SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13E-4
AMENDMENT NO. 1 TO THE
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
NTS-PROPERTIES VII, LTD.
(Name of Issuer)
NTS-PROPERTIES VII, LTD.
(Name of Person Filing Statement)
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
62942E506
(CUSIP Number of Class of Securities)
J.D. Nichols, Managing General Partner
NTS-Properties Associates VII
10172 Linn Station Road
Louisville, Kentucky 40223
(502) 426-4800
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person Filing Statement)
Copy to:
Michael J. Choate, Esq.
Shefsky & Froelich Ltd.
444 North Michigan Avenue, Suite 2500
Chicago, Illinois 60611
(312) 836-4066
December 7, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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| Transaction Valuation: $120,000 (a) | Amount of Filing Fee |
| Limited Partnership Interest at $6.00 per Interest | $24.00(b) |
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(a) Calculated as the aggregate maximum purchase price for limited
partnership interests.
(b) Calculated as 1/50th of 1% of the Transaction Value.
|X| Check box if any part of the fee is offset as provided by Rule0-11(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 of Schedule and the date of its filing.
Amount Previously Paid: _______ $24.00
Form or Registration No.: ______ Schedule 13E-4, No. 98-000018
Filing Party: _________________ NTS PROPERTIES VII, LTD. and ORIG, LLC
Date Filed: ___________________ December 7, 1998
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1
<PAGE>
Item 1. Security and Issuer.
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(d) In addition to NTS Properties VII, Ltd. (the "Partnership"), ORIG,
LLC, a Kentucky limited liability company (the "Affiliate") and an affiliate of
the Partnership, is jointly offering to purchase the Interests. The address of
the Affiliate is 10172 Linn Station Road, Louisville, Kentucky, 40223. The
Affiliate is not a co-filer of this Amendment No. 1 to the Issuer Tender Offer
Statement on Schedule 13E-4. Rather, the Affiliate is filing a Tender Offer
Statement on Schedule 14D-1 simultaneously with the filing of this Amendment No.
1 to the Issuer Tender Offer Statement. The members of the Affiliate are J.D.
Nichols and Brian F. Lavin. Mr. Nichols is the general partner of the
NTS-Properties Associates VII, general partner of the Partnership (the "General
Partner"). Mr. Nichols is also the managing member of the Affiliate. Mr. Lavin
is the Executive Vice President of the General Partner. The business address of
Mr. Nichols and Mr. Lavin is: 10172 Linn Station Road, Louisville, Kentucky,
40223.
Item 2. Source and Amount of Funds or Other Consideration.
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The General Partner is not offering to purchase Interests pursuant to
the Offer. Therefore, this Item 2 is inapplicable to the General Partner.
Item 4. Interest in Securities of the Issuer.
- ---------------------------------------------
There have not been any transactions involving Interests that were
effected during the past forty (40) business days by the Partnership, the
General Partner, Mr. Nichols or Mr. Lavin, the Affiliate or any other associate
or subsidiary of any such person.
Item 5. Contracts, Arrangements, Understandings or Relationships with Respect to
- --------------------------------------------------------------------------------
the Issuer's Securities.
- -----------------------
Mr. Nichols and Mr. Lavin, the members of the Affiliate, have executed
a binding Capital Contribution Agreement under which they have agreed to fund
the purchase of Interests by the Affiliate and the Affiliate's proportionate
share of the expenses of the Offer. Mr. Nichols anticipates contributing
approximately 90% of these funds; and Mr. Lavin anticipates contributing
approximately 10% of these funds. The members of the Affiliate anticipate making
these capital contributions immediately upon the expiration of the Offer.
Other than these agreements, the Offerors are not aware of any other
contract, arrangement, understanding or relationship relating, directly or
indirectly, to this Offer (whether or not legally enforceable) between or among
(i) the Partnership, the General Partner or the Affiliate or (ii) any person
controlling the Partnership, the General Partner or the Affiliate or any other
person.
Reference is hereby made to Exhibit (c)(2) to this Schedule which is
incorporated herein by reference.
2
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Item 8. Additional Information.
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(e) Section 6, "Certain Conditions of the Offer," of the Offer to
Purchase is hereby amended by deleting the phrase "sole judgment" and replacing
it with the phrase "reasonable judgment".
Reference is hereby made to the Offer to Purchase, the Letter of
Transmittal and related documents, and Amendment No. 1 to the Offer to Purchase,
which are incorporated herein by reference.
Item 9. Material to be Filed as Exhibits.
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(a)(1) Form of Offer to Purchase dated December 7, 1998 (including
financial statements giving pro forma effect of the Offer).2
(a)(2) Form of Letter of Transmittal.2
(a)(3) Form of Affidavit and Indemnification Agreement for Missing
Certificate(s) of Ownership.2
(a)(4) Form of Letter to Limited Partners.2
(a)(5) Substitute Form W-9 with Guidelines.2
(a)(6) Form of Amendment No.1 to the Offer to Purchase dated February
9,1999(including amended financial statements giving pro forma
effect of the Offer).1
(b) Not applicaable.
(c)(1) Reference is hereby made to the Amended and Restated Agreement
of Limited Partnership of NTS-Properties VII, Ltd., dated as
of February 11, 1988, previously filed with the Securities and
Exchange Commission as part of the Partnership's Registration
Statement on Form S-11, No. 33-14308, filed with the
Commission on May 11, 1987 and declared effective on October
29, 1987.
(c)(2) Capital Contribution Agreement dated January 20, 1999 executed
by the members of ORIG, LLC.1
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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1 Filed herein.
2 Previously filed as an Exhibit to the Issuer Tender Offer Statement
on Schedule 13E-4, No. 98-000018, filed with the SEC on December 7, 1998.
3
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SIGNATURE
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.
Date: February 9, 1999 NTS-PROPERTIES VII, Ltd., a Florida limited
partnership
By: NTS-PROPERTIES ASSOCIATES VII
General Partner
By: /s/ J. D. Nichols
-----------------
J.D. Nichols,
Its: Managing General Partner
4
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EXHIBITS
Exhibit
Number Description
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(a)(1) Form of Offer to Purchase, dated December 7, 1998
(including financial statements giving pro forma effect of
the Offer).2
(a)(2) Form of Letter of Transmittal.2
(a)(3) Form of Affidavit and Indemnification Agreement for
Missing Certificate(s) of Ownership.2
(a)(4) Form of Letter to Limited Partners.2
(a)(5) Substitute Form W-9 with Guidelines.2
(a)(6) Form of Amendment No. 1 to the Offer to Purchase dated
February 9, 1999 (including amended financial statements
giving pro forma effect of the Offer).1
(b) Not applicable.
(c)(1) Reference is hereby made to the Amended and Restated
Agreement of Limited Partnership of NTS-Properties VII,Ltd.,
dated as of February 11, 1988, previously filed with the
Securities and Exchange Commission as part of the
Partnership's Registration Statement on Form S-11, No.33-
14308, filed with the Commission on May 11,1987,and declared
effective on October 29, 1987.
(c)(2) Capital Contribution Agreement dated January 20, 1999
executed by the members of ORIG, LLC. 1
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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1 Filed herein.
2 Previously filed as an Exhibit to the Issuer Tender Offer Statement
on Schedule 13E-4, No. 98-000018, filed with the SEC on December 7, 1998.
<PAGE>
Exhibit (a)(6)
Form of Amendment No. 1 to Offer to Purchase, dated February 9, 1999
<PAGE>
Amendment No. 1 to the
Offer to Purchase for Cash
by
NTS-Properties VII, Ltd.
and
ORIG, LLC
of Up to
20,000 Limited Partnership Interests
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, EASTERN STANDARD TIME, ON MARCH 6, 1999, UNLESS EXTENDED.
NTS-Properties VII, Ltd. is a Florida limited partnership (the
"Partnership") that owns, or owns joint venture interests in, certain commercial
and residential rental real estate properties. See Section 10, "Certain
Information About the Partnership." Except as otherwise provided in the
Partnership Agreement (defined below), the Partnership's general partner,
NTS-Properties Associates VII (the "General Partner"), owns a one percent (1%)
interest in the Partnership and the limited partners, in the aggregate, own a
ninety-nine percent (99%) interest in the Partnership. The Partnership and ORIG,
LLC, a Kentucky limited liability company (the "Affiliate"), an affiliate of the
Partnership (the Affiliate and the Partnership are each an "Offeror" and
collectively, the "Offerors"), are offering to purchase for cash upon the terms
and conditions set forth in this Amendment No. 1 to the Offer to Purchase
("Offer to Purchase") and the related Letter of Transmittal ("Letter of
Transmittal," which together with the Offer to Purchase constitutes the "Offer")
in the aggregate up to 20,000 of the Partnership's limited partnership interests
(the "Interests") at a price equal to $6.00 per Interest (the "Purchase Price").
This Offer is being made to all limited partners of the Partnership ("Limited
Partners") and is generally not conditioned upon any minimum amount of Interests
being tendered, but is subject to certain conditions described herein.
Limited Partners tendering all or any portion of their Interests are
subject to certain risks including:
o The Purchase Price of $6.00 per Interest may not equate to the
fair market value or the liquidation value of the Interest,
and is less than the book value per Interest.
o Neither the General Partner, on behalf of the Partnership, nor
the Affiliate has retained an independent third party to
evaluate the fairness of the Offer.
o Conflicts in establishing the Purchase Price exist between
tendering Limited Partners and the Partnership, the General
Partner and non-tendering Limited Partners.
o Negative tax consequences may exist for any Limited Partner
tendering its Interests.
o The General Partner makes no recommendation regarding whether
Limited Partners should tender or retain their Interests.
Limited Partners continuing to hold all or any portion of their
Interests are subject to certain risks including:
o The Partnership may not make future cash distributions to
Limited Partners.
o The percentage ownership of Interests held by persons
controlling, controlled by or under common control with the
General Partner or its affiliates will increase as a result of
the Offer.
o The Partnership has no current plan to liquidate its assets
and to distribute the proceeds to its Limited Partners.
o General economic risks are associated with investments in real
estate.
o The Partnership's financial condition may be adversely
affected by a downturn in the business of any tenant occupying
a significant portion of a Partnership property or a tenant's
decision not to renew its lease.
See "RISK FACTORS."
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1
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THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF INTERESTS BEING
TENDERED; PROVIDED, HOWEVER, NO TENDER WILL BE ACCEPTED FROM A LIMITED PARTNER
IF, AS A RESULT OF THE TENDER, THE LIMITED PARTNER WOULD CONTINUE TO BE A
LIMITED PARTNER AND WOULD HOLD FEWER THAN ONE HUNDRED (100) INTERESTS. THE OFFER
IS CONDITIONED UPON, AMONG OTHER THINGS, THE ABSENCE OF CERTAIN CONDITIONS
DESCRIBED IN SECTION 6, "CERTAIN CONDITIONS OF THE OFFER."
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IMPORTANT
Any Limited Partner wishing to tender all or any portion of his, her or
its Interests should complete and sign the enclosed Letter of Transmittal in
accordance with the instructions in the Offer to Purchase and Letter of
Transmittal and deliver it together with the Certificate(s) of Ownership for the
Interests being tendered (or if the Certificate(s) of Ownership for the
Interests is (are) lost, stolen , misplaced or destroyed, the Affidavit and
Indemnification Agreement for Missing Certificate(s) of Ownership executed by
the Limited Partner attesting to such fact), the Substitute Form W-9 and any
other required documents to the Partnership. A Limited Partner having Interests
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that broker, dealer, commercial bank, trust company
or other nominee if he, she or it desires to tender such Interests.
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Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, or any other documents relating to
this Offer may be directed to NTS Investor Services c/o Gemisys at (800)
387-7454.
The date of this Amendment No. 1 to the Offer to Purchase is February 9, 1999
2
<PAGE>
NEITHER THE OFFERORS NOR THE PARTNERSHIP'S GENERAL PARTNER MAKE ANY
RECOMMENDATION TO ANY LIMITED PARTNER REGARDING WHETHER TO TENDER OR REFRAIN
FROM TENDERING INTERESTS. EACH LIMITED PARTNER MUST MAKE HIS, HER OR ITS OWN
DECISION REGARDING WHETHER TO TENDER INTERESTS, AND, IF SO, THE PORTION OF SUCH
LIMITED PARTNER'S INTERESTS TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE OFFERORS REGARDING WHETHER LIMITED PARTNERS SHOULD TENDER OR REFRAIN FROM
TENDERING INTERESTS PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. ANY RECOMMENDATION
OR INFORMATION, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE OFFERORS OR THE GENERAL PARTNER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH
TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
3
<PAGE>
TABLE OF CONTENTS
INTRODUCTION...................................................................5
SUMMARY OF CERTAIN INFORMATION.................................................8
RISK FACTORS...................................................................9
THE OFFER.....................................................................12
Section 1. Background and Purposes of the Offer........................12
Section 2. Offer to Purchase and Purchase Price; Proration; Expiration
Date; Determination of Purchase Price.......................13
Section 3. Procedure for Tendering Interests...........................15
Section 4. Withdrawal Rights...........................................16
Section 5. Purchase of Interests; Payment of Purchase Price............16
Section 6. Certain Conditions of the Offer.............................17
Section 7. Cash Distribution Policy....................................19
Section 8. Effects of the Offer........................................20
Section 9. Source and Amount of Funds..................................20
Section 10. Certain Information About the Partnership...................21
Section 11. Certain Federal Income Tax Consequences.....................22
Section 12. Transactions and Arrangements Concerning Interests..........25
Section 13. Extensions of Tender Period; Terminations; Amendments.......25
Section 14. Fees and Expenses...........................................26
Section 15. Address; Miscellaneous......................................26
Appendix A The Partnership's Financial Statements
Giving Pro Forma Effect of the Offer........................28
4
<PAGE>
To Holders of Limited Partnership Interests of
NTS-Properties VII, Ltd.
INTRODUCTION
NTS-Properties VII, Ltd. is a Maryland Florida limited partnership (the
"Partnership") that owns, or owns joint venture interests in, certain commercial
and residential rental real estate properties. See Section 10, "Certain
Information About the Partnership." Except as otherwise provided in the
Partnership Agreement (defined below), the Partnership's general partner,
NTS-Properties Associates VII (the "General Partner"), owns a one percent (1%)
interest in the Partnership and the limited partners own, in the aggregate, a
ninety-nine percent (99%) interest in the Partnership. The Partnership and ORIG,
LLC, a Kentucky limited liability company (the "Affiliate"), an affiliate of the
Partnership (the Partnership and the Affiliate are each an "Offeror" and,
collectively, the "Offerors"), hereby offer to purchase up to 20,000 of the
Partnership's limited partnership interests (the "Interests") at a purchase
price of $6.00 per Interest (the "Purchase Price") in cash to the seller upon
the terms and subject to the conditions set forth in this Amendment No. 1 to the
Offer to Purchase (the "Offer to Purchase") and in the related "Letter of
Transmittal" (together the "Offer to Purchase" and "Letters of Transmittal"
constitute the "Offer"). (As used herein, the term "Interest" or "Interests," as
the context requires, refers to the limited partnership interests in the
Partnership and portions thereof that constitute the class of equity security
that is the subject of this Offer or the limited partnership interests or
portions thereof that are tendered by the limited partner to the Offerors
pursuant to the Offer.) This Offer is being made to all limited partners in the
Partnership ("Limited Partners") and is generally not conditioned upon any
minimum amount of Interests being tendered, except as described herein. The
Interests are not traded on any established trading market and are subject to
certain restrictions on transferability set forth in the Amended and Restated
Agreement of Limited Partnership of NTS-Properties VII, Ltd. dated February 11,
1988 (the "Partnership Agreement"). The Partnership or the Affiliate, each in
its sole discretion, may purchase more than 10,000 Interests, but neither has
any current intention to do so.
The Purchase Price should not be viewed as equivalent to the fair
market value or the liquidation value of an Interest and is less than the book
value per Interest. As of September 30, 1998 and December 31, 1997, the book
value of each Interest was approximately $9.52 and $9.66, respectively. The
Purchase Price offered by the Offerors has been determined by the Partnership,
in its sole discretion, based on: (i) recent sales of Interests by Limited
Partners to third parties in secondary market transactions; (ii) recent
repurchases of interests by the Partnership; and (iii) recent purchases of
Interests by the Partnership's affiliate, Ocean Ridge Investments Ltd., a
Florida limited liability partnership ("Ocean Ridge"). Neither the Offerors nor
the General Partner has obtained an opinion from an independent third party
regarding the fairness of the Purchase Price.
Subject to the conditions set forth in the Offer, the Partnership will
purchase the first 10,000 Interests which are tendered and received by the
Partnership by, and not withdrawn prior to, 12:00 Midnight, Eastern Standard
Time, on March 6, 1999, subject to any extension of the Offer by the
5
<PAGE>
Offerors (the "Expiration Date"). If more than 10,000 Interests are tendered,
the Affiliate will purchase up to an additional 10,000 Interests which are
tendered and received by the Partnership by, and not withdrawn prior to, the
Expiration Date. If, on the Expiration Date, the Offerors determine that more
than 20,000 Interests have been tendered during the Offer, each Offeror may: (i)
accept the additional Interests permitted to be accepted pursuant to Rule
13e-4(f)(1) promulgated under the Securities Exchange Act of 1934 ("Exchange
Act"), as amended; or (ii) extend the Offer, if necessary, and increase the
amount of Interests that the Offeror is offering to purchase to an amount that
the Offeror believes to be sufficient to accommodate the excess Interests
tendered as well as any Interests tendered during the extended Offer.
If the Offer is oversubscribed and the Offerors do not act in
accordance with (i) or (ii), above, or the Offerors act in accordance with (i)
and (ii), above, but the Offer remains oversubscribed, then the Offerors will
accept Interests tendered prior to or on the Expiration Date for payment on a
pro rata basis ("Proration"). In the event of Proration, the number of Interests
purchased from a Limited Partner will be equal to a fraction of the Interests
tendered, the numerator of which will be the total number of Interests the
Offerors are willing to purchase and the denominator of which will be the total
number of Interests properly tendered. Any fractional interests resulting from
this calculation will be rounded down to the nearest whole number. Fractions of
Interests will not be purchased. The Partnership will notify, in writing, all
Limited Partners from whom the Offerors will purchase fewer than the number of
Interests tendered by the Limited Partner. For any Interest tendered but not
purchased by the Offerors, a book entry will be made on the Partnership's books
to reflect the Limited Partner's ownership of the Interests not purchased. The
Partnership will not issue a new Certificate of Ownership for the Interests not
purchased by the Offerors, except upon written request of the Limited Partner.
The Offer is generally not conditioned upon any minimum number of
Interests being tendered. The Offer, however, is conditioned upon, among other
things, the absence of certain adverse conditions described in Section 6,
"Certain Conditions of the Offer." In particular, the Offer will not be
consummated, if in the opinion of the General Partner, there is a reasonable
likelihood that purchases under the Offer would result in termination of the
Partnership (as a partnership) under Section 708 of the Internal Revenue Code of
1986, as amended (the "Code") or termination of the Partnership's status as a
partnership for federal income tax purposes under Section 7704 of the Code.
Further, the Offerors will not purchase Interests if the purchase of Interests
would result in Interests being owned by fewer than three hundred (300) holders
of record. See Section 6, "Certain Conditions of the Offer."
All purchases of Interests pursuant to the Offer will be effective as
of the Expiration Date. Each Limited Partner who tenders Interests pursuant to
the Offer will receive the Purchase Price and cash distributions declared prior
to the Expiration Date, if any. Limited Partners will not be entitled to receive
cash distributions declared and payable after the Expiration Date, if any, on
any Interests tendered and accepted by the Offerors.
6
<PAGE>
The tender of an Interest will be treated as a sale of the Interest for
federal and most state income tax purposes which will result in the Limited
Partner recognizing gain or loss for income tax purposes. Limited Partners are
urged to review carefully all the information contained in or referred to in
this Offer including, without limitation, the information presented herein in
Section 11, "Certain Federal Income Tax Consequences."
As of December 31, 1998, the General Partner owned five (5) of the
Partnership's outstanding Interests and the Affiliate did not own any of the
Partnership's outstanding Interests. All partners, members, affiliates and
associates of the General Partner or the Affiliate beneficially owned, in the
aggregate, 5,743 Interests, representing approximately 1.0% of the Partnership's
575,736 outstanding interests. Although the Offer is being made to all Limited
Partners, the Partnership has been advised that neither the General Partner nor
any of the partners, members, affiliates or associates of the General Partner or
the Affiliate intend to tender any Interests pursuant to the Offer. Assuming the
Offer is fully subscribed, the General Partner, the Affiliate, and partners,
members, affiliates and associates of the General Partner or the Affiliate, will
own, after the Offer, in the aggregate, 20,743 Interests representing
approximately 3.6% of the Partnership's outstanding Interests.
7
<PAGE>
SUMMARY OF CERTAIN INFORMATION
------------------------------
The following is a summary of certain information contained elsewhere
in this Offer. The summary does not purport to be complete and is qualified in
its entirety by reference to the more detailed information contained elsewhere
in this Offer and related documents. Capitalized terms used but not defined in
this summary are defined elsewhere in this Offer. Limited Partners are urged to
read all documents constituting this Offer in their entirety.
Offerors The Partnership, a Florida limited
partnership, and the Affiliate, a
Kentucky limited liability company,
invite all of the Partnership's
Limited Partners to tender their
Interests upon the terms and subject
to the conditions set forth in this
Offer.
Purchase Price $6.00 per Interest in cash.
Expiration Date The Offer expires on March 6,1999 at
12:00 Midnight,Eastern Standard Time
unless the Offer is otherwise
extended by the Offerors in
accordance with the provisions set
forth herein. ALL INTERESTS BEING
TENDERED MUST BE RECEIVED BY THE
PARTNERSHIP AT THE ADDRESS SET FORTH
IN SECTION 15, "ADDRESS;
MISCELLANEOUS," ON OR BEFORE THE
EXPIRATION DATE.
Offer Conditions The Offerors will purchase in the
aggregate up to 20,000 Interests.The
first 10,000 Interests tendered will
be purchased by the Partnership; up
to an additional 10,000 Interests
tendered will be purchased by the
Affiliate. If the Offer is
oversubscribed,first the Partnership
may purchase additional Interests,
and then the Affiliate may purchase
additional Interests, each in its
sole discretion.If the Offer remains
oversubscribed, Interests will be
purchased on a pro rata basis. This
Offer is being made to all Limited
Partners and is not conditioned upon
a minimum amount of Interests being
tendered; provided however,no tender
will be accepted from a Limited
Partner if, as a result of the
tender, the Limited Partner would
continue to be a Limited Partner and
would hold fewer than one hundred
(100) Interests.The Offer is subject
to certain terms and conditions set
forth in the Offer.
8
<PAGE>
RISK FACTORS
------------
Limited Partners Tendering All or Any Portion of Their Interests Are
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Subject to Certain Risks:
- -------------------------
Purchase Price May Be Less Than Fair Market Value and Liquidation
----------------------------------------------------------------------
Value Per Interest and Is Less Than Book Value. The Interests are not traded on
- ----------------------------------------------
a recognized stock exchange or trading market and a readily identifiable, liquid
market for the Interests does not exist. The Offerors are aware of certain
secondary market transactions by which Interests were transferred at prices
ranging from $4.95 to $7.10 per Interest (including commissions and other
mark-ups) by Limited Partners to third parties during the period from January 1,
1997 to April 30, 1998. Additionally, the Partnership and its affiliate, Ocean
Ridge, have purchased 68,267 Interests during the period from March 1, 1995 to
September 10, 1998 at prices ranging from $4.00 to $6.00 per Interest. As of
September 30, 1998 and December 31, 1997, the book value of each Interest was
approximately $9.52 and $9.66, respectively. Neither these secondary market
transactions nor the Purchase Price necessarily reflects the value that Limited
Partners would realize from holding the Interests until termination or
liquidation of the Partnership, which could result in greater or lesser value.
The Offerors have not obtained an opinion from an independent third party
regarding the fairness of the Purchase Price. Furthermore, the Offerors did not
obtain an appraisal of the Partnership's assets in establishing the Purchase
Price.
Negative Tax Consequences May Exist for Any Limited Partner Tendering
-----------------------------------------------------------------------
Interests. Limited Partners tendering and selling Interests pursuant to this
- ---------
Offer generally will recognize a gain or loss on the tender of his, her or its
Interests for federal and most state income tax purposes. The amount of gain or
loss realized will be, in general, the excess of the Purchase Price minus the
Limited Partner's adjusted tax basis in the Interests sold. Generally, the sale
of Interests held by a Limited Partner for more than twelve (12) months will
result in long-term capital gain or loss. Due to the complexity of tax issues,
Limited Partners are advised to consult their tax advisors with respect to their
individual tax situations before tendering their Interests pursuant to the
Offer. See Section 11, "Certain Federal Income Tax Consequences."
Conflict of Interest. A conflict of interest exists between Limited
--------------------
Partners who are tendering their Interests and the Partnership, the General
Partner and non-tendering Limited Partners. Tendering Limited Partners would
prefer a higher Purchase Price; the Partnership, the General Partner and
non-tendering Limited Partners would prefer a lower Purchase Price.
General Partner Makes No Recommendation to Limited Partners. The
-----------------------------------------------------------------
General Partner makes no recommendation regarding whether Limited Partners
should tender or retain their Interests. Limited Partners should make their own
decisions regarding whether to tender their Interests based upon their own
individual situation.
9
<PAGE>
Limited Partners Who Do Not Tender All or Any Portion of Their
-----------------------------------------------------------------------
Interests Are Subject to Certain Risks:
- --------------------------------------
The Partnership May Not Make Future Cash Distributions. The amount of
-------------------------------------------------------
funds required by the Partnership to fund the Offer is estimated to be
approximately $78,000 ($60,000 to purchase 10,000 Interests plus approximately
$18,000 for its proportionate share of the expenses associated with
administering the Offer; the expenses of the Offer will be apportioned between
the Offerors based on the number of Interests purchased by each Offeror). The
Partnership intends to fund these monies from its cash reserves. The use of the
Partnership's cash reserves to fund the Offer will have the effect of: (i)
reducing the existing cash available for future needs or contingencies and (ii)
reducing or eliminating the interest income that the Partnership earns on its
cash reserves. There can be no assurance that the Partnership will be able to
fund its future needs or contingencies, which may have a material adverse effect
on the Partnership's business or financial condition.
Increased Voting Control by Affiliates of the Partnership. If the Offer
---------------------------------------------------------
is fully subscribed, the percentage ownership of Interests held by persons
controlling, controlled by or under common control with the Partnership will
increase. As of December 31, 1998, the General Partner owned five (5) and the
Affiliate did not own any of the Partnership's outstanding Interests. The
General Partner and all Partners, members, affiliates and associates of the
General Partner or the Affiliate beneficially owned, in the aggregate, 5,743
Interests, representing approximately 1.0% of the Partnership's 575,736
outstanding Interests. Although this Offer is made to all Limited Partners, the
Partnership has been advised that neither the General Parnter nor any of the
partners, members, affiliates or associates of the General Partner or the
Affiliate intend to tender any Interests pursuant to the Offer. Assuming the
Offer is fully subscribed, the General Partner, the Affiliate, and partners,
members, affiliates and associates of the General Partner or the Affiliate, will
own, after the Offer, in the aggregate, 20,743 Interests representing
approximately 3.6% of the outstanding Interests, an increase of 2.6%. In
addition, other persons controlling, controlled by or under common control with
the Partnership, by virtue of the decreased number of outstanding Interests,
will have a greater percentage of the outstanding Interests. The increase in
ownership of Interests will enable these entities or individuals to have a
greater influence on certain matters voted on by Limited Partners, including
removal of the General Partner and termination of the Partnership.
Partnership Has No Current Plans to Liquidate. The Partnership has no
----------------------------------------------
current plan to liquidate its assets and to distribute the proceeds to its
Limited Partners nor does the Partnership contemplate resuming distributions to
the Limited Partners. Therefore, Limited Partners who do not tender their
Interests may not be able to realize any return on or of their investment in the
foreseeable future.
Reliance on Certain Tenants. The Partnership's financial condition and
---------------------------
ability to fund future cash needs including its ability to make future cash
distributions, if any, may be adversely affected by the bankruptcy, insolvency
or a downturn in business of any tenant occupying a significant portion of any
Partnership property or by a tenant's decision not to renew its lease. Failure
to release the space vacated by significant tenants on a timely basis and on
terms and conditions
10
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acceptable to the Partnership could have a material adverse effect on the
Partnership's results of operation and financial condition.
General Economic Risks Associated with Investments in Real Estate. All
-----------------------------------------------------------------
real property investments are subject to some degree of risk. Generally, equity
investments in real estate are illiquid and, therefore, the Partnership's
ability to promptly vary its portfolio in response to changing economic,
financial and investment conditions is limited. Real estate investments are also
subject to changes in economic conditions as well as other factors affecting
real estate values, including: (i) possible federal, state or local regulations
and controls affecting rents, prices of goods, fuel and energy consumption and
prices, water and environmental restrictions; (ii) increased labor and material
costs; and (iii) the attractiveness of the property to tenants in the
neighborhood. For a detailed discussion of the risks associated with investment
in real estate, refer to the "Risk Factors" set forth in the Partnership's
prospectus dated October 29, 1987.
11
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THE OFFER
Section 1. Background and Purposes of the Offer. The purpose of the
Offer is to provide Limited Partners who desire to liquidate their investment in
the Partnership with a method for doing so. With the exception of isolated
transactions, no established secondary trading market for the Interests exists
and pursuant to the Partnership Agreement, transfers of Interests are subject to
certain restrictions including the prior approval of the General Partner. The
General Partner believes that there are certain Limited Partners who desire
immediate liquidity, while other Limited Partners may not need or desire
liquidity and would prefer the opportunity to retain their Interests. The
General Partner believes that the Limited Partners should be entitled to make a
choice between immediate liquidity and continued ownership and, thus, believes
that the Offer being made hereby accommodates the differing goals of both groups
of Limited Partners.
Those Limited Partners who tender their Interests pursuant to the Offer
are, in effect, exchanging certainty and liquidity for the potentially higher
return of continued ownership of their Interests. The continued ownership of
Interests, however, entails the risk of loss of all or a portion of the Limited
Partner's investment. See "Risk Factors."
Neither the Offerors nor the General Partner has any current plans or
proposals that relate to or would result in: (i) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Partnership; (ii) a sale or transfer of a material amount of assets of the
Partnership; (iii) any change in the identity of the General Partner or in the
management of the Partnership, including, but not limited to, any plans or
proposals to change the number or term of the General Partner(s), to fill any
existing vacancy for the General Partner, or to change any material term of the
management agreement between the General Partner and the Partnership; (iv) any
material change in the present distribution policy, indebtedness or
capitalization of the Partnership; (v) any other material change in the
structure or business of the Partnership; or (vi) any change in the Partnership
Agreement or other actions that may impede the acquisition of control of the
Partnership by any person. The General Partner, however, may explore and pursue
any of these options in the future.
The purchase of Interests pursuant to the Offer will have the effect of
increasing the proportionate interest in the Partnership of Limited Partners
(including affiliates of the General Partner that own Interests) who do not
tender their Interests or tender only a portion of their Interests. Limited
Partners retaining their Interests may be subject to increased risks including
but not limited to: (1) reduction in the Partnership's cash reserves, which may
impact the Partnership's ability to fund its future cash requirements, thus
having a material adverse effect on the Partnership's financial condition; and
(2) increased voting control by the affiliates of the General Partner (including
the Affiliate) and members of the affiliates. See "Risk Factors." Interests that
are tendered to the Partnership in connection with this Offer will be retired,
although the Partnership may issue new interests from time to time in compliance
with the federal and state securities laws or any exemptions therefrom.
Interests purchased by the Affiliate will be held by the Affiliate. Neither the
Partnership
12
<PAGE>
nor the General Partner has plans to offer for sale any other additional
interests, but each reserves the right to do so in the future.
The General Partner intends to consider the desirability of the
Partnership making future tender offers to purchase interests following
completion of the Offer, but is not required to make any future offers. Although
the Partnership and its affiliates have from time to time purchased interests,
this is the first tender offer made by the Partnership or the Affiliate for
interests. See Section 2, "Offer to Purchase and Purchase Price; Expiration
Date; Determination of Purchase Price."
Section 2. Offer to Purchase and Purchase Price; Proration;
Expiration Date; Determination of Purchase Price.
Offer to Purchase and Purchase Price. The Offerors will, upon the terms
------------------------------------
and subject to the conditions of the Offer, described below, purchase in the
aggregate up to 20,000 Interests that are properly tendered by, and not
withdrawn prior to, the Expiration Date at a price equal to $6.00 per Interest;
provided however, that no tender will be accepted from a Limited Partner if, as
a result of the tender, the Limited Partner would continue to be a Limited
Partner and would hold fewer than one hundred (100) Interests. The Partnership
will purchase the first 10,000 Interests which are tendered and received by the
Partnership by, and not withdrawn prior to, the Expiration Date. If more than
10,000 Interests are tendered and received by the Partnership as a result of
this Offer, the Affiliate will purchase up to an additional 10,000 Interests
which are tendered by, and not withdrawn prior to, the Expiration Date.
If, on the Expiration Date, the Offerors determine that more than
20,000 Interests have been tendered during the Offer, each Offeror may: (i)
accept the additional Interests permitted to be accepted pursuant to Rule
13e-4(f)(1) promulgated under the Exchange Act, as amended; or (ii) extend the
Offer, if necessary, and increase the amount of Interests that the Offeror is
offering to purchase to an amount that the Offeror believes to be sufficient to
accommodate the excess Interests tendered as well as any Interests tendered
during the extended Offer.
Proration. If the Offer is oversubscribed and the Offerors do not act
---------
in accordance with (i) or (ii), above, or if the Offerors act in accordance with
(i) and (ii), above, but the Offer remains oversubscribed, then the Offerors
will accept Interests tendered prior to or on the Expiration Date for payment on
a pro rata basis. In the event of Proration, the number of Interests purchased
from a Limited Partner will be equal to a fraction of the Interests tendered,
the numerator of which will be the total number of Interests the Offerors are
willing to purchase and the denominator of which will be the total number of
Interests properly tendered.
Any fractional interests resulting from this calculation will be
rounded down to the nearest whole number. Fractions of Interests will not be
purchased. The Partnership will notify, in writing, all Limited Partners from
whom the Offerors will purchase fewer than the number of Interests tendered by
the Limited Partner. For any Interest tendered but not purchased by the
Offerors, a book entry will be made on the Partnership's books to reflect the
Limited Partner's ownership of the
13
<PAGE>
Interests not purchased. The Partnership will not issue a new Certificate of
Ownership for Interests not purchased by the Offerors, except upon written
request of the Limited Partner.
THIS OFFER IS NOT CONDITIONED UPON ANY MINIMUM AMOUNT OF INTERESTS
BEING TENDERED; PROVIDED, HOWEVER, NO TENDER WILL BE ACCEPTED FROM A LIMITED
PARTNER IF, AS A RESULT OF THE TENDER, THE LIMITED PARTNER WOULD CONTINUE TO BE
A LIMITED PARTNER AND WOULD HOLD FEWER THAN ONE HUNDRED (100) INTERESTS.
Expiration Date. The term "Expiration Date" means 12:00 Midnight,
----------------
Eastern Standard Time, on March 6, 1999, unless and until the Offerors extend
the period of time for which the Offer is open, in which event "Expiration Date"
will mean the latest time and date at which the Offer, as extended by the
Offerors, expires. The Partnership may extend the Offer, in its sole discretion,
by providing the Limited Partners with written notice of the extension;
provided, however, that if the Offer is oversubscribed, the Partnership or the
Affiliate may, each in its sole discretion, extend the Offer by providing the
Limited Partners with written notice of the extension. For a description of how
the Offer may be extended or terminated, see Section 13, "Extensions of Tender
Period; Terminations; Amendments."
Determination of Purchase Price. The Purchase Price represents the
---------------------------------
price at which the Offerors are willing to purchase Interests. No Limited
Partner approval is required or was sought regarding the determination of the
Purchase Price. No special committee of the Partnership, the Affiliate or the
Limited Partners has approved this Offer and no special committee or independent
person has been retained to act on behalf of the Partnership or the Affiliate.
Neither the Offerors nor the General Partner has obtained an opinion from an
independent third party regarding the fairness of the Purchase Price.
The Purchase Price offered by the Offerors was determined by the
Partnership in its sole discretion based on: (i) the value of recent sales of
Interests by Limited Partners to third parties in secondary market transactions;
(ii) the value of recent repurchases of interests by the Partnership; and (iii)
the value of recent purchases of Interests by Ocean Ridge. The General Partner
is aware of certain sales of Interests made at prices ranging from $4.95 to
$7.10 per Interest (including commissions and other mark-ups) by certain Limited
Partners to third parties during the period from January 1, 1997 to April 30,
1998. The Partnership has repurchased interests, and Ocean Ridge has also
purchased, Interests in secondary market transactions at prices ranging from
$4.00 to $6.00 per Interest during the period from March 1, 1995 to September
30, 1998. The information regarding transactions between Limited Partners and
third parties is based on the General Partner's knowledge and may not reflect
all transactions that have taken place during the time periods set forth above.
As of September 30, 1998 and December 31, 1997, the book value of each Interest
was approximately $9.52 and $9.66, respectively.
In determining the Purchase Price, the Partnership did not consider the
liquidation value per Interest, the book value per Interest and did not appraise
the value of its assets.
14
<PAGE>
Section 3. Procedure for Tendering Interests. Limited Partners that
wish to tender Interests pursuant to this Offer must submit a properly completed
and duly executed Letter of Transmittal and Substitute Form W-9, together with
the Certificate(s) of Ownership for the Interests being tendered or if the
Certificate(s) of Ownership for the Interests is(are) lost, stolen, misplaced or
destroyed, the Affidavit and Indemnification Agreement for Missing
Certificate(s) of Ownership executed by the Limited Partner attesting to such
fact (the "Affidavit"), and any other required documents, to NTS Investor
Services c/o Gemisys at the address listed in Section 15, "Address;
Miscellaneous." THE LETTER OF TRANSMITTAL, SUBSTITUTE FORM W-9, AND
CERTIFICATE(S) OF OWNERSHIP FOR THE INTERESTS BEING TENDERED (OR AFFIDAVIT, IF
APPLICABLE) AND ANY OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE PARTNERSHIP
ON OR BEFORE THE EXPIRATION DATE. NEITHER THE PARTNERSHIP NOR THE AFFILIATE WILL
ACCEPT INTERESTS RECEIVED BY THE PARTNERSHIP AFTER THE EXPIRATION DATE.
Method of Delivery. LIMITED PARTNERS ASSUME ANY RISK ASSOCIATED WITH
------------------
THE METHOD FOR DELIVERING THE LETTER OF TRANSMITTAL, SUBSTITUTE FORM W-9 AND
CERTIFICATE(S) OF OWNERSHIP FOR THE INTERESTS (OR THE AFFIDAVIT). THE
PARTNERSHIP RECOMMENDS THAT LIMITED PARTNERS SUBMIT ALL DOCUMENTS VIA REGISTERED
MAIL RETURN RECEIPT REQUESTED AND PROPERLY INSURED OR BY AN OVERNIGHT COURIER
SERVICE. LIMITED PARTNERS MAY CONFIRM RECEIPT OF A LETTER OF TRANSMITTAL BY
CONTACTING NTS INVESTOR SERVICES C/O GEMISYS AT THE ADDRESS AND TELEPHONE NUMBER
LISTED IN SECTION 15,"ADDRESS; MISCELLANEOUS."
Determination of Validity. All questions regarding the validity, form,
-------------------------
eligibility (including time of receipt) and acceptance for payment of any
Interests will be determined by the Partnership, in its sole discretion.
Notwithstanding the foregoing, if the Offer is oversubscribed, the Partnership
and the Affiliate may each decide to purchase Interests in excess of the initial
20,000 Interests. In that case, all questions regarding the validity, form or
eligibility (including time of receipt) and acceptance for payment of any
additional Interests purchased by either the Partnership or the Affiliate will
be determined by each respective party, in its sole discretion. Each
determination, whether made by the Partnership or the Affiliate, will be final
and binding. The Partnership or the Affiliate, if applicable, has the absolute
right to waive any of the conditions of the Offer or any defect or irregularity
in any tender, or in the related transmittal documents. Unless waived, any
defects or irregularities must be cured within the time period established by
the Partnership or the Affiliate. In any event, tenders will not be deemed to
have been made until all defects or irregularities have been cured or waived.
The Offerors are neither under any duty nor will they incur any liability for
failure to notify any tendering Limited Partner of any defects, irregularities
or rejections contained in the tenders.
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 14e-4 promulgated thereunder require that a person tendering
Interests on his, her or its behalf, must own
15
<PAGE>
the Interests tendered. Section 10(b) and Rule 14e-4 provide a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person.
The tender of Interests pursuant to any of the procedures described
herein constitutes acceptance by the tendering Limited Partner of the terms and
conditions of the Offer, including a representation and warranty that (i) the
tendering Limited Partner owns the Interests being tendered within the meaning
of Rule 14e-4; and (ii) the tender complies with Rule 14e-4.
Section 4. Withdrawal Rights. Any Limited Partner tendering Interests
pursuant to this Offer may withdraw the tender at any time prior to the
Expiration Date. For a withdrawal to be effective, it must be in writing and
received by NTS Investor Services c/o Gemisys via mail or facsimile at the
address or facsimile number set forth in the Section 15, "Address;
Miscellaneous" on or before the Expiration Date. Any notice of withdrawal must
specify the name of the person withdrawing the tender and the amount of
Interests previously tendered that are being withdrawn.
All questions as to form and validity of the notice of withdrawal will
be determined by the Partnership, in its sole discretion. If the Offer is
oversubscribed, all questions as to form and validity of the notice of
withdrawal will be determined by the Partnership or the Affiliate, each in its
sole discretion, for any Interests purchased by the Partnership or the
Affiliate, as the case may be, in excess of the initial 20,000 Interests. All
determinations made by the Partnership or the Affiliate will be final and
binding. Interests properly withdrawn will not thereafter be deemed to be
tendered for purposes of the Offer. However, withdrawn Interests may be
retendered by following the procedures set forth in Section 3, "Procedure for
Tendering of Interests" prior to the Expiration Date. Tenders made pursuant to
the Offer which are not otherwise withdrawn in accordance with this Section 4
"Withdrawal Rights," will be irrevocable.
Section 5. Purchase of Interests; Payment of Purchase Price. Upon the
terms and subject to the conditions of the Offer, the Offerors will pay $6.00
per Interest to each Limited Partner properly tendering its Interests. The
Purchase Price will be paid in the form of a check from the purchasing Offeror
to each Limited Partner. All monies due to each Limited Partner will be
delivered to the Limited Partner by first class U.S. Mail deposited in the
mailbox within five (5) business days after the Expiration Date. Under no
circumstances will interest be paid on the Purchase Price to be paid by the
Offerors for Interests tendered, regardless of any extension of the Offer or any
delay in making payment. In the event of Proration as set forth in Section 2,
"Offer to Purchase and Purchase Price; Proration; Expiration Date; Determination
of Purchase Price," the Offerors may not be able to determine the proration
factor and pay for those Interests that have been accepted for payment, and for
which payment is otherwise due, until approximately five (5) business days after
the Expiration Date.
Interests will be deemed purchased at the time of acceptance by the
Offerors but in no event earlier than the Expiration Date. Interests purchased
by the Partnership will be retired, although the
16
<PAGE>
Partnership may issue new interests from time to time in compliance with the
registration requirements of federal and state securities laws or exemptions
therefrom.
Interests purchased by the Affiliate will be held by the Affiliate.
Neither the Partnership nor the General Partner has plans to offer for sale any
other additional interests, but each reserves the right to do so in the future.
Section 6. Certain Conditions of the Offer.
Notwithstanding any other provision of this Offer, the Offerors will
not be required to purchase or pay for any Interests tendered and may terminate
the Offer as provided in Section 13, "Extensions of Tender Period; Terminations;
Amendments" or may postpone the purchase of, or payment for, Interests tendered
if any of the following events occur prior to the Expiration Date:
(a) there is a reasonable likelihood that consummation of the
Offer would result in the termination of the Partnership (as a
partnership) under Section 708 of the Code;
(b) there is a reasonable likelihood that consummation of the
Offer would result in termination of the Partnership's status as a
partnership for federal income tax purposes under Section 7704 of the
Code;
(c) as a result of the Offer, there would be fewer than three
hundred (300) holders of record, pursuant to Rule 13e-3 promulgated
under the Exchange Act;
(d) there shall have been instituted or threatened or shall be
pending any action or proceeding before or by any court or
governmental, regulatory or administrative agency or instrumentality,
or by any other person, which: (i) challenges the making of the Offer
or the acquisition by the Partnership or the Affiliate of Interests
pursuant to the Offer or otherwise directly or indirectly relates to
the Offer; or (ii) in the Partnership's reasonable judgment (determined
within five (5) business days prior to the Expiration Date), could
materially affect the business, condition (financial or other), income,
operations or prospects of the Partnership, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct
of the business of the Partnership, or materially impair the Offer's
contemplated benefits to the Partnership;
(e) there shall have been any action threatened or taken, or
approval withheld, or any statute, rule or regulation proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Partnership or the Affiliate, by any
government or governmental, regulatory or administrative authority or
agency or tribunal, domestic or foreign, which, in the Offerors'
reasonable judgment, would or might directly or indirectly:
17
<PAGE>
(i) delay or restrict the ability of the Partnership
or the Affiliate, or render the Partnership or the Affiliate
unable, to accept for payment or pay for some or all of the
Interests;
(ii) materially affect the business, condition
(financial or other), income, operations, or prospects of the
Partnership or the Affiliate, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct
of the business of the Partnership or the Affiliate;
(f) there shall have occurred:
(i) the declaration of any banking moratorium or
suspension of payment in respect of banks in the United States;
(ii) any general suspension of trading in, or
limitation on prices for, securities on any United States
national securities exchange or in the over-the-counter
market;
(iii) the commencement of war, armed hostilities or
any other national or international crises directly or
indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority
on, or any event which, in the Offerors' reasonable judgment,
might affect, the extension of credit by banks or other
lending institutions in the United States;
(v) (A) any significant change, in the Offerors'
reasonable judgment, in the general level of market prices of
equity securities or securities convertible into or
exchangeable for equity securities in the United States or
abroad or (B) any change in the general political, market,
economic, or financial conditions in the United States or
abroad that (1) could have a material adverse effect on the
business condition (financial or other), income, operations or
prospects of the Partnership, or (2) in the reasonable
judgment of the Offerors, makes it inadvisable to proceed with
the Offer; or
(vi) in the case of the foregoing existing at the
time of the commencement of the Offer, in the Offerors'
reasonable judgment, a material acceleration or worsening
thereof;
(g) any change shall occur or be threatened in the business,
condition (financial or otherwise), or operations of the Partnership,
that, in the Partnership's reasonable judgment, is or may be material
to the Partnership;
18
<PAGE>
(h) a tender or exchange offer for any or all of the Interests
of the Partnership, or any merger, business combination or other
similar transaction with or involving the Partnership, shall have been
proposed, announced or made by any person;
(i) (i) any entity, "group" (as that term is used in Section
13(d)(3) of the Exchange Act) or person (other than entities, groups or
persons, if any, who have filed with the Commission on or before
December 7, 1998 a Schedule 13G or a Schedule 13D with respect to any
of the Interests) shall have acquired or proposed to acquire beneficial
ownership of more than 5% of the outstanding Interests; or (ii) such
entity, group, or person that has publicly disclosed any such
beneficial ownership of more than 5% of the Interests prior to such
date shall have acquired, or proposed to acquire, beneficial ownership
of additional Interests constituting more than 2% of the outstanding
Interests or shall have been granted any option or right to acquire
beneficial ownership of more than 2% of the outstanding Interests; or
(iii) any person or group shall have filed a Notification and Report
Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
made a public announcement reflecting an intent to acquire the
Partnership or its assets; or
(j) the General Partner determines that it is not in best
interest of the Partnership to purchase Interests pursuant to the
Offer;
which, in the reasonable judgment of the Offerors, in any such case and
regardless of the circumstances (including any action of the Partnership or the
Affiliate) giving rise to such event, makes it inadvisable to proceed with the
Offer or with such purchase or payment. The foregoing conditions are for the
sole benefit of the Partnership and the Affiliate and may be asserted by the
Partnership or the Affiliate on their respective behalf regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Partnership or the Affiliate) or may be waived by the
Partnership or the Affiliate in whole or in part. The Offerors' failure at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Partnership
or the Affiliate concerning the events described in this Section 6, "Certain
Conditions of the Offer" shall be final and binding on all parties. As of the
date hereof, the Offerors believe that neither paragraph (a) nor paragraph (b)
of this Section 6, "Certain Conditions of the Offer" will prohibit the
consummation of the Offer.
Section 7. Cash Distribution Policy.
The Partnership commenced operations in October, 1987 and anticipated
providing Limited Partners with 8% non-cumulative distributions. A two percent
(2%) cash distribution has been paid on each Interest in every calendar quarter,
beginning with the quarter ended June 30, 1988. The Partnership intends to make
future cash distributions, although it is not obligated to do so. Limited
Partners that tender the Interests pursuant to the Offer will not be entitled to
receive any cash distributions made, if any, after the Expiration Date, on any
Interests which are tendered and accepted by the Offerors. There can be no
assurance that the Partnership will make any distributions in the future to
Limited Partners who continue to own Interests following completion of the
Offer.
See Section 10, "Certain Information About the Partnership."
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<PAGE>
Section 8. Effects of the Offer.
In addition to the effects of the Offer on tendering and non-tendering
Limited Partners and upon the General Partner as set forth in the "Risk Factors"
of this Offer to Purchase, the Offer will affect the Partnership in several
other respects:
The Partnership will use some or all of its existing cash reserves to
purchase Interests. The use of the Partnership's cash reserve will have the
effect of: (i) reducing the cash available to fund future needs and
contingencies or to make future distributions; and (ii) reducing or eliminating
the Partnership's present interest income earned on such cash reserves.
Financial statements giving pro forma effect of the Offer, assuming the purchase
by the Partnership of 10,000 Interests at $6.00 per Interest, are attached
hereto as Appendix A.
Upon completion of the Offer, the Offerors may consider purchasing any
interests not purchased in the Offer. Any such purchases may be on the same
terms as the terms of this Offer or on terms which are more favorable or less
favorable to Limited Partners than the terms of this Offer. Rule 13e-4
promulgated under the Exchange Act prohibits the Offerors from purchasing any
Interests, other than pursuant to the Offer, until at least ten (10) business
days after the Expiration Date. Any possible future purchases by the Partnership
will depend on many factors, including but not limited to, the market price of
Interests, the results of the Offer, the Partnership's business and financial
position and general economic market conditions.
Section 9. Source and Amount of Funds. The total amount of funds
required to complete this Offer is approximately $156,000 (including $120,000 to
purchase 20,000 Interests plus approximately $36,000 for expenses related to
administering the Offer). The Partnership expects to fund monies required to
complete its purchases and to pay its portion of expenses (approximately $60,000
to purchase 10,000 Interests and approximately $18,000 for its proportionate
share of expenses related to administering the Offer; the expenses of the Offer
will be apportioned between the Offerors based on the number of Interests
purchased by each Offeror) from its cash reserves. As of December 31, 1997 and
September 30, 1998 the Partnership had unrestricted cash and cash equivalents
equal to $164,714 and $518,825, respectively. If the Offer is oversubscribed and
the Partnership, in its sole discretion, decides to purchase Interests in excess
of 10,000 Interests, the Partnership will fund these additional purchases and
expenses, if any, from its cash reserves.
The Affiliate expects to fund monies required to complete its purchases
and to pay its portion of expenses (approximately $60,000 to purchase 10,000
Interests and approximately $18,000 for its proportionate share of expenses
related to administering the Offer; the expenses of the Offer will be
apportioned between the Offerors based on the number of Interests purchased by
each Offeror) from cash contributions to be made to the Affiliate by its
members. If the Offer is oversubscribed and the Affiliate, in its sole
discretion, decides to purchase Interests in excess of 10,000 Interests, the
Affiliate will fund these additional purchases and expenses, if any, from these
cash contributions.
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Section 10. Certain Information About the Partnership
Certain Information About the Partnership. The Partnership was formed
------------------------------------------
in February, 1988 under the laws of the State of Florida. The general partner is
NTS-Properties Associates VII, a Kentucky limited partnership. Except as
otherwise provided in the Partnership Agreement, NTS-Properties Associates VII
owns a one percent (1%) interest in the Partnership and the limited partners own
a ninety-nine percent (99%) interest in the Partnership.
The Partnership owns the following properties and joint venture interests:
- The Park at the Willows, a 48-unit luxury apartment complex
located on a 2.8 acre tract in Louisville, Kentucky, acquired
complete by the Partnership. The occupancy level of the apartment
complex at September 30, 1998 was 88%.
- Park Place Apartments Phase II, a 132-unit luxury apartment
complex located on an 11 acre tract in Lexington, Kentucky,
constructed by the Partnership. The occupancy level of the
apartment complex at September 30, 1998 was 86%.
- A joint venture interest in Blankenbaker Business Center 1A, a
business center with approximately 50,000 net rentable ground
floor square feet and approximately 50,000 net rentable mezzanine
square feet located in Louisville, Kentucky, acquired complete by
the joint venture between the Partnership and NTS-Properties Plus
Ltd., an affiliate of the General Partner of the Partnership. The
Joint Venture Agreement was amended to admit NTS-Properties IV.,
Ltd., an affiliate of the General Partner of the Partnership,
("NTS-Properties IV") during 1994. The Partnership's percentage
interest in the joint venture was 31% at June 30, 1998. The
occupancy level at Blankenbaker Business Center 1A at September
30, 1998 was 100%.
The Partnership has a fee title interest in each of the properties that
it owns. The joint venture in which the Partnership is a partner has a fee title
interest in the property that it owns. In the opinion of the Partnership's
management, the properties are adequately covered by insurance.
A wholly-owned subsidiary of The Prudential Insurance Company of
America (Prudential Service Bureau, Inc.) has leased 100% of Blankenbaker
Business Center 1A through July 2005. In addition to monthly rental payments,
Prudential Service Bureau, Inc. is obligated to pay substantially all of the
operating expenses attributable to its space. Blankenbaker Business Center 1A's
rental and other income remained fairly constant for the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997.
If present trends continue, the Partnership will be able to continue at
its current level of operations without the need of any additional financing.
Current occupancy levels are considered adequate to continue the operations of
the Partnership's properties.
As of September 30, 1998, other than the planned renovation of the
clubhouse at the Park Place apartment community, the Partnership had no material
commitments for renovations or capital improvements.
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The Partnership is presently principally engaged in the leasing and
management of a commercial business center and residential apartment complexes.
A presentation of information concerning industry segments is not applicable.
The current business of the Partnership is consistent with the original
purpose of the Partnership which was to acquire, directly or by joint venture,
unimproved or partially improved land, to construct and otherwise develop
thereon apartment complexes or commercial properties, and to own and operate the
completed properties. The original purpose also includes the ability of the
Partnership to invest in fully improved properties, either directly or by joint
venture. The Partnership's properties are in a condition suitable for their
intended use.
The Partnership intends to hold the Properties until such time as sale
or other disposition appears to be advantageous with a view to achieving the
Partnership's investment objectives or it appears that such objectives will not
be met. In deciding whether to sell a Property, the Partnership will consider
factors such as potential capital appreciation, cash flow and federal income tax
considerations, including possible adverse federal income tax consequences to
the Limited Partners. The General Partner of the Partnership is currently
exploring the marketability of certain of its properties, and has not yet
determined if any of the properties might be sold in the next 12 months, and
there are no contracts for sale under negotiation at the present time.
Section 11. Certain Federal Income Tax Consequences.
Certain Federal Income Tax Consequences of the Offer. The following is
-----------------------------------------------------
a general summary under currently applicable law of certain federal income tax
considerations generally applicable to the sale of Interests pursuant to the
Offer. The following summary is for general information only, and the tax
treatment described herein may vary depending upon each Limited Partner's
particular situation. Certain Limited Partners (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions or
broker/dealers, foreign corporations, and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. In addition, the summary does not address the federal income tax
consequences to all categories of Interest holders, nor does it address the
federal income tax consequences to persons who do not hold the Interests as
"capital assets," as defined by the Internal Revenue Code of 1986, as amended
(the "Code"). No ruling from the Internal Revenue Service ("IRS") will be sought
with respect to the federal income tax consequences discussed herein; thus,
there can be no assurance that the IRS will agree with the conclusions stated
herein. Limited Partners are urged to consult their own tax advisors as to the
particular tax consequences of a tender of their Interests pursuant to the
Offer, including the applicability and effect of any state, local, foreign or
other tax laws, any recent changes in applicable tax laws and any proposed
legislation. The following information is intended as a general statement of
certain tax considerations, and Limited Partners should not construe this as
legal or tax advice.
Sale of Interests Pursuant to the Offer. The receipt of cash for
-------------------------------------------
Interests pursuant to the Offer will be a taxable transaction for federal income
tax purposes and may also be a taxable transaction under applicable state, local
and other tax laws. The purchase of Interests pursuant to the Offer will be
deemed a sale of the Interests by the tendering Limited Partner. The payment for
a Limited
22
<PAGE>
Partner's Interests may be in complete liquidation of that portion of the
Limited Partner's ownership in the Partnership represented by the purchased
Interests. The recipient of such payments is taxable to the extent of any gain
or loss recognized in connection with such sale. In general, and subject to the
recapture rules of the Code Section 751 discussed below, a holder will recognize
capital gain or loss at the time his or her Interests are purchased by the
Partnership to the extent that the money distributed to him or her exceeds his
or her adjusted basis in the purchased Interests. Upon a sale of an Interest
pursuant to the Offer, a Limited Partner will be deemed to have received money
in the form of any cash payments to him or her and to the extent he or she is
relieved from his or her proportionate share of liabilities, if any, to which
the Partnership's assets are subject. A Limited Partner will thus be required to
recognize gain upon the sale of his or her Interests if the amount of cash he or
she received, plus the amount he or she is deemed to have received as a result
of being relieved of his or her proportionate share of Partnership nonrecourse
liabilities (if any), exceeds the adjusted basis of the Limited Partner in the
purchased Interests. The income taxes payable upon the sale must be determined
by each Limited Partner on the basis of his or her own financial interests.
The adjusted basis of a Limited Partner's Interests is calculated by
taking his or her initial basis and making certain additions and subtractions
thereto. The initial basis of a Limited Partner is the amount paid for each
Interest ($20 per Interest for those who purchased in the initial offering),
increased by a Limited Partner's proportionate share of nonrecourse liabilities,
if any, to which the Partnership's assets are subject and by the share of
Partnership taxable income, capital gains and other income items allocated to
the Interest. There was nonrecourse debt attributed to the Interests in the
approximate amount of $5,143,957 as of September 30, 1998. Basis is reduced by
cash distributions and by the share of Partnership losses allocated to the
Interest.
A selling Limited Partner will be allocated a pro rata share of the
Partnership's taxable income or loss for 1998 with respect to the Interests sold
in accordance with the provisions of the Partnership Agreement concerning
transfers of Interests. Such allocation will affect the Limited Partner's
adjusted tax basis in his or her Interests and, therefore, the amount of the
Limited Partner's taxable gain or loss upon a sale of Interests pursuant to this
Offer. For individuals, trusts and estates the income allocated will be treated
as ordinary income which could be taxed at a rate as high as 39.6% for federal
income tax purposes, while the corresponding reduction in taxable gain upon the
sale of the Interests will result in tax savings of no more than 28% of the
reduction in taxable gain. The Partnership's net income for the nine-month
period ended September 30, 1998 was $362.
In determining the tax consequences of accepting the Offer, the
Partnership's payments for Interests will be deemed to be equal to the $6 cash
payment per Interest plus a pro rata share of the Partnership's nonrecourse debt
(together, the "Selling Price"). The taxable gain (or loss) to be incurred as a
consequence of accepting the Offer is determined by subtracting the Selling
Price from the adjusted basis of the purchased Interest.
Each Limited Partner must determine his or her own adjusted tax basis
because it will vary depending upon when the Limited Partner purchased the
Interests and the amount of distributions received for each Interest, which
varies depending upon the date on which the Limited Partner was admitted to the
Partnership.
23
<PAGE>
A taxable gain, if any, on the disposition of Interests must be
allocated between ordinary income and long term capital gain. Long term capital
gain or loss will be realized on such sale by a Limited Partner if: (1) he or
she is not a "dealer" in securities; (2) he or she has held the Interests for
longer than twelve (12) months; and (3) the Partnership has no Section 751
assets. To the extent that a portion of the gain realized on the sale of an
Interest is attributable to Section 751 assets (i.e., "unrealized receivables"
and "inventory items of the Partnership which have appreciated substantially in
value") a Limited Partner will recognize ordinary income, and not a capital
gain, upon the sale of the Interest. For purposes of Code Section 751, certain
depreciation deductions claimed by the Partnership (recapturable cost recovery
allowance) are treated as if they were an "unrealized receivable." Thus, gain,
if any, recognized by a Limited Partner who sells an Interest will be ordinary
income in an amount not to exceed his or her share of the Partnership's
recapturable cost recovery allowance. Furthermore, if the Partnership were
deemed to be a "dealer" in real estate for federal income tax purposes, the
property held by the Partnership might be treated as "inventory items of the
Partnership which have appreciated substantially in value" for purposes of Code
Section 751 and a Limited Partner tendering his or her Interest would recognize
ordinary income, in an amount equal to his or her share of the appreciation in
value of the Partnership's real estate inventory. The General Partner does not
believe it has operated the Partnership's business in a manner as to make the
Partnership a "dealer" for tax purposes.
For taxable Limited Partners the amount of recapturable cost recovery
allowance per Interest purchased by a Limited Partner in the original offering
is estimated to be $3.00 as of September 30, 1998. Therefore, a maximum of $3.00
of the taxable gain per Interest will be considered to be ordinary income, with
the balance of the taxable gain considered to be capital gain for federal income
tax purposes for the Limited Partners who hold their Interests as capital
assets. Ordinary income recognized in 1998 is taxed at a stated maximum rate of
39.6% for federal income tax purposes. Net capital gains are taxed for federal
income tax purposes at a stated maximum rate of 20% for Interests held at least
twelve (12) months. The tax rates may actually be somewhat higher, depending on
the taxpayer's personal exemptions and amount of adjusted gross income. A
taxable loss, if any, on the disposition of Interests will be recognized as a
capital loss for federal income tax purposes for Limited Partners who hold their
Interests as capital assets. Tax exempt Limited Partners may be subject to a
recapturable cost recovery allowance. The amount of recapturable cost recovery
allowance per Interest for tax exempt Limited Partners, if any, may be less than
that for taxable Limited Partners. Tax exempt Limited Partners subject to
unrelated business taxable income (UBTI) should consult their tax advisor to
determine what amount, if any, of the recapturable cost recovery allowance
should be reported as UBTI.
Foreign Limited Partners. Gain realized by a foreign Limited Partner on
------------------------
a sale of Interests pursuant to this Offer will be subject to federal income
tax. Under Code Section 1445 and related regulations, the transferee of a
partnership interest held by a foreign person is generally required to deduct
and withhold a tax equal to 10% of the amount realized on the disposition. The
Partnership or the Affiliate, as the case may be, will withhold 10% of the
amount realized by a tendering foreign Limited Partner. Amounts withheld would
be creditable against a foreign Limited Partner's federal income tax liability,
and if in excess thereof, a refund could be obtained from the IRS by filing a
U.S. income tax return.
24
<PAGE>
To prevent back-up federal income tax withholding equal to 31% of the
payments made pursuant to the Offer, each Limited Partner (except a foreign
Limited Partner) who does not otherwise establish an exemption from such
withholding must notify the Partnership of the Limited Partner's correct
taxpayer identification number (or certify that such taxpayer is awaiting a
taxpayer identification number) and provide certain other information by
completing a Substitute Form W-9 to the Partnership. (For each Limited Partner's
convenience, a Substitute Form W-9 is enclosed herein). Certain Limited
Partners, including corporations, are not subject to the withholding and
reporting requirements. Foreign Limited Partners are subject to other
requirements.
Retirement Plan Investors. Qualified pension, profit sharing and stock
bonus plans and IRA's (collectively "Qualified Plans") are generally exempt from
taxation except to the extent that their UBTI, determined in accordance with
Code Sections 511-514, exceeds $1,000 in any taxable year. Code Section
512(b)(5) provides generally that UBTI does not include gains or losses from the
disposition of property other than inventory or property held primarily for sale
to customers in the ordinary course of business. However, Treasury Regulation
1.1245-6(b) provides that Code Section 1245 overrides the nonrecognition
provisions of subtitle A of the Code, including Code Section 512(b)(5), if
applicable; furthermore Code Section 12(b)(4) provides that notwithstanding Code
Section 512(b)(5), a portion of the gain from the sale of "debt-financed
property" (as defined in Section 514) may be treated as UBTI. Because a portion
of the Partnership's assets are "debt financed," a portion of the gain, if any,
recognized by a Qualified Plan on the sale of an interest may be UBTI. If a
Qualified Plan is not a "dealer" in securities, the remaining portion of any
gain from the sale of Interests will not be UBTI unless the Partnership is
deemed to be a "dealer" in real estate. The General Partner does not believe the
Partnership's business has been operated in such a manner as to make it a
dealer, but there is no assurance that the IRS may not contend that the
Partnership is a dealer. If the Partnership obtains financing to purchase
Interests, the IRS may contend that each nonredeeming Limited Partner has
acquired an interest in debt-financed property, in addition to the current
debt-financed property of the Partnership. See Section 9, "Source and Amount of
Funds."
Section 12. Transactions and Arrangements Concerning Interests. Based
upon the Partnership's and Affiliate's records and information provided to the
Partnership by the General Partner and affiliates of the General Partner,
neither the Partnership, General Partner, the Affiliate nor, to the best of the
Partnership's knowledge, any controlling person of the Partnership, the General
Partner, or the Affiliate, has effected any transactions in the Interests during
the forty (40) business days prior to the date hereof.
Section 13. Extensions of Tender Period; Terminations; Amendments. The
Partnership has, or if the Offer is oversubscribed, each Offeror has, the right
at any time and from time to time, to extend the period of time during which the
Offer is open by giving written notice of the extension to each Limited Partner.
If there is any extension, all Interests previously tendered and not purchased
or withdrawn will remain subject to the Offer and may be purchased by the
Offerors, except to the extent that such Interests may be withdrawn as set forth
in Section 4, "Withdrawal Rights."
If the Offer is oversubscribed, each Offeror has the right to purchase
additional Interests. If either Offeror decides, in its sole discretion, to
increase the amount of Interests being sought and,
25
<PAGE>
at the time that the notice of such increase is first published, sent or given
to holders of Interests, the Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth business day from, and
including, the date that such notice is first so published, sent or given, then
the Offer will be extended until the expiration of such period of ten (10)
business days.
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 Midnight, Eastern Standard Time. The Offerors have the right:
(i) to terminate the Offer and not to purchase or pay for any Interests not
previously purchased or paid for upon the occurrence of any of the conditions
specified in Section 6, "Certain Conditions of the Offer," by giving written
notice of such termination to the Limited Partners and making a public
announcement thereof; or (ii) at any time and from time to time, to amend the
Offer in any respect. All extensions, delays in payment or amendments will be
followed by public announcements thereof, such announcements in the case of an
extension to be issued no later than 9:00 a.m. Eastern Standard Time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Offerors may choose to make any public
announcement, except as provided by applicable law (including Rule 13e-4(e)(2)
under the Exchange Act), the Offerors have no obligation to publish, advertise
or otherwise communicate any such public announcement, other than by issuing a
release to the Dow Jones News Service.
Section 14. Fees and Expenses. The Offerors will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Interests pursuant to the Offer. The Offerors will reimburse brokers, dealers,
commercial banks and trust companies for customary handling and mailing expenses
incurred in forwarding the Offer to their customers.
Section 15. Address; Miscellaneous.
Address. All executed copies of the Letter of Transmittal, Substitute
-------
Form W-9 and the Certificate(s) of Ownership for the Interests being tendered
(or the Affidavit) must be sent via mail or overnight courier service to the
address set forth below. Manually signed facsimile copies of the Letter of
Transmittal will not be accepted. The Letter of Transmittal, Substitute Form W-9
and Certificate(s) of Ownership for the Interests being tendered (or the
Affidavit) should be sent or delivered by each Limited Partner or such Limited
Partner's broker, dealer, commercial bank, trust company or other nominee as
follows:
By Mail, Hand Delivery or Overnight Mail/Express:
NTS Investor Services
c/o Gemisys
7103 S. Revere Parkway
Englewood, CO 80112
Any questions, requests for assistance, or requests for additional
copies of this Offer to Purchase, the Letter of Transmittal or any other
documents relating to this Offer also may be directed to NTS Investor Services
c/o Gemisys at the above-listed address or at: (800) 387-7454 or by facsimile
at: (303) 705-6171.
26
<PAGE>
Miscellaneous. The Offer is not being made to, nor will tenders be
-------------
accepted from, Limited Partners in any jurisdiction in which the Offer or its
acceptance would not comply with the securities or Blue Sky laws of such
jurisdiction. Neither Offeror is aware of any jurisdiction in which the Offer or
tenders pursuant thereto would not be in compliance with the laws of such
jurisdiction. The Offerors reserve the right to exclude Limited Partners in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. The
Offerors believe such exclusion is permissible under applicable laws and
regulations, provided the Offerors make a good faith effort to comply with any
state law deemed applicable to the Offer.
The Offerors have filed an Issuer Tender Offer Statement on
Schedule 13E-4 and a Tender Offer Statement on Schedule 14D-1 with the
Securities and Exchange Commission ("Commission") which include certain
information relating to the Offer summarized herein. A copy of this statement
may be obtained from the Partnership by contacting NTS Investor Services c/o
Gemisys at the address and phone number set forth in this Section 15, "Address;
Miscellaneous" or from the public reference office of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission
also maintains a site on the World Wide Web at http://www.sec.gov that contains
reports electronically filed by the Partnership with the Commission.
NTS-Properties VII, Ltd.
February 9, 1999
27
<PAGE>
APPENDIX A
----------
The Partnership's Financial Statements Giving
Pro Forma Effect of the Offer
The following unaudited pro forma balance sheet and income statement of
the Partnership are presented to give effect of the Offer as if it was fully
subscribed and completed before September 30, 1998 and December 31, 1997. Each
pro forma statement contains four columns. The two columns on the left contain
certain financial information extracted or derived from the Partnership's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and its
Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
respectively. The Quarterly and Annual Reports contain more comprehensive
financial information than the information contained herein and were filed with
the Securities and Exchange Commission ("Commission") pursuant to the Securities
Exchange Act of 1934. The information extracted from the Quarterly and Annual
Reports is qualified in its entirety by reference to the reports and the
financial statements (including the notes) contained in the reports. The two
columns on the right present the quarterly and annual reports of the Partnership
giving effect of the Offer as if the Offer was fully subscribed and completed
before September 30, 1998 and December 31, 1997. The information presented in
these columns is based on certain assumptions made by the Partnership in its
good faith judgment, such as, the amount of expenses it will incur in
administering the Offer. These unaudited pro forma statements are not
necessarily indicative of what the Partnership's actual financial condition
would have been for the quarter ended September 30, 1998 and the year ended
December 31, 1997, nor do they purport to represent the future financial
position of the Partnership.
28
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
BALANCE SHEETS AND STATEMENT OF PARTNERS' EQUITY
------------------------------------------------
<CAPTION>
Actual Actual After Tender After Tender
As of As of As of As of
September 30, December 31, September 30, December 31,
1998 1997 1998 1997
---- ---- ---- ----
ASSETS
- ------
<S> <C> <C> <C> <C>
Cash and equivalents $ 518,825 $ 164,714 $ 458,825 $ 104,714
Cash and equivalents - restricted 59,958 176,636 59,958 176,636
Investment securities -- 338,129 -- 338,129
Accounts receivable 1,593 858 1,593 858
Land, buildings and amenities, net 10,106,119 10,361,786 10,106,119 10,361,786
Other assets 137,093 137,022 137,093 137,022
----------- ----------- ----------- -----------
$10,823,588 $11,179,145 $10,763,588 $11,119,145
=========== =========== =========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable $ 5,143,957 $ 5,303,947 $ 5,143,957 $ 5,303,947
Accounts payable 55,327 38,815 55,327 38,815
Distributions payable 29,078 60,426 29,078 60,426
Security deposits 31,275 36,325 31,275 36,325
Other liabilities 82,315 6,787 82,315 6,787
----------- ----------- ----------- -----------
5,341,952 5,446,300 5,341,952 5,446,300
Partners' equity 5,481,636 5,732,845 5,421,636 5,672,845
----------- ----------- ----------- -----------
$10,823,588 $11,179,145 $10,763,588 $11,119,145
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
STATEMENTS OF OPERATIONS
------------------------
<CAPTION>
After Tender After Tender
September 30, December 31, September 30, December 31,
1998 1997 1998 1997
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Rental income $1,450,721 $ 2,064,236 $ 1,450,721 $ 2,064,236
Interest and other income 20,543 29,516 20,543 29,516
---------- ----------- ----------- -----------
1,471,264 2,093,752 1,471,264 2,093,752
EXPENSES:
Operating expenses 346,890 460,177 346,890 460,177
Operating expenses - affiliated 192,275 230,130 192,275 230,130
Write-off of unamortized
land improvements and
amenities 10,743 17,797 10,743 17,797
Interest expense 297,781 434,680 297,781 434,680
Management fees 75,648 106,264 75,648 106,264
Real estate taxes 75,803 99,458 75,803 99,458
Professional and administrative
expenses 46,423 58,895 46,423 58,895
Professional and administrative
expenses - affiliated 63,990 79,075 63,990 79,075
Depreciation and amortization 361,349 515,005 361,349 515,005
---------- ----------- ----------- -----------
1,470,902 2,001,481 1,470,902 2,001,481
---------- ----------- ----------- -----------
Net income before extraordinary
item 362 92,271 362 92,271
Extraordinary item - write-off
unamortized loan costs -- (27,784) -- (27,784)
---------- ----------- ----------- -----------
Income before tender offer cost 362 64,487 362 64,487
Tender offer cost -- -- (36,000) (36,000)
---------- ----------- ----------- -----------
Net income (loss) $ 362 $ 64,487 $ (35,638) $ 28,487
========== =========== =========== ===========
Net income (loss) allocated to
the limited partners:
Income (loss) before
extraordinary item $ 358 $ 91,348 $ 358 $ 91,348
Extraordinary Item -- (27,506) -- (27,506)
---------- ----------- ----------- -----------
Income (loss) before tender
offer cost 358 63,842 358 63,842
Tender offer cost -- -- (35,640) (35,640)
---------- ----------- ----------- -----------
Net income (loss) $ 358 $ 63,842 $ (35,282) $ 28,202
========== =========== =========== ===========
Net income (loss) per limited
partnership unit:
Income (loss) before
extraordinary item $ .00 $ .15 $ .00 $ .16
Extraordinary item -- (.09) -- (.05)
---------- ----------- ----------- -----------
Income (loss) before tender
offer cost .00 .06 .00 .11
Tender offer cost -- -- (.10) (.10)
---------- ----------- ----------- -----------
Net income (loss) $ .00 $ .06 $ (.10) $ .01
========== =========== =========== ===========
Weighted average number of units 583,606 598,526 568,606 583,526
========== =========== =========== ===========
</TABLE>
<PAGE>
EXHIBIT (c)(2)
Capital Contribution Agreement
dated January 20, 1999 executed
by the Members of ORIG, LLC.
29
<PAGE>
CAPITAL CONTRIBUTION AGREEMENT
This Capital Contribution Agreement (the "Agreement") is made as of the
20th day of January, 1999 by and between J.D. Nichols ("Nichols") and Brian F.
Lavin ("Lavin"), being all of the members of ORIG, LLC, a Kentucky limited
liability company ("ORIG"). Nichols and Lavin are individually referred to as a
"Member" and collectively referred to as the "Members".
RECITALS:
WHEREAS, ORIG has filed with the Securities and Exchange Commission
offers to purchase (the "Tender Offers") limited partnership interests
("Interests") jointly with each of the following limited partnerships: (i)
NTS-Properties III, a Georgia limited partnership; (ii) NTS-Properties IV.,
Ltd., a Kentucky limited partnership; (iii) NTS-Properties VII, a Florida
limited partnership; (iv) NTS Properties VI, a Maryland limited partnership; and
(v) NTS-Properties VII, a Florida limited partnership (collectively, the
"Partnerships");
WHEREAS, pursuant to the terms and conditions of the Tender Offers,
ORIG anticipates accepting and purchasing Interests in each of the Partnerships;
WHEREAS, pursuant to the terms and conditions of the Tender Offers,
ORIG will be required to pay any and all of ORIG's expenses incurred in
connection with the Tender Offers (including, but not limited to, ORIG's
proportionate share of the legal, accounting, printing and mailing expenses
relating to the Tender Offers) (the "Expenses");
WHEREAS, the Members desire to make cash capital contributions to ORIG
(the "Capital Contributions") sufficient for ORIG to purchase the Interests and
to pay the Expenses; and
WHEREAS, each Member desires to receive membership interests in ORIG
proportionate to the Member's Capital Contributions.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Aggregate Capital Contributions: On or prior to the expiration of
---------------------------------
each of the Tender Offers, the Members shall make Capital Contributions, which,
in the aggregate, are sufficient for ORIG to purchase all Interests accepted by
ORIG pursuant to the Tender Offers and to pay any and all of the Expenses.
2. Individual Capital Contributions: On or prior to the expiration of
---------------------------------
each of the Tender Offers, each Member shall make a Capital Contribution to ORIG
in an amount to be unanimously agreed upon by the Members. The Members agree
that upon expiration of all of the Tender Offers, the approximate percentages of
the aggregate Capital Contributions shall be: (i) Nichols -- 90%; and (ii) Lavin
- -- 10%, unless otherwise agreed to in writing by the Members.
3. Disagreement: If the Members cannot agree upon the amounts of the
------------
Capital Contributions to be made by each Member upon the expiration of each
Tender Offer, Nichols hereby agrees to make all Capital Contributions necessary
to enable ORIG to fulfill its obligations pursuant to the Tender Offers.
1
<PAGE>
4. Membership Interest: At all times, each Member shall have a
--------------------
membership interest in ORIG calculated by dividing the Capital Contributions
made by the individual Member by the total of all Capital Contributions made by
the Members.
5. Miscellaneous:
-------------
a. Assignability. This Agreement shall not be assignable by
-------------
any of the parties hereto without the prior written consent of all of the
other parties.
b. Governing Law. The laws of the State of Kentucky will
--------------
govern all questions concerning the construction, validity and interpretation of
this Agreement and the performance of the obligations imposed by this Agreement.
c. Entire Agreement. This Agreement and other documents
-----------------
delivered or to be delivered pursuant to this Agreement contain or will contain
the entire agreement among the parties hereto with respect to the transactions
contemplated herein and supersede all previous oral and written agreements.
d. Amendment. This Agreement may be amended, modified, or
---------
supplemented only by written agreement of all of the Members.
e. Counterparts. This Agreement may be executed in several
------------
counterparts,each of which shall be deemed an original,but all of which together
shall constitute one and the same Agreement.
f. Further Assurances. The parties will, from time to time,
------------------
upon the reasonable request of any other party, execute, acknowledge and deliver
in proper form such further instruments and perform such further acts as may be
reasonably necessary or desirable to give effect to the transactions
contemplated by this Agreement.
g. Recitals: The recitals set forth above are incorporated by
--------
reference herein and made a part hereof as if fully set forth herein.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their signature to
be set forth below as of the day and year first written above.
/s/ J.D. Nichols
----------------
J.D. Nichols, a Member
/s/ Brian F. Lavin
------------------
Brian F. Lavin, a Member
Being all of the Members of ORIG, LLC
3
<PAGE>
