 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 BACs 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 BACs, 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.
April 3, 2007
MPF-NY 2007, LLC; Moraga Gold, LLC; Steven Gold; MPF Badger Acquisition Co.,
LLC; MPF Senior Note Program I, LP; MPF DeWaay Fund 4, LLC; MP Income Fund 11,
LP; MP Income Fund 12, LLC; MP Income Fund 14, LLC; MPF Flagship Fund 12, LLC;
Sutter Opportunity Fund 4, LLC; MPF ePlanning Opportunity Fund, LP; MacKenzie
Patterson Special Fund 6, LLC; MacKenzie Patterson Special Fund 6-A, LLC; MPF
Acquisition Co. 3, LLC; MP Value Fund 7, LLC; MacKenzie Patterson Special Fund
5, LLC; MPF Special Fund 8, LLC; MPF Blue Ridge Fund I, LLC; MPF Blue Ridge Fund
II, LLC; MPF DeWaay Premier Fund 3, LLC; MPF DeWaay Premier Fund 4, LLC; MPF
DeWaay Fund 3, LLC; MPF DeWaay Fund 5, LLC; MPF Income Fund 22, LLC; MPF Income
Fund 23, LLC
20
SCHEDULE I
THE PURCHASERS AND THEIR RESPECTIVE PRINCIPALS
The Purchasers are MPF-NY 2007, LLC; Moraga Gold, LLC; Steven Gold;
MPF Badger Acquisition Co., LLC; MPF Senior Note Program I, LP; MPF DeWaay Fund
4, LLC; MP Income Fund 11, LP; MP Income Fund 12, LLC; MP Income Fund 14, LLC;
MPF Flagship Fund 12, LLC; Sutter Opportunity Fund 4, LLC; MPF ePlanning
Opportunity Fund, LP; MacKenzie Patterson Special Fund 6, LLC; MacKenzie
Patterson Special Fund 6-A, LLC; MPF Acquisition Co. 3, LLC; MP Value Fund 7,
LLC; MacKenzie Patterson Special Fund 5, LLC; MPF Special Fund 8, LLC; MPF Blue
Ridge Fund I, LLC; MPF Blue Ridge Fund II, LLC; MPF DeWaay Premier Fund 3, LLC;
MPF DeWaay Premier Fund 4, LLC; MPF DeWaay Fund 3, LLC; MPF DeWaay Fund 5, LLC;
MPF Income Fund 22, LLC; MPF Income Fund 23, 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, except for MacKenzie Patterson
Fuller, LP (whose general partner is BC-GP, Inc.), 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 BACs 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 BACs among themselves as follows: 10%, 5%, 5%, 5%, 15%, 2.3%, 0.5%, 0.9%,
0.5%, 2.8%, 3.7%, 10%, 2.3%, 1.4%, 0.5%, 1.4%, 0.9%, 2.3%, 1.8%, 0.9%, 2.3%,
2.3%, 2.3%, 2.3%, 2.3%, 2.3%, and 14%. We will determine modifications to this
allocation based upon the number of BACs tendered. Priority is given to
Purchasers which already hold BACs, then to Purchasers which raised capital
first, then to the remaining Purchasers in equal shares. BACs will be allocated
according to this priority until the maximum number of BACs listed above are
allocated to Purchasers within a given priority, then BACs will be allocated
similarly among Purchasers in the next level of priority, until all BACs are
allocated; provided that MPF-NY 2007 will receive at least 10% of all BACs
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
21
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.
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 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 has served as an officer and director of Sutter Holding
Company, Inc. since March 2002. 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.
22