<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
QUEST HEALTH CARE INCOME FUND I, L.P.
(Name of Registrant as Specified In Its Charter
and Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE> 2
QUEST HEALTH CARE INCOME FUND I, L.P.
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD ON JULY 1, 1995
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
limited partners (the "Limited Partners") of Quest Health Care Income Fund I,
L.P. (the "Partnership") called by Quest Rescue Partners I-1, L.P., the general
partner of the Partnership ("Quest" or the "General Partner"), will be held at
____________________, on July 1, 1995, at 9:00 a.m., local time, for the
following purpose:
To consider and approve the dissolution of the Partnership, and, in
conjunction therewith, the disposition or the sale, in a single sale or
in more than one sale, of the remaining assets of the Partnership (the
"Liquidation Proposal"). The vast majority of the Partnership's remaining
assets are 99% partnership interests in partnerships which own the Burley
Care Center located in Burley, Idaho; the Hearthside Care Center, located in
Coos Bay, Oregon; the South Salem Care Center located in Salem, Oregon; and
the Comanche View Nursing Home located in Ft. Stockton, Texas (the "Remaining
Assets"). As of the date hereof, the Partnership has received no offers to
purchase any of its Remaining Assets.
It is very important that all Limited Partners vote. The General Partner's
ability to dissolve the Partnership which will result in the orderly sale or
disposition of the Remaining Assets is dependent upon the approval of a
majority of the holders of the limited partnership interests.
Matters incidental to the conduct of the Special Meeting which are properly
brought before the Special Meeting, including consideration of any adjournment
or postponement thereof, may also be voted upon at the Special Meeting. The
General Partner has fixed the close of business on April 1, 1995, as the record
date for determination of the Limited Partners entitled to notice of and to
vote at the Special Meeting.
THE GENERAL PARTNER BELIEVES THAT THE APPROVAL OF THE LIQUIDATION PROPOSAL IS
IN THE BEST INTERESTS OF THE LIMITED PARTNERS AND RECOMMENDS THAT YOU VOTE FOR
THE LIQUIDATION PROPOSAL.
YOUR VOTE IS IMPORTANT. IN ORDER TO ENSURE THAT YOUR INTERESTS WILL BE
REPRESENTED, WHETHER YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING OR NOT,
PLEASE SIGN THE ENCLOSED WHITE PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE. ANY PROXY CARDS ON WHICH A CHOICE IS NOT INDICATED WILL BE VOTED AS
AN APPROVAL OF THE LIQUIDATION PROPOSAL.
THE GENERAL PARTNER URGES YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE AND, IN ANY EVENT, BY JULY ___,
1995.
BY ORDER OF THE GENERAL PARTNER,
QUEST RESCUE PARTNERS I-1, L.P.
By: Quest Rescue Partners I-1 Corp.,
general partner
By: Stuart C. Berry, Executive Vice President
Atlanta, Georgia
June __, 1995
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Previous Sales and Pending Distributions . . . . . . . . . . . . . . . . 2
REASONS FOR THE LIQUIDATION PROPOSAL . . . . . . . . . . . . . . . . . . . 3
Investment Objectives of the Partnership . . . . . . . . . . . . . . . . 3
Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Lack of Liquidity; Low Rate of Return . . . . . . . . . . . . . . . . . . 3
Cost of Maintaining the Partnership . . . . . . . . . . . . . . . . . . . 4
IF THE LIQUIDATION PROPOSAL IS NOT APPROVED . . . . . . . . . . . . . . . . 4
DISTRIBUTIONS OF SALE OR REFINANCING PROCEEDS . . . . . . . . . . . . . . . 4
FEDERAL INCOME TAX CONSEQUENCES TO LIMITED PARTNERS . . . . . . . . . . . . 5
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Method for Determining Amount of Net Profit or Net Loss . . . . . . . . 5
Character of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Passive Loss Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Taxation of Cash Distributions . . . . . . . . . . . . . . . . . . . . . 7
INTERESTS IN PARTNERSHIP AND DISTRIBUTIONS . . . . . . . . . . . . . . . . 7
SUMMARY OF LIQUIDATION PROPOSAL . . . . . . . . . . . . . . . . . . . . . . 8
PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CERTAIN INFORMATION ABOUT THE PARTNERSHIP,
THE GENERAL PARTNER AND CERTAIN AFFILIATES . . . . . . . . . . . . . . . . 9
LIQUIDATION PROXY CARD . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 4
QUEST HEALTH CARE INCOME FUND I, L.P.
1355 Peachtree Street, Suite 1900
Atlanta, Georgia 30309
PROXY STATEMENT
SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD JULY 1, 1995
INTRODUCTION
On behalf of Quest Health Care Income Fund I, L.P. (the "Partnership"), Quest
Rescue Partners I-1, L.P., the general partner of the Partnership ("Quest" or
the "General Partner"), requests your approval of the following proposal:
To consider and approve the dissolution of the Partnership, and, in
conjunction therewith, the disposition or the sale, in a single sale or in
more than one sale, of the Remaining Assets of the Partnership (the
"Liquidation Proposal"). The Partnership's Remaining Assets are 99%
partnership interests in partnerships which own the Burley Care Center located
in Burley, Idaho; the Hearthside Care Center, located in Coos Bay, Oregon; the
South Salem Care Center located in Salem, Oregon; and the Comanche View
Nursing Home located in Ft. Stockton, Texas (the "Remaining Assets"). As of
the date hereof, the Partnership has received no offers to purchase any of its
Remaining Assets.
Pursuant to the terms of the Partnership's Limited Partnership Agreement, as
amended to date (the "Partnership Agreement"), the Limited Partners shall have
the right to vote on and approve the dissolution of the Partnership. As part
of the Liquidation Proposal, the General Partner will attempt to sell the
Remaining Assets in an orderly fashion in order to maximize any potential
return to the Limited Partners. Approval of the Liquidation Proposal by the
Limited Partners will act as the approval of subsequent sales of the Remaining
Assets and the Limited Partners will not have the opportunity to vote on the
specific terms of subsequent sales. The Liquidation Proposal, if approved, will
allow the General Partner the opportunity to begin marketing the Remaining
Assets for sale. The General Partner presently has no commitment to sell any of
these properties and, therefore, cannot yet determine the price it will receive
for each property or the amount of return that will be available for
distribution to the Limited Partners.
If the Limited Partners do not approve the Liquidation Proposal, the
Partnership will continue operations, but may in the future, if deemed in the
best interest of the Partnership, offer one or more of the Remaining Assets for
sale. Without approval of the Liquidation Proposal, a sale of all or
substantially all of the Partnership's Remaining Assets would require the
approval of a majority of the Limited Partners which would require at least one
additional proxy solicitation.
FOR THE REASONS SET FORTH HEREIN, THE GENERAL PARTNER REQUESTS YOUR APPROVAL
TO THE LIQUIDATION PROPOSAL BY MARKING BOX "A" ON THE ENCLOSED WHITE PROXY
CARD, DATING AND
_____________________________________________________________________________
The Notice of Meeting, Proxy Statement and form of proxy are being mailed to
Limited Partners on or about June __, 1995.
<PAGE> 5
SIGNING THE CARD IN THE SAME MANNER AS YOUR NAME APPEARS ON THE ADDRESS LABEL
AND RETURNING IT TO THE PARTNERSHIP IN THE SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE PROVIDED.
There are 262,183 limited partnership interests of the Partnership (the
"Units") outstanding. Pursuant to the Partnership Agreement, the approval of
the holders of a majority of the Units is required to approve the Liquidation
Proposal. Units held by any Limited Partner who mails in a proxy card on which
a choice is not indicated will be voted as an approval for the Liquidation
Proposal. Neither Quest Rescue Partners I-1 L.P., the General Partner of the
Partnership, Quest Financial Corp., the sole limited partner of the General
Partner, Quest Rescue Partners I-1, Corp., the general partner of the general
partner of the General Partner, nor any officer, director or other affiliate
thereof is the holder of any Units. Limited Partners do not have any appraisal
or similar rights of dissenters with respect to the Liquidation Proposal.
YOUR PARTICIPATION IN THIS PROCESS IS CRITICAL. WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE UNITS, THE PARTNERSHIP CANNOT PROCEED WITH THE
LIQUIDATION PROPOSAL.
THE GENERAL PARTNER BELIEVES THAT THE DISSOLUTION OF THE PARTNERSHIP AND THE
SUBSEQUENT SALE OR DISPOSITION OF THE PARTNERSHIP'S REMAINING ASSETS IS IN THE
BEST INTERESTS OF THE LIMITED PARTNERS AND RECOMMENDS THAT THE LIMITED PARTNERS
APPROVE THE LIQUIDATION PROPOSAL
BACKGROUND
GENERAL
The Partnership, formerly Southmark/CRCA Health Care Income Fund I, L.P., was
organized on July 16, 1986, as a limited partnership under the laws of the
State of Delaware for the purpose of engaging in the business of acquiring
income producing health care related real properties on purchase terms which
involve substantially all cash payments, and operating and holding such
properties for investment and future capital appreciation. The General Partner
of the Partnership is Quest Rescue Partners I-1, L.P., whose sole limited
partner is Quest Financial Corp. and whose sole general partner is Quest
Rescue Partners I-1 Corp. Quest became the General Partner of the Partnership
on August 1, 1990. The former General Partner of the Partnership was Southmark
Investment Group 86, Inc., a Nevada corporation and a wholly-owned subsidiary
of Southmark Corporation. The Partnership's principal executive office is
currently located at 1355 Peachtree Street, N.E., Suite 1900, Atlanta, Georgia
30309, and its telephone number at such office is (800) 377-4301.
PREVIOUS SALES AND PENDING DISTRIBUTIONS
On February 28, 1995, the Registrant sold its 99% limited partnership
interests in the seven limited partnerships owning Cedar Springs Care Center,
Caroleton Manor Care Center, Sunny Vista Care Center, Crestview Care Center,
Parkway North Care Center, Holly Care Center and Salmon Valley Care Center to
an unaffiliated third party.
The proceeds from the sale will be distributed to the Limited Partners as
soon as practicable. The proceeds from the sale are subject to adjustment
reflecting changes in elements of the Partnership's working capital between
December 31, 1994 and the date of the sales.
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Therefore, the distributions to the Limited Partners, which are expected to
occur by the end of June 1995, cannot be estimated until these adjustments are
determined.
Neither the General Partner nor its affiliates will receive any remuneration
or distributions of the sale proceeds from the completed sales or from the
proceeds of the Partnership's liquidation.
REASONS FOR THE LIQUIDATION PROPOSAL
The most significant reasons why the General Partner believes the Liquidation
Proposal is in the best interest of the Limited Partners are set forth below:
INVESTMENT OBJECTIVES OF THE PARTNERSHIP
The Partnership's prospectus dated September 16, 1986 (the "Prospectus")
stated that the Partnership intended to sell the Partnership's properties when
it appeared advantageous to the Limited Partners, considering investment
objectives, capital appreciation, cash flow and federal income tax
implications. The Prospectus also stated that the Partnership expected to sell
properties between the fifth and tenth years after acquisition, but that the
Partnership had no obligation to sell properties at any particular time and
that the decision to sell a particular property would be made by the General
Partner. The Partnership is in its ninth year of operations. The General
Partner believes the timing of the Liquidation Proposal is consistent with the
Partnership's objectives as stated in the Prospectus relating to the sale of
the Partnership's assets between the fifth and tenth years of operations.
FLEXIBILITY
The approval of the Liquidation Proposal will provide the Partnership with
the flexibility to sell the Remaining Assets individually or as a package,
resulting in cost efficiencies. This will enable the General Partner to sell
the Remaining Assets when such sale or sales appear to be most advantageous to
the Partnership. Without prior approval of the Limited Partners of the
Liquidation Proposal, the timing involved in soliciting Limited Partner
approval could result in lost opportunities for the Partnership. Upon approval
of the Liquidation Proposal, the General Partner will attempt to sell the
Remaining Assets in an orderly fashion, on an all-cash basis with the purchaser
assuming all future and past liabilities.
LACK OF LIQUIDITY; LOW RATE OF RETURN
There is no established trading market for the Units. Since the Units are
not readily transferrable, Limited Partners are essentially locked into their
investment in the Units. As a result of operating costs, the Limited Partners
have not received distributions since 1989. The dissolution of the Partnership
and the subsequent sale of the Remaining Assets will liquify the Limited
Partners' investment in the Partnership and accelerate returns to Limited
Partners. The receipt by the Limited Partners of the liquidating distribution
will permit them to make alternative investments which may generate more
favorable returns than that currently being earned by the Limited Partners.
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COST OF MAINTAINING THE PARTNERSHIP
Continuing to operate the Partnership as a public partnership requires large
expenditures such as overhead costs associated with investor relations and
investor servicing, as well as legal and accounting costs associated with
required compliance reporting. The Partnership is subject to federal and state
securities laws and the terms of the Partnership Agreement under which periodic
reports and annual financial statements are required to be generated by the
Partnership (see "Certain Information About the Partnership, the General
Partner and Certain Affiliates"). The cost of completing these reports and
financial statements is paid out of the revenues of the Partnership. Since the
Partnership recently sold its 99% interests in seven nursing home facilities
(see "Background -- Previous Sales and Pending Distributions"), the number of
facilities generating revenues has been reduced while the costs of generating
such reports and financial statements has not changed. Thus, the Partnership
has less revenues to pay the same expenses.
IF THE LIQUIDATION PROPOSAL IS NOT APPROVED
The General Partner believes that it is cost efficient and in the best
interest of the Limited Partners to dissolve the Partnership prior to year end.
In the event that the Liquidation Proposal is not approved by the Limited
Partners, the Partnership will continue operations, but may in the future, if
deemed in the best interest of the Partnership, offer one or more of the
Remaining Assets for sale. A sale of all or substantially all of the Remaining
Assets would require the approval of a majority of the Limited Partners
pursuant to the Partnership Agreement. Since the Partnership recently sold its
99% interests in seven nursing home facilities, Limited Partner approval would
be required in order to complete any sales of the Remaining Assets prior to
February 1996. This would require at least one additional proxy solicitation.
The General Partner believes that without the prior approval of the Limited
Partners of the Liquidation Proposal, the timing required to solicit the
requisite Limited Partner approval would likely require concessions which could
negatively impact the sales price or result in the loss of opportunity for the
Partnership.
On behalf of the Partnership, the General Partner requests your approval of
the Liquidation Proposal, which involves the dissolution of the Partnership
through the orderly sale of the Partnership's Remaining Assets since the
General Partner believes it is in the best interests of the Limited Partners.
DISTRIBUTIONS OF SALE OR REFINANCING PROCEEDS
All capitalized terms used in this section and not otherwise defined in this
Proxy Statement shall have the meaning ascribed to such terms in the
Partnership Agreement.
The Partnership Agreement provides that all Distributions of Sale or
Refinancing Proceeds or Cash From Other Sources are distributed first to
Limited Partners in an amount equal to each Limited Partner's Priority Return
to the extent not previously received through Distributions of Cash From
Operations; second to the General Partner or its designated affiliate in
repayment of Distribution Funds previously advanced to the Partnership, if any;
third to the Limited Partners until such time as the Limited Partners have
received Distributions of Sale Proceeds, Refinancing
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Proceeds and Cash From Other Sources equal to their Original Capital
Investment; fourth to the General Partner until such time as it has received,
on a cumulative basis, total Distributions of Cash From Operations and Sale or
Refinancing Proceeds in an amount equal to at least 1% of the total
distributions of cash from all sources made by the Partnership other than a
return of the Limited Partners' Original Capital Investment or in payment of
Distribution Funds to the General Partner and its designated Affiliate; and
fifth, the balance shall be distributed 85% to the Limited Partners and 15% to
the General Partner.
If the Liquidation Proposal is approved by the holders of a majority of the
Units and the Remaining Assets are sold, the General Partner expects to
distribute Sale Proceeds to the Limited Partners, although there can be no
assurance that sufficient proceeds will be available for distribution. The
Limited Partners may only look to the assets of the Partnership for all
distributions. Upon dissolution and termination of the Partnership, the
General Partner would be required to contribute certain amounts to the
Partnership if there were deficit balances in their capital accounts at
termination, however, it is likely that any such deficit would be offset by any
gain from the sale of the remaining properties or by advances made to the
Partnership. The General Partner anticipates that no additional funds will be
available for distribution to the Limited Partners other than any proceeds of
the sale of the Remaining Assets. Upon liquidation, dissolution and winding up
of the Partnership any amounts available for distribution will be distributed
to the Limited Partners as provided in the Partnership Agreement.
Cash distributions totalled $585,713 to the Limited Partners for the year
ended December 31, 1989. No cash distributions were made to the Limited
Partners in 1990, 1991, 1992, 1993 or 1994. The General Partner anticipates
that distributions to Limited Partners from the February 28, 1995 sale of its
interests in seven nursing home facilities will occur no later than the end of
the second quarter of 1995.
FEDERAL INCOME TAX CONSEQUENCES TO LIMITED PARTNERS
GENERAL
All capitalized terms used in this section and not otherwise defined in this
Proxy Statement shall have the meaning ascribed to such terms in the
Partnership Agreement. Upon the sale of each Remaining Asset, the Partnership
will recognize Net Profit or Net Loss for federal income tax purposes equal to
the difference between the consideration received and the adjusted tax basis
thereof. As there are currently no contracts to sell any of the Remaining
Assets, it is impossible to determine whether the eventual sales will produce
Net Profit or Net Loss or the precise consequences for the Partnership or any
particular Limited Partner. However, based on the General Partner's estimate
of current fair market values, it appears that sales of the Remaining Assets
would produce Net Losses, and the discussion that follows is based on such
conclusion.
METHOD FOR DETERMINING AMOUNT OF NET PROFIT OR NET LOSS
The Partnership shall allocate Net Profits or Net Losses to the Partners in
accordance with the provisions of the Partnership Agreement. Net Losses, if
any, shall be allocated 99% to the Limited Partners and 1% to the General
Partner. However, Section 5.041 of the Partnership Agreement effectively
precludes the allocation of losses to any Partner that has a negative
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Adjusted Capital Account balance in excess of the amount of the Partnership's
Minimum Gain when any other Partner has a positive Adjusted Capital Account
Balance. The Partnership will allocate Net Profit or Net Loss from the
Partnership's operations among the Partners prior to any sale authorized
hereunder.
As there are currently no contracts to sell any of the Remaining Assets, it
is impossible to determine whether the eventual sales will produce Net Profit
or Net Loss. However, based on the General Partner's estimate of current fair
market value, a Limited Partner who acquired its Units in the Partnership's
initial offering will be allocated Net Losses from the sale of all of the
Remaining Assets at such current fair market values equal to the difference
between: (i) such Limited Partner's Original Capital Investment reduced by
prior allocations of Net Losses (including Net Loss for the year of sale), or
increased by prior allocations of Net Profits (including Net Profits from
operations for the year of sale); and (ii) the amount of cash received
hereunder.
A transferee of Units (a "Transferee") shall be allocated Net Losses from the
sale of all of the Remaining Assets at such current fair market values equal to
the amount that the transferor Limited Partner would have been allocated under
the formula set forth above, regardless of the amount the Transferee paid for
its Units. If the amount such Transferee is allocated differs from the amount
he or she would have received if they had acquired their Units directly from
the Partnership, such Transferee will recognize on its income tax return the
amount of such difference as: (i) a capital gain, if the amount of loss
allocated exceeds the amount it would have been allocated; or (ii) a capital
loss, if the amount of loss allocated is less than the amount it would have
been allocated.
CHARACTER OF LOSS
Assuming a sale of all of the Remaining Assets at the General Partner's
current estimate of value, a portion of the losses allocated to each Partner
will be characterized as long-term losses from the sale or exchange of capital
assets ("Capital Losses"), while the remainder will be characterized as losses
from the sale of property used in a trade or business ("Section 1231 Losses").
Each Limited Partner will include the amount of its Capital Losses on its
income tax return with all other capital gains and losses. Each Limited
Partner may use its share of the Capital Losses to offset long-term or
short-term capital gains from any source plus, in the case of non-corporate
taxpayers, ordinary income of up to $3,000 per year. Any Capital Losses a
Limited Partner cannot use in the year of sale to offset gains or income will
carry forward to future years to offset future capital gains plus up to $3,000
of ordinary income per year, until fully utilized. Section 1231 Losses are
aggregated with all long-term capital gains and losses for any year, and if
such Section 1231 Losses exceed the capital gains, all losses are treated as
ordinary losses, which are not subject to the deductibility limits ordinarily
imposed on Capital Losses. A Limited Partner that recognizes Section 1231
gains in the five tax years following the year of sale may be required to treat
such gain as ordinary income, rather than capital gain, to the extent of the
Section 1231 Losses from the Partnership treated as an ordinary loss.
Therefore, the deductibility of both Capital Losses and Section 1231 Losses
will depend on each Limited Partner's particular income tax situation for the
year of sale and for future years.
PASSIVE LOSS RULES
Generally, the Limited Partners have been allocated losses in recent years
which were subject to the "passive loss" limitation rules which, subject to
various phase-in rules, allowed the
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Limited Partners to deduct passive losses only against passive income (if any)
from the Partnership or other sources. Any unused passive losses were
suspended and carried forward to offset passive income or gains from any source
in future years or, if not otherwise used, at the time of a complete
disposition of a Limited Partner's entire interest in the passive activity.
The liquidation of the Partnership will constitute a complete disposition of
each Limited Partner's interest in the Partnership and the Partnership's
passive activities upon the sale of the last Remaining Asset and, therefore,
each Partner's suspended loss (other than Capital Losses) can be fully utilized
to offset all forms of income in the year of the liquidation of the
Partnership. Although the Capital Losses and Section 1231 Losses constitute
passive losses, they also can be used to offset all forms of income or gain,
subject to the Capital Loss limitation rules discussed above.
TAXATION OF CASH DISTRIBUTIONS
In general, a Limited Partner shall not recognize any gain upon receipt of a
current or liquidating cash distribution, except to the extent that the amount
of the cash received exceeds such Partner's tax basis in his Units. The only
significant difference between a current and a liquidating distribution is that
upon a liquidating distribution, a Partner can recognize loss to the extent
such liquidating distribution consists solely of money, unrealized receivables
and inventory, and the amount of such money and the basis of the distributed
property is less than the Partner's pre-distribution basis in his Units. Any
gain which a Partner recognizes from a distribution, either current or
liquidating, shall be taxed as though such Partner had sold or exchanged his
Units and, therefore, will generally be taxed as a capital gain. Based on the
General Partner's estimates of current fair market value, Limited Partners
other than Transferees should not recognize any gain or loss from their
distributions, while Transferees could recognize either gain or loss depending
on the price they paid for their Units.
For purposes of these rules, a liquidating distribution occurs upon the
"termination" of a Partner's entire interest in the Partnership by means of a
distribution, or a series of distributions, while a current distribution is
defined as any distribution that is not a liquidating distribution. Since the
Limited Partners are voting to approve sales in liquidation of the Partnership,
it is likely that all distributions will be considered "liquidating"
distributions.
ALL TAXPAYERS ARE URGED TO CONSULT WITH THEIR PERSONAL TAX ADVISORS TO
DETERMINE THE CONSEQUENCES FROM ANY CURRENT OR LIQUIDATING DISTRIBUTIONS.
INTERESTS IN PARTNERSHIP AND DISTRIBUTIONS
All capitalized terms used in this section and not otherwise defined in this
Proxy Statement shall have the meaning ascribed to such terms in the
Partnership Agreement. No individual or group, as defined by Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), known to
the Partnership, is the beneficial owner of more than 5% of the Units.
Distributions to the Limited Partners are paid from Cash From Operations of
the Partnership's properties or from Sale or Refinancing Proceeds. Since
inception, the Partnership has distributed an aggregate of $585,713 to the
Limited Partners and has made no distributions to the General Partner. Cash
From Operations is distributed 96% to the Limited Partners and 4% to the
General Partner, however, no distribution of Cash From Operations are made to
the
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General Partner in any year until the Limited Partners have received cumulative
distributions for such year equal to 8.5% of their invested capital.
Distributions of Cash From Operations are paid out of cash available after
payment of the expenses of the Partnership, including fees paid to affiliates
of the General Partners.
SUMMARY OF LIQUIDATION PROPOSAL
The Partnership Agreement requires the approval of the holders of a majority
of the Units to dissolve the Partnership. In conjunction with the dissolution
of the Partnership, the General Partner will attempt to dispose of or sell the
Remaining Assets. This may result in a single sale or in more than one sale of
substantially all of the Remaining Assets. The General Partner will attempt to
sell the Partnership's Remaining Assets in an orderly fashion in order to
attempt to maximize any potential return to the Limited Partners and on an
all-cash basis with the purchaser assuming all future and past liabilities.
The General Partner believes that the approval of the Liquidation Proposal
would allow the orderly process of dissolution of the Partnership and provide
the General Partner with the flexibility to sell the Remaining Assets
individually or as a package to maximize and accelerate returns to the Limited
Partners. Without Limited Partner approval to the Liquidation Proposal, the
General Partner will have to seek Limited Partner approval in order to sell any
of the Remaining Assets prior to February 1996. This would require at least
one additional proxy solicitation. The costs of continuing to operate the
Partnership are such that the General Partner believes that it is in the best
interests of the Limited Partners to dissolve the Partnership and subsequently
sell or dispose of the Remaining Assets. There can be no assurance, however,
that the General Partner can meet any of these objectives if the Liquidation
Proposal is approved.
PROCEDURAL MATTERS
The General Partner has fixed the close of business on April 1, 1995, as the
record date for determination of the Limited Partners entitled to notice of and
to vote at the Special Meeting. The solicitation of proxies will be made by
the Partnership by mail and the cost will be borne directly by the Partnership.
The Units represented by properly executed proxies in the accompanying form
received by the General Partner prior to the Meeting Date will be voted at the
Special Meeting on the Meeting Date. Units not represented by properly
executed proxies will not be voted at the Special Meeting, except as provided
below. In such instance as a Limited Partner specifies in a proxy a choice
with respect to any matter to be acted upon, the Units represented by such
proxy will be voted as specified. In such instance as a Limited Partner does
not specify a choice, in an otherwise properly executed proxy, with respect to
the proposal referred to therein, the Units represented by such proxy will be
voted with respect to such proposal in accordance with the recommendation of
the General Partner described herein. A Limited Partner who signs and returns
a proxy in the accompanying form may revoke it by: (i) giving written notice
of revocation to the General Partner before the proxy is voted at the Special
Meeting on the Meeting Date; (ii) executing and delivering a later-dated proxy;
or (iii) attending the Special Meeting on the Meeting Date and voting his or
her Units in person. The Partnership Agreement requires that Limited Partners
holding at least a majority of the Units must approve a sale, such as the sale
of the Remaining Assets. Any Limited Partner or such Limited Partner's
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authorized representative shall have access to the Partnership's records during
regular business hours at the Partnership's offices.
Representatives of Coopers & Lybrand L.L.P., the Partnership's independent
auditors, are not expected to be available for the Special Meeting.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP,
THE GENERAL PARTNER AND CERTAIN AFFILIATES
The Units are registered pursuant to Section 12(g) of the 1934 Act. As such,
the Partnership currently is subject to the informational filing requirements
of the 1934 Act and, in accordance therewith, is obligated to file periodic
reports, certain proxy statements and other information with the Securities and
Exchange Commission (the "Commission") relating to its business, financial
condition and other matters. Reports and other information filed with the
Commission by the Partnership can be inspected and copied (at prescribed rates)
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional
offices: Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison, Suite 1400, Chicago, Illinois 60661-2511. The Annual Report
on Form 10-K for the period ended December 31, 1994 (the "1994 10-K") and the
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (the "1995
10-Q") are specifically incorporated by reference herein. The Partnership's
registration and reporting requirements under the 1934 Act will be terminated
upon the dissolution of the Partnership.
The Partnership has only one class of Units and no Limited Partner has a
right of priority over any other Limited Partner. There is no established
trading market for the Units. Since December 31, 1989, the Partnership has
made no cash distributions, however, the Partnership anticipates making a
distribution to Limited Partners no later than the end of June 1995 from the
sale of the Partnership's 99% interests in seven nursing home facilities. See
"Background -- Previous Sales and Pending Distributions."
The General Partner and its constituent partners are privately held companies
and are not subject to the reporting requirements of the 1934 Act.
The 1994 10-K and the 1995 10-Q, which are specifically incorporated by
reference herein, are also available to any Limited Partner from the
Partnership without charge upon written or oral request made to the General
Partner. Any requests for documents or other information should be directed to
Ms. Valarie Stugelmeyer, Director of Investor Relations, at (800) 377-4301.
The General Partner will forward such documents, via first class mail, within
one business day of receipt of a Limited Partner's written request therefor.
All documents subsequently filed on behalf of the Partnership pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to June ___, 1995
shall be deemed to be incorporated by reference into this Proxy Statement.
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QUEST HEALTH CARE INCOME FUND I, L.P.
LIQUIDATION PROXY CARD
This proxy is solicited on behalf of Quest Health Care Income Fund I, L.P.
(the "Partnership") by Quest Rescue Partners I-1 Corp., the general partner of
the general partner (the "General Partner").
The General Partner proposes the approval of the dissolution of the
Partnership, as described in the Proxy Statement (the "Liquidation Proposal").
The General Partner requests the approval of the Limited Partners to the
Liquidation Proposal.
A. [ ] Yes, I consent to the Liquidation Proposal, as described in the
Partnership's Proxy Statement.
B. [ ] No, I do not consent to the Liquidation Proposal, as described in the
Partnership's Proxy Statement.
C. [ ] I abstain on whether or not to approve the Liquidation Proposal, as
described in the Partnership's Proxy Statement.
The General Partner recommends that you mark box "A" above, however, you
should carefully review the enclosed Proxy Statement prior to making your
selection.
IMPORTANT: THIS LIQUIDATION PROXY CARD MUST BE SIGNED IN ORDER TO BE VALID
SIGNATURE(S) REQUIRED:
X___________________________________________________________ X________________
Date:_________________________________________
Note: Please sign as your name(s) appears on the address label. All parties
indicated on the address label must sign this card. If a Limited
Partner signs this card, but does not indicate a consent to any of boxes
"A," "B" or "C" above, the General Partner will treat such card as a
vote for box "A" above.
INSTRUCTIONS FOR LIQUIDATION PROXY CARD:
1) Please review the endorsed proxy materials.
2) Indicate your vote by marking "A", "B" or "C" on the Liquidation Proxy
Card above. Your General Partner recommends that you select box "A."
3) SIGN LIQUIDATION PROXY CARD AS YOUR NAME(S) APPEARS ON THE ADDRESS LABEL
ON THE REVERSE SIDE OF THE PROXY CARD.
4) Mail in the enclosed postage prepaid envelope.
Your prompt response is appreciated. If you have any questions concerning this
information, please feel free to contact our Investor Relations Department at
(800) 377 - 4301.
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