SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Amendment No. 3)
Under the Securities Exchange Act of 1934
MIP Properties, Inc.
(Name of issuer)
Common Stock
(Title of class of securities)
553051103
(CUSIP number)
Gary P. Stevens, Esq.
J.E. Robert Companies
11 Canal Center Plaza
Suite 200
Alexandria, Virginia 22314
(703) 739-4400
(Name, address and telephone number of person
authorized to receive notices and communications)
Copy to:
Stephen W. Hamilton
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue
Washington, DC 20005
(202) 371-7000
September 13, 1995; September 18, 1995
(Date of event which requires filing of this statement)
If the filing person has previously filed a
statement on Schedule 13G to report the acquisition which is
the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the
following box [ ].
Check the following box if a fee is being paid
with the statement [ ].
This Amendment No. 3 amends and supplements the
Schedule 13D filed with the Securities and Exchange
Commission on May 31, 1995, as amended by Amendment No. 1
thereto filed with the Securities and Exchange Commission on
June 21, 1995 and Amendment No. 2 thereto filed with the
Securities and Exchange Commission on July 19, 1995 on
behalf of JER Partners, LLC and Joseph E. Robert, Jr. with
respect to MIP Properties, Inc. Capitalized terms used
herein without definition shall have the respective meanings
ascribed thereto in such Schedule 13D, as amended.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 is hereby amended and supplemented by
adding the following at the end thereof:
JER has entered into agreements with certain
potential equity investors, and JER continues to obtain
commitments from potential equity investors.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 is hereby amended by adding the following
at the end thereof:
On September 13, 1995, the Issuer was served with
a purported class action complaint naming it, each of its
directors, JER and Merger Sub as defendants in a proceeding
instituted in the United States District Court for the
Central District of California. The purported class action
complaint alleges violations of the Securities Exchange Act
of 1934, as amended, breaches of fiduciary duties and other
causes of action relating to the Merger.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
7. Complaint entitled John A. Hinson, on behalf
of himself and all others similarly situated
v. MIP Properties, Inc. et al. (Case Number
CV-95-6006 IH).
SIGNATURE
After reasonable 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.
September 21, 1995
(DATE)
/s/ Joseph E. Robert, Jr.
(SIGNATURE)
Joseph E. Robert, Jr.
(NAME/TITLE)
SIGNATURE
After reasonable 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.
September 21, 1995
(DATE)
JER PARTNERS LLC
By: J.E. Robert Company, Inc.
(SIGNATURE)
J.E. Robert Company Inc., Member
(NAME/TITLE)
By: /s/ Joseph E. Robert, Jr.
(SIGNATURE)
Joseph E. Robert, President
(NAME/TITLE)
EXHIBIT INDEX
7. Complaint entitled John A. Hinson, on
behalf of himself and all others
similarly situated v. MIP Properties,
Inc. et al. (Case Number CV-95-6006 IH)
EXHIBIT 7
CENTRAL DISTRICT OF CALIFORNIA
- - - - - - - - - - - - - - - - - x CASE NUMBER
JOHN A. HINSON, ON BEHALF OF
HIMSELF and ALL OTHERS SIMILARLY : CV - 95-6006 IH
SITUATED,
Plaintiffs, :
S U M M O N S
-against- :
MIP PROPERTIES, INC.; JER :
PARTNERS, LLC; MIP ACQUISITION
CORP.; CARL C. GREGORY, III; :
RAYMOND L. BLY, JR.; JOHN W.
CREIGHTON, JR.; ROBERT W. DRAINE; :
W. JOHN DRISCOLL; LAWRENCE W.
FARMER; PAUL FITZGERALD and :
RICHARD T. PRATT,
Defendants. :
- - - - - - - - - - - - - - - - - :
x
TO THE ABOVE-NAMED DEFENDANT(S), You are hereby summoned
and required to file with this court and serve upon
William S. Lerach
Plaintiff's attorney, whose address is:
Milberg Weiss Bershad Hynes & Lerach
600 W. Broadway, Suite 1800
San Diego, CA 92101
an answer to the complaint which is herewith served upon
you within 20 days after service of this summons upon
you, exclusive of the day of service. If you fail to do
so, judgment by default will be taken against you for the
relief demanded in the complaint.
DATE:
CLERK, U.S DISTRICT COURT
By
Deputy Clerk
(SEAL OF THE COURT)
_________________________________________________________
SUMMONS
_________________________________________________________
BURT & PUCILLO
MICHAEL J. PUCILLO
LEO W. DESMOND
222 Lakeview Avenue
Suite 300 East
W. Palm Beach, FL 33401
Telephone 407/835-9400
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
-and-
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
- - - - - - - - - - - - - - - - - ) Civ. No. 95-6006 IH
JOHN A. HINSON, ON BEHALF OF )
HIMSELF and ALL OTHERS ) CLASS ACTION
SIMILARLY SITUATED, )
) CLASS ACTION COMPLAINT
Plaintiff, )
)
vs. )
)
MIP PROPERTIES, INC.; JER )
PARTNERS, LLC; MIP ACQUISITION )
CORP.; CARL C. GREGORY, III; ) Plaintiff Demands A
RAYMOND LO. BLY, JR.; JOHN W. ) Trial By Jury
CREIGHTON, JR.; ROBERT W. DRAINE; )
W. JOHN DRISCOLL; LAWRENCE W. )
FARMER; PAUL FITZGERALD and )
RICHARD T. PRATT, )
)
Defendants.
Plaintiff John a. Hinson ("Plaintiff") sues
Defendants and alleges as follows:
SUMMARY OF ACTION
1. This is an action brought under Sections 14(a)
and 14(d)(7) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rules 14a-9 and 14d-10 promulgated
thereunder, and Section 10(b) of the Exchange Act and
Rule 10b-13 promulgated thereunder. This action arises
out of a cash offer by Defendant JER Partners, LLC
("JER") and its wholly-owned subsidiary, MIP Acquisition
Corp. for all of the outstanding shares of MIP
Properties, Inc. ("MIP" or the "Company") for $2.475 cash
without interest, and MIP management's recommendations
that shareholders of MIP tender their shares.
Contemporaneously with, and as an integral part of this
tender offer, JER entered into an agreement to pay the
largest single shareholder of MIP, Stephen C. Markoff
("Markoff"), a former director of the Company, and his
either wholly-owned or affiliate corporation, Palm
Finance Corporation ("Palm"), a California corporation,
additional consideration for the shares held by Palm that
JER did not offer to other shareholders. Specifically,
in exchange for Markoff's support of the proposed
acquisition, JER entered into an agreement with Palm,
Markoff and his wife, Jadwiga Z. Markoff, whereby Markoff
or Palm would receive the right to acquire certain
properties owned by MIP would receive the right to
acquire certain properties owned by MIP with a book value
of over $3.9 million, for only $1.8 million. Palm and/or
Markoff beneficially own 1,366,306 shares of common stock
of MIP, or approximately 15% of the outstanding common
shares of MIP. The bargain purchase, which was an
integral part of and condition precedent to the tender
offer, would thus result in Markoff and/or Palm receiving
additional consideration of approximately $1.53 per
share, for his MIP common stock based on a Generally
Accepted Accounting Principles ("GAAP") valuation of the
Company's assets. The $1.53 per share is over and above
what other shareholders are being offered in violation of
Sections 14(d)(7) and 10(b) of the Exchange Act and Rules
14d-10 and 10b-13, promulgated thereunder, and the
holders of the remaining 85% of MIP shares are entitled
to receive the same consideration. MIP management's
recommendation that the JER offer be accepted --
notwithstanding its unfairness to the holders of the
remaining 85% of MIP shares -- violates Section 14(a) of
the Exchange Act, and Rule 14a-9 promulgated thereunder.
This action is brought on their behalf.
2. Defendants have craftily structured this
acquisition of all of the outstanding shares of MIP to
appear to be a merger, when, in fact, the substance of
the transaction is in reality a tender offer. After the
requisite shareholder approval is obtained, the MIP
shareholders will receive $2.475 per share in cash which
will be paid upon shareholders tendering their shares to
an appointed exchange agent. Unlike a merger in which
shareholders maintain an equity position in the combined
or surviving entity, MIP shareholders "will no longer
have the opportunity to continue their equity interest in
[MIP] as an ongoing corporation, and, therefore, will not
share in the future and earnings and growth" of MIP or
the surviving combined entity. The Defendants' apparent
intent in masquerading this tender offer as a merger, is
to effect a two-tier tender offer in violation of the
Exchange Act and the rules promulgated thereunder.
JURISDICTION AND PARTIES
3. This Court has jurisdiction of this action
pursuant to Section 27 of the Exchange Act, 15 U.S.C.
SECTION 78aa. The claims asserted arise under Sections 10(b),
14(a) and 14(d)(7) of the Exchange Act and Rules 10b-13,
14a-9 and 14d-10 promulgated thereunder, giving rise to
federal question jurisdiction.
4. Venue is proper in this district pursuant to
Section 27 of the Exchange Act. Many of the acts alleged
herein, including a tender offer for all of the
outstanding shares of MIP, the Board's vote to act
favorably on that offer, and the agreement to enter into
a "two tiered" tender offer, all occurred, in substantial
part, in this district. At all relevant times, MIP
maintained its principal place of business in this
district at 2020 Santa Monica Blvd., Santa Monica.
California 90404. In addition, many of the individual
Defendants named herein reside in this district.
5. In connection with the acts alleged in this
Complaint, the Defendants directly or indirectly used
various means and instrumentalities of interstate
commerce, including, but not limited to, the mails,
interstate telephonic communications and the facilities
of the national securities markets.
6. Plaintiff is a citizen of the State of Florida.
As of May 22, 1995, the date the acquisition was
announced, he was the holder of 182,953 shares of MIP,
about 2% of the outstanding shares, with a value,
pursuant to the offer of $452,808.
7. Defendant MIP is a Maryland real estate
investment trust with its principal place of business in
Santa Monica, California. As of March 15, 1995, MIP had
9,233,105 shares outstanding. The Company's common stock
is listed for trading on the American Stock Exchange
under the symbol "MIP." As of December 31, 1994, there
were 909 stockholders of record of MIP, which includes
shares held in street name beneficially for others.
8. Defendant JER is the parent company for MIP
Acquisition Corp. ("JER Sub"). JER Sub is a newly
formed entity, for purposes of the acquisition of all of
the outstanding shares of MIP. JER is an affiliate of
J.E. Roberts Companies ("J.E. Roberts"), a leading U.S.
real estate investment and asset management firm. J.E.
Roberts is headquartered in Alexandria, Virginia, as is,
on information and belief, JER.
9. Defendant JER Sub is a corporation organized
under the laws of the State of Maryland. On information
and belief, the principal place of business of JER Sub is
the J.E. Roberts' headquarters in Alexandria, Virginia.
JER Sub is the entity designated to acquire all of the
outstanding shares of MIP and is, therefore, the
acquiring company for purposes of the claims asserted
herein.
10. Defendant Carl C. Gregory, III ("Gregory") has
served as Chairman of the Board and Chief Executive
Officer of MIP since May of 1989. He has served on the
Board of Directors of MIP since May of 1986. Gregory
received a salary of $270,000 from MIP in 1994; and
$261,667 in 1993, plus a bonus of 50,000 shares of stock
of the Company valued at $50,000. In 1992, Gregory
received $250,000 in cash compensation and a cash bonus
of $30,000. In addition to approximately $202,500 in
anticipated 1995 salary, Defendant Gregory is entitled to
receive a "retention bonus" of $135,000 if he is employed
as of the effective date of the acquisition, or November
30, 1995, whichever is earlier. (Defendant Gregory's
employment contract with the Company expired on June 30,
1995.) In addition, Gregory will receive accrued
vacation and "other benefit payments" valued at $44,500
on November 30, 1995. These payments are to be received
whether or not the acquisition of MIP by JER Sub is
consummated. Finally, in addition to the foregoing,
pursuant to a resolution of the Board of Directors
adopted on May 14, 1995, Gregory has been awarded $65,000
as a cash bonus for services rendered to the Company
during the 1994 calendar year and stock grant valued at
$123,750. Thus, in addition to his $202,500 per year
salary, Gregory has received or will receive on or before
November 30, 1995, cash or stock valued at $368,250 for a
total of $570,75 from the Company.
11. Defendant Raymond L. Bly, Jr. ("Bly") is a
Director of the Company. He beneficially owns 15,658
shares of the Company, and has options to acquire 20,000
shares of the Company stock. Defendant Bly has served as
a Director of the Company since 1985.
12. Defendant John W. Creighton, Jr. ("Creighton")
has served as a Director of the Company since 1985. He
is also a member of the Company's Compensation Committee.
he is a former Chairman of the Board of MIP. Mr.
Creighton beneficially owns 50,258 shares of the
Company's common stock, and has options to exercise an
additional 20,000 shares of the Company's common stock.
13. Defendant Robert w. Draine ("Draine") has
served as a Director of the Company since 1985. He
currently beneficially owns 68,412 shares of the
Company's stock, and has options to acquire another
20,000 shares of the Company's stock.
14.Defendant W. John Driscoll ("Driscoll") has
served as a Director of the Company since 1989. He also
serves on the Company's Compensation Committee.
Defendant Driscoll owns beneficially 49,098 shares of the
Company's common stock, controls 131,800 shares of the
Company's common stock through voting and/or dispositive
powers shared with others, and has options to acquire an
additional 20,000 shares of the Company's common stock.
Driscoll's total holdings as of March 1, 1995, including
options, total 200,898 shares, or approximately 2.17% of
the Company's outstanding common stock.
15. Defendant Lawrence W. Farmer ("Farmer") has
served as a Director of the Company since 1985. He is a
former President and Chief Executive Officer of MIP. Mr.
Farmer owns beneficially 19,534 shares of the Company's
common stock, and has options to acquire another 50,000
shares of the Company's common stock.
16. Defendant Paul Fitzgerald ("Fitzgerald") has
been a Director of the Company since 1985. Defendant
Fitzgerald owns beneficially 14,658 shares of the Company
common stock, and has options to acquire another 20,000
shares of the Company's common stock.
17. Defendant Richard T. Pratt ("Pratt") has been a
Director of the Company since 1985. He is also a member
of the Company's Compensation Committee. In addition,
Defendant Pratt was one of three members of a special
committee of the Board of Directors, the others being
Defendant Gregory and then director, Stephen C. Markoff,
responsible for evaluating mergers and acquisitions.
This special committee was formed at a special meeting of
the Board on October 31, 1994.
18. The Defendants named in paragraphs 10 through
17 are collectively hereinafter referred to as the
"Individual Defendants." The Individual Defendants, by
reason of their position on the Board of Directors, owe a
fiduciary duty to Plaintiff and the members of the Class,
which duty includes the duty to ensure that Plaintiff and
the Class receive the highest possible consideration for
their shares and, consistent with the federal securities
laws, that no shareholder receive any greater
consideration for his shares than the rest of the
shareholders.
CLASS ACTION ALLEGATIONS
19. Plaintiff brings this action as a class action
pursuant to Federal Rules of Civil Procedure 23(a) and
(b)(3) on behalf of all shareholders of record of MIP as
of Monday, may 22, 1995, the date MIP announced publicly
the execution of a merger agreement between JER Sub and
the Company and related entities, Palm, Stephen C.
Markoff and his wife, Jadwiga Z. Markoff.
20. The members of the Class are so numerous and
geographically dispersed that the joinder of all members
is impracticable. While the exact number of Class
Members is not known at this time, as of March 15, 1995,
there were 9,223,105 shares outstanding and 909
stockholders of record. Because stockholders of record
include holders in "street name," it is believed that the
number of Class Members is well in excess of 1,000.
21. Plaintiff's claims are typical of the claims of
the members of the Class because Plaintiff and the Class
Members sustained the same damage as a result of the
violations of the federal securities laws and common law
alleged herein.
22. Plaintiff will adequately protect the interests
of the Class. Plaintiff is the holder of approximately
2% of the outstanding common stock of the Company, and
has a significant interest in the outcome of this
litigation. In addition, Plaintiff has retained counsel
who are competent and experienced in class action and
securities litigation. Plaintiff has no interest which
are in conflict or antagonistic with those of the members
of the Class.
23. A class action is superior to other available
methods for the fair and efficient adjudication of this
controversy. No difficulty will be encountered in the
management of this action as a class action.
24. Questions of law and fact common to the members
of the Class predominate over any questions which may
affect individual members only. Among the common
questions of law and fact are:
(a) whether Section 14(d)(7) of the Exchange Act
and Rule 14d-10 thereunder have been violated;
(b) whether Section 14(a) of the Exchange Act and
Rule 14a-9 thereunder have been violated;
(c) Whether Section 10(b) and Rule 10b-3 thereunder
have been violated;
(d) whether the Individual Defendants breached
their fiduciary duty to Plaintiff and the members of the
Class;
(e) whether Palm is receiving compensation in
excess of that received by Plaintiff and other members of
the Class; and
(f) the extent of damages sustained by the members
of the Class.
BACKGROUND
25. At fiscal year end December 31, 1985, MIP had
assets in excess of $113 million, shareholder equity of
over $82 million, and positive earnings of $3.5 million.
It completed a public offering in July of 1985 at $10 per
share. Since that time, MIP has taken significant write-
offs on its assets, failed to meet certain covenants in
its lending agreements, and seen its value significantly
diminish. This has occurred under current management,
most of whom are named as Individual Defendants herein.
26. In February of 1994, the Board of Directors of
MIP interviewed three investment banking firms in order
to evaluate possible "strategic alternatives" for the
Company. As a result of these presentations, the Board
selected Tallwood Associates, Inc. ("Tallwood") and
Cornerstone Capital Advisors, Ltd. ("Cornerstone"), and
instructed those firms to present recommendations to the
Board regarding possible strategic alternatives by the
end of March.
27. At a March 31, 1994 Board meeting, Tallwood and
Cornerstone made a presentation to the Board which
included, among other things, a "friendly cas tender" for
the Company. As a result of the presentation, the
Company's Board made the decision to pursue the sale,
merger or significant acquisition involving the Company,
and on April 4, 1994, the retention of Tallwood and
Cornerstone was publicly announced for the purpose of
finding a buyer or merger partner for the Company.
28. At this point, MIP was publicly for sale to the
highest bidder. Having put the Company on the auction
block, the Board of Directors was under a duty to obtain
the highest and best consideration available for the
shareholders. Numerous potential acquires approached the
Company in late 1994. In December of 1994, after one
potential transaction was abandoned, Stephen C. Markoff,
the Company's largest shareholder, through his affiliate,
Palm, made an offer to acquire all of the outstanding
shares of the Company for $2.525 per share, consisting of
$1.83 per share in cash, and a three year note with a
face value of $.695. Mr. Markoff controlled
approximately 15% of the outstanding common stock of the
Company. In January or February of 1995, the Board also
received a proposal from defendant JER. The JER proposal
contemplated an all cash acquisition subject to
completion of due diligence.
29. On February 6, 1995, at a special meeting of
the Board, the Board concluded that an all cash
transaction proposed by JER was preferable to the Markoff
proposal and so informed Mr. Markoff. On February 16,
1995, Mr. Markoff resigned from the Board.
30. According to Article V, Section 2 of the
Company's Articles of Restatement of Charter, any sale of
the Company is subject to 80% approval of the outstanding
shares. Thus, Mr. Markoff, as the holder of
approximately 15% of the outstanding shares of common
stock of the Company, could jeopardize the acquisition of
the Company should he fail to support a transaction. As
a result, during March and April of 1995, while the
Company negotiated terms of a potential acquisition by
JER, JER separately engaged in negotiations with mr.
Markoff in order to secure his support for any potential
acquisition by JER.
31. On May 14, 1995, Defendant Gregory presented a
draft merger agreement to the Board of Directors at a
special meeting of the Board. The agreement provided for
a proposed acquisition of all of the outstanding shares
of MIP for cash consideration of $2.475 per share for
each share of common stock. The Board voted to recommend
the transaction to the Company's shareholders, subject to
finalizing certain matters including notice from JER Sub
that it had secured Mr. markoff's support for any
potential acquisition.
32. On May 21, 1995, Stephen C. Markoff, his wife
and Palm entered into an agreement with JER and JER Sub
whereby Palm was committed to voting its proxy in favor
of the JER acquisition. Upon receipt of an executed copy
of the proxy agreement, the Company entered into a
definitive merger and acquisition agreement on the same
day, which included a commitment on the part of the
Individual Defendants to recommend the transaction to MIP
shareholders. The proposed acquisition by JER was
announced the following morning.
33. In consideration of his commitment to vote
Palm's 1,366,306 shares of common stock of MIP in favor
of the acquisition of MIP by JER, Stephen Markoff and/or
Palm entered into an agreement with JER whereby JER
agreed that following consummation of the acquisition it
would cause the surviving corporation to sell Palm all of
its right, title and interest in certain assets of MIP
for a purchase price of $1,575 million, plus certain cash
flows. MIP estimates that the price to be paid by Palm
for these assets will be approximately $1.8 million. The
closing on the sale of these assets would occur
immediately following consummation of the transaction,
and would be contingent upon the acquisition of 80% of
MIP shares. In other words, Palm would only be able to
purchase the assets at the bargain price of $1.8 million
if the acquisition of MIP was consummated.
34. The assets of MIP that are subject to the side
agreement with Palm are:
(a) the Irwindale Executive Plaza at 5200 and
5240 North Irwindale Avenue in Irwindale, California (the
"Irwindale Plaza").
(b) a 4.26 acre parcel of unimproved land in
San Bernardino, California (known as the "Sun West
Land");
(c) ninety-eight percent of the right, title
and interest in a limited partnership interest in
Discovery Partners, a California limited partnership
("Discovery Partners");
(d) the contract rights of the surviving
corporation under a settlement agreement dated March 10,
1994, among Larry J. Mielke, Thomas R. Tellefsen and MIP
(the "Greenhouse Settlement Agreement"); and
(e) the surviving corporation's interest in a
certain promissory note dated June 5, 1989, by Donald F.
Sammis and Fernanda Sammis, Lee C. Sammis, Trustee for
Donald Sammis' children, Mission Valley One, a California
general partnership, and MBM Associates, a California
limited partnership. This note, which was in default,
had a face amount of $12,350,000. (The foregoing
properties are sometimes collectively referred to as the
"Palm Properties.")
35. On or about August 8, 1995, MIP and the
Individual Defendants mailed to MIP shareholders a Proxy
Solicitation seeking the affirmative vote of 80% of the
shareholders of MIP in favor of a purported merger
between MIP and JER Sub. Since the transaction was
technically structured as a merger (but was in substance
a tender offer), the solicitation of shareholder votes
was required. The Proxy Statement contained the
following statements supporting the purported merger:
(a) [T]he Company's Board of Directors determined
the Merger to be fair to, and in the best interests of,
the Company and its stockholders . . .;
(b) THE BOARD OF DIRECTORS OF THE COMPANY
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT;
(c) Management's and the Board of Directors'
determination, after thorough analysis [is] that a sale
transaction would be more favorable to the stockholders
than stockholder approved plan of liquidation . . .;
(d) The Special Committee and the Board of
Directors independently concluded that the $2.475 per
share all cash price proposed to be paid was an
attractive and fair price for the outstanding share of
common stock . . . .
36. As of December 31, 1994, MIP had shareholder
equity of $30,907,100. This was a reduction from
$51,751,700 as of December 31, 1993, due largely to
significant writedowns in the value of the Company's real
estate assets during 1994. Yet, even this reduced
shareholder equity of $30,907,100 amounted to
approximately a $3.265 per share book value, or about
$.80 higher than the price offered to the holders of the
remaining 85% of MIP shares.
37. According to the Company's Proxy Solicitation,
the net book value of the Palm Properties determined in
accordance with GAAP as of March 31, 1995, was
approximately $3.3 million. As of December 31, 1994,
they were valued at least $3.9 million. The large
majority, if not all, of this value was attributable to
the Irwindale Plaza and the Sun West Land.
38. The Irwindale Plaza and the Sun West Land were
acquired at substantially in excess of $3.3 million in
the aggregate. The Irwindale Plaza was constructed in
1990, and consisted of 53,300 square feet, of which
42,000 was dedicated to office space and 13,300 was
dedicated to retail space. MIP has a cost basis in the
property of approximately $5,461,000, or about $102 per
square foot. At one time the property was valued on the
financial statements of MIP at approximately $5.4
million. As of the time the agreement was entered into
to convey the Palm properties from the surviving
corporation to Palm, the Irwindale Plaza was
approximately 81% leased.
39. MIP's original investment in the Sun West Land
was approximately $1,850,000, or about $10 per square
foot. The Sun West Land was valued on the financial
statements as of December 31, 1994 at $1,426,000.
Indeed, in 1993, the Sun West Land was offered for sale
at $7.50 per square foot, or approximately $1.4 million.
The property was zoned for office, retail, entertainment,
financial, restaurant or hotel use.
40. The Irwindale Plaza and the Sun West Land had
been substantially written down in value on the financial
statements of MIP audited by the Arthur Andersen & Co.
Nevertheless, as of year end 1994, these two properties
were still valued on the financial statements of MIP at
substantially more than the sale price to Palm. The
Irwindale Plaza was carried at $2,764,000 before
accumulated depreciation of $266,000, which yielded a net
value of approximately $2.5 million as of year end 1994.
The Sun West Land valued at $1,426,000 and the Irwindale
Plaza at $2,498,000 were valued on MIP's audited
financial statements at over $3.9 million, as of year end
1994.
41. According to note 2(C), of the notes to the
consolidated financial statements of MIP as of December
31, 1994, audited by Arthur Andersen & Co., land,
buildings and improvements are carried on the financial
statements of MIP at the "lesser of cost, less
accumulated depreciation relating to buildings and
improvements, or net realizable value." Land held for
sale was carried at the "lower of cost or fair market
value." Thus, if the Irwindale Plaza and Sun West Land
were, in fact, valued at market value in accordance with
GAAP on the Company's financial statements as of December
31, 1994, as requested, the fair market value of these
properties was approximately $3.9 million, and the sale
of those properties for $1.8 million together with other
assets constituted a bargain sale of at least $2.1
million. Moreover, the fact that these assets were being
sold to Palm and not retained by JER after the
acquisition, suggested that contrary to the MIP Board's
statements in the Proxy Solicitation, shareholders of MIP
were not getting full value for their shares because
these valuable assets were not being conveyed to JER and
were, therefore, not considered in the $2.475 offer.
42. While the financial statements do not ascribe a
value to the remaining assets conveyed to Palm, the fact
that Stephen Markoff, a former director of the Company,
who presumably is knowledgeable about the financial
condition of the Company's assets, considers them
sufficiently valuable to negotiate for their acquisition,
suggests they may also have value.
43. In summary, the assets sold to Palm in
consideration for Palm's commitment to convey its
1,366,306 shares to JER Sub had a market value in excess
of $3.9 million at the time of the agreement to sell
those assets to Palm. Thus, Palm received an additional
$2.1 million of bargain purchase consideration in
exchange for Palm's commitment to convey its shares to
JER Sub. On a per share basis, assuming a value of $2.1
million to the bargain purchase, Palm was offered an
additional $1.53 per share consideration over and above
the $2.475 per share that other shareholders were
offered, giving rise to a two tier tender offer.
THE LOCKUP
44. The Company has the right to terminate the
agreement in the event of certain conditions. One of the
conditions is if the Board of Directors of the Company
determines that a definitive agreement with respect to
the acquisition proposal would constitute a breach of
fiduciary duty to the stockholders of the Company. In
such event, however, the Company is obligated to pay the
purchaser a fee in the amount of $400,000. This "lockup
fee" will serve as a disincentive to consideration of any
other proposal.
COUNT I
VIOLATION OF SECTION 14(a) AND RULE 14a-9 THEREUNDER
BY MIP AND THE INDIVIDUAL DEFENDANTS
45. Plaintiff realleges all prior allegations as
though fully set forth herein.
46. The statements made in the MIP Proxy
Solicitation described in paragraph 35 were materially
false and misleading. Two significant assets, the
Irwindale Plaza and the Sun West Land, were being sold at
a bargain price and were, therefore, not properly valued
for purposes of the acquisition price. Accordingly, the
opinion of management and the Board of Directors as to
the fairness of the acquisition price was not reasonable.
47. The statements in the MIP Proxy Statement
regarding the value of the transaction were also
unreasonable and without a foundation in fact since the
entire consideration offered amounts to less than the
book value of the assets of MIP, and will result in a
payment to shareholders of nearly $.80 per share below
the book value of MIP as of December 31, 1994. Such a
sale at $.80 below book value would be due in part to the
fact that $2.1 million, or about $.23 per share for all
shareholders, is being offered to the largest
shareholder.
48. The false and misleading statements in the MIP
Proxy Solicitation by the Individual Defendants are
motivated, in part, by the desire of the Individual
Defendants, in particular Gregory, to obtain the benefits
offered to them under the proposed acquisition.
49. Plaintiff and the members of the Class have
been damaged by the violations of Section 14(a) and Rule
14a-9 alleged herein.
COUNT II
VIOLATION OF SECTION 14(d)(7) OF THE
EXCHANGE ACT AND RULE 14d-10 PROMULGATED
THEREUNDER BY JER AND JER SUB
50. All prior allegations are realleged as though
fully set forth herein.
51. In offering to acquire all of the outstanding
shares of MIP, Defendants JER and its affiliate, JER Sub,
have engaged in a tender offer within the meaning of
Section 14(d)(1) of the Exchange Act and the Rules and
Regulations of Regulation 14D promulgated thereunder.
52. By entering into a side agreement with Palm,
JER and JER Sub have agreed to pay consideration to Palm
which is higher than that paid to other security holders
subject to the tender offer in violation of Rule 14d-
10(a)(2) of the Rules promulgated pursuant to Section
14(d)(7) of the Exchange Act.
53. By offering additional consideration, in the
form of a bargain purchase valued at approximately $1.53
per share, JER and JER Sub have offered varying types of
consideration to security holders of MIP without
affording the equal right to elect among each type of
consideration, or combination thereof offered to such
security holders in violation of Rule 14d-10(c)(1) of
Regulation 14D.
54. Plaintiff and the members of the Class who are
receiving unequal and lesser consideration than is
offered to Palm have been damaged by reason of JER and
JER Sub's violation of Section 14(d)(7) and Rule 14d-10
promulgated thereunder
COUNT III
VIOLATION OF SECTION 10(b) AND RULE 10b-13
PROMULGATED THEREUNDER BY JER AND JER SUB
55. Plaintiff realleges all prior allegations as
though fully set forth herein.
56. JER and JER Sub, by making a cash tender offer
and contemporaneously therewith entering into a side
arrangement with Palm to purchase Palm's common stock of
MIP in an arrangement other than the tender offer for all
publicly held shares, have violated Section 10(b) of the
Exchange Act and Rule 10b-13 promulgated thereunder.
57. Plaintiff and the members of the Class, by
reason of the violations of Section 10(b) and Rule 10b-13
alleged herein, have been damaged.
COUNT IV
BREACH OF FIDUCIARY DUTY AGAINST
THE INDIVIDUAL DEFENDANTS
58. The allegations of paragraphs 1 through 44 are
realleged as though fully set forth herein.
59. The Individual Defendants, by reason of their
position on the Board of Directors of the Company, owe a
fiduciary duty to Plaintiff and members of the Class.
Such duty includes an obligation to secure for Plaintiff
and the members of the Class the highest price available
for their shares in the context of the public auction
which was commenced in late 1994 and early 1995 for MIP.
60. Defendants, by reason of their position on the
Board of Directors, are also under a fiduciary duty to
act in the best interest of the Company at all times. In
entering into a transaction whereby a substantial quantum
of the consideration, approximately $2.1 million, is paid
to one large shareholder rather than paid to all
shareholders equally as required under Section 14(d) of
the Exchange Act, the Individual Defendants have breached
their fiduciary duty to Plaintiff and the members of the
Class.
61. Plaintiff and the members of the Class have
been damaged by reason of the breaches of fiduciary duty
by the Individual Defendants alleged herein.
WHEREFORE, Plaintiff, on behalf of himself and all
members of the Class as defined herein, asks this Court
to:
1. Certify this action as a class action on behalf
of the Class alleged herein;
2. Enter judgment in favor of Plaintiff and the
Class for damages arising out of the violations of
Sections 14a, 14(d)(7) and Section 10(b) of the Exchange
Act against JER and JER Sub;
3. Enter judgment in favor of Plaintiff and the
members of the Class against the Individual Defendants
for breach of their fiduciary duty to Plaintiff and
members of the Class;
4. Award Plaintiff costs incurred in bringing this
action, including but not limited to expert consultant
fees; and
5. Awarding extraordinary equitable and/or
injunctive relief as permitted by law, equity and federal
statutory provisions sued hereunder pursuant to Rules 64,
65 and any appropriate state law remedies, including
attaching, impounding, imposing a constructive trust on
or otherwise restricting the proceeds of defendant's
activities or their other assets to assure that plaintiff
has an effective remedy; and
6. Such other relief as this Court deems just and
proper.
DEMAND FOR JURY TRIAL
Plaintiff demands a trial by jury of all issues so
triable.
DATED: September 7, 1995
BURT & PUCILLO
MICHAEL J. PUCILLO
LEO W. DESMOND
222 Lakeview Avenue
Suite 300 East
W. Palm Beach, FL 33401
Telephone 407/835-9400
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
/s/ William S. Lerach
WILLIAM S. LERACH
600 West Broadway
Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
Attorneys for Plaintiff
