Execution Copy
STOCK PURCHASE AGREEMENT
Among
HX INVESTORS, LP,
EXETER CAPITAL CORPORATION
and
SHELBOURNE PROPERTIES II, INC.
Dated as of July 1, 2002
Table of Contents
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions...................................................2
ARTICLE II
THE OFFER
SECTION 2.01. The Offer.....................................................4
SECTION 2.02. Company Action................................................5
ARTICLE III
[RESERVED]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization and Qualification................................6
SECTION 4.02. Certificate of Incorporation and By-laws......................7
SECTION 4.03. Capitalization................................................7
SECTION 4.04. Authority Relative to Agreements..............................8
SECTION 4.05. No Conflict; Required Filings and Consents....................8
SECTION 4.06. Offer Documents; Schedule 14D-9; Proxy Statement..............9
SECTION 4.07. Amendment to Rights Agreement.................................9
SECTION 4.08. SEC Filings; Financial Statements.............................9
SECTION 4.09. Absence of Litigation........................................10
SECTION 4.10. REIT Status..................................................10
SECTION 4.11. Waiver of Ownership Limit....................................10
SECTION 4.12. Section 203 of Delaware Law..................................10
SECTION 4.13. Brokers......................................................11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 5.01. Corporate and Partnership Organization.......................11
SECTION 5.02. Authority Relative to This Agreement.........................11
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SECTION 5.03. No Conflict; Required Filings and Consents...................11
SECTION 5.04. Financing....................................................12
SECTION 5.05. Offer Documents; Proxy Statement.............................12
SECTION 5.06. Ownership of Company Capital Stock...........................12
SECTION 5.07. Brokers......................................................13
SECTION 5.08. Absence of Litigation........................................13
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business by the Company...........................14
SECTION 6.02. Corporate Governance.........................................15
SECTION 6.03. Transfer Tax.................................................15
SECTION 6.04. Indemnification of Exeter and Purchaser......................15
SECTION 6.05. No Solicitation of Transactions..............................15
SECTION 6.06. Further Action; All Reasonable Efforts.......................16
SECTION 6.07. Public Announcements.........................................16
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination..................................................16
SECTION 7.02. Effect of Termination........................................17
SECTION 7.03. Fees and Expenses............................................17
SECTION 7.04. Amendment....................................................17
SECTION 7.05. Waiver.......................................................18
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Non-Survival of Representations, Warranties and Agreements...18
SECTION 8.02. Notices......................................................18
SECTION 8.03. Severability.................................................19
SECTION 8.04. Specific Performance.........................................19
SECTION 8.05. Entire Agreement; Assignment.................................19
SECTION 8.06. Parties in Interest..........................................19
SECTION 8.07. Governing Law................................................20
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SECTION 8.08. Waiver of Jury Trial.........................................20
SECTION 8.09. Headings.....................................................20
SECTION 8.10. Counterparts.................................................20
ANNEX A Conditions to the Offer
ANNEX B Corporate Governance Provisions
ANNEX C The Plan of Liquidation
iii
STOCK PURCHASE AGREEMENT, dated as of July 1, 2002 (this "Agreement"),
among HX INVESTORS, LP, a Delaware limited partnership ("Purchaser"), EXETER
CAPITAL CORPORATION, a New Jersey corporation and the sole general partner of
Purchaser ("Exeter"), and SHELBOURNE PROPERTIES II, INC., a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors or other equivalent management boards
of Purchaser, Exeter and the Company have each determined that it is in the best
interests of their respective partners and stockholders for Purchaser to acquire
up to 268,444 issued and outstanding shares (the "Shares") of common stock, par
value $0.01 per share, of the Company (the "Common Stock"), and subsequent to
such acquisition, for the Company to dissolve and liquidate its assets;
WHEREAS, in furtherance of such acquisition, it is proposed that
Purchaser shall make a cash tender offer (the "Offer") for such Shares for
$62.00 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being the "Per Share Amount"), net to the seller in cash, upon the
terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved to recommend that
holders of shares of Common Stock ("Stockholders") desiring to maximize
immediate liquidity of their Shares accept the Offer and tender their Shares
pursuant to the Offer and Stockholders not seeking immediate liquidity, but
desiring to receive their pro rata portion of the liquidation proceeds
contemplated by the Plan of Liquidation, should not accept the Offer, and should
vote to approve the adoption of the Plan of Liquidation at a meeting of the
Stockholders to be held to consider such matter;
WHEREAS, in furtherance of such dissolution and liquidation, the Board
has, in accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), approved the plan of liquidation of the Company attached
hereto as Annex C (the "Plan of Liquidation") and resolved to recommend,
following the consummation of the Offer, that Stockholders approve the Plan of
Liquidation; and
WHEREAS, contemporaneously with the execution of this Agreement,
Purchaser and the Company have entered into a Settlement Agreement and Mutual
Release, dated as of the date hereof (the "Settlement Agreement"), between
plaintiff Purchaser and the additional plaintiffs who are listed in Exhibit A
thereto, and the Company, Shelbourne Properties II, Inc. and Shelbourne
Properties III, Inc., which contemplates this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby Purchaser, Exeter and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) For purposes of this Agreement:
"Acquisition Proposal" means (i) any proposal or offer from
any person relating to any direct or indirect acquisition of (A) all or
substantially all of the assets of the Company and its subsidiaries,
taken as a whole, or (B) over 20% of any class of equity securities of
the Company; (ii) any tender offer or exchange offer as defined
pursuant to the Exchange Act that, if consummated, would result in any
person beneficially owning 20% or more of any class of equity
securities of the Company; or (iii) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the Transactions.
"affiliate" of a specified person means a person who, directly
or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"beneficial owner", with respect to any shares of Common
Stock, has the meaning ascribed to such term under Rule 13d-3(a) of the
Exchange Act.
"business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks
are not required or authorized to close in The City of New York.
"Certificate of Dissolution" means the certificate of
dissolution filed with the Secretary of State of the State of Delaware
by the Board to effect the dissolution of the Company, in such form as
is required by, and executed in accordance with the relevant provisions
of, Delaware Law.
"Code" means the Internal Revenue Code of 1986, as amended.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise.
"Dissolution" means the dissolving of the Company by the Board
by the filing of a Certificate of Dissolution.
"Effective Time" means the date and time of the filing of the
Certificate of Dissolution
"knowledge of the Company" means the actual knowledge of the
directors and officers of the Company after reasonable investigation.
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"Liquidation Date" means the date upon which the Company
distributes the final proceeds of any remaining assets of the Company
to the Stockholders pursuant to the Dissolution and the Plan of
Liquidation.
"Material Adverse Effect" means, when used in connection with
the Company or any of its subisdiaries, any event, circumstance, change
or effect that is materially adverse to the financial condition or
results of operations of the Company and its subsidiaries, taken as a
whole; provided, however, that "Material Adverse Effect" shall not
include any event, circumstance, change or effect arising out of or
attributable to (i) any decrease in the market price of the Shares,
(ii) events, circumstances, changes or effects that generally affect
the industries in which the Company operates, (iii) general economic
conditions or events, circumstances, changes or effects affecting the
securities markets generally, or (iv) changes arising from the
announcement of the execution of this Agreement or the consummation of
the Transactions.
"person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person
(including, without limitation, a "person" as defined in Section
13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government.
"REIT" means a real estate investment trust within the meaning
of Sections 856-860 of the Code.
"subsidiary" or "subsidiaries" of the Company, Purchaser,
Exeter or any other person means an affiliate controlled by such
person, directly or indirectly, through one or more intermediaries.
"Transactions" means, collectively, the Offer, the Plan of
Liquidation and the other transactions contemplated by this Agreement
and the Settlement Agreement.
(b) The following terms have the meaning set forth in the Sections set
forth below:
Defined Term Location of Definition
------------ ----------------------
Action ss. 4.09
Agreement Preamble
Blue Sky Laws ss. 4.05(b)
Board Recitals
Common Stock Recitals
Company Preamble
Company Excess Stock ss. 4.03
Company Preferred Stock ss. 4.03
Delaware Law Recitals
Disclosure Schedule Article IV
Equity Amount Annex C ss.6
Exchange Act ss. 2.01(a)
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Defined Term Location of Definition
------------ ----------------------
Exeter Preamble
Financial Advisor ss. 4.13
GAAP ss. 4.08(b)
Governmental Authority ss. 4.05(b)
Indemnified Parties Annex B ss.5(b)
Independent Director Annex B ss.3(a)
Law ss. 4.05(a)
Offer Recitals
Offer Documents ss. 2.01(b)
Offer to Purchase ss. 2.01(b)
Per Share Amount Recitals
Plan of Liquidation Recitals
Proxy Statement ss. 4.06
Purchaser Preamble
Purchaser Indemnified Parties ss. 6.04
Rights ss. 4.03
Rights Agreement ss. 4.03
Schedule 14D-9 ss. 2.02(a)
Schedule TO ss. 2.01(b)
SEC ss. 2.01(a)
SEC Reports ss. 4.08(a)
Settlement Agreement Recitals
Shares Recitals
Stockholders Recitals
Stockholders' Meeting Annex B ss.1
subsequent offering period ss. 2.01(a)
ARTICLE II
THE OFFER
SECTION 2.01. The Offer. (a) Purchaser shall, and Exeter shall cause
Purchaser to, commence the Offer as promptly as reasonably practicable after the
date hereof, but in no event later than July 12, 2002. The obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer shall be
subject to the conditions set forth in Annex A hereto. Purchaser expressly
reserves the right to waive any such condition, to increase the price per Share
payable in the Offer, and to make any other changes in the terms and conditions
of the Offer; provided, however, that, without the prior written consent of the
Company, Purchaser shall not (i) decrease the price per Share payable in the
Offer, (ii) reduce the maximum number of Shares to be purchased in the Offer,
(iii) impose conditions to the Offer in addition to those set forth in Annex A
hereto, (iv) extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) amend, add to or waive any other term of the Offer in any
manner that would be, in any significant respect, adverse to the Company or the
Stockholders. Notwithstanding the foregoing, Purchaser may, without consent of
the Company, (i) extend the Offer beyond the scheduled expiration date, which
shall be 20 business days following the commencement of the Offer, if, at the
scheduled expiration of the Offer, any of the conditions to Purchaser's
obligation
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to accept for payment, and to pay for, the Shares, shall not be satisfied or
waived or (ii) extend the Offer for any period required by any rule, regulation
or interpretation of the Securities and Exchange Commission (the "SEC"), or the
staff thereof, applicable to the Offer; provided, however, that if the sole
condition remaining unsatisfied on the initial scheduled expiration date of the
Offer is a condition set forth in paragraph (d) or (e) of Annex A, Purchaser
shall, so long as the breach can be cured and the Company is vigorously
attempting to cure such breach, extend the Offer from time to time until five
business days after such breach is cured; provided, further, that Purchaser
shall not be required to extend the Offer beyond 30 calendar days after such
initial scheduled expiration date. In addition, if all of the conditions to the
Offer are satisfied or waived, then upon the applicable expiration date of the
Offer, Purchaser may, without the consent of the Company, provide "subsequent
offering periods," as such term is defined in, and in accordance with, Rule
14d-11 under the Exchange Act, for an aggregate period not to exceed twenty (20)
business days (for all such extensions) and Purchaser shall (A) give the
required notice of such subsequent offering period and (B) immediately accept
and promptly pay for all Shares tendered as of such applicable expiration date.
The Per Share Amount shall, subject to applicable withholding of taxes, be net
to the seller in cash, upon the terms and subject to the conditions of the
Offer. Upon expiration of the Offer, Purchaser shall, and Exeter shall cause
Purchaser to, accept for payment all Shares validly tendered and not withdrawn
pursuant to the Offer and pay for all such Shares promptly following the
acceptance of Shares for payment. Notwithstanding the immediately preceding
sentence and subject to the applicable rules of the SEC and the terms and
conditions of the Offer, Purchaser expressly reserves the right to delay payment
for Shares in order to comply in whole or in part with applicable Laws. Any such
delay shall be effected in compliance with Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) As promptly as reasonably practicable on the date of commencement
of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on
Schedule TO (together with all amendments and supplements thereto, the "Schedule
TO") with respect to the Offer. The Schedule TO shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule TO, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the "Offer Documents"). Purchaser and the Company agree to correct promptly any
information provided by any of them for use in the Offer Documents that shall
have become false or misleading, and Purchaser further agrees to take all steps
necessary to cause the Schedule TO, as so corrected, to be filed with the SEC,
and the other Offer Documents, as so corrected, to be disseminated to
Stockholders, in each case as and to the extent required by applicable federal
securities laws.
SECTION 2.02. Company Action. (a) Except as required by the fiduciary
duties of the Board under applicable Law as determined by the Board in good
faith, after consultation with its counsel, the Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board described in
Section 9 of the Settlement Agreement. As promptly as reasonably practicable on
the date of commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, except as
required by the fiduciary duties of the Board under applicable Law as determined
by the Board in good faith, after consultation with its counsel, the
recommendation of the Board described in Section 9 of
5
the Settlement Agreement, and shall disseminate the Schedule 14D-9 to the extent
required by Rule 14d-9 promulgated under the Exchange Act, and any other
applicable federal securities laws. The Company and Purchaser agree to correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become false or misleading, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9, as so corrected, to be
filed with the SEC and disseminated to Stockholders, in each case as and to the
extent required by applicable federal securities laws.
(b) The Company shall promptly furnish Purchaser with (i) mailing
labels containing the names and addresses of all record Stockholders, (ii)
security position listings of shares of Common Stock held in stock depositories
and (iii) a non-objecting beneficial owners (NOBO) list, each as of a recent
date, together with all other available listings and computer files containing
names, addresses and security position listings of record holders and beneficial
owners of shares of Common Stock. The Company shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of Stockholders, mailing labels and security position listings,
and such other assistance in disseminating the Offer Documents to holders of the
shares of Common Stock as Purchaser may reasonably request. Subject to the
requirements of applicable Law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer, Purchaser shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Offer, and, if this Agreement shall be terminated in accordance with Section
7.01, shall deliver to the Company all copies of such information then in its
possession.
ARTICLE III
[RESERVED]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Exeter and Purchaser to enter into this Agreement,
and except as disclosed in a separate disclosure schedule (it being agreed that
disclosure under any particular disclosure schedule provided hereunder shall be
deemed adequate for all schedules where such disclosure would be applicable;
provided, however, that notwithstanding anything in this Agreement to the
contrary, the mere inclusion of an item in such disclosure schedule as an
exception to a representation or warranty shall not be deemed an admission by
the Company that such item represents a material exception or material fact,
event or circumstance or that such item has had or would have a Material Adverse
Effect with respect to the Company) which has been delivered by the Company to
Purchaser prior to the execution of this Agreement (the "Disclosure Schedule")
the Company hereby represents and warrants to Exeter and Purchaser that:
SECTION 4.01. Organization and Qualification. The Company and each
subsidiary of the Company is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite power and authority
6
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not have a Material
Adverse Effect or prevent or materially delay consummation of the Transactions,
or otherwise prevent the Company from performing is obligations under the
Settlement Agreement or this Agreement. The Company and each subsidiary of the
Company is duly qualified or licensed as a foreign entity to do business, and is
in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not have a Material
Adverse Effect or prevent or materially delay consummation of the Transactions,
or otherwise prevent the Company from performing its obligations under the
Settlement Agreement or this Agreement.
SECTION 4.02. Certificate of Incorporation and By-laws. The Company
has heretofore made available to Purchaser a complete and correct copy of the
Certificate of Incorporation and the By-laws or equivalent organizational
documents, each as amended to date, of the Company and each material subsidiary
of the Company. Such Certificates of Incorporation, By-laws or equivalent
organizational documents are in full force and effect. Neither the Company nor
any subsidiary is in violation of any of the provisions of its Certificate of
Incorporation, By-laws or equivalent organizational documents, except for such
violations as would not have a Material Adverse Effect or prevent or materially
delay consummation of the Transactions, or otherwise prevent the Company from
performing its obligations under the Settlement Agreement or this Agreement.
SECTION 4.03. Capitalization. The authorized capital stock of the
Company consists of 2,500,000 shares of Common Stock, 1,500,000 shares of
"excess stock", par value $0.01 per share ("Company Excess Stock"), and 500,000
shares of preferred stock, par value $0.01 per share ("Company Preferred
Stock"). As of the date hereof, (i) 894,814 shares of Common Stock are issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
and (ii) 343,102 shares of Common Stock are held in the treasury of the Company.
As of the date hereof, no shares of Company Excess Stock or Company Preferred
Stock are issued and outstanding. Except as set forth in this Section 4.03, and
except for the rights (the "Rights") issued pursuant to the Rights Agreement,
dated as of February 8, 2001 (the "Rights Agreement"), between the Company and
American Stock Transfer & Trust Company, as rights agent, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
subsidiary of the Company or obligating the Company or any subsidiary of the
Company to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any subsidiary of the Company. All shares of Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no material outstanding contractual obligations of the Company or any subsidiary
of the Company to repurchase, redeem or otherwise acquire any shares of Common
Stock or any equity interests of any subsidiary of the Company or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any subsidiary of the Company or any other person. Each
outstanding equity interest of each subsidiary of the Company that is owned by
the Company is duly authorized, validly issued, fully paid and nonassessable,
and each such equity
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interest owned by the Company or a subsidiary of the Company is owned free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or any of its
subsidiaries' voting rights, charges and other encumbrances of any nature
whatsoever.
SECTION 4.04. Authority Relative to Agreements. The Company has all
necessary power and authority to execute and deliver this Agreement and the
Settlement Agreement, to perform its obligations hereunder and thereunder and to
consummate the Transactions. The execution and delivery of this Agreement and
the Settlement Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or the Settlement Agreement or to
consummate the Transactions (other than, with respect to the Dissolution and
Plan of Liquidation, the approval and adoption of the Dissolution and Plan of
Liquidation by the holders of a majority of the then-outstanding shares of
Common Stock and the filing and recordation of appropriate documents as required
by Delaware Law). Each of this Agreement and the Settlement Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Exeter and Purchaser, constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Settlement Agreement by the
Company do not, and the performance of this Agreement and the Settlement
Agreement by the Company will not, (i) conflict with or violate the Certificate
of Incorporation or By-laws or equivalent organizational documents of the
Company or any of its subsidiaries, (ii) conflict with or violate any foreign or
domestic statute, law, ordinance, regulation, rule, code, executive order,
injunction, judgment, decree or other order ("Law") applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not have a
Material Adverse Effect or prevent or materially delay consummation of the
Transactions, or otherwise prevent the Company from performing its obligations
under this Agreement or the Settlement Agreement.
(b) The execution and delivery of this Agreement and the Settlement
Agreement by the Company do not, and the performance of this Agreement and the
Settlement Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any federal,
state, county or local government, governmental, regulatory or administrative
authority, agency, instrumentality or commission or any court, tribunal, or
judicial or arbitral body (a "Governmental Authority") or any other person,
except (i) for (A) applicable requirements, if any, of the Exchange Act, state
securities or "blue sky" laws ("Blue Sky Laws") and state takeover laws, (B)
applicable requirements, if any, of any
8
applicable so-called state "property transfer acts" (e.g., the New Jersey
Industrial Site Recovery Act, the Connecticut Transfer Act), (C) filing and
recordation of appropriate documents as required by Delaware Law and (D)
transfer tax and other filings as required by applicable state law, and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not have a Material Adverse
Effect or prevent or materially delay consummation of the Transactions, or
otherwise prevent the Company from performing its obligations under the
Settlement Agreement and this Agreement.
SECTION 4.06. Offer Documents; Schedule 14D-9; Proxy Statement.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the times the Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to Stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The proxy statement to be sent to the Stockholders in connection with the
Stockholders' Meeting (the "Proxy Statement"), shall not, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
Stockholders and at the time of the Stockholders' Meeting contain any statement
which, at the time and in light of the circumstances under which it was made, is
false or misleading with respect to any material fact, or which omits to state
any material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Purchaser or any of Purchaser's representatives for inclusion in the
foregoing documents. The Schedule 14D-9 and the Proxy Statement shall comply in
all material respects as to form with the requirements of the Exchange Act and
the rules and regulations thereunder.
SECTION 4.07. Amendment to Rights Agreement. The Board has amended the
Rights Agreement so that none of the execution or delivery of this Agreement or
the Settlement Agreement, the making of the Offer, the acceptance for payment or
payment for Shares by Purchaser pursuant to the Offer or the consummation of any
other Transaction will result in (i) the occurrence of the "flip-in event"
described under Section 11 of the Rights Agreement, (ii) the occurrence of the
"flip-over event" described in Section 13 of the Rights Agreement, or (iii) the
Rights becoming evidenced by, and transferable pursuant to, certificates
separate from the certificates representing shares of Common Stock.
SECTION 4.08. SEC Filings; Financial Statements. (a) The Company has
filed on a timely basis all forms, reports and documents required to be filed by
it with the SEC since April 17, 2001 through the date of this Agreement (the
"SEC Reports"). The SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder, and (ii)
did not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No subsidiary of the Company is
required to file any form, report or other document with the SEC.
9
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented in all material respects the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments).
SECTION 4.09. Absence of Litigation. Except as disclosed in the SEC
Reports, as of the date of this Agreement, there is no litigation, suit, claim,
action or proceeding (an "Action") pending or, to the knowledge of the Company,
threatened in writing against the Company or any of its subsidiaries, or any
property or asset of the Company or any of its subsidiaries, before any
Governmental Authority that (i) would have a Material Adverse Effect, (ii) seeks
to materially delay or prevent the consummation of any Transaction or (iii) if
successful would prevent or materially delay consummation of the Transactions,
or otherwise prevent the Company from performing its obligations under the
Settlement Agreement or this Agreement or would render the Transactions or the
Settlement Agreement or this Agreement null and void. Neither the Company nor
any of its subsidiaries nor any property or asset of the Company or any of its
subsidiaries is subject to any continuing order of, consent decree, settlement
agreement or similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would have a Material Adverse Effect or prevent or materially
delay consummation of the Transactions, or otherwise prevent the Company from
performing its obligations under the Settlement Agreement or this Agreement.
SECTION 4.10. REIT Status. The Company (i) for the taxable year ended
December 31, 2001 was subject to taxation as a REIT and (ii) has operated since
December 31, 2001 to the date hereof, and intends to continue to operate, in
such a manner as to be able to qualify as a REIT for the taxable year that
includes the Effective Time.
SECTION 4.11. Waiver of Ownership Limit. Pursuant to Section (C)(4) of
Article IV of the Certificate of Incorporation and provided that the
representations and warranties in Section 5.06 remain true and accurate, the
Company and its Board hereby waive the Ownership Limit applicable to Purchaser
so long as Purchaser's Beneficial Ownership of shares of Common Stock shall at
no time exceed 42% of the total number of shares of Common Stock (for the
purposes of this Section 4.11, Ownership Limit and Beneficial Ownership shall
have the meaning, as the case may be, as defined in the Company's Certificate of
Incorporation).
SECTION 4.12. Section 203 of Delaware Law. The Board has approved this
Agreement and the Transactions for purposes of Section 203 of Delaware Law prior
to Purchaser becoming an "interested stockholder" under Section 203 of Delaware
Law and hereby waives any right, interest or claim that it may have under
Section 203 of Delaware Law to amend or terminate any agreements previously
entered into by the Company and Purchaser or its affiliates, as well as any new
service agreements between the Company and a third party that is an affiliate of
Purchaser as contemplated by the Plan of Liquidation.
10
SECTION 4.13. Brokers. No broker, finder or investment banker (other
than Lazard Freres & Co., LLC (the "Financial Advisor")) is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company. The
Company has provided Purchaser with a copy of the engagement letter with the
Financial Advisor.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company to enter into this Agreement, Exeter
and Purchaser hereby, jointly and severally, represent and warrant to the
Company that:
SECTION 5.01. Corporate and Partnership Organization. Each of Exeter
and Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not
prevent or materially delay consummation of the Transactions, or otherwise
prevent Purchaser or Exeter from performing their obligations under the
Settlement Agreement and this Agreement.
SECTION 5.02. Authority Relative to This Agreement. Each of Exeter and
Purchaser has all necessary power and authority to execute and deliver this
Agreement and the Settlement Agreement, to perform its obligations hereunder and
thereunder and to consummate the Transactions. The execution and delivery of
this Agreement and the Settlement Agreement by Purchaser and Exeter and the
consummation by Purchaser and Exeter of the Transactions have been duly and
validly authorized by all necessary action, and no other proceedings on the part
of Purchaser or Exeter are necessary to authorize this Agreement or the
Settlement Agreement or to consummate the Transactions (other than, with respect
to the Dissolution and Plan of Liquidation, the filing and recordation of
appropriate documents as required by Delaware Law). Each of this Agreement and
the Settlement Agreement has been duly and validly executed and delivered by
each of Purchaser and Exeter, and, assuming due authorization, execution and
delivery by the Company, constitutes legal, valid and binding obligations of
each of Purchaser and Exeter enforceable against Purchaser and Exeter in
accordance with its terms.
SECTION 5.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Settlement Agreement by
Purchaser and Exeter do not, and the performance of this Agreement and the
Settlement Agreement by Purchaser and Exeter will not, (i) conflict with or
violate the organizational documents of Purchaser or Exeter, (ii) assuming that
all consents, approvals, authorizations and other actions described in
subsection (b) have been obtained and all filings and obligations described in
subsection (b) have been made, conflict with or violate any Law applicable to
Purchaser or Exeter or by which any property or asset of either of them is bound
or affected, or (iii) result in any breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset
11
of Purchaser or Exeter pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Purchaser or Exeter is a party or by which Purchaser or
Exeter or any property or asset of either of them is bound or affected, except,
with respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or materially
delay consummation of the Transactions, or otherwise prevent the Purchaser or
Exeter from performing its obligations under this Agreement or the Settlement
Agreement.
(b) The execution and delivery of this Agreement and the Settlement
Agreement by Purchaser and Exeter do not, and the performance of this Agreement
and the Settlement Agreement by Purchaser and Exeter will not, require any
consent, approval, authorization or permit of, or filing with, or notification
to, any Governmental Authority or any other person, except (i) for applicable
requirements, if any, of the Exchange Act and Blue Sky Laws and filing and
recordation of appropriate documents as required by Delaware Law, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Transactions, or otherwise prevent Purchaser or Exeter from
performing their obligations under this Agreement or the Settlement Agreement.
SECTION 5.04. Financing. Purchaser has, and will have at the time of
consummation of the Offer, sufficient funds to acquire all the Shares in the
Offer and to perform its obligations under this Agreement.
SECTION 5.05. Offer Documents; Proxy Statement. The Offer Documents
shall not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to Stockholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
information supplied by Purchaser or Exeter for inclusion in the Proxy Statement
shall not, at the date the Proxy Statement (or any amendment or supplement
thereto) is first mailed to Stockholders and at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not false or misleading, or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders'
Meeting which shall have become false or misleading. Notwithstanding the
foregoing, Purchaser and Exeter make no representation or warranty with respect
to any information supplied by the Company or any of its representatives for
inclusion in the Offer Documents. The Offer Documents shall comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 5.06. Ownership of Company Capital Stock. (a) Pursuant to the
Certificate of Incorporation, based on information provided by the Company to
Purchaser and publicly available information, each of Purchaser and Exeter
represent and warrant to the Company that Purchaser's Beneficial Ownership or
Constructive Ownership (in each case, for the purposes of this Section 5.06, as
defined in the Company's Certificate of Incorporation) of
12
shares of Common Stock of the Company, including any Shares acquired pursuant to
the Offer, will not now, and Purchaser will not take any affirmative action in
the future that will:
(i) result in the Company being "closely held" within the meaning of
Section 856(h) of the Code;
(ii) cause the Company to (A) Constructively Own 10% or more of the
ownership interests of a tenant of the Company or any of its subsidiaries (other
than a Taxable REIT Subsidiary, if the requirements of Section 856(d)(8) are
satisfied) within the meaning of Section 856(d)(2)(B) of the Code or (B) violate
the 95% gross income test of Section 856(c)(2) of the Code;
(iii) result in the shares of Common Stock being Beneficially Owned by
fewer than 100 persons within the meaning Section 856(a)(5) of the Code;
(iv) result in the Company being a "pension held REIT" within the
meaning of Section 856(h)(3)(D) of the Code;
(v) cause the Company to fail to be a "domestically controlled REIT"
within the meaning of Section 856(h)(4)(B) of the Code; and
(vi) cause the Company to fail to qualify as a REIT.
(b) Each of Exeter and Purchaser further represent and warrant to the
Company that:
(i) as of the date of this Agreement, Purchaser and its affiliates are
the Beneficial Owners of, in the aggregate, 100,250 shares of Common Stock; and
(ii) no individual (as such term is defined under Section 542(a)(2) of
the Code) who Beneficially Owns or will Beneficially Own any of the shares of
Common Stock Beneficially Owned by Purchaser (including, without limitation, the
Shares acquired pursuant to the Offer) shall Beneficially Own shares of Common
Stock in an amount equal to or greater than 18% of the total number of shares of
Common Stock.
SECTION 5.07. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Purchaser.
SECTION 5.08. Absence of Litigation. There is no Action pending or, to
the knowledge of Purchaser or Exeter, threatened against Purchaser or any of its
subsidiaries, or any property or asset of Purchaser or any of its subsidiaries,
before any Governmental Authority that as of the date hereof, seeks to
materially delay or prevent the consummation of any Transaction. Neither
Purchaser nor any of its subsidiaries nor any property or asset of Purchaser or
any of its subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or similar written agreement with, or, to the knowledge of
Purchaser or Exeter, continuing investigation by, any Governmental Authority, or
any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority that would prevent or materially delay consummation
13
of the Transactions, or otherwise prevent Purchaser or Exeter from performing
their obligations under the Settlement Agreement or this Agreement.
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business by the Company. The Company agrees
that, from the date of this Agreement until the date that new directors are
appointed to the Board pursuant to Section 3 of Annex B hereto, except as set
forth in Section 6.01 of the Disclosure Schedule or as contemplated by any other
provision of this Agreement, the Plan of Liquidation and the Settlement
Agreement, the businesses of the Company and its subsidiaries shall be conducted
in, and the Company and its subsidiaries shall not take any action except in,
and Purchaser shall not cause the Company and its subsidiaries to take any
action except in, accordance with this Agreement, the Settlement Agreement and
the Plan of Liquidation. Without limiting the preceding sentence, except as
disclosed in Section 6.01 of the Disclosure Schedule, prior to the date that new
directors are appointed to the Board pursuant to Section 3 of Annex B hereto,
neither the Company nor any of its subsidiaries shall, directly or indirectly:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of any class of capital stock or other ownership interest of the
Company or any of its subsidiaries, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company or any of its
subsidiaries or (ii) any assets of the Company or any of its subsidiaries;
(c) except in accordance with the Plan of Liquidation and solely to
the extent necessary for the Company to qualify as a REIT, declare, set
aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or
any division thereof, real property or any material amount of assets; (ii)
except for borrowings under existing credit facilities, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, or grant
any security interest in any of its assets except in the ordinary course of
business; (iii) enter into any contract or agreement other than in
accordance with the Plan of Liquidation; or (iv) enter into or amend any
14
contract, agreement, commitment or arrangement with respect to any matter
set forth in this Section 6.01(e) except as permitted by clauses (ii) and
(iii);
(f) increase the compensation payable to its directors or officers or
hire any employees;
(g) take any action, other than actions required by GAAP or in the
ordinary course of business, with respect to accounting policies or
procedures;
(h) terminate, repeal, amend or otherwise change, or take any action
inconsistent with the terms of, the Plan of Liquidation; or
(i) announce an intention, enter into any agreement or otherwise make
a commitment, to do any of the foregoing.
SECTION 6.02. Corporate Governance. Purchaser, Exeter and the Company
hereby incorporate by reference and agree to all of the provisions of Annex B,
including, without limitation, those relating to corporate governance, the Plan
of Liquidation and the Stockholder Meeting.
SECTION 6.03. Transfer Tax. Purchaser shall pay any real property
transfer or gains, sales, use, transfer value added, stock transfer, and stamp
taxes, and any similar taxes (and any penalties or interest with respect to such
taxes), which are or become payable in connection with the acquisition of the
Shares by Purchaser, and shall indemnify and hold harmless the Stockholders and
the Company from and against any liability with respect to such taxes (including
any penalties, interest and professional fees). The Company and Purchaser shall
cooperate in the preparation and filing of any required returns with respect to
such taxes (including returns on behalf of the Stockholders.)
SECTION 6.04. Indemnification of Exeter and Purchaser. The Company
shall indemnify and hold harmless Exeter, Purchaser, their respective
affiliates, and each of their employees, officers, directors, stockholders,
limited and general partners, advisors, agents and representatives
(collectively, the "Purchaser Indemnified Parties") from and against any losses,
damages, liabilities, judgments, costs and expenses (including reasonable
attorneys fees) incurred by any of them in connection with or arising from any
Action brought by any person other than any Purchaser Indemnified Party against
the Company or any Purchaser Indemnified Party in connection with this
Agreement, the Settlement Agreement, the Transactions or actions taken to
implement this Agreement or the Settlement Agreement between the date of this
Agreement and the date on which the new directors are appointed to the Board
pursuant to Section 3 of Annex B hereto.
SECTION 6.05. No Solicitation of Transactions. (a) Neither the Company
nor any of its subsidiaries shall, directly or indirectly, through any officer,
director, agent or otherwise, solicit, or initiate the submission of, any
Acquisition Proposal.
(b) Notwithstanding anything in this Section 6.05 to the contrary, the
Company may negotiate and otherwise engage in discussions with any person who
delivers an
15
Acquisition Proposal that (i) a majority of the Board believes, if consummated,
would result in a transaction that is superior to the Offer and (ii) the
Financial Advisor advises the Board would, if consummated, be superior to the
Offer from a financial point of view, if the Company has complied with the terms
of Section 6.05(a).
(c) The Board shall be permitted to withdraw its approval and
recommendation to the Stockholders, but only if the Company has complied with
Section 6.05(a) and 6.05(b).
SECTION 6.06. Further Action; All Reasonable Efforts. (a) Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the
Transactions, including, without limitation, using all reasonable efforts to
obtain all permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with the Company and
any of its subsidiaries as are necessary for the consummation of the
Transactions and to fulfill the conditions to the Offer and the Plan of
Liquidation.
(b) Each of the parties hereto agrees to cooperate and use all
reasonable efforts to vigorously contest and resist any Action, including
administrative or judicial Action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Transactions, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal.
SECTION 6.07. Public Announcements. Purchaser and the Company agree
that no public release or announcement concerning the Transactions, the Offer or
the Plan of Liquidation shall be issued by either party without the prior
consent of the other party (which consent shall not be unreasonably withheld),
except as such release or announcement may be required by Law or the rules or
regulations of any securities exchange, in which case the party required to make
the release or announcement shall use all reasonable efforts to allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated and the
Plan of Liquidation and the other Transactions may be abandoned at any time
prior to the consummation of the Offer by Purchaser:
(a) by mutual written consent of Purchaser and the Company duly
authorized by the Boards of Directors or equivalent management boards of
Purchaser and the Company; or
16
(b) by either Purchaser or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any
non-appealable permanent injunction, order, decree or ruling which is then
in effect and has the effect of making consummation of the Offer or the
completion of the Plan of Liquidation illegal or otherwise preventing or
prohibiting consummation of the Offer or the completion of the Plan of
Liquidation; or
(c) by Purchaser if, prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser its approval or recommendation of the
Offer, this Agreement or the Plan of Liquidation, or shall have recommended
or approved any Acquisition Proposal, or shall have resolved to do any of
the foregoing; or
(d) by the Company, upon approval of the Board, if (i) Purchaser shall
have (A) failed to commence the Offer by the close of business on July 9,
2002, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer by
September 30, 2002, unless such action or inaction under (A), (B) or (C)
shall have been caused by or resulted from the failure of the conditions
specified in paragraph (c), (d), (e) or (i) of Annex A, or (ii) prior to
the purchase of Shares pursuant to the Offer, the Board determines in good
faith, upon consultation with outside counsel, that it is required to do so
by its fiduciary duties under applicable Law.
SECTION 7.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Section 7.03 and (ii) nothing herein shall relieve
any party from liability for any willful breach hereof.
SECTION 7.03. Fees and Expenses. (a) Except as otherwise provided in
this Section 7.03, all costs and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such
expenses, whether or not any Transaction is consummated.
(b) If this Agreement is terminated pursuant to Section 7.01(c) or
Section 7.01(d)(ii), then the Company shall pay Purchaser promptly (but in no
event later than two Business Days after such termination) a fee of $600,371 to
Purchaser as liquidated damages to compensate Purchaser for lost opportunity,
time, expenses and avoiding the difficulty of trying to quantify damages.
(c) If the Company fails to pay any amount due Purchaser under this
Section 7.03, the Company shall also pay any costs and expenses incurred by
Purchaser in any legal action to enforce this Agreement that results in any
judgment or settlement against the Company.
SECTION 7.04. Amendment. Subject to Section 3 of Annex B to this
Agreement, this Agreement may be amended by the parties hereto by action taken
by or on behalf of their respective Boards of Directors at any time prior to the
date that Purchaser
17
purchases the Shares pursuant to the Offer. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 7.05. Waiver. Subject to Section 3 to Annex B to this
agreement and Section 8.06, at any time prior to the Liquidation Date, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein of the other party or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the time of the consummation of the Offer or upon the
termination of this Agreement pursuant to Section 7.01, as the case may be,
except that the agreements set forth in Article VI, Article VIII and Annex B
shall survive consummation of the Offer indefinitely and those set forth in
Section 7.03 shall survive termination indefinitely.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.02):
if to Purchaser:
HX Investors, L.P.
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxxx
18
if to the Company:
c/o First Winthrop Corporation
0 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone No: (000) 000-0000
Telecopier No: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No: (000) 000-0000
Telecopier No: (000) 000-0000
Attention: Xxxxx X. Xxxxx
Xxxxxxx X. X'Xxxxxxxx
SECTION 8.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 8.04. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement is
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 8.05. Entire Agreement; Assignment. This Agreement and the
Settlement Agreement (including the exhibits, annexes and schedules thereto)
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and thereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Purchaser may assign all or any of
its rights and obligations hereunder, including the obligation to make the
Offer, to any affiliate of Purchaser, provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
SECTION 8.06. Parties in Interest. This Agreement shall be binding
upon and inure to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature
19
whatsoever under or by reason of this Agreement, except that (i) Section 5 to
Annex B to this Agreement is intended to be for the benefit of the persons
covered thereby and may be enforced by such persons and (ii) Article II, Article
VI and Article VIII and Section 6.05 to this Agreement and Annex B to this
Agreement (except Section 5 to Annex B) are intended to be for the benefit of
the Stockholders and may be enforced by such persons.
SECTION 8.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any Delaware state or federal court. The parties
hereto hereby (a) submit to the exclusive jurisdiction of the Delaware Chancery
Court for the purpose of any Action arising out of or relating to this Agreement
brought by any party hereto, and (b) irrevocably waive, and agree not to assert
by way of motion, defense, or otherwise, in any such Action, any claim that it
is not subject personally to the jurisdiction of the above-named court, that its
property is exempt or immune from attachment or execution, that the Action is
brought in an inconvenient forum, that the venue of the Action is improper, or
that this Agreement or the Transactions may not be enforced in or by the
above-named court.
SECTION 8.08. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF
THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.08.
SECTION 8.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[Remainder of page intentionally left blank.]
20
IN WITNESS WHEREOF, Purchaser, Exeter and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
HX INVESTORS, L.P.
By: Exeter Capital Corporation
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
EXETER CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
SHELBOURNE PROPERTIES II, INC.
By /s/ Xxxxxx Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxx Xxxxxxx Xxxxx
Title: Director
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ANNEX A
Conditions to the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment any Shares tendered pursuant to the Offer, and
may, subject to section 2.01, extend, terminate or amend the Offer, if at any
time on or after the date of this Agreement and prior to the expiration of the
Offer, any of the following conditions shall exist:
(a) there shall have been instituted and remain pending any
Action brought by any Governmental Authority of competent jurisdiction
over the Company (i) challenging or seeking to make illegal or
otherwise directly or indirectly restrain or prohibit the Offer or the
Plan of Liquidation, (ii) seeking to impose material limitations on
the ability of Purchaser to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to
vote any Shares acquired or owned by Purchaser on all matters properly
presented to the Stockholders, including, without limitation, the
approval and adoption of the Dissolution and the Plan of Liquidation,
or (iii) seeking to require divestiture by Purchaser of any Shares;
(b) there shall have been any judgment, order or injunction
entered or issued by any Governmental Authority of competent
jurisdiction that results in any of the consequences referred to in
clauses (i), (ii) and (iii) of paragraph (a) above;
(c) (i) the Board, or any committee thereof, shall have withdrawn
or modified, in a manner adverse to Purchaser, the approval or
recommendation of the Offer or the Plan of Liquidation or approved or
recommended any Acquisition Proposal or any other acquisition of
Shares other than the Offer or (ii) the Board, or any committee
thereof, shall have resolved to do any of the foregoing;
(d) any representation or warranty of the Company in the
Agreement shall not be true and correct as if such representation or
warranty was made as of such time on or after the date of this
Agreement, except as would not have a Material Adverse Effect or
prevent or materially delay consummation of the Transactions, or
otherwise prevent the Company from performing its obligations under
this Agreement;
(e) the Company shall have failed to perform any material
obligation or to comply with any material agreement or covenant of the
Company to be performed or complied with by it under the Agreement;
(f) the Agreement shall have been terminated in accordance with
its terms;
(g) there shall have occurred a Material Adverse Effect;
(h) Purchaser and the Company shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder;
(i) the conditions specified in Annex A of either the Stock
Purchase Agreement, dated as of the date hereof, between Purchaser and
Shelbourne Properties I, Inc. or the Stock Purchase Agreement, dated
as of the date hereof, between Purchaser and Shelbourne Properties
III, Inc. shall fail to have been satisfied or waived by Purchaser; or
(j) there shall have occurred any act of terrorism against the
United States of America that shall have resulted in (i) the
simultaneous closing of three or more domestic international airports
for a period of at least 24 consecutive hours or (ii) the simultaneous
closing of the three largest stock exchanges in the United States for
a period of at least 6.5 consecutive trading hours;
provided that, with respect to paragraphs (a) and (b) above, Purchaser
shall give the Company advance written notice of any intention by
Purchaser to assert the nonsatisfaction of any of the conditions set
forth in such paragraphs (a) and (b), which notice shall describe in
reasonable detail the basis for the belief that any such condition has
not been satisfied; and, provided further that (i) in the event of any
action, proceeding, judgment, order or injunction contemplated by such
paragraphs (a) or (b), Purchaser shall not terminate the Offer under
such paragraphs (a) and (b) unless and until there shall have been
issued a final and non-appealable judgment, order or injunction.
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ANNEX B to Stock Purchase Agreement
Corporate Governance Provisions
1. Stockholders' Meeting. In order to effect the Dissolution and
approve and adopt the Plan of Liquidation, the Company, acting through the
Board, shall, in accordance with applicable Law and the Company's Certificate of
Incorporation and By-laws, (i) duly call, give notice of, convene and hold an
annual or special meeting of its Stockholders as promptly as reasonably
practicable following consummation of the Offer for the purpose of considering
and taking action on the Dissolution and Plan of Liquidation (the "Stockholders'
Meeting") and (ii) unless the Board determines in good faith that its fiduciary
duties under applicable Law require otherwise, (A) include in the Proxy
Statement the recommendation of the Board that the Stockholders approve and
adopt the Dissolution and the Plan of Liquidation and (B) use all reasonable
efforts to obtain such approval and adoption. At the Stockholders' Meeting,
Purchaser shall cause all shares of Common Stock then owned by it and its
affiliates to be voted in favor of the approval and adoption of the Dissolution
and the Plan of Liquidation. The obligations of the Company to effect the Plan
of Liquidation shall be subject to the conditions that (i) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer,
(ii) the Plan of Liquidation shall have been approved and adopted by the
affirmative vote of the Stockholders to the extent required by Delaware Law,
(iii) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any non-appealable permanent injunction, order, decree or
ruling which is then in effect and has the effect of making completion of the
Plan of Liquidation illegal or otherwise preventing or prohibiting completion of
the Plan of Liquidation. Should the conditions in the previous sentence fail to
be satisfied, then the Company shall not be obligated to implement the
provisions of Annex C to this Agreement or Section 4 below.
2. Proxy Statement. As promptly as reasonably practicable following
consummation of the Offer, the Company shall file the Proxy Statement with the
SEC under the Exchange Act, and shall use all reasonable efforts to have the
Proxy Statement cleared by the SEC. The Company shall give Purchaser and its
counsel the opportunity to review the Proxy Statement prior to its being filed
with the SEC. The Company agrees to use all reasonable efforts to respond to all
comments and requests of the SEC and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the Stockholders
entitled to vote at the Stockholders' Meeting at the earliest practicable time.
3. Company Board Representation; Section 14(f). (a) Promptly upon the
purchase by Purchaser of the Shares pursuant to the Offer, Purchaser shall be
entitled to designate up to six persons to be appointed to the Board, four of
whom shall be Independent Directors. For the purposes of this Agreement,
"Independent Director" shall mean a person who is not an officer, director,
security holder or employee of Purchaser or one of its affiliates, or a relative
of such person. The Purchaser shall propose four of the following individuals
for the original nominees to fill such Independent Director positions: Xxxxxx
Blasburg, Jr., Xxxxxx X. Xxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx
and Xxxxxxx Xxxxxxxxx; and each of
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Purchaser's designees to the Board shall be subject to the reasonable approval
of the Board, as the Board is constituted at the time of the consummation of the
Offer. Subject to the forgoing, the Company shall, at such time, promptly take
all actions necessary to cause Purchaser's designees, including the Independent
Director nominees, to be elected as directors of the Company, including
increasing the size of the Board to six persons and securing the resignations of
incumbent directors, if necessary. After the new members of the Board shall have
been elected (i) any subsequent nominations for vacancies in the Board created
by the removal or resignation of an Independent Director shall be made by the
remaining Independent Directors of the Board, and (ii) Purchaser and the Company
shall take all action necessary to cause the Company's By-laws to be amended to
implement the provisions of clause (i) and provide that any amendment to such
provisions shall require the approval of a majority of the shares of Common
Stock entitled to vote at a meeting of Stockholders, other than those Shares
held by Purchaser and its affiliates.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to
fulfill its obligations under this Section 3, and shall include in the Schedule
14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Purchaser shall supply to the Company, and be solely responsible
for, any information with respect to the nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1.
(c) Following the election of designees of Purchaser, including the
Independent Directors, pursuant to this Section 3, prior to the Liquidation
Date, any amendment of this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Purchaser, or waiver of any of the Company's
rights hereunder, shall require the concurrence of a majority of the Independent
Directors.
4. The Plan of Liquidation. (a) Subject to the conditions specified in
the penultimate sentence of Section 1 of this Annex B, and in accordance with
Delaware Law, at the Effective Time, the Board shall cause the Dissolution of
the Company. As a result of the Dissolution, the Company shall settle and close
its business and distribute to its stockholders any remaining assets pursuant to
the Plan of Liquidation.
(b) As promptly as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in the penultimate sentence of
Section 1 of this Annex B, the Company shall, and Purchaser shall take all
action necessary to cause the Company to, cause the Dissolution to be effected
by filing the Certificate of Dissolution.
(c) At the Effective Time, the effect of the Dissolution shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, beginning at the Effective
Time, the Company shall direct bodies corporate for the purpose of prosecuting
and defending suits, and enabling them to settle and close its business, dispose
of and convey its property, discharge its liabilities and distribute to its
stockholders any remaining assets.
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5. Directors' and Officers' Indemnification and Insurance. (a) For a
period ending on the earlier of (i) the sixth anniversary of the Effective Time
and (ii) the Liquidation Date, the By-laws of the Company shall contain
provisions no less favorable with respect to indemnification or the liability of
directors than are set forth in Article VII, Section 7.2 of the By-laws of the
Company, and such provisions shall not be amended, repealed or otherwise
modified in any manner that would affect adversely the rights thereunder of
individuals who at or prior to the time of the consummation of the Offer were
directors, officers, fiduciaries or agents of the Company, unless such
modification shall be required by Law.
(b) The Company shall, to the fullest extent permitted under
applicable Law, indemnify and hold harmless each present and former director,
officer, fiduciary and agent of the Company and each of its subsidiaries
(collectively, the "Indemnified Parties") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the date
hereof), whether civil, criminal, administrative or investigative, arising out
of or pertaining to any action or omission occurring before or after the date
hereof. In the event of any such claim, action, suit, proceeding or
investigation, (i) the Company shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company, promptly after statements therefor are received and
(ii) the Company shall cooperate in the defense of any such matter; provided,
however, that the Company shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
(c) The Company shall maintain until the earlier of (i) the sixth
anniversary of the Effective Time and (ii) the Liquidation Date, if available,
the current directors' and officers' liability insurance policies maintained by
the Company (provided that the Company may substitute therefor policies of at
least the same coverage containing terms and conditions which are not less
favorable).
(d) In the event the Company or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Company shall assume the obligations set forth in
this Section 5.
(e) Purchaser shall use all reasonable efforts to cause the Company to
perform all of its obligations under this Section 5.
(f) This Section 5 is intended for the benefit of the Indemnified
Parties and their respective heirs, executors and personal representatives and
shall be enforceable by them as third party beneficiaries hereof.
6. Company REIT Election. The Company shall not, and Purchaser shall
not cause the Company to, without the unanimous approval of the Independent
Directors of the
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Board and the approval of the holders of a majority of the outstanding shares of
Common Stock other than those shares of Common Stock held by Purchaser and its
affiliates at such time, and subject to the Plan of Liquidation and applicable
tax laws, take any action or reporting position that would cause the Company to
fail to qualify for taxation as a REIT, and Purchaser shall not take any action
or tax reporting position that would be inconsistent with such qualification.
7. Transactions with Purchaser. Except as contemplated by the Plan of
Liquidation, neither the Company nor any of its subsidiaries shall, and
Purchaser shall not cause the Company or any of its subsidiaries to, (i) enter
into any new transaction with Purchaser or its affiliates, (ii) amend any
agreements previously entered into by the Company with Purchaser or its
affiliates or (iii) enter into a new service agreement, or change the terms of
any existing service agreement, between the Company and a third party that is an
affiliate of Purchaser, in each case without the unanimous approval of the
Independent Directors of the Board.
8. AMEX Listing. For as long as it remains eligible, the Company shall
use all reasonable efforts to, and Purchaser shall use all reasonable efforts to
cause the Company to, maintain the listing of its shares of Common Stock on the
American Stock Exchange. If the shares of Common Stock should be delisted from
the American Stock Exchange, then the Company shall use all reasonable efforts
to, and Purchaser shall use all reasonable efforts to cause the Company to, have
its shares of Common Stock listed on another national stock exchange or on the
Nasdaq stock market or Nasdaq small cap market.
9. Dispositions. The Company shall not, and Purchaser shall not cause
the Company to, make any disposition of any asset or group of assets greater
than $500,000 without the approval of such disposition by the majority of the
directors of the Company.
10. Audit Committee. Following the appointment or election of the
Independent Directors as contemplated by Section 3 above, the Board shall cause
the Audit Committee of the Board to be constituted solely of Independent
Directors.
11. Capitalized Terms. Capitalized terms used in this Annex and not
otherwise defined herein shall have the meaning assigned to such terms in the
Stock Purchase Agreement.
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ANNEX C to the Stock Purchase Agreement
SHELBOURNE PROPERTIES II, INC.
PLAN OF LIQUIDATION
1. In accordance with the provisions of the Settlement Agreement and
Mutual Release, dated as of July 1, 2002 (the "Settlement Agreement"), between
plaintiff HX Investors, LP ("Purchaser") and the additional plaintiffs who are
listed in Exhibit A thereto, and Shelbourne Properties II, Inc. (the "Company"),
Shelbourne Properties I, Inc. and Shelbourne Properties III, Inc. and the
provisions of the Stock Purchase Agreement, dated as of July 1, 2002 (the "Stock
Purchase Agreement"; terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Stock Purchase Agreement), between
Purchaser, Exeter Capital Corporation and the Company, and in accordance with
Delaware Law, as promptly as practicable after the approval of this Plan of
Liquidation by the stockholders of the Company, but in any event not later than
five business days after such date, the Board shall cause the Company to be
dissolved (the "Dissolution"), by filing a certificate of dissolution with the
Secretary of State of the State of Delaware (the date and time of such filing
being the "Effective Time"), and thereafter liquidated pursuant to this Plan of
Liquidation.
2. This Plan of Liquidation has been approved by the Board as being
advisable and in the best interests of the Company and its stockholders. The
Board has directed that this Plan of Liquidation be submitted to the
stockholders of the Company for approval. This Plan of Liquidation shall become
effective upon approval of this Plan of Liquidation by the holders of at least a
majority of the outstanding shares of Common Stock.
3. At or after the Effective Time, as soon as reasonably practicable,
the Company shall be voluntarily liquidated in accordance with this Plan of
Liquidation. Pursuant to this Plan of Liquidation, the Board shall cause the
Company and its subsidiaries to sell, convey, transfer and deliver or otherwise
dispose of any and all of the assets and properties of the Company and its
subsidiaries in one or more transactions, without further approval of the
Company's stockholders; provided that all dispositions of assets with an
aggregate gross exchange value of over $500,000 shall require the approval of a
majority of the directors of the Company.
4. From the date that new directors are appointed to the Board
pursuant to Section 3 of the Corporate Governance Provisions attached to the
Stock Purchase Agreement as Annex B until the Liquidation Date, the businesses
of the Company and its subsidiaries shall be conducted, and the Company and its
subsidiaries shall not, and Purchaser shall not cause the Company and its
subsidiaries to, take any action except in accordance with the Stock Purchase
Agreement, the Settlement Agreement and this Plan of Liquidation. Within the
requirements of the Stock Purchase Agreement, the Settlement Agreement and this
Plan of Liquidation, the Company shall continue to conduct its operations in the
ordinary course of business, including but not limited to entering into
contracts, deeds, assignments or other instruments, making normal and customary
improvements or renovations to managed properties, engaging real estate brokers
and compromising claims for or against the Company, incurring secured or
unsecured indebtedness for borrowed money for any corporate purpose or for
making distributions in
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accordance with this Plan of Liquidation and concurrent therewith, the Company
shall proceed with winding up its business and affairs, discharging and paying
all Company liabilities and distributing the Company's assets and properties to
its stockholders in accordance with this Plan of Liquidation and the Company's
Certificate of Incorporation. Notwithstanding the foregoing, neither the Company
nor any of its subsidiaries shall, and Purchaser shall not act in any way to
cause the Company or any of its subsidiaries to, directly or indirectly, do, or
propose to do, any of the following without the prior consent of holders of a
majority of the outstanding shares of Common Stock other than those shares of
Common Stock held by Purchaser and its affiliates at such time:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any shares of any
class of capital stock or other ownership interest of the Company or any of its
subsidiaries, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any of its subsidiaries;
(c) except in accordance with this Plan of Liquidation and to the
extent necessary for the Company to qualify as a REIT, declare, set aside, make
or pay any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock;
(d) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets or any other business combination) any
corporation, partnership, other business organization or any division thereof,
real property or any material amount of assets;
(e) pay any compensation (other than reasonable out of pocket
expenses) to any director or officer of the Company other than the Independent
Directors;
(f) take any action, other than actions required by GAAP or in the
ordinary course of business, with respect to accounting policies or procedures;
(g) announce an intention, enter into any agreement or otherwise make
a commitment, to do any of the foregoing.
The appropriate officers or directors of the Company shall take such actions as
may be necessary or appropriate to marshal the assets and properties of the
Company and its subsidiaries and convert the same, in whole or in parts, into
cash or such other form as may be used to pay the Company's debts and distribute
any excess proceeds to the Company's stockholders as provided in Sections 5 and
6 below.
5. The Company shall (i) pay or make reasonable provision to pay all
claims and obligations of the Company, including all contingent, conditional or
unmatured contractual
8
claims known to the Company, (ii) make such provision as will be reasonably
likely to be sufficient to provide compensation for any claim against the
Company in connection with any pending action, suit or proceeding to which the
Company is a party and (iii) make such provision as will be reasonably likely to
be sufficient to provide compensation for claims that have not been made known
to the Company or that have not arisen but that, based on facts known to the
Company, are likely to arise or to become known to the Company within ten years
of the Effective Time. All such claims shall be paid in full and any such
provision for payment made shall be made in full. After providing for the
foregoing and complying with all debt covenants, the Company shall distribute
all available cash, other than minimum operating reserves and amounts required
to comply with financial or other contractual covenants, at least once per
fiscal quarter to its stockholders. In any event, the Company shall make such
distributions to its stockholders as are necessary to maintain the Company's
qualification as a REIT. Unless otherwise approved by the Court of Chancery or
the holders of a majority of the outstanding shares of Common Stock other than
shares of Common Stock held by the Purchaser and its affiliates and unless
otherwise required by the fiduciary duties of the Board of Directors of the
Company after consultation with its counsel, the Company shall complete the
disposition of all assets and properties of the Company and its subsidiaries by,
and make a final distribution of all cash and other proceeds therefrom no later
than, the third anniversary of the Effective Time.
6. Subject to the payments and provisions of Section 5 above, all
distributions made pursuant to this Plan of Liquidation shall be made as
follows:
(i) Holders of shares of Common Stock shall receive on a pro rata
basis based upon the number of shares of Common Stock held (A) up to
the entire Base Amount (as defined below) plus (B) 75% of the excess
of (x) the Net Proceeds (as defined below) over (y) the Base Amount;
and
(ii) Purchaser shall receive 25% of the excess of (x) the Net
Proceeds over (y) the Base Amount.
The "Base Amount" means (i) $59,281,427.50 (the "Equity Amount") plus (ii) a
return calculated on the undistributed portion of the Equity Amount compounded
quarterly. For the purpose of calculating such return, the return rate shall (x)
begin at an annual rate of 6% for the period commencing at the Effective Time
and ending 18 months from such date and (y) increase by 0.5% for each subsequent
six-month period thereafter through the Liquidation Date, such return not to
exceed 8%.
"Net Proceeds" means (i) the aggregate fair value of all consideration received
upon disposal of a Company asset in accordance with this Plan of Liquidation
less the sum of all direct costs incurred in connection with such disposal, plus
(ii) all cash and other proceeds generated from operating the assets and
properties of the Company and its subsidiaries.
The distributions contemplated by this Section 6 shall be in complete
liquidation of the Company and in cancellation of all issued and outstanding
shares of Common Stock, and all certificates ("Certificates") representing such
shares of Common Stock shall be canceled upon
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the final distribution. The Board shall make such provisions as it deems
appropriate regarding cancellation of all outstanding Certificates upon the
final distribution.
7. As soon as reasonably practicable but no earlier than October 1,
2002, the Company shall (i) terminate the transition management services
provided by Presidio Capital Investment Company ("PCIC"), pursuant to the
Purchase and Contribution Agreement, dated as of February 14, 2002, made and
entered into by PCIC, the Company and the other parties thereto and (ii) retain
Kestrel Management, L.P. to provide interim management services from the
termination date on terms and conditions substantially identical to those
pursuant to which PCIC provides such services for an aggregate annual cost for
the initial period ending on the earlier of the third anniversary of the
Effective Time or the Liquidation Date, of not more than $200,000. Thereafter,
such fees shall be determined by a majority of the Independent Directors. The
Company shall terminate, at no cost, each of the respective property management
agreements between the Company or any subsidiaries of the Company and Kestrel
Management, L.P. upon the disposal of each of the properties subject to such
agreements.
8. The Board, and such officers and directors of the Company as the
Board may direct, are hereby authorized to interpret the provisions of this Plan
of Liquidation and are hereby authorized and directed to take such further
actions, to execute such agreements, as may in their judgment be necessary or
desirable in order to wind up expeditiously the affairs of the Company and
complete the liquidation thereof, including, without limitation (i) the
execution of any contracts, deeds, assignments or other instruments necessary or
appropriate to maintain the value of, sell or otherwise dispose of, any and all
property of the Company, whether real or personal, tangible or intangible, (ii)
the appointment of other persons to carry out any aspect of this Plan of
Liquidation and (iii) the temporary investment of funds in such medium as the
Board may deem appropriate. The death, resignation or other disability of any
director or officer of the Company shall not impair the authority of the
surviving or remaining directors or officers of the Company (or any persons
appointed as substitutes therefor) to exercise any of the powers provided for in
this Plan of Liquidation. Upon such death, resignation or other disability, the
surviving or remaining directors shall have the authority to fill the vacancy or
vacancies so created, but the failure to fill such vacancy or vacancies shall
not impair the authority of the surviving or remaining directors or officers to
exercise any of the powers provided for in this Plan of Liquidation.
9. This Plan of Liquidation shall not be terminated, amended or
repealed, and no action inconsistent with the terms hereof shall be taken by the
Company, in each case without the approval of the holders of a majority of the
outstanding shares of Common Stock excluding any shares of Common Stock held by
the Purchaser and its affiliates at such time.
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