Exhibit 99.1
PURCHASE AND CONTRIBUTION AGREEMENT
This Purchase and Contribution Agreement, dated as of February 14,
2002 (this "Agreement"), is made and entered into by and among Presidio Capital
Investment Company, LLC, a Delaware limited liability company ("PCIC"), certain
subsidiaries of PCIC listed on the signature pages hereto (collectively with
PCIC, "Seller"), NorthStar Capital Investment Corp., a Maryland corporation
("NCIC"), Shelbourne Management LLC, a Delaware limited liability company
("Management Company"), Shelbourne Properties I, Inc., a Delaware corporation
("Shelbourne I"), Shelbourne Properties II, Inc., a Delaware corporation
("Shelbourne II"), and Shelbourne Properties III, Inc., a Delaware corporation
("Shelbourne III" and, together with Shelbourne I and Shelbourne II, the
"Companies" and, individually, a "Company"), Shelbourne Properties I, L.P., a
Delaware limited liability company ("Shelbourne I OP"), Shelbourne Properties
II, L.P., a Delaware limited liability company ("Shelbourne II OP"), and
Shelbourne Properties III, L.P., a Delaware limited liability company
("Shelbourne III OP" and, together with Shelbourne I OP and Shelbourne II OP,
the "OPs" and, individually, an "OP"). All capitalized terms used herein without
definition shall have the meanings specified in Article I hereof.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each of the Companies wishes to purchase from Seller and
Seller wishes to sell to each such Company all of the Shares of such Company
Seller holds;
WHEREAS, each of the Companies, together with its the general
partner of its respective OP, are parties to an advisory agreement with
Management Company, dated as of April 17, 2001 (collectively the "Advisory
Agreements"), and Management Company wishes to contribute the Advisory
Agreements to the respective OPs in exchange for preferred operating partnership
units in the OPs (collectively, the "Preferred Units"); and
WHEREAS, the OPs are prepared to afford to PCIC the opportunity to
guarantee certain indebtedness of the OPs used to refinance the Notes
(collectively, the "Guarantees") and NCIC is prepared to waive its existing
exemption from the REIT-related ownership limitations in the Certificates.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the
following meanings for the purposes of this Agreement:
"Advisory Agreements" has the meaning set forth in the recitals to
this Agreement.
"Affiliate" means, with respect to any specified Person, (1) any
other Person which, directly or indirectly, controls, is under common control
with, or is controlled by, such specified Person, (2) any other Person which is
the beneficial owner of 50 percent or more of any class of securities of the
specified Person or a Person described in clause (1) of this paragraph, and (3)
any relative or spouse of the specified Person or any of the Persons
contemplated in this definition; provided, however, that "Affiliates" of each
Company shall not include Seller, NCIC or Management Company.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Business Day" means any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which commercial banks located in
The City of New York are required or authorized by Law to be closed for
business.
"Certificates" means the respective certificates of incorporation
of the Companies.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Companies" and "Company" have the meanings set forth in the
preamble to this Agreement.
"Contract" means any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"GAAP" means generally accepted accounting principles as in effect
in the United States of America from time to time.
"Governmental Authority" means the government of the United States
of America or any foreign country or any state or political subdivision thereof
and any entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guarantees" has the meaning set forth in the recitals to this
Agreement.
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"Indemnified Parties" has the meaning set forth in Section 5.1(b).
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.
"Lien" means any mortgage, lien, charge, restriction, pledge,
security interest, option, lease or sublease, claim, proxy, right of any third
party, easement, encroachment or encumbrance.
"Loan Documents" means, as to any OP, collectively the Notes, the
Security Agreements and the Mortgages being entered into or to be entered into
by such OP.
"Management Company" has the meaning set forth in the preamble to
this Agreement.
"Mortgages" means the mortgages to be entered into pursuant to
Section 5.6 hereof to secure the OPs' obligations under the Notes and under
Section 5.3 of this Agreement.
"NCIC" has the meaning set forth in the preamble to this
Agreement.
"Notes" means, collectively, the Secured Promissory Notes being
issued by the OPs on the date hereof as initial distributions under the
Preferred Units.
"OP" and "OPs" have the meanings set forth in the preamble to this
Agreement
"PCIC" has the meaning set forth in the preamble to this
Agreement.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited liability company, limited partnership, trust, association
or other entity, including a government or government department, agency or
instrumentality.
"Preferred Units" has the meaning set forth in the recitals to
this Agreement.
"Related Agreements" means any Contract which is being entered
into or is to be entered into pursuant to this Agreement. The Related Agreements
executed by a specified Person shall be referred to as "such Person's Related
Agreements," "its Related Agreements" or another similar expression.
"REIT" means a real estate investment trust within the meaning of
Section 856 of the Code.
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"Security Agreements" means the Security Agreements being entered
into by the OPs on the date of this Agreement to secure the OPs' obligations
under the Notes and under Section 5.3 of this Agreement.
"Seller" means PCIC, together with those of its Subsidiaries
listed on the signature pages hereto and the obligations of all such Persons
shall be joint and several.
"Shares" means, the shares of common stock, par value $0.01 per
share, of each Company set forth on Schedule 2.2(a) hereto.
"Special Committees" means the special committees of the boards of
directors of the Companies established on November 20, 2001.
"Subsidiary" means, with respect to any Person at any time, (a)
any other Person the accounts of which would be consolidated with those of such
first Person in its consolidated financial statements as of such time under GAAP
consistently applied and (b) any other Person, at least a majority of the voting
power of which shall at the time be owned, directly or indirectly, by the first
Person and/or by one or more direct or indirect Subsidiaries of such first
Person.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding (including, without
limitation, dividend withholding and withholding required under Sections 1445
and 1446 of the Code), unemployment and Social Security taxes, which are imposed
by any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
"Transaction Agreements" mean, collectively, this Agreement, the
Loan Documents, the Preferred Units and the Guarantees.
Section 1.2 Other Interpretive Provisions.
(a) Except as otherwise specified herein, all references
herein (i) to any Person shall be deemed to include such Person's successors and
assigns and (ii) to any applicable law defined or referred to herein shall be
deemed references to such applicable law or any successor applicable law as the
same may have been or may be amended or supplemented from time to time.
(b) When used in this Agreement, the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article",
"Section", "Schedule" and "Exhibit" shall refer to Articles and Sections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
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(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Captions to Articles, Sections and subsections of, and
Schedules and Exhibits to, this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or in any way affect the meaning or construction of any provision of
this Agreement.
(f) Except as otherwise specified therein, terms that are
defined herein that are used in any other Transaction Agreement, certificates,
opinions and other documents delivered in connection herewith shall have the
meanings ascribed to them herein and such documents shall be otherwise
interpreted in accordance with the provisions of this Section 1.2.
ARTICLE II
PURCHASE AND SALE OF SHARES;
CONTRIBUTION OF ADVISORY AGREEMENTS
Section 2.1 Purchase and Sale of Shares; Contribution of Advisory
Agreements. Subject to the terms and conditions of this Agreement, (i) Seller is
hereby selling to each Company the Shares of such Company, free and clear of all
Liens, and each Company is hereby purchasing all such Shares, and (ii)
Management Company is hereby contributing to each OP the Advisory Agreement to
which such OP's general partner and limited partner are parties, free and clear
of all Liens. It is agreed and understood that, notwithstanding such
contribution, Management Company shall retain the right to receive reimbursement
for all expenses incurred prior to the date of this Agreement in connection with
its performance under the Advisory Agreements for which it is entitled to
reimbursement by the terms thereof and which have not been previously reimbursed
and shall retain its indemnification rights thereunder as provided in Section
5.1(b) hereof. The Companies and the OPs agree that all reimbursements shall be
made promptly upon delivery by Management Company of requests therefor in
accordance with past practice.
Section 2.2 Payment of Purchase Price and Accrued Management Fees;
Issuance of Preferred Units.
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(a) In consideration for its purchase of Shares, each Company
is today paying to Seller the amount set forth on Schedule 2.2(a) hereto across
from the name of such Company, such payment being made by means of a wire
transfer of immediately available funds to the bank accounts designated by
Seller.
(b) In consideration of Management Company's contribution of
the Advisory Agreements, each OP is (i) today issuing to Management Company
Preferred Units with the aggregate initial liquidation amount set forth on
Schedule 2.2(b) hereto across from the name of such OP and (ii) today paying all
accrued and unpaid management fees, and reimbursement for all presently
determinable reimbursable and documented expenses, under the Advisory Agreement
being contributed to such OP. Each OP agrees that as an initial distribution
under its Preferred Units it is today issuing to Management Company, as the
initial holder of such Preferred Units, a Note in the principal amount set forth
on Schedule 2.2(b) attached hereto across from the name of such OP. The
Companies and the OPs agree that Management Company may transfer the Notes
and/or the Preferred Units to any of its Affiliates and that any such transferee
of Notes and/or Preferred Units shall acquire them subject to Management
Companies' rights and obligations under this Agreement and the Loan Documents,
including without limitation the right to receive the Reacquisition Price;
provided, however, that any such transfer of the Preferred Units shall be made
in accordance with the terms and conditions of the applicable Agreement of
Limited Partnership.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER, MANAGEMENT
COMPANY AND NCIC
Each of Seller, Management Company and NCIC represents and
warrants to the Companies, as of the date of this Agreement, as follows (it
being understood and agreed that each such representation and warranty is being
made individually by Seller, Management Company and NCIC only as to itself and
not jointly and that Sections 3.7 and 3.8 are being made solely by Management
Company):
Section 3.1 Organization, Standing and Power. It is duly
organized, validly existing and in good standing under the laws of the state of
its organization, and has all requisite power and authority to enter into this
Agreement and any other Transaction Agreements to which it is a party and
perform its obligations hereunder and thereunder.
Section 3.2 Due Authorization and Validity. The execution,
delivery and performance by it of this Agreement and any other Transaction
Documents to which it is a party have been duly and validly approved by all
requisite action and no other actions or proceedings on its part are necessary
to authorize this Agreement, any other Transaction Documents to which it is a
party and the transactions contemplated hereby and thereby. It has duly and
validly executed and delivered this Agreement and any other
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Transaction Agreements to which it is a party being entered into as of the date
of this Agreement. This Agreement and any other Transaction Agreements to which
it is a party constitute (or when executed and delivered will constitute) its
legal, valid and binding obligations, in each case enforceable in accordance
with their respective terms.
Section 3.3 Consents and Approvals; Authority Relative to this
Agreement.
(a) Except for filings required by the securities laws, no
consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any other Person not a party to
this Agreement is necessary in connection with the execution, delivery and
performance by it of this Agreement or any other Transaction Agreements to which
it is a party or the consummation by it of the transactions contemplated hereby
or thereby.
(b) The execution, delivery and performance by it of this
Agreement and any other Transaction Agreements to which it is a party and any
actions contemplated herein or therein to be taken by it do not and will not,
and the consummation by it of the transactions contemplated hereby and thereby
does not and will not, (i) violate any Law; (ii) violate or conflict with,
result in a breach or termination of, constitute a default or give any third
party any additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon any of its assets or
properties under, or result in or constitute a circumstance which, with or
without notice or lapse of time or both, would constitute any of the foregoing
under, any material Contract to which it is a party or by which it or any of its
assets or properties are bound; (iii) permit the acceleration of the maturity of
any of its material indebtedness or indebtedness secured by its respective
assets or properties; or (iv) violate or conflict with any provision of any of
its certificate of incorporation, charter, bylaws or similar organizational
instruments.
Section 3.4 Shares. Seller owns (legally and beneficially) the
number of the Shares set forth on Schedule 2.2(a) hereto and all such Shares are
free and clear of any and all Liens (except for Liens related to Taxes related
to periods prior to the date of this Agreement and not yet due and payable).
Except for the ownership of such Shares by Seller and for the Preferred Units
being acquired hereunder, none of Seller, NCIC nor any of their respective
Affiliates own any securities of any of the Companies or any of their respective
Subsidiaries.
Section 3.5 Advisory Agreements. Each Advisory Agreement (a) is
valid and binding on the parties thereto, (b) is freely assignable to each OP
without penalty or other adverse consequences and (c) upon consummation of the
transactions contemplated by this Agreement and the other Transaction
Agreements, shall continue in full force and effect without penalty or other
adverse consequence. Management Company is not in breach of, or default under,
any Advisory Agreement. Management Company's rights and interests under each
Advisory Agreement are unencumbered.
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Section 3.6 Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by it or on its behalf.
Section 3.7 REIT Status. During the period from each Company's
inception to immediately prior to the date of this Agreement, each Company has
qualified as a real estate investment trust within the meaning of section 856(a)
of the Code.
Section 3.8 Five or Fewer Test. Immediately before and immediately
after the date of this Agreement, not more than 50 percent in value of the
outstanding Shares of each Company have been or will be owned directly or
indirectly, actually or constructively (within the meaning of section 542(a)(2)
of the Code, as modified by section 856(h) of the Code), by five or fewer
individuals (or entities treated as individuals for purposes of section 856(h)
of the Code).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE OPS
The Companies and the OPs represent and warrant to Seller,
Management Company and NCIC, as of the date of this Agreement, as follows (it
being understood and agreed that each such representation and warranty is being
made individually by each Company and OP only as to itself and not jointly):
Section 4.1 Organization, Standing and Power. It is duly organized
and validly existing under the laws of the state of its organization, and has
all requisite power and authority to enter into this Agreement and any other
Transaction Agreements to which it is a party and perform its obligations
hereunder and thereunder.
Section 4.2 Due Authorization and Validity. The execution,
delivery and performance by it of this Agreement and any other Transaction
Agreements to which it is a party have been duly and validly approved by all
requisite action and no other actions or proceedings on its part are necessary
to authorize this Agreement, any other Transaction Agreements to which it is a
party and the transactions contemplated hereby and thereby. It has duly and
validly executed and delivered this Agreement and any other Transaction
Agreements to which it is a party being entered into as of the date of this
Agreement. This Agreement and any other Transaction Agreements to which it is a
party constitute (or when executed and delivered will constitute) its legal,
valid and binding obligations, in each case enforceable in accordance with their
respective terms. The Companies have provided to Seller copies of the
resolutions of the Special Committees recommending approval by the Companies'
Boards of Directors of this Agreement and the other Transaction Agreements and
the consummation of the transactions contemplated hereby and thereby, and all
such resolutions remain in full force and effect.
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The Preferred Units, when issued in accordance with the terms hereof, will be
fully paid and nonassessable.
Section 4.3 Consents and Approvals; Authority Relative to this
Agreement. The execution, delivery and performance by it of this Agreement and
any other Transaction Agreements to which it is a party and any actions
contemplated herein or therein to be taken by it do not and will not, and the
consummation by it of the transactions contemplated hereby and thereby does not
and will not, violate or conflict with any provision of any of its certificate
of incorporation, charter, bylaws or similar organizational instruments.
Section 4.4 Brokers. No broker, investment banker, financial
advisor or other person, other than ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital, the
fees and expenses of which will be paid by the Companies, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Companies. The Companies have furnished to Seller a
true and complete copy of all agreements between the Companies and ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital relating to the transactions contemplated hereby.
Section 4.5 Opinion of Financial Advisor. Each Special Committee
has received the opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Advisors,
Inc., dated the date of this Agreement, to the effect that, as of such date, the
consideration to be paid by such Company and its OP to Management Company and
Seller in exchange for the Shares and the contribution of the respective
Advisory Agreements (including the distribution of the Notes by the OP) is fair
to such Company from a financial point, signed copies of which opinions have
been delivered to Seller.
ARTICLE V
COVENANTS
Section 5.1 Directors and Officers; Indemnification and D&O
Insurance.
(a) Each of the individuals listed on Schedule 5.1 has
submitted his resignation from his positions as directors and/or officers of the
Companies and their Subsidiaries, effective as of the consummation of the
transactions contemplated by Section 2.2(a) hereof, except that W. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ will continue as a director of the Companies and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will
continue as interim Treasurer of each Company. Seller shall cause W. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ to resign from his positions as directors of the Companies not later
than the Companies' 2003 annual meetings of shareholders.
(b) The Companies and the OPs agree that all, to the fullest
extent permitted under Law, rights to indemnification under their respective
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organizational documents, indemnification or other agreements, the Advisory
Agreements or by Law for acts or omissions occurring prior to the date of this
Agreement now existing in favor of Management Company, the persons identified on
Schedule 5.1 hereto or any other directors, officers, employees, members or
other Affiliates of NCIC in their respective capacities as current or former
directors or officers of any of the Companies or their respective Subsidiaries
(the "Indemnified Parties") as provided in their respective organizational
documents, indemnification or other agreements, Advisory Agreements or by Law
shall survive the transactions occurring under the Transaction Agreements and
shall continue in full force and effect in accordance with their terms until the
expiration of the applicable statute of limitations (provided, that in the event
any claim or claims are asserted or made prior to the expiration of all
applicable statutes of limitation, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims). The Companies and the OPs shall pay all expenses, including reasonable
attorneys' fees, that may be incurred by any of the Indemnified Parties in
successfully enforcing the indemnity and other obligations provided for in this
Section 5.1(b)
(c) The Companies shall cause to be maintained for a period
of not less than six years from the date of this Agreement directors' and
officers' insurance and indemnification policies covering those Persons who are
currently covered by the Companies' directors' and officers' insurance policies
that are on terms comparable to such existing coverage; provided, however, that
no Company shall be required to expend pursuant to this Section 5.1(c) more than
an annual amount equal to 200% of the current annual premiums paid by such
Company for such existing insurance.
Section 5.2 Transition Services. PCIC agrees to provide the
transition services set forth on Schedule 5.2 hereto for a period of up to one
year from the date of this Agreement, unless sooner terminated by the Companies
in writing upon not less than 30 days' notice (the "Services Term"). The
Companies and the OPs shall pay for such services a fee of $83,300 per month (to
be allocated among them as they shall determine), payable in advance for the
first month on the date of this Agreement and payable in advance for subsequent
months on the 12th day of each calendar month (or next preceding Business Day if
the 12th is not a Business Day). In performing such transition services, PCIC
shall be entitled to receive reimbursement for all expenses to the extent that
such expenses would have been reimbursable to Management Company under the
Advisory Agreements. The OPs agree that all reimbursements shall be made
promptly upon delivery by PCIC of requests therefor in accordance with past
practice under the Advisory Agreements. The Companies and the OPs confirm and
acknowledge that they, and not Management Company or its Affiliates, are the
parties under and responsible for the Property Management Agreements (the
"Property Management Agreements") with Kestrel Management, L.P. ("Kestrel").
PCIC agrees to cooperate with the Companies and the OPs in seeking Kestrel's
agreement to amend the Property Management Agreements to permit the termination
thereof on 30 days' notice by the Companies and the OPs without penalty or
premium.
Section 5.3 Put and Call of the Preferred Units. Each OP shall
have the right at any time to reacquire the Preferred Units issued by such OP at
a price equal to the
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sum of (a) the initial liquidation preference thereof, (b) any accrued and
unpaid distributions thereon through the date of reacquisition and (c) if such
reacquisition shall occur prior to the fifth anniversary of the date of this
Agreement, the additional amount indicated opposite such OP's name on Schedule
5.3 hereto. Management Company or its transferee shall have the right at any
time to cause each OP to reacquire the Preferred Units issued by such OP at a
price equal to the sum of (a) the initial liquidation preference thereof, (b)
any accrued and unpaid distributions thereon through the date of reacquisition
and (c) in the event that a "Put Premium Event" (as defined below) shall have
occurred, the additional amount indicated opposite such OP's name on Schedule
5.3 hereto; provided, that if a Put Premium Event shall occur, Management
Company or such transferee shall be deemed to have exercised such put
simultaneously with the occurrence of such Put Premium Event. The amount so
required to be paid under either of the two immediately preceding sentences is
the "Reacquisition Price". The payment by each OP of the Reacquisition Price
shall be made in cash within fifteen Business Days following written notice of
an election by such OP pursuant to the first sentence of this Section 5.3, or an
election by Management Company or such transferee pursuant to the second
sentence of this Section 5.3, or the occurrence of a Put Premium Event,
whichever is the earliest to occur. Except as expressly provided herein, the
Companies and the OPs agree that they will not amend or terminate the Advisory
Agreements and the OPs agree that they will not distribute, transfer or
otherwise dispose of the Advisory Agreements or any rights therein until such
time as the Preferred Units shall have been acquired by the OPs as contemplated
by this Section 5.3; provided, that, with five Business Days' prior written
notice to Management Company, the Companies and the OPs may amend the Advisory
Agreements if the Companies deliver to Management Company at the time of such
notice an opinion of counsel upon which Management Company is expressly
permitted to rely from a nationally recognized law firm that such amendment, by
itself, would not be treated as a disposition or distribution of such Advisory
Agreements for United States federal income tax purposes. A "Put Premium Event"
shall mean the earliest to occur of (a) a breach by any of the Companies or the
OPs of the immediately preceding sentence, (b) a failure of any OP to repay its
Note at or prior to its "Maturity Date" (as defined in such Notes) or the
occurrence of an "Event of Default" (as defined in the Notes) under any of the
Notes or (c) a failure of any of the Companies or the OPs to comply with Section
5.5 or 5.6 hereof.
Section 5.4 Surrender and Excess Stock. Each of Seller and NCIC,
on behalf of itself and all other "Related Parties" (as defined in the
Certificates), hereby agrees that, effective upon repayment in full of all of
the Notes (the "Repayment Date"), it shall surrender, relinquish and release all
rights under the Certificates to acquire or "Beneficially Own" (as defined in
the Certificates) shares of their Equity Stock (as defined in the Certificates)
in excess of the "Ownership Limit" (as defined in the Certificates) and agrees
that, effective upon the Repayment Date, they shall be subject to the Ownership
Limit and shall not have the benefit of the Related Limit (as defined in the
Certificates) or of those provisions of the Certificates applicable to a Related
Party. Each of Seller and NCIC, on behalf of itself and all other Related
Parties, hereby acknowledges and agrees that, as a result of the surrender of
the right to acquire or Beneficially Own shares of Equity Stock of the Company
in excess of the Ownership Limit upon the Repayment Date, the Beneficial
Ownership of any Equity Stock in excess of the
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Ownership Limit shall be, and shall be deemed to be, a violation of the
Ownership Limit by Seller, NCIC or any other Related Party and will, and shall
be deemed to, result in the conversion of such shares in excess of the Ownership
Limit into Excess Stock in accordance with the terms and conditions set forth in
the Certificates. Until the earlier to occur of the Repayment Date or an "Event
of Default" (as defined in each Note) under any of the Notes, each of NCIC and
Seller agrees, on behalf of itself and all Related Parties, not to acquire any
Equity Stock or securities convertible into or exercisable for Equity Stock.
Section 5.5 Guarantees. The Companies and the OPs agree that,
unless an OP shall have theretofore reacquired its Preferred Units and paid the
Reacquisition Price as provided in Section 5.3 hereof, such OP (a) will repay
its Note entirely from the proceeds of new third party borrowings which will (x)
if non-recourse obligations of such OP, be collateralized by first security
interests in an amount of property with a fair market value of at least 150% of
the principal amount of the indebtedness being incurred, which first security
interests must remain in effect on such collateral or substitute collateral of
equivalent value to the collateral replaced for so long as such indebtedness
shall remain outstanding, and (y) have neither recourse against nor a guarantee
from the general partner of such OP or a related party to the general partner of
such OP such that the general partner or such related party would be deemed to
bear the economic risk of loss of such borrowings within the meaning of Treasury
Regulation Section 1.752-2 (the "Refinancing Indebtedness") and (b) shall not
repay any of the principal amount of such Refinancing Indebtedness unless either
(x) after giving effect to such repayment, the remaining principal amount of
such Refinancing Indebtedness shall not be less than the initial principal
amount of such OP's Note and, if such Refinancing Indebtedness is non-recourse
to such OP, the fair market value of the Partnership's assets securing such
Refinancing Indebtedness shall be at least 150% of such remaining principal
amount, or (y) it shall have made arrangements satisfactory to PCIC in its sole
discretion for it to continue to extend Guarantees of other indebtedness of such
OP in an amount at least equal to the initial principal amount of such OP's
Note. In connection with arranging such Refinancing Indebtedness, each OP will
make the necessary arrangements to (a) permit PCIC, should it elect to do so in
its discretion, to issue a Guarantee (in a form to be determined by PCIC
provided that such form does not have adverse consequences to such OP, the
Company that is a limited partner in such OP or the lenders under such
Refinancing Indebtedness) as to the payment of an amount of such borrowings by
such OP in an amount equal to the principal amount of the Note issued by such
OP, provided, that, if such Refinancing Indebtedness is of differing levels of
seniority, the Guarantees shall guarantee the most senior indebtedness, and (b)
to provide PCIC with sufficient notice to enable PCIC to elect to make such a
Guarantee with effect from the time of the incurrence of such Refinancing
Indebtedness. NCIC, PCIC and Management Company shall cooperate and use
commercially reasonable efforts to assist the Companies and the OPs in promptly
obtaining the Refinancing Indebtedness, including making available to potential
lenders access to such information and personnel about the Companies and its
properties as are under the control of NCIC, PCIC and Management Company.
Section 5.6 Mortgages and Security Agreement. Each OP agrees that,
within five Business Days following the date of this Agreement, it will execute
and
12
deliver, or cause the relevant Subsidiary to execute and deliver, to Management
Company Mortgages concerning the properties identified as to such OP on Schedule
5.6 hereto (the "Mortgage Properties") to secure on a first priority basis
(subject to any Liens existing as of the date of this Agreement) such OP's
obligations under the Notes and to pay the Reacquisition Price under Section 5.3
hereof. Each such Mortgage shall be in the form of Schedule 5.6 hereto with the
requisite information concerning the Mortgage Property included and otherwise in
proper form for recordation. Management Company shall pay all documentary,
stamp, intangible and mortgage recording costs and taxes and recordation fees
for the Mortgages. Management Company agrees that, in connection with the
incurrence of the Refinancing Indebtedness of any OP, Management Company will,
at its expense, release the Liens on, or reconvey to such OP, the Mortgage
Properties covered by such OP's Security Agreement and Mortgages and will
provide each such OP with all necessary and customary documentation to evidence
such release or reconveyance, including, without limitation, the assignment of
the Mortgages to the lenders providing the Refinancing Indebtedness. Each OP
agrees, for the period from the date of this Agreement through the Repayment
Date, to cause the joint venture that owns ▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ in New York City
(the "Broadway Property") not to incur any indebtedness or provide guarantees in
addition to the indebtedness or guarantees outstanding on the date of this
Agreement and not to grant Liens to secure indebtedness on the Broadway
Property.
Section 5.7 FIRPTA. Seller shall have delivered by the date of
this Agreement to each Company a certification with respect to each Company in
accordance with Section 1445(b)(2) of the Code and Treasury Regulation Section
1.1445-2(b), which certification shall be in the form attached as Schedule 5.7
hereto.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Expenses. Seller shall pay all expenses of Seller,
NCIC and Management Company (including attorneys' fees and expenses) and the
Companies shall pay all expenses of the Companies (including attorneys' fees and
expenses), in each case incurred in connection with this Agreement and the other
Transaction Agreements and the transactions contemplated hereby and thereby.
Section 6.2 Amendment. This Agreement may be amended, modified or
supplemented from time to time but only in writing signed by each of the parties
hereto.
Section 6.3 Notices. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing and shall
be deemed to have been given, when received:
(i) If to Seller, Management Company or NCIC, addressed as
follows:
13
Presidio Capital Investment Company, LLC
c/o NorthStar Capital Investment Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to any of the Companies and the OPs, addressed to such
individual Company or OP as follows:
c/o Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇,
or to such other individual or address as a party hereto may
designate for itself by notice given as herein provided.
Section 6.4 Waivers. The failure of a party hereto at any time or
times to require performance of any provision hereof shall in no manner affect
its right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or warranty
contained in this Agreement shall be effective unless in writing, and no waiver
in any one or more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a waiver of any
other condition or breach of any other term, covenant, representation or
warranty.
Section 6.5 Counterparts. This Agreement may be executed in one or
more counterparts, and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.6 Interpretation. Consummation of the transactions
contemplated herein shall not be deemed a waiver of a breach of or inaccuracy in
any representation, warranty or covenant or of any party's rights and remedies
with regard thereto. No specific representation, warranty or covenant contained
herein shall limit the generality or applicability of a more general
representation, warranty or covenant
14
contained herein. A breach of or inaccuracy in any representation, warranty or
covenant shall not be affected by the fact that any more general or less general
representation, warranty or covenant was not also breached or inaccurate.
Section 6.7 Applicable Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without giving effect to the principles of conflicts of law thereof.
Section 6.8 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective estates, heirs,
legal representatives, successors and assigns; provided, however, that no
assignment of any rights or obligations shall be made by any party hereto
without the written consent of each other party hereto.
Section 6.9 No Third-Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto and, to the extent provided herein, their
respective estates, heirs, successors, Affiliates and their respective
directors, officers, employees, agents and representatives, and no provision of
this Agreement other than Section 5.1 shall be deemed to confer upon other third
parties any remedy, claim, liability, reimbursement, cause of action or other
right.
Section 6.10 Further Assurances. Upon the reasonable request of
the Companies and the OPs, Seller and Management Company shall, and shall cause
any of their Affiliates to, execute and deliver to the Companies such other
documents, releases, assignments and other instruments as may be required to
effectuate completely the transfer and assignment to the Companies of, and to
vest fully in the Companies title to, the Shares, and in the OPs title to the
Advisory Agreements and to otherwise carry out the purposes of this Agreement.
Section 6.11 Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall not be affected thereby, and
there shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.
Section 6.12 Remedies Cumulative. Unless otherwise specified, the
remedies provided in this Agreement shall be cumulative and shall not preclude
the assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
Section 6.13 Entire Understanding. This Agreement and any party's
Related Agreements set forth the entire agreement and understanding of the
parties hereto and supersede any and all prior agreements, arrangements and
understandings among the parties.
Section 6.14 Jurisdiction of Disputes; Waiver of Jury Trial. In
the event any party to this Agreement commences any litigation, proceeding or
other legal action in connection with or relating to this Agreement, any Related
Agreement or any matters
15
described or contemplated herein or therein, with respect to any of the matters
described or contemplated herein or therein, the parties to this Agreement
hereby (a) agree under all circumstances absolutely and irrevocably to institute
any litigation, proceeding or other legal action in a court of competent
jurisdiction located within the Borough of Manhattan in The City of New York,
New York, whether a state or federal court; (b) agree that in the event of any
such litigation, proceeding or action, such parties will consent and submit to
personal jurisdiction in any such court described in clause (a) of this Section
6.14 and to service of process upon them in accordance with the rules and
statutes governing service of process (it being understood that nothing in this
Section 6.14 shall be deemed to prevent any party from seeking to remove any
action to a federal court in the Borough of Manhattan in The City of New York,
New York); and (c) agree to waive to the full extent permitted by law any
objection that they may now or hereafter have to the venue of any such
litigation, proceeding or action in any such court or that any such litigation,
proceeding or action was brought in an inconvenient forum.
Section 6.15 Seller. In dealing with Seller, the Companies may
always deal solely and directly with PCIC and make any payments or perform any
obligations to or as instructed by PCIC, in full satisfaction of any of the
Companies' obligations to any person included in Seller.
Section 6.16 REIT Qualification. No provision in this Agreement
shall be construed or interpreted in a manner that would adversely affect the
qualification of any Company as a real estate investment trust within the
meaning of section 856(a) of the Code.
[The remainder of this page is intentionally left blank.]
16
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the date first above written.
PRESIDIO CAPITAL INVESTMENT COMPANY, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
MILLENNIUM FUNDING I LLC
By: PRESIDIO CAPITAL INVESTMENT
COMPANY, LLC, its Sole Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
MILLENNIUM FUNDING II LLC
By: PRESIDIO CAPITAL INVESTMENT
COMPANY, LLC, its Sole Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
MILLENNIUM FUNDING III LLC
By: PRESIDIO CAPITAL INVESTMENT
COMPANY, LLC, its Sole Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
17
MILLENNIUM FUNDING IV LLC
By: PRESIDIO CAPITAL INVESTMENT
COMPANY, LLC, its Sole Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
SHELBOURNE MANAGEMENT LLC
By: PRESIDIO CAPITAL INVESTMENT
COMPANY, LLC, its Sole Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
NORTHSTAR CAPITAL INVESTMENT CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
SHELBOURNE PROPERTIES I, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
SHELBOURNE PROPERTIES II, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
18
SHELBOURNE PROPERTIES III, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
SHELBOURNE PROPERTIES I, L.P.
By: SHELBOURNE PROPERTIES I GP, LLC., its
General Partner
By: SHELBOURNE PROPERTIES I, INC., its
Sole Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
SHELBOURNE PROPERTIES II, L.P.
By: SHELBOURNE PROPERTIES II GP, LLC., its
General Partner
By: SHELBOURNE PROPERTIES II, INC., its
Sole Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
SHELBOURNE PROPERTIES III, L.P.
By: SHELBOURNE PROPERTIES III GP, INC.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
19
Schedule 2.2(a)
List of Cash Amounts
Defined Terms: For the purposes of this Schedule 2.2(a), the following
terms shall have the following meanings.
"MF-I" means Millennium Funding I LLC, a Delaware limited liability
company.
"MF-II" means Millennium Funding II LLC, a Delaware limited liability
company.
"MF-III" means Millennium Funding III LLC, a Delaware limited liability
company.
"MF-IV" means Millennium Funding IV LLC, a Delaware limited liability
company.
--------------------------------------------------------------------------------
MF-I MF-II MF-III MF-IV Total Cash Amounts
Shares
--------------------------------------------------------------------------------
Shelbourne I 10,053 413,850 -0- -0- 423,903 $14,303,060
--------------------------------------------------------------------------------
Shelbourne II 5,884 -0- 337,240 -0- 343,124 $17,866,603
--------------------------------------------------------------------------------
Shelbourne III 16,410 -0- -0- 368,816 385,226 $11,830,337
--------------------------------------------------------------------------------
Schedule 2.2(b)
List of Principal Amounts of the Notes and Numbers of Preferred Units
---------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal Amount Number of Preferred Units
of Note Issued to (Liquidation Preference)
Management Company Issued to Management
Company
--------------------------------------------------------------------------------
Shelbourne Properties I L.P. $18,939,737 812.674 Units ($812,674)
--------------------------------------------------------------------------------
Shelbourne Properties II L.P. $23,658,488 1,015.148 Units ($1,015,148)
--------------------------------------------------------------------------------
Shelbourne Properties III L.P. $15,665,421 672.178 Units ($672,178)
--------------------------------------------------------------------------------
Schedule 5.1
List of NCIC Employees Who Are Current Directors and/or Officers
----------------------------------------------------------------
o ▇▇▇▇▇ ▇. ▇▇▇;
o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇;
o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇;
o ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.;
o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇; and
o W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Schedule 5.2
List of Transition Services
---------------------------
Accounting
Asset Management
Investor Services
Treasury & Cash Management
Schedule 5.3
Schedule of Amounts to be Included in Reacquisition Price
For purposes of the following schedule, "Q1" shall be deemed to be
the period from February 14, 2002 through May 13, 2002, and succeeding Quarters
shall be deemed to commence on the day following the end of the preceding
"Quarter" and end on the 13th day of the third calendar month following the
calendar month in which the preceding Quarter ends.
--------------------------------------------------------------------------------
Prepayment Penalty
Quarter ($ in thousands)
--------------------------------------------------------------------------------
Q1 $20,186
--------------------------------------------------------------------------------
Q2 $18,838
--------------------------------------------------------------------------------
Q3 $17,531
--------------------------------------------------------------------------------
Q4 $16,265
--------------------------------------------------------------------------------
Q5 $15,039
--------------------------------------------------------------------------------
Q6 $13,851
--------------------------------------------------------------------------------
Q7 $12,699
--------------------------------------------------------------------------------
Q8 $11,584
--------------------------------------------------------------------------------
Q9 $10,503
--------------------------------------------------------------------------------
Q10 $9,457
--------------------------------------------------------------------------------
Q11 $8,442
--------------------------------------------------------------------------------
Q12 $7,460
--------------------------------------------------------------------------------
Q13 $6,508
--------------------------------------------------------------------------------
Q14 $5,585
--------------------------------------------------------------------------------
Q15 $4,692
--------------------------------------------------------------------------------
Q16 $3,826
--------------------------------------------------------------------------------
Q17 $2,987
--------------------------------------------------------------------------------
Q18 $2,175
--------------------------------------------------------------------------------
Q19 $1,387
--------------------------------------------------------------------------------
Q20 $624
--------------------------------------------------------------------------------
Schedule 5.6
List of Properties on Which Mortgages Will Be Placed
----------------------------------------------------
Century Park I, San Diego, CA
Commerce Plaza I, Richmond, VA
Livonia Plaza, Livonia, MI
Loch Raven Plaza, ▇▇▇▇▇▇▇, MD
▇▇▇▇▇▇▇▇ Festival, Matthews, NC
Seattle Tower, Seattle, WA
Southport, Ft. Lauderdale, FL
Sunrise Marketplace, Las Vegas, NV
▇▇▇▇▇▇ Square, Raleigh, NC
Tri-Columbus - Volvo, Westerville, OH
Schedule 5.7
FIRPTA CERTIFICATION
Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform Shelbourne Properties [I] [II] [III], Inc. that withholding of
tax is not required upon the disposition of a U.S. real property interest by
[Seller] ("Seller"), the undersigned hereby certifies the following on behalf of
Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations),
2. Seller's U.S. employer identification number is [ ], and
3. Seller's office address is:
c/o NorthStar Capital Investment Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Seller understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
DATE: February 14, 2002 _______________________
(Authorized signatory)