IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE

Transcription

1 IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE X THE EDITH ZIMMERMAN ESTATE, By And : Through STANLEY E. ZIMMERMAN, JR., : A Personal Representative Of The Estate; : THE ESTATE OF GEORGE E. BATCHELOR, : By And Through MARVIN C. GUTTER, : Personal Representative Of The Estate; DR. PAUL : M. LATONERO; THEODORE N. UTZ; and : Civil Action No VCS THE NATHAN DOUGLAS BATCHELOR : TRUST, : : Plaintiffs, : : v. : : GFB-AS INVESTORS, LLC; and : BROOKDALE LIVING COMMUNITIES, INC., : : Defendants. : X NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION, SETTLEMENT HEARING AND RIGHT TO APPEAR TO: ALL HOLDERS OF LIMITED PARTNERSHIP INTERESTS IN: WATERFORD SHORES ASSOCIATES, L.P. I AND WATERFORD SHORES ASSOCIATES, L.P. II AS OF JANUARY 28, 2004; WINDSOR ASSOCIATES, L.P. AS OF MARCH 30, 2004; AND VICTORIA MANOR ASSOCIATES, L.P. AS OF MARCH 30, 2004; OR THEIR SUCCESSORS-IN-INTEREST EXCEPTING (A) PERSONS WHO WERE PLAINTIFFS IN THE ACTION STYLED ATKINS ET AL. V. APOLLO REAL ESTATE ADVISORS, L.P., NO. CV FORMERLY PENDING IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK AND (B) DEFENDANTS AND PERSONS AFFILIATED WITH DEFENDANTS 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, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS, REASONABLENESS AND ADEQUACY OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE SETTLED CLAIMS (DEFINED HEREIN). 1

2 I. PURPOSE OF NOTICE This Notice informs you of a lawsuit in the Delaware Court of Chancery (the Court ) concerning limited partnerships operating as Waterford Shores Associates, L.P. I, Waterford Shores Associates, L.P. II, Windsor Associates, L.P., and Victoria Manor, L.P., the proposed settlement of the lawsuit (the Settlement ), and your right to participate in a hearing to be held on June 15, 2009 at 10:00 a.m., in the Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware (the Settlement Hearing ) to determine whether the Court should approve the Settlement, the Plaintiffs counsel s request for an award of attorneys fees and expenses, and the request for an allowance made by one of the plaintiffs. This Notice describes the rights you may have and what steps you may take in relation to the Settlement. If the Court approves the Settlement, the parties will ask the Court at the Settlement Hearing to enter an Order and Final Judgment dismissing the lawsuit with prejudice which would preclude any more litigation concerning the subject matter of the lawsuit, described below. THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. IT IS BASED ON STATEMENTS OF THE PARTIES AND SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES. II. BACKGROUND OF THE ACTION The plaintiffs are the Edith Zimmerman Estate, the Estate of George E. Batchelor, the Nathan Douglas Batchelor Trust, Dr. Paul M. Latonero and Theodore N. Utz ( Plaintiffs ). They commenced this Action on behalf of the abovedescribed class of limited partner investors in Waterford Shores Associates, L.P. I ( Waterford I ), Waterford Shores Associates, L.P. II ( Waterford II ), Windsor Associates, L.P. ( Windsor ) and Victoria Manor Associates, L.P. ( Victoria Manor, and collectively with Waterford I, Waterford II and Windsor, the Partnerships ). The Partnerships were established in the mid 1980s by Grand Court Lifestyles, Inc. ( GCLI ), an entity wholly unrelated to defendants GFB-AS Investors, LLC ( GFB-AS ) and Brookdale Living Communities, Inc. ( Brookdale, and collectively with GFB-AS, Defendants ). GCLI syndicated the Partnerships to participate as investment partnerships in connection with properties ( Properties ) operating as senior housing facilities. The Waterford I and II partnerships collectively own a 99% interest in a partnership that owned and operated a senior living facility in Fort Myers, Florida (the Fort Myers Property ). The Windsor partnership owns a 99% interest in a partnership that owned and operated a senior living facility in Farmington Hills, Michigan (the Farmington Hills Property ). The Victoria Manor partnership owns a 99% interest in a partnership that owned and operated a senior living facility in Overland Park, Kansas (the Overland Park Property ). GCLI, through its affiliates, had management rights over the Partnerships and was responsible for the daily management and operation of the Properties in which the Partnerships had ownership interests. GCLI filed for bankruptcy protection in March In connection with GCLI s bankruptcy proceeding, in early 2001, GFB-AS acquired GCLI s rights and interests in the Partnerships. Subsequently, affiliates of Brookdale were responsible for the daily management and operation of the Properties. Beginning in the summer of 2003, Defendants undertook to obtain appraisals of the Properties in connection with a possible sale or refinancing. Subsequently, the general partners of the partnerships owning the Properties, which partnerships were affiliates of the Defendants, caused the Properties to be sold to Ventas, Inc. ( Ventas ) in a series of transactions ( Transactions ). The Fort Myers Property was sold on or about January 28, The Farmington Hills and Overland Park Properties were sold on or about March 30, Contemporaneously with each of these sales, Ventas leased each of the Properties to an affiliate of Brookdale. In this lawsuit, which followed an earlier action in Florida described in Section VIII below, Plaintiffs have challenged the Transactions, which they contend were sale/leaseback transactions, as unfair. Plaintiffs filed their original complaint on March 22, 2006, and filed an amended complaint (the Amended Complaint ) on November 21, Defendants filed their Answer and Affirmative Defenses to the original complaint on July 10, 2006, and then on December 12, 2006 filed their Answer and Affirmative Defenses to the Amended Complaint. 2

3 On April 24, 2008, the Court of Chancery certified this Action as a class action, pursuant to Court of Chancery Rules 23(a) and (b)(1), on behalf of a Class consisting of the following three subclasses (the Class ): (i) all holders of limited partnership units in Waterford I and/or Waterford II as of January 28, 2004 and their successors-in-interest (the Waterford Subclass ); (ii) all holders of limited partnership units in Windsor as of March 30, 2004, and their successorsin-interest (the Windsor Subclass ); and (iii) all holders of limited partnership units in Victoria Manor as of March 30, 2004, and their successors-in-interest (the Victoria Manor Subclass ). The Court excluded from each subclass: (i) holders of limited partnership units in each of the Partnerships who were plaintiffs in the now-settled action styled Atkins, et al. v. Apollo Real Estate Advisors, L.P., et al., No. CV (E.D.N.Y.) ( Atkins Action ), and (ii) Defendants in this action, and any person, firm, trust, corporation, or other entity related to or affiliated with any of the Defendants. The Court also designated Plaintiffs as class representatives, and Plaintiffs counsel as counsel for the Class ( Class Counsel ). Pursuant to the Class Certification Order, on July 11, 2008, Plaintiffs sent a Notice of Pendency of the Action by first class mail, postage prepaid, to all Class members at addresses shown on the Partnerships records provided by Defendants. III. THE SETTLEMENT During the litigation, the parties completed fact discovery, including the exchange of written discovery and document production, and numerous depositions of parties and relevant third parties. The parties also exchanged expert reports, conducted expert depositions, and completed pretrial briefing. Trial was scheduled to begin on March 9, On December 6, 2007, the parties participated in mediation in an attempt to resolve the Action. No resolution was reached at the mediation or in negotiations that followed, including a meeting in New York in June Following the completion of fact and expert discovery and the filing of the parties opening pretrial briefs, the parties resumed settlement discussions and, after protracted negotiations, the parties reached an agreement on the terms of settlement which are set forth in a Stipulation and Agreement of Compromise, Settlement and Release ( Settlement Agreement ) dated April 9, 2009, the principal terms of which are as follows: (a) On or before April 15, 2009, Brookdale will cause (i) $6,000,000, which shall constitute the Settlement Fund, to be delivered by wire transfer into a trust account ( Escrow Account ) controlled by Class Counsel for the benefit of the Class; and (ii) not less than $6,600 per unit to be paid by check delivered by first class mail to the members of the Waterford Subclass representing the Waterford Subclass members allocable distribution of the proceeds of the sale of the Fort Myers Property, plus interest accrued thereon from January 28, 2004 to April 15, 2009 (the aggregate of these distributions being the Waterford Distribution ). The members of both the Windsor Subclass and the Victoria Manor Subclass received their allocable shares of proceeds from the sales of their respective Partnership s Property following the sale of those Properties on or about March 30, (b) The Action will be fully and finally dismissed, and Defendants in the Action will be released from all present and future claims asserted or that could have been asserted in the Action or relating in any way to the matters alleged in the Action, as set forth more fully in this Notice. IV. REASONS FOR THE SETTLEMENT Plaintiffs and Class Counsel have carefully considered the discovery completed in this Action and investigated the claims and allegations asserted in the Amended Complaint, as well as the underlying events relevant to the Transactions. While Plaintiffs and Class Counsel believe that the claims asserted in the Action have merit, they also believe that the Settlement provides substantial benefits for the Class. In addition to these substantial benefits, Plaintiffs and their counsel have considered: (a) the attendant risks of continued litigation and the uncertainty of the outcome of the Action, particularly with regard to the amount Class members may receive even if Plaintiffs are successful in establishing their claims; (b) the probability of success on the merits and the allegations contained in the Action; (c) the desirability of permitting the Settlement to be consummated according to its terms; and (d) their conclusion that the terms and conditions of the Settlement are fair, reasonable and adequate and that it is in the best interest of Plaintiffs and the members of the Class to settle the Action on the terms described in this Notice. 3

4 Defendants have vigorously denied, and continue to deny (a) any wrongdoing or liability with respect to all claims, events and transactions complained of in the Action; (b) that they engaged in any wrongdoing; (c) that they committed any violation of law; (d) that they breached any fiduciary duties; (e) that they acted improperly in any way; and (f) any liability of any kind to Plaintiffs or the Class, but consider it desirable that the Action be settled and dismissed on the merits and with prejudice and without costs to any party (except as set forth below) in order to: (i) avoid the distraction, burden and expenses of further litigation; (ii) dispose of potentially burdensome and protracted litigation; and (iii) finally put to rest and terminate the claims asserted in the Action. V. SUMMARY OF THE SETTLEMENT In consideration for the settlement and dismissal of the Action with prejudice, and the releases described herein, Brookdale will cause (a) the Settlement Fund in the amount of $6,000,000 to be deposited into the Escrow Account to be administered by Class Counsel; and (b) the Waterford Distribution in an amount not less than $6,600 per unit to be paid by check delivered by first class mail to the members of the Waterford Subclass. Fees and expenses of the Settlement Administrator, attorneys fees and expenses the Court awards Class Counsel, any allowance the Court awards any of the Plaintiffs, and other necessary expenses, including costs of preparing tax returns (should any be required), and the expenses of distributing funds to the Class, will be paid from the Escrow Account. The remainder of the Settlement Fund (the Net Settlement Fund ) will be distributed to each Subclass in the following percentages: (a) Waterford Subclass 25.79% (b) Windsor Subclass 45.96%; and (c) Victoria Manor Subclass 28.25% These allocations of the Net Settlement Fund were determined as follows: (a) Class Counsel calculated the maximum potential recovery, exclusive of interest, for each Subclass based on the number of units in each Subclass and the valuations of the Properties prepared by the expert retained on behalf of Plaintiffs ( Plaintiffs Expert ); (b) Class Counsel then calculated the aggregate maximum potential recovery, exclusive of interest, and the percentage of that aggregate attributable to each Subclass ( First Percentage ); (c) Class Counsel then calculated the maximum potential recovery, exclusive of interest, for each Subclass based on the number of units in each Subclass and the valuations of the Properties prepared by Plaintiffs Expert as modified to reflect what Defendants Expert contended were errors in the valuations prepared by Plaintiffs Expert ( Second Percentage ); (d) Class Counsel then calculated the aggregate maximum potential recovery based on this modified scenario, and the percentage of that aggregate attributable to each Subclass ( Second Percentage ); (e) Class Counsel then determined the average of the First and Second Percentages; (f) Each member of the Waterford Subclass shall receive a distribution per unit determined by a fraction, the numerator of which shall be 25.79% of the Net Settlement Fund, and the denominator of which shall be 36.75, which represents the total number of units in the Waterford Subclass; (g) Each member of the Windsor Subclass shall receive a distribution per unit determined by a fraction, the numerator of which shall be 45.96% of the Net Settlement Fund, and the denominator of which shall be 78.75, which represents the total number of units in the Windsor Subclass; and (h) Each member of the Victoria Manor Subclass shall receive a distribution per unit determined by a fraction, the numerator of which shall be 28.25% of the Net Settlement Fund, and the denominator of which shall be 76.5, which represents the total number of units in the Victoria Manor Subclass. 4

5 (i) If the Court approves the proposed Settlement and the application for attorneys fees and expenses and for an allowance to plaintiff the Edith Zimmerman Estate described in Section VIII below, Class Counsel estimate that the distributions from the Net Settlement Fund will be approximately as follows: $35,548 per Waterford unit (which includes the Waterford Distribution described on page 4 above and already paid in April 2009); $24,074 per Windsor unit; $15,233 per Victoria Manor unit. VI. SETTLEMENT HEARING The Court has scheduled a Settlement Hearing which will be held on June 15, 2009 at 10:00 a.m., in the Court of Chancery, New Castle County Courthouse, 500 North King Street, Wilmington, Delaware to: (a) determine whether the Court should approve the Settlement as fair, reasonable, adequate and in the best interests of the Class; (b) determine whether an Order and Final Judgment should be entered pursuant to the Settlement Agreement; (c) consider the application of Class Counsel for an award of attorneys fees and reimbursement of litigation expenses, including the request contained therein on behalf of the Edith Zimmerman Estate (appearing through the Estate s personal representative Stanley E. Zimmerman, Jr.) for an allowance in addition to the Edith Zimmerman Estate s pro rata share of the Net Settlement Fund; and (d) rule on such other matters as the Court may deem appropriate. The Court has reserved the right to adjourn the Settlement Hearing, including the consideration of the application for attorneys fees, without further notice of any kind other than oral announcement at the Settlement Hearing or any adjournment thereof. The Court also has reserved the right to approve the Settlement at or after the Settlement Hearing with such modification(s) as may be consented to by the parties to the Stipulation and without further notice to the Class. VII. APPLICATION FOR ATTORNEYS FEES AND EXPENSES AND FOR AN ALLOWANCE TO PLAINTIFF THE ESTATE OF EDITH ZIMMERMAN Class Counsel in the Action intend to apply to the Court for an award of attorneys fees not to exceed $1,600,000, and reimbursement of litigation expenses incurred in the prosecution of the action not to exceed $230,000, which shall be conditioned upon approval of the Settlement. Defendants do not oppose such requests. Notwithstanding the foregoing, any decision by the Court to approve an attorneys fee award or reimbursement of expenses less than such amounts shall not in any way void the Settlement. Any attorneys fees and expenses awarded by the Court will be paid out of the Escrow Account. Defendants will not be obligated to pay any fees or expenses to Class Counsel in this Action if the Court does not approve the Settlement. Prior to this litigation, Stanley E. Zimmerman, Jr., the personal representative of plaintiff the Edith Zimmerman Estate, started a lawsuit in state court in Florida seeking to enjoin the sale of the Fort Myers Property for what he alleged in that litigation, and later in this lawsuit, was an unfairly low price. Mr. Zimmerman and his affiliates incurred $36,261 in attorneys fees and expenses in connection with the Florida litigation. Mr. Zimmerman determined that the expenses of the litigation would substantially exceed the value of the Waterford unit his family held, so he discontinued prosecution of the Florida litigation. He then invested significant effort in getting this litigation started. During the course of this case, he spent considerable time and effort assisting Class Counsel in the investigation and prosecution of the claims asserted. 5

6 Accordingly, Plaintiffs and Class Counsel intend to request that the Court approve an allowance for the Edith Zimmerman Estate, in addition to the Estate s pro rata share of the Net Settlement Fund, in the amount of $45,000, as a special payment to reimburse the Edith Zimmerman Estate for expenses incurred in connection with the Florida litigation and for the extraordinary assistance Mr. Zimmerman provided to Class Counsel in the prosecution of this litigation. Any amount approved by the Court as a special payment to the Edith Zimmerman Estate will be paid from the Net Settlement Fund. Any decision by the Court to disapprove, in whole or in part, the requested allowance of $45,000 to the Edith Zimmerman Estate shall not in any way void the Settlement. VIII. ORDER AND FINAL JUDGMENT OF THE COURT If the Court determines that the Settlement is fair, reasonable, adequate and in the best interests of the Class, the parties will ask the Court to enter an Order and Final Judgment, which will, among other things: 1. approve the Settlement; 2. authorize and direct the performance of the Settlement and reserve jurisdiction to supervise it; 3. determine that the requirements of the Delaware Court of Chancery Rules and due process have been satisfied in connection with this Notice; 4. dismiss the Action with prejudice, bar prosecution of Settled Claims (as defined below), and grant the releases described more fully below; and 5. state the Court s decision on the application for attorneys fees and expenses to Class Counsel, and the requested allowance for the plaintiff Edith Zimmerman Estate. IX. RELEASES Under the terms of the Settlement, all claims, debts, demands, rights, actions or causes of action, liabilities, damages, losses, obligations, judgments, suits, matters and issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, accrued or unaccrued, liquidated or unliquidated, matured or unmatured, that have been or could have been asserted in the Action or in any court, tribunal or proceeding (including, but not limited to, any claims arising under federal, state, foreign or common law, including claims relating to alleged fraud, breach of any duty, negligence or violations of the federal or state securities laws, or under any other law, rule or regulation) by or on behalf of Plaintiffs in the Action or any and all of the members of the Class (including the respective heirs, executors, administrators and assigns of Plaintiffs and members of the Class), whether as an individual, class, derivative, representative, legal, equitable or any other type of action, or in any other capacity, against any and all Defendants, and/or any of their respective parent entities, affiliates, controlling persons, subsidiaries, successors or predecessors and each and all of their respective past, present or future officers, directors, stockholders, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, auditors, investment bankers, commercial bankers, appraisers, advisors or agents, heirs, executors, trustees, general or limited partners or partnerships, personal representatives, estates, administrators, predecessors, successors and assigns (collectively, the Released Persons ) which Plaintiffs or any member of the Class ever had, now have, or hereafter can, shall or may have by reason of, arising out of, relating to or in connection with the allegations, facts, events, transactions, acts, occurrences, statements, representations, misrepresentations, omissions or any other matter, thing or cause whatsoever, or any series thereof, embraced, involved, set forth or otherwise related to the Action or the Transactions, including without limitation, any disclosures or distributions (including the Waterford Distribution, as defined herein) made in connection with any of the foregoing, and any claims by the Released Persons against Plaintiffs and their attorneys, financial advisors, agents, affiliates, predecessors and successors relating to the institution, prosecution or settlement of the Action (collectively, the Settled Claims ) shall be barred, compromised, discharged, settled, released and dismissed with prejudice; provided, however, that the Settled Claims shall not include any claims to enforce the Settlement. Further, pursuant to the Order and Final Judgment, upon the Effective Date (as defined in the Settlement Agreement), Plaintiffs and the members of the Class, on behalf of themselves and their respective heirs, executors, administrators, predecessors, successors and assigns, shall be deemed by operation of law to have compromised, discharged, settled, released, waived and dismissed any and all 6

7 Settled Claims, and shall forever be barred and enjoined from instituting, commencing or prosecuting any and all Settled Claims, against any and all Released Persons. The members of the Class shall not be entitled to opt out of the Settlement. X. RIGHT TO APPEAR AND OBJECT Any member of the Class who objects to: (i) the Settlement; (ii) the entry of the proposed Order and Final Judgment; (iii) the application for attorneys fees and expenses; (iv) the application for an allowance to plaintiff the Edith Zimmerman Estate; and/or (v) who otherwise wishes to be heard, may appear in person or by his attorney at the Settlement Hearing and present evidence or argument that may be proper and relevant. Any Class member who wishes to do so, however, must, no later than June 5, 2009, (unless the Court extends this deadline for good cause shown), file with the Register in Chancery, New Castle County Courthouse, 500 N. King Street, Wilmington, Delaware 19801, and serve upon the counsel listed below: (a) proof of membership in the Class; (b) a written notice of intention to appear; (c) a statement of such person s objections to any matters before the Court; and (d) the grounds for such objections and the reasons that such person desires to appear and be heard, as well as all documents or writings such person desires the Court to consider. Such filings shall be served upon the following counsel: Norman M. Monhait, Esquire ROSENTHAL, MONHAIT & GODDESS, P.A. 919 Market Street, Suite 1401 Citizens Bank Center Wilmington, DE Attorneys for Plaintiffs and Thomas J. Allingham II, Esquire Jennifer C. Voss, Esquire SKADDEN ARPS SLATE MEAGHER & FLOM LLP One Rodney Square Wilmington, DE Attorneys for Defendants Any member of the Class who does not object to the Settlement, the request for an award of attorneys fees and reimbursement of litigation expenses to Class Counsel, the application for an allowance to plaintiff the Edith Zimmerman Estate or any other matter before the Court, need not do anything with respect to the Settlement Hearing. Unless the Court otherwise directs, no person shall be entitled to object to the approval of the Settlement, any judgment entered thereon, the adequacy of the representation of the Class by Plaintiffs and Class Counsel, any award of attorneys fees and expenses or an allowance to any plaintiff, or otherwise be heard, except by serving and filing a written objection and supporting papers and documents as described above. Any person who fails to object in the manner described above shall be deemed to have waived the right to object (including any right of appeal) and shall be forever barred from raising such objection in this or any other action or proceeding. 7

8 XI. IRS FORM W9 REQUIRED If the Court approves the proposed Settlement, Class members will receive their share of the Net Settlement Fund by mail, at the address to which this Notice is being sent. To receive a distribution, however, each Class member must complete and return an Internal Revenue Service Form W9 which is being included with this Notice. Please complete this form promptly and return it to: Brookdale Settlement Administrator c/o RSM McGladrey, Inc. One Valley Square, Suite Township Line Road Blue Bell, PA Also, if your address has changed from the one to which this Notice was sent, or if your address changes after you receive this Notice, please send your current address to Brookdale Settlement Administrator, at the above address. XII. SCOPE OF THIS NOTICE This Notice is not all-inclusive. The references in this Notice to the pleadings in the Action, the Settlement Agreement and other papers and proceedings are only summaries and do not purport to be comprehensive. For the full details of the Action, the claims which have been asserted by the parties and the terms and conditions of the Settlement, including a complete copy of the Settlement Agreement, members of the Class are referred to the Court files in the Action. You or your attorney may examine the Court files during regular business hours of each business day at the office of the Register in Chancery, Court of Chancery, 500 N. King Street, Wilmington, Delaware Questions may also be directed to Class Counsel: Norman M. Monhait, Esquire or George W. Croner, Esquire ROSENTHAL, MONHAIT & GODDESS, P.A. KOHN SWIFT & GRAF, P.C. 919 Market Street, Suite 1401 One South Broad Street Citizens Bank Center Suite 2100 Wilmington, DE Philadelphia, PA DO NOT WRITE OR CALL THE COURT. Dated: May 8, 2009 BY ORDER OF THE COURT: Register in Chancery 8