Common use of SPECIAL FACTORS Clause in Contracts

SPECIAL FACTORS. BACKGROUND OF THE MERGER; PURPOSE OF THE TRANSACTION The Partnership was formed in 1983. In that year 35,200 Units were offered to the public at a price of $1,000 per Unit. The Partnership initially owned four multi-family apartment complexes and a joint venture interest in a fifth project. In 1992, the Partnership sold one apartment complex as well as the joint venture. The proceeds from the sales were approximately $3.9 million and $16.0 million, respectively. In 1995, the Partnership sold another apartment complex for $6,436,505. The proceeds from these sales were used to retire the mortgage indebtedness on the properties sold, to purchase additional fixed assets and to pay accumulated operating expenses, and were not distributed to Unitholders. The General Partners believe that most Unitholders have held their investment in the Partnership for longer than their anticipated holding period. The term of the Partnership is currently scheduled to terminate on December 31, 2020, unless it is sooner dissolved or terminated as provided in the partnership agreement. While the Partnership currently provides investors with a $40 annual distribution, other investment opportunities may offer a rate of return that is as good or better than that offered by the Partnership. The Units are not listed or traded on an exchange or quoted on the National Association of Securities Dealers Automated Quotation System, and no active trading market in the Units has developed. At the time of the Unit offering, Unitholders may have anticipated holding their Units for approximately five years based upon the statement made in the prospectus for the offering that the General Partners anticipated that the Partnership would preserve and return the capital investment made by Unitholders, and increase Unitholders' equity in the Properties, upon the sale or refinancing of the Properties after an average holding period of five years. Because of the limited trading market for the Units, Unitholders who wish to sell Units may have difficulty doing so, and from time to time, the General Partners have been asked by Unitholders to provide a means of disposing of their Units at a fair price. In the spring of 1999, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and individuals employed by the General Partners considered the possibility of acquiring the outstanding Units, thereby providing Unitholders with the opportunity to liquidate their investment in the Partnership for cash. ▇▇. ▇▇▇▇▇ contacted ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ of The Berkshire Group, an affiliate of the Partnership, regarding the possibility of forming an investment vehicle that would acquire the outstanding Units and merge with the Partnership. At this time, the parties agreed to explore acquiring the remaining Units by these methods in view of their belief that market conditions were favorable for the purchase and financing of the outstanding Units at a merger price that was attractive to Unitholders at this time. On July 8, 1999, ▇▇▇▇▇▇▇ & Wakefield was retained by the Partnership to appraise the fair market value of the Properties, the principal assets of the Partnership. The ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ appraisals were completed in August 1999. In September 1999, ▇▇. ▇▇▇▇▇ of the Purchaser initiated contact with ▇▇. ▇▇▇▇▇▇ Dagbjartsson of Equity Resources, the holders of approximately 11% of the outstanding Units, regarding the possibility of forming a joint venture to acquire the remaining outstanding Units. Following the proposed merger and based upon the recapitalization of the Partnership, Equity Resources will own approximately a 25% interest in the Purchaser. The parties determined Equity Resources' interest in the Purchaser following the proposed merger by valuing Equity Resources' current 11% interest in the Partnership on a per Unit basis at an amount equal to the merger price, or $1,200 per Unit. KRF Company's interest in the Purchaser, as the managing member, will be based on its capital contribution to the Purchaser, which will be in the form of a cash contribution of up to $16 million. See "--Financing of the Merger--Source of Funds." Consequently, the interests of Equity Resources and KRF Company in the Purchaser following the merger will be a function of their respective unit and cash contributions to the Purchaser. Equity Resources was approached because of its considerable experience in evaluating the benefits and risks associated with continued ownership of the Properties. Formed in 1982, Equity Resources holds interests in over 1,500 separate partnerships involved in all facets of the real estate business as long-term investments and has invested over $100 million in real estate business holdings. The Purchaser expects to utilize this experience by discussing with Equity Resources from time to time matters relating to the Properties. In this regard, the Purchaser hopes to benefit from Equity Resources' real estate management experience.

SPECIAL FACTORS. BACKGROUND OF THE MERGER; PURPOSE OF THE TRANSACTION The Partnership was formed in 1983. In that year 35,200 Units were offered to the public at a price of $1,000 per Unit. The Partnership initially owned four multi-family apartment complexes and a joint venture interest in a fifth project. In 1992, the Partnership sold one apartment complex as well as the joint venture. The proceeds from the sales were approximately $3.9 million and $16.0 million, respectively. In 1995, the Partnership sold another apartment complex for $6,436,505. The proceeds from these sales were used to retire the mortgage indebtedness on the properties sold, to purchase additional fixed assets and to pay accumulated operating expenses, and were not distributed to Unitholders. The General Partners believe that most Unitholders have held their investment in the Partnership for longer than their anticipated holding period. The term of the Partnership is currently scheduled to terminate on December 31, 2020, unless it is sooner dissolved or terminated as provided in the partnership agreement. While the Partnership currently provides investors with a $40 annual distribution, other investment opportunities may offer a rate of return that is as good or better than that offered by the Partnership. The Units are not listed or traded on an exchange or quoted on the National Association of Securities Dealers Automated Quotation System, and no active trading market in the Units has developed. At the time of the Unit offering, Unitholders may have anticipated holding their Units for approximately five years based upon the statement statements made in the prospectus for the offering that the General Partners anticipated that the Partnership would preserve and return the capital investment made by Unitholders, and increase Unitholders' equity in the Properties, upon the sale or refinancing of the Properties after an average holding period of five yearsoffering. Because of the limited trading market for the Units, Unitholders who wish to sell Units may have difficulty doing so, and from time to time, the General Partners have been asked by Unitholders to provide a means of disposing of their Units at a fair price. In the spring of 1999, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and individuals employed by the General Partners considered the possibility of acquiring the outstanding Units, thereby providing Unitholders with the opportunity to liquidate their investment in the Partnership for cash. ▇▇. ▇▇▇▇▇ contacted ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ of The Berkshire Group, an affiliate of the Partnership, regarding the possibility of forming an investment vehicle that would acquire the outstanding Units and merge with the Partnership. At this time, the parties agreed to explore acquiring the remaining Units by these methods in view of their belief that market conditions were favorable for the purchase and financing of the outstanding Units at a merger price that was attractive to Unitholders at this timemethods. On July 8, 1999, ▇▇▇▇▇▇▇ & Wakefield was retained by the Partnership to appraise the fair market value of the Properties, the principal assets of the Partnership. The ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ appraisals were completed in August 1999. In September 1999, ▇▇. ▇▇▇▇▇ of the Purchaser initiated contact with ▇▇. ▇▇▇▇▇▇ Dagbjartsson of Equity Resources, the holders of approximately 11% of the outstanding Units, regarding the possibility of forming a joint venture to acquire the remaining outstanding Units. Following the proposed merger and based upon the recapitalization of the Partnership, Equity Resources will own approximately a 25% interest in the Purchaser. The parties determined Equity Resources' interest in the Purchaser following the proposed merger by valuing Equity Resources' current 11% interest in the Partnership on a per Unit basis at an amount equal to the merger price, or $1,200 per Unit. KRF Company's interest in the Purchaser, as the managing member, will be based on its capital contribution to the Purchaser, which will be in the form of a cash contribution of up to $16 million. See "--Financing of the Merger--Source of Funds." Consequently, the interests of Equity Resources and KRF Company in the Purchaser following the merger will be a function of their respective unit and cash contributions to the Purchaser. Equity Resources was approached because of its considerable experience in evaluating the benefits and risks associated with continued ownership of the Properties. Formed in 1982, Equity Resources holds interests in over 1,500 separate partnerships involved in all facets of the real estate business as long-term investments and has invested over $100 million in real estate business holdings. The Purchaser expects to utilize this experience by discussing with Equity Resources from time to time matters relating to the Properties. In this regard, the Purchaser hopes to benefit from Equity Resources' real estate management experience.