-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PsfFqcdfIRovc1uaXptNpZ4BfUM0+rqarzl6qIWWjAYOlM+vZJ/5pP3fWumuN4gm O29Co7JvK7zSI6I+BNrldw== 0001140437-03-000217.txt : 20030514 0001140437-03-000217.hdr.sgml : 20030514 20030514161356 ACCESSION NUMBER: 0001140437-03-000217 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20030514 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NELSON KENNETH E CENTRAL INDEX KEY: 0001227065 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 4107 W GAZEBO HILL BLVD STREET 2: N107 CITY: MEQUON STATE: WI ZIP: 53092 BUSINESS PHONE: 2622426653 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: METRIC PARTNERS GROWTH SUITE INVESTORS LP CENTRAL INDEX KEY: 0000800730 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 943050708 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-56507 FILM NUMBER: 03699304 BUSINESS ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: SUITE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 BUSINESS PHONE: 4156782000 MAIL ADDRESS: STREET 1: ONE CALIFORNIA ST STREET 2: SUITE 1400 CITY: SAN FRANCISCO STATE: CA ZIP: 94111-5415 FORMER COMPANY: FORMER CONFORMED NAME: FOX GROWTH SUITE INVESTORS DATE OF NAME CHANGE: 19880412 FORMER COMPANY: FORMER CONFORMED NAME: MRI BUSINESS PROPERTIES FUND LTD IV DATE OF NAME CHANGE: 19871104 SC TO-T 1 k30461scto.txt TENDER OFFER STATEMENT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule TO Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 Metric Partners Growth Suite Investors, LP A California limited partnership -------------------------------- (Name of Subject Company) at $86 (plus release from certain litigation claims) Net Per Unit by by Kenneth E. Nelson ----------------- (Name of Filing Person) Limited Partnership Units ------------------------- (Title or Class of Securities) Kenneth E. Nelson 4107 W. Gazebo Hill Blvd. N107 Mequon, WI 53092 262-242-6653 ------------ (Name, address and telephone number of person authorized to receive notices and communications on behalf of filing person) Calculation of Filing Fee ================================================================================ Transaction Valuation* Amount of Filing Fee $2,580,000 $208.72 ================================================================================ *For purposes of calculating the filing fee only. This calculation assumes the purchase of 30,000 Units at a purchase price of $86 per Unit in the Partnership. |_| 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 Filing Party: Not Applicable Form of Registration No.: Not Applicable Date Filed: Not Applicable |_| Check the 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. |_| issuer tender offer subject to Rule 13e-4. |_| going-private transaction subject to Rule 13e-3. |_| 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: |_| TENDER OFFER This Tender Offer Statement on Schedule TO (the "Schedule TO") relates to an offer by Kenneth E. Nelson (the "Purchaser") to purchase 30,000 units (the "Units") of limited partnership assignee interests in Metric Partners Growth Suite Investors, LP, a California limited partnership (the "Partnership"), at $86 for each Unit, net to the seller in cash, without interest, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003 (without regard to the record date), plus a release from certain litigation claims, upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer to Purchase") and in the related Agreement of Sale, copies of which are attached hereto as Exhibits (a)(l) and (a)(3) (which are herein collectively referred to as the "Offer"). The information in the Offer to Purchase, including all schedules and annexes thereto, is hereby expressly incorporated herein by reference in response to all the items of this Statement, except as otherwise set forth below. Item 12. Exhibits (a)(1) Offer to Purchase, dated May 14, 2003 (a)(2) Transmittal letter, dated May 14, 2003 (a)(3) Agreement of Sale (a)(4) Solicitation Statement, dated May 14, 2003 (a)(5) Summary Advertisement (b) Loan Agreement, dated April 17, 2003 (c) Not applicable (d) Not applicable (e) Not applicable (f) Not applicable (g) Not applicable (h) Not applicable 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. Dated: May 14, 2003 /s/ Kenneth E. Nelson - ---------------------- Kenneth E. Nelson EXHIBIT INDEX - -------------------------------------------------------------------------------- Sequential Exhibit No Description Page Number - -------------------------------------------------------------------------------- (a)(1) - Offer to Purchase, dated May 14, 2003. 5-36 - -------------------------------------------------------------------------------- (a)(2) - Transmittal letter, dated May 14, 2003. 37-39 - -------------------------------------------------------------------------------- (a)(3) - Agreement of Sale 40-44 - -------------------------------------------------------------------------------- (a)(4) - Solicitation Statement, dated May 14, 2003. 45-64 - -------------------------------------------------------------------------------- (a)(5) Summary Advertisement 65 - -------------------------------------------------------------------------------- (b) - Loan Agreement, dated April 17, 2003. 66-67 - -------------------------------------------------------------------------------- (c) - Not applicable. - -------------------------------------------------------------------------------- (d) - Not applicable. - -------------------------------------------------------------------------------- (e) - Not applicable. - -------------------------------------------------------------------------------- (f) - Not applicable. - -------------------------------------------------------------------------------- (g) Not applicable. - -------------------------------------------------------------------------------- (h) Not applicable. - -------------------------------------------------------------------------------- EX-99.(A)(1) 3 k30461exa1.txt OFFER TO PURCHASE, DATED APRIL 28, 2003 Exhibit (a)(1) OFFER TO PURCHASE FOR CASH 30,000 Units OF METRIC PARTNERS GROWTH SUITE INVESTORS, LP at $86 Net Per Unit (plus release from certain litigation claims) by KENNETH E. NELSON - -------------------------------------------------------------------------------- THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON JUNE 27, 2003 UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- Kenneth E. Nelson ("Nelson" or sometimes the "Purchaser"), hereby offers to purchase 30,000 Limited Partnership Assignee Units ("Units") in Metric Partners Growth Suite Investors, LP, a California limited partnership (the "Partnership"). Nelson is offering to pay a purchase price of $86 for each Unit, to the seller in cash, without interest, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003 (without regard to the record date), upon the terms and subject to the conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in the Agreement of Sale, as each may be supplemented or amended from time to time (which together constitute the "Offer"). In addition, if I purchase any Units, each holder of Units (a "Limited Partner") who tenders all of his Units will be given a release in certain litigation in which the Limited Partners, as a class, have been named as defendants. Nelson is not an affiliate of the Partnership or of Metric Realty, the Managing General Partner of the Partnership. The Units sought to be purchased pursuant to the Offer represent slightly more than 50% of all Units outstanding as of the date of the Offer. The Offer is conditioned upon the valid tender of 30,000 Units (the "Minimum Tender Condition"). If more than 30,000 Units are validly tendered and not withdrawn, the Purchaser will accept for purchase up to 30,000 Units, on a pro rata basis, subject to the terms and conditions described in the Offer to Purchase, see "THE OFFER--Section 15--Certain Conditions of the Offer." A Limited Partner may tender any or all Units owned by that Limited Partner. Certain other conditions to the consummation of the Offer are described in the Offer to Purchase. The Purchaser reserves the right (subject to the applicable rules and regulations of the Commission) to amend or waive any one or more of the terms and conditions of the offer. See "THE OFFER--Section 15--Certain Conditions Of The Offer." The Offer is subject to certain risks described in this Offer to Purchase. See "THE OFFER--Introduction--Risk Factors." IMPORTANT Any Limited Partner desiring to tender any or all of the Units held by that Limited Partner should complete and sign the Agreement of Sale (BLUE) accompanying this Offer to Purchase, in accordance with the instructions set forth in the Agreement of Sale, and mail or deliver the Agreement of Sale and any other required documents to D.F. King & Co., Inc. ("King"), at the address set forth on the back cover of this Offer to Purchase, or request his or her broker, dealer, commercial bank, credit union, trust company or other nominee to effect the transaction for him or her. No person has been authorized to make any recommendation or any representation on behalf of the Purchaser or to provide any information other than as contained in this Offer to Purchase or in the Agreement of Sale. No recommendation, information, or representation may be relied upon as having been authorized. Direct questions or requests for assistance or additional copies of this Offer to Purchase or the Agreement of Sale to King at: D.F. King & Co., Inc. 48 Wall Street New York, NY 10005 800-949-2583 -ii- Table of Contents SUMMARY TERM SHEET.............................................................v INTRODUCTION...................................................................1 RISK FACTORS...................................................................4 THE OFFER......................................................................6 SECTION 1. TERMS OF THE OFFER.................................................6 SECTION 2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS............6 SECTION 3. PROCEDURES FOR TENDERING UNITS.....................................7 SECTION 4. WITHDRAWAL RIGHTS..................................................8 SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.................8 SECTION 6. CERTAIN TAX CONSEQUENCES...........................................9 SECTION 7. PURPOSE AND EFFECTS OF THE OFFER; METHOD OF DETERMINING THE OFFER PRICE...................................................................11 SECTION 8. FUTURE PLANS......................................................13 SECTION 9. PAST CONTACT AND NEGOTIATIONS WITH GENERAL PARTNER................13 SECTION 10. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP...................14 SECTION 11. BACKGROUND AND REASONS FOR THE OFFER.............................18 SECTION 12. CERTAIN INFORMATION CONCERNING THE PURCHASER.....................18 SECTION 13. SOURCE AND AMOUNT OF FUNDS.......................................19 SECTION 14. VOTING POWER.....................................................19 SECTION 15. CERTAIN CONDITIONS OF THE OFFER..................................19 SECTION 16. CERTAIN LEGAL MATTERS AND REQUIRED REGULATORY APPROVALS..........21 SECTION 17. FEES AND EXPENSES................................................22 SECTION 18. MISCELLANEOUS...................................................22 SCHEDULE 1....................................................................23 -iii- [THIS PAGE INTENTIONALLY BLANK] -iv- SUMMARY TERM SHEET Kenneth E. Nelson ("Nelson") is offering to purchase 30,000 limited partnership assignee units ("Units") in Metric Partners Growth Suite Investors, LP, a California limited partnership (the "Partnership") for $86 per Unit, to the seller in cash, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003, unless a Unit holder was not entitled to receive that distribution. In addition, you will be given a release from the claim asserted against you in certain litigation if I purchase any Units from you. The following are some questions you, as a Limited Partner, may have, and the answers to those questions. I urge you to read carefully the remainder of this Offer to Purchase and the accompanying documents because the information in this summary is not complete, and additional information is contained in the remainder of this Offer to Purchase. o How do I tender my Units? In order to tender your Units properly, you must properly complete and execute an Agreement of Sale (BLUE) and deliver it to King at the address set forth on the enclosed business reply envelope and on the back cover of the offer to purchase not later than the time the offer expires. See "THE OFFER--Section 3--Procedures for Tendering Units." o Is there anything else I should do if I wish to sell my Units? Yes, you should also properly complete and execute the consent which is on the reverse of the Agreement of Sale (BLUE). The Offer is contingent upon my election as general partner replacing the current general partners, upon the settlement of all outstanding litigation against the Partnership, and upon amendment of the Limited Partnership Agreement, all of which you should vote for by executing the Consent. You have also received a Solicitation Statement which sets forth in detail information regarding such votes. See "THE OFFER--Section 3--Procedures for Tendering Units." o How much are you offering to pay for my securities and what is the form of payment? Will I have to pay fees or commissions? I am offering to pay a purchase price of $86 for each Unit, to the seller in cash, without interest, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003 (without regard to the record date), upon the terms and subject to the conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in the Agreement of Sale, as each may be supplemented or amended from time to time (which together constitute the "Offer"). In addition, you will be given a release from the claims asserted against you in certain litigation. Limited Partners who hold their units in a brokerage account or in trust should consult their advisors concerning brokerage fees, commissions or similar expenses associated with the tender of their Units. See "THE OFFER--Section 1--Terms of the Offer." o Am I being sued? What can I do about it? Yes, you and the other Limited Partners are named, as a class, as defendants in a fraudulent transfer lawsuit filed in San Francisco as a result of the transfer by the Partnership of $16.8 million in January, 1998. It is alleged that that transfer was made to put assets out of the reach of the Partnership's creditors. The suit seeks to force you to return that distribution, which was $275 per Unit. However, if you tender all of your Units to me, and if I purchase any of your Units, you will be given a release from liability in such lawsuit. See "THE OFFER--Section 1--Terms of the Offer." o Who is offering to buy my Units? Kenneth E. Nelson is offering to purchase 30,000 Units. Nelson is actively involved in the litigation of certain claims against the Partnership, and was previously active in the development of hotels, some of which were sold to the Partnership. See "THE OFFER--Section 12--Certain Information Concerning the Purchaser." o What are the classes and amounts of securities sought in the offer? -v- Nelson is seeking to purchase 30,000 Units of limited partnership assignee units in the Partnership. This represents slightly more than 50% of the Partnership's outstanding Units. See "INTRODUCTION." o Do you have the financial resources to make payment and is your financial condition relevant to my decision to tender in the offer? I expect that approximately $2,580,000 (exclusive of fees and expenses) will be required to purchase 30,000 Units, if tendered. I will obtain such funds by means of a loan from GP Credit Co., LLC ("GP Credit"), a company of which my wife is the manager. I am not a public company and have not prepared audited financial statements. I do not think my financial condition is relevant to your decision whether to tender in the offer because the form of payment is cash. Thus, I will owe you no money following the purchase of your Units. Furthermore, I currently have a commitment for a loan sufficient for the consideration to be paid in the offer. Additionally, the offer is not subject to any financing condition. Finally, the Partnership will not rely upon me for financing if the Offer is successful. However, if you believe my financial condition is relevant, you should be aware that I have a negative net worth in excess of $10 million. See "THE OFFER--Section 13--Source and Amount of Funds." o How long do I have to decide whether to tender in the offer? You will have at least until 12:00 midnight, Eastern Time, on June 27, 2003, to decide whether to tender your Units in the offer. In addition, if I decide to extend the offering period as described below, you will have an additional opportunity to tender your Units. See "THE OFFER--Section 3--Procedures for Tendering Units." o Can the offer be extended or amended and under what circumstances? Yes, I may elect to extend the offer: to extend the period of time during which the offer is open; upon the failure of a Limited Partner to satisfy any of the conditions specified in Section 15, to delay the acceptance for payment of, or payment for, any Units; and to amend the Offer in any respect (including, without limitation, by increasing or decreasing the offer price). However, if you do not tender your Units during the initial offering period, you will not have the opportunity to accept the Offer, unless extended. See "THE OFFER--Section 5--Extension of Tender Period; Termination; Amendment." o How will I be notified if the offer is extended? If I decide to extend the offer, I will send each Limited Partner notification of the extension, not later than 9:00 a.m., Eastern Time, on the business day after the day on which the offer was scheduled to expire. See "THE OFFER--Section 5--Extension of Tender Period; Termination; Amendment." o What are the most significant conditions to the offer? I am not obligated to purchase any Units in the Offer if: o less than 30,000 Units are tendered (the "Minimum Tender Condition"); o there is not a settlement of all outstanding litigation against the Partnership (the "Settlement Condition"); o there is not a vote by the Limited Partners to amend the Agreement of Limited Partnership to allow the transfer of more than 5% of the Units in a year (the "Transfer Amendment Condition"); or, o I am not elected general partner of the Partnership and the current general partners do not resign or are not removed (the "General Partner Condition"). I have the right to waive any or all of these conditions. There are also certain other conditions. See "THE OFFER--Section 15--Certain Conditions of the Offer." o How do I withdraw previously tendered Units? To withdraw your Units after you have tendered them, you must deliver a properly executed written notice of withdrawal with the required information to us while you still have the right to withdraw the Units. See "THE OFFER--Section 4--Withdrawal Rights." o Until what time can I withdraw previously tendered Units? -vi- You can withdraw Units tendered pursuant to the Offer at any time until the expiration of seven days after the date of the Offer, or May 21, 2003, and at any time after sixty days from the date of the Offer, or July 13, 2003, and you can withdraw them at any time after the expiration date until I accept Units for payment. See "THE OFFER--Section 4--Withdrawal Rights." o What does the Partnership think of the offer? The Managing General Partner is required to respond to this offer. I do not currently know what Metric Realty, the Managing General Partner of the Partnership, will recommend to Limited Partners as to whether or not to tender Units pursuant to the offer. However, a tender offer was made last year for $20 per Unit. The Managing General Partner made no recommendation, expressed no opinion, and remained neutral as to that offer. Furthermore, the Partnership no longer calculates an estimated Net Asset Value ("NAV") for Units because of the uncertainty of the litigation against the Partnership. The Managing General Partner previously indicated that it would likely oppose a different offer that I proposed making, but the terms of that offer were significantly different from the terms of this Offer. o Will there be any change to the Partnership or my Units if I decide not to tender my Units? It is expected that following the offer, the business and operations of the Partnership will be changed substantially. I am acquiring the Units with a view toward affecting management of the Partnership. You should note that if I purchase 30,000 Units, I will own over 50% of the outstanding Units. This would represent a majority interest, which would give me control over any vote of the Limited Partners. The Partnership will enter into a settlement of all litigation against it. Furthermore, I will cause the Partnership to vigorously pursue the lawsuit previously filed by the Partnership against James Reuben, an attorney who represented the Partnership in connection with a 1993 settlement of certain litigation. For a description of such settlement, see "THE OFFER--Section 11--Background and Reasons for the Offer." Finally, I will cause the Partnership to engage independent counsel to review the conduct of the Managing General Partner and various other advisors to the Partnership during the period of time since 1993, as I believe that there may have been breaches of their fiduciary duties during that period. Should the independent counsel find evidence of such wrongdoing, then I will cause the Partnership to attempt to recover from the wrongdoers. See "THE OFFER--Section 8--Future Plans" and "--Section 14--Voting Power." o What is the market value of my Units as of a recent date? There is no public trading of Units, thus determination of the market value of Units is difficult. I established the Offer Price based primarily upon my discussions with the Limited Partners who control the greatest number of Units. The Offer Price of $86 per Unit is the asking price of a partner of Peachtree Partners, who controlled more Units than any other Limited Partner at the time that I talked to him. I did not negotiate with him, but merely asked at what price he would sell. I also talked to Equity Resource Arlington Fund Limited Partnership ("Equity Resource"), which now controls more Units than any other Limited Partner as the result of its recent tender offer. I believe that these Limited Partners are sophisticated and knowledgeable about the affairs of the Partnership. While I have no agreement or understanding with such Limited Partners that they will tender their Units, based upon such discussions I believe that the Offer Price is acceptable to holders of at least 18% of the Units. As to recent sales, Equity Resource made a tender offer for Units at $20 per Unit during the third quarter of 2002. Equity Resource reported that it acquired 2,160 Units at $20 per Unit. Secondly, Peachtree Partners made a tender offer for Units in the third quarter of 2002. Such tender offer was for $29 per Unit, was made to only a limited number of Limited Partners, and was for less than 5% of the Units. It is my understanding that approximately 120 Units were acquired by Peachtree Partners as a result of such tender offer. The sale proceeds received by the Limited Partners selling to Peachtree Partners was reduced by a $75 transfer fee. Finally, in its most recent annual report, the Partnership reported that 2,808 Units, or 4.69% of the total outstanding Units, traded in resale transactions between January 1, 2002 and December 31, 2002, at prices ranging from $10-$300 per Unit, with a simple average price of $26.78. The Purchaser and his affiliates have purchased no Units in the Partnership in the past twelve months and know of no other sales of Units in the past twelve months. See "INTRODUCTION--Market Value of the Units." -vii- o Who can I talk to if I have questions about the offer? You can call D.F. King & Co., Inc, which is acting as information agent for the offer, at 800-949-2583. -viii- INTRODUCTION Kenneth E. Nelson ("Nelson" or the "Purchaser"), is offering to purchase 30,000 limited partnership assignee units ("Units") in Metric Partners Growth Suite Investors, LP, a California limited partnership (the "Partnership"). I am offering to pay a purchase price of $86 for each Unit, to the seller in cash, without interest, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003 (without regard to the record date), upon the terms and subject to the conditions set forth in this Offer to Purchase (the "Offer to Purchase") and in the Agreement of Sale, as each may be supplemented or amended from time to time (which together constitute the "Offer"). If you tender your Units in the Offer and you were not entitled to receive any distribution declared or paid from any source by the Partnership with respect to your Units after January 1, 2003, the amount paid to you in the Offer will not be reduced by the amount of any distribution you were not entitled to receive. In addition, you will be given a release from the claims asserted against you in certain litigation. You and the other Limited Partners are named, as a class, as defendants in a fraudulent transfer lawsuit filed in San Francisco as a result of the transfer by the Partnership of $16.8 million in January, 1998. It is alleged that that transfer was made to defraud the Partnership's creditors by putting assets out of their reach. The suit seeks to force you to return that distribution, which was $275 per Unit. However, if you tender all of your Units to me, and if I purchase any of your Units, you will be given a release from liability in such lawsuit. The Units sought to be purchased pursuant to the Offer represent, to the best of my knowledge, slightly more than 50% of the Units outstanding as of the date of the Offer. I am not an affiliate of the Partnership. A holder of Units (a "Limited Partner") may tender any or all Units owned by that Limited Partner. The Offer to Purchase is conditioned upon the valid tender of at least 30,000 Units (the "Minimum Tender Condition"). If more than 30,000 Units are validly tendered and not withdrawn, the Purchaser will accept for purchase up to 30,000 Units, on a pro rata basis, subject to the terms and conditions described in this Offer to Purchase. The Offer is also conditioned upon: (i) settlement of all outstanding litigation against the Partnership (the "Settlement Condition"); (ii) a vote by the Limited Partners to amend the Agreement of Limited Partnership to allow the transfer of more than 5% of the Units in a year (the "Transfer Amendment Condition"); and (iii) my election as general partner of the Partnership and the resignation or removal of the current general partners (the "General Partner Condition"). However, Purchaser retains the right to waive any or all of these conditions. See "OFFER--Section 15--Certain Conditions of the Offer." Payment of the Offer Price For those Limited Partners who accept the Offer, a cash payment for Units will be made to those Limited Partners not later than ten (10) business days following the expiration date of the Offer and the satisfaction or waiver of all conditions to the Offer, as long as Purchaser has received from those Limited Partners a properly completed and duly executed Agreement of Sale. One of the conditions of the Offer is the removal of the current general partners. See "THE OFFER--Section 15--Certain Conditions of the Offer." In the event that the current general partners contest their removal, payment for Units will be delayed until such time as there is a final judicial determination that the current general partners were removed and I was elected general partner. The Purchaser may accept only a portion of the Units tendered by a Limited Partner in the event a total of more than 30,000 Units are tendered. Market Value of the Units There is no public trading of Units, thus determination of the market value of Units is difficult. I established the Offer Price based primarily upon my discussions with the Limited Partners who control the greatest number of Units. The Offer Price of $86 per Unit is the asking price of a partner of Peachtree Partners, who controlled more Units than any other Limited Partner at the time that I talked to him. I did not negotiate with him, but merely asked at what price he would sell. I also talked to Equity Resource Arlington Fund Limited Partnership ("Equity Resource"), which now controls more Units than any other Limited Partner as the result of its recent tender offer. I believe that these Limited Partners are sophisticated - 1 - and knowledgeable about the affairs of the Partnership. While I have no agreement or understanding with such Limited Partners that they will tender their Units, based upon such discussions I believe that the Offer Price is acceptable to holders of at least 18% of the Units. As to recent sales, Equity Resource made a tender offer for Units at $20 per Unit during the third quarter of 2002. Equity Resource reported that it acquired 2,160 Units at $20 per Unit. Secondly, Peachtree Partners also made a tender offer for Units in the third quarter of 2002. Such tender offer was for $29 per Unit, was made to only a limited number of Limited Partners, and was for less than 5% of the Units. It is my understanding that approximately 120 Units were acquired by Peachtree Partners as a result of such tender offer. The price received by the Limited Partners selling to Peachtree Partners was reduced by a $75 transfer fee. Finally, in its most recent annual report, the Partnership reported that 2,808 Units, or 4.69% of the total outstanding Units, traded in resale transactions between January 1, 2002 and December 31, 2002, at prices ranging from $10-$300 per Unit, with a simple average price of $26.78. The Purchaser and his affiliates have purchased no Units in the Partnership in the past twelve months and know of no other sales of Units in the past twelve months. As of the date of the Offer, all ten of the Partnership's investment properties have been liquidated. According to the Partnership's balance sheet, the Partnership's only significant asset is cash and cash equivalents in the amount of $6,987,000, as of December 31, 2002, the date of the most recent report of the Partnership filed with the Securities and Exchange Commission. Of that amount, distribution of all but $1,987,000 has been enjoined pending the outcome of one of the Partnership's seven current lawsuits. In addition, the general partners owe in excess of $900,000 to the Partnership upon its liquidation. The Partnership's ability to distribute money to limited partners and to liquidate the Partnership is contingent on the outcome of the lawsuits. No Selling Commissions Units sold in the informal market "matching service" usually require payment of a selling commission of the greater of $200 or 8.75%. If you accept the Offer, however, you will not pay any selling commission. Transfer Fees If you accept the Offer, the Purchaser will pay any transfer fee for this transaction. Purpose of the Offer The primary purpose of the Offer is to obtain control of the Partnership, settle all outstanding litigation against the Partnership, and to then cause the Partnership to attempt to recover from third parties for the damages suffered by the Partnership. If successful, the Offer will allow the Purchaser to benefit from any one or a combination of the following: o any cash distributions, whether these distributions are classified as a return on, or a return of, capital, from the operations in the ordinary course of the Partnership; o any distributions of net proceeds from the liquidation of the Partnership; o any cash from any redemption of the Units by the Partnership, and o any proceeds that may be received by the Limited Partners or by the Partnership as a result of any litigation. The Offer is conditioned upon the valid tender of 30,000 Units. If more than 30,000 Units are tendered and not withdrawn, the Purchaser will accept up to 30,000 of the tendered Units on a pro rata basis, subject to the terms and conditions described in this Offer to Purchase. The Offer is also subject to other conditions. See "THE OFFER--Section 15--Certain Conditions of the Offer. The Purchaser expressly reserves the right, in its sole discretion and for any reason, to waive any or all of the conditions of the Offer, although the Purchaser does not presently intend to do so. Certain Information About the Partnership The Partnership is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance with that act, is required to file reports and other information with the Securities and Exchange Commission (the "SEC") relating to its business, financial condition and other matters. These reports and other information may be inspected at the public - 2 - reference facilities maintained by the SEC at room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and is available for inspection and copying at the regional offices of the SEC located in Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials can also be obtained from the Public Reference Room of the SEC in Washington, D.C. at prescribed rates or from the SEC's Website at http://www.sec.gov. The Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO (including exhibits) pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, which provides certain additional information with respect to the Offer. The Schedule TO and any amendments to the Schedule TO, including exhibits, may be inspected and copies may be obtained from the SEC in the manner specified above. According to publicly available information, there were 59,919 Units issued and outstanding held by approximately 4,056 limited partners on February 1, 2003. Information contained in this Offer to Purchase which relates to, or represents statements made by, the Partnership, has been derived from information provided in reports and other information filed with the SEC by the Partnership. Limited Partners are urged to read this Offer to Purchase and the accompanying Agreement of Sale carefully before deciding whether to tender their Units in the Offer. - 3 - RISK FACTORS Before making a decision whether or not to accept the Offer, you should consider the following Risk Factors: o In making the Offer, there has been no third party valuation or appraisal. No independent party has been retained by Purchaser or any other person to evaluate or render any opinion to Limited Partners with respect to the fairness of the Offer Price, and no representation is made as to any fairness or other measures of value that may be relevant to Limited Partners. In making the Offer, Purchaser has not based its valuation of the Units on any third-party appraisal or valuation and it is uncertain whether the Offer Price reflects the value that would be realized upon the sale of Units by a Limited Partner to a third party. I urge Limited Partners to consult their own financial and tax advisors in connection with the Offer. o The Offer Price may not represent fair market value of Units. There is no established or regular trading market for Units, nor is there another reliable standard for determining the fair market value of the Units. The Offer Price does not necessarily reflect the price that Limited Partners might receive in an open market sale of Units. Those prices could be higher than the Offer Price. o The Offer Price may not represent the value that a Limited Partner might receive upon a liquidation of the Partnership. Although a liquidation of the Partnership is not anticipated in the near future, you might receive more value if you retain Units until the Partnership is liquidated. The Partnership no longer calculates an estimated Net Asset Value ("NAV") for Units, due primarily to the uncertainty concerning the current lawsuits. However, the actual proceeds which might be obtained upon liquidation of the Partnership are highly uncertain and could be more than the Offer Price. Limited Partners are not required to accept the Offer and tender their Units. o There may be conflicts of interest with respect to the Offer. Purchaser is making the Offer with a view toward making a profit. Accordingly, there is a conflict between Purchaser's desire to acquire your Units at a low price and your desire to sell your Units at a high price. Purchaser's intent is to acquire the Units at a discount to the value Purchaser might ultimately realize from owning the Units. Although Purchaser cannot predict the future value of the Partnership assets on a per Unit basis, the Offer Price could differ significantly from the net proceeds that may be realized upon future liquidation of the Partnership. Furthermore, I am the general partner of Nashville Lodging Co., which was involved in litigation with the Partnership, and am also the husband of the manager of GP Credit, which is involved in litigation with the Partnership (GP Credit has acquired the claims against the Partnership of Nashville Lodging Co.). While a settlement of all such litigation is a condition of this Offer, GP Credit will continue to have a claim against Limited Partners who do not tender all of their Units. o Purchaser may conduct future offers at a higher price. It is possible that I may conduct a future offer at a higher price than the Offer Price. That decision will depend on, among other things, the performance of the Partnership, prevailing economic conditions and my interest in acquiring the Units. o If you accept the Offer and sell your Units, you may recognize taxable gain on your sale. A sale of Units in the Offer will be a taxable sale, with the result that you will recognize taxable gain or loss measured by the difference between the amount realized on the sale and your adjusted tax basis in the Units you transfer to us. The tax consequences of the Offer to a particular Limited Partner may be different from those of other Limited Partners and I urge you to consult your own tax advisor in connection with the Offer. - 4 - o If you accept the Offer and sell your Units, you will lose the right to share in the future profits of the Partnership. Limited Partners who sell their Units will be giving up the opportunity to participate in any future potential benefits associated with ownership of Units, including the right to participate in any future distribution of cash or property. o The Purchaser has not engaged a depository to hold tendered units until payment. A depository is an independent agent who holds tendered units until payment. The Purchaser has not engaged a depository for the Offer and the transfer of units will not be dependent on a depository's determination that payment has been made. The primary risk associated with the Purchaser's decision to not engage a depository is that the Purchaser will have access to tendered units before all terms of the Offer (including payment for the Units) are complete. o I will be elected as general partner of the Partnership before I am obligated to purchase any Units. A condition of the Offer is that I be elected general partner of the Partnership. Thus, such election must take place prior to the time at which I am obligated to purchase any Units. To alleviate this risk, I agree to resign as general partner should I fail to fulfill my obligations under the Offer. o The Offer will give me control of the Partnership. If the Offer is successful, I will own a majority of the Units, and I also will have been elected as the general partner, thereby giving me control of the Partnership. o The current general partners may contest their removal. My obligation to pay for Units will not arise until such time as the current general partners have been removed or have resigned. In the event that the current general partners refuse to resign, or chose to contest their removal, in will be necessary to ask a court to determine that they were properly removed. Doing so would delay payment for the Units. - 5 - THE OFFER Section 1. Terms of the Offer. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for up to 30,000 Units that are validly tendered on or prior to the Expiration Date (as defined below). The term "Expiration Date" means 12:00 midnight, Eastern Time, on June 27, 2003, unless the Purchaser extends the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest date on which the Offer, as so extended by the Purchaser, shall expire. If you tender your Units, you will receive both cash and certain non-cash consideration for them. You will receive $86 in cash, less certain distributions if the Partnership makes them. You will also receive a release in certain litigation against you. GP Credit has filed a fraudulent transfer action against the Partnership, the class of all persons who were Limited Partners as of January 13, 1998, the Managing General Partner, and others affiliated with the Managing General Partner. If successful, GP Credit will obtain a judgment against each Limited Partner who is a member of that class in an amount equal to the distribution made to such Limited Partner as of January 13, 1998, or $275 per Unit. In that event, GP Credit would likely attempt to collect on such judgment by all means permitted by law, which could include placing liens upon your property. However, GP Credit has agreed, in exchange for certain consideration from me, to release you from liability in that lawsuit if you tender all of your Units to me, and if I purchase any of your Units. The Offer is conditioned upon the satisfaction of certain conditions. See "Offer--Section 15--Certain Conditions of the Offer," which sets forth in full the conditions of the Offer. The Purchaser will not be required to accept for payment or to pay for any Units tendered, and may amend or terminate the Offer if: o less than 30,000 Units are tendered (the "Minimum Tender Condition"); o there is not a settlement of all outstanding litigation against the Partnership (the "Settlement Condition"); o there is not a vote by the Limited Partners to amend the Agreement of Limited Partnership to allow the transfer of more than 5% of the Units in a year (the "Transfer Amendment Condition"); or, o I am not elected general partner of the Partnership and the current general partners do not resign or are not removed (the "General Partner Condition"). Purchaser reserves the right (but shall not be obligated) to waive any or all of these conditions. If any or all of those conditions have not been satisfied or waived by the Expiration Date, Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Units tendered, (ii) terminate the Offer and return all tendered Units to tendering Limited Partners, (iii) waive all of the unsatisfied conditions and, subject to complying with applicable rules and regulations of the SEC, purchase all Units validly tendered, (iv) extend the Offer and, subject to the right of Limited Partners to withdraw Units until the Expiration Date, retain the Units that have been tendered during the period or periods for which the Offer is extended or (v) otherwise amend the Offer. Section 2. Proration; Acceptance for Payment and Payment for Units. If fewer than 30,000 Units are validly tendered and not properly withdrawn prior to the Expiration Date, the Purchaser, upon the terms and subject to the conditions of the Offer, may accept for payment any or all of those Units so tendered, but is under absolutely no obligation to do so. If more than 30,000 Units are validly tendered and not properly withdrawn on or prior to the Expiration Date, the Purchaser, upon the terms and subject to the conditions of the Offer, will accept for payment 30,000 Units so tendered, on a pro rata basis, with appropriate adjustments to avoid tenders of fractional Units. Purchaser may elect to purchase more than 30,000 Units, but is under absolutely no obligation to do so. - 6 - In the event that proration is required, the Purchaser will determine the precise number of Units to be accepted and will announce the final results of proration as soon as practicable, but in no event later than five (5) business days following the later of the Expiration Date or the date on which all conditions have been satisfied or waived. A letter announcing the final results of proration will be mailed to all tendering limited partners and a press release announcing the final results of proration will be released. Purchaser will not pay for any Units tendered until after the final results of proration have been determined. Payment for the Units accepted for payment will be made within ten (10) business days of the later of the Expiration Date or the date on which all conditions have been satisfied or waived. One of the conditions of the Offer is the removal of the current general partners. See "THE OFFER--Section 15--Certain Conditions of the Offer." In the event that the current general partners contest their removal, payment for Units will be delayed until such time as there is a final judicial determination that the current general partners were removed and I was elected general partner. Section 3. Procedures for Tendering Units. Valid Tender. For Units to be validly tendered pursuant to the Offer, a properly completed and duly executed Agreement of Sale (BLUE) must be received by Purchaser at King's office, whose address is set forth on the back cover of this Offer to Purchase, on or prior to the Expiration Date and not withdrawn prior to the Expiration Date. A Limited Partner may tender any or all Units owned by that Limited Partner. At least ten (10) business days will remain in the offer in the event the offer price is reduced by any distributions with respect to the Units. The delivery of the Agreement of Sale will be deemed made only when actually received by me. Sufficient time should be allowed by a Limited Partner electing to tender Units in the Offer to ensure timely delivery. Backup Federal Income Tax Withholding. A tendering Limited Partner must verify that Limited Partner's correct taxpayer identification number or social security number, as applicable, and make certain warranties and representations that it is not subject to backup federal income tax withholding as set forth in the Agreement of Sale. Any Limited Partner wishing to tender Units under the Offer who is subject to backup withholding, including nonresident aliens and foreign corporations, should contact the Purchaser's information agent for information regarding the tender procedure for limited partners subject to backup withholding. Tenders by Beneficial Holders. A tender of Units can only be made by the Registered Owner of those Units, and the party whose name appears as Registered Owner must tender those Units on behalf of any beneficial holder, as set forth in the "Instructions" to the Agreement of Sale. Determination of Validity; Rejection of Units; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the form of documents and validity, eligibility (including time of receipt), and acceptance for payment of any tender of Units will be determined by the Purchaser, in its sole discretion, which determination will be final and binding on all parties. Other Requirements. By executing and delivering the Agreement of Sale, a tendering Limited Partner (who does not properly withdraw acceptance of the Offer prior to the Expiration Date) irrevocably appoints the Purchaser as that Limited Partner's proxy, with full power of substitution. All proxies are irrevocable and coupled with an interest in the tendered Units and empower the Purchaser to exercise all voting and other rights of such Limited Partner as it in its sole discretion may deem proper at any meeting of Limited Partners. The complete terms and conditions of the proxy are set forth in the Agreement of Sale. By executing and delivering the Agreement of Sale, a tendering Limited Partner also irrevocably constitutes and appoints the Purchaser and its designees as the Limited Partner's attorneys-in-fact. This appointment will be effective upon Purchaser's payment for the Units. The complete terms and conditions of the Power of Attorney are set forth in the Agreement of Sale. By executing and delivering the Agreement of Sale, a tendering Limited Partner will irrevocably assign to the Purchaser and its assignees all right, title, and interest that the Limited Partner has to the Units, including, without limitation, any and all distributions made by the Partnership after January 1, 2003, - 7 - regardless of the fact that the record date for any such distribution may be a date prior to the Expiration Date and whether those distributions are classified as a return on, or a return of, capital. The complete terms and conditions of the assignment of the Units are set forth in the Agreement of Sale. By executing the Agreement of Sale, a tendering Limited Partner represents that either: o the Limited Partner is not a "plan" subject to Title 1 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed to hold "plan assets" within the meaning of 29 C.F.R ss.2510-3-101 of any "plan"; or o the tender and acceptance of Units pursuant to the applicable Offer will not result in a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. By executing the Agreement of Sale, a tendering Limited Partner also agrees that regardless of any provision in the Partnership's Agreement of Limited Partnership which provides that a transfer is not effective until a date subsequent to the date of any transfer of Units under the Offer, the Offer Price will be reduced by any distributions with respect to the Units after January 1, 2003, whether those distributions are classified as a return on, or a return of, capital, unless, with respect to a limited partner, that limited partner was not entitled to receive that distribution. Limited Partners will not have any appraisal or dissenters' rights with respect to or in connection with the Offer. Section 4. Withdrawal Rights. Except as otherwise provided in this Section 4, tenders of Units made pursuant to the Offer are irrevocable. Units tendered pursuant to the Offer may be withdrawn by or on behalf of the depositor at any time until the expiration of seven days after the date of the Offer, or May 21, 2003, and at any time after sixty days from the date of the Offer, or July 13, 2003. In the event that the Offer is extended beyond the Expiration Date, the Units tendered may be withdrawn at any time prior to the end of the extension period. In addition, limited partners have a right to withdraw tendered shares at any time after the expiration of the Offer until I accept Units for payment. Tendering Limited Partners will additionally have withdrawal rights as provided under Exchange Act 14(d)(5). In order for a withdrawal to be effective, a signed, written transmission notice of withdrawal must be timely received by the Purchaser at King's office, whose address is set forth on the last page of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Units to be withdrawn, and the number of Units to be withdrawn. Any Units properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be re-tendered at any subsequent time prior to the Expiration Date by following the procedures described in Section 3. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. Section 5. Extension of Tender Period; Termination; Amendment. The Purchaser expressly reserves the right, in its sole discretion, at any time: to extend, for a specific period of time, the Offer's expiration date; and, to amend the Offer in any respect (including, without limitation, by increasing or decreasing the Offer Price). Any extension, or amendment will be followed as promptly as practicable by a mailing notifying each Limited Partner, the mailing in the case of an extension to be issued no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled Expiration Date, in accordance with Rule 14e-1(d) under the Exchange Act. Any extension or amendment will be announced by press release on the date of the amendment or extension in accordance with Rule 14e-1(d). Any mailing or press release announcing an amendment or extension will include the approximate number of Units tendered at the time of the extension or amendment. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will extend the Offer to the extent required by the - 8 - rules and regulations of the SEC. The minimum period during which an Offer must remain open following a material change in the terms of the Offer or of information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the change in the terms or information. With respect to a change in price or a change in percentage of securities sought, however, a minimum ten-business-day period is generally required to allow for adequate dissemination to security holders and for investor response. As used in this Offer, "business day" means any day other than a Saturday, Sunday, or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time. Because Purchaser is offering to purchase less than 100% of the Units, there will be no "subsequent offering period" as defined in Rule 14d-11 of the Exchange Act. Section 6. Certain Tax Consequences The following is a summary of certain federal income tax consequences of a sale of Units pursuant to the Offer assuming that the Partnership is a partnership for federal income tax purposes and that it is not a "publicly traded partnership" as defined in Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary is based on the Code, applicable Treasury Regulations thereunder, administrative rulings, practice and procedures and judicial authorities as of the date of the Offer. All of the foregoing are subject to change, and any change could affect the continuing accuracy of this summary. This summary does not address all aspects of federal income taxation that may be relevant to a particular Limited Partner in light of that Limited Partner's specific circumstances, or that may be relevant to Limited Partners subject to special treatment under the federal income tax laws (for example, foreign persons, dealers in securities, banks, insurance companies and tax-exempt entities), nor does it address any aspect of state, local, foreign or other tax laws. Sales of Units pursuant to the Offer will be taxable transactions for federal income tax purposes, and may also be taxable transactions under applicable state, local, foreign and other tax laws. EACH LIMITED PARTNER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO THAT LIMITED PARTNER OF SELLING UNITS PURSUANT TO THE OFFER, INCLUDING, WITHOUT LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES. Consequences to tendering Limited Partners. A Limited Partner will recognize gain or loss on a sale of Units pursuant to the Offer equal to the difference between (i) the Limited Partner's "amount realized" on the sale and (ii) that Limited Partner's adjusted tax basis in the Units sold. The "amount realized" with respect to a Unit sold pursuant to the Offer will be a sum equal to the amount of cash received by the Limited Partner for the Unit plus the amount of Partnership liabilities allocable to the Unit (as determined under Code Section 752). The amount of a Limited Partner's adjusted tax basis in Units sold pursuant to the Offer will vary depending upon that Limited Partner's particular circumstances and will be affected by allocations of Partnership taxable income or loss to a Limited Partner with respect to those Units, and distributions to a Limited Partner. In this regard, tendering Limited Partners will be allocated a pro rata share of the Partnership's taxable income or loss with respect to Units sold pursuant to the Offer through the last day of the month preceding the effective date of the sale. Subject to Code Section 751 (discussed below), the gain or loss recognized by a Limited Partner on a sale of a Unit pursuant to the Offer generally will be treated as a capital gain or loss if the Unit was held by the Limited Partner as a capital asset. Changes to the federal income tax laws in recent years modified applicable capital gain rates and holding periods. Gain with respect to Units held for more than one year will be taxed at long-term capital gain rates not exceeding 20 percent. Gain with respect to Units held one year or less will be taxed at ordinary income rates, up to a maximum rate of 39.6 percent. To the extent of depreciation recapture of previously deducted straight-line depreciation with respect to real property, a maximum rate of 25 percent is imposed (assuming eligibility for long-term capital gain treatment). A portion of the gain realized by a Limited Partner with respect to the disposition of the Units may be subject to this maximum 25 percent rate to the extent that the gain is attributable to depreciation recapture inherent in the properties of the Partnership. - 9 - Capital losses are deductible only to the extent of capital gains, except that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess of the amount of their capital gains against ordinary income. Excess capital losses generally can be carried forward to succeeding years (a corporation's carry forward period is five years and non-corporate taxpayer can carry forward such capital losses indefinitely). In addition, corporations (but not non-corporate taxpayers) are allowed to carry back excess capital losses to the three preceding taxable years. A portion of Limited Partner's gain or loss on a sale of a Unit pursuant to the Offer may be treated as ordinary income or loss. That portion will be determined by allocating a Limited Partner's amount realized for a Unit between amounts received in exchange for all or a part of the Limited Partner's interest in the Partnership attributable to "Section 751 items" and non-Section 751 items. Section 751 items include "inventory items" and "unrealized receivables" (including depreciation recapture) as defined in Code Section 751. The difference between the portion of the Limited Partners amount realized that is allocable to Section 751 items and the portion of the Limited Partner's adjusted tax basis in the Units sold that is so allocable will be treated as ordinary income or loss. The difference between the Limited Partner's remaining amount realized and adjusted tax basis will be treated as capital gain or loss assuming the Units were held by the Limited Partner as a capital asset. Under Code Section 469, a non-corporate taxpayer or personal service corporation can deduct passive activity losses in any taxable year only to the extent of that person's passive activity income for such year. Closely held corporations may offset passive activity losses against passive activity income and active income, but may not offset such losses against portfolio income. If a Limited Partner is subject to these restrictions and has unused passive losses from prior years, those losses will generally become available upon a sale of Units, provided the Limited Partner sells all of his or her Units. If a Limited Partner does not sell all of his or her Units, the deductibility of those losses would continue to be subject to the passive activity loss limitation until the Limited Partner sells his or her remaining Units. Gain realized by a foreign Limited Partner on a sale of a Unit pursuant to the Offer will be subject to federal income tax. Under Code Section 1445 of the Code, 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. Purchaser will withhold 10% of the amount realized by a tendering Limited Partner from the Purchase Price payable to that Limited Partner unless the Limited Partner properly completes and signs the Agreement of Sale certifying the accuracy of the Limited Partner's TIN and address, and that the Limited Partner is not a foreign person. Amounts withheld are creditable against a foreign Limited Partner's federal income tax liability. If amounts withheld are in excess of such liability, a refund can be obtained. A Limited Partner who tenders Units must file an information statement with his or her federal income tax return for the year of the sale which provides the information specified in Treasury Regulation Section 1.751-1(a)(3). The selling Limited Partner must also notify the Partnership of the date of the transfer and the names, addresses and tax identification numbers of the transferors and transferees within 30 days of the date of the transfer (or, if earlier, January 15 of the following calendar year). Consequences to a non-tendering Limited Partner. Purchaser anticipates that a Limited Partner who does not tender his or her Units will not realize any material adverse federal income tax consequences as a result of the decision not to tender. In a preliminary proxy statement filed with the SEC January 15, 2003, the Partnership stated: "The Managing General Partner engaged outside counsel to assist in review of the costs, risks and benefits of the Proposed Amendment. Counsel to the Partnership and the Managing General Partner rendered a tax opinion to the Partnership and the Managing General Partner, to the effect that even if the Partnership is classified as a publicly traded partnership there are no present materially adverse federal tax consequences to the Partnership attributable to such classification and if the Partnership were to be terminated for tax purposes by reason of a sale or exchange of a 50% or more interest in Partnership profits and capital within a 12-month period there are no material adverse federal income tax consequences for the Partnership or its partners. Counsel did not opine on the consequences under the income tax law of any State but has observed that most State's tax laws, including California law, are likely to be similar to federal tax law in these areas, if there are any State income tax laws in these areas at all." - 10 - Section 7. Purpose and Effects of the Offer; Method of Determining the Offer Price. I am acquiring the Units with a view toward affecting management of the Partnership. You should note that if I purchase 30,000 Units, I will own over 50% of the outstanding Units. This would represent a majority interest, which would give me control over any vote of the limited partners. Furthermore, the Offer is conditioned upon my election as the sole general partner. It is expected that following the offer, the business and operations of the Partnership will be changed substantially. The Partnership will enter into a settlement of all outstanding litigation against it. Furthermore, the Partnership will vigorously pursue the lawsuit previously filed by the Partnership against James Reuben, an attorney who represented the Partnership in connection with the 1993 settlement. Finally, the Partnership will engage independent counsel to review the conduct of the general partners and various other advisors to the Partnership during the period of time since 1993, as I believe that there may have been breaches of their fiduciary duties during that period. Should the independent counsel find evidence of such wrongdoing, then the Partnership will attempt to recover from the wrongdoers. However, other than as described above or in Section 8-Future Plans, the Purchaser has no plans that relate to or would result in: o any extraordinary transaction, such as a merger or consolidation, involving the Partnership; o any purchase, sale or transfer of a material amount of assets of the Partnership; o any material change in the distribution policy of the Partnership or in its capitalization or indebtedness. The Purchaser's intent is to acquire the Units at a discount to the value that the Purchaser might ultimately realize from owning the Units. No independent party has been retained by the Purchaser to evaluate or render any opinion with respect to the fairness of the Offer Price and no representation is made as to the fairness of the Offer Price. The Purchaser may in the future seek to acquire additional Units through private purchases, one or more future tender offers, or by any other means deemed advisable. Method of Determining the Offer Price. The methodology and information discussed below represent the only analysis of the Offer Price completed by me in connection with the Offer. I established the Offer Price based primarily upon my discussions with the Limited Partners who control the greatest number of Units. The Offer Price of $86 per Unit is the asking price of a partner of Peachtree Partners, who controlled more Units than any other Limited Partner at the time that I talked to him. I did not negotiate with him, but merely asked at what price he would sell. I also talked to Equity Resource, which now controls more Units than any other Limited Partner as the result of its recent tender offer. I believe that these Limited Partners are sophisticated and knowledgeable about the affairs of the Partnership. While I have no agreement or understanding with such Limited Partners that they will tender their Units, based upon such discussions I believe that the Offer Price is acceptable to holders of at least 18% of the Units. I also considered the reasonableness of the Offer Price based upon my own review of the Partnership. First, I considered the liabilities of the Partnership. The Partnership is a defendant in several lawsuits (lengthy descriptions of these lawsuits are given in the Partnership's most recent annual and quarterly reports). One lawsuit against the Partnership claims damages from the Partnership's breach of a settlement agreement in excess of $12 million, nearly twice the Partnership's current cash and cash equivalents. The Partnership has already been found liable for breach, although the court also found the Partnership caused no damages. The matter is now proceeding before the appellate court. Furthermore, in January, 1998, the Partnership distributed $16.8 million on the morning of the hearing of a motion to block any such distribution. As a result of that distribution, the Partnership was left without sufficient funds to pay all claims against it in the event that it does not prevail in its litigation. Accordingly, a fraudulent transfer suit has been filed against the Partnership and the Limited Partners as a class. Punitive damages are sought in that action. Furthermore, as a result of the fraudulent transfer suit, each Limited Partner may be found liable in an amount equal to the distribution made to him in January, 1998, $275 per Unit. Judgment could issue against each such Limited Partner, and the plaintiff could then seek to enforce such judgments against the assets of such Limited Partners. Furthermore, the Uniform Limited Partnership Act, as adopted by California at Cal. Corp. Code ss. 15517(4), states: "When a contributor has rightfully received the return in whole or in part of - 11 - the capital of his contribution, he is nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return." Thus, Limited Partners could, under certain circumstances, be liable for all capital contributions returned to them, plus interest. Next, I considered the assets of the Partnership. That asset review first focused on the Partnership's current cash position. As of the date of the Offer, all ten of the Partnership's investment properties have been liquidated. The Partnership's balance sheet shows that the only significant asset is cash and cash equivalents of $6,987,000 ($117 per Unit). Of that amount, all but $1,987,000 ($33 per Unit) has been enjoined pending the outcome of one of the Partnership's seven current lawsuits. The Partnership's ability to distribute this money to the limited partners and to liquidate the Partnership is contingent on the outcome of the lawsuits. My asset review then focused upon other assets of the Partnership, in particular upon the claim of the Partnership against James Reuben ("Reuben"), an attorney who represented the Partnership in connection with the 1993 settlement of certain litigation, and also upon possible claims against others who may have failed to fulfill their obligations to the Partnership. Unless the management of the Partnership is changed, I believe that the value of such claims to the Partnership is nothing. However, if the Offer is successful, I believe that such claims have substantial value. I believe any claims against the Managing General Partner have no value to the Partnership unless the Managing General Partner is removed from control. However, if the Offer is successful, I will cause the Partnership to engage attorneys, who have never represented me, to review the conduct of the Managing General Partner. Should such review reveal the existence of claims, I will cause the Partnership to pursue such claims. It is my feeling at this time, without having access to the books and records of the Partnership, that such claims may be worth millions of dollars. Because of the uncertainty concerning the duration and the ultimate outcome of the lawsuits, the Purchaser was unable to determine a liquidation value for the Partnership. Given the fact that the Partnership's properties have been sold, the liquidation value would represent the most accurate value of the Partnership and its Units. Without the ability to calculate an accurate liquidation value, the Purchaser's Offer Price should be considered speculative in nature. Limited partners should note that the Partnership no longer calculates an estimated Net Asset Value ("NAV") for Units. This is due primarily to the uncertainty concerning the current lawsuits. The Purchaser reviewed the Partnership's Annual Report on Form 10-K for the year ended December 31, 2002 ("2002 10-K") and its quarterly report on Form 10-Q for the period ended September 30, 2002. Other measures of value may be relevant to a Limited Partner, and all Limited Partners are urged to carefully consider all of the information contained in the Offer to Purchase and Agreement of Sale and to consult with their own advisors (tax, financial, or otherwise) in evaluating the terms of the Offer before deciding whether to tender Units. The Offer is being made as a speculative investment by the Purchaser based on its belief that there is inherent underlying value in the assets of the Partnership. The purpose of the Offer to allow the Purchaser to benefit to the greatest extent possible from any one or a combination of the following: o any cash distributions, whether those distributions are classified as a return on, or a return of, capital, from the operations in the ordinary course of the Partnership; o any distributions of net proceeds from the sale of assets by the Partnership; o any distributions of net proceeds from the liquidation of the Partnership; o any cash from any redemption of the Units by the Partnership, and o any proceeds that may be received by the Limited Partners or by the Partnership as a result of litigation. Price Range of Units; Distributions. Lack of Public Market. At present, privately negotiated sales and sales through intermediaries (e.g., through the trading system operated by the American Partnership Board, which publishes sell offers by - 12 - holders of Units) are the only means available to a Limited Partner to liquidate an investment in Units (other than by accepting the Offer) because the Units are not listed or traded on any national securities exchange or quoted on NASDAQ. The Purchaser and its affiliates have purchased no Units in the Partnership in the past twelve months. Section 8. Future Plans. Future Plans of the Purchaser. The Purchaser is acquiring the Units pursuant to the Offer for purposes of gaining control of the Partnership. The Purchaser and its affiliates may acquire additional Units through private purchases, one or more future tender offers, or by any other means deemed advisable. The Purchaser does not currently have any plan or purpose (either formal of informal) of acquiring Units in a series of successive and periodic offers in order to acquire Units over time at the lowest possible price at which Unit holders are willing to sell. Future Plans of the Partnership. A condition of the Offer is settlement all outstanding litigation against the Partnership. The general terms of the settlement are that the Partnership will agree to entry of a judgment in favor of GP Credit against the Partnership for $10 million. The Partnership will immediately pay $4 million to GP Credit, and GP Credit will agree that it will not attempt to collect more than $4 million of such judgment for a period of three years following entry of the judgment. GP Credit will further agree that following such three-year period it will not attempt to collect more from the Partnership than an amount which would leave the Partnership with $2 million (including amounts owed by the current general partners due to the negative balances in their capital accounts) immediately prior to liquidation. For the complete text of the proposed settlement agreement, see the Solicitation Statement sent to you with this Offer, Exhibit B. Certain claims that may constitute assets of the Partnership are discussed above. See Section 7--Purpose and Effects of the Offer. Should a review determine that the Partnership does in fact have viable claims against the Managing General Partner or others, I presently intend to cause the Partnership to offer such persons the chance to have such claims decided in binding arbitration before Judge William Cahill, Retired. Judge Cahill oversaw the settlement in 1993 to which the Partnership is a party, and subsequently heard a number of motions regarding that settlement. Judge Cahill joined the California Superior Court on January 4, 1991. He was named San Francisco "Trial Judge of the Year" by the San Francisco Trial Lawyers after only two years on the bench. In 1998, the San Francisco Examiner also rated him the city's top judge in a five-part article based on an extensive poll of Bay Area attorneys. Judge Cahill joined JAMS, a dispute resolution firm, in 2000 at age 50. The Partnership has previously rejected my suggestion that certain issues be arbitrated by Judge Cahill. Alternatively, I presently intend to cause the Partnership to pursue any such claims in the appropriate courts. Such pursuit make take a number of years, which would delay liquidation of the Partnership. Following the resolution of the claims against third parties, if any, I presently intend to cause the Partnership to be liquidated. Section 9. Past Contact and Negotiations with General Partner. Since prior to formation of the Partnership, and continuing until the date of this Offer, I have engaged in ongoing conversations and exchanges of correspondence with various affiliates of the Partnership and affiliates of the Managing General Partner of the Partnership. Entities with which I was affiliated sold two Residence Inns to the Partnership, sold a third to an affiliate of the Partnership, and discussed selling a fourth to the Partnership. Another entity with which I was affiliated sold a Hampton Inn to an affiliate of the Partnership. Entities with which I was affiliated managed two Residence Inns for the Partnership, and managed a Hampton Inn for an affiliate of the Partnership. I, and entities with which I am affiliated, entered into an agreement with the Partnership in 1993 to settle certain claims. That agreement obligated the Partnership, among other things, to purchase the land under the Residence Inn--Nashville. When the Partnership breached that agreement, litigation was the result, and I have been in regular contact with the Partnership regarding such litigation ever since. - 13 - Contact with the Managing General Partner regarding a tender offer began on August 12, 2002, when I offered to make a tender offer for a majority of the Units at $65 per Unit if the Partnership would treat the offer as a friendly offer. The offer was rejected. Another offer to make a tender offer was made on September 23, 2002, for $60 per Unit, reflecting what appeared to be a weakening market for the Units. I urged the Managing General Partner to allow the Limited Partners to vote on a settlement of certain litigation rather than keeping the decision out of the hands of the Limited Partners. This offer was rejected. Finally, on October 7, 2002, I again offered to make a tender offer at $60 per Unit, if treated as friendly. This too was rejected. In rejecting all such offers, the Managing General Partner has refused to identify the terms and conditions which would be acceptable to it, although I requested that it do so. Neither the Partnership, the Managing General Partner or any of their affiliates have disclosed to the Purchaser or disclosed in any filings made by the Partnership with the SEC, any plans or intentions to liquidate the Partnership. Section 10. Certain Information Concerning the Partnership. Except as otherwise indicated, information contained in this Section 10 is based upon filings made by the Partnership with the SEC. Purchaser is not assuming any responsibility for the accuracy or completeness of any information contained in this Section 10 which is derived from those filings, or for any failure by the Partnership to disclose events which may have occurred and may affect the significance or accuracy of any information but which are unknown to the Purchaser. Purchaser believes, but may be wrong, that the filings made by the Partnership with the SEC fail to adequately disclose certain material issues as to claims the Partnership may have, particularly against James Reuben and the Managing General Partner. See Section 7--Purpose and Effects of the Offer. Purchaser also believes that to the extent that the description of the Partnership's litigation suggests that the Partnership is not liable for substantial damages such filings are also false. General. The Partnership's principal executive offices are located at One California Street, Suite 1400, San Francisco, CA 94111. Its telephone number is 415-678-2000. The Partnership's primary business was real estate ownership and related operations. The Partnership was organized in 1984 under the California Uniform Limited Partnership Act. The principal business of the Partnership was to acquire, hold for investment, manage and ultimately sell all-suite, extended stay hotels, which are operated under franchise licenses from Residence Inn by Marriott, Inc. Beginning in April 1988, the Partnership offered $60,000,000 in Limited Partnership Assignee Units. The offering was closed on June 30, 1989, with total funding of $59,932,000. The net proceeds of the offering were used to purchase ten hotel properties. The acquisition activities of the Partnership were completed on March 16, 1990, with the purchase of the Residence Inn-Altamonte Springs. Since that time, the principal activity of the Partnership has been managing its portfolio. As the Partnership's long-term goal was to ultimately liquidate the portfolio, the markets where the hotels are located were monitored on an ongoing basis for potential sales opportunities. The Partnership entered into a purchase and sale agreement for the Residence Inn--Atlanta (Perimeter West) with an unaffiliated buyer and sold the property on October 3, 1995. In 1997, the Partnership marketed eight of the nine remaining hotels for sale, and on December 30, 1997, the hotels were sold to an unaffiliated buyer. The Partnership's last property, the Residence Inn-Nashville, was sold through foreclosure on June 18, 1999. Originally Anticipated Term of Partnership; Alternatives. The Partnership was formed to invest in real estate. In 1988, investors were told that the anticipated holding period of the Partnership's assets was five to ten years. Selected Financial and Property-Related Data. Set forth on the following pages is a summary of certain financial and statistical information with respect to the Partnership, all of which has been excerpted or derived from the Partnership's most recent Form 10-K for the quarter ended December 31, 2002. More comprehensive financial and other information is included in those reports and other documents filed by the Partnership with the SEC, and the following summary is qualified in its entirety by reference to those reports and other documents and all the financial information and related notes contained in those reports. - 14 - [THIS PAGE INTENTIONALLY BLANK] - 15 - METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership BALANCE SHEETS
December 31, December 31, 2002 2001 ASSETS Cash and Cash Equivalents $1,987,000 $2,302,000 Restricted Cash 5,000,000 5,000,000 TOTAL ASSETS 6,987,000 7,302,000 LIABILITIES AND PARTNERS' EQUITY Other Liabilities 44,000 31,000 TOTAL LIABILITIES 44,000 31,000 PARTNERS' EQUITY (DEFICIENCY): General Partners (914,000) (914,000) Limited Partners (59,932 Units Outstanding) 7,857,000 8,185,000 TOTAL PARTNERS' EQUITY 6,943,000 7,271,000 TOTAL LIABILITIES AND PARTNERS' EQUITY 6,987,000 7,302,000 - --------------------------------------------------------------------------------------------------
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) For the Years Ended December 31, 2002 and 2001
General Limited Partners Partners Total Balance, January 1, 2002 $(914,000) $8,185,000 $7,271,000 Net Loss 0 (328,000) (328,000) Balance, December 31, 2002 $(914,000) $7,857,000 $6,943,000 Balance, January 1, 2001 $(914,000) $8,134,000 $7,220,000 Net Income 0 141,000 141,000 Balance, December 31, 2001 $(914,000) $8,275,000 $7,361,000
- 16 - METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2002 2001 REVENUES: Interest and Other 123,000 294,000 Total Revenues 123,000 294,000 EXPENSES: General and Administrative 451,000 243,000 Total Expenses 451,000 243,000 NET (LOSS) INCOME $(328,000) $51,000 NET (LOSS) INCOME PER LIMITED PARTNERSHIP ASSIGNEE UNIT $(5) $1 - ---------------------------------------------------------------------------------------------------------
METRIC PARTNERS GROWTH SUITE INVESTORS, L.P., a California Limited Partnership STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002 2001 OPERATING ACTIVITIES Net (Loss) Income $(328,000) $51,000 Adjustments to reconcile Net (Loss) Income to net cash (used) provided by operating activities: Changes in operating assets and liabilities: Accounts Receivable -- 134,000 Accounts Payable, accrued expenses, and other liabilities 13,000 (35,000) Net cash (used) provided by operating activities (315,000) 240,000 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (315,000) 240,000 Cash and cash equivalents at beginning of period 2,302,000 2,067,000 CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,987,000 $2,307,000
- 17 - Other Information. The Partnership is subject to the reporting requirements of the Exchange Act and accordingly is required to file reports and other information with the SEC relating to its business, financial results and other matters. These reports and other documents may be inspected at the SEC's Public Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, where copies may be obtained at prescribed rates, and at the regional offices of the SEC located in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies should be available by mail upon payment of the SEC's customary charges by writing to the SEC's principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a web site that contains reports, proxy and other information filed electronically with the SEC, the address of which is http://www.sec.gov. Cash Distributions History. The Partnership made no cash distributions in 2002, 2001 or 2000. Its last cash distribution of $85 per Unit was made in 1999. Section 11. Background and Reasons for the Offer. By way of background, my dealings with the Partnership began when the Partnership purchased Residence Inns in Ontario, California and Nashville, Tennessee from partnerships of which I was the general partner. Following such sales, entities controlled by me continued to manage the Inns. In 1990, the Partnership refused to provide funds for the 5-year renovation of the Residence Inn--Ontario, as it was obligated to do. As a result, the management company controlled by me terminated that management contract. Litigation regarding that, and regarding additional monies owed for the purchase of that Inn, followed. As its defense to paying the additional purchase price, the Partnership claimed to have mistakenly left a sentence out of the purchase contract. On March 23, 1993, before Judge Cahill in San Francisco, the Partnership agreed to settle that litigation, and also agreed to purchase the land under the Residence Inn--Nashville. The Partnership had already purchased the Residence Inn--Nashville in 1989. However, within weeks of the settlement, the Partnership refused to perform its obligations under that settlement agreement. The Partnership claims to have made a mistake in entering into such agreement, although the Managing General Partner has never disclosed such mistake to the Partnership. As a result of the Partnership's refusal to perform its obligations, the Partnership and entities related to me have been involved in considerable litigation. The reasons for this offer are to allow the Limited Partners to vote on a settlement of all litigation against it, to allow the Partnership to effectively pursue its claims against those who may have breached their duties to the Partnership, and to allow me to profit from such actions. As discussed above, I do not believe that the Partnership will effectively pursue its claims against third parties unless control of the Partnership is given to me. See Section 7--Purposes and Effects of Offer. However, if I have control of the Partnership, I believe that such claims have sufficient value to the Partnership to allow me to profit from my purchase of Units. Section 12. Certain Information Concerning the Purchaser. The Purchaser, Kenneth E. Nelson, is an individual citizen of the United States. His office is located at 4107 W. Gazebo Hill Blvd. N107, Mequon, WI 53092. Set forth below is his present principal occupation and five (5) year employment history. Mr. Nelson has been a general partner of Nashville Lodging Co., which owned the land and buildings of the Residence Inn--Nashville from 1986, and since 1993 is principally involved in handling the various litigation which has resulted from the Partnership's breach of a settlement agreement it entered into in 1993. Mr. Nelson was previously active in the development of hotels, primarily Residence Inns. Mr. Nelson is a certified public accountant and a real estate broker. He holds two degrees (a BBA in accounting and an MBA in finance and accounting) from the University of Wisconsin. During the past five years, Mr. Nelson has not been convicted in a criminal proceeding or been a party to any procedural or administrative proceeding that resulted in a judgment, decree or final order enjoining Mr. Nelson from future violations of, or prohibiting activities subject to, federal or state securities law, or a finding of any violation of federal or state securities law. - 18 - Except as otherwise set forth in this Offer to Purchase, o neither the Purchaser, nor any affiliate of the Purchaser, beneficially owns or has a right to acquire any Units, other than 5 Units owned by my wife; o neither the Purchaser, nor any affiliate of the Purchaser or any member, director, executive officer, or subsidiary of any of the foregoing has effected any transaction in the Units; o neither the Purchaser or any affiliate of the Purchaser has any contract, arrangement, understanding, or relationship with any other person with respect to any securities of the Partnership, including but not limited to, contracts, arrangements, understandings, or relationships concerning the transfer or voting thereof, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies, consents, or authorizations; o there have been no transactions or business relationships which would be required to be disclosed under the rules and regulations of the SEC between the Purchaser or any affiliate of the Purchaser, on the one hand, and the Partnership or affiliates, on the other hand; and o there have been no contracts, negotiations, or transactions between the Purchaser or, to the best knowledge of the Purchaser, any affiliate of the Purchaser, on the one hand, and the Partnership or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer (other than as described in Sections 8 and 9 of this Offer) or other acquisition of securities, an election or removal of the General Partner (other than as currently proposed), or a sale or other transfer of a material amount of assets. Section 13. Source and Amount of Funds. The Purchaser expects that approximately $2,580,000 (exclusive of fees and expenses) will be required to purchase 30,000 Units, if tendered. The Purchaser does not have the financial wherewithal to purchase the tendered Units, but will obtain such funds by means of a loan (the "Loan") from GP Credit, an entity of which his wife is the manager. GP Credit has committed itself to make a loan of this amount. The Loan will be secured by any Units purchased by me, will carry an interest rate of 15%, and will have a term of three years. Purchaser plans to repay the Loan with proceeds from the liquidation of the Partnership. I am not a public company and have not prepared audited financial statements. I do not believe that my financial condition is relevant to the Offer as the Offer is a cash offer and tendering Limited Partners will be owed no money by me following completion of the Offer. Moreover, the Partnership will not rely upon me for financing if the Offer is successful. However, if you believe my financial condition is relevant, you should be aware that I have a negative net worth in excess of $10 million. Most of my obligations are to GP Credit. It is estimated that the following costs will be incurred in connection with the Offer: filing, $208; legal, $5,000; accounting and appraisal fees, $0; solicitation expenses, $12,500; and printing costs, $10,000. The Partnership has not paid, and will not be responsible for paying such expenses. The Purchaser represents to all tendering Limited Partners that the Purchaser has, by way of the Loan, the financial wherewithal to accept for payment and thereby purchase all 30,000 Units which the Purchaser has offered to purchase in this Offer to Purchase. No alternative financing plan exists. Section 14. Voting Power. I currently own no Units. My wife currently owns 5 Units. However, if the Offer is successful, I will own in excess of 50% of the Units and will be the general partner. Thus, I will have control of the Partnership. Section 15. Certain Conditions of the Offer Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend and amend the Offer at any time, in its sole discretion, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, - 19 - including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Units promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of and accordingly the payment for, any tendered Units, and may terminate the Offer, if, in the sole judgment of the Purchaser, (1) on or prior to the Expiration Date, any one or more of the Minimum Tender Condition, the Settlement Condition, the Amendment Condition, or the General Partner Condition has not been satisfied, or (2) at any time on or after April 28, 2003 and before the time of payment for any such Units (whether or not any Units have theretofore been accepted for payment pursuant to the Offer), any of the following events shall occur or shall be determined by the Purchaser to have occurred: (1) there has been or will be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign that, in the reasonable judgment of the Purchaser, would be expected to, directly or indirectly: - make illegal or otherwise prohibit or materially delay consummation of the Offer or seek to obtain material damages or make materially more costly the making of the Offer, - impose material limitations on the ability of the Purchaser effectively to acquire, hold or exercise full rights of ownership of the Units, including, without limitation, the right to vote any Units acquired or owned by the Purchaser on all matters properly presented to the Limited Partners of the Partnership, or - result in a material adverse effect on the Purchaser or the Partnership; or (2) there has been or will be instituted or pending any action or proceeding by any governmental entity or third party seeking, or that would reasonably be expected to result in any of the consequences referred to in the clauses of paragraph (1) above, which, in the sole judgment of the Purchaser, in any such case and regardless of the circumstances (including any action or inaction by the Purchaser) giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and may be asserted by the Purchaser regardless of the circumstances (including any action or inaction by the Purchaser) giving rise to any such conditions and may be waived by the Purchaser in whole or in part at any time and from time to time, in each case, in the exercise of the sole discretion of the Purchaser. The failure by the Purchaser 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 that may be asserted at any time and from time to time. Any determination by the Purchaser concerning any condition described in this Section 15 shall be final and binding on all parties. A public announcement may be made of a material change in, or waiver of, such conditions and the Offer may, in certain circumstances, be extended in connection with any such change or waiver. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Units not theretofore accepted for payment shall forthwith be returned to the tendering Unit holders. The Minimum Tender Condition. The Offer is conditioned upon my acquiring at least 30,000 Units, which is a majority of the Units. Ownership of a majority of the Units will give me control of the Partnership. The Settlement Condition. The Offer is conditioned upon a settlement of all outstanding litigation against the Partnership. You are simultaneously being asked to vote, by means of the Consent, for such settlement. Entities which are related to me are the plaintiffs in such litigation, thereby causing me to presently have a conflict of interest with the Partnership. One of my objectives in making the Offer conditional upon such settlement is to eliminate that conflict of interest. The general terms of the settlement are that the Partnership will agree to entry of a judgment in favor of GP Credit against the Partnership for $10 million. The Partnership will immediately pay $4 million to GP Credit, and GP Credit will agree that it will not attempt to collect more than $4 million of such judgment for a period of three years following entry of the - 20 - judgment. GP Credit will further agree that following such three-year period it will not attempt to collect more from the Partnership than an amount which would leave the Partnership with $2 million (including amounts owed by the current general partners due to the negative balances in their capital accounts) immediately prior to liquidation. The complete text of the proposed settlement agreement is Exhibit B to the accompanying Solicitation Statement. The Amendment Condition. The Offer is conditioned upon a vote by the Limited Partners to amend the Agreement of Limited Partnership to allow the transfer of more than 5% of the Units in a year. You are simultaneously being asked to vote, by means of the Consent, for such amendment. In a proxy statement filed February 20, 2003, the Managing General Partner recommended that you vote in favor of such a proposal. The proposed amendment is more fully described in the accompanying Solicitation Statement. The General Partner Condition. The Offer is conditioned upon a vote by the Limited Partners to elect me the general partner of the Partnership. You are simultaneously being asked to vote, by means of the Consent, to do so. In connection with my election as general partner, the Offer is also conditioned upon the resignation or removal of the current general partners. You are simultaneously being asked to vote, by means of the Consent, to do so. Should the current general partners contest their removal, payment for the Units will be delayed until such time as there is a final judicial determination that I am the sole general partner of the Partnership. The Offer is conditioned upon the absence of any litigation in connection with the Offer. Thus, the Managing General Partner, should it wish to deny you the opportunity to consider the Offer, may cause the Partnership, or another person, to commence litigation regarding the Offer. However, I reserve the right to waive this condition, as I do with all conditions. Thus, I have retained the San Francisco law firm of Steefel, Levitt & Weiss to represent me should such litigation be commenced. The Purchaser confirms that it has disclosed all conditions of the Offer and that all conditions of the Offer must be satisfied prior to Purchaser being obligated to purchase the Units. Section 16. Certain Legal Matters and Required Regulatory Approvals. Except as set forth in this Offer to Purchase, based on its review of filings made by the Partnership with the SEC and other publicly available information regarding the Partnership, the Purchaser is not aware of any licenses or regulatory permits that would be material to the business of the Partnership, taken as a whole, and that might be adversely affected by the Purchaser's acquisition of Units in the Offer. In addition, the Purchaser is not aware of any filings, approvals, or other actions by or with any domestic, foreign, or governmental authority or administrative or regulatory agency that would be required prior to the acquisition of Units by the Purchaser pursuant to the Offer. Should any approval or other action be required, there can be no assurance that any additional approval or action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the Partnership's business, or that certain parts of the Partnership's or the Purchaser's business might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain that approval. The Purchaser's obligation to purchase and pay for Units is subject to certain conditions. See "THE OFFER--Section 15--Certain Conditions of the Offer." Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules and regulations that have been promulgated under the HSR Act by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated until information and documentary material has been furnished for review by the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The Purchaser does not currently believe that any filing is required under the HSR Act with respect to its acquisition of Units contemplated by the Offer. State Takeover Laws. The Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer, and nothing in the Offer, nor any action taken in connection with the Offer, is intended as a waiver of that right. In the event that any state takeover statute is found - 21 - applicable to the Offer, the Purchaser might be unable to accept for payment or purchase Units tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In that case, the Purchaser may not be obligated to accept for purchase, or pay for, any Units tendered. Section 17. Fees and Expenses D.F. King & Co., Inc., has been retained by the Purchaser to act as the Information Agent in connection with the Offer. The Information Agent will receive reasonable and customary compensation for its services in an amount not expected to be in excess of $12,500 in connection with the Offer and will be indemnified against certain liabilities and expenses in connection with its service as the Information Agent. Except as set forth in this Section 17, the Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Units pursuant to the Offer. Brokers, dealers, commercial banks, trust companies, and other nominees, if any, will, upon request, be reimbursed by the Purchaser for customary clerical and mailing expenses incurred by them in forwarding materials to their customers. Section 18. Miscellaneous. The Offer is not being made to (nor will tenders be accepted from or on behalf of) Limited Partners in any jurisdiction in which the making of the Offer or the acceptance of Units tendered in the Offer would not be in compliance with the laws of that jurisdiction. The Purchaser is not aware of any jurisdiction within the United States in which the making of the Offer of the acceptance of Units tendered in the Offer would be illegal. In any jurisdiction where the securities, blue sky, or other laws require the Offer to be made by a licensed broker or dealer, the Purchaser will withdraw the Offer. The Purchaser has filed, with the SEC, the Schedule TO, together with exhibits, pursuant to Rule 14d-1 of the General Rules and Regulations under the Exchange Act, furnishing information with respect to the Offer, and may file amendments to that Schedule TO. The Schedule TO and any amendments to that Schedule TO, including exhibits, may be examined and copies may be obtained from the SEC as set forth above in "Introduction." No person has been authorized to give any information or to make any representation on behalf of the Purchaser not contained in this Offer to Purchase or in the Agreement of Sale and, if given or made, any information or representation must not be relied upon as having been authorized. Neither the delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall, under any circumstances, create any implication that there has been no change in the affairs of the Purchaser or the Partnership since the date as of which information is furnished or the date of this Offer to Purchase. - 22 - SCHEDULE 1 PROPERTIES OWNED BY THE PARTNERSHIP For a summary of the Properties owned by the Partnership, see Section 10 of the Offer. - 23 - D.F. King & Co., Inc. 48 Wall Street New York, NY 10005 800-949-2583 - 24 - EX-99.(A)(2) 4 k30461exa2.txt TRANSMITTAL LETTER, DATED APRIL 28, 2003 Exhibit (a)(2) Kenneth E. Nelson 4107 W. Gazebo Hill Blvd. N107 Mequon, WI 53092 May 14, 2003 Offer To Purchase Units in Metric Partners Growth Suite Investors, LP For $86 Net per Unit (plus release from certain litigation claims) Dear Limited Partner: Enclosed with this letter is an offer to purchase limited partnership assignee units ("Units") in Metric Partners Growth Suite Investors, LP (the "Partnership") for $86 per Unit. In addition, you will receive a release from liability in certain litigation in which you, along with the other Limited Partners, have been named as defendants. [See "THE OFFER-Introduction"]. The Offer Price is net to the seller. This offer expires on June 27, 2003. If you are interested in selling, please read the enclosed offer carefully. Also enclosed is a solicitation statement which seeks your approval of a number of proposals. The approval of all such proposals is a condition of my offer. Thus, should you wish to sell your Units, you should vote to approve such proposals. FACTORS TO CONSIDER IN EVALUATING THIS OFFER o Offer Price Since there is no public trading of Units, the market value of Units is difficult to determine. However, I believe that because of my knowledge of the business of the Partnership that I am willing to pay more than any other buyer would pay. The Managing General Partner did not oppose a tender offer in 2002 at $20 per Unit. The Offer Price is $86. In addition, the possibility of having to return prior distributions can be eliminated if I purchase any of your Units. Thus, this Offer is far superior to an offer not opposed by the Managing General Partner. The Offer Price was determined based upon conversations with the largest Limited Partners, persons that I believe are sophisticated and knowledgeable. $86 was the asking price of the person holding the greatest number of Units; I did not bargain with him. I believe that $86 is acceptable to persons holding at least 18% of the Units. o Release from Liability A suit in San Francisco seeks to force you to return $275 per Unit that was distributed in January, 1998. You will be released from liability if you sell your Units to me. o Settlement of the Partnership's Litigation The Partnership is involved in numerous suits in connection with the Partnership's refusal to perform a 1993 settlement agreement entered into before a judge in San Francisco. I am interested in settling such litigation, but do not wish to be accused of causing the Partnership to enter into a settlement that is not in the Partnership's interest. Thus, I have conditioned my offer upon the approval of a settlement by the Limited Partners. The proposed settlement is structured to pay only a fraction of the claims against the Partnership unless the Partnership is able to recover from third parties. The "right" amount of any litigation settlement can never be known because of the vagaries of the justice system. No one can predict the final outcome of the cases with certainty. o Opportunity for Liquidity; Tax Return Simplification My offer gives limited partners a rare chance to sell this investment. You invested in 1988 for 5-10 years. The Partnership's hotels have been sold, but litigation has prevented cash distributions. By selling your Units, you give yourself the opportunity to place the proceeds from a sale into other investments. You may also simplify your tax returns by eliminating future K-1 reporting for this Partnership. o The Purchaser Previously, I developed hotels, and sold several to the Partnership and its affiliates. However, for ten years I have been involved in the litigation regarding the Partnership's refusal to perform a 1993 settlement agreement entered into before a judge in San Francisco. I believe that my understanding of the events arising from the Partnership's breach gives me the unique ability to cause the Partnership to recover from those who have failed to properly advise the Partnership. Thus, I seek to acquire a majority of the Units with a view to control. o Risk Factors Numerous Risk Factors are more fully discussed in the offer. See "The Offer--Risk Factors." A primary risk factor is our conflicting interests. While I believe that the offer is mutually beneficial, I am making the offer because I believe that it will allow me to profit. There is a conflict between my desire to acquire your Units at a low price and your desire to sell your Units at a high price. You are free to accept the Offer and to vote for the accompanying proposals regardless of whether you voted for, voted against, or abstained from voting for the Partnership's earlier proposal to amend the Partnership Agreement. Please read the enclosed offer carefully. It contains important information concerning this offer, the Partnership and me, the Purchaser. If you wish to sell your units, complete the enclosed Agreement of Sale (BLUE) according to the directions on the agreement, sign where indicated, complete the consent card (BLUE), and return them in the pre-addressed return envelope. If you have any questions, please call D.F. King & Co., Inc., the information agent, at 800-949-2583. Sincerely, /s/ Kenneth E. Nelson EX-99.(A)(3) 5 k30461exa3.txt AGREEMENT OF SALE AGREEMENT OF SALE Exhibit (a)(3) AGREEMENT OF SALE AND ASSIGNMENT The undersigned Limited Partner (the "Seller") does hereby sell, assign, transfer, convey and deliver to Kenneth E. Nelson, or his designee ("Nelson" or the "Purchaser"), all of the Seller's right, title and interest in the units (the "Units") of limited partnership assignee interests in Metric Partners Growth Suite Investors, LP, a California limited partnership (the "Partnership") being sold pursuant to this Agreement of Sale and Assignment ("Agreement") and indicated on the signature pages to this Agreement, for a purchase price of $86 per Unit, less the amount of any distributions declared or paid from any source by the Partnership with respect to the Units after January 1, 2003, without regard to the record date or whether such distributions are classified as a return on, or a return of, capital, plus a release from certain litigation claims. PAYMENT FOR UNITS BEING SOLD PURSUANT TO THIS AGREEMENT WILL BE MADE WITHIN TEN (10) BUSINESS DAYS FOLLOWING THE "EXPIRATION DATE" SET FORTH IN THE OFFER TO PURCHASE ACCOMPANYING THIS AGREEMENT, PROVIDED PURCHASER HAS RECEIVED AND ACCEPTED THIS AGREEMENT, PROPERLY COMPLETED AND DULY EXECUTED PURSUANT TO THE TERMS AND CONDITIONS OF THE OFFER. HOWEVER, IN THE EVENT THAT NELSON'S ELECTION AS GENERAL PARTNER IS CONTESTED, PAYMENT MAY BE DELAYED UNTIL AFTER A JUDICIAL DETERMINATION THAT NELSON IS THE SOLE GENERAL PARTNER. The Seller hereby represents and warrants to the Purchaser that the Seller owns all of the Units being sold hereunder and has full power and authority to validly sell, assign, transfer, convey, and deliver to the Purchaser such Units, and that when any such Units are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all options, liens, restrictions, charges, encumbrances, conditional sales agreements, or other obligations relating to the sale or transfer thereof, and such Units will not be subject to any adverse claim. The Seller represents and warrants that the Seller is a "United States person" as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended, or if the Seller is not a United States person, the Seller does not own beneficially or of record more than 5 percent of the outstanding Units. The Seller also represents and warrants that in deciding to sell the Units to the Purchaser, the Seller has not relied upon any representation or warranty made by the Purchaser or any agent of the Purchaser with respect to the value of the Units or the income tax consequences of the sale of the Units. The sale of Units pursuant to this Agreement shall include, without limitation, all rights in, and claims to, any Partnership profits and losses, cash distributions, voting rights and other benefits of any nature whatsoever, distributable or allocable to such Units under the Partnership's Agreement of Limited Partnership. Upon the execution of this Agreement by the Seller, Purchaser shall have the right to receive all benefits and cash distributions and otherwise exercise all rights of beneficial ownership of such Units. By executing this Agreement, Seller assigns to Purchaser (i) the Seller's right to pursue any legal or other action of recovery against any person or entity which might be liable in any way to the Seller as a result of his purchase or ownership of the Units (or any interest therein) being sold hereby and (ii) any existing or future rights arising from the refusal of the Partnership or its General Partners to recognize the substitution of Purchaser as a limited partner, the assignment of Seller's beneficial ownership of the Units to Purchaser, or the assignment of claims effected by clause (i) of this sentence. Any damages or recoveries resulting from such actions, whether initiated by the Purchaser or by other parties will be due and payable to the Purchaser. Seller, upon execution of this Agreement, hereby irrevocably constitutes and appoints Purchaser as its true and lawful agent and attorney-in-fact with respect to the Units being sold hereby with full power of substitution. This power of attorney is an irrevocable power, coupled with an interest of the Seller to Purchaser, to (i) execute, swear to, acknowledge, and file any document relating to the assignment of the Units being sold hereby on the books of the Partnership that are maintained with respect to the Units and on the Partnership's books maintained by the General Partner of the Partnership, or amend the books and records of the Partnership as necessary or appropriate for the assignment of the Units, (ii) vote or act in such manner as any such attorney-in-fact shall, in its sole discretion, deem proper with respect to the Units being sold hereby, (iii) deliver the Units being sold hereby and transfer ownership of such Units on the books of the Partnership that are maintained with respect to the Units and on the Partnership's books, maintained by the Partnership's General Partner, (iv) endorse on the Seller's behalf any and all payments received by Purchaser from the Partnership for any period on or after January 1, 2003, which are made payable to the Seller, in favor of Purchaser, (v) execute on the Seller's behalf, any applications for transfer and any distribution agreements required by the National Association of Securities Dealers, Inc.'s Notice to Members 96-14 to give effect to the transaction contemplated by this Agreement, (vi) receive all distributions and inspect and amend the books and records of the Partnership, including Seller's address and records, to direct all distributions to Purchaser as of the effective date of this Agreement, (vii) request an accounting of the affairs of the Partnership. Purchaser shall not be required to post bond of any nature in connection with this power of attorney, and (viii) in the event that the General Partner of the Partnership refuses to either transfer the Seller's Units to the Purchaser or to admit the Purchaser as a substitute limited partner, take legal action, as the Seller's true and lawful agent and attorney-in-fact, on behalf of the Seller, to enforce this Agreement of Sale. Seller does hereby direct and instruct the Partnership and the General Partners immediately upon their receipt of this Agreement of Sale, which includes a power of attorney appointing the Purchaser as the Seller's true and lawful agent and attorney-in-fact, (i) to amend the books and records of the Partnership to change the Seller's address of record for purposes of mailing distributions with respect to the Units being sold hereby to Kenneth E. Nelson, 4107 W. Gazebo Hill Blvd. N107, Mequon, WI 53092, and (ii) to forward all distributions and all other information relating therein to be received by Seller to Nelson at the address set forth in (i) above. Seller does hereby release and discharge the General Partners and their officers, shareholders, employees and agents from all actions, causes of actions, claims or demands Seller has, or may have, against the General Partner that result from the General Partner's reliance on this Agreement or any of the terms and conditions contained herein. Seller agrees to indemnify and hold the Purchaser and the Partnership harmless from and against, and to reimburse the Purchaser and/or the Partnership on demand, for any damage, loss, cost or expense (including attorneys' fees and costs of investigation incurred in defending against and/or settling such damage, loss, cost or expense) reasonably incurred by the Purchaser and/or the Partnership arising out of or in connection with any misrepresentation, breach of warranty, or failure to perform or violation of any agreement or covenant on the part of the Seller under this Agreement. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the Seller and any obligations of the Seller shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. This agreement is irrevocable and may not be withdrawn following execution and delivery by the Seller. Upon request, the Seller will execute and deliver any additional documents deemed by the Purchaser or the Partnership to be necessary or desirable to complete the assignment, transfer and purchase of such Units. If the Seller is more than one person, then and in such event, the obligations of the Seller under this Agreement shall be joint and several and the representations, warranties and covenants herein contained shall be deemed to be made by and binding upon each such person and his heirs, executors, administrators, successors and assigns. The representations, warranties, covenants and agreements contained in this Agreement shall survive the transfer of the Units made by this Agreement and the payment of the consideration therefor. The Seller hereby certifies, under penalties of perjury, that (i) the tax identification number shown on this form is the Seller's correct Taxpayer Identification Number; and (ii) Seller is not subject to backup withholding either because Seller has not been notified by the Internal Revenue Service (the "IRS") that Seller is subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified Seller that Seller is no longer subject to backup withholding. The Seller hereby also certifies, under penalties of perjury, that the Seller, if an individual, is not a nonresident alien for purposes of U.S. income taxation, and if not an individual, is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations). The Seller understands that this certification may be disclosed to the IRS by the Purchaser and that any false statements contained herein could be punished by fine, imprisonment, or both. The undersigned recognizes that, if proration is required pursuant to the terms of the Offer, the Purchaser will accept for payment from among those Units validly tendered on or prior to the Expiration Date and not properly withdrawn, the maximum number of Units permitted pursuant to the Offer on a pro rata basis. The undersigned understands that a tender of Units to the Purchaser will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Units tendered hereby. In such event, the undersigned understands that any Agreement for Units not accepted for payment will be destroyed by the Purchaser. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin. Seller waives any claim that any court in Wisconsin is an inconvenient forum, and waives any right to trial by jury. The undersigned Seller (including any joint owner(s)) owns and wishes to assign the number of Units set forth below. By its own or its Authorized Signatory's signature below, the Seller hereby assigns its entire right, title and interest in the Units set forth below to the Purchaser. By executing this Agreement, the Seller hereby acknowledges to the General Partners that the Seller desires to assign the Units referenced herein and hereby directs the General Partners to take all such actions as are necessary to accomplish such assignment, and appoints the General Partners the agent and attorney-in-fact of the Limited Partner, to execute, swear to, acknowledge and file any document or amend the books and records of the Partnership as necessary or appropriate for the assignment of the withdrawal of the Limited Partner. Each of the Parties hereto agrees to promptly execute and deliver any and all further agreements, documents or instruments necessary to effectuate this Agreement and the transaction referred to herein or reasonably requested by the other party to perfect or evidence its or his rights hereunder. Should either party hereto commence any proceeding to enforce the provisions of this Agreement, then and in such event, the prevailing party in any such proceeding or action shall be entitled to reimbursement of its or his costs, including attorney's fees, incurred in the investigation and prosecution of such proceeding or action. The parties agree that the proper venue for any such action shall be in the County of Ozaukee, State of Wisconsin, and the Seller hereby consents to the jurisdiction over the Seller by the state and Federal courts of or in the State of Wisconsin, County of Ozaukee, in connection with any proceeding or action brought under this Assignment. Any provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of any provisions of this Agreement in any other jurisdiction. METRIC PARTNERS GROWTH SUITE INVESTORS, L.P. - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Nelson and the Limited Partners have executed this Assignment as of May 14, 2003. (A) NUMBER OF UNITS OWNED: _________________ NUMBER OF UNITS TO BE TRANSFERRED -ALL- (B)_____________________________________________________________________________ Limited Partner (s)/Assignor(s) (Full Registered Name of Limited Partner(s)/Assignor(s)) (C) Mailing Address: ________________________________________ Street ________________________________________ City State Zip (D)_______________________________________________ Telephone Number (And Fax Number if Available) (E)_____________________________________ Signature of Limited Partner Date ___________________________, 2003 Limited Partner's Signature Guarantee* __________________________________________________________ Signature of Joint Limited Partner or Custodian / Trustee Date ___________________________, 2003 Joint Limited Partner's or Custodian / Trustee Signature Guarantee* F) ________________________________________________ Social Security/Taxpayer No. of Limited Partner _______________________________________________ Security/Taxpayer No. of Joint Limited Partner (G) Custodian(s) or Trustee(s) Information __________________________________________ Name of Custodian(s) or Trustee(s) __________________________________________ Address __________________________________________ City, State, Zip ____________________________________________ Account Number _______________________________________ for NELSON INSTRUCTIONS TO COMPLETE AGREEMENT OF SALE - -------------------------------------------------------------------------------- LINE HOW TO FILL IN ---- -------------- (A) number of Units you wish to sell (B) print full registered name of Limited Partner (for example: "Mary Smith" or "Anne & Bob Smith, JTWROS"). If Units are held in partnerships, trusts, retirement accounts or other entities, please indicate (for example: "ABC Corp. Pension Plan, Jane Smith, Custodian" or "John Smith, Trustee UGMA FBO Sarah Smith Trust") (C) Limited Partner's current mailing address (D) telephone number (E) signature of person listed on Line B or authorized representative (F) social security or tax ID number of person/entity listed on Line B (G) name and address of custodian (for example, IRA custodian) *signature guarantee: necessary only if selling more than 50 units. May be obtained by the officer of a national bank or trust company, or a member firm of a stock exchange. CONSENT THIS WRITTEN CONSENT IS SOLICITED BY KENNETH E. NELSON TO BE EFFECTIVE AS SET FORTH IN THE SOLICITATION STATEMENT ACCOMPANYING THIS CONSENT CARD. This Consent Card ("Consent Card") must be completed and returned by every Unit holder who wishes to vote for the Proposals as described in the Solicitation Statement accompanying this Consent Card. A postage-paid return envelope is enclosed for your convenience in returning this Consent Card. The Consent Card must be received prior to June 27, 2003. The undersigned, with respect to each Unit in Metric Partners Growth Suite Investors, L.P., held of record by the undersigned on May 14, 2003, hereby sets forth his, her or its vote in connection with the written consent solicited by Kenneth Nelson as described in the Solicitation Statement accompanying the Consent Card and hereby directs the Assignor Limited Partner to vote on the Proposed Amendment as directed below. A PROPERLY EXECUTED CONSENT CARD THAT IS NOT MARKED WILL BE DEEMED TO VOTE FOR THE PROPOSALS. KENNETH E. NELSON RECOMMENDS A VOTE FOR ALL PROPOSALS. Proposal No. 1: Approval of Proposed Amendment to Paragraph 12.3 of the Limited Partnership Agreement of Metric Partners Growth Suite Investors, L. P. |_| FOR |_|AGAINST |_| ABSTAIN Proposal No. 2: Approval of the removal of the current general partners of Metric Partners Growth Suite Investors, L. P. |_| FOR |_|AGAINST |_| ABSTAIN Proposal No. 3: Approval of the election of Kenneth E. Nelson as general partner of Metric Partners Growth Suite Investors, L. P. |_| FOR |_|AGAINST |_| ABSTAIN Proposal No. 4: Approval of the Proposed Settlement Agreement. |_| FOR |_|AGAINST |_| ABSTAIN The undersigned hereby acknowledges receipt of the Solicitation Statement, dated May 14, 2003. If Units are owned jointly, all joint owners must sign below. Date:________________________________________________ Signature of Owner:__________________________________ Signature of Joint Owner:____________________________ Please date and sign here exactly as your name or names appear on this Consent Card. Each executor, administrator, trustee, guardian, attorney-in-fact or other fiduciary should sign and indicate his or her full title. D.F. King & Co., Inc. 48 Wall Street New York, NY 10005 800-949-2583 EX-99.(A)(4) 6 k30461exa4.txt EXHIBIT 99(A)(4) Exhibit (a)(4) Kenneth E. Nelson 4107 W. Gazebo Hill Blvd. N107 Mequon, WI 53092 May 14, 2003 Dear Unit Holders: Kenneth E. Nelson ("Nelson") requests your written consent to remove the current general partners of Metric Partners Growth Suite Investors, L.P., a California limited partnership (the "Partnership"), to elect Nelson as the new general partner of the Partnership, to settle all currently outstanding litigation against the Partnership, and to amend the partnership agreement of the Partnership (the "Limited Partnership Agreement"), all as described in the enclosed Solicitation Statement. I presently intend to make a tender offer (the "Offer") to purchase 30,000 limited partnership assignee units ("Units") of the Partnership. Materials related to the Offer will be filed separately with the SEC. You will receive such materials at the same time you receive this statement. The Offer is conditioned, among other things, upon approval of the proposals set forth in the accompanying Solicitation Statement. Thus, should you desire to sell your Units to me, you should approve the proposals. Please review the Solicitation Statement carefully. Your consent is important. Abstentions or failures to return the enclosed consent card will have the same effect as voting against the proposals. Therefore you are requested to complete, sign and return the Consent in the enclosed pre-paid envelope at your earliest convenience and, in any event, by the expiration of the solicitation period which is June 27, 2003. You may withdraw your consent at any time before the expiration of the solicitation period. The Managing General Partner is recommending approval of a proposed amendment to the partnership agreement which would allow a purchaser to acquire control of the Partnership. The proposed amendment, a copy of which is attached to the Solicitation Statement as Exhibit A, would eliminate certain prohibitions on transfers of Units of the Partnership, which exist presently in the Partnership Agreement and would apply if the Managing General Partner reasonably believed, in accordance with advice from counsel, that such transfer or assignment could result in a termination of the Partnership for tax purposes or cause the Partnership to be classified as a publicly traded partnership. As a result of these existing prohibitions, the Managing General Partner may choose not to process transfers of Units which, when combined with prior transfers during any calendar year, would exceed in the aggregate 5% of the number of Units then outstanding. In no event, as a result of the existing prohibition on any transfer of Units that would result in the termination of the Partnership for tax purposes could 50% or more of the total Units outstanding be transferred in any single transaction or series of transactions in any 12-month period. As more fully discussed in the Solicitation Statement, I am proposing this amendment because these prohibitions (which were originally placed in the Partnership Agreement to protect holders from certain adverse tax consequences) are no longer necessary and the prohibitions potentially limit the ability of the holders of Units to transfer their Units. Furthermore, such amendment is a condition of my presently outstanding tender offer. According to the Partnership's annual report, as of March 17, 2003, holders of 23% of the outstanding Units had submitted written consents approving the proposed amendment. Your approval of the proposal to remove the current general partners and the proposal to elect me as general partner would result in me being the sole general partner of the Partnership. Your approval of the proposal that the Partnership settle all currently outstanding litigation against it would result in the Partnership entering into a settlement agreement (the "Proposed Settlement Agreement") pursuant to which the Partnership would agree to entry of a judgment in favor of GP Credit Co., LLC ("GP Credit") (a company of which my wife is the manager) against the Partnership for $10 million. The Partnership would immediately pay $4 million to GP Credit. GP Credit would agree that it would not attempt to collect more than $4 million of such judgment for a period of three years following entry of the judgment. GP Credit would further agree that following such three-year period it will not attempt to collect more from the Partnership than an amount which would leave the Partnership with $2 million (including amounts owed by the current general partners due to the negative balances in their capital accounts) immediately prior to liquidation. The full text of the Proposed Settlement Agreement is attached to the Solicitation Statement as Exhibit B. In the event that the solicitation results in the approval of any of the proposals, you will be advised of such approval by mail. The Managing General Partner favors amendment of the Limited Partnership Agreement. However, the position of the Managing General Partner as to the other proposals is not known. If you wish to sell your Units to me, it is in your interest to execute the Consent and vote "FOR" all of the proposals. Thus, I recommend you approve all proposals. You are free to vote for these proposals regardless of whether you voted for, voted against, or abstained from voting for the Partnership's earlier proposal to amend the Partnership Agreement. I urge you to complete, sign and date the enclosed consent card and return it in the enclosed, pre-paid envelope by June 27, 2003. If you have any questions, please contact D.F. King & Co., Inc. at 800-949-2583. Sincerely, /s/ Kenneth E. Nelson - ii - METRIC PARTNERS GROWTH SUITE INVESTORS, L.P. SOLICITATION STATEMENT This Solicitation Statement is being sent to each holder of limited partnership assignee units (the "Units") of Metric Partners Growth Suite Investors, L.P., a California Limited Partnership (the "Partnership"), of record as of May 1, 2003, in connection with the solicitation by Kenneth E. Nelson ("Nelson") of Unit holder consents to approve a proposed amendment (the "Proposed Amendment") to the Amended and Restated Limited Partnership Agreement of the Partnership (the "Limited Partnership Agreement"), to remove the current general partners (the "Removal Proposal"), to elect Nelson as the new general partner (the "Election Proposal"), and to approve a settlement of all outstanding litigation against the Partnership (the "Proposed Settlement Agreement") (together the "Proposals"). The Managing General Partner is recommending approval of a proposed amendment to the partnership agreement which would allow a purchaser to acquire control of the Partnership. Approval of the Proposed Amendment to the Limited Partnership Agreement, the full text of which is attached as Exhibit A, would eliminate certain prohibitions on transfers of Units that would apply if the Managing General Partner reasonably believes, in accordance with advice from counsel, that such transfer or assignment could result in a termination of the Partnership for tax purposes or cause the Partnership to be classified as a publicly traded partnership for federal income tax purposes. As a result of these existing prohibitions, the Managing General Partner may not process transfers of Units which, when combined with prior transfers during any calendar year, would exceed in the aggregate 5% of the number of Units then outstanding. In no event, as a result of the existing prohibition on any transfer that would result in the termination of the Partnership for tax purposes could 50% or more of the total Units outstanding be transferred in any single transaction or series of transactions in any 12-month period. As more fully discussed elsewhere in this Solicitation Statement, the Managing General Partner has proposed the Proposed Amendment because these requirements (which were originally placed in the Limited Partnership Agreement to protect holders of Units from certain adverse tax consequences) are no longer necessary and the prohibitions potentially limit the ability of holders of Units to transfer their Units. According to the Partnership's annual report, as of March 17, 2003, holders of 23% of the outstanding Units had submitted written consents approving the Proposed Amendment. Approval of the Removal Proposal would remove the Managing General Partner and the Associate General Partner. Approval of the Election Proposal would result in Nelson becoming the sole general partner of the Partnership. Approval of the Proposed Settlement Agreement, the full text of which is attached as Exhibit B, would cause the Partnership to settle all currently outstanding litigation against the Partnership by means of entry of a judgment in favor of GP Credit Co., LLC ("GP Credit") (a company of which my wife is the manager) against the Partnership for $10 million. The Partnership would immediately pay $4 million to GP Credit. GP Credit would agree that it would not attempt to collect more than $4 million of such judgment for a period of three years following entry of the judgment. GP Credit would further agree that following such three-year period it will not attempt to collect more from the Partnership than an amount which would leave the Partnership with $2 million (including amounts owed by the current general partners due to the negative balances in their capital accounts) immediately prior to liquidation. The holders of Units are being asked to sign a consent card to give direction to the Assignor Limited Partner of the Partnership, the party which actually votes the Units of the Partnership, as to how to vote on the Proposals. In order for the Proposals to become effective the Proposals will need to be approved by the holders of more than 50% of the total outstanding Units. If you wish to sell your Units to me in the tender offer I am currently making (the "Offer"), I recommend that you consent to the Proposals. In making your decision, you should carefully review and consider the information set forth below. - 1 - No assurance can be given that unitholder value will be increased if my proposals are approved. Only holders of Units at the close of business on May 1, 2003 are entitled to vote on the proposals. The Partnership has reported that on February 1, 2003, there were 59,919 Units issued and outstanding, held of record by approximately 4,056 holders of Units. Holders of Units holding a majority of the outstanding Units must approve each of the Proposals. An abstention or a failure to vote will be the equivalent of a vote against the Proposals. This solicitation will expire at 5:00 P.M, EDT, June 27, 2003. This Solicitation Statement is dated May 14, 2003. The Solicitation Statement and related consent form is being mailed to holders of Units on or about May 14, 2003. Enclosed with this Solicitation Statement is a written consent card (BLUE) for your signature. Failure to return a properly executed and dated Consent will have the same effect as a vote against the Proposals. Any person who has given consent pursuant to this solicitation may revoke or change it by delivering to me a written notice stating that the consent is revoked or change a vote by delivering a subsequently dated, fully executed Consent. In order to be effective, the revocation or subsequently executed consent card must be delivered prior to 5:00 P.M. on June 20, 2003. If no instructions are indicated on a properly executed and dated Consent, it will be deemed a vote "For" the Proposals. The offices of Nelson are located at 4107 W. Gazebo Hill Blvd. N107, Mequon, Wisconsin 53092. - 2 - TABLE OF CONTENTS THE CONSENT SOLICITATION................................................................................. 4 RECORD DATE AND OUTSTANDING UNITS; VOTING RIGHTS...................................................... 4 MAJORITY VOTE REQUIRED................................................................................ 4 VOTING AND REVOCATION OF CONSENTS..................................................................... 4 ABSENCE OF DISSENTERS' RIGHTS......................................................................... 5 SOLICITATION OF CONSENTS.............................................................................. 5 THE PROPOSED AMENDMENT................................................................................... 5 OVERVIEW.............................................................................................. 5 BACKGROUND AND REASONS FOR THE PROPOSED AMENDMENT..................................................... 5 THE PARTNERSHIP'S DISCUSSION OF THE PROPOSED AMENDMENT................................................ 5 Overview............................................................................................ 5 Background and Reasons for the Proposed Amendment................................................... 6 Tax Opinion of Counsel.............................................................................. 8 Recommendation of Managing General Partner.......................................................... 8 Effect and Risks of Approval........................................................................ 8 RECOMMENDATION OF NELSON.............................................................................. 9 THE PROPOSED CHANGE IN MANAGEMENT OF THE PARTNERSHIP (THE REMOVAL PROPOSAL AND THE ELECTION PROPOSAL).... 9 OVERVIEW.............................................................................................. 9 BACKGROUND AND REASONS FOR THE REMOVAL PROPOSAL AND THE ELECTION PROPOSAL............................. 9 RECOMMENDATION OF NELSON.............................................................................. 10 EFFECT AND RISKS OF APPROVAL.......................................................................... 10 THE PROPOSED SETTLEMENT AGREEMENT........................................................................ 11 OVERVIEW.............................................................................................. 11 BACKGROUND AND REASONS FOR THE PROPOSED SETTLEMENT AGREEMENT.......................................... 11 RECOMMENDATION OF NELSON.............................................................................. 12 EFFECT AND RISKS OF APPROVAL.......................................................................... 12 FORWARD-LOOKING STATEMENTS............................................................................... 12 AVAILABLE INFORMATION.................................................................................... 13 PROPOSED AMENDMENT TO PARAGRAPH 12.3 OF THE METRIC PARTNERS GROWTH SUITE INVESTORS, L.P. AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT................................................................... 14 PROPOSED SETTLEMENT AGREEMENT............................................................................ 15 FORM OF CONSENT CARD..................................................................................... 18
- 3 - THE CONSENT SOLICITATION The purpose of soliciting the consents is to secure Unit holder approval of the Proposals. If Unit holder approval is obtained for the Proposals, the Assignor Limited Partner will be authorized and directed to vote its limited partnership interests in the Partnership in favor of the Proposals. RECORD DATE AND OUTSTANDING UNITS; VOTING RIGHTS Only holders of Units of record at the close of business on May 1, 2003, shall be entitled to vote by written consent on the Proposals. As of February 1, 2003, there were approximately 4,056 holders of Units of record with 59,919 Units issued and outstanding. Nelson's wife is the owner of five Units. Neither the Managing General Partner nor the other general partner of the Partnership are the beneficial owners of any Units. To the Managing General Partner's knowledge, none of its partners and none of the officers and directors of its managing general partner owns any Units. Each Unit holder shall be entitled to cast one vote per Unit owned by such Unit holder. Neither the Managing General Partner nor any of its affiliates shall be permitted to direct the vote of any Units, but any individual officer, director or stockholder of the partners of the Managing General Partner or its affiliates who holds any Units in an individual capacity shall be entitled to vote the Units held in such individual capacity. No established trading market exists for the Units. As of February 1, 2003, no person or group of related persons was known by the Partnership to be the beneficial owner of more than 5% of the Units, based upon a review of the filings made with the Securities and Exchange Commission with respect to the Partnership. However, in connection with a tender offer made by Equity Resource Arlington Fund Limited Partnership ("Equity Resource Arlington"), 44 Brattle St., Cambridge, MA 02138, pursuant to a filing made with the Securities and Exchange Commission dated July 24, 2002, Equity Resource Arlington reported that Equity Resource Arlington and its affiliates owned 1,234 Units, representing 2.06% of the Partnership's outstanding Units; in the Final Amendment to the Equity Resource Arlington Tender Offer Statement, Equity Resource Arlington reported that it had accepted an aggregate of 2,160 Units in the tender offer, which number of Units, when combined with the 1,234 Units previously owned by Equity Resource Arlington and affiliates, would total to 5.66% of the total Units outstanding. MAJORITY VOTE REQUIRED The Assignor Limited Partner (who under the terms of the Limited Partnership Agreement is the only person who can vote for or against the Proposals) is required to vote as directed by the Unit holders. The Assignor Limited Partner may not approve the Proposals without the affirmative vote of Unit holders who collectively hold more than 50% of the outstanding Units. Any consent to the Proposals may be given in writing by the consenting Unit holder and must be received by Nelson at or prior to the date of expiration of the solicitation period. Any consent to the Proposals given by a consenting Unit holder may be revoked by such Unit holder at any time prior to the expiration of the solicitation period by delivering written notice of such revocation to Nelson stating that the consent is revoked or by executing and timely delivering a subsequently dated consent card changing the vote. The Proposals will be deemed to have been approved by the Unit holders if by June 20, 2003 (the "Expiration Date") Nelson has received consents that have not previously been revoked representing the approval of Unit holders holding a majority of the Units then outstanding. VOTING AND REVOCATION OF CONSENTS The Unit holders are being requested to indicate approval of, consent to, and direction and instruction to the Assignor Limited Partner concerning the Proposals by checking the appropriate boxes on the enclosed consent card and by dating and executing the consent. A complete description of the Proposals has not been set forth on the consent itself due to space limitations. Nevertheless, signing and indicating approval and consent on the consent card will be deemed to be approval of and written consent to the Proposals. IN DETERMINING WHETHER THE PROPOSALS HAVE RECEIVED THE REQUISITE NUMBER OF AFFIRMATIVE VOTES, ABSTENTIONS WILL HAVE THE SAME EFFECT AS A VOTE AGAINST - 4 - THE PROPOSALS. A Unit holder who has executed and returned a consent may revoke it at any time prior to the Expiration Date by delivering to Nelson a written notice stating the consent is revoked or change the Unit holder's vote by delivering a subsequently dated, fully executed consent card. All properly executed consent cards that contain no voting instructions will be deemed to have voted "FOR" approval of the Proposals. If you properly execute and date your consent card and mark "ABSTAIN," your vote will have the same effect as a vote against the Proposals. Failure to return the consent card will also have the same effect as a vote against the Proposals. The failure of anyone, including a broker, to vote will have the effect of a vote against the proposals. ABSENCE OF DISSENTERS' RIGHTS The Unit holders are not entitled to dissenters' rights under the California Revised Limited Partnership Act or the Limited Partnership Agreement in connection with the matters to be voted on in this request for written consents. SOLICITATION OF CONSENTS Consents are being solicited hereby by Nelson. Nelson, not the Partnership, will bear the cost of the solicitation of consents from Unit holders. In addition to solicitation by mail, Nelson and agents of Nelson may solicit consents from Unit holders in person, by telephone or facsimile, or by other means of communication. Such agents will not be additionally compensated for such solicitation but may be reimbursed for any reasonable out-of-pocket expenses incurred in connection with the solicitation. Nelson has retained the services of D. F. King & Co., Inc., ("King") to provide administrative and printing services in connection with the consent solicitation at a cost of approximately $16,000 plus out-of-pocket expenses. King may also make telephone solicitations at a cost of approximately $4.50 per call. Nelson will not seek reimbursement from the partnership for the costs of the solicitation. THE PROPOSED AMENDMENT OVERVIEW The purpose of the Proposed Amendment is to allow a purchaser to acquire control of the Partnership. The Managing General Partner has recommended approval of the Proposed Amendment (see the Solicitation Statement dated February 19, 2003), and so do I. According to the Partnership's annual report, as of March 17, 2003, holders of 23% of the outstanding Units had submitted written consents approving the proposed amendment. BACKGROUND AND REASONS FOR THE PROPOSED AMENDMENT In 2002, the Managing General Partner refused to negotiate with me toward a tender offer, stating that certain provisions of the Limited Partnership Agreement barred the transfer of more than 5% of the Units in a year. After reviewing such provisions, I suggested to the Managing General Partner that, in my opinion, the reasons for the existence of such provisions, reasons related to the treatment of the Partnership for federal income tax purposes, were no longer relevant. The Managing General Partner subsequently engaged tax counsel which has confirmed my opinion. Accordingly, the Partnership is now seeking approval of the Proposed Amendment, as am I. My reason for making the proposed amendment is to permit my Offer to succeed. THE PARTNERSHIP'S DISCUSSION OF THE PROPOSED AMENDMENT The following discussion of the Proposed Amendment is reproduced from a preliminary proxy statement filed by the Partnership with the SEC on January 15, 2003. Overview Paragraph 12.3 of the Limited Partnership Agreement presently sets forth prohibitions on the transfer of Units if the Managing General Partner reasonably believes, in accordance with advice from counsel, that - 5 - such transfer could result in a termination of the Partnership for tax purposes or cause the Partnership to be classified as a publicly traded partnership for federal income tax purposes. The Managing General Partner has proposed an amendment to the Limited Partnership Agreement to eliminate these two prohibitions and make necessary conforming modifications. Background and Reasons for the Proposed Amendment The Limited Partnership Agreement was last amended in 1988, when the Units were first sold in a public offering. At that time the Partnership was commencing its business of investing in all-suite, extended stay hotels. A number of the prohibitions on transfers of Units contained in Paragraph 12.3 of the Limited Partnership Agreement were included to protect the expectations of investors as to the tax consequences of their investment in the Partnership. Two of the prohibitions contained in Paragraph 12.3 of the Limited Partnership Agreement had the effect of limiting the number of Units that could be transferred in any one calendar year or, as to the transfer of more than 50% of the Units, over a 12-month period. These prohibitions were needed while the Partnership was engaging in its business to assure the partnership was taxed as a partnership and not as a corporation and that no material adverse tax consequence resulted from a tax termination of the partnership. The Partnership's last hotel was sold on June 18, 1999 through foreclosure. Since that time the Partnership's assets have consisted solely of cash and cash equivalents, and the Partnership's income has consisted solely of interest and dividends on its cash and cash equivalent holdings. Even though the Partnership has ceased its real estate operations, the Partnership has not been able to liquidate due to several litigation matters in which it and its affiliates are presently involved. There is also an injunction presently in place pursuant to which the Partnership is enjoined from conveying, transferring, or otherwise disposing of any of its cash to any extent which would leave less than $5,000,000 available for payment of any judgment awarded to certain parties in one of the Partnership's litigation matters. The pertinent portion of Paragraph 12.3 of the Limited Partnership Agreement is as follows: Notwithstanding any provisions of this Paragraph 12 or Paragraph 13 to the contrary, no transfer or assignment of any Unit, or any fraction thereof, maybe made if the Managing General Partner reasonably believes, in accordance with advice from Counsel, that such transfer or assignment could (i) be in violation of any state securities or "Blue Sky" laws (including any investor suitability standards) applicable to the Partnership, (ii) result in a termination of the Partnership for tax purposes, (iii) cause the Partnership to be classified as a publicly traded partnership for federal income tax purposes, or (iv) cause the Partnership to be classified as an association taxable as a corporation The Proposed Amendment, a copy of which is attached as Exhibit A, would delete clauses (ii) and (iii) of Paragraph 12.3 of the Limited Partnership Agreement and make necessary conforming modifications. Relevant U.S. Treasury regulations provide that, should 5% of more of the Units be transferred in so-called "non-exempt" transactions within a calendar year, the Partnership could be classified as a publicly traded partnership for federal tax purposes. As a result of the prohibition in clause (iii) of Paragraph 12.3 and these regulations, in 1996, 1997 and 1998, the Managing General Partner suspended the processing of most types of resale transactions relating to the Units, when the level of such resale transactions reached 4.9% of the total number of outstanding Units for each of those years. This action was taken to ensure that resale transactions did not cause the Partnership to be classified as a publicly traded partnership. During 2000 and 2001 resale transactions did not reach the 4.9% limit. During 2002, a total of 2,808 Units, 4.69% of the total outstanding Units, were processed for transfer. A partnership is deemed terminated for tax purposes when 50% or more of the capital and profits interests of the partnership are sold or exchanged within any 12-month period. In July 2002, Equity Resource Arlington made a tender offer to purchase up to 8,990 Units at $[omitted] (for all omitted prices, see the Partnership's statement dated February 19, 2003) per Unit in cash upon the terms and subject to the conditions set forth in the Offer to Purchase which was filed with the Securities and Exchange Commission. The tender offer was for more than 5% of the total Units outstanding. - 6 - The Partnership notified Equity Resource Arlington that pursuant to the terms of the Limited Partnership Agreement the Managing General Partner could not permit transfers of Units which, when combined with other transfers of Units made during 2002, would exceed the 5% safe harbor from having the Partnership classified as a publicly traded partnership for federal income tax purposes. The Partnership advised the Unit holders that it was not making a recommendation and it expressed no opinion and remained neutral with respect to the Equity Resource Arlington tender offer. The Final Amendment to the Tender Offer Statement filed with the Securities and Exchange Commission by Equity Resource Arlington reported that it had accepted an aggregate of 2,160 Units (3.60% of the total outstanding Units) from sellers in the tender offer at the time of expiration of the tender offer. In connection with the Partnership's response to the Equity Resource Arlington tender offer, the Managing General Partner advised the Unit holders that since the Partnership was no longer actively conducting business operations and had never previously been classified as a publicly traded partnership, there might be no material adverse tax consequence if more than 5% of the number of Units were transferred and the Partnership was classified as a publicly traded partnership. The Managing General Partner stated that it was therefore going to review the costs, risks and benefits of amending the Limited Partnership Agreement to remove the restriction set forth in clause (iii) of Paragraph 12.3 of the Limited Partnership Agreement. While the Equity Resource Arlington tender offer was pending, Peachtree Partners made an offer to purchase Units at a price of $[omitted] per Unit in cash for up to a total of 4.9% of the total Units outstanding including the number of Units already owned by Peachtree Partners. The Peachtree Partners offer was to expire on September 9, 2002. The Partnership advised Peachtree Partners of the restriction contained in clause (iii) of Paragraph 12.3 of the Limited Partnership Agreement. The Partnership advised the Unit holders that it was not making a recommendation and it expressed no opinion and remained neutral with respect to the Peachtree Partners offer. In addition during this time period the Partnership received a proposal from Kenneth E. Nelson pursuant to which Mr. Nelson offered to present a tender offer for a majority of the Units at $[omitted] per Unit in cash. Mr. Nelson's proposal was conditioned on the general partners of the Partnership recommending to the Unit holders (should Mr. Nelson make a tender offer) that his tender offer be accepted. The proposal also contained certain other conditions with which the Managing General Partner could not comply. One of those conditions was that the general partners of the Partnership permit the transfers even if such transfers in a calendar year would exceed 5% of the total Units outstanding, a violation of clause (iii) of Paragraph 12.3 of the Limited Partnership Agreement. As Mr. Nelson's proposal related to a tender offer for a majority of the Units, the Managing General Partner noted that if Mr. Nelson was to make a tender offer for a majority of the Units and was successful in having those Units tendered, clause (ii) of Paragraph 12.3 of the Limited Partnership Agreement would prohibit the transfer of the Units since a sale of 50% or more of the Units in any 12-month period would cause a termination of the Partnership for tax purposes. Accordingly, Mr. Nelson was advised that without a formal amendment to the Limited Partnership Agreement, the general partners of the Partnership could not agree to Mr. Nelson's proposal. The Managing General Partner, on behalf of the Partnership, advised Mr. Nelson that his proposal was rejected. In connection with the proposal, the Managing General Partner noted that there might be no material adverse income tax consequence if the Partnership were to be terminated for tax purposes. Accordingly the Managing General Partner stated it was going to review the costs, risks and benefits of amending the Limited Partnership Agreement to remove the restriction set forth in clause (ii) of Paragraph 12.3 of the Limited Partnership Agreement. Subsequent to the foregoing communications, the Partnership became aware that Peachtree Partners had made another offer to purchase Units at a price of $[omitted] per Unit in cash for up to a total of 4.9% of the total Units outstanding, including the number of Units already owned by Peachtree Partners. This offer was to expire on October 3, 2002. The Partnership advised the Unit holders that it was not making a recommendation and it expressed no opinion and remained neutral with respect to the second Peachtree Partners offer. While this second Peachtree Partners offer was pending, the Partnership received a modified proposal from Mr. Nelson pursuant to which he offered, subject to certain conditions, to present a tender offer for a majority of the Units at $[omitted] per Unit in cash (a reduction from the $[omitted] per Unit mentioned in his earlier proposal). One of the conditions to the new proposal was that the Unit holders be permitted to - 7 - vote for the amendments to Paragraph 12.3 of the Limited Partnership Agreement in connection with their tender of Units (should Mr. Nelson make a tender offer) necessary to permit a transfer of a majority of the Units. The Partnership advised Mr. Nelson that until he presented a definitive tender offer to the holders of Units it would be premature for the Managing General Partner to take a position on how it would respond to a tender offer. The Managing General Partner pointed out to Mr. Nelson at that time that any solicitation of approval for an amendment to the Limited Partnership Agreement would require compliance with the proxy solicitation rules promulgated by the Securities and Exchange Commission. The Partnership reminded Mr. Nelson at the time of its response that the Managing General Partner was reviewing the costs, risks and benefits of proposing amendments to the Limited Partnership Agreement to remove the restrictions on transfer contained in clauses (ii) and (iii) of Paragraph 12.3 of the Limited Partnership Agreement. Tax Opinion of Counsel The Managing General Partner engaged outside counsel to assist in review of the costs, risks and benefits of the Proposed Amendment. Counsel to the Partnership and the Managing General Partner rendered a tax opinion to the Partnership and the Managing General Partner, to the effect that even if the Partnership is classified as a publicly traded partnership there are no present materially adverse federal tax consequences to the Partnership attributable to such classification and if the Partnership were to be terminated for tax purposes by reason of a sale or exchange of a 50% or more interest in Partnership profits and capital within a 12-month period there are no material adverse federal income tax consequences for the Partnership or its partners. Counsel did not opine on the consequences under the income tax law of any State but has observed that most State's tax laws, including California law, are likely to be similar to federal tax law in these areas, if there are any State income tax laws in these areas at all. Recommendation of Managing General Partner The Managing General Partner reviewed the tax opinion received from counsel. In addition, the Managing General Partner reviewed the costs associated with a solicitation of Unit holders and compliance with applicable securities laws. The Managing General Partner also considered the impact the Proposed Amendment could have if future offers were made to purchase Units. The Managing General Partner considered the fact that the Proposed Amendment would permit there to be a purchase offer made for a majority of the Units, which if successful, would allow the purchaser to control the Partnership. The Managing General Partner believed it was important, given that there did not appear to be any material adverse tax consequences resulting from the Proposed Amendment, to let the holders of Units determine in the event there is an offer to acquire a majority of the Units whether the Unit holders wanted the offeror to control the direction of the Partnership. Therefore, following the analysis, the Managing General Partner concluded that it would be in the best interests of the holders of Units for the Limited Partnership Agreement to be amended to remove the prohibitions contained in clauses (ii) and (iii) of Paragraph 12.3 of the Limited Partnership Agreement. The Managing General Partner therefore recommends that the holders of Units vote in favor of the Proposed Amendment. Effect and Risks of Approval Unit holders should consider the following factors which may affect them, as well as the other information contained in this Solicitation Statement, in evaluating the Proposed Amendment. The possibility that any applicable State income tax laws may vary from relevant federal income tax laws relating to publicly traded partnerships and tax terminations of partnerships. For example, it is possible, although counsel believes it unlikely, that some States' income tax laws could tax any partnership classified as a publicly traded partnership as a corporation, notwithstanding that it would not be so taxed for federal income tax purposes. California income tax law regarding publicly traded partnerships is substantially the same as federal law. If the Proposed Amendment is adopted, a purchaser of Units could acquire control of the Partnership. Under the terms of the Limited Partnership Agreement, many of the provisions of the Limited Partnership - 8 - Agreement cannot be modified unless the holders of a majority of the Units approve the proposal. Removal of either or both of the general partners and appointment of successor general partner requires the approval of the holders of a majority of the Units. Presently, due to the restrictions in Paragraph 12.3 of the Limited Partnership Agreement, the Managing General Partner cannot permit the transfer of more than 5% of the total Units in any one calendar year. This precludes anyone from purchasing the Units necessary to acquire control of the Partnership in any single transaction or any series of transactions unless many calendar years have elapsed. (The restrictions do not preclude the granting of a proxy, however.) If Paragraph 12.3 of the Limited Partnership Agreement is amended, it will be possible for a purchaser to acquire a majority of the Units and amend the Limited Partnership Agreement, remove the general partners, elect a successor general partner and otherwise govern any transaction requiring a vote of the holders of Units. This could mean the management and direction of the Partnership could change if a successful purchaser of a majority of the Units so desired. [This is the end of the information reproduced from the preliminary proxy statement filed by the Partnership.] If the Proposed Amendment is approved, and if the Offer is successful, Nelson will acquire control of the Partnership. Nelson will acquire control of the Partnership if the Offer is successful. This is the risk warned of by the Managing General Partner in the preceding paragraph. RECOMMENDATION OF NELSON Nelson recommends approval of the Proposed Amendment if you wish to sell your Units to Nelson. THE PROPOSED CHANGE IN MANAGEMENT OF THE PARTNERSHIP (the Removal Proposal and the Election Proposal) OVERVIEW The Removal Proposal and the Election Proposal are discussed together, as their mutual objective is a change in the management of the Partnership. Nelson is currently making the Offer in order to acquire control of the Partnership. The Offer is conditioned upon the removal of the current general partners and the election of Nelson as the sole general partner of the Partnership. This change in management would be implemented by means of the Removal Proposal and the Election Proposal. Nelson has consented to being named in this solicitation statement, and has consented to serve as general partner if elected. BACKGROUND AND REASONS FOR THE REMOVAL PROPOSAL AND THE ELECTION PROPOSAL Nelson believes that the Partnership may have certain substantial claims against the current general partners and others who have advised the Partnership. (Nelson's plans for the Partnership are more specifically discussed in the documents related to the Offer, which documents you have also received.) However, Nelson believes that only if he is in control of the Partnership will the Partnership pursue such claims. Thus, Nelson has no interest in acquiring Units unless he controls the Partnership. If Nelson were to acquire a majority of the Units, it is possible that Nelson could then himself vote his Units to remove the current general partners and to elect himself as the sole general partner. However, Nelson fears that the current general partners may refuse to surrender control of the Partnership. Thus, Nelson has conditioned the Offer upon the actual removal of the current general partners, in connection with his election as sole general partner. In the event that the current general partners contest their removal, Nelson will have no obligation to complete the Offer until such time as there is a final judicial determination that the current general partners have been removed and Nelson is the sole general partner. The current general partners have a conflict of interest with the Partnership. The Partnership has stated on several occasions that a mistake (the "Mistake") was made in connection with the Partnership entering into a 1993 settlement agreement. However, the Managing General Partner has never advised the Limited Partners of the existence of the Mistake, the nature of the Mistake, or who was responsible for the Mistake. The Partnership has sued James Reuben, an attorney who represented the Partnership in connection with the 1993 settlement agreement, alleging that Reuben failed to advise the Partnership of the risks of agreeing to purchase the land under the Residence Inn--Nashville subject to certain litigation. However, the - 9 - Partnership would not have been harmed by Reuben's failure to advise the Partnership of such risks had the Managing General Partner not also failed to advise the Partnership of such risks. Thus, the Managing General Partner may be jointly liable with Reuben for failing to advise the Partnership of such risks. In spite of this, the Managing General Partner has testified that it has taken no steps to determine whether it may be liable to the Partnership in regard to the Mistake. Furthermore, the Managing General Partner has testified that it did not even consider causing the Partnership to perform the 1993 settlement agreement and then causing the Partnership to recover its damages from the Managing General Partner. Thus, I believe the Managing General Partner may be liable to the Partnership for the consequences of the Mistake, including, without limitation, concealment of the Mistake from the Limited Partners. Finally, in extensive discovery and briefing in the Tennessee litigation, the Managing General Partner has been unable to explain how it was in the interest of the partnership to breach the 1993 Settlement Agreement. RECOMMENDATION OF NELSON Nelson recommends approval of the Removal Proposal and the Election Proposal if you wish to sell your Units to Nelson. PARTICIPANTS IN THIS SOLICITATION Nelson is a participant in this solicitation. Kenneth E. Nelson, age 52, is an individual citizen of the United States. He holds no Units, and is not, and was not in the past year, a party to any contract, arrangement or understanding of any kind with the Partnership. His office is located at 4107 W. Gazebo Hill Blvd. N107, Mequon, WI 53092. His present principal occupation and five year employment history are: Mr. Nelson has been a general partner of Nashville Lodging Co., which owned the land and buildings of the Residence Inn--Nashville from 1986, and since 1993 is principally involved in handling the various litigation which has resulted from the Partnership's breach of a settlement agreement it entered into in 1993. Mr. Nelson was previously active in the development of hotels, primarily Residence Inns. Mr. Nelson is a certified public accountant and a real estate broker. He holds two degrees (a BBA in accounting and an MBA in finance and accounting) from the University of Wisconsin. Nelson is party to litigation with the Partnership, which litigation will be settled if the Settlement Proposal is approved, and with Orlando Residence, Ltd., as a result of the failure of the Partnership to purchase the land under the Residence Inn--Nashville. Nelson's wife is the manager of GP Credit Co., LLC, and thus might also be considered a participant in this solicitation. Susan B. Nelson, age 48, is an individual citizen of the United States. She holds five Units; other than that, she is not, and was not in the past year, a party to any contract, arrangement or understanding of any kind with the Partnership. Her present principal occupation and five year employment history are: Mrs. Nelson is employed as an alderman of the city of Mequon, WI, and as a fund raiser by the Mequon Community Foundation, both with their offices at 11333 N. Cedarburg Road, Mequon, Wisconsin 53092. Prior to that time, she was a homemaker. Mrs. Nelson is licensed as an insurance agent. She holds two degrees (a BBA and an MBA) from the University of Wisconsin. EFFECT AND RISKS OF APPROVAL Unit holders should consider the following factors which may affect them, as well as the other information contained in this Solicitation Statement, in evaluating the Removal Proposal and the Election Proposal. The effects of approval will be the removal of the Managing General Partner and the Associate General Partner, and the election of Nelson as the sole general partner. If a successor general partner is not elected, the Partnership will suffer from a lack of management. Should the Removal Proposal be approved, but the Election Proposal not approved, then the Partnership will not have a general partner. The benefits, if any, of the collective memory of the current general partners may be lost. If the current general partners are removed, and if they subsequently refuse to cooperate with the Partnership, the benefits, if any, of their knowledge of Partnership affairs may be lost. While much of any such knowledge should be contained in the books and records of the Partnership, there may be some such knowledge which will be lost. - 10 - Nelson will have been elected the sole general partner prior to completion of his purchase of a majority of Units. If the Election Proposal and the Removal Proposal are approved, Nelson will have been elected as the sole general partner of the Partnership prior to his purchase of any Units. To alleviate this risk, Nelson agrees to resign as general partner should he fail to fulfill his obligations under the Offer. Nelson has a conflict of interest with the Partnership. Nelson presently has a conflict of interest with the Partnership. Thus, the terms of the Offer have been designed to alleviate, if not eliminate, such conflict. Nelson has claims against the Partnership arising from the Partnership's breach of a 1993 settlement agreement both as an individual and as the general partner of Nashville Lodging Co. Although such claims of Nashville Lodging Co. have been assigned to GP Credit, the manager of GP Credit is Nelson's wife. Thus, Nelson still has a conflict as to settlement of such claims. However, the settlement of such claims is a condition of the Offer. Thus, Nelson believes that such conflict as to settlement terms will no longer exist if the Offer is successful. THE PROPOSED SETTLEMENT AGREEMENT OVERVIEW Nelson is currently making the Offer. The Offer is conditioned upon approval of the Proposed Settlement Agreement (see Exhibit B), which would result in the settlement of all currently outstanding litigation against the Partnership by means of an immediate payment of $4 million and the contingent payment of as much as $6 million more. More specifically, the Partnership will agree to the entry of a judgment against it in the amount of $10 million. However, GP Credit will agree, that for a period of three years, it will not attempt to collect more than $4 million of such judgment (which amount the Partnership will pay immediately). Even after the three-year period, GP Credit agrees not to collect so much as to leave the Partnership with less than $2 million when the Partnership liquidates. Furthermore, GP Credit will reimburse the Partnership for monies spent by the Partnership which allow GP Credit to collect more than $4 million, up to the amount of any such excess. The effect of such provisions is to effectively shift the cost of pursuing the Partnership's claims to GP Credit. GP Credit is willing to accept such burden as it benefits from such pursuit prior to the Partnership benefiting. The three-year forbearance period will allow the Partnership the opportunity to attempt to recover from the current general partners, and others who have advised the Partnership, for damages caused by any wrongs done by them. Since as much as $6 million of any such recovery will go to GP Credit, GP Credit has agreed to reimburse the Partnership for its expenses in attempting such recovery, up to the amount such attempts benefit GP Credit. In the event that the Partnership is able to recover the full amount it has agreed to pay GP Credit, $10 million, then the Partnership will effectively be made whole. In the event that the Partnership is able to recover punitive damages from such third parties, such as for the breach of fiduciary duties, then the Partnership may be able to recover more than it has agreed to pay GP Credit. BACKGROUND AND REASONS FOR THE PROPOSED SETTLEMENT AGREEMENT Nelson has determined that it may be profitable to the Partnership, and thus to Nelson (as owner of a majority of the Units if the Offer is successful), if Nelson were to control the Partnership and the Partnership were to pursue claims against all parties responsible for the Mistake. Nelson believes that breaches of fiduciary duties occurred, and that the recovery of punitive damages is possible. However, if Nelson controlled the Partnership, it would be impossible for the Partnership to settle the litigation against it without Nelson being accused of having a conflict of interest in such settlement. Thus, in order to avoid such accusations, Nelson has conditioned the Offer upon the approval by the Limited Partners of the Proposed Settlement. Approval of the Settlement Proposal will not obligate the Partnership to enter into the proposed settlement agreement. However, if I am elected general partner I will cause the Partnership to do so. It is likely, and it is my intent, that the effect of approval of the Settlement Proposal will be to limit the rights of the Partnership to challenge my conduct in causing the Partnership to enter into the proposed settlement. - 11 - The Partnership is engaged in a substantial amount of litigation, all of it related in one way or another to a 1993 settlement agreement entered into by the Partnership. The litigation has lasted for a decade, and could last for a number of years more. The litigation has prevented the liquidation of the Partnership. Thus, the resolution of such litigation is necessary to liquidation of the Partnership. The litigation against the Partnership relates primarily to claims originally held by Nelson and Nashville Lodging Co. The claims of Nashville Lodging Co. have been assigned to GP Credit Co. Nelson is the general partner of Nashville Lodging Co., and his wife is the manager of GP Credit Co. Thus, the existence of such litigation causes a conflict of interest between Nelson and the Partnership. Nelson's conflict of interest could form the basis of accusations against Nelson were Nelson to cause the Partnership to settle such litigation without the approval of the Limited Partners. Thus, Nelson seeks the approval of the Proposed Settlement Agreement by the Limited Partners. I believe that the Partnership will ultimately be found liable for damages in excess of $12 million from its breach of the 1993 settlement agreement. However, it could be many years before the trials, and appeals, are completed. The process could cost the Partnership hundreds of thousands of dollars, if not more. Thus, I believe that it is mutually beneficial for the parties to enter into the Proposed Settlement Agreement. The Proposed Settlement Agreement permits the Partnership to pay only a fraction of the amount for which it may be held liable, and obligates it to pay more only if it is able to recover from third parties on its claims against such third parties. In the event that the liabilities of the Partnership are in excess of its assets, it is possible that the Limited Partners would be called upon to return cash distributions made to them. The Uniform Limited Partnership Act, as adopted by California at Cal. Corp. Code Section 15517(4), states: "When a contributor has rightfully received the return in whole or in part of the capital of his contribution, he is nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return." The Proposed Settlement would eliminate this possibility. RECOMMENDATION OF NELSON Nelson recommends approval of the Proposed Settlement Agreement if you wish to sell your Units to Nelson. EFFECT AND RISKS OF APPROVAL Unit holders should consider the following factors which may affect them, as well as the other information contained in this Solicitation Statement, in evaluating the Proposed Settlement Agreement. The amount paid pursuant to the proposed settlement agreement may exceed the amount which the Partnership would ultimately be required to pay by the courts. The vagaries of the justice system are such that no one can predict with certainty the outcome of the cases against the Partnership. Judges, and juries, make mistakes. The Tennessee judge has decided that the Partnership breached the 1993 settlement agreement. The Managing General Partner believes the judge made a mistake. The same judge decided that the Partnership's breach caused no damages. I believe he made a mistake. How the appellate courts will view the matters cannot be known with certainty. Thus, it is possible that the Partnership would ultimately be found liable for damages in an amount less than the amount of the Proposed Settlement. FORWARD-LOOKING STATEMENTS Forward-looking statements contained in this Solicitation Statement include, but are not limited to, statements relating to the Partnership's objectives, strategies and plans, and all statements (other than statements of historical fact) that address actions, events or circumstances that Nelson expects, believes or intends will occur in the future. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated at the time the forward-looking statements are made, including, without limitation, risks and uncertainties associated with whether any persons will make offers to acquire Units in the future, - 12 - changes in tax laws, general business and economic conditions, and developments in the litigations pending against the Partnership. AVAILABLE INFORMATION The Partnership files annual, quarterly and current reports and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Copies of any of this information may be read and copied at the Public Reference Room of the Securities and Exchange Commission at: 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet site that contains these reports and other filings made by the Partnership since the Partnership became an electronic filer. The address of the site is http://www.sec.gov. In connection with the Offer, Nelson is filing a Schedule TO. That schedule, with its exhibits, is hereby incorporated by reference into this Solicitation Statement. - 13 - EXHIBIT A Proposed Amendment to Paragraph 12.3 of the Metric Partners Growth Suite Investors, L.P. Amended and Restated Limited Partnership Agreement. Paragraph 12.3 would be amended to read in its entirety as follows: 12.3 Notwithstanding any provisions of this Paragraph 12 or Paragraph 13 to the contrary, no transfer or assignment of any Unit, or any fraction thereof, may be made if the Managing General Partner reasonably believes, in accordance with advice from Counsel, that such transfer or assignment could (i) be in violation of any state securities or "Blue Sky" laws (including any investor suitability standards) applicable to the Partnership, or (ii) cause the Partnership to be classified as an association taxable as a corporation. The Managing General Partner shall incur no liability to any investor or prospective investor for any action or inaction by it in connection with the foregoing, provided it acted in good faith. If all transfers must be suspended, the Managing General Partner will notify all Unit Holders that sales and transfers have been suspended. - 14 - EXHIBIT B PROPOSED SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is entered into as of ______ , 2003 (the "Execution Date") by and between Metric Partners Growth Suite Investors, L.P., a California limited partnership ("Metric") and Kenneth E. Nelson ("Nelson"), Nashville Lodging Co., a Wisconsin limited partnership ("Lodging"), and GP Credit Co., LLC, an Oklahoma limited liability company ("GP Credit"). RECITALS A. Metric and GP Credit are parties to a lawsuit captioned GP Credit Co., LLC v. Metric Partners Growth Suite Investors, L.P., Metric Realty, SSR Realty Advisors, Inc., Metric Property Management, Inc., GHI Associates II, L.P., Lorenz Menrath, Ronald Zuzack, Thomas Lydon, Joseph Gaudio, Kevin Howley, and Does 1-10,000, Superior Court of California, City and County of San Francisco, Action No. CGC-02-403301 (hereinafter the "Fraudulent Transfer Case"), wherein GP Credit seeks damages from Metric, among others, as a result of a transfer made by Metric on or about January 13, 1998. B. Metric, Lodging, and GP Credit are parties to a lawsuit captioned Orlando Residence, Ltd. vs. 2300 Elm Hill Pike, Inc. and Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P., Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 94-1911-I ("Nashville Case I") wherein GP Credit, as successor-in-interest to Lodging, seeks damages from Metric as a result of Metric's breach of a settlement agreement entered into in March, 1993. C. Metric and Lodging are parties to a lawsuit captioned Metric Partners Growth Suite Investors, L.P., vs. Nashville Lodging Co., 2300 Elm Hill Pike, Inc., Orlando Residence Ltd., and LaSalle National Bank, as trustee under that certain pooling and servicing agreement, dated July 11, 1995 for the holders of the WHP Commercial Mortgage Pass Through Certificates, Series 1995C1 and Robert Holland, Trustee, Chancery Court for Davidson County, in Nashville, Tennessee, Case No. 96-1405-III ("Nashville Case II") wherein Metric sought a judicial determination of certain rights under the senior mortgage on the Residence Inn--Nashville ("Senior Mortgage"), a note held by Lodging "wrapped around" the Senior Mortgage (the "Wrap Note") and the lease of certain land. D. Metric and Lodging are parties to a lawsuit captioned Nashville Lodging Company vs. Metric Partners Growth Suite Investors, L.P. et al., Circuit Court, State of Wisconsin, Case No. 94CV001212 (the "Milwaukee Litigation") wherein Lodging seeks damages from Metric as a result of Metric's breach of a settlement agreement entered into in March, 1993. This case is inactive. E. The purpose of this Agreement is to bring an end to the litigation between the parties described above. It is not the purpose of this Agreement to bring an end to the Fraudulent Transfer Case as to defendants other than Metric. F. Metric and Nelson, without in any way admitting liability with reference to either the claims or counterclaims asserted by either party, desire to reach a full and final compromise of all damages and equitable claims arising among them, known or unknown, as of the Execution Date, save and except any claims specifically set forth below. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. ENTRY OF JUDGMENT; PAYMENT; FORBEARANCE Metric hereby agrees to the entry of a judgment against it, and in favor of GP Credit, in the amount of Ten Million Dollars ($10,000,000.00) in the Fraudulent Transfer Case. Metric further agrees to immediately pay GP Credit Four Million Dollars ($4,000,000.00). Except for the immediate payment of Four Million Dollars ($4,000,000.00), GP Credit agrees to forbear collection of such judgment for a period of three years from the Execution Date. GP Credit further agrees that following such three-year period it will not attempt to collect more from Metric than an amount which would leave Metric with Two Million Dollars - 15 - ($2,000,000.00) (including amounts owed by Metric's current general partners due to the negative balances in their capital accounts) immediately prior to liquidation. GP Credit further agrees that, in the event that Metric pays more than Four Million Dollars ($4,000,000.00) of such judgment, then GP Credit will reimburse Metric for the costs of Metric in seeking to recover from third parties any monies which would be subject to collection by GP Credit, provided, however, that the amount of such reimbursement shall not exceed the excess of the amount paid by Metric to GP Credit over Four Million Dollars ($4,000,000.00). 2. WARRANTIES 2.1 Metric's Warranty. Metric hereby represents and warrants that Metric has the full right and authority to enter into this Agreement and to consummate or cause to be consummated the transactions to be completed hereunder, and the person or persons signatory to this Agreement and any document executed pursuant to it on behalf of Metric shall have full power and authority to bind Metric or the party to be bound. 2.2 Warranty of Lodging, GP Credit, and Nelson. Lodging, GP Credit, and Nelson hereby represent and warrant that they have the full right and authority to enter into this Agreement and to consummate or cause to be consummated the transactions to be completed hereunder, and the person or persons signatory to this Agreement and any document executed pursuant to it on behalf of they shall have full power and authority to bind them or the party to be bound. 3. RELEASE 3.1. GP Credit's Release of Metric. Effective as of the Execution Date, and except for such rights, duties and obligations as are established and/or provided for by this Agreement and the documents which are exhibits hereto, GP Credit hereby generally releases and forever discharges Metric from any and all claims, demands, obligations, losses, causes of action, costs, expenses, attorneys' fees, liabilities and indemnities or any kind or nature whatsoever, based on contract, tort, statutory or other legal or equitable theory of recovery, whether known or unknown, which as of the Execution Date GP Credit had claimed or may hereafter assert against Metric. This release is a release of Metric only, and GP Credit reserves its rights as to all other persons. 3.2. Nelson's and Lodging's Release of Metric. Effective as of the Execution Date, and except for such rights, duties and obligations as are established and/or provided for by this Agreement and the documents which are exhibits hereto, Nelson and Lodging hereby generally release and forever discharge Metric from any and all claims, demands, obligations, losses, causes of action, costs, expenses, attorneys' fees, liabilities and indemnities or any kind or nature whatsoever, based on contract, tort, statutory or other legal or equitable theory of recovery, whether known or unknown, which as of the Execution Date Nelson and/or Lodging had claimed or may hereafter assert against Metric. This release is a release of Metric only, and Nelson and Lodging reserve their rights as to all other persons. 3.3. Metric's Release of GP Credit, Nelson, and Lodging. Effective as of the Execution Date, and except for such rights, duties and obligations as are established and/or provided for by this Agreement and the documents which are exhibits hereto, Metric hereby generally releases and forever discharges GP Credit, Nelson, and Lodging from any and all claims, demands, obligations, losses, causes of action, costs, expenses, attorneys' fees, liabilities and indemnities or any kind or nature whatsoever, based on contract, tort, statutory or other legal or equitable theory of recovery, whether known or unknown, which as of the Execution Date Metric had claimed or may hereafter assert against GP Credit, Nelson, and/or Lodging. This release is a release of GP Credit, Nelson, and Lodging only, and Metric reserves its rights as to all other persons. 3.4. Effective Date. The releases set forth in paragraphs 3.1, 3.2, and 3.3 shall only be effective, and are hereby conditioned upon, payment by Metric to GP Credit of Four Million Dollars ($4,000,000.00). 3.5. Waiver of Civil Code Section 1542. With respect to those matters released and discharged under paragraphs 3.1, 3.2, and 3.3, the parties hereby further expressly waive all rights they - 16 - have or may claim to have against the other party under the provisions of California Civil Code Section 1542 or under equivalent law of any other jurisdiction. California Civil Code Section 1542 provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor. 4. SETTLEMENT NOT AN ADMISSION This Agreement is a result of a compromise by the parties hereto, and is not and shall not be considered as an admission of truth of any of the allegations, claims or contentions of any of the parties against any of the other parties. 5. ADDITIONAL DOCUMENTS The parties hereto agree to execute, acknowledge, deliver, and record such certificates, amendments, instruments, and documents, and to take such other action, as may be necessary to carry out the intent and purpose of this Agreement. 6. WARRANTY AGAINST ASSIGNMENT Each of the parties hereto warrants and represents to the other that each has not assigned, transferred, conveyed or purported to assign, transfer, or convey to anyone any cause of action, claim, demand, debt, liability, or account herein released, other than the transfer to GP Credit of claims formerly held by Lodging. 7. BINDING ON SUCCESSORS This Agreement and the covenants and conditions herein contained shall apply to, be binding upon, and inure to the benefit of the respective heirs, administrators, executors, legal representatives, assignees, and successors-in-interest of the parties hereto, and to each of the parties hereto. 8. CONFIDENTIALITY This Agreement is not confidential. 9. MISCELLANEOUS 9.1. Severability. The provisions of this Agreement are severable, and should any provision, for any reason, be unenforceable, the balance shall, nonetheless, be of full force and effect. 9.2. Applicable Law. This Agreement shall in all respects be interpreted, enforced, and governed exclusively by and under the laws of the State of California. The Agreement is to be deemed to have been jointly prepared by the parties hereto, and any uncertainty or ambiguity existing herein shall not be interpreted against any of the parties, but according to the application of the rules of interpretation of contracts. 9.3. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. 9.4. Merger and Integration. This Agreement and the exhibits hereto contain the entire understanding of the parties. There are no representations, covenants, or understandings other than those expressed or referred to herein. Each party to this Agreement acknowledges that no other party or any agent or attorney of any other party has made any promise, representation, or warranty whatsoever, express, implied, or statutory, not contained or referred to herein, concerning the subject matter hereof, to induce it to execute this Agreement, and it acknowledges that it has not executed this Agreement in reliance on any such promise, representation, or warranty not specifically contained herein. IN WITNESS WHEREOF, the parties hereto have either executed this Agreement themselves, or have caused their duly authorized officer to sign this Agreement so that same may be effective as of the date first above written. [SIGNATURES] - 17 - APPENDIX A FORM OF CONSENT CARD CONSENT THIS WRITTEN CONSENT IS SOLICITED BY KENNETH E. NELSON TO BE EFFECTIVE AS SET FORTH IN THE SOLICITATION STATEMENT ACCOMPANYING THIS CONSENT CARD. This Consent Card ("Consent Card") must be completed and returned by every Unit holder who wishes to vote for the Proposals as described in the Solicitation Statement accompanying this Consent Card. A postage-paid return envelope is enclosed for your convenience in returning this Consent Card. The Consent Card must be received prior to June 27, 2003. The undersigned, with respect to each Unit in Metric Partners Growth Suite Investors, L.P., held of record by the undersigned on May 14, 2003, hereby sets forth his, her or its vote in connection with the written consent solicited by Kenneth Nelson as described in the Solicitation Statement accompanying the Consent Card and hereby directs the Assignor Limited Partner to vote on the Proposed Amendment as directed below. A PROPERLY EXECUTED CONSENT CARD THAT IS NOT MARKED WILL BE DEEMED TO VOTE FOR THE PROPOSALS. KENNETH E. NELSON RECOMMENDS A VOTE FOR ALL PROPOSALS. Proposal No. 1: Approval of Proposed Amendment to Paragraph 12.3 of the Limited Partnership Agreement of Metric Partners Growth Suite Investors, L. P. [ ] FOR [ ] AGAINST [ ] ABSTAIN Proposal No. 2: Approval of the removal of the current general partners of Metric Partners Growth Suite Investors, L. P. [ ] FOR [ ] AGAINST [ ] ABSTAIN Proposal No. 3: Approval of the election of Kenneth E. Nelson as general partner of Metric Partners Growth Suite Investors, L. P. [ ] FOR [ ] AGAINST [ ] ABSTAIN Proposal No. 4: Approval of the Proposed Settlement Agreement. [ ] FOR [ ]AGAINST [ ] ABSTAIN The undersigned hereby acknowledges receipt of the Solicitation Statement, dated May 14, 2003. If Units are owned jointly, all joint owners must sign below. Date:______________________________________________ Signature of Owner:________________________________ Signature of Joint Owner:__________________________ Please date and sign here exactly as your name or names appear on this Consent Card. Each executor, administrator, trustee, guardian, attorney-in-fact or other fiduciary should sign and indicate his or her full title. - 18 - EX-99.(A)(5) 7 k30461exa5.txt SUMMARY ADVERTISEMENT Exhibit (a)(5) - -------------------------------------------------------------------------------- Kenneth E. Nelson (the "Purchaser") is offering (the "Offer") to purchase 30,000 units of limited partnership assignee interests ("Units") in Metric Partners Growth Suite Investors LP (the "Subject Company") for a purchase price of $86 per Unit in cash, plus a release of certain litigation claims. The Offer and withdrawal rights will expire on June 27, 2003 (the "Expiration Date"). Offer materials will be mailed to record holders, beneficial holders, brokers, banks and similar persons whose name appears on the list of Unit holders of the Subject Company ("Limited Partners"), a list obtained from the Subject Company. You may obtain a copy of the tender offer materials with respect to the Offer by calling D.F. King & Co., Inc., 48 Wall St., NY, NY 10005, the information agent for the Offer, at 800-949-2583. The Purchaser intends to establish control of the Subject Company. The general partner of the Subject Company has not approved or disapproved of the Offer. If more than 30,000 Units are validly tendered and not withdrawn, Purchaser will accept up to 30,000 Units, on a pro rata basis. If Purchaser decides to extend the Offer, Purchaser will promptly send each Limited Partner notification of that fact. For Units to be validly tendered pursuant to the Offer, a properly completed and duly executed Agreement of Sale must be received by Purchaser. A cash payment for Units will be made within 10 business days following the Expiration Date and the satisfaction of all conditions of the Offer, as long as the Purchaser has received a properly completed and duly executed Agreement of Sale, unless, however, the current general partners contest their removal, in which case payment will be made after a final judicial determination that Nelson is the general partner. Units tendered pursuant to the Offer can be withdrawn at any time until the expiration of seven days after the date of the Offer, or May 21, 2003, and at any time after sixty days from the date of the Offer, or July 13, 2003, and at any time after the expiration date until Units are accepted for payment. In the event that the Offer is extended beyond the Expiration Date, the Units tendered may be withdrawn at any time up to the date that the Offer, as extended, expires. For a withdrawal to be effective, a signed, written or facsimile transmission notice of withdrawal must be timely received by Purchaser. The most significant conditions to the offer are: the tender of at least 30,000 Units; the settlement of all outstanding litigation against the Partnership; amendment of the partnership agreement to allow the transfer of more than 5% of the Units in a year; and, the election of Nelson as general partner of the Partnership in connection with the resignation or removal of the current general partners. The information required by Exchange Act Rule 14d-6(d)(1) is contained in the Offer to Purchase with respect to the Offer and is incorporated by reference into this summary advertisement. The complete terms and conditions of this Offer are set forth in the Offer to Purchase and related agreement of sale, which are being filed today with the Securities and Exchange Commission and mailed to Limited Partners. This advertisement is not an offer to purchase nor a solicitation of an offer to sell Units. - -------------------------------------------------------------------------------- EX-99.(B) 8 k30461exb.txt LOAN AGREEMENT, DATED APRIL 17, 2003 Exhibit (b) GP Credit Co., LLC April 17, 2003 Kenneth E. Nelson 4107 W. Gazebo Hill Blvd. N107 Mequon, WI 53092 Dear Sir: GP Credit Co., LLC, an Oklahoma limited liability company ("Lender"), hereby agrees to make, and by its acceptance of this commitment Borrower agrees to accept, a loan (the "Loan") in the amount and upon the terms and conditions set forth herein. 1. Definitions. As used herein, Units means limited partnership assignee interests, or units, in Metric Partners Growth Suite Investors, L.P. ("Metric"). As used herein, Offer means a tender offer by Kenneth E. Nelson for 30,000 Units of Metric. 2. Borrower. The name of the Borrower ("Borrower") is Kenneth E. Nelson, a citizen of Wisconsin. 3. Closing Date. The closing of this Loan must take place by July 31, 2003. This commitment and all obligations of Lender will terminate if such disbursement is not made by such date. 4. Amount. The amount of the Loan will not exceed the actual purchase price of Units acquired in the Offer, plus related costs and expenses, but will in no case exceed Two Million Six Hundred Thousand Dollars ($2,600,000.00). 5. Interest Rate. The Loan will bear interest, such interest to be payable monthly, at the rate of fifteen percent (15%) per annum, compounded monthly. 6. Maturity. The principal of and any unpaid interest on the Loan will be payable on the third anniversary of the date on which funds are first advanced on the Loan. 7. Prepayment. The Borrower shall have no right to prepay the Loan prior to the maturity stated above unless a prepayment penalty of Fifty Thousand Dollars ($50,000.00) is paid to Lender. Kenneth E. Nelson April 17, 2003 Page 2 8. Security. The Loan will be secured by a first lien on all Units acquired in the Offer, subject only to such encumbrances and defects as Lender shall approve in writing. 9. Documentation. All documentation, including a note and financing agreement, will be prepared by special counsel selected by Lender and will be in form, content, and execution satisfactory to Lender. 10. Expenses. Borrower agrees to pay all taxes and assessments, and all recording fees, registration taxes, title insurance premiums and other charges of the title company, attorney's fees (including the fees of special counsel for Lender), appraisal fees, and all other expenses of closing the loan, whether or not the loan contemplated hereunder is made, unless the loan is not made because of the wrongful action or delay of Lender. 11. Assignment by Borrower, Transfer of Title and Other Liens. This commitment may not be assigned by Borrower. Pending consummation of the terms of this commitment and as long as the Loan is outstanding, there shall be no transfer of title to the Units without the prior written consent of Lender. There shall be no other liens on title whether subordinate or superior to the lien given Lender to secure this Loan. 12. Lender Not Partner. Anything contained herein to the contrary notwithstanding, Lender, by making this commitment or by any action taken pursuant hereto, will not be deemed a partner or joint venturer with the Borrower, and the Borrower will indemnify and hold Lender harmless from any and all damages resulting from such a construction of the parties and their relationship. 13. Insolvency and Other Events of Default. Lender may cancel its obligations under this commitment without liability in the event of the following: (a) with respect to Borrower of the Loan to be made hereunder, the filing of a voluntary petition for bankruptcy. 14. Acceptance. Acceptance of this commitment must be indicated by the return of one signed copy of this letter by April 22, 2003. The undertakings made by Lender in the commitment cannot be accepted conditionally, and any such conditional acceptance will terminate absolutely the undertakings made herein. We are pleased to have the opportunity to assist you with this financing. Effective as of the date first shown above. GP Credit Co., LLC By: /s/ Susan B. Nelson Manager /s/ Kenneth E. Nelson Date: April 17, 2003 -----END PRIVACY-ENHANCED MESSAGE-----