SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
_______________________
MRI BUSINESS PROPERTIES FUND, LTD. III
(Name of Subject Company)
DEFOREST VENTURES I L.P.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class
of Securities)
NONE
(CUSIP Number of Class
of Securities)
_______________________
Michael L. Ashner Copy to:
DeForest Capital I Corporation Mark I. Fisher
100 Jericho Quadrangle Rosenman & Colin
Suite 214 575 Madison Avenue
Jericho, New York 11735-2717 New York, New York 10022-2585
(516) 822-0022 (212) 940-8877
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
Calculation of Filing Fee
Transaction Amount of
Valuation* Filing Fee
$7,174,020 $1,434.80
*For purposes of calculating the filing fee only. This amount
assumes the purchase of 51,243 units of limited partnership inter-
est ("Units") of the subject company for $140 per Unit in cash.
[ ] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or
Schedule and date of its filing.
<PAGE>
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
DeForest Ventures I L.P.
I.R.S. I.D. No. 11-3230287
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) []
(b) []
3. SEC Use Only
4. Sources of Funds (See Instructions)
WC; OO
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) of 2(f)
[]
6. Citizenship or Place of Organization
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting
Person
76 Units
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
[]
9. Percent of Class Represented by Amount in Row (7)
0.1%
10. Type of Reporting Person (See Instructions)
PN
<PAGE>
Item 1. Security and Subject Company.
(a) The name of the subject company is MRI Business
Properties Fund, Ltd. III, a California limited partnership (the
"Partnership"), which has its principal executive offices at 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
(b) This Schedule relates to the offer by DeForest
Ventures I L.P., a Delaware limited partnership (the "Purchaser"),
to purchase up to 51,243 outstanding units of limited partnership
interest ("Units") of the Partnership at $140 per Unit, net to the
seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated October 17, 1994 (the "Offer
to Purchase") and the related Letter of Transmittal, copies of
which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. The number of Units outstanding is set forth under
"INTRODUCTION" in the Offer to Purchase and is incorporated herein
by reference.
(c) The information set forth under "THE TENDER OFFER --
Section 13. Background of the Offer" of the Offer to Purchase is
incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d) The information set forth under "INTRODUCTION",
"THE TENDER OFFER -- Section 11. Certain Information Concerning
the Purchaser" and Schedule 1 of the Offer to Purchase is
incorporated herein by reference.
<PAGE>
(e)-(f) During the last five years, neither the
Purchaser, the General Partner nor, to the best of its knowledge,
any of the persons listed in Schedule 1 of the Offer to Purchase
(i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) were a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding were or are subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting activities subject to, Federal or state
securities laws or finding any violation of such laws.
(g) The information set forth in Schedule 1 of the Offer
to Purchase is incorporated herein by reference.
Item 3. Past Contracts, Transactions or Negotiations with the
Subject Company.
(a) The information set forth in "THE TENDER OFFER --
Section 10. Conflicts of Interest and Transactions with
Affiliates" and "THE TENDER OFFER -- Section 13. Background of the
Offer" of the Offer to Purchase is incorporated herein by
reference. In addition, the information set forth in Note 2 to the
financial statements of the Partnership included in the Form 10-K
of the Partnership for the fiscal year ended September 30, 1993
(such Note being referred to as the "Form 10-K Note"), a copy of
which is attached hereto as Exhibit (g)(i), Note 2 to the financial
statements of the Partnership included in the Form 10-Q of the
Partnership for the nine months ended June 30, 1994 (such Note
being referred to as the "Form 10-Q Note"), a copy of which is
attached hereto as Exhibit (g)(ii), and Item 5 of Form 8-K of the
Partnership dated October 12, 1994 ("Form 8-K"), a copy of which is
attached hereto as Exhibit (g)(iii), is incorporated herein by
reference.
<PAGE>
(b) The information set forth in "THE TENDER OFFER --
Section 13. Background of the Offer" of the Offer to Purchase is
incorporated herein by reference. In addition, the information set
forth in the Form 10-K Note, the Form 10-Q Note and Item 5 of Form
8-K is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in "THE TENDER OFFER
- -- Section 10. Conflicts of Interest and Transactions with
Affiliates" and "THE TENDER OFFER -- Section 12. Source of Funds"
of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
(a)-(b) The information set forth in "THE TENDER OFFER
- -- Section 8. Future Plans" and "THE TENDER OFFER -- Section 13.
Background of the Offer" of the Offer to Purchase is incorporated
herein by reference.
(c) Not applicable.
(d) The information set forth in "THE TENDER OFFER --
Section 8. Future Plans" of the Offer to Purchase is incorporated
herein by reference.
<PAGE>
(e)-(g) Not applicable.
Item 6. Interest in Securities of the Subject Company.
(a) The information set forth in "INTRODUCTION" and "THE
TENDER OFFER -- Section 11. Certain Information Concerning the
Purchaser" of the Offer to Purchase is incorporated herein by
reference.
(b) None.
Item 7. Contracts, Arrangements, Understandings or Relationships
with Respect to the Subject Company's Securities.
The information set forth in "THE TENDER OFFER -- Section
12. Source of Funds" of the Offer to Purchase is incorporated
herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
None.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "THE TENDER OFFER -- Section
11. Certain Information Concerning the Purchaser" and Schedule 2
of the Offer to Purchase is incorporated herein by reference.
Item 10. Additional Information.
(a) None.
<PAGE>
(b)-(d) The information set forth in "THE TENDER OFFER
- -- Section 15. Certain Legal Matters" of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase
and the related Letter of Transmittal, copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively, and which are
incorporated herein in their entirety by reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase dated October 17, 1994.
(a)(2) Letter of Transmittal.
(a)(3) Form of Cover Letter, dated October 17, 1994,
from DeForest Ventures I L.P. to Unitholders.
(b) Commitment Letter dated October 11, 1994
between Kidder Peabody Mortgage Capital
Corporation, DeForest Ventures I L.P.,
DeForest Ventures II L.P., NPI-AP Management,
L.P. and National Property Investors, Inc.
(c) None.
(d) None.
(e)-(f) Not applicable.
(g)(i) Note 2 to the financial statements of MRI
Business Properties Fund, Ltd. III included in
the Form 10-K of MRI Business Properties Fund,
Ltd. III for the fiscal year ended September
30, 1993.
(g)(ii) Note 2 to the financial statements of MRI
Business Properties Fund, Ltd. III included in
the Form 10-Q of MRI Business Properties Fund,
Ltd. III for the nine months ended June 30,
1994.
(g)(iii) Item 5 of the Form 8-K of MRI Business
Properties Fund, Ltd. III dated October 12,
1994.
<PAGE>
Signatures
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true,
complete and correct.
Dated: October 17, 1994
DEFOREST VENTURES I L.P.
By: DeForest Capital I Corporation,
its General Partner
By: /s/ Michael L. Ashner
Name: Michael L. Ashner
Title: President
<PAGE>
Offer to Purchase for Cash
Up to 51,243 Units of Limited Partnership Interest
of
MRI BUSINESS PROPERTIES FUND, LTD. III
at
$140 Net Per Unit
by
DEFOREST VENTURES I L.P.
DeForest Ventures I L.P., a newly-formed Delaware limited
partnership (the "Purchaser"), hereby offers to purchase up to
51,243 of the outstanding Units of Limited Partnership Interest
(the "Units") of MRI Business Properties Fund, Ltd. III, a
California limited partnership (the "Partnership"), at a purchase
price of $140 per Unit, net to the seller 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"). The Offer is
made to Unitholders of record as of October 10, 1994. The 51,243
Units sought pursuant to the Offer represent approximately 47% of
the Units outstanding as of October 10, 1994.
The Offer is not conditioned upon any minimum number of Units
being tendered. If more than 51,243 Units are validly tendered and
not withdrawn, the Purchaser will accept for purchase on a pro rata
basis 51,243, subject to the terms and conditions herein.
A Unitholder must tender all Units owned by such Unitholder in
order for the tender to be valid.
The Purchaser expressly reserves the right, in its 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, (ii) to
terminate the Offer and not accept for payment any Units not
theretofore accepted for payment or paid for, (iii) upon the
occurrence of any of the conditions specified in Section 14, to
delay the acceptance for payment of, or payment for, any Units not
theretofore accepted for payment or paid for, and (iv) to amend the
Offer in any respect (including, without limitation, by increasing
the consideration offered, increasing or decreasing the number of
Units being sought, or both). Notice of any such extension,
termination or amendment will promptly be disseminated to
Unitholders in a manner reasonably designed to inform Unitholders
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., New York City time, on the next business day after
the scheduled Expiration Date, in accordance with Rule 14e-1(d)
under the Exchange Act.
_____________________________
The Information Agent for the Offer is:
The Herman Group Inc.
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
October 17, 1994
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE TENDER OFFER . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. Terms of the Offer . . . . . . . . . . . . . . 3
Section 2. Proration; Acceptance for Payment
and Payment for Units . . . . . . . . . . . . . . 3
Section 3. Procedures for Tendering Units . . . . . . . . 4
Section 4. Withdrawal Rights. . . . . . . . . . . . . . . 5
Section 5. Extension of Tender Period;
Termination; Amendment. . . . . . . . . . . . . . 5
Section 6. Certain Federal Income Tax
Consequences. . . . . . . . .. . . . . . . . . . . 6
Section 7. Effects of the Offer . . .. . . . . . . . . . . 8
Section 8. Future Plans . . . . . . .. . . . . . . . . . . 8
Section 9. Certain Information Concerning the
Partnership . . . . . . . . .. . . . . . . . . . . 9
Section 10. Conflicts of Interest and
Transactions With Affiliates . . . . . . . . . . . 9
Section 11. Certain Information Concerning the
Purchaser . . . . . . . . . . .. . . . . . . . . . 10
Section 12. Source of Funds. . . . . . .. . . . . . . . . . 10
Section 13. Background of the Offer. . .. . . . . . . . . . 13
Section 14. Conditions of the Offer. . .. . . . . . . . . . 15
Section 15. Certain Legal Matters. . . .. . . . . . . . . . 17
Section 16. Fees and Expenses. . . . . .. . . . . . . . . . 17
Section 17. Miscellaneous. . . . . . . . . . . . . . . . . 17
Schedule 1 Information with respect to Directors and Executive
Officers of DeForest Capital
Schedule 2 Financial Statements of the Purchaser and DeForest
Capital
Schedule 3 NPI Partnerships and Fox Subject Partnerships
<PAGE>
To the Holders of Units of
Limited Partnership Interest
of MRI Business Properties Fund, Ltd. III
INTRODUCTION
DeForest Ventures I L.P., a newly-formed Delaware limited
partnership (the "Purchaser"), hereby offers to purchase up to
51,243 of the outstanding Units of Limited Partnership Interest
(the "Units") of MRI Business Properties Fund, Ltd. III, a
California limited partnership (the "Partnership"), at a purchase
price of $140 per Unit (the "Purchase Price"), net to the seller 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"). Holders of Units ("Unitholders") who
tender their Units will not be obligated to pay any commissions or
partnership transfer fees, which commissions and fees will be borne
by the Purchaser. The Purchaser will also pay all charges and
expenses of The Herman Group, Inc. (the "Information Agent") and
GKN Securities Corp. (the "Dealer Manager") in connection with the
Offer. A Unitholder must tender all Units owned by such Unitholder
in order for the tender to be valid.
The Offer will provide Unitholders with an opportunity to
liquidate their investment without the usual transaction costs
associated with market sales. Unitholders may no longer wish to
continue with their investment in the Partnership for a number of
reasons, including:
Although not necessarily an indication of value, an Offer
price substantially in excess of recent secondary market
trades for Units
The absence of a formal trading market for the Units
General disenchantment with real estate investments,
particularly long-term investments in limited partnerships
The continuing administrative costs and resultant negative
financial impact on the value of the Partnership's assets due
to their ownership in a publicly registered limited
partnership
More immediate use for the cash tied up in an investment in
the Units
The delays and complications in preparing and filing personal
income tax returns which may result from an investment in the
Units
The opportunity to transfer Units without the costs and
commissions normally associated with a transfer
The Offer is not conditioned upon any minimum number of Units
being tendered. If more than 51,243 Units are validly tendered and
not withdrawn, the Purchaser will accept for purchase on a pro rata
basis 51,243, subject to the terms and conditions herein.
As discussed herein, the Purchaser is affiliated with the
general partners of the Partnership and, accordingly, the general
partners of the Partnership have certain conflicts of interest with
respect to the Offer. The Partnership has indicated in its
statement on Schedule 14D-9 filed with the Securities and Exchange
Commission (the "Commission") that, because of such conflicts, it
makes no recommendation and is remaining neutral as to whether a
Unitholder should accept the Offer. (See "THE TENDER OFFER -
Section 13. Background of the Offer"; and "Section 10. Conflicts of
Interest and Transactions with Affiliates".)
<PAGE>
The general partner of the Purchaser is DeForest Capital I
Corporation, a newly-formed Delaware corporation ("DeForest
Capital") which is affiliated with NPI Equity Investments II, Inc.
("NPI Equity"), the entity which, on December 6, 1993, assumed
management and obtained control of Montgomery Realty Company-85 and
MRI Associates, Ltd. III, the general partners of the Partnership
(together, the "General Partner"). (See "THE TENDER OFFER -
Section 13. Background of the Offer".)
Unitholders who desire liquidity may wish to consider the
Offer. However, each Unitholder must make his or her own decision
based upon such Unitholder's particular circumstances, including
the Unitholder's own financial needs, other investment
opportunities and tax position. Each Unitholder should consult
with his or her own advisors, tax, financial or otherwise, in
evaluating the terms of and whether to tender Units pursuant to the
Offer.
The Purchaser has made its own independent analysis in
establishing the Purchase Price. No independent person has been
retained to evaluate or render any opinion with respect to the
fairness of the Purchase Price. Accordingly, Unitholders are urged
to consider carefully all of the information contained herein
before accepting the Offer. (See "THE TENDER OFFER - Section 13.
Background of the Offer".)
According to information supplied by the Partnership, there
are 109,027 Units issued and outstanding held by 8,448 Unitholders.
The Purchaser does not directly own any of these Units; however, an
affiliate of the Purchaser owns 76 Units in the Partnership,
constituting approximately .1% of the Units outstanding.
Certain information contained in this Offer to Purchase which
relates to the Partnership, or represents statements made by the
General Partner, has been derived from information provided to the
Purchaser by the General Partner.
Unitholders are urged to read this Offer to Purchase and the
accompanying Letter of Transmittal carefully before deciding
whether to tender their Units.
<PAGE>
THE TENDER OFFER
Section 1. Terms of the Offer. Upon the terms of the Offer,
the Purchaser will 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
5:00 p.m., New York City time, on November 18, 1994, unless the
Purchaser shall have extended the period of time for which the
Offer is open. In the event the Offer is extended, the term
"Expiration Date" shall mean the latest time and date on which the
Offer, as extended by the Purchaser, shall expire.
If, prior to the Expiration Date, the Purchaser shall increase
the consideration offered to Unitholders 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.
The Offer is conditioned on satisfaction of certain
conditions. See Section 14, which sets forth in full the
conditions of the Offer. The Purchaser reserves the right (but
shall not be obligated), in its sole discretion, to waive any or
all of such conditions. If, on or prior to the Expiration Date,
any or all of such conditions have not been satisfied or waived,
the Purchaser reserves the right to (i) decline to purchase any of
the Units tendered, terminate the Offer and return all tendered
Units to tendering Unitholders, (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 Unitholders 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) amend the Offer.
This Offer to Purchase and the related Letter of Transmittal
are being mailed by the Purchaser to Unitholders or beneficial
owners of Units (in the case of Individual Retirement Accounts and
qualified plans) of record as of October 10, 1994.
Section 2. Proration; Acceptance for Payment and Payment for
Units. If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn is 51,243 or less, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, all Units so tendered.
If the number of Units validly tendered on or prior to the
Expiration Date and not withdrawn exceeds 51,243, the Purchaser
will accept for payment, subject to the terms and conditions of the
Offer, Units so tendered on a pro rata basis (with such adjustments
to avoid purchase of fractional Units). In the event that
proration is required, because of the difficulty of immediately
determining the precise number of Units to be accepted, the
Purchaser does not expect to announce the final results of
proration until at least ten business days following the Expiration
Date. The Purchaser will not pay for any Units tendered until
after the final proration factor has been determined.
The Purchaser will pay for Units validly tendered and not
withdrawn in accordance with Section 4, as promptly as practicable
following the Expiration Date. In all cases, payment for Units
purchased pursuant to the Offer will be made only after timely
receipt by Purchaser of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and "any other
documents required by the Letter of Transmittal. (See "Section 3.
Procedures for Tendering Units".) Under no circumstances will
interest be paid on the purchase price by reason of any delay in
making such payment.
If any tendered Units are not purchased for any reason, the
Letter of Transmittal with respect to such Units will be destroyed
by the Purchaser. If for any reason acceptance for payment of, or
payment for, any Units tendered pursuant to the Offer is delayed or
the Purchaser is unable to accept for payment, purchase or pay for
Units tendered pursuant to the Offer, then, without prejudice to
the Purchaser's rights under Section 14, the Purchaser may retain
tendered Units and such Units may not be withdrawn except to the
extent that the tendering Unitholders are entitled to withdrawal
rights as described in Section 4; provided, however, that the
Purchaser is required, pursuant to Rule 14e-1(c) under the Exchange
Act, to pay Unitholders the Purchase Price in respect of Units
tendered or return such Units promptly after termination or with-
drawal of the Offer.
<PAGE>
Section 3. Procedures for Tendering Units.
Valid Tender. To validly tender Units, a properly completed
and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal, must be received by the
Purchaser on or prior to the Expiration Date. A Unitholder must
tender all Units owned by such Unitholder in order for the tender
to be valid.
Signature Requirements. If the Letter of Transmittal is
signed by the registered holder of the Units and payment is to be
made directly to that holder, then no notarization or signature
guarantee is required on the Letter of Transmittal. Similarly, if
the Units are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States
(each an "Eligible Institution"), no notarization or signature
guarantee is required on the Letter of Transmittal. However, in
all other cases, all signatures on the Letter of Transmittal must
either be notarized or guaranteed by an Eligible Institution.
In order for a tendering Unitholder to participate in the
Offer, Units must be validly tendered and not withdrawn on or prior
to the Expiration Date, which is 5:00 p.m., New York City time, on
November 18, 1994.
The method of delivery of the Letter of Transmittal and all
other required documents is at the option and risk of the tendering
Unitholder and delivery will be deemed made only when actually
received by the Purchaser.
Backup Federal Income Tax Withholding. To prevent the
possible application of backup federal income tax withholding with
respect to payment of the purchase price, a tendering Unitholder
must provide the Purchaser with such Unitholder's correct taxpayer
identification number by completing the Substitute Form W-9
included in the Letter of Transmittal. (See the Instructions to
the Letter of Transmittal and "Section 6. Certain Federal Income
Tax Consequences".)
FIRPTA Withholding. To prevent the withholding of federal
income tax in an amount equal to 10% of the amount of the Purchase
Price plus Partnership liabilities allocable to each Unit
purchased, each Unitholder must complete the FIRPTA Affidavit
included in the Letter of Transmittal certifying such Unitholder's
taxpayer identification number and address and that the Unitholder
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, a
tendering Unitholder irrevocably appoints the designees of the
Purchaser as such Unitholder's proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to
the full extent of such Unitholder's rights with respect to the
Units tendered by such Unitholder and accepted for payment by the
Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts such Units for payment.
Upon such acceptance for payment, all prior proxies given by such
Unitholder 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 Purchaser will, as to
such Units, be empowered to exercise all voting and other rights of
such Unitholder as they in their sole discretion may deem proper at
any meeting of Unitholders, by written consent or otherwise. The
Purchaser reserves the right to require that, in order for Units to
be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Units, the Purchaser must be able to
exercise full voting rights with respect to such Units, including
voting at any meeting of Unitholders then scheduled.
<PAGE>
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 Purchaser, in
its sole discretion, which determination shall be final and
binding. The Purchaser reserves 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
Purchaser's counsel, be unlawful. The Purchaser also reserves the
right to waive any defect or irregularity in any tender with
respect to any particular Units of any particular Unitholder, and
the Purchaser's 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 Purchaser, the
Information Agent, the Dealer Manager 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
Unitholder and the Purchaser on the terms set forth in the Offer.
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
already accepted for payment as provided in this Offer to Purchase,
may also be withdrawn at any time after November 18, 1994.
For withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the
Purchaser at the address set forth on the back cover of this Offer
to Purchase. 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 Purchaser is unable to purchase or pay for Units
for any reason, then, without prejudice to the Purchaser's rights
under the Offer, tendered Units may be retained by the Purchaser
and may not be withdrawn except to the extent that tendering
Unitholders are entitled to withdrawal rights as set forth in this
Section 4; provided, however, that the Purchaser is required,
pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or
return such Units promptly after termination or withdrawal of the
Offer.
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 any of the procedures described in
Section 3 at any time prior to the Expiration Date.
Section 5. Extension of Tender Period; Termination;
Amendment. The Purchaser expressly reserves the right, in its 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, (ii) to
terminate the Offer and not accept for payment any Units not
already accepted for payment or paid for, (iii) upon the occurrence
of any of the conditions specified in Section 14, to delay the
acceptance for payment of, or payment for, any Units not already
accepted for payment or paid for, and (iv) to amend the Offer in
any respect (including, without limitation, by increasing the
consideration offered, increasing or decreasing the number of Units
being sought, or both). Notice of any such extension, termination
or amendment will promptly be disseminated to Unitholders in a
manner reasonably designed to inform Unitholders of such change in
compliance with Rule 14d-4(c) under 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., New York City time, on the next business day after
the scheduled Expiration Date, in accordance with Rule 14e-1(d)
under the Exchange Act.
<PAGE>
If the Purchaser extends the Offer, or if the Purchaser
(whether before or after its acceptance for payment of Units) is
delayed in its payment for Units or is unable to pay for Units
pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer, the Purchaser may retain
tendered Units and such Units may not be withdrawn except to the
extent tendering Unitholders are entitled to withdrawal rights as
described in Section 4; provided, however, that the Purchaser is
required, pursuant to Rule 14e-1(c) under the Exchange Act, to pay
Unitholders the Purchase Price in respect of Units tendered or
return such Units promptly after termination or withdrawal of the
Offer.
If the Purchaser makes a material change in the terms of the
Offer or the information concerning the Offer or waives a material
condition of the Offer, the Purchaser will extend the Offer and
disseminate additional tender offer materials to the extent
required by Rules 14d-4(c) and 14d-6(d) 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 will depend upon the facts and circumstances,
including the relative materiality of the change in the terms or
information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material
change is first published, sent or given to securityholders, and if
material changes are made with respect to information that
approaches the significance of price or the percentage of
securities sought, a minimum of ten business days may be required
to allow for adequate dissemination to securityholders 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
12:00 Midnight, New York City time.
Section 6. Certain Federal Income Tax Consequences. The
following summary is a general discussion of certain federal income
tax consequences of a sale of Units pursuant to the Offer. This
summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder,
administrative rulings, practice and procedures and judicial
authority as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing
accuracy of this summary. This summary does not discuss all
aspects of federal income taxation that may be relevant to a
particular Unitholder in light of such Unitholder's specific
circumstances or to certain types of Unitholders subject to special
treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-
exempt organizations), nor does it discuss any aspect of state,
local, foreign or other tax laws. Sales of Units pursuant to the
Offer will be taxable transactions for federal income tax purposes,
and may also be taxable transactions under applicable state, local,
foreign and other tax laws. EACH UNITHOLDER SHOULD CONSULT HIS OR
ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
UNITHOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
A taxable Unitholder will recognize gain or loss on a sale of
Units pursuant to the Offer equal to the difference between (i) the
Unitholder's "amount realized" on the sale and (ii) the
Unitholder's adjusted tax basis in the Units sold. The amount of
a Unitholder's adjusted tax basis in such Units will vary depending
upon such Unitholder's particular circumstances. The "amount
realized" with respect to a Unit will be a sum equal to the amount
of cash received by the Unitholder for the Unit pursuant to the
Offer plus the amount of Partnership liabilities allocable to the
Unit (as determined under Code Section 752).
Based on the results of Partnership operations through
December 31, 1993, it is estimated that, depending on the
Unitholder's date of entry into the Partnership, a taxable
Unitholder who or which tenders Units that were acquired by such
Unitholder at the time of the Partnership's original offering of
Units will recognize a loss for federal income tax purposes of
between $337 per Unit for those admitted in January 1986 and $358
per Unit for those admitted in July 1986. It also is estimated
that such Unitholder has "suspended" passive activity losses (i.e.,
post-1986 net taxable losses in excess of statutorily provided
"phase-in" amounts) from the Partnership of $379 per Unit (subject
to reduction to the extent such Unitholder utilized any of such
losses to offset passive activity income from other investments).
Once the Unitholder sells all his Units, such losses should no
longer be subject to the passive activity loss limitation, and
therefore should be deductible by such Unitholder from his other
income subject to any other applicable limitations. (See the
discussion of the passive activity loss limitation below.)
<PAGE>
The gain or loss recognized by a Unitholder on a sale of a
Unit pursuant to the Offer generally will be treated as a capital
gain or loss if the Unit was held by the Unitholder as a capital
asset. Such capital gain or loss will be treated as long-term
capital gain or loss if the tendering Unitholder's holding period
for the Unit exceeds one year. Under current law, long-term
capital gains of individuals and other non-corporate taxpayers are
taxed at a maximum marginal federal income tax rate of 28%, whereas
the maximum marginal federal income tax rate for other income of
such persons is 39.6%. Capital losses are deductible only to the
extent of capital gains, except that non-corporate taxpayers may
deduct up to $3,000 of capital losses in excess of the amount of
their capital gains against ordinary income. Excess capital losses
generally can be carried forward to succeeding years (a corpora-
tion's carryforward period is five years and a non-corporate
taxpayer can carry forward such losses indefinitely); in addition,
corporations are allowed to carry back excess capital losses to the
three preceding taxable years.
If any portion of the amount realized by a Unitholder is
attributable to "unrealized receivables" (which includes
depreciation recapture) or "substantially appreciated inventory" as
defined in Code Section 751, then a portion of the Unitholder's
gain or loss may be ordinary rather than capital. It is possible
that the basis allocation rules of Code Section 751 may result in
a Unitholder's recognizing ordinary income with respect to such
items while recognizing a larger capital loss with respect to the
remainder of the Unit, even though such Unitholder has an overall
loss on the sale.
Under Code Section 469, a non-corporate taxpayer or personal
service corporation can deduct passive activity losses in any year
only to the extent of such person's passive activity income for
such year, and closely held corporations may not offset such losses
against so-called "portfolio" income. A loss recognized by a
Unitholder upon a sale of a Unit pursuant to the Offer can be
currently deducted (subject to other applicable limitations) to the
extent of such Unitholder's taxable income from the Partnership for
that year, and gain recognized by a Unitholder upon such sale can
be offset by such Unitholder's passive activity losses (if any)
from the Partnership. If a Unitholder disposes of all his Units
pursuant to the Offer, such Unitholder generally will be able to
deduct his remaining passive activity losses (if any) from the
Partnership that could not previously be deducted by such
Unitholder due to the foregoing limitation.
A tendering Unitholder will be allocated a pro rata share of
the Partnership's taxable income or loss for the year of sale with
respect to the Units sold in accordance with the provisions of the
Partnership Agreement of the Partnership (the "Partnership
Agreement") concerning transfers of Units. Such allocation and any
cash distributed by the Partnership to such Unitholder for such
year will affect the Unitholder's adjusted tax basis in Units and,
therefore, the amount of such Unitholder's taxable gain or loss
upon a sale of Units pursuant to the Offer.
A taxable Unitholder (other than corporations and certain
foreign individuals) who tenders Units may be subject to 31% backup
withholding unless the Unitholder provides a taxpayer
identification number ("TIN") and certifies that the TIN is correct
or properly certifies that he is awaiting a TIN. A Unitholder may
avoid backup withholding by properly completing and signing the
Substitute Form W-9 included as part of the Letter of Transmittal.
If a Unitholder who is subject to backup withholding does not
properly complete and sign the Substitute Form W-9, the Purchaser
will withhold 31% from payments to such Unitholder.
Gain realized by a foreign Unitholder 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 with-
hold a tax equal to 10% of the amount realized on the disposition.
The Purchaser will withhold 10% of the amount realized by a
tendering Unitholder unless the Unitholder properly completes and
signs the FIRPTA Affidavit included as part of the Letter of
Transmittal certifying the Unitholder's TIN, that such Unitholder
is not a foreign person and the Unitholder's address. Amounts
withheld would be creditable against a foreign Unitholder'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.
<PAGE>
Section 7. Effects of the Offer.
Limitations on Resales. Pursuant to authority contained in
the Partnership Agreement, the General Partner restricts transfers
of Units if a transfer, when considered with all other transfers
during the same applicable twelve-month period, would cause a
termination of the Partnership for federal or applicable state
income tax purposes (which termination may occur when more than 50%
of the Units are transferred in a twelve-month period).
Consequently, sales of Units on the secondary market in private
transactions for the twelve-month period following completion of
the Offer may be limited. The Partnership will not process any
requests for recognition of substitution of Unitholders upon a
transfer of Units during such twelve-month period which the General
Partner believes may cause a tax termination. In determining the
number of Units for which the Offer to Purchase is made
(representing approximately 47% of the outstanding Units if 51,243
Units are tendered), the Purchaser took this restriction into
account so as to permit normal historical levels of transfers to
occur without violating this restriction.
Effect on Trading Market. There is no established public
trading market for the Units and, therefore, a reduction in the
number of Unitholders should not materially further restrict the
Unitholders' ability to find purchasers for their Units. (See
"Section 13. Background of the Offer - Establishment of the
Purchase Price" for certain limited information regarding recent
secondary sales of the Units.)
Control of all Unitholder Voting Decisions by Purchaser;
Effect of Affiliation with General Partner. The Purchaser will
have the right to vote each Unit purchased. As a result, the
Purchaser could be in a position to significantly influence all
voting decisions with respect to the Partnership. This could (i)
prevent non-tendering Unitholders from taking action they desire
but that the Purchaser opposes and (ii) enable the Purchaser to
take action desired by the Purchaser but opposed by non-tendering
Unitholders. Under the Partnership Agreement, Unitholders holding
a majority of the Units are entitled to take action with respect to
a variety of matters. When voting on such matters, the Purchaser
will vote the Units acquired pursuant to the Offer in its interest,
which, because of its affiliation with the General Partner, will
also likely be in the interest of the General Partner. However,
the Purchaser agrees, for the benefit of non-tendering Unitholders,
that it will vote its Units in proportion to the votes cast by
other Unitholders on matters put to a vote of Unitholders which
propose to change the fees and other compensation payable by the
Partnership to the General Partner and any of its affiliates.
Except for the foregoing, no other limitations are imposed on the
Purchaser's right to vote each Unit tendered.
The Units are registered under the Exchange Act, which
requires, among other things, that the Partnership furnish certain
information to its Unitholders and to the Commission and comply
with the Commission's proxy rules in connection with meetings of,
and solicitation of consents from, Unitholders. Purchase of Units
pursuant to the Offer will not result in the Units becoming
eligible for deregistration under the Exchange Act.
Section 8. Future Plans. The Purchaser is acquiring the
Units pursuant to the Offer for investment purposes. Subject to
the limitation on resales discussed in Section 7, following the
completion of the Offer, the Purchaser may acquire additional
Units. Any such acquisition may be made through private purchases,
through one or more future tender offers or by any other means
deemed advisable. Any such acquisition may be at a price higher or
lower than the price to be paid for the Units purchased pursuant to
the Offer. Neither the Purchaser nor the General Partner has any
present plans or intentions with respect to a liquidation, sale of
assets or, except as described in "Section 13. Background of the
Offer", refinancing of any of the Partnership's properties.
However, the Purchaser believes that consistent with its fiduciary
obligations the General Partner will continue to review any
opportunities such as sales or refinancings and will seek to
maximize returns to investors in the Units. The General Partner's
stated intentions are to manage the Partnership's assets to
maximize capital appreciation, improve property operations and
reduce Partnership debt. See "Section 10. Conflicts of Interest
and Transactions with Affiliates" for information concerning the
General Partner's potential conflict of interest with respect to
sales or refinancings.
<PAGE>
Section 9. Certain Information Concerning the Partnership.
The Partnership was organized on June 28, 1984, under the laws of
the State of California. Its principal executive offices are
located at 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia
30328. Its telephone number is (404) 916-9050.
The Partnership's primary business is real estate related
operations.
Unitholders are referred to the financial and other
information included in the Partnership's Annual Report on Form 10-
K for the fiscal year ended September 30, 1993, and the Partner-
ship's Quarterly Report on Form 10-Q for the nine months ended
June 30, 1994. Such reports and other documents may be examined
and copies may be obtained from the offices of the Commission at
450 Fifth Street, N.W., Washington, D.C 20549, and at the regional
offices of the Commission located in the Northwestern Atrium
Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, New York, New York 10048. Copies should
be available by mail upon payment of the Commission's customary
charges by writing to the Commission's principal offices at 450
Fifth Street, N.W., Washington, D.C. 20549.
Section 10. Conflicts of Interest and Transactions with
Affiliates. The General Partner, the Purchaser and their
affiliates have conflicts of interest with respect to the Offer as
set forth below.
Conflicts of Interest With Respect to the Offer. The General
Partner has a conflict of interest with respect to the Offer,
including as a result of its affiliation with the Purchaser. (See
"Section 13 Background of the Offer".)
Voting by the Purchaser. As a result of the Offer, the
Purchaser may be in a position to significantly influence all
Partnership decisions on which Unitholders may vote. However, the
Purchaser agrees, for the benefit of non-tendering Unitholders,
that it will vote its Units in proportion to the votes cast by
other Unitholders on matters put to a vote of Unitholders which
propose to change the fees and other compensation payable by the
Partnership to the General Partner and any of its affiliates. (See
"Section 7. Effects of the Offer".)
Repayment of Tender Offer Loan. A loan (the "DeForest Loan")
may be obtained by the Purchaser in connection with the Offer.
(See "Section 12. Source of Funds".) The Purchaser plans to
service the DeForest Loan with Purchaser Cash Flow and Tender Cash
Flow (as defined in Section 12). The amount of the DeForest Loan,
and consequently the ability of the Purchaser to repay such amount,
is dependent upon the number of Units tendered in the DeForest
Tender Offers (as defined in Section 12), which number is not
currently ascertainable. One of several possible sources of Tender
Cash Flow is the Purchaser's distributable portion of the proceeds
of any sales or refinancings of Partnership properties attributable
to the Units tendered. Consequently, a conflict of interest may
exist for the General Partner in determining whether and when to
sell and/or refinance the Partnership's properties. Any such
conflict, however, may be mitigated by the fact that (i) proceeds
from the sale or refinancing of properties owned by other
partnerships in which the Purchaser or its affiliates may have an
interest may be available to the Purchaser (see "Section 12. Source
of Funds."), (ii) there exist other repayment sources, including
capital contributions from the Purchaser's partners, (iii) certain
of the Purchaser's partners have agreed to loan funds to the
Purchaser in order to enable the Purchaser to make timely interest
payments, and (iv) the Purchaser may be able to refinance all or a
portion of the DeForest Loan.
Distributions upon Sales or Refinancings. As mentioned above,
one source of Tender Cash Flow is the Purchaser's distributable
portion of the proceeds of any sales or refinancings of Partnership
properties attributable to the Units tendered. The agreement
governing the DeForest Loan will provide that the Purchaser will be
required to make a prepayment on the DeForest Loan of an amount
equal to 60% (100% in the case of a refinancing) of the Purchaser's
distributable portion of the proceeds of such sale or refinancing,
whether or not distributed by the Partnership. Consequently,
unless the Purchaser otherwise has funds available to make such a
required prepayment, a conflict of interest may exist for the
General Partner in determining whether and when to cause the
Partnership to distribute the proceeds of any such sale or
refinancing to the Partnership's partners.
<PAGE>
Transactions with Affiliates. The General Partner of the
Partnership, an affiliate of the Purchaser, owns, a 2% interest in
the Partnership and thus receives, as a continuing interest in the
Partnership, an amount equal to a 2% allocation of the
Partnership's profits and losses, and 2% of distributions. The
General Partner is also entitled to be reimbursed for certain
expenses and to receive certain fees pursuant to the terms of the
Partnership Agreement. For information as to the amounts paid to
the General Partner and its affiliates during the last three fiscal
years and the nine months ended June 30, 1994, see Note 2 to the
Financial Statements of the Partnership in the Form 10-K of the
Partnership for the fiscal year ended September 30, 1993 and Note
2 to the Financial Statements of the Partnership in the Form 10-Q
of the Partnership for the nine months ended June 30, 1994. For
the period from July 1, 1994 through September 30, 1994, the
General Partner and its affiliates received from the Partnership an
aggregate of approximately $33,000 with respect to the foregoing
interests, reimbursements and fees.
Section 11. Certain Information Concerning the Purchaser.
The Purchaser was organized for the purpose of acquiring the Units.
The principal executive office of the Purchaser and DeForest Capi-
tal is at 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia
30328. DeForest Capital was organized for the purpose of acting as
the general partner of the Purchaser.
For certain information concerning the directors and executive
officers of DeForest Capital, the general partner of the Purchaser,
see Schedule 1 to this Offer to Purchase.
For certain financial information concerning the Purchaser and
DeForest Capital, see Schedule 2 to this Offer to Purchase.
Except with respect to 76 Units owned by an affiliate of the
Purchaser, and except as otherwise set forth herein, (i) neither
the Purchaser, DeForest Capital, to the best of Purchaser's
knowledge, the persons listed on Schedule 1 nor any affiliate of
the foregoing beneficially owns or has a right to acquire any
Units, (ii) neither the Purchaser, DeForest Capital, to the best of
Purchaser's knowledge, the persons listed on Schedule 1, nor any
affiliate thereof or director, executive officer or subsidiary of
DeForest Capital has effected any transaction in the Units,
(iii) neither the Purchaser, DeForest Capital, to the best of
Purchaser's knowledge, any of the persons listed on Schedule 1, nor
any director or executive officer of DeForest Capital 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, (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 Purchaser, DeForest Capital or, to the best of Purchaser's
knowledge, the persons listed on Schedule 1, on the one hand, and
the Partnership or its affiliates, on the other hand, and (v) there
have been no contracts, negotiations or transactions between the
Purchaser, DeForest Capital or, to the best of Purchaser's
knowledge, the persons listed on Schedule 1, on the one hand, 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.
The 76 Units owned by the Purchaser's affiliate are owned by
QAL Associates, whose address is 100 Jericho Quadrangle, Suite 214,
Jericho, New York 11753.
Section 12. Source of Funds. The Purchaser expects that
approximately $7,374,000 would be required to purchase 51,243
Units, if tendered, and to pay related fees and expenses.
Purchaser will obtain not less than $1,799,000 of such funds from
capital contributions from its partners. The remainder of such
funds will be obtained from debt financing to be provided by Kidder
Peabody Mortgage Capital Corporation or an affiliate thereof (the
"Lender") concurrently with the consummation of the Offer pursuant
to the terms of a commitment letter, dated October 11, 1994 (the
"Commitment Letter") among the Lender, the Purchaser and the NPI
Purchaser (as defined below).
<PAGE>
The Commitment Letter provides for two separate loans
(together, the "Loans"). One loan, the DeForest Loan, will be made
to the Purchaser in order to enable the Purchaser to consummate the
Offer as well as to tender for units of limited partnership
interest of eleven other Fox Partnerships (as defined in Section
13) (together with the Partnership, the "Fox Subject
Partnerships"). The Purchaser commenced such other tender offers
concurrently with the commencement of the Offer (the Offer and such
other tender offers are collectively referred to herein as the
"Deforest Tender Offers"). The second loan (the "DeForest II
Loan") will be made to DeForest Ventures II L.P. (the "NPI
Purchaser"), an affiliate of the Purchaser, which is the offeror in
tenders for units of limited partnership interest in seven limited
partnerships (collectively, the "NPI Partnerships"). The NPI
Purchaser commenced such tender offers (the "DeForest II Tender
Offers") concurrently with the commencement of the Offer. The
units of limited partnership interest of the Fox Subject
Partnerships which are purchased by the Purchaser pursuant to the
Deforest Tender Offers, and the units of limited partnership
interest of the NPI Partnerships which are purchased by the NPI
Purchaser pursuant to the DeForest II Tender Offers, are
collectively referred to herein as the "Tendered Units". Schedule
3 hereto sets forth the identity of each other Fox Subject Partner-
ship and each NPI Partnership.
The maximum aggregate principal amount of the Loans will be
$55 million, of which $36,775,000 has been allocated to the
Purchaser for its use in consummating the DeForest Tender Offers.
In no event, however, will the aggregate principal amount of the
Loan made to the Purchaser exceed 80% of the aggregate purchase
price of the Tendered Units to be acquired by it. It is
anticipated that the aggregate maximum purchase price, including
related fees and expenses, will be approximately $48,640,000 for
the Tendered Units in the Fox Subject Partnerships and will be
approximately $23,325,000 for the Tendered Units in the NPI
Partnerships. The Purchaser will obtain not less than
approximately $11,900,000 of the anticipated maximum aggregate
purchase price for the Tendered Units in the Fox Subject
Partnerships from capital contributions from its partners, and the
NPI Purchaser will obtain not less than approximately $5,100,000
of the anticipated maximum aggregate purchase price for the
Tendered Units in the NPI Partnerships from capital contributions
from its partners. Accordingly, it is anticipated that not more
than approximately $36,775,000 of such aggregate maximum purchase
price will be borrowed by the Purchaser and not more than
approximately $18,225,000 will be borrowed by the NPI Purchaser.
To the extent that the number of Tendered Units is less than the
aggregate number of units of limited partnership interest sought by
the Purchaser and the NPI Purchaser, the aggregate principal amount
of the Loans will be reduced.
The DeForest Loan and the DeForest II Loan will be cross-
defaulted and cross-collateralized. Each Loan will be due and
payable one year after initial funding subject to the right of the
borrower to extend such Loan for two consecutive one-year periods
provided that the Loans are not then in default. Interest on each
Loan will accrue monthly and be payable in arrears at a rate per
annum equal to 250 basis points over LIBOR during the initial 12
months of the Loan, 350 basis points over LIBOR during the second
12 months of the Loan and 450 basis points over LIBOR during the
last 12 months of the Loan. As of October 11, 1994 the LIBOR rate
was 5.125% per annum.
The Lender will also be entitled to additional interest on the
Loans in the form of a residual fee. Payment of the Lender's
additional interest, however, is subordinate to the prior return of
the aggregate capital contributions received by the Purchaser and
the NPI Purchaser, together with a 15% per annum return thereon.
The residual fee will consist of the greater of 20% or a specified
percentage of Tender Cash Flow until the Lender has received a 17%
per annum rate of return. The specified percentage to be received
by the Lender will be based upon the actual monthly outstanding
balance of the Loans and the period of time during which the Loans
were outstanding, and will continue to be paid to the Lender after
its receipt of a 17% per annum rate of return. The amount of the
Loans is dependent upon the number of Tendered Units acquired.
Because such amount and the time of repayment of the Loans cannot
be ascertained at this time, the effective rate of interest on the
Loans cannot be determined. "Tender Cash Flow" is the amount to be
received by the Purchaser with respect to the Tendered Units
acquired by it, whether in the form of distributions from the Fox
Subject Partnerships or as proceeds from the sale or other
disposition of such Tendered Units.
<PAGE>
Although the Loans will be prepayable at any time without
premium or penalty, a prepayment is required upon the occurrence of
certain events. The Purchaser will be required to prepay the
outstanding principal amount of the DeForest Loan utilizing
Purchaser Cash Flow (as defined herein), if any, remaining after
its application to the payment of interest on the Loans and, under
certain circumstances, to the prepayment of the DeForest II Loan.
Further, whether or not distributed to the Purchaser, 60% of the
Purchaser's distributable portion of the net proceeds of a sale
(and 100% of the net proceeds of a refinancing) of a property owned
by a Fox Subject Partnership is required to be applied in
prepayment of the DeForest Loan. (See "Section 10. Conflicts of
Interest and Transactions With Affiliates" for a discussion of
certain conflicts of interest which will be created as a result of
the Purchaser's obligation to prepay the DeForest Loan with the
proceeds of sales or refinancings of Partnership properties.)
"Purchaser Cash Flow" means the cash revenues, with certain
exceptions, to be received by NPI-AP Management, L.P. ("NPI-AP
Management"), an affiliate of the Purchaser, and by certain other
entities affiliated with National Property Investors, Inc. ("NPI")
less allowable operating expenses. Each of NPI-AP Management and
NPI will guarantee the Loan.
As collateral security for the Loans, among other things, the
Purchaser and the NPI Purchaser will be required to pledge and
collaterally assign the Tendered Units to the Lender, and their
respective partners will be required to pledge all partnership
interests in the borrowers. As additional collateral security, all
outstanding shares of the common stock of NPI Equity (and its
parent NPI) and all partnership interests in NPI-AP Management will
be required to be pledged to the Lender by the holders thereof.
The Purchaser and the NPI Purchaser anticipate that the loan
agreement(s) governing the Loans will contain certain customary
affirmative and negative reporting and operational covenants.
The borrowers will be required to pay the Lender reasonable and
customary fees in connection with the Loans and will also be
required to indemnify the Lender against certain liabilities,
including liabilities under the Exchange Act. It is also
anticipated that the agreement(s) governing the Loans will provide
that certain actions (i.e., bankruptcy or insolvency and default
under mortgage indebtedness) by Fox Subject Partnerships or NPI
Partnerships having in the aggregate an Attributed Net Value (as
defined below) of more than 20% of the Attributed Net Value of all
the Fox Subject Partnerships and the NPI Partnerships shall
constitute a default under the Loans. "Attributed Net Value" of
any Fox Subject Partnership or any NPI Partnership will represent
the purchase price actually paid by the Purchaser or the NPI
Purchaser for Tendered Units of such Partnership multiplied by the
number of Tendered Units actually acquired.
Neither the Purchaser nor the General Partner has any present
plans or intentions with respect to a liquidation, sale of assets
or, except as described in "Section 13. Background of the Offer",
refinancing of any of the Partnership's properties. However, the
Purchaser believes that the General Partner will continue to review
opportunities to sell the Partnership's properties and refinance
its indebtedness consistent with its fiduciary obligations and with
a view to maximizing returns to Unit Holders.
The amount of the Loans is dependent upon the number of
Tendered Units to be acquired, which number is not currently
ascertainable. If the DeForest Tender Offers are successful, and
the maximum number of Tender Units sought are acquired, unless
properties owned by one or more of the Fox Subject Partnerships
and/or the NPI Partnerships are sold or refinanced, repayment of
the Loans would be dependent upon the ability of the Purchaser or
the NPI Purchaser to obtain replacement financing. (See "Section
10. Conflicts of Interest and Transactions with Affiliates" for a
discussion of certain conflicts of interest which will be created
as a result of the Purchaser consummating the DeForest Loan.)
There are 86 individual properties owned by the Fox Subject
Partnerships and the NPI Partnerships. Except for one property
owned by MRI Business Properties Fund, Ltd. ("MRI"), neither the
Purchaser nor the General Partner is able to identify any specific
property owned by any Fox Subject Partnership or NPI Partnership
which is intended to be sold. MRI has entered into a letter of
intent to sell its interests in the Dallas Marriott Quorum Hotel.
It is anticipated that the sale of this property will be
consummated prior to December 31, 1994, and MRI anticipates
receiving net proceeds of approximately $1,500,000 from this sale.
There can be no assurance, however, that the sale of this property
will be consummated. The Purchaser anticipates that, over the
course of the Loans or any refinancing thereof, the allocable share
of sale or refinancing proceeds to be received by it on account of
its investment in the Tendered Units, together with the Purchaser
Cash Flow available to service the Loans, will be sufficient to
retire the principal balance of the Loans or any replacement loans.
However, neither the Purchaser nor the NPI Purchaser has made any
plans or arrangements to refinance the Loans.
<PAGE>
Section 13. Background of the Offer.
Acquisition of Control. On December 6, 1993, NPI Equity, a wholly-
owned subsidiary of NPI, an affiliate of the Purchaser, assumed
management and obtained control of the General Partner of the
Partnership, as well as the respective general partners of certain
other affiliated limited partnerships (together with the
Partnership, the "Fox Partnerships"), by being appointed as
substitute managing partner of Fox Realty Investors ("FRI"), a
partner of the General Partner and the respective direct or
indirect general partner of certain of the other Fox Partnerships,
and by entering into a voting trust agreement with the beneficial
owners of the outstanding shares of stock of Fox Capital Management
Corporation ("FCMC"), another direct or indirect general partner of
certain of the other Fox Partnerships. Three of the eleven former
individual general partners of FRI are limited partners of the
Purchaser.
In connection with the acquisition by NPI Equity of management
and control of the Partnership and the Fox Partnerships, NPI Realty
Advisors, Inc. ("NPI Realty"), an affiliate of NPI Equity, acquired
for cash and notes an aggregate of approximately $10,800,000 of
loans made by FRI and/or FCMC to the Fox Partnerships (the
"Partnership Advances") for the outstanding balance of such loans.
As of the date of this Offer, the Fox Partnerships have repaid all
but $182,000 of the Partnership Advances from, among other sources,
the proceeds of the sales of certain Fox Partnership properties.
On October 12, 1994, NPI sold one-third of its stock to AP-NPI
II, L.P. ("AP-NPI"), an affiliate of Apollo Real Estate Advisors,
L.P. ("Apollo"). (See the Partnership's Form 8-K dated October 12,
1994 for additional information with respect to this transaction.)
Certain individual beneficial owners of NPI and an entity
affiliated with Apollo formed both the Purchaser and DeForest
Capital on September 30, 1994 for the purpose of making the Offer.
Establishment of Purchase Price. The Purchaser has set the
Purchase Price at $140 net per Unit. The Purchaser established the
Purchase Price by analyzing a number of both quantitative and
qualitative factors including: (i) the volume and prices of recent
secondary market resales of the Units; (ii) the lack of liquidity
of, and lack of current income derived from, an investment in the
Partnership; (iii) an estimate of the underlying value of the
Partnership's assets; (iv) the costs to the Purchaser associated
with acquiring the Units; and (v) the administrative costs of
continuing to own the Partnership's assets through a publicly
registered limited partnership.
Secondary sales activity for the Units has been limited and
sporadic. According to information obtained from trade
publications which report on public real estate limited
partnerships, from July 1, 1993 through June 30, 1994, an aggregate
of 887 Units were transferred in the secondary market at prices
ranging from $20.00 to $62.00 per Unit. Secondary market sales may
not be an efficient measure of value. However, such sales of Units
on the secondary market and in private transactions are the only
current means available to a Unitholder to liquidate his investment
in his Units since the Units are not listed or traded on any
exchange or quoted on any NASDAQ list or system. Therefore, the
Purchaser believes resale prices may be relevant to establishing
the Purchase Price. Based solely on the price range set forth
herein, the Purchase Price is 225% of the highest secondary market
sales price.
The Purchaser is offering to purchase Units which are a
relatively illiquid investment and which do not presently generate
current income and is not offering to purchase the Partnership's
underlying assets. Consequently, the Purchaser does not believe
that the underlying asset value of the Partnership is determinative
in arriving at the Purchase Price. Nevertheless, the Purchaser
derived an estimated net value (the "Derived Value") for the
Partnership's assets. In determining the Derived Value, the
Purchaser first calculated the "Adjusted Value" of each of the
Partnership's properties.
<PAGE>
The Adjusted Value was determined by
subtracting a reserve (the "FF&E Reserve") from a property's
earnings before interest, depreciation and amortization ("EBIDA")
for the twelve month period commencing on July 1, 1993 and ending
June 30, 1994, which earnings were based upon the Partnership's
actual operating results. This amount was then divided by a
capitalization rate (the "Cap Rate") to determine the property's
Adjusted Value. In calculating Adjusted Values, a 10.5% cap rate
was used. The FF&E Reserve used was 4% of gross revenues for
Holiday Inn Crowne Plaza and 37% of gross revenues for the other
three properties which are limited service hotels. The Adjusted
Value at the Partnership's Holiday Inn Crowne Plaza property
represents the Partnership's 50% ownership interest in such
property and was reduced by 1% of the existing mortgage debt to
account for the costs to be incurred in connection with the
extension of the financing of such property in 1995. In addition,
the Adjusted Value at the Residence Inn - Orlando was then reduced
by $250,000 to provide for the cost required to make necessary
improvements at such property.
The Purchaser believes that the FF&E Reserve and Cap Rates
utilized by it are within a range of reserves and capitalization
rates currently employed in the marketplace. The utilization of
different FF&E reserves and capitalization rates could also be
appropriate. Unitholders should be aware that the use of lower
FF&E reserves and/or capitalization rates would result in higher
Adjusted Values for the Partnership's properties.
The following table applies the method used by the Purchaser
to determine the Adjusted Value.
Property Year EBIDA FF&E Cap Adjustments Adjusted
Built Reversed Rate Valu
Holiday
Inn Crowne 1986 $3,190,000 $811,000 10.50% $11,498,571 $11,158,571
Plaza
Residence
Inn - 1986 $1,714,000 $143,580 10.50% ___ $14,956,381
Sacramento
Residence
Inn - 1984 $1,170,000 $126,030 10.50% $ 250,000 $ 9,692,571
Orlando
Embassy
Suites - 1984 $2,141,000 $187,590 10.50% ___ $18,603,905
Tempe
To determine the Derived Value of the Partnership's assets,
the Purchaser then added to the aggregate Adjusted Value the net
amount of all cash and cash equivalents of the Partnership at
June 30, 1994, less all accounts payable and other claims against
the Partnership which net amount equaled $3,471,000. Finally, the
Adjusted Value of each property was reduced by subtracting to the
extent of such property's Adjusted Value its long term debt as of
June 30, 1994, which reduction amounted to approximately
$27,332,000 in the aggregate. The resulting Derived Value of the
Partnership's assets was approximately $30,550,000 or $275 per
Unit (based upon the percentage of capital distributions to which
Unitholders are entitled).
The Purchaser believes that realization by the Partnership of
the Derived Value may be impacted by several factors affecting real
estate assets generally, including: (i) the reduced availability of
real estate financing resulting from various factors including the
present condition of financial institutions, and (ii) the continued
sale of properties acquired by financial institutions and
government agencies. No Partnership properties or assets have been
identified for sale, and neither the General Partner nor the Pur-
chaser has any present plans or intentions with respect to liquida-
tion of the Partnership. Furthermore, the Purchaser believes that
sales of the Partnership's properties for all cash purchase prices
may be affected by the foregoing factors.
<PAGE>
Unitholders should also be aware that, in connection with
Apollo's decision to make an investment in the Purchaser and its
affiliates, Apollo retained an independent third party to conduct
an equity analysis of, among other entities, the Partnership as of
June 30, 1994. The foregoing analysis estimated the equity value
of the Partnership at an amount equivalent to $299 per Unit.
However, Unitholders are advised that this valuation was not
prepared with a view toward public disclosure (including disclosure
in this Offer) and that Apollo does not as a matter of course make
public its internal valuations. The fact that Apollo commissioned
this evaluation of the Partnership in connection with its decision
to make an investment in the Purchaser and its affiliates should
not be considered as an indication that either Apollo or the
Purchaser considers this valuation as an accurate indicator of the
net amount the Partnership could realize for its assets.
In establishing the Purchase Price, the Purchaser also took
into account the administrative costs regularly incurred by the
Partnership. Because the Purchaser is offering to purchase Units
rather than the underlying assets of the Partnership, the Purchaser
believes it is appropriate to consider such costs. From
information set forth in the Partnership's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, the average
administrative costs of the Partnership for its three prior fiscal
years was $526,333 or $4.83 per outstanding Unit per year.
Furthermore, the Purchaser gave consideration to the costs
associated with the acquisition of the Units of approximately
$200,000 or $3.90 per Unit assuming it was able to purchase all of
the Units sought. To the extent less Units are purchased, the
Purchaser's cost per Unit will be proportionately increased.
The Partnership Agreement of the Partnership provides, among
other things, that upon dissolution of the Partnership subsequent
to the sale of all of the Partnership's properties, the General
Partner is required to contribute capital to the Partnership in an
amount equal to any deficit then existing in its capital account.
Through ownership of Units by the Purchaser, an affiliate of the
General Partner, the potential liability of the General Partner and
its affiliates would be effectively reduced. Although there was a
deficit in the capital account of the General Partner of $1,521,355
as of the end of the Partnership's last fiscal year, such amount is
subject to future reduction through allocation of a portion of the
taxable gain, if any, that results from the sale by the Partnership
of its properties under the Partnership Agreement. Consequently,
the ultimate amount, if any, of the deficit and the date on which
it would be paid are indeterminable. Accordingly, the Purchaser
has attributed no value to this obligation in establishing the
Purchase Price.
By taking into consideration all of the above factors, the
Purchaser determined the Purchase Price to be $140. The Purchase
Price represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to
evaluate or render any opinion with respect to the fairness of the
Purchase Price and no representation is made by the Purchaser or
any affiliate of the Purchaser as to such fairness. The Purchaser
did not attempt to obtain current independent valuations or
appraisals of the underlying properties and other assets owned by
the Partnership; however, the Purchaser is aware of the equity
analysis referred to above. As indicated above, the Purchaser does
not believe that such valuations or appraisals should be
determinative as to the Purchaser's establishment of the Purchase
Price. Other measures of the value of the Units may be relevant to
Unitholders. Unitholders are urged to consider carefully all of
the information contained herein and consult with their own
advisors, tax, financial or otherwise, in evaluating the terms of
the Offer before deciding whether to tender Units.
Partnership Makes No Recommendation. The Partnership has
indicated in its Statement of Schedule 14D-9 filed with the
Commission that it makes no recommendation and is remaining neutral
as to whether Unitholders should tender their Units pursuant to the
Offer because the General Partner of the Partnership is subject to
an inherent conflict of interest resulting from the General
Partner's affiliation with the Purchaser.
Section 14. Conditions of the Offer. Notwithstanding any
other term of the Offer, the Purchaser shall not be required to
accept for payment or to pay for any Units tendered if all
authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by the Offer
shall not have been filed, occurred or been obtained. Furthermore,
notwithstanding any other term of the Offer, the Purchaser shall
not be required to accept for payment or pay for any Units not
theretofore accepted for payment or paid for 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 acceptance of such Units for
payment or the payment therefor, any of the following conditions
exists:
<PAGE>
(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 Purchaser, (ii) imposes or confirms limitations on the
ability of the Purchaser effectively to exercise full rights
of ownership of any Units, including, without limitation, the
right to vote any Units acquired by the Purchaser pursuant to
the Offer or otherwise on all matters properly presented to
the Partnership's Unitholders, (iii) requires divestiture by
the Purchaser of any Units, (iv) causes any material
diminution of the benefits to be derived by the Purchaser as
a result of the transactions contemplated by the Offer, or
(v) might materially adversely affect the business,
properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the
Purchaser or the Partnership;
(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, which might, 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 sole judgment of the Purchaser, is
or may be materially adverse to the Partnership, or the
Purchaser shall have become aware of any fact that, in the
sole judgment of the Purchaser, does or may 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;
(e) it shall have been publicly disclosed or the
Purchaser shall have otherwise learned that (i) more than ten
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 Commission pursuant to Section 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; or
(f) the transactions contemplated by the Commitment
Letter shall not have been consummated.
<PAGE>
The foregoing conditions are for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to such conditions or may be waived by
the Purchaser in whole or in part at any time and from time to time
in its sole discretion. Any determination by the Purchaser
concerning the events described above will be final and binding
upon all parties.
Section 15. Certain Legal Matters.
General. Except as set forth in this Section 15, the
Purchaser is 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
Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is the Purchaser's 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 Purchaser to elect to terminate the Offer
without purchasing Units thereunder. The Purchaser's obligation to
purchase and pay for Units is subject to certain conditions,
including conditions related to the legal matters discussed in this
Section 15.
Antitrust. The Purchaser does not believe that the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, is
applicable to the acquisition of Units contemplated by 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,
securityholders, principal executive offices or principal places of
business therein. Although the Purchaser has not attempted to
comply with any state anti-takeover statutes in connection with the
Offer, the Purchaser reserves the right to challenge the validity
or applicability of any state law allegedly applicable to the Offer
and nothing in this Offer to Purchase 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
Purchaser 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 Purchaser may not be
obligated to accept for purchase or pay for any Units tendered.
Section 16. Fees and Expenses. Except as set forth in this
Section 16, the Purchaser will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Units
pursuant to the Offer. The Purchaser has retained The Herman
Group, Inc. to act as Information Agent, and GKN Securities Corp.
to act as Dealer Manager, in connection with the Offer. The Pur-
chaser will pay the Information Agent and Dealer Manager reasonable
and customary compensation for their respective services in connec-
tion with the Offer, plus reimbursement for out-of-pocket expenses,
and will indemnify the Information Agent and the Dealer Manager
against certain liabilities and expenses in connection therewith,
including liabilities under the federal securities laws. The
Purchaser will also pay all costs and expenses of printing and
mailing the Offer.
Section 17. Miscellaneous. The Purchaser is not aware of any
jurisdiction in which the making of the Offer is not in compliance
with applicable law. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in
compliance with applicable law, the Purchaser will make a good
faith effort to comply with any such law. If, after such good
faith effort, the Purchaser cannot comply with any such law, the
Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Units residing in such jurisdiction. In
those jurisdictions whose securities or blue sky laws require the
Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of the Purchaser by the Dealer Manager.
<PAGE>
No person has been authorized to give any information or to
make any representation on behalf of the Purchaser 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.
The Purchaser has filed with the Commission a Schedule 14D-1,
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file
amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected and copies may be obtained at
the same places and in the same manner as set forth in Section 9
hereof (except that they will not be available at the regional
offices of the Commission).
DEFOREST VENTURES I L.P.
October 17, 1994
<PAGE>
Schedule 1
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is the name, current business address, present
principal occupation, and employment history for at least the past
five years of each director and executive officer of DeForest Capi-
tal. Except for Mr. Koenigsberger, who is a citizen of Guatemala,
each person listed below is a citizen of the United States.
Present Principal Occupation or Employment;
Material Occupation, Position, Office
or Employment During the Past Five Years
Michael L. Ashner. Since October 1994, Mr. Ashner has been
a Director, President and Co-Chairman of DeForest Capital and
DeForest Capital II Corporation ("DeForest Capital II"), the
general partner of the NPI Purchaser. Since June 1994, Mr. Ashner
has been a Director, President and Co-Chairman of NPI, and since
December 1984 has been a Director and President of NPI Equity. Mr.
Ashner has also been a Director and executive officer of NPI
Property Management Corporation ("NPI Management"), the general
partner of NPI-AP Management, L.P., since April 1984, and is
currently NPI Management's Chairman. Since 1981, Mr. Ashner has
also served as President of Exeter Capital Corporation, a firm
which has organized and administered real estate limited
partnerships. Mr. Ashner's business address is 100 Jericho
Quadrangle, Suite 214, Jericho, New York 11753.
Martin Lifton. Since October 1994, Mr. Lifton has been a
Director and Chairman of DeForest Capital and DeForest Capital II,
and since June 1994 has been a Director and Chairman of NPI. Since
November 1991, Mr. Lifton has been a Director and executive officer
of NPI Equity, and is currently NPI Equity's Chairman. Mr. Lifton
has also been a Director and/or executive officer of NPI Management
since November 1991, and is currently a Director and NPI
Management's Co-Chairman. Mr. Lifton has also served as Chairman
and President of The Lifton Company, a real estate investment firm,
since January 1985, and as Chairman of The Bank of Great Neck, a
Great Neck, New York bank, since March 1986. Mr. Lifton's business
address is 100 Jericho Quadrangle, Suite 214, Jericho, New York
11753.
W. Edward Scheetz. Mr. Scheetz has been a Director of
DeForest Capital, DeForest Capital II, NPI and NPI Equity since
October 1994. Since May 1993, Mr. Scheetz has been a limited
partner of Apollo Real Estate Advisors, L.P. ("Apollo"), the
managing general partner of Apollo Real Estate Investment Fund,
L.P., a private investment fund. Mr. Scheetz has also served as a
Director of Roland International, Inc. ("Roland"), a real estate
investment company, since January 1994, and as a Director of
Capital Apartment Properties, Inc., a multi-family residential real
estate investment trust, since January 1994. From 1989 to May
1993, Mr. Scheetz was a principal of Trammell Crow Ventures, a
national real estate investment firm. Mr. Scheetz' business
address is 1301 Avenue of the Americas, 38th floor, New York, New
York 10019.
Ricardo Koenigsberger. Mr. Koenigsberger has been a Director
of DeForest Capital, DeForest Capital II, NPI and NPI Equity since
October 1994. Since October 1990, Mr. Koenigsberger has been an
associate of Apollo and of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional
investors with respect to securities investments. For more than
one year prior thereto, Mr. Koenigsberger was an associate with
Drexel Burnham Lambert Incorporated. Mr. Koenigsberger's business
address is 1301 Avenue of the Americas, 38th floor, New York, New
York 10019.
Arthur N. Queler. Mr. Queler has been a Director, Executive
Vice President, Secretary and Treasurer of DeForest Capital and
DeForest Capital II since October 1994, and of NPI since June 1994.
Mr. Queler has been a Director and executive officer of NPI Equity
and NPI Management since December 1984 and April 1984,
respectively. Mr. Queler has also served as President of ANQ
Securities, Inc., a NASD registered broker-dealer firm which has
been responsible for supervision of licensed brokers and
coordination with a nationwide broker-dealer network for the
marketing of NPI investment programs, since 1983. Mr. Queler's
business address is 5665 Northside Drive, N.W., Suite 370, Atlanta,
Georgia 30328.
<PAGE>
Lee Neibart. Mr. Neibart has been a Director of DeForest
Capital, DeForest Capital II, NPI and NPI Equity since October
1994. Mr. Neibart has also been an associate of Apollo since
December 1993. From 1986 to 1993, Mr. Neibart also served as
Executive Vice President of the Robert Martin Company, a private
real estate development and management firm based in Westchester
County, New York, and from 1982 to 1985 Mr. Neibart served as
President of the New York Chapter of the National Association of
Industrial Office Parks, a professional real estate organization.
Mr. Neibart's business address is 1301 Avenue of the Americas, 38th
floor, New York, New York 10019.
G. Bruce Lifton. Since October 1994, Mr. Lifton has been a
Director and Vice President of DeForest Capital and DeForest
Capital II. Mr. Lifton has also been Vice President of NPI and NPI
Equity since January 1991 and November 1991, respectively, and a
Director and Vice President of NPI Management since June 1994. Mr.
Lifton has also served as Vice President of The Lifton Company
since September 1986. Mr. Lifton is a son of Martin Lifton and the
brother of Steven Lifton. Mr. Lifton's business address is 5665
Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328.
Steven Lifton. Mr. Lifton has been a Vice President of
DeForest Capital and DeForest Capital II since October 1994 and of
NPI Management since June 1994. Since June 1994, Mr. Lifton has
been a Director and Vice President of NPI. Mr. Lifton has been
Vice President of NPI Equity since November 1991 and a director
since October 1994. Mr. Lifton has also served as Senior Vice
President of The Lifton Company since September 1984 and as a
Director of The Bank of Great Neck since March 1986. Steven Lifton
is a son of Martin Lifton and the brother of G. Bruce Lifton. Mr.
Lifton's business address is 100 Jericho Quadrangle, Suite 214,
Jericho, New York 11753.
<PAGE>
Schedule 2
FINANCIAL STATEMENTS OF THE
PURCHASER AND DEFOREST CAPITAL
<PAGE>
Independent Auditors' Report
DeForest Ventures I L.P.
(A Delaware Limited Partnership)
We have audited the accompanying balance sheet of DeForest Ventures
I L.P. (A Delaware Limited Partnership) as of October 12, 1994.
This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Ventures I L.P. (A Delaware Limited Partnership) as of
October 12, 1994 in conformity with generally accepted accounting
principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
DeFOREST VENTURES I L.P.
(A Delaware Limited Partnership)
Balance Sheet
October 12, 1994
ASSETS
Cash $ 11,900,000
Deferred Costs 1,800,000
Total Assets $ 13,700,000
LIABILITIES AND PARTNERS' EQUITY
Accrued Expenses $ 1,511,000
Due to Affiliate 289,000
Total Current Liabilities 1,800,000
Commitments and Contingencies
Partners' Equity:
General Partner 119,000
Limited Partners 11,781,000
Total Partners' Equity 11,900,000
Total Liabilities and Partners' Equity $ 13,700,000
See Notes to Financial Statement
<PAGE>
DeFOREST VENTURES I L
(A Delaware Limited Partnership)
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Ventures I L.P., a Delaware Limited Partnership
("DeForest"), was formed on September 30, 1994 for the purpose
of acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships"). The general
partner of DeForest is DeForest Capital I Corporation, a
Delaware Corporation ("DeForest Capital"). Shareholders who
control DeForest Capital also control the general partners of
all the Limited Partnerships. The $289,000 due to an
affiliate represents fees and expenses paid by a related party
on behalf of DeForest.
Concurrently with this transaction, DeForest Ventures II L.P.
("DeForest II"), a Delaware Limited Partnership, was formed
for the purpose of acquiring limited partnership units in
various other affiliated limited partnerships.
2. DEFERRED COSTS
Deferred costs consist of fees and expenses related to the
offers to purchase units in the Limited Partnerships. These
costs will be capitalized as part of DeForest's investment
once the purchases are consummated.
3. COMMITMENTS AND CONTINGENCIES
In order to complete the purchase of limited partnership
units, DeForest and DeForest II have received a commitment for
debt financing from Kidder Peabody Mortgage Capital
Corporation for up to $55 million. The financing will be in
the form of two separate loans which will be cross-defaulted
and cross-collateralized. Each loan will be due one year
after initial funding subject to the right to extend such loan
for two consecutive one-year periods provided that the loan is
not then in default. Interest will accrue at a rate per annum
equal to 250 basis points over LIBOR during the initial 12
months of the loan, 350 basis points over LIBOR during the
second 12 months of the loan and 450 basis points over LIBOR
during the last 12 months of the loan. The lender will also
be entitled to additional interest on the loan pursuant to the
terms of the formula set forth in the commitment. It is
anticipated that DeForest and DeForest II will incur a total
of approximately $1,300,000 in fees and expenses relating to
the financing which will be divided between the two entities
based upon the amount of their respective loans.
<PAGE>
Independent Auditors' Report
DeForest Capital I Corporation
We have audited the accompanying balance sheet of DeForest Capital
I Corporation as of October 12, 1994. This financial statement is
the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of
DeForest Capital I Corporation as of October 12, 1994 in conformity
with generally accepted accounting principles.
IMOWITZ KOENIG & COMPANY
Certified Public Accountants
New York, NY
October 13, 1994
<PAGE>
DeFOREST CAPITAL I CORPORATION.
Balance Sheet
October 12, 1994
ASSETS
Investment in DeForest Ventures I L.P. $ 119,000
STOCKHOLDERS' EQUITY
Capital Stock, Par Value $.01,
7,500 Shares Authorized, 600
issued and outstanding $ 6
Additional Paid in Capital 1,118,994
Notes Receivable from Stockholders (1,000,000)
Total Stockholders' Equity $ 119,000
See Notes to Financial Statement
<PAGE>
DeFOREST CAPITAL I CORPO
Notes to Financial Statement
October 12, 1994
1. ORGANIZATION
DeForest Capital I Corporation ("DeForest Capital"), a
Delaware Corporation, was incorporated on September 30, 1994
and will serve as the general partner of DeForest Ventures I
L.P. ("DeForest"). DeForest was formed for the purpose of
acquiring limited partnership units in various limited
partnerships (the "Limited Partnerships").
Shareholders who control DeForest Capital also control the
general partners of all of the Limited Partnerships.
2. STOCKHOLDERS' EQUITY
Shareholders of DeForest Capital have contributed $119,000 in
cash and $1,000,000 in negotiable demand promissory notes.
<PAGE>
Schedule 3
NPI PARTNERSHIPS
National Property Investors II
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
FOX SUBJECT PARTNERSHIPS
Century Properties Fund XII
Century Properties Fund XIII
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Growth Fund XXII
MRI Business Properties Fund, Ltd.
MRI Business Properties Fund, Ltd. II
<PAGE>
Facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of
Transmittal and any other required documents should be sent or
delivered by each Unitholder or his broker, dealer, commercial
bank, trust company or other nominee to the Purchaser at its
address set forth below:
DEFOREST VENTURES I L.P.
By Hand, Mail (insured or registered
recommended) or Overnight Delivery:
DeForest Ventures I L.P.
c/o The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
By Facsimile:
(214) 991-4422 or (214) 991-4432
For Telephone Information:
1-800-530-4966
Any questions or requests for assistance or for additional
copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other tender offer materials may
be directed to the Information Agent at the telephone number and
address below. You may also contact the Dealer Manager or your
broker for assistance concerning the Offer. To confirm delivery of
your Letter of Transmittal, please contact the Purchaser.
The Information Agent for the Offer is:
The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, Texas 75240
1-800-530-4966
The Dealer Manager of the Offer is:
GKN Securities Corp.
61 Broadway, 12th Floor
New York, New York 10006
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
LETTER OF TRANSMITTAL
Taxpayer Identification
Number
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON NOVEMBER 18, 1994 (the "Expiration Date") UNLESS
EXTENDED.
Deliver to: DeForest Ventures I L.P.
c/o The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, TX 75240
Telephone: (800) 530-4966
By Facsimile: (214) 991-4432 OR (214) 991-4422
To participate in the Offer, a duly executed copy of this Letter of
Transmittal (or facsimile hereof) must be received by the Purchaser on or
prior to the Expiration Date. Delivery of this Letter of Transmittal or any
other required documents to an address or facsimile number other than as set
forth above does not constitute valid delivery. The method of delivery of
all documents is at the election and risk of the tendering Unitholder.
Please use the pre-addressed, postage-paid envelope provided.
This Letter of Transmittal is to be completed by Unitholders of record
as of October 10, 1994 of MRI Business Properties Fund, Ltd. III, a
California limited partnership (the "Partnership"), pursuant to the
procedures set forth in the Offer to Purchase (as defined below).
PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS
Gentlemen:
The undersigned hereby tenders to DeForest Ventures I L.P., a Delaware
limited partnership (the "Purchaser"), the above described Units at $140 per
Unit, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated October 17, 1994 (the "Offer to
Purchase"), and this Letter of Transmittal (which together constitute the
"Offer"). Receipt of the Offer to Purchase is hereby acknowledged.
Subject to and effective upon acceptance for payment of any of the Units
tendered hereby, the undersigned hereby sells, assigns and transfers to, or
upon the order of, Purchaser all right, title and interest in and to such
Units tendered hereby. The undersigned hereby irrevocably constitutes and
appoints the Purchaser as the true and lawful agent and attorney-in-fact of
the undersigned with respect to such Units, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with
an interest), to deliver such Units and transfer ownership of such Units on
the books of the Partnership, together with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser and, upon
payment of the purchase price in respect of such Units by the Purchaser, to
receive all benefits and otherwise exercise all rights of beneficial
ownership of such Units all in accordance with the terms of the Offer.
Subject to and effective upon acceptance for payment of any Units tendered
hereby, the undersigned hereby requests that the Purchaser be admitted to the
Partnership as a "Substitute Limited Partner" under the terms of the
Partnership Agreement of the Partnership. Upon the purchase of Units
pursuant to the Offer, all prior proxies and consents given by the
undersigned with respect to such Units will be revoked and no subsequent
proxies or consents may be given (and if given will not be deemed effective).
The undersigned recognizes that, if more than 51,243 Units are validly
tendered prior to or on the Expiration Date and not properly withdrawn, the
Purchaser will, upon the terms of the Offer, accept for payment from among
those Units tendered prior to or on the Expiration Date 51,243 Units on a pro
rata basis, with adjustments to avoid purchases of certain fractional Units,
based upon the number of Units validly tendered prior to the Expiration Date
and not withdrawn. The undersigned further recognizes that if no more than
51,243 Units are validly tendered prior to the Expiration Date and not
withdrawn, the Purchaser will, upon the terms of the Offer, accept for
payment all such Units.
The undersigned hereby represents and warrants that the undersigned owns
the Units tendered hereby within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and has full power and authority
to validly tender, sell, assign and transfer the Units tendered hereby, and
that when any such Units are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, conditional
sales agreements or other obligations relating to the sale or transfer
thereof, and such Units will not be subject to any adverse claim. Upon
request, the undersigned will execute and deliver any additional documents
deemed by the Purchaser to be necessary or desirable to complete the
assignment, transfer, and purchase of Units tendered hereby.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned
recognizes that under certain circumstances set forth in the Offer to
Purchase, the Purchaser may not be required to accept for payment any of the
Units tendered hereby. In such event, the undersigned understands that any
Letter of Transmittal for Units not accepted for payment will be destroyed by
the Purchaser. All authority herein conferred or agreed to be conferred
shall survive the death or incapacity of the undersigned and any obligations
of the undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
Do Not Return Certificates With This Letter of Transmittal
The Unitholder hereby tenders Units pursuant to the terms of the Offer. The
Unitholder hereby certifies, under penalities of perjury, that the
information and representations provided in Boxes A and B (for U.S. persons)
and Box C (for non-U.S. persons) of this Letter of Transmittal which have
been duly completed by the Unitholder are true and complete and correct as of
the date hereof.
OWNERS SIGN HERE TO TENDER
(Attach additional sheets, if necessary)
If this Letter of Transmittal is not
signed exactly as name(s) appear(s)
above, or if this Letter of
Transmittal is signed by a general
partner, corporate officer, or other
person acting in a fiduciary or
representative capacity, please
complete BOX D. (See Instruction 1).
X
X
Date
Bus. Tel. ( )
Home Tel. ( )
<PAGE>
PAYER'S NAME: DEFOREST VENTURES I L.P.
BOX A
(Attach additional copies for joint Unitholders)
SUBSTITUTE FORM W-9
(See Instruction 3(A))
Part I - Please provide the TIN of the Unitholder submitting
this Letter of Transmittal in the box at right or, if applicable,
write "Applied For" in such box.
Social Security Number or Employer Identification Number:
Please check the appropriate box
describing the Unitholder: [] Individual/Sole Proprietor [] Corporation
[] Partnership []____________________
Other
<PAGE>
Part II - Certification - The Unitholder submitting this Letter of
Transmittal hereby certifies the following:
(1) The TIN shown in Part 1 above is the correct TIN of the
Unitholder who is submitting this Letter of Transmittal. If the box
in Part I states the words "Applied For", a TIN has not been issued to
the Unitholder, and either (a) the Unitholder has mailed or delivered
an application to receive a TIN to the appropriate IRS Center or
Social Security Administration Office, or (b) the Unitholder intends
to mail or deliver an application in the near future. The Unitholder
understands that if such Unitholder does not provide a TIN to the
Purchaser within sixty (60) days, 31% of all reportable payments made
to the Unitholder thereafter will be withheld until a TIN is provided
to the Purchaser; and
(2) Unless this box [] is checked, such Unitholder is not subject to
backup withholding either because such Unitholder has not been
notified by the IRS that such Unitholder is subject to backup
withholding as a result of a failure to report all interest or
dividends, or because the IRS has notified such Unitholder that such
Unitholder is no longer subject to backup withholding.
(Note: You must place an "X" in the box in (2) above if you have been
notified by the IRS that you are currently subject to backup
withholding because of underreporting of interest or dividends on your
tax return.)
<PAGE>
BOX B
(Attach additional copies for joint Unitholders)
FIRPTA AFFIDAVIT
(See Instruction 3(B))
Under Section 1445(e)(5) of the Internal Revenue Code and Treas. Reg.
1.I445-11T(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a partnership
in which 50 percent or more of the value of the gross assets consists of
U.S. real property interests and 90 percent or more of the value of the
gross assets consist of U.S. real property interests plus cash or cash
equivalents, if the holder of the partnership interest is a foreign person.
To inform the Purchaser that no withholding is required with respect to the
Unitholder's interest in the Partnership, the Unitholder hereby certifies
the following under penalties of perjury:
(1) The Unitholder, if an individual, is not a nonresident alien for
purposes of U.S. income taxation, and if not an individual, is not a
foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
(2) The Unitholder's U.S. social security number (for individuals) or
employer identification number (for non-individuals)
is___________________;
(3) The Unitholder's home address (for individuals), or office
address and (if applicable) place of incorporation (for non-
individuals) is
The Unitholder understands that this certification may be disclosed to
the IRS by the Purchaser and that any false statements contained herein
could be punished by fine, imprisonment, or both.
<PAGE>
BOX C
(Attach additional copies for joint Unitholders)
SUBSTITUTE FORM W-8
(See Instruction 4)
By checking this box [], the Unitholder certifies that it is an "exempt
foreign person" for purposes of the backup withholding rules under the U.S.
federal income tax laws, because the Unitholder:
(1) Is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(2) If an individual, has not been and plans not to be present in the
U.S. for a total of 183 days or more during the calendar year; and
(3) Neither engages, nor plans to engage, in a U.S. trade or business
that has effectively connected gains from transactions with a broker
or barter exchange.
<PAGE>
BOX D
(Attach additional copies for joint Unitholder)
NON-CONFORMING SIGNATURES AND FIDUCIARIES SIGN HERE
(See Instruction 1)
The undersigned,if signing this Letter of Transmittal on behalf of the
Unitholder, hereby declares that he, she or it has the authority to sign
this document on behalf of such Unitholder.
Fiduciary: X__________________________
Printed Name:_________________________________ Address:____________________
Title:________________________________________
Telephone: ( )___________
Notarization of Sign
(If required. See Instruction 1)
STATE OF______________________
COUNTY OF______________________
On this day of , 1994, before me came personally
____________________________________________, to me____________________
known to be the person who executed the foregoing Letter of Transmittal.
Notary Public
OR
Guarantee of Signature
(If required. See Instruction 1)
Name of Firm:__________________________
Authorized Signature:__________________ Date:_______________________
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Tender, Signature Requirements; Delivery. After carefully reading
and duly completing this Letter of Transmittal, to tender Units a
Unitholder must sign in the signature block on the front of this Letter
of Transmittal. If this Letter of Transmittal is signed by the
registered Unitholder(s) of the Units as printed on the front of this
Letter of Transmittal without any change whatsoever, no notarization or
signature guarantee on this Letter of Transmittal is required.
Similarly, if Units are tendered for the account of a member firm of a
registered national security exchange, a member firm of the National
Association of Securities Dealers, Inc. or a commercial bank, savings
bank, credit union, savings and loan association or trust company having
an office, branch or agency in the United States (each an "Eligible
Institution"), no notarization or signature guarantee is required on this
Letter of Transmittal. In all other cases, signatures on this Letter of
Transmittal must either be notarized or guaranteed by an Eligible
Institution, by completing the Notarization or Guarantee of Signature set
forth in BOX D of this Letter of Transmittal. If any tendered Units are
registered in the names of two or more joint holders, all such holders
must sign this Letter of Transmittal. If this Letter of Transmittal is
signed by trustees, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and
must submit proper evidence satisfactory to the Purchaser of their
authority to so act. For Units to be validly tendered, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required notarizations or signature guarantees in BOX
D and any other documents required by this Letter of Transmittal, must be
received by the Purchaser prior to or on the Expiration Date at its
address or to its facsimile number set forth herein. No alternative,
conditional or contingent tenders will be accepted. All tendering
Unitholders by execution of this Letter of Transmittal waive any right to
receive any notice of the acceptance of their tender.
2. Transfer Taxes. The Purchaser will pay or cause to be paid all
transfer taxes, if any, payable on the transfer to it of Units pursuant
to the Offer.
3. U.S. Persons. A Unitholder who or which is a United States citizen
or resident alien individual, a domestic corporation, a domestic
partnership, a domestic trust or a domestic estate (collectively, "United
States persons") as those terms are defined in the Internal Revenue Code
and Income Tax Regulations, should complete the following:
(A). Substitute Form W-9. In order to avoid 31% federal income tax
backup withholding on the payment of the purchase price for Units
purchased, the tendering Unitholder must provide to the Purchaser the
Unitholder's correct Taxpayer Identification Number ("TIN") and certify
under penalties of perjury, that such Unitholder is not subject to such
backup withholding by completing the Substitute Form W-9 set forth in BOX
A of this Letter of Transmittal. If a correct TIN is not provided,
penalties may be imposed by the Internal Revenue Service ("IRS") in
addition to the Unitholder being subject to backup withholding. Certain
Unitholders (including, among others, all corporations) are not subject
to backup withholding. Backup withholding is not an additional tax. If
withholding results in an overpayment of taxes, a refund may be obtained
from the IRS.
The TIN that must be provided on the Substitute Form W-9 is that of
the registered Unitholder(s) indicated on the front of this Letter of
Transmittal. Write the words "Applied For" in the box in Part I of the
Substitute Form W-9 if the tendering Unitholder has applied for but has
not been issued a TIN or intends to apply for a TIN in the near future.
If the words "Applied For" are written in the box in Part I of the
Substitute Form W-9 and the Purchaser is not provided with the
Unitholder's TIN within 60 days, the Purchaser will withhold 31% of all
subsequent payments, if any, of the purchase price for the Units until
such TIN is provided to the Purchaser.
(B). FIRPTA Affidavit. To avoid potential withholding of tax
pursuant to Section 1445 of the Internal Revenue Code in an amount equal
to 10% of the purchase price for Units purchased pursuant to the Offer,
plus the amount of any liabilities of the Partnership allocable to such
Units, each Unitholder who or which is a United States person must
complete the FIRPTA Affidavit contained in BOX B of this Letter of
Transmittal stating, under penalties of perjury, such Unitholder's TIN
and address, and that such Unitholder is not a foreign person. Tax
withheld under Section 1445 of the Internal Revenue Code is not an
additional tax. If withholding results in an overpayment of tax, a
refund may be obtained from the IRS.
4. Foreign Persons. In order for a Unitholder who is a foreign person
(i.e. a person who is not a United States person as defined in 3. above)
to qualify as exempt from 31% backup withholding, such foreign Unitholder
must certify, under penalties of perjury, the statement in BOX C of this
Letter of Transmittal attesting to that foreign person's status by
checking the box preceding such statement. In any event, the Purchaser
intends to withhold from foreign Unitholders 10% of the purchase price of
Units purchased pursuant to the Offer, plus the amount of liabilities of
the Partnership allocable to such Units, pursuant to Section 1445 of the
Internal Revenue Code. Backup withholding and tax withheld under Section
1445 of the Internal Revenue Code are not additional taxes. If
withholding results in an overpayment of tax, a refund may be obtained
from the IRS.
5. Additional Copies of Offer to Purchase and Letter of Transmittal.
Requests for assistance or additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from the Information Agent at
the address or telephone number set forth below:
The Information Agent is:
The Herman Group, Inc.
13760 Noel Road, Suite 320
Dallas, TX 75240
1-800-530-4966
IMPORTANT: In order to participate in the offer, this letter of transmittal
(or facsimile hereof) must be received by the Purchaser on or prior to the
Expiration Date.
<PAGE>
DeForest Ventures I L.P.
5665 Northside Drive, N.W., Suite 370
Atlanta Georgia 30328
October 17, 1994
Dear ____________:
As described in each enclosed Offer to Purchase and related
Letter of Transmittal (the "Offer(s)"), DeForest Ventures I L.P.
is offering to purchase, for cash, Units of Limited Partnership
Interest of each Partnership listed below in which you own Units.
The Offer(s) will provide you with an opportunity to
liquidate your investment in the Partnership(s), without the
usual transaction costs associated with market sales or
partnership transfer fees. In this regard, you may no longer
wish to continue your investment in the Partnership(s) for a
number of reasons, including:
More immediate use for the cash to be paid on account of
your investment in the Units,
The absence of a formal trading market for the Units,
General disenchantment with real estate investments,
particularly long-term investments in limited partnerships,
The continuing administrative costs and resultant negative
financial impact on the value of a Partnership's assets due
to their ownership in a publicly registered limited
partnership,
Elimitate the delays and complications in preparing and
filing personal income tax returns which may result from an
investment in the Units, and
The opportunity to transfer your Units without the costs and
commissions normally associated with a transfer.
If you tender your Units, you will receive the amount listed
below so long as no more than the maximum number of Units sought
in each Partnership is received.
Name of Number of Purchase Price Total Purchase
Partnership Units you own per Unit Price by Partnership
_________________
Aggregate Purchase Price for your
Units............................................................
.....................................$
Please note that in order to tender any of your Units in a
Partnership, you must tender all of your Units in such Partner-
ship - no partial tenders will be accepted.
We suggest that you review the enclosed Offer(s) with your
personal financial and tax advisor. After carefully reading each
enclosed Offer, if you elect to tender your Units, mail (using
the enclosed pre-addressed, postage-paid envelope) or telecopy a
duly completed and executed copy of the Letter of Transmittal and
any documents required by the Letter of Transmittal to the
Purchaser at:
DeForest Ventures I L.P.
c/o The Herman Group, Inc.
13760 Noel Rd., Suite 320
Dallas, Texas 75240
Telecopier No. (214) 991-4422 or (214) 991-4432
If you have any questions, please call the Information
Agent, The Herman Group, Inc., at 1-800-530-4966.
DEFOREST VENTURES I L.P.
October 11, 1994
DeForest Ventures I L.P.
DeForest Ventures II L.P.
5665 Northside Drive, N.W.
Suite 370
Atlanta, Georgia 30328
Attention: Mr. Michael Ashner
re Senior Secured Financing
Gentlemen:
You have advised Kidder Peabody Mortgage Capital
Corporation ("KPMCC") that NPI-AP Management, L.P., a
Delaware limited partnership ("NPI-AP Management"), intends
to acquire (the "Acquisition") up to 49% of the limited
partnership units (the "LP Units") of each of 19 partnerships
identified to KPMCC (the "Tender Offer Partnerships") by
means of offers to purchase (the "Tender Offers") initiated
by (x) in the case of certain of the Tender Offer
Partnerships, DeForest Ventures II L.P. ("Borrower A"), a
newly-formed, bankruptcy remote single purpose Delaware
limited partnership all of the limited partnership interests
in which will be owned by NPI-AP Management and all of the
general partnership interests in which will be owned by
DeForest Capital II Corporation, a newly-formed, bankruptcy
remote single purpose Delaware corporation ("DeForest Capital
II"), and (y) in the case of the other Tender Offer
Partnerships, DeForest Ventures I L.P. ("Borrower B", and
together with Borrower A, the "Borrowers"), a newly-formed,
bankruptcy remote single purpose Delaware limited partnership
71% of the partnership interests in which will be owned by
NPI-AP Management (all of which are limited partnership
<PAGE>
interests), 28% of the partnership interests in which will be
owned by Emmet J. Cashin, Jr., Jarold A. Evans, W. Patrick
McDowell (or trusts created by such persons) and PD
Associates (the "Fox Investors") (all of which are limited
partnership interests) and 1% of the partnership interests
(all of which will be general partnership interests) in which
will be owned by DeForest Capital I Corporation, a newly-
formed, bankruptcy remote single purpose Delaware corporation
("DeForest Capital I"). We also understand that at the
closing of the Acquisition (x) Michael L. Ashner, Martin
Lifton and Arthur N. Queler and/or their spouses and issue
(and trusts established for the benefit of their spouses and
issue) (collectively, the "NPI Principals") collectively will
directly own 66%, and Apollo Real Estate Advisors, L.P.
and/or its affiliates (collectively, "Apollo") collectively
will directly own 33%, of the equity interests in each of
DeForest Capital I, DeForest Capital II and National Property
Investors, Inc., a Delaware corporation ("NPI Corp."), (y)
the NPI Principals collectively will directly own 100% of the
equity interests in NPI Property Management Corporation, a
Florida corporation ("NPI Property Management"), and (z) NPI
Property Management will directly own 66% of the partnership
interests in, and Apollo will directly own 33% of the
partnership interests in, NPI-AP Management.
KPMCC understands that the Acquisition of the LP
Units pursuant to the Tender Offers and the payment of
related reasonable fees and expenses (which shall not be
payable to the NPI Principals, Apollo or any affiliates of
either, provided that Borrower B may reimburse NPI-AP
Management or NPI Corp. for up to $100,000 of expenses
incurred in connection with the Tender Offers) will be funded
by (x) secured credit facilities in the aggregate amount of
up to $55 million (the "Credit Facilities") to be made
available to the Borrowers and (y) cash equity contributions
to the Borrowers aggregating no less than $17 million.
Attached as Annex A to this letter is a Summary of Certain
Terms (the "Term Sheet") setting forth the principal terms
and conditions of the Credit Facilities.
KPMCC is pleased to confirm that subject to
satisfaction of all of the conditions set forth herein and in
the Term Sheet, KPMCC will provide 100% of the Credit
Facilities.
As you are aware, KPMCC and its advisers have
undertaken certain legal, business and financial due
diligence analysis and review of the proposed transaction
(the "Transaction") including, without limitation, with
respect to (i) the limited partnerships (including, without
limitation, the Tender Offer Partnerships) which have been
formed for the purpose of investing in real estate and the
partnerships, subsidiaries and joint ventures in which such
limited partnerships have an interest (each an "Operating
Partnership" and, collectively, the "Operating
<PAGE>
Partnerships"), (ii) NPI-AP Management and its subsidiaries
and partnerships (including, without limitation, the
Borrowers) in which it has an interest, DeForest Capital I,
DeForest Capital II and NPI Property Management (such
entities, other than the Operating Partnerships and the NPI
Entities (as defined below), collectively, the "NPI-AP
Management Entities"), (iii) NPI Corp. and its subsidiaries
and partnerships in which it has an interest (such entities,
other than the Operating Partnerships and NPI-AP Management
Entities, collectively, the "NPI Entities"), and (iv) the
Tender Offers. KPMCC's willingness to provide the financing
described in this letter is subject to (a) KPMCC being
satisfied in its reasonable discretion that (x) NPI Corp. has
the right to directly or indirectly control the liquidation
and dissolution of the Tender Offer Partnerships and the
sale, financing and management of property owned, directly or
indirectly, by the Tender Offer Partnerships and (y)
following the exercise of its rights under the security for
the Credit Facilities, KPMCC and its successors and assigns
shall have the right to exercise the rights of NPI Corp. as
described in the immediately preceding clause (x), (b) KPMCC
not becoming aware of any facts or information after the date
hereof which was not previously disclosed to it and which in
its reasonable determination has a material adverse effect on
its evaluation of the Tender Offers or the business,
property, operations, nature of assets, assets, liabilities,
condition (financial or otherwise) or prospects of (x) any
NPI-AP Management Entity or any NPI Entity (collectively, the
"Credit Parties"), (y) any Tender Offer Partnership or (z)
the Operating Partnerships (other than the Tender Offer
Partnerships) taken as a whole and (c) no material adverse
change having occurred in the Tender Offers or the business,
property, operations, nature of assets, assets, liabilities,
condition (financial or otherwise) or prospects of (x) any
Credit Party, (y) any Tender Offer Partnership, or (z) the
Operating Partnerships (other than the Tender Offer
Partnerships) taken as a whole. In the event that KPMCC
becomes aware of any such fact or information, KPMCC is not
so satisfied as described above or any material adverse
change occurs, KPMCC may, in its sole discretion, suggest
alternative financing, amounts or structures (including,
without limitation, interest and fees) that assure adequate
protection for KPMCC or decline to provide or participate in
the proposed financing. KPMCC shall not be responsible or
liable for any consequential damages which may be alleged as
a result of its failure to provide the Credit Facilities or
for any damages for its failure to provide the Credit
Facilities as permitted above.
To induce KPMCC to issue this letter and to
continue with its analysis and review, you, jointly and
severally, hereby agree that all reasonable fees and expenses
(including the reasonable fees and expenses of counsel for
KPMCC, auditors, field examiners, appraisers, consultants or
other outside experts) of KPMCC arising in connection with
<PAGE>
this letter (and the due diligence in connection herewith)
and in connection with the Transaction shall be for your
account, whether or not the transaction is consummated, the
Credit Facilities are made available or the definitive legal
documents with respect thereto are executed and are delivered
by any party. You, jointly and severally, further agree to
indemnify and hold harmless KPMCC and each director, officer,
employee and affiliate thereof (each an "indemnified person")
from and against any and all actions, suits, proceedings
(including any investigations or inquiries), claims, losses,
damages, liabilities or reasonable costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel and amounts paid
in settlement of court costs) which may be incurred by or
asserted against or involve KPMCC or any such indemnified
person as a result of or arising out of or in any way related
to or resulting from any transaction (whether or not
consummated) contemplated by this letter and, upon demand, to
pay and reimburse KPMCC and each indemnified person for any
reasonable legal or other out-of-pocket expenses incurred in
connection with investigating, defending or preparing to
defend any such action, suit, proceeding (including any
inquiry or investigation) or claim (whether or not KPMCC or
any such person is a party to any action or proceeding out of
which any such expenses arise), provided that you shall not
have to indemnify any indemnified person against any loss,
claim, damage, expense or liability which resulted solely
from the gross negligence or wilful misconduct of such
indemnified person. This letter is issued for your benefit
only and no other person or entity may rely hereon. The
provisions of this paragraph shall survive any termination of
this letter.
This commitment is delivered to you with the
understanding that, whether or not this or any other
commitment is accepted from KPMCC relating to any aspect of
the Transaction outlined herein, this commitment letter and
the terms outlined herein and in the Term Sheet will be kept
confidential by you and not disclosed to any third party
(including, without limitation, other sources of financing)
without the express prior written consent of KPMCC, except
that (a) you may disclose this commitment letter and the Term
Sheet and the contents hereof and thereof (i) to the Credit
Parties and to your and their partners, shareholders,
officers, directors, employees, accountants, attorneys and
other advisors on a confidential basis in connection with the
transactions contemplated hereby or thereby or (ii) as
required by law, and (b) after your acceptance of this
commitment letter you may disclose this commitment letter,
the Term Sheet and the contents hereof and thereof (as well
as a summary of the principal terms and conditions of KPMCC's
commitment and obligations hereunder or thereunder) in any
public filings whether in connection with the transactions
contemplated hereby or otherwise (provided that any such
written disclosure shall be subject to KPMCC's review and
approval, which approval will not be unreasonably withheld).
The provisions of this paragraph shall survive any
termination of this letter.
<PAGE>
As a material inducement for KPMCC to execute and
deliver this letter, you hereby represent and warrant that
neither you nor any person acting on your behalf (including,
without limitation, Apollo, any NPI Principal, any NPI Entity
or any NPI-AP Management Entity) have employed or used a
broker in connection with the transactions contemplated
herein, and you agree to indemnify and hold harmless KPMCC
and each other indemnified person from and against all loss,
cost, damage or expense arising by reason of any claim made
by any such broker. The provisions of this paragraph shall
survive any termination of this letter.
Upon the closing of the transactions contemplated
in this letter, KPMCC and its affiliates shall be entitled,
but not required, to advertise the same from time to time in
media selected by KPMCC or its affiliates at their expense,
provided that no such advertisement shall refer to the use of
the proceeds of the Credit Facilities. Neither you nor your
affiliates shall advertise the closing of the transactions
contemplated herein prior to such closing. Upon the closing
of the transactions contemplated herein, you and your
affiliates shall be entitled, but not required, to advertise
the same from time to time in media selected by you at your
expense, provided that your advertisements shall include a
disclosure, in each case approved in writing by KPMCC, that
KPMCC provided the Credit Facilities.
Any services provided by KPMCC pursuant hereto are
those of an independent contractor providing a service.
Nothing contained herein (i) shall constitute KPMCC or any of
its affiliates or you or any of your affiliates as members of
any partnership, joint venture, association or other separate
entity, (ii) shall be construed to impose any liability as
such on KPMCC or (iii) shall constitute a general or limited
agency or be deemed to confer on any party hereto any
express, implied or apparent authority to incur any
obligation or liability on behalf of any other.
This letter and the Term Sheet attached hereto
contain all of the agreements and understandings of the
parties hereto and their respective obligations in connection
therewith. All prior negotiations, proposals, agreements and
understandings relating to the subject matter of this letter
and the Term Sheet are hereby agreed to be superseded hereby.
If you are in agreement with the foregoing, please
sign and return to KPMCC the enclosed copy of this letter by
no later than 5:00 p.m., New York time on October 12, 1994.
This letter, and the commitment set forth herein, shall
terminate at such time unless you accept this letter as
provided above.
<PAGE>
This letter and the rights and obligations of the
parties hereunder shall be construed in accordance with and
governed by the law of the State of New York.
Very truly yours,
KIDDER PEABODY MORTGAGE CAPITAL
CORPORATION
By_____________________
Name:
Title:
Agreed to and Accepted this
day of October, 1994
DEFOREST VENTURES I L.P.
By DeForest Capital I Corporation,
its General Partner
By_________________________
Name: Michael A. Ashner
Title: President
DEFOREST VENTURES II L.P.
By DeForest Capital II Corporation,
its General Partner
By_________________________
Name: Michael A. Ashner
Title: President
The obligations of DeForest Ventures I L.P.
and DeForest Ventures II L.P. under the
fifth and seventh paragraphs of this letter
are jointly and severally guaranteed by
each of the undersigned as primary obligors
and not as a surety only:
NATIONAL PROPERTY INVESTORS, INC.
By
Name: Michael A. Ashner
Title: President
<PAGE>
NPI-AP MANAGEMENT, L.P.
By NPI Property Management
Corporation, a general partner
By
Name: Michael A. Ashner
Title: Chief Executive Officer
<PAGE>
ANNEX A
SUMMARY OF CERTAIN TERMS AND CONDITIONS
Borrowers: Two newly-formed, bankruptcy
remote, single purpose limited
partnerships satisfactory to Kidder
Peabody Mortgage Capital
Corporation ("KPMCC") in all
respects. Borrower A will tender
for outstanding limited partnership
units ("LP Units") in the
partnerships listed on Exhibit A
hereto which are controlled by NPI
Equity Investments, Inc., a wholly-
owned subsidiary of NPI Corp. (the
"NPI Tender Partnerships").
Borrower B will tender for the LP
Units in the partnerships listed on
Exhibit A hereto which are
controlled, directly or indirectly,
by NPI Equity Investments II, Inc.,
a wholly owned subsidiary of NPI
Corp. (the "Fox Tender
Partnerships" and together with the
NPI Tender Partnerships, the
"Tender Offer Partnerships").
Lender: KPMCC (or its designee).
Equity Contribution: An aggregate of at least $17
million in cash equity
contributions will be made to the
Borrowers by the partners therein
which cash equity contributions
will be allocated $5.1 million to
Borrower A and $11.9 million to
Borrower B. As is provided below
under "Conditions Precedent," the
entire minimum cash equity
contribution (i.e., $17 million)
must be utilized by the Borrowers
to acquire the LP Units pursuant to
the Tender Offers and to pay
related reasonable fees and
expenses prior to the incurrence of
any loans under the Credit
Facilities (the "Loans"). The
equity contribution to the
Borrowers may be increased over $17
million from time to time during
the Availability Period (as defined
below) at the Borrowers' discretion
for purposes of paying the costs
and expenses of the Tender Offers
and funding an increase in the
purchase prices of the LP Units
pursuant to the Tender Offers over
those specified in Exhibit A hereto
(for each LP Unit its "Initial
Price").
The aggregate amount of cash equity
contributions actually made to the
Borrowers in accordance with the
immediately preceding paragraph is
hereinafter referred to as the
"Capital Contribution Amount".
Use of Proceeds: The proceeds of the Loans will be
used by the Borrowers solely to
fund the acquisition of LP Units in
the 19 partnerships identified on
Exhibit A pursuant to the Tender
Offers and to pay related
reasonable fees and expenses (which
shall not be payable to the NPI
Principals, Apollo or any affiliate
of either, provided that Borrower B
may reimburse NPI-AP Management or
NPI Corp. for up to $100,000 of
expenses incurred in connection
with the Tender Offers), provided
that (i) the purchase price paid
for the LP Units of a Tender Offer
Partnership may not exceed the
Initial Price and the fees and
expenses related to the Tender
Offers may not exceed $4.0 million,
unless the sum of aggregate excess
purchase prices paid for all LP
Units plus the related fees and
expenses in excess of $4.0 million
does not exceed the amount by which
the aggregate cash equity
contributions actually made to the
Borrowers which are not repaid with
proceeds of the Loans as
contemplated by clause (ii) below
exceeds $17 million, (ii) the
proceeds of the Loans made on the
Closing Date may be utilized to (x)
repay advances made by the partners
to the Borrowers in connection with
the Tender Offers or (y) return
equity contributions made by such
partners which exceed $17 million
in the aggregate and (iii) the
proceeds of the Loans made on the
last day of the Availability Period
may be utilized to return equity
contributions made by the partners
to the Borrower in an amount equal
to the lesser of (x) the amount by
which such equity contributions
exceed $15,000,000 in the aggregate
and (y) the amount by which the
aggregate Initial Price for all LP
Units (assuming that the full
number of LP Units tendered for
pursuant to the Tender Offers are
purchased) exceeds the aggregate
Initial Price for all LP Units
actually acquired pursuant to the
Tender Offer. The maximum number
of LP Units of any Tender
Partnership which may be accepted
by the relevant Borrower shall be
49% of such LP Units.
Commitment: Up to $55 million. The commitment
will be allocated $18,225,000 to
Borrower A and $36,775,000 to
Borrower B. In no event will the
aggregate principal amount of the
Loans made to a Borrower exceed 80%
of the total acquisition price of
the LP Units acquired by such
Borrower in the Tender Offers.
<PAGE>
Availability: The Loans may be incurred under the
Credit Facilities at any time prior
to the 45th day after the initial
borrowing of the Loans under the
Credit Facilities (the "Closing
Date") upon at least five days
prior written notice, provided that
(x) the aggregate principal amount
of the Loans incurred on the
Closing Date shall be no less than
$10 million and (y) Loans may not
be incurred on more than five
different days. The period during
which Loans may be incurred under
the Credit Facilities is
hereinafter referred to as the
"Availability Period."
Commitment
Termination: The commitment, and KPMCC's
obligations to make Loans under the
Credit Facilities, will terminate
if the Closing Date has not
occurred on or before December 31,
1994.
Maturity: The first anniversary of the
Closing Date, provided that the
Borrowers will have a right to two
1-year extensions of the maturity
date provided that no default or
event of default exists on the date
of any such extension (such
maturity date as it may be
extended, the "Maturity Date").
Interest Rate: The Loans will bear interest at the
LIBOR Rate (as defined below) as
determined by KPMCC for interest
periods of one month plus the
Applicable Margin, provided that
the initial interest period for
Loans incurred after the Closing
Date will terminate on the date the
interest period for the Loans
incurred on the Closing Date
terminates.
"LIBOR Rate" shall mean, for any
interest period, the rate per annum
from time to time equal to the rate
(rounded upward, if necessary, to
the nearest 1/32 of one percent),
shown on the Telerate page 3750 (or
such display substituted therefor
as is then customarily used to
quote the London interbank offering
rate as determined by KPMCC in its
reasonable discretion) as the
offered rate per annum for one
month U.S. dollar deposits of
amounts in same day funds
comparable to the principal amount
of the Loans as of approximately
11:00 a.m. (London time) on each
interest rate determination date
for each interest period for such
Loan, provided that if on any
interest rate determination date
the quotation specified in the
preceding clause above does not
appear on Telerate Page 3750, the
LIBOR Rate will be either (a) the
arithmetic mean (rounded upwards as
aforesaid) of the offered rates
which leading New York City banks
selected by KPMCC are quoting at
approximately 11:00 a.m. (New York
City time) on the relevant interest
rate determination date for United
States dollar deposits for the next
month to the principal London
office of each of the reference
banks or those of them (being at
least two in number) to which such
offered quotations are, in the
opinion of KPMCC, being so made, or
(b) in the event that KPMCC can
determine no such arithmetic mean,
the arithmetic mean (rounded
upwards as aforesaid) of the
offered rates which leading New
York City banks selected by KPMCC
are quoting on such interest rate
determination date to leading
European banks for United States
dollar deposits for the next month.
"Applicable Margin" shall mean a
percentage per annum equal to (x)
prior to the first anniversary of
the Closing Date, 2.5%, (y) on and
after the first anniversary of the
Closing Date and prior to the
second anniversary of the Closing
Date, 3.5% and (z) on and after the
second anniversary of the Closing
Date, 4.5%.
The Credit Facilities shall include
customary protective provisions for
such matters as capital adequacy,
increased costs, funding losses,
illegality and withholding taxes.
Interest in respect of the Loans
shall be payable at the end of the
applicable interest period. All
interest calculations shall be
based on a 360-day year and actual
days elapsed.
Upon the happening and continuance
of any default in the payment of
principal or interest, subject to
limitations imposed by applicable
law, all Loans shall bear interest
at a rate per annum equal to the
rate which is the greater of (x)
12% and (y) 3% in excess of the
prime lending rate announced from
time to time by Bankers Trust
Company. Such interest shall be
payable on demand.
Residual Fee: As additional compensation on the
Loan, after the Initial Return
Obligation (as defined below) has
been satisfied, KPMCC will receive
a residual fee (the "Residual
Fee"). The amount of the
<PAGE>
Residual
Fee will be the Participation
Percentage (as defined in Exhibit
B) of the Partnership Cash Flows
(as defined below). The Borrowers
will have the right to buy out
KPMCC's right to receive the
Residual Fee after the Loan
Satisfaction Date (as defined
below) for a purchase price
calculated in accordance with
Exhibit C.
The "Initial Return Obligation"
will be satisfied when each of the
following has occurred:
(i) the Loans, together with all
interest accrued thereon and
all other amounts owing
under the Credit Facilities
(other than the Residual
Fee) have been paid in full
(such date, the "Loan
Satisfaction Date");
(ii) there has been deemed
applied to a return on
capital as provided under
"Application of Partnership
Cash Flows" below, a
cumulative, compounded
(annually) amount equal to
15% per annum of the Capital
Contribution Amount; and
(iii) there has been deemed
applied to a return of
capital as provided under
"Application of Partnership
Cash Flows" below, an amount
equal to the Capital
Contribution Amount.
"Partnership Cash Flows" shall
mean, without duplication, for any
period, (x) distributions received
by the Borrowers or the Fox
Transferees (as defined below) in
respect of the LP Units during such
period, and (y) proceeds received
by the Borrowers or the Fox
Transferees during such period from
the sale or other disposition of
such LP Units, provided that
Partnership Cash Flows shall not
include Fox Deficit Distributions
(as defined below).
Definitions of NPI Net
Cash Flow/Fox Cash
Flow/Capital Event
Proceeds: "NPI Net Cash Flow" shall mean, for
any period, and without duplica-
tion, (a) all cash revenues
(including expense reimbursables)
received by the NPI-AP Management
Entities and the NPI Entities
during such period (including,
without limitation, (x) the
distributions in respect of general
partnership interests in the
Operating Partnerships (other than
the Tender Offer Partnerships) and
(y) property management fees and
asset management fees) other than
(i) revenues which constitute
Capital Event Proceeds, (ii) the
portion of the management fees
payable to PD Associates pursuant
to the two letter agreements dated
October 13, 1993 between NPI Corp.
and LPD Equities, Inc. as amended
by the letter dated November 29,
1993 between such parties (the
collectively, "PD Agreement") to
the extent that such portion does
not exceed $700,000 during any year
(the "PD Associate Fees"), (iii)
after the Collateral Release Date
(as defined below), the revenues
from (x) the Non-Tender Offer
Collateral (as defined below) and
(y) the general partnership
interests in the Operating
Partnerships which are not Tender
Offer Partnerships, (iv) the Fox
Deficit Distributions, (v) the
"special contribution" received by
Borrower B from the Fox Investors
pursuant to Sections 3.7(b) and (c)
of the Borrower B partnership
agreement, (vi) the amounts, if
any, received by Borrower B from
Lisle W. Payne and Janet E. Larson,
individually and as Trustee of the
Larson Family Revocable Trust,
pursuant to the agreements which
may be entered into by Borrower B
and such persons (the amounts
specified in clause (v) above and
this clause (vi) are hereinafter
collectively referred to as the
"Borrower B Special
Contributions"), (vii) the Borrower
B Advances (as defined below),
(viii) the distributions received
in respect of the general
partnership interests in the Fox
Tender Partnerships which are
required to be held by NPI Corp. in
respect of the obligations of the
former individual general partners
of Fox Realty Investors ("FRI") to
make contributions to such Fox
Tender Partnerships due to excess
distributions received by such
former general partners (the "Fox
GP Amounts"), provided that such
amounts are set aside and held in
the Security Account (as defined
below) and (ix) amounts paid in
respect of the general partnership
interests in the Fox Tender
Partnerships to FRI or Fox
Management Capital Corp. ("FCMC")
which are distributable to PRA
Associates ("PRA") pursuant to
FRI's partnership agreement or to
the shareholders of FCMC, less (b)
the Pro Rata Portion (as defined
below) of the Approved Operating
Expenses (as defined below) paid in
cash by the NPI-AP Management
Entities and the NPI Entities
during such period (including
reasonable compensation to the NPI
Principals not to exceed in the
aggregate amounts provided for in
the current employment agreements
for Michael L. Ashner, Martin
Lifton, Steven J. Lifton, G. Bruce
Lifton and Arthur N. Queler).
<PAGE>
It is understood that Net Cash Flow
before officer's compensation is
presently estimated to be $9
million per annum.
"Pro Rata Portion" shall mean, for
any period, the Approved Operating
Expenses paid in cash during such
period by the NPI-AP Management
Entities and the NPI Entities mul-
tiplied by a fraction the numerator
of which is the cash revenues for
such period from property and asset
management fees which are included
in determining NPI Net Cash Flow
for such period plus the PD
Associate Fees for such period and
the denominator of which is the
total cash revenues of the NPI-AP
Management Entities and the NPI
Entities for such period from
property and asset management fees.
"Approved Operating Expenses" shall
mean, for any period, the operating
expenses provided for in a budget
for such period submitted to, and
approved by, KPMCC prior to the
first day of such period (such
approval not to be unreasonably
withheld), provided that the
aggregate amount expended shall be
deemed to be "Approved Operating
Expenses" so long as the aggregate
excess amounts for the entire
period does not exceed the total
budgeted amount by more than 10%,
if prior to the Collateral Release
Date, and 15%, if on and after the
Collateral Release Date. In the
event that KPMCC withholds consent
for an annual budget, the budget
for such year shall be the budget
for the immediately preceding year
increased by the consumer price
increase for such immediately
preceding year.
"Fox Cash Flow" shall mean, for any
period, (x) all cash received by
the Borrower B in respect of the
Borrower B Special Contributions
and (y) all Borrower B Advances.
"Capital Event Proceeds" shall mean
for any Borrower for any period (w)
distributions received by such
Borrower, the NPI Entities or the
holders of the Affiliate Units
during such period in respect of
the LP Units owned by such
Borrower, by the NPI Entities or by
such holders during such period and
in respect of general partnership
interests in the Tender Offer
Partnerships related to such
Borrower (other than any such
amounts which are distributable to
PRA pursuant to FRI's partnership
agreement or the shareholders of
FCMC but including amounts
distributable by FRI to NPI Equity
Investments II, Inc. and
"Disposition Compensation" (as
defined in FRI's partnership
agreement)), (x) proceeds received
by such Borrower, the NPI Entities
or such holder during such period
from the sale or other disposition
of such LP Units and general
partnership interests during such
period and (y) the Refinancing
Amount (as defined below) and the
Liquidation Amount (as defined
below) for each Distribution Date
occurring during such period in
respect of the properties owned by
the Tender Offer Partnerships
related to such Borrower, provided
that Capital Event Proceeds shall
not include (a) Fox Deficit
Distributions or (b) prior to the
occurrence of a default or an event
of default, the distributions in
respect of, or the sale proceeds
of, the Affiliate Units.
"Distribution Date" shall mean each
June 30 and December 31.
"NPI Interest" in any amount shall
mean the portion of such amount
which would have been distributed
to the NPI Entities and the NPI-AP
Management Entities in respect of
the LP Units and the general
partnership interests in the Tender
Offer Partnership receiving such
amounts had 100% of such amount
been distributed by the relevant
Tender Offer Partnership.
"Liquidation Amount" shall mean,
for any Distribution Date and for
any property owned by a Tender
Offer Partnership, the NPI Interest
in the net proceeds of (x) any sale
of the properties owned by such
Tender Offer Partnerships or (y) to
the extent not applied to the
repair, restoration or replacement
of the affected property,
condemnation or insurance proceeds
with respect to such properties,
which in the case of this clause
(y) exceed $100,000 for each event
for which such insurance or
condemnation proceeds are payable,
to the extent that such sale,
condemnation or insurance proceeds
are received during the period (for
each Distribution Date, its
"Measurement Period") commencing on
the 15th day preceding the immedi-
ately preceding Distribution Date
and ending on the 15th day
<PAGE>
preceding such Distribution Date
and are not distributed in full by
the relevant Tender Offer
Partnership on or before such
Distribution Date.
"Refinancing Amount" shall mean,
for any Distribution Date, for any
property owned by a Tender Offer
Partnership: (x) if indebtedness
in respect of such property is
outstanding on the Closing Date,
75% of the NPI Interest in the
amount by which the principal
amount of indebtedness incurred in
respect of such property (including
any refinancing of existing
indebtedness) during the
Measurement Period for such
Distribution Date exceeds 107% of
the principal amount of the
indebtedness in respect of such
property which is outstanding on
the Closing Date or (y) if no such
indebtedness in respect of such
property is outstanding on the
Closing Date, the amount equal to
75% of the NPI Interest in
indebtedness incurred in respect of
such property during the
Measurement Period for such
Distribution Date to the extent
that such excess indebtedness
amounts are not distributed in full
by the relevant Tender Offer
Partnership, provided that the
Refinancing Amount shall not
include the first $500,000 of
indebtedness which is incurred by
each of CP Properties Fund XIX and
Century Properties Growth Fund XXII
which is in excess of 107% of the
principal amount of the
indebtedness of such Operating
Partnership which is outstanding on
the Closing Date so long as such
indebtedness is utilized for
operating expenses of each such
Operating Partnership (other than
payments to affiliates).
Application of NPI Net
Cash Flow/Fox Cash
Flow/Capital Event
Proceeds/Partnership
Cash Flows: A. Application of NPI Net Cash
Flow.
Until the occurrence of the Loan
Satisfaction Date, NPI Net Cash
Flow will be applied as follows
(with such application to be made
on a monthly basis):
(i) first, to the payment of
interest on the Borrower A
Loans and the other
obligations of Borrower A
under the Credit Facilities
(other than the obligations
to repay the principal
amount of the Loans) which
are then due and payable;
(ii) second, to the payment of
interest on the Borrower B
Loans and the other
obligations of Borrower B
under the Credit Facilities
(other than the obligations
to repay the principal
amount of the Loans) which
are then due and payable
after the application of Fox
Cash Flow actually received;
(iii) third, provided that no
default or event of default
then exists, an amount equal
to 40% of the NPI Net Cash
Flow remaining after the
application pursuant to
clauses (i) and (ii) above
shall be retained by the
relevant Credit Parties for
application to the
satisfaction of the income
tax obligations of NPI Corp.
and of the partners of NPI-
AP Management;
(iv) fourth, with respect to NPI
Net Cash Flow remaining
after application pursuant
to clauses (i), (ii) and
(iii) above (x) if such NPI
Net Cash Flow is for a
period ending on or before
the first anniversary of the
Closing Date, 50% of such
remaining NPI Net Cash Flow
and (y) if such remaining
NPI Net Cash Flow is for any
period thereafter, 100% of
such remaining NPI Net Cash
Flow shall be applied to the
repayment of the principal
of the Borrower A Loans and
after the Borrower A Loans
have been paid in full to
the Borrower B Loans; and
(v) fifth, provided that no
default or event of default
then exists, the NPI Net
Cash Flow remaining after
applications pursuant to
clauses (i) through (iv)
above shall be retained by
the Credit Parties and may
be utilized in a manner
consistent with the
covenants set forth in the
Credit Facilities.
<PAGE>
Amounts retained for application to
the satisfaction of income tax
obligations of the partners of NPI-
AP Management pursuant to clause
(iii) above may be distributed by
NPI-AP Management to its partners
on February 1 of each year in
respect of NPI Net Cash Flow of the
immediately preceding calendar year
and until such time as such amounts
have been so distributed such
amounts shall be retained in the
Security Account.
B. Application of Fox Cash Flows.
Until the occurrence of the Loan
Satisfaction Date, Fox Cash Flow
will be applied as follows (with
such application to be made on a
monthly basis):
(i) first, to the payment of
interest on the Borrower B
Loans and the other
obligations of Borrower B
under the Credit Facilities
(other than the obligations
to repay the principal
amount of the Loans) which
are then due and payable;
(ii) second to the repayment of
the principal of the
Borrower B Loans.
C. Application of Capital Event
Proceeds.
Until the occurrence of the Loan
Satisfaction Date, Capital Event
Proceeds for a Borrower will be
applied as follows (with such
application to be made upon receipt
of such proceeds (with the
Refinancing Amount and Liquidation
Proceeds for a Distribution Date
being deemed received on such
Distribution Date)):
(i) first, provided that no
default or event of default
then exists, an amount equal
to 40% of the Capital Event
Proceeds for such Borrower
which do not constitute the
Refinancing Amount shall be
retained by the Credit
Parties for application to
the satisfaction of the
income tax obligations of
NPI Corp. and of the
partners of NPI-AP
Management; and
(ii) second, with respect to
Capital Event Proceeds for
such Borrower remaining
after application pursuant
to clause (i) above, 100% of
such remaining Capital
Events Proceeds shall be
applied to the repayment of
the principal of the Loans
of such Borrower; and
(iii) third, with respect to
Capital Event Proceeds
remaining after application
of clauses (i) and (ii)
above and the repayment in
full of all Loans made to
such Borrower (x) in the
case of Borrower A, 100% of
such remaining Capital Event
Proceeds shall be applied to
the Loans of Borrower B and
(y) in the case of Borrower
B, the Retained Interest (as
defined below) in such
remaining Capital Event
Proceeds shall be applied to
the Loans of Borrower A.
For purposes hereof the term
"Retained Interest" is an amount
which shall equal the greater of
(x) 72% of such amount and (y) the
percentage interest of the partners
other than the Fox Investors in
Borrower B at the time of
determination.
Amounts retained for application to
the satisfaction of the income tax
obligations of the partners of NPI-
AP Management pursuant to clause
(i) above, may be distributed by
NPI-AP Management to its partners
on February 1 of each year in
respect of Capital Event Proceeds
received in the immediately
preceding calendar year and until
such time as such amounts have been
so distributed they shall be
retained in the Security Account.
D. Application of Partnership
Cash Flow.
After the occurrence of the Loan
Satisfaction Date, Partnership Cash
Flows will be applied as follows
(with such applications to be made
on a monthly basis):
(i) first, an amount equal to
15% per annum (computed on a
cumulative compounded
(annually) basis) of the
Capital Contribution Amount
shall be deemed
<PAGE>
applied to a
return on capital pursuant
to this clause (i) to the
extent not theretofore
deemed applied to said
return on capital;
(ii) second, the Partnership Cash
Flows remaining after
application pursuant to
clause (i) above to the full
amount of the deemed return
on capital then accrued
shall be deemed applied to
the return of capital until
such time as an aggregate
amount equal to the Capital
Contribution Amount shall be
deemed applied to a return
of capital pursuant to this
clause (ii); and
(iii) third, the Partnership Cash
Flows remaining after
application pursuant to
clauses (i) and (ii) above
shall be applied to the
Residual Fee and the
remainder may be used by the
Credit Parties for general
corporate and partnership
purposes.
E. Application After an Event of
Default.
Notwithstanding anything to the
contrary contained herein, upon the
occurrence and during the
continuance of an event of default,
after KPMCC shall give notice
thereof to the Borrowers all
Collateral and the proceeds thereof
(including, without limitation,
revenues under management contracts
and Capital Event Proceeds) shall
be applied to the repayment of
principal and interest on the Loans
and to the satisfaction of the
Borrowers' other obligations under
the Credit Facilities.
Repayment of the
Loans: The Loans shall be repaid as
follows:
(i) the entire unpaid principal
amount of the Loans shall be
due and owing on the
Maturity Date; and
(ii) the Loans shall be repaid at
the times, and in the
amounts, required under
"Application of NPI Net Cash
Flow/Fox Cash Flow/Capital
Events Proceeds/ Partnership
Cash Flows" above.
Security Account: KPMCC shall establish, with a
financial institution satisfactory
to KPMCC, a trust account (the
"Security Account"), under the sole
dominion and control of KPMCC, and
KPMCC shall have a continuing
security interest in and lien upon
the Security Account and all funds
on deposit therein from time to
time (together with interest
accruing thereon). The Security
Account will be divided into a
number of sub-accounts (each a
"Sub-Account") to be determined.
All revenues payable to the NPI-AP
Management Entities and the NPI
Entities (including, without
limitation, the revenues under
management contracts, Borrower B
Special Contributions, the proceeds
of Borrower B Advances and Capital
Event Proceeds) shall be deposited
directly into the appropriate Sub-
Account (with all entities making
such payments being directed to
make such payments into the
appropriate Sub-Account and not to
the relevant NPI-AP Management
Entity or NPI Entity). All
revenues under management contracts
will be deposited in a separate
Sub-Account and provided that no
default or event of default then
exists, (x) the first $650,000
deposited in such management
contract Sub-Account during a
calendar month shall be transferred
to an account designated by NPI
Corp. and the amounts so
transferred shall be utilized by
the NPI Entities and the NPI-AP
Management Entities for Approved
Operating Expenses and (y) an
amount equal to the amount required
to be paid to PD Associates under
the PD Agreements (but no more than
$58,333 in any month) shall be
withdrawn and paid to PD
Associates. On the 15th day
following the end of each calendar
quarter, the aggregate amount
expended for Approved Operating
Expenses during such calendar
quarter will be compared with the
amounts transferred as designated
by NPI Corp. during such calendar
quarter and (x) to the extent such
aggregate amount expended for
Approved Operating Expenses exceeds
the amount so transferred as
designated by NPI Corp., an amount
equal to such excess amount will be
transferred as designated by NPI
Corp. and (y) to the extent that
the amount so transferred as
designated by NPI Corp. exceeds the
aggregate amount expended for
Approved Operating Expenses, such
excess amount shall be deposited by
NPI Corp. into a debt service Sub-
Account. Amounts on deposit in the
Security Account shall be applied
in accordance with the section
hereof entitled "Application of NPI
Net Cash Flow/Fox Cash Flow/Capital
Event Proceeds/Partnership Cash
Flows". Notwithstanding the
foregoing the following shall not
be required to be deposited in the
Security Account: (x) amounts
received by the NPI Entities solely
as agent of the Operating
Partnerships in respect of
insurance premium payments (but
only to the extent required to pay
insurance premiums on insurance
policies obtained for the benefit
of the Operating Partnerships), (y)
amounts received by the NPI
Entities solely as agent to pay the
salaries of employees of such
Operating Partnership who are not
included in the budget of Approved
Operating Expenses as employees of
the NPI Entities or the NPI-AP
Management Entities and are not
paid out of the revenues of the
NPI-AP Management Entities or the
NPI Entities and (z) amounts
received from by the NPI Entities
or the NPI-AP Management Entities
solely as agent to pay the real
estate taxes of the Operating
Partnerships.
<PAGE>
Guarantors: The obligations of the Borrowers
under the Credit Facilities will be
fully guaranteed on a joint and
several basis by NPI-AP Management
(provided that such obligations
shall be non-recourse to the
general partners of NPI-AP
Management) and NPI Corp.
Collateral: All obligations of the Borrowers
under the Credit Facilities
(including, without limitation, the
obligation to pay principal and
interest on the Loans) shall be
secured by a first priority
perfected security interest in all
of the following (collectively, the
"Collateral"):
(i) the general and limited
partnership interests in the
Borrowers;
(ii) the LP Units held by the
Borrowers including all
rights to distributions in
respect thereof;
(iii) all limited partnership
interests in the Tender
Offer Partnerships which are
owned, directly or
indirectly, by the NPI
Principals (including,
without limitation, those
owned by QAL Associates)
(the "Affiliate Units") but
not including those owned by
FRI;
(iv) the Fox GP Amounts held in
respect of the obligations
of the Fox Investors;
(v) all stock of, and
partnership interests in,
(x) NPI Corp., DeForest
Capital I, DeForest Capital
II, NPI-AP Management and
NPI Property Management
(y) the direct subsidiaries
of NPI Corp. (other than NPI
Equity Investments, Inc.)
and (z) the other entities
(other than NPI Equity
Investments, Inc. but
including NPI Equity
Investments II, Inc. and its
partnership interest in FRI
and its rights under the
voting trust agreement
relating to FCMC) holding
all partnership interests
held (whether directly or
indirectly) by the NPI
Entities (or any of their
affiliates) (including,
without limitation, the
entities holding the general
partnership interests in the
Tender Offer Partnerships
and the other Operating
Partnerships);
(vi) all management contracts and
asset management agreements
to which the NPI-AP
Management Entities or the
NPI Entities are party,
whether currently existing
or entered into after the
date hereof; and
(vii) the Security Account.
The Collateral shall not include
(x) Borrower B's rights to require
the Borrower B Special
Contributions (but shall include
the proceeds thereof once
contributed) or (y) the Fox Deficit
Distributions.
The Collateral described in clause
(vi) above to the extent
constituting management contracts
with entities which are not Tender
Offer Partnerships (such
Collateral, the "Non-Tender Offer
Collateral") shall be released on
the first date (such date the
"Collateral Release Date") on which
the principal amount of the Loans
is less than 65% of the aggregate
principal amount of the Loans
outstanding at the end of the
Availability Period. The
Collateral will be released in full
on the Loan Satisfaction Date.
KPMCC and its assignees will agree
that it will pay to DeForest
Capital I the portion of any
distribution received by KPMCC or
such assignee in respect of LP
Units which are interests in a Fox
Tender Partnership which are
attributable to the capital
contributions of general partners
in such Tender Offer Partnership
made to restore the deficit in such
general partner's capital account
(each a "Fox Deficit Distribution")
net of any tax liabilities
attributable thereto (without
taking into account any tax credits
or net operating loss carry
forwards otherwise available to
KPMCC or such assignee, as the case
may be. KPMCC and its assignee
will agree that it will not retain
any amount in respect of tax
liabilities attributable to Fox
Deficit Distributions received by
it if at the time of such receipt
it shall have received an opinion
of counsel satisfactory to it to
the effect that no such tax
liability will result from KPMCC's
or such assignee's, as the case may
be, receipt of the Fox Deficit
Distribution. It is understood
that a Fox Deficit Distribution
shall not include amounts
distributed in respect of the
contribution of the Fox GP Amounts
to the Fox Tender Partnerships.
<PAGE>
Cross
Collateralization: The Collateral shall secure the
obligations of each Borrower on a
pari passu basis.
Fox Investor
Repurchase Right: In the event that an event of
default occurs under the Credit
Facility for Borrower A at a time
when no default or event of default
exists under the Credit Facility
for Borrower B (other than the
event of default arising under the
cross default to the Borrower A
Credit Facility) then KPMCC agrees
that each Fox Investor will have
the right to purchase a percentage
of the LP Units owned by Borrower B
equal to such Fox Investor's
percentage interest in Borrower B
at such time commencing on the date
KPMCC gives notice to the Fox
Investors that an event of default
has occurred under the Credit
Facility for Borrower A at a time
when no event or event of default
exists under the Credit Facility
for Borrower B (other than the
event of default arising under the
cross default to the Borrower A
Credit Facility) and that the
purchase period contemplated hereby
is then commencing and ending on
the date 60 days after such notice,
for a cash purchase price equal to
the greater of (x) such percentage
interest of all obligations of
Borrower B under its Credit
Facility (including the principal
of the Loans, interest accrued
thereon and all other amounts due
and payable under such Credit
Facility) and (y) the price
established pursuant to the
Borrower B partnership agreement.
The cash purchase price shall be
required to be paid on or before
such 60th day directly to KPMCC and
shall be applied to the repayment
of the Borrower B Loans. It is
understood and agreed that KPMCC
may exercise any or all of its
rights and remedies under the
Credit Facilities before or after
such 60 day period including,
without limitation, foreclosing on
the LP Units owned by Borrower B,
provided that (x) it shall not
foreclose on a percentage of the LP
Units owned by Borrower B equal to
the Fox Investors' percentage
interest in Borrower B at such time
unless it shall have given the
notice to the Fox Investors
referred to above and (y) any sale
of such LP Units made during the
Fox Investors' purchase period
shall be subject to the Fox
Investors' right to purchase such
LP Units as herein provided. The
LP Units purchased by any Fox
Investor shall be a percentage in
the LP Units of each Tender Offer
Partnership owned by Borrower B
equal to such Fox Investor's
percentage.
Any such units purchased by the Fox
Investors are herein referred to as
the "Fox Investor Units" and the
lien of KPMCC on such units shall
be released upon the payment of the
full cash purchase price therefor.
The Fox Investors purchasing such
units (each a "Fox Transferee")
shall be responsible for their pro
rata share of any Residual Fee
payable in respect of such units
provided that the Credit Parties
shall be obligated to pay such
amounts whether or not paid by the
Fox Investors.
Prepayment: The Loans shall be fully prepayable
in whole or in part on any interest
payment date. KPMCC shall retain
its right to its Residual Fee
following repayment, subject to the
Borrowers' right to "buy out".
Recourse: The obligations under the Credit
Facilities will be fully recourse
to the Borrowers, NPI-AP
Management, NPI Corp., and the
Collateral, provided the Loans will
be non-recourse to the general
partners of the Borrowers and NPI-
AP Management.
Funding Fees: A funding fee shall be payable to
KPMCC (i) on the Closing Date equal
to the greater of (x) 1% of the
Loans incurred on the Closing Date
and (y) $400,000 and (ii) on each
subsequent borrowing date an amount
equal to 1% of the Loans being
incurred on such borrowing date,
provided that the Borrowers will be
entitled to a credit against the
aggregate of such fees payable on
the subsequent borrowing dates in
the amount by which the Funding Fee
paid on the Closing Date exceeds 1%
of the Loans incurred on the
Closing Date.
<PAGE>
Conditions Precedent
to Initial Loans: The conditions which shall be
required to be satisfied prior to
or simultaneously with the making
of the Loans on the Closing Date
will include those listed below,
those listed in the commitment
letter to which this Summary of
Certain Terms and Conditions is
attached and any other typical for
this type of facility and any
others appropriate in the context
of the proposed transaction:
(i) The Tender Offer
documentation (collectively,
the "Tender Offer
Materials") shall be in full
force and effect and any
amendments thereto from the
drafts dated October 11,
1994 provided to KPMCC prior
to the date of the
Commitment Letter (the
"Initial Tender Offer
Documents") shall be
reasonably satisfactory to
KPMCC.
(ii) All conditions precedent
under the Tender Offer
Materials to the
consummation of the Tender
Offer(s) with respect to the
LP Units then being acquired
shall have been satisfied.
The Tender Offer(s) with
respect to the LP Units then
being acquired shall have
been consummated after the
receipt of all necessary
governmental, regulatory and
other third party approvals.
(iii) The Borrowers shall have
received cash proceeds
aggregating at least $17
million representing equity
contributions from its
partners and shall have
utilized the full $17
million so made available to
purchase the LP Units and to
pay related fees and
expenses as contemplated
above under "Use of
Proceeds."
(iv) The documentation evidencing
the Credit Facilities
including the related
security documentation (the
"Credit Documents") shall
have been executed and
delivered reflecting the
terms and conditions set
forth in this Summary of
Certain Terms and Conditions
and shall otherwise be in
form and substance
satisfactory to KPMCC and
all conditions to the making
of the Loans set forth
therein shall have been
satisfied on or prior to the
date of funding. All Loans
shall be in full compliance
with all requirements of law
including Regulations G, T,
U and X of the Board of
Governors of the Federal
Reserve System.
(v) No litigation by any entity
(private or governmental)
shall be pending or threa-
tened (x) with respect to
the Acquisition, the Credit
Facilities or the Tender
Offers or any documentation
executed in connection
therewith or (y) which KPMCC
shall determine could have a
materially adverse effect on
the business, assets, lia-
bilities, condition (finan-
cial or otherwise) or
prospects of (m) the Credit
Parties, (n) the Tender
Offer Partnerships or (o)
the Operating Partnerships
(other than the Tender Offer
Partnerships) taken as a
whole.
(vi) All necessary governmental,
regulatory and third party
approvals in connection with
the Tender Offers, the
transactions contemplated by
the Credit Facilities and
otherwise referred to herein
shall have been obtained and
remain in effect, and all
applicable waiting periods
shall have expired without
any action being taken by
any competent authority
which restrains, prevents,
or imposes materially
adverse conditions upon, the
consummation of the Tender
Offers. Additionally, there
shall not exist any
judgment, order, injunction
or other restraint
prohibiting or imposing
materially adverse con-
ditions upon, or materially
delaying, or making
economically unfeasible, the
purchase of LP Units
pursuant to the Tender
Offers.
(vii) All costs, fees, expenses
(including, without
limitation, legal fees and
expenses) and other
compensation contemplated
hereby payable to KPMCC
shall have been paid to the
extent due.
<PAGE>
(viii) KPMCC shall have received
legal opinions from counsel,
in form and substance
reasonably acceptable to
KPMCC.
(ix) The security agreements
required as described under
the heading "Collateral"
above shall have been
executed and delivered and
shall be satisfactory in
form and substance to KPMCC
and KPMCC shall have a first
priority perfected interest
in all Collateral as
required above. In
addition, all payors of
amounts required to be
deposited in the Security
Account shall have been
instructed to make such
payments directly to the
Security Account and each
such payor shall have
acknowledged such
instructions and consented
thereto.
(x) PRA shall have consented to
the assignment of NPI Equity
Investments II Corporation's
interest in FRI and FCMC to
KPMCC or any other Approved
Entity as contemplated by
the Credit Documents and to
such cure rights with
respect to the occurrence of
a "Triggering Event" (as
defined in FRI's partner-
ship agreement) as shall be
reasonably satisfactory to
KPMCC. An "Approved Entity"
shall mean (x) KPMCC and its
affiliates and (y) any other
person which (m) is the
general partner of at least
seven public real estate
limited partnerships, (n)
has been engaged in the
business of managing public
real estate limited
partnerships for at least
three years, (o) has assets
under management of at least
$350 million, and (p) in the
reasonable business judgment
of KPMCC is capable of
satisfying the fiduciary
obligations of a managing
general partner of a public
real estate limited
partnership.
(xi) Amendments waiving the
provisions of the master
agreement relating to the
acquisition of control of
the Fox Tender Partnerships
requiring that a
restructuring proposal be
made shall have become
effective.
(xii) The arrangement between NPI
Corp. and its affiliates
with Apollo and the Fox
Investors shall have been
consummated in a manner
consistent with the terms of
the Commitment Letter and
this Summary of Certain
Terms and Condition.
Conditions to All
Loans (including
Loans incurred on
the Closing Date): Absence of material adverse change,
absence of material litigation,
absence of default or unmatured
default under the Credit
Facilities, continued accuracy of
representations and warranties,
satisfaction of the condition
precedent set forth under clause
(ii) under "Conditions Precedent to
Initial Loans" with respect to the
Tender Offer(s) for the LP Units
then being acquired and receipt of
such documentation (including,
without limitation, opinions of
counsel) as shall be required by
KPMCC.
Representations
and Warranties: The Credit Documents shall contain
customary representations and
warranties for transactions in the
nature of the Transaction,
including, without limitation, the
following:
(i) due organization, valid
existence, good standing and
authority and qualification to
do business of each Borrower,
each other Credit Party and
each Operating Partnership;
(ii) due authorization, execution
and delivery of the Credit
Documents by the applicable
Credit Parties;
(iii) no conflicts with laws,
regulations or orders of
governmental authorities
applicable to the Credit
Parties or their respective
assets, and no conflicts with
agreements to which any Credit
Party or Operating Partnership
is a party or which purport to
bind them or their respective
assets or the organizational
documents of any Credit Party
or Operating Partnership
except that certain change of
control provisions in the
indebtedness of the Tender
Offer Partnerships may be
breached by the consummation
of the Tender Offer and the
financing under the Credit
Facilities;
<PAGE>
(iv) no governmental approvals,
filings or registrations are
required other than those
previously obtained or made;
(v) no litigation which could have
a material adverse effect on
the Loans, the security
therefor or the ability of any
Credit Party to perform its
obligations under the Credit
Documents or which could have
a material adverse effect on
the business, assets,
liabilities, condition
(financial or otherwise) or
prospects of (m) the Credit
Parties, (n) the Tender Offer
Partnerships or (o) the other
Operating Partnerships taken
as a whole;
(vi) the appropriate Credit Party
having good, unencumbered
title to each item of
Collateral being pledged by it
as security for the Loans and
KPMCC's security interest
therein being a first priority
perfected security interest
except for the promissory
notes issued by an Operating
Partnership which have been
pledged to secure the Bank
South Loan;
(vii) full and accurate disclosure
by all Credit Parties;
(viii) all Credit Parties and
Operating Partnerships having
made all required tax filings
and having paid all taxes and
other impositions applicable
to them and/or their
respective assets;
(ix) each (x) Credit Party being in
substantial compliance with
the terms of any indebtedness
owed by it (whether secured or
unsecured), (y) Tender Offer
Partnership being in
substantial compliance with
the terms of any indebtedness
owed by it (whether secured or
unsecured), no payment
defaults existing under any
such indebtedness and no
notice of default having been
received thereunder, except
that (a) certain change of
control provisions in the
indebtedness of the Fox Tender
Partnerships may have been
breached by reason of NPI
Corp.'s acquisition of control
of such partnerships and (b)
certain change of control
provisions in the indebtedness
of the Tender Offer
Partnerships may be breached
by the consummation of the
Tender Offer and the
consummation of the financing
under the Credit Facilities
and (z) Operating Partnership
being in substantial
compliance with the terms of
any indebtedness owned by it
whether secured or unsecured,
except for (a) noncompliances
which in the aggregate could
not reasonably be expected to
have a material adverse effect
on the Operating Partnerships
taken as a whole and (b) MAQ
Kingston Associates is in
default under the indebtedness
owed by such partnership;
(x) the properties owned by each
Operating Partnership being in
material compliance with
applicable laws and
governmental requirements, and
all taxes and other
impositions (including
insurance premiums) relating
to such properties having been
duly paid, escrowed against or
contested in good faith;
(xi) all financial information
provided in respect of the
Credit Parties and the
Operating Partnerships and
their respective assets being
true, complete and correct in
all material respects;
(xii) no pending or threatened
condemnation in respect of any
property owned by an Operating
Partnership, except for the
University Plaza property
located in Bozeman, Montana,
and no casualty at any such
property;
(xiii) neither Borrower nor any other
Credit Party having any
indebtedness other than the
Credit Facilities, and no
Operating Partnership or any
other Credit Party having any
indebtedness other than (w)
the Bank South Loan, (x) as
listed on Exhibit B hereto,
(y) advances made by partners
in the Borrowers to the
Borrowers which are being
repaid with the proceeds of
the Loans incurred on the
Closing Date and (z) after the
Closing Date, Borrower B
Advances;
(xiv) each Tender Offer Partnership
having good and marketable
title to its property except
as disclosed in the title
reports relating thereto
previously provided to KPMCC;
<PAGE>
(xv) no state of facts existing
with respect to zoning,
ingress and egress,
permitting, separate tax lot
status and access to utilities
which would materially impair
the value or use of the
properties owned by (x) the
Tender Offer Partnerships or
(y) the Operating Partnerships
taken as a whole;
(xvi) the special purpose nature of
the Borrowers and the general
partners in the Borrowers;
(xvii) Exhibit C hereto being a true
and complete list of all
interests in partnerships,
corporations and other
entities owned, directly or
indirectly, by NPI-AP
Management or NPI Corp., and
said Exhibit C listing (x) the
owners of all partnership
interests in partnerships
listed on Exhibit C (other
than holders of LP Units not
held by a member of the NPI
affiliated group) and the
percentage and type of each
such interest and (y) the
holder of such class of
capital stock of each such
corporation listed on Exhibit
C and the percentage interest
of the capital stock held by
each such holder;
(xviii) Exhibit D hereto being a true
and complete list of Tender
Offer Partnerships and a list
of all real property owned,
directly or indirectly, by
each such partnership and in
the case of any such real
property which is not owned
directly by a Tender Offer
Partnership, the entity which
directly holds such real
property and the means by
which such Tender Offer
Partnership owns an interest
in such entity and its
ownership interest therein;
(xix) Exhibit E hereto being a true
and complete list of all
presently effective management
agreements to which NPI-AP
Management is a party and each
management agreement being in
full force and effect and no
default having occurred
thereunder other than any such
management agreement which
shall have been terminated in
the ordinary course of
business, provided that the
aggregate revenues received
from all such terminated
management agreements shall
not exceed 4% of the total
revenues received from all
management agreements listed
on said Exhibit E;
(xx) NPI Corp. having the right to
control, directly or
indirectly, without the
consent of any other person
the managing general partner
of each Tender Offer
Partnership and the
liquidation and dissolution of
the Tender Offer Partnerships
and the sale, financing and
management of property owned,
directly or indirectly by the
Tender Offer Partnerships and
Exhibit F listing all
agreements which provide for,
or limit or in any manner
effect, the rights and ability
of NPI Corp. to control the
Tender Offer Partnerships;
(xxi) true and complete copies
having been provided to KPMCC
prior to the delivery of the
Commitment Letter of (x) all
organizational documents of
the Credit Parties and the
Operating Partnerships, (y)
all agreements relating to the
indebtedness of the Credit
Parties and the Tender Offer
Partnerships and (z) all
agreements listed on Exhibit E
and Exhibit F, and no
amendments having been made to
any of the foregoing;
(xxii) the Tender Offers having been
consummated in compliance with
applicable law and all the
information in the Tender
Offer Materials disclosing all
material facts and not
omitting any material facts;
(xxiii) each Borrower and Tender Offer
Partnership being a
partnership for federal income
tax purposes and not
constituting a publicly traded
partnership for purposes of
Section 7704 of the Internal
Revenue Code of 1986, as
amended;
(xxiv) the requirement that the
"Restructuring" contemplated
by the master agreement
entered into with respect to
the acquisition of control of
the Fox Tender Partnerships be
pursued by the NPI Entities
having been waived;
(xxv) no NPI Principal having any
interest in PRA; and
<PAGE>
(xxvi) no default existing under the
partnership agreements
relating to the Operating
Partnerships or any NPI
Entity.
Covenants: The Credit Documents shall contain
customary covenants for
transactions in the nature of the
Transaction, including, without
limitation, the following (with the
following to be applicable to the
Credit Parties and not to the
Operating Partnerships):
(i) maintenance of existence and
compliance with laws by each
Credit Party;
(ii) payment of taxes and other
impositions (including
insurance premiums) applicable
to each Credit Party and/or
its respective assets;
(iii) notice of pending or
threatened litigation,
proceedings or condemnation
actions with respect to a
Credit Party or an Operating
Partnership;
(iv) notice of pending defaults
under the Credit Documents;
(v) notice of defaults under the
indebtedness of the Operating
Partnerships;
(vi) management of the properties
of the Operating Partnerships
in a manner consistent with
past practice and requirement
that a monthly certificate be
provided certifying that,
except as is disclosed in said
exhibit, all insurance
premiums in respect of the
insurance policies of the
Operating Partnerships have
been paid, all debt payments
in respect of indebtedness of
the Operating Partnerships
have been made and all real
estate taxes of the Operating
Partnerships have been paid;
(vii) financial reporting
requirements;
(viii) maintenance of existence and
businesses and operations of
each Credit Party;
(ix) each Borrower and the general
partner in the Borrower
remaining a single purpose,
bankruptcy remote entity;
(x) prohibition on other
indebtedness, provided that
(w) Borrower B may incur
advances from its partners as
contemplated by section 4.4(c)
of its partnership agreement
provided that such advances
(the "Borrower B Advances")
are subordinated to the Loans
on terms satisfactory in form
and substance to KPMCC, (x)
the Borrowers may incur
advances from their partners
prior to the Closing Date
provided that such advances
are paid in full on the
Closing Date, (y) the loan to
NPI Capital II Corporation
from Bank South (the "Bank
South Loan") may remain
outstanding (provided that the
aggregate principal amount
thereof shall not exceed
$375,000) but not any
refinancing thereof and (z)
the installment notes issued
by NPI Realty Advisors Inc. in
connection with NPI Corp.'s
acquisition of control of the
Fox Tender Partnerships (the
"Installment Notes") may
remain outstanding (provided
that the aggregate principal
amount thereof shall not
exceed $190,000) but not any
refinancing thereof;
(xi) restrictions on mergers,
acquisitions, joint ventures,
partnerships and acquisitions
and dispositions of assets;
(xii) restrictions on sale-leaseback
transactions and lease pay-
ments;
(xiii) restrictions on dividends,
distributions, and on amend-
ments of management agree-
ments, partnership agreements
and organizational, corporate
and other documents, provided
that NPI-AP Management may
distribute amounts in respect
of the income taxes of its
partners as provided above
under "Application of NPI Net
Cash Flow/Fox Cash
Flow/Capital Event
Proceeds/Partnership Cash
Flows";
(xiv) restrictions on voluntary
prepayments of other
indebtedness and amendments
thereto;
(xv) restrictions on (x)
transactions with affiliates
other than (m) transactions
disclosed in writing to KPMCC
prior to the date of the
Commitment Letter and (n)
transactions consummated on an
arm's length basis and (y)
<PAGE> formation of subsidiaries;
(xvi) restrictions on investments;
(xvii) no liens other than (w) the
liens securing the Credit
Facilities, (x) the liens
securing the Bank South Loan,
(y) the lien of certain
advances to Operating
Partnerships owned by NPI
Realty Advisors, Inc. which
secure the Installment Note
and (z) other exceptions to be
negotiated;
(xviii) adequate insurance coverage;
(xix) ERISA covenants;
(xx) restrictions on capital
expenditures;
(xxi) delivery of operating budgets
for NPI-AP Management and NPI
Corp.;
(xxii) payment of costs (including
enforcement costs);
(xxiii) application of Loan proceeds;
(xxiv) no transfers of Collateral or
of properties owned by the
Credit Parties.
The covenants set forth above will
be terminated on the Loan
Satisfaction Date, provided that on
and after the Loan Satisfaction
Date the Credit Parties will agree
(x) to be bound by the same
fiduciary duty to KPMCC in respect
of the Residual Fee as the general
partners in the Operating
Partnerships owe to the holders of
the LP Units and (y) not to sell or
transfer the LP Units to an
affiliate or to any third party for
consideration other than cash.
Events of Default: The Credit Documents shall contain
customary events of default for
transactions in the nature of the
Transaction, including, without
limitation, the following:
(i) failure to pay principal when
due, interest within five days
of due date or any other
amount due under the Credit
Documents within 30 days of
notice by KPMCC;
(ii) failure to make required
deposits into the Security
Account;
(iii) failure to pay taxes or other
impositions (including
insurance premiums);
(iv) any representation or warranty
in the Credit Documents having
been untrue in any material
respect as of the date made or
deemed made;
(v) bankruptcy or insolvency of
any Credit Party;
(vi) bankruptcy or insolvency of
(x) Tender Offer Partnerships
having in the aggregate an
Attributed Net Value (as
defined below) of more than
20% of the Attributed Net
Value of all Tender Offer
Partnerships or (y) Operating
Partnerships (other than
Tender Offer Partnerships)
which are obligated to pay
management fees to NPI-AP
Management during the fiscal
year last ended which
aggregate more than 20% of the
management fees payable by all
Operating Partnerships (other
than the Tender Offer
Partnerships) to NPI-AP
Management during the fiscal
year last ended;
(vii) direct or indirect change in
control of any Credit Party,
with exceptions and consent
requirements to be negotiated;
(viii) dissolution or other
termination of any Credit
Party;
(ix) breach of other covenants in
the Credit Documents, with
cure periods after notice (if
applicable) to be negotiated;
(x) failure of any security for
the Loans;
<PAGE>
(xi) cross-defaults to other
indebtedness of any Credit
Party;
(xii) cross-default to indebtedness
of (x) Tender Offer
Partnerships having in the
aggregate an Attributable Net
Value of more than 20% of the
Attributed Net Value of all
Tender Offer Partnerships or
(y) Operating Partnerships
(other than Tender Offer
Partnerships) which are
obligated to pay management
fees to NPI-AP Management
during the fiscal year last
ended which aggregate more
than 20% of the management
fees payable by all Operating
Partnerships (other than the
Tender Offer Partnerships) to
NPI-AP Management during the
fiscal year last ended;
(xiii) termination of management
contracts (for a reason other
than the sale of the related
properties) by Operating
Partnerships (including Tender
Offer Partnerships) which are
obligated to pay management
fees to NPI-AP Management
during the fiscal year last
ended which aggregate more
than 20% of the management
fees payable by all Operating
Partnerships (including the
Tender Offer Partnerships) to
NPI-AP Management during the
fiscal year last ended (other
than fees payable pursuant to
management contracts
terminated by reason of the
sale of the related property);
(xiv) material unsatisfied judgments
with respect to the Credit
Parties, the Credit Facilities
or the Tender Offers;
(xv) ERISA defaults; and
(xvi) the occurrence of a Triggering
Event.
"Attributed Net Value" shall
mean for any Tender Offer
Partnership the purchase price
actually paid by the relevant
Borrower for the LP Units of
such Tender Offer Partnership
pursuant to the Tender Offers
multiplied by the number of LP
Units actually acquired by the
relevant Borrower in such
Tender Offer Partnership
pursuant to the Tender Offers.
Assignments and
Participations: The Borrowers may not assign their
respective rights or obligations
under the Credit Facilities without
the prior written consent of KPMCC.
KPMCC may assign, and may sell
participations in, its rights and
obligations under the Credit
Facilities, provided that neither
KPMCC nor any assignee may assign,
or sell participations in, the
Credit Facilities (x) to any
investment bank without the prior
consent of NPI Corp. (which consent
shall not be unreasonably withheld,
or (y) to any other party unless
such party shall have signed a
customary confidentiality letter
prior to such assignment or
participation. The Credit
Facilities shall provide for a
mechanism which will allow for each
assignee to become, after the
termination of the Availability
Period, a direct signatory to the
Credit Facilities and will, after
the termination of the Availability
Period, relieve the assigning
lender of its obligations with
respect to the assigned portion of
its commitment.
Governing Law: The Credit Documents and the rights
and obligations of the parties
thereunder shall be construed in
accordance with and governed by the
law of the State of New York.
Securitization: KPMCC intends to underwrite the
Loans and the Collateral to rating
agency standards, in order to
facilitate a refinancing and
securitization of the Loans and the
Collateral in the event the
Borrowers have not satisfied their
obligations in full by the Maturity
Date. The Credit Parties shall
covenant and agree to cooperate in
good faith with KPMCC in connection
with such underwriting and the
performance of all due diligence
deemed necessary or desirable by
KPMCC in connection therewith, and
shall take all actions deemed
necessary or desirable by KPMCC to
effect any such securitization of
the Loans and the Collateral,
provided that (x) the Credit
Parties will not be obligated to
agree to have their obligations
materially increased or their
rights materially decreased, (y)
any such securitization shall be
done on a private placement basis
with each investor therein agreeing
to appropriate confidentiality
provisions and (z) the reasonable
out-of-pocket costs and expenses of
the Credit Parties in connection
therewith shall be reimbursed by
KPMCC. Notwithstanding such
underwriting by KPMCC, unless KPMCC
agrees otherwise prior to the
Maturity Date, the Borrowers will
be required to repay the Loans in
full and satisfy all of their other
obligations under the Credit
Documents not later than the
Maturity Date.
<PAGE>
Exhibit A
To Annex A
Partnership Name Initial Price Property
NPI II $36 Sugarmill
NPI III $51 Lakeside
Pinetree
Summerwalk
NPI IV $102 Pennbrook
NPI V $70 Meadows
Oakwood
Seasons
Village
NPI VI $152 Alpine
Colony
Fairway View I
Place Due Plantier
Rocky Ridge
Ski Lodge
Village
NPI VII $102 Fairway View II
Northwoods
Patchen Place
Pines
Southpoint
NPI VIII $132 Huntington
Williamsburgh
Century 12 $126 Parkside
Country Plaza
Indian River Plaza
Century 13 $227 Riverway Plaza
North Park Plaza
Parker Plaza
Central Forest
Hidden Valley
Century 14 $117 Torrey Pines
St. Charleston Village
Sun River Village
University Plaza
Greenbriar Plaza
The Oaks
Duck Creek
Gateway Park
Broadway Trade Center
Wingren Plaza
Century 15 $120 Lakeside
Plumtree
Summerhill
Preston Creek
Farmer's Lane Plaza
Northbank
Phoenix Business Park
Century 16 $15 The Landings
Woods of Inverness
Century 17 $76 Village in the Woods
Creekside
Lodge
Cherry Creek Garden
Cooper's Pond
Century 18 $20 Overlook Point
Oak Run
Century 19 $60 Woodlake
Wood Ridge
Sandspoint
Greenpoint
Plantation Crossing
Sunrunner
<PAGE>
Partnership Name Initial Price Property
McMillan Place
Misty Woods
Century 22 $80 Wood Creek
Plantation Creek
Stoney Creek
Four Winds
Promonotory Point
Coopers Point
Hampton Greens
Monterey Village
Autumn Run
Cooper Mill
MRI 1 $106 Resource Park West
Mardot II
Priest Office Building
Parkway Village
Norwood Tower
MRI 2 $232 Holiday Inn Crowne Plaza
Marriott-Somerset
Radisson South
Marriott Riverwalk Hotel
MRI 3 $140 Holiday Inn Crowne Plaza
Residence Inn-Sacramento
Residence Inn-Orlando
Embassy Suites-Tempe Hotel
<PAGE>
Exhibit B
To Annex A
Computation of Participation Percentage
The "Participation Percentage" shall mean (x) until
such time as KPMCC shall have earned an internal rate of
return on the Loans of 17% per annum on a compounded
(annually) cumulative basis (the computation of such IRR not
to include the Funding Fee) the greater of (i) 20% and (ii)
the Cumulative Monthly Participation Percentage for the month
in which the Loan Satisfaction Date occurred and (y) at any
time thereafter, the Cumulative Monthly Participation
Percentage for the month in which the Loan Satisfaction Date
occurred.
"Cumulative Monthly Participation Percentage" shall
mean the sum of the Monthly Participation Percentage for each
month during the period commencing on the Closing Date and
ending on and including the month in which the Loan
Satisfaction Date occurs.
"Monthly Participation Percentage" shall mean for
each month the (x) percentage set forth opposite such month
on the table below multiplied by (y) the average aggregate
principal amount of the Loans outstanding during such month
divided by $1,000,000:
Month %
1-6 .01%
7-24 .015%
25-36 .025%
<PAGE>
Exhibit C
To Annex A
Buy Out Formula:
The buy out of the Residual Participation shall be 90% of the
resultant Residual Participation as calculated pursuant to
Exhibit B, assuming a sale of the Properties of the
Partnerships and a full liquidation of the Partnerships in an
orderly way. The sale price of the properties shall be
determined by the average of three appraisals, each performed
by three independent appraisers, one chosen by NPI, one
chosen by lender, and one chosen by each of the other
selected appraisers. The cost of such appraisals shall be
shared on a 50%/50% basis by NPI Corp. and KPMCC.
2. Transactions With the General Partner and Affiliates
In accordance with the Partnership Agreement, the
Partnership may be charged by the general partner and affiliates
for services provided to the Partnership. From March 1988 to
December 1992 such amounts were assigned pursuant to a services
agreement by the general partner and affiliates to Metric Realty
Services, L.P., which performed partnership management and other
services for the Partnership. On January 1, 1993, Metric
Management, Inc., a company which is not affiliated with the
general partner, commenced providing certain property and
portfolio management services to the Partnership under a new
services agreement. As provided in the new services agreement
effective January 1, 1993, no reimbursements were made to the
general partner and affiliates after December 31, 1992.
Subsequent to December 31, 1992, reimbursements were made to
Metric Management, Inc. On December 16, 1993, the service
agreement with Metric Management, Inc. was modified and, as a
result thereof, the Partnership's general partner will assume
responsibility for cash management of the Partnership as of
December 23, 1993 and for investor relations services as of April
1, 1994. Related party expenses for the years ended September
30, 1993, 1992 and 1991 are as follows:
1993 1992 1991
Reimbursement of expenses:
Partnership accounting..... $44,000 $184,000 $229,000
Professional services...... 11,000 44,000 36,000
Investor services.......... 8,000 34,000 34,000
Total........................... $63,000 $262,000 $299,000
In accordance with the Partnership Agreement, the general
partner received cash distributions as follows: (1) a
Partnership management incentive equal to an allocation of ten
percent determined on a cumulative, noncompounded basis, of cash
available for distribution (as defined in the Partnership
Agreement) which is distributed to partners, and (2) a continuing
interest representing two percent of cash available for
distribution distributed to partners remaining after the
allocation of the Partnership management incentive. Subsequent
to December 31, 1986, the Partnership management incentive is
subordinated to certain cash distributions to the unit holders.
There were no cash distributions to the general partner for the
years ended September 30, 1993, 1992 and 1991.
In accordance with the Partnership Agreement, the general
partner is entitled to receive an allocation of net loss and
taxable loss of two percent.
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Transactions with Related Parties
Affiliates of the Managing General Partner received
reimbursements of administrative expenses amounting to
$58,000 during the nine months ended June 30, 1994. These
reimbursements are primarily included in general and
administrative expenses.
Item 5. Other Events.
On October 12, 1994, National Property Investors, Inc.
("NPI"), the parent of NPI Equity Investments II, Inc. ("NPI
Equity") sold one-third of the stock of NPI to an affiliate
("Apollo") of Apollo Real Estate Advisors, L.P., for $325,000.
NPI Equity controls the general partners of Registrant.
Apollo is entitled to designate three of the seven directors
of NPI Equity. In addition, the approval of certain major
actions on behalf of Registrant requires the affirmative vote of
at least five directors of NPI Equity.
On October 12, 1994, affiliates of Apollo acquired for
aggregate consideration of approximately $14,800,000 (i) one-
third of the stock of the respective general partners of DeForest
Ventures I L.P. ("DeForest I") and DeForest Ventures II L.P.
("DeForest II") and (ii) an additional equity interest in NPI-AP
Management, L.P. ("NPI-AP"), an affiliate of NPI (bringing its
total equity interest in such entity to one-third). NPI-AP is
the sole limited partner of DeForest II and one of the limited
partners of DeForest I. DeForest I has been formed for the
purpose of making tender offers for limited partnership interests
in Registrant as well as 11 affiliated limited partnerships.
DeForest II has been formed for the purpose of making tender
offers for limited partnership interests in 7 affiliated limited
partnerships.
