RIGHTS OFFERING AGREEMENT
RIGHTS OFFERING AGREEMENT, dated as of March 19, 1996 (the
"Agreement") among T-Two Holding, L.L.C., a Delaware limited liability company
(the "Company"), Presidio Capital Corp. ("PCC") and Roundhill Associates Limited
Partnership, a Connecticut limited partnership, and Roundhill Associates Limited
Partnership II, a Connecticut limited partnership (the latter two collectively,
the "Initial Members").
WHEREAS, the Initial Members are borrowing in the aggregate,
up to $31,500,000 from PCC (the "Loan") and PCC is lending such funds to the
Initial Members with all of the principal and interest payments due on the
earlier of the date of the completion of the Rights Offering (as defined below)
and March 19, 1999;
WHEREAS, the Initial Members will contribute the entire amount
of the Loan to the Company in exchange for 100% of the Company's membership
interests;
WHEREAS, the Company will contribute a substantial portion of
such amount to T-Two Partners, L.P. (the "T-2 Holder"), a Delaware limited
partnership, in exchange for all of the T-2 Holder's limited partnership
interests, constituting 99% of the T-2 Holder's partnership interests and the
Company will retain the balance of such amount for working capital purposes;
WHEREAS, the T-2 Holder will use such funds as are contributed
to it by the Company to purchase the Grantor Trust T-Two Certificates (as
defined in the T-Two Certificate Purchase Agreement (the "T-2 Purchase
Agreement") dated as of March 28, 1996 between T-2 Holder and the Contract Right
Grantor Trust (the "Grantor Trust")) pursuant to the T-2 Purchase Agreement;
WHEREAS, the Grantor Trust T-Two Certificates will represent
an interest primarily in certain contract receivables that are currently owned
by Presidio CR Holdings, L.P., which is wholly owned by wholly owned
subsidiaries of PCC;
NOW, THEREFORE, in consideration of and premised upon the
various agreements and undertakings of each of the parties hereto contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. RIGHTS OFFERING
(a) The Initial Members hereby agree to cause the Company to
conduct the Rights Offering, as soon as practicable after completion of the sale
of the Grantor Trust T-Two Certificates to the T-2 Holder. Pursuant to the
Rights Offering, transferable rights to purchase the equivalent of 100% of the
membership interests in the Company (the "Offered Interests") will be offered to
the stockholders of PCC at such exercise price and on such terms as are approved
by a majority of the Class A directors of PCC (the "Rights Offering").
(b) If the Company is prevented from initiating the Rights
Offering within one year of the sale of the Grantor Trust T-Two Certificates to
the T-2 Holder, the Initial Members agree to develop an alternative transaction
comparable to the Rights Offering, subject to the approval of a majority of the
Class A directors of PCC.
(c) The Company hereby (i) agrees to conduct the Rights
Offering or the alternative thereto developed pursuant to Section 1(c) and, (ii)
agrees not to make any distribution to its members until the completion of the
Rights Offering or the alternative thereto developed pursuant to Section 1(c).
(d) The Initial Members agree to remain the sole members of
the Company and not to dispose of any of their membership interests in the
Company and the Company agrees to cause the Initial Members to remain as the
sole members of the Company, in each case, until the completion of the Rights
Offering or the alternative thereto developed pursuant to Section 1(c), unless
PCC consents to the contrary.
(e) The Initial Members agree that, prior to the completion of
the Rights Offering, if necessary or appropriate to the successful completion of
the Rights Offering, to cause the amendment of the Operating Agreement of the
Company to admit a corporation (the "Corporation") which shall be designated as
the managing member of the Company, which Corporation shall be issued a
membership interest by the Company in exchange for a capital contribution equal
to the percentage of the Corporation's Common Stock acquired in the Rights
Offering, times the exercise price under the Rights Offering attributable to
such part of an Offered Interest which consists of a 1% membership interest in
the Company. Notwithstanding the foregoing, the Corporation's maximum capital
contribution to the Company shall be $500,000 (or the applicable fraction
thereof, if less than 100% of the Common Stock is acquired in the Rights
Offering), and the Corporation's membership interest shall represent a
percentage interest in the Company equivalent to the membership interest
acquired as part of an Offered Interest in the Rights Offering for an exercise
price of which $500,000 is attributable to such membership interest in the
Company; provided, however, that in no event shall the Corporation's membership
interest constitute less than 0.2% of the membership interests in the Company.
As used herein, the term "Capital Contribution" shall mean the total capital
contributions required to be made by the Corporation in the Company under this
Section 1(e) assuming 100% of the rights issued in the Rights Offering are
exercised. All of the shares of common stock of the Corporation will be offered
in the Rights Offering pro rata with membership interests in the Company as
units, in which event, the term "Offered Interests" used herein shall be deemed
to refer to such units. The Board of Directors of the Company shall be
disbanded, and the initial Board of Directors of the Corporation shall be
comprised of the same individuals as the Board of Directors of the Company at
that time. The constituent documents of the Corporation shall contain comparable
terms for its directors and Board of Directors as are contained in the Limited
Liability Company Agreement, dated as of March 19, 1996, by and between the
Initial Members, including without limitation, term, classification of
directors, removal and qualification. Notwithstanding the foregoing, the Initial
Members shall have the option to develop an alternative to designating a
managing member that would have the effect of preserving the partnership status
of the Company for tax purposes.
(f) PCC agrees to advance to the Company such funds as are
necessary for the Company to pay the out-of-pocket costs and expenses associated
with conducting the Rights Offering and the other transactions contemplated
hereby as such costs and expenses are incurred, which advances shall be repaid
on the expiration of the Rights Offering or alternative thereto developed
pursuant to Section 1(c), but in no event later than March 19, 1999, together
with interest thereon at the minimum applicable federal rate in effect from time
to time.
2. REPURCHASE OF INTERESTS IN THE COMPANY
(a) The Company hereby agrees to repurchase and the Initial
Members agree to sell to the Company on a pro rata basis the Initial Interests
immediately upon a successful completion of the Rights Offering in the same
percentage that the Offered Interests are acquired in the Rights Offering. To
the extent that any Offered Interests consisting of units representing, in part,
common stock of the Corporation are not acquired in the Rights Offering, the
Initial Members agree to acquire and the Corporation shall issue and sell to the
Initial Members or their designees all such unacquired common stock in exchange
for the pro rata portion of the Capital Contribution represented by such
unacquired common stock; provided that the Initial Members may use their
membership interests in the Company in lieu of cash.
(b) The Initial Members and the Company agree that the
repurchase price for these Interests shall be calculated on a proportionate
basis so that the aggregate repurchase price for 100% of such Interests equals
the sum of (i) $50,000, (ii) the amount due on the date of completion of the
Rights Offering by the Initial Members under the Loan plus all amounts
previously paid thereunder and, (iii) the product of (A) the marginal effective
combined federal, state and local income tax rates applicable to the individual
owners of the Initial Members, and (B) an amount equal to the total net income
recognized by the Company during the period from the date of acquisition of the
interests in the Company by the Initial Members up to, and including, the date
of such repurchase, which sum shall be reduced by each of (X) the product of (1)
the marginal federal income tax rate applicable to the individual owners of the
Initial Members, and (2) the total interest expense on the Loan, and (Y) the
product of (1) the marginal effective state and local income tax rates
applicable to the individual owners of the Initial Members, and (2) the total
interest expense on the Loan which is deductible by such individuals for state
and local income tax purposes; provided that, to the extent such aggregate
repurchase price, excluding the $50,000 component, is greater than the aggregate
tax basis of the Initial Members in all of their interests in the Company, as
adjusted, then the aggregate repurchase price shall be increased by the amount
equal to the product of (i) such excess amount and (ii) the difference between
(a) the fraction, the numerator of which is 1 and the denominator of which is
the difference between 100% and the marginal effective combined federal, state
and local income tax rates applicable to the individual owners of the Initial
Members and (b) 1; and provided further that, to the extent such aggregate
repurchase price, excluding the $50,000 component, is less than the aggregate
tax basis of the Initial Members in all of their interests in the Company, as
adjusted (solely with respect to Company-level items), then such repurchase
price shall be reduced by an amount equal to the product of such difference and
a fraction of which the numerator is 12% and the denominator is 88%.
3. MISCELLANEOUS
(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
(b) Amendment. This Agreement may not be amended, altered or
modified except by a written instrument executed by the parties hereto.
(c) 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 this Agreement 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
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
(d) Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of New York which are applicable
to contracts made and to be performed wholly within such state.
(e) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
(f) Benefits of Agreement. This Agreement does not confer on
the shareholders of PCC the right to enforce the obligations of the Company or
the Initial Members hereunder.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the date first above written.
PRESIDIO CAPITAL CORP.
By: Wexford Management LLC
as agent
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: Senior Vice President
T-TWO HOLDING, L.L.C.
By: Roundhill Associates Limited
Partnership
By: /s/ Xxxx Xxxxxxxx
-----------------
Name: Xxxx Xxxxxxxx
Title: Vice President
ROUNDHILL ASSOCIATES LIMITED
PARTNERSHIP
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: Vice President
ROUNDHILL ASSOCIATES LIMITED
PARTNERSHIP II
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Vice President
