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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1 TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SHELBOURNE PROPERTIES I, INC.
(Name of subject company)
SHELBOURNE PROPERTIES I, INC.
(Name of person filing statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Including the associated preferred share purchase rights)
(Title of class of securities)
821373107
(CUSIP Number of class of securities)
RICHARD J. MCCREADY
C/O FIRST WINTHROP CORPORATION
7 BULFINCH PLACE, SUITE 500
BOSTON, MA 02114
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the person filing statement)
Copy to:
PETER D. LYONS
CHRISTA A. D'ALIMONTE
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is Shelbourne Properties I, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is c/o First Winthrop Corporation, 7 Bulfinch Place,
Suite 500, Boston, MA, 02114. The telephone number of the Company at its
principal executive offices is (617) 570-4600.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the common stock, par value $0.01 per share, of the Company (the
"Common Stock") and the associated preferred share purchase rights (together
with the Common Stock, the "Shares") issued under the Shareholder Rights
Agreement, dated as of February 8, 2001, as amended, between the Company and
American Stock Transfer & Trust Company (the "Rights Agreement"). As of July 1,
2002 there were 839,286 Shares issued and outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by HX Investors, L.P. (the
"Purchaser"), a Delaware limited partnership, disclosed in a Tender Offer
Statement on Schedule TO (the "Schedule TO"), dated July 5, 2002, to purchase
up to 251,785 issued and outstanding Shares at a purchase price of $53.00, net
to the seller in cash (the "Offer Price"), without interest, upon the terms,
and subject to the conditions, set forth in the Purchaser's Offer to Purchase,
dated July 5, 2002 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto
collectively constitute the "Offer"). The Purchaser beneficially owns
approximately 12% of the outstanding Shares and the Shares subject to the Offer
constitute approximately 30% of the outstanding Shares. Accordingly, if all of
the Shares sought in the Offer are purchased, the Purchaser would beneficially
own approximately 42% of the outstanding Shares.
The Offer is being made pursuant to (1) a Stock Purchase Agreement, dated
as of July 1, 2002 (the "Stock Purchase Agreement"), among the Company, the
Purchaser and Exeter Capital Corporation, a New Jersey corporation and the sole
general partner of Purchaser, and (2) a Settlement Agreement, dated July 1,
2002 (the "Settlement Agreement"), among the Purchaser and the additional
plaintiffs in the action who are listed on Exhibit A to the Settlement
Agreement, on the one hand, and the Company, Shelbourne Properties II, Inc.,
Shelbourne Properties III, Inc. (collectively, the "Shelbourne Companies"),
Presidio Capital Investment Company, LLC ("PCIC") and Shelbourne Management,
LLC ("Management"), on the other hand. The Settlement Agreement and the Stock
Purchase Agreement provide, among other things, that promptly after completion
of the Offer, at a meeting of the stockholders of the Company, the Company
will, and the Purchaser will take all reasonable action to cause the Company
to, submit to the stockholders a Plan of Liquidation (the "Plan of
Liquidation") for their approval. As soon as practicable following the approval
by the stockholders of the Plan of Liquidation, but in any event no later than
five days after the approval, the board of directors of the Company (the
"Board" or the "Board of Directors") will cause the Company to be dissolved by
filing with the Secretary of State of the State of Delaware a Certificate of
Dissolution (the "Certificate of Dissolution"). After the filing of the
Certificate of Dissolution, the Company will be liquidated pursuant to the Plan
of Liquidation (the "Liquidation"). Pursuant to the Stock Purchase Agreement
and the Settlement Agreement, the Purchaser has agreed to vote its Shares,
including any Shares acquired in the Offer, in favor of the Plan of
Liquidation. A copy of the Stock Purchase Agreement (which includes the Plan of
Liquidation as an Annex thereto) is filed herewith as Exhibit (e)(1) and is
incorporated herein by reference and a copy of the Settlement Agreement is
filed herewith as Exhibit (e)(2) and is incorporated herein by reference.
As set forth in the Offer to Purchase, the principal executive offices of
the Purchaser are located at 100 Jericho Quadrangle, Suite 214, Jericho, NY,
11753.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
The information contained in the Information Statement pursuant to Rule
14f-1 under the Securities Exchange Act of 1934 that is attached hereto as
Schedule II is incorporated herein by reference. Each
material agreement, arrangement or understanding and any actual or potential
conflict of interest between the Company or its affiliates and (a) the
Company's executive officers, directors or affiliates or (b) the Purchaser or
its executive officers, directors or affiliates, is either incorporated herein
by reference as a result of the previous sentence or set forth below.
The Stock Purchase Agreement. The summary of the Stock Purchase Agreement
and the description of the conditions of the Offer contained in the Offer to
Purchase, which is filed as Exhibit (a)(1) to this Statement and which has
previously been mailed to the Company's stockholders, are incorporated herein
by reference. Such summary and description are qualified in their entirety by
reference to the Stock Purchase Agreement, which has been filed as Exhibit
(e)(1) hereto and is incorporated herein by reference.
The Settlement Agreement. The summary of the Settlement Agreement
contained in the Offer to Purchase, which is filed as Exhibit (a)(1) to this
Statement and which has previously been mailed to the Company's stockholders,
is incorporated herein by reference. Such summary and description are qualified
in their entirety by reference to the Settlement Agreement, which has been
filed as Exhibit (e)(2) hereto and is incorporated herein by reference.
Plan of Liquidation. The summary of the Plan of Liquidation contained in
the Offer to Purchase, which is filed as Exhibit (a)(1)to this Statement and
which has previously been mailed to the Company's stockholders, is incorporated
herein by reference. Such summary and description are qualified in their
entirety by reference to the Plan of Liquidation, which is attached as Annex C
to the Stock Purchase Agreement, which has been filed as Exhibit (e)(1) hereto
and is incorporated herein by reference.
Director's Fee. Pursuant to resolutions passed by the Board on July 1,
2002, in consideration of the significant time and efforts that each of the
directors has made as a member of the Board and has put forth, among other
things, evaluating strategic alternatives to enhance stockholder value,
arranging for financing of the Company and otherwise managing the business of
the Company, the Board authorized a one-time payment to each of the directors
in the amount of $75,000.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
The Board of Directors of the Company, at a meeting held on July 1, 2002,
declared the advisability of the Settlement Agreement and the Stock Purchase
Agreement and the dissolution of the Company contemplated thereby, and
determined that the transactions contemplated by the Settlement Agreement and
the Stock Purchase Agreement, including the Offer and the Plan of Liquidation,
are fair to and in the best interests of the Company and the Company's
stockholders. At this meeting, the Board approved the Settlement Agreement, the
Stock Purchase Agreement and the Plan of Liquidation. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS DESIRING TO MAXIMIZE IMMEDIATE
LIQUIDITY OF THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER AND STOCKHOLDERS NOT SEEKING IMMEDIATE LIQUIDITY, BUT DESIRING TO
RECEIVE THEIR PRO RATA PORTION OF THE LIQUIDATION PROCEEDS CONTEMPLATED BY THE
PLAN OF LIQUIDATION, SHOULD NOT ACCEPT THE OFFER, AND SHOULD VOTE TO APPROVE
THE ADOPTION OF THE PLAN OF LIQUIDATION AT A MEETING OF THE STOCKHOLDERS TO BE
HELD TO CONSIDER SUCH MATTER.
(b) (i) Background
The Company was originally formed in 1983 as a California limited
partnership. On April 17, 2001, the limited partnership was converted to a
Delaware corporation. At that time, PCIC, an entity controlled by NorthStar
Capital Investment Corp. ("NorthStar"), owned approximately 33% of the
Company's common stock, approximately 27% of the common stock of Shelbourne
Properties II, Inc. and approximately 32% of the common stock of Shelbourne
Properties III, Inc., and a wholly owned subsidiary of PCIC, Shelbourne
Management, LLC ("Management") was party to an advisory agreement with each
Shelbourne Company, pursuant to which Management managed the business of each
of the Shelbourne Companies.
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The initial directors of the Company consisted of Michael Ashner, who is
President of the general partner of the Purchaser, five individuals who were
affiliated with PCIC, and three individuals who were not affiliated with PCIC.
Mr. Ashner was also the President of each of the Shelbourne Companies. Mr.
Ashner resigned as a director and as President of each of the Shelbourne
Companies as of August 15, 2001.
In October 2001, PCIC entered into discussions with Mr. Ashner and a third
party in connection with (1) a proposed sale of PCIC's interest in the
Shelbourne Companies and (2) a proposed transfer of PCIC's interest in the
advisory agreements to an entity controlled by Mr. Ashner and the third party
(the "Proposed Transaction"). As a condition to the Proposed Transaction, Mr.
Ashner and the third party required that the boards of directors of the
Shelbourne Companies grant certain waivers as to share ownership limitations in
the Shelbourne Companies' certificates of incorporation and certain other
matters. At a meeting of the Board of Directors on November 20, 2001, the Board
established a special committee consisting of the three independent directors
of the Company (the "Special Committee") for the purpose of reviewing and
evaluating the Proposed Transaction. The Special Committee engaged independent
legal counsel and financial advisors (which were not Lazard Freres & Co. LLC
("Lazard")) to assist in its review of the Proposed Transaction.
In late December 2001, Mr. Ashner, the third party and PCIC prepared a
proposed agreement, which provided for the acquisition by Mr. Ashner and the
third party of PCIC's interest in the Shelbourne Companies as well as the
advisory agreements for, among other things, an aggregate purchase price to
PCIC of $92.5 million, subject to adjustment.
Throughout December 2001 and January 2002, the Special Committee held
numerous meetings and discussions with its legal and financial advisors to
evaluate and consider the Proposed Transaction. In addition, during this period
the Special Committee's financial advisors met with Mr. Ashner as part of their
due diligence review of the Proposed Transaction.
In February 2002, representatives of the Special Committee advised Mr.
Ashner and the third party that the Special Committee had concluded that it was
not prepared to recommend to the Board that the requested waivers needed to
complete the Proposed Transaction be granted. The Special Committee recommended
to each board of directors that it explore the feasibility and advisability of
a transaction in which each of the Shelbourne Companies would repurchase the
shares of its common stock held by PCIC and acquire PCIC's interest in its
respective advisory agreement (the "February 2002 Transaction"). Thereafter,
the Special Committee and its advisors and PCIC and its advisors actively
negotiated the terms of the proposed February 2002 Transaction.
At a meeting of the Special Committee on February 13, 2002, the Special
Committee reviewed and considered the February 2002 Transaction. The Special
Committee unanimously recommended that the Board, and the Board unanimously
did, approve the February 2002 Transaction.
On February 14, 2002, the Shelbourne Companies announced the consummation
of the February 2002 Transaction. The details of the February 2002 Transaction
are contained in the Company's Current Report on Form 8-K filed by the Company
with the Securities and Exchange Commission on February 14, 2002.
In connection with the February 2002 Transaction, the boards of directors
of the Shelbourne Companies, through a series of actions, reduced the size of
each board to four members, comprised of the Special Committee members and one
of the PCIC-affiliated directors, and the newly constituted boards were
reclassified as equally as possible among the three classes of the Board.
On February 22, 2002, a derivative action, In re Shelbourne Properties
Derivative Litigation, Consolidated C.A. No, 19442-NC (Del. Ch.), was filed in
the Court of Chancery of the State of Delaware by certain putative stockholders
of the Company (the "Derivative Action"). The Derivative Action challenged the
February 2002 Transaction on various grounds. At or about the same time, a
separate action brought by another stockholder of the Company, alleging both
derivative and direct claims relating to the February 2002 Transaction, was
filed in the Supreme Court of the State of New York, County of New York. This
action was subsequently settled and voluntarily dismissed.
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In April 2002, the Shelbourne Companies announced that they had hired
Lazard to assist in their ongoing efforts to evaluate strategic and financial
alternatives that would enhance stockholder value.
Representatives of Lazard first met with representatives of the Purchaser
on April 8, 2002. At that time, the Purchaser discussed various possible
transactions, including one that would involve the Company issuing convertible
preferred securities to the Purchaser and giving control of the Company to the
Purchaser. The Board of Directors of the Company discussed this proposal, but
did not consider it worthy of additional consideration. The Board of Directors
subsequently directed Lazard to initiate a marketing process to solicit, on
behalf of the Board, proposals to acquire or recapitalize the Shelbourne
Companies. As part of the marketing process, representatives of Purchaser and
Lazard communicated from time to time concerning Purchaser's continuing
interest in a transaction with the Company.
From April 2002 through the end of June 2002, Lazard conducted a process
to solicit acquisition proposals, pursuant to which Lazard contacted
approximately 30 potential parties, 21 of whom entered into confidentiality
agreements, and 10 of whom submitted proposals.
On May 22, 2002, a lawsuit, HX Investors, L.P., et al. v. Shelbourne
Properties I, Inc. et al., Del. Ch., C.A. No. 19644, was filed against the
Company in the Court of Chancery of the State of Delaware by a group of
putative stockholders, including the Purchaser. At or about the same time, the
lead plaintiffs in the Derivative Action filed a similar lawsuit on behalf of a
class of stockholders of the Company in the same court (collectively, the
"Statutory Actions"). The Statutory Actions challenged certain actions taken at
the time of the February 2002 Transaction in connection with the composition of
the Board. From May 22, 2002 through July 1, 2002, the Statutory Actions
proceeded through the discovery phase and a trial date was set for July 2,
2002.
On Wednesday, June 12, representatives of Lazard, Donald W. Coons, a
director of the Company (by telephone) and Richard J. McCready, an officer of
PCIC and designated representative of the Board of Directors, met with
representatives of the Purchaser to discuss the terms of a possible settlement
to the Statutory Actions. Among the possible terms discussed was the granting
of an option by the Purchaser to the Company to purchase an amount of Shares
held by the Purchaser equal to 10% of the outstanding Shares, as well as a
possible alternative settlement that would involve a tender by the Purchaser
for a certain number of Shares and a subsequent plan of liquidation of the
Company.
On Friday, June 14, 2002, representatives of the Company and the
Purchaser, in connection with negotiating a settlement of the Statutory
Actions, had further discussions regarding the proposed granting of an option
by the Purchaser to the Company to purchase Shares held by the Purchaser.
Negotiations between representatives of the Company and the Purchaser regarding
the settlement of the Statutory Actions and the option arrangement continued on
Saturday, June 15, 2002 and Sunday, June 16, 2002. On June 16, the Company and
the Purchaser ceased negotiations without reaching agreement on the settlement
of the Statutory Actions and the option arrangement.
On Monday, June 17, 2002, the Board of Directors met with its advisors to
discuss the Purchaser's proposed tender offer and plan of liquidation. The
Board of Directors authorized its advisors to continue discussions with the
Purchaser and to explore a transaction that would give stockholders the option
of immediately selling their Shares or receiving, over a longer period of time,
proceeds from the liquidation of the Company.
On Tuesday, June 18, 2002, representatives of the Company and the
Purchaser reconvened negotiations of a settlement of the Statutory Actions and,
in connection therewith, began negotiating the terms of the Offer, the
Settlement Agreement, the Stock Purchase Agreement and the Plan of Liquidation.
During the course of that week, representatives of the Purchaser and the
Company continued to negotiate the terms of the Offer, the Settlement
Agreement, the Stock Purchase Agreement and the Plan of Liquidation.
Negotiations regarding the Offer, the Settlement Agreement, the Stock Purchase
Agreement and the Plan of Liquidation continued through Sunday, June 30, 2002.
This stage of the negotiations included lead counsel for the plaintiffs in the
Derivative Action.
On Sunday, June 30, 2002, the Board of Directors held a meeting to discuss
the proposed terms of the Offer, the Settlement Agreement, the Stock Purchase
Agreement and the Plan of Liquidation. At such
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meeting, the Company's legal advisors gave a presentation outlining the
proposed terms of the transaction and settlement. In addition, at that meeting
Lazard reviewed the terms of proposals that had been received from parties
other than the Purchaser and gave a presentation regarding the financial terms
of the proposed transaction and delivered its oral opinion that as of such date
and based upon and subject to the various considerations and assumptions set
forth in its opinion, the Offer Price, together with the proceeds from the
Liquidation of the Company pursuant to the Plan of Liquidation, taken as a
whole, to be received by the stockholders of the Company (other than the
Purchaser) in the Offer and Plan of Liquidation, was fair to such stockholders
from a financial point of view. The Board of Directors also discussed a
proposed settlement of the Derivative Action. The Board of Directors directed
counsel to seek to finalize a settlement of the Derivative Action and postponed
taking final action on the proposed transaction with the Purchaser pending the
conclusion of those settlement discussions.
On Monday, July 1, 2002, representatives of the Purchaser and the Company
finalized the terms of the Offer, the Settlement Agreement, the Stock Purchase
Agreement and the Plan of Liquidation. In addition, the parties to the
Derivative Action agreed in principle to the terms of a settlement of the
Derivative Action and prepared a memorandum of understanding reflecting those
terms. After the close of business on July 1, 2002, the Board of Directors met
with its advisors to review the final terms of the Offer, the Settlement
Agreement, the Stock Purchase Agreement and the Plan of Liquidation as well as
the proposed settlement of the Derivative Action. During the course of the
Board's discussions and deliberations, Lazard delivered its written opinion
that, as of July 1, 2002, and based upon and subject to the various
considerations and assumptions set forth in its opinion, the Offer Price,
together with the proceeds from the Liquidation of the Company pursuant to the
Plan of Liquidation, taken as a whole, to be received by the stockholders of
the Company (other than the Purchaser) in the Offer and Plan of Liquidation,
was fair to such stockholders from a financial point of view. The Board of
Directors then unanimously approved the Offer, the Settlement Agreement, the
Stock Purchase Agreement and the Plan of Liquidation, and authorized execution
of the memorandum of understanding settling the Derivative Action.
The Settlement Agreement, the Stock Purchase Agreement and the memorandum
of understanding were executed on the evening of July 1, 2002, and the
Purchaser commenced the Offer on July 5, 2002.
(ii) Reasons for the Recommendation of the Board of Directors
In reaching its recommendations described above in this Item 4, the Board
considered a number of factors, including the following:
1. Transaction Financial Terms/Premium to Market Price. The relationship
of the consideration to be paid in the Offer and contemplated by the
Liquidation to recent and historical market prices of the Common Stock.
The consideration of $53.00 per Share in the Offer represents a 23%
premium over the $43.00 closing price per Share of Common Stock on July
1, 2002. The Board also considered the form of consideration to be paid
to holders of Shares in the Offer and the Liquidation, taking into
account the certainty of value and timing of payment of the
consideration to be paid in the Offer as compared to the Liquidation
component, as well as the fact that the Liquidation component permits
the Company stockholders to participate in the dissolution of the
Company in accordance with the Plan of Liquidation. The Board believed
that the total consideration was the highest per Share consideration
that could be negotiated with the Purchaser. The Board was aware that
the consideration received by holders of Shares in the Offer and the
Liquidation would be taxable to such holders for federal income tax
purposes.
2. Lazard Freres & Co. LLC Analyses. The presentations from Lazard and the
written opinion thereof dated July 1, 2002, that, as of such date, based
upon and subject to certain considerations and assumptions set forth in
its opinion, the Offer Price, together with the proceeds from the
Liquidation of the Company in accordance with the Plan of Liquidation,
taken as a whole, to be received by the stockholders of the Company
(other than the Purchaser) in the Offer and Plan of Liquidation, was
fair to such stockholders from a financial point of view. A copy of the
written opinion delivered by Lazard to the Board, setting forth the
procedures followed, the matters considered and the assumptions made by
Lazard in arriving at its opinion, is attached hereto as
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Schedule I, and is incorporated herein by reference. Stockholders are
urged to read this opinion in its entirety. The Board was aware that
Lazard becomes entitled to certain fees described under "Item 5.
Persons/Assets Retained, Employed, Compensated or Used" upon the
consummation of the Offer.
3. The Company's Operating and Financial Condition. The current and
historical financial condition and results of operations of the Company,
as well as the prospects and strategic objectives of the Company,
including the risks involved in achieving those prospects and
objectives, and the current and expected conditions in the industry in
which the Company operates.
4. Impact of the Transaction on Interim Operations of the Company. The
possible negative impact on the business of the Company between signing
and closing due to announcement of the Offer and the interim covenants
relating to the operation of the Company's business between signing of
the Stock Purchase Agreement and the consummation of the Offer.
5. Limited Conditions. The limited nature of the conditions to
Purchaser's obligation to consummate the Offer, including the absence of
a financing condition, and the perceived ability of Purchaser to
consummate the Offer.
6. Strategic Alternatives. The presentation of Lazard and the Board's
review with respect to the strategic alternatives available to the
Company, including the Company remaining an independent public company,
the possibility of acquisitions or mergers with other companies and
other transactions, as well as the risks and uncertainties associated
with such alternatives.
7. Alternative Proposals. The results of an extensive and highly visible
process seeking business combination proposals, pursuant to which Lazard
contacted approximately 30 potential parties, 21 of whom entered into
confidentiality agreements, and 10 of whom submitted proposals. The
Board, with the aid of Lazard, reviewed carefully the proposals
received. The Board noted that the Purchaser's proposal had a higher
value, taken together, than any of the other proposals and had the
highest degree of certainty of closing. The Board was aware that the
potential liquidation proceeds of the proposed Plan of Liquidation could
be adversely affected by future events prior to the distribution of
proceeds pursuant to the Plan of Liquidation.
8. Timing and Manner of Completion. The anticipated timing of consummation
of the Offer, which will provide short-term liquidity to stockholders
who tender their Shares in the Offer, and the Liquidation, which will
enable stockholders that do not tender pursuant to the Offer to receive
the proceeds of the Liquidation.
9. Realization of Liquidation Proceeds. The fact that stockholders may not
realize the amount of liquidation proceeds contemplated by the Plan of
Liquidation.
10. Time to Effect Plan of Liquidation. The fact that although the Plan of
Liquidation contemplates that the Liquidation will be effected in three
years, the Liquidation could take a longer period of time.
11. Alternative Transactions. The fact that under the terms of the Stock
Purchase Agreement, while the Company is prohibited from soliciting
acquisition proposals from third parties, the Company may participate in
negotiations with third parties who deliver an unsolicited proposal if
(a) a majority of the Board believes, if consummated, such a proposal
would result in a transaction that is superior to the Offer and (b)
Lazard advises the Board that the proposal would, if consummated, be
superior to the Offer from a financial point of view.
12. Ability to Terminate for Fiduciary Reasons. The fact that the Board is
permitted, subject to the payment to the Purchaser of a $481,372
termination fee, to terminate the Stock Purchase Agreement if, prior to
the purchase of Shares pursuant to the Offer, the Board determines in
good faith, upon consultation with outside counsel, that it is required
to do so by its fiduciary duties under applicable law.
6
13. Corporate Governance. The fact that the terms of the Settlement
Agreement and the Stock Purchase Agreement require the Company to
implement and abide by certain corporate governance provisions (as more
fully described in the Offer to Purchase).
14. Potential Conflicts of Interests. The Board was aware of the potential
conflicts of interest between the Company, on the one hand, and certain
of the Company's officers, directors or affiliates, on the other hand,
all as described in the Offer under "Item 3. Past Contacts,
Transactions, Negotiations and Agreements."
15. Settlement of Outstanding Litigation. The Board, contemporaneously with
executing the Settlement Agreement and the Stock Purchase Agreement, was
able to negotiate and enter into settlement agreements with respect to
all outstanding litigation involving the Company.
16. Best Interests of Stockholders. The Board's belief, based in part on
the factors described above, that the interests of stockholders would be
best served by consummation of the Offer and the implementation of the
Plan of Liquidation.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive, but includes the material factors
considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Offer and the Plan of Liquidation, the
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination and recommendation. In addition, individual directors may have
given differing weights to different factors.
(c) Intent to Tender
To the best knowledge of the Company, Robert Martin, the only director or
executive officer who owns Shares, desires to receive his pro rata portion of
the liquidation proceeds of the Company contemplated by the Plan of
Liquidation, and therefore currently intends not to tender the Shares owned by
him, and to vote such Shares in favor of the Plan of Liquidation at the
stockholders' meeting of the Company held to consider that matter.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED
Pursuant to an engagement letter among Lazard and the Shelbourne
Companies, the Company retained Lazard in April 2002 to act as its financial
advisor in connection with the Company's review of strategic and financial
planning matters. The Board retained Lazard based upon Lazard's qualifications,
experience and expertise. Lazard is an internationally recognized investment
banking and advisory firm. Lazard, as part of its investment banking and
financial advisory business, is continuously engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
Pursuant to the engagement letter, upon the consummation of the Offer,
Lazard will receive an aggregate fee of $2,500,000 from the Shelbourne
Companies, provided, however, that any monthly fees previously paid to Lazard
pursuant to the engagement letter will be credited against that fee. The
Company has also agreed to indemnify Lazard or any of its members, employees,
agents, affiliates or controlling persons, if any, against certain liabilities
and expenses, including liabilities under federal securities laws, related to
or arising out of Lazard's engagement.
On April 3, 2002, the Shelbourne Companies retained Innisfree M&A
Incorporated ("Innisfree") to provide consulting and analytic services. In
connection with such services, Innisfree will receive an aggregate fee of
$25,000 from the Shelbourne Companies, plus expenses incurred in connection
with the distribution of documents. In the event of a contested solicitation,
the Company agreed to retain Innisfree, and Innisfree agreed to represent the
Company, at fees to be mutually determined.
On or about February 27, 2002, the Shelbourne Companies retained Sitrick
and Company to provide public relations services.
Except as described above, neither the Company, nor any person acting on
its behalf, has employed, retained or agreed to compensate any person or class
of persons to make solicitations or recommendations in connection with the
Offer or the Plan of Liquidation.
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ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No discretionary transactions in Shares have been effected during the past
60 days by the Company or, to the knowledge of the Company, by any executive
officer, director, affiliate or subsidiary of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (a) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (b) any
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (c) any purchase, sale
or transfer of a material amount of assets of the Company or any subsidiary of
the Company; or (d) any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board, agreements in principle, or signed contracts entered
into in response to the Offer that relate to one or more of the matters
referred to in the preceding paragraph.
ITEM 8. ADDITIONAL INFORMATION
(a) Rights Agreement
On July 1, 2002, the Company and American Stock Transfer & Trust Company
amended the Rights Agreement to provide, among other things, that the execution
and delivery of the Stock Purchase Agreement, the Settlement Agreement and the
consummation of the transactions contemplated thereby will not cause (a) the
Purchaser or any affiliate or associate of the Purchaser to be deemed an
Acquiring Person (as defined in the Rights Agreement), (b) the occurrence of a
Shares Acquisition Date (as defined in the Rights Agreement), (c) the
occurrence of a Distribution Date (as defined in the Rights Agreement), or (d)
activation of "flip over" rights under Section 13 of the Rights Agreement. A
copy of the amendment to the Rights Agreement is filed herewith as Exhibit
(e)(3) and is incorporated herein by reference.
(b) Delaware Corporation Law
The Company is incorporated under the laws of the State of Delaware. No
appraisal rights are available in connection with the Offer.
(c) Regulatory Approvals
Except as set forth herein, the Company and the Purchaser are not aware of
any licenses or regulatory permits that appear to be material to the business
of the Company and its subsidiaries, taken as a whole, and that might be
adversely affected by the acquisition of Shares in the Offer. In addition,
except as set forth herein, the Company and the Purchaser are not aware of any
filings, approvals or other actions by or with any governmental authority or
administrative or regulatory agency that would be required for the acquisition
or ownership of the Shares. Should any such approval or other action be
required, the Company and the Purchaser expect to seek such approval or action,
except as described under "State Takeover Laws." Should any such approval or
other action be required, the Company and the Purchaser cannot be certain that
they would be able to obtain any such approval or action without substantial
conditions or that adverse consequences might not result to the Company's or
its subsidiaries' businesses, or that certain parts of the Company's, the
Purchaser's or any of their respective subsidiaries' businesses might not have
to be disposed of or held separate in order to obtain such approval or action.
In that event, the Purchaser may not be required to purchase any Shares in the
Offer.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of Delaware Law prevents an
"interested stockholder" (generally a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock, or an
affiliate or associate thereof) from engaging in a "business combination"
(defined to include mergers and certain
8
other transactions) with a Delaware corporation for a period of three years
following the date such person became an interested stockholder unless, among
other things, prior to such date the board of directors of the corporation
approved either the business combination or the transaction in which the
interested stockholder became an interested stockholder. On July 1, 2002, prior
to the execution of the Settlement Agreement and the Stock Purchase Agreement,
the Board by unanimous vote of all directors at a meeting held on such date,
approved the Settlement Agreement and the Stock Purchase Agreement, and
determined that each of the Offer and the Plan of Liquidation is fair to, and
in the best interest of, the stockholders of the Company. Accordingly, Section
203 is inapplicable to the Offer and the Plan of Liquidation.
A number of states have adopted takeover laws and regulations that purport
to be applicable to attempts to acquire securities of corporations that are
incorporated in those states or that have substantial assets, stockholders,
principal executive offices or principal places of business in those states. To
the extent that these state takeover statutes purport to apply to the Offer or
the Plan of Liquidation, we believe that those laws conflict with U.S. federal
law and are an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Statute, which, as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult. The reasoning in that decision is likely to apply
to certain other state takeover statutes. In 1987, however, in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court of the United States held that the
State of Indiana could as a matter of corporate law and, in particular, those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, as long
as those laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma
ruled that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma, because they would subject those
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a federal district court in
Florida held, in Grand Metropolitan Plc v. Butterworth, that the provisions of
the Florida Affiliated Transactions Act and Florida Control Share Acquisition
Act were unconstitutional as applied to corporations incorporated outside of
Florida.
The Company, directly or through its subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Purchaser and the Company do not know whether any of these laws
will, by their terms, apply to the Offer and have not complied with any such
laws. Should any person seek to apply any state takeover law, the Purchaser
will take such action as then appears desirable, which may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to the Offer, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Purchaser
may not be obligated to accept for payment any Shares tendered.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied. The Company does
not believe that the exchange of Shares for cash pursuant to the Offer is
subject to such requirements.
(d) Litigation
Pursuant to the Settlement Agreement entered into by the Company
contemporaneously with the Stock Purchase Agreement, and pursuant to a
memorandum of understanding entered into July 1, 2002 regarding the Derivative
Action, the Company has settled or entered into arrangements to settle all
outstanding litigation against the Company.
9
(e) The Purchaser's Designation of Persons to be elected to the Board of
Directors
The Information Statement attached as Schedule II to this Statement is
being furnished in connection with the possible designation by the Purchaser,
pursuant to the terms of the Settlement Agreement and the Stock Purchase
Agreement, of certain persons to be elected to the Board of Directors other
than at a meeting of the Company's stockholders and such Information Statement
is incorporated herein by reference.
(f) The Company's Certificate of Incorporation
The Company's certificate of incorporation restricts any "person" from
being the "beneficial owner" (each as defined in the certificate of
incorporation) of more than 8% of the issued and outstanding Shares. In a
resolution passed on July 1, 2002, the Board, pursuant to the Company's
certificate of incorporation and subject to the completion of the Tender Offer,
waived the ownership limit as it applies to the Purchaser so long as the
Purchaser's "beneficial ownership" does not exceed 42% of the issued and
outstanding Shares.
ITEM 9. EXHIBITS
The following Exhibits are filed herewith:
EXHIBIT
NO. DESCRIPTION
--- -----------
(a)(1) Offer to Purchase, dated July 5, 2002 (incorporated by reference
to Exhibit (a)(1) to the Schedule TO, filed by the Purchaser with
the Securities and Exchange Commission (the "SEC") on July 5,
2002).
(a)(2) Form of Letter of Transmittal, dated July 5, 2002 (incorporated
by reference to Exhibit (a)(2) to the Schedule TO, filed by the
Purchaser with the SEC on July 5, 2002).
(a)(3) Letter to Stockholders from the Directors of the Company, dated
July 9, 2002.*
(a)(4) Joint Press Release of the Company, Shelbourne Properties II,
Inc. and Shelbourne Properties III, Inc., dated July 2, 2002
(incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K filed by the Company with the SEC on
July 2, 2002).
(a)(5) Fairness Opinion of Lazard Freres & Co. LLC, dated July 1, 2002
(included as Schedule I hereto).*
(a)(6) Information Statement pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder (included as
Schedule II hereto).*
(e)(1) Stock Purchase Agreement, dated as of July 1, 2002, among the
Purchaser, Exeter Capital Corporation and the Company
(incorporated by reference to Exhibit 2.1 to the Current Report
on Form 8-K filed by the Company with the SEC on July 2, 2002).
(e)(2) Settlement Agreement, dated July 1, 2002, among the Purchaser,
and the additional plaintiffs in the action who are listed on
Exhibit A to the Settlement Agreement, on the one hand, and the
Company, Shelbourne Properties II, Inc., and Shelbourne
Properties III, Inc., Presidio Capital Investment Company, LLC
and Shelbourne Management, LLC, on the other hand (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed by the Company with the SEC on July 2, 2002).
(e)(3) Amendment No. 2 to the Shareholder Rights Agreement, dated as of
July 1, 2002, between the Company and American Stock Transfer &
Trust Company as Rights Agent (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed by the
Company with the SEC on July 8, 2002).
----------
* Included with this Statement mailed to stockholders.
10
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
SHELBOURNE PROPERTIES I, INC.
By: /s/ Richard J. McCready
-----------------------------------
Richard J. McCready
Secretary
Dated: July 9, 2002
SCHEDULE I
July 1, 2002
The Board of Directors
Shelbourne Properties I, Inc.
7 Bulfinch Place, Suite 500
Boston, MA 02114
Dear Members of the Board:
We understand that Shelbourne Properties I, Inc. (the "Company"), Exeter
Capital Corporation ("Exeter") and HX Investors, L.P. ("HX" and, together with
Exeter, the "Purchaser") have entered into a Stock Purchase Agreement, dated as
of July 1, 2002 (the "Agreement"), pursuant to which, among other things, (i)
Purchaser agreed to commence a tender offer (the "Tender Offer") to purchase up
to 30% of the outstanding common stock, par value $.01 per share, of the
Company (the "Common Stock") at a price per share of $53.00 (the "Offer Price")
and (ii) subsequent to the completion of the Tender Offer, the Company will
submit to the Company Stockholders (as defined below) for approval and
adoption, the Plan of Liquidation attached as Annex C to the Agreement (the
"Plan of Liquidation" and, together with the Tender Offer, the "Transaction")
pursuant to which Company Stockholders shall be entitled to receive
distributions of the proceeds from the liquidation of the Company in accordance
with the Plan of Liquidation (the "Liquidation Proceeds" and, together with the
Offer Price, the "Consideration"). In addition, we understand that each of
Shelbourne Properties II, Inc. ("Shelbourne II") and Shelbourne Properties III,
Inc. ("Shelbourne III") have entered into separate Stock Purchase Agreements
with Purchaser, each dated as of July 1, 2002, pursuant to which (a) Purchaser
agreed to commence separate tender offers to purchase up to 30% of the
outstanding common stock of each of Shelbourne II and Shelbourne III (the
"Shelbourne II and III Tender Offers"), at a price per share of $62.00 and
$49.00, respectively (the "Shelbourne II and III Offer Prices") and (b)
subsequent to the completion of the respective tender offers, each of
Shelbourne II and Shelbourne III will submit to their respective shareholders
for approval and adoption, a plan of liquidation (the "Shelbourne II and III
Liquidations" and, together with the Shelbourne II and III Tender Offers, the
"Shelbourne II and III Transactions") pursuant to which such shareholders shall
be entitled to receive distributions of the net proceeds from the relevant
liquidation in accordance with such plan of liquidation (the "Shelbourne II and
III Liquidation Proceeds").
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the Common Stock (other than Purchaser and its
affiliates) (the "Company Stockholders") of the Consideration, taken as a
whole, to be received by such holders pursuant to the Transaction. In
connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement and
the schedules, exhibits and annexes thereto;
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed various financial budgets, asset appraisals and other
data provided to us by the Company relating to its business;
(iv) Held discussions with members of the Board of Directors of the
Company and senior management of the Company's property
management and asset management firms with respect to the
business and prospects of the Company and the strategic
objectives the Company;
(v) Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the businesses of the Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to those of the Company;
(vii) Reviewed the historical stock prices and trading volumes of the
Common Stock; and
(viii) Reviewed such other information and conducted such other
financial studies, analyses and investigations as we deemed
appropriate.
We have not received any forecasts with respect to the Company, and have
been informed that no such forecasts exist.
In conducting our analysis and in arriving at our opinion as expressed
herein, we have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the properties, assets or liabilities of the Company, or concerning the
solvency or fair value of the Company or its properties. In addition, the Board
of Directors of the Company has instructed us to assume for purposes of the
rendering of our opinion, that the Liquidation Proceeds are equal to $69.59 per
share of Common Stock (the "Net Liquidation Price Per Share"), which price as
determined by the Company is equal to the ninety percent (90%) of the per share
appraised liquidation value of the properties and assets of the Company as
adjusted to reflect the repayment of indebtedness and the incurrence of
liquidation costs and expenses. We have assumed no responsibility for and
express no view as to whether the Company's assumption of the Net Liquidation
Price Per Share is the correct determination of the Liquidation Proceeds that
will be received by the Common Stockholders, and we have not independently
verified the underlying asset appraisal, assumptions and discounts on which
such price is based.
Further, our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made available to us
as of, the date hereof.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and Purchaser and that obtaining
the necessary regulatory approvals for the Transaction will not have an adverse
effect on the Company. We have also assumed that each of the Plan of
Liquidation and the Shelbourne II and III Liquidations will be consummated
concurrently in accordance with their terms without any waiver or
modifications, and that the Plan of Liquidation and the Shelbourne II and III
Liquidations will not result in any prepayment penalty on the preferred
interests of the operating partnership of each of the Company, Shelbourne II
and Shelbourne III.
Lazard Freres & Co. LLC is acting as investment banker to the Board of
Directors of the Company in connection with the Transaction and will receive a
fee for our services, a substantial portion of which is contingent upon the
consummation of the Tender Offer. Lazard Freres & Co. LLC is also acting as
investment banker to the Board of Directors of each of Shelbourne II and
Shelbourne III in connection with the Shelbourne II and III Transactions.
However, no opinion is made with respect to the allocation by Purchaser of the
(a) Offer Price and the Shelbourne II and III Offer Prices and (b) Liquidation
Proceeds and the Shelbourne II and III Liquidation Proceeds. Lazard Freres &
Co. LLC provides a full range of investment banking and security services and,
in the course of our trading and market making activities, may from time to
time effect transactions and hold securities, including derivative securities,
of the Company for our own account and for the accounts of customers.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered in connection with its
consideration of the Transaction. No opinion is made herein with respect to the
fairness of the Shelbourne II and III Transactions, the Shelbourne II and III
Liquidation Proceeds or the Shelbourne II and III Offer Prices. The opinion is
not intended and does not constitute a recommendation to any Company
Stockholder as to whether such holder should tender their Common Stock into the
Tender Offer or whether a Company Stockholder should vote to adopt and approve
the Plan of Liquidation. It is understood that this letter may not be disclosed
or otherwise referred to without our prior consent, except for the reproduction
of this letter in its entirety in filings the Company may be required to make
with the Securities and Exchange Commission and except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Consideration, taken as a whole, to be received by the Company Stockholders in
the Transaction is fair to the Company Stockholders from a financial point of
view.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Matthew J. Lustig
------------------------------------
Matthew J. Lustig
Managing Director
SCHEDULE II
SHELBOURNE PROPERTIES I, INC.
C/O FIRST WINTHROP CORPORATION
7 BULFINCH PLACE, SUITE 500
BOSTON, MA 02114
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
BACKGROUND INFORMATION
This information statement (the "Information Statement") is being mailed
on or about July 9, 2002 as part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") of Shelbourne Properties I, Inc. (the
"Company"). You are receiving this Information Statement in connection with the
possible election of persons designated by HX Investors, L.P., a Delaware
limited partnership (the "Purchaser"), to a majority of seats on the board of
directors of the Company (the "Board of Directors" or the "Board"). There will
be no vote or other action by stockholders of the Company in connection with
this Information Statement. Voting proxies regarding shares of the Common Stock
(as defined below) are not being solicited from any stockholder. You are urged
to read this Information Statement carefully. You are not, however, required to
take any action in connection with this Information Statement.
On July 1, 2002, the Company entered into a Settlement Agreement (the
"Settlement Agreement") and a Stock Purchase Agreement (the "Stock Purchase
Agreement") with the Purchaser, pursuant to which the Purchaser has commenced
an offer to purchase up to 251,785 shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock") and the associated preferred share
purchase rights (the Common Stock and any associated preferred share purchase
rights are referred to in this Information Statement as the "Shares"), for
$53.00, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase relating to the offer, filed by the
Purchaser with the Securities and Exchange Commission (the "SEC") on July 5,
2002 (as amended from time to time, the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with the Offer to Purchase, as
amended or supplemented from time to time, constitute the "Offer"). Copies of
the Offer to Purchase and the Letter of Transmittal have been mailed to
stockholders of the Company and are filed as Exhibit (a)(1) and Exhibit (a)(2),
respectively, to the Tender Offer Statement on Schedule TO filed by the
Purchaser with the SEC in connection with the Offer.
The Settlement Agreement and the Stock Purchase Agreement provide that,
subject to the satisfaction or waiver of certain conditions, following
completion of the Offer, and in accordance with the Delaware General
Corporation Law, at a meeting of the stockholders of the Company, the Company
will, and the Purchaser will take all reasonable action to cause the Company
to, submit to the stockholders a Plan of Liquidation (the "Plan of
Liquidation") for their approval. As soon as practicable following the approval
by the stockholders of the Plan of Liquidation, but in any event no later than
five days after the approval, the Board of Directors will cause the Company to
be dissolved by filing with the Secretary of State of the State of Delaware a
Certificate of Dissolution (the "Certificate of Dissolution"). After the filing
of the Certificate of Dissolution, the Company will be liquidated pursuant to
the Plan of Liquidation (the "Liquidation").
The Stock Purchase Agreement and the Settlement Agreement provide that,
upon the acceptance for payment of the Shares by the Purchaser pursuant to the
Offer, the Purchaser will be entitled to designate up to six persons to be
appointed as directors on the Board of Directors (the "the Purchaser
Designees"), four of whom shall be Independent Directors. For these purposes,
"Independent Director" means a person who is not an officer, director, security
holder or employee of the Purchaser or one of its affiliates, or a relative of
such person. Each of the Purchaser's designees to the Board shall be subject to
the reasonable approval of the Board, as the Board is constituted at the time
of the consummation of the
II-1
Offer. Subject to the forgoing, the Company shall, at such time, promptly take
all actions necessary to cause the Purchaser's designees, including the
Independent Director nominees, to be elected as directors of the Company,
including increasing the size of the Board to six persons and securing the
resignations of incumbent directors, if necessary. After the new members of the
Board have been elected (i) any subsequent nominations for vacancies in the
Board created by the removal or resignation of an Independent Director will be
made by the remaining Independent Directors of the Board, and (ii) the
Purchaser and the Company will take all action necessary to cause the Company's
by-laws to be amended to implement the provisions of clause (i) and provide
that any amendment to such provisions will require the approval of a majority
of the Shares entitled to vote at a meeting of stockholders of the Company,
other than those Shares held by Purchaser and its affiliates.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule
14f-1 promulgated thereunder. The information set forth herein supplements
certain information set forth in the Schedule 14D-9. Information set forth
herein related to the Purchaser or the Purchaser Designees has been provided by
the Purchaser and the Company assumes no responsibility for the accuracy or
completeness of such information. You are urged to read this Information
Statement carefully. You are not, however, required to take any action in
connection with the matters set forth herein.
Pursuant to the Settlement Agreement and the Stock Purchase Agreement, the
Purchaser commenced the Offer on July 5, 2002. The Offer is currently scheduled
to expire at 12:00 midnight, New York City time, on August 2, 2002; however,
the Purchaser currently intends to extend the Offer from time to time as
necessary until all the conditions to the Offer have been satisfied or waived.
CERTAIN INFORMATION CONCERNING THE COMPANY
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. Each Share is entitled to one vote. As of the close of business on
July 1, 2002, there were 839,286 outstanding Shares, of which the Purchaser
owns 100,700 as of the date hereof.
THE PURCHASER DESIGNEES
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the individuals listed below. The Purchaser has informed the
Company that each of the individuals listed below has consented to act as a
director of the Company, if appointed.
Set forth in the table below is the name and the present principal
occupations or employment and the name, principal business and address of any
corporation or other organization in which such occupation or employment is
conducted, and the five-year employment history of each of the individuals from
whom the Purchaser will designate the Purchaser Designees. Unless otherwise
indicated, each person identified below is a United States citizen. The
principal business address of the Purchaser and, unless otherwise indicated,
the business address of each person identified below is 100 Jericho Quadrangle,
Suite 214, Jericho, NY, 11753.
NAME AND ADDRESS AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
---------------- --- --------------------------------------------------------------
Michael L. Ashner 49 Mr. Ashner has been the Chief Executive Officer of Winthrop
Financial Associates, a Limited Partnership, since 1996, and the
Chief Executive Officer of The Newkirk Group, since 1997, two
real estate investment and management companies controlling
approximately $3.5 billion of commercial real estate throughout
the United States. Mr. Ashner currently serves as a director of
Great Bay Hotel and Casino Inc., and NBTY, Inc.
II-2
NAME AND ADDRESS AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
---------------- --- --------------------------------------------------------------
Arthur Blasberg, Jr. 74 For the past five years, Mr. Blasberg's activities include
c/o Sullivan & Worcester LLP appointment by the Superior Court in Massachusetts to serve as
One Post Office Square a receiver of various businesses (including real estate investment
Boston, MA 02109 companies), acting as trustee of a trust holding undeveloped
land and of another trust whose main asset was a limited
partnership interest in a cogeneration plant. Mr. Blasberg
previously served as the receiver and liquidating trustee of The
March Company, Inc., a real estate investment firm which acted
as the general partner and/or limited partner in over 250 limited
partnerships. Mr. Blasberg is an attorney admitted to practice in
the Commonwealth of Massachusetts and previously served for
five years as an attorney in the general counsel's office of the
Securities and Exchange Commission.
Peter Braverman 50 Mr. Braverman has been the Executive Vice President of
Winthrop Financial Associates, a Limited Partnership, since
1996, and the Executive Vice President of The Newkirk Group,
since 1997, two real estate investment and management
companies controlling approximately $3.5 billion of commercial
real estate throughout the United States.
Donald W. Coons 38 Mr. Coons has been a director of the Company, since February 8,
911 Golf Links Road 2001; director, President and Chief Executive Officer of The
Suite III Loyalist Insurance Group, a public company that trades on the
Ancaster, ON Canadian Venture Exchange, since 1996; President of Loyalist
Canada L9K 1H9 Insurance Brokers Limited and Loyalist Insurance Managers,
since 1990; director and President of Canadian Shortline
Insurance Services and The Loyalist Insurance Company, since
1996; and director of American Special Risks Limited, since
1991.
John Ferrari 48 Since 1996, Mr. Ferrari has been a Managing Director of
500 West 37th Street Manhattan East Suite Hotels, a New York based hotel
New York, NY 10018 management company that operates ten hotels (2,100 rooms) in
New York City. Mr. Ferrari is responsible for the day-to-day
operations of the company and for all acquisitions and
development of new ventures.
Howard Goldberg 56 Since 1999, Mr. Goldberg has been a private investor and has
117 Cheltenham Avenue provided consulting services to start-up companies. From 1994
Linwood, NJ 08221 through 1998, Mr. Goldberg served as President and Chief
Executive Officer of Player's International, a public company in
the gaming business, prior to its being sold to Harrah's
Entertainment Inc. In addition, from 1995 to 2000, Mr. Goldberg
served on the board of directors of Imall Inc., a public company
that provided on-line shopping and which was ultimately sold to
Excite-at-Home. Mr. Golberg has a law degree from New York
University and was the managing partner of a large New Jersey
law firm.
II-3
NAME AND ADDRESS AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
------------------------------- --- --------------------------------------------------------------
Steven Zalkind 60 For the past five years, Mr. Zalkind has been a principal with
Resources Investments Resources Investments Limited, L.L.C., a real estate
Limited, L.L.C. management and investment company that owns, operates and
4300 Haddenfield Road manages over 6,000 apartment units and 500,000 square feet of
Suite 314 retail shopping centers. Mr. Zalkind has extensive experience in
Pennsauken, NJ 08109 the operation, management and financing of real estate projects
including apartment buildings, shopping centers and office
buildings and has been involved in real estate acquisitions and
resales totaling in excess of $1.5 billion.
Richard Zimmerman CPA 59 Mr. Zimmerman is a certified public accountant. Since 1998, Mr.
Cornick, Garber & Sandler LLP Zimmerman has been a partner in the accounting firm of
630 3rdAvenue Cornick Garber & Sandler LLP. Prior to joining Cornick
Suite 1600 Garber & Sandler LLP, Mr. Zimmerman was the managing
New York, NY 10017 partner at Frank & Zimmerman & Company LLP.
INFORMATION CONCERNING
DIRECTORS OF THE COMPANY
TERMS OF DIRECTORS
Pursuant to the Company's certificate of incorporation, the Board is
divided into three classes, as equal in number as possible, with respect to the
term for which they hold office. Prior to February 13, 2002, and the
transactions through which the Company repurchased all of the shares of common
stock of a controlling stockholder, Presidio Capital Investment Company, LLC.
("PCIC"),the Board consisted of nine directors. As five of those eight
directors at the time of the transaction were officers and directors of PCIC,
upon the consummation of the stock repurchase, four of those five directors
resigned. As three of the remaining four members of the Board were all in the
same class, the Board reallocated its members among the three classes, in
accordance with Delaware General Corporate Law, with one director, who has
since resigned, having a term that would expire at the 2002 annual meeting of
stockholders of the Company, two directors having terms that expire in 2003 and
one director having a term that expires in 2004.
CURRENT MEMBERS OF THE BOARD OF DIRECTORS WITH TERMS EXPIRING IN 2003
NAME AND AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
------------ ---------------------------------------------------------------------
ROBERT MARTIN (40) DIRECTOR; EXECUTIVE MANAGING DIRECTOR AT INSIGNIA/ESG., INC.
o Director of the Company since February 8, 2001
o Executive Managing Director at Insignia/ESG., Inc., a global
commercial real estate brokerage firm, where he has been employed
since 1995
o Senior Managing Director at Grubb & Ellis, a commercial real
estate brokerage firm, from 1984 to 1994
II-4
NAME AND AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
------------ ---------------------------------------------------------------------
W. EDWARD SCHEETZ (37) DIRECTOR; CO-CHIEF EXECUTIVE OFFICER OF NORTHSTAR CAPITAL INVESTMENT
CORP.
o Director of the Company since February 8, 2001
o Co-Chief Executive Officer of NorthStar Capital Investment Corp.,
a company he co-founded in July 1997
o Co-Chief Executive Officer of the Company from August 15, 2001
to February 14, 2002
o Partner at Apollo Real Estate Advisors, where he was responsible
for the investment activities of Apollo Real Estate Investment
Funds I and II, from 1993 to 1997
o Principal with Trammell Crow Ventures, where he was responsible
for that firm's opportunistic real estate investment activities, from
1989 to 1993
CURRENT MEMBER OF THE BOARD OF DIRECTORS WITH TERM EXPIRING IN 2004
NAME AND AGE POSITION, PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND DIRECTORSHIPS
------------ ---------------------------------------------------------------------
DONALD W. COONS (38) DIRECTOR; DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE
LOYALIST INSURANCE GROUP
o Director of the Company since February 8, 2001
o Director, President and Chief Executive Officer of The Loyalist
Insurance Group, a public company that trades on the Canadian
Venture Exchange, since 1996
o President of Loyalist Insurance Brokers Limited and Loyalist
Insurance Managers since 1990
o Director and the President of Canadian Shortline Insurance Services
and The Loyalist Insurance Company since 1996
o Director of American Special Risks Limited since 1991
BOARD MEETINGS AND COMMITTEES
From April 10, 2001 when the full Board of Directors was appointed through
the end of 2001, the Board met seven times. Each director attended all of the
meetings.
The Company's by-laws give the Board of Directors the authority to
delegate its powers to a committee appointed by the Board. All committees are
required to conduct meetings and take action in accordance with the directions
of the Board and the provisions of the Company's by-laws. The Board of
Directors has appointed three standing committees. Certain of the committees'
principal functions are described below.
Until March 27, 2002, the audit committee consisted solely of independent
directors, Michael Bebon, Donald W, Coons and Robert Martin. Upon Michael
Bebon's resignation from the Board of Directors on March 27, 2002, the Board of
Directors nominated W. Edward Scheetz to replace Michael Bebon as a member of
the audit committee. Robert Martin and Donald W. Coons are the members of the
corporate governance committee and the compensation committee.
THE AUDIT COMMITTEE:
o reviews annual consolidated financial statements with the Company's
independent auditors,
o recommends the appointment and reviews the performance, independence,
and fees of the Company's independent auditors and the professional
services they provide,
o oversees the Company's system of internal accounting controls and the
internal audit function, and
II-5
o discharges other responsibilities, including those described in the
"Audit Committee Report" on page II-10.
The Audit Committee did not meet during 2001. On March 25, 2002, the Audit
Committee met with the external auditors of the Company to discuss the
Company's 2001 financial statements.
THE COMPENSATION COMMITTEE:
o recommends to the Board of Directors the compensation policies and
arrangements for the Company's officers,
o ensures appropriate oversight of the Company's executive compensation
programs and human resources policies, and
o will, as appropriate, report to stockholders on the Company's executive
compensation policies and programs.
The Company's Compensation Committee was formed on March 1, 2002 and is
composed of two individuals who are non-employee directors of the Company.
THE CORPORATE GOVERNANCE COMMITTEE:
o reviews the qualifications of current and potential directors,
o reviews each director's continued service on the Board of Directors,
o reviews outside activities of Board members and resolves any issue of
possible conflict of interest, and
o reviews and assesses the adequacy of the Corporate Governance
Committee's Charter.
The Company's Corporate Governance Committee was formed on March 1, 2002
and is composed of two directors.
FORMER DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth information relating to all directors and
officers who served the Company for any period from February 8, 2001, the date
of the Company's initial public offering, through July 1, 2002, but who no
longer hold those positions.
NAME AND AGE POSITION HELD TERM OF SERVICE
------------------------ -------------------------- ------------------------------------------------
PETER AHL (37) Director, Vice President February 8, 2001-February 14, 2002, as Director
August 15, 2001-February 14, 2002, as Vice
President
MICHAEL ASHNER (49) Director, President February 8, 2001-August 15, 2001, as President
and Director
MICHAEL BEBON (40) Director February 8, 2001-March 27, 2002, as Director
PETER BRAVERMAN (50) Vice President February 8, 2001-August 15, 2001, as Vice
President
DAVID T. HAMAMOTO (43) Director, Co-Chief February 8, 2001-February 14, 2002, as Director
Executive Officer
August 15, 2001-February 14, 2002, as Co-Chief
Executive Officer
STEVEN B. KAUFF (40) Vice President February 8, 2001-February 14, 2002, as Vice
President
II-6
NAME AND AGE POSITION HELD TERM OF SERVICE
------------------------- -------------------------- ------------------------------------------------
DAVID G. KING, JR. (39) Director, Vice President February 8, 2001-February 14, 2002, as Vice
President and Director
DALLAS LUCAS Treasurer November 20, 2001 -- July 1, 2002, as Treasurer
LARA SWEENEY (29) Vice President, February 8, 2001-August 15, 2001, as Vice
Secretary President and Secretary
CAROLYN TIFFANY (35) Vice President, February 8, 2001-April 10, 2001, as Treasurer
Treasurer February 8, 2001-August 15, 2001, as Vice
President
DIRECTOR COMPENSATION
The Company's non-employee directors, currently Donald W. Coons, W. Edward
Scheetz and Robert Martin, receive $6,667 annually for their services as
directors. Directors of the Company who are also employees of the Company
receive no additional compensation for serving on the Board of Directors.
However, all directors are reimbursed for travel expenses and other
out-of-pocket expenses incurred in connection with their service on the Board
of Directors.
In addition, solely for their services as members of the Special
Committee, which was organized to review and evaluate the fairness of the
February 2002 repurchase by the Company of the Shares held by PCIC, Michael
Bebon, a former director, Donald W. Coons and Robert Martin received a one-time
payment of $20,000.
In consideration of the significant time and efforts that each of the
current directors has made as a member of the Board and has put forth, among
other things, evaluating strategic alternatives to enhance stockholder value,
arranging for financing and otherwise managing the business of the Company, the
Board authorized a one-time payment of $75,000 to each of Robert Martin, W.
Edward Scheetz and Donald W. Coons.
SECURITY OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
PRINCIPAL STOCKHOLDERS
The table below shows the stockholders that beneficially own more than
five percent of the outstanding Shares as of the most recent practicable date.
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
-------------------------------------- -------------------- ----------------
HX Investors, L.P.(1) 100,700 11.99%
----------
(1) Source: Schedule TO-T as filed by the Purchaser with the SEC on July 1,
2002.
II-7
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the number of Shares beneficially owned by each
director and executive officer and all directors and executive officers as a
group as of July 1, 2002.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED(1) PERCENT OF CLASS
---- --------------------- -----------------
Donald W. Coons 0 *
Robert Martin 1,300 *
W. Edward Scheetz 0 *
Richard J. McCready 0 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP 1,300 *
----------
1. The directors and executive officers have sole voting and investment power
over the shares of common stock listed.
* Indicates ownership of less than 1%.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires the Company's
directors, certain officers and stockholders who own more than ten percent of
the Company's equity securities to file initial reports of ownership on Form 3
and changes in ownership on Forms 4 or 5 with the SEC. SEC regulations require
such stockholders to furnish the Company with copies of all Section 16(a) forms
they file.
Based on its review of such forms and on written representations from such
officers and directors, the Company believes that during the fiscal year ended
December 31, 2001 all applicable Section 16(a) filing requirements were met.
II-8
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
For fiscal year 2001, the executive officers of the Company were employed
by Shelbourne Management LLC. Such executive officers were compensated by
Shelbourne Management LLC in their capacities as officers and employees of that
company, as shown in the table below, rather than as executive officers of the
Company. The Company currently has one executive officer, who is not
compensated by the Company, and no other employees. The current executive
officer is employed by NorthStar Capital Investment Corp. ("NorthStar") and its
affiliate, Presidio Capital Corp., and his services are provided to the Company
pursuant to the Purchase and Contribution Agreement, dated February 14, 2002,
between PCIC and the Company.
COMPENSATION COMMITTEE INTERLOCKS
Richard J. McCready, an executive officer of the Company, also serves on
the board of directors of NorthStar, a former affiliate of the Company. W.
Edward Scheetz, a director of the Company, also serves on the board of
directors of NorthStar.
COMPENSATION FOR SERVICES
The following entities, which were affiliated with the Company until
February 14, 2002, earned or received compensation or payments for services or
reimbursements from the Company, its affiliates, or its predecessor
partnership, directly or indirectly, during the year ended December 31, 2001 as
follows:
COMPENSATION FROM THE COMPANY, ITS
NAME OF RECIPIENT CAPACITY IN WHICH SERVED PREDECESSOR PARTNERSHIP OR PRESIDIO SUBSIDIARIES
---------------------------- ------------------------------ -------------------------------------------------
Resources High Equity Inc. Managing General Partner $ 358,685(1)
Presidio AGP Corp. Associate General Partner $ 1,391(2)
Kestrel Management, L.P. Affiliated Property Managers $ 312,777(3)
Shelbourne Management LLC Business Manager $ 862,818(4)
----------
(1) $44,583 represents payment for non-accountable expenses of the Managing
General Partner and $314,102 represents a Partnership Management Fee for
managing the affairs of the predecessor partnership. Furthermore, under
the predecessor partnership's Limited Partnership Agreement which was in
effect until April 18, 2001, 5% of the predecessor partnership's net
income and net loss is allocated to the predecessor General Partners
(0.1% to the Associate General Partner and 4.9% to the Managing General
Partner). Pursuant thereto, for the year ended December 31, 2001, $68,164
of the predecessor partnership's net income was allocated to the General
Partners.
(2) For the year ended December 31, 2001, $1,391 of the predecessor
partnership's net income was allocated to the Associate General Partner.
(3) This amount was earned pursuant to a management agreement with Kestrel
Management, L.P. for performance of certain functions relating to the
management of the Company's properties.
(4) This amount was earned pursuant to an advisory agreement with Shelbourne
Management LLC for performance of certain functions relating to the
management of our business. $105,417 represents reimbursement expenses of
Shelbourne Management LLC and $757,401 represents an asset management fee
for managing the affairs of the Company, property management fees and
$150,000 for non-accountable expenses.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any person.
II-9
REPORT OF THE COMPENSATION COMMITTEE
The Board of Directors, acting upon the recommendation of the Compensation
Committee, is responsible for determining compensation for the Company's
executive officers. The Compensation Committee is composed of two individuals
who are non-employee directors of the Company.
EXECUTIVE COMPENSATION PRINCIPLES
The Compensation Committee believes that the Company's compensation
program is a critical part of the management and incentivization of its
executive officers. Therefore, the Compensation Committee believes that, in
structuring compensation, the Company should:
o Adopt equity compensation plans to attract and retain high quality
executive officers, enhance the long-term profitability of the Company
and align the interests of executive officers with those of the
Company's stockholders; and
o Provide executive officers of the Company with competitive compensation
packages consisting of a mix of cash and equity-based compensation.
In making its compensation recommendations to the Board of Directors, the
Compensation Committee will consider (1) the potential long-term profitability
of the Company as indicated by a variety of factors, including stock prices,
projected and actual cash flow, leasing activities, new acquisitions, funds
from operations and other factors, (2) the compensation trends among REITs of
comparable size to ensure that the Company's compensation packages are
competitive and (3) with respect to a specific executive officer, such
officer's specific responsibilities, experience and overall performance.
EXECUTIVE COMPENSATION FOR 2001
For fiscal year 2001, no executive officers of the Company, including the
Co-Chief Executive Officers, received compensation from the Company. These
executive officers were compensated by Shelbourne Management LLC in their
capacities as officers and employees of that company. Please see "Compensation
of Executive Officers" above for a description of those arrangements between
the Company and Shelbourne Management LLC.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), a publicly held company, such as the Company, will not be entitled to
a Federal income tax deduction for compensation paid to the chief executive
officer or any one of the other four most highly compensated officers of the
Company to the extent that compensation paid to such officer exceeds $1 million
in any fiscal year, unless such compensation is subject to certain exceptions
set forth in the Code for compensation that qualifies as performance based. The
Board of Directors and the Compensation Committee intend to consider Section
162(m) in structuring compensation for the Company's executive officers;
however, the Board of Directors or the Compensation Committee may, where it
deems appropriate, implement compensation arrangements that do not satisfy the
exceptions to Section 162(m).
Members of the Compensation Committee:
Donald W. Coons
Robert Martin
II-10
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (the "Committee") is comprised of three directors and
operates under a written charter. The Committee met with Deloitte & Touche LLP
("Deloitte & Touche") the independent auditors of the Company on March 25, 2002
to discuss the Company's 2001 financial statements. The Committee held
discussions with the independent auditors, without management present, on the
results of their examinations and the overall quality of the Company's
financial reporting and internal controls. The Committee evaluates the
continued appointment of the Company's independent auditors and makes its
recommendation to the Board of Directors.
Prior to March 27, 2002, the Committee was comprised of three members who were
independent within the meaning of Section 121(a) of the American Stock Exchange
Listing Standards (the "Listing Standards"). On March 27, 2002, a member of our
Board of Directors, who was a Committee member as well, resigned. In order to
remain in compliance with the requirement of our Committee charter and the
Listing Standards that the Committee have three members, the directors elected
W. Edward Scheetz to be a member of the Committee. Mr. Scheetz is not an
independent director within the meaning of Section 121(a) of the Listing
Standards, as he is employed by a former affiliate of the Company, NorthStar
Capital Investment Corp. However, as there were no other directors to fill the
required third position on the Committee, the Board of Directors appointed Mr.
Scheetz.
As stated in the Committee's Charter, the Committee's responsibility is one of
oversight. It is the responsibility of the Company's management to prepare
consolidated financial statements in accordance with generally accepted
accounting principles and of the Company's independent auditor to audit those
financial statements. The Committee does not provide any expert or other
special assurance as to such financial statements concerning compliance with
laws, regulations, or generally accepted accounting principles.
In fulfilling its responsibilities, the Committee has reviewed and discussed
the Company's audited consolidated financial statements for the fiscal year
ended December 31, 2001 with the Company's management and the independent
auditors.
The Committee has discussed with Deloitte & Touche the matters required to be
discussed by Statement on Auditing Standards No. 61, "Communication with Audit
Committees." In addition, the Committee has received the written disclosures
and the letter from Deloitte & Touche required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees" and has
discussed with Deloitte & Touche its independence from the Company and its
management.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements for the fiscal year ended December 31, 2001 be included in
our 2001 Annual Report to Stockholders which is incorporated by reference into
our Annual Report on Form 10-K for the year ended December 31, 2001 and was
filed with the Securities and Exchange Commission on April 1, 2002.
AUDIT COMMITTEE
Donald W. Coons
Robert Martin
W. Edward Scheetz
II-11
EXHIBIT (A)(3)
SHELBOURNE PROPERTIES I, INC.
July 9, 2002
Dear Stockholder,
We are pleased to inform you that the Company entered into a Settlement
Agreement and a Stock Purchase Agreement with HX Investors, L.P. (the
"Purchaser"), pursuant to which the Purchaser has commenced a tender offer for
up to 251,785 issued and outstanding shares of common stock of the Company at a
purchase price $53.00, net to the seller in cash, without interest. Upon the
completion of the offer, the Company will, and the Purchaser will take all
reasonable action to cause the Company to, submit to the stockholders a plan of
liquidation for their approval. As soon as practicable following the approval
by the stockholders of the plan of liquidation, but in any event no later than
five days after the approval, the board of directors of the Company will cause
the Company to be dissolved and the Company will be liquidated and the proceeds
distributed to the stockholders pursuant to the plan of liquidation. A copy of
each of the Stock Purchase Agreement and the Settlement Agreement is filed as
Exhibits (e)(1) and (e)(2), respectively, to the attached 14D-9.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
PLAN OF LIQUIDATION ARE FAIR TO AND IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE STOCK PURCHASE AGREEMENT AND THE SETTLEMENT
AGREEMENT AND RECOMMENDS THAT STOCKHOLDERS DESIRING TO MAXIMIZE IMMEDIATE
LIQUIDITY OF THEIR SHARES OF COMMON STOCK ACCEPT THE OFFER AND TENDER THEIR
SHARES OF COMMON STOCK PURSUANT TO THE OFFER AND STOCKHOLDERS NOT SEEKING
IMMEDIATE LIQUIDITY, BUT DESIRING TO RECEIVE THEIR PRO RATA PORTION OF THE
LIQUIDATION PROCEEDS CONTEMPLATED BY THE PLAN OF LIQUIDATION, SHOULD NOT ACCEPT
SUCH OFFER, AND SHOULD VOTE TO APPROVE THE ADOPTION OF THE PLAN OF LIQUIDATION
AT A MEETING OF THE STOCKHOLDERS TO BE HELD TO CONSIDER SUCH MATTER.
In arriving at its recommendation, your board of directors carefully
considered a number of factors, as described in the attached Schedule 14D-9,
including the written opinion of the Company's financial advisor, Lazard Freres
& Co. LLC, that, as of such date, based upon and subject to certain
considerations and assumptions set forth in its opinion, the offer price
together with the proceeds from the liquidation of the Company in accordance
with its plan of liquidation, taken as a whole, to be received by the
stockholders of Company (other than the Purchaser) in the tender offer and plan
of liquidation, is fair to such stockholders from a financial point of view. A
copy of Lazard's written opinion, which sets forth the assumptions made,
procedures followed and matters considered by Lazard in rendering its opinion,
can be found in Schedule I to the Schedule 14D-9. You should read the opinion
carefully and in its entirety.
The Schedule 14D-9 describes in more detail the reasons for your board's
conclusions and contains other information relating to the tender offer. In
addition, the Purchaser's Offer to Purchase, dated July 5, 2002, Letter of
Transmittal and related documents were sent to you separately by the Purchaser.
These documents set forth the terms and conditions of the tender offer and
provide information on how to tender your Company shares to the Purchaser. We
urge you to read these documents and to consider this information carefully.
Questions or requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal or related documents may be directed to
MacKenzie Partners, the Purchaser's Information Agent, at 105 Madison Avenue,
New York, NY, 10016. You can call MacKenzie Partners toll-free at
1-800-322-2885 or email them at proxy@mackenziepartners.com.
Very truly yours,
/s/ Donald W. Coons /s/ Robert Martin /s/ W. Edward Scheetz
---------------------- -------------------- ----------------------
Donald W. Coons Robert Martin W. Edward Scheetz
Director Director Director