Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH 23,183.5
BENEFICIAL ASSIGNMENT CERTIFICATES ("UNITS")
OF
OF LIBERTY TAX CREDIT PLUS II L.P.
AT
$30 PER UNIT
MPF-NY 2007, LLC; MPF Badger Acquisition Co., LLC; SCM Special Fund, LLC;
MPF Senior Note Program, LP (collectively the "Purchasers")
THE OFFER, WITHDRAWAL RIGHTS, AND PRORATION PERIOD WILL EXPIRE AT 11:59
P.M., PACIFIC TIME, ON AUGUST 3, 2007, UNLESS THE OFFER IS EXTENDED.
The Purchasers hereby seek to acquire 23,183.5 Beneficial Assignment
Certificates, representing assignments of limited partnership interest
(hereinafter referred to as the "Units") in LIBERTY TAX CREDIT PLUS II L.P. (the
"Partnership"). The Purchasers are not affiliated with the Partnership or its
general partner. The general partner of the Partnership is Related Credit
Properties II, LP, Liberty Associates II, LP, and Liberty GP II, Inc. (the
"General Partner"). The Purchasers hereby offer to purchase 23,183.5 Units at a
purchase price equal to $30 per Unit, less the amount of any distributions
declared or made with respect to the Units between June 27, 2007 and August 3,
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 Unit holders to the Purchasers.
Tender of Units will include the tender of any and all securities into which the
Units may be converted and any securities distributed with respect to the Units
from and after the Offer Date. The Partnership had 8,342 holders of record
owning an aggregate of 115,917.5 units as of March 31, 2006, according to its
Annual Report on Form 10-K for the fiscal year ending March 31, 2006. The
Purchasers and their affiliates currently beneficially own 9,348.93 Units, or
8.065% of the outstanding Units. The 23,183.5 Units subject to the Offer
constitute 20% of the outstanding Units. Consummation of the Offer, if all Units
sought are tendered, would require payment by the Purchasers of up to $695,505
in aggregate purchase price, which the Purchasers intend to fund out of their
current working capital.
Holders of Units ("Unit holders") are urged to consider the following factors:
o While the Partnership is selling properties, it has stated that "It
is anticipated that this process will take a number of years." If
you sell your Units to us, you will no longer have to file a
Schedule K-1 with your tax return for this Partnership.
o The tax credits associated with the Partnership have all expired;
until last year, no distributions were paid to limited partners, and
according to the Partnership "The Partnership does not anticipate
providing cash distributions to the [holders of Units] other than
distributions of sale or refinancing proceeds upon the disposition
of Properties." (See Annual Report on Form 10-K for the year ended
March 31, 2006).
o The Partnership has stated that it "there can be no assurance that
the Partnership will achieve [the] investment objective of providing
cash distributions from the operations of the Properties." Our Offer
will provide you with cash within 3 business days of the transfer of
the Units.
o Unit holders who tender their Units will give up the opportunity to
participate in any future benefits from the ownership of Units,
including potential future distributions by the Partnership from
property operations or dispositions, and the purchase price per Unit
payable to a tendering Unit holder by the Purchasers may be less
than the total amount which might otherwise be received by the Unit
holder with respect to the Unit 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 Units. In
establishing the purchase price of $30 per Unit, the Purchasers are
motivated to establish the lowest price which might be acceptable to
Unit holders consistent with the Purchasers' objectives. There is no
public market for the Units, and neither the Unit holders nor the
Purchasers have any accurate means for determining the actual
present value of the Units. Although there can be no certainty as to
the actual present value of the Units, 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 $46 per Unit. It should be noted,
however, that the Purchasers have not made an independent appraisal
of the Units 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 Units or that the
actual amounts which may be realized by holders for the Units may
not vary substantially from this estimate.
o You should consult with your financial or tax advisor about the tax
consequences of the sale of your Units. You may have to recapture
the amount of passive losses that you have used to offset passive
income to the extent you have been able to do so in past years.
However, you do not have to recapture Tax Credits. Of course, this
recapture of passive losses used will happen eventually, regardless
of whether you sell now, but you should consult your advisors. You
may also be able to recognize a loss on the sale of your Units
because you have not received back your entire capital contribution
from the Partnership.
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 Unit holders have been paid; however, neither the
Depositary nor the Purchasers has any rights with respect to the
Units prior to the Expiration Date and acceptance by the Purchasers
for payment. Further, by tendering your Units, you are agreeing to
arbitrate any disputes that may arise between you and the Purchasers
or the Depositary, to subject yourself to personal jurisdiction in
California, and that the prevailing party in any such action will be
entitled to recover attorney fees and costs.
o The Offer allows Unitholders the option to sell 'All or None' of
their Units, thereby allowing Unitholders the option to avoid
proration if more than 23,183.5 Units are tendered. See Section
2--Acceptance for Payment and Payment for Units; Proration and
Section 4--Withdrawal Rights; Automatic Withdrawal Option. The
Purchasers may accept only a portion of the Units tendered by a
Unitholder if a total of more than 23,183.5 Units are tendered and
the Unitholder does not select the 'All or None' option.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF UNITS BEING
TENDERED. IF MORE THAN 23,183.5 UNITS ARE VALIDLY TENDERED AND NOT WITHDRAWN,
THE PURCHASERS WILL ACCEPT FOR PURCHASE 23,183.5 UNITS FROM TENDERING
UNITHOLDERS (WHO DO NOT ELECT THE 'ALL OR NONE' OPTION) ON A PRO RATA BASIS,
SUBJECT TO THE TERMS AND CONDITIONS HEREIN. A UNIT HOLDER MAY TENDER ANY OR ALL
UNITS OWNED BY SUCH UNIT 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 Units, 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 Units,
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 Unit holders in a manner reasonably designed to inform Unit holders of such
change in compliance with Rule 14d-4(c) under the Securities Exchange Act of
1934 (the "Exchange Act"). In the case of an extension of the Offer, such
extension will be followed by a press release or public announcement which will
be issued no later than 9:00 a.m., Eastern Time, on the next business day after
the scheduled Expiration Date, in accordance with Rule 14e-1(d) under the
Exchange Act.
IMPORTANT
Any Unit holder desiring to tender any or all of such Unit holder's Units should
complete and sign the Letter of Transmittal (a copy of which is enclosed with
this Offer to Purchase, printed on purple paper) in accordance with the
instructions in the Letter of Transmittal and mail, deliver or telecopy the
Letter of Transmittal and any other required documents to MacKenzie Patterson
Fuller, LP (the "Depositary"), an affiliate of the Purchasers, at the address or
facsimile number set forth below.
MacKenzie Patterson Fuller, LP
1640 School Street, Moraga, California 94556
Telephone: 800-854-8357; Facsimile: 925-631-9119
E-Mail Address: offers@mpfi.com
Questions or requests for assistance or additional copies of this Offer to
Purchase or the Letter of Transmittal may be directed to the Purchasers at
1-800-854-8357.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR ANY REPRESENTATION
ON BEHALF OF THE PURCHASERS OR TO PROVIDE ANY INFORMATION OTHER THAN AS
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. NO SUCH RECOMMENDATION,
INFORMATION OR REPRESENTATION
2
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.
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET...........................................................4
INTRODUCTION.................................................................7
TENDER OFFER................................................................10
Section 1. Terms of the Offer..............................................10
Section 2. Acceptance for Payment and Payment for Units;Proration...........10
Section 3. Procedures for Tendering Units...................................11
Section 4. Withdrawal Rights................................................12
Section 5. Extension of Tender Period; Termination; Amendment...............13
Section 6. Material Federal Income Tax Consequences.........................13
Section 7. Effects of the Offer.............................................15
Section 8. Future Plans....................................................15
Section 9. The Business of the Partnership..................................16
Section 10. Conflicts of Interest...........................................16
Section 11. Certain Information Concerning the Purchasers...................16
Section 12. Source of Funds.................................................17
Section 13. Conditions of the Offer.........................................17
Section 14. Certain Legal Matters...........................................18
Section 15. Fees and Expenses...............................................18
Section 16. Miscellaneous...................................................18
SCHEDULE I..................................................................19
3
SUMMARY TERM SHEET
The Purchasers are offering to purchase up to 23,183.5 Units for $30 per Unit in
cash. The following are some of the questions that you, as a Unit 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 Units is being made jointly by MPF-NY 2007, LLC; MPF
Badger Acquisition Co., LLC; SCM Special Fund, LLC; MPF Senior Note Program, LP.
Each of the entity Purchasers is a real estate investment fund managed or
advised by MacKenzie Patterson Fuller, LP, a private, independent real estate
investment firm or its affiliate Sutter Capital Management, LLC. None of these
entities is affiliated with the Partnership or its General Partner.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase up to 23,183.5 Units of limited partnership interest,
which are the "Units" 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 $30 per Unit, net to you in cash, less the amount of any
distributions declared or made with respect to the Units between June 27, 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 Unit holders to the Purchasers. If you tender your Units 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 Units sought is purchased, the Purchasers' capital
commitment will be approximately $695,505. The Purchasers have an aggregate of
approximately $10 million in total assets at their disposal to fund payment to
selling Unit 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 August 3, 2007, to
decide whether to tender your Units in the Offer.
WILL ALL OF THE UNITS I TENDER BE ACCEPTED BY THE PURCHASERS?
The Purchasers desire to purchase up to 23,183.5 Units. If the number of Units
validly tendered and not properly withdrawn on or prior to the Expiration Date
is less than or equal to 23,183.5, we will purchase all Units so tendered and
not withdrawn, upon the terms and subject to the conditions of the Offer.
However, if more than 23,183.5 Units are so tendered and not withdrawn, we will
accept for payment and pay for 23,183.5 Units so tendered, pro rata according to
the number of Units so tendered, adjusted by rounding down to the nearest whole
number of Units tendered by each Unit holder to avoid purchases of fractional
Units, as appropriate. However, you have the option to sell `All or None' of
your Units by checking the appropriate box on the Letter of Transmittal. If you
check that box, we will not purchase your Units if more than 23,183.5 Units are
tendered, and you will be deemed to automatically withdraw your tender. See
Section 2. Acceptance for Payment and Payment for Units; Proration and Section
4. Withdrawal Rights.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
The Offer can be extended in our discretion.
4
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will make a public announcement of the extension, not
later than 9:00 a.m., Eastern Time, on the day after the day on which the Offer
was scheduled to expire. You can check our website at www.mpfi.com (click on MPF
Tenders) to see if it has been extended, or check the SEC's EDGAR database.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There are no conditions to the offer based on a minimum number of Units
tendered, the availability of financing, or the success of the offer. However,
we may not be obligated to purchase any Units if certain conditions occur, such
as legal or government actions which would prohibit the purchase. Furthermore,
we are not obligated to purchase any Units 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 Units, 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 UNITS I TENDER?
Upon the Expiration of the Offer and our acceptance of the Units you tender, we
will pay you upon confirmation that the general partner will either transfer the
Units or recognize the change of address for distributions and correspondence on
the Units.
HOW DO I TENDER MY UNITS?
To tender your Units, you must deliver a completed Letter of Transmittal
(printed on purple paper), to the Depositary at: MacKenzie Patterson Fuller, LP,
1640 School Street, Moraga, California 94556 (Telephone: 800-854-8357; Facsimile
Transmission: 925-631-9119), no later than the time the Offer expires.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED UNITS?
You can withdraw previously tendered Units at any time until the Offer has
expired and, if we have not agreed to accept your Units for payment by August
26, 2007, you can withdraw them at any time after such time until we do accept
your Units for payment.
HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
To withdraw Units, 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 Units.
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 8,342 holders of its outstanding Units as of the date
of its most recent annual report. If the total number of Unit 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 Unit holders falling below the 300 holder level. However, there has
never been a public trading market for the Units and none is expected to
develop, so the Partnership's status as a public company will not affect a
trading market in the Units. While the Partnership's Agreement of Limited
Partnership requires that all Unit holders be provided annual audited financial
statements, quarterly interim financial statements, and timely reports providing
other information regarding the operations and condition of the Partnership, a
change in the Partnership's status as a public company could reduce the
information available to Unit 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 UNITS?
The Purchasers do not anticipate that Units held by non-tendering Unit holders
will be affected by the completion of the offer.
5
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 Units 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 UNITS?
The Units do not have a readily ascertainable market value, and neither the Unit
holders nor the Purchasers have any accurate means for determining the actual
present value of the Units. According to the Partnership, "Neither the BACs nor
the Limited Partnership Interests are [sic] traded on any established public
trading market." (Annual Report on Form 10-K for the fiscal year ending March
31, 2006). The Purchasers' review of independent secondary market reporting
publications such as The Stanger Report and The Direct Investments Spectrum
(formerly The Partnership Spectrum), reported sales of Units on secondary
markets at $62 during the 1st Quarter 2007 and sales of Units on secondary
markets at $87.43 per Unit in Jan/Feb 2007, respectively. The American
Partnership Board, another independent, third-party source, reported sales of
Units at $57.26 per Unit in April 2007. It is important to note that The Stanger
Report and The Direct Investments Spectrum quotes are market prices BEFORE the
partnership distribution that occurred in March of 2007. This distribution was
for $77 per Unit. 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. Further, some of the Purchasers and their affiliates made
a tender offer in August of 2006, pursuant to which they purchased approximately
5,180 Units at a price of $70 per Unit (also before the distribution). Although
there can be no certainty as to the actual present value of the Units, 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 $46 per Unit, or higher. It should be noted, that the Purchasers
have not made an independent appraisal of the Units 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 Units or that the actual amounts which may be realized by Unit holders
for the Units may not vary substantially from this estimate.
TO WHOM CAN I TALK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call MacKenzie Patterson Fuller, LP, toll-free, at 800-854-8357.
6
To the Unit holders of LIBERTY TAX CREDIT PLUS II L.P.:
INTRODUCTION
The Purchasers hereby offer to purchase 23,183.5 Units at a purchase price
of $30 per Unit ("Offer Price"), less the amount of any distributions declared
or paid with respect to the Units between June 27, 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 June 27, 2007. Unit holders who tender their Units will not be
obligated to pay any Partnership transfer fees, or any other fees, expenses or
commissions in connection with the tender of Units. 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 625 Madison Avenue, New York, New
York 10022, and its phone number is (212) 317-5700
Unit holders are urged to consider the following factors:
o While the Partnership is selling properties, it has stated that "It
is anticipated that this process will take a number of years." If
you sell your Units to us, you will no longer have to file a
Schedule K-1 with your tax return for this Partnership.
o The tax credits associated with the Partnership have all expired;
until last year, no distributions were paid to limited partners, and
according to the Partnership "The Partnership does not anticipate
providing cash distributions to the [holders of Units] other than
distributions of sale or refinancing proceeds upon the disposition
of Properties." (See Annual Report on Form 10-K for the year ended
March 31, 2006).
o The Partnership has stated that it "there can be no assurance that
the Partnership will achieve [the] investment objective of providing
cash distributions from the operations of the Properties." Our Offer
will provide you with cash within 3 business days of the transfer of
the Units.
o The Purchasers are making the Offer for investment purposes and with
the intention of making a profit from the ownership of the Units. In
establishing the purchase price of $30 per Unit, the Purchasers are
motivated to establish the lowest price which might be acceptable to
Unit holders consistent with the Purchasers' objectives. There is no
public market for the Units, and neither the Unit holders nor the
Purchasers have any accurate means for determining the actual
present value of the Units. Although there can be no certainty as to
the actual present value of the Units, 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 $46 per Unit. It should be noted,
however, that the Purchasers have not made an independent appraisal
of the Units or the Partnership's properties, and are not qualified
to appraise real estate. Furthermore, although the Partnership has
announced that it is attempting to sell its remaining properties,
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
Units or that the actual amounts which may be realized by holders
for the Units may not vary substantially from this estimate.
o You should consult with your financial or tax advisor about the tax
consequences of the sale of your Units. You may have to recapture
the amount of passive losses that you have used to offset passive
income to the extent you have been able to do so in past years.
However, you do not have to recapture Tax Credits. Of course, this
recapture of passive losses used will happen eventually, regardless
of whether you sell now, but you should consult your advisors. You
may also be able to recognize a loss on the sale of your Units
because you have not received back your entire capital contribution
from the Partnership.
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 Unit holders have been paid; however, neither the
Depositary nor the Purchasers has any rights with respect to the
Units prior to the Expiration Date and acceptance by the Purchasers
for payment. Further, by tendering your Units, you are agreeing to
arbitrate any disputes that may arise between you and the Purchasers
or the Depositary, to subject yourself to personal jurisdiction in
California, and that the prevailing party in any such action will be
entitled to recover attorney fees and costs.
o The Offer allows Unitholders the option to sell 'All or None' of
their Units, thereby allowing Unitholders the option to avoid
proration if more than 23,183.5 Units are tendered. See Section
2--Acceptance for Payment and Payment for
7
Units; Proration and Section 4--Withdrawal Rights; Automatic
Withdrawal Option. The Purchasers may accept only a portion of the
Units tendered by a Unitholder if a total of more than 23,183.5
Units are tendered and the Unitholder does not select the 'All or
None' option.
Establishment of the Offer Price
The Purchasers have set the Offer Price at $30 per Unit, less the amount
of any distributions declared or made with respect to the Units between June 27,
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 Units 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 Units.
The Partnership made the following statements in its Annual Report on Form
10-K for the fiscal year ending March 31, 2006: "Neither the BACs nor the
Limited Partnership Interests are [sic] traded on any established public trading
market.." The lack of any public market for the sale of Units means that Unit
holders have limited alternatives if they seek to sell their Units. As a result
of such limited alternatives for Unit holders, the Purchasers may not need to
offer as high a price for the Units as they would otherwise. On the other hand,
the Purchasers take a greater risk in establishing a purchase price as there is
no prevailing market price to be used for reference and the Purchasers
themselves will have limited liquidity for the Units upon consummation of the
purchase. The Purchasers' review of independent secondary market reporting
publications such as Stanger Report and The Direct Investments Spectrum
(formerly The Partnership Spectrum), reported sales of Units on secondary
markets at $62 during the 1st Quarter 2007 and sales of Units on secondary
markets at $87.43 per Unit in Jan/Feb 2007, respectively. The American
Partnership Board, another independent, third-party source, reported sales of
Units at $57.26 per Unit in April 2007. It is important to note that The Stanger
Report and The Direct Investments Spectrum quotes are market prices BEFORE the
partnership distribution that occurred in March of 2007. This distribution was
for $77 per Unit. 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. Further, some of the Purchasers and their affiliates made
a tender offer in August of 2006, pursuant to which they purchased approximately
5,180 Units at a price of $70 per Unit (also before the distribution).
The Purchasers are offering to purchase Units which are an illiquid
investment and are not offering to purchase the Partnership's underlying assets.
The Partnership has disclosed in its Quarterly Report on Form 10-Q for the
fiscal quarter ending December 31, 2006 that on December 21, 2006, the property
and the related assets and liabilities of two Local Partnerships were sold (West
107th Street and 96th Street). In addition, on December 12, 2006, the property
and related assets and liabilities of one Local Partnership were sold (Spring
Creek) and on October 31, 2006, the property and related assets and liabilities
of another Local Partnership were sold (Rolling Green). Subsequent to this
report, on January 11, 2007, one Local Partnership entered into a purchase and
sale agreement to sell its property and its related assets and liabilities
(Whittier). 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 Unit 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 March
31, 2006 and the quarterly reports for the quarters ended December 31, 2006,
September 30, 2006, and June 30, 2006, the Purchasers derived an estimated net
asset value for the Units. 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 Units, 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 10.5% capitalization rate (the "Cap Rate"). The
result reduced by 3% to take into account the estimated closing costs which
would be incurred upon sale by the Partnership of the properties, including
brokerage commissions, title costs, surveys, appraisals, legal fees and transfer
taxes. The NOI and the rental income were obtained from the Partnership's Form
10-Q for the third quarter 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, Unit holders should
be aware that the use of lower capitalization rate would result in a
8
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-Q for the quarter ended December 31, 2006, and calculated the amount of
the balance allocable to the Units. The resulting Estimated Liquidation Value of
the Partnership's assets was approximately $46 per Unit. 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 Unit 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 Unit based upon this
information is given below:
- --------------------------------------------------------------------------------------------
Gross valuation of partnership properties $36,768,317
- --------------------------------------------------------------------------------------------
Less: Selling Costs at 3% ($1,103,050)
- --------------------------------------------------------------------------------------------
Less: Notes Payable ($32,769,273)
- --------------------------------------------------------------------------------------------
Plus: Net Current Assets $2,450,808
- --------------------------------------------------------------------------------------------
Estimated net valuation of your partnership $5,346,803
- --------------------------------------------------------------------------------------------
Percentage of estimated net valuation allocated to holders of units
based upon subordinated general partner participation 99%
- --------------------------------------------------------------------------------------------
Estimated net valuation of units $5,293,335
- --------------------------------------------------------------------------------------------
Total number of units 115,917.5
- --------------------------------------------------------------------------------------------
Estimated valuation per unit $46
- --------------------------------------------------------------------------------------------
The Offer Price represents the price at which the Purchasers are willing
to purchase Units. The Purchasers arrived at the $30 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 Units 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 Units may be
relevant to Unit holders. Unit 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 Units.
The Offer is not made with any current view toward or plan or purpose of
acquiring Units 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 23,183.5 Units pursuant to this Offer, may consider
future offers. Factors affecting the Purchasers' future interest in acquiring
additional Units 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 Units or actions
by unrelated parties to tender for or purchase Units, 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 Unit holders will not be obligated to pay transfer fees,
brokerage fees, or commissions on the sale of the Units to the Purchasers
pursuant to the Offer. The Purchasers will pay all charges and expenses incurred
in connection with the Offer. The Purchasers desire to purchase up to 23,183.5
Units. If the number of Units validly tendered and not properly withdrawn on or
prior to the Expiration Date is less than or equal to 23,183.5, we will purchase
all Units so tendered and not withdrawn, upon the terms and subject to the
conditions of the Offer. However, if more than 23,183.5 Units are so tendered
and not withdrawn, we will accept for payment and pay for 23,183.5 Units so
tendered, pro rata according to the number of Units so tendered, adjusted by
rounding down to the nearest whole number of Units tendered by each Unit holder
to avoid purchases of fractional Units, as appropriate. However, you have the
option to sell `All or None' of your Units by checking the appropriate box on
the Letter of Transmittal. If you check that box, we will only purchase your
Units if we can purchase all of your Units; otherwise, you will be deemed to
automatically withdraw your tender. See Section 2. Acceptance for Payment and
9
Payment for Units; Proration and Section 4. Withdrawal Rights.
If, prior to the Expiration Date, the Purchasers increase the
consideration offered to Unit holders pursuant to the Offer, such increased
consideration will be paid with respect to all Units that are purchased pursuant
to the Offer, whether or not such Units were tendered prior to such increase in
consideration.
Unit holders are urged to read this Offer to Purchase and the accompanying
Letter of Transmittal carefully before deciding whether to tender their Units.
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 Units 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 August 3, 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 Units tendered, terminate the Offer and return all tendered Units to
tendering Unit holders, (ii) waive all the unsatisfied conditions and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Units validly tendered, (iii) extend the Offer and, subject to the right of
Unit holders to withdraw Units until the Expiration Date, retain the Units 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 Units upon confirmation that the
general partner will either transfer the Units or recognize the change of
address for distributions and correspondence on the Units, 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 Units 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 Units as offered herein.
Further, by tendering your Units, 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 Units Acceptance for Payment
and Payment for Units; Proration. Upon the terms and subject to the conditions
of the Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), the Purchasers will accept for
payment, and will pay for, Units 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 Units or
recognize the change of address for distributions and correspondence on the
Units. In all cases, payment for Units purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal.
The Purchasers desire to purchase up to 23,183.5 Units. If the number of
Units validly tendered and not properly withdrawn on or prior to the Expiration
Date is less than or equal to 23,183.5, we will purchase all Units so tendered
and not withdrawn, upon the terms and subject to the conditions of the Offer.
However, if more than 23,183.5 Units are so tendered and not withdrawn, we will
accept for payment and pay for 23,183.5 Units so tendered, pro rata according to
the number of Units so tendered, adjusted by rounding down to the nearest whole
number of Units tendered by each Unit holder to avoid purchases of fractional
Units, as appropriate.
In the event that proration is required, because of the difficulty of
immediately determining the precise number of Units to be accepted, the
Purchasers will announce the final results of proration as soon as practicable,
but in no event later than five business days following the Expiration Date. The
Purchasers will not pay for any Units tendered until after the final proration
factor has been determined.
Unitholders may indicate, by checking a box on the Letter of Transmittal
(the 'All or None' Box), that they only wish to sell their Units if they will be
able to sell all of their Units, without any proration. See Section
4--Withdrawal Rights. If more than 23,183.5 Units have been properly tendered
without checking the All or None Box, then the above description of
10
proration will apply only to tenders of such Units that do not have the All or
None Box checked.
For purposes of the Offer, the Purchasers shall be deemed to have accepted
for payment (and thereby purchased) tendered Units when, as and if the
Purchasers give oral or written notice to the Depositary of the Purchasers'
acceptance for payment of such Units pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Units 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 Unit holders for the
purpose of receiving payment from the Purchasers and transmitting payment to
tendering Unit holders.
Under no circumstances will interest be paid on the Offer Price by reason
of any delay in making such payment.
If any tendered Units are not purchased for any reason (other than due to
proration as described above), the Letter of Transmittal with respect to such
Units not purchased will be of no force or effect. If, for any reason
whatsoever, acceptance for payment of, or payment for, any Units tendered
pursuant to the Offer is delayed or the Purchasers are unable to accept for
payment, purchase or pay for Units tendered pursuant to the Offer, then, without
prejudice to the Purchasers' rights under Section 13, the Depositary may,
nevertheless, on behalf of the Purchasers, retain tendered Units and such Units
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 Units deposited by or on behalf of the Unit holder promptly after
the termination or withdrawal of a tender offer), except to the extent that the
tendering Unit 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 Unit holders pursuant to the Offer, such increased
consideration shall be paid for all Units accepted for payment pursuant to the
Offer, whether or not such Units were tendered prior to such increase.
Section 3. Procedures for Tendering Units.
Valid Tender. For Units to be validly tendered pursuant to the Offer, a properly
completed and duly executed Letter of Transmittal (a copy of which is enclosed
with this Offer to Purchase, printed on purple paper) with any other documents
required by the Letter of Transmittal must be received by the Depositary at its
address set forth on the back cover of this Offer to Purchase on or prior to the
Expiration Date. A Unit holder may tender any or all Units owned by such Unit
holder.
In order for a tendering Unit holder to participate in the Offer, Units must be
validly tendered and not withdrawn prior to the Expiration Date, which is 11:59
p.m., Pacific Time, on August 3, 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 Unit 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 Units purchased pursuant to the Offer, a tendering Unit holder must
provide the Depositary with such Unit holder's correct taxpayer identification
number and make certain certifications that such Unit holder is not subject to
backup federal income tax withholding. Each tendering Unit holder must insert in
the Letter of Transmittal the Unit 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 Unit tendered, each Unit holder must complete the
FIRPTA Affidavit included in the Letter of Transmittal certifying such Unit
holder's taxpayer identification number and address and that the Unit 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 Unit holder irrevocably appoints the designees of the Purchasers as
such Unit 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
Unit holder's rights with respect to the Units tendered by such Unit holder and
accepted for payment by the Purchasers. Such appointment will be effective when,
and only to the extent that, the Purchasers accept such Units for payment. Upon
such acceptance for payment, all prior proxies given by such Unit holder with
respect to such Units 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 Units, be empowered to
exercise all voting and other rights of such Unit holder as they in their sole
discretion may deem proper at any meeting of Unit holders, by written consent
11
or otherwise. In addition, by executing a Letter of Transmittal, a Unit holder
also assigns to the Purchasers all of the Unit holder's rights to receive
distributions from the Partnership with respect to Units 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 Units; Waiver of Defects; No Obligation
to Give Notice of Defects. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance for payment of any tender of Units
pursuant to the procedures described above will be determined by the Purchasers,
in their sole discretion, which determination shall be final and binding. The
Purchasers reserve the absolute right to reject any or all tenders if not in
proper form or if the acceptance of, or payment for, the absolute right to
reject any or all tenders if not in proper form or if the acceptance of, or
payment for, the Units 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 Units of any
particular Unit 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 Units or will incur any
liability for failure to give any such notification.
A tender of Units pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Unit holder and the
Purchasers upon the terms and subject to the conditions of the Offer, including
the tendering Unit holder's representation and warranty that (i) such Unit
holder owns the Units being tendered within the meaning of Rule 14e-4 under the
Exchange Act and (ii) the tender of such Unit 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 Unit holders who have granted options to sell or purchase the Units, hold
option rights to acquire such securities, maintain "short" positions in the
Units (i.e., have borrowed the Units) or have loaned the Units 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 Units. In any event, a Unit holder will be deemed to tender
Units in compliance with Rule 14e-4 and the Offer if the holder is the record
owner of the Units and the holder (i) delivers the Units 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 Units pursuant to the Offer are irrevocable, provided that Units
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 August 26,
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 Units
to be withdrawn and must be signed by the person(s) who signed the Letter of
Transmittal in the same manner as the Letter of Transmittal was signed.
If purchase of, or payment for, Units is delayed for any reason or if the
Purchasers are unable to purchase or pay for Units for any reason, then, without
prejudice to the Purchasers' rights under the Offer, tendered Units may be
retained by the Depositary on behalf of the Purchasers and may not be withdrawn
except to the extent that tendering Unit 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 Units properly withdrawn will be deemed not to be validly tendered for
purposes of the Offer. Withdrawn Units may be re-tendered, however, by following
the procedures described in Section 3 at any time prior to the Expiration Date.
Automatic Withdrawal Option. Unitholders may indicate, by checking a box
on the Letter of Transmittal (the 'All or None Box'), that they only wish to
sell their Units if they will be able to sell all of their Units, without any
proration. If at any time during the day of the Expiration Date more than
23,183.5 Units have been properly tendered, unless the Purchaser amends the
Offer to increase the number of Units to be purchased, the Purchaser will deem
all Units from Unitholders that checked the All or None Box to be withdrawn and
not validly tendered for purposes of the Offer. Neither the Purchaser nor any
other person will be under any duty to give any notice that such automatic
withdrawal will occur. Unitholders may change their election whether or not to
check the All or None Box at any time on or prior to the Expiration Date by
submitting a new Letter
12
of Transmittal with their preferred election, in the manner described in Section
3 herein.
Section 5. Extension of Tender Period; Termination; Amendment. The Purchasers
expressly reserve the right, in their sole discretion, at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Units 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 Units by giving oral or
written notice of such termination to the Depositary, and (iii) to amend the
Offer in any respect (including, without limitation, by increasing or decreasing
the consideration offered or the number of Units 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 Unit
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 Units) are delayed in their payment for
Units or are unable to pay for Units pursuant to the Offer for any reason, then,
without prejudice to the Purchasers' rights under the Offer, the Depositary may
retain tendered Units on behalf of the Purchasers, and such Units may be
withdrawn to the extent tendering Unit 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 Units 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 Units or
recognize the change of address for distributions and correspondence on the
Units.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer or waive a material condition of the Offer, the
Purchasers will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer to Purchase, "business day" means any day other than a Saturday, Sunday or
a federal holiday, and consists of the time period from 12:01 a.m. through
midnight, Pacific Time. Any material change in the terms of the Offer will be
published, sent, or given to you in a manner reasonably designed to inform you
of such change; in most cases we will mail you supplemental materials.
Section 6. Material Federal Income Tax Consequences. THE FEDERAL INCOME TAX
DISCUSSION SET FORTH BELOW DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF TAXATION
THAT MAY BE RELEVANT TO A PARTICULAR UNIT 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 Unit 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 UNIT HOLDER TENDERING UNITS SHOULD CONSULT SUCH UNIT HOLDER'S OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH UNIT 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 Units are not
traded on an established securities market. In the unlikely event that the
Partnership becomes a "publicly traded partnership" and is not excepted from
federal income tax, there would be several adverse tax consequences to the Unit
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
13
corporation in exchange for stock which would be deemed distributed to the Unit
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 Units are
readily traded on a secondary market by virtue of the fact that there have been
some tender offers and auction trades of Units, however unlikely and
inconsistent with the Code that would be. However, we have previously provided
an opinion of counsel satisfactory to the Partnership that transfers pursuant to
our previous tender offer would not cause the Partnership to be a publicly
traded partnership and have indemnified the Partnership for any losses the
Partnership suffers as a result of being deemed a publicly traded partnership,
if the IRS were to treat the Partnership as such.
Gain or Loss. A taxable Unit holder will recognize a gain or loss on the sale of
such Unit holder's Units in an amount equal to the difference between (i) the
amount realized by such Unit holder on the sale and (ii) such Unit holder's
adjusted tax basis in the Units sold. The amount realized by a Unit holder will
include the Unit holder's share of the Partnership's liabilities, if any (as
determined under Code section 752 and the regulations thereunder). If the Unit
holder reports a loss on the sale, such loss generally could not be currently
deducted by such Unit holder except against such Unit 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 Units of a Unit holder will depend upon
individual circumstances. (See also "Partnership Allocations in Year of Sale"
below.) Each Unit holder who plans to tender hereunder should consult with the
Unit holder's own tax advisor as to the Unit holder's adjusted tax basis in the
Unit holder's Units and the resulting tax consequences of a sale.
If any portion of the amount realized by a Unit holder is attributable to
such Unit holder's share of "unrealized receivables" or "substantially
appreciated inventory items" as defined in Code section 751, a corresponding
portion of such Unit 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 Unit holder's recognizing ordinary income with respect to the
portion of the Unit holder's amount realized on the sale of a Unit that is
attributable to such items while recognizing a capital loss with respect to the
remainder of the Unit.
A tax-exempt Unit 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 Units pursuant
to the Offer, assuming that such Unit holder does not hold its Units as a
"dealer" and has not acquired such Units with debt financed proceeds.
Partnership Allocations in Year of Sale. A tendering Unit holder will be
allocated the Unit holder's pro rata share of the annual taxable income and
losses from the Partnership with respect to the Units sold for the period
through the date of sale, even though such Unit holder will assign to the
Purchasers their rights to receive certain cash distributions with respect to
such Units. Such allocations and any Partnership distributions for such period
would affect a Unit holder's adjusted tax basis in the tendered Units and,
therefore, the amount of gain or loss recognized by the Unit holder on the sale
of the Units.
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 Units that would cause such a
termination). A tax termination of the Partnership could have an effect on a
corporate or other non-individual Unit holder whose tax year is not the calendar
year, as such a Unit 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 Unit holder who sells all of the Unit
holder's Units 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 Unit 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 Unit holder's Units, such Unit holder would be
able to use any "suspended" passive activity losses first against gain, if any,
on sale of the Unit holder's Units and then against income from any other
source.
Recapture of Deductions from Passive Activity Losses. To the extent you were
allocated passive losses by the Partnership in previous years, you may have to
"recapture" such losses in the year you sell your Units. Such recapture only
occurs if you had been able to use your previous passive losses to offset
passive income. Such recapture is taxed at a special income tax rate equal to
25%, but may be limited depending upon your individual circumstances and may be
offset by other deductions resulting from a sale of Units. You should consult
your tax advisor.
14
Foreign Unit holders. Gain realized by a foreign Unit holder on a sale of a Unit
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 Unit holder from the purchase price payment to be made
to such Unit holder unless the Unit holder properly completes and signs the
FIRPTA Affidavit included as part of the Letter of Transmittal certifying the
Unit holder's TIN, that such Unit holder is not a foreign person and the Unit
holder's address. Amounts withheld would be creditable against a foreign Unit
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 Units pursuant to the Offer,
although no more than 50% of the Units may be transferred in any 12-month
period. This limitation will not affect the tender of Units under this Offer
because, subject to the terms of the Offer, we will pay for the Units upon
confirmation that the general partner will either transfer the Units or
recognize the change of address for distributions and correspondence on the
Units, and, under the terms of the Letter of Transmittal, we will take a power
of attorney over your Units that will permit us to change the address to which
distributions are sent. We will then wait to transfer the Units 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 Units are purchased
pursuant to the Offer the result would be a reduction in the number of Unit
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 Units and none is expected to develop.
Therefore, the Purchasers do not believe a reduction in the number of Unit
holders will materially further restrict the Unit holders' ability to find
purchasers for their Units through secondary market transactions.
Voting Power of Purchasers. If the Purchasers acquire a significant number of
the Units 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 Unit 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
Units (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
Unit holder who tenders Units 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 Units in their sole discretion as to any matters for which the
Partnership has established a record date prior to the time such. Units 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 Units 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 Units are registered under the Exchange Act, which
requires, among other things that the Partnership furnish certain information to
its Unit holders and to the Commission and comply with the Commission's proxy
rules in connection with meetings of, and solicitation of consents from, Unit
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 8,342 limited partners as of
its most recent fiscal year end, but the Purchasers are offering to purchase up
to 23,183.5 Units. Accordingly, it is possible that the Offer could result in
the total number of Unit 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 Units and none is expected to develop, so
the Partnership's status as a public company will not affect a trading market in
the Units. While the Partnership's Agreement of Limited Partnership requires
that all Unit holders be provided annual audited financial statements, quarterly
interim financial statements and timely reports providing other information
regarding the operations and condition of the Partnership, a change in the
Partnership's status as a public company could reduce the information available
to Unit 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 Units. 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 Units
purchased pursuant to the Offer. The Purchasers are seeking to purchase a total
of 23,183.5 Units. If the Purchasers acquire fewer than 23,183.5 Units pursuant
to the Offer, the Purchasers may seek to make further purchases on the open
market at prevailing prices, or solicit Units pursuant to one or more future
tender offers at the same price, a higher price
15
or, if the Partnership's circumstances change, at a lower price. Alternatively,
the Purchasers may discontinue any further purchases of Units after termination
of the Offer, regardless of the number of Units purchased. The Offer is not made
with any current view toward or plan or purpose of acquiring Units 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 23,183.5 Units in this Offer, may consider future
offers. Factors affecting the Purchasers' future interest in acquiring
additional Units 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 Units or actions
by unrelated parties to tender for or purchase Units, 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 Units 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 Units or
the reporting requirements of the Partnership. However, if the Purchasers
purchase over 50% of the outstanding Units 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, Form 8-K, 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 Unit holders.
Section 11. Certain Information Concerning the Purchasers. The Purchasers are
MPF-NY 2007, LLC; MPF Badger Acquisition Co., LLC; SCM Special Fund, LLC; MPF
Senior Note Program, LP. 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
Units subject to the Offer, the expenses to be incurred in connection with the
Offer, and all other anticipated costs of the Purchasers. The Purchasers are not
public companies and have not prepared audited financial statements or financial
statements prepared in accordance with generally accepted accounting principles.
MacKenzie Patterson Fuller, LP and its affiliates have been in the business of
purchasing illiquid real estate securities, both in open market transactions and
by means of tender offers, since 1982 and have acquired more than $170 million
in such securities for affiliated portfolios during the last ten years. The
Purchasers have aggregate assets that are more than sufficient to fund their
collective obligation to purchase Units 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
Units, (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 Units 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
16
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 $695,505
would be required to purchase 23,183.5 Units, 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 Units 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
Units and may terminate or amend the Offer as to such Units if, at any time on
or after the date of the Offer and before the Expiration Date, any of the
following conditions exists:
(a) a preliminary or permanent injunction or other order of any federal or
state court, government or governmental authority or agency shall have been
issued and shall remain in effect which (i) makes illegal, delays or otherwise
directly or indirectly restrains or prohibits the making of the Offer or the
acceptance for payment of or payment for any Units by the Purchasers, (ii)
imposes or confirms limitations on the ability of the Purchasers effectively to
exercise full rights of ownership of any Units, including, without limitation,
the right to vote any Units acquired by the Purchasers pursuant to the Offer or
otherwise on all matters properly presented to the Partnership's Unit holders,
(iii) requires divestiture by the Purchasers of any Units, (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 Units;
(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 Units 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
17
Commission pursuant to Sections 13(d) or (g) of the Exchange Act has increased
or proposes to increase the number of Units beneficially owned by such person or
group as disclosed in such Statement by two percent or more of the outstanding
Units.
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
Unitholder, we will waive that condition for all Unitholders tendering Units.
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
Units 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 Units tendered pursuant to the Offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Partnership's business, or that certain parts of the Partnership's business
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchasers to elect to terminate the Offer without
purchasing Units thereunder. The Purchasers' obligation to purchase and pay for
Units 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 Units
pursuant to the Offer.
Margin Requirements. The Units are not "margin securities" under the regulations
of the Board of Governors of the Federal Reserve System and, accordingly, such
regulations are not applicable to 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 Units 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 Units 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) UNIT 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 Units, you are agreeing to arbitrate any disputes
that may arise between you and the
18
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.
June 27, 2007
MPF-NY 2007, LLC; MPF Badger Acquisition Co., LLC; SCM Special Fund, LLC; MPF
Senior Note Program, LP
SCHEDULE I
THE PURCHASERS AND THEIR RESPECTIVE PRINCIPALS
The Purchasers are MPF-NY 2007, LLC; MPF Badger Acquisition Co.,
LLC; SCM Special Fund, LLC; MPF Senior Note Program, LP. Each of the entity
Purchasers is organized as a limited liability company or limited partnership.
The Manager of each of the limited liability company Purchasers and the general
partner of each of the limited partnership Purchasers is MacKenzie Patterson
Fuller, LP or its affiliate Sutter Capital Management, LLC. The names of the
directors and executive officers of MacKenzie Patterson Fuller, LP are set forth
below. Sutter Capital Management, LLC is wholly owned by MPF Advisers, LP, an
affiliate of MacKenzie Patterson Fuller, LP. The Purchasers have jointly made
the offer and are jointly and severally liable for satisfying its terms. Other
than the foregoing, the Purchasers' relationship consists of an informal
agreement to share the costs associated with making the offer and to allocate
any resulting purchases of Units 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 Units among themselves as follows: 10.0%, 5.0%, 50.0%, and 35.0%. We will
determine modifications to this allocation based upon the number of Units
tendered. Priority is given to Purchasers which already hold Units, then to
Purchasers which raised capital first, then to the remaining Purchasers in equal
shares. Units will be allocated according to this priority until the maximum
number of Units listed above are allocated to Purchasers within a given
priority, then Units will be allocated similarly among Purchasers in the next
level of priority, until all Units are allocated; provided that MPF-NY 2007 will
receive at least 10% of all Units tendered.
MacKenzie Patterson Fuller, LP
The names of the directors and executive officers of MacKenzie Patterson Fuller,
LP are set forth below. Each individual is a citizen of the United States of
America. The principal business address of MacKenzie Patterson Fuller, LP, each
Purchaser, and each individual is 1640 School Street, Moraga, California 94556,
and the business telephone number for each is 925-631-9100. The general partner
is BC-GP, Inc., a California corporation owned by the limited partners.
C.E. Patterson is President and a director of MacKenzie Patterson Fuller, LP,
which acts as manager and general partner of a number of real estate investment
vehicles, and has served in those positions since January 1989. In 1981, Mr.
Patterson founded Patterson Financial Services, Inc. (now MPF Advisers, LP), a
registered investment adviser ("MPFA"), with Berniece A. Patterson, as a
financial planning firm, and he has served as its President since that date. Mr.
Patterson founded Patterson Real Estate Services, a licensed California Real
Estate Broker, in 1982. As President of MPFA, Mr. Patterson is responsible for
all investment counseling activities. He supervises the analysis of investment
opportunities for the clients of the firm. Mr. Patterson previously served as
president of Host Funding, Inc., an owner of lodging properties, from December
1999 through 2003. Mr. Patterson is also an officer and controlling shareholder
of Cal-Kan, Inc., a closely held real estate investment company. Mr. Patterson,
through his affiliates, manages a number of investment and real estate
companies.
Berniece A. Patterson is a director of MacKenzie Patterson Fuller, LP and has
served in that capacity since January 1989. In 1981, Ms. Patterson and C.E.
Patterson established MPFA. She has served as Chair of the Board and Secretary
of MPFA since that date. Her responsibilities with MPFA include oversight of
administrative matters and monitoring of past projects underwritten by MPFA.
Since October 1990, Ms. Patterson has been responsible for the day-to-day
operations of two nursing homes and over 200 employees.
Glen W. Fuller became senior vice president and a director of MacKenzie
Patterson Fuller, LP in May 2000. Since 2004 he has been a director and vice
president of MPFA. Prior to becoming senior vice president, from August 1998 to
April 2000, he was with MacKenzie Patterson Fuller, LP as a portfolio manager
and research analyst. From December 1999 to 2003, Mr. Fuller served as an
officer and director of Host Funding, Inc. Prior to joining MacKenzie Patterson
Fuller, LP, from May 1996 to July 1998, Mr. Fuller ran the over-the-counter
trading desk for North Coast Securities Corp. (previously Morgan Fuller Capital
Group) with responsibility for both the proprietary and retail trading desks.
Mr. Fuller was also the registered options principal and registered municipal
bond principal for North Coast Securities, a registered broker dealer. Mr.
Fuller was formerly a NASD-registered options principal and registered bond
principal, and he held his NASD Series 7, general securities license (now
inactive). Mr. Fuller has also spent time working on the floor of the New York
Stock Exchange as a trading clerk
19
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 senior vice president of MacKenzie Patterson Fuller, LP and
MPFA and is responsible for the day-to-day management of research and securities
purchases and sales on behalf of the entities managed by MacKenzie Patterson
Fuller, LP Ms. Simpson has served in that position since January 1997; from
January 1994 until her promotion to vice president, she was a research analyst
with MacKenzie Patterson Fuller, LP She joined MacKenzie Patterson Fuller, LP as
an administrative assistant in July 1990. Ms. Simpson received her Bachelor of
Arts degree in Management from Saint Mary's College of California in May 2005
and her Master of Science in Financial Analysis and Investment Management from
Saint Mary's College of California in October 2006.
Robert E. Dixon is senior vice president and a director of MPFA and MacKenzie
Patterson Fuller, LP and served as an officer and director of Sutter Holding
Company, Inc. from March 2002 to October 2006. Mr. Dixon received his Bachelor's
degree in economics from the University of California at Los Angeles in 1992. He
worked for Lehman Brothers, Inc. in equity sales and trading during 1993 and
1994. From October 1994 to June, 1996 he worked for MacKenzie Patterson, Inc. as
a securities research analyst. Mr. Dixon became a Chartered Financial Analyst in
1996, and received his Master of Business Administration degree from Cornell
University in 1998. In July of 1998 he began buying and selling securities for
his own account and those of the entities he controlled, and he was principally
engaged in that activity until May 2005, when he rejoined MPFA. Mr. Dixon was a
registered representative of North Coast Securities from 1994 through 1997.
Andrea K. Meyer is vice president of Trading and Portfolios for MPFA and
MacKenzie Patterson Fuller, LP As vice president of Trading and Portfolios, Ms.
Meyer is responsible for handling the day-to-day operations of the trading
department. She graduated from St. Mary's College of California in 1997 with a
Bachelor of Science in Business Administration with a concentration in Finance
and a Minor in Accounting. Prior to joining MPFA in 1998, she worked for a year
for State Street Bank and Trust, one of the leading financial services
specialists worldwide, as a portfolio accountant.
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