U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________________ to ________________
Commission file number 1-10641
MILESTONE PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 65-0158204
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
150 E. Palmetto Park Rd. 4th Floor, Boca Raton, FL 33432
(Address of Principal Executive Offices) (Zip Code)
(561) 394-9533
(Registrant's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of August 10, 1998, 4,250,445 shares of the registrant's common stock, par
value $.01 per share, and 3,000,251 shares of the registrant's $.78 Convertible
Series A preferred stock, par value $.01 per share, were outstanding.
<PAGE>
Part I: Financial Information
Item 1. Financial Statements
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 (Unaudited) and December 31, 1997
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
Assets:
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 12,865,320 $ 13,435,237
Restricted cash 222,000 222,000
Loans receivable 1,479,274 1,512,744
Accounts receivable 897,520 1,265,625
Accrued interest receivable 3,779,958 8,465,528
Due from related party 485,444 391,851
Prepaid expenses and other 1,625,507 1,034,613
---------- ----------
Total current assets 21,355,023 26,327,598
Property, improvements and equipment, net 23,167,422 19,610,060
Wraparound notes, net 52 874,991 59,402,931
Deferred income tax asset, net 5,114,060 4,058,358
Investments in preferred stock 1,337,600 2,228,600
Management contract rights, net 242,316 290,926
Goodwill and other, net 601,938 304,639
----------- -----------
Total assets $104,693,350 $ 112,223,112
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,097,264 $ 2,015,942
Accrued interest payable 242,019 259,116
Master lease payable 6,911,321 13,637,564
Current portion of mortgages and notes payable 37,742,544 38,456,766
Income taxes payable 2,822,119 2,822,119
---------- ----------
Total current liabilities 48,815,267 57,191,507
Mortgages and notes payable 31,700,071 29,282,798
---------- ----------
Total liabilities 80,515,338 86,474,305
---------- ----------
Commitments and Contingencies
Stockholders' equity:
Common stock ($0.01 par value, 10,000,000 shares
authorized, 4,943,036 and 4,905,959 issued and
outstanding in 1998 and 1997, respectively) 49,431 49,060
Preferred stock (Series A $0.01 par value, $10
liquidation preference 10,000,000 shares
authorized, 3,000,251 and 3,033,995 shares issued
and outstanding in 1998 and 1997, respectively) 30,004 30,341
Additional paid-in surplus 48,105,395 48,105,428
Accumulated deficit (20,566,400) (18,995,604)
Shares held in treasury - 692,591 shares at cost (3,440,418) (3,440,418)
------------ -----------
Total stockholders' equity 24,178,012 25,748,807
------------ -----------
Total liabilities and stockholders' equity $104,693,350 $ 112,223,112
============ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
1
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
REVENUES:
<S> <C> <C>
Rent $ 2,598,415 $ 2,476,066
Interest income 2,227,375 3,293,194
Revenue from management company operations 99,203 83,751
Tenant reimbursements 276,218 200,745
Management and reimbursement income 26,935 45,011
Percentage rent 201,759 131,363
Amortization of discount - available-for-sale securities 0 90,136
Unrealized (loss) on treasury notes sold short 0 (354,065)
--------- ---------
Total revenues 5,429,905 5,966,201
--------- ---------
EXPENSES:
Master lease expense 3,445,833 3,445,833
Interest expense 1,581,007 2,375,655
Depreciation and amortization 197,948 187,808
Salaries, general and administrative 588,632 661,902
Property expenses 548,846 458,172
Expenses for management company operations 294,431 298,818
Professional fees 308,294 228,844
--------- ---------
Total expenses 6,964,991 7,657,032
--------- ---------
Loss before income taxes (1,535,086) (1,690,831)
(Benefit) provision for income taxes (498,584) 416,309
--------- ----------
Net loss $ (1,036,502) $ (2,107,140)
========= =========
Loss attributable to common stockholders $ (0.25) $ (0.50)
========= =========
Weighted average common shares outstanding 4,225,727 4,192,211
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
REVENUES:
<S> <C> <C>
Rent $ 5,344,220 $ 5,347,516
Interest income 4,467,931 6,669,521
Revenue from management company operations 295,045 284,442
Tenant reimbursements 533,602 558,734
Management and reimbursement income 55,986 308,143
Percentage rent 311,007 201,439
Amortization of discount - available-for-sale securities 0 179,436
Unrealized gain on treasury notes sold short 0 49,365
Gain on realization of wraparound notes 81,890 0
Loss on sale of available-for-sale securities 0 (784,122)
---------- ----------
Total revenues 11,089,681 12,814,474
---------- ----------
EXPENSES:
Master lease expense 6,891,666 6,977,659
Interest expense 3,100,605 4,638,932
Depreciation and amortization 406,021 380,916
Salaries, general and administrative 1,164,960 1,192,209
Property expenses 992,512 892,896
Expenses for management company operations 562,696 658,869
Professional fees 527,639 435,782
---------- ----------
Total expenses 13,646,099 15,177,263
---------- ----------
Loss before income taxes (2,556,418) (2,362,789)
(Benefit) provision for income taxes (985,622) 93,388
---------- ----------
Net loss $ (1,570,796) $ (2,456,177)
=========== ===========
Loss attributable to common stockholders $ (0.37) $ (0.59)
=========== ===========
Weighted average common shares outstanding 4,219,548 4,192,211
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
MILESTONE PROPERTIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Common Stock Preferred Stock Treasury Stock Additional
Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Shares Cost Surplus Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1998 4,905,959 $49,060 3,033,995 $30,341 (692,591) $(3,440,418) $48,105,428 $(18,995,604) $25,748,807
Conversion of preferred stock
into common stock 37,077 371 (33,744) (337) (33)
Net loss for the six months
ended June 30, 1998 (1,570,796) (1,570,796)
--------- -------- ---------- ------- --------- ------------ ----------- ------------- -----------
Balance June 30, 1998 4,943,036 $49,431 3,000,251 $30,004 (692,591) $(3,440,418) $48,105,395 $(20,566,400) $24,178,012
========= ======== ========== ======= ========= ============ =========== ============= ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES June 1998 June 1997
<S> <C> <C>
Net loss $ (1,570,796) $ (2,456,177)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 406,021 380,916
Deferred benefit taxes (1,055,702) 138,407
Unrealized gain on treasury notes sold short 0 (49,365)
Amortization of discount-available-for-sale securities 0 (179,436)
Realized loss on sale of available-for-sale securities 0 784,122
Gain on sale of property 81,890 0
Change in operating assets and liabilities, net:
Decrease in accounts receivable 368,105 680,112
Increase in due from related party (93,592) (141,642)
Decrease in accrued interest receivable 4,685,570 4,921,944
(Increase) decrease in prepaid expenses and other (925,335) 294,830
Decrease in accounts payable and accrued expenses (918,678) (1,410,540)
Decrease in accrued interest payable (17,097) (338,319)
Decrease in master lease payable (6,726,243) (7,264,000)
Decrease in income taxes payable 0 (816,371)
Decrease in due to related party 0 (61,688)
----------- ----------
Net cash used in operating activities (5,765,857) (5,517,207)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal repayments on loans receivable 33,470 139,680
Principal repayments on wraparound notes 5,025,520 4,727,684
Issuance of wraparound notes 25,410 0
Purchase of building and land (3,650,000) 0
Purchase of leasehold improvements (227,631) (43,668)
Proceeds from realization of wraparound notes 75,000 0
Proceeds from the sale of available-for-sale securities 0 9,498,529
Proceeds from redemption of investments in preferred stock 891,000 839,834
Proceeds from redemption of reverse repurchase agreements 0 9,436,884
Purchase of treasury notes 0 (9,166,017)
----------- -----------
Net cash provided by investing activities 2,172,769 15,432,926
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgages and notes payable 6,497,746
Principal payments on mortgages and notes payable (3,474,575) (1,517,846)
Principal payment on loans payable 0 (5,985,822)
Amounts received on treasury notes payable 0 49,365
----------- -----------
Net provided by (cash used in) financing activities 3,023,171 (7,454,303)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (569,917) 2,461,416
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,435,237 3,141,839
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,865,320 $ 5,603,255
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 3,117,702 $ 4,977,251
=========== ===========
Cash paid during the period for income taxes $ 70,080 $ 793,651
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
MILESTONE PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying consolidated financial statements of Milestone Properties, Inc.
("Milestone") and its wholly owned subsidiaries (together, Milestone with its
subsidiaries is herein referred to as the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The financial statements as of and for the periods ended June 30, 1998
and 1997 are unaudited. The results of operations for the interim periods are
not necessarily indicative of the results of operations for the fiscal year.
Certain information for 1997 has been reclassified to conform to the 1998
presentation. These consolidated financial statements should be read in
conjunction with the financial statements and footnotes included thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. As of June 30, 1998 (and currently), the Company possessed interests in
33 commercial real estate properties consisting of (i) six fee interests (the
"Fee Properties") and (ii) Wrap Debt (as defined herein) interests in 27
commercial real properties (the "Underlying Properties"). At June 30, 1997, the
Company possessed interests in 33 commercial real estate properties consisting
of (i) three Fee Properties and (ii) Wrap Debt interests in 30 Underlying
Properties. The Underlying Properties are secured by and subject to wraparound
notes (the "Wraparound Notes") and wraparound mortgages (the "Wraparound
Mortgages" and, together with the Wraparound Notes, the "Wrap Debt"). Most of
the Fee Properties are multi-tenanted as compared to the Underlying Properties
of which most are single-tenanted.
1. Acquisition and Disposition of Real Estate Related Assets
On July 15, 1998, the Company completed the purchase of Teeca Plaza, a 22,589
square foot shopping center located in Boca Raton, Florida (Palm Beach County),
from an unrelated party for $2,075,000. In connection with the purchase, the
Company obtained a $1,800,000 first mortgage loan which bears interest at a rate
of 7.39% per annum. Such first mortgage requires monthly principal and interest
payments of $12,450 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately $1,591,100 due July 1, 2008. The
shopping center is currently 97% occupied by local tenants who are subject to
operating leases ranging from three to 28 years with various renewal options.
On July 7, 1998, the Company completed the sale of its Mountain View Mall
property located in Bend, Oregon (the "Bend Property") to an unrelated party for
$17,750,000. The Company realized net proceeds from the sale of approximately
$319,200, after paying off the balance of the underlying first mortgage of
$17,065,000 (which represented approximately 23% of the Company's total
liabilities) and using a portion of the funds for closing costs and net credits
to the buyer. At the time of the sale, the Bend Property represented
approximately 17% of the Company's total assets with a carrying value, net of
accumulated depreciation, of approximately $16,482,000. As a result of the sale,
the Company will realize a book gain of approximately $948,000 in the third
quarter of 1998.
6
<PAGE>
On May 1, 1998, the Company secured a $1,160,000 first mortgage loan on its Pine
Oak property located in Sunrise Florida, which bears interest at a rate of 7.48%
per annum. Such first mortgage requires monthly principal and interest payments
of $8,095 based upon a 30 year self liquidating amortization schedule, with a
balloon payment of approximately $1,027,700 due May 1, 2008.
On April 17, 1998, the Company completed the purchase of Orange Park Shopping
Center, a 21,509 square foot shopping center located in Orange Park, Florida
(Clay County), from an unrelated party for $1,500,000. In connection with the
purchase, the Company obtained a $1,300,000 first mortgage loan which bears
interest at a rate of 7.39% per annum. Such first mortgage requires monthly
principal and interest payments of $8,992 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $1,147,600 due
April 1, 2008. The shopping center is currently 95% occupied by local tenants
who are subject to operating leases ranging from two to six years with various
renewal options.
On April 17, 1998, the wraparound mortgagor (i.e. the Partnership that owns the
related Underlying Property) completed the refinancing of Morgantown Plaza, a
92,646 square foot shopping center located in Natchez, Mississippi, on behalf of
the Company, as the wraparound mortgagee. The $2,200,000 first mortgage loan
bears interest at a rate of 7.59% per annum, and requires monthly principal and
interest payments of $15,519 based upon a 30 year self liquidating amortization
schedule, with a balloon payment of approximately $1,951,900 due May 1, 2008.
The Company also extended the Wraparound Mortgage on such property to mature May
1, 2008.
On April 1, 1998, the Company completed the purchase of Regency Walk Shopping
Center, a 34,436 square foot shopping center located in Jacksonville, Florida
(Duval County), from an unrelated party for $2,150,000. On April 2, 1998, the
Company secured a $1,840,000 first mortgage loan which bears interest at a rate
of 7.87% per annum. Such first mortgage requires monthly principal and interest
payments of $13,335 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately $1,643,700 due May 1, 2008.The shopping
center, which is currently 92% occupied, is occupied by local tenants who are
subject to operating leases ranging from two to nine years with various renewal
options.
On February 9, 1998, the Company realized its position in its wraparound note
that had a carrying value of $1,477,010 on the property located in Chili, New
York as a result of the assignment of the wraparound note on such property to an
unrelated party for $75,000. The assignment resulted in the relief of a
non-recourse underlying mortgage on such property that had a principal balance
outstanding of $1,477,010, which resulted in a book gain of $81,890 to the
Company.
As previously reported, the Company and Societe Generale Securities Corporation
("SGSC") entered into an agreement (the "SGSC Agreement") on January 9, 1998,
effective as of December 24, 1997, pursuant to which Milestone and certain of
its affiliates retained SGSC to act as a financial advisor to the Company and
certain of its affiliates (the "Affiliates") in connection with any transaction
involving a proposed sale (a "Proposed Sale") by the Affiliates of certain
shopping center properties and any proposed sale by Milestone of certain Fee
Properties owned by Milestone. The shopping center properties to be sold by the
Affiliates are subject to Wrap Debt secured by Underlying Properties. Such Wrap
Debt is held by the Company and would need to be released prior to the
consummation of any transaction. The properties to be sold and the Wrap Debt to
be repaid in connection with a Proposed Sale could represent a substantial
portion of the Company's real estate related assets. Currently, the Company and
the Affiliates are negotiating the terms of a Proposed Sale. However there can
be no assurance that such negotiation will result in a sale contract for a
Proposed Sale, nor can there be any assurance that if a sale contract is reached
that a Proposed Sale will be consummated.
7
<PAGE>
2. Legal Proceedings
As previously reported, on January 30, 1996, Milestone, certain former and
present members of its Board of Directors and executive officers, and Concord
Assets Group, Inc. ("Concord"), a New York corporation, the executive officers
and directors of which are also executive officers and directors of Milestone,
were named as defendants in a purported class action and derivative lawsuit (the
"Winston Action") which was brought by a Series A Preferred Stockholder on
behalf of himself and purportedly on behalf of all holders of the Company's $.78
Convertible Series A Preferred Stock (the "Series A Preferred Stock"), par value
$.01 per share, $10 liquidation preference, and derivatively on behalf of
Milestone, in connection with (i) Milestone's acquisition in October 1995 of
certain wraparound notes, wraparound mortgages and fee properties from certain
affiliates of Concord, (ii) the transfer in August and October 1995 of 16 of
Milestone's retail properties to Union Property Investors, Inc. ("UPI"), a then
wholly-owned Delaware subsidiary of Milestone and (iii) the subsequent
distribution of all of the issued and outstanding shares of UPI's common stock
to Milestone's common stockholders on a share-for-share basis and for no
consideration (the events referred to in clauses (i) through (iii) above are
collectively referred to herein as the "Transactions").
On October 30, 1997, Milestone had entered into a Stipulation and Agreement of
Settlement (the "Initial Winston Settlement Agreement") providing for the
settlement of the Winston Action. In April 1998, counsel for the plaintiff to
the Winston Action advised the Company that the plaintiff would not proceed with
such settlement and counsel for the Company advised the Court of Chancery of the
State of Delaware that the parties would resume litigation of the matter. If
such settlement had been approved and consummated, the Winston Action would have
been dismissed and Milestone's stockholders who did not opt out of such
settlement would have been required to surrender each share of Series A
Preferred Stock held by such stockholder and release all claims against any and
all of the defendants in the Winston Action arising in connection with the
Transactions in exchange for $0.75 per share in cash from Milestone and one
share of preferred stock of an affiliate of Concord having a $2.25 per share
liquidation preference and which would have been required to be redeemed at
$2.25 per share after five years.
On July 14, 1998, the Company announced that it had reached a new settlement
(the "Winston Settlement") with plaintiff's counsel relating to the Winston
Action. On August 5, 1998, a Stipulation and Agreement of Settlement (the
"Winston Settlement Agreement") was entered into between the parties to the
Winston Action setting forth the terms of the Winston Settlement. Pursuant to
the Winston Settlement, each holder of Series A Preferred Stock eligible to
participate in the Winston Settlement who does not opt out of the Winston
Settlement will be required to surrender each share of Series A Preferred Stock
held by such stockholder and release all claims he or she may have against
Milestone and the other named defendants in connection with the Winston Action
in exchange for $3.00 in cash, payable by Milestone. The defendants in the
Winston Action and their affiliates are not eligible to participate in the
Winston Settlement. The Winston Settlement is subject to approval by the Court
of Chancery of the State of Delaware after a hearing, and is also subject to a
number of conditions which may be waived at the option of Milestone and the
other defendants, including the condition that stockholders owning more than 10%
of the Series A Preferred Stock do not opt out of the Winston Settlement. The
ultimate consummation of the Winston Settlement is subject to numerous
conditions, some of which are not in the control of the Company, such as
approval by the Court of Chancery of the State of Delaware, and therefore is
inherently uncertain.
The foregoing description of the Winston Settlement is qualified in its entirety
by reference to the Winston Settlement Agreement, a copy of which is being filed
as Exhibit 10.01 hereto.
As previously reported, on January 29, 1998, Milestone, along with certain of
its directors, commenced a lawsuit in the United States District Court for the
Southern District of New York against National Union Fire Insurance
8
<PAGE>
Company of Pittsburgh, Pa. ("National Union") and Stonewall Surplus Lines
Insurance Company ("Stonewall"). National Union had issued a directors and
officers insurance and company reimbursement policy (the "National Policy") for
Milestone and its directors with a limit of $2,000,000. Stonewall had issued an
excess directors and officers liability and company reimbursement policy (the
"Stonewall Policy") for Milestone and its directors with a limit of $2,000,000.
Pursuant to the Initial Winston Settlement Agreement, had such proposed
settlement been consummated, Milestone would have paid approximately $2,225,000,
plus plaintiff's legal fees in an amount not to exceed $650,000 and would have
incurred other legal expenses. Milestone believes that the amount it and certain
of its directors would have paid pursuant to the initial proposed settlement and
as a result of the litigation, had such proposed settlement been consummated,
would have been covered losses under both the National Union Policy and the
Stonewall Policy. In addition, the Company incurred approximately $550,000 in
legal fees in defending Milestone and its directors in connection with the
Winston Action, which it believes is a covered loss under the National Union and
Stonewall policies. National Union refused to contribute to such proposed
settlement, as set forth in the Initial Winston Settlement Agreement, asserting
that such proposed settlement did not encompass any covered loss (as defined in
the National Policy). Stonewall also refused to contribute to such proposed
settlement. In the complaint, the plaintiffs alleged that National Union and
Stonewall wrongfully failed to contribute to the initial proposed settlement and
sought reimbursement from National Union and Stonewall up to the limits of their
respective policies. National Union and Stonewall both answered the complaint
and denied liability. As a result of the termination of the Initial Winston
Settlement Agreement, Milestone, on one hand, and Stonewall and National Union,
on the other hand, agreed to dismiss such action without prejudice and such
action was dismissed on May 29, 1998 by the United States District Court for the
Southern District of New York. The Company has given National Union and
Stonewall notice of the Winston Settlement and has provided each of them with a
copy of the Winston Settlement Agreement. It is possible that the Company will
assert a claim against National Union and Stonewall in connection with covered
losses under the National Policy and the Stonewall Policy relating to the
Winston Settlement. At this time, the Company is not in a position to render an
opinion as to the outcome of such an action if one is commenced.
If the Winston Settlement is consummated and all of the holders of shares of the
Series A Preferred Stock eligible to participate in the Winston Settlement
participate in such settlement, the total amount of funds necessary for
Milestone to acquire such shares of Series A Preferred Stock is approximately
$9,000,000. Additional expenses of approximately $1,200,000 are anticipated to
be incurred in connection with the Winston Settlement. The source of such funds
necessary to effectuate the Winston Settlement would be from the Company's
existing cash reserves.
3. Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting and displaying of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 mandates that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed in equal prominence with
all other financial statements. It does not require a specific format for such
financial statements, but requires that an enterprise display an amount
representing total comprehensive income for the period in such a financial
statement. SFAS No. 130 is effective for both interim and annual periods
beginning after December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassified to reflect the provisions of
SFAS No. 130.
The Company adopted SFAS No. 130 in the first quarter of 1998. There are no
components of comprehensive income for the three months or six months ended June
30, 1998. For the three months ended June 30, 1997 the Company had components of
comprehensive income, as defined in SFAS No. 130, of approximately $577,000
9
<PAGE>
of unrealized gains (net of tax of $385,000 ) on available-for-sale securities.
Under SFAS No. 130 the Company has a comprehensive loss of approximately
$1,530,000 for the three months ended June 30, 1997. For the six months ended
June 30, 1997 the Company had components of comprehensive income, as defined in
SFAS No. 130, of approximately $906,000 of unrealized gains (net of tax of
$609,000) on available-for-sale securities. Under SFAS No. 130 the Company has a
comprehensive loss of approximately $1,550,000 for the six months ended June 30,
1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
General
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such forward-looking statements include
statements regarding the intent, belief or current expectations of Milestone
Properties, Inc. ("Milestone") and its wholly-owned subsidiaries (together,
Milestone with its subsidiaries is hereinafter referred to as the "Company") and
its management and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: general economic and
business conditions, which will, among other things, affect the demand for
retail space or retail goods, availability and creditworthiness of prospective
tenants, lease rents and the terms and availability of financing; adverse
changes in the real estate markets including, among other things, competition
with other companies; risks of real estate development and acquisition;
governmental actions and initiatives; and environmental and safety requirements.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. As of June 30, 1998 (and currently), the Company possessed interests in
33 commercial real estate properties consisting of (i) six fee interests (the
"Fee Properties") and (ii) Wrap Debt (as defined herein) interests in 27
commercial real properties (the "Underlying Properties"). At June 30, 1997, the
Company possessed interests in 33 commercial real estate properties consisting
of (i) three Fee Properties and (ii) Wrap Debt interests in 30 Underlying
Properties. The Underlying Properties are secured by and subject to wraparound
notes (the "Wraparound Notes") and wraparound mortgages (the "Wraparound
Mortgages" and, together with the Wraparound Notes, the "Wrap Debt"). Most of
the Fee Properties are multi-tenanted as compared to the Underlying Properties
of which most are single-tenanted.
Year 2000 Compliance
The Company has and will continue to make certain investments in its software
systems and applications to ensure that the Company is year 2000 compliant. It
is anticipated that the project will be completed by internal staff without
significant contributions from outside contractors. Management believes that the
financial impact to the Company of ensuring its year 2000 compliance has not
been and will not be material to the Company's financial position or results of
operations.
Recent Developments
On August 5, 1998, Milestone and the other parties to a purported class and
derivative lawsuit (the "Winston Action") which was brought against Milestone,
certain former and present members of its Board of Directors and executive
officers, and Concord Assets Group Inc. ("Concord"), a New York corporation,
entered into a Stipulation and Agreement of Settlement (the "Winston Settlement
Agreement"), setting forth the terms of a
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proposed settlement (the "Winston Settlement") relating to the Winston Action
which was publicly announced on July 14, 1998. In April 1998, counsel for the
plaintiff to the Winston Action had advised the Company that the plaintiff would
not proceed with a previous settlement. Pursuant to the Winston Settlement, each
holder of shares of Milestone's $.78 Convertible Series A preferred stock (the
"Series A Preferred Stock), par value $.01 per share, $10 liquidation
preference, who is eligible to participate in the Winston Settlement and who
does not opt out of the Winston Settlement will be required to surrender all of
such holders' shares of Series A Preferred Stock and release all claims such
holder may have against Milestone and the other named defendants in connection
with the Winston Action in exchange for $3.00 in cash, payable by Milestone. The
Winston Settlement is subject to approval by the Court of Chancery of the State
of Delaware after a hearing, and is also subject to a number of conditions which
may be waived at the option of Milestone and the other defendants, including the
condition that stockholders owning more than 10% of the Series A Preferred Stock
do not opt out of the Winston Settlement. The ultimate consummation of the
Winston Settlement is subject to numerous conditions, some of which are not in
the control of the Company, such as approval by the Court of Chancery of the
State of Delaware, and therefore is inherently uncertain. See Part II-Other
Information, Item 1. Legal Proceedings.
If the Winston Settlement is consummated and all of the holders of shares of the
Series A Preferred Stock eligible to participate in the Winston Settlement
participate in such settlement, the total amount of funds necessary for
Milestone to acquire such shares of Series A Preferred Stock would be
approximately $9,000,000. Additional expenses of approximately $1,200,000 are
anticipated to be incurred in connection with the Winston Settlement. The source
of such funds necessary to effectuate the Winston Settlement would be from the
Company's existing cash reserves. See Part I-Financial Information, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operation, Liquidity and Capital Resources.
On July 15, 1998, the Company completed the purchase of Teeca Plaza, a 22,589
square foot shopping center located in Boca Raton, Florida (Palm Beach County),
from an unrelated party for $2,0750,000. In connection with the purchase, the
Company obtained a $1,800,000 first mortgage loan which bears interest at a rate
of 7.39% per annum. Such first mortgage requires monthly principal and interest
payments of $12,450 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately $1,591,100 due July 1, 2008. The
shopping center is currently 97% occupied by local tenants who are subject to
operating leases ranging from three to 33 years with various renewal options.
On July 7, 1998, the Company completed the sale of its Mountain View Mall
property located in Bend, Oregon (the "Bend Property") to an unrelated party for
$17,750,000. The Company realized net proceeds from the sale of approximately
$319,200, after paying off the balance of the underlying first mortgage of
$17,065,000 (which represented approximately 23% of the Company's total
liabilities) and using a portion of the funds for closing costs and net credits
to the buyer. At the time of the sale, the Bend Property represented
approximately 17% of the Company's total assets with a carrying value, net of
accumulated depreciation, of approximately $16,482,000. As a result of the sale,
the Company will realize a book gain of approximately $948,000 in the third
quarter of 1998.
The New York Stock Exchange (the "Exchange") suspended trading in shares of the
Series A Preferred Stock and Common Stock prior to the market opening on July 6,
1998 because the Exchange had determined that Milestone had fallen below certain
of its continued listing criteria relating to net income and market value of
publicly held shares of the Series A Preferred Stock and Common Stock. The
Exchange subsequently applied to the Securities and Exchange Commission to
delist the Series A Preferred Stock and Common Stock. The Company has learned
that on or about July 6, 1998, a market was being made for shares of the Series
A Preferred Stock and Common Stock on the Over-The-Counter Bulletin Board with
the ticker symbols MPRPP and MPRP, respectively.
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On April 17, 1998, the Company completed the purchase of Orange Park Shopping
Center, a 21,509 square foot shopping center located in Orange Park, Florida
(Clay County), from an unrelated party for $1,500,000. In connection with the
purchase, the Company obtained a $1,300,000 first mortgage loan which bears
interest at a rate of 7.39% annum. Such first mortgage requires monthly
principal and interest payments of $8,992 based upon a 30 year self liquidating
amortization schedule, with a balloon payment of approximately $1,147,600 due
April 1, 2008.The shopping center is currently 95% occupied by local tenants who
are subject to operating leases ranging from two to six years with various
renewal options.
On April 1, 1998, the Company completed the purchase of Regency Walk Shopping
Center, a 34,436 square foot shopping center located in Jacksonville, Florida
(Duval County), from an unrelated party for $2,150,000. On April 2, 1998, the
Company secured a $1,840,000 first mortgage loan which bears interest at a rate
of 7.87% per annum. Such first mortgage requires monthly principal and interest
payments of $13,335 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately $1,643,700 due May 1, 2008.The shopping
center, which is currently 92% occupied, is occupied by local tenants who are
subject to operating leases ranging from two to nine years with various renewal
options.
On February 9, 1998, the Company realized its position in its wraparound note
that had a carrying value of $1,477,010 on the property located in Chili, New
York as a result of the assignment of the wraparound note on such property to an
unrelated party for $75,000. The assignment resulted in the relief of a
non-recourse underlying mortgage on such property that had a principal balance
outstanding of $1,477,010, which resulted in a book gain of $81,890 to the
Company.
As previously reported, the Company and Societe Generale Securities Corporation
("SGSC") entered into an agreement (the "SGSC Agreement") on January 9, 1998,
effective as of December 24, 1997, pursuant to which Milestone and certain of
its affiliates retained SGSC to act as a financial advisor to the Company and
certain of its affiliates (the "Affiliates"), in connection with any transaction
involving a proposed sale (a "Proposed Sale") by the Affiliates of certain
shopping center properties and any proposed sale by Milestone of certain Fee
Properties owned by Milestone. The shopping center properties to be sold by the
Affiliates are subject to Wrap Debt secured by Underlying Properties. Such Wrap
Debt is held by the Company and would need to be released prior to the
consummation of any transaction. The properties to be sold and the Wrap Debt to
be repaid in connection with a Proposed Sale could represent a substantial
portion of the Company's real estate related assets. Currently, the Company and
the Affiliates are negotiating the terms of a Proposed Sale. However there can
be no assurance that such negotiation will result in a contract for a Proposed
Sale, nor can there be any assurance that if a sale contract is reached that a
Proposed Sale will be consummated.
Results of Operations
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
The Company recognized a net loss of $1,036,502 for the three months ended June
30, 1998 as compared to a net loss of $2,107,140 for the same period in 1997 due
to the following factors:
Revenues for the three months ended June 30, 1998 were $5,429,905, a decrease of
$536,296 or 9%, from $5,966,201 for the three months ended June 30, 1997. Such
decrease was primarily due to the net of: (1) a decrease in interest income of
$1,065,819 comprised mostly of a decrease in interest income of $951,500
resulting from a decrease in the number of available-for-sale securities held by
the Company to none for the three months ended June 30, 1998 from two for the
same period in 1997; (2) an increase in rents of $122,349 resulting from an
increase in the number of Fee Properties owned by the Company to six for the
three months ended June 30, 1998 from three for the same period in 1997; (3) an
increase in tenant reimbursements of $75,473 resulting
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from an increase in the number of Fee Properties owned by the Company to six for
the three months ended June 30, 1998 from three for the same period in 1997; (4)
an increase in percentage rents, as a function of annual sales reported by
certain tenants, of $70,396 for the three months ended June 30, 1998 resulting
from increased annual sales reported by certain tenants as compared to the same
period in 1997; (5) no amortization of discount on available-for-sale securities
for the three months ended June 30, 1998 compared to amortization of $90,136 for
the same period in 1997 and (6) no unrealized gain or loss on U.S. Treasury
Notes sold short for the three months ended June 30, 1998 compared to an
unrealized holding loss of $354,065 on U.S. Treasury Notes sold short for the
same period in 1997.
Operating expenses for the three months ended June 30, 1998 were $5,186,036, an
increase of $92,467, or 2%, from $5,093,569 for the three months ended June 30,
1997. Such increase was primarily due to the net of: (1) a decrease in salaries,
general and administrative expenses of approximately $73,270 due to the net of
(a) a decrease in rental expense for the corporate offices of approximately
$147,000 for the three months ended June 30, 1998 compared to the same period in
1997; (b) an increase in insurance expense of approximately $19,000 for the
three months ended June 30, 1998 compared to the same period in 1997 due to the
increase in the number of Fee Properties owned by the Company to six from three,
respectively and (c) an increase in closing costs of approximately $46,000 for
the three months ended June 30, 1998 compared to the same period in 1997 due to
the increase in the number of Fee Properties purchased by the Company to three
from none, respectively; (2) an increase in property expenses of $90,674 due to
the increase in the number of Fee Properties owned by the Company to six for the
three months ended June 30, 1998 from three for the same period in 1997 and (3)
an increase in professional fees of $79,450 due to fees associated with the
Winston Settlement with plaintiff's counsel relating to the Winston Action.
Interest expense for the three months ended June 30, 1998 was $1,581,007, a
decrease of $794,648, or 33%, from $2,375,655 for the three months ended June
30, 1997. Such decrease was primarily due to a decrease in financing
arrangements related to the available-for-sale securities held by the Company to
none for the three months ended June 30, 1998 from two for the same period in
1997 resulting in a decrease in interest expense of approximately $672,000.
Depreciation and amortization for the three months ended June 30, 1998 was
$197,948, an increase of $10,140, or 5%, from $187,808 for the three months
ended June 30, 1997. Such increase was primarily due to property improvement
purchases made during 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The Company recognized a net loss of $1,570,796 for the six months ended June
30, 1998 as compared to a net loss of $2,456,177 for the same period in 1997 due
to the following factors:
Revenues for the six months ended June 30, 1998 were $11,089,681, a decrease of
$1,724,793 or 13%, from $12,814,474 for the six months ended June 30, 1997. Such
decrease was primarily due to the net of: (1) a decrease in interest income of
$2,201,590 comprised mostly of (a) a decrease in interest income of $1,867,068
resulting from a decrease in the number of available-for-sale securities held by
the Company to none for the six months ended June 30, 1998 from two for the same
period in 1997 and (b) a decrease in the number of properties with interest
bearing wraparound notes to 27 for the six months ended June 30, 1998 from 30
for the same period in 1997 resulting in a decrease in interest income of
approximately $199,000; (2) a decrease in management and reimbursement income of
$252,157 resulting primarily from the termination of the Management Services
Agreement between Union Property Investors, Inc. and the Company in February
1997; (3) an increase in percentage rents, as a function of annual sales
reported by certain tenants, of $109,568 for the six months ended June 30, 1998
resulting from increased annual sales reported by the certain tenants as
compared to the same period in 1997; (4) no amortization of discount on
available-for-sale securities for the six months ended June 30,
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1998 compared to amortization of $179,436 for the same period in 1997; (5) no
unrealized gain or loss on U.S. Treasury Notes sold short for the six months
ended June 30, 1998 compared to an unrealized holding gain of $49,365 on U.S.
Treasury Notes sold short for the same period in 1997; (6) a gain on the
realization of wraparound notes of $81,890 compared to no gain or loss on the
realization of wraparound notes for the same period in 1997 and (7) no gain or
loss on the sale of available-for-sale securities for the six months ended June
30, 1998 compared to a loss of $784,122 on the sale of available-for-sale
securities for the six months ended June 30, 1997.
Operating expenses for the six months ended June 30, 1998 were $10,139,473, a
decrease of $17,942, or 0.2%, from $10,157,415 for the six months ended June 30,
1997. Such decrease was primarily due to the net of: (1) a decrease in master
lease expense of $85,993 due to a decrease in the number of properties leased by
the Company to 27 for the six months ended June 30, 1998 from 30 for the same
period in 1997; (2) a decrease in salaries, general and administrative expenses
of approximately $118,081 due to the net of: (a) a decrease in rental expense
for the corporate offices for the six months ended June 30, 1998 compared to the
same period in 1997 of $281,110; (b) an increase in closing costs of
approximately $24,000 for the six months ended June 30, 1998 compared to the
same period in 1997 due to the increase in the number of Fee Properties
purchased to three from none, respectively; (c) a decrease in the number of
employees from 1998 to 1997 resulting in a decrease in salary expense of
approximately $37,000; (d) an increase in insurance expense of approximately
$49,000 for the six months ended June 30, 1998 compared to the same period in
1997 due to the increase in the number of Fee Properties owned by the Company to
six from three, respectively and (e) an increase in other office expense (i.e.
relocation, computers, storage, etc.) related to the corporate offices move in
January 1998 of approximately $53,000 for the six months ended June 30, 1998;
(3) an increase in property expenses of $99,616 due to an increase in the number
of Fee Properties owned by the Company to six for the six months ended June 30,
1998 as compared to three for the same period in 1997 and (4) an increase in
professional fees of $91,857 due to fees associated with the Winston Settlement
with plaintiff's counsel relating to the Winston Action.
Interest expense for the six months ended June 30, 1998 was $3,100,605, a
decrease of $1,538,327, or 33%, from $4,638,932 for the six months ended June
30, 1997. Such decrease was primarily due to a decrease in financing
arrangements related to the available-for-sale securities held by the Company to
none for the six months ended June 30, 1998 from two for the same period in 1997
resulting in a decrease in interest expense of approximately $1,271,000.
Depreciation and amortization for the six months ended June 30, 1998 was
$406,021, an increase of $25,105, or 7%, from $380,916 for the six months ended
June 30, 1997. Such increase was primarily due to property improvement purchases
made during 1997.
Liquidity and Capital Resources
The Company, as the holder of 133,860 shares of Kranzco Series C Cumulative
Redeemable Preferred Shares as of June 30, 1998, is entitled to receive from the
redemption of such shares, in three equal installments over the next 7 months,
an aggregate amount of cash equal to approximately $1,338,600, plus interest at
the rate of 8% per annum on the applicable outstanding balance of such shares.
The first mortgage loan on the Underlying Property located in Quincy, Illinois
matured on July 1, 1998 and the first mortgage loan on the Underlying Property
located in South Williamson, Kentucky is due to mature October 1, 1998. The
Company, as the wraparound mortgagee, is seeking either an extension of terms on
the first mortgage loans or to realize its position in its Wrap Debt on both
properties.
Milestone has no present intention to declare or pay cash dividends on the
Series A Preferred Stock or Common Stock in the foreseeable future. The
cumulative period relating to the payment of dividends on the Series A Preferred
Stock expired on September 30, 1995. If Milestone declares further dividends on
the Series A
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Preferred Stock or the Common Stock and the payment thereof utilizes all, or
substantially all, of its available cash flow after taxes and expenses, the
Company will require other sources of funding to allow it to effect the
contemplated purchases of additional commercial real estate and accomplish its
other long-term goals. Accordingly, no assurance can be given that Milestone
will declare or pay dividends on the Series A Preferred Stock or, subject to the
preference on the Series A Preferred Stock, the Common Stock, in the future, and
currently has no intention to do so. Any decision as to the future payment of
dividends on the Series A Preferred Stock or Common Stock will depend on the
results of operations, investment opportunities for available funds, the
financial condition of the Company and such other factors as Milestone's Board
of Directors deems relevant. See Part II-Other Information, Item 5. Other
Information.
Cash generated by the (i) redemption of the Kranzco Series C Cumulative
Redeemable Preferred Stock and (ii) the cash on hand at June 30, 1998, may be
used to fund (a) the Company's real estate investment, acquisition and
development activities, (b) costs associated with the Winston Action and the
Winston Settlement of (w) approximately $9,000,000, payable by Milestone to
Series A Preferred Stockholders (assuming all eligible stockholders participate
in the Winston Settlement), (x) approximately $750,000 in plaintiff attorney
fees, (y) approximately $300,000 in the Company's attorney fees and (z)
approximately $150,000 in accounting, printing, mailing and other miscellaneous
fees and expenses, and (c) other general corporate purposes. See Part II-Other
Information, Item 1. Legal Proceedings for a discussion of the Winston Action
and the Winston Settlement.
The Company's existing borrowings and the encumbrances on the properties
securing those borrowings may inhibit or result in increased costs to the
Company in connection with its ability to incur future indebtedness and/or raise
substantial equity capital in the marketplace.
The Company has invested available funds in secure, short-term, interest bearing
investments. The Company believes that its levels of working capital, liquidity
and funds from operations are sufficient to support present operations, make any
payments required by the Winston Settlement and to continue to fund future
growth and business opportunities as the Company seeks to maximize shareholder
value.
Other than as described herein, management is not aware of any other trends,
events, commitments or uncertainties that will, or are likely to, materially
impact the Company's liquidity.
Cash Flows
Net cash used in operating activities of $5,765,857 for the six months ended
June 30, 1998 included (1) a net loss of $1,570,796; (2) adjustments for
non-cash items of $567,791 and (3) a net change in operating assets and
liabilities of $3,627,270, compared to net cash used in operating activities of
$5,517,207 for the six months ended June 30, 1997, which included (1) a net loss
of $2,456,177; (2) adjustments of $1,074,644 for non-cash items and (3) a net
change of $4,135,674 in operating assets and liabilities.
Net cash provided by investing activities of $2,172,769 for the six months ended
June 30, 1998 included (1) proceeds from principal repayments on loans
receivable and wraparound notes of $5,058,990; (2) the issuance of wraparound
notes of $25,410; (3) the purchase of building and land for $3,650,000; (4) the
purchase of leasehold improvements of $227,631; (5) proceeds from the
realization of wraparound notes of $75,000 and (6) proceeds from redemption of
investment in preferred stock of $891,000, compared to net cash provided by
investing activities of $15,432,926 for the six months ended June 30, 1997,
which included: (1) principal repayments of $4,867,364 on loans receivable and
wraparound notes; (2) the purchase of leasehold improvements of $43,668; (3)
proceeds of $9,498,529 from the sale of available-for-sale securities; (4)
proceeds of $839,834 from redemption of investment in preferred stock; (5)
proceeds of $9,436,884 from the redemption of reverse repurchase agreements and
(6) purchase of U.S. Treasury Notes for $9,166,017.
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Net cash provided by financing activities of $3,023,171 for the six months ended
June 30, 1998 included proceeds from mortgages and notes payable of $6,497,746
and principal payments on mortgages and notes payable of $3,474,575, compared to
net cash used in financing activities of $7,454,303 for the six months ended
June 30, 1997, which included (1) principal payments of $1,517,846 on mortgages
and notes payable; (2) principal payments of $5,985,822 on loans payable and (3)
$49,365 received on U.S. Treasury Notes payable.
See Part II-Other Information, Item 1. Legal Proceedings and Item 5. Other
Information for a description of certain transactions which occurred subsequent
to June 30, 1998 which may impact the Company's future cash flows.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, on January 30, 1996, Milestone, certain former and
present members of its Board of Directors and executive officers, and Concord, a
New York corporation, the executive officers and directors of which are also
executive officers and directors of Milestone, were named as defendants in the
Winston Action which was brought by a Series A Preferred Stockholder on behalf
of himself and purportedly on behalf of all holders of the Series A Preferred
Stock, and derivatively on behalf of Milestone, in connection with (i)
Milestone's acquisition in October 1995 of certain wraparound notes, wraparound
mortgages and fee properties from certain affiliates of Concord, (ii) the
transfer in August and October 1995 of 16 of Milestone's retail properties to
Union Property Investors, Inc. ("UPI"), a then wholly-owned Delaware subsidiary
of Milestone and (iii) the subsequent distribution of all of the issued and
outstanding shares of UPI's common stock to Milestone's common stockholders on a
share-for-share basis and for no consideration (the events referred to in
clauses (i) through (iii) above are collectively referred to herein as the
"Transactions").
On October 30, 1997, Milestone had entered into a Stipulation and Agreement of
Settlement (the "Initial Winston Settlement Agreement") providing for the
settlement of the Winston Action. In April 1998, counsel for the plaintiff to
the Winston Action advised the Company that the plaintiff would not proceed with
such settlement and counsel for the Company advised the Court of Chancery of the
State of Delaware that the parties would resume litigation of the matter. If
such settlement had been approved and consummated, the Winston Action would have
been dismissed and Milestone's stockholders who did not opt out of such
settlement would have been required to surrender each share of Series A
Preferred Stock held by such stockholder and release all claims against any and
all of the defendants in the Winston Action arising in connection with the
Transactions in exchange for $0.75 per share in cash from Milestone and one
share of preferred stock of an affiliate of Concord having a $2.25 per share
liquidation preference and which would have been required to be redeemed at
$2.25 per share after five years.
On July 14, 1998, the Company announced that it had reached the Winston
Settlement with plaintiff's counsel relating to the Winston Action. On August 5,
1998, the Winston Settlement Agreement was entered into between the parties to
the Winston Action setting forth the terms of the Winston Settlement. Pursuant
to the Winston Settlement, each holder of Series A Preferred Stock eligible to
participate in the Winston Settlement who does not opt out of the Winston
Settlement will be release all claims he or she may have against Milestone and
the other named defendants in connection with the Winston Action in exchange for
$3.00 in cash, payable by Milestone. The defendants in the Winston Action and
their affiliates are not eligible to participate in the Winston Settlement. The
Winston Settlement is subject to approval by the Court of Chancery of the State
of Delaware after a hearing, and is also subject to a number of conditions which
may be waived at the option of Milestone and the other defendants, including the
condition that stockholders owning more than 10% of the Series A Preferred Stock
do not opt out of the Winston Settlement. The ultimate consummation of the
Winston Settlement is subject to numerous conditions, some of which are not in
the control of the Company, such as approval by the Court of Chancery of the
State of Delaware, and therefore is inherently uncertain.
The foregoing description of the Winston Settlement is qualified in its entirety
by reference to the Winston Settlement Agreement, a copy of which is being filed
as Exhibit 10.01 hereto.
As previously reported, on January 29, 1998, Milestone, along with certain of
its directors, commenced a lawsuit in the United States District Court for the
Southern District of New York against National Union Fire Insurance Company of
Pittsburgh, Pa. ("National Union") and Stonewall Surplus Lines Insurance Company
("Stonewall"). National Union had issued a directors and officers insurance and
company reimbursement policy (the "National
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Policy") for Milestone and its directors with a limit of $2,000,000. Stonewall
had issued an excess directors and officers liability and company reimbursement
policy (the "Stonewall Policy") for Milestone and its directors with a limit of
$2,000,000. Pursuant to the Initial Winston Settlement Agreement, had such
proposed settlement been consummated, Milestone would have paid approximately
$2,225,000, plus plaintiff's legal fees in an amount not to exceed $650,000 and
would have incurred other legal expenses. Milestone believes that the amount it
and certain of its directors would have paid pursuant to the initial proposed
settlement and as a result of the litigation, had such proposed settlement been
consummated, would have been covered losses under both the National Union Policy
and the Stonewall Policy. In addition, the Company incurred approximately
$550,000 in legal fees in defending Milestone and its directors in connection
with the Winston Action, which it believes is a covered loss under the National
Union and Stonewall policies. National Union refused to contribute to such
proposed settlement, as set forth in the Initial Winston Settlement Agreement,
asserting that such proposed settlement did not encompass any covered loss (as
defined in the National Policy). Stonewall also refused to contribute to such
proposed settlement. In the complaint, the plaintiffs alleged that National
Union and Stonewall wrongfully failed to contribute to the initial proposed
settlement and sought reimbursement from National Union and Stonewall up to the
limits of their respective policies. National Union and Stonewall both answered
the complaint and denied liability. As a result of the termination of the
Initial Winston Settlement Agreement, Milestone, on one hand, and Stonewall and
National Union, on the other hand, agreed to dismiss such action without
prejudice and such action was dismissed on May 29, 1998 by the United States
District Court for the Southern District of New York. The Company has given
National Union and Stonewall notice of the Winston Settlement and has provided
each of them with a copy of the Winston Settlement Agreement. It is possible
that the Company will assert a claim against National Union and Stonewall in
connection with covered losses under the National Policy and the Stonewall
Policy relating to the Winston Settlement. At this time, the Company is not in a
position to render an opinion as to the outcome of such an action if one is
commenced.
Item 5. Other Information
Milestone's Board of Directors determined not to pay any dividends on the Series
A Preferred Stock during the years ended December 31, 1996 and 1997 and for the
six months ended June 30, 1998. The last dividend declared by Milestone was for
the quarter ended December 31, 1995 and was paid on February 15, 1996 at $0.195
per share of Series A Preferred Stock.
After September 30, 1995, holders of the Series A Preferred Stock having a
liquidation preference of $10.00 per share, were no longer entitled to receive
dividends on a cumulative basis. Pursuant to the Certificate of Designations of
the Series A Preferred Stock, after such date, no cash dividend may be paid on
the Common Stock unless full dividends of $0.195 on all outstanding shares of
Series A Preferred Stock for the then current quarterly dividend period are
declared and either paid or sufficient sums for the payment thereof are set
apart. As a result of Milestone's Board of Directors' determination not to pay a
dividend for the quarter ended June 30, 1997, which was the sixth consecutive
quarter for which no dividend was paid, the number of persons entitled to serve
as directors on Milestone's Board of Directors has been increased by one, and
the holders of the Series A Preferred Stock, who currently elect one member of
the Board of Directors, are entitled to elect a second member of the Board of
Directors to fill such newly created directorship. Any decision as to the future
payment of dividends on the Series A Preferred Stock will depend on the results
of operations and the financial condition of the Company and such other factors
as Milestone's Board of Directors, in its discretion, deems relevant. See Part
I-Financial Information, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation, Liquidity and Capital Resources.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a)The following exhibits are included herein:
Exhibit 10.01 - Stipulation and Agreement of Settlement, dated August
5, 1998, by and among John Winston and Leonard S. Mandor, Robert
A. Mandor, Joan LeVine, Harvey Jacobson, Gregory McMahon,
Geoffrey S. Aaronson, Milestone Properties, Inc. and Concord
Assets Group, Inc.
Exhibit 27 - Financial Data Schedule Article 5 included for
Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
purposes only. This Schedule contains summary financial
information extracted from the consolidated balance sheets and
consolidated statements of revenues and expenses of the Company
as of and for the six month period ended June 30, 1998, and is
qualified in its entirety by reference to such financial
statements.
(b)Reports on Form 8-K:
On April 29, 1998, a Form 8-K was filed with the Commission
reporting that the plaintiff in the Winston Action will not
proceed with a previously announced settlement agreement.
On July 21, 1998, a Form 8-K was filed with the Commission
reporting; (i) the Sale of the Mountain View Mall property
located in Bend, Oregon; (ii) the proposed settlement with
plaintiff's counsel relating to the Winston Action and (iii) the
suspension of trading of shares of the Series A Preferred Stock
and Common Stock by the New York Stock Exchange.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MILESTONE PROPERTIES, INC.
(Registrant)
Date: August 14, 1998 /s/ Robert A. Mandor
Robert A. Mandor
President and Chief Financial Officer
Date: August 14, 1998 /s/ Patrick S. Kirse
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
20
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,087,320
<SECURITIES> 0
<RECEIVABLES> 6,642,196
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,355,023
<PP&E> 29,891,550
<DEPRECIATION> 6,724,128
<TOTAL-ASSETS> 104,693,350
<CURRENT-LIABILITIES> 48,815,267
<BONDS> 0
0
30,004
<COMMON> 49,431
<OTHER-SE> 24,098,577
<TOTAL-LIABILITY-AND-EQUITY> 104,693,350
<SALES> 0
<TOTAL-REVENUES> 11,089,681
<CGS> 0
<TOTAL-COSTS> 13,646,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,100,605
<INCOME-PRETAX> (2,556,418)
<INCOME-TAX> (985,622)
<INCOME-CONTINUING> (1,570,796)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (1,570,796)
<EPS-PRIMARY> (0.37)
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</TABLE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JOHN WINSTON, )
)
Plaintiff, )
)
v. ) C.A. Nos. 14807 & 15416
)
LEONARD S. MANDOR, ROBERT A. )
MANDOR, JOAN LEVINE, HARVEY )
JACOBSON, GREGORY MCMAHON, )
GEOFFREY S. AARONSON, MILESTONE )
PROPERTIES, INC. and CONCORD ASSETS )
GROUP, INC., )
)
Defendants. )
STIPULATION AND AGREEMENT OF SETTLEMENT
THIS STIPULATION AND AGREEMENT OF SETTLEMENT (together with all
exhibits, the "Stipulation") is entered into this 5th day of August, 1998 by and
among (i) JOHN WINSTON (the "Plaintiff"), suing on his own behalf, purportedly
on behalf of all holders of the $.78 Convertible Series A preferred stock, par
value $.01 per share (the "MPI Preferred Stock") of MILESTONE PROPERTIES, INC.
("MPI"), a Delaware corporation, and derivatively on behalf of MPI, and (ii)
LEONARD S. MANDOR, ROBERT A. MANDOR, JOAN LEVINE, HARVEY JACOBSON, GREGORY
MCMAHON, GEOFFREY S. AARONSON, MPI and CONCORD ASSETS GROUP, INC., a New York
corporation ("Concord") (collectively, the "Defendants") through their
undersigned counsel.
1
<PAGE>
WHEREAS:
A. MPI, through its own operations and those of its subsidiaries, is
engaged in the business of acquiring, owning, managing and developing real
estate, and other real estate related businesses.
B. Defendants Leonard S. Mandor, Robert A. Mandor, Geoffrey Aaronson,
Harvey Jacobson and Gregory McMahon are directors and/or executive officers of
MPI, and at the time of the Transactions (as defined herein) were, along with
Defendant Joan LeVine, directors and/or executive officers of MPI.
C. Defendants Geoffrey Aaronson, Harvey Jacobson and Gregory McMahon
were, at the time of the Transactions, the only members of the Related Party
Transaction Committee of MPI's Board of Directors, which committee was appointed
by the Board to evaluate the fairness of possible transactions with parties
related to MPI, including the Acquisition (as defined herein) challenged by the
Plaintiff.
D. In September 1995, MPI distributed to each holder of MPI common
stock, par value $.01 per share (the "MPI Common Stock"), and to each holder of
MPI Preferred Stock, a Proxy Statement - Information Statement dated September
12, 1995 (the "Proxy Statement") describing certain transactions to be
considered and approved at a Special Meeting of MPI's stockholders held on
October 23, 1995, whereby: (i) MPI would acquire certain wraparound notes,
wraparound mortgages and fee interests from subsidiaries and affiliates of
Concord in exchange for $500,005 in cash and the issuance to such subsidiaries
and affiliates of Concord of 2,544,654 shares of MPI Common Stock (the
"Acquisition"); (ii) 16 properties owned by MPI would be transferred (the
2
<PAGE>
"Transfer") to Union Property Investors, Inc. ("UPI"), a Delaware corporation
and a then wholly-owned subsidiary of MPI; and (iii) UPI would be recapitalized
(the "Recapitalization") and thereafter, all of the outstanding shares of UPI's
Common Stock would be distributed to the holders of MPI Common Stock (the "MPI
Common Stockholders") on a share-for-share basis and for no consideration (the
"Spin-Off") (the Acquisition, the Transfer, the Recapitalization, the Spin-Off,
and the transactions contemplated thereby, including, without limitation, the
actions undertaken at and in connection with the Special Meeting of MPI's
stockholders held on October 23, 1995, and the documents prepared in connection
therewith, including, without limitation, the Proxy Statement, are collectively
referred to herein as the "Transactions"). The Acquisition required the approval
of a majority of the shares of MPI Common Stock, and the Transfer and Spin-Off
were contingent on the approval of the Acquisition. On October 23, 1995, the MPI
Common Stockholders approved the Acquisition. The Transfer and the Spin-Off were
completed in October 1995 and November 1995, respectively.
E. On January 30, 1996, the Plaintiff, a holder of MPI Preferred Stock,
filed a class action complaint (the "Complaint") on behalf of all holders of
shares of MPI Preferred Stock (the "MPI Preferred Stockholders") in the Delaware
Court of Chancery (the "Court"), Civil Action No. 14807, claiming that the
Transactions breached the Defendants' fiduciary duty and an implied obligation
of good faith owed to the holders of the MPI Preferred Stock (the "First
Action"). On February 12, 1996, the Defendants moved to dismiss the Complaint
pursuant to Chancery Court Rule 12(b)(6) for failure to state a claim.
F. The Plaintiff filed an Amended Class Action Complaint on June 5, 1996
(the
3
<PAGE>
"Amended Complaint") that included additional counts challenging the
Transactions as violating Section 271 of the Delaware General Corporation Law
("Section 271") and several provisions of the Certificate of Designations
governing the MPI Preferred Stock (the "Certificate of Designations"). On June
19, 1996, the Defendants moved to dismiss the Amended Complaint. On October 25,
1996, the Court ruled that the remedy of rescission would not be available in
the action. See Winston v.
Mandor, Del. Ch., C.A. No. 14807, Steele, V.C.
G. While the remainder of the Defendants' motion to dismiss was before
the Court, the Plaintiff, on December 9, 1996, filed a second action against the
same defendants, Civil Action No. 15416 (the "Second Action"), and sought
dismissal, without prejudice, of the First Action (collectively, the "Actions").
The Second Action contained a single claim alleging that the Transactions
constituted a breach of fiduciary duty to the MPI Preferred Stockholders. The
Defendants moved to dismiss, or in the alternative, to stay the Second Action.
H. By Memorandum Opinion and Order dated May 12, 1997, the Court
granted in part and denied in part the Defendants' motions to dismiss. The Court
dismissed the Second Action in its entirety, dismissed the breach of fiduciary
duty claim in the First Action for failure to state a claim, and dismissed the
Section 271 claim on the ground that the Plaintiff had no standing to sue under
such section. The Court also denied the motion to dismiss the Plaintiff's
contractual claims in the First Action against MPI alleging breaches of the
Certificate of Designations, and granted leave to further amend the Amended
Complaint to assert a derivative claim challenging the fairness of the
Acquisition. The Plaintiff subsequently filed an amended complaint asserting a
breach of fiduciary duty claim.
4
<PAGE>
I. On June 4, 1997, the Plaintiff appealed the May 12, 1997 Order of
the Court (the "Appeal") dismissing the Second Action. On June 11, 1997, the
Defendants moved to dismiss the Plaintiff's appeal and cross-appealed from the
portion of the Order which denied the motion to dismiss certain causes of action
in the First Action (the "Cross Appeal").
J. On October 30, 1997, the parties hereto entered into a certain
Stipulation and Agreement of Settlement (the "Prior Stipulation") in connection
with a previous proposed settlement (the "Prior Settlement") of the Actions.
Pursuant to the terms of the Prior Settlement, if approved and consummated, MPI
and its stockholders would have released all derivative claims arising in
connection with the Transactions and the holders of the MPI Preferred Stock
between October 23, 1995 and the date on which the Prior Settlement was
consummated would have released any claims they may have had against MPI and the
other named Defendants arising out of the Transactions. Each MPI Preferred
Stockholder who did not opt out of the Prior Settlement and who owned shares of
the MPI Preferred Stock on the date that the Prior Settlement was consummated
would surrender their shares of MPI Preferred Stock to a wholly-owned subsidiary
of Concord, and receive in exchange for each share of MPI Preferred Stock
surrendered, $0.75 in cash payable by MPI plus one share of Preferred Stock of
such Concord subsidiary. The Preferred Stock of the Concord subsidiary would
have had a liquidation preference of $2.25 per share, would have been required
to be redeemed by the Concord subsidiary at $2.25 per share after five years,
and would have had no voting or dividend rights. In addition, any holder of the
Concord subsidiary's preferred stock who did not want to wait the full five
years for such shares to be redeemed could have had shares redeemed by the
Concord subsidiary at the following prices prior to the fifth year: within 2
years after the Prior Settlement - $1.00 per share; 2-3 years after the Prior
Settlement - $1.40 per share;
5
<PAGE>
3-4 years after the Prior Settlement - $1.60 per share; 4 - 5 years after the
Prior Settlement - $1.90 per share. The Concord subsidiary's redemption
obligations would have been secured by a Letter of Credit.
K. Upon executing the Prior Stipulation, the parties asked the Supreme
Court of the State of Delaware (the "Supreme Court") to remand the matter to the
Court for consideration of the terms of the Prior Stipulation and the actions to
be undertaken thereby as required by Chancery Court Rules 23(e) and 23.1.
L. By correspondence of April 22, 1998, Defendants' counsel informed
the Supreme Court and the Court that the Plaintiff had withdrawn from the Prior
Settlement. By order of June 11, 1998, the Supreme Court dismissed the Appeal
and the Cross Appeal as interlocutory appeals not taken in compliance with
Delaware Supreme Court Rule 42, but said that the dismissal ruling did not
preclude the Court from determining, upon appropriate application, whether a
final judgment should be entered pursuant to Rule 54(b) of the Court.
M. The Plaintiff enters into this Stipulation after taking into account
(i) the benefits to the MPI Preferred Stockholders and MPI from the Settlement,
(ii) the risks of continued litigation, (iii) the desirability of permitting the
Settlement to be consummated as provided by the terms of this Stipulation, and
(iv) the conclusion by the Plaintiff and his counsel that the terms and
conditions of the Settlement are fair, reasonable, adequate, and in the best
interests of MPI and the MPI Preferred Stockholders.
N. The Defendants enter into this Stipulation after taking into account
(i) MPI's indemnification obligations to the individual Defendants under its
Certificate of Incorporation, as
6
<PAGE>
amended, and its By-laws, (ii) the Settlement's resolution of all claims or
potential claims by the MPI Preferred Stockholders and derivative claims by the
stockholders of MPI relating to, or arising from, the Transactions (iii) the
Settlement's beneficial impact on the MPI Common Stockholders by settling claims
of MPI Preferred Stockholders relating to the right of MPI Preferred
Stockholders to convert their shares into MPI Common Stock at a higher ratio as
part of the Transactions, and (iv) avoiding delay and significant expenses
associated with continued litigation.
O. The Defendants have denied and continue to deny that any of them has
committed or has threatened to commit any violations of law or breaches of duty
to MPI, the Plaintiff or the MPI Preferred Stockholders, but because of the
expense, inconvenience and uncertainty of continued litigation, consider it
desirable that the Actions be settled and dismissed.
P. The parties hereto desire to settle and dismiss with prejudice the
Actions and any and all claims that have been or could have been asserted
therein directly or indirectly by any and all members of the Settlement Class
(as defined herein) and any derivative claims arising out of or relating to the
Transactions (the "Settlement Claims") on the terms and subject to the
conditions set forth in this Stipulation.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows, subject to
court approval as set forth below:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Stipulation, except as otherwise
expressly provided or unless the context otherwise requires:
7
<PAGE>
(a) the words "herein," "hereof," and "hereunder" and other words of
similar import refer to this Stipulation as a whole and not to any particular
Article, Section or other subdivision;
(b) the words "including," "include," and "includes" followed by one or
more examples are intended to be illustrative and shall not be deemed to limit
the scope of the classification or category to the examples listed, and shall be
read to mean "including, without limiting the scope or generality of the
foregoing;" and
(c) the following capitalized terms shall have the meanings respectively
assigned to them below, and include the plural as well as the singular:
"Acquisition" shall have the meaning set forth in the Recitals;
"Actions" shall have the meaning set forth in the Recitals;
"Amended Complaint" shall have the meaning set forth in the
Recitals; "Appeal" shall have the meaning set forth in the
Recitals; "Business Day" is a day on which the New York Stock
Exchange is open for trading; "Cash Payment" shall have the
meaning set forth in Section 2.1; "Certificate of Designations"
shall have the meaning set forth in the Recitals; "Class Claims"
shall have the meaning set forth in Section 3.1(a); "Complaint"
shall have the meaning set forth in the Recitals; "Concord" shall
have the meaning set forth in the Introduction; "Court" shall
have the meaning set forth in the Recitals; "Cross-Appeal" shall
have the meaning set forth in the Recitals; "Defendants" shall
have the meaning set forth in the Introduction; "Defendants'
Affiliates" shall have the meaning set forth in Section 3.1(a);
8
<PAGE>
"Derivative Claims" shall have the meaning set forth in Section
3.1(b); "Exchange Act" means the Securities Exchange Act of 1934,
as amended; "Exchange Agent" shall have the meaning set forth in
Section 4.6; "Final Opt-Out Date" shall have the meaning set
forth in Section 4.3; "Final Order" shall have the meaning set
forth in Section 4.5; "First Action" shall have the meaning set
forth in the Recitals; "Letter of Transmittal" shall have the
meaning set forth in Section 4.6; "MPI" shall have the meaning
set forth in the Introduction; "MPI Certificate" shall have the
meaning set forth in Section 4.6; "MPI Common Stock" shall have
the meaning set forth in the Recitals; "MPI Common Stockholders"
shall have the meaning set forth in the Recitals; "MPI Preferred
Stock" shall have the meaning set forth in the Introduction; "MPI
Preferred Stockholders" shall have the meaning set forth in the
Recitals; "Opt-Out Shares" are shares of MPI Preferred Stock held
by Record MPI Preferred Stockholders who (i) formally file a
notice in the manner set forth in Section 4.3 herein informing
the Court of their desire to opt out of the Settlement and not be
considered members of the Settlement Class and (ii) do not sell,
transfer, assign or otherwise convey such shares of MPI Preferred
Stock prior to the Settlement Effective Date; "Plaintiff" shall
have the meaning set forth in the Introduction; "Potential
Settlement Class Members" means all holders of shares of MPI
Preferred Stock as of October 23, 1995 and their successors in
interest through the Settlement Effective Date, including the
Record MPI Preferred Stockholders but excluding Defendants and
Defendants'
9
<PAGE>
Affiliates; "Prior Settlement" shall have the meaning set forth in the
Recitals; "Prior Stipulation" shall have the meaning set forth in
the Recitals; "Proxy Statement" shall have the meaning set forth
in the Recitals; "Recapitalization" shall have the meaning set
forth in the Recitals; "Record Date" shall have the meaning set
forth in Section 4.2; "Record MPI Preferred Stockholders" means
all holders of shares of MPI Preferred Stock as of the Record
Date, excluding Defendants and Defendants' Affiliates; "Released
Persons" shall have the meaning set forth in Section 3.1(a);
"Scheduling Order" shall have the meaning set forth in Section
4.1; "SEC" shall mean the Securities and Exchange Commission;
"Second Action" shall have the meaning set forth in the Recitals;
"Section 271" shall have the meaning set forth in the Recitals;
"Securities Act" means the Securities Act of 1933, as amended;
"Settled Claims" shall have the meaning set forth in Section
3.1(c); "Settlement" shall have the meaning set forth in the
Recitals; "Settlement Claims" shall have the meaning set forth in
the Recitals; "Settlement Class" means all Potential Settlement
Class Members who do not opt out of the Settlement, temporarily
certified by the Court solely for purposes of the Settlement;
"Settlement Consideration" means the Cash to be paid to the
Settlement Consideration Recipients; "Settlement Consideration
Recipients" means Settlement Class members who own shares of
10
<PAGE>
MPI Preferred Stock as of the Settlement Effective Date; "Settlement
Effective Date" means the date on which the Final Order approving
the Settlement becomes final and is no longer subject to appeal,
whether by the passage of time, affirmance on appeal or
otherwise; "Settlement Hearing" shall have the meaning set forth
in Section 4.4; "Settlement Notice" shall have the meaning set
forth in Section 4.1; "Spin-Off" shall have the meaning set forth
in the Recitals; "Stipulation" shall have the meanings set forth
in the Introduction; "Supreme Court" shall have the meaning set
forth in the Recitals; "Transactions" shall have the meaning set
forth in the Recitals; "Transfer" shall have the meaning set
forth in the Recitals; and "UPI" shall have the meaning set forth
in the Recitals.
ARTICLE II
THE EXCHANGE OF MPI PREFERRED STOCK AND RELEASES
FOR THE CASH PAYMENT
Section 2.1 Settlement Consideration. As of the Settlement Effective
Date, each Settlement Consideration Recipient shall, in consideration of the
releases and discharge of the Settled Claims provided for in this Stipulation
and the transfer to MPI of each share of MPI Preferred Stock held by such
Settlement Consideration Recipient as of the Settlement Effective Date, be
entitled to receive $3.00 in cash (the "Cash Payment" or the "Settlement
Consideration") from MPI on behalf of the Defendants.
ARTICLE III
11
<PAGE>
DISCHARGE OF CLAIMS
Section 3.1. Release of Claims. In consideration of the benefits to MPI
and the Settlement Class described in the Recitals and Section 2.1 hereof, and
subject to the approval of the Court as provided for herein, the Class Claims
and the Derivative Claims, as described below, shall be released as follows:
(a) Release of Class Claims. MPI, the Plaintiff and each Settlement
Class member shall fully, finally and forever compromise, settle, release and
dismiss with prejudice pursuant to the terms and conditions as set forth herein,
any and all claims, rights, demands, liabilities, actions, causes of action,
suits, damages, losses, obligations, matters and issues, whether asserted or
unasserted, contingent or absolute, known or unknown, suspected or unsuspected,
disclosed or undisclosed, matured or unmatured, material or immaterial, legal or
equitable, (i) which have been, could have been, or in the future can or might
be, asserted in the Actions or otherwise by the Plaintiff or any member of the
Settlement Class, whether individual or class, (including, without limitation,
claims arising under the federal securities laws), against any of the Defendants
in the Actions or any of their families, affiliates, associates and
subsidiaries, and each of their respective present or former officers,
directors, stockholders, agents, employees, attorneys, representatives,
financial and other advisors, investment or commercial bankers, trustees,
general and limited partners and partnerships, heirs, executors, personal
representatives, estates, administrators, predecessors, successors and assigns
(collectively, the "Defendants' Affiliates") and any other person or entity
acting for or on behalf of any Defendant (collectively, the "Released Persons"),
and (ii) which arise out of or relate in any manner whatsoever, directly or
indirectly, to any of the allegations, facts, events, transactions, occurrences,
acts,
12
<PAGE>
representations, statements, misrepresentations or omissions, or any other
matter, thing or cause whatsoever, or any series thereof, involved, embraced,
set forth or otherwise referred or related directly or indirectly to the
Transactions, the Actions, the adjustment made to the conversion ratio for the
MPI Preferred Stock in connection with the Transactions, or any public filings
or other statements that were issued in connection with the Transactions by any
Released Person in the Actions (the "Class Claims").
(b) Release of Derivative Claims. MPI, the Plaintiff, each Settlement
Class member, each MPI Common Stockholder and each MPI Preferred Stockholder
shall fully, finally and forever compromise, settle, release and dismiss with
prejudice pursuant to the terms and conditions as set forth herein, any and all
claims, rights, demands, liabilities, actions, causes of action, suits, damages,
losses, obligations, matters and issues, whether asserted or unasserted,
contingent or absolute, known or knowable, matured or unmatured, material or
immaterial, legal or equitable (i) which have been, could have been, or in the
future can or might be, asserted in the Actions (including, without limitation,
claims arising under the federal securities laws) or otherwise by or on behalf
of MPI against any of the Defendants in the Actions or against any Released
Person, and (ii) which arise out of or relate in any manner whatsoever, directly
or indirectly, to any of the allegations, facts, events, transactions,
occurrences, acts, representations, statements, misrepresentations or omissions,
or any other matter, thing or cause whatsoever, or any series thereof, involved,
embraced, set forth or otherwise referred or related directly or indirectly to
the Transactions, the Actions, the adjustment made to the conversion ratio for
the MPI Preferred Stock in connection with the Transactions, or any public
filings or other statements that were issued in connection with the Transactions
by any Released Person in the
13
<PAGE>
Actions (the "Derivative Claims").
(c) The Class Claims and the Derivative Claims will be referred to
collectively herein as the "Settled Claims". The term "Settled Claims" does not
include claims arising pursuant to this Stipulation.
ARTICLE IV
IMPLEMENTATION
Section 4.1 The Scheduling Order.. Forthwith after this Stipulation has
been signed with due authorization by all counsel for the parties, counsel for
the parties shall jointly submit this Stipulation to the Court and shall jointly
apply for a scheduling order substantially in the form annexed hereto as Exhibit
A (the "Scheduling Order") establishing a date for a hearing to determine the
fairness and adequacy of the Settlement, granting conditional class
certification, and approving the proposed Notice of Pendency of Class and
Derivative Action, Proposed Settlement, Settlement Hearing and Right to Appear
to the Settlement Class (the "Settlement Notice") in substantially the form
annexed hereto as Exhibit B. The parties hereto hereby consent to the
conditional certification of the Settlement Class solely for the purposes of
this Stipulation as set forth herein. In the event that this Stipulation shall
terminate or be cancelled, or the Settlement shall not become effective for any
reason, the conditional class certification and notice order described in this
Section 4.1 shall be vacated and Defendants shall be free to assert any claims
or defenses with respect to any subsequent action or proceeding involving or
relating to class certification.
Section 4.2 Notice of Proposed Settlement. MPI shall set a record date (the
"Record Date"), which shall be no later than the 15th day following entry of the
Scheduling Order, to determine the
14
<PAGE>
MPI Common Stockholders who shall be entitled to receive the Settlement Notice
and to determine the Potential Settlement Class Members who shall be afforded an
opportunity to opt out of the Settlement. Promptly after the Record Date, MPI
shall cause the Settlement Notice to be sent to the Plaintiff, each Potential
Settlement Class Member, and each MPI Common Stockholder as of the Record Date
in the manner directed and approved by the Court. Costs of printing, mailing and
publication of the Settlement Notice shall be paid by MPI. MPI will instruct its
transfer agent to distribute a copy of the Settlement Notice together with any
certificates of shares of MPI Preferred Stock that may be issued after the
Record Date. The Settlement Notice shall direct brokers, nominees and others who
hold of record for the account of another to provide copies of the Settlement
Notice to any persons for whose account they purchase MPI Preferred Stock after
the Record Date.
Section 4.3 Settlement Opt-Out. The Potential Settlement Class Members
(other than those who acquire shares of MPI Preferred Stock after the Record
Date) shall have 45 days from the date of the mailing of the Settlement Notice
in which to opt out of the Settlement Class and the Settlement (the 45th day
shall be referred to herein as the "Final Opt-Out Date") by mailing a letter to
the Register in Chancery and to each counsel of record prior to the Final
Opt-Out Date setting forth (i) his, her or its name, address, social security
number or employer identification number, as applicable, and telephone number,
(ii) the number of shares of MPI Preferred Stock owned and, if available, the
certificate number(s) of the stock certificate(s) representing such shares of
Stock, (iii) if the shares of MPI Preferred Stock are not or were not held of
record or registered in such member's name on the books and records of MPI, the
letter shall indicate the name or brokerage firm and account in which such
shares of MPI Preferred Stock were registered and shall include evidence
15
<PAGE>
of such member's ownership thereof, and (iv) that he, she or it elects to opt
out of the Settlement. Any Potential Settlement Class Member who does not return
an opt-out election meeting the requirements of this Section 4.3 on or prior to
the Final Opt-Out Date shall be deemed a member of the Settlement Class and
shall be bound by, and subject to, the terms and conditions of this Stipulation,
the Settlement and all court orders affecting the Settlement Class. Any
Potential Settlement Class Member who elects to opt out of the Settlement and,
prior to the Settlement Effective Date, sells, transfers, assigns or otherwise
conveys his, hers or its shares of MPI Preferred Stock, shall not be entitled to
receive the Settlement Consideration and his, hers or its shares of MPI
Preferred Stock shall not be deemed to be Opt-Out Shares. MPI Preferred
Stockholders who acquire their shares of MPI Preferred Stock after the Record
Date shall not be entitled to opt out of the Settlement.
Section 4.4 Settlement Hearing. A settlement hearing (the "Settlement
Hearing") shall be held at such time after the Final Opt-Out Date and at such
place as shall be designated by the Court. In connection with the Settlement
Hearing, the parties hereto shall file such papers as their counsel believe to
be necessary. At the Settlement Hearing, the Court shall consider the fairness
of the terms and conditions of the Settlement and all of the transactions
contemplated by this Stipulation and whether the Settled Claims should be
dismissed with prejudice.
Section 4.5 Entry of Order. At the Settlement Hearing, counsel for the
parties shall submit for entry by the Court an agreed upon proposed Final Order
(the "Final Order") in substantially the form annexed hereto as Exhibit C,
providing as follows:
(a) Approving the Stipulation, the Settlement and the transactions
contemplated thereby as
16
<PAGE>
fair, just, reasonable, adequate and in the best interest of the Settlement
Class and the members thereof, and directing the performance of the acts set
forth in, and reserving jurisdiction to supervise the administration and
consummation of, this Stipulation and the Settlement;
(b) Determining that the requirements of Rules 23.1 and 23 (e) of the
Chancery Court Rules and due process have been satisfied, including inter alia,
certification of a Settlement Class and that the class and derivative interests
have been adequately represented;
(c) Dismissing the Actions with prejudice on the merits, extinguishing,
discharging and releasing any and all Settled Claims as against any and all
Released Persons, and permanently barring the parties, including Plaintiff and
all members of the Settlement Class, from asserting, commencing, prosecuting or
continuing, either directly, individually, representatively, derivatively or in
any other capacity any of the Settled Claims as against any and all Released
Persons; and
(d) Containing provision for the Final Order to be vacated upon notice to
the Court of the nonfulfillment or impossibility of fulfillment of any of the
conditions set forth in Article V hereof.
Section 4.6 Cash Distribution. (a) The Defendants shall designate an
exchange agent reasonably acceptable to the Plaintiff (the "Exchange Agent") to
act as such in connection with effecting the settlement distribution
contemplated by Section 2.1.
(b) Within ten days after the Settlement Effective Date, MPI, on behalf of
the Defendants, shall deliver to the Exchange Agent an amount equal to the
aggregate Cash Payment to be paid to the Settlement Consideration Recipients
pursuant to Section 2.1. In no event shall interest be paid or accrue on any
Cash Payment.
(c) As soon as practicable after the Settlement Effective Date, the
Defendants shall cause the Exchange Agent to distribute to each Settlement
Consideration Recipient a letter of transmittal
17
<PAGE>
(the "Letter of Transmittal") in a form reasonably acceptable to Plaintiff's
counsel which shall specify (i) the manner by which to effect the surrender of
the certificate(s) representing such Settlement Consideration Recipient's shares
of MPI Preferred Stock (the "MPI Certificates") in exchange for the Cash Payment
due to such Settlement Consideration Recipient, and (ii) that delivery shall be
effected, and risk of loss and title to MPI Certificates shall pass, upon proper
delivery thereof to the Exchange Agent. Upon surrender of an MPI Certificate
together with a Letter of Transmittal, duly executed, and in the form and having
such other provisions as MPI shall reasonably request, the holder of such MPI
Certificate shall be entitled to receive the Cash Payment provided for in
Section 2.1 hereof in exchange therefor from the Exchange Agent, and such MPI
Certificate shall thereafter be cancelled. The Exchange Agent shall be directed
by MPI to take reasonable steps to contact all Settlement Consideration
Recipients and to assist such Settlement Consideration Recipients in
surrendering their MPI Certificates in exchange for the Settlement
Consideration.
(d) From and after the Settlement Effective Date, each MPI Certificate
shall be deemed to be conveyed, assigned and transferred to and for the benefit
of MPI, shall be cancelled and retired, and shall not evidence as to any holder
or former holder thereof any interest in MPI other than the right of the
Settlement Consideration Recipients to receive the Settlement Consideration for
each share of MPI Preferred Stock formerly represented by such MPI Certificate.
If a Cash Payment is to be made to a person other than the one in whose name the
MPI Certificate surrendered in exchange therefor is registered, it shall be a
condition to such issuance and payment that such MPI Certificate be properly
endorsed (or accompanied by an appropriate instrument of transfer), with
signatures guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency
18
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or other institution that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, and accompanied by evidence that any
applicable stock transfer taxes have been paid or provided for.
(e) Any Cash Payments made available to the Exchange Agent pursuant to
Section 4.6(b) and not paid out in exchange for MPI Certificates within one year
after the Settlement Effective Date shall be repaid to MPI by the Exchange
Agent. MPI shall deposit all such Cash Payments repaid to it pursuant to the
previous sentence in trust, in either an interest or a non-interest bearing
account, as determined by MPI in its sole discretion, for such Settlement
Consideration Recipients who have not exchanged their MPI Certificates for a
Cash Payment within one year after the Settlement Effective Date. Any interest
accrued on any such funds so deposited shall belong to MPI and be paid to it
from time to time. Any funds so deposited and not exchanged for MPI Certificates
within seven years after the Settlement Effective Date need not be maintained in
trust for such Settlement Consideration Recipients who have not, at such time,
exchanged their MPI Certificates for a Cash Payment. After the first anniversary
of the Settlement Effective Date, any Settlement Consideration Recipient who has
not theretofore delivered or surrendered his or her MPI Certificate to the
Exchange Agent shall, subject to applicable law, look to MPI for the Cash
Payment to be paid pursuant to Section 2.1. Notwithstanding the foregoing, none
of the Exchange Agent, MPI or any other party hereto shall be liable to a
Settlement Consideration Recipient for any Cash Payment delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) The Exchange Agent and MPI shall be entitled to deduct and withhold
from the payment of any Settlement Consideration payable to any Settlement
Consideration Recipient, such amounts as the Exchange Agent or MPI may be
required to deduct and withhold under the Internal
19
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Revenue Code of 1986, as amended from time to time, or any provision of any
state, local or foreign law. To the extent that any amounts are so withheld,
such withheld amounts shall be treated for all purposes of this Stipulation as
having been paid to such Settlement Consideration Recipient.
(g) In the event that any MPI Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such MPI Certificate to be lost, stolen or destroyed, and, if required by MPI,
in its sole discretion, the posting by such person of a bond in such reasonable
amount as MPI may direct as indemnity against any claim that may be made against
it with respect to such MPI Certificate, the Exchange Agent or MPI shall
exchange for such lost, stolen or destroyed MPI Certificate such Cash Payment to
which such person would otherwise have been entitled had such MPI Certificate
been surrendered in accordance with Section 4.6(c).
ARTICLE V
CONDITIONS
Section 5.1 The Defendants' agreement to settle the Actions on the
terms stated herein is contingent upon, and subject to the fulfillment of, each
of the following conditions, any or all of which may be waived in writing by the
Defendants:
(a) The Scheduling Order and the Final Order shall have been approved and
entered by the Court in substantially the forms annexed hereto as Exhibit A and
Exhibit C, respectively;
(b) The number of Opt-Out Shares shall not at any time exceed 10% of the
shares of MPI Preferred Stock outstanding on the Record Date;
(c) The Settlement Class shall not be modified by the Court in any manner
adverse to the Defendants;
20
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(d) MPI shall have complied with all applicable requirements of Rule 13(e)
of the Exchange Act or received a "no-action letter" from the SEC or separate
opinions of counsel from counsel for the Plaintiff and counsel for the
Defendants reasonably satisfactory to MPI that the transactions contemplated by
the Settlement need not comply with and/or are exempt from, the requirements set
forth in Rule 13(e) of the Exchange Act;
(e) All necessary state securities or "blue sky" filings, permits or
approvals required to consummate the Settlement and the other transactions
contemplated hereby shall have been made or obtained, the cost of making such
filings and obtaining such permits and approvals shall not be greater than
$50,000, and no stop order or proceedings seeking a stop order with respect to
any such filings, permits or approvals shall be in effect;
(f) The Defendants shall have made all filings and registrations and shall
have received (in form and substance reasonably satisfactory to the Defendants)
all consents, authorizations, declarations and approvals necessary to consummate
the Settlement and the other transactions contemplated hereby;
(g) No court, agency or other authority shall have issued any order, decree
or judgment to set aside, restrain, enjoin or prevent, and no statute, rule,
regulation, executive order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any United States court or governmental
entity of competent jurisdiction which prohibits, restrains, enjoins, sets aside
or prevents, the consummation of the Settlement or the transactions contemplated
hereby and no action, suit, investigation or proceeding shall be pending, or
threatened in writing, seeking such relief or damages from any or all of the
Defendants related to the Transactions or the Settled Claims which the
Defendants reasonably believe would not or might not be barred by the releases
given in
21
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connection with this Settlement or by the res judicata effect of entry of the
Final Order dismissing the Actions with prejudice; and
(h) The Settlement Effective Date shall not be after June 30, 1999.
Section 5.2 Termination. In the event that at any time after the date
hereof, any of the conditions set forth in Section 5.1 fail to be fulfilled or
become impossible of fulfillment, or either party terminates this Stipulation
without prejudice, upon notice to the Court and the other parties hereto of the
non-fulfillment of any of said conditions, or the impossibility of the
fulfillment of any of said conditions, the Court shall vacate the Final Order
(if it has been entered) which shall thereafter be of no further force and
effect.
ARTICLE VI
COVENANTS
Section 6.1 Cooperation. The parties hereto and their attorneys agree
to cooperate fully with one another in seeking the Court's approval of this
Stipulation and the Settlement, obtaining the entry of the Final Order,
effectuating the Settlement and the transactions contemplated hereby, and
fulfilling the conditions set forth in Article V hereof.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Purpose of Agreement. Counsel for Plaintiff have
represented that they have sufficiently investigated the facts and researched
the applicable law regarding the claims advanced by the Plaintiff in the Actions
and the potential defenses which have been or may be asserted thereto by the
Released Persons. However, by entering into this Stipulation, none of the
parties hereto
22
<PAGE>
agrees or concedes that the claims or defenses heretofore asserted by any of the
other parties hereto, whether in the Actions or otherwise, have merit or do not
have merit. The parties acknowledge that this Stipulation is being entered into
for the purposes of the Settlement only, there having been no finding of
liability of any kind, and to avoid the expense and length of continued
proceedings, taking into account the uncertainty and risk inherent in any
litigation, especially in complex matters such as the Actions. The parties
further acknowledge that this Stipulation will not be disclosed, referred to or
offered in evidence in the Actions or in any other proceeding if this
Stipulation is terminated for any reason.
Section 7.2 Stipulation Not Admission. Neither this Stipulation or any
exhibit or document referenced herein, nor any action taken to effectuate or
further this Stipulation or the Settlement set forth herein is, may be construed
as, or may be used as an admission by or against any other parties of any fault,
wrongdoing or liability whatsoever, or as a waiver or limitation of any defenses
otherwise available to any of the parties. Entering into or carrying out of this
Stipulation, the exhibits hereto, and any negotiations or proceedings related
thereto shall not in any event be construed as, or deemed to be evidence of, an
admission or concession by any of the parties, or to be a waiver of any
applicable defense, and shall not be offered or received in evidence in any
action or proceeding against any party hereto in any court, administrative
agency or other tribunal for any purpose whatsoever other than to enforce or
effectuate the provisions of this Stipulation or the provision of any of the
exhibits to this Stipulation. No one other than MPI, the Plaintiff, the
Defendants and the other parties hereto, the members of the Settlement Class and
MPI Common Stockholders is entitled to rely upon this Stipulation. The parties
hereto each specifically reserve all rights, claims, demands, defenses, actions
or causes of action which each party presently has, or
23
<PAGE>
claims to have, against any of the others and nothing contained herein will be
deemed to affect the same, until the Settlement Effective Date.
Section 7.3 Attorneys' Fees. Plaintiff will apply to the Court, at the
Settlement Hearing, for an award of legal fees and expenses reasonably incurred
by Plaintiff's counsel in connection with the Actions, this Stipulation and the
Settlement, in an aggregate amount not to exceed $750,000, which application and
amount shall not be challenged by the Defendants. The amounts awarded by the
Court shall be paid by MPI, without interest, on the later to occur of the
Settlement Effective Date or November 1, 1999. No other legal fees and expenses
will be sought by Plaintiff's counsel from the Defendants nor from the
Settlement Consideration to be paid under this Settlement.
Section 7.4 Notices. Any and all notices, requests, consents,
directives or communications by any party intended for any other party shall be
in writing, shall be given personally, by telecopy (with confirmation
acknowledged), or by postage prepaid certified or registered mail, return
receipt requested, and shall be deemed delivered on the earlier of (a) the date
received and (b) the date four Business Days after the date of a deposit in a
United States Postal Depository, and shall be addressed as follows:
24
<PAGE>
If to Plaintiff:
Rosenthal, Monhait Gross & Goddess
Suite 1401
Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
Attention: Joseph A. Rosenthal, Esq.
Telephone: (302) 656-4433
Telecopy: (302) 658-7567
If to Defendants:
Milestone Properties, Inc.
150 E. Palmetto Park Road, 4th Floor
Boca Raton, FL 33432
Attention: President
Telephone: (561) 394-9533
Telecopy: (561) 392-8311
With a copy to:
Prickett, Jones, Elliott, Kristol & Schnee
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
Attention: Michael Hanrahan, Esq.
Telephone: (302) 888-6500
Telecopy: (302) 658-8111
and
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attention: Joel A. Yunis, Esq.
Telephone: (212) 940-8666
Telecopy: (212) 940-8776
Any party may, from time to time, change the address to which such
written notice, requests, consents, directive or communications are to be
mailed, by giving the other parties ten days' prior written notice of the
changed address in the manner herein above provided.
25
<PAGE>
Section 7.5 Costs and Expenses. All reasonable costs and expenses
related to the Settlement shall, except as otherwise provided herein, be paid by
MPI.
Section 7.6 Release and Discharge. When the Final Order approving the
Settlement becomes final and is no longer subject to appeal, whether by the
passage of time, affirmance on appeal or otherwise, and subject to the
contingencies contained herein, MPI and its stockholders and each member of the
Settlement Class shall be deemed to release and forever discharge each of the
Released Persons from the Settled Claims.
Section 7.7 Settlement Not Enforceable. In the event (a) the Settlement
proposed herein is not approved by the Court, (b) the Court approves the
Stipulation, but such approval is reversed or vacated on appeal and such order
reversing or vacating the Settlement becomes final by lapse of time or
otherwise, or (c) if any of the other conditions to such Settlement are not
fulfilled on or prior to June 30, 1999, then the Settlement proposed herein
shall be of no further force or effect and the Stipulation and any amendment
thereof shall be null and void and without prejudice to any party hereto, and
each party shall be restored to his or its respective position as it existed
prior to the execution of the Stipulation.
Section 7.8 Authority to Execute. Each of the attorneys executing the
Stipulation on behalf of one or more parties hereto warrants and represents that
he or she has been duly authorized and empowered to execute the Stipulation on
behalf of his or her respective clients.
Section 7.9 Extensions of Time. Without further order of this Court,
the parties hereto may agree to reasonable extensions of time to carry out any
of the provisions of the Stipulation beyond June 30, 1999.
26
<PAGE>
Section 7.10 Entire Agreement/Modifications. This Stipulation and the
exhibits hereto constitute the entire agreement among these parties and no
representations, warranties or inducements have been made to the Plaintiff or
its counsel concerning this Stipulation or its exhibits other than those
representations, warranties and covenants contained herein and in the exhibits
hereto. No waiver, modification or amendment of the terms of this Stipulation
shall be valid unless in writing signed by the party to be charged and only to
the extent therein set forth. 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 Stipulation to be
performed by such other party.
Section 7.11 Binding Agreement. This Stipulation, upon execution and
subject only to subsequent approval by the Court and satisfaction of the
conditions stated herein, shall be binding upon and inure to the benefit of the
parties hereto and their respective legal representatives, heirs, transferees,
successors in interest and assigns and upon any corporation, partnership or
other entity into or with which any party may merge or consolidate; provided,
however, that no assignment by any party hereto shall operate to relieve such
party hereto of its obligations hereunder.
Section 7.12 Third Parties. Nothing in this Stipulation, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Stipulation on any persons other than the members of Settlement
Class, MPI Common Stockholders, MPI, the Defendants and the Defendants'
Affiliates, and the other parties hereto, and their respective successors and
assigns, nor is anything in this Stipulation intended to relieve or discharge
the obligations or liabilities of any
27
<PAGE>
third parties to any party to this Stipulation, nor shall any provision give any
third parties any right of subrogation or action over or against any party to
this Stipulation.
Section 7.13 Exhibits. All of the exhibits hereto are incorporated by
reference as if set forth herein verbatim, and the terms of all exhibits are
expressly made part of this Stipulation.
Section 7.14 Counterparts. This Stipulation may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 7.15 Captions. 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 Stipulation or the intent of any provision hereof.
Section 7.16 Arm's-Length Negotiations. This Stipulation and the
exhibits hereto were executed after significant arm's-length negotiations among
the parties and reflect the conclusion of counsel for all of the parties to this
Stipulation that this Stipulation and the Settlement contemplated hereby are in
the best interests of all the parties hereto.
Section 7.17 Choice of Law. This Stipulation shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without regard to conflict of law principles.
Section 7.18 Waiver. The waiver by any party of any breach of this
Stipulation shall not be deemed or construed as a waiver of any other breach,
whether prior, subsequent, or contemporaneous, of this Stipulation.
28
<PAGE>
IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have
executed this Stipulation as of August 5, 1998.
ROSENTHAL, MONHAIT, GROSS
& GODDESS
By:_______________________________
Joseph A. Rosenthal
Kevin Gross
Suite 1401, Mellon Bank Center
Wilmington, DE 19899
302-656-4433
Attorneys for Plaintiff
PRICKETT, JONES, ELLIOTT
KRISTOL & SCHNEE
By:_____________________________
Michael Hanrahan
April Caso Ishak
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
302-888-6500
Attorneys for Defendants
29
<PAGE>
EXHIBIT A
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JOHN WINSTON, )
)
Plaintiff, )
)
v. ) C.A. Nos. 14807 & 15416
)
LEONARD S. MANDOR, ROBERT A. )
MANDOR, JOAN LEVINE, HARVEY )
JACOBSON, GREGORY MCMAHON, )
GEOFFREY S. AARONSON, )
MILESTONE PROPERTIES, INC. and )
CONCORD ASSETS GROUP, INC., )
)
Defendants.
ORDER SCHEDULING FAIRNESS HEARING AND APPROVING NOTICE
WHEREAS, the parties to the above-captioned actions (the "Actions")
have applied pursuant to Chancery Court Rules 23(a) and 23.1 for an Order to
approve the proposed settlement of the Actions in accordance with the
Stipulation and Agreement of Settlement entered into by the parties (the
"Stipulation");
NOW, this ____ day of ____________ 1998, upon application of Plaintiffs
and Defendants, IT IS HEREBY ORDERED as follows:
1. A hearing (the "Settlement Hearing") pursuant to Chancery Court
Rules 23(e) and 23.1 shall be held on _______, 199_, at __.m. in the Court of
Chancery, _____________ County Courthouse, ______________________, Delaware to
determine the fairness, reasonableness and adequacy of the Stipulation and the
Settlement (as defined in the Stipulation) and whether the Stipulation and the
Settlement should be finally approved by the Court and judgment entered
1
<PAGE>
thereon, to consider the adequacy of the class and derivative representative, to
conditionally certify the Settlement Class (as defined in the Stipulation) in
accordance with Chancery Court Rule 23, to hear and determine any objection to
the Settlement, and to consider Plaintiff's application for an award of
attorney's fees and expenses.
2. The Court reserves the right to adjourn the Settlement Hearing
without further notice other than by announcement at the Settlement Hearing or
any adjournment thereof.
3. The Court reserves the right to approve the Settlement at or after
the Settlement Hearing with such modifications as may be consented to by the
parties to the Stipulation and without further notice to the members of the
Settlement Class or to MPI Common Stockholders (as defined in the Stipulation).
4. No later than 60 days prior to the date of the Settlement Hearing,
counsel for the Defendants shall cause to be mailed to members of the Settlement
Class and to MPI Common Stockholders, by first-class mail, postage prepaid, a
Notice of Pendency of Class and Derivative Action, Proposed Settlement and
Settlement Hearing (the "Settlement Notice") substantially in the form attached
hereto as Exhibit 1. Upon request, MPI shall make available additional copies of
the Settlement Notice to enable record holders to provide copies thereof to
beneficial owners. Milestone Properties, Inc. ("MPI") will instruct its transfer
agent to send a copy of the Settlement Notice together with any certificates of
shares of MPI Preferred Stock (as defined in the Stipulation) issued after the
Record Date (as defined in the Stipulation). The Settlement Notice shall direct
brokers, nominees and others who hold of record for the account of another to
provide copies of the Settlement Notice to any persons for whose account they
purchase MPI Preferred Stock after the
2
<PAGE>
Record Date.
5. The form and method of notice specified herein is the best notice
practicable and shall constitute due and sufficient notice of the Settlement
Hearing to all persons entitled to receive such notice. Milestone Properties,
Inc. shall, on or before the date of the Settlement Hearing directed herein,
file proofs of mailing of the Settlement Notice as directed herein.
6. Any Settlement Class member and any MPI Common Stockholder who
objects to the Settlement may appear in person or by his, her or its attorney at
the Settlement Hearing and present any evidence or argument that may be proper
and relevant; provided, however, that no person other than the Plaintiff and
Defendants and their counsel in the Actions 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 no later than ten days prior to the Settlement Hearing (i) a
written notice of the intention to appear, (ii) a detailed statement of such
person's objections to any matter before the Court, and (iii) the grounds
therefor or the reasons why such person desires to appear and to be heard, as
well as all documents and writings which such person desires the Court to
consider, shall be served by hand or first class mail, postage prepaid, with the
Register in Chancery and the following counsel of record at the respective
addresses listed below:
REGISTER IN CHANCERY
1020 North King Street
Wilmington, DE 19801
PRICKETT, JONES, ELLIOTT, KRISTOL & SCHNEE
Michael Hanrahan
April Caso Ishak
1310 King Street
3
<PAGE>
P.O. Box 1328
Wilmington, DE 19899
Attorneys for Defendants
ROSENTHAL, MONHAIT, GROSS & GODDESS
Joseph A. Rosenthal
Kevin Gross
Suite 1401, Mellon Bank Center
Wilmington, DE 19899
Attorneys for Plaintiff and the Class
7. For Settlement purposes only, these actions are provisionally
certified as class actions on behalf of the Settlement Class.
8. Any person who fails to object in the manner prescribed above shall
be deemed to have waived such objection and shall be forever barred from raising
such objection or otherwise contesting the Settlement in this or any other
action or proceeding.
9. The Potential Settlement Class Members (as defined in the
Stipulation, other than those who acquire their shares of MPI Preferred Stock
after the Record Date) shall have 45 days from the date of the mailing of the
Settlement Notice in which to opt out of the Settlement Class and the Settlement
(the 45th day shall be referred to herein as the "Final Opt-Out Date") by
mailing a letter to the Register in Chancery and to each counsel of record prior
to the Final Opt-Out Date setting forth (i) his, her or its name, address,
telephone number and social security number or employer identification number,
as applicable, (ii) the number of shares of MPI Preferred Stock owned and, if
available, the certificate number(s) of the stock certificate(s) representing
such shares, (iii) if the shares of MPI Preferred Stock are not or were not held
of record or registered in such member's name on the books and records of MPI,
the letter shall indicate the name or brokerage firm and account in which such
shares of MPI Preferred Stock were registered and shall include evidence
4
<PAGE>
of such member's ownership thereof, and (iv) that he, she or it elects to opt
out of the Settlement. Any Potential Settlement Class Member who does not return
an opt-out election in accordance with the provisions of this Paragraph 9 shall
be deemed a member of the Settlement Class.
10. Pending final determination of whether the Stipulation should be
approved, Plaintiff and all members of the Settlement Class and, as to the
derivative claim, MPI and its stockholders, or any of them, are barred and
enjoined from commencing or prosecuting any action in any forum asserting any
claims, either directly, representatively, derivatively or in any other
capacity, against any of the Defendants or any other persons or entities which
have been or could have been asserted, or which arise out of, or relate in any
way to the Settled Claims (as defined in the Stipulation).
11. If the Settlement provided for in the Stipulation shall be approved
by the Court following the Settlement Hearing, a Final Order and Judgment shall
be entered in substantially the form of Exhibit 1 to the Settlement Notice
attached as Exhibit 1 hereto.
12. If the parties withdraw from the Stipulation or if the Stipulation,
including any amendment made in accordance with its terms, is not approved by
the Court or is terminated or shall not become effective for any reason
whatever, this action shall proceed, completely without prejudice to any party
as to any matter of law or fact, as if the Stipulation had not been made and had
not been submitted to the Court, and neither the Stipulation nor any provision
contained in the Stipulation nor any action undertaken pursuant thereto nor the
negotiation thereof by any party shall be deemed an admission or offered or
received in evidence at any proceeding in this action or any other action or
proceeding.
--------------------------------
5
<PAGE>
Vice Chancellor
6
<PAGE>
[THIS NOTICE MAY BE MODIFIED TO COMPLY WITH THE REQUIREMENTS OF
RULE 13E-3 AND/OR RULE 13E-4 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED]
EXHIBIT B TO STIPULATION/EXHIBIT 1 TO SCHEDULING ORDER
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JOHN WINSTON, )
)
Plaintiff, )
)
v. ) C.A. Nos. 14807 & 15416
)
LEONARD S. MANDOR, ROBERT A. )
MANDOR, JOAN LEVINE, HARVEY )
JACOBSON, GREGORY MCMAHON, )
GEOFFREY S. AARONSON, )
MILESTONE PROPERTIES, INC. and )
CONCORD ASSETS GROUP, INC., )
)
Defendants.
NOTICE OF PENDENCY OF CLASS AND DERIVATIVE ACTION,
PROPOSED SETTLEMENT, SETTLEMENT HEARING AND RIGHT TO APPEAR
TO: TO ALL HOLDERS OF THE $.78 CONVERTIBLE SERIES A PREFERRED
STOCK OF MILESTONE PROPERTIES, INC. AS OF OCTOBER 23, 1995,
AND THEIR SUCCESSORS IN INTEREST; and
TO ALL HOLDERS OF COMMON STOCK OF MILESTONE PROPERTIES,
INC. AS OF , 1998:
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATIONS TO THE CONTRARY IS UNLAWFUL.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL
BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF THE COURT APPROVES
THE PROPOSED SETTLEMENT, THE SETTLEMENT CLASS (EXCEPT FOR PERSONS WHO OPT OUT OF
THE SETTLEMENT) AND, AS TO THE DERIVATIVE CLAIM, MPI AND ALL OF ITS
STOCKHOLDERS, WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS,
REASONABLENESS OR ADEQUACY OF THE
1
<PAGE>
SETTLEMENT, OR FROM PURSUING THE SETTLED CLAIMS (AS DEFINED BELOW).
IF THE COURT APPROVES THE PROPOSED SETTLEMENT, EACH OUTSTANDING SHARE
OF $.78 CONVERTIBLE SERIES A PREFERRED STOCK OF MILESTONE PROPERTIES, INC.
("MPI") (EXCEPT FOR SHARES HELD BY DEFENDANTS OR BY PERSONS WHO OPT OUT OF THE
SETTLEMENT) WILL BE EXCHANGED FOR $3.00 IN CASH, PAYABLE BY MPI.
IF THE COURT APPROVES THE PROPOSED SETTLEMENT AND THE PROPOSED
SETTLEMENT IS CONSUMMATED, SUBSTANTIALLY ALL OF THE SHARES OF THE $.78
CONVERTIBLE SERIES A PREFERRED STOCK OF MPI WILL BE ACQUIRED AND CANCELLED BY
MPI. UNDER RULES 13E-3 AND 13E-4 PROMULGATED PURSUANT TO THE SECURITIES EXCHANGE
ACT OF 1934, SUCH TRANSACTIONS MUST BE DISCLOSED IN A SCHEDULE 13E-3 AND A
SCHEDULE 13E-4. A SCHEDULE 13E-3 AND A SCHEDULE 13E-4 HAVE BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, COPIES OF WHICH ARE ANNEXED HERETO AS
EXHIBITS A AND B AND INCORPORATED BY REFERENCE HEREIN. IN ADDITION, SUCH
SCHEDULES CONTAIN CERTAIN DISCLOSURE REGARDING THE POTENTIAL SALES BY MPI AND
TWO OF ITS AFFILIATES OF CERTAIN PROPERTIES WHICH COULD REPRESENT A SUBSTANTIAL
PORTION OF MPI'S REAL ESTATE RELATED ASSETS. THE SCHEDULE 13E-3 AND SCHEDULE
13E-4 HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON OR ENDORSED THE ACCURACY OR
ADEQUACY OF THE DISCLOSURES IN THOSE SCHEDULES.
THE FOLLOWING DESCRIPTIONS OF THE ACTIONS AND OF THE PROPOSED
SETTLEMENT ARE BASED ON REPRESENTATIONS MADE TO THE COURT BY COUNSEL FOR THE
PARTIES AND DOES NOT CONSTITUTE THE FINDINGS OF THE COURT.
SUMMARY OF NOTICE
The following is a summary of certain information contained in this
notice (the "Settlement Notice") and the Exhibits hereto. This summary does not
purport to be complete and is qualified in its entirety by reference to the more
detailed information set forth elsewhere herein and in the Exhibits hereto.
The purpose of this notice is to advise all stockholders of MPI that at
__:__ 0 __.m (Eastern Time) on ____________, 1998, a hearing will be held before
The Honorable Myron T. Steele, Vice Chancellor of the Court of Chancery at the
Kent County Courthouse, 38 The Green, Dover Delaware, to decide whether to
approve a proposed Settlement (as defined in the Stipulation and
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Agreement of Settlement (the "Stipulation") entered into by the parties to the
above-captioned action) of certain class and derivative actions which will
directly affect the rights and interests of MPI and its stockholders.
The proposed Settlement provides that MPI Preferred Stockholders (as
defined in the Stipulation) who owned their shares as of __________, 199__ and
who do not "opt out" of the Settlement (i.e., send in a written request to be
excluded from the Settlement) will surrender their shares of MPI Preferred
Stock, which prior to the public announcement of the Settlement had a market
value of approximately $0.875 per share, and receive in exchange from MPI on
behalf of the Defendants, $3.00 per share in cash.
The MPI Preferred Stock has been listed on the New York Stock Exchange
(the "NYSE") since January 29, 1991 and is publicly traded. Because MPI had
fallen below certain of the NYSE's continued listing criteria relating to net
income and market value of publicly held shares of MPI's Preferred Stock and
Common Stock, the NYSE suspended trading in shares of MPI's Preferred Stock and
Common Stock prior to the market opening on July 6, 1998 and subsequently
applied to the Securities and Exchange Commission (the "SEC") to delist such
issues. MPI has been advised that on or about July 6, 1998, a market developed
for trading shares of MPI's Preferred Stock and Common Stock on the OTC Bulletin
Board. There can be, however, no assurance as to the prices at which the MPI
Preferred Stock will trade prior to or after the consummation of the Settlement
or whether an active trading market will develop, or if developed, will
continue, for such shares. A Schedule 13E-3 (the "Schedule 13E-3") and a
Schedule 13E-4 (the "Schedule 13E-4") (collectively, the Schedule 13E-3 and
Schedule 13E-4 are referred to herein as the "Schedules"), copies of which
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are annexed hereto as Exhibit A and Exhibit B and incorporated by reference
herein, were filed by MPI with the SEC on _____, 1998. The Schedules disclose
that if the Settlement is approved and consummated, substantially all of the MPI
Preferred Stock will be acquired and cancelled by MPI. In addition, the
Schedules contain certain disclosure regarding the potential sale by MPI and
certain of its affiliates of certain properties which could represent a
substantial portion of MPI's real estate related assets. As of the date of this
Settlement Notice, the SEC has neither approved the Schedules nor reviewed,
passed upon or endorsed the accuracy or adequacy of the disclosures contained
therein.
The proposed Settlement would extinguish the claims raised in the class
and derivative actions. Several of the claims allege that the rights of MPI
Preferred Stockholders were violated in 1995 when MPI transferred certain
shopping centers and other commercial properties to its then wholly-owned
subsidiary, Union Property Investors, Inc. ("UPI"), and subsequently distributed
all of the outstanding common stock of UPI to the MPI Common Stockholders. The
other claim raised in the actions alleges that MPI paid too high a purchase
price to acquire certain wraparound notes, mortgages and other properties from
Concord Assets Group, Inc. ("Concord") in 1995. MPI and the other defendants
contend that these claims do not have any merit.
The proposed Settlement also provides that, subject to court approval,
MPI will pay the plaintiffs' attorneys fees and expenses in connection with the
class and derivative actions and the Settlement in an amount up to $750,000,
which amount will be payable without interest on the first anniversary of the
date on which the final order of the Court approving the Settlement becomes
final and is no longer subject to appeal (the "Settlement Effective Date").
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Anyone who owned shares of MPI Preferred Stock after October 23, 1995
or who owned shares of MPI Common Stock as of _________, 199__ may submit
objections to the proposed Settlement at the settlement hearing by complying
with certain specified procedures; alternatively, MPI Preferred Stockholders who
owned their shares prior to ________, 199_ may opt out and be excluded from the
Settlement. If MPI Preferred Stockholders who own more than 10% of the shares of
MPI Preferred Stock outstanding as of __________, 199__ choose to opt out and be
excluded from the Settlement, MPI and the other defendants to the actions may
elect not to proceed with the Settlement. Shares of MPI Preferred Stock held by
stockholders who elect to opt out of the Settlement and who, prior to the
effective date of the Settlement, sell or otherwise transfer their shares of MPI
Preferred Stock, will not be counted towards such 10% threshold.
THOSE MPI STOCKHOLDERS WHO ARE IN FAVOR OF THE PROPOSED
SETTLEMENT NEED NOT DO ANYTHING AT THIS TIME. If the proposed Settlement is
approved by the Court after a hearing on the fairness of the Settlement, all
claims raised in these class and derivative actions will be dismissed with
prejudice and the Defendants will forever be released by MPI Preferred
Stockholders and, with respect to the derivative claim only, by MPI and all of
its stockholders. MPI Preferred Stockholders who own their shares at the time
the Settlement becomes effective and who do not opt out of the Settlement will
receive instructions for surrendering their shares of MPI Preferred Stock and
receiving the cash payment from MPI. MPI Preferred Stockholders who sell or
otherwise transfer their shares of MPI Preferred Stock prior to the time the
Settlement becomes effective will be bound by the Settlement as described above,
but will not be entitled to receive the cash payment.
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If the proposed Settlement is not approved, the actions will continue,
and it may be several years before any final determination is made by the courts
on the merits of the claims.
[SPECIAL FACTORS]
[To be included pursuant to Rule 13e-3]
RULE 13E-3 AND RULE 13E-4 TRANSACTION
If approved and consummated, the proposed Settlement will result in the
acquisition and cancellation by MPI of substantially all of the outstanding
shares of MPI Preferred Stock, a transaction which would require MPI to file a
Schedule 13E-3 and a Schedule 13E-4 pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended. On _________, 1998, MPI filed such Schedules
with the SEC, copies of which are annexed hereto as Exhibit A and Exhibit B and
incorporated by reference herein. Each MPI stockholder is urged to read the
Schedules in their entirety. As of the date of this Settlement Notice, the SEC
has neither approved the Schedule 13E-3 or the Schedule 13E-4 nor reviewed,
passed upon or endorsed the accuracy or adequacy of the disclosures contained
therein.
THE SETTLEMENT CLASS
All persons who owned shares of MPI's $.78 Convertible Series A
preferred stock as of October 23, 1995 and their successors in interest are
"Potential Settlement Class Members." Potential Settlement Class Members who do
not opt out of the Settlement will be referred to herein as members of the
"Settlement Class" and will be bound by the Settlement if the Court approves it.
Since the Settlement entails, among other things, the exchange of MPI Preferred
Stock for cash payments, only those members of the Settlement Class who are
holders of MPI Preferred Stock as
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of date on which the Settlement becomes effective (the "Current MPI Preferred
Stockholders") and who do not opt out of the Settlement will receive the
settlement consideration described herein. Potential Settlement Class Members
who sell or otherwise transfer their shares of MPI Preferred Stock prior to the
Settlement Effective Date will still be bound by and subject to the terms of the
Settlement, but will transfer their right to receive the settlement
consideration described herein to the acquirer of their shares of MPI Preferred
Stock. MPI Preferred Stockholders who acquire their shares of MPI Preferred
Stock after _________, 199__ will not be permitted to opt out, but, if they own
their shares on the Settlement Effective Date, will be entitled to receive the
settlement consideration.
BACKGROUND AND DESCRIPTION OF THE ACTIONS
MPI is a Delaware corporation which, through its own operations and
those of its subsidiaries, is engaged in the business of acquiring, owning,
managing and developing real estate, and other real estate related businesses.
Leonard S. Mandor, Robert A. Mandor, Geoffrey Aaronson, Harvey Jacobson and
Gregory McMahon, are directors and/or executive officers of MPI, and, at the
time of the Transactions (as defined herein) were, along with Defendant Joan
LeVine, directors and/or officers of MPI. Defendants Geoffrey Aaronson, Harvey
Jacobson and Gregory McMahon were also the only members of the Related Party
Transaction Committee of MPI's Board of Directors, which committee was appointed
by the Board to evaluate the fairness of possible transactions with parties
related to MPI, including the Acquisition (defined herein) challenged by
Plaintiff.
In September 1995, MPI distributed to each holder of common stock of
MPI ("MPI Common
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Stock") and to each holder of MPI Preferred Stock, a Proxy Statement -
Information Statement (the "Proxy Statement") describing certain transactions to
be considered and approved at a Special Meeting of MPI's stockholders held on
October 23, 1995, whereby: (i) MPI would acquire certain wraparound notes,
wraparound mortgages and fee interests from subsidiaries and affiliates of
Concord in exchange for $500,005 in cash and the issuance to such subsidiaries
and affiliates of Concord of 2,544,654 shares of MPI Common Stock (the
"Acquisition"); (ii) 16 properties owned by MPI would be transferred (the
"Transfer") to UPI which was then a wholly-owned subsidiary of MPI; and (iii)
UPI would be recapitalized (the "Recapitalization") and thereafter, all of the
outstanding shares of UPI's common stock would be distributed to of MPI Common
Stockholders on a share-for-share basis and for no consideration (the
"Spin-Off") (the Acquisition, Transfer, Recapitalization and Spin-Off and the
transactions contemplated thereby, including the Proxy Statement and the special
meeting of MPI's stockholders held on October 23, 1995 and the actions
contemplated thereby are collectively referred to herein as the "Transactions").
The Acquisition required the approval of a majority of the shares of MPI Common
Stock, and the Transfer and Spin-Off were contingent on the approval the
Acquisition. On October 23, 1995, the holders of MPI Common Stock approved the
Acquisition. The Transfer and the Spin-Off were completed in October 1995 and
November 1995, respectively.
On January 30, 1996, the Plaintiff, a holder of MPI's Preferred Stock,
filed a class action complaint on behalf of the MPI Preferred Stockholders in
the Delaware Chancery Court (the "Court") claiming that the Transactions
breached the Defendants' fiduciary duty and an implied obligation of good faith
owed to the holders of the MPI Preferred Stock. On February 12, 1996, the
Defendants moved to dismiss the complaint for failure to state a claim.
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The Plaintiff filed an amended complaint on June 5, 1996 that included
additional counts challenging the Transactions as violating Section 271 of
the Delaware General Corporation Law and several provisions of the
Certificate of Designations governing the MPI Preferred Stock. On June 19,
1996, the Defendants moved to dismiss the amended complaint and on October
26, 1996, the Court ruled that the remedy of rescission would not be
available in the action. While the remainder of the Defendants' motion to
dismiss was before the Court, the Plaintiff, on December 9, 1996, commenced
a second action and sought dismissal, without prejudice, of the first
action. The second action contained a single claim alleging that the
Transactions constituted a breach of fiduciary duty to the MPI Preferred
Stockholders. The Defendants moved to dismiss, or in the alternative, to
stay the second action. On May 12, 1997, the Court dismissed the second
action in its entirety and dismissed the breach of fiduciary duty claim in
the first action. The Court also dismissed the claim under Section 271 of
the Delaware General Corporation Law on the ground that the Plaintiff had
no standing to sue for violation of that statute. The Court denied the
motion to dismiss the Plaintiff's contractual claims against MPI which
alleges breaches of the Certificate of Designations governing the MPI
Preferred Stock, and granted leave to further amend the complaint in the
first action to assert a derivative claim challenging the fairness of the
Acquisition. The Plaintiff subsequently filed a second amended complaint
asserting a breach of fiduciary duty claim. On June 4, 1997, the Plaintiff
appealed the Court's ruling of May 12, 1997 insofar as it dismissed the
second action and, thereafter, the Defendants moved to dismiss the appeal
and cross-appealed from the Court's decision insofar as it declined to
dismiss the claims in the first action based on the Certificate of
Designations. On October 30, 1997, the parties hereto entered into a
previous stipulation and agreement of settlement (the "Prior Settlement")
pursuant to which MPI's stockholders would release all derivative claims
arising in connection with the Transactions and the holders of the MPI
Preferred Stock between October 23, 1995 and the date on which the Prior
Settlement was consummated would release any claims they may have had
against MPI and the other named Defendants arising out of the Transactions.
Each MPI Preferred Stockholder who did not opt out of the Prior Settlement
and who then owned shares of the MPI Preferred Stock would transfer his or
her shares of MPI Preferred Stock to a wholly-owned subsidiary of Concord
and receive, in exchange for each share, $0.75 in cash to be paid by MPI
plus one share of Preferred Stock of the Concord subsidiary. The Preferred
Stock of the Concord subsidiary would have had a liquidation preference of
$2.25 per share, would have been required to be redeemed by the Concord
subsidiary at $2.25 per share after five years, and would have had no
voting or dividend rights. In addition, any stockholder of the Concord
subsidiary's preferred stock who did not want to wait the full five years
for such shares to be redeemed could have had shares redeemed by the
Concord subsidiary at the following prices prior to the fifth year: within
2 years after the Prior Settlement - $1.00 per share; 2-3 years after the
Prior Settlement - $1.40 per share; 3-4 years after the Prior Settlement -
$1.60 per share; 4-5 years after the Prior Settlement - $1.90 per share.
The Concord subsidiary's redemption obligations would have been secured by
a Letter of Credit. By correspondence of April 22, 1998, Defendants'
counsel informed the Supreme Court and the Court that the Plaintiff had
withdrawn from the Prior Settlement. By order of June 11, 1998, the Supreme
Court dismissed the Appeal and the Cross Appeal as interlocutory appeals
not taken in compliance with Delaware Supreme Court Rule 42, but said that
the dismissal ruling did not preclude the Court from determining, upon
appropriate application, whether a final judgment should be entered
pursuant to Rule 54(b) of the Court. The Plaintiff entered into the
Stipulation after taking into account (i) the benefits to the MPI Preferred
Stockholders and MPI from the Settlement, (ii) the risks of continued
litigation, (iii) the desirability of permitting the Settlement to be
consummated as provided by the terms of this Stipulation, and (iv) the
conclusion by the Plaintiff and his counsel that the terms and conditions
of the Settlement are fair, reasonable, adequate, and in the best interests
of MPI and the MPI Preferred Stockholders. MPI and the other Defendants
agreed to enter into the Stipulation after taking into account (i) MPI's
indemnification obligations to the individual Defendants under its
Certificate of Incorporation, as amended, and its By-laws, (ii) the
Settlement's resolution of all claims or potential claims by the MPI
Preferred Stockholders and derivative claims by the stockholders of MPI
relating to, or arising from, the Transactions, (iii) the Settlement's
beneficial impact on the MPI Common Stockholders by settling claims of MPI
Preferred Stockholders relating to the right of MPI Preferred Stockholders
to convert their shares into MPI Common Stock at a higher ratio as part of
the Transactions, and (iv) avoiding delay and significant expenses
associated with continued litigation. As part of the Settlement, the
parties desired to settle and dismiss with prejudice the Actions and any
and all claims that have been or could have been asserted therein by MPI or
any and all members of the Settlement Class and any derivative claims
arising out of or relating to Transactions (the "Claims") on the terms and
conditions reflected in the Stipulation.
THE SETTLEMENT
The Settlement will bind everyone who owned MPI Preferred Stock since
October 23, 1995 except for those who choose to opt out of the Settlement, and
provides that each Current MPI Preferred Stockholder who does not opt out of the
Settlement shall, in exchange for each share of his or her MPI Preferred Stock,
receive $3.00 in cash (the "Cash Payment" or the "Settlement Consideration").
The MPI Preferred Stock has been listed on the New York Stock Exchange
since January 29, 1991 and is publicly traded. Because MPI had fallen below
certain of the NYSE's continued listing criteria relating to net income and
market value of publicly held shares of MPI's Preferred Stock and Common Stock,
the NYSE suspended trading in shares of MPI's Preferred Stock and Common Stock
prior to the market opening on July 6, 1998 and subsequently applied to the
Commission to delist such issues. MPI has been advised that on or about July 6,
1998, a market developed for trading shares of MPI's Preferred Stock and Common
Stock on the OTC Bulletin Board. There can be, however, no assurance as to the
prices at which the MPI Preferred Stock will trade prior to or after the
consummation of the Settlement or whether an active trading market will develop,
or if developed, will continue, for such shares. A Schedule 13E-3 and a Schedule
13E-4 were filed by MPI with the SEC on _____, 1998, disclosing that, if the
Settlement is approved and consummated, substantially all of the MPI Preferred
Stock will be acquired and cancelled by MPI. In addition, the Schedule 13E-3 and
the Schedule 13E-4 contain certain disclosure regarding the potential sale by
MPI and certain of its affiliates of certain properties which could represent a
substantial portion of MPI's real estate related assets. As of the date of this
Settlement Notice, the Commission has neither approved the Schedule 13E-3 or
Schedule 13E-4 nor reviewed, passed upon or endorsed the accuracy or adequacy of
the disclosures contained therein.
If you owned shares of MPI Preferred Stock at any time between October
23, 1995 and _________, 199_ (the "Record Date") and do not wish to be a member
of the Settlement Class, you may opt out of and be excluded from the Settlement
by following the procedures set forth in the section of this Settlement Notice
entitled "RIGHT TO OPT OUT."
Pursuant to the terms of the Stipulation, if Current MPI Preferred
Stockholders owning more than 10% of the shares of MPI Preferred Stock
outstanding on the Record Date choose to opt out and be excluded from the
Settlement, MPI and the other Defendants may elect not to proceed with the
Settlement. Shares of MPI Preferred Stock held by stockholders who elect to opt
out of the Settlement and who, prior to the effective date of the Settlement,
sell or otherwise transfer their shares of MPI Preferred Stock, will not be
counted towards such 10% threshold.
Current MPI Preferred Stockholders who opt out of the Settlement,
Potential Settlement Class Members who sell or transfer their shares of MPI
Preferred Stock prior to the effective date of the Settlement, and MPI Common
Stockholders will not receive the Settlement Consideration under the terms of
the Stipulation.
If the Settlement is approved by the Court, (a) the Plaintiff and each
Settlement Class member will be releasing all claims alleged in these actions or
which relate to the transactions that are the subject of these actions, shall
fully, finally and forever compromise, settle, release and dismiss with
prejudice, any and all claims, rights, demands, liabilities, actions, causes of
action, suits, damages, losses, obligations, matters and issues, whether
asserted or unasserted, contingent or absolute known or unknown, suspected or
unsuspected, disclosed or undisclosed, matured or unmatured, material or
immaterial, legal or equitable, (i) which have been, could have been, or in the
future can or might be, asserted in the Actions or otherwise by the Plaintiff or
any member of the Settlement Class, whether individual or class, (including,
without limitation, claims arising under the federal securities laws), against
any of the Defendants in the Actions or any of their families, affiliates,
associates and subsidiaries, and each of their respective present or former
officers, directors, stockholders, agents, employees, attorneys,
representatives, financial and other advisors, investment or commercial bankers,
trustees, general and limited partners and partnerships, heirs, executors,
personal representatives, estates, administrators, predecessors, successors and
assigns (collectively, the "Defendants' Affiliates") and any other person or
entity acting for or on behalf of any Defendant (collectively, the " Released
Persons"), and (ii) which arise out of or relate in any manner whatsoever,
directly or indirectly, to any of the allegations, facts, events, transactions,
occurrences, acts, representations, statements, misrepresentations or omissions,
or any other matter, thing or cause whatsoever, or any series thereof, involved,
embraced, set forth or otherwise referred or related directly or indirectly to
the Transactions, the Actions, the adjustment made to the conversion ratio for
the MPI Preferred Stock in connection with the Transactions, or any public
filings or other statements that were issued in connection with the Transactions
by any Released Person in the Actions (the "Class Claims"), and (b) MPI, the
Plaintiff, each Settlement Class Member, each MPI Common Stockholder and each
MPI Preferred Stockholder shall fully, finally and forever compromise, settle,
release and dismiss with prejudice, any and all claims, rights, demands,
liabilities, actions, causes of action, suits, damages, losses, obligations,
matters and issues, whether asserted or unasserted, contingent or absolute,
known or knowable, matured or unmatured, material or immaterial, legal or
equitable (i) which have been, could have been, or in the future can or might
be, asserted in the Actions (including, without limitation, claims arising under
the federal securities laws) or otherwise by or on behalf of MPI against any of
the Defendants in the Actions or against any Released Person, and (ii) which
arise out of or relate in any manner whatsoever, directly or indirectly, to any
of the allegations, facts, events, transactions, occurrences, acts,
representations, statements, misrepresentations or omissions, or any other
matter, thing or cause whatsoever, or any series thereof, involved, embraced,
set forth or otherwise referred or related directly or indirectly to the
Transactions, the Actions, the adjustment made to the conversion ratio for the
MPI Preferred Stock in connection with the Transactions, or any public filings
or other statements that were issued in connection with the Transactions by any
Released Person in the Actions (the "Derivative Claims"). The Class Claims and
the Derivative Claim will be referred to collectively herein as the "Settled
Claims". The term "Settled Claims" does not include claims arising pursuant to
the Stipulation.
The Settlement will become effective at such time as the Final Order and
Judgment approving the Settlement, if entered by the Court, shall become final
and not subject to further appeal or review. In the event that the Settlement is
not approved, the Stipulation shall be of no further force and effect and each
party shall be restored to his, her or its respective position prior to entering
into the Stipulation, except that all costs and expenses of providing this
Settlement Notice to the Settlement Class and to MPI Common Stockholders shall
be paid by MPI.
The release and dismissal with prejudice described above shall not
become effective unless and until the Final Order becomes final and no longer
subject to appeal or other contingencies.
REASONS FOR THE SETTLEMENT
Plaintiff and his counsel have agreed to and are recommending the
Settlement based upon the following considerations. First, the Settlement
Consideration will provide significant value to Settlement Class members who own
their shares of MPI Preferred Stock as of the effective date of the Settlement.
Prior to the public announcement of the Settlement, the MPI Preferred Stock had
a market value of approximately $0.875 per share. Under the terms of the
Settlement, on the effective date of the Settlement, each share of MPI Preferred
Stock will be exchanged for $3.00 in cash. Second, there are significant risks
in continued litigation. While Plaintiff and his counsel believe the claims
asserted are meritorious, there is a possibility of an adverse outcome on
liability or damages. Defendants have presented a number of defenses, and
already have succeeded in obtaining dismissal of several of the Plaintiff's
claims. Third, proceeding with the litigation could result in a substantial
delay before the Settlement Class would obtain any recovery. The Delaware
Supreme Court had refused to consider the interlocutory appeal of the Court's
rulings dismissing portions of Plaintiff's claims. Resolution of further
motions, discovery and trial, and ultimately, the issuance of a detailed opinion
by the Court after trial could take years to complete before the Plaintiff would
be able to raise on appeal the issues which were the subject of his dismissed
interlocutory appeal. Following a decision after trial, there may well be an
appeal by Defendants of any adverse judgment. Thus, as much as two years or more
could pass before the litigation would finally be concluded and MPI and the
Settlement Class members could actually recover on a judgment. After considering
the foregoing, the Plaintiff and counsel for the Settlement Class have concluded
that the Settlement is fair to and in the interest of MPI, the Settlement Class
and the members thereof.
SETTLEMENT HEARING
The Settlement Hearing is scheduled for __:__0 __.m. (Eastern Time)
on __________, 199__, before the Honorable Myron T. Steele, Vice
Chancellor of the Court of Chancery at ______________,
_____________, _____________, Delaware. At the Settlement Hearing
the parties will ask the Court (i) to determine whether the
Settlement, as reflected in the terms of the Stipulation, is
fair, reasonable, adequate and in the best interests of the
Settlement Class, the members thereof and MPI, (ii) to determine
whether judgment should be entered in the Actions pursuant to the
Settlement which will, among other things dismiss the Actions
with prejudice, and (iii) to rule on such other matters as the
Court may deem appropriate. If you were a holder of shares of MPI
Preferred Stock between October 23, 1995 and __________, 199__
and held the stock beneficially for others, or if you were a
holder of shares of MPI Common Stock as of ____________, 199__
and held the stock beneficially for others, you are requested to
forward this Notice to the beneficial owner. In addition, if you
acquire stock for the account of others after the Record Date,
you are requested to forward this Notice to the beneficial owner
of such shares.
Additional copies of the Settlement Notice will be made available to you
for this purpose upon request directed to MPI at: Milestone Properties,
Inc.
150 E. Palmetto Park Road, 4th Floor
Boca Raton, FL 33432
Attention: Director of Stockholder Services
RIGHT TO APPEAR AT SETTLEMENT HEARING
Any Potential Settlement Class Member who does not opt out of the
Settlement and any MPI Common Stockholder who objects to the Stipulation or the
Settlement, or who otherwise wishes to be heard, may appear in person or by
counsel at the Settlement Hearing and present any evidence or argument that may
be proper and relevant; provided, however, that no person other than the
plaintiffs, defendants and their counsel in these actions 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 no later than ten days prior to the Settlement Hearing, (i)
a written notice of the intention to appear, (ii) a detailed statement of such
person's objections to any matter before the Court, and (iii) the grounds
therefor or the reasons why such person desires to appear and to be heard, as
well as all documents and writings which such person desires the court to
consider, shall be served by hand or first class mail, postage prepaid, with the
Register in Chancery and the following counsel of record at the respective
addresses listed below:
REGISTER IN CHANCERY
1020 North King Street
Wilmington, DE 19801
PRICKETT, JONES, ELLIOTT, KRISTOL SCHNEE
Michael Hanrahan
April Caso Ishak
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
Attorneys for Defendants
ROSENTHAL, MONHAIT, GROSS & GODDESS
Joseph A. Rosenthal
Kevin Gross
Suite 1401, Mellon Bank Center
Wilmington, DE 19899
Attorneys for Plaintiff and the Class
Any person who fails to object in the manner prescribed above shall be
deemed to have waived such objection and shall be forever barred from
raising such objection or otherwise contesting the Settlement in this
or any other action or proceeding.
RIGHT TO OPT OUT
Potential Settlement Class Members (other than those who acquire shares
of MPI Preferred Stock after the Record Date) shall have 45 days from the date
of this Settlement Notice in which to opt out of the Settlement Class and the
Settlement (the 45th day shall be referred to herein as the "Final Opt-Out
Date") by mailing a letter prior to the Final Opt-Out Date to the Register in
Chancery and to each counsel of record at the addresses listed in "RIGHT TO
APPEAR AT SETTLEMENT HEARING" above, which letter shall set forth (i) the name,
address, telephone number and social security number or employer identification
number, as applicable, of such stockholder (ii) the number of shares of MPI
Preferred Stock owned by such stockholder and, if available, the certificate
number(s) of the stock certificate(s) representing such shares, (iii) if the
shares of MPI Preferred Stock owned by such stockholder are not or were not held
of record or registered in such stockholder's name on the books and records of
MPI the letter shall indicate the name or brokerage firm and account in which
such shares of MPI Preferred Stock were registered and shall include evidence of
such member's ownership thereof, and (iv) that such stockholder elects to opt
out of the Settlement. Any Potential Settlement Class Member who does not return
an opt-out election on or prior to the Final Opt-Out Date shall be deemed a
member of the Settlement Class and shall be bound by, and subject to, the terms
and conditions of the Stipulation and all court orders affecting the Settlement
Class. Any Potential Settlement Class Member who elects to opt out of the
Settlement and, prior to the effective date of the Settlement, sells or
otherwise transfers his or her shares of MPI Preferred Stock shall not be
entitled to receive the Settlement Consideration and his or her shares of MPI
Preferred Stock shall not be included in determining the total number of shares
for which opt-out elections have been submitted. In addition, any MPI Preferred
Stockholder who acquires his or her shares of MPI Preferred Stock after the
Record Date will not be entitled to opt out of the Settlement, although such
stockholder will be entitled to receive the Settlement Consideration if such
stockholder holds his or her shares of MPI Preferred Stock on the Settlement
Effective Date.
INFORMATION CONCERNING MPI
MPI is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith, files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and may be
available at the following Regional Offices o the Commission: Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such materials can be obtained
at prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Web site at "http://www.sec.gov" that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission.
IN ADDITION TO THE SCHEDULES ANNEXED TO THIS NOTICE, EACH MPI
STOCKHOLDER IS URGED TO REVIEW THE FOLLOWING PUBLICLY FILED
DOCUMENTS OF MPI AND DISCUSS THE TERMS OF THE SETTLEMENT WITH
THEIR FINANCIAL AND OTHER ADVISORS:
1. Annual Report of MPI on Form 10-K, as amended, for the fiscal
year ended December 31, 1997;
2. Quarterly Report of MPI on Form 10-Q for the fiscal quarter ended
March 31, 1998;
3. Quarterly Report of MPI on Form 10-Q for the fiscal quarter ended
June 30, 1998; and
4. The description of the MPI Common Stock and MPI Preferred Stock
contained in the Proxy Statement dated September 12, 1995.
DOCUMENTS RELATING TO MPI (OTHER THAN EXHIBITS TO SUCH DOCUMENTS) ARE
AVAILABLE TO EACH MPI PREFERRED STOCKHOLDER AND MPI COMMON STOCKHOLDER
TO WHOM THIS NOTICE IS DELIVERED, UPON WRITTEN OR ORAL REQUEST FROM
MPI AT 150 E. PALMETTO PARK ROAD, 4TH FLOOR, BOCA RATON, FL 33432,
ATTENTION: KAREN RENZA (TELEPHONE NO. 561-394-9260). IN ORDER TO
ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY _________________, 1998.
ATTORNEYS' FEES
If the Settlement is approved by the Court at the Settlement Hearing or at
such later time as the Court may direct, Defendants have agreed not to oppose an
application by the Plaintiff for attorneys' fees and expenses of Plaintiff's
counsel in connection with the Settlement in an aggregate amount not to exceed
$750,000. MPI will pay such fees and expenses in the amount awarded by the
Court, without interest, on the later to occur of the of the Settlement
Effective Date or November 1, 1999.
BAR AGAINST FILING OTHER LAWSUITS
Pending final determination of whether the Stipulation should be approved,
the Plaintiff and all members of the Settlement Class and, as to the derivative
claim, MPI and its stockholders, shall not commence or prosecute any action in
any form asserting any claims, either directly, representatively, derivatively
or in any other capacity, against the defendants or any other person or entities
which have been or could have been asserted, or which arise out of or relate in
any way to, the Settled Claims.
SCOPE OF THIS NOTICE AND FURTHER INQUIRIES
THIS SETTLEMENT NOTICE DOES NOT PURPORT TO BE A COMPREHENSIVE
DESCRIPTION OF THE CONSOLIDATED ACTION OR THE PLEADINGS, THE TERMS OF
THE SETTLEMENT OR THE SETTLEMENT HEARING. For more complete
information concerning the litigation and the proposed Settlement, you
may inspect the pleadings, the Stipulation, and other papers and
documents filed with the Court in these actions, during normal
business hours at the Office of the Register in Chancery of the Court
of Chancery of the State of Delaware, Daniel L. Herrmann Courthouse,
1020 King street, New Castle County, Wilmington, Delaware.
BY ORDER OF THE COURT:
--------------------------------------
Register in Chancery 1998
Dated ____________________, 1998
<PAGE>
EXHIBIT C TO STIPULATION/EXHIBIT 1 TO SETTLEMENT NOTICE
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JOHN WINSTON, )
)
Plaintiff, )
)
v. ) C.A. Nos. 14807 & 15416
)
LEONARD S. MANDOR ROBERT A. )
MANDOR, JOAN LEVINE, HARVEY )
JACOBSON, GREGORY MCMAHON )
GEOFFREY S. AARONSON, )
MILESTONE PROPERTIES, INC. and )
CONCORD ASSETS GROUP, INC., )
)
Defendants. )
FINAL ORDER AND JUDGMENT
A hearing having been held before this Court on ___________________,
pursuant to the Court's Order of __________ __, 1998 (the "Scheduling Order"),
upon a Stipulation and Agreement of Settlement, dated __________ __, 1998 (the
"Stipulation"), of the above-captioned actions (the "Actions"), which
Stipulation and Scheduling Order are incorporated herein by reference; it
appearing that due notice of said hearing has been given in accordance with the
aforesaid Scheduling Order; the respective parties having appeared by their
attorneys of record; the Court having heard and considered evidence in support
of the proposed Settlement (as defined in the Stipulation); the attorneys for
the respective parties having been heard; an opportunity to be heard having been
given to all other persons requesting to be heard or desiring to opt out of the
Settlement in accordance with the Scheduling Order; the Court having determined
that notice to the Settlement Class certified in the Actions and to the MPI
Common Stockholders as of the Record Date (as each of such terms is defined in
the Stipulation) pursuant to the aforesaid Scheduling Order was adequate and
sufficient and the entire matter of the proposed Settlement having been heard
and considered by the Court;
IT IS HEREBY ORDERED, ADJUDGED AND DECREED this ____ day of
____________, 1998, that:
1. The form and manner of notice given to the members of the Settlement
Class and to the MPI Common Stockholders as of the Record Date is hereby
determined to have been the best practicable notice under the circumstances and
to have been given in full compliance with the requirements of due process and
of Chancery Court Rules 23 and 23.1.
2. Certification of a class is appropriate because (i) the Settlement
Class is so numerous that joinder of all members is impracticable, (ii) there
are questions of law or fact common to the Settlement Class, (iii) the claims of
Settlement Class Plaintiff are typical of the claims of the other Settlement
Class members, and (iv) the Settlement Class Plaintiff has fairly and adequately
protected the interests of the Settlement Class. The Court further finds that
the Settlement Class meets the criteria of Chancery Court Rule 23(b)(3) in that
questions of law or fact common to the members of the Settlement Class
predominate over any questions affecting only individual members and a class
action is superior to other available methods for the fair and efficient
adjudication of the controversy. Settlement Class members objecting to the
Settlement who acquired their shares of MPI Preferred Stock prior to the Record
Date had ample opportunity to object to the Settlement or opt out of the
Settlement Class. With respect to Settlement Class Members who acquire their
shares of MPI Preferred Stock subsequent to the Record Date, the criteria of
Chancery Court Rule 23(b)(2) are met because Milestone Properties, Inc. ("MPI")
has acted with respect to the rights of such stockholders in a manner generally
consistent with Settlement Class Members who acquired their shares of MPI
Preferred Stock prior to the Record Date, and their claim relating to the MPI
Preferred Stock would be for injunctive relief or corresponding declaratory
relief.
3. In approving settlement of the class and derivative claims, the
Court has considered (a) the probability of the validity of Plaintiff's claims;
(b) the apparent difficulty of enforcing claims through the courts; (c) the
collectability of any judgments; (d) the delay, expense and trouble of
litigation; (e) the consideration to be received by the Settlement Class as
compared with the potential recovery for the Settlement Class if the Actions
were litigated to a conclusion; (f) the views of the parties as to the terms of
the Settlement, both pro and con; and (g) the adequacy of representation by
counsel for the Plaintiff.
4. The Settlement is approved as fair, reasonable, adequate and in the best
interests of the Settlement Class, the members thereof, MPI and its stockholders
and shall be consummated by the parties to the Stipulation in accordance with
its terms and subject to its conditions.
5. The Actions are hereby dismissed with prejudice against Plaintiff
and each member of the Settlement Class on the merits, each party to bear its
own costs, except as provided herein, and (a) MPI, the Plaintiff and each
Settlement Class member shall fully, finally and forever compromise, settle,
release and dismiss with prejudice, any and all claims, rights, demands,
liabilities, actions, causes of action, suits, damages, losses, obligations,
matters and issues, whether asserted or unasserted, contingent or absolute,
known or unknown, suspected or unsuspected, disclosed or undisclosed, matured or
unmatured, material or immaterial, legal or equitable, (i) which have been,
could have been, or in the future can or might be, asserted in the Actions or
otherwise by the Plaintiff or any member of the Settlement Class, whether
individual or class, (including, without limitation, claims arising under the
federal securities laws), against any of the Defendants in the Actions or any of
their families, affiliates, associates and subsidiaries, and each of their
respective present or former officers, directors, stockholders, agents,
employees, attorneys, representatives, financial and other advisors, investment
or commercial bankers, trustees, general and limited partners and partnerships,
heirs, executors, personal representatives, estates, administrators,
predecessors, successors and assigns (collectively, the "Defendants'
Affiliates") and any other person or entity acting for or on behalf of any
Defendant (collectively, the "Released Persons"), and (ii) which arise out of or
relate in any manner whatsoever, directly or indirectly, to any of the
allegations, facts, events, transactions, occurrences, acts, representations,
statements, misrepresentations or omissions, or any other matter, thing or cause
whatsoever, or any series thereof, involved, embraced, set forth or otherwise
referred or related directly or indirectly to the Transactions, the Actions, the
adjustment made to the conversion ratio for the MPI Preferred Stock in
connection with the Transactions, or any public filings or other statements that
were issued in connection with the Transactions by any Released Person in the
Actions (the "Class Claims"), and (b) MPI, the Plaintiff, each Settlement Class
Member, each MPI Common Stockholder and each MPI Preferred Stockholder shall
fully, finally and forever compromise, settle, release and dismiss with
prejudice, any and all claims, rights, demands, liabilities, actions, causes of
action, suits, damages, losses, obligations, matters and issues, whether
asserted or unasserted, contingent or absolute, known or knowable, matured or
unmatured, material or immaterial, legal or equitable (i) which have been, could
have been, or in the future can or might be, asserted in the Actions (including,
without limitation, claims arising under the federal securities laws) or
otherwise by or on behalf of MPI against any of the Defendants in the Actions or
against any Released Person, and (ii) which arise out of or relate in any manner
whatsoever, directly or indirectly, to any of the allegations, facts, events,
transactions, occurrences, acts, representations, statements, misrepresentations
or omissions, or any other matter, thing or cause whatsoever, or any series
thereof, involved, embraced, set forth or otherwise referred or related directly
or indirectly to the Transactions, the Actions, the adjustment made to the
conversion ratio for the MPI Preferred Stock in connection with the
Transactions, or any public filings or other statements that were issued in
connection with the Transactions by any Released Person in the Actions (the
"Derivative Claims"). The Class Claims and the Derivative Claim will be referred
to collectively herein as the "Settled Claims". The term "Settled Claims" does
not include claims arising pursuant to the Stipulation.
6. Notwithstanding any other provision of this Order, the dismissal with
prejudice and releases provided for in paragraph 5 of this order shall not
become effective as to any Released Person until the Final Order approving the
Settlement becomes final and is no longer subject to appeal, whether by the
passage of time, affirmance on appeal or otherwise, and subject to the
satisfactory completion of obligations and contingencies contained in the
Stipulation.
7. The Plaintiff and all members of the Settlement Class and, as to the
derivative claim, MPI and all stockholders of MPI, directly, representatively,
derivatively or in any other capacity, are permanently barred and enjoined from
instigating, instituting, commencing, asserting, prosecuting, continuing or
participating in any way in the maintenance of any of the Settled Claims in any
court or tribunal of this or any other jurisdiction.
8. The attorneys for the Plaintiff are awarded attorneys fees and expenses
in the aggregate amount of $_________ to be paid by MPI in accordance with the
terms of the Stipulation.
9. Without affecting the finality of this Final Order and Judgment in any
way, this Court reserves jurisdiction over all matters relating to the
administration and consummation of the settlement.
------------------------
Myron T. Steele
Vice Chancellor
