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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D(1)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 5)*
ARVIDA/JMB PARTNERS, L.P.
- --------------------------------------------------------------------------------
(Name of Issuer)
Limited Partnership Interests and Assignee Interests Therein
- --------------------------------------------------------------------------------
(Title of Class of Securities)
None
- --------------------------------------------------------------------------------
(CUSIP Number)
Michael L. Ashner
Raleigh Capital Associates L.P.
100 Jericho Quadrangle, Suite 214
Jericho, New York 11735-2717
(516) 822-0022
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
September 27, 1996
-----------------------------------------------------------
(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 [ ]. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
(Continued on following pages)
(Page 1 of 8 Pages)
- --------------------------------
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(1) This Amendment No. 5 amends certain information contained in the final
amendment to Schedule 14D-1 filed by Raleigh Capital Associates L.P., Raleigh
GP Corp., Rockland Partners, Inc. and Zephyr Partners on August 6, 1996, which
constituted the initial filing on Schedule 13D by such entities under Section
13(d) of the Act, and Amendment Nos. 1, 2, 3 and 4 to Schedule 13D filed by
such entities.
<PAGE> 2
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------- ----------------------------------------------
CUSIP NO. N/A Page 2 of 8 Pages
- ---------------------------------------- ----------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Raleigh Capital Associates L.P.
- ----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF; WC
- ----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------------------------------------------------------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 80,342 Units
EACH ------------------------------------------------------------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------------------------------------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
80,342 Units
- ----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
80,342 Units
- ----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- ----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------- ----------------------------------------------
CUSIP NO. N/A Page 3 of 8 Pages
- ---------------------------------------- ----------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Raleigh GP Corp.
- ----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
------------------------------------------------------------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 80,342 Units**
OWNED BY ------------------------------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH ------------------------------------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
80,342 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
80,342 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- ----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ----------------------------------------
**Reflects beneficial ownership by Raleigh Capital Associates L.P. (of which
Raleigh GP Corp. is a general partner).
<PAGE> 4
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------- ----------------------------------------------
CUSIP NO. N/A Page 4 of 8 Pages
- ---------------------------------------- ----------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Rockland Partners, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ------------------------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 80,347 Units**
REPORTING ------------------------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
------------------------------------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
80,347 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
80,347 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- ----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ----------------------------------
**Reflects beneficial ownership of 5 Units by Rockland Partners, L.P. (of which
Rockland Partners, Inc. is the general partner) and 80,342 Units beneficially
owned by Raleigh Capital Associates L.P. (of which Rockland Partners, Inc. is a
general partner).
<PAGE> 5
SCHEDULE 13D
<TABLE>
<S> <C>
- ---------------------------------------- ----------------------------------------------
CUSIP NO. N/A Page 5 of 8 Pages
- ---------------------------------------- ----------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Zephyr Partners
- ----------------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
N/A
- ----------------------------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ----------------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
New York
------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES ------------------------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 80,342 Units**
REPORTING ------------------------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
------------------------------------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
80,342 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
80,342 Units**
- ----------------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- ----------------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- ----------------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
- ---------------------------------
**Reflects beneficial ownership by Raleigh Capital Associates L.P. (of which
Zephyr Partners is a general partner).
<PAGE> 6
This Amendment No. 5 amends certain information contained in the final
amendment to Schedule 14D-1 (the "Final Amendment") filed by Raleigh Capital
Associates L.P. ("Raleigh Capital"), Raleigh GP Corp., Rockland Partners, Inc.
and Zephyr Partners on August 6, 1996, which constituted the initial filing on
Schedule 13D under Section 13(d) of the Act, and Amendment Nos. 1, 2, 3 and 4
to Schedule 13D filed by such entities ("Amendment Nos. 1, 2, 3 and 4").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Final Amendment and Amendment Nos. 1, 2, 3 and 4.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 is hereby supplemented and amended by adding the following,
copies of which are attached hereto as exhibits:
99.(8) Complaint dated September 27, 1996 filed in the Court of Chancery
of the State of Delaware, New Castle County.
99.(9) Motion for a temporary restraining order dated September 27, 1996
filed in the Court of Chancery of the State of Delaware, New Castle
County.
<PAGE> 7
Signatures
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: October 2, 1996 RALEIGH CAPITAL ASSOCIATES L.P.
By: Raleigh GP Corp., General Partner
By: /s/ Peter Braverman
------------------------------
Name: Peter Braverman
Title: Vice President
By: ROCKLAND PARTNERS, INC.,
General Partner
By: /s/ Jonathan H. Paul
-----------------------------
Name: Jonathan H. Paul
Title: Vice President
By: ZEPHYR PARTNERS
By: GP Aeolus Inc., General Partner
By: /s/ Edward Mattner
------------------------------
Name: Edward Mattner
Title: Vice President
By: AREHGP INC., General Partner
By: /s/ John Saldarelli
----------------------------
Name: John Saldarelli
Title: President
RALEIGH GP CORP.
By: /s/ Peter Braverman
------------------------------
Name: Peter Braverman
Title: Vice President
<PAGE> 8
Signatures
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: October 2, 1996 ROCKLAND PARTNERS, INC.
By: /s/ Jonathan H. Paul
-----------------------
Name: Jonathan H. Paul
Title: Vice President
ZEPHYR PARTNERS
By: GP Aeolus Inc., General Partner
By: /s/ Edward Mattner
-----------------------
Name: Edward Mattner
Title: Vice President
By: AREHGP INC., General Partner
By: /s/ John Saldarelli
-----------------------
Name: John Saldarelli
Title: President
<PAGE> 9
Exhibit Index
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
<S> <C> <C>
99. 8 Complaint dated September 27, 1996 filed in the Court of Chancery of the State of Delaware,
New Castle County.
99. 9 Motion for a temporary restraining order dated September 27, 1996 filed in the Court of Chancery
of the State of Delaware, New Castle County.
</TABLE>
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C> <C>
- ---------------------------------------------- x
::
VANDERBILT INCOME AND GROWTH ASSOCIATES, L.L.C., and RALEIGH CAPITAL :
ASSOCIATES L.P., individually, and derivatively on behalf of ARVIDA/JMB :
PARTNERS, L.P., :
:
Plaintiffs, :
:
- against - :
: C.A. No. ___________
ARVIDA/JMB MANAGERS, INC., JUDD D. MALKIN, NEIL G. BLUHM, BURTON E. GLAZOV, :
STUART C. NATHAN, A. LEE SACKS, JOHN G. SCHREIBER, BSS CAPITAL II, L.L.C., :
STARWOOD CAPITAL GROUP I, L.P., STARWOOD/FLORIDA FUNDING, L.L.C., STARWOOD :
OPPORTUNITY FUND, IV, L.P. and BARRY STERNLICHT, :
:
Defendants, :
:
- and - :
:
ARVIDA/JMB PARTNERS, L.P., :
::
Nominal Defendant. ::
:
- ---------------------------------------------- :
</TABLE>
VERIFIED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
Plaintiffs, by their attorneys, allege on personal knowledge as to
plaintiffs and otherwise upon information and belief, as follows:
INTRODUCTION
1. This is an action for declaratory and injunctive relief arising
from defendants' egregious scheme to cause Arvida/JMB Partners, L.P. (the
"Partnership") to incur approximately $160 million of burdensome, unnecessary
and above- market rate secured debt (the "Financing"). The Financing was
conceived in response to, and as part of a bad faith attempt to thwart, a
tender offer for Limited Partnership Interests ("Units") of the Partnership.
The purpose of the Financing -- to entrench the position of the Partnership's
general partner, defendant Arvida/JMB Managers, Inc. ("Managers") -- is wholly
improper. It will cause the Partnership unnecessarily to incur onerous costs,
including excessive interest costs of more than $30 million.
2. Plaintiffs are assignee holders of Units ("Unitholders") and/or
beneficial owners of Units. They own approximately 20% of the outstanding
Units. Plaintiffs have made substantial investments in the Partnership and are
alarmed by the defendants' wrongful actions in connection with the Financing
and the serious and irreparable harm that the Financing will cause to the
Partnership and its Unitholders.
<PAGE> 2
3. Defendants have acted with utter disregard for their (or their
co-defendants') fiduciary duties to the Partnership and its Unitholders and
applicable provisions of the Partnership's Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement").
4. Defendants have arranged the Financing solely for their own
financial self-interest in order to preserve and maintain the entrenched
position of Managers, to receive an $8 million cash distribution for Managers,
and to continue to receive lucrative fees, distributions and other payments
from the Partnership.
5. Managers and its affiliates, which originally invested only
$2,000 in the Partnership, already have received in excess of $118 million in
fees, distributions and other payments, most of which is pure profit, while the
Unitholders, who originally invested $400 million, have not and never will
recoup their investment of $1,000 per Unit and have received distributions on a
sporadic basis averaging only approximately 4.2% per year since the
Partnership's inception in 1987.
6. Defendants have acted without any concern whatsoever for the
interests of the Unitholders, whose investment in the Partnership will be
severely jeopardized as a result of the Financing.
7. The terms of the Financing, which are unnecessarily and
unreasonably unfavorable, onerous, burdensome and detrimental to the
Partnership and its Unitholders, include:
o An exorbitantly costly interest rate which is much higher than
that which is presently available in the market for similar
financing.
o Covenants which will diminish if not effectively preclude further
distributions to Unitholders, beyond a one-time distribution of
$350 per Unit (substantially below the value of each Unit),
during the 5 1/2 year term of the Financing, while permitting the
defendants and their affiliates to continue receiving lucrative
fees and other payments from the Partnership.
o Excessive prepayment penalty and yield maintenance obligations
which will unnecessarily cost the Partnership an additional $30.5
million (approximately $75 per Unit).
o A "liquidated damages" provision requiring the Partnership to pay
the lender a $1.6 million penalty if the Partnership decides not
to consummate the Financing.
o Prejudicial "break-up" fee obligations which require the
Partnership to pay the lender a penalty of between $2.4 million
and $4.4 million if the Partnership obtains financing on better
terms from another source, and which effectively grant the lender
-- which is controlled by a former business associate of Managers
-- improper "lock up" rights.
o Provisions abdicating Managers' contractual obligations to the
Unitholders by giving the lender effective control of the
Partnership, its operating and capital budgets, its business and
marketing plans, and its cash distributions.
o Provisions giving the lender the right to accelerate the
Financing, thereby causing the Partnership to incur exorbitant
prepayment and yield maintenance penalties, if the Unitholders
remove and replace Managers as general partner, as they are
entitled to do under the Partnership Agreement. These provisions
improperly impede the exercise of that right of the Unitholders
to remove and replace Managers.
o Provisions requiring the Partnership to pay the lender an
additional fee of up to $1.6 million if the lender consents to
the replacement of Managers as general partner, but dispensing
with such requirement if the new general partner is an affiliate
of Managers.
<PAGE> 3
o A provision which effectively prevents the Partnership from
terminating its management agreement with Arvida Company -- which
is an affiliate of Managers -- without the consent of the lender
or, absent such consent, the payment of exorbitant fees. This
provision is in direct violation of Section 5.3 of the
Partnership Agreement, which gives the Partnership the absolute
right to terminate the Arvida agreement without payment of any
penalty.
o Indemnification rights granted to the lender and its affiliates
protecting them against their wrongdoing in connection with the
Financing.
8. Defendants' intention in proceeding with the Financing is to
preserve Managers' entrenched lucrative position by improperly thwarting third
party offers for Units and improperly creating contractual and financial
obstacles to the removal of Managers as general partner, to assure continued
receipt of lucrative fees and other payments from the Partnership, to obtain an
immediate substantial cash distribution for Managers, and to confer other
illicit benefits on the defendants.
9. Defendants' scheme, agreements entered into in connection
therewith, and the proposed Financing are in violation of applicable provisions
of the Partnership Agreement, ultra vires, the result of negligence, gross
negligence and mismanagement, and amount to waste of partnership assets.
10. Defendants wrongfully have breached, and/or aided and abetted,
participated in and/or induced the wrongful breach of, the Partnership
Agreement and fiduciary duties owed to the Partnership.
11. Plaintiffs intend to promptly commence a solicitation of
Unitholders to remove and replace Managers as general partner. If such
solicitation is successful the Financing will be rejected.
12. The Financing has no legitimate business purpose. It is being
made to obtain funds to improperly influence Unitholders by providing a one
time cash distribution. By so doing, Managers is depriving Unitholders of any
meaningful opportunity to participate in future cash flows and to earn any
significant future return on or of their investment in the Partnership.
PARTIES
13. Plaintiff Vanderbilt Income & Growth Associates, L.L.C.
("Vanderbilt") is a Delaware limited liability company having an office at 100
Jericho Quadrangle, Jericho, NY 11753. Vanderbilt owns five Units, which it
acquired on or about January 30, 1995. Such acquisition was reflected in the
records of the Partnership effective April 1, 1995.
14. Plaintiff Raleigh Capital Associates L.P. ("Raleigh") is a
Delaware limited partnership having an office at 100 Jericho Quadrangle,
Jericho, NY 11753. Raleigh owns 80,342 Units, which it acquired on or after
August 1, 1996.
15. Plaintiffs, as Unitholders, are assignees of all rights
(including but not limited to voting rights) which limited partners (other than
associate limited partners) have under the Partnership Agreement and, except as
otherwise provided in the Partnership Agreement, the Revised Uniform Limited
Partnership Act
<PAGE> 4
of the State of Delaware and other applicable law.
16. Defendant Managers is a Delaware corporation having an office at
900 North Michigan Avenue, Chicago, IL 60611. Managers is the sole general
partner of the Partnership.
17. Defendants Judd D. Malkin, Neil G. Bluhm, Burton E. Glazov,
Stuart C. Nathan, A. Lee Sacks and John G. Schreiber are the directors of
Managers (said defendants, together with Managers, collectively are referred to
hereinafter as the "Managers Defendants").
18. Defendant Starwood Capital Group I, L.P. (formerly known as
Starwood Capital Group, L.P.) ("Starwood") is a Delaware limited partnership
having an office at Three Pickwick Plaza, Suite 250, Greenwich, CT 06830.
19. Defendant Starwood/Florida Funding, L.L.C. ("Starwood/Florida")
is a Delaware limited liability company having an office at Three Pickwick
Plaza, Suite 250, Greenwich, CT 06830.
20. Defendant Starwood Opportunity Fund IV, L.P. ("Starwood
Opportunity") is a Delaware limited partnership having an office at Three
Pickwick Plaza, Suite 250, Greenwich, CT 06830.
21. Defendant BSS Capital II, L.L.C. ("BSS") is a limited liability
company having an office at Three Pickwick Plaza, Suite 250, Greenwich, CT
06830. BSS, Starwood, Starwood/Florida and Starwood Opportunity are affiliates
or otherwise under common control.
22. Defendant Barry Sternlicht ("Sternlicht") directly or indirectly
controls Starwood, Starwood/Florida, Starwood Opportunity and BSS
(collectively, together with Sternlicht, the "Starwood Defendants").
Sternlicht formerly was a business associate of Managers. He was a partner in
JMB Realty, an affiliate of Managers, where he became one of the ten largest
equity holders in the firm. As an officer of various affiliates of the
Partnership, Sternlicht identified, analyzed and helped negotiate the
Partnership's original purchase of its business and properties from the Walt
Disney Company for approximately $400 million in 1987. Sternlicht also was
actively involved in the management and operation of the Partnership's business
and properties.
THE PARTNERSHIP
23. Nominal defendant Partnership is a Delaware limited partnership
having an office at 900 North Michigan Avenue, Chicago, IL 60611. The
Partnership was organized in 1987 to own and to develop substantially all of
the assets of Arvida Corporation, a subsidiary of The Walt Disney Company,
which the Partnership acquired on September 10, 1987. On September 16, 1987,
the Partnership commenced an offering to the public of up to $400,000,000 in
Units. A total of 400,000 Units were sold to the public (at an offering price
of $1,000 per Unit before discounts) in October 1987. The offering terminated
on October 31, 1987. In addition, an affiliate of the dealer-manager of the
public offering received 4,000 Units.
<PAGE> 5
24. In addition to the 404,000 outstanding Units, Arvida/JMB
Associates, an Illinois general partnership, and Arvida/JMB Limited
Partnership, an Illinois limited partnership, which are affiliates of Managers,
are the associate limited partners of the Partnership and receive substantial
benefits from the Partnership.
25. The assets of the Partnership consist principally of interests in
land which is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial and
industrial properties; mortgage notes and accounts receivable; construction,
brokerage and other support businesses; real estate assets held for investment;
certain club and recreational facilities; and a cable television business
serving one of its Communities. The Partnership is principally engaged in the
development of comprehensively planned resort and primary home Communities
containing a diversified product mix designed for the middle and upper income
segments of the various markets in which the Partnership operates.
26. Pursuant to the Partnership Agreement (a copy of which is
attached as Exhibit A), the Partnership may continue in existence until
December 31, 2087. However, the Partnership Agreement requires Managers on or
before October 31, 1997 to elect to pursue one of the following courses of
action: (i) to cause the Units to be listed on a national exchange or to be
reported by the National Association of Securities Dealers Automated Quotation
System; (ii) to purchase, or cause JMB Realty Corporation or its affiliates to
purchase, all of the Units at their then appraised fair market value (as
determined by an independent nationally recognized investment banking firm or
real estate advisory company); or (iii) to commence a liquidation phase in
which all of the Partnership's remaining assets will be sold or disposed of
prior to October 2002.
27. Managers did not publicly disclose its intentions concerning
which of these courses of action it intended to pursue until after Raleigh
commenced the Raleigh Tender Offer (see paragraph 29, infra). In response to
the Raleigh Tender Offer, Managers publicly disclosed that its current
intention is to commence a liquidation phase on October 31, 1997, in which all
of the Partnership's assets will be sold over a five year-period.
28. Since the inception of the Partnership, Managers and its
affiliates (which invested only $2,000 in the Partnership) have received from
the Partnership aggregate fees, distributions and reimbursements in excess of
$118 million. In 1995 alone, Managers and its affiliates were paid by the
Partnership aggregate fees, distributions and reimbursements exceeding $7
million, while total distributions to Unitholders amounted to only $5.45
million (a 1.36% return). Managers and its affiliates continue to receive
substantial payments from the Partnership.
<PAGE> 6
DEFENDANTS' WRONGFUL CONDUCT
29. On June 19, 1996, Raleigh commenced a tender offer (the "Raleigh
Tender Offer"), pursuant to which Raleigh offered to purchase for cash up to
185,000 outstanding Units, representing approximately 46% of the total Units
outstanding at March 31, 1996, at a purchase price (the "Purchase Price") equal
to $411 per Unit. Raleigh subsequently amended the Raleigh Tender Offer, and
ultimately increased the Purchase Price to $461 per Unit.
30. On or about July 30, 1996, in response to the Raleigh Tender
Offer, which was due to expire on August 1, 1996, and in an attempt to
interfere with it improperly, Managers, acting as general partner of the
Partnership, publicly disclosed that:
(a) The Partnership, after negotiations and review lasting not more
than ten days, had entered into a letter agreement with BSS (the "BSS Letter
Agreement") pursuant to which the Partnership and BSS agreed, among other
things, to negotiate within ten business days a commitment setting forth the
principal terms, covenants, and conditions for a debt recapitalization of
approximately $160 million (the "Financing");
(b) The Financing, if accomplished, together with certain additional
project financing, would enable the Partnership to make a distribution to
Unitholders of at least $350 per Unit;
(c) Pursuant to the BSS Letter Agreement, the Partnership agreed that
for a period of 45 days from the date of the agreement, the Partnership would
not pursue or negotiate any other offers for portfolio financing or debt
recapitalizations of a similar size or purpose as the Financing.
31. On or about July 30, 1996, the Partnership also mailed to all
Unitholders a letter dated July 30, 1996, which stated in pertinent part that:
[A]s a result of any such Financing, the Partnership would be highly
leveraged and any future cash distributions would be dependent on the
ability of the Partnership to service the debt incurred by the
Partnership in connection with such Financing.
32. Defendants' actions in entering into and publicizing the BSS
Letter Agreement were an eleventh hour bad faith attempt to create the false
appearance and facade that the Financing was reasonably likely to provide a
better alternative to Unitholders than the Raleigh Tender Offer.
33. The Raleigh Tender Offer legitimately was perceived by
Unitholders as offering an attractive opportunity to sell their Units at a
fair, reasonable and adequate price which was superior to that available in the
existing limited secondary market for the Units.
34. Defendants' actions in entering into the BSS Letter Agreement --
and promptly heralding the Financing as an alleged alternative to the Raleigh
Tender Offer -- were contrary to the best interests of the Unitholders, and
were conceived wholly or primarily for the improper purpose of attempting to
defeat, by wrongful and fraudulent means, the Raleigh Tender Offer, the success
of which threatened to imperil
<PAGE> 7
defendants' lucrative entrenched position.
35. The Raleigh Tender Offer ultimately was accepted by Unitholders
holding 79,696 Units (representing approximately 19.7% of the total Units
outstanding), which were purchased by Raleigh on or about August 1, 1996.
36. Having failed in their improper efforts to thwart the Raleigh
Tender Offer completely, the defendants determined to thwart any further
efforts by Raleigh to acquire Units and, to that end, determined to proceed
with the Financing, the result of which would be to seriously diminish the
participation in future cash flows which the Unitholders otherwise would
receive.
37. Defendants' intention in thus proceeding with the Financing is
improperly to deter third parties from making further investments in Units, in
order to avoid loss of Managers' control of the Partnership, to preserve its
entrenched lucrative position as general partner, to assure its continued
receipt of lucrative fees from the Partnership, and to confer other illicit
benefits (including exorbitant interest, fees and other payments) on the
defendants, including the Starwood Defendants.
38. Moreover, the Managers Defendants are motivated by self-interest
for the added reason that, pursuant to Section 4.1 of the Partnership
Agreement, Managers as general partner and its affiliates which are associate
limited partners would be entitled to receive immediately, as a distribution of
Partnership cash flow, ten percent (subject to certain deferrals and
limitations) of the $160 million proceeds from the Financing.
39. On August 16, 1996, representatives of plaintiffs met with
defendant Malkin, chairman of Managers, to communicate plaintiffs' concerns
relating to the Financing. At this meeting, defendant Malkin revealed that it
was contemplated that the Financing would consist of two tranches, a senior
portion of $80 million and a junior portion of $80 million. The Financing
would be funded in whole or part by Starwood/Florida, Starwood Opportunity or
another of the Starwood Defendants' affiliates. Plaintiffs' representatives,
who are knowledgeable concerning the terms upon which real estate financing is
currently available in the market, strenuously objected to the Financing, and
communicated their desire that the Partnership not proceed with the Financing.
40. Raleigh also informed Malkin that if Managers was determined to
proceed with the Financing, Raleigh would use its best efforts to obtain
financing proposals for the benefit of the Partnership and its Unitholders on
terms superior to those contemplated in connection with the Financing.
41. On August 19, 1996, Managers responded to Raleigh's offer by
stating that Managers intended to "honor" its purported agreement in the BSS
Letter Agreement not to pursue or negotiate any other offer for financing
similar to the Financing for the period of time specified in the BSS Letter
Agreement.
<PAGE> 8
42. On August 20, 1996, Raleigh supplemented its offer to obtain
better financing by informing Managers that Raleigh was prepared to offer to
Unitholders, to the extent permitted by the Partnership Agreement, the
opportunity to accept, should they desire, $500 per Unit (less the amount of
the distributions to Unitholders as a result of such financing). Raleigh's
financing proposal was not, however, conditioned on the acceptance of such
supplemental offer. Managers failed to respond to Raleigh's supplementation of
its offer.
43. On September 13, 1996, Raleigh sent a letter to Managers, a copy
of which is attached as Exhibit B, in which Raleigh reiterated that it strongly
believed that the Financing was not in the best interests of the Partnership.
Raleigh also expressed its continued concern regarding Managers' having refused
Raleigh's offer of assistance to obtain superior financing, and having
continued to pursue the Financing against Raleigh's strenuous objection as the
Partnership's largest Unitholder.
44. Raleigh's letter then stated that Manager's actions had left
Raleigh with no other alternative than to propose to Managers directly a merger
transaction in which an entity to be established by Raleigh and the Partnership
would merge or otherwise combine and pursuant to which the current Unitholders
would be given the choice of receiving either (i) $500 per Unit in cash, or
(ii) $525 per Unit, composed of $400 per Unit in cash plus a security of the
surviving entity which would be worth not less than $125 per Unit. The
valuation of the security would be supported by nationally recognized
investment bankers, and the surviving entity would seek to have such security
listed for trading on a national securities exchange.
45. The Raleigh proposal, which is conditioned on the Financing not
being consummated, would be far more beneficial to Unitholders than the
Financing.
46. Raleigh also informed Managers that it would be acceptable to
Raleigh for the Unitholders to be permitted to vote on whether the Partnership
should enter into the Raleigh proposal or to consummate the Financing.
47. On September 17, 1996, Managers, on behalf of the Partnership,
sent Raleigh a letter, a copy of which is attached as Exhibit C, in which
Managers stated in pertinent part that "the Partnership has no interest in your
proposal, and its business is not for sale." Managers thereby demonstrated
that its response was motivated solely by its unwillingness to give up its
entrenched position, the best interests of the Unitholders notwithstanding.
48. Managers made no attempt to contact Raleigh in order to discuss
with Raleigh any questions Managers might have with respect to the terms and
conditions of Raleigh's proposal. Nor did Managers attempt to negotiate with
Raleigh any change in the terms and conditions of Raleigh's proposal to see
whether those terms and conditions could be improved for the benefit of the
Unitholders.
<PAGE> 9
49. Also on September 17, 1996, Managers, on behalf of the
Partnership, issued a press release, a copy of which is attached as Exhibit D,
announcing that (i) the Partnership and the Starwood Defendants had entered
into a commitment with respect to the Financing, and (ii) the Partnership had
advised Raleigh that the Partnership has no interest in the Raleigh proposal
and that the Partnership's business is not for sale. The press release stated
that the Financing, together with certain additional project financing, would
enable the Partnership to make a distribution to Unitholders of $350 per Unit.
50. On September 19, 1996, in a report on SEC Form 8-K, a copy of
which is attached as Exhibit E, Managers for the first time disclosed the
precise terms of the commitment letter for the Financing (the "Financing
Commitment Letter") into which it had entered on September 12, 1996 with
Starwood/Florida.
51. The Financing Commitment Letter provides, among other things, for
a floating rate of interest (equal to LIBOR + 3.25% or the prime rate + 1.25%)
on an $80 million senior portion, together with a required amortization of $10
million per year commencing in 1997, and a maturity date of June 30, 2002 for
the unpaid balance. It further provides for a 15% fixed rate of interest
(actually, 15.21% per annum because interest payments will be based on a 360
day year) on the $80 million junior portion, the unpaid balance of which is
also due on June 30, 2002.
52. These terms would be exorbitantly costly to the Partnership as
compared with financing terms currently available in the market. For similar
loans, financing would be available in the market for a $115 million senior
portion bearing interest at a rate as low as LIBOR + 2.50% and a $45 million
junior portion bearing interest at a rate as low as 13%.
53. The Financing would result in the Partnership paying at least $3
million per year in additional, unnecessary interest costs.
54. The terms of the Financing are so inadequate to the Partnership
from a financial point of view that no general partner exercising ordinary,
sound business judgment would agree to such terms.
55. Managers has a substantial direct financial interest in the
consummation of the Financing. While, pursuant to the terms of the Financing,
a per Unit distribution of only $350 is contemplated to be made to Unitholders
with the proceeds of the Financing, a distribution of over $8 million is to be
made to Managers.
56. Under the terms of the Financing Commitment Letter, further
distributions to Unitholders are not permitted until February 28, 1998, are
restricted in amount and are subject to various contingencies, including the
maintenance of a debt service coverage ratio covenant of not less than 1.6 to
1.
57. Such covenant will seriously diminish and may even totally
preclude further distributions
<PAGE> 10
during the term of the Financing. However, even if such distributions were to
be made, the maximum amount receivable by a Unitholder would be $26.39 per Unit
in 1998 and 1999 and $47.50 per Unit per annum for the three years thereafter.
58. Moreover, if Managers does not cause the Partnership to sell
specified assets, distributions to Unitholders would be deferred, but Managers
and its affiliates would continue to receive fees arising from the
Partnership's continued ownership of such assets.
59. The Financing Commitment Letter and the Financing also have
provisions which are improperly designed to entrench Managers in its position
as general partner. If, without the consent of Starwood/Florida, the
Unitholders determine to exercise their right to remove and to replace Managers
as general partner, the Financing Commitment Letter provides that
Starwood/Florida may accelerate the due date of the loan, requiring the payment
of substantial prepayment premiums and yield maintenance obligations.
Starwood/Florida has agreed not to "unreasonably withhold" its consent to such
removal. However, such consent would require the Partnership to pay
Starwood/Florida an additional fee equal to 1% of the outstanding principal
amount of the Financing, i.e., up to $1.6 million. No such fee would be
required if the new general partner is an affiliate of Managers.
60. By agreeing that such provisions be included in the Financing
Commitment Letter, Managers has placed substantial impediments on the unlimited
right of the Unitholders to remove Managers as general partner, thereby seeking
further to entrench its position as general partner by chilling the right of
Unitholders to do so.
61. The Financing Commitment Letter also gives Starwood/Florida the
ability to veto any attempt by the Partnership to terminate the existing
management, advisory and supervisory agreement between the Partnership and
Arvida Company. That provision is in direct violation of Section 5.3 of the
Partnership Agreement, which gives the Partnership the absolute right to
terminate the Arvida agreement without payment of any penalty.
62. Although the Partnership may breach and refuse to consummate the
Financing, under the terms of the Financing Commitment Letter, Managers has
caused the Partnership to enter into a purported obligation to make a
$1,600,000 payment to Starwood/Florida as "liquidated damages" for such breach.
Managers thereby has interposed yet another obstacle to the Partnership's
ability to avoid the onerous consequences of the Financing.
63. The Financing Commitment letter also imposes on the Partnership
excessive prepayment penalty and yield maintenance obligations in the event
that the Partnership decides to repay all or part of the Financing prior to
maturity.
<PAGE> 11
64. Even though the Partnership's projected cash flow could permit
prepayment of the Financing several years prior to maturity, the onerous
provisions applicable to the prepayment of the junior portion effectively
preclude prepayment of that portion for three years, and the Partnership would
thereby be forced to incur unnecessary interest expense (at a cost of
approximately $30.5 million, which would reduce the value of each Unit by
approximately $75).
65. The Financing Commitment Letter also purports to impose
prejudicial break-up fee obligations on the Partnership, pursuant to which,
subject to certain conditions, the Partnership would be required to pay
Starwood/Florida a break-up fee of between $2,400,000 and $4,400,000, together
with certain of Starwood/Florida's out-of-pocket costs and expenses, in the
event the Partnership enters into one or more agreements for portfolio
financings or debt recapitalizations of similar size or purpose as the
Financing with any third party.
66. The Financing Commitment Letter also requires the Partnership to
indemnify and hold harmless the Starwood Defendants from and against all loss,
cost, expense or liability incurred by them in respect of any claims made by
any third party as a result of or in connection with the execution and delivery
of the Financing Commitment Letter, any performance pursuant thereto or any
publicity, press release, filing or other oral or written statements made by
the Partnership or its affiliates with respect to the transactions contemplated
by the Financing Commitment Letter, such indemnity to include, without
limitation, claims of limited partners or parties currently involved in
tendering for Units. This provision imposes on the Partnership (and thus in
substance on the Unitholders) the obligation to finance the defense by the
Starwood Defendants of any lawsuit brought against them by Unitholders, thereby
deterring Unitholders from exercising their right to protect themselves against
wrongdoing by the Starwood Defendants.
67. The break-up fee, indemnity, "liquidated damages" and other
provisions of the Financing Commitment Letter, and the interest rate and other
terms of the Financing, are unusual, extraordinary and excessive, and not in
accord with the terms generally offered and available in the market for
comparable transactions.
68. The Managers Defendants have failed and refused to seek or to
consider other offers for refinancing or to attempt to obtain the most
favorable terms available for a refinancing. Consequently, the Managers
Defendants were and are uninformed regarding, or are acting in reckless
disregard of, the terms generally offered and available in the market for
comparable transactions and the enormous unwarranted and unjustifiable
financial detriment to the Partnership which would result from the Financing
Commitment Letter and the Financing.
69. The Managers Defendants hastily negotiated and agreed to the
onerous, unreasonable and
<PAGE> 12
detrimental terms of the Financing, without adequate investigation and in bad
faith, in order to preserve and to extend their entrenched positions and for
the other improper reasons alleged herein.
70. The Starwood Defendants will be granted rights to review and to
approve operating and capital budgets and business/marketing plans, to approve
the manager and the management agreement, to approve the replacement of the
general partner and to control cash distributions. The granting of such rights
would effectively transfer management and control of the Partnership to the
Starwood Defendants in violation of Section 5.1 of the Partnership Agreement,
which grants to the general partner the exclusive right to manage the business
of the Partnership.
71. The Financing Commitment Letter, the break-up fee, indemnity,
"liquidated damages" and other provisions thereof, and the Financing (i) have
no valid business purpose, (ii) are not and would not be in the best interests
of the Partnership or its Unitholders, and (iii) are and would be contrary to
any reasonable exercise of business judgment.
72. The Financing is not required in order to satisfy any operational
requirements of the Partnership's business, and none of the proceeds of the
Financing will be used in the Partnership's business.
73. The sole purposes of the Financing Commitment Letter and the
Financing are to deter investment in Units by third parties (including
Raleigh), in order to advance the Managers Defendants' self-interest, to
preserve Managers' entrenched lucrative position as general partner, its
control of the Partnership, and its continued receipt of lucrative fees from
the Partnership, and to confer illicit benefits (including exorbitant interest,
fees and other payments) on the Starwood Defendants.
74. Neither the Raleigh Tender Offer nor any prospective investment
in Units by Raleigh or other third parties gives rise to any threat reasonably
perceived by the Managers Defendants to be harmful to the Partnership. Neither
the BSS Letter Agreement, nor the Financing Commitment Letter, nor the
Financing was or is motivated by any good faith concern for the welfare of the
Partnership and its Unitholders, nor are the Managers Defendants' actions in
connection therewith reasonable in relation to any unreasonably perceived
threat.
75. By entering into the Financing Commitment Letter, Managers and
its directors have breached, and unless enjoined from acting in furtherance of
the Financing Commitment Letter and from proceeding with the Financing will
continue to breach, their fiduciary duties to the Partnership and its
Unitholders.
76. The Starwood Defendants were and are aware that the foregoing
acts, practices and course of conduct were and are wrongful, and constitute a
breach of the Partnership Agreement and the Managers Defendants' fiduciary
duties to the Partnership and the Unitholders. Such awareness is evidenced by,
<PAGE> 13
among other things, the Starwood Defendants' knowledge that the Managers
Defendants' negotiation and publicizing of the Financing was conceived and
pursued in order to attempt to thwart offers by third parties (including
Raleigh) for Units and to preserve the Managers Defendants' entrenched
position, and the Starwood Defendants' insistence that the Partnership
undertake the indemnity obligations contained in the BSS Letter Agreement and
the Financing Commitment Letter. Despite such knowledge, the Starwood
Defendants participated in this scheme for their personal benefit to the
detriment of the Partnership.
FIRST CLAIM FOR RELIEF
77. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 76 above.
78. The Managers Defendants were and are in a fiduciary relation with
the Unitholders and the Partnership.
79. The Managers Defendants owe the Unitholders and the Partnership
the fiduciary duties of due care, full disclosure, loyalty and utmost good
faith.
80. The terms of the Financing Commitment Letter, including but not
limited to the break-up fee, the indemnity and the "liquidated damages"
provisions, and the Financing, are unfair to the Partnership and the
Unitholders, are intended to and will solely benefit the defendants, and, if
enforced, will result in waste of the Partnership's assets.
81. By reason of the foregoing acts, practices and course of conduct,
defendants, acting in concert, have violated, or aided and abetted or
participated in the violation of, fiduciary duties owed to the Partnership and
the Unitholders, and have put their personal interests ahead of the interests
of the Partnership and the Unitholders.
82. Unless enjoined by this Court, defendants will continue to
breach, or to aid and abet or to participate in the breach of, fiduciary duties
owed to the Partnership and the Unitholders, as a result of which unnecessary,
onerous and prejudicial obligations will be imposed on the Partnership, thereby
causing irreparable harm to the Partnership and the Unitholders.
83. Raleigh intends to file forthwith with the SEC proxy solicitation
material seeking the removal of Managers as general partner of the Partnership.
If successful, Raleigh intends to replace Managers with a new general partner
which will terminate the Partnership's commitment for the Financing.
84. If injunctive relief is not granted, it is likely that the
Financing will be consummated before Unitholders are afforded the opportunity
to vote on the replacement of Managers by a new general partner who would
reject the Financing.
85. Plaintiffs have no adequate remedy at law.
86. By reason of the foregoing, plaintiffs are entitled to a
declaratory judgment that the
<PAGE> 14
Financing Commitment Letter, as well as the purported break-up fee, indemnity
and "liquidated damages" obligations contained in the Financing Commitment
Letter, and any debt obligations and mortgages or other security interests
which may purportedly arise under or be granted pursuant to the terms of the
Financing Commitment Letter and the Financing are, and will be, null, void and
unenforceable.
SECOND CLAIM FOR RELIEF
87. Plaintiffs repeat and reallege the allegations contained in
paragraphs 1 through 86 above.
88. Plaintiffs assert this claim derivatively on behalf of the
Partnership, pursuant to applicable provisions of the Delaware Revised Uniform
Limited Partnership Act, 6 Del. Code Section 17-1001, et seq.
89. Defendants' acts, practices and course of conduct as herein
alleged are solely the result of negligence, gross negligence and
mismanagement, and amount to a waste of partnership assets.
90. Demand upon Managers, the sole general partner, to bring this
action would be futile. An effort to cause Managers, as general partner, to
bring this action is not likely to succeed. Managers and its directors have
committed, participated in, aided or abetted, and/or condoned the wrongs
alleged herein.
91. The Managers Defendants are neither disinterested nor independent
with respect to the Financing Commitment Letter and the Financing. Their
purpose in negotiating and publicizing those transactions was and is to
entrench themselves by attempting, by improper means, to thwart offers for
Units by third parties (including Raleigh), and by creating impediments
(including but not limited to the acceleration provisions of the Financing
Commitment Letter) to the Unitholders' right to remove Managers as general
partner.
92. The Financing Commitment Letter was not the product of a valid
exercise of business judgment.
93. The defendants initially conceived the Financing in haste, in an
eleventh hour bad faith attempt to thwart the Raleigh Tender Offer. They
proceeded with their negotiation of the Financing Commitment Letter as part of
a determined effort improperly to thwart further efforts by Raleigh to acquire
Units, and acted without due care, negligently, with gross negligence and in
bad faith in approving the unnecessarily costly and prejudicial terms of the
Financing.
94. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs respectfully demand judgment as follows:
A. Declaring that the Financing Commitment Letter is void and
unenforceable;
B. Preliminarily and permanently enjoining defendants from taking
any actions pursuant to or in furtherance of the Financing Commitment Letter
and the Financing;
C. Alternatively, in the event that injunctive relief is denied in
whole or pertinent part, awarding
<PAGE> 15
compensatory damages in an amount to be proven at trial;
D. Requiring defendants to compensate and account to the Partnership
for all losses it has sustained or will sustain as a result of the wrongs
alleged herein;
E. Awarding plaintiffs interest as allowed by law;
F. Awarding plaintiffs the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
G. Granting plaintiffs such other and further relief as may be just and
proper.
Dated: September 27, 1996
/s/Gregory P. Williams
----------------------
Gregory P. Williams
Robert J. Stearn, Jr.
Raymond J. DiCamillo
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Plaintiffs
OF COUNSEL:
- ----------
Gerald Walpin
Arthur S. Linker
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
<PAGE> 16
STATE OF NEW YORK )
) ss:
COUNTY OF NASSAU )
VERIFICATION
MICHAEL L. ASHNER, being duly sworn, hereby verifies that he is
President of Raleigh GP Corp., a general partner of Raleigh Capital Associates
L.P., a plaintiff in this action, that he has read the foregoing complaint, and
that the facts recited therein are true and correct to the best of his
knowledge, information and belief.
/s/Michael L. Ashner
--------------------
Michael L. Ashner
SWORN TO AND SUBSCRIBED before me
this 27th day of September, 1996.
- ---------------------------------
- ---------------, Notary Public
My Commission Expires:
-----------------
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C> <C>
- ---------------------------------------------- x
::
VANDERBILT INCOME AND GROWTH ASSOCIATES, L.L.C., and RALEIGH CAPITAL :
ASSOCIATES L.P., individually, and derivatively on behalf of ARVIDA/JMB :
PARTNERS, L.P., :
:
Plaintiffs, :
:
- against - :
: C.A. No. ___________
ARVIDA/JMB MANAGERS, INC., JUDD D. MALKIN, NEIL G. BLUHM, BURTON E. GLAZOV, :
STUART C. NATHAN, A. LEE SACKS, JOHN G. SCHREIBER, BSS CAPITAL II, L.L.C., :
STARWOOD CAPITAL GROUP I, L.P., STARWOOD/FLORIDA FUNDING, L.L.C., STARWOOD :
OPPORTUNITY FUND, IV, L.P. and BARRY STERNLICHT, :
:
Defendants, :
:
- and - :
:
ARVIDA/JMB PARTNERS, L.P., :
::
Nominal Defendant. ::
:
- ---------------------------------------------- :
x
</TABLE>
MOTION FOR A TEMPORARY RESTRAINING ORDER
Plaintiffs hereby move the Court, pursuant to Chancery Court Rule 65,
for a Temporary Restraining Order in the form attached hereto, preserving the
status quo and temporarily restraining the defendants, their agents, servants,
employees, and attorneys, and all other persons in active concert or
participation with them, from consummating the financing transaction pursuant
to which Starwood/Florida Funding, L.L.C. or an affiliate is to make a secured
loan to Arvida/JMB Partners, L.P. (the "Partnership") in the approximate amount
of $160 million (the "Financing").
Grounds for this motion are as follows:
95. This is a classic case of a general partner ("Managers") which
has used the Partnership primarily for its own benefit, contrary to the
interest of Holders of Limited Partnership Interests ("Unitholders"). Then,
when faced with a third party Tender Offer for Units, which might result in the
removal of Managers and the substitution of a new general partner, Managers
schemed with a third party "White Knight" to thwart the Unitholders' right to
replace the general partner.
96. Since the inception of the Partnership, Managers and its
affiliates (which invested only $2,000 in the Partnership) have received from
the Partnership aggregate fees, disbursements and other
<PAGE> 2
payments in excess of $118,000,000, while the Unitholders, which invested $1000
per Unit, have not recouped and never will recoup their investment, and have
received distributions on a sporadic basis averaging only approximately 4.2%
per year. In 1995 alone, Managers and its affiliates were paid aggregate fees,
disbursements and revenues in excess of $7,000,000 or a 3,500% return on their
investment, while Unitholders received only a 1.3% return.
97. A Temporary Restraining Order preventing Managers from completing
this scheme is necessary to protect the rights of the Unitholders, including
plaintiffs. Defendants cannot be prejudiced by a short delay to allow this
Court to have a hearing on the merits, and to decide whether or not the
Partnership should be allowed to be burdened by their scheme -- which Managers
is rushing to complete notwithstanding that it has until December 1, 1996 to
close the Financing.
98. In contrast, the prejudice to the Unitholders, if Managers is
permitted to consummate the scheme by executing the Financing Agreement, is
enormous.
99. The terms of the Financing Agreement to be entered between the
Partnership and various Starwood entities controlled by Barry Sternlicht -- a
long time friend and business associate of Managers -- provide for an
exorbitantly costly interest rate, much higher than what is presently available
in the market for similar financings. Indeed, Paine Webber has advised in
writing that it is seriously interested in providing similar financing at
substantially lower cost to the Partnership.
100. The Financing Agreement contains covenants which will
substantially diminish and possibly preclude distributions to Unitholders,
beyond a one-time distribution of $350 per Unit (which is substantially below
the value of each Unit), while permitting defendants and their affiliates to
continue to receive substantial fees and other compensation from the
Partnership. It also contains covenants for excessive prepayment penalties and
yield maintenance obligations which will impose substantial additional
financial burdens on the Partnership. Further the Financing Agreement contains
provisions akin to a "poison pill," imposing substantial financial liability on
the Partnership, if the Unitholders exercise their right under the Partnership
Agreement to remove Managers as the general partner.
101. It is believed that the closing of the Financing is to occur as
early as October 1, 1996. It thus is essential that a Temporary Restraining
Order be granted immediately in order to preserve the status quo. Once the
Financing is consummated and the Partnership receives the $160 million proceeds
thereof, it will be in a position to immediately distribute to Unitholders (a
diverse group of public investors) the $350 per Unit distribution (more than
$141 million in total) which Managers has touted as the ostensible reason for
the Financing. Managers and its affiliates also would receive a distribution
from such proceeds in the
<PAGE> 3
amount of approximately $8 million. If that were to occur, it almost certainly
would be beyond the practical ability of the Court to undo the transaction, if
it ruled that the Financing was improper.
102. The grounds for this motion are set forth in more detail in the
Verified Complaint and the Affidavit of Michael L. Ashner filed
contemporaneously herewith.
Dated: September 27, 1996
/s/Raymond J. DiCamillo
-----------------------
Gregory P. Williams
Robert J. Stearn, Jr.
Raymond J. DiCamillo
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Plaintiffs
OF COUNSEL:
- ----------
Gerald Walpin
Arthur S. Linker
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
