EXECUTION COPY
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (the "Agreement") is made and
entered into this 1st day of July 2002, between plaintiff HX Investors, L.P.,
and the additional plaintiffs in the Action who are listed on Exhibit A hereto
(collectively, "HX Investors" or the "Purchaser"), the defendants Shelbourne
Properties I, Inc., Shelbourne Properties II, Inc., and Shelbourne Properties
III, Inc. (each, a "Company", and collectively, the "Companies"), Presidio
Capital Investment Company, LLC ("Presidio") and Shelbourne Management, LLC
("Management").
WHEREAS, HX Investors filed an action on May 22, 2002 against the Companies
in the Court of Chancery of the State of Delaware in and for New Castle County
(the "Court") captioned HX Investors, L.P., et al. ▇. ▇▇▇▇▇▇▇▇▇▇ Properties I,
Inc., et al., Del. Ch., C.A. No. 19644 (the "Action"), seeking an order
directing that the Companies hold a stockholder election for the purpose of
electing directors to nine seats on the boards of each of the Companies;
WHEREAS, on May 9, 2002, the Companies announced that each of their
calendar year 2002 annual meetings (collectively, the "Annual Meetings") would
take place on July 9, 2002;
WHEREAS, the Court subsequently ordered, and HX Investors and the Companies
agreed, that the Annual Meetings be held on September 9, 2002;
WHEREAS, the Companies have not yet announced their nominees for election
to the Boards of Directors at the Annual Meetings;
WHEREAS, the parties have entered into certain transactions described
below; and;
WHEREAS, the undersigned parties wish to avoid costly litigation between
them by compromising and settling the Action;
NOW, THEREFORE, the parties, intending to be legally bound hereby, agree as
follows:
1. Upon execution of this Agreement, HX Investors will promptly take such
action as necessary and appropriate to have the Action dismissed with prejudice.
2. HX Investors, on behalf of themselves and their past, present and future
employees, officers, directors, stockholders, limited and general partners,
parents, subsidiaries, affiliates, predecessors, successors, heirs,
beneficiaries, trustees, and assigns (collectively in this paragraph, the
"Plaintiff Releasors"), hereby irrevocably and unconditionally remise, release,
and forever discharge the Companies, and their past, present, and future
employees, officers, directors, stockholders, limited and general partners,
advisors, agents, representatives, parents, subsidiaries, affiliates,
predecessors, successors, and assigns (collectively in this paragraph, the
"Shelbourne Releasees"), of and from any and all actions, causes of action,
suits, debts, charges, complaints, or liabilities, whether pursuant to statute
or common law or otherwise, that the Plaintiff Releasors have against the
Shelbourne Releasees relating to any and all matters from the beginning of the
world through the date of this Agreement, including without limitation all
claims that were asserted in HX Investors' complaint or that arise out of the
following:
(a) the reduction of the boards of the Companies, on or about February 13,
2002, from nine seats to four seats;
(b) the resignations, on or about February 13, 2002, of ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, Jr., and W.
▇▇▇▇▇▇ ▇▇▇▇▇▇ from the boards of the Companies; or
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(c) the reappointment, on or about February 13, 2002, of ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to the boards of the Companies.
3. Plaintiff Releasors shall not participate or join in any litigation
involving any of the matters described and released in paragraph 2 of this
Agreement (including without limitation the pending action styled ▇▇▇▇▇▇ v.
Northstar Capital Investment Corp. et al., Consol. C.A No. 19442, in the Court
of Chancery of the State of Delaware in and for New Castle County). It is
further understood and agreed by the parties that any persons designated by HX
Investors to serve on the Boards of Directors of any of the Companies (other
than the Independent Directors as defined in Exhibit E hereto) shall recuse
themselves and not in any way participate in any deliberations, discussions,
resolutions or actions taken by such Boards of Directors concerning any of the
matters described and released in Paragraph 2 of this Agreement. Nothing
contained herein shall prevent HX Investors or its affiliates from responding to
compulsory process, discovery requests or orders of any court of competent
jurisdiction; provided, however, that HX Investors or its affiliates, as the
case may be, shall provide reasonable notice to the Companies in advance of any
such responses, to the extent reasonably practicable. Notwithstanding any other
provision in this Agreement to the contrary, HX Investors may participate
passively as a stockholder in a derivative action or as a class member in a
class action including without limitation those involving any of the matters
described and released in paragraph 2 of this Agreement solely for the purpose
of receiving its portion of the economic or other benefit achieved in such
litigation.
4. The Companies, on behalf of themselves and their past, present, and
future employees, officers, directors, stockholders, limited and general
partners, parents, subsidiaries, affiliates, predecessors, successors, heirs,
beneficiaries, trustees, and assigns (collectively in this
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paragraph, the "Shelbourne Releasors"), hereby irrevocably and unconditionally
remise, release, and forever discharge HX Investors, and their past, present,
and future employees, officers, directors, stockholders, limited and general
partners, advisors, agents, representatives, parents, subsidiaries, affiliates,
predecessors, successors, and assigns (collectively in this paragraph, the
"Plaintiff Releasees"), of and from any and all actions, causes of action,
suits, debts, charges, counterclaims, complaints, or liabilities, whether
pursuant to statute or common law or otherwise, that the Shelbourne Releasors
have against the Plaintiff Releasees relating to any and all matters from the
beginning of the world through the date of this Agreement, including without
limitation all claims that could be asserted with respect to HX Investors'
complaint or that arise out of the following:
(a) the reduction of the boards of the Companies, on or about February 13,
2002, from nine seats to four seats;
(b) the resignations, on or about February 13, 2002, of ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, Jr., and W.
▇▇▇▇▇▇ ▇▇▇▇▇▇ from the boards of the Companies; or
(c) the reappointment, on or about February 13, 2002, of ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to the boards of the Companies.
5. By entering into this Agreement, the Defendants do not admit any
liability with respect to any claim asserted in the Action, and nothing in this
Agreement shall be construed as an admission of any such liability.
Notwithstanding any other provision herein to the contrary, this Agreement does
not release any claims that have been asserted in the action styled ▇▇▇▇▇▇ v.
Northstar Capital Investment Corp., et al., Consol. C.A. No. 19442, in the Court
of Chancery of the State of Delaware in and for New Castle County.
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6. Contemporaneously with the execution of this Agreement, the Companies
and HX Investors have entered into, and agreed to be bound by, Stock Purchase
Agreements attached hereto as Exhibits B, C, and D (each a "Stock Purchase
Agreement") and the Board of Directors of each of the Companies have approved
the respective Plan of Liquidation attached to each Stock Purchase Agreement as
Annex C (each, a "Plan of Liquidation") and resolved to submit such Plans of
Liquidation for approval by its stockholders.
7. HX Investors and the Companies hereby incorporate by reference and agree
to all of the provisions of Exhibit E, including, without limitation, those
relating to corporate governance, the Plan of Liquidation and the Stockholder
Meeting.
8. This Agreement incorporates by reference (i) all of the representations
and warranties of the Companies contained in Article IV of each of the
respective Stock Purchase Agreements and (ii) all of the representations and
warranties of the Purchaser contained in Article V of each of the Stock Purchase
Agreements.
9. Each Company hereby represents and warrants to HX Investors that (i) its
Board of Directors, at a meeting duly called and held on July 1, 2002 has
unanimously (a) determined that this Agreement, the Stock Purchase Agreement to
which it is a party and the transactions contemplated hereby and thereby,
including HX Investors' tender offers for up to 30% of the outstanding shares of
common stock, par value $0.01, of such Company (each, an "Offer") and the Plan
of Liquidation contemplated by such Stock Purchase Agreement, are fair to, and
in the best interests of its stockholders, (b) approved, adopted and declared
advisable this Agreement, such Stock Purchase Agreement, such Offer and such
Plan of Liquidation (such approval and adoption having been made in accordance
with Delaware Law, including, without limitation, Section 203 thereof) and (c)
recommended that stockholders desiring to maximize
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immediate liquidity of their shares of common stock accept the respective Offer
and tender their shares of common stock pursuant to such Offer and stockholders
not seeking immediate liquidity, but desiring to receive their pro rata portion
of the liquidation proceeds contemplated by the Plans of Liquidation, should not
accept such Offer, and should vote to approve the adoption of such Plan of
Liquidation at a meeting of the stockholders to be held to consider such matter,
and (ii) Lazard Freres & Co., LLC (the "Financial Advisor") has delivered to
each Board of Directors a written opinion that the price per share of common
stock offered pursuant to each Offer together with the distributions of the
proceeds from the respective liquidation of each Company in accordance with each
Plan of Liquidation, taken as a whole, to be received by the stockholders of
each Company in the respective Offer and Plan of Liquidation, is fair to such
stockholders from a financial point of view.
10. In the event that the Offers (i) shall not have expired (other than
solely by reason of a breach by HX Investors of this Agreement or the Stock
Purchase Agreements) prior to the date proxy materials for the September 9, 2002
annual meetings have been mailed, or (ii) closes on a date that would make it
impracticable to change the proxy materials required by the terms of this
Agreement or the Stock Purchase Agreements prior to the date on which amended
proxy materials would as a matter of law have to be mailed, then the parties
hereto will use all reasonable efforts to cooperate to have the Court enter an
order permitting the Companies to change the date of the annual meetings to a
later date proposed by the parties. The date proposed by the parties shall be a
date selected by HX Investors, L.P., subject to the approval of the Companies,
such approval not to be unreasonably withheld.
11. The parties hereby agree:
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(a) HX Investors, L.P. will receive as compensation from Management an
amount equal to the total of (i) any return received by Management as a result
of its investment in the Class A Preferred Partnership Units of each of
Shelbourne Properties I, L.P, Shelbourne Properties II, L.P and Shelbourne
Properties III, L.P, (the "Limited Partnerships") respectively, multiplied by,
in the case of each of the Limited Partnerships, (ii) the quotient resulting by
dividing (x) the number of shares of common stock of the respective related
Company of such Limited Partnership beneficially owned by HX Investors, L.P. on
September 30, 2002, by (y) the total number of issued and outstanding shares of
common stock of such Company issued and outstanding on September 30, 2002; and
(b) The Companies, Presidio and Management shall take all action necessary
to cause that, as of September 30, 2002 the Purchase and Contribution
Agreements, dated as of February 14, 2002, made and entered into by Presidio
Capital Investment Company (each, a "Purchase and Contribution Agreements"),
each Company and the other parties thereto shall be amended such that the number
"150%" as it appears in Section 5.5 of each Purchase and Contribution Agreement
shall be replaced by "138%".
(c) Notwithstanding anything expressed or implied to the contrary in this
Agreement, the parties do not intend to create a partnership, joint venture, or
any other similar arrangement between or among the parties. Each of the parties
hereby agrees it will not take any action inconsistent with the preceding
sentence for any purpose. Notwithstanding anything in this Section 11 to the
contrary, paragraphs (a) and (b) above are conditioned upon the final settlement
or dismissal of all existing litigation pending against the Companies identified
in Section 4.09 of the Disclosure Schedule, including, but not limited to (i)
▇▇▇▇▇▇ v. Northstar Capital Investment Corp., et al., Consol. C.A. No. 19442, in
the Court of
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Chancery of the State of Delaware in and for New Castle County, and (ii) HX
Investors, L.P., et al. ▇. ▇▇▇▇▇▇▇▇▇▇ Properties I, Inc., et al., C.A. No. 19644
NC, in the Court of Chancery of the State of Delaware in and for New Castle
County,
12. This Agreement shall be construed and enforced in accordance with the
laws of the State of Delaware.
13. Each party will bear its own costs and fees in connection with this
Action and Agreement, except that the Companies agree that they shall reimburse
HX Investors for all reasonable documented legal fees and expenses in connection
with this Action and the settlement thereof incurred through the date hereof
(and any legal fees and expenses incurred hereafter in connection with the
disposition of this Action) within five business days after submission of an
invoice therefor, provided that such documentation need not reveal any attorney
client privileged information or information protected by the work product
doctrine and that an affidavit of counsel (together with an invoice showing
total fees and expenses incurred) shall constitute reasonable documentation.
14. The parties agree that the Court shall have sole and exclusive
jurisdiction over actions brought to enforce or interpret this Agreement.
15. The parties represent that they have read, understood and voluntarily
accepted the terms of this Agreement, and that they have had the opportunity to
rely upon the advice of their attorneys, who are the attorneys of their own
choice, concerning the legal consequences of this Agreement.
16. This Agreement and the Stock Purchase Agreements (including all
schedules, exhibits and annexes thereto) constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and may not be
amended, supplemented or
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modified, except by a writing signed by the parties hereto and thereto.
Modifications not directly affecting the rights of the plaintiff parties hereto
and thereto other than HX Investors, L.P. do not require the agreement of the
plaintiff parties hereto other than HX Investors, L.P.
17. For purposes of contract interpretation, no party shall be considered
the author of the Agreement.
18. The signatories hereto represent that they are authorized to execute
the Agreement and bind the respective parties to the terms herein.
19. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
20. If this Agreement is executed in counterparts, no signatory hereto
shall be bound until all of the parties named below have duly executed, or
caused to be duly executed, a counterpart of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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NOW THEREFORE, intending to be legally bound hereby, the parties hereto set
forth their seals on the dates set forth below.
HX INVESTORS, L.P. and all parties identified in
Exhibit A hereto
By: Exeter Capital Corporation
General Partner
By:
---------------------------------------
Name:
Title:
SHELBOURNE PROPERTIES I, INC.
By:
---------------------------------------
Name:
Title:
SHELBOURNE PROPERTIES II, INC.
By:
---------------------------------------
Name:
Title:
SHELBOURNE PROPERTIES III, INC.
By:
---------------------------------------
Name:
Title:
PRESIDIO CAPITAL INVESTMENT COMPANY, LLC
By:
---------------------------------------
Name:
Title:
SHELBOURNE MANAGEMENT, LLC
By:
---------------------------------------
Name:
Title:
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Exhibit A
List of Plaintiffs
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▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇
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V. ▇▇▇▇ ▇▇▇▇▇ Trust, V. ▇▇▇▇ ▇▇▇▇▇, Trustee
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Cope Irrevocable Trust O. ▇▇▇▇▇ ▇▇▇▇, Trustee
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A. ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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E.L. ▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇▇▇▇▇, Trustees
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Trustees
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Equity Resource Fund XIV, L.P.
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Equity Resource Fund XV, L.P.
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Equity Resource Fund XVIII, L.P.
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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FBO Charitable Remainder Unitrust dtd 8/15/86, ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustees
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▇▇▇▇▇ Family Trust dtd 5/29/97, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustees
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The ▇▇▇▇▇▇ Trust, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, Trustees
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▇▇▇▇▇ ▇▇▇▇ Revocable Trust, ▇▇▇▇▇ ▇▇▇▇, Trustee
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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May ▇. ▇▇▇▇▇▇ Revocable Trust dtd 5/12/92, May ▇. ▇▇▇▇▇▇, Trustee
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ Family Trust dtd 12/30/96, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustees
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
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J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust dtd 12/21/92, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
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The ▇▇▇▇▇▇ Family Revocable Trust, ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustees
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▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ and ▇▇▇▇▇▇▇ May ▇▇▇▇▇▇▇ Living Trust, ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ May ▇▇▇▇▇▇▇,
Trustees
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. Drneck
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ Family 1994 Trust UTD dtd 9/27/94 Exemption Trust, G. ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Trustee
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Latrobe Area Hospital, Inc.
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▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
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▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trust dtd 11/1/91, ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
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▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Mukai Family Trust, ▇▇▇▇▇▇ ▇▇▇▇▇, Trustee
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
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The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. Trust, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., Trustee
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▇▇▇▇▇ ▇▇▇▇
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August ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Trustee
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
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▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
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TRS FBO ▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustees
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FBO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ UAD dtd. 3/3/95 Trust, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Revocable Trust dtd 11/21/96, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇
Trustees
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The ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇
Family Trust Trustees
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▇▇▇▇▇▇ ▇▇▇▇ Spear, as sole beneficiary of the Estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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The White Marital Trust U/A dtd 4/14/93, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
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Living Trust of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
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14
Exhibit E to the Settlement Agreement
Corporate Governance Provisions
1. Stockholders' Meeting. In order to effect each Dissolution and
approve and adopt each Plan of Liquidation, each Company, acting through its
board of directors, shall, in accordance with applicable Law and such 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 an Offer for the purpose of
considering and taking action on such Dissolution and such Plan of Liquidation
(each, a "Stockholders' Meeting") and (ii) unless its board of directors
determines in good faith that its fiduciary duties under applicable Law require
otherwise, (A) include in its Proxy Statement the recommendation of its board of
directors that its Stockholders approve and adopt such Dissolution and such Plan
of Liquidation and (B) use all reasonable efforts to obtain such approval and
adoption. At each such Stockholders' Meeting, Purchaser shall cause all shares
of common stock of such Company then owned by it and its affiliates to be voted
in favor of the approval and adoption of such Dissolution and such Plan of
Liquidation. The obligations of each Company to effect such Plan of Liquidation
shall be subject to the conditions that (i) Purchaser shall have purchased all
shares of common stock of such Company validly tendered and not withdrawn
pursuant to each Offer, (ii) each Plan of Liquidation shall have been approved
and adopted by the affirmative vote of the stockholders of each Company 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 its Plan of Liquidation illegal or otherwise preventing
or prohibiting completion of such Plan of Liquidation. Should the conditions in
the previous sentence fail to be satisfied for any Plan of Liquidation, then
such Company shall not be obligated to implement the provisions of Annex C to
the applicable Stock Purchase Agreement or Section 4 below.
2. Proxy Statement. As promptly as reasonably practicable following
consummation of each Offer, each Company shall file a Proxy Statement with the
SEC under the Exchange Act, and shall use all reasonable efforts to have its
Proxy Statement cleared by the SEC. Each Company shall give Purchaser and its
counsel the opportunity to review its Proxy Statement prior to it being filed
with the SEC. Each Company agrees to use all reasonable efforts to respond to
all comments and requests of the SEC and to cause its Proxy Statement and all
required amendments and supplements thereto to be mailed to the stockholders
entitled to vote at each Stockholders' Meeting at the earliest practicable time.
3. Company Board Representation; Section 14(f). (a) Promptly upon the
purchase by Purchaser of the shares of common stock of each Company pursuant to
each Offer, Purchaser shall be entitled to designate up to six persons to be
appointed to the board of directors of each Company, 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 for each board of
directors: ▇▇▇▇▇▇ Blasburg, Jr., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇
15
Ferrari, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; and each of
Purchaser's designees to the boards of directors shall be subject to the
reasonable approval of the respective board of directors, as such board of
directors is constituted at the time of the consummation of each Offer. Subject
to the forgoing, each 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 such Company, including increasing the
size of its board of directors to six persons and securing the resignations of
incumbent directors, if necessary. After the new members of each board of
directors shall have been elected (i) any subsequent nominations for vacancies
in the respective board of directors created by the removal or resignation of an
Independent Director shall be made by the remaining Independent Directors of
such board of directors, and (ii) Purchaser and each Company shall take all
action necessary to cause each 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 Stockholders' Meeting of such Company, other than those shares of
common stock of such Company held by Purchaser and its affiliates.
(b) Each 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 such 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 each 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
Companies, any extension by the Companies of the time for the performance of any
of the obligations or other acts of Purchaser, or waiver of any of the
Companies' 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 last sentence of Section 1 of this Annex B, and in accordance with Delaware
Law, at the Effective Time of each Dissolution, each board of directors shall
cause a Dissolution of its respective Company. As a result of each Dissolution,
each Company shall settle and close its business and distribute to its
stockholders any remaining assets pursuant to a Plan of Liquidation.
(b) As promptly as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in the last sentence of Section
1 of this Annex B, each Company shall, and Purchaser shall take all action
necessary to cause each Company to, cause a Dissolution to be effected by filing
a Certificate of Dissolution.
(c) At the Effective Time, the effect of each Dissolution shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, beginning at each Effective
Time, each Company shall direct bodies corporate for the purpose of prosecuting
and defending suits, and enabling it to settle and close its business, dispose
of and convey its property, discharge its liabilities and distribute to its
stockholders any remaining assets.
16
5. Directors' and Officers' Indemnification and Insurance. (a) For a
period ending on the earlier of (i) the sixth anniversary of each respective
Effective Time and (ii) each respective Liquidation Date, the By-laws of each
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 each 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 each Offer were directors, officers, fiduciaries or agents
of any Company, unless such modification shall be required by Law.
(b) Each Company shall, to the fullest extent permitted under
applicable Law, indemnify and hold harmless each present and former director,
officer, fiduciary and agent of such 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) any or each respective Company shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel shall
be reasonably satisfactory to any or each Company, promptly after statements
therefor are received and (ii) any or each Company shall cooperate in the
defense of any such matter; provided, however, that any or each Company shall
not be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld).
(c) Each Company shall maintain until the earlier of (i) the sixth
anniversary of each respective Effective Time and (ii) each respective
Liquidation Date, if available, the current directors' and officers' liability
insurance policies maintained by each Company (provided that such Company may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not less favorable).
(d) In the event any 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 such Company shall assume the obligations set forth in
this Section 5.
(e) Purchaser shall use all reasonable efforts to cause each 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. No Company shall, and Purchaser shall not
cause any Company to, without the unanimous approval of the Independent
Directors of the board of directors of such Company and the approval of the
holders of a majority of the outstanding shares of common stock of such Company
other than those shares of common stock held by Purchaser and its affiliates at
such time, and subject to the respective Plan of Liquidation and applicable tax
laws, take any action or reporting position that would cause such Company to
fail
17
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, none of the Companies nor any of their subsidiaries shall, and
Purchaser shall not cause any of the Companies or any of their subsidiaries to,
(i) enter into any new transaction with Purchaser or its affiliates, (ii) amend
any agreements previously entered into by a Company with Purchaser or its
affiliates or (iii) enter into a new service agreement, or change the terms of
any existing service agreement, between a 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 of directors of such Company.
8. AMEX Listing. For as long as it remains eligible, each Company shall
use all reasonable efforts to, and Purchaser shall use all reasonable efforts to
cause such 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 such Company shall use all reasonable efforts
to, and Purchaser shall use all reasonable efforts to cause such 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. None of the Companies shall, and Purchaser shall not
cause any of the Companies 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 such Company.
10. Audit Committee. Following the appointment or election of the
Independent Directors as contemplated by Section 3 above, each board of
directors of each Company shall cause the Audit Committee of such board of
directors 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 Agreements.
18