<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 14D-9/A
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------
(AMENDMENT NO. 7)
ARVIDA/JMB PARTNERS, L.P.
(NAME OF SUBJECT COMPANY)
ARVIDA/JMB PARTNERS, L.P.
(NAME OF PERSON FILING STATEMENT)
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(TITLE OF CLASS OF SECURITIES)
043287101
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
--------------------
GARY NICKELE
ARVIDA/JMB MANAGERS, INC.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
(312) 440-4800
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
MICHAEL H. KERR, P.C.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2094
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<PAGE>
This Amendment No. 7 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Statement") filed by Arvida/JMB Partners, L.P.
(the "Partnership") on October 28, 1996, as amended by Amendment No. 1 on
November 14, 1996, Amendment No. 2 on November 15, 1996, Amendment No. 3 on
December 17, 1996, Amendment No. 4 on December 19, 1996, Amendment No. 5 on
January 9, 1997 and Amendment No. 6 on January 10, 1997. Unless otherwise
indicated, capitalized terms used herein have the same meanings as set forth in
the originally filed Statement.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
Item 5 is amended to add the following immediately after the first
paragraph thereof:
On February 11, 1997, Lehman and the Partnership agreed that, in
consideration of Lehman's prior and continuing service through July 1, 1998, the
Partnership will pay Lehman an additional fee of $500,000. At the partnership's
request and for no additional fee, Lehman will assist the Special Committee in
its evaluation of the courses of action set forth in Section 5.5J of the
Partnership Agreement.
Lehman further agreed that up to $250,000 of the $500,000 additional fee
will be credited against any fees payable to Lehman pursuant to subparagraph
5(d)(i) of the agreement dated July 1, 1996 (the "July Agreement", as described
in clause (i) under Item 5 of the originally filed Statement). In addition,
Lehman agreed to credit any fee received from the Partnership pursuant to
subparagraph 5(d)(ii) of the July Agreement in connection with the October 17,
1996 tender offer commenced by Raliegh against any fees payable to Lehman
pursuant to 5(d)(i) of the July Agreement.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
Item 7 (a) is amended to add the following to the discussion of Raleigh:
On January 10, 1997, Raleigh sent a letter to Managers requesting that it
be admitted as a Substituted Limited Partner of the Partnership under the terms
of the Partnership Agreement with respect to 78,694.3599 Interests held by
Raleigh.
On February 11, 1997, Managers sent a letter in reply to Raleigh's letter
of January 10, 1997, informing Raleigh that the Special Committee had denied
Raleigh's request for admission as a Substituted Limited Partner.
See Item 8 below.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is amended to add the following:
Barnett Financing
<PAGE>
During March 1997, the Partnership received a non-binding term sheet from
Barnett Bank of Broward County, N.A. ("Barnett") for a proposed $75 million term
loan, a $20 million revolving line of credit and a $5 million letter of credit
facility (the "Barnett Financing"). Under the term sheet, the Barnett Financing,
if consummated, is expected to have a term of four years with annual scheduled
principal payments of $12.5 million as well as additional annual principal
repayments based upon a specified percentage of the Partnership's available
cash, with a maximum principal repayment including the scheduled payment of
$18.75 million per annum. The remaining outstanding balance on the Barnett
Financing would be due upon maturity. Under the term sheet, the interest rate on
the Barnett Financing would be based, at the Partnership's option, on the
relevant London Inter-Bank Offering Rate (LIBOR) plus 2.25% per annum or
Barnett's prime rate. Barnett will require the Partnership to have an interest
rate swap or cap in place for one-third of the projected outstanding balance of
the term loan. It is expected that the Partnership would be required to pay a
loan fee of 1% of the total facility upon closing of the loan. It is currently
anticipated that a portion of the proceeds of the Barnett Financing, if
consummated, would be used by the Partnership to make a distribution in the
amount of approximately $75 million, including a distribution of approximately
$175 per Interest to the Interestholders. Consummation of the Barnett Financing
is subject to the negotiation and execution by the parties of binding loan
documents. There can be no assurance that the Barnett Financing will be
consummated or, if consummated, that its terms will be similar to those
described above. The Partnership has gained preliminary permission to pursue the
Barnett Financing from a judge sitting on the Circuit Court of Cook County,
Illinois pursuant to the preliminary settlement order in the Carlstrom action,
as discussed below under Litigation in this Item 8.
Litigation
Delaware Chancery Court
As previously disclosed, on December 12, 1996, the Delaware Supreme Court
reversed the order of the Delaware Chancery Court dismissing the action
captioned (C.A. No. 15238) Vanderbilt Income and Growth Associates, L.L.C., et
al. v. Arvida/JMB Managers, Inc., et al. ("Delaware action") and remanded the
matter for further proceedings. In particular, the Supreme Court found that the
Chancery Court improperly considered matters outside the pleadings to reach its
determination on the motion to dismiss and that the plaintiffs should have an
opportunity to take discovery before the Chancery Court decides the matter. On
December 16, 1996, the Partnership filed a counterclaim, which was subsequently
amended, to the plaintiffs' complaint in this matter seeking a declaratory
judgment that Raleigh Capital Associates, L.P. ("Raleigh Capital") does not have
the right to vote its Interests. On January 28, 1997, the trial court granted
plaintiffs leave to dismiss their complaint concerning the Starwood financing,
leaving the Partnership's amended counterclaim concerning voting rights pending.
By letter dated January 10, 1997, Raleigh Capital requested admission as a
Substituted Limited Partner of the Partnership. The Partnership referred the
request to the Special Committee of the Partnership. On February 11, 1997, the
Special Committee denied the request. The Partnership has supplemented its
counterclaim, as amended, to seek a court declaration that Raleigh Capital is
not entitled to be admitted as a Substituted Limited Partner. On February 20,
1997, Raleigh Capital filed a reply and counterclaim in the Delaware action
against the Partnership, the General Partner, and the Special Committee. The
reply counterclaim filed by Raleigh Capital seeks,
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<PAGE>
among other things, a declaration that Raleigh Capital has voting rights in the
Partnership and that defendants breached their fiduciary duties by failing to
admit Raleigh Capital as a Substituted Limited Partner. The reply counterclaim
also seeks to enjoin the Partnership, the General Partner, and the Special
Committee from refusing to admit Raleigh Capital as a Substituted Limited
Partner, an award of damages, interest, fees, and costs.
On or about February 28, 1997, Gladys Beasley, individually and as a
representative of a class of persons similarly situated, filed an intervenor
complaint in the Delaware action for declaratory relief against the Partnership.
In the intervenor complaint, plaintiff seeks a declaration that original
purchasers who obtained Interests in the Partnership and subsequent holders of
Interests in the Partnership by assignment have the same voting rights in the
Partnership, among other things, to remove and replace the General Partner. In
addition, plaintiff Gladys Beasley seeks an order adjudging and decreeing that
the intervenor action be properly maintained as a class action, an award of her
costs and expenses of the litigation, and such other relief as the Court deems
appropriate.
The trial of all claims in the Delaware action is scheduled for April 7
through April 9, 1997.
Illinois Circuit Court
As previously disclosed, on December 13, 1996, the trial court in the
Circuit Court of Cook County, Illinois, granted the plaintiffs' motion for a
preliminary injunction in the action entitled Carlstrom, et al. v. Arvida/JMB
Managers, Inc., et al., Case No. 96 CH 6892/96 CH 6627, ("Carlstrom action")
and preliminarily enjoined the Partnership from consummating the proposed
Starwood Financing after an evidentiary hearing in which the president of
Raleigh GP Corp., Michael Ashner, testified as one of the plaintiffs' principal
witnesses in opposition to the Starwood Financing. The Partnership, General
Partner and members of the Special Committee have appealed from the preliminary
injunction ruling. The appeal ("Illinois appeal") is pending in the Appellate
Court of Illinois, First Judicial District, Case No. 97-0093. In the appeal, the
Partnership, among other things, contends that the wrong legal standard was
applied by the trial court in the hearing on plaintiffs' motion for preliminary
injunction in requiring the Partnership to prove the fairness of the Starwood
Financing. In addition, and alternatively, the Partnership contends that the
adoption of the Starwood Financing, which an independent investment banker
opined was commercially reasonable and fair, satisfied the legal standard
applied by the trial court.
The trial court in the Carlstrom action scheduled the matter for a hearing
on a permanent injunction for March 17, 1997. Before the scheduled hearing, the
trial court asked the parties to participate in Court-supervised mediation
sessions which began on March 5, 1997. The mediation effort has resulted in a
stipulation of settlement, which was preliminarily approved by the trial court
in a settlement hearing order dated April 1, 1997, as being fair, reasonable,
adequate, and in the best interests of the plaintiffs, the Interestholders, and
the Partnership. The stipulation of settlement provides, among other things: (i)
that the General Partner will be able to pursue the Barnett Financing for the
purposes of making a distribution and replacing certain of the Partnership's
current credit facilities; (ii) that the Partnership will not pursue the
Starwood Financing; (iii) that the General Partner will choose the option set
forth in Section 5.5(J)(i)(c) of the Partnership Agreement (i.e., to commence a
liquidation phase on October 31, 1997, in which all of the Partnership's
remaining assets will be sold or disposed of by October 31, 2002); (iv) that, if
the settlement is finally approved by the trial court,
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<PAGE>
the decision to choose the option set forth in Section 5.5(J)(i)(c) of the
Partnership Agreement will be binding upon the Interestholders and the General
Partner, its affiliates, and any subsequent general partner, whether or not
affiliated with the General Partner; (v) that the claims set forth in the
Carlstrom action will be released; (vi) that the Illinois appeal will be
dismissed; and (vii) that the General Partner and/or its affiliates will defer a
portion of the proceeds from the Barnett Financing otherwise distributable to
them (subject to the right of the General Partner and/or such affiliates to
receive such deferred amount after Interestholders have received a specified
amount of distributions from the Partnership after July 1, 1996) and such
deferred distribution amount will be used to pay a portion of the legal fees and
expenses in the Carlstrom action. In the preliminary settlement hearing order,
the trial court also vacated the preliminary injunction ruling, established a
procedure for notifying Interestholders of their rights in connection with the
settlement, and set the matter for a final hearing. At the final hearing the
trial court will determine whether: (a) the settlement is fair, reasonable,
adequate, and in the best interests of the Partnership and the Interestholders;
(b) the settlement should be approved by the trial court; (c) the Carlstrom
action should be dismissed on the merits with prejudice; and (d) the plaintiffs'
counsels' application for attorney's fees and reimbursement for out of pocket
costs (including experts' fees) should be approved. The terms of the proposed
Barnett Financing are discussed above in this Item 8.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 of the Statement is amended to add the following Exhibits:
(a)(6) Letter, dated April 7, 1997, from the Partnership to Interestholders.
(c)(10) Letter, dated January 10, 1997, from Raleigh Capital Associates to
Arvida/JMB Managers, Inc.
(c)(11) Letter, dated February 11, 1997, from Arvida/JMB Managers, Inc. to
Raleigh Capital Associates.
(c)(12) Stipulation of Settlement, dated April 1, 1997, filed in the Circuit
Court of Cook County, Illinois, Chancery Department.
(c)(13) Letter of Intent, dated March 12, 1997, from Barnett Bank of Broward
County, N.A.
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<PAGE>
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.
ARVIDA/JMB PARTNERS, L.P.
By: Arvida/JMB Managers, Inc.,
-----------------------------------
General Partner of the Partnership
By: /s/ Judd D. Malkin
-----------------------------------
Name: Judd D. Malkin
Title: Chairman
Dated: April 7, 1997
5
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
- ------ ----------- ----
(a)(6) Letter, dated April 7, 1997, from the Partnership to
Interestholders.
(c)(10) Letter, dated January 10, 1997, from Raleigh Capital Associates
to Arvida/JMB Managers, Inc.
(c)(11) Letter, dated February 11, 1997, from Arvida/JMB Managers, Inc.
to Raleigh Capital Associates.
(c)(12) Stipulation of Settlement, dated April 1, 1997, filed in the Circuit
Court of Cook County, Illinois, Chancery Department.
(c)(13) Letter of Intent, dated March 12, 1997, from Barnett Bank of
Broward County, N.A.
6
<PAGE>
Exhibit (a)(6)
ARVIDA/JMB PARTNERS, L.P.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
312-440-4800
April 7, 1997
Dear Interestholders:
Arvida/JMB Managers, Inc. (the "General Partner") is pleased to announce
that Arvida/JMB Partners, L.P. (the "Partnership") has obtained from Barnett
Bank of Broward County, N.A. ("Barnett Bank") a term sheet for a $100 million
financing for the Partnership (the "Barnett Bank Financing"). Assuming that
the Barnett Bank Financing proceeds on the terms currently under discussion,
the General Partner is pleased to advise you that the Partnership intends to
distribute for the second quarter of 1997 APPROXIMATELY $75 MILLION, OR
APPROXIMATELY $175 PER INTEREST. This anticipated $175 per Interest
distribution would bring the total of all distributions made to
Interestholders since the inception of the Partnership to approximately $600
per Interest:
<TABLE>
<CAPTION>
DATE AMOUNT
---- -----------------
(APPROXIMATE)
<S> <C>
Through December 31,
1996.................. $365 per Interest
February 28, 1997...... $ 60 per Interest
For Second Quarter
1997.................. $175 per Interest
TOTAL $600 PER INTEREST
</TABLE>
The Partnership has gained the preliminary permission of the presiding judge
in the matter of Jack H. Carlstrom and Lynne M. Carlstrom, et al. v.
Arvida/JMB Managers, Inc., et al., No. 96 CH 6627/96 CH 6892 (the "Carlstrom
Matter"), to pursue the Barnett Bank Financing pursuant to a Stipulation of
Settlement among the parties (the "Carlstrom Settlement"). The Barnett Bank
Financing, if consummated, would permit the Partnership to make an anticipated
$175 per Interest distribution while allowing Interestholders to retain their
respective interests in the remaining equity of the Partnership. In addition,
under the Carlstrom Settlement, if finally approved, the claims of the
plaintiffs will be dismissed with prejudice and the Carlstrom Matter will be
terminated, with the trial judge retaining jurisdiction over certain matters.
Finalization of the Carlstrom Settlement is subject to, among other things,
notification to Interestholders of their rights in connection with the
Carlstrom Settlement and a final court determination that the Carlstrom
Settlement is fair, reasonable, adequate and in the best interests of the
Partnership and the Interestholders.
As you know, on October 17, 1996, Raleigh Capital Associates, L.P. and
certain of its affiliates ("Raleigh") commenced an unsolicited offer to
acquire up to 100,000 Interests, which represents approximately 24.8% of the
Partnership's outstanding Interests, at a purchase price of $500 per Interest
(the "Offer"), which is currently scheduled to expire at midnight on April 11,
1997. IF YOU HAVE TENDERED YOUR INTERESTS TO RALEIGH UNDER THE OFFER AND DO
NOT WITHDRAW YOUR INTERESTS BEFORE THE OFFER EXPIRES, YOU WILL NOT RECEIVE ANY
BENEFIT FROM ANY DISTRIBUTIONS MADE BY THE PARTNERSHIP SINCE THE OFFER
COMMENCED. Under the terms of the Offer, Raleigh will reduce its purchase
price of $500 per Interest by the amount of any distributions declared or made
with respect to the Interests between the date of the Offer and the date
Raleigh pays the purchase price for the Interests. Thus, if the Offer closes
after the Partnership makes the anticipated $175 per Interest distribution out
of the anticipated Barnett Bank Financing proceeds and if you have tendered
your Interests to Raleigh under the Offer and do not withdraw them before the
Offer expires, YOU WILL ONLY RECEIVE FROM RALEIGH APPROXIMATELY $265 PER
INTEREST INSTEAD OF $500 PER INTEREST and you will not be entitled to any
subsequent distributions to be made by the Partnership (WHICH SUBSEQUENT
DISTRIBUTIONS ARE CURRENTLY ANTICIPATED TO BE IN EXCESS OF $800 PER INTEREST
BASED UPON THE PARTNERSHIP'S CURRENT PROJECTED BUDGETS WHICH ASSUME THE
ORDERLY LIQUIDATION OF THE PARTNERSHIP'S ASSETS BY OCTOBER, 2002).
Moreover, you should consider that Raleigh's Offer has been open for nearly
six months. Raleigh has continued to extend the Offer time and time again
(until April 11, 1997 in its eleventh extension). Why? Raleigh
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<PAGE>
has stated that it has extended and will continue to extend the Offer until
the "resolution" of an issue pending before the Delaware Chancery Court
relating to whether, among other things, Raleigh is entitled to the voting
rights of limited partners of the Partnership. A trial is currently scheduled
on this voting rights issue for April 7 through April 9, 1997. Nevertheless,
if, as is very possible, the decision of the court is appealed by one of the
parties and the issue is reviewed for several more months, ANY DECISION BY
RALEIGH TO CONSIDER THE MATTER "RESOLVED" AND TO PURCHASE THE INTERESTS IT IS
ASKING YOU TO TENDER UNDER ITS OFFER MAY BE A LONG WAY OFF.
As previously reported, the General Partner has established a special
committee (the "Special Committee") to review and consider offers for
Interests, including the Offer. Based upon a number of business, financial and
other factors, the Special Committee determined, and hereby reiterates its
determination, that THE OFFER IS INADEQUATE AND NOT IN THE BEST INTEREST OF
INTERESTHOLDERS who have the expectation of retaining their Interests through
an anticipated orderly liquidation of the Partnership's assets by October 31,
2002, and who have no current or anticipated need or desire for liquidity.
ACCORDINGLY, THE SPECIAL COMMITTEE RECOMMENDS THAT SUCH INTERESTHOLDERS REJECT
THE OFFER AND NOT TENDER THEIR INTERESTS, OR IF THEIR INTERESTS HAVE BEEN
TENDERED, PROMPTLY WITHDRAW THEIR INTERESTS. Withdrawal forms are enclosed for
the use of those Interestholders who have tendered their Interests in the
Offer, but who now wish to withdraw them.
The Special Committee, however, recommends to those Interestholders who have
a current need or desire for liquidity that such Interestholders tender their
Interests in the Offer, based on the fact that the consummation of the Barnett
Bank Financing is not assured and that, once the Offer has expired, the price
for Interests through privately negotiated sales and sales through
intermediaries may be substantially less than the purchase price under the
Offer because there is no established market for the Interests.
The Special Committee notes again that Raleigh's tender offer materials
state that "in establishing the Purchase Price, [Raleigh] was motivated to set
the LOWEST PRICE for the [Interests] which might be acceptable to
[Interestholders] consistent with [Raleigh's] objectives." (Emphasis added.)
You should consult with your personal tax advisor and financial consultant
prior to deciding whether to accept the Offer and tender your Interests or, if
you have already tendered your Interests, before considering whether to
withdraw them.
On behalf of the Special Committee.
Very truly yours,
Arvida/JMB Partners, L.P.
By: Arvida/JMB Managers, Inc.
General Partner
By:
LOGO
Judd D. Malkin
Chairman
2
<PAGE>
Exhibit (c)(10)
--------------
RALEIGH CAPITAL ASSOCIATES L.P.
100 Jericho Quadrangle
Suite 214
Jericho, New York 11753-2717
January 10, 1997
BY COURIER
- ----------
Arvida/JMB Managers, Inc.
as General Partner of
Arvida/JMB Partners, L.P.
900 North Michigan Avenue
Chicago, Illinois 60611
Attn: Judd D. Malkin, Chairman
Gentlemen:
The undersigned, Raleigh Capital Associates L.P. ("Raleigh"), hereby
requests that it be admitted as a Substituted Limited Partner of Arvida/JMB
Partners, L.P. (the "Partnership") under the provisions of the Amended and
Restated Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") with respect to (i) 5 Limited Partnership Interests as to which
Raleigh has been recognized as an Assignee Holder under the Partnership
Agreement and (ii) 78,689.3599 Limited Partnership Interests as to which Raleigh
has previously requested that it be recognized as an Assignee Holder under the
Partnership Agreement. Capitalized terms used herein and not otherwise defined
have the meanings ascribed to them in the Partnership Agreement.
Attached hereto is a Signature Page and Power of Attorney required in
connection with this request to be admitted as a Substituted Limited Partner.
Enclosed is a check for $100 as required by Section 7.2D of the Partnership
Agreement.
This request is without prejudice to Raleigh's position that all Assignee
Holders, including Assignee Holders who acquired their interests subsequent to
the Partnership's public offering, have the right to exercise voting and consent
rights under the Partnership Agreement.
Very truly yours,
RALEIGH CAPITAL ASSOCIATES L.P.
By: Raleigh GP Corp.
By: /s/
--------------------------------
Vice President
<PAGE>
Exhibit (c)(11)
ARVIDA/JMB PARTNERS, L.P.
900 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
312/440-4800
February 11, 1997
BY TELECOPIER AND FEDERAL EXPRESS
Raleigh Capital Associates, L.P.
100 Jericho Quadrangle
Suite 214
Jericho, New York 11753-2717
Attention: Peter Braverman, Vice President, Raleigh GP Corp.
Gentlemen:
Pursuant to Section 7.2 of the Partnership Agreement, on February 11, 1997,
the Special Committee of the General Partner of Arvida/JMB Partners L.P. (the
"Partnership") denied your request for admission as a Substituted Limited
Partner of the Partnership.
Very truly yours,
ARVIDA/JMB PARTNERS, L.P.
By: ARVIDA/JMB MANAGERS, INC.
General Partner
By: /s/ J. D. Malkin
Judd D. Malkin
Chairman
<PAGE>
Exhibit (c)(12)
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
JACK H. CARLSTROM, LYNNE M. )
CARLSTROM, WONETA BELLEVUE, )
ROGER LATHBURY, and BEGONA )
LATHBURY, as representatives of a class of )
similarly situated persons and derivatively )
on behalf of nominal defendant ARVIDA/JMB )
PARTNERS, L.P., ) No. 96 CH 6627
)
Plaintiffs, ) consolidated with
)
v. ) No. 96 CH 6892
)
ARVIDA/JMB MANAGERS, INC., NEIL G. )
BLUHM, IRA J. SCHULMAN, WALTON )
STREET CAPITAL ACQUISITION CO. III, )
L.L.C., BURTON E. GLAZOV, STUART C. )
NATHAN, A. LEE SACKS, JOHN G. )
SCHREIBER, and JUDD D. MALKIN, )
)
Defendants, )
)
and )
)
ARVIDA/JMB PARTNERS, L.P., )
)
Nominal Defendant. )
STIPULATION OF SETTLEMENT
The plaintiffs, on their own behalf and on behalf of the nominal defendant
Arvida/JMB Partners, L.P. (the "Partnership"), and the Settling Defendants
(defined below), each acting through their attorneys, hereby enter into this
Stipulation of Settlement (the "Stipulation") as of this ___ day of April, 1997,
providing for a settlement of the above-captioned consolidated action on the
terms and conditions set forth in this Stipulation and subject to the approval
of this Court.
<PAGE>
WHEREAS:
A. On June 24, 1996, Irwin Weiss commenced a class action against
Arvida/JMB Managers, Inc. (the "General Partner"), the Partnership, and certain
of the Defendants (defined below (the "Weiss Action").
B. On July 1, 1996, Jack H. and Lynne M. Carlstrom commenced a class and
derivative action on behalf of themselves and the Partnership against the
General Partner and certain of the Defendants (the "Carlstrom Action").
C. By order dated August 8, 1996, the Carlstrom Action and Weiss Action
were consolidated (the "Action"), and by order dated September 25, 1996, Weiss
was voluntarily dismissed as a plaintiff.
D. By Memorandum of Opinion dated November 27, 1996, determining certain
motions to dismiss, the Court dismissed the class claims, found that the Action
was properly brought only as a derivative action, held that the Carlstroms did
not have standing to assert such claims, and dismissed claims against certain of
the Defendants.
E. Plaintiffs subsequently voluntarily dismissed claims against the
remaining Defendants other than the Settling Defendants.
F. On November 27, 1996, plaintiffs Woneta Bellevue, Roger Lathbury, and
Begona Lathbury filed the Third Amended Consolidated Class Action and Verified
Derivative Complaint (the "Complaint").
G. The Complaint charges that the Settling Defendants (as defined below)
violated their fiduciary obligations to the Partnership by entering into the
Starwood Financing (defined below) in
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order to entrench themselves and to defeat certain attempts to wrest their
control of the Partnership posed by the Tender Offers (defined below).
H. In a verified answer filed on December 12, 1996 (the "Answer"), the
Settling Defendants denied all material allegations of the Complaint.
I. On December 12 and 13, 1996, the Court held an evidentiary hearing.
Based upon the evidence adduced at the hearing, the Court made oral findings and
issued a written order dated December 13, 1996, preliminarily enjoining the
consummation of the Starwood Financing until issuance of a permanent injunction
(the "Preliminary Injunction Ruling").
J. On January 13, 1997, the Settling Defendants filed a Notice of Appeal
of the Preliminary Injunction Ruling. The Settling Defendants contend that the
wrong legal standard -- an "enhanced" scrutiny standard under which the Settling
Defendants were required to prove the fairness of the Starwood Financing -- was
applied at the preliminary injunction hearing. In addition and alternatively,
the Settling Defendants contend that their adoption of the Starwood Financing,
which an independent investment banker opined was commercially reasonable and
fair, satisfied the enhanced scrutiny standard.
K. The Action was set for a permanent injunction hearing to be held on
March 17, 1997.
L. Defendants continue to deny all allegations of wrongdoing and
liability contained in the Complaint. The Settling Defendants contend that the
Starwood Financing was fair, commercially reasonable, and in the best interests
of the Partnership. The Settling Defendants relied, in part, on the opinions of
an independent investment banker. In the absence of the Settlement (defined
below), the Settling Defendants would vigorously pursue defenses to the Action
and would continue to pursue the Appeal.
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<PAGE>
M. Plaintiffs' Counsel has conducted an investigation of the facts and
legal principles relating to the claims and the underlying events and
transactions alleged in the Complaint.
N. On March 5, 1997, and March 13, 1997, the Parties engaged in a
mediation before the Court with respect to the possible compromise of the
Action. Plaintiffs' Counsel, in light of their investigation and prosecution of
the Action and as a result of two days of arms' length, Court-supervised
negotiation, have concluded that settlement of the Action on the terms set forth
in this Stipulation, is fair, reasonable, and adequate and is in the best
interests of plaintiffs, the Partnership, and the Unitholders (defined below).
O. Settling Defendants, while continuing to deny all allegations of
liability and without in any way acknowledging any fault or liability, also
desire to settle, compromise, and terminate the claims against them to avoid the
further expense, distraction of management, and inconvenience, and to put to
rest the Released Claims (defined below).
NOW, THEREFORE, IT IS HEREBY AGREED, by and among the undersigned
parties, through their respective counsel, and subject to all of the terms and
conditions set forth herein and the approval of the Court, that the Action is
hereby settled on the terms and conditions set forth below:
I. DEFINITIONS.
-----------
For purposes of this Stipulation:
A. The term "Action" means the consolidated action, case Nos. 96 CH 6627
and 96 CH 6892, for which the Complaint and Answer are the final, operative
pleadings.
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<PAGE>
B. The term "Appeal" means the appeal of the Preliminary Injunction
Ruling captioned Jack H. Carlstrom et al. v. Arvida/JMB Managers, Inc., et al.,
No. 97-0093, presently pending before the Appellate Court of Illinois, First
District.
C. The term "Barnett Bank" means Barnett Bank of Broward County, N.A.,
and its affiliates, parent and subsidiary companies, and agents.
D. The term "Barnett Bank Financing" means the financing of the
Partnership by Barnett Bank on the terms substantially set forth in a letter
dated March 12, 1997 from Brian K. Davis, Vice President of Barnett Bank, to
Stephen Lovelette, Vice President of Arvida Company, which is attached hereto as
Exhibit A.
E. The term "Defendants" shall mean the Settling Defendants (defined
below) and Lehman Brothers, Inc., Starwood Capital Group I, L.P.,
Starwood/Florida Funding, L.L.C., Starwood Opportunity Fund IV, L.P., BSS
Capital II, L.L.C., Barry Sternlicht, Walton Street Capital Acquisition Co.,
III, L.L.C., Neil G. Bluhm, Ira J. Schulman, and Whitehall Street Real Estate
Limited Partnership VII.
F. The term "Defendants' Counsel" shall mean Kirkland & Ellis and Jenner
& Block to the extent that they represented any of the Partnership, the General
Partner, or the Special Committee in the Action or the Appeal.
G. The term "Delaware Action" means the action captioned Arvida/JMB
Partners, L.P. v. Vanderbilt Income and Growth Associates, L.L.C., et al.;
Vanderbilt Income and Growth Associates, L.L.C., et al. v. Arvida/JMB Partners,
L.P., et al.; and Beasley v. Arvida/JMB Partners, L.P., C.A. No. 15238,
presently pending before the Delaware Court of Chancery.
-5-
<PAGE>
H. The term "Final Judgment and Order" means the final judgment proposed
to be entered by the Court, substantially in the form of Exhibit D, attached
hereto.
I. The term the "Final Settlement Hearing" means the hearing to be held
by the Court after Notice (defined below) to the Unitholders (defined below)
during which the Court will consider whether to approve the Settlement as fair,
reasonable, and adequate, and whether to enter the Final Judgment and Order.
J. The term "General Partner" shall mean Arvida/JMB Managers, Inc.
K. The term "Lead Plaintiffs' Settlement Counsel" means Goodkind Labaton
Rudoff & Sucharow L.L.P. and Beigel Lasky Rifkind Fertik Gelber & White. Lead
Plaintiffs' Settlement Counsel represent that they have full authority to sign
this Stipulation on behalf of Plaintiffs (defined below) and Plaintiffs' Counsel
(defined below).
L. The term "Notice" means the Notice of Pendency and Proposed Settlement
of Derivative Action proposed to be approved by the Court, substantially in the
form of Exhibit C, attached hereto.
M. The term "Partnership" means Arvida/JMB Partners, L.P.
N. The term the "Partnership Agreement" means the Amended and Restated
Partnership Agreement appended to the initial offering prospectus for units of
the Partnership.
O. The term "Plaintiffs" shall mean the named plaintiffs, Woneta
Bellevue, Roger Lathbury, and Begona Lathbury; the dismissed plaintiffs, Jack H.
Carlstrom, and Lynne M. Carlstrom; and the Partnership.
-6-
<PAGE>
P. The term "Plaintiffs' Counsel" means Goodkind Labaton Rudoff &
Sucharow, L.L.P.; Beigel, Lasky Rifkind Fertik Gelber & White; Block & Landsman;
Law Offices of Harold B. Obstfeld; and Hanzman, Criden, Korge, Hertzberg &
Chaykin.
Q. The term "Preliminary Settlement Hearing Order" means the order
proposed to be entered by the Court, substantially in the form attached as
Exhibit B hereto.
R. The term "Raleigh" means Raleigh Capital Associates, L.P., and each of
its present and former agents, partners, shareholders in its general partner,
affiliates, attorneys, employees, officers, directors, heirs, executors,
representatives, successors, and assigns, including without limitation,
Vanderbilt Income and Growth Associates, L.L.C.
S. The term "Release" means the release set forth in Section II, below.
T. The term "Released Claims" means the claims being released in
accordance with Section II below.
U. The term "Settlement" means the proposed settlement of the Action as
set forth herein, and accompanying exhibits.
V. The term "Settlement Effective Date" means the first date on which
both of the following have occurred: (i) the Partnership shall receive from
Barnett Bank, on terms substantially similar to those set forth in the Barnett
Bank Financing, a term sheet which has been approved by Barnett Bank's loan
committee; and (ii) the Final Judgment and Order entered by the Court becomes
final. The date upon which the Final Judgment and Order becomes final is
determined as follows: (i) if an appeal or review is not sought by any person
from such Final Judgment and Order, the 35th day after entry of such Final
Judgment and Order, provided that is a business day, and if it is not, then the
next succeeding business day (or, if the date for taking an appeal or seeking
review shall be
-7-
<PAGE>
extended, five days after the date of expiration of the extension if any appeal
or review is not sought); or (ii) if an appeal or review is sought from such
Final Judgment and Order, the day after such judgment is affirmed or the appeal
or review is dismissed or denied and such judgment is no longer subject to
further judicial review.
W. The term "Settling Defendants" means Arvida/JMB Managers, Inc., Burton
E. Glazov, Stuart C. Nathan, A. Lee Sacks, John G. Schreiber, and Judd D. Malkin
and each of their respective present and former agents, partners, attorneys,
affiliates, employees, officers, directors, heirs, executors, representatives,
successors, and assigns.
X. The term "Starwood" means Starwood Capital Group I, L.P.,
Starwood/Florida Funding, L.L.C., Starwood Opportunity Fund IV, L.P., BSS
Capital II, L.L.C., and Barry Sternlicht.
Y. The term "Starwood Financing" means the $160 million recapitalization
of the Partnership described in a loan commitment letter dated September 12,
1996, to Stephen Lovelette from Eugene Gorab, of Starwood.
Z. The term the "Tender Offers" means the tender offers made for the
units of the Partnership by Raleigh, Boreas Partners, L.P., and Walton Street
Capital Acquisition Co. III, L.L.C. during the period of June 1996 through
October 1996, including the Raleigh tender offer at $500 per unit which was
commenced on or about October 17, 1996.
AA. The term "Unitholders" means all record or beneficial holders in the
Partnership as of June 24, 1996, whether they purchased their interests in the
initial offering, or subsequently; and all of their successors and assigns
through the date of the entry of the Preliminary Settlement Hearing Order,
including Raleigh; except for the Defendants, their partners, agents, employees,
attorneys, officers, directors, heirs, executors, representatives, successors
and assigns.
-8-
<PAGE>
II. RELEASES.
--------
Upon the Settlement Effective Date, the Partnership, and the
Plaintiffs herein, their heirs, executors, administrators, successors, and
assigns, individually and derivatively, and the Unitholders, their heirs,
executors, administrators, successors, and assigns, derivatively, for the
consideration and upon the terms and conditions set forth below, shall release
and forever discharge the Defendants, their respective present and former
partners, agents, parents, affiliates of any kind and nature, predecessors,
servants, employees, officers, directors, heirs, executors, representatives,
successors, and assigns, including their attorneys, accountants, consultants,
appraisers, and actuaries, from each and every claim, liability, expense, cause
of action, matter, or suit, whether arising under state, federal, or the common
law, whether or not brought in this or in any other court or forum (including,
but not limited to, in arbitration), which arise from the Tender Offers, the
Settling Defendants' responses thereto through the date of the entry of the
Preliminary Settlement Hearing Order, the Barnett Bank Financing, or the
Starwood Financing, which has been or might have been asserted against them in
the Action. Notwithstanding the foregoing, and without limiting the generality
of the foregoing, the following claims are not, and shall not be, released by
this Section II - Releases: (a) Raleigh's and the Unitholders' (including
Gladys Beasley's) claims and defenses against the Partnership and the
Defendants, if now pending, or later brought, in the Delaware action, relating
to (i) Raleigh's and the Unitholders' alleged ability to vote; (ii) Raleigh's
efforts to be made replacement general partner, other than derivative claims
released in this Section; and (iii) Raleigh's request to be made a Substituted
Limited Partner in the Partnership; and (b) any claim to enforce the terms of
this Settlement.
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<PAGE>
III. CONSIDERATION TO PLAINTIFFS AND THE PARTNERSHIP.
In consideration for the release, the Settling Defendants agree to the
following:
A. The Settling Defendants will obtain from Barnett Bank a term sheet
which has been approved by Barnett Bank's credit committee, subject to
participation of other banks, on substantially the terms set forth in Exhibit A,
and will use reasonable efforts to close the loan within 120 days of the
Settlement Effective Date. The Barnett Bank Financing, if consummated, will be
used for the purposes of funding a cash distribution, and to replace the
Partnership's current Partnership-level bank facilities. The General Partner
will use its reasonable judgment to select the lowest rates available under the
Barnett Bank Financing.
B. Defendants will not cause the Partnership to enter into the Starwood
Financing.
C. If the Partnership does not enter into a final loan agreement for
the Barnett Bank Financing within 120 days of the Settlement Effective Date, or
on such earlier date as the General Partner concludes the Barnett Bank Financing
will not be consummated, the General Partner will notify the Court, with copies
of such notice to Lead Plaintiffs' Settlement Counsel. Prior to such
notification, the General Partner will not cause the Partnership to enter into a
Partnership-level financing other than the Barnett Bank Financing. After such
notification, the Partnership may enter into a loan agreement with any other
commercial bank for a financing on terms not materially different than the
Barnett Bank Financing. Until October 1998, without first obtaining approval
from the Court, with 21 days advance notice to Lead Plaintiffs' Settlement
Counsel, the General Partner will not cause the Partnership to enter into a
Partnership-level financing for the purposes of making a distribution which is
not substantially similar to the Barnett Bank Financing, or which is with a
lender other than a commercial bank.
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<PAGE>
D. Upon the earlier of the Settlement Effective Date or the entry of an
order of the Circuit Court vacating the Preliminary Injunction Ruling, the
Settling Defendants will move to dismiss the Appeal without prejudice. The
appeal may be deemed to be dismissed with prejudice upon the later of the
Settlement Effective Date or the entry of an order of the Circuit Court vacating
the Preliminary Injunction Ruling.
E. A portion of any proceeds of the Barnett Bank Financing otherwise
distributable to the General Partner and/or its affiliates will be used to pay
(i) up to 50% of the Defendants' Counsel attorney's litigation fees and expenses
in the Action and the Appeal; and (ii) up to 50% of any award by the Court of
fees and expenses to Plaintiffs' Counsel in connection with this Action and the
Appeal. The total payments under this provision will not exceed the maximum
amount of the distribution to which the General Partner and/or its affiliates
may otherwise be entitled under the Partnership Agreement as a result of the
Barnett Bank Financing.
F. The General Partner and/or its affiliates will defer the amounts
otherwise distributable to the General Partner and/or its affiliates referred to
in Section III(E) above, until such time as the investors have received the
"Threshold Amount," which is defined as aggregate distributions made after July
1, 1996 equal to $565 per unit plus a 4.5% per annum cumulative return,
compounded quarterly, beginning July 1, 1996, on an amount, calculated from time
to time, equal to $565 per unit less any amounts distributed to the investors
after July 1, 1996. At such time as the investors have received the Threshold
Amount, distributions shall be paid to the General Partner and/or its affiliates
in an amount equal to the distributions deferred pursuant to Section III(E)
above, with appropriate adjustments to the General Partner's capital accounts
for such amounts as received. Following receipt by the General Partner of the
distributions deferred pursuant to Section III(E) above,
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<PAGE>
distributions to the General Partner and/or its affiliates and the investors
shall thereafter be made in accordance with the provisions of the Partnership
Agreement.
G. The Settling Defendants make the following representations and
commitments:
1. The Barnett Bank Financing is the best financing offer they have
received, after investigating financing alternatives to the Starwood Financing.
2. From a financing point of view, a commercial lender should permit
Raleigh Capital Associates, L.P. to serve as general partner of the Partnership
without calling the Partnership's loans.
3. The settlement is not intended to affect the intervention in the
Delaware Action of class counsel.
4. The Settling Defendants estimate that should $75 million be
distributed out of the proceeds of the Barnett Bank Financing: (a) approximately
$175 per interest would be distributed to those investors who are entitled to
receive distributions under the Partnership Agreement as of the date of the
distribution; (b) based on Raleigh's ownership of approximately 20% of the
interests in the Partnership, approximately $14.2 million would be distributable
to Raleigh, pursuant to the terms of the Partnership Agreement; and (c)
approximately $3.6 million would be distributable to the General Partner and its
affiliates, pursuant to the terms of the Partnership Agreement, subject to
Sections III(E) and III(F) of this Stipulation.
-12-
<PAGE>
IV. IMPLEMENTATION AND SCHEDULING.
A. As a condition of this Stipulation, the board of directors of the
General Partner will adopt a resolution within 10 business days of the date of
this Stipulation irrevocably committing that in October 1997, the General
Partner will choose the option set forth in Section 5.5(J)(i)(c) of the
Partnership Agreement. Within two business days of the adoption of the
foregoing resolution, the General Partner will provide a copy of the resolution
to the Lead Plaintiffs' Settlement Counsel. In addition, as a provision of this
Stipulation, it is agreed to by the Partnership, the General Partner, and the
Plaintiffs, if approved by the Court as fair, reasonable, and in the best
interests of the Partnership and Unitholders, that the decision to choose the
option set forth in Section 5.5(J)(i)(c) of the Partnership Agreement will be
binding upon the General Partner, its affiliates, and any subsequent general
partner, whether or not affiliated with the General Partner, and the
Unitholders.
B. Promptly upon execution of this Stipulation, the parties shall jointly
apply to the Court for entry of a Preliminary Settlement Hearing Order
substantially in the form annexed as Exhibit B hereto, requesting approval for
the mailing to the Unitholders of a Notice in substantially the form as that
annexed hereto as Exhibit C. The Preliminary Settlement Hearing Order will
vacate the Preliminary Injunction Ruling.
C. Within 6 days after the entry of the Preliminary Settlement Hearing
Order, and as provided for therein, the General Partner shall send copies of the
Notice by first-class mail, postage pre-paid, to the Unitholders at their last
known addresses as appearing in the records maintained by the Partnership. The
Notice shall be substantially in the form of Exhibit C, hereto, the terms of
which are incorporated as a material part of this Stipulation. Subsequent to
mailing the Notice, and no less than five days before the Final Settlement
Hearing, Defendants' Counsel shall file an
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<PAGE>
affidavit of mailing with the Court attesting that the Notice was duly served
upon the Unitholders in accordance with the Preliminary Settlement Hearing
Order.
D. The Final Settlement Hearing shall be held 45 days, or such other
period as the Court directs, after the sending of Notice to the Unitholders. In
connection with the Final Settlement Hearing, the Parties shall file with the
Court all such papers as their counsel believe to be necessary. At the Final
Settlement Hearing, the Court will consider the fairness of the terms and
conditions of the Settlement. The Court will also be asked to consider the
application of Plaintiffs' Counsel for fees and reimbursement of expenses.
E. At the Final Settlement Hearing, counsel for the Parties shall jointly
submit to the Court a proposed Final Judgment and Order, in substantially the
form annexed hereto as Exhibit D, providing, among other things, that:
1. the Settlement is approved as fair, reasonable, adequate, and in
the best interests of the Partnership and the Unitholders; and, without limiting
the generality of the foregoing, further finding that the decision of the
General Partner to adopt a resolution irrevocably committing that the General
Partner will choose the option set forth in Section 5.5(J)(i)(c) of the
Partnership Agreement in October 1997 is fair, reasonable, adequate, and in the
best interests of the Partnership and the Unitholders;
2. repeating and reaffirming its prior ruling that all claims that
were asserted in the Actions were only derivative in nature;
3. dismissing the Complaint and each and every cause of action set
forth therein on the merits and with prejudice to the Plaintiffs, the
Partnership, and the Unitholders, and extinguishing all Released Claims;
-14-
<PAGE>
4. permanently barring the plaintiffs, the Unitholders, and the
Partnership from asserting against the Defendants any and all Released Claims;
and
5. reserving the Court's jurisdiction over all matters relating to
the consummation and enforcement of this Stipulation and the Settlement, and,
without limiting the generality of the foregoing, to enforce on any replacement
general partner the commitment of the General Partner in October 1997 to choose
the option set forth in Section 5.5(J)(i)(c) of the Partnership Agreement.
F. The parties agree to cooperate in the prompt submission of this
Stipulation to the Court, to take those reasonable steps that may be required by
the Court to consummate this Settlement and to obtain the entry of a Final
Judgment and Order, annexed as Exhibit D.
G. If this Stipulation shall terminate, or if the Settlement shall not
become effective for any reason, this Stipulation shall be of no effect, and all
orders entered pursuant to this Stipulation, shall be vacated, without
prejudice, and the parties shall be returned to their status quo as of the date
of the entry of this Stipulation, including the reinstatement of the Preliminary
Injunction Ruling and the Appeal.
V. APPLICATION OF PLAINTIFFS' COUNSEL'S FEES AND EXPENSES.
Plaintiffs' Counsel intend to apply to the Court for an award of fees
and the reimbursement of out-of-pocket costs. The Settling Defendants are free
to object to such applications. Any award of fees and expenses made by the
Court shall be payable to Plaintiffs' Counsel ten days after the Settlement
Effective Date.
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<PAGE>
VI. MISCELLANEOUS.
A. This Stipulation shall be binding and shall inure to the benefit
of the parties hereto and their respective successors, assigns, executors,
administrators, heirs, and legal representatives, as the case may be; provided,
however, that no assignment by any party hereto shall operate to relieve such
party hereto of its obligations hereunder.
B. This Stipulation may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
C. This Stipulation, and the exhibits hereto, constitute the sole
and entire agreement among the parties hereto with respect to the subject matter
hereof and no representations, warranties, inducements, promises, or agreements
oral or otherwise not embodied or incorporated herein, have been made concerning
or in connection with this Stipulation, or the exhibits hereto. Any and all
prior discussions, negotiations, agreements, commitments, and understandings
relating thereto, are superseded hereby and merged herein. The provisions of
this Stipulation (including any time periods specified herein) may be modified
by written agreement of all of the parties with the consent of the Court without
further notice to the Unitholders unless the Court so requires. The terms or
provisions of this Stipulation may not be changed, waived, modified, or varied
in any manner whatsoever unless in writing duly signed by all parties. Any
failure by any party to insist upon the strict performance by any other party of
any of the provisions of this Stipulation shall not be deemed a waiver of any of
the provisions hereof, and such party, notwithstanding such failure, shall have
the right thereafter to insist upon the strict performance of any and all of the
provisions of this agreement to be performed by such other party.
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<PAGE>
D. The captions contained in this Stipulation are inserted only as a
matter of convenience and in no way define, limit, extend, or describe the scope
of this agreement or the intent of any provision hereof.
E. This Stipulation including, but not limited to, the Release
contained herein, shall be governed by, and construed in accordance with the
laws of the State of Illinois, without regard to its conflict of laws
principles. This Stipulation shall be enforced solely by the Court and this
Court shall retain jurisdiction over this Settlement.
F. Neither this Stipulation nor any proceedings taken in accordance
with the terms set forth herein shall be construed as or deemed to be evidence,
or any admission or concession, either (a) on the part of plaintiffs, of the
lack of merit of this Action, and (b) on the part of the Settling Defendants, of
any liability or wrongdoing whatsoever, which is hereby expressly denied and
disclaimed by each of the Settling Defendants.
G. This Stipulation shall not be construed more strictly against one
party than another merely by virtue of the fact that it may have been prepared
by counsel for one of the parties, it being recognized that, because of the
arm's-length negotiations described above, all parties hereto have contributed
substantially and materially to the preparation of this Stipulation.
H. All personal pronouns used in this Stipulation, whether used in
the masculine, feminine or neuter gender, shall include all other genders, and
the singular shall include the plural and vice versa.
I. The Plaintiffs and Plaintiffs' Counsel represent that they have
not assigned any of the Released Claims.
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<PAGE>
J. The administration of the Settlement shall be under the authority of
this Court
Dated: April __, 1997 GOODKIND LABATON RUDOFF
& SUCHAROW LLP
By: /s/ Lynda J. Grant
--------------------------------
100 Park Avenue
New York, New York 10017-5563
(212) 907-0700
BEIGEL LASKY RIFKIND FERTIK GELBER &
WHITE
By: /s/ Leigh Lasky
---------------------------------
250 South Wacker Drive
Suite 1500
Chicago, Illinois 60606
(312) 466-9444
Lead Plaintiffs' Settlement Counsel
AND
---
JENNER & BLOCK
By: /s/ Michael T. Brody
---------------------------------
One IBM Plaza
Firm No. 05003
Chicago, Illinois 60611
(312) 222-9350
Counsel for Settling Defendants
BRODY3.CON
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<PAGE>
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
JACK H. CARLSTROM, LYNNE M. )
CARLSTROM, WONETA BELLEVUE, )
ROGER LATHBURY, and BEGONA )
LATHBURY, as representatives of a class of )
similarly situated persons and derivatively on )
behalf of nominal defendant ARVIDA/JMB )
PARTNERS, L.P., )
)
Plaintiffs, ) No. 96 HC 6627
)
v. ) Consolidated with
)
ARVIDA/JMB MANAGERS, INC., NEIL G. ) No. 96 CH 6892
BLUHM, IRA J. SCHULMAN, WALTON )
STREET CAPITAL ACQUISITION CO. III, )
L.L.C., BURTON E. GLAZOV, STUART C. )
NATHAN, A. LEE SACKS, JOHN G. )
SCHREIBER, and JUDD D. MALKIN, )
)
Defendants, )
)
and )
)
ARVIDA/JMB PARTNERS, L.P., )
)
Nominal Defendant. )
PRELIMINARY SETTLEMENT HEARING ORDER
------------------------------------
Upon review and consideration of the Stipulation of Settlement dated
April 1, 1997 (the "Stipulation"), and the exhibits attached thereto, and as a
hearing on the proposed Settlement (as defined in the Stipulation ) is
appropriate and necessary;
NOW, this 1st day of April 1997, upon application of the parties, IT
IS HEREBY ORDERED as follows:
1. The Court adopts all terms as defined in the Stipulation.
<PAGE>
2. The Court has reviewed the Stipulation of Settlement and
preliminarily finds it and the Settlement therein to be fair, reasonable,
adequate, and in the best interests of the Plaintiffs, Unitholders, and
Partnership.
3. A Final Settlement Hearing shall be held on May 13, 1997, at 10:00
a.m. in the Circuit Court of Cook County, Chancery Division, Richard J. Daley
Center, Room 2510, Chicago, Illinois, to determine: (a) the fairness,
reasonableness and adequacy of the Settlement; (b) whether the Settlement should
be finally approved by the Court, and the Final Judgment and Order in a form
substantially similar to Exhibit D to the Stipulation should be entered, and to
hear and determine any objections to the Settlement; and (c) Plaintiffs'
Counsel's application for an award of attorney's fees and reimbursement of out
of pocket costs (including experts' fees).
4. The Court reserves the right to adjourn the Final Settlement
Hearing, without further notice to the Unitholders, other than by announcement
at the Final Settlement Hearing or any adjournment thereof.
5. The Court reserves the right to approve the Settlement at or after
the Final Settlement Hearing with such modifications as may be consented to by
the parties to the Stipulation and without further notice to the Unitholders.
6. Not less than 6 days after the date of this Preliminary Settlement
Hearing Order, the Settling Defendants shall cause the Partnership to mail to
the Unitholders at the addresses shown on the records maintained by or on behalf
of the Partnership, by first-class mail, postage prepaid, a Notice of Pendency
and Settlement of Derivative Action (the "Notice") in substantially the form
attached to the Stipulation as Exhibit B.
7. The form and method of notice specified herein is the best notice
practicable and shall constitute due and sufficient notice of the Final
Settlement Hearing to all
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<PAGE>
persons entitled to receive such notice. Settling Defendants shall, no more than
five (5) days before the Final Settlement Hearing, file proofs of mailing of the
Notice with the Court.
8. Any Unitholder who objects to the Stipulation, the Settlement, the
judgment to be entered herein, and/or Plaintiffs' Counsel's application for
attorneys's fees and reimbursement of out of pocket costs, or who otherwise
wishes to be heard, may appear in person or by his, her or its attorney at the
Final Settlement Hearing and present any evidence or argument that may be proper
and relevant; provided, however, that no person other than the Plaintiffs and
the Settling Defendants and their counsel shall be heard, and no papers, briefs,
pleadings or other documents submitted by any such person shall be received and
considered by the Court (unless the Court in its discretion shall thereafter
otherwise direct, upon application of such person and for good cause shown),
unless not later than April 30, 1997, such persons (a) file with the Court a
written notice of their intention to appear and/or be heard at the Final
Settlement Hearing; (b) file with the Court any other papers they wish to be
considered at the Final Settlement Hearing, setting forth any such information
and/or objections and the support for such objections. Such papers must refer to
Jack H. Carlstrom, et al. v. Arvida/JMB Managers, L.P., et al., No. 96 CH 6627,
state the full name of the person or entity submitting the request to be heard,
the number of units of the Partnership owned by such person or entity, or its
predecessor or assignor, on June 24, 1996, or the dates thereafter on which such
units were obtained, and a statement of the reasons why it is believed that the
Court should find that the Settlement is, or is not, fair, reasonable and
adequate or in the best interests of the Partnership or its Unitholders, or the
reasons why Plaintiffs' Counsel's application for fees and reimbursement of
expenses should not be approved; (c) file with the Court proof of service of the
foregoing papers upon the below-
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<PAGE>
designated counsel; and (d) serve copies of the foregoing papers by first-class
mail or overnight express upon counsel for the parties at the addresses below.
Lead Plaintiffs' Settlement Counsel
-----------------------------------
Lynda J. Grant, Esq.
Joel H. Bernstein, Esq.
Goodkind Labaton Rudoff
& Sucharow, LLP
100 Park Avenue
New York, NY 10017
Leigh Lasky, Esq.
Philip Fertik, Esq.
Beigel Lasky Rifkind
Fertik Gelber & White
250 South Wacker Drive
Suite 1500
Chicago, IL 60606
Settling Defendants' Counsel
----------------------------
Ronald L. Marmer, Esq.
Michael T. Brody, Esq.
Jenner & Block
One IBM Plaza
Chicago, IL 60611
9. Any Unitholder who does not make his, her or its objection in the
manner provided herein shall be deemed to have waived such objection and shall
forever be foreclosed from making any objections unless otherwise ordered by the
Court.
10. Pending final determination of whether the Settlement should be
approved, Plaintiffs, the Partnership, and the Unitholders are barred and
enjoined from commencing or prosecuting an action in any court against any of
the Defendants on any of the Released Claims.
-4-
<PAGE>
11. If the Settlement is approved by the Court, a Final Order and
Judgment, in substantially the form appended as Exhibit D to the Stipulation,
shall be entered as described in the Stipulation.
12. The Court hereby vacates its Preliminary Injunction Ruling. The
General Partner has agreed that it will not cause the Partnership to enter into
the Starwood Financing.
13. In the event that the Settlement does not become effective for any
reason, the Stipulation and all orders entered in furtherance of the Settlement
shall become null and void and of no further force and effect, and the
Stipulation, all orders entered in furtherance of the Settlement, and all
negotiations and proceedings relating thereto shall be without prejudice to the
rights of any and all parties hereto, who shall be restored to their respective
positions existing prior to the execution of the Stipulation and issuance of
this order, including the restoration of the Preliminary Injunction Ruling, and
the reinstatement of the Appeal.
14. In the event that the Settlement does not become effective for any
reason, neither the Stipulation nor any proceedings taken in accordance with the
terms set forth therein shall be construed as or deemed to be evidence, or any
admission or concession, either (a) on the part of plaintiffs, of the lack of
merit of this Action, or (b) on the part of the Settling Defendants, of any
liability or wrongdoing whatever, which is hereby expressly denied and
disclaimed by each of the Settling Defendants.
/s/ Judge Michael B. Getty
--------------------------------
Judge Michael B. Getty
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<PAGE>
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
JACK H. CARLSTROM, LYNNE M. CARLSTROM,WONETA
BELLEVUE, ROGER LATHBURY, andBEGONA LATHBURY,
as representatives of a class ofsimilarly
situated persons and derivatively on behalf
ofnominal defendant ARVIDA/JMB PARTNERS,
L.P.,
Plaintiffs,
v.
ARVIDA/JMB MANAGERS, INC., No. 96 CH
NEIL G. BLUHM, IRA J. SCHULMAN, 6627
WALTON STREET CAPITAL ACQUISITION CO. III, consolidated
L.L.C., with
BURTON E. GLAZOV, STUART C. NATHAN, No. 96 CH
A. LEE SACKS, JOHN G. SCHREIBER, and 6892
JUDD D. MALKIN,
Defendants,
and
ARVIDA/JMB PARTNERS, L.P.,
Nominal Defendant.
NOTICE OF PENDENCY AND SETTLEMENT OF DERIVATIVE ACTION
TO: ALL RECORD AND BENEFICIAL HOLDERS OF UNITS IN ARVIDA/JMB PARTNERS, L.P.
(the "PARTNERSHIP") AS OF JUNE 24, 1996, AND THEIR SUCCESSORS IN INTEREST
AND ASSIGNS, WITH CERTAIN EXCEPTIONS (the "UNITHOLDERS").
PLEASE READ THIS NOTICE CAREFULLY.
THIS NOTICE RELATES TO THE PROPOSED SETTLEMENT OF THE BELOW DESCRIBED
DERIVATIVE ACTION (the "ACTION") AND CONTAINS IMPORTANT INFORMATION WHICH
MAY AFFECT YOUR RIGHTS.
Notice is hereby given to all Unitholders pursuant to an order of the Hon.
Michael B. Getty of the Circuit Court of Cook County, Chancery Division (the
"Court"), dated April 1, 1997 (the "Preliminary Settlement Hearing Order"),
that a hearing (the "Final Settlement Hearing") will be held before Judge
Getty, or such other judge as may be sitting in his stead, on May 13, 1997, at
10:00 a.m., at the Richard J. Daley Center, 50 W. Washington Street, Chicago,
Illinois, 60602, in Courtroom 2510, to determine: (1) whether the proposed
settlement (the "Settlement") of the captioned action (the "Action") upon the
terms set forth in the Stipulation of Settlement dated April 1, 1997 (the
"Stipulation"), is fair, reasonable, adequate, and in the best interests of
Arvida/JMB Partners, L.P. (the "Partnership"), and the Unitholders; (2)
whether a final order and judgment should be entered dismissing the Action on
the merits and with prejudice; and (3) whether plaintiffs' counsel's
application for attorneys' fees and reimbursement of out of pocket costs
(including experts' fees) should be approved. This notice describes a proposed
Settlement that affects the rights of the Partnership and the Unitholders.
<PAGE>
SUMMARY OF PROPOSED SETTLEMENT
The following description is a summary of the Settlement of the Action.
Reference is made to the text of the Stipulation, on file with the Court, for
a full statement of the Settlement provisions:
1. The Partnership will obtain a term sheet from Barnett Bank, a major
commercial bank, which has been approved by Barnett Bank's credit
committee, subject to participation of other banks, for a proposed credit
facility, more fully described in the Stipulation, of $100 million (the
"Barnett Bank Financing"), consisting of a $75 million term loan, a $20
million revolving line of credit, and a $5 million revolving line of credit
available for issuance of standby letters of credit. The Partnership will
use reasonable efforts to close the loan within 120 days of the Settlement
Effective Date (defined in the Stipulation). The Partnership will use the
proceeds of the term loan, if consummated, to fund a cash distribution to
the investors in the Partnership at the time of the distribution of
approximately $175 per unit. The remaining facilities will be used to
replace the Partnership's current Partnership-level bank facilities with
debt at more beneficial interest rates. The Partnership will borrow the
majority of the funds at a floating interest rate 2.25% above the London
Interbank Offered Rate ("LIBOR"). If the loan were closed today, the
interest rate under the Barnett Bank Financing on the floating rate portion
of the loan would be approximately 8.12%. The Partnership will not enter
into the previously proposed recapitalization with Starwood/Florida
Funding, L.L.C. ("Starwood," the "Starwood Financing"), which was first
announced on July 30, 1996.
2. If the Partnership does not enter into a final loan agreement for the
Barnett Bank Financing pursuant to the term sheet within 120 days of the
Settlement Effective Date, or on such earlier date as Arvida/JMB Managers,
Inc. (the "General Partner") concludes the Barnett Bank Financing will not
be consummated, the General Partner will notify the Court, with copies of
such notice to Lead Plaintiffs' Settlement Counsel (designated below).
Prior to such notification, the General Partner will not cause the
Partnership to enter into a Partnership-level financing other than the
Barnett Bank Financing. After such notification, the Partnership may enter
into a loan agreement with any other commercial bank for a financing on
terms not materially different than the Barnett Bank Financing. Until
October 1998, without first obtaining approval from the Court, with 21 days
advance notice to Lead Plaintiffs' Settlement Counsel, the General Partner
will not cause the Partnership to enter into a Partnership-level financing
for the purposes of making a distribution which is not substantially
similar to the Barnett Bank Financing, or which is with a lender other than
a commercial bank.
3. As a condition of the Settlement, the board of directors of the
General Partner will adopt a resolution on or before April 15, 1997,
irrevocably committing that in October 1997, the General Partner will
choose the option set forth in Section 5.5(J)(i)(c) of the Restated and
Amended Partnership Agreement (the "Partnership Agreement") providing for
an orderly disposition phase, in which all of the Partnership's remaining
assets will be sold or disposed of by October 31, 2002. Within two business
days of the adoption of the foregoing resolution, the General Partner will
provide a copy of the resolution to Lead Plaintiffs' Settlement Counsel. In
addition, as a provision of this Stipulation, it is agreed to by the
Partnership, the General Partner, and the plaintiffs, if approved by the
Court, that the decision to choose the option set forth in Section
5.5(J)(i)(c) of the Partnership Agreement will be binding upon the
Unitholders and the General Partner, its affiliates, and any subsequent
general partner, whether or not affiliated with the General Partner. The
Court will retain jurisdiction to enforce this provision.
4. The Court had previously made oral findings and issued a written
ruling in which it preliminarily enjoined the consummation of Starwood
Financing (the "Preliminary Injunction Ruling"). The Settling Defendants
appealed the Ruling. As part of its Preliminary Settlement Hearing Order,
the Court has vacated its Preliminary Injunction Ruling. Pursuant to the
Settlement, the Settling Defendants will move to dismiss their Appeal
(defined below) without prejudice. The Appeal may be deemed to be dismissed
with prejudice upon the Settlement Effective Date.
5. A portion of any proceeds of the Barnett Bank Financing otherwise
distributable to the General Partner and/or its affiliates will be used to
pay (i) up to 50% of the defendants' counsel's litigation fees and expenses
in the Action and the Appeal; and (ii) up to 50% of any award by the Court
of plaintiffs' counsel's
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fees and out of pocket expenses in connection with this Action and the
Appeal. The total payments under this provision will not exceed the maximum
amount of the distribution to which the General Partner and/or its
affiliates may otherwise be entitled under the Partnership Agreement as a
result of the Barnett Bank Financing.
6. The General Partner and/or its affiliates will defer the amounts
otherwise distributable to the General Partner and/or its affiliates
referred to in the preceding paragraph, until such time as the investors
have received the "Threshold Amount," which is defined as aggregate
distributions after July 1, 1996 equal to $565 per unit plus a 4.5% per
annum cumulative return, compounded quarterly, beginning July 1, 1996, on
an amount, calculated from time to time, equal to $565 per unit less any
amounts distributed to the investors after July 1, 1996. At such time as
the investors have received the Threshold Amount, distributions shall be
paid to the General Partner and/or its affiliates in an amount equal to the
distributions deferred pursuant to the preceding paragraph, with
appropriate adjustments to the General Partner's capital accounts for such
amounts as received. Following receipt by the General Partner of the
distributions deferred pursuant to the preceding paragraph, distributions
to the General Partner and/or its affiliates and the investors shall
thereafter be made in accordance with the provisions of the Partnership
Agreement.
SETTLING DEFENDANTS' REPRESENTATIONS
The Settling Defendants additionally make the following representations and
commitments:
(a) The Barnett Bank Financing is the best financing offer they have
received after investigating financing alternatives to the Starwood
Financing.
(b) From a financing point of view, a commercial lender should permit
Raleigh Capital Associates, L.P. to serve as general partner of the
Partnership without calling the Partnership's loans.
(c) The Settlement is not intended to affect the intervention of class
counsel in the Delaware Action (defined below).
RELEASE
Upon the Settlement Effective Date, the Partnership, and the Plaintiffs
herein, their heirs, executors, administrators, successors, and assigns,
individually and derivatively, and the Unitholders, their heirs, executors,
administrators, successors, and assigns, derivatively, for the consideration
and upon the terms and conditions set forth below, shall release and forever
discharge the Defendants (defined in the Stipulation), their respective
present and former partners, agents, parents, affiliates of any kind and
nature, predecessors, servants, employees, officers, directors, heirs,
executors, representatives, successors, and assigns, including their
attorneys, accountants, consultants, appraisers, and actuaries, from each and
every claim, liability, expense, cause of action, matter, or suit, whether
arising under state, federal, or the common law, whether or not brought in
this or in any other court or forum (including, but not limited to, in
arbitration), which arise from the Tender Offers (defined below), the Settling
Defendants' (defined below) responses thereto through the date of the entry of
the Preliminary Settlement Hearing Order, the Barnett Bank Financing, or the
Starwood Financing, which has been or might have been asserted against them in
the Action. Notwithstanding the foregoing, and without limiting the generality
of the foregoing, the following claims are not, and shall not be, released by
this release: (a) Raleigh's (defined in the Stipulation) and the Unitholders'
(including purported class representative Gladys Beasley's) claims and
defenses against the Partnership and the Defendants, if now pending, or later
brought, in the Delaware Action, captioned Arvida/JMB Partners, L.P. v.
Vanderbilt Income and Growth Associates, L.L.C., Vanderbilt Income and Growth
Associates, L.L.C., et al. v. Arvida/JMB Partners, L.P., et al., and Beasley
v. Arvida/JMB Partners, L.P., C.A. No. 15238 (Del. Ct. Ch.), relating to (i)
Raleigh's and the Unitholders' alleged ability to vote; (ii) Raleigh's efforts
to be made replacement general partner, other than derivative claims released
in this Section; and (iii) Raleigh's request to be made a substituted limited
partner in the Partnership; and (b) any claim to enforce the terms of this
Settlement.
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COMMENCEMENT OF ACTION AND PRE-HEARING PROCEEDINGS
The Action was commenced with the filing of two constituent actions: a class
action captioned Irwin Weiss, et al. v. Arvida/JMB Managers, Inc., 96 CH 6627,
filed on June 24, 1996, and a class and derivative action, captioned Jack M.
Carlstrom, et al. v. Arvida/JMB Managers, Inc. et al., No. 96 CH 6892, on July
1, 1996, against the General Partner and certain other persons and entities.
The two actions were subsequently consolidated, and claims were added against
the certain members of the General Partner's board of directors (with the
General Partner, the "Settling Defendants") and others. Irwin Weiss later
voluntarily dismissed his claims as a plaintiff.
In or about November 1996, expedited motions to dismiss were heard,
resulting in the Court's Memorandum of Opinion dated November 27, 1996 (the
"November 27 Ruling"). In the November 27 Ruling, the Court determined that
the Action was properly brought as a derivative action, that all purported
individual claims should be dismissed because they were derivative in nature,
held that Jack H. and Lynne M. Carlstrom did not have standing to bring such
derivative claims, and dismissed claims against certain of the then named
defendants, including Walton Street Capital Acquisition Co., III, L.L.C.
("Walton Street"), Neil G. Bluhm, and Ira J. Schulman. The Court further gave
plaintiffs leave to file another complaint. Plaintiffs subsequently
voluntarily dismissed claims against Lehman Brothers, Inc., Starwood Capital
Group I, L.P., Starwood/Florida Funding, L.L.C., Starwood Opportunity Fund IV,
L.P., BSS Capital II, L.L.C. Barry Sternlicht, and Whitehall Street Real
Estate Limited Partnership VII.
On November 27, 1996, plaintiffs Woneta Bellevue, Roger Lathbury and Begona
Lathbury filed the Third Amended Consolidated Class Action and Verified
Derivative Complaint (the "Complaint"). The Complaint charges that the
Settling Defendants violated their fiduciary obligations to the Partnership by
entering into the Starwood Financing.
The Complaint alleges, among other things, that the Starwood Financing was:
(a) entered into primarily to entrench the General Partner in light of threats
to its control of the Partnership from various tender offers by Walton Street,
Boreas Partners, L.P., and Raleigh Capital Associates, L.P. (the "Tender
Offers"); and threats to its ability to exercise the option and its benefits
thereunder, contained in Section 5.5(J)(i)(c) of the Partnership Agreement
which provides that, in October 1997, the General Partner can choose one of
three alternatives for the Partnership: (i) the listing of the Partnership's
units on a nationally recognized stock exchange; (ii) an orderly disposition
phase, in which all of the Partnership's remaining assets will be sold or
disposed of by October 31, 2002; and (iii) the General Partner's purchase of
the units at fair market value; and (b) was not in the best interests of the
Partnership or the Unitholders as it would impose onerous and risky leverage
upon the Partnership.
In their Verified Answer filed on December 12, 1996, the Settling Defendants
denied the allegations of wrongdoing in the Complaint. The Settling Defendants
contend that the Starwood Financing was in the best interests of the
Partnership and that it would protect the Unitholders from the inadequate
Raleigh Capital Associates, L.P. tender offers by allowing the Partnership to
make an immediate cash distribution, and permit the investors in the
Partnership to retain their interests. The Settling Defendants also contend
that they acted pursuant to the opinion of their independent investment
banker, Lehman Brothers, Inc., and that the Starwood Financing was
"commercially reasonable" and "fair."
From the period of October 1996 until March 1997, the parties engaged in
extensive expedited discovery. During that period, plaintiffs' counsel
reviewed the thousands of pages of documents produced by the Defendants and
third parties. The parties further engaged in deposition discovery, taking the
depositions of approximately ten parties and third party witnesses.
In September 1996, Raleigh commenced an action against the General Partner,
among others, in the Chancery Court of Delaware, and various claims and
counterclaims have been filed in that case (the "Delaware Action"). That
action is currently pending and the Settlement will not resolve the Delaware
Action.
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PRELIMINARY INJUNCTION HEARING AND RULING
On December 12 and 13, 1996, the Court held an evidentiary hearing. During
that hearing, the Court heard testimony from: Judd Malkin, the chairman of the
board of JMB Realty Corporation and the chairman of the board of the General
Partner; Michael Ashner, the president of Raleigh's corporate general partner;
Eugene Gorab, a Starwood executive; and plaintiffs' investment banking expert.
The Court also considered the evidentiary deposition of William Evans, III, of
PaineWebber, Inc. After considering two days of testimony, and 25 exhibits,
the Court made oral findings and issued a written preliminary injunction
ruling enjoining the Starwood Financing until further order of the Court
following a permanent injunction hearing. The Court subsequently set the
permanent injunction hearing for March 17, 1997.
On January 13, 1997, the Settling Defendants filed a Notice of Appeal of the
Preliminary Injunction Ruling (the "Appeal"), in which they claim the Court
applied an incorrect legal standard at the preliminary injunction hearing. In
addition and alternatively, the Settling Defendants contend that their
adoption of the Starwood Financing was commercially reasonable and fair.
THE MEDIATION
On March 5, 1997, and March 13, 1997, plaintiffs' counsel, with authority of
the named plaintiffs, and the Settling Defendants, with their counsel, engaged
in two days of mediation before the Court. That mediation resulted in the
proposed Settlement.
In light of their investigation and prosecution of the Action, and as a
result of the vigorous negotiations during the Court-supervised mediation,
plaintiffs' counsel have concluded that the Settlement is fair, reasonable and
adequate to the Partnership and its Unitholders, as discussed below.
Defendants, while continuing to deny all allegations of liability and
without in any way acknowledging any fault or liability, also desire to
settle, compromise and terminate the claims against them to avoid the further
expense, distraction of management, and inconvenience and to put to rest all
claims which have or could have been asserted against them arising from the
circumstances and the events alleged in the Action.
THE BENEFITS OF THE BARNETT BANK FINANCING
The Barnett Bank Financing, if consummated, would provide the Partnership
and the Unitholders with significant benefits, without placing the Partnership
at significant risk. The Barnett Bank Financing would provide the Partnership
with: a $75 million term loan; a $20 million revolving line of credit; and a
$5 million revolving line of credit available for the issuance of standby
letters of credit. The majority of the term loan and $20 million line of
credit are at an interest rate of LIBOR plus 225 basis points (approximately
8.12% on April 1, 1997).
The Barnett Bank Financing, if consummated, will be used to replace the
Partnership's present Partnership-level credit facilities. The Barnett Bank
Financing would allow the Partnership to make a cash distribution of
approximately $75 million, which will permit a distribution to the investors
in the Partnership at the time of the distribution of approximately $175 per
unit.
Although the Barnett Bank Financing requires that the General Partner
continue to manage the Partnership, Barnett Bank has agreed to not
unreasonably withhold its consent and to use its normal and customary
standards in determining whether to consent to any replacement general
partner. Moreover, any replacement general partner can buy out the Barnett
Bank Financing and become the replacement general partner (upon approval of
the Unitholders having the right to vote). The Barnett Bank Financing,
therefore, does not have any entrenching effect.
If the Partnership is able to close the loan, the Barnett Bank Financing
will enable the Partnership to make an immediate distribution to the investors
in the Partnership, at lower interest rates than its existing borrowings or
the Starwood Financing. The Barnett Bank Financing will also not impose a
barrier to potential tender offerors seeking to replace the General Partner,
such as Raleigh.
5
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The effect of the Barnett Bank Financing and the General Partner's
continuing commitment to choose the option set forth in Section 5.5(J)(i)(c)
of the Partnership Agreement in October 1997 will be to increase the
anticipated distributions to Unitholders and the remaining value of their
units. Therefore, plaintiffs' counsel believe that the Barnett Bank Financing
is more beneficial to the Partnership than the Starwood Financing, and the
terms of the Settlement, including the Settling Defendants' agreement to defer
a portion of their own distributions, as described above, are fair,
reasonable, adequate, and in the best interests of the Partnership and the
Unitholders.
THE PROPOSED FINAL ORDER AND JUDGMENT
At the Final Settlement Hearing, counsel for the parties shall jointly
submit to the Court a proposed Final Order and Judgment, which will:
1. provide that the Settlement is fair, reasonable, adequate and in the
best interests of the Partnership, plaintiffs, and the Unitholders; and,
without limiting the generality of the foregoing, further finding that the
decision of the General Partner to adopt a resolution irrevocably
committing that the General Partner will choose the option set forth in
Section 5.5(J)(i)(c) of the Partnership Agreement in October 1997 is fair,
reasonable, and in the best interests of the Partnership, plaintiffs, and
the Unitholders;
2. repeat and reaffirm the Court's prior ruling that all claims that were
asserted in the Actions were only derivative in nature.
3. dismiss the Complaint and each and every cause of action set forth
therein on the merits and with prejudice to the Plaintiffs and the
Partnership, and extinguishing the released claims, as described above.
4. permanently bar plaintiffs, the Partnership, and the Unitholders from
asserting against the Settling Defendants any and all released claims; and
5. reserve the Court's jurisdiction over all matters relating to the
consummation and enforcement of the Stipulation and the Settlement, and,
without limiting the generality of the foregoing, reserve jurisdiction to
enforce on any replacement general partner the commitment of the General
Partner in October 1997 to choose the option set forth in Section
5.5(J)(i)(c) of the Partnership Agreement.
PLAINTIFFS' COUNSEL'S FEES AND EXPENSES
Plaintiffs' counsel intend to apply to the Court for an award of fees of up
to $5,000,000.00 and for the reimbursement of their out of pocket costs
(including experts' fees) in the Action and the Appeal. Plaintiffs and the
Settling Defendants have agreed to participate in a Court supervised mediation
respecting the plaintiffs' counsel's application for an award of attorneys'
fees and reimbursement of out of pocket expenses. If the mediation is
successful, the Court will be asked to grant final approval of plaintiffs'
counsel's fees and expenses at the Final Settlement Hearing. Otherwise, the
Court will make a determination as to plaintiffs' counsel's application for
fees and reimbursement of out of pocket expenses at the Final Settlement
Hearing.
THE FINAL SETTLEMENT HEARING
At the Final Settlement Hearing, the Court will determine whether: (a) the
Settlement described above is fair, reasonable, adequate, and in the best
interests of the Partnership and the Unitholders; (b) the Settlement should be
approved by the Court; (c) the Action should be dismissed on the merits and
with prejudice; and (d) the plaintiffs' counsel's application for attorneys'
fees and reimbursement of out of pocket costs (including experts' fees) should
be approved. The hearing may be continued or adjourned from time to time by
the Court at the hearing or any adjourned session thereof without further
notice.
If you are a Unitholder and you wish to be heard respecting approval of the
Settlement, or plaintiffs' counsel's application for attorneys' fees and out
of pocket costs, you must, on or before April 30, 1997: (a) file with the
Court a written notice of your intention to appear and/or be heard at the
Final Settlement Hearing; (b) file with the Court any other papers you wish to
be considered at the Final Settlement Hearing, setting forth any
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such information and/or objections and the support for such objections. Such
papers must refer to Jack H. Carlstrom, et al. v. Arvida/JMB Managers, L.P.,
et al., No. 96 CH 6627 and 96 CH 6892, state the full name of the person or
entity submitting the request to be heard, the number of units of the
Partnership owned by such person or entity, or its predecessor or assignor, on
June 24, 1996, or the dates thereafter on which such units were obtained, and
a statement of the reasons why it is believed that the Court should find that
the Settlement is, or is not, fair, reasonable and adequate or in the best
interests of the Partnership or its Unitholders, or the reasons why
plaintiffs' counsel's application for fees and reimbursement of out of pocket
costs should not be approved; (c) serve copies of the foregoing papers by
first class mail or overnight express upon counsel for the parties at the
addresses below; and (d) file with the Court proof of service of the foregoing
papers upon the below designated counsel:
Lead Plaintiffs' Settlement Counsel
Lynda J. Grant, Esq.
Joel H. Bernstein, Esq.
Goodkind Labaton Rudoff
& Sucharow LLP
100 Park Avenue
New York, NY 10017
Leigh Lasky, Esq.
Philip Fertik, Esq.
Beigel Lasky Rifkind
Fertik Gelber & White
250 South Wacker Drive
Suite 1500
Chicago, IL 60606
Settling Defendants' Counsel
Ronald L. Marmer, Esq.
Michael T. Brody, Esq.
Jenner & Block
One IBM Plaza
Chicago, IL 60611
ANY UNITHOLDER WHO DOES NOT MAKE HIS, HER OR ITS OBJECTION IN THE MANNER
PROVIDED HEREIN SHALL BE DEEMED TO HAVE WAIVED SUCH OBJECTION TO THE
SETTLEMENT AND THE FINAL ORDER AND JUDGMENT AND SHALL FOREVER BE FORECLOSED
FROM MAKING ANY OBJECTIONS UNLESS OTHERWISE ORDERED BY THE COURT.
EXAMINATION OF PAPERS AND INQUIRIES
For a more detailed statement of the matters involved in the Action,
reference is made to the pleadings, the Stipulation, and other papers filed in
this Action, which may be inspected at the office of the Clerk of the Circuit
Court of Cook County, Chancery Division, Room 802, Richard J. Daley Center, 50
W. Washington Street, Chicago, Illinois, 60602, during business hours.
Inquiries regarding the Action should be addressed in writing to plaintiffs'
counsel listed above.
DO NOT CONTACT THE COURT
Dated: April 1, 1997
BY ORDER OF THE CIRCUIT COURT OF
COOK COUNTY, CHANCERY DIVISION
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IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
JACK H. CARLSTROM, LYNNE M. )
CARLSTROM, WONETA BELLEVUE, )
ROGER LATHBURY, and BEGONA )
LATHBURY, as representatives of a class of )
similarly situated persons and derivatively on )
behalf of nominal defendant ARVIDA/JMB )
PARTNERS, L.P., )
)
Plaintiffs, ) No. 96 HC 6627
)
v. ) Consolidated with
)
ARVIDA/JMB MANAGERS, INC., NEIL G. ) No. 96 CH 6892
BLUHM, IRA J. SCHULMAN, WALTON )
STREET CAPITAL ACQUISITION CO. III, )
L.L.C., BURTON E. GLAZOV, STUART C. )
NATHAN, A. LEE SACKS, JOHN G. )
SCHREIBER, and JUDD D. MALKIN, )
)
Defendants, )
)
and )
)
ARVIDA/JMB PARTNERS, L.P., )
)
Nominal Defendant. )
FINAL ORDER AND JUDGMENT
------------------------
A Final Settlement Hearing having been held before this Court on
_________________, 1997, pursuant to the Preliminary Order dated April __, 1997,
upon the Stipulation of Settlement dated April __, 1997 (the "Stipulation"),
which is incorporated herein by reference, it appears that (i) due notice of
said Final Settlement Hearing having been given in accordance with the
Preliminary Settlement Hearing Order; (ii) the respective parties having
appeared by their attorneys of record; (iii) the Court having heard and
considered the evidence
<PAGE>
and arguments in support of the Settlement; (iv) opportunity to be heard having
been given to the Plaintiffs, the Partnership and the Unitholders in accordance
with the Preliminary Settlement Hearing Order; (v) the Court having determined
that notice to the Plaintiffs, the Partnership, and the Unitholders in
accordance with the Preliminary Settlement Hearing Order was adequate and
reasonable; and (vi) the entire matter of the Settlement having been heard and
considered by the Court.
NOW, THEREFORE IT IS HEREBY ORDERED, ADJUDGED, AND DECREED this __ day
of _______________, 1997, that:
1. The Court finally adopts all terms as defined in the Stipulation.
2. The form and manner of notice given to the Plaintiffs, the
Partnership, and the Unitholders is determined to have been the best notice
practicable under the circumstances and satisfies due process requirements.
3. Any objections to the Settlement have been considered by the
Court.
4. The Settlement is approved as fair, reasonable and adequate, and
in the best interests of the Plaintiffs, the Partnership and the Unitholders,
and shall be consummated by the parties in accordance with its terms and
conditions and the terms and conditions of the Stipulation. Without limiting the
generality of the foregoing, the decision of the General Partner to adopt a
resolution irrevocably committing that the General Partner will choose the
option set forth in Section 5.5(J)(i)(c) of the Partnership Agreement in October
1997 is fair, reasonable, and in the best interests of the Partnership and the
Unitholders;
5. The Court repeats and reaffirms its prior ruling that all claims
that were asserted in the Actions were only derivative in nature;
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<PAGE>
6. The Court dismisses the Action on the merits and with prejudice to
the Plaintiffs, the Partnership, and the Unitholders, and extinguishes all
Released Claims;
7. The Partnership, Plaintiffs, and Unitholders are permanently
barred and enjoined from instituting, commencing, asserting, prosecuting, or
continuing any of the Released Claims against any of the Defendants in this or
any other jurisdiction.
8. The Court reserves jurisdiction over all matters relating to the
consummation and enforcement of this Stipulation and the Settlement, and,
without limiting the generality of the foregoing, to enforce on any replacement
general partner the commitment of the General Partner in October 1997 to choose
the option set forth in Section 5.5(J)(i)(c) of the Partnership Agreement.
9. Without affecting the finality of this Final Order and Judgment in
any way, the Court reserves jurisdiction over all matters relating to the
consummation and enforcement of the Settlement and this Final Judgment and
Order.
------------------------------------
Judge Michael B. Getty
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Exhibit (c)(13)
[LOGO OF BARNETT BANK] Barnett Bank of Broward County, N.A.
Commercial Real Estate One East Broward Boulevard
Fort Lauderdale, Florida 33301
March 12, 1997
Mr. Stephen A. Lovelette
Vice President
Arvida/JMB
900 North Michigan Avenue
Chicago, Illinois 60611-1575
Re: Refinance of Arvida/JMB Partners, L.P.
Dear Steve,
Barnett Bank is pleased to present the following proposed terms to provide
financing for the Partnership. While these terms summarize our proposal, the
complete terms and conditions will be those contained in the loan documents. I
hope you will find everything to be in order and am looking forward to working
together.
Borrower: Arvida/JMB Partners, L.P. (Partnership)
- ---------
Participation: The amounts discussed below are gross facility amounts,
- -------------- subject to participation. Barnett has approval for a
maximum 50% share of each facility.
Facilities/Amounts: 1) $75,000,000 Term Loan
- ------------------- 2) $20,000,000 Revolving Line of Credit
3) $5,000,000 Revolving Line of Credit available for the
issuance of standby letters of credit.
Repayment: Curtailments will be based on the following: i) $12,500,000
- ---------- by each anniversary of the closing of the loan, ii) the sum
of any shortfalls from previous years calculated by
subtracting the actual curtailments for any year from
$18,750,000, iii) additional principal curtailments will be
based upon a formula calculated by multiplying
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cash available for distribution* times 25%. Curtailments related
to (iii) will occur at the time distributions are made.
Subject to the other terms and conditions in the loan agreement
once the Borrower has curtailed the term loan by $18,750,000 in
year 1, ii) $37,500,000 (cumulative) for years 1 and 2, or iii)
$56,250,000 (cumulative) for years 1, 2, and 3, the Borrower may
distribute remaining cash available for distribution without the
Bank receiving 25%.
* Cash available for distribution will include all sources of
cash that will constitute the distribution (e.g. cash flow after
project financing, cash from cash accounts that will be
distributed).
Term: 48 months from closing for all facilities.
Collateral: All property and assets presently owned or in the future owned by
the Borrower subject to a first lien of the Bank Group. Security
will consist of first real estate mortgagees on real property and
improvements including tangible and intangible personalty
associated with the properties, pledge or assignment of all other
assets, sales contracts, and Borrower interests in any entities.
Notwithstanding the foregoing, Borrower will be able to finance
individual projects up to an aggregate committed amount of $70
million. In the event a joint venture partner of the Borrower
will not consent to a first lien or pledge of its assets, the
Borrower will not be obligated to provide the lien or pledge, and
the Bank Group will not accept the property in the calculation of
loan-to-value.
Administrative
Agent: Barnett Bank
Pricing: Rate
i) LIBOR + 225 basis points, or
ii) Prime
Fee
1% loan fee on all facilities.
Note: Barnett intends to fully pass through all fees and rate to
other banks participating in the three credits with exception of
the letter of credit facility where only 7/8% of the 1% fee will
be passed through. Because multiple L/C's are impractical,
Barnett will issue one letter of credit for the bank group. For
this service it will receive 1/8%.
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Other: 1) Covenants -- Please see attached Conditions Sheet.
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2) Borrower will pay all reasonable third-party costs incurred
by Barnett in underwriting the loan, including but not
limited to: appraisal, environmental, costing, inspections,
and legal. All costs will be subject to Borrower's review. If
possible and if appropriate, Bank will try to use any
existing reports in its underwriting.
I hope you will find this proposal acceptable and that you will ask Barnett to
move forward with documenting the loan. I look forward to talking with you.
Very truly yours,
/s/ Brian K. Davis
Brian K. Davis
Vice President
<PAGE>
CONDITIONS
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1) Facilities: Are part of a $100,000,000 financing package and should be viewed
collectively. BBBC will have a maximum 50% share and assume the role of
administrative agent. We anticipate that the remaining $50,000,000 share will be
participated to at least one, but more likely, two other banks including [names
of banks redacted].
2) Loan-to-Value: The three facilities will not exceed 60% for the first two
years and 50% for the remaining two years. Loans will include the committed
amount of the three subject facilities divided by all assets where the bank
group has a first lien and excluding assets and their respective debt financed
outside of the facility. LTV to be reaffirmed whenever releases are submitted to
the Bank, most likely quarterly. LTV calculations will be based on the remaining
collateral secured by the bank group's first mortgage. For any period when a new
appraisal of the assets has not been performed, Bank will attempt to use the
discounted cash flow model as a proxy for value of the remaining assets.
Borrower to warrant that it is in compliance with the LTV covenant whenever it
draws funds under the revolver or requests a letter of credit.
If the LTV covenant is in excess of the specified level, the Borrower shall: i)
pay down the term loan to a level such that the covenant would not be violated,
or, ii) place sufficient cash into a cash collateral account at Barnett Bank
that, when added to the value of the other collateral, would permit the ratio to
be in compliance.
3) Appraisals: Value will be determined by appraisals acceptable to the bank
group. Borrower will need to appraise sufficient properties to render the LTV
levels discussed above. If necessary, the bank group will have the right to
appraise all assets securing the loan once annually at the Borrower's expense.
Any disputes relating to value will be resolved under a dispute resolution
methodology as set forth in the loan agreement.
4) Term Loan Curtailments: Annual curtailments will be based on the following:
i) $12,500,000 by each anniversary of the closing of the loan, ii) the sum of
any shortfalls from previous years calculated by subtracting the actual
curtailments for any year from $18,750,000, iii) additional principal
curtailments will be based upon a formula calculated by multiplying cash
available for distribution* times 25%.
Subject to the other terms and conditions in the loan agreement, once the
Borrower has curtailed the term loan by $18,750,000 in year 1, ii) $37,500,000
(cumulative) for years 1 and 2, or, iii) $56,250,000 (cumulative) for years 1,
2, and 3, the Borrower may distribute remaining cash available for distribution*
without the Bank receiving 25%.
*Cash available for distribution will include all sources of cash that will
constitute the distribution (e.g. cash flow after project financing, cash from
cash accounts that will be distributed).
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5) Application/Underwriting Fee: The Borrower will pay a non-refundable
application fee of $25,000 when BBBC issues an acceptable term sheet. This fee
will be applied against the commitment fee if the loan closes. If the loan does
not close for reasons other than BBBC declining the request, the partnership
will further compensate BBBC for reasonable third party costs.
6) Covenants: All covenants will be tested quarterly. Financial covenants
will be calculated using operating results for the prior twelve
month period.
a) DSC: Minimum of 1.6:1 If (less than) 1.6: No further
distributions until the ratio of 1.6:1 is restored. If (less
than) 1.3: event of default. In 1998 only, Borrower may make
distributions to the partners as long as DSC is greater than or
equal to 1.3X. DSC is defined as cash flow after project
financing divided by all payments of interest and required
amortization related to the term loan. Interest expense includes
all accrued and capitalized interest. Capitalized interest may
be excluded as long as it is being funded from an interest
reserve. Provided no other covenants are in default, if the DSC
covenant is in default, the Borrower will have 90 days to cure.
b) Liabilities to Net Worth must be (less than) 1.65:1 during
the first two years of the loan. The ratio will decrease to
1.5:1 for the final two years of the loan. Liabilities will
include all GAAP liabilities, including: letters of credit
(except when posted as "maintenance bonds" and the Borrower can
demonstrate that the work has been completed), financial
guaranties of indebtedness (without redundancy), and unfunded
obligations of the borrower. If the ratio exceeds the prescribed
level using committed, but unfunded obligations, but is less
than the prescribed level using outstandings, the Borrower will
not be permitted to make any distributions, but it will not
constitute an event of default.
c) Minimum GAAP net worth must be at least $120,000,000 at the
time of closing and reduce annually by an amount equal to the
total curtailments made to the Term Loan.
d) Borrower may not acquire additional land except as may be
required under existing DRI's or to maintain or preserve
entitlements. Notwithstanding the foregoing, the purchase of
HAE, predesignated parcels at Weston, and a parcel adjacent to
Water's Edge is allowed.
e) Financial Information: Bank group will have the right to
receive sufficient information including, but not limited to:
GAAP basis quarterly partnership financial statements (45 days
after the end of the quarter), audited consolidated and
unaudited consolidating financial statements (90 days after the
end of the year), property cash flows, rent rolls and leasing
status reports, budgets (45 days
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<PAGE>
prior to the end of the year), operating statements, note
receivable summary, summary of cash and cash equivalents,
overhead budgets, and capital improvement budgets.
f) Borrower may not have or incur additional debt.
Notwithstanding the foregoing, Borrower may not incur third party
project debt in excess of $70 million based on the committed
amount of the loans.
g) Borrower will not permit or make: i) any material changes to
its partnership agreement, ii) a change in control of the general
partner of the Borrower, or, iii) a change in control of the
Borrower without the prior consent of the Bank, which consent
shall not be unreasonably withheld or delayed. Consideration of
any requested changes will be in accordance with the Bank's
normal and customary standards. If the Bank Group consents to
(ii) or (iii), the Borrower will pay a 1/2% fee calculated on the
committed amount of the revolver and L/C facility and a 1/2% fee
on the then outstanding amount of the term loan.
7) Events of Default: Customary without limitation, failure to make payments
when due; breach of covenants; breach of representations and warranties; breach
of any guaranties; bankruptcy/insolvency; judgments or attachments which cannot
be bonded or cured within an acceptable period; any monetary or material non-
monetary default resulting in acceleration of other recourse indebtedness in
excess of $5,000,000. All defaults will have customary notice and cure
provisions. Defaults under non-recourse debt are excluded from this provision.
8) Intercompany Advances: Except for cases in the ordinary course of business
and for properties and assets currently in the portfolio or permitted to be
acquired under the loan documents, the Borrower is prohibited from making any
intercompany advances for businesses or assets outside of Arvida/JMB Partners,
L.P.
9) Revolver Clean-up: Borrower will clean-up the Revolver for 30 consecutive
days during each twelve month period commencing at closing. The loan will
consist of four 12 month periods. The Borrower will have the ability, for one
time only, to clean-up the Revolver during a 24 month period and not have the
lack of clean-up constitute an event of default. However, during this period,
the Borrower may not make any distributions. If the Borrower does not clean-up
the Revolver by the end of the 24 month period, it will be an event of default.
10) Letters of Credit: BBBC will front the letter of credit for the bank group.
For this service, BBBC will receive 1/8% on the remaining bank group's share of
the letter of credit facility. Any draws under the facility will be funded by
BBBC and immediately reimbursed by the other participating banks (via a
reimbursement provision in the intercreditor agreement). Borrower will cash
collateralize any letters of credit outstanding at maturity of the Letter of
Credit facility.
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11) Legal: All litigation affecting the Borrower, the Partnership Agreement,
DRI/zoning status to be reviewed by Bank counsel prior to closing, to confirm
Borrower's representations.
12) Unscheduled Asset Sales: For any currently unscheduled asset sales
occurring during any year during the term of the loan greater than or equal to
$25 million, alone or cumulatively, Borrower will not distribute the proceeds
from those sales until BBBC has had sufficient opportunity to evaluate the
effect of those sales on the remaining collateral value and the loan covenants.
If the distribution would not result in a violation of any of the loan
covenants, then the Borrower would be free to make a distribution subject to the
loan agreement. If the distribution would result in a violation of any of the
loan covenants: i) the Borrower would not be permitted to make the distribution
related to those sales until the time that, if by making the distribution, no
covenants would be violated, or, ii) Borrower could pay down the term loan to a
level so that no covenants would be violated after the distribution.
13) Recourse: Each of the three facilities will be without recourse to the
general partner and each of the limited partners in the Borrower (and any of
their respective officers, directors, shareholders, partners, other owners, or
agents). Deficit capital accounts of the partners in the Borrower and any
Obligations of any partner to: i) contribute capital or otherwise pay amounts to
the Borrower or to any other partners, or, ii) restore or repay any deficit
capital account shall not be considered an asset or property of the Borrower to
which Lenders shall have any recourse.
14) Swap/Cap: Borrower has agreed to swap or cap on third of the projected
outstandings of the term loan.
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