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 -