SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------
SCHEDULE TO
Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
NTS-Properties VII, Ltd.
(Name of Subject Company (issuer))
NTS-Properties VII, Ltd. (Offeror and Issuer)
ORIG, LLC (Offeror and Affiliate of Issuer)
(Names of Filing Persons(identifying status as offeror, issuer or other person))
LIMITED PARTNERSHIP INTERESTS
(Title of Class of Securities)
62942E506
(CUSIP Number of Class of Securities)
J.D. Nichols, Managing General Partner of
NTS-Properties Associates VII and Managing Member
of ORIG, LLC
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
filing persons)
Copy to:
Michael J. Choate, Esq.
Shefsky & Froelich Ltd.
444 North Michigan Avenue, Suite 2500
Chicago, Illinois 60611
(312) 836-4066
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction Valuation: $30,000 |Amount of Filing Fee
5,000 Limited Partnership Interests at $6.00 per Interest(a)| $6.00 (b)
- --------------------------------------------------------------------------------
(a) Calculated as the aggregate maximum purchase price for limited
partnership interests.
(b) Calculated as 1/50th of 1% of the Transaction Value.
o Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
Amount Previously Paid: __________________________ Not Applicable
Form or Registration No.: _________________________ Not Applicable
Filing Party: ____________________________________ Not Applicable
Date Filed: ______________________________________ Not Applicable
o Check box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to
which the statement relates:
|X| third-party tender offer subject to rule 14d-1.
|X| issuer tender offer subject to rule 13e-4.
o going private transaction subject to Rule 13e-3.
o amendment to Schedule 13D under rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: o
<PAGE>
Information in the Offer to Purchase is incorporated herein by reference.
Item 2. Subject Company Information
- ------------------------------------
(a) The name of the subject company is NTS-Properties VII, Ltd., a Florida
limited partnership (the "Partnership"). The Partnership's principal executive
offices are located at 10172 Linn Station Road, Louisville, Kentucky 40223 and
its telephone number is (502) 426-4800.
(b) This Schedule TO relates to an Offer to Purchase dated March 27, 2000
(the "Offer") by the Partnership and ORIG, LLC, a Kentucky limited liability
company and affiliate of the Partnership (the "Affiliate"), to purchase up to
5,000 limited partnership interests in the Partnership ("Interests"). As of
February 29, 2000, the Partnership had 555,736 outstanding Interests held by
1,109 holders of record.
(c) There is currently no established trading market for the Interests.
Item 3. Identity and Background of Filing Person
- ------------------------------------------------
(a) The Filing Persons for this Schedule TO are the Partnership, which is
also the subject company, and the Affiliate (collectively, the "Offerors"). The
following table names each person specified in Instruction C to Schedule TO. The
business address and telephone number of each person set specified in the
following table is 10172 Linn Station Road, Louisville, Kentucky 40223, (502)
426-4800.
Name Position / Relationship to Filing Persons
- ----------------------------- --------------------------------------------
NTS-Properties Associates VII General Partner of the Partnership
NTS Capital Corporation Corporate General Partner of NTS-
Properties Associates VII
J.D. Nichols Chairman of the Board and Sole Director of
NTS Capital Corporation and Managing
Member of the Affiliate
Brian F. Lavin President and Chief Operating Officer of NTS
Capital Corporation and Managing Member
of the Affiliate
Gregory A. Wells Senior Vice President and Chief Financial
Officer of NTS Capital Corporation
2
<PAGE>
(b) The principal business of the Affiliate is to invest in entities that
own commercial and residential real estate. The Affiliate is a Kentucky limited
liability company. During the past five years, the Affiliate has not been the
subject of any criminal proceedings. During the past five years, the Affiliate
was not a party to a judicial or administrative proceeding that resulted in a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violations of such laws
NTS-Properties Associates VII, a Kentucky limited partnership, is the
general partner of the Partnership (the "General Partner"). During the past five
years, the General Partner has not been the subject of any criminal proceedings.
During the past five years, the General Partner was not a party to a judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violations of such laws.
NTS Capital Corporation, a Kentucky corporation, is the corporate general
partner of the General Partner. During the past five years, NTS Capital
Corporation has not been the subject of any criminal proceedings. During the
past five years, NTS Capital Corporation was not a party to a judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violations of such laws.
(c) J.D. Nichols:
-------------
(1)-(2) During the past 5 years, Mr. Nichols has served as Chairman of the
Board of Directors of NTS-Development Company, a real estate development
corporation and a wholly-owned subsidiary of NTS Corporation. Mr. Nichols is the
Chairman of the Board of NTS Capital Corporation, the corporate general partner
of the General Partner. Mr. Nichols serves as the managing general partner of
the General Partner. Mr. Nichols is also a managing member of the Affiliate. The
address of NTS-Development Company, NTS Capital Corporation, and NTS- Properties
Associates VII is 10172 Linn Station Road, Louisville, Kentucky 40223.
(3) Mr. Nichols has not been the subject of any criminal proceedings.
(4) During the past five years, Mr. Nichols was not a party to a judicial
or administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violations of such laws.
(5) Mr. Nichols is a citizen of the United States.
3
<PAGE>
Brian F. Lavin:
---------------
(1)-(2) Since February, 1999, Mr. Lavin has served as President and Chief
Operating Officer of NTS-Development Company and NTS Capital Corporation. From
July, 1997 through February, 1999, Mr. Lavin served as Executive Vice President
of NTS-Development Company and NTS Capital Corporation. Mr. Lavin is also a
managing member of the Affiliate. The address of NTS-Development Company, NTS
Capital Corporation, and the General Partner is 10172 Linn Station Road,
Louisville, Kentucky 40223. Prior to July, 1997, Mr. Lavin served as the
Executive Vice President of Paragon Group, Inc. The address of Paragon Group,
Inc., is 7557 Rambler Road, Dallas, Texas, 75231.
(3) Mr. Lavin has not been the subject of any criminal proceedings.
(4) During the past five years, Mr. Lavin was not a party to a judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violations of such laws.
(5) Mr. Lavin is a citizen of the United States.
Gregory A. Wells:
-----------------
(1)-(2) Since July, 1999, Mr. Wells has served as Senior Vice President and
Chief Financial Officer of NTS-Development Company and NTS Capital Corporation.
The address of NTS-Development Company and NTS Capital Corporation is 10172 Linn
Station Road, Louisville, Kentucky 40223. From January, 1995 until May, 1998,
Mr. Wells served as Vice President and Treasurer of Hokanson Construction. From
May, 1998 through July, 1999, Mr. Wells served as Chief Financial Officer of
Hokanson Companies, Inc. The principal business of Hokanson Construction is
construction of commercial buildings and residences and the principal business
of Hokanson Companies, Inc., is property management. The address of Hokanson
Construction and Hokanson Companies, Inc., is 107 North Pennsylvania Street,
Indianapolis, Indiana 46204.
(3) Mr. Wells has not been the subject of any criminal proceedings.
(4) During the past five years, Mr. Wells was not a party to a judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violations of such laws.
(5) Mr. Wells is a citizen of the United States.
4
<PAGE>
Item 4. Terms of the Transaction
- --------------------------------
(b) Securities will not be purchased from officers, director or affiliates
of the subject company.
Item 5. Past Contracts, Transactions, Negotiations and Agreements
- -----------------------------------------------------------------
(a) NTS-Development Company, an affiliate of the General Partner, directs
the management of the Partnership's properties pursuant to a written agreement
(the "Management Agreement") between NTS Development Company and the
Partnership. Mr. Nichols has a controlling interest in NTS Capital Corporation
and is a general partner of the General Partner. Under the agreement, NTS
Development Company establishes rental policies and rates and directs the
marketing activity of leasing personnel. It also coordinates the purchase of
equipment and supplies, maintenance activity and the selection of all vendors,
suppliers and independent contractors.
Pursuant to the Management Agreement, property management fees of $76,514
(nine months ended September 30, 1999) and $101,354(1998) were paid to
NTS-Development Company. The fee is equal to 5% of gross revenues from
residential properties and 6% of gross revenues from commercial properties. Also
pursuant to the Management Agreement, NTS-Development Company will receive a
repair and maintenance fee equal to 5.9% of costs incurred which relate to
capital improvements. The Partnership has paid NTS-Development Company repair
and maintenance fees of $4,295 (nine months ended September 30, 1999) and $1,410
(1998). These charges include items which have been expensed as operating
expenses - affiliated or professional and administrative expenses and items
which have been capitalized as other assets or as land, buildings and amenities.
Pursuant to the Management Agreement, the Partnership paid NTS-Development
Company the following amounts for the nine months ended September 30, 1999 and
for the year ended December 31, 1998. These charges included items which have
been expensed as operating expenses - affiliated or professional and
administrative expenses and items which have been capitalized as other assets or
as land, building and amenities.
5
<PAGE>
Nine
Months
Ended
09/30/99 1998
-------- ----
Leasing $30,049 $46,636
Administrative 114,710 106,476
Property Manager 106,202 189,491
Other 226 1,570
-------- --------
$251,187 $344,173
======== ========
The Management Agreement requires the Partnership to purchase all insurance
relating to the managed properties, to pay the direct out-of-pocket expenses of
NTS-Development Company in connection with the operation of the properties,
including the cost of goods and materials used for and on behalf of the
Partnership, and to reimburse NTS-Development Company for the salaries,
commissions, fringe benefits, and related employment expenses of on-site
personnel.
The initial term of the Management Agreement was five years, and thereafter
for succeeding one-year periods, unless canceled by either party upon sixty days
written notice. As of March 24, 2000, the Management Agreement is still in
effect.
On May 20, 1998, Mr. Nichols purchased from a third part bank a $1,950,000
promissory note made by NTS Corporation, an affiliate of the Partnership, in
favor of the bank. On May 21, 1998, Mr. Nichols assigned all of his right, title
and interest in this promissory note to NTS Financial Partnership, a Kentucky
general partnership ("NTS Financial"), as a capital contribution thereto. On
September 17, 1999, Mr. Nichols received a return of capital from NTS Financial
in the amount of $50,000, and used such funds to make a capital contribution to
the Affiliate.
6
<PAGE>
In the past two years, Mr. Nichols has received the following returns of
capital from NTS Financial, an affiliate of the Partnership, on the dates set
forth in the table below. Mr. Nichols used these funds to pay third party
obligations.
1. January 5, 2000 $164,121.62
2. October 18, 1999 $100,000.00
3. October 15, 1999 $225,739.00
4. June 30, 1999 $119,154.86
5. August 27, 1998 $280.079.33
6. August 25, 1998 $269,105.83
7. August 10, 1998 $146,000.00
8. August 5, 1998 $209,370.17
9. June 30, 1998 $119,079.33
In the past two years, Mr. Nichols has received the following returns of
capital from NTS Financial on the dates set forth in the table below. Mr.
Nichols used such funds to make a capital contribution to the Affiliate to
purchase limited partnership interests in the entities listed below.
January 4, 2000 $220,000 NTS-Properties V
December 28, 1999 $320,000 NTS-Properties VI
December 21, 1999 $191,750 The Partnership
December 15, 1999 $404,897 NTS-Properties III and
NTS-Properties IV
October 7, 1999 $852,000 The Partnership
April 5, 1999 $109,000 NTS-Properties III.
March 11, 1999 $ 96,000 NTS-Properties IV
February 24, 1999 $137,000 NTS-Properties IV
March 11, 1999 $ 96,000 The Partnership
7
<PAGE>
In the past two years, Mr. Nichols has also received the following funds
from NTS Financial, which were not a return of capital, but were undistributed
profits from private affiliates of NTS Financial. These funds were used to pay
taxes.
January 1, 1999 $297,500
January 1, 1999 $ 56,000
April 19, 1999 $715,000
January 18, 2000 $251,000
Since January 1, 1998, Mr. Nichols has personally guaranteed various loans
made to the Partnership's affiliates, including both publicly-held affiliates
and privately-held affiliates. As of December 31, 1998, Mr. Nichols had
outstanding personal guarantees totaling approximately $26,898,000 on aggregate
loan balances of approximately $32,000,000, secured by properties with an
aggregate book value of approximately $33,000,000. In October, 1998, Mr. Nichols
and Mr. Lavin each personally guaranteed $3,250,000 of a loan made to a
privately-held affiliate of the Partnership secured by a property, the book
value of which is $10,000,000. In December, 1999, Mr. Nichols and Mr. Lavin each
personally guaranteed a $2,000,000 loan to the Affiliate from Community Trust
Bank, N.A. in the following amounts: (1) Mr. Nichols guaranteed 75% of all
indebtedness of the Affiliate or $1,500,000, whichever is less; and (2) Mr.
Lavin guaranteed 25% of all indebtedness of the Affiliate or $500,000, whichever
is less.
(b) On March 12, 1999, the Affiliate and the Partnership purchased an
aggregate of 25,794 Interests from Limited Partners for $6 per Interest pursuant
to a joint offer to purchase Interests. The Partnership purchased 10,000 of
these Interests. The Affiliate purchased 15,794 of these Interests. Mr. Nichols
disclaims beneficial ownership of 1,579, or 10%, of the Interests purchased by
the Affiliate; Mr. Lavin disclaims beneficial ownership of 14,215, or 90%, of
the Interests purchased by the Affiliate.
On November 30, 1999, the Affiliate and the Partnership purchased an
aggregate of 41,652 Interests from Limited Partners for $6 per Interest pursuant
to a joint offer to purchase Interests. The Partnership purchased 10,000 of
these Interests. The Affiliate purchased 31,652 of these Interests. Mr. Nichols
disclaims beneficial ownership of 3,165, or 10%, of the Interests purchased by
the Affiliate; Mr. Lavin disclaims beneficial ownership of 28,487, or 90%, of
the Interests purchased by the Affiliate.
On December 31, 1998, the Affiliate and NTS-Properties III purchased an
aggregate of 729 limited partnership interests of NTS-Properties III from
limited partners for $250 per interest pursuant to a joint offer to purchase
interests. NTS-Properties III purchased 500 of these interests. The Affiliate
purchased 229 of these interests. Mr. Nichols disclaims beneficial ownership of
23, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 206, or 90%, of the interests purchased by the
Affiliate.
8
<PAGE>
On December 8, 1999, the Affiliate and NTS-Properties III purchased an
aggregate of 938 limited partnership interests of NTS-Properties III from
limited partners for $250 per interest pursuant to a joint offer to purchase
interests. NTS-Properties III purchased 500 of these interests. The Affiliate
purchased 438 of these interests. Mr. Nichols disclaims beneficial ownership of
44, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 394, or 90%, of the interests purchased by the
Affiliate.
On February 19, 1999, the Affiliate and NTS-Properties IV purchased an
aggregate of 1,259 limited partnership interests of NTS-Properties IV from
limited partners for $205 per interest pursuant to a joint offer to purchase
interests. NTS-Properties IV, purchased 600 of these interests. The Affiliate
purchased 659 of these interests. Mr. Nichols disclaims beneficial ownership of
66, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 593, or 90%, of the interests purchased by the
Affiliate.
On December 8, 1999, the Affiliate and NTS-Properties IV purchased an
aggregate of 2,245 limited partnership interests of NTS-Properties IV from
limited partners for $205 per interest pursuant to a joint offer to purchase
interests. NTS-Properties IV purchased 500 of these interests. The Affiliate
purchased 1745 of these interests. Mr. Nichols disclaims beneficial ownership of
175, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 1,570, or 90%, of the interests purchased by the
Affiliate.
On February 5, 1999, the Affiliate and NTS-Properties V purchased an
aggregate of 2,458 limited partnership interests of NTS-Properties V from
limited partners for $205 per interest pursuant to a joint offer to purchase
interests. NTS-Properties V purchased 600 of these interests. The Affiliate
purchased 1,858 of these interests. Mr. Nichols disclaims beneficial ownership
of 186, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 1,672, or 90%, of the interests purchased by the
Affiliate.
On September 30, 1999, NTS-Properties V purchased 2,523 limited partnership
interests of NTS-Properties V from limited partners for $205 per interest
pursuant to an offer to purchase interests.
On December 31, 1999, the Affiliate and NTS-Properties V purchased an
aggregate of 1,196 limited partnership interests of NTS-Properties V from
limited partners pursuant to a joint offer to purchase interests. The original
offering price was $215 per interest which was increased to $230 per interest on
December 20, 1999. NTS-Properties V purchased 250 of these interests. The
Affiliate purchased 946 of these interests. Mr. Nichols disclaims beneficial
ownership of 95, or 10%, of the interests purchased by the Affiliate; Mr. Lavin
disclaims beneficial ownership of 851, or 90%, of the interests purchased by the
Affiliate.
On January 18, 1999, the Affiliate and NTS-Properties VI purchased an
aggregate of 2,103 limited partnership interests of NTS- Properties VI from
limited partners for $350 per interest pursuant to a joint offer to purchase
interests. NTS-Properties VI purchased 750 of these interests. The Affiliate
purchased 1,353 of these interests. Mr. Nichols disclaims beneficial ownership
of 135, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 1,218, or 90%, of the interests purchased by the
Affiliate.
9
<PAGE>
On September 30, 1999, the Affiliate and NTS-Properties VI purchased an
aggregate of 2,801 limited partnership interests of NTS-Properties VI from
limited partners at $370 per interest pursuant to a joint offer to purchase
interests. NTS-Properties VI purchased 500 of these interests. The Affiliate
purchased 2,301 of these interests. Mr. Nichols disclaims beneficial ownership
of 230, or 10% of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 2,071, or 90%, of the interests purchased by the
Affiliate.
On December 23, 1999, the Affiliate and NTS-Properties VI purchased an
aggregate of 1,085 limited partnership interests of NTS-Properties VI from
limited partners at $380 per interest pursuant to a joint offer to purchase
interests. NTS-Properties VI purchased 250 of these interests. The Affiliate
purchased 835 of these interests. Mr. Nichols disclaims beneficial ownership of
109, or 10%, of the interests purchased by the Affiliate; Mr. Lavin disclaims
beneficial ownership of 976, or 90%, of the interests purchased by the
Affiliate.
The Partnership, BKK Financial, Inc., an Indiana corporation ("BKK") (which
is wholly- owned by Mr. Nichols' wife, Barbara, and two majority-age daughters,
and of which Mr. Nichols is the Chairman of the Board) and Ocean Ridge
Investments, Ltd., a Florida limited partnership ("Ocean Ridge"), (of which Mrs.
Nichols is the sole limited partner and of which BKK is the general partner)
have purchased Interests from time to time. Since January 1, 1996, Ocean Ridge
and BKK have purchased 7,534 Interests at prices ranging from $4.00 to $6.00 per
Interest. Mr. Nichols and Mr. Lavin disclaim beneficial ownership of each of
these Interests. The General Partner owns five Interests. Mr. Nichols and Mr.
Lavin disclaim beneficial ownership of each of these Interests.
The Affiliate purchased Interests in the Partnership and also purchased
limited partnership interests in limited partnerships affiliated with the
Partnership pursuant to an Agreement, Bill of Sale and Assignment dated February
10, 2000, by and among the Affiliate and four investors in the Partnership (the
"Purchase Agreement") for an aggregate purchase price of $900,000. The Affiliate
paid these investors a premium above the purchase price previously offered for
limited partnership interests pursuant to prior tender offers because this
purchase allowed the Affiliate to purchase a substantial number of limited
partnership interests without incurring the significant expenses involved with a
tender offer. Pursuant to the Purchase Agreement, the Affiliate purchased the
following Interests in the Partnership and limited partnership interests in
limited partnerships affiliated with the Partnership:
o An aggregate of 2,251 Interests in the Partnership from one of the
investors for total consideration of $15,082, or an average price of
$6.70 per Interest.
o An aggregate of 135 limited partnership interests in NTS-Properties III
from two of the investors for total consideration of $38,676, or an
average price of $286.49 per interest.
o An aggregate of 565 limited partnership interests in NTS-Properties IV
from three of the investors for total consideration of $136,629, or an
average price of $241.82 per interest.
o An aggregate of 1,604 limited partnership interests in NTS-Properties V
from three of the investors for total consideration of $425,949, or an
average price of $265.55 per interest.
10
<PAGE>
o An aggregate of 675 limited partnership interests in NTS-Properties VI
from two of the investors for total consideration of $281,128, or
$416.49 per interest.
o An aggregate of 2,536 limited partnership interests in NTS-Properties
Plus, Ltd., from three of the investors for total consideration of
$2,536 or an average purchase price of $1.00 per interest.
Item 6. Purposes of the Transaction and Plans or Proposals
- -----------------------------------------------------------
(c)(1) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans or proposals
that relate to or would result in an extraordinary corporate transaction, such
as a merger, reorganization or liquidation involving the Partnership.
(c)(2) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in an any purchase, sale or
transfer of a material amount of assets of the Partnership.
(c)(3) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in any material change in the
present distribution policy or indebtedness or capitalization of the
Partnership.
(c)(4) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans or proposals
that relate to or would result in any other material change in the Partnership's
management.
(c)(5) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in any other material change in
the Partnership's structure or business.
(c)(6) Item (c)(6) of this Item 6 is not applicable to the Partnership
because its securities are not listed on a national securities exchange and are
not authorized to be quoted on an inter-dealer quotation system of a registered
national securities association.
(c)(7) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in a class of equity securities
of the Partnership becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934 (the "Act").
(c)(8) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in the suspension of the
Partnership's obligation to file reports under Section 15(d) of the Act.
11
<PAGE>
(c)(9) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in the acquisition by any person
of additional Interests of the Partnership, or the disposition of Interests of
the Partnership.
(c)(10) Neither the Partnership, the General Partner, NTS Capital
Corporation, the Affiliate, Mr. Nichols nor Mr. Lavin has any plans, proposals
or negotiations that relate to or would result in any changes in the
Partnership's governing instruments that could impede the acquisition or control
of the Partnership.
Item 8. Interest in Securities of the Subject Company
- ------------------------------------------------------
(a) The Affiliate, Mr. Nichols and Mr. Lavin each beneficially own 57,236,
or 10.3% of the outstanding Interests, (i) 49,697 of which are owned by the
Affiliate, (ii) 1,796 of which are owned by Ocean Ridge, (iii) 5,738 which are
owned by BKK Financial, Inc. and (iii) five of which are owned by the General
Partner. Mr. Nichols disclaims beneficial ownership of 12,504 of these
Interests. Mr. Lavin disclaims beneficial ownership of 52,266 of these
Interests. The Affiliate disclaims beneficial ownership of 7,539 of these
Interests. The address of each of these persons is 10172 Linn Station Road,
Louisville, Kentucky 40223.
Item 9. Persons/Assets, Retained, Employed, Compensated or Used
- ---------------------------------------------------------------
None.
Item 11. Additional Information
- --------------------------------
(a) None.
(b) None.
Item 12. Material to be Filed as Exhibits
- ------------------------------------------
(a)(1) Form of Offer to Purchase dated March 27, 2000 (including financial
statements giving pro forma effect of the Offer). Form of Letter of
Transmittal. Form of Affidavit and Indemnification Agreement for
Missing Certificate(s) of Ownership. Form of Letter to Limited
Partners. Substitute Form W-9 with Guidelines.
(a)(2) None.
(a)(3) None.
(a)(4) None.
(a)(5) None.
(b) Business Loan Agreement dated December 28, 1999, between ORIG,
LLC and Community Trust Bank, N.A.
(d) None.
(g) None.
(h) None.
12
<PAGE>
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: March 24, 2000 NTS-PROPERTIES VII, LTD., a Florida limited
partnership
By: NTS-PROPERTIES ASSOCIATES VII,
General Partner
By:__________________________________
J.D. Nichols,
Managing General Partner
ORIG, LLC, a Kentucky
limited liability company
By:/s/ J. D. Nichols
----------------------------------
J.D. Nichols, Managing Member
/s/ J. D. Nichols
----------------------------------
J. D. Nichols, individually
/s/ Brian F. Lavin
----------------------------------
Brian F. Lavin, individually
13
<PAGE>
EXHIBITS
Exhibit
Number Description
- ------ -----------
(a)(1) Form of Offer to Purchase dated March 27, 2000 (including financial
statements giving pro forma effect of the Offer). Form of Letter of
Transmittal. Form of Affidavit and Indemnification Agreement for
Missing Certificate(s) of Ownership. Form of Letter to Limited
Partners. Substitute Form W-9 with Guidelines.
(a)(2) None.
(a)(3) None.
(a)(4) None.
(a)(5) None.
(b) Business Loan Agreement dated December 28, 1999,
between ORIG, LLC and Community Trust Bank, N.A.
(d) None.
(g) None.
(h) None.
<PAGE>
Offer to Purchase for Cash
by
NTS-Properties VII, Ltd.
and
ORIG, LLC
of Up to
5,000 Limited Partnership Interests
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, EASTERN STANDARD TIME, ON FRIDAY, June 27, 2000, UNLESS EXTENDED.
LIMITED PARTNERS TENDERING ALL OR ANY PORTION OF THEIR INTERESTS ARE
SUBJECT TO CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
THE OFFER IS NOT CONDITIONED ON THE TENDER OF ANY MINIMUM NUMBER OF
INTERESTS; 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 OF THIS OFFER TO PURCHASE.
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, HOW MANY 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.
-----------------------------------------------------
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.
-----------------------------------------------------
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 Offer to Purchase is March 27,2000.
<PAGE>
SUMMARY
The following is a summary of information contained elsewhere in this
offer to purchase. The summary may not be complete, so it is important that you
read the detailed information contained elsewhere in this offer to purchase and
related documents.
NTS-Properties VII, Ltd., is a Florida limited partnership that owns,
or owns joint venture interests in, certain residential rental and commercial
real estate properties. The partnership and ORIG, LLC, a Kentucky limited
liability company, an affiliate of the partnership, are inviting limited
partners to sell limited partnership interests back to the partnership or to the
affiliate for cash. Set forth below are the material terms of this offer to
purchase. NTS-Properties VII, Ltd., is referred to in this offer as "the
Partnership," and ORIG, LLC is referred to as the "Affiliate." Together, they
are referred to as the "Offerors."
o The Offerors will purchase in the aggregate up to 5,000 limited
partnership interests. The first 2,500 interests tendered will be
purchased by the Partnership, and up to an additional 2,500 interests
tendered will be purchased by the Affiliate. See Section 2 of this
offer to purchase.
o The Offerors will purchase these interests in cash for $6.00 per
interest from tendering limited partners. See Section 2 of this offer
to purchase.
o 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. See
Section 2 of this offer to purchase.
o This offer is being made to all limited partners and is not generally
conditional on the tender of any minimum number of interests. However,
the Offerors will not accept your tender if, as a result of the tender,
you would continue to be a limited partner and would hold fewer than
one hundred interests. See Section 2 of this offer to purchase.
o The offer is subject to certain conditions which are described in
Section 6 of this offer to purchase.
o The offer expires on Friday, June 27, 2000 at 12:00 Midnight, Eastern
Standard Time, but may be extended by the Offerors by providing you
with a written notice of the extension. See Section 2 of this offer to
purchase.
o You must properly complete and execute the letter of transmittal
included in these materials by 12:00 Midnight, June 27, 2000 Eastern
Standard Time in order to sell your interests to the Offerors in this
offer. See Section 3 of this offer to purchase.
o If you tender pursuant to this offer you may withdraw the tender at any
time prior to the expiration date. For your withdrawal to be effective,
it must be in writing and received by
ii
<PAGE>
NTS Investor Services c/o Gemisys via mail or facsimile at the address
or facsimile number set forth in Section 15 of this offer to purchase
on or before the expiration date. If you file a notice of withdrawal it
must specify the name of the person withdrawing the tender and the
amount of interests previously tendered that are being withdrawn. See
Section 4 of this offer to purchase.
o If you tender and your tender is accepted the price of any of your
interests which are purchased will be paid in the form of a check from
the purchasing Offeror. All checks will be delivered by first class
U.S. Mail deposited in the mailbox within five business days after the
expiration date. See Section 5 of this offer to purchase.
o If you tender all or any portion of your interests you are subject to
certain risks including:
o The purchase price of $6.00 per interest may not equal the
fair market value or the liquidation value of the interests
and is less than the book value of the interests.
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 There are conflicts in establishing the purchase price between
tendering limited partners and the Partnership, the general
partner and limited partners who do not tender.
o You may be subject to negative tax consequences if you tender.
o The general partner is not recommending that you tender or not
tender your interests.
o If you continue to hold all or any portion of your interests you are
subject to certain risks including:
o The Partnership might 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 plans to liquidate its assets
and to distribute the proceeds to the limited partners.
o General economic risks are associated with investments in real
estate.
o The Partnership's financial condition may be harmed by a
downturn in the business of any tenant occupying a significant
portion of a partnership property or by a tenant's decision
not to renew its lease.
iii
<PAGE>
TABLE OF CONTENTS
SUMMARY .....................................................................ii
INTRODUCTION..................................................................1
RISK FACTORS..................................................................4
THE OFFER.....................................................................7
Section 1. Background and Purposes of the Offer............................7
Section 2. Offer to Purchase and Purchase Price; Proration; Expiration Date;
Determination of Purchase Price.................................8
Section 3. Procedure for Tendering Interests..............................10
Section 4. Withdrawal Rights..............................................11
Section 5. Purchase of Interests; Payment of Purchase Price...............11
Section 6. Certain Conditions of the Offer................................12
Section 7. Cash Distribution Policy.......................................15
Section 8. Effects of the Offer...........................................15
Section 9. Source and Amount of Funds.....................................15
Section 10. Certain Information About the Partnership......................17
Section 11. Certain Federal Income Tax Consequences........................19
Section 12. Transactions and Arrangements Concerning Interests.............23
Section 13. Extensions of Tender Period; Terminations; Amendments..........24
Section 14. Fees and Expenses..............................................24
Section 15. Address; Miscellaneous.........................................24
Appendix A
The Partnership's Financial Statements Giving
Pro Forma Effect of the Offer.......................................A-1
Balance Sheets..............................................................A-2
Statement of Operations.....................................................A-3
iv
<PAGE>
To Holders of Limited Partnership Interests of
NTS-Properties VII, Ltd.
INTRODUCTION
NTS-Properties VII, Ltd., is a Florida limited partnership (the
"Partnership") that owns, or owns joint venture interests in, certain
residential rental and commercial real estate properties. NTS- Properties
Associates VII, a Kentucky limited partnership, is the general partner of the
Partnership (the "General Partner"). NTS Capital Corporation, a Kentucky
corporation, is the corporate general partner of the General Partner. NTS
Capital Corporation is controlled by Mr. J.D. Nichols, its Chairman of the
Board, and Brian F. Lavin, its President and Chief Operating Officer. Except as
otherwise provided in the Partnership Agreement (defined below) and as more
fully described in Section 10 of this Offer to Purchase, 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 Offerors hereby offer to purchase up to 5,000 of the Partnership's limited
partnership 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 "Offer to Purchase" and in the related "Letter of Transmittal"
(together the "Offer to Purchase" and "Letters of Transmittal" constitute the
"Offer"). As used in this Offer to Purchase, 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. The Partnership, in its sole discretion, may purchase
more than 2,500 Interests, and the Affiliate, in its sole discretion, may
purchase more than 2,500 Interests, but neither has any current intention to do
so. 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., as amended on February 11, 1988 (the
"Partnership Agreement").
The Purchase Price should not be viewed as equivalent to the fair
market value or the liquidation value of an Interest. As of December 31, 1998
and September 30, 1999, the book value of each Interest was approximately $9.51
and $9.49 respectively. The Purchase Price offered by the Offerors has been
determined by the General Partner, in its sole discretion, based on: (i) the
response to the Offerors' first tender offer of $6.00 per Interest which
commenced on December 7, 1998 and terminated on March 6, 1999 (the "First
Offer"); (ii) the response to the Offerors' second tender offer of $6.00 per
Interest which commenced on September 2, 1999 and terminated on December 15,
1999 (the "Second Offer"); (iii) sales of Interests by Limited Partners to third
parties in secondary market transactions in 1997, 1998 and 1999; (iv)
repurchases of interests by the Partnership in 1996, 1997, 1998 and 1999; (v)
purchases by the Partnership's affiliate, BKK Financial, Inc., in 1996, 1997 and
1998; (vi) a purchase of Interests by the Partnership's affiliate, Ocean Ridge
Investments Ltd., a
1
<PAGE>
Florida limited liability partnership ("Ocean Ridge"), in 1999; and (vii) the
purchase of Interests from two Limited Partners by the Affiliate on February 10,
2000 at an average price of $6.70 per Interest. 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 2,500 Interests which are tendered and received by the
Partnership by, and not withdrawn prior to, 12:00 Midnight, Eastern Standard
Time, on Friday, June 27, 2000, subject to any extension of the Offer by the
Offerors (the "Expiration Date"). If more than 2,500 Interests are tendered, the
Affiliate will purchase up to an additional 2,500 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 5,000
Interests have been tendered during the Offer, each Offeror may: (i) accept the
additional Interests in accordance with 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 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 ("Proration"). If the Partnership pro rates, 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 on the tender of any minimum
number of Interests. The Offer, however, is conditioned upon, among other
things, the absence of certain adverse conditions described in Section 6 of this
Offer to Purchase. 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 of this Offer to Purchase.
2
<PAGE>
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 and
payable 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.
The tender and acceptance 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 in Section 11 of this Offer to Purchase.
As of February 29, 2000, the General Partner owned five (5) of the
Partnership's outstanding Interests and the Affiliate owned 49,697 of the
Partnership's outstanding Interests. All partners, members, affiliates and
associates of the General Partner or the Affiliate beneficially owned an
aggregate of 57,236 Interests, representing approximately 10.3% of the
Partnership's 555,736 outstanding Interests. Although the Offer is being made to
all Limited Partners, the Partnership has been advised that neither the General
Partner, the Affiliate, nor any of the partners, members, affiliates or
associates of the General Partner or the Affiliate intends 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, an aggregate
of 59,736 Interests, representing approximately 10.8% of the Partnership's
553,236 outstanding Interests.
3
<PAGE>
RISK FACTORS
------------
Limited Partners Tendering All or Any Portion of Their Interests Are
--------------------------------------------------------------------
Subject to Certain Risks:
- -------------------------
Purchase Price May Be Less Than Fair Market Value and Liquidation
----------------------------------------------------------------------
Value and Is Less Than Book Value. The Interests are not traded on a recognized
- ----------------------------------
stock exchange or trading market. A readily identifiable, liquid market for the
Interests does not exist and is not likely to exist in the near future. The
Partnership and the Affiliate purchased an aggregate of 25,794 Interests on
March 6, 1999 for $6.00 per Interest, pursuant to the First Offer. The
Partnership purchased 10,000 of these Interests. The Affiliate purchased 15,794
of these Interests. The Partnership and the Affiliate Purchased an aggregate of
41,652 Interests on December 15, 1999, for $6.00 per Interest, pursuant to the
Second Offer. The Partnership purchased 10,000 of these Interests. The Affiliate
purchased 31,652 of these Interests. The Offerors are also aware of certain
secondary market transactions by which Interests were transferred at prices
equal to $3.90 to $6.76 per Interest (including commissions and other mark-ups)
by Limited Partners to third parties during the period from January 1, 1997 to
December 31, 1999. Additionally, the Partnership repurchased 82,529 Interests,
and its affiliates, BKK Financial, Inc. and Ocean Ridge, purchased 5,738 and
1,796 Interests, respectively, during the period from January 1, 1996 through
July 31, 1999 at prices ranging from $4.00 to $6.00 per Interest. The Affiliate
purchased 2,251 Interests from one Limited Partner on February 10, 2000 at an
average price of $6.70 per Interest. As of both December 31, 1998 and September
30, 1999, the book value of each Interest was approximately $9.51 and $9.49
respectively. The Purchase Price per Interest in this Offer was determined by
the General Partner, in part, based on the purchase price per Interest in the
First and Second Offers. None of the purchase price per Interest in the First or
Second Offers, the secondary market transactions described above or the Purchase
Price in this Offer 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 selling Interests pursuant to this Offer generally
- ----------
will recognize a gain or loss on the sale of their Interests for federal and
most state income tax purposes. The amount of gain or loss realized will be, in
general, the excess of the amount realized by the seller (generally, the sum of
the Purchase Price plus the selling Limited Partner's share of Partnership
liabilities) 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 selling their
Interests pursuant to the Offer. See Section 11 of this Offer to Purchase.
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.
4
<PAGE>
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.
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 $24,000 ($15,000 to purchase 2,500 Interests plus approximately
$9,000 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.
The Partnership may not be able to Pay for Necessary Capital
-----------------------------------------------------------------------
Improvements to Partnership Properties. Certain of the Partnership's properties
- ---------------------------------------
require capital improvements to be fully operable. The Partnership expects to
make the necessary capital improvements to certain Partnership properties over
the next year and anticipates funding these improvements using the proceeds from
an existing mortgage as well as cash reserves. However, there can be no
assurance that the anticipated sources of funding will be sufficient to make the
necessary improvements. If the anticipated sources of funding prove to be
insufficient, the Partnership may be required to fund the capital improvements
by incurring additional indebtedness. There can be no assurance that the
Partnership will be able to obtain additional indebtedness on favorable terms,
or at all, and if it is unable to do so this may have a material adverse effect
on the Partnership's business or financial condition. In addition, the
Partnership intends to make roof replacements on certain of its buildings over
the next 36 months because the roofs appear to have defects. The Partnership
does not have sufficient working capital to make all of the repairs immediately,
and there is a risk that serious damage will occur to the roofs before all of
the replacements can be made. If such damage occurs it will significantly harm
the Partnership's financial condition..
Increased Voting Control by Affiliates of the Partnership. If the Offer
---------------------------------------------------------
is fully subscribed, the percentage of Interests held by persons controlling,
controlled by or under common control with the Partnership will increase. As of
February 29, 2000, the General Partner owned five (5) of the Partnership's
outstanding Interests and the Affiliate owned 49,697 of the Partnership's
outstanding Interests. The General Partner, the Affiliate, and all partners,
members, affiliates and associates of the General Partner or the Affiliate
beneficially own, in the aggregate, 57,236 Interests, representing approximately
10.3% of the Partnership's 555,736 outstanding Interests. Although this Offer is
5
<PAGE>
made to all Limited Partners, the Partnership has been advised that none of the
General Partner, the Affiliate, nor any of the partners, members, affiliates or
associates of the General Partner or the Affiliate intends 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, an aggregate
of 59,736 Interests, representing approximately 10.8% of the Partnership's
553,236 outstanding Interests, an increase of 0.50% of the outstanding
Interests. In addition, other persons controlling, controlled by or under common
control with the Partnership, by virtue of the decreased number of outstanding
Interests, will own a greater percentage of the outstanding Interests. Thus,
these entities or individuals will 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 Plan to Liquidate. The Partnership has no
----------------------------------------------
current plan to sell 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 any distribution relating to their
investment in the Partnership 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 re- lease the space vacated by significant tenants on a timely basis and on
terms and conditions acceptable to the Partnership could have a material adverse
effect on the Partnership's results of operation and financial condition. See
Section 10 of this Offer to Purchase.
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.
6
<PAGE>
THE OFFER
Section 1. Background and Purposes of the Offer. The purpose of the
Offer is to provide Limited Partners who desire to liquidate some or all of
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 current value of a Limited Partner's investment.
See Risk Factors - "General Economic Risks Associated with Investments in Real
Estate."
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)
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 the Affiliate and other 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 persons controlling the
affiliates, which will increase the influence that affiliates of the General
Partner and persons controlling the affiliates have on certain matters voted on
by Limited Partners, including removal of the General Partner and termination of
the Partnership. See Risk Factors -- "The Partnership May Not Make Future Cash
Distributions" and "Increased Voting Control by Affiliates of the Partnership."
Interests that are tendered to the Partnership in connection with this Offer
will be retired, although the Partnership
7
<PAGE>
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 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 Offer is the third tender offer made by the Partnership and the
Affiliate for Interests. The Partnership and the Affiliate purchased an
aggregate of 25,794 Interests on March 6, 1999 for $6.00 per Interest, pursuant
to the First Offer. The Partnership purchased 10,000 of these Interests. The
Affiliate purchased 15,794 of these Interests. The Partnership and the Affiliate
purchased an aggregate of 41,652 Interests on December 15, 1999 for $6.00 per
Interest, pursuant to the Second Offer. The Partnership purchased 10,000 of
these Interests. The Affiliate purchased 31,652 of these Interests. 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.
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 5,000 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 2,500 Interests which are tendered and received by the Partnership by,
and not withdrawn prior to, the Expiration Date. If more than 2,500 Interests
are tendered and received by the Partnership as a result of this Offer, the
Affiliate will purchase up to an additional 2,500 Interests which are tendered
by, and not withdrawn prior to, the Expiration Date.
If, on the Expiration Date, the Offerors determine that more than 5,000
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.
8
<PAGE>
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 Interests not purchased by the
Offerors, except upon written request of the Limited Partner.
THIS OFFER IS NOT CONDITIONED ON 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.
Expiration Date. The term "Expiration Date" means 12:00 Midnight,
-----------------
Eastern Standard Time, on Friday, June 27, 2000, 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 of
this Offer to Purchase.
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
General Partner in its sole discretion based on: (i) the response to the
purchase price of $6.00 in the First Offer; (ii) sales of Interests by Limited
Partners to third parties in secondary market transactions in 1997, 1998 and
1999; (iii) the response to the purchase price of $6.00 in the Second Offer;
(iv) repurchases of interests by the Partnership in 1996, 1997, 1998 and 1999;
(v) purchases by the Partnership's affiliate, BKK Financial, Inc., in 1996, 1997
and 1998; and (vi) a purchase of Interests by the Partnership's affiliate, Ocean
Ridge, in 1999. The General Partner is also aware of certain sales of Interests
made at prices equal to $3.90 to $6.76 per Interest (including commissions and
other mark- ups) by certain Limited Partners to third parties during the period
from January 1, 1997 to December 31, 1999. The Partnership has repurchased
interests, and its affiliates, BKK Financial, Inc. and Ocean Ridge, have
purchased Interests, in secondary market transactions at prices ranging from
$4.00 to $6.00 per Interest during the period from January 1, 1996 to July 31,
1999. The Affiliate
9
<PAGE>
purchased Interests from one Limited Partner on February 10, 2000 at an average
price of $6.70 per Interest. 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 both December 31, 1998 and September 30, 1999,
the book value of each Interest was approximately $9.51, and $9.49,
respectively.
In determining the Purchase Price, the Partnership did not estimate or
project the liquidation value per Interest or consider the book value per
Interest and did not appraise the value of its assets.
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 of this Offer to
Purchase.
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 OF THIS OFFER TO PURCHASE.
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
5,000 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
10
<PAGE>
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 Exchange Act and Rule 14e-4 promulgated thereunder
require that a person tendering Interests on his, her or its behalf, own 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 Section 15 of this Offer to Purchase 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 5,000 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 of this Offer to
Purchase prior to the Expiration Date. Tenders made pursuant to the Offer which
are not otherwise withdrawn in accordance with this Section 4 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 of
this Offer to Purchase, the Offerors may not be able to determine the proration
factor and pay for those
11
<PAGE>
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 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
of this Offer to Purchase 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:
12
<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 or threatened change 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;
13
<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 March
27, 2000 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 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 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
quarterly non-cumulative distributions totaling eight percent (8%) on an
annualized basis (2% per quarter). Quarterly cash distributions equal to two
percent (2%) on an annualized basis (.5% per quarter) were paid on each Interest
in every calendar quarter beginning with the quarter ended June 30, 1988 and
ending with the quarter ended March 31, 1998. Beginning with the quarter ended
June 30, 1998, the Partnership has made quarterly cash distributions equal to
one percent (1%) on an annualized basis (.25% per quarter). Although the
Partnership is not obligated to make future cash distributions, it may do so in
the future. Limited Partners that tender the Interests pursuant to the Offer
will not be entitled to receive any cash distributions declared and payable, if
any, after the Expiration Date, on any Interests
14
<PAGE>
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
of this Offer to Purchase.
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:
If the Offer is fully subscribed, the Partnership will use
approximately $24,000 to purchase 2,500 Interests and pay costs associated with
the Offer. This 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 interest income that the Partnership would have been
able to earn had it invested this cash in interest bearing investments.
Financial statements giving pro forma effect of the Offer, assuming the purchase
by the Partnership of 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 $48,000 (including $30,000 to
purchase 5,000 Interests plus approximately $18,000 for expenses related to
administering the Offer). The Partnership expects to fund monies required to
complete its purchases and to pay its expenses from its cash reserves
(approximately $15,000 to purchase 2,500 Interests and approximately $9,000 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. As of September 30, 1999 and
December 31, 1998 the Partnership had unrestricted cash and cash equivalents of
$456,274 and $398,001, or $.81 and $.69 per Interest, respectively. If the Offer
is oversubscribed and the Partnership, in its sole discretion, decides to
purchase Interests in excess of 2,500 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 $15,000 to purchase 2,500
Interests and approximately $9,000 for its proportionate share of expenses
related to administering the Offer) of the Offer from the loan proceeds from the
loan described below. If the Offer is oversubscribed and the Affiliate, in its
sole
15
<PAGE>
discretion, decides to purchase Interests in excess of 2,500 Interests, the
Affiliate will fund these additional purchases and expenses, if any, from the
loan.
The Affiliate will also use the loan proceeds to fund the purchase of
limited partnership interests of affiliated partnerships. The loan proceeds
could also be used to return capital contributions previously made by Mr. J.D.
Nichols and Mr. Brian F. Lavin, the members of the Affiliate, to the Affiliate.
On December 28, 1999 the Affiliate and Community Trust Bank entered
into a Business Loan Agreement under which Community Trust Bank agreed to
provide a $2,000,000 revolving line of credit to the Affiliate at an interest
rate of prime plus .25% per annum for a term ending on January 28, 2005. The
line of credit is secured by: (1) the Interests of the Partnership held by the
Affiliate; and (2) limited partnership interests in partnerships affiliated with
the Partnership which are held by the Affiliate. Mr. Nichols and Mr. Lavin
agreed to guarantee the indebtedness of the Affiliate with respect to Community
Trust Bank as follows: (1) Mr. Nichols guaranteed 75% of all indebtedness of the
Affiliate or $1,500,000, whichever is less; and (2) Mr. Lavin guaranteed 25% of
all indebtedness of the Affiliate or $500,000, whichever is less. Under the
terms of the Business Loan Agreement, the Affiliate will repay any proceeds of
the revolving line of credit. The loan will be repaid as follows: Commencing on
April 28, 2000, 20 consecutive quarterly interest payments will be made by the
Affiliate with respect to accrued interest on the unpaid principal balance.
Commencing January 28, 2001, 5 annual payments of principal along with interest
on the unpaid balance as of the date of each payment will be made by the
Affiliate as follows: $100,000 on January 28, 2001; $125,000 on January 28,
2002; $150,000 on January 28, 2003; $175,000 on January 28, 2004; and
$1,471,498.26 on January 28, 2005. The final payment is an estimate based on the
assumption that all prior payments are made in a timely fashion. The Affiliate
intends to use funds from cash distributions from the Partnership and affiliated
partnerships and from capital contributions to the Affiliate by Mr. Nichols and
Mr. Lavin to make these payments.
In addition to using the proceeds of the revolving line of credit to
fund the purchase of Interests and the Affiliate's proportionate share of
expenses of the Offer, Mr. Nichols and Mr. Lavin may fund the purchase of
Interests by the Affiliate and the Affiliate's proportionate share of the
expenses of the Offer from capital contributions pursuant to the terms of a
Capital Contribution Agreement dated as of January 20, 1999 by and between Mr.
Nichols and Mr. Lavin.
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:
16
<PAGE>
- 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, 1999 was 90%.
- 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, 1999 was 92%.
- 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 Partnership. The Joint Venture Agreement was amended
to admit NTS-Properties IV, Ltd., an affiliate of the Partnership,
("NTS-Properties IV") during 1994. The Partnership's percentage
interest in the joint venture was 31% at September 30, 1999. The
occupancy level at Blankenbaker Business Center 1A at September 30,
1999 was 100%.
The Partnership's principal activity is the leasing and management of the
above properties. 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.
Sykes HealthPlan Service Bureau, Inc. ("Sykes"), occupies 100% of
Blankenbaker Business Center 1A. Sykes was formerly known as Prudential Service
Bureau, Inc., and was indirectly owned by The Prudential Insurance Company of
America ("Prudential"), which is a guarantor on the lease. Sykes was purchased
by SHPS, Inc. and given its current name in March 1998. After this purchase
Prudential remained as a guarantor on the lease. SHPS, Inc., leases Blankenbaker
Business Center 1A and subleases the property to Sykes. In addition to monthly
rental payments, SHPS, Inc., is obligated to pay substantially all of the
operating expenses attributable to its space.
During the first quarter of 1999, Sykes Enterprises, Inc. ("Sykes
Enterprises"), the parent company of SHPS, Inc., and an indirect owner of Sykes,
announced its intentions to consolidate its operations and to build its
corporate headquarters in Jefferson County, Kentucky. It is the Partnership's
understanding that, due to the expansion of the headquarters of Sykes
Enterprises, Sykes does not intend to continue to occupy the space at
Blankenbaker Business Center 1A through the duration of the lease, which
terminates in July 2005. The Partnership's proportionate share of the rental
income from this property accounted for approximately 15% of the Partnership's
total revenues for the nine months ended September 30, 1999. SHPS, Inc., is
under lease until the year 2005, and no official notice of termination has been
received. In addition, Prudential is a guarantor on the lease. However, if SHPS,
Inc., defaults on its lease, this could have a material adverse effect on the
Partnership's financial condition.
17
<PAGE>
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. However, the Partnership plans to replace the
roofs at Park Place Apartments Phase II (17 buildings) all of which were
installed using materials produced by a single manufacturer. The roofing
materials appear to contain defects which may cause roofs to fail before the end
of their expected useful lives. As the manufacturer has declared bankruptcy, the
Partnership does not expect to be able to recover any of the costs of the roof
replacements. The Partnership does not have sufficient working capital to make
all of the roof replacements at once and intends to make the replacements over
the next 36 months.
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 its 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. There
are no contracts for sale of any of the Partnership's properties under
negotiation at the present time.
The Partnership's properties are encumbered by the following mortgages:
Loan Balance
at 09/30/99: Encumbered Property: Due:
----------- ------------------- ----
$ 3,905,218 Park Place apartments Phase II 10/15/2012
The Park at the Willows is not encumbered by a mortgage.
Properties owned by joint ventures in which the Partnership is a
partner are encumbered by the following mortgages:
18
<PAGE>
Loan Balance
at 09/30/99: Encumbered Property: Due:
----------- ------------------- ---
$ 1,009,452* Blankenbaker Business Center 1A 11/15/2005
*This amount represents the Partnership's proportionate interest in the
mortgages payable as of September 30, 1999.
The Partnership's ratio of earnings to fixed charges was 1.22 for the
three months ending September 30, 1999. The Partnership had an earnings to fixed
charges coverage deficiency of $30,191 for the year ended December 31, 1998. The
Partnership's ratio of earnings to fixed charges was 1.2:1 for the year ended
December 31, 1997.
For more detailed financial information about the Partnership, see
Appendix A of this Offer to Purchase.
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. The actual tax
treatment of a tender of Interests may vary depending upon each Limited
Partner's particular situation. Certain Limited Partners (including, but not
limited to, insurance companies, tax-exempt entities, 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 discussion 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 treat 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 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 Partner's Interests will 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
19
<PAGE>
extent of any gain 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 sum of money distributed to
him or her plus the selling Limited Partner's share of Partnership liabilities
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 Partnership
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 liabilities (if any), exceeds the Limited
Partner's adjusted basis 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 tax circumstances.
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. A Limited Partner's initial basis is the amount paid for an Interest
($20 per Interest for those who purchased in the initial offering), increased by
a Limited Partner's share of 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 Limited Partner. There was nonrecourse
debt attributed to the Interests in the approximate amount of $4,914,670, or
$8.69 per Interest, as of September 30, 1999. Basis is generally reduced by cash
distributions, decreases in a Limited Partner's share of liabilities 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 1999 with respect to the Interests sold
in accordance with the provisions of the Partnership Agreement concerning
transfers of Interests. This 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.
In determining the tax consequences of accepting the Offer, the
Partnership's payments for Interests will be deemed to be equal to the $6.00
cash payment per Interest plus a pro rata share of the Partnership's debt
(together, the "Selling Price"). There was nonrecourse debt attributed to the
Interests in the approximate amount of $4,914,670, or $8.69 per Interest, as of
September 30, 1999. The taxable gain (or loss) to be incurred as a consequence
of accepting the Offer is determined by subtracting the adjusted basis of the
purchased Interest from the Selling Price.
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
20
<PAGE>
received for each Interest, which varies depending upon the date on which the
Limited Partner was admitted to the Partnership.
A taxable gain, if any, on the disposition of Interests must be
allocated between ordinary income, unrecaptured Section 1250 gain 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
(generally, depreciation deductions in excess of straight-line depreciation in
the case of real property and all allowable depreciation to date in the case of
other property) constitute "unrealized receivables." 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 depreciation
deductions that are "unrealized receivables." In general, for Interests held for
twelve (12) months or longer, with respect to real property, the amount of gain
attributable to depreciation not taxed as ordinary income is taxed at a maximum
rate of 25%. 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 depreciation subject to
ordinary income tax per Interest purchased by a Limited Partner in the original
offering is estimated to be $3.31 as of September 30, 1999, subject to further
adjustment for tax exempt use property rules. Therefore, a maximum of
approximately $3.31 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 1999 is taxed at a
stated maximum rate of 39.6% for federal income tax purposes. In the case of
real property, the amount of gain not taxed as ordinary income attributable to
depreciation is taxed at a maximum rate of 25%. 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 may be subject to tax on unrelated business taxable income
(UBTI) and, therefore, should consult their tax advisors
21
<PAGE>
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 may be
credited against a foreign Limited Partner's federal income tax liability, and
if in excess thereof, a refund can be obtained from the IRS by filing a U.S.
income tax return.
Back-up Withholding. 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. See "Foreign Limited Partners," above.
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 512(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 will 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 will 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 of this Offer to
Purchase.
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
22
<PAGE>
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 sixty (60) business
days prior to the date hereof except as follows:
The Affiliate purchased Interests in the Partnership and also
purchased limited partnership interests in limited partnerships
affiliated with the Partnership pursuant to an Agreement, Bill of Sale
and Assignment dated February 10, 2000, by and among the Affiliate and
four investors in the Partnership for an aggregate purchase price of
$900,000. The Affiliate purchased an aggregate of 2,251 Interests in
the Partnership from one of the investors for total consideration of
$15,082, or an average price of $6.70 per Interest. The Affiliate paid
these investors a premium above the purchase price previously offered
for Interests pursuant to prior tender offers because this purchase
allowed the Affiliate to purchase a substantial number of Interests
without incurring the expenses involved with a tender offer.
The Partnership and the Affiliate Purchased an aggregate of
41,652 Interests on December 15, 1999, for $6.00 per Interest, pursuant
to the Second Offer. The Partnership purchased 10,000 of these
Interests. The Affiliate purchased 31,652 of these Interests.
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 of this Offer to Purchase.
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, 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 of this Offer to Purchase 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
23
<PAGE>
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.
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.
24
<PAGE>
The Offerors have filed a Tender Offer Statement under section 14(d)(1)
and 13(e)(1) of the Securities Exchange Act of 1934 on Schedule TO with the
Securities and Exchange Commission ("Commission") which includes certain
information relating to the Offer summarized herein. Copies of these statements
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 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.
March 27, 2000
25
<PAGE>
Appendix A
The Partnership's Financial Statements Giving
Pro Forma Effect of the Offer
The following unaudited pro forma balance sheets and statements of
operations of the Partnership are presented to give effect of the Offer as if it
was fully subscribed and completed as of September 30, 1999 and January 1, 1999.
The pro forma financial statements contain certain financial information for the
fiscal year ended December 31, 1998 extracted or derived from the Partnership's
Annual Report on Form 10-K and certain financial information for the quarter
ended September 30, 1999 extracted or derived from the Partnership's Quarterly
Report on Form 10-Q. The Annual and Quarterly 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 Annual and Quarterly
Reports is qualified in its entirety by reference to the reports and the
financial statements (including the notes) contained in the reports. The pro
forma financial statements present the quarterly and annual reports of the
Partnership giving effect of the Offer as if the Offer was fully subscribed and
completed as of September 30, 1999 and January 1, 1999, respectively. The
information presented in these pro forma financial statements 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 year ended December 31, 1998
or the quarter ended September 30, 1999, nor do they purport to represent the
future financial position of the Partnership.
A-1
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
A Florida Limited Partnership
-----------------------------
Unaudited Proforma
------------------
BALANCE SHEETS
--------------
<CAPTION>
Tender
Actual Proforma
As of As of
September 30, 1999 September 30, 1999
------------------ ------------------
ASSETS
- ------
<S> <C> <C>
Cash and equivalents ....................... $ 456,274 $ 441,274
Cash and equivalents -- restricted ......... 115,529 115,529
Investment securities ...................... -- --
Accounts receivable ........................ 6,798 6,798
Land, buildings and amenities, net ......... 9,757,124 9,757,124
Other assets ............................... 123,154 123,154
----------- -----------
$10,458,879 $10,443,879
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Mortgages payable .......................... $ 4,914,670 $ 4,914,670
Accounts payable ........................... 74,675 74,675
Distributions payable ...................... 28,573 28,573
Security deposits .......................... 30,799 30,799
Other liabilities .......................... 91,099 91,099
----------- -----------
5,139,816 5,139,816
----------- -----------
Partners' equity ........................... 5,319,063 5,304,063
----------- -----------
$10,458,879 $10,443,879
=========== ===========
</TABLE>
A-2
<PAGE>
<TABLE>
NTS-PROPERTIES VII, LTD.
------------------------
A Florida Limited Partnership
-----------------------------
Unaudited Proforma
------------------
STATEMENT OF OPERATIONS
-----------------------
<CAPTION>
Tender Tender
Actual Actual Proforma Proforma
for three months for the for three for the
ended year ended months ended year ended
September 30, December 31, September 30, December, 31
1999 1998 1999 1998
---------- ------------ ----------- -----------
REVENUES:
<S> <C> <C> <C> <C>
Rental income ............... $ 514,892 $ 1,922,874 $ 514,892 $ 1,922,874
Interest and other income ... 4,505 29,063 4,505 29,063
----------- ----------- ----------- -----------
519,397 1,951,937 519,397 1,951,937
EXPENSES:
Operating expenses ........... 118,014 467,432 118,014 467,432
Operating expenses -
affiliated ................. 65,684 253,900 65,684 253,900
Write-off of unamortized land
improvements and amenities ... -- 13,008 -- 13,008
Interest expense ............. 94,775 395,180 94,775 395,180
Management fees .............. 27,728 101,354 27,728 101,354
Real estate taxes ............ 27,136 108,709 27,136 108,709
Professional and
administrative expenses ...... 31,454 77,953 31,454 77,953
Tender offer costs ........... -- -- 10,000 10,000
Professional and
administrative expenses -
affiliated ................. 17,614 82,748 17,614 82,748
Depreciation and amortization 115,989 482,149 115,989 482,149
----------- ----------- ----------- -----------
498,394 1,982,433 508,394 1,992,433
----------- ----------- ----------- -----------
Net income (loss) ............ $ 21,003 $ (30,496) $ 11,003 $ (40,496)
=========== =========== =========== ===========
Net income (loss) allocated to
the limited partners ......... $ 20,793 $ (30,191) $ 10,893 $ (40,091)
=========== =========== =========== ===========
Net income (loss) per limited
partnership unit ............. $ 0.04 $ (0.05) $ .02 $ (.07)
=========== =========== =========== ===========
Weighted average number of 565,736 581,622 560,736 576,622
units......................... =========== =========== =========== ===========
</TABLE>
A-3
<PAGE>
Exhibit (a)(2)
Form of Letter of Transmittal
<PAGE>
LETTER OF TRANSMITTAL
Regarding the Interests in
NTS-Properties VII, Ltd.
Tendered Pursuant to the Offer to Purchase Dated March 27, 2000
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT,
AND THIS LETTER OF TRANSMITTAL MUST BE RECEIVED BY THE PARTNERSHIP
BY, 12:00 MIDNIGHT EASTERN STANDARD TIME, ON
FRIDAY, June 27, 2000 (THE "EXPIRATION DATE"), UNLESS
THE OFFER IS EXTENDED BY OFFERORS.
[Investor Name] If applicable:
[Address] [Custodian]
[City, State, Zip] [Address]
[Tax I.D. #] [City, State, Zip]
[# of Interests] [Account #]
I am a Limited Partner of NTS-Properties VII, Ltd. I hereby tender my limited
partnership interests or portion thereof, as described and specified below, to
the Offerors, NTS-Properties VII, Ltd. (the "Partnership"), and the
Partnership's affiliate, ORIG, LLC, (the "Affiliate" and the Partnership are
each an "Offeror" and collectively the "Offerors") upon the terms and conditions
set forth in the Offer to Purchase, dated March 27, 2000, (collectively, the
"Offer to Purchase" and "Letter of Transmittal" constitute the "Offer").
THIS LETTER OF TRANSMITTAL IS SUBJECT TO ALL THE TERMS AND CONDITIONS SET FORTH
IN THE OFFER TO PURCHASE, INCLUDING, BUT NOT LIMITED TO, THE ABSOLUTE RIGHT OF
THE OFFERORS TO REJECT ANY AND ALL TENDERS DETERMINED BY THEM, IN THEIR SOLE
DISCRETION, NOT TO BE IN THE APPROPRIATE FORM.
I hereby represent and warrant that I have full authority to sell my interests,
or portion thereof, to the Offerors, and that the Offerors will acquire good
title, free and clear of any adverse claim. Upon request, I will execute and
deliver any additional documents necessary to complete the sale of my interests
in accordance with the terms of the Offer. In the event of my death or
incapacity, all authority and obligation shall be placed with my heirs, personal
representatives and successors.
I hereby appoint NTS-Properties Associates VII (without posting of a bond) as my
attorney-in-fact with respect to my interests, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to: (1) transfer ownership of my interests on the Partnership's books
to the respective Offeror, (2) change the address of record of my interests
prior to or after completing the transfer, (3) execute and deliver lost
certificate indemnities and all other transfer documents, (4) direct any
custodian or trustee holding record title to the interests to do what is
necessary, including executing and delivering a copy of this Letter of
Transmittal, and (5) upon payment by the respective Offeror of the purchase
price, to receive all benefits and cash distributions and otherwise exercise all
rights of beneficial ownership of my interests hereby tendered.
(Over)
<PAGE>
INSTRUCTIONS TO TENDER INTERESTS
Please complete the following steps to tender your interests:
o Complete Part 1. by inserting the number of interests you wish to tender.
o Complete Part 2. by providing your telephone number(s).
o Complete Part 3. by providing the appropriate signature(s). (Note: if your
account is held by a Trustee or Custodian, sign below and forward this form
to the Trustee or Custodian at the address noted on the first page of this
Letter of Transmittal to complete the remaining steps). All signatures must
be notarized by a Notary Public.
o Return your original Certificate(s) of Ownership for the interests with
this form. If you are unable to locate your Certificate(s) of Ownership,
complete the Affidavit and Indemnification Agreement for Missing
Certificate(s) of Ownership.
PART 1. NUMBER OF INTERESTS IN THE PARTNERSHIP TO BE TENDERED:
[ ] I tender my entire interest in the Partnership of ________ interests for
for a price of $6.00 per interest.
[ ] I tender ______ interests, representing only a portion of my interest in
the Partnership, for a price of $6.00 per interest.
PART 2. TELEPHONE NUMBER(S).
My telephone numbers are: (____)__________[Daytime] and (____)_________[Evening]
PART 3. SIGNATURE(S).
FOR INDIVIDUALS/JOINT OWNERS:
____________________________________ _____________________________________
Print Name of Limited Partner Print Name of Joint Owner
_____________________________________ _____________________________________
Signature of Limited Partner Signature of Joint Owner
Sworn to me this ___ day of ___, 2000 Sworn to me this ___ day of ___,2000.
_____________________________________ _____________________________________
Notary Public Notary Public
FOR CUSTODIAL/TRUSTEE/IRA ACCOUNTS:
_____________________________________ _____________________________________
Print Name of Signatory Signature
Sworn to me this ___ day of ___,2000.
_____________________________________
Title of Signatory
_____________________________________
Notary Public
Return or Deliver: (1) this Letter of Transmittal; (2) your original
Certificate(s) of Ownership for the interests, or if you are unable to locate
your Certificate(s) of Ownership, the Affidavit and Indemnification Agreement
for Missing Certificate(s) of Ownership; and (3) the Substitute Form W-9 on or
before the Expiration Date to:
NTS INVESTOR SERVICES
C/O GEMISYS
7103 S. REVERE PARKWAY
ENGLEWOOD, CO 80112
For additional information, call: (800) 387-7454.
<PAGE>
Exhibit (a)(3)
Form of Affidavit and Indemnification Agreement for
Missing Certificate(s) of Ownership
<PAGE>
AFFIDAVIT AND INDEMNIFICATION AGREEMENT
FOR MISSING CERTIFICATE(S) OF OWNERSHIP
State of ______________
County of _____________
_____________________________________
_____________________________________
_____________________________________
_____________________________________ (The "Investor")
being duly sworn, deposes and says:
1. The Investor is of legal age and is the true and lawful, present and
sole, record and beneficial owner of _________ (insert number of interests)
limited partnership interests (the "Interests") of NTS- Properties VII, Ltd.,
(the "Partnership"). The Interests were represented by the following
Certificate(s) of Ownership (the "Certificate(s)") issued to the Investor:
Certificate(s) No. Number of Interests Date Issued
- ----------------- ------------------- -----------
The Certificate(s) was (were) lost, stolen, destroyed or misplaced under the
following circumstances:
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________ and after diligent search, the
Certificate(s) could not be found.
2. Neither the Certificate(s) nor any interest therein has at any time
been sold, assigned, endorsed, transferred, pledged, deposited under any
agreement or other disposed of, whether or not for value, by or on behalf of the
investor. Neither the Investor nor anyone acting on the Investor's behalf has at
any time signed any power of attorney, any stock power or other authorization
with respect to the Certificate(s) and no person or entity of any type other
than the Investor has or has asserted any right, title, claim or interest in or
to the Certificate(s) or to the Interests represented thereby.
3. The Investor hereby requests, and this Affidavit and Indemnification
Agreement is made and given in order to induce the Partnership, (i) to refuse to
recognize any person other than the Investor as the owner of the Certificate(s)
and (ii) to refuse to make any payment, transfer, registration, delivery or
exchange called for by the Certificate(s) to any person other than the Investor
and to refuse the Certificates or to make the payment, transfer, registration,
delivery or exchange called for by the Certificate(s) without the surrender
thereof or cancellation.
4. If the Investor or the representative or the assigns of the Investor
should find or recover the Certificate(s), the Investor will immediately
surrender and deliver the same to the Partnership for cancellation without
requiring any consideration thereof.
5. The Investor agrees in consideration of the issuance to the Investor
of a new certificate in substitution for the Certificate(s), to indemnify and
hold harmless the Partnership, each general partner of the Partnership, each
affiliate of the Partnership and any person, firm or corporation now or
hereafter acting as the transfer agent, registrar, trustee, depository,
redemption, fiscal or paying agent of the Partnership, or in any other
(Over)
<PAGE>
capacity and their respective successors and assigns, from and against any and
all liabilities, losses, damages, costs and expenses of every nature (including
reasonable attorney's fees) in connection with, or arising out of, the lost,
stolen, destroyed or mislaid Certificate(s) without the surrender thereof and,
whether or not: (a) based upon or arising out of the honoring of, or refusing to
honor, the Certificate(s) when presented to anyone, (b) or based upon or arising
from inadvertence, accident, oversight or neglect on the part of the
Partnership, its affiliates or any general Partner of the Partnership, agents,
clerk, or employee of the Partnership or any general partner of the Partnership
and/or the omission or failure to inquire into contest or litigate the right of
any applicant to receive payment, credit, transfer, registration, exchange or
delivery in respect of the Certificate(s) and/or the new instrument or
instruments issued in lieu thereof, (c) and/or based upon or arising out of any
determination which the Partnership, its affiliates or any general partner
thereof may in fact makes as to the merits of any such claim, right, or title,
(d) and/or based upon or arising out of any fraud or negligence on the part of
the Investor in connection with reporting the loss of the Certificate(s) and the
issuance of new instrument or instruments in lieu thereof, (e) and/or based upon
or arising out of any other matter or thing whatsoever it may be.
6. The Investor agrees that all notices, requests, demands and other
communications under this Affidavit and Indemnification Agreement shall be in
writing and shall be mailed to the party to whom notice is to be given by
certified or registered mail, postage prepaid; if intended for the Partnership
shall be addressed to Gemisys, 7103 S. Revere Pkwy., Englewood, CO 80112 Attn.:
NTS Investor Services, or such other address as the Partnership shall have given
notice to the Investor at the address set forth at the end of this Affidavit and
Indemnification Agreement or at such other address as the Investor shall have
given prior notice to the Partnership in a manner herein provided.
7. No waiver shall be deemed to be made by the Partnership or its
affiliates of any of its rights hereunder unless the same shall be in writing,
and each waiver, if any, shall be a waiver only with respect to the specific
instance involved and shall in no way impair the rights of the Partnership or
its affiliates or the obligations of the Investor in any other respect at any
other time.
8. The provisions of this Affidavit and Indemnification Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Partnership and its affiliates and the Investor.
9. This Affidavit and Indemnification Agreement shall be governed
by and construed in accordance with the laws of the State of Kentucky.
____________________________________________________
Investor Signature
(Please sign exactly as name appears on certificate)
____________________________________________________
Investor Signature
(if held jointly)
____________________________________________________
Name
____________________________________________________
Address
Sworn to me this ____ day of
________________, 2000.
_______________________________________
Notary Public
My commission expires:_____/_____/_____
<PAGE>
Exhibit (a)(4)
Form of Letter to Limited Partners
<PAGE>
[NTS letterhead]
March 27, 2000
Account Name 1
Account Name 2
Address
City, State Zip
To our Limited Partners:
Enclosed for your review is an Offer to Purchase your limited
partnership interests. Please read all of the enclosed material carefully before
deciding to tender your interests.
You currently own ______ interests. The Partnership is offering to purchase your
interests for $6.00 per interest, or a total of $_____________, subject to the
terms of the Offer.
Payment will be made within five business days of the expiration of the Offer.
We invite your attention to the following:
o This Offer is being made to all Limited Partners.
o Up to 2,500 Interests may be purchased by the Partnership and an
additional 2,500 Interests may be purchased by the Partnership's
affiliate, ORIG, LLC. If more than 5,000 Interests are tendered, the
Partnership may decide to purchase more than 2,500 Interests and the
affiliate may decide to purchase more than 2,500 Interests or the
Partnership and the affiliate may decide to purchase less than all of
the Interests tendered on a pro rata basis.
o The Offer will expire at 12:00 midnight, Eastern Standard Time, on
Friday, June 27, 2000, unless the Offer is extended.
After reading the Offer to Purchase (white), if you wish to tender any
or all of your interests, complete and return to NTS Investor Services c/o
Gemisys, before Friday, June 27, 2000, the following:
(1) the Letter of Transmittal (blue);
(2) the Substitute Form W-9 (green); and
(3) the Certificate(s) of Ownership for the interests or,
if you are unable to locate the Certificate(s) of
Ownership, complete the Affidavit and Indemnification
Agreement for Missing Certificate(s) of Ownership
(yellow).
NTS INVESTOR SERVICES
C/O GEMISYS
7103 S. REVERE PARKWAY
ENGLEWOOD, CO 80112
For additional information, call: (800) 387-7454
<PAGE>
Exhibit (a)(5)
Substitute Form W-9 with Guidelines
<PAGE>
Substitute Form W-9
o Purpose of the Substitute Form W-9
Each tendering Limited Partner is required to provide to the
Partnership its correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 which is provided below, and to certify whether the Limited Partner is
subject to backup withholding of federal income tax. If the Partnership is not
provided with the correct TIN, the Limited Partner may be subject to a $500
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
failure to provide the information on Substitute Form W-9 may subject the
tendering Limited Partner to 31% federal income tax withholding on the payment
of the purchase price of all Interests purchased by the Offerors from the
Limited Partner pursuant to this Offer.
o Instructions for filling out the Substitute Form W-9
Each tendering Limited Partner must fill out the Substitute Form W-9
below by: (1) inserting their TIN; (2) certifying whether the Limited Partner is
subject to backup withholding of federal income tax; and (3) signing the form.
If the tendering Limited Partner is an individual, the TIN is the
Limited Partner's social security number.
If the tendering Limited Partner has been notified by the IRS that the
Limited Partner is subject to backup withholding, the Limited Partner must cross
out item (2) of the "Certification" box of Substitute Form W-9, unless the
Limited Partner has since been notified by the IRS that the Limited Partner is
no longer subject to backup withholding. If backup withholding applies, the
Partnership is required to withhold 31% of any payments made to the Limited
Partner. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
If the tendering Limited Partner has not been issued a TIN and has
applied for one or intends to apply for one in the near future, the Limited
Partner should write "Applied For" in the space provided for the TIN in Part I
of the Substitute Form W-9, and sign and date the Substitute Form W-9. If
"Applied For" is written in Part I and the Partnership is not provided with a
TIN within 60 days, the Partnership will withhold 31% on all payments of the
purchase price to the Limited Partner until a TIN is provided to the
Partnership.
Certain Limited Partners (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, the individual must submit an Internal Revenue Form W-8,
signed under penalties of perjury, attesting to such individual's exempt status.
A Form W-8 may be obtained from NTS Investor Services c/o Gemisys at the address
and telephone number provided in Section 15, "Address; Miscellaneous" of the
Offer to Purchase.
For complete instructions on how to fill out Substitute Form W-9, refer
to the Guidelines enclosed.
(OVER)
<PAGE>
________________________________________________________________________________
SUBSTITUTE | Part I -- Taxpayer Identification |
FORM W-9 | Number -- For all accounts, enter | ___________________
| your TIN in the box at right. | Social Security No.
| (For most individuals, this is |
Department of the | your social security number.) |
Treasury | Certify by signing and dating | OR
Internal Revenue | below. |
Service | | ___________________
| | Employer
Payer's Request | | Identification No.
for Taxpayer | |
Identification | |
Number (TIN) | |
| | (If awaiting a TIN
| | write "Applied For"
| | in the space above).
____________________|___________________________________|_______________________
Part II -- For payees exempt from backup withholding, see the enclosed
Guidelines and complete as instructed therein.
________________________________________________________________________________
Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me). and
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certificate Instructions -- You must cross out item (2) above, if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)
________________________________________________________________________________
SIGNATURE __________________________________ DATE _________________ , 199 ____
________________________________________________________________________________
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer. -
Social Security numbers have nine digits separated by two hyphens, e.g.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen, e.g., 00-0000000. The table below will help determine the number to
give the payer.
Give the SOCIAL
For this type of account: SECURITY
number of -
- ------------------------------------ --------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on the
account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to Minors
Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. A revocable savings trust The grantor-trustee(1)
account (in which grantor
is also trustee)
b. Any "trust" account that The actual owner(1)
is not a legal or valid trust
under State law
Give the EMPLOYER
For this type of account: IDENTIFICATION
number of -
- ------------------------------------ --------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or The legal entity (do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is not
designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
12. Partnership account held in The partnership
13. Association, club, or other The organization
14. A broker or registered The broker or nominee
15. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
State or local government,
school district, or prison) that
receives agricultural program
payments
- ------------------------------------ --------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at an office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a tax payer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part 1, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and will
continue until you furnish your taxpayer identification number to the requester.
Payees Exempt from Backup Withholding Penalties
Payees specifically exempted from backup withholding on ALL payments include the
following:*
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States,
or any political subdivision or instrumentality thereof.
o A foreign government or a political subdivision, agency or
instrumentality thereof.
o An international organization or any agency or instrumentality
thereof.
o A registered dealer in securities or commodities registered in the
United States or a possession of the United States.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An entity registered at all times during the tax year under the
Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the
United States and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid
in money.
- ----------
* Unless otherwise noted herein, all references below to section numbers or to
regulations are references to the Internal Revenue Code and the regulations
promulgated thereunder.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if (i) this interest is $600 or
more, (ii) the interest is paid in the course of the payer's trade or
business and (iii) you have not provided your correct taxpayer
identification number to the payer.
o Payments of tax-exempt interest (including exempt interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice.- Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.-If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Statements With Respect to Withholding.-If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500. (3) Criminal
Penalty for Falsifying Information.-If you falsify certifications or
affirmations, you are subject to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION
CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE
